Wolfson Microelectronics Plc (WLFMF.PK)
Q1 2010 Earnings Conference Call
May 5, 2010 9:00 AM ET
Mike Hickey – CEO
Mark Cubitt – CFO
Francois Meunier – JPMorgan
Simon Schafer – Goldman Sachs
Didier Scemama – RBS
Tim Shaw – Citi
Nick James – Panmure Gordon
Daniel Ridsdale – Edison Investment Research
Arun George – Execution Noble
Ian Robertson – Seymour Pierce
Daniela Ventrone – Piper Jaffray
Susan Gordon – Speirs and Jeffrey
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Good morning and welcome to the Wolfson Microelectronics Q1 2010 results conference call. I’m Mike Hickey, CEO of Wolfson and also here in Mark Cubitt, the CFO of the company.
Let me quickly go through some of the key points of the first quarter and then we’ll be happy to take any questions.
Before I go into the details of the business, let me summarize the first quarter financial performance. We continued to make progress with revenues up both year-on-year and sequentially to $28.5 million, an increase of 13% and 4% respectively.
Gross margin was up to 51.5% compared with 50.2% same period last year reflecting product mix and effective supply chain management.
Gross profit increased by around 15% to $14.6 million compared with $12.7 million for the same period last year. There was an underlying operating loss of $4.9 million.
Our net cash balance as at 4th of April 2010 was $91 million and we have no debt.
Now let me give you a progress report on how the business has performed in the quarter and the flavor of where we anticipate growth is going to come from in 2010 and beyond. We continue to make progress in the first quarter with revenues up both year-on-year and sequentially and coupled with an increasingly strong design-ins performance and the launch of another nine new products.
2009 design-ins including audio hub designers from several tier 1 mobile phone manufacturers are beginning to translate into revenue, overcoming the normal Q4 to Q1 seasonal revenue decline with the balance of the previously reported design-ins transition into volume manufacturing in line with our expectations.
In the quarter sales into mobile phones, multifunction printers and eBook showed good growth specifically sales into mobile phones grew 50% sequentially.
Sales into digital still cameras and PNDs (inaudible), however, the new digital still camera products we launched last year are beginning to bear fruit and we expect sales into digital still cameras to recover as we progress through the year.
We’re also pleased that the design-in and product launch momentum we achieved last year has continued through to this quarter.
We are increasingly seeing the benefits of our refreshed product portfolio with another strong design-in quarter. We secured over 90 new design-ins across a range of consumer electronic products with both existing and new customers.
The most significant of these was our latest audio hub solution being designed into a new tier 1 Smartphone platform from which we will generate revenues in 2011.
We’re also delighted to have been selected by a leading brand for its breakthrough new Windows Mobile Phone with the inclusion of one of our high performance ultralow power audio hubs.
Product development performance was maintained with the launch of nine new products. This includes two new audio amplifier products that will feature many of the world’s most highly integrated mid and low tier mobile phones.
We also introduced the world’s first digital audio hub solution. We signed an agreement to integrate Tensilica’s high quality digital signal process and IP cause into our audio subsystem solutions.
This enabled Wolfson to continue to lead the way in bringing category defining high definition sound to portable multimedia platforms including mobile phones, netbook, smart books and other converge multimedia devices. Further progress across our audio plus solutions, power management, noise cancellation in MEMS microphones as they continue to gain traction with customers with each of them gaining further design-ins in quarter one.
We earned record revenues for our power management products, which reflect our strength and positioning in this market. Of particular note is Wolfson’s leadership in the rapidly expanding eBook reader market, where our family of power management products are ideally suited.
We introduced our first Stereo Ear-Bud Noise Cancellation Headset reference design. This product can be customized and branded by customers for (inbox) or aftermarket sales.
Our SoundStage Software was selected by BBK Electronics, a leading Chinese mobile phone provider for inclusion in its latest handset. This includes virtual 3D surround sound, which creates a sensation of virtual speakers around the head of the listener.
Our MEMS based silicon microphone products, which are designed into multiple applications shipped in volumes to numerous customers. We’re also introducing the second generation of our MEMS technology products with a new family of digital MEMS microphones announced this week.
Looking ahead, as previously mentioned, previously reported design-ins are transitioned into volume production in line with our expectations. As more of these design-ins reach full production during the year, we expect our revenues to increase leaving us well placed to return to sustainable profitability.
For the second quarter, we expect revenue to be in the range of $30 million to $35 million. Our backlog is currently at $27.5 million compared to $23 million at the equivalent point for Q1 2010 and we expect gross margins to be between 50% and 51%. Thank you for listening and we’ll be happy to take any questions now.
Thank you. (Operator Instructions) We are taking our first question from Francois Meunier from JPMorgan.