Cabot Microelectronics Corporation (CCMP)

F2Q10 (Qtr End 03/31/10) Earnings Call Transcript

April 22, 2009 10:00 am ET

Executives

Amy Ford – Director, IR

Bill Noglows – Chairman, President and CEO

Bill Johnson – VP and CFO

Analysts

Avinash Kant – D.A. Davidson & Company

Steve O'Rourke – Deutsche Bank

Dmitry Silversteyn – Longbow Research

Chris Kapsch – BDR Research Group

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter fiscal 2010 earnings conference call. My name is Fab [ph] and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator instructions) I would now like to turn the conference over to your host for today, Amy Ford, Director of Investor Relations. Please proceed.

Amy Ford

Good morning. With me today are Bill Noglows, Chairman and CEO, and Bill Johnson, Chief Financial Officer. This morning, we reported results for our second quarter of fiscal year 2010, which ended March 31st. A copy of our press release is available in the Investor Relations section of our website, cabotcmp.com, or by calling our Investor Relations office at 630-499-2600.

Today’s conference call is being recorded and will be archived for four weeks on our website. The script of this morning’s formal comments will also be available there. Please remember that our discussion today may include forward-looking statements that involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from these forward-looking statements.

These risk factors are discussed in our SEC filings, including our report filed on Form 10-Q for the first quarter of fiscal 2010 ended December 31, 2009, and Form 10-K for the fiscal year ended September 30, 2009. We assume no obligation to update any of this forward-looking information.

Before we deliver our prepared remarks, I would like to remind you about our upcoming Investor Day, which will be held Thursday, June 3rd, at the NASDAQ MarketSite in Times Square. For more information, please see the upcoming events page within the Investor Relations section of our corporate website.

I will now turn the call over to Bill Noglows.

Bill Noglows

Thanks, Amy. Good morning, everyone, and thanks for joining us. This morning we announced strong financial results for our second fiscal quarter of 2010. We reported our second consecutive quarter of record revenue, totaling $98.6 million. This record is particularly noteworthy as the March quarter has historically been seasonally soft for both the industry and our company.

Additionally, we reported gross profit margin of 50.2% of revenue. This quarter’s results benefited from solid utilization of our manufacturing capacity, continued productivity gains within our manufacturing operations, the integration of our Epoch acquisition, and revenue growth in our CMP pad business.

Our revenue this quarter was generally consistent with the monthly trends reported by the large foundries in Taiwan, which included slightly lower revenue in January and February than in the preceding months, followed by an uptick in revenue in March. During the quarter, a number of industry analysts increased their 2010 semiconductor revenue growth estimates from mid-teen to mid-20% growth versus the prior year.

Within our business, demand across each major semiconductor segment, logic, memory and foundry, appears healthy as we head into the second half of our fiscal year, which is typically a strong seasonal period. In the short term, we are encouraged by reports of continued strong end-use electronics demand, including a potential boost in corporate IT spending over the remainder of the calendar year, including the PC renewal cycle and Windows 7.

Over the longer term, we believe we are well positioned to benefit from capacity additions underway by many of our customers, reflecting their efforts to meet increasing demand. Given the current positive industry indicators and solid near-term forecasts from our customers, we continue to have a strong outlook for fiscal 2010.

We recently commemorated our 10th anniversary as a public company, and it’s interesting to reflect on the changes that have occurred since we went public 10 years ago. At that time, we had 281 employees, demand for our products was primarily driven by US customers, and we reported revenue of $99 million in the fiscal year leading up to our IPO.

Since that time, the company has grown to approximately 900 employees, now 80% of our revenue is derived from customers in the Asia Pacific region, and we believe we are on track to exceed our fiscal 2008 revenue level of $375 million, following the severe industry contraction in fiscal 2009.

Over the past 10 years, we have steadily built up our infrastructure in Asia so that we now have approximately half of our workforce and assets located in the Asia Pacific region. In addition, we have transitioned to a direct sales model in nearly every region of the world, resulting in much closer relationships with our customers.

We have also completed three successful acquisitions, we have maintained our leadership in CMP slurries, and we have become the second largest supplier of CMP pads. While a lot has changed over the years, we have remained dedicated to our primary strategy of strengthening and growing our core CMP consumables business through the execution of our three key strategic initiatives; Technology Leadership, Operations Excellence, and Connecting With Customers. By adhering to our strategy and consistently executing on these three initiatives, we believe we have built a strong foundation for sustainable, long-term profitable growth.

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