Actel Corporation (ACTL)

Q2 2010 Earnings Call

July 29, 2010 5:00 AM ET


John East – President and CEO

Maurice Carson – Executive Vice President, Finance and CFO


Richard Shannon – Northland Securities

Neil Gagnon – Gagnon Securities

Brad Evans – Heartland Advisors

Tim O’Toole – Delta Management



Welcome to the Actel Corporation’s Conference Call regarding its results for the Second Quarter of 2010. A replay of this call will be available for one week at 1-800-642-1687, conference ID 50404762. You can also access this call on Thomson CCBN through a link on Actel’s website at This call is being recorded. To ensure that the question-and-answer session proceeds in an orderly manner, participants will be returned to the queue after one question and one follow-up question.

All forward-looking statements during the call and made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward-looking statements. Information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements are contained in Actel’s most recent Form 10-Q, which is available on Actel’s website. (Operator Instructions) It is my pleasure to hand the floor over to your host, Mr. John East, President of Actel.

John East

Thanks, Marcello. Good afternoon. I’m John East, the President and CEO of Actel. With me is Maurice Carson, our Executive Vice President of Finance and CFO. After Maurice reviews the results for the quarter, I’ll give you a brief update on products and then we’ll open the call for questions. So now I’d like to turn the call over to Maurice.

Maurice Carson

Thank you, John. Before I talk about the financial details for the second quarter, let me tell you how we will provide financial information regarding the third quarter of 2010. We will give guidance on the call today. The guidance will be our targets for sales, gross margin, operating expenses, other income, tax position -- provision and share count for the third quarter of 2010.

Next, we expect to provide a financial update in early September. In the absence of a material change, that will be the only financial guidance the company will give during the quarter. A replay of this call will be made available. Please access the company’s website for the replay information.

As is generally the case, my remarks today will include non-GAAP measures as a supplement to our GAAP results, in order to provide a more comprehensive view of our financial performance. A reconciliation of non-GAAP to GAAP statement of operations is included in our earnings release and is posted in the press room of our company website. I will focus on comparisons of the second quarter to the first quarter.

Now, on to the financials. Second quarter sales were $57.8 million, an increase of 10.5% over Q1 and above the midpoint of both our revised and original guidance. Some of you may be wondering why we issued revised guidance when we ended up above the midpoint of our original guidance. We were worried that we may not be able to match up deliveries with demand. In the end, we were able to. However, the revenue split was different than the original guidance.

We had anticipated a decline in the space business, but ended up with a slight increase. Good job by the factory to get this product delivered. All other product lines, non-space, antifuse and flash were also up. Silicon book-to-bill is substantially above 1.

Non-GAAP gross margin in the second quarter was 62.8%, up from Q1. This margin is higher than our guidance due to the space shipments coming in higher than anticipated. Non-GAAP operating expenses for the quarter were $27.3 million compared with $27.7 million in the first quarter.

R&D spending was $13.6 million, flat to Q1. SG&A was $13.7 million, down from $14.2 million in the last quarter. Other income was $0.4 million, compared with $0.6 million in the prior quarter. Non-GAAP net income was $6.6 million compared with $3.8 million last quarter. Diluted share count was 26.5 million. And this all resulted in earnings per share on a non-GAAP basis of $0.25 compared to $0.14 last quarter.

A quick note on the share count, during the quarter we bought back over 200,000 shares under our 10b-5 plan. Most of these shares were bought near the end of the quarter and due to using weighted average shares, most of this reduction is not reflected in our diluted EPS calculation.

On the balance sheet, cash, cash equivalents and investments were $162.8 million at the end of the quarter, an increase of $13.5 million. We generated $11 million from the income statement and $7.6 million from working capital. This was offset by $2 million CapEx and $3 million for the share repurchase.

Accounts receivable increased by $11 million to $44.1 million, while DSO finished at 70 days. Much of the increase in receivables is offset in deferred income. So there was little effect on working capital. This increase was due to higher revenue, more shipments in the last month of the quarter and distributors building inventory that they continue to forecast increasing demand.

Net inventory decreased by $2 million to $36.4 million. This includes $8 million of legacy wafers purchased as part of the last-time buy, we have discussed in the past. We will continue to purchase these wafers for one more quarter. Even with this purchase, net days of inventory decreased to 154 days.

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