Hittite Microwave Corporation ( HITT) Q3 2010 Earnings Call October 21, 2010 5:00 PM ET Executives Stephen Daly – Chairman and CEO Bill Boecke – Vice President and CFO Analysts Tore Svanberg – Stifel Nicolaus Quinn Bolton – Needham & Company Aalok Shah – D. A. Davidson Gus Richard – Piper Jaffray Jiwon Lee – Sidoti & Company Dale Gose – Analyst John Haller – HHR Asset Management Presentation Operator
The earnings release, along with other financial and statistical data that we may discuss on the call and copies of our SEC reports, are available in the Investor Relations section of our website at www.hittite.com. You may also obtain copies of our SEC reports and a copy of our press release furnished under Form 8-K from the SEC’s website at www.sec.gov.Today’s conference call will be structured as follows. I will begin by summarizing our third quarter results. Following my comments, Bill will review in detail our financial performance. After that, I will provide revenue and earnings guidance for the fourth quarter of 2010. I will then invite listeners to ask questions. Following the question period, I will make some brief closing remarks. In reviewing the third quarter, our revenue was $64.2 million, an increase of 6.4% over the second quarter of 2010 and 54.7% increase year-over-year. Net income was $20.8 million, an 8.8% sequential increase and a 73.8% increase year-over-year. Our net income exceeded our guidance to a slightly higher than expected revenues and stronger than expected gross profit margins. Overall, we are very satisfied with our Q3 performance. The first three quarters of the year have been strong, primarily due to the significant improvement in the business environment compared to last year. On a geographic basis, 44% of our third quarter revenue was from domestic customers and 56% from international customers, which is similar to last quarter’s results. The 2.3% sequential domestic revenue growth is driven by the military market and the 10% sequential international revenue growth is driven by various markets including cellular communication. In the third quarter, three of our eight markets accounted for approximately 80% of our total revenue, which is slightly less concentration than last quarter. These markets are cellular infrastructure, microwave and millimeterwave communications, and military. The remaining target markets, automotive, broadband, fiber optic, space, and test and measurement accounted for 20% of our revenue.
Six of our eight markets experienced positive sequential growth and two were down. This quarter-to-quarter growth variation is normal and result of timing of orders and revenue. Year-to-date, our total revenues have grown by 50% compared to the first nine months of 2009.This is exceptionally high growth and we are cautious, and expect the growth levels will moderate in the coming quarters. At a macro level, the increasing demand for additional wireless data bandwidth and network capacity has been driving our growth. Our strategy is to expand our product portfolio to capitalize on this trend and to take market share. During the quarter, our engineering teams introduced 30 new products for a total of 85 year-to-date, which brings the standard product portfolio to over 880 at the end of Q3. These 30 new non-commodity products will allow us to capture more market share in the cellular infrastructure, fiber optic, microwave and millimeterwave communications and military markets. Our customers will be attracted to these products because of their industry-leading performance, which in turn will give them a competitive advantage. I will briefly review a few specific new product highlights. During the quarter we introduced eight products targeting the microwave and millimeterwave radio market. Specifically, we introduced five new power amplifiers and three new highly integrated IQ up and down converters. Our new power amplifier products deliver between 0.5 watt and 4 watts of linear output power and cover poplar microwave bands between 12 and 33 gigahertz. Our new 4-watt linear amplifier represents the highest power of MMIC amplifier we’ve introduced to our standard product portfolio. The amplifiers have been optimized for 3G and 4G high-capacity point-to-point radio system. Additionally, we introduced three new converters, which include integrated variable gain amplifiers and produce industry-leading figures of merit on sideband rejection, image rejection and noise figure. These feature rich converters target the 5 to 9-gigahertz long-haul microwave radio market. These frequency bands are typically used in rural and remote areas where long distance between links as required. Read the rest of this transcript for free on seekingalpha.com