Verigy, Ltd. (VRGY) Q4 2010 Earnings Call November 23, 2010 4:30 PM ET Executives Judy Davies – Vice President, Investor Relations and Marketing Communications Keith Barnes – Chairman and CEO Jorge Titinger – President and COO Bob Nikl – Chief Financial Officer Analysts Atif Malik – Morgan Stanley Tom Diffely – D.A. Davidson C.J. Muse – Barclays Capital Patrick Ho – Stifel Nicolaus Wenge Yang – Citigroup Jim Covello – Goldman Sachs Krish Sankar – Bank of America Merrill Lynch David Dooley – Steelhead Securities Raj Seth – Cowen & Company Presentation Operator
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A replay of today’s call will be available via telephone and webcast from November 23rd through December 7th. You may access the replay by going to the Investor Relations section of our website.We will be making forward-looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Factors that may cause results to differ materially from those in the forward-looking statements are discussed in our most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance, provided during today’s call and expectations regarding our merger with LTX-Credence are only valid as of this date and Verigy undertakes no obligation to update the forward-looking statements. In addition, during this call we will discuss non-GAAP financial measures, including non-GAAP net profit loss, earnings and loss per share and gross margin. You will find reconciliation to the most directly comparable GAAP financial measures in the Investor Relations section of our website and in our press release. At the conclusion of our prepared remarks, we will open up the call for questions, to enable us to answer all of your questions, please limit yourself to one question. As a reminder, this conference call is being recorded. Thank you all again, and now it is my pleasure to turn the call over to Keith Barnes. Keith Barnes Thank you, Judy. Good afternoon, everyone, and thank you for joining us today. As we look back on fiscal 2010, I’m pleased with the significant progress that we’ve made. We introduced several new products, reduced our costs structure and return the company to profitability. Further, we ended our fiscal year by signing a definitive merger agreement with LTX-Credence. We expect that the merger of two strong ATE suppliers will change the landscape of the test industry by creating a new company to be called Verigy that will provide a comprehensive portfolio of engineering and production testers, as well as advanced memory probe cards.
Turning to our financial results, Q4 was another strong quarter of profitability and cash generation for us. Total revenue of $159 million was within our guidance range with continuing robust demand for our SoC products.Port Scale RF contributed more than 40% of our revenue, nearly 50% of orders in Q4. Orders in the fourth quarter were $123 million, down 25% from Q3 and our book-to-bill ratio was $0.77 for the quarter and $1.06 for the fiscal year. We believe that the sequential order decline is due primarily to the industry entering the seasonally low period of the year and we expect the holiday season will set a positive tone as we enter 2011. Our customers have been closely managing their IC inventory levels and according to VLSI research, there does not appear to be a significant over supply at this time. IC inventory is relatively low at 1.1 times billings, compared to 1.5 times billings in early 2008 at the beginning of the downturn. For the full fiscal year revenue was $539 million, an increase of 67% over last year and orders were $569 million, up approximately 76% from last year. On a non-GAAP basis, earnings per share for Q4 were $0.29 and for the fiscal year earnings were $0.57 per share, compared with a loss of a $1.49 in fiscal 2009. Overall, we greatly improved our financial performance in fiscal 2010. For 2011, market research firms continue to forecast growth in IC revenues, which should translate to a positive year to the test industry. Based on channel checks, our customers expect to resume purchasing test equipment at higher rates in Q2, with an increase in investments projected in the second half of the year. As a result, we anticipate our fiscal second quarter revenue to return to a higher level and our annual revenue to grow approximately 20% over 2010. Bob will provide more details about our financial results and discuss our Q1 guidance. Read the rest of this transcript for free on seekingalpha.com