CSR Plc ( CSR)

Q4 2011 Earnings Call

February 20, 2012 9:00 AM ET


Joep van Beurden – CEO

William Gardiner – CFO



Good afternoon and welcome to the Fourth Quarter and Full Year 2011 Results Conference Call. Throughout the call, all participants will be in listen-only-mode. (Operator Instructions) Just to remind you, this conference call is being recorded.

Today, I’m please to present Joep van Beurden. Please begin.

Joep van Beurden

Thank you. Good morning and welcome to CSR’s Q4 2011 and full year results presentation. My name is Joep van Beurden, CEO, and with me is Will Gardner, our CFO. Will and I will be making forward-looking statements. Before we start, I would like to draw your careful attention to our cautionary statement.

During today’s presentation, we will reference estimates, plans and expectations that are forward-looking statements. The actual outcomes could differ materially due to the factors we note on this slide and in our regulatory filings. Please take a moment to carefully read the cautionary statement and refer to the disclosure in today’s earnings release as well as the filings with the U.S. Securities and Exchange Commission on Forms 20-F and 6-K for more details.

Today’s agenda, first, I will give you the overview of our Q4 and 2011 performance. Then Will will review the numbers. I’ll discuss outlook and go to Q&A. First, the key messages. In 2011, we made progress in our transition to being a provider of higher margin platforms to multiple end markets. That being said, we have a lot of work to do to complete that transition: further improving margins, reducing cost, allocating our capital to areas where we can grow, improving our profitability.

For Q4 2011, our revenues came in at $244 million towards the top end of our guidance. We saw year-over-year revenue growth in Automotive of 15% and in Home of 32%. The declines in Personal Navigation Devices, or PNDs, of 56% and in handsets of 11%.

In the fourth quarter, our underlying gross margin continued to improve to 51%, up from 48.7% in Q4 2010, as we got an increased proportion of our revenue from higher-margin platforms. We have confidence in our future prospects, and as a reflection of that confidence, the board is recommending a final dividend of $7.01, resulting in an annual dividend for 2011 of $10.03 per share, an increase of 5% on 2010.

In addition, we are announcing up to a $50 million share buyback. As you know, we have platforms in voice and music, automotive infotainment, digital cameras and imaging, and we are pleased with the momentum we have in those markets.

Before I talk about the performance of our business groups, let me update you on the Zoran integration and our cost reduction programs. We have largely completed the integration with Zoran, and we have made good progress delivering towards the $130 million in costs savings as a result of both integration and our decision to no longer invest in the development of DTV SOCs, Set-Top Box SOCs, and Digital Tuners.

Our head count, which stood at 3,185 at the end of Q3, was down to 2,783 by December 31. We expect to be at around 2,400 by the end of Q2 2011.

If you look at our underlying Q4 OpEx run rate, we are well on our way, delivering $130 million in cost reduction by the end of Q2 2012. And as we implement our cost reduction plan, we will continue to look for opportunities to increase our efficiency and thereby accelerate our progress towards delivering our targeted levels of R&D and SG&A expense as a percentage of revenue.

Next, I will review the performance of our four business groups, starting with Auto. The Auto group consists of two main parts, Automotive Infotainment and PNDs. The group’s $45.4 million revenue includes $2.3 million from Zoran. In Q4, strong growth in Automotive Infotainment of 15% was more than offset by a decline in PNDs of 56%, as navigation and location capabilities are moving towards in-dash navigation and smartphones.

We also faced increased competition in the PND segment. For the year, this has resulted in an 8% revenue decline for auto, from $233.1 million in 2010 to $205 million in 2011. Looking ahead, we do expect continued growth in the Automotive Infotainment market and ongoing decline in the PND market, and we are managing our investment accordingly. We do see good design win traction in Automotive Infotainment, both in SOCs and connectivity.

Moving on to the Homes Business Group, the Home Business Group consists of voice and music, consumer electronics, and imaging. DTV set-top box and digital tuners are reported separately under the Legacy Products Group. The group’s $72.9 million Q4 revenue includes $15.1 million from Zoran. Excluding Zoran, Home grew with 5% from Q4 2010. Growth came from voice and music and gaming, (audio gap) where we added a major customer. For the year, our revenues in Home of $269 million are 14% higher than in 2010, driven by $20 million in additional revenue from Zoran, the growth in stereo audio and the gaming win.

On the platform side, we launched our Bluetooth SMART platform with the μEnergy development kit. Our design wins were strong with the number of Stereo Bluetooth sync qualifications with CSR voice and music silicon inside at 310 in 2011, up from 134 in 2010. This represents a market share of more than 90% for both years. We saw design wins for computer mice and keyboards for our Bluetooth SMART products. Timex selected SiRFstarIV for their GPS enabled sport watch, and aptX was chosen by a whole range of audio companies such as Cambridge Audio, Gear4 and NAD, which leads me to Mobile.

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