RF Micro Devices' CEO Discusses Q4 2012 Results - Earnings Call Transcript

RF Micro Devices (RFMD)

Q4 2012 Earnings Call

April 24, 2012 5:00 pm ET

Executives

Doug DeLieto - Vice President of Investor Relations

Robert A. Bruggeworth - Chief Executive Officer, President, Director and Member of Strategic Development Committee

William A. Priddy - Chief Financial Officer, Corporate Vice President of Administration and Secretary

Steven E. Creviston - Corporate Vice President and President of Cellular Products Group

Norman Hilgendorf - Vice President of Corporate Development

Analysts

Cody G. Acree - Williams Financial Group, Inc., Research Division

Edward F. Snyder - Charter Equity Research

Ittai Kidron - Oppenheimer & Co. Inc., Research Division

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

Parag Agarwal - UBS Investment Bank, Research Division

Blaine R. Carroll - Avian Securities, LLC, Research Division

Blayne Curtis - Barclays Capital, Research Division

Aalok K. Shah - D.A. Davidson & Co., Research Division

Vivek Arya - BofA Merrill Lynch, Research Division

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Sujeeva De Silva - ThinkEquity LLC, Research Division

Jaeson Schmidt - Craig-Hallum Capital Group LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the RF Micro Devices Fourth Quarter 2012 Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, April 24, 2012. I would now like to turn the conference over to Douglas DeLieto, Vice President, Investor Relations of RF Micro Devices. Please go ahead.

Doug DeLieto

Thanks very much, Alicia. Hello, everyone, and welcome to our conference call. At 4 p.m. today, we issued a press release. If anyone listening did not receive a copy of the release, please call Samantha Alphonso at the Financial Relations Board at (212) 827-3746. Sam will fax a copy to you and verify that you are on our distribution list. In the meantime, the release is also available on our website, rfmd.com, under the heading, Investors.

At this time, I want to remind our audience that this call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release published today, as well as our most recent SEC filings for a complete description.

In today's release and on today's call, we provide both GAAP and non-GAAP financial measures. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain noncash expenses for unusual items that may obscure trends and our underlying performance.

During our call, our comments and comparisons to income statement items will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today, available on our corporate website, rfmd.com, under Investors. [Operator Instructions]

Sitting with me today are Bob Bruggeworth, President and CEO; and Dean Priddy, Chief Financial Officer. I'm also joined by Eric Creviston and Norm Hilgendorf, who lead our Cellular Products Group and Multi-Market Products Group, respectively, as well as other members of RFMD's management team.

And with that, I'll turn the call over to Bob.

Robert A. Bruggeworth

Thank you, Doug and welcome, everyone. RFMD's revenue performance of $188 million during the March quarter reflected greater than seasonal declines among handset manufacturers in China and in the leading European handset manufacturer. Partially offsetting, this RFMD's ultra-high efficiency power amplifiers and PowerSmart power platforms achieved greater than 15% sequential revenue growth. As a percent of revenue, 3G/4G components represented more than 2/3 of cellular revenue during the March quarter versus approximately 25% 1 year ago. RFMD expanded gross margin by 220 basis points versus the prior quarter and generated approximately $11 million in free cash flow. This is despite reduced revenue and lower factory utilization.

As we begin our June quarter, we're forecasting a return to diversified sequential revenue growth and improving financial performance. Order visibility into China has improved, and we are forecasting sequential growth in the June quarter. It's especially noteworthy that the March quarter represented a turning point for RFMD in China with CPG revenue now split approximately 50-50 between 3G and 2G. This speaks directly to RFMD's greater content opportunity and higher market share in 3G devices.

As a result of key program wins in both CPG and MPG, our 2012 growth drivers are more aligned with the market-leading customers and channel partners. From a market perspective, we continue to enjoy positive secular growth drivers. The overall TAM expansion for 3G/4G is in the early stages of a multiyear cycle, and it is supported by the complementary macro trends of mobility, broadband data and energy efficiency.

In LTE, we are forecasting accelerated global adoption this year as consumers demand higher mobile data rates and as our customers launch new iconic LTE devices to satisfy this demand. In China, RFMD has a broad set of growth drivers in place, with reference design wins in wideband CDMA and TD-SCDMA and with essentially all baseband providers. The China market is transitioning now to 3G, and this has the effect of tripling RFMD's dollar content opportunity in that key market.

In the markets served by MPG, we've seen a stabilization in the macro environment, and we continue to launch new products and technologies to deliver revenue growth. We sharpened our MPG focus to drive growth in 3 major markets: WiFi, wireless infrastructure and GaN power. MPG will continue to reach a broad range of markets and customers with these 3 categories, the most important drivers of MPG's future success.

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