LTX-Credence's CEO Discusses F3Q12 Results - Earnings Call Transcript

LTX-Credence Corporation (LTXC)

F3Q12 (Qtr End 04/30/2012) Earnings Call

May 23, 2012 10:00 am ET

Executives

David Tacelli - President and CEO

Mark Gallenberger - VP and CFO

Analyst

Vernon Essi - Needham & Company

Olga Levinzon - Barclays Capital

Patrick Ho - Stifel Nicolaus

Farhan Rizvi - Credit Suisse

David Dooley - Steelhead Securities

Christian Schwab - Craig-Hallum Capital

Tom Diffely - D. A. Davidson

Presentation

Operator

Good morning and welcome to the LTX-Credence Corporation third quarter analyst conference call. (Operator Instructions) At the request of LTX-Credence, this conference call is being recorded. The speakers for today's call will be David Tacelli, Chief Executive Officer and President; and Mark Gallenberger, Vice President and Chief Financial Officer.

At this time, I would like to turn the call over to Mr. Mark Gallenberger.

Mark Gallenberger

Thank you. Welcome to LTX-Credence Corporation's third quarter fiscal year 2012 conference call for the period ended April 30, 2012. Joining me on today's call is Dave Tacelli, CEO and President.

After my introductory comments, Dave will discuss the company's performance for the third quarter and discuss the business outlook. Then I will provide further detail on the company's financial performance during the third quarter as well as provide guidance for the fourth quarter of fiscal year 2012. We will take your questions after our prepared remarks.

A replay of this call will be made available through June 22 by dialing 855-859-2056 and the passcode is 77734913, or you can visit our website at ltxc.com. As a reminder, the only authorized spokespeople for the company are Dave Tacelli, Rich Yerganian and myself.

Now for our Safe Harbor statement. During the course of this conference call, we will make forward-looking statements regarding LTX-Credence's business outlook or the future financial performance of the company. We wish to caution you that these statements such as projected revenues, net income or loss, earnings or loss per share, operating expenses, gross margin, cash flow, non-GAAP measures and breakeven targets are management's current predictions and that actual events or results may differ materially.

These statements provided during this call represent the company's estimates as of this day and the company assumes no obligation to update them after this call. Please refer to our Safe Harbor statement in our earnings release for more information on important factors that could cause actual results to differ.

Now on to the call. Dave?

David Tacelli

Thank you, Mark, and good morning everyone. During today's call, I'll review our third quarter performance and then spend the majority of my prepared remarks on the major factors expected to drive the company's topline growth over the next business cycle.

Our third quarter financial results for revenues were slightly better than the midpoint of our guidance and EPS was better than the high end of the range as our business model continues to perform better than planned. With the momentum in the marketplace, our goal is to reach profitability in the fourth fiscal quarter. As we begin this next business cycle, our financial model is prime to deliver strong results and our newest products are expected to achieve our gross margin target starting with initial shipments.

From balance sheet perspective, we currently have $137 million in cash with no debt. By far, this is the best position the company has ever been in at the beginning of a growth cycle. As revenues climb over the next several years, we expect to generate strong cash flow, which will allow us to invest in all opportunities to grow our business.

While visibility beyond the next three months is limited, the positive information we're getting from customers indicate business expansion into the second half of the year. Utilization rates have increased dramatically across both IDMs and OSATs, and we received multiple requests asking for accelerated deliveries. Fortunately, our outsourced manufacturing model gives us the flexibility to ramp shipments in respond to changing customer demand.

As our guidance suggests, industry conditions are improving and the recovery has broadened beyond the RF power amplifier market. The ASSP and Power Management segments in particular are expected to show recovery for us in the fourth quarter, driven in part by customer wins in the automotive and mobility markets.

Business cycles in the ATE industry generally lasts three years and the shape of the curve is unique to each cycle as external factors such as macroeconomic conditions, disruptive global events or high growth new product introductions influence industry revenues. We don't expect quarter to be up and to the right, but we believe our trend lines for the next two years will be positive. We think this is so because of the general industry trend and because of anticipated growth from our recent product introductions.

We believe our growth in the new cycle will come from three sources: first, leveraging on existing customer base as the business recovery drives capacity expansion; second, incremental business with existing products from several new customers expected to ramp in the second half of the calendar year; and third, new opportunities from our Diamondx product. We expect initial revenues for the engineering and development testers in our fourth quarter and revenues associated with volume production in our first fiscal quarter starting in August.

During our last conference call, we discussed the imminent launch of our new product, Diamondx, at SEMICON China. Diamondx is targeted at the ASSP market and approximately $400 million market segment of the SoC tester space. The launch was extremely successful and the customers thought that the new product was even better than anticipated.

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