Mindspeed Technologies Management Discusses Q3 2012 Results - Earnings Call Transcript

Mindspeed Technologies (MSPD)

Q3 2012 Earnings Call

July 23, 2012 5:00 pm ET

Executives

Kevin D. Trosian - Vice President of Business Development and Investor Relations

Raouf Y. Halim - Chief Executive Officer and Director

Stephen N. Ananias - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Analysts

Quinn Bolton - Needham & Company, LLC, Research Division

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Krishna Shankar - Roth Capital Partners, LLC, Research Division

Presentation

Operator

Welcome and thank you for joining the Mindspeed Technologies' Third Quarter Fiscal Year 2012 Conference Call. [Operator Instructions] This call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to introduce Mr. Kevin Trosian, who will chair this afternoon's conference call. Go ahead, sir. You may begin.

Kevin D. Trosian

Thank you, and good afternoon to all of you who have joined us for today's call to discuss Mindspeed's fiscal third quarter of 2012 financial results. Our press release issued this afternoon detailing these results may be accessed in the Investors section of our website at www.mindspeed.com.

Today, our CEO, Raouf Halim, will provide some key milestones for the business, a discussion of our announced restructuring and the strategic focus of the company going forward. Following, Steve Ananias, our CFO, will review fiscal third quarter financial results and provide financial guidance for our fiscal fourth quarter of 2012.

Before we begin, I want to remind you that our comments today will include forward-looking statements within the meaning of Federal Securities laws. Forward-looking statements include, among others, statements regarding our expectations, goals or intentions including, but not limited to, our current assessment of the demand environment in our target markets; our assessment of growth opportunities in specific product markets; anticipated financial and operational impact of the restructuring that we announced today, including our ability and anticipated time frame to achieve profitability, revenue and margin targets required to achieve profitability and our current expectations for fiscal fourth quarter net product revenue, non-GAAP gross margin and non-GAAP operating expenses.

These forward-looking statements are based on management's current expectations, estimates, forecasts and projections and are subject to risks and uncertainties that could cause actual results and events to differ materially from those stated in the forward-looking statements. For example, we cannot provide assurances that our announced restructuring plan will result in our achieving operating profitability within the currently anticipated time frames, if at all.

Our business is and any financial projections provided today are subject to numerous risks and uncertainties, including our ability to realize the revenue growth anticipated from various product markets, including any incremental revenues realized from the Picochip acquisition; fluctuations in our operating results and future operating losses, loss of or diminished demand from one or more key customers or distributors; our ability to successfully develop and introduce new products, pricing pressures; and the potential for intellectual property litigation.

Additional risks and uncertainties that could cause our actual results to differ from those set forth in any forward-looking statements are discussed in more detail under the caption Risk Factors in our annual report on Form 10-K for the fiscal year ended September 30, 2011, and will be included in our quarterly report on Form 10-Q for the quarter ended June 29, 2012, as well as our future filings with the SEC.

Forward-looking statements made during this call are made only as of the date hereof and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

During our call today, we will be making reference to non-GAAP financial measures, which excludes stock-based compensation expense and related payroll costs, asset impairments, acquisition-related costs, restructuring charges, reevaluation of contingent consideration, integration costs, employee separation costs, restructuring charges, profit and acquired inventory, amortization of acquired intangible assets and noncash interest expense on convertible notes. For a reconciliation of non-GAAP to GAAP financial measures, please refer to the Investors section of our website at www.mindspeed.com and our earnings press release and our Form 8-K furnished to the SEC today. We do not provide a reconciliation of the forward-looking non-GAAP measures to GAAP measures because of our inability to project restructuring charges, employee separation costs and stock-based compensation-related expenses.

With that, I will now turn the call over to Raouf Halim, our Chief Executive Officer. Raouf?

Raouf Y. Halim

Thank you, Kevin, and good afternoon, everyone. I'm pleased to report that Mindspeed achieved the 3 key milestones that we set out last quarter, despite tracing a difficult macro environment. First, we met our revenue goal. Second, we exceeded our gross margin forecast due to strong product mix. And third, our wireless business continues to ramp as expected.

In the quarter, we reported over $4 million in wireless revenue, greater than 10% of total quarterly revenue. Critically, our wireless initiative is well on track. In the quarter, we recorded 3 new design engagements, including one with a new tier 1 European OEM, bringing our total to 28.

And in a strong confirmation of our leadership position in small cell wireless basestations, we are pleased to report that we have production orders on backlog for our 4G LTE Transcede products and the first wave of Korean deployments for this coming calendar fourth quarter.

Now, as I'm sure many of you have seen from today's press release, we have begun a significant global restructuring. At Mindspeed, one of our core operating principles is to evaluate both near-term as well as long-term opportunities in our industry and to align our investments accordingly. In order to remain a global leader in the areas in which we compete, we must adapt to evolving market realities.

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