PSEM

Pericom Semiconductor Corporation (PSEM)

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Pericom Semiconductor (PSEM)

F3Q10 (Qtr End 03/27/10) Earnings Call

May 03, 2010 4:30 p.m. ET

Executives

Robert Strickland - Director, IR

Aaron Tachibana - CFO

Alex Hui - President & CEO

Analysts

Suji De Silva - Kaufman Brothers

Hans Mosesmann - Raymond James

Christopher Longiaru - Sidoti & Company

Presentation

Operator

Good day ladies and gentlemen and welcome to your Pericom Semiconductor Third Quarter 2010 Earnings Conference Call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Robert Strickland.

Robert Strickland

Thank you. Good afternoon and welcome to Pericom's third-quarter fiscal 2010 conference call. Our speakers today are Alex Hui, President and CEO, and Aaron Tachibana, our recently appointed CFO. Before we get started, please be aware that we will be presenting several visual slides during management's discussion of the business. To view these slides, please go to www.pericom.com and click on the Investors link.

Today the Company will discuss its financial results, comment on the industry and on Pericom's business and provide guidance for the fourth quarter of fiscal 2010. Certain matters discussed in the press release and on this conference call may contain forward-looking statements that involve risk and uncertainty.

Therefore, we encourage you to review all filings made by the Company with the Securities and Exchange Commission, particularly the risk factors sections of such filings. In accordance with regulations of fair disclosure, Pericom will continue to only provide guidance via its earnings release and its conference calls. The Company will not provide further guidance or updates during the quarter unless it does so via a press release.

Aaron will discuss the financial performance for the quarter, and Alex will give his comments on the industry and on Pericom's business. Then he will provide guidance for the fourth quarter of fiscal 2010. Aaron?

Aaron Tachibana

Thank you, Bob, and good afternoon, everyone. This is my first conference call with Pericom as I recently joined the Company about a month and a half ago. I am thrilled to be a part of this team and I look forward to working with all of you going forward.

Our fiscal year 2010 third quarter results were better than expected with net revenues growing by 2.4% sequentially and by 50% year over year. We increased gross margin by 166 basis points over last quarter. Also, GAAP net income exceeded last quarter by 23% and was nearly 1,100% higher year-over-year.

Now let's review some of the detail. Our consolidated net revenues for the third quarter were $36.7 million and represented a 2.4% increase from the $35.8 million reported last quarter and a 50.3% increase over the $24.4 million for the same period last year. End-market shipments were as follows; computer, 47%; communication, 35%; consumer, 12% and 6% from all others. Geographic distribution was as follows; U.S., 10%; Asia, 85% and Europe, 5%. Channel sales mix was as follows; domestic distribution, 7%; international distribution, 55%; contract manufacturers, 22% and OEMs were 16%.

Consolidated gross margin for the third quarter was 35.3% and was 166 basis points higher than last quarter's 33.6% and 22 basis points lower than the 35.5% for the same period last year. Gross profit was $12.9 million for the third quarter, compared with $12 million reported last quarter and $8.7 million for the same period last year.

Operating expenses were $10.5 million for the third quarter, compared with $10.4 million last quarter and $9.4 million for the same period last year. Share-based compensation expense for the third quarter was approximately $1 million.

Operating income for the third quarter was $2.5 million, compared with $1.7 million last quarter and an operating loss of $0.8 million for the same period last year. We were extremely pleased with the 49% sequential increase in our operating income for the quarter concluded. Interest and other income was $1.2 million for the third quarter, compared with $1.3 million last quarter and $1.5 million for the same period last year. Income generated from our unconsolidated affiliates, PTI and JCP, was $0.6 million.

Income before tax was $3.7 million for the third quarter, compared with $3 million last quarter and $0.7 million for the same period last year. The third quarter effective tax rate was 34% and was approximately the same as last quarter. GAAP net income for the third quarter was $3.1 million or $0.12 per share, compared with $2.5 million or $0.10 per share last quarter and $0.3 million or $0.01 per share for the same period last year.

Now let's turn to the balance sheet. Cash including both short and long-term investments and marketable securities, was $126 million at the end of Q3 and was about the same level as last quarter. Working capital was $136 million at the end of Q3. Accounts Receivable was $22.5 million and the DSO was approximately 56 days for the quarter. Net inventory was $18.6 million, equating to approximately 71 days of supply.

Our book value was $8.69 per share. During the quarter, we also repurchased approximately 338,000 shares of common stock at an average price of $9.46 per share. The total cost of repurchase was $3.2 million. Cash plus investments were $4.98 per share at the end of Q3.

Read the rest of this transcript for free on seekingalpha.com