QLGC

QLogic Corporation (QLGC)

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QLogic Corporation (QLGC)

F4Q 2011 Earnings Call

May 5, 2011 5:00 pm ET

Executives

Simon Biddiscombe – President and Chief Executive Officer

Jean Hu – Senior Vice President and Chief Financial Officer

H. K. Desai – Executive Chairman

Analysts

Katy Huberty – Morgan Stanley

Glenn Hanus – Needham & Company

Paul Mansky – Canaccord

Keith Bachman – Bank of Montreal

Kaushik Roy – Wedbush Securities

John Slack – Citigroup

Douglas Ireland – JMP Securities

Rajesh Ghai – ThinkEquity

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter Fiscal Year 2011 QLogic Earnings Announcement Conference Call. As a reminder today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Simon Biddiscombe, Chief Executive Officer. You may begin when ready, sir.

Simon Biddiscombe

Thank you, Keith. Good afternoon, and welcome to QLogic’s fourth quarter and fiscal year 2011 earnings conference call. I am Simon Biddiscombe, President and Chief Executive Officer and with me is Jean Hu, our recently appointed Senior Vice President and Chief Financial Officer.

Jean has more than 18 years of financial and corporate development experience and joins us from Conexant Systems where she mostly recently served as Senior Vice President and Chief Financial Officer. Please join me in welcoming Jean to our team.

On today’s call Jean will begin with a review of the fourth quarter and full year 2011 financial results then I will follow with a discussion of the current state of our business. We will then open the call for questions.

With that I’ll turn the call over to Jean. Jean?

Jean Hu

Thank you, Simon, and good afternoon. Certain of our comments today will include forward-looking statements regarding future events and/or projections of the financial performance of the company based on our current expectations. These comments are subject to significant risks and uncertainties that could cause our actual results to differ materially from those expressed in these forward-looking statements.

We refer you to the documents QLogic files with SEC, specifically our most recent Forms 10-K and 10-Q. These documents identify important risk factors that could cause our actual results to differ materially from expectations. We do not intend to update the forward-looking statements that we make today.

In our fourth quarter earnings press release issued earlier today, we reported both the GAAP and the non-GAAP results. All the references we’ll make on our call today relates to non-GAAP results unless otherwise called out. Our reconciliation of non-GAAP to the GAAP financial measures is available on our website under Investor Relations.

Turning now to our financial results for the fourth fiscal quarter ended April 30th 2011. As a remainder to everyone, our fourth quarter included 14 week. Our revenue in the fourth quarter was $152.3 million, an increase of 5% from the same quarter last year. This revenue was at the high end of our guidance range of $148 million to $153 million provided during our third quarter earnings call.

Our fourth quarter revenue from host product which have comprised primarily of fiber channel converged and the 10-Gig Ethernet adapters was $109.1 million and increased 5% from $103.7 million recorded in the fourth quarter of last year.

Fourth quarter revenue from network products which are comprised primarily of fiber channel and InfiniBand switches with $24.3 million and increased 8% from $22.6 million recorded in the fourth quarter of last year. Our fourth quarter revenue from Silicon products comprised over fiber channel converged 10-Gig Ethernet and iSCSI chips was $16.1 million and decreased to 4% from $16.7 million recorded in the fourth quarter of last year. Our service and other revenue was $2.8 million.

Our fourth quarter gross margin of 67.8% improved from 66.6% recorded in the fourth quarter of last year primarily due to higher volume to absorb manufacturing cost. Our gross margin exceeded our forecast of 66% to 66.5% provided during our third quarter earnings call primarily due to product mix.

Next, I would like to cover our fourth quarter operating expenses. Total operating expenses were $58.3 million, up 5% from $55.5 million reported in the fourth quarter of last year. Operating expenses were consistent with our expectation.

Engineering expenses in the fourth quarter of $33.2 million increased 9% from year ago and it increased as a percentage of revenue from 20.9% to 21.8%. Sales and the marketing expenses in the fourth quarter of $18.3 million increased 3% from year ago and it decreased as a percentage of revenue from 12.1% to 12.0%. G&A expenses in the fourth quarter of $6.8 million were 12.5% of revenue.

Operating profit in the fourth quarter of $44.9 million increased 8% from a year ago and increased as a percentage of revenue from 28.5% to 29.5%. Interest and other income was $900,000 in the fourth quarter.

Our income tax rate for the fourth quarter was 14.4% resulting in an annual rate for the full year of 9.3%. Our fourth quarter net income of $39.3 million increased to 21% from a year ago and it represent a net profit margin of 25.8%.

Our fourth quarter net income per diluted share of $0.37 was significantly better than the $0.28 we achieved last year and exceeded the $0.32 to $0.35 range we provided during our third quarter earnings call. This represents 63rd consecutive quarter of profitability for QLogic.

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