QLogic Corporation (QLGC)
Q2 2013 Earnings Call
October 25, 2012 05:00 pm ET
Jean Hu - Senior Vice President of Finance and Chief Financial Officer
Simon Biddiscombe - President and Chief Executive Officer
Amit Daryanani - RBC Capital Markets
John Slack - Caris & Company
Jayson Noland - Robert W. Baird
Harsh Kumar - Stephens Incorporated
Scott Schmitz - Morgan Stanley
Jung Pak - BMO Capital Markets
Previous Statements by QLGC
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» QLogic Corporation CEO Discusses F1Q13 Results - Earnings Call Transcript
At this time, I would like to turn the conference over to Jean Hu, Chief Financial Officer for QLogic. Please go ahead.
Thank you, operator. Good afternoon and welcome to QLogic's second quarter fiscal year 2013 earnings conference call. Joining me on the call today is Simon Biddiscombe, our Chief Executive Officer. I'll begin the call with a review of the second quarter financial results. Simon will follow with a customary business update. We'll then open the call for questions.
Certain of our comments today will include the forward-looking statements regarding future events and our projections of our financial performance 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 statement that we make today.
In our second quarter earnings press release issued earlier today, we reported both GAAP and non-GAAP results. All of the references we will make on our call today relate to non-GAAP results unless otherwise stated. A reconciliation of non-GAAP to GAAP financial measures is available on our website under Investor Relations.
Turning now to our financial results for the second fiscal quarter ended September 30, 2012. Our revenue in the second quarter was $117.9 million, compared to $136.3 million recorded in the same quarter last year. This revenue was above the middle point of our guidance range of $115 million to $120 million provided during our first quarter earnings call.
Our second quarter revenue from Host Products, which are comprised primarily for Fibre Channel, converged 10-Gig Ethernet adapters was $89.6 million, compared to $103.4 million recorded in the second quarter of last year. Second quarter revenue from Network Products, which comprised primarily of Fibre Channel switches and was $17.6 million, compared to $19 million recorded in the second quarter of last year.
Our second quarter revenue from Silicon Products comprised of Fibre Channel, converged, 10-Gig Ethernet and iSCSI chips was $10.7 million and consistent with our expectation.
Our second quarter gross margin of 67.6% declined from 68.8% recorded in the second quarter of last year, primarily due to unfavorable product mix. Our gross margin was consistent with our guidance range of 67% to 68% provided during our first quarter earnings call.
Next, I'd like to cover our second quarter operating expenses. As a reminder, we continue to invest in engineering in order to address increased opportunities and expand our server markets while aggressively managing sales, marketing and G&A costs.
Total operating expenses were $59.4 million, up from $55.5 million reported in the second quarter of last year. Operating expenses were consistent with our expectation. Engineering expenses in the second quarter of $34.9 million increased from $31.8 million last year.
Sales and marketing expenses in the second quarter were $18.1 million and increased from $16.8 million last year, primarily due to products samples associated with increased new design win opportunities and qualifications. G&A expenses in the second quarter of $6.4 million decreased from $6.9 million last year. Operating income in the second quarter of $20.3 million was 17.2% of revenue.
Interest and other income was $1.1 million in the second quarter. Our income tax rate for the second quarter was 20.8%. Our second quarter income from continuing operations of $16.8 million represent (Inaudible) of 14.3%. This is 69th consecutive quarter of profitability for QLogic. Our second quarter income from continuing operations per diluted share of $0.18 was within our guidance range of $0.15 to $0.20 provided during our first quarter earnings call.
Turning now to our balance sheet. Our cash and marketable securities were $484 million or more than $5 per share at end of the second quarter. We continue to maintain a very strong cash position and have no debt. During the second quarter, we generated $42 million of cash from operations.
We remain committed to our stock buyback, and during the quarter we purchased $41 million of company's common stock. Receivables were $72.9 million at end of the second quarter. DSO at the end of the second quarter was 56 days, compared to 55 days at end of the first quarter. Inventory was $21.8 million at the end of the second quarter. Annualized inventory turns for the second quarter was 7, compared to 7.6 turns achieved in the first quarter.
Turning now to our near-term outlook. We continue to see macroeconomic conditions as a major hurdle and enterprise data center spending forecast have weakened for the six last year. Server unit sales in the enterprise data center remain enterprise share, and according to Gartner, our largest customers are clearly being more negatively impact within the total markets.