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PLX Technology, Inc. (PLXT)
Q3 2008 Earnings Call
October 27, 2008 at 5:00 pm ET
James Guzy - Chairman of the Board
Arthur Whipple - Chief Financial Officer, Vice President
Michael Salameh - Chief Executive Officer, Director
Ralph Schmitt - New Chief Executive Officer
Christian Schwab - Craig-Hallum Capital.
Sandy Harrison - Signal Hill Group LLC.
Previous Statements by PLXT
» PLX Technology, Inc. Q3 2009 Earnings Call Transcript
» PLX Technology, Inc. Q4 2008 Earnings Call Transcript
» PLX Technology, Inc. Q2 2008 Earnings Call Transcript
I will start this session with a review of our third quarter financial performance then Mike Salameh, our Chief Executive Officer, will provide more information on our business. I will then provide fourth quarter 2008 financial estimates. James Guzy, our Chairman will then introduce Ralph Schmitt, who will assume the role of PLX CEO on November 3rd. Ralph will have an opportunity to make some comments. There will be an opportunity for your questions after our prepared remarks.
As we begin, I would like to point that certain statements made in the course of this conference call regarding our expectations and our associated projections will be forward-looking statements. These statements will include comments relating to the introduction and adoption of new products, the projection of financial results, our future growth, the development of next generation technologies, and other areas and will be made in both in our prepared remarks and in the subsequent Q&A session. Our forward-looking statements deal with future events and are subject to risks and uncertainties. Our actual results could differ materially from our current expectations. Some of the factors that could cause such differences are described in our press release dated October 27th, 2008, and in our SEC filings including our report on Form 10-Q for the quarters ended March 31 and June 30th , 2008 and on Form 10-K for the year ended December 31st, 2007.
Now let us take a look at this quarter’s financial results. Net revenues for the third quarter ended September 30th, 2008 were $20.8 million. Revenues were down 2% from $21.2 million for the same quarter a year ago and down 11% from $23.4 million last quarter. Net revenues for the nine months ended September 30th, 2008 were $66.9 million up 12% year-on-year. PCI Express product revenues declined in the third quarter by 22% to $9.2 million. PCI Express revenues increased 19% from $7.7 million in the same quarter a year ago. PCI Express revenues represented 44% of the total revenues for the current quarter down from 51% last quarter and up from 36% in the same quarter a year ago. For the nine months ended September 30th, 2008, revenues for PCI Express and legacy businesses were $31.7 million and $35.3 million respectively. Our year-to-date PCI Express revenues grew by 65%. Gross margin was 58.5% down from 59.3% in the prior quarter and down from 61.8% in the same quarter a year ago. This quarter, we provided a $229,000 allowance against our legacy product that reduce gross margin by 1.1 percentage of points. Our gross margin for the nine months ended September 30, 2008 was 59.6% down from 60.6% last year. Our margin on PCI Express products continues to improve overall gross margin decreased due to the increase mix of PCI Express products.
Operating expenses for the third quarter were $11.6 million a sequential decrease of $2.5 million or 18% from $14.1 million in the prior quarter. As expected, R&D costs declined $1.8 million primarily due to take outs from the prior quarter. SG&A spending was down by $625,000 reflecting reduced payroll and related costs, including stock compensation charges and lower commission expense. A worldwide headcount declined slightly to 157 employees, compared to the same quarter a year ago, operating expenses were down $437,000. Research and development expenses were relatively unchanged from the prior year. SG&A expenses were down $475,000 from the prior year due to decreased stock compensation charges and lower commission expense. Interest income expense and other net for the third quarter was $335,000 down from $367,000 in the previous quarter as a result of lower interest rates. Our year-to-date effective tax rates through the third quarter were 25.1%. This rate was based on our year-to-date operating estimates and our assessment to the order of utilization of certain tax credits. During the first quarter, we had $117,000 benefit that was incremental the effective tax rate.
Our GAAP net income for the quarter ended September 30th, 2008 was $798,000 or $0.03 per diluted share. This compared to net income of $997,000 or $0.03 per diluted share in the same quarter a year ago and with a net loss of $75,000 or $0.00 per diluted share last quarter. For the nine months ended September 30th, 2008, we are reporting net income with $1.8 million or $0.06 per diluted share compared to net income of $643,000 and earnings per share of $0.02 for the same period last year. The current quarter net income, included charges of $687,000 for stock-based compensation and $150,000 for amortization of acquired intangibles.