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Molex Incorporated (MOLX)

Q2 2013 Earnings Call

January 23, 2013 9:30 am ET

Executives

Steve Martens

Martin P. Slark - Chief Executive Officer, Vice Chairman, Member of Executive Committee and Member of Stock Option Plan Committee

David D. Johnson - Chief Financial Officer, Executive Vice President and Treasurer

Analysts

Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division

Shawn M. Harrison - Longbow Research LLC

Brian John White - Topeka Capital Markets Inc., Research Division

Sherri Scribner - Deutsche Bank AG, Research Division

Mike Wood - Macquarie Research

Anil K. Doradla - William Blair & Company L.L.C., Research Division

Steven Bryant Fox - Cross Research LLC

Jim Suva - Citigroup Inc, Research Division

Ruplu Bhattacharya

Anthony C. Kure - KeyBanc Capital Markets Inc., Research Division

Amit Daryanani - RBC Capital Markets, LLC, Research Division

Amitabh Passi - UBS Investment Bank, Research Division

James M. Kisner - Jefferies & Company, Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 Molex Earnings Conference Call. My name is Juscinia, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today Mr. Steve Martens, Vice President Investor Relations. Please proceed, Sir.

Steve Martens

Thank you, Juscinia. Good morning, everyone, and welcome to our December 2012 conference call. I'm here this morning with Martin Slark, our CEO, who will provide an overview of the quarter results and comments by market; and Dave Johnson, our CFO, who will cover financial results and guidance for the March quarter. Please visit our website, molex.com, for a copy of presentation materials and to access the replay of this call.

Now we will review our Safe Harbor statements, which are on Slides 1 and 2 of the presentation materials. During the course of this presentation, we will be looking -- we will be providing forward-looking information and referring to non-GAAP measures. Please read carefully the forward-looking statements of our press release and Form 10-K for an understanding of the risks and uncertainties associated with the forward-looking information and the reconciliation of non-GAAP measures to GAAP.

And now, I’ll turn the call over to Martin.

Martin P. Slark

Thank you, Steve, and good morning to everybody and let me wish everyone on the call a happy New Year as well. And perhaps you could now turn to Page 3. Prior to giving you an overview of our results by market, I'd like to give you a quick high-level summary of the key points that resulted from this quarter. As you now know, we reported record revenues for the quarter, and we were pleased to see such strong growth in an uncertain operating environment. Our record revenues were driven primarily by new product launches. In recent years, the economic cycle has overwritten the normal seasonal pattern that we see for orders. However, this year, we did see a normal seasonal slowdown in orders, particularly in the consumer and mobile sectors. The bookings pattern, frankly, continues to be very volatile on a day-to-day basis, and it's very difficult to predict the overriding trend in the market. We still believe that there are growth opportunities as we move into calendar year '13 and during the last quarter, we completed a number of investments that we think will help our future growth. As I said in the release, we are, however, waiting until the post-Chinese New Year period before, we believe, we can get a stronger fix on how calendar year '13 will turn out.

The investments we have made in the last quarter include completing our Affinity Medical acquisition, which is doing very well and reported record results in its first couple of months, and CapEx for our new plants in the Philippines and a new facility in Korea, clearly a high-growth market. In addition, we continue to invest in R&D, particularly in high-speed, high power and microminiature products.

During the quarter, we completed the due diligence on a couple of acquisitions that we decided not to move forward with at this time. As we've stated in prior calls, our acquisition focus will continue to be on the industrial, medical and value-added areas. Despite a challenging environment, our organization continues to operate extremely well. For the quarter, we reported record on-time delivery performance and record quality metrics. We believe that these outstanding levels of customer service will continue to help us win business and key customers.

If you'd now turn to Page 4. During the December quarter, our record revenue was $968 million, and that was up 6% sequentially and 13% from the December 2011 quarter. Our orders decreased 2% -- 2.8% -- 2.6% sequentially but increased 13% from the prior year. The book-to-bill ratio for this quarter was 0.95:1. On a regional basis, we recognized 64% of our revenues in Asia, 25% in the Americas and just 11% in Europe. It will come as no surprise that Europe continues to be the weakest region as revenues were down 3% sequentially and 10% year-over-year, while bookings were down 1% sequentially and 6% year-over-year. I was just in Europe last week and I guess one comment I would make about that is I think at least in some of the major markets, we've seen some bottoming out and some -- improvement in some local trends. However, it's clear that European economy is in very challenging situation.

If you look at the Americas and Asia, both regions grew nicely during the quarter with double-digit increases in revenue measured on a year-over-year basis. The automotive, medical and high-end infotech markets drove increased bookings in the Americas which were up 8% sequentially. In Asia, we benefited from new product launches which was sold primarily into on a range of mobile applications. 21% of our revenue was through the distribution channel which continues to struggle. Our distribution channel was down 3% sequentially, but was up 1% year-over-year.

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