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Volterra Semiconductor Corporation (VLTR)

Q4 2008 Earnings Call

January 26, 2009 5:30 pm ET

Executives

Mike Burns - CFO

Jeff Staszak - President and CEO

Analysts

Tore Svanberg - Thomas Weisel Partners

Patrick Wang - Wedbush Morgan Securities

JoAnne Feeney - FTN

Christopher Longiaru - Sidoti & Company

Nicholas Aberle - Caris & Company

Gus Richard - Piper Jaffray

Presentation

Operator

Welcome to the Volterra Q4 and year end earnings conference call. During today's presentation, all participants will be in a listen-only mode and following the presentation, the conference will be opened for questions.

(Operator Instructions).

As a reminder this conference is being recorded today, Monday, January 26 of 2009.

Now, I'd like to turn the conference over to Mr. Mike Burns, Chief Financial Officer. Please go ahead, sir.

Mike Burns

Thank you. And welcome everyone to today's conference call. With me to review our fourth quarter and fiscal year 2008 results is Volterra President and CEO, Jeff Staszak.

As we begin today's conference call, I'd like to remind everyone of a few important items. First, today's earnings release and financial statements are available on the Investor section of the company's website at volterra.com.

Also, we're going to discuss certain non-GAAP financial measures on this call, and we've provided a reconciliation of the GAAP and non-GAAP financial measures in our press release. The non-GAAP measures exclude the effect of stock-based compensation expense and special items, such as the effect of accounting changes. Unless, we specifically state otherwise, when we give guidance about a financial measure, we mean the non-GAAP financial measure.

Finally, I'd like to caution everyone that today's remarks contain forward-looking statements that are based on the company's current views and expectations. Our actual results or events may differ materially from these forward-looking statements due to a number of risks and uncertainties.

Please review today's press release and our filings with the SEC, including our Annual Report on Form 10-K filed March 5, 2008 and the Form 10-Q filed on October 30, 2008, for detailed discussion of the risk factors that could cause actual results to differ materially from the forward-looking statements.

In addition, please note that the company undertakes no obligation to update or revise these forward-looking statements.

At this point, I'd like to turn the call over to Jeff to provide an overview of the business and our results.

Jeff Staszak

Thanks, Mike. Good afternoon and thank you all for joining us today. First, I'll provide a short recap of our CY '08 and Q4 '08 financials. In addition, I'll talk a little bit about our nine financial achievements in CY '08 as well. I'll then give a short update on our four focused markets and following this, I'll talk about Q1 '09 and provide guidance for the quarter. Finally, I'll hand it over to Mike to review the details of our financial performance for the quarter and then we will open it up for any additional questions you may have.

First, we are pleased to announce that CY '08 was an outstanding year even though Q4 was impacted by macroeconomic factors beyond our control. Revenue grew from $74.7 million in CY '07 to 104.2 million in CY '08, or 39% growth year-over-year.

Non-GAAP earnings per share increased from $0.17 in CY '07 to $0.73 in CY '08. Gross margins increased from 49.5% in CY '07 to 56.8% in CY '08. This was our seventh consecutive year of revenue growth and fifth consecutive year of profitability.

In addition to the outstanding financial achievements in CY '08, we also had some significant non-financial achievements over for the year which I'll talk about shortly. For Q4 '08 revenue came in for our revised guidance at $21.9 million versus $19.8 million in Q4 '07 and $30.6 million in Q3 '08.

Non-GAAP EPS was $0.09 versus $0.09 in Q4 '07 and $0.25 in Q3 '08. Non-GAAP gross margins decreased from 58% in Q3 '08 to 56.4% in Q4. Several of our non-financial achievements in CY '08 were outstanding as well.

First, we achieved world-class product quality levels based on our customer's assembly results achieving a very low defect rate. We said in our Q2 '07 earnings call that it would take sometime, but we would fix our problems and get our quality to world class levels based on our customer's ratings.

Second, we had another record year of total new products that we started sampling to existing and new customers that will generate revenue in '09 and beyond.

Third, all four of our markets, server and storage, notebook, communications, workstation and graphics grew year-over-year.

Fourth, we continued to diversify our customer base and grew the number of customer's, which generate $1 million or more in revenue per year, from 6 in '07 to 18 in '08.

Fifth, we repurchased $9.9 million worth of Volterra stock and exited the year with a very healthy cash position and zero debt which will enable us to weather out this economic storm.

Now, I'd like to share some more details about our business. Although the current macroeconomic situation has had an impact on our short-term business, our long-term growth and profitability prospects remain very strong. In fact, last week after our annual Worldwide Sales Meeting, I came away feeling more bullish than ever.

We plan on sticking to our proven strategy of gaining market share, adding new customers and further penetrating our existing base of customers, as new products and platforms are launched.

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