Intersil Corporation (ISIL)
Q1 2009 Earnings Call
April 22, 2009 4:45 pm ET
Dave Bell - President and CEO
Jonathan Kennedy - SVP and CFO
James Schneider - Goldman Sachs
Parag - UBS
Ross Seymore - Deutsche Bank
Romit Shah - Barclays Capital
Shawn Webster - JPMorgan
Tore Svanberg - Thomas Weisel Partners
Steve Smigie - Raymond James
Mahesh Sanganeria - Royal Bank of Canada
Terence Whalen - Citi
Doug Freedman - Broadpoint
Joanne Feeney - FTN Equity
Blayne Curtis - Jefferies
Patrick Wang - Wedbush Morgan Securities
Previous Statements by ISIL
» Intersil Corporation Q4 2008 Earnings Call Transcript
» Intersil Corporation Q3 2008 Earnings Call Transcript
» Intersil Corporation Q2 2008 Earnings Call Transcript
I would now like to turn the presentation over to your host for today’s call, Mr. Jonathan Kennedy, Chief Financial Officer of Intersil. Mr. Kennedy please proceed.
Thank you Tanya. Good afternoon and thank you for joining us today for Intersil's first quarter 2009 Earnings Call. Today with me is Dave Bell, Intersil’s President and Chief Executive Officer. In a few moments, we will deliver remarks on the first quarter of 2009, and provide a summary of our business outlook. After our prepared comments, we will open the line for questions.
We completed our first quarter on April 3, 2009. A press release was issued today at approximately 1:10 pm Pacific Time. A copy of this press release is available on the Investor Relations section of our website at intersil.com.
In addition, this call is being webcast live over the internet and may also be accessed via the Investor Relations section of our website. A replay of the conference call and the webcast will be available for two weeks through May 6th.
Please note that some comments made during today’s conference call may contain forward-looking statements. I would like to remind you that, while these statements reflect our best current judgment, they are subject to risk and uncertainties that could cause our actual results to vary. These risk factors are discussed in detail in our filings with the Securities and Exchange Commission.
In addition, during this call, we may refer to financial measures that are not prepared according to Generally Accepted Accounting Principles. We sometimes use these non-GAAP measures, because we believe they would provide useful information about the performance of our business and should be considered by investors in conjunction with GAAP measures that we also provide.
For those of you interested in learning more about Intersil, we will be presenting during the second quarter at JPMorgan Global Technology Conference in Boston on May 20th and the UBS Global Technology Conference in New York on June 8th.
Before I turn the call over to Dave, I would like to welcome Brendan Lahiff, as our new Senior Manager of Investor Relations. Brendan has many years of Investor Relations experience and will add significant benefits to our efforts. So please feel free to contact Brendan directly for any of your IR requests.
Now, I'll now turn the call over to Dave.
Thanks, Jonathan. Good afternoon and thank you for joining us today for Intersil's first quarter 2009 earnings conference call.
First I would like to congratulate Jonathan Kennedy on his promotion to Senior Vice President and CFO. Jonathan became Interim CFO four months ago, during very challenging business conditions and we have all been impressed at how quickly he came up to speed. We expect Jonathan’s leadership will help drive Intersil forward and assist us in achieving our strategic goals.
Now, let's move on to review of the first quarter. For the first quarter in 2009, we achieved net revenues of $118. 2 million, a decline of 42% from the same quarter last year, but above the high end of our guidance range of $105 million to a $115 million.
This result was driven primarily by a stronger than expected rebound in our computing business. Not surprisingly, the strong mix of shift put more pressure on gross margin than we had forecast and Jonathan will discuss this further in his remarks.
We continued our tight control of operating expenses in response to the poor macroeconomic conditions and again reduced OpEx by over 10% sequentially from the fourth quarter.
These reductions were the result of various initiatives including the elimination of salary increases and bonuses, operational shutdowns, travel constraints and hiring restrictions. These expense controls ultimately led to earnings per share of $0.02 also considerably better than our expectations.
We also continued to make progress on several previously announced long-term cost saving initiatives, including the consolidation of our two Florida wafer fabs, migrating from gold to copper bond wire and releasing products on our new quarter micron process. These initiatives are still on track and we expect to reap incremental rewards as we progress through 2009.
Our strong business model, combined with rapid expense controls, enabled us to generate over $11 million in free cash flow during the quarter. We remained very confident in our unique business model and as a result the Board of Directors has authorized quarterly dividend of $0.12 per share of common stock. At our current stock price, this results in a dividend yield of nearly 4%.
The strong bookings during the last part of Q1 and a positive book-to-bill so far in Q2, we're confident that we've turned the corner in this downturn. The computing market was hit very early with sharp declines in Q4 that is now on recovery. However, the consumer, industrial and communication's markets were slower to respond to the downturn and continue to be soft. The recovery in those markets is likely to lag by appropriately one quarter.
Despite improvement in the overall business, visibility remains limited with very short lead-times and many orders particularly in the PC market. Having reduced distributor inventory significantly during the last two quarters, we now plan to increase inventory modestly during the currently quarter, so we can respond to such short lead-time orders.
As we discussed at our Analyst Day in February, our efforts for SAM expansion are beginning to take hold. Our recent acquisitions of D2Audio, Kenet and Zilker Labs have all been very successful and have contributed significant number of design opportunities and design wins during the last quarter.
We continue to build closer and more strategic relationships with our key customers as we move to the left in the selling cycle selling cycle resulting in many strategic design opportunities.
This multitude of opportunities, fueled both by acquisitions and in-house development, is diversifying our product portfolio and leading to a more balanced business. However, growth in the industrial, infrastructure, and automotive markets, requires long-term investments and patience; so we don't expect to achieve the desired balance in our business until 2011.
At this time, I'd like to turn the call over to Jonathan Kennedy, who will provide a financial summary. I'll then discuss results from each of our end markets and provide additional comments on our second quarter 2009 outlook. Jonathan?
Thanks, Dave. Okay, let me begin with the income statement. As Dave stated, we reported $118.2 million in net revenue for the first quarter of 2009, a 42% decline from the same quarter last year, and a 10% decline sequentially. Quarter rates increased steadily throughout the quarter, with particular strength during February, and we ended the quarter with a book-to-build greater than one.