PLX Technology, Inc. (PLXT)
Q3 2009 Earnings Call Transcript
October 27, 2009 6:00 pm ET
Arthur Whipple – CFO
Ralph Schmitt – President and CEO
Christian Schwab – Craig-Hallum Capital
Richard Shannon – Northland Securities
Neil Kenyon [ph] – Kenyon Securities [ph]
Sandy Harrison – Signal Hill Group
Previous Statements by PLXT
» PLX Technology, Inc. Q4 2008 Earnings Call Transcript
» PLX Technology, Inc. Q3 2008 Earnings Call Transcript
» PLX Technology, Inc. Q2 2008 Earnings Call Transcript
Actually, Troy, thank you for the promotion. I am actually just the CFO. Good afternoon and thank you for joining us today. I will start this session with a review of our third quarter 2009 financial performance, and Ralph Schmitt, our CEO, will provide more information on our business. I will then provide fourth quarter 2009 financial estimates. There will be an opportunity for your questions after our prepared remarks.
As we begin, I’d like to point out that certain statements made in the course of this call regarding our expectations and associated projections will be forward-looking statements. These statements will include comments related to the introduction and adoption of new products, the projection of financial results, the development of next generation technologies and other areas, and will be made 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 and 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 27, 2009, and in our various SEC filings including our reports on Form 10-Q for the quarters ended March 31, and June 30, 2009, and on Form 10-K for the year ended December 31, 2008.
A press release issued earlier today includes financial statements and other information related to our performance this quarter. Let us look at some of the highlights from that information. Net revenues for the third quarter were $21.6 million, up 19% from $18.2 million last quarter, and up 4% from $20.8 million from the same quarter a year ago. The increase in revenues this quarter was led by PCI Express, which grew 28% quarter-over-quarter.
Storage and legacy revenues also showed healthy growth with a 13% and 14% increase respectively quarter-over-quarter. PCI Express revenues, storage revenues, and legacy revenues were 36%, 28%, and 36% of revenues respectively.
In the third-quarter, gross margin was 56.3%, up slightly from 55.6% in the prior quarter. Operating expenses for the third quarter were $14.2 million. Quarter-on-quarter R&D costs net of stock compensation charges declined 7% associated with higher take-out related costs in the prior quarter.
Interest income expense and other net for the third-quarter was income of $149,000 compared to expense of $2.5 million in the previous quarter. The second quarter charges primarily rose from the interest and fair value adjustments on the Oxford Acquisition Note. We closed our Singapore office this quarter and incurred expenses of $171,000 for severance and lease termination costs.
On the balance sheet, cash investments declined by $229,000 in the current quarter to $38.5 million. Accounts receivable were $8 million for a DSO of 34 days. We had $8.3 million or 81 days of inventory on hand at the end of the quarter. At the end of the quarter, we had 201 full-time and four part-time employees.
Now Ralph has some comments on the business.
Thanks, Art. We are pleased with the results from this as business trends continued to improve. As we discussed on last quarter’s call, we expected our enterprise business to improve. Actually every aspect of our business grew in the quarter with PCI Express leading the way.
Our PCI Express growth came through diversification. We are no longer relying on a single large customer as our top three customers are within a few hundred thousand dollars of each other. This customer diversification is very good for our long-term prospects. Besides customer diversification there is also a market diversification as our newer penetrated markets of storage, networking and embedded now account for close to 50% of the PCI Express total up from just 35% two quarters ago.
We are expecting a record unit number in PCI Express for calendar Q4. This diversification will further enhance with the enablement of the high-end motherboards used mostly for graphics. This application is starting to take hold as we announced in a press release during the quarter. ASUS is a first in a string of other such wins at major PC ODMs.
We again led the market by releasing the largest switch available at 96 lanes. This product is enabled with a feature called ACS, which is now being dictated by Intel as a must have in new I/O virtualization implementation for data centers.
Access control service or ACS is used to eliminate data corruption between I/O subsystems. This is a key differentiator for PLX. In the consumer storage business, we had a record quarter for NAS shipments surpassing our dollar shipment for all of last year in a single quarter. This continues to be a growth opportunity that consumers are more rapidly adopting this network technology due to improved performance and ease of use.