PMC-Sierra, Inc. (PMCS)
Q1 2010 Earnings Call Transcript
April 22, 2009 4:30 pm ET
David Climie – VP, Marketing Communications & IR
Mike Zellner – CFO
Greg Lang – President and CEO
James Schneider – Goldman Sachs
Romit Shah – Barclays Capital
Sandy Harrison – Signal Hill
Srini Pajjuri – CLSA
Ruben Roy – Pacific Crest Securities
Kevin Cassidy – Thomas Weisel Partners
Mark Lipacis – Morgan Stanley
Allan Mishan – Brigantine
Cody Acree – Williams Financial Group
Eric Ghernati – Bank of America/Merrill Lynch
Previous Statements by PMCS
» PMC-Sierra Inc. F4Q09 Earnings Conference Call
» PMC-Sierra, Inc. Q3 2009 (Qtr End 09/30/09) Earnings Call Transcript
» PMC-Sierra, Inc. Q2 2009 Earnings Call Transcript
Thank you. Good afternoon, everyone, and thank you for attending our investor conference call. With us on the call today is Greg Lang, President and CEO; and Mike Zellner, Vice President and CFO. Please note that our first quarter 2010 earnings release was disseminated today via Business Wire, after market close, and a copy of the release can be downloaded from our website.
Before we begin I would like to point out that during the course of this conference call, we'll be making forward-looking statements that involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, product demand, inventory levels, pricing, exchange rates, taxation rates and other risk factors that are detailed in the company's Securities and Exchange Commission filings. Actual results may differ materially from the company's projections.
For further information about these risks and uncertainties, please read the company's SEC filings, including our forms 10-K and 10-Q. If you're asking a question during the Q&A session of today's call, we request that you limit yourself to one question, if you'd like to ask a second question, please re-queue with the operator.
Thank you. And I'll now turn the call over to Mike Zellner.
Thanks, Dave. I'll review our first quarter 2010 results and financial position then turn it over to Greg to discuss our business activity in detail.
PMC-Sierra had a strong first quarter and reported its fourth consecutive quarter of sequential growth. Revenue in Q1 was $152.8 million. This exceeded a high-end of our guidance for the quarter and reflects an increase of $13.3 million or 9.5% over Q4 and is our highest revenue quarter since 2001.
On a year-over-year basis, revenue increased by over $50 million or 49%, compared with $102.6 million in the first quarter of 2009. Our turn’s business, meaning those orders booked and shipped within the same quarter was 17% in Q1, compared with 23% in Q4 of last year. By reason, Asia continues to generate strong results in this quarter.
In Q1, we have one customer that represented greater than 10% of our revenue, calculated on a rolling 12-month basis. Gross margin in first quarter of 68.1% was at the high-end of our guidance and consistent with the 68.2% in Q4 of last year.
On a non-GAAP basis, operating expenses increased from $54.5 million at Q4 to $59.3 million in Q1. This is in line with our outlook on expenses provided on our last quarterly conference call.
Quarter-over-quarter, approximately half of this increases arises structurally with the payroll related reset of employee benefits at the beginning of the calendar year, and the effect of foreign exchange on our foreign operations.
The other half relates primarily to a combination of higher takeout related expenses in Q1, and the completion of plant hiring and other investments and high potential R&D projects, including the purchase of related intellectual property.
In Q1, we maintain our non-GAAP operating margin at 29%, which is at the high-end of our targeted operating margin range of 25% to 30%. The non-GAAP tax provision was $2 million in the first quarter as guided and similar to the amount for Q4 at $1.9 million.
Non-GAAP income for Q1 was $43.5 million or $0.19 per share on a diluted basis, representing a $4.3 million or 11% increase over Q4 non-GAAP net income of $39.2 million. On a year-over-year basis, non-GAAP net income increased by $31.1 million or over two and a half times the $12.4 million generated in Q1 of 2009.
Q1, GAAP diluted net income per share was $0.12 versus $0.06 in Q4. The increases in net income and the dilutive net income per share on both GAAP and non-GAAP basis were driven primarily by the higher revenues partially offset by higher operating expenses.
The comparable GAAP measures for each gross margin, operating expenses, operating income, provision for income taxes and net income are reconciled to the related non-GAAP amounts in our reconciliation of GAAP to non-GAAP measures included in our press release today.
The primarily reconciling items for Q1 are as follows. 9.8 million amortization of purchased intangible assets, $5.4 million in stock-based compensation expense, $800,000 of non-cash interest expense and $300,000 of net expense related to foreign exchange, income taxes and other item as described in the press release.
Turning to the balance sheet, we entered the quarter with over $486 million of cash and cash equivalent short-term investments and investment securities. Our cash position at quarter end net of the $68.3 million face value of our convertible note was our $418 million reflecting an increase of $32.8 million in first quarter this year.