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Atmel (ATML)

Q4 2011 Earnings Call

February 08, 2012 5:00 pm ET


Peter Schuman -

Stephen Cumming - Chief Financial Officer and Vice President of Finance

Steven A. Laub - Chief Executive Officer, President and Executive Director


Brian C. Peterson - Raymond James & Associates, Inc., Research Division

James Schneider - Goldman Sachs Group Inc., Research Division

Blayne Curtis - Barclays Capital, Research Division

Sujeeva De Silva - ThinkEquity LLC, Research Division

Steven Eliscu - UBS Investment Bank, Research Division

Rajvindra S. Gill - Needham & Company, LLC, Research Division

Jeffrey A. Schreiner - Capstone Investments, Research Division

Kevin George Rottinghaus - Cleveland Research Company

John Vinh - Collins Stewart LLC, Research Division

Li-Wen Zhang - Pacific Crest Securities, Inc., Research Division

Betsy Van Hees - Wedbush Securities Inc., Research Division



Thank you. I would now like to turn the call over to Peter Schuman, Director of Investor Relations. You may begin, sir.

Peter Schuman

Thank you, Misty. Good afternoon, and thank you for joining us for Atmel's Fourth Quarter 2011 Earnings Conference Call. A copy of the press release issued today is available on our Investor Relations website. A replay of this call will be available after 5:00 p.m. Pacific today and will be archived for 48 hours. The webcast will be archived on the company's website for 1 year. Access information is provided in today's press release.

Joining us for the call today are Steve Laub, Atmel's President and CEO; and Stephen Cumming, Vice President of Finance and Chief Financial Officer. Stephen will begin the call with a review of our fourth quarter financial results, and Steve will then provide additional information on the business. At the conclusion of Steve's remarks, Stephen will discuss our financial guidance for the first quarter of 2012 and then open the call for questions.

During the course of this conference call, we may make forward-looking statements about Atmel's business outlook, including statements regarding our expectations for market growth, litigation matters and the anticipated course of patent litigation, revenue, target gross and operating margins, product introductions and cost savings for 2012 and beyond.

Our forward-looking statements and all other statements that are not historical facts reflect our expectations and beliefs as of today, and therefore, are subject to risks and uncertainties as described in the Safe Harbor discussion found in today's press release.

During the call, we will also discuss non-GAAP financial measures. The non-GAAP measures are not prepared in accordance with Generally Excepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's press release.

I would now like to turn the call over to Stephen Cumming for the discussion of our fourth quarter financial results. Stephen?

Stephen Cumming

Thank you, Peter. Most of you noticed slight changes to the format of today's earnings press release. Atmel provides both GAAP and non-GAAP results in our earnings release to provide our investors with a better understanding of the results of our ongoing operations.

Many analysts and our closest peer companies continue to exclude equity compensation in their non-GAAP EPS estimates in what is reported in for First Call, FactSet and other reporting services. In an effort to align our non-GAAP results reliably and accurately with these various estimate reporting services, we are now reporting equity compensation by functional areas in our press release to provide increased comparability for the investment community.

The new press release format will increase the comparability of Atmel's actual non-GAAP earnings to those non-GAAP earnings estimates published by analysts, as well as increase the level of comparability of our earnings to those of our closest peer group.

Now let me provide some details of our statement of operations.

Revenue of $383.6 million for the fourth quarter of 2011 decreased 20% sequentially, and decreased 16% as compared to the same quarter in 2010, consistent with our revised guidance and below the low end of our initial guidance of 12% to 16% down sequentially.

After 10 consecutive quarters of sequential revenue growth, the global slowdown in the industrial and Consumer Markets had a significant impact on our business. As we mentioned in our pre-announcement last week, Q4 revenue was also negatively affected by approximately $11 million as a result of rescheduling payments on a receivable related to an Asian distributor. We have a payment in plan in place and expect payment in full by the end of the second quarter.

The full year 2011 revenue was $1.8 billion compared to a $1.64 billion for 2010, representing a 10% increase over the prior year. Excluding the Smart Card divestiture, which occurred during the first quarter of 2010, full year revenue increased 15% during 2011.

Fourth quarter 2011 gross margin was 48.1%. The fourth quarter gross margin was slightly above the midpoint of our guidance range of 48%, plus or minus 50 basis points.

The non-GAAP gross margin was 48.7%. The sequential decrease in gross margin was due primarily to lower factory utilization as a result of decreased revenues due to the downturn. Despite this softness in the semi cycle, our new fab-lite operating model is showing resilience compared to past downturns. In 2009, our gross margin reached the low 30% level.

For the full year 2011, gross margin of 50.4% was a record for the company and was a significant improvement from the 2010 gross margin of 44.3%. The non-GAAP gross margin of 50.8% for the full year 2011 compared to a non-GAAP gross margin of 44.8% in 2010.

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