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Freescale Semiconductor (FSL)
Q2 2007 Earnings Call
July 19, 2007 5:00 pm ET
Mitch Haws - VP of IR
Michel Mayer - Chairman & CEO
Alan Campbell - CFO
Previous Statements by FSL
» Freescale Semiconductor Q3 2007 Earnings Call Transcript
» Freescale Semiconductor Q1 2007 Earnings Call Transcript
» Freescale Semiconductor Q3 2006 Earnings Call Transcript
Sundar Varadarajan - Deutsche Bank
Jeff Harlib - Lehman Brothers
Guy Baron - Credit Suisse
William Matthews - Canyon Capital Advisors
Robert Hopper - UBS
At this time we would like to thank all participants for holding. Let you know, you'll be in the listen-only mode until the question-and-answer session of today's program. Also the call is being recorded. If you have any objections you may disconnect.
I would now like to turn the call over to Mr. Mitch Haws. Thank you, sir.
Thank you, Mike, and thanks to all of you, and welcome to our Second Quarter 2007 Conference Call. With me as always is Michel Mayer, our Chairman and Chief Executive Officer, and Alan Campbell, our CFO.
The earnings release and financial statements discussed today are available at the Investors Relation section of our website at Freescale.com. This call is being webcast live at the site as well.
Today, we will make certain forward-looking statements and these statements are based on our current expectations and assumptions. Because of the inherent risks and uncertainties in our business our actual results could differ materially from these statements.
Please review our filings with the Securities and Exchange Commission for a detailed discussion of the factors that could cause our actual results to differ materially from the statements made today as well as other factors that could affect our future results.
The presentation is being made on July 19th, 2007 and includes time sensitive information and the Company undertakes no obligation to correct or update any information presented on the call.
Also we will reference certain non-GAAP financial measures today. We believe this helps provide useful information about our ongoing operational performance. You will find at our web site the required reconciliations to the most directly comparable GAAP number.
With that I will turn the call over to Michel.
Thank you. Mitch. Good afternoon. Welcome to the call. Before I start reviewing the quarter, I would like to thank those of you who attended our third annual FTF Freescale Technology Forum at our analyst meeting in Orlando. Some of you were among the 2300 attendees that are top of our support ecosystem; we had 70 partner companies, 200 reps from our key suppliers and global distribution partners, very successfully done.
It is gaining recognition as a premier industry event. We meet our customers, exchange ideas on common design challenges; and we believe we are building strong relationships that will be productive for years to come.
Now let's turn to the quarter. Consistent with the outlook that we discussed during our last earnings call, we continue to generate consistent sales and corporate performance in our consultation, consumer, industrial and networking segment. Both those segments generated strong EBITDA margin.
However, revenues in our wireless business were once again impacted by the challenges at our largest customer. As in Q1, we were surprised by the change in volume and business activity within the quarter; and we responded by optimizing further internal loadings and managing capital expenditures. This allowed us to moderate the impact on our gross margins, EBITDA, and cash.
In addition, we initiated a number of cost reductions that will begin to generate additional savings in Q3. Alan will provide additional details on these actions later in the call. Going forward, we expect consistent performance in our consultation and networking segments. The lack of demand, creditability and visibility in our wireless business will likely continue for a while.
Let's start the review of the businesses with consultation and standout products. TSPG revenue was $684 million, slightly down from last year's $697 million. But you may recall last year we benefited in the second quarter from a spike as we made up for some production challenges at an external foundry early in 2006.
Adjusting for that volume which was really a catch-up from Q1 in '06 revenues were relatively flat year on year. Consistent with prior quarters at a high level what we are seeing is growth in Asia-Pacific, which is helping to offset the impact of the production decline among the North American OEMs.
In the second quarter, Asia-Pac Automotive was up 21% compared to last year. Our sensor products also grew in all segments, as well, with 26% growth over last year. TSPG continues to generate consistent and profitable results and we expect the performance to continue in the coming quarter. We continue to make investments in products and partnerships in TSPG to support that growth.
In consumer and industrial we launched a new Flexis microcontroller series. These devices are the industry's first pin for pin compatible 8, 16 and 32-bit MCU's. Flexis MCUs enables developers to make easily between low-end and high-performance embedded design.
Momentum for the Freescale and STMicroelectronics joint automotive design initiative continued also to accelerate and gain traction with customers. The Company's recently announced the delivery of a common microcontroller architectural platform based on power architecture technology and optimized beta outsets for speed automotive applications.
We continued to expand our Telematics Solutions with the introduction of a low-power system-on-a-chip device that combines power architecture technology with integrated 3-D graphics and mixed media acceleration core. To help meet demands for engine, performance fuel efficiency and environmental expectations, we introduced six standard Smart-MOS analog products for engine management applications.