IXYS Corporation (IXYS)

IXYS 
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IXYS Corp. (IXYS)

F3 Q08 (Qtr End 12/31/07) Earnings Call

February 6, 2008 5:00 pm ET

Executives

Dr. Nathan Zommer - President and CEO

Uzi Sasson - COO and CFO

Analysts

Todd Cooper

Christopher Longiaru

Manoj Nandakani

John Gordon

Operator

Good day, everyone, and welcome to the IXYS Third Quarter Ending December 31, 2007 Earnings Conference Call. Today's conference is being recorded. For opening remarks and introduction, I'd like to turn the call over to the Chief Executive Officer and President, Dr. Nathan Zommer. Please go ahead sir.

Nathan Zommer

Thank you. Good afternoon and welcome to the IXYS Corporation's third quarter earnings conference call from our new Silicon Valley headquarters. I am joined by Uzi Sasson, our COO and CFO. Uzi will lead us through the financial discussion later in the call.

First, to review the formalities, our discussion today contains forward-looking statements, including statements related to potential future revenues and earnings. Any statements in this conference call that are not statements of historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause the result of IXYS to differ materially from those indicated by these forward-looking statements including among others, risks detailed from time-to-time in our SEC reports, including our quarterly report on Form 10-Q for the quarter ended September 30, 2007. IXYS does not undertake any obligation to update forward-looking statements.

In the December 2007 quarter our net income was $2.2 million or $0.07 per share on a diluted basis as compared to a $6000 or $0.00 per share on a diluted basis in the same quarter of the preceding year. Revenues for the third quarter of fiscal 2008 was $73.1 million an increase of 1.2% as compared to $72.3 million in the last year's comparable quarter.

The increase in revenues can be attributed to stronger sales in power semiconductors and modules. However, sequential quarter revenues were affected primarily by weaker integrated circuit buying and shorter working days in holidays. As a percentage of our total revenues from the third quarter fiscal 2008, North America represented 25.8%, Europe 38.3%, Asia, 30.1% and the rest of the world 5.8%.

Our revenues by market segments for the third quarter of fiscal 2008 were as follows. Industrial and commercial 48%, communication infrastructure 13%, medical and electronic 12%, consumer 11% and others 16%.

Although revenues have been relatively flat and holding up invertible of market, we continue to see our product lines into our strong market. However, we are still seeing relative weakness in our ASIC business and our telecommunication ICs. We are investing in no integrated circuit products that are in line with our strategy for the medical, industrial display and power management markets, and are transitioning some of our ASIC business to more application specific standard products. There has been early market acceptance for our display in our HVIC for new lighting applications, which indicate the return to growth in the IC business.

Our revenues based on products groups for the third quarter fiscal 2008 were $79.9% for power semiconductors, 11% for integrated circuits and 9.1% for systems and RF. Importantly our systems sales are reaching record level of growth by unit and revenues. We continue to see strong demand in our core power semiconductor business and we intend to return to record shipping levels to meet the demand.

Margin, gross profit for the quarter was $20.8 million as compared to $22.5 million of the year ago quarter. Gross margin was 28.4% for the quarter, as compared to 31.1% for the prior year quarter. Importantly margins were up sequentially quarter-over-quarter by 2.1%, much of this can be attributed to increased fab utilization and then an increased average in power semiconductors.

To improve our gross margins we are working on; one, focusing our products on high margins applications including industrial telecom and medical; two, the result of our new distributors and building up these relationships to offer multiple products; three, executing our internal policy to meet minimum margin targets and turning down orders that don't meet that level; four, reducing material costs and negotiating lower wafer for application prices and assembling costs; five, investing in integrated circuit R&D to develop higher margins products and new power devices with hope of better price performance; and six, increasing our in-house fab utilization and consolidating assembly and testing operations.

Next, the demand for our products remains on; backlog was a record $110.7 million as compared to $109.9 million in the prior quarter. For the quarter, the book-to-bill ratio was 1.01. We are pleased to see that the backlog held up and even increased reinforcing our current strategy of diversification in product lines, technology and geography.

Net inventory increased by $1.1 million during this quarter over the last. We have made this investment for three reasons: first to expand our distribution business capacity, second to ensure that we could amply supply products to our customers with delivery times and third to sustain our supply with silicon and packaging materials in our outsourced foundries and subcontractors.

At this point inventories mostly raw material end and partially finished products, as our product is usually shipped immediately to the customer once production is finished. Our goal is to reduce inventory by shipping more products on hand in the coming months limiting wafer purchases and shaping cycle times from order to delivery.

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