- Revenue met guidance
- Net income beat guidance and more than doubled sequentially
- Consumer electronics revenue slowed, but the industrial and automotive sector remained strong at 43% of revenue
- Gross margin was 54%, up 3.7 percentage points sequentially
- Free cash flow was $39.5 million (21.5% of revenue)
Fellow shareholders:
Our revenue and earnings for the quarter are given below, compared with those of the prior quarter and prior year:
(In thousands, except per-share data)
NON-GAAP GAAP
---------------------------- ----------------------------
Q2 2014 Q1 2014 Q2 2013 Q2 2014 Q1 2014 Q2 2013
-------- -------- -------- -------- -------- --------
Revenue $183,601 $170,283 $193,466 $183,601 $170,283 $193,466
Gross margin 54.0% 50.3% 53.1% 51.9% 45.6% 47.3%
Pretax margin 14.9% 7.3% 11.5% 5.2% -7.5% -3.1%
Net income
(loss) $ 26,723 $ 11,974 $ 21,635 $ 9,527 $ (7,934) $ 3,766
Diluted EPS
(loss per share) $ 0.16 $ 0.07 $ 0.14 $ 0.06 $ (0.05) $ 0.02
Second-quarter revenue increased 8% sequentially, and gross margin increased to 54%, due to a favorable product and end-customer mix. Higher revenue and gross margin produced $0.16 earnings per share in the quarter, up significantly from the $0.07 in the prior quarter.
Our book-to-bill ratio was 0.99, due to a mild, but broad, softening in the consumer electronics sector. However, based on the strength of the automotive and industrial sectors, we remain on track to attain our 2014 revenue forecast, which I communicated to shareholders in our 2013 Annual Report. Those two sectors account for 43% of revenue, more than double our TrueTouch® touchscreen revenue.
Our pretax profit of $27.4 million and our free cash flow of $39.5 million were up quarter-on-quarter by 120% and 102%, respectively, reflecting the fall-through leverage in our current model.
BUSINESS REVIEW
+ Our non-GAAP consolidated gross margin for the second quarter was 54.0%, up 3.7 percentage points from the previous quarter, primarily due to product and end-customer mix. Excluding our Emerging Technologies Division (ETD), our core semiconductor gross margin was 55.8%, the highest level since 2012. ETD revenue nearly doubled year-on-year (see Net Revenue Summary table) and will continue to grow rapidly throughout 2014.
+ Net inventory at the end of the second quarter was flat at $89.0 million.
NET REVENUE SUMMARY
(In thousands, except percentages)
(Unaudited)
THREE MONTHS ENDED
-------------------------------
Jun. 29, Mar. 30, Jun. 30, Sequential Year-over-
Business Unit 2014 2014 2013 Change Year Change
--------- --------- --------- ----------- ------------
PSD(1) $ 74,676 $ 69,347 $ 81,320 8% -8%
MPD(1) $ 85,582 $ 81,323 $ 88,127 5% -3%
DCD(1) $ 17,989 $ 15,590 $ 21,296 15% -16%
ETD(1, 2) $ 5,354 $ 4,023 $ 2,723 33% 97%
--------- --------- --------- ----------- ------------
Total $ 183,601 $ 170,283 $ 193,466 8% -5%
--------- --------- --------- ----------- ------------
Geographic
China and ROW 62% 62% 69% 0% -10%
Americas 17% 15% 13% 13% 31%
Europe 13% 14% 10% -7% 30%
Japan 8% 9% 8% -11% 0%
--------- --------- --------- ----------- ------------
Total 100% 100% 100% 0% 0%
--------- --------- --------- ----------- ------------
Channel
Distribution 68% 68% 75% 0% -9%
Direct 32% 32% 25% 0% 28%
--------- --------- --------- ----------- ------------
Total 100% 100% 100% 0% 0%
--------- --------- --------- ----------- ------------
1. PSD, Programmable Systems Division; DCD, Data Communications Division;
MPD, Memory Products Division: ETD, Emerging Technologies Division.
2. "Emerging Technologies" includes businesses outside our core
semiconductor businesses outlined in Footnote 1. Includes subsidiaries AgigA
Tech Inc., Deca Technologies Inc., and our foundry business unit.
