Hittite Microwave Corp. Q1 2008 Earnings Call Transcript

Hittite Microwave Corp. (HITT)

Q1 2008 Earnings Call

April 24 2008 5:00 pm ET

Executives

Steve Daly - Chairman and CEO

Bill Boecke - VP, CFO

Analysts

Jeff Kvaal - Lehman Brothers

Amit Kapur - Piper Jaffray

Dan Morris - Oppenheimer

Quinn Bolton - Needham & Company

John Hailer - HHR Asset Management

Tore Svanberg - Thomas Weisel Partners

Presentation

Operator

Good day and welcome to the Hittite Microwave first quarter 2008 teleconference. As a reminder, today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Steve Daly, Chairman and CEO of Hittite Microwave Corporation. Please go ahead sir.

Steve Daly

Thank you. Ladies and gentlemen, good afternoon and welcome to Hittite Microwave Corporation's first quarter 2008 conference call. With me today is Bill Boecke, our Vice President and Chief Financial Officer. Before I begin the discussion, I'd like to review the Safe Harbor Statement.

Please note that statements made in this conference call about Hittite's future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors. For information about these factors, I refer you to the earnings release that we issued earlier today and into our Annual Report on Form 10-K filed with the Securities and Exchange Commission.

The earnings release along with other financial and statistical data that we may discuss on the call and copies of our SEC reports are available free of charge in the investor relations section of our website at www.Hittite.com. You may also obtain copies of our SEC reports and a copy of our press release furnished under Form 8-K from the SEC's website at www.SEC.gov.

Today's conference call will be structured as follows; first, I will summarize our first quarter performance; next, Bill will review in detail our first quarter financial results. When Bill is finished, I will provide revenue and earnings guidance for the second quarter of 2008. I will then invite listeners to ask questions regarding the past quarters results. Following the question period, I will make some brief closing remarks.

We began the year with a solid first quarter and we're pleased with the results. Our revenue for the first quarter was $43.3 million, an increase of 1.9% over the fourth quarter of 2007 and 19.2% year-over-year.

Net income was $13 million, a decrease of 2.4% over the fourth quarter of 2007 and an 8.8% increase year-over-year. Our revenue and operating profits were in line with our plan.

On a geographic basis 42% of our first quarter revenue was from domestic customers and 58% from international customers. Year-over-year our domestic and international revenue growth was strong at 11% and 26%, respectively. Going forward we expect international growth to continue to outpace our domestic growth.

The revenue distribution across our target eight markets was similar to that seen throughout 2007. In the first quarter three of the eight end markets accounted for approximately 72% of our total revenue. These markets are cellular infrastructure, microwave and millimeter wave communications and military. The remaining target markets, automotive, broadband, fiber optic, space, and test and measurement accounted for 28% of our revenue. Due to timing we experienced strong performance from our space and automotive end markets in the quarter.

In general, the global demand for high data rate communications service is driving our customers to either upgrade or deploy new equipment. Hittite is well positioned to benefit from this trend in our strategy of providing analog and mixed signal ICs for these markets remains the same. Demand in the microwave and cellular market segments was driven by telecom infrastructure deployments across Asia and Eastern Europe.

Demand from our broadband market was driven by increased demand for high-definition television equipment and demand from our automotive market was driven by various platforms ramping in the US, Asia and Europe. We continue to penetrate our target markets, a result of our expanding product lines, our new product introductions and the expansion of our sales efforts to reach new customers.

Our engineering and product development team introduced 12 new products in the first quarter, bringing the standard product portfolio to over 640. The new products include five converters, three low-noise amplifiers, two power detectors and one microwave frequency multiplier. These new products are designed to address low, medium and high-volume non commodity applications, where the customers require specialized performance or higher levels of integration or IC functionality.

In the quarter, we also introduced a new interface product line. This is the first new product line introduced in 2008 and brings our total number of product lines to 17. The interface products are used to control gallium arsenide integrated circuits. Typical applications include microwave transmit receive modules, complex multi-throw switch matrices and high-speed test and measurement equipment.

The first product in the product line, the HMC677LP5 is a six bit serial to parallel driver which can be used to control digital attenuators, digital phase shifters, digital variable gain amplifiers and switch matrices.

Hittite's products is differentiated because of its power-up state functionality, adjustable output voltages and latched parallel control mode which allows multiple control devices to share a common bus. The products within this product line will ultimately target applications across all of our eight end-markets.

One notable technical accomplishment is our new HMC613LC4B Successive Detection Log Video Amplifier or SDLVA. Many of Hittite's customers have critical needs to capture short pulse signals with high amplitude accuracy. This need is prevalent in applications such as direction-finding, ELINT receivers, ECM systems, high performance radar warning receivers and test and measurement equipment.

These applications rely on the SDLVA as a key component to measure the extremely wide power range of input signals. Historically, SDLVAs have been narrow band, physically large and expensive microwave hybrid modules requiring high levels of power and expensive cables and connectors. Our highly innovative solution provides customers a new way to realize the same performance at a fraction of the size and cost.

The HMC613LC4B is the industry's first broadband microwave SDLVA IC component. It operates up to 20 GHz and is available in an extremely small 4x4 mm surface mount package. Our product will be compelling for customers that need to reduce the overall size of their systems. And in time we expect to significantly reduce the market share of specialty module OEMs who currently supply the hybrid modules. I congratulate our IC engineering team for these remarkable results.

Revenue growth generated by our new products confirms that we continue to improve our product marketing and release strategies. Our strategy is to add more depth to our existing core product lines, as well as add new functionality to the portfolio. For example, 40% of Q1's new products utilized high performance silicon processes, allowing Hittite to further expand our serviceable market beyond the traditional gallium arsenide applications and functions.

Going forward, we expect to continue to expand our silicon products. The revenue growth derived from these products is primarily coming from market share gains from larger analog and mixed signal companies.

We also continue to invest in gallium arsenide IC product development in R&D. In addition to developing gas products on established processes, we continue to perform research on a wide range of state-of-the-art processes, such as gallium nitrite and indium phosphide HBT.

Our strategy is to work directly with industry and government customers to gain design experience on these processes as they are maturing. We remain focused on introducing products across the full RF microwave and millimeter wave spectrum. The recently introduced product lines specifically the passives, variable gain amplifiers, high-speed digital logic and interface products enable Hittite to address new applications in our existing customer base, as well as access to new customers. In addition to designing and launching these standard products, our design teams are extremely busy supporting a wide range of customer specific requirements.

High-quality investment in R&D will continue to be a focus for the company. We continue to expand R&D staffing in all four design centers and continue to invest in state-of-the-art design tools and equipment for our design engineers.

In the first quarter our R&D spending increased by $1 million sequentially, primarily due to personnel costs and timing of engineering material purchases. We will continue to manage our R&D spending to ensure it is in line with our financial and strategic goals.

During the quarter, our module R&D team successfully completed many programs which I'll quickly summarize. For the space market, we delivered a complex set of proof of concept modules for military satellite application. We also delivered prototype modules for commercial broadband satellite application.

We expect to follow on business from both programs in late 2008 and early 2009. For the military market, we completed delivery of a large high performance subsystem for a missile application. This hardware represented one of the most complex subsystems we had ever built and we expect follow-on business in 2008 and beyond. The team also completed a development program for the Office of Naval Research or ONR for hardware to be used in next generation digital ray radar or DART applications.

And last, the team began production ramping and deploying our T2000 commercial signal generator for the test and measurement end market. These programs represent state-of-the-art high performance modules based on Hittite's proprietary mimic technology.

Two key sales and marketing milestones were completed in the first quarter. First, our staff introduced our 13th annual Designers Guide. Over the coming months, this three volume catalog set will be distributed to thousands of customers worldwide. The Designer Guide contains over 5000 pages of data sheets, helpful selection guides, packaging and assembly information and technical product application notes. Our Designers Guide, corresponding CDs and our website are some of the key tools we use to communicate with our expanding customer base.

Second, our staff completed a major website redesign and launch. Our new website design makes it easier for our customers to quickly navigate to a specific product or product line using a product splash page, which summarizes and organizes the technical product information they need. To keep up with our growing portfolio, we have also improved our Web based search and navigation functions, so that customers can quickly access the data they need to make a decision. We're confident the new website will improve our customers experience as they research our products and technology.

In Q1, our top 10 customers represented 37% of our total revenue and no one customer exceeded 10% of our total revenue. Our overall customer concentration remains similar to prior quarters. Our strategy of expanding sales to new customers as well as increasing sales to existing customers has been effective.

Revenue from our distribution channel was 3% of our first quarter revenue. Future Electronics, our sole distributor, continues to expand its knowledge and experience of Hittite's products and markets and we expect growth from them going forward.

In January, our operations and quality staff successfully completed an AS-9100 certification audit. The AS-9100 quality management system specifies quality and manufacturing standards that are universally recognized by aerospace manufacturers. This certification will allow Hittite to satisfy the QMS needs of our growing aerospace customer base.

Capital spending was $1.4 million in the quarter, primarily focused on microwave test and measurement equipment for production as well as the expansion of our engineering, computer-aided design or CAD tools. I'm confident these new investments will enable Hittite to achieve our future goals.

In summary, we are satisfied with the first quarter results achieving revenue of $43.3 million and net income of $13 million. Our 19.2% year-over-year revenue growth was driven by our existing and new products, the expansion of our sales channels and the improved penetration of our targeted markets.

I will now turn the discussion over to Bill Boecke, our Chief Financial Officer.

Bill Boecke

Thank you, Steve and good afternoon. Our first quarter 2008 results contained a number of financial highlights including continued revenue growth which for the quarter was 19.2% year-over-year and 1.9% sequentially, gross profit margin of 70.1% and an operating profit margin of 43.1%. Cash and short-term investments grew by $16.5 million to $181.2 million. And our return on capital employed was approximately 91% on an annualized basis.

Our revenue grew in the quarter as a result of a number of factors including increased international orders, continued growth from the introduction of new products and increased market penetration with new and existing customers. For the first quarter, revenue was $43.3 million, a 19.2% increase over the prior year Q1 2007 and 1.9% above the prior sequential quarter Q4 2007.

Gross profit and margin for the quarter was $30.4 million or 70.1% compared with 71.3% in the prior year and 70.8% in the prior sequential quarter. The sequential change in the gross margin was attributable to a number of factors including an unfavorable manufacturing standard cost variances partially offset by improved product mix and nonstandard costs.

R&D expense for the quarter was $5.7 million or 13.2% of revenue compared with $4.4 million in the prior year and $4.8 million sequentially. The increase in R&D expenses year-over-year is attributable primarily to an increase in personnel costs and equipment costs as well as the timing of engineering material costs. We will continue to manage our R&D expenditures to support our long-term product growth strategy.

Sales and marketing expense in the quarter was $4 million 9.3% of revenue compared with $2.9 million in the prior year and $4 million sequentially. The year-over-year increase in sales and marketing expense is related primarily to personnel costs, commissions and other marketing expenses.

General and administrative expense in the quarter was $2 million or 4.5% of revenue compared with $1.7 million in the prior year and $1.9 million sequentially.

Operating income and margin in the first quarter was $18.7 million or 43.1% compared to 46.5% in the prior year and 45.6% sequentially. Operating income for this quarter included equity compensation expense of $1.1 million or $748,000 after tax.

Interest and other income is primarily interest income and the decrease in interest income is primarily related to the decline in effective yields on our short-term investments. The provision for income taxes in the quarter was $6.8 million, an effective rate of 34.19% an increase of 37 basis points from the effective rate for the prior year 2007. The increase in the effective rate is primarily the result of the expiration of the federal R&D credit, a decrease in interest income from tax-exempt investments and certain discrete items.

Net income in the first quarter was $13 million or $0.42 per diluted share, an increase of 8.8% compared with $12 million or $0.39 in the prior year and a decrease of 2.4% compared with $13.4 million or $0.43 in the prior sequential quarter.

In review of our financial position, total assets at March 31st, 2008 were $251.7 million, a net increase of $17.2 million from December 31st, 2007. Total assets turns in the quarter on an annual basis were 0.7 times and net operating assets or capital employed turned approximately 3.2 times on an annual basis. The increase in assets in the quarter was primarily cash as well as other working capital items and fixed assets. Cash, short-term investments increased $16.5 million in the quarter.

In further analysis of our financial position, total accounts receivable was $24.3 million which represents approximately 50 days sales outstanding compared with 47 in the prior sequential quarter.

Net inventories were $12.7 million a decrease of $1.4 million from the prior quarter. Current inventory turns equate approximately to 4.1 times annually.

CapEx in the quarter was approximately $1.4 million. From the perspective of our financial returns, our return on assets in this quarter was approximately 21% annualized and our return on equity was approximately 23%. More importantly, our return on capital employed for the quarter was approximately 91% on an annual basis.

I'll now return the discussion to Steve.

Steve Daly

Thank you, Bill. Hittite Microwave Corporation expects net revenue in the second quarter ending June 30th, 2008 to be in the range of $44 million to $45 million and net income to be between $13.2 million and $13.6 million or $0.42 to $0.43 per diluted share.

Our Q2 guidance at the midpoint of the range represents 18.2% year-over-year growth and 10.2% year-over-year net income growth. Our Q2 forecasted net income is based on an estimated gross profit margin between 70% and 71% and a tax-rate range of 33.9% to 34.4%. At a macro level, at the start of the second quarter new orders have been strong from Asia and are steady from North America and Europe. Our Q2 turns business is healthy and as a result we're confident to achieve the targets set for Q2.

I would also like to announce the Board of Directors has authorized a stock repurchase program. The purpose of the program is to offset share dilution attributable to equity based awards made to employees and directors since our initial public offering in 2005. The program authorizes the company to purchase up to 1.7 million shares of common stock over a period of three years in offsetting future equity grants with additional stock repurchases. The timing, price and volume of repurchases will be based on market conditions, relevant security laws, and other factors considered appropriate by the company.

Given the size of the repurchase program and our historical and forecasted cash generation capability, this plan will not limit our operational, business or strategic investment initiatives such as acquisitions.

I would now like to invite our listeners to ask questions.

Questions-and-Answers Session

Operator

Yes, sir certainly. (Operator Instructions). And we'll take our first question from Jeff Kvaal with Lehman Brothers.

Jeff Kvaal - Lehman Brothers

Thanks very much guys, I appreciate it. Steve, I was wondering perhaps for you, obviously there has been a lot of talk about where things are, the macroeconomic outlook, I’m wondering if you're seeing that in any of your end-markets or in terms of your visibility or in terms of your inventory turns or anything along those line?

Steve Daly

Well certainly as we've gone into 2008 we have been very concerned about the global economy. But it's also very difficult for us to comment on how ultimately those global economical issues will impact our business. What I can say is we're not seeing any signs from our customers at this stage that they're slowing down their spending or build outs. So, from our point of view we see strength at our customers and a reasonable strength in our end-markets.

Jeff Kvaal - Lehman Brothers

Okay. Thank you. And then secondly, I was wondering if you could talk a little bit about OpEx. This is two quarters in a row where we've had a pretty big increase in OpEx, one in R&D and one in SG&A. Could you tell us a little bit about what the targets are that you've set and what we should be thinking about for OpEx going forward? Thank you.

Steve Daly

Sure, why don't we answer that question in two parts, I'll talk about Q1. Almost a 100% of the OpEx growth in Q1 came from R&D and I think for the right reasons. We continue to expand and invest in our engineering staff, as well as, equipment for that staff so that we can continue to address the markets that we want to. I think the team did a very good job holding sales and marketing and G&A essentially flat between Q4 and Q1. So I think it's being very well managed. Bill, if you wanted to comment further?

Bill Boecke

Just in the second quarter, our goal was to keep the OpEx pretty much in line with the percentages of revenue that you see in Q1.

Jeff Kvaal - Lehman Brothers

Okay and do you feel like, you folks are now at the range where you would like to be for your operating margins, the 43 percentish range?

Steve Daly

We would like to get that number higher obviously and we're certainly going to be doing that. When we go back and look at our growth rate over the past two years and compare that to the revenue growth rate and compare that to our spending growth, we're very careful to control and make sure that we're not getting out in front ourselves. And it has been a couple of quarters where our OpEx has, spending has outgrown our revenue, our growth rate and we want to be careful to control that so that we don't push these operating margins down. Certainly Bill and I want to get that number up over 45% and that will commence as we start to see acceleration on the top line.

Jeff Kvaal - Lehman Brothers

Okay, great. So effectively, you're suggesting that there will be a pickup in revenue growth in the second half of the year as well?

Steve Daly

Well, what I'm saying is that --

Jeff Kvaal - Lehman Brothers

You are planning for it maybe, the way to put --

Steve Daly

Well I did not -- what I'm saying is that in order for us to improve our operating margins, we want to focus on the top line.

Jeff Kvaal - Lehman Brothers

Okay, all right. Thank you.

Operator

And moving on to Amit Kapur with Piper Jaffray.

Amit Kapur - Piper Jaffray

Great, thank you very much. Steve, I think you mentioned we should expect a continued shift in revenues coming from international markets, to what extent have you found the depreciating US dollar kind of helping or accelerating that transition? And then Bill, maybe if you could remind us how you manage any foreign currency impacts?

Steve Daly

Okay. So, we think that there is probably some opportunities internationally due to the situation with the value of the dollar but, we don't think that's driving growth or preventing us from getting into certain markets. So I would say that certainly, a low dollar can be helpful in some of these international markets but I wouldn't want to peg our growth to that. I think it's in the noise, if there is an impact. Our growth is coming from the fact that we're taking market share and we're launching compelling products into markets that we haven't reached into before and last year I think our international growth outpaced our domestic growth significantly almost two-to-one and we expect trends like that to continue.

Bill Boecke

Amit, on the second half of your question, the vast majority of our revenue is denominated in US dollars. So actually we have very little exposure to foreign exchange.

Amit Kapur - Piper Jaffray

Okay. That's helpful. And then I'm sorry, if I missed it but could you go through what your book-to-bill and backlog were for the quarter?

Steve Daly

We don't disclose the bookings or the backlog on a quarterly basis. We just disclose it at yearend.

Amit Kapur - Piper Jaffray

Okay. Thanks a lot.

Operator

And moving on to Rick Schafer with Oppenheimer.

Dan Morris - Oppenheimer

Hi, guys this is Dan Morris coming in for Rick. Thanks for taking my questions. First of all, your margins came down a little bit this quarter due to manufacturing variances but it looks like you're still expecting them to hold up pretty well in Q2, be flat to up. How should we think about it going, margins when that might happen, when it might go towards your target, that 68% level?

Steve Daly

Certainly, we're not targeting 68%, we're targeting to obviously increase the margins. But with that said we think it's prudent for people that are generating long-term models to use a number that is closer to 68 than the numbers that we've been delivering which have been over 70%. The reason for that is we can get variation around the mean and I think we saw some of that in the first quarter where we dipped down to 70.1 primarily due to internal manufacturing related activities which we consider normal. So ultimately keeping these margins high and driving them higher comes from doing things like launching innovative products that nobody else has and a great example of that is one of the products I talked about in the script which is the SDLVA IC.

We're talking about a device that will literally replace a module that might cost $5,000 or $10,000. So there's an incredible amount of value built into that solution and we plan on leveraging that into a variety of applications. So it's that investment in R&D that will ultimately keep these margins high.

Dan Morris - Oppenheimer

Okay and speaking of those new products, you did mention some of your silicon products in you're prepared remarks. I believe the number you threw out there was kind of interesting, the 40%, was that 40% of new product revenues were based on those product lines?

Steve Daly

Okay. Let me just clarify that. Of the 12 devices that we launched in Q1, 40% of them were based on silicon technology not related to revenue, just segregating between gallium arsenide and silicon.

Dan Morris - Oppenheimer

Okay, so what about -- when do you expect to see some acceleration in the silicon based revenues and are you seeing any, do you have any specific examples of areas where you're seeing traction?

Steve Daly

We are seeing that acceleration today and I think if I remember on our last call we talked about looking at the results for 2007 in that our silicon product revenue had grown by over 100%. Because we are essentially starting from zero and driving these up and expanding the product line and then driving the revenue up, we would expect high growth rates from our silicon product lines to continue. It is still a small piece of our total revenue but over time that will certainly grow. We haven't broken out specifically the growth rate against any one of our 17 product lines primarily for strategic reasons. But suffice it to say it is our expectation that there is Greenfield opportunities with the silicon technology and we plan on and we certainly hope for very high growth from these products.

Dan Morris - Oppenheimer

Okay. And one last one for me, just looking at Q2 guidance, you're expecting some growth. Could you talk a little bit about where, which end markets might be driving that growth?

Steve Daly

Yes, we are as I pointed out in the script expecting 44 million to 45 million that's between roughly 1.6% and 4% growth. That will be primarily driven from the international markets certainly. Every quarter what we do, is we break out the eight markets by strong, neutral and weak and so let me run down that now. As we look into Q2, we believe the automotive, millimeter wave communications and test and measurement end markets will be strong.

We believe that military, cellular infrastructure and broadband end-markets will be neutral. And we believe that the space and fiber optic markets will be weak. So that's how we would segment the outlook for Q2. Every quarter these market segments move from strong to neutral to weak depending on our backlog, the timing of orders and whatnot. So, I wouldn't read too much into that other than our expectation over the next three months.

Dan Morris - Oppenheimer

Great, thanks and nice quarter.

Steve Daly

Thank you.

Operator

(Operator Instructions). And moving on Quinn Bolton with Needham & Co.

Quinn Bolton - Needham & Company

Hi, guys. First, wanted to ask a question just to Bill, on the manufacturing variances. It sounded like in your prepared script the company did see a better product mix which sounds like would've otherwise taken the gross margin up quarter-over-quarter. Is that if you exclude these manufacturing variances, is that a fair statement?

Steve Daly

Yes.

Quinn Bolton - Needham & Company

Okay. So, the manufacturing variances could have taken 70 basis points to 100 basis points off the gross margin, something in that range?

Bill Boecke

From the margins we reported in Q1.

Quinn Bolton - Needham & Company

From the margins, right, right. In terms of the manufacturing variances, I know you sort of consider these to be normal but would this be the magnitude that you would tend to see quarter-to-quarter or this seemed to be a little bit larger because I can't recall you, at least in the last few quarters, breaking out manufacturing variances and issue hitting the gross margins. So, just trying to get a sense of how temporary or non-temporary this effect may be?

Bill Boecke

It's hard to say whether it's temporary or not. In the past they have been relatively favorable, this is the first time they have been unfavorable to this extent.

Quinn Bolton - Needham & Company

And was it just sort of a low yield on a new product; was it a test, any more detail you can provide on sort of the nature of the variance?

Bill Boecke

Combination of yields, labor absorption, overhead absorption and other manufacturing variances.

Quinn Bolton - Needham & Company

Okay, great. And then just a question for Steve, Steve on the last call, you were just looking out to 2008. I think you had sort of mentioned that five of the eight product groups grew in '07 and you were hopeful that all eight would grow in 2008. Now that we have got a quarter under our belts, do you still think that you can grow all eight end markets year-over-year?

Steve Daly

Yes, we do.

Quinn Bolton - Needham & Company

Great. Okay. Thank you.

Steve Daly

Thank you

Operator

And moving on to our last question from [John Hailer] with HHR Asset Management.

John Hailer - HHR Asset Management

Hi, guys. I was wondering, how you can guide to relatively strong revenue growth when three of the big four areas are only neutral? And then related to that any idea when you expect broadband to pickup?

Steve Daly

Okay. You're right, the military, cellular infrastructure and broadband are three of our four largest markets. The growth we're seeing from the automotive is certainly supporting the growth. The fourth largest market, the millimeter wave communications is also forecasted to be strong as well as our test and measurement. So in aggregate, we're certainly confident we can hit the Q2 range that we have talked about. Having a market be neutral isn't necessarily a bad thing. It doesn't necessarily mean that market is going to retract or even remain flat. In our minds strong means very, very strong growth and neutral means more modest performance.

John Hailer - HHR Asset Management

And then trends in broadband, international and US?

Steve Daly

Trends in broadband, we're getting very good traction in the DBS or direct broadcast satellite end-market. We are also seeing opportunities in a variety of fixed wireless access applications both licensed and unlicensed. As well as we have recently been designing and introducing custom parts to a variety of OEMs that produce set-top boxes. So there's quite a mix of broadband opportunities. It is definitely a volatile market and probably one of our most competitive markets. So we always forecast performance in that market conservatively. But our expectation is that over the long run, Hittite will certainly gain more than its fair share in that market.

John Hailer - HHR Asset Management

Great.

Operator

And now we're moving on to Brian Williamson with Thomas Weisel.

Tore Svanberg - Thomas Weisel Partners

Yeah, it’s actually Tore Svanberg from TWP. I know, you don't comment too much on bookings but can you maybe talk a little bit about the linearity of bookings last quarter and so far this quarter? I am just directionally trying to understand where they are headed.

Steve Daly

Certainly, it's very difficult for us to do that. As Bill mentioned, we report our backlog at the end of the year. The reason for that is we typically going into the next quarter with approximately 50% of our revenue in backlog, that's typical and it's been running at those levels for a number of quarters now. So, I would characterize the current quarter as normal and with no significant problems or issues in front of us.

Tore Svanberg - Thomas Weisel Partners

Great and again just some visibility maybe for between now and at the end of the year and again I know you can't talk about bookings, but how about your customers forecast again directionally are they getting better? Are they getting worse? I'm just trying to understand how your end customers feel about the current environment.

Steve Daly

Well, certainly within the eight markets there is a mix and a continuum of some customers are quite bullish and others are more concerned. But when we weigh all of their information as well as the opportunities in front of Hittite, we ultimately believe that we can have all eight of these -- eight market segments grow. When we look at our performance up through the end of Q2 at our midpoint, it's about 18% growth Q1 and Q2, when at the high end of our range, it's about 19.5%. That's more or less in line with the performance we gave last year. So, it is our expectation that as we move into the second half some of these markets will open up and provide us with some opportunities for growth.

Tore Svanberg - Thomas Weisel Partners

Great. Thank you very much.

Operator

And Mr. Daly, there are no further questions in the queue at this time.

Steve Daly

Okay. In closing, I would like to acknowledge the hard work of all of our employees during the quarter which made these results possible. I'd also like to thank our suppliers and customers for their continued support as we begin 2008. With more customers, design engineers, sales engineers and more products to sell, I believe our business is stronger today than ever before. Thank you.

Operator

That does conclude today's conference. Thank you for your participation and have a wonderful day.

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