Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Robert V. Dickinson – President, Chief Executive Officer& Director

Kevin J. Berry – Chief Financial Officer

Analysts

Vernon Essi – Needham & Company

John Fichthorn – Dialectic Capital

Brian [Cutlet] – Wachovia Capital Markets

[Alan Hicks] – Ansley Capital Management

Jim Schwartz - Harvey Partners

Scott Searle - S Square Technologies

Marty Hill – Hill Capital

California Micro Devices (CAMD) F1Q09 Conference Call July 22, 2008 5:00 PM ET

Operator

Welcome to the Q1 fiscal 2009 earnings conference call. (Operator Instructions) I would now like to turn the conference over to Robert Dickinson, President and CEO.

Robert Dickinson

Thanks for joining us today for our review of the first quarter of our fiscal 2009 which ended on June 30. I have mentioned in our press release earlier today, we are providing a web cast that include slide in addition to audio. I will begin with the business update following which Kevin Berry our Chief Financial Officer will present our financial results and outlook. Kyle Baker our Vice President of Marketing is currently off in business so I will include the brief update on designs webs and new products and my comment. Kevin and I will be available for questions after our remarks.

Before we start, Kevin will quickly review our use of forward-looking statement and of non-GAAP financial measures.

Kevin J. Berry

I would like to remind everyone that all the statements made during this conference call including responses to your questions which are not historical facts are forward-looking statements made in reliance upon the Federal Securities law Safe Harbor. Such forward forward-looking statements are not guarantees of future performance or events rather they are based on our current expectations, estimates, beliefs and assumptions about the future which may prove incorrect and upon our goals and objectives which may change. Often such statements can be identified by the use of words such as will, and can, expects, plan, believe, anticipates, and estimate. Forward-looking statements in this conference call include our expectation for fiscal 2009 including revenues and sources of revenue growth, gross margins and cost reductions and EPS, significant sequential revenue growth in Q2, strong demand for product or expectations for Q2 including revenue gross margins and EPS both on a GAAP and non-GAAP basis. Non-GAAP gross margins for Q3, expected cash flow and inventory for Q2, our expectation that are production business will continue to generate profits, our R&D expenses, anticipated benefits of all products, our products development and our intent to invest of the $5 million in display control alert and diversified protection R&D including for example a second generation MIPI products for a top five handset maker and our first MIPI products for the GSM market and our cash allocation.

Additional information about risks and other factors related to such statements maybe found in our press release of earlier today, the slide show of our company and our webcast of today and our form 10K, 10Q, 8K and other SEC filings. Due to these risks and other factors, our future actual results could differ materially from those contained in the forward-looking statements made during this call. Forward-looking statements speaks only as of today and we undertake no obligation to publicly update or revise these statements whether as a result of new information, future events or otherwise.

Non-GAAP measures included in our press release today and discussed on this call are included with the intention of providing investors a more complete understanding of our operational results and trends which can only be used in conjunction with the results reported in accordance with generally accepted accounting principles. The non-GAAP financial measures should enable investors to analyze our base the financial and operating performance to facilitate period to period comparisons and analysis of operating trend. Non-GAAP measures presented and discussed today are in our release, presentations and similar documents issued by us excluding income statements of facts of all forms of employee share base compensation and the effects of 123R on the number of diluted shares used in calculating non-GAAP earnings per share. The Arques Technology acquisition related cost including amortization of acquisition related intangibles and one time charges during the fiscal 2007 for acquired in process research and development and utilize the tax rate that is based upon the income taxes; we expect to actually pay relating to the activities and results of the relevance fiscal period.

Now, let me turn the call back to Bob.

Robert Dickinson

Revenue in Q1 was up year-on-year for the first time in seven quarters. Both low capacitance ESD and High Brightness LED-ESD protection sales were up nicely year-on-year. Our handset protection sales were down. Revenue was down sequentially due to lower handset protection demand than expected with low capacitance ESD protection sales up and High Brightness LED-ESD protection sales flat. In addition, approximately $300,000 in revenue was deferred to Q2 as the result of the logistics error.

On our highlights in the quarter included reaching $500,000 in display controller sales and $1 million in Praetorian filter sales. Gross margin was down sequentially but above the high end of our guidance. GAAP EPS was at the low end and non-GAAP EPS was below guidance due to a change in accounting or an asset sale from what we had anticipated. We generated $400,000 of operating cash flow in the quarter.

Bookings were down sequentially but up sharply year-on-year. The book-to-bill ratio was 1.06 and we begin Q2 with a highest backlog in almost two years. The protection business continue to be profitable in Q1 and we continue to make a major investment in display controller R&D. As we have previously discussed, we expect fiscal 2009 to represent a turning point for CAMD. We have recently begun doing business with major new customers in both the mobile handset and digital television markets and we expect both to contribute to revenue growth this year.

In addition, we expect to see growth in ESD protection for High Brightness LEDs. We also expect to see gross margin for the year improved compared to last year as the result of our ongoing cross reduction activities. Of course, all of these could be affected if there is a severe economic downturn. We expect to see significant sequential revenue growth in Q2 as the result of stronger demand pretty much across the board with display controller sales showing very strong growth, low capacitance ESD protection strong growth and handset protection moderate growth.

We expect High Brightness LED-ESD protection to be roughly flat. Revenue for the full year should be in the range of what we talked about in our Q4 earnings call. We expect gross margin to decline in Q2 and improve for the full year. We expect our protection business to continue to be profitable throughout the year. Display controller R&D expense should peak in Q2 resulting in both GAAP and non-GAAP losses in the quarter. We expect to be profitable in the second half of the year.

We made several important product announcements during Q1. We introduced the CM1234, the second part using our new PicoGuard XS Architecture which provides a very high level of ESD protection together with superior signal integrity. This device is currently being evaluated by a major digital television manufacturer. We also introduced the Praetorian III architecture, the latest and most advanced in our family of LC EMI filtering for mobile handset. It combines the filter performance of our Praetorian I products with the cost structure of our Praetorian II products.

Finally, we introduced our MDDI MIPI bridge architecture whose main purpose is to allow MDDI compliance base found processors to drive MIPI compliance displays. This architecture was defined in conjunction with key customers and industry partners. As we have mentioned, we are continuing to invest in display controller R&D. Over the last several fiscal years, we were working on our first product one of CAMD market which is now in volume production. This year, we are developing two products in parallel, the bridge that I just mentioned and our first product for the MIPI market.

As a result, our spending on display controller R&D has increased this year. Designing activity for handset protection and low capacitance ESD protection continued at roughly the same level in Q1 as in Q4. One highlight was that the number of Praetorian design went double on the number in Q4. We also secured five new display controller design ones in Q1.

Finally, I would like to touch on our thoughts about the use of our cash, something that we are frequently asked about. First, while we have been generating cash for the last several years, the future growth is sufficiently rapid and some of our cash will be consumed as we invest in additional working capital. The second requirement for cash is having a reserve in case of a severe economic or industry downturn such as the one that occurred at the beginning of this decade.

At that time, we have to do several equity offerings to provide for our cash needs resulting in significant delusion for existing shareholders. One of the things that give us the credibility needed to build relationships with leaders in the in markets we serve is our solid balance sheet. We need to maintain a larger net cash position to ensure that we do not undermine that credibility.

Finally, the best opportunities for our company to improve its market position often present themselves in times of economic uncertainty. For that reason we want to preserve maximum strategic flexibility at this point in time.

Now, let me turn the call over to Kevin.

Kevin J. Berry

We are presenting our fiscal 2009 Q1 results on a GAAP basis and also using non-GAAP measures. Our non-GAAP measures excludes stock compensation expenses and Arques acquisition cost and use of cash base with tax rate where under GAAP we include stock compensation and Arques acquisition expenses in determining use and effective tax rate which differs from the tax which we actually pay.

First on a GAAP basis, revenue for Q1 of $14.1 million was at the low end of our guidance but up 8% compared to $13.1 million in Q1 of last year. Gross margin for Q1 at 33.6% was above the high end of our guidance mainly due to product mix and cost reduction, an increase of 31.1% last year. EPS for Q1 was a loss of $0.04 compared to a loss of $0.05 in Q1 of last year and was at the low end of our guidance.

The increase was mainly due to higher gross margins and a lower effective tax rate partially offset by higher research and development expenses. Next, non-GAAP revenue for Q1 was also $14.1 million. Gross margin for Q1 is 34.2% was above the high end of our guidance mainly due to product mix, cross reduction, an increase from 31.9% last year. Operating expenses were $5.6 million, an increase of 8% over Q1 of last year. The increase was mainly due to increased R&D expenses for the zero interphase display controller products.

ASPs declined by 8% year-on-year based on a constant mix below recent trend of 12%. Cash in short term investment of $52.1 million at the end of Q1 was up from $51.6 million at the end of Q4 and up $4 million last year. Operating cash flow was about $400,000. Net receivables were $5.5 million and DSO was 35 down from 38 in Q4.

Net inventory was $6.8 million and turns were $5.7, the same at the end of Q4. Our actual taxes payable in Q1 was $31,000 for our non-GAAP guidance expect this amount in Q2 as well. As we look at Q2 representing our guidance on a GAAP basis and also using non-GAAP measures. Our non-GAAP measures excludes stock compensation expenses and Arques acquisition cost and use of cash base as tax rate or under GAAP will include stock compensation and Arques acquisition expenses and use an effective tax rate of 20%.

GAAP revenue is expected to be in the range $15 million to $17.5 million. Gross margin was expected to be between 32% and 33%. EPS is expected to be between the loss of $0.07 and a loss of $0.04. Diluted shares outstanding are expected to be between $23.4 million and $23.5 million. Non-GAAP revenue is expected to be in the range of $15 million to $17.5 million. Gross margin is expected to be between 32.5% and 33.5%. EPS is expected to be between the loss of $0.04 and a loss of $0.01.

We expect margins to decline sequentially due to product mix. We also expect margins to increase beginning in Q3. Regarding the balance sheet for Q2, we expect to have slightly positive operating cash flow and expect the DSO to be higher. Inventory turns are expected to increase. Looking at the full fiscal year 2009 revenue and both the GAAP and non-GAAP basis, we expect protection revenue to grow by between 7% and 12%. Display controller revenue to be as much as 10% of total revenue and total revenue to grow to $67 million to $73 million.

We expect GAAP gross margin for the year to be between 34.5% and 35.5% and non-GAAP gross margin to be between 35% and 36% into the rest of year above that. Although we will be investing up to $5 million in the display controller and diversified protection R&D, we expect GAAP EPS to be a profit of between $0.01 and $0.06 and non-GAAP EPS to grow by up to 100% to between $0.10 and $0.16. We expect the operating cash flow to be in the range of $3 million to $6 million.

Now, let me turn the call back over to Bob.

Robert Dickinson

Before we move on to questions, I would like to mention that we will be holding our annual shareholder meeting on August 21 and we hope to see many of you there. We will now open the call to your questions.

Question-and-Answer Session

Operator

(Operator’s instruction) Then our first question comes from the line of Vernon Essi from Needham & Company. Please go ahead.

Vernon Essi – Needham & Company

Thank you. I just wanted to get a little more color if we could on the display ramp. It looks to me like the display controller products obviously going to have an aggressive ramp into the next two quarters given the guidance to sort of outlining here and the revenue that you just recorded and I am trying now to reconcile that Bob and I am asking this sort of a strange question here but you have only booked I think $0.5 million sort of shift the $0.5 million to that in September with the June quarter and it looks like you have got about at least $5 million more in the next three quarters to make that ramp. Am I interpreting that correctly?

Robert Dickinson

Yes, you are interpreting that exactly and correctly. As I said, we are expecting very strong growth sequentially for display controller revenue in the Q2 and I would say it is going to be two to three X sequentially.

Vernon Essi – Needham & Company

Okay, I appreciate that. I just want to make sure though I understand you said two to three X, I mean I think of this being a product that as probably going to have a strong I would imagine the September quarter would be the strongest calendar quarter for that product so I am still trying to understand how this is going to make that revenue target.

Robert Dickinson

I understand your point. The thing, certainly there is going to be some seasonal component to this but the thing that is really driving that growth is that it is designed into multiple platform and as we go to the year, more and more of them are starting to shift. So, it is really getting the parts on more phones than are in production quarter by quarter that is driving the growth, not just the seasonality. In fact, seasonality is probably a second order effect here.

Vernon Essi – Needham & Company

Okay.

Robert Dickinson

Does that make sense?

Vernon Essi – Needham & Company

Yes, it does. That helps. In terms of just going for more one thing, we did not talk about on the guidance is the taxes; we assumed still sort of modeling a very, very low tax rate. I think that was something you used to disclose but not on these slides.

Robert Dickinson

I am going to let Kevin fill that one.

Kevin J. Berry

Yes, on the non-GAAP tax rate that is basically the [AMT] that we will have to pay whether we have a profit or loss. On the GAAP guidance, it looks like, as we look at last quarter on new set of the guidance things the change going forward, we expect to have the tax credit of about 20%.

Vernon Essi – Needham & Company

Okay and also I do not…

Robert Dickinson

Just sort you did not met us, Kevin did mentioned that last quarter end in Q2 we expect to have on a non-GAAP basis $31,000 in tax liability and we cannot view that as a percent because we are saying we are going to have a non-GAAP loss in both quarter so actually, paying a tiny amount of taxes but will be showing on the PNL a lot.

Vernon Essi – Needham & Company

Okay and then, I do not, in the past you disclosed, I mean you said there is a project in this in the prepared comment here but the design wins between the two boxes usually put like handsets and mobile and then the PC to sell to the consumer. Did you talk about that?

Robert Dickinson

I did not talked about the PC and consumer simply because the low capacitance ESD covered both of them and it is the most important product category so no, I did not really talk about PC or digital consumer but that was also pretty flat.

Vernon Essi – Needham & Company

Okay. Alright, thank you.

Robert Dickinson

Alright, you are very welcome.

Operator

Our next question comes from the line of John Fichthorn from Dialectic Capital. Please go ahead.

John Fichthorn – Dialectic Capital

Yes, hi guys. Just for the next quarter of this modeling for a log stand for [2656] might go up. I am kind of wondering what your cash, Bob, are in terms of consumption next quarter and then it sounds like you are still looking for a midpoint of around $4.5 million in cash generation for the year and so I was kind of wondering how the backlog for the year looks. It sounds like you are going to be generating cash then and I guess most of that is due to revenue growth but I was wondering if you could give a little more color on kind of the shape of the curve of the various line items on the income statement because into that $5 million in cash flow for the year since you basically generated $500,000 mid quarter and you probably going to burn some next quarter.

Robert Dickinson

What I said in the comments John is that we expect slightly positive operating this quarter. So slightly would mean somewhat less than last quarter in terms of operating so overall cash flow could be around even for Q2. So yes we still expect to generate for the year somewhere between 3 and 6 of which, let us say $0.5 million is already in and that is based on with the possibility that we expect in the September quarter. That is in the September quarter as well as March. I am not sure what else…

Kevin J. Berry

I think it is fairer to say that we are expecting the second half of the year in revenue to be higher in R&D spending than what could be to...

Robert Dickinson

Well it is as well as margins as well.

John Fichthorn – Dialectic Capital

So R&D us going to grow, I am sorry I lost you, I apologize I mean I am on a cellular phone. R&D will be growing slower than revenue in the back half of the year so we will generally see market expansion?

Robert Dickinson

That is correct. We actually said that the display controller R&D should peak this quarter in Q2.

John Fichthorn – Dialectic Capital

On an absolute or a percentage basis?

Robert Dickinson

On a dollar basis.

John Fichthorn – Dialectic Capital

Okay, great. So, you are going to maintain your cash profitability and I am excited to hear that. When you talked about cash uses, this is my personal bet is, it sounded like I did not hear you guys talk about or share about that and I wanted to validate maybe lunge into acquiring distress opportunities since I would classify your stock as a distress opportunity. I am just wondering if you could comment in more on that.

Robert Dickinson

Well, I think that is probably, I do not know that we could consider our sales as a distress property to begin with but maybe a stressed property at the moment but…

John Fichthorn – Dialectic Capital

But I mean your stock is currently trading with a $105 over $120 million and you are going to do roughly five in cash flow in the forward years so that is around four times cash flow and that too is really cheap, based on everything I looked at in on the universe. I would wonder if you could at least talk about how you would weigh that against other acquisitions you might be looking at.

Robert Dickinson

I guess first of all we are not actively looking at any acquisitions right now. It is more a question of keeping our powder dry so to speak and the difference between buying our own stock and buying another operating entity is that the latter would presumably add to the operating results of the business and the former would not.

John Fichthorn – Dialectic Capital

Oh, the former as we have discussed before would obviously add to the earnings per share as opposed to the total operating which seeing all shares is all we are gunning for but I encourage you and the board to evaluate that otherwise I hope you guys are able to execute on your growth strategy because that is opportunity on that sounds good. So thanks.

Robert Dickinson

Okay thanks for your comments, John.

Operator

Our next question comes from the line of Brian Cutlet [ph] from Wachovia. Please go ahead.

Brian [Cutlet] – Wachovia Capital Markets

Hi this Brian calling for David Wong.

Robert Dickinson

Hi, Brian.

Brian [Cutlet] – Wachovia Capital Markets

How are you guys doing?

Robert Dickinson

Good.

Brian [Cutlet] – Wachovia Capital Markets

I just want to if you could give us some more detail on well probably about the short fall in the June quarter and then sort of how do you factor in those weak areas into your guidance for your September quarter and full year 2009?

Robert Dickinson

Well, I think two things that are highlighted. One is purely a timing issue that was approximately $300,000 of revenues because of the mid step in logistics. It should have been Q1 revenue but it turned out to be Q2 revenue. I think we have actually already shifted it so that was unfortunate the short run but no loss in that events. I also said that handset protection revenue was weaker than we had expected. We are expecting to see growth there this quarter however but I characterize that as moderate and so many other areas I am expecting to see stronger growth, as I have mentioned.

Brian [Cutlet] – Wachovia Capital Markets

So you are anticipating sort of ongoing softness in handsets for the September quarter and..?

Robert Dickinson

Well, softness, I guess I got to be really careful here because we do expect the demand to grow in our handset protection business. Now, it does not look like it is just a really strong growth for the market. It does not appear that way; I mean we hear a lot of mix signals in terms of what the overall handset market is. On the Arques rise at the moment is that it is decent but not outstanding nor a bit okay so it is sort of in the middle of the road at the moment.

Brian [Cutlet] – Wachovia Capital Markets

You would categorize this below season?

Robert Dickinson

Well, I do not even know yet about that. We are not very good forecasters of the market demand so probably we should not view that as important data points to many conclusions. Right now, we think there is a decent September quarter starting to shape up but we will know a lot more about it as we go through it.

Brian [Cutlet] – Wachovia Capital Markets

Alright, thanks a lot guys.

Robert Dickinson

Okay.

Operator

Our next question comes from the line of [Alan Hicks] from Ansley Capital Management. Please go ahead.

[Alan Hicks] – Ansley Capital Management

Yes, good afternoon.

Robert Dickinson

Hi, Alan.

[Alan Hicks] – Ansley Capital Management

On the R&D, you expect that to jump again this quarter. Can you say roughly about how much?

Robert Dickinson

In terms of details from where we were last quarter, it will probably grow in that somewhere between $.5 million and three quarters of $1 million in the quarter.

[Alan Hicks] – Ansley Capital Management

Okay, so significant jump and then where do you expect it to get the run rate in the third and fourth quarter?

Robert Dickinson

Then going forward it will probably drop down from between where we are this quarter and where we are, between Q1 and Q2. Somewhere in between.

[Alan Hicks] – Ansley Capital Management

And then do you expect, I mean major future projects in R&D?

Robert Dickinson

Well, I think there will be but right now we have about underway and as we have said, we expect, we are excited about the activity and things like that. We expect to see a peak in spending this quarter and then see it drop back down as Kevin outlined. I am sure that there will be future quarters where we will get some other peaks but that are not what we are expecting in the near future.

[Alan Hicks] – Ansley Capital Management

Okay. And in the area of SG&A that is part of revenue.

Kevin J. Berry

Well, to a degree it does but we are also depending on the timing within the year. Q1 and Q4 are generally the highest because of the added expenses and then Q3 is generally the lowest of the quarters when it comes to that.

Robert Dickinson

Taking a look at the pieces now on a lot of reasons for what Kevin was talking about is things about product related activities. In the G&A area we are basically are not expecting a lot of growth on the year over year basis. In the sales and marketing area, we will have what I would consider it to be modest growth but certainly not as great as what we are expecting in the revenue increase to be.

[Alan Hicks] – Ansley Capital Management

Okay. So we could see good earnings growth from the third and fourth quarters?

Robert Dickinson

Well, if you think about we are basically saying that we are going to earn more than a 100% of the non-GAAP earnings that we talked about in the second half of the year so the answer is just we are anticipating some decent earnings within the last few quarters of the year.

[Alan Hicks] – Ansley Capital Management

Okay and then jumping to the digital TV, I guess it is the Extreme ESD products; you were up from fourth quarter to first quarter?

Kevin J. Berry

In revenue?

[Alan Hicks] – Ansley Capital Management

Yes.

Kevin J. Berry

We are up in low capacitance so I cannot tell you how much of that came from PC and how much of that came from consumer but the total is certainly up.

[Alan Hicks] – Ansley Capital Management

Okay, much more is towards the digital TV.

Kevin J. Berry

The digital TV, specifically I do not have that data in front of me at that level this time. In fact we already, we did, let me just, I have to say revenue from digital TV was up sequentially as I stop and think about it.

[Alan Hicks] – Ansley Capital Management

Okay, so you began to shift to a second major…

Kevin J. Berry

Yes.

[Alan Hicks] – Ansley Capital Management

And you are now talking to the third.

Kevin J. Berry

Right.

[Alan Hicks] – Ansley Capital Management

And that second customers is ramping throughout the year, how do you see that?

Kevin J. Berry

I think back to our expectations.

[Alan Hicks] – Ansley Capital Management

And how soon do you think you could add the third major cut?

Robert Dickinson

Well depends on how on the evaluation goes but it is conceivable that it could be as early as fiscal Q3.

[Alan Hicks] – Ansley Capital Management

So the new products you have been coming out would be extremely at the family, that type of gaining traction.

Robert Dickinson

Yes, we are already shipping in volume our first PicoGuard XP product and we say we are getting evaluated right now on PicoGuard XS.

[Alan Hicks] – Ansley Capital Management

And LED lighting that was flat from last quarter?

Robert Dickinson

Yes.

[Alan Hicks] – Ansley Capital Management

And you expect it to be flat again this quarter?

Robert Dickinson

That is the current expectation but we expect year-on-year growth and we actually expect sequential growth later in the year.

[Alan Hicks] – Ansley Capital Management

Do you see any other new customers coming in that area?

Robert Dickinson

We have other prospects which could contribute to revenue this year but our current major customers are also anticipating growth in their business.

[Alan Hicks] – Ansley Capital Management

Could you comment on the development of new products and in the case, as a new product areas and market areas?

Robert Dickinson

I am sorry, in which area is that Allan?

[Alan Hicks] – Ansley Capital Management

Well talked about the developing new…

Robert Dickinson

Oh, the diversified products. We are in the process right now of focusing in on just the big applications and products. I mean we are looking at product definition and just to remind you of the timetable there, we would hope to release the first of these products by the end of the fiscal year and see revenue from them next fiscal year.

[Alan Hicks] – Ansley Capital Management

Last question, the bridge product on the three controller, when do you expect that to be shipping?

Robert Dickinson

We expect both the bridge and the first MIPI product to be sampling in the fall and realistically there would not be any revenue from them until next fiscal year, probably in this point in time.

[Alan Hicks] – Ansley Capital Management

But you are working with that customer on that product?

Robert Dickinson

We are working with the customer on the bridge and we are working from the major industry player on first MIPI device but also talking to potential customers about it.

[Alan Hicks] – Ansley Capital Management

Alright, thank you very much.

Robert Dickinson

You are very welcome Alan.

Operator

(Operator’s instruction) And our next question comes from the line of Jim Schwartz from Harvey Partners. Please go ahead.

Jim Schwartz - Harvey Partners

Hi guys.

Robert Dickinson

Hi, Jim.

Jim Schwartz - Harvey Partners

Question for you just on handset protection, we have got roughly a 40% greater opportunity today than we do the last year at this time and I guess I am just curious, what in the Q2 after this quarter is that your projection is to have a down year-over-year handset quarter or..?

Robert Dickinson

Well, for the quarter?

Jim Schwartz - Harvey Partners

Yes.

Robert Dickinson

I understand the question you are asking, hang on a second. Let me just check that. Well, the answer to your question is probably more flattish could be up, could be down a little bit. There has been some…

Jim Schwartz - Harvey Partners

Flattish year over year.

Robert Dickinson

Yes.

Jim Schwartz - Harvey Partners

Okay. That was just very good sequential growth and then the big ramp with the new customer and customers will be I guess Q4 and beyond or Q3 and beyond?

Robert Dickinson

Well, it is an ongoing process. I mean we are seeing in our customer base, we are seeing places where we are gaining. We are seeing places where we are moving sideways and that is because of issues that are customers are having so it is a mix bag but generally speaking I think we are moving in the right direction.

Jim Schwartz - Harvey Partners

Okay and I guess just to echo one of the first callers made with the $17 million enterprise value right now I mean, it is very hard to find the value like yours out there which is part of the reason why it is hard to find an acquisition. I just, with the $52 million cash hoard, I mean I am surprised you guys would not allocate $10 million to $20 million to that to buy back stock and I know Bob you are not a huge fan of that but I mean at this level I would encourage you to consider it.

Robert Dickinson

No, I understand the point and that it is certainly something that we have and we will continue to pay serious attention to but the other thing is that there maybe some pretty interesting opportunities that would end up with a better result. So, we also want to make sure that we are paying attention to those.

Jim Schwartz - Harvey Partners

Okay. Alright, thanks guys.

Robert Dickinson

Okay, thank you Jim.

Operator

Our next question comes from the line of Scott Searle from S Square Technologies. Please go ahead.

Scott Searle - S Square Technologies

Hey guys, how are you doing?

Robert Dickinson

Good, hi Scott.

Scott Searle - S Square Technologies

I apologize I miss so just a couple of housekeeping items, mobile was how much in the quarter? Mobile revenue?

Robert Dickinson

We did not say but what we, but we will tell you.

Scott Searle - S Square Technologies

And that would include the serial controller business as well when you break it out now?

Robert Dickinson

I would give you both the protection and the protection was just under $8 million and as I mentioned, the light controller was about $0.5 million.

Scott Searle - S Square Technologies

Okay and 10% customers on the quarter?

Robert Dickinson

There were two in terms of OEM customers plus one distributor.

Scott Searle - S Square Technologies

Okay and what about in terms of the outlook for later in the year? Do you expect to have a third, possibly a fourth 10% customer by say at December quarter?

Robert Dickinson

That is kind of unlikely.

Scott Searle - S Square Technologies

Unlikely. How about the third?

Robert Dickinson

That is…

Scott Searle - S Square Technologies

Okay.

Robert Dickinson

In terms of customers.

Scott Searle - S Square Technologies

Got you. And just for clarification, R&D this quarter the big take out cost of a $0.5 million but then in absolute dollars, it will come down again a little bit in December. Is that correct and then grow it from there?

Robert Dickinson

It is going to come down in December and probably very fairly flat in the Q4.

Scott Searle - S Square Technologies

Okay and clarification on gross margins in terms of the target you are talking about from a non-GAAP perspective of a 35% to 36% that is for the total fiscal year. That is not the exit rate on the year, is that correct? So, you are implying basically that by the March quarter, we are doing 36.5% to 37% to kind of get up to the lower end of that thing.

Robert Dickinson

We are expect to exit a higher than that.

Scott Searle - S Square Technologies

Okay and just last couple of things. Taiwan, how big was Taiwan in the quarter, in particular in the mobile business and if you give us some sense in terms of Taiwanese exposure and/or Chinese exposure? Is that totally worked its way through the numbers at this point in time?

Robert Dickinson

Well, as a matter of fact, the combination of those two was up sequentially and about the mobile business last quarter about roughly 25% or something like that for combination of the two and the demand from the Taiwan OEM was up sequentially and the demand from the Chinese OEMs was down sequentially.

Scott Searle - S Square Technologies

Okay so but the Taiwanese is already OEMs for tier ones, is that correct or is there some activity for tier-two or tier-three as well?

Robert Dickinson

I would think it is largely for tier ones but they do business with a variety of people.

Scott Searle - S Square Technologies

Got you. Are you getting visibility on the China front at this point in time or is that fussy?

Robert Dickinson

Well, our sense that the domestic handset suppliers in China are having a difficult time and part of it is we are having a competition from multi nationals and partly because the government is cracking down in the so called grey market and that might actually help us because the people that we deal with are not heavily involved in the grey market.

Scott Searle - S Square Technologies

Okay.

Robert Dickinson

So they may actually end up getting some benefit from that effect if that gets close down to some different degree.

Scott Searle - S Square Technologies

Got you and last thing on the display controller side, you guys I think indicated five new design wins in the quarter. Could you remind us now how many have in total, how many is revenue producing now, how many will be revenue producing kind of ball park maybe September or December?

Robert Dickinson

Now, I do not have the exact numbers in front of me but order of magnitude I think the total number of platforms that we are buying into now must be between 15 and 20 and I think of those 4 or 5 are, I do not see production for some part this quarter. But still that is a small number of the designs are producing the revenue.

Scott Searle - S Square Technologies

And the DST…

Robert Dickinson

Excuse me; it was $4 to $5 this quarter. No, what we are talking to $4 to $5 the first time so again that is just small part of total design wins that are producing the current revenue.

Scott Searle - S Square Technologies

Got you and pricing on the display controller side that is kind of in the range where it historically been or for first quarter $1.40 kind of range that is how we should be thinking of it?

Robert Dickinson

It is actually higher.

Scott Searle - S Square Technologies

A little higher, okay.

Robert Dickinson

Yes because it is above $1.50 somewhere between $1.50 and $2.00 on an average basis.

Scott Searle - S Square Technologies

Great. Okay, thanks so much.

Robert Dickinson

Okay thank you Scott.

Operator

Our next question comes from the line of [Vincent Tang] from Hill Capital. Please go ahead.

Marty Hill – Hill Capital

Hi guys. I am actually Marty Hill from Hill Capital.

Robert Dickinson

Oh, hi Marty.

Marty Hill – Hill Capital

Hi. We know your seasoned, capable execs have around the block and we are generally excited by the potential of your especially relative to devaluation. I think we continue to find it disconcerting that you guys were resisting buying back stock because if you believe in the projections, it would be enormously freed up. I mean if you buy stock at $3, today it could be worth $6 that is a 100% return and what we are struggling with is reconciling your forecast with this reluctance and I have been on a lot of public boards, I have been doing this for a long time and what scares me is that if you are truly concerned about a downside case, I think you are ought to build an expense plan to that more realistic perhaps downside case and/or you are have to buy back stock. Either one of those two seem like the right kind of path but I am really wrestling with that cognitive dissonance and I think if you are not willing to do either of those things, you have to put a shareholder on the board who actually own some stock and who cares about shareholder value or use the board fees to buy back some stock because we got a lot of guys in this board who do not own any of these stocks. We are just concerned that no one here is acting or thinking like a shareholder.

Robert Dickinson

Well one thing I can point out is that the management team is very highly motivated financially and otherwise I think definitely higher stock price so I would be glad to show you some data points which the public on that but I can assure you there is a lot of outside leverage.

Marty Hill – Hill Capital

We understand that but there is a difference between buying stock and getting an option.

Robert Dickinson

I guess what I am saying is that we do not win financially unless you do.

Marty Hill – Hill Capital

I understood. Well, we do like the situation. We actually like what you guys are doing. I think we just would again echo what a number of other investors have said and encourage you, I mean it does not have to be $20 million but 10% of your cash, $5 million will, just to us, seems like a no-brainer accretive move so you have heard us. We said our piece and we wish you guys luck.

Robert Dickinson

Okay and I guess we will actually be seeing you in the not so distant future.

Marty Hill – Hill Capital

Yes, we look forward to it.

Robert Dickinson

Or essentially in any case so thank you very much.

Marty Hill – Hill Capital

Thank you.

Operator

And our next question is a follow up question from the line of Vernon Essi from Needham & Company. Please go ahead.

Vernon Essi – Needham & Company

Thank you. I just want to clarify, I think just kind of ask on the split on display controller and would that include in your mobile handset number that you gave just under $8 million for the quarter that also…

Robert Dickinson

No, that was protection.

Vernon Essi – Needham & Company

Okay so that excludes the display, alright.

Robert Dickinson

Yes.

Vernon Essi – Needham & Company

Okay, thank you very much.

Robert Dickinson

Sure, thanks.

Operator

And Mr. Dickinson, there are no further questions at this time. I will turn the call back over to you for any closing remarks.

Robert Dickinson

Well, I just like to thank everyone again for joining us today.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: California Micro Devices F1Q09 (Qtr End 06/30/08) Earnings Call Transcript
This Transcript
All Transcripts