Tom, here is a conference call synopsis from AOL.
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UNION CITY, Ca., July 23, 1996/FOOLWIRE/ --- Actel Corporation released their Q2 1996 financial results this afternoon. Actel reported record net revenues of $36.7 million for Q2, an increased of 38% compared with revenues of $26.6 million for Q2 1995 and $35 million for Q1 1996. Operating income for Q2 was a record $5.4 million, up from $1.6 million in Q2 1995 and $5 million for Q1 1996. Their net income was $3.6 million, up from $1.7 million in Q2 1995 and up from $3.3 million for Q1 1996. Earnings per share were $0.17, in line with analyst estimates. This compared to $0.08 per share in Q2 1995 and $0.16 per share in Q1 1996. Gross margin improved for Q2, increasing to 56.1% from 55% in the preceding quarter, and was up from 50.2% in Q2 a year ago.
Looking ahead, their thinking is pretty much unchanged. In the long term, they still believe their net revenues will rise and their gross margins will continue to gradually improve until they are more in line with those of their competitors.
Unit sales were up 29% and average selling prices were up 7%. The changes here were largely product mix related -- a couple of large orders, etc. Actel's effective tax rate increased from zero for 1995 to an estimated 37.5% for 1996. The increase in the effective tax rate was due to the utilization of deferred tax assets in accordance with FASB 109 during 1995. On a sequential basis, net revenues increased 5% due to an increase in unit sales of 14% and a decrease in ASPs of 8%. Operating income increased 8% over Q1. Total operating expenses were $15.2 million, or 41.5% of revenue for Q2, down from 44.3% in Q2 1995 and up from 40.9% in Q1 1996. Q2 operating margins grew for the 5th consecutive quarter to a record high of 14.6% of revenue, a 50 basis points improvement from prior quarters.
Last year Actel said that they would be introducing two new families in 1996. The first new family was just introduced -- the radiation hardened family. The second family has grown into the SPGA family discussed below. They feel that they can change the industry with this family so they have decided to spend the money it takes to get these products out sooner and to promote them more effectively. In Q2 there were extra marketing expenses associated with the SPGA that included added infrastructure. They also began the early promotional activities. Going forward, they are going to continue this process, so operating expenses will be at the same level and the added expenses will vary between marketing and R&D. R&D was down because when they bought the Texas Instruments FPGA business, TI agreed to do some R&D work for them. It was supposed to be roughly a year's worth but they were supposed to pin down the exact duration at a later date. In fact, they worked through the end of Q1, but not into Q2. So they did have an accrual in Q1 for TI R&D and there was not one in Q2 for TI R&D. Since Actel didn't know exactly what they were spending until later, they always took their best guess and made an accrual of that amount and they had over-accrued the R&D spending due to TI by a little bit, so they had to reverse it in Q2.
Cash, cash equivalents, and short term investments at the end of Q2 amounted to $22 million, a decrease of 8% from the prior quarter balance of $23.9 million. With respect to accounts receivable, days sales outstanding were 42 days at the end of the quarter versus 41 days at the end of last quarter. Inventories at the end of Q2 increased 10% or $2.5 million from the previous quarter and amounted to $27.5 million. At the end of the quarter, they had 156 days of inventory versus 145 days at the end of the prior quarter. The increase in inventory was mostly attributable to the introduction of the new products in the quarter. Also, Q1 was a little lighter than normal. If you look back to Q4 last year, for example, it was 156 days.
As far as inventory in the channels, their Q2 North American distribution inventories grew slightly and they think that number is around 3%, while their resellers grew 7%. That means that their Q2 inventory turns for North American distribution came in at a little over 7 turns or 50 days versus the prior quarter of about 7 turns or 52 days. Their North American distribution inventory turns target is about 5.5 turns or 66 days, so they are well below that target level right now.
From a marketing perspective, Q2 has been the most active in the company's history. Over the past 3 months they have signed a major strategic alliance, introduced new members of their 3200DX and radiation hardened families, and released an enhanced version of their Designer Series development tools. They did not sell any rad-hard in Q2, but expect to sell some in Q3. In fact, some has gone out already.
On June 3rd, they announced an arrangement with a leading intellectual property provider, Technical Data Freeway. This arrangement will eventually give Actel customers access to perhaps the industry's widest range of cores. Cores are pre-defined functions such as micro-controllers or multimedia which are reusable in the design of FPGAs. What all this means to Actel and their customers is -- logic designers are moving more and more toward integrating entire systems on a single device. They are looking to do so through the use of these functional cores. Actel believes that reusable cores, along with robust programmable logic will provide the flexibility, cost savings, and time to market advantages that designers will require. What makes the TDF story really exciting to Actel is that it is the first of several major announcements Actel will make before year end. In aggregate, these announcements will describe a new class of logic they are calling SPGAs or System Programmable Gate Arrays. They can only say at this time to watch for the next step in the trade press on Monday, July 29th. The company indicated that as people read about this they should keep in mind that there is still much more to come.
On the device side, Actel continues to roll out their flagship 3200DX product family with the 32140DX, a 14000 gate device that they introduced earlier, has received excellent market acceptance and is now generating revenue. Early in June, they introduced the 32200DX, their new 20,000 gate device. In the 32200DX they combined their technology with embedded dedicated SRAM blocks. In addition, the SRAM features true dual-port modes that is often substantially faster than competitive devices.
During the quarter they also rolled out their Designer Series 3.1 development tools for both the 32140 and the 32200DX. That means that the DX family and Designer Series 3.1 together allow designers to integrate high speed functions such as memory decode and data pass into a single SPGA, reducing board space power requirements and overall system costs. Early indications are that the 32200DX is drawing a great deal of interest from designers in the growing high-bandwidth markets such as telecommunicatons and networking.
Lastly, they formally announced Actel's first radiation hardened, non-volatile FPGA, the 8000 gate RH1280. The second rad-hard device, the 2000 gate RH1020 is expected to be available in 1997.
In Q2, April bookings were okay, May a little better, and June pretty strong so they ended up with a book-to-bill of more than 1 to 1 in both the OEM channel and the distribution channel. They don't take credit for sales to distributors, so the fact that Actel booked a lot from their distributors doesn't necessarily mean that they booked a lot from their end customers. Actel doesn't have great visibility there. But the visibility they do have is that the quarter was pretty good from a bookings standpoint in both OEM and distribution. July to-date has been where people would expect, about average. All the statistics line up to make them feel the same way about this quarter (Q3) as they have about the last couple of quarters, so they are giving the same guidance looking forward, which is mid-single-digit growth and some improvement in margins.
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* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event.
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Best wishes. |
