Verigy Ltd. (NASDAQ:VRGY), a premier semiconductor test company,
today reported financial results for its third quarter ended July
31, 2010. Revenue for the third quarter was $154 million, an
increase of $34 million, or 28 percent from the prior quarter and
an increase of $67 million, or 77 percent from the comparable prior
year period.
Net income for the third quarter was $13 million, or $0.21 per
share, compared to a net loss of $1 million, or ($0.02) per share
last quarter, and a net loss of $21 million, or ($0.36) per share,
in the prior year period.
Results for the third quarter included approximately $1.6
million of charges related to the company’s restructuring actions
and manufacturing transition. After excluding these items, Verigy
reported non-GAAP net income of $14 million, or $0.23 per share,
including $5.2 million of share-based compensation expense.
A reconciliation between GAAP and non-GAAP net income is
provided following the financial statements that are part of this
press release.
“During the quarter, we continued our momentum in product
innovation, customer wins, and strengthening our financial model,”
said Keith Barnes, Verigy chairman and chief executive officer. “In
Q3, we brought several new solutions and capabilities to market.
The new offerings on our V93000 platform combined with the
broad-based strength in the SOC test market, contributed to a 43
percent sequential revenue growth for our SOC products. In
particular, V93000 Port Scale RF demand remained extremely strong
throughout the quarter and generated more than 50 percent of our
total SOC revenue in Q3.”
“We’re very pleased with the strong profitability achieved
during the quarter and the continuing strength in sales of our SOC
products,” added Bob Nikl, Verigy chief financial officer. “Our
goal is to continue to improve the leverage in our operating model
and generate higher profitability over a cycle.”
Outlook for Q4
2010
For the fourth quarter ending October 31, 2010, the company is
providing the following outlook:
- Revenue is expected to be in the
range of $157 million to $167 million.
- Earnings per share are expected
to be in the range of $0.22 to $0.27.
- After excluding charges related
to restructuring actions and the manufacturing transition, earnings
per share on a non-GAAP basis are expected to be in the range of
$0.24 to $0.29.
- Share-based compensation expense
is expected to be approximately $4.2 million to $4.4 million.
Conference Call and
Webcast
Verigy’s management will present more details on its third
quarter fiscal year 2010 financial results on a conference call
with investors today beginning at 1:30 p.m. (Pacific). This event
will be webcast live in listen-only mode. Listeners may log on at
http://investor.verigy.com and select “Q3 FY’10 Verigy Earnings
Conference Call” in the “Events & Webcast” section under “IR
News & Events.” The webcast will remain available on the
company’s web site for 14 days.
A telephone replay of the conference call will be available from
4:30 p.m. (Pacific) today through September 2, 2010. The replay
number is +1 888-286-8010 toll-free, or international callers may
dial +1 617-801-6888; enter passcode 62807308.
About Verigy
Verigy provides advanced semiconductor test systems and
solutions used by leading companies worldwide in design
validation, characterization, and high-volume manufacturing test.
Verigy offers scalable platforms for a wide range of
system-on-chip (SOC) test solutions, and memory test
solutions for Flash, DRAM including high-speed
memories, as well as multi-chip packages (MCP). Verigy also
provides advanced analysis tools that accelerate design debug and
yield ramp processes. Additional information about Verigy can be
found at www.verigy.com.
Forward-Looking
Statements
This earnings release contains forward-looking statements,
including statements about our estimated fourth quarter revenue,
GAAP and non-GAAP earnings per share and share-based compensation
expense. Forward-looking statements are subject to a number of
risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. The risks
and uncertainties include, but are not limited to, uncertainty
about the global economic recovery, the conditions of the
semiconductor and semiconductor test industries, the strength of
our customers’ businesses, unforeseen changes in the demand for our
products and unanticipated delays in meeting product demand and
delivery requirements. Additional factors that may cause results to
differ materially from those in the forward-looking statements are
discussed in our most recent SEC filings. The forward-looking
statements in this press release are only valid as of this date,
and Verigy undertakes no duty to update any forward-looking
statements.
Information About Non-GAAP
Measures
Verigy is supplementing its financial measures presented on a
GAAP basis by providing non-GAAP measures to provide additional
meaningful comparisons between current results and results in prior
operating periods to evaluate the operating performance of the
company. Management believes that these non-GAAP financial measures
can provide additional meaningful information of underlying trends
of the business because they provide a comparison of historical
information that excludes certain items that impact the overall
comparability. Non-GAAP net income for the quarter ended July 31,
2010 excludes the effects of charges related to the company’s
restructuring actions and manufacturing transition. Management uses
this information to make operational decisions and for comparisons
to historical operating results and the operating results of its
competitors. Management finds the non-GAAP information to be useful
and believes that its investors may also benefit from seeing the
company’s results “through the eyes” of management in addition to
seeing its GAAP results. A reconciliation between the company’s
GAAP and non-GAAP measures is provided in the attached tables.
Non-GAAP numbers are merely a supplement to, and not a replacement
for, GAAP financial measures. They should be read and evaluated in
conjunction with the GAAP financial measures.
VERIGY LTD. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In millions, except share and per share
amounts) (Unaudited)
Three Months Ended Nine Months Ended July 31, July 31,
2010 2009 2010
2009 Net revenue: Products $ 122 $ 58 $ 286 $ 133
Services 32 29 94
93 Total net revenue 154 87 380 226 Cost of sales:
Cost of products (*) 55 32 137 98 Cost of services (*) 23
20 63 62 Total
cost of sales 78 52 200 160 Operating expenses: Research and
development (*) 25 25 70 70 Selling, general and administrative (*)
35 29 96 88 Restructuring Charges - 1
2 7 Total operating expenses 60 55 168
165 Income (loss) from operations 16 (20 ) 12 (99 ) Other
(expense) income, net (1 ) 1 (3 ) 4 Impairment of investments
- (2 ) (1 ) (16 ) Income
(loss) before income taxes 15 (21 ) 8 (111 ) Provision for income
taxes 2 - 2 4
Net Income (loss) $ 13 $ (21 ) $ 6 $
(115 ) Net income (loss) per share- basic: $
0.21 $ (0.36 ) $ 0.09 $ (1.97 ) Net income (loss) per share-
diluted (#): $ 0.21 $ (0.36 ) $ 0.09 $ (1.97 )
Weighted average shares (presented in thousands) used in computing
net income (loss) per share: Basic 59,755 58,583 59,421 58,307
Diluted 70,462 58,583 59,790 58,307 * Share-based
compensation expense by function: Cost of products $ 0.7 $ 0.6 $
1.8 $ 1.6 Cost of services $ 0.3 $ 0.3 $ 0.8 $ 0.9 Research and
development $ 0.7 $ 0.6 $ 1.7 $ 1.6 Selling, general and
administrative $ 3.5 $ 3.4 $ 10.5 $ 10.0 # In accordance
with accounting guidance, the computation of diluted EPS for the
three months ended July 31, 2010 includes the dilutive effect of
our convertible senior notes and as a result net income is adjusted
to add back the related interest expense of approximately $1.9
million. The convertible senior notes are antidilutive for nine
months ended July 31, 2010.
VERIGY LTD. CONDENSED
CONSOLIDATED BALANCE SHEETS (In millions, except share
data) (Unaudited)
July 31, October 31, 2010 2009
ASSETS Current assets: Cash and cash equivalents $ 247 $ 197
Short-term marketable securities 146 167 Trade accounts receivable,
net 86 54 Inventory 80 55 Other current assets 44
42 Total current assets 603 515 Property,
plant and equipment, net 41 41 Long-term marketable securities 52
75 Goodwill and other intangibles, net 19 20 Other long-term assets
62 62 Total assets $ 777 $ 713
LIABILITIES AND SHAREHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 70 $ 40 Employee compensation and
benefits 25 32 Deferred revenue, current 40 26 Other current
liabilities 20 27 Total current
liabilities 155 125 Long-term liabilities: Convertible
senior notes 138 138 Income taxes payable 17 15 Other long-term
liabilities 42 33 Total liabilities 352
311 Shareholders' equity Ordinary shares, no
par value, 59,893,983 and 58,841,248 issued and outstanding at July
31, 2010 and October 31, 2009, respectively Additional paid in
capital 447 429 Retained earnings (17 ) (23 ) Accumulated other
comprehensive loss (5 ) (4 ) Total shareholders'
equity 425 402 Total liabilities and
shareholders’ equity $ 777 $ 713
VERIGY LTD.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In millions,
except per share amounts) (Unaudited)
Three
Months Ended Nine Months Ended July 31, 2010
July 31, 2010 Net income EPS (*) Gross profit
Gross margin
Operatingexpenses
Net income EPS (*) Gross profit Gross margin
Operatingexpenses
GAAP $ 13 $ 0.21 $ 76 49 % $ 60 $ 6 $ 0.09 $ 180 47 % $ 168
Non-GAAP adjustments: Restructuring charges in cost of sales 0.6
0.01 0.6 0.4 % - 1.4 0.02 1.4 0.4 % - Restructuring charges in
operating expenses 0.4 0.01 - - (0.4 ) 2.1 0.03 - - (2.1 )
Impairment of auction rate securities - - - - - 1.0 0.02 - - - Gain
on sale of investments (0.0 ) - - - - (0.6 ) (0.01 ) - - -
Non-Recurring operating expenses - - - - - 0.4 0.01 - - (0.4 )
Acquisition related charges in cost of sales 0.1 - 0.1 0.1 % - 0.2
- 0.2 0.1 % - Acquisition related charges in operating expenses 0.1
- - - (0.1 ) 0.2 - - - (0.2 ) Transition related charges in cost of
sales 0.1 - 0.1 0.1 % - 4.2 0.07 4.2 1.1 % - Transition related
charges in operating expenses 0.4 -
- - (0.4 ) 0.9 0.02
- - (0.9 ) Non-GAAP $ 14 $ 0.23
$ 77 50 % $ 59 $ 15 $ 0.25 $ 186 49 % $
164
Three Months Ended Nine
Months Ended July 31, 2009 July 31, 2009 Net loss
EPS Gross profit Gross margin Operating
expenses Net loss EPS Gross profit Gross
margin Operating expenses GAAP $ (21 ) $ (0.36 ) $ 35
40 % $ 55 $ (115 ) $ (1.97 ) $ 66 29 % $ 165 Non-GAAP adjustments:
Restructuring charges in cost of sales 1.0 0.02 1.0 1.1 % - 4.6
0.08 4.6 2.0 % - Restructuring charges in operating expenses 1.1
0.02 - - (1.1 ) 7.4 0.12 - - (7.4 ) Impairment of auction rate
securities 1.5 0.03 - - - 9.1 0.16 - - - Impairment of cost method
investment - - - - - 6.2 0.11 - - - Non-Recurring operating
expenses - - - - - 2.6 0.05 - - (2.6 ) Acquisition related charges
in cost of sales - - - 0.0 % - 0.2 - 0.2 0.1 % - Acquisition
related charges in operating expenses 3.9 0.07 - - (3.9 ) 4.0 0.07
- - (4.0 ) Transition related charges in cost of sales 0.6 0.01 0.6
0.7 % - 0.6 0.01 0.6 0.3 % - Transition related charges in
operating expenses 0.1 - - - (0.1 ) 0.1 - - - (0.1 ) Tax impact for
transfer of intellectual property - - - - - 1.2 0.02 - - - Tax
impact related to acquisition (1.5 ) (0.03 ) -
- - (1.5 ) (0.03 ) - -
- Non-GAAP $ (14 ) $ (0.24 ) $ 37 42 % $ 50
$ (80 ) $ (1.38 ) $ 71 32 % $ 151 * In
accordance with accounting guidance, the computation of diluted EPS
for the three months ended July 31, 2010 includes the dilutive
effect of our convertible senior notes and as a result net income
is adjusted to add back the related interest expense of
approximately $1.9 million. The convertible senior notes are
antidilutive for nine months ended July 31, 2010.
VERIGY
LTD. RECONCILIATION OF GAAP TO NON-GAAP GUIDANCE (In
millions, except per share amounts) (Unaudited)
Guidance for the three months ended October 31, 2010
Three Months Ended October 31, 2010
Revenue GAAP and Non-GAAP revenue guidance: $ 157 $ 167
Earnings per share GAAP net income per diluted
share $ 0.22 $ 0.27 Exclude restructuring charges in cost of sales
0.01 0.01 Exclude transition and acquisition related charges
0.01 0.01 Non-GAAP net income per diluted share $ 0.24 $
0.29
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