Wednesday, November 30, 2011

Omnivision Quarterly Earnings Call

Seeking Alpha published Omnivision Quarterly Earnings Call transcript. Few interesting quotes from it:

Anson Chan, CFO:

"For the second quarter of fiscal 2012, we’re reporting revenues of $217.9 million, down 21.1% sequentially and down 9% on a year-over-year basis."

"Our fiscal 2012 second quarter gross margin was 30.6% compared with the 31.7% that we reported in our prior quarter."

"Our GAAP operating income in the second quarter totaled approximately $19.5 million as compared to $40.6 million the prior quarter."

Shaw Hong, CEO:

"...we encountered an unanticipated cutback in orders from major customers. For sensors that were designed into assist the conventional consumer devices. This event derailed our ability to deliver the financial performance that we had forecasted in August."

"...we acknowledge that a company’s near-term financial performance is disappointing."

"I’d like to express my disappointment in the results for our second fiscal quarter. However, from Q2, OmniVision posted a record revenues in four of its last five quarters. Our focus has always being on executing and technology leadership. The focus remains the heart and soul of the company."

Ray Cisneros, VP Worldwide Marketing:

"Our execution felt short of expectations for our second quarter. This was brought about by a sudden cut back of orders from our largest end used customers of sensors. We also expect further degradation in demand for our third fiscal quarter."

Some quotes from Q&A session:

Harsh Kumar - Morgan Keegan:

"..the order cutbacks, is that primarily related to one customer or are you seeing cutbacks in orders from multiple customers? And is the cutback in orders related to one product or is that multiple products at one or many customers?"

Ray Cisneros:

"The order cutbacks are associated with several customers and they are associated also with several market segments. It's in several products."

Paul Coster - JPMorgan:

"The product cycle leadership that you had a year or so ago seems to have evaporated. Are we correct in assuming that you’re losing market share here?"

Ray Cisneros:

"It’s difficult for us to draw conclusions on market share. If you look at the 2011 calendar year, we are looking at a fairly-fairly still robust number of units OmniVision delivered to the marketplace once 2011 is tallied up."

Betsy Van Hees - Wedbush Securities:

"...I was wondered if we could go back to BSI-2? So the 8830 is shipping in limited volumes. Is it shipping in production to anyone or is it qualified, and so that if there could be a tear down of our product, for example, we would be able to see it?"

Ray Cisneros:

"Yes. It is shipping in production. It is shipping in the customer’s product in production. If you find that product you could tear it down and find our product in there, but obviously due to confidentiality agreements we have we can’t divulge particular names and products, but it is in the marketplace."

Betsy Van Hees - Wedbush Securities:

"And then you talked about ASP pressure... That is something we haven’t heard in a while. So could you talk a little bit more about that ASP pressure, where you are seeing it and if it is broad-based or specific to certain market segments?"

Ray Cisneros:

"...the product mix going from a slant of higher resolution product mix to a lower resolution product mix due to the cut back in orders we experienced in Q3... that’s the big driving factor for the step-down in price. And then, what I mentioned in my prepared commentary is, it's normal quarter-over-quarter price erosion. That was as simple as that. That's common and fair."

Raji Gill - Needham & Company:

"A question on the gross margins. If you look at the guidance, would it be fair to say that the implied guidance of the gross margin would be 28% range?"

Anson Chan:

"...In terms of unit shipments for the BSI-2 products because again these products are still in a very early stage of introduction and the yield is below optimal. So the more we ship the less the margin will be and so that will present itself with a headwind."

Raji Gill - Needham & Company:

"...if I do the math, and it seems like the camera phone business was down about 24% sequentially... And then PCs were down like 53% sequentially... maybe ... you could comment on the competitive landscape coming from other competitors?"

Ray Cisneros:

"...we’ve been in business for 15 years in this space, and we've seen a lot of competitors come and go and this is no different. That said, however, we always respect our competition. Everybody is moving very fast with technology... and we like our chances."

Update: Seeking Alpha posts a post-conference analysis of the results:

"The real blow to the stock price came from the Q3 outlook. The company expects fiscal third quarter 2012 revenues will be in the range of $160 million to $180 million [well below consensus of $201.4M]. This is an indication that the company may have lost more key contracts than merely the originally feared Apple iPhone 4s contract."

"While they took a hit this most recent quarter, Omnivision is still cash rich with $464 million of net cash currently on their balance sheet. They are also unhindered by long term debt with less than $50 million reported on the balance sheet."

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