Company reports revenue in line with guidance, sequential earnings increase and guides to 24% sequential quarter revenue growth at mid-point of the Q3 outlook
LONDON — (BUSINESS WIRE) — July 27, 2016 — Dialog Semiconductor plc (FWB: DLG), a provider of highly integrated power management, AC/DC, solid state lighting and Bluetooth(R) low energy wireless technology, today reports results for the second quarter ended July 1, 2016.
Q2 2016 financial highlights
- Revenue of $246 million in line with May guidance
- Power Conversion revenue up 46% over Q2 2015 to $28.6 million
- Gross margin at 46.3%. Underlying* gross margin at 47.1%
- Operating profit of $22.9 million, a year-on-year reduction of 63%. Underlying* operating profit of $33.2 million, a sequential increase of 11% and a year-on-year reduction of 53%
- All operational business segments profitable on an underlying basis
- Diluted EPS of 22 cents, a year-on-year reduction of 60%. Underlying* diluted EPS of 34 cents, a sequential increase of 21% and a year-on- year reduction of 48%
- Cash flow from operating activities of $13 million (Q2 2015: $46 million). $33 million of free cash flow* generated in Q2 2016, up 113% over Q2 2015. $660 million of cash and cash equivalents, $212 million above Q2 2015
- Subsequent to quarter end, on July 5, 2016 the Company purchased 590,000 ordinary shares at an average price of EUR27.6429
Q2 2016 operational highlights
- Continued design win momentum for Power Management ICs (PMICs) with both custom and standard products at leading smartphone and computing OEMs
- Innovative new standard products: PMICs, Charging and Audio ICs sampled to the market
- Enhancement of leadership position in the mobile adapter rapid charge market
- Continued Bluetooth design win success at Xiaomi for their Mi Band 2 fitness band
- Expanded our IoT product portfolio and ecosystem with new product offerings within the Home Automation segment
- Continued momentum in China smartphone market with second generation sub-PMIC ASSP
- Good progress in our strategic objective to expand our business footprint in China
Commenting on the results Dialog Chief Executive, Dr Jalal Bagherli, said:
"During the quarter we have delivered sequential revenue and earnings growth while maintaining focused investment in R&D. The exceptional growth achieved within our Power Conversion and Bluetooth low energy businesses is an indicator of the growth potential these markets offer.
The product pipeline remains strong across our core business groups and we expect to ramp a number of new high volume products in the second half of this year. Looking further ahead, we believe our R&D investments will generate new opportunities with Tier 1 OEMs, increase our share of content in mobile devices and expand our IoT footprint. All of which gives us confidence that our positive momentum will continue through the second half of 2016, and in to 2017 and 2018."
Outlook
Based on our current visibility, we anticipate revenue for Q3 2016 to improve sequentially from Q2 2016 and to be in the range of $290 to $320 million. On the basis of this revenue guidance, gross margin in Q3 2016 will be marginally above H1 2016.
As a result of the continuing softness in smartphone market demand, we now anticipate revenue for the full year 2016 to decline approximately 15% year-on-year. We expect growth momentum in our Connectivity and Power Conversion products to remain strong through 2016.
In line with the revenue performance, we expect underlying gross margin percentage for the full year to be slightly below the level achieved in 2015. The effect of the lower anticipated revenue in FY 2016 will be partially offset by rigorous control of operating expenses in the period.
| Financial overview | |||||||||||||
| IFRS | Second Quarter | First Half | |||||||||||
| US$ million | 2016 | 2015 | Var. | 2016 | 2015 | Var. | |||||||
| Revenue | 245.7 | 316.5 | -22% | 487.2 | 627.7 | -22% | |||||||
| Gross Margin | 46.30% | 46.50% | -20bps | 45.40% | 46.20% | -80bps | |||||||
| R&D %1 | 24.30% | 17.70% | +660bps | 24.10% | 17.50% | +660bps | |||||||
| SG&A %1 | 12.70% | 9.30% | +340bps | 13.90% | 10.10% | +380bps | |||||||
| Other operating income %2 | 0.10% | 0.10% | - | 28.30% | 0.20% | nm | |||||||
| Operating profit | 22.9 | 62.5 | -63% | 174.1 | 118.1 | 47% | |||||||
| Operating margin | 9.30% | 19.70% | nm | 35.70% | 18.70% | nm | |||||||
| Net income | 16.8 | 42.9 | -61% | 159.7 | 81.7 | 96% | |||||||
| Basic EPS $ | 0.23 | 0.59 | -61% | 2.11 | 1.15 | 83% | |||||||
| Diluted EPS $ | 0.22 | 0.55 | -60% | 2.02 | 1.08 | 87% | |||||||
| Cash flow from operating activities | 13.5 | 45.7 | -70% | 120.6 | 165.3 | -27% | |||||||
| Underlying* | Second Quarter | First Half | |||||||||||
| US$ million | 2016 | 2015 | Var. | 2016 | 2015 | Var. | |||||||
| Revenue | 245.7 | 316.5 | -22% | 487.2 | 627.7 | -22% | |||||||
| Gross margin | 47.10% | 47.10% | - | 46.30% | 46.90% | -60bps | |||||||
| R&D %1 | 23.10% | 17.00% | +610bps | 22.70% | 16.50% | +620bps | |||||||
| SG&A %1 | 10.60% | 7.80% | +280bps | 10.70% | 7.90% | +280bps | |||||||
| EBITDA | 44.5 | 80.8 | -45% | 85.3 | 160.9 | -47% | |||||||
| EBITDA % | 18.10% | 25.50% | -740bps | 17.50% | 25.60% | -810bps | |||||||
| Operating profit | 33.2 | 71.2 | -53% | 63.2 | 142.1 | -56% | |||||||
| Operating margin | 13.50% | 22.50% | -900bps | 13.00% | 22.60% | -960bps | |||||||
| Net income | 26.7 | 52.1 | -49% | 48.3 | 107.6 | -55% | |||||||
| Basic EPS $ | 0.36 | 0.71 | -49% | 0.65 | 1.51 | -57% | |||||||
| Diluted EPS $ | 0.34 | 0.66 | -48% | 0.62 | 1.37 | -55% | |||||||
1. R&D and SG&A as a percentage of revenue.
2. First Half Other operating income includes $137.3 million Atmel termination fee.
Revenue in Q2 2016 was down 22% to $246 million. The revenue performance was the result of the anticipated year-on-year volume decline in Mobile Systems (31%) partially offset by 46% growth in Power Conversion. Revenue performance improved sequentially in Connectivity 38%, Power Conversion 19% and Automotive and Industrial 14%. Q2 2016 gross margin was 46.3%, 20bps below Q2 2015. Q2 2016. Underlying* gross margin was 47.1%, 160bps above Q1 2016 and in line with Q2 2015. Excluding $2.7 million manufacturing costs credit, underlying gross margin in Q2 2016 was 46.0%, 50bps above Q1 2016.
Net OPEX (comprising SG&A and R&D expenses, and other operating income) in Q2 2016 was $90.8 million, or 37.0%. Underlying* net OPEX (comprising SG&Aand R&D expenses, and other operating income) in Q2 2016 was $82.6 million, or 33.6% of revenue. On a trailing twelve month basis, underlying* net OPEX in Q2 2016 was 26.8% of revenue (Q2 2015: 23.3%).
R&D expense in Q2 2016 was up 7% from Q2 2015. As a percentage of revenue R&D in Q2 2016 was up 660bps year-on-year to 24.3%. As a percentage of revenue, underlying* R&D in Q2 2016 was up 610bps year-on-year to 23.1% (Q2 2015:17.0%). This increase was predominantly the result of the lower revenue in Q2 2016 and the on-going investment in large application- specific customer opportunities. On a trailing twelve month basis, underlying* R&D was 18.0% of revenue (Q2 2015: 15.9%). On an underlying* basis, R&D expense was up 6% from Q1 2016.
SG&A expense in Q2 2016 was 12.7% of revenue, 340bps above Q2 2015. This increase was predominantly the result of the lower revenue in Q2 2016 and the scaling up of our support functions in 2016. Underlying* SG&A in Q2 2016 was 10.6% of revenue, 30bps below Q1 2016.
In Q2 2016 we achieved IFRS and underlying* operating profit of $22.9 million and $33.2 million, respectively. Operating profit in the quarter was down 63% year-on-year. Underlying operating profit in the quarter was up 11% sequentially over Q1 2016 and down 53% over Q2 2015. The year-on- year decrease was mainly the result of the revenue decline and higher OPEX expenses.
The effective tax rate in H1 2016 was 7.4% (H1 2015: 28.5%).The underlying* effective tax rate in Q2 2016 was 25%, which increased slightly sequentially and is in line with the Q2 2015 rate. The underlying* effective tax rate for H1 2016 was 24.0%, which compares with 25.0% for FY 2015.
In Q2 2016, net income was down 61% year-on-year. Underlying* net income was up 24% sequentially over Q1 2016 and down 49% year-on-year. Underlying* diluted EPS in Q2 2016 was up 21% sequentially over Q1 2016 and down 48% year-on-year.
As indicated in May, at the end of Q2 2016, our total inventory level was down 8% over the prior quarter to $141million (or ~98 days), representing a 5-day decrease in our days of inventory. The decrease in the inventory value was mostly due to the decrease in raw materials. During Q3 2016 we expect inventory value to be broadly at the same level as Q2 2016 and inventory days to decrease from Q2 2016 as we serve our customers backlog.
At the end of Q2 2016, we had a cash and cash equivalents balance of $660 million. In the second quarter we generated $33 million of free cash flow*, more than double what the business generated in Q2 2015 (Q2 2015: $15 million).
Subsequent to the quarter end, the first interim (six weeks) settlement of the first tranche of the buyback programme took place. On 5 July 2016 the Company purchased 590,000 ordinary shares at an average price of EUR27.6429. The maximum maturity date for the first tranche shall be 15 September 2016 and the maximum total cost of the shares to be purchased by the Company from Barclays Bank PLC shall be EUR50 million and the minimum cost EUR37.5 million.
* Non-IFRS measures
Underlying measures and free cash flow quoted in this Press Release are non-IFRS measures. Our use of underlying measures is explained on pages 149 to 154 of our 2015 Annual Report. Reconciliations of the underlying measures to the nearest equivalent IFRS measures for Q2 2016, Q2 2015, H1 2016 and H1 2015 are presented in Section 3 of the Q2 2016 Interim Report. For ease of reference, we present below those reconciliations for Q2 2016.
|
Q2 2016 |
IFRS US$000 |
Share-based compensation and related payroll taxes US$000 |
Amortisation of acquired intangible assets
US$000 |
Aborted merger with Atmel US$000 | Effective interest US$000 | Underlying US$000 | |||||||
| Revenue | 245,747 | - | - | - | - | 245,747 | |||||||
| Gross profit | 113,737 | 326 | 1,755 | - | - | 115,818 | |||||||
| SG&A expenses |
(31,179) |
3,338 | 1,900 |
(15) |
- |
(25,956) |
|||||||
| R&D expenses |
(59,816) |
2,996 | - | - | - |
(56,820) |
|||||||
| Other operating income | 200 | - | - | - | - | 200 | |||||||
| Operating profit | 22,942 | 6,660 | 3,655 |
(15) |
- | 33,242 | |||||||
| Net finance income | 2,497 | - | - | - | 138 | 2,635 | |||||||
| Income tax expense |
(8,653) |
(250) |
(217) |
- |
(27) |
(9,147) |
|||||||
| Net income | 16,786 | 6,410 | 3,438 |
(15) |
111 | 26,730 | |||||||
| EBITDA | n/a | 44,527 |
EBITDA is defined as underlying net income of US$26.7 million (Q2 2015: US $52.1 million), before income tax expense of US$9.1 million (Q2 2015: US $17.6 million), depreciation of US$6.6 million (Q2 2015: US$5.7 million), amortisation of US$4.7 million (Q2 2015: US$4.0 million) and net finance (income) expense of US$(2.6) million (Q2 2015: US$1.4 million).
Free Cash Flow is defined as net income of US$16.8 million (Q2 2015: US $42.9 million), before depreciation of US$6.6 million (Q2 2015: US$5.7 million), amortisation of US$8.3 million (Q2 2015: US$7.6 million) and the net interest (income) expense of US$(0.6) million (Q2 2015: US$1.1 million), plus (minus) the net decrease (increase) in working capital of US $13.7 million (Q2 2015: US$(19.4) million) and minus capital expenditure of US$12.3 million (Q2 2015: US$22.6 million).
Operational overview
Our latest generation of highly integrated PMICs will begin to ramp in high volume production during Q3 2016. Additionally, during the quarter we completed a number of sophisticated PMIC designs which are now sampling to our customers for products targeting H2 2017 production.
The company made further progress in the strategic objective of expanding its business footprint and deepening customer engagements in Asia:
- Building on the success of our R&D initiatives in Power Management, our next generation Chargers ICs will ship in volume production for a Tier 1 Korean customer's smartphones and tablets from Q3 2016.
- The on-going initiative to establish further regional strategic partnerships in Greater China and develop deeper customer engagements in the region is well under way, with a first major engagement for a 2017 platform.
- The roll-out of our RapidChargeTM solutions continued to gather momentum, enhancing Dialog's estimated 70% market share of the rapid charging adapter market for smartphones, tablets and other devices.
- Our second generation sub-PMIC was shipped during Q2 2016 to leading Chinese smartphones OEMs who entered volume production of their MediaTek based LTE platforms.
Bluetooth low energy continues to be rapidly adopted across a wide range of IoT applications. Our business made solid progress during the quarter in capturing the high-growth opportunity within IoT with our Bluetooth(R) low energy, smart LED driver ICs and ambient light and colour sensor controls:
- SmartBondTM DA14681 Wearable-on-Chip(TM) was selected to power Xiaomi's latest activity tracking wrist band, Mi Band 2, one of the most anticipated wearable devices of 2016. The DA14681 provides connectivity, application processing, sensor fusion and advanced power management functionality enabling the Mi Band 2 to be even better positioned to further grow share in the rapidly expanding wearable market.
- Launched the industry-first OpenThread Sandbox Development Platform to support the development of Home Automation applications. It provides Thread ecosystem developers with plug-and-play hardware and OpenThread software released by Nest, enabling development for the connected home. By adding Thread capability to our Bluetooth low energy portfolio, Dialog has created a unique combination of connectivity solutions for IoT and smart home applications.
- Added ambient light and colour sensor controls to our smart lighting platform of advanced LED drivers and Bluetooth controllers. This represents another significant milestone in the joint effort with Dyna Image as both companies continue to combine their core technologies to provide complete platform solutions.
In line with our diversification strategy, during the quarter we expanded into the consumer headset segment with the launch of our SmartBeat(TM) Audio IC, enabling a new immersive headset experience. Supporting both wired USB 3.0 type C and Bluetooth based headsets, the DA14195 offers a new route to next generation active headphone development. This digital SoC with built in advanced audio processing heightens performance and defines a new standard for headset functionality and sound quality.
We continued to provide effective and efficient Power Management innovation to the market, expanding our range of ASSP solutions with the DA9061 and DA9062 PMICs. These highly efficient, cost-optimized devices can power a broad range of single or dual-core ARM(R) Cortex(R) based processors in applications such as handheld consumer, industrial embedded, smart home and automotive systems.
The expansion into the smart TV and set-top box (STB) market continues to progress according to plan with a number of leading customers evaluating our recently released integrated PMICs targeted for volume production in Q1 2017.
* * * * *
Dialog Semiconductor invites you today at 09.30 am (London) / 10.30 am (Frankfurt) to take part in a live conference call and to listen to management's discussion of the Company's Q2 2016 performance, as well as guidance for Q3 2016. Participants will need to register using the link below labelled 'Online Registration'. A full list of dial in numbers will also be available. To register for the webcast and receive dial in numbers, the conference PIN and a unique User ID please click on the link below:
http://members.meetingzone.com/selfregistration/registration.aspx? booking=gum7t5ZQcIR91evp5n3Pdmy0gkWFjnVKQSbOVqsTZ5s=&b=d58ae4ab-80e5-47f2- 8295-e04d92bbba83
In parallel to the call, the analyst presentation will be webcasted on our website at http://webcast.openbriefing.com/semiconductor_q2_results_280716/
A replay will be posted on the Dialog website four hours after the conclusion of the presentation and will be available at http://www.dialog- semiconductor.com/investor-relations
Full release including the Company's Interim condensed consolidated income statement, consolidated balance sheet, consolidated statements of cash flows and selected notes for the quarter ended 1 July 2016 is available under the investor relations section of the Company's website at: http://www.dialog-semiconductor.com/investor-relations
Dialog, the Dialog logo, SmartBond , RapidCharge, SmartBeat are registered trademarks of Dialog Semiconductor Plc or its subsidiaries. All other product or service names are the property of their respective owners. (c) Copyright 2016 Dialog Semiconductor. All rights reserved
Note to editors
Dialog Semiconductor provides highly integrated standard (ASSP) and custom (ASIC) mixed-signal integrated circuits (ICs), optimised for smartphone, tablet, IoT, LED Solid State Lighting (SSL), and Smart Home applications. Dialog brings decades of experience to the rapid development of ICs while providing flexible and dynamic support, world-class innovation and the assurance of dealing with an established business partner. With world-class manufacturing partners, Dialog operates a fabless business model and is a socially responsible employer pursuing many programs to benefit the employees, community, other stakeholders and the environment we operate in.
Dialog's power saving technologies including DC-DC configurable system power management deliver high efficiency and enhance the consumer's user experience by extending battery lifetime and enabling faster charging of their portable devices. Its technology portfolio also includes audio, Bluetooth(R) Low Energy, Rapid Charge(TM) AC/DC power conversion and multi- touch.
Dialog Semiconductor plc is headquartered in London with a global sales, R&D and marketing organisation. In 2015, it had $1.35 billion in revenue and was one of the fastest growing European public semiconductor companies. It currently has approximately 1,660 employees worldwide. The company is listed on the Frankfurt (FWB: DLG) stock exchange (Regulated Market, Prime Standard, ISIN GB0059822006) and is a member of the German TecDax index.
Forward Looking Statements
This press release contains "forward-looking statements" that reflect management's current views with respect to future events. The words "anticipate," "believe," "estimate", "expect," "intend," "may," "plan," "project" and "should" and similar expressions identify forward-looking statements. Such statements are subject to risks and uncertainties, including, but not limited to: an economic downturn in the semiconductor and telecommunications markets; changes in currency exchange rates and interest rates, the timing of customer orders and manufacturing lead times, insufficient, excess or obsolete inventory, the impact of competing products and their pricing, political risks in the countries in which we operate or sale and supply constraints. If any of these or other risks and uncertainties occur (some of which are described under the heading "Risks and their management" in Dialog Semiconductor's most recent Annual Report) or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement which speaks only as of the date on which it is made, however, any subsequent statement will supersede any previous statement.
| Language: | English | ||
| Company: |
Dialog Semiconductor Plc. Tower Bridge House, St. Katharine's Way E1W 1AA London United Kingdom |
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| Phone: | +49 7021 805-412 | ||
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| ISIN: | GB0059822006, XS0757015606 | ||
| WKN: | 927200 | ||
| Indices: | TecDAX | ||
| Listed: |
Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Hanover, Munich, Stuttgart, Tradegate Exchange; Terminbörse EUREX; Luxemburg |
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