Second Quarter Fiscal 2008 GAAP Results
Record revenue of $411 million increased by $31 million, or 8 percent, when compared with the same period a year ago, and reflects continued gains in the wired and wireless communications markets. Gross margin of $159 million, or 39 percent of sales, represents an improvement of $24 million year-over-year.
Operating expenses were $118 million versus $108 million a year ago, owing to increased levels of investment in new product development. The favorable revenue and margin performance drove net income to a record $17 million, up from $4 million in the second quarter of fiscal 2007.
Cash balances increased sequentially by $22 million to $83 million at the end of the quarter. Cash generated from operations of $43 million was partially offset by $6 million spent on an acquisition.
Second Quarter Fiscal 2008 Non-GAAP Results
Higher revenue led to gross margin of $174 million, or 42 percent. The $23 million uptick from last year translates into a gain of 260 basis points.
R&D expenses climbed by $11 million to $62 million, while selling, general and administrative costs rose by $2 million to $46 million from the second quarter a year ago.
Net income increased to an all-time high of $43 million, compared with $33 million in the same period last year. These results translate into Adjusted EBITDA of $85 million, down $3 million from the same quarter a year ago, due to a reduction in other income.
“We continue to exceed past performance based on revenue gains in targeted markets and a favorable product mix. This fueled record revenue and enabled expanded profitability for the quarter,” said Hock E. Tan, president and CEO of Avago Technologies. “These strong results are indicative of early success with our stated strategy to drive growth in more profitable segments.”
Financial Results Conference Call
Avago Technologies will host a conference call to review its financial results for the second fiscal quarter today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial (480) 629-9031. A replay will be available until Midnight Pacific Time Wednesday, June 4, 2008. To access the replay, dial (303) 590-3030, passcode: 3878915.
Non-GAAP Financial Measures
In addition to GAAP reporting, Avago reports net income or loss, as well as gross margin and operating expenses, on a non-GAAP basis. This non-GAAP earnings information excludes stock-based compensation expense, amortization of intangibles and unusual items and their related tax effects. In addition, Avago also discloses Adjusted EBITDA as measured by the Company’s principal debt instruments. Avago believes this non-GAAP earnings information provides additional insight into the Company’s on-going performance and has therefore chosen to provide this information to investors for a more consistent basis of comparison and to emphasize the results of on-going operations. These historical non-GAAP measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP net income (loss) is included in the financial tables.
About Avago Technologies
Avago Technologies is a leading supplier of analog interface components for communications, industrial and consumer applications. By leveraging its core competencies in III-V compound and silicon semiconductor design and processing, the company provides an extensive range of analog, mixed signal and optoelectronics components and subsystems to more than 40,000 customers. Backed by strong customer service support, the company's products serve four diverse end markets: industrial and automotive, wired infrastructure, wireless communications, and computer peripherals. Avago has a global employee presence and heritage of technical innovation dating back 40 years to its Hewlett-Packard roots. Information about Avago is available on the Web at www.avagotech.com.
Safe Harbor Statement
This announcement and supporting materials may contain forward-looking
statements which address our expected future business and financial
performance. These forward looking statements are based on current
expectations, estimates, forecasts and projections of future Company or
industry performance based on management’s
judgment, beliefs, current trends and market conditions and involve
risks and uncertainties that may cause actual results to differ
materially from those contained in the forward-looking statements.
Accordingly, we caution you not to place undue reliance on these
statements. For Avago, particular uncertainties which could adversely or
positively affect future results include cyclicality in the
semiconductor industry or in our end markets; fluctuations in interest
rates; our ability to generate cash sufficient to service our debt and
to fund our research and development, capital expenditures and other
business needs; our increased dependence on outsourced service providers
for certain key business services and their ability to execute to our
requirements; our ability to maintain tax concessions in certain
jurisdictions; our ability to protect our intellectual property; our
competitive performance and ability to continue achieving design wins
with our customers; any expenses associated with resolving customer
product and warranty claims; our ability to achieve the growth prospects
and synergies expected from our acquisitions; delays and challenges
associated with integrating acquired companies with our existing
businesses; our ability to improve our cost structure through our
manufacturing outsourcing program; and other events and trends on a
national, regional and global scale, including those of a political,
economic, business, competitive and regulatory nature. Our Annual Report
on Form 20-F filed with the SEC on December 13, 2007, recent Current
Reports on Form 6-K, and other Avago filings with the U.S. Securities
and Exchange Commission ( “ SEC ” )
(which you may obtain for free at the SEC ’ s
http://www.sec.gov ) discuss
some of the important risk factors that may affect our business, results
of operations, and financial condition.