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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 “Risk Factors” 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.
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Silicon Solutions for Focused Markets
Low Power Displaysystems
Audio-Power Management Mixed Signal SOC
IndustrialAutomotiveMobile Consumer
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Y2007 Achievements Summary (1)
Cost Reduction in our operating platform:
Functional currency change to USD, reducing FX exposure
De-listing from Nasdaq implemented
Off-shore manufacturing Phase1 implemented (Test) and Phase2 launched (Logistics)
Set up advanced Audio R&D Centre in Edinburgh
Ramped a new product for our first major consumer electronics customer
Ramped production for our 3G/HSPA product line with Tier 1 Phone
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Y2007 Achievements Summary (2)
Expanded Smartphone manufacturers in our list of customers for 3G/HSPA and Marvell based chipsets
Extended product partnerships with application processor companies
Completed CSTN actions and re-focused resources onto MEMS, E-Ink and OLED display technologies
Implemented invoice discounting scheme to support cash flow requirements in 2H07
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Q4 2007 Business Overview
Continued strategic focus maintained on securing growth in the long term :
Our Wireless activity returned to growth based on new products and customers
Broadening Dialog’s product range and building a more diversified customer base / Asus announced at Mobile World Congress, Barcelona.
Continuous improvements in our design win pipeline for new products; notable wins in Automotive for cooling fan and intelligent battery sensing
Fully integrated offshore product test and logistic operation
SmartXtend™ - Break through technology for OLED Displays announced
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Q4 2007 Financial Overview
Q4 2007 - a return to quarterly profitability and further margin enhancement:
Q4 revenues stand at USD 34.5m: an increase of 40% on the prior quarter and 150% higher than the comparative period in 2006
Q4 saw Dialog generate positive cash flow from operations and return to quarterly profitability, posting a quarterly net profit of USD 1.3m or USD 0.03 per share
Q4 gross margin stands at 41.5%: some 5.1% points higher than the prior quarter and up from 9.3% in the year-ago quarter.
Revenue mix continues to improve with over 70% of Q4 revenues derived from new, higher margin product sales
At the close of Q4, liquid asset balances stood at USD 36.2m: up USD 9.4m on the prior quarter and Dialog remains debt free
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Financial Snapshot
4Q07 Revenue up 40% compared to prior quarter GOP up 222 bp in last 9 monthsPosted first net income since 3Q05Generated positive cash flow from operations
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Improving margin trend
224bp margin improvement in 12 months
>30% Gross Margin achieved one Quarter ahead of plan
Highest Gross Margin for over 3 years despite lower revenues
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Cash & Securities
4Q07 saw positive cash flow from Operations ($ 2.6m)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Mill
ion
USD
Securities 18.9 19.6 20.8 20.0 20.3 Cash and cash equivalents 32.0 24.4 10.5 6.5 15.9
Q4 '06 A Q1 '07 A Q2 '07 A Q3 '07 A Q4 '07 A
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6.3
9.8
4.6
3.7
9.7
4.4
1.3
5.6
2.2
0.83.9
2.7
1.6
5.6
2.0
2.2
5.3
2.4
1.5
5.5
8.5
1.5
5.3
10.2
0.0
5.0
10.0
15.0
20.0
25.0M $
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07
Inventory by Stage
Raw Material WIP FG
4Q06 1Q07 2Q07 3Q07 4Q07
DIO (days) 64 83 94 100 78
Turns 5.6 4.3 3.8 3.6 4.6
Inventory build in FG (Finished Good) to support customer forecasts in 1H08Well positioned to support 1H08 revenue with limited working capital Continue to improve turns
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2008 Business Strategy
2007 was a year of recovery, execution and a return to a growth path. We will continue our efforts to fine-tune our strategy to ensure that the Company is well positioned to deliver sustainable growth, in revenue and profits. In 2008 we will:
Increase our ASSP portfolio for all segments to reach a wider market
Focused R&D investment for extending our competitive technical advantage for entering new Tier 1 accounts in Consumer, Mobile Phone and Automotive
Increase our sales and technical support worldwide, focusing on new customers in the North America and Asia markets
Optimise our operating platform by introducing advanced enterprise and information management systems to enable further scalable growth
Enhance communication of Dialog’s brand and strategy to customers and investors
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Target market for Wireless Segment
Mobile Phone1 Billion
Digital Still Camera150 Million
Personal Media Players
100 MillionAmusement/Games
80 Million
TAM : $5.4B
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Arima X800
Integrated Power & Audio for 3G/HSPA
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Emerging technology – for the next generation of mobile displays
STN Declining
TFT-LCD Mature
OLED Emerging
2000 201019901980
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Reason for this application:Keep battery small at an increased number of electric systems in cars
Save fuel
Mandatory for Start/Stop systems and intelligent generators
System Description:Supervision of battery loading algorithm, temperature, voltage and current
Provides info to switch off sub systems to save energy for capability of engine start
Market:Will become a Standard in all cars
First launch in European market and mid to high end cars
Intelligent Sensors – Battery Management
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Telematics/Infotainment/GPS
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2008 outlook
The strong performance in the final quarter of 2007 gives us a high degree of confidence in our medium and long term growth prospects based upon a strong product portfolio and a healthy pipeline of design wins. The momentum has continued into the first quarter of the new financial year although this is a traditionally quieter period.
Whilst general economic conditions remain uncertain, we anticipate that H1 2008 revenues will be at similar levels to those of H2 2007
The second half of 2008 should see a substantial and accelerating growth in revenues as compared to the first half of 2008 which in turn should deliver positive operating margins for the full year at similar levels to those just reported for Q4 2007
We continue to balance our strategic plans with a careful attention to efficiency and a tight and effective control over working capital.
Dialog continues to effectively neutralise foreign exchange volatility
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A t 3 1 D ecemb er 2 0 0 7
A t 3 1 D ecemb er 2 0 0 6
(in thousands) $ $
A SSET S
Cash and cash equivalents 15,923 32,032
Available-for-sale financial assets 15,921 19,351
Trade accounts receivable and other receivables 2,569 4,666
Inventories 17,051 7,459
Other financial assets 336 -
Other current assets 1,866 1,938
53,666 65,446
Non current assets classified as held for sale - 1,393
T o tal current assets 53,666 66,839
Property, plant and equipment, net 10,452 12,417
Intangible assets 2,443 1,579
Held to maturity securities 4,000 -
Investments - 1,620
Deposits 209 231
Assets for current tax 453 443
T o tal no n-current assets 17,557 16,290
T OT A L A SSET S 71,223 83,129
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A t 3 1 D ecember 2 0 0 7
A t 3 1 D ecember 2 0 0 6
(in thousands) $ $
LIA B ILIT IES A N D SH A R EH OLD ER S’ EQUIT Y
Trade and other payables 14,735 9,109
Provisions 978 1,430
Income taxes payable 40 28
Other current liabilities 1,778 1,893
T o tal current liabilit ies 17,531 12,460
T o tal no n-current liabilit ies - -
Ordinary Shares 9,328 9,328
Additional paid-in capital 222,914 222,781
Accumulated deficit (177,844) (159,764)
Other reserves (501) (1,444)
Employee stock purchase plan shares (205) (232)
N et Shareho lders’ equity 53,692 70,669
T OT A L LIA B ILIT IES A N D SH A R EH OLD ER S’ EQUIT Y 71,223 83,129
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2 0 0 7 2 0 0 6
(in thousands) $ $
C ash f lo ws fro m o perat ing act ivit ies:
Net loss (18,985) (44,015)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Interest income, net (969) (1,152)
Other income tax expense 136 (158)
Impairment of inventories 937 7,899
Impairment of trade accounts receivable - 2,644
Impairment of investment 2,662 -
Depreciation of property, plant and equipment 5,486 7,087
Amortization of intangible assets 900 3,883
Losses on disposals o f fixed assets and Impairment of fixed and financial assets 743 1,472
Expense related to share-based payments 905 1,157
Restructuring and related impairment charges 332 5,473
C hanges in wo rking capital:
Trade accounts receivable and o ther receivables (6,816) 30,042
Factoring 8,913 -
Inventories (10,529) 7,254
Prepaid expenses (321) 154
Trade accounts payable 6,290 (5,814)
Provisions (461) (175)
Other assets and liabilities (496) (874)
C ash generated fro m (used fo r) o perat io ns (11,273) 14,877
Interest paid (76) (8)
Interest received 1,153 1,410
Income taxes paid (53) (48)
C ash f lo w fro m (used fo r) o perat ing act iv it ies (10,249) 16,231
2 0 0 7 2 0 0 6
(in thousands) $ $
C ash f lo ws fro m invest ing act iv it ies:
Sale of property, plant and equipment 1,081 -
Purchases of property, plant and equipment (4,146) (3,733)
Purchases of intangible assets (1,100) (1,333)
Payments for capitalized development costs (724) -
Investments and deposits made (1,021) (1,564)
Purchase of securities (26,621) -
Sale of Securities 26,471 -
C ash used fo r invest ing act iv it ies (6,060) (6,630)
C ash f lo ws fro m f inancing act iv it ies:
Sale of employee stock purchase plan shares 159 279
C ash f lo w fro m f inancing act iv it ies 159 279
C ash f lo w fro m (used fo r) o perat ing, invest ing and f inancing act iv it ies (16,150) 9,880
Effect o f foreign exchange rate changes on cash and cash equivalents 41 (150)
N et increase (decrease) in cash and cash equivalents (16,109) 9,730
Cash and cash equivalents at beginning of period 32,032 22,302
C ash and cash equivalents at end o f perio d 15,923 32,032
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