Dialog Semiconductor Announces Results for the First Quarter of 2010

KIRCHHEIM/TECK, Germany--(BUSINESS WIRE)--

Dialog Semiconductor plc DLG, a leading provider of Power Management Semiconductor solutions, today reports results for the first quarter ended 2 April 2010.

Q1 2010 Financial Highlights

- Revenue for Q1 2010 was $61.1 million, a year-on-year increase of 70% over the corresponding first quarter of 2009.

- Cash, cash equivalents and restricted cash increased in Q1 2010 by $15.1 million over Q4 2009 to stand at $138.2 million. Dialog remains debt free.

- Recorded our tenth consecutive quarter of profitability with an operating profit in Q1 2010 of $6.6 million or 10.8% of revenue compared to $0.9 million or 2.6% in the corresponding first quarter of 2009.

- Diluted and Basic earnings per share of 8 cents.

Q1 2010 Operational Highlights

- Successful launch of our second generation of system level Power Management Integrated Circuits (PMICs) which now include an integrated class G audio codec.

- Continued design win success in the mobile market:

- LG selects Dialog for its Android smartphone for China Mobile

- Sharp selects Dialog for a series of Softbank 3G cellphones

- Collaboration with TSMC for industry-leading BCD process for higher integrated next generation Power Management ICs.

Commenting on the results Dialog Chief Executive, Dr Jalal Bagherli, said:

'I am very pleased to report a strong start to 2010, with revenue, gross margin, cash generation and earnings performance greatly exceeding the levels and growth rates we achieved in the corresponding quarter of the prior year.

Execution to our strategy of market share expansion and increasing the power management content delivered into our smartphones and other high growth emerging convergent portable device customers, represent a powerful combination which we expect will allow Dialog to continue its positive operational and financial trajectory.'

FINANCIAL OVERVIEW

Revenue in Q1 2010 was $61.1 million, an increase of 70% over the $36.0 million in the first quarter of 2009 and a sequential decrease of 21% on the $77.6 million of revenue delivered in the prior quarter, in line with the typical seasonal reduction in demand. During the quarter we also benefited from $3.5 million sales of last time buy products within the Automotive and Industrial segment. These products were sold as a result of last year's notification of the phasing out of an older manufacturing process from one of our foundry partners.

Gross margin in Q1 2010 was 46.0%. This represents an increase of 9.3 percentage points over the 36.7% achieved in the comparative period last year and a decrease of 2.0 percentage points over the 48.0% achieved in Q4 2009. Excluding the effect of the last time buy program, our underlying gross margin would have been 44.9% in the first quarter.

Our operating expenses in Q1 2010 decreased by $1.53 million over the prior quarter to $21.5 million, with R&D and SG&A at 21.6% and 13.6% of revenue respectively, compared to 17.2% R&D and 12.5% SG&A in the prior quarter. The operating expenses in Q1 2010 include $3.0 million of expense associated with share based compensation programmes of which $1.4 million was a onetime charge principally resulting from additional social charges payable as a result of the effect of the increase in the share price post 2009 year end. Excluding this onetime charge, which mainly impacts SG&A, Q1 2010 underlying operating expenses would have been 32.9% of Q1 2010 revenue.

Operating profit in Q1 2010 was $6.6 million or 10.8% of total revenue compared to $0.95 million or 2.6% of total revenue delivered in Q1 2009 and $14.2 million or 18.3% of total revenue in the prior quarter. Excluding the onetime charge associated with share based compensation programmes, Q1 2010 operating profit would have been 12.0% of total revenue.

Q1 2010 taxable profits continued to benefit from the utilisation of brought forward tax losses resulting in a residual minimum level tax charge mainly applying to taxable profits in Germany. A net tax charge of $0.6 million was recorded for Q1 2010 which included a benefit of $1.37 million - or 2 cents per diluted and basic share, being a further recognition of a proportion of the deferred tax assets principally relating to carried forward losses. As a result, the Q1 2010 effective tax rate was 11.0%. As we have previously stated, going forward and on a quarterly basis, we will consider whether it is appropriate to continue to recognise further currently unrecognised deferred tax assets.

In Q1 2010, net income was $4.9 million or 8.1% of revenue. Earnings per diluted and basic share were 8 cents: our tenth consecutive quarter of profitability. This compares to a net income of $0.8 million or 2 cents per diluted and basic share in Q1 2009 and to a net income of $19.9 million or 31 cents and 34 cents per diluted share and basic share delivered in Q4 2009.

At the end of Q1 2010, we had a cash, cash equivalents and restricted cash balance of $138.2 million, with no debt. This represents an increase of $97.4 million over the cash and cash equivalents and restricted cash balance at the end of Q1 2009 and an increase of $15.1 million over the prior quarter. In September 2009 net proceeds of $59.7 million were raised from an international equity offering which contributed to the increase in cash balances over the prior 12 months.

At the end of Q1 2010, our inventory level was $21.3 million (or ~58 days): a reduction of $4.9 million over the prior quarter, demonstrating continued tight inventory management.

OPERATIONAL OVERVIEW

In addition to starting the year with a strong quarterly revenue performance, we have continued our strategy of launching innovative new products to expand our ASSP portfolio and engaging new customers for continued growth.

We launched our second generation of system level power management ICs - DA9057 - which now include an integrated class G audio codec with an accompanying DA7021 Class D speaker driver device.

Additionally, we announced a number of important design wins with leading smartphone and cellphone manufacturers including a win with LG for a power management and audio device which has been designed into the company's GW880 smartphone, to be offered by China Mobile to its customers.

In addition, our power management and audio technology has been designed into a series of Sharp 3G cellphones: the first of which, the Sharp AQUOS SHOT 940SH, is now available from the Japanese network operator, Softbank.

Our recently released DA7210 ultra low power audio codec product continues to find positive traction with major consumer electronics companies, and is currently undergoing detailed design evaluation in Japan and Korea.

We continue to work closely with our SmartXtend(TM) passive matrix OLED display module partners, one of whom demonstrated their first transparent display module based on our technology at Japan's Finetech show in March. Our plans remain on track for production-ready modules to be available by the end of this year and by multiple module providers.

We saw increased demand for our automotive motor control devices for deliveries throughout the year. In addition, our Q1 2010 revenue in this segment was also bolstered by a number of last time buy programs which we entered into due to the phasing out of an older process by one of our foundry partners.

In support of our strategy to strengthen power management technology leadership while continuing to deliver the industry's highest integrated power management solutions, we executed on a number of intellectual property licensing, acquisition transactions and technology partnerships during the quarter.

We announced an ongoing partnership with our foundry partner Taiwan Semiconductor Manufacturing Company (TSMC) on a bipolar-CMOS-DMOS (BCD) technology specifically tailored to high-performance power management ICs for portable devices. The 0.25-micron high-voltage process node enables higher voltage functionality to be integrated efficiently into single chip power management ICs, increasing cost efficiencies and expanding the addressable market for Dialog solutions.

During the quarter we entered into an agreement with NXP to license its leading CoolFlux(TM) audio DSP and LifeVibes software for eliminating background noise and echo, while improving speech quality in smartphones and portable media devices. This technology will enhance the user's experience by allowing their smartphone to automatically respond to their environment and to deliver natural and immersive sound at quality beyond that achievable today.

We acquired complimentary power management assets and certain intellectual property rights from Diodes Zetex GmbH. As part of the transaction, a design team also transferred to Dialog. The acquired IP is already being integrated into a new generation of power management devices which will allow the consumer to better manage and achieve greater operating lifetime from their battery powered devices.

Subsequent to the quarter close, we also acquired a number of power management patents from Leadis Technology Inc, complimenting our existing intellectual property patent portfolio.

OUTLOOK

We believe we can continue to achieve sequential quarterly revenue growth, with Q2 2010 revenue expected to be in the range of $64.0 million to $69.0 million, maintaining our trajectory of quarterly year over year growth since Q3 2007. We maintain our previous outlook for the full year and despite some market uncertainty still remaining, we remain confident in our ability to grow our revenue faster than the broader market and to deliver a successful result for 2010.

Dialog Semiconductor invites you today at 09:00 London / 10:00 Frankfurt time to listen to and participate in a live conference call including a management discussion of Q1 2010 performance. To access the call please use the following dial-in numbers: Germany: 0800 101 4960, UK: 01452 569 393, US:1 866 434 1089 with no access code required. An instant replay facility will be available for 30 days after the call and can be accessed at +44 (0)1452 550 000 with access code 71147857. An audio replay of the conference call will also be posted soon thereafter on the company's website at:

http://www.diasemi.com/investor_relations.php

Additional information to this ad hoc release including the company's consolidated income statement, consolidated balance sheet and consolidated statements of cash flows for the period ending 2 April 2010 is available under the investor relations section of the Company's web site.

Information about Dialog Semiconductor:

Dialog Semiconductor creates energy-efficient, highly integrated, mixed-signal circuits optimised for personal mobile, lighting & display and automotive applications. The company provides flexible and dynamic support, world-class innovation and the assurance of dealing with an established business partner.

With its focus and expertise in system power management, Dialog brings decades of experience to the rapid development of integrated circuits for power management, audio, display processing and motor control. Dialog's processor companion chips enhance both the performance of hand-held products and the consumers' multimedia experience. With world-class manufacturing partners, Dialog operates a fabless business model.

Dialog Semiconductor plc is headquartered near Stuttgart with a global sales, R&D and marketing organisation. In 2009, it recorded $218 million in revenue and was one of the fastest growing European public semiconductor companies. It currently has approximately 350 employees. The company is listed on the Frankfurt DLG stock exchange.

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
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Phone:		+49 7021 805-412
Fax:		+49 7021 805-200
E-mail:		birgit.hummel@diasemi.com
Internet:		www.diasemi.com
ISIN:		GB0059822006
WKN:		927200
Indices:		TecDAX
Listed:		Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin, München, Düsseldorf, Stuttgart, Hamburg