Verigy Ltd. (MM) (NASDAQ:VRGY)
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Verigy Ltd. (NASDAQ:VRGY), a premier semiconductor test company, today
reported financial results for its fiscal second quarter, ended April
30, 2007.
Second quarter revenue was $183 million, an 11 percent increase from the
prior quarter revenue of $165 million and a 5 percent decline from $192
million in the second quarter of fiscal 2006. Orders for the second
quarter were $202 million, an increase of 52 percent from the prior
quarter of $133 million. The book-to-bill ratio was 1.10 for the second
quarter.
On a GAAP basis, net income for the quarter was approximately $22
million, or $0.36 per fully diluted share, compared to net income of $13
million, or $0.22 per share in the prior quarter, and to a net loss of
$11 million, or ($0.22) per share in the prior year period. Net income
for the quarter included approximately $2.4 million of charges related
to separation and restructuring activities undertaken in connection with
Verigy’s spin-off from Agilent Technologies
last year. Excluding these charges related to the spin-off, non-GAAP net
income for the quarter was $24 million, or $0.40 per share.
“Verigy had a very strong quarter for both
product lines,” said Keith Barnes, Verigy
president and chief executive officer. “Our
V5000 memory products showed sustained strength in the quarter and our
SOC revenue grew 41 percent sequentially. We received increased business
from existing customers and won new accounts in design validation and
production test. Our book-to-bill ratio for the quarter was 1.10 and
sequential order growth was greater than fifty percent. Second quarter
bookings represented our highest order quarter since our record quarter
of $313 million a year ago.”
“We exceeded the high end of the range of our
revenue and earnings guidance, and improved our free cash flow
performance,” added Bob Nikl, Verigy chief
financial officer. “This is our fourth
consecutive quarter of strong financial results and reflects our
continuing solid execution since our IPO last year.”
Outlook for Q3 2007
For the third quarter ending July 31, 2007, the company provided the
following guidance:
Revenue is expected to be in the range of $195 to $205 million.
GAAP net income is expected to be in the range of $26 to $29 million,
or $0.43 to $0.48 per share, including approximately $3.2 to $3.7
million of share-based compensation expense.
On a non-GAAP basis, the company expects to report net income of $27
to $30 million, or $0.45 to $0.50 per share. To reconcile third
quarter GAAP and non-GAAP net income and earnings per share, the
company expects to exclude $1 to $1.5 million of charges related to
separation and restructuring from the GAAP results.
Conference Call and Webcast
Verigy’s management will present more details
on its second quarter results on a conference call with investors today
beginning at 1:30 p.m. (Pacific). This event will be webcast live in
listen-only mode. Listeners may log on at http://investor.verigy.com
and select “Q2 Fiscal Year 2007 Verigy
Earnings Conference Call” in the “Events
& Presentations” section. The webcast
will remain available on the company’s Web
site for seven days.
A telephone replay of the conference call will be available from 4:30
p.m. (Pacific) today through June 7, 2007. The replay number is +1
888-286-8010 toll-free, or international callers may dial +1
617-801-6888; enter pass code 32081009.
About Verigy
Verigy designs, develops, manufactures, sells and services advanced test
systems and solutions for the memory and system-on-chip segments of the
semiconductor industry. Verigy’s scalable
platform systems are used by leading semiconductor companies worldwide
in design validation, characterization, and high volume manufacturing
test. Formerly part of Agilent Technologies, the company began doing
business as Verigy on June 1, 2006, and completed its initial public
offering on June 13, 2006. Information about Verigy can be found at www.verigy.com.
Forward-Looking Statements
This earnings release contains forward-looking statements, including
statements regarding Verigy’s guidance for
the third quarter and other statements that express the company’s
expectations, beliefs, plans and forecasts. These forward-looking
statements are based on current information and estimates, and are not
guarantees of future performance or events. These statements are subject
to a number of risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements. The
risks and uncertainties include, but are not limited to, unforeseen
changes in demand for semiconductors and thus for semiconductor test
solutions, the strength of our customers’
businesses, and unforeseen changes in the demand for current and new
products and technologies. Additional factors that may cause results to
differ materially from those in the forward-looking statements are
discussed in our Quarterly Report on Form 10-Q for the quarter ended
January 31, 2007. The forward-looking statements, including guidance,
are only valid as of this date, and Verigy undertakes no duty to update
any forward-looking statements.
Information About Non-GAAP Measures
Our management uses non-GAAP measures to evaluate the operating
performance of the company. By eliminating the separation and
restructuring charges associated with Verigy’s
spin-off from Agilent Technologies, management believes it is better
able to assess the operating performance of the business. Since
management finds the non-GAAP information to be useful, we believe that
our investors also benefit from seeing our results “through
the eyes” of management in addition to seeing
our GAAP results. This information also facilitates our management’s
internal comparisons to our historical operating results as well as to
the operating results of our competitors. A reconciliation between our
GAAP and non-GAAP results is provided in the attached tables. Readers
are reminded that non-GAAP numbers are merely a supplement to, and not a
replacement for, GAAP financial measures. They should be read in
conjunction with the GAAP financial measures.
VERIGY LTD.
CONDENSED COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
April 30,
April 30,
2007
2006
2007
2006
Orders:
$
202
$
313
$
335
$
489
Net revenue:
Products
$
147
$
158
$
275
$
301
Services
36
34
73
61
Total net revenue
183
192
348
362
Cost of sales:
Cost of products (a)
79
81
148
155
Cost of services (a)
25
25
50
49
Total cost of sales
104
106
198
204
Operating expenses:
Research and development (a)
22
25
45
50
Selling, general and administrative (a)
35
40
69
77
Restructuring charges
-
8
-
14
Separation costs
1
20
3
35
Total operating expenses
58
93
117
176
Income (loss) from operations
21
(7)
33
(18)
Other income (expense), net
4
-
7
-
Income (loss) before taxes
25
(7)
40
(18)
Provision for income taxes
3
4
5
9
Net income (loss)
$
22
$
(11)
$
35
$
(27)
Net income (loss) per share - basic:
$
0.37
$
(0.22)
$
0.59
$
(0.54)
Net income (loss) per share - diluted:
$
0.36
$
(0.22)
$
0.59
$
(0.54)
Weighted average shares (presented in thousands) used in computing
net income (loss) per share:
Basic
59,004
50,000
58,884
50,000
Diluted
59,945
50,000
59,567
50,000
(a) Share-based compensation expense by function:
Cost of products
$
0.4
$
0.7
$
0.8
$
1.2
Cost of services
$
0.2
$
-
$
0.4
$
-
Research and development
$
0.4
$
0.3
$
0.9
$
0.8
Selling, general and administrative
$
2.2
$
1.5
$
4.8
$
4.5
VERIGY LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
April 30,
October 31,
2007
2006
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
168
$
300
Marketable securities
180
-
Trade accounts receivable, net
71
108
Receivables from Agilent
-
8
Inventory
73
87
Other current assets
55
48
Total current assets
547
551
Property, plant and equipment, net
41
44
Goodwill
18
18
Other long-term assets
60
61
Total assets
$
666
$
674
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
71
$
75
Payables to Agilent
5
37
Employee compensation and benefits
43
43
Deferred revenue, current
53
58
Income and other taxes payable
9
23
Other current liabilities
15
15
Total current liabilities
196
251
Long-term liabilities
33
34
Total liabilities
229
285
Commitments and contingencies
Shareholders' equity
Ordinary shares, no par value, 59,056,065 issued and outstanding at
April 30, 2007
Additional paid in capital
371
358
Retained earnings
69
34
Accumulated other comprehensive loss
(3)
(3)
Total shareholders' equity
437
389
Total liabilities and shareholders’ equity
$
666
$
674
VERIGY LTD.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
Year-to-Date
Ended
October 31,
2007
EPS
July
31,
2007
EPS
April
30,
2007
EPS
January
31,
2007
EPS
2007
EPS
GAAP net income
$
-
$
-
$
-
$
-
$
22
$
0.36
$
13
$
0.22
$
35
$
0.59
Non-GAAP adjustments:
Restructuring charges in cost of sales
-
-
-
-
1.1
0.02
1.1
0.02
2.2
0.04
Restructuring charges in operating expenses
-
-
-
-
-
-
-
-
-
-
Separation related costs in cost of sales
-
-
-
-
0.4
0.01
0.2
-
0.6
0.01
Separation related costs in operating expenses
-
-
-
-
0.9
0.01
2.0
0.04
2.9
0.05
Other
-
-
-
-
-
-
-
-
-
-
Non-GAAP net income
$
-
$
-
$
-
$
-
$
24
$
0.40
$
16
$
0.28
$
40
$
0.69
Three Months Ended
Twelve Months Ended
October 31, 2006
EPS
July 31, 2006
EPS
April 30, 2006
EPS
January 31, 2006
EPS
2006
EPS
GAAP net income (loss)
$
14
$
0.25
$
13
$
0.23
$
(11)
(0.22)
$
(16)
(0.32)
$
-
$
-
Non-GAAP adjustments:
Restructuring charges in cost of sales
2.2
0.03
2.2
0.04
2.4
0.05
0.9
0.02
7.7
0.14
Restructuring charges in operating expenses
0.9
0.01
1.6
0.03
8.0
0.16
6.0
0.12
16.5
0.31
Separation related costs in cost of sales
1.0
0.02
-
-
3.7
0.07
-
-
4.7
0.09
Separation related costs in operating expenses
12.6
0.21
20.9
0.38
20.0
0.40
15.0
0.30
68.5
1.28
Other
-
-
-
-
(0.7)
(0.01)
-
-
(0.7)
(0.01)
Non-GAAP net income
$
31
$
0.52
$
38
$
0.68
$
22
$
0.45
$
6
$
0.12
$
97
$
1.81