Verigy Ltd. (MM) (NASDAQ:VRGY)
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Verigy Ltd. (NASDAQ:VRGY), a premier semiconductor test
company, reported today revenue of $214 million for its third fiscal
quarter ending July 31, 2006, 81 percent above last year. Orders were
$199 million, up 36 percent over the same period a year ago. Third
quarter net income on a GAAP basis was $13 million, or $0.23 per
share, compared with a loss of $22 million, or $0.44 per share, in the
prior year period.
Included in GAAP results are $24 million of net charges related
principally to separation and restructuring activities undertaken in
connection with Verigy's spin-off from Agilent Technologies. Excluding
these charges and $2 million of share-based compensation expense,
Verigy reported third quarter non-GAAP net income of $39 million, or
$0.71 per share. On a comparable basis, the business lost $21 million,
or $0.42 per share, in the prior year period.
"We had a very strong quarter as we continued to see the results
of positive customer acceptance of our enhanced SOC and Flash test
products," said Keith Barnes, Verigy president and chief executive
officer. "Our separation from Agilent has proceeded as planned and
progress toward our targeted, focused operating model is on track. We
have expanded our Served Available Market through technology
innovations, while our revenue success is customer validation that our
strategy of delivering real customer value on scalable platforms is
sound. We also believe we are well positioned to capitalize on the
anticipated demand for new leading edge consumer-oriented
semiconductors."
Outlook
For the fiscal fourth quarter ending Oct. 31, 2006, the company
provided the following guidance:
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-- Revenue is expected to be in the range of $185 to $200
million.
-- GAAP net income is expected to be in the range of $7 to $16
million, or $0.12 to $0.27 per share.
-- On a non-GAAP basis, the company expects to report net income
of $25 to $34 million, or $0.43 to $0.58 per share. To
reconcile fourth quarter net income under GAAP to non-GAAP net
income, the company expects to exclude:
-- $16 to $18 million of charges related principally to
separation and restructuring activities undertaken in
connection with Verigy's spin-off from Agilent
Technologies.
-- $2 to $3 million of share-based compensation expense.
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This guidance is forward-looking, and actual results may differ
materially. The company has no obligation to update this guidance.
Conference Call and Webcast
Verigy's management will present more details on its third quarter
FY2006 financial results on a conference call with investors today
beginning at 2:30 p.m. (Pacific). This event will be webcast live in
listen-only mode. Listeners may log on at http://investor.verigy.com
and select "Q3 2006 Verigy Earnings Conference Call" in the "Webcasts
& 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 August 21, 2006. The replay number
is +1-866-543-6403 toll-free, or international callers may dial
1-617-213-8896; enter pass code 59436506.
About Verigy
Verigy designs, develops, manufactures and sells advanced test
systems and solutions for the semiconductor industry. Verigy comprises
the semiconductor test business recently separated from Agilent
Technologies. The company began doing business as Verigy on June 1,
and completed its initial public offering on June 13, 2006.
Information about Verigy can be found at www.verigy.com.
Forward-Looking Statements
In our earnings release, some of the comments are forward-looking,
including statements regarding Verigy's revenue and earnings; guidance
for the fourth quarter; and other statements that express the
company's expectations, beliefs, plans and forecasts. Words such as
expect, anticipate, intend, plan, believe, estimate and variations of
such words and similar expressions may identify additional
forward-looking statements. 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 registration statement
on Form S-1, filed with and declared effective by the SEC on June 12,
2006, and in our Quarterly Report on Form 10-Q for the quarter ended
April 30, 2006. 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 performance
of our core businesses, to estimate future core performance and to
compensate employees. Since management finds this measure to be
useful, we believe that our investors 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. The non-GAAP net income (loss)
and earnings per share reconciliation is estimated based on our
current information. 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.
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VERIGY LTD.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
Three Months Nine Months
Ended Ended
July 31, July 31,
--------------- ---------------
2006 2005 2006 2005
------- ------- ------- -------
Orders: $199 $146 $688 $323
Net revenue:
Products $181 $93 $482 $224
Services 33 25 94 73
------- ------- ------- -------
Total net revenue 214 118 576 297
Cost of sales
Cost of products 88 58 243 147
Cost of services 23 22 72 65
------- ------- ------- -------
Total cost of sales 111 80 315 212
Operating expenses
Research and development 25 24 75 76
Selling, general and
administrative 37 33 114 101
Restructuring charges 2 1 16 1
Separation costs 21 - 56 -
------- ------- ------- -------
Total operating expenses 85 58 261 178
Income (loss) from operations 18 (20) - (93)
Other income (expense), net 2 - 2 -
------- ------- ------- -------
Income (loss) before taxes 20 (20) 2 (93)
Provision for taxes 7 2 16 11
------- ------- ------- -------
Net profit (loss) $13 $(22) $(14) $(104)
======= ======= ======= =======
Net income (loss) per share- basic: $0.23 $(0.44) $(0.28) $(2.08)
Net income (loss) per share- diluted: $0.23 $(0.44) $(0.28) $(2.08)
Weighted average shares used in
computing net income (loss)
per share:
Basic 54,662 50,000 51,571 50,000
Diluted 54,681 50,000 51,590 50,000
Historical amounts were reclassified to conform with current period
presentation.
Weighted average shares are presented in thousands
VERIGY LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions, except share amounts)
(Unaudited)
July October
31 31,
2006 2005
----- -------
ASSETS
Current assets:
Cash and cash equivalents $206 $-
Trade accounts receivable, net 156 75
Related Party accounts receivable, net 23 -
Inventory 79 110
Other current assets 36 14
----- -------
Total current assets 500 199
Property, plant and equipment, net 36 18
Goodwill 18 17
Other assets 50 26
----- -------
Total assets $604 $260
===== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $69 $21
Related Party Payable 14 -
Employee compensation and benefits 33 40
Deferred revenue 57 42
Income and other taxes payable 8 32
Other accrued liabilities 14 23
----- -------
Total current liabilities 195 158
Long-term Liabilities 33 15
----- -------
Total liabilities 228 173
Stockholders' equity
Owner's net investment - 86
Ordinary shares issued and outstanding at July 31,
2007, 58,651,559 - -
Additional paid in capital 358
Retained earnings 19 -
Accumulated other comprehensive income (loss) (1) 1
----- -------
Total stockholders' equity 376 87
----- -------
Total liabilities and stockholders'
equity $604 $260
===== =======
VERIGY LTD.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME (LOSS)
(In millions, except per share amounts)
(Unaudited)
Three Months Ended Nine Months
Ended
---------------------------------------- -------------
July EPS April EPS January EPS July EPS
31, 30, 31, 31,
2006 2006 2006 2006
------------ ------------ -------------- -------------
GAAP net income
(loss) $13 $0.23 $(11) (0.22) $(16) (0.32) $(14)$(0.28)
Non-GAAP
adjustments:
Restructuring
charges in
cost of
sales 2.2 0.04 2.4 0.05 0.9 0.02 5.5 0.11
Restructuring
charges in
operating
expenses 1.6 0.03 8.0 0.16 6.0 0.12 15.6 0.30
Separation
related
costs in
cost of
sales - - 3.7 0.07 - - 3.7 0.07
Separation
related
costs in
operating
expenses 20.9 0.38 20.0 0.40 15.0 0.30 55.9 1.08
Share-based
compensation
expense 1.7 0.03 2.5 0.05 4.0 0.08 8.2 0.16
Other - - (0.7) (0.01) - - (0.7) (0.01)
------------ ------------ -------------- -------------
Non-GAAP net
income $39 $0.71 $25 $0.50 $10 $0.20 $74 $1.43
============ ============ ============== =============
Three Months Ended Nine Months
Ended
---------------------------------------- -------------
July EPS April EPS January EPS July EPS
31, 30, 31, 31,
2005 2005 2005 2005
------------ ------------ -------------- -------------
GAAP net loss $(22) (0.44) $(37) (0.74) $(45) (0.90) $(104) (2.08)
Non-GAAP
adjustments:
Restructuring
charges in
cost of
sales - - - - - - - -
Restructuring
charges in
operating
expenses 1.0 0.02 - - - - 1.0 0.02
Separation
related
costs in
cost of
sales - - - - - - - -
Separation
related
costs in
operating
expenses - - - - - - - -
Share-based
compensation
expense - - - - - - - -
------------ ------------ -------------- -------------
Non-GAAP net
loss $(21)$(0.42) $(37)$(0.74) $(45)$(0.90) $(103)$(2.06)
============ ============ ============== =============
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