Novellus Systems (:NVLS) reported first quarter earnings that were in line with the Zacks Consensus Estimate. It was overall a good quarter for the company, with orders, revenue and margins all looking up after three quarters of decline. The tax rate also dropped, helping results.
Novellus did not host a conference call or provide guidance for the next quarter, given that this is likely its last earnings report before the merger with Lam Research (LRCX). The company received appoval from all countries except China, and shareholders will vote on May 10.
Novellus reported revenue of $326.7 million, up 15.6% sequentially and 20.9% year over year, better than management’s guidance range of $300-330 million and street expectations of $316 million. Further revenue details based on segment and geography were also not provided.
Orders were up 26.1% sequentially and down 12.9% year over year. In the last quarter, Novellus saw its orders touch $361.7 million. Backlog increased 17.8%. Novellus did not mention the lead time, so we assume that it remained at 12-16 weeks, slightly higher than the normal 12-week range.
The pro forma gross margin for the quarter was 47.3%, up 52 basis points (bps) from the previous quarter’s 46.8% and at the higher end of the guided range of 47% (+/- 1%). Novellus’ long-term target of 52-54% seems very far away right now although continued strong spending on semi capex, particularly by Intel (INTC), Samsung and Taiwan Semiconductor Manufacturing Company (TSM) indicates that 2012 will be a good year.
Operating expenses of $96.5 million were up 8.1% sequentially and 1.5% year over year. The operating margin was 17.8%, up 255 bps from 15.2% recorded in the previous quarter and down 964 bps from 27.4% reported in the year-ago quarter. As a percentage of sales, all expenses declined sequentially, with SG&A declining the most. All expenses increased on a year-over-year basis, but R&D increased the most.
Novellus reported pro forma net income of $46.0 million or a 14.1% net income margin, compared to $30.8 million or 10.9% in the previous quarter and $97.5 million or 23.6% in the year-ago quarter.
Including restructuring charges and merger-related costs on a tax-adjusted basis, the GAAP net income was $44.4 million or 59 cents a share compared to $38.5 million or 56 cents in the December 2011 quarter and $96.4 million or $1.04 a share in the March quarter of 2011.
Inventories were up 5.6%, with inventory turns going from 2.8X to 3.1X. Days sales outstanding (DSOs) went from 61 to 63. Novellus ended with cash and short term investments of $1.01 billion ($14.35 per share), up $95.2 million during the quarter. In the last quarter, Novellus generated $32.8 million in cash from operations, spending $5.2 million on capex and $1.4 million on share repurchases.
Novellus shares currently carry a Zacks Rank of #3, implying a Hold recommendation in the short term. We are also Neutral on a long-term basis.Read the Full Research Report on NVLS
More From Zacks.com