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Event Brief of Q4 2008 Microtune, Inc. Earnings Conference Call - Final.

Article Excerpt
PARTICIPANTS

. Jeff Kupp, Microtune, Inc., CFO . Jim Fontaine, Microtune, Inc., President and CEO . John Vinh, Collins Stewart Llcc, Analyst . Bud Taddiken, Microtune, Inc., COO . Dan Morris, Oppenheimer, Analyst . Edward Waldridge, RAA Inc., Analyst . Unidentified Participant , Analyst

OVERVIEW

TUNE reported that 2008 revenue increased 19%. 4Q08 net revenue was $24m. 2008 non-GAAP net income was $11.1m or $0.20 per diluted share and 4Q08 non-GAAP net income was $2m or $0.04 per diluted share. Expects 1Q09 net revenue to be approx. $17.5-18.5m.

FINANCIAL DATA

A. Key Data From Call 1. 2008 revenue increase = 19%. 2. 4Q08 net revenue = $24m. 3. 2008 non-GAAP net income = $11.1m. 4. 4Q08 non-GAAP net income = $2m. 5. 2008 non-GAAP diluted EPS = $0.20. 6. 4Q08 non-GAAP diluted EPS = $0.04. 7. 2008 GM = 49.4%. 8. 4Q08 GM = 50.6%. 9. 2008 GAAP OpEx = $47.4m. 10. 2008 non-GAAP OpEx = $43m. 11. 4Q08 non-GAAP OpEx = $10.3m. 12. 4Q08 DSO = 36. 13. Cash and investments balance at 12/31/08 = $86.1m. 14. 4Q08-end debt = $0. 15. 2008 share repurchase = repurchased $8.6m worth of stock. 16. 1Q09 net revenue guidance = approx. $17.5-18.5m.

PRESENTATION SUMMARY

S1. 4Q08 Business Review (J.F.) 1. Highlights: 1. Despite the challenging economic conditions, reported record 2008 financial results that were characterized by 19% increase in net revenue. 1. Substantial increases in operating margins. 2. Good performance in target markets. 2. Ended 4Q08 with strong balance sheet. 1. No debt. 2. Cash in bank, $86m. 3. Financial fundamentals combined with market and differentiated product positions (indiscernible) Co. as a whole. 1. It provides the basis for management's confidence not only in Co.'s ability to withstand the deepening recession, but also its ability to focus on strategic programs that position TUNE for growth in longer term as the economy recovers. 2. 1Q09 Outlook: 1. Net revenue, approx. $17.5-18.5m. 1. This is somewhat lower than Co. guided to last Dec., due to continued weakness in markets. 2. Currently sees 2Q09 as being flat with 1Q09 and expects break-even in 2H09. 1. Break-even point is approx. $22m per qtr., therefore expects small net losses in 1Q09 and 2Q09. 2. Losses that in short-term are undesirable, but acceptable to management team and board. 3. Strongly believes in future of TUNE and believes that even in these uncertain times, it makes a lot of sense to trade off a level of short-term losses for an investment in the future. 4. Believes this is the best formula for TUNE and will position Co. well, when it exits the current recession. 5. Cable market will continue to provide the revenue foundation for 1Q09 and beyond. 1. Despite difficult economic conditions Co. anticipates stable, although somewhat weaker performance in cable set-top box and cable modem markets. 2. Expects cable to drive over 75% of revenue. 6. Most of automotive revenues comes from sale of car radio and car TV tuners to major automotive customers in Europe. 1. Last qtr., introduced two new automotive grade RF silicon products, part of long-term strategy to transition automotive module customers to silicon. 7. Although conditions facing European OEMs, not as bad as those faced by US OEMs, continues to see market weaknesses for most of automotive products. 8. Suspects that the current weakness in customer demand is somewhat exacerbated by ongoing inventory burn off. 1. Although several countries are implementing stimulus measures intended to spur car buying, overall consumer confidence remains low, which Co. believes will continue to have a negative bias to new car sales. 2. Anticipates automotive revenues will remain soft throughout most of 2009. 3. For 1Q09, expects automotive products to account for over 20% of quarterly revenues. 3. Summary: 1. During 4Q08, shipped approx. $1.6m in revenue into the converter box market. 1. As stated last qtr., not forecasting any meaningful revenue from converter box market in 2009. 2. However on 02/04/09, Congress passed a bill delaying analog cutoff until June 12. 1. This bill which is expected to be signed into law by President Obama may present an upside opportunity for TUNE if its customers receive new orders for converter boxes.

S2. Financials (J.K.) 1. Highlights: 1. 4Q08 revenue, $24m. 1. Down 25% from 3Q08. 2. Although sequential decrease in revenue appears similar to declines experienced by many others, believes it is important to put this decrease in broader Co. perspective. 3. Removing impact of converter box business, can better understand how core business has been affected by economic situation. 2. Converter Box Revenue: 1. $5.8m in 3Q08. 2. $1.6m in 4Q08. 3. Excluding converter box business, revenue from core markets declined sequentially by approx. 14%, which included: 1. 32% decline in automotive market. 2. 6% decline in cable market. 1. Historically, has seen revenue decline from 3Q to 4Q, primarily due to cable market seasonality. 4. Revenue in 4Q08, up approx. 6% vs. prior-year. 1. Driven by YoverY increases in: 1. Automotive. 2. Cable. 5. 4Q08 revenue from DTV market declined, with and without converter box revenue vs. prior-year. 6. Full-year: 1. Revenue increased 19%, driven by increases in all three of target markets. 1. Excluding converter box revenue, revenue from DTV market declined, but total revenue still increased by approx. 10%. 2. GM: 1. 4Q08 GM, 50.6%, due in part to improved manufacturing variances. 1. Saw sequential quarterly increase in GM percentage from certain automotive applications, partially offset by sequential decrease in cable market GM percentage. 2....