Intersil Achieves Target Operating Model in Q3

October 31, 2016 by Jeff Shepard

Intersil Corporation announced that for the third quarter ended September 30, 2016, revenue was up 4% sequentially and 8% year-over-year to $139.0 million. Other highlights of the results include: Consumer and Computing (C&C) revenue increased 6% sequentially and 9% year-over-year, the fourth consecutive quarter of year-over-year growth. Industrial and Infrastructure (I&I) revenue was up 2% sequentially and 8% year-over-year. Computing and automotive end markets were key growth areas, with revenue in automotive increasing by 16% year-over-year. Gross margin increased sequentially to 60.6% on a GAAP basis. GAAP operating margin increased sequentially and year-over-year to 16.4%. GAAP earnings per share increased sequentially to $0.11.

"The third quarter marked a significant milestone for us as we achieved the gross and operating margin goals we set for the business. The top line has continued to show progress towards our goal as well, as new product investments translated into solid year-over-year revenue growth. This reflects the high quality foundation of the business we've built over the last three years," said Necip Sayiner, president and CEO of Intersil. "Strong execution has been an important aspect of our turnaround efforts and we have been able to successfully intersect a number of key trends with our power management and precision analog solutions in every one of our target end markets. With power efficiency becoming a consistent thread through virtually every application, we believe Intersil solutions can be central to the evolution of next-generation electronics."

Revenue for the third quarter improved sequentially due to strength in both the C&C and I&I businesses. Seasonal growth in C&C, particularly in computing, increased C&C revenue to its highest point since 2014. The ramp of next generation PC processors continued to drive demand for the company's computing power products, and design win traction in mobile platforms remained strong.

Strength across a number of product areas contributed broadly to the I&I sequential revenue improvement and year-over-year growth. I&I power revenue reached its highest level in six quarters, with power modules achieving record revenue in the quarter.

Intersil's automotive revenue reached record levels as well. The company also introduced new products in Q3 that address the major trends in advanced driver assistance systems (ADAS) and around view displays.

Third quarter GAAP gross margin was up to 60.6%, a 120 basis point sequential increase and a 140 basis point year-over-year increase. Total third quarter GAAP operating expenses decreased to $61.4 million and included R&D expense of $31.3 million and SG&A expense of $22.8 million. Third quarter GAAP operating income increased sequentially and year-over-year to $22.8 million, or 16.4% of revenue. GAAP net income for the third quarter increased to $15.9 million, resulting in diluted earnings per share of $0.11.

"From the beginning of the Intersil transformation, we have talked about gross margin being a key measure of differentiation. Clearly we have successfully increased the competitiveness of our products given the approximately 500 basis point difference in gross margin we reported compared to the same period in 2013, the first year of the turnaround," said Rick Crowley, senior vice president and chief financial officer for Intersil. "When combined with spending discipline and strong cash generation, the recent results and early achievement of our target operating model are a tangible proof point for the strategy we have patiently pursued."

Intersil's board of directors authorized payment of a quarterly dividend of $0.12 per share of common stock. The payment of this dividend will be made on or about November 28, 2016 to stockholders of record as of the close of business on November 15, 2016.

On September 12, 2016 Renesas Electronics Corporation, a premier supplier of advanced semiconductor solutions, and Intersil Corporation announced they had signed a definitive agreement for Renesas to acquire Intersil for US$22.50 per share in cash, representing an aggregate equity value of approximately US$3.2 billion. Closing of the transaction is expected in the first half of 2017, conditioned on approval by Intersil stockholders and the relevant governmental authorities.