Intersil Reports Stabilized Revenue and Long-Term Targets
Intersil Corporation announced financial results for the fourth quarter and the year ended January 2, 2015. Revenue stabilized and was $562.6 million, down 2% compared to the prior year. Gross margin improved again in the fourth quarter, and for the year was up 310 basis points on a GAAP basis and 300 basis points on a non-GAAP basis compared to 2013. Operating income increased significantly from the prior year, resulting in a non-GAAP operating margin of 21.3% for 2014 compared to 16% in 2013. Diluted GAAP earnings per share increased from $0.02 to $0.41 in 2014 and non-GAAP earnings per share increased from $0.59 to $0.73.
Entering a new phase in the company's development and anticipating a return to growth, the management team introduced a new target operating model outlined below. The new long-term, non-GAAP target was provided to help investors evaluate management's progress towards improving the business over time. The long-term targets include gross margins of at least 60%, R&D expense of 20-21% of revenue, SG&A expense of 14-15% of revenue and operating margin of 25%.
"With a number of revenue transitions behind us and the R&D investments in new products poised to begin generating revenue, we're starting 2015 with a strong foundation," said Necip Sayiner, president and CEO of Intersil. "Our newly introduced target model raises the bar for profitability and underscores the confidence we have as a team in Intersil's potential."
Revenue for the fourth quarter was down as expected to $131.1 million, a nine percent sequential decline. Intersil's consumer, computing, and industrial and infrastructure revenue declined sequentially in the fourth quarter due in part to weaker than seasonal demand. For the full year, industrial and infrastructure grew by nearly six percent as a result of strong growth in power management and automotive products. Consumer revenue was down meaningfully for the year primarily due to weakness in gaming and the deliberate de-emphasis of low margin products. Revenue from the computing end market was down one percent for the year.
For the fourth quarter, GAAP operating expenses decreased to $60.8 million. GAAP gross margin increased to 59.6% and GAAP operating income was $17.4 million or 13.3% of sales. GAAP net income for the quarter increased to $17.3 million or $0.13 per diluted share. For the full year, GAAP gross margin of 58.1% improved 310 bps from 55% in 2013. GAAP operating expenses declined to $252.0 million. GAAP net income increased to $54.8 million resulting in GAAP diluted earnings per share of $0.41, up from $0.02 in 2013.
The following forward looking guidance is for the first quarter ending April 3, 2015, based on current business trends and conditions: GAAP revenue of $131 to $136 million, gross margin down 50 to 100 points, operating expenses of $63 to $64 million, and earnings per share of $0.07 to $0.08.