News

Micrel Reports Gross Margin Above 58% in Q1

April 26, 2006 by Jeff Shepard

Micrel, Inc. announced revenues for the first quarter ended March 31, 2006 were $68.2 million, an increase of 5% from fourth quarter revenues of $65.1 million and 12% higher than revenues of $60.7 million recorded in the year-ago period. First quarter net income, including equity-based compensation expense, was $8.7 million, or $0.10 per diluted share, compared with net income of $9.9 million, or $0.11 per share, in the previous quarter and net income of $6.6 million, or $0.07 per share, in the year-ago period.

The results for the first quarter of 2006 include the impact from the adoption of SFAS No. 123(R) "Share-Based Payment". The company recorded pre-tax equity-based compensation expense of $2.4 million or $0.03 per diluted share in the first quarter of 2006 in its cost of revenues and operating expenses. Excluding the impact of equity-based compensation, first quarter net income on a non-GAAP basis would have been $10.9 million, or $0.13 per diluted share, compared on a similar basis with $0.11 in the previous quarter and $0.08 in the first quarter of 2005.

"Demand from customers serving the industrial and communications end markets resulted in continued bookings strength and solid revenue growth in what is historically a seasonally weak quarter for Micrel," stated Ray Zinn, president and CEO of Micrel. "Furthermore, we are pleased to report that Micrel achieved a first quarter gross margin of 58.5%, the highest quarterly gross margin in the company's history. This exceeded the previous peak gross margins recorded in second half of 2000, when revenue levels were higher than they are today. Q1 is the fifth consecutive quarter of gross margin expansion for Micrel. We believe this validates Micrel's high performance products can command higher margins even in the face of pricing pressure and competition. Our operating margin on a non-GAAP basis, excluding the effect of stock based compensation, of 23.2% in the first quarter also improved significantly, up from 18.9% in the previous quarter and 15.9% in the year ago period. This continued margin expansion demonstrates the leverage in the Company's business model and our ability to generate profitable growth."

Zinn continued, "Since the industry downturn in 2001, we have been working diligently to return Micrel's financial results to levels experienced before the height of the dot-com bubble. Six years ago, in the first quarter of 2000, Micrel earned net income of $0.13 per share, excluding stock compensation, on $69 million in revenue. On roughly the same revenue in Q1 2006, Micrel posted comparable non-GAAP EPS. This is a significant accomplishment given that Micrel currently has a lower level of high margin sales to the communications end market and lower factory utilization. Micrel is now a considerably stronger company financially than it was entering 2000. Our first quarter performance indicates we have achieved our objective."

Zinn concluded, "We are encouraged by the apparent broad based demand we experienced for Micrel's products in the first quarter. We remain optimistic about the growth prospects for the semiconductor industry in 2006 and believe Micrel is well positioned to participate in the overall industry growth."