Dialog Semiconductor Reports Second Quarter Results Ended 1 July

Dialog Semiconductor Reports Second Quarter Results Ended 1 July 2016.

Company reports revenue in line with guidance, sequential earnings increase and guides to 24% sequential quarter revenue growth at mid-point of the Q3 outlook

LONDON — (BUSINESS WIRE) — July 27, 2016 — Dialog Semiconductor plc (FWB: DLG), a provider of highly integrated power management, AC/DC, solid state lighting and Bluetooth(R) low energy wireless technology, today reports results for the second quarter ended July 1, 2016.

Q2 2016 financial highlights

- Revenue of $246 million in line with May guidance

- Power Conversion revenue up 46% over Q2 2015 to $28.6 million

- Gross margin at 46.3%. Underlying* gross margin at 47.1%

- Operating profit of $22.9 million, a year-on-year reduction of 63%. Underlying* operating profit of $33.2 million, a sequential increase of 11% and a year-on-year reduction of 53%

- All operational business segments profitable on an underlying basis

- Diluted EPS of 22 cents, a year-on-year reduction of 60%. Underlying* diluted EPS of 34 cents, a sequential increase of 21% and a year-on- year reduction of 48%

- Cash flow from operating activities of $13 million (Q2 2015: $46 million). $33 million of free cash flow* generated in Q2 2016, up 113% over Q2 2015. $660 million of cash and cash equivalents, $212 million above Q2 2015

- Subsequent to quarter end, on July 5, 2016 the Company purchased 590,000 ordinary shares at an average price of EUR27.6429

Q2 2016 operational highlights

- Continued design win momentum for Power Management ICs (PMICs) with both custom and standard products at leading smartphone and computing OEMs

- Innovative new standard products: PMICs, Charging and Audio ICs sampled to the market

- Enhancement of leadership position in the mobile adapter rapid charge market

- Continued Bluetooth design win success at Xiaomi for their Mi Band 2 fitness band

- Expanded our IoT product portfolio and ecosystem with new product offerings within the Home Automation segment

- Continued momentum in China smartphone market with second generation sub-PMIC ASSP

- Good progress in our strategic objective to expand our business footprint in China

Commenting on the results Dialog Chief Executive, Dr Jalal Bagherli, said:

"During the quarter we have delivered sequential revenue and earnings growth while maintaining focused investment in R&D. The exceptional growth achieved within our Power Conversion and Bluetooth low energy businesses is an indicator of the growth potential these markets offer.

The product pipeline remains strong across our core business groups and we expect to ramp a number of new high volume products in the second half of this year. Looking further ahead, we believe our R&D investments will generate new opportunities with Tier 1 OEMs, increase our share of content in mobile devices and expand our IoT footprint. All of which gives us confidence that our positive momentum will continue through the second half of 2016, and in to 2017 and 2018."

Outlook

Based on our current visibility, we anticipate revenue for Q3 2016 to improve sequentially from Q2 2016 and to be in the range of $290 to $320 million. On the basis of this revenue guidance, gross margin in Q3 2016 will be marginally above H1 2016.

As a result of the continuing softness in smartphone market demand, we now anticipate revenue for the full year 2016 to decline approximately 15% year-on-year. We expect growth momentum in our Connectivity and Power Conversion products to remain strong through 2016.

In line with the revenue performance, we expect underlying gross margin percentage for the full year to be slightly below the level achieved in 2015. The effect of the lower anticipated revenue in FY 2016 will be partially offset by rigorous control of operating expenses in the period.

Financial overview
IFRS	Second Quarter			First Half
US$ million	2016	2015	Var.	2016	2015	Var.
Revenue	245.7	316.5	-22%	487.2	627.7	-22%
Gross Margin	46.30%	46.50%	-20bps	45.40%	46.20%	-80bps
R&D % ¹	24.30%	17.70%	+660bps	24.10%	17.50%	+660bps
SG&A % ¹	12.70%	9.30%	+340bps	13.90%	10.10%	+380bps
Other operating income % ²	0.10%	0.10%	-	28.30%	0.20%	nm
Operating profit	22.9	62.5	-63%	174.1	118.1	47%
Operating margin	9.30%	19.70%	nm	35.70%	18.70%	nm
Net income	16.8	42.9	-61%	159.7	81.7	96%
Basic EPS $	0.23	0.59	-61%	2.11	1.15	83%
Diluted EPS $	0.22	0.55	-60%	2.02	1.08	87%
Cash flow from operating activities	13.5	45.7	-70%	120.6	165.3	-27%

Underlying*	Second Quarter			First Half
US$ million	2016	2015	Var.	2016	2015	Var.
Revenue	245.7	316.5	-22%	487.2	627.7	-22%
Gross margin	47.10%	47.10%	-	46.30%	46.90%	-60bps
R&D % ¹	23.10%	17.00%	+610bps	22.70%	16.50%	+620bps
SG&A % ¹	10.60%	7.80%	+280bps	10.70%	7.90%	+280bps
EBITDA	44.5	80.8	-45%	85.3	160.9	-47%
EBITDA %	18.10%	25.50%	-740bps	17.50%	25.60%	-810bps
Operating profit	33.2	71.2	-53%	63.2	142.1	-56%
Operating margin	13.50%	22.50%	-900bps	13.00%	22.60%	-960bps
Net income	26.7	52.1	-49%	48.3	107.6	-55%
Basic EPS $	0.36	0.71	-49%	0.65	1.51	-57%
Diluted EPS $	0.34	0.66	-48%	0.62	1.37	-55%

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