Multi-Fineline Electronix posts strong Q1 on GM and sales to Apple
Multi-Fineline Electronix, Inc. (Nasdaq: MFLX), manufacturer of flexible printed circuit boards and related component assemblies for electronics industry, reported robust fiscal first-quarter results after Tuesday’s close that blew away expectations on account of strong gross margins and increased sales to Apple, Inc. (Nasdaq: AAPL).
For the three months ended Dec. 31, 2007, the Anaheim, Calif.-based company reported revenues increased nearly 49% to $184.1 million from $123.9 million for the first quarter of fiscal 2007. The Thomson Financial mean estimate for revenue was $175.3 million. The company attributed the upshot in revenue primarily to increased sales to two of its key customers.
The small cap recorded net income of $13.6 million, or $0.54 per diluted share, compared with $3.7 million, or $0.14 per diluted share, for the same period in fiscal 2007.The Thomson Financial mean estimate for earnings was $0.14 per share.
Multi-Fineline said the year-over-year increase in profitability was propelled by improved gross margin and added leveraging of operating expenses on the higher net sales. Gross margin increased to 16.7% for the quarter, compared with 12.1% in the same quarter last year, primarily due to program mix, leveraging of expenses on the higher net sales and yield improvements, which were partially offset by pricing reductions in early 2007.
The small cap said that sales to Apple Inc. rose to more than 10% of net sales in the first quarter, rendering Apple one of Multi-Fineline’s four largest customers. The company also noted that it made progress on diversifying its customer base, as net sales during the first quarter were distributed among four customers.
Despite a sanguine quarter, the company cautioned it will continue to face ongoing challenges due to the nature of the markets in which it operates. The company continues to grapple with customers' shortened product life cycles and to combat such a challenge Multi-Fineline said it plans to ramp up more new programs into high-volume production more frequently and with more customers.
“While we expect yields to remain good, we are concerned that the shortening product cycles will increase the number and complexity of new programs leading to some fall-off from the current high levels,” Robert W. Baird analyst Reik Read wrote in a research note today. “This will cause margins to move more toward the middle of the company's forecasted 10% to15% rather than staying at the high end.”
Read is taking a cautious outlook on the company. The analyst is maintaining a “neutral” rating on the stock due to a weakening handset market and the expectation that yield improvements will decline, causing margins to move toward the company's forecasted range.
Specifically, the analyst cites that according to the online news source DigiTimes, component suppliers for Apple's iPhone indicated that Apple has lowered its projected shipments of the iPhone in the March quarter by 40% to 50%. In addition, the analyst says the report cites that Sony-Ericsson expects to continue to see a mix shift towards lower-end phones.
Shares of Multi-Fineline (MFLX) rocketed 40.06%, or $5.30, to $18.53 in afternoon trading on volume of 706,076 shares. Shares of Multi-Fineline have been trading in the range of $9.70 to $23.24 for the past 52 weeks. Typical volume for Multi-Fineline’s stock is 195,329 shares.
