Dialog's revenue in Q2/2016 was down 22 percent to USD 246 million. The revenue performance was the result of the anticipated year-on-year volume decline in Mobile Systems (31 percent) partially offset by 46 percent growth in Power Conversion.
Revenue performance improved sequentially in Connectivity 38 percent, Power Conversion 19 percent and Automotive and Industrial 14 percent. Q2/2016 gross margin was 46.3 percent, 20bps below Q2/2015. Q2 2016. Underlying gross margin was 47.1 percent, 160bps above Q1/2016 and in line with Q2/2015. Excluding USD 2.7 million manufacturing costs credit, underlying gross margin in Q2/2016 was 46.0 percent, 50bps above Q1/2016.
Q2/2016 financial highlights
Revenue of USD 246 million in line with May guidance
Power Conversion revenue up 46 percent over Q2/2015 to USD 28.6 million
Gross margin at 46.3 percent. Underlying gross margin at 47.1 percent
Operating profit of USD 22.9 million, a year-on-year reduction of 63 percent. Underlying operating profit of USD 33.2 million, a sequential increase of 11 percent and a year-on-year reduction of 53 percent.
All operational business segments profitable on an underlying basis
Cash flow from operating activities of USD 13 million (Q2/2015: USD 46 million). USD 33 million of free cash flow generated in Q2/2016, up 113 percent over Q2/2015. USD 660 million of cash and cash equivalents, USD 212 million above Q2/2015
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 USD 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 percent 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.
