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2 November 2009


RFMD’s revenue grows 20%, boosted by CATV growth of 70%

For its fiscal second-quarter 2010 (ended 3 October 2009), RF Micro Devices Inc of Greensboro, NC, USA has reported revenue of $254.8m, down 6.2% on $271.7m a year ago but up 19.9% on last quarter's $212.5m.

The Multi-Market Products Group (MPG) comprised slightly less than 20% of revenue and the Cellular Products Group (CPG) just more than 80% (up from 75% last quarter).

CPG grew significantly faster than its end markets, driven by new product cycles as diversification efforts yield results. The group launched nine new products during the quarter, and is on track to launch about 40 this fiscal year. While revenue grew sequentially at CPG’s largest customer, total revenue at all other customers also grew, by about 50%. In particular, sales to Greater China rose 75% (to 10% of overall revenue). Cellular product sales into 3G handsets increased by 50% year-on-year. CPG also broadened its customer base for its portfolio of power amplifiers and switch products for 4G LTE data cards and handsets.

In MPG, shipments of WiMAX components grew about 40% sequentially, while CATV revenue grew by 70%. During the quarter, MPG added two new automatic meter reading (AMR)/smart-grid customers, and increased its electronic toll collection (ETC) customer base in China to seven (now covering all major population centers in China). MPG launched a record 100 new and derivative products, making 169 through fiscal first-half 2010 (and is on track to launch more than a product a day in full-year fiscal 2010). During the quarter, RFMD completed the transfer of production & test of MPG’s integrated circuit (IC) and multi-chip module (MCM) products from Shanghai to its primary assembly facility in Beijing.

“RFMD’s business model generated significant improvements in several key financial metrics,” says chief financial officer Dean Priddy. Gross margin has risen from 28.3% a year ago and 34.8% last quarter to 35.9%.

Compared to an operating loss of $19m a year ago, operating profit almost doubled from last quarter’s $12.1m to a record $24.1m (an operating margin of 9.5% of revenue).

However, excluding the impact of Polaris cellular transceivers (which have gross margin in the mid-teens and comprised 10-15% of total revenue), core business exceeded RFMD’s target model of 40% gross margin and 15% operating margin.

Compared to a net loss of $14.2m a year ago, net income was $14.6m, more than triple last quarter’s $4.8m.

Cash flow from operations rose from $36.4m last quarter to $47.2m. Subtracting capital expenditure of just $1.4m, free cash flow was $45.8m (up 33% sequentially). Total cash, cash equivalence, short-term investment and trading security investment therefore rose to $357.8m.

RFMD believes its overall business environment is improving. The firm is experiencing continued strong demand from its cellular customers and much improved order visibility in MPG’s primary markets, including significant growth in CATV.

Adjusting for the 14-week September quarter, for the 13-week December quarter RFMD expects revenue to grow sequentially, and gross margin to be maintained.

Capital expenditure should be $3m (tracking to the low-end of RFMD’s forecast of $10-20m for fiscal 2010). “Its likely we’ll maintain at that level for the foreseeable future,” says Priddy. “We are continuing to ramp our reduced-die-size products, resulting in meaningful and sustainable positive impact on manufacturing capacity. We are only in about the third innings for die-size reductions, so we are very optimistic that we can continue to grow revenues and improve the quality of profit without the need for significant gallium arsenide capital investments,” he adds.

For the December quarter, RFMD therefore also expects strong cash flow and sequential growth in cash, cash equivalents and short-term investments. “Our expectations are for continued strong performance both in the December quarter and in calendar year 2010,” adds president & CEO Bob Bruggeworth.

Also, despite Polaris transceivers maintaining a sizable low-margin contribution to revenue for roughly three more quarters, in the longer term RFMD expects a substantial and sustainable improvement in gross margin, due to its customer diversification, the release of reduced-die-size products, the return of MPG’s end markets, the transfer of MPG test & assembly to Beijing, declines in depreciation, and increases in capacity utilization.

See related items:

Greater-than-expected revenue returns RFMD to profit

RFMD seeing better-than-expected order activity

RFMD still generating cash despite further 15% drop in revenue

Search: RFMD


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