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15 May 2015

Qorvo's quarterly revenue up 46% year-on-year

For its fiscal fourth-quarter 2015 (ended 28 March), Qorvo Inc, a provider of core technologies and RF solutions for mobile, infrastructure and aerospace/defense applications, has reported revenue of $633.9m, down seasonally by 14.5% on $742m last quarter but up 46% on $433.6m a year ago compared with the combined revenue of RF Micro Devices Inc of Greensboro, NC and TriQuint Semiconductor Inc of Hillsboro, OR, USA (following the merger of the two firms on 1 January). This is also well above the guidance of $615-625m.

There were two greater-than-10% customers (although the larger, at about 37% of revenue, represented the aggregated demand of multiple subcontractors for this end-customer).

Revenue for Infrastructure and Defense Products (IDP) was $140m, up 10% year-on-year. However, growth was led by Mobile Products, up 61% year-on-year to $493m (of which over 95% is 3G or 4G). "Qorvo is a leading beneficiary of the explosive demand for mobile data and the resulting growth in data traffic," says president & CEO Bob Bruggeworth.

On a non-GAAP basis (excluding about $250m of merger-related accounting entries and costs), gross margin was a record 50.4% (well above the forecasted 46-48%). This is up on last quarter due to favorable product mix (weighted towards higher-margin IDP, in a seasonally down quarter for Mobile Products), better-than-expected manufacturing yields (through driving waste out of the manufacturing process), and synergies that are beginning to accumulate. "The sequential increase in gross margin in the seasonally down March quarter reflected crisp execution by the Qorvo team as we implemented our integration plans and captured synergies," says Bruggeworth.

Operating expenses were $150m. Synergy-driven reductions in general & administrative (G&A) spending were offset by increased investments in R&D for masks and filter designers. Operating income was hence $169.6m (operating margin of 26.8%), up from $25.3m a year ago for RFMD and TriQuint combined.

Net income was $167.2m ($1.11 per diluted share, exceeding the guidance of $0.80-0.90). Higher revenue and strong execution accounted for about $0.15 of the improvement from the midpoint of guidance while lower taxes contributed $0.09 and share count related to the timing of the merger contributed the remaining $0.02.

Cash flow from operations was $138m. Capital expenditure was $120m, primarily to address continued growth in demand for premium filters. Total cash and investments was $544.6m. Also, during the quarter Qorvo repurchased about 760,000 shares of common stock at an average price of $65.87 (a total cost of $50m). 

During the quarter, Qorvo achieved several strategic highlights (intended to diversify and grow revenue). Specifically, the firm secured a design win with a major base-station OEM with a 3.5GHz gallium nitride (GaN) multi-mode multi-band power amplifier (MMPA) that began field trials to support major operators in China, Europe, Japan and North America. Qorvo also launched a broad family of MMPAs and duplexer modules covering major cellular bands for the small-cell base-station market. Additionally, the firm was selected as the primary supplier of 802.11ac 5GHz PAs for a next-generation 802.11ac wave 2 chipset. Qorvo also saw increased design traction on leading mobile Wi-Fi reference designs, including Wi-Fi front-end solutions integrating active components and filters into a single placement.

In addition, Qorvo launched production of high-performance GPS low-noise amplifier (LNA) filter modules for a leading fitness wearable device manufacturer. It also secured its first receive diversity module design win in support of a flagship Android smartphone (scheduled to launch in second-half 2015). Finally, Qorvo received production orders for its RF Flex solution, supporting a next-generation Octa-Core 4G chipset (with shipments starting in the June quarter). Qorvo is also supporting the launch of multiple 4G smartphones with multiple dollars of RF content (including filters, switches, antenna control solutions, discrete PAs, multi-mode multi-band PAs, and Wi-Fi solutions).

"We're leveraging our combined strengths to open new avenues of growth, many of which are coming in the form of highly integrated RF devices," says Bruggeworth. "Qorvo's Wi-Fi front-end solutions integrating active components and filters, and our receive diversity modules are both excellent examples," he adds. "In the case of our receive diversity modules, we've combined two of the fastest-growing functions in RF, premium BAW filters and high-performance, high-throw-count switches and highly integrated compact single placements. This makes them unique in our industry and are intersecting customer demand at the right time, as smartphone manufacturers increasingly migrate from SAW to BAW to solve the interference challenges of higher band count and carrier aggregation." 

At its Analyst Day last November, Qorvo increased its operating model goals to 50% gross margin and 30% operating margin. "Achieving nearly 27% operating income in a seasonally weak quarter is a great start for Qorvo," comments chief financial officer Steven J. Buhaly. "Add in the substantial synergies yet to come and we feel we can hit these goals while making significant investments in the process technologies and great products that sustain and enhance our competitive advantage," he adds.

"We enjoy strong participation in the highest-volume and highest-value devices across the mobile, infrastructure and defense markets, and we anticipate continued strong financial performance in the June quarter," says Bruggeworth. 

"We're confident we can outpace our markets this year," adds Buhaly. For the June quarter, Qorvo now expects revenue of $660-670m (up 5% sequentially), gross margin roughly consistent with the prior quarter, and diluted earnings per share of $1.00-1.10. Solid operating leverage is expected to drive operating income up about 10% sequentially.

"We're making steady progress towards our goal of bringing up our second facility in China to in-source the assembly & test of legacy TriQuint products, and we expect to begin shipments in the December quarter," notes Bruggeworth. "We are confident in our ability to deliver a run rate exceeding $75m in synergies exiting this calendar year, and we see a clear path to a run rate of greater than $150m in synergies exiting calendar year 2016," he adds.

"From a very high level, we believe we're just beginning to demonstrate the value of bringing our two companies together, and we expect to build on that as we realize the full run rate of our cost synergies and introduce new products and technologies we could not have achieved individually," continues Bruggeworth. "Qorvo is well-positioned to win more than our share of the industry's highest-growth opportunities by leveraging our diversified product portfolio, systems-level expertise, R&D and manufacturing scale, and internal assembly & test capabilities."

See related items:

Qorvo reports combined RFMD-TriQuint December-quarter revenue up 33% year-on-year to $742m

Merger of RFMD and TriQuint as Qorvo now completed

Tags: Qorvo RFMD TriQuint

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