1 February 2016

Skyworks' quarterly revenue grows by 5% to new record of $926.8m

For fiscal first-quarter 2016 (ending 1 January), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported revenue of $926.8m, up 5% on the record $880.8m last quarter and up 15% on $805.5m a year ago.

As a proportion of total revenue, power amplifiers (PAs) have fallen further, from 31% a year ago and 20% last quarter to 16%, as the market shifts toward higher-value integrated solutions. Integrated mobile systems (IMS) have risen further, from 47% a year ago and 59% last quarter to 64%. Broad markets comprised 20%, down from 22% both last quarter and a year ago, although revenue grew healthily.

On a non-GAAP basis, gross margin has grown further, from 46.7% a year ago and 50% last quarter to 51.4% (above the expected 51%).

Operating expenses have risen further, from $94.4m a year ago and $104.9m last quarter to $109.5m (above the expected $108m), driven by ongoing investments in engineering and development teams as Skyworks expands its footprint within new verticals and further enhances its integration capabilities.

Operating income has grown further, from $282m (operating margin of 35%) a year ago and $335.2m (margin of 38.1%) last quarter to $366.6m (margin of 39.6%, exceeding the expected 39%).

Likewise, net income has grown further, from $244.8m ($1.26 per diluted share) a year ago and $296.1m ($1.52 per diluted share) last quarter to $311.2m ($1.60 per diluted share).

Cash flow generated from operations was $345m (up from $230m last quarter), although this includes a $88.5m fee paid by PMC-Sierra Inc on 24 November for terminating their merger agreement (in favor of an acquisition proposal from Microsemi Corp). Capital expenditure was $79.5m (cut from $151m last quarter). Depreciation was $51.5m.

During the quarter, cash and cash equivalents hence rose from $1044m to $1233m (while the firm also has no debt). Skyworks' board of directors declared a cash dividend of $0.26 per share (payable on 3 March to stockholders of record at the close of business on 11 February).

"Skyworks delivered solid financial results in the first fiscal quarter of 2016, driven by our diversification across customers, markets and applications," says chairman & CEO David J. Aldrich. "Leveraging our proprietary and highly integrated system solutions, we continue to increase our addressable content, gain market share and capitalize on global demand for ubiquitous network access."  

Business highlights cited for fiscal first-quarter 2016 include the following:

• commencing volume shipments of telematics solutions at Volkswagen;  

• securing the first mass production of vehicle-to-vehicle communications sockets at GM;  

• supporting Google Chromecast and Roku set-top boxes for streaming applications;

• winning multiple sockets in flagship smartphone platforms at Samsung and other OEMs;  

• ramping microcell radio subsystems at a leading infrastructure OEM;

• launching an IP security camera solutions at Nest;

• powering Huawei's Mate 8 flagship LTE platform;

• enabling the DJI Phantom 3 drone with a suite of 14 semiconductors;

• leveraging ZigBee and Bluetooth capabilities for temperature control and garage door applications in the connected home; and

• capturing key smart fitness watch design wins at Fitbit.  

"The March quarter, which is normally a seasonally soft period, has been impacted by above-normal forecast reductions and inventory adjustments at one of our top customers," notes Aldrich. "After closely analyzing the market environment, we have adopted an appropriately conservative outlook for our Q2 revenue guidance." Hence, for fiscal second-quarter 2016, Skyworks expects revenue to fall by 16% to $775m (though still up on $762.1m a year ago).

"Despite the current market environment, we expect to deliver earnings growth in the March quarter driven by strong gross margin performance and a disciplined approach with expenses," says executive VP & chief financial officer Donald W. Palette. Although gross margin should fall slightly from fiscal Q1 to 50.5-51%, this is still up year-on-year from 46.7%. Operating expenses are expected to be level sequentially (staying at about $109.5m for the next few quarters). "Through strong gross margin performance and a disciplined focus on cost, the overall impact to EPS is relatively small," says Aldrich. Diluted earnings per share should be $1.24, down sequentially but still representing high single-digit percentage growth year-on-year (from $1.15).

"Our strong gross margin outlook in the face of current market dynamics highlights the benefits of our higher-value integrated systems, along with our scale, and flexible manufacturing operations," says Palette. "Our Q2 margin and EPS guidance highlights the robustness of our business model within the context of challenging market conditions," he adds. 

"Looking ahead, we see continued opportunity for margin improvement, as we leverage our recent capital investments and ramp our custom integrated solutions and precision analog products," Palette continues. "We are targeting a goal of at least 53% gross margin for the company and have a number of initiatives in place to accelerate our progress toward achieving this goal," he adds.  

"We are well-positioned for a strong second half of calendar 2016 based on clear visibility into design wins across our flagship smartphone customers," says Aldrich. "We are highly confident in our prospect for gaining dollar content within upcoming generations, putting us on track to continue delivering above-market revenue growth with expanding profit margins and earnings leverage," he adds.

"For the second half of calendar 2016, we see momentum building off of this baseline. Many of the drivers supporting this are already in place," notes Palette. "We remain on track toward our mid-term goal of $8 in annualized EPS."

* Skyworks recently agreed for Kyocera to buy (for about $42m) its small subsidiary Trans-Tech, which produces ceramic substrates and materials for broad market applications but had become non-critical to Skyworks' corporate strategy. The transaction is expected to close in early April. Skyworks estimates an impact to revenue of about $14m per quarter (starting in the June quarter) with no impact to EPS. "This transaction helps to improve the financial returns of our business, while sharpening focus on our core strategy," says Palette.

See related items:

Skyworks announces new $400m stock repurchase program

Skyworks exceeds quarterly revenue and EPS guidance  

Skyworks' quarterly revenue rises a more-than-expected 38% year-on-year to $810m

Skyworks' quarterly revenue rises by more-than-expected 58% year-on-year to $762m

Skyworks exceeds quarterly revenue, margin and earnings guidance

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