24 May 2021
Qorvo’s quarterly revenue up 36% year-on-year
Qorvo Inc of Greensboro, NC, USA (which provides core technologies and RF solutions for mobile, infrastructure and defense applications) has reported full-year revenue growth of 24%, from $3.239bn for fiscal 2020 to over $4.015bn for fiscal 2021 (ended 3 April).
“We concluded our fiscal 2021 with an exceptionally strong March quarter,” comments president & CEO Bob Bruggeworth. Fiscal fourth-quarter 2021 revenue was $1072.7m, down just 2% from $1094.8m last quarter and up 36% on $787.8m a year ago (and exceeding the $1025-1055m guidance), driven by demand for 5G smartphone handsets and Wi-Fi 6 and 6E. Demand was broad-based across customers.
Mobile Products revenue was $808m, down slightly from $826m last quarter but up 45% on $556m a year ago due to the growth of higher-content 5G smartphones. Strategic highlights are listed as:
- achieving record shipments of low-, mid-high and ultra-high-band main-path solutions and Wi-Fi 6E front-end modules (FEMs) in support of leading Android smartphone OEMs;
- continuing to expand the firm’s content opportunity with the leading Android OEMs by securing complete main-path solutions and secondary transmit in the diversity path;
- selection by a leading provider of consumer Internet of Things (IoT) products to integrate ultra-wideband (UWB) into a broad set of connected home devices;
- being honored by Samsung with its ‘Best Quality Award’ in recognition of Qorvo’s innovation and outstanding performance in support of the Galaxy product family.
Infrastructure and Defense Products
Infrastructure and Defense Products (IDP) revenue was $265m, down slightly from $269m last quarter but up 14% on $232m a year ago.
- Growth was led principally by record Wi-Fi revenue. “The rate of adoption of Wi-Fi 6 is outpacing the adoption we experienced for Wi-Fi 5, and the rollout is forecasted to span multiple years across enterprise, retail and service providers,” notes Bruggeworth. “Qorvo is seeing a strong attach rate, given the performance advantages we enabled related to range, efficiency, signal integrity, and form factor,” he adds. To that end, Qorvo secured the entire Wi-Fi 6 radio-frequency front-end (RFFE) bill of materials (BOM) in support of a major US MSO gateway and releasing multiple 5GHz iFEMs delivering improved band isolation and enhanced capacity and range in tri-band Wi-Fi 6 home mesh networks.
- In broadband, MSOs are increasing downstream and upstream data capabilities by upgrading to DOCSIS 3.1 infrastructure. During the quarter, Qorvo expanded shipments of DOCSIS 3.1 gallium nitride (GaN) power amplifiers to major US MSOs, offering greater efficiency, longer range and increased bandwidth to maximize upstream and downstream data connectivity.
- In infrastructure, Qorvo continued to ramp shipments of GaN power amplifiers and small-signal components to a major base-station OEM in support of US C-band massive MIMO deployments. It also captured initial design wins for mMIMO deployments in Canada, Japan and Korea.
- In automotive, Qorvo has for years been successful supporting the increased demand for in-vehicle infotainment. “During that time we’ve expanded our automotive portfolio and engage with customers to enable the transition to connected car through cellular V2Xm,” says Bruggeworth. In the March quarter, these efforts helped to generate the firm’s first production orders for our cellular V2X front-end modules and bulk acoustic wave (BAW) coexistence filters to support the leading European automotive OEMs. (Qorvo’s high-frequency BAW coexistence filters also enable the concurrent operation of cellular V2X and Wi-Fi.)
- In programmable power management, customer demand has been strong and supported two trends. First, the transition to solid-state drives is ongoing, primarily in laptops and gaming consoles. During the quarter, Qorvo’s programmable power management integrated circuit (PMIC) continues to support this transition with expanded shipments to and new engagements with multiple leading solid-state drive providers. Second, the transition of brushless DC electric motors is accelerating, enhancing efficiency and a broad set of consumer products, including power tools and appliances. Qorvo increased shipments with motor control solutions during the quarter, supporting multiple major consumer brands.
- In defense applications, the shift to higher frequencies, the adoption of phased-array radar and the proliferation of GaN are among the trends supporting demand for Qorvo’s products. For radar applications, the firm released a reconfigurable dual-band (S-band and X-band) GaN power amplifier monolithic microwave integrated circuit (MMIC), enabling more compact next-generation radar systems. Also, over 30 million miles away, the successful landing of NASA’s JPL Mars Perseverance rover was supported by Qorvo’s components integrated into the rover’s descent radar.
On a non-GAAP basis, gross margin was 52.6% (the third consecutive quarter over 50%, taking full-year fiscal 2021 gross margin to over 52%). This is down from 54.4% last quarter but up on 49.6% a year ago, and above the 50.5-51% guidance range, as a less favorable mix was more than offset by better-than-expected price, manufacturing costs and inventory charges.
Operating expenses have risen further, from $194.2m (17.7% of revenue) last quarter to $207.5m (19.3% of revenue), driven by technology and product development expenses, associated with recent acquisitions and other key growth programs.
Net income was $315.4m ($2.74 per diluted share, above the $2.42 guidance), down from $356.7m ($3.08 per diluted share) last quarter but up on $185.3m ($1.57 per diluted share) a year ago.
Cash flow from operations was $402.9m (roughly level with last quarter). Capital expenditure (CapEx) more than doubled to $77.4m (taking full-year CapEx to $187m, below 5% of sales). Free cash flow was hence $325m (taking full-year free cash flow to over $1.1bn, up five-fold over the past four years). Also during the quarter, Qorvo repurchased $175m of shares.
Cash and cash equivalents hence rose from $1234m to $1398m. The debt balance remained unchanged at about $1.7bn. “Our leverage remains low, our revolver is untapped and we have no near-term maturities,” notes chief financial officer Mark Murphy. “In April S&P upgraded our credit rating to investment grade, reflecting the steps we’ve taken to profitably grow the business and maintain a strong balance sheet.”
After the quarter-end, Qorvo received an emergency use authorization (EUA) from the US Food & Drug Administration (FDA) for the Omnia COVID-19 rapid antigen test, which leverages high-frequency BAW sensors for high sensitivity and specificity. “Qorvo began efforts to use BAW sensors to develop diagnostic test solutions in 2013, in a manner similar to how we leveraged our BAW filters to achieve superior frequency selectivity in RF applications,” says Bruggeworth. “Now with the authorization from the FDA, we are preparing to scale production to help support ongoing public health efforts,” he adds. To that end, Qorvo was awarded a contract with the US National Institutes of Health (NIH) through the Rapid Acceleration of Diagnostics (RADx) initiative. With $24m from the Biological Advanced Research and Development Authority (BARDA), the award is helping to advance the production and market launch of the Omnia diagnostic test platform.
After the quarter closed, in early May, Qorvo acquired NextInput Inc of Mountain View, CA, USA, a pioneer in the emerging field of force-sensing human-machine interface (HMI) solutions utilizing micro-electro-mechanical systems (MEMS)-based sensors for mobile, true wireless stereo (TWS), consumer, automotive, IoT, robotics, medical and industrial applications. NextInput will be part of the Mobile Products Group. “They have shipped tens of millions of MEMS-based sensors solutions to leading manufacturers of smartphones, wearables, automobiles, and other applications,” says Bruggeworth. “We see multiple opportunities for their solutions to augment or displace capacitive touch and mechanical buttons with smaller, more reliable and air-tight solutions applicable to any surface, including glass, polycarbonate, aluminium and carbon fiber. We are excited to expand our technology portfolio and accelerate the deployment of the technology to our broad customer base and new markets,” he adds.
“Our outlook is strong as Qorvo is enabling multi-year upgrade cycles in existing markets and introducing disruptive technologies including ultra-wideband, RF-based biotechnology testing and MEMS-based solutions,” summarizes Bruggeworth.
For fiscal first-quarter 2022 (to end-June 2021), Qorvo expects revenue of $1.065-1.095bn, reflecting sustained and broad-based customer demand driven by multi-year technology upgrade cycles. Mobile Products revenue should grow slightly quarter-on-quarter to $810m (up 73% on $468m a year previously), as demand for 5G is adding RF complexity and driving higher content. IDP revenue should grow to $270m, sustained by Wi-Fi 6 demand and other markets.
Reflecting seasonal patterns and a less favorable mix, gross margin is expected to fall to about 50%, but that is still up on 48.6% a year previously due to higher volumes, active portfolio management and pricing, and continuous productivity efforts. “We expect our June-quarter gross margin to be the lowest gross margin quarter of the year,” notes Murphy.
Operating expenses should rise to about $214m, as a result of added labor and other development expenses associated with recent acquisitions and key growth programs.
Net income is expected to fall to $2.45 per diluted share, but this is still up on $1.50 per diluted share a year previously.
Capital expenditure will remain around $70m, as Qorvo works to “intersect projected demand and support long-term supply agreements with multiple customers”.
For full-year fiscal 2022, Qorvo forecasts approximately 15% revenue growth, based on an increase in smartphone volumes of 5-10%, a doubling in 5G smartphone handsets (within which RF content is expected to increase $5-7 per phone compared with 4G, including in the mid-tier), sustained Wi-Fi demand, and growth in other markets including power management and defense. Gross margin is targeted to be about 52%. OpEx is expected to increase sequentially through the year but remain below 20% of sales for the full year. “This level of OpEx is in line with what we laid out years ago and supports Qorvo’s ongoing product and technology leadership in existing markets, while funding investment in newer areas such as UWB, biosensors, power management and MEMS,” says Murphy. CapEx should be about 5% of revenue. Due to slightly higher CapEx and working capital build, free cash flow is expected to grow only modestly year-on-year.
“Based on our strong free cash flow performance in fiscal year 2021 and our fiscal year 2022 outlook, along with our substantial balance sheet capacity and other factors, the board of directors has authorized a $2bn share repurchase program,” announces Murphy.