15 November 2021
Skyworks reports record quarterly and full-year revenue and earnings
For full-year fiscal 2021 (ended 1 October), Skyworks Solutions Inc of Irvine, CA, USA (which manufactures analog and mixed-signal semiconductors) has reported record revenue of $5109m, up 52% on fiscal 2020’s $3356m. By business sector, Broad Markets revenue grew by 45% to over $1400m. Mobile revenue grew 55% to $3700m.
Fiscal fourth-quarter 2021’s revenue was a record $1311m (towards the high end of the $1.27-1.33bn guidance range), up 17% on last quarter’s record $1116.4m and 37% on $956.8m a year ago.
The quarter includes two months of revenue from the acquisition (on 26 July) of the Infrastructure & Automotive (I&A) business of silicon, software and solutions provider Silicon Labs Inc of Austin, TX, USA, which has a $100m per quarter run-rate (to be reported within Skyworks’ Broad Markets segment). “We completed a strategic and compelling acquisition, immediately diversifying our product portfolio and expanding our market reach,” notes chairman, CEO & president Liam Griffin.
“Revenues in our Mobile and Broad Markets portfolios both grew at double-digit rates sequentially and year-over-year as we capitalized on broad-based momentum fueled by demand for our unique connectivity solutions,” says Griffin.
Broad Markets comprised 29% of total revenue, up 13% sequentially and 31% year-on-year.
Mobile comprised 71% of total revenue, up 19% sequentially and 40% year-on-year, after supporting the ramp of new phone platforms at the firm’s largest customer (driving up that customer’s share of Skyworks’ total revenue from 56% in fiscal Q4/2020 to 59% in fiscal Q4/2021, and 59% also for full-year 2021). “Not only in the smartphone lineup, but almost in every other product that they have and that they sell, you will find Skyworks inside,” notes senior VP & chief financial officer Kris Sennesael.
“Our strong performance throughout the initial stage of a multi-year wireless transition has been powered by deep customer relationships and decades of investments in innovative connectivity solutions,” says Griffin. “The complexity inherent in 5G and demand for highly integrated solutions were major catalysts in driving our performance,” he adds.
“The acceleration of 5G powered a broad set of use-cases in Q4, with design wins encompassing the newest, most innovative smartphones and IoT devices, as well as gains in wireless infrastructure,” says Griffin. Specifically:
- In Mobile, Skyworks extended the reach of its Sky5 portfolio, powering the latest launches at leading tier-1 smartphone OEMs, supporting more than 20 platforms. In addition, it shipped Sky5 solutions across Samsung Galaxy’s tablet portfolio.
- In IoT, Skyworks continues to gain new customers and expand content, delivering 5G CPE connectivity solutions to Nokia. It also partnered with Swisscom to launch their Wi-Fi 6 GPON residential gateways, and ramped Wi-Fi 6 and 6E platforms at NETGEAR and Cisco. Skyworks launched connectivity in home security devices with Amazon Ring and Comcast. It also captured design wins at Garmin supporting mobile fitness applications.
- In automotive, Skyworks supported autonomous driving systems with a market-leading Robotaxi platform. It also enabled the advanced charge control unit systems for a tier-1 European automotive OEM.
- Skyworks also provided power isolation solutions to a strategic manufacturer of EV, residential solar and energy storage systems.
“Leveraging strategic technologies from high-performance filters to custom gallium arsenide and advanced packaging, our world-class manufacturing capabilities enable us to effectively navigate a complex supply environment, capturing expanding opportunities across our end markets,” says Griffin.
On a non-GAAP basis, quarterly gross margin has grown further, from 50.4% a year ago and 50.6% last quarter to 51% in fiscal Q4/2021 (aided by the I&A business, which is running at about 60% gross margin). This has boosted full-year gross margin from 50.2% in fiscal 2020 to 50.9% for fiscal 2021.
While operating expenses have risen further, from $147m a year ago and $161m last quarter to $180m in fiscal Q4, this is a cut from 15.4% then 14.5% to 13.8% of revenue (and at the bottom of the expected $180-183m range), “demonstrating leverage in our operating model while continuing our strategic investments in support of future growth,” says Sennesael.
Top-line momentum and execution on margins drove quarterly net income up from $312.2m ($1.85 per diluted share) a year ago and $358.6m ($2.15 per diluted share) last quarter to $438.8m ($2.62 per diluted share, exceeding the $2.53 guidance by $0.09). This boosted full-year net income from $1041m ($6.13 per diluted share) in fiscal 2020 to $1753m ($10.50 per diluted share) for fiscal 2021.
“Skyworks set new records for revenue and earnings for the fourth quarter and the fiscal year, delivering significant year-over-year growth in response to robust demand across our expanded product portfolio,” says Griffin.
Quarterly operating cash flow has risen from $272.9m last quarter to $398m (taking full-year operating cash flow to $1772m, up 47% year-on-year from $1204m). Capital expenditure (CapEx) has more than doubled from $115m last quarter to $263m.
During the quarter, Skyworks paid $93m in dividends and repaid $250m of its term loan. In full-year fiscal 2021, Skyworks returned $536m of cash back to the shareholders. This comprised $340m in dividends (up from $307m the prior year), plus $196m in share buybacks (down from $648m). The latter were all during fiscal Q1/2021. “Starting into fiscal 2021, we temporarily suspended our share repurchase program in connection with the acquisition of the Infrastructure & Automotive business from Silicon Labs [for $2.75bn],” notes Sennesael.
As a result of the all-cash transaction, cash, cash equivalents & marketable securities hence fell during the quarter from $2978m to $1027m while long-term debt rose from $1487m to $2235m.
Griffin notes that capital assets and technology investments that Skyworks made 6-12 months ahead have minimized the impact of industry supply chain issues and shortages. “Having those assets in-house is strategic, it's critical, it's what customers want to see, all the way from gallium arsenide to packaging, assembly & test, TC-SAW [thermally compensated surface acoustic wave], bulk acoustic wave, standard SAW [filters]. We can mix and match to put the right solution together,” says Griffin. “It was the ability to invest early, drive that cash flow, drive that performance to continue to do that and then bring those products to market in ways that are very flexible and having the ability to go from IoT to 5G to Bluetooth to Wi-Fi,” he adds. “Whatever the connectivity protocol may be, we will have the technology execution vehicles within our company to execute for our customers.”
“Looking ahead, Skyworks’ cash generation ability is funding capacity expansion and next-generation technology development, positioning us for continued leadership and sustainable growth as the transition to 5G and other advanced connectivity solutions continues,” reckons Griffin.
CapEx has been running at 10-12% of revenue. “We made the necessary investments in our manufacturing footprint, not only just expanding the capacity but also adding new technology and improving the performance of our technology and our products,” says Sennesael. “Demand is higher than the supply, but Skyworks has, compared to peers and competitors and other industry players, executed really well because we did not hesitate and put the CapEx in place,” he adds.
“Based on continued content gains, product ramps and design wins across both mobile and broad markets, we expect further double-digit sequential revenue and earnings growth in the December quarter,” says Sennesael. For fiscal first-quarter 2022 (to end-December 2021), Skyworks hence expects another quarter of double-digit sequential revenue growth, by 14% to $1475-1525m. Gross margin is projected to be 51-51.5%. Operating expenses should rise to $184-187m. At the $1.5bn midpoint of the revenue range, diluted earnings per share should be $3.10, up 18% sequentially.
“This is just the beginning of a long 5G cycle, the beginning of Wi-Fi upgrade, the beginning of proliferation of 5G outside of mobile into growth markets,” says Sennesael. “It is a tight supply-constrained environment and we are facing some input cost increases right now. We continue to drive further operational efficiencies,” he adds.
“Skyworks will continue to strategically invest in next-generation technologies and capital expansion, positioning us for market leadership and sustainable growth as the transition to 5G and other advanced connectivity technologies accelerates,” says Griffin.
Skyworks’ board of directors has declared a cash dividend of $0.56 per share of common stock, payable on 14 December, to stockholders of record at the close of business on 23 November.
“Given the strength of our business and the progress we have made on integrating the acquisition, and given the low leverage ratio of less than 1 turn, going forward we will, from time to time, consider share repurchases as part of our capital allocation strategy, depending on market conditions and in addition to our dividend program and further term-loan repayments,” says Sennesael.