7 February 2022
Skyworks’ revenue grows 15% sequentially to a record $1.51bn
For fiscal first-quarter 2022 (to end-December 2021), Skyworks Solutions Inc of Irvine, CA, USA (which manufactures analog and mixed-signal semiconductors) has reported record revenue of $1.51bn, up fractionally year-on-year and up 15% on $1.311bn last quarter, driven by continued strong demand across the firm’s entire portfolio. “The growth trajectory we established in fiscal 2021 is extending into fiscal 2022,” notes CEO, president & chairman Liam Griffin. “This demonstrates the strength of our broadening product portfolio. Growth was well diversified across Mobile and Broad Markets.”
Mobile business (comprising 68% of total revenue) was up 12% sequentially, driven by increasingly complex architectures in 5G phones at the firm’s largest customer and momentum across the Android ecosystem. Mobile revenue was down 13% year-on-year, but: “You have to take into account the timing of the ramp of flagships, especially last year, where the large customer had a condensed ramp with a late launch in the late October/early November time frame,” comments senior VP & chief financial officer Kris Sennesael. “This year, the launch was spread over the September and December quarters,” he adds. “Our large customer left some revenue on the table in the December quarter [due to their capacity constraints], and they’re still trying to catch up - they see improvements going into the March quarter.”
Broad Markets business was a record $477m, up 23% sequentially and 46% year-on-year (rising from 22% of total revenue a year ago through 29% last quarter to 32% now).
“Growth was fueled by both the continued adoption of our solutions across 5G, IoT [Internet of Things], automotive and wireless infrastructure, and an expanding set of new customers and markets from our recently acquired I&A business [Infrastructure & Automotive, acquired last July from Silicon Laboratories Inc of Austin, TX, USA for $2.75bn],” says Griffin. “We’ve done really well in the last couple of months of introducing the I&A products and technologies to customers that we already have - proven customers that we do a lot of business with - which is a great synergy for us,” he adds. “The majority of the portfolio and the I&A business had been more of a fabless play. Over time, we’re going to bring that technology under our own roof here at Skyworks and leverage the great [manufacturing] scale that we have.”
On a non-GAAP basis, gross margin was 51.2%, up slightly from 51.1% a year ago and 51% last quarter.
Operating expenses were $187m (12.4% of revenue), at the top end of the forecasted $184-187m range but cut further from 13.8% of revenue last quarter, “demonstrating leverage in our operating model while continuing our strategic investments in support of future growth,” says Griffin.
“Skyworks delivered strong first quarter results, with double-digit sequential growth in both revenue and earnings per share,” notes Griffin.
Net income was $523m ($3.14 per diluted share, up 20% sequentially and exceeding the targeted $3.10). This is up from $438.8m ($2.62 per diluted share) last quarter.
Operating cash flow was a record $581.7m (up from $398m last quarter and $485.1m a year ago). Capital expenditure (CapEx) was “somewhat light” at $96m (compared with $263m last quarter). Free cash flow was hence a record $486m (free cash flow margin of 32%), driven by strong profitability and working capital management. In fact, inventory was cut by 22 days to 103 days, and receivables were reduced by 5 days to 47 days.
In terms of capital allocation during the quarter, Skyworks paid $93m in dividends, and repaid $50m of its term loan. The firm also repurchased 1.7 million shares of common stock for a total of $269m. “Given where the stock is trading today and what it was trading over the last 3 months, we have switched on the buybacks again,” says Sennesael. “We have still $2.2bn of debt on the balance sheet in addition to $1bn of cash. Gross debt is less than a turn of EBITDA,” he notes.
“Despite macro challenges in supply-chain-specific headwinds, Skyworks delivered excellent first-quarter results, underscoring the increasingly diverse composition of our customer base and extending our track record of strong profitability and robust free cash flow generation,” says Griffin. “This strong performance and outlook reflect our critical position within the wireless ecosystem and how complexity favors Skyworks with its vast IP, deep customer relationships, differentiated manufacturing capabilities and market-leading solutions.”
Quarterly business highlights
“The rapid adoption of new wireless technologies enables a proliferating set of use cases, with design wins spanning Mobile and Broad Markets, further bolstered by contributions from our recently completed acquisition [I&A],” says Griffin.
In Mobile, Skyworks shipped Sky5 platforms across leading 5G smartphone OEMs including Samsung, Oppo, Vivo and Xiaomi.
In enterprise and IoT, Skyworks supported the launch of Wi-Fi access points at Siemens, powered NETGEAR’s latest Wi-Fi 6E mesh system, partnered with British Telecom to launch their 5G home routers, ramped Wi-Fi 6 and 6E modules at Juniper Networks and Telus, and provided digital isolation products for GE consumer appliances.
In automotive, Skyworks leveraged Sky5 technology to enable 5G telematics, security, driver-assist and other advanced services at leading automotive OEMs. The firm also scaled volume production of timing and isolation products, enabling the leading electric vehicle (EV) manufacturers.
In the infrastructure and industrial space, Skyworks captured design wins at Quectel for their enterprise machine-to-machine (M2M) platforms, and delivered industrial IoT solutions to Itron, Honeywell and Thales (supporting smart energy and factory automation).
Skyworks also expanded its position in timing applications at the top five data-centers server providers.
“As markets evolve, we expect to deploy billions of wireless devices, capitalizing on a strong multi-year growth trend,” notes Griffin.
“Looking forward, demand for connectivity is rapidly expanding across multiple essential wireless protocols, including 5G, advanced Wi-Fi and precision GPS,” says Griffin. “Skyworks is uniquely positioned to outperform in all of these technologies through an expanding blue-chip customer base, differentiated manufacturing capabilities and market-leading solutions, all underpinned by strong cash generation,” he reckons.
“Based on new product ramps across our increasingly diversified product portfolio, we expect double-digit year-over-year revenue and earnings growth in the March quarter,” says Sennesael.
For fiscal second-quarter 2022 (to end-March), Skyworks expects revenue of $1.3-1.36bn. This is down 12% sequentially, but slightly better than normal seasonality compared with the last five years of March quarters. Year-on-year it is up 13.5%, with both segments growing by double-digits (more strongly in Broad Markets than in Mobile). Gross margin is expected to be 50.75-51.25%. With operating expenses steady at $186-188m, diluted earnings per share should be $2.62 (up 11% year-on-year).
“We do expect normal seasonality for the June quarter [just a transition quarter – typically down 3-4% sequentially, driven mostly by Mobile],” notes Sennesael. “Based on our technology roadmap, the products, the design-win momentum and the design wins that we have on the book right now, we feel very strong for further sequential growth into the September and December quarters, typically as you see, with strong performance in the second half of the year,” he adds.
“This is still early stages in a multi-year 5G upgrade cycle. There’s a lot of growth opportunities and growth markets. So we will continue to further invest in our manufacturing, adding more size and scale, but at the same time also supporting the technology roadmaps,” says Sennesael.
“As you start to see 5G really accelerate, to really get the performance that’s been promised and that’s been desired, you’ve got to put in more filtering,” notes Griffin. “You need to raise the performance of your gallium arsenide (GaAs) technologies. You got to look at your packaging & test, and the coexistence issues that happen when you have more and more of these technologies in a single application, whether the application is a phone or something else,” he adds.
“We have major success with bulk acoustic wave (BAW), and so the revenue of integrated devices that have BAW filters inside is growing very strong, and we’re supporting that,” says Sennesael.
“We have an outstanding position in WiFi today. But there have been improvements in technology and demand for higher speeds and higher performance. In those cases, bulk acoustic wave is a critical element within the WiFi system,” says Griffin. “We have ramped our bulk acoustic wave technology in smartphones with a lot of work, a lot of investment. Now we’re seeing that move into WiFi. We have design wins now that capture bulk acoustic wave within a WiFi system, multiple customers. A lot of that is in the Broad Markets side. When you get into the connectivity nodes around WiFi and other cases, you have a broadening there. So we're in a great position also now to start to lever up bulk acoustic wave beyond the mobile phone,” he adds. “A key element in our strategy in Broad Markets is to do more and raise the bar there on overall WiFi performance… It plays into core technologies that we have in-house… We have our own gallium arsenide technology. We have our own TC-SAW [thermally compensated surface acoustic wave filters], standard SAW, bulk acoustic wave, assembly & test.”
“We’re also making the necessary investments in Mexicali, in our back-end operation, supporting advanced packaging and test,” says Sennesael. “So, again, we have a lot of growth opportunity for us. We will support that, and we will continue to expand the capacity and pay CapEx.”
“The strength of our balance sheet and consistent outperformance demonstrates the significant value of our vertically integrated model and the compelling advantages it delivers… We are committed to supporting the strategic investments in technology, product development and world-class manufacturing scale to further extend our market leadership,” concludes Griffin.
“Given our strong cash flow and confidence in the business model, we will continue to focus on investing in our business, while returning cash to the shareholders through both share repurchases and dividends,” notes Sennesael. Skyworks’ board of directors has hence declared a cash dividend of $0.56 per share of common stock, payable on 15 March to stockholders of record at the close of business on 22 February.