1 May 2013

RFMD’s quarterly revenue grows greater-than-expected 49% year-on-year

For its fiscal fourth-quarter 2013 (to end-March), radio-frequency component and compound semiconductor company RF Micro Devices Inc of Greensboro, NC, USA has reported revenue of $280.6m, up 3.5% on $271.2m the prior quarter and up 49% on $187.9m a year ago (and much better than the expected 6-8% quarter-to-quarter drop to $250-255m).

Fiscal	Q4/2012	Q1/2013	Q2/2013	Q3/2013	Q4/2013
Revenue	$187.9m	$202.7m	$209.7m	$271.2m	$280.6m

“Our March quarterly results reflect market share gains and an above-seasonal revenue performance,” commented president & CEO Bob Bruggeworth. “We have won share across a broad customer set and outpaced our industries’ underlying growth rates.” The increase in sequential revenue reflected increased demand for RFMD’s cellular RF solutions and broad-based growth in high-performance Wi-Fi, broadband/CATV and standard products applications.

RFMD’s Cellular Products Group (CPG) grew about 1.4% sequentially and 59% year-on-year to $225.7m. During the quarter, RFMD began production shipments in support of a high-volume flagship smart-phone containing multiple RFMD components, including multi-mode multi-band (MMMB) power amplifiers (PAs), single-band PAs, and antenna control solutions.

The firm also benefited in the entry-level segment from “leadership on major reference designs” and the expansion of RFMD’s entry solutions product portfolio to include industry-leading CMOS PAs. “We are accelerating the adoption of our RF CMOS technology into new markets and new customers, and we anticipate this will provide a path to lower costs and improve margins in our 2G product portfolio,” said Bruggeworth, commenting that this is “especially significant in China”, where the company holds a leadership position.

RFMD’s Multi-Market Products Group (MPG) grew 13% sequentially and 20% year-on-year to $54.9m, with sequential growth in all three business units. In particular, high-performance Wi-Fi activities achieved double-digit quarter-to-quarter revenue growth, and doubled year-on-year.

“We supported multiple reference designs for both mobile Wi-Fi and CPE, with particular interest in our high-band front-end modules,” noted Bruggeworth. “We expect continued growth in 802.11n applications and also at 802.11ac, which is beginning to ramp,” he added. “While 802.11ac activity for mobile applications has been strong for a while, CPE's activities strengthened.”

On a non-GAAP basis, gross margin totalled 34.4%, up from 32.4% a year ago although down from 35.5% last quarter. Net income was $17.1m ($0.06 per diluted share), down from $21.3m ($0.08 per diluted share) last quarter but a big improvement on a loss of $5.4m ($0.02 per diluted share) a year ago. Cash flow from operations was $10m. However, after capital expenditure of $20.4m (up from $13.7m last quarter), cash, cash equivalent and short-term investments fell from $189.7m to $179.6m.

During the quarter, RFMD announced a flexible gallium arsenide (GaAs) sourcing strategy, including the intent to exit its pHEMT fabrication facility in Newton Aycliffe in the UK, to expand gross margin, and to support aggressive growth. Furthermore, RFMD made a $10m investment to secure duplexer capacity to support product ramps in fiscal second-half 2014. 

“We expect to drive substantial margin improvement through multiple activities, including the migration of our 2G product portfolio to our lower-cost, best-in-class RF CMOS technology, the addition of internal assembly capacity to increase the share that we in-source, completing exiting our UK facility, and the resulting improvement in capacity utilization in our Greensboro GaAs fab,” said Dean Priddy, chief financial officer & VP of administration. “We believe these activities will drive three to four points of margin expansion in the second half of this fiscal year,” he added.

During the quarter, operating expenses were $76m, including $12.6m on general & administrative (G&A), $16.7m on sales & marketing and $46.8m on R&D. RFMD says that its emphasis on R&D in particular is resulting in content gains and category expansion across a broad set of smartphone makers and chipset providers. The acquisition of RF CMOS technology provider Amalfi Semiconductor last November added about $2.3m in operating expenses.

“If you look from a high level at our long-term strategy, a few quarters ago, you would have seen that we began making incremental investments in R&D to drive growth and diversification through product and technology leadership,” commented Bruggeworth. “Now, you're seeing continued above-industry growth and an additional layer of diversification across products and product categories.

“Those same investments are shaping our current year; helping us to further expand our dollar content on flagship platforms and to diversify our product offerings. To expand these customer relationships, we're leveraging our R&D and capital expenditure investments to expand our product offerings.”

“To drive growth, we are engaged at a very high level with the leading carriers, smartphone manufacturers and chipset providers, and we expect these technologies to play an increasing role in differentiating our product offerings,” said Bruggeworth.

“Our strong growth continues to reflect our sharp focus on diversification, category expansion and content gain in the large market supporting data mobility,” Priddy commented. “RFMD’s financial outlook reflects the company’s current expectations for the timing of key customer program ramps and continued strength in 2G and high-performance Wi-Fi.”

For the June quarter, RFMD expects revenue to rise further to $285-290m, and non-GAAP earnings per share to rise to $0.07-0.08.

See related items:

RFMD enjoys 29% sequential revenue growth

RFMD’s revenue up 3.5% on last quarter, but 14% down year-on-year

RFMD’s quarterly revenue and margins grow, driven by diversified markets

RFMD’s quarterly revenue falls 16.6% to $187.9m

Tags: RFMD

Visit: www.rfmd.com

Author: Matthew Peach, Contributing Editor