10 February 2014

TriQuint grows 7% in Q4, led by 21% rebound in Networks infrastructure

For fourth-quarter 2013, RF front-end component maker and foundry services provider TriQuint Semiconductor Inc of Hillsboro, OR, USA has reported record revenue of $267.7m, up 15% on $233.6m a year ago (driven by 26% growth in mobile devices) and up 7% on $250.8m last quarter (led by a strong rebound in Networks infrastructure, growing 21%, while Mobile Devices grew 5% and Defense & Aerospace fell 2%).

Fiscal	Q4/2012	Q1/2013	Q2/2013	Q3/2013	Q4/2013
Revenue	$233.6m	$184.2m	$190.1m	$250.8m	$267.7m

End-market revenue split was 71% Mobile Devices (down from 72% last quarter), 18% Network Infrastructure (up from 16%), and 11% Defense & Aerospace (down slightly from 12%).

Subcontract assembly firm Foxconn Technology Group was TriQuint’s sole customer accounting for more than 10% of total revenue, rising from 35% last quarter to 44%.

Total full-year revenue was $892.9m, up 8% on 2012 due to an increase in Mobile Devices and Defense & Aerospace revenue. Defense & Aerospace revenue rose 50%, with a record number of new products released (among the 190 that TriQuint launched in total during 2013). In Mobile Device, for the second-half in particular, revenue was a record $371m, up 66% on first-half 2013. Premium discrete filter revenue grew 52% to over $90m for full-year 2013. Excluding about $15.5m from the now discontinued non-strategic foundry business, Networks revenue rose just 5% in 2013, but base-station revenue in particular grew 50% (supporting the TD-LTE build-out in China).

“We’ve been investing in higher-value products including discrete filters, primarily BAW [bulk acoustic wave] and TC-SAW [temperature-compensated surface acoustic wave], MMPA [multi-mode power amplifier] and integrated PA duplexer modules,” says president & CEO Ralph Quinsey. “These products are designed to support the growing demand for LTE devices. At the same time we’ve been reducing our revenue from lower-margin products including commodity power amplifiers and transmit modules. Sales of our high-volume products grew 36% in 2013 due to growing demand for premium filters and high-performance broadband amplifiers - growing much faster than the overall market,” he adds. “Offsetting this growth, revenue from lower-margin amplifiers and transmit modules declined 25% in 2013, which represents a major product transition for the company that has lifted gross profit much faster than revenue in 2013, a trend that we expect will continue in 2014.”

“In Q4, responding to changes in industry demand, we reduced our overall GaAs capacity [the main cause of a non-recurring charge of $27.1m: $3.9m of cash and $23.2m for asset impairment], resulting in lower cost and better alignment to market requirements,” continues Quinsey. “The success of broadband amplifiers which replaced multiple discrete power amplifiers, combined with the growth of SOI switches, has contributed to GaAs capacity concerns.”

“By refocusing the company at higher-value products, reducing unused capacity and tightly managing our overall spending, we saw significantly improved financial results and a seasonally strong second half of 2013 compared to the first half,” explains Quinsey.

On a non-GAAP basis, gross margin was 37.2% in Q4, down from 38% last quarter but up from 31.7% a year ago (and above the expected 35-36%) due to the higher revenue, cost control and improved mix. Full-year gross margin was 33.2%, up from 30.7% in 2012.

Net income was $26.4m ($0.16 per diluted share, above the $0.12-0.14 guidance), up slightly from $26.3m ($0.16 per diluted share) last quarter and $6.2m ($0.04 per diluted share) a year ago. Net income for full-year 2013 was $14.5m ($0.09 per diluted share), compared with a loss of $2.2m ($0.01 per diluted share) a year ago. Capital expenditure has dropped from $20.8m last quarter (which was primarily for premium filter products) to $9m in Q4.

During the fourth quarter, total cash and investments rose by $52.1m to $79m, and TriQuint closed the year with no debt. The board of directors has increased the firm’s authorization to repurchase its stock from the existing balance of $24m to $75m.

For first-quarter 2014, TriQuint expects revenue to fall to $170-180m, due to seasonality and lower demand from a major customer in Mobile Devices that is undergoing short-term inventory corrections. “We expect stronger-than-seasonal demand for most other major customers in Q1, including Samsung, Huawei and ZTE, driven by ramping future demand in the roll-out of TD-LTE infrastructure in China [with Chinese carriers estimated to roll out over 400,000 4G base-stations by the end of 2014],” says Quinsey. “TriQuint has strong relationships with equipment suppliers supporting these LTE deployments, including Huawei, ZTE, Alcatel-Lucent, Ericsson and others. We are forecasting sustained demand over the next several quarters to support this infrastructure build-up.”

However, due to the lower revenue and utilization, in Q1 gross margin is expected to fall to 28-30%. Net loss per share is expected to be $0.11-0.13. Nevertheless, excluding any share repurchases, cash should still grow by $70m to about $150m.

For full-year 2014 TriQuint expects revenue growth in the mid single digits as strong growth in high-value premium filters (both BAW and TC-SAW) – with over $200m from discrete filters, driving Mobile Devices revenue growth of about 20% – is partially offset by significant reductions in revenue from lower-margin amplifiers (commodity mobile) and non-strategic foundry revenue (which is not expected to be material going forward). Revenue seasonality should be roughly similar to 2013, with about 40% of revenue coming in the first half of the year.

Excluding Q1, TriQuint expects gross margins to average 40% for the subsequent three quarters of 2014. For full-year 2014, gross margin should grow about 500 basis points from 2013 due to increasing handset filter content, strong base-station demand and cost reductions in operations.

To further optimize the firm’s GaAs footprint, TriQuint is transitioning its Texas GaAs line (which supports mainly high-performance products for the infrastructure and defense markets) from 4-inch to 6-inch in order to improve yield, throughput and cost. “We completed our first 6-inch wafers for GaAs enhanced on this hybrid line in 2013 and we expect 6-inch revenue in this line to begin in Q1, with customer transitions continuing into the 2016 timeframe,” says Quinsey.

Capital expenditure may decline from $87m in 2013 to $70m for 2014. “In 2014, I see continued product mix improvement with solid gross margin gains complemented by tightly managed overall spend,” says Quinsey. “Market trends such as smartphone growth, expanding 4G infrastructure, and the dramatic increase in data traffic have aligned customer needs with our high-value solutions. As a result, we anticipate significant year-over-year improvement in profitability, with favorable same-quarter comparisons to each period throughout the year.” The firm believes earnings per share will meet or beat the current analyst consensus of $0.49.

TriQuint expects premium filter markets to reach about $2bn in 2016, doubling over 2013. “In preparation, we have invested in filter capacity, doubled our filter R&D team, and accelerated the development of filter-based products, both integrated and discrete,” notes Quinsey. “Our BAW filter are currently being designed in, with ramping forecast from multiple customers including Samsung, Huawei, ZTE, LGE and Sony,” he adds.

“Additionally, we are seeing good design interaction in Asia for our MMPA family. This traction is with handset customers directly and with chipset partners on reference design platforms,” says Quinsey. “While some customers already embrace highly integrated solution, much of the market - including most of China - is still in the early stages of transition from discrete to more integrated solutions,” he adds.

“Our strategy is to use our strength in premium discrete filters and broadband MMPAs to leverage future integrated opportunities [capitalizing on the move towards LTE in mobile devices],” summarizes Quinsey. “Recognizing we had excess GaAs capacity, we have already taken steps to reduce our cost structure and plan on taking further actions to enhance profit, while maintaining our ability to design world-class GaAs power amplifiers.”

See related items:

TriQuint’s Q3 revenue grows 32% on Q2, driven by demand for LTE products and product ramp

TriQuint’s revenue returns to year-on-year growth in Q2

TriQuint’s revenue dives 21% in Q1 as Mobile Device revenue falls 30%

TriQuint’s sequential growth of 16% drives greater-than-expected revenue and income in Q4

Tags: TriQuint

Visit: www.triquint.com