27 July 2015

Skyworks' quarterly revenue rises a more-than-expected 38% year-on-year to $810m

For its fiscal third-quarter 2015 (ended 3 July), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported revenue of $810m, up 6.3% on $762.1m last quarter and up 38% on $587m a year ago (and exceeding guidance of $800m).

Fiscal	Q3/2014	Q4/2014	Q1/2015	Q2/2015	Q3/2015
Revenue	$587m	$718.2m	$805.5m	$762.1m	$810m

Compared with last quarter, power amplifiers have fallen from 31% to 24% of revenue, while broad markets have risen slightly again from 22% to 23%, and integrated mobile systems have risen from 47% to 53%. Integrated mobile systems was again the fastest-growing category, up 120% year-on-year, highlighting the shift to higher-margin system solutions (ongoing across the firm's customer base). The broad market products category again grew over 20% during the quarter (well ahead of the diversified analog market), fueled by the spread of connectivity through a broad range of end-markets.

"As the world becomes more interconnected, we are capitalizing on powerful secular growth trends, including the rising adoption of streaming media services, the proliferation of connectivity in emerging markets, and the Internet of Things — all of which are driving growth well in excess of the broader semiconductor market," says chairman & CEO David J. Aldrich.

"The common thread across all of these market trends is the need for seamless access to content and the ability to transmit large amounts of data to the cloud, efficiently, reliability, anytime and anywhere," notes Aldrich. "Technology leaders like Google, like Facebook, Amazon, Netflix and others all recognize this and are prioritizing mobility with their corporate strategies… These market dynamics translate into much more complex architectures and higher-performance specifications, providing an opportunity for Skyworks to offer differentiated solutions with high barriers to entry. We accomplished this by leveraging our combination of core technology expertise, integration capabilities and systems leadership," he adds.

"Our solutions have become mission critical within the overall value chain, facilitating deeper strategic relationships with our customers, a more defensible business model with enhanced financial returns," continues Aldrich.  

On a non-GAAP basis, gross margin has risen further, from 45.4% a year ago and 46.7% last quarter to 49% (exceeding guidance of 48%), driven by gains from accretive new product launches, enhancements in the filter business, and improved operational efficiencies.

Operating expenses have risen again, from $97m last quarter to $101.3m (higher than the expected $99.5m), driven by research and development (R&D) expenses rising from $63m to $65.1m and selling, general and administrative (SG&A) expenses rising from $34m to $36.2m.

Despite this, operating income has risen further, from $179.1m a year ago (operating margin of 30.5%) and $258.9m last quarter (margin of 34%) to $295.4m (margin of 36.5%). Likewise, net income has risen again, from $160.8m a year ago ($0.83 of diluted earnings per share) and $224.6m last quarter ($1.15 per diluted share) to $262.5m ($1.34 per diluted share, $0.06 better than the guidance of $1.28 per diluted share).

Cash flow generated from operations has rebounded from $155m last quarter to $222m. After doubling last quarter, capital expenditure rose from $84m to $108m. Despite distributing $72m to shareholders through dividend and stock repurchase activity, cash and cash equivalents rose during the quarter from just over $1bn to over $1.1bn (with no debt).

As announced on 18 June, Skyworks' board of directors declared a cash dividend of $0.26 per share of common stock, payable on 27 August to stockholders of record at the close of business on 6 August (doubling the quarterly dividend from $0.13 per share).

"Looking ahead, we see tremendous opportunity to leverage our capabilities across a broadening set of markets and applications," says Aldrich. 

Design wins in fiscal Q3/2015 highlight success in capturing new high-value system-level opportunities. Recent broad market wins include ZigBee analog front-end solutions within Home Depot's smart lighting platform; multiple analog designs with its extended automotive telematics line-up, supporting Subaru's 2016 models (complementing prior telematics wins at Ford and at Audi); and a customized system-in-a-package including processor and all supporting analog content across Google's refreshed smart-home portfolio. Skyworks has also won analog ICs within Gemalto's machine-to-machine modules (supporting industrial and transportation verticals) and secured over $14 of new content in a femtocell design alongside a leading system-on-chip (SoC) partner.

In the mobile sector, Skyworks delivered a complete system portfolio (comprising a suite of six devices, including a transmit chain, an antenna tuning and switching functions) to support Huawei's Honor smartphone platform. The firm also expanded participation in Xiaomi's smartphone portfolio (adding antenna switch and connectivity modules for LTE models targeting India). In addition, it ramped a carrier-aggregation-enabled version of the SkyOne Mini, along with diversity modules in ZTE's quad-core Star-II LTE mobile platform. Skyworks also enabled Meizu's 4G LTE smartphone portfolio with SkyLiTE solutions supporting Mediatek's latest-generation octa-core chipset.

"These design wins illustrate the diverse pipeline of rich content opportunities that we are servicing today," comments Aldrich. "They highlight our competitive edge in applications that require complex systems capabilities," he adds.  "We are successfully leveraging our systems portfolio to strengthen our competitive position," says executive VP & chief financial officer Donald W. Palette.

For fiscal fourth-quarter 2015, Skyworks expects revenue of $875m (up 22% year-on-year). Gross margin should be about 50% (versus 45.9% a year previously), driven by the continued adoption of integrated solutions and precision analog products, integration efficiencies and ongoing operational initiatives. Operating expenses are expected to rise again, to $104-105m, driven primarily by incremental investments in engineering and development teams (expanding the firm's footprint within new verticals and the serviceable market opportunity, as well as further enhancing integration capabilities). Operating margin is expected to rise to more than 38%. From this new baseline of profitability, diluted earnings per share should grow to $1.51. 

"We continue to recommend modeling 55% incremental gross margin from the new Q4 baseline, providing additional runway for margin improvement ahead," notes Palette.

"We maintain a high level of confidence in our growth trajectory through 2016 and beyond," he adds. "Having just guided over $6 in earnings per share on an annualized basis, we continue to accelerate our progress towards our $7 EPS target."

See related items:

Skyworks doubles quarterly dividend

Skyworks' quarterly revenue rises by more-than-expected 58% year-on-year to $762m

Skyworks exceeds quarterly revenue, margin and earnings guidance

Skyworks' quarterly revenue grows 22% to record $718m

Skyworks exceeds raised quarterly earnings and revenue guidance, up 35% year-on-year to $587m

Tags: Skyworks

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