3 August 2016

Skyworks' revenue falls less than expected, despite largest customer's inventory adjustment

For fiscal third-quarter 2016 (to 1 July), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported revenue of $751.7m, slightly exceeding the $750m guidance but down 3% on $775.1m last quarter and 7.2% on $810m a year ago, impacted as expected by a one-time inventory adjustment at a large customer in Asia (driving up Skyworks inventory from $323.9m last quarter to $437.6m). Excluding Skyworks' largest customer, revenue is up 10-12% year-on-year.

Of total revenue, integrated mobile systems (IMS) comprised 55%, broad markets 29%, and power amplifiers (PAs) 16%.

"We delivered above-guidance results in the quarter, driven by increasing global demand for high-speed connectivity coupled with strong operational execution," says president & CEO Liam K. Griffin.

On a non-GAAP basis, gross margin was 50.9%, slightly below the 51% guidance (despite the higher revenue level and broad markets doing better) but up from 50.8% last quarter and 49% a year ago.

Operating expenses were $107.6m (below the expected $108.5m). This was up from $101.3m a year ago but cut from last quarter's $108.6m.

Operating income has fallen further, from $295.4m (operating margin of 36.5%) a year ago and $285m (operating margin of 36.8%) last quarter to $274.7m (operating margin of 36.5%). Likewise, net income has fallen from $262.5m ($1.34 per diluted share) a year ago and $242.3m ($1.25 per diluted share) last quarter to $238.1m ($1.24 per diluted share, although $0.03 better than the $1.21 guidance).

Cash flow from operations was $141m (down further, from $154.5m last quarter and $222m a year ago). Though still down on $108m a year ago, capital expenditure (CapEx) has rebounded from $37m last quarter to $57m, with depreciation of $54.6m. During the quarter, Skyworks returned over $240m of cash to shareholders via dividends and the repurchase of 3 million shares of common stock. Hence, overall, cash and cash equivalents fell from $1177m to $973.7m.

"Our highly integrated solutions are enabling a broad array of applications, ranging from streaming media to e-commerce to cloud-based services," says Griffin. "Specifically, we are capturing performance-driven content gains within the world's premium mobile platforms while expanding our customer and end-market reach across the Internet of Things," he adds.

"We continued to gain broad market traction," notes Griffin. Business highlights during the quarter included:

• supporting Huawei's P9 smartphone platform (incorporating 10 unique devices including SkyOne systems across low, mid and high bands);
• launched advanced carrier aggregation capabilities across a suite of premium and value tier smartphone OEM accounts (including Samsung, Motorola as well as Oppo, Vivo and ZTE);
• ramping SkyBlue technology (enabling enhanced power management and LED flash drivers);
• commencing volume production of proprietary diversity receive solutions;
• expanding the antenna tuning portfolio (enabling higher data rates and smaller footprints);
• securing telematics design wins at Continental for 4G LTE automotive systems;
• capturing digital attenuator and multimode repeater design wins at Audi;
• releasing Bluetooth Low Energy long-range modules for industrial applications;
• enabling connectivity within leading always-listening virtual assistant platforms;
• supporting the world's first head cam with LTE connectivity and 4K streaming video;
• powering enterprise radios for the Google 3.5GHz-band ecosystem; and
• surpassing 2 billion cumulative shipments of filters from the Panasonic joint venture.

"These major wins and others demonstrate our expanding customer and end-market reach across both mobile platforms and the Internet of Things," says Griffin. "Accordingly, we are planning for sustained market outperformance with operating leverage and strong cash flow generation," he adds.

"Based on our broad market traction and new program ramps as well as analog and mixed-signal content gains, we expect a strong second half of 2016 with further operational improvements," says executive VP & chief financial officer Donald W. Palette. For fiscal fourth-quarter 2016, Skyworks expects revenue to be up 10-11% sequentially to $831m. Gross margin should be 51%, up from 50% a year previously (even with a lower revenue base) but roughly flat quarter-to-quarter (despite revenue rising). Both R&D and SG&A expenses should be level sequentially. Diluted earnings per share should rise to $1.43.

"The double-digit revenue growth we expect in Q4, followed by continued growth into our first fiscal quarter, will reduce inventory," says Palette. "We have level loaded our factories and positioned ourselves well to address a series of new filter-rich program ramps with leading customers," he adds. By the March-quarter 2017, Skyworks should see a return to year-on-year growth, adds Griffin.

"Given the confidence in our business model and plans to enhance cash returns to our shareholders, we are separately announcing that our board of directors has authorized an 8% dividend increase and a new $400m stock repurchase program," notes Palette.

See related items:

Skyworks increases quarterly dividend and announces new $400m stock repurchase program

Skyworks' quarterly revenue up slightly year-on-year

Skyworks' quarterly revenue grows by 5% to new record of $926.8m

Skyworks announces new $400m stock repurchase program

Skyworks exceeds quarterly revenue and EPS guidance  

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

Tags: Skyworks

Visit: www.skyworksinc.com