7 November 2016

Skyworks' quarterly revenue grows a more-than-expected 11% to a record $835.4m

For full-year fiscal 2016 (ending 30 September), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported record revenue of $3.29bn, up 9.4% on fiscal 2015's $3.26bn (or up 11-12%, excluding headwinds at Skyworks' largest customer).

For the fiscal fourth quarter, Skyworks has reported revenue of $835.4m, down 5% on $880.8m a year ago but up 11% on $751.7m last quarter and exceeding the $831m guidance.

Of total Q4 revenue, compared with last quarter, integrated mobile systems (IMS) rose from 55% to 60% and broad markets fell from 29% to 25% (mostly due to infrastructure, since the Internet of Things sector held steady), while the power amplifier (PA) sector was steady at about 16%. "Skyworks is capitalizing on the strength of both Mobile and Internet of Things ecosystems," says president & CEO Liam K. Griffin.

Skyworks had two more-than-10% customers: Foxconn at about 40% and Samsung at about 10%. China comprised 25% of total revenue.

Skyworks lists fiscal Q4 business highlights as:

• leveraging SkyOne across Huawei's Honor 8 global platform;
• powering Google's flagship Pixel 4G LTE smartphones;
• securing multiple 4G LTE design wins with leading Chinese OEMs including Asus, Gionee, HTC, Meizu, Oppo, Xiaomi and ZTE;
• commencing volume production of diversity receive and antenna tuner solutions;
• supporting Amazon's Echo and Tap virtual assistant devices;
• enabling Netgear's Orbi router with connectivity and analog control ICs;
• launching linear power amplifiers in support of small-cell ramps in China;
• delivering integrated 4G LTE modules for Jaguar and Land Rover automobiles;
• ramping vehicle-to-vehicle communication modules for Alps;
• capturing ZigBee content in Trilliant's smart-grid communication systems;
• designed into a premier medical imaging OEM for MRI applications; and
• integrating GPS, connectivity and switching solutions for GoPro drones.

"We are in the midst of a dramatic sea change in the usage case for wireless technologies and the way they are transforming how we live, work and play," says Griffin. "As a virtual hub for e-commerce, enterprise to the cloud, social media, gaming and entertainment, mobile devices are rapidly evolving to address the massive demand for data and speed across an increasingly crowded spectrum. Skyworks is resolving this daunting complexity with customized system-level solutions to ultimately improve the user experience with higher levels of efficiency, enhanced streaming capabilities and expanded network coverage. As a result, we are well positioned to continue delivering above-market growth, profitability and shareholder value," he adds.

On a non-GAAP basis, quarterly gross margin has risen further, from 50% a year ago and 50.9% last quarter to 51%. Full-year gross margin has risen from 48.2% for fiscal 2015 to 51% for fiscal 2016, demonstrating strong operational execution. Operating expenses were $107.5m (12.9% of revenue), level with last quarter.

Operating income was $318.4m (operating margin of 38.1%), down from $335.2m a year ago but up from $274.7m (36.5% margin) last quarter. Full-year operating income has risen from $1.17bn (36% margin) for fiscal 2015 to $1.24bn (37.8% margin) for fiscal 2016.

Although down from $296.1m ($1.52 diluted earnings per share) a year ago, net income has rebounded from $238.1m ($1.24 diluted EPS) last quarter to $277.6m ($1.47 diluted EPS, better than the $1.43 guidance). Full-year net income has risen from $1.03bn ($5.27 diluted EPS) for fiscal 2015 to $1.07bn ($5.57 diluted EPS) for fiscal 2016.

Cash flow generated from operations has rebounded from $141m last quarter to a record $455m, driven by high profitability and significant improvements in working capital on a sequential basis. In particular, days sales outstanding (DSO) declined from 69 days to 45 days, and days of inventory was cut from 108 days to 94 days. This contributed to full-year operating cash flow rising from $1bn for fiscal 2015 to a record $1.1bn for fiscal 2016.

Capital expenditure has fallen further, from $150.8m a year ago and $57m last quarter to just $15.7m, making $189m for full-year fiscal 2016. The decline reflects the lower investment level now required for the firm's temperature-compensated surface acoustic wave (TC-SAW) filter production.

This allowed the firm to more than double the amount of cash returned to shareholders from $360m (64% of free cash flow in fiscal 2015) to $727m (81% of free cash flow) in fiscal 2016 in the form of more than $200m in dividends (up 63% year-on-year) and repurchasing 8 million shares (including 3 million shares in fiscal Q4) at an average price of just under $66 per share.

Skyworks' board of directors has since declared a cash dividend of $0.28 per share of common stock, payable on 8 December to stockholders of record at the close of business on 17 November.

"Entering fiscal year 2017, we are leveraging our scale, customer partnerships and differentiated system solutions to capture increasing content per platform across mobile connectivity and Internet of Things applications," says senior VP & chief financial officer Kris Sennesael. Accordingly, for fiscal first-quarter 2017 (to end-December 2016), Skyworks expects revenue to grow further, by 7-9% sequentially. "Our largest customer is seasonally strong… going into a seasonal ramp," notes Griffin. "The top-three tier-1 accounts are also ramping aggressively into Q1." At the mid-point of $902m, gross margin should in the low 51% range. Operating expenses are expected to be $112m (up on $107.4m in fiscal Q4, but falling from 12.9% to 12.4% of revenue). Diluted EPS should rise to $1.58. Skyworks aims to reduce days of inventory further, from 94 days to 85 days.

"We want to continue to further drive operational efficiencies," says Sennesael. "We believe that we can improve the gross margins with another 100 basis points exiting fiscal year 2017.

For full-year fiscal 2017, Skyworks targets CapEx of $200-220m (up from $189m for fiscal 2016). A couple of years ago Skyworks' annual CapEx was $400-430m to outfit and install its TC-SAW facility, which is a 3 billion unit per year producer of high-performance filters. "With that behind us, the run-rate CapEx is sustainable," says Griffin. "It's enough for us. We can do a great job with that capital and monetize our assets and filters as well."

See related items:

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

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

Skyworks' quarterly revenue up slightly year-on-year

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Skyworks announces new $400m stock repurchase program

Skyworks exceeds quarterly revenue and EPS guidance  

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