Skyworks reports record quarterly revenue of $1.008bn, and ninth consecutive record year

For full-year fiscal 2018 (to 28 September), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported a ninth consecutive year of record revenue, at $3.868bn, up 6% on fiscal 2017’s $3.651bn.

For fiscal fourth-quarter 2018, revenue was a record $1.008bn, up 13% on $894.3m last quarter and 2.4% on $984.6m a year ago (and exceeding the guidance of $1bn), despite a “choppy end-market environment”. However, this includes six weeks of revenue (about $6m) from fabless semiconductor supplier Avnera Corp of Beaverton, OR, USA ─ a developer of analog system on chips (ASoCs) ─ acquired on 17 August.

By market sector, Mobile (Integrated Mobile Systems and Power Amplifiers) comprised 72% of revenue (up from 70% last quarter) and Broad Markets 28% (down from 30%, but still growing at a double-digit rate on both a year-on-year basis and a full-year basis, reaching an annualized run rate of $1.1bn).

Strong design-win traction during the quarter across the mobile ecosystem and the Internet of Things (IoT) included the following:

powering Samsung’s Galaxy flagship smartphones;
validating world-class performance of the Sky5 suite for 5G New Radio architectures;
introducing 5G wideband, 16-state antenna aperture tuners;
securing wireless networking sockets at Cisco for high-density enterprise applications.
capturing LTE Cat M content within u-blox’s machine-to-machine modules;
deploying massive MIMO and small-cell solutions for global infrastructure;
supporting DOCSIS 3.1 cable TV modems/gateways with 2.4GHz and 5GHz front-ends;
leveraging smart audio solutions across Microsoft, Nintendo and Sony gaming consoles;
ramping connectivity and telematics engines with BMW, Geely, Hyundai, Tesla and Toyota; and
launching millimeter-wave RF technology at a major avionics supplier.

“We are capturing large-scale design wins across all key segments, spanning industrial, home automation, enterprise, automotive and defense as well as numerous flagship mobile platforms,” says president & CEO Liam K. Griffin.

On a non-GAAP basis, gross margin was 51.2%, up from 50.9% last quarter and 51% a year ago. Full-year gross margin has risen from 50.8% for 2017 to 51.1% for 2018.

Despite rising further from $123m a year ago and $130m last quarter to $136m, operating expenses (OpEx) as a proportion of revenue have been cut from 14.5% last quarter to 13.5%.

Operating income was $379.6m (operating margin of 37.6% of revenue), up only slightly on $379.2m a year ago but up from $324.8m last quarter. Full-year operating income has risen from $1379.1m for 2017 to $1449.5m (37.5% operating margin) for 2018.

Net income was $349.7m ($1.94 per diluted share, exceeding the $1.91 guidance), up from $299.9m ($1.64 per diluted share) last quarter and $338.8m ($1.82 per diluted share) a year ago. Full-year net income has risen from $1.205bn ($6.45 per diluted share) for 2017 to $1323.4m ($7.22 per diluted share) for 2018 (a ninth consecutive year of record EPS).

“Skyworks delivered a record fourth quarter and fiscal 2018, marking our ninth consecutive year of revenue and non-GAAP earnings growth ─ demonstrably outperforming the broader semiconductor industry,” says Griffin.

Cash flow from operations was $209m (making $1.3bn in full-year 2018). Capital expenditure (CapEx) was $112m, taking full-year CapEx to slightly over $400m (just over 10% of revenue). During the quarter, Skyworks paid $68m in dividends and spent $235m repurchasing stock (making $1.003bn in cash returned to shareholders in full-year fiscal 2018 ─ $243m of dividend payments and $760m in share buybacks ─ representing 55% growth in cash returns compared with fiscal 2017, and comprising well over 100% of the free cash flow). During the quarter, cash and investments fell from $1.649bn to $1.050m. The firm has no debt.

Following the end of the quarter, Skyworks’ board of directors has declared a cash dividend of $0.38 per share, payable on 18 December, to stockholders of record on 27 November.

For fiscal first-quarter 2019 (to end-December 2018), Skyworks expects revenue of $1-1.02bn (including $15-16m from Avnera, so flattish quarter-to-quarter). This includes continued strength in broad markets (continuing to see strong double-digit year-on-year growth), coupled with the launch of a diverse set of new high-performance mobile solutions, offsetting unit declines in premium smartphones and overall China softness.

Skyworks hence expects gross margin to also be flat, at 51.2% (“As we look into the back half of fiscal 2019, we will continue to make further improvements on gross margin toward our target of 53%,” says senior VP & chief financial officer Kris Sennesael). Operating expenses should rise to $140m due to incurring the first full quarter of OpEx from acquisition Avnera. Diluted earnings per share should fall only slightly to $1.91. Sennesael expects CapEx to remain at or about the same percentage of revenue as it was in fiscal 2018.

“Despite the near-term industry weakness, we have a clear path to deliver our tenth consecutive year of revenue and non-GAAP earnings growth in fiscal 2019,” says Sennesael. “This outlook is driven by sustained double-digit growth across our broad markets business, a powerful and expanding design-win pipeline encompassing a wide range of customers and applications, world-class operational execution and scale, and finally our unwavering commitment to creating shareholder value,” he adds.

“Our conviction is based on a number of strategic catalysts. First, we’re seeing a significant uptick in demand for our base-station and small-cell massive MIMO solutions, as carriers around the world require LTE Advanced technologies to achieve multi-gigabit speeds, driving network efficiency, higher capacity and greater coverage. Skyworks’ vast experience is at the forefront of these initial deployments, leveraging our complete portfolio, including amplifiers, circulators and switches as well as system-level highly integrated engines. We are well-positioned to support the rapid deployments of the world's leading infrastructure OEMs,” Griffin says.

“Second, on the other hand of the broadband connection, our smartphone opportunity is poised for a step up in architectural complexity, which in turn drives a dramatic increase in addressable content for us. This expansion is driven by entirely new bands, complementing existing systems, reformed frequencies and expanded use of multi-channel carrier aggregation.”

“Skyworks already offers the industry's broadest portfolio for 4G LTE, proven and selected by the most discerning market-leading customers. We’ve demonstrated technology leadership across a vast set of critical product categories, as our market-tested solutions resolve increasingly complex architectures, preparing us for the performance gains demand in 5G,” Griffin continues.

“As 5G rapidly approaches, we are pushing the performance envelope with our comprehensive Sky5 platform and positioning Skyworks to extend our reach across a wide array of high-growth applications. Skyworks is uniquely positioned to capitalize on the rapidly approaching 5G upgrade cycle and build upon the strong foundation we’ve established over the past decade,” he believes.

“Our solutions uniquely cover the spectrum from low-to-high and ultrahigh bands, leveraging SkyOne and DRx modules to optimize transmit and receive performance. Beyond cellular, we augment this portfolio with equally innovative WiFi, power management, precision GPS and tuning solutions.”

“Further, we see compelling TAM [total addressable market] growth driven by new product functionality, including 4x4 MIMO, antenna multiplexing and new millimeter-wave technologies. At the same time, the broader IoT category continues to accelerate. With expanded 5G network capacity on the horizon, we expect 75 billion devices will be connected by 2025. That’s three times today’s installed base,” Griffin notes.

“Leveraging our leadership across all major wireless standards, including 802.11ac and ax, LoRa, Bluetooth, ZigBee, Z-Wave, as well as 4G LTE and 5G, we are well positioned to capture a disproportionate share of this growth, particularly with the advent of autonomous vehicles, virtual reality, industrial IoT and frictionless commerce,” he believes.

See related items:

Skyworks closes acquisition of analog-system-on chip-designer Avnera

Skyworks reports above-expected quarterly revenue of $894.3m, despite $25-30m hit from ZTE ban

Skyworks’ March-quarter revenue grows a more-than-expected 7% year-on-year

Skyworks’ quarterly revenue up 7% sequentially to a record $1.052bn

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