For third-quarter 2014, RF front-end component maker and foundry services provider TriQuint Semiconductor Inc of Hillsboro, OR, USA has reported record revenue of $272.1m, up 18% on $230.8m last quarter and up 8% on $250.8m a year ago. This was also well above the guidance of $255-265m (up 4% year-on-year).
Fiscal Q3/2013 Q4/2013 Q1/2014 Q2/2014 Q3/2014
Revenue $250.8m $267.7m $177.6m $230.8m $272.1m
End-market revenue split was 68% Mobile Devices, 22% Network Infrastructure, and 10% Defense & Aerospace (compared with 63% Mobile Devices, 26% Network Infrastructure, and 11% Defense & Aerospace last quarter). Subcontract assembly firm Foxconn Technology Group accounted for 30% of total revenue (up from 25% last quarter).
Defense & Aerospace revenue was $28.4m, up 7% on $26.4m last quarter. “Similar to last quarter, we launched many new gallium nitride (GaN)-based products with continued strong customer interests,” says president & CEO Ralph Quinsey.
Networks Infrastructure revenue was $58.6m, down slightly on $60m last quarter but still up 45% on $40.4m a year ago. Of Networks Infrastructure revenue, the base-station market accounted for 44%, or $25.6m, up 53% on $16.7m a year ago, driven by the worldwide 4G LTE build-out. The transport market accounted for 43%, or $25.4m, up 58% on $16.1m a year ago. The transport market is expected to remain strong as TriQuint continues to accumulate key wins in next-generation designs.
Collectively, revenue for Infrastructure and Defense Products (IDP) was $86.9m, flat sequentially but up 24% on a year ago. Growth in IDP came from solid execution coupled with strong demand for base-station products supporting the worldwide expansion of LTE (primarily in China). In IDP, 130 new products have been launched so far this year.
Mobile Devices revenue was $185.2m, back above the $180.8m a year ago (after falling as low as $103.5m in Q1/2014) and up 28% on $144.4m last quarter, due to a large product ramp at a major customer and continued strong demand (driven by filters) from a broad set of customers (primarily in China). After rapid revenue growth, there are now over 50 unique customers for discrete filter products.
Of Mobile Devices revenue, 4G/LTE was $132m (up 49% on $88.4m a year ago, rising from 49% of Mobile Devices revenue to 71% now), while 3G/2G was $36.8m (down 3 46% on $68.6m a year ago, falling from 38% of Mobile Devices revenue to 20% now) and WLAN was $16.5m (down 30% on $23.8m a year ago, falling from 19% of Mobile Devices revenue to 13% now).
“Our financial results in the third quarter were well above expectations due to strong demand and an improved product mix driven by a strategic focus on delivering high-performance solutions in each of our markets,” says Quinsey. “The success we are seeing today is due to years of investment in bulk acoustic wave/surface acoustic wave [BAW/SAW] and high-performance GaAs/GaN technologies,” he adds.
On a non-GAAP basis, gross margin was 46.6%, up sharply from 41.7% last quarter and 38% a year ago (and above the guidance of 43-45%). “Active management of our portfolio highlighted by strong growth in our premium filter business and reductions in lower-margin revenue contributed to the dramatic improvement,” says chief financial officer Steve Buhaly. “Efficient factory execution and the cost reductions taken earlier this year also contributed.”
Operating expenses have risen further, from $68.6m a year ago and $72m last quarter to $74.7m (above the expected $70m). TriQuint hired additional premium filter designers and incurred higher costs for variable compensation.
Net income was a record $51.4m ($0.28 per per diluted share, well above the guidance of $0.23-0.25), up from $23.6m ($0.13 per diluted share) last quarter and $26.3m ($0.16 per diluted share) a year ago.
Cash flow from operations of $47m plus cash proceeds from employee stock option exercises of $28m was partially offset by capital expenditure being increased from $21.3m last quarter to $54.2m (almost entirely for premium filter capacity). During the quarter, total cash and investments hence rose by $24.4m from $223.5m to $247.9m.
“We have made considerable progress transitioning away from low-margin and non-strategic foundry revenue while serving a growing demand for our higher-value products,” says Quinsey. “Our improved financial performance is a result of many years of fundamental technology investment and product development in growth markets for premium filters, advanced GaAs/GaN products, and highly integrated solutions.” TriQuint achieved another record with 55 new products released in Q3. “These investments have positioned us for sustainable and profitable growth supporting long-term growth markets such as the build-out of the worldwide communications infrastructure, continued smartphone adoption, and the deployment of advanced electronics with critical defense applications,” he adds.
“We continue to see robust demand and are raising our outlook for the fourth quarter,” says Quinsey. “With strong demand in design-win momentum in place, I anticipate Q4 will also be a record quarter.”
For fourth-quarter 2014, TriQuint expects revenue of $330-340m, up 23% sequentially, with Network business relatively flat but growth in Defense & Aerospace and Mobile Devices. Gross margin should be 46-48%, driven by driven by product mix, better yields, and lower factory costs. Operating expenses are expected to be about $75m. Capital expenditure should rise further to $75-100m as the firm aligns its factories to keep pace with market demand by doubling premium filter capacity across both BAW and TC-SAW. “These incremental investments will directly address an exciting set of market opportunities where we see intense customer interest,” says Buhaly. Net income per diluted share should be $0.40-0.45.
TriQuint is fully booked to the midpoint of Q4 revenue guidance, which would yield full-year 2014 revenue up about 14% on 2013’s $892.9m (specifically, in Mobile Devices, TriQuint now expects discrete filter revenue to more than triple on 2013 and MMPA [multi-mode, multi-band power amplifier] revenue to grow by about 30%). “Growth would be 28%, disregarding the $100m headwind caused by our exit from low-margin and non-strategic foundry business,” notes Quinsey. “Additionally our strategic investments, combined with solid operational excellence, is expected to push gross margin performance through a 14-year high in 2014, with more margin upside and better-than-market growth anticipated in 2015.”
TriQuint expects to maintain annualized base-station revenue of $100m through 2015 and likely well into 2016 as carriers continue to build out their 4G LTE networks worldwide (with an estimated 1 billion subscribers, including India, eager to transition to LTE in broadband smartphones).
“Regarding our pending merger with RF Micro Devices to form Qorvo, we received overwhelming shareholder support [on 5 September] and expect to close once we complete final regulatory approvals prior to the end of the year,” notes Quinsey. “Our time since the February announcement has been used constructively with significant progress being made by integration teams to ensure we maintain momentum into a successful launch of the company while creating a platform for strong ongoing business results as a combined entity.”
