For its fiscal fourth-quarter 2014 (to 3 October), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported revenue of $718.2m, up 22% on $587m last quarter and 51% on $477m a year ago. This exceeds the original guidance (given on 17 July) of $680m (up 16% sequentially and 43% year-on-year).
Fiscal Q4/2013 Q1/2014 Q2/2014 Q3/2014 Q4/2014 Revenue $477m $505.2m $481m $587m $718.2m
Of total revenue, power amplifiers represented 36% (down from 41% last quarter), integrated mobile systems 39% (up from 33%) and broad markets 25% (compared with 26%).
Growth was healthy across all product categories, but the strongest was integrated mobile systems (which includes Skyworks’ integrated systems portfolio as well as mobile analog products such as power management, Wi-Fi and GPS). The broad markets product lines (which serve the Connected Home, networking, media, automotive and medical markets) have grown by more than 30% over the course of fiscal 2014, significantly outpacing the broader semiconductor industry, says the firm.
During fiscal Q4, Skyworks began volume production of custom 4G/LTE modules leveraging proprietary TC-SAW filter technology; delivered switching and connectivity modules for Xiaomis Mi3 platform; ramped analog control ICs at GoPro for action video cameras; and supported Rockwell Collins with custom ASICs for GPS applications in avionics platforms. Design wins also included: multiple diversity receive modules at a Tier 1 LTE smartphone maker; providing a suite of devices for Netgear’s latest Nighthawk X6 tri-band WiFi 802.11ac router; enabling ZigBee-based thermostat and lighting platforms at GE and iControl; and capturing short-range communications sockets at General Motors for vehicle-to-vehicle collision avoidance systems. Skyworks also introduced low-power Bluetooth solutions for Tile Inc’s item location applications, and it has expanded wearable designs (including connectivity modules for three new Smartwatch programs).
“Skyworks is aggressively executing on our strategy to deliver sustainable, above-market growth with diversified analog semiconductor returns,” says chairman & CEO David J. Aldrich. “Our advanced solutions are at the heart of mobile connectivity and the Internet of Things, and are empowering exciting new applications spanning mobile payments, to streaming music services, to on-demand media,” he adds. “Given our accelerating design-win momentum and deep product pipeline, we have never been better positioned to grow demonstrably faster than our addressable markets and, in turn, to deliver best-in-class financial returns,” believes Aldrich.
On a non-GAAP basis, gross margin has risen from 44.4% a year ago and 45.4% last quarter to45.9% (at the upper end of the 45.5-46% guidance range). This is despite operating expenses rising further, from $87.5m last quarter to $93.9m, with R&D expenses up from $53.8m to $58.2m and selling, general & administrative (SG&A) expenses up from $33.7 to $35.8m.
Operating income has risen further, from $130.3m (operating margin of 27.3%) a year ago and $179.1m (operating margin of 30.5%) last quarter to $235.7m (operating margin of 32.8%).
Likewise, net income has grown from $121.2m ($0.64 per diluted share) a year ago and $160.8m ($0.83 per diluted share) last quarter to $216.1m ($1.12 of per diluted share, above both the original guidance of $1.00 and the revised guidance, given on 14 October, of $1.08, due in the latter case to $0.01 from better-than-expected operating results plus $0.03 from a fiscal year-end tax benefit).
Cash flow generated from operations has risen from $166m a year ago and $199m last quarter to $201m. Capital expenditure has more than doubled, from $38m a year ago through $68m last quarter to $83m.
During the quarter, cash and cash equivalents fell from $893.3m to $806m. However, this was after Skyworks repurchased 875,000 shares of its common stock. Also, on 7 July the firm agreed to pay $148.5m to acquire a 66% controlling stake in Panasonic’s Filter division (with provisions to acquire the remaining 34% about 2 years from now). “This venture makes Skyworks the performance leader in TC SAW (temperature-compensated surface acoustic wave) filters, with shipments approaching 100 million units per quarter, broadening our technology portfolio, enriching our systems capabilities and enhancing our financial returns,” comments chief financial officer Donald W. Palette.
Skyworks’ board of directors has also declared a quarterly cash dividend of $0.13 per share (an 18% increase on last quarter’s dividend), payable on 11 December.
Through its dividend plan and ongoing share repurchasing, Skyworks returned about $200m to shareholders during fiscal 2014, representing 35% of free cash flow. “We continue to view in allocation of roughly 40% of free cash flow as an appropriate balance between internal investment for growth initiatives and shareholder returns,” says Palette.
For full-year fiscal 2014, revenue was a record $2.29bn, up 28% on fiscal 2013’s $1.79bn. “Fiscal 2014 was a record year for Skyworks as we exceeded key metrics in each and every quarter and crossed the $2bn revenue threshold,” says Palette. Gross margin rose from 43.4% to 45.2%. Operating income grew by over 50%, from $457m to $687m, boosting operating margin from 25.5% to 30%. Net income was $623.2m ($3.24 per diluted share), up from fiscal 2013’s $423.5m ($2.20 per diluted share). Cash flow generated from operations was $773m, up from $508m. Free cash flow rose from $384m to $564m (the second consecutive year with free cash flow yield of nearly 8%).
For fiscal first-quarter 2015, Skyworks expects revenue of $770m (up 7% sequentially and 52% year-on-year), the first quarter with an annualized revenue run rate over $3bn. Gross margin should rise further, to 46.5%, yielding $1.18 of diluted earnings per share. “Based on broad customer demand and crisp operational execution, we are now scaling to more than a $3bn revenue run-rate with annualized non-GAAP earnings per share approaching $5.00,” Palette notes.
“We expect margins to continue to trend positively over the course of fiscal 2015, as we leverage a higher mix of integrated systems, improve volume utilization and realize the benefits of our joint venture with Panasonic,” says Palette. “As a result, of all these positive factors, we now recommend modeling at 52% drop-through of incremental revenue to the gross profit line for the remainder of fiscal 2015 and beyond,” he told analysts at the firm’s quarterly conference call.
