8 February 2021
Skyworks’ quarterly revenue grows 58% to record $1.51bn
For fiscal first-quarter 2021 (to 1 January), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported record revenue of $1510m (more than $455m above the midpoint of the $1040-1070m guidance). This is up 58% (rather than the expected 10%) on $956.8m last quarter and up 69% (rather than the expected 18%) on $896.1m a year ago.
Revenue from Skyworks’ largest customer (which has just launched its first 5G phones) was about 70% of total revenue (up from the low-60s a year before). However, “All our other customers, all our other segments, every region [including China] was up double digits sequentially and strong double digits on a year-over-year basis,” notes chief financial officer Kris Sennesael. Growth was driven by increasing adoption of Mobile solutions with all smartphone OEMs along with record Broad Market revenue and customer reach.
“Skyworks started the new fiscal year with record results, clearly demonstrating the breadth and depth of our business model, from tier-1 Mobile to thousands of Broad Market customers,” says president & CEO Liam Griffin.
For the Mobile business sector (Integrated Mobile Systems and Power Amplifiers), revenue grew 80% both sequentially and year-on-year, driven largely by widespread content increases as 5G phones are ramping with all major smartphone brands worldwide.
For the Broad Markets business sector, revenue grew to $326m, up 10.5% on last quarter’s record $295m and up 35% year-on-year, benefiting from a diverse set of use cases supporting “work, play, learn from anywhere, and increasing adoption of technologies such as Wi-Fi 6 and Wi-Fi 6E (extended band) along with the continuous momentum in our audio solutions business”.
“We are proud to play an instrumental role in shaping the fast-evolving landscape, collaborating with our partners and customers, leveraging key technologies from TC-SAW [temperature-compensated surface acoustic wave] to high-performance BAW [bulk acoustic wave] filtering, silicon-on-insulator (SOI), gallium arsenide (GaAs), and state-of-the-art packaging technologies,” says Griffin. “Our strong results in Q1 demonstrate our execution around these themes,” he adds.
- In Mobile, Skyworks accelerated the ramp of its Sky5 portfolio, supporting the next wave of 5G launches at South Korea’s Samsung as well as China’s Oppo, Vivo and Xiaomi and other tier-1 players. In Internet of Things (IoT), the firm captured design wins across a diversified array of new customers. Specifically, it partnered with ASUS on the launch of the world’s first Wi-Fi 6E connected home router. Skyworks shipped Wi-Fi 6 solutions for access points at leading network OEMs including Cisco, NETGEAR, TP-Link and Aruba, and launched Wi-Fi 6 engines for CenturyLink’s latest GPON media gateway. The firm also captured new design wins at Google for their latest Fitbit smartwatch. In addition, Skyworks delivered low-latency cognitive audio solutions, powering wireless gaming headsets at multiple tier-1 accounts including Turtle Beach and SteelSeries.
- In Industrial, Skyworks ramped Itron’s multi-standard ISM connectivity solutions for smart cities.
- In Infrastructure, it commenced volume shipments of 5G amplifier and receive modules, supporting multiple European base-station OEMs.
- In Automotive, Skyworks accelerated shipments of advanced connectivity solutions supporting the world’s premier electric vehicle (EV) manufacturer. It leveraged V2X solutions with Volkswagen and Toyota for their enhanced safety systems, and partnered with MediaTek for emerging 5G reference design, specifically targeted at automotive and other IoT applications.
Despite a very tight supply chain environment, non-GAAP gross margin has risen further, from 50.1% a year ago and 50.4% last quarter to 51.1% (exceeding the expected 50.25-50.75%, and above 51% for the first time in eight quarters).
Operating expenses have increased, from $134m a year ago and $147m last quarter to $149m, albeit falling from 15% to 10% of revenue, “demonstrating strong leverage in our operating model, while continuing our strategic investments in support of future growth,” says Sennesael.
Net income has risen further, almost doubling year-on-year from $288.8m ($1.68 per diluted share) a year ago then $312.2m ($1.85 per diluted share) last quarter to $560m (a record $3.36 per diluted share, exceeding the $2.06 guidance by $1.30).
“We established new quarterly records for revenue, operating margin and earnings per share, demonstrating both the power of our financial model and unique opportunity to lead the global transition to more advanced wireless communications,” says Griffin.
Operating cash flow was $485.1m (up from $267m last quarter). Capital expenditure (CapEx) was $119m (down from $146m). Skyworks paid $83m in dividends and spent $196m to repurchase 1.4 million shares of common stock at an average price of about $139 per share. Overall, during the quarter, cash, cash equivalents and marketable securities rose from $980m to $1019.3m. Skyworks has no debt.
“We will continue to return most of our free cash flow back to the shareholders,” says Sennesael. Skyworks’ board of directors has consequently declared a cash dividend of $0.50 per share of common stock, payable on 9 March to stockholders of record at the close of business on 16 February. The board has also authorized a new $2bn stock repurchase program (replacing the existing two-year $2bn program approved by the board on 30 January 2019, which had about $783m of repurchase authority remaining on expiry). This “reflects their confidence in our business model driven by sustained above-market growth and strong cash flow generation,” comments Sennesael.
“Demand for our proven solutions continues to accelerate across a growing set of customers and end markets, powering the world’s most impactful use cases, from 5G mobile platforms to IoT, wireless infrastructure, autonomous transport and machine-to-machine installations,” says Griffin. “Importantly, the multi-year wireless transition is now underway, creating a burgeoning set of new opportunities. With deep customer engagements, underpinned by decades of technology investments and scale, Skyworks is uniquely positioned to lead,” he reckons.
“We expect the continued and rapid adoption of multiple wireless protocols and expanding use cases to drive strong year-over-year growth,” says Sennesael.
In fiscal second-quarter 2021 (to end-March), Skyworks expects revenue growth to $1.125-1.175bn, up 50% sequentially. This is despite some seasonality with Skyworks’ largest customer. “If you look at the revenue in Mobile outside of our large customer, as well as the revenue in growth markets, it will be up double digits sequentially, which is a lot stronger than normal seasonality,” notes Sennesael. “It further accelerates our year-over-year revenue growth with all those accounts, the Korean, the Chinese [Oppo, Vivo, Xiaomi], as well as thousands of Broad Market customers.”
Fiscal Q2/2021 gross margin should be 50.5-51%. Operating expenses is expected to rise to $150-152m. Diluted earnings per share should grow by 75% to $2.34.
“The demand for always-on connectivity is accelerating and extending into new applications, including telemedicine, high-speed video conferencing, remote learning, autonomous transport, essential services for the infrastructure markets, store-to-door delivery, and touchless commerce. This is a global phenomenon, where upgrades of key technologies are increasingly critical in the face of the ongoing pandemic,” says Griffin. “The investments we’ve made over the last two decades have prepared Skyworks to address these challenges. The mobile and wireless ecosystems will benefit from these dynamics, yet outsized gains will largely accrue to those companies that have invested deeply in core technology and scale. These gains are being driven by both a growing device count and an expanding content per device, in some cases doubling or even tripling for Skyworks,” he adds.
“We are seeing the confluence of multiple market developments, a significant rise in device complexity and expansion in wireless spectrum and band count combined with a technology bar that has never been higher. These trends directly translate to increased opportunity for Skyworks with both new and existing customers,” continues Griffin. “With essential technologies and scale propelling performance gains across a broad set of applications, our purpose-built solutions address all key network protocols, spanning 5G, Wi-Fi-enhanced UPS and Bluetooth. Additionally, we expect the current C-band auction to be a catalyst, with new spectrum creating significant content opportunities for our Sky5 platform. While smartphones were the first to embrace 5G, the performance gains will power a broad set of use cases, extending into billions of IoT devices,” he adds. “Looking ahead, we see 5G as a transformative technology, catalyzing new applications, while acting as the universal connector from the home to the car to the factory floor. Skyworks is solidifying market leadership as connectivity meaningfully alters the way we live, work, play and educate, not just from home, but from anywhere.”