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11 February 2019

Skyworks quarterly revenue down 7.6% year-on-year to $972m

For fiscal first-quarter 2019 (to 28 December 2018), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported revenue of $972m, down 3.6% on the record $1008m last quarter and down 7.6% on $1051.9m a year ago (and below the $1-1.02bn original guidance given on 8 November).

The firm’s largest customer comprised more than 50% of total revenue (as usual for a December quarter).
By market sector, Mobile (Integrated Mobile Systems and Power Amplifiers) comprised 73% of revenue and Broad Markets 27%.

“Momentum in our high-growth Broad Market business allowed us to partially offset unit declines across our Mobile business,” says senior VP & chief financial officer Kris Sennesael. “That was mostly driven by weak end-customer demand in China [20% of total revenue],” he adds. “Revenue from Broad Markets continued to outperform... We have double-digit revenue growth compared to the first quarter of last year, demonstrating continued diversification across multiple end-markets, customers and applications.”

On a non-GAAP basis, gross margin was 51%, down from 51.2% last quarter and 51.4% a year ago.

Operating expenses (OpEx) have risen from $136m (13.5% of revenue) last quarter to $139m (14% of revenue), although this was slightly below the expected $140m.

Operating income has fallen further, from $414m (operating margin of 39.4%) a year ago and $379.6m (37.6% margin) last quarter to $356.4m (36.7% margin).

Likewise, net income has fallen further, from $371.5m ($2.00 per diluted share) a year ago and $349.7m ($1.94 per diluted share) last quarter to $324.6m ($1.83 per diluted share, below November’s original guidance of $1.91).

“Despite macro weakness across our global Mobile business, Skyworks delivered solid financial results driven by content gains, our expanding footprint and Broad Markets to continued execution of our innovator product strategy, and the strength of our business model,” says president & CEO Liam Griffin. “We are continuing to deliver high levels of profitability with consistently strong cash flow,” he adds.

Cash flow from operations was a record $549m. Capital expenditure (CapEx) was $129m. Free cash flow margin was hence strong (representing free cash flow margin of about 43%).

During the quarter, Skyworks paid $67m in dividends, and repurchased a record 4 million shares of common stock for a total of $284m.

Overall, cash, cash equivalents and marketable securities hence rose by $51.6m from $1.050bn to $1.102bn. The firm has no debt.

“These results highlight our success as we continue to increase our product reach across a growing set of end markets, applications and customers,” says Griffin.

During the quarter, Skyworks expanded its design-win pipeline in several emerging high-growth categories. “Our solutions are now enabling the newest Wi-Fi standards along with the latest advances in MIMO base stations and across mobile payment platforms. For example, our Wi-Fi 6 products are now powering NetGear routers, Charter Communications’ Home Gateways and Ruckus’ Indoor Access Points, to name just a few,” says Griffin. “We also partnered with Square, a market-leading mobile payment platform, powering their latest long-range retail systems. We supported next-generation high-fidelity smart audio solutions for Bose and Sonos enabled by Alexa voice controls. In addition, we’ve ramped advanced wireless engines supporting Phillips end-to-end street-light management platforms,” he adds.

“Across the infrastructure space, we’ve secured a number of massive MIMO wins with leading base-station providers [in Europe] as they prepare for the ramp to 5G. Across automotive, we supported next-generation telematics [remote access] solutions for leading German and Korean manufacturers,” continues Griffin.

“Looking ahead, we are leveraging our demonstrated technology leadership, trusted customer partnerships and innovative Sky5 portfolio to capitalize on compelling 5G, IoT and automotive opportunities,” says Griffin.

“In the March quarter, we expect diversification and momentum in our high-growth Broad Markets business to partially offset unit declines in mobile,” says Sennesael.

For fiscal second-quarter 2019, Skyworks expects revenue to fall $800-820m (with a further minor sequential decline from China offsetting continued growth in Broad Markets). Despite the decline from $913.4m a year previously, gross margin should be level year-on-year, at 50.5-51%. “In light of the market backdrop, we will continue to drive operational efficiencies and prudently manage our operating expenses down to approximately $135m,” says Sennesael. “I feel good about our ability to further expand the gross margin towards our target model of 53%,” adds Griffin. Diluted earnings per share should fall to $1.43.

Skyworks’ board of directors has declared a cash dividend of $0.38 per share of common stock, payable on 19 March to stockholders of record at the close of business on 26 February.

The board has also approved a new $2bn stock repurchase program (superseding the $1bn share buyback program instituted in January 2018, of 88% was executed, leaving $129m). “This new buyback plan reflects our confidence in Skyworks’ business model and our ability to consistently produce strong free cash flow, allowing us to leverage share repurchases and dividends to generate higher shareholder returns,” notes Sennesael. “Our strong balance sheet and cash position provide important competitive advantages, allowing us to make the strategic investments in R&D while funding the capital requirements for 5G, as a complexity of our solutions intensifies.”

“We have strategically positioned Skyworks to outperform, as we seize upon a complex set of new opportunities in both Mobile and Broad Markets. For example, the shift of 5G is a tremendous catalyst representing an entirely new connected ecosystem, one where Skyworks will play a leadership role,” says Griffin. “At a higher level, 5G will be transformational, requiring step-function increases in analog performance, advanced filtering and power efficiency. With decades of experience spanning successors technology generations, Skyworks is well positioned to capitalize with strategic partnerships across all smartphone and IoT customers, differentiated systems solutions, enabling unmatched levels of integration and performance, focused investments to expand our product portfolio, IP and scale,” he adds.

“Looking ahead, 5G technology will fuel a broad array of markets and applications, ranging from industrial IoT, automotive, machine to machine, healthcare, smart cities as well as artificial intelligence,” says Griffin. “Capitalizing on the advances of our mobile solutions, the launch of strategic product categories and the diversified strength of broad markets, we remain confident in our ability to outperform,” he adds. “We are squarely focused on operational excellence while continuing to invest strategically across innovative technologies and products, establishing a firm foundation for future growth.”

See related items:

Skyworks cuts December-quarter revenue and earnings guidance

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

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

Tags:  Skyworks

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