For fiscal second-quarter 2017 (to 31 March), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported revenue of $851.7m, down seasonally by 6.8% on $914.3m last quarter but up 10% on $775.1m a year ago and exceeding the $840m guidance.
Mobile sales (include integrated mobile systems as well as power amplifiers) were slightly below 75% of total revenue. Comprising slightly more than 25% of total revenue, Broad Markets sales were up 18% year-on-year, driven by Internet of Things (IoT) applications, which comprised about 70% of Broad Markets revenue.
The three greater-than-10% customers were: Foxconn (falling slightly to just below 40% of total revenue), then Huawei and Samsung (each slightly above 10%). China collectively comprised about 25% of total revenue.
“Skyworks exceeded financial expectations in the second fiscal quarter of 2017, driven by insatiable demand for high-speed, reliable, always-on connectivity spanning Mobile and Internet of Things [IoT] ecosystems,” says president & CEO Liam K. Griffin.
“We are aggressively expanding our design-win pipeline,” says Griffin. “In mobile, we are extending our reach across all premier smartphone OEMs. Specifically, we enabled Huawei’s P10 and P10+ models with low-, mid- and high-band SkyOne solutions, along with antenna tuner, carrier aggregation switching, and power management devices. We powered Samsung’s Galaxy S8 platform with proprietary DRx and SkyOne solutions as well as GPS and DC/DC converters, and we secured reference design sockets across MediaTek’s next-generation architectures,” he adds. “In IoT [Internet of Things], we supported Cisco’s enterprise-grade MIMO gateways, delivered analog control ICs across Nintendo’s gaming platforms, including the recently introduced Switch console, ramped audio solutions for Sonos’ high-fidelity wireless speakers, extended Wi-Fi mesh networking wins at Google and Plume, deployed high-power smart-meter devices for Itron, and we shipped custom connectivity engines to Fitbit, Garmin and LG.” Skyworks also secured strategic design wins with three leading auto manufacturers, providing advanced LTE modules supporting high-reliability connectivity, GPS and data transport capabilities.
“Expanding content gains, coupled with successful product ramps across a diverse customer set, are enabling Skyworks to demonstrably outpace our addressable markets,” says senior VP & chief financial officer Kris Sennesael.
On a non-GAAP basis, gross margin was 50.4%, down from 51.2% last quarter and 50.8% a year ago, but 20 basis points higher than expected.
Operating expenses (OpEx) were $116m (13.7% to revenue), cut from $132.7m a year ago.
Although down on $354.3m last quarter, operating income was $312.5m (operating margin of 36.7% of revenue), up from $285m a year ago.
Net income was $272m ($1.45 per diluted share, exceeding the $1.40 guidance), down from $301.6m (a record $1.61 per diluted share) last quarter but up on $242.3m ($1.25 per diluted share) a year ago.
Cash flow generated from operations was $235.9m, down from last quarter’s record $495.9m but up from $154.5m a year ago. Capital expenditure (CapEx) has risen further, from $37.4m (4.8% of total revenue) a year ago and $50m (5.5% of revenue) last quarter to $54.9m (6.4% of revenue) – mostly for the back-end facility in Mexicali, Mexico, which is running at full capacity. During the quarter, Skyworks made dividends payments of $51.9m. The firm also spent $95.2m to repurchase 1 million shares of common stock. Overall, cash and cash equivalents hence rose by $56.4m, from $1.35bn to $1.41bn (compared with a drop of $55.7m a year ago).
Inventory was up $22m in fiscal Q2. “That’s clearly in anticipation of the strong sequential revenue growth that we see in the next three quarters – the June quarter, the September quarter and the December quarter,” says Sennesael.
For fiscal third-quarter 2017 (to end-June), Skyworks expects revenue to grow 4.5% sequentially and 18% year-on-year to $890m, driven by content gains at Huawei and Samsung. Gross margin should grow to 50.5-51%. Operating expenses are expected to rise to $122m, as Skyworks continues to invest in growth initiatives, including its IoT business. Diluted earnings per share increase to $1.52.
“We expect to continue to build some further inventory in the current quarter in Q3, all in anticipation, of course, to the peak, which is in the December quarter,” Sennesael. “We also expect three quarters of gross margin improvements benefiting from that revenue growth as well, of course, as all the other operational efficiency that we continue to drive there,” he adds. “We also continue to benefit from filter in-sourcing. All that will help us to make further progress towards our target model of 53% gross margin and 40% operating margin.”
“We are continuing to make the necessary investments to grow the business; grow the business in mobile, grow the business in IoT,” continues Sennesael. “Especially in IoT, we are adding some resources from an R&D point of view, as well as a sales & marketing point of view, to address that diverse market segment.” Skyworks targets OpEx of 13% of revenue on a full-year basis.