For fiscal third-quarter 2017 (to end-June), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures analog and mixed-signal semiconductors) has reported revenue of $900.8m, up 5.8% on $851.7m last quarter and up 20% on $751.7m a year ago (and exceeding the expected $890m).
Mobile sales (include integrated mobile systems as well as power amplifiers) were 73% of total revenue (down further, from 75% last quarter), while Broad Markets sales rose to 27% of total revenue (up from 25%).
“Skyworks exceeded top- and bottom line expectations,” notes president & CEO Liam K. Griffin. “Our outperformance is being driven by global demand for Skyworks’ highly integrated and ultra-efficient connectivity engines. As system-level complexity and performance requirements intensify across mobile and Internet of Things ecosystems, we are extending our product reach and capturing more content per platform,” he adds.
“We are aggressively expanding our design-win pipeline,” says Griffin. “In mobile, we are broadening our reach across all premier OEMs”. Specifically, Skyworks supported Huawei’s feature-rich smartphones with SkyOne and SkyLiTE products.
Skyworks also extended its proprietary DRx solutions across Samsung’s Galaxy platforms, and leveraged SkyOne and SkyLiTE at OPPO, Vivo, ZTE and Sharp, among others. “We extended our antenna tuning wins across virtually all of the leading Chinese OEMs,” adds Griffin. “Huawei is a big, big player for us now; OPPO and Vivo are also important.”
In broad markets, Skyworks delivered ZigBee and Wi-Fi devices for Amazon’s virtual assistants, commenced volume production of 802.11p modules for vehicle-to-vehicle communications, ramped advanced 4G/LTE MIMO solutions for leading infrastructure OEMs, released optocouplers supporting healthcare monitoring systems, captured design wins with the leading supplier of 4K surveillance cameras, launched home security sensors and motion detectors at Honeywell and Bosch, unveiled what is said to be the first high-efficiency LAA (License Assisted Access) and new LTE solutions for small-cell base stations, powered NetGear’s latest-generation mesh networking product line leveraging Skyworks’ proprietary 802.11ac technology, and enabled cellular telematics platforms in support of a Chinese auto manufacturer.
“We are well positioned to capitalize on the rapidly approaching 5G technology wave – enabling new markets from autonomous vehicles to emerging segments in artificial intelligence, robotics and virtual reality,” reckons Griffin.
On a non-GAAP basis, quarterly gross margin was 50.7%, down from 50.9% a year ago but up from 50.4% last quarter.
Operating expenses (OpEx) have risen from $107.6m a year ago and $116m last quarter to $123m (slightly above the targeted $122m, but remaining 13.7% of revenue).
Operating income has grown further, from $274.7m (operating margin of 36.5% of revenue) a year ago and $312.5m (36.7% margin) last quarter to $333.1m (37% margin).
Likewise, net income has risen further, from $238.1m ($1.24 per diluted share) a year ago and $272m ($1.45 per diluted share) last quarter to $292.7m ($1.57 per diluted share, exceeding the $1.52 guidance).
Cash flow from operations was $314.1m (up from $235.9m last quarter and $140.9m a year ago). Capital expenditure (CapEx) has doubled from $54.9m (6.4% of revenue) last quarter to $113m (12.5% of revenue). During the quarter, Skyworks paid dividends of $51.6m (level with last quarter), and spent $128.8m repurchasing 1.3 million shares of common stock (up from $95.2m last quarter). Despite this, overall cash and cash equivalents still rose by $37.1m, from $1407m to $1444m (up nearly 50% from $973.7m a year ago). The firm has no debt.
“CapEx is typically higher in the second half of our fiscal year,” notes senior VP & chief financial officer Kris Sennesael. “We target to have our CapEx on or about high single digits percent to revenue,” he adds. “Most of that CapEx is of course driven by a strong revenue growth that translate into more units and so we’re making the necessary investments in our program fabs as well as our backend operation, assembly & test, and our filter operation. For filter operation it’s not only expanding or increasing the capacity but also making sure we’re making the necessary technology investments to be able to provide a higher content for a richer filter portfolio,” continues Sennesael. “Currently we have approximately 50% of filters in-house. As we ramp in the second half of calendar year 2017, there will be a new set of platforms that will further increase this probably towards 75%. And then we will continue to work on that in 2018. Probably at the maximum, we will reach 90%,” he forecasts.
“Given our design-win momentum and new product pipeline, we intend to sustainably outpace growth in our addressable markets,” says Sennesael. For fiscal fourth-quarter 2017, Skyworks expects a new revenue record of $980m, up slightly more than 9% sequentially and 17% year-on-year. Specifically, Broad Markets revenue (which has been growing at double-digit levels) will exceed $250m (a $1bn annualized revenue run rate going forwards). Revenue in China should be flat to up single digits (while being up double digit year-on-year).
Gross margin should grow by 30 basis points for a second consecutive quarter, to 51%. With operating expenses rising only slightly to $124m, operating margin should also grow. Diluted earnings per share should be a record $1.75.
“Our gross margin target is to get to 53%, and we are making good progress towards that target,” says Sennesael. “In the December quarter, we expect on higher revenue further improvements on the gross margin.”
“We are targeting in excess of $1.1bn in free cash flow this fiscal year, while systematically returning cash to our shareholders through buybacks and increasing dividends [targeting 40-50% of free cash flow, following 60% year-to-date],” says Griffin. Skyworks’ board of directors has declared a cash dividend of $0.32 per share of common stock (payable on 29 August to stockholders of record at the close of business on 8 August), up 14% on the prior quarterly dividend of $0.28 per share.