Skyworks Delivers on Revenue Guidance and Exceeds Gross Margin and Earnings Expectations in Third Fiscal Quarter 2005
Skyworks Solutions, Inc. (NASDAQ:SWKS), a global leader in analog, mixed signal and digital semiconductors for mobile communications applications, today announced revenue of $191.5 million for the third fiscal quarter ended July 1, 2005, compared to revenue of $190.5 million in the previous quarter and $207.4 million in the same period a year ago. Results were consistent with the company's guidance provided last quarter and reflect the growth of the company's newest linear products and share gains in RF solutions, offset by softness among a subset of tier three cellular systems accounts.
GAAP operating income for the third fiscal quarter was $11.8 million, up 41 percent sequentially from $8.3 million in the second fiscal quarter of 2005 and compared to $17.8 million in the corresponding period a year ago. On a pro forma basis, operating income for the third fiscal quarter was $12.3 million, up 26 percent when compared to $9.8 million last quarter and versus $18.6 million for the same period a year ago. GAAP diluted earnings per share during the quarter was $0.05, while pro forma diluted earnings per share was $0.06, one cent ahead of consensus estimates.
"In the third fiscal quarter, Skyworks delivered another strong performance, meeting top line expectations and exceeding bottom line estimates, while strengthening the balance sheet. Our performance was driven by market adoption of our family of innovative linear products and newest RF solutions," said David J. Aldrich, Skyworks' president and chief executive officer. "Of special note, our 250 basis point sequential improvement to nearly 41 percent in gross margin exemplifies our progress in further diversifying into linear products, delivering higher levels of integration, and implementing operational efficiencies. These initiatives are the focused mission of Skyworks and are setting the stage for further gross margin expansion this year and the realization of our target model of 45 percent in 2006."
Corporate Achievements
- Improved gross margin from 38.2 percent to 40.7 percent sequentially
- Delivered pro forma operating income of $12.3 million, up 26 percent sequentially
- Generated $25 million of cash flow from operations in the third fiscal quarter, and increased cash and investments balance to an all-time high of $235 million
- Cross-licensed RF patents with Qualcomm
- Implemented the Green Initiatives program for lead (Pb)-free and Restriction of Hazardous Substances (RoHS) compliant products
Product Highlights
Mobile Platforms
- Captured another strategic Helios EDGE design win with a top tier handset OEM
- Licensed patented SMV speech vocoder intellectual property to Qualcomm, enabling higher-quality voice, improved data rates and increased capacity for the world's CDMA networks and mobile phones
- Shipped 1 millionth Single Package Radio, which fuses switch, power amplifier, filter and transceiver functionality in a compact footprint
- Ramped production of EDGE front-end modules at Sony Ericsson
- Sampled next generation EDGE multimedia system solutions
Linear Products
- Launched a family of highly linear gain blocks, supporting medical equipment, test instrumentation, cellular infrastructure, and broadband applications
- Won a key reference design with Broadcom for a front-end module to be paired with the 54g chip set
- Developed breakthrough ceramic-based material for RFID applications
- Introduced ultra compact and high performance dual mixers and voltage controlled oscillator synthesizers for the 3G infrastructure market
- Introduced first generation Bulk Acoustic Wave (BAW) filters supporting UMTS frequencies
Business Outlook
"We anticipate revenue for the fourth fiscal quarter to be up 4 to 8 percent sequentially off a base of $186.7 million, which excludes third quarter assembly and test services revenue. As previously announced at the end of June, we fulfilled our obligation to provide assembly and test services to Conexant," said Allan M. Kline, Skyworks' vice president and chief financial officer. "Our revenue growth in the fourth fiscal quarter is being driven by the ramp of our linear products portfolio and traction with our EDGE and WCDMA solutions. Operationally, we expect gross margin to expand another 75 to 100 basis points, enabling an approximately 40 percent sequential improvement in our level of operating income."
Skyworks' Third Quarter Conference Call
Skyworks will host a conference call at 5 p.m. Eastern time (ET) today to discuss results for the third fiscal quarter of 2005. To listen to the conference call via the Internet, please visit the Investor Relations section of Skyworks' Web site at www.skyworksinc.com. To listen to the conference call via telephone, please call 800-289-0494 (domestic) or 913-981-5520 (international); security code: Skyworks.
Playback of the conference call will begin at 9 p.m. ET on Thursday, July 21, and end at 9 p.m. ET on Thursday, July 28, 2005. The replay will be available on Skyworks' Web site or by calling 888-203-1112 (domestic) or 719-457-0820 (international); access code: 3397242#.
About Skyworks
Skyworks Solutions, Inc. is a global leader in analog, mixed signal and digital semiconductors for mobile communications applications. The company's power amplifiers, front-end modules, direct conversion transceivers and complete system solutions are at the heart of many of today's leading-edge multimedia handsets, cellular base stations and wireless networking platforms. Skyworks also offers a portfolio of highly innovative linear products, supporting a diverse set of automotive, broadband, industrial and medical customers.
Headquartered in Woburn, Mass., Skyworks is worldwide with engineering, manufacturing, sales and service facilities throughout Asia, Europe and North America. For more information, please visit the Skyworks Web site at www.skyworksinc.com.
Safe Harbor Statement
This press release, and related conference call, includes "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements included in this press release and related conference call, other than statements or characterizations of historical fact, are forward-looking statements. These forward-looking statements include information relating to future results of Skyworks (including certain projections and anticipated business trends). Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "believes," "plans," "may," "will," "continue," similar expressions, and variations or negatives of these words. All such statements are subject to certain risks and uncertainties that could cause actual results to differ materially and adversely from those expressed.
These risks and uncertainties include, but are not limited to: global economic and market conditions, such as the cyclical nature of the semiconductor industry and the markets addressed by the company's and its customers' products; demand for and market acceptance of new and existing products; the ability to develop, manufacture and market innovative products in a rapidly changing technological environment; the ability to compete with products and prices in an intensely competitive industry; product obsolescence; losses or curtailments of purchases from key customers or the timing of customer inventory adjustments; the timing of new product introductions; the availability and extent of utilization of raw materials, critical manufacturing equipment and manufacturing capacity; pricing pressures and other competitive factors; changes in product mix; fluctuations in manufacturing yields; the ability to continue to grow and maintain an intellectual property portfolio and obtain needed licenses from third parties; the ability to attract and retain qualified personnel; labor relations of the company, its customers and suppliers; economic, social and political conditions in the countries in which Skyworks, its customers or its suppliers operate, including health and security risks, possible disruptions in transportation networks and fluctuations in foreign currency exchange rates; and the uncertainties of litigation, as well as other risks and uncertainties, including but not limited to those detailed from time to time in the company's filings with the Securities and Exchange Commission.
These forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.
Note to Editors: Skyworks, Skyworks Solutions, Green Initiatives, Helios and Single Package Radio are trademarks or registered trademarks of Skyworks Solutions, Inc. or its subsidiaries in the United States and in other countries. All other brands and names listed are trademarks of their respective companies.
SKYWORKS SOLUTIONS, INC. UNAUDITED GAAP CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended Nine Months Ended July 1, July 2, July 1, July 2, (in thousands, except per 2005 2004 2005 2004 share amounts) Net revenues $191,532 $207,377 $602,197 $565,956 Cost of goods sold 113,658 123,593 363,705 340,400 Gross profit 77,874 83,784 238,492 225,556 Operating expenses: Research and development 39,823 38,712 115,612 114,250 Selling, general and administrative 25,745 26,493 78,027 69,427 Special charges - - - 15,759 Amortization of intangibles 536 768 1,818 2,306 Total operating expenses 66,104 65,973 195,457 201,742 Operating income 11,770 17,811 43,035 23,814 Interest expense (3,683) (3,609) (10,851) (14,386) Other income, net 1,536 395 3,724 1,151 Income before income taxes 9,623 14,597 35,908 10,579 Provision for income taxes 2,234 1,567 13,358 2,798 Net income $7,389 $13,030 $22,550 $7,781 Earnings per share: Basic $0.05 $0.09 $0.14 $0.05 Diluted $0.05 $0.08 $0.14 $0.05 Weighted average shares: Basic 157,809 153,062 157,161 150,414 Diluted 158,682 155,274 158,621 152,854 SKYWORKS SOLUTIONS, INC. UNAUDITED RECONCILIATION OF PRO FORMA NON-GAAP MEASURES Three Months Ended Nine Months Ended July 1, July 2, July 1, July 2, (in thousands) 2005 2004 2005 2004 GAAP operating income $11,770 $17,811 $43,035 $23,814 Asset impairments (a) - - - 13,182 Restructuring charges (b) - - - 3,551 Lease and leasehold improvements (c) - - 886 - Amortization of intangible assets 536 768 1,818 2,306 Pro forma operating income $12,306 $18,579 $45,739 $42,853 Three Months Ended Nine Months Ended July 1, July 2, July 1, July 2, (in thousands) 2005 2004 2005 2004 GAAP net income $7,389 $13,030 $22,550 $7,781 Asset impairments (a) - - - 13,182 Restructuring charges (b) - - - 3,551 Lease and leasehold improvements (c) - - 886 - Amortization of intangible assets 536 768 1,818 2,306 Tax adjustments (d) 1,511 984 10,700 984 Pro forma net income $9,436 $14,782 $35,954 $27,804 Three Months Ended Nine Months Ended July 1, July 2, July 1, July 2, 2005 2004 2005 2004 GAAP net income per share, diluted $0.05 $0.08 $0.14 $0.05 Asset impairments (a) - - - 0.09 Restructuring charges (b) - - - 0.02 Lease and leasehold improvements (c) - - 0.01 - Amortization of intangible assets - 0.01 0.01 0.02 Tax adjustments (d) 0.01 0.01 0.07 - Pro forma net income per share, diluted $0.06 $0.10 $0.23 $0.18 (a) These charges primarily consist of a write-down of legacy technology licenses related to the Company's cellular systems business which was included in operating expenses, except for $0.9 million which was included in cost of goods sold. (b) These charges represent certain costs incurred to implement facility consolidations. (c) These charges represent an aggregate adjustment for the correction of an error in the manner in which the Company accounted for scheduled rent increases and amortization of leasehold improvements. (d) During the third quarter of fiscal 2005 and for the three and nine months ended July 2, 2004, these charges represent a non-cash tax charge related to the utilization of pre-merger deferred tax assets. During the nine months ended July 1, 2005, these charges primarily represent non-cash charges related to the utilization of pre-merger deferred tax assets and a reduction in the expected benefit of foreign deferred tax assets resulting from a change in regulated foreign tax rates. The above pro forma non-GAAP measures are based upon our unaudited consolidated statements of operations for the periods shown. These measures are not in accordance with, or an alternative for, U.S. Generally Accepted Accounting Principles (GAAP). However, the Company believes this information is useful in understanding the results of operations. Therefore, Skyworks provides this supplemental information to enable investors to perform additional comparisons of operating results and as a means to provide additional insight into the Company's ongoing operations and economic performance. SKYWORKS SOLUTIONS, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET July 1, Oct 1, (in thousands) 2005 2004 Assets Current assets: Cash, cash equivalents and short-term investments $235,479 $214,552 Accounts receivable, net 162,006 157,772 Inventories 81,188 79,572 Prepaid expenses and other current assets 8,804 11,968 Property, plant and equipment, net 149,765 150,009 Goodwill and intangible assets, net 513,264 524,388 Other assets 30,537 30,545 Total assets $1,181,043 $1,168,806 Liabilities and Equity Current liabilities: Short-term debt $50,000 $50,000 Accounts payable 62,122 73,405 Accrued liabilities and other current liabilities 44,510 57,846 Long-term debt 230,000 230,000 Other long-term liabilities 6,679 5,932 Stockholders' equity 787,732 751,623 Total liabilities and equity $1,181,043 $1,168,806
SOURCE: Skyworks Solutions, Inc.
Skyworks Solutions, Inc.Pilar Barrigas (Media), 949-231-3061
Thomas Schiller (Investors), 949-231-4700