Skyworks Solutions, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended September 29, 2023 (52 weeks). This is an annual filing, not a standalone fourth-quarter report. Skyworks designs, manufactures and sells analog and mixed-signal semiconductors for mobile, connectivity, automotive, industrial and other markets.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $4,772.4 million | $5,485.5 million | -13.0% |
| Gross profit / margin | $2,107.3 million / 44.2% | $2,604.3 million / 47.5% | Margin down 3.3 percentage points |
| Operating income / margin | $1,125.0 million / 23.6% | $1,527.0 million / 27.8% | Margin down 4.2 percentage points |
| Net income | $982.8 million | $1,275.2 million | -22.9% |
| Diluted EPS | $6.13 | $7.81 | -21.5% |
| Cash from operations | $1,856.4 million | $1,424.6 million | Up $431.8 million |
| Capital expenditures | $210.3 million | $489.4 million | Down $279.1 million |
Operating cash flow less capital expenditures was approximately $1,646.1 million. Operating cash flow benefited substantially from working-capital changes, principally lower receivables and inventory; the filing reports a $988.5 million favorable working-capital impact.
- Liquidity: Cash, cash equivalents and marketable securities totaled $738.5 million at year-end, up $151.7 million year over year. Current assets were $3,179.5 million and current liabilities $955.7 million.
- Debt: Total debt was $1,292.3 million, including $300 million under term loans and $992.9 million in net senior notes. The $750 million revolving facility was undrawn. Skyworks repaid $900 million of debt in FY2023; it repaid a further $150 million of term loans on October 4, 2023.
- Shareholder returns: Dividends paid were $405.2 million, or $2.54 per share. Stock repurchases under the prior program totaled $175.3 million; $2.0 billion remained authorized under the new program at year-end. A $0.68-per-share dividend was declared after year-end.
Changes and key drivers
- Management attributed the revenue decline primarily to weaker demand for mobile products from Android smartphone customers and lower demand for connectivity solutions in consumer and enterprise markets.
- Gross profit fell 19.1%. Lower unit volumes reduced gross profit by $572.0 million; impairment charges on long-term supply-capacity deposits reduced it by $47.5 million, and lower average selling prices by $41.8 million. Favorable product mix partly offset these pressures by $261.2 million.
- R&D expense declined 1.8% to $606.8 million, while increasing as a share of revenue to 12.7%. SG&A fell 4.8% to $314.0 million. Amortization of intangibles declined to $33.2 million as certain acquired assets reached the end of their useful lives.
- Interest expense rose 34.4% to $64.4 million, primarily because of higher variable interest rates on term loans, partly offset by lower average debt. Income tax expense declined to $96.0 million from $201.4 million, mainly reflecting lower operating income and tax-related items.
Outlook, risks and unusual items
- The filing provides no numerical revenue or earnings guidance. Management said available cash, expected operating cash generation and the undrawn revolver should be sufficient for anticipated liquidity requirements, while noting that future capital needs or acquisitions could require additional resources.
- Demand is seasonal: typically strongest in the first and fourth fiscal quarters. Management notes ongoing industry price erosion for established products and plans to pursue volume growth, cost reductions, manufacturing efficiencies and higher-value products.
- Customer concentration is material: Apple accounted for 66% of FY2023 revenue, versus 58% in FY2022 and 59% in FY2021. The three largest receivable balances represented 83% of gross receivables at year-end.
- Supply and demand risks include semiconductor cyclicality, customer order cancellations or deferrals, excess inventory, manufacturing yields, reliance on third-party foundries and suppliers, and minimum purchase commitments. FY2023 included $47.5 million of charges related to long-term capacity deposits amid reduced market demand.
- Other prominent risks include competition and pricing pressure, geopolitical and trade restrictions—especially involving China and Taiwan—cybersecurity, intellectual-property claims, and changing tax and environmental requirements. U.S. R&D capitalization rules are increasing near-term cash taxes; the corporate alternative minimum tax applies to the company beginning in FY2024, with its impact still under evaluation.
- The company reported $64.5 million of total asset impairment charges in FY2023, including the capacity-deposit charge and a $12.3 million loss on divested assets. Goodwill and indefinite-lived intangible assets were not impaired in the annual test. Management said pending legal matters were not reasonably likely to result in a material loss.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective. The auditor identified application of tax laws and regulations as a critical audit matter.
Investor verification points
- Assess the durability of the revenue downturn and gross-margin pressure, including the pace of recovery in Android and consumer/enterprise connectivity demand.
- Review Apple’s 66% revenue concentration and whether customer, geographic and channel exposures are changing.
- Track inventory, receivables and operating cash conversion; FY2023 cash flow benefited significantly from working-capital releases.
- Monitor capacity commitments, deposits and any further impairment risk if demand remains below reserved supply levels.
- Confirm debt repayment and refinancing progress, variable-rate exposure, and the cash-tax impact of R&D capitalization and the corporate alternative minimum tax.
- Evaluate capital allocation, including dividends and use of the $2.0 billion repurchase authorization, against investment and liquidity needs.