Skyworks Solutions, Inc. — Q2 FY2021 Form 10-Q
Reporting period: Quarter and six months ended April 2, 2021; comparisons are with the corresponding periods ended March 27, 2020. Skyworks makes analog semiconductors for wireless connectivity applications across consumer, industrial, automotive, infrastructure, and other markets.
Financial performance
| Metric | Quarter | Six months |
|---|---|---|
| Revenue | $1,171.8 million; up 53.0% | $2,681.8 million; up 61.3% |
| Gross profit / margin | $578.4 million / 49.4% (49.0% prior year) | $1,340.1 million / 50.0% (49.3% prior year) |
| Operating income / margin | $374.7 million / 32.0% | $945.4 million / 35.3% |
| Net income | $325.0 million, versus $181.1 million | $834.3 million, versus $438.1 million |
| Diluted EPS | $1.95, versus $1.06 | $5.00, versus $2.56 |
| Operating cash flow | Not separately presented for the quarter | $1,100.8 million, versus $678.8 million |
Quarterly net income increased approximately 79%; six-month net income increased approximately 90%. Six-month capital expenditures were $259.8 million, dividends paid were $165.6 million, and stock repurchases were $195.6 million. The effective tax rate was 13.4% for the quarter and 11.8% for the six-month period.
Liquidity and balance sheet
At April 2, 2021, cash and cash equivalents were $1,059.9 million and marketable securities totaled $363.7 million, or $1,423.6 million combined. The combined balance was up $443.6 million from October 2, 2020. Current assets were $2,804.7 million and current liabilities were $538.4 million. Total liabilities were $1,022.1 million; the balance sheet reports no borrowings or debt balance. Management said available liquidity and expected operating cash generation should fund anticipated needs for at least 12 months.
Changes, outlook, and risks
- Management attributed revenue growth to stronger wireless connectivity demand, 5G and Wi-Fi 6 upgrade cycles, and higher average content per device. Favorable product mix and higher unit volumes supported gross profit, partly offset by lower average selling prices.
- R&D expense rose as the company invested in new technologies and products. SG&A also increased, mainly from employee-related compensation, including share-based compensation.
- The filing provides no specific revenue or earnings guidance. Management noted typical seasonal peaks in fiscal Q4 and Q1 and cautioned that interim results may not indicate full-year results.
- On April 22, 2021, after quarter-end, Skyworks agreed to acquire Silicon Labs’ Infrastructure and Automotive business for $2.75 billion in cash, expected to be funded with cash and debt financing. Closing was expected in Q3 2021, subject to customary conditions and regulatory approvals. The company temporarily suspended stock repurchases in anticipation of the acquisition.
- Skyworks disclosed a debt commitment of up to $2.5 billion for the acquisition and anticipated longer-term financing that could include a term loan of up to $1.5 billion, notes of up to $1.0 billion, and a $750 million revolving facility. The transaction, integration, financing costs, debt covenants, and ability to realize expected benefits introduce risks.
- COVID-19 remained a source of uncertainty, including potential supply-chain disruption and production constraints from facility suspensions, quarantines, or employee absences. Intellectual-property disputes can carry injunction risk, although the company said it did not believe pending matters were reasonably likely to result in a material loss. No material off-balance-sheet arrangements were reported.
Most important facts to verify
- Whether the Silicon Labs transaction closed on schedule, its final financing mix and cost, and the resulting debt and integration effects.
- Whether demand for 5G/Wi-Fi 6 products and favorable product mix persisted, and how pricing pressure affected gross margins.
- Whether operating cash flow, capital spending, dividends, and the repurchase suspension changed the company’s liquidity position.
- Any subsequent developments in COVID-related supply constraints, acquisition conditions, or material legal and intellectual-property matters.