Skyworks Solutions, Inc. — FY2022 Form 10-K
Business context and reporting period. Skyworks designs, develops, manufactures, and markets analog and mixed-signal semiconductor products for mobile, automotive, industrial, wireless infrastructure, and other connectivity markets. This annual filing covers the fiscal year ended September 30, 2022 (52 weeks), compared primarily with the 52-week fiscal year ended October 1, 2021. The Silicon Labs Infrastructure and Automotive business acquired in July 2021 broadened Skyworks’ exposure to automotive, industrial, data center, and infrastructure markets.
Financial performance
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $5,485.5 million | $5,109.1 million | +7.4% |
| Gross profit / margin | $2,604.3 million / 47.5% | $2,512.4 million / 49.2% | Profit +3.7%; margin down 1.7 percentage points |
| Operating income / margin | $1,527.0 million / 27.8% | $1,612.7 million / 31.6% | Income down 5.3%; margin down 3.8 points |
| Net income / margin | $1,275.2 million / 23.2% | $1,498.3 million / 29.3% | Income down 14.9%; margin down 6.1 points |
| Diluted EPS | $7.81 | $8.97 | Down 12.9% |
| Operating cash flow | $1,424.6 million | $1,772.0 million | Down 19.6% |
| Capital expenditures | $489.4 million | $637.8 million | Down 23.3% |
Revenue growth reflected the acquisition and stronger demand for 5G and advanced Wi-Fi products, including increased content per device. These gains were partly offset by weaker mobile-product demand from smartphone customers in China. Gross profit increased on favorable product mix and new-product volumes, but margin declined amid lower comparable unit volumes and higher acquisition-related intangible amortization. Operating expenses rose to $1,077.3 million from $899.7 million, including increased R&D, amortization, and restructuring and impairment charges. The $30.7 million FY2022 charge was primarily related to abandoning previously capitalized in-process R&D projects.
Balance sheet, liquidity, and capital allocation
- Cash, cash equivalents, and marketable securities were $586.8 million at year-end, down $440.3 million from FY2021. Cash and cash equivalents alone were $566.0 million.
- Inventory increased to $1,212.1 million from $885.0 million. Management attributed the operating-cash-flow decline primarily to a $523.7 million unfavorable working-capital change, including increased inventory and supplier deposits.
- Total debt was $2,189.1 million, including $700.0 million of term loans; $499.2 million of debt was classified as current, principally the 0.90% notes due 2023. The term loans mature in July 2024 and bear variable interest. The $750 million revolving facility had no borrowings outstanding.
- FY2022 investing included $489.4 million of capital expenditures. Financing included $886.8 million of share repurchases and $373.1 million of dividends. The quarterly dividend was increased to $0.62 per share for the December 2022 payment, subject to future Board declarations.
- Management stated that cash on hand, expected operating cash generation, and the Revolver should be sufficient for anticipated liquidity needs, while noting that future acquisitions or investments could require additional resources.
Material changes, outlook, and risks
- Apple represented 58% of FY2022 revenue, compared with 59% in FY2021; this concentration makes results sensitive to one customer’s product cycles and purchasing decisions. The three largest receivable balances were 79% of gross receivables at year-end.
- Revenue attributed to China fell to $599.6 million from $994.2 million. Skyworks also reported continued supply-chain constraints, customer supply issues, and demand fluctuations related to COVID-19 and China shutdowns.
- The filing provides no specific numerical revenue or earnings guidance. Management describes long-term opportunities in 5G, Wi-Fi, IoT, automotive, and other connectivity markets, but cautions that demand, economic conditions, supply availability, competition, and customer ordering can change materially.
- Skyworks expects U.S. tax rules requiring R&D costs to be capitalized and amortized beginning in FY2023 to increase taxes payable and reduce cash flows. It expects the Inflation Reduction Act to increase its effective tax rate in FY2024; the impact was still under evaluation.
- Other material risks include semiconductor cyclicality and pricing pressure; reliance on third-party foundries and limited-source suppliers; manufacturing disruptions and yield risk; export controls and U.S.-China and China-Taiwan tensions; cybersecurity and intellectual-property claims; and variable-rate borrowing exposure. Long-term foundry commitments could also be costly if demand falls below minimum commitments.
- The company reported no pending legal proceedings it believed reasonably possible to result in a material loss. Management and the auditor concluded that internal control over financial reporting was effective; the auditor identified application of tax laws in certain jurisdictions as a critical audit matter, without modifying its audit opinion.
Most important facts for investors to verify
- Whether Apple’s 58% revenue concentration and the decline in China-related revenue persist or change.
- Whether inventory and supplier deposits convert into sales and cash, and whether supply constraints or customer demand weakness lead to excess or obsolete inventory.
- The repayment or refinancing plan for the $499.2 million current debt balance and the $700 million term loan due in 2024, including the impact of variable interest rates.
- Whether acquisition-related product growth and diversification offset margin pressure, higher R&D spending, and amortization.
- The realized cash-tax impact of FY2023 R&D amortization requirements and the expected FY2024 tax-rate impact of the Inflation Reduction Act.