Skyworks Solutions, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended October 1, 2021 (52 weeks), compared with the year ended October 2, 2020 (53 weeks). This filing reports annual results; it does not provide a clear standalone fourth-quarter financial summary.
Business context
Skyworks designs, develops, manufactures, and sells analog semiconductors for wireless connectivity and related markets, including smartphones, 5G and Wi-Fi, automotive, industrial, infrastructure, and connected-home applications. It has one reportable operating segment. In July 2021, it acquired Silicon Laboratories’ Infrastructure and Automotive business for $2.75 billion in cash consideration, expanding its exposure to automotive, industrial, data-center, and infrastructure markets.
Financial performance
| Metric | FY2021 | FY2020 | Change or context |
|---|---|---|---|
| Revenue | $5,109.1 million | $3,355.7 million | Up 52.3% |
| Gross profit / margin | $2,512.4 million / 49.2% | $1,612.9 million / 48.1% | Margin up 1.1 percentage points |
| Operating income / margin | $1,612.7 million / 31.6% | $891.8 million / 26.6% | Higher revenue and lower operating expenses as a share of revenue |
| Net income / margin | $1,498.3 million / 29.3% | $814.8 million / 24.3% | Net income up approximately 84% |
| Diluted EPS | $8.97 | $4.80 | Up approximately 87% |
| Operating cash flow | $1,772.0 million | $1,204.5 million | Up $567.5 million; higher earnings partly offset by working-capital use |
| Capital expenditures | $637.8 million | $389.4 million | Increased investment |
Management attributed revenue growth principally to stronger demand for wireless connectivity and technology upgrade cycles, including 5G and Wi-Fi 6, as well as higher average content per device. Gross-profit growth reflected higher unit volumes and favorable product mix, partly offset by lower average selling prices and acquisition-related intangible and inventory-step-up amortization. R&D expense rose to $532.3 million from $464.1 million; SG&A rose to $322.5 million from $231.4 million, including acquisition-related and headcount costs.
Liquidity, debt, and capital allocation
Cash, cash equivalents, and marketable securities totaled $1,027.2 million at year-end, up from $980.0 million. Cash and cash equivalents were $882.9 million. Long-term debt was reported at a carrying value of $2,235.6 million: $1.5 billion of senior notes due 2023, 2026, and 2031, plus $750 million outstanding under term loans due 2024. The company had no borrowings under its $750 million revolving facility, which matures in 2026. The term loan and revolver include a maximum leverage covenant of 3.0-to-1.0.
FY2021 investing cash outflow was $3,133.2 million, primarily reflecting the acquisition and $637.8 million of capital expenditures. Financing cash inflow was $1,677.4 million, including debt proceeds, partly offset by debt repayments, dividends, and repurchases. Dividends paid were $340.6 million; the company repurchased 1.4 million shares for $195.6 million. A $0.56-per-share dividend was declared after year-end, subject to the stated record and payment dates.
Changes, outlook, and key risks
- Acquisition and accounting effects: The acquisition added $1,708.3 million of intangible assets and $986.2 million of goodwill. Its contribution to FY2021 revenue and net income from the acquisition date was described as not material. Management estimated FY2022 gross margin would decrease and amortization expense and interest expense would increase, chiefly due to the acquisition and higher average borrowings. The filing gives no quantified earnings or revenue guidance.
- Tax items: The effective tax rate was 6.3%, versus 11.2% in FY2020. The lower rate reflected, among other items, benefits from changes in uncertain-tax-position reserves; the company recognized a $34.8 million benefit following conclusion of an IRS examination and reduced reserves after a statute-of-limitations lapse. The Singapore tax holiday reduced FY2021 taxes by $99.5 million, subject to employment and investment conditions.
- Customer concentration: Apple represented 59% of FY2021 revenue, versus 56% in FY2020 and 51% in FY2019. The three largest accounts receivable balances represented 70% of gross receivables at year-end.
- Operating and market risks: COVID-19-related supply constraints, elevated input and logistics costs, demand forecasting uncertainty, and potential production or staffing disruptions remained significant risks. The company also identified reliance on limited or sole-source suppliers, complex manufacturing and yield execution, semiconductor cyclicality, pricing competition, product obsolescence, and dependence on customer design wins.
- Geopolitical, financing, and other risks: U.S.-China trade restrictions and export controls may affect sales, sourcing, and manufacturing. Acquisition integration, debt service and covenant compliance, and the potential effects of tax-law changes are additional risks. The filing says no pending legal proceeding was reasonably expected to result in a material loss; it nevertheless describes possible intellectual-property, product, and other claims.
Important facts for investors to verify
- Whether growth and margins continue after accounting for the 53-week FY2020 comparison, seasonal demand, lower selling prices, and acquisition-related amortization.
- Integration progress and realized benefits from the Silicon Labs Infrastructure and Automotive acquisition, including acquired-asset assumptions and future amortization.
- Apple-related revenue exposure, customer receivables concentration, and any changes in customer orders or purchasing patterns.
- Supply availability, inventory levels, purchase commitments, manufacturing yields, and the cost effects of continuing supply-chain disruptions.
- Debt repayment capacity, variable-rate term-loan exposure, leverage covenant headroom, and liquidity after capital spending, dividends, and any further acquisitions.
- Tax-audit developments, uncertain tax positions, and continued eligibility for the Singapore tax holiday.
The auditor issued an unqualified opinion on the financial statements and concluded that internal control over financial reporting was effective as of October 1, 2021.