Skyworks Solutions, Inc. — Q2 FY2023 Form 10-Q
Reporting period: Fiscal second quarter and six months ended March 31, 2023; comparatives are the three and six months ended April 1, 2022. Skyworks sells analog and mixed-signal semiconductors across wireless and other end markets.
Key financial results
| Metric | Q2 FY2023 | Q2 FY2022 | Six months FY2023 | Six months FY2022 |
|---|---|---|---|---|
| Revenue | $1,153.1 million | $1,335.6 million | $2,482.4 million | $2,846.0 million |
| Gross profit / margin | $527.4 million / 45.7% | $637.6 million / 47.7% | $1,165.0 million / 46.9% | $1,352.4 million / 47.5% |
| Operating income / margin | $273.3 million / 23.7% | $367.3 million / 27.5% | $640.3 million / 25.8% | $813.1 million / 28.6% |
| Net income / net margin | $232.8 million / 20.2% | $305.8 million / 22.9% | $542.2 million / 21.8% | $705.7 million / 24.8% |
| Diluted EPS | $1.46 | $1.86 | $3.39 | $4.27 |
- Q2 revenue fell 13.7% year over year; six-month revenue fell 12.8%. Management attributed the decline mainly to weaker mobile-product demand from smartphone customers in Asia-Pacific.
- Q2 gross profit decreased 17.3%. Management cited lower average selling prices and unit volumes, partly offset by favorable product mix. Gross margin declined 2.0 percentage points.
- Q2 operating expenses were $254.1 million, including $23.1 million of restructuring, impairment and other charges. Interest expense rose to $18.9 million from $11.4 million, reflecting higher variable rates on term loans.
- Six-month operating cash flow was $1,185.1 million, versus $974.5 million a year earlier. The improvement was primarily associated with favorable working-capital changes, especially lower receivables. Investing cash outflow was $329.2 million; financing cash outflow was $589.3 million.
Liquidity, debt and capital allocation
- At March 31, 2023, cash and cash equivalents were $832.6 million and marketable securities were $228.8 million, totaling $1,061.4 million. Cash and securities increased $474.6 million from September 30, 2022.
- Reported current and long-term debt totaled approximately $2.0 billion. This included $500 million of notes due 2023, $500 million of notes due 2026, $500 million of notes due 2031, and $500 million outstanding under the term loan facility. The $750 million revolving facility had no borrowings outstanding. The term loan facility expires July 2024.
- During the six months, Skyworks repaid $200 million of term loans, paid $198.0 million of dividends and spent $175.3 million on stock repurchases. A new $2.0 billion repurchase authorization was approved in January 2023, expiring in February 2025; no shares had been purchased under the new program as of March 31.
- On May 8, 2023, the board declared a $0.62-per-share dividend, payable June 20 to shareholders of record May 30.
Outlook, risks and unusual items
- No specific revenue or earnings guidance is provided in the supplied filing text. Management expects interest expense to decline in Q3 FY2023 following the $200 million term-loan repayment.
- Management said existing cash, expected operating cash generation and access to the revolver should fund anticipated liquidity needs, while noting that future strategic investments or acquisitions could require additional capital.
- The company recorded $17.0 million of asset impairment charges in the six months, primarily related to certain assets held for sale; assets and liabilities classified as held for sale at quarter-end were not material. Goodwill had no impairment indicators reported.
- Management cited uncertainty around COVID-19 impacts and identified risks including market and interest-rate conditions, foreign-exchange movements, industry demand, and litigation/IP claims. It said no pending legal matter was reasonably expected to result in a material loss.
Important facts for investors to verify
- Whether smartphone demand and Asia-Pacific customer purchasing recover, and how that affects revenue, pricing, volumes and gross margin.
- The status and repayment or refinancing plan for the $500 million notes due 2023, and progress on reducing term-loan borrowings.
- Whether the working-capital-driven cash-flow improvement is sustainable, alongside inventory levels and cash conversion.
- Subsequent use of the new stock-repurchase authorization and continuation of dividends amid lower earnings.
- Future impairment, restructuring or held-for-sale charges and any material developments in legal or intellectual-property contingencies.