Skyworks Solutions Inc. Beats Its Guidance and Issues a Bullish Outlook

By Brian Feroldi Markets Fool.com

Skyworks Solutions(NASDAQ: SWKS)reported its fiscal first-quarter results after the market closed on Thursday, Jan. 19. While the company's top and bottom lines contracted for the third time in a row, the results came in well ahead of management's guidance. Let's take a closer look at the specialty semiconductor manufacturer's results to see how it performed during the period.

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Image source: Getty Images.

Skyworks Solutions' fiscal Q1: The raw numbers

Metric

Q1 2017

Q1 2016

Year-Over-Year Change

Revenue

$914.3 million

$926.8 million

(1.3%)

Non-GAAP operating income

$354.3 million

$366.6 million

(3.4%)

Non-GAAP net income

$301.6 million

$311.2 million

(3.1%)

Non-GAAP EPS

$1.61

$1.60

0.6%

DATA SOURCE: SKYWORKS SOLUTIONS.

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What happened with Skyworks this quarter?

  • Revenue of $914 million came in ahead of the high end of management's guidance range of $894 million to $910 million.
  • Non-GAAP margins remained strong, but they declined slightly year over year. Specifically, gross margin declined by 20 basis points to 51.2%, while operating margin fell by 80 basis points to 38.8%.
  • Cash flow from operations reached $496 million, which was a new quarterly record.
  • Non-GAAP earnings per share of $1.61 were slightly ahead of the $1.58 management had projected.
  • Skyworks repurchased 1.4 million shares of its stock at an average price of $76. Over the past year, Skyworks' diluted share count has declined by 4%. The company's board has authorized a new $500 million share repurchase program.

Looking beyond the financial statement, Skyworks also stated that it is making progress in diversifying its customer base away from its dependence on Apple. While the Mac maker still comprises about 40% of the company's total revenue, management provided numerous examples of design wins or expanding relationships with other customers. These included such companies as Netgear,Comcast,Huawei,Ubiquiti Networks, and Rogers Communications.

What management had to say

CEO Liam Griffin credited the company's strong quarterly performance to the huge growth in consumer demand for mobile products. He also stated that Skyworks remains well-positioned to capitalize on the strong demand growth for mobile bandwidth, saying:

We are enabling the next phase of the wireless revolution, powering new and previously unimagined applications. With the proliferation of 4G/LTE and advent of 5G, system-level performance requirements are intensifying, driving the need for substantially higher data rates, improved efficiency and reduced latency across an exponentially growing scope of networked devices.Leveraging our innovative portfolio, carrier aggregation leadership, operational scale and demonstrated ability to deliver highly integrated solutions, Skyworks is uniquely positioned to capitalize on this connectivity megatrend.

Looking forward

CFO Kris Sennesael provided investors with a bullish outlook when he issued guidance, stating, "Given our expanding product pipeline and accelerating design win momentum, we expect to outperform industry seasonality in the March quarter." Specifically, the company is calling for revenue in the upcoming quarter to hit $840 million, which represents an 8% increase year-over year. Meanwhile, Non-GAAP EPS is expected to be $1.40. Both of those figures compared favorably to Wall Street's expectation.

The markets cheered Skyworks' quarterly report. The stock was up roughly 12% around noon on Friday. With an ever-expanding customer base and connectivity trend working in its favor, Skyworks continues to provide investors with reasons to believe that its future remains bright.

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Brian Feroldi owns shares of AAPL. The Motley Fool owns shares of and recommends AAPL and SWKS. The Motley Fool has the following options: long January 2018 $90 calls on AAPL and short January 2018 $95 calls on AAPL. The Motley Fool recommends NTGR, RCI, and UBNT. The Motley Fool has a disclosure policy.