Financial Releases
Qorvo® Announces Fiscal 2018 Second Quarter Financial Results
"Qorvo delivered a strong September quarter, with revenue and EPS exceeding our guidance range," said
Quarterly Highlights
- Grew Mobile Products revenue 38% sequentially to
$630 million , driven by Qorvo's largest customer and stronger demand inChina - Achieved record IDP revenue of
$190 million , up 21% year-over-year, and secured record design wins to support strong revenue growth - Increased IoT revenue by 50% year-over-year and doubled GaN revenue year-over-year
- Significantly expanded family of antenna control solutions and enjoyed strong growth, supported by increased antenna complexity, 4x4 MIMO implementations and expansion into mid-tier smartphones
- Supported
Huawei Mate 10 with BAW filters, antenna tuners, RF front end modules and envelope tracking (ET) power management solution - Secured RF FEM design win supporting the Tile® tracker family
- Shipped more than
$9 of RF content to Xiaomi forMi Mix 2 and received Xiaomi partnership award - Supported the deployment of 900 MHz narrow band IoT (NB-IoT) infrastructure in
China with a broad product portfolio - Launched 600 MHz band 71 wireless infrastructure products and secured design wins, expanding support for all 5G bands, from 600 MHz to 39 GHz
- Shipped BAW-based band 1/3 quadplexer, Wi-Fi iFEMs, and RF Flex™ to Oppo for next-generation flagship smartphone
- Secured multi-year design wins with major defense contractor for high-power, high-efficiency GaAs components supporting several advanced radar applications
Financial Commentary and Outlook
- Quarterly revenue in the range of
$830 million to$850 million - Gross margin of approximately 47.5%
- Diluted EPS of
$1.60 at the midpoint of guidance
Qorvo's actual quarterly results may differ from these expectations and projections, and such differences may be material.
Selected Financial Information
The following tables set forth selected GAAP and non-GAAP financial information for
SELECTED GAAP RESULTS | ||||||||||
(Unaudited) | ||||||||||
(In millions, except for percentages and EPS) | ||||||||||
For the quarter ended | For the quarter ended | Change vs. Q1 FY 2018 | ||||||||
Revenue | $ | 821.6 | $ | 640.8 | $ | 180.8 | ||||
Gross profit | $ | 321.0 | $ | 236.4 | $ | 84.6 | ||||
Gross margin | 39.1 | % | 36.9 | % | 2.2 | ppt | ||||
Operating expenses | $ | 271.5 | $ | 264.2 | $ | 7.3 | ||||
Operating income (loss) | $ | 49.6 | $ | (27.8 | ) | $ | 77.4 | |||
Net income (loss) | $ | 35.9 | $ | (30.6 | ) | $ | 66.5 | |||
Weighted average diluted shares | 130.8 | 127.0 | 3.8 | |||||||
Diluted EPS | $ | 0.27 | $ | (0.24 | ) | $ | 0.51 | |||
SELECTED NON-GAAP RESULTS1 | ||||||||||
(Unaudited) | ||||||||||
(In millions, except for percentages and EPS) | ||||||||||
For the quarter ended | For the quarter ended | Change vs. Q1 FY 2018 | ||||||||
Revenue | $ | 820.6 | $ | 639.9 | $ | 180.7 | ||||
Gross profit | $ | 388.7 | $ | 302.9 | $ | 85.8 | ||||
Gross margin | 47.4 | % | 47.3 | % | 0.1 | ppt | ||||
Operating expenses | $ | 158.2 | $ | 165.5 | $ | (7.3 | ) | |||
Operating income | $ | 230.5 | $ | 137.4 | $ | 93.1 | ||||
Net income | $ | 198.4 | $ | 113.9 | $ | 84.5 | ||||
Weighted average diluted shares | 130.8 | 131.3 | (0.5 | ) | ||||||
Diluted EPS | $ | 1.52 | $ | 0.87 | $ | 0.65 | ||||
SELECTED GAAP RESULTS | ||||||||||
(Unaudited) | ||||||||||
(In millions, except for percentages and EPS) | ||||||||||
For the quarter ended | For the quarter ended | Change vs. Q2 FY 2017 | ||||||||
Revenue | $ | 821.6 | $ | 864.7 | $ | (43.1 | ) | |||
Gross profit | $ | 321.0 | $ | 316.8 | $ | 4.2 | ||||
Gross margin | 39.1 | % | 36.6 | % | 2.5 | ppt | ||||
Operating expenses | $ | 271.5 | $ | 271.4 | $ | 0.1 | ||||
Operating income | $ | 49.6 | $ | 45.4 | $ | 4.2 | ||||
Net income | $ | 35.9 | $ | 11.8 | $ | 24.1 | ||||
Weighted average diluted shares | 130.8 | 132.3 | (1.5 | ) | ||||||
Diluted EPS | $ | 0.27 | $ | 0.09 | $ | 0.18 | ||||
SELECTED NON-GAAP RESULTS1 | ||||||||||
(Unaudited) | ||||||||||
(In millions, except for percentages and EPS) | ||||||||||
For the quarter ended | For the quarter ended | Change vs. Q2 FY 2017 | ||||||||
Revenue | $ | 820.6 | $ | 863.7 | $ | (43.1 | ) | |||
Gross profit | $ | 388.7 | $ | 369.7 | $ | 19.0 | ||||
Gross margin | 47.4 | % | 42.8 | % | 4.6 | ppt | ||||
Operating expenses | $ | 158.2 | $ | 172.9 | $ | (14.7 | ) | |||
Operating income | $ | 230.5 | $ | 196.8 | $ | 33.7 | ||||
Net income | $ | 198.4 | $ | 170.4 | $ | 28.0 | ||||
Weighted average diluted shares | 130.8 | 132.3 | (1.5 | ) | ||||||
Diluted EPS | $ | 1.52 | $ | 1.29 | $ | 0.23 | ||||
1Excludes stock-based compensation, amortization of intangibles, restructuring charges, intellectual property rights (IPR) litigation settlement, acquisition and integration related costs, non-cash deferred royalty revenue and equal and offsetting non-cash prepaid royalty amortization, start-up costs, loss (gain) on assets, (gain) loss on investments, and an adjustment of income taxes. | ||||||||||
Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance with
In managing
We believe that these non-GAAP financial measures offer an additional view of
Our rationale for using these non-GAAP financial measures, as well as their impact on the presentation of
Non-GAAP revenue. Non-GAAP revenue excludes non-cash deferred royalty revenue. We believe that the exclusion of this non-cash adjustment to revenue provides management and investors a more effective means of evaluating our historical and projected performance.
Non-GAAP gross profit and gross margin. Non-GAAP gross profit and gross margin exclude stock-based compensation expense, amortization of intangible assets, non-cash deferred royalty revenue, non-cash prepaid royalty amortization, and certain non-cash expenses. We believe that exclusion of these costs in presenting non-GAAP gross profit and gross margin gives management and investors a more effective means of evaluating
Non-GAAP operating income and operating margin. Non-GAAP operating income and operating margin exclude stock-based compensation expense, amortization of intangible assets, restructuring charges, IPR litigation settlement, acquisition and integration related costs, loss (gain) on assets, start-up costs and certain non-cash expenses. We believe that presentation of a measure of operating income and operating margin that excludes amortization of intangible assets and stock-based compensation expense is useful to both management and investors for the same reasons as described above with respect to our use of non-GAAP gross profit and gross margin. We believe
that restructuring charges, IPR litigation settlement, acquisition and integration related costs, loss (gain) on assets, start-up costs and certain non-cash expenses do not constitute part of
Non-GAAP net income and non-GAAP net income per diluted share. Non-GAAP net income and non-GAAP net income per diluted share exclude the effects of stock-based compensation expense, amortization of intangible assets, restructuring charges, IPR litigation settlement, acquisition and integration related costs, loss (gain) on assets, start-up costs, certain non-cash expenses, (gain) loss on investments and also reflect an adjustment of income taxes. The income tax adjustment primarily represents the use of net operating loss and research and development tax credit carryforwards, deferred tax expense not affecting taxes payable, tax deductible stock-based compensation expense in excess of GAAP stock-based compensation expense, and non-cash expense (benefit) related to uncertain tax positions. We believe that presentation of measures of net income and net income per diluted share that exclude these items is useful to both management and investors for the reasons described above with respect to non-GAAP gross profit and gross margin and non-GAAP operating income and operating margin. We believe disclosure of non-GAAP net income and non-GAAP net income per diluted share has economic substance because the excluded expenses are either unrelated to ongoing operations or do not represent current cash expenditures.
Non-GAAP research and development and selling, general and administrative expenses. Non-GAAP research and development and selling, general and administrative expenses exclude stock-based compensation expense, amortization of intangible assets, acquisition and integration related costs, IPR litigation settlement and certain non-cash expenses. We believe that presentation of measures of these operating expenses that exclude amortization of intangible assets and stock-based compensation expense is useful to both management and investors for the same
reasons as described above with respect to our use of non-GAAP gross profit and gross margin. We believe that acquisition and integration related costs do not constitute part of
Free cash flow.
EBITDA.
Non-GAAP ROIC. Return on invested capital (ROIC) is a non-GAAP financial measure that management believes provides useful supplemental information for management and the investor by measuring the effectiveness of our operations' use of invested capital to generate profits. We use ROIC to track how much value we are creating for our shareholders. Non-GAAP ROIC is calculated by dividing annualized non-GAAP operating income, net of an adjustment for income taxes (as described above), by average invested capital. Average invested capital is calculated by subtracting the average of the beginning balance and the ending balance of current liabilities (excluding the current portion of long-term debt and other short-term financings) from the average of the beginning balance and the ending balance of net accounts receivable, inventories, other current assets, net property and equipment and a cash amount equal to seven days of quarterly revenue.
Net debt or positive net cash. Net debt or positive net cash is defined as unrestricted cash, cash equivalents and short-term investments minus any borrowings under our credit facility
and the principal balance of our senior unsecured notes. Management believes that net debt or positive net cash provides useful information regarding the level of
Forward-looking non-GAAP measures. Our earnings release contains forward-looking non-GAAP revenue, gross margin, income tax rate and diluted earnings per share. We provide these non-GAAP measures to investors on a prospective basis for the same reasons (set forth above) that we provide them to investors on a historical basis. GAAP revenue is expected to reconcile within
Limitations of non-GAAP financial measures. The primary material limitations associated with the use of non-GAAP financial measures as an analytical tool compared to the most directly comparable GAAP financial measures are these non-GAAP financial measures (i) may not be comparable to similarly titled measures used by other companies in our industry, and (ii) exclude financial information that some may consider important in evaluating our performance, thus limiting their usefulness as a comparative tool. We compensate for these limitations by providing full disclosure of the differences between these non-GAAP financial measures and the corresponding GAAP financial measures, including a reconciliation of the non-GAAP financial measures to the corresponding GAAP financial measures, to enable investors to perform their own analysis of our gross profit and gross margin, operating expenses, operating income, net income, net income per diluted share and net cash provided by operating activities. We further compensate for the limitations of our use of non-GAAP financial measures by presenting the corresponding GAAP measures more prominently.
About
This press release includes "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions and are not historical facts and typically are identified by use of terms such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" and similar words, although some forward-looking statements are expressed differently. You should be aware that the forward-looking statements included herein represent management's current judgment and expectations, but our actual results, events and performance could differ materially from those expressed or implied by forward-looking statements. We do
not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as is required under
QRVO-F
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
(In thousands, except per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | $ | 821,583 | $ | 864,698 | $ | 1,462,414 | $ | 1,563,235 | |||||||
Costs and expenses: | |||||||||||||||
Cost of goods sold | 500,561 | 547,899 | 905,015 | 969,961 | |||||||||||
Research and development | 111,398 | 126,078 | 227,897 | 243,215 | |||||||||||
Selling, general and administrative | 138,867 | 138,583 | 278,298 | 282,178 | |||||||||||
Other operating expense | 21,193 | 6,745 | 29,469 | 16,747 | |||||||||||
Total costs and expenses | 772,019 | 819,305 | 1,440,679 | 1,512,101 | |||||||||||
Income from operations | 49,564 | 45,393 | 21,735 | 51,134 | |||||||||||
Interest expense | (14,778 | ) | (15,554 | ) | (27,049 | ) | (30,741 | ) | |||||||
Other income (expense), net | 866 | (119 | ) | 698 | (341 | ) | |||||||||
Income (loss) before income taxes | $ | 35,652 | $ | 29,720 | $ | (4,616 | ) | $ | 20,052 | ||||||
Income tax benefit (expense) | 267 | (17,873 | ) | 9,911 | (13,880 | ) | |||||||||
Net income | $ | 35,919 | $ | 11,847 | $ | 5,295 | $ | 6,172 | |||||||
Net income per share, diluted | $ | 0.27 | $ | 0.09 | $ | 0.04 | $ | 0.05 | |||||||
Weighted average outstanding diluted shares | 130,778 | 132,329 | 131,062 | 132,461 | |||||||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | |||||||||||
(In thousands, except per share data) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | |||||||||||
2017 | 2016 | ||||||||||
GAAP operating income (loss) | $ | 49,564 | $ | (27,829 | ) | $ | 45,393 | ||||
Stock-based compensation expense | 23,458 | 21,126 | 26,042 | ||||||||
Amortization of intangible assets | 135,639 | 134,686 | 119,646 | ||||||||
Restructuring charges | 7,453 | 531 | 468 | ||||||||
IPR litigation settlement | — | — | (5,100 | ) | |||||||
Acquisition and integration related costs | 2,613 | 2,777 | 8,962 | ||||||||
Start-up costs | 7,129 | 6,624 | 2,012 | ||||||||
Other (including loss (gain) on assets and other non-cash expenses) | 4,685 | (522 | ) | (610 | ) | ||||||
Non-GAAP operating income | $ | 230,541 | $ | 137,393 | $ | 196,813 | |||||
GAAP net income (loss) | $ | 35,919 | $ | (30,624 | ) | $ | 11,847 | ||||
Stock-based compensation expense | 23,458 | 21,126 | 26,042 | ||||||||
Amortization of intangible assets | 135,639 | 134,686 | 119,646 | ||||||||
Restructuring charges | 7,453 | 531 | 468 | ||||||||
IPR litigation settlement | — | — | (5,100 | ) | |||||||
Acquisition and integration related costs | 2,613 | 2,777 | 8,962 | ||||||||
Start-up costs | 7,129 | 6,624 | 2,012 | ||||||||
Other (including loss (gain) on assets and other non-cash expenses) | 4,685 | (522 | ) | (610 | ) | ||||||
(Gain) loss on investments | (70 | ) | (1,098 | ) | 169 | ||||||
Adjustment of income taxes | (18,443 | ) | (19,587 | ) | 6,974 | ||||||
Non-GAAP net income | $ | 198,383 | $ | 113,913 | $ | 170,410 | |||||
GAAP weighted average outstanding diluted shares | 130,778 | 126,961 | 132,329 | ||||||||
Dilutive stock-based awards | — | 4,384 | — | ||||||||
Non-GAAP weighted average outstanding diluted shares | 130,778 | 131,345 | 132,329 | ||||||||
Non-GAAP net income per share, diluted | $ | 1.52 | $ | 0.87 | $ | 1.29 | |||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | |||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended | |||||||||||||||||
GAAP gross profit/margin | $ | 321,022 | 39.1 | % | $ | 236,377 | 36.9 | % | $ | 316,799 | 36.6 | % | |||||
Adjustment for intangible amortization | 63,279 | 7.7 | % | 62,122 | 9.7 | % | 47,191 | 5.5 | % | ||||||||
Adjustment for stock-based compensation | 4,167 | 0.5 | % | 4,001 | 0.6 | % | 5,263 | 0.6 | % | ||||||||
Other non-cash expenses | 279 | — | % | 431 | — | % | 430 | — | % | ||||||||
Non-cash deferred royalty revenue and equal and
offsetting non-cash prepaid royalty amortization ( | — | 0.1 | % | — | 0.1 | % | — | 0.1 | % | ||||||||
Non-GAAP gross profit/margin | $ | 388,747 | 47.4 | % | $ | 302,931 | 47.3 | % | $ | 369,683 | 42.8 | % |
Three Months Ended | |
Non-GAAP Operating Income | |
(as a percentage of sales) | |
GAAP operating income | 6.0% |
Stock-based compensation expense | 2.9% |
Amortization of intangible assets | 16.5% |
Restructuring charges | 0.9% |
Acquisition and integration related costs | 0.3% |
Start-up costs | 0.9% |
Other (including loss on assets and other non-cash expenses) | 0.6% |
Non-GAAP operating income | 28.1% |
Three Months Ended | |||
Free Cash Flow (1) | |||
(in millions) | |||
Net cash provided by operating activities | $ | 219.9 | |
Purchases of property and equipment | (67.8 | ) | |
Free cash flow | $ | 152.1 | |
(1) Free Cash Flow is calculated as net cash provided by operating activities minus property and equipment expenditures. | |||
ADDITIONAL SELECTED NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS | |||||||||||
(In thousands) | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | |||||||||||
GAAP research and development expense | $ | 111,398 | $ | 116,499 | $ | 126,078 | |||||
Less: | |||||||||||
Stock-based compensation expense | 5,573 | 5,471 | 6,768 | ||||||||
Acquisition and integration related costs | — | — | 3,597 | ||||||||
Other non-cash expenses | 295 | 462 | 56 | ||||||||
Non-GAAP research and development expense | $ | 105,530 | $ | 110,566 | $ | 115,657 | |||||
Three Months Ended | |||||||||||
GAAP selling, general and administrative expense | $ | 138,867 | $ | 139,431 | $ | 138,583 | |||||
Less: | |||||||||||
Stock-based compensation expense | 13,613 | 11,587 | 13,963 | ||||||||
Amortization of intangible assets | 72,360 | 72,564 | 72,455 | ||||||||
IPR litigation settlement | — | — | (5,100 | ) | |||||||
Other non-cash expenses | 217 | 309 | 51 | ||||||||
Non-GAAP selling, general and administrative expense | $ | 52,677 | $ | 54,971 | $ | 57,214 | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 574,873 | $ | 545,463 | |||
Accounts receivable, net | 459,761 | 357,948 | |||||
Inventories | 461,005 | 430,454 | |||||
Other current assets | 112,569 | 127,740 | |||||
Total current assets | 1,608,208 | 1,461,605 | |||||
Property and equipment, net | 1,443,392 | 1,391,932 | |||||
2,173,889 | 2,173,914 | ||||||
Intangible assets, net | 1,130,036 | 1,400,563 | |||||
Long-term investments | 66,085 | 35,494 | |||||
Other non-current assets | 56,470 | 58,815 | |||||
Total assets | $ | 6,478,080 | $ | 6,522,323 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 396,935 | $ | 386,830 | |||
Other current liabilities | 26,067 | 31,998 | |||||
Total current liabilities | 423,002 | 418,828 | |||||
Long-term debt | 989,692 | 989,154 | |||||
Deferred tax liabilities | 74,168 | 131,511 | |||||
Other long-term liabilities | 86,642 | 86,108 | |||||
Total liabilities | 1,573,504 | 1,625,601 | |||||
Stockholders' equity | 4,904,576 | 4,896,722 | |||||
Total liabilities and stockholders' equity | $ | 6,478,080 | $ | 6,522,323 |
At Qorvo
Doug DeLieto
VP, Investor Relations
336-678-5797
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