Financial Releases
RFMD® Announces December Quarterly Results
Quarterly Highlights:
-
Quarterly Revenue Totals
$225.4 Million - Sales Of 3G/4G Components Increase Sequentially, Outpacing Smartphone Market Growth
-
GAAP Operating Loss Is
($2.2) Million , And GAAP Diluted LPS Is($0.03) -
Non-GAAP Operating Income Is
$8.8 Million , And Non-GAAP Diluted EPS Is$0.02 -
Quarterly Shipments Of Switch And Signal Conditioning Products Exceed
$25 Million
RFMD's third quarter revenue was
During the December quarter, RFMD generated approximately
Strategic Highlights
- RFMD continued to diversify its customer base, with approximately 100% year-over-year revenue growth during the quarter at Foxconn, HTC, Huawei, Motorola, and Research In Motion
-
Shipments of switch and signal conditioning products surpassed
$25 million in quarterly revenue, in support of Foxconn, HTC,Samsung , LG, Research In Motion, and others - CPG continued to ramp its ultra-high efficiency 3G/4G PAs across a broad range of leading smartphone manufacturers
- CPG ramped PowerSmart® with an additional baseband supplier and is engaged with leading LTE baseband suppliers to deliver PowerSmart LTE to their customers
- CPG secured a major PA design win on a reference design for the 3G entry market
- MPG released a broad range of new products during the quarter, including 15 new high frequency MMICs operating from 6 to 27 GHz for microwave backhaul
- RFMD secured major GaN-based design wins and commenced volume shipments of GaN-based components to a major defense contractor
GAAP RESULTS |
||||||||||||||||||||||||||||
(in millions, except |
Q3 Fiscal |
Q2 Fiscal |
Change |
Q3 Fiscal |
Change |
|||||||||||||||||||||||
Revenue |
$ |
225.4 |
$ |
243.8 |
(7.5)% |
$ |
278.8 |
(19.2)% |
||||||||||||||||||||
Gross Margin |
28.2% |
37.1% |
(8.9) |
ppt |
37.0% |
(8.8) |
ppt |
|||||||||||||||||||||
Operating (Loss) Income |
$ |
(2.2) |
$ |
23.0 |
$ |
(25.2) |
$ |
43.3 |
$ |
(45.5) |
||||||||||||||||||
Net (Loss) Income |
$ |
(9.4) |
$ |
14.3 |
$ |
(23.7) |
$ |
36.7 |
$ |
(46.1) |
||||||||||||||||||
Diluted (LPS) EPS |
$ |
(0.03) |
$ |
0.05 |
$ |
(0.08) |
$ |
0.13 |
$ |
(0.16) |
||||||||||||||||||
NON-GAAP RESULTS (excluding share-based compensation, amortization of intangibles, integration charges, start-up costs, loss on retirement of convertible subordinated notes, restructuring charges, (gain) loss on PP&E, (income) loss from equity investment, and non-cash interest expense on convertible subordinated notes and tax adjustments) |
||||||||||||||||||||||||||||
(in millions, except |
Q3 Fiscal |
Q2 Fiscal |
Change |
Q3 Fiscal |
Change |
|||||||||||||||||||||||
Gross Margin |
30.2% |
39.1% |
(8.9) |
ppt |
38.7% |
(8.5) |
ppt |
|||||||||||||||||||||
Operating Income |
$ |
8.8 |
$ |
37.4 |
$ |
(28.6) |
$ |
54.0 |
$ |
(45.2) |
||||||||||||||||||
Net Income |
$ |
5.1 |
$ |
31.1 |
$ |
(26.0) |
$ |
52.6 |
$ |
(47.5) |
||||||||||||||||||
Diluted EPS |
$ |
0.02 |
$ |
0.11 |
$ |
(0.09) |
$ |
0.19 |
$ |
(0.17) |
||||||||||||||||||
Financial Outlook and Business Commentary
For the March quarter, RFMD anticipates share gains in smartphones and projects 3G/4G products will represent approximately two-thirds of total cellular revenue. The Company currently forecasts a greater-than-seasonal decline in sales to cellular handset manufacturers in
RFMD currently believes the demand environment in its end markets supports the following expectations and projections for the
-
RFMD expects March quarter revenue of approximately
$185 million - RFMD expects gross margin to improve 200-300 basis points
-
RFMD expects non-GAAP per share results of breakeven to
($.02) - RFMD expects to reduce inventory levels and generate positive free cash flow
RFMD's actual quarterly results may differ from these expectations and projections, and such differences may be material.
Comments From Management
Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance with
In managing RFMD's business on a consolidated basis, management develops an annual operating plan, which is approved by our Board of Directors, using non-GAAP financial measures. In developing and monitoring performance against this plan, management considers the actual or potential impacts on these non-GAAP financial measures from actions taken to reduce unit costs with the goal of increasing gross margin and operating margin. In addition, management relies upon these non-GAAP financial measures to assess whether research and development efforts are at an appropriate level, and when making decisions about product spending, administrative budgets, and marketing programs. In addition, we believe that non-GAAP financial measures provide useful supplemental information to investors and enable investors to analyze the results of operations in the same way as management. We have chosen to provide this supplemental information to enable investors to perform additional comparisons of operating results, to assess our liquidity and capital position and to analyze financial performance excluding the effect of expenses unrelated to operations, certain non-cash expenses and share-based compensation expense, which may obscure trends in RFMD's underlying performance.
We believe that these non-GAAP financial measures offer an additional view of RFMD's operations that, when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of RFMD's results of operations and the factors and trends affecting RFMD's business. However, these non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.
Our rationale for using these non-GAAP financial measures, as well as their impact on the presentation of RFMD's operations, are outlined below:
Non-GAAP gross profit and gross margin. Non-GAAP gross profit and gross margin exclude share-based compensation expense, amortization of intangible assets, other non-cash expenses and adjustments for restructuring and integration charges. 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 RFMD's historical performance and projected costs and the potential for realizing cost efficiencies. We believe that the majority of RFMD's purchased intangibles are not relevant to analyzing current operations because they generally represent costs incurred by the acquired company to build value prior to acquisition, and thus are effectively part of transaction costs rather than ongoing costs of operating RFMD's business. In this regard, we note that (i) once the intangibles are fully amortized, the intangibles will not be replaced with cash costs and therefore, the exclusion of these costs provides management and investors with better visibility into the actual costs required to generate revenues over time, and (ii) although we set the amortization expense based on useful life of the various assets at the time of the transaction, we cannot influence the timing and amount of the future amortization expense recognition once the lives are established. Similarly, we believe that presentation of non-GAAP gross profit and gross margin and other non-GAAP financial measures that exclude the impact of share-based compensation expense assists management and investors in evaluating the period-over-period performance of RFMD's ongoing operations because (i) the expenses are non-cash in nature, and (ii) although the size of the grants is within our control, the amount of expense varies depending on factors such as short-term fluctuations in stock price volatility and prevailing interest rates, which can be unrelated to the operational performance of RFMD during the period in which the expense is incurred and generally is outside the control of management. Moreover, we believe that the exclusion of share-based compensation expense in presenting non-GAAP gross profit and gross margin and other non-GAAP financial measures is useful to investors to understand the impact of the expensing of share-based compensation to RFMD's gross profit and gross margins and other financial measures in comparison to both prior periods as well as to its competitors. We also believe that the adjustments to profit and margin related to other non-cash expenses and restructuring and integration charges do not constitute part of RFMD's ongoing operations and therefore the exclusion of these costs provides management and investors with better visibility into the actual costs required to generate revenues over time and gives management and investors a more effective means of evaluating our historical and projected performance. We believe disclosure of non-GAAP gross profit and gross margin has economic substance because the excluded expenses do not represent continuing cash expenditures and, as described above, we have little control over the timing and amount of the expenses in question.
Non-GAAP operating income and operating margin. Non-GAAP operating income and operating margin exclude share-based compensation expense, amortization of intangible assets, other non-cash expenses, restructuring and integration charges, (gain) loss on PP&E and start-up costs. We believe that presentation of a measure of operating income and operating margin that excludes amortization of intangible assets and share-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 other non-cash expenses, restructuring and integration charges, (gain) loss on PP&E and start-up costs do not constitute part of RFMD's ongoing operations and therefore, the exclusion of these costs provides management and investors with better visibility into the actual costs required to generate revenues over time and gives management and investors a more effective means of evaluating our historical and projected performance. We believe disclosure of non-GAAP operating income and operating margin has economic substance because the excluded expenses are either unrelated to operations or do not represent current cash expenditures.
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 share-based compensation expense, amortization of intangible assets, other non-cash expenses, restructuring and integration charges, (gain) loss on PP&E, start-up costs, loss on retirement of convertible subordinated notes, non-cash interest expense on convertible subordinated notes, loss (income) from equity investment and also reflect an adjustment of income taxes for cash basis. 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 operations or do not represent current cash expenditures.
Non-GAAP research and development, marketing and selling and general and administrative expenses. Non-GAAP research and development, marketing and selling and general and administrative expenses exclude share-based compensation expense, amortization of intangible assets, other non-cash expenses and restructuring and integration charges. We believe that presentation of measures of these operating expenses that exclude amortization of intangible assets and share-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 other non-cash expenses and restructuring and integration charges do not constitute part of RFMD's ongoing operations and therefore, the exclusion of these costs provides management and investors with better visibility into the actual costs required to generate revenues over time and gives management and investors a more effective means of evaluating our historical and projected performance. We believe disclosure of these non-GAAP operating expenses has economic substance because the excluded expenses are either unrelated to operations or do not represent current cash expenditures.
Free cash flow. RFMD defines free cash flow as net cash provided by operating activities during the period minus property and equipment expenditures made during the period. We use free cash flow as a supplemental financial measure in our evaluation of liquidity and financial strength. Management believes that this measure is useful as an indicator of our ability to service our debt, meet other payment obligations and make strategic investments. Free cash flow should be considered in addition to, rather than as a substitute for, net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. Additionally, our definition of free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our entire statement of cash flows.
EBITDA. RFMD defines EBITDA as earnings before interest expense and interest income, income tax expense (benefit), depreciation and intangible amortization. Management believes that this measure is useful to evaluate our ongoing operations and as a general indicator of our operating cash flow (in conjunction with a cash flow statement which also includes among other items, changes in working capital and the effect of non-cash charges). The amounts shown for EBITDA as presented herein differ from the amounts calculated under the definition of EBITDA used in our equipment term loan agreement. The definition of EBITDA as used in the loan agreement is further adjusted for certain cash and non-cash charges, including stock compensation expense, and is used to determine compliance with financial covenants.
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 cash taxes, 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 the principal amount of RFMD's convertible subordinated notes due 2012 and 2014. Management believes that net debt or positive net cash provides useful information regarding the level of RFMD's indebtedness by reflecting cash and investments that could be used to repay debt.
Limitations of non-GAAP financial measures. The primary material limitations associated with the use of non-GAAP gross profit and gross margin, non-GAAP operating expenses, non-GAAP operating income and operating margin, non-GAAP net income, non-GAAP net income per diluted share, free cash flow, EBITDA, non-GAAP ROIC and net debt or positive net cash, as compared to the most directly comparable GAAP financial measures of gross profit and gross margin, operating expenses, operating income, net income, net income per diluted share and net cash provided by operating activities are (i) they may not be comparable to similarly titled measures used by other companies in RFMD's industry, and (ii) they exclude financial information that some may consider important in evaluating our performance. 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.
About RFMD
Headquartered in
The
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 the federal securities laws.
RF MICRO DEVICES®, RFMD® and PowerSmart® are trademarks of
|
||||||
Three Months Ended |
||||||
December 31, 2011 |
January 1, |
|||||
Total revenue |
$ |
225,425 |
$ |
278,794 |
||
Costs and expenses: |
||||||
Cost of goods sold |
161,864 |
175,705 |
||||
Research and development |
37,455 |
33,920 |
||||
Marketing and selling |
16,047 |
14,621 |
||||
General and administrative |
12,238 |
11,036 |
||||
Other operating expense |
5 |
192 |
||||
Total costs and expenses |
227,609 |
235,474 |
||||
Operating (loss) income |
(2,184) |
43,320 |
||||
Other expense |
(2,084) |
(3,034) |
||||
(Loss) income before income taxes |
$ |
(4,268) |
$ |
40,286 |
||
Income tax expense |
(5,125) |
(3,600) |
||||
Net (loss) income |
$ |
(9,393) |
$ |
36,686 |
||
Net (loss) income per share, diluted |
$ |
(0.03) |
$ |
0.13 |
||
Weighted average outstanding diluted shares |
283,918 |
284,152 |
||||
|
||||||
Nine Months Ended |
||||||
December 31, 2011 |
January 1, |
|||||
Total revenue |
$ |
683,427 |
$ |
838,430 |
||
Costs and expenses: |
||||||
Cost of goods sold |
451,305 |
524,280 |
||||
Research and development |
110,999 |
105,626 |
||||
Marketing and selling |
46,901 |
44,083 |
||||
General and administrative |
38,396 |
36,941 |
||||
Other operating expense |
136 |
1,229 |
||||
Total costs and expenses |
647,737 |
712,159 |
||||
Operating income |
35,690 |
126,271 |
||||
Other expense |
(8,013) |
(11,851) |
||||
Income before income taxes |
$ |
27,677 |
$ |
114,420 |
||
Income tax expense |
(13,829) |
(13,996) |
||||
Net income |
$ |
13,848 |
$ |
100,424 |
||
Net income per share, diluted |
$ |
0.05 |
$ |
0.36 |
||
Weighted average outstanding diluted shares |
283,079 |
279,493 |
||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except percentages and per share data) (Unaudited) |
|||||||||
Three Months Ended |
|||||||||
December 31, |
October 1, |
January 1, |
|||||||
GAAP operating (loss) income |
$ |
(2,184) |
$ |
23,021 |
$ |
43,320 |
|||
Share-based compensation expense |
6,409 |
9,784 |
5,615 |
||||||
Amortization of intangible assets |
4,598 |
4,597 |
4,614 |
||||||
Other expenses (income) (restructuring, (gain) loss on PP&E, |
5 |
(45) |
454 |
||||||
Non-GAAP operating income |
8,828 |
37,357 |
54,003 |
||||||
GAAP net (loss) income |
(9,393) |
14,310 |
36,686 |
||||||
Share-based compensation expense |
6,409 |
9,784 |
5,615 |
||||||
Amortization of intangible assets |
4,598 |
4,597 |
4,614 |
||||||
Other expenses (income) (restructuring, (gain) loss on PP&E, |
5 |
(45) |
454 |
||||||
Loss on retirement of convertible subordinated notes |
20 |
- |
- |
||||||
Non-cash interest expense on convertible subordinated notes |
2,388 |
2,332 |
3,046 |
||||||
(Income) loss from equity investment |
(497) |
13 |
(34) |
||||||
Tax adjustments |
1,555 |
112 |
2,257 |
||||||
Non-GAAP net income |
$ |
5,085 |
$ |
31,103 |
$ |
52,638 |
|||
GAAP and Non-GAAP weighted average outstanding diluted |
283,918 |
282,711 |
284,152 |
||||||
Non-GAAP net income per share, diluted |
$ |
0.02 |
$ |
0.11 |
$ |
0.19 |
|||
Three Months Ended |
||||||||||||
|
|
|
||||||||||
GAAP gross margin |
$ |
63,561 |
28.2% |
$ |
90,393 |
37.1% |
$ |
103,089 |
37.0% |
|||
Adjustment for intangible amortization |
3,515 |
1.6% |
3,514 |
1.4% |
3,515 |
1.2% |
||||||
Adjustment for share-based compensation |
993 |
0.4% |
1,455 |
0.6% |
1,065 |
0.4% |
||||||
Other expenses |
- |
0.0% |
- |
0.0% |
262 |
0.1% |
||||||
Non-GAAP gross margin |
$ |
68,069 |
30.2% |
$ |
95,362 |
39.1% |
$ |
107,931 |
38.7% |
|||
ADDITIONAL SELECTED NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
(In thousands, except percentages) |
||
Three Months Ended |
||
Non-GAAP Operating Income |
|
|
(as a percentage of sales) |
||
GAAP operating loss |
(1.0)% |
|
Share-based compensation expense |
2.9% |
|
Amortization of intangible assets |
2.0% |
|
Other expenses (restructuring, (gain) loss on PP&E, start-up costs and other non-cash |
0.0% |
|
Non-GAAP operating income |
3.9% |
|
Three Months Ended |
||||||||||||
December 31, |
October 1, |
January 1, |
||||||||||
GAAP research and development expense |
$ |
37,455 |
$ |
36,961 |
$ |
33,920 |
||||||
Less: |
||||||||||||
Share-based compensation expense |
1,515 |
1,533 |
1,405 |
|||||||||
Amortization of intangible assets |
13 |
13 |
13 |
|||||||||
Non-GAAP research and |
$ |
35,927 |
$ |
35,415 |
$ |
32,502 |
||||||
Three Months Ended |
||||||||||||
December 31, |
October 1, |
January 1, |
||||||||||
GAAP marketing and selling expense |
$ |
16,047 |
$ |
15,828 |
$ |
14,621 |
||||||
Less: |
||||||||||||
Share-based compensation expense |
1,339 |
1,546 |
1,255 |
|||||||||
Amortization of intangible assets |
1,070 |
1,070 |
1,086 |
|||||||||
Non-GAAP marketing and selling expense |
$ |
13,638 |
$ |
13,212 |
$ |
12,280 |
||||||
Three Months Ended |
||||||||||||
December 31, |
October 1, |
January 1, |
||||||||||
GAAP general and administrative expense |
$ |
12,238 |
$ |
14,629 |
$ |
11,036 |
||||||
Less: |
||||||||||||
Share-based compensation expense |
2,562 |
5,250 |
1,890 |
|||||||||
Non-GAAP general and administrative |
$ |
9,676 |
$ |
9,379 |
$ |
9,146 |
||||||
ADDITIONAL SELECTED NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (Unaudited) |
|||
Free |
Three Months Ended |
||
|
|||
(In millions) |
|||
Net cash provided by operating activities |
$ |
46.2 |
|
Purchases of property and equipment |
(8.7) |
||
Free cash flow |
$ |
37.5 |
|
(1) Free Cash Flow is calculated as net cash provided by operating activities minus property and equipment expenditures. |
|||
|
||||||
December 31, |
April 2, |
|||||
ASSETS |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ |
134,484 |
$ |
131,760 |
||
Restricted cash |
519 |
422 |
||||
Short-term investments |
160,931 |
159,881 |
||||
Accounts receivable, net |
115,539 |
120,375 |
||||
Inventories |
147,887 |
149,813 |
||||
Other current assets |
29,415 |
37,908 |
||||
Total current assets |
588,775 |
600,159 |
||||
Property and equipment, net |
202,484 |
209,478 |
||||
Intangible assets, net |
69,888 |
83,685 |
||||
Goodwill |
95,628 |
95,628 |
||||
Long-term investments |
3,246 |
2,694 |
||||
Other non-current assets |
30,310 |
33,749 |
||||
Total assets |
$ |
990,331 |
$ |
1,025,393 |
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
Current liabilities: |
||||||
Accounts payable and accrued liabilities |
121,514 |
130,973 |
||||
Current portion of long-term debt |
39,947 |
3,852 |
||||
Other short-term liabilities, net |
5,315 |
112 |
||||
Total current liabilities |
166,776 |
134,937 |
||||
Long-term debt, net |
117,173 |
177,343 |
||||
Other long-term liabilities |
27,437 |
36,758 |
||||
Total liabilities |
311,386 |
349,038 |
||||
Shareholders' equity |
678,945 |
676,355 |
||||
Total liabilities and shareholders' equity |
$ |
990,331 |
$ |
1,025,393 |
||
SOURCE
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