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Skyworks Solutions Inc. Braces Investors for Slowdown

By Brian Feroldi – Nov 9, 2018 at 11:56AM

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The semiconductor maker beat its quarterly guidance but projects declines in the current quarter.

Skyworks Solutions (SWKS -0.78%) reported its fiscal fourth-quarter and full-year results on Thursday, Nov 9. The company managed to eke out modest sales growth during the period and succeeded in translating the small gain into decent bottom-line growth thanks to stock buybacks and a reduced tax rate. However, management warned investors that industrywide headwinds are going to cause year-over-year declines in the current quarter. 

Skyworks Solutions' fiscal Q4: The raw numbers

 Metric Q4 2018 Q4 2017 Year-Over-Year Change
Revenue $1.01 billion $984.6 million

2.4%

GAAP operating income $340 million $346 million (1.7%)
GAAP net income $286 million $281 million 1.8%
GAAP EPS $1.58 $1.51 4.6%

Data source: Skyworks Solutions. GAAP = unadjusted.

What happened with Skyworks this quarter?

  • Revenue of $1.008 billion came in at the high end of guidance.
  • Non-GAAP gross margin remained strong at 51.2%. 
  • Non-GAAP earnings per share grew 6% to $1.94. That number exceeded management's guidance range. The growth was aided by a 3% reduction in shares outstanding thanks to copious amounts of stock buybacks and a lower tax rate.
  • Management spent $235 million on stock buybacks during the quarter and $68 million on dividends.
  • Skyworks ended the quarter with just over $1 billion in cash. That represents a large sequential decline caused by acquisition expenses and heavy spending on buybacks.

Here's a quick review of the headline numbers from the full fiscal year 2018:

  • Revenue grew 6% to $3.868 billion.
  • Non-GAAP EPS grew 12% to $7.22.
  • $1 billion was returned to shareholders via buybacks and dividends.
People sitting next to each other with smartphones in their hands

Image source: Getty Images.

What management had to say

CEO Liam Griffin said this was the ninth year in a row that the company posted revenue and non-GAAP EPS growth. He also expounded on the large opportunities that lie ahead:

From industrial IoT to frictionless commerce, autonomous vehicles, ubiquitous streaming and virtual reality, Skyworks is revolutionizing the way the world communicates. As 5G rapidly approaches, we are pushing the performance envelope with our comprehensive Sky platform and positioning Skyworks to extend our reach across a wide array of high growth applications.

CFO Kris Sennesael noted that the company was able to post growth in spite of weakness in its core market: "Skyworks' continued strength in broad markets coupled with the launch of a diverse set of high performance mobile solutions is offsetting unit declines in premium smartphones and overall China softness."

Looking forward

Sennesael warned investors that the near-term industry weakness was going to weigh on its results in the current quarter.

Metric Fiscal 2019 Q1 Guidance Fiscal 2018 Q1 Actual Implied Change (at Midpoint for Revenue)
Revenue $1.00 billion to $1.02 billion $1.052 billion (3.9%)
Non-GAAP EPS $1.91 $2.00 (4.5%)

Data source: Skyworks Solutions.

Despite guiding for year-over-year declines in the current quarter, CEO Griffin did his best to reassure investors that the upcoming year will be a prosperous one for investors:

Despite the near-term market weakness, we have a clear path to deliver our 10th consecutive year of revenue and earnings growth in fiscal 2019. This outlook is driven by sustained double-digit growth across our broad markets business, a powerful and expanding design win pipeline encompassing a wide range of customers and applications, world-class operational execution and scale, and finally, our unwavering commitment to creating shareholder value.

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skyworks Solutions. The Motley Fool has a disclosure policy.

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