Skyworks Solutions (SWKS 1.21%), a maker of specialty semiconductors, reported its fiscal 2019 second-quarter results on Thursday.
Last quarter, management warned investors that headwinds in the mobile industry would lead to a significant pullback in both revenue and profits. About two-thirds of Skyworks' revenue comes from chips used in mobile devices, and its biggest customer is Apple (AAPL 0.64%). Since Apple recently reported a double-digit percentage drop in iPhone revenue, it makes sense that Skyworks' revenue and profits also took a substantial hit.
Skyworks Solutions' fiscal Q2: The raw numbers
| Metric | Fiscal Q2 2019 | Fiscal Q2 2018 | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $810.4 million | $913.4 million |
(11%) |
| GAAP operating income | $237.6 million | $289.4 million | (18%) |
| GAAP net income | $214 million | $276 million | (22%) |
| GAAP EPS | $1.23 | $1.50 | (18%) |
GAAP = generally accepted accounting principles. EPS = earnings per share. Data source: Skyworks Solutions.
What happened this quarter?
- Non-GAAP net income dropped 15% to $256.6 million. That translated into $1.47 in adjusted earnings per share, which was down 10% year over year, but still beat management's guidance range.
- Non-GAAP gross margin held steady at 50.7%.
- Non-GAAP operating margin dropped 220 basis points to 34.1%.
- Stock buybacks totaled $141.5 million. The diluted share count dropped 5% year over year, which helped to cushion the decline in EPS.
- Cash balance at quarter's end was $991 million. The company remains debt free.
Image source: Getty Images.
What management had to say
CEO Liam Griffin focused his commentary on the opportunities ahead for the business:
At a higher level, our advanced connectivity solutions are enabling the critical wireless protocols that form the backbone of today's mobile economy. From data center to cloud, media and entertainment, to e-commerce and ride-hailing services, our innovative technology is underpinning the newest generation of connected applications. As we transition to 5G, these connections become increasingly more important.
Looking forward
CFO Kris Sennesael stated that the company's end markets are stabilizing, but said the current fiscal quarter will be another challenging one:
| Metric | Fiscal 2019 Q3 Guidance | Fiscal 2018 Q3 Actual | Implied Change (at Midpoint for Revenue) |
|---|---|---|---|
| Revenue | $815 million to $835 million | $894 million | (8%) |
| Non-GAAP EPS | $1.50 | $1.64 | (9%) |
Data source: Skyworks Solutions.
Griffin ended his prepared remarks on the conference call by stating that the company will continue to plow money into R&D to capitalize on the upcoming transition to 5G:
[W]e continue to deliver strong levels of profitability, allowing us to make the pivotal investments that drive market leadership. In parallel, we are advancing our technological reach, positioning us to win in the connected economy of tomorrow, an unprecedented opportunity for Skyworks.
