Skyworks Solutions Inc. (NASDAQ:SWKS) reported first-quarter fiscal 2019 non-GAAP earnings of $1.83 per share, missing the Zacks Consensus Estimate by a penny. The bottom line also came below management’s guidance of $1.91 per share, at mid-point. The figure decreased 8.5% from the year-ago quarter.
Revenues of $972 million were down 7.6 % year over year and 3.6% sequentially, primarily owing to declines across mobile business.
Further, the top line missed the Zacks Consensus Estimate of $975 million. The figure also fell short of management’s guidance of $1 billion to $1.020 billion.
Mobile contributed almost 73% of revenues, while the rest came from broad markets.
However, Skyworks is benefiting from strong demand of its wireless communications engines. The company’s expanding product portfolio, growing clout in the Internet-of-Things (IoT) solutions and 5G markets are key catalysts.
Skyworks Solutions, Inc. Revenue (TTM)
Skyworks Solutions, Inc. Revenue (TTM) | Skyworks Solutions, Inc. Quote
Quarter Details
During the first quarter, Skyworks launched SkyOne Ultra 3.0 suite to facilitate emerging automotive applications, in particular. The suite comprises SKYA230xx front-end modules leveraging SkyBlue enabling technology, SKYA220xxpower amplifiers, SKYA250xx Diversity Receive (DRx) and MIMO modules, SKYA21xxx suite of Low Noise Amplifiers (LNAs) and Discrete switches.
Additionally, the company powered Samsung’s Galaxy smartphones and clout smart audio solutions with multimode, multiband front-ends.
Moreover, Skyworks powered LG’smobile suite with antenna tuners, diversity receive modules, GPS devices and integrated transmit portfolio. The company also deployed 5G base station solutions for leading European infrastructure providers.
Further, the company joined hands with Square (NYSE:SQ) to power secure, long-range retail payment systems. The company’s Avnera Corporation acquisition is also noteworthy.The buyout gives Skyworks access to robust analog/mixed signal voice, audio and speech processing engines.
Operating Details
Non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis to 51%.
Research & development (R&D) expenses as percentage of revenues increased 190 bps on a year-over-year basis to 11.2%. However, selling, general & administrative (SG&A) expenses decreased 10 bps from the year-ago quarter to 4.9%. Non-GAAP operating expenses during the reported quarter came in at $139 million or 14% of total revenues, marginally below management’s guided range of $140 million.
As a result, non-GAAP operating margin contracted 270 bps on a year-over-year basis to 36.7% in the reported quarter.
Balance Sheet & Cash Flow
As of Dec 28, 2018, cash & cash equivalents were $1.10 billion, up from $1.05 billion reported in the previous quarter.
Cash flow from operating activities was $549 million, up from $207.6 million in the previous quarter. Capital expenditure was $129 million in the quarter under review.
The company declared a quarterly dividend of 38 cents per share, payable on Mar 19, 2019. Skyworks repurchased 4 million shares for a total of $284 million. Moreover, Skyworks authorized a new $2 billion stock repurchase program during the quarter.
Skyworks Solutions, Inc. Price, Consensus and EPS Surprise
Skyworks Solutions, Inc. Price, Consensus and EPS Surprise | Skyworks Solutions, Inc. Quote
Guidance
For second-quarter fiscal 2019, revenues are expected to be in the range of $800 million to $820 million. The Zacks Consensus Estimate is pegged at $856.9 million.
Gross margin is expected in to be in the range of 50.5-51%. Operating expenses are projected to be $135 million.
Non-GAAP earnings are anticipated to be $1.43 per share, at mid-point. The Zacks Consensus Estimate is pegged at $1.52 billion.
Conclusion
Skyworks reported dismal first-quarter results and provided tepid second-quarter guidance. The near-term softness witnessed across leading smart-phone customers remains a headwind. Moreover, unit declines across mobile business impacted the quarterly results.
The company faces stiff competition from the likes of Broadcom (NASDAQ:AVGO) and Qorvo (NASDAQ:QRVO) , among others, which exposes it to significant pricing pressures. The company also seems to be plagued with customer concentration woes.
Reportedly, the company’s power-amplifier chips enable Apple’s (NASDAQ:AAPL) iPhones to transmit data at elevated speeds. Notably, lesser-than-expected demand of latest iPhones is a headwind.
Moreover, slight changes in demand of iPhone related devices create a stir among Apple’s supplier base, which includes Skyworks. To add to the woes, Apple’s vertical integration policy is also a major concern.
However, the company is benefiting from its portfolio strength, particularly in the 5G applications and IoT market. The lifting of ban on ZTE (HK:0763) by the United States is positive, although the contribution from the Chinese original equipment manufacturer (OEM) is expected to be minimal in the near term.
Further, Skyworks continues to win content at mobile and OEMs like Huawei, Samsung (KS:005930), Oppo, Vivo, LG and Nokia (HE:NOKIA).
Zacks Rank
Currently, Skyworks has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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