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Qorvo Declares Pricing of $270M Additional Senior Notes

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Qorvo, Inc. (QRVO - Free Report) recently announced the pricing of an additional $270 million of unsecured senior notes. The notes are slated to mature in 2026.

The pricing of additional secure notes is at 101.5% of par value, which includes any accrued interest from Jan 15, 2019 through the closing date. Consequently, this will take the total principal amount outstanding to $900 million.

Once placed, the additional notes will be an unsecured senior liability of Qorvo, interest for which will be paid at 5.5% anually.

Notably, the size of the additional offering was increased from the previous level of $170 million. Subject to customary closing conditions, the sale of these notes to initial buyers is anticipated to conclude on or around Mar 5, 2019.

The notes will be privately offered to institutional buyers qualifying under Rule 144A of the Securities Act of 1933, as amended.

Qorvo intends to utilize the proceeds of additional notes to address general corporate purposes. We believe that these notes will provide financial flexibility to the company and fuel long-term growth.

Brief on Qorvo’s Cash Position

As of Dec 29, 2018, cash and cash equivalents were $649.7 million compared with $557.9 million reported in the previous quarter. Long-term debt was $714.4 million as compared with $735.1 million at the end of the previous quarter.

In third-quarter of fiscal 2019, Qorvo generated operating cash flow of $333 million, up from $214.5 million in the previous quarter. Free cash flow during the quarter came in at $261 million.

Notably, the company repurchased shares worth $152 million under the share repurchase program during the last reported quarter.

Wrapping Up

Qorvo is benefiting from robust adoption of its wireless connectivity and base station solutions. Also, solid demand for Gallium Nitride (GaN) integrated front end modules for high-power applications bode well over the long haul.

However, weakness in flagship smartphone product volumes and softness in China domestic market is an overhang at least in the near term. In fact, Qorvo anticipates Mobile Products revenues in the fourth quarter to be down roughly 25% sequentially, primarily due to seasonal declines.

Further, customer concentration, particularly from Apple (AAPL - Free Report) amid lesser-than-expected demand of latest iPhones is a significant headwind for Qorvo.

Zacks Rank & Stocks to Consider

Currently, Qorvo carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Cadence Design Systems, Inc (CDNS - Free Report) and Symantec Corporation , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cadence Design and Symantec have a long-term earnings growth rate of 12% and 7.9%, respectively.

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