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Qorvo (QRVO) Q1 Earnings Top Estimates, Stock Up on Solid View

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Qorvo Inc. (QRVO - Free Report) reported first-quarter fiscal 2021 non-GAAP earnings of $1.50 per share, which improved 10.3% on a year-over-year basis. The figure surpassed the Zacks Consensus Estimate by 32.7%.

Revenues increased 1.5% year over year to $787.5 million. Further, the top line outpaced the consensus mark by 7.8%. Moreover, the figure was above the higher end of the management’s guidance of $710 million to $750 million.

Improvement in Infrastructure and Defense (IDP) contributed to the results. Moreover, the company benefited from broad-based demand in 5G handsets, Wi-Fi 6 and IoT products.

Shares Up on Encouraging Q2 View

Following stellar fiscal first-quarter results and encouraging second-quarter 2021 guidance, shares of Qorvo were up 5% in the pre-market trading on Jul 30.

For second-quarter fiscal 2021, Qorvo anticipates revenues between $925 million and $955 million. The Zacks Consensus Estimate for revenues is pegged at $793.7 million.

Sequential improvement in smartphone vertical, and gains from consistent growth in 5G infrastructure, power management, 5G base stations, Wi-Fi 6 solutions, and defense end-markets is anticipated to drive performance in second-quarter fiscal 2021.

Non-GAAP earnings are projected to be $1.90 per share at the mid-point. The consensus mark for earnings is currently pegged at $1.40.

Non-GAAP gross margin is anticipated to be 50%.

 


Notably, Qorvo’s stock has fallen 0.8% year to date, compared with the industry’s decline of 1.9%.

Quarter Details

Segment-wise, Mobile Products (MP) revenues of $468 million, exceeded the company’s expectations, driven by resilient mobile and handset demand. Impact of global supply chain disruptions due to COVID-19 was also less than initially expected.

During the fiscal first quarter, the company witnessed robust traction for its 5G solutions. These offerings are highly integrated and high-performance solutions, which enable customers to reduce product footprint and accelerate products to market.

Additionally, Qorvo’s mid-high-band and ultra-high-band 5G solutions are being adopted by all leading 5G chipsets.

Further, synergies from Decawave, Active-Semi and MEMS technology acquisitions have significantly expanded Qorvo’s capabilities and positions it well to benefit from growing demand for proximity awareness, secure payments and secure access for smartphones, automotive and IoT.

IDP revenues grew double-digit year over year to $319 million. The year-over-year increase can primarily be attributed to robust growth in the company’s wireless connectivity, improvement in 5G base station deployments and robust 5G infrastructure market demand.

Further, growth reflects strong demand for the company’s solutions in defense (advanced radars and power management technologies and other electronic warfare products) and connectivity (Wi-Fi 6 and emerging IoT applications). Rapid adoption of gallium nitride or GaN for high-power applications also drove the defense top line.

Notably, uptick in GaN high-power amplifiers and small signal components improved during the reported quarter, driven by increasing deployment of 5G massive MIMO antennas.

In the connectivity and broadband business, the company increased shipments of Wi-Fi 6 solutions and secured multiple cable amplifier design wins to cater to rising need for data to home owing to COVID-19 induced shelter-in-place guidelines. Notably, Qorvo expanded its global customer base for Wi-Fi 6 solutions, front-end modules (FEM) and BAW filters during the quarter under review.

Moreover, the acquisition of Custom MMIC enhanced Qorvo’s capabilities in the defense and aerospace end-markets.

In the programmable power management business, the company’s programmable ICs enjoyed solid momentum driven by robust growth in data center, computing and gaming consoles.

Operational Details

Non-GAAP gross margin expanded 240 basis points (bps) from the year-ago quarter to 48.6%. This can be attributed to lower manufacturing cost and favorable product mix.

Non-GAAP operating expenses increased 6.4% year over year to $178.7 million.
 

Qorvo, Inc. Price, Consensus and EPS Surprise

Qorvo, Inc. Price, Consensus and EPS Surprise

Qorvo, Inc. price-consensus-eps-surprise-chart | Qorvo, Inc. Quote

Non-GAAP operating income improved 7.2% to $203.7 million. Non-GAAP operating margin expanded 140 bps from the year-ago quarter to 25.9%.

Balance Sheet & Cash Flow

As of Jun 27, 2020, cash and cash equivalents were $1.14 billion compared with $714.9 million reported as of Mar 28, 2020. As of Jun 27, 2020, long-term debt was $1.87 billion compared with $1.57 billion as of Mar 28, 2020. The company also concluded the quarter with unused $300 million unsecured revolver.

Net cash provided by operating activities was $214.3 million, flat sequentially. Free cash flow during the reported quarter came in at $184.4 million, compared with $179.2 million in the prior quarter.

During the fiscal first quarter, the company repurchased shares worth $75 million.

Zacks Rank & Stocks to Consider

Currently, Qorvo carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Dropbox (DBX - Free Report) , Asure Software, Inc. (ASUR - Free Report) and Analog Devices (ADI - Free Report) . While both Dropbox and Asure Software sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dropbox, Asure Software, and Analog Devices are scheduled to report earnings on Aug 6, Aug 10 and Aug 19, respectively.

Long-term earnings growth rate of Dropbox, Asure Software, and Analog Devices is pegged at 32.51%, 14% and 13.33%, respectively.

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