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Skyworks' (SWKS) Q4 Earnings and Revenues Beat Estimates

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Skyworks Solutions (SWKS - Free Report) reported fourth-quarter fiscal 2020 non-GAAP earnings of $1.85 per share that beat the Zacks Consensus Estimate and rose from the year-ago quarter’s figure by 21.7%.

Revenues of $956.8 million surpassed the Zacks Consensus Estimate by 13.6%. Also, the top line rallied 15.6% on a year-over-year basis.

The upside can be attributed to rapid deployment of 5G, which boosted demand for Skyworks’ mobile solutions. Also, broad markets continued to witness robust momentum.

Skyworks Solutions, Inc. Price, Consensus and EPS Surprise

Skyworks Solutions, Inc. Price, Consensus and EPS Surprise

Skyworks Solutions, Inc. price-consensus-eps-surprise-chart | Skyworks Solutions, Inc. Quote

Broad markets contributed 31% to revenues in the fiscal fourth quarter.

Notable Deal Wins

In the quarter under review, Skyworks’ Sky5 product portfolio continued to facilitate several 5G launches. Skyworks' solutions were utilized by Samsung, Xiaomi, OPPO and other Tier-1 players.

Skyworks stated that 5G-enabled smartphones now constituted 12% of the total smartphones in the world. Globally, 38 countries have already launched 5G networks and more are likely to follow the suit in the coming days.

By 2023, the number of 5G-enabled smartphones, as a percentage of overall smartphones, will increase to 50%, added Skyworks.

Also, Skyworks’ clinched 5G design wins for deployment of MIMO base stations and small cell installations.

Skyworks also facilitated the touch-free point-of-sale systems at Square. Moreover, the company’s solutions also supported Facebook’s (FB - Free Report) Oculus AR/VR devices.

In the fiscal third quarter, the company’s Wi-Fi 6 solutions were adopted by ASUS and NETGEAR (NTGR - Free Report) to power their advanced routers. Logitech, Sony, and Razer chose Skyworks’ wireless audio solutions, which boast low latency to power headsets used for video gaming.

Skyworks’ introduced connected-car solutions (high-speed) for prominent Japan-based and Korea-based automotive OEMs along with Daimler.

The company also rolled out 802.11ax Wi-Fi solutions for Amazon’s (AMZN - Free Report) eero's access points. It won residential gateways design wins from Telecom Italia and Verizon.

In the industrial space, Skyworks’ unveiled embedded connectivity modules to facilitate Fibocom to manage its enterprise Internet of Things (IoT) architectures. Itron and Census deployed Skyworks’ solutions to power wireless utility metering systems.

Boston Scientific and General Electric Company chose Skyworks’ vital medical applications.

Operating Details

Non-GAAP gross margin expanded 10 basis points (bps) on a year-over-year basis to 50.4%. The figure was within the management’s guidance of 50-50.5%.

Research & development expenses, as percentage of revenues, expanded 30 bps on a year-over-year basis to 13.2%. Moreover, selling, general & administrative expenses, as percentage of revenues, contracted 20 bps from the year-ago quarter’s tally to 6.5%.

Non-GAAP operating margin expanded 100 bps on a year-over-year basis to 35% in the reported quarter.

Balance Sheet & Cash Flow

As of Oct 2, 2020, cash & cash equivalents and marketable securities were $980 million, down from $1.162 billion as of Jun 26, 2020.

Cash generated by operating activities was $267 million compared with $258.7 million in the prior quarter.

Capital expenditures came in at $146 million in the reported quarter compared with $72 million in the prior quarter.

In the fiscal fourth quarter, Skyworks repurchased 1.7 million shares for a total of $231 million and paid out $84 million as dividends.

Skyworks announced quarterly dividend of 50 cents payable on Dec 10, to shareholders as on Nov 19.

Fiscal 2020 At a Glance

For fiscal 2020, Skyworks reported revenues of $3.356 billion indicating a decline of 0.6% from fiscal 2019. COVID-19 crisis as well as souring of U.S. China trade relations marred the top-line performance for the fiscal 2020.

Non-GAAP earning per share came in at $6.13 compared with $6.17 reported for fiscal 2019.

Non-GAAP gross margin contracted 40 bps to 50.2% while non-GAAP operating margin contracted 80 bps to 33.7%.

For fiscal 2020, Skyworks’ repurchased 6.3 million shares worth $648 million and paid $307 million as dividends.

Guidance

For first-quarter fiscal 2021, revenues are expected in the range of $1.04-$1.07 billion. The Zacks Consensus Estimate for revenues currently stands at $934.04 million.

The company expects broad markets to increase at a strong double-digit rate year over year in fiscal first quarter.

Skyworks expects expect gross margin in the range of 50.25-50.75% and operating expenses of nearly $148 million. Gross margin growth is likely to benefit from favorable product mix due to more 5G products.

Non-GAAP earnings are anticipated to be $2.06 per share at the mid-point of the revenue range. The Zacks Consensus Estimate for earnings is pegged at $1.78.

To Wrap up

Skyworks is banking on its diversified portfolio strength to benefit from the rapid changes  witnessed in the industry amid continued disruption from the coronavirus crisis. Rapid deployment of 5G across the globe is a tailwind for the company. The company continues to win content at mobile and OEMs like Motorola, Samsung, OPPO, VIVO, and Xiaomi, which bodes well for the long haul.

Further, solutions of this Zacks Rank #2 (Buy) company are supporting remote work, and online learning along with telemedicine and emergency response applications among others.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, supply chain disruptions and macroeconomic uncertainties owing to coronavirus pandemic remain headwinds.

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