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Qorvo Inc. (QRVO - Free Report) reported fourth-quarter fiscal 2017 non-GAAP earnings of 74 cents per share (including stock-based compensation), which was in line with the Zacks Consensus Estimate.

Earnings (excluding stock-based compensation) were 85 cents per share, which plunged 18.3% from the year-ago quarter and was within the company’s guided range of 70–90 cents per share.

Revenues improved 5.7% year over year to $643 million, which lagged the Zacks Consensus Estimate of $645 million. Further, the figure was within management’s guided range of $610–$650 million.
 

Qorvo, Inc. Price, Consensus and EPS Surprise

 

Qorvo, Inc. Price, Consensus and EPS Surprise | Qorvo, Inc. Quote

 

Revenues increased 16% over fiscal 2016 to $3.03 billion in fiscal 2017. However, Qorvo reported loss of 13 cents per share as compared with loss of 20 cents in fiscal 2016. Non-GAAP earnings were $4.57 per share in fiscal 2017.

Shares fell more than 2% in after-hour trading following the result. We note that Qorvo has outperformed the S&P 500 Index on a year-to-date basis. While the stock has returned 25.6%, the index gained 7%.



Quarter Details

Segment-wise, Mobile Products (MP) revenues increased 2% year over year to $474 million. Strong customer adoption was observed for the company’s recently launched BAW 5-based products.

Revenues from IDP grew 18% year over year to $168 million on the back of growth in WiFi, defense and IoT markets. In the defense and aerospace markets, revenues grew more than 20% year-over-year, driven by GaN-based products. In WiFi, IDP grew more than 40% year over year, with notable strength in 5 gigahertz PAs and 802.11ac FEMs.

Non-GAAP gross margin contracted 330 basis points (bps) from the year-ago quarter to 45.6%. The figure includes stock-based compensation expense.

Both non-GAAP research & development (R&D) and selling, general & administrative (SG&A) expense as percentage of revenues increased 30 bps, respectively.

As a result, operating margin contracted 390 bps to 18.3%. The figure includes stock-based compensation expense.

Balance Sheet & Cash Flow

As of Apr 1, 2017, cash and cash equivalents were $545.5 million up from $495.8 million as of Dec 31, 2016. Long-term debt was $989.2 million as compared with $988.9 million at the end of the previous quarter.

Net cash provided by operating activities was $247.1 million (up from $220 million in the previous quarter) with free cash flow of $81.3 million (down from $83.9 million in the previous quarter) at the end of the quarter.

Further, Qorvo returned $51 million to shareholders under its ongoing $500 million repurchase program.

Guidance

Qorvo expects non-GAAP revenues in first-quarter fiscal 2018 to be approximately $610–$650 million. The company expects to expand revenue share at its largest customer later this year. Management expects BAW-based revenues to represent approximately 40% of mobile's revenues in fiscal 2019.

Qorvo anticipates gross margin of approximately 47%. Management expects operating expenses to increase almost $5 million sequentially on higher R&D costs. Earnings are expected to be in the range of 70–90 cents per share.

Qorvo forecasts revenues to strengthen through fiscal 2018. Management expects strong revenue growth, along with higher BAW-based product mix, higher utilization rates and ongoing productivity and quality improvements to help it achieve 50% gross margin target exiting fiscal 2018.

The company anticipates operating expense efficiency to continue to improve and forecast operating expenses to be approximately 20% of sales for the year. The company is confident that it will hit target of 30% operating margin during the fiscal year.

Capital expenditure is currently forecast to decline to almost $400 million. The company expects free cash flow to double from fiscal year 2017 to 2018.

Stocks to Consider

Applied Optoelectronics (AAOI - Free Report) , Texas Instruments (TXN - Free Report) and Advanced Micro Devices (AMD - Free Report) are stocks worth watching in the broader industry. While Applied Optoelectronics and Texas Instruments sport a Zacks Rank #1 (Strong Buy), AMD carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Applied Optoelectronics, Texas Instruments and AMD are currently pegged at 20%, 9.6% and 6.3%, respectively.

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