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Qorvo (QRVO) Releases Early Results of Its Tender Offer

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Qorvo, Inc. (QRVO - Free Report) has declared the early results of its previously announced offer to purchase for cash (the "Tender Offer"), any or all of its outstanding 6.75% Senior and 7.00% Senior Notes worth up to $150 million. The notes are due in 2023 and 2025, respectively, subject to specific terms and conditions. Notably, these are popularly known as “the Notes.”

The company also declared results in connection with the previously announced Tender Offer for the 2023 Notes. In this regard, the company stated solicitation of consents to amend certain provisions, related to the indenture, as of Nov 19, 2018, among “the Company, the guarantors party thereto and MUFG Union Bank, N.A., as trustee.”

The company also extended its early tender date for the 2025 Notes. The Tender Offer will now expire at midnight, NY time, on Jul 13, 2018, unless extended or earlier terminated by the company.

Per the announcement, Qorvo will pay to each holder of record of Notes, who delivered a valid consent, a cash fee for each $1,000 principal amount of 2023 Notes, subject to terms and conditions of theTender Offers and the Consent Solicitation.

Wells Fargo Securities, Citigroup Global Markets Inc. and BofA Merrill Lynch were appointed as joint lead deal managers for the tender offer solicitation agents by Qorvo.

Shares of Qorvo have returned 27.3% year to date outperforming the industry’s rally of 3.6%.

Balance Sheet & Cash Flow

As of Mar 31, the company’s cash and cash equivalents were $926 million compared with $841.3 million as of Dec 30. Long-term debt was $983.3 million as compared with $1.09 billion at the end of the previous quarter.

Net cash provided by operating activities was $259 million down from $270.1 million in the previous quarter. Capital expenditures declined sequentially to $32 million.

To Conclude

The company is benefiting from increasing demand in the performance-tier for RF Flex and RF Fusion based solutions as well as for antenna tuning, discrete components and BAW-based multiplexers. Improved demand environment in China is a positive. Expanding portfolio also bodes well for Qorvo. The company’s 5G and GaN solutions hold promise. It is well poised to seize growth opportunities that the corresponding markets offer.

However, Qorvo depends on a handful of customers including Apple (AAPL - Free Report) and Huawei to sustain revenues. To add to the woes, Apple’s self-reliance strategy is a looming threat. Moreover, the company operates in a competitive landscape which is intensifying further due to with low barriers to entry. The increased competition is exerting pricing pressure which remains a matter of concern for the company.

Qorvo’s top-line growth is significantly dependent on iPhone’s growth trajectory. We also note that Qorvo’s share price movement depends heavily on Apple’s results, which doesn’t bode well for the investors.

In order to sustain its market position, Qorvo has to constantly come up with new products. Consequently, higher spending on product development is likely to keep margins under pressure at least in the near term.

Zacks Rank & Key Picks

Qorvo has a Zacks Rank #5 (Strong Sell).

A couple of better-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) and Micron Technology, Inc. (MU - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA and Micron have a long-term expected EPS growth rate of 10.3% and 8.2%, respectively.

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