In what seems like cut and paste, Skyworks reported record fiscal fourth quarter (Q4) and full year results — the ninth consecutive year of revenue and earnings growth. However, the positive results were dampened by declining iPhone shipments and mobile phone softness in China, reflected in slower growth and tepid guidance for the December quarter (Skyworks’ fiscal Q1).
For Q4, Skyworks generated $1.0 billion in revenue, growth of 13 percent sequentially and just 2.4 percent year-over-year. 72 percent of the revenue was contributed from the mobile phone segment, 28 percent from what Skyworks calls “broad markets,” which represents non-handset IoT, Wi-Fi, automotive and the aerospace and defense markets.
Skyworks said the broad markets segment grew at a double-digit year-over-year rate during Q4, representing $1.1 billion in annualized revenue.
In Q4, non-GAAP gross margin was 51.2 percent, improving 50 basis points during the prior two quarters. Operating margin was 37.6 percent, a 130 basis point improvement from Q3. The margins yielded earnings per share (EPS) of $1.94, up 18 percent sequentially.
Full-year revenue was $3.9 billion, another record although a modest 6 percent increase from the prior fiscal year. Skyworks generated $1.3 billion in cash from operations, ending the year with $1.05 billion in cash and no debt.
Providing guidance for the December quarter (Q1 of fiscal 2019), Skyworks expects revenue in the range of $1.00 billion to $1.02 billion, with EPS of $1.91. At the midpoint, revenue will decline 4 percent year-over-year and be flat sequentially.
The stock market was disappointed by the guidance. Skyworks’ stock opened 7 percent below Thursday’s closing price, just prior to the release of the earnings report.
As if to calm investor concerns about the near-term outlook, during the earnings call, Skyworks CEO Liam Griffin said “we have a clear path to deliver our tenth consecutive year of revenue and earnings growth in fiscal 2019.”
He said Skyworks gained content in the new “premier smartphones” (i.e., iPhone), which is helping to offset the decline in unit volume. He also said Skyworks has a strong position with the mobile phone suppliers in China, and the softness in the December quarter reflects a normal seasonal decline. And the broad markets segment is growing at a double-digit rate.
Positioning for 5G
Griffin was very bullish about Skyworks’ position in 5G, saying, “We are extremely well positioned to lead in 5G.”
For the first time, he disclosed Skyworks is developing BAW filter technology and sampling customers:
“Today, we’re ready in BAW. We’re developing BAW in house."
His statement led to an interesting exchange with Ed Snyder, of Charter Equity Research, during the earnings call:
Griffin also revealed Skyworks is developing millimeter wave components for 5G. Responding to a question from Bill Peterson of JPMorgan, he said:
”We are absolutely positioned to execute in that area, certainly on the handheld side and also on the infrastructure side. There’s a lot of IP in our company that goes back into the infrastructure days.”