01—Abstract
Summary
Summary of the 10-K filed November 24, 2015. Cited figures are marked; the original filing is the authoritative source.
Skyworks Solutions, Inc. reported fiscal 2015 (year ended October 2, 2015) net revenue of $3,258.4 milliona, up from $2,291.5 million in fiscal 2014, with net income of $798.3 million, or $4.10 per diluted share, compared with $457.7 million, or $2.38 per diluted share, the prior year.
Operating income rose to $1,023.1 millionb, an operating margin of 31.4% versus 24.7% in fiscal 2014. Gross margin improved to 47.7% of net revenue, driven mainly by higher unit volumes and lower per-unit material and manufacturing costs. The company describes its business as analog semiconductors for wireless connectivity, with customers including Foxconn, Samsung, Huawei, and others, and Foxconn Technology Group exceeded ten percent of net revenue in fiscal 2015.
Cash and cash equivalents ended the year at $1,043.6 millionc, up from $805.8 million. Operating cash flow was $992.8 million, while the company spent $430.1 million on capital expenditures, primarily for capacity expansion in Mexico and Japan. Skyworks repurchased 2.9 million shares for $237.3 million and paid $123.1 million in dividends.
Quarterly dividends were $0.13d per share through the first three quarters and $0.26 in the fourth quarter, and the Board declared a $0.26 dividend on November 5, 2015. Subsequent to year end, the company agreed to acquire PMC-Sierra, Inc. at $11.60 per share in cash under an Amended and Restated Merger Agreement dated October 29, 2015.
On November 23, 2015, PMC terminated that agreement, and on November 24, 2015, PMC paid Skyworks a termination fee of $88.5 million. Shareholder class action lawsuits challenging the proposed merger were filed in October 2015 and remain pending.
02—Key points
Key Highlights
- Net revenue rose to $3,258.4 million in fiscal 2015 from $2,291.5 million in fiscal 2014, an increase of 42.2%.
- Operating income was $1,023.1 million, with operating margin of 31.4%, up from 24.7% in fiscal 2014.
- Net income was $798.3 million, and diluted EPS was $4.10 versus $2.38 in fiscal 2014.
- Operating cash flow was $992.8 million, and capital expenditures were $430.1 million, mainly for expansion in Mexico and Japan.
- Skyworks repurchased 2.9 million shares for $237.3 million and paid $123.1 million in cash dividends during fiscal 2015.
- A new $400.0 million share repurchase program was approved on November 10, 2015, replacing the November 2014 program.
- Foxconn Technology Group constituted more than ten percent of net revenue in fiscal 2015, and the company's three largest receivable balances comprised 62% of gross accounts receivable.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Skyworks Solutions kept $0.24.
- Revenue$3.26B100.0%
- Cost of revenue−$1.70B52.3%
- Gross profit$1.55B47.7%
- Operating costs−$531.4M16.3%
- Operating income$1.02B31.4%
- Interest, other & tax−$224.8M6.9%
- Net income$798.3M24.5%
Where FY2015 revenue went
$3.26B- Cost of revenue: $1.70B, 52% of revenue
- Net income: $798.3M, 24% of revenue
- R&D: $303.2M, 9.3% of revenue
- SG&A: $191.3M, 5.9% of revenue
- Other operating costs: $36.9M, 1.1% of revenue
- Interest, other & tax: $224.8M, 6.9% of revenue
Kept 24% as net incomeOther operating costs $36.9M · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed November 24, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $3.26B$2.29B | +42.2% |
| Cost of Revenue | $1.70B$1.27B | +34.3% |
| Gross Profit | $1.55B$1.02B | +52.0% |
| R&D Expenses | $303.20M$252.20M | +20.2% |
| SG&A Expenses | $191.30M$179.10M | +6.8% |
| Operating Expenses | $531.40M$457.50M | +16.2% |
| Operating Income | $1.02B$565.20M | +81.0% |
| Net Income | $798.30M$457.70M | +74.4% |
| EPS (Basic) | $4.21$2.44 | +72.5% |
| EPS (Diluted) | $4.10$2.38 | +72.3% |
| Shares Outstanding (Basic) | 189.50M187.20M | +1.2% |
| Shares Outstanding (Diluted) | 194.90M192.60M | +1.2% |
05—Questions
Frequently Asked Questions
How did Skyworks perform financially in fiscal 2015?
Net revenue increased to $3,258.4 million from $2,291.5 million, and net income increased to $798.3 million from $457.7 million. The filing attributes the growth to smartphones displacing traditional cellular phones, emerging-market adoption of 3G and 4G, growth in tablets, and expansion of the analog portfolio into medical, automotive, military and industrial markets.
How concentrated is Skyworks' customer base?
The company states that a small number of customers has historically accounted for a significant portion of net revenue. Foxconn Technology Group constituted more than ten percent of net revenue in fiscal 2015, and the filing lists Company A at 44% of net revenue in fiscal 2015, up from 34% in fiscal 2014.
What happened with the proposed acquisition of PMC-Sierra?
Skyworks entered into a merger agreement with PMC-Sierra at $10.50 per share in October 2015, later amended to $11.60 per share in cash. PMC delivered notice terminating the agreement on November 23, 2015, and paid Skyworks a termination fee of $88.5 million on November 24, 2015. Three putative class action lawsuits by PMC stockholders challenging the merger were filed and remain pending.
What are the company's capital allocation priorities?
In fiscal 2015 Skyworks spent $430.1 million on capital expenditures, repurchased shares for $237.3 million, and paid $123.1 million in dividends. The Board declared a $0.26 per share quarterly dividend on November 5, 2015, and approved a new $400.0 million repurchase program on November 10, 2015. The company stated it intends to continue paying quarterly dividends subject to capital availability.
What are the main risks highlighted in the filing?
The filing highlights cyclicality of the semiconductor industry, reliance on a small number of customers, intense competition with pricing pressure, dependence on third-party foundries and subcontractors, reliance on sole-source suppliers, risks of doing business internationally including in China, and reliance on smartphone demand. It also notes that the company's gallium arsenide products must remain competitive with silicon alternatives.
06—Continue