01—Abstract
Summary
Summary of the 10-K filed November 22, 2016. Cited figures are marked; the original filing is the authoritative source.
Skyworks Solutions, Inc. reported fiscal 2016 (year ended September 30, 2016) net revenue of $3,289.0 milliona, up from $3,258.4 million in fiscal 2015, with operating income of $1,118.7 million and net income of $995.2 million, or $5.18 per diluted share.
Results were supported by a gross profit margin of 50.6% of net revenue, up from 47.7% in fiscal 2015, and included $88.5 millionb of other income from the PMC-Sierra merger termination fee. Management attributed revenue growth to a higher share of RF and analog content per device, emerging-market 3G and 4G adoption, Internet of Things applications, and expansion into automotive, industrial, medical and military markets, partly offset by weaker demand from a key smartphone customer. Cash generation remained strong, with cash from operations of $1,095.7 million.
The company returned about $726 millionc to shareholders through $525.6 million of share repurchases (8.0 million shares) and $201.0 million of dividends, and it spent $189.3 million on capital expenditures and $132.1 million on business acquisitions. Cash and cash equivalents ended the year at $1,083.8 million. Stockholders' equity rose to $3,541.4 million.
The company also bought the remaining 34% interest in its SAW and TC-SAW filter joint venture with Panasonic for $76.5 milliond in August 2016. Customer concentration remained a notable risk: Company A accounted for 40% of fiscal 2016 net revenue, and Company B for 10%.
The filing also reports a $1,676.8 million balance of undistributed foreign earnings intended to be permanently reinvested, and a Singapore tax holiday that lowered taxes by $30.8 million in fiscal 2016. The board declared a quarterly dividend of $0.28 per share on November 3, 2016.
02—Key points
Key Highlights
- Net revenue of $3,289.0 million in fiscal 2016, up slightly from $3,258.4 million in fiscal 2015; operating margin of 34.0% versus 31.4% a year earlier.
- Net income of $995.2 million, or $5.18 per diluted share, compared with $798.3 million, or $4.10 per diluted share, in fiscal 2015; includes $88.5 million PMC-Sierra merger termination fee.
- Gross profit margin rose to 50.6% of net revenue from 47.7%, driven by higher unit volumes and lower per-unit material and manufacturing costs.
- Cash flow from operations of $1,095.7 million; ending cash and cash equivalents of $1,083.8 million.
- Returned about $726 million to shareholders: $525.6 million in repurchases of 8.0 million shares and $201.0 million in dividends; $201.4 million remained under the $400.0 million July 2016 repurchase program.
- Acquired the remaining 34% interest in the Panasonic SAW and TC-SAW filter joint venture for $76.5 million, making it a wholly-owned subsidiary.
- Customer concentration: Company A represented 40% of fiscal 2016 net revenue and Company B 10%; the three largest receivable balances were 54% of gross accounts receivable.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Skyworks Solutions kept $0.30.
- Revenue$3.29B100.0%
- Cost of revenue−$1.62B49.4%
- Gross profit$1.67B50.6%
- Operating costs−$546.5M16.6%
- Operating income$1.12B34.0%
- Interest, other & tax−$123.5M3.8%
- Net income$995.2M30.3%
Where FY2016 revenue went
$3.29B- Cost of revenue: $1.62B, 49% of revenue
- Net income: $995.2M, 30% of revenue
- R&D: $312.4M, 9.5% of revenue
- SG&A: $195.9M, 6.0% of revenue
- Other operating costs: $38.2M, 1.2% of revenue
- Interest, other & tax: $123.5M, 3.8% of revenue
Kept 30% as net incomeOther operating costs $38.2M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed November 22, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $3.29B$3.26B | +0.9% |
| Cost of Revenue | $1.62B$1.70B | −4.7% |
| Gross Profit | $1.67B$1.55B | +7.1% |
| R&D Expenses | $312.40M$303.20M | +3.0% |
| SG&A Expenses | $195.90M$191.30M | +2.4% |
| Operating Expenses | $546.50M$531.40M | +2.8% |
| Operating Income | $1.12B$1.02B | +9.3% |
| Net Income | $995.20M$798.30M | +24.7% |
| EPS (Basic) | $5.27$4.21 | +25.2% |
| EPS (Diluted) | $5.18$4.10 | +26.3% |
| Shares Outstanding (Basic) | 188.70M189.50M | −0.4% |
| Shares Outstanding (Diluted) | 192.10M194.90M | −1.4% |
05—Questions
Frequently Asked Questions
How did Skyworks perform financially in fiscal 2016?
Net revenue rose to $3,289.0 million from $3,258.4 million, operating income reached $1,118.7 million, and net income was $995.2 million, or $5.18 per diluted share. Results included an $88.5 million merger termination fee received from PMC-Sierra.
What drove revenue and margin performance?
Management cited a higher share of RF and analog content per device as smartphones displaced traditional cellular phones, growth in emerging markets from 3G and 4G adoption, Internet of Things applications, and expansion into automotive, industrial, medical and military markets. Gross margin improved due to higher unit volumes and lower per-unit costs, partly offset by average selling price erosion and product mix changes. Demand from a key smartphone customer declined.
How is Skyworks returning capital to shareholders?
In fiscal 2016 the company repurchased 8.0 million shares for $525.6 million and paid $201.0 million in cash dividends. The Board declared a $0.28 per share quarterly dividend on November 3, 2016, payable December 8, 2016. Dividend policy is subject to capital availability and Board determinations.
What are the main risks highlighted in the filing?
Key risks include the cyclical semiconductor industry, reliance on a small number of customers (Company A at 40% of net revenue), dependence on third-party foundries, assembly and test subcontractors and sole-source suppliers, intense competition, and international operations, including exposure to China. The filing also notes reliance on design wins and the potential for intellectual property litigation.
Did the company make any significant acquisitions or investments?
Yes. In August 2016 the company exercised its option and paid Panasonic $76.5 million to acquire the remaining 34% interest in the filter joint venture. It also acquired two businesses for $55.6 million in cash during fiscal 2016, and acquired a business on October 7, 2016 for $14.4 million in cash plus contingent consideration of up to $20.0 million.
06—Continue