01—Abstract
Summary
Summary of the 10-K filed November 14, 2019. Cited figures are marked; the original filing is the authoritative source.
Skyworks Solutions, Inc. reported net revenue of $3,376.8 milliona for the fiscal year ended September 27, 2019, down 12.7% from $3,868.0 million in fiscal 2018.
The filing attributes the decline primarily to weakness in smartphone demand and to Huawei being added to the U.S. Bureau of Industry and Security's Entity List in May 2019, partially offset by growth in IoT applications and a higher share of RF and analog content per device. Operating income fell to $952.0 millionb (28.2% operating margin) from $1,319.3 million (34.1%), and net income declined to $853.6 million, or $4.89 per diluted share, from $918.4 million, or $5.01 per diluted share. Gross margin decreased to 47.5% from 50.4%, with the filing citing a $66.1 million inventory-related charge tied to Huawei and $546.5 million of lower unit volumes and average selling prices.
Cash flow remained solid. Cash provided by operating activities rose to $1,367.4 millionc from $1,260.6 million, and cash, cash equivalents and marketable securities totaled $1,082.2 million at year end. During the year the company repurchased 8.9 million shares for $657.6 million, spent $398.4 million on capital expenditures and paid $273.9 million in cash dividends.
The Board declared a $0.44d per share quarterly dividend on November 12, 2019. Management stated that cash on hand and expected operating cash flow will be sufficient to fund operations for at least the next 12 months. The independent auditor, KPMG LLP, issued an unqualified opinion on the financial statements and on internal control over financial reporting.
The critical audit matter identified was the assessment of $103.3 million of gross unrecognized tax benefits. The filing also notes that the Tax Reform Act's deemed repatriation tax of $232.7 million is payable over eight years, and that the fiscal 2019 effective tax rate was 11.2%, compared with 31.1% in fiscal 2018.
02—Key points
Key Highlights
- Net revenue declined 12.7% to $3,376.8 million, driven by smartphone demand weakness and the Huawei Entity List designation.
- Gross margin fell to 47.5% from 50.4%, including a $66.1 million inventory charge related to Huawei.
- Operating income was $952.0 million, a 28.2% operating margin, versus $1,319.3 million (34.1%) in fiscal 2018.
- Diluted EPS was $4.89, compared with $5.01 in fiscal 2018; net income was $853.6 million.
- Operating cash flow rose to $1,367.4 million, and cash, equivalents and marketable securities ended at $1,082.2 million.
- Shareholder returns included $657.6 million of buybacks (8.9 million shares) and $273.9 million of dividends; a $0.44 quarterly dividend was declared November 12, 2019.
- Research and development spending rose to $424.1 million, or 12.5% of net revenue, up from 10.4% in fiscal 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Skyworks Solutions kept $0.25.
- Revenue$3.38B100.0%
- Cost of revenue−$1.77B52.5%
- Gross profit$1.60B47.5%
- Operating costs−$651.8M19.3%
- Operating income$952.0M28.2%
- Interest, other & tax−$98.4M2.9%
- Net income$853.6M25.3%
Where FY2019 revenue went
$3.38B- Cost of revenue: $1.77B, 53% of revenue
- Net income: $853.6M, 25% of revenue
- R&D: $424.1M, 13% of revenue
- SG&A: $198.3M, 5.9% of revenue
- Other operating costs: $29.4M, 0.9% of revenue
- Interest, other & tax: $98.4M, 2.9% of revenue
Kept 25% as net incomeOther operating costs $29.4M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed November 14, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $3.38B$3.87B | −12.7% |
| Cost of Revenue | $1.77B$1.92B | −7.5% |
| Gross Profit | $1.60B$1.95B | −17.8% |
| R&D Expenses | $424.10M$404.50M | +4.8% |
| SG&A Expenses | $198.30M$207.80M | −4.6% |
| Operating Expenses | $651.80M$631.40M | +3.2% |
| Operating Income | $952.00M$1.32B | −27.8% |
| Interest Expense | $0— | — |
| Net Income | $853.60M$918.40M | −7.1% |
| EPS (Basic) | $4.92$5.06 | −2.8% |
| EPS (Diluted) | $4.89$5.01 | −2.4% |
| Shares Outstanding (Basic) | 173.50M181.30M | −4.3% |
| Shares Outstanding (Diluted) | 174.50M183.20M | −4.7% |
05—Questions
Frequently Asked Questions
Why did Skyworks' revenue decline in fiscal 2019?
The filing states that net revenue decreased $491.2 million, or 12.7%, primarily due to weakness in smartphone demand and Huawei being added to the Entity List in May 2019, which led the company to temporarily suspend shipments to Huawei. Growth in IoT applications and higher RF and analog content per smartphone partly offset the decline.
What drove the drop in gross margin?
Gross margin fell to 47.5% from 50.4%. The filing attributes a $546.5 million gross profit impact to lower unit volumes and lower average selling prices and a $66.1 million inventory-related charge from lower expected demand due to Huawei's Entity List addition, partially offset by a $265.7 million favorable product mix impact.
How did the company return capital to shareholders?
During fiscal 2019 Skyworks repurchased 8.9 million shares for $657.6 million and paid $273.9 million in cash dividends. As of September 27, 2019, $1,626.4 million remained available under the January 30, 2019 repurchase program, which authorizes up to $2.0 billion through January 30, 2021.
Is the company's liquidity sufficient for the next year?
Management stated that cash, cash equivalents and marketable securities of $1,082.2 million, together with expected cash from operations, will be sufficient to fund R&D, capital expenditures, potential acquisitions, working capital, quarterly dividends and other obligations for at least the next 12 months.
What caused the lower effective tax rate in fiscal 2019?
The annual effective tax rate was 11.2%, versus 31.1% in fiscal 2018. The filing attributes the decrease mainly to fiscal 2018 one-time Tax Reform Act charges, which were $224.6 million for the deemed repatriation tax and $18.3 million for deferred tax revaluation. Fiscal 2019 benefited from foreign earnings taxed at lower rates, while GILTI added 5.7% to the rate.
06—Continue