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Skyworks Solutions Annual Report (Amendment), Year Ended Sep 27, 2019

Filing Date
Filed January 27, 2020
Period End
September 27, 2019
Security
SWKS
One revenue dollarkept$0.25
In the record · 2016–202610-K2110-Q338-K121

SWKS filed 21 annual reports (10-K), 33 quarterly reports (10-Q) and 121 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Aug ’18Aug ’18
  2. Leadership change8-K · Dec ’20Dec ’20
  3. Leadership change8-K · Dec ’22Dec ’22
  4. Material agreement8-K · Oct ’26Oct ’26

01—Abstract

Summary

Summary of the 10-K/A filed January 27, 2020. Cited figures are marked; the original filing is the authoritative source.

Skyworks Solutions, Inc. (SWKS) reports in this Part III of its Form 10-K for the fiscal year ended September 27, 2019 (fiscal 2019) on governance, executive pay, and ownership.

The filing states fiscal 2019 revenue of $3,377 milliona and non-GAAP operating income of $1,166 million, both below the threshold levels of the Fiscal Year 2019 Executive Incentive Plan. The company attributes the shortfall to the U.S.-China trade war and the May 2019 Entity List placement of Huawei and certain affiliates (the "Huawei Ban"), which it says significantly reduced shipments to and revenue from Huawei. The Compensation Committee waived the nominal non-GAAP operating income condition and adjusted the metrics to account for an estimated $564 million of lost revenue and $285 million of lost non-GAAP operating income.

Named executive officers received payouts equal to 64.5% of target, while non-executive employees averaged 78% of target. On long-term incentives, no shares were earned under the fiscal 2019 PSAs' non-GAAP EBITDA growth metric, because fiscal 2019 non-GAAP EBITDA of $1,494 millionb fell below the threshold against fiscal 2018's $1,728 million. The Committee declined to adjust that metric for the trade war.

Stockholders approved the say-on-pay proposal at the 2019 annual meeting with about 72%c of votes cast, a lower level of support than in prior years. Following outreach to top institutional holders, the company said it enhanced its performance-metric disclosure. Chief Executive Officer Liam K.

Griffin's fiscal 2019 total compensation was $13,660,593,d which the filing estimates at approximately 625 times that of the median employee. The filing also covers board and ownership matters. As of January 20, 2020, 170,155,181 common shares were outstanding.

The Vanguard Group, Inc. (11.04%), BlackRock, Inc. (7.80%), Vulcan Value Partners, LLC (5.65%), and Capital Research Global Investors (5.17%) are the 5% holders listed. Alan S. Batey joined the board in August 2019, and Peter L.

Gammel retired as Chief Technology Officer effective November 19, 2019. KPMG LLP billed total fees of $2,485,650 for fiscal 2019, of which audit fees were $2,315,150.

02—Key points

Key Highlights

  1. Fiscal 2019 revenue of $3,377 million and non-GAAP operating income of $1,166 million fell below the Incentive Plan's threshold targets of $3,868 million and $1,450 million, respectively.
  2. The filing attributes the shortfall to the U.S.-China trade war and the Huawei Ban; the Compensation Committee estimated $564 million of lost revenue and $285 million of lost non-GAAP operating income and adjusted the metrics accordingly.
  3. Named executive officers' short-term incentive payouts equaled 64.5% of target, lower than the average of approximately 78% of target paid to non-executive employees.
  4. No shares were earned under the FY19 PSAs' non-GAAP EBITDA growth metric (fiscal 2019 non-GAAP EBITDA of $1,494 million versus $1,728 million in fiscal 2018), and those awards were cancelled.
  5. About 72% of votes cast approved the 2019 say-on-pay proposal, lower than in prior years; ISS recommended against it, and the company expanded its performance-metric disclosure after stockholder outreach.
  6. CEO Liam K. Griffin's fiscal 2019 total compensation was $13,660,593, approximately 625 times that of the median employee, per the filing's pay-ratio estimate.
  7. Vanguard Group (11.04%) and BlackRock (7.80%) are the largest reported holders of the 170,155,181 shares outstanding as of January 20, 2020.

03—One dollar

Follow one dollar

Of each $1.00 of revenue in FY2019, Skyworks Solutions kept $0.25.

  1. Revenue$3.38B100.0%
  2. Cost of revenue−$1.77B52.5%
  3. Gross profit$1.60B47.5%
  4. Operating costs−$651.8M19.3%
  5. Operating income$952.0M28.2%
  6. Interest, other & tax−$98.4M2.9%
  7. Net income$853.6M25.3%
Computed from 10-K/AFY2019filed January 27, 2020Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

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-K/AFY2019filed January 27, 2020
Revenue$3.38B47.5% Gross MarginNet Income$853.60M25.3% Net MarginEPS (Diluted)$4.89Free Cash Flow$969.00M

Financial Statements

FY2019 against FY2018

Line itemFY2019FY2018Change
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

  1. Why did executive bonuses still get paid when the company missed its financial targets?

    The Compensation Committee determined in November 2019 that the trade war's impact was outside management's control. It waived the nominal non-GAAP operating income condition and adjusted the revenue and non-GAAP operating income metrics for the estimated $564 million and $285 million of losses. Under the adjusted metrics, revenue achieved 77.7% of target and non-GAAP operating income achieved 51.3%, which resulted in payouts equal to 64.5% of target for each named executive officer.

  2. Did the long-term performance awards pay out in fiscal 2019?

    Not for the non-GAAP EBITDA growth portion of the FY19 PSAs. Fiscal 2019 non-GAAP EBITDA of $1,494 million failed to reach the threshold relative to fiscal 2018's $1,728 million, and the Committee chose not to adjust the metric for trade war effects, so those awards were cancelled. The TSR-based portion remains in progress, with its performance period running through fiscal 2021.

  3. How did shareholders respond to executive pay?

    About 72% of votes cast approved the say-on-pay proposal at the 2019 annual meeting, with lower support than prior years. ISS recommended against the proposal. After engaging with top 25 institutional holders representing approximately 54% of shares outstanding, the company said it enhanced its disclosure of performance metrics and achievement.

  4. Who are the company's largest stockholders and how many shares are outstanding?

    As of January 20, 2020, there were 170,155,181 shares outstanding. The filing lists The Vanguard Group, Inc. at 11.04%, BlackRock, Inc. at 7.80%, Vulcan Value Partners, LLC at 5.65%, and Capital Research Global Investors at 5.17% as beneficial owners of more than 5%. All current directors and executive officers as a group held less than 1% individually and 649,776 shares in total.

06—Continue

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