01—Abstract
Summary
Summary of the 10-K filed November 17, 2020. Cited figures are marked; the original filing is the authoritative source.
Skyworks Solutions, Inc. reported fiscal 2020 (53 weeks ended October 2, 2020) net revenue of $3,355.7 milliona, down 0.6% from $3,376.8 million in fiscal 2019, with net income of $814.8 million and diluted EPS of $4.80, versus $853.6 million and $4.89 a year earlier.
The filing attributes the revenue decline primarily to reduced demand from Huawei remaining on the Entity List and to the COVID-19 pandemic, partially offset by growing demand for its 5G solutions. Gross margin improved to 48.1% of net revenue from 47.5%, driven by favorable product mix, and operating income was $891.8 millionb versus $952.0 million. Research and development rose to $464.1 million from $424.1 million, largely due to higher share-based compensation.
Cash generation remained strong, with cash from operations of $1,204.5 millionc, though this was $162.9 million lower than the prior year, mainly due to working capital changes. The company returned capital through $647.5 million of share repurchases (6.3 million shares) and $307.0 million of dividends, and spent $389.4 million on capital expenditures. Cash, cash equivalents and marketable securities ended at $980.0 million, down $102.3 million.
The board declared a $0.50d quarterly dividend on November 2, 2020, and $978.8 million remained available under the January 2019 repurchase program. The filing highlights ongoing risk from customer concentration: Apple accounted for 56% of net revenue in fiscal 2020, up from 51% in fiscal 2019.
Other key risks include the Entity List restrictions on Huawei, U.S.-China trade tensions, and pandemic-related disruptions at its Mexicali, Mexico facility, which was suspended for about two weeks in April 2020 and produced a $23.4 million production utilization charge. KPMG issued an unqualified opinion on the financial statements and on internal control over financial reporting.
02—Key points
Key Highlights
- Net revenue of $3,355.7 million, down 0.6% from $3,376.8 million in fiscal 2019, as Huawei's Entity List status and COVID-19 weighed on demand, partly offset by 5G solution growth.
- Gross profit margin rose to 48.1% of net revenue from 47.5%, aided by favorable product mix despite lower unit volumes and average selling prices.
- Operating income fell to $891.8 million from $952.0 million; R&D expense increased to $464.1 million from $424.1 million.
- Net income of $814.8 million and diluted EPS of $4.80, compared with $853.6 million and $4.89 in fiscal 2019.
- Apple accounted for 56% of fiscal 2020 net revenue, up from 51% in fiscal 2019, highlighting significant customer concentration.
- Cash from operations of $1,204.5 million; capital returns included $647.5 million in buybacks and $307.0 million in dividends, with $978.8 million remaining under the repurchase authorization.
- Mexicali operations were suspended for about two weeks in April 2020, resulting in a $23.4 million production utilization charge.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Skyworks Solutions kept $0.24.
- Revenue$3.36B100.0%
- Cost of revenue−$1.74B51.9%
- Gross profit$1.61B48.1%
- Operating costs−$721.1M21.5%
- Operating income$891.8M26.6%
- Interest, other & tax−$77.0M2.3%
- Net income$814.8M24.3%
Where FY2020 revenue went
$3.36B- Cost of revenue: $1.74B, 52% of revenue
- Net income: $814.8M, 24% of revenue
- R&D: $464.1M, 14% of revenue
- SG&A: $231.4M, 6.9% of revenue
- Other operating costs: $25.6M, 0.8% of revenue
- Interest, other & tax: $77.0M, 2.3% of revenue
Kept 24% as net incomeOther operating costs $25.6M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed November 17, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $3.36B$3.38B | −0.6% |
| Cost of Revenue | $1.74B$1.77B | −1.7% |
| Gross Profit | $1.61B$1.60B | +0.6% |
| R&D Expenses | $464.10M$424.10M | +9.4% |
| SG&A Expenses | $231.40M$198.30M | +16.7% |
| Operating Expenses | $721.10M$651.80M | +10.6% |
| Operating Income | $891.80M$952.00M | −6.3% |
| Interest Expense | $0$0 | — |
| Net Income | $814.80M$853.60M | −4.5% |
| EPS (Basic) | $4.84$4.92 | −1.6% |
| EPS (Diluted) | $4.80$4.89 | −1.8% |
| Shares Outstanding (Basic) | 168.50M173.50M | −2.9% |
| Shares Outstanding (Diluted) | 169.90M174.50M | −2.6% |
05—Questions
Frequently Asked Questions
How did Skyworks perform financially in fiscal 2020?
Net revenue was $3,355.7 million, down 0.6% from fiscal 2019. Net income was $814.8 million, or $4.80 per diluted share, compared with $853.6 million, or $4.89 per diluted share, a year earlier. Gross margin improved to 48.1% from 47.5%, while operating income declined to $891.8 million from $952.0 million.
What drove the decline in revenue?
The filing attributes the decrease primarily to reduced demand resulting from Huawei remaining on the Entity List and to the COVID-19 pandemic. These were partially offset by increased demand for the company's new 5G solutions across a growing set of customers.
How concentrated is Skyworks' customer base?
Concentration is significant. Apple, through multiple distributors, contract manufacturers and direct sales, accounted for 56% of net revenue in fiscal 2020, up from 51% in fiscal 2019 and 47% in fiscal 2018. The filing notes that loss or reduced orders from major customers could materially affect results and the stock price.
How is Skyworks returning capital to shareholders?
In fiscal 2020 the company repurchased 6.3 million shares for $647.5 million and paid $307.0 million in dividends, which totaled $1.82 per share for the year. On November 2, 2020, the board declared a $0.50 per share quarterly dividend payable December 10, 2020. As of October 2, 2020, $978.8 million remained available under the January 30, 2019 repurchase program, which expires January 30, 2021.
What are the main risks to the business mentioned in the filing?
Key risks include customer concentration, the Entity List restrictions affecting sales to Huawei, U.S.-China trade tensions and tariffs, pandemic-related disruptions to operations and the supply chain, reliance on third-party foundries and sole-source suppliers, and intense industry competition that drives down average selling prices.
06—Continue