Market Overview

RFMD Achieves 15% Sequential Growth In Quarterly Revenue

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GAAP Diluted EPS is $0.21, and Non-GAAP Diluted EPS is $0.30

RFMD Expects Revenue of Approximately $385 Million and Non-GAAP Diluted EPS of Approximately $0.33 in the December Quarter

GREENSBORO, N.C., Oct. 29, 2014 /PRNewswire/ --  

Quarterly Highlights

  • September Quarterly GAAP Revenue Increases Approximately 17% Year-Over-Year to $362.7 Million
  • GAAP Gross Margin Expands 1,250 Basis Points Year-Over-Year to 46.2%
  • GAAP Diluted EPS is $0.21, Versus $0.02 in Q2 Fiscal 2014
  • Non-GAAP Gross Margin Expands 1,180 Basis Points Year-Over-Year to 48.0%
  • Non-GAAP Diluted EPS is $0.30, Versus $0.12 in Q2 Fiscal 2014

RF Micro Devices, Inc. (Nasdaq: RFMD), a global leader in the design and manufacture of high-performance radio frequency solutions, today reported financial results for the Company's fiscal 2015 second quarter, ended September 27, 2014.

On a GAAP basis, September quarterly revenue increased 15% sequentially and 17% year-over-year to $362.7 million. Gross margin for the September quarter expanded sequentially by 120 basis points to 46.2%, operating income was $75.3 million, and net income was $63.3 million, or $0.21 per diluted share.

On a non-GAAP basis, September quarterly revenue was $362.0 million. Gross margin expanded sequentially by 90 basis points to 48.0%, operating income was $100.1 million, or 27.6% of sales, and net income was $90.0 million, or $0.30 per diluted share. Revenue, gross profit, operating income, operating margin, and earnings per share were all quarterly records.

Strategic Highlights

  • On September 5, 2014, the shareholders of RFMD and TriQuint Semiconductor, Inc. (Nasdaq: TQNT) voted in favor of the pending business combination between RFMD and TriQuint, and RFMD continues to expect a successful close this calendar year, subject to required regulatory approvals and customary closing conditions
  • At the request of customers, RFMD and TriQuint executed multiple three-way NDAs with leading smartphone manufacturers to accelerate highly integrated products to market, as early as next year
  • RFMD's Cellular Products Group (CPG) commenced shipments of envelope tracking (ET) power management integrated circuits (PMICs) to a leading smartphone manufacturer in support of multiple basebands
  • CPG supported new customer engagements for RF Fusion™, a complete RF front end solution for 4G world phones and tablets
  • RFMD's Multi-Market Products Group (MPG) increased revenue 15% sequentially, supported primarily by high-performance Wi-Fi, 4G wireless infrastructure, and Gallium Nitride- (GaN-) related revenue

 

GAAP RESULTS

(in millions, except


















percentages and per


Q2 Fiscal


Q1 Fiscal


Change



Q2 Fiscal


Change


share data)


2015



2015



vs. Q1 2015



2014



vs. Q2 2014


Revenue


$

362.7



$

316.3



14.7

%



$

310.7



16.7

%


Gross Margin


46.2

%


45.0

%


1.2


ppt


33.7

%


12.5


ppt

Operating Income


$

75.3



$

46.1



$

29.2




$

9.5



$

65.8



Net Income


$

63.3



$

38.6



$

24.7




$

5.9



$

57.4



Diluted EPS


$

0.21



$

0.13



$

0.08




$

0.02



$

0.19





















NON-GAAP RESULTS

(excluding share-based compensation, amortization of intangibles, acquisition and integration related costs, intellectual property rights (IPR) litigation costs, non-cash deferred royalty revenue and equal and offsetting non-cash prepaid royalty amortization, start-up costs, restructuring and disposal costs, certain consulting costs, (gain) loss on PP&E, income from equity investment, non-cash interest expense on convertible subordinated notes and tax adjustments)

(in millions, except


















percentages and per


Q2 Fiscal


Q1 Fiscal


Change



Q2 Fiscal


Change


share data)


2015



2015



vs. Q1 2015



2014



vs. Q2 2014


Revenue


$

362.0



$

316.3



14.4

%



$

310.7



16.5

%


Gross Margin


48.0

%


47.1

%


0.9


ppt


36.2

%


11.8


ppt

Operating Income


$

100.1



$

78.9



$

21.2




$

37.2



$

62.9



Net Income


$

90.0



$

71.3



$

18.7




$

33.9



$

56.1



Diluted EPS


$

0.30



$

0.24



$

0.06




$

0.12



$

0.18



 

Financial Outlook

RFMD currently believes the demand environment in its end markets supports the following non-GAAP expectations and projections for the December 2014 quarter:

  • RFMD expects quarterly revenue of approximately $385 million
  • RFMD expects gross margin to be approximately flat sequentially
  • RFMD expects operating expenses to be approximately flat
  • RFMD expects a tax rate of approximately 10% - 15%
  • RFMD expects diluted EPS of approximately $0.33

RFMD's actual quarterly results may differ from these expectations and projections, and such differences may be material.

Comments From Management

Bob Bruggeworth, president and CEO of RFMD, said, "In the September quarter, RFMD continued to benefit from the increasing global demand for mobile data. Consumers want more bandwidth for their data-hungry applications, carriers want greater throughput from their available spectrum, and device manufacturers want greater functionality within the same product footprint. In each instance, RFMD's solutions are a key enabling technology.

"RFMD is enjoying multiple diversified, long-term growth opportunities across markets, customers, and products. This is enabling RFMD to capture increasing content across a broad range of mobile data devices and outpace the growth rate of our underlying markets."

Dean Priddy, CFO and vice president of administration of RFMD, said, "In the September 2014 quarter, RFMD's revenue, gross profit, operating income, and earnings per share were all quarterly records. Of note, gross profit increased by $24.9 million, and operating income increased by $21.2 million on the $46 million increase in revenue.

"In the December quarter, RFMD anticipates continued superior financial performance as we execute on our financial model. Our growth drivers are broad-based, we are identifying new opportunities to expand gross margin, and we see continued improvement in operating income, earnings per share, free cash flow, and return on invested capital."

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with United States (U.S.) generally accepted accounting principles (GAAP), RFMD's earnings release contains some or all of the following non-GAAP financial measures: (i) non-GAAP gross profit and gross margin, (ii) non-GAAP operating income and operating margin, (iii) non-GAAP net income, (iv) non-GAAP net income per diluted share, (v) non-GAAP operating expenses (research and development, marketing and selling and general and administrative), (vi) free cash flow, (vii), EBITDA, (viii) return on invested capital (ROIC), and (ix) net debt or positive net cash.  Each of these non-GAAP financial measures is either adjusted from GAAP results to exclude certain expenses or derived from multiple GAAP measures, which are outlined in the "Reconciliation of GAAP to Non-GAAP Financial Measures" tables on pages 9 and 10 and the "Additional Selected Non-GAAP Financial Measures And Reconciliations" tables on page 11.

In managing RFMD's business on a consolidated basis, management develops an annual operating plan, which is approved by our Board of Directors, using non-GAAP financial measures.  In developing and monitoring performance against this plan, management considers the actual or potential impacts on these non-GAAP financial measures from actions taken to reduce unit costs with the goal of increasing gross margin and operating margin.  In addition, management relies upon these non-GAAP financial measures to assess whether research and development efforts are at an appropriate level, and when making decisions about product spending, administrative budgets, and marketing programs. In addition, we believe that non-GAAP financial measures provide useful supplemental information to investors and enable investors to analyze the results of operations in the same way as management.  We have chosen to provide this supplemental information to enable investors to perform additional comparisons of operating results, to assess our liquidity and capital position and to analyze financial performance excluding the effect of expenses unrelated to operations, certain non-cash expenses and share-based compensation expense, which may obscure trends in RFMD's underlying performance.

We believe that these non-GAAP financial measures offer an additional view of RFMD's operations that, when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of RFMD's results of operations and the factors and trends affecting RFMD's business.  However, these non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Our rationale for using these non-GAAP financial measures, as well as their impact on the presentation of RFMD's operations, are outlined below:

Non-GAAP revenue.  Non-GAAP revenue excludes non-cash deferred royalty revenue.  We believe that the exclusion of this non-cash adjustment to revenue provides management and investors a more effective means of evaluating our historical and projected performance.

Non-GAAP gross profit and gross margin.   Non-GAAP gross profit and gross margin exclude share-based compensation expense, amortization of intangible assets, non-cash deferred royalty revenue, non-cash prepaid royalty amortization, and a

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