28 July 2011

RFMD returns to sequential revenue growth

For its fiscal first-quarter 2012 (ended 2 July 2011), RF Micro Devices Inc of Greensboro, NC, USA has reported revenue of $214.2m, down 21.8% on $273.8m a year ago but up 0.4% on last quarter’s $213.3m in contrast to the expected 5% drop.

This return to sequential growth (after a 23.5% revenue drop last quarter) was due mainly to the expected steep decline in sales of legacy POLARIS transceiver products to RFMD's largest customer Nokia (which fell to just 15% of total revenue) being more than offset by another quarter of double-digit sequential growth in core business (up 8–12%), outpacing addressable markets.

“RFMD’s June quarterly results demonstrate how RFMD has been transformed into a highly diversified growth-oriented supplier of RF components,” states president & CEO Bob Bruggeworth. “We launched several industry-leading new products, and this fueled a sharp improvement in our customer and product mix — yielding our most diverse quarter by customer concentration,” he adds.

In particular, in RFMD’s Cellular Products Group (CPG), sales of 3G/4G cellular products for smartphones and tablets grew more than 50% sequentially as the firm gained market share.

RFMD’s Multi-Market Products Group (MPG) saw double-digit sequential revenue growth across its diversified market. New product and technology cycles, including its PowerSmart converged power amplifiers (PAs), high-performance switches, Phenom high-efficiency single-mode PAs, and gallium nitride (GaN), all contributed to better-than-consistent revenue performance.

In particular, revenue for the PowerSmart power platform surpassed $10m in support of multiple flagship smartphones and tablets. Also during the quarter, RFMD started production shipments of its ultra-high-efficiency 3G/4G PAs in support of multiple customers, secured an additional high-performance 3G/4G switch design win on a Qualcomm reference design, ramped volume shipments of new GaN-based products to leading military radar and CATV customers, was awarded two DARPA contracts for advanced thermally managed GaN RF power technology (valued at about $3m through fiscal 2013), and secured major design wins across multiple growth markets, including 3G/4G smartphones, emerging market handsets, wireless infrastructure, Smart Energy/Advanced Metering Infrastructure (AMI), high-performance WiFi, and point-to-point radio for cellular backhaul.

On a non-GAAP basis, gross margin was 38.5%, down on 39.2% a year ago but up from 37.5% last quarter, despite the flattish revenue and historically low fab utilization rates. “We are in the early stages of this favorable mix shift that PowerSmart, switch-based products, Phenom and new MPG products are forecasted to provide a greater percentage of our total revenue going forward,” says chief financial officer & VP of administration Dean Priddy. “Regarding fab utilization, our internal focus is on capital efficiency,” he adds. “In some cases, we’re simply designing smaller die. In other cases, such as PowerSmart and our switch-based products, we’re changing the game and relying more on outsourced silicon technology. We refer to this business model as a fab-right strategy.” 

Net income was $21.3m, down slightly from $21.7m last quarter and less than half the $44.3m a year ago. Nevertheless, during the quarter, RFMD generated about $19.1m in cash flow from operations, retired $22m principal amount of convertible debt, and repurchased about 945,000 shares of common stock at an average price of $5.93. Capital expenditures were $19.9m, with depreciation of $14.6m and intangible amortization of $4.6m. Cash, cash equivalents and short-term investments have hence fallen from $291.6m to $255.6m.

“With transceiver revenue now at immaterial levels, RFMD is positioned to achieve continued sequential revenue growth, enabling broad improvement in our financial performance, including margin expansion and operating leverage,” says Priddy.

“The increasing demand for mobility, energy conservation, and ‘always-on’ broadband data, continues to favor RFMD’s core strengths and expanding product and technology portfolio,” says Bruggeworth. “We plan to capitalize on these global secular growth drivers to outperform our addressable markets,” he adds. “We see further customer diversification in the September quarter, supported by share gains in smartphones, tablets, smart energy management solutions, point-to-point radio chipsets for cellular backhaul, and other growth markets.”  

According to the current demand environment in its end markets, for its fiscal second-quarter 2012 (to end September 2011), RFMD expects revenue to rise about 6% sequentially (mainly due to further diversifying its customer base, through market share gains in 3G/4G smartphone and tablet products, and Nokia falling below 15% of total revenue and possibly being overtaken by Samsung). RFMD also expects non-GAAP gross margin to rise about 50 basis points (to 39%). Operating expenses should be approximately flat to up $1m sequentially. 

“We believe utilization rates have bottomed and expect this metric to improve this year and into next year,” says Priddy. “Improving factory utilization, combined with exciting new product cycles, gives us confidence to project an optimistic long-term outlook regarding margin expansion and the resulting earnings leverage,” he adds. RFMD expects to further diversify its revenue base in the December quarter. “The new product cycles we are ramping today will extend multiple years and reinforce our position as a highly diversified growth-oriented supplier of RF components and compound semiconductor technologies,” believes Bruggeworth. 

See related items:

RFMD’s quarterly revenue drops 23% to $213.3m

RFMD’s revenue falls 2.4% due to 3G drop at Nokia

RFMD’s quarterly revenue grows 12% year-on-year to record $285.8m

RFMD’s revenue grows 29% year-on-year

Strong demand gives RFMD 51.4% increase in revenue year-on-year

Tags: RFMD

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