1 August 2013

RFMD’s quarterly revenue rises 45% year-on-year to a record $293m

For its fiscal first-quarter 2014 (ended 29 June 2013), RF Micro Devices Inc of Greensboro, NC, USA has reported record revenue of $293m, up 4.4% on $280.6m on last quarter and up 44.5% on $202.7m a-year ago.

Fiscal	Q1/2013	Q2/2013	Q3/2013	Q4/2013	Q1/2014
Revenue	$202.7m	$209.7m	$271.2m	$280.6m	$293m

Revenue for the Cellular Products Group (CPG) was $237.7m, up 5.3% on last quarter’s $225.7m and up 55.8% year-on-year, led by nearly every major manufacturer of smart-phones, tablets and handsets. CPG also benefited in the entry-level smart-phone segment from its participation in major reference designs and customer developments at Lenovo, Coolpad, Skycom, and WaterWorld, among others. Also, CPG’s leading carrier aggregation switch portfolio was selected to enable the world’s first LTE-Advanced handset.

Revenue for the Multi-Market Products Group (MPG) was $55.3m, up 1% on last quarter’s $54.9m and up 10.4% year-on-year. Broad-based sequential growth spanned multiple markets, including Wi-Fi, power broadband, and high-reliability applications. Year-on-year, high-performance Wi-Fi grew 77%. While WiFi growth in prior quarters was led by mobile devices, this quarter’s growth was driven by expansion across consumer premise equipment (CPE) and multiple applications including routers, access points and set-top boxes.

“We are capitalizing on growing demand for data-rich mobile applications, and our products are at the heart of the high-speed data connections enabling always-on, broadband mobility, both in the devices and consumer premises equipment, and within the supporting network infrastructure,” commented president & CEO Bob Bruggeworth. “We are delivering on multiple opportunities to increase our dollar content generation-over-generation in the world’s leading smart-phones and benefiting from increasing participation in the highest-volume entry-level platforms and reference designs,” he added.

“In the emerging tier, customers want to choose between cost and performance, while being absolutely assured about supply availability and quality. As a result, we estimate that RFMD’s average dollar content per handset has increased 40% in just two years, as we’ve expanded our dollar content from the high to the low tier,” Bruggeworth continued. “It’s our aim to be the industry's most diversified supplier in terms of customers, product categories, market segment and air standards,” he added. “Our two largest customers are the top two smartphone manufacturers. Beyond our top two customers, we also support multiple customers who each are low- to mid-single digits as a percentage of revenue. These are all large accounts that can drive large volumes, and RFMD is at the heart of their next-generation product ramps, very often with a full suite of RFMD components further driving increased dollar content.”

“Design activity related to our new low-cost CMOS PA is accelerating, and we expect this will improve margins in our 2G product portfolio by the end of 2013,” said Bruggeworth. “With 56% year-over-year growth, our cellular sales are outpacing the underlying handset industry, and we expect this dynamic will continue into the foreseeable future.”

On a non-GAAP basis, gross margin has risen further, from 34.1% a year ago and 34.4% last quarter to 35.1%. Operating expenses were cut to $74.7m from $76m last quarter, mainly due to general & administrative (G&A) expenses falling from $12.6m last quarter to $11.5m. Net income was $25.6m ($0.09 per diluted share), up on $17.1m ($0.06 per diluted share) last quarter and just $2.7m ($0.01 per diluted share) a year ago.

Cash flow from operations was $7.2m. Capital expenditures (which included investments in duplexer capacity, assembly equipment, and equipment to reduce gold consumption) were $27.2m. During the quarter, cash, cash equivalent and short-term investments hence fell from $179.6m to $159.4m.

Outlook

Based on the demand environment in the firm’s end-markets, for fiscal second-quarter 2014 (to end-September 2013), RFMD expects sequential growth in revenue (to $305-310m), gross margin, and earnings per share (to $0.10-0.11).

“The company’s good performance has resulted from three key margin drivers this fiscal year,” noted chief financial officer Dean Priddy.

“First, we have signed a definitive agreement to sell our UK fab [in Newton Aycliffe, County Durham - Europe’s largest GaAs manufacturing facility - to Compound Photonics of Phoenix, AZ, USA]. This is part of our overall flexible GaAs sourcing strategy, and it accounts for roughly half of the margin expansion goal. We expect the full benefit of this transaction will be realized in the December 2013 quarter.

“Second, our ultra-low-cost CMOS PA has been fully released and is rapidly ramping production. We have demand for multiple millions of units in the September quarter, and that number is projected to more than double in the December quarter. This initiative represents a margin expansion of 1%.

“Third, assembly capacity has been installed in our Beijing facility and is now being qualified. We will begin to realize the full benefit of this expansion during the December quarter. This represents approximately 0.5-1% of the margin expansion.”

“Our key margin improvement initiatives are all either on or ahead of schedule, and we remain confident in achieving 3-4% in gross margin improvement this year,” said Priddy. “We expect this will result in significant financial leverage throughout the year.”

See related items:

RFMD selling UK GaAs fab to Phoenix-based Compound Photonics

RFMD announces flexible GaAs sourcing strategy

RFMD’s quarterly revenue grows greater-than-expected 49% year-on-year

RFMD enjoys 29% sequential revenue growth

RFMD’s revenue up 3.5% on last quarter, but 14% down year-on-year

RFMD’s quarterly revenue and margins grow, driven by diversified markets

RFMD’s quarterly revenue falls 16.6% to $187.9m

Tags: RFMD

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Author: Matthew Peach, Contributing Editor