Yahoo Finance Qorvo (QRVO) Q1 Earnings Miss Miserably, Q2 Outlook Grim - Analyst Blog
Leading semiconductor manufacturer Qorvo, Inc. QRVO reported first-quarter fiscal 2016 net income of $2.0 million or a penny per share. Excluding one-time items, non-GAAP earnings in the reported quarter aggregated $168.5 million or $1.09 per share. The adjusted earnings (with stock-based compensation adjustments) of 78 cents per share miserably missed the Zacks Consensus Estimate of 98 cents.
Revenues
Revenues for first quarter fiscal 2016 were $673.6 million, up 23% year over year compared to the combined revenues of RF Micro Devices and TriQuint. The quarterly revenues beat the Zacks Consensus Estimate of $665 million. The year-over-year increase in revenues was primarily driven by merger-related synergies.
Top-line growth was led by the Mobile Products segment, which was up 35% to $551 million. Revenues from the Infrastructure and Defense Products (IDP) segment decreased 13% to $122 million, driven by a sharp decline in base station opportunities. Excluding wireless infrastructure, IDP revenue grew approximately 9% year over year.
Margins
Non-GAAP gross margin was record high at 51.5%, up sequentially from 50.4% and significantly up on a year-over-year basis from 44.8% for RF Micro Devices and TriQuint combined. The improvement in gross margin was primarily attributable to a favorable product mix and synergies from the merger.
Operating income was $187.8 million for the reported quarter versus $103.2 million in the year-ago period for RF Micro Devices and TriQuint combined. The healthy rise in operating income was driven by synergistic benefits, leading to higher investment in product and process development while making solid progress towards the operating expense model.
Balance Sheet & Cash Flow
At quarter end, cash and cash equivalents aggregated $325.6 million. During the quarter, the company repurchased approximately 602,000 shares for $50 million. Capital expenditures were $89 million in the reported quarter.
Net cash provided by operating activities stood at $141.4 million, resulting in free cash flow of $52.0 million in the reported quarter.
Outlook
Qorvo expects revenues in second-quarter fiscal 2016 to be in the range of $690 million to $710 million, up 4% sequentially. Earnings per share are expected to be in the range of $1.05 to $1.15, well below the current Zacks Consensus Estimate of $1.25. The grim earnings guidance was primarily due to softness in the LTE (Long Term Evolution) market, which is expected to result in lower wireless infrastructure revenues. In addition, management envisions slower demand from the Chinese manufacturers, who have been among the largest customers of the company, with higher levels of inventory at their disposal.
However, new product launches and customer design activity are likely to generate significant revenue growth throughout calendar year 2015 and 2016. The company expects $75 million in synergies exiting this calendar year and $150 million in synergies exiting calendar year 2016.
Total addressable market for mobile RF is expected to grow at a CAGR of 10% to 15% over the next few years, driven primarily by unit growth of 4G phones and increase in RF content and complexity.
Qorvo currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the semiconductor industry that are worth a look include Exar Corp. EXAR, Cirrus Logic Inc. CRUS and Himax Technologies, Inc. HIMX, each carrying a Zacks Rank #2 (Buy).
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