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RF Micro Devices Announces December Quarterly Results
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RFMD Generates Approximately $279 Million In Revenue And $54 Million
In Free Cash Flow
RFMD's Board Of Directors Authorizes Share Repurchase
Plan
GREENSBORO, N.C., Jan. 25, 2011 /PRNewswire/ --
Company Highlights:
- Quarterly Revenue Increases Approximately 11% Year-Over-Year
To Approximately $279 Million
- GAAP Operating Income Is $43.3 Million, And GAAP Diluted EPS
Is $0.13
- Non-GAAP Operating Income Equals $54.0 Million, Or 19.4% Of
Revenue
- Non-GAAP Diluted EPS Equals $0.19
- RFMD Generates Approximately $54 Million In Quarterly
Free Cash Flow
- RFMD's Board Of Directors Authorizes 2-Year, $200 Million Share
Repurchase Plan
RF Micro Devices, Inc. (Nasdaq GS: RFMD), a global leader in the design
and manufacture of high-performance radio frequency components and compound
semiconductor technologies, today reported financial results for its
fiscal 2011 third quarter, ended January 1, 2011.
RFMD's quarterly
revenue increased approximately 11% year-over-year and decreased approximately
2% sequentially to $278.8 million. On a GAAP basis, gross margin
equaled 37.0%, quarterly operating income totaled $43.3 million, and
quarterly net income was $36.7 million, or $0.13 per diluted share.
On a non-GAAP basis, gross margin equaled 38.7%, quarterly operating
income totaled $54.0 million, and quarterly net income was $52.6 million,
or $0.19 per diluted share. During the quarter, RFMD generated $54.2
million in free cash flow.
- RFMD Strategic Highlights:
RFMD's Multi-Market
Products Group (MPG) enjoyed strong underlying demand in its end
markets, and each MPG business unit grew sequentially, led by wireless
infrastructure, Smart Energy, WiFi for 3G/4G smartphones and tablets,
defense, and high-power gallium nitride (GaN) applications
- RFMD's Cellular Products Group (CPG) saw accelerating design
activity for 3G/4G smartphones across its PowerSmart™ power platforms,
high-performance switch-based products, and recently launched family
of industry-leading, high-efficiency single-mode power amplifiers
(PAs)
- RFMD supported the launch of a highly anticipated flagship 3G/4G
smartphone and tablet product family featuring RFMD's PowerSmart
and WiFi components
- MPG commenced volume production of GaN products for applications
in high-power military radar and CATV
- RFMD continued to diversify its customers and markets in the
December quarter
Business Outlook
RFMD currently believes
the demand environment in its end markets supports the following expectations
and projections:
- RFMD expects total revenue in the March quarter to seasonally
decline approximately 10%-15% and RFMD expects an additional decline
of approximately $25 million in transceiver revenue in the March
quarter, consistent with the anticipated end-of-life of legacy transceiver
products
- RFMD anticipates its transceiver products will be immaterial
to financial results in the June 2011 quarter and thereafter
- RFMD expects to commence volume shipments of PowerSmart in the
March quarter
RFMD expects March quarterly gross margin to be
flat-to-down 200 basis points, compared to the December quarterly
gross margin
- RFMD expects to achieve free cash flow in fiscal 2011 in the
range of $180-$200 million
- RFMD's actual quarterly and annual results may differ from these
expectations and projections, and such differences may be material.
Comments From Management
Bob Bruggeworth, president
and CEO of RFMD, commented, "The March quarter represents an inflection
point for RFMD as we close out our legacy transceiver business and begin
the ramp of new, higher margin component solutions, including our PowerSmart
power platforms, our industry-leading high efficiency single-mode PAs,
our silicon-based switches, our GaN components, and our high-performance
WiFi components.
"We are forecasting sequential growth in the
March quarter in 3G/4G smartphones, wireless infrastructure and GaN-based
products, and we expect to ramp 3G/4G smartphones featuring PowerSmart
at an additional leading smartphone OEM each quarter of calendar 2011.
This supports our expectations for broad-based share gains and positions
RFMD to grow sequentially and expand gross margins during fiscal 2012,
outpacing overall growth in our core markets."
Dean Priddy, CFO
and vice president of administration of RFMD, said, "RFMD's capital
efficient business model has generated two years of industry-leading
free cash flow, with an outlook for continued superior free cash flow.
During the December quarter, RFMD generated free cash flow of approximately
$54 million, and RFMD has improved its net cash position by $405 million
dollars over the past eight quarters.
"We are confident RFMD's
business model enables us to substantially grow our revenues and expand
margins while achieving industry-leading capital efficiency. In fact,
we believe we can approximately double our revenue without requiring
additional GaAs fabrication capacity.
"Based on this outlook
and other factors, our Board of Directors has authorized a two-year,
$200 million share repurchase plan. This provides us with the flexibility
when market conditions warrant to significantly reduce our outstanding
shares and offset potential future dilution from our convertible debt
and awards under our equity-based compensation plans."
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 page 10 and the "Additional
Selected Non-GAAP Financial Measures And Reconciliations" tables on
pages 11 and 12.
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
gross profit and gross margin. Non-GAAP gross profit and gross
margin exclude share-based compensation expense, amortization of intangible
assets, other non-cash expenses and adjustments for restructuring and
integration charges. We believe that exclusion of these costs
in presenting non-GAAP gross profit and gross margin gives management
and investors a more effective means of evaluating RFMD's historical
performance and projected costs and the potential for realizing cost
efficiencies. We believe that the majority of RFMD's purchased
intangibles are not relevant to analyzing current operations because
they generally represent costs incurred by the acquired company to build
value prior to acquisition, and thus are effectively part of transaction
costs rather than ongoing costs of operating RFMD's business.
In this regard, we note that (i) once the intangibles are fully amortized,
the intangibles will not be replaced with cash costs and therefore,
the exclusion of these costs provides management and investors with
better visibility into the actual costs required to generate revenues
over time, and (ii) although we set the amortization expense based on
useful life of the various assets at the time of the transaction, we
cannot influence the timing and amount of the future amortization expense
recognition once the lives are established. Similarly, we believe
that presentation of non-GAAP gross profit and gross margin and other
non-GAAP financial measures that exclude the impact of share-based compensation
expense assists management and investors in evaluating the period-over-period
performance of RFMD's ongoing operations because (i) the expenses are
non-cash in nature, and (ii) although the size of the grants is within
our control, the amount of expense varies depending on factors such
as short-term fluctuations in stock price volatility and prevailing
interest rates, which can be unrelated to the operational performance
of RFMD during the period in which the expense is incurred and generally
is outside the control of management. Moreover, we believe that
the exclusion of share-based compensation expense in presenting non-GAAP
gross profit and gross margin and other non-GAAP financial measures
is useful to investors to understand the impact of the expensing of
share-based compensation to RFMD's gross profit and gross margins and
other financial measures in comparison to both prior periods as well
as to its competitors. We also believe that the adjustments to
profit and margin related to other non-cash expenses and restructuring
and integration charges do not constitute part of RFMD's ongoing operations
and therefore the exclusion of these costs provides management and investors
with better visibility into the actual costs required to generate revenues
over time and gives management and investors a more effective means
of evaluating our historical and projected performance. We believe
disclosure of non-GAAP gross profit and gross margin has economic substance
because the excluded expenses do not represent continuing cash expenditures
and, as described above, we have little control over the timing and
amount of the expenses in question.
Non-GAAP operating income
and operating margin. Non-GAAP operating income and operating
margin exclude share-based compensation expense, amortization of intangible
assets, other non-cash expenses, restructuring and integration charges,
loss on PP&E and start-up costs. We believe that presentation
of a measure of operating income and operating margin that excludes
amortization of intangible assets and share-based compensation expense
is useful to both management and investors for the same reasons as described
above with respect to our use of non-GAAP gross profit and gross margin.
We believe that other non-cash expenses, restructuring and integration
charges, loss on PP&E and start-up costs do not constitute part
of RFMD's ongoing operations and therefore, the exclusion of these costs
provides management and investors with better visibility into the actual
costs required to generate revenues over time and gives management and
investors a more effective means of evaluating our historical and projected
performance. We believe disclosure of non-GAAP operating income
and operating margin has economic substance because the excluded expenses
are either unrelated to operations or do not represent current cash
expenditures.
Non-GAAP net income and non-GAAP net income per
diluted share. Non-GAAP net income and non-GAAP net income per diluted
share exclude the effects of share-based compensation expense, amortization
of intangible assets, other non-cash expenses, restructuring and integration
charges, loss on PP&E, start-up costs, loss on retirement of convertible
subordinated notes, non-cash interest expense on convertible subordinated
notes, income from equity investment and also reflect an adjustment
of income taxes for cash basis. We believe that presentation of measures
of net income and net income per diluted share that exclude these items
is useful to both management and investors for the reasons described
above with respect to non-GAAP gross profit and gross margin and non-GAAP
operating income and operating margin. We believe disclosure of non-GAAP
net income and non-GAAP net income per diluted share has economic substance
because the excluded expenses are either unrelated to operations or
do not represent current cash expenditures.
Non-GAAP research
and development, marketing and selling and general and administrative
expenses. Non-GAAP research and development, marketing and selling and
general and administrative expenses exclude share-based compensation
expense, amortization of intangible assets, other non-cash expenses
and restructuring and integration charges. We believe that presentation
of measures of these operating expenses that exclude amortization of
intangible assets and share-based compensation expense is useful to
both management and investors for the same reasons as described above
with respect to our use of non-GAAP gross profit and gross margin. We
believe that other non-cash expenses and restructuring and integration
charges do not constitute part of RFMD's ongoing operations and therefore,
the exclusion of these costs provides management and investors with
better visibility into the actual costs required to generate revenues
over time and gives management and investors a more effective means
of evaluating our historical and projected performance. We believe disclosure
of these non-GAAP operating expenses has economic substance because
the excluded expenses are either unrelated to operations or do not represent
current cash expenditures.
Free cash flow. RFMD defines free
cash flow as net cash provided by operating activities during the period
minus property and equipment expenditures made during the period. We
use free cash flow as a supplemental financial measure in our evaluation
of liquidity and financial strength. Management believes that this measure
is useful as an indicator of our ability to service our debt, meet other
payment obligations and make strategic investments. Free cash flow should
be considered in addition to, rather than as a substitute for, net income
as a measure of our performance and net cash provided by operating activities
as a measure of our liquidity. Additionally, our definition of free
cash flow is limited, in that it does not represent residual cash flows
available for discretionary expenditures due to the fact that the measure
does not deduct the payments required for debt service and other contractual
obligations. Therefore, we believe it is important to view free cash
flow as a measure that provides supplemental information to our entire
statement of cash flows.
EBITDA. RFMD defines EBITDA as
earnings before interest expense and interest income, income tax expenses,
depreciation and intangible amortization. Management believes
that this measure is useful to evaluate our ongoing operations and as
a general indicator of our operating cash flow (in conjunction with
a cash flow statement which also includes among other items, changes
in working capital and the effect of non-cash charges). The amounts
shown for EBITDA as presented herein differ from the amounts calculated
under the definition of EBITDA used in our equipment term loan agreement.
The definition of EBITDA as used in the loan agreement is further adjusted
for certain cash and non-cash charges, including stock compensation
expense, and is used to determine compliance with financial covenants.
Non-GAAP ROIC. Return on invested capital (ROIC) is a non-GAAP financial
measure that management believes provides useful supplemental information
for management and the investor by measuring the effectiveness of our
operations' use of invested capital to generate profits. We use ROIC
to track how much value we are creating for our shareholders. Non-GAAP
ROIC is calculated by dividing annualized non-GAAP operating income,
net of cash taxes, by average invested capital. Average invested
capital is calculated by subtracting the average of the beginning balance
and the ending balance of current liabilities (excluding the current
portion of long-term debt and other short-term financings) from the
average of the beginning balance and the ending balance of net accounts
receivable, inventories, other current assets, net property and equipment
and a cash amount equal to seven days of quarterly revenue.
Net debt or positive net cash. Net debt or positive net cash is defined
as unrestricted cash, cash equivalents and short-term investments minus
the principal amount of RFMD's convertible subordinated notes. Management
believes that net debt or positive net cash provides useful information
regarding the level of RFMD's indebtedness by reflecting cash and investments
that could be used to repay debt.
Limitations of non-GAAP financial
measures. The primary material limitations associated with the use of
non-GAAP gross profit and gross margin, non-GAAP operating expenses,
non-GAAP operating income and operating margin, non-GAAP net income,
non-GAAP net income per diluted share, free cash flow, EBITDA, non-GAAP
ROIC and net debt or positive net cash, as compared to the most directly
comparable GAAP financial measures of gross profit and gross margin,
operating expenses, operating income, net income, net income per diluted
share and net cash provided by operating activities are (i) they may
not be comparable to similarly titled measures used by other companies
in RFMD's industry, and (ii) they exclude financial information that
some may consider important in evaluating our performance. We compensate
for these limitations by providing full disclosure of the differences
between these non-GAAP financial measures and the corresponding GAAP
financial measures, including a reconciliation of the non-GAAP financial
measures to the corresponding GAAP financial measures, to enable investors
to perform their own analysis of our gross profit and gross margin,
operating expenses, operating income, net income, net income per diluted
share and net cash provided by operating activities.
RF Micro
Devices will conduct a conference call at 5:00 p.m. EST today to discuss
today's press release. The conference call will be broadcast live
over the Internet and can be accessed by any interested party at
http://www.rfmd.com
(under "Investors"). A telephone playback of the conference call
will be available approximately one hour after the call's completion
by dialing 303-590-3030 and entering pass code 4397339.
About RFMD
RF Micro Devices, Inc. (Nasdaq GS:
RFMD) is a global leader in the design and manufacture of high-performance
semiconductor components. RFMD's products enable worldwide mobility,
provide enhanced connectivity and support advanced functionality in
the cellular handset, wireless infrastructure, wireless local area network
(WLAN), CATV/broadband and aerospace and defense markets. RFMD is recognized
for its diverse portfolio of semiconductor technologies and RF systems
expertise and is a preferred supplier to the world's leading mobile
device, customer premises and communications equipment providers.
Headquartered in Greensboro, N.C., RFMD is an ISO 9001- and
ISO 14001-certified manufacturer with worldwide engineering, design,
sales and service facilities. RFMD is traded on the NASDAQ Global Select
Market under the symbol RFMD. For more information, please visit RFMD's
web site at www.rfmd.com.
This press release includes "forward-looking statements" within the
meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements include, but are
not limited to, statements about our plans, objectives, representations
and contentions and are not historical facts and typically are identified
by use of terms such as "may," "will," "should," "could," "expect,"
"plan," "anticipate," "believe," "estimate," "predict," "potential,"
"continue" and similar words, although some forward-looking statements
are expressed differently. You should be aware that the forward-looking
statements included herein represent management's current judgment and
expectations, but our actual results, events and performance could differ
materially from those expressed or implied by forward-looking statements.
We do not intend to update any of these forward-looking statements or
publicly announce the results of any revisions to these forward-looking
statements, other than as is required under the federal securities laws.
RF Micro Devices' business is subject to numerous risks and uncertainties,
including variability in operating results, risks associated with the
impact of global macroeconomic and credit conditions on our business
and the business of our suppliers and customers, our reliance on a few
large customers for a substantial portion of our revenue, the rate of
growth and development of wireless markets, our ability to bring new
products to market, our reliance on inclusion in third party reference
designs for a portion of our revenue, our ability to manage channel
partner and customer relationships, risks associated with the operation
of our wafer fabrication, molecular beam epitaxy, assembly and test
and tape and reel facilities, our ability to complete acquisitions and
integrate acquired companies, including the risk that we may not realize
expected synergies from our business combinations, our ability to attract
and retain skilled personnel and develop leaders, variability in production
yields, raw material costs and availability, our ability to reduce costs
and improve margins in response to declining average selling prices,
our ability to adjust production capacity in a timely fashion in response
to changes in demand for our products, dependence on gallium arsenide
(GaAs) for the majority of our products, dependence on third parties,
and substantial reliance on international sales and operations. These
and other risks and uncertainties, which are described in more detail
in RF Micro Devices' most recent Annual Report on Form 10-K and other
reports and statements filed with the Securities and Exchange Commission,
could cause actual results and developments to be materially different
from those expressed or implied by any of these forward-looking statements.
RF MICRO DEVICES®, RFMD® and PowerSmart™ are trademarks of RFMD,
LLC. All other trade names, trademarks and registered trademarks are
the property of their respective owners. [Tables To Follow]
Inc.
SOURCE RF Micro Devices, Inc.
CONTACT:
RF Micro Devices,Doug DeLieto
VP, Investor Relations
336-678-7088
Posted 1/25/2011
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