This report and other documents we have filed with the SEC contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and are
subject to the "safe harbor" created by those sections. Words such as
"anticipates," "believes," "continue," "could," "estimates," "expects,"
"intends," "may," "plans," "potential," "predicts," "seek," "should," "will,"
"would," and similar expressions or variations or negatives of such words are
intended to identify forward-looking statements, but are not the exclusive means
of identifying forward-looking statements in this report. Additionally,
statements concerning future matters such as the possible impacts of the
COVID-19 pandemic, the development of new products, enhancements of
technologies, sales levels, expense levels, and other statements regarding
matters that are not historical are forward-looking statements. Although
forward-looking statements in this report reflect the good faith judgment of our
management as of the date the statement is first made, such statements can only
be based on facts and factors then known by us. Consequently, forward-looking
statements involve inherent risks and uncertainties, and actual results and
outcomes may differ materially and adversely from the results and outcomes
discussed in, or anticipated by, the forward-looking statements. A number of
important factors could cause actual results to differ materially and adversely
from those in the forward-looking statements. We urge you to consider the risks
and uncertainties discussed in this Quarterly Report on Form 10-Q and the 2020
10-K, under the heading "Risk Factors" and in the other documents we have filed
with the SEC in evaluating our forward-looking statements. We have no plans, and
undertake no obligation, to revise or update our forward-looking statements to
reflect any event or circumstance that may arise after the date of the initial
filing of this Quarterly Report on Form 10-Q. We caution readers not to place
undue reliance upon any such forward-looking statements.
In this document, the words "we," "our," "ours," and "us" refer only to Skyworks
Solutions, Inc. and its subsidiaries and not any other person or entity.
Impact of COVID-19
The COVID-19 pandemic and the resulting economic downturn are affecting business
conditions in our industry. The duration, severity, and future impact of the
pandemic continue to be highly uncertain and could still result in significant
disruptions to our business operations, including our supply chain, as well as
negative impacts to our financial condition. A renewed suspension of our
operations in Mexicali, Mexico, similar to what we experienced in April 2020, or
a continued reduction in our production capacity due to employee quarantines,
employee absenteeism, and restrictions on certain of our employees' ability to
work, would negatively impact our future operating results.
RESULTS OF OPERATIONS
Three Months Ended January 1, 2021, and December 27, 2019
The following table sets forth the results of our operations expressed as a
percentage of net revenue:
Three Months Ended
January 1, December 27,
2021 2019
Net revenue 100.0 % 100.0 %
Cost of goods sold 49.6 50.4
Gross profit 50.4 49.6
Operating expenses:
Research and development 8.1 12.0
Selling, general, and administrative 4.4 6.2
Amortization of intangibles 0.2 0.3
Restructuring, impairment, and other charges - 0.1
Total operating expenses 12.7 18.6
Operating income 37.7 31.0
Other income, net - 0.2
Income before income taxes 37.7 31.2
Provision for income taxes 4.1 2.4
Net income 33.6 % 28.8 %
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OVERVIEW
We, together with our consolidated subsidiaries, are empowering the wireless
networking revolution. Our highly innovative analog semiconductors are
connecting people, places, and things spanning a number of new and previously
unimagined applications within the aerospace, automotive, broadband, cellular
infrastructure, connected home, entertainment and gaming, industrial, medical,
military, smartphone, tablet, and wearable markets.
General
During the three months ended January 1, 2021, the following key factors
contributed to our overall results of operations, financial position, and cash
flows:
•Net revenue increased by 68.5% to $1,510.0 million for the three months ended
January 1, 2021, as compared with the corresponding period in fiscal 2020. This
increase in revenue was driven primarily by an increase in overall demand for
wireless connectivity products coupled with the onset of technology upgrade
cycles, including for 5G and Wi-Fi 6 solutions. Additionally, our average
content per device for these next-generation solutions increased.
•Our ending cash, cash equivalents, and marketable securities balance increased
4.0% to $1,019.3 million as of January 1, 2021, from $980.0 million as of
October 2, 2020. This increase in cash, cash equivalents and marketable
securities during the three months ended January 1, 2021, was primarily the
result of cash generated from operations of $485.1 million, partially offset by
the repurchase of 1.4 million shares of common stock for $195.6 million, capital
expenditures of $118.9 million, and dividend payments of $83.0 million.
Net Revenue
Three Months Ended
January 1, December 27,
2021 Change 2019
(dollars in millions)
Net revenue $ 1,510.0 68.5% $ 896.1
We market and sell our products directly to OEMs of communications and
electronics products, third-party original design manufacturers and contract
manufacturers, and indirectly through electronic components distributors. We
generally experience seasonal peaks during our fourth and first fiscal quarters
(which correspond to the second half of the calendar year), primarily as a
result of increased worldwide production of consumer electronics in anticipation
of increased holiday sales, whereas our second and third fiscal quarters are
typically lower and in line with seasonal industry trends.
The increase in net revenue for the three months ended January 1, 2021, as
compared with the corresponding period in fiscal 2020, was driven primarily by
an increase in overall demand for wireless connectivity products coupled with
the onset of technology upgrade cycles, including for 5G and Wi-Fi 6 solutions.
Additionally, our average content per device for these next-generation solutions
increased.
Gross Profit
Three Months Ended
January 1, December 27,
2021 Change 2019
(dollars in millions)
Gross profit $ 761.7 71.4% $ 444.3
% of net revenue 50.4 % 49.6 %
Gross profit represents net revenue less cost of goods sold. Our cost of goods
sold consists primarily of purchased materials, labor and overhead (including
depreciation and share-based compensation expense) associated with product
manufacturing. Erosion of average selling prices of established products is
typical of the semiconductor industry. As part of our normal course of business,
we mitigate the gross margin impact of declining average selling prices with
efforts to increase unit volumes, reduce material costs, improve manufacturing
efficiencies, lower manufacturing costs of existing products and by introducing
new and higher value-added products.
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The increase in gross profit for the three months ended January 1, 2021, as
compared with the corresponding period in fiscal 2020, was primarily the result
of a favorable product mix and higher unit volumes with a gross profit impact of
$332.1 million, partially offset by lower average selling prices. Gross profit
margin increased to 50.4% of net revenue for the three months ended January 1,
2021, as compared with 49.6% in the corresponding period in fiscal 2020.
Research and Development
Three Months Ended
January 1, December 27,
2021 Change 2019
(dollars in millions)
Research and development $ 121.6 12.9% $ 107.7
% of net revenue 8.1 % 12.0 %
Research and development expenses consist primarily of direct personnel costs
including share-based compensation expense, costs for pre-production evaluation
and testing of new devices, masks, engineering prototypes, and design tool
costs.
The increase in research and development expenses for the three months ended
January 1, 2021, as compared with the corresponding period in fiscal 2020, was
primarily related to an increase in employee-related compensation expense,
including higher performance achievement with respect to performance stock
awards.
Selling, General, and Administrative
Three Months Ended
January 1, December 27,
2021 Change 2019
(dollars in millions)
Selling, general, and administrative $ 66.6 20.2% $ 55.4
% of net revenue
4.4 % 6.2 %
Selling, general, and administrative expenses include legal and related costs,
accounting, treasury, human resources, information systems, customer service,
bad debt expense, sales commissions, share-based compensation expense,
advertising, marketing, costs associated with business combinations completed or
contemplated during the period, and other costs.
The increase in selling, general, and administrative expenses for the three
months ended January 1, 2021, as compared with the corresponding period in
fiscal 2020, was primarily related to increases in employee-related compensation
expense, including higher performance achievement with respect to performance
stock awards.
Amortization of Intangibles
Three Months Ended
January 1, December 27,
2021 Change 2019
(dollars in millions)
Amortization of intangibles 2.8 (9.7)% 3.1
% of net revenue 0.2 % 0.3 %
The decrease in amortization expense for the three months ended January 1, 2021,
as compared with the corresponding period in fiscal 2020, was primarily due to
the end of the useful lives of certain intangible assets that were acquired in
prior fiscal years.
Provision for Income Taxes
Three Months Ended
January 1, December 27,
2021 Change 2019
(dollars in millions)
Provision for income taxes $ 61.6 185.2% $ 21.6
% of net revenue 4.1 % 2.4 %
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We recorded a provision for income taxes of $61.6 million (which consisted of
$41.0 million and $20.6 million related to United States and foreign income
taxes, respectively) for the three months ended January 1, 2021.
The increase in income tax expense for the three months ended January 1, 2021,
as compared with the corresponding period in fiscal 2020, was primarily due to
increased income from operations, a reduction in the relative amount of benefits
related to foreign income taxed at rates lower than the federal statutory rate,
and a reduction in the relative amount of windfall tax deductions as compared to
income from operations.
LIQUIDITY AND CAPITAL RESOURCES
Three Months Ended
January 1, December 27,
(in millions) 2021 2019
Cash and cash equivalents at beginning of period $ 566.7 $ 851.3
Net cash provided by operating activities
485.1 398.4
Net cash used in investing activities (111.0) (180.5)
Net cash used in financing activities (323.6) (141.0)
Cash and cash equivalents at end of period $ 617.2 $ 928.2
Cash provided by operating activities:
Cash provided by operating activities consists of net income for the period
adjusted for certain non-cash items and changes in certain operating assets and
liabilities. The $86.7 million increase in cash provided by operating activities
during the three months ended January 1, 2021, as compared with the
corresponding period in fiscal 2020, was primarily related to a $252.2 million
increase in net income, partially offset by $170.0 million of unfavorable
changes in working capital, due primarily to an increase in net cash outflows
for accounts receivable which correlates with higher sales during the period.
Cash used in investing activities:
Cash used in investing activities consists primarily of capital expenditures and
cash paid related to the purchase of marketable securities, offset by cash
received related to the sale or maturity of marketable securities. The $69.5
million decrease in cash used in investing activities during the three months
ended January 1, 2021, as compared with the corresponding period in fiscal 2020,
was primarily related to an $81.5 million difference in the net purchase and
sale of marketable securities, partially offset by a $7.7 million increase in
cash used for capital expenditures.
Cash used in financing activities:
Cash used in financing activities consists primarily of cash transactions
related to equity. The $182.6 million increase in cash used in financing
activities during the three months ended January 1, 2021, as compared with the
corresponding period in fiscal 2020, was related to an increase of $121.4
million in stock repurchase activity, a decrease of $32.2 million in net
proceeds from employee stock option exercises, an increase of $21.1 million
related to the minimum statutory payroll tax withholdings upon vesting of
employee performance and restricted stock awards, and an increase of $7.9
million in dividend payments.
Liquidity:
Cash, cash equivalents and marketable securities totaled $1,019.3 million as of
January 1, 2021, representing an increase of $39.3 million from October 2, 2020.
The increase resulted primarily from $485.1 million in cash generated from
operations, partially offset by $195.6 million used to repurchase 1.4 million
shares of stock, $118.9 million in capital expenditures, and $83.0 million in
cash dividend payments. Based on our historical results of operations, we expect
that our cash, cash equivalents, and marketable securities on hand and the cash
we expect to generate from operations will be sufficient to fund our research
and development, capital expenditures, potential acquisitions, working capital,
quarterly cash dividend payments (if such dividends are declared by the Board of
Directors), outstanding commitments, and other liquidity requirements associated
with existing operations for at least the next 12 months. However, we cannot be
certain that our cash on hand and cash generated from operations will be
available in the future to fund all of our capital and operating requirements.
In addition, any future strategic investments and acquisitions may require
additional cash and capital resources. If we are unable to obtain sufficient
cash or capital to meet our needs on a timely basis and on favorable terms, our
business and operations could be materially and adversely affected.
Our invested cash balances primarily consist of highly liquid marketable
securities that are available to meet near-term cash requirements including:
term deposits, certificate of deposits, money market funds, U.S. Treasury
securities, agency securities, corporate debt securities and commercial paper.
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CONTRACTUAL OBLIGATIONS
Our contractual obligations disclosure in the 2020 10-K has not materially
changed since we filed that report.
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OFF-BALANCE SHEET ARRANGEMENTS
We have no material off-balance sheet arrangements as defined in SEC Regulation
S-K Item 303(a)(4)(ii).
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