SKYWORKS SOLUTIONS, INC. This report and other documents we have filed with theSEC 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 geopolitical conflicts, inflation, and the COVID-19 pandemic, as well as the development of new products, enhancements of technologies, sales levels, expense levels, the benefits of acquisitions we have made or may make in the future, 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 2021 10-K, under the heading "Risk Factors" and in the other documents we have filed with theSEC 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
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, including as a result of more contagious variants of the virus that
causes COVID-19, continue to be highly uncertain and could still result in
significant disruptions to our business operations, as well as negative impacts
to our financial condition. Like many companies in the semiconductor industry,
we are experiencing various supply constraints due to the pandemic. While we are
working with our global supply chain partners to mitigate this risk, the
duration and extent of the supply chain disruptions remain uncertain.
14
--------------------------------------------------------------------------------
Table of Contents
RESULTS OF OPERATIONS
Three and Six Months Ended
The following table sets forth the results of our operations expressed as a
percentage of net revenue:
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
2022 2021 2022 2021
Net revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 52.3 50.6 52.5 50.0
Gross profit 47.7 49.4 47.5 50.0
Operating expenses:
Research and development 12.0 11.2 11.0 9.4
Selling, general, and administrative 6.2 6.0 5.8 5.1
Amortization of intangibles 1.6 0.2 1.9 0.2
Restructuring, impairment, and other
charges 0.4 - 0.2 -
Total operating expenses 20.2 17.4 18.9 14.7
Operating income 27.5 32.0 28.6 35.3
Interest expense (0.9) - (0.8) -
Other income (expense), net (0.1) - - -
Income before income taxes 26.5 32.0 27.8 35.3
Provision for income taxes 3.6 4.3 3.0 4.2
Net income 22.9 % 27.7 % 24.8 % 31.1 %
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
•Net revenue increased to$1,335.6 million for the three months endedApril 1, 2022 , as compared to$1,171.8 million for the corresponding period in fiscal 2021, driven primarily by our prior year fourth quarter acquisition to support high-growth market segments, including electric and hybrid vehicles, industrial and motor control, power supply, 5G wireless infrastructure, optical data communication and data center, automotive, and smart home. The increase in net revenue was also driven in part by an increase in demand for next-generation wireless connectivity products, including 5G and advanced Wi-Fi solutions, from major OEMs and the associated increases in average content per device for these products, partially offset by a decrease in demand for our mobile products from smartphone customers inChina . •Our ending cash, cash equivalents, and marketable securities balance decreased to$778.2 million . The decrease in cash, cash equivalents, and marketable securities during the three months endedApril 1, 2022 , was primarily due to the repurchase of 3.0 million shares of common stock for$418.0 million , capital expenditures of$126.7 million , and dividend payments of$91.2 million , partially offset by cash generated from operations of$392.9 million .
Net Revenue
15--------------------------------------------------------------------------------
Table of Contents
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
2022 Change 2021 2022 Change 2021
(dollars in millions)
Net revenue $ 1,335.6 14.0% $ 1,171.8 $ 2,846.0 6.1%
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 and six months endedApril 1, 2022 , as compared with the corresponding periods in fiscal 2021, was driven primarily by our prior year fourth quarter acquisition to support high-growth market segments, including electric and hybrid vehicles, industrial and motor control, power supply, 5G wireless infrastructure, optical data communication and data center, automotive, and smart home. The increase in net revenue was also driven in part by an increase in demand for next-generation wireless connectivity products, including 5G and advanced Wi-Fi solutions, from major OEMs and the associated increases in average content per device for these products, partially offset by a decrease in demand for our mobile products from smartphone customers inChina . Gross Profit Three Months Ended Six Months Ended April 1, April 2, April 1, April 2, 2022 Change 2021 2022 Change 2021 (dollars in millions) Gross profit$ 637.6 10.2%$ 578.4 $ 1,352.4 0.9%$ 1,340.1 % of net revenue 47.7 % 49.4 % 47.5 % 50.0 % 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, share-based compensation, and amortization of acquisition intangibles, including inventory step-up expense) associated with product manufacturing. As part of our normal course of business, we intend to improve gross profit with efforts to increase unit volumes, improve manufacturing efficiencies, lower manufacturing costs of existing products, and by introducing new and higher value-added products. The increase in gross profit for the three and six months endedApril 1, 2022 , as compared with the corresponding periods in fiscal 2021, was primarily the result of a favorable product mix including volume increases for new product introductions with a gross profit impact of$110.9 million and$220.7 million , respectively, partially offset by lower comparable unit volumes and an increase in amortization of acquisition intangibles, including inventory step-up, due to additional intangible assets acquired during the fourth quarter of fiscal 2021. Research and Development Three Months Ended Six Months Ended April 1, April 2, April 1, April 2, 2022 Change 2021 2022 Change 2021 (dollars in millions) Research and development$ 160.7 23.0 %$ 130.7 $ 311.9 23.6 %$ 252.3 % of net revenue 12.0 % 11.2 % 11.0 % 9.4 % 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 and six months endedApril 1, 2022 , as compared with the corresponding periods in fiscal 2021, was primarily related to headcount-related expenses, including share-based compensation, as a result of our increased investment in developing new technologies and products. The increase in headcount was partially due to our acquisition in the fourth quarter of fiscal 2021.
Selling, General, and Administrative
16--------------------------------------------------------------------------------
Table of Contents
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
2022 Change 2021 2022 Change 2021(dollars in millions) Selling, general, and administrative$ 83.0 18.1 %$ 70.2 $ 165.1 20.6 %$ 136.9 % of net revenue 6.2 % 6.0 % 5.8 % 5.1 % 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 and six months endedApril 1, 2022 , as compared with the corresponding periods in fiscal 2021, was primarily related to increases in headcount-related expenses, including share-based compensation. The increase in headcount was primarily due to our acquisition in the fourth quarter of fiscal 2021.
Amortization of Intangibles
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
2022 Change 2021 2022 Change 2021
(dollars in millions)
Amortization of intangibles $ 21.9 682.7 % $ 2.8 $ 55.2 903.6 % $ 5.5
% of net revenue 1.6 % 0.2 % 1.9 % 0.2 %
The increase in amortization expense for the three and six months ended April 1,
2022 , as compared with the corresponding periods in fiscal 2021, was primarily
due to the intangible assets acquired during the fourth quarter of fiscal 2021.
Interest Expense
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
2022 Change 2021 2022 Change 2021
(dollars in millions)
Interest expense $ (11.4) 100.0 % $ - $ (22.3) 100.0 % $ -
% of net revenue (0.9) % - % (0.8) % - %
The increase in interest expense for the three and six months ended April 1,
2022 , as compared with the corresponding periods in fiscal 2021, was due to the
issuance of the Notes (as defined below) in May 2021 and the borrowing of the
Term Loans (as defined below) in July 2021 .
Provision for Income Taxes
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
2022 Change 2021 2022 Change 2021
(dollars in millions)
Provision for income taxes $ 48.3 (4.4) % $ 50.5 $ 84.6 (24.5) % $ 112.0
% of net revenue 3.6 % 4.3 % 3.0 % 4.2 %
We recorded a provision for income taxes of $48.3 million (which consisted of
$34.3 million and $14.0 million related to United States and foreign income
taxes, respectively) and $84.6 million (which consisted of $52.7 million and
$31.9 million related to United States and foreign income taxes, respectively)
for the three and six months ended April 1, 2022 , respectively.
The decrease in income tax expense for the three and six months ended April 1,
2022 , as compared with the corresponding periods in fiscal 2021, was primarily
due to a decrease in income from operations and an increase in windfall tax
deductions.
LIQUIDITY AND CAPITAL RESOURCES
17--------------------------------------------------------------------------------
Table of Contents
Six Months Ended
April 1, April 2,
(in millions) 2022 2021
Cash and cash equivalents at beginning of period
974.5 1,100.8
Net cash used in investing activities (214.4) (214.9)
Net cash used in financing activities (986.6) (392.7)
Cash and cash equivalents at end of period
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
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$0.5 million decrease in cash used in investing activities during the six months endedApril 1, 2022 , as compared with the corresponding period in fiscal 2021, was primarily related to a$37.3 million decrease in cash used for capital expenditures, partially offset by a$28.7 million decrease in the net sales of marketable securities.
Cash used in financing activities:
Cash used in financing activities consists primarily of proceeds and payments related to our long-term borrowings and cash transactions related to equity. The$593.9 million increase in cash used in financing activities during the six months endedApril 1, 2022 , as compared with the corresponding period in fiscal 2021, was primarily related to an increase of$491.8 million in stock repurchase activity, a$50.0 million repayment of Term Loans, an increase of$32.3 million related to the minimum statutory payroll tax withholdings upon vesting of employee performance and restricted stock awards, and an increase of$18.1 million in dividend payments.
Liquidity:
Cash, cash equivalents, and marketable securities totaled$778.2 million as ofApril 1, 2022 , representing a decrease of$249.0 million fromOctober 1, 2021 . The decrease during the six months endedApril 1, 2022 , resulted primarily from the repurchase of 4.7 million shares of common stock for$687.4 million , capital expenditures of$222.5 million , and dividend payments of$183.7 million , partially offset by cash generated from operations of$974.5 million . We have outstanding$500.0 million of Notes Due 2023,$500.0 million of Notes Due 2026, and$500.0 million of Notes Due 2031 (the "Notes"). We have a term credit agreement (the "Term Credit Agreement") providing for a$1.0 billion term loan facility (the "Term Loan Facility"). OnJuly 26, 2021 , the Company borrowed$1.0 billion in aggregate principal amount of term loans (the "Term Loans") under the Term Loan Facility to finance a portion of the purchase price for the Infrastructure and Automotive business of Silicon Laboratories Inc. and to pay fees and expenses incurred in connection therewith. During the six months endedApril 1, 2022 , we repaid$50.0 million of outstanding borrowings under the Term Loans. As ofApril 1, 2022 , there were$700.0 million of borrowings outstanding under the Term Credit Agreement. We have a Revolving Credit Agreement (the "Revolving Credit Agreement") under which we may borrow up to$750.0 million for general corporate purposes and working capital needs of the Company and its subsidiaries. As ofApril 1, 2022 , there were no borrowings outstanding under the revolving credit facility (the "Revolver"). The Revolving Credit Agreement expiresJuly 26, 2026 . Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, the cash we expect to generate from operations, and funds from our Revolver, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from: 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. However, we cannot be certain that our cash on hand, cash generated from operations, and funds from our Revolver will be available in the future to fund all of our capital and operating requirements. In addition, any future strategic investments and significant acquisitions may require additional cash and capital 18 -------------------------------------------------------------------------------- Table of Contents 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, certificates of deposit, money market funds,
Our contractual obligations disclosure in the 2021 10-K has not materially changed since we filed that report.
© Edgar Online, source
