RFMD Announces June Quarterly Revenue of $214.2 Million
-- Company Forecasts Continued Revenue Growth And Margin Expansion
GREENSBORO, N.C., July 26, 2011 /PRNewswire/ --
Company Highlights: Quarterly Revenue Totals $214.2 Million
GAAP Operating Income Is $14.9 Million, And GAAP Diluted EPS Is $0.03
Non-GAAP Operating Income Is $25.1 Million, Or 11.7% Of Revenue
Non-GAAP Diluted EPS Totals $0.08 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 2012 first
quarter, ended July 2, 2011.
RFMD's June 2011 quarterly revenue increased sequentially to
$214.2 million, primarily as a result of double-digit sequential growth
in the Company's core business, which more than offset a decline in
sales of legacy transceiver products. On a GAAP basis, gross margin
equaled 36.5%, quarterly operating income totaled $14.9 million, and
quarterly net income was $8.9 million, or $0.03 per diluted share.
On a non-GAAP basis, gross margin equaled 38.5%, quarterly operating
income totaled $25.1 million, and quarterly net income was $21.3 million,
or $0.08 per diluted share. During the quarter, RFMD generated approximately
$19.1 million in cash flow from operations, retired $22.0 million principal
amount of convertible debt and repurchased approximately 945,000 shares
of common stock.
RFMD Strategic Highlights Sales of RFMD's 3G/4G cellular products
for smartphones grew more than 50% sequentially Shipments of RFMD's
PowerSmart™ power platform surpassed $10 million in revenue in support
of multiple flagship smartphones and tablets
RFMD commenced production shipments of its industry-leading ultra-high
efficiency 3G/4G PAs in support of multiple customers RFMD secured an
additional high-performance 3G/4G switch design win on a Qualcomm reference
design RFMD ramped volume shipments of new GaN-based products to leading
military radar and CATV customers RFMD was awarded two DARPA contracts
for advanced thermally managed GaN RF power technology valued at approximately
$3 million through fiscal 2013 RFMD secured major design wins across
multiple growth markets, including 3G/4G smartphones, emerging market
handsets, wireless infrastructure, Smart Energy/Advanced Metering Infrastructure
(AMI), high-performance WiFi, and point-to-point radio for cellular
backhaul GAAP RESULTS
NON-GAAP RESULTS (excluding share-based compensation, amortization
of intangibles, integration charges, start-up costs, loss on retirement
of convertible subordinated notes, restructuring charges, (gain) loss
on PP&E, (income) loss from equity investment, and non-cash interest
expense on convertible subordinated notes and tax adjustments)
Business Outlook RFMD currently believes the demand environment
in its end markets supports the following expectations and projections
for the September 2011 quarter:
RFMD expects quarterly revenue to increase approximately
6% sequentially RFMD expects to further diversify its customer
base, primarily through market share gains in 3G/4G smartphones RFMD
expects non-GAAP gross margin to increase approximately 50 basis points
and non-GAAP operating expenses to be approximately flat to up $1 million
sequentially RFMD expects a non-GAAP tax rate of approximately 15%
RFMD's actual quarterly results may differ from these expectations and
projections, and such differences may be material.
Comments From Management Bob Bruggeworth, president and chief
executive officer of RFMD, said, "The increasing demand for mobility,
energy conservation, and 'always-on' broadband data, continues to favor
RFMD's core strengths and expanding product and technology portfolio.
We plan to capitalize on these global secular growth drivers to outperform
our addressable markets.
"During the June quarter, RFMD enjoyed strong design momentum
in 3G/4G smartphones and across MPG's diversified markets. We launched
several industry-leading new products, and this fueled a sharp improvement
in our customer and product mix -- yielding our most diverse quarter
by customer concentration. We see further customer diversification in
the September quarter, supported by share gains in smartphones, tablets,
smart energy management solutions, point-to-point radio chipsets for
cellular backhaul, and other growth markets.
"We believe the new product cycles we are ramping today will extend
multiple years and reinforce our position as a highly diversified growth-oriented
supplier of RF components and compound semiconductor technologies."
Dean Priddy, CFO and vice president of administration of RFMD, said,
"RFMD returned to sequential revenue growth in the June quarter on the
strength of double-digit growth in our core business. With transceiver
revenue now at immaterial levels, RFMD is positioned to achieve continued
sequential revenue growth, enabling broad improvement in our financial
performance, including margin expansion and operating leverage."
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
page 11.
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, (gain) 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,
(gain) 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,
(gain) loss on PP&E, start-up costs, loss on retirement of convertible
subordinated notes, non-cash interest expense on convertible subordinated
notes, loss (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 expense (benefit), 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
due 2012 and 2014. 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.
EDT 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 4454639. About
RFMD RF Micro Devices, Inc. (Nasdaq GS: RFMD) is a global leader
in the design and manufacture of high-performance radio frequency components
and compound semiconductor technologies. 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® and RFMD® are trademarks of RFMD, LLC. All
other trade names, trademarks and registered trademarks are the property
of their respective owners.
RF MICRO DEVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
RF MICRO DEVICES, INC. AND SUBSIDIARIES RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES (In thousands, except percentages and
per share data) (Unaudited)
RF MICRO DEVICES, INC. AND SUBSIDIARIES ADDITIONAL SELECTED NON-GAAP
FINANCIAL MEASURES AND RECONCILIATIONS
SOURCE RF Micro Devices, Inc.
Contact Douglas DeLieto VP of Investor
Relations RF Micro Devices 336-678-7088
Posted
7/27/2011
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