RFMD Announces June Quarterly Revenue of $214.2 Million
-- Company Forecasts Continued Revenue Growth And Margin Expansion
GREENSBORO, N.C., July 26, 2011 /PRNewswire/ --
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
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
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
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
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.
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
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
except percentages and per share data)
RF MICRO DEVICES, INC. AND SUBSIDIARIES
ADDITIONAL SELECTED NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
SOURCE RF Micro Devices, Inc.
VP of Investor Relations
RF Micro Devices