RFMD Delivers Record Revenue and Exceeds Earnings Guidance in 4th Quarter of Fiscal 200626 April 2006
RF Micro Devices, Inc. (Nasdaq: RFMD), a leading provider of proprietary radio frequency integrated circuits (RFICs) for wireless communications applications, today reported financial results for its fiscal 2006 fourth quarter ended March 31, 2006.
RFMD's results for the March 2006 quarter reflect strength at the world's leading handset manufacturers, share gains in RF semiconductors and increased sales of transceiver modules and transmit modules, which have higher average selling prices and increase RFMD's average dollar content per handset. During the March 2006 quarter, sales of RFMD's POLARIS(TM) TOTAL RADIO(TM) solutions increased sequentially approximately 78% compared to the December 2005 quarter and represented more than 25% of total quarterly revenue.
Both GAAP and non-GAAP earnings per share for the March quarter exceeded the Company's quarterly financial guidance previously provided on January 24, 2006. The March 2006 GAAP guidance excluded share-based compensation expense arising from the impact of variable accounting associated with RFMD's option exchange program. This non-cash variable accounting expense, which totaled $19.9 million, or $0.09 of diluted earnings per share, in the March quarter, was impossible to predict because it was dependent on the Company's closing stock price at the end of the March quarter. The financial statement portion of this release provides additional detail on the effect of share-based compensation on expenses.
GAAP and non-GAAP financial measures are presented in the tables below and are reconciled to the corresponding GAAP measures in the financial statement portion of this press release.
GAAP RESULTS
(in millions,
except
percentages
and per Q4 Fiscal Q3 Fiscal % Change Q4 Fiscal % Change
share data) 2006 2006 vs. Q3 2006 2005 vs. Q4 2005
Revenue $225.9 $208.0 8.6% $150.4 50.2%
Gross Margin 33.6% 36.1% (2.5) ppt 29.8% 3.8 ppt
Operating (Loss)
Income $(1.7) $17.1 (109.9)% $(62.9) 97.3%
Net (Loss)
Income $(1.6) $14.7 (110.7)% $(63.0) 97.5%
Diluted EPS $(0.01) $0.07 (112.5)% $(0.34) 97.5%
NON-GAAP RESULTS (excluding share-based compensation, amortization,
restructuring and lease adjustments)
(in millions,
except
percentages
and per Q4 Fiscal Q3 Fiscal % Change Q4 Fiscal % Change
share data) 2006 2006 vs. Q3 2006 2005 vs. Q4 2005
Revenue $225.9 $208.0 8.6% $150.4 50.2%
Gross Margin 35.0% 36.2% (1.2) ppt 30.1% 4.9 ppt
Operating
Income(Loss) $ 19.8 $ 18.8 5.1% $ (16.5) 219.5%
Net Income
(Loss) $ 19.9 $ 16.4 21.5% $ (16.6) 219.8%
Diluted EPS $0.09 $0.08 18.7% $ (0.09) 204.9%
Business Highlights
Revenue
* Revenue grew 50% year-over-year and 8.6% sequentially to a record $225.9
million
* Revenue reflected market share gains in cellular transceivers and
transmit modules and increasing requirements for GaAs content in mobile
devices
* Growth was driven by all three business units (Cellular, Wireless
Connectivity and Infrastructure)
* Average selling prices within RFMD's Cellular business unit increased by
approximately 8%
Transceivers
* POLARIS(TM) transceiver sales grew 78% sequentially and exceeded 25% of
quarterly revenue
* Two new POLARIS(TM) customers placed production orders in the March
quarter
* RFMD is experiencing increased order activity -- from new and existing
customers -- for its POLARIS(TM) Radio Module for EDGE
Power Amplifiers
* RFMD extended its market share leadership in power amplifiers in the
March quarter, based upon continued share gains in transmit modules
across multiple leading customers
* RFMD is booked for sequential growth in CDMA, GSM/GPRS, EDGE and
WCDMA/HSDPA
Investment Businesses
* RFMD launched a wireless connectivity platform that enables the
integration of multiple wireless technologies, such as FM tuners and
Bluetooth functionality, in mobile phones
* RFMD extended its leadership in WLAN power amplifiers for handsets with
production shipments of the industry's first front-end module designed
for embedded WLAN in handsets
* RFMD is booked for sequential growth in GPS, WLAN and Bluetooth
components
Manufacturing Capacity
* RFMD announced a 40% expansion of its industry-leading GaAs wafer
fabrication capacity to support forecasted revenue as the handset market
grows and as GaAs content requirements increase with the adoption of
transmit modules and multimode handsets
* RFMD is expanding its internal assembly capacity in Beijing by over 100%
Financial Guidance And Business Outlook
In the June 2006 quarter, RFMD anticipates continued market share gains and increased sales of higher dollar content products, such as cellular transceiver modules and cellular transmit modules. Beyond June, RFMD expects revenue, margins and earnings will be impacted favorably by customer momentum, new product launches and recent design wins.
* Revenue in the June 2006 quarter is expected to be in the range of $230
million to $245 million, representing year-over-year growth of
approximately 44% to 54%.
* Quarterly GAAP net income in the June 2006 quarter is expected to be in
the range of $0.05 to $0.07 per share, including estimated share-based
compensation expense and amortization of intangibles of approximately
$6.5 million. The methodology used to estimate share-based compensation
expense does not factor in items such as new grants, exercises,
terminations or amounts that may be capitalized in inventory, and the
methodology used to estimate intangible amortization assumes no
additional intangible assets are recorded. The Company currently cannot
estimate the impact of share-based compensation on gross margin or
operating expenses and will provide this information with its first
quarter results. Accordingly, actual quarterly results may differ from
these estimates, and such differences may be material.
* Quarterly non-GAAP net income is expected to be in the range of $0.08 to
$0.10 per share. Non-GAAP net income excludes share-based compensation
and intangible amortization.
Comments From Management
Bob Bruggeworth, president and CEO of RFMD, said, "RFMD is achieving record financial performance as the world's leading handset manufacturers continue to select our best-in-class RF semiconductor solutions. During the March quarter, shipments of our cellular transmit modules continued to increase substantially, and sales of our POLARIS(TM) transceiver solutions grew to over 25% of total revenue. We've rapidly taken market share in cellular transceivers and transmit modules, and we expect this trend will continue during the remainder of calendar 2006 and into calendar year 2007. In the June 2006 quarter we are currently booked for growth in cellular transceivers and transmit modules, as well as in power amplifiers, Bluetooth products, GPS products and WLAN components."
Bruggeworth concluded, "We enter fiscal 2007 with a robust handset market, exceptional customer relationships and a broad-based product portfolio. We believe we are positioned exceptionally well to leverage these advantages and grow our revenue and earnings per share as the year progresses."
Dean Priddy, CFO and vice president of administration, said, "We're pleased with our ability to generate an increase of $8.7 million in cash and short-term investments during the March quarter, even as we made substantial investments in wafer fab and assembly capacity. We believe that these investments will enable RFMD to increase revenue and earnings per share as the year progresses by continuing to capture the growing demand for our GaAs and silicon products. Specifically, the 40% increase in our industry-leading GaAs fab capacity will position us to capture our customers' increasing requirements for multiple power amplifiers and switches in their handsets and wireless LAN applications. Additionally, our growing position as a mainstream fabless silicon supplier should enable us to expand our dollar content as our cellular transceivers, Bluetooth components and GPS products continue to ramp."
Non-GAAP Financial Measures
RFMD reports gross margin, operating income, net income and earnings per share (EPS) on a GAAP basis and non-GAAP basis. RFMD believes non-GAAP financial measures provide useful supplemental information to investors and facilitate a better understanding of results of operations as seen through the eyes of management. RFMD has chosen to provide this supplemental information to enable investors to perform additional comparisons of operating results and analyze financial performance without the impact of certain non-cash expenses or unusual items that may obscure trends in the Company's underlying performance. Management uses these non-GAAP financial measures internally to make strategic decisions, forecast future results and evaluate the Company's current performance. These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP and may differ from non-GAAP financial measures used by other companies.
RF Micro Devices will conduct a conference call at 5:00 p.m. ET 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.earnings.com or http://www.rfmd.com (under Investor Info). A telephone playback of the conference call will be available approximately one hour after the call's completion by dialing 303-590-3000 and entering pass code 11058061.
About RF Micro Devices
RF Micro Devices, Inc., an ISO 9001- and ISO 14001-certified manufacturer, designs, develops, manufactures and markets proprietary radio frequency integrated circuits (RFICs) for wireless communications products and applications. The Company is a leading supplier of power amplifiers, one of the most critical radio frequency (RF) components in cellular phones. The Company is also the leading manufacturer of GaAs HBT, which offers distinct advantages over other technologies for the manufacture of current- and next- generation power amplifiers. The Company's products are included primarily in cellular phones, base stations, wireless local area networks (WLANs), cable television modems and global positioning systems (GPS). The Company derives revenue from the sale of standard and custom-designed products. The Company offers a broad array of products including amplifiers, mixers, modulators/demodulators and single-chip transmitters, Bluetooth(R) products and receivers and transceivers that represent a substantial majority of the RFICs required in wireless subscriber equipment. The Company's goal is to be the premier supplier of low-cost, high-performance integrated circuits and solutions for applications that enable wireless connectivity. RF Micro Devices, Inc. is traded on the Nasdaq National Market under the symbol RFMD. For more information about RFMD, please visit http://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 quarterly operating results, the rate of growth and development of wireless markets, risks associated with the operation of our wafer fabrication facilities, molecular beam epitaxy facility, our assembly facility and our test, tape and reel facilities, our ability to attract and retain skilled personnel and develop leaders, variability in production yields, our ability to reduce costs and improve gross margins by implementing innovative technologies, our ability to bring new products to market, our ability to adjust production capacity in a timely fashion in response to changes in demand for our products, dependence on a limited number of customers and dependence on third parties. These and other risks and uncertainties, which are described in more detail in RF Micro Devices' most recent Annual Report on Form 10-K 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(R), RFMD(R) and POLARIS(TM) TOTAL RADIO(TM) are trademarks of RFMD, LLC. BLUETOOTH is a trademark owned by Bluetooth SIG, Inc., U.S.A. and licensed for use by RF Micro Devices, Inc. All other trade names, trademarks
and registered trademarks are the property of their respective owners.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
Three Months Ended March 31,
2006 2005
(Unaudited) (Unaudited)
Total revenue $225,885 $150,406
Costs and expenses:
Cost of goods sold (1) 149,902 105,602
Research and development (1) 52,034 45,127
Marketing and selling (1) 16,080 12,899
General and administrative (1) 9,505 7,285
Other operating expense 53 42,414
Total costs and expenses (1) 227,574 213,327
Operating loss (1,689) (62,921)
Other income (expense), net 654 64
Loss before income taxes $(1,035) $(62,857)
Income tax expense (533) (116)
Net loss $(1,568) $(62,973)
Net loss per share, diluted $(0.01) $(0.34)
Weighted average outstanding diluted shares 189,599 187,547
(1) The following table shows the share-based compensation expense
included in the cost and expense items shown for the periods
presented:
Three Months Ended Three Months Ended
March 31, 2006 March 31, 2005
Share- Share-
As Based As Based
Reported Compensation Net Reported Compensation Net
Total costs
and expenses:
Cost of goods
sold $149,902 $2,992 $146,910 $105,602 $226 $105,376
Research
and development 52,034 11,132 40,902 45,127 276 44,851
Marketing
and selling 16,080 4,196 11,884 12,899 457 12,442
General and
administrative 9,505 2,623 6,882 7,285 269 7,016
Other
operating
expense 53 - 53 42,414 - 42,414
Total costs
and expenses $227,574 $20,943 $206,631 $213,327 $1,228 $212,099
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
Twelve Months Ended March 31,
2006 2005
(Unaudited) (Audited)
Total revenue $770,247 $634,204
Costs and expenses:
Cost of goods sold (1) 501,224 417,079
Research and development (1) 168,858 156,464
Marketing and selling (1) 52,121 47,409
General and administrative (1) 29,589 25,053
Other operating expense (income) (251) 49,469
Total costs and expenses (1) 751,541 695,474
Operating income (loss) 18,706 (61,270)
Loss in equity method investee - (1,761)
Other income (expense), net 1,505 (2,433)
Income (loss) before income taxes $20,211 $(65,464)
Income tax expense (3,881) (581)
Net income (loss) $16,330 $(66,045)
Net income (loss) per share, diluted $0.08 $(0.35)
Weighted average outstanding diluted shares 192,781 186,985
(1) The following table shows the share-based compensation expense
included in the cost and expense items shown for the periods
presented:
Twelve Months Ended Twelve Months Ended
March 31, 2006 March 31, 2005
Share- Share-
As Based As Based
Reported Compensation Net Reported Compensation Net
Total costs
and expenses:
Cost of
goods sold $501,224 $3,760 $497,464 $417,079 $959 $416,120
Research and
development 168,858 12,261 156,597 156,464 1,273 155,191
Marketing
and selling 52,121 5,532 46,589 47,409 2,223 45,186
General and
administrative 29,589 3,472 26,117 25,053 921 24,132
Other operating
expense (income) (251) - (251) 49,469 - 49,469
Total costs
and expenses $751,541 $25,025 $726,516 $695,474 $5,376 $690,098
RF MICRO DEVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31, December 31, March 31,
2006 2005 2005
GAAP operating expenses $77,672 $57,855 $107,725
Share-based compensation expense 17,951 708 1,002
Amortization of intangible assets 289 274 983
Lease adjustment - - 1,483
Discontinuation of WLAN
chipset development efforts 53 380 42,414
Non-GAAP operating expenses 59,379 56,493 61,843
GAAP operating (loss) income (1,689) 17,126 (62,921)
Share-based compensation expense 20,943 862 1,228
Amortization of intangible assets 457 442 1,255
Lease adjustment - - 1,483
Discontinuation of WLAN
chipset development efforts 53 380 42,414
Non-GAAP operating income (loss) 19,764 18,810 (16,541)
GAAP net (loss) income (1,568) 14,678 (62,973)
Share-based compensation expense 20,943 862 1,228
Amortization of intangible assets 457 442 1,255
Lease adjustment - - 1,483
Discontinuation of WLAN
chipset development efforts 53 380 42,414
Non-GAAP net income (loss) 19,885 16,362 (16,593)
Plus: Income impact of assumed
conversions for interest on
1.50% convertible notes 1,060 1,036 -
Non-GAAP net income (loss) plus
assumed conversion of notes -
Numerator for diluted income
per share $20,945 $17,398 $(16,593)
GAAP weighted average outstanding
diluted shares 189,599 222,565 187,547
Adjustments:
Dilutive stock options 6,002 - -
Assumed conversion of 1.50%
convertible notes 30,144 - -
Non-GAAP weighted average
outstanding diluted shares 225,745 222,565 187,547
Non-GAAP net income (loss) per
share, diluted $0.09 $0.08 $(0.09)
GAAP gross margin percentage 33.6% 36.1% 29.8%
Adjustment for share-based
compensation 1.3% 0.1% 0.1%
Adjustment for intangible amortization 0.1% 0.0% 0.2%
Non-GAAP gross margin percentage 35.0% 36.2% 30.1%
RF MICRO DEVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)(Unaudited)
Twelve Months Ended
March 31,
2006 2005
GAAP net income (loss) $16,330 $(66,045)
Share-based compensation expense 25,025 5,376
Amortization of intangible assets 1,706 6,223
Discount and issuance cost write-off
related to the extinguishments of the
3.75% convertible debt - 642
Lease adjustment - 1,483
In process research and development charge - 6,201
Customer related payment 5,000 -
Discontinuation of WLAN chipset development
efforts (adjustment) (251) 42,414
Impairment charge - 391
Non-GAAP net income (loss) 47,810 (3,315)
Plus: Income impact of assumed conversions
for interest on 1.50% convertible notes 4,188 -
Non-GAAP net income (loss) plus assumed
conversion of notes - Numerator for
diluted income per share $51,998 $(3,315)
GAAP weighted average outstanding
diluted shares 192,781 186,985
Adjustments:
Dilutive stock options - -
Assumed conversion of 1.50%
convertible notes 30,144 -
Non-GAAP weighted average
outstanding diluted shares 222,925 186,985
Non-GAAP net income (loss) per
share, diluted $0.23 $(0.02)
GAAP gross margin percentage 34.9% 34.2%
Adjustment for share-based compensation 0.5% 0.2%
Adjustment for intangible amortization 0.1% 0.2%
Non-GAAP gross margin percentage 35.5% 34.6%
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, March 31,
2006 2005
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $81,588 $26,016
Short-term investments 68,949 134,828
Accounts receivable, net 115,715 74,545
Inventories 116,782 75,090
Other current assets 23,355 15,970
Total current assets 406,389 326,449
Property and equipment, net 341,293 339,624
Goodwill 117,218 119,694
Investment in Jazz 59,265 59,265
Semiconductor, Inc.
Long-term investments 584 365
Intangible assets, net 10,849 11,316
Other assets 2,086 3,033
Total assets $937,684 $859,746
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $102,772 $74,684
Other short-term liabilities, net 260 4,968
Total current liabilities 103,032 79,652
Long-term debt, net 226,876 226,168
Other long-term liabilities 8,419 5,876
Total liabilities 338,327 311,696
Shareholders' equity:
Total shareholders' equity 599,357 548,050
Total liabilities and shareholders'
equity $937,684 $859,746
Source: prnewswire
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