Skyworks Solutions, Inc. (SWKS)

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Skyworks Solutions, Inc. (SWKS)

F2Q10 Earnings Call

April 29, 2009 5:00 pm ET


Thomas Schiller – Investor Relations

David J. Aldrich – President & Chief Executive Officer.

Donald W. Palette – Chief Financial Officer & Vice President

Liam K. Griffin – Senior Vice President Sales & Marketing


Alex Gauna – JMP Securities

Ittai Kidron – Oppenheimer & Co.

Craig Ellis – Caris & Company

Cody Acree – Williams Financial Group

Analyst for Stephen Ferranti – Stephens, Inc.

Suji DeSilva – Kaufman Brothers

Patrick Newton – Stifel Nicolaus

Tim Luke – Barclays Capital

Aalok Shah – D. A. Davidson & Co.

Anthony Stoss – Craig-Hallum Capital

Todd Koffman – Raymond James

Dunham Winoto – Avian Securities

Jonathan Goldberg – Deutsche Bank North America

Edward Snyder – Charter Equities

Nathan Johnson – Pacific Crest Securities



Welcome to the Skyworks Solutions second quarter fiscal year 2010 earnings conference call. This call is being recorded. Now, at this time I’d like to turn the conference over to Tom Schiller, Investor Relations.

Thomas Schiller

Welcome to Skyworks second fiscal quarter 2010 conference call. Joining me today are Dave Aldrich, our President and Chief Executive Officer; Don Palette, our Chief Financial Officer; and Liam Griffin, our Senior Vice President of Sales and Marketing. Dan will begin today’s call with a business overview followed by Don’s financial review and outlook. We will then open the lines for your questions.

Please note that our comments today will include statements relating to future results that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially and adversely from those projected as a result of certain risks and uncertainties including but not limited to those noted in our earnings release and those detailed from time-to-time in our SEC filings.

I would also like to remind everyone that the results and guidance we will discuss today are from our non-GAAP income statement consistent with the format we have used in the past. Please refer to our press release within the investor relations section of our company’s website for a complete reconciliation of GAAP.

With that I’ll now turn the call over to Dave for his comments on the quarter.

David J. Aldrich

I’m pleased to report today that the Skyworks team delivered better than seasonal performance in the March quarter, demonstrating solid operating leverage with both gross and operating margin expansion. As a result we exceeded our updated top and bottom line financial guidance provided back in March and at a higher level we are making progress across each of our strategic objectives and are benefitting from several macro growth trends as Skyworks transitions to a highly diversified analog company.

Specifically for the quarter, we delivered revenue of $238 million. We improved our gross margins by $230 basis points year-over-year to 42.3% and we increased our operating margins by 820 basis points to 20.5%. In turn, we grew operating income by 130% year-over-year to $49 million and we posted $0.24 of diluted earnings per share versus our updated guidance of $0.22 to $0.23.

Of note and to give you a sense of our broad diversification, during the quarter we shipped to nearly 1,000 customers of which only one exceeded 10% of our total revenue. Now, with respect to cash we generated $60 million of cash flow from operations and we exited the quarter with $412 million of cash. Now, this is even after a $40 million outlay for convertible debt retirement.

Finally, we are guiding to 10% to 15% sequential revenue growth with earnings per share of $0.30 in the June quarter. Now, just to digress a bit from the numbers and to give you a more macro perspective, we believe our results today and outlook underscore several accelerating market trends. First is the increasing ubiquity of broadband access across both wireless and wire lined networks. The second trend is the apparent insatiable consumer demand for always on connectivity for things like audio, video, text and social networking. Third, the emergence of a host of new wireless applications and really slick consumer friendly platforms enabled by reliable and affordable technologies.

Now, I’d like to step back for a moment. Quite frankly, each of these macro trends is still in the early stages of development. At the same time we are increasingly beginning to see multiple mobile internet access to devices per person beyond the traditional cellular handset and even Smartphones to now encompassing things like high resolution tablets, netbooks and other products we haven’t even yet thought of.

Meanwhile, wireless local area networking [inaudible] functionality is being integrated within things like gaming consoles, LED televisions, Blu-Ray players and smart appliances. So in short, virtually all next generation electronics are embedding some form of wireless network connectivity. So on today’s call we’ll talk about how Skyworks is capitalizing of these trends and even in some small ways enabling these rapidly expanding opportunities with analog semiconductors.

More specifically, we’ll highlight our traction within Smartphones, within network infrastructure and smart grid applications, three of our key growth engines and we’ll discuss why we’re confident in our ability to continue to outpace market growth.

To start with regard to Smartphones, this is perhaps the most exciting mobile communications market today given the ever expanding range of applications and broad consumer acceptance. Skyworks is uniquely positioned as a supplier to all leading Smartphones OEMs and according to Oppenheimer, this category is enjoying three to four times the 8% to 10% anticipated overall handset growth rate in 2010 and 2011.

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