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Qorvo (QRVO) Q4 Earnings Beat Estimaes, Revenues Improve Y/Y

Zacks Equity Research

Qorvo Inc. QRVO delivered fourth-quarter fiscal 2019 non-GAAP earnings of $1.22 per share, surpassing the Zacks Consensus Estimate of $1.06 per share. The figure also jumped 14% from the year-ago quarter.

Revenues on a non-GAAP basis increased 2.5% year over year to $680.9 million. Moreover, the figure was slightly above management’s guidance of $660 million and $680 million. However, the top line lagged the Zacks Consensus Estimate of $690 million.

The results can be attributed to improved progress in IDP and stringent cost control measures. The company benefited from increased demand in the performance-tier for RF Fusion based solutions, antenna tuning, discrete components and BAW-based multiplexers.

Qorvo, Inc. Revenue (Quarterly)

Qorvo, Inc. Revenue (Quarterly) | Qorvo, Inc. Quote

Quarter Details

Segment-wise, Mobile Products (MP) revenues were $443 million. The segmental revenues were aided by robust demand in China and Korea.

Infrastructure and Defense (IDP) revenues grew double digit year over year to $238 million, marking 12th consecutive quarter of growth. The year-over-year increase can primarily be attributed to robust growth in the company’s wireless connectivity, improvement in base station solutions and robust 5G infrastructure market demand.

Further, growth reflects strong demand for the company’s solutions in defense (advanced radars and other electronic warfare products) and connectivity (Wi-Fi and emerging IoT applications). Rapid adoption of GaN for high-power applications also drove defense top-line growth.

On May 6, 2019, Qorvo acquired Active-Semi International, Inc. with an aim to strengthen its portfolio of programmable analog and mixed signal power offerings. The company pursued the deal on account of Active-Semi’s strength in power efficient analog and mixed signal solutions that enable users to accelerate time to market and reduce total cost of ownership. In fact, the company anticipates the buyout to bolster its addressable markets by approximately $3 billion.

The company also recently enhanced 5G infrastructure solutions portfolio with industry’s first stand-alone ET PMIC that is “capable of modulating the power supply at 100 MHz for 5G New Radio (NR) operation.”

Further, Qorvo augmented shipments of 5G massive MIMO infrastructure solutions to various OEMs. The company also secured new design wins across all sub-6 GHz 5G frequency bands. The company’s expanding RF product portfolio pertaining to 5G and massive MIMO base stations bodes well in the long haul.

Notably, Qorvo sampled BAW-based 5G antennaplexer solutions to offer customers to utilize antenna architectures for 5G devices.

Accelerating timeline for 5G deployment bodes well for Qorvo. It has participated in dozens of 5G field trials and demonstrations. We believe an expanding portfolio enabling 5G deployment augurs well for the company.

Operational Details

Non-GAAP gross margin expanded 20 bps from the year-ago quarter to 48.2%. This was primarily due to favorable product mix.

Non-GAAP operating expenses as percentage of revenues contracted 20 bps on a year-over-year basis to 23.6%.

Non-GAAP operating margin expanded 10 bps from the year-ago quarter to 24.6%.

Balance Sheet & Cash Flow

As of Mar 30, 2019, cash and cash equivalents were $711 million compared with $649.7 million reported in the previous quarter. Long-term debt was $919.3 million as compared with $714.4 million at the end of the previous quarter.

Net cash provided by operating activities was $187.3 million down from $333 million in the previous quarter. Free cash flow during the reported quarter came in at $152 million.

During the quarter under review, the company repurchased shares worth $300 million under the share repurchase program.

Guidance

For the first quarter of fiscal 2020, Qorvo expects revenues between $780 million and 800 million. Earnings are projected to be $1.30 per share at mid-point. The Zacks Consensus Estimate for revenues and earnings are pegged at $695.6 million and $1.05 per share, respectively.

Further, Mobile Products revenues in the first quarter are expected to be up sequentially and year over year. IDP revenues are expected to grow double-digit year over year and sequentially, primarily driven by Active-Semi acquisition.

Non-GAAP gross margin is anticipated to be in the range of 45% to 45.5%. Operating expenses are expected to increase in the first quarter to approximately $173 million.

Zacks Rank & Stocks to Consider

Qorvo carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are Cirrus Logic, Inc. CRUS, Universal Display Corporation OLED  and Synopsys, Inc. SNPS, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cirrus Logic, Universal Displayand Synopsyshave a long-term earnings growth rate of 15%, 30% and 10%, respectively.

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