NEWS RELEASE
At RF Micro Devices At the Financial Relations Board
Dean Priddy Doug DeLieto Joseph Calabrese
Chief Financial Officer VP, Investor Relations (212) 827-3772
(336) 931-7975 (336) 678-5091
For Immediate Release
April 25, 2006
RFMD DELIVERS RECORD REVENUE AND EXCEEDS EARNINGS
GUIDANCE IN 4th QUARTER OF FISCAL 2006
Quarterly Highlights:
• Record Quarterly Revenue Of $225.9 Million
• Sales Of POLARIS™ TOTAL RADIO™ Solutions Grow Approximately 78% Sequentially And Exceed
25% Of Total Quarterly Revenue
• Two New POLARIS™ Customers Book Orders For Shipments In June 2006 Quarter
• GAAP Diluted Earnings Per Share Of ($0.01), Including $20.9 Million Of Non-Cash Share-Based
Compensation Expense And $0.5 Million Of Non-Cash Amortization Of Intangibles
• Non-GAAP Diluted Earnings Per Share Of $0.09 And Operating Income Of $19.8 (8.7% Of Quarterly
Revenue), Excluding Non-Cash Share-Based Compensation And Amortization
• RFMD Currently Expects June Quarterly Revenue Of $230 Million To $245 Million
• RFMD Currently Expects June Quarterly Earnings Per Share Will Be Approximately $0.05 To $0.07
On A GAAP Basis And Approximately $0.08 To $0.10 On A Non-GAAP Basis
Greensboro, NC, April 25, 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™ TOTAL RADIO™ 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 share data)
| |
Q4 Fiscal 2006
| |
Q3 Fiscal
2006
| |
% Change
vs. Q3 2006
| |
Q4 Fiscal
2005
| |
% Change
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 share data) | |
Q4 Fiscal 2006
| |
Q3 Fiscal
2006
| |
% Change
vs. Q3 2006
| |
Q4 Fiscal
2005
| |
% Change
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™ transceiver sales grew 78% sequentially and exceeded 25% of quarterly revenue
• Two new POLARIS™ customers placed production orders in the March quarter
• RFMD is experiencing increased order activity - from new and existing customers - for its POLARIS™ 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™ 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 www.earnings.com or 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® 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 www.rfmd.com <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®, RFMD® and POLARISTM TOTAL RADIOTM 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.
Tables To Follow
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended March 31, |
| 2006
(Unaudited) | | 2005
(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 March 31, 2006 | | Three Months Ended March 31, 2005 |
|
As Reported |
Share-Based
Compensation |
Net
| |
As Reported
|
Share-Based
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
(Unaudited) | | 2005
(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 March 31, 2006 | | Twelve Months Ended March 31, 2005 |
|
As Reported |
Share-
Based
Compensation
|
Net
| |
As Reported
|
Share-
Based
Compensation
|
Net
|
Total costs
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, 2006 | | December 31,
2005 | | March 31,
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,
2006
(Unaudited)
| |
March 31,
2005
(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 | 19,542 | | 15,970 |
Total current assets | 402,576 | | 326,449 |
| | | |
Property and equipment, net | 341,293 | | 339,624 |
Goodwill | 117,218 | | 119,694 |
Investment in Jazz Semiconductor, Inc. | 59,265 | | 59,265 |
Long-term investments | 584 | | 365 |
Intangible assets, net | 10,849 | | 11,316 |
Other assets | 3,658 | | 3,033 |
Total assets | $ | 935,443 | | $ | 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 | 6,178 | | 5,876 |
Total liabilities | 336,086 | | 311,696 |
| | | |
Shareholders' equity: | | | |
Total shareholders' equity | 599,357 | | 548,050 |
| | | |
Total liabilities and shareholders' equity | $ | 935,443 | | $ | 859,746 |
