At RF Micro Devices At the Financial Relations Board
Dean Priddy Douglas DeLieto Joe Calabrese
Chief Financial Officer VP, Investor Relations (212) 827-3772
(336) 931-7975 (336) 931-7968
FOR IMMEDIATE RELEASE
January 23, 2007
RF MICRO DEVICES DELIVERS RECORD QUARTERLY RESULTS
RFMD Achieves All-Time Highs In Revenue, Quarterly Earnings
And Cash Flow From Operations
Quarterly Highlights:
- Quarterly Revenue Jumped Approximately 14% Sequentially To A Record $281.1 Million
- Cash Flow From Operations, Which Excludes Bluetooth® Transaction, Totaled A Record $64.8 Million
- GAAP Diluted Earnings Per Share Equaled $0.26
- Non-GAAP Diluted Earnings Per Share Equaled $0.16
- RFMD Recognized A Gain Of $36.3 Million Related To The Sale Of Substantially All Of Its Bluetooth® Assets
- Based On Existing Customer Forecasts, RFMD Currently Expects A Less-Than-Seasonal Quarterly Decline In
Its Cellular Business During The March 2007 Quarter
GREENSBORO, N.C., January 23, 2007 -- RF Micro Devices, Inc. (Nasdaq: RFMD), a global leader in the design and manufacture of high-performance radio systems and solutions for applications that drive mobile communications, today reported financial results for its fiscal 2007 third quarter ended December 31, 2006. Quarterly revenue grew approximately 35% year-over-year and approximately 14% sequentially to a record $281.1 million. Operating income totaled $66.1 million, on a GAAP basis, and $35.2 million, on a non-GAAP basis. RFMD's December 2006 quarterly results reflected strength at the world's leading handset manufacturers, market share gains in RF semiconductors and record demand for RFMD's cellular transceivers and transmit modules.
Business Unit Highlights
Cellular
RFMD expanded its leadership position in cellular transmit modules in low-tier handsets
Sales of POLARIS™ TOTAL RADIO™ solutions grew sequentially for the tenth consecutive quarter
RFMD secured POLARIS™ solution design wins across multiple tiers of handsets at original equipment
manufacturers (OEMs) and original design manufacturers (ODMs)
RFMD passed a key customer milestone during the December 2006 quarter related to its POLARIS™ 3 solution
RFMD anticipates POLARIS™ sales will continue to grow sequentially in the March 2007 quarter
Wireless Connectivity
RFMD experienced strong design momentum for WLAN front end modules and power amplifiers for
multiple applications, including handsets, access points, mobile computing and consumer electronics
RFMD completed the sale of substantially all of its Bluetooth® assets to QUALCOMM
RFMD has multiple customer engagements for its RF811X family of software-based GPS solutions and
expects to receive commercial production orders in the first half of calendar 2007
Infrastructure
RFMD sampled its 15-watt RF3825 Gallium Nitride (GaN) Power IC to manufacturers of public mobile
radios and other wideband applications
RFMD sampled its new 48V, 120W WCDMA internally-matched GaN HPA (RF3925) to a key
technology partner
GAAP and non-GAAP financial measures are presented in the tables below, and non-GAAP financial measures are reconciled to the corresponding GAAP financial measures in the financial statement portion of this press release.
GAAP RESULTS |
(in millions, except
percentages and per share data)
| |
Q3 Fiscal
2007
| |
Q2 Fiscal
2007
| |
% Change
vs. Q2 2007
| |
Q3 Fiscal
2006
| |
% Change
vs. Q3 2006
|
| | | | | | | | | | |
Revenue | | $ | 281.1 | | $ | 246.9 | | 13.8% | | $ | 208.0 | | 35.2% |
Gross Margin | | | 35.8% | | | 34.9% | | 0.9 ppt | | | 36.1% | | (0.3)ppt |
Operating Income | | $ | 66.1 | | $ | 13.0 | | 407.6% | | $ | 17.1 | | 285.8% |
Net Income (Loss) | | $ | 59.3 | | $ | (20.0) | | 397.0% | | $ | 14.7 | | 304.2% |
Diluted EPS | | $ | 0.26 | | $ | ( 0.10) | | 353.6% | | $ | 0.07 | | 274.3% |
NON-GAAP RESULTS (excluding share-based compensation, amortization, discontinuation of WLAN chipset development efforts,
impairment charge, gain on sale of substantially all Bluetooth® assets, restructuring charges related to sale of substantially all Bluetooth®
assets and the tax effect on certain non-GAAP adjustments) |
(in millions, except
percentages and per share data)
| |
Q3 Fiscal
2007
| |
Q2 Fiscal
2007
| |
% Change
vs. Q2 2007
| |
Q3 Fiscal
2006
| |
% Change
vs. Q3 2006
|
| | | | | | | | | | |
Revenue | | $ | 281.1 | | $ | 246.9 | | 13.8% | | $ | 208.0 | | 35.2% |
Gross Margin | | | 36.1% | | | 35.3% | | 0.8 ppt | | | 36.2% | | (0.1)ppt |
Operating Income | | $ | 35.2 | | $ | 22.8 | | 54.2% | | $ | 18.8 | | 87.2% |
Net Income | | $ | 34.3 | | $ | 23.7 | | 44.8% | | $ | 16.4 | | 109.9% |
Diluted EPS | | $ | 0.16 | | $ | 0.11 | | 40.4% | | $ | 0.08 | | 98.3% |
Financial Guidance And Business Outlook
RFMD believes it is benefiting from market share consolidation at its largest customers and robust overall unit demand for cellular handsets. RFMD expects to grow market share in cellular products in the March 2007 quarter, driven by sales of POLARIS™ cellular transceivers, as well as cellular power amplifier modules and transmit modules.
Current customer forecasts for the March 2007 quarter indicate a less-than-seasonal decline in the Company's core cellular business
Legacy 802.11b radio and Bluetooth® components are expected to decline sequentially at a greater-than-
seasonal rate, as a result of previously announced divestitures
Revenue in the March 2007 quarter is currently expected to be in the range of $250 million to $260 million
Quarterly GAAP net income in the March 2007 quarter, assuming the previously announced Jazz
Semiconductor transaction closes in the March 2007 quarter, is currently expected to be in the
range of $0.11 to $0.12 per diluted share, including estimated non-cash share-based compensation
expense and non-cash amortization of intangibles of approximately $3.8 million in the aggregate
Quarterly non-GAAP net income is currently expected to be in the range of $0.10 to $0.11 per share,
excluding non-cash share-based compensation expense, non-cash amortization of intangibles and the
impact of the Jazz Semiconductor transaction
The methodology used by RFMD to estimate non-cash share-based compensation expense does not factor in items such as new grants, terminations or amounts that may be capitalized in inventory, and the methodology used to estimate intangible amortization assumes no additional intangible assets are recorded. RFMD currently cannot estimate the impact of non-cash share-based compensation expense on gross margin or operating expenses and will provide this information with its March 2007 quarterly results. Accordingly, actual quarterly results may differ from these estimates, and such differences may be material.
Comments From Management
Bob Bruggeworth, president and CEO of RF Micro Devices, said, "In the December 2006 quarter, RFMD continued to execute on a proven growth strategy. The markets for our products remain strong and RFMD continues to benefit by bringing compelling, differentiated products to our customers. As we look to March and the balance of 2007, we expect our growth to be led by our industry-leading power amplifiers as well as our POLARIS™ family of TOTAL RADIO™ transceiver solutions. We also anticipate that initial production ramps of our GaN-based products and our software-based GPS solutions will commence in 2007, which we expect will contribute positively to growth, diversification and profitability."
Dean Priddy, CFO and vice president, finance and administration of RF Micro Devices, said, "The December 2006 quarter highlights RFMD's ability to drive continued revenue growth and improving profitability. We are demonstrating consistent, sustainable financial returns, and we are advancing toward our long-term operating model of 15 percent operating income. Our performance and outlook demonstrate the importance of investing in our future. With our expanded manufacturing capacity, we believe that RFMD is capable of continued revenue growth and reduced manufacturing costs. Finally, our balance sheet is equally as strong as our income statement, and RFMD's financial outlook has never been stronger."
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 RFMD's underlying performance. Management uses these non-GAAP financial measures internally to make strategic decisions, forecast future results and evaluate RFMD's current performance. These non-GAAP financial measures are not in accordance with, or an alternative for, GAAP financial measures 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. EST 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 11080516.
About RFMD
RF Micro Devices, Inc. (Nasdaq: RFMD) is a global leader in the design and manufacture of high-performance radio systems and solutions for applications that drive mobile communications. RFMD's power amplifiers, transmit modules, cellular transceivers and system-on-chip (SOC) solutions enable worldwide mobility, provide enhanced connectivity and support advanced functionality in current- and next-generation mobile handsets, cellular base stations, wireless local area networks (WLANs), wireless personal area networks (WPANs) and global positioning systems (GPS). Recognized for its diverse portfolio of state-of-the-art semiconductor technologies and vast RF systems expertise, RFMD is a preferred supplier enabling the world's leading mobile device manufacturers to deliver advanced wireless capabilities that satisfy current and future market demands.
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 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, assembly facility and test and 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® and RFMD® are trademarks of RFMD, LLC. 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)
(Unaudited)
| Three Months Ended December 31, |
| 2006 | | 2005 |
| | | |
Total revenue | $ | 281,091 | | $ | 207,974 |
| | | |
Costs and expenses: | | | |
Cost of goods sold (1) | 180,594 | | 132,993 |
Research and development (1) | 47,526 | | 38,650 |
Marketing and selling (1) | 13,010 | | 11,906 |
General and administrative (1) | 8,450 | | 6,919 |
Other operating (income) expense (1) | (34,558) | | 380 |
| | | |
Total costs and expenses (1) | 215,022 | | 190,848 |
| | | |
Operating income | 66,069 | | 17,126 |
Other income, net | 1,303 | | 298 |
| | | |
Income before income taxes | $ | 67,372 | | $ | 17,424 |
Income tax expense | (8,046) | | (2,746) |
| | | |
Net income | $ | 59,326 | | $ | 14,678 |
| | | |
Net income per share, diluted | $ | 0.26 | | $ | 0.07 |
| | | |
Weighted average outstanding diluted shares | 227,852 | | 222,565 |
(1)
| Three Months Ended
December 31, 2006 | | Three Months Ended
December 31, 2005 |
| As
Reported | Share-based
Compensation |
Net
| | As
Reported | Share-based
Compensation |
Net
|
Total costs and expenses: | | | | | | | |
Cost of goods sold | $ | 180,594 | $ | 828 | $ | 179,766 | | $ | 132,993 | $ | 154 | $ | 132,839 |
Research and development | 47,526 | 1,093 | 46,433 | | 38,650 | 121 | 38,529 |
Marketing and selling | 13,010 | 598 | 12,412 | | 11,906 | 340 | 11,566 |
General and administrative | 8,450 | 699 | 7,751 | | 6,919 | 247 | 6,672 |
Other operating (income) expense | (34,558) | 102 | (34,660) | | 380 | - | 380 |
Total costs and expenses | $ | 215,022 | $ | 3,320 | $ | 211,702 | | $ | 190,848 | $ | 862 | $ | 189,986 |
| | | | | | | | | | | | | | | | | | | |
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Nine Months Ended December 31, |
| 2006 | | 2005 |
| | | |
Total revenue | $ | 766,345 | | $ | 544,362 |
| | | |
Costs and expenses: | | | |
Cost of goods sold (1) | 500,051 | | 351,322 |
Research and development (1) | 137,884 | | 116,824 |
Marketing and selling (1) | 40,900 | | 36,041 |
General and administrative (1) | 28,853 | | 20,084 |
Other operating income (1) | (34,460) | | (304) |
| | | |
Total costs and expenses (1) | 673,228 | | 523,967 |
| | | |
Operating income | 93,117 | | 20,395 |
Impairment of Jazz Semiconductor, Inc. investment | (33,865) | | - |
Other income, net | 3,667 | | 851 |
| | | |
Income before income taxes | $ | 62,919 | | $ | 21,246 |
Income tax expense | (9,635) | | (3,348) |
| | | |
Net income | $ | 53,284 | | $ | 17,898 |
| | | |
Net income per share, diluted | $ | 0.25 | | $ | 0.09 |
| | | |
Weighted average outstanding diluted shares | 225,940 | | 191,678 |
(1)
| Nine Months Ended
December 31, 2006 | | Nine Months Ended
December 31, 2005 |
| As
Reported | Share-based
Compensation |
Net
| | As
Reported | Share-based
Compensation |
Net
|
Total costs and expenses: | | | | | | | |
Cost of goods sold | $ | 500,051 | $ | 3,813 | $ | 496,238 | | $ | 351,322 | $ | 768 | $ | 350,554 |
Research and development | 137,884 | 4,542 | 133,342 | | 116,824 | 1,129 | 115,695 |
Marketing and selling | 40,900 | 3,165 | 37,735 | | 36,041 | 1,336 | 34,705 |
General and administrative | 28,853 | 6,453 | 22,400 | | 20,084 | 849 | 19,235 |
Other operating income | (34,460) | 102 | (34,562) | | (304) | - | (304) |
Total costs and expenses | $ | 673,228 | $ | 18,075 | $ | 655,153 | | $ | 523,967 | $ | 4,082 | $ | 519,885 |
| | | | | | | | | | | | | | | | | | | |
RF MICRO DEVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
| Three Months Ended |
| December 31, | | September 30, | | December 31, |
| 2006 | | 2006 | | 2005 |
| | | | | |
GAAP operating expenses | $ | 34,428 | | $ | 73,126 | | $ | 57,855 |
Share-based compensation expense | 2,492 | | 8,521 | | 708 |
Amortization of intangible assets | 285 | | 285 | | 274 |
Gain on sale of substantially all Bluetooth® assets | (36,311) | | - | | - |
Restructuring charges related to sale of substantially
all Bluetooth® assets |
1,752
| |
-
| |
-
|
Discontinuation of WLAN chipset development
efforts (adjustment) |
(100)
| |
32
| |
380
|
Non-GAAP operating expenses | 66,310 | | 64,288 | | 56,493 |
| | | | | |
GAAP operating income | 66,069 | | 13,015 | | 17,126 |
Share-based compensation expense | 3,320 | | 9,289 | | 862 |
Amortization of intangible assets | 484 | | 503 | | 442 |
Gain on sale of substantially all Bluetooth® assets | (36,311) | | - | | - |
Restructuring charges related to sale of substantially
all Bluetooth® assets |
1,752
| |
-
| |
-
|
Discontinuation of WLAN chipset development
efforts (adjustment) |
(100)
| |
32
| |
380
|
Non-GAAP operating income | 35,214 | | 22,839 | | 18,810 |
| | | | | |
GAAP net income (loss) | 59,326 | | (19,977) | | 14,678 |
Impairment of Jazz investment | - | | 33,865 | | - |
Share-based compensation expense | 3,320 | | 9,289 | | 862 |
Amortization of intangible assets | 484 | | 503 | | 442 |
Gain on sale of substantially all Bluetooth® assets | (36,311) | | - | | - |
Restructuring charges related to sale of substantially
all Bluetooth® assets |
1,752
| |
-
| |
-
|
Tax effect on certain Non-GAAP adjustments | 5,872 | | - | | - |
Discontinuation of WLAN chipset development
efforts (adjustment) |
(100)
| |
32
| |
380
|
| | | | | |
Non-GAAP net income | 34,343 | | 23,712 | | 16,362 |
Plus: Income impact of assumed conversions for
interest on 1.50% convertible notes |
977
| |
1,050
| | 1,036 |
Non-GAAP net income plus assumed conversion of
notes-Numerator for diluted income per share |
$
|
35,320
| |
$ |
24,762
| |
$ |
17,398
|
| | | | | |
GAAP weighted average outstanding diluted shares | 227,852 | | 191,670 | | 222,565 |
Adjustments: | | | | | |
Diluted stock options | - | | 2,484 | | - |
Assumed conversion of 1.50% convertible notes | - | | 30,144 | | - |
Non-GAAP weighted average outstanding diluted shares | 227,852 | | 224,298 | | 222,565 |
| | | | | |
Non-GAAP net income per share, diluted | $ | 0.16 | | $ | 0.11 | | $ | 0.08 |
| | | | | |
GAAP gross margin percentage | 35.8% | | 34.9% | | 36.1% |
Adjustment for share-based compensation | 0.3% | | 0.3% | | 0.0% |
Adjustment for intangible amortization | 0.0% | | 0.1% | | 0.1% |
Non-GAAP gross margin percentage | 36.1% | | 35.3% | | 36.2% |
| | | | | | | | | |
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
December 31,
2006
(Unaudited)
| |
March 31,
2006
(Audited)
|
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 161,037 | | $ | 81,588 |
Short-term investments | 84,955 | | 68,949 |
Accounts receivable, net | 119,092 | | 115,715 |
Inventories | 121,699 | | 116,782 |
Other current assets | 20,731 | | 19,542 |
Total current assets | 507,514 | | 402,576 |
| | | |
Property and equipment, net | 377,390 | | 341,293 |
Goodwill | 115,443 | | 117,218 |
Investment in Jazz Semiconductor, Inc. | 25,400 | | 59,265 |
Long-term investments | 636 | | 584 |
Intangible assets, net | 9,328 | | 10,849 |
Other assets | 9,709 | | 3,658 |
Total assets | $ | 1,045,420 | | $ | 935,443 |
| | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 107,570 | | $ | 102,772 |
Other short-term liabilities, net | 4,153 | | 260 |
Total current liabilities | 111,723 | | 103,032 |
| | | |
Long-term debt, net | 246,358 | | 226,876 |
Other long-term liabilities | 7,301 | | 6,178 |
Total liabilities | 365,382 | | 336,086 |
| | | |
Shareholders' equity: | | | |
Total shareholders' equity | 680,038 | | 599,357 |
| | | |
Total liabilities and shareholders' equity | $ | 1,045,420 | | $ | 935,443 |
