- Based On Existing Customer Forecasts, RFMD Currently Expects A Less-Than-Seasonal Quarterly Decline In Its Cellular Business During The March 2007 Quarter
Business Unit Highlights Cellular -- RFMD expanded its leadership position in cellular transmit modules in low-tier handsets -- Sales of POLARIS(TM) TOTAL RADIO(TM) solutions grew sequentially for the tenth consecutive quarter -- RFMD secured POLARIS(TM) 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(TM) 3 solution -- RFMD anticipates POLARIS(TM) 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(R) 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 percent- ages and per Q3 Fiscal Q2 Fiscal % Change Q3 Fiscal % Change share data) 2007 2007 vs. Q2 2007 2006 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(R) assets, restructuring charges related to sale of substantially all Bluetooth(R) assets and the tax effect on certain non-GAAP adjustments) (in millions, except percent- ages and per Q3 Fiscal Q2 Fiscal % Change Q3 Fiscal % Change share data) 2007 2007 vs. Q2 2007 2006 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(TM) 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(R) 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(TM) family of TOTAL RADIO(TM) 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.
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(R) and RFMD(R) are trademarks of RFMD, LLC. 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) (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 Three Months Ended December 31, 2006 December 31, 2005 Share- Share- based based As Compen- As Compen- Reported sation Net Reported sation 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 Nine Months Ended December 31, 2006 December 31, 2005 Share- Share- based based As Compen- As Compen- Reported sation Net Reported sation 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(R) assets (36,311) - - Restructuring charges related to sale of substantially all Bluetooth(R) 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(R) assets (36,311) - - Restructuring charges related to sale of substantially all Bluetooth(R) 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(R) assets (36,311) - - Restructuring charges related to sale of substantially all Bluetooth(R) 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, March 31, 2006 2006 (Unaudited) (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
Web site: http://www.rfmd.com/