Although Skyworks' fiscal Q3 revenue and earnings met guidance, revenue declined year-over-year, reflecting the headwinds in the mobile industry from the softness in iPhone sales.
Q3 revenue was $751.7 million, slightly above the company's guidance of $750 million. Revenue was down 3 percent from the prior quarter and down 7 percent from the same quarter in 2015 — the first year-over-year revenue decline in at least three years.
Split among Skyworks' three segments, integrated mobile systems generated 55 percent of the quarter's revenue, or $413 million, which was down 8 percent from the prior quarter. Power amplifiers represented 16 percent, $120 million, declining 8.7 percent sequentially. However, broad markets grew 12.5 percent sequentially to $218 million and was 29 percent of total revenue.
Skyworks expects revenue in fiscal Q4 to grow 10 to 11 percent, reaching $831 million at the midpoint.
Non-GAAP diluted earnings per share in Q3 was $1.24, 3 cents above guidance. Skyworks maintained their margins despite the revenue decline:
| Margin | Q3 FY16 | Q3 FY15 |
|---|---|---|
| GAAP Gross Margin | 50.3% | 48.5% |
| Non-GAAP Gross Margin | 50.9% | 49% |
| GAAP Operating Margin | 31.7% | 32% |
| Non-GAAP Operating Margin | 36.5% | 36.5% |
While iPhone sales have been disappointing, weighing down the entire mobile industry, Skyworks has grown their mobile phone base in China and, more broadly, through design wins in various Internet of Things (IoT) applications. The company's press release included a long list of design wins, including
- Huawei's P9 platform, incorporating 10 unique devices, including SkyOne® systems across low, mid and high bands;
- advanced carrier aggregation capabilities at multiple smartphone OEMs;
- proprietary diversity receive solutions;
- telematics design wins at Continental for 4G LTE automotive systems;
- leading always-listening virtual assistant platforms;
- head cam with LTE connectivity and 4K streaming video;
- enterprise radios for Google's 3.5 GHz ecosystem; and
- digital attenuator and multimode repeater design wins at Audi.
The company reported that they have now shipped over two billion filters from their joint venture with Panasonic, all of which Skyworks uses in integrated front-end modules. Most of the filters are temperature compensated (TC) SAW devices, which are used primarily in the low cellular bands. During the earnings call, Skyworks CEO Liam Griffin said, "Our TC SAW capability has moved up in frequency. Where it was largely just a low band play, maybe 600 meg and 900 meg, we now have technology well over 1 gig, getting close to 2 gig and 2.5 gig."
During the earnings call, analysts asked about the $113 million growth in inventory during Q3, which ended the quarter at $438 million. Griffin and CFO Don Palette responded that the inventory growth was largely filters for "known programs with known ramps in the second half" and represents "essentially no risk."
