RFMD CC Notes Apr 17
PR Stuff:
RF Micro Devices, Inc. Announces Fiscal 2001 Fourth Quarter and Year-End Results
Company Anticipates 20% Sequential Revenue Growth In Fiscal 2002 First Quarter
Quarterly Highlights:
-- March Quarterly Book-To-Bill Improves to Greater Than One, Driven By Strong GSM Order Rates -- Company is 100% Booked For 20% Sequential Revenue Growth -- Company Begins Production Shipments of Key High Volume GSM Power Amplifier Module -- Module Products Accelerate to 32% Of Total Revenue -- Consistent With Previously Disclosed Guidance, Quarterly Revenue Is $55.0 Million and Quarterly Loss Per Share is $0.04
GREENSBORO, N.C., April 17 /PRNewswire/ -- RF Micro Devices, Inc. (Nasdaq: RFMD - news), a leading provider of proprietary radio frequency integrated circuits (RFICs) for wireless communications applications, today reported financial results for its fourth quarter and fiscal year ended March 31, 2001.
Financial Results
Consistent with the Company's previous announcement on March 8, 2001 regarding its anticipated results for the fourth quarter, revenues for the quarter were approximately $55.0 million, a decrease of 35.1% versus revenues of $84.8 million for the corresponding quarter of fiscal 2000 and a decrease of 31.2% versus revenues of $79.9 million for the quarter ended December 31, 2000. Power amplifier (PA) module revenues increased 41% sequentially and represented 32% of revenues in the March quarter, versus 16% of revenues in the December quarter.
Gross profit for the quarter decreased 67.7% to $13.6 million, versus $42.0 million for the corresponding quarter of fiscal 2000, and decreased 63.8% sequentially over gross profit of $37.5 million for the quarter ended December 31, 2000. The year-over-year and sequential decrease in gross profit was primarily attributable to the decrease in the Company's revenues, the initial higher cost of goods sold associated with the Company's module products, and greater than normal yield losses associated with the steep ramp of the module business.
Other operating expenses during the March quarter totaled $3.4 million. Other operating expenses represent startup costs associated with the Company's second wafer fab facility, which currently is expected to commence operations late in the quarter ending September 30, 2001.
Net loss for the quarter was $6.8 million, or $0.04 per diluted share, compared to net income of $14.6 million, or $0.08 per diluted share, for the fourth quarter of fiscal 2000, based on a 35% tax rate. This compares sequentially to net income of $7.8 million, or $0.05 per diluted share, for the third quarter of fiscal 2001, based on a tax rate of 36%. Included in the March 2001 results is a one-time $0.02 per share tax benefit, which is the result of R&D tax credits taken in the fourth quarter. Earnings per share for all periods have been adjusted to reflect a 2-for-1 stock split effective August 8, 2000.
Business Outlook And Financial Guidance
Based upon increases in order rates and the Company's backlog, management believes it has improved visibility into fiscal 2002 revenues. The Company's book-to-bill ratio was greater than one for the March quarter, and the Company has booked sufficient orders to result in approximately 20% sequential revenue growth in the June quarter over the quarter ended March 31, 2001.
During the fiscal fourth quarter, the Company began high-volume production shipments of a key PA module for use in an existing dual-band GSM handset for its largest customer. The module is ramping quickly and is expected to result in multi-million-dollar revenues in the June quarter. The Company also anticipates beginning volume production of a high-volume GSM/GPRS PA module late in the June quarter. Both PA modules are expected to become among RF Micro Devices' highest volume products to date, providing a significant opportunity for the Company to gain additional market share in GSM handsets.
While production shipments of PA modules are expected to contribute to sequential revenue growth, start-up costs associated with module products are expected to negatively impact the Company's gross margins in the near-term. However, the Company is implementing a series of cost reduction and yield improvement initiatives designed to improve gross margins.
The Company expects its capacity in its first wafer fab facility will be sufficient to meet demand until late in the September 2001 quarter. Until its second wafer fab commences production, the Company will expense start-up costs associated with preparing this facility for production.
As a result of these factors, the Company currently expects revenues for the quarter ending June 30, 2001 to increase sequentially from the quarter ending March 31, 2001 by approximately 20%. Gross margin for the quarter ending June 30, 2001 currently is anticipated to be in the range of 25% to 30%. Operating expenses in the June quarter, excluding other operating expenses associated with the Company's second wafer fab facility, are currently expected to increase sequentially 3% to 5% due to increased investments in the Company's R&D activities. Other operating expenses are anticipated to range from $6.0 million to $6.5 million, or approximately $0.03 per share after tax. The annualized tax rate for fiscal 2002 is expected to be in the range of 33% to 35%. These factors are currently expected to result in a net loss per share for the June 2001 quarter in the range of approximately ($0.05) to ($0.06).
Looking beyond the June quarter, management anticipates continued growth in revenues in the fiscal second quarter ending September 30, 2001 based on current customer forecasts and the Company's regular communication with its customers. The aforementioned GSM/GPRS PA module is expected to contribute to sequential revenue growth in the September quarter. In addition, other new GSM/GPRS power amplifiers designed for new customers, including Siemens AG, are expected to contribute to revenue growth in the second half of calendar 2001.
As part of its relationship with QUALCOMM, the Company secured several new design wins in CDMA, for which it currently expects to begin production shipments in the quarter ending December 31, 2001. The Company announced on March 5, 2001, the signing of a Memorandum of Understanding (MOU) to expand its alliance with QUALCOMM Incorporated, pioneer and world leader of Code Division Multiple Access (CDMA) digital wireless technology. Under the MOU, RFMD and QUALCOMM, through its QUALCOMM CDMA Technologies (QCT) division, will cooperate on the development of a Wideband CDMA (WCDMA) PA module for inclusion in QCT's MSM5200(TM) integrated circuit family. The PA5200(TM) device is QUALCOMM's first generation IMT-2000 WCDMA PA module and represents a joint design effort between QUALCOMM and RFMD.
Given the Company's current expectations for sequential revenue growth into the second half of calendar 2001, management currently anticipates a return to profitability during that period. Near-term variables that could impact the Company's ability to return to profitability include wafer fab capacity utilization, module product margin improvements, product mix and other items outside the control of the company.
CC Notes
- Dave Norberty - CEO
- Dean Priddy CFO
Dean
- orders improved in March, 20% q2q growth
- Mar 8 announced key GSM production ramp
- PA modules up 41%q2q and rep 31% of the rev
- Siemens and QCOM ramping
- Lost 0.04 EPS and made 0.20 EPS for the year
- 55M in rev, down 31% q2q
- HBT- 90%
- Handsets were 91%
- International 72% of rev
- GSM 28%, tdma 32%, cdma 31%
- Korea 17%, down q2q
- 24.7% in GM – decline in rev and ramp of module products
- SGA 25.6M flat q2q
- 3.4M in second fab expense
- 16.4M operating loss for the quarter
- 1.6 in other income
- 6.8M in net loss or 0.04
- cash 345M
- 40M in net rec 65, day DSO
- 71.7M in inventory
- 2.8 inventory turns
- PPE 208M
- Capex was 16.8M
- Order visibility is improved, gaining GSM market share,
Dave
- After 2 Qs of falling rev, will see improvement,
- Backlog is 100%
- Strengthen relationship with handset leaders
- Strongest growth is dual band GSM module product, selling million to largest customer
- Largest customer (NOK) ordering gsm/gprs products
- QCOM has OEM interest in our CDMA modules
- Siemens is gaining market share in GSM products, see revs next q
- Modules are more integrated the other products,
- Module testing is complex, lower yields since new, benefit to customer is significant, smaller footprint, customers are demanding modules
- Near term gross margin are nothing to write about but we been through low margins with new product
- GM should be 25-30% for June Q
- Loss EPS in June 0.05-0.06
- After June, expect profitability
Q&A
Q: ML – first good news in wireless in months, 5 of new models
A: 25% is new revs
Q: shift from Si module to GaAs?
A: Yes some, we are gaining market share but not to silicon vs. GaAs
Q: MOT & ERICY
A: got alot things with both. Will announced news with both in next Q.
Q: Customer mix
A: QCOM will pick up fairly dramatically, several new design wins last few weeks, will go into production in Sep Q
Q; Handsets for the year
A: 425-475M for handsets worldwide. Investor must look at the model. Seeing transition to modules from old style
Q: WITs – ramp on GPRS module?
A: Will see some shipments in June, got visibility on that model into Sep
Q: Matt G – nice q, CDMA rev only Korea?
A: Some Japanese and US too in additional to Korea,
Q: Gaining QCOM market share?
A: Yes, not offering modules to other vendors, only us
Q: ASP?
A: ASP increased in March and will increase in June. 25 cents per part.
Q: MK – congrats, module % from NOK
A: 65% of revs
Q: TDMA?
A: Saw t trail off and see it stabilize, module business enter it
Q: Fab 2 cap?
A: 15-20K wafers initially
Q: Module GM?
A: Will see improvement toward 48-50% in next year or so.
Q: PEIM – sole provider of NOK module?
A: We are second source taking market share.
Q: 70% capacity of fab 1, same as Sept.
A: Seeing steep ramp in modules and Fab2 needed due to lower yields being seen.
Q: Visibility improved.
A: NOK gives us forecast and maintain inventory levels constant. Others not so clear. Best visibility in two quarter.
Q: Inventory keeps going up?
A: We trying supplier management type of inventory
Q: CIBC – module 32% of rev
A: yes
Q: modules GM is mid teens?
A: Yes, below other products due to yield losses and costs. Will improve yields and lower costs.
Q: will see ramp on gprs/gsm products?
A: yes, getting similar yields, but we have more experience. GRPS has more timeslots being utilitized
Q: QCOM all modules?
A: yes
Q: What % is GaAs?
A: Not broke it out, maybe 25-35%
Q: assembly for module done offshore?
A: Yes, some done here.
Q: Final test done inhouse.
A: No. Most done out of house.
Q: FUS – yield and margin on modules?
A: Current gen module won’t be 48% GM, maybe 30-35% range. Newer modules should be 45-50% range.
Q: Margin without inventory writedown.
A: Cost us 2-3 cents a share, also some of writedown was yield loss.
Q: Sep guidance?
A: Have to see in June.
Q: 2.5G handsets?
A: Hard to tell what 2.5G will do. Could be 2-255 of our rev.
Q: CSFB – wafer fab vs. March
A: 70% utilization in Fab 1
Q: How much of June growth were from pushouts
A: Not a lot
Q: Only three handset players still?
A: Hitachi is the big dog in Silicon, now moving into GaAs, CXNT big supplier in CDMA, but we are taking their share, AHAA has capability to move.
Q: TWP – CDMA module second source?
A: Second created since we are competitive. Any customer would like to have two sources. Tough to make them look the same.
Q: New model % of revs?
A: will increase due to new module introduction
Q: GSM vs. CDMA mix
A: GSM will be highest, then CDMA, then TDMA. GSM and GSM/GPRS will be over half.
Q: DRW – gaining share on new module?
A: Customer taking product so we are gaining share.
Q: GPRS models?
A: there 5-6 models in production.
Q: Geographical split
A: Korea was 17%. Silicon was 9% of revs total.
Q: Why yields low on module
A: This is bare chip, die attached and wire bond, surface mount on the same subassembly. New technology. We do phototype and contract it to outside assembly company.
Q: BA – Why module better on GPRS?
A: We can put in control chip that makes it using friend. All parts in the board not on the outside.
Q: Hitachi module?
A: Gas/hbt in us and HIT is silicon. Not as efficiency. Important in a multitime slot application.
Q: USPJ – Braodband as % of sales
A: 2-3% of rev, been down, see slowing in cable modems, not a lot of visibility. Did get a design win with largest manufacturer of cable modems, not sure where it will go/
Q: Guidance for 2002.
A: Not giving it.
Q: Module customers in total.
A: 6-8 currently and QCOM will add more to customers.
Q: Module % of rev at end of year.
A: 60-80% of revs.
Q: Sagen?
A: Nothing major this quarter.
Q: BS – How much was pick up in market demand vs. new RFMD product.
A: Feel like our work with specific customer is paying off. We got a better product taking market share vs. market is growing. Market suppose to grow 15-20%. We are faster than that.
Q: Pushouts companies last q ordering now?
A: No.
Q: Inventory protection against a repeat of last fall.
A: We got good visibility with NOK, and we control that visibility ourselves. Much better today to handle shift than a year ago.
Q: AT: CDMA volume #:
A: QCOM will supply this # at their CC. We are shipping 16M chipsets this Q.
Q: Optical Components:
A: Looking at a lot, but nothing specific. We agree need diversification.
Q: MOT said inventory down to 2 week from 3-4 week?
A: Been improvement, but worked through.
Q: Needham – SiGe?
A: Got some high performance orders from Korean handset mfrs. Don’t think it will be a PA. Will see in a driver use.
Q: HIT PA vs. RFMD?
A: The part works in the same phone. Customer figured it out, how to use both modules.
Q: Si Ge PA?
A: Many announced capability in that area. Pretty sig learning curve for all of us in SiGe. Si Ge not going to make high volume for anyone. Major suppliers want us to manage inventory for them, want quality, want packaging concepts for two or three generations out. Not just bring a price and quote.
Q: ASP on module?
A: Increased 20-25 cents per unit from last quarter.
Q: Why?
A: Higher quality product that performs several functions in a cell phone. Dual band PA module goes for 2x of two MMIC packages. Customer saving money by having only one package versus two.
Q: Outside contractor capacity?
A: We use well known packaging houses. We use 2-3.
Q: MMIC btb?
A: Not broke it out that way.
Q: JPMHQ – order cancellations
A: Some cancellations from contract assembly, nothing major, 2-3M max. Business has stability.
Q: NOK rev for modules.
A: 70%.
Q: Pricing concessions?
A: We see pressure, nothing like 30% as some speculation. We will improve GM in competitive environment.
Q: MMICS in TDMA.
A: Will ship for few more quarters
Q: 10% customer?
A: Siemen and QWCOM may be 10% at of the year.
Q: 2-3% q2q growth?
A: Will see improvement in margins through out the year
**********************
Some comments:
- No mention of InPh. Apparently profitabilty and visibilty pushing questions more than technology.
- International sales jumped from 63% last quarter. MOT really is hurting since majot US customer.
- GM dropped drastically from 46.7% last quarter. These yields on the modules are hurting the bottom line on RFMD. Not up on if module problem in industry wide. As they said last Q, demand is there, high volume quality is not.
- RFMD missed January guidance of 2-3 cents for the March Q and had to issue a warning in March.
- I like it at $12-16, but $27 is too high.
Jack |
