Company On Track For At Least 10% Non-GAAP Operating Income By December Quarter Business Highlights:
GREENSBORO, N.C., July 29 /PRNewswire-FirstCall/ -- RF Micro Devices, Inc.
(Nasdaq: RFMD), a global leader in the design and manufacture of
high-performance semiconductor components, today reported financial results
for its fiscal 2009 first quarter ended June 28, 2008. Quarterly revenue
increased approximately 13.7% year-over-year and approximately 9.0%
sequentially to $240.5 million. Operating loss was approximately ($39.7)
million on a GAAP basis, reflecting restructuring charges related to the
strategic restructuring announced on May 6, 2008. Non-GAAP operating income
was approximately $2.3 million. Non-GAAP gross margin improved sequentially
240 basis points during the quarter, primarily driven by the sequential
increase in MPG revenue. Consistent with guidance provided on May 6, 2008,
RFMD's June 2008 quarterly revenue reflected broad-based strength in MPG and a
10% sequential increase in sales of cellular front ends.
RFMD(R) Product Group Highlights
CPG
-- Sales of cellular front ends increased 10%, or approximately three
times the industry's growth rate in the June quarter
-- RFMD shipped production volumes of cellular front ends to all five of
the world's leading handset OEMs
-- RFMD is experiencing increased design and bookings activity, driven by
multiple customers
-- RFMD is on track to eliminate approximately $75 million in annual CPG
product development expenses by the end of the calendar year
MPG
-- MPG significantly exceeded RFMD's revised revenue target of 20%
sequential growth in MPG revenue
-- All five MPG product lines -- Aerospace & Defense, Broadband/Consumer,
Standard Products, Wireless Infrastructure and Wireless Connectivity -- grew
sequentially
-- The sequential increase in MPG revenue was a significant contributor to
RFMD's 240-basis point improvement in non-GAAP gross margin
-- June 2008 quarterly results reflected new "soft synergies" from the
Sirenza Microdevices acquisition, including supply chain savings and volume
buying power on component parts
-- MPG released 27 new products and is on track to release more than 100
new products in fiscal 2009
-- RFMD is on track to exceed its fiscal 2009 revenue goal of $250 million
in MPG revenue
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 perQ1 Fiscal Q4 Fiscal % Change Q1 Fiscal % Change
share data) 20092008 vs. Q4 2008 2008 vs. Q1 2008
Revenue $240.5$ 220.6 9.0 % $ 211. 6 13.7 %
Gross Margin 30.1 % 25.2 % 4.9ppt 31.5 %(1.4)ppt
Operating Loss $(39.7) $ (32.8) 20.9 % $ (1.8) 2,162.1 %
Net (Loss)
Income $(24.1) $ (17.2) 39.9 % $ 23.6(202.2)%
Diluted
(LPS) EPS $(0.09) $ (0.06) 47.9 % $ 0.11(186.6)%
NON-GAAP RESULTS (excluding share-based compensation, amortization of
intangibles, amortization of acquisition-related inventory step-up, acquired
in process research and development charge, manufacturing facility relocation
and related costs, manufacturing start-up costs, loss on investment,
restructuring charges, valuation allowance adjustment and the tax effect on
non-GAAP restructuring adjustments)
(in millions,
except
percentages andQ1 Fiscal Q4 Fiscal % Change Q1 Fiscal % Change
per share data) 2009 2008vs. Q4 20082008vs. Q1 2008
Gross Margin 33.0 % 30.6 % 2.4ppt 31.9 %1.1ppt
Operating
Income (Loss)$ 2.3 $ (13.4)117.2 % $2.3 2.4 %
Net Income$ 7.9 $ 2.2 260.8 % $ 6.6 21.1 %
Diluted EPS $ 0.03 $ 0.01 270.7 % $ 0.03 (7.6)%
Financial Guidance And Business Outlook
-- Revenue in the September 2008 quarter is currently expected to be in
the range of $250 million to $260 million
-- RFMD forecasts CPG revenue will increase sequentially in the September
2008 quarter, driven by handset unit volume growth, share gains at targeted
accounts, new handset launches and improved order visibility
-- RFMD forecasts MPG revenue will increase sequentially in the September
2008 quarter, supported by improved order visibility across multiple markets
-- GAAP net loss in the September 2008 quarter is currently expected to be
in the range of ($0.03) to ($0.05) per diluted share, including approximately
$15 million to $20 million in restructuring charges related to the strategic
restructuring announced on May 6, 2008
-- Non-GAAP net income in the September 2008 quarter is currently expected
to be approximately $0.05 per diluted share, excluding estimated share-based
compensation expense, amortization of intangibles and restructuring charges
The methodology used by RFMD to estimate 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 amortization
of intangibles assumes no additional intangible assets are recorded. RFMD
does not estimate the impact of share-based compensation expense on gross
margin or operating expenses and will provide this information with its
September 2008 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 RFMD, said, "RFMD's new strategy and
diversification efforts are already paying dividends -- one quarter ahead of
our original estimates, driven by exceptional teamwork and steady execution by
the entire RFMD team. We gained share in cellular RF components, with front
end revenue increasing 10% sequentially, and our performance in MPG easily
exceeded our revised revenue target of 20% sequential revenue growth.
"Consistent with our strategic restructuring announcement on May 6, we
have eliminated all product development expenses related to wireless systems,
and we believe our organization is now positioned to achieve sustainable,
long-term growth and profitability. We have already begun to deliver the
expense reductions forecast for later this year, and we are well on our way to
achieving our stated goal of at least 10% non-GAAP operating income and
double-digit return on invested capital (ROIC) by the December quarter."
Dean Priddy, CFO and corporate vice president of administration of RFMD,
said, "RFMD's June financial performance and September quarterly guidance
highlight the progress we have made in achieving our financial goals. RFMD's
sharpened focus on RF components and compound semiconductors is driving our
revenue and profitability, and our expense reductions are ahead of schedule.
As our June results demonstrate, our 240-basis point sequential improvement in
gross margin and approximately 700-basis point sequential improvement in
operating margin are leading indicators of the superior financial leverage
RFMD is positioned to deliver."
Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance with
United States (U.S.) generally accepted accounting principles (GAAP), RFMD's
earnings release contains the following non-GAAP financial measures: (i)
non-GAAP gross margin, (ii) non-GAAP operating (loss) income, (iii) non-GAAP
net income, and (iv) non-GAAP net income per diluted share. Each of these
non-GAAP financial measures is adjusted from GAAP results to exclude certain
expenses that are outlined in the "Reconciliation of GAAP to Non-GAAP
Financial Measures" table on page 8.
In managing RFMD's business on a consolidated basis, management develops
an annual operating plan, which is approved by our Board of Directors, using
non-GAAP financial measures. In developing and monitoring performance against
this plan, management considers the actual or potential impacts on these non-
GAAP financial measures from actions taken to reduce unit costs with the goal
of increasing gross margin. In addition, management relies upon these non-
GAAP financial measures to assess whether research and development efforts are
at an appropriate level, and when making decisions about product spending,
administrative budgets, and marketing programs. In addition, we believe that
non-GAAP financial measures provide useful supplemental information to
investors and enable investors to analyze the results of operations in the
same way as management. We have chosen to provide this supplemental
information to enable investors to perform additional comparisons of operating
results and to analyze financial performance excluding the effect of certain
non-cash expenses, unusual items and share-based compensation expense, which
may obscure trends in RFMD's underlying performance.
We believe that these non-GAAP financial measures offer an additional view
of RFMD's operations that, when coupled with the GAAP results and the
reconciliations to corresponding GAAP financial measures, provide a more
complete understanding of RFMD's results of operations and the factors and
trends affecting RFMD's business. However, these non-GAAP financial measures
should be considered as a supplement to, and not as a substitute for, or
superior to, the corresponding measures calculated in accordance with GAAP.
Our rationale for using these non-GAAP financial measures, as well as
their impact on the presentation of RFMD's operations, are outlined below:
Non-GAAP gross margin. Non-GAAP gross margin excludes share-based
compensation expense, amortization of intangible assets, an adjustment for
amortization of acquisition-related inventory step-up and an adjustment for
manufacturing facility relocation and related costs. We believe that
exclusion of these costs in presenting non-GAAP gross margin gives management
and investors a more effective means of evaluating RFMD's historical
performance and projected costs and the potential for realizing cost
efficiencies. We believe that the majority of RFMD's purchased intangibles
are not relevant to analyzing current operations because they generally
represent costs incurred by the acquired company to build value prior to
acquisition, and thus are effectively part of transaction costs rather than
ongoing costs of operating RFMD's business. In this regard, we note that (i)
once the intangibles are fully amortized, the intangibles will not be replaced
with cash costs and therefore, the exclusion of these costs provides
management and investors with better visibility into the actual costs required
to generate revenues over time, and (ii) although we set the amortization
expense based on useful life of the various assets at the time of the
transaction, we cannot influence the timing and amount of the future
amortization expense recognition once the lives are established. Similarly,
we believe that presentation of non-GAAP gross margin and other non-GAAP
financial measures that exclude the impact of share-based compensation expense
assists management and investors in evaluating the period-over-period
performance of RFMD's ongoing operations because (i) the expenses are non-cash
in nature, and (ii) although the size of the grants is within our control, the
amount of expense varies depending on factors such as short-term fluctuations
in stock price volatility and prevailing interest rates, which can be
unrelated to the operational performance of RFMD during the period in which
the expense is incurred and generally is outside the control of management.
Moreover, we believe that the exclusion of share-based compensation expense in
presenting non-GAAP gross margin and other non-GAAP financial measures is
useful to investors to understand the impact of the expensing of share-based
compensation to RFMD's gross margins and other financial measures in
comparison to both prior periods as well as to its competitors. We also
believe that the adjustments to margin related to business acquisitions
(amortization of acquisition-related inventory step-up and an adjustment for
manufacturing facility relocation and related costs) do not constitute part of
RFMD's ongoing operations and therefore, the exclusion of these costs provides
management and investors with better visibility into the actual costs required
to generate revenues over time and gives management and investors a more
effective means of evaluating our historical and projected performance.
We believe disclosure of non-GAAP gross margin has economic substance
because the excluded expenses do not represent continuing cash expenditures
and, as described above, we have little control over the timing and amount of
the expenses in question.
Non-GAAP operating (loss) income. Non-GAAP operating (loss) income
excludes share-based compensation expense, amortization of intangible assets,
restructuring charges, acquired in-process research and development,
amortization of acquisition-related inventory step-up, costs associated with
the relocation of a manufacturing facility, manufacturing start-up costs, and
adjustments associated with the discontinuation of our WLAN chipset
development efforts. We believe that presentation of a measure of operating
(loss) income that excludes amortization of intangible assets and share-based
compensation expense is useful to both management and investors for the same
reasons as described above with respect to our use of non-GAAP gross margin.
We believe that restructuring charges, manufacturing start-up costs, acquired
in-process research and development, amortization of acquisition-related
inventory step-up, and costs associated with the relocation of a manufacturing
facility, do not constitute part of RFMD's ongoing operations and therefore,
the exclusion of these costs provides management and investors with better
visibility into the actual costs required to generate revenues over time and
gives management and investors a more effective means of evaluating our
historical and projected performance. We believe disclosure of non-GAAP
operating (loss) income has economic substance because the excluded expenses
are either non-recurring in nature or do not represent current cash
expenditures.
Non-GAAP net income and non-GAAP net income per diluted share. Non-GAAP
net income and non-GAAP net income per diluted share exclude the effects of
share-based compensation expense, amortization of intangible assets,
restructuring charges, manufacturing start-up costs, acquired in-process
research and development, amortization of acquisition-related inventory
step-up, costs associated with the relocation of a manufacturing facility,
loss on investment, valuation allowance adjustment and also reflect an
adjustment of income tax associated with the exclusion of non-GAAP
restructuring adjustments. We believe that presentation of measures of net
income and net income per diluted share that exclude these items is useful to
both management and investors for the reasons described above with respect to
non-GAAP gross margin and non-GAAP operating income. We believe disclosure of
non-GAAP net income and non-GAAP net income per diluted share has economic
substance because the excluded expenses are either non-recurring in nature, do
not represent current cash expenditures, or are variable in nature and thus
unlikely to become recurring expenses.
Limitations of non-GAAP financial measures. The primary material
limitations associated with the use of non-GAAP gross margin, non-GAAP
operating (loss) income, non-GAAP net income and non-GAAP net income per
diluted share as compared to the most directly comparable GAAP financial
measures of gross margin, operating (loss) income, net (loss) income and net
(loss) income per diluted share are (i) they may not be comparable to
similarly titled measures used by other companies in RFMD's industry, and (ii)
they exclude financial information that some may consider important in
evaluating our performance. We compensate for these limitations by providing
full disclosure of the differences between these non-GAAP financial measures
and the corresponding GAAP financial measures, including a reconciliation of
the non-GAAP financial measures to the corresponding GAAP financial measures,
to enable investors to perform their own analysis of our gross margin,
operating (loss) income, net (loss) income and net (loss) income per diluted
share.
RF Micro Devices will conduct a conference call at 5:00 p.m. EDT 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 11116474.
About RFMD: About RFMD: RF Micro Devices, Inc. (Nasdaq GS: RFMD) is a
global leader in the design and manufacture of high-performance semiconductor
components. RFMD's products enable worldwide mobility, provide enhanced
connectivity and support advanced functionality in the cellular handset,
wireless infrastructure, wireless local area network (WLAN), CATV/broadband
and aerospace and defense markets. RFMD is recognized for its diverse
portfolio of semiconductor technologies and RF systems expertise and is a
preferred supplier to the world's leading mobile device, customer premises and
communications equipment providers.
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 our planned exit from our wireless systems business, including
cellular transceivers and GPS solutions, the risk that restructuring charges
may be greater than originally anticipated and that the cost savings and other
benefits from the restructuring may not be achieved, 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 complete acquisitions and integrate acquired companies, including the risk
that we may not realize expected synergies from our business combinations, 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 and other reports and
statements 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.
Tables To Follow
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 28, 2008 June 30, 2007
Total revenue$ 240,492 $ 211,599
Costs and expenses:
Cost of goods sold 168,163 144,901
Research and development 51,35447,688
Marketing and selling 18,52212,230
General and administrative13,058 7,776
Other operating expense 29,098 759
Total costs and expenses 280,195 213,354
Operating loss (39,703) (1,755)
Other (loss) income (79)6,069
(Loss) income before income taxes$ (39,782)$ 4,314
Income tax benefit 15,65919,287
Net (loss) income$ (24,123)$ 23,601
Net (loss) income per share, diluted $(0.09)$0.11
Weighted average outstanding diluted
shares 261,249 227,504
RF MICRO DEVICES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 28, March 29, June 30,
2008 2008 2007
GAAP operating loss $(39,703) $(32,832) $(1,755)
Share-based compensation
expense 4,481 4,6452,791
Amortization of intangible assets 7,771 7,682 461
Acquired in process research
and development 1,400 --
Amortization of
acquisition-related
inventory step-up 661 5,482-
Charges related to strategic
restructuring26,568 --
Restructuring charges related
to sale of substantially
all Bluetooth(R) assets - - 329
Restructuring charges related
to the integration of Sirenza
and other 474 998-
Manufacturing start-up costs 657 299 430
Manufacturing facility
relocation and related costs - 337-
Non-GAAP operating income (loss) 2,309 (13,389) 2,256
GAAP net (loss) income (24,123) (17,240) 23,601
Share-based compensation expense 4,481 4,6452,791
Amortization of intangible assets 7,771 7,682 461
Acquired in process research
and development 1,400 --
Amortization of
acquisition-related inventory
step-up 661 5,482-
Charges related to strategic
restructuring26,568 --
Restructuring charges related
to sale of substantially all
Bluetooth(R) assets - - 329
Restructuring charges related
to the integration of Sirenza
and other 474 998-
Manufacturing start-up costs 657 299 430
Manufacturing facility
relocation and related costs - 337-
Loss on investment - - 671
Tax effect on non-GAAP
restructuring adjustments(9,944)--
Valuation allowance adjustment - - (21,722)
Non-GAAP net income7,945 2,2036,561
Plus: Income impact of assumed
conversions for interest on
1.50% convertible notes 660 - 669
Non-GAAP net income plus assumed
conversion of notes-Numerator for
diluted income per share $ 8,605 $ 2,203 $ 7,230
GAAP weighted average outstanding
diluted shares Adjustments: 261,249 276,085 227,504
Diluted stock options 1,745 1,952-
Assumed conversion of 1.50%
convertible notes30,144 --
Non-GAAP weighted average
outstanding diluted shares 293,138 278,037 227,504
Non-GAAP net income per share,
diluted$ 0.03 $ 0.01 $ 0.03
GAAP gross margin percentage30.1 %25.2 % 31.5 %
Adjustment for amortization of
acquisition-related inventory
step-up 0.3 % 2.5 % -
Adjustment for share-based
compensation0.3 % 0.2 %0.2 %
Adjustment for manufacturing
facility relocation and
related costs - 0.2 % -
Adjustment for intangible
amortization2.3 % 2.5 %0.2 %
Non-GAAP gross margin percentage33.0 %30.6 % 31.9 %
RF MICRO DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 28, March 29,
2008 2008
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $116,581 $129,750
Restricted cash 69504
Short-term investments 80,490100,841
Accounts receivable, net117,246115,629
Inventories 180,196190,753
Other current assets 93,663 84,556
Total current assets588,245622,033
Property and equipment, net 417,741430,237
Goodwill716,179701,317
Long-term investments24,586 26,336
Intangible assets, net 206,159205,072
Other assets 31,770 32,200
Total assets $ 1,984,680 $ 2,017,195
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $123,044 $130,785
Current portion - long-term debt 4,613 4,523
Other short-term liabilities, net 150283
Total current liabilities 127,807135,591
Long-term debt, net 616,211616,698
Other long-term liabilities 22,323 26,269
Total liabilities 766,341778,558
Shareholders' equity:
Total shareholders' equity1,218,339 1,238,637
Total liabilities and shareholders'
equity $ 1,984,680 $ 2,017,195
SOURCE RF Micro Devices, Inc.
