Skyworks Solutions Inc.

07/31/2024 | Press release | Distributed by Public on 07/31/2024 04:02

Quarterly Report for Quarter Ending June 28, 2024 (Form 10-Q)

swks-20240628
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________
Commission file number 001-05560
Skyworks Solutions, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-2302115
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
5260 California Avenue 92617
Irvine, California
(Address of principal executive offices)
(Zip Code)
(949) 231-3000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.25 per share SWKS Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þYes¨No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þYes¨No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes þNo
As of July 25, 2024, the registrant had 159,716,371 shares of common stock, par value $0.25 per share, outstanding.
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SKYWORKS SOLUTIONS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 28, 2024
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
2
CONSOLIDATED STATEMENTS OF OPERATIONS
2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
3
CONSOLIDATED BALANCE SHEETS
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
15
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
20
ITEM 4: CONTROLS AND PROCEDURES
21
PART II. OTHER INFORMATION
22
ITEM 1: LEGAL PROCEEDINGS
22
ITEM 1A: RISK FACTORS
22
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
22
ITEM 5: OTHER INFORMATION
22
ITEM 6: EXHIBITS
24
SIGNATURES
25
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SKYWORKS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share amounts)
Three Months Ended Nine Months Ended
June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023
Net revenue $ 905.5 $ 1,071.2 $ 3,153.0 $ 3,553.6
Cost of goods sold 541.4 607.1 1,862.0 1,924.4
Gross profit 364.1 464.1 1,291.0 1,629.2
Operating expenses:
Research and development 160.7 148.0 468.1 460.0
Selling, general, and administrative 71.2 77.2 226.7 240.7
Amortization of intangibles 0.2 3.8 0.7 29.5
Restructuring, impairment, and other charges 1.6 4.4 17.5 28.0
Total operating expenses 233.7 233.4 713.0 758.2
Operating income 130.4 230.7 578.0 871.0
Interest expense (6.6) (16.2) (23.8) (52.0)
Other income, net
9.6 7.6 23.8 13.6
Income before income taxes 133.4 222.1 578.0 832.6
Provision for income taxes 12.5 26.3 42.5 94.6
Net income $ 120.9 $ 195.8 $ 535.5 $ 738.0
Earnings per share:
Basic $ 0.75 $ 1.23 $ 3.34 $ 4.63
Diluted $ 0.75 $ 1.22 $ 3.32 $ 4.61
Weighted average shares:
Basic 160.4 159.2 160.2 159.4
Diluted 161.4 160.0 161.4 160.0
See accompanying Notes to Consolidated Financial Statements.
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SKYWORKS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in millions)
Three Months Ended Nine Months Ended
June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023
Net income $ 120.9 $ 195.8 $ 535.5 $ 738.0
Other comprehensive income (loss), net of tax:
Pension adjustments - - (0.1) (0.8)
Comprehensive income $ 120.9 $ 195.8 $ 535.4 $ 737.2
See accompanying Notes to Consolidated Financial Statements.
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SKYWORKS SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
As of
June 28, 2024 September 29, 2023
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,263.4 $ 718.8
Marketable securities 5.6 15.6
Receivables, net of allowances of $0.9 and $0.8, respectively
607.4 864.3
Inventory 822.8 1,119.7
Other current assets 539.9 461.1
Total current assets 3,239.1 3,179.5
Property, plant, and equipment, net 1,265.3 1,390.1
Operating lease right-of-use assets 197.0 205.4
Goodwill 2,176.7 2,176.7
Intangible assets, net 1,075.6 1,222.1
Deferred tax assets, net 192.9 192.3
Marketable securities 14.9 4.1
Other long-term assets 74.9 56.5
Total assets $ 8,236.4 $ 8,426.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 160.9 $ 159.2
Accrued compensation and benefits 115.9 94.3
Current portion of long-term debt - 299.4
Other current liabilities 286.1 402.8
Total current liabilities 562.9 955.7
Long-term debt 994.0 992.9
Long-term tax liabilities 119.9 162.8
Long-term operating lease liabilities 187.1 188.7
Other long-term liabilities 36.1 43.9
Total liabilities 1,900.0 2,344.0
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, no par value: 25.0 shares authorized, no shares issued
- -
Common stock, $0.25 par value: 525.0 shares authorized; 159.7 shares issued and outstanding at June 28, 2024, and 159.5 shares issued and outstanding at September 29, 2023
39.9 39.9
Additional paid-in capital 217.8 172.4
Retained earnings 6,084.4 5,876.0
Accumulated other comprehensive loss (5.7) (5.6)
Total stockholders' equity 6,336.4 6,082.7
Total liabilities and stockholders' equity $ 8,236.4 $ 8,426.7
See accompanying Notes to Consolidated Financial Statements.
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SKYWORKS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
Nine Months Ended
June 28, 2024 June 30, 2023
Cash flows from operating activities:
Net income $ 535.5 $ 738.0
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation 142.1 135.2
Depreciation 196.3 295.8
Amortization of intangible assets
139.6 174.7
Deferred income taxes (2.2) (86.3)
Asset impairment charges 16.8 17.0
Amortization of debt discount and issuance costs 2.0 2.9
Other, net (6.6) (2.2)
Changes in assets and liabilities:
Receivables, net 256.9 367.2
Inventory 291.5 (24.9)
Accounts payable 0.4 (98.3)
Other current and long-term assets and liabilities (223.7) (28.2)
Net cash provided by operating activities 1,348.6 1,490.9
Cash flows from investing activities:
Capital expenditures (74.2) (140.2)
Purchased intangibles (20.2) (18.8)
Purchases of marketable securities (25.7) (282.1)
Sales and maturities of marketable securities 25.3 289.0
Other 10.3 5.9
Net cash used in investing activities (84.5) (146.2)
Cash flows from financing activities:
Repurchase of common stock - payroll tax withholdings on equity awards (34.4) (33.6)
Repurchase of common stock - stock repurchase program (77.3) (175.3)
Dividends paid (327.1) (296.7)
Net proceeds from exercise of stock options 1.1 1.0
Proceeds from employee stock purchase plan 18.2 15.5
Payments of debt (300.0) (700.0)
Net cash used in financing activities (719.5) (1,189.1)
Net increase in cash and cash equivalents
544.6 155.6
Cash and cash equivalents at beginning of period 718.8 566.0
Cash and cash equivalents at end of period $ 1,263.4 $ 721.6
Supplemental cash flow disclosures:
Income taxes paid $ 154.3 $ 177.8
Interest paid $ 27.7 $ 48.9
Incentives paid in common stock
$ 1.2 $ 19.2
Non-cash investing in capital expenditures, accrued but not paid $ 34.3 $ 20.9
Operating lease assets obtained in exchange for new lease liabilities $ 14.5 $ 6.0
See accompanying Notes to Consolidated Financial Statements.
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SKYWORKS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, in millions)
Shares of common stock Par value of common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss
Total stockholders'equity
Balance at September 29, 2023
159.5 $ 39.9 $ 172.4 $ 5,876.0 $ (5.6) $ 6,082.7
Net income - - - 231.3 - 231.3
Exercise and settlement of share-based awards, net of shares withheld for taxes 0.7 0.2 (30.6) - - (30.4)
Share-based compensation expense - - 52.6 - - 52.6
Dividends declared - - - (108.9) - (108.9)
Other comprehensive loss - - - - (0.1) (0.1)
Balance at December 29, 2023
160.2 $ 40.1 $ 194.4 $ 5,998.4 $ (5.7) $ 6,227.2
Net income - $ - $ - $ 183.3 $ - $ 183.3
Exercise and settlement of share-based awards, net of shares withheld for taxes 0.2 - 17.5 - - 17.5
Share-based compensation expense - - 40.3 - - 40.3
Dividends declared - - - (109.1) - (109.1)
Balance at March 29, 2024
160.4 $ 40.1 $ 252.2 $ 6,072.6 $ (5.7) $ 6,359.2
Net income - $ - $ - $ 120.9 $ - $ 120.9
Exercise and settlement of share-based awards, net of shares withheld for taxes 0.1 - (1.0) - - (1.0)
Share-based compensation expense - - 43.8 - - 43.8
Repurchase of common stock (0.8) (0.2) (77.2) - - (77.4)
Dividends declared - - - (109.1) - (109.1)
Balance at June 28, 2024
159.7 $ 39.9 $ 217.8 $ 6,084.4 $ (5.7) $ 6,336.4
Balance at September 30, 2022
160.2 $ 40.0 $ 11.9 $ 5,421.9 $ (4.8) $ 5,469.0
Net income - - - 309.4 - 309.4
Exercise and settlement of share-based awards, net of shares withheld for taxes 0.7 0.2 (11.9) - - (11.7)
Share-based compensation expense - - 49.7 - - 49.7
Repurchase of common stock (1.8) (0.5) (45.8) (120.0) - (166.3)
Dividends declared - - - (99.4) - (99.4)
Other comprehensive loss - - - - (0.8) (0.8)
Balance at December 30, 2022
159.1 $ 39.7 $ 3.9 $ 5,511.9 $ (5.6) $ 5,549.9
Net income - $ - $ - $ 232.8 $ - $ 232.8
Exercise and settlement of share-based awards, net of shares withheld for taxes 0.2 - 14.9 - - 14.9
Share-based compensation expense - - 43.0 - - 43.0
Repurchase of common stock (0.1) - (5.6) (3.5) - (9.1)
Dividends declared - - - (98.6) - (98.6)
Balance at March 31, 2023
159.2 $ 39.7 $ 56.2 $ 5,642.6 $ (5.6) $ 5,732.9
Net income - $ - $ - $ 195.8 $ - $ 195.8
Exercise and settlement of share-based awards, net of shares withheld for taxes - 0.1 (1.0) - - (0.9)
Share-based compensation expense - - 48.8 - - 48.8
Dividends declared - - - (98.7) - (98.7)
Balance at June 30, 2023
159.2 $ 39.8 $ 104.0 $ 5,739.7 $ (5.6) $ 5,877.9
See accompanying Notes to Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Skyworks Solutions, Inc., together with its consolidated subsidiaries ("Skyworks" or the "Company"), is empowering the wireless networking revolution. The Company's analog and mixed-signal semiconductors are connecting people, places, and things, spanning a number of new applications within the aerospace, automotive, broadband, cellular infrastructure, connected home, defense, entertainment and gaming, industrial, medical, smartphone, tablet, and wearable markets.
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. Certain information and footnote disclosures, normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), have been condensed or omitted pursuant to those rules and regulations. However, in management's opinion, the financial information reflects all adjustments, including those of a normal recurring nature, necessary to present fairly the results of operations, financial position, and cash flows of the Company for the periods presented. The results of operations, financial position, and cash flows for the Company during the interim periods are not necessarily indicative of those expected for the full year. This information should be read in conjunction with the Company's financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 2023, filed with the SEC on November 17, 2023, as amended by Amendment No. 1 to such Annual Report on Form 10-K, filed with the SEC on January 26, 2024 ("2023 10-K"). Certain items in the prior period financial statements have been reclassified to conform to the current period presentation.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, expenses, comprehensive income, and accumulated other comprehensive loss that are reported during the reporting period. The Company evaluates its estimates on an ongoing basis using historical experience and other factors, including the current economic environment. Judgment is required in determining the reserves for, and fair value of, items such as overall fair value assessments of assets and liabilities, particularly those classified as Level 2 or Level 3 in the fair value hierarchy, marketable securities, inventory, intangible assets associated with business combinations, share-based compensation, revenue reserves, loss contingencies, and income taxes. In addition, judgment is required in determining whether a potential indicator of impairment of long-lived assets exists and in estimating future cash flows for any necessary impairment testing. Actual results could differ significantly from these estimates.
The Company's fiscal year ends on the Friday closest to September 30. The fiscal year ending on September 27, 2024 consists of 52 weeks ("fiscal 2024"). The fiscal year ended on September 29, 2023 consisted of 52 weeks ("fiscal 2023"). The three and nine months ended June 28, 2024, and June 30, 2023, each consisted of 13 weeks and 39 weeks, respectively.
Property, Plant, and Equipment
Property, plant, and equipment are carried at cost less accumulated depreciation, with significant renewals and betterments being capitalized and retired equipment written off in the respective periods. Maintenance and repairs are expensed as incurred.
Depreciation is calculated using the straight-line method over the estimated useful lives, which range from five to forty years for buildings and improvements and from five to ten years for machinery and equipment. Leasehold improvements are depreciated over the lesser of the economic life or the life of the associated lease.
During the nine months ended June 28, 2024, the Company changed its accounting estimate for the expected useful lives of certain machinery and equipment. The Company evaluated its current asset base and reassessed the estimated useful lives of certain machinery and equipment in connection with its recent usage of older equipment, including considering the technological and physical obsolescence of such machinery and equipment. Based on its ability to re-use equipment across generations of process technologies and historical usage trends, the Company determined that the expected useful lives for certain machinery and equipment should be increased by up to two years to reflect more closely the estimated economic lives of those assets. This change in estimate was applied prospectively effective during the first quarter of fiscal 2024 and resulted in a decrease in depreciation expense of $18.9 million and $56.6 million for the three and nine months ended June 28, 2024, respectively. This benefit decreased cost of goods sold by $8.9 million and $10.7 million and decreased research and development expenses by $2.4 million and $7.4 million for the three and nine months ended June 28, 2024, respectively, and decreased ending inventory by $38.5 million as of June 28, 2024. As a result of this change in accounting estimate, net income increased by $11.3 million and $18.1 million and diluted earnings per share increased by $0.07 and $0.11 for the three and nine months ended June 28, 2024, respectively.
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Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure" ("ASU 2023-07"). ASU 2023-07 requires disclosure of incremental segment information on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). ASU 2023-09 includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on either a prospective or retrospective basis, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.
2. REVENUE RECOGNITION
The Company presents net revenue by geographic area, based upon the location of the original equipment manufacturers' ("OEMs") headquarters, and by sales channel, as it believes that doing so best depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Individually insignificant OEMs are presented based upon the location of the Company's direct customer, which is typically a distributor.
Net revenue by geographic area is as follows (in millions):
Three Months Ended Nine Months Ended
June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023
United States $ 658.5 $ 793.9 $ 2,422.8 $ 2,668.8
China 75.9 81.6 232.7 277.0
Taiwan 80.7 81.2 226.1 252.0
South Korea 52.9 48.1 158.1 139.6
Europe, Middle East, and Africa 31.3 51.3 87.6 164.0
Other Asia-Pacific 6.2 15.1 25.7 52.2
Total net revenue $ 905.5 $ 1,071.2 $ 3,153.0 $ 3,553.6
Net revenue by sales channel is as follows (in millions):
Three Months Ended Nine Months Ended
June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023
Distributors $ 767.1 $ 937.0 $ 2,745.0 $ 3,183.1
Direct customers 138.4 134.2 408.0 370.5
Total net revenue $ 905.5 $ 1,071.2 $ 3,153.0 $ 3,553.6
The Company's revenue from external customers is generated principally from the sale of semiconductor products that facilitate various wireless communication applications. Accordingly, the Company considers its product offerings to be similar in nature and therefore not segregated for reporting purposes.
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3. MARKETABLE SECURITIES
The Company's portfolio of available-for-sale marketable securities consists of the following (in millions):
Current Noncurrent
June 28, 2024 September 29, 2023 June 28, 2024 September 29, 2023
U.S. Treasury and government securities $ 5.2 $ 15.1 $ 14.9 $ 4.1
Corporate bonds and notes 0.3 - - -
Municipal bonds 0.1 0.5 - -
Total marketable securities $ 5.6 $ 15.6 $ 14.9 $ 4.1
Neither gross unrealized gains and losses nor realized gains and losses were material as of June 28, 2024, or September 29, 2023.
4. FAIR VALUE
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The Company groups its financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
•Level 1 - Quoted prices in active markets for identical assets or liabilities.
•Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less-active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.
•Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by the Company.
Assets and liabilities recorded at fair value on a recurring basis consisted of the following (in millions):
As of
June 28, 2024 September 29, 2023
Fair Value Measurements Fair Value Measurements
Total
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents (1) $ 1,263.4 $ 1,263.0 $ 0.4 $ - $ 718.8 $ 718.5 $ 0.3 $ -
U.S. Treasury and government securities 20.1 1.6 18.5 - 19.2 - 19.2 -
Corporate bonds and notes 0.3 - 0.3 - - - - -
Municipal bonds 0.1 - 0.1 - 0.5 - 0.5 -
Total assets at fair value $ 1,283.9 $ 1,264.6 $ 19.3 $ - $ 738.5 $ 718.5 $ 20.0 $ -
(1) Cash equivalents included in Levels 1 and 2 consist of money market funds, municipal bonds, and U.S. Treasury and government securities purchased with less than ninety days until maturity.
Assets Measured and Recorded at Fair Value on a Nonrecurring Basis
The Company's non-financial assets and liabilities, such as goodwill, intangible assets, and other long-lived assets resulting from business combinations, are measured at fair value using income approach valuation methodologies at the date of acquisition and are subsequently re-measured if there are indicators of impairment. During the three and nine months ended June 28, 2024, the Company recorded impairment charges of $0.7 million and $16.8 million, respectively. The impairment charges for the nine months ended June 28, 2024 primarily related to the abandonment of a previously capitalized in-process research and development ("IPR&D") project. During the three months ended June 30, 2023, there were no indicators of impairment identified. During the nine months ended June 30, 2023, the Company recorded impairment charges of $17.0 million.
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Fair Value of Debt
The Company's debt is carried at amortized cost and is measured at fair value quarterly for disclosure purposes. The estimated fair values are based on Level 2 inputs as the fair value is based on quoted prices for the Company's debt and comparable instruments in inactive markets.
The carrying amount and estimated fair value of debt consists of the following (in millions):
As of
June 28, 2024 September 29, 2023
Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value
1.80% Senior Notes due 2026 $ 498.4 $ 465.1 $ 497.7 $ 444.5
3.00% Senior Notes due 2031 495.6 424.8 495.2 390.4
Total debt under Senior Notes $ 994.0 $ 889.9 $ 992.9 $ 834.9
5. INVENTORY
Inventory consists of the following (in millions):
As of
June 28, 2024 September 29, 2023
Raw materials $ 29.6 $ 57.2
Work-in-process 607.2 746.8
Finished goods 186.0 315.7
Total inventory $ 822.8 $ 1,119.7
6. PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment, net consists of the following (in millions):
As of
June 28, 2024 September 29, 2023
Land and improvements $ 11.9 $ 11.8
Buildings and improvements 603.3 588.2
Furniture and fixtures 79.1 74.8
Machinery and equipment 3,394.4 3,389.3
Construction in progress 57.2 107.6
Total property, plant, and equipment, gross 4,145.9 4,171.7
Accumulated depreciation (2,880.6) (2,781.6)
Total property, plant, and equipment, net $ 1,265.3 $ 1,390.1
7. GOODWILL AND INTANGIBLE ASSETS
There were no changes to the carrying amount of goodwill during the three and nine months ended June 28, 2024.
The Company tests its goodwill for impairment annually as of the first day of its fourth fiscal quarter and in interim periods if certain events occur indicating the carrying value of goodwill may be impaired. There were no indicators of impairment noted during the three and nine months ended June 28, 2024.
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Intangible assets consist of the following (in millions):
As of
Weighted
Average
Amortization
Period (Years) 		June 28, 2024 September 29, 2023
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying Amount
Accumulated
Amortization
Net
Carrying
Amount
Developed technology and other 6.3 $ 1,379.6 $ (500.4) $ 879.2 $ 1,290.4 $ (379.4) $ 911.0
Technology licenses 3.1 72.5 (42.1) 30.4 75.8 (36.0) 39.8
In-process research and development 166.0 - 166.0 271.3 - 271.3
Total intangible assets $ 1,618.1 $ (542.5) $ 1,075.6 $ 1,637.5 $ (415.4) $ 1,222.1
Fully amortized intangible assets are eliminated from both the gross and accumulated amortization amounts in the first quarter of each fiscal year. During the three months ended June 28, 2024, $33.4 million of IPR&D assets were transferred to definite-lived intangible assets, and are being amortized over their useful lives of 12 years. During the nine months ended June 28, 2024, $89.1 million of IPR&D assets were transferred to definite-lived intangible assets, of which $33.4 million is being amortized over their useful lives of 12 years and $55.7 million is being amortized over their useful lives of 8 years. During the nine months ended June 30, 2023, $9.5 million of IPR&D assets were transferred to definite-lived intangible assets, and are being amortized over their useful lives of 12 years. Amortization expense related to definite-lived intangible assets was $46.0 million and $139.6 million for the three and nine months ended June 28, 2024, respectively. Amortization expense related to definite-lived intangible assets was $51.3 million and $174.7 million for the three and nine months ended June 30, 2023, respectively.
Annual amortization expense for the next five fiscal years related to definite-lived intangible assets, excluding IPR&D, is expected to be as follows (in millions):
Remaining 2024
2025 2026 2027 2028 Thereafter
Amortization expense $ 46.5 $ 167.9 $ 140.0 $ 124.0 $ 100.1 $ 331.1
8. INCOME TAXES
The provision for income taxes consists of the following components (in millions):
Three Months Ended Nine Months Ended
June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023
United States income taxes $ 8.6 $ 17.5 $ 16.0 $ 60.0
Foreign income taxes 3.9 8.8 26.5 34.6
Provision for income taxes $ 12.5 $ 26.3 $ 42.5 $ 94.6
Effective tax rate 9.4 % 11.8 % 7.4 % 11.4 %
The difference between the Company's effective tax rate and the 21.0% United States federal statutory rate for the three and nine months ended June 28, 2024 and June 30, 2023 resulted primarily from foreign earnings taxed at rates lower than the federal statutory rate, a benefit from foreign-derived intangible income deduction ("FDII"), and research and experimentation and foreign tax credits earned, partially offset by a tax on global intangible low-taxed income ("GILTI"), and tax expense related to share-based compensation shortfalls.
In August 2022, the U.S. government enacted the Inflation Reduction Act, which imposes a corporate alternative minimum tax ("CAMT") of 15% on corporations with three-year average annual adjusted financial statement income exceeding $1.0 billion. The Company is subject to the provisions of CAMT in fiscal 2024. CAMT had no impact to the Company's consolidated financial statements for the three and nine months ended June 28, 2024.
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9. COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, various lawsuits, claims, and proceedings have been, and may in the future be, instituted or asserted against the Company, including those pertaining to patent infringement, intellectual property, environmental hazards, product liability and warranty, safety and health, employment, and contractual matters.
The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights. From time to time, third parties have asserted and may in the future assert patent, copyright, trademark, and other intellectual property rights to technologies that are important to the Company's business and have demanded and may in the future demand that the Company license their technology. The outcome of any such litigation cannot be predicted with certainty and some such lawsuits, claims, or proceedings may be disposed of unfavorably to the Company. Generally speaking, intellectual property disputes often have a risk of injunctive relief, which, if imposed against the Company, could materially and adversely affect the Company's financial condition or results of operations. From time to time the Company may also be involved in legal proceedings in the ordinary course of business.
The Company monitors the status of legal proceedings and other contingencies on an ongoing basis to assess whether loss contingencies should be recognized and disclosed in its financial statements and footnotes. The Company does not believe there are any pending legal proceedings that are reasonably possible to result in a material loss. The Company is engaged in various legal actions in the normal course of business and, while there can be no assurances, the Company believes the outcome of all pending litigation involving the Company will not have, individually or in the aggregate, a material adverse effect on its business or financial statements.
Guarantees and Indemnities
The Company has made no significant contractual guarantees for the benefit of third parties. However, the Company generally indemnifies its customers from third-party intellectual property infringement litigation claims related to its products and, on occasion, also provides other indemnities related to product sales. In connection with certain facility leases, the Company has indemnified its lessors for certain claims arising from the facility or the lease.
The Company indemnifies its directors and officers to the maximum extent permitted under the laws of the state of Delaware. The duration of the indemnities varies and in many cases is indefinite. The indemnities to customers in connection with product sales generally are subject to limits based upon the amount of the related product sales and in many cases are subject to geographic and other restrictions. In certain instances, the Company's indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities in the accompanying consolidated balance sheets and does not expect that such obligations will have a material adverse impact on its financial statements.
Purchase Commitments
The Company purchases materials primarily pursuant to individual purchase orders, some of which have underlying master purchase agreements. Some of these purchase commitments are cancellable, and some are non-cancelable, depending on the terms with each individual supplier. In the event of cancellation, the Company may be required to pay costs incurred through the date of cancellation or other fees. When cancellation would result in incurring costs or other fees, the Company has historically sought to negotiate amended terms to the original agreements and orders to limit its exposure. As such, the Company believes that purchase commitments as of any particular date may not be a reliable indicator of future commitments.
The Company maintains certain minimum purchase commitments under long-term capacity reservation agreements primarily with foundries for the purchase of wafers. Under these agreements, the Company has agreed to pay a combination of refundable deposits and prepayments to the suppliers in exchange for reserved manufacturing production capacity over the term of the agreements. As of June 28, 2024, the deposits and prepayments under the long-term capacity reservation agreements were $141.7 million and $2.5 million, respectively, recorded within other current assets, and $1.4 million and $22.6 million, respectively, recorded within other long-term assets. As of September 29, 2023, the deposits and prepayments under the long-term capacity reservation agreements were $41.7 million and $1.3 million, respectively, recorded within other current assets and $16.0 million of prepayments recorded within other long-term assets.
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10. STOCKHOLDERS' EQUITY
Stock Repurchase
On January 31, 2023, the Board of Directors approved a stock repurchase program ("January 31, 2023 stock repurchase program"), pursuant to which the Company is authorized to repurchase up to $2.0 billion of its common stock from time to time through February 1, 2025, on the open market or in privately negotiated transactions, in compliance with applicable securities laws and other legal requirements. The January 31, 2023 stock repurchase program succeeds in its entirety the stock repurchase program approved by the Board of Directors on January 26, 2021 ("January 26, 2021 stock repurchase program"). The timing and amount of any shares of the Company's common stock that are repurchased under the January 31, 2023 stock repurchase program will be determined by the Company's management based on its evaluation of market conditions and other factors. The January 31, 2023 stock repurchase program may be suspended or discontinued at any time. The Company currently expects to fund the January 31, 2023 stock repurchase program using the Company's working capital.
During the three and nine months ended June 28, 2024, the Company paid $77.4 million (including commissions and excise tax, as applicable) in connection with the repurchase of 0.8 million shares of its common stock (paying an average price of $101.33 per share), all of which shares were repurchased pursuant to the January 31, 2023 stock repurchase program. As of June 28, 2024, $1.9 billion remained available under the January 31, 2023 stock repurchase program.
During the three months ended June 30, 2023, the Company did not repurchase any shares of its common stock pursuant to the January 31, 2023 stock repurchase program. During the nine months ended June 30, 2023, the Company paid $175.3 million (including commissions) in connection with the repurchase of 1.9 million shares of its common stock (paying an average price of $90.60 per share), all of which shares were repurchased pursuant to the January 26, 2021 stock repurchase program.
Dividends
On July 30, 2024, the Company announced that the Board of Directors had declared a cash dividend on the Company's common stock of $0.70 per share. This dividend is payable on September 10, 2024, to the Company's stockholders of record as of the close of business on August 20, 2024.
Dividends charged to retained earnings were as follows (in millions, except per share data):
Fiscal Years Ended
September 27, 2024 September 29, 2023
Per Share Total Amount Per Share Total Amount
First quarter $ 0.68 $ 108.9 $ 0.62 $ 99.4
Second quarter 0.68 109.1 0.62 98.6
Third quarter 0.68 109.1 0.62 98.7
Total dividends $ 2.04 $ 327.1 $ 1.86 $ 296.7
Share-based Compensation
The following table summarizes the share-based compensation expense by line item in the Consolidated Statements of Operations (in millions):
Three Months Ended Nine Months Ended
June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023
Cost of goods sold $ 5.7 $ 3.3 $ 26.1 $ 13.4
Research and development 21.8 24.4 67.1 69.7
Selling, general, and administrative 15.2 17.1 48.9 52.1
Total share-based compensation $ 42.7 $ 44.8 $ 142.1 $ 135.2
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11. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share amounts):
Three Months Ended Nine Months Ended
June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023
Net income $ 120.9 $ 195.8 $ 535.5 $ 738.0
Weighted average shares outstanding - basic 160.4 159.2 160.2 159.4
Dilutive effect of equity-based awards 1.0 0.8 1.2 0.6
Weighted average shares outstanding - diluted 161.4 160.0 161.4 160.0
Net income per share - basic $ 0.75 $ 1.23 $ 3.34 $ 4.63
Net income per share - diluted $ 0.75 $ 1.22 $ 3.32 $ 4.61
Anti-dilutive common stock equivalents 0.3 0.7 - 0.5
Basic earnings per share are calculated by dividing net income by the weighted average number of shares of the Company's common stock outstanding during the period. The calculation of diluted earnings per share includes the dilutive effect of equity-based awards that were outstanding during the three and nine months ended June 28, 2024, and June 30, 2023, using the treasury stock method. Shares issuable upon the vesting of performance stock awards are likewise included in the calculation of diluted earnings per share as of the date the condition(s) have been satisfied, assuming the end of the reporting period was the end of the contingency period. Certain of the Company's outstanding share-based awards, noted in the table above, were excluded because they were anti-dilutive, but they could become dilutive in the future.
12. SUPPLEMENTAL FINANCIAL INFORMATION
Other current assets consist of the following (in millions):
As of
June 28, 2024 September 29, 2023
Prepaid expenses $ 233.7 $ 306.0
Other 306.2 155.1
Total other current assets $ 539.9 $ 461.1
Other current liabilities consist of the following (in millions):
As of
June 28, 2024 September 29, 2023
Accrued customer liabilities $ 197.6 $ 270.9
Accrued taxes 36.3 58.8
Short-term operating lease liabilities 19.7 28.3
Other 32.5 44.8
Total other current liabilities $ 286.1 $ 402.8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This report and other documents we have filed with the SEC contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and are subject to the "safe harbor" created by those sections. Any statements that are not statements of historical fact should be considered to be forward-looking statements. Words such as "anticipates," "believes," "continues," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "seeks," "should," targets," "will," "would," and similar expressions or variations or negatives of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements in this report. Additionally, statements concerning future matters such as the possible impacts of geopolitical conflicts, inflation, recession, and global health crises, as well as the development of new products, enhancements of technologies, sales levels, expense levels, the benefits of acquisitions we have made or may make in the future, and other statements regarding matters that are not historical are forward-looking statements. Although forward-looking statements in this report reflect the good faith judgment of our management as of the date the statement is first made, such statements can only be based on facts and factors then known and understood by us. Consequently, forward-looking statements involve inherent risks and uncertainties, and actual financial results and outcomes may differ materially and adversely from the results and outcomes discussed in, or anticipated by, the forward-looking statements. A number of important factors could cause actual financial results to differ materially and adversely from those in the forward-looking statements. We urge you to consider the risks and uncertainties discussed in the 2023 10-K, under the heading "Risk Factors" and in the other documents filed by us with the SEC in evaluating our forward-looking statements. We have no plans, and undertake no obligation, to revise or update our forward-looking statements to reflect any event or circumstance that may arise after the date of the initial filing of this Quarterly Report on Form 10-Q. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.
In this document, the words "we," "our," "ours," "us," and "the Company" refer only to Skyworks Solutions, Inc., and its subsidiaries and not any other person or entity.
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RESULTS OF OPERATIONS
Three and Nine Months Ended June 28, 2024, and June 30, 2023
The following table sets forth the results of our operations expressed as a percentage of net revenue:
Three Months Ended Nine Months Ended
June 28, 2024 June 30, 2023 June 28, 2024 June 30, 2023
Net revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cost of goods sold 59.8 56.7 59.1 54.2
Gross profit 40.2 43.3 40.9 45.8
Operating expenses:
Research and development 17.7 13.8 14.8 12.9
Selling, general, and administrative 7.9 7.2 7.2 6.8
Amortization of intangibles - 0.4 - 0.8
Restructuring, impairment, and other charges 0.2 0.4 0.6 0.8
Total operating expenses 25.8 21.8 22.6 21.3
Operating income 14.4 21.5 18.3 24.4
Interest expense 0.7 1.5 0.8 1.5
Other income, net
1.1 0.7 0.8 0.4
Income before income taxes 14.8 20.7 18.3 23.4
Provision for income taxes 1.4 2.5 1.3 2.7
Net income 13.4 % 18.3 % 17.0 % 20.8 %
OVERVIEW
We, together with our consolidated subsidiaries, are empowering the wireless networking revolution. Our highly innovative analog and mixed-signal semiconductors are connecting people, places, and things spanning a number of new and previously unimagined applications within the aerospace, automotive, broadband, cellular infrastructure, connected home, defense, entertainment and gaming, industrial, medical, smartphone, tablet, and wearable markets.
General
During the three months ended June 28, 2024, the following key factors contributed to our overall results of operations, financial position, and cash flows:
•Net revenue decreased to $905.5 million for the three months ended June 28, 2024, as compared to $1,071.2 million for the corresponding period in fiscal 2023, driven primarily by a decrease in demand for our mobile and mixed-signal products.
•Our ending cash, cash equivalents, and marketable securities balance increased to $1,283.9 million. The increase in cash, cash equivalents, and marketable securities during the three months ended June 28, 2024, was primarily due to cash generated from operations of $273.5 million, partially offset by dividend payments of $109.1 million, share repurchases of $77.4 million, and capital expenditures of $24.4 million.
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Net Revenue
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Net revenue $ 905.5 (15.5)% $ 1,071.2 $ 3,153.0 (11.3)% $ 3,553.6
We market and sell our products directly to OEMs of communications and electronics products, third-party original design manufacturers and contract manufacturers, and indirectly through electronic components distributors. We generally experience seasonal peaks during our fourth and first fiscal quarters (which correspond to the second half of the calendar year), primarily as a result of increased worldwide production of consumer electronics in anticipation of holiday sales, whereas our second and third fiscal quarters are typically lower and in line with seasonal industry trends.
The decrease in net revenue for the three and nine months ended June 28, 2024, as compared with the corresponding periods in fiscal 2023, was driven primarily by a decrease in demand for our mobile and mixed-signal products.
Gross Profit
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Gross profit $ 364.1 (21.5)% $ 464.1 $ 1,291.0 (20.8)% $ 1,629.2
% of net revenue 40.2 % 43.3 % 40.9 % 45.8 %
Gross profit represents net revenue less cost of goods sold. Our cost of goods sold consists primarily of purchased materials, labor, and overhead (including depreciation, share-based compensation expense, and amortization of acquisition intangibles) associated with product manufacturing. Erosion of average selling prices of established products is typical of the semiconductor industry. Consistent with trends in the industry, we anticipate that average selling prices for our established products will continue to decline over time. As part of our normal course of business, we intend to improve gross profit with efforts to increase unit volumes, improve manufacturing efficiencies, lower manufacturing costs of existing products, and by introducing new and higher value-added products.
The decrease in gross profit for the three and nine months ended June 28, 2024, as compared with the corresponding periods in fiscal 2023, was primarily the result of an unfavorable product mix, lower unit volumes, and lower average selling prices.
Research and Development
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Research and development $ 160.7 8.6% $ 148.0 $ 468.1 1.8% $ 460.0
% of net revenue 17.7 % 13.8 % 14.8 % 12.9 %
Research and development expenses consist primarily of direct personnel costs including share-based compensation expense, costs for pre-production evaluation, and testing of new devices, non-production masks, engineering prototypes, and design tool costs.
The increase in research and development expenses for the three and nine months ended June 28, 2024, as compared with the corresponding periods in fiscal 2023, was primarily related to an increase in certain headcount-related expenses as a result of our increased investment in developing new technologies and products, partially offset by a decrease in depreciation expense as a result of extending the useful lives of certain machinery and equipment. For information regarding this change in accounting estimate, refer to Note 1 of the Notes to Consolidated Financial Statements.
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Selling, General, and Administrative
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Selling, general, and administrative $ 71.2 (7.8)% $ 77.2 $ 226.7 (5.8)% $ 240.7
% of net revenue 7.9 % 7.2 % 7.2 % 6.8 %
Selling, general, and administrative expenses include legal and related costs, accounting, treasury, human resources, information systems, customer service, bad debt expense, sales commissions, share-based compensation expense, advertising, marketing, costs associated with business combinations completed or contemplated during the period, and other costs.
The decrease in selling, general, and administrative expenses for the three and nine months ended June 28, 2024, as compared with the corresponding periods in fiscal 2023, was primarily related to a gain on the sale of property, plant, and equipment, a decrease in professional services costs, and a decrease in share-based compensation.
Amortization of Intangibles
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Amortization of intangibles $ 0.2 (94.7)% $ 3.8 $ 0.7 (97.6)% $ 29.5
% of net revenue - % 0.4 % - % 0.8 %
The decrease in amortization expense for the three and nine months ended June 28, 2024, as compared with the corresponding periods in fiscal 2023, was primarily due to certain intangible assets that were acquired in prior fiscal years reaching the end of their useful lives.
Restructuring, Impairment, and Other Charges
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Restructuring, impairment, and other charges
$ 1.6 (63.6)% $ 4.4 $ 17.5 (37.5)% $ 28.0
% of net revenue 0.2 % 0.4 % 0.6 % 0.8 %
Restructuring, impairment, and other charges for the three months ended June 28, 2024 was primarily due to employee severance costs. Restructuring, impairment, and other charges for the nine months ended June 28, 2024 was primarily related to the abandonment of a previously capitalized IPR&D project.
Restructuring, impairment, and other charges for the three months ended June 30, 2023 was primarily due to employee severance costs. Restructuring, impairment, and other charges for the nine months ended June 30, 2023 was primarily due to impairment charges on divested assets.
Interest Expense
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Interest expense $ 6.6 (59.3)% $ 16.2 $ 23.8 (54.2)% $ 52.0
% of net revenue 0.7 % 1.5 % 0.8 % 1.5 %
The decrease in interest expense for the three and nine months ended June 28, 2024, as compared with the corresponding periods in fiscal 2023, was due to the repayment of the outstanding balance on the Term Loans (as defined below).
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Other Income, Net
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Other income, net $ 9.6 26.3% $ 7.6 $ 23.8 75.0% $ 13.6
% of net revenue 1.1 % 0.7 % 0.8 % 0.4 %
The increase in other income, net for the three and nine months ended June 28, 2024, as compared with the corresponding periods in fiscal 2023, was primarily due to an increase in interest income generated from marketable securities.
Provision for Income Taxes
Three Months Ended Nine Months Ended
(dollars in millions) June 28, 2024 Change June 30, 2023 June 28, 2024 Change June 30, 2023
Provision for income taxes $ 12.5 (52.5)% $ 26.3 $ 42.5 (55.1)% $ 94.6
% of net revenue 1.4 % 2.5 % 1.3 % 2.7 %
We recorded a provision for income taxes of $12.5 million (which consisted of $8.6 million and $3.9 million related to United States and foreign income taxes, respectively) and $42.5 million (which consisted of $16.0 million and $26.5 million related to United States and foreign income taxes, respectively) for the three and nine months ended June 28, 2024, respectively.
The decrease in income tax expense for the three and nine months ended June 28, 2024, as compared with the corresponding periods in fiscal 2023, was primarily due to lower income from operations and a lower tax on GILTI, partially offset by an increase in the shortfall in tax deductions for share-based compensation.
LIQUIDITY AND CAPITAL RESOURCES
Nine Months Ended
(in millions) June 28, 2024 June 30, 2023
Cash and cash equivalents at beginning of period $ 718.8 $ 566.0
Net cash provided by operating activities 1,348.6 1,490.9
Net cash used in investing activities (84.5) (146.2)
Net cash used in financing activities (719.5) (1,189.1)
Cash and cash equivalents at end of period $ 1,263.4 $ 721.6
Cash provided by operating activities:
Cash provided by operating activities consists of net income for the period adjusted for certain non-cash items and changes in certain operating assets and liabilities. The $142.3 million decrease in cash provided by operating activities during the nine months ended June 28, 2024, as compared with the corresponding period in fiscal 2023, was primarily related to lower net income, partially offset by favorable changes in working capital of $109.3 million, due primarily to a decrease in inventory.
Cash used in investing activities:
Cash used in investing activities consists primarily of capital expenditures, cash paid to acquire intangible assets, and cash paid to purchase marketable securities, offset by cash received related to the sale or maturity of marketable securities. The $61.7 million decrease in cash used in investing activities during the nine months ended June 28, 2024, as compared with the corresponding period in fiscal 2023, was primarily related to a decrease of $256.4 million in purchases of marketable securities and a decrease of $66.0 million in cash used for capital expenditures, partially offset by a decrease of $263.7 million in sales of marketable securities.
Cash used in financing activities:
Cash used in financing activities consists primarily of proceeds and payments related to our long-term borrowings and cash transactions related to equity. The $469.6 million decrease in cash used in financing activities during the nine months ended June 28, 2024, as compared with the corresponding period in fiscal 2023, was primarily related to a decrease of $400.0 million for the
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repayment of debt, a decrease of $98.0 million in stock repurchase activity, partially offset by an increase of $30.4 million in dividend payments.
Liquidity:
Cash, cash equivalents, and marketable securities totaled $1,283.9 million as of June 28, 2024, representing an increase of $545.4 million from September 29, 2023.
We have outstanding $500.0 million of Notes Due 2026 and $500.0 million of Notes Due 2031 (the "Notes"). During the nine months ended June 28, 2024, we repaid $300.0 million of outstanding borrowings under the term loans (the "Term Loans") that the Company borrowed on July 26, 2021 under a $1.0 billion term loan facility (the "Term Loan Facility"). As of June 28, 2024, there were no borrowings outstanding under the Term Loan Facility. We have a Revolving Credit Agreement (the "Revolving Credit Agreement") under which we may borrow up to $750.0 million for general corporate purposes and working capital needs of the Company and its subsidiaries. As of June 28, 2024, there were no borrowings outstanding under the revolving credit facility (the "Revolver"). The Revolving Credit Agreement expires July 26, 2026.
Based on our historical results of operations, we expect that our cash, cash equivalents, and marketable securities on hand, the cash we expect to generate from operations, and funds from our Revolver, will be sufficient to fund our short-term and long-term liquidity requirements primarily arising from: research and development, capital expenditures, potential acquisitions, working capital, quarterly cash dividend payments (if such dividends are declared by the Board of Directors), outstanding commitments, and other liquidity requirements associated with existing operations. However, we cannot be certain that our cash on hand, cash generated from operations, and funds from our Revolver will be available in the future to fund all of our capital and operating requirements. In addition, any future strategic investments and significant acquisitions may require additional cash and capital resources. If we are unable to obtain sufficient cash or capital to meet our needs on a timely basis and on favorable terms, our business and operations could be materially and adversely affected.
Our invested cash balances primarily consist of highly liquid marketable securities that are available to meet near-term cash requirements including: money market funds, U.S. Treasury and government securities, corporate bonds and notes, and municipal bonds.
Our contractual obligations disclosure in the 2023 10-K has not materially changed since we filed that report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are subject to overall financial market risks, such as changes in market liquidity, credit quality, investment risk, interest rate risk, and foreign exchange rate risk as described below.
Investment and Interest Rate Risk
Our exposure to interest rate and general market risks relates to our investment portfolio. Our investment portfolio consists of cash and cash equivalents (money market funds, municipal bonds, and U.S. Treasury and government securities purchased with less than ninety days until maturity) that total approximately $1,263.4 million, and marketable securities (U.S. Treasury and government securities, corporate bonds and notes, and municipal bonds) that total approximately $5.6 million and $14.9 million within short-term and long-term marketable securities, respectively, as of June 28, 2024.
The main objectives of our investment activities are liquidity and preservation of capital. Our cash equivalent investments have short-term maturity periods that dampen the impact of market or interest rate risk. Our marketable securities have short-term maturity periods less than one year. Credit risk associated with our investments is not material because our investments are diversified across several types of securities with high credit ratings, which reduces the amount of credit exposure to any one investment.
Based on our results of operations for the three and nine months ended June 28, 2024, a hypothetical reduction in the interest rates on our cash, cash equivalents, and other investments to zero would result in an immaterial reduction of interest income with a de minimis impact on income before taxes.
We do not believe that investment or interest rate risks currently pose material exposures to our business or results of operations.
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Foreign Exchange Rate Risk
Substantially all sales to customers and arrangements with third-party manufacturers provide for pricing and payment in United States dollars, thereby reducing the impact of foreign exchange rate fluctuations on our results. A percentage of our international operational expenses are denominated in foreign currencies, and exchange rate volatility could positively or negatively impact those operating costs. Increases in the value of the United States dollar relative to other currencies could make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the United States dollar relative to other currencies could result in our suppliers raising their prices to continue doing business with us. Given the relatively small number of customers and arrangements with third-party manufacturers denominated in foreign currencies, we do not believe that foreign exchange volatility has a material impact on our current business or results of operations. However, fluctuations in currency exchange rates could have a greater effect on our business or results of operations in the future to the extent our expenses increasingly become denominated in foreign currencies.
We may enter into foreign currency forward and options contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows, and net investments in foreign subsidiaries. However, we may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, accounting considerations and the prohibitive economic cost of hedging particular exposures. For the three and nine months ended June 28, 2024 and June 30, 2023, we had not entered into any outstanding foreign currency forward or options contracts with financial institutions.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 28, 2024. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on management's evaluation of our disclosure controls and procedures as of June 28, 2024, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
During the third quarter of fiscal 2024, we completed the implementation of our new enterprise resource planning ("ERP") system and have modified certain existing internal control processes and procedures related to the new system. These changes did not materially affect our internal control over financial reporting. As we implement new functionality under this ERP system, we will continue to assess the impact on our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Refer to Note 9 of the Notes to Consolidated Financial Statements for a detailed discussion.
ITEM 1A. RISK FACTORS.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A Risk Factors in the 2023 10-K, which could materially affect our business, financial condition, or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The following table provides information regarding repurchases of common stock made during the three months ended June 28, 2024:
Period Total Number of Shares Purchased Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (2)
03/30/24 - 04/26/24 755 (3) $105.48 - $2.0 billion
04/27/24 - 05/24/24 9,425 (3) $94.39 - $2.0 billion
05/25/24 - 06/28/24 763,767 $101.33 763,767 $1.9 billion
Total 773,947 763,767
(1) The stock repurchase program approved by the Board of Directors on January 31, 2023 authorized the repurchase of up to $2.0 billion of our common stock from time to time on the open market or in privately negotiated transactions, in compliance with applicable securities laws and other legal requirements, and expires on February 1, 2025.
(2) The Company's net share repurchases are subject to a 1% excise tax under the Inflation Reduction Act. Excise tax incurred reduces the amount available under the repurchase program, as applicable, and is included in the cost of shares repurchased in the Consolidated Statement of Stockholders' Equity and the calculation of the average price paid per share.
(3) Represents shares repurchased by us at the fair market value of the common stock as of the applicable purchase date, in connection with the satisfaction of tax withholding obligations under equity award agreements.
ITEM 5. OTHER INFORMATION.
Director and Officer Trading Arrangements
A significant portion of the compensation of our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) is in the form of equity awards and, from time to time, directors and officers engage in open-market transactions with respect to the securities acquired pursuant to such equity awards or our other securities, including to satisfy tax withholding obligations when equity awards vest or are exercised, and for diversification or other personal reasons.
Transactions in our securities by directors and officers are required to be made in accordance with our insider trading policy, which requires that the transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables directors and officers to prearrange transactions in our securities in a manner that avoids concerns about initiating transactions while in possession of material nonpublic information.
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The following table describes contracts, instructions or written plans for the sale or purchase of our securities adopted by our directors and officers during the quarter covered by this report that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a "Rule 10b5-1 trading arrangement"):
Name and Title Date of Adoption Duration of Rule 10b5-1 Trading Arrangement Aggregate Number of Securities to Be Purchased or Sold
Robert Terry, Senior Vice President and General Counsel
May 7, 2024
Until May 1, 2025, or such earlier date upon which all transactions are completed or expire without execution
Sale of up to 14,457 shares
Reza Kasnavi, Senior Vice President, Technology and Manufacturing
May 15, 2024
Until May 1, 2025, or such earlier date upon which all transactions are completed or expire without execution
Sale of up to 16,843 shares
Carlos Bori, Senior Vice President, Sales and Marketing
June 10, 2024
Until February 14, 2025, or such earlier date upon which all transactions are completed or expire without execution
Sale of up to 19,498 shares
None of our directors or officers terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.
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ITEM 6. EXHIBITS.
Exhibit
Number
Exhibit Description Form Incorporated by Reference Filed Herewith
File No. Exhibit Filing Date
10.1*
Skyworks Solutions, Inc. Second Amended and Restated 2015 Long-Term Incentive Plan
X
10.2*
Skyworks Solutions, Inc. 2002 Employee Stock Purchase Plan, as Amended
X
10.3*
Skyworks Solutions, Inc. Non-Qualified Employee Stock Purchase Plan, as Amended
X
31.1
Certification of the Company's Chief Executive Officer pursuant to Securities Exchange Act of 1934, as amended, Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification of the Company's Chief Financial Officer pursuant to Securities Exchange Act of 1934, as amended, Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32.1
Certification of the Company's Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2
Certification of the Company's Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)
* Indicates a management contract or compensatory plan or arrangement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SKYWORKS SOLUTIONS, INC.
Date: July 30, 2024 By: /s/ Liam K. Griffin
Liam K. Griffin
Chairman, Chief Executive Officer and President
(Principal Executive Officer)
By: /s/ Kris Sennesael
Kris Sennesael
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
By: /s/ Philip Carter
Philip Carter
Vice President and Corporate Controller
(Principal Accounting Officer)
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