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Skyworks Solutions (SWKS) David J. Aldrich on Q2 2016 Results - Earnings Call Transcript

Q2 2016 Earnings Call

April 28, 2016 5:00 pm ET


Stephen Ferranti - Vice President, Investor Relations

David J. Aldrich - Chairman & Chief Executive Officer

Donald W. Palette - Chief Financial Officer & Executive Vice President

Liam K. Griffin - President


Rick Schafer - Oppenheimer & Co., Inc. (Broker)

T. Michael Walkley - Canaccord Genuity, Inc.

Vivek Arya - Merrill Lynch, Pierce, Fenner & Smith, Inc.

Blayne Curtis - Barclays Capital, Inc.

Toshiya Hari - Goldman Sachs Japan Co., Ltd.

Craig A. Ellis - B. Riley & Co. LLC

Atif Malik - Citigroup Global Markets, Inc. (Broker)

Edward F. Snyder - Charter Equity Research, Inc.


Ladies and gentlemen, good afternoon, and welcome to Skyworks Solutions' Second Quarter Fiscal Year 2016 Earnings Call. This call is being recorded. At this time, I will turn the call over to Steve Ferranti, Vice President of Investor Relations for Skyworks. Mr. Ferranti, please go ahead.

Stephen Ferranti - Vice President, Investor Relations

Thank you, Kathy. Good afternoon everyone, and welcome to Skyworks' second fiscal quarter 2016 conference call. Joining me today are Dave Aldrich, Don Palette, and Liam Griffin. Dave will begin today's call with a business overview, followed by Don's financial review and outlook. We will then open the lines for your questions.

Please note that our comments today will include statements relating to future results that are forward looking as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially and adversely from those projected as a result of certain risks and uncertainties including, but not limited to, those noted in our earnings release and those detailed from time to time in our SEC filings.

I would also like to remind everyone that the resulting guidance we will discuss today are from our non-GAAP income statement, consistent with the format we have used in the past. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP.

With that, I'll turn the call over to Dave for his comments on the quarter.

David J. Aldrich - Chairman & Chief Executive Officer

Thanks, Steve, and welcome everyone. Well we delivered another solid financial performance for the second fiscal quarter of 2016, posting year over year growth in revenue, profitability and earnings, even as we navigated through a combination of inventory adjustments and forecast reductions at one of our major customers.

During the quarter we delivered revenue of $775 million. That's in line with our guidance. We posted gross margin of 50.8%. That's up 410 basis points year over year. We generated operating income of $285 million. That's up 10% year over year. We produced operating margin of 36.8%, and we provided $1.25 in earnings per share. That's up 9% versus the prior year. For the first half of fiscal 2016, we generated roughly $383 million in free cash flow, redistributing over 60% or $234 million to shareholders through our dividend plan and our share repurchase activity.

Q2 was a solid quarter, highlighting the strong execution of our team and the robustness of our financial model. Our gross margin initiatives and operating expense discipline enabled us to both expand margins and earnings in a seasonally down quarter. The market environment remains challenging entering the third fiscal quarter. The June quarter is normally a transitional period in our sector, bridging the March quarter seasonal trough with a stronger second half of the calendar year. This year, inventory drawdowns and slower sell-through trends at our top customer are providing a drag on overall demand levels, impacting our Q3 guidance despite our strong growth in broader markets and with other OEMs.