Communications chips maker Qorvo (NASDAQ: QRVO) announced better-than-expected results in the Q4 FY2022 quarter, with revenue up 8.7% year on year to $1.16 billion. However, guidance for the next quarter was less impressive, coming in at $1.02 billion at the midpoint, being 8.71% below analyst estimates. Qorvo made a GAAP profit of $212.2 million, down on its profit of $298.7 million, in the same quarter last year.
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Qorvo (QRVO) Q4 FY2022 Highlights:
- Revenue: $1.16 billion vs analyst estimates of $1.15 billion (1.38% beat)
- EPS (non-GAAP): $3.12 vs analyst estimates of $2.94 (6.22% beat)
- Revenue guidance for Q1 2023 is $1.02 billion at the midpoint, below analyst estimates of $1.12 billion
- Free cash flow of $295.4 million, up from $66.5 million in previous quarter
- Inventory Days Outstanding: 115, up from 114 previous quarter
- Gross Margin (GAAP): 48.9%, in line with same quarter last year
Bob Bruggeworth, president and chief executive officer of Qorvo, said, “Qorvo delivered a strong fiscal 2022 fourth quarter and full fiscal year. Revenue exceeded the midpoint of quarterly guidance, despite a dynamic and challenging macro environment. We continue to execute well, and our customers are excited about the technologies and products we are releasing. Qorvo is extremely well positioned with multiyear growth drivers, broadening market and customer exposure and a deep product and technical portfolio.”
Formed by the merger of TriQuint and RF Micro Devices, Qorvo (NASDAQ: QRVO) is a designer and manufacturer of RF chips used in almost all smartphones globally, along with a variety of chips used in networking equipment and infrastructure.
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Qorvo's revenue growth over the last three years has been mediocre, averaging 15.6% annually. But as you can see below, last year has been stronger for the company, growing from quarterly revenue of $1.07 billion to $1.16 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
While Qorvo beat analysts' revenue estimates, this was a very slow quarter with just 8.7% revenue growth. This marks 10 straight quarters of revenue growth, which means the current upcycle has had a good run, as a typical upcycle tends to be 8-10 quarters.
Qorvo's revenue growth is expected to go negative next quarter, with the company guiding to decline of 7.68% YoY next quarter, but analyst consensus sees growth of 7.2% over the next twelve months.
There are others doing even better than Qorvo. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.
Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.
This quarter, Qorvo’s inventory days came in at 115, 21 days above the five year average, suggesting that that inventory has grown to higher levels than what we used to see in the past.
Key Takeaways from Qorvo's Q4 Results
With a market capitalization of $13 billion, more than $972.5 million in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.
We were impressed by how strongly Qorvo outperformed analysts’ earnings expectations this quarter. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and the revenue growth was quite weak. Overall, this quarter's results could have been better. The company is down 3.25% on the results and currently trades at $115.45 per share.
Should you invest in Qorvo right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.
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The author has no position in any of the stocks mentioned.