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Xilinx’s Fiscal 3Q16 Earnings Beat Analysts’ Estimates

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Xilinx beats analysts’ estimates

So far, we have discussed the Xilinx (XLNX) change-of-control provision announcement that took investors’ attention away from the fiscal 3Q16 earnings and drove up the company’s shares by 9%. Let us now look at the company’s performance in fiscal 3Q16.

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Revenue

During the quarter, the company’s revenue fell 5% YoY (year-over-year) to $566 million, beating the consensus estimate of $554.6 million. The sales were affected by a reduced demand from the Communications and Data Center sectors, as well as the Industrial, Aerospace, and Defense sectors. However, it witnessed strong revenue growth from new products, especially the 7-series and UltraScale. We will discuss this in detail in the next part of this series.

During the quarter, the company entered into a partnership to supply FPGAs (field-programmable gate array) for IBM (IBM) and Qualcomm’s (QCOM) data center solutions.

EPS

The company’s GAAP (generally accepted accounting principles) EPS (earnings per share) fell 21% YoY to $0.49, in line with the analysts’ estimate of $0.49. The $0.03 positive impact on EPS from the reinstatement of the R&D (research and development) tax credit was offset by a $0.05 negative impact due to an increase in foreign earnings that is subject to tax.

However, the R&D tax credit had a positive impact on Cree’s (CREE) December 2015 quarter EPS.

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Profitability

Xilinx GAAP gross margin fell from 69.7% in fiscal 3Q15 to 68.5% in fiscal 3Q16 as the cost of production ramp-up of new products was higher than anticipated. A small portion of these costs would be transferred to fiscal 4Q16. The company’s GAAP operating margin fell from 32% in fiscal 3Q15 to 28.3% in fiscal 3Q16 as its operating expenses rose 1.7% YoY.

Cash position

In fiscal 3Q16, Xilinx generated $290.3 million in cash from operating activities and spent $6.1 million in capital expenditures, $79.7 million in dividends, and $100 million in share buybacks. As of January 2, 2016, the company’s total cash reserves stood at $3.4 billion and long-term debt at ~$1.6 billion.

The company declared a dividend of $0.31 per share, which equates to an annual dividend of $1.24 and a dividend yield of 2.88%. The quarterly dividend is due to be paid on March 16, 2016.

The PowerShares QQQ ETF (QQQ) has ~7.8% exposure in the semiconductor stocks, including 0.25% in XLNX and 1.46% in QCOM.

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