Xilinx's (XLNX) Q2 Earnings and Revenues Beat Estimates

Xilinx Inc. XLNX delivered second-quarter fiscal 2021 adjusted earnings of 82 cents per share, beating the Zacks Consensus Estimate of 76 cents. However, the bottom line comes in 13% lower than the prior-year quarter’s 94 cents.

Revenues of $767 million came in higher than the Zacks Consensus Estimate of $755.3 million but declined 8% year over year. The impact of the Huawei ban and other trade-related uncertainties, along with the pandemic’s adverse impact on the business, hurt the top line.

The company witnessed improved chip demand across Data Center Group (DCG) and A&D, Industrial and TME (AIT) markets. However, demand from Wired and Wireless Group (WWG) and Automotive, Broadcast and Consumer (ABC) businesses remained weak through the quarter.

Quarter in Detail

Product wise, advanced product revenues declined 13% year over year, contributing 70% to total revenues. However, revenues from core products (30% of total revenues) increased 6% from the year-ago quarter.

The company’s Zynq product-based revenues declined 20% year on year but grew 28% sequentially. This quarter-on-quarter improvement was primarily driven by the ramp up in 5G Wireless and improvement in the automotive markets.

Xilinx, Inc. Price, Consensus and EPS Surprise

Xilinx, Inc. price-consensus-eps-surprise-chart | Xilinx, Inc. Quote

On the basis of end markets, AIT revenues (44% of total revenues) increased 11% on a year-over-year basis, mainly supported by the strong performance in the Aerospace and Defense end markets. The company noted that ISM matched performance expectations, while TME results were slightly below the projections due to an emulation of customer program, which initiated in fiscal the second quarter, is now expected to extend into the fiscal third quarter.

ABC (16% of total revenues) slipped 8% year over year. The automotive business suffered a steep decline in auto sales and witnessed factory shutdowns due to the pandemic.

WWG revenues (26% of total revenues) plunged 36% year over year chiefly due to CIV-related order acceleration.

DCG revenues (14% of total) jumped 30% from the year-ago period, primarily owing to contributions from compute acceleration, driven by a mix of cloud and high-performance compute customers. Notable contribution from a hyperscaler deployment of its FPGA-based SmartNIC was a tailwind.

Geographically, the company registered a year-over-year decrease of 4% in North America, 13% in the Asia Pacific, and 23% in Japan, respectively. Revenues from the Europe region grew 10% during the quarter.

Margins

Non-GAAP gross margin came in at 71.5%, up 570 basis points (bps) year over year. It also came within the company’s guided range of 69.5-72.5%.

Non-GAAP OpEx came in at $332 million, which was toward the higher-end of the company’s guided range of $322-$336 million. As a percentage of revenues, non-GAAP OpEx elevated to 43.3% from the year-ago quarter’s 38.5%.

The company posted non-GAAP operating income of $216.5 million, marginally down from the $217.1 million reported in the year-ago quarter. Operating margin expanded 210 bps to 28.2%, chiefly owing to higher gross margin, partially offset by inflated operating expenses as a percentage of revenues.

Balance Sheet and Cash Flow

Xilinx exited the fiscal second quarter with cash, cash equivalents and short-term investments of $3.1 billion compared with the prior quarter’s $3 billion.

The company’s total long-term debt (excluding current maturities) was $1.49 billion as of Jun 27, flat when compared with the previous quarter ended Jun 27. However, long-term debt was significantly higher from $747.1 million at the end of fiscal 2020. This upswing reflects senior notes issuance of $750 million in May 2020.

Xilinx generated $247.6 million of cash from operations during the reported quarter and $493.1 million in the first-half of fiscal 2021.

During the fiscal second quarter, the company paid out dividends worth $93.1 million but didn’t repurchases stocks. In the first half of fiscal 2021, it repurchased shares worth $53.7 million and paid out dividends worth $185.5 million.

Outlook

For the third quarter of fiscal 2021, the company expects revenues between $750 million and $800 million. Non-GAAP gross margin is estimated to be 68.5-71.5%. Non-GAAP operating expenses are projected at $333-$347 million for the fiscal second quarter.

Zacks Rank and Stocks to Consider

Xilinx currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader technology sector include Zoom Video Communications ZM, salesforce.com, inc. CRM and Sapiens International Corporation SPNS, all sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom, Salesforce and Sapiens is currently pegged at 25%, 15.7%, and 5%, respectively.

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