RF Micro Devices Announces Financial Results for First Quarter

RF Micro Devices Announces Financial Results for First Quarter of Fiscal 2006

  Company Continues to See Strong Customer Demand into the September Quarter

    Financial Highlights:

     - Consistent with Updated Guidance Provided on July 7, 2005, Revenue
       Totals $159.4 Million

     - Gross Profit Margin Improves 430 Basis Points Sequentially To 34.1%
       From 29.8% in March 2005 Quarter

     - Per Share Results of ($0.01) on a GAAP Basis and $0.01 on a Pro Forma
       Basis Exceed Original Guidance of ($0.03) - ($0.04) GAAP and ($0.02) -
       ($0.03) Pro Forma

     - Company Ships Approximately 3 Million POLARIS(TM) TOTAL RADIO(TM)
       Transceiver Chipsets

     - Company Currently Anticipates September 2005 Quarterly Revenue in the
       Low- to Mid-$170 Million Range and Anticipates Quarterly Earnings Per
       Share of $0.01 - $0.02 on a GAAP Basis and $0.02 - $0.03 on a Pro Forma
       Basis

GREENSBORO, N.C., July 26 /PRNewswire-FirstCall/ -- RF Micro Devices, Inc. (NASDAQ: RFMD), a leading provider of proprietary radio frequency integrated circuits (RFICs) for wireless communications applications, today reported financial results for its fiscal 2006 first quarter ended June 30, 2005.

Financial Results

Consistent with updated financial guidance provided on July 7, 2005, revenue for the June 2005 quarter was $159.4 million, which represented a year-over-year decrease of 3.9% versus revenue of $165.8 million in the June 2004 quarter and a sequential increase of 6.0% versus revenue of $150.4 million in the March 2005 quarter.

Gross profit for the quarter was $54.3 million, which represented a year-over-year decrease of 16.3% compared to $64.9 million in the prior-year period and a sequential increase of 21.2% versus $44.8 million in the March 2005 quarter. Gross profit margin improved sequentially 430 basis points during the June 2005 quarter to 34.1% from 29.8% in the March 2005 quarter.

Net loss in accordance with U.S. generally accepted accounting principles (GAAP) for the quarter ended June 30, 2005, was ($2.7) million, or ($0.01) per diluted share, compared to GAAP net income of $3.0 million, or $0.02 per diluted share, for the quarter ended June 30, 2004. This compares sequentially to a GAAP net loss of ($63.0) million, or ($0.34) per diluted share, for the prior quarter ended March 31, 2005.

In addition to reporting net income (loss) and net income (loss) per share in accordance with GAAP, RFMD separately reports these items on a non-GAAP basis, referred to as pro forma, in order to exclude the effect of certain non-recurring, non-cash and unusual items. For the purposes of this press release, all references to pro forma results reflect non-GAAP financial information. In the quarter ended June 30, 2005, pro forma results excluded approximately $1.4 million in non-cash expenses related to amortization of deferred stock-based compensation and amortization of transaction-related intangibles, a $0.9 million credit related to the discontinuation of the Company's internal WLAN chipset development efforts and a previously reported $5.0 million cash payment to a top-tier customer due to production delays related to the Company's POLARIS(TM) TOTAL RADIO Module.

After excluding these items, pro forma net income for the quarter ended June 30, 2005, was $2.8 million, or $0.01 per diluted share. This compares with pro forma net income of $13.7 million, or $0.06 per diluted share, for the quarter ended June 30, 2004, and pro forma net loss of ($16.6) million, or ($0.09) per diluted share, for the quarter ended March 31, 2005.

In the quarter ended June 30, 2004, pro forma results excluded $9.7 million in expenses, including an in-process R&D charge of approximately $6.2 million related to the acquisition of Silicon Wave, as well as approximately $3.5 million in non-cash expenses related to the amortization of deferred stock-based compensation and the amortization of transaction-related intangibles. In the quarter ended March 31, 2005, pro forma results excluded the effects of the discontinuation of the Company's WLAN chipset development efforts, deferred compensation and intangible amortization and an accounting correction related to lease expenses for prior periods, which amounted to approximately $42.4 million, $2.5 million and $1.5 million, respectively. A reconciliation of the Company's GAAP financial results to pro forma financial results is provided in the financial statement portion of this release.

RF Micro Devices believes pro forma reporting provides useful supplemental information to the investment community and facilitates a better understanding of its results of operations. RF Micro Devices has chosen to provide this supplemental information to investors to enable them to perform additional comparisons of operating results and as a means to analyze its financial performance without the impact of certain non-cash expenses or unusual items that may obscure trends in the Company's underlying performance. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Business Outlook And Financial Guidance

RFMD is enthusiastic about its wireless end-markets and continues to experience strength in customer demand. The Company currently anticipates revenue in the quarter ending September 30, 2005, will be in the low- to mid-$170 million range. On a per-share basis, GAAP net income is currently expected to be approximately $0.01 to $0.02 per share, and pro forma net income is currently expected to be approximately $0.02 to $0.03 per share, after giving effect to non-cash expenses related to the amortization of deferred stock-based compensation and the amortization of transaction-related intangibles.

Comments From Management

Bob Bruggeworth, president and CEO, said, "During the June quarter, we grew our business at the world's top five handset manufacturers, which are also our top five customers. In doing so, we increased our market share and expanded our dollar content per handset. We experienced greater than anticipated order activity for our power amplifiers, POLARIS TOTAL RADIO transceiver chipsets and Bluetooth(R) products. During the quarter, we shipped approximately three million POLARIS 2 chipsets, and we believe we took share in the EDGE market with every POLARIS 2 transceiver we shipped.

"In the September quarter, we currently expect sequential growth as we continue to expand our semiconductor content in our customers' next-generation devices. We are forecasting sequential growth in transceiver shipments, and we currently expect our POLARIS chipsets will represent greater than 10 percent of the Company's revenue in the current quarter. Later this year, we expect continued growth in transceiver shipments, driven by increased shipments to our lead customer as well as anticipated shipments to a new customer."

Bruggeworth continued, "Beyond transceivers, we continue to expand our dollar content in handsets, and we are currently supporting an aggressive ramp of highly integrated transmit modules to the world's two largest handset manufacturers. Given the trajectory of this ramp, we currently expect one of our transmit modules will be our highest volume product by quarterly revenue this year."

Dean Priddy, CFO and vice president of administration, said, "We are pleased to have delivered a 430-basis point improvement in gross profit margin, driven mainly by increased fab utilization and yield improvement across our highest volume products. We currently expect continued margin expansion this fiscal year through ongoing cost savings initiatives, including yield improvements, increased capacity utilization of fab and test facilities and the ramp of our module assembly operation in Beijing. Of note, we anticipate our module assembly operation will be accretive to corporate margins beginning this quarter and will continue to benefit margins for the remainder of the year."

RF Micro Devices will conduct a conference call at 5:00 p.m. (ET) today, July 26, 2005, to discuss fiscal 2006 first quarter results and comment on the Company's outlook. The conference call will be broadcast live over the Internet and can be accessed by any interested party at http://www.earnings.com or by going to http://www.rfmd.com and clicking on "Investor Info." The conference call will also be available by dialing (303) 262-2052. A replay of the conference call will be available by dialing (303) 590-3000 and entering pass code 11034439.

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