SWKS has a target of returning 40% of FCF to shareholders in the form of dividends and share buybacks. On the conference call, this discussion starts at the 21 minute mark.
The dividend currently costs them $1.04 per share or $200M per year or $50M per quarter. The CFFO last quarter was $345M, 40% of which is about $140M. They noted that they did not buyback ANY shares during the December quarter, and we know that they cannot buy back shares during the 5 weeks prior to their earnings release. Hmmm. So they also didn’t buy back the since the beginning of 2016. So there’s $90M from he Dec quarter that they had slated for buybacks that weren’t used. They are also generating more FCF this quarter. Maybe they will generate $250-270M during the March quarter, 40% of which is $100-$108M; $50M will go to the dividend so another %50-60M will be available for buybacks during the current quarter.
So that’s $140+M available for buybacks (about 2M shares at current prices or about 1% of the shares outstanding) just in the current quarter (plus last quarter). With the shares down, they could start buying as early as next week…
So that’s $140+M available for buybacks (about 2M shares at current prices or about 1% of the shares outstanding) just in the current quarter (plus last quarter). With the shares down, they could start buying as early as next week…
or maybe they see an acquisition on the horizon. Not certain that would be my favorite use of the cash. That would depend on a lot of factors about a potential acquisition.
It seems as though they are wanting or planning to do an acquisition.
From the CFO on the call:
“As far as the cash, yes, we continue to generate very strong cash off of the earnings. We have that 40% target of free cash flow that we want to distribute to the shareholders through dividend [and] buybacks. We didn’t do any buybacks this quarter. We also balance it about what’s going on and potential M&A activity, what we’re looking at and those things. And bottom line is that 40% we’ll continue to do, so stay tuned.”
Chris, I had very similar thoughts. I liked the call a lot. The numbers were great, the execs were upbeat and knew their facts easily, the pace was really brisk- but I never heard them stumble. They know what they want and are determined to get it, profitably. The prospect of share buyback so at these prices makes me happy, I wonder if the aborted merger had something to do with timing?
In any case I am happy with the management, and the company.