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Announcement:

Moody's: Qorvo's ratings are unchanged at Ba1 on announced offering of additional senior notes

28 May 2020

New York, May 28, 2020 -- Moody's Investors Service ("Moody's") says that Qorvo, Inc.'s ("Qorvo") ratings, including the Ba1 senior unsecured debt rating and Corporate Family Rating ("CFR"), remain unchanged following the announced offering of an additional $250 million of 4.375% Senior Notes due 2029 ("Senior Notes"). The outlook remains unchanged at stable.

Qorvo plans to use the net proceeds of the additional Senior Notes for general corporate purposes. Proforma for the $250 million issuance of Senior Notes, adjusted debt to EBITDA will increase to about 2x from 1.7x for the year ended March 28, 2020.

The Ba1 CFR reflects Qorvo's modest leverage, which Moody's expects to remain at or below the low 2x adjusted debt to EBITDA level during 2020 and below 1.5x over time. The company also benefits from its strong niche position in the smartphone radio frequency ("RF") filter market and a portfolio of infrastructure and defense products, which tend to have longer product life cycles. RF filter providers are enjoying strong secular growth from both increased smartphone sales over the long term and rapidly increasing RF content per phone. Still, the modest leverage and good liquidity are needed to balance the large revenue concentrations, as Qorvo's top two customers comprise over 40% of revenues, and the very short product life cycles characteristic of the smartphone industry.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The semiconductor sector has been one of the sectors affected by the shock given its sensitivity to consumer and enterprise demand and sentiment. More specifically, the weaknesses in Qorvo's credit profile, including its exposure to a global supply chain, have left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Qorvo remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.

Qorvo's credit profile is supported by governance considerations, specifically Qorvo's conservative financial policy, with adjusted debt of about 2x debt to EBITDA (year ended March 28, 2020, proforma for this Notes offering). The company's good liquidity, including cash of $715 million as of March 28, 2020 and strong free cash flow generation, should provide a reasonable degree of financial flexibility to fund share buybacks and tuck in acquisitions. Qorvo is a public company with a broad investor base and an independent board of directors.

The stable outlook reflects Moody's expectation that, following a near term decline in end market demand due to the impact of the coronavirus outbreak on the smartphone industry, revenues will resume growth over the next 12 to 18 months, with EBITDA margin (Moody's adjusted) gradually recovering. Moody's expects that the adjusted debt to EBITDA will increase during 2020 but will return to below 2x once the pandemic abates. Moody's also expects that Qorvo will refrain from shareholder friendly actions over the near term.

Qorvo's SGL-2 rating indicates good liquidity supported by cash, which Moody's expects to be maintained in excess of $500 million, and FCF, which Moody's projects to be over $450 million over the next year. These internal sources of liquidity are supplemented by an undrawn $300 million unsecured revolving credit facility maturing in December 2022.

Qorvo, Inc. ("Qorvo"), based in Greensboro, North Carolina, produces radio frequency ("RF") filters and modules used in smartphones and other RF products for a variety of end markets including cellular telephony base stations, military and commercial radar, and WiFi networks.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Terrence Dennehy, CFA
VP-Sr Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Stephen Sohn
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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