Q1 2021 Qorvo Inc Earnings Call
Good day, everyone welcome to the core of all incorporated Q1 2021 conference call today's call is being recorded.
Let's turn the conference over to Mr. Douglas Delieto, Vice President Investor Relations. Please go ahead Sir.
Thanks, very much Hello, everybody and welcome to corporate Cisco 2021 first quarter earnings Conference call. This call will include forward looking statements and involve risks factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the safe Harbor statement contained in the earnings release published today as well.
Factors associated with our business and our annual report on form 10-K filed with the S. You see because these risk factors may affect our operations and financial results.
In today's release and on todays call, we provide both GAAP and non-GAAP financial results, we provide the supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain non cash expenses or other items, then they obscure trends in our underlying performance.
During our call our comments and comparisons to income statement, obviously based primarily on non-GAAP results.
A reconciliation of GAAP to non-GAAP financial measures. Please refer to our earnings release issued earlier today available on our website corbo dotcom under investors.
Joining us today from multiple locations, our Bob Rucker, with President and CEO, Mark Murphy, Chief Financial Officer, James Corden, President, a corporate infrastructure and defense products group.
Eric harvest in the President of corporate was mobile products group as well as other members of corporate was management team and with that I'll hand, it over to Bob.
Thanks, Doug and welcome everyone.
Well, we'll begin our fiscal year, what's an exceptional first quarter quarterly revenue gross margin and he P.S., where each well above guidance.
I'd be returned a robust year over year gross and represented a record percentage of total core though revenue.
Infrastructure was especially strong.
We increased our support for Fiveg, specifically sub six gigahertz foggy massive mimo deployments.
We achieved record Gan product revenue also contributing we're multiyear defense programs and the continued ramp aboard five six.
Smartphone market demand was more resilient than anticipated in fourg smartphones represented increasing percentage of total units.
Looking more closely far Gee, we were in the early stages of a multi year upgrade cycle supporting growth across both businesses.
In mobile products, we're benefiting from the need for more and better RF fueled by higher front any integration and increased complexity. This includes the move to higher frequency.
The addition of new ban combinations and the adoption of dual transmit architectures to support far G.
10 expansion and increased complexity supporting fiveg architectures favor, our design expertise and technology at scale.
We were securing broad based design wins for our most highly integrated low mid high and ultra high Dan solutions in some cases supplying customers the entire main path.
We are seeing increased demand for a ball based multiplexing solutions across a range of baseband across a range of ban combinations.
Smartphone units are forecast to be down over 10% year over year RF content expansion in fiveg devices of approximately five to $7 as mitigating the impact on fewer units for the year. We continue to expect approximately 250 million fiveg smartphones globally.
And infrastructure or opportunities in small single devices like holidays are growing in line with the increase and massive mimo antennas elements well revenue related to GMP age is added content.
Well again leadership and infrastructure is built on decades of advanced technology development commercial experience in other markets and proven ability to scale.
We expect slide you base station deployments to outpace the initial deployments of Fourg with over three quarters of a million deployments. This calendar year rolling to more than a million and 2021.
In the U.S. and Youre, we see deployments picking up next year, adding to this multiyear investment cycle by the carriers. This will drive strengthen RTP, given our technologies design capabilities and operational excellence.
In the June quarter infrastructure revenue was a record and we secured record design wins in support of ongoing Fourg base station deployments.
We also began sampling gan amplifiers for upcoming C band spectrum allocations and United States.
It's been over here now since we added our programmable power management business and the team is doing a great job driving growth across diversified markets.
During the June quarter, we ramped a programmable power management solution, along with a wide five six front end module for the leading drone manufacturers, enabling longer flight times greater range and larger pilot.
We also ramped shipments programming power management and motor control solutions, improving the efficiency of solid state drives and places like data centers and enabling Restless motors used in a range of consumer products.
In the future, we see opportunities for our power management technologies and defense and other markets.
We delivered a strong quarter in game for the defense market led by radar programs and we signed several long term agreements with the defense primes firming up our expectations for double digit growth in defense this fiscal year.
We were also awarded design wins for integrated Kim multi chip broadband transmit receive module.
They 50, Wad Gan power amplifier for defense radar programs.
These wins are notable as core those supply more integrated solutions into the defense market.
And connectivity, we experienced continued strong demand for once by six products, including front end modules and BAW filters driven by work from home trends.
We commence shipments of our integrated ultra low power multi protocol zigbee, Billy and thread Aiotv solution supporting one of the largest providers of smart home infrastructure solutions.
We requested an emergency use authorization from the SDK for covered 19 antibody testing using corvo biotechnologies platform.
This innovative device features unique sensor technology and is designed to address the needs of medical clinicians for rapid and accurate results.
On the same technology platform. We also received initial production orders for our biosensor platform for high sensitivity veterinary point of care applications.
Turning to mobile products, we supported multiple production ramps and benefited broadly from integration trends at multiple customers.
Revenue was diversified across categories, including modules integrating P. Eight switches bomb saw filters as well as antenna flexshares antenna tuners and specialized RF power management.
We were selected by leading clear based smartphone manufacturer to supply a highly integrated hi, Dan solution for this year's flagship smartphone.
We're also supplying an innovative and kind of flex their solution that addresses antenna network complexity and optimize system efficiency for upcoming Foldable smartphone.
Cross our customers we are engaged on the most critical fiveg challenges and enabling them to introduce innovative new designs enhance performance and bring products to market faster.
At multiple Android smartphone manufacturers, we captured the complete main path, including low band mid hard Dan and ultra hybean modules for upcoming projects smartphone launches.
Supported customers across all major chipset providers, and notably began production shipments in support of leading customers using mediateks RG basebands.
And also wideband, we commenced card volume shipments of our you WB solutions, enabling superior accuracy, and reliability and contact tracing and social distancing applications for numerous customers globally.
As an example, we're working with can Exxon, whose safezone tag is being used by the MBJ any NFL in their training camps.
Carlos you WB technology delivers a short burst of energy spread over a large them with the precisely measure the distance between ultra wide been enabled devices.
We are interacting very closely with the mobile community and we are actively engaged across other applications, including automotive and identity.
In power management, we increased shipments of mobile power management solutions, driven by the adoption of Fourg to Fiveg dual transmit any associated complexity. It introduces.
Across our markets, where those advancing a range of best in class technologies supporting our customers with a broad set of high performance and highly integrated solutions.
Our R&D investments in product and technology Roadmaps are align closely with our customers and with long term market drivers.
The same can be said for our recent acquisitions.
At June quarter marked our first full quarter for custom mimic and decker wave in just over a year since acquiring active semi.
The integration activities are progressing nicely and the teams are performing extremely well.
Before handing the car over to Mark I'll briefly address some of the active measures. We continue to take in light of Coven 19.
Well those operating under enhance safety protocols to keep our employees and operations safe, while supporting our customers.
Additions in addition to social distancing practices.
Temperature scanning and restrictions on travel and site visits we conduct rigorous screening and quarantine processes for suspected or confirmed cases.
Thanks to these and other efforts we've experienced no material disruptions in our business or operations.
Our design teams are releasing best in class products.
Our sales and application engineers are designing our solutions in our customers next generation products and our factories are operating well.
I'm extremely proud of the corbo team and thank them for their ongoing efforts.
In summary, we're pleased with our financial and operating performance in the June quarter, and we're confident in our outlook for September.
With that I'll hand, the call over to Mark.
Thanks, Bob and good afternoon, everyone.
Corvel is revenue for the June our first quarter fiscal 2001 was $787 million $57 million about the midpoint of our guidance on stronger than expected demand in both our mobile products and infrastructure and defense product segments.
Mobile products revenue of $468 million exceeded our expectation as handset demand remain more resilience and global supply chain disruptions less impactful than we anticipated at the time of our guide.
In the September quarter, we expect mobile to increase sequentially, driven by new handset launches and increased content due to due primarily to the adoption of fiveg.
Infrastructure and defense products revenue increased to 319 million.
Over 40% of the company's revenue.
As the ongoing bailed out of Fiveg networks drove demand.
And we successfully ramped new Gan products.
During the quarter I'd P. returned a robust year over year growth and we expect itps sustain healthy double digit year over year growth through the year with strength in Fiveg why Fi and defense.
Non-GAAP gross margin in the June quarter is 48.6%, which was a 110 basis points over our guidance due to lower than expected manufacturing costs and favorable mix effects.
Our efforts to improve that portfolio and drive productivity are yielding favorable results and we expect this progress to continue as we are forecasting approximately 50% gross margin in the September quarter.
Non-GAAP operating expenses in the June quarter were $179 million and lower than expected due in part to spend discipline on discretionary activities.
Non-GAAP net income in the June quarter was $175 million and diluted earnings per share of $1.50 was 37 cents above the midpoint of our may guidance.
Cash from operations in the June quarter was $214 million and Capex is $30 million shielding free cash flow of $184 million.
We repurchased $75 million a shares during the quarter.
We continue to invest ahead of customer and market needs, while sustaining responsible capital return.
During the June quarter, we raised over $300 million through an add on to our 2029 unsecured notes.
Mounting liquidity and further extending the weighted average maturity of our outstanding debt to October of 2027.
Our leverage remains low and we have no near term maturities.
We ended the quarter with 1.1 billion of cash.
At an untapped 300 million dollar unsecured revolver.
With this financial flexibility, we can focus on advancing technology supporting customers and making prudent organic and inorganic investments that support long term earnings and free cash flow growth.
As Bob mentioned, our recent acquisitions have been integrated quickly and are performing well.
On ultra wide band, we see a wide array of applications emerging with this wireless technology and have significant customer engagement on the design of new products and solutions.
We expect this business and our mens technology acquisition to contribute meaningfully to corvel over time.
Our other recent acquisitions are already accretive.
Custom mimic bolt onto our IBP segment exceeded plan its first full quarter and further strengthens our defense and aerospace franchise.
Programmable power management, serving customers advanced power management needs.
As delivering in line with our expectations as and is on track to grow revenues strong double digits this quarter versus the same period last year.
Turning to our current quarter outlook.
We expect revenue between $925 million and $955 million.
Non-GAAP gross margin of approximately 50%.
Non-GAAP diluted earnings per share of $1.90 at the midpoint of our guidance.
As mentioned in the guidance section of our press release, our fiscal year 2021 is at 53 week fiscal year and our September quarter, as a 14 week quarter versus a typical 13 week quarter.
Our last 14 week quarter occurred in September 2015, our fiscal 16, which was the last 50 53 week fiscal year reported.
Our current quarter revenue outlook reflects the additional week.
Strong sequential growth in mobile and over 50% year over year growth and IBP.
And mobile demand for Fiveg, as adding more complex parts and driving higher content.
And we forecast revenue and the current quarter to be approximately $640 million.
And I repeat we project the business to be approximately $300 million in the current quarter, reflecting the timing of base station deployments.
We do forecast IP to sustain strong year over year growth through the year as infrastructure demand remains robust and defense Wi Fi and power management strengthen.
While there is considerable economic uncertainty associated with the ongoing effort FX of the pandemic.
Currently we expect end market demand to support full fiscal year revenue growth for korba.
Our September quarter gross margin guide of approximately 50% reflects volume growth and ongoing efforts to improve the quality and efficiency of our business.
Specifically, we've invested early and adequately and the technologies that markets need.
Okay, our product portfolio on where we can best serve customers.
Gained productivity across our operations.
And reduced our capital intensity.
Recognizing that a potential impact to our demand and supply chain remains given the uncertainty due to the pandemic.
We believe our work to minimize inventories and reduce our cost structure will help us sustain approximately 50% gross margin through the balance of the year.
Non-GAAP operating expenses are projected to increase in the September quarter to approximately $207 million due to the additional weak in the quarter higher personnel costs, including raises.
Increased product development activities and the resumption of some discretionary spend.
Excluding the additional week opex to be closer to $196 million for the quarter and we expect our opex to remain below that level further balance of the year.
Other expense will increase to over 20 million driven by the full quarter effect of the net interest charge from debt added in June.
We expect our current quarter and full year non-GAAP tax rate to be approximately 8%.
We project capital expenditures to remain below $200 million in fiscal 21, and focused on Bob can and other areas, which advanced a differentiated position for corvel to best serve customer needs.
As of June quarter results at our September quarter outlook show.
Carbo continues to operate well through a challenging period, while serving customers in fiveg infrastructure and smartphones fly Fi Aiotv defense and other growth markets.
In closing I'd like to join Bob and thanking Corvel employees for their efforts during this time.
Now I'll turn the call back over to the operator for questions.
Thank you at this time, if you do have a question. Please signals by pressing star one we do ask that you. Please limit yourself to one question with one follow up again that will be star one for questions. We'll hear first today from Gary Mobley with Wells Fargo.
Hey, everyone. Thanks for taking my question.
Wanted to ask about how that extra week in the September quarter may impact here.
Seasonal expectations for the December quarters mass works out correctly that might be roughly 60 million dollar impediment to.
What would normally be a seasonally up December quarter. So maybe as you can help help us think about that December quarter.
Gary It's mark.
You're right that the fact is about as about.
It's over 65 million.
Adjusted that that quarter September quarter would be around 873 million or so.
And.
Yes, so so even even without the additional week, it's still a very strong quarter for us.
We are up over 10% sequential for that adjusted number and were on now going to be just under 10% year.
Year over year.
Okay.
As my follow up I wanted to ask about through the emergence of the the mid tier in Fiveg in particular in China, India and so maybe if you can just walk us through under a scenario, where the sub $600 portion of the smartphone market becomes a leading driver the second half of the year for Fiveg mobile handset sales in particular in China, how this.
Plays out for Corbo.
Sure. This is Eric I'll be happy to take that.
We said previously and it's still true today that we were seeing is five to $7 for it the content adder.
For friendly Fiveg opponent, that's holding even as you go into into the mid tier.
We're coming off a smaller base of content, obviously, but the fiveg honor its still roughly the same so as a percentage, it's actually quite a bit more of an increase in and.
You might expect that there could be less integrated more discrete implementations to save costs. The fact is that most of the band combinations and requirements are the same.
And so the fully integrated solution just offers an awful lot of value from the time to market given all the complexity and so on so we're seeing just a lot of design activity across the tiers. We brought out our fusion 20. This year absolutely industry, leading best in class performance highly integrated full band coverage low band mid.
Hi.
Ultra high advance.
Integrated shielding. So the parts are already showed you put them down you don't have any sort of issues with interference integrated yellen A's now as well. So when you look at that capability. Just a few places have a complete fiveg from RF section.
Regardless of the tier, it's a very very compelling offering.
I appreciate it thanks guys.
Okay.
Well hear next from Bill Peterson with JP Morgan.
Yes, hi, congratulations on the results in the strong guide.
My first question is a follow up to the question on on China.
Thank you have a lot of wins that are now across multiple devices for the full main path, but I guess you go in the past you've had really good content and phones and sometimes the falls on so as well so trying to fuel for the breadth of your design wins.
Maybe in which case as you might just have a mid high in some cases or other.
Parts try to get a fuel for the breadth of your design wins here for the phones launching in the back half the year in China.
Yeah sure no. This is Eric again.
It's actually quite quite broad with our fusion 20 portfolio. We're talking about this year. We're engaged with every single time GP spend our parts our universal so they can be used with all the fiveg basebands on the market today.
We're engaged with every Android customers with this portfolio.
In some cases, we are doing on maybe just the ultra high band section or the high band or low band, but in many cases, we are looking at the full solution. The very same parts are seeing design traction broadly across all fiveg Android customers.
Okay. Thanks for that color. My second question is for James.
James huge upside I was hoping you could just hoping you could help us understand where are the upside came in June and where do you see the upside here in September I presume infrastructure, but if you can rank. The you said defense is strong and in some areas helpless right, where the upside was coming from an expected to come from here in the September.
Okay.
Yes, Thanks, Bill in the first quarter, we continue to have significant ramps in both fiveg and and why Fysixteen.
We supported the most of these markets, where the really broad set of products, including Gan power amplifiers and drivers modules integrating front end modules ball filters and numerous discrete products and we supported a broad set of customers in both of those markets.
Gan power employers are Great example of one of the ramps we brought a broad set of products to the market to support fiveg different frequencies different power levels and supporting different customers.
And our ROE Gan revenue for the quarter doubled.
From what it was at the same time last year.
Why six products were also doing very well.
Both the retail and set top box markets.
And we believe a large part of that is due from work from home. So we've seen strength, particularly.
Hi, and retail space of defense stayed to good foundation for the business and as we move into Q2.
We'll see a similar type story will continue the the ramp in Wi Fi six.
Defense will also pick up quite a bit.
I am again based on some of those long term supply agreements that we that Bob talked about in his earlier comments.
The base station business itself will also be very strong in Q2.
We will start to see that come down a bit in Q3, as we finish calendar year 20 deployments and then we expect that to ramp back up as we move into our physical Q4 to support the calendar year 21 deployments.
We'll go next to harsh Kumar with Piper to Sandler.
Yeah, Hey, guys. Another one for James James very popular today.
How how come all of sudden this massive explosion of growth did did you just have liked a series of design wins that kicked in all Simon.
Could you just have a series of design wins that kicked in all simultaneously or was it you know one or two customers that that predominantly drove the upside.
Yes, it will things first for the popularity I appreciate it we as.
I've been saying for.
The better part of a year as I expected us to return to growth in about a year and I couldn't be more proud of the broad team here of designers and sales teams and and the manufacturing folks it really allowed us to recover the business.
From what was obviously a significant downturn for us about a year ago.
So we've been projecting this I think it's fairly broad based.
Massive mimo or Fiveg rollouts have been a really positive for us I talked about in the past that we see content gains about 10, x. on a mimo base station compared to conventional macro now that uplift is because of.
Element count and because also we now can supply the Gan power amplifiers. We're in the past those would have been ldmos. So we picked up a tremendous amount of content in fiveg and Thats really helped drive the growth.
But we're setting records in our Wi Fi space as well.
With with Wi Fi six coming on board over the last couple of quarters. This was our third consecutive quarter of double digit.
Quarter over quarter growth in that part of the market.
You know defense was a good foundation and we don't talk about it relatively small business, but our power management business is doing very very well.
Exceeding our expectations and growing and strong double digits on on top of everything else. So I think.
We've just got a great portfolios and great technologies, and the markets have aligned fairly well for us.
Okay, and then for my follow up a question for Mark or Bob margins of 50%.
Truly truly fantastic to see that and Youre actually calling I think if I heard it correctly that neighborhood for the rest of the yeah correct me if I'm wrong there.
But.
What.
Again, the uptake of roughly 140 basis points, how much of that is mix and how much of that is simply straight up utilization.
Yes.
So so hard share your.
Yeah, I think first of all were really plays to.
Hit a milestone, which you know as Ben has and dying asked for some time.
Yes, I think if you go back couple of years, we had had a lackluster mobile handset volume period, and then we add wild way.
And then we had the pandemic and said ever just as a series of headwinds that kept us from from that milestone.
[music].
It took us a bit longer than we thought that we were confident we're going to get there.
Yeah, we feel that we're doing the right. Thanks.
And we're going to continue doing these things investing in the technology.
Yes, managing our portfolio, the right way to where where most valued by customers.
Driving productivity very hard and I've got at.
Certainly complement Paul say go and his team for just a tremendous job.
Yes, doing all the things around cycle time improvement and and.
As a way for expansions and we shutdown of facility and seamlessly and die shrinks I can go on it on but.
We're seeing those results and the number so it's it's real and.
And we're making real progress.
Despite the headwinds we've had.
So and then finally, we have reduced capital intensity and you've seen that pretty dramatically for us for not constrained.
Growth, we've just been very selective about what we're doing and being smart about how we expand and get more out of the assets that we have.
On a on the lot from Q1 to Q2.
It is it's partly the we still have some period costs harsh.
I'll have farmers branch period costs stemming out some idle equipment.
So the higher revenue helps us and the sense. It does does period cost or a smaller percentage higher revenues. So.
That helps us a bit on the margin most of the rest of it as lower manufacturing costs. So my point earlier about Paul and his team.
Excellent spend control.
This higher volume business better absorption and the mix is such that we have good absorption and then finally, we had very good Kashi elds.
Yes.
As as we left from from this at this new forecast.
Yes, as we look out rest of the year.
Our our inventories are really good spot.
We are inventory only ticked up a little bit.
Sequentially.
Fourth to first quarter.
And we.
Where are our terms or started historical levels. So they don't look bad I'm never going to say, we're pleased with our inventories but.
But there.
Yes, there they've been managed and the channels very healthy so thats important so that gives us confidence that we're running that.
Running the the operation Lane.
Yes, we have a little bit of flexibility.
But theres a healthy tension in our business between.
Trying to keep costs down and trying to keep inventory's low trying to keep the fads level loaded I mean, there's a healthy dynamic that occurs here that we think we've been we've been playing okay.
So having said all that if the market holds up and.
And the mix.
As what we think it will be.
Then or favorable we we believe we have a high degree of confidence in 50.
Our center approximately 50% if.
If I if the market softened in the back half.
Or is somewhat worse than than anticipated on mix.
Than than we would we would be on the south side of 50, but but we feel good where in that neighborhood and and we intend to stay there and actually expand margins.
And from Morgan Stanley will move to Craig Hettenbach.
Yes, thanks on the wireless infrastructure front can you touch maybe on the just the competitive landscape.
Particularly your positioning within Gan is that helping as that market really starts to take off what you're seeing competitively.
Well I think this is James the dynamic is fairly similar to what we've talked about in the prior quarters.
Our focus right now is just making sure that we've got best in class technology, and and we continue to innovate and drive technology improved performance.
With our Deanne, and then really focused on scale and.
Driving up our mad manufacturing capabilities getting our yields up and I think we prove that in this in this quarter and again next quarter that we were able to to go through a pretty aggressive ramp on the on these as sub five gigahertz deployments sub 60 years deployments. So thats been our focus will continue to focus that way.
I think on the small signal side, we've got a great set of competitors, there as well and and we're doing the same thing we're just continuing to focus on innovation.
Bringing more highly integrated modules to play bringing ball filters as an example into our mix in the infrastructure side. So I I would say competitions been been fairly stable and we're just focused on.
On being able to bring innovative new products to the market and ramp up quickly.
Got it thanks, and then just a follow up on the smartphone side as it relates to Fiveg can you talk about just what you're seeing from the antenna tuning perspective, and how that plays into some of your expectations around content.
Sure.
Yes.
As you know a lot of.
Presence there all around the intent and structures and with Fiveg not only because of the higher bandwidth, but also new bands some coming in at even higher frequencies and.
The implications are running and dual transmitting on where you're running on multiple bands at the same time when you put all that together the antenna issues that our customers are struggling which has continued to get exponentially worse every year, especially with fiveg. So so we're seeing on just a tremendous amount of interaction we've got.
So we the best team in the World working on these solutions and it's it's not just the antenna tuning, but also just rounding around all these advanced intend structure. So an awful lot. Unlike multiplexing in and out what we're calling into flexshares.
Just a lot of of activity there and of course as you know this is part of the industrial design. So it's not sort of part of the modem proper. It's done after the fact is they're just getting the phones to market. So it's usually on a very tight time schedule and and.
Working with some very unique expertise that we've got a great great team and field and the great team and product design, bringing absolutely state of the aren't solutions to really a very serious problem and our customers.
Well move next to Edward Snyder with charter equity research.
Thanks, a lot couple of questions Eric gradually still the antenna flex or is this your first production launch of that and why should we expect margins on that part to be exceptional given it's probably just bond a package and is this driven by.
The fiveg.
Ends being at especially the dual transmit which kind of mix up everything in the antenna side of it and then.
James Dan doubling year over year, which is surprising can you help clarify remind us to do not have a license to ship directly to walk away is that correct and you do have.
He is a customer.
Again.
And then if I could.
Mark on the 50% gross margin you said is productive productivity efficiency in production.
But it would sound like given the modules you're shipping into module into into.
Hi in smartphones now that include just about everything and James is increase usable again and ball that mix start becoming a bigger issue in though in the move to a 250 plus percent gross margin or is it is going to rely on volume for while thanks.
Hey, Thanks for your question, Eric Why don't you take a part one James you can take part two and Mark you'll take part three.
Alright sounds good this is our again.
Yes, as you pointed out antenna flexing is relatively new for us it is a.
Category Thats its really.
Just said in the previous answer becoming really critical for our customers and we it comes down to relive the filter R&D and we've really hitting our stride now in terms of the team getting out the latest technologies and ban coverage. We've got very cost effective in very high performance BAW filters across every single band.
Even going up into higher frequencies and so then we developed the capability of multiplexing those into very high order multiplexers is driven by our army modules and then it's a short step from there into the antenna flexing business essentially leveraging all of that work to get get the multiplexing capabilities. It really comes down to the absolute state of the.
In BAW filter process technology, that's what's enabling this and as I said, we've got a lot of experience around the antenna sections of our customers phones. So we're very well placed to open.
Thanks James.
Hey, so Ed So we were surprised to see again double at all we have been the planning and ramping up for quite some time and again I Gotta go back to truly congratulating our team on the work that they've done but the direct answer to Wawa is no. We don't have a license in our deliveries to walk away or are.
Pretty much not material at this point in time and that's a IBP comment we are engaged with.
Virtually all over the rest of the tier ones in tier twos in the space I will talk about what we do with any particular ones, but we do see all of those.
Customers moving towards massive MISO Mimo solutions all of them are engaged in Ghana.
And so we are confident is we ever have beyond that the technology will continue to proliferate that we will see big content pickups in this space.
That that will not just be a China story, but that will continue as fiveg proliferates around the rest of the world. So this is a we think a long term trend for us over the next you know for five years as the as the networks get deployed everywhere in the world.
So at on gross margin.
I hate to single one out is more important than the others because it's really.
Really does take all this to to expand the margins in our view and and so we've we've spent a lot of time on productivity and ops and.
All the programs over the years and great efforts there, it's a critical part of.
Getting there.
We've also as you have gone through a lot around rightsizing our footprint.
And making sure that incremental Capex dollars are directed at the right place and we're getting good return for those.
But to your point specifically on mix.
That's why it to us its related about.
Investment you make in technology, and when you make them and how you make them and we we feel like we've put ourselves in a good position to compete where we want to compete.
And Thats, where customers will evaluate the most where we bring the most differentiated products and Thats that said the portfolio management. So we we do have it's difficult to quarter to quarter depends on.
The comparison quarter end and.
Yes, so as to how big an effect mix plays from quarter to quarter, but.
Over the.
Time here over the long term that we've been expanding our margins.
And we expect to continue to expand our margins mix is playing an important role.
Thank you.
Well hear next from Chris Caso with Raymond James.
Yes. Thank you I guess first question would be.
What we should be thinking about with regard to seasonality for the December quarter, and there's a few differences this year with the extra week that you have in the September quarter.
In addition, some of your peers have talked about.
Seasonality timing differences because of a flagship.
Different timing of flipped flagship ramp this year Qualcomm talked about on their call. This evening.
And is that a factor for you we should be thinking about with regard to the December quarter.
Yeah, Chris It's Mark I'll I'll take that and then maybe just provide a bit more color on the year. It's it's been AD.
It's been a tough year for everyone.
And that remains a lot of uncertainty so.
I'll provide some general comments.
Realizing that theres still lot of risk, we can't be too specific I would I would certainly point everybody as always to the risk factors.
And our K, which which include the pandemic and trade.
But you know on the second quarter.
Yes, we did put up a very strong guide and we've been very clear they included that extra week for.
Our 53 week fiscal year, because excluding that it's still a very strong guide and as we said Gary asked at the beginning.
We're over $870 million for the second quarter.
Yes.
As we as we look at December.
We expect December to be down.
On an absolute basis of course.
But on an adjusted basis, we would expect.
December to be roughly flat.
With the September quarter.
And.
And I'd say, it's a function of a few things.
You've got.
Hi, DP is going to be over $275 million through the through the back half each quarter, but its.
But it's it's timing of infrastructure projects and that in mobile we'll see.
Yes, this normal seasonal ramp into September.
And then you'll you'll have.
Have a normal March seasonal downtick as we have planned now.
And.
And it as of where where December where December falls in that is tough to call at this point, but but we think it's probably going to be roughly flat to the September quarter adjusted.
As I mentioned, we expect to grow full year.
I think as folks are thinking about that keep mind, we've got one this extra week.
I laid out the acquisition impact year over year on last quarter's call.
So you have that and then we've had this good start to.
So the to the.
First half of fiscal 21, and but I think given all the uncertainty in the end the outlook and that broader macro.
Yes, I think it's prudent to call below 5%.
Year over year.
Yeah, I talked about just kind of filling things out we've covered gross margin.
Yes called approximately 50% in the September quarter and then.
While approximately 50, 50%.
Through the through the back half and again thats going to be.
Yes, thats going to be above or below that based on the strength of the broader economy, our end markets and the mix of the business.
Thats very helpful.
If I could return to gross margin a bit and just the avoidance of doubt.
Talking about 50% gross margin through the end of the calendar year not not at the fiscal year I assume.
That's good question, Chris and I'm glad you asked it I was talking about fiscal year.
Fiscal year Okay.
Well then that leads to another question, which is.
The elements of strength, which which allow the gross margin to stay high in the March quarter, Despite seasonality and then.
Does that provide a runway for growth for continued gross margin improvement as you go into fiscal 2002.
Listen we're constantly working crested to expand gross margins and covered at Atlanta and a previous question.
Depends on how how well the market's hold off of course, and our ability to absorb costs of our factories and spend there.
We're doing a good job of keeping capex down so our footprint or very sensitive to that and then it matters our reinvesting in the right technologies. We think we are.
We have the right capabilities to develop the most advanced products customers want.
Then there are we managing portfolio in the way that we're winning business.
And the sockets, who want to that or that are going to.
Brain, most side to customers and hopefully with that carry the margins.
Well move on to Ambrish Srivastava with BMO.
Hi, Thanks very much.
Bob I had a question on the total fiveg units for the year I heard you say.
250 million that seems to be in the high side and I haven't seen with Qualcomm said. So I was wondering if that is indeed the number you gave us where are we year to date. So how much is remaining on I'm assuming majority of buttons.
Most of that is China and debt for my follow up for James.
He is doing really well good to see.
Back to growth and you seem pretty confident for the remainder of the year. It would be helpful. If you could give us a rough breakout of what the business looks like today.
In terms of all the end markets our product categories. However, you choose to.
Delineate within the business. Thank you.
James I wondered and take the first part.
In my prepared remarks, I did say that we expect 250 million smartphones globally. This year consistent with what we've said when we reported our March results.
We have seen many analysts, but also cover the industrys, bringing their numbers up.
We feel pretty good about it as far as the amount of subscribers today, it's tracking in line with our model to potentially even slightly ahead. So we still feel very good about our number of 250 million units. This calendar year for Fiveg and obviously significant growth as we look into the next year.
James.
Yes.
Typically I don't want to break it out in great detail.
But certainly the base station business remains to be about it about a quarter, so and growing at a pretty rapid pace as we go through your defense is about a quarter.
Our I O T business is about a quarter and then we have various other markets that we serve the represent the rest of the business.
Definitely we are growing faster this year in the in the Fiveg space around wireless infrastructure, so that that will start to take a larger and larger part of the business as we go through the year.
And from Needham and company will move to Russia Gill.
Yes. Thanks for taking my question, just going back to the great traction and again.
I'm wondering if you could describe kind of the market.
Towards Gan adoption in China.
As well as outside of China.
The ship from away from Ldmos too again base stations.
What's been the traction there.
Obviously, you're kind of will position with the.
The major Chinese base station vendor.
What's your positioning where your or your view on on Gan adoption outside of China.
And your ability to kind of leverage your technology in those markets.
Yeah, Great Great question.
Probably the best way to think about Gan adoption today is one very very broad based a really across all of the customer base.
All the Oems are evaluating Gan are implementing Gan and some in some version the other what's driving big adoption today is really the fiveg deployments that are using massive mimo antennas.
So in 10 element counts are significantly up.
And for the first time I think last year, we saw massive mimo until albert's actually become a larger amount of the transceivers than macro and the vast majority of those are using Gan today. So I think that's what's been driving the adoption as fiveg and the shift a massive mimo.
It is definitely broad based in what's going on in China, I would say most of the base stations that are getting deployed.
With this viju rollout in China.
Our using Gan.
Especially those that are in frequencies.
Around 2.6, or three and a half which is a good share what's getting deployed.
If you go to the rest of the world the again or pretty much every OEM tier one tier twos or are in progress of designing Gan solutions into their portfolio.
So I do think that this trend will continue.
And.
How many base stations are of what.
Of what configuration as we go out over the next four or five years I don't think it's completely clear, but we definitely do see again as a continued growth for the business and we do see that by the Mimo antennas. We'll also continue to adopted an ever increasing rate.
I think that will hold for the whole world.
Yeah, Thanks for that and just a follow up on again, so you're my understanding is your expertise is kind of low power sub 10, what.
Wanted to get a sense in terms of your roadmap to high power high water vision and what the competitive landscape exist and those markets.
Yet to today, we've got products and.
In the base station market that serve both the eight and 16, what slide so I would say that certainly where weve centered.
Our focus today and really because that's where we've seen the biggest part of the market.
We also are working on additional technology developments that will really help us compete more heavily in really two aspects and base station one much higher levels of integration, which we see coming and then also to be able to get into the high power spots in macro. So we are developing those technologies and certainly expect to play in.
Those parts of the market as we continue to expand now from a power perspective, you can tell from our defense related comments over the last few quarters that we definitely have experienced in very very high power.
We started in the defense business, we've developed a very high voltage and very high products for high power products for years. So we understand how to deal with the thermals how to deal with the high current loads those sort of thing so.
So definitely we will move in that space, we wanted to make sure we were focused on.
Mimo, because we saw that is the biggest content gain in the market.
Thanks.
And at this time I'd like to turn things back to management for any closing remarks.
Thank you for joining us on our call Tonight, we will be presenting via webcast at upcoming investor conferences, and we invite everyone to listen to them.
Thanks, again have a good night.
And that does conclude today's conference again, thank you all for joining us.
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