Q3 2021 Qorvo Inc Earnings Call

February 3, 2021

Yes.

[noise] please standby.

Good day and welcome to the Corvo, Inc. Q3, 2021 Conference call today's conference is being recorded.

At this time and they did turn the comments over to Douglas to veto Toledo, Vice President of Investor Relations. Please go ahead.

Thanks James.

Very much everybody welcome to <unk> fiscal 2021 third quarter earnings Conference call.

This call will include forward looking statements and involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the safe Harbor statement and contained and the earnings release published today as well as the risk factors associated with our business and and our annual report on form 10-K filed with the SEC because these risk factors.

Actors may affect our operations and financial results and today's release and on today's call. We provide both GAAP and non-GAAP financial results. We provide this 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 that may obscure trends.

And our underlying performance during our call our comments and comparisons to income statement items will be based primarily on non-GAAP results on non-GAAP results for cash.

Reconciliation of GAAP to non-GAAP financial measures. Please refer to our earnings release issued earlier today available on our website at corporate Dot com under investors joining us today are Bob <unk>, President and CEO, Mark Murphy, Chief Financial Officer, James Klein, President of <unk> infrastructure, and defense products group, and Eric Creviston and product President of <unk>.

<unk> mobile products group as well as other members of <unk> management team and with that I'll turn the call over to Bob. Thank.

Thank you Doug.

And thanks to everyone for joining our call.

Core ROE exceeded our third fiscal quarter guidance on revenue gross margin and EPS.

Our performance was supported by multi year technology upgrade cycles and was broad based across markets and customers.

The <unk> team is executing very well and we are pleased with our operating performance.

The growth drivers and <unk> markets are supported by durable long term trends.

And smartphones and.

And <unk> units are set to approximately double year over year.

<unk> also presents opportunities beyond smartphones with advanced network capabilities for more data lower latency and machine to machine and communications.

We expect our technologies will be increasingly critical to cloud gaming connected car industrial Iot remote medicine, smart homes and other growth categories.

And Wi Fi, we are early and the rollout of Wi Fi six and.

And industry analysts expect rapid adoption to continue.

Our next generation front end modules and Bob based filtering products are optimized for higher frequency and wider bandwidth on Wi Fi six and 60, enabling faster upload and download speeds, increasing capacity and improving efficiency.

Across our markets complexity is increasing.

As functionality is added within shrinking form factors, while more demanding next generations specifications must be met.

This is favoring higher performance more.

Densely integrated system solutions from proven suppliers with large scale manufacturing expertise.

Take for example, the migration to dual transmit architectures beginning in the premium tier of smart phones for <unk>.

The old transmit architectures require integrated transmit and receive filtering and the traditional receive only diversity path.

And this requires better performing more functionally dense solutions, making high performance bar multiplexing, a proven differentiator.

Industry analysts estimate there were over $250 million <unk> phones sold in 2020 for.

For 2021, we forecast approximately 500 million <unk> loans.

Within these phones are front and content is increasing.

Five to $7 versus <unk>, including in the mid tier where content and approximately doubled.

The addition of <unk> is driving a shift from discrete products to higher value content, including our highly integrated solutions.

For the <unk> reference designs ramping now corvo was the first to integrate filters switching power amps, Ellen Hayes, and Cmos control and fully shielded compact solutions and.

And in doing so we address customer size and performance and time to market challenges.

Demand has been strong for these complete main path solutions and.

And customers are increasingly sourcing all three including the low mid high and ultrahigh band placements.

When combined with our Pemex tuners, and pent up <unk> and dual connectivity modules quarter offers customers a compact front end solution with minimal placements delivering world class performance.

And as a result, we.

We enjoy increasingly collaborative relationships with our customers.

During the quarter, we were recognized by two leading Android manufacturers with highly selective annual awards.

Corvo was the sole RF supplier to win and vivo excellent quality award for 2020.

And we were the sole electronics supplier to <unk> a steam joint Development Award, we're extremely proud of both honors.

As I referenced earlier during the quarter, we increased shipments of our complete main pass solutions across the leading <unk> baseband we.

We also secured new design wins for our next generation complete main pass solutions and support our upcoming Android five <unk> launches.

So the diversity path, we launched our first generation of dual connectivity module for the mid and high bands and commence shipments to the leading Android smartphone manufacturer.

We also released our next generation <unk> process, which reduces insertion loss increases bandwidth and ultra high band and Wi Fi six E applications.

And mobile Wifi, we began production shipments of our Wi Fi six solutions, so top Android Oems increase and capacity and lowering latency and a range of smartphones and mobile devices.

And ultra wideband, we extended our capabilities to include open fully supported system solutions, enabling ultra precision location applications and mobile Iot and automotive markets. During the quarter, we increased our ultra wideband customer engagements and a broadening range of consumer.

Patients, including tracker tags, smart speakers smart Tvs and other smart home appliances.

Customers and channel partners are evaluating a broad range of applications and we continue to believe ultra wideband adoption and smartphones will be the catalyst for our growing ecosystem of connected devices.

We see ultra wideband proliferating quickly and representing an exciting opportunity for core book.

And IDP, we're very proud to have been selected by the National Institutes of health for its rapid acceleration of diagnostics initiative, our Rad ex to add COVID-19 testing capacity.

And this program, we will use our omni and test platform a complete test solution enabled by <unk> high frequency. Bob. This platform is currently pending emergency use authorized authorization from the food and drug administration.

Carbos antigen testing has demonstrated high levels of sensitivity and specificity and clinical studies.

That means its capable of producing accurate results with very low levels of false readings.

We believe this ball sensor technology may be able to deliver a new approach to diagnostic testing ultimately providing central lab testing accuracy at the point of care.

Elsewhere and IDP, we continue to support a broad range of multiyear trends, including <unk> Wi Fi six and 60.

And defense radar and comps.

Programmable power management.

<unk> ex automotive Wi Fi and ultra wideband and our team has done an outstanding job developing products and ramping production to support initial <unk> base station deployments and Asia today.

We are and the early stages of multiyear Rollouts and we have strong momentum as <unk> continues to deploy.

We've been selected by multiple Oems to supply <unk>, and addition to our small signal components and modules and we see the focus on power consumption bandwidth and higher frequencies supporting the continued migration to <unk>.

During the quarter <unk> secured design wins with multiple base station Oems to support <unk> band and the U S for which the spectrum auctions are and the process and initial deployments are expected later this year.

We also received the best comprehensive performance award from Cte recognizing our <unk> portfolio and customer support during the initial rollout on <unk> base stations.

And defense, we achieved strong growth and domestic radar and communications applications and Gan defense products for international radar programs.

And connectivity, we ramp shipments of our five gigahertz Wi Fi six pas filters and sample our six gigahertz Wi Fi six <unk> front end modules for routers, and gateways and maximizing throughput and range for high bandwidth applications, such as video conferencing and online gaming.

Demand for our Wi Fi six solutions has been strong across Msos and retail segments and we see continued.

Continued strength as Wi Fi six deployments are still and the early phases.

And the connected car, we were selected to supply <unk> LTE.

<unk> <unk> and Wi Fi automotive qualified products for multiple Oems, including Audi and BMW and Volvo.

And low power wireless Corvo was selected to supply the leading TV manufacturer are low power and multi protocol Soc and custom software, enabling our solar charging remote control.

Before handing the call over to Mark I want to say a word about <unk> workforce.

Team delivered an outstanding performance and the December quarter, they adapted quickly and a dynamic environment and help support exceptional results.

And I'm extremely proud of their responsiveness and dedication to our customers' success as.

And as <unk> Wi Fi six and 60 ultra wideband and other connectivity protocols are rolled out globally.

<unk> is well positioned to delight customers and expand our technology reach.

And with that I'll hand, the call over to Mark.

Thanks, Bob and good afternoon, everyone.

<unk> revenue for the fiscal 'twenty, one third quarter was $1 $95 million $35 million above the midpoint of our guidance up 26% or $226 million versus last year and up approximately 11% sequentially adjusting for the 14 week September quarter.

As a reminder, our fiscal year 2021 is a 53 week fiscal year.

And the September quarter was a 14 week quarter versus a typical 13 week quarter.

And the December quarter mobile products drove the sequential growth with revenue of $826 million.

And on seasonal demand effects and the ramp of higher content and <unk> smartphones.

And infrastructure and defense products revenue of $269 million.

It's up 30% versus last share on robust Wi Fi demand and double digit growth from defense programmable power management and Iot markets.

Non-GAAP gross margin and in the third quarter was 54, 4%.

Which was above our guidance due to better than expected volumes price and mix and lower than expected manufacturing and inventory costs.

The combination of strong end market demand and our ongoing efforts to improve the portfolio.

<unk> productivity and carefully manage inventories yielded record results.

Non-GAAP operating expenses and the third quarter were better than expected at $194 million and 17, 7% of sales largely due to timing on development programs.

As a result, we forecast opex to pick up and the March quarter to levels previously guided.

Non-GAAP net income and the third quarter was $357 million.

And diluted earnings per share of $3 eight.

Was <unk> 43 cents above the midpoint of our guidance.

Cash flow from operations and the third quarter was $404 million and Capex was $36 million, yielding free cash flow of $368 million and free cash flow margin of 33, 6%.

We repurchased $160 million of shares during the quarter.

As discussed on our last earnings call. We retired our 2026 notes during the quarter.

We also called the remaining 2025 notes.

We ended the quarter with $1 $7 billion of debt and $1 $2 billion of cash.

Our leverage remains low and our revolver is untapped and <unk>.

Weighted average maturity of our debt is late 2029.

And we have no material near term maturities.

With our financial flexibility.

And we can focus on developing technology supporting customers and making prudent organic and inorganic investments.

Support long term earnings and free cash flow growth.

To that and we continue to advance our boss saw Gan gas packaging and other core technologies and.

And fund Uwp programmable power management, Biotechnologies, Mems and other promising areas.

Turning to our current quarter outlook, we expect revenue between $1.025 billion.

And $1 $55 million.

Non-GAAP gross margin at $55 to 51%.

And non-GAAP diluted earnings per share of $2 and 42.

At the midpoint of guidance.

Our March quarter outlook reflects sustained broad customer demand stemming from multi year technology upgrade cycles.

And mobile demand for <unk> is adding RF complexity and driving higher content.

The breadth of our customer base and firm demand signals provide confidence and stability and our outlook.

We forecast mobile revenue and the current quarter to be approximately $770 million at the midpoint are up over 35% year over year.

And IDP, we project revenue of approximately $270 million and the current quarter sustaining strong double digit growth driven by Wi Fi six demand and other markets, even as <unk> infrastructure build outs remain uneven.

Our March quarter gross margin guide is in line with the gross margin outlook discussed on our last earnings call.

And up over 100 basis points year over year at the midpoint.

Non-GAAP operating expenses are projected to increase and the march quarter to around $207 million.

At the midpoint of our March quarter guidance operating margin is forecasted to be over 35% for the third consecutive quarter.

Our operating margin outlook for the year is 31, 5% at the midpoint.

Clearing the lower end of the margin model, we laid out previously.

<unk> is built for the integration and and advanced technology trends critical to customer success, and <unk> and other growth markets.

And with broad and robust end market growth, we're now leveraging a more focused footprint our.

And our product portfolio is better matched to customer needs.

And our culture of continuous improvement is thriving.

We project, our current quarter and full year non-GAAP tax rate to be below seven 9%.

With our year to date earnings and March quarter EPS Guide.

Our fiscal 'twenty, one EPS estimate is over $9 40 per share at the midpoint are up nearly 50% year over year.

Capital expenditures will step up and the March quarter, as we work to intersect near term demand and support long term supply agreements with multiple customers.

We still for a cash capex to remain below $200 million.

Or less and 5% of sales in fiscal 'twenty one.

Currently we project free cash flow of approximately $1 billion this fiscal year.

As of December quarter results, and our March quarter outlook show <unk>.

<unk> continues to operate well through a challenging period, while delivering premium technology to a broad spectrum of customers and <unk> Wi Fi Iot defense and other growth markets.

In closing I'd like to join Bob and thanking <unk> employees again for their continued efforts during this time.

Now I'll turn the call back over to the operator for questions.

Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off hilarious no true equipment.

We ask that you limit yourself to one question and one follow up question again press Star one to ask a question.

And we'll take our first question of day from Gary Mobley with Wells Fargo Securities.

Hey, guys. Thanks for taking my question and congrats on that.

Yes, strong quarter and outlook.

I wanted to first point out.

Strong relative performance to the rest of the smartphone market and your mobile business calling out.

And it appears to be 11% to 12% growth and that business for calendar year 2020.

Even after <unk> after adjusting for the extra week.

And of course, I think it's a backdrop of a declining smartphone market. So my question is.

And to what extent was that driven by.

And <unk> content growth to what extent is it driven by overall market share and hydro.

How do those variables impact your outlook relative to the smartphone market and calendar year 2021.

Thanks, Gary Good question and I'll go and let Eric address that thank you for your complements.

Sure Yes.

As Mark had said in his opening comments corvo was built for <unk>.

Complexity of the RF front end and the new handsets is driving a need for integration, which just naturally drives towards our strength given that we have all the leading technologies in house and.

I think the team has done a really good job on.

And bringing the right technologies to maturity and <unk>.

Time, and then integrating very well and building the right relationships with all of our customers to help them achieve their goals with what theyre trying to do with their products as well. So it's coming together really well we've got the tailwind of the content growth and it is not by any means over issue, however, and the very early innings and when we've got new generations of virtually all of our technology.

She is coming out throughout this year to get even stronger as we as we enter next year.

Okay, and a follow up question for Mark.

Hopefully at some point and this calendar year, we'll be resuming Robert resuming their normal activities and traveling for work and whatnot and and with that and mine how should we think about your opex progression.

And when we started moving more freely and.

And what ways have you benefit and what ways might.

Step up at some point.

Yes, Gary.

<unk>.

We've obviously incurred some additional costs there some inefficiencies as everyone's experiencing but as you know.

Everyone is also benefiting from less travel which can be material.

So a lot of it a lot of it sort of washes out.

I think as we look forward.

And as we've talked about over the years, we're going to continue to work to get the best up operating leverage we can.

And.

We're running at about 20% and sales Opex.

And for a year.

We would expect next year to be.

Be it that those levels and maybe it may be slightly below where we're never going to be the lowest opex company and the space because as you heard were the DNA of this of this company is innovation. So we're.

We're going to likely be several points higher than and what I would call best in class as it relates to just cost. So I think thats, what what you can look forward to as we go forward on and on an annual basis.

Next we'll hear from Craig head and block with Morgan Stanley.

Yes. Thank you I just had a question on the smartphone market overall that market and made a comment about firm demand signals.

And we know broadly capacity has been pretty tight and so just what are some other things youre looking at in terms of monitoring those demand signals and.

And how much also does the step up and <unk> kind of helping driving that growth.

And Craig maybe I'll start.

We've got very yes, as I mentioned very firm demand signals.

Pricing is a bit firmer than normal as a result.

And we see.

Out to the June quarter, I'd say, we're we're pretty confident and and.

And.

And we will see how demand.

<unk> post Chinese new year, but demand signals are strong and the channel is very healthy and as you can see our inventory levels are are very good.

We spend a lot of time.

Fortunately for US we've got a very broad customer base. So.

And given our given our position and the market. So we see the space across customers and products and have very good visibility. So it's.

And that explains why very early last year, we called $250 million.

<unk> handsets and Thats about where the number ended up.

Further we not only use.

Our rigorous internal assessments, but we use external views.

To balance that and we make the best call we can.

Yes, we were about 3% off on this this particular quarter.

Lower were generally close and so we feel good about.

The guide we have and the March quarter, 10, 40, and then we would think that we'd be somewhere near a $1 billion.

And if markets hold up and the.

And the June quarter.

Okay.

Got it appreciate that color and then just as a follow up with Deca wave.

On board for a few quarters now just love to get your thoughts on in terms of how that acquisition is <unk>.

Laying out and I know, it's mostly design stage today, but relative.

The reason to kind of by that and and the market opportunity just what youre seeing and and what is some of that milestone to keep in mind that the ultra wide band as you go through the year.

This is Eric I'll be happy to take that.

We're thrilled so far with the integration of the team and and the response from customers as well.

It's playing out at least as good or better than than we had hoped.

They are the pioneers of the technology and just a fantastic organization for design and development, we are bringing the scale and the customer relationships to really take it to the top tier so we've got and.

And then of course, the acquisition of seven hugs to give the entire software stack has been a huge addition, as well that's helping us. So all of that is working really well, we're continuing to invest and hire more and critical resources that are enablers to cover all of the opportunities but.

One other things that.

And since we closed the acquisition nearly a year ago now is just much more interaction with the mobile handset providers of course on the channel that we bring.

Everyone is looking to put this uwp.

And to the next generations of handsets. So we're seeing the uptake we're expecting.

And then a lot of people are lining up with devices that are going to talk to those handsets as well right. So a lot of consumer electronics and smart home and so.

And so forth devices that we're talking to and then the base of the revenue today is industrial Iot basically and.

And thats continuing to grow and perform at least as well as what we had expected and then we will have auto coming in on top of all of that so we're engaged.

Well with all the leading auto manufacturers. So it's it's a law.

A lot.

And we've got a lot going on but debt.

On activity the reception is strong and and really I think adding the the software stack to the equation just really takes it to another level and in terms of what we're going to be able to do for the industry.

We'll now hear from Karl Ackerman with Cowen.

Good afternoon, gentlemen, thank you for taking my questions I have two.

<unk>.

Just on gross margins I understand that volumes are working against you in March.

But mixed does not appear to be a factor.

And so I guess are there competitive factors at play or maybe other manufacturing costs.

And that I am not fully appreciating that is influencing your outlook.

Yes, so so Carl is smart.

Yes, the outlook is basically on top of what I talked about last quarter. So.

And <unk>.

We've become pretty good at being able to forecast.

Where we're going to be.

Now I think we got to acknowledge that we miss by quite a margin. This December quarter. So I think you need to understand that in order to understand the March quarter. So the March quarter really isn't.

And a surprise.

Whereas where it's landing.

It's more of the December quarter was much stronger than we expected and we're really pleased about the December quarter, and I want that to be a clear yes.

And we've talked about our approach.

Over the years and while we're striving to do about investing in technology.

Actively work and the portfolio driving productivity exercising capital discipline and the December quarter shows what's possible with the business.

And its years of hard work, it's it's just excellent execution by the team.

And it's those things intersecting with favorable market conditions.

Just about.

Yes, a lot and went right and the December quarter, and the result is that $54 four so.

Volumes.

We're stronger and more importantly stronger than than we expected and the outlook stayed strong so that helps us sustained loadings and the associated fixed cost absorption.

On a span control remains excellent.

And it is especially noteworthy given the tough and operating environment that our operations team has to has to work with.

And I mentioned earlier, the pricing environment is a bit.

I guess more favorable than normal.

The market's tight we're doing and the best we can to serve customers and.

And the time that they are expecting us to get them product.

And then.

Mix, we continue to move towards integrated modules, and that's helping us greatly and INR particular advantage and mid high band and all related integrated products is pulling in some other integrated.

Modules and.

And to enter into wins. So so we're benefiting greatly there and then we've got of course other highly differentiated products that are helping.

And then there are another a number of other favorable items in the quarter favorable yields we had lower inventory charges and we expected.

And.

And a number of other items again generally.

Things went the right way.

Yes, as we look forward to the March quarter, we do expect gross margin and drop to about where I said.

We guided to $55 51, today, and Thats up 100 basis points year over year, which is what we've been striving to do is show margin expansion, but were down sequentially due to a number of factors.

We're trying to keep inventories low so.

And that will keep a check on absorption.

We're ramping some lower margin products to candidly, we're just still working down the cost curve on those other important longer term, but yes that debt. Some of those products are coming into the March quarter, and and that actually continues on into the June quarter.

And there are some other mix dynamics as well, including some less defense and the March quarter.

And some other things and then we just can't assume that all of these other things go our way as they did and the December quarter, we had the pricing environment.

And probably turn grow more normal state the inventories write offs will probably be more normal and we've assumed that.

So we feel good about the.

About what we did comfortable with the guide we have.

And.

And I'll leave it at that.

Okay very helpful Mark.

For my follow up with results and and outlook is strong that you've just described and the VLT and in the room is about sustainability with some investors, arguing that this is a peak.

But I'm not asking you to discuss your peers.

But it would be very helpful. If you could share your perspective, whether your order book is outstripping your ability to supply near term.

And then second how you are managing the demand pull from multiple customers across multiple markets because as you describe it out there appear to be quite many of them across both smartphones and IDP with Wifi six so if you could discuss those that'd be very helpful. Thank you.

Karl is the barbell do my best to answer your question because as usual.

It's not as simple as what many people from externally believe when youre working and the business.

Number one yes, there is tightness on the supply chain and I think it's quite well known and the industry that silicon is constrained.

And thats in the communications industry automotive so in many ways that is a governor on what's going on and the situation.

And we've been very fortunate that our team has excellent relationships and agreements with our suppliers externally and feel pretty good about how we've done that and.

And I'm quite confident we left some.

Revenue on the.

Out there for us still to get but Mark mentioned in his opening comments that we've been getting long term agreements with our customers. So that they feel pretty confident and their demand and when we do our market model, which mark also talked about and we feel we have a pretty good handle on the market based on our comments all the way through last year that many people.

Okay, and so there was not going to be turning out the way, we projected and just the number of <unk> handsets.

So when we look at our market models. The orders, we already have the migration and you've already commented on <unk> more than doubling looking at Wi Fi.

Looking at Wi Fi six part and every room going from two streams, the three streams that moving to four five.

<unk> communicated on the client and then for the backhaul using a third stream, which adds a lot of content and if it's.

Eight channels feeding it back to the.

Main access point, so when we integrate all of this and look at our customer orders and we feel pretty good about the commitments, they're making to us So and then.

And I want to remind everyone the sudden change and Huawei.

So it was not using best in class components. As you guys remember, we talked a lot about call. It they started and rightfully so because of the U S government try to use local sources.

While the people that are picking up their share.

Are using best in class components, which is what we said Huawei would have done if it was available to them. So when we looked at everything thats going on as Mark said, we feel good.

And we can already comment on June which he did so I think as we lay out the year.

Sales sell throughs, and Chinese new year, and all of those conditions and the pandemic and his explanation, but we feel good about what we're communicating today very good about it.

Tokyo Hari with Goldman Sachs has our next question.

Hey, good afternoon, Thanks for taking the question and congratulations on the strong results and the strong outlook.

And maybe yes, maybe first one for Eric and I guess, Bob you sort of kind of addressed this in your and your response to the prior question, but just curious how are you guys thinking about seasonality and your mobile business.

And there's clearly a very odd year with supply.

Supply constraints and.

New products being introduced later than usual and other moving parts, but to the extent you can comment how are you thinking about I mean March obviously, youre thinking better than seasonal for your mobile business, but what about June and potentially September and then I've got a quick follow up right.

And Ryan as you pointed out.

As you pointed out.

March seasonality clearly is muted from from normal.

And to Bob's point, it's really going to depend upon supply and the near term.

And just our own you know through our supply chain network, but the rest of the bill of material that our customers have to get so.

And it's really going to be sort of a demand or excuse me and supply limited climb and at least for the next few quarters.

And then once things are fully opened up again.

And we're extremely bullish about the opportunity of course for <unk> to take off and so that's why we still think.

And even in the worst case, we'll see five to double this year.

Got it. Thank you and then as my follow up on gross margins.

Mark Great job in December.

To your point, you've got multiple moving parts and and I guess margins can be very lumpy on a quarter to quarter basis, but when you think about calendar 'twenty, one and its entirety or maybe fiscal 'twenty, two and I realize its kind of early.

But how are you thinking about gross margins, it's pretty clear that structurally and through cycle Youre doing a lot better but can we can we sort of extrapolate.

Trajectory that <unk> been on or are you sort of approaching peak ish kind of levels as it relates to gross margins. Thank you.

Yes toshi.

Yes.

Time of year, because we're a march fiscally, we sort of get these calendar 'twenty, one or calendar year fiscal next fiscal year question. So I appreciate that.

And as you say.

Yes, it's a bit early so we expect to provide more details on our next earnings call.

And then we will wrap up fiscal 'twenty, one and start fiscal 'twenty two but.

And maybe maybe before I get into gross margin or margins overall.

Yeah.

Maybe just talk a little bit of a fiscal 'twenty two.

As we sit here today for the most part demand is firm as Bob and Eric have talked about.

Our business is broad.

And you see that reflected in the December results March quarter Guide.

And then we all know that the markets that we serve <unk> Wi Fi defense Iot.

Other markets.

And we obviously expect those to grow multi multi year.

We believe that corvid is technology and products.

And our ongoing customer engagement position us really well on those markets.

So we've talked about feeling very comfortable about the June quarter as Eric just mentioned kind of more of a supply constraint situation and demand constraints. We see at this point now we're reasonably confident for a for a near $1 billion per quarter.

And again, we will see see what happens on the other side lunar new year and.

Keep watching the channels, but.

Keep an eye on the rest of the P&L as you can imagine.

While the rest of the year and certainly the rest of the P&L, It's just a lot more difficult.

To give anything were and our planning cycle now.

There's just a number of factors.

<unk>.

And what happens and the outlook.

The effect on loadings and absorption.

Mix effects and the business yields inventory and so forth and.

And then just on the Opex side and investments, we want to make and the future. So any number of factors are going to impact the results and we just need to finish.

Planning.

And we've given on March guide.

And we've given at June revenue guide.

Our revenue indication supply constrained.

I think on the June quarter, we actually see margin margins going down a bit.

We actually see the June quarter gross margin below 50.

We see operating margin below 30, and again Thats price mix cost factors.

But I would say for the year.

We still expect May now clearly operating margins to be above 30%, we cleared that this year.

We're committed to continue to work to expand operating margins and.

I think we will say that for this call and provide.

More detail on the next call.

Next we'll hear from Edward Snyder with charter equity research.

Thank you very much Eric you're shipping a lot of main path modules tuners, I guess, some EBT and.

On the other one offs received <unk> are you and production on a <unk> now and when do you expect to be in productions on transmit Dr. Ex.

And secondarily was the transmit the Rx.

Part of your five to $7 Tam increase for five G for yourself and for the industry or is it going to be incremental.

To those numbers and if I could James sounds like infrastructure cooling again a bit.

Particularly curious about the buildup has been a lot of feedback that China's slowing because they go to the rural areas and the.

U S is not quite picked up yet is that kind of the trends you're seeing here.

And if so do you anticipate when the U S starts building up C band is going to be using a lot of gan or zanesville, Jan or mimo actually and CFO or will we expect to see sort of a little bit of a whole form.

Okay. This is Eric I'll go first and.

We're actually and in production already with both of the categories, you mentioned antenna flexures with multiple customers.

And we expect of course that portfolio to continue to grow out and we've got.

Multiple generations of ball and and <unk>.

Process right now to continue driving those over the next couple of years.

And then.

As you called <unk>, that's what we call the dual connect modules and we've referenced you'll connect modules and some of our discussions or is that a marquee Korean handset launched recently you'll find we're.

Regarding the dual connect module capability there so to your point, that's really exciting because it gets us into that diversity path, which typically it's been Rx only it's typically been saw filters and heavily competitive.

With this you are looking at multiple <unk> channels that warrants youre looking at bulk filter content and a higher frequency range. So it's a really interesting new category, that's emerging and were happy to be leading off with it.

And this is James.

Our base station business owner on a pace to set all time record for physical revo.

Revenue for the year, so it will be up about 60% full year over full.

Full year with the guide that we provided today.

It was driven mainly by strength and deployments in Asia.

And the adoption of massive mimo antennas, where Gan has been selected many many times over LD Moss.

And of course, we have been able to support many other major frequency bands that have been rolled out and China.

Looking ahead, I think youre pretty close deployments.

Deployments will slow during the first half of the calendar year and then we expect those to start to accelerate and the second half.

And additionally, with the C band auctions, nearly complete and the U S. We do expect deployments to start later in the year and we do expect those to include both massive mimo antennas and Gan power amplifiers.

And then obviously we're in the early stages of <unk> deployment, and we expect those deployments to to continue both in China and around the world as we go through the next several years.

We'll now hear from harsh Kumar with Piper Sandler.

Yeah, Hey, guys. Congratulations on solid results solid guide.

So we appreciate the execution.

There's been no normal and this year with respect to revenue and seasonality, but I think your guide for March is less seasonal than a typical and March I was.

Just curious if you could point to the factors.

Maybe relative to what you guys are assuming for China and March versus U S business.

That's question number one and I had another one.

Sure.

Yeah. Thanks <unk> so.

Typical seasonality as you know is the IDP business roughly flat that's roughly what we guided the mobile business seasonally down.

We're not going to break it out of geographies or customers, but obviously, our mobile business is not going to be off as much as normal I think we do know the timing of marquee phones has maybe shifted a little bit from prior years and and layering on top of that.

And the China business is doing well and.

We spend and our comments already answering questions, we will see how Chinese new year goes.

And that's the way I would like to answer that.

That's fair and you guys and your press release had a comment on low band mid band Ultra high band and Android and the wins you guys are seeing I was curious if you could elaborate what kind of phones youre seeing this and if you expect this kind of functionality to make it to mid and <unk> phones by.

Some point in 2021 this year.

Yes, so harsh this is Eric.

And in fact <unk>.

Merrily, we are shipping these into <unk> phones today.

And as <unk> became more complex over and over the past couple of years and move towards integration began to take off and then when <unk> emerge. There really was no looking back for for our customers that are bringing out and high performance handsets. So.

The main path, including Ultra high band low band mid high band.

Selling fully integrated modules in many cases all of them and at the same handset to support the <unk> ramps right now.

Our next question will come from Ravi Gill with Needham and company.

Yes, thanks, and congrats as well on the great momentum just a question again on the infrastructure.

You guys really had kind of a strong dominance and Gan.

Base stations and have kind of been riding that wave wanted to get your update on on.

And Dan proliferation across the other base station vendors outside of sales.

<unk> and China, what would the adoption rate is outside of that customer and how do you think about the competitive landscape. It does appear that one of your other competitors on the LD Moss side are starting to ramp.

Q3 2021 Qorvo Inc Earnings Call

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