Q2 2021 Skyworks Solutions Inc Earnings Call

Good afternoon, and welcome to Sky work solutions second quarter fiscal year 2021 earnings call.

This call is being recorded.

At this time I will turn the call over to Mitch Haws Investor Relations for Sky works Mr. Hans Please go ahead.

Thank you Rob good afternoon, everyone and welcome to Sky works second fiscal quarter of 2021 conference call.

With me today are Liam Griffin, our President and Chief Executive Officer, and Chris set of solar Chief Financial Officer.

Before we begin I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward looking statements. Please refer to our earnings press release, and recent SEC filings, including our annual report on form 10-K.

The information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today. Additionally, the results and guidance. We will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for complete.

Nation to GAAP with that I'll turn the call to Liam Thanks.

Thanks, Mitch and welcome everyone Sky works delivered another record quarter with strong year over year of growth and revenue margins and earnings per share for Q2, we.

We continue to leverage our expansive technology reach and deep customer engagements spanning both mobile and broad markets to capture the exploding demand for connectivity.

And with our planned acquisition of the infrastructure and the automotive business of Silicon labs, and we expect to accelerate that momentum further.

Sure a few highlights and the quarter.

We delivered revenue of $1.17 billion.

53% above Q2 of last year.

Our broad markets portfolio generated record revenue of 385 billion, 67% growth over the same period last year.

We posted a new Q2 record per earnings per share of $2.37.

Representing a year over year increase of 77 per cent and demonstrating strong operating leverage.

Importantly, we drove $616 million and operating cash flow and.

Quarterly record of new quarterly record for the company.

Looking ahead, the technology bar has never been higher as billions of daily interactions move online spawning of growing set of use cases from remote work virtual education Touchless Commerce cognizant of the audio machine to machine communication and autonomous transport.

The good these advances rely on radical upgrades and speed latency and reliability with comparable requirements for power efficiency and smaller form factors.

For nearly two decades Sky works has prepared for this opportunity and.

Investing in innovative technologies human capital and manufacturing infrastructure.

Positioning us to capitalize on the secular global transition.

Notably our strong cash generation Fortifies, our ability to fund deep investments and technology Fabs and manufacturing scale.

Further our proven and flexible model is squarely aligned with the complex demands of our customers.

Our demonstrated operational expertise allowed us to drive the had another strong quarter of design win execution.

In mobile we expanded the reach of our Sky five portfolio across premium and mid tier and <unk> smartphone launches at Samsung Abo vivo Xiaomi and other leading Oems.

And the Iot space, we secured wins across a diverse set of customers specifically, we partnered with net year to deploy Wi Fi six and six E routers launch Wi Fi six gateways of Deutsche Telekom, Nokia and Altice.

Shipped home security solutions to Xfinity.

Captured design wins with Google nest, and we delivered low latency cognizant of audio systems powering wireless gaming headsets at Microsoft and Sony.

Moving to the industrial space, we delivered Iot modules, two quick talent and Jim Alto.

And and infrastructure, we leveraged our wireless portfolio to deploy mimo base stations with Nokia and Ericsson.

And finally, and automotive, we ramped telematics and driver assist platforms with Volkswagen LG and GM Onstar.

Moving forward, we see a multiyear of technologically tech technology evolution with our aperture of widening from smartphones and industrial to automotive to an expanding set of Iot devices.

Today, we support of global network that extends to over 20 billion interconnected devices.

Spawning of new class of ecosystems from autonomous transport to smart cities and robotics.

Sky works is fueling this dramatic shift with our unique capabilities integrating not only five G. But other critical protocols, including high performance Wi Fi Bluetooth and precision GPS.

And finally Sky works is well positioned to win with deep customer relationships established over 20 years.

Experience across multiple technology transitions of.

Technically seasoned and talented workforce and an efficient cash flow engine that funds the pipeline of market leading solutions.

While providing strong returns to our shareholders.

With that I will turn the call over to Chris for a discussion of Q2 and our outlook for Q3.

Thanks Liam.

Just kind of works posted another quarter of strong financial results delivering record Q2 revenue of 1.1, and seven 2 billion exceeding the midpoint of our guidance.

Total revenue grew 53% year over year based on early <unk> adoption as well as strong demand for our broad market solutions.

Mobile revenue grew 47% year over year, largely driven by widespread content increases as <unk> phones are ramping across smartphone Oems worldwide.

The <unk> markets revenue grew further in Q2, two and all time record of $385 million.

This reflects revenue growth of 67% over Q2 of last year Benny.

Benefiting from a diverse set of use cases, including the adoption of technologies, such as Wi Fi six and 65, <unk> wireless infrastructure and automotive along of the continued positive momentum and our audio solutions business.

Gross profit and the quarter was $595 million, resulting in a gross margin of 58% of.

Up 60 basis points year over year.

Operating expenses would want and looks 50 155 million or 13, 2% of revenue demonstrating spending discipline, while continuing our strategic investments to drive growth.

We generated $440 million of operating income translating into an operating margin of 37, 6%, a 510 basis points improvement over Q2 of last year.

Other income was $1 million and our effective tax rate was 10, 5%, resulting in net income of 395 million or the net income margin of 33, 7%.

Execution on both gross and operating margins drove record Q2 diluted earnings per share of $2.37.

Beating the guidance by <unk>, <unk>, and an increase of 77% when compared to fiscal Q2 of 2020.

Turning to the balance sheet and cash flow second fiscal quarter. The cash flow from operations was $616 million of quarterly record for Sky works.

Capital expenditures were $141 million, resulting and a record $475 million of free cash flow translating into a strong free cash flow margin of 41%.

We paid $83 million and dividends and given the recently announced the acquisition of the infrastructure and automotive business of Silicon Labs, which we expect to close and the September quarter, we have temporarily suspended our share repurchase program.

Now, let's move on to our outlook for Q3 of fiscal 2020 one.

Based on robust demand for connectivity solutions, and mobile and broad markets. We expect continued momentum and euro for the year growth in the June quarter.

Specifically and the third fiscal quarter of 2021.

The anticipated revenue to be between 1.0 of seven 5 billion and 112 5 billion with non-GAAP diluted earnings per share of $2 and 13 at.

At the midpoint of our revenue range the.

Translate into year over the year revenue growth of 49% at the midpoint of the revenue range and year over the years non-GAAP diluted earnings per share of growth of 70%.

Gross margin is projected to be and the range of 52, 5% to 57 and 5%.

We expect operating expenses to be between 159 and $161 million.

Below the line, we anticipate roughly $1 5 million and other income and a tax rate of approximately 10, 5%.

We expect our diluted share count to be approximately 167 million shares and with that I'll turn the call back over to Liam Thanks, Chris.

<unk> is on track to deliver record results for fiscal 2021, clearly demonstrating the value of our technologies as we address and increasingly broader landscape of impactful customers and applications.

Further the pending acquisition of the <unk> business fits squarely with our strategic priorities to expand our market reach and accelerate revenue diversification and drive industry, leading profitability and cash flow.

In parallel skywalk is solidifying its global leadership.

Technology breadth and vast operational scale.

During the connected experience and mobile industrial automotive and enterprise and other emerging applications.

That concludes our prepared remarks.

Operator, we can open the line of questions.

Thank you as a reminder to ask a question you will need the press star one and your telephone to withdraw your question. Please.

Please press the pound or hash key and given time constraints. Please limit yourself to one question and one follow up and.

And your first question comes from the lineup Karl Ackerman from Cowen and company. Your line is open.

Hey, Thank you. Thank you gentlemen.

If I if I could.

You know one of your RF peers, who reported last evening spoke about new content wins across the Android the supply chain with its integrated modem and.

And as a result, I think some investors have concluded.

What's good for them as perhaps bad for you in terms of your opportunity.

And in certain areas of the of the RF supply chain and so.

I know, you're probably limited and discussing specific OEM wins, but I was hoping you could discuss your conviction and RF content gains across the mobile market.

That would be helpful. As we think about your.

The growth trajectory beyond the June quarter. Thank you.

Sure. Good question, well, we are very bullish about our outlook and RF and other elements and our portfolio all of you.

And see the results that we just reported a very very strong substantial double digit returns and.

And compares across across the space, we have and incredible view going forward we have.

A rich set of technologies that we continue to grow.

We're expanding the aperture of the componentry that we put in one of these devices, we're leveraging our integrated solutions Sky five that brings and filtering bulk acoustic wave core gallium arsenide and other elements to provide a turnkey solution for our customers and we've been doing this for years. This is not new.

And what is new is the outlook that we have and we start to see <unk> really pick up the complexities and <unk> and having a fill of full system solutions as we have at Sky works and support our customers and place the win so we feel really good about it we always have competition. There is no change there at all but if you look at how we play and how we how we work with our <unk>.

<unk> and the technologies that we deliver and the ways that our customers want to consume it it's the recipe that works.

Yep.

That if I may.

And broad markets.

Very very strong results.

The result is strong and you also have the rumors about sustainability.

And some semi is across the supply chain and I've spoken about.

And some modest inventory restocking at non distribution channels of addressing consumer electronics and so.

Perhaps you could discuss your lead times here and what proactive measures you may be taking that could limit any double ordering.

For your Wi Fi and audio solutions. Thank you.

Sure we have a very.

Close look in at the pipeline and and and the supply chain of course, so one of the things that I'm sure. You know about Sky works is that we're vertically integrated so we're building product and our own factory, we're customizing and our own factory from filter to gallium arsenide to packaging and test all of that is done in house. So there's two things there number one it mitigates some of.

<unk> and mitigate some of the risks that we're seeing with the overall chip supply chain constraints, there's still some but we're going to fare much better than others, but on the other and we are very close to our customers and the channel.

We try to keep that as lean as possible. So we get the real demand and the natural demand and and that's the way we want it.

The diversity and broad markets, though is a theme that we should think about here because we really are expanding the aperture.

It's multiple technologies, whether it's Wi Fi or Wi Fi six of our Bluetooth.

The EPS, but then there is a broadening set of customers that have that have stepped up and joined the skywalk saw the design win team. So theres a lot of diversity within the broad market portfolio.

But there's also a lot of technology differentiation that allows us to gain share and we're looking forward to continuing to put up above market results and that category.

Our next question comes from the line of Blayne Curtis from Barclays. Your line is open.

Good afternoon, and thanks for taking my question just wanted to ask on gross margin and then as part of the if I know you are catching up in March after a very strong December, particularly if one customer so maybe related but kind of two parts there just aren't.

How are you and the process of catching up and then if you can just comment on the gross margin. It is down a bit and June obviously revenue of about 50% you've been kind of the 50 and change the range for a while and what's the drivers of the margin to be down in June.

Yeah Blayne.

The restart of the gross margin question first of all I was pleased with our actual result at 58 in the fiscal Q2 up 60 basis points on a year over year, despite the somewhat challenging and tight supply chain environment as you're well aware, we are guiding here 50 and a half.

The midpoint for fiscal Q3, which is up 40 basis points year over year slightly.

Slightly down from Q2.

On slightly lower revenue as we are going into our slowest seasonal quarter of the year.

But we do of course and expect further gross margin improvement and the second half of the year as we start ramping as we usually do in the September and December quarter.

Okay.

Thanks, and then maybe just the the first part of the question just catching up on the customers and any.

The additional color as to how you are and that process and.

As of June.

Yeah, No I mean this is a.

And then vitamin water is very strong demand across the board and as Liam pointed out to you as well we've done really well.

The meeting that demand despite the tight supply environment, and we control that through our own factories, we've been putting in a lot of capacity proactively because we knew that this big strong cycle with 50% year over year growth was coming towards us as we moving into five G and so we've been.

Executing well now we do buy some stuff from third parties and that's a little bit tight, but given the size and scale. That's kind of works have and the strong team that we have we've been executing pretty well there.

Your next question comes from the line of Chris Caso from Raymond James Your line is open.

Yes. Thank you and your first question with regard to the the the China OEM business could you describe what.

What's going on there we heard Mediatek report earlier. This week. It was a really strong first half of their guidance seem to suggest some flattening out.

Into the second half.

And how is that.

Going for your business.

Sure, Chris well, obviously the off the China market is very important to the overall ecosystem and we are doing very well and that space again and players like Apple vivo Xiaomi and then media attack a whole another angle, which we've been working with Mediatek for years of very strong.

Baseband provider and we have unique technologies that wrap around their core baseband and we've been doing that for quite a while so we still feel very good about about China. It is lifted off first and the <unk> landscape of course there is.

The tremendous amount of opportunity between now and the next four of five years and more as we populate and and drive thoughts subscriptions and <unk>, but with the Mediatek side, we were gaining market share and mediatek and their platform is getting stronger and more powerful more potent.

And it is one of the leading platforms. When we look at APAC and again populating. Some of these brands and also hitting some sort of some new markets as well. So the mediatek relationship. We have is outstanding at the technically driven relationship. We know the company, we've been working with them for years and those solutions often portfolio out and.

The Android ecosystem with the names that we mentioned the <unk> et cetera. So.

Got a very good handle on that and and the other thing Chris here is that these customers really like the fact that we grow our own technologies develop.

And on packaging and test can get very very flexible can integrate and of sky five solution that makes it very easy for them to go to market and so theres some unique elements and the skywalk strategy that go beyond just kind of the parts right. So that's always been a key play for us and and players like like Mediatek.

That's an ideal solution for them.

Thank you.

Follow up follow up question is on the Opex and moderately on a year on year basis, but obviously up a lot less and then the revenue growth rate.

And not necessarily talking for the short term, but over the next couple of years.

Whats the plan and Opex do you invest some of the cash flow you are getting now.

And it's substantially higher rate.

Is this opex level that you're at right now are.

Sufficient enough to kind of drive the sort of growth that you guys want to see.

Yes, Chris.

I mean, we've been talking about that a lot.

We will continue to invest and our business and.

And we are a technology leader, we want to continue.

To expand our reach.

And to that very rich ecosystem, and we are not hesitating Dan so.

The flip side of course, we are very efficient and how we do it and what we do.

Our total opex is running on or about 13% to revenue.

That's the that's an area of ZIP codes, where we want to keep it obviously that are if you look at it during the year. There are seasonal swings of the revenue goes up and down but longer term and that's somewhat like 13% of revenue.

That's the that's a good place to be yes.

Yeah, and I'll, just just to add to that remember the leverage that we have and our business and we are a company that we are.

Driving the broad market portfolio with the big dollars and of mobile portfolio. So our business is very much focused on that execution and our design teams know how to develop products that have and incredible market market reach and so that's the thesis behind that and certainly we're funding R&D.

<unk> to the level of needs to be funded we know exactly where we're headed there and we're investing and aggressively technology investments and our fabs and our packaging houses.

And really just the platform that we have and sky five as we move forward. So all of that kind of we used together and you get leverage because these are these are really strong markets that have.

The pretty potent unit.

The curve all of them as well so part part of the strategy is is to really drive of solution that can then.

And then off the revenue, but still have that same that same core. So that's a unique element of the skywalk and as Chris said, having your own fab, having your own manufacturing Assembly and test all of that under under multiple rooms, but our own roofs makes a big difference for us.

Your next question comes from the line of Gary Mobley from Wells Fargo Securities. Your line is open.

Hey, guys. Thanks for taking my question I had a multi part question to start out with I think when you started the fiscal year, yet a pretty optimistic view on.

Your mobile related revenue tied to the non iOS community and.

And my question to you is.

Are you at a point in the year now that we're in somewhat of a law that you are able to.

Service those Android smartphone customers to the fullest extent or are you really are perhaps being.

Over extended by trying to service your largest customer.

Yeah, that's of Great question, and I will tell you the.

The the Android ecosystem right now is really strong and and we're putting up excellent numbers and that part of the part of the landscape. So theres no wall.

And there was some supply chain of hiccups here and there, but we're still executing to a very aggressive path. We've got the demand we have the technology thats needed.

And we're doing that.

In parallel with great outcomes with our largest customer.

So that's that's definitely moving and the right direction and it's for.

And the reasons, we talked about we have a great <unk> E <unk>.

Multi year, and I mean, really multi year opportunity here for us and others and and we have of technology curve that we talked about and the prepared remarks stuff is getting this is really challenging stockpile and companies that have invested in R&D and invested and their fabs.

And work closely with their customers are going to be the winners and we're going to be at the top of that list. So we feel really good about that and it's absolutely our mission to deliver across all of the different segments and mobility.

I appreciate the color of Liam and as my follow up and.

And I want to nitpick here, you guys have been producing great results, but.

Your you had a higher mix of broad markets revenue and in the March quarter, and I think it was pretty substantial.

The mix upside you know for that particular business unit.

And so my question is why are you guys not able to deliver.

More upsides of the gross margin just given that higher than expected mix of broad markets.

Yes, so the broker.

Market mix and the quarter came in in line with expectations. So there was no surprised at I mean, we did 22 million or better than what we guided but that was somewhat across our full revenue portfolio. So there was no change to have and again from a gross margin.

We were up 60 basis points year over year, despite the challenging supply chain environment and there are some of it.

The increased input costs.

And that needs to be absorbed and despite all of that we continue to demonstrate year over year gross margin improvements.

Okay.

Your next question comes from the line of <unk> Srivastava from BMO capital markets. Your line is open.

Hi, Thank you Chris on the margin front when should we expect the input cost increase that.

And as noted due to COVID-19 and.

And then.

I had the follow up.

I mean, they're already input costs right. This is not new the tightness and the supply chain.

<unk> has been there now for several months.

And so instead of course again, we're working it really hard and we have long term relationships with our suppliers.

We have the size and scale.

And as well and and again the team is working it really hard and I think we will definitely see some improvements there going into the second half of the calendar year.

Okay, and with respect to second half calendar year EMEA, maybe a question for you there's no such thing as normal seasonality, but.

Given everything that's going on and the supply chain, what's the best way you could describe for us too in terms of the expectations for the second half.

The calendar year that we should expect versus what the normal seasonally it would be.

Yeah sure I mean, we absolutely expect to grow and the second half of <unk>.

And there's a lot of opportunity out there and still very early and <unk>. The broad market print that we put out and what really matters, there and if I can.

I can't show the show this to you and the conference call, but if you saw the breadth of customers.

The breadth of customers number one really really stepped up and then the diversity of the technologies that those customers consume was also a really.

And incredible opportunity for us and to be realized so that's the important thing and then you go to the strength and mobility, which will come and the second half. We know what we've won there were a lot of really difficult challenging.

The opportunities that we've been able to win and that should be.

The apparent here and the second half so there's some stuff happening right now that we're knocking knocking the cover of the cover of the ball off and broad markets, while the diversity with customers diversity and the technologies, we bring and then and core mobility of the SEC.

Half of the year, we think will be strong and we know what we want and we know what we'd comps consummated and the key to sites and it's all good on that front.

Your next question comes from the line of Timothy Arcuri from UBS. Your line is open.

Hi, Thanks, a lot Chris.

I I think your largest customer last quarter, you said it was 70% of revenue.

Obviously, it was down this quarter, but can you give us a sense of maybe how large it was in March.

Yeah.

And the largest customer.

Yes, it was approximately 50% of total revenue.

Okay awesome. Thanks, so much and then I guess a question on what's assumed in the mix for the June guidance.

Typically broad markets of sort of you know I mean, there's not really that strong season now of the in broad markets, but usually it's up about 10% sequentially. In June is that about the right assumption for broad market. Some of the can net out mobile to get the mixed for Jim.

Right so.

And total company, we guide of June down 6%.

And so when you look at mobile and broke markets broke markets is going to be flat to slightly down.

And then of course on the flip side you have the mobile business.

Yeah, and you have of year over year number that is 60% year over year Q3.

Right. So total total business.

It's up 49, and 50% on autopilot and saw broad markets. There continues to do really well.

More than 50 closer to 60% on a year over year basis.

Your next question comes from the line of harsh Kumar from Piper Sandler Your line is open.

Yeah, Hey, guys sticking to that team of the broad markets could you maybe help us understand where that strength.

And you saw that incremental spend and broad markets, where did it come from I know you mentioned and it was broad and it wasn't leaning towards any one particular technology of our end market.

Yeah. It was quite diverse harsh, but I would say unique strength and and higher and Wi Fi Wi Fi six and <unk>.

A lot of connected home applications that we consummated.

The wireless infrastructure has picked up a bit Nokia and Ericsson and we mentioned them and the prepared remarks.

And to do a little bit more with automotive as well so it was.

Great quarter and broad markets, it's the.

The type of output that we're capable of doing consistently and growing consistently.

As I said earlier and the call the diversity of the customers was really unique for us so more and more companies that had not.

And not been customers of Sky works are now customers of Sky works and we'd love to see that and once we establish a beachhead with some of these players we can do a lot more so and as you heard today needs like Microsoft and names like Sony.

The names like GM, and onstar and moving into industrial markets, that's all coming together and the <unk>.

Nice thing is it's using the kinds of needs and we.

Needs the technology that we have and we havent ready for them. So it's saw it isn't the case, where we have to spin up something unique.

By and large the technologies that we have now of ready to go so we're able to deliver those solutions and Wi Fi and deliver those solutions and the cellular format, whether it's <unk> or otherwise.

We have the technology protocols to address what the customers want and so and we will continue to do that and I think some of the the the impacts that we've seen with the COVID-19 crisis is that the ability to be flexible and adapt and we've seen the usage case change where we have customers that were not non interest.

And some of the things that we did or didn't have the need for it and now mobility and connectivity has become paramount and critical and essential and that's driving our business and ways that we really didnt anticipate.

But we understand and deeply and and as we move forward, we're going to continue to develop both of those customers and and bring the best technologies, we can to each and each and every one of their own applications.

And the Liam I wanted to and that was very helpful. By the way I wanted to switch to mobile and ask the longer term type of question.

Since as long as I've covered you guys for the entire <unk> cycle.

And the increases were somewhere in the call. It seven the 10% range consistent and that was that was always the case, how do you see that cadence for five of Gee, There's a lot more bands and there's a lot of stuff going on there as you know a different frequency is being added spectrum C band et cetera.

Is that number a number that is likely to go.

The content add number and on a yearly basis that a number of thats likely to creep up because of all of that <unk> brings.

Yes, absolutely and it.

And really if necessary. So if you just think about at the high level.

Even the backward compatibility of the mobile phone today, you still have <unk> and completely and sometimes even <unk>. So you have elements of <unk> and <unk> and then you have <unk>.

We're also extending the spectrum. We're typically if you looked at a three year of <unk> foam and youre somewhere between.

700, Meg to one gig now we go from one gig to six gig and even higher so there is new spectrum and the <unk> Theres new challenges, there's new technologies that need to be brought to bear and then the ability to integrate that and.

And a fungible asset the delivering that as the complete system and our customers can assimilate that.

That is really special and we do that and and that's back to the comments that Chris and I made about having our own technology, having our own factories having.

Having unique packaging and assembly and test to really customize a full solution and the complexity is going up substantially and the complexity is what drives the content gains.

Your next question comes from the line of Craig hit and Buck from Morgan Stanley. Your line is open.

Yes, Thanks, I, just coming back the broad markets I know if of parts of that business you've been supply chain are constrained and are you catch.

Or are there still pockets in terms of where you're trying to kind of catch up to demand and broad markets.

Sure Frank that is one area that we are we're getting there, but theres still some catch up work to be done.

Broad markets is more diverse.

It's a.

Set of customers that is 10 times broader than what we have and mobile. So two designed specifically to each one of those applications is a great opportunity, we're pursuing but there have been a few bumps and supply chain and.

Chris mentioned, we're faring better than most because we do have our own fabs, we have our own assembly and test we can control our destiny for the most part but there still are a few wrinkles and supply chain that are being ironed out and it does have a slight headwind on GM and cost as you can.

B some lack of price reductions by some of what some of our suppliers there as well.

Logistics issues with next slide outs and things like that so there's a couple of things that pop and that create a bit of the headwind but.

But the broad markets business will continue to move and I think we'll certainly see these supply chain hiccups and.

It out very quickly.

Got it and then just as a follow up Liam and any update on some of the Bod design activity that you're seeing.

Yeah the bot.

All of the signs are doing great.

And you could see and the current lineup of phones today across multiple customers.

Our sky five solution is bringing in more and more bulk acoustic wave. There's also some bulk of bulk acoustic wave technologies and some of the wide body engines that we have and as we start to look out into the second half of the year.

You should expect more content underpinned by our own organic while our own organic boss systems as we move forward and so we feel really good about it. We've also made the investments and our fab technology to deliver that to deliver the solutions. So there's a lot of good work that's been done and we're going to be able to reap the rewards of that as we go forward.

And the second half and beyond.

Your next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Your line is open.

And thank you.

And I was just wondering if you had some visibility into the infrastructure deployment, maybe as you go out and to the second half of the year and in particular and maybe the C band.

Is that deployments and the antennas are coming and the second half.

Yeah, and that's of Great question, a couple of things. So first of all infrastructure had had been lagging a bit and this whole mobility ecosystem and specifically and <unk>.

So as we mentioned in the and the call we are starting to see.

More energy and rollout saw with some of the key players in Europe, and Nokia's and the Ericsson, specifically and we have great technology, there with Mimo solutions small cell solutions.

A lot of the core recipes that we need and gallium arsenide and other places. So we feel really good about it it's been it's been slow, but its starting to pick up and.

And it's the necessary as you move into <unk>, it's necessary as we build out that spectrum and then as you and as you mentioned the C band auction.

Is great now because that money has been spent and the carriers want to deploy.

More and more.

They basically want to leverage that.

Technology as quickly as possible. So all of the infrastructure is going to pop up a little bit there and it also could add content opportunities to the core mobile device. So you have a few of up to a two pronged approach there with the infrastructure side and we have positions. There and then of course, when we look at C band and the unique spectrum, there and there's going to be devices that will need to be NAV.

Gating and and and populating that spectrum within the handset so that that's something that that's starting its been happening, but there's there's definitely lots of room to move on that and.

Okay, great for that the thank.

Thank you for that answer and just for your.

And your Capex spending can you say is there anything new and what you're spending it on or is it mostly just capacity expansion.

So the.

Our capex.

Two main drivers day and of course, one is just expanding the capacity as the business is growing at 50% year over year right now and so we definitely need to support that but then the addition to that there is a big part of the Capex that is technology related making the investments and our.

Gallium arsenide power amplifiers and <unk>.

Making the investments and our filter operation Tc saw and as Liam talked about the bulk acoustic wave also and our backend of operation with more complex higher performance packaging technologies and.

So that is really driving a differentiated product offering and that's why we win and the marketplace, but and but we have to support that of course with putting up the capex dollars and I would only flops.

Your next question comes from the line of Harrison and Barrett from Arete Research. Your line is open.

Alright, Thanks for taking my questions could we get some color on your share and to the China Oems is there and RF product area, where youre seeing particular traction or are you tending to see a broad mix across your addressable content.

Yeah, I mean, the of the demands in APAC up and very solid very strong and oftentimes we have customers that were <unk> and the lift into <unk> is actually quite substantial and so and some of the comments I just made and the with the last caller. There's unique technologies that are required and <unk> that went.

Not in the <unk> phone. So we're seeing a lot of that pickup so beachheads with the accounts were in that have been strong and <unk> and <unk> now need to augment and extend their content to be of player in <unk>, So and we're starting to see that happening. It's been building up our China has a long way to go to really match some of the.

The premium brands that we see and and and the U S and some other countries, but there's a lot of there's a lot of opportunity to grow that technology and grow the business there.

It's also a market that really does value connectivity and mobility.

It's a core and essential.

Element within that marketplace and in that region, and we differentiate with our ability to offer that complete sky five solution and really.

Remove some of the complexity of that our customers may have when they're launching new technologies.

Great and then sort of continuing on that theme there was a lot of commentary about millimeter wave and traction.

And traction in Asia, I think China, particularly from one of your competitors yesterday do you have any updates on the old millimeter wave right now.

Yeah, we're working on millimeter wave, but it is its really kind of a narrow slice within within the mobility architecture right. Now so we've got some some work to do on the infrastructure side, but we know how to do that and we've got some investments in the handheld side as well.

To augment and so we're continuing to drive that but at the same time in the core RF, let's say one gig to six gig the opportunities continue to move on.

And the spectrum needed continues to be more and more complex. The C band auction that was just mentioned is the big driver.

And it's really that's the technology that you would take anywhere and the challenge with the millimeter wave is that you have subsea.

Substantial current consumption needs.

You have the physical size that is that's the challenge and a mobile phone and then you have point to point at the parent so it's a technology that could have.

Use and certain environments work going into the stadiums where campus environments.

And of course.

It works, but if you look at what we can do and five G. Today with the solutions that we have today and the spectrum that we have today it's incredible.

The speeds the performance of the latency.

And and the ability to volume and expand that signal anywhere unimpeded. So it's it's going to be a challenge and like anything else I mean, theres layers and the cake right. There is you have your low band mid manual high band and you could have.

Unique spot at the top that delivers the millimeter wave cycle. So.

It's all of their we understand it we know how to navigate through it and we know how to work with our customers to ensure that they get the best solution.

And your final question comes from the line of Rajiv Gill from Needham <unk> Company. Your line is open.

Yeah.

Yeah.

Again Rajeev Gil your line is open.

Great Chris.

Thanks for taking my questions.

The thing if you could.

Discuss the linearity in the in the quarter I think last quarter. It started a little bit slower and then accelerated.

<unk> and wondering how that shaped up this quarter.

And wondering if you if there was any signs of pull ins during the quarter.

So let me first talk about the March quarter. The linearity was just the perfect.

And it.

Was evenly spread amongst the three months within the quarter and of course now and in June we are going through our slowest seasonal quarter. So.

And somewhat in the middle of the quarter you hit the bottom and then you start ramping up.

Ramping up towards the second half of the calendar year, where again, we're very.

Very bullish about the opportunity there for us to produce strong sequential growth into September and December.

And Liam you mentioned Youre integrated modular approach and particularly giving you.

Vantage and I'm wondering how you would characterize the RF content gains this year versus say last year with the kind of the the first initial rollout of the <unk> phones and integrated modular approach.

Providing kind of more tailwind in terms of RF content, particularly and kind of the mid range of the <unk>.

Market and China any color there in terms of how youre leveraging the integrated approach to either the gain share or increase of RF content. Thank you. Yes. Thank you great question, Yeah and that this is it.

This is exactly why we developed our sky five solutions, we know how hard it is to deliver a <unk> socket with all the bells and whistles that can handle spectrum across the board a handle the.

Plex city of roaming the size of constrained the current consumption and it's really hard. So we spent a great deal of time, creating a solution that makes it very easy for our customers to go to market, although the hard work underneath within the skywalk cover the Scottrade module is not easy so we have the ability to deliver the filtering technology.

And he has all the way from sort of TC saw the bulk acoustic wave our own customized gallium arsenide devices unique assembly and test and packaging in house and wrapping that together with a lot of these players that really need that knowhow. It's been of great. Great opportunity. This is something that we have been.

Thinking about and working on for years. So this is a purpose built solution. It is not something that we just turned on this year. This is something that we've been working on for quite a while but the higher the complexity that we see and the market is and the handset the better we do.

And youll see that across the board youll see that with launches this year youll see that with phones that are out there now and the complexity continues to rise that drives content and the consumer demand for the technology around mobility just continues to grow so it's a great market to be in.

But theres a lot of problems to be solved and that's what really gets us excited and and it puts us and are positioned to outperform.

Yeah.

Ladies and gentlemen that concludes today's question and answer session I will now turn the call back over to Mr. Griffin for any closing comments.

Thank you all for participating on today's call. We look forward to talking to you at upcoming conferences during the quarter. Thank you.

Ladies and gentlemen that does conclude today's conference call and we thank you for your participation.

Okay.

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