Q4 2021 Qorvo Inc Earnings Call
Okay.
Good day and welcome to the Corvette and incorporated Q4, 2021 conference call. Today's conference is being recorded at this time I would like to turn the conference over to Douglas Toledo, Vice President of Investor Relations. Please go ahead Sir.
Thanks, very much Hello, everybody and welcome to Carbos fiscal 2020, one and fourth quarter earnings Conference call.
Call will include forward looking statements that 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 contained and the earnings release published today as well as the risk factors associated with our business and our annual report on form 10-K filed with the SEC.
Because these risks these risk factors may affect our operations and financial results and.
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 and analyze financial performance without the impact of certain non cash expenses or other items that may obscure trends and our underlying performance during our <unk>.
Call, our comments and comparisons to income statement items will be based primarily on non-GAAP and non-GAAP results for complete reconciliation of GAAP to non-GAAP financial measures. Please refer to our earnings release issued earlier today available on our website at <unk> Dot com under investors joining us today are Bob <unk>, President and C.
<unk>, Mark Murphy, Chief Financial Officer, James Klein, President and corporate was infrastructure and defense products group and Eric Creviston, President of Corn goes mobile products group as well as other members of <unk> management team and with that I'll turn it over and above.
Thanks, Doug and welcome everyone and CT.
And I've concluded our fiscal 2021 with an exceptionally strong March quarter.
Quarterly revenue gross margin and EPS were well above guidance.
Outperformance was driven primarily by <unk> smartphones, and Wi Fi six and 60.
Demand was broad based across customers and design activity suggests continued strength and fiscal 'twenty, two and supported by multiyear trends and wired and wireless connectivity markets.
And smartphones the adoption of <unk> is driving demand for higher value content.
Device architectures are increasing in complexity as higher frequencies with wider bandwidth are added.
Transmit is introduced and the diversity path.
My mom architectures are adopted and.
And new receive pass featuring carrier aggregation and this.
This is placing a premium on kormos highly differentiated semiconductor technologies, and enabling us to supply and expanding portfolio of products and the industry leaders.
For calendar 'twenty, one we expect <unk> smartphones, so double versus last year within these phones, we expect the RF content to increase five to $7 per phone when compared to <unk>, including and the mid tier.
Turning to the March quarterly highlights corbo achieved record shipments of low mid high and Ultrahigh band main path solutions, and Wi Fi six defense and support our leading Android Oems.
On the design front, we continue to expand our content opportunity with the leading Android Oems by securing complete main path solutions and secondary transmit and the diversity path.
And ultra Wideband corridor was selected by a leading provider of consumer Iot products to integrate ultra wideband and into a broad set of connected home devices.
More customers are looking to add ultra wideband to their products to take advantage of its superior location accuracy security and latency compared to other wireless technologies.
Non interest and Kormos Ultra wideband solutions has been robust and we continue to see adoption and smartphones as the catalyst for and expanding ecosystem of connected devices that includes associated periphery automobiles consumer and industrial Iot applications.
Finally, and mobile we're very pleased and honored by Samsung with the Best Quality Award recognizing core growth innovation and outstanding performance and support of their galaxy product families.
And IDP Wi Fi revenue, including Wifi six was a record the rate of adoption of Wi Fi six is outpacing the adoption and we experience for Wifi and.
And the rollout is forecasted to span multiple years across enterprise and retail and service providers.
And I was seeing a strong attach rate given the performance advantages, we enable related to range efficiency signal integrity and form factor.
And we recently secured the entire bill of materials and support of a major U S. M S on gateway.
We also released multiple five G five gigahertz.
And that deliver improved ban and isolation and enhanced capacity and range and Tri band Wifi six mesh networks.
And broadband Msos are increasing downstream and upstream data capabilities by upgrading to DOCSIS three one infrastructure.
During the quarter, we expanded shipments of DOCSIS three one Gan power amplifiers to major U S msos offer and greater efficiency longer range and increased bandwidth and maximize upstream and downstream data connectivity.
And automotive.
Service has per year has been successful supporting the increased demand for in vehicle infotainment.
During that time, we've expanded our automotive portfolio and engage with customers to enable the transition to connected car through cellular VX.
And the March quarter. These efforts helped to generate the first production orders for our cellular beta ex front end modules and bonk coexistence filters to support the leading European automotive Oems.
No.
And most high frequency ball co existence filters also enable the concurrent operations on cellular beta ex and Wifi.
And programmable power management customer demand has been strong and support of two trends first the transition to solid state drives and this ongoing primarily and laptops and gaming consoles during.
During the quarter Corvo is programmable premix continued to support this transition with expanded shipments too and new engagements with multiple leading solid state drive providers.
Second the transition to brushless DC electric motors is accelerating enhancing efficiency and a broad set of consumer products, including power tools and appliances.
<unk> increased shipments of motor control solutions during the quarter supporting multiple major consumer brands.
And defense applications, the shifts to higher frequencies, the adoption of phased array radar and the proliferation of gang are among the trends supporting demand for courthouse products.
Radar applications, we released a reconfigurable Dolby and Tam power amplifier Amendment for.
For the S and X band and he'll be doing more compact and next generation radar systems.
Over 30 million miles away.
A successful landing of Nascar's J P. L. Morris perseverance Rover, well supported by our components integrated into the Rovers defense radar.
And infrastructure, we continue to ramp shipments during the quarter, So base station OEM and support on you.
U S C band and massive Mimo deployments and we captured initial design wins for massive mimo deployment, and Canada, Japan and Korea.
Corvo brings decades of technology leadership, and wireless infrastructure and we are leveraging the full breadth of organic power and small signal portfolio to support Oems on upcoming five deployments.
We have strong customer engagements, we are investing and critical enabling technologies and design activity remains robust.
We see tremendous opportunity and <unk> infrastructure globally over the next four to five years as deployments continue to rollout.
After the quarter close we received and emergency use authorization from the FDA for Omnia COVID-19, rapid antigen test, which leverages high frequency boss sensors for high sensitivity and specificity.
Corvo began efforts to use boss sensors to develop diagnostic test solutions in 2013, and a manner similar to how we leveraged our ball and filters to achieve superior frequency selectivity and RF applications.
And now with the authorization from the FDA, we are preparing to scale production to help support ongoing public health efforts.
To that and Corvo was awarded a contract with the National Institutes of health through the rapid acceleration of diagnostics or <unk> initiative.
With $24 million from the biological advanced research and development authority or BARDA. The award is helping to advance the production and market launch over on the diagnostic test platform.
Also after the quarter closed Corvo acquired next input a pioneer and the emerging field of force sensing solutions for the next generation of human machine interface.
Next input will be part of the mobile products, providing mems based sensors and innovative products for customers and existing and new markets.
Have shipped tens of millions of Mems based sensor solutions for leading manufacturers of smartphones and wearables automotive and automobiles and other applications.
We see multiple opportunities for their solutions to augment or displace capacitive touch and mechanical buttons with smaller more reliable and airtime solutions are applicable to any surface, including glass polycarbonate aluminum and carbon fiber, we welcomed and.
And put teams and our corvo family and.
We are excited to expand our technology portfolio and accelerate the deployment of the technology to our broad customer base and new markets.
Before handing the call over to Mark I want to acknowledge the entire corvo team for their commitment to supporting our customers and keeping the world connected car.
Corporate is enabling multi year upgrade cycles, and existing markets and and introducing disruptive technologies, including ultra wideband RF based biotechnology testing and Mems based solutions.
We expect broad based and market demand for our products and another year of strong financial results and whatnot.
I'll hand, the call over to Mark.
Okay.
Thanks, Bob and good afternoon, everyone Colorado's revenue for the fiscal 'twenty, one and fourth quarter and was 1.073 billion $33 million above the midpoint of our guidance and up 36% or $285 million versus last year.
And mobile products revenue of 808 million was on 45 per cent year over year on the growth of higher content and <unk> smartphones.
Infrastructure and defense products revenue and $265 million was up 14% versus last year led principally by robust Wi Fi demand.
And the fourth quarter of fiscal 'twenty, one we deliver our third consecutive quarter of gross margin over 50% non.
Non-GAAP gross margin was 52, 6% and above our guidance as less favorable mix was more than offset by better and better than expected price manufacturing cost and inventory charges.
Non-GAAP operating expenses and the fourth quarter were $207 million or 19, 3% of sales and in line with expectations.
Sequential and year over year increases and Opex were driven by technology and product development expenses associated with recent acquisitions and other key growth programs.
Non-GAAP net income and the fourth quarter was $315 million and diluted earnings per share of $2.74 was 32 cents above the midpoint of our guidance.
Cash flow from operations and the fourth quarter was $403 million and Capex was $77 million in line with our expectations.
Capex for the year was $187 million and below 5% of sales.
During the quarter free cash flow was $325 million, and we repurchased $175 million of shares.
On the balance sheet, Inc. On the cash on the balance sheet cash increased to $1 $4 billion and debt remained unchanged at approximately $1 $7 billion.
Our leverage remains low and our revolver is untapped and we have no material near term maturities.
And April S&P upgraded our credit rating to investment grade, reflecting the steps we've taken to profitably grow the business and maintain a strong balance sheet.
Yeah.
Before turning to the outlook I will comment briefly on the past year.
Corporate and full year fiscal 'twenty, one performance realized what was envisioned at the time of the merger.
Create and enterprise, that's able to serve customers technology and product needs and when connectivity trends accelerated and as product performance requirements increase.
Carbos commitment to R&D, and active portfolio management, and sustained productivity and capital discipline and positioned us to serve our customers' needs expand supply chain partner opportunities and improved financial results.
In fiscal 'twenty, one corvo delivered revenue over $4 billion non-GAAP gross margin over 52%.
Non-GAAP operating margin over 32 per cent.
And free cash flow over $1.1 billion.
Corvo is free cash flow has increased fivefold over the past four years.
We are committed to build on net and are investing and executing to do so.
Now turning to our current quarter outlook, we expect revenue between $1.065 billion and 1.095 billion.
Non-GAAP gross margin of approximately 50 per cent.
Non-GAAP diluted earnings per share and $2.45 and the midpoint of our guidance.
Our June quarter revenue outlook reflects sustained and broad based customer demand driven by multi year technology upgrade cycles.
And mobile demand for five G is adding RF complexity and driving higher content.
We forecast mobile revenue and the current quarter to be approximately $810 million at the midpoint or <unk> 73 per cent year over year.
And I D. P. We project revenue of approximately $270 million and the current quarter sustained by Wifi six demand and other markets.
Our June quarter, and gross margin guide is approximately 50%, reflecting seasonal patterns and less favorable mix.
And is up 140 basis points versus last year on higher volumes active portfolio management and pricing and continuous productivity efforts.
We expect our June quarter on gross margin being the lowest gross margin quarter of the year.
Non-GAAP operating expenses are projected to increase and the June quarter to around $214 million on added labor and other development expenses associated with recent acquisitions and key growth programs.
At the midpoint of our June quarter guidance operating margin and is forecast to be over 30% for the fourth consecutive quarter.
We project, our current quarter and full year non-GAAP tax rate to be between nine and 10 per cent.
Capital expenditures will remain around $70 $70 million and the June quarter, as we work to intersect projected demand and support long term supply agreements with multiple customers.
For our full year fiscal 'twenty, two we forecast approximately 15% revenue growth on an increase and smartphone volumes and a range of 5% to 10% and.
A doubling of five G handsets.
<unk> Wi Fi and demand.
And growth and other markets, including power management and defense.
We project full year gross margin to be approximately 52 per cent.
We expect opex to increase sequentially through the year.
And remain below 20% of sales for the full year.
This level of Opex is in line with what we laid out years ago and supports corvo is ongoing product and technology leadership.
And existing markets, while funding investments and newer areas such as U W. B.
Bio sensors power management and mens.
We forecast other expense to drop slightly on lower interest expense, but remain above $60 million.
We see capex around five per cent of sales so up on an absolute basis and.
As we add capacity intersect known and high confidence opportunities.
We expect free cash flow to growth year over year modestly due to slightly higher capex and working capital build.
Based on our strong free cash flow performance in fiscal year, 'twenty, one and our fiscal year 'twenty two outlook, along with our substantial balance sheet capacity and other factors. The board of directors has authorized a $2 billion share repurchase program.
Amidst the pandemic, the corvo team executed well and serving customers and advancing technologies critical to a more connected world.
Entering fiscal 'twenty, two we are well positioned to continue delivering premium technology to an expanding set of customers and five G. Wi Fi Iot defense power management and other markets.
Okay.
In closing I'd like to join Bob and thanking cargo employees again for their contributions over this past year.
Now I'll turn the call back over to the operator for questions.
Thank you.
If you would like to ask a question. Please press star one now and in order to accommodate everyone's questions. Please limit yourself to one question and one follow up.
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We'll pause for a price moment to allow everyone the opportunity to enter the queue for questions.
And we will take our first question from Blayne Curtis with Barclays.
So my question and nice results I wanted to ask you on IDP you.
And many many positive drivers.
The business and it's kind of flattish here.
And just kind of curious if theres any areas that are going the other way for you and.
And I guess do you expect that to reverse as you move through fiscal 'twenty two.
Yeah. Thanks, Blayne I mean, we certainly have had a great positive years and we exited the year grew.
38%, mainly driven by really strong demand and wireless infrastructure, but also a great year and Wi Fi with the consecutive double digit growth quarters.
And both defense and power management also haven't really strong years. So I'm really pleased with the results of our physical 2020, one we've been pretty public about the slowdown and the water infrastructure business and in the back half of last year and and we certainly see that continuing as we go through the first half of this year.
We think it will start to pick up in the back half of next year as deployments and China start and then certainly we expect C band to start to roll out in the United States as we get into the back half of the year.
So you know overall I would expect base station to start to pick up a bit.
But I think if you if you look at full year variety P base station will actually probably be down a bit.
And and we will see significant growth and some of the other markets.
Thanks, and then maybe just a follow up from that.
Mark gave the low.
This call low because the top line do you think I E B and growth this fiscal year.
Okay.
Yeah, Blayne and I'll I'll I'll take that one.
Yeah based on based on the guidance I gave you you'll you'll see that we are expecting IDP to grow and it'll be and the lower end of the range of games typically yeah, she gets 10% to 15% per year.
And we'll be on the lower end of that range.
Given the dynamic as James mentioned, we expect to see.
Yeah lackluster infrastructure build out.
And the first half and we're expecting that to pick up and the second half, but we're also seeing.
Yeah, and his business just great opportunities to continue and Wi Fi power management is growing strongly on the defense business is strong and durable I'm. So I'm still a great year for his business ahead of us.
Thanks appreciate it.
Thanks, Brian.
Thank you and we will take our next question from Bill Peterson of J P. Morgan.
Nice job on net quarterly execution, and guide and and thanks for giving the color on the on the full year, but.
Just wanted to come back to infrastructure. It sounds like most of this may be more related to the market delayed timing and maybe perhaps a china build outs, but I guess just trying to understand you know the competitiveness of your business is just going down and it's just a delay and the market or is it mixes and it relates to no more macro versus a massive mimo and any color on it.
And give on why.
And why we're sort of flow to start I gave some infrastructure.
Yeah. Thanks, Bill I mean definitely the market has slowed down I think it's been pretty public across you know many of our customers and our competitors as we've seen these deployments and and tenders delay and China.
The other thing that's happened a bit is mix.
And again, we've talked about that over last couple of quarters as the mix has shifted a little bit from from 64 element arrays to you know more macro base stations and more 32 element a race now that said you know I I am very happy with the portfolio that we have we continue to invest and the technology and both AR and the Gan side for Powell.
And in the small signal side. So I'm you know I'm happy where we are and I think we continue to make progress there and we're and the very early stages. So this is just beginning we've had one year and China. We're just starting really in the U S and and the rest of the world. So this is gonna be a multi year trend I think we're positioned very very well with our portfolio.
And we have and of course, we're obviously not going to sit still and we're going to continue to to drive that business forward and invest in technology and make sure that we're able to do what we did last year with the early Rollouts in China.
Thanks for that and and then maybe for Eric.
On the mobile growth is implied to be faster than a 50% based off of that you know James is coming on a bit less so within within that growth the growth outlook.
Where do you see the most growth coming from is it.
And with these sort of four main pathways and the Android camp and.
Is it a further I mean, including further adoptions of dual transmit.
Hmm.
And you'd have to believe where where do you see there what's driving the most growth within within your business and this fiscal year and I guess at a high level.
Right well certainly in the near term and currently where we are today. The the the full main pass solutions are just getting a lot of traction that brings a lot of dollar content with it, especially as we look and the forward look on the future and see all the new bands coming and so forth, but also just on all of our complexity around the antenna it comes.
With all of that as well right and its complexity goes there's a lot more antenna tuning and antenna flexing and and so forth. So that's still a strong market force and Wi Fi as well and <unk>.
<unk> and <unk> rollout has been and really really good for us. So Wifi has been growing at one of the faster clips and on all of our product groups as well.
W. B a lot of excitement about that for sure and lots of design activity across all the verticals.
<unk> announced the design and consumer Iot space, which is which is pretty big price that's going to drive growth second half of the year and so it's going to be picking up throughout the year, it's not driving the growth now given its scale, but as we exit the year it'll be a bigger contributor.
And thanks for that.
Thank you and we will take our next question from Karl Ackerman of Cowen.
Yes, Thank you gentlemen.
Mark if I could start with you first I think your prior directional outlook for June.
Contemplated supply constraints.
And it would seem that supply constraints were lower than you anticipated between you and China handset Oems is there a way to quantify the amount of revenue that maybe pushed into the second half of this calendar year, given the supply constraints you've seen so far today.
Yeah.
And Carl I'm, not I'm, not going to add any more to the current guidance, it's our best view and considering the constraints, we have and and what we believe we can deliver and work with customers. Yeah part of that part of the benefit we had and and the fourth quarter was just a tremendous jobs you're on.
<unk> team has done and then the work we've done with customers to expedite product to them. So we were able to both produce more product and get them more product and you see that come in and a number of forums and more favorable absorption we had some better pricing on our inventory charges were actually lower than we thought so.
<unk>.
Number of positives again, and the fourth quarter, just showing how Wellbore survey and the market and working with our customers closely so yeah.
And you know it gives us a lot of confidence.
And the next couple of quarters that demand is very firm, which is why I felt comfortable getting on giving a preliminary full year view.
You know and and and we'll just continue to do and we've been doing and.
Managing our inventories closely watching the channel.
And both of those are very healthy and the behavior from customers suggests that its long term demand and and they're looking to <unk>.
Partnering with us more closely.
I appreciate that even if I could then as my follow up you spoke about the full year outlook for fiscal 'twenty, two and so.
And I really appreciate that you also spoke about the growing opportunity within mobile and fiscal 'twenty two with regard to the four main pass solutions and so.
In that context.
Last call you indicated that your cost basis on your integrated modules is not where you'd like them to be today.
Hoping you could discuss what progress you've made on improving factory efficiencies or our outsourcing initiatives.
That may drive improve yields from here on so we think about that progression towards a sustained mid to mid to low.
Low to mid fifties gross margins. Thank you.
Yeah, and I guess, Carl so if the question is.
Yeah, what what are we doing to sustain margin I mean first of all it's a very complicated.
Equation right on on all the things that go and and making and making the gross margin I think what I'd like to do is just start with yeah.
Our our fiscal 'twenty, two guide and it.
As for margins to hold on let's start with the fact that and fiscal year 'twenty. One we increased gross margin over 400 basis points versus fiscal year 'twenty.
So I'd say sustaining at these levels is pretty good and I think I think you've got to remember that some things will will go against us and 22 that went with us and and 21, yeah, notably on the pricing environment is very firm now.
And that that is likely to loosen.
Loosen a bit and still be healthy we believe but.
Well will not be as as tight as it is at the moment moment.
And we believe our inventory charges, we have to assume they will kind of pick.
Pick back up to normal levels.
And and we've got to remember just how hard this stuff is that we do so.
Yeah, I can go on and on and now there's there's plenty of good that's going on to offset the bad and fiscal 'twenty. Two I mean, we're continuing to drive productivity and.
The portfolio management continues utilization, we've got some room and we will continue to invest as we need to but keep that utilization high and all the things we've talked about over the years.
And and and so as a result, we just we have a view now that we can sustain margin at these levels of course over time Carl.
Yeah, we've set up where we aspire to expand our gross margins and I think it it runs through the.
And the same things, we've been doing and will continue to be a technology leader.
<unk> allows us to do the hardest parts will take to play with customers with those hardest parts, where where our value get recognized on productivity is as good as it's ever been and the company and were driving even more there and then and what we're just going to be very circumspect about any capital build so where.
And we're optimistic that over time and there'll be some opportunity.
Okay.
Thank you and.
And we will take our next question from Craig hadn't book of Morgan Stanley.
Yes, Thanks, just a follow up on ultra wide band just can you talk about the breadth of design activity and then is there a way to think about it over the next year or two of kind of a revenue level that would be kind of reasonable to reach that technology.
Sure Craig this is Eric.
The design activity is really really broad.
It is a very very good that we completed a 700 ex acquisition and brought the entire software stack, which really enables us to work across a very broad array of applications. So are engaged with multiple mobile handset providers of course to leverage on that channel. But then also the all the things that talk to them.
And the phone lights to consumer Iot devices of course, and also automotive and then a just a bunch of industrial Iot and sort of applications around robotics and a R V R and navigation indoors and you know those sorts of applications, so really broad, but the teams and a great job of doing all of this with a unified hardware and a unified software.
Stock for the most part with very few variation so a tremendous productivity coming out on that organization to cover such a broad number of verticals and.
And in terms of the outlook for it we said before we believe we can get it to a couple hundred million dollar revenue business within a few years nothing has changed there and by any means and we're super excited about the opportunities it is bringing.
Great and then as a follow up for James I mean to be able to grow I D. P. At the low end of 10% to 15%, even with roughly a quarter of the business down.
I know you talked about this Wi Fi strength and programmable power, but any other context in terms of.
And how some of that growth to drive the 10% even with the infrastructure headwind.
Yeah and and.
I'll lead off with those ones that we spoke about I mean, we're seeing very strong demand and Wi Fi six and and.
Mark and Bob both have hit that and their repair.
Prepared remarks, and so we've got a performance advantage there and I think our customers are seeing that and and we've been able to scale that business very significantly on top of that we got 60, just coming right on the heels of Wifi six and so we've we're releasing products are into <unk> and we've also have our first.
Production orders and 60, so that'll take you to sort of layer on the growth there and power management, great trends there it continues to grow and well up into the double digits and has done that quarter. After quarter. So it's been a very nice acquisition for us as a company and defense as well we've got.
And again nice trends inside the defense business now I'm on top of that the automotive business is really starting to kick in as we go into this year and cable TV has also started to grow our broadband business because of deployment of DOCSIS three one.
So a lot of our growth drivers that we have inside the business. As you said the diversification is working for US is helping us offset some of the market challenges that we're seeing with the rollout of infrastructure and China.
Yeah.
Thank you and went on they have to our next question from Vivek Arya of.
Bank of America.
Thanks for taking my question off on my first question very impressive performance on the on the gross margin side for the last two quarters almost on.
And I to beat our expectations by almost 200 basis points, but now when I look at your June guide, you and essentially guiding to flattish mobile and I D. P sales. So mark I'm curious, what specifically about mix will drive gross margins are down and by 250 basis points and.
And you know what what I would really like to understand is why is there so much variability between you and initial outlook horses.
All right what you have reported and should we assume gross margin outlook. This time has also come down like it has been in the last two quarters.
Yeah, I think we are well.
We do our best Vivek to forecast very complicated business and I think I think our forecast history as far as our ability to meet commitments. It's clear I think we've we've had 17 quarters or so it depends on.
What you do with the Hurricane in Florida, and several years ago as to as to whether that's and ruin the streak or not but we do our best to give a good read and.
But there's a lot of things and the mix in any given quarter.
And and and so you know what's most important to US is can we forecast day, well and meet commitments and I think we and you can argue that were.
Kind of missing it on the high side, but but.
But I'd say that we have it and control and Ken Ken.
Continue to improve the business because we know it's going on the second thing is it's it's indisputable at this point that all the work we've been doing has led to a higher quantum so we've just we've increased gross margin.
Yeah.
Particularly over the past year and had stabilized it before so yeah, the R&D investment and and and portfolio management and productivity and reducing capital intensity. It's all paying off to your point Yeah. We we continue to work on growing the business and the right areas and.
And working on our cost curves and and and picking and choosing where we're going to compete and bring the most value to customers and over time, we think that the variability that we have well well moderate.
And as it relates to that.
And to the June quarter.
Yeah, we're where we are down.
And Oh, I, I said actually that we'd be down and the 40 nines.
And the drivers are the same we assume that that price will moderate somewhat sequentially.
We do have some product mix effects.
And then we have some favorability from and this case the March quarter and that yeah. That's that's not going to repeat and we had some favorable absorption and the factories and then we had some inventory effects that we have to assume we might return to normal levels.
On inventory charges. So so.
And so that that explains the sequential decline.
Yeah, I'll I'll finish my comments with that and.
You'll remember that that's an increase versus the.
Soft guidance I gave you before so we've our view is actually improved on the quarter.
We're driving more productivity and we saw we have a little bit better price than we thought because the market is still very firm.
And then there are a number of other factors, but less and we're pleased to guide of 50%, a number and and where we have confidence and that result.
And that's not very helpful and my follow up for Bob Bob erratic and when I look at the implied guidance on the mobile side for the next fiscal year right like 17, 18 per cent or so I'm here on you aren't.
And given you want to grow double digit and IDP.
That's a desk.
About the same growth on somewhat of a deceleration from last year and given the doubling of <unk> smartphones and I'm curious you know why can't you grow faster and mobile and.
And the real underlying question and that is what are your views about the competitive landscape because of the industry. So supply constrained I'm surprised to hear you talk about loosening of price unless you think something about the competitive landscape.
Good change so just give us some more color on about the competitive landscape and why do you think pricing would start to loosen up at the day industry. So supply constrained right now thank you.
This is Eric I'll I'll take a stab at it so first of all in terms of the growth.
First of all five G doubling year over years, and an additional 250 million phones on top of the $2 50 from last year right. So in terms of growth rate.
And at the same rate and so Thats you know so we're seeing growth that you're consistent with last year being able to sustain at this at this level is good we have other growth drivers coming on and on top of that as well but of course as we entered the year. We take a relatively conservative look I think it's still a pretty strong guide for the year and in terms of pricing.
And.
I think in terms of loosening and I'll I'll Mark was indicating is that you know we've had very firm pricing and the March quarter ex.
Extremely tight on markets, we're going to continue to you know to push the price curve, while maintaining core relationships and design strength that we have mark indicated long term agreements with customers, who are coming into play which is great for us and for customers. It's just an incredibly constructive environment for building.
Our long term business, that's that's profitable for us and helps our customers and making a lot of money to because of the advanced technologies. So I think it's a very constructive positive environment, we're not we're not indicating anything about weakening pricing on necessarily.
The only thing I'd add there because if you look at some of the other companies to play on our space and see what they've got it quarter over quarter I think we're starting out on a much stronger foot than they are and.
And we'll see how well we deal with the constraints that both Mark and Eric have talked about and we'll see how much of that we can capture I also think one of the few that gave you some your outlook as well I'll leave it at that thank you.
Thank you and we'll take our next question from Gary Mobley of Wells Fargo.
Hey, everyone and thanks for taking my question.
And to ask about the Wi Fi six and Wi Fi six E product cycles, you mentioned I believe a minute ago double digit percent sequential increases as you finished up the second half of the fiscal year.
And.
You mentioned as well Wi Fi six he just really starting to ramp up now and so.
And my question to you James is how material now is this Wi Fi six and 60 product cycle.
Maybe measured and absolute dollar terms percentages like GPU revenue or how it ranks relative to prior Wifi cycles.
Well I'm.
And I'm not going on obviously skilled revenue down at the individual areas, but you know what what I will say is we're early on and we you know mark talked about that we've we've probably only seen about a 15% or so adoption and Wi Fi six and very very early and <unk>.
And so you know I think those kind of growth rates that we're talking about are something that we do expect.
To continue to accelerate as we go through the adoption curve, it's probably going to take another three or four years for Wi Fi six to build out.
And we're already working on seven so I think Oh. This is a business that will continue to.
To drive you know.
As far as overall size of the IDP as you know I've talked about many times I I love the diversification of the business and.
We're gonna ebb and flow a bit and so you know that kind of guidance and I constantly give of these businesses all being about a quarter of the size I think as you average through a long long cycle.
And it stays pretty much and that span.
Okay I appreciate that James and my follow up for Mark.
The fact, yet and probably to your 10-K, yet, but can you share with us.
Specifics on any greater than 10% customers for the year.
Yeah, Gary I would just say that we normally don't give much detail on that and.
You'll see the full year numbers and and the K we had one.
Full year.
And so we look at it now we had a number of 10% customers and that fourth quarter on.
And another one that was actually very close and approaching 10 and so.
Very good diversified revenue and AR and the quarter.
Okay.
Thank you and we'll take our next question from Eric I'm, Sorry, Edward Snyder of charter equity research.
And so China is moving from Mimo, which is what they built on the urban brand and I think everybody knows now to the suburban and rural to macro and.
Why should we believe there should be any rebound in demand for for anywhere close to what you saw originally for Gan and given that you're going from 64 day macros are much smaller cells and then.
I'm kind of.
Spirit of things.
The Chinese built out on an industrial policy.
From the government the U S doesn't do that and all U S carriers actually I've shown on ROI for their build out which calls into question. How many mimo stations will actually deploy given the low.
Modest improvement you get and performance versus the incredibly higher cost for this so I'm just trying to and it was slowing down now.
Forecasted and that's actually happening now, but if I'm looking out to the end of this year why are you confident that you'll see a big rebound and it will be and China.
C band and the United States.
We're just building out anything and I have.
Sure.
Yes, Thanks Ed.
So we.
We didn't we didn't talk about a large rebound and we start we said that it would start to accelerate as we get into the back half and the U S deployments will start to pick up.
I do believe that the overall market as we look at it this year will be down and are in and sort of those single digits of addressable market and that sort of has everything into play on.
That has deployments and U S and the configurations that our customers are telling us about.
And deployments in China and of course, the rest of the world.
Going forward, though there are tremendous amount of base stations still to be deployed and.
And the China deployments during the first year, we're relatively low so I do see just tremendous content.
Pickups for us as we go through this five year deployment. It's important to know that you know if you go back to <unk> or.
64 element array is still about a 10 ex content pickup for us and it was 32 all of them and arrays.
A little bit more than half of that so these are big big content gains for us and the business.
And so it's really a content story and as you play that out and deployments around the world.
It continues to be a growth business for us and of course scans and new technology for US we couldn't access the power amplifiers as we went through the <unk> cycle and now we've got great products and great technology allow us to address that whole segment.
Great and then Eric if I could so long, so that you and or the.
Transmit diversity path as it made sense for your filter business.
With regard to ball and and it sounds like you've done that congratulations but does that limit you I mean, this would be like and instead of in 77 and Wi Fi combination for coexist or are all the sub six bands open to to your.
To your solutions.
And on that and then if I could also on the on ultra wide band. It looks increasingly like you know Apple has got their own solution doing their phone and NXP is taking a lot of the handset side of the business.
And is it fair assumption to say Deca wave is really going to be focused mostly on the other side of it and she said if at all the devices that talk to the handsets and other than.
And Google should we expect to see much and the Android handset.
Thanks.
Sure.
Well take those and orders so starting with the transmit and the diversity of path and that's a that's a rapidly growing space force is as you indicated we had we had forecasted it would be and it's not binary it's limited to the content, we have today and today, it's relatively kind of discrete.
<unk> placements and going forward, we'll see complete what we call <unk> connect module as more and more going from the upper tier down and the Duke energy and so we have a complete transmit and receive path for the balance that they do transmit on right and those bands are.
Our throughout the mid and high band frequencies will say so so it's a great growing category and we're going to bring all filters to it we're going to bring integration to it and best in class gas and and everything we have and the main path. So that's a it's a great new category for us and of course.
Ported by more bandwidth and the uplink and.
And trying to get more video through that through the networks and higher data rates and so forth. That's really what's driving that is we've been talking about for for years actually.
And <unk>.
When you say youre seeing and XP, primarily and Android houses, that's kind of a legacy comment, which I acknowledge obviously deck, where it wasn't in a position to to really address the mobile market and that's why they you know.
They took the path they did as Corrigo, though of course, we're targeting the mobile market directly and to your point that that is Android and so.
The current state of play at least Apple's doing their own but we are we expect that we will be.
And engaged and represented and production and the Android ecosystem I'm, just and all the accessories, but also in the mobile part themselves.
And Theres really no part of the uwp ecosystem that we feel like we can address and we are addressing.
Thank you.
And we will take our next question from Toshi Hari of Goldman Sachs.
Hi, guys. Thanks, so much for taking the question and congrats on the strong results.
Marc or maybe Eric I had a multi part question on long term supply agreements you both spoke to this and your prepared remarks, but curious are you signing long term agreements both on mobile and IDP or is it primarily I D. P. I guess, that's part one and part two just for context roughly what.
Percentage of your future revenue.
We will be tied to long term supply agreements are we talking you know 5% to 10% is it 25% just a rough hum.
A ballpark number would be helpful. And then I guess, most importantly, how should we think about the level of commitment on the part of your customers in terms of both volume and pricing and I asked the question because historically, maybe not specific to corvo, but and the industry broadly the suppliers would have to be committed to a long term agreement, but the customer is always has been.
Flexibility to push her counsel purchases I was just curious how the how the contracts are constructed.
And then maybe maybe I can start and then and then alright and take it or Bob.
So.
First of all I don't think we want to give a number at this point on percent because it's there was a lot and flight of what's been done and a lot is still on flight. So.
That's a number that we would be changing and.
Yeah, and just does not practical at this point point to give it and.
The second thing I would mention is that.
Yeah.
And the the nature of the agreements, we get and so forth is going to.
Determined the level of investment, we make and shape our cash Capex decision. So yeah. That's another yeah, they're they're intertwined.
Yeah and to the ex earlier question on gross margin and while we want to do here going forward.
Working to strike deals that would be best for our customers and best to maintain stability on our business. So we can invest for our customers.
And.
And and so I would I would I would leave it at that Eric or Bob The only thing I'd add she was there for both business units and to Mark's point Theyre growing and.
Clearly there are a lot more.
Our confidence and the outlook because of them than we had and any of the years before we did have some smaller long term agreements, but it is a growing part of our portfolio and.
We think it's a very good thing and so to our customers I think that's the really important part as mark pointed out.
That's great and then a quick follow up on a simple one on on next and put you guys talked about the rationale and your prepared remarks, I think that was pretty clear, but can you speak to some of the financial implications how much are paying them. The revenue accretion the margin profile of visit fee. The corporate average thank you.
Yeah, it's a share.
Just on the on the dollars you will see a subsequent event note and the and the K and and this was over $150 million.
And cultural 175, actually so you'll you'll see that and in the K as a subsequent event.
It's accretive pretty quickly like within the first few quarters of of our ownership.
And the gross margin profile is favorable.
To the company and given the scale of course, the operating margins weaker just because the opex, but it's certainly a business, we're excited about and investing and kind of be investing heavily and.
Thank you and we will take our next question from Chris cash out of Raymond James.
Yes. Thank you.
I guess my question is about the the seasonality that's implied in the mobile business based on what you've guided and it would it would appear that the seasonality is more muted than we've seen in years past.
First is that interpretation correct and if so.
Why is that the case is it you know, perhaps a function of your business the geographic.
Nature of the business now being different than windows and the past is it that you know some business was pulled forward into the first half of the year could you give us some more color on that please.
Yeah. This is Eric I'll be happy to talk to that I mean.
As we are and a supply constrained environment. So.
Customers would.
We'd be happy to get more potentially but you know, we're working through our supply chain and growing its capabilities throughout the year.
And so it's not a typical demand.
And profile that you might see this is this is really a function of how much we can get out right now.
Maybe just to talk to the full year guide I gave as well.
And.
Yeah, a couple a couple of things to add one is keep in mind and this is this is a first look.
So and the first half of the view is.
Obviously, a lot clearer Chris and.
And in the back half and where.
And <unk>.
Yes, I think thats, just the nature of providing a high level view, there obviously a lot of positive factors going into the year.
Demand is firm, it's more of a supply constrained environment.
And on.
On the growth drivers and the business are intact.
With the near term exception of infrastructures as we've discussed.
<unk> got the economic recovery is underway, but we know how quickly that can turn on and then.
There's just pockets of supply chain risks, which are managing very well, but but acknowledging that there there. So I just want that to be clear and.
And then and this initial look that set the second thing on the guide and just talking about maybe giving a bit of shape to it.
And specifically September.
Yes September quarter looks looks firm as well.
We expect revenue to be up probably around $50 million or so sequentially.
Versus our June guide the gross margin, we see increasing.
Yeah.
And between 50, 152%, so increasing 100 150 basis points.
Hi.
Closer to 150 basis points.
As we see it now.
And on.
And we will get more Oh, and one last thing on Opex, we see going up about $10 million sequentially and again, that's some salary increases plus the addition of next input.
And then just increased investments and our other growth opportunities and recent acquisitions.
And I'll give more color through the through the quarter or on our next earnings call.
Alright, that's very helpful and I'm glad we got that and before that before the call ended as well.
But just to follow up if if it sounds like supply constraints are a factor that that potentially.
It could affect the revenue as you go through the year could you give us some sense of kind of timing and magnitude of getting more supply out there and I guess the trick is getting the supply out in time for your customers launch schedules.
Chris This is Bob and them, obviously quite challenging and even define that I think we've given you a pretty good view as mark has already outlined somewhat of a profile of the year along with what we're thinking for the year it.
It is dynamic and.
Collectively we all spent a lot of time with our customers working through their other constraints. So that they can complete their bill of materials. So theres a lot of churn on our business as we and they figure out what they can get from certain suppliers, we adjust what we can make and there's just a tremendous amount going on out there and.
Really size that and let you know dollar wise will be quite.
Not not really useful on my mind, because if we could produce more and they may not want it because they can't get it from someone else. So we gave you what we believe is well and.
And unconstrained view excuse me a different way and constrained view of what we think we can get and support along with what our customers can get and we're in.
Almost daily communications with them.
And I feel good about the outlook <unk> provided.
And just one and I need to make one correction, Chris I may I made a mistake here and just.
And to make sure it's clear for the calls.
Our actual sequential will be.
And up between 100, and 150 actually going June and September.
So just that yeah, not 50, as I mentioned, but between 100 150, so I'm sorry about that.
And hopefully that clears that up.
Okay.
Thank you and this concludes today's question and answer session I would now like to turn it over to management for any closing remarks.
Thank you for joining us this evening Corvo, we'll be presenting at multiple investor conferences in the coming weeks and we invite you to listen and thanks again and have a good night.
Okay.
Thank you, ladies and gentlemen for your participation in todays teleconference. You may now disconnect.
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