Q2 2022 Qorvo Inc Earnings Call

Good day and welcome to the Corvo, Inc. Q2, 2022 conference call. Today's conference is being recorded at this time I would like to turn the conference over to Douglas delete to Vice President of Investor Relations. Please go ahead.

Thanks, very much Todd Hello, everybody and welcome to the Corvus fiscal 2022 second quarter earnings Conference call.

Yeah.

Thank you and welcome everyone to our call Corvo team delivered an exceptional September quarter with revenue and EPS at all time highs strength during the quarter was broad based across customers and supported by new product launches.

And mobile products the multiyear migration of five G continues to drive RF content and integration trends.

What began in top tier flagship phones is now playing out in the mass market, where the RF content increase is greater on a percent basis that in flagship devices.

Corvo enjoys broad exposure to mass market designs, a customers like Anna oboe pixel, Samsung vivo and show me.

As a preferred supplier with leading products and a robust technology roadmap corvo as well positioned as five G devices, and Android ecosystem contribute increasingly to the growth and the RF Tan.

And other connectivity markets Ultra wideband adoption and smartphones is serving as the infrastructure for a growing ecosystem of ultra wideband enabled devices the.

The opportunities that spans mobile automotive analogy markets, creating a strong foundation for growth over the coming years and.

And Wifi the adoption Wi Fi six eight and the performance limitations of smaller node Cmos integrated Pa's are driving the migration to chip onboard femmes and iphones like ours.

And why fine in other markets Carbos products and technologies are at the forefront of multiyear upgrade cycles, enabling new ecosystems and use cases and transforming the user experience.

Now, let's look at some of the quarterly highlights in our end markets, starting with mobile for Google, We commend shipments of mid high and ultra high band pads antenna tuners, and multiple connectivity solutions to support the ramp of their recently announced pixel six.

For an upcoming Korea based <unk> mass market smartphone platform. We received the first production orders for our mid high and ultra high been pads Wi Fi Femmes and multiple high performance discreet solutions.

And mobile Wifi, we secured a Wi Fi fix them design wins with multiple top tier smartphone Oems and began sampling Wi Fi seven films, enabling higher data rates and improve performance.

And ultra wideband core rose advancing technologies for a diverse ecosystem of proximity aware connected devices.

We secured an ultra wideband design when to enable real time device tracking and other location aware applications and home mesh networks.

And we were selected supply ultra wideband solutions for enterprise access points as well.

We also expanding our engagement with a leading provider of consumer ILP products across a broad set of connected home devices, including smart speakers.

Control fans and air conditioners.

An automotive manufacturing korbut was selected to supply ultra wideband and Zigbee solutions with concurrent connect technology to an automaker in Korea streamlining automation in manufacturing.

And other connectivity markets, we began sampling of Wi Fi six of them covering five two gigahertz and five six figures and featuring an integrated bar filter.

<unk> five gigahertz iphones enables higher capacity and improve efficiency and reduced form factor.

And broadband we begin sampling a triple output DOCSIS three one amplifier module supporting network upgrades for major cable operators in the us and in Europe.

And infrastructure design, one activity was strong across Oems, including small cells and base stations wins included all of the RF transmit and receive path content, including Bob filters for five G small cells at a major base station Oems.

We see infrastructure markets picking up in 2022 with Corvo, Sam growing year over year, the Sam for Corva outside of China will post significant growth next year and support a strong double digit carrier through 2025.

And aerospace and defense, we expanded our product portfolio with an industry, leading 125 Watt S band power amplifier module and a one eight kilowatt L. Ben.

Great our palette for commercial and defense radar applications.

And Rfa's biotechnology testing, we received our first commercial orders and commenced shipments of our Omnia antigen test platform.

During the quarter.

The NIH <unk> variant task force conducted an external study that demonstrated the performance of our Omnia antigen test platform and effectively detecting COVID-19 variance, including the Delta variant.

Although this is a new market for us.

We believe we bring a novel technology that offers unique and real value as the world moves to more testing protocols, including for flew a b and other seasonal pathogens.

Our platform offers a unique combination of accuracy and speed at the point of care with improved process flow, including real time wireless delivery of results.

We have seen its benefits in our own operations as part of our protocol for our own internal testing.

After the quarter closed.

Corvo acquired United Silicon Carbide, an innovator in silicon carbide power devices, and a pioneer in silicon carbide JFS the.

The combination will further differentiate <unk> power portfolio, enabling more highly integrated power device solutions and expand our addressable market to include higher voltage applications that demand maximum power efficiency, such as electric vehicles charging stations and renewable energy systems.

We welcome crystallized and his team and look forward to helping them accelerate the growth in their business.

Four corvo, our ability to deliver more power more efficiently and using less current helped put us at the center of the digital transformation.

We are eager to expand these competencies as global markets move to electrification and renewable energy.

Courthouse technology portfolio as best in class or product position as strong or and market exposures, expanding and we are operating very well.

Yes, we are seeing constraints and we are working closely with our customers and our partners.

Mark will have more comments about the operating environment and we look forward to discussions during your question and answers.

Picture, we see the industry working through this as it always has.

Four corvo, we see a business with unique competencies and expanding set of growth drivers and we expect a continuation of double digit growth over several years.

Before handling the call over to Mark I'm pleased to welcome Fillip Chesley as president of core rose infrastructure and defense products group.

Philip has a proven track record growing global semiconductor businesses with experience in RF power data communications automotive industrial Aerospace and defense. We are very pleased Philip has joined corvo to lead our IDP team.

So I want to thank James Klein since the formation of Corvo, James and the team have more than doubled IDP revenue, while creating a recognized industry leader.

We thank James for as many contributions to corvo and wish him the very best.

James will remain with us through November to help ensure a smooth transition transition with the change in the IDP leadership.

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

Thanks, Bob and good afternoon, everyone and.

In the September quarter cargo delivered the strongest quarterly revenue and earnings in the company's history.

Cargoes revenue for the fiscal year 2022 second quarter was 1.255 billion 5 million above the mid play of our guidance and $195 million or 18% higher than last year September quarter.

When comparing September quarter numbers recall that our fiscal year 2021 was a 53 week fiscal year and Ah September quarter last year was a 14 week quarter versus this fiscal years more typical 13 wait quarter.

Mobile products revenue at $996 million was up 32% year over year on a continued growth of higher content <unk> smartphones.

Infrastructure and defense products revenue of $260 million was slightly below expectations due to reduced supply from outsourced Assembly and test operations in Malaysia and elsewhere.

As expected IDP was down year over year, due primarily to last year strong infrastructure build out and a 14 week quarter.

We expect IDP to return two year over year growth and the December quarter and growth to accelerate in the March quarter.

Non-GAAP gross margin in the September quarter was shaky too, 4% above the midpoint of our guidance despite supply chain disruption that worsened through the quarter.

Non-GAAP operating expenses in the second quarter were less than expected at $222 million or.

17.7% of sales.

The sequential and year over year increases in Opex were driven by technology and product development expenses associated with key gross programs in rake recent acquisitions.

Non-GAAP operating income in the September quarter was $435 million, 34.7% of sales assess.

As soon as a fourth consecutive quarter of operating margin over 33%.

Non-GAAP net income in the second quarter was $385 million and diluted earnings per share of $3.42.

Was 18 cents above the midpoint of our guidance.

Cash flow from operations in the second quarter is $245 million or.

Are working capital includes an increase in payables associated with a long term silicon supply agreement.

The largest said these ads as a deposit which we expect to recoup by the end of the agreement in calendar 25.

This agreement is structured.

This agreement is a structured way to advance are differentiated technology position and simplify our long term planning.

Furthermore, it's only one of a number of examples whereby corvo is belding longer term and more collaborative partnerships to provide our customer supplier sharon's and meet their product and technology needs.

Concurrently our customer relationships are broadening and strengthening allowing us to invest with more certainty.

As we have indicated previously that challenges. The industry is currently experiencing are driving more constructive and longer term relationships that we see enhancing the overall durability and value of the business.

Capital expenditures in the September quarter, or $47 million lower than expected on spend timing and an earlier than expected reimbursement for a portion of our government funded work on advanced packaging.

Free cash flow was $198 million, and we repurchased $223 million of shares.

Over the last two quarters, we've purchased $523 million of shares.

Which was 110% of our free cash flow.

We continue to repurchase shares as our outlook is positive are free cash flow and ability to sustained investment in technology and growth is strong and our leverage remains low.

On the balance sheet cash in that remained largely unchanged from the prior quarter at $1.2 billion and $1.7 billion respectively.

And the December quarter or cash is projected to decline following payments associated with the previously mentioned agreement.

And with our acquisition United Silicon Carbide.

Now turning to our current quarter outlook.

We expect revenue between $1 billion $90 million and $1.120 billion.

Non-GAAP gross margin between 52% and 52.5%.

Non-GAAP diluted earnings per share of $2.75.

At the midpoint of our guidance.

Our December quarter out revenue outlook.

Reflects broad based challenges and supply impacting mobile and IDP.

In near term weakness in demand principally in Asia.

Starting with supply we have several areas of constrained.

Our external supply chain is still recovering from disruptions in September including shutdowns in Southeast Asia.

Beyond that select materials products and production capacity remained tight.

These are industrywide issues affecting all suppliers.

And our customers are challenged and producing match stats for products.

For example, and smartphones.

Even where channel inventory for certain parts as healthy.

Customer slack silicon chips to produced phones.

This in turn creates check changes in demand that add two constraints on our own production as.

As we work to adjust mix.

Next changes are part of our business.

But in a normal environment corvo can move swiftly to respond and capture demand.

Is supply driven gaps are making recent demand softness in select areas such as our Asia smartphone customers.

Harder to quantify.

We see the industry working through this situation with some with some supply effects beginning to moderate this quarter and supply demand alignment improving more broadly through the March quarter.

Given the supply and demand effects, we now see <unk> smartphone volumes coming in below $550 million and calendar 21.

Corva has this set December forecasted revenue of $1 billion $105 million at the midpoint is down 12% sequentially and up slightly year over year.

We forecast mobile revenue in the current quarter to be approximately $830 million at the midpoint.

Down, 17% sequentially and flat year over year.

And the March quarter, we expect Marvel to be up slightly sequentially as a typical seasonal decline is offset by improved supply and demand.

And we.

We project revenue to increase in the December quarter to $275 million and the segment to return to year over year growth.

We expect it to be over $300 million and the March quarter.

Our December quarter gross margin guide of 52.25% at the midpoint.

Is up versus a view it provided last quarter, despite a more challenging supply demand environment than expected.

We see our technology and product Max and operating and capital efficiency, yielding a gross margin above 52% for the fiscal year.

We expect of March quarter to be around 52%.

We project non-GAAP operating expenses to increase slightly in December quarter to approximately $224 million, reflecting higher investments and core technologies and expanding capabilities and new businesses, including the addition of the United Silicon Carbide team.

We know project, our current quarter and full year non-GAAP tax rate to be between eight five at 9%.

Capital expenditures are projected to exceed $70 million in the December quarter, as you work to intersect demand and support long term supply agreements with multiple customers.

Currently we are supply constrained.

And prod project to remain so through our fiscal year end.

We continue to expand Bath and gas capacity as well as biocensor production capacity.

The support our growth projections for fiscal 2023.

In summary, we expect year over year revenue growth in the December quarter, though less than we had expected previously.

The current supply challenges in near term demand weaknesses weakness are acute.

More temporary than durable.

We expect supply effects to moderate starting this quarter and improved supply demand alignment early next calendar year.

Four full fiscal year 2002, we expect revenue growth over 15%.

Gross margin over 52.

Excuse me, we expect revenue growth over 15% gross margin over 52% and operating Mar margin of approximately 33%.

Looking beyond this fiscal year, we expect double digit growth to continue as Corevest premium technology product portfolio and operating capability support <unk> Wi Fi Iot defense power and other growth markets.

Overall, we are investing to grow mobile an IAP at or above market.

Looking at our business bye and markets instead of operating segments helps highlight the strength of our portfolio and market position.

An advance sailor RF front ends for smartphones.

<unk> technology and product Brat is world class.

We expect this part of the core of his business near three $3 billion this fiscal year.

To deliver high single digit to low double digit growth ads, increasing RF complexity and integration trend support years of content expansion.

Next looking at other cat activity beyond cellular solutions for smartphones.

Corvo enjoys exposure across multiple wireless protocols and serves industrial automation connected home automotive and other high growth Iot markets.

This fiscal year connectivity solutions spread across our mobile and IDP segments combined to approximately $700 million and can grow and the strong double digits.

Finally defense infrastructure and power solutions support multiple long term secular growth drivers.

These include the multiyear build out of <unk> infrastructure, increasing semiconductor spend in defense.

And worldwide demand for power semi is driven by mega trends like electrification.

We expect a sustained long term double digit growth in this business from a base of over $600 million this fiscal year.

Our December quarter is off where we expected previously, but still guided up year over year as as our view of the March quarter.

We expect the business to strengthen through the second half of our fiscal year.

And contributed to a record full year performance, including earnings growth over 20%.

Longer term the outlook is bryce.

Corvo is is exceptionally well positioned to deliver earnings and free cash flow growth, serving the large and growing need for more efficient power and greater connectivity.

Now Todd would you. Please open the line for questions.

At this time, if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Please limit yourself to one question and one follow up question again.

Again to ask a question press star one.

We'll take our first question.

From two Shia Hari with Goldman Sachs.

Hi, guys. Good afternoon. Thanks, so much for taking the question.

I have two if I may.

First one is probably mark the 17% sequential decline your guiding too and your mobile business for December.

It's probably hard but can.

Can you sort of break that down into supply factors in demand factors.

To the extent possible.

And then on the demand side, you talked about weakness in Asia, but if you can if you can elaborate on that that would be super helpful. And then I got a quick follow up.

Sharp.

So.

So as to share we we we.

We decrease our December number about about $150 million.

As you can see.

And.

About $135 million of that was involved will where we went from roughly 965 to 830 in the December quarter.

The balance of of the decrease was IDP.

IDP is the most straightforward it it's all supply and IDP.

So just keep that in mind.

Of the 135 roughly in mobile.

Yeah.

As we characterize supply <unk>.

Constraints, which is our suppliers not having supply for us.

Our customers not having that chipsets, thus not able to build their product.

And use our product and then finally, our own internal constraints.

We see up to $100 million that we would characterize as supply related of that $135 million.

The balance so $35 million, we would view as net demand. Some some demand is up and we were able to intersect that but some demand is clearly down and I think that's well publicized.

Particularly in parts of Asia.

So <unk>.

<unk>, brushstrokes, where three quarters or less.

Down on supply and mobile and one quarter or more related to demand now a few if you add in IDP, which is all supplies and.

That proportion is stronger so.

That's our view.

To ship.

Great. Thanks for the color and then as my follow up.

You guys talked quite a bit about.

Having having constructive longer term conversations with your customers. You also talked about your long term silicon supply agreement.

As you kind of compare and contrast, the visibility you have today versus three years ago five years ago, I mean, how would you characterize the key differences.

I'm sure you've had long term agreements in the past, but how much bigger are they as a percentage of your backlog and and how enforceable or are they going forward relative to history. Thank you.

Sure. This is Erica I'll take that I think.

What are the silver linings in this environment is how constructive conversations have gotten in terms of much longer term. So.

Not just one or even two years with some cases up to three years of discussions about how we're going to outline both our technology supply roadmap to our customers product roadmaps their markets.

And what they expect to ship and.

There is no crystal ball.

Perfect, but at least we have ranges of alignment.

And sort of volume bar sure Windows and things like this that we can talk both to our customers in to our suppliers and I think for suppliers, that's a great benefit to them and us to have more stability.

And for our customers of course supply insurance is paramount and for us to have more confidence in our growth of the businesses is of course very important as well. So it's a it's a.

It's a very different environment driven by all the factors we've talked about already on this call.

Got it thank you.

We will take our next question from Vivek ARIA of Bank of America.

Hello. Thank you for taking my question for the first one.

I'm curious given this supply constraints in the industry.

Does that change the competitive landscape in the side and some day as we look at next year. So for example.

Glen appeal competitors can bundled apps processors and modems along that.

<unk> site do you think that give them, perhaps an advantage from a <unk>.

Edited perspective, as we look at next year.

Hey, this is Eric.

Think so.

Technology decisions are still critical to enable next generation phones and.

Best in class RMS is still going to win in the front ends section so.

I don't think we're.

Competing against people that have advantages of bundling across the boundary and fuel from the apps and modem side to the ROF side really and I think again just as in the last question what to share I think the long term visibility, we have and kind of planning our technology Roadmaps, we're getting no no signs.

There is any change if you will and drew little bundling or the architecture that would change that.

This is Bob punch to the question I think the other point that's interesting is.

A lot of things that our customers were waiting on or some of those very people. You mentioned, so I think we need to keep that in mind.

All of US the primary reason.

We have the parts, we can get the parts for them.

I have been swimming as we've mentioned many times through last quarter as well as this quarter challenges our customers.

Match sets are kidding, whatever vocabulary or you want to use that's been there are bigger problems.

Soc's.

With RF romance loose not from us.

And then on the acquisition was announced.

I was hoping you could give us some more color in terms of what is the right way to reflect that.

And the model.

And our sense of the silicon carbide and the borrower 70 spaces of course, it's in front of us.

Very large growth opportunity in autos and industrial and so forth, but it's a very capital intensive space and a number of established players have margins been below your corporate average.

So what what's the what's the right way to think about the strategy and is that going to be accretive.

Overtime for Ya.

Yeah, Let me, let me take some of the financial words.

Vick and I'll turn it over to James.

First of all.

We're not in the capital intensive part where in a device manufacturing parts. So that's the expertise or leveraging our silicon carbide organic solvent carbide knowledge and.

Which will be an advantage share.

So that's that's maybe first thing is realizing that this is these are things that we can boundary.

And source of material.

There'll be more disclosure in a queue tomorrow, but it'll be over $200 billion that we're paying for United Silicon carbide.

And it is it is dilutive initially.

But we expect that to be.

Creative.

Maybe at the end of next fiscal year, and we expect it to be a.

Significant business for us several years now.

James.

This is James.

So as you as you stated we like the aspect that it gives us into several fast growing markets like electric vehicles industrial willpower.

And data centers, maybe it'll all of his longer term even in things like circuit protection.

We see it all in the current year, expanding our adjustable market by almost $1 billion and we think that that certainly continues to grow at a high growth rate as we go over the next several years.

We do believe that we have industry, leading of performance and inefficiency in in die size. So we think when we compare those differentiated type capabilities with our existing power management.

Capabilities, we really do believe we have the ability to continue to grow in scale business.

Thank you.

Thank you. Our next question comes from Blaine Curtis of Barclays.

Hey, good afternoon. Thanks to my question I just wanted to go back on the.

Supply issues.

If you look at the shipments from the two major modem companies I guess, they're up and you are seeing a corrections and just kind of curious in a couple of ways that could happen.

Just kind of curious.

Now in retrospect.

Did you ship more are out that may be modems in the first half of the year and that has the correct or just kind of curious to hear your thoughts on that I know you probably haven't seen qualcomm's guide, but about mediatek, they're not seeing as sharp a decline in December just kind of thoughts between the disconnect there.

And then you blame this is Eric it's yes.

Yeah. It's a good question and I think to a certain extent, there's some of that and I think a lot of it comes down to mix as well.

I think we did a good job of responding to customer demand that we still have several parts were were on allocation as well as in chasing an behind of course, as we talked about but for the most part.

Pretty good job of satisfying customer demand customer demand, but.

What happens is the mix shifts I mean, they're essentially picking every baseband chip that can get regardless of which our efforts on so it could be that net net we shipped a bit ahead up to this point.

Okay, and then just how your perspective on it.

Right.

While I always I always look add planned it.

So we are disappointed with the December guide.

But I think it's also to reinforce our commitment to keep the channel healthy.

And.

And gave you a guide batched, we see on.

The supply demand fronts.

But it's never easy, but but admittedly, it's more difficult than usual.

Environment right now I do think it's important with this adjustment to step back not not lose sight of how good a business we've got.

For this for this fiscal year.

Yes, we call down.

But that was and we miss but that's a.

It said there was an aged consensus that clearly to supply environment worsened through.

Through the quarter.

Particularly in mid to late September and then these.

Publicize weakness in demand emerged.

We see things improving we think December is.

As bad as it gets for us and we see it proving in March.

And broadly we.

We had given a guidance range of 15% to 20% and with this two 5% adjustment for the year were down at the lower end of that range. So we're still in the range that we had provided.

Yes, hi, lessen our gross margin outlook is intact around 52% Opex is in control of our investing in the future of the business. That's both traditional parts of the business and newer parts of the business.

And in the end were taken EPS, Rob roughly a dime above $12.

Two roughly a dime below $12.

And.

Yes, there is a bit of a correction there, but I would say, it's the right thing for us to do if we look in the next year and beyond and we're just.

Feel great about our position.

Premium technology and products.

Serving attractive and markets gone double digits, and we expect to grow double digits were operating well sustained margins over 52% expanding operating margins. So laughter lots to talk about the positive beyond this quarter.

I guess when you look at your supply constrained clubs constraints on your business.

You did grow inventory in September with that level of sales. So I guess I'm looking at our sales down teen.

So I guess I'm kind of wondering I guess.

Supply situation and get that bad between September December or is there another factor that I'm, just trying to understand those moving business.

No word worst it did get worse in mid to late September blamed for sure.

And that's what we've tried to explain in first that was yes, we will supply environment, which has been tough for a year and a half almost two years down the supply environment got worse, and then and then demand.

Over the past.

Three weeks or so has has deteriorated.

But.

R and some of that inventory is just again, it's it's it's mix match of sets and so forth like that but but having said that are.

Our inventories are okay, I mean, our turns or at the high end of historical range and even with the slowdown.

The turns will be within the normal historical range. So we yeah. This is why we are dealing with this now and again, we think it's a short term issue that we work through.

And are in better shape than the March quarter.

Thanks.

Thank you we'll take our next question from Carl Ackerman with Cowen and company.

Yes. Thank you.

For your December quarter outlook.

Are the bottlenecks you described at least for mobile are they concentrated in the Android ecosystem and then if I may just as a follow up.

If you could highlight whether the growth trajectory of Android into December.

Is better or worse than your guide of down 17 for mobile that'd be very helpful. Thank you.

Yes, Carl this is Eric I don't think we can break them up between ecosystems like doesn't give any more color given the concentration of the ecosystem.

Okay.

If I May then just just going back to.

Hi to this acquisition you've made in in Silicon carbide I understand that.

Most of United six products are aimed at high voltage server in general industrial power supplies, where you have some.

Pretty good customer overlap today, but could you discuss your plan to go to market for United sick and whether they have existing relationships with tier one automotive Oems. Thank you.

Yeah. So today you are right I mean, it's predominantly.

So I would say on the lower voltage scale and it's in power supplies around automotive the data center applications.

If you look at how we plan to take the business on a go forward basis, certainly we will use our channels to expand substantially as you know we've got a broad base into the automotive and in many other places like the defense market will be able to take this technology over the long term.

We will also be skilled the technology.

In voltage.

Which will allow us to enter other parts of the automotive space motor controls and things like that of a go forward basis.

Thank you.

Thank you we'll take our next question from Gary Mildly with Wells Fargo Securities.

Hey, guys. Thanks for taking my question that went to pick up with some line of questioning on the acquisition.

James Your core competency historically in wideband gap semiconductor materials and crappy for long it's been.

And gain power or I'm, sorry can RF and so.

It's looking carbides core competency courses.

So can carbide in the company's always mangle outsource manufacturing X fab.

So my question is.

Is is the plan to eventually bring in the manufacturing.

Internally leveraging some of the quarterly historical wideband gap.

Assessing capabilities.

In a related to trying to penetrate the automotive market. It has been important so far for car Oems to align with silicon carbide providers that are vertically stacked with bowls materials and power devices for supply chain security.

And so my question is as a matter of strategy is that the intent longterm for this business.

So let me take the second one first.

Certainly we'll use are are very large and strong supply chain to to make sure we supply that in and of course, we have expertise also had very high power packaging. So.

We will combine that with the power control that we have from the active semiconductor acquisition.

It's been a couple of years ago, now and we really intend to take this this is much more into a module play we will have that integrated capability and of course, we will use our supply chain to make sure. It got stable supply of raw material and the ability to manufacture the wafers things like that.

As far as moving inside will certainly as we as we go over a period of scale in the business, we're going to take a hard look at at what makes sense and what doesn't make sense.

I think there is part of that process that that may be will adapt well to some of our internal capabilities and some that may be a bit more of a challenge.

And I think it will just look at that as we go through the next several years as we scale to see what makes the most economic since go forward basis.

Got it thank you.

And.

Correct. It can reason the wrong term here, but the prepayment of wafer.

Sorry, Gary the question like we've lost Mister monthly.

Oh.

I like to go to the next question.

Sure.

Next question comes from Edward Snyder with charter equity research.

Thanks, very much Eric it's.

It's clear the call comments, gaining some share in the low to mid mid high and low in China assumptions of mass market. How can you be sure that some muted ban weaknesses sure loss.

Few slots in that area I know the history as much to neutralize trying to figure out how you figure that out given some of their gains and then mark.

I am really puzzled by the sick power acquisition.

By way for some free environment Exburbs Awards.

We've seen it was like the industrial market or more good diversified analogue but.

You face a huge disadvantage in scale against <unk>, and especially will speaking foundry in New York.

So I'm just curious where do you see this going what leverage do thank you for.

For love or do you have.

This new acquisition to get Unde's, because it isn't going to be cost and given the.

The size of the fab and the fact that there will be.

Bobbing on wafers, you can't even get the 200 millimeters wafers.

You're going to be facing a big issue in terms of.

<unk>, so I'm, just trying to get a little bit more clarity on what market you're addressing what you think and then I have one final question for James before he leaves.

Okay I'll start with the question about share and how we can be certain about our share gains or losses and.

It's fairly straightforward for us.

I don't think there's a phone platform of any significance that we don't have content on so we know exactly how many phones are remodel are being built.

And so we know exactly what our shareholders. We do all the turn announced and figure out what all the other slots are if we don't already known.

Easily trackable and I can assure you that it's not not assure issue at all.

We're excited.

As we exit December quarter, and going into March I think we've got some very nice content pickups with Samsung in particular, new.

New platforms that were.

We're really happy about that tailwind, but right now.

To your question I think we're we're quite certain of our short position, especially against the Qualcomm, where frankly any arms or.

This is James I'll take on the acquisition question. So for us that the technology benefit there is low loss and therefore smaller die size.

We agree competitive market, but we are sort of the high end performance side of that side of the market. So it's going to take it's going to take that customer assistance really really looking for a high performance part now go forward basis will take both the power management things that we have in the prior acquisition and our packaging capable.

<unk> will move more into a module space and.

And again, we will do that selectively where we see parts of the market that are really going to be driven by performance.

So we're not trying to take over the world.

So you couldn't be.

Hi performance application specific in the module side of it but you did mention ev's quite a bit and all easy to build a big modules.

Well, the bill there'll be high performance applications in that space as well.

Okay.

Go.

Everybody's got that time, but.

Mr coming down and bugging, you before you get off and push off into the Prairie.

I have a question about your <unk> guided or the guide for IDP was outside of China, you're going to expect to see growth given how pervasive China was to the slide you infrastructure business and how it is not coming back in the U S needs to be a lot more skittish about what's the long term.

Lots of next year.

Five G. Four IDP when you get back to the point, where the five G. My most stuff is it fair you were you were in China would you expect it to be a longer haul. Thanks.

Yeah, I think think of five G specific I suspect it will be a bit of a longer haul, but I will tell you to really pleased with the progress. We've made we've had when significant winds outside of China in that Milo space, we begin giving out our first integrated modules.

What we call pales power or a fire modules.

And really pleased with those winds of the performance that we have there.

You do look at are the core the IDP business minus the infrastructure side of this year will grow north of 20%. So it really is the story for US is just the lack of deployments.

Of going on in China, If you look at that base station business outside of China.

Actually growing way up over 30%. So it really is a story for us about of slowdown in China is the IDP story of the rest of it the rest of the business is doing very very well and a on your comment about my retirement I want to say a few words, but first of all I really wanted to safety Corvo teen.

For all the work over this past decade, or so they've done just absolutely tremendous job and we've been able to accomplish a tremendous amount of I also want to thank Bob for all of US leadership in building Corvo I have a lot of pride associated with the company that we built in and I want to thank Bob for I guess guiding us through that may be dragging.

But I want to thank you very much and third I want I want to thank Phil look for accepting the challenge to lead the IDP team.

I'm really confident that he's going to do a great job in the future with the organization. So I want to thank you for joining us.

Thanks James.

Thank you we'll take our next question from Christopher Roland of Susquehanna.

Thanks for the question guys.

I did want to kind of go back to blames earlier question. So Qualcomm did post some some very impressive RFC numbers.

They are now at about $1.2 billion, a quarter and probably going up from there.

And they actually said that their supply constraints were lessening.

And had been better than initially expected. So I did want to circle back on the differences between you and them and and what you're seeing here in December I think you guys did say it could be a timing it could be an inventory issue.

But I would really love to flush.

The rest out here is is there a difference tied to.

More mediatek modem centric customers or diff.

Different OEM customers here.

Is there anything else that would mark the.

Difference between the two.

Hey, Christmases bond with no make a few comments and obviously, we have Erica from color blue.

Without seeing what they said or understood us a little bit difficult, but I believe in that number UK. There is the millimeter wave.

Front ends, but they do sell two are mutually largest customer.

They broke out that probably would be helpful. In.

Yes, we do see them out there we don't see them on any mediatek platforms that's for sure.

But we sit alongside them they won't have the entire or ask that the same customers is Eric party outlines. So I think we've got a pretty good handle of what's going on so.

Yes, they have more RF content I would say at our largest customer that's a fact.

So that could be part of easily with the sixers.

Might have missed.

Maybe the distinction.

I am not saying call comes not doing well, we've got some drivers of course.

I think my response to it is that I know, it's not in our experience. So we're not <unk>.

Losing share to them was the question.

Yeah. Thank you for that and indeed, the millimeter wave is a big portion for sure.

And then I did want to switch to M&A for a second and congrats on acquisition.

You know, it's this union silicon.

Silicon, sorry, and Dec wave.

These do appear to be somewhat niche businesses.

And I guess my question is do you guys have a desire for more broad based businesses or even a catalog business.

Whether it's analog or micro control or mixed signal something like that.

And.

What is your desire.

To move in that direction.

Let me start with Chris I. Appreciate the question I think we've said before will never telegraph the areas that we want to go after that's for sure.

I think Eric would probably take exception and I'll, let them talk about it the call ultra wideband initiatives probably.

Different view than what we have that's for sure. We think that is nice growth area and I'll, let her speak to that because I think what we demonstrated with bullets in our press release, where my own comments I think this was clifford eating a lot greater than what most people thought.

Yeah, and maybe to kind of take a step towards your question I think we're always looking for opportunities that allow us to leverage our scale in mobile and then use that same technology had an unfair advantage everywhere else were in smaller markets right I mean, that's.

When an advantage that we have with our corporate structure. So you can review could set perfectly the mobile phone itself of course is going to drive.

Billions of units, but around that there will be 567 things that talk to those billions of units right. So the whole connected home ecosystem and so forth. It's it will be a major franchise overtime.

And continuing to expand into industrial some of the things we talked about in the press release use industrial things like auto manufacturing autos themselves. So certainly not a niche business to Bob's point and we're thrilled with the progress that we're making with ultra wideband today.

Yeah, and I would I have this mark I would just add that.

We're looking at this several years out and they are most definitely not niche businesses at that point I mean that the tan that we see associated with $1.6 billion. So acquisitions that we've done over the last several years and I'm, including the streets at 200 million plus on it.

Silicon carbide we.

We see that cabinet at about $5 billion.

We see that Cam doubling.

10 billion or more.

Over the next several years.

So.

We expect these businesses to be material and enjoy that growth which is significant.

And that's not including Biotechnologies.

Very good points. Thanks, Thanks, a lot and congrats on the acquisition.

Thanks, Chris.

Thank you we'll take our next question.

We'll take our next question from Rod Spindrift Gill with Needham and company.

Ross.

Our next question comes from Rob Spindrift Grill, with Needham and company.

Hi, guys can you hear me.

Yes.

Great. This is Dennis on <unk>. So I just wanted to ask you guys. A question of regarding the comments you made about mass market handsets in the content increases could you provide some more color. Please about what you're seeing how much of a of a of a defense you're seeing percent I think had mentioned it was higher versus the high end kind of five G handsets.

Can you guys, please and a little bit more detail about that.

Sure.

Looking at the Arab content in that is five G proliferates down.

We've said, there's like a five to $7 increased from four G. Advanced Pro for example up to the five G.

And what we said previously is what's interesting is we see that five to $7.

Consistent as the phones go down so.

The highest earphone Hunter smartphone you might be looking at 30 to $35 RF bomb, you're adding 5% to 7% that that's a good growth, but as you go down in the mid tier you're adding that five to seven on top of the $13 for $10 in some cases right. So I think that was the interesting.

Kind of content growth story as you go down some of the fundamental RF challenges in in five G that drive a lot of complexity around filtering in Multiband multimode operation.

Received diversity requirements growing up transfers diversity coming in and so forth all of that are sort of independent of tear because they are not a lot of them aren't driven specifically by consumer feature.

Features and things that you see is driven just as much by sort of network infrastructure.

Efficiency economy's driven by the the provided the carriers so so.

So I think that's the essence of of the comments he made in the past that you're asking about.

Perfect. Thank you and then for my follow up I just wanted a task regarding the gross margins you had mentioned that kind of gross margins are holding a fall. This quarter. Despite challenges can you can you discuss the chief drivers of this resilience in the gross margins. Please.

Oh.

Cover that at length in previous calls and it's the same.

Factor switches, what we had hoped would happen so.

We have premium products and those allow us to price better and compete.

Where we most want to compete.

We've maintained the utilization of our factory network.

We continue to drive productivity programs aggressively.

And.

It's it's these and other factors.

Contributed to the gross margin.

Quantum improvement and then consistency we're seeing.

I appreciate that thank you.

Thank you, we'll take our last question from Amber's Srivastava BMO capital markets.

I have a question on the demand side.

What are your assumptions for the Asia market and.

In the March quarter.

Are you, assuming a snap back or what is embedded in and your guide for what you think about that market and then you made a comment on holding back to keep the channels Hildy can you talk a little bit about.

Give us some color on what the channel and neutral looks like.

And for my follow up Mark.

Given them the tightness.

Cap intensity very low for awhile does that change in fiscal 23. Thank you.

Right over so first of all looking at the mobile market you asked about Asia, specifically in March I mean, clearly I think as you saw from our guide this is on a normal year right.

We're booking seasonality and our projection in March growing up so.

I think that's.

There is no.

Nor Matt normality here to the seasonality so.

We're expecting that.

It will be roughly in line growing a bit over December quarter was politically.

And and the channel imagery.

Oh, sorry, the channel inventory, yes that also various dramatically by part numbers as we talked about we have some where we're back up to healthy levels.

Sure others that were still absolutely a hand to mouth or or even.

Constrained on in some cases, so that there is a wide range of but we've been saying I think over the past quarter or two that we're beginning to see channel inventories begin to get healthier and some parts. We've definitely got in there and that's where we're making sure that we don't over ship into into the channel to merge point.

And next phenom variation on your.

Yes.

On.

<unk> Glared Mark.

Go ahead. Please sorry, I was going to ask her capex question, but if you add a follow up.

Have a follow on.

Heard the memory guys talk about bills.

And the box complex is that specific to the memory guys or are you seeing that kind of manifest in your business as well that.

That different individuals.

Inventory did you see at Vox V vocal Shlomi taught you said, yeah, yes, because whenever you guys have called it out without taking the names that they talked about so and the desire to take sure well one one thing in which I don't think we've touched on this call yet we do see very very lean inventories in the finished goods channel. So in terms of phone inventory in the channel from before.

And surely we don't you see pretty tight discipline. There, we don't we don't see overbuilt and phone inventory building up.

I am not sure. If you are asking that or whether they are building up a stockpile of memory chips I don't know I can't.

Comment without opponents side.

You saw anything on the cohort inside that site.

No no I don't.

I don't think they're intentionally doing that they are doing with mix shifts due to supply changes week to week, which based plants that can get depends on which honestly can ship. So.

Yeah. So I think that's the key factor.

And then on British British on your Capex question, it's still our our long term goal.

Yeah.

Keep our capital intensity as low as we can as we grow and stay around that mid single digits as a percentage of sales now that will.

That will move a bit up and down as we're going through various investment cycles, but.

But that's the long term goal.

I do think it's important to call out that.

Our capex is staying at sustained levels and through this week or period in December because we see on the other side of it and it's we're only talking in the March quarter, where we see things writing.

We see next shares gaining at Goodyear and so we need to we need to invest capacity.

Realize that growth potential.

Got it thank you.

Thank you at this time I'd like to turn the call back to management for closing remarks.

We want to thank everyone for joining us today, we look forward to speaking with you again it come.

Coming investor conferences, Thanks, again and have a good night.

This concludes today's call. Thank you for your participation you may now disconnect.

[music].

[music].

Good day and welcome to the Corvo, Inc. Q2, 2022 Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Douglas delete to Vice President of Investor Relations. Please go ahead.

Thanks, very much Todd Hello, everybody and welcome to Corpus fiscal 2022 second quarter earnings Conference call. This 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 statements contained in the earnings release published today as well as the risk fact.

<unk> associated with our business in our annual report on Form 10-K filed with the Securities and Exchange Commission because these risk factors may affect our operations and financial results.

In today's release and on today's call, we provide both GAAP and non-GAAP financial results. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze Nash performance without the impact of certain noncash expenses or other items that may obscure trends in our underlying performance during our call our comments and comparisons to <unk>.

Income statement items will be based primarily on 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 CEO, Mark Murphy, Chief Financial Officer, Eric <unk>.

President of <unk> mobile products group Phillip <unk> incoming president of Carbos infrastructure, and defense products group and James Klein outgoing president of cargoes infrastructure and defense products group as well as other members of <unk> management team and with that I'll turn the call over to Bob.

Thank you, Doug and welcome everyone to our call to Corvo team delivered an exceptional September quarter with revenue and EPS at all time highs.

<unk> during the quarter was broad based across customers and supported by new product launches.

In mobile products, the multi year migration of <unk> continues to drive RF content and integration trends well.

While began in top tier flagship phones is now playing out in the mass market, where the RF content increase is greater on a percent basis that in flagship devices.

<unk> enjoys broad exposure to mass market designs, our customers like honor.

Pixel, Samsung vivo and Xiaomi.

As a preferred supplier with leading products and a robust technology roadmap corvo is well positioned as <unk> devices, and Android ecosystem contribute increasingly to the growth in the RF Tam.

And other connectivity markets Ultra wideband adoption in smartphones is serving as the infrastructure for our growing ecosystem of ultra wideband enabled devices.

The opportunity set spans mobile automotive and Iot markets, creating a strong foundation for growth over the coming years.

And Wifi the adoption of Wi Fi six eight and the performance limitations of smaller node Cmos integrated <unk> are driving the migration to chip onboard firms and items like ours and.

In Wi Fi and other markets <unk> products and technologies are at the forefront of multi year upgrade cycles, enabling new ecosystems and use cases and transforming the user experience.

Now, let's look at some of the quarterly highlights in our end markets starting with mobile.

Google we commenced shipments of mid high and ultra high band pads antenna tuners, and multiple connectivity solutions to support the ramp of their recently announced pixel six.

For an upcoming Korea based <unk> mass market smartphone platform. We received the first production orders for our mid high and Ultra high band pads, Wi Fi <unk> and multiple high performance discrete solutions.

And mobile Wifi, we secured a Wi Fi six band design wins with multiple top tier smartphone Oems and began sampling Wi Fi seven firms, enabling higher data rates and improved performance.

And ultra wideband Corvo is advancing technologies for a diverse ecosystem of proximity aware connected devices.

We secured an ultra wideband design win to enable real time device tracking and other location aware applications in home mesh networks and.

And we were selected to supply ultra wideband solutions for enterprise access points as well.

We also expanded our engagement with a leading provider of consumer Iot products across a broad set of connected home devices, including smart speakers.

<unk> controlled fans and air conditioners.

And automotive manufacturing Corvo was selected to supply ultra wideband and Zigbee solutions with concurrent connect technology to an automaker in Korea streamlining automation in manufacturing.

And other connectivity markets, we began sampling of Wi Fi six of them covering five two gigahertz and five six gigahertz and featuring an integrated bar filter.

<unk> five gigahertz iphones enable higher capacity and improved efficiency and a reduced form factor.

In broadband we begin sampling a triple output DOCSIS three one amplifier module supporting network upgrades for a major cable operators in the U S and in Europe.

And infrastructure design win activity was strong across Oems, including small cells and base stations wins included all of the RF transmit and receive path content, including boss filters for <unk> small cells at a major base station Oems.

We see infrastructure markets picking up in 2022 with Corvo, Sam growing year over year, the Sanford <unk> outside of China will post significant growth next year and support a strong double digit CAGR through 2025.

In aerospace and defense, we expanded our product portfolio with an industry, leading 125 Watt S band power amplifier module and a one eight kilowatt L band.

Radar palette for commercial and defense radar applications.

In RF based biotechnology testing, we received our first commercial orders and commenced shipments of our Omnia antigen test platform.

During the quarter.

The NIH <unk> variant task force conducted an external study that demonstrated the performance of our Omnia antigen test platform and effectively detecting COVID-19 variance.

Including the Delta variant.

Although this is a new market for us.

We believe we bring a novel technology that offers unique and real value as the world moves to more testing protocols, including for flu, a b and other seasonal pathogens.

Our platform offers a unique combination of accuracy and speed at the point of care with improved process flow, including real time wireless delivery of results.

We have seen its benefits in our own operations as part of our protocol for our own internal testing.

After the quarter closed.

<unk> acquired United Silicon Carbide, an innovator in silicon carbide power devices, and a pioneer in silicon carbide <unk>.

The combination will further differentiate <unk> power portfolio, enabling more highly integrated power device solutions and expand our addressable market to include higher voltage applications that demand maximum power efficiency, such as electric vehicles charging stations and renewable energy systems.

We welcome Chris <unk> and his team and look forward to helping them accelerate the growth in their business.

For corvo, our ability to deliver more power more efficiently and using less current help put us at the center of the digital transformation.

We are eager to expand these competencies as global markets move to electrification and renewable energy.

Cordless technology portfolio is best in class our product position is strong our end market exposure is expanding and we are operating very well.

Yes, we are seeing constraints and we are working closely with our customers and our partners.

Mark will have more comments about the operating environment and we look forward to discussions during our question and answers.

Picture, we see the industry working through this as it always has.

For Corvo, we see a business with unique competencies and expanding set of growth drivers and we expect a continuation of double digit growth over several years.

Before handling the call over to Mark I am pleased to welcome Philip Chesley as president of <unk> infrastructure and defense products group.

Philip has a proven track record growing global semiconductor businesses with experience in RF power data communications automotive industrial Aerospace and defense. We are very pleased Philip has joined <unk> to lead our IDP team.

I want to thank James Klein since the formation of Corvo, James and the team have more than doubled IDP revenue, while creating a recognized industry leader.

We thank James for his many contributions to <unk> and wish him the very best.

James will remain with us through November to help ensure a smooth transition transition with the change in the IDP leadership.

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

Thanks, Bob and good afternoon, everyone.

In the September quarter cargo delivered the strongest quarterly revenue and earnings in the company's history.

Cargo revenue for the fiscal year 2022, second quarter was 1.255 billion $5 million above the midpoint of our guidance and $195 million or 18% higher than last year September quarter.

When comparing September quarter numbers.

Recall that our fiscal year 2021 was a 53 week fiscal year and our September quarter last year was a 14 week quarter versus this fiscal year's more typical 13 week quarter.

Mobile products revenue of $996 million was up 32% year over year on a continued growth of higher content <unk> smartphones.

Infrastructure and defense products revenue of $260 million was slightly below expectations due to reduced supply from outsourced Assembly and test operations in Malaysia and elsewhere.

As expected IDP was down year over year, due primarily to last year's strong infrastructure build out and a 14 week quarter.

We expect IDP to return to year over year growth in the December quarter.

And growth to accelerate in the March quarter.

Non-GAAP gross margin in the September quarter was 52, 4%.

The midpoint of our guidance despite supply chain disruptions that worsened through the quarter.

Non-GAAP operating expenses in the second quarter were less than expected at $222 million or 17, 7% of sales.

The sequential and year over year increases in Opex were driven by technology and product development expenses associated with key growth programs and recent acquisitions.

Non-GAAP operating income in the September quarter was $435 million 34, 7% of sales this.

This was our fourth consecutive quarter of operating margin over 33%.

Non-GAAP net income in the second quarter was $385 million and diluted earnings per share of $3 42.

Was <unk> 18 above the midpoint of our guidance.

Cash flow from operations in the second quarter is $245 million.

Our working capital includes an increase in payables associated with a long term silicon supply agreement.

The largest of these pads is a deposit which we expect to recoup by the end of the agreement in calendar 'twenty five.

This agreement is structured.

This agreement is a structured way to advance our differentiated technology position and simplify our long term planning.

Furthermore, it's only one of a number of examples whereby corvo is building longer term and more collaborative partnerships to provide our customers supply assurance and meet their product and technology needs.

Concurrently our customer relationships are broadening and strengthening allowing us to invest with more certainty.

As we have indicated previously the challenges the industry is currently experiencing are driving more constructive and longer term relationships that we see enhancing the overall durability and value of the business.

Capital expenditures in the September quarter were $47 million.

Lower than expected on spend timing and an earlier than expected reimbursement for a portion of our government funded work on advanced packaging.

Free cash flow was $198 million, and we repurchased $223 million of shares.

Over the last two quarters, we've purchased $523 million of shares.

Which was 110% of our free cash flow.

We continue to repurchase shares as our outlook is positive our free cash flow and ability to sustained investment in technology and growth is strong and our leverage remains low.

On the balance sheet cash and debt remained largely unchanged from the prior quarter at $1 2 billion and $1 7 billion respectively.

In the December quarter, our cash is projected to decline following payments associated with the previously mentioned agreement.

And with our acquisition of United Silicon Carbide.

Now turning to our current quarter outlook.

We expect revenue between $1 $90 million and $1 billion $120 million.

Non-GAAP gross margin between 52% and 52, 5%.

Non-GAAP diluted earnings per share of $2 75.

At the midpoint of our guidance.

Our December quarter, our revenue outlook.

It reflects broad based challenges and supply impacting mobile in IDP.

And near term weakness in demand principally in Asia.

Starting with supply we have several areas of constraint.

Our external supply chain is still recovering from disruptions in September including shutdowns in Southeast Asia.

Beyond that select materials products and production capacity remains tight.

These are industry wide issues affecting all suppliers.

And our customers are challenged and producing matched stats for products.

For example in smartphones.

Even where channel inventory for certain parts as healthy cut.

Customers lack silicon chips to produce phones.

This in turn creates chat changes in demand that add two constraints on our own production.

As we work to adjust mix.

Mix changes are part of our business.

But in a normal environment corvo can move swiftly to respond and capture demand.

The supply driven gaps are making recent demand softness in select areas such as our Asia smartphone customers.

Harder to quantify.

We see the industry working through this situation with some with some supply effects beginning to moderate this quarter and supply demand alignment improving more broadly through the March quarter.

Given the supply and demand effects, we now see <unk> smartphone volumes coming in below $550 million in calendar 'twenty one.

Moreover, this December forecasted revenue of $1 billion $105 million at the midpoint is down 12% sequentially and up slightly year over year.

We forecast mobile revenue in the current quarter to be approximately $830 million at the midpoint.

Down, 17% sequentially and flat year over year.

In the March quarter, we expect mobile to be up slightly sequentially as a typical seasonal decline is offset by improved supply and demand.

In IDP, we project revenue to increase in the December quarter to $275 million.

In the segment to return to year over year growth.

We expect IEP to be over $300 million in the March quarter.

Our December quarter gross margin guide of $52 two 5% at the midpoint.

As up versus the view, we provided last quarter, despite a more challenging supply demand environment than expected.

We see our technology and product mix and operating and capital efficiency, yielding a gross margin above 52% for the fiscal year.

We expect the march quarter to be around 52%.

We project non-GAAP operating expenses to increase slightly in the December quarter to approximately $224 million, reflecting higher investments in core technologies, and expanding capabilities and new businesses, including the addition of the United Silicon Carbide team.

We now project, our current quarter and full year non-GAAP tax rate to be between eight five and 9%.

Capital expenditures are projected to exceed $70 million in the December quarter, as we work to intersect demand and support long term supply agreements with multiple customers.

Currently we are supply constrained.

And prod project to remain so through our fiscal year end.

We continue to expand bar and gas capacity as well as bio sensor production capacity.

Port our growth projections for fiscal 2023.

In summary, we expect year over year revenue growth in the December quarter, though less than we had expected previously.

The current supply challenges and near term demand weaknesses weakness are acute.

But more temporary than durable.

We expect supply effects to moderate starting this quarter and improved supply demand alignment early next calendar year.

For full fiscal year 'twenty, two we expect revenue growth over 15%.

Gross margin over 52.

Excuse me, we expect revenue growth of over 15% gross margin over 52% and operating margin of approximately 33%.

Looking beyond this fiscal year, we expect double digit growth to continue as cargoes premium technology product portfolio and operating capability support <unk> Wi Fi Iot defense power and other growth markets.

Overall, we are investing to grow mobile and IAP at or above market.

Looking at our business by end markets instead of operating segments helps highlight the strength of our portfolio and market position.

An advanced cellular RF front ends for smartphones.

<unk> technology and product breadth is world class.

We expect this part of the <unk> business near $3 $3 billion this fiscal year.

To deliver high single digit to low double digit growth at increasing RF complexity and integration trend support years of content expansion.

Next looking at other cat activity beyond cellular solutions for smartphones.

<unk> enjoys exposure across multiple wireless protocols and serves industrial automation connected home automotive and other high growth Iot markets.

This fiscal year connectivity solution spread across our mobile and IDP segments combined to approximately $700 million and can grow in the strong double digits.

Finally defense infrastructure and power solutions support multiple long term secular growth drivers.

These include a multiyear build out on <unk> infrastructure, increasing semiconductor spend in defense.

And worldwide demand for power semi is driven by mega trends like electrification.

We expect a sustained long term double digit growth in this business from a base of over $600 million this fiscal year.

Our December quarter is off where we expected previously, but still guided up year over year as is our view of the March quarter.

We expect the business to strengthen through the second half of our fiscal year.

And contributed to our record full year performance, including earnings growth over 20%.

Longer term the outlook is bright.

<unk> is exceptionally well positioned to deliver earnings and free cash flow growth, serving a large and growing need for more efficient power and greater connectivity.

Now Todd would you. Please open the line for questions.

At this time, if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you were using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Please limit yourself to one question and one follow up question again.

Again to ask a question press star one.

We will take our first question.

From Toshi Hari with Goldman Sachs.

Hi, guys. Good afternoon. Thanks, so much for taking the question.

I have two if I may my first one is probably for mark.

17% sequential decline you are guiding to in your mobile business for December.

It's probably hard but can you sort of break that down into supply factors and demand factors.

To the extent possible.

And then on the demand side, you talked about weakness in Asia, but if you can if you can elaborate on that that would be super helpful. And then I got a quick follow up.

Sure.

So.

So two weeks.

<unk>.

We decreased our December number about about $150 million.

As you can see.

And.

About $135 million of that was in mobile where we went from roughly $965 to $8 30 in the December quarter.

The balance of the decrease was IDP.

IDP is the most straightforward its all supply and IDP.

So just keep that in mind.

Of the 135 roughly in mobile.

Yes, as we characterize supply.

Constraints, which is our suppliers not having supply for us.

Are customers not having that chipsets, thus not able to build their product.

And use our product and then finally, our own internal constraints.

We see up to a $100 million that we would characterize as supply related of that $135 million.

The balance so $35 million, we would view as net demand. Some some demand is up and we're able to intersect that but some demand is clearly down and I think that's well publicized.

Particularly in parts of Asia.

So <unk>.

Broadbrush strokes, where three quarters or less.

On supply in mobile and one quarter or more related to demand now a view if you add in IEP, which is all supply then yes that that proportion is stronger so.

That's our view.

Sure.

Great. Thanks for the color and then as my follow up.

You guys talked quite a bit about.

Having having constructive longer term conversations with your customers. You also talked about your long term silicon supply agreement.

As you kind of compare and contrast, the visibility you have today versus three years ago five years ago, I mean, how would you characterize the key differences.

I'm sure you've had long term agreements in the past, but how much bigger are they as a percentage of your backlog in and how enforceable or are they going forward relative to history.

Yes sure. This is Eric I'll take that I think.

One of the silver linings in this environment is how constructive the conversations have gotten in terms of much longer term. So.

Not just.

One or even two years with some cases up to three years of discussions about how we're going to outline both our technology and supply roadmap to our customers product roadmaps their markets.

And what they expect to ship in <unk>.

There is no crystal ball is not perfect, but at least we have ranges of alignment.

And sort of volume bars share windows and things like this that we can talk both to our customers and our suppliers and I think for suppliers, it's a great benefit to them and us to have more stability.

And for our customers of course, the supply assurance is paramount for us to have more confidence in our growth of the businesses is of course very important as well so it's.

It's a very different environment driven by all the factors we've talked about already on this call.

Got it thank you.

Thank you we'll take our next question from Vivek Arya of Bank of America.

Thank you for taking my question for the first one.

I'm curious given the supply constraints in the industry.

Does that change the competitive landscape in DIY site and someday as we look at next year. So for example.

It's one of your competitors can bundle that apps processors and modems along that.

<unk> side do you think that give them, perhaps an advantage from a.

Competitive perspective, as we look at next year.

Hey, Jay this is Eric.

I don't think so.

Technology decisions are still critical to enable next generation phones.

Best in class RF is still going to win in the front end section so.

I think we are.

Competing against people that have advantages of bundling across the boundary. If you will from the absent and modem side to the RF side really and I think again just as in the last question with the share I think the long term visibility, we have and kind of planning our technology Roadmaps, we're getting no.

No signs that there is any change if you will in terms of the bundling of the architectures that would change that.

This is Bob Thanks for your question I think the other point that's interesting is that.

A lot of the things that our customers are waiting on or from some of those very people. You mentioned, so I think we need to keep that in mind, it's not us the primary reason.

We have the parts, we can get the parts for them.

<unk> been saying as we've mentioned many times through last quarter as well as this quarter the challenges our customers are.

Match sets are kidding, whatever vocabulary you want to use that's been their bigger problem is.

Soc.

Not with RF front ends.

Not from us.

Got it and then on the acquisition that was announced.

I was hoping you could give us some more color in terms of what is the right way to reflect that in the model.

And our sense of the silicon carbide and the power semi space is of course, it's in front of us.

Very large growth opportunity in autos and industrial and so forth, but it's a very capital intensive space and a number of established players have margins well below your corporate average.

But what's the right way to think about the strategy and is it going to be accretive.

Overtime for Ya.

Yes, let me, let me take some of the financial lens.

Vivek and ill turn it over to James.

Yes.

First of all we're not in the capital intensive part where in the device manufacturing parts. So thats the expertise and we're leveraging our silicon carbide.

Gan on Silicon carbide knowledge and.

Which will be an advantage here.

So thats maybe first thing is realizing that this is these are things that we can boundary.

<unk>.

And source the material.

<unk>.

There'll be more disclosure in our acuity tomorrow, but it will be over $200 million that we're paying for United Silicon carbide.

And it is it is dilutive initially.

But we expect that to be.

Accretive.

Yes, maybe at the end of next fiscal year, and we expect it to be a.

Significant business for us several years out.

James.

This is James.

So as you as you stated we like the aspect that it gets us into several fast growing markets like electric vehicles industrial power.

And data centers, maybe in la and longer term, even in things like circuit protection.

We see it all in current year, expanding our adjustable market by almost $1 billion and we think that that certainly continues to grow at a high growth rate as we go over the next several years.

We do believe that we have industry, leading performance and inefficiency and in die size. So we think when we compare those differentiated type capabilities with our existing power management.

Capabilities, we really do believe we have the ability to continue to grow and scale the business.

Thank you.

Thank you. Our next question comes from Blayne Curtis of Barclays.

Hey, good afternoon. Thanks for taking my question I just wanted to go back on the supply.

Supply issues.

Look at the shipments from the two major modem companies I guess theyre up and Youre seeing a correction. So just kind of curious a couple of ways that could happen.

Kind of curious.

Now in retrospect.

Did you ship more RF and maybe modem in the first half of the year and that has the correct or just kind of curious your thoughts on that I know you probably haven't seen qualcomm's guide, but that mediatek youre not seeing as sharp as the decline in December just kind of thoughts between the disconnect there.

Hey, Blaine this is Eric.

Yes, it's a good question and I think to a certain extent theres some of that and I think a lot of it comes down to mix as well.

We did a good job of responding to customer demand that we still have.

Several parts, where we're on allocation as well and chasing in behind of course, as we talked about but for the most part we did.

A pretty good job of Sandisk.

<unk> customer demand customer demand.

What happens is as the mix shifts.

They're essentially taking every baseband chip that can get regardless of which are episodic. So yes. It could be that net net we shipped a bit ahead up to this point.

Okay, and then just to your perspective on it.

Got it.

Well I would just add planned it.

So we're disappointed with the December guide.

But I think it's also to reinforce our commitment to keep the channel healthy.

<unk>.

And gave you a guide batched, we see on.

The supply demand fronts.

But it's never easy, but admittedly, it's more difficult than usual.

Environment right now I do think it's important with this adjustment to step back not not lose sight of.

Get a business we've got.

For this for this fiscal year.

Yes, we call down.

But that was and we missed but that's a.

It's that there is an aged consensus that clearly to supply environment worsened through.

Through the quarter.

Particularly in mid to late September and then knees.

Publicized weakness in demand emerge.

Yes.

We see things improving we think December is.

As bad as it gets for us and we see improving in March.

And broadly we had given a guidance range of 15% to 20%.

And with this two 5% adjustment for the year were down at the lower end of that range. So we're still in the range that we had provided.

Yes, less than our gross margin outlook is intact around 52%.

Opex is in control and we are investing in the future of the business. That's both traditional parts of the business and newer parts of the business.

And in the end were taken EPS, roughly a dime above $12.

Two roughly a dime below $12.

And so yes, there is a bit of a correction there, but I would say, it's the right thing for us to do it.

If we look into next year and beyond we're just feel.

Feel great about our position now.

Our premium technology and products.

Serving attractive end markets growing double digits, and we expect to grow double digits.

Our operating well sustained margins over 52% expanding operating margins.

Lots of lots of talk about the positive beyond this quarter.

And I guess when you look at your supply constrained clauses constraints on your business.

You did grow inventory in September with that level of sales. So I guess I'm looking at our sales down teens.

So I guess I'm kind of wondering I guess.

Supply situation and get that bad between September December or is there. Another factor there I'm just trying to understand those moving pieces.

Yes.

Worse it did get worse in mid to late September blamed for sure.

And that's what we've tried to explain in first that was yes, it will supply environment, which has been tough for a year and a half almost two years now.

Supply environment got worse and then in.

And then demand.

Over the past.

Three weeks or so has deteriorated.

<unk>.

But our work are Alan some of that inventory is just again.

It's mixed match of SaaS, and so forth like adapt but but having said that our.

Our inventories are okay. I mean, our turns are at the high end of historical range and even with the slowdown.

The turns will be within the normal historical range.

Yes. This is why we're dealing with this now and again, we think it's a short term issue that we work through.

That are in better shape in the March quarter.

Thanks.

Thank you we'll take our next question from Karl Ackerman with Cowen and company.

Yes. Thank you.

For your December quarter outlook.

Are the bottlenecks you described at least for mobile are they concentrated in the Android ecosystem and then if I may just as a follow up.

If you could highlight whether the growth trajectory of Android into December.

Is better or worse than your guide of down 17 for mobile that'd be very helpful. Thank you.

Yeah. Carl this is Eric I don't think we can break them out between ecosystems like that can give us any more color given the concentration of the ecosystem.

Okay.

If I May then just going back to.

This acquisition you've made in silicon carbide I understand that.

Most of the United six products are aimed at high voltage server and general industrial power supplies, where you have some.

Pretty good customer overlap today, but could you discuss your plan go to market for United sick, and whether they have existing relationships with tier one automotive Oems. Thank you.

Yes.

Today, you are right I mean, it's predominantly.

So I would say all of the lower voltage scale and its empower suppliers around automotive and data center applications.

If you look at how we plan to take the business on a go forward basis, certainly we will use our channels to expand substantially.

As you know, we've got a broad base into the automotive and in many other places like the defense market will be able to take this technology over the long term.

We will also be scaling the technology up in voltage.

Which will allow us to enter other parts of the automotive space motor controls and things like that on a go forward basis.

Thank you.

Thank you we'll take our next question from Gary Mobley with Wells Fargo Securities.

Hey, guys. Thanks for taking my question I wanted to pick up with some line of questioning on the acquisition.

James Your core competency historically and wide band gap semiconductor materials and correct me if I'm wrong, it's been in and Gan power or Im sorry, Gan RF.

So.

Silicon carbide <unk> core competency of courses.

Silicon carbide and the company has always managed outsource manufacturing to X fab.

So my question is.

Is the plan to eventually bring in the manufacturing.

Internally leveraging some of the cordless historical wideband gap.

<unk> capabilities.

And a related to trying to penetrate the automotive market.

Has been important so far for <unk>.

Our Oems to align with silicon carbide providers that are vertically stacked with bowls materials and power devices for supply chain security and so.

Question is as a matter of strategy is that the intent long term for this business.

So let me take the second one first.

Certainly we will use our very large and strong supply chain to make sure we supply that in and of course, we have expertise also had very high power packaging. So.

We'll combine that with the power control that we have from the active semiconductor acquisition.

It's been a couple of years ago, now and we really intend to take this business much more into a module play where we'll have that integrated capability and of course, we'll use our supply chain to make sure. We've got stable supply of raw material and the ability to manufacture the wafers and things like that as.

As far as moving inside of <unk>.

Certainly as we as we go over the period of scale in the business, we're going to take a hard look at what makes sense and what doesn't make sense.

I think there is parts of that process that that maybe we will adapt well to sum up our internal capabilities and some that may be a bit more of a challenge.

And I think we will just look at that as we go through the next several years as we scale to see what makes the most economic sense go forward basis.

Got it thank you.

And <unk>.

Correct it from using the wrong term here, but the prepayment of wafers.

Sorry, Gary a question like we lost Mr. <unk>.

Oh.

I'd like to go to the next question.

Sure.

Next question comes from Edward Snyder with charter equity research.

Thanks, very much Eric.

The call welcome is gaining some share in the low to mid high mid high and low in China, and Samsung is a mass market. How can you be sure that some of you that Bam weaknesses and share loss and a few slots in that area I know you don't participate as much.

I'm just trying to figure out how you figure that out given some of their gains and then mark.

I'm really puzzled why the sic power acquisition.

Buying wafers from premium filtering through X fab rewards.

We've seen it was like the industrial market are more volume the reverse.

Fight analog.

What do.

Thanks, a huge disadvantage in scale against <unk>, neon and especially will speak in foundry and New York.

So just curious where do you see this going what levers do you think you can pull or.

Do you have.

This new acquisition to get you into evs, because it isn't going to be cost and given the.

The size of the fab and the fact that there would be.

Bobby on wafers, you can't even get the 200 millimeter wafers.

Youre going to be facing a big issue in terms of.

<unk>, so I'm, just trying to get a little bit more clarity on what market you're addressing what I think and then I have one final question for gains before he leaves.

Okay.

Okay I'll start with the question about share and how we can be certain about our share gains or losses.

It's fairly straightforward for us.

I don't think there is a phone platform of any significance that we don't have content on so we know exactly how many phones are a remodel or being built.

And so we know exactly what our shareholders, we do all the turnarounds and figure out with all the other slots harping on already known.

Easily trackable and I can assure you that's not it.

Not a share issue at all.

We're excited as.

As we exit the December quarter and going into March I think we've got some very nice content pickups with Samsung in particular on new platforms that were.

We're really happy about that tailwind right now.

To your question I think where we're quite certain of our share position, especially against Qualcomm or frankly any are similar.

This is James I'll take on the acquisition question. So for us that the technology benefit there is low loss and therefore smaller die size.

We agree competitive market, but we are sort of the high end performance side of that side of the market. So it's going to take it's going to take that customer set that's really really looking for a high performance part now go forward basis, we'll take both the power management things that we have in the prior acquisition and our packaging capable.

And we will move more into a module space and.

And again, we will do that selectively where we see parts of the market that are really going to be driven by performance.

So we're not trying to take on the world.

So you couldnt be.

High performance application specific and the module side of it but you did mentioned evs quite a bit and all easy to build a big modules for.

Well no.

There'll be high performance applications in that space as well.

Okay.

You go.

Everybody's got that time, but.

Is that coming down my bugging, you before you get off and push off into the Prairie.

I had a question about your <unk>.

<unk> guided or the guide for IDP was outside of China.

I'd like to see growth given how pervasive China was for the slides your infrastructure business and how it's not coming back in the U S looks to be a lot more skittish about what's the long term.

Lots of next year five G for IDP.

You get back to the point, where the <unk> Mimo stuff is it parity where you were in China, what do you expect that to be a longer haul.

Yes, I think singled five specific I suspect it'll be a bit of a longer haul, but I will tell you Ed.

Pleased with the progress we've made we've had wins.

Significant wins outside of China.

In that Mimo space.

Again getting out our first integrated modules or what we call <unk> power RF fiber modules.

And really pleased with those wins and the performance that we have there.

You do look at our core.

IDP business minus the infrastructure side of this year will grow north of 20%. So it really is the story for US is just the lack of deployments of.

Of going on in China, If you look at that base station business outside of China.

I actually growing way up over 30%. So it really is a story for us about a slowdown in China as the IDP story, the rest of it the rest of the business is doing very very well and on your comment about my retirement I want to say a few words first of all I really wanted to take the corvo team.

For all the work over this past decade, or so they've done just absolutely tremendous job and we've been able to accomplish a tremendous amount of I also wanted to thank Bob for all of his leadership in building core role I have a lot of pride associated with the company that we built in and I want to thank Bob for I guess guiding us through that maybe dragging us.

But I want to thank you very much and third I want to thank Philip for accepting the challenge to lead the IDP team.

Im really confident that he's going to do a great job in the future with the organization. So I want to thank them for joining us.

Thanks James.

Yes.

Thank you we'll take our next question from Christopher Rolland of Susquehanna.

Thanks for the question guys.

I did want to kind of go back to <unk> earlier question. So Qualcomm did post some some very impressive RFS the numbers.

They're now at about $1 2 billion in the quarter and probably going up from there.

And they actually said that their supply constraints were lessening.

Had been better than initially expected. So I did want to circle back on the differences between you and them and what Youre seeing here in December.

Thank you guys did say it could be a timing it could be an inventory issue.

But I'd I'd.

I'd really love to flush.

The rest out here is is there a difference tied to.

More mediatek modem centric customers or defer.

Different OEM customers here.

Is there anything else that would mark the difference between the two.

Hey, Chris This is Bob and I'll make a few comments and obviously with Eric add some color.

No we're not seeing what they said or understood, it's a little bit difficult.

I believe in that number you gave there is the millimeter wave.

<unk> front ends that they do sell two are mutually largest customer.

I would say broke that out that probably would be helpful.

Yes, we do see them out there, we don't see them on any mediatek platforms Thats for sure.

But we sit alongside them they don't have the entire RF, but the same customers as Erik already outlined so I think we've got a pretty good handle of what's going on so.

Yes, they have more RF content I would say at our largest customer.

So that could be part of it easily.

Eric If you think there is anything I may have missed this.

Maybe the distinction.

I'm, not saying qualcomm's not doing well they've got some drivers of course.

I think my response is that I know, it's not in our experience. So we're not.

Losing share to them with the question.

Yes, thank you for that and indeed, the millimeter wave is a big portion for sure.

And then I did want to switch to M&A for a second and congrats on the acquisition.

It's this union silicon.

Silicon sorry in Deca wave.

These do appear to be somewhat niche businesses.

And I guess my question is do you guys have a desire for more broad based businesses or even a catalog business.

Whether it's analog or micro control or mixed signal.

Like that.

And what is your desire.

To move in that direction.

So let me start with Chris appreciate the question.

I think we've said before we will never telegraph the areas that we want to go after that's for sure.

I think Eric would probably take exception and I'll, let him talk about it the call ultra wideband initiatives probably.

Different view than what we have that's for sure. We think that is a nice growth area.

And I'll, let Eric speak to that because I think what we demonstrated with the bullets in our press release in my own comments I think this was clifford eating a lot greater than what most people thought.

Yeah, and maybe to kind of take a step towards your question I think we're always looking for opportunities that allow us to leverage our scale in mobile and the new sensing technology at an unfair advantage everywhere else. We're in smaller markets right. I mean thats what are the advantages we have with our corporate structure. So <unk> fits that perfectly the mobile phone itself of course is going to drive.

Billions of units, but around that will be $5 $6 seven things that talk to those billions of units right. So the whole connected home ecosystem and so forth it.

It will be a major franchise overtime.

And continuing to expand into industrial some of the things we talked about in the press release industrial things like auto manufacturing autos themselves. So certainly not a niche business to Bob's point and we're thrilled with the progress that we're making with ultra wideband today, yes.

Yeah, and I would I have this mark I would just add that.

We're looking at this several years out and there most definitely not niche businesses at that point I mean, thats. The Tam that we see associated with $1 6 billion or so acquisitions that we've done over the last several years, including this most recent 200 million plus on silicon carbide.

We see that can at about $5 billion.

We see that Cam doubling.

$10 billion or more.

Over the next several years.

We expect these businesses to be material and enjoy that growth which is significant.

And that's not including Biotechnologies.

Very good point, thanks, Thanks, a lot and congrats on the acquisition.

Thanks, Chris.

Thank you we'll take our next question.

We will take our next question from Raj Bindra Gill with Needham <unk> company.

Raj.

Alright. Our next question comes from Raj Bindra Gill with Needham <unk> company.

Hi, guys can you hear me.

Yes.

Great. This is Dennis on for Rajeev. So I just wanted to ask you guys. A question regarding the comments you made about mass market handsets in the content increases could you provide some more color. Please about what you are seeing how much of a.

Of a difference youre seeing 8% I think you had mentioned that it was higher versus the high end kind of <unk> handsets can you guys. Please.

A bit more detail about that.

Sure.

Looking at the RF content in.

<unk> proliferates down.

We've said there is like a $5 to $7 increase from four GE advanced Pro for example up to the five <unk>.

And what we've said previously is what's interesting is we see that $5 to $7.

<unk> as the funds go down so.

Uh huh.

A high tier phones <unk> smartphone you might be looking at 30 to $35 RF bump youre, adding five to seven to that that's a good growth, but as you go down into the mid tier youre, adding that five to seven on top of nearly $13 or $10. In some cases right. So I think that was the.

Interesting.

What kind of content growth story as you go down some of the fundamental RF challenges in in <unk> that drive a lot of complexity around filtering and multi band multi mode operation.

Received diversity requirements going up transmit diversity coming in and so forth all of that are sort of independent of tier because theyre not a lot of them aren't driven specifically by consumer.

Some things that you see is driven just as much of a set of network infrastructure.

Efficiency and economies driven by the provider the carriers so.

That's the essence of the comments, we made in the past that you are asking about.

Perfect. Thank you and then for my follow up I just wanted a cast regarding the gross margins. So you had mentioned that kind of gross margins are holding up well this quarter. Despite challenges can you.

Can you discuss the chief drivers of this resilience in the gross margins. Please.

Okay.

Covered at length in previous calls and it's the same.

Factors, which is what we had hoped would happen. So we have premium products and allow us to price better and compete where we most want to compete.

We maintain the utilization of our factory network.

We continue to drive productivity programs aggressively.

And.

These and other factors.

Contributed to the gross margin.

Quantum improvement and then the consistency we're seeing.

I appreciate it thank you.

Thank you, we'll take our last question from <unk> Srivastava of BMO capital markets.

Thank you Ian.

I had a question on the demand side.

What are your assumptions for the ACO market.

In the March quarter.

Are you assuming a snap back or what is embedded in your guide for what you think about that market and then you made a comment on holding back to keep the channel's healthy can you talk a little bit about give us some color on what the channel inventory looks like.

And for my follow up Marc.

Given all the tightness.

Cap intensity very low for a while.

Is that change in fiscal 'twenty three.

Alright ever so first of all looking at the mobile market you asked about Asia, specifically in March I mean, clearly I think as you saw from our guide. This is on a normal year right. We're booking seasonality in our projection in March going up so.

I think thats.

There is no.

Newer Matt normality here to the seasonality so.

We're expecting that.

It'll be roughly in line growing a bit over December quarter looks likely.

And the channel inventory.

Oh, sorry, the channel inventory, yes that also varies dramatically by part numbers as we talked about we have some where we're back up to healthy levels.

Sure others that we're still absolutely a hand to mouth or or even.

Constrained on in some cases, so there is a wide range of it.

We've been saying I think over the past quarter or two that we're beginning to see channel inventories begin to get healthier in some parts, we've definitely gotten there and that's where we're making sure that we don't over ship into into the channel to Mark's point.

I think phenom ratio under.

Yeah.

Yes.

Got it sorry go ahead, Mike go.

Go ahead, please sorry.

Was going to ask your Capex question, but if you add a follow up.

I did have a follow on.

Okay.

The memory guys talk about the bill.

And the box complex is that specific to the memory guys or are you seeing that kind of manifest in your business as well.

Inventory.

Inventory did you see at box vivo Xiaomi, so yes, yes, because I remember you guys have called that out without taking the names, but they've talked about and the desire to take share one one thing, which I don't think we've touched on this call yet we do see very very lean inventories in the finished goods channel. So in terms of phone inventory in the channel.

Both <unk> and Xiaomi, we don't see pretty tight discipline. There. We don't we don't see overbuilt and phone inventory building up I'm.

Im not sure if youre asking that or whether they are building up a.

Stockpile of memory chips, I don't know I cant.

Unemployment is tight.

So anything on the component side that site.

No no I don't.

I don't think intentionally doing that theyre dealing with mix shifts due to supply changes week to week, which based on how they can get to.

Honestly can ship so.

Yes, so I think thats the key factor.

Got it and then operation British on your Capex question.

Still are our long term goal.

Yes.

Keep our capital intensity as low as we can.

As we grow and stay around that mid single digits as a percent of sales out of that well.

That will move a bit up and down as we're going through various investment cycles, but.

But thats the long term goal.

I do think it's important to call out that our capex is staying at sustained levels.

And through this weaker period in December because we see on the other side of it and it's we're already talked in the March quarter, where we see things writing.

We see next year as being a good year and so we need to we need to invest capacity.

Realize that growth potential.

Got it thank you.

Thank you at this time I'd like to turn the call back to management for closing remarks.

We want to thank everyone for joining us today, we look forward to speaking with you again it.

Coming investor conferences, Thanks, again and have a good night.

This concludes today's call. Thank you for your participation you may now disconnect.