Q2 2022 Skyworks Solutions Inc Earnings Call
Good afternoon, and welcome to Sky Rich solutions second quarter fiscal year, 2022 earnings call.
Call is being recorded at this time I will turn the call over to Mitch Haws Investor Relations for Sky bricks. Mr. Haack. Please go ahead.
Thank you Rachel good afternoon, everyone and welcome to Sky work second fiscal quarter of 2022 conference call.
With me today are Liam Griffin, our chairman, Chief Executive Officer, and President and Chris Senner sell our Chief Financial Officer.
Before we begin I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward looking statements.
Please refer to our earnings press release, and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today. Additionally, the results and guidance. We will discuss include non-GAAP financial measures consistent with.
Our past practice, please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP with that I'll turn the call to Liam Thanks, Mitch and welcome everyone. Despite a challenging macro backdrop I am pleased to report that Scott works delivered record second quarter results with them.
Digit year over year growth in both revenue and earnings per share.
We continue to benefit from our broad and diverse product portfolio.
And with an expanding set of customers in high growth markets, we are well positioned to outperform outperform in the current environment.
Looking at the quarter in more detail, we delivered record Q2 revenue.
134 billion.
Above consensus and up 14% compared to last year.
Highlighting both our growing content within tier one mobile and the increasing diversification of our customer base and technology reach.
In fact, our broad market revenue rose to a record $523 million in the quarter up 10% sequentially.
And 36% year over year.
In addition, we continued to drive solid profit margins exceptional cash flow and consistent cash returns.
We achieved gross margin of 51, 2% and operating margin of 36, 8%.
We posted earnings per share of $2 63.
Up 11% year over year.
We generated operating cash flow of $393 million, and we returned $509 million to shareholders through dividends and share repurchases.
Our strong results this quarter were driven by a vast expansion of use cases.
From content rich smartphones to complex Iot devices.
Innovative solutions for the automotive markets industrial and infrastructure.
Specifically in mobile we supported the top five Oems with our Sky five architectures.
Including flagship models from Google, Samsung and other tier ones.
In parallel we leverage our in house temperature compensated saw bar and gallium arsenide technologies to extend the reach across further content opportunities in <unk>.
And enterprise and Iot, we powered Comcast latest Wi Fi 60 residential gateways.
[noise] partnered with T mobile for their integrated <unk> fixed wireless access service.
We debuted the industry's first Wifi six E gaming router, featuring ultra fast Quad band performance.
And we embedded sky five technology and rugged mobile computing devices.
For industrial grade factory automation.
In automotive we are executing on our vision to lead the global transition while accelerating the shift.
To electrification trends that paved the way for cleaner and more efficient autonomous transport.
Over the past quarter, we enabled next generation wireless technologies across multiple leading Oems.
Further our power isolation portfolio continued to gain momentum.
The global EV market leaders.
And finally in infrastructure and in industrial we.
We captured milestone design wins at tier one equipment and service providers for <unk> macro and small cell deployments.
We ramped high performance clock solutions at Hughes network systems.
Supporting Leo satellite networking.
And we extended the reach of our cutting edge timing portfolio across the leading fiber backhaul and data center equipment providers.
Moving forward ubiquitous connectivity cloud computing and the massive shift to Evs are fundamentally reshaping the way we live.
As complexity intensifying with billions of intelligent edge compute nodes that demand for high speed.
Ultra reliable low latency solutions is accelerating.
Sky works is uniquely positioned to engineer and seamlessly integrate.
These advancements into increasingly smaller more efficient form factors.
Purpose built and customized for specific end markets and applications.
Lastly, our business aperture our end market reach has never been broader as we scale investments in core and new technologies.
We are pioneering the breakthroughs in RF signal processing power isolation timing.
Audio among others.
Propelling, our diversification and growth into the future.
With that I'll turn the call over to Chris.
Thanks Liam.
During the second fiscal quarter of 2022 scholars delivered record Q2 revenue of 1.34 billion, an increase of 14% year over year.
Broad market revenue was a record 523 million, representing 39% of total <unk> revenue in the quarter.
Gross profit in the second quarter was $683 million, resulting in a gross margin of 51, 2% up 40 basis points compared to Q2 of last year.
Operating expenses were 192 million or 14, 4% of revenue, reflecting our investments in support of future growth.
We generated 491 million of operating income translating into an operating margin of 36, 8%.
We incurred 13 million of other expense and our effective tax rate was nine 6% driving net income of $432 million.
And based on a further reduction of our weighted average share count to $164 4 million shares we achieved earnings per share of $2 63.
Up 11% year over year.
Turning to our balance sheet and cash flow second fiscal quarter cash flow from operations was 393 million and capital expenditures were $127 million.
In terms of capital allocation during the quarter, we returned $509 million to shareholders paying 91 million in dividends and repurchasing 3 million shares of our common stock for a total of $418 million.
During the first half of the fiscal year Sky works returned 871 million to shareholders through dividends and share repurchases.
In summary, the Sky works team delivered another solid quarter with Q2 record revenue and earnings per share while continuing to make the investments in our technology and product roadmaps to support future growth in mobile and broad markets.
Now, let's move on to our outlook for Q4 of fiscal 2022.
We expect to deliver it.
Double digit year over year revenue and earnings per share growth in the June quarter, specifically, we anticipate revenue between $1 2 billion and $1 two 6 billion.
At the midpoint of 123 billion revenue for the quarter is expected to increase 10% year over year.
This outlook takes into account our current view of recent pandemic related supply chain disruptions, which are impacting the ability of our customers to fulfill and market demand.
Gross margin is projected to be in the range of $50, 75% to 50, 125%.
We expect operating expenses of approximately $190 million to $192 million.
Below the line, we anticipate roughly $10 million in other expense and a tax rate of approximately nine 5% <unk>.
We expect our diluted share count to be approximately 163 5 million shares accordingly at the midpoint of the revenue range, we intend to deliver diluted earnings per share of $2 36.
An increase of 10% over Q3 of last year.
And finally, given our consistently strong cash flow and confidence in our outlook. We are investing for diversified growth, while returning cash to shareholders through both share repurchases and dividends and with that I'll turn the call back over to Liam. Thanks.
Thanks, Chris despite macro headwinds and supply chain disruptions Sky works remains squarely focused on delivering above market growth.
Across a diversified set of applications and end markets.
Capitalizing on in house technologies scale, and strategic customer relationships. We look forward to generating continued increases in revenue earnings profitability and free cash flow.
Finally, our efficient balance sheet and consistent cash generation provide a formidable platform for long term growth as we invest for the future and deliver premium returns to our shareholders.
Operator that concludes our prepared remarks to open the lines for questions.
Thank you and as a reminder to ask a question you will need to press Star and then the number one on your telephone keypad. If you wish to remove yourself from the queue. Please press the pound key given time constraints. Please limit yourself to one question and one follow up. Thank you, we'll pause for a moment, while we compile the Q&A roster.
Okay.
Our first question comes from the line of Timothy Arcuri with UBS.
Please proceed with your question Hi.
Hi, Hi, Thanks, a lot so Chris.
Just had a question around the dynamics in the quarter revenue was pretty much in line, but the mix was much different you know broad markets was supposed to be flattish and it was actually up a lot in mobile was supposed to be a little better than normal seasonal on the easier comp from your large customer given some of their issues with respect to the supply chain, but in fact.
<unk>.
Mobile was much weaker in broad markets was much better. So I guess the question is one what happened in the quarter and two can you give us a sense of what the split would be between mobile and broad markets. That's assumed for the June guidance. Thanks.
Yes, first reflecting on the March quarter.
Mobile as a group came out about as we expected with strong performance at the large customer.
Very strong performance at Samsung, which is now back being a plus 10% customer for Sky works as well as a really nice ramp with Google and pixel six fold.
It's no surprise, we've seen some softness in the China market.
In part as a result of the Covid related lockdowns on the flip side, our broad markets business was doing really well.
And it was across the board Iot automotive infrastructure, but also of course D. I N. A business that we acquired from Silicon Labs was performing really well during the quarter setting a new all time revenue record.
So that is that is for March I think in June .
In mobile of course, we will.
Continue to see some COVID-19 related supply chain disruptions that are impacting the ability of our customers to fulfill the strong end customer demand and so that is being contemplated into our June guide, but we will there as well on the flip side in broad markets.
We continue to see.
Strong sequential as well as year over year growth in the call it high <unk> approaching 40% year over year growth in broad markets.
Thank you and then can you give us what the percent of revenue.
Revenue was for your largest customer in March.
Yeah in March the large customer was approximately 54% of total revenue that clearly demonstrates strong demand from that customer as.
As well of course.
Strong content gains that Sky works.
Been able to obtain with that customer revenue for that customer was up more than 20% on a year over year basis in the March and the March quarter.
Thank you and our next question comes from the line of Chris Caso with Raymond James. Please go ahead.
Yes. Thank you good evening.
Maybe we could dig into some of the China.
Supply constraint issues, a little more deeply and you can you help us I mean, one to quantify the magnitude of how much that may impact the June quarter.
Whether that's more supply related or on your customer side that they cant accept the product.
And then finally, what that means for the September quarter does that allow you know because that's impacted now do you presume that some of that comes back in September and in the second half of the year.
Sure Chris This is Liam.
Clearly there has been some disruption around COVID-19 and specifically in China.
It happens to be a very very strategic area for backend Assembly and test for a number of our customers, including some of the bigger ones. So for the most part that's where the.
The inflection was trying to manage through that dynamic with a pretty pretty stark lockdowns.
And operational site so for Sky works.
Obviously, the things that we do internally, we're continuing to execute with our filtering technology, our gallium arsenide, our in House Assembly and test.
But again it all comes down to your customer set so we're doing the work today with some great companies, helping everybody getting back on track in terms of demand.
It's not it is not a lack of demand issue at all.
It really is a supply chain issue.
And every company has their own elements, whether it's at a chip level or it's at the back end Assembly and test. So that's kind of what's going on and we certainly think that this is going to abate as we go forward.
It's not a long term issue we have great partnerships with the customers that are that we're leaning into we're helping them.
And we expect things to get a lot better as we get through the next few months.
Yeah, Chris as it relates to September as you know, we only guide one quarter at a time and I'm going to stick to that guidance only one quarter at a time, but having said that.
As Liam just express strike, we feel good about our technology and product Roadmaps, we have deep customer engagements and very strong design win momentum and it will have the size and scale of our manufacturing assets to support some a big.
Big important product launches and ramps in the second half of the calendar year.
As well in mobile and broad markets and so we are very well positioned to see some strong sequential as well as year over year growth in the second half of the calendar year of course, assuming no worsening of the geopolitical or macroeconomic or pandemic related.
Issues that we have seen in the past.
Thank you as a follow up I'll ask one on gross margins.
We've been kind of hovering around this 51%.
Plus or minus.
Been a while I know last year, you said there were some pandemic related costs that were persisting and I presume to June .
Some of the.
The impact is persisting again, just just kind of on a on a lower revenue base, what what's the prospect for getting the gross margins a bit higher what what's your expectations for gross margin progress as we go through the year from here.
Yes. So in March we did $51, two which was up 40 basis points on a year over year basis.
We are guiding on or about the same maybe.
Maybe slightly down for June on a on a sequential lower revenue, but then again as as we look into the back half of the year and see some steep ramps.
In September and December we are we are geared up for two to deliver some gross margin.
Expansions.
And again I talked about that before right.
Higher value add higher complex custom build specific products for our customers that are ramping.
Of course size and scale and helps as well and then of course, we have a little bit of a tailwind from broad markets.
That typically has some higher gross margin compared to the mobile space and when you combine all of that we are we have confidence in improving the gross margins towards our target model of 53%.
Thank you and our next question comes from the line of Blayne Curtis with Barclays. Please go ahead.
Hey, Thanks for taking my questions and I apologize a lot going on Tonight. So just.
I apologize, but Chris I thought you said the broad markets was $523 million up in June and a year over year would be kind of high <unk> or 40.
Starting with that math, maybe I'm doing something wrong, but I just want to clarify by segment, that's what they're looking for.
So Marcus was $5 23 in March, which was up 10% sequentially and up 36% year over year.
And we do expect further.
Sequential growth in June that translate into a very similar year over year growth as well.
Okay.
I guess I can check with you on the call back on that.
I guess the byproduct of that is the mobile down and you talked about the supply disruptions I'm just kind of curious your outlook on the overall handset market maybe it's the same question but.
Yeah, I think the overall market is kind of weekend, there's outlook for kind of even down 10%, obviously RF can grow faster, but just kind of curious your perspective on the overall market.
Yeah, So I mean overall market as Chris mentioned.
I'm going to get the mobile in a second but it really you know we're also really excited about what we're doing in broad markets and the numbers, we just reiterated 523 million in the quarter.
With a lot of momentum going forward. So just on the broad market story.
Things are looking very strong very diverse new customers, new end markets and growth in technology. So that's one important lever on the mobile side, we're actually continuing to do very well we were.
Somewhat surprised that the continued.
Covid restrictions came down.
It's not a case honestly, where there is that this is a demand issue. This is really about supply chain.
We know the customers that we're working with and we're extremely close in terms of the dynamics of where products need to be and when they need to be there and we feel very good about that and that will drive our business forward into the second half on the mobile and.
We also have made incredible strides with Samsung.
And there was a customer that you know.
They're a great company, but we hadn't done that much with them.
A lot of it had to do with just technology. We were trying to go high end and you know a lot of the opportunities there, we're a little bit more lower market and we've now moved up big time.
Within that account and so we have three of the most important companies in mobile right now all with very good share.
And outlooks going into the second half of the year around.
Around new technologies and more around <unk>, but also a lot of things that are coming up.
And the Iot side.
Looking at things even in Wi Fi that if all I'll really stepped up so we feel really good about the business right now.
These lockdowns came in a little bit late for us and so it was a bit of a surprise, but we wanted to do the appropriate thing and.
Reflect that in our guidance, but we feel very good about the second half of the year. We know the products that we've designed into we know what our content looks like.
And we're looking forward to fulfill that demand when skies clear a little bit and demonstrate demonstrate that through earnings.
Thank you and your next question comes from the line of <unk> Srivastava with BMO. Your line is open.
Alright. Thank you very much I just wanted to come back to the two.
It's always that's trying to figure it out as long as I'm sure you guys, where there is demand versus supply related issues.
The China market has been in for quite some time.
Yes.
Is there a point that you are seeing barricades this as much a supply and we'll be hearing that.
That's it guys have been over index exposure to the European market Eastern European in particular.
Well, that's causing concern to you.
Think about how big is the China market.
<unk> Sky works.
Yeah no great question, so there's two elements.
One is China itself the geography.
And that is not so what we're dealing with now is more around.
China the workforce the assembly and test the backend all of that where theres been tremendous it doesn't matter, whether it's a smartphone or whether it's an Iot device right. So the lockdown issues are more around.
Issues in China Covid related.
And that is a blanket type of thing around technology.
One on the other side.
Consolidated our China, our China business right now, it's really pushed by the higher end players theyre not necessarily the China brands. We have we have exposure with <unk> of course.
But we are growing our business with the higher end brands within China. So companies that maybe in the U S that are doing really well in China are companies that are maybe had great technology in Korea, and they are sold into China. So, it's really about where the products land from a geographic perspective, but I will tell you in all of those three companies.
The major top three in mobile we're gaining share.
Producing unique content.
Really like our position in some of the lower end brands quite frankly are rolling off a little bit for us and it's not really the business that work that interested in.
But we are growing and gaining share and gaining value with the top players. So that's kind of how it shakes out.
So it's a geographical issue with with Covid and then also looking at the elements.
Each of the mobile players and.
And how we address those so and.
Honestly the playbook that we have right now is working very well.
Get through this bump here around Covid in China, and things look very good from there and we know.
The partners that we have for.
Are counting on us in terms of their execution as well so it's a good spot to be in.
And so.
So the total Chinese customers for total Sky works is on or about 11%.
Actually in broad markets Thats slightly higher that means in mobile it's less than 10% of revenue coming from the Chinese mobile customers. Yes. So I mean, we've effectively derisked that that that low end market at this point and are driving our attention and our contact to higher value higher margin players.
May I ask a quick follow up please.
Hum.
The broad markets business I don't think I've heard you guys talk about it.
The extended lead times really impacted this business at all and I ask because there's concern that all of us have is that.
As the demand real or not and when you're guiding for 30 or 40% kind of growth year over year that again begs the question.
That is because of lead times extending out thank you.
Yes, no it's not a lead time, saying I think right now.
Quite frankly, if we could execute the full bill of materials on the end products.
Numbers will be higher.
In often cases.
We've got a little bit ahead of the end market with our technology.
But you have to you have to stay on pace right you have to stay in the lane with your with your with your customer because ultimately these.
These devices that we're working with whether their Iot, whether they are automotive whether they're mobile right. They're complex very very complex bills of materials and those bills of materials have to be 100% on point and working in perfect harmony when it gets yet so.
What you see in this industry now is a lot of complexity a lot of exposure.
And companies that did not invest.
Which is much harder.
But the ability for us to kind of.
<unk> through some of those bumps around supply chain I think it has been a.
It's not easy it's not something that we wished for but it tends to be an opportunity for us to outperform given our own operational levers here inside the building all the way from again gallium arsenide to assembly and test at bulk acoustic wave to temperature compensated saw all the elements are there. So it's a little choppy there, but the demand is.
Really viable it's just about getting these products together integrated in a seamless way.
And get the technology delivered to the end market.
Our next question comes from the line of Matt Ramsey with Cowen Your line is open.
Good afternoon. Thank you very much for letting me on.
The first question guys I had was with respect to the broad markets business.
Alright, my team covered silicon labs for a long time in a couple of the businesses that we're in that segment that.
We thought they could have done maybe a better job of scaling and maybe you guys have an opportunity to do that is the voltages isolation franchisee E vs. What you sort of addressed the bid in your script and also the timing business. There had been sort of concentrated in wireless infrastructure and that was a move to make a push into cloud I Wonder if you guys might comment.
A little bit on on those two initiatives those are things that you're investing in to grow that franchise further thank you.
Yeah excellent I'm really glad you asked that question so at a very high level.
<unk> action with the <unk> portfolio has been great. I mean, we are really excited it's doing better than we expected.
And it's also had to endorse some some supply chain issues, because theyre more granular around outsourced fabless players.
But the great news is.
Actually literally line by line, but you just mentioned are things that we're working hard on.
He is a very very interesting and attractive market and there's not many players that are going after it.
The portfolio within <unk> is very strong it's very capable.
It's got a great technology edge and what we really need is for those great things to be matched up with significant powerhouses in the industry companies that can scale with it. So we're working on that again. The technology is there. This is about taking devices and technologies that have already been homed in and have been.
Diversified tremendously, but we also need to get scale right. So we're working on that making good strides team's doing well.
Isolation power isolation, specifically in automotive big Big market and here again.
Leveraging some of the relationships that we haven't sky works in some of.
The scale opportunities that we can bring to end customers. So we're making really good progress on that end date.
Data center is another market that they have super cool technology, and just need more muscle to try to get it out more sales folks more marketing people more people boots.
Boots on the ground leveraging customers that we already have great customers that can put up tremendous scale and have those customers meet the technologies that were in the <unk> portfolio. So we're really excited about it.
I think Chris mentioned it already.
We're.
Ahead of our expectations, so far early innings, but I really really feel great about that deal.
And the team are really driving driving behind it. So look forward to more things on that end, but again broad markets at a high level. These are big numbers, we're talking about now we just we put up.
Over $500 million print.
Creating tremendous diversification, it's a $2 billion run rate. This is not skyhawk three years ago.
We were at three three in 2020 were in the mid 555 $6 billion level now with a much more diversified portfolio. So we're looking forward to reflecting that in our valuation and delighting our customers.
Thank you very much for all the color there I'm just switching gears for my follow up you guys mentioned it sounded like some some share gains within the portfolio at Samsung with them, becoming a 10% customer again.
I think last week, there was commentary from from San Diego that they've had up there.
Processor and baseband share at Samsung Galaxy 22.
As opposed to the internal solutions I Wonder if you might comment about how you're aligned with that change there and how sustainable you think it might be thanks.
Yeah.
The modem side, the baseband processor, we don't make that product, but we have technologies that will wrap around just about anybody's baseband, whether its a friend or foe. So we're agnostic to that and our customers are really kind of make the decisions that they need to make to get the best performance. So you could very well see a <unk>.
Hi content device populated with a lot of her unique skywalk solutions that are all in house custom crafted not fabless done in house and are building in our factories with people that live and breathe wireless.
And also same applications could have a baseband from qualcomm or someone else. So that we live with that all the time.
But the interesting thing is with baseband, you've got a single monolithic high performance device.
When you think about what's happening in our mobile phone today as we move into <unk> and beyond the number of.
Connected things the content.
The size of the semiconductor devices.
Thinking about filtering all the way from TC saw bulk acoustic wave leveraging gallium arsenide theres a lot of complexity.
And it's not it's not done by any one company. So I think if you look at the number of nodes that we addressed within mobile, it's really really high and diverse zone.
There are some cornerstone pieces of course in every device.
But.
Our solutions are gaining a lot of share in a flexibility that we have given that in house.
<unk> and assembly and test in House filter reason, we can do a lot of things are a little more crafty and unique.
<unk> a customer centric approach I would say and it served us well so there's room for more than one one or two players and a high end mobile device, but we feel really good about it and I will say that we've been in this industry I'm going to send you a long time and I'm really excited about that.
The appreciation that our customers see in the technology that we can bring.
And it's actually very clearly demonstrated with the leading brands and oftentimes the mid tier mid tier players they want to get better they want their technology, better and they come to us to try and help them make that leap. So while we feel good about that side.
Your next question comes from the line of Edward Snyder with Charter equity Research. Please go ahead. Thanks.
Thanks, a lot.
Yeah.
You seem to be pretty excited this year about the content gains in mobile, especially in the second half of this year.
Just to dig into that a little bit should we expect similar gains in dual connectivity because it seemed to be a big growth last year, maybe fewer bands are being added and more content to the brands you have.
And to the extent that a millimeter wave comes out of phones, which sounds like the rumblings, maybe not for this year maybe for the next year does that have much of an impact on scar was content and then I have a follow up please.
Sure Yeah, no we are excited Ed.
About the opportunity and we feel really good about.
So the design win positions that we have with strategic customers. Some of those products haven't yet been taken to market, but they are ready.
We are seeing more and more complexity in mobile device.
Modest opportunity still to grow and our conviction as to continue to gain share in game content.
So I'm quite positive that that won't happen again.
And different ways and also with <unk>.
More specific devices as well, which is good so that feels really good.
Go forward.
There's just a lot of other tools here that we're working our bulk acoustic wave technology is growing.
It is continuing to hit higher and higher levels of performance and gaining value and some of the tier one players.
Multiple tier one players right now so there's a lot more to go on that end.
We're still doing a great job on the broad market side, we talked about the numbers here over a 500 million clip and a lot of that technology. As you know that can be transferable you gave a <unk> engine that could go into.
A data center application that could go into a mobile phone it could go into an Iot device. So we really want to be the universal connector there.
Around <unk>.
And related technology supporting multiple and applications.
And then for my follow up if I could the broke 10% on Sampson. This this quarter I'm sure that will drop below that in your big ramp the largest customer.
Second half of this year.
But one do you expect it to be 10% for the year overall, and then secondarily, maybe more importantly, the big change going on here because it was pretty small you've done the 3% to 4% of revenue at one point in the last year or so and now you're back above 10% is this largely due to their shift to modules in the mass tier or are you also seeing.
And to the extent that it is how far into that program. Do you expect you are I mean that that's a very big product lines. So it's going to take several years to penetrate how much more runway do you have in the shift to modules in their mass to you. If that's where the content gain is and maybe you could scale for us how much of it is due to maybe a better content growth in India and the flagship too.
Thanks.
Yeah, no that's good.
A question and I know you've seen this fall through so we've always been a partner with Samsung, but it had been challenging to sort of leap into the.
The richer and more complex more powerful connectivity modules nodes and just doing a lot of really good work shoulder to shoulder work engineer to engineer work with our team and the folks at Samsung to try to develop a more powerful solution.
That really demonstrates all these wonderful things that we can do in <unk> and so Fortunately our engineering teams and the Knowhow that we brought to market in other other areas allowed us to do a great.
A great partnership job with with the number two player out there.
It's awesome and it's not a one single one trick pony deal at all I mean, there's a lot of room here for us to go.
There's a lot of complexity that hasnt been resolved, we love that.
A new opportunity for us is going to be very strong. So we're really really excited about it quite frankly, I know, we've already talked a little bit about that in the call itself, but.
We're working with the top tier players and the flexible customer first approach.
Purpose built technology is the way to go.
We're not really focusing on masked here with leveraging new high performing assets most of those being procured and delivered right out of our own factories. So we're excited about it most in most.
Mid to premium players love it they want to see that they want to see trusts they want to know where the price would be built they want to have a decision.
On it and a voice and all that's been going well. So we think there's more to go and we're pleased with it.
And of course, you're opening it to 10%, but there's still a lot of room for everybody else.
Thank you and your next question comes from the line with Gary Mobley with Wells Fargo. Please go ahead.
Hey, guys. Thanks for taking my question, let me first apologize for the background noise.
Going back to Chris's question to try to quantify what some of these shutdowns may mean for your June quarter revenue.
Your large customer gave a specific impact range, which I believe is 4% of their overall revenue 5% of product revenue.
Is that about the right way to think about the impact for you in the June quarter, let's call it $50 million.
Yeah, Yeah, I think Gary.
So not about right.
Look at we guided down sequentially.
6% to 10%, 8% at the midpoint I think if you look at.
Our average historical sequential declines this into 3% to 5% range and so the only difference here is really the.
The fact that our large customers as well as some other customers right are leaving revenue on the table in the June quarter, specifically because of the Covid related Lockdowns in April .
What you've heard from many of those customers that the situation has improved since then and the factories are reopening.
And they're going to try to work hard to fulfill that strong end customer demand that they see but that's going to be hard to make that all up in the June quarter.
I appreciate the color there Chris.
And for the share buyback I guess, probably the best word to use to describe your buyback in the March quarter was aggressive.
$420 million can you keep can you sustain that pace.
And are you willing to maybe.
Be creative in the way you fund your share buyback given the pressure price.
Yes, it's something that we look at it.
Day by day week by week $418 million.
Our March quarter was an all time record.
Never spent more than that amount in one given quarter, we still have some firepower there and we definitely are continuing to generate strong free cash flow and we will use that cash flow to of course continue to pay the dividend and there is room for improvement there as well and to use it for.
Share buybacks.
I mean, given where the valuation is right now obviously, we're all over that so.
As Chris said, there's room for more and I'm glad we did what we did so far but more needs to be done we can actually do with the cash flow engine is very strong.
The business is very solid.
And we think as we go forward more and more of that's going to come through here.
In the numbers.
Your next question comes from the line of harsh Kumar with Piper Sandler. Please go ahead.
Yes, Hey, guys.
Two questions one.
Liam I was thinking I was hoping that you could give us some clarity on the issues in China I hate to focus on just 11% of your business, but it is causing some issues. The phones that are made in China for Chinese consumption.
Over the side do you think that that do you think first of all if there was any inventory of those.
So phones in China, and then secondly, Covid aside do you think by the end of the June quarter, hopefully that's burned down so you get into the build season, you just see pure growth and my follow up My second question on Alaska right. Now can you help us think about your role with your large customer.
Any.
In a world where they are using their own modem.
What kind of how can you provide to them.
At that point in time.
Okay, alright, harsh I'll try to start from the beginning here.
Well certainly the China situation, there's a lot of factors right I mean the.
The overarching factor right now is really just the final stages of assembly and test.
Where you.
You see you know Fox on Peg a tron.
That that is China is where the lion's share of technology Assembly and test.
Outbound U that that's it's the biggest hub in the world. So many many companies go through that hub.
And multiple factories multiple technology. So that's just that is a macro China situation that I think will get better.
Not too much we can do right now and therefore, we had to lower our guidance based on the risk.
Conservatively take take our numbers down, but if you look at where we see things coming out the app the app the appetite.
Appetite for the technology is still very very robust this is not.
I don't think this is going to be a major major hit to the industry at all I think we're going to get through it.
Well understood.
No.
The parts of the equation that we that we manage our teams are all over it and technologies. Our fabs are working great. Our filter fabs are up and running we're doing well here on the Covid side of the U S of course, we know that.
Theres still some bumps and I think that those pumps will be smoothed out.
And a man.
Months.
We will do everything we can to make that happen and Meanwhile, we've also within China.
It kind of stepped up a little bit more towards the mid to higher end tier within mobile within China. So we're starting to see a little bit more off consumption.
In China, but not not necessarily with the China brands. So some of the China plans are rolling off a little bit, but some of the major brands. The top three are actually gaining and thats been a very important vector for us and it's something that we anticipated.
The smaller companies really need to step up and do more.
Or they're going to fall by the wayside and the top three majors are going to continue to drive. So that's the dynamic that that is in play.
And that's actually positive for us quite frankly, because we're seeing more and more games like a Samsung.
That are stepping up and driving technology, and working with Sky works and others to try to really make that happen. So that's a positive for us rather than how do we make a lower cost of bill of materials.
And then your last comment with respect to.
Largest customers generically.
Generically here. So I'll just say this we have a very powerful relationship.
With very strategic customers.
And we respect that everyday it is extremely important.
Not just the people side, which is great. It's also the.
The technology and the collaboration and the trust and the execution and that comes.
It comes with Great people, but also comes with investments in the assets and knowhow around the portfolio and understanding.
The nuances between the carriers and manufacturers and all of the ecosystems that we work with.
And and and and.
The way that that works is it's a partnership.
Where we can provide great technology to make our customers better. That's the initiative, that's what we want to be able to do and we've been able to do that with some really important high bar players and we love it.
That's going to change.
And with respect to modem change is not going to be a problem, we've worked with top tier customers.
With Qualcomm on the modem with Intel on the modem with Mediatek on the modem.
We're agnostic and we have to be we would not be able to run the business. The way. We do if we didnt have that flexibility and that we've talked a little bit about that before but just to reiterate.
Sky works ability shoulder to shoulder engineer to engineer, we know how to solve problems we know how to.
Create success with our customers.
And that's the culture of our business. So that's not going to change, but no I. Appreciate that was actually a good question just to really kind of cover some of the nuances around.
The real dynamics behind the technology, and we don't take any of that for granted and everyday we just want to make our customers happier.
Yeah.
Thank you and ladies and gentlemen that concludes today's question and answer session. I will now turn the call back over to Mr. Gleason for any closing comments.
Thank you all for participating in today's call. We look forward to seeing you at upcoming Investor conferences. Thank you.
Ladies and gentlemen that concludes today's conference call. We thank you for your participation.
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