Q3 2022 Skyworks Solutions Inc Earnings Call
Good afternoon, and welcome to the Skywalk solutions third quarter fiscal year 2022 earnings call. This call is being recorded.
At this time I will turn the call over to much Hot Investor Relations with Sky works. Mr. Haack. Please go ahead.
Thank you Joanne and good afternoon, everyone and welcome to Sky works, the third fiscal quarter 2022 conference calls.
With me today are Liam Griffin, our chairman, Chief Executive Officer, and precedent and Chris <unk>, 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 Sky works delivered record third quarter results with double digit year over year growth in revenue and non-GAAP earnings per share high.
Highlighting our resilient business model and disciplined execution.
With strong design win momentum across an expanding and diverse customer set we are well positioned to drive sequential growth into the second half of the calendar year.
Looking at the quarter in more detail, we delivered record Q3 revenue of one point to $3 billion above consensus and up 10% compared to last year.
Highlighting our content expansion and premium five G enabled smartphones along with growth in automotive data center and network infrastructure.
We achieved gross margin of 51, 2%.
We posted earnings per share of $2.44.
13% year over year.
We have continued to return cash to shareholders through dividends and share repurchases.
And today, we announced an 11% increase to our quarterly dividend that marks our eighth consecutive year of dividend increases.
In addition to generating solid results in a challenging macro environment, we are leveraging decades of targeted investments to drive a pipeline of design wins.
Banning an array of market critical solutions.
Specifically in mobile we delivered sky five platforms to the leading smartphone Oems, including launches at Google Samsung and many others.
Sky works technology leadership innovation and scale has allowed us to continue to capture an outsized share of our mobile revenue from high performance by G platforms.
And enterprise and Iot, we powered Tri band access points that Cisco ramped Orange Lightbox sex Europe's first carrier grade six E platforms.
We launched advanced solutions with Verizon for integrated Wi Fi and cellular gateways.
And supported Google's newest pixel watch with our cellular GPS Wi Fi and Bluetooth technologies.
In automotive, we achieved an all time record revenue and quarterly.
This last quarter as we executed on our vision to drive connectivity and lead the shift to electrification.
During the quarter, we ramped next generation wireless and EV power technology across multiple top Oems.
We leverage our timing solutions with a market, leading bravo taxi and driverless vehicle provider.
And finally in infrastructure and industrial we captured multiple design wins at European equipment and service providers.
Massive mimo deployments.
We delivered integrated timing solutions to the market leaders in data center and network infrastructure.
And we ship modules for high power industrial and Iot applications.
Supporting a prominent brand in smart energy.
Moving forward, we see a continued expansion in data consumption dependent on seamless reliable and ubiquitous wireless connectivity.
A few statistics illustrate this point.
Global wireless data traffic traffic is expected to grow at a 27% annual rate over the next five years.
Machine to machine connections the fastest growing Iot category will soon surpass 15 billion users.
Like 2030, we expect 650 million connected cars.
Each consuming 25 times the data that we see in today's smartphones.
Over the past two decades Sky works, that's made critical investments to power this connectivity transformation.
Addressing all key network technologies from cellular to advanced Wi Fi enhanced GPS and Bluetooth among others.
Capitalizing on both organic growth and strategic acquisitions, we are gaining momentum in high growth verticals, while at the same time, diversifying our revenue and customer cycles.
Looking ahead, our design win pipeline and unique in house capabilities are positioning us for continued outperformance.
Leveraging decades of innovation, we deliver purpose built solutions.
Underpinned by in House gallium arsenide temperature temperature compensated saw filters bulk acoustic wave technologies and customized packaging.
With that I will turn the call over to Chris for a discussion of Q3, and our Q4 outlook.
Thanks Liam.
During the third fiscal quarter of 2022 Sky works delivered record revenue of $1 3 billion, an increase of 10% year over year.
The growth was fueled by expanding our technology reach at the largest smartphone Oems, including Samsung, Google, partially offset by soft demand from China customers, mainly as a result of the lockdowns early in the quarter.
In addition, broad markets revenue was up 38% year over year as we continued to drive design wins and revenue with innovative solutions for fast growing end markets, including automotive industrial data Center and network infrastructure.
Gross profit in the second quarter was 631 million, resulting in a gross margin of 51, 2% up 60 basis points compared to Q3 of last year.
Operating expenses were $191 million slightly down on a sequential basis.
We generated $440 million of operating income translating into an operating margin of 35, 7% we.
We incurred $11 million of other expense and our effective tax rate was eight 1% driving net income of $394 million.
Based on a further reduction of our weighted average share count to 161 5 million shares.
We achieved earnings per share of $2 44 to <unk>.
<unk> consensus estimates and up 13% year over year.
Turning to cash flow, our third fiscal quarter cash flow from operations was $214 million and our capital expenditures were $125 million.
In terms of capital allocation during the quarter, we returned $209 million to shareholders being $90 million in dividends and repurchasing 1 million shares of our common stock for a total of $119 million.
During the first nine months of the fiscal year Sky works has returned more than $1 billion to shareholders through dividends and share repurchases, representing 129% of our free cash flow.
In summary, the Sky works team delivered another solid quarter with Q3 record revenue and earnings per share, while making the investments in our technology and product roadmaps to support future growth.
Now, let's move on to our outlook for Q4 of fiscal 'twenty two.
We expect to deliver double digit sequential revenue and earnings per share growth in the September quarter.
Specifically, we anticipate revenue between $1 billion, and $375 million and $1 billion and $425 million.
At the midpoint of $1 4 billion revenue for the quarter is expected to increase 14% sequentially.
This outlook takes into account the seasonal impact from major product launches and leveraging our technology leadership deep customer engagements and world class in house manufacturing capabilities.
Gross margin is projected to be in the range of 51 to 51, 5%.
We expect operating expenses of approximately $190 million to $194 million.
Below the line, we anticipate roughly $12 million in other expense and a tax rate of approximately 9%.
We expect our diluted share count to be approximately 161 million shares accordingly at the midpoint of the revenue range, we intend to deliver diluted earnings per share of $2.90, an increase of 19% sequentially.
Lastly, given our conviction and Sky works long term strategic outlook and consistent cash generation, we announced an 11% increase to our quarterly dividend to <unk> 62 cents per share.
That I will turn the call back over to Lynn.
Thanks, Chris Sky works decades long decades long investments are driving increasing opportunities across the markets fastest growing segments.
Ruling our momentum going into the second half of the calendar year.
With our customer count doubling year over year, and our broad markets portfolio on page four 2 billion in annualized revenue our business is more diverse than ever.
Finally, our consistently strong profitability cash generation and diverse revenue streams fund our ability to invest and win while returning cash to our shareholders that concludes our prepared remarks, operator, let's open the line for questions.
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Well here at Sandstorm pronged acknowledging other quest.
Should you wish to withdraw from the question queue. Please press star followed by the Q.
Given time constraints. Please limit yourself to one question and one follow up press Star One now if you have a question.
Yeah.
First question comes from Rodrigo at Needham <unk> Company. Please go ahead.
Yes, Thank you for taking my questions and congrats on managing.
Providing good results through a kind of a crazy cycle just a question on China.
I know, it's about 10% to 15% of your revenue, but wondering kind of what youre seeing in terms of the inventory situation there.
The China handset Oems and just in general if you can make a distinction on the premium level of handsets in the overall market versus low to mid tier how would you characterize the.
Demand landscape, there and the level of channel inventory in the market as you see it today.
Sure.
Yeah, it's been certainly off a challenging market in China and Theres. Several several factors that played out here right of course, she had locked down and some of the major provinces and across many of the factories.
At impeded demand, even with the larger customers.
And then you also had a group of folks that were just a little bit less.
Less prepared for the Lockdowns as well so if you look at the.
The high end market.
China is still a market where you can get some you know very very strong act activity tempered a bit by by Lockdowns, which we think are going to abate rather quickly.
But on the on the lower end the Ob X brand saw really hadn't performed two well at all so that was an area that was weak generally.
But if you look at the way Sky works has been positioned our aperture has been much more towards the mid to high tier so our exposure to the <unk> market has come down.
And in many cases, it's it was hard power positioned to do that and our choice to do it.
And at the same time in parallel we had tremendous gains with names like Google.
Some of our other flagship player Samsung even doing quite well so a lot going on there China was definitely bumpy, but.
It's still a market that consumes the technology.
And we do we do think that some of the manufacturing issues and supply chain problems are going to abate.
And we see even more of a tailwind.
I appreciate that and for my follow up last quarter you cited.
$50 million pushout related to your top customer as they were having challenges assembly final components, given given the lockdowns in China and in Singapore and to account for that last month in April .
You had said kind of Derisked the June quarter, and guided down seven 8% and you are kind of falling in that range.
Im wondering how youre thinking about the ramp in the end of September and December quarters as your top customer is through that process and started to launch new platforms with with your content.
Sure and you're still expecting a steep ramp. Thank you yeah. Yeah. So we have a lot more clarity on that side of the field Oh, you know again, we work with everyone, but you know we have.
High degree of visibility and some of those premium brands and we feel very good about that all for two reasons. We think the appetite for the technologies continues to grow their use cases continue to grow around connectivity and mobility.
And the market leaders the market leaders are actually consolidating.
So and we know who the market leaders are in and we're very well positioned. So we're excited about that we feel very good about.
Where our technologies are going the breadth of our offering driving some incredible technologies with our bulk acoustic wave or in house gallium arsenide our packaging.
Doing all of this in our amazing Fabs admits a market where everyone's challenged with supply chain. So lot of good work going on there and.
And we do expect you know.
Strength as we go into the second half of the year really buoyed by some of these content gains that we've been discussing.
And maybe maybe Raj just threw out there. So we just guided September up 14% sequentially.
And obviously that is more in higher in terms of sequential growth at a large customer based on the known design wins that we are shipping today.
And we do expect further sequential growth into the December quarter.
<unk> customer as well.
Total <unk> revenue.
Next question comes from Gary Mobley at Wells Fargo Securities. Please go ahead.
Hey, guys. Thanks for taking my question.
Could you share with us how big your largest customer was in the quarter and were there any other greater than 10% customers in the quarter.
Yes, so we are half to plus 10% customers in the June quarter, obviously, the large customer which was approximately 55% of total revenue just to compare to last year. In June was 53%. So we've continued to execute very well with that.
And then Samsung is yet again, plus 10% customer again, great execution, great design wins at their flagship level as well are in and the rest of day.
Our product lineup.
Okay.
So I know not all of your sales to your largest customers go into smartphones I think dominant portion of it.
It does.
So kind of doing back of the envelope calculation in your mobile business I presume you're.
Your business with customers outside that that large customer is in the ballpark of what $90 million to $100 million.
Quarter.
Okay.
Yeah.
$90 million with the large customer and broad markets.
Well I'm.
I'm trying to get what I'm trying to get to is trying to get a sense of.
How much of your mobile business is comprised of customers outside of your of your largest.
Trying to get a sense of.
Maybe where you stand with respect to BARDA in the Android market and whatnot.
Yeah, no the vast majority of our.
Markets revenue is not related to the large customer right. We have more than 6000 customers spreads over our connectivity solutions automotive, which was an all time record revenue industrial customers, we have our audio business we have our.
Infrastructure networking business in there and that's now a on a 2 billion annualized run rate.
Yeah, and I would just say in addition to the largest customer we have several other significant ones. We mentioned, obviously sampling very strong and even Google So at all.
It's a balanced next year.
Yeah.
Next question comes from Vivek Arya Bank of America Securities. Please go ahead.
Thanks for taking my question, Liam or Kris Im curious how much of a year on year headwind has China Android mean for June and September and does China Android bottomed for you in December or March or so just how much of a headwind year on year, because when I look at your implied September mobile.
Guidance, it still seems to be kind of flattish to down somewhat year on year, So I imagine that.
Donna Android headwind, so how much is that and when does China bottom for you.
So.
As it relates to China.
We definitely saw some softness from a demand point of view that is very well documented we have played it very carefully even into December quarter, almost a year ago, we started pushing the brakes, we actually push the brakes pretty hard in March and June we did not want to end up with.
Major inventory into the channel, we do expect relatively minor revenue in the September guide for the China customers.
We do expect beyond that of course that the demand will bounce back you already started seeing that in the June numbers. When they were close to <unk> 29 30 million phones.
<unk> sold in China, and so we do expect a bounce back but the.
That's not included in the September guidance and I'll, just add one more comment is that the complexity and the performance nodes are getting more and more difficult and more challenging which is great for us and thats, what we want to see so there are some pockets.
In China that are very very low end that are not not really interesting for us and that's fine.
But we're building off a strong base in mid tier and certainly leading the pack when it comes to the premium players.
Got it and for my follow up I wanted to ask about your balance sheet inventory.
I understand and I appreciate the need right that your customers have for our supply assurance and you're making a very wide range of products I get that but when I look at inventory days I think they are among the highest that we have seen so how are you planning to manage utilization and what impact if any will it have on your gross margins.
For the next handful of quarters.
Yeah. So vivek. So we feel good about the business right and we just guided up 14% sequentially from September we do expect further sequential growth into December and that is all based on known design wins with a large customer with other mobile players and eat.
We are in broad markets.
And as you know, we always level load our factories.
We have hired a filter content and many of those new devices that we bring to market.
Filters typically are built many weeks or months in advance of product shipments and that accumulated into higher inventory, but the.
The inventory is fully in line with our expectations and will help us and support the steep ramp in September and December .
Yeah.
Next question comes from harsh Kumar Piper Jaffray. Please go ahead.
First of all congratulations on a very tricky environment managing the business so while.
We certainly appreciate it.
Maybe I missed it in the press release, but could you would you mind, giving us the breakdown of the mobile business versus the broadband business in June and the second part of that same question is how do you see the trends in September I would suspect that mobile would be up in September given your largest customer or is that incorrect assumption.
Yeah.
Break out was broad markets was 38%.
Our our total revenue it was up 38% year over year. So very strong performance. There mobile was 62% of total revenue it was slightly down on a year over year basis. Despite the fact that we have strong performance. After a large custom motor strong performance with Samsung and Google.
But offset with the softness that we just discussed in the China market and going forward looking forward to the September quarter, obviously that is a.
Very strong mobile quarter as we execute on some of those launches are.
With the large customer as well.
Many of our other customers, but we still expect our markets to be up double digit year over year in the September quarter, Yeah, I remember that.
As we discussed at the beginning here, the lockdown dynamics and some of the supply chain volatility.
It did put a little pressure on what would be a normal seasonal died so all those factors play together with much less exposure to China, which is very helpful. But are these warrant. These warranty issues that were related to demand I mean, the demand is there the demand was there and it still is and we need to go execute on that but.
Some of the early Lockdowns in the ripple effects, there and supply chain added a little bit of Nip talk to the quarter.
Understood and maybe for my follow up question earlier months you said.
<unk> handsets went to a rapid period of growth and sort of feature edition then load in band edition.
Are you still see very good content increase in the flagship mobile phones, even at this point like the ones that are coming up maybe you can talk about and maybe maybe talk to us about some of the things that are driving that it is at the bands are being added or is it things like wireless <unk> is there any color you would appreciate that.
Yeah.
A great deal of enhancements that come through the cycle with the leading players and we have to back that up with great technology and if you look at look at the Capex that we've been delivering and one of the themes that we've been talking a lot about the level of customization and basically crafting those technologies in house or are you you know that we're a rare.
Breed that manufacturer's end to end from high end bulk acoustic wave temperature conference.
Compensated saw filtering in house gallium arsenide in.
In house customized Assembly and test all of those factors come together and allow us to do very unique things customer by customer.
So we're able to go after a much much broader set of accounts when we have that level of customization and technology Knowhow, So and Thats one of the reasons why.
The mid to high tier really appreciate Sky works, because we didn't do a lot of good work with those partners and really help lift their business with.
With our teams beneath them under the wings here supplying the right kinds of technology. So it's a good partnership there for both sides.
Next question comes from Blayne Curtis of Barclays. Please go ahead.
Hey, Thanks, taking my question I, just wanted to ask on our September guidance.
Two things one you said broad markets will still be up double digits I guess it doesn't give me an idea of which direction. It is sequentially. So you had the issue that I think you talked about supply chain in June .
I'll look for broad markets in September .
So as I, just said September will still be up double digit year over year. It will actually be slightly down on a sequential basis, you have to keep in mind in broad markets.
We continue to see very strong demand in some cases, the demand is higher than the supply. That's the case in our audio business. That's the case and some of the automotive and infrastructure business that we have.
In addition to that we also continue to see many of our customers still having kidney issues. They don't have the complete Bom as a result of that they don't need to establish spots for now, but assuming that the ship shortage will get resolved over time, they will have to catch up and that will then further fuel.
The Grove for scar works content as well.
Okay, and then maybe just some comments on your own supply chain them and the fact that you're able to build that much inventory can you just talk about this constrained.
Any that Youre still seeing on your business from a foundry in back end perspective.
Yes, as I just said in the vast majority of our business, we are able to supply to what our customers want, especially as it relates to the products and the vast majority of the products that we do in house, we have proactively invested in capacity and technology in our gallium arsenide.
Pops in our filter operation and our back end operation, where we struggle is on some of the.
Smaller businesses that we have that are in the <unk> business model, where we depend on foundries and all backend work.
Some cases, we don't have enough capacity were working at we're working it hard we're making improvements we were getting in securing more capacity to fulfill the strong demand that we have in some of those areas and we will continue to work. It yeah, I'm just going to add I mean, theres been a tremendous amount of technology investment in the portfolio.
<unk>.
And a lot of that really is come through you can see in our Capex line. So there's some really important things that we're doing that sort of are under the hood so to speak.
Really driving performance in bulk acoustic wave, which is a tough technology we've improved.
The efficiency of our TC saw capabilities, we have as you know for years, we've had customized gallium arsenide its a very unique technology in RF.
And we've been upgrading that at every cycle. So there's a lot of really interesting building blocks that go into the finished product here and the flexibility that we can bring and I think it's one of the reasons why.
The discerning higher end customers really appreciate that they have a voice in the decision with us.
There's a lot of collaboration when we launched technologies and products, we can do a great deal of customization.
Understanding where the carriers are going to be and where those phones.
Wrong, so theres a lot going on it and it comes it comes with the capital that we put forth and I think it's an advantage right now.
And despite the ups and downs and supply chain I'd, rather have that in our house that we can deal with it we can make decisions we have a voice in.
We can do the right thing for the customers.
Yeah.
Yeah.
Next question comes from Amyris Srivastava BMO. Please go ahead.
Alright. Thank you Chris I, just wanted to come back to the days of inventory and actually more importantly, free cash flow.
In the past you said that.
Inventory does go up in March and June . So so that's that's fine that's consistent with your with your past comments, but I was looking at free cash flow to sales and I have to go back to.
No what I was going back many years past.
As a percent of sales, it's it's really.
At a very low number and I have to go back to June eight 2018 to get that number I guess the change in working capital.
How should we think about the trajectory of our free cash flow and good to see that you raised your dividend.
If I'm not missing anything on that.
On the actual absolute free cash flow number yeah.
Yeah, I'm really sorry.
We can't manage the free cash flow quarter by quarter and I look at it more on a 12 month trailing basis or a 12 months.
Rolling forward basis, and our free cash flow now is in the mid twenties.
As a percent of revenue and based on further growth of the top line and further expansion of the profitability. We have line of sight to get to plus 30% free cash flow margin.
And I think that's a that's a pretty good number are also taken into account what Liam just said like while we continue to invest in our technology Roadmaps and our product Roadmaps and continue to invest in our own factories that gives us a very strong competitive advantage.
To deliver a high performance products to our customers.
And I think that's a that's a pretty darn good number again I'm not concerned about to June free cash flow, which is indeed was a little bit muted because of the inventory build that we did fully supported by the known design wins and the revenue ramp that we will experience into September and the December quarter.
Got it okay, I understand and I don't look at it just from a quarterly basis I think we want to make sure I wasn't missing anything just a quick clarification on the.
December quarter, and then what's the right way to think about it.
You did say you'd grow should be think seasonal sub seasonal how should be think about it for modeling purposes. Thank you.
Yeah, Yeah, I mean, it's still a little bit early but I can tell you what moves the needle is the technology and what we're able to do to drive that and what we call is kind of really you know.
A technology, we how do we create something more impactful for the customers and we're doing that and it's not one or two parts I mean, the breath of the technology and the reach of our performance saw the engineer to engineer lineup is awesome. The relationships are awesome with the largest customer.
And we certainly feel good about execution and the opportunity for the second half of the year.
Very much so and Theres a lot of you.
Invention going on so to speak and in a lot of technologies.
That are opening up.
That are that are providing even more revenue opportunity for sky works as we go forward. So we feel really good about that cycle.
Great collaboration with the people that matter.
And get any getting in.
Again shoulder to shoulder in our Fabs together a lot of really good work being done to ensure leadership at the high end and we feel very good about that and I, absolutely expect that to play out in revenue and in our numbers.
Yeah.
Next question comes from Edward Snyder at Charter equity Research. Please go ahead.
Thanks, a lot Liam.
Sit back and look at mobile from a holistic point of view.
I think from what we know of your product line and from what you said here that you're much more exposed to the high end models. The mid tier I know you don't do much in low and no. One does but if you had to break it out I mean, you're not big in China, You're big in you mentioned Samsung flagship mine I'm not sure. If that means you are getting great big gains in a series of.
Of course, your largest customers, Ohio, So I'm just trying to get an idea of if you could.
If you could maybe bracket that for us.
To break out mobile would you say, it's 60 40.
It's an approximation, but just in general 60, 40 high Ed to meet Yours is something closer to like 70 525.
Yeah, It's probably more you know 70% high end Ed.
And what we're trying to do is actually take the low end.
And bring them along towards a higher level of technology and performance and as a result, it would be revenue for us.
And also great for the consumer that gets a better product so.
Certainly.
We are business services.
Think about it is that we want to hit the fastball first like we want the 100 100 mile an hour pitch and then from there. We can go downhill and take care of everybody else, but the DNA and our company is to go after the hard things and solve the hard problems and delight the customer right and sometimes the cup.
Customer doesn't even realize the amount of work and energy and technology know how that comes comes through this but ultimately it's a great solution that they get and so that's the way we can do this now we'd like to start with the tough problems and then go downhill as I mentioned.
And Theres still a lot of really good work to do we now here you know a lot of discussion about some other customers that we haven't talked about too much Samsung Google, There's many others in mobile and many others and connectivity that we can serve so.
It's a model that's worked for us.
It's all about customer customer performance and uplifting their product.
And their ability to drive to their consumer market. So it's.
It's always been a challenge for us, but we love that challenge it makes what we do.
Really matter for us here at Sky works.
Okay, and then given that if I could.
It seems clear for the reports so far or what was it last night, telling everybody else talking that in the low and the mid tier they're getting hit a lot harder with weakness due to varying factors. The recession now obviously, you're starting to take hold on that it hasn't really hit the high end yet at all.
But if it gets worse, obviously, most people think that it will and that kind of a profile, especially with regard to your largest customer because it's kind of a unique leadership when it comes time to start the <unk>.
Building, a new model, it's like the gate opens and you can ship as much as you want but you have to true up at the end of the year.
I know the last time, they had a big dislocation was many years ago success, but I'm just trying to get a feel with this when you normally would get indications that things are slowing down of that high end or at Samsung.
Well I mean, the launch starts you usually sell a glut of phones to the faithful et cetera, but then the real demand starts showing up in January February . So that's the last time I think it all happened in December and January So I'll, just visibility wise I know it looks good for a while when do you think if there were problems you'd foresee it.
Yeah No. That's a good question you know what it's interesting Ed now is.
The curve ball is the lockdown situations. So it's kind of an unusual thing we all we all went through Covid and we knew what was going on there and it was just dark everywhere right. There really wasn't any pockets of opportunity I think what's happening now which is a little bit of a bifurcation.
You've got those that played very hard in China, and the <unk> I think are much more exposed to the downside on the other hand at Sky works, where we were continuing to raise mid and high end, which has been beneficial for us and more profitable. So it's kind of a kind of a tale of two different markets and European story, we want them, we want them.
Want to pursue opportunities globally across every account obviously.
But the way our business is really.
It kind of grown up here, it's like like I said, the high end going down.
We have opportunity to do more and some of the low end markets its really more of a choice for us.
And then a technical problem, we know how to do it but so but we do think that the opportunities are still looking very good. There's a lot of a lot of demand that was not shift with these issues in China. Some of these lockdowns really.
Hinged some supply chain areas that are still not on clock Tonight.
And that's really I mean, we can measure that in our hubs and we have very good visibility on where that demand is so it off it definitely gives us some some some color and some positive view on where we see the second half can go and maybe there is a delay with the delays that go further into.
Secondly, the early part of next year as well so there's a lot going on there the nuance being this supply chain wrinkle not COVID-19 related necessarily but the hard lockdown that we saw at.
At the end at the end of the quarter. So it kind of it kind of mixes altogether, but we still feel really good about the opportunity.
And of course, we have great communication with our customers. So we're always in.
I think with what they need.
Next question comes from Anthony Pettinari at SMB Nikko Securities. Please go ahead.
Thank you I have a question on broad markets, Liam obviously, it's growing nicely on a year on year basis, but sequentially. It was down almost 10% and then you're guiding down for in all of the sequential decline.
In an environment, which seems pretty stable.
Especially on the consumer side, you know you have a lot of <unk>.
Secular drivers like Wi Fi Iot et cetera, So I'm just curious as to what the headwind is for that business in the short term.
And then you know along the same lines.
Some of that business is probably still a source from external you know foundries and obviously the costs have been increasing have you implemented any pricing actions to kind of offset those cost increases and.
And if you can talk about you know where we are in that cycle in terms of the pricing actions that would be helpful. Thank you.
Yeah very good question, Oh, yes, certainly the challenges in the broader market in the broad markets business.
Sure.
We can see more of an impact there with supply chain issues. So we don't have all the clarity that you have in a mobile device. It's very very we know exactly where we're going and we're attending broad markets. It's more diverse it goes to multiple customers.
We'd actually broader set of technology. So if we have any ties back to your question on supply chain. So if you think about broad markets. It wasn't a demand constraint. It was it was a supply chain constraints, that's an area lessor and mobile but more so in broad market that we saw that.
And with respect to pricing.
We did take some action and pricing off that was necessary we.
We do everything we can to keep our customers healthy and strong, but but together as partners saw it was required that we had to raise our prices a little bit and it was fine.
That was healthy, but soft, but we do feel like the opportunity in broad markets is still a really strong part of our portfolio lots of opportunities, we talked about the growth rates, 38% year over year revenue broad markets that's outstanding.
There's still a lot of stuff out there that we haven't had it as a huge pool of broad market opportunities that are.
That await us as we go forward a lot of great things that are not not not at all tag in warm mobile business a lot of unique markets unique customers that are on their own factor in terms of topline so looking forward to that.
Got it thank you.
Next question comes from Melissa Fairbanks at Raymond James. Please go ahead.
Hi, guys. Thanks, very much I'm, just maybe as a follow up to that just wondering how much pricing inflation has played into your overall revenue growth.
First as say unit volumes are just mix trending higher.
And then as a follow up I know this is a this is one of your favorite questions. What should we expect in terms of generational content growth going forward, where it is content begin to Max out are we even close to that.
So on the pricing as Liam just explained right. So in certain parts of our broad market business, especially which is based.
Based on the five plus foundry model, we've experienced some input cost increases and we've been passing that on to our customers that is a relatively small part of the overall <unk> business.
So I think that answers your first question.
Yeah Yeah.
And with respect to content and content reach we felt most of US here at the table here <unk> been in this market for quite some time and we do see incremental opportunities year after year after year, but I think what's changing now is that the.
Do you think about Sky works. It isn't just mobility mobility is great and wireless technologies are great, but what's what's different right now is the customer set and the application set that we're playing in we talked today about data center, we talked about electric vehicles.
Much more on the infrastructure side, we had high performance audio we have technology nodes that were not available to us two or three years ago, and we created these new technologies bulk acoustic wave et cetera in house with our own with our with our own people that are on capital. So I guess, what I would say to you is think about connectivity at large.
And think about the markets that require this strike, it's a mobile phone of course, but Iot industrial health care business. The business. All these interesting end markets rely very much on the kind of technologies that we bring so we're looking forward to that would love to give you guys more.
Info around that factor, but we certainly see pools of opportunity that Sky works in Sky works technologies can address.
Excellent thanks very much thank.
Thank you.
Yeah.
Your final question comes from the line of Matt Ramsay at Cowen. Please go ahead.
Good afternoon, and thanks, very much guys I wanted to ask a couple of questions about the.
The <unk>.
Acquisition.
Of the <unk> business, and then sort of how that's playing out so the first one is on the timing segment I guess the thesis. There was there were some really good timing technologies that silicon labs, and you guys were gonna add scale to those in the telco market in the switching market and then maybe.
Into cloud over time, and I, just theres some big server disruptions that are going on and in the cloud space and I Wonder if you might give me a little bit of an update as to how that thesis on the timing side is playing out there and what you're seeing and then I have a follow up on the automotive market. Thank you.
Yeah, Matt let me just start high level.
I've said before we're not breaking out every sub product line, but let me tell you that we are very pleased with the performance of the acquired business.
It's exceeding our.
Spectation <unk> by a lot of bolstering our revenue gross margin and operating margin point of view and it is still a lot of opportunities that we are working on keep in mind that again that business is supply constrained. The demand currently is a lot higher than what we were able to supply, but despite all of that.
Exceeding our expectations and so I'll turn it over to Liam to answer your question on timing, Yeah. So certainly great opportunities coming out of our what we call NSS portfolio, which was the IAA business of slab.
Really pleased with not only the products, but with the people and the execution. So all good.
Markets like data center right now are really critical for the timing solutions that we have very high performance timing.
<unk> solutions and growing that.
Additional investments from from the larger core Sky works well.
We're also looking at.
A lot of EDI work coming out of that portfolio is while the <unk> has some great technology. There that we're scaling I think it's a case where.
You've got Super technology, and Great performance and Great Engineering talent.
Now, it's really going to be about scale, it's really going to be about scale. So one of the things that we do very well at Sky works, you've heard that from us.
Vertically integrated we do a lot of hardcore manufacturing technology development in house, but we also do very very well.
In high scale.
Dull markets.
It sounds easy to say, but there's a lot of work behind that and if you look at our business and the kind of the way that we talk to our customers and markets and the way we communicate to investors. We really are a company that looks at.
Markets that can really move the dial we've got some of these here. These are these are coming off their growing right now for US. It's early stage, but the tough part is getting the technology right and in the team and NSS and from Silicon labs have gotten anyway. So it's about scaling now and driving our sales and marketing teams further.
Capturing a great deal of opportunity that we haven't seen so while we're excited about it.
Certainly give you more color next fall.
Yeah. Thanks, Thanks for that guys as my follow up I wanted to ask I was kind of intrigued with some of the automotive announcements I'm on a lot of the call here is focused on on handsets, but.
I guess the question on the automotive space for you guys is the opportunities that you're seeing how would you characterize them in terms of split and in terms of sort of the competitive landscape across cellular Wi Fi E V to X.
There's RF opportunities and a lot of different domains and in automotive that are different than the handset market. So I'd just be interested in and where you're seeing the traction and what the competitive landscape looks like.
Yes, Theres a lot of.
Interesting interesting notes that come together here in the EV side.
<unk> got you.
<unk> got certainly technology coming through wireless wireless nodes and five Gee, we've got a lot of EV accounts right now that are being developed all of that we have design wins and now and theres going to be a lot of investment that we put forth and certainly when you go further into heavy <unk>.
Connectivity and wireless connectivity is going to be pivotal it's going to be one of the most critical elements in the whole process.
And just think about from a safety perspective from a latency perspective.
If there's going to be a lot of technology development that hasnt yet come through.
Electric vehicles autonomous vehicles in that whole spectrum. So we're looking forward to it.
But like I said, we've got.
Got a beachhead with with our partners in Texas here.
And we also have some great great engineering minds and know how across the greater Sky works team to turn that into big dollars as we move forward. So it's going to be one of the bigger markets going forward for sure and it is a market that absolutely needs high performance low latency.
High quality solutions and those are the kind of things that we like to do and we've already been working with many many players in the EV space.
Many of those customers don't want don't don't Wanna.
How have the conversations all publicly about what we do so we will.
With respect that but please note that we are deeply involved in the development and we're putting a great deal of investment into that part of the market.
Ladies and gentlemen that concludes today's question and answer session I will now turn the call back over to Mr. Griffin for any closing comments.
Yes.
Thank you all for participating on today's call. We look forward to talking to you at upcoming Investor conferences. Thank you.
Okay.
Ladies and gentlemen that does conclude today's conference call. We thank you for your participation.