Q4 2023 Qorvo Inc Earnings Call
Speaker 1: I and the.
Speaker 1: And.
Speaker 1: I.
Speaker 2: Greetings and welcome to the Coral Row Inc. Q4 2023 Conference Call. At this time, our participants are on Elysanoni Mode. A brief question and session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad.
Speaker 2: As a reminder, this conflict has been recorded. It is now my pleasure to introduce your host, Douglas Delito, VP Investor Relations. Thank you. You may begin.
Speaker 3: Thanks very much. Hello everybody and welcome to Corvo's fiscal 2023-4th quarter, the Furnings Conference call. This call will include forward-looking statements that involve risk factories that could cause our actual results to differ materially from management's current expectations.
Speaker 3: We encourage you to review the State of Arbor Statement contained in the earnings release, published today as well as the risk factors associated with our business and our annual report on Form 10K, filed with the SEC because these risk factors may affect our operations and financial results. 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. We provide this supplemental information to enable investors to perform additional comparisons of operating results.
Speaker 3: and to analyze financial performance without the impact of certain non-catch expenses or other items that may obscure trends in our underlying performance.
Speaker 3: During our call, our comments and comparisons to the Comestatement items will be based primarily on non-GAQ results.
Speaker 3: For complete reconciliation of Gap to Non- GAAP financial Measures, please refer to our earnings release issues earlier today, available on our Investor Relations website at ir.corpo.com under financial releases.
Speaker 3: Joining us today are Bob Rutgers, President and CEO , Grant Brown, CFO .
Speaker 3: Dave Flowwood, Senior Vice President of Sales and Marketing, and other members of Corvo's Management Team. And with that, I'll turn the call over to Bob.
Speaker 4: Design activity was strong across a variety of applications, including smart home, precision location, indoor navigation, automotive connectivity, automotive smart interiors, and enhanced human machine interfaces. In advanced cellular, total Android revenue was up sequentially on the strength of a large customer flagship ramp with record Corvo content. We believe March was a low point for China-based Android quarterly revenue, and we expect total Android revenue will grow sequentially in June .
Speaker 4: In our performance analog, Corva was selected by an industry leader to supply self-to-satellite solutions that combine a variety of technologies, including multiple RF components and Bob Bay's multi-plectures. These solutions enable low-earth orbit-based, based on the celestial connectivity, helping to provide cellular coverage in the hardest to reach geography. We achieved a milestone with the delivery of our first prototype RF multi-chip modules to BAU systems.
Speaker 4: under the shift contract with the U.S. Department of Defense. Poveros leveraging our state-of-the-art production capabilities in our Richardson Texas facility through advanced heterogeneous packaging integration and enable significant savings in power, size, weight, and cost.
Speaker 4: This early milestone showcases the speed and efficiency of our collaboration with our program partners.
Speaker 4: It is a critical first step towards the goal of reestablishing US leadership and microelectronics in accelerating the modernization of microelectronics systems for next generation based array radars, unmanned vehicles, and satellite communications. And our power device business.
Speaker 4: The Department of Energy, forecast solar power will make up more than half of new capacity in the US in 2023, and the market for silicon-carbiding voters is expected to achieve double-digit compound annual growth rate through 2026. This wind complements our ongoing business in automotive charging applications and data centers. In our connectivity and sensors business, we were selected to supply ultra-wide-band solutions across multiple verticals, including a next-generation smartwatch, supporting secure-car access.
Speaker 4: Wi-Fi access points enabling indoor navigation and an additional 2024 flagship Android smartphone. Of note, ultra-wide-band design activity for in-car applications has ramped up significantly. We are a member of the car connectivity consortium and we are proud to be a contributor to the Digital Key Plus program for the Android ecosystem recently announced by BMW.
Speaker 4: With Digital Key Plus, BMW drivers with compatible smartphones can unlock or lock their car and start the engine without having the key and without removing the phone from their pocket.
Speaker 4: In automotive connectivity, we collaborated with automotive OEMs and leading third parties to advance smart antennas and next generation shark fin architectures. We also expanded design engagements related to 5G network access devices with automotive Tier 1. Imzasers.
Speaker 4: We secured a design win to supply force sensing touch sensors in support of a premium true wireless headset for a leading European OEM.
Speaker 4: The headset will leverage the ultra sensitivity of Corvo's men space sensors to enable a new industrial design.
Speaker 4: In Wi-Fi, we secured our first Wi-Fi 7-Ball Filter Design win, and we expanded sampling of a Wi-Fi solution enabling full coverage of 2.4, 5, and 6 gigahertz bands for smartphones and consumer and enterprise access points.
Speaker 4: In Event Cellular, we supported the ramp of a green-based smartphone OEM's flagship smartphone with multiple core-vote placements.
Speaker 4: including low-band, mid-highband, and ultra-highband pads, as well as secondary transmit, tuning, and Wi-Fi. We are pleased to support this customer broadly in their flagship year, and we are seeing expanding opportunity as they migrate their mass market portfolio to integrated 5G solutions.
Speaker 4: Across the Android ecosystem, Corva was awarded broad-based design wins in support of flagship, mid-tier, and mass-market 5G devices at the top five Android smartphone OEMs. The support new designs, we shift our first samples of our news.
Speaker 4: mid-highband pad to an Android OEM addressing this customer's most challenging performance and size requirements.
Speaker 4: This is the industry's most highly integrated front-end placement.
Speaker 4: It combines main path and diversity received content for the mid and high gains.
Speaker 4: And as we said previously, this product integrates nearly two times the Baw filter content in a smaller footprint than existing main pack only mid-high vN pad architectures. It leverages the reduced size and enhanced performance of our newest Baw and soft filters.
Speaker 4: We expect the first smartphone featuring this solution to launch the calendar 2024.
Speaker 4: Across the business, we're leveraging investments in best-in-class technologies, introduced differentiated products that delight our customers.
Speaker 4: With many growth drivers in her portfolio, and design activity has been strong. In HPA, design winds secured in the March quarter span a variety of applications in aerospace, battery management, the fence radar, electric vehicles, and renewable energy systems.
Speaker 4: In CSG, we secured new business and automotive connectivity, indoor navigation, smart home, and wearables. In ACG, we enjoyed broad representation across all leading OEMs, and we are increasing our content in the highest volume flagship phones.
Speaker 4: We believe we have room to grow at our largest customer, including ball-based content, and we are leading supplier to the Android ecosystem where the transition to 5G supports long-term content gains. Last year, approximately 40% of the roughly 920 million Android smartphones were 5G.
Speaker 4: and we see Android 5G Smartphone unit growth achieving a double-digit CAGR for several years. Over time, we expect HPA and CSG to outpace the growth rate of ACG, increasing our total growth rate and driving leverage as Mix increasingly favors our high-growth investment businesses. I want to thank the team for continued operational excellence.
Speaker 4: We are introducing new technologies and launching new products to align with the industry's growth drivers and broaden our market exposure.
Speaker 4: We are seeing increasing strength in customer design activity across our businesses, and we expect improved financial performance supported by content gains in large customer programs.
And with that, I'll hand the call off to Grant. Thanks, Bob, and good afternoon, everyone. As a reminder, our references today will be to our three operating segments, High Performance Analog, or HPA, Productivity and Sensors Group, or CSG, and Advanced Cellular Group, or ACG. In our upcoming 10K, we'll be discussing the
We will provide historical financial information that reflects these operating segments.
I'll now turn to our latest quarterly results. Revenue for the quarter was $633 million. Non-GAP gross margin was 41.3% and non-GAP EPS was 26%.
Relative to our expectations as provided on our February earnings call, results exceeded the midpoint of guidance despite a weak demand environment and channel inventory reduction effort.
As considered in our fourth quarter guidance, we held factory production at uncharacteristically low volumes, which created underutilization impacts that negatively affected margins.
On a non-gap basis, gross margin of 41.3% improved sequentially given a modest increase in factory utilization.
Charges related to low factor utilization continue to weigh on margins on a year-over-year base
was up sequentially given the timing of seasonal employee-related expenses such as payroll taxes, the timing of vacation, the rules, and other items.
In absolute dollar terms by functional area, the sequential increase was principally driven by R&D as we support our customers and invest in future growth opportunities. In total, non-GAAP operating income in the quarter was $34 million, or 5% of sales.
Breaking out operating margin by each segment, ACG was 14%, HPA was 13%, and CSG was negative 51%.
During the quarter, Corvo Biotechnologies reduced CSG operating income by approximately $11 million. As a reminder, we are currently in the process of seeking strategic alternatives for this business.
non-GAAP income was $26 million representing diluted earnings per share of 26 cents. Fiscal Q4 GAAP results were impacted by two notable non-cash balance sheet impairments. These items were recorded during the quarter but address multi-year time horizons.
and do not reflect the underlying performance during the period. The first impairment is related to Corvo biotechnologies. While we are seeking strategic alternatives, it is too early to comment on possible outcomes. We strongly believe in the technology and the team and feel the business will more quickly achieve its highest potential outside of course.
that failed the test for impairment.
The second impairment is related to the cash deposit asset on our balance sheet tied to a long-term silicon supply agreement.
There is no cash impact during the period as the deposit was remitted to the supplier at the time the agreement was executed and was scheduled to be refunded at the end of the agreement in calendar 2026.
We have elected to apply the pre-pay cash deposit against portions of monthly purchase commitments in lieu of ordering additional wafer. This will allow us to better align our specific mix of silicon wafer inventory with skew level finish goods demand over time.
We are comfortable with our current silicon inventory relative to forecasted demand, while mindful of the risk in ordering long lead time materials.
A reconciliation between GAAP and non-GAAP results can be found in the earnings release and more information will be available in our upcoming 10K.
A reconciliation between GAP and non-GAP results can be found in the earnings release, and more information will be available in our upcoming 10K. Moving on to the cash flow statement.
Capital expenditures were $34 million resulting in free cash flow of $31 million. During the quarter we repurchased $150 million worth of shares. The rate and pace of our repurchases is based on our long-term outlook, free cash flow, low leverage, alternative uses of cash and other factors. Turning to the balance sheet, as of quarter end we had approximately $2 billion of debt outstanding with no near-term maturities.
and $810 million of cash and equipment. Our net inventory balance ending the quarter was down $61 million to $797 million.
For the full year, we recorded revenue of $3.6 billion, non-GAP gross margin of 46.3%, non-GAP operating margin of 21.1%, and non-GAP earnings per share of $5.99. We had two 10% customers in fiscal 23.
Apple accounted for 37% of total sales in fiscal 23 versus 33% in fiscal 22, and Samsung accounted for 12% of total sales in fiscal 23 versus 11% in fiscal 22. Looking forward, we are encouraged by ongoing progress.
in reducing channel inventories, and we expect to benefit from strong dollar content growth on a large customer seasonal rank.
Turning to our current quarter outlook, we expect quarterly revenue between $620 million and $660 million, non-GAP gross margin of approximately 41.5%, and non-GAP diluted earnings per share of approximately 15%.
Our outlook contemplates the current demand environment, further consumption of channel inventory and seasonal factors.
Our non-GAAP guidance for fiscal Q1 includes normal operating spend for the biotechnology unit, but excludes any costs related to its divestiture.
We project non-GAAP operating expenses in the June quarter will be up approximately $10 million sequentially due to investments in multi-year customer programs, investments in core systems and other productivity initiatives, and the return of expensive compensation to the business buyers. Wright frog has announced success in the Sol wedding since January 2021, that the first
based on our expectations for improved financial performance. Below the operating income line, non-operating expense will be approximately $10 to $12 million, reflecting interest paid on our fixed rate debt offset by interest income earned on our cash balances, FX gains or losses, along with other items.
Our non-GAAP tax rate for Fiscal 24 is expected to be within a range of 13 to 15 percent.
We expect our inventory balance will increase in the June quarter as we support a seasonal ramp at our largest customer.
In terms of channel inventory, inventories of our components in the Android channel were reduced during the March quarter by approximately 25%. This follows a more than 20% reduction in the December quarter. Our expectations for this quarter are for channel inventories to decline again in the double digits. Later this calendar year, we expect Android channel inventories will...
and our largest customers.
For the full year, Fiscal 24 non-GAAP gross margin is expected to be approximately 44%, with variability on a quarterly basis, primarily tracking utilization and mix.
Looking across the fiscal year, we expect significant sequential improvement in gross margin during fiscal Q2 as we sell new products for our largest customers that are less burdened by higher costs associated with underutilization.
We expect sequential declines in gross margins during Q3 and again in Q4 primarily related to utilization and myth.
beyond June , excluding biotechnology, operating expenses for Q2 through Q4 are expected to be approximately 240 million to 245 million per quarter.
with variability related to the timing, the product development spend, investments in core systems and related productivity initiatives, the return of incentive compensation based on our expectations for improved financial performance, as well as other items.
Forgo enjoys many growth drivers across our three operating segments. We are leveraging a broad portfolio of technologies and capabilities to grow content this year on large customer programs, and we are uniquely positioned across leading customers and end markets. We are investing to drive outsized growth in diverse businesses.
to broaden our market exposure and accelerate growth.
At this time, please open the line for questions. Thank you. Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question and queue. You may press star two if you'd like to remove your questions from the queue. For participants, use and speak equipment.
It may be necessary to pick up your handset before pressing the star keys. We ask that you limit to one question and one follow-up so that others may have an opportunity to ask questions. One moment while we post our first question.
Our first question comes from Tosia Harry with Goldman Sachs. Please proceed. Hi, guys. Good afternoon. Thank you so much for taking the question.
I guess my first question, hoping you could talk a little bit about full year 24 revenue. Grant, you gave good color on gross margin and OpX as well, but how are you thinking about the top line in fiscal 24? And if you kind of provide context around or color.
around the three segments that would be super helpful. I'm going to have a follow up shoot.
Thanks, Toshia. I appreciate the question. This is Grant. In terms of the full year of physical 24 guidance based on our current view and barring any macroeconomic deterioration, right? We're not forecasting a significant jump in the handset unit cell through. In fact, we actually believe smartphones to be down.
year over year, but 5G phones to be up in the 5 to 10 percent range. So that underpins our overall fiscal 24 view for ACG. We do expect some growth in HPA and CSG as well, especially as the year progresses.
but generally speaking, not a terribly aggressive back half of the year. That said, just walking through the quarters, you know, margin will follow mix, as I pointed out in my prepared remarks. You know, although there's no change to our view of returning to 50% in the gross margin line, it's unlikely and...
in the ramp. Gross margin will also be up in the neighborhood of approximately 400 basis points quarter on quarter. As mix begins to favor some newer products, which are less burdened by those higher unit costs associated with underutilization.
In the December quarter, our fiscal Q3, we expect revenue to be approximately flat and continuing off of September . Gross margin will be down 100 to 150 basis points as utilization begins to ramp down following that large seasonal ramp and mix.
begins to modestly shift to some of that higher cost inventory. And finally in the March quarter, our fiscal Q4 of calendar year 2024, we expect Android to be a higher percent of our mix but decline less than might be historic seasonality due to a clean channel and returning to shipping to end demand.
However, gross margin will be down 200 to 300 basis points quarter on quarter as mix reflects that higher cost inventory. As I mentioned in the prepared remarks beyond June , I gave some color around op-x for the year, which would exclude file in the 240 to 245 million per quarter with some of the various.
comfortable as returning to shipping to end market demand.
tax rates probably in that 13 to 15 percent range consistent with the fiscal 23 and we believe share counts will be approximately 100 million shares or less.
Thank you. Our next question comes from Gary Mobley with Wells Fargo Securities. Please repeat.
Hey guys, thanks for taking my question. Grant, thanks for that very explicit fiscal year 24 revenue guide. It's quite helpful. But I wanted to ask about something one of your competitors is talking about this evening that is some sub-seasonal shipments to their largest customer appreciation.
just from customer specific standpoint.
Hi, this is Bob Gary. Thanks for the question. And as you know, we don't normally talk a lot about our largest customer. I think what I can say is ACG will be down quarter of a quarter. So, you know, we are expecting from a smartphone revenue to be down. And historically, it is a lower quarter for our largest customer. So...
I don't know why or whoever said whatever you just said, but I think we have a real good handle on the market. We talk a lot about our model and how things work. So we feel good about what we've said for sure, no doubt.
Okay, do my basket follow up? Absolutely, go ahead, Karen. All right, so I guess the $64,000 question is, what will a new normal look like with your Android customers once they're through draining their access inventory? What's your best field based on design when tracked? Do you think you're gonna cheat?
look at where we're gaining share and what we've been talking about the great work we've done in the Android ecosystem whether that's Samsung and Google and already what we believe we've started to win in 24. And you know as you know what we've been facing are these headwinds with you know not shipping up to demand and reducing the inventories that Grant went through the 20% last quarter or two quarters ago 25% last quarter.
that as that comes and we continue to gain share there, I believe we can get back there or better. No doubt about it. But again, you have to forecast our largest customers done quite well in gaining share in some of their markets. So the good news is we're positioned, and I think this is what's important, we're the only strategic supplier of the top six Android manufacturers, and we've got a great...
of kind of retaining this new content over the next several years, because customers in this market have a habit of making different architecture decisions every year. So as you start ramping this new content, how do you think you are able to sustain it over the next few years?
Yeah, I think what's interesting, Vivek, is I mean, over time we've done a pretty good job of holding in the areas that were winning, nice share and growing, and as they add content in those areas, we've done well. So as we look out, we feel pretty good about things. And I even commented and granted as well that...
We believe we can continue to grow content at our largest customer, whether it be ball-based or our discrete components that we sell there. So we feel good about the outlook there for multiple years. Thanks Bob. For my follow-up, do you think this was a competitive win or do you think this is a new technology that customers are adding?
in this area. So is this expanding the pie or do you think this is kind of a competitive bin from something they might have been using from somebody else before?
I think I answered this question last quarter, I believe, on a similar topic and it was both. We're gaining content through both share gains as well as, to your point, making the pie bigger. What are the same incinerations you don't outdoors stove?
Our next question comes from Carl Ackerman with BNP. Please proceed.
Yes, thank you. Good afternoon, gentlemen. I guess based on your comments on channel inventory realignment for Android, why wouldn't channel inventory be aligned with sell through by the end of the June quarter, given the further improvements that you're seeing.
And as you address that question, how would you characterize the inventory balances and timing of reaching normalized inventory in your infrastructure and IoT businesses? Yeah, this is Dave. I'll take that question. So in the Android ecosystem,
You got to remember we ship a lot of products into a lot of different customers. So it all depends on their program ramps, how well their phone sell through relative to their expectations. So in some cases, you're right, we're going to be in pretty good shape by the end of the June quarter. In other cases, it'll probably take a little longer.
depending on the customer and their business. So, but as Grant said, by the second half of the year, we definitely see the Android ecosystem. We should be clear of all the channel inventory and back to shipping to the true end customer demand.
Base station is going to take a little longer. I think some of those customers built up more inventory during the tight supply conditions of last year. And so it's just going to take some of those customers longer to burn that off. So we see that probably taking you through this calendar year and into the early part of next year.
Hey Carl, this is Grant. Let me jump in there and maybe if I take it up a level. Our view on channel inventories is incorporated in our guide. So our 50% increase in the September quarter is predicated largely on content gains. Sequentially we would expect the channel to begin clearing and us to begin shipping to more normalized demand.
later in our fiscal year. Again, it doesn't incorporate anything aggressive in terms of unit growth. This would be simply a return to what could be considered somewhat normal and that would be incorporated in our guide so you can you can make at least the quantification of it based on that.
Clear. Thank you. Our next question comes from Edward Snyder, Charter Equity. Please proceed.
Thanks, you guys seem very confident about content gains in the fall. Bobby said both share gains and new content. Maybe we do a little bit further down to the share gain aspect. Is this areas that you've not shipped before because you guys have tended to focus on specific areas and there have been some kind of back and forth and a couple of those slots are going to be...
something completely new. And then you mentioned kind of an all-in-one mid-highband DRX. I said are we watching that? The channel's been looking at that for some time. It's been attempted in the past but it's too constrained. It sounds like more android guys are open to that. Question there is all-in-one, it gives you more defensible position because you're one of the few companies they've actually build in all-in-one, but doesn't it also-
And as I said, we're very confident in our ability to continue to grow there. And Dave, you want to take care of the work that we're doing there? Yeah, I think part of the question is, you referred to it as an all-in-one. What we talked about on the bullet there was a—
solution that combines the mid-high band plus the diversity received. So that diversity received, that's all new content for us. We don't traditionally service that part of the phone. But in general we're supporting our customers I think with a very high performance small size with what they're looking for.
That's creating a lot of value as well. So we don't see it as an ASP issue. It's a very high performance, small size solution that's going to drive. Great. And then if I could, you took another charge on the silicon supply agreement. I understand things are slow here. On my calculations, you probably have what you've got to maybe
continue if you're under purchasing from that supplier just trying to get a feel for how that plays out next over quarter. Sure this is Grant I'll take the question. Quarter on quarter at a high level our revenue outlook for fiscal 24 hasn't changed if anything it's it's actually improved. What has changed would be our current forecast of mix.
over the out years in that contract, right? As you understand, wafers aren't fungible once they've been fabricated and our demand profile is complex. The supply agreement covers multiple products, technologies, customers across multiple years. So there's a significant mixed impact. Furthermore, we can't order wafers for products that haven't been designed yet, so there's a timing element as well.
But since we have to place those POs well in advance, we have to make sure we manage our inventory accordingly. And we're comfortable with our current inventory based on forecasted demand, so we're applying our prepaid deposit, as you mentioned, to the wafers that we don't believe we'd ultimately need. And we know there will be continued variability in the mix over the remaining life of the agreement. It could be better, it could be worse. So the overall campaign plan, this is basically swings in time with our paid investment service. So without further ado, I'd thoughts I should hand this over to the twice- Rodrigo. Messiah unique
but this is something we analyze each corridor and we're continuing to work with the supplier in that case to stay aligned.
Our next question comes from Matt Ramsey with Cowan & Company. Please proceed. Please proceed.
Yes, thank you very much. Good afternoon, guys. Thanks for taking my question. I'm obviously really appreciative of all the additional fiscal 24 detail and guidance, color, and I know there's content things that are happening, but I guess I just want to think about philosophically.
Right now, giving all that additional detail and guidance on a per-quarter basis all the way through the fiscal year I mean we a lot of us are listening to the media tech commentary out of Asia Just got off the Qualcomm call listening to their comments where certainly it seems like a lot more Uncertainty in the handset market all the way around at your largest customer in terms of volumes and in terms of
the market recovery in China. So I guess the question I have is really just about the choice to give all that granular detail right now through the next four quarters and the level of confidence sort of underpinning those estimates just given all that's going on in the macro despite the content gains you have. Thanks. Yeah, sure. Matt this Grant. Let me take the question.
First off, we usually get some color around the forward fiscal year as we start it. So it's something that we do as a matter of practice. I think it's extremely helpful in this case given the volatility in the market. So I hope that it's helpful for you as you're putting your models together. In terms of the quarter by quarter guidance.
It's so specific to the margin profile given the mix of products and the inventory balances we're carrying that I wanted to make sure that we were upfront and helping people understand the margin is going to follow that mix and to a degree the utilization associated with those customer ramps.
So it's important to understand it will vary on a quarter by quarter basis. So I wanted to make sure that we gave as much color as we could there. Underpinning our overall view, again, is nothing overly aggressive from a recovery or a step function jump in enhanced unit sales. So I don't want to be...
You know overly conservative, but there's nothing aggressive there as we've said we're really looking to just clear the channel inventory We've been working aggressively to do so and I think we're making a lot of progress there as we return to normal In the channel later in our fiscal year. We should see Some incremental improvement just simply being able to shift to what would be considered end market demand No, thank you for all the detail there as
how much of a drag is it still for another couple quarters? If there's any kind of quantification there, that'd be helpful as we think about maybe modeling beyond the inventory burn over the next couple quarters. Thanks.
Matt, I'll make a couple of comments and then turn it over to Dave. We really don't want to get into given dollars and units and all that because it moves around based on future demand. I think what we can say is that we're going to continue to reduce the channel inventory so we have a ways to go. And what we said is we'll reduce it this quarter and we'll probably continue to reduce some in September . It's probably going to take until December on the over a year.
overall channel inventories. And I think we were one of the first saying, hey, we were gonna do this to your point. I can't speak for the others that you're listening to, but we started to throttle back on this a long time ago and others are just seeing it. I also think our lead times are much shorter than theirs, which is why we saw this before they did and saw it now coming back differently. Coming back in a sense, not the market's coming back.
that we've made significant progress on producing the inventories in the channel. So the Edwins are subsiding and it's like tellwins are going to be behind us as we start shipping into the end demand, even though it's significantly lower than what we saw a year ago. So I think I'd had caught that on Dave if you want to add any color to that feel free.
No, I think they're all good comments Bob, and you know we did see that the Android sales, we think that bottomed in December , and our sales into China bottomed in March. And so as Bob said, we still got some work to do to clear that inventory in the next couple of quarters, but we do see that improving already. Bookings are up, customer demand is coming back, and so it's only a matter of time at this point.
Hi, I actually had Matt ask a good question. On the Gross Margin Site Grant, is that largely a factor of utilization? Could you please quantify for us? And it's not under your watch, but gross margin performance has been pretty volatile. So just help us understand, is utilization at its lowest ever in the recent past? So is that the biggest driving factor that gives you the confidence on the gross margin side? Sure, Amritsar. This is Grant. I'll take the question. Yes. That is, how far would theUFC Nancy Aeris Web site look for wings?
and reinforced by my guidance today. So underutilization to your point is by far the largest item. The next item, which I've commented again on before, is the headwind associated with inflation. We're seeing in the neighborhood of 80 basis points, maybe 100 basis points there. So a distant second to underutilization.
Okay, super helpful and we all appreciate the details. Just real quick on the assumptions for the plus 50% Q over Q growth. Is that largely of inventory normalizing because you pointed out that demand continues to be uncertain. Is that largely driven by some sense of normalization of the state.
on the Android side, and then the second factor being the content gains at your large customers. That's the right way to think about it.
I would turn that around. A very, very little expectation of the channel clearing in time for the September quarter, very much dependent on content gains in a large seasonal ramp.
The next question comes from Ruben Roy with Steve Food. Please proceed. Thanks. Thanks for taking my question. Grant, I wanted to just talk a little bit about HPA and PSG in terms of how you're seeing the rest of the year play out. You mentioned that you're not terribly aggressive, but you do think there's going to be some growth progressing? I think there's going to be some growth progressing.
through the year. So I wonder if you could talk a little bit about the pricing environment in those markets. There's been a lot of discussion around pricing, you know, when things were tight last year and, you know, how you're thinking about that as we flow through this year. And then, you know, also if you just comment on, you know, where we are in inventory and when you think, you know, that normalizes when we get back to sort of your
longer term growth targets for the two businesses. That'd be great. Thanks. Thanks for the question. I'll take the first part. I'll let Dave comment on pricing. In terms of our HPA and CSG businesses, we would expect to see strength in defense and power devices within our HPA business. It will grow over the course of the year. Then in our CSG business, we'll see growth in Wi-Fi business and then the other connectivity elements, including UWB. So strong sense and confidence on those businesses, given where they're standing today and the growth.
We're growing at double digits for the next several years. And that's all new content for us, because we really haven't participated in the 4G entry space for many years. So, as customers start to migrate more and more of their portfolio to 5G, that's all new opportunity for us. We're pretty excited about that growth opportunity as well. Thank you for your time.
Ruben maybe I'll give you just a little bit more color here on the segment revenues in Q4 and then I'll compare it to a year ago just for reference. HPA in Q4 was 133 million in revenue, CSG was 82 million in revenue.
and ACG was $418 million. If we look back one year at the March quarter in our fiscal 22, HPA was $211 million, CSG was $179 million, and ACG was $777 million. So, you know, as we get back to those levels of growth we would expect over time, we should see...
some forward progress throughout the fiscal 24 year. That's great. Thanks for that perspective. I appreciate the breakout for a key form before the key came out. If I could just really quickly, Bob, on I guess following up to Ed's question on ASPs, with all the content, you know, kind of moving up to kind of just the ball filter content in one of your placements.
Is five to seven dollars still the right way to think about you know kind of the ASPs and a typical 5G handset or do you think at some point we start to you know, push that higher with the value being added? Yeah, I think your number is probably on the low side if we look at you know, the average smartphone It's much higher than that But we see that pretty stable over time
I mean of course there's going to be ASP erosion, but the conversion from 4G to 5G is going to be a big driver to offset that. And there's also new content. You know Wi-Fi 7 is going to add new content. We talked about our ball filters there, but also as you look backwards in time in a lot of cases Wi-Fi 5 and prior there wasn't even a fem involved.
And so Wi-Fi 6 and now Wi-Fi 7, there's opportunities there for us with our FEMs and our Wi-Fi portfolio. And we're well represented across all the reference designs there. And then even in 5G, there continues to be new capabilities, new requirements coming in 5G Advanced. And that's going to increase complexity and increasing the performance requirements. And in a lot of cases, there's new content opportunities there as well.
So all that's going to be easily enough to offset any ASP erosion that we see.
Thank you. Our next question comes from Siri with Raymond James. Please proceed. Thank you. Bob, just a question on China. I think you are guiding for sequential growth in the second quarter, June quarter. I'm just curious. It's slightly more optimistic than what we heard from some of your peers.
So any comments there I think would be helpful.
100% agree with your last comment. We're not seeing any pickup either. What we've been making clear now for the second quarter now, we continue to reduce the channel inventories. So as you do that, you know, we've reduced the inventory, customers do need to order some parts. So all we're saying is, in our revenue, we're going to see an uptick.
That has nothing to do with end-to-man. It means we're signaling, we're heading towards the bottom of cleaning up the channel. I think Dave just mentioned that our bookings were up strong. In fact, we have the largest bookings in China for almost two years now. So all we're showing is the momentum's changing, not in the end market.
Not any in-market, we don't disagree with anything that you guys have heard from others. It's, we've done a very good job over the last two quarters of significantly reducing the channel inventory.
So all we're saying is we're starting to see that bottom and as I mentioned earlier, you know The headwinds are subsiding and the tailwinds are starting to come but that's not an in market comment That's a comment about our revenues.
Thank you for that clarification. And then a grant on the gross margin, and a lot of questions have been asked about utilization. If I take your guidance, it looks like you're going to exit the year in low 40s. So I'm just trying to bridge the gap between that and your long-term model. Is it primarily utilization or are there any other factors?
margin in the September quarter. In the December and March quarters you start to see more sell-through of product that we have already got on the shelf and that incorporates higher unit cost due to prior underutilization. So it's a bit of mix and utilization.
Is there any revenue level grant that you think you need to get to before you know we see a five handle on the gross margin side? I wouldn't tether it to revenue again it goes really back to mix it depends which products we're selling through and what kind of content are in those products so it's not an absolute revenue level but again really related to mix. Thank you the next question. I do feel maybe sorry just to follow up on that.
I do feel confident in the path back to 50%. As I pointed out earlier, in the Pareto of gross margin, it's dominated by underutilization. So really in terms of the path back, it's just a question of filling up the factories in order to get there.
Thank you. The next question comes from a thief Malik with city. Please proceed. Hi, thank you for taking my question. Grant, I have two questions. How do we look at the strategic exposure to your largest customer? You said fiscal 23 Apple was 37% and 12%.
It sounds like based on the content gains this year, you will grow those percentages both these customers. And historically, Apple in terms of profitability has not been the best exposure name. So how are you balancing content growth with profitability? Sure, well, as Bob pointed out, About computer access,
good about our positioning there. In terms of managing profitability going forward, as I pointed out in my prepared remarks, we are heavily investing in multi-year opportunities at multiple customers and you know those R&D dollars are spent today for revenue in the out years but we feel like we're positioned to win we have the technology in place.
to do so and we're confident in our development and the investments we're making. I understand. And then on the power devices, Silicon Card, I understand you're growing from a small base and...
And then multiple million dollar order and inverter side. How strategic is this business to Corvo? How are you investing, R&D dollars towards this business? And could this be 10% type of business maybe in a couple of years?
Yeah, we think it's a very strategic investment for Corvo, right? It's similar to a lot of the other compound semi-work we do. We have a differentiated solution with our JFET technology. We have a lot of customer demand. And in terms of the investment there, I think it's well placed. We do expect
to grow significantly. And as you'll see in the 10K, we will be paying a contingent payment to the shareholders of United Silicon Carbide, which reflects a lot of success in that business that we've seen since we've taken it over.
The next question comes from Harlan Sir with JP Morgan. Please proceed. Hi, good afternoon. Thanks for taking my question. You guys are set to ramp into new smartphone models across your customers in the second half of this year. I appreciate the new and higher content gains.
How are the pricing trends on like-for-like components on these new model ramps, either versus prior generation or on a yearly basis? Yeah, I don't think we can comment on a like-for-like. Every generation there's always new challenges to solve. We're just excited about the content gains that we have. As Bob mentioned, in some cases that's new content, in some cases it's share gain.
And that's probably true as you look across the customer base, you know, similar story plays out. Okay, perfect. Um, I believe it's spread across both your HPA and connectivity segments, but wanted to get your views in the broadband access markets, cable, fiber to the home on the infrastructure side, you know, where are we in the DOCSIS 3.1 upgrade site?
Are you guys also burning to access inventories here?
Yeah, I think the timing of what you said, I think that's pretty consistent with what we're seeing and we do see a lot of new design activity in the newer standards and we're very well positioned there with our technology. And to your point, we do see some inventory challenges there as well that we're working through. So we think that's relatively near term, but there will be a little bit of challenge there to get through.
in that business. Thank you. At this time, I would like to turn the call back over to Ms. Smith for closing comments.
We want to thank everyone for joining us today. We appreciate your time. We look forward to meeting with you at upcoming investor conferences. I hope you have a good night. Thank you. Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.
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