Q1 2024 Qorvo Inc Earnings Call
Greetings and welcome to Carnival, Inc, Q1, 'twenty 'twenty four conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being at a contract. It is now my pleasure to introduce your host Douglas Dolittle, Vice President Investor Relations. Thank you. Mr. <unk> you may begin.
Thanks, very much Hello, everybody and welcome to <unk> fiscal 2024 first quarter earnings Conference call.
This call will include forward looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the safe Harbor statement contained in the earnings release published today as well as the risk factors associated with our business and our annual report on Form 10-K filed with the SEC because these risk factors.
These may affect our operations and financial results in today's release and on today's call. We provide both GAAP and non-GAAP financial results. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain noncash expenses or other items that may obscure trends in our.
Underlying performance.
During our call our comments and comparisons to income statement items will be based primarily on non-GAAP results for complete reconciliation of GAAP to non-GAAP financial measures. Please refer to our earnings release issued earlier earlier today available on our Investor Relations website at IR Dot <unk> dot com under financial releases.
Joining us today are Bob <unk>, President and CEO Grant Brown CFO , David forward Senior Vice President of sales and marketing and other members of <unk> management team and with that I'll turn the call over to Bob.
Thanks, Todd and welcome everyone to <unk> fiscal 2024 first quarter coal revenue margin and EPS were all above the midpoint of the outlook. We provided on our May 3rd earnings call end market demand in the June quarter was consistent with our expectations within the Android ecosystem channel.
Inventories continue to be consumed and corvo continue to under ship to end market demand we.
We expect continued reduction in channel inventories in the September quarter, and we see Android channel inventories normalizing by calendar year end.
The other markets relative strength in the areas like defense and aerospace and automotive was offset by inventory consumption across consumer markets and weak demand in <unk> infrastructure.
And some of these markets, we expect inventory consumption to extend into next year.
[noise] Corvo has worked diligently since last fall to aggressively drive down channel inventories in multiple markets. While at the same time prioritizing new product development and securing customer designs.
It has enabled us to drive growth and large customer programs and it positions corvo for incremental growth as end markets recover.
As we have stated in the past carbos growth targets by segment or for strong double digit growth in connectivity and sensors.
Double digit growth in high performance analog and.
And mid to high single digit growth in advanced cellular.
Design wins during the quarter and HPA, we're diversified across customers and markets and included large defense programs extending multiple years.
And connectivity and sensors design activity spanned a variety of applications, including highly integrated Iot connectivity solutions.
Well I fly seven RF front ends.
Enforced sensing touch sensors.
We have a broad range of growth drivers and CSP and we were pleased with our increasing design activity and new growth areas like sensors and ultra wideband <unk>.
Over time, we see HPA and C. S G contributing increasingly so growth diversification and margin expansion.
And advanced cellular design activity continued to be favorable across all leading smartphone Oems we.
We are growing our content in next generation <unk> smartphones at our largest customers and we are capturing new content in the Android ecosystem is forging units transmission to five G and enter our Sam.
In calendar 2023, approximately 45% of Android smartphones will be five G and we expect Android five <unk> smartphone unit growth to post double digit CAGR for several years.
Now, let's turn to some quarterly highlights.
And automotive applications corporate was selected by an automotive tier one to supply ultra wideband connectivity for upcoming EV launch by U S based manufacturer.
We are pleased with this win and the growing content opportunity in automotive, where the ultra wide band content inside the car will typically include five to seven placements plus one placement and each key fob.
<unk> also secured touch sensor design wins, enabling forest level detection and a range of smart interior applications, including center console door panel steering wheel and display.
These are multiple design wins totaling multiple millions of dollars.
And automotive connectivity, we were selected by a leading automotive antenna supplier to provide cellular V to X front end modules and Bob coexistence filters for use by a major European based Oems.
Lastly, we expanded our automotive footprint with an automotive radar design win to supply you receive amplifier for a major U S based automotive OEM.
Carbos automotive opportunities include DC to DC converters onboard Chargers smart interiors RF front ends for five G. Wi Fi N V to X connectivity radars and ultra wideband secure car access for keyboards and inside cars.
And Wifi, we secured several Wi Fi seven design wins with access point providers for Wi Fi seven Bob filters, enabling full coverage of 245 and six gigahertz bands.
We also began sampling tier one customers for our next generation Wi Fi seven films, which pair with multiple chipsets.
And our connectivity systems business, we were among the first to achieve matter one one certification for our concurrent connected integrated solutions for gateways and devices.
This expands our market opportunity and support other top smart home ecosystem customers, whose installed base exceeds 150 million home networks.
And silicon carbide, we booked a multi million dollar customer order for silicon carbide power devices supporting AI servers, and other data center applications.
The design win funnel for Corvo Silicon carbide power devices is increasing and we continue to expand our supply base to support our customers.
In addition to the previously announced supply agreement with SK filter on.
We also have agreements in place with we'll see incoherent.
For broadband applications, we extended our leadership in DOCSIS 4.0 with customer sampling over one eight gigahertz hybrid power double or this solution delivers more RF power with lower power consumption than competing solid state solutions.
In cellular infrastructure, we released the highly integrated three four to three eight gigahertz eight want Pam that simplifies <unk> massive mimo system design.
We also began sampling the industry's first C band discrete Pas bandpass filter for <unk> small cell radios.
For Defense Communications, we began sampling the industry's first two to 18 gigahertz transmit receive front end module delivering 10 watts of transmit power.
This highly integrated wideband solution integrates the.
Switch, Illinois and limiter.
Bridges Corvo is advanced packaging and process technologies to maximize power efficiency and a miniaturized footprints.
The form factor and functional density of our solution is especially critical given the trend in our defense and aerospace business of one to many.
In addition, the manned aircraft there will be many more drones.
In addition, the large T O satellites, there will be many more Leo satellites.
These future communication systems and system upgrades incorporate more electronic requiring greater integration across higher volumes.
For smartphone Oems, we began sampling Android smartphone customers corvo, its newest highly integrated pad, which combines in a single placement below mid and high band main path functionality that is currently offered in two placements.
This new architecture reduce the surface area by 40% to meaningfully simplify design and decrease time to market for mass tier five G phones.
This follows on the heels of our announcement last quarter that we'd begun sampling a mid high band pad that combines the main path and diversity receive content for the mid and high bands.
Both placements leverage a broad range of corvo process technologies, including our newest spa and saw filters.
Lastly, we commenced customer sampling of our next generation antenna tuners, which deliver best in class linearity the industry smaller solution size and compatible with all major chipsets.
I want to thank the corvo team for continued operational excellence, we've made significant progress clearing channel inventories, while developing new technologies and securing new design wins that enhance our customers' products and expand our addressable market.
In the September quarter, our outlook, primarily reflects new products ramping at our largest customer later in the year, we expect Android revenues to reflect a healthier channel and cargo shipments that are more closely aligned with end market demand.
We are very encouraged by customer design activity, we've seen so far this year, we expect revenue growth and margin expansion.
Product mix favors our high growth investment businesses, and we are positioned for incremental growth as end markets recover.
And with that I'll hand, the call off the grant.
Thanks, Bob and good afternoon, everyone.
Revenue for the quarter was $651 million non-GAAP gross margin was 42, 9% and non-GAAP EPS was <unk> 34.
Relative to our expectations as provided on our May earnings call results exceeded the midpoint of guidance, despite the macro environment and channel inventory reduction efforts.
Consistent with our guidance factory production levels improved modestly, but remained below which created an underutilization impacts during the quarter of approximately 800 basis points.
The sequential improvement in gross margin and upside to the midpoint of our guidance was due to higher production levels and product mix.
non-GAAP operating expenses in the quarter were $233 million approximately in line with our expectations.
We continue to invest in new product development, it targets multiyear growth opportunities across all three segments as well as in the teams that directly support our customers.
In total non-GAAP operating income in the quarter was $47 million or.
Or 7% of sales, which increased modestly relative to last quarter.
Breaking out operating margin by each segment.
<unk> was 11% HPA was 17% and CSC was negative 20%.
During the quarter corridor biotechnologies reduced CST operating income by approximately $2 million.
As a reminder, we are currently in the process of seeking strategic alternatives for this business.
non-GAAP net income was $34 million.
Representing diluted earnings per share of 34.
Moving on to the cash flow statement free.
Free cash flow was $5 million and capital expenditures were $39 million.
During the quarter, we repurchased $100 million worth of shares at an average price of $96 81.
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 $744 million of cash and equivalents.
Cash benefited from the sale of our farmers branch campus, which was completed during the quarter.
Assistant with our expectations and commentary from our prior earnings call. Our net inventory balance ended the quarter was up $121 million to $917 million driven by the seasonal ramp at our largest customer.
Turning to our current quarter outlook, we expect quarterly revenue of approximately $1 billion, plus or minus $15 million non-GAAP gross margin between 45% 46%.
And non-GAAP diluted earnings per share of approximately $1 75 at.
At the midpoint of the revenue range.
Our outlook contemplates the current demand environment further consumption of channel inventory and seasonal factors, our non-GAAP guidance for fiscal Q2 excludes any costs related to the divestiture of the biotech business, but includes ongoing operating expenses until it is divested.
We project non-GAAP operating expenses in the September quarter will be approximately $240 million. In addition to growth oriented investments across our product and technology portfolios. We are also targeting enterprise wide productivity initiatives, we're simplifying and rationalizing processes and.
<unk> the core systems, we use to run the business.
We will present these productivity investments as non-GAAP other operating expenses. These multi year efforts will support future growth and enhanced profitability as we upgrade modernize and standardize around the latest tools and best practices.
Below the operating income line nonoperating expense is expected to be approximately $10 million, reflecting the interest paid on our fixed rate debt offset by interest income earned on our cash balances FX gains or losses, along with the other items.
Our non-GAAP tax rate for fiscal 'twenty, four is expected to be within a range of 13% to 15%.
We expect our inventory balance will decrease in the September quarter, as we support a seasonal ramp at our largest customer in terms of channel inventory. The environment continues to improve inventories of our components in the Android channel will reduce during the June quarter by approximately 20% this follows greater than 20% reduction.
<unk> in the prior two quarters.
We anticipate channel inventories will continue to decline this quarter.
Later this calendar year, we expect Android channel inventories will normalize outside of the Android ecosystem. There are smaller pockets of channel inventory it will take longer to digest.
For the full year, there is no change to the full fiscal 'twenty four commentary provided last quarter to reiterate we forecast fiscal 'twenty four revenue will be above fiscal 'twenty, three and expect to benefit from strong dollar content growth at our largest customer.
For the full year fiscal 'twenty four non-GAAP gross margin is expected to be approximately 44% with variability on a quarterly basis, primarily tracking utilization and mix.
During the second half of the fiscal year, we expect sequential declines in gross margin during Q3 and again in Q4, primarily related to utilization and mix.
non-GAAP operating expenses for Q3, and Q4 are expected to be approximately $240 million to $245 million per quarter with variability related to the timing of product development spend investments in core systems and related productivity initiatives incentive compensation based on our.
Vacations for improved financial performance.
Timing of the biotechnology business disposition as well as other items.
<unk> enjoys multi year growth drivers across our three segments, we are leveraging our broad portfolio of technologies and capabilities to grow content. This year on large customer programs and we are uniquely positioned across leading customers in large markets, we're investing to drive outsized growth in diverse businesses that broaden our markets.
Exposure and accelerate growth at this time. Please open the line for questions. Thank you.
Thank you.
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Please restrict yourself to one question and one follow up one.
One moment, please while we poll for questions.
The first question comes from the line of Ackerman with BNP Paribas. Please go ahead.
Yes. Thank you two questions if I may gentlemen.
First could you comment on your ability to secure a gallium and germanium substrates for your products.
What are your thoughts on the ability to pass along.
Higher substrate cost if that were to occur going forward.
Sure. Thanks for the question Karl This is grant.
We currently don't believe the export ban will have a meaningful near term impact took effect yesterday as you know, but it was communicated well in advance.
I credit our ops and sales team for acting quickly to assess the supply needs and communicate with customers and suppliers and ultimately for increasing our raw material coverage with our direct suppliers wherever needed.
We have not observed any notable changes in our customers' behavior or supplier lead times, we remain in close contact with our suppliers and they have assured us of their ability to support our demand is down to individual purchase orders.
On committed delivery dates.
In terms of pricing, we had again havent seen anything abnormal there.
As of today.
Very helpful.
I guess, if I could just maybe zoom out for a second you know I was hoping you could discuss the timing.
All of the automotive design wins, you've mentioned in your prepared remarks across many applications really silicon carbide ultra wide band for sensing.
My understanding was that automotive represented kind of a mid single digit portion of your sales I could be wrong, but that clearly appears to be expanding so could you comment and whether maybe your automotive business doubled for you by 2025.
Thanks, Carl This is Bob I appreciate the question.
As you will know the nice thing about automotive is when you win you get great visibility for multiple years, unlike the smartphone industry where.
Today, we get a little bit of visibility, but you have to then earn it. The following models were in automotive as you pointed out you go out several years, we've got great visibility at this time, we're not sizing it but I think based on the volume of opportunities that we shared in my prepared remarks, plus in the press release it is our expectations.
As you pointed out as we move out into calendar year, 'twenty, five and 26, it will become a much more meaningful part of our business, but as you pointed out we're already.
Participating in some of the automotive applications today I will comment the electric vehicle manufacturers do seem to move a little bit more a little bit faster than the traditional.
Gas engine manufacturers.
We do look forward to continue to report our progress.
Okay.
Your next question comes from the line of.
Proven Troy with Stifel. Nicholas Please go ahead.
Thank you Bob if I can follow up right, where you left off on auto can you talk about or characterize the types of automobiles, where you're winning is it sort of flagship version of our flagship autos are met.
Mid tier high end or across the board and at this point is there a way to think about and content per auto and dollars.
Sure. Thanks, I'll have Dave and into some of the details on that Ruben.
Yeah, and so you can imagine some of these products that we're talking about they're going to start at a higher tier.
The Otto from Ultra wideband or.
Or the sensors that are going into the cockpit.
Electric vehicles, certainly our focus there, but even some of the higher end gas powered vehicles and over time, we expect that to go down market on some of the connectivity side that can go more broadly across the.
And the Oems because there youre talking about connectivity within the vehicle connectivity from vehicle to outside of the vehicle. So some of those are more driven by the governments and those requirements are going to be across all vehicles, regardless of the tier where that models.
Got it thank you and as a follow up grant I caught the operating margin numbers you gave for the segments I.
Don't know if I missed this but I don't have it can you give us the dollars or kind of the performance for the segments in the June quarter, and then obviously, you've got a strong content gains at the largest customer driving this September .
Revenue expectation, but if you can give us any granularity on how you're thinking about the other.
Segments. As you proceed any changes to how you're thinking about those segments through the rest of the year. Thanks.
Sure.
Revenue by segment was $412 million for ACG $140 million for HPA and $99 million for CSC.
In Atg, our fiscal Q1 as is the lowest seasonal point.
For those largest customers, but despite that the topline for ACG was approximately flat or down about a percent or so.
Both HPA and DSG saw.
<unk> growth in the quarter up five and 21% sequentially.
Sequentially.
As I commented in the prepared remarks operating income was 11% just.
For ACG, 17% for HPA, and then negative <unk> 20 per <unk>, which was a notable sequential improvement.
For CST, we don't guide by segment, but looking out into September . The primary driver is the content gains at our largest customer within ACG.
Revenue is not supported by existing inventory.
It is built and shipped in line with the seasonal ramp so its not burdened with those higher costs. So the Android inventory for example.
Without benefits gross margin and has been factored into our into our guidance.
I appreciate it.
Operator.
Operator next question please.
Okay.
Operator are you there.
This is the operator should I.
It's a question NOLA.
Yes. Please next question please.
Just a moment.
Our next question comes from the line of Gary <unk> with.
Wells Fargo. Please go ahead.
Hey, guys sure plus getting my question in.
Good afternoon I was.
Observing that your first half of <unk>.
Fiscal year 'twenty four appears to be running about 3% above your you may commentary and we're about $50 million.
What's driving that minor variance and.
Is there anything to call out that may be offsetting that.
Sure. Thanks, Gary good to get the question.
I think it's fair to say that the quarter played out better than we had forecast when we provided our may guidance.
If you if you look into that revenue it was strength in the areas that we had that we had talked about at our largest customer and then within having cleared some of the channel inventory were.
Still benefiting to a modest degree there, but generally speaking the quarter played out better.
In terms of the drivers on on maybe the EPS beat to go a little further than just revenue.
That was primarily gross margin improvement.
Which was partially driven by the revenue upside but was also.
Factor there of lower factory variances.
Including utilization better utilization and continuing cost reduction efforts those were.
Partially offset by some inventory related charges and typical price erosion, along with inflation, but generally speaking the quarter was was better than than we forecasted in may.
Got it.
Thanks Grant.
So you're guiding the September quarter revenue at about $1 billion, which take this back to a similar level to the June quarter fiscal year 'twenty three.
When gross margins were 450 basis points higher and I presume. The difference today is that you know you're.
You just have too much inventory and you just can't fully utilized.
The manufacturing operation Thunder.
<unk> is under what circumstances.
Can we see a return to that 50% gross margin.
Sure, we still have visibility to 50% as I pointed out on the call. We have about 800 basis point headwind from from utilization in the prior quarter and looking forward. We still have those same issues from a utilization perspective as you pointed out on inventory.
I think as we clear the channel inventory across Android and utilization returns to a level in which we're shipping to end market demand, we should have a clear path back towards the 50% gross margins we have enjoyed in the past.
Those are really twofold. There is the inventory we have on hand, which is already burdened with the cost of that.
That underutilization in the past and then there is the forward looking utilization within the current quarter as we meet future demand or build product for future demand. Both of those can can weigh on on the quarter and are in that 800 basis points that I quoted.
The Underutilization of current period can if its extreme can hit as period charges and we've experienced some of those as well. So it's really as we've raised synchronize our factories to end market demand, we should have a clear path back.
Okay.
Okay.
Thank you next.
Next question comes from the line of screening for jewelry with Raymond James. Please go ahead.
Thank you Bob on the Android inventory, you seem pretty optimistic that it's going to normalize by end of the calendar year. So I guess as we look out to the March quarter and next calendar year are what's the I guess in our strategy for I guess.
Whether you call it refilling, the channel or or maybe just.
Just trying to think about how the seasonality might get impacted once the inventory normalizes.
Thanks, Ronny for your question and yes, we're getting pretty comfortable with the progress, we're making and as both grant and I have commented the team's done a great job of.
Managing the inventory down working with our customers working with some of our distributors to do that.
Our expectations are now we should be able to by the end of the calendar year things will normalize.
And then obviously as that happens we're not expecting.
And demand to change at all from where we are in fact as we sit here today reporting the most recent quarter and we were a quarter ago, our numbers for units of Android.
Alan smartphones has not changed so we think things are stabilizing some yes, the market's been down here a little bit up there, but overall so as we look out into 'twenty for calendar 'twenty for fiscal 'twenty five for us.
We're not ready to make any calls on what's going to happen with the macro economy and things like that but clearly as we've come down to normalized inventories that headwind turns into a tailwind. So we'll watch how that plays out.
Yeah, that's great and then maybe one for grant Grant you know you kind of highlighted Underutilization is one of the issues with the gross margin, but I guess the other issue is the high cost inventory. So I guess at what point do you know that stops would become a headwind to your gross margins or maybe potentially a tailwind.
Sure.
We haven't commented beyond fiscal 'twenty four so I won't do that here, but in our guidance with a sequential drop in Q3, you start to see.
Some improvement there and then in Q4 again, you start to see even more improvement.
As we sell through some of the channel inventory now gross margin will be sequentially down in the sense that we're selling through some of that inventory, but we do expect to re synchronize utilization towards towards the end of our fiscal year and into fiscal 'twenty five, but we haven't commented specifically beyond that.
Thank you.
Our next question comes from the line of Vivek Arya with Bank of America Securities. Please go ahead.
Alright, Thank you for taking my question.
Bob you are sounding more confident about the topline growth since the last time corporate reported that has been kind of this pronounced slowdown in China, and even if the Android customer inventory might be getting cleaned up your large customers still have China as an important end markets I'm curious.
That you know on the last call you suggested that December sales could be flattish right in March would be down just kind of seasonal.
Is that still the.
Right way to think about December and in March or do you think we should be reflecting.
Any macro effects that we're seeing by way of sell through I guess consumer demand.
Thanks, Vivek. This grant let me take that one.
Beyond the specific September quarter guidance that we just provided there is no change to the fiscal 'twenty four commentary that we provided last quarter, so as Bob pointed out our expectations for sell through.
And in the channel remained the same absent any macro related disruptions, which were not predicting we do forecast and continue to think fiscal 'twenty four revenue will be above fiscal 'twenty three as you mentioned and we're benefiting from some strong dollar content growth at our largest customer and then later in the year, we will benefit from the actions we've taken in connection with our <unk>.
<unk> that clear that channel inventory.
To be clear.
We are calling for very modest growth on the year, which is consistent.
In fact, our forecast does not anticipate a significant rebound in Android units alright, corvo specific situation as we process through the channel inventory and then return to shipping to end market demand.
Beyond revenue just for the for the year. There's also no change to our fiscal 'twenty four non-GAAP gross margin is still expected to be approximately 24% plus or minus with some variability on a quarterly basis tracking utilization and mix.
I've already talked about.
It is important to understand mix will shift seasonally.
Over fiscal Q3, and even more so in fiscal Q4 towards higher cost inventories and utilization is also important as I pointed out because it supports that incremental forward looking demand, but also because severe underutilization can lead the period costs as I mentioned earlier.
We've been very transparent there and continue to expect those sequential declines in gross margin and that's factored into our 44% guide.
I covered opex a bit in my prepared remarks, but it's important to note that we are investing for the future. We're investing in large customer programs, where we have the technologies to win we're investing and diversifying businesses like silicon carbide Uwp matter Soc and power management and finally, we're investing in ourselves by upgrading our.
Our core systems and numerous productivity initiatives. So on the whole there is no change to our fiscal 'twenty for guidance and our view of the market remains the same.
Okay. Thanks, that's very helpful. And then on gross margin I apologize if you had answered this before but again from the last call. I think you had mentioned December could be down 100, 150 basis points and then March would be down another two to 300 basis points as you walk through some of the higher priced component inventory.
What would make that component inventory cost go down right I imagine there's been more inflation overtime. So I guess, that's a long winded way of asking that as we start the next fiscal year. What is the right baseline off of gross margins. We should think about is it that 43, 44% level as you're exiting March is at the average level.
That you have in this fiscal year, what is the right way to.
Just think about the baseline level of gross margin as you enter the next fiscal year.
Sure I might think about it two different ways I wouldn't characterize Q1 of fiscal 'twenty five as baseline revenue, but I think it's appropriate to build off of what you are modeling in Q4 of fiscal 'twenty four but we haven't provided explicit explicit guidance for that.
Thank you next question comes from the line of.
Our acuity with UBS. Please go ahead.
Hi, This is <unk>, calling in for Ken I. Just one question from me I just wanted to ask about.
The us dollar market for iPhone.
<unk> changed the trajectory of the recovery on the Android side, because I know that the Idaho market.
That useful market is going.
Actually I just wanted to try to get a sense for if that sort of.
A headwind to the recovery on the Android side.
The iPhone refurbished market has been around for quite a long time, so at least when we model that coupled with everything else that we do in our normal research for phone usage different segments. All of those things that we feed into a model. We've taken all that into account for all the comments that we've made this evening last quarter the quarter before.
For that and the quarter before that so.
It's all in our calculus already.
Yes.
Thank you.
Thank you.
Next question comes from the line of Matt Ramsay.
TD Cowen and company. Please go ahead.
Alright, Thank you guys good afternoon.
There's a couple of calls going on at the same time, so I apologize if I missed a little bit.
Got it I I heard all the comments going into the back half of the year regarding inventory in the handset market and also.
Sales potentially getting better with the large customer I wanted to ask.
On the Qualcomm guys mentioned Tonight, not having a license to ship into Huawei for five G and theres, some pretty well documented reports about.
Hi, Silicon doing a modem width with snake.
For some of those columns and it's uncertain about volumes, but could you guys.
Tell us if Europe would be allowed to participate in in those handset build bent and if you have some sort of export license to do so thanks.
Matt. Thanks for the question I don't believe there's any company in the U S that has a license to ship to Huawei for a <unk> phone.
They've become a very small customer of ours, so theres no real impact from that perspective, and as you pointed out we'll see if they are successful or not won't impact our business at this time.
Got it no that was my assumption, but I had a few people asked me to clarify that.
I guess as my follow up.
You guys have spent a lot of time talking about diversification of the company outside of the wireless market and it's not lost on us through the press release and summary of communications that the first bunch of bullets was about things in the auto market in an aerospace and defense and a bunch of market that silicon carbide, a bunch of things outside of the handset Mark.
But theres also been some pretty dynamic macroeconomic conditions and all of those markets as well like nothing is really immune from the macro. So maybe you guys could give us a little bit of an update outside of the handset market how inventory for the company is overall.
Our customers in the channel are there any.
Well documented what the inventory headwinds are to gross margin and a recovery in your handset business and we all follow that closely but are there any things that we should know about outside of the handset market from an inventory perspective, where do you feel like things are relatively clean there. Thank you.
Sure. This is Gregg let me take.
Maybe the two part question and then I'll ask Dave to step in if I Miss anything.
The question about the growth drivers if you look at or think about the phases of growth that we're looking at right. Now you can as we've commented on return to shipping to end market demand is relatively near term beyond that we're continuing to work with our customers and believe that we will benefit.
As the volume levels return so beyond just shipping the end market demand, we should see some growth in return to normalcy over the coming years, and then maybe beyond that even into the longer term we should see.
Benefits from the investments, we're making that would be sort of beyond five and youre looking into the migration to DOCSIS Ford auto within HPA in the one to many phenomenon Bob commented on in defense and Aerospace will continue.
Within <unk> there is a move to Wi Fi seven among many other things that where we're investing in and expect to see growth there in.
In the near term on inventory to that piece of the question. We are seeing pockets, which we've talked about before and in base station and partially in Wi Fi and some consumer areas, which will take longer for us to work through.
Versus Android.
And Dave I don't know if you have anything further yes, and I think you hit it right grant and the the inventories in the channel for for most of the components outside of Android will probably be on a similar cadence maybe into early next year other than base station. We don't have as good a visibility into our customers' end markets and how much inventory may be there.
They need to work for us so that's probably a.
A little bit of uncertainty for us.
Yeah.
Thank you next question comes from the line of Christopher Rolland.
Susquehanna. Please go ahead.
Hey, guys congrats on the great guidance and sorry, if these were answered but.
December did you still expect that to be flat revenues are flattish for them from September .
Any other thoughts on seasonality moving forward and then grant I know you expect revenue to grow fiscal year on year any chance that EPS could grow as well or is that a little too far of a long shot.
Sure. Thanks, Chris.
I'm glad you asked the question actually on December so when we made the comment to a flattish December it was on our previously anchored to our last quarter guidance.
I would expect that right now given that we're not anticipating significant growth in fiscal 'twenty for that.
I would couch that with the comments, we made last quarter it could end up being slightly down to flattish.
And then of course, some seasonal decline in March.
Potentially less than normal as we clear the channel so.
That question has been asked I'm glad you went there in terms of EPS.
I've given a majority of the P&L, but haven't commented specifically on an annual EPS relative to fiscal 'twenty three.
Oh.
And then I thought it was interesting you mentioned silicon carbide I believe it was for AI servers, if I got that right and is that like D. C. The D C or into power supplies or any other detail there would be great. If I got that right.
Yes, Yes, you got that right, it's for power supplies and the servers and of course, AI and any any type of an application like that is going to drive demand. There. So that's good for us but.
Yes, that's a strong market for us as we grow our silicon carbide business.
Thank you next question comes from the line of Edward Snyder with charter with data such please go ahead.
Thanks, Scott Thanks, a lot based on everything you've said here and you're still a bit stronger than expected guidance in September .
Everything you said about Android, you're not expecting a rebound et cetera.
That suggests that the extra strength is coming from content gains at your largest customer doesn't that imply given your share and all that that youre going to see well year over year on content, it's gonna have to be up much.
Much more significantly 40%.
Have I got that math right.
Thanks, Ed. Thank you are consistent with what we've been saying, we're going to have significant content gain at our largest customer and as I've said in other public forums that primarily in products that we already participated in where we've been able to.
Grow our share as well as they're adding content.
Right. So that was my second question because you have been killed the content gains are all kind of a mix of both.
Share gains and new content does that mean that we will see you in sections. The RFP that we haven't seen in the past when you're talking about new content.
Or is it just additions to the air you have been very strong in previously and how sticky do you feel those share gains will be over the next year or so, especially the ones that youre taking from other folks just curious.
Yes, Thanks, Ed again, what I've said publicly is in.
Which I know it's hard for many of you to find in the antenna tuner space along with some of the other small components that are in there that.
Quite honestly a lot of you missed there not on the motherboard there and various other.
Flex circuits and things like that it's gaining there.
Ultra high band we've talked.
It's a.
Small filter them, we've been in for about three years. So that's the areas. So it's really in those two areas primarily.
With the areas that you guys actually been quite strong and they're expanding given all the new connectivity going on here makes sense.
Every tenant tuners, I think I think you're up to like 12 to 15.
And the last model plus a couple of the impedance tuners too. So that's generally what we're talking about most of the gains.
Your numbers not mine I'm not going to comment on the units number of units per phone I will say you are in the right area and I'd also point out we publicly said the last couple of quarterly calls as well that we still believe theres lots of opportunity for us to grow with that customer as we look forward in the coming years.
Great. Thank you Bob.
Thank you.
Thank you.
There are no further questions at this time I would like to turn the floor back over to the management for closing comments.
Well, thank everyone for joining us on today's call. We appreciate your time and look forward to speaking with you at upcoming Investor events. Thank you and hope you have a good night.
Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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