Q4 2023 Skyworks Solutions Inc Earnings Call

November 2, 2023

Yeah.

Good afternoon, and walk to Scott work solutions fourth quarter fiscal year 2023 earnings call.

All is being recorded at this time I'll turn the call over to Rajiv Gill Vice President of Investor Relations for Sky works. Mr. Gill. Please go ahead.

Thank you operator, good afternoon, everyone and welcome to Sky works fourth fiscal quarter 2023 conference call.

With me today is Liam Griffin, our chairman Chief Executive Officer and President.

And Chris <unk>, Chief Financial Officer for Sky works.

This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at Sky works <unk> Dot Com. In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call.

Before we begin I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or maybe 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 disclose include non-GAAP financial measures.

Distant 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 will turn the call over to Liam.

Rajiv and welcome everyone.

Despite macroeconomic headwinds and volatility.

<unk> executed well during the fourth fiscal quarter.

We delivered revenue of $1 billion and $219 million.

Posted earnings per share of $2 20.

And generated $366 million of operating cash flow.

During fiscal 2023 free cash flow was well above $1 6 billion.

Which reflects our efficient business model, despite a challenging macro environment.

While access supply conditions are modestly improving any android.

<unk>.

We continue to under ship to natural demand as the industry rebalancing.

Within broad markets, we see softer demand extending from consumer to certain durable sectors as customers adjust to normalized lead times and reduced excess inventory.

After two years of unprecedented events due to COVID-19 and historical supply chain shortages. The semiconductor industry is returning to a normal supply and demand balance.

We are responding to these dynamics by actively managing our inventory levels, making strategic investments in growth areas and diversifying the reach of our business.

Yes.

We are well positioned to capitalize when demand and flex from a technology and roadmap manufacturing capacity and financial perspective.

Over the medium to long term, we remain bullish on several sectors.

And trends.

In our mobile business and our broad markets businesses in mobile, we see opportunities to expand RF content over the coming years.

On the path to six G. We anticipate RF content increases will be driven by additional bands enabling satellite connectivity.

Growing usage of uplink carrier aggregation.

Further adoption of four by four Mimo and other innovations in RF.

Switching gears to broad markets, which accounted for approximately 37% of our total revenue in fiscal 2023.

We expect to benefit from three long term secular trends.

First the proliferation of intelligent Iot connected devices on the edge.

Second the rapid transition towards electrification and <unk> and advanced safety and vehicles.

And third high speed connectivity for AI enabled data intensive and infrastructure and cloud applications.

Within Iot, we are excited about the upgrade cycle with Wi Fi six and seven.

Driving additional content as incremental higher frequency bands drive more stringent filter requirements, including the need for Bob.

Wi Fi seven has several use cases, including 8-K video screaming immersive AR and VR cloud gaming industrial Iot and telemedicine.

Yes.

Shifting to automotive skywalk is well positioned to benefit from the electrification and adoption of advanced safety and vehicles. Okay.

According to internal analysis, and third party estimates, we expect RF automotive semiconductor Tam to reach $1 billion.

Within automotive, we are focused on high growth segments and content opportunities.

Including power isolation chips for onboard Chargers, powertrains, and battery management systems and Evs.

Connectivity, such as cellular engines, Wi Fi Bluetooth and GPS.

In vehicle infotainment systems, driven by digital radios, and lastly, Adas solutions per ton autonomous driving.

We have the experience and ability to execute at scale with some of the leading brands in the world.

In addition, we believe AI can be a catalyst for more efficient wireless communication and could fuel the need for more complex and higher performance wireless solutions.

Overtime, we expect high.

Performance smartphones will be a critical platform for advanced AI capabilities and in turn could spark a major upgrade cycle.

Furthermore, over the past two years, we've made significant investments in both technology and scale.

Which has led us to for competitive differentiation.

We've expanded our reach within the smartphone market and today nearly 50% of our mobile revenue is tied to box that's more than double from last two years.

Our bond investment has also resulted in key design wins in our broad markets business.

Which represents more than 10% of our business.

Wi Fi Wi Fi <unk> is a perfect example of <unk> technology being a critical requirement for the new standard.

Now turning to our quarterly business highlights.

We secured five design wins for premium Android smartphones.

Including Google Samsung and several models in the box ecosystem.

We accelerated design wins in Wi Fi, including net gears Wi Fi service mesh system Linksys, <unk> Tri band mesh router and.

And TP links Quad band Wi Fi seven router.

Yeah.

We expanded our reach and automotive segments by winning several designs for onboard Chargers battery management systems and digital broadcast products across the leading brands.

And lastly in emerging Iot, we enabled next generation Smart energy solutions with Trillium and Sam Sara.

In summary, Sky works continues to delivered solar deliver solid results. Despite a challenging macro environment at the same time, our advanced technology and product Roadmaps are aligned to long term secular trends further expanding and diversifying our customer base.

Our strategic customer engagements resilient business model and experience will help us weather through this cycle volatility.

With that I will turn the call over to Chris for a discussion of last quarter's performance and our outlook for Q1 of fiscal 'twenty four.

Thanks, Liam <unk> revenue for the fourth fiscal quarter of 2023 was $1 billion and $219 million up 14% sequentially and slightly above the midpoint of our outlook.

Mobile was approximately 65% of total revenue an increase of 25% sequentially as.

As we supported the ramp of new high performance solutions at our largest customer.

Broad markets were approximately 35% of total revenue down 3% sequentially.

We continue to see inventory digestion within broad markets, including consumer Iot enterprise and telecom infrastructure.

Gross profit was 575 million, resulting in a gross margin of 47, 1%.

Gross margin continued to be impacted by temporary factory underutilization as we rightsize our inventory levels.

During Q4, we reduced our internal inventory by $116 million to $1 billion and $120 million and we are on track to further reduce it below $1 billion by the end of the December quarter.

Operating expense of $177 million was down 3% sequentially and down 8% year over year, given our ongoing focus on managing discretionary expenses.

We generated $398 million of operating income translating into an operating margin of 32, 6%.

We incurred $7 million of other expense and our effective tax rate was nine 7% driving net income of 353 million and diluted earnings per share of $2 20.

EPS was <unk> 10 above the guidance that we provided during the last earnings call.

Now turning to cash flow Skywards business model continues to deliver robust cash generation.

Fourth fiscal quarter cash flow from operations was 366 million and capital expenditures were $70 million, resulting in free cash flow of $296 million.

For the full fiscal year, we generated $1 billion and $856 million of cash flow from operations.

Capital expenditures were $210 million or 4% of revenue as a result, we delivered a record $1 billion and $646 million of free cash flow, an increase of 76% year over year driving a record free cash flow margin of 34, 5%.

And translating into approximately $10 30.

Our free cash flow per share.

In a free cash flow yield of approximately 12%.

In fiscal 2023, we significantly reduced our capital expenditures in line with our business model.

The major investments during prior years to expand our manufacturing footprint, including ball filtering, we expect our capital intensive intensity to moderate.

We focus on driving operational efficiencies through yield improvements die shrinks and test time reductions, creating additional available capacity.

We believe we are currently well positioned from an equipment and tooling standpoint to support the demand recovery.

Also during fiscal Q4, we paid $108 million in dividends and repaid $200 million of our term loan.

In early October we repaid $150 million of outstanding borrowings under the term loan and we intend to pay off the remaining $150 million by year end.

Entering calendar year 2024, we are comfortable with our capital structure and depth levels of $1 billion, which provide us with superior flexibility and optionality.

Now, let's move on to our outlook for Q1 of fiscal 2024, we.

We anticipate revenue between $1 billion, and $175 million and $1 billion and $225 million.

We expect our mobile business to demonstrate momentum while in broad markets. We expect to continue digesting excess inventory affecting our revenue outlook.

Gross margin is projected to be in the range of 46% to 47%, reflecting the ongoing cyclical impact of lower factory utilization reduction of internal inventory and an unfavorable mix shift given the lower proportion of broad markets as a percentage of total <unk>.

Revenue.

We expect operating expenses in the range of 193 million to $197 million as we continue to make strategic investments in mobile and broad markets to drive share gains and increased diversification.

Below the line, we anticipate roughly $6 million in other expense and an effective tax rate of 12% for Q1 as well as through fiscal year 2024.

We expect our diluted share count to be approximately 161 million shares.

Accordingly at the midpoint of the revenue range of $1 billion and $200 million, we intend to deliver diluted earnings per share of $1 95.

Operator, let's open the line for questions.

Thank you if you'd like to ask a question. Please press star one one is for you.

This has been answered and you'd like to look yourself from the queue. Please press star one again.

Given time constraints, please limit yourself to one question and one follow up.

First question comes from Chris Caso with Wolfe Research Your line is open.

Yes. Thank you good evening I guess the first question if you could give some color with regard to the December quarter guidance.

The prepared remarks suggested that.

The.

Incremental weakness was still coming from broad markets. If you can give some more granular detail about what you expect for mobile and broad markets in the December quarter.

Yes, Chris so.

Hugh you have it right we do expect.

In the December quarter, our mobile business to be up sequentially.

We continue to execute the ramp with our largest customer and as we will continue to see some further modest improvement in the Android mobile part of the business as well on the flip side, we have our broad markets business, which we expect to be down sequentially.

As we will continue.

The digestion of excess inventory in the channel as well as at the end customer level.

That's helpful.

As a follow up.

And obviously, we've been going through this for a bit of a while in the mobile space burning off inventory and against broad markets was affected a little bit later.

Where do you think we are with regard to the inventory correction in each one of those markets.

Particularly as we look into the March and June quarters.

What's the prospect for when we can get some bottoming out here and we go back to shipping to actual real consumption.

Sure Chris This is Liam.

There is actually kind of like two dynamics there in the mobile business, we absolutely know what the dollars are and where the opportunities are.

And we have eyes on all of that.

And we will continue to drive that portfolio very strong on.

On the other side, the broad markets business, starting a wonderful opportunity for us, but unfortunately going through the semiconductor cycle and the inventory.

Issues that we just mentioned on the call here I've been bit of a problem that we know how to fix that these products are all solid, but they just slow down through the channel.

And I think in some cases.

Levels of distribution another layer between the buy and sell position can sometimes mute some of the results. So we understand it some of that stuff. We can just handle ourselves directly and also drive more and more opportunities broadly in those markets. There's a lot of opportunity Chris I mean, it goes way beyond what you see.

Hey.

Portfolio that we've been driving with the <unk>.

Business the automotive gains were in data center today, just a really whole different set of broad markets opportunities, but we certainly have our teams working hard to execute and demonstrate that success.

Thank you.

Okay.

Thank you.

Next question comes from call Ackerman with BNP Paribas. Your line is open.

Yes. Thank you I have two questions. Please.

First and foremost.

Narrow down on your Android opportunity.

Mediatek.

Earlier.

So that 50 units should grow double digits next year, certainly above overall smartphone unit expectations of.

Maybe flat to up low singles next year.

And I was just curious to hear about some of the expanding opportunities you have with China, Android Oems I mean, you kind of mentioned how.

That is picking up in the December quarter, and I think going forward for you.

So.

At the same time Huawei I think it's also kind of coming back into the market. So I wanted to hear your perspective.

On.

What is your opportunity in trying to Android near term, but in the December quarter, and then secondarily, how does Huawei impact your Tam opportunity for the kind of Android ecosystem.

The near term and perhaps encounter 24. Thank you.

Yes, sure a little bit to unpack here.

Clearly we know the players we know the landscape in China very familiar with the Fox ecosystem and great opportunities for us to continue to grow although we've been we've been conservative in that area because of the risks.

Of inventory glut and as you know we've been running really lean so theres no no downside there.

We start to go further.

You have opportunities that can continue to grow a lot of these handsets in China have a lot of upside ability to drive more content and more.

More benefits for the user those products are still subscale BS V. A U S type product.

The appetite for the China consumers to get more technology to have higher speeds in data rates and more efficiency in their solution. So that can come through will be X of course, but don't forget big players like Google and Samsung really strong Android players.

Create a nice buffer from us with our larger customers. So it's a really good mix and as you know about our business, we're very flexible.

We don't sell one part to everyone. It's very very unique engagements.

I think thats a signature for Sky works, but always on always room to grow from here and we are starting to see I think.

Light in the tunnel I would say.

And the <unk> channel and with Huawei, I don't think that Thats, a big issue I mean, we can certainly deliver product thats better than Huawei right now but.

It is not really where we want to be as a company and I think the technology has really lagged for Huawei to re engage but.

We've got a lot of opportunity in front of us that we can execute and deliver.

Yep, Thanks, Liam Chris Crafts.

Perhaps a question for you.

You talked about the significant out of free cash flow generation that you have just the upcoming this most recent quarter, but I guess, taking a step back.

How are you and the management team thinking about M&A.

M&A.

Longer term just given the fact that valuations have come down across the space.

We're in areas within your broad markets business, just any commentary on that would be helpful. As well. Thank you.

Yes.

First of all Youre, absolutely right I mean, we have very strong free cash flow.

The good news there is that it's sustainable so for many years to come we target a free cash flow well above 30%. In addition to that we have a clean balance sheet right.

By year end, the depth will be on or about 1 billion.

We've all known about a billion dollars of cash.

And so and so we have a clean balance sheet, we continue to generate a ton of free cash flow that gives us a ton of optionality.

On one hand of course, we will continue to invest in our organic business, making sure we invest in our technology and product Roadmaps.

But we also have optionality to further diversify the business as you know we've done a very successful transaction in 2021.

We're very happy with that transaction.

And so there is definitely optionality there.

Thank you. Our next question comes from Ruben Roy with Stifel. Your line is open.

Yes, hi, Thank you for letting me ask the question.

Okay.

Christopher Liam I wanted to go back to the broad markets and I think in the prepared commentary in terms of that kind of the areas of weakness you are seeing consumer obviously, it's been weak for a while and I think you mentioned a couple of other areas that we can spread.

But I didn't hear industrial and automotive and so can you maybe give us a little bit of.

Detail on what Youre seeing there what you saw there in the September quarter, and how you see that playing out over the next quarter. Okay. Thank you.

Yes, that's a great. That's a great question and I'm glad you brought it up we talked a little bit through the prepared remarks, but our business in automotive that is actually really moving moving well.

We're growing the portfolio, we had really been in that in that market at all two three or four years ago and this is another kind of nod to the silicon labs transaction because they were they were significant in that piece.

We continue to do very very well you rattled off a number of the brands and the names that are in the industry and we have design wins.

We're investing aggressively we see that as a <unk>.

Credible opportunity for Sky works, and we're underweight, we have the technology to win but we're not we're not big enough yet and so we're continuing to grow but I would say in a ballpark level, Chris I mean, we're in hundreds of millions of dollars in terms of automotive so it is not.

Relative to the scale of Sky works.

It's not a significant piece, but on an absolute basis.

It's got some real opportunity to grow and we look forward to that.

Thanks, Helane, thanks for the detail I guess, just a quick follow up in terms of the Capex commentary.

Where you sit.

Some of that utilization and capacity perspective can you remind us where you ended up now.

Sort of in source to outsource.

I guess are you on target there.

I guess that means you are a target, but can you remind us with details around in source to outsource to application.

Yes Reuben.

No we are not only a developer of world class technology. We also manufacture most of that technology in house and that's a key differentiator that's how we win.

Our largest customers.

Being able to secure the supply.

You know, we do all our gallium arsenide power amplifiers in house, we do all our filters Tc saw and ball in house and we do most of the very complex assembly and packaging and testing in house some parts of the business like the business, we have acquired from <unk>.

And some other parts of the business is being outsourced, but the vast majority is in house and again, that's a key differentiator for us having said that.

For many years, we have done major investments expanding our capacity footprint.

Currently we are focusing more on driving operational efficiencies into that footprint that is creating additional capacity for us and so going forward.

Capital intensity will be much lower.

Last year, it was on or about 4% to revenue going forward, we expect.

To be in the mid single digits as a percent of revenue.

And so we have.

This amount of upside down that will further drive gross margin improvements and stronger free cash flow.

Thank you. Our next question comes from Christopher Roland with Susquehanna. Your line is open.

Hey, guys. This is Matt Meyers on for Chris.

So you guys have talked historically about 10% annual content increases. So I was curious about how we should think about it from this past cycle.

And then again looking into next year do you think you can grow content another 10%.

Well certainly our ambition is to continue to grow that content and diversify the level of content as well and I think.

What youre going to see from Sky works and its already embedded in some of our numbers of diversification within mobile so it's not going to just be one or two products as you know.

But the breadth of the technology is right there for us So we're going to continue to do that.

You've already seen us demonstrate.

Very well execution getting into things like bulk acoustic wave very very tough technology years and years of work.

And then the scale to actually produce so both of the kind of challenges and opportunities that we like.

I know, we talked a little bit our automotive all relevant markets like that has a tremendous tam opportunity for Sky works and we're really just scratching the surface. There. So we're going to take some of that core technology and poured it out into multiple applications. So it's really kind of a fungible asset.

And look at the pools of opportunity and revenue.

We can address and I think.

It's going to be a great journey for us along the way we've learned a lot more.

Our teams together are executing in an outstanding way.

And we're committed to the growth and diversification and certainly.

Matching the challenges with our top tier customers.

Got it that's helpful. And then on gross margins I know you guys have had gross margins hit from lower Utilizations, but curious where utilization stand now versus 90 days ago, and where do you expect them to be in the next quarter I would assume down again, given the gross margin guide down and how are you guys thinking about your outlook for gross margin into next year.

No.

The utilization of our factories is stable right now.

On one hand, the demand is.

Proving but on the other hand, we are still further reducing our internal inventory levels.

And so that will be played out by the end of December.

In addition to that as we alluded to in the prepared remarks, we have a little bit of a mix headwind now we've brought markets temporarily a little bit softer due to the excess inventory.

And that's why we guided slightly down in the December quarter. Looking ahead, a couple of quarters, Obviously March and June is our seasonally slower quarters.

In terms of topline and typically you will see a modest reduction of gross margins during those quarters and then and then beyond that you look at the second half of the calendar year September and December we will start ramping up again, and you will see gradual improvements of the gross margins.

Thank you. Our next question comes from Tim Arcuri with UBS. Your line is open.

Thanks, a lot I had two quick quick ones, Chris first of all can you talk about the your largest customer as a percent of revenue.

No.

Yes, the largest customer was in September was approximately 68% of total revenue.

On a full year basis. It was approximately 66% of total revenue keep in mind that.

The vast majority of that is.

For the smartphone, but we also have great content in every other device that that customer brings to the market.

Thank you for that and then.

Quick one can you give us a sense Chris for what you consider off of this base would you consider sort of a normal seasonal March would be I think mobile is usually down 25% in March is that a reasonable number off of this base to sort of think about I know that broad markets is kind of all.

The place.

Going through a digestion, but I guess im just asking about seasonality in mobile.

In March.

Yes, so we're not going to guide to March, but Directionally, you would think about it the right way right. So.

And you were referring just to mobile this is not total.

Revenue, but yes mobile is down.

In the 2025%.

Sequentially in the March quarter from from our top quarter, which is the December quarter.

Thank you and normal seasonality.

Okay.

Our next question comes from Edward Snyder with Charter equity Research. Your line is open.

Thanks, a lot so I mean, you're underrepresented in Android today and have been for a while but given the pricing for many of the modules that selling Android, especially relative to your largest customer why should we consider gains Android.

<unk> is an increased pressure on gross margin because I think it's widely understood that.

Price competition is a bit more and performance is a bit less in Android change than it is that you.

Largest customers I'm, just kidding I feel we talked about diversification mobile thats. It then I have a follow up.

Yes, I mean on the on the initial question I agree with you on that and I think as you know.

You go deep in the technology and you see what we do.

And so we're very very capable to do more.

We quite frankly that the attractiveness of the portfolio at the time was pretty weak.

As compelling and some other opportunities and we deploy our resources in different places.

Lastly.

But.

But now kind of taking a look at the landscape a bit I think it's time for us to be a little bit more aggressive we absolutely have.

The knowledge and the execution and the scale in our factories to do more so it's been more of a choice rather than.

A no go from the customer customers wanted so I think we're in a little bit more work, there and get a little bit more aggressive.

And I think it will come.

Company and our shareholders.

That's been our approach there too. So then if I could on your largest customer.

You had a fewer modules than you had last time and I know, that's not where our content is clearly.

Year to year, there's increases in existing modules, but.

We've done the Teradata.

Lot of the especially the largest margins looked to be identical to last year. So one.

Where did you see a material increase in content in existing modules, if not too I'm just trying to get a feel for where your content gains were in the latest round.

Mostly just trying to get a feel for what's going to happen in the future because if if you're kind of giving up a few modules to meritor murata, mostly I guess.

Why wouldn't that trend persist.

And next year.

Yes, I mean, we're going to do everything we can as we always do to create the best answer and the best outcome for the shareholders and our customers.

And Thats, what we always do I mean, there is.

As you know our business and our company, we have a very very extended bench of opportunities and technologies and knowhow.

We can do a lot of really interesting things and we've created a lot of categories that just didn't exist.

We will lean on that and continue to leverage the high class engineering talent that we have at Sky works at the scale that we have the customer relationships.

So really happy to see that we're doing more outside the largest customer great customer, but we'd like to do more.

With others. So the setup for US is certainly going to improve we are going through this cyclical low that we're all in the industry.

But we look forward to executing and taking the steps up again to continue to drive the RF technology.

Thank you. Our next question comes from Matt Ramsay with TD Cowen Your line is open.

Thank you very much good afternoon.

I don't think it's a huge surprise given whats going on with so many of your peers with the industrial markets.

Rod markets.

The source of the weakness, but I wanted to spend a little bit of time.

Trying to unpack the different pieces of broad market. So.

I would I mean that the.

Timing business that you guys acquired from slab had had wireless infrastructure and telco exposure to it.

I'd be interested to hear about that given what's going on there.

Theres been Tesla unit weakness and consternation about evs in China, and maybe that turning so theres some voltages isolation business in there.

Just things that might have to do with Iot given what's gone on in some of those places if you could just maybe.

I'm sure I'm missing some sub segments for sure.

So if you could just kind of walk through those.

Those different buckets.

Are there any where we're closer to the end than the beginning of the correction what I, what I'm trying to get out.

I Gotcha, I Gotcha Gotcha, I appreciate it and I'm going to start with I think it's going to get better for everybody in the industry I really think that we're getting through it.

But one of the things Thats interesting and I'm really glad that.

This is a question here.

With Sky works.

Obviously, we have an incredible franchise built around our mobile technology and adjacent technologies.

And we will continue to leverage that.

We're very profitable in those markets with our scale with our execution and our Knowhow, but I'll tell you what we have.

It's a tremendous opportunity.

Take the technology Knowhow that we have the scale that we have and go into broader market automotive automotive right now maybe on a macro level slow but for us.

We're not that big.

It's going to be a problem. So when you really dig in your 40 30, 40% share player and you get knocked down it's going to hurt you, but when youre going from 510, 15% to 20% growing up into the markets like automotive and you look at Sky works three or four years ago, we wouldn't talk about cars at all and now they are a meaningful piece adding.

Adding the <unk> business from Silicon labs is only fueled more opportunities for us so.

There's a lot of opportunities like that we have.

Got design wins in data center now didn't have that two or three years ago.

Wi Fi portfolios are really strong right now I think everybody in the industry.

Recognize that Wi Fi seven is going to be a catalyst for significant growth.

Tabling a lot of broad categories from consumer to industrial so we're really excited about that we have the technology to do that today. So I think the difference is you've got mobile and we all understand that everyone on this call.

Probably has a really good view on that technology in that market, but when you go to the broad markets. The real broad markets. There are so many different end points.

We're trying to pick and choose the right ones, but the good news is we're not heavily constant other than multiple theres not a lot of concentration. So you get a big diversified technology play at Sky works with scale with technology Knowhow with the ability to hit the fastballs with the toughest customers and we can deploy that across multiple.

Markets do.

Doing that today, but there's a long long long way from now on how we can get even better and our teams are excited about that.

Thank you very much for all the perspective there.

Maybe just building on some.

We've been going through this.

Correction and sort of the broader markets for a while now.

Companies like yourselves have.

The balance sheet and the margin structure to sort of lean into it and Barrett and until they get better I imagine there are smaller competitors and lots of those diverse end markets that maybe don't have the balance sheet and the scale to.

To get through so I guess my question is how active is the M&A funnel right now and if it's not why isn't it.

Yeah, well, it's one of those things, it's often thoughts on right.

So clearly the dynamics.

Pretty good.

It feels like 10 years, what's happened in one right a.

A lot of activity up and down.

Seeing some pretty wild swings with significant companies that are.

Really strong place.

So we are fortunate.

And we've worked hard to get there to deliver the kind of cash performance that will put us in position.

To do the right kinds of transactions and as you know at Sky works, we're very very picky.

But I think in this case.

Honestly I think there's more opportunities for for M&A and alike than I've seen in a long time. This has been kind of a really.

Interesting time in semiconductors and in other markets.

I think the stronger the stronger again, it gets stronger and I think the week are probably not going to do as well.

What side, we're going to be on so it's an opportunity for us too.

Take advantage.

Leveraging the balance sheet, you look at the free cash flow margins that are sustainable I mean, these aren't one quarter stats.

And so yes, I mean, it's we.

We'll continue to be very.

I will say.

Peggy I guess.

Some of these transactions because we know how good our company itself.

But the opportunity to step up on that is definitely there.

Yeah.

Thank you and our last question comes from Vivek Arya of Bank of America. Your line is open.

Hi, This is Blake Friedman on for Vivek. Thanks for taking my question.

One other touch on the China smartphone market.

In the past, it's been hard to precisely nail down share between.

While others.

So how do you make that determination in the future on how many orders for themselves. So there is no inventory issues thereafter, just walking us through that process would be helpful. Thanks.

So in the China market, there is still some excess inventory.

In.

But as you pointed out it's a complex market. There's multiple players some of that is for the domestic market. Some of that is for the export markets.

They also have flagship models, all the way down to mid level low level going into <unk> and <unk>, obviously, we focus mostly on the flagship level, maybe one or two steps below that.

That of course translate.

Potential bigger focus on the export markets, but we also of course support them in their <unk>.

Mastic markets as well.

There is still some excess inventory it has been coming down it's improving our revenue for three or four quarters now.

China Android has been up has been up substantially.

On a percentage basis, not necessarily on an absolute dollar basis, but it has been up substantially on a sequential basis on a relative percentage basis.

I think we are as Liam said, we're seeing light at the end of the tunnel, we are nearing towards the completion of.

The inventory correction.

We have the design wins with those customers we are ready to go.

And I think you will continue to see that in the next couple of quarters, it's going to be it's going to be a gradual process I don't I personally don't believe in a snap back it's a gradual process and we are well positioned and you will see us there.

Got it and then just following up as well just kind of domestic competition within China I guess, maybe if you can walk us through how you've seen the developments there, but the past two years to three years and maybe moving forward. What you think domestic competition will be like I guess two to three years from now.

Yes, certainly we have the technology to handle.

The broader markets, they're in and the mobile markets in China. Ultimately, we think that there is an upside opportunity there.

And the gap is widening from a technology perspective, so you think about kind of.

The haves and have nots, there they're seeing.

There is a segment in China that really is lower and it's great for some consumers, but hasnt been a driver for us, but if you go back to the.

Fox ecosystem.

A lot of opportunity for us to continue to drive that we haven't been as aggressive as we should be there and we will take a look at that again.

But also just throughout the other markets as well that we talked about it there is a lot of energy around mobility. There is a lot of energy around Iot.

Some of the markets, we talked about before of course automotive are great, but the aperture continues to widen and what happens with us.

<unk> penetrated segment.

We go in heart and this is where the balance sheet.

Tenacity of the team the scale of our operations, where a lot of our stuff is done in house.

It makes us very unique and it's an opportunity for us to continue to demonstrate the growth the growth curve as well.

Ladies and gentlemen that concludes today's question answer session I'll now turn the call back over to Mr. Griffin for any closing remarks.

Thank you all for participating on today's call. We look forward to talking to you at upcoming investor conferences during the quarter. Thanks again.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation you may now disconnect.

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Thank you operator, good afternoon, everyone and welcome to Sky works fourth fiscal quarter 2023 conference call.

With me today is Liam Griffin, our chairman Chief Executive Officer and President.

And Chris <unk>, Chief Financial Officer for Sky works.

This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at Skywest, Inc. Dot Com. In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call.

Before we begin I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or maybe considered forward looking statements.

Additionally, the results and guidance, we will disclose 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.

That I will turn the call over to Liam Thanks.

Thanks, Roger and welcome everyone, despite macroeconomic headwinds and volatility Sky works executed well during the fourth fiscal quarter.

We delivered revenue of $1 billion and $219 million.

Posted earnings per share of $2 20.

And generated $366 million of operating cash flow.

During fiscal 2023 free cash flow was well above $1 6 billion.

Which reflects our efficient business model, despite a challenging macro environment.

Okay.

While access supply conditions are modestly improving any android.

Thats.

We continue to under ship to natural demand as the industry rebalancing.

Within broad markets, we see softer demand extending from consumer to certain durable sectors as customers adjust to normalized lead times and reduced excess inventory.

After two years of unprecedented events due to COVID-19 and historical supply chain shortages. The semiconductor industry is returning to a normal supply and demand balance.

We are responding to these dynamics by actively managing our inventory levels, making strategic investments in growth areas and diversifying the reach of our business.

We are well positioned to capitalize when demand and flex.

From a technology and roadmap manufacturing capacity and financial perspective.

Over the medium to long term, we remain bullish on several sectors.

And trends.

In our mobile business and our broad markets businesses in mobile, we see opportunities to expand RF content over the coming years.

On the path to six G. We anticipate RF content increases will be driven by additional bands.

Enabling satellite connectivity.

Growing usage of uplink carrier aggregation.

Further adoption of four by four Mimo and other innovations in RF.

Switching gears to broad markets, which accounted for approximately 37% of our total revenue in fiscal 2023.

We expect to benefit from three long term secular trends.

First the proliferation of intelligent Iot connected devices on the edge.

Second the rapid transition towards electrification and <unk> and advanced safety and vehicles.

And third high speed connectivity for AI enabled data intensive and infrastructure and cloud applications.

Within Iot, we are excited about the upgrade cycle with Wi Fi six.

Seven.

Driving additional content as incremental higher frequency bands drive more stringent filter requirements, including the need for ball.

Why five seven has several use cases, including 8-K video screaming immersive AR and VR cloud gaming industrial Iot and telemedicine.

Yes.

Shifting to automotive skywalk is well positioned to benefit from the electrification and adoption of advanced safety and vehicles occur.

According to internal analysis, and third party estimates, we expect RF automotive semiconductor Tam to reach $1 billion.

Within automotive, we are focused on high growth segments and content opportunities.

Including power isolation chips for onboard Chargers, powertrains, and battery management systems and Evs.

Connectivity, such as cellular engines, Wi Fi Bluetooth and GPS.

In vehicle infotainment systems, driven by digital radios, and lastly, Adas solutions per ton autonomous driving.

We have the experience and ability to execute at scale with some of the leading brands in the world.

In addition, we believe AI can be a catalyst for more efficient wireless communication and could fuel the need for more complex and higher performance wireless solutions.

Overtime, we expect high performance smartphones will be a critical platform for advanced AI capabilities and in turn could spark a major upgrade cycle.

Furthermore, over the past two years, we've made significant investments in both technology and scale.

Which has led us to FERC competitive differentiation.

We've expanded our reach within the smartphone market and today nearly 50% of our mobile revenue is tied to box that's more than double from last two years.

Our bond investment has also resulted in key design wins in our broad markets business, which.

Which represents more than 10% of our business.

Wi Fi Wi Fi <unk> is a perfect example of ball technology being a critical requirement for the new standard.

Now turning to our quarterly business highlights.

We secured five design wins for premium Android smartphones.

Including Google Samsung and several models and the box ecosystem.

We accelerated design wins in Wi Fi, including net gears Wi Fi seven mesh system.

Linksys 60 Tri band mesh router.