Q3 2024 Qorvo Inc Earnings Call

January 31, 2024

Hello, and welcome to the third quarter 2024 earnings conference call for Kordell, all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

I'll ask a question you May press Star then one on your telephone keypad to withdraw from the question queue. You May Press Star then two.

I would now like to hand, the call over to Doug <unk>, Vice President Investor Relations. Please go ahead.

Doug: Hello, everybody and welcome to <unk> fiscal 2024 third 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.

Doug: Associated with our business in our annual report on Form 10-K filed with the SEC because these risk factors may affect our operations and financial results.

Doug: Today's press release 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.

Doug: During our call our comments and comparisons to income statement items will be based primarily on non-GAAP results.

Doug: The reconciliation of GAAP to non-GAAP financial measures. Please refer to our earnings release issued earlier today available on our Investor Relations website at IR Dot Corvo dot com under financial releases.

Doug: Joining us today are Bob <unk>, President and CEO Grant Brown CFO, David <unk> 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.

Bob: Thanks, Doug and welcome everyone to core Roes fiscal 2024 third quarter call.

Bob: I would like to start by complementing the team for delivering another solid quarter the demand environment in the December quarter improve versus our November outlook and this is reflected in our strong performance.

Bob: Looking at our business from a high level <unk> is capitalizing on secular trends, including connectivity sustainability and electrification. These trends are playing out over many years and they are fueling the transition to new technologies and new standards like <unk> advanced Wi Fi seven matter.

Bob: <unk> four <unk>.

Bob: And others.

Bob: As a result customers across our businesses are increasingly seeking higher levels of efficiency and performance where performance is measured in power out talk time or time between charges.

Bob: Central to these transitions and we are critical to enabling these capabilities.

Bob: We leverage unique competitive strengths to supply our customers best in class solutions that enhance efficiency increased throughput and reduced form factor we.

Bob: We are preferred supplier with leading products and a robust technology roadmap and we are positioned favorably for broad based growth across our three operating segments.

Speaker Change: Now, let's turn to our strategic highlights.

Speaker Change: Beginning with HPA customer demand in end markets. Excluding base station is improving and supports our view for a return to year over year growth in HPA and the March quarter.

Speaker Change: In defense and aerospace.

Speaker Change: One in X band radar design with a major Dod contractor and we received new standard product orders in support of several large domestic and international ground based radar systems.

Speaker Change: We also enjoyed increasing demand for solid state products and for our switch filter bank products across multiple customers and programs.

Speaker Change: There are multiyear secular trends driving our DNA business, including the trend of London, many and the transition of mechanical systems to active electronics scanning systems, both of which increased requirement for more advanced systems level RF solutions.

Operator: Hello and welcome to the third quarter 2024 earnings conference call for Corvo. All participants will be in listen-only mode.

Speaker Change: Earlier today, we announced the signing of a definitive agreement to acquire Boston based on Nokia ways.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw from the question queue, you may press star, then two.

Speaker Change: <unk> is a leading supplier of high performance integrated Silicon Ics for intelligence active array antennas.

Speaker Change: We're excited to have the Nokia wave team join Corvo and expand our offerings for defense and aerospace Satcom and <unk> applications.

Doug DeLieto: I would now like to hand the call over to Doug DeLieto, Vice President, Investor Relations. Please go ahead. Hello, everybody, and welcome to Corbeau's fiscal 2024 third 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 containing the earnings release published today, as well as the risk factors associated with our business in our annual report in Form 10-K, filed with the SEC, because these risk factors may affect our operations and financial results. In today's press 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 non-cash expenses or other items that may obscure trends in our underlying performance.

Speaker Change: In power management, we are extending our reach in markets, where corvo enjoys a strong presence such as wearables and other consumer products.

Speaker Change: Our most recent award is a PMA chipset with multiple placement for wearable and charger at a leading Android OEM.

Speaker Change: Complementing this we have begun to see a rebound in ssds for PC and enterprise markets.

Speaker Change: We are continuing to expand upon our strong position with an additional power management win in support of a leading manufacturer of laptops.

Speaker Change: Lastly, our recently launched Q Spice circuit simulation software was honored as the design tool and development software product of the year at the 2023 Elektra Awards.

Speaker Change: And power devices, we are shipping into power supplies for blockchain applications and design activity and data center continues to be strong.

Doug DeLieto: 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 today, available on our Investor Relations website at ir.corvo.com under Financial Release. Joining us today are Bob Bruggeworth, President and CEO, Grant Brown, CFO, Dave Fullwood, Senior Vice President of Sales and Marketing, and other members of Corvoa's management team. And with that, I'll turn the call over to Bob.

Speaker Change: We are also seeing increased activity in circuit protection, where our <unk> technology brings unique advantages.

Speaker Change: In automotive design activity remained strong not only for onboard Chargers, but also for other emerging applications in electric vehicles.

And infrastructure Corvo is leading the DOCSIS four <unk> upgrade cycle.

Speaker Change: We commenced volume shipments of our newest stocks as for hybrid power Delaware in support of multiple cable Oems.

Robert Bruggeworth: Thanks Doug and welcome everyone to Corvo's fiscal 2024 third quarter call. I would like to start by complimenting the team for delivering another solid quarter. The demand environment in the December quarter improved versus our November outlook, and this is reflected in our strong performance. Looking at our business from a high level, Corvo is capitalizing on secular trends, including connectivity, sustainability, and electrification. These trends are playing out over many years, and they are fueling the transition to new technologies and new standards, like 5G Advanced, Wi-Fi 7, MATTER, DOCSIS 4.0, and others. As a result, customers across our businesses are increasingly seeking higher levels of efficiency and performance, where performance is measured in power out, talk time, or time between charges.

Speaker Change: And the sort of the base station market inventories continue to be consumed and we expect demand conditions to remain soft through calendar year 'twenty four.

Speaker Change: Turning to <unk> customer activity for ultra wideband is increasing and secure access automotive applications.

We're also seeing new applications for ultra wideband in automotive, including presence detection and other radar based sensors.

Speaker Change: This momentum builds upon our recent wins and ultra wideband, including an in vehicle car access platform and a flagship Android smartphone launch.

Speaker Change: As we demonstrated at CES, we are actively involved in a wide array of enterprise and connected home solutions, leveraging matter and ultra wideband for applications such as door locks.

Speaker Change: Art lighting and indoor navigation.

Robert Bruggeworth: Corporate is central to these transitions, and we are critical to enabling these capabilities. We leverage unique competitive strengths to supply our customers best-in-class solutions that enhance efficiency, increase throughput, and reduce form factor. We are a preferred supplier with leading products and a robust technology roadmap, and we are positioned favorably for broad-based growth across our three operating segments. Now, let's turn to our strategic highlights, beginning with HPA.

And <unk> touch sensors, we received first production orders for an automotive supplier in support of a leading Korea based automotive OEM.

Speaker Change: We are seeing increasing traction across a growing set of customers and markets, including automotive.

Laptop trackpad, Wearables and smart health and.

Speaker Change: <unk> Wi Fi design activity and collaboration remains strong across reference designs customers and operators.

Robert Bruggeworth: Customer demand in end markets, excluding base stations, is improving and supports our view for a return to year-over-year growth in HPA in the March quarter. In defense and aerospace, we won an X-band radar design with a major DoD contractor, and we received new standard product orders in support of several large domestic and international ground-based radar systems. We also enjoy increasing demand for our solid-state PA products and for our switch filter bank products across multiple customers and programs. There are multi-year secular trends driving our DNA business, including the trend of one-to-many and the transition of mechanical systems to active electronic scanning systems, both of which increase requirements for more advanced systems-level RF solutions. Earlier today, we announced the signing of a definitive agreement to acquire Boston-based Inoculate. EnokiWave is a leading supplier of high-performance integrated silicon ICs for intelligent active array antennas.

Speaker Change: Within the Android ecosystem, the demand environment for mobile Wi Fi is improvement with the normalization of Android channel inventories and access points Wi Fi six volumes continue to grow with service provider Rollouts in India.

Speaker Change: In Wi Fi seven kormos secured design wins across operator, retail enterprise and mobile segments.

Speaker Change: And ACG, we commenced shipments in support of our spring 2020 for flagship smartphone launch by the leading Android smartphone OEM.

Speaker Change: On our last earnings call, we highlighted our content gains in the flagship tier in addition to the ultra wideband <unk> content. This year includes the low band mid high band Ultra high band secondary transmit and receive tuning and Wi Fi we are ramping up now and building upon our momentum with our <unk>.

Speaker Change: <unk> set of design wins in this customer's high volume mass market portfolio.

Speaker Change: Android mass market smartphones are set to transition to <unk> through the decade and.

Speaker Change: In our collaboration with Android customers on their long term product roadmaps positions <unk> to be a primary beneficiary as these new <unk> units and our Sam.

Robert Bruggeworth: We are excited to have the Inokia Wave team join Corvo and expand our offerings for Defense and Aerospace, SATCOM, and 5G applications. In power management, we are extending our reach in markets where Corvo enjoys a strong presence, such as wearables and other consumer products. Our most recent award is a PMIC chipset with multiple placements for a wearable and charger at a leading Android OEM. Complementing this, we've begun to see a rebound in SSDs for PC and enterprise markets. We're continuing to expand upon our strong position with an additional power management win in support of a leading manufacturer of laptops. Lastly, our recently launched QSpice circuit simulation software was honored as the design tool and development software product of the year at the 2023 Electra Awards.

Speaker Change: To that end Kobo was recognized by the top four China based Android five <unk> Oems with 2023 awards for innovation quality supply technology and strategic partnership.

Speaker Change: To simplify <unk> adoption and sustain our position as the leading global strategic supplier to Android Oems, we continue to launch new architectures and new products that enhance performance and reduce form factors during the quarter, we expanded customer sampling of our newly launched main path <unk>.

Speaker Change: Pat This highly integrated solution is optimized for mass market smartphones.

Speaker Change: It combines in a single placement the low mid and high band main pass content traditionally offered in two placements. This reduces surface area by 40% simplifies design and accelerates time to market.

Robert Bruggeworth: In power devices, we're shipping power supplies for blockchain applications, and design activity and data center continues to be strong. We are also seeing increased activity in circuit protection, where our JFET technology brings unique advantages. In automotive, design activity remains strong, not only for onboard chargers but also for other emerging applications in electric vehicles.

Speaker Change: During the quarter, we received purchase orders for discrete BARF filters using our recently released next generation Board technology.

Robert Bruggeworth: In infrastructure, Corvo is leading the DOCSIS 4.0 upgrade cycle. We have begun volume shipments of our newest DOCSIS 4.0 hybrid power doubler in support of multiple cable OEMs. In the center of the base station market, inventories continue to be consumed, and we expect demand conditions to remain soft through calendar year 24. Turning to CSG, customer activity for ultrawideband is increasing in secure access automotive applications. We're also seeing new applications for ultrawideband in the automotive industry, including presence detection and other radar-based sensors.

Speaker Change: During the quarter, we continued to bring channel inventory is down and now our shipments are more closely aligned with end market demand.

Speaker Change: We are also seeing incremental improvement in end market demand in the Android ecosystem.

Speaker Change: For calendar 'twenty four we expect total total smartphone units to grow in low single digits with five <unk> units growing over 10%.

Speaker Change: The compete and win we collaborate with customers on their three year product Roadmaps, and we supply them industry leading solutions.

Speaker Change: We enjoy our position as the preferred strategic RF supplier for all the customers we serve in the Android space and we are very well positioned to benefit as their portfolios continue to transition to <unk>.

Speaker Change: In summary demand for <unk> products has improved primarily due to our proactive efforts to align channel inventories with end market demand and content gains on key customer programs.

Speaker Change: We are delivering customers industry, leading products and technologies and design activity remains robust.

Speaker Change: This positions core vote favorably for continued strong content and durable long term growth and with that I'll hand, the call over to grant.

Robert Bruggeworth: We're seeing increasing traction across a growing set of customers and markets, including automotive, laptop trackpads, wearables, and smart health. In Wi-Fi, design activity and collaboration remain strong across reference designs, customers, and operators. Within the Android ecosystem, the demand environment for mobile Wi-Fi is improving with the normalization of Android channeling authority and access points. Wi-Fi 6 volumes continue to grow with server providers' roll-ups in India, and Wi-Fi 7, Corvo secured design wins across operator, retail, enterprise, and mobile segments.

Grant Brown: Thanks, Bob and good afternoon, everyone.

Grant Brown: Revenue for the quarter was $1.074 billion non-GAAP gross margin was 43, 8% and non-GAAP diluted EPS was $2 10.

Grant Brown: All exceeding the midpoint of our guidance range.

Revenue increased approximately 44% year over year and continued to benefit from significant content gains at our largest customer.

Grant Brown: As communicated last quarter ACG achieved year over year growth in September.

Grant Brown: <unk> achieved year over year growth during the September quarter, and we expect HPA to achieve strong year over year growth in the March quarter.

Robert Bruggeworth: In ACG, we commend shipments in support of the Spring 2024 flagship smartphone launch by the leading Android smartphone OEM. On our last earnings call, we highlighted our content gains in the flagship tier. In addition to the ultra-wideband, Corvo content this year includes the low-band, mid-highband, ultra-highband, secondary transmit and receive, tuning, and Wi-Fi.

Regarding gross margin a larger portion of December revenue was manufactured internally during periods of lower utilization, which led to higher unit costs compared to the September quarter.

Grant Brown: Factory utilization is improving and the impacts from Underutilization in factory related variances continues to moderate.

Grant Brown: non-GAAP operating expenses in the quarter were $234 million.

Robert Bruggeworth: We are ramping up now and building upon our momentum with a broad set of design wins in this customer's high-volume mass market portfolio. Android mass market smartphones are set to transition to 5G through the decade. In our collaboration with Android customers on their long-term product roadmaps positions Corvo to be a primary beneficiary as these new 5G units enter our SANS. To that end, Querva was recognized by the top four China-based Android 5G OEMs with 2023 awards for innovation, quality, supply, technology, and strategic partnership. To simplify 5G adoption and sustain our position as the leading global strategic supplier to Android OEMs, we continue to launch new architectures and new products that enhance performance and reduce form factors. During the quarter, we expanded customer sampling of our newly launched MainPath LMH pad. This highly integrated solution is optimized for mass market smartphones. It combines, in a single placement, the low-, mid-, and high-bin main path content traditionally offered in two placements.

Grant Brown: We continue to invest in new product development as it is a critical catalyst for driving multiyear growth across all three business segments.

Grant Brown: Alongside these growth oriented investments, we continue to launch productivity initiatives across the enterprise. These initiatives also spanning multiple years are designed to support future growth augment productivity and enhanced profitability.

Grant Brown: In total non-GAAP operating income in the quarter was $237 million or 22% of sales.

Grant Brown: non-GAAP net income was $206 million.

Grant Brown: Representing diluted earnings per share of $2 10.

Turning to the cash flow statement were pleased to report that during the December quarter, we generated free cash flow of $467 million.

Grant Brown: Setting a new quarterly record for cargo.

Grant Brown: Our capital expenditures for the period were $26 million, and we repurchased approximately $100 million of stock at $94 per share.

The rate and pace of our share repurchases consider several factors, including our long term financial outlook free cash flow debt maturities alternative uses of cash and other relevant strategic considerations. This approach ensures that our capital allocation strategy balances future growth with a return of capital.

Robert Bruggeworth: This reduces surface area by 40%, simplifies design, and accelerates time-to-market. In addition to developing highly integrated solutions with increasing levels of functional density, we're also advancing technology in our high-performance discrete portfolio, including our BHAW filters. During the quarter, we received purchase orders for discrete BOD filters using our recently released Next Generation BOD technology. During the quarter, we continued to bring channel inventories down, and now our shipments are more closely aligned with end market demand. We're also seeing incremental improvement in end market demand in the Android ecosystem. For calendar 24, we expect total smartphone units to grow in low single digits, with 5G units growing over 10%.

Grant Brown: And aligns with our underlying goal of delivering long term shareholder value.

On the balance sheet as of quarter end, we had approximately $1 6 billion of long term debt outstanding and over $1 billion of cash and equivalents regarding balance sheet presentation, but 2024 notes have been reclassified as current and will mature in December subject to changes.

Grant Brown: The interest rate environment and other factors. We currently expect to retire. These notes later this year.

Grant Brown: In line with the expectations shared during our previous earnings call, we successfully reduced our net inventory balance over the period.

Grant Brown: We ended the quarter with a net inventory balance of $727 million, a sequential decrease of $113 million.

Robert Bruggeworth: To compete and win, we collaborate with customers on their three-year product roadmaps, and we supply them industry-leading solutions. We enjoy a position as the preferred strategic RF supplier for all the customers we serve in the Android space, and we are very well positioned to benefit as their portfolios continue to transition to 5G. In summary, demand for Corvo's products has improved, primarily due to our proactive efforts to align channel inventories with end market demand and content gains on key customer programs.

Grant Brown: In terms of days of inventory. This represents a decrease from 138 days in the September quarter to 118 days in the December quarter. This reduction reflects our commitment to efficient inventory management and we expect continued improvement in the March quarter.

Grant Brown: Turning to the current quarter outlook, we expect revenue of approximately $925 million plus.

Grant Brown: Plus or minus $25 million.

Grant Brown: non-GAAP gross margin of approximately 42% and non-GAAP diluted EPS of $1 20 at the midpoint of the revenue range relative.

Robert Bruggeworth: We are delivering customers industry-leading products and technologies, and design activity remains robust. This positions Corvo favorably for continuing strong content and durable long-term growth. And with that, I'll hand the call over to Grant. Thanks, Bob. And good afternoon, everyone.

Grant Brown: Relative to December we expect March revenue to reflect a larger percentage of higher cost inventories previously manufactured internally during periods of lower utilization.

Grant Brown: Revenue for the quarter was $1,074,000,000. Non-GAAP gross margin was 43.8%, and non-GAAP diluted EPS was $2.10, all exceeding the midpoint of our guidance range. Revenue increased approximately 44% year-over-year and continued to benefit from significant content gains at our largest customers. As communicated last quarter, ACG achieved year-over-year growth in September, CSG achieved year-over-year growth during the September quarter, and we expect HPA to achieve strong year-over-year growth in the March quarter. Regarding gross margin, a larger portion of December revenue was manufactured internally during periods of lower utilization, which led to higher unit costs compared to the September quarter. However, factory utilization is improving, and the impact from underutilization and factory-related variances continues to moderate. Non-GAAP operating expenses for the quarter were $234 million.

Grant Brown: As these higher costs previously manufactured inventory sell through it paves the way for future gross margins that reflect increasing levels of utilization.

Grant Brown: Currently expect to have sold through most of these higher cost inventories and associated cost by the second half of this calendar year.

Grant Brown: We project non-GAAP operating expenses in the March quarter will be approximately $245 million with variability related to labor related expenses and the timing of program development spend.

Grant Brown: Below the operating income line non operating expense is expected to be approximately $10 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.

Grant Brown: Our non-GAAP tax rate for fiscal 'twenty, four is expected to be within a range of 11% to 13%.

Grant Brown: In December we announced a new partnership with luck sure related to the divestiture of our Beijing, and <unk> Assembly and test facilities.

Grant Brown: Upon the closing of this transaction <unk> share will acquire each facility's operations and assets, which includes the property plant and equipment as well as the existing workforce to enable the seamless continuity of operations.

Grant Brown: We continue to invest in new product development as it is a critical catalyst for driving multi-year growth across all three business segments. Additionally, alongside these growth-oriented investments, we continue to launch productivity initiatives across the enterprise. These initiatives, also spanning multiple years, are designed to support future growth, augment productivity, and enhance profitability. In total, non-GAAP operating income in the quarter was $237 million, or 22% of sales. Non-GAAP net income was $206 million, representing diluted earnings per share of $2.10.

Grant Brown: <unk> will continue to maintain our sales product and test engineering and customer support employees in China.

We believe that adding luck share as a strategic partner will strengthen our position to serve our customers globally.

Grant Brown: As it relates to our manufacturing strategy. This is a further step in our ongoing efforts to reduce capital intensity. This.

Grant Brown: This move aligns with previous actions, including the closure of our Florida manufacturing operations and the recent sale of our farmers branch facility in Texas we.

Grant Brown: According to the cash flow statement, we're pleased to report that during the December quarter, we generated a free cash flow of $467 million, setting a new quarterly record for Corbo. Our capital expenditures for the period were $26 million, and we repurchased approximately $100 million of stock at $94 per share. The rate and pace of our share repurchases consider several factors, including our long-term financial outlook, free cash flow, debt maturities, alternative uses of cash, and other relevant strategic considerations. This approach ensures that our capital allocation strategy balances future growth with the return of capital and aligns with our underlying goal of delivering long-term shareholder value. On the balance sheet, as of quarter end, we had approximately $1.6 billion of long-term debt outstanding and over $1 billion of cash in equivalence.

Grant Brown: We are efficiently managing a complex supply chain, including our internal factories, which support all three operating segments and will remain an ongoing focus.

Grant Brown: We will leverage internal manufacturing, where it uniquely differentiates our products and outsource production, where we maintain a strong network of foundry and <unk> partners.

Grant Brown: <unk> is well positioned to capitalize on multiple growth drivers within each of our three operating segments. We are confident that our investments in our technology portfolio product development and advanced manufacturing will broaden our addressable market diversify revenue expand margin and accelerate growth.

Speaker Change: At this time please open the line for questions. Thank you.

Speaker Change: Certainly thank you.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Speaker Change: You are using a speakerphone please pick up your handset before pressing the keys.

Grant Brown: Regarding balance sheet presentation, the 2024 notes have been reclassified as current and will mature in December. Subject to changes in the interest rate environment and other factors, we currently expect to retire these notes later this year. In line with the expectations shared during our previous earnings call, we successfully reduced our net inventory balance over the period. We ended the quarter with a net inventory balance of $727 million, a sequential decrease of $113 million.

Speaker Change: Good Joel Your question. Please press Star then two.

Speaker Change: Please limit yourself to one question and one follow up.

Speaker Change: Today's first question comes from Toshi Hari with Goldman Sachs. Please go ahead.

Toshiya Hari: Hi, Thank you so much for taking the question.

Toshiya Hari: I had two questions.

Toshiya Hari: First one on content growth.

Toshiya Hari: For this year, Bob Obviously, you guys did a really good job last year and gaining content.

Toshiya Hari: Not only at your largest customer but across the board.

Toshiya Hari: It's a little bit early but curious how you're thinking about.

Toshiya Hari: Europe has potential to grow content. This year again at the largest customer as well as on the Android side, you gave great color on.

Grant Brown: In terms of days of inventory, this represents a decrease from 138 days in the September quarter to 118 days in the December quarter. This reduction reflects our commitment to efficient inventory management, and we expect continued improvement in the March quarter. Turning to the current quarter outlook, we expect revenue of approximately $925 million, plus or minus $25 million, a non-GAAP gross margin of approximately 42%, and non-GAAP diluted EPS of $1.20 at the midpoint of the revenue range. Relative to December, we expect March revenue to reflect a larger percentage of higher-cost inventories previously manufactured internally during periods of lower utilization.

Toshiya Hari: Youre Korea based customer, but curious how you're thinking about.

Toshiya Hari: For the year across the board. Thank you.

Speaker Change: I appreciate it thanks, Thanks for your question.

Speaker Change: And it does seem there is some reports last night and have created some confusion about our business. So I think it's best to go out and address it now that you gave me the opportunity with your first question.

Speaker Change: Based on our known design wins and engagements with our largest customer.

Speaker Change: One of our competitors I think it's been named Qualcomm, We don't believe they're competing on any of the sockets we're engaged in.

Speaker Change: They did not win any sockets that we've been in.

Speaker Change: Nor do we see them challenging our share in any of the sockets, we're competing for investing in at our largest customer.

Speaker Change: In fact <unk>.

Speaker Change: You can ask them, we're quite confident they would tell you the same thing.

Speaker Change: Now specifically to alter high band we've made it clear on past calls it was a multi source socket.

Speaker Change: And we were the only company that consistently won over the last three years.

Grant Brown: As these higher-cost previously manufactured inventories sell through, it paves the way for future gross margins that reflect increasing levels of utilization. We currently expect to have sold through most of these higher-cost inventories and associated costs by the second half of this calendar year. We project non-GAAP operating expenses in the March quarter will be approximately $245 million, with variability related to labor-related expenses and the timing of program development span. Below the operating income line, non-operating expense is expected to be approximately $10 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 11 to 13 percent.

Speaker Change: We've never had 100% share of the ultra high band.

Speaker Change: In fact, you can look at paradigms of the latest iPhone and seek hormone one the ultra high band and the Pearl and Pro Max models.

Speaker Change: I know I've said in many of our team said consistently that this is a perfect.

Formats, driven customer and we're winning based on multiyear engagements.

Speaker Change: Our technology investments and clearly our product performance.

Speaker Change: And we expect to grow with our largest customer in FY 'twenty five.

Speaker Change: And grow even more in FY 'twenty six.

Speaker Change: I wish I could give you more specifics, but I think that answers your question to ship.

Speaker Change: Yes, I appreciate the color. Thanks, Bob and then as my follow up one for Greg on the gross margin side I think three months ago.

Speaker Change: You had shared the Underutilization charge of I think it was 550 basis points for the September quarter.

Speaker Change: Curious.

Greg: What the headwind was in December what's embedded in your March quarter guidance and more importantly, as you progressed through the year, how should we think about the trajectory of gross margins and sorry, one last one deluxe share deal.

Grant Brown: In December, we announced a new partnership with Luxshare related to the divestiture of our Beijing and Dejaux assembly and test facilities. Upon the closing of this transaction, Luxshare will acquire each facility's operations and assets, which includes the property, plant, and equipment, as well as the existing workforce, to enable the seamless continuity of operations. Corvo will continue to maintain our sales, product and test engineering, and customer support employees in China.

Greg: Should we think about that potentially benefiting gross margins medium to long term. Thank you.

Speaker Change: Sure sure.

Speaker Change: Let me try and take all of the border.

Speaker Change: So the first one in terms of the impact from Underutilization charges.

Speaker Change: About half, maybe maybe a little less than half of what we had previously reported and as I pointed out we'll be we'll be working through those higher cost inventories over the balance of this year and should clear them in the second half so that should give you a sense of the timing there.

Operator: We believe that adding Luxshare as a strategic partner will strengthen our position to serve our customers globally. As it relates to our manufacturing strategy, this is a further step in our ongoing efforts to reduce capital intensity. This move aligns with previous actions, including the closure of our Florida manufacturing operations and the recent sale of our farmers branch facility in Texas. We are efficiently managing a complex supply chain, including our internal factories, which support all three operating segments and will remain an ongoing focus. We will leverage internal manufacturing where it uniquely differentiates our products and outsource production where we maintain a strong network of foundry and OSAT partners. Corvo is well positioned to capitalize on multiple growth drivers within each of our three operating segments.

Speaker Change: There is a lot of moving factors that influenced gross margin. In addition to underutilization. So the timing of where something was built when it was built and then in any given period when it's sold.

Speaker Change: In the September quarter. For example, we had a relatively high percentage of product mix. It was manufactured at external.

Silicon foundries and then processed at third party Oss versus a higher percentage in the December than what we anticipated march to be manufactured internally.

Speaker Change: In prior periods of lower utilization. So there's this lag effect that I described last quarter.

Speaker Change: The underutilization in past periods, obviously conversion.

The products sold in future periods, but beyond March no change to our guidance of returning it to 50% plus gross margin over time, we have line of sight to get there once we sell through the high cost inventories as I mentioned, it's encouraging on the utilization front as its improving and we will continue to execute on further productivity.

Speaker Change: <unk> opportunities as well.

Speaker Change: Commented in my prepared remarks that we expect to have worked through all that as I mentioned by the SEC.

Operator: We are confident that our investments in our technology portfolio, product development, and advanced manufacturing will broaden our addressable market, diversify revenue, expand margins, and accelerate growth. At this time, please open the line for questions. Thank you. Certainly. Thank you. We will now begin the question and answer session. To ask a question, you may press the star, then one, on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: It can happen and that will clear the path for margins that reflect higher levels of a factory utilization going forward.

Speaker Change: Thank you. The next question comes from Ruben Roy with Stifel. Please go ahead.

Ruben Roy: Thank you.

Ruben Roy: Bob first of all on the.

Ruben Roy: On the unit.

Ruben Roy: Functions that you have for the year low single digits. I think you said for the total smartphone market in <unk>.

Ruben Roy: 10% or so.

Ruben Roy: Thinking about.

Toshiya Hari: To withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. Today's first question comes from Toshiya Hari at Goldman Sachs. Please go ahead.

Ruben Roy: Non China Android in China, Android as you think about your mix going forward. It would seem like youre doing quite well, obviously in Korea and elsewhere just wondering.

Ruben Roy: Kind of where you're seeing things.

Ruben Roy: Things shake out with China, and trade and as you kind of progress through calendar 2004.

Ruben Roy: Okay. Thanks for the question. This is Dave I'll take that one so.

Dave: As Bob mentioned as we said before we enjoy a really strong position as the preferred strategic supplier for all our Android customers.

Robert Bruggeworth: Hi, thank you so much for taking the question. I had two questions. The first one on content growth for this year. Bob, obviously, you guys did a really good job last year in gaining content, not only at your largest customer but across the board. I know it's a little bit early, but I'm curious how you're thinking about your potential to grow content this year, again, at the largest customer, as well as on the Android side. You gave great color on your Korea-based customer, but I'm curious how you're thinking about the year across the board. Toshiya, thanks for your question.

Dave: Engage with them on multiple years out on their product Roadmaps and it's really a special seat at the table that we have is they are a leading global supplier.

Dave: They care deeply about our products our technology, but also the quality and the supply assurance and we deliver and we've been that trusted supplier for all of our Android customers for many many years.

Dave: And the one thing we've learned is you have to be there for them over the long term you can't just come in and out of a market and expect to gain any meaningful share.

Dave: So at our China customers as Bob mentioned, we received top supplier awards for innovation quality supply.

Dave: Strategic partnership for 2023 and includes awards from honor <unk> Xiaomi and vivo.

Dave: And we're also proud of our position in Android outside of China, as well Bob highlighted the great content in the new Samsung Galaxy <unk> 24 for multiple years now we provide a full lineup of ultra high band mid high band secondary transmit path low band tuning in Wi Fi and this year, we added ultra wideband.

Robert Bruggeworth: And it does seem there were some reports last night that created some confusion about our business, so I think it's best I go ahead and address it now that you gave me the opportunity with your first question. You know, based on our known design wins and engagements with our largest customer, one of our competitors, I think it's been named Qualcomm, we don't believe they're competing in any of the sockets we're engaged in. They did not win any of the sockets that we've been in.

Dave: We're also excited to have received initial purchase orders for our next generation mid high band with integrated diversity received we announced that product a few quarters ago. When we had our first purchase orders for a U S based Android customer in.

Dave: <unk> brings a new level of integration for size and performance leveraging our latest filter technology for bi and saw and we've also got a lot of other great content on that phone that we're excited to tell you about in the future as well.

Robert Bruggeworth: Nor do we see them challenging our share in any of the sockets we're competing for or investing in at our largest customer. In fact, you can ask them. We're quite confident they would tell you the same thing.

Dave: We believe we are best positioned to grow and our Android customers as their products continue to transition to <unk> over the coming years, and we've got a lot of great new opportunities in content, we can address with ultra wideband touch sensors and power management. So we feel really good about our position really across the entire Android ecosystem.

Robert Bruggeworth: Now specifically to alter the high band, we've made it clear on past calls that it was a multi-source socket, and we were the only company that consistently won over the last three years. You know, we've never had 100% share of the ultra high band. In fact, you can look at teardowns of the latest iPhone and see Corvo won the ultra high band in the Pro and Pro Max models.

That's great. Thank you for all that detail a quick follow up for grant on the luck sure.

Dave: Commentary.

Grant Brown: How are you thinking grant about sort of longer term capex. Clearly this is part of sort of the longer term strategy around capex, but if you could speak to that.

Robert Bruggeworth: You know, I know I've said, and many of our team members have said consistently that this is a performance-driven customer, and we're winning based on multi-year engagements, our technology investments, and clearly our product performance. And we expect to grow with our largest customer in FY25 and grow even more in FY26. I wish I could give you more specifics, but I think that answers your question, Toshiya. Yeah, I appreciate

Grant Brown: The deal is going to close first half of 2004, so maybe a little bit early but.

Grant Brown: Has anything changed I guess with the strategy around Capex and cash flow.

Grant Brown: Assumptions that you have as you think about sort of the next 12 to 18 months.

Grant Brown: Sure.

Grant Brown: Cash flow.

Speaker Change: Question I think.

Speaker Change: As we as we look forward as I've always said, we will follow the P&L, so largely that will be dictated by our by the <unk>.

Toshiya Hari: Thanks, Bob. And then, as my follow-up question, one for Grant, on the gross margin side, I think three months ago, you shared the underutilization charge of, I think it was, 550 basis points for the September quarter. Curious what the headwind was in December, what's embedded in your March quarter guidance, and more importantly, as you progress through the year, how should we think about the trajectory of gross margins? And sorry, one last one.

Speaker Change: Growth that Bob mentioned.

Speaker Change: In fiscal 'twenty, five and 26 in.

Speaker Change: In terms of our Capex.

Speaker Change: As a percentage of the top line, we do expect it to continued in that 5% or less category. If there are capacity additions made it will be in response to demand and the capacity required to serve it.

Speaker Change: As it relates to the sale of Beijing in the show.

Speaker Change: We're really excited to partner with loss share as we transition those sites.

Speaker Change: <unk> is over multiple years.

Grant Brown: The LuxShare deal, how should we think about that potentially benefiting gross margins, medium to long term? Thank you. Sure, Toshiya. Let me try and take all those in order.

Speaker Change: There is obviously some benefits there for corvo.

Speaker Change: As the volume increases and we found a great partner to help reduce our capital intensity.

Speaker Change: And we're confident in their ability to provide the cost improvements that we would expect over time in a rather similar relationship.

Grant Brown: So, the first one, in terms of the impact of the underutilization charges, you know, it's about half, maybe a little less than half of what we had previously reported. And as I pointed out, we'll be working through those higher-cost inventories over the balance of this year and should clear them in the second half. So, that should give you a sense of the timing there.

Speaker Change: To what we incur today cost wise at those locations.

Speaker Change: Thank you. The next question comes from Edward Snyder with charity Im Sorry Charter equity research. Please go ahead.

Edward Snyder: Sure you just yet.

Speaker Change: Yes.

Speaker Change: Yeah.

Grant Brown: You know, there are a lot of moving factors that would influence gross margin in addition to underutilization. So, you know, the timing of where something was built, when it was built, and then in any given period when it's sold.

Edward Snyder: Couple of questions a couple of things Bob. Thank you very much for clearing that up or up about I really appreciate that that clears up a lot of confusion.

Speaker Change: Maybe we can shift gears a little bit.

Edward Snyder: Oh on the Android market.

Edward Snyder: So very well in China and in the whole inventory digestion. That's all I think fairly clear now, but when you get back to normal run rate here.

Grant Brown: You know, in the September quarter, for example, we had a relatively high percentage of product mix that was manufactured at external silicon foundries and then processed at third-party OSAPs versus a higher percentage in December and what we anticipate in March to be manufactured internally during prior periods of lower utilization. So, there's this lag effect I described last quarter. The underutilization in past periods obviously can burden the product sold in future periods, but beyond March, there will be no change to our guidance of returning to 50% plus gross margin over time. We have a line of sight to get there once we sell through the high-cost inventories. As I mentioned, it's encouraging on the utilization front as it's improving, and we will continue to execute on further productivity opportunities as well. I commented in my prepared remarks that we expect to have worked through all of that, as I mentioned in the second half, and that'll clear the path for margins that reflect higher levels of factory utilization going forward. Thank you. The next question comes from Ruben Roy with Steeple. Please go ahead.

Edward Snyder: The content games seems to be shifted a little bit of the Chinese suppliers have picked up a little bit, but they don't seem to be threatening you in modules and now youre talking about these very high integrated modules, which would separate you from any other competitors I think Scott where she'd been has a part yet so one.

Edward Snyder: Content wise by combining all of that into a single module must be.

Edward Snyder: The sum of the parts isn't quite equal to the individual pieces.

Edward Snyder: Is it a content decline just on average or are you pulling in content that you may not have had before or are they paying for premiums I'm just trying get an idea of how that shakes out when China gets back to a normal run rate and then I had a follow up please.

Edward Snyder: Okay.

Edward Snyder: Yeah. This is Dave it kind of depends.

Dave: Bob mentioned, our low mid high and so that's a combination of what used to be the mid high band, which we generally enjoyed a pretty nice share of that and the low band, which we had good share, but we shared a lot of that with some other <unk>.

Dave: <unk>, but when we integrated the low mid high altogether, obviously, we can pick up some content there overall as we support customers with that that platform.

Ruben Roy: Thank you. Bob, first of all, on the unit assumptions that you have for the year, low single digits, I think you said, for the total smartphone market and then 5G, 10% or so. Are you thinking about sort of non-China Android and Chinese Android as you think about your mix going forward? It would seem like you're doing quite well, obviously, in Korea and elsewhere.

Dave: You also have to look at the different SKU strategies that our customers have to depending on the markets. They serve there may be more or less filter content. So we work with them as Bob mentioned and I mentioned as well on our long term roadmap to help architect.

Dave: To support their solutions across those different tiers, so whether they are doing a global SKU, where they're doing regional skus, we can tier the product along with that to fit the need that they have there.

Speaker Change: Great and then if I could.

Speaker Change: You historically havent sold discrete filters in quite a long time I can remember and I know you're doing it now is that first of all maybe you could give us some idea of where those are going is that most seem to Wi Fi.

Dave Fullwood: I'm just wondering, you know, kind of where you think things shake out with China Android as you kind of progress through California? Thanks for the question. This is Dave. I'll take that one.

Speaker Change: Where what.

Speaker Change: And is it driven mostly by the fact that you have.

Dave Fullwood: So, as Bob mentioned, and as we said before, we enjoy a really strong position as the preferred strategic supplier for all our Android customers. We engage with them for multiple years on their product roadmaps, and it's really a special seat at the table that we have as their leading global supplier. They care deeply about our products, our technology, but also the quality and the supply assurance that we deliver. And we've been that trusted supplier for all of our Android customers for many, many years. And the one thing we've learned is you have to be there for them over the long term.

Speaker Change: Capacity in Texas could support that.

Speaker Change: Whereas you've not seen maybe as much ball and some of the modules that you had before.

Speaker Change: Then.

Yes, and this is due to that one.

Speaker Change: Yeah, and it's an interesting one so we've been in the discrete filter market has not been a huge business for us because we focus more on the models as you said.

Speaker Change: But it's a very good performing module it is for <unk> not for Wi Fi and.

Speaker Change: I like to EBIT example is the customers.

Speaker Change: Even in that tier of the market are paying for performance. They want the latest and greatest technology from us and even on a very based product make a discrete filter.

Speaker Change: There is still looking for performance.

Speaker Change: We're pretty excited about those products.

Speaker Change: Okay.

Speaker Change: Thank you. The next question is from Karl Ackerman with BNP Paribas. Please go ahead.

Karl Ackerman: Yes. Thank you two if I may a question first for grant.

Karl Ackerman: Write downs of your Florida facility.

Dave Fullwood: And we're also proud of our position in Android outside of China as well. Bob highlighted the great content in the new Samsung Galaxy S24. For multiple years now, we have provided a full lineup of ultra-high band, mid-high band, secondary transmit path, low band tuning, and Wi-Fi, and this year, we added ultra-wide band.

Karl Ackerman: Which I believe was historically saw and the sale of farmers branch, but also expansion of your Richardson facility I guess why wouldn't gross margins exceed 50% on a lower revenue base than the prior peak as <unk> unit volumes continue to grow from here.

Speaker Change: Sure. So those are all productivity enhancements.

Speaker Change: And then as we've talked about it's largely a utilization a function of utilization.

Dave Fullwood: We're also excited to have received initial purchase orders for our next generation mid-high band with integrated diversity receive. We announced that product a few quarters ago, and we have our first purchase orders for a U.S.-based Android customer. And this part brings a new level of integration for size and performance, leveraging our latest filter technology for ball and saw.

Speaker Change: In addition to.

Speaker Change: Shuttering some of those facilities that you mentioned were also producing significantly smaller die and so we have effective capacity that has grown a lot.

Speaker Change: Regardless of the number of wafers. So you can get more die out of a given wafer so is productivity there.

Speaker Change: And I would say theres, a lot of productivity opportunities for us looking forward.

Speaker Change: We as we work into that across the board.

Speaker Change: So there is there is productivity initiatives.

Speaker Change: We still have to do in terms of why we haven't achieved 50% it's again largely.

Dave Fullwood: And we've also got a lot of other great content on that phone that we're excited to tell you about in the future as well. We believe we are best positioned to grow with our Android customers as their products continue to transition to 5G over the coming years. And we've got a lot of great new opportunities and content we can address with ultra-wideband, touch sensors, and power management. So we feel really good about our position, across the entire Android ecosystem. That's great!

Speaker Change: A utilization issue.

Speaker Change: Sure. Thanks for that grant I guess, Bob you also mentioned that five G units would grow over 10% this calendar year.

Speaker Change: I'm curious if that is done predominantly in mid range across maybe the China Android OEM has worked out.

Speaker Change: Only from Korean and U S. Oems can you give some color on that.

Speaker Change: The constitution of the <unk> unit growth and tower 24, that'd be very helpful. Thank you.

Ruben Roy: Thank you for all that detail. A quick follow-up for Grant on the LuxShare commentary. How are you thinking, Grant, about sort of longer-term CapEx? You know, clearly this is part of, you know, sort of the longer-term strategy around CapEx, but if you could speak to that, would you? You know, I know the deal is going to close in the first half of 24, so maybe a little bit early, but, you know, has anything changed, I guess, with the strategy around CapEx and cash flow, you know, assumptions that you have as you think about 12. 12. 12. 12. 12.

Bob: Yes. Thanks for the question Carl it's primarily the Android ecosystem. So it would include all of the Android manufacturers, because where we're seeing some of in China. The manufacturers that are not each box also moving into <unk>. So it's a broad comment across the Android ecosystem as what we see driving most of that.

Bob: Growth.

Thank you. The next question is from Shanghai, Gerry with Raymond James. Please go ahead.

Gerry: Thank you.

Gerry: Yes on your March quarter outlook pretty solid guide by the way Bob just trying to understand the puts and takes by different segments.

Grant Brown: Sure. The cash flow question, I think as we look forward, as I've always said, we'll follow the P&L. Largely, that'll be dictated by the growth that Bob mentioned in fiscal 25 and 26. In terms of our CapEx, as a percentage of the top line, we do expect it to continue in that 5% or less category. If there are capacity additions made, it will be in response to demand and the capacity required to serve it.

Gerry: You said HPA is going to grow nicely in March quarter, which seems to imply that.

Gerry: The smartphone business is probably seasonal but based on what you said it looks like Android is coming back a bit and your content is increasing so I'm just curious as to why it's not better than seasonal as we look into the March quarter.

Gerry: Sure history. This is grant and I'll take that question.

Grant Brown: We don't guide specifically by segment, but our views are incorporated in.

Edward Snyder: As it relates to the sale of Beijing and Dejaux, we're really excited to partner with LoveShare as we transition those sites. The agreement is for multiple years, and there are obviously some benefits there for Corvo as the volume increases, and we found a great partner to help reduce our capital intensity. We're confident in their ability to provide the cost improvements that we'd expect over time in a rather similar relationship to what we incur cost-wise at those locations. Thank you. The next question comes from Edward Snyder with Charter Equity Research. Please go ahead.

Grant Brown: The total guidance, so I'll give a bit of color on each.

Grant Brown: And ACG, we expect substantial year on year growth. Despite the typical sequential decline associated with our largest customers.

Grant Brown: Paul ramp partially offsetting that seasonal decline is a healthier channel inventories and improving smartphone unit demand in China as well as the flagship launch by our largest Android customer.

Grant Brown: In in HPA, we expect also expect year over year growth across all the businesses, except base station from a mixed perspective, the more capital intensive end markets, we serve such as base station and some others, including infrastructure faced headwinds due to the interest rate sensitivity of those customers and some of those larger build outs.

Edward Snyder: You know, we're not a charity just yet. A couple quid, a couple things. Bob, thank you very much for clearing that up right off the bat. I really appreciate that. That clears up a lot of questions.

Grant Brown: Consequently.

Grant Brown: Fence in aerospace now represents over half of the HVA topline, making that segment a bit more sensitive to the timing of some of those defense programs quarter to quarter.

Edward Snyder: Maybe we can shift gears a little bit on the Android market. I know you're doing very well in China and the whole inventory digestion, and that's all, I think, fairly clear now, but when you get back to a normal run rate here, the content game seems to have shifted a little bit.

Grant Brown: In CST.

Grant Brown: We also expect year over year growth in the March quarter supported by a Wifi revenue.

Grant Brown: Which we've talked about it will be up meaningfully from Q4 last fiscal year, and then slower than expected ramps in Iot related areas are expected in March probably persisting through the first half of 'twenty four.

Dave Fullwood: The Chinese suppliers have picked up a little bit, but they don't seem to be threatening you in modules. And now you're talking about these very high-integrated modules, which would separate you from any other competitors. Thank you! Is it a content decline, just on average, or are you pulling in content that you may not have had before, or are they paying more attention to it?

Grant Brown: Although the auto market appears to be weakening in general are secular opportunities there lie in the automotive connectivity areas, which are supported.

Grant Brown: By the growing adoption of Wi Fi Vida accident, and ultra Wideband I think Dave commented on earlier.

Grant Brown: We've already announced some significant design wins, there and CST for automotive and smartphone and we're targeting additional areas, including industrial enterprise.

Dave Fullwood: Yeah, this is Dave. It kind of depends. So when you Bob mentioned our low, mid, and high, And so that's a combination of what used to be the mid-high band, which we generally enjoyed a pretty high share of, and the low band, which we had a good share of, but we shared a lot of that with some other competitors. But when we integrate the low, mid, and high all together, obviously, we can pick up some content there overall, as we support customers with that platform. You also have to look at the different SKU strategies that our customers have. So, depending on what markets they serve, there may be more or less filter content.

Grant Brown: And smart home.

Grant Brown: Great.

Speaker Change: That's great color, Greg I appreciate that and then grant cash flow you know very very strong here, obviously, you had a little bit of a headwind in the first half with working capital now I think that has become a tailwind but.

Speaker Change: Impressive nevertheless.

Speaker Change: So can you talk about.

Speaker Change: How are you thinking about cash flow going forward I think you mentioned.

Speaker Change: Capex is going to be fairly relatively small.

Speaker Change: And you also kind of suggested that inventory might come down again, so just.

Edward Snyder: So we work with them, as Bob mentioned and I mentioned as well, on their long-term roadmaps to help architect to support their solutions across those different tiers. So whether they're doing a global SKU or they're doing regional SKUs, we can tier the product along with that to fit the needs that they have. Great, and then if I could..., historically haven't sold Douglas DeLieto, Robert Bruggeworth, Jim Klein, Steve Smigie, Craig Hettenbach, Karl, And is it driven mostly by the fact that you have..., commentary? If this could 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 on some of the... War.

Speaker Change: Just wanted your thoughts on cash flow generation going forward and then.

Speaker Change: What are the uses for the cash going forward I guess you name it looks like you've made an acquisition.

Speaker Change: Obviously, you've been buying back shares. So if you can talk about that that would be helpful. Thank you.

Speaker Change: Sure.

Speaker Change: In terms of the cash flow next quarter as you point out there's a few puts and takes I would expect capex to be up it's going to follow.

Speaker Change: The level of support for the top line and our capacity addition, there for our customers demand. So I would expect that to be up in the March quarter, but remain on the year under our limit of around.

Speaker Change: 5% well.

Speaker Change: Well under.

The.

Monetization of our receivables is something that I expect will continue that's been a significant tailwind last quarter, along with the reduction in inventory balances. So now you're starting to see that come down.

Speaker Change: As we're able to sell through inventory rather than purchase as much new materials, so that helps cash flow.

Speaker Change: Looking forward.

Speaker Change: Pointed out.

Dave Fullwood: And then... Yeah, let's just do that one. Yeah, and it's an interesting one. So we've been in the discrete filter market. It's not been a huge business for us because we focus more on the modules, as you said. But it's a very good performing module. It is for 5G, not for Wi-Fi.

Speaker Change: On rate and pace of our buyback will fluctuate.

Speaker Change: Dependent this year on our.

Speaker Change: Maturing 2024 notes, which will look to.

Speaker Change: Take out by December and then.

Karl Ackerman: And, you know, I like to use an example as customers, even in that tier of the market, are paying for performance, right? They want the latest and greatest technology from us. And even on a very basic product like a discrete filter, they're still looking for performance, and we're pretty excited about this project. Thank you. The next question is from Karl Ackerman with B&B Paribas. Please go ahead.

Speaker Change: Obviously, we'll be continuing to grow throughout the throughout the calendar year and into into fiscal 'twenty five so overall.

Speaker Change: We should see some improvement, but on a quarter to quarter basis in March there were some additional items there.

Speaker Change: Thank you. The next question comes from Matt Ramsay with TD Cowen. Please go ahead.

Grant Brown: Yes, thank you. Two, if I may, a question first for Grant. You know, with shutdowns in your Florida facility, which I believe was a historically saw, and the sale of Farmer's Branch, but also the expansion of your Richardson facility, I guess, why wouldn't gross margins exceed 50% on a lower revenue base than the prior peak as 5G unit volumes continue to grow from Sure, so those are all productivity enhancements, you know, and then, as we talked about, it's largely a function So in addition to just shuttering some of those facilities that you mentioned, we're also producing significantly smaller dyes, and so we have effective capacity that has grown along with the number of wafers, so you can get more dye out of a given wafer.

Matthew D. Ramsay: Thank you very much guys good afternoon.

Matthew D. Ramsay: I guess my question in.

Matthew D. Ramsay: Trying to dovetail some.

The market is increasing habit and increasingly having about.

Matthew D. Ramsay: AI adoption and clients are handset devices.

Matthew D. Ramsay: Particularly flagship ones and.

Matthew D. Ramsay: Dovetail that Bob with Europe.

Matthew D. Ramsay: Commentary about visibility to maybe accelerating content gains for you with your large customer.

Speaker Change: What I'm trying to understand a bit more.

Speaker Change: You guys as AI.

Speaker Change: I guess proliferates over the long term in the handset market do you view that in and of itself is a driver of Tam our RF content for your company or is it more that the <unk>.

Speaker Change: Sources in the fall and are going to get jacked up a lot in terms of compute and memory et cetera.

Grant Brown: So there's productivity there, and I would say there are a lot of productivity opportunities for us looking forward as we work on that across the board. So, you know, there are productivity initiatives that we still have to do, and in terms of, you know, why we haven't achieved 50%, it's again largely a utilization issue. Sure. Thanks for that, Grant. I guess, Bob, you know, you also mentioned that 5G units would grow over 10% this calendar year. I'm curious if that is done predominantly in the mid-range across maybe the Chinese Android OEMs, or is that only from Korean and U.S. OEMs?

Speaker Change: Additional constraints on our apps, where are your company can distinguish itself through R&D and taking out things like cost and board space and power et cetera, I'm just trying to.

Speaker Change: Figure out what you see driving that visibility of content.

Speaker Change: AI, presumably comes into these devices.

Speaker Change: Yes. This is Dave it's early days as you know with AI.

Dave: It's pretty exciting I think you hit on a lot of the key points already.

Dave: It could be a catalyst that can help improve their replacement rate as people want to upgrade to take advantage of the new AI capabilities that show up in phones.

Dave: It should drive more.

Robert Bruggeworth: If you could give us some color on the constitution of the 5G unit growth in calendar 24, that would be very helpful. Yeah, thanks for the question, Karl. It's primarily the Android ecosystem. So it would include all the Android manufacturers because we're seeing some in China, the manufacturers that are not HBox also moving into 5G. So it's a broad comment across the Android ecosystem that we see driving most of that growth. Thank you. The next question is from Srinivas Pajjuri with Raymond James. Please go ahead.

Dave: Data over the network and that of course means more and better RF.

Dave: And then as you pointed out it's going to be more computer processing power and the device, which is going to put more pressure on the rest of the phone.

Dave: And so that to us.

Dave: Translate into performance and it could be in the RF and we can deliver better and better RF and lower power consumption to help solve those problems, but also we can deliver power management and Theres a lot of areas in the phone to address with power management that we can use our IP there to help again reduce current consumption improved battery life and make more room to run.

Srinivas Reddy Pajjuri: Thank you. I guess on your March quarter outlook, a pretty solid guide, by the way, Bob, you know, just trying to understand the puts and takes by different segments. I think you said HPA is going to grow nicely in the March quarter, which seems to imply that. You know, the smartphone business is probably seasonal, but based on what you said, it looks like Android is coming back a bit and your content is increasing, so I'm just curious as to why it's not better than seasonal. Sure. Hey, Srini, this is Grant.

Dave: AI on the phone, but it's early and so we have to see how this plays out but definitely we're looking forward to how AI can help.

To help drive.

Dave: Smartphone market further.

Speaker Change: Got it thanks for the comments there that that's helpful. I guess as my follow up is just a quick one I know you guys didn't discuss financial terms or whatnot, but you did announce an acquisition today than you did.

Grant Brown: I'll take that question. We don't guide specifically by segment, but our views are incorporated in the total guidance, but I'll give a bit of color on each. In APG, we expect substantial year-on-year growth despite the typical sequential decline associated with our largest customer's fall ramp. Partially offsetting that seasonal decline is healthier channel inventories and improving smartphone unit demand in China, as well as the flagship launch by our largest Android customer. In HPA, we also expect year-over-year growth across all businesses except Bay Station.

Speaker Change: Give us a little context around the technologies.

That youre, bringing in the people that you're bringing in just any any color there would be helpful. Thanks.

Speaker Change: Thanks for the question Matt. This is Brian I'll take that one we're really excited to bring the <unk> team on board they bring highly.

Brian: Highly experienced talent and RF silicon antenna and phased array systems to our our DNA group.

Brian: This technology will complement our existing product portfolio, the beam, forming capabilities, especially where we can leverage those with our advanced packaging capabilities.

Grant Brown: From a mixed perspective, the more capital-intensive end markets we serve, such as Bay Station and some others, including infrastructure, face headwinds due to the interest rate sensitivity of those customers and some of those larger build-outs. Consequently, defense and aerospace now represents over half of HPA's top line, making that segment a bit more sensitive to the timing of some of those defense programs quarter-to-quarter. In CSG, we also expect year-over-year growth in the March quarter, supported by our Wi-Fi revenue, which we've talked about. It'll be up meaningfully from Q4 last fiscal year. And then slower-than-expected ramps and IoT-related areas are expected in March, probably persisting through the first half of 24. Although the auto market appears to be weakening, in general, our secular opportunities there lie in the automotive connectivity areas, which are supported by the growing adoption of 5G, Wi-Fi, V2X, and ultra-wideband, as Dave commented earlier. We've already announced some significant design wins there in CSG for automotive and smartphone, and we're targeting additional areas, including industrial enterprise and smartphones. Great, that's a great color, Grant. I appreciate that.

Brian: We in terms of the deal we did announce the terms as you mentioned, but we do expect to close this quarter and the impact is factored into our guidance. Initially it will add revenue in the low single digits per quarter and be slightly dilutive to EPS, but accretive to gross margin and all of that's factored into our guidance.

Brian: Thank you. The next question is from Chris Caso with Wolfe Research. Please go ahead.

Chris Caso: Yes. Thank you.

Chris Caso: Wonder if you could speak to seasonality for the rest of the year and recognize that.

Chris Caso: Only want a guide for one quarter, but.

Chris Caso: With.

Chris Caso: I guess some of the inventory correction certainly in the mobile business looking like it's behind us.

Chris Caso: Is the expectation to kind of returned to normal seasonal patterns and then how does that apply to the non.

Chris Caso: Non mobile businesses, which I guess youre still going through some degree of correction.

Chris Caso: It's a little early to comment with any specificity on what would be our fiscal 'twenty five or the balance of this calendar year, largely but absent any macro related disruptions as I pointed out we do expect to grow and improve our gross margins year on year, It's it's worth pointing out.

Chris Caso: Given the content gains and success, we're having in our largest customer.

Srinivas Reddy Pajjuri: And then, Grant, cash flow, you know, very, very strong here. Obviously, you had a little bit of a headwind in the first half with working capital. Now, I think that has become a tailwind, but, you know, quite impressive, nevertheless.

Chris Caso: The success in our defense and aerospace areas, our revenue seasonality will more closely align to those customer programs and ramp profiles. So.

Chris Caso: We anticipate that quarterly profile or the shape of revenue across 25, we expect it to look very similar to 224.

Grant Brown: So, can you talk about, you know, how you're thinking about, you know, cash flow going forward? I think you mentioned that Kapex is going to be, you know, fairly, relatively small.

Chris Caso: Beyond 25, we are proactively investing focusing on diversifying our business pursuing substantial customer platforms, where we have the technology to win and the customer engagement.

Grant Brown: And you also kind of suggested that inventory might come down again. So just want to hear your thoughts on, you know, cash flow generation going forward and then, you know, what are the uses for the cash going forward? I guess it looks like you made an acquisition and, obviously, you've been buying back shares. So if you can talk about that, that would be great.

Chris Caso: Justify that that product development.

Speaker Change: That's helpful as a follow up to that.

Speaker Change: Can speak to the CSC and HPE businesses and could you give us perhaps an update on what you think are our longer term growth rates for that business. Those businesses. There is a lot of different moving parts in there and I know.

Grant Brown: Sure. In terms of cash flow next quarter, as you point out, there's a few puts and takes. I would expect CapEx to be up. It's going to follow the level of support for the top line and our capacity additions there for our customers' demand. So I would expect that to be up in the March quarter but remain under our limit of around 5%, well under.

Speaker Change: Through this correction, perhaps some of the expectations may have changed in that.

Whats your kind of outlook for those businesses, we look over the next two years or so.

Speaker Change: This is grant I'll take that one too I.

Grant Brown: I would think of Corvo is having a portfolio of diversified businesses that contribute to the revenue line no change to our long term growth.

Grant Brown: The monetization of our receivables is something that I expect will continue. That was a significant tailwind last quarter, along with the reduction in inventory balances. So you're starting to see that come down as we're able to sell through inventories rather than purchase as much new material. So that helps cash flow.

Grant Brown: Metrics that we've commented on in the past, but if you.

Grant Brown: <unk> the business about two thirds of it is ACG and this is primarily the smartphones and other cellular devices, including tablets and Wearables that we largely commented on already the other third of our revenues composed of our HPA in CSD businesses in <unk>.

Matthew D. Ramsay: Looking forward, as I pointed out, rate and pace of our buyback will fluctuate. It's dependent this year on our, maturing 2024 notes, which we'll look to take out by December and then you know obviously we'll be continuing to grow you know throughout the throughout the calendar year and into into fiscal 25 so you know overall you know we should see some some improvement but on a quarter to quarter basis in March there's some additional items, Thank you. The next question comes from Matt Ramsay with T.D. Cohen.

Grant Brown: HCA over half of that business is now defense and aerospace and in BSG over half that business is Wi Fi currently.

Grant Brown: It hasn't always been the case in HVA base station used to be significantly larger those have better than corporate gross margins typically and so that's.

Grant Brown: An area, where we still have a lot of opportunity, but it's underrepresented in HPA at the time.

Grant Brown: Between HP and <unk>, there is theres smaller portfolio of businesses that range from 25% to $75 million annually or so and they address market opportunities and the $1 billion. So theres a lot of room to grow there.

Matthew D. Ramsay: Please go ahead. Thank you very much, guys. Good afternoon.

Dave Fullwood: I guess my question is, trying to dovetail some expectations the market is increasingly having about AI adoption in clients or handset devices, particularly flagship ones, and they'll tell that Bob with your commentary about visibility to maybe accelerating content gains for you with your large customer. And what I'm trying to understand a bit more is, you guys as AIs, so how do you think that peripherates over the long term in the handset market? Do you view that in and of itself as a driver of TAM or RF content for your company, or is it more that the resources in the phone are going to get jacked up a lot in terms of compute and memory, etc., and that puts additional constraints on RF where your company can distinguish itself through R&D and taking out things like cost, board space, and power, etc.? How do you figure out what you see driving the visibility of content as AI presumably comes into these devices? Yeah, this is Dave.

Grant Brown: Substantiates, our comments on the on our strong double digit growth rates.

Grant Brown: Our largest investments are aimed at very large customer programs as I pointed out in ACG for fiscal 'twenty five and beyond we're looking to scale, our defense and power franchises within HPA and we're building our uwp in matter of business in ESG and all combined this this collection of businesses brings the diversification and financial.

Grant Brown: Resiliency.

Grant Brown: So rarely if ever all all in phases. It's also interesting to note.

Grant Brown: That in each of our operating segments, the largest businesses all benefit from our shared internal manufacturing capabilities.

Grant Brown: Our more nascent businesses rely on external capital and over time, we expect to grow.

Grant Brown: Less capital intensive simply because of the relative growth rates in those smaller businesses.

Grant Brown: Thank you. The next question is from Thomas O'malley with Barclays. Please go ahead.

Thomas O'malley: Hey, good evening guys. Thanks for taking my question I wanted to ask kind of a broader 30000 foot view question on hallways entry into the Android market can you just talk about what your internal estimates are for the.

Dave Fullwood: It's early days, as you know, with AI, but it's pretty exciting. I think you hit on a lot of the key points already. I mean, definitely, it could be a catalyst that can help improve the replacement rate, as people want to upgrade to take advantage of the new AI capabilities that show up in phones. It should drive more data over the network, and that, of course, means more and better RF. And then, as you pointed out, there's going to be more compute and processing power in the device, which is going to put more pressure on the rest of the phone.

Thomas O'malley: Huawei smartphone penetration in calendar year, 'twenty, four and just how that impacts your outlook for Android, particularly as you get into the back half of the calendar year and 24.

Thomas O'malley: We also had the revenue what we currently do.

Speaker Change: <unk> revenue is very low.

Speaker Change: Near zero or at zero at this point with Huawei, but that's a good question I think the performance of the phones that are out there that the newer ones I think it's pretty widely known people have done performance.

Speaker Change: Evaluations and Theres definitely some performance challenges on those codes. So we don't think that they could export them to other markets that probably have very difficult time.

Dave Fullwood: And so that, to us, translates into performance. And it could be in the RF, and we can deliver better and better RF performance and lower power consumption to help solve those problems. But also, we can deliver power management. And there are a lot of areas in the phone to address with power management that we can use our IP there to help, again, reduce current consumption, improve battery life, and make more room to run the AI on the phone. But it's early, and so we have to see how this plays out.

Getting carrier approval. So we think there are limited to China and so if you look at their performance to date since the May 60 ramp.

Speaker Change: We think they did about $30 million in calendar year 'twenty three if you take the last four months of data and you start to project that forward you can see an incremental.

10 to 20 million units added in CDI 24, so thats kind of how we're sizing it right now and Thats all built into our models.

Speaker Change: Yes, there was probably some pent up demand from Huawei user. So we'll have to see how that plays out and how sustainable that is but in any case any of those numbers to you that it's really not that significant when you think about a $1 2 billion unit smartphone market. So it's not that meaningful to us on a grand scale of things and when we think about our China customers.

Grant Brown: But definitely, we're looking forward to how AI will help drive. Mark, thanks for the comments there; that's helpful. I guess as my follow-up, it's just a quick one. I know you guys didn't discuss financial terms and whatnot, but you did announce an acquisition today. If you could give us a little context around the technologies that you're bringing in, the people that you're bringing in, just any color there would be helpful. Thanks. Thanks for the question, Matt. This is Grant. I'll take that one.

Speaker Change: The ones I mentioned earlier they have.

Speaker Change: Pretty meaningful market shares also outside of China, and that's where a lot of the growth is coming from that Bob talked about as the market converts to <unk> as most of China has already moved to <unk>. So for US we look at that as a great opportunity to work with those customers to continue to grow and that <unk> comes into our market because we're really not present to.

Grant Brown: We're really excited to bring the InokiWave team on board here at Corvo. They bring highly experienced talent in RF silicon, antenna, and phased array systems to our DNA group. The technology will complement our existing product portfolio, the beamforming capabilities, especially, where we can leverage those with our advanced packaging capabilities. In terms of the deal, we didn't announce the terms, as you mentioned, but we do expect to close it this quarter. The impact is factored into our guidance. Initially, it'll add revenue in the low single digits per quarter and be slightly diluted to EPS, but accretive to gross margin, and all that's factored into our guidance. Thank you. The next question is from Chris Caso with Wolf Research. Please go ahead.

Speaker Change: And in the <unk> portion of the market.

Speaker Change: Helpful.

Speaker Change: That one wasn't your favorite I can give you a bit of a lay up now, but just if you look at the.

The competitive environment in Android at the high end your competitor is talking about having a bit more capacity and maybe going after that market can you remind us of your competitive positioning there, particularly in ball filters.

Speaker Change: And why existing customers go with you and if they were to enter the market.

Speaker Change: Why do you think that you would keep the share profile that you have today. Thank you.

Speaker Change: You are referring to the Android market.

Speaker Change: The Android market.

Speaker Change: I think I commented on this earlier I mean, we've been working with these customers for a very very long time in fact, I was just in China last quarter.

Chris Caso: Yes, thank you. I wonder if you could speak to, you know, seasonality for the rest of the year and, you know, recognize that you only want to guide for one quarter, but, you know, with, I guess, some of the inventory correction, certainly in the mobile business, looking like it's behind us, is the expectation to kind of return to normal seasonal patterns? And then, you know, how does that apply to the non-mobile businesses, which I guess you're still going through some degree of. It's a little early to comment with any specificity on what would be our fiscal 25 or the balance of this calendar year, largely, but absent any macro-related disruptions, as I pointed out, we do expect to grow and improve our gross margins year on year.

Speaker Change: Sat with all of these customers talking about our long term roadmaps.

Speaker Change: We mentioned the awards, we got I mean, there is a lot of.

Speaker Change: Trust and relationship that has been built up over the years.

Speaker Change: So we're very confident that we will continue to enjoy our leadership position there and other competitors.

Speaker Change: They may come and go.

Speaker Change: But we feel confident we will maintain our leadership position there.

Speaker Change: Thank you.

Speaker Change: This does conclude our question and answer session I would like to turn the call back over to management for closing remarks.

Speaker Change: We want to thank everyone for joining us on the call Tonight. We appreciate your interest and we look forward to speaking with many of you at upcoming Investor events. Thanks, again and have a great evening.

Chris Caso: It's worth pointing out that given the content gains and success we're having in our largest customer and the success in our defense and aerospace areas, our revenue seasonality will be more closely aligned to those customer programs and RAMP profiles. So as we anticipate that quarterly profile or the shape of revenue across 25, we expect it to look very similar to 24. Beyond 25, we're proactively investing, focusing on diversifying our business, and pursuing substantial customer platforms where we have the technology to win and the customer engagement to justify that product development. That's helpful.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

[music].

Speaker Change: Okay.

Grant Brown: As a follow-up to that, you know, if you could speak to the CSG and HPA businesses and, you know, could you give us perhaps an update on, you know, what you think are the longer-term growth rates for that business? There are a lot of different moving parts in there, and I know, you know, through this correction, perhaps, you know, some of the expectations may have changed in that. You know, what's your kind of outlook for those businesses as we look over the next two years? This is Grant. I'll take that one too.

Speaker Change: Yeah.

Speaker Change: Okay.

Grant Brown: I would think of Corvo as having a portfolio of diversified businesses that contribute to the revenue line. No change to our long-term growth metrics that we've commented on in the past, but if you decompose the business, about two-thirds of it is ACG, and this is primarily the smartphones and other cellular devices, including tablets and wearables, that we've largely commented on already. The other third of our revenue is composed of our HPA and CSG businesses, and HPA, over half of that business, is now defense and aerospace, and then CSG, over half that business, is Wi-Fi currently. It hasn't always been the case, and HPA's base station used to be significantly larger.

Grant Brown: Those typically have better than corporate gross margins, and so that's an area where we still have a lot of opportunity, but it's underrepresented in HPA at the time. Between HPA and CSG, there are smaller portfolio businesses that range from $25 to $75 million annually or so, and they address market opportunities in the billions, so there's a lot of room to grow there, substantiating our comments on the strong double-digit growth Our largest investments are aimed at very large customer programs, as I pointed out, in ACG for fiscal 25 and beyond. We're looking to scale our defense and power franchises within HPA, and we're building our UWB and matter business in CSG. All combined, this collection of businesses brings diversification and some financial resiliency since they're rarely, if ever, all in phase.

Grant Brown: It's also interesting to note that in each of our operating segments, the largest businesses all benefit from our shared internal manufacturing capabilities. Our more nascent businesses rely on external capital, and over time, we expect to grow the less capital-intensive businesses simply because of the relative growth rates in those smaller businesses. Thank you. The next question is from Thomas O'Malley with Barclays. Please go ahead.

Speaker Change: [music].

Thomas O'malley: Hey, good evening guys, thanks for taking my question. I wanted to ask kind of a broader 30,000 feet view question on Huawei's entry into the Android market. Can you just talk about what your internal estimates are for Huawei smartphone penetration in calendar year 24 and just how that impacts your outlook for Android, particularly as you get into the back half of the calendar year in 24. We also add revenue, which we currently do. Our revenue is very low, near zero or at zero at this point with Huawei, but that's a good question. I think, you know, the performance of the phones that are out there, the newer ones, I think it's pretty widely known. People have done a performance.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Dave Fullwood: Evaluations, and there are definitely some performance challenges on those phones, so we don't think that they could export them to other markets. They probably will have a very difficult time getting carrier approval. So we think they're limited to China. And so if you look at their performance to date, you know, since the May 60 ramp, we think they did about 30 million in calendar year 23. If you take the last four months of data and start to project that forward, you can see an incremental 10 to 20 million units added in CY24. So that's kind of how we're sizing it right now. And that's all built into our models.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Dave Fullwood: You know, there was probably some pent-up demand from Huawei users. So we'll have to see how that plays out and how sustainable that is. But in any case, any of those numbers you use, it's really not that significant when you think about a 1.2 billion-unit smartphone market. So it's not that meaningful to us on the grand scale of things.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

[music].

Yes.

Speaker Change: [music].

Speaker Change: Yes.

Okay.

Speaker Change: [music].

Speaker Change: Hello, and welcome to the <unk> third quarter 2024 earnings conference call for <unk>.

Speaker Change: All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Thomas O'malley: And when we think about our Chinese customers, you know, the ones I mentioned earlier, they have pretty meaningful market shares also outside of China. And that's where a lot of the growth is coming from that Bob talked about as the market converts to 5G because most of China has already moved to 5G. So for us, you know, we look at that as a great opportunity to work with those customers to continue to grow, and that 5G comes into our market because we're really not present today in 4G, Helpful. And since that one wasn't your favorite, I can give you a bit of a layup now.

Speaker Change: Ask a question you May press Star then one on your telephone keypad.

Speaker Change: Jonathan The question queue, you May Press Star then two.

Speaker Change: I would now like to hand, the call over to Doug <unk>, Vice President Investor Relations. Please go ahead.

Doug: Hello, everybody and welcome to <unk> fiscal 2024 third 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 statements contained in the earnings release published today as well as the risk factors.

Dave Fullwood: But just if you look at the competitive environment in Android at the high end, your competitor is talking about having a bit more capacity and maybe going after that market. Can you remind us of your competitive positioning there, particularly in ball filters, and why existing customers go with you? And if they were to enter the market, why do you think that you'd keep the share profile that you have today? Are you referring to the Android market? The Android, Yeah, I think I commented on this earlier.

Doug: Associated with our business and our annual report on Form 10-K filed with the SEC because these risk factors may affect our operations and financial results in today's press 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.

Doug: <unk> and to analyze financial performance without the impact of certain noncash expenses or other items and obscure trends in our underlying requirements.

Dave Fullwood: I mean, we've been working with these customers for a very, very long time. In fact, I was just in China last quarter, you know, sat with all of these customers, talking about our long-term roadmaps, and we mentioned the awards we got. I mean, there's a lot of trust and relationship that's been built up over the years.

During our call our comments and comparisons to income statement items will be based primarily on non-GAAP results, particularly reconciliation of GAAP to non-GAAP financial measures. Please refer to our earnings release issued earlier today available on our Investor Relations website at IR Doc Corvo Dot com under financial releases joining us today.

Operator: So we're very confident that, you know, we'll continue to enjoy our leadership position there. And other competitors, yeah, I mean, they may come and go, but we feel confident we'll maintain our leadership position. Thank you.

Doug: They are Bob <unk>, President and CEO Grant Brown, CFO, David <unk> 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.

Operator: This does conclude our question and answer session. I would like to turn the call back over to management for closing remarks. We want to thank everyone for joining us on the call tonight. We appreciate your interest, and we look forward to speaking with many of you at upcoming investor events. Thanks again, and have a great evening.

Bob: Thanks, Doug and welcome everyone to <unk> fiscal 2024 third quarter call.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your line. , © BF-WATCH TV 2021 ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? Hello and welcome to the third quarter 2024 earnings conference call for Corvo. All participants will be in listen-only mode.

Bob: <unk> 4.0 and others.

As a result customers across our businesses are increasingly seeking higher levels of efficiency and performance where performance is measured in power out talk time or time between charges corporate was central to these transitions and we are critical to enabling these capabilities.

Doug DeLieto: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw from the question queue, you may press star, then two.

Bob: Leverage unique competitive strengths to supply our customers best in class solutions that enhance efficiency increased throughput and reduced form factor.

Bob: We are preferred supplier with leading products and a robust technology roadmap and we are positioned favorably for broad based growth across our three operating segments.

Speaker Change: Now, let's turn to our strategic highlights.

Speaker Change: Beginning with HPA customer demand in end markets. Excluding base station is improving and supports our view for a return to year over year growth in HPA and the March quarter.

Speaker Change: In defense and aerospace, we want an X band radar design with a major Dod contractor and we received new standard product orders in support of several large domestic and international ground based radar systems.

Speaker Change: Also enjoyed increasing demand for our solid state products and for our switch filter bank products across multiple customers and programs.

Speaker Change: There are multiyear secular trends driving our DNA business, including the trend of London, <unk> and the transition of mechanical systems to active electronics scanning systems, both of which increased requirement for more advanced systems level RF solutions.

Speaker Change: Earlier today, we announced the signing of a definitive agreement to acquire Boston based on opioid.

Speaker Change: <unk> is a leading supplier of high performance integrated Silicon Ics for intelligence active array antennas we.

We are excited to have the Nokia wave team joined Corvo and expand our offerings for defense and aerospace Satcom and <unk> applications.

Speaker Change: In power management, we are extending our reach in markets, where corvo enjoys a strong presence.

Speaker Change: Such as Wearables and other consumer products.

Speaker Change: Our most recent award is a PMA chipset with multiple placement for wearable and charger at a leading Android OEM.

Robert Bruggeworth: And welcome everyone to Corvo's fiscal 2024 third quarter call. I would like to start by complimenting the team for delivering another solid quarter. The demand environment in the December quarter improved versus our November outlook, and this is reflected in our strong performance. Looking at our business from a high level, Corvo is capitalizing on secular trends, including connectivity, sustainability, and electrification. These trends are playing out over many years, and they are fueling the transition to new technologies and new standards, like 5G Advanced, Wi-Fi 7, MATTER, DOCSIS 4.0, and others. As a result, customers across our businesses are increasingly seeking higher levels of efficiency and performance, where performance is measured in power out, talk time, or time between charges. Corporate is central to these transitions, and we are critical to enabling these capabilities.

Speaker Change: <unk> news, we have begun to see a rebound in ssds for PC and enterprise markets.

We're continuing to expand upon our strong position with an additional power management win in support of a leading manufacturer of laptops.

Speaker Change: Lastly, our recently launched Q Spice circuit simulation software was honored as the design tool and development software product of the year at the 2023 Elektra Awards.

Speaker Change: And power devices, we're shipping into power supplies for blockchain applications and design activity and data center continues to be strong.

Speaker Change: We are also seeing increased activity in circuit protection, where our <unk> technology brings unique advantages.

Speaker Change: In automotive design activity remained strong not only for onboard Chargers, but also for other emerging applications in electric vehicles.

Speaker Change: In infrastructure <unk> is leading the DOCSIS four <unk> upgrade cycle.

Robert Bruggeworth: We leverage unique competitive strengths to supply our customers best-in-class solutions that enhance efficiency, increase throughput, and reduce form factor. We are a preferred supplier with leading products and a robust technology roadmap, and we are positioned favorably for broad-based growth across our three operating segments. Now, let's turn to our strategic highlights, beginning with HPA.

We commenced volume shipments of our newest DOCSIS four <unk> hybrid power, Delaware in support of multiple cable Oems.

Speaker Change: And the cellular base station market inventories continue to be consumed and we expect demand conditions to remain soft through calendar year 'twenty four.

Speaker Change: Turning to CST customer activity for ultra wideband is increasing and secure access of automotive applications.

Robert Bruggeworth: Customer demand in end markets, excluding base stations, is improving and supports our view for a return to year-over-year growth in HPA in the March quarter. In Defense and Aerospace, we won an X-band radar design with a major DoD contractor, and we received new standard product orders in support of several large domestic and international ground-based radar systems. We also enjoy increasing demand for our solid-state PA products and for our switch filter bank products across multiple customers and programs. There are multi-year secular trends driving our DNA business, including the trend of one-to-many and the transition of mechanical systems to active electronic scanning systems, both of which increase requirements for more advanced systems-level RF solutions. Earlier today, we announced the signing of a definitive agreement to acquire Boston-based Inoculate. Inoki Wave is a leading supplier of high-performance integrated silicon ICs for intelligent active array antennas.

Speaker Change: We're also seeing new applications for ultra wideband in automotive, including presence detection and other radar based sensors.

Speaker Change: This momentum builds upon our recent wins and ultra wideband, including an in vehicle car access platform and a flagship Android smartphone launch.

Speaker Change: And <unk> touch sensors, we received first production orders for an automotive supplier in support of a leading Korea based automotive OEM we.

Speaker Change: We're seeing increasing traction across a growing set of customers and markets, including automotive.

Speaker Change: Laptop trackpad, Wearables and smart health.

Speaker Change: And Wifi design activity and collaboration remains strong across reference designs customers and operators.

Speaker Change: Within the Android ecosystem, the demand environment for mobile Wi Fi users improvement with the normalization of Android channel inventories and access points Wi Fi six volumes continue to grow with service provider Rollouts in India.

Speaker Change: In Wi Fi seven Corvo secured design wins across operator, retail enterprise and mobile segments.

Speaker Change: And ACG, we commenced shipments in support of the spring 2024 flagship smartphone launch by the leading Android smartphone OEM.

Speaker Change: On our last earnings call, we highlighted our content gains in the flagship here. In addition to the ultra Wideband <unk> content. This year includes the low band mid high band Ultra high band secondary transmit and receive tuning and wildfire, we are ramping up now and building upon our momentum with a broad.

Speaker Change: Set of design wins in this customer's high volume mass market portfolio.

Speaker Change: Android mass market smartphones are set the transition of FRG through the decade and.

Robert Bruggeworth: In infrastructure, Corvo is leading the DOCSIS 4.0 upgrade cycle. We have begun volume shipments of our newest DOCSIS 4.0 Hybrid Power Doubler in support of multiple cable OEMs. In the start of the base station market, inventories continue to be consumed, and we expect demand conditions to remain soft through calendar year 24. Turning to CSG, customer activity for ultrawideband is increasing in secure access automotive applications. We're also seeing new applications for ultrawideband in the automotive industry, including presence detection and other radar-based sensors.

Speaker Change: In our collaboration with Android customers on their long term product roadmaps positions <unk> to be a primary beneficiary as these new <unk> units enter our Sam.

Speaker Change: To that end Corvo was recognized by the top four China based Android <unk> Oems with 2023 awards for innovation quality supply technology and strategic partnership.

Speaker Change: During the quarter, we expanded customer sampling of our newly launched main path L. MH pad. This highly integrated solution is optimized for mass market smartphones.

Robert Bruggeworth: This momentum builds upon our recent wins in ultra-wideband, including an in-vehicle car access platform and a flagship Android smartphone launch. As we demonstrated at CES, we are actively involved in a wide array of enterprise and connected home solutions, leveraging Matter and Ultra Wideband for applications such as door locks, smart lighting, and indoor navigation. Additionally, with four sensing touch sensors, we received our first production orders for an automotive supplier in support of a leading Korea-based automotive OEM. We're seeing increasing traction across a growing set of customers and markets, including automotive, laptop trackpads, wearables, and smart health. In Wi-Fi, design activity and collaboration remain strong across reference designs, customers, and operators. Within the Android ecosystem, the demand environment for mobile Wi-Fi is improving, with the normalization of Android channeling in stores and access points. Wi-Fi 6 volumes continue to grow with server providers' rollouts in India, and Wi-Fi 7, Corvo secured design wins across operator, retail, enterprise, and mobile segments.

Speaker Change: It combines in a single placement below mid and high band main pass content traditionally offered in two placements. This reduces surface area by 40% simplifies design and accelerates time to market.

Speaker Change: In addition to developing highly integrated solutions with increasing levels of functional density. We're also advancing technology in our high performance discrete portfolio, including our ball brokers during the quarter. We received purchase orders for discrete BARF filters using our recently released next generation <unk> technology.

Speaker Change: During the quarter, we continued to bring channel inventory is down and our shipments are more closely aligned with end market demand.

Speaker Change: We're also seeing incremental improvement in end market demand in the Android ecosystem.

Speaker Change: For calendar 'twenty four we expect total total smartphone units to grow in low single digits with five units growing over 10%.

Speaker Change: The compete and win we collaborate with customers on their three year product Roadmaps, and we supply them industry leading solutions.

Speaker Change: <unk> Jordan our position as the preferred strategic RF supplier for all of the customers. We serve in the Android space and we're very well positioned to benefit as their portfolios continue to transition to <unk>.

In summary demand for core boat products has improved primarily due to our proactive efforts to align channel inventories with end market demand and content gains on key customer programs.

Robert Bruggeworth: NACG, we commend shipments in support of the Spring 2024 flagship smartphone launch by the leading Android smartphone OEM. On our last earnings call, we highlighted our content gains in the flagship tier. In addition to the ultra-wideband, Corvo content this year includes the low-band, mid-highband, ultra-highband, secondary transmit and receive, tuning, and Wi-Fi.

Speaker Change: We are delivering customers industry, leading products and technologies.

Speaker Change: And design activity remains robust.

Speaker Change: This positions <unk> favorably for continued strong content and durable long term growth and with that I'll hand, the call over to grant.

Grant Brown: Thanks, Bob and good afternoon, everyone.

Grant Brown: Revenue for the quarter was $1.074 billion non-GAAP gross margin was 43, 8% and non-GAAP diluted EPS was $2 10.

Grant Brown: All exceeding the midpoint of our guidance range.

Robert Bruggeworth: We are ramping up now and building upon our momentum with a broad set of design wins in this customer's high-volume, mass-market portfolio. Android mass market smartphones are set to transition to 5G through the decade. In our collaboration with Android customers on their long-term product roadmaps positions Corvo to be a primary beneficiary as these new 5G units enter our SANS. To that end, Quivo was recognized by the top four China-based Android 5G OEMs with 2023 awards for innovation, quality, supply, technology, and strategic partnerships. To simplify 5G adoption and sustain our position as the leading global strategic supplier to Android OEMs, we continue to launch new architectures and new products that enhance performance and reduce form factors. During the quarter, we expanded customer sampling of our newly launched main path LMH pad. This highly integrated solution is optimized for mass market smartphones. It combines, in a single placement, the low-, mid-, and high-bin main path content traditionally offered in two placements.

Grant Brown: Revenue increased approximately 44% year over year and continued to benefit from significant content gains at our largest customer.

As communicated last quarter ACG achieved year over year growth in September.

Grant Brown: <unk> achieved year over year growth during the September quarter, and we expect HVA to achieve strong year over year growth in the March quarter.

Grant Brown: Regarding gross margin a larger portion of December revenue was manufactured internally during periods of lower utilization, which led to higher unit costs compared to the September quarter.

Grant Brown: Factory utilization is improving and the impact from Underutilization in factory related variances continues to moderate.

Grant Brown: non-GAAP operating expenses in the quarter were $234 million we.

Grant Brown: You need to invest in new product development as it is a critical catalyst for driving multiyear growth across all three business segments.

In total non-GAAP operating income in the quarter was $237 million or 22% of sales.

Grant Brown: non-GAAP net income was $206 million.

Grant Brown: Representing diluted earnings per share of $2 10.

Grant Brown: Turning to the cash flow statement were pleased to report that during the December quarter, we generated free cash flow of $467 million.

Grant Brown: Setting a new quarterly record for cargo.

Grant Brown: Our capital expenditures for the period were $26 million, and we repurchased approximately $100 million of stock at $94 per share.

Grant Brown: The rate and pace of our share repurchases consider several factors, including our long term financial outlook free cash flow debt maturities alternative uses of cash and other relevant strategic considerations. This approach ensures that our capital allocation strategy balances future growth with the return of capital.

Grant Brown: And aligns with our underlying goal of delivering long term shareholder value.

Grant Brown: On the balance sheet as of quarter end, we had approximately $1 6 billion of long term debt outstanding and over $1 billion of cash and equivalents regarding balance sheet presentation, but 2024 notes have been reclassified as current and will mature in December.

Robert Bruggeworth: To compete and win, we collaborate with customers on their three-year product roadmaps, and we supply them industry-leading solutions. We enjoy a position as the preferred strategic RF supplier for all the customers we serve in the Android space, and we are very well positioned to benefit as their portfolios continue to transition to 5G. In summary, demand for Corvo's products has improved primarily due to our proactive efforts to align channel inventories with end market demand and content gains on key customer programs.

Subject to changes in the interest rate environment and other factors. We currently expect to retire. These notes later this year.

Grant Brown: In line with the expectations shared during our previous earnings call, we successfully reduced our net inventory balance over the period.

Grant Brown: We ended the quarter with a net inventory balance of $727 million, a sequential decrease of $113 million in terms of days of inventory. This represents a decrease from 138 days in the September quarter to 118 days in the December quarter. This reduction reflects.

Robert Bruggeworth: We are delivering customers industry-leading products and technologies, and design activity remains robust. This positions Corvo favorably for continued strong content and durable long-term growth. And with that, I'll hand the call over to Grant. Thanks, Bob. And good afternoon, everyone.

Grant Brown: Our commitment to efficient inventory management, and we expect continued improvement in the March quarter.

Grant Brown: Turning to the current quarter outlook, we expect revenue of approximately $925 million plus or minus $25 million non.

Grant Brown: Revenue for the quarter was $1,074,000,000. Non-GAAP gross margin was 43.8%, and non-GAAP diluted EPS was $2.10, all exceeding the midpoint of our guidance range. Revenue increased approximately 44% year over year and continued to benefit from significant content gains at our largest customers. As communicated last quarter, ACG achieved year-over-year growth in September, CSG achieved year-over-year growth during the September quarter, and we expect HPA to achieve strong year-over-year growth in the March quarter. Regarding gross margin, a larger portion of December revenue was manufactured internally during periods of lower utilization, which led to higher unit costs compared to the September quarter. However, factory utilization is improving, and the impact from underutilization and factory-related variances continues to moderate. Non-GAAP operating expenses for the quarter were $234 million.

Grant Brown: non-GAAP gross margin of approximately 42% and non-GAAP diluted EPS of $1 20 at the midpoint of the revenue range relative.

Grant Brown: Relative to December we expect March revenue to reflect a larger percentage of higher cost inventories previously manufactured internally during periods of lower utilization.

Grant Brown: As these higher costs previously manufactured inventory sell through it paves the way for future gross margins that reflect increasing levels of utilization.

Grant Brown: Currently expect to have sold through most of these higher cost inventories and associated cost by the second half of this calendar year.

Grant Brown: Our non-GAAP tax rate for fiscal 'twenty, four is expected to be within a range of 11% to 13%.

Grant Brown: In December we announced a new partnership with luck sure related to the divestiture of our Beijing, and <unk> Assembly and test facilities.

Grant Brown: Upon the closing of this transaction love share will acquire each facilities operations and assets, which includes the property plant and equipment as well as the existing workforce to enable the seamless continuity of operations.

Grant Brown: <unk> will continue to maintain our sales product and test engineering and customer support employees in China.

We believe that adding loss share as a strategic partner will strengthen our position to serve our customers globally.

Grant Brown: As it relates to our manufacturing strategy. This is a further step in our ongoing efforts to reduce capital intensity.

Grant Brown: This move aligns with previous actions, including the closure of our Florida manufacturing operations and the recent sale of our farmers branch facility in Texas.

Grant Brown: We are efficiently managing a complex supply chain, including our internal factories, which support all three operating segments and will remain an ongoing focus we.

Grant Brown: We will leverage internal manufacturing, where it uniquely differentiates our products and outsource production, where we maintain a strong network of foundry and <unk> partners.

At this time please open the line for questions. Thank you.

Speaker Change: Certainly thank you.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.

Speaker Change: Your question. Please press Star then two.

Speaker Change: Please limit yourself to one question and one follow up.

Speaker Change: Today's first question comes from Toshi Hari with Goldman Sachs. Please go ahead.

Toshiya Hari: Hi, Thank you so much for taking the question.

Toshiya Hari: I had two questions.

Toshiya Hari: First one on content growth for this year, Bob Obviously, you guys did a really good job last year and gaining content.

Toshiya Hari: Not only at your largest customer but across the board.

Toshiya Hari: I know, it's a little bit early but curious how you're thinking about.

Toshiya Hari: <unk> potential to grow content. This year again at the largest customer as well as on the Android side, you gave great color on.

Toshiya Hari: Youre Korea based customer, but curious how you're thinking about.

Toshiya Hari: For the year across the board. Thank you.

Speaker Change: I appreciate it thanks, Thanks for your question.

Does seem there is some reports last night and have created some confusion about our business. So I think it's best to go out and address it now what you gave me the opportunity with your first question.

Speaker Change: Based on our known design wins and engagements with our largest customer.

Speaker Change: One of our competitors I think it's been named Qualcomm, We don't believe they're competing on any of the sockets we're engaged in.

Speaker Change: They did not win any sockets that we've been in.

Grant Brown: As these higher-cost previously manufactured inventories sell through, it paves the way for future gross margins that reflect increasing levels of utilization. We currently expect to have sold through most of these higher-cost inventories and associated costs by the second half of this calendar year. We project non-GAAP operating expenses in the March quarter will be approximately $245 million, with variability related to labor-related expenses and the timing of program development spend. Below the operating income line, non-operating expense is expected to be approximately $10 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 11 to 13 percent.

Speaker Change: Nor do we see them challenging our share in any of the sockets, we're competing for investing in at our largest customer.

Speaker Change: In fact <unk>.

Speaker Change: Can ask them, we're quite confident they would tell you the same thing.

Speaker Change: Now specifically to alter high band we've made it clear on past calls there was a multi source socket.

Speaker Change: And we were the only company that consistently won over the last three years.

Speaker Change: We've never had 100% share of the ultra high band.

Speaker Change: Perhaps you can look at paradigms of the latest iPhone and <unk>, while in the ultra high band and the Pearl and Pro Max models.

Speaker Change: I know I've said in many of our team said consistently that this is a performance driven customer and we're winning based on multi year engagements, our technology investments and clearly our product performance.

Speaker Change: And we expect to grow with our largest customer in FY 'twenty, five and grow even more in FY 'twenty six.

Grant Brown: In December, we announced a new partnership with Luxaire related to the divestiture of our Beijing and Dejaux assembly and test facilities. Upon the closing of this transaction, LuxShare will acquire each facility's operations and assets, which includes the property, plant, and equipment, as well as the existing workforce, to enable the seamless continuity of operations. Corbel will continue to maintain our sales, product, and test engineering, and customer support employees in China.

Speaker Change: Wish I could give you more specifics, but I think that answers your question to ship.

Speaker Change: I appreciate the color Thanks, Bob and then as my follow up one for grant.

Speaker Change: On the gross margin side.

Speaker Change: Three months ago.

Speaker Change: You had shared the Underutilization charge of I think it was 550 basis points for the September quarter.

Grant Brown: We believe that adding Luxshare as a strategic partner will strengthen our position to serve our customers globally. As it relates to our manufacturing strategy, this is a further step in our ongoing efforts to reduce capital intensity. This move aligns with previous actions, including the closure of our Florida manufacturing operations and the recent sale of our farmers branch facility in Texas. We are efficiently managing a complex supply chain, including our internal factories, which support all three operating segments and will remain an ongoing focus. We will leverage internal manufacturing where it uniquely differentiates our products and outsource production where we maintain a strong network of foundry and OSAT partners. Corvo is well-positioned to capitalize on multiple growth drivers within each of our three operating segments.

Speaker Change: Curious.

Grant Brown: What the headwind was in December what's embedded in your March quarter guidance and more importantly, as you progress through the year, how should we think about the trajectory of gross margins and sorry, one last one the luck share deal.

Grant Brown: Should we think about that potentially benefiting gross margins medium to long term. Thank you.

Speaker Change: Sure sure, let me try and take all of the border.

Speaker Change: So the first one in terms of the impact from Underutilization charges.

Speaker Change: There is a lot of moving factors that influenced gross margin. In addition to underutilization. So the timing of where something was built when it was built in and then in any given period when it's sold.

Grant Brown: We are confident that our investments in our technology portfolio, product development, and advanced manufacturing will broaden our addressable market, diversify revenue, expand margin, and accelerate growth. At this time, please open the line for questions. Thank you. Certainly. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one, on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

Speaker Change: In the September quarter. For example, we had a relatively high percentage of product mix. It was manufactured at external.

Speaker Change: Silicon foundries and then processed at third party SaaS versus a higher percentage in the December than what we anticipated in March to be manufactured internally during prior periods of lower utilization. So there's this lag effect that I described last quarter.

Operator: To withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up. Today's first question comes from Toshiya Hari at Goldman Sachs. Please go ahead.

Speaker Change: The underutilization in past periods, obviously can burden.

Speaker Change: The products sold in future periods, but beyond March.

Speaker Change: No change to our guidance of returning it to 50% plus gross margin over time, we have line of sight to get there once we sell through the high cost inventories as I mentioned, it's encouraging on the utilization front as its improving and will continue to execute on further productivity opportunities as well.

Toshiya Hari: Hi, thank you so much for taking the question. I had two questions. The first one on content growth for this year, Bob. Obviously, you guys did a really good job last year in gaining content, not only at your largest customer but across the board. I know it's a little bit early, but I'm curious how you're thinking about your potential to grow content this year, again, at your largest customer as well as on the Android side. You gave great color on your Korea-based customer, but I'm curious how you're thinking about the year across the board. Thank you.

Speaker Change: Commented in my prepared remarks that we expect to have worked through all of that as I mentioned in the second half and that will clear the path for margins that reflect higher levels of a factory utilization going forward.

Speaker Change: Thank you. The next question comes from Ruben Roy with Stifel. Please go ahead.

Robert Bruggeworth: Toshiya, thanks for your question. And it does seem there were some reports last night that created some confusion about our business, so I think it's best I go ahead and address it now that you gave me the opportunity with your first question. You know, based on our known design wins and engagements with our largest customer, one of our competitors, I think it's been named Qualcomm, we don't believe they're competing in any of the sockets we're engaged in. They did not win any of the sockets that we've been in.

Ruben Roy: Thank you.

Ruben Roy: Bob first of all on the.

Ruben Roy: On the unit.

Ruben Roy: Assumptions that you have for the year low single digits. I think you said for the total smartphone market in <unk>.

Ruben Roy: 10% or so.

Ruben Roy: Thinking about sort.

Ruben Roy: Non China Android in China, Android as you think about your mix going forward. It would seem like youre doing quite well, obviously in Korea and elsewhere just wondering.

Ruben Roy: Kind of where you're seeing things.

Ruben Roy: Things shake out with China, Android as you kind of progress through calendar 2004.

Ruben Roy: Thanks for the question. This is Dave I'll take that one so.

As Bob mentioned as we said before we enjoy a really strong position as the preferred strategic supplier for all our Android customers.

Dave: Engage with them on multiple years out on their product Roadmaps and it's really a special seat at the table that we have is there a leading global supplier.

Dave: They care deeply about our products our technology, but also the quality and the supply assurance that we deliver and we've been that trusted supplier for all of our Android customers for many many years and the one thing. We've learned is you have to be there for them over the long term you can't just come in and out of a market and expect to gain any meaningful share.

Dave: Sure.

Dave: So at our China customers as Bob mentioned, we received top supplier awards for innovation quality supply.

Dave: Strategic partnership for 2023, and Anchorage Awards from honor <unk> Xiaomi and vivo.

Grant Brown: The LuxShare deal, how should we think about that potentially benefiting gross margins, medium to long term? Thank you. Sure, Toshiya. Let me try and take all those in order.

Dave: <unk> brings a new level of integration for size and performance leveraging our latest filter technology for bi and saw and we've also got a lot of other great content on that phone and we're excited to tell you about in the future as well.

Dave: We believe we are best positioned to grow with our Android customers as their product continue to transition to <unk> over the coming years, and we've got a lot of great new opportunities in content, we can address with ultra wideband touch sensors and power management. So we feel really good about our position really across the entire Android ecosystem.

Grant Brown: So the first one, in terms of the impact of the underutilization charges, you know, it's about half, maybe a little less than half of what we had previously reported. And as I pointed out, we'll be working through those higher-cost inventories over the balance of this year and should clear them in the second half. So that should give you a sense of the timing there. You know, there are a lot of moving factors that influence gross margin in addition to underutilization. So, you know, the timing of where something was built, when it was built, and then in any given period when it's sold.

Speaker Change: That's great. Thank you for all that detail a quick follow up for grant on the luck sure.

Speaker Change: Commentary.

How are you thinking grant about sort of longer term capex. Clearly this is part of sort of the longer term strategy around capex, but if you could speak to that.

Grant Brown: The deal is going to close first half of 'twenty for Cemig, a little bit early but.

Grant Brown: Has anything changed I guess with the strategy around Capex and cash flow.

Grant Brown: Assumption that you have as you think about sort of the next 12 to 18 months.

Grant Brown: Sure.

Grant Brown: Cash flow.

Grant Brown: Question I think.

Speaker Change: As we as we look forward as I've always said, we will follow the P&L, so largely that'll be dictated by our by the <unk>.

Speaker Change: Growth that Bob mentioned.

Speaker Change: In fiscal 'twenty, five and 26 in.

Grant Brown: But beyond March... No change to our guidance of returning to 50% plus gross margin over time. We have a line of sight to get there once we sell through the high-cost inventories. As I mentioned, it's encouraging on the utilization front as it's improving, and we will continue to execute on further productivity opportunities as well. I've commented in my prepared remarks that we expect to have worked through all of that, as I mentioned, in the second half, and that'll clear the path for margins that reflect higher levels of factory utilization going forward. Thank you. The next question comes from Ruben Roy with Stiefel. Please go ahead.

Speaker Change: In terms of our Capex.

Speaker Change: As a percentage of the top line, we do expect it to continue in that 5% or less category. If there are capacity additions made it will be in response to demand and the capacity required to serve it.

Speaker Change: As it relates to the sale of Beijing in the show.

Speaker Change: We're really excited to partner with loss share as we transition those sites.

Speaker Change: <unk> is over multiple years.

Speaker Change: There is obviously some benefits there for corvo.

Speaker Change: As the volume increases and we found a great partner to help reduce our capital intensity and we're confident in their ability to provide the cost improvements that we would expect over time in a rather similar relationship.

Ruben Roy: Thank you. Bob, first of all, on the unit assumptions that you have for the year, low single digits, I think you said, for the total smartphone market, and then 5G, 10% or so, are you thinking about sort of non-China Android and Chinese Android as you think about your mix going forward? It would seem like you're doing quite well, obviously, in Korea and elsewhere.

Speaker Change: To what we incur today cost wise at those locations.

Speaker Change: Thank you. The next question comes from Edward Snyder with charity Im Sorry Charter equity research. Please go ahead.

Sure you just yet.

Speaker Change: [laughter].

Edward Snyder: A couple of quite a couple of things Bob. Thank you very much for clearing that up right off the bat I really appreciate that that clears up a lot of confusion.

Edward Snyder: Maybe we could shift gears, then a little bit.

Edward Snyder: Hum on the Android market.

Edward Snyder: So very well in China and in the whole inventory digestion. That's all I think fairly clear now, but when you get back to normal run rate here.

Edward Snyder: The content games seems to be shifted a little bit of the Chinese suppliers have picked up a little bit, but they don't seem to be threatening you in modules and now you are talking about these very high integrated modules, which would separate you from any other competitors I think Scott what she'd been has apart yet so one.

Edward Snyder: Content wise by combining all of that into a single module must be.

Edward Snyder: Some of the parts isn't quite equal to the individual pieces.

Dave Fullwood: You can't just come in and out of a market and expect to gain any meaningful share. So at our Chinese customers, as Bob mentioned, we received top supplier awards for innovation, quality, supply, strategic partnership for 2023, and that included awards from Honor, OPPO, Xiaomi, and Vivo. And we're also proud of our position in Android outside of China as well. Bob highlighted the great content in the new Samsung Galaxy S24. For multiple years now, we have provided a full lineup of ultra-high band, mid-high band, secondary transmit path, low band tuning, and Wi-Fi. And this year, we added ultra-wide band.

Edward Snyder: Is it a content decline just on average or are you pulling in content.

Edward Snyder: You may not have had before or are they paying for premiums I'm just trying get an idea of how that shakes out with China. Finally gets back to a normal run rate and then I had a follow up please.

Okay.

Edward Snyder: Yeah. This is Dave it kind of depends.

Dave: Bob mentioned, our low mid high and so that's a combination of what used to be the mid high band, which we generally enjoyed a pretty high share of that and the low band, which we had good share, but we shared a lot of that with some other <unk>.

Dave: Competitors, but when we integrated the low mid high altogether, obviously, we can pick up some content there overall as we support customers with that that platform.

Dave Fullwood: We're also excited to have received initial purchase orders for our next generation mid-high band with integrated diversity receive. We announced that product a few quarters ago, and we have our first purchase orders for a US-based Android customer. This part brings a new level of integration for size and performance, leveraging our latest filter technology for ball and saw.

Ruben Roy: And we've also got a lot of other great content on that phone that we're excited to tell you about in the future as well. We believe we're best positioned to grow with our Android customers as their products continue to transition to 5G over the coming years, and we've got a lot of great new opportunities and content we can address with ultra-wideband, touch sensors, and power management, so we feel really good about our position across the entire Android ecosystem. That's great; thank you for all that detail. Quick follow-up for Grant on the LuxShare commentary.

Dave: To support their solutions.

Dave: Across those different tiers, so whether theyre doing a global SKU, where theyre doing regional skus, we can tier the product along with that to fit the need that they have there.

Speaker Change: Great and then if I could.

Speaker Change: You historically havent sold discrete filters in quite a long time for lack of a member I know you're doing it now is that well first of all maybe.

Speaker Change: If you could give us some idea of where those are going is that most seem to Wi Fi.

Grant Brown: How are you thinking, Grant, about sort of longer-term CapEx? Clearly, this is part of the longer-term strategy around CapEx, but if you could speak to that. I know the deal's gonna close in the first half of 24, so maybe a little bit early, but has anything changed, I guess, with the strategy around CapEx and cash flow assumptions that you have as you think about 2012.

Speaker Change: Where what.

Is it driven mostly by the fact that you have.

Speaker Change: Capacity in Texas could support that.

Speaker Change: Whereas you've not seen maybe as much bond and some of the modules that you had before and then.

Speaker Change: Yes, and this is due to that one.

Speaker Change: Yeah, and it's an interesting one so we've been in the discrete filter market has not been a huge business for us because we focus more on the models as you said.

Grant Brown: Sure. The cash flow question, I think as we look forward, as I've always said, we'll follow the P&L. So largely, that'll be dictated by the growth that Bob mentioned in fiscal 25 and 26. In terms of our CapEx, as a percentage of the top line, we do expect it to continue in that 5% or less category. If there are capacity additions made, it will be in response to demand and the capacity required to serve it.

Speaker Change: But it's a very good performing module it as it is for <unk> not for Wi Fi and.

Speaker Change: I like to use an example is the customers.

Even in that tier of the market are paying for performance. They want the latest and greatest technology from us and even on a very based product like a discrete filter.

Speaker Change: There is still looking for performance.

Speaker Change: So we're pretty excited about those products.

Speaker Change: Okay.

Speaker Change: Thank you. The next question is from Karl Ackerman with BNP Paribas. Please go ahead.

Karl Ackerman: Yes. Thank you two if I may a question first for grant shut.

Edward Snyder: As it relates to the sale of Beijing and Dejaux, we're really excited to partner with Luxair as we transition those sites. The agreement is for multiple years, and there are obviously some benefits there for Corvo as the volume increases. And we found a great partner to help reduce our capital intensity, and we're confident in their ability to provide the cost improvements that we'd expect over time in a rather similar relationship to what we incur cost-wise at those locations. Thank you. The next question comes from Edward Snyder with Charter Equity Research. Please go ahead.

Karl Ackerman: Write downs of your Florida facility.

Speaker Change: Sure. So those are all productivity enhancements.

Speaker Change: And then as we've talked about it's largely a utilization a function of utilization.

Speaker Change: In addition to.

Speaker Change: Just shuttering some of those facilities that you mentioned were also producing significantly smaller die and so we have effective capacity that has grown a lot.

Regardless of the number of wafers. So you can get more die out of a given wafer so there's productivity there.

Speaker Change: I would say theres, a lot of productivity opportunities for us looking forward.

Speaker Change: We as we work into that across the board.

Speaker Change: So there is there is productivity initiatives.

Speaker Change: We still have to do it and in terms of why we haven't achieved 50% it's again largely.

Speaker Change: A utilization issue.

Speaker Change: Sure. Thanks for that grant I guess, Bob you also mentioned that five G units would grow over 10% this calendar year.

Dave Fullwood: The Chinese suppliers have picked up a little bit, but they don't seem to be threatening you in modules. And now you're talking about these very highly integrated modules, which would separate you from any other competitors. Skyworks doesn't even have that part yet.

I'm curious if that is done predominantly in mid range across maybe the China Android OEM has worked out.

Speaker Change: Only from Korea, and U S. Oems can you give some color on that.

Dave Fullwood: So one, content wise, by combining all that into a single module, it must be, you know, the sum of the parts isn't quite equal to the individual. Is it a content decline, just on average, or are you pulling in content that you may not have had before, or are they paying attention to it? This is just for you to get an idea of how that shakes out when China finally gets back to normalcy, and then I will. Yeah, this is Dave. It kind of depends.

Speaker Change: The constitution of the <unk> unit growth and tower 24, that'd be very helpful. Thank you.

Bob: Yes. Thanks for the question Carl it's primarily the Android ecosystem. So it would include all the Android manufacturers, because where we're seeing some of in China. The manufacturers that are not based box also moving into <unk>. So it's a broad comment across the Android ecosystem as what we see driving most of that.

Dave Fullwood: So when Bob mentioned our low mid-high, that's a combination of what used to be the mid-high band, which we generally enjoyed a pretty high share of. And the low band, which we had a good share of, but we shared a lot of that with some other competitors. But when we integrate the low, mid, and high bands altogether, obviously, we can pick up some content there overall, as we support customers with that platform. You also have to look at the different SKU strategies that our customers have. So depending on what markets they serve, there may be more or less filter content.

Bob: Growth.

Bob: Thank you. The next question is from Shanghai, Gerry with Raymond James. Please go ahead.

Gerry: Thank you.

Gerry: Yes on your March quarter outlook pretty solid guide by the way Bob just trying to understand the puts and takes by different segment. I think you said HPA is going to grow nicely in March quarter, which seems to imply that.

Dave Fullwood: So we work with them, as Bob mentioned and I mentioned as well, on their long-term roadmaps to help architect to support their solutions across those different tiers. So whether they're doing a global SKU or they're doing regional SKUs, we can tier the product along with that to fit the needs that they have. Great, and then if I could...

Gerry: Sure history. This is grant and I'll take that question.

Grant Brown: We don't guide specifically by segment, but our views are incorporated in.

Grant Brown: The total guidance I will give a bit of color on each.

Grant Brown: And ACG, we expect substantial year on year growth. Despite the typical sequential decline associated with our largest customers.

Edward Snyder: Historically, has it sold well, Douglas DeLieto, Robert Bruggeworth, Jim Klein, Steve Smigie, Craig Hettenbach, Ed Snyder, And is it driven mostly by the fact that you have... Spahn, and some of the... War. Yeah, let's just do that one. Yeah, and it's an interesting one. So we've been in the discrete filter market. It's not been a huge business for us because we focus more on the modules, as you said. But it's a very good performing module. It is for 5G, not for Wi-Fi.

Grant Brown: Consequently.

Grant Brown: The fence in aerospace now represents over half of the HVA topline, making that segment a bit more sensitive to the timing of some of those defense programs quarter to quarter.

Dave Fullwood: And I like to use an example as customers, even in that tier of the market, are paying for performance, right? They want the latest and greatest technology from us. And even on a very basic product like a discrete filter, they're still looking for performance.

Grant Brown: In CST.

Grant Brown: We also expect year over year growth in the March quarter supported by our Wi Fi revenue.

Karl Ackerman: We're pretty excited about this product. Thank you. The next question is from Karl Ackerman with B&B Paribas. Please go ahead.

Grant Brown: Yes, thank you. Two, if I may, a question first for Grant. You know, with shutdowns in your Florida facility, which I believe was a historically sawmill, and the sale of Farmer's Branch, but also expansion of your Richardson facility, I guess, why wouldn't gross margins exceed 50% on a lower revenue base than the prior peak as 5G unit volumes continue to grow? Sure, so those are all productivity enhancements, you know, and then, as we talked about, it's largely a function So in addition to just shuttering some of those facilities that you mentioned, we're also producing significantly smaller dyes, and so we have effective capacity that has grown along with the number of wafers, so you can get more dye out of a given wafer.

Grant Brown: Although the auto market appears to be weakening in general are secular opportunities there lie in the automotive connectivity areas, which are supported.

Grant Brown: By the growing adoption of Wi Fi Vida accident, and ultra Wideband I think Dave commented on earlier.

We've already announced some significant design wins, there and CST.

Grant Brown: For automotive and smartphone and we're targeting additional areas, including industrial enterprise and smart home.

Grant Brown: Great.

Speaker Change: Great color Grant I appreciate that and then grant our cash flow you know very very strong here, obviously, you had a little bit of a headwind in the first half with the working capital now I think that has become a tailwind but quite impressive. Nevertheless.

Speaker Change: So can you talk about.

Speaker Change: How are you thinking about cash flow going forward I think you mentioned.

Speaker Change: Capex is going to be fairly relatively small.

And you also kind of suggested that inventory might come down again, so just.

Just wanted your thoughts on cash flow generation going forward and then you know.

Speaker Change: What are the uses for the cash going forward I guess you name it looks like you've made an acquisition.

Speaker Change: Obviously, you've been buying back shares. So if you can talk about that that would be helpful. Thank you.

Speaker Change: Sure.

Speaker Change: In terms of the cash flow next quarter as you point out there's a few puts and takes I would expect capex to be up it's going to follow.

Speaker Change: The level of support for the top line and our capacity additions there for our customers demand. So I would expect that to be up in the March quarter, but remain on the year under our limit of around.

Robert Bruggeworth: If you could give us some color on the constitution of the 5G unit growth in calendar 24, that would be very helpful. Yeah, thanks for the question, Karl. It's primarily the Android ecosystem. So it would include all the Android manufacturers because we're seeing some in China, the manufacturers that are not HBOX also moving into 5G. So it's a broad comment across the Android ecosystem that we see driving most of that growth. Thank you. The next question is from Srinivas Pajjuri with Raymond James. Please go ahead.

Speaker Change: 5% well.

Speaker Change: Well under.

Speaker Change: The.

Speaker Change: Monetization of our receivables is something that I expect will continue that's been a significant tailwind last quarter, along with the reduction in inventory balances. So now you're starting to see that come down.

Speaker Change: As we're able to sell through inventory rather than purchase as much new materials, so that helps cash flow.

Speaker Change: Looking forward.

Speaker Change: Pointed out.

Speaker Change: On rate and pace of our buyback will fluctuate.

Speaker Change: Dependent this year on our.

Speaker Change: Maturing 2024 notes, which will look to.

Speaker Change: Take out by December and then.

Speaker Change: Obviously, we'll be continuing to grow throughout the throughout the calendar year and into into fiscal 'twenty five so overall.

Speaker Change: We should see some improvement, but on a quarter to quarter basis in March there were some additional items there.

Speaker Change: Thank you. The next question comes from Matt Ramsay with TD Cowen. Please go ahead.

Grant Brown: I'll take that question. We don't guide specifically by segment, but our views are incorporated in the total guidance. I'll give a bit of color on each.

Matthew D. Ramsay: Thank you very much guys good afternoon.

I guess my question in.

Matthew D. Ramsay: Trying to dovetail some expectation that the market is increasing habit increasingly having about.

Grant Brown: In APG, we expect substantial year-on-year growth despite the typical sequential decline associated with our largest customer's fall ramp. Partially offsetting that seasonal decline is healthier channel inventories and improving smartphone unit demand in China, as well as the flagship launch by our largest Android customer. In HPA, we also expect year-over-year growth across all the businesses except Bay Station.

Matthew D. Ramsay: AI adoption in clients or handset devices.

Particularly flagship ones and dovetail that Bob with your <unk>.

Matthew D. Ramsay: And sorry about visibility to maybe accelerating content gains for you is with your large customer.

Matthew D. Ramsay: What I'm trying to understand a bit more is it.

Matthew D. Ramsay: That is AI.

Matthew D. Ramsay: I guess proliferates over the long term in the handset market do you view that in and of itself is a driver of Tam our RF content for your company or is it more that the resources in the fall and are going to get jacked up a lot in terms of compute and memory et cetera.

Matthew D. Ramsay: Additional constraints on our App for your company can distinguish itself through R&D and taking out things like cost and board space and power et cetera, and just trying to.

Matthew D. Ramsay: Figure out what you see driving the visibility of content.

Matthew D. Ramsay: AI, presumably comes into these devices.

Matthew D. Ramsay: Yes. This is Dave it's early days as you know with AI.

Dave: It's pretty exciting I think you hit on a lot of the key points already.

Dave: It could be a catalyst that can help improve their replacement rate as people want to upgrade to take advantage of the new AI capabilities that show up in phones.

It should drive more.

Dave: Data over the network and that of course means more and better RF.

Dave: And then as you pointed out it's going to be more computer processing power and the device, which is going to put more pressure on the rest of the phone.

Dave: And so that to us translates into performance and it could be in the RF and we can deliver better and better RF and lower power consumption to help solve those problems, but also we can deliver power management and Theres a lot of areas in the phone to address with power management that we can use our IP there to help again reduced current consumption improved battery life and make more.

Srinivas Reddy Pajjuri: And then Grant, cash flow, you know, very, very strong here. Obviously, you had a little bit of a headwind in the first half with working capital, but now I think that has become a tailwind, but, you know, quite impressive nevertheless.

Grant Brown: So can you talk about, you know, how you're thinking about, you know, cash flow going forward? I think you mentioned that. CapEx is going to be relatively small. Uhm, and you also kind of suggested that inventory might come down again. Just want to hear your thoughts on cash flow generation going forward and then what are the uses for the cash going forward. I guess it looks like you made an acquisition and, obviously, you have been buying back shares, so if you can talk about that, Sure. In terms of cash flow next quarter, as you point out, there are a few puts and takes. I would expect CapEx to be up. It's going to follow the level of support for the top line and our capacity additions there to meet our customers' demand.

Dave: <unk> room to run the AI on the phone, but it's early and so we have to see how this plays out but definitely we're looking forward how AI can.

Dave: Helped drive.

Dave: Mark loan market further.

Speaker Change: That youre, bringing in the people that you're bringing in just any any color there would be helpful. Thanks.

Speaker Change: Thanks for the question, Matt This is grant and I'll take that one we're really excited to bring the <unk> team on board here at <unk>.

Grant Brown: Hey, Brian.

Grant Brown: Our highly experienced talent and RF silicon antenna and phased array systems to our our DNA group.

Grant Brown: So I would expect that to be up in the March quarter but remain on the year under our limit of around 5%, well under. The monetization of our receivables is something that I expect will continue. That was a significant tailwind last quarter, along with the reduction in inventory balances. So you're starting to see that come down as we're able to sell through inventories rather than purchase as much new material. So that helps cash flow.

Grant Brown: This technology will complement our existing product portfolio, the beam, forming capabilities, especially where we can leverage those with our advanced packaging capabilities.

Grant Brown: We in terms of the deal we did announce the terms as you mentioned, but we do expect to close this quarter. The impact is factored into our guidance. Initially it will add revenue in the low single digits per quarter and be slightly dilutive to EPS, but accretive to gross margin and all of that's factored into our guidance.

Matthew D. Ramsay: Looking forward, as I pointed out, the rate and pace of our buyback will fluctuate. It's dependent this year on our maturing 2024 notes, which we'll look to take out by December, and then obviously, we'll be continuing to grow throughout the calendar year and into fiscal 25, so overall, we should see some improvement but on a quarter to quarter basis in March, there are some additional items. Thank you. The next question comes from Matt Ramsey with TD Cohen.

Grant Brown: Thank you. The next question is from Chris Caso with Wolfe Research. Please go ahead.

Chris Caso: Yes. Thank you I'm wondering if you could speak to seasonality for the rest of the year and recognize that the.

Chris Caso: I only want a guide for one quarter, but.

With.

Chris Caso: I guess some of the inventory correction certainly in the mobile business looking like it's behind us.

Chris Caso: Is the expectation to kind of returned to normal seasonal patterns and then how does that apply to the non.

Chris Caso: Non mobile businesses, which I guess youre still going through some degree of correction.

Matthew D. Ramsay: Please go ahead. Thank you very much, guys. Good afternoon.

Dave Fullwood: I guess my question is... trying to dovetail some expectations the market is increasingly having about AI adoption in client or handset devices, particularly flagship ones, and they'll tell that Bob with your commentary about visibility to maybe accelerating content gains for you with your large customer. And what I'm trying to understand a bit more is that you guys as AI, the visibility of content as AI presumably comes into these devices. Yeah, this is Dave.

Chris Caso: But given the content gains and success, we're having in our largest customer.

Chris Caso: The success in our defense and aerospace areas, our revenue seasonality will more closely aligned to today's customer programs and ramp profile. So.

Chris Caso: We anticipate that quarterly profile or the shape of revenue across 25, we expect it to look very similar to 224.

Chris Caso: Beyond 25, we are proactively investing focusing on diversifying our business pursuing substantial customer platforms, where we have the technology to win and the customer engagement.

Chris Caso: Justify that that product development.

Speaker Change: Okay. That's helpful. As a follow up to that if you can.

Speaker Change: Through this correction, perhaps some of the expectations may have changed in that.

Whats your kind of outlook for those businesses, we look over the next two years or so.

Speaker Change: This is grant I'll take that one too I.

Grant Brown: I would think of <unk> as having a portfolio of diversified businesses that contribute to the revenue line no change to our long term growth.

Dave Fullwood: And so that, to us, translates into performance, and it could be in the RF, and we can deliver better and better RF and lower power consumption to help solve those problems. But we can also deliver power management. And there are a lot of areas in the phone to address with power management that we can use our IP there to help, again, reduce current consumption, improve battery life, and make more room to run the AI on the phone. But it's early, and so we have to see how this plays out. But definitely, we're looking forward to how AI will help drive.

Grant Brown: Metrics that we've commented on in the past but.

HCA over half of that business is now defense and aerospace and in BSG over half that business is Wi Fi currently.

Grant Brown: It hasn't always been the case in HVA base station used to be significantly larger those have better than corporate gross margins typically and so thats.

Grant Brown: An area, where we still have a lot of opportunity, but it's underrepresented in HPA at the time.

Grant Brown: Mark, thanks for the comments there; that's helpful. I guess as my follow-up, it's just a quick one. I know you guys didn't discuss financial terms and whatnot, but you did announce an acquisition today. Maybe you could give us a little context around the technologies that you're bringing in, the people that you're bringing in, just any color there would be helpful. Thanks. Thanks for the question, Matt. This is Grant. I'll take that one.

Grant Brown: Between HP and <unk>, there is a smaller portfolio of businesses that range from 25% to $75 million annually or so and they address market opportunities and the $1 billion. So theres a lot of room to grow there.

Grant Brown: Substantiate our comments on the on the strong double digit growth rates.

Grant Brown: Our largest investments are aimed at very large customer programs as I pointed out in ACG for fiscal 'twenty five and beyond we're looking to scale, our defense and power franchises within HPA and we're building our uwp in matter of business and <unk> and all combined this this collection of businesses brings the diversification as a financial.

Grant Brown: We're really excited to bring the InokiWave team on board here at Corvo. They bring highly experienced talent in RF silicon, antenna, and phased array systems to our DNA group. The technology will complement our existing product portfolio, the beamforming capabilities, especially, where we can leverage those with our advanced packaging capabilities. In terms of the deal, we didn't announce the terms, as you mentioned, but we do expect to close it this quarter. The impact is factored into our guidance. Initially, it'll add revenue in the low single digits per quarter and be slightly dilutive to EPS, but accretive to gross margin, and all that's factored into our guidance. Thank you. The next question is from Chris Caso with Wolf Research. Please go ahead.

Grant Brown: Resiliency.

Grant Brown: So rarely if ever all all in phases. It's also interesting to note.

Grant Brown: That in each of our operating segments, the largest businesses all benefit from our shared internal manufacturing capabilities.

Grant Brown: Our more nascent businesses rely on external capital and over time, we expect to grow that.

Less capital intensive simply because of the relative growth rates in those smaller businesses.

Grant Brown: Thank you. The next question is from Thomas O'malley with Barclays. Please go ahead.

Chris Caso: Yes, thank you. I wonder if you could speak to, you know, seasonality for the rest of the year and, you know, recognize that you only want a guide for one quarter, but, with, I guess, some of the inventory correction, certainly in the mobile business, looking like it's behind us, is the expectation to kind of return to normal seasonal patterns? And then, you know, how does that apply to the non-mobile businesses, which I guess you're still going through some degree of. It's a little early to comment with any specificity on what would be our fiscal 25 or the balance of this calendar year, largely, but absent any macro-related disruptions, as I pointed out, we do expect to grow and improve our gross margins year on year.

Thomas O'malley: The Huawei smartphone penetration in calendar year, 2004, and just how that impacts your outlook for Android, particularly as you get into the back half of the calendar year and 24.

Thomas O'malley: We also had the revenue what we currently do.

Thomas O'malley: <unk>.

Speaker Change: <unk> revenues very low near zero or at zero at this point with Huawei, but that's a good question I think the performance of the phones that are out there that the newer ones I think it's pretty widely known people have done performance.

Speaker Change: Evaluations and there is definitely some performance challenges on those funds. So we don't think that they could export them to other markets that probably have very difficult time.

Chris Caso: It's worth pointing out that given the content gains and success we're having in our largest customer and the success in our defense and aerospace areas, our revenue seasonality will more closely align to those customer programs and ramp profiles. So, as we anticipate that quarterly profile or the shape of revenue across 25, we expect it to look very similar to 24. Beyond 25, we're proactively investing, focusing on diversifying our business, and pursuing substantial customer platforms where we have the technology to win and the customer engagement to justify that product development. That's helpful.

Getting carrier approval. So we think there are limited to China and so if you look at their performance to date since the May 60 ramp.

Speaker Change: We think they did about $30 million in calendar year 'twenty three if you take the last four months of data and you start to project that forward you can see an incremental.

Speaker Change: 10 to 20 million units added in CDI 24, so thats kind of how we're sizing it right now and Thats all built into our models.

Speaker Change: Yes, there was probably some pent up demand from Huawei user. So we'll have to see how that plays out and how sustainable that is but in any case any of those numbers yet it's really not that significant when you think about a $1 2 billion unit smartphone market. So it's not that meaningful to us on a grand scale of things and when we think about our China customers.

Grant Brown: As a follow-up to that, you know, if you could speak to the CSG and HPA businesses and, you know, could you give us perhaps an update on, you know, what you think are the longer-term growth rates for that business, those businesses? There are a lot of different moving parts in there, and I know, through this correction, perhaps, some of the expectations may have changed in that regard. What's your kind of outlook for those businesses as we look over the next two years? This is Grant. I'll take that one too.

Speaker Change: The ones I mentioned earlier they have.

Speaker Change: Pretty meaningful market shares also outside of China, and that's where a lot of the growth is coming from it that Bob talked about as the market converts to <unk> as most of China has already moved to <unk>. So for US we look at that as a great opportunity to work with those customers to continue to grow and that <unk> comes into our market because they're really not present.

Speaker Change: And in the <unk> portion of the market.

Speaker Change: Helpful.

Speaker Change: That one wasn't your favorite I can give you a bit of a lay up now, but just if you look at the.

Speaker Change: And why you know existing customers go with you and if they were to enter the market why do you think that you would keep the share profile that you have today. Thank you.

Speaker Change: You are referring to the Android market.

The Android market.

Speaker Change: Yes, I think I commented on this earlier I mean, we've been working with these customers for a very very long time in fact, I was just in China last quarter.

Speaker Change: Sat with all of these customers talking about our long term roadmaps.

Speaker Change: We mentioned the awards, we got I mean, there is a lot of.

Speaker Change: Trust and relationship that has been built up over the years.

Speaker Change: So we're very confident that we will continue to enjoy our leadership position there and other competitors.

Speaker Change: They may come and go.

Speaker Change: But we feel confident we will maintain our leadership position there.

Speaker Change: Thank you.

Thomas O'malley: We're looking to scale our defense and power franchises within HPA, and we're building our UWP and matter business in CSG, and all combined, this collection of businesses brings diversification and some financial resiliency since they're rarely, if ever, all in phase. It's also interesting to note that in each of our operating segments, the largest businesses all benefit from our shared internal manufacturing capabilities. Our more nascent businesses rely on external capital, and over time, we expect to grow the less capital-intensive businesses simply because of the relative growth rates of those small enterprises. Thank you. The next question is from Thomas O'Malley with Barclays. Please go ahead.

Speaker Change: This does conclude our question and answer session I would like to turn the call back over to management for closing remarks.

We want to thank everyone for joining us on the call Tonight. We appreciate your interest and we look forward to speaking with many of you at upcoming Investor events. Thanks, again and have a great evening.

Okay.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Dave Fullwood: Hey, good evening guys, thanks for taking my question. I wanted to ask kind of a broader 30,000 feet view question on Huawei's entry into the Android market. Can you just talk about what your internal estimates are for Huawei smartphone penetration in calendar year 24 and just how that impacts your outlook for Android, particularly as you get into the back half of the calendar year in 24. Did we also add revenue, as we currently do? Our revenue is very low, near zero or at zero at this point with Huawei, but that's a good question. I think, you know, the performance of the phones that are out there, the newer ones, I think, is pretty widely known. People have done performance evaluations, and there are definitely some performance challenges on those phones, so we don't think that they could export them to other markets. They probably will have a very difficult time getting carrier approval.

Dave Fullwood: So we think they're limited to China. And so if you look at their performance to date, you know, since the May 60 ramp, we think they did about 30 million in calendar year 23. If you take the last four months of data and start to project that forward, you can see an incremental 10 to 20 million units added in CY24. So that's kind of how we're sizing it right now.

Dave Fullwood: And that's all built into our models. You know, there was probably some pent-up demand from Huawei users. So we'll have to see how that plays out and how sustainable that is. But in any case, any of those numbers you use, it's really not that significant when you think about a 1.2 billion-unit smartphone market. So it's not that meaningful to us on the grand scale of things.

Thomas O'malley: And when we think about our Chinese customers, you know, the ones I mentioned earlier, they have pretty meaningful market shares also outside of China. And that's where a lot of the growth is coming from that Bob talked about as the market converts to 5G, because most of China has already moved to 5G. So for us, we look at that as a great opportunity to work with those customers to continue to grow and that 5G comes into our market because we're really not present today in 4G. And since that one wasn't your favorite, I can give you a bit of a layup now.

Dave Fullwood: Yeah, I think I commented on this earlier. I mean, we've been working with these customers for a very, very long time. In fact, I was just in China last quarter, you know, sitting with all of these customers talking about our long-term roadmaps, and we mentioned the awards we got. I mean, there's a lot of trust and relationship that's been built up over the years. So we're very confident that, you know, we'll continue to enjoy our leadership position there. And other competitors, yeah, I mean, they may come and go.

Operator: But we feel confident we'll maintain our leadership position. Thank you. This does conclude our question and answer session. I would like to turn the call back over to management for closing remarks. We want to thank everyone for joining us on the call tonight. We appreciate your interest, and we look forward to speaking with many of you at upcoming investor events. Thanks again, and have a great evening. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your line.

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