Q2 2024 Skyworks Solutions Inc Earnings Call

April 30, 2024

Yeah.

Rajvindra S. Gill: I would like to introduce Raja Gill, Vice President of Investor Relations for Skyworks. Thank you, operator. Good afternoon, everyone.

I would like to introduce Raj Gill Vice President of Investor Relations for Sky works.

Rajvindra S. Gill: And welcome to Skyworks' second fiscal quarter 2024 conference call. With me today is Liam Griffin, our Chairman, Chief Executive Officer, and President, and Kris Sennesael, Chief Financial Officer for Skyworks. This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at skyworksinc.com. In addition, the company's prepared remarks will be made available on our website promptly after their conclusion during the call. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are, or may be, considered forward-looking statements.

Rajvindra S. Gill: Thank you operator, good afternoon, everyone and welcome to Sky work second fiscal quarter 2024 conference call.

Rajvindra S. Gill: With me today is Liam Griffin, our chairman, Chief Executive Officer, and President and Chris Citizen, Chief Financial Officer for Sky works.

Rajvindra S. Gill: This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at Sky works each dot com <unk>.

Rajvindra S. Gill: In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call.

Rajvindra S. Gill: Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. Additionally, the results and guidance we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release in the Investor Relations section of our company website for complete reconciliation to GAAP. With that, I'll turn the call over to Liam. Thanks, Raji, and welcome, everyone. Skyworks posted solid results for the second fiscal quarter of 2024.

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

Liam K. Griffin: We delivered revenue of $1.046 billion. We posted earnings per share of $1.55 and generated $300 million of operating cash flow, which reflects strong working capital management and operational excellence. During the March quarter, in our mobile business, we saw below-normal seasonal trends with lower-than-expected end-market demand. In broad markets, the December quarter represented the bottom, and we delivered modest sequential growth in March, reflecting a turning point. We expect the pace of the recovery will be measured throughout 2024, given ongoing weakness in certain end markets like infrastructure and automotive. For Edge IoT, we have a solid Wi-Fi 6e and Wi-Fi 7 design pipeline.

Rajvindra S. Gill: Please refer to our earnings press release, and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today.

Additionally, the results and guidance, we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP with that I'll turn the call over to Liam.

Liam K. Griffin: Thanks, Rajiv and welcome everyone. Scott works posted solid results for the second fiscal quarter of 2024.

Liam K. Griffin: We delivered revenue of $1 <unk> 6 billion.

Liam K. Griffin: We posted earnings per share of $1 55.

Liam K. Griffin: And generated $300 million of operating cash flow, which reflects strong working capital management and operational excellence.

Liam K. Griffin: During the March quarter, and our mobile business, we saw below normal seasonal trends with lower than expected end market demand.

Liam K. Griffin: In broad markets. The December quarter represented the bottom and we delivered modest sequential growth in March reflecting a turning point.

Liam K. Griffin: We expect the pace of the recovery will be measured throughout 2024, given ongoing weakness in certain end markets like infrastructure and automotive.

Liam K. Griffin: And edge Iot, we have a solid Wi Fi <unk> and.

Liam K. Griffin: In Wi Fi seven design win pipeline.

Liam K. Griffin: We are in the early innings of a multi-year upgrade cycle, with high-end access points now being offered. Over the coming quarters, we anticipate retailers will roll out mainstream models, followed by carriers and MSOs for their gateways and router products. The wireless infrastructure and traditional data center markets remain soft. We continue to undership natural demand as we allow the distribution channel and customers to consume excess inventory.

We are in the early innings of a multi year upgrade cycle with high end access points now being offered.

Liam K. Griffin: Over the coming quarters, we anticipate retailers to rollout mainstream models, followed by carriers and msos for their gateways and routers.

Liam K. Griffin: The wireless infrastructure and traditional data center markets remained soft we continue to under ship natural demand as we allow the distribution channel and customers to consume excess inventory.

Liam K. Griffin: Despite near-term headwinds, we remain bullish on AI workloads, driving upgrades to Ethernet switches and optical modules, a positive long-term driver for our advanced precision timing solutions. Lastly, the automotive and industrial markets remain under pressure as they continue to undergo a steep inventory correction. However, we see opportunities for long-term growth in our automotive industry. Automotive OEMs are increasingly focused on software-defined vehicles. The Connected Car is an in-cabin user experience.

Liam K. Griffin: Despite near term headwinds, we remain bullish on AI workloads driving upgrades to Ethernet switches and optical modules are positive long term driver for our advanced precision timing solutions.

Liam K. Griffin: Lastly, automotive and industrial markets remain under pressure as they continue to undergo a steep inventory correction.

Liam K. Griffin: However, we see opportunities for long term growth in our automotive business.

Liam K. Griffin: Automotive Oems are increasingly focused on software defined vehicles.

Liam K. Griffin: The connected car.

Liam K. Griffin: And in cabin user experience all of which are generating higher levels of radio complexity.

Liam K. Griffin: All of which are generating higher levels of radio complexity. Despite near-term headwinds, we remain positive on growing EV penetration and demand for our Power Isolation Project. Our strategy is to leverage connectivity technology across multiple growth segments, including edge-connected IoT devices, automotive electrification and advanced safety systems, and AI infrastructure. Connectivity is crucial in enabling AI on decentralized edge systems.

Liam K. Griffin: Despite near term headwinds, we remain positive on growing EV penetration.

Creating demand for our power isolation products.

Liam K. Griffin: Our strategy is to leverage connectivity technology across multiple growth segments, including edge connected Iot devices, automotive electrification and advanced safety systems and AI infrastructure.

Liam K. Griffin: Connectivity is crucial and enabling AI on decentralized edge systems, our RF technology powered applications like the connected home building automation.

Liam K. Griffin: Our RF technology powers applications like the connected home, building automation, smart cities, machine-to-machine, and wearables. We are particularly excited about the industry mandates and regulatory tailwinds leading to higher levels of connectivity inside the car. For example, the number of radios and antennas are growing in vehicles to support various communication standards, including 5G cellular, Bluetooth, Wi-Fi, ultra-wideband, NFC, and CD2X. The multitude of radios creates challenges around coexistence, external interference, and latency. Our advanced RF solutions can solve these complex problems for our OEMs. In Datacenter, accelerated workloads supporting large language models are catalyzing networking and optical upgrades.

Liam K. Griffin: <unk> cities machine to machine and Wearables.

We are particularly excited about the industry mandates and regulatory tailwind leading to higher levels of connectivity inside the car.

Liam K. Griffin: For example, the number of radios and antennas are growing and vehicles to support various communication standards.

Liam K. Griffin: <unk> cellular Bluetooth Wi.

Liam K. Griffin: Wi Fi Ultra wideband, NFC and CV to ask the multitude of radios create challenges around coexistence external interference and latency.

Liam K. Griffin: Our advanced RF solutions can solve these complex problems for our Oems.

Liam K. Griffin: In data center accelerated workload supporting large language models are catalyzing networking and optical upgrades, we have a tiny portfolio targeting next generation 800 gig and one six terabits Ethernet switches and optical modules, enabling.

Liam K. Griffin: We have a timing portfolio targeting next-generation 800 gigabit and 1.6 terabit Ethernet switches and optical modules, enabling AI infrastructure. At Mobile World Congress in Barcelona, we were excited to see several AI-enabled phones being introduced to the market. We believe AI could propel a meaningful replacement cycle in the smartphone market, fueling applications like real-time language translation, voice assistance, advanced camera and imaging, and on-device personalization. Over time, AI-enabled phones could drive higher levels of RF complexity, including robust connectivity, higher throughput, further integration, and lower power consumption.

Liam K. Griffin: Infrastructure.

Liam K. Griffin: During mobile World Congress in March in Barcelona, We were excited to see several AI enabled phones being introduced to the marketplace.

We believe AI could propel a meaningful replacement cycle in the smartphone market.

Liam K. Griffin: Fueled by applications like real time language translation voice assistants advanced camera in imaging and on device personalization.

Liam K. Griffin: Over time AI enabled phones could try that could drive higher levels of RF complexity.

Liam K. Griffin: <unk> robust connectivity higher throughput further integration and lower power consumption.

Liam K. Griffin: Turning to our quarterly business highlights, we delivered integrated platforms to the leading 5G smartphone OEMs, including flagship and mid-tier models with Samsung, Google, Oppo, and others. We expanded our design pipeline and initiated new programs in automotive, including infotainment systems, traction inverters, cloud-enhanced driver assist, and CB2X. We secured several audio SOC designs with Sony and Samsung.

Liam K. Griffin: Turning to our quarterly business highlights.

Liam K. Griffin: We delivered integrated platforms to the leading smartphone Oems.

Liam K. Griffin: Including flagship and mid tier models, with Samsung, Google Apple and others.

Liam K. Griffin: We expanded our design win pipeline and initiated new programs in automotive, including infotainment systems traction Inverters cloud enhanced driver assist and <unk>.

Liam K. Griffin: We secured several audio Soc designs with Sony and Samsung.

Liam K. Griffin: In summary, Skyworks continues to execute well despite a challenging macro environment. While we are navigating near-term headwinds, we remain bullish on our long-term strategy. With that, I will turn the call over to Chris for a discussion of last quarter's performance and our outlook for Q3 of fiscal 2024. Thanks, Liam.

Liam K. Griffin: In summary, <unk> continues to execute well, despite a challenging macro environment.

While we are navigating near term headwinds, we remain bullish on our long term strategy.

Liam K. Griffin: With that I will turn the call over to Chris for a discussion of last quarter's performance and our outlook for Q3 of fiscal 2024.

Kris Sennesael: Skyworks revenue for the second fiscal quarter of 2024 was $1,046,000,000, slightly above the midpoint of our outlook. Mobile was approximately 66% of total revenue, down 19% sequentially. Broad markets accounted for approximately 34% of total revenue, up 1% sequentially. Gross profit was $471 million, with gross margin at 45%, in line with expectations. Gross margin was down 140 basis points sequentially, reflecting our seasonally weakest period. Also, during Q2, we further reduced our internal inventory by 91 million to 836 million, which reflects five consecutive quarters of reduction. Operating expenses were $192 million, below the low end of the guidance range.

Chris Krastel: Thanks Liam.

Chris: <unk> revenue for the second fiscal quarter of 2024 was 1 billion at $46 million slightly above the midpoint of our outlook.

Chris: Mobile was approximately 66% of total revenue down 19% sequentially.

Chris: Broad markets were approximately 34% of total revenue up 1% sequentially.

Chris: Gross profit was 471 million with gross margin at 45% in line with expectations.

Chris: Gross margin was down 140 basis points sequentially, reflecting our seasonally weakest periods.

Chris: Also during Q2, we further reduced our internal inventory by $91 million to $836 million, which reflects five consecutive quarters of reductions.

Operating expenses were $192 million below the low end of the guidance range, reflecting our disciplined focus on managing discretionary expenses, while continuing to invest in our technology and product Roadmaps.

Kris Sennesael: Reflecting our disciplined focus on managing discretionary expenses... while continuing to invest in our technology and product roadmaps, we generated $279 million of operating income, translating into an operating margin of 26.7%. We generated $4 million of other income, and our effective tax rate was 11.3%, driving net income of $251 million and diluted earnings per share of $1.55, which is three cents above the guidance that we provided during the last earnings call despite the quarterly volatility. Skyworks' business model generates strong cash flow. For example, second fiscal quarter cash flow from operations was $300 million. Capital expenditures were $28 million, or less than 3% of revenue, resulting in a free cash flow of $273 million.

Chris: We generated $279 million of operating income translating into an operating margin of 26, 7%.

Chris: We generated $4 million of other income and our effective tax rate was 11, 3% driving net income of 251 million and diluted earnings per share of $1 55.

Chris: Which is <unk> <unk> above the guidance that we provided during the last earnings call.

Despite the quarterly volatility <unk> business model generates strong cash flow.

Second fiscal quarter cash flow from operations was $300 million capital expenditures were $28 million or less than 3% of revenue, resulting in a free cash flow of $273 million.

Kris Sennesael: We continue to drive robust cash flow through high levels of profitability, prudent working capital management, and moderating capacity. Also, during fiscal Q2, we paid $109 million in dividends. Our cash balances grew to over $1.2 billion, and we have $1 billion in debt. Our solid capital structure provides us with excellent flexibility and optionality. Now, let's move on to our outlook for Q3 of fiscal 2024. We anticipate revenue of $900 million, plus or minus 2%.

Chris: We continue to drive robust cash flow through high levels of profitability prudent working capital management and moderating capex.

Chris: Also during fiscal Q2, we paid $109 million in dividends.

Chris: Our cash balances grew to over $1 2 billion and we have $1 billion in depth.

Chris: Our solid capital structure provides us with excellent flexibility and Optionality.

Speaker Change: Now, let's move on to our outlook for Q3 of fiscal 2024.

Speaker Change: We anticipate revenue of 900 million plus or minus 2%.

Kris Sennesael: We expect our mobile business to be down sequentially, below normal seasonal patterns, as excess inventory clears. In broad markets, we anticipate further modest sequential growth as inventory levels appear to be normalizing in certain areas. Gross margin is projected to be in the range of 45 to 47 percent, improving 100 basis points sequentially at the mid-term.

Speaker Change: We expect our mobile business to be down sequentially below normal seasonal patterns.

Speaker Change: Excess inventory clears.

Speaker Change: And broad markets, we anticipate further modest sequential growth as inventory levels appear to be normalizing and certain end markets.

Speaker Change: Gross margin is projected to be in the range of 45% to 47%.

Proving 100 basis points sequentially at the midpoint.

Kris Sennesael: We anticipate gross margin expansion during the remainder of 2024, driven by our cost reduction actions, favorable makeshift, and higher utilization rates. We expect operating expenses in the range of $192 million to $198 million, as we continue to make strategic investments in mobile and broad markets to drive share gains and increase de-pacification. Below the line, we anticipate roughly $2 million in other income, an effective tax rate of 11.5%, and a diluted share count of approximately 161.5 million shares. Accordingly, at the midpoint of the revenue range of $900 million, we intend to deliver diluted earnings per share of $1.21.

Speaker Change: We anticipate gross margin expansion during the remainder of 2024, driven by our cost reduction actions favorable mix shift and higher utilization rates.

Speaker Change: We expect operating expenses in the range of 192 million to $198 million.

Speaker Change: As we continue to make strategic investments in mobile and broad markets to drive share gains and increased diversification.

Speaker Change: Below the line, we anticipate roughly $2 million in other income and effective tax rate of 11, 5% and a diluted share count of approximately $161 5 million ships.

Speaker Change: Accordingly at the midpoint of the revenue range of $900 million, we intend to deliver diluted earnings per share of $1 21.

Operator: Operator, let's open the line for questions. Thank you. If you'd like to ask a question, please press star 11. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star 1 again.

Operator, let's open the line for questions.

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

Speaker Change: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Operator: Our first question comes from Chris Caso with Wolf Research. Your line is open. Yes, thank you. Good afternoon.

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

Christopher Caso: I guess the first question with regard to the worst in seasonal mobile business is: you speak about excess inventory. We've unfortunately been hearing about excess inventory in mobile for some time. Could you give a few more details on that? And specifically, was this from the Android space, or was it beyond Android? Yes, Kris. This is Kris here.

Christopher Caso: Yes. Thank you good afternoon, I guess, the first question with regard to.

Christopher Caso: The worst and seasonal mobile business.

Christopher Caso: You speak about excess inventory we have.

Christopher Caso: Unfortunately been hearing medicus inventory in mobile for some time could you give us a few more details on that and specifically was that.

Christopher Caso: It's from the Android space or it wasn't beyond the Android space.

Kris Sennesael: I'm happy to provide some more color as it relates to our guidance for the June quarter. And specifically, in our mobile business, towards the end of the March quarter, especially in the month of March, we saw some below-normal seasonal trends with lower than expected end market demand. And unfortunately, that resulted in some buildup of inventory in the channel, and that was somewhat across our mobile business. Unfortunately, those trends also continued during the four weeks of April.

Christopher Caso: Yes, Chris this is Chris here.

Chris: Happy to provide some more color as it relates to our guidance for the June quarter.

Specifically in our mobile business towards the end of the March quarter, especially in the month of March we saw some below normal seasonal trends with lower than expected end market demand and unfortunately that resulted in some buildup of inventory in the channel and that was somewhat.

Chris: Across our mobile business.

Chris: Ultimately those trends also continue during the four weeks of April and so we took that all into account as we set our guidance for the June quarter.

Kris Sennesael: And so we took that all into account as we set our guidance for the June quarter. And we do expect our mobile business to be down sequentially by 20 to 25%, which is well below normal seasonal patterns. And it's mostly due to the fact that we have to clear out the excess inventory and the channel. On the flip side, in our broad markets business, we do expect to see some modest sequential growth in addition to the modest sequential growth that we saw in the March quarter. Thank you for the clarification.

Chris: Then.

Chris: We do expect our mobile business to be down sequentially.

Chris: 25%.

Chris: Which is well below normal seasonal patterns and it's mostly due to the fact that we have to clear out excess inventory in the channel.

On the flip side.

Chris: In our broad markets business, we do expect to see some modest sequential growth.

Chris: In addition to the modest sequential growth that we saw in the March quarter as well.

Christopher Caso: I guess as a follow-up, what does this mean for the second half of the year? And, you know, typically you don't guide for the second half on this call, but do you expect those inventory headwinds to persist? Obviously, you have new product launches as you go into the second half. But, you know, what does that mean for normal seasonality as you go through the second half of the year from these launches? Yeah, Chris, we only got one quarter at a time.

Speaker Change: Thank you for the clarification I guess as a follow up what does this mean for the second half of the year and typically.

Speaker Change: You don't guide for the second half on this call, but do you expect those inventory headwinds to persist obviously, you have new product launches as you go to the second half.

What does that mean for normal seasonality as you go through the second half of the year from these levels.

Speaker Change: Yes, Chris we only guide one quarter at a time.

Kris Sennesael: It's somewhat unpredictable what's going to happen three, four quarters down the road, but we do expect that most of the inventory clearance will be done during the June quarter. So does that suggest, you know, kind of back to normal revenue levels or like, I guess, I guess what you're saying is this is a very short-term issue in the June quarter. Yeah, from a demand point of view, that is correct. Okay, thank you. Thank you. Our next question comes from Matt Ramsey with TD Cowen.

Speaker Change: It's.

Speaker Change: Somewhat unpredictable, what's going to happen three or four quarters down the road, but we do expect that most of the inventory clearance will be done.

Speaker Change: During the June quarter.

Speaker Change: So does that does.

Speaker Change: Does that.

Suggest kind of a back to normal revenue levels.

Speaker Change: I guess.

Speaker Change: I guess, what Youre, saying is this is a this is a very short term issue.

Speaker Change: In the June quarter.

Speaker Change: Yes from a from a demand point of view that is correct.

Speaker Change: Okay. Thank you.

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

Matthew D. Ramsay: Your line is open. Thank you very much. Good afternoon, everybody.

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

Matthew D. Ramsay: Guys, I wanted to follow on from Chris's questions there on the mobile segment. And is there any correlation at all that we should draw between, is this just a unit and inventory thing, or is there any correlation we should draw to potentially expected content and programs that would launch later in the year? Is there a further drawdown in inventory because maybe content has changed one way or the other, or should we just not try to make that conclusion? Thanks. Yeah, this is Liam.

Matthew D. Ramsay: Guys I wanted to follow on.

Matthew D. Ramsay: Chris's question there on the mobile segment.

Matthew D. Ramsay: Is there any correlation at all that we should draw between is this just a unit in inventory thing or is there any correlation we should draw too.

Matthew D. Ramsay: Essentially expected content and programs that would launch later in the year. They are a quarter of a drawdown in inventory because maybe content has changed one way or the other or should we just not tried to make that conclusion.

Liam K. Griffin: Yes. This is liam.

Liam K. Griffin: So there's this interesting dynamics here, and I really can't comment on specifics related to our largest customer. However, we will provide as much directional color as possible. So we were placed in a unique situation with our largest customer where we were unable to consummate an award that we expected and, frankly, thought we had earned.

Liam K. Griffin: So this is an interesting dynamics here and I really can't comment on specifics related to our largest customer.

Liam K. Griffin: However, we will provide as much directional color as possible here.

Liam K. Griffin: So we were placed in a unique situation with our largest customer where we were unable to consummate an award that we expected and frankly thought we had earned.

Liam K. Griffin: As a result, we expect content headwinds from the upcoming cycle. At the same time, we are strategically aligned with our largest customer and we're ready to engage in all of their strategic initiatives going, Yeah, and Matt, just to add a little bit more color there, and again, we, as you know, we can't really go into the specifics as it relates to the large customer, but we were able to partially offset the socket loss that Liam just talked about it, with some additional content gains, including some new sockets that we don't have in the current version of the phone.

Liam K. Griffin: As a result, we expect content headwinds from the upcoming cycle.

Liam K. Griffin: At the same time, we are strategically aligned with our largest customer and we are ready to engage in all of their strategic initiatives going forward.

Speaker Change: Yes, and Matt just to add a little bit more color there.

Speaker Change: And again, we as you know we can't really go into the specifics as it relates to the large customer, but we were able to partially offset the socket loss that Liam just talked about it with some additional content gains, including some new sockets that we don't have in the current.

Speaker Change: Version of the phone and so.

Liam K. Griffin: And so As a result, on a nap nap, we expect the content to be down a little more than 10% compared to the current phone model, and that will start having an impact in the September quarter. Got it.

Speaker Change: As a result on a net net we expect the content to be down.

Speaker Change: A little more than 10% compared to the current phone model.

Speaker Change: And that will start having an impact in the September quarter.

Matthew D. Ramsay: No, I guys, I appreciate that very much. And I know it's super sensitive, but I kind of need to ask a follow up here, which is, if you could, Liam, if you could try to characterize, maybe the chain of events that happened to the extent that you're able to with this any kind of performance or quality or product issue with Skyworks programs specifically? Was this a program change that they made?

Speaker Change: Got it no I appreciate that very much and I know it's super sensitive.

Speaker Change: Kind of need to ask a follow up here, which is <unk>.

Speaker Change: Liam if you could try to characterize it.

Liam K. Griffin: Maybe the chain of events that happen to the extent that you're able to with it.

Liam K. Griffin: Any kind of a.

Liam K. Griffin: Any context as to when you guys sort of learned about this and how the whole thing came to pass? Again, appreciate it. It's super sensitive if you're on a public call.

Performance or quality or product issue with with Skywards program, specifically was this a program change that they made.

Liam K. Griffin: Any context.

Liam K. Griffin: When you guys sort of learned about this and.

Liam K. Griffin: How the whole thing came to pass that again I appreciate it it's 2%, but if youre on a public call.

Liam K. Griffin: Yeah, I mean, this is not performance-related. It's not technology-related. In fact, the product has been a stalwart in the portfolio. So nothing, nothing like, Just a unique situation; can't get into all the details, but we're looking forward to it. We are partners with our largest customer. We expect to do more work in the future, and I am looking forward to that. I appreciate the candor. I'll jump back in the queue.

Speaker Change: Yes, I mean this is not performance related it's not technology related in fact, the product has been a stalwart in the portfolio. So nothing nothing like that.

Speaker Change: It's a unique situation and can't get into all the details we're looking forward.

Speaker Change: We are partners with our largest customer we expect to do more work in the future and looking forward to that.

Speaker Change: Alright fair enough I appreciate the candor I'll jump back in the queue. Thanks, guys.

Speaker Change: Sure.

Edward Francis Snyder: Thanks, guys. Thank you. Our next question comes from Edward Snyder with Charter Equity Research. Your line is open.

Speaker Change: Thank you. Our next question comes from Edward Snyder with Charter equity Research. Your line is open.

Edward Francis Snyder: Great. Thanks a lot, guys. A couple of questions if I could. So Liam or Kris, doesn't matter, you've got incremental gain. And Sargis, you didn't have last year.

Edward Francis Snyder: Great. Thanks, a lot guys couple of questions if I could so.

Edward Francis Snyder: Chris doesn't matter you got incremental gains and so I guess you didn't have last year I think the general idea here is you want some Wi Fi.

Edward Francis Snyder: I think the general idea here is that you want some Wi-Fi. That is obviously coming out of mobile, not broad markets, first of all. And secondly, would you characterize any content losses in the second half of the year? What I would say is a primary product that tends to be very performance-driven, or is it kind of a marginal product with a number of, qualified for 2 or 3 different vendors, and I had to follow up. Yeah, you know, Unfortunately, I can't give you too much detail here.

Edward Francis Snyder: That is obviously coming out of mobile not broad markets first of all and secondly would you characterize any content losses in the second half of the year to be in a in a what I would say a primary.

Edward Francis Snyder: Product.

Edward Francis Snyder: Tends to be very performance, driven or is it kind of a marginal product with a number of different people compete and you could qualify for.

Edward Francis Snyder: Two or three different.

Speaker Change: Vendors that I had a follow up please yes.

Speaker Change: Unfortunately can't give you too much detail here, but as you know.

Liam K. Griffin: But as you know, I mean, we're striving to. [inaudible] And, you know, we're getting through it, and we expect to be able to turn up the revenue here. Can, maybe we can go out a little bit further? I know you don't like to give, well, I'm not looking for guidance, but just generally characterize...

Speaker Change: We're striving to.

Speaker Change: Gained share in every every every every even sockets that we're addressing today whether.

Speaker Change: Whether the largest customer or some of the other players.

Speaker Change: The technology is there I mean is this is this is not a technology gap. This is really nothing.

Speaker Change: Commercial issues.

That will unique.

Speaker Change: And we're getting through it and we expect to be able to turn up the revenue here as we go forward.

Maybe we can go out a little bit further I know you don't like to give or not looking for guidance, but just generally characterize.

Liam K. Griffin: Contact us at www.skysolutionsinc.com, is impacting the RF section in kind of an unforeseen way in that you're obviously not participating in the machine learning part. Make room for batteries, make room for more processes, and squeeze the barricade, it sounds like. Specially your flagship customers are starting. The RF guys to get small packages. So even if the performance doesn't change, it sounds like the package... The Bulletproof Executive 2013, Transcribed by https://otter.ai. Will it occur in 25, or will we have to wait for 25? Yeah, Ed, great question.

Speaker Change: The content picture, saying 25.

I feel like it was 26 or so, but it's clear that from our research that the.

Showing up in phones.

Speaker Change: Any of the phones.

Speaker Change: Especially the flagship models is impacting the RF section and kind of in an unforeseen way and that obviously not participating in the machine learning part of it but to make room for batteries make room for more processing and.

Speaker Change: Squeeze the battery consumption and the footprint it sounds like.

Speaker Change: Especially your flagship customers are starting to turn the screws to the RF guys, who get smaller packaging.

Speaker Change: The performance doesn't change it sounds like the packaging, which is already quite difficult was going to get substantially more so what impact do you expect this to have generally speaking on revenue in flagship phones.

Speaker Change: Current 25, where we have to wait to 'twenty six to start seeing these results.

Liam K. Griffin: I'm glad you asked. As you know, if we think about the mobile phone today, which we can't live without, right? Everybody needs it. So much activity on that device. And you know, it's an incredible, incredible product. But when you start to go into generative AI, as you know, the compute power head is going to be so, so hot. The current consumption, All of that action is going to burn up your battery.

Speaker Change: Yes, Ed Great question I'm glad you asked so as you know if we think about the mobile phone today, which we can't live without right everybody needs to equity so much activity on that device.

Speaker Change: It's an incredible incredible product.

Speaker Change: But when you start to go into general of AI as you know the compute power and it's going to be social.

Speaker Change: The current consumption all of that action is going to it's going to burn up your bandwidth. So you've got to step up into a new.

Liam K. Griffin: So you've got to step up to a new set of solutions that we're working on right now that will be more power efficient. There will be mark-to-market around mobility, but with GEN-I... Right, right in the strike zone.

Speaker Change: New set of solutions that we're working on right now that will be more power efficient.

That will be mark to market around mobility, but generally generally.

Liam K. Griffin: So we're really excited about that. And we've been talking to the larger customers and players about that as well. We have the toolbox to create unique, unique solutions across multiple customer sets. But if you think about it, the technology burden there is going to be so high. The amount of data back and forth from the handheld to the server is going to be immense. It's going to be very, very difficult.

Speaker Change: Right right and this right. So we're really excited with that and we've been talking to the larger customers and players with that as well.

Speaker Change: We have the toolbox to create unique unique solutions across multiple customer sets.

Speaker Change: But if you think about it the technology burden there is going to be so high.

Speaker Change: The amount of data back and forth from the handheld to the server is going to be immense.

Karl Ackerman: So I think it's going to narrow down the playing field and mobile for customers, and then opportunities at Skyworks to really work with the best and brightest in our space and create elegant new solutions. So we're really looking forward to that and more. Thank you. Our next question comes from Karl Ackerman with BNP Paribas. Your line is open.

Speaker Change: Can be very very difficult. So I think it's going to narrow down the playing field in mobile for customers.

Speaker Change: You see and then opportunities at Sky works to.

Speaker Change: Really work with the best and brightest in our space to create elegant new solutions. So we're really looking forward to that and more to come.

Speaker Change: Thank you our next question comes from.

Ackerman with BNP Paribas Your line is open.

Karl Ackerman: Thank you. I realize you've been moderating CapEx following a significant investment year in 2022. But, you know, CapEx is also down over 50% in the first half of 2024, relative to last year. And so I was curious, Kris, if you could give an updated view on your CapEx this year, and how do we reconcile that outlook with your longer-term opportunities that you discussed in broad markets as well as 5G? Yeah, Karl, we've talked about that before.

Ackerman: Yes. Thank you.

Ackerman: I realize you've been moderating capex following a significant investment year in 2022, but Capex is also down over 50% in the first half of 2024 relative to last year and so I was curious.

Ackerman: Chris If you could give an updated view on your Capex this year.

Ackerman: And how do we reconcile.

That outlook with your longer term opportunities that you discussed some broad markets as well as <unk> handsets.

Kris Sennesael: We had multiple years where CAPEX was running in the 10, 11, 12% to revenue, where we built out our manufacturing assets, especially our filter operation, adding a substantial amount of capacity, but also in our back end operation, where we do very complex integration, assembly, and test. So those CAPEX, heavy CAPEX years are behind us. We are now focusing more on driving efficiency, yield improvements, test time reductions, and die shrinks, and we are creating additional capacity to do so and focusing on those operational improvements.

Chris: Yes Carlo.

We've talked about that before we have multiple years, where capex was running in the 10% 11% 12%.

Chris: Two revenue, where we build out our manufacturing assets, especially our filter operation.

Chris: Substantial amount of capacity, but also.

Chris: Our backend operation, what we do very complex integration of Assembly and test.

Chris: So those capex heavy capex years are behind US we are now focusing more on driving efficiency yield improvements test time reductions die shrinks and we are creating additional capacity.

Chris: In doing so and focusing on those operational improvements in.

Chris: In addition to that as you know revenue has been down year over year. So we do have underutilized factories right now we can substantially grow the revenue without having to add a lot more capex there will always be some capex because we need to continue to advance our technology.

Chris: <unk> advanced our our product roadmaps and that will require some level of technology, driven capex, but it's going to remain for many many years here in the low <unk>.

Kris Sennesael: But it's going to remain for many, many years here in the low single digits as a percent to revenue, and that will continue to fuel a very strong free cash flow. Yes, I appreciate that. If I may sneak in another one,

Low single digits as a percent to revenue and that will continue to fuel a very strong free cash flow.

Karl Ackerman: Chris, you know, you also mentioned an expansion of gross margins in the second half. It sounds like broad markets are improving throughout the second half. It also sounds like gross margins have troughed in the March quarter, but perhaps could you just discuss some ways in which you can improve margins in the mobile business? As volumes come back, and perhaps... Could we also see 50% margins? you know, over the next couple of quarters. Any thoughts on the timing of that?

Speaker Change: Yes, I appreciate that if I may sneak in another one.

Speaker Change: You also mentioned about an expansion of gross margins in the second half.

Speaker Change: It sounds like broad markets is improving throughout the second half and also it sounds like gross margins have trough in the March quarter, but perhaps could you just discuss.

Some ways to which you can improve margins in the mobile business.

Speaker Change: As volumes come back and perhaps.

Speaker Change: Yes.

Speaker Change: Could we also see 50% margins.

Speaker Change: Over the next couple of quarters any thoughts on timing of that thank you.

Kris Sennesael: Thank you. Yeah, Karl, so we did 45 in March, and we guided up 100 basis points at the midpoint of the guidance range for June. We also said in the prepared remarks that we continue to see further gross margin improvements in the remainder of 2024 and beyond. And the three key drivers, which are applicable to our broad markets as well as to our mobile business, right, are driving cost reductions internally as well as externally with all the suppliers that we have already indicated in my previous answer, yield improvements, test time reductions, overall cost reductions, and we are making good progress, and we actually can do a The second element, as you indicated, yes, broad markets have above average gross margin compared to mobile, and so we have a little bit of a mixed tailwind there as well. And then, thirdly, it's factory utilization.

Speaker Change: Yes, Karl So we did 45 in March we guided.

Speaker Change: Up 100 basis points.

Speaker Change: At the midpoint of the guidance range for June.

Speaker Change: We also said in the prepared remarks that we continue to see.

Karl: See further gross margin improvements in the remainder of 2024 and beyond.

Karl: <unk>.

Karl: Three key drivers, which is applicable to our broad markets as well as to our mobile business right is driving cost reductions internally as well as externally with all the suppliers that we have.

Karl: Already.

Karl: <unk> indicated that in my previous answer.

Karl: <unk>.

Karl: Improvements test time reductions overall cost reductions and we are making good progress and we actually can do a lot more and the teams are working really hard on that the second element as you indicated yes brought markets has above average gross margin compared to mobile and so we have a little bit of a mixed tailwind there as well.

Karl: Sure.

Italy, it's factory utilization.

Kris Sennesael: Keep in mind that we have been drastically reducing our internal inventory for five quarters in a row now. And so we are, I'm comfortable with where inventory levels are right now. So that is no longer going to be a headwind as well; we will start growing here and no longer see inventory reductions. We will start seeing improvements in factory utilization. And a combination of all of that gives me confidence that gross margins will continue to improve from here. Thank you. Thank you.

Karl: Keep in mind that we have been drastically reducing our internal inventory for five quarters in a row by now.

Karl: And so we are I'm comfortable with where inventory levels are right. Now so that is no longer going to be a headwind as well and so as revenue will start growing here and no longer inventory reductions, we will start seeing improvements in factory utilization and a.

Karl: Nation of all of that gives me confidence that gross margins will continue to improve from here.

Speaker Change: Thank you.

Thomas O'malley: Our next question comes from Thomas O'Malley with Barclays. Your line is open. Can you give the percentage of revenue for your largest customer? And then, just kind of following up on your comments related to March, you talked about some inventory worked in at the customer. Could you, to the best of your knowledge, try to describe whether that's existing inventory that's related to the current phone, or do you think that it's the early stages of potentially working down the socket that may be associated with the next phone as well? Are they separate issues, or could they potentially be related?

Speaker Change: Thank you. Our next question comes from Thomas O'malley with Barclays. Your line is open.

Kris Sennesael: No, it's all related to the current phone. We are not shipping for the next launch yet. So this is all related to the current phone. The large customer was approximately 68% of total revenue in the March quarter. [inaudible] helpful

Thomas O'malley: Hey, Thanks for taking the question two parter here for Chris in the March quarter could you give the percentage of revenue from your largest customer and then just kind of following up on your comments related to Mark you talked about some inventory worked up the customer could you could you do your best of your knowledge trying to describe whether thats existing inventory that's really.

Thomas O'malley: Added to the current phone or do you think that is.

Thomas O'malley: Early stages of potentially working down the stock that may be associated with the next phone as well or are they separate issues.

Thomas O'malley: Or could they potentially be related.

Thomas O'malley: No. It's all related to the current phones, we are not shipping.

Thomas O'malley: For the next.

Thomas O'malley: Launch yet so this is all related to the current phone.

Thomas O'malley: The large customer was approximately 68%.

Thomas O'malley: Of total revenue in the March quarter.

Thomas O'malley: That was down 19% sequentially, which is somewhat in line with normal seasonality it was down 3% year over year.

Thomas O'malley: But as I indicated, we probably build up a little bit of inventory in the channel.

Thomas O'malley: And then trying to parse out the pieces for June, you're kind of saying that mobile is down 20 to 25%. Even if you set your largest customer in that range, you still need to see double-digit declines on the Android side. So could you maybe describe what's happening in the Android business? I think, you know, some of your peers have talked about maybe a weaker Q2. But what are you seeing with those customers there? Thank you.

Speaker Change: Helpful. And then just trying to parse out the pieces for June you're kind of saying that mobile is down 20% to 25%. Even if you set kind of your largest customer in that range you still need to see double digit declines on the Android side. So could you maybe describe what's happening in the Android business I think some of your peers have.

Speaker Change: Talks about maybe a weaker Q2, but what are you seeing with those customers there. Thank you.

Kris Sennesael: Yeah, our Android business has been stabilizing, so it's approaching $100 million a quarter, all our Android, which is Google, Samsung, and the Chinese players. It has been stabilizing. Obviously, there is some seasonality in that business, and yes, June is a little bit of a weaker seasonality in that business, but overall, it has been stabilizing. The inventory correction is over.

Speaker Change: Yes, our Android business has been stabilizing.

Speaker Change: So it's.

Speaker Change: Approaching $100 million per quarter.

Speaker Change: All of our Android, which is Google Samsung and the China players. It has been stabilizing obviously, there is some seasonality into that business and yes.

Speaker Change: June is a little bit of a weaker seasonality.

Speaker Change: In that business, but overall it has been stabilizing the inventory correction is over.

Kris Sennesael: We are making some good traction with design wins that, as end customer demand will continue to improve over time, new design wins will roll in. We do expect that business to contribute to some nice year-over-year growth in the next eight quarters here. Thank you. Our next question comes from Ruben Roy with Stiefel.

Speaker Change: We are making some good traction with design wins.

That.

Speaker Change: As end customer demand will continue to improve over time, new design wins roll in we do expect that business to contribute to some nice year over year growth.

Speaker Change: In the next four to eight quarters here.

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

Ruben Roy: Your line is open. Yes, thank you. Liam, I want to switch over to broad markets and just talk about this sort of how you're seeing things. Great to see the bottom in December and the modest growth in March and the outlook for June. But relative to 90 days ago, how would you kind of characterize the recovery?

Ruben Roy: Yes. Thank you.

Ruben Roy: I want to switch over to broad markets and just talk about <unk>.

Ruben Roy: Sort of how youre seeing things great to see the bottom in December and the modest growth in March and the outlook for June but relative to 90 days ago.

Ruben Roy: How would you kind of characterize the recovery.

Liam K. Griffin: Are you still, you know, sort of thinking, you know, incremental growth quarterly, or has anything changed with inventory levels in some of the markets? You know, the data points around auto industrial have been mixed. Maybe just if you could talk us through the big buckets, IOT, auto industrial, and common infrastructure, that'd be helpful. Yeah, absolutely.

Ruben Roy: Are you still sort of thinking.

Ruben Roy: Incremental growth quarterly or has anything changed with inventory levels and some of the markets. The data points around auto industrial have been mixed. So maybe just if you could talk us through the big buckets, Iot auto industrial and comm infrastructure that'd be helpful.

Liam K. Griffin: So there's a lot of opportunity and growth that we're seeing in the broad bar. We've been doing a great job with the automotive. A lot of technology there, a lot of opportunity, we're growing that. We continue to look at other players in the space who are doing quite well.

Speaker Change: Yes, absolutely.

Speaker Change: There's a lot of opportunity and growth that we're seeing in the broad markets. We've.

Speaker Change: We've been doing a great job with your automotive automotive segments mono technology, there lot of opportunity with growing that business.

Speaker Change: We continue to look at other players in this space.

Speaker Change: Doing quite well in industrial markets are coming up for US right now solar markets are coming up.

Liam K. Griffin: And industrial markets are coming up for us right now. Solar markets are coming up. We're seeing some good action in PlayStation as well, so we've got kind of a consumer play there, but a lot of volume and a lot of content.

Speaker Change: We're seeing some good action in Playstation as well so we've got kind of a consumer play there, but a lot of volume and a lot of content. So the portfolio is growing its diversifying and theres a lot more opportunity out there we've been kind of focus more.

Liam K. Griffin: So the portfolio is growing, it's diversifying, and there's a lot more opportunity out there. You know, we've been kind of focused more on some of the bigger names, but now we are starting to see a longer roster of opportunities that we can, and also just some of the technologies that we brought in from our MSS X Lab, giving us more green shoots and opportunities. Thanks for that, Liam.

Speaker Change: And some of the bigger names, but now we start to see a longer roster of opportunities that we can capture.

Speaker Change: And also just some of the technologies that we brought in from our MSS ex lab deal is giving us more green shoots and opportunities as we look months.

Speaker Change: Okay.

Ruben Roy: I guess just a quick follow-up, just on the inventory levels around those buckets. You know, have they improved to, you know, kind of where you thought they would or, you know, like any of the big buckets? Yeah, it depends on which part of the broad markets you are looking at. If you look more at the consumer IOT, the edge IOT connectivity products, that have been improving for many quarters now. I think that market is getting stronger. We obviously have some strong technology transfer that is going on as we upgrade to Wi-Fi 60 and 7. And bookings have been improving.

Speaker Change: Thanks for that and I guess, just a quick follow up just on the inventory levels.

Speaker Change: Round those buckets.

Speaker Change: Have they improved.

Speaker Change: Where you thought they would it work.

Speaker Change: Is any of the big buckets been been a little bit slower or not.

Speaker Change: Yes, it depends on which part of the broad markets. You are looking at if you look more at the consumer Iot.

Speaker Change: The agile <unk> connectivity products.

Speaker Change: That has been improving for many quarters now.

I think that market is getting stronger we obviously have some.

Speaker Change: Our strong technology.

Speaker Change: Transfer that is going on as we upgrade to Wi Fi six and seven and bookings has been improving with a book to bill above one.

Liam K. Griffin: We have a book to bill above one in that part of the market. When you look at infrastructure, networking, and data center, that market has been, as you probably have heard from peers and competitors, a little bit soft. There is some inventory that needs to be cleared out, so we are under shipping natural demand right now. It's going to take a couple of quarters for that business to really bounce back, and in the meantime, we have to clear out the inventory.

Part of the market.

Speaker Change: When you look at infrastructure networking.

Speaker Change: Data center that market has been as you probably have heard from peers and competitors a little bit soft.

Speaker Change: There is some inventory that needs to be cleared out. So we are under shipping natural demand right now.

It's going to take a couple of quarters for that business to really bounce back.

Speaker Change: And in the meantime, we have to clear out inventory and then automotive and industrial that again, you've heard from peers and competitors. There is definitely uncertain spots some excess inventory that needs to be flushed out again for Sky works, we're doing reasonably well in that market.

Liam K. Griffin: And then automotive and industrial, you've heard from peers and competitors, there is definitely in certain spots some excess inventory that needs to be flushed out again for Skyworks. We're doing really reasonably well in that market. Given just the product cycle, the ramp of connectivity in the car, the ramp with our power isolation for TV, we're doing well with our radio processor in the car. And so we are booking the trend that a little bit in a tough environment. Appreciate the, Thank you. Our next question comes from Timothy Arcuri with UBS. Your line is open.

Speaker Change: Even just the product cycle.

Ramp of connectivity in the car the ramp with our.

Speaker Change: Power as relation 40, we were doing well with our.

Speaker Change: Radio processor in the car.

Speaker Change: And.

Speaker Change: And so we are bucking the trend a little bit in a tough environment.

Speaker Change: I appreciate the detail Chris.

Speaker Change: Thank you. Our next question comes from Timothy Arcuri with UBS. Your line is open.

Timothy Michael Arcuri: Hi, this is Aman here jumping in for Tim. I just want to ask, what was the Chinese mobile revenue, China as a percentage of total mobile revenue? And what is your expectation for that business going forward? As you know, sell through at certain Chinese OEMs appears to be bouncing back. So how should we think about the trajectory of that going forward? Thank you. Yeah, our China mobile revenue is still de minimis. It has been improving quarter after quarter, but it is still at a relatively low level.

Demand: Hi. This is demand are jumping in for Tim I just wanted to ask was.

Demand: The China mobile revenue as a percentage of total mobile revenue and what is your expectation for that business going forward.

Speaker Change: Sell through in China Oems appears to be bouncing back. So how should we think about trajectory of that going forward. Thank you.

Kris Sennesael: I mean, we have great relationships with OPPO, Vivo, and Xiaomi, the three main players there. Design wind momentum is picking up a little bit, but the overall end customer demand environment is still, is still somewhat, somewhat soft. I think that's the best way to characterize that.

Speaker Change: Yes, our China mobile revenue is still de minimus.

Speaker Change: It has been improving quarter after quarter, but still on a relatively low level.

Speaker Change: I mean, we have great relationship with <unk> vivo Xiaomi the three main players there.

Speaker Change: Design win momentum is picking up a little bit but the overall end customer demand environment is still is still somewhat.

Kris Sennesael: But, again, I think over time, especially when I'm looking forward to fiscal 25, we do expect to see some meaningful year-over-year growth in that business. Thank you. Our next question comes from Peter Pang with J.P. Morgan. Your line is open.

Speaker Change: Somewhat soft.

Speaker Change: I think that's the best way to characterize that but but again I think over time, especially when I am looking forward to fiscal 'twenty five we do expect.

Speaker Change: To see some meaningful year over year growth in that business.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question comes from Peter Peng with Jpmorgan. Your line is open.

Peter Pang: Hi, thanks for taking my question. On the Android point, you talked about it approaching 100 million; I believe your previous peak was kind of closer to 200 million per quarter. As you kind of look out into 2025 and 2026, is there anything that precludes you from getting back to those kind of levels?

Peter Peng: Hi, Thanks for taking my question on the Android point, you talked about it approaching 100 million I believe your previous peak was probably.

Peter Peng: Closer to $200 million per quarter.

Peter Peng: You kind of look out into 2025 and 2020. Thanks is there anything that precludes you.

Peter Peng: Getting back to those kind of levels.

Kris Sennesael: I think it's going to be difficult to go back to the highest peaks that we have seen in the past because that was overdrive. Remember, that was in the COVID years when all customers were screaming to get more parts, and then they ended up with a lot of excess inventory that took more than a year to burn off. Directionally, yes.

Speaker Change: I think it's going to be difficult to get back to the highest peaks that we have seen in the past because that was overdrive remember that wasn't.

Speaker Change: Covid years were all customers were screaming to get more parts and then they ended up with a lot a lot of excess inventory that took more than a year to burn off but.

Kris Sennesael: I mean, it's at $100 million. I mean, we want to get back to $125, $150, or $200 million. And we are focused on that. We do have the technology. We are adding more resources in terms of product development to go after those opportunities. And as customer demand improves and the design wins roll in, we will see some really good revenue growth on those. And I'll just jump in on that. If you think about where we are with Android, we've got really strong engagement with Google and Samsung. High-end players, a lot of volume.

Speaker Change: But directionally, yes, I mean, it's at 100 million I mean, we want to get back to 125 150 to 200 million.

Speaker Change: And we are focused on that we do have the technology, we are adding more resources in terms of product development to go after those opportunities.

Speaker Change: As end customer demand improves and the design wins roll in we will see some really good revenue growth in those segments and I'll just jump in on that if you think about where we are with Android, we've got really strong engagement with Google and Samsung High end players a lot of volume so it's not so.

Liam K. Griffin: It's not so much the Oppo Vivo Xiaomi for us, but it's more around the Samsung and Google players that, right now, are doing very well. I have a follow-up. On the broad market, so you have one out of the three segments that's actually bottoming and recovering, and you're still, the implicit growth rate is 4%. So as we kind of look into the back half of the year, as things kind of, you know, inventory adjustment, update, and the other two segments, should we kind of be expecting more of an accelerating sequential growth as we move through the year? Absolutely, absolutely.

Speaker Change: Much of the offer vivo xiaomi for us, but it's more around the Samsung and Google players right now are ramping very well.

Speaker Change: Got it.

Speaker Change: Bob.

Speaker Change: <unk>.

Bob: On the broad market. So you have one out of the three segments, that's actually bottoming and recovering and you still didn't place the growth rate is 4%. So as we kind of lumped into the back half of the year as things kind of.

Speaker Change: Inventory adjustment a beta in the other two segments should we kind of.

Speaker Change: Expecting more of a accelerating sequential growth as we move through the year.

Peter Pang: So currently, it's only modest, like in March, it was 1% sequentially. In June, we expect 2%, and 3% sequentially. But then, as we look out in the next couple quarters, we do expect and expect an acceleration of that sequential growth, getting back to initially modest year-over-year growth but then translating into strong double-digit year-over-year growth in our broad markets business. Thank you. Thank you. The next question comes from Cody Acree with The Benchmark Company. Your line is open.

Speaker Change: Absolutely absolutely. So currently it's only modest like in March it was 1% sequentially in June we expect two or 3% sequentially, but then as we look out in the next couple of quarters, we do and expect an acceleration of that sequential growth getting back to.

Speaker Change: Initially modest year over year growth, but then translating into strong double digit year over year growth in our broad markets business.

Speaker Change: Thank you.

Coty Acreage: Thank you. Our next question comes from Coty acreage with the benchmark company. Your line is open.

Cody Grant Acree: Yeah, thanks guys for taking my question. You did mention Huawei in your specific comments about China. I guess any comments on that OEM given their success in that market? Yeah, we're still not engaged with Huawei. But again, we will work in the Android markets with some of the other players that we talked about. So, Huawei for now, I think has really been kind of on the. Is there any specific reason for that? Well, there's just, you know, a couple things.

Coty Acreage: Thanks, guys for taking my question.

Coty Acreage: You mentioned Huawei and your specific comments around China.

Coty Acreage: Yes.

Coty Acreage: Comments on that OEM given there.

Coty Acreage: Their success in that market.

Speaker Change: Yes, we're still not engage with with Huawei, but again, we will work.

Coty Acreage: We enjoyed markets with some of the other players that we talked about so but Huawei for now I think has really been kind of on the bench.

Speaker Change: Is there any specific reason for that.

Kris Sennesael: I mean, the product quality there that we look at is just not really up to snuff for us, and it's still just a very difficult environment. Okay. And then I guess just lastly, any further comment on your AI comments in prepared remarks about content and dollar content opportunities in addition to just unit volume replacement cycles? Any framework of how you expect those dollar content increases to layer in as we're just now starting to get any kind of real-gen AI unit volumes across the channel? Yeah, yeah, a great question.

Coty Acreage: Well, there's still just a couple of things I mean that the product quality there that we look at it it's just not really up to snuff for us.

Coty Acreage: And so it's just very difficult environment in that marketplace.

Coty Acreage: Okay.

Speaker Change: And then I guess, just lastly, any further comment on your AI comments in prepared remarks about content and dollar content opportunities.

Speaker Change: In.

Coty Acreage: In addition unit volume replacement cycles.

Coty Acreage: Any framework of how you expect those dollar content increases to layer in as we're just now starting to give any kind of real gem AI unit volumes across the channel.

Speaker Change: Yeah, Yeah, Great question. So if we actually think about it right now we've been really long in the tooth here with upgrades across the board in mobile across the whole market.

Cody Grant Acree: So, you know, if you actually think about it right now, we've been really long in the tooth here with upgrades. Transcribed by https://otter.ai. Without AI, the market is, we believe, is going to inflect with a resurgence of growth in terms of units. But when you get into the AI side, we talked about a little bit earlier, we're going to need to do some tremendous things in the smartphone world to actually catalyze what AI needs to do, and it's going to drive tremendous power. Power is really, really important.

Coty Acreage: So without AI.

Coty Acreage: The market is we believe is going to inflect with thought with it.

Coty Acreage: <unk> resurgence of growth in terms of units, that's one park, but when you get into the AI side can we talked about a little bit earlier.

Coty Acreage: We're going to need to do some tremendous things in the smartphone world to actually catalyze AI needs to do.

Coty Acreage: There's going to be upgrades in servers is going to be upgrades on the on the device and its going to drive tremendous power and power is really really important when you think about data center you hear all these things from Nvidia powered their power to a server mobile as mobile where untethering. So.

Liam K. Griffin: When you think about data centers, you hear all these things from NVIDIA. They're power. They're power to a service. Mobile is mobile. We're untethered. The burden on technology in the smartphone world is really going to go up, and it's going to narrow the playing field. And I love our chances.

Coty Acreage: The burden on technology in the smartphone World is really going to go up and it's going to narrow the playing field and I love our chances we've got a great business. We've got in house technologies, Great Engineering, a long long live set of solutions.

Liam K. Griffin: We've got a great business. We've got in-house technologies, great engineering, a long, long live set of solutions, and the know how that we built over the years.

Liam K. Griffin: So we're really looking forward to it. I think we talked about it already. The smart, the smart group.

Coty Acreage: How that we built over the years. So we're really looking forward to it I.

Coty Acreage: I think we talked about it already the smart smart growth.

Liam K. Griffin: The smartphone market today is kind of slowed down; it's in need of an upgrade right now. So the intersection between AI and smartphone growth could be really special. So we're looking forward to it. We have a lot of the key building blocks.

Coty Acreage: The smartphone market today already has kind of slowed down has turned for an upgrade right now so the intersection between AI and smartphone growth could be really special so we're looking forward to it.

Coty Acreage: We have a lot of the key building blocks and our engineering teams know exactly what to do to turn this on so we're definitely anticipating some upside here.

Cody Grant Acree: And our engineering teams know exactly what to do to turn this on, so we're definitely anticipating some... William, thank you for that. I guess just further that though, are there specific areas of the front end module that you expect to benefit more in the short term as processing rates are going higher as connectivity demands are increased? Is it more a thermal issue? Is it more transferability or switching or intended tuning for that matter?

Speaker Change: Great and thank you for that I guess.

Speaker Change: Further to that though are there specific areas of the front end module that you expect to benefit more in the short term is processing rates are going higher as connectivity demands. Our increase is it more thermal issue or is it more of transferability or switching.

Speaker Change: Antenna tuning for that matter.

Liam K. Griffin: Yeah, I mean, there are more paths, uplink and downlink. You've got carrier aggregation here, better filters that we do in-house, and engaging with Wi-Fi as well. And there's also gonna be a range of new frequency bands as you move forward into those devices. So there's a lot to do. And just that technology alone is gonna be amazing, but also the smartphone opportunity today with all those legacy phones that wanna turn over to a new upgrade. I think we're all gonna come together.

Speaker Change: Yeah, I mean, there's more pass uplink and downlink carrier aggregation here better filters that we do in house.

Speaker Change: Engaging in with Wi Fi as well and there is also going to be a range of new frequency bands as you move forward into those devices. So there is a lot to do and.

Speaker Change: Just just just that technology alone is going to be amazing, but also the smartphone opportunity today with all of those legacy phones that wanted to turn over to a new upgrade.

Speaker Change: We're all going to come together. So we're looking forward to that we're doing the technical work to make it happen.

Liam K. Griffin: So we're looking forward to that. We're doing the technical work to make it happen. And we'll keep you posted. All right, great.

Speaker Change: And we'll keep you posted.

Speaker Change: Alright, great. Thank you.

Speaker Change: Sure.

Cody Grant Acree: Our next question comes from Quinn Bolton with Needham & Company. Your line is open. Hey, Liam and Kris.

Speaker Change: Thank you. Our next question comes from Quinn Bolton with Needham <unk> Company. Your line is open.

Quinn Bolton: Thanks for taking my question. I guess I wanted to start, you opened the call kind of talking about the slower demand environment in March and April that's led to this inventory correction in the June quarter, but I guess I haven't heard you guys say that you've necessarily seen the end of that demand softness. And so, you know, what signals are you looking for, have you already seen, that give you confidence that this inventory correction is going to be limited to only the June quarter? You know, are you starting to see, you know, demand signals strengthen as you look, you know, past the June quarter? And Quinn, so this is not a major, major correction, right?

Quinn Bolton: Hey, Chris Thanks for taking my question I guess I wanted to start you off.

Quinn Bolton: On the call kind of talking about the slower demand environment in March and April. This led to this inventory correction in the June quarter, but I guess I'm I haven't heard you guys say that you are.

Speaker Change: Necessarily seen the end of that demand softness and so.

Speaker Change: What signals are you looking for have you already seen that give you confidence that this inventory correction is going to be limited to only the June quarter.

Speaker Change: Are you starting to see demand signals strengthen as you look past the.

Speaker Change: The June quarter.

Speaker Change: And Quinn. So this is not a major major correction right. This is just some softer than expected demand that we see.

Kris Sennesael: This is just some softer than expected demand that we see. We're not talking here about a huge, major correction. And again, based on customer forecasts and our own intelligence about what's going on in the market, we think that will be mostly flushed out in the June quarter and in the guide that we provided for June. So it sounds like it's the forecast from customers that leads you to believe it's largely limited to the June quarter. That's correct.

Speaker Change: We're not talking here about a huge major correction.

Speaker Change: Uh huh.

Speaker Change: And.

Speaker Change: Again based on customer forecast and our own intelligence about what's going on into the market. We think that will be mostly flushed out.

Speaker Change: In the June quarter and in the guide that we provided for the June.

Speaker Change: Okay. So it sounds like its demand forecast from customers that lead you to believe it's largely limited to the June quarter.

Speaker Change: That's correct yes.

Quinn Bolton: And then, you know, I know it's sensitive, but just coming back to the socket loss, the large customer, it sounds like you think this may be sort of a near-term commercial issue. But I guess I just wanted to ask, do you think there's any read throughs from this that might signal a move to sort of a multi-sourcing strategy at that customer where they're looking to bring in additional suppliers across all sockets just for supplier diversity reasons, or again, do you think it's kind of more limited to, you know, one year, you know, one socket?

Speaker Change: Understood and then.

Speaker Change: I know, it's sensitive, but just coming back to the socket loss at the large customer it sounds like Youre thinking maybe sort of a near term commercial issue, but I guess I just wanted to ask do you think there is any read throughs from from this that might signal a move to sort of.

Speaker Change: Multi sourcing strategy and that customer where they're looking to bring in additional suppliers across all sockets just for supplier diversity reasons or again do you think it's kind of more limited.

Speaker Change: One year, one socket, yeah, it's one year one socket for sure.

Liam K. Griffin: Oh, yeah, it's one year, one socket, for sure. We have very, very good eyes. We'll wrap it up, but the product in question, we know how to make. We look forward to continuing to deliver that and others as we go forward, so we appreciate that. Thank you. Thank you. There are no further questions at this time.

Speaker Change: And we have very very good eyes on that.

Speaker Change: Like I said, we'll wrap it up at the product in question, we don't have to make.

Speaker Change: Look forward to continuing to deliver that and others as we go forward. So we appreciate that.

Speaker Change: Thank you.

Liam K. Griffin: I'd like to turn the call back over to Liam for closing remarks. Thank you, everyone, for participating in today's call. We will look forward to talking to you at upcoming investor conferences during the quarter. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day. Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Speaker Change: Thank you there are no further questions at this time I'd like to turn the call back over to Liam for closing remarks.

Liam K. Griffin: Thanks, everyone for participating in today's call. We will look forward to talking to you at upcoming investor conferences during the quarter. Thanks.

Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.

Liam K. Griffin: Yes.

Liam K. Griffin: [music].

Liam K. Griffin: Okay.

Liam K. Griffin: [music].

Liam K. Griffin: Okay.

Liam K. Griffin: [music].

Liam K. Griffin: Yes.

Liam K. Griffin: [music].

Liam K. Griffin: Okay.

Liam K. Griffin: Yes.

Liam K. Griffin: Okay.

Liam K. Griffin: Yes.

Liam K. Griffin: [music].

Liam K. Griffin: Video extract from Satsang DVD Satsang with Mooji Satsang with Mooji Video extract from Satsang DVD Satsang with Mooji Video extract from Satsang DVD Satsang with Mooji Video extract from Satsang DVD Satsang with Mooji Copyright 2019 Mooji Media Ltd. All Rights Reserved.

Liam K. Griffin: No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Copyright 2019 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Liam K. Griffin: [music].

Rajvindra S. Gill: Copyright 2020, New Thinking Allowed Foundation. I would like to introduce Raja Gill, Vice President of Investor Relations for Skyworks. Thank you, operator. Good afternoon, everyone.

Liam K. Griffin: I would like to introduce Raj Gill Vice President of Investor Relations for Sky works.

Rajvindra S. Gill: And welcome to Skyworks' second fiscal quarter 2024 conference. With me today is Liam Griffin, our Chairman, Chief Executive Officer, and President, and Kris Sennesael, Chief Financial Officer of Skyworks. This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at skyworksinc.com. In addition, the company's prepared remarks will be made available on our website promptly after their conclusion during the call. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are, or may be, considered forward-looking statements.

Rajvindra S. Gill: Thank you operator, good afternoon, everyone and welcome to Sky works second fiscal quarter 2024 conference calls.

Rajvindra S. Gill: With me today is Liam Griffin, our chairman, Chief Executive Officer, and President and Chris Citizens, Chief Financial Officer for Sky works.

Speaker Change: This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at <unk> Dot com.

Speaker Change: In addition, the company's prepared remarks will be made available on our website promptly after their conclusion during the call.

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

Speaker Change: Please refer to our earnings press release, and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today.

Speaker Change: Additionally, the results and guidance, we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP with that I'll turn the call over to Liam.

Liam K. Griffin: Thanks, Rajiv and welcome everyone Sky works posted solid results for the second fiscal quarter of 2024.

Liam K. Griffin: We delivered revenue of $1 <unk> 6 billion, we posted earnings per share of $1 55.

Liam K. Griffin: And generated $300 million of operating cash flow, which reflects strong working capital management and operational excellence.

Liam K. Griffin: During the March quarter, and our mobile business, we saw below normal seasonal trends with lower than expected end market demand.

Liam K. Griffin: In broad markets. The December quarter represented the bottom and we delivered modest sequential growth in March reflecting a turning point.

Liam K. Griffin: We expect the pace of the recovery will be measured throughout 2020, more given ongoing weakness in certain end markets like infrastructure and automotive.

Liam K. Griffin: And edge Iot, we have a solid Wi Fi six Wi Fi seven design win pipeline.

Liam K. Griffin: We are in the early innings of a multi year upgrade cycle with high end access points now being offered.

Speaker Change: Over the coming quarters, we anticipate retailers to rollout mainstream models, followed by carriers and msos for their gateways and routers.

Speaker Change: The wireless infrastructure and traditional data center markets remained soft we continue to under ship natural demand as we allow the distribution channel and customers to consume excess inventory.

Liam K. Griffin: Despite near-term headwinds, we remain bullish on AI workloads, driving upgrades to Ethernet switches and optical modules, a positive long-term driver for our advanced precision timing solutions. Lastly, automotive and industrial markets remain under pressure as they continue to undergo a steep inventory correction. However, we see opportunities for long-term growth in our automotive industry, because automotive OEMs are increasingly focused on software-defined vehicles.

Speaker Change: Despite near term headwinds, we remain bullish on AI workloads driving upgrades to Ethernet switches and optical modules are positive long term driver for our advanced precision timing solutions.

Speaker Change: Lastly, automotive and industrial markets remain under pressure as they continue to undergo a steep inventory correction.

Speaker Change: However, we see opportunities for long term growth in our automotive business.

Speaker Change: Automotive Oems are increasingly focused on software defined vehicles.

Liam K. Griffin: The Connected Car, an in-cabin user experience, all of which are generating higher levels of radio complexity. Despite near-term headwinds, we remain positive on growing EV penetration and creating demand for our Power Isolation Products. Our strategy is to leverage connectivity technology across multiple growth segments, including edge-connected IoT devices, automotive electrification, and advanced safety systems, and AI infrastructure. Connectivity is crucial in enabling AI on decentralized

Speaker Change: The connected car.

Speaker Change: And in cabin user experience all of which are generating higher levels of radio complexity.

Speaker Change: Despite near term headwinds, we remain positive on growing EV penetration.

Speaker Change: Creating demand for our power isolation tracks.

Speaker Change: Our strategy is to leverage connectivity technology across multiple growth segments, including edge connected Iot devices, automotive electrification and advanced safety systems and AI infrastructure.

Speaker Change: Connectivity is crucial and enabling AI on decentralized edge systems, our RF technology powered applications like the connected home building automation smart cities machine to machine and Wearables.

Liam K. Griffin: Our RF technology powers applications like the connected home, building automation, smart cities, machine-to-machine, and wearables. We are particularly excited about the industry mandates and regulatory tailwinds leading to higher levels of connectivity inside the car. For example, the number of radios and antennas are growing in vehicles to support various communications mandates, including 5G cellular, Bluetooth, Wi-Fi, Ultra Wideband, NFC, and CB2X. The multitude of radios creates challenges around coexistence, external interference, and latency. Our advanced RF solutions can solve these complex problems for our OEMs. In Datacenter, accelerated workloads supporting large language models are catalyzing networking and optical upgrades.

Speaker Change: We are particularly excited about the industry mandates and regulatory tailwind leading to higher levels of connectivity inside the car.

Speaker Change: For example, the number of radios and antennas are growing at vehicles to support various communication standards <unk>.

Speaker Change: <unk> cellular Bluetooth Wi.

Speaker Change: Wi Fi Ultra wideband, NFC and <unk>, the multitude of radios create challenges around coexistence external interference and latency.

Speaker Change: Our advanced RF solutions can solve these complex problems for our Oems.

Speaker Change: In data center accelerated workload supporting large language models are catalyzing networking and optical upgrades, we have a tiny portfolio targeting next generation 800 gig and one six terabits Ethernet switches and optical modules, enabling.

Liam K. Griffin: We have a timing portfolio targeting next-generation 800 gigabit and 1.6 terabit Ethernet switches and optical modules, enabling AI infrastructure. At Mobile World Congress in Barcelona, we were excited to see several AI-enabled phones being introduced to the marketplace. We believe AI could propel a meaningful replacement cycle in the smartphone market, fueling applications like real-time language translation, voice assistance, advanced camera and imaging, and on-device personalization. Over time, AI-enabled phones could drive higher levels of RF complexity, including robust connectivity, higher throughput, further integration, and lower power consumption.

Speaker Change: Infrastructure.

Speaker Change: During mobile World Congress in March in Barcelona, We were excited to see several AI enabled phones being introduced to the marketplace.

Speaker Change: We believe AI could propel a meaningful replacement cycle in the smartphone market fueled by applications like real time language translation voice assistant advanced camera in imaging and on device personalization.

Speaker Change: Over time, AI enabled phones could drive it could drive higher levels of RF complexity, including robust connectivity higher throughput further integration and lower power consumption.

Liam K. Griffin: Turning to our quarterly business highlights, we delivered integrated platforms to the leading 5G smartphone OEMs, including flagship and mid-tier models with Samsung, Google, Oppo, and others. We expanded our design pipeline and initiated new programs in automotive, including infotainment systems, traction inverters, cloud-enabled driver assist, and CV2X. We secured several audio SOC designs with Sony and Samsung.

Speaker Change: Turning to our quarterly business highlights, we delivered integrated platforms to the leading smartphone Oems.

Speaker Change: <unk> flagship and mid tier models, with Samsung, Google Apple and others.

Speaker Change: We expanded our design win pipeline and initiated new programs in automotive, including infotainment systems traction Inverters cloud enhanced driver assist and <unk>.

Speaker Change: We secured several audio Soc designs with Sony and Samsung.

Speaker Change: In summary, skylarks continues to execute well, despite a challenging macro environment.

Speaker Change: While we are navigating near term headwinds, we remain bullish on our long term strategy.

Speaker Change: With that I will turn the call over to Chris for a discussion of last quarter's performance and our outlook for Q3 of fiscal 2024.

Chris: Thanks Liam.

Chris: <unk> revenue for the second fiscal quarter of 2024 was $1 billion at $46 million slightly above the midpoint of our outlook.

Kris Sennesael: Mobile was approximately 66% of total revenue, down 19% sequentially. Broad markets were approximately 34% of total revenue, up 1% sequentially. Gross profit was $471 million, with gross margin at 45%, in line with expectations. However, gross margin was down 140 basis points sequentially, reflecting our seasonally weakest period. Also, during Q2, we further reduced our internal inventory by 91 million to 836 million, which reflects five consecutive quarters of reduction. Operating expenses were $192 million, below the low end of the guidance range.

Chris: Mobile was approximately 66% of total revenue down 19% sequentially.

Chris: Broad markets were approximately 34% of total revenue up 1% sequentially.

Chris: Gross profit was 471 million with gross margin at 45% in line with expectations.

Chris: Gross margin was down 140 basis points sequentially, reflecting our seasonally weakest period.

Chris: Also during Q2, we further reduced our internal inventory by $91 million to 836 million, which reflects five consecutive quarters of reductions.

Chris: Operating expenses were $192 million below the low end of the guidance range, reflecting our disciplined focus on managing discretionary expenses, while continuing to invest in our technology and product Roadmaps.

Chris: We generated $279 million of operating income translating into an operating margin of 26, 7%.

Chris: We generated $4 million of other income and our effective tax rate was 11, 3% driving net income of 251 million and diluted earnings per share of $1 55.

Chris: Which is <unk> <unk> above the guidance that we provided during the last earnings call.

Chris: Despite the quarterly volatility <unk> business model generates strong cash flow.

Chris: <unk> fiscal quarter cash flow from operations was 300 million capital expenditures were $28 million or less than 3% of revenue, resulting in a free cash flow of $273 million.

Kris Sennesael: Capital expenditures were $28 million, or less than 3% of revenue, resulting in a free cash flow of $273 million. We continue to drive robust cash flow through high levels of profitability, prudent working capital management, and moderating capital. Also, during fiscal Q2, we paid $109 million in dividends. Our cash balances grew to over $1.2 billion, and we have $1 billion in debt. Our solid capital structure provides us with excellent flexibility and optionality

Chris: We continue to drive robust cash flow through high levels of profitability prudent working capital management and moderating capex.

Chris: Also during fiscal Q2, we paid $109 million in dividends our.

Chris: Our cash balances grew to over $1 2 billion and we have $1 billion in depth.

Chris: Our solid capital structure provides us with excellent flexibility and Optionality.

Kris Sennesael: Now, let's move on to our outlook for Q3 of fiscal 2024. We anticipate revenue of $900 million, plus or minus 2%. We expect our mobile business to be down sequentially, below normal seasonal patterns, as excess inventory clears. In broad markets, we anticipate further modest sequential growth, as inventory levels appear to be normalizing in certain end-users. Gross Margin is projected to be in the range of 45-47%, improving by 100 basis points sequentially at the mid-term.

Speaker Change: Now, let's move on to our outlook for Q3 of fiscal 2024.

Chris: We anticipate revenue of 900 million plus or minus 2%.

Chris: We expect our mobile business to be down sequentially below normal seasonal patterns as excess inventory clears.

Chris: And broad markets, we anticipate further modest sequential growth as inventory levels appear to be normalizing and certain end markets.

Chris: Gross margin is projected to be in the range of 45% to 47% improving 100 basis points sequentially at the midpoint.

Kris Sennesael: We anticipate cross-margin expansion during the remainder of 2024, driven by our cost reduction actions, favorable makeshift, and higher utilization rates. We expect operating expenses in the range of $192 million to $198 million, as we continue to make strategic investments in mobile and broad markets to drive share gains and increase diversification. Below the line, we anticipate roughly $2 million in other income, an effective tax rate of 11.5%, and a diluted share count of approximately 161.5 million shares. Accordingly, at the midpoint of the revenue range of $900 million, we intend to deliver diluted earnings per share of $1.21.

Chris: Anticipate gross margin expansion during the remainder of 2024, driven by our cost reduction actions favorable mix shift and higher utilization rates.

Chris: We expect operating expenses in the range of 192 million to $198 million.

Chris: As we continue to make strategic investments in mobile and broad markets to drive share gains and increased diversification.

Chris: Below the line, we anticipate roughly $2 million in other income and effective tax rate of 11, 5% and a diluted share count of approximately $161 5 million shifts.

Chris: Accordingly at the midpoint of the revenue range of $900 million, we intend to deliver diluted earnings per share of $1 and 21.

Speaker Change: Operator, let's open the line for questions.

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

Speaker Change: Thank you. Your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Christopher Caso: Our first question comes from Chris Caso with Wolf Research. Your line is open. Yes, thank you. Good afternoon.

Speaker Change: Our first question comes from Chris Caso with Wolfe Research Your line is open.

Kris Sennesael: I guess the first question with regard to the worst in seasonal mobile business is: you speak about excess inventory. We've unfortunately been hearing about excess inventory in mobile for some time. Could you give a few more details on that? And specifically, was this from the Android space, or was it beyond Android? Yes, Kris. This is Kris here.

Christopher Caso: Yes. Thank you good afternoon, I guess, the first question with regard to.

Christopher Caso: The worst and seasonal mobile business you speak about excess inventory, we have unfortunately been hearing medicus inventory.

Christopher Caso: In mobile for some time could you give a few more details on that and specifically was from.

Christopher Caso: From the Android space or it wasn't beyond the Android space.

Kris Sennesael: I'm happy to provide some more color as it relates to our guidance for the June quarter. So, specifically in our mobile business, towards the end of the March quarter, especially in the month of March, we saw some below-normal seasonal trends with lower than expected end market demand. And unfortunately, that resulted in some buildup of inventory in the channel, and that was somewhat across our mobile business. Unfortunately, those trends also continued during the four weeks of April.

Christopher Caso: Yes, Chris this is Chris here.

Chris: Happy to provide some more color as it relates to our guidance for the June quarter, and so specifically in our mobile business towards the end of the March quarter, especially in the month of March we saw some below normal seasonal trends with lower than expected end market demand.

Chris: And unfortunately that resulted in some buildup of inventory in the channel and that was somewhat across our mobile business. Unfortunately those trends also continue during the four weeks of April and so we took that all into account as we set our guidance for the June quarter.

Kris Sennesael: And so we took that all into account as we set our guidance for the June quarter. And we do expect our mobile business to be down sequentially by 20 to 25 percent, which is well below normal seasonal patterns. And it's mostly due to the fact that we have to clear out the excess inventory and the channel. On the flip side, in our broad markets business, we do expect to see some modest sequential growth in addition to the modest sequential growth that we saw in the March quarter. Thank you for the clarification.

Chris: And.

Chris: We do expect our mobile business to be down sequentially.

Chris: 225%.

Chris: Which is well below normal seasonal patterns and it's mostly due to the fact that we have to clear out excess inventory in the channel.

Chris: On the flip side.

Chris: And our broad markets business, we do expect to see some modest sequential growth.

Chris: In addition to the modest sequential growth that we saw in the March quarter as well.

Speaker Change: Thank you for the clarification I guess as a follow up what does this mean for the second half of the year and typically.

Speaker Change: You don't guide for the second half on this call, but do you expect those inventory headwinds to persist. Obviously you have new product launches as you go to the second half what does that mean for normal seasonality as you go through the second half of the year from these levels.

Speaker Change: Yes, Chris we only guide one quarter at a time.

Kris Sennesael: It's somewhat unpredictable what's going to happen three, four quarters down the road, but we do expect that most of the inventory clearance will be done during the June quarter. So does that suggest, you know, kind of back to normal revenue levels, or like, I guess, I guess what you're saying is this is a very short-term issue in June? Yeah, from a demand point of view, that is correct. Okay, thank you. Thank you. The next question comes from Matt Ramsey with TD Cowen.

Speaker Change: <unk>.

Speaker Change: Somewhat unpredictable, what's going to happen three or four quarters down the road, but we do expect that most of the inventory clearance will be dawn.

Speaker Change: During the June quarter.

Speaker Change: So does that does.

Speaker Change: Does that.

Speaker Change: Suggest kind of a back to normal revenue levels.

Speaker Change: I guess.

Speaker Change: I guess, what Youre, saying is this is a this is a very short term issue.

Speaker Change: In the June quarter.

Speaker Change: Yes from a from a demand point of view with August correct.

Speaker Change: Okay. Thank you.

Matthew D. Ramsay: Your line is open. Thank you very much. Good afternoon, everybody.

Speaker Change: Thank you. Our next question comes from Matt Ramsay with TV Cowen Your line is open.

Matthew D. Ramsay: Guys, I wanted to follow on from Chris's questions there on the mobile segment, and is there any correlation at all that we should draw between, is this just a unit and inventory thing, or is there any correlation we should draw to potentially expected content and programs that would launch later in the year? Is there a further drawdown in inventory because maybe content has changed one way or the other, or should we just not try to make that conclusion? Thanks. Yeah, this is Liam.

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

Matthew D. Ramsay: Guys I wanted to follow on to Chris's question, there on the mobile segment.

Matthew D. Ramsay: Is there.

Matthew D. Ramsay: Any correlation at all that we should draw between.

Matthew D. Ramsay: Just a unit in inventory thing or is there any correlation we should draw too.

Matthew D. Ramsay: Essentially expected content and programs that would launch later in the year is there a photo of a drawdown in inventory because maybe content has changed one way or the other or should we just not try to make that conclusion.

Liam K. Griffin: Yes. This is liam.

Liam K. Griffin: So this is an interesting dynamics here and I really can't comment on specifics related to our largest customer.

Liam K. Griffin: However, we will provide as much directional color as possible here.

Liam K. Griffin: So we were placed in a unique situation with our largest customer where we were unable to consummate an award that we expected and frankly thought we had earned.

Liam K. Griffin: As a result, we expect content headwinds from the upcoming cycle. At the same time, we are strategically aligned with our largest customer, and we're ready to engage in all of their strategic initiatives. Yeah, and Matt, just to add a little bit more color there, and again, as you know, we can't really go into the specifics as it relates to the large customer, but we were able to partially offset the socket loss that Liam just talked about with some additional content gains, including some new sockets As a result, on a nap nap, we expect the content to be down.

Liam K. Griffin: As a result, we expect content headwinds from the upcoming cycle.

Liam K. Griffin: At the same time, we are strategically aligned with our largest customer and we are ready to engage in all of their strategic initiatives going forward.

Speaker Change: Yes, and Matt just to add a little bit more color there.

Speaker Change: And again, we as you know we can't really go into the specifics as it relates to the large customer.

Matthew D. Ramsay: We were able to partially offset the socket loss that Liam just talked about it with some additional content gains, including some new sockets that we don't have in the current version of the phone and so.

Speaker Change: As a result on a net net we expect the content to be down.

Liam K. Griffin: A little more than 10% compared to the current phone model, and that will start having an impact in the September quarter. No, I guys, I appreciate that very much. And I know it's super sensitive, but I kind of need to ask a follow up here, which is, if you could, Liam, if you could try to characterize, maybe, the chain of events that happened to the extent that you're able to with this any kind of performance or quality or product issue with Skyworks programs specifically? Was this a program change that they made?

Speaker Change: Little more than 10% compared to the current phone model.

Speaker Change: And that will start having an impact in the September quarter.

Speaker Change: Got it no I appreciate that very much and I know it's super sensitive.

Speaker Change: Kind of need to ask a follow up here, which is.

Speaker Change: If you could if you could try to characterize.

Speaker Change: Maybe the chain of events that happened to the extent that you're able to weather. This.

Speaker Change: Any kind of a.

Matthew D. Ramsay: Any context as to when you guys sort of learned about this and how the whole thing came to pass? Again, appreciate it. It's super sensitive if you're on a public call.

Speaker Change: Performance or quality or product issue with Skywards program, specifically was this a program change that they made.

Speaker Change: Any context.

Speaker Change: When you guys sort of learned about this and how the whole thing came to pass again I appreciate it it's 2%, but if youre on a public call.

Liam K. Griffin: Yeah, I mean, this is not performance-related. It's not technology-related. In fact, the product has been, www.skyworks.com Just a unique situation; can't get into all the details, we're looking forward to. We are partners with our largest customer. We expect to do more work in the future, and we're looking forward to that. I appreciate the gander.

Speaker Change: Yes, I mean this is not performance related it's not technology related in fact, the product has.

Speaker Change: It's been a stalwart in the portfolio so nothing nothing like that.

Speaker Change: Just the unique situation I can't get into all the details.

Speaker Change: Looking forward.

Speaker Change: We are partners with our largest customer we expect to do more work in the future and looking forward to that.

Speaker Change: Alright fair enough I appreciate the candor I'll jump back in the queue. Thanks, guys.

Speaker Change: Okay.

Matthew D. Ramsay: I'll jump back into the queue. Thanks, guys. Thank you. Our next question comes from Edward Snyder with Charter Equity Research. Your line is open. Great, thanks a lot guys. A couple of questions if I could. So Liam or Kris, doesn't matter, you've got incremental gains in stock as you did last year. I think the general idea here is you want some Wi-Fi.

Speaker Change: Thank you. Our next question comes from Edward Snyder with Charter equity Research. Your line is open.

Edward Francis Snyder: That is obviously coming out of mobile, not broad markets, first of all. And secondly, would you characterize any content losses in the second half of, what I would call a primary product that tends to be very performance-driven, or is it kind of a marginal product with a number of, Qualify for 2 or 3 different vendors, and I had to follow up. Yeah, you know, Unfortunately, I can't give you too much detail here.

Edward Francis Snyder: Great. Thanks, a lot guys couple of questions if I could so.

Edward Francis Snyder: Or Chris doesn't matter, you got incremental gains and so I guess you didn't have last year I think the general idea here is you want some Wi Fi.

Edward Francis Snyder: <unk> is obviously coming out of mobile not broad markets first of all and secondly would you characterize any content losses in the second half of the year to be in a in a what I would say primary.

Edward Francis Snyder: Product.

Edward Francis Snyder: It tends to be very performance driven or is it kind of a marginal product with a number of different people compete and you could qualify for.

Edward Francis Snyder: Two or three different.

Speaker Change: Different vendors and then I had a follow up please.

Speaker Change: Yes, Unfortunately, I can't give you too much detail here, but as you know.

Liam K. Griffin: But as you know, we're striving to. [inaudible] and you know we're getting through it, and we expect to be able to turn up the revenue here. Can maybe we can go out a little bit further? I know you don't like to give, or I'm not looking for guidance, but just generally describe.

Speaker Change: Driving too.

Edward Francis Snyder: Gained share in every every every every even sockets that we're addressing today.

Edward Francis Snyder: Whether the largest customer or some of the other players.

Edward Francis Snyder: The technology is there I mean is this is this is not a technology gap. This is really some commercial issues.

Speaker Change: That was unique.

Edward Francis Snyder: And we're getting through it and we expect to be able to turn up the revenue here as we go forward.

Speaker Change: Maybe we can go out a little bit further I know you don't like to give an outlook for guidance, but just generally characterize.

Edward Francis Snyder: Contact us at www.skysolutionsinc.com, is impacting the RF section in kind of an unforeseen way in that you're obviously not participating in the machine learning part of it, make room for batteries, make room for more processes, and squeeze the barricade, sounds like. The RF guys are getting small packages. So even if the performance doesn't change, it sounds like the pack... The Bulletproof Executive 2013, Transcripts provided by Transcription Outsourcing, LLC. Will it occur in 25, or will we have to wait until 25? Yeah, Ed, great question. I'm glad you asked.

Speaker Change: The content picture, saying 25.

Speaker Change: I feel like it was 26 or so, but it's clear that from our research that the.

Speaker Change: Showing up in phones.

Speaker Change: Any of the phones.

Speaker Change: Especially the flagship models is impacting the RF section and kind of an unforeseen way and that obviously not participating the machine learning part of it but to make room for batteries to make room for more processing.

Speaker Change: And to squeeze the battery consumption the footprint it sounds like.

Speaker Change: Especially your flagship customers are starting to turn the screws to the RF guys, who get smaller packaging. So unit's performance doesn't change it sounds like the packaging is which is already quite difficult was going to get substantially more so what impact do you expect this to have generally speaking on revenue in flagship phones.

Speaker Change: And we will occur in 'twenty five we have to wait 26 to start seeing these results. Thanks yeah.

Speaker Change: Yes, Great question I'm glad you asked so.

Liam K. Griffin: As you know, if we think about the mobile phone today, which we can't live without, right? Everybody needs it. So much activity on that device. And you know, it's an incredible, incredible product. But when you start to go into generative AI, as you know, the compute power head is going to be so, so hot. The current consumption, All of that action is going to burn up your battery.

Speaker Change: As you know if we think about the mobile phone today, which we can't live without right everybody needs to equity so much activity.

Speaker Change: On that device.

Speaker Change: It's an incredible incredible product.

Speaker Change: But when you start to go into general of AI as you know the compute power and it's going to be social.

Speaker Change: The current consumption all of that action is going to it's going to burn up your bandwidth. So you've got to step up into a new.

Liam K. Griffin: So you've got to step up to a new set of solutions that we're working on right now that will be more power efficient. That will be mark to market around mobility, but with GEN-I. Right, right in the strike zone.

Speaker Change: New set of solutions that we're working on right now that will be more power efficient.

Speaker Change: That will be mark to market around mobility, but generally with generally.

Liam K. Griffin: So we're really excited about that, and we've been talking to larger customers and players about it as well. We have the toolbox to create unique solutions across multiple customer sets. But if you think about it,

Speaker Change: Right right and this write down so we're really excited with that and we've been talking to the larger customers and players with that as well.

Speaker Change: We have the toolbox to create unique unique solutions across multiple customer sets, but if you think about it the technology burden there is going to be so high.

Liam K. Griffin: The technology burden there is going to be so high. The amount of data going back and forth from the handheld to the server is going to be immense. It's going to be very, very difficult.

Speaker Change: The amount of data back and forth from the handheld to the server is going to be immense.

Speaker Change: It can be very very difficult. So I think it's going to narrow down the playing field in mobile for customers.

Speaker Change: You see an opportunity at Sky works to.

Speaker Change: Really work with the best and brightest in our space to create elegant new solutions. So we're really looking forward to that and more to come.

Karl Ackerman: So I think it's going to narrow down the playing field and mobile for customers, you see, and then opportunities at Skyworks to really work with the best and brightest in our space and create elegant new solutions. So we're really looking forward to that and more. Thank you. Our next question comes from Karl Ackerman with BNP Paribas. Your line is open.

Speaker Change: Thank you our next question comes from.

Ackerman: Ackerman with BNP Paribas Your line is open.

Karl Ackerman: Yes, thank you. I realize you've been moderating CapEx following a significant investment year in 2022. But you know, CapEx is also down over 50% in the first half of 2024 relative to last year. And so I was curious, Kris, if you could give an updated view on your CapEx this year, and how do we reconcile that outlook with your longer-term opportunities that you discussed in broad markets as well as 5G? Yeah, Karl, we've talked about that before.

Ackerman: Yes. Thank you.

Ackerman: I realize you've been moderating capex following a significant investment year and 2022.

Ackerman: But capex is also down over 50% in the first half of 2024 relative to last year and so I was curious.

Ackerman: Chris If you could give an updated view on your Capex this year.

Ackerman: And how do we reconcile.

Chris: That outlook with your longer term opportunities that you discussed in broad markets as well as slides handsets.

Speaker Change: Yes.

Chris: We've talked about that before we have multiple years, where capex was running in the 10%, 11% 12% to.

Chris: <unk> revenue, where we build out our manufacturing assets, especially our filter operation.

Speaker Change: A substantial amount of capacity, but also.

Speaker Change: Our backend operation, what we do very complex integration of Assembly and test.

Speaker Change: So those capex heavy capex years are behind US we are now focusing more on driving efficiency yield improvements test time reductions die shrinks and we are creating additional capacity.

Speaker Change: In doing so and focusing on those operational improvements.

Speaker Change: In addition to that as you know revenue has been down year over year. So we do have underutilized factories right now we can substantially grow the revenue without having to add a lot more capex there will always be some capex because we need to continue to advance our technology.

Speaker Change: <unk> advanced our our product roadmaps and that will require some level of technology, driven capex, but it is going to remain for many many years here in the low.

Speaker Change: Low single digits as a percent to revenue and that will continue to fuel a very strong free cash flow.

Karl Ackerman: Chris, you know, you also mentioned an expansion of gross margins in the second half. It sounds like broad markets are improving throughout the second half. It also sounds like gross margins have troughed in the March quarter. But perhaps could you just discuss some ways in which you can improve margins in the mobile business? As volumes come back, and perhaps... Could we also see 50% margins? you know, over the next couple of quarters? Any thoughts on the timing of that?

Speaker Change: Yes, I appreciate that if I may sneak in another one.

Speaker Change: Chris You also mentioned about an expansion of gross margins in the second half.

Speaker Change: It sounds like broad markets is improving throughout the second half and also it sounds like gross margins have dropped in the March quarter, but perhaps could you just discuss.

Speaker Change: Some ways to which you can improve margins in the mobile business.

Speaker Change: As volumes come back and perhaps.

Speaker Change: Yes.

Speaker Change: Could we also see 50% margins.

Speaker Change: Over the next couple of quarters any thoughts on timing of that thank you.

Kris Sennesael: Thank you. Yeah, Karl, so we did 45 in March, and we guided up 100 basis points at the midpoint of the guidance range for June. We also said in the prepared remarks that we continue to see further gross margin improvements in the remainder of 2024 and beyond. And the three key drivers, which are applicable to our broad markets as well as to our mobile business, right? It's driving cost reductions internally as well as externally with all the suppliers that we have already indicated in my previous answer, yield improvements, test time reductions, overall cost reductions, and we are making good progress, and we can actually do a lot more, and the teams are working really hard on that. The second element, as you indicated, yes, broad markets have above average gross margin compared to mobile. And so we have a little bit of a mixed tailwind there as well.

Speaker Change: Yes, Karl So we did 45 in March we guided.

Speaker Change: Up 100 basis points.

Speaker Change: The midpoint of the guidance range for June.

Speaker Change: We also said in the prepared remarks that we continue to see.

Speaker Change: See further gross margin improvements in the remainder of 2024 and beyond and.

Speaker Change: Three key drivers, which is applicable to our broad markets as well as to our mobile business right is driving cost reductions internally as well as externally with all of the suppliers that we have.

Speaker Change: Already.

Speaker Change: I indicated that in my previous answer yield.

Speaker Change: Improvements test time reductions overall cost reductions and we are making good progress and we actually can do a lot more and the teams are working really hard on that the second element as you indicated yes brought markets has above average gross margin compared to mobile and so we have a little bit of a mixed tailwind there as well and then.

Kris Sennesael: And then thirdly, it's factory utilization. Keep in mind that we have been drastically reducing our internal inventory for five quarters in a row by now. And so we are, I'm comfortable with what inventory levels are right now. So that is no longer going to be a headwind as well.

Speaker Change: Thirdly, it's factory utilization.

Speaker Change: Keep in mind that we have been drastically reducing our internal inventory for five quarters in a row by now.

Speaker Change: And so we are I'm comfortable with where inventory levels are right. Now so that is no longer going to be a headwind as well and so as revenue will start growing here and no longer inventory reductions, we will start seeing improvements in factory utilization and a.

Kris Sennesael: And so revenue will start growing here, and not just inventory reductions. We will start seeing improvements in factory utilization. And a combination of all of that gives me confidence that gross margins will continue to improve from here. Thank you. Thank you. Our next question comes from Thomas O'Malley with Barclays. Your line is open. Hey, thanks for taking the question. A two-parter here for Chris.

Speaker Change: Nation of all of that gives me confidence that gross margins will continue to improve from here.

Speaker Change: Thank you.

Thank you. Our next question comes from Thomas O'malley with Barclays. Your line is open.

Thomas O'malley: In the March quarter, could you give the percentage of revenue for your largest customer? And then, just kind of following up on your comments related to March, you talked about some inventory work done at one customer. Could you, to the best of your knowledge, try to describe whether that's existing inventory that's related to the current phone, or do you think that it's the early stages of potentially working down the socket that may be associated with the next phone as well? Are they separate issues, or could they potentially be related?

Thomas O'malley: Hey, Thanks for taking the question two parter here for Chris in the March quarter could you give the percentage of revenue from your largest customer and then just kind of following up on your comments related to March you talked about some inventory work done at the customer could you could you do your best of your knowledge try to describe whether thats existing inventory that's really.

Thomas O'malley: Added to the current phone or do you think that is.

Speaker Change: Early stages of potentially working down the stock that may be associated with the next phone as well or are they separate issues.

Speaker Change: Or could they potentially be related.

Speaker Change: No. It's all related to the current phone we are not shipping.

Speaker Change: For the next.

Speaker Change: Launch yet so this is all related to the current phone.

Speaker Change: The large customer was approximately 68%.

Speaker Change: Of total revenue in the March quarter.

Speaker Change: That was down 19% sequentially, which is somewhat in line with normal seasonality it was down 3% year over year.

But as I indicated, we probably build up a little bit of inventory in the channel.

Speaker Change: Helpful. And then just trying to parse out the pieces for June you're kind of saying that mobile is down 20% to 25%. Even if you set kind of your largest customer in that range you still need to be double digit declines on the Android side. So could you maybe describe what's happening in the Android business I think some of your peers have.

Speaker Change: Talks about maybe a weaker Q2, but what are you seeing with those customers there. Thank you.

Kris Sennesael: Yeah, our Android business has been stabilizing. So it's approaching $100 million a quarter, all our Android, which is Google, Samsung, and the Chinese players. It has been stabilizing. Obviously, there is some seasonality in that business, and yes, June is a little bit of a weaker seasonality in that business. But overall, it has been stabilizing. The inventory correction is over.

Speaker Change: Yes, our Android business has been stabilizing.

Speaker Change: So it's.

Speaker Change: Approaching $100 million per quarter.

All of our Android, which is Google Samsung and the China players. It has been stabilizing obviously, there is some seasonality into that business and yes.

Speaker Change: June is a little bit of a weaker seasonality.

Speaker Change: In that business, but overall it has been stabilizing the inventory correction is over.

Speaker Change: We are making some good traction with design wins.

That.

Speaker Change: And customer demand.

Speaker Change: We will continue to improve over time, new design wins roll in we do expect that business to contribute to some nice year over year growth.

Speaker Change: In the next four to eight quarters here.

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

Ruben Roy: Yes. Thank you.

Ruben Roy: I wanted to switch over to broad markets and just talk about <unk>.

Ruben Roy: Sort of how youre seeing things great to see the bottom in December and the modest growth in March and the outlook for June but relative to 90 days ago.

Ruben Roy: How would you kind of characterize the recovery.

Liam K. Griffin: Are you still sort of thinking incremental growth quarterly, or has anything changed with inventory levels in some of the markets? The data points around auto industrial have been mixed, so maybe just if you could talk, Yeah, absolutely. So there's a lot of opportunity and growth that we're seeing in the broad market. We've been doing a great job with the automotive. There is a lot of technology there, a lot of opportunity, and we're growing that.

Ruben Roy: Are you still sort of thinking.

Ruben Roy: Incremental growth quarterly or has anything changed with inventory levels and some of the markets and the data points around auto industrial have been mixed. So maybe just if you could talk us through the big buckets, Iot auto industrial and comm infrastructure that'd be helpful.

Speaker Change: Yes, absolutely.

Speaker Change: There's a lot of opportunity and growth that we're seeing in the broad markets. We've.

Speaker Change: We've been doing a great job with the automotive automotive segments Mono technology. There are a lot of opportunity we're growing that business.

Liam K. Griffin: We continue to look at other players in the space doing quite well, and industrial markets are coming up for us right now. Solar markets are coming up. We're seeing some good action in PlayStation as well, so we've got kind of a consumer play there, but a lot of volume and a lot of content.

Speaker Change: We continue to look at other players in this space.

Doing quite well and industrial markets are coming up for US right now solar markets are coming up.

We're seeing some good action in Playstation as well so we've got kind of a consumer play there, but a lot of volume and a lot of content. So the portfolio is growing its diversifying and theres a lot more opportunity out there we've been kind of focus more.

Liam K. Griffin: So the portfolio is growing, it's diversifying, and there's a lot more opportunity out there. You know, we've been kind of focused on some of the bigger names, but now we are starting to see a longer roster of opportunities that we can, and also just some of the technologies that we brought in from our MSS X Lab. Thank you for giving us more green shoots and opportunities. Thanks for that, Liam.

And some of the bigger names, but now we start to see a longer roster of opportunities that we can capture.

Speaker Change: And also just some of the technologies that we brought in from our MSS ex lab deal is giving us more green shoots and opportunities as we move along.

Ruben Roy: I guess just a quick follow-up, just on the inventory levels around those buckets. You know, have they improved to, you know, kind of where you thought they would or, you know, as good as any of the big buckets, you know, Unknown Speaker. Yeah, it depends on which part of the broad market you are looking at. If you look more at the consumer IoT, the Edge IoT connectivity products, that have been improving for many quarters now.

Speaker Change: Thanks for that and I guess, just a quick follow up just on the inventory levels.

Around those buckets.

Speaker Change: Have they improved to kind of where you thought they would it work.

Speaker Change: Is any of the big buckets been been a little bit slower or not.

Speaker Change: Yes, it depends on which part of the broad markets. You are looking at if you look more at the consumer Iot.

Speaker Change: The agile <unk> connectivity products.

Speaker Change: That has been improving for many quarters now.

Ruben Roy: I think that market is getting stronger. We obviously have some strong technology transfer that is going on as we upgrade to Wi-Fi 6E and 7, and bookings have been improving with a book-to-bill ratio above 1 in that part of the market. When you look at infrastructure, networking, and data center, that market has been, as you probably have heard from peers and competitors, a little bit soft. There is some inventory that needs to be cleared out, so we are under shipping natural demand right now.

Speaker Change: I think that market is getting stronger we obviously have some.

Speaker Change: Strong technology.

Speaker Change: Transfer that is going on as we upgrade to Wi Fi six and seven and bookings has been improving with a book to bill above one.

Speaker Change: That part of the market.

Speaker Change: When you look at infrastructure networking.

Speaker Change: Data center that market has been as you probably have heard from peers and competitors a little bit soft.

Speaker Change: There is some inventory that needs to be cleared out. So we are under shipping natural demand right now.

Liam K. Griffin: It's going to take a couple quarters for that business to really bounce back, and in the meantime, we have to clear out the inventory. And then, for automotive and industrial, there again, you've heard from peers and competitors, there is definitely some excess inventory that needs to be flushed out. Again, for Skyworks, we're doing reasonably well in that market, given just the product cycle. The ramp of connectivity in the car, the ramp with our power isolation for EV, and we're doing well with our radio processor in the car.

Speaker Change: It's going to take a couple of quarters for that business to really bounce back.

And in the meantime, we have to clear out inventory and then automotive and industrial that again, you've heard from peers and competitors. There is definitely uncertain spots some excess inventory that needs to be flushed out again for Sky works, we're doing reasonably.

Speaker Change: Reasonably well in that market given just the product cycle.

Speaker Change: Our ramp of connectivity in the car the ramp with our.

Speaker Change: Powered adulation 40, we were doing well with our.

Speaker Change: Radio processor in the car and.

Liam K. Griffin: And so we are booking the trend a little bit in a tough environment. Thank you. Our next question comes from Timothy Arcuri with UBS. Your line is open. Hi, this is Aman here jumping in for Tim.

Speaker Change: And so we are bucking the trend a little bit in a tough environment.

Speaker Change: I appreciate the detail Chris.

Speaker Change: Thank you. Our next question comes from Timothy Arcuri with UBS. Your line is open.

Timothy Michael Arcuri: I just want to ask, what was the China mobile revenue, China as a percentage of total mobile revenue? And what is your expectation for that business going forward, as you know, sell through at certain Chinese OEMs appears to be bouncing back. So how should we think about the trajectory of that going forward? Thank you. Yeah, our China mobile revenue is still de minimis. It has been improving quarter after quarter, but it is still at a relatively low level.

Speaker Change: Hi, This is a man here jumping in for Tim I just wanted to ask was.

Speaker Change: The China mobile revenue kind of as a percentage of total mobile revenue and what is your expectation for that business going forward.

Speaker Change: Sell through at third in China Oems appears to be bouncing back. So how should we think about trajectory of that going forward. Thank you.

Speaker Change: Yes, our China mobile revenue is still de minimus it.

Has been improving quarter after quarter, but still on a relatively low level.

Speaker Change: We have great relationship with <unk> vivo Xiaomi the three main players there.

Speaker Change: Design win momentum is picking up a little bit but the overall end customer demand environment is still is still somewhat.

Speaker Change: Somewhat soft.

Speaker Change: I think that's the best way to characterize that but but again I think over time, especially when I am looking forward to fiscal 'twenty five we do expect.

Speaker Change: To see some meaningful year over year growth in that business.

Speaker Change: Thank you. Our next question comes from Peter Peng with Jpmorgan. Your line is open.

Peter Peng: Hi, Thanks for taking my question on the Android point, you talked about it approaching 100 million I believe your previous peak was probably closer to $200 million per quarter.

Peter Peng: Look out into 2025, and 2020 is there anything that precludes you to getting back to those kind of levels.

Kris Sennesael: I think it's going to be difficult to go back to the highest peaks that we have seen in the past because that was overdrive. Remember that was in the COVID years when all customers were screaming to get more parts, and then they ended up with a lot of excess inventory that took more than a year to burn off. Directionally, yes.

Peter Peng:

Speaker Change: I think it is.

Speaker Change: Going to be difficult to get back to the highest peaks that we have seen in the past because that was overdrive remember that was in.

Covid years were all customers were screaming to get more parts and then they ended up with a lot a lot of excess inventory that took more than a year to burn off but.

Kris Sennesael: I mean, it's at $100 million. I mean, we want to get back to $125, $150, or $200 million. And we are focused on that. We do have the technology. We are adding more resources in terms of product development to go after those opportunities. And as customer demand improves and the design wins roll in, we will see some really good revenue growth from those. And I'll just jump in on that. If you think about where we are with Android, we've got really strong engagement with Google and Samsung. High-end players with a lot of volume.

Speaker Change: But directionally, yes, I mean, it's at $100 million I mean, we want to get back to 125 150 to 200 million.

Speaker Change: And we are focused on that we do have the technology, we are adding more resources in terms of product development to go after those opportunities.

Speaker Change: And as end customer demand improves and the design wins roll in we will see some really good revenue growth in those segments and I'll just jump in on that if you think about where we are with Android, we've got really strong engagement with Google and Samsung High end players a lot of volume so it's not so.

Liam K. Griffin: So, it's not so much the Oppo Vivo Xiaomi for us, but it's more around the Samsung and Google players that are right now doing very well. I have a follow-up. On the broad market, so you have one out of the three segments that's actually bottoming and recovering, and you're still, the implicit growth rate is 4%. So as we kind of look into the back half of the year, as things kind of, you know, inventory adjustment, update, and the other two segments, should we kind of be expecting more of an accelerating sequential growth as we move through the year? Absolutely, absolutely.

Speaker Change: In March the offer vivo xiaomi for us, but it's more around the Samsung and Google players right now are ramping very well.

Got it and I have a follow up.

Speaker Change: On the on the.

Speaker Change: Broad market. So you have one out of the three segments, that's actually bottoming and recovering and you still didn't place the growth rate is 4%. So as we kind of look into the back half of the year as things kind of inventory.

Speaker Change: Inventory adjustment of beta and the other two segments should we kind of.

Speaker Change: Expecting more of a accelerating sequential growth as we move through the year.

Peter Pang: So currently, it's only modest, like in March, it was 1% sequentially. In June, we expect it to be 2-3% sequentially. But then, as we look out in the next couple quarters, we do expect and see an acceleration of that sequential growth, getting back to initially modest year-over-year growth but then translating into strong double-digit year-over-year growth in our broad markets business. Thank you. Thank you. The next question comes from Cody Acree with The Benchmark Company. Your line is open.

Speaker Change: Absolutely absolutely. So currently it's only modest like in March it was 1% sequentially.

Speaker Change: June we expect two 3% sequentially, but then as we look out in the next couple of quarters, we do and expect an acceleration of that sequential growth getting back to.

Speaker Change: Initially modest year over year growth, but then translating into strong double digit year over year growth in our broad markets business.

Thank you.

Thank you. Our next question comes from Coty acreage with the benchmark company. Your line is open.

Cody Grant Acree: Yeah, thanks guys for taking my question. You did mention Huawei in your specific comments around China. I guess any comments on that OEM given their success in that market?

Cody Grant Acree: Yes, Thanks, guys for taking my question.

Cody Grant Acree: You mentioned Huawei and your specific comments around China, I guess any comments on that OEM given there.

Cody Grant Acree: Success in that market.

Kris Sennesael: Yeah, we're still not engaged with Huawei. But again, we will work on the Android markets with some of the other players that we talked about. So, but Huawei for now, I think has really been kind of on. Is there any specific reason for that? Well, there's still just, you know, a couple things. I mean, the product quality there that we look at is just not really up to snuff for us, and it's still just a very difficult environment.

Cody Grant Acree: Yes, we're still not engaged with with Huawei, but again, we will work.

Cody Grant Acree: The Android markets with some of the other players that we talked about so but Huawei for now I think has really been kind of on the bench.

Speaker Change: Is there any specific reason for that.

Speaker Change: Well, there's still just a couple of things.

Speaker Change: Quality, there that we look at it as not really up to snuff for us.

Speaker Change: So, it's just very difficult environment in that marketplace.

Cody Grant Acree: Okay. And then, I guess just lastly, any further comment on your AI comments in prepared remarks about content and dollar content opportunities in addition to just unit volume replacement cycles? Any framework of how you expect those dollar content increases to layer in as we're just now starting to get any kind of real-gen AI unit volumes across the channel? Yeah, yeah, great question.

Speaker Change: Okay.

Speaker Change: And then I guess, just lastly, any further comment on your AI comments in prepared remarks about content and dollar content opportunities.

Speaker Change: In.

Speaker Change: In addition unit volume replacement cycles.

Speaker Change: Any framework of how you expect those dollar content increases to layer in as.

Speaker Change: We're just now starting to give any kind of real G&A AI unit volumes across the channel.

Speaker Change: Yeah, Yeah, Great question. So if we actually think about it right now.

Liam K. Griffin: So, you know, if you actually think about it right now, we've been really long in the tooth here with upgrades. Transcribed by https://otter.ai. Without AI, the market is, we believe, is going to inflect with a resurgence of growth in terms of units. But when you get into the AI side, we talked about a little bit earlier, we're going to need to do some tremendous things in the smartphone world to actually catalyze what AI needs to do, and it's going to drive tremendous power. Power is really, really important.

Speaker Change: Been really long in the tooth here with upgrades across the board in mobile across the whole market.

So without AI.

Speaker Change: But the market is we believe is going to inflect with thought.

<unk> resurgence of growth in terms of units that's one part.

Speaker Change: But when you get into the AI side, we talked about a little bit earlier.

Speaker Change: We're going to need to do some tremendous things in the smartphone world to actually catalyze what AI needs to do.

Speaker Change: There's going to be upgrades in servers is going to be upgraded on the device and its going to drive tremendous power and power is really really important when you think about data center you hear all these things from Nvidia powered their power to a server mobile as mobile we're on tethered.

Liam K. Griffin: When you think about data centers, you hear all these things from NVIDIA, they're power. They're power to a service. Mobile is mobile. We're untethered. The burden on technology in the smartphone world is really going to go up, and it's going to narrow the playing field, and I love our chances. We've got a great business, we've got in-house technologies, great engineering, a long, long live set of solutions and the know how that we built over the years.

Speaker Change: The burden on technology in the smartphone World is really going to go up and it's going to narrow the Plainfield and I love our chances we've got a great business. We've got in house technologies, Great Engineering, a long long live set of solutions.

Liam K. Griffin: So we're really looking forward to it. I think we talked about it already. The smart, the smart group.

Speaker Change: Knowhow that we built over the years, so we're really looking forward to it.

Speaker Change: We talked about it already the smart the smartphone.

Liam K. Griffin: The smartphone market today is kind of slowed down; it's in for an upgrade right now. So the intersection between AI and smartphone growth could be really special. So we're looking forward to it. We have a lot of the key building blocks.

Speaker Change: The smartphone market today already has kind of slowed down has turned for an upgrade right now so the intersection between AI and smartphone growth.

Speaker Change: It'd be really special so we're looking forward to it.

Speaker Change: We have a lot of the key building blocks and our engineering teams know exactly what to do to turn this on so we're definitely anticipating some upside here.

Cody Grant Acree: And our engineering teams know exactly what to do to turn this on, so we're definitely anticipating some... William, thanks for that. I guess just further that though, are there specific areas of the front end module that you expect to benefit more in the short term as processing rates are going higher as connectivity demands are increased? Is it more of a thermal issue?

Liam K. Griffin: Is it more transferability or switching or intended tuning for that matter? Yeah, I mean, there are more paths, uplink and downlink. You've got carrier aggregation here, better filters that we do in-house, engaging with Wi-Fi as well. And there's also gonna be a range of new frequency bands as you move forward into those devices. So there's a lot to do, and you know, just that technology alone is gonna be amazing. But also, the smartphone opportunity today with all those legacy phones that wanna turn over to a new upgrade.

Thank you for that I guess just.

Speaker Change: Yeah, I mean, there's more paths uplink and downlink carrier aggregation here better filters that we do in house.

Speaker Change: Engaging in with Wi Fi as well and there is also going to be a range of new frequency bands as you move forward into those devices. So there is a lot to do and.

Speaker Change: Just just just that technology alone is going to be amazing, but also the smartphone opportunity today with all of those legacy phones that wanted to turn over to a new upgrade.

Liam K. Griffin: I think we're all gonna come together, so we're looking forward to that. We're doing the technical work to make it happen. And we'll keep you posted. Alright, great. Thank you.

Speaker Change: We're all going to come together. So we're looking forward to that we're doing the technical work to make it happen.

Speaker Change: I'll keep you posted.

Speaker Change: Alright, great. Thank you.

Speaker Change: Sure.

Quinn Bolton: Thank you. Our next question comes from Quinn Bolton with Needham & Company. Your line is open.

Speaker Change: Thank you. Our next question comes from Quinn Bolton with Needham <unk> Company. Your line is open.

Quinn Bolton: Hey, Liam and Kris, thanks for taking my question. I guess I wanted to start, you opened the call kind of talking about the slower demand environment in March and April that's led to this inventory correction in the June quarter. But I guess I'm, I haven't heard you guys say that you've necessarily seen the end of that demand softness. And so, you know, what signals are you looking for, or have you already seen, that give you confidence that this inventory correction is going to be limited to only the June quarter? You know, are you starting to see, you know, demand signals strengthening as you look, you know, past the June quarter? And Quinn, so this is not a major, major correction, right?

Quinn Bolton: Hey, Chris Thanks for taking my question I guess I wanted to start you opened the call talking about the slower demand environment in March and April. This led to this inventory correction in the June quarter, but I guess I'm I haven't heard you guys say that you have necessarily seen the end of that demand softness and so.

Quinn Bolton: What signals are you looking for have you already seen that give you confidence that this inventory correction is going to be limited to only the June quarter.

Quinn Bolton: Are you starting to see demand signals strengthen as you look past the June quarter.

Quinn Bolton: So this is not a major major correction. This is just some softer than expected demand that we see.

Kris Sennesael: This is just some softer-than-expected demand that we see. We're not talking here about a huge, major correction. And again, based on customer forecasts and our own intelligence about what's going on in the market, we think that will be mostly fleshed out in the June quarter and in the guide that we provided for June. Okay, so it sounds like it's the forecast from customers that leads you to believe it's largely limited to the June quarter. That's correct.

Quinn Bolton: We're not talking here about a huge major correction.

Quinn Bolton: And.

Quinn Bolton: Again based on customer forecast and our own intelligence about what's going on into the market. We think that will be mostly flushed out.

In the June quarter and in the guide that we provided for the June.

Speaker Change: Okay. So it sounds like its demand forecast from customers that leads you to believe it's largely limited to the June quarter.

Speaker Change: That's correct yes.

Quinn Bolton: And then, you know, I know it's sensitive, but just coming back to the socket loss, the large customer, it sounds like you think this may be sort of a near-term commercial issue. But I guess I just wanted to ask, do you think there's any read-throughs from this that might signal a move to sort of a multi-sourcing strategy at that customer where they're looking to bring in additional suppliers across all sockets just for supplier diversity reasons, or again, do you think it's kind of more limited to, you know, one year, you know, one socket? Oh, yeah. It's one year, one socket, for sure.

Understood and then.

Speaker Change: I know, it's sensitive, but just coming back to the socket loss at the large customer it sounds like youre, saying Thats may be sort of a near term commercial issue, but I guess I just wanted to ask do you think there is any read throughs from from this that might signal a move to sort of.

Multi sourcing strategy and that customer where they're looking to bring in additional suppliers across all sockets.

Speaker Change: Just for supplier diversity reasons or again do you think it's kind of more limited.

Speaker Change: One year one socket.

Speaker Change: It's one year, one socket for sure and we.

Liam K. Griffin: We have very, very good eyes on us. We'll wrap it up, but the product in question is one that we know how to make. We look forward to continuing to deliver that and others as we go forward, so we appreciate that. Thank you. There are no further questions at this time.

Speaker Change: We are very very good eyes on that.

Speaker Change: Like I said, we'll wrap it up at the product in question, we don't have to make.

Speaker Change: We look forward to continuing to deliver that and others as we go forward. So we appreciate that.

Speaker Change: Thank you.

Liam K. Griffin: I'd like to turn the call back over to Liam for closing remarks. Thank you everyone for participating in today's call. We will look forward to talking to you at upcoming investor conferences during the quarter. Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.

Speaker Change: Thank you there are no further questions at this time I'd like to turn the call back over to Liam for closing remarks.

Liam K. Griffin: Thanks, everyone for participating in today's call. We will look forward to talking to you at upcoming investor conferences during the quarter. Thanks.

Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.

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