Q4 2024 Skyworks Solutions Inc Earnings Call
Thank you. Bye.
Speaker Change: Good afternoon and welcome to SkyWorks Solutions' fourth quarter fiscal year 2024 earnings call. This call is being recorded. At this time, I will turn the call over to Rajvindra Gill, Vice President of Investor Relations for SkyWorks. Mr. Gill, please go ahead.
Rajvindra Gill: Thank you, Operator. Good afternoon, everyone, and welcome to SkyWorks' fourth fiscal quarter 2024 conference call.
Rajvindra Gill: 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.
Rajvindra Gill: 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 may be 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.
Thanks, Rajvi, and welcome, everyone.
Skyworks executed well during the fourth fiscal quarter of 2024.
Speaker Change: We posted revenue of $1,025,000,000 We delivered earnings per share of $1.55 And generated free cash flow of $393,000,000
Speaker Change: Revenue, gross margin, and EPS met or exceeded the midpoint of our guidance.
Our business model continues to deliver robust cash generation.
Speaker Change: For the second year in a row, annual free cash flow was well above $1.6 billion, providing a strong foundation to invest in our technology and product roadmaps to support future growth.
Speaker Change: In mobile, our revenue grew 21% sequentially and we expect further growth in the December quarter as customer orders and channel inventory have normalized and we continue to support seasonal product ramps.
Speaker Change: based on our technology leadership position and in close collaboration with our mobile customers.
Speaker Change: We expand our reach, develop best-in-class, high-performance connectivity solutions, and drive more integration with advanced packaging, reducing the footprint, and increasing energy efficiency.
Speaker Change: We believe that AI is poised to ignite a transformative smartphone upgrade cycle.
propelling the demand for higher levels of RF complexity.
Speaker Change: As AI capabilities continue to advance, smartphones will evolve into more sophisticated and intelligent companions, demanding more powerful solutions to support their enhanced functionalities.
Speaker Change: We are in the early stages of this multi-year trend, and Skyworks is well positioned to capitalize on it.
Speaker Change: In broad markets, we have seen signs of stabilization and have grown modestly since the bottom in the December quarter of 2023, despite uneven demand dynamics and high customer inventory in certain segments.
Speaker Change: Long-term, we remain bullish on broad markets, given secular trends in edge IoT, automotive electrification, and advanced safety systems, as well as AI-enabled workloads, driving cloud and data center upgrades.
Speaker Change: In Edge IoT, demand continues to improve as customers adopt Wi-Fi 6E and 7 systems, which carry higher dollar content due to increasing complexity and additional bands.
Speaker Change: We are in the early stages of a multi-year upgrade cycle with Wi-Fi 7 shipments now ramping.
Speaker Change: As we indicated at the beginning of the year, inventory levels in traditional data center and wireless infrastructure remain stubbornly elevated, which is delaying the recovery. We continue to undershift natural demand.
Speaker Change: However, over the medium to long term, we remain bullish on our product roadmap and design wind funnel targeting AI data centers.
Speaker Change: Lastly, global demand remains muted in automotive and industrial markets as Tier 1s and OEMs work down excess inventory.
Speaker Change: Despite near-term headwinds, we continue to convert design winds into revenue across our connectivity, power isolation, and digital broadcast solutions for the connected car and EV markets.
Speaker Change: Turning to our quarterly business highlights, we secured 5G content for premium Android smartphones, including Google Pixel 9, Samsung Galaxy, Oppo One Plus, and several others.
Speaker Change: We expanded our Wi-Fi 7 Design 1 pipeline with Linksys, Charter, Netgear, Comscope, and TP-Link.
Speaker Change: For emerging IoT applications, we powered advanced audio solutions for wireless gaming and clinical-grade hearing aids.
Speaker Change: Lastly, we increased our design with momentum in automotive, including 5G front-end modules, infotainment, and digital isolators.
Speaker Change: In summary, the SkyWorks team executed well despite a challenging macroeconomic climate.
Speaker Change: We intend to leverage our robust cash generation to make critical investments that drive long-term profitable growth.
Speaker Change: while diversifying the overall business. With that, I will turn the call over to Kris for discussion of last quarter's performance and our outlook for Q1 of 2025.
Kris Sennesael: Thanks, Liam. Skyworks revenue for the fourth fiscal quarter of 2024 was $1 billion and $25 million, slightly above the midpoint of our outlook.
Kris Sennesael: Mobile was approximately 65% of total revenue, up 21% sequentially as we successfully supported the ramp of new products at our mobile customers.
Kris Sennesael: Broad markets were approximately 35% of total revenue, up 1 million sequentially.
Kris Sennesael: Gross profit was $476 million with gross margin at 46.5% in line with expectations.
Kris Sennesael: Gross margin grew 50 basis points sequentially, reflecting our ongoing cost reduction actions.
Kris Sennesael: Operating expenses were 203 million, reflecting our strategic investments in our technology and product roadmaps.
Kris Sennesael: We delivered 273 million of operating income, translating into an operating margin of 27%.
Kris Sennesael: We incurred $2 million of other expenses and our effective tax rate was 8%, driving net income of $250 million and diluted earnings per share of $1.55, which is 3 cents above our guidance.
Kris Sennesael: During the fourth fiscal quarter, we delivered impressive cash generation, with cash flow from operations at $476 million, capital expenditures at $83 million, resulting in a free cash flow of $393 million, or 38% free cash flow margin.
Kris Sennesael: For fiscal 2024, we generated well over $1.6 billion of free cash flow, our second year in a row, and ended the year with a record 40% free cash flow margin.
Kris Sennesael: translating into approximately ten dollars and forty cents of free cash flow per share and a free cash flow yield of approximately 11.5 percent.
Kris Sennesael: We continue to drive robust cash flow through steady levels of profitability, prudent working capital management, and moderating capex intensity.
During fiscal Q4, we paid $112 million in dividends.
Kris Sennesael: Cash and investments grew to approximately $1.6 billion and we have $1 billion in debt, providing us with excellent optionality.
Kris Sennesael: Now, let's move on to our Outlook for Q1 of Fiscal 2025.
Kris Sennesael: We anticipate revenue of $1,050,000,000 to $1,080,000,000, up 4% sequentially at the midpoint.
Kris Sennesael: We expect our mobile business to be up mid-single-digit sequentially, driven by seasonal protocrams.
Kris Sennesael: In broad markets, we anticipate further modest sequential growth and a return to year-over-year growth.
Kris Sennesael: The pace of the recovery is more measured than we anticipated, given excess inventory in select segments, like industrial, automotive, infrastructure, and networking.
Kris Sennesael: Gross margin is projected to be 46 to 47 percent and we expect operating expenses in the range of 209 to 215 million.
Kris Sennesael: with sequential increases reflecting typical adjustments made at the start of a new fiscal year including variable compensation accruals.
Kris Sennesael: In addition, we are leveraging our strong cash flow generation to invest in technology and product roadmaps to drive share and increase diversification.
Kris Sennesael: Below the line, we anticipate 3 million in other income, an effective tax rate of 12.5 percent, and a diluted share count of approximately 160 million shares.
Kris Sennesael: Accordingly, at the midpoint of the revenue range of $1,065,000,000, we intend to deliver diluted earnings per share of $1.57.
Operator, let's open the line for questions.
Thank you.
Speaker Change: Thank you. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Given time constraints, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster.
Now first question coming from the
Peter Peng with J.P. Morgan. The line is now open.
Speaker Change: Hey, good afternoon. Thanks for taking my questions and good job on the execution. Can you, on your mobile business, can you talk about your
Rajvindra Gill, Kris Sennesaeal
Thank you very much.
specifically Google
Speaker Change: They've been doing a great, great job, and also Samsung. So we have, you know, incredible design wins there. Fortunately they are investing in technology.
The performance that we're seeing in those devices has been...
Speaker Change: amazing for us. It's a great match for Skyworks. It gives us an opportunity really to demonstrate our technology reach, our scale, and also moving into a diversified portfolio as well. So we're doing very well as a business and we expect much more in that company.
Right, and Peter, just to level set, right, our Android...
Speaker Change: is with the China players. So we definitely have de-risked our position with China. We've talked about that before. We are very selective as it relates to that part of the Android business with Samsung and China. We are playing with those.
Speaker Change: who are switching the AI-enabled phones that drives a lot more complexity inside the phones. And that's all music to our ears, and that's why we have a strong relationship with them.
Speaker Change: Perfect, thank you. And then on the broad markets, good to see you guys driving.
Speaker Change: I think for the December quarter that will be probably your fourth quarter of sequential growth.
Speaker Change: I know there's a lot of puts and takes in my business, but as we kind of look into 2025, can you talk about the sustainability of this?
Speaker Change: recovery or do you think that there's going to be some seasonality that might impact growth you know into 2025?
Speaker Change: Yeah, and so you're absolutely right our broad markets business bottomed
Speaker Change: sequential growth. We are guiding to further modest sequential growth in the December quarter and a return to year-over-year growth again, somewhat in the mid single digits.
in our Broke Markets business.
but we have not really seen that for now.
Speaker Change: engines in our broad markets, as we talked about in the prepared remarks.
to Wi-Fi 60 and 7.
advanced safety systems and electrification, and as well in AI.
Speaker Change: data centers and networking where we play with our timing solutions and so when I put this all together, we still believe that.
in the longer term in a neutral macroeconomic environment.
Our broad markets business can grow mid-teens year over year.
Thank you.
Speaker Change: Thank you. And our next question coming from the line of...
Speaker Change: Edward Snyder with Charter Equity Research. Your line is now open.
Thanks a lot.
Speaker Change: Maybe if we touch on guys Obviously with what's going on with the largest customers caused to kind of a little bit of temporary or appears to be temporary upheaval What's your feeling in terms of? 2025 known for specific guides
Speaker Change: all that, but it's already clear from what I've heard out that there's some content changes on the last flagship phone.
Speaker Change: And from what we've gathered, there's going to be some additional changes. There's a lot of things moving, a lot of moving pieces here. What's your view of, let me put it this way, the long term, say 2025 to 2026 in terms of your ability to gain back content when they make the big shift?
Speaker Change: And then perhaps go from there. I know we've talked of AI in the past, about its impact on the RFP, given the roadmap was stretched out for three years. What are you seeing in terms of generic content growth in that kind of flagship, a front-end from AI? And then I have a follow-up. Thanks.
Speaker Change: Okay, okay, I'll unpack that with you here. Yeah, I mean, certainly, there's a tremendous opportunity for us to continue to grow in mobile. We've got an incredible technology bench, we have the scale, we have the physical plant.
Speaker Change: and we have the flexibility to do what our customers need. And I'm sure, as you know, we have a very good partnership with our largest customers. So that back and forth is always going our way. We've got great people on both sides to make it work.
Speaker Change: We expect to have more growth, certainly we had the last couple of quarters weren't so great, but we're popping up now. If you look at the road map that we're putting forward, it's pretty good.
Speaker Change: It's very, very potent, and we definitely have the team to make that execution done. It's going to take a little time, of course, but we have the scale, we have the people, we have the ambition.
Speaker Change: to make it happen. And most important, we have the confidence of our most important customer.
Speaker Change: Okay, maybe you want to give a follow-up. First of all, housekeeping, what was the percentage of your largest customer? And secondly, you've been underrepresented at Samsung for a while.
Speaker Change: And again, plans are shifting there in terms of the RFSV. What's the prospect for that in the next, let's say, year or so in terms of it becoming a larger customer for you, given that
Speaker Change: I think there are more open slots available to you. Are you seeing good design traction in spring or fall, or do you get any indication of that at all right now? Thanks.
Speaker Change: So in the September quarter, our largest customer was approximately 69% of our total revenue, which was up 21% sequentially.
Speaker Change: So the team really executed well, supporting our largest customer, ramping up their new products. And I'll turn it over to Liam.
for the rest of your question.
Liam Griffin: Yeah, sure. I mean, as we spoke, there's just tremendous opportunity there. You know, we're diving much deeper in some of those platforms. And I would say the technology pipeline that we have at Skyworks and the investments that we've been making are really going to yield opportunities for us in growth.
Liam Griffin: So that's kind of what we're looking at right now. There's a lot of opportunity we're executing.
Liam Griffin: Our engineers are making incredible progress on the next generation solutions. There's a lot more going as you get into the AI world. And you can expect that Skyworks is right there, ready to go. We're under the hood, so to speak, with some really incredible people on our side and with our partners.
Liam Griffin: So we should look forward to that. That work is being done now and we look forward to putting that into products very shortly.
Speaker Change: Thank you. And our next question, coming from the line of...
Timothy Archer with UBS, the line is now open.
Thank you.
Speaker Change: Thanks a lot. Kris, can you talk about what's included for the largest customer for December? It seems like you did see some pull-ins into September, just like most others did. It was a little higher than what I think you thought it would be. Usually, that large, that customer's about flat in December, but maybe it's down a smidge because of the pull-ins. Can you, can you kind of talk about that? Kris Sennesael
Kris Sennesael: Yeah, first of all, we can't really go into the specifics as it relates with our large customer, but I can tell you that the business and the demand is fully in line with our expectations.
Kris Sennesael: So we didn't see any surprise in September, didn't see any, or don't expect any surprise in December. The demand is in line with our expectations.
And so as I just...
Kris Sennesael: answered the question before that the large customer was up 21% sequentially in the September quarter and we expect it to be up further in the December quarter in the in the five to ten percent range on a sequential basis.
Speaker Change: Great. Great, Kris. Thanks. And then I noticed that the repo was quite low despite the strong free cash flow. I might have thought it would have been a little stronger. Can you kind of talk?
Speaker Change: Yeah, yeah, absolutely. So, first of all, I want to highlight here as well that we do have very strong free cash flow and as we indicated in the prepared remarks, right, for the second time in a row, more than $1.6 billion of free cash flow and that does take into account that we continue to make the necessary investments.
Speaker Change: in our business. We continue to strengthen our technology and product roadmaps and there's no hesitation there. We know where the opportunities are. We are making the necessary investments there to capture those opportunities.
Speaker Change: as we have seen in the last couple of years, but we continue to invest it as well. And so our free cashflow is very strong. Our balance sheet is very healthy. We have $1.6 billion of cash on the balance sheet and only $1 billion in debt with no near-term maturities. And so we have plenty of optionality. We have optionality to do M&A, although you know us, we're gonna remain disciplined, but we have that optionality and we have optionality.
Speaker Change: to return excess cash back to the shareholders through a combination of our dividend program and our share buyback program. On the dividend program, we just recently increased the dividend three percent to now 70 cents per share.
And so that's turning into a really nice dividend yield.
and we have the optionality to do buybacks.
Speaker Change: The board and the management team are taking into account and into consideration multiple elements. But as a matter of policy, I can't really share the details of those considerations. Having said that, it's our intent to continue to return all the excess cash back to the shareholders over time.
Speaker Change: Thank you. And our next question coming from the line of...
Rajvindra Sankara with TD Colony, Elan is now open.
Rajvindra Sankara: Hi, thanks for taking my question, and Liam and Kris, thanks for the call on the December quarter and your large customers. I'm just kind of curious, you know, when you look at the December quarter compared to history, how is the demand linearity trending, and what does that imply for March quarter seasonality? I had a follow-up.
going into the December quarter. Obviously, March is seasonally down.
Um, uh...
Rajvindra Sankara: to be seasonally down. Obviously, we only got one quarter at a time, so it's too early to to be more specific. We do, however, our broad markets business to continue to grow sequentially, and we expect
Rajvindra Sankara: Broad Markets to be up modestly in the March quarter and beyond. But as combined, of course for Skyworks, we will have normal or expect normal seasonal declines into the March quarter.
Kris Sennesael: Got it. Thanks a bit, Kris. Really appreciate that. And then a quick follow-up.
Speaker Change: on the Wi-Fi 7 upgrade cycle. It seems like it's been pretty good for you.
Speaker Change: I'm just curious, historically, how long has the growth inflection lasted for a Wi-Fi upgrade cycle, and how to think about how this profile would be versus prior cycles? Thank you.
Speaker Change: Sure, sure. Yeah, I mean, actually, you're right. The Wi-Fi cycle had been somewhat muted here for a while. Fortunately, with the Skyworks team, you know, we're in great position.
Speaker Change: We're working with companies like Motorola, we're looking at companies like Logitech.
Speaker Change: We've got some automotive plays in there as well. So the broad market businesses...
Speaker Change: are coming up. It's been, it had been, you know, kind of a rough ride there, but we're starting to look better. Next year is another play we're in there. Charter communications. We're in industrial markets. We're engaged with Mercedes-Benz even in the auto side. So there's been a lot of activity and strength here in the broad markets. It's just that it's the design one pipeline is filling and we'll get that through revenue.
Speaker Change: So while we're very encouraged about the signs we're seeing there
Speaker Change: Thank you. And our next question coming from the line of Vivek Iyer with Bank of America Securities. Your line is now open.
Speaker Change: Hi, this is Michael Manny on for VEC-ARIA. Thanks so much for taking our questions.
Speaker Change: to start just across the various end markets that are marketplace and which areas have become maybe incrementally worse or better over the last 90 days and just where are you still under shipping to demand?
Speaker Change: So, in BroadMarketsWide there's three parts, there is the H-IoT connectivity.
Speaker Change: where we play mostly with Wi-Fi but any other wireless connectivity protocol. We've definitely seen improvements in that area.
Speaker Change: Again, in part driven by a big step up in content as the transitioning, the multi-year transitioning is happening from Wi-Fi 6 to 6E.
Speaker Change: I think we're still somewhat under shipping natural demand there, but there is definitely improvement in that area.
The second part is our networking infrastructure.
and Cloud.
Speaker Change: I think that's very well documented there. There is excess inventory that's being worked down, and that will take multiple quarters. I think we start seeing some improvements there. Bookings is improving, backlog is improving, but it's still shipping way under natural
Speaker Change: We're definitely under shipping natural demand there. Again, I think we're doing fairly well given some design wins that we have able to put on the book.
Speaker Change: a year or two years ago, those design wins continue to ramp up.
and turn into revenue.
But it's a soft
and everyone for coming.
Speaker Change: Again, December, year-over-year growth, and that year-over-year growth will accelerate over time as well.
J.M. Carr, L.A. J.M. Carr, L.A.
Great, thank you. And then just some gross margins.
Speaker Change: given that broad markets might be taking a more measured upturn.
Speaker Change: expected previously. What are the puts and takes for gross margin expansion?
Speaker Change: from here. I know you guided the summer contract, essentially thought of the midpoint, but how do you think about expansion into 2025? And then maybe more broadly,
as we think about the eventual return to...
Speaker Change: 50% for greater gross margins. What would you rank order as the most important drivers to achieve this between utilization, product mix and a recovery in broad markets or any other factors? Thank you.
Speaker Change: Yeah, so as it relates to gross margin, we did 46.5% in September, which was up 50 basis points.
Speaker Change: So, that's a step in the right direction. For December, we guide 46 to 47, so kind of flattish at the midpoint, but the range is 46 to 47.
Speaker Change: Looking ahead to fiscal 25 and longer term, as you called out correctly, we drive gross margin improvements through better factory utilization, through cost reductions, and we have a mixed tailwind.
Speaker Change: because broad markets has above average gross margin compared to the mobile. I think the team continues to execute well. We start seeing some improvement on the
Speaker Change: factory utilization, the team is executing well on cost reductions internally as well as externally, but as we talked already, the mixed tailwind is not blowing as strong as we initially anticipated.
But currently, the sequential growth is modestly, and so...
The mixed tailwind there is not as strong as expected.
Speaker Change: As a result of that, for now, we think that Fiscal 25...
Speaker Change: and set us up well for further gross margin expansions in fiscal 26 and beyond. We want to get as fast as we can back to the 50% gross margin and then we're going to keep grinding to our long-term target model of 53%.
Speaker Change: Thank you. And our next question coming from the line of...
Call Aquamarine with BNP Parimbo. Sealon is open.
Speaker Change: Yes, thank you. Kris, I just wanted to follow up on that gross margin comment with regard to fiscal 25, I guess.
Do you have an Inventory Days target?
Speaker Change: You know, because you continue to make good strides in reducing inventory days, now in the 130 range, broad markets continue to improve. And so if inventory days are at normal,
Speaker Change: Presumably margins should go up. So again, maybe tying the inventory days comment with what your comments just were around
Speaker Change: Gross margin is how we see it stepping up over the next couple quarters.
Speaker Change: First of all, we have been reducing our internal inventory for seven quarters in a row now. It peaked at well above 1.2 billion and we are down now to less than 800.
Speaker Change: I think we can continue to drive inventory down a little bit more. Obviously, that's not helping from a factory utilization point of view. It's not helping from a gross margin point of view. But I think it's the right thing to do. We want to...
Speaker Change: and I think we still can reduce that a little bit.
It's all
again
when you put it all together there
Speaker Change: I think gross margins are going to be flattish in fiscal 25, start improving towards, and we will have seasonality there, right? We will have seasonality, typically gross margins go down in the March and June quarter and then start improving in the September and December quarter.
Speaker Change: But from an absolute dollars point of view, we're sub 800, continue to drive it down a little bit further.
Got it. Thank you.
Speaker Change: As my follow-up, do you believe the M&A environment is more favorable from a regulatory and funding perspective in 2025? And if not,
Speaker Change: because of your very strong free cash regeneration and perhaps ability to further reduce inventory, can you, you know, be more aggressive on the buyback? If so, thanks.
putting forth, which is a great, great tool for us.
Speaker Change: So we're always looking for the optimal mix, whether it's an M&A play or another factor. And so those are great options for Skyworks, and it's a testament of the ability to drive that cash. And it's going to be a hallmark of this company.
Speaker Change: So we look at everything You know, we're very disciplined. We think about our shareholders. We think about the longevity of the technology and it's been a strategy That's worked quite well, and I think it will continue to be really purposeful for us as we go forward
Speaker Change: Thank you. And our next question coming from the line of Ruben Roy with Stiefel. Your line is now open.
Speaker Change: Thank you. Liam, I had a question on Edge IoT to start with and just wondering
Speaker Change: How are you thinking about AI impact, if any, on the HIT business? You've talked a lot about the smartphone side of it. Just wondering if there's anything investors should be thinking about in terms of AI and potential impacts as we look out over the next 12-18 months?
Liam Griffin: Yeah, absolutely. So I think, you know, we've got a couple of things. Certainly on the smartphone side, you know, we are deeply entrenched with the most important customers.
learning together, executing.
Liam Griffin: and driving excellence. So that's really, really key and we're doing great work there. But then now flipping back to the broad markets, we're doing very, very well in the IoT space and really engaging with companies that are real hallmarks in the business. We talked about Google
and Samsung, but also the broad markets businesses.
Liam Griffin: We've got design wins with Mercedes, we have design wins with Netgear, Cambium Networks, Motorola, you know, really, really meaningful companies that are now part of that portfolio that we have in broad markets. And I'm 100% confident our team will continue to drive that with more.
Liam Griffin: with more opportunities, more diversification, and more cash, and more earnings for us. So look forward to that, but things look much better there in that market.
Speaker Change: Thanks, Liam. And a couple of quick ones for Kris. Kris, can you tell us about the impairment charge during the quarter and what that was related to? And then finally, on CapEx, picked up a little bit, any...
Speaker Change: any initial view on how we should think about CapEx for fiscal 25. Thank you.
Kris Sennesael: Right, so we did take an impairment chart in Q4 of Fiscal 24, which was related to in-process R&D.
Kris Sennesael: related to the INA acquisition we did with Silicon Labs. As you probably know, at the time of an acquisition, you have to identify all the in-process R&D projects.
and have to put a valuation around that.
Kris Sennesael: As time goes by, some projects are being accelerated, some projects are being pushed out, some projects are being redefined.
Kris Sennesael: And so that's all being taken into account and could potentially result in an impairment charge which we took in MQ4.
The business itself that we acquired...
is part of our Broad Markets business.
Kris Sennesael: We are going through some inventory correction there because a lot of that business plays in the industrial, automotive area. But we are still very pleased with that business. That business has great...
As it relates to CAPEX...
Kris Sennesael: CapEx is running in fiscal 24 on about 3% to revenue which has been one of the lowest
Kris Sennesael: in many, many years. Part of that, of course, is we didn't have to do any...
Kris Sennesael: capacity expansion, CAPEX during fiscal 24, but all the CAPEX we did was mostly for technology reasons.
Kris Sennesael: Going forward, we think CAPEX will remain moderate mid to longer term in the mid-single digits as a percent to revenue.
Thank you.
Speaker Change: Thank you. And our next question coming from the line of Srini Pachauri with Raymond James. Your line is now open.
Speaker Change: There are a lot of moving parts in there, just trying to understand, you know, how big auto industrial and IOT and...
Speaker Change: infrastructure businesses are individually. And also you talked about some inventory on the infrastructure and cloud networking. I think you have a bit more exposure on the telcos. I just want to make sure because from everything that we see and hear, the cloud business is very strong right now. So I'm just curious as to what's causing that inventory build.
Speaker Change: Yes, so our broad markets, it's roughly 40-50% is the Edge IoT connectivity, 35%
Thank you. Bye.
Speaker Change: and data center. We do see some good traction in the AI related investments.
Speaker Change: that where we play with our timing solutions but investments in the more traditional cloud and data is somewhat muted and there is still some ongoing inventory correction in that part of the market.
Okay, that's clear.
Speaker Change: And then on the, I guess, on the December guidance, you know, you talked...
Speaker Change: You kind of mentioned that everything is kind of tracking as you expected originally, but it is slightly below your normal seasonality. I think historically you have done kind of high single digits in December. So my question is, is that primarily on the Android side, the weakness or broad markets? And then, you know, given the lower base, should we expect your March quarter to be slightly, you know, about seasonal? Thank you.
Right, so the revenue...
Speaker Change: Again, on one hand, pleased that we continue to see, for the fourth quarter in a row, sequential growth, but the sequential growth is less than what we anticipated three or six months ago.
and Chris Chappell. Thank you. Thank you.
Speaker Change: Thank you. And our next question coming from the line of Vijay Rakesh with Missile Group. Your line is now open.
Speaker Change: Hi Liam and Kris, just wondering on 2025 if you were to take a look at how HODC has shown growth year-on-year and within that 5G and then a follow-up.
Speaker Change: So so we only got one quarter at a time and and we're going to stick to that I mean
Visibility
Speaker Change: is I think okay, it's not bad or great, but as a matter, we only got one quarter at a time and we're going to stick to that.
Speaker Change: There you are. I was talking more of the industry. But as you look at one of the things that one of your peers have talked about is in China, there has been a trend towards entry level and some of the RF side moving to discrete. Have you seen any of that? That's it.
Speaker Change: Yeah, you know, we actually don't do much in China in those markets, and if we were, they're really low-end stuff, and so we're naturally kind of out of that space.
Speaker Change: and upgrading more with some of the other players that we talked about earlier, the Googles and Samsungs, etc. So we still have a great Android business, it just happens to be a much more important strategic one.
Speaker Change: Thank you. And our next question coming from the line of...
Nicola Stoll with Beadham and Company, Elanis Northam
Speaker Change: Hi guys, thanks for my questions. You mentioned tremendous opportunity in Android. Can you be any more specific in terms of products or maybe the connectivity, you know, if it's RF or Wi-Fi type opportunities? And I guess I assume that's mostly with Google. Thanks.
Speaker Change: Yeah, I mean you have two really strong players here that that we're engaging with Google and Samsung and what I really like about those companies is that they are these are enterprise companies
Speaker Change: It's great that they're smartphone players and we can engage, that's wonderful, but they're also technology companies, they're companies that play in AI and other markets, so it's really a great opportunity for us. We're pleased that we're able to engage at that level. We're learning a lot from those customers, very, very...
Speaker Change: Smart people with a lot of ideas and a lot of applications, so it's it's a it's a broad market business of its own Within the portfolio, so you should expect more from us with those companies
Speaker Change: We're making great progress and looking forward to continuing to raise the bar, and so we're happy to be there.
Speaker Change: Okay, thanks, and maybe just a broader strategy question. You've seen broad markets grow modestly quarter over quarter, yet you've been under shipping kind of this whole time, so why not halt those shipments more aggressively at the beginning of the year and kind of burn through that inventory quicker? Is there any sort of...
Speaker Change: you know business strategy around that decision or that's just you know how business goes. Thanks.
Speaker Change: I mean we're always very careful and when we talk about inventory we talk about inventory in the channel and at the customer level.
Speaker Change: and we're always trying to get a good read about that and there's no advantage or any good reason to go and build up channel inventory or access inventory at the customer level. We're always trying to ship in line with real end customer demand. Now, sometimes our customers don't have it right either and they are pounding the table to get more parts and then...
Speaker Change: and then their end customer demand doesn't materialize and you end up with excess inventories somewhere in the channel. It could be at the distributor or it could be at the end customer. Nobody wants that and we're always trying to manage that very carefully.
Liam Griffin: Thank you. Ladies and gentlemen, that concludes today's question and answer session. I will now turn the call back over to Mr. Griffin for any closing comments.
Liam Griffin: Thanks for participating on today's call. We look forward to talking to you at upcoming investor conferences during the quarter. Thank you.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. We thank you for your participation and you may now disconnect.
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Speaker Change: Now the web series Big Big Things is finally reported! Oh yes, and we are going to tell Teresa's story. No, no, not the episode with Teresa, like nobody is going to be able to. We are going to get a phone call back. We'll end it here.
Speaker Change: to watch the final episode in four weeks time. Thank you People of India.