Q1 2025 Skyworks Solutions Inc Earnings Call
Good afternoon, and welcome to the Skywalk solutions first quarter fiscal year earnings call.
It's being recorded.
Speaker Change: At this time I will turn the call over to Raj Kim Vice.
Gill: That's enough installation sports Guy works you said Gill. Please go ahead.
Gill: Thank you operator, good afternoon, everyone and welcome to Sky works first fiscal quarter 2025 conference call with me today for our prepared remarks, as Liam Griffin, our Chief Executive Officer, and President and Chris Cytosorb, Chief Financial Officer for Sky works. Following the conclusion of the prepared remarks.
Chris will be available for Q&A. This call is being broadcast over the web and can be accessed from the Investor Relations section of the company's website at Sky Works, Inc. Dot Com. In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call before we begin I would like to remind everyone.
One that our discussion will include statements relating to future results and expectations that are or may be considered forward looking statements. Please refer to our earnings press release, and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially.
Gill: And adversely from any forward looking statements made today.
Gill: 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 Griffin: Thanks, Roger and welcome everyone before we get into the details of the results I wanted to address succession planning, we announced today after an incredible 20 plus years at Sky works with the last nine as president and CEO I will be stepping down.
Liam Griffin: Sky works has chosen Philip brace as our next president and CEO. He will join the company on February 17 at which point I will shift to an advisory role for a few months to help ensure a smooth transition.
Liam Griffin: We also announced at Christine King.
Liam Griffin: Who has been our Sky works lead independent director has been appointed chairman of the board.
Liam Griffin: As an excellent choice.
Liam Griffin: Bill's appointment follows a robust succession planning process by the Sky works Board.
Liam Griffin: Bill is an accomplished technology executive who has served as president and CEO of Sierra wireless from 2021 to 2023.
Liam Griffin: He currently serves on the board of directors of Blackberry land Tronox and in Sego.
Liam Griffin: He brings a deep knowledge of the technology industry and extensive experience in scaling and leading successful businesses.
Speaker Change: I want to offer my sincerest, congratulations to fill honestly on his appointment and I'm excited for you to meet him.
Speaker Change: I look forward to watching Sky works business Prosper under his leadership through continued innovation ingenuity and hard work.
Speaker Change: Let's now move into a discussion of <unk> first fiscal quarter of 2025.
Speaker Change: Sky works began the new fiscal year with solid results, we posted revenue of $1 billion and $68 million, we delivered earnings per share of $1 60 and.
Speaker Change: And generated free cash flow of $338 million revenue gross margin and EPS met or exceeded the midpoint of our guidance.
Speaker Change: In mobile our revenue grew 6% sequentially as we successfully supported multiple product launches across our top mobile customers.
Speaker Change: Mobile adoption of generative AI on smartphones is still in its nascent stage. We anticipate this to be a multiyear trend that will catalyze smartphone upgrades and increase the complexity and requirements for RF solutions and.
Speaker Change: In broad markets, we have experienced modest growth for four consecutive quarters.
Speaker Change: We anticipate further growth as demand signals and backlog improve.
Speaker Change: And certain segments supply and demand dynamics are in equilibrium and channel inventories have normalized.
Speaker Change: Meanwhile, industrial and infrastructure remain subdued due to persistent inventory challenges.
Speaker Change: Overall, we are encouraged by the recent momentum in broad markets and are energized about new product cycles in automotive electrification edge Iot and.
Speaker Change: In AI data center fueling long term growth.
Speaker Change: And Andrew Iot, we are observing higher levels of intelligence and combined with more nodes being added to the edge of the network driving higher levels of RF complexity.
Speaker Change: Artificial intelligence and machine learning increases the range of functionality running models like voice and computer vision are.
Speaker Change: RF connectivity is the conduit for secure robust and lower power AI applications.
Speaker Change: Moreover, the adoption of Wi Fi six and seven systems by customers is contributing to the improvement in demand.
Speaker Change: These systems characterized by enhanced complexity and utilization of additional bands enable transmission of higher value content.
Speaker Change: We are currently in the emerging stages of a multi year upgrade cycle with Wi Fi seven shipments experiencing a ramp up.
Speaker Change: We are seeing growth in wireless gaming wireless home audio and wireless headsets, where customers are adopting sky works connectivity and audio technology.
Speaker Change: In automotive, we returned to year over year growth, despite a soft demand environment as design wins in the connected car.
Onboard charging an infotainment are gradually converting into revenue.
Specifically, we expect our RF content per vehicle to grow driven by <unk> cellular Wi Fi Bluetooth and beta wax lastly, the industrial segments remain a headwind as we continue to under ship demand turning to our quarterly business highlights.
Speaker Change: We secured a five <unk> content for premium Android smartphones, including Samsung Galaxy, Xiaomi Seuss and several others. We supported Gentex launch of the first AI router with voice enabled AI powered health care service, we enabled our Seuss's award winning quad.
Speaker Change: Band Wi Fi seven gaming routers and expanded our design win pipeline in automotive with cellular connectivity and power management solutions with that I will turn the call over to Chris for a discussion of last quarter's performance and our outlook for Q2 of fiscal 'twenty five.
Chris Cytosorb: Thanks Liam.
Chris Cytosorb: <unk> revenue for the first fiscal quarter of 2025 was $1 billion and $68 million slightly above the midpoint of our outlook mobile revenue was 67% of total revenue and increased 6% sequentially as we successfully supported multiple product launches.
Chris Cytosorb: Markets was up slightly sequentially and return to year over year growth at 2%.
Chris Cytosorb: Q1 fiscal 'twenty five mark the fourth consecutive quarter of modest sequential growth since the Q1 fiscal 'twenty four it bottomed.
Chris Cytosorb: Despite a muted demand environment and ongoing inventory digestion across selective and markets gross profit was 497 million with gross margin at 46, 5% inline with expectations also during Q1, we further decreased our <unk>.
Chris Cytosorb: Internal inventory slightly below $700 million, resulting in eight consecutive quarters of reductions.
Chris Cytosorb: Operating expenses were $212 million, reflecting our strategic investments in our technology and product Roadmaps.
Chris Cytosorb: We delivered $285 million of operating income translating into an operating margin of 27%.
Chris Cytosorb: We generated $9 million of other income and our effective tax rate was 12, 2% driving net income of 258 million and diluted earnings per share of $1 63.
<unk> above our guidance.
Chris Cytosorb: For the first quarter of fiscal 2025, we demonstrated robust cash generation with operating cash flow of 377 million capital expenditures of $39 million and a free cash flow of $338 million, representing a 32% free cash flow margin.
Chris Cytosorb: During fiscal Q1, we distributed $112 million in dividends.
Chris Cytosorb: Our cash and investment balance increased to approximately $1 75 billion.
Chris Cytosorb: While we maintain a debt level of 1 billion, providing us with ample financial flexibility.
Chris Cytosorb: Now, let's move on to our outlook for Q2 of fiscal 2025.
Chris Cytosorb: Anticipating revenue of $935 million to $965 million.
Chris Cytosorb: We expect our mobile business to decline mid to high teens sequentially in line with historical seasonality.
Chris Cytosorb: In broad markets, we anticipate additional sequential growth and a further improvement in year over year growth.
Chris Cytosorb: We are seeing positive momentum in booking trends backlog and sell through patterns across broad markets. However, inventory headwinds remain acute industrial and infrastructure.
Chris Cytosorb: Gross margin is projected between $45 five and 46%.
Chris Cytosorb: It's seasonally adjusted for lower sales volume.
Chris Cytosorb: We anticipate operating expenses in the range of $220 million to $228 million.
Chris Cytosorb: Utilizing our robust cash flow generation to invest in technology and product Roadmaps.
Chris Cytosorb: The sequential increase is mostly driven by a reset of the social charges at the beginning of the calendar year as well as an increase in R&D project expenses.
Chris Cytosorb: Slow the line, we anticipate $6 million in other income and effective tax rate of 12 to 12, 5% and a diluted share count of approximately 158 5 million shares.
Chris Cytosorb: Accordingly at the midpoint of the revenue range of $950 million, we intend to deliver diluted earnings per share of $1 20.
Chris Cytosorb: <unk>.
Chris Cytosorb: Finally, our board of Directors has approved a new $2 billion stock repurchase program as part of our disciplined capital allocation strategy.
Chris Cytosorb: Before moving into Q&A I want to briefly reflect on our business and address our strategic partnership with our largest customer.
Chris Cytosorb: Over the past 25 years, we have built a strong technology company a leader in RF connectivity for mobile solutions.
Chris Cytosorb: And expand a dose RF capabilities with analog and mixed signal expertise and our growing broad markets business.
Chris Cytosorb: And over the last 18 years, we have benefited from a truly collaborative partnership with our largest customer who has constantly pushed us to develop innovative high performance and highly integrated RF solutions.
Chris Cytosorb: We have partnered with customers since the launch of their first phone, which has resulted in significant content and revenue growth over the years.
Chris Cytosorb: However, the last couple of years have been challenging as the competitive landscape has intensified.
Chris Cytosorb: As it relates to the upcoming phone cycle expected to be launched in the fall of 2025.
Chris Cytosorb: Sky works team developed a suite of high performance RF solutions.
Chris Cytosorb: Despite our rich product offering we did not get a result that we targeted.
Chris Cytosorb: Although we were able to secure multiple sockets, including several highly integrated RF modules, our content position is expected to be down 20% to 25%.
Chris Cytosorb: This decline will start impacting our revenue in the fourth quarter of fiscal 'twenty five and throughout fiscal 2006.
Chris Cytosorb: While we are disappointed with this outcome we.
Chris Cytosorb: We remain steadfast in our commitment to invest and innovate around our technology Roadmaps.
Chris Cytosorb: We have already started the development of a new suite of solutions for the next generation for we have an expanding set of products and addressing more opportunities than ever before.
Chris Cytosorb: In addition, we will continue to pursue growth opportunities with our other mobile customers, although on a selective basis focusing on those segments of the market that demand high performance RF and we will continue to drive our diversification strategy supported by multiple secular growth trends in <unk>.
Speaker Change: What markets.
Speaker Change: We expect those opportunities to partially offset the revenue decline at the large customer in fiscal 2006 and position us for growth in fiscal 2007.
Liam Griffin: Now, let me hand, it back to Liam for some final remarks.
Liam Griffin: To wrap it up I would like to thank all of our <unk> employees and stakeholders for their support during the last 25 years.
Speaker Change: It has truly been a privilege and the highlight of my career to lead this company.
Speaker Change: Broadly believe the Sky works team with support of our board of directors and under New leadership, we will execute on the strategic path of profitable growth I.
Speaker Change: I will turn it over to Chris now who will be taking Q&A this quarter.
Chris Cytosorb: Operator, let's open the line for questions.
Speaker Change: Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone.
Speaker Change: <unk> will need to be announced.
Speaker Change: Trailing a question simply press star one again.
Speaker Change: As a reminder, given the time constraints. We ask you. Please limit yourself to one question and one follow up please.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: And our first question coming from the line of Edward Snyder with Charter equity Research. Your line is now open.
Speaker Change: Thanks, very much first of all well.
Speaker Change: I guess congratulations are retiring I'll get them initiated did a phenomenal job I always appreciate how Frank in.
Speaker Change: <unk> been on everything and I think.
Speaker Change: You did a bang up job so I'd see it go or how things are better.
Speaker Change: When your ROFO sunset or wherever you're going to wind up doing.
Speaker Change: As for Apple or your largest customer I know.
Speaker Change: It sounds like.
Speaker Change: New competition is in one of your largest modules and I know you guys are making a big push towards that in the fall.
Speaker Change: And there is a whole another round of this coming up in the year out first off I'd like to get a feel for if you think it's.
Speaker Change: Our target you can hit given how rich that part is BARF filters and secondarily you guys are one of the most favorite suppliers to your largest customer there is a lot of the parts on this on this.
Speaker Change: This version and what's going to be the next couple of versions that will change over the years.
Speaker Change: Maybe you could help characterize what the what the content opportunity as in other areas that don't necessarily involve a lot of blood filters, but maybe more in Wi Fi satisfactions Youll Ultra high band that sort of thing. So maybe you can give us an idea of what you think the landscape looks like in the next couple of years.
Speaker Change: Yes.
Chris Cytosorb: This is Chris here.
Chris Cytosorb: Thanks for your for your question in your remarks.
Chris Cytosorb: As you know I can't really go into too much specifics as it relates to our largest customer and go into specifics on specific sockets or certain design wins.
Chris Cytosorb: But having said that right I think we have a long partnership relation with that customer.
Chris Cytosorb: We developed really high performance RF solutions.
Chris Cytosorb: And Unfortunately, we didn't really get what we targeted.
And part of that is most of the sockets that we targeted we actually were able to keep but instead of being single sourced on one particular sockets, it's being dual sourced and thats a little bit of a setback.
Chris Cytosorb: Having said that we are already working on the next generation phone that is expected to be launched in the fall of 2026, we actually have been working for many months on that and as we said in the prepared remarks, we are expanding our reach we are developing more parts than <unk>.
Chris Cytosorb: Before targeting more opportunities than ever before and we collaborate very strongly with our customer on that.
Chris Cytosorb: And we want to continue to support our customer and their baseband transition and and and that's what we need to do.
Speaker Change: Okay, if I could I'm sorry for the interruption.
Chris Cytosorb: Sure.
Chris Cytosorb: So you are sharing a socket that you may not have shared last year is that what you're saying.
Chris Cytosorb: That is correct.
Chris Cytosorb: Okay. So actually then you are competitive to that though I thought I'm sorry, the way, we were characterizing and I thought you did.
Chris Cytosorb: You didn't quantify at all so actually you are competitive for that socket analysis. It would be horse trading from here on out right. So you didn't lose all thing.
Speaker Change: That is absolutely correct again, we have been investing for many years and our technology and product Roadmaps, we have been investing in our field of technology, both Tc saw and ball and as I've said many times before.
Speaker Change: I do believe we are at the gold standard our ball filters aren't as good as anybody else.
Speaker Change: Now you still need to develop a product and and get to the best performance and in many cases, we do get to the best performance, but as you indicated as well.
Speaker Change: Competition has intensified.
Speaker Change: It used to be there are about five major RF players and we used to swim in our own swim lanes, but more recently.
Speaker Change: Including Sky works right, we are reaching out and we cross swim lanes and.
Speaker Change: And so the competition has intensified but.
Speaker Change: But we are stepping up.
Speaker Change: Helping more products, we keep expanding our technology and improving our technology and the customer is asking the customer is demanding and asking for a better and higher RF products in part because as you. All know they are bringing AI capabilities to the phone, which is increasing the technological burden inside the phone.
Speaker Change: They are asking for smaller footprint lower power consumption.
Speaker Change: Lower latency and higher throughput and overall higher performance and we are stepping up.
Speaker Change: We are we.
Speaker Change: Trade it that our technology and products can do it. Unfortunately, right we didn't get a single source. We we're dual sourced totaled one important part.
Chris Cytosorb: Great. Thanks, Chris.
Speaker Change: Thank you Kim.
Speaker Change: And our next question coming from the line of Chris.
Speaker Change: Christopher Rolland with Susquehanna. Your line is now open.
Speaker Change: Hey, Thanks for the question and congrats to <unk> Phil.
Speaker Change: So, yes, just a little more clarity on the <unk>.
Speaker Change: Down 20 to 25.
Speaker Change: So.
Speaker Change: It sounds like you're sharing a socket instead of a sole sourced.
Speaker Change: Assuming that would be the.
Speaker Change: The rumors so you've been hearing about diversity receive.
Speaker Change: I don't know if that would fully account for the 20% to 25.
Speaker Change: And.
Speaker Change: The other question is the lost sockets to Qualcomm.
Speaker Change: Would you take those back.
Speaker Change: And then sorry. The last question here is this is for all phones coming in the fall or is this just for the ones with the new modem.
Speaker Change: Yeah. So.
Speaker Change: The content loss is really a result of the share loss that accounts for all of it because we actually in certain sockets, we have been able to win back.
Speaker Change: <unk> that we lost that we talked about nine months ago. So we've been executing well there we've been gaining content, but unfortunately on an existing slot.
We lost share as we move from single source to.
Speaker Change: Dual source.
Speaker Change: And so.
Speaker Change: Assume that answer to your question.
Speaker Change: Yes, I did except just to follow ups to that are any any update on the Qualcomm socket and getting that back that you lost and then is this just for all the phones all the phones or just the phones with the new modem.
Speaker Change: Right. So again I can't really go into the specifics but.
Speaker Change: We've indicated that it's unlikely or impossible that we went back those slots sockets as it relates to the Qualcomm modem, but we've done well as it relates to the internal modem and maybe a last point.
Speaker Change: So we indicated a range of 20% to 25%. The reason of that is because we are dual sourced and so the final results will still depend on the mix.
Speaker Change: And the mix of course, you have to think about.
Speaker Change: New products versus legacy product and also the mix within the new product between different baseband as well as within a certain baseband the mix between certain skus that all lined up and so a lot of it will depend on what the demand will materialize and how that all plays out.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Karl Ackerman with BNP Paribas. Your line is now open.
Speaker Change: Yes, Thank you gentlemen.
Speaker Change: I wanted to.
Speaker Change: I was hoping you could clarify whether you are able to repurpose.
Speaker Change: Some of the RF designs that you've spent so much time on within R&D for some of these new content wins within <unk> Android and Samsung.
Speaker Change: And then secondarily.
Speaker Change: While the content and iOS devices handsets.
Speaker Change: Not what you've targeted I was hoping you could discuss.
Speaker Change: Your dollar content opportunities you see across the consumer electronic market, such as watches and tablets and Pcs over coming quarters. Thank you.
Speaker Change: Right. So I mean, we develop technology for our mobile business that of course can be deployed at the large customer.
Speaker Change: And we've been Android, Google, Samsung and China, and some of that actually does spill over into our broad markets as well. So that's the technology building blocks as it as it relates to <unk>.
Speaker Change: Product development for certain products for our largest customer obviously they are proprietary for our large customer and that again.
Speaker Change: Most of the developments, we did all resulting in revenue Unfortunately, not in a single source position, but in a dual source position.
Speaker Change: And typically of course, what we learn from the large customer.
Speaker Change: Technology and the expertise that we learn we can leverage that and develop in the Android market. The Android market as you probably know.
Speaker Change: And we've talked about that before we are going to remain selective we focus on the high end of the market, where the demand high performance RF and we believe that we are well positioned to grow that part of the business.
Speaker Change: Going forward.
Speaker Change: As it.
Speaker Change: As it relates to your second part of the question.
Speaker Change: As you probably know we have substantial revenue with a large customer roughly 85% of that revenue is.
Related to the phone and approximately 15% of that is related to all of their other products.
Speaker Change: That they bring to market to watch the tablet if we see the home pulp.
Speaker Change: Division product.
Speaker Change: So and.
Speaker Change: And in that part of the business, we continue to do well in terms of design wins and we do expect.
Speaker Change: This year and next year that part of the business will continue to grow.
Very helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Felicia.
Speaker Change: <unk> with Goldman Sachs. Your line is now open.
Speaker Change: Hi, Thank you so much for taking the question.
Speaker Change: I just had one question for you Chris given the content.
Speaker Change: Dynamics with the largest customer I am curious if you plan on making any permanent changes to the manufacturing footprint of the company.
Speaker Change: And how to think about gross margins going forward as part of that and then similarly for Opex I know you're guiding opex to grow in the near term but.
Speaker Change: Any any intent or any plans to.
Speaker Change: Adjusted the new backdrop, if you will thank you.
Speaker Change: Yes.
Speaker Change: A series of good questions, there and I'll try to address them one by one first of all as it relates to Capex.
Speaker Change: We are currently.
Speaker Change: Operating the business with a lot less capital intensity.
Speaker Change: As you probably know we have underutilization in our factories and so we didn't have any capacity expansion.
Speaker Change: Capex in our plans and obviously now that we recently learned.
Speaker Change: About.
Speaker Change: The down selection for the upcoming phone.
Speaker Change: We do not have to add or subtract any of the capex. So the capex plan will remain on or about the same.
Speaker Change: As it relates to manufacturing footprint.
Speaker Change: We do not plan to make changes to add but of course.
Speaker Change: Independent of what just recently happened, we will always continue to evaluate our overall manufacturing footprint and make the necessary adjustments, if and where we can.
As it relates to the gross margin.
Speaker Change: I've talked before about gross margin and this basically three major drivers for gross margin improvement first is revenue growth that translate into better factory utilization second its operational efficiencies and cost reductions and our internal factories as well.
Speaker Change: Well as throughout the supply chain and working with our suppliers and then thirdly, it's a mixed tailwind as growth markets grows faster than mobile and broad markets has above average gross margin.
Speaker Change: Obviously here with the latest information.
Speaker Change: Revenue growth.
Speaker Change: Is going to be challenged and so we are going to remain with underutilization in our factories for a little bit longer than we initially anticipated and so that is not going to help in gross margins improvement but of course, we are going to continue and actually doubled down on trying to file.
Speaker Change: <unk> operational efficiencies in our factories.
Speaker Change: As we.
Speaker Change: Deal with this situation.
Speaker Change: And then thirdly, the gross margin tailwind from growth markets, it's actually going to blow stronger as broad markets is going to become a bigger part of the overall business.
Speaker Change: And then.
Speaker Change: May be lost on operating expenses.
Speaker Change: We will of course.
Speaker Change: <unk> to manage our operating expenses like we've always have done at Sky works, we run a very tight ship here.
Speaker Change: But.
Speaker Change: We are already as I indicated also we have already started for many months the development of new products, a whole new suite of products in support of our large customer.
Speaker Change: More products than ever before addressing more opportunities than ever before and obviously, we're going to continue with those developments that position us well to capture more content in the in.
Speaker Change: The next generation phone that's expected to be launched in 2026 in addition to that and we've.
Speaker Change: Talked a little bit about that in the prepared remarks, our broad markets business is back to year over year growth, we expect that year over year growth to accelerate and improve over time.
Speaker Change: And we see plenty of growth opportunities based on secular growth engines.
Speaker Change: And of course, we need to continue to invest into the growth of our broad markets as well.
Speaker Change: <unk> said all of that we understand that.
Speaker Change: Setback on revenue, but will require a deep dive.
Speaker Change: And we will as a management team continue to look at every opportunity.
Speaker Change: To limit the Opex spending obviously, there will be an adjustment to the variable compensation.
Speaker Change: We will not hit the targets that we set for ourselves and we will continue to look at any opportunity to further discrete <unk>.
Speaker Change: Decrease.
Speaker Change: Discretionary spending.
Speaker Change: Okay.
Speaker Change: Thank you.
Next question coming from the line of Peter Peng with Jpmorgan. Your line is now open.
Peter Peng: Thanks for taking my question.
Peter Peng: I think just bigger picture I think for like two years of neuro you've lost some content not because of the technology positioning.
Peter Peng: Right.
Peter Peng: How are you thinking about your relationship with that customer longer term and does this kind of.
Speaker Change: Put you into a more diversification I saw your diversification strategy even faster.
Speaker Change: No we are not changing our strategy here again, we've been working with that customer for 18 years.
Speaker Change: We've built a very strong relationship that our relationship remains intact.
Speaker Change: Honestly the last couple of years has been challenging.
Speaker Change: In part.
Speaker Change: The competition has been intensifying in part because of the multi year baseband modem transition, which has created some turbulence.
Speaker Change: Amongst the RF cliffs, but.
Speaker Change: But we continue to collaborate very strongly with that customer and as I said before we are developing more parts than ever before addressing more opportunities than ever before.
Speaker Change: In part because we've been asked by that customer to go do that and so we definitely will continue that relationship.
Speaker Change: Having said that diversification and focusing on broad markets has always been part of the strategy.
Speaker Change: <unk>.
Speaker Change: That will of course remain the case, we like our broad markets business. It's a very diverse business addressing multiple end markets from consumer to enterprise to infrastructure networking and cloud and industrial and automotive markets. We have some key technologies.
Speaker Change: And product offerings.
Speaker Change: In those markets with strong customer relationships.
Speaker Change: Yes.
Speaker Change: And of course, we will continue to invest in that market and drive growth.
Speaker Change: I said before we think our broad markets business.
Speaker Change: Should be growing double digits more than 10% year over year.
Speaker Change: And Thats the target and we will continue to invest and support their business.
Speaker Change: Got it.
Speaker Change: And then on the Android space, what was the revenue number for the quarter I think last quarter. It was somewhere in that $75 million.
Speaker Change: Do you think that we're at a stable level and we can grow from those levels.
Speaker Change: That is correct it was in December quarter.
Speaker Change: Flat sequentially.
Speaker Change: And as you know the Android segment as Google.
Speaker Change: Armstrong in China.
Speaker Change: There is seasonality in that business and sometimes it's offsetting seasonality, but there is definitely.
Speaker Change: Seasonality in that business as well we continue to have a strong relationship with Google We have already won.
Speaker Change: Substantial design wins for the for the.
Speaker Change: For next year and the year after.
Speaker Change: And so I think we are well positioned Dev and then as well as it relates to Samsung in China, We will remain selective.
Speaker Change: But this design win momentum.
Speaker Change: That starts turning into revenue and we do believe that we can grow our <unk>.
Speaker Change: Droid business as a whole.
Speaker Change: This year and the year after and beyond.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the lineup Timothy Arcuri with UBS. Your line is now open.
Timothy Arcuri: Good afternoon.
Speaker Change: My contact Tim Thanks for taking our question and Chris.
Speaker Change: Just first on your largest customer I was hoping you could speak to.
Speaker Change: Competitive dynamics, there in the sense and more specifically do you see this dual sourcing strategy potentially reverse in future.
Speaker Change: Phones.
Speaker Change: So at the large customer.
Speaker Change: Win because we have the best performance parts.
Speaker Change: And so if there is only one supplier obviously that supply will win the business. If there are two or more suppliers, but one supply it has a substantially better part than anybody else.
Speaker Change: Supplier can get all the business. If there are two or three suppliers and they are high in terms of performance the customer.
Speaker Change: This site to dual source that especially on the larger more expensive pumps and I think that's the reality and we have to our knowledge that and face that and so it's up to us and the team to again continue to strengthen our technology roadmaps to develop high performance.
Speaker Change: Parts and sockets.
Speaker Change: That are better than our competitors.
Speaker Change: We again, we have the teams in place we have the.
Speaker Change: The R&D resources, and the strength and the capabilities in place.
Speaker Change: But we need to focus on execution and get those best performance parts in front of our customer.
Speaker Change: Again in the one particular sockets that.
Speaker Change: That is causing.
Speaker Change: Some pain here, we developed a really high performance part that is as good as our competitors part.
Speaker Change: But it wasn't necessarily much better as a result of that the customer decided to dual source it.
Speaker Change: Got it very helpful. And then maybe just a housekeeping item. If you can just tell us what the percentage of your largest customer was this quarter okay.
Speaker Change: Yes in the December quarter, the largest customer was 72% of total revenue, which was up 9% sequentially as we support that customer.
Speaker Change: With the ramp of their current phone.
Speaker Change: Also.
Speaker Change: Again, I want to reiterate that right that revenue with the large customer there is not just on the phone roughly 85% it fluctuates a little bit from quarter to quarter, but roughly 85% of that revenue is related to reform. The other 15% is related to all other.
Speaker Change: That customer has out in the market.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of.
Speaker Change: Vivek Arya with Bank of America. Your line is now open.
Speaker Change: Hi, This is liam for on behalf of tobacco Mario. Thank you for taking my question I wanted to focus on China with a competitor sort of exiting that market. What is your longer term strategy for China, and if you could at least like tariffs come into play to the inventory of the overall market. Thank you.
Speaker Change: Yeah.
Speaker Change: Right, so with China, and Samsung we are remaining selective we have a longstanding relationship with those customers, but many years ago, we have decided not to compete for them mid or low end.
Speaker Change: All of their products.
Speaker Change: But we but we compete for.
Speaker Change: For sockets with them and the high end of the market, that's where they need us or our competitors right, that's where they need high performance RF and and we see opportunities to add as I said before we are getting some design win momentum that is starting to ramp up in revenue.
Speaker Change: And we will continue to do that on a selective basis.
Speaker Change: Thank you and just as a follow up looking forward to June.
Speaker Change: How are you looking at seasonality and how you're seeing that kind of shape out this first half.
Speaker Change: Yes, so we only guide one quarter at a time, but I don't see anything different right now than normal seasonality in our business.
Speaker Change: Thank you.
Speaker Change: And our next question.
Speaker Change: Coming from the line of Chris Dankert with TD Cowen. Your line is now open.
Speaker Change: Hey, guys. This is Eddie for Krish. Thanks for taking my question.
Speaker Change: It sounds like your competitor has improved the performance of their product meaningfully this year, which pushed your.
Speaker Change: Main customer to dual source.
Speaker Change: But I wonder if you can quantify where where the performance gap stands today between your product and that competitors product and how that compares to last year and I Wonder if you can share any.
Speaker Change: <unk> or <unk>.
Speaker Change: Technical specifications that we can follow that would give us an idea how that gap is developing going forward between you guys and your main sir Thank you.
Speaker Change: You're right.
Speaker Change: Right. So again, we can't really go into the specifics at that detailed level as it relates to our large customer.
Speaker Change: And performance is being measured on five or 10 different.
Speaker Change: Parameters and so this would become a very technical discussion, but I want to go back to the beginning of your question, it's not that our competitor improved their performance of their part.
Speaker Change: <unk>.
Speaker Change: That competitor in the past has not competed for that product and it was the first year that that competitor competed for that product.
Speaker Change: And so that's the dynamic there.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Mcdonnell with Needham. Your line is now open.
Speaker Change: Hi, Thanks for taking my questions.
Speaker Change: Rod market should see improving growth next quarter and it sounds like that's driven by the large customer and Wi Fi where inventories more in line do you have any indication of how long inventory headwinds will slow the industrial and infrastructure piece one cannot reach that.
Speaker Change: Double digit growth year over year that you discussed.
Speaker Change: Yes.
Speaker Change: That's a very good question.
Speaker Change: But unfortunately visibility is not that great.
Speaker Change: I'm listening to all my peers and competitors that have huge exposure to industrial and infrastructure markets that as well.
And it seems that we all struggle a little bit with lack of visibility there.
Speaker Change: And part of that is because.
Speaker Change: There is a persistent excess inventory at the customer level, where we don't really have good visibility.
Speaker Change: The inventory in the distribution channel is clean and it has been cleared out but there is still inventory at the customer level.
Speaker Change: Again for Sky works that is not the biggest part of our broad markets right. We had a much bigger player in our connected Iot devices, which is roughly 40 40, 40% to 45% of the business our automotive.
Speaker Change: <unk> business, which is roughly 20 or so percent of our broad markets business and so we have less exposure on some of those markets, where there is still unfortunately some.
Speaker Change: Persistent.
Speaker Change: Inventory correction.
Speaker Change: Thank you and can you expand on the socket or anything around the type of <unk> premium Android content that you won.
Speaker Change: Maybe how big is the combined opportunity any timing. Thank you.
Speaker Change: Sorry, the five <unk> debt can you repeat that.
Speaker Change: Yes, the kind of the first point in your press release talked about a <unk> premium Android content win.
Speaker Change: Yes, I mean again.
Speaker Change: Sure.
Speaker Change: In Android, we continue to be selective we we have design wins, including with Samsung in the Galaxy and.
Speaker Change: As well as many of their other products.
Speaker Change: And that will continue going forward.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And ladies and gentlemen that concludes today's question and answer session I'll now turn the call back over to Mr Singh for any closing comments.
Speaker Change: Yes, so I would like to thank everybody for your participation on today's call and Im looking forward to talk to you together with for RG and Phil.
Speaker Change: At upcoming Investor meetings. Thank you.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. We thank you for your participation you may now disconnect.
Speaker Change: Yes.
Speaker Change: [music].
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Speaker Change: <unk>.
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Speaker Change: Good afternoon, and welcome to the Skywalk solutions first quarter fiscal year earnings call.
Speaker Change: This call is being recorded.
Speaker Change: At this time I will turn the call over to Raj Kim.
Speaker Change: As president of Investor Relations for Sky works is the Gill. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Thank you operator, good afternoon, everyone and welcome to Sky works first fiscal quarter 2025 conference call with me today for our prepared remarks, as Liam Griffin, our Chief Executive Officer, and President and Chris Citizens Chief Financial Officer for Sky works. Following the conclusion of the prepared remarks, Chris will be available for Q&A.
Speaker Change: This call is being broadcast over the web and can be accessed from the Investor Relations section of the company's website at Sky Works, Inc. Dot Com. In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call before we begin I would like to remind everyone that our discussion will.
Speaker Change: Include statements relating to future results and expectations that are or may be considered forward looking statements. Please refer to our earnings press release, and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from <unk>.
Any forward looking statements made today.
Liam Griffin: 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 Griffin: Thanks, Roger and welcome everyone before we get into the details of the results I want to address the succession planning, we announced today after an incredible 20 plus years at Sky works with the last nine as president and CEO I will be stepping down.
Liam Griffin: Sky works has chosen Philip brace as our next president and CEO. He will join the company on February 17 at which point I will shift to an advisory role for a few months to help ensure a smooth transition today, we also announced at Christine King who has been our Sky works lead independent director has been in <unk>.
Speaker Change: And as chairman of the board. She is an excellent choice built.
Speaker Change: Bill's appointment follows a robust succession planning process by the sky or export Phil.
Speaker Change: Bill is an accomplished technology executive who has served as president and CEO of Sierra wireless from 2021 to 2023.
Speaker Change: He currently serves on the board of directors of Blackberry land Tronox and in CECO.
Speaker Change: He brings a deep knowledge of the technology industry and extensive experience in scaling and leading successful businesses.
Speaker Change: I want to offer my sincerest congratulations to fill honest was on his appointment and I'm excited for you to meet him.
Speaker Change: I look forward to watching Sky works business Prosper under his leadership through continued innovation ingenuity and hard work.
Speaker Change: Let's now move into a discussion of Sky works first fiscal quarter of 2025.
Speaker Change: Sky works began the new fiscal year with solid results, we posted revenue of $1 billion and $68 million, we delivered earnings per share of $1 60 and.
Speaker Change: And generated free cash flow of $338 million revenue gross margin and EPS met or exceeded the midpoint of our guidance.
Speaker Change: In mobile our revenue grew 6% sequentially as we successfully supported multiple product launches across our top mobile customers.
Speaker Change: Global adoption of generative AI on smartphones is still in its nascent stage. We anticipate this to be a multiyear trend that will catalyze smartphone upgrades and increase the complexity and requirements for RF solutions and.
Speaker Change: In broad markets, we have experienced modest growth for four consecutive quarters.
Speaker Change: We anticipate further growth as demand signals and backlog improve.
Speaker Change: And certain segments supply and demand dynamics are in equilibrium and channel inventories have normalized.
Speaker Change: Meanwhile, industrial and infrastructure remained subdued due to persistent inventory challenges.
Speaker Change: Overall, we are encouraged by the recent momentum in broad markets and are energized about new product cycles in automotive electrification edge Iot and.
Speaker Change: In AI data center fueling long term growth.
Speaker Change: And Azure Iot, we are observing higher levels of intelligence and combined with more nodes being added to the edge of the network driving higher levels of RF complexity.
Speaker Change: Artificial intelligence and machine learning increases the range of functionality running models like voice and computer vision RF.
Speaker Change: <unk> connectivity is the conduit for secure robust and lower power AI applications.
Speaker Change: Moreover, the adoption of Wi Fi six and seven systems by customers is contributing to the improvement in demand.
Speaker Change: These systems characterized by enhanced complexity and utilization of additional bands enable transmission of higher value content.
Speaker Change: We are currently in the emerging stages of a multiyear upgrade cycle with Wi Fi seven shipments experiencing a ramp up.
Speaker Change: We are seeing growth in wireless gaming wireless home audio and wireless headsets, where customers are adopting sky works connectivity and audio technology.
Speaker Change: In automotive, we returned to year over year growth. Despite a soft demand environment as design wins in the connected car onboard charging an infotainment are gradually converting into revenue.
Speaker Change: Specifically, we expect our RF content per vehicle to grow driven by <unk> cellular Wi Fi Bluetooth and Vito wax lastly, the industrial segments remain a headwind as we continue to under ship demand turning to our quarterly business highlights.
Speaker Change: We secured a five G content for premium Android smartphones, including Samsung Galaxy shall may a suit and several others. We supported Gentex launch of the first AI router with voice enabled AI powered health care service, we enabled our Seuss's award winning quad.
Speaker Change: Band Wi Fi seven gaming routers and expanded our design win pipeline in automotive with cellular connectivity and power management solutions with that I will turn the call over to Chris for a discussion of last quarter's performance and our outlook for Q2 of fiscal 'twenty five.
Chris: Thanks, Liam Sky works revenue for the first fiscal quarter of 2025 was $1 billion and $68 million slightly above the midpoint of our outlook mobile revenue was 67% of total revenue and increased 6% sequentially as we successfully supported multiple.
<unk> product launches.
Chris: Broad markets was up slightly sequentially and return to year over year growth at 2%.
Chris: Q1 fiscal 'twenty five mark the fourth consecutive quarter of modest sequential growth since the Q1 fiscal 'twenty four bottom.
Chris: Despite a muted demand environment and ongoing inventory digestion across selective and markets gross profit was 497 million with gross margin at 46, 5% inline with expectations also during Q1, we further decreased our <unk>.
Chris: Total inventory slightly below $700 million, resulting in eight consecutive quarters of reductions.
Chris: Operating expenses were $212 million, reflecting our strategic investments in our technology and product Roadmaps.
Chris: We delivered $285 million of operating income translating into an operating margin of 27%.
Chris: We generated $9 million of other income and our effective tax rate was 12, 2% driving net income of 258 million and diluted earnings per share of $1 63.
Chris: <unk> above our guidance.
Chris: For the first quarter of fiscal 2025, we demonstrated robust cash generation with operating cash flow of 377 million capital expenditures of $39 million and our free cash flow of $338 million, representing a 32% free cash flow margin.
Chris: During fiscal Q1, we distributed $112 million in dividends.
Chris: Our cash and investment balance increased to approximately $1 75 billion, while we maintain a debt level of 1 billion, providing us with ample financial flexibility.
Chris: Now, let's move onto our outlook for Q2 of fiscal 2025.
Chris: We anticipate revenue of $935 million to $965 million.
Chris: We expect our mobile business to decline mid to high teens sequentially in line with historical seasonality.
Chris: And broad markets, we anticipate additional sequential growth and a further improvement in year over year growth.
Chris: We are seeing positive momentum in booking trends backlog and sell through patterns across broad markets, However, inventory headwinds remain acute and industrial and infrastructure.
Chris: Gross.
Chris: Arjun is projected between $45, five and 46%, which is seasonally adjusted for lower sales volume.
Chris: We anticipate operating expenses in the range of $220 million to $228 million utilizing our robust cash flow generation to invest in technology and product Roadmaps.
Chris: The sequential increase is mostly driven by a reset of the social charges at the beginning of the calendar year as well as an increase in R&D project expenses.
Chris: Below the line, we anticipate $6 million in other income and effective tax rate of 12 to 12, 5% and a diluted share count of approximately 158 5 million shares accordingly at the midpoint of the revenue range of $950 million, we intend to deliver diluted earnings per share of <unk>.
Chris: $1.20.
Chris: Finally, our board of Directors has approved a new $2 billion stock repurchase program as part of our disciplined capital allocation strategy.
Chris: Before moving into Q&A I want to briefly reflect on our business and address our strategic partnership with our largest customer.
Chris: Over the past 25 years, we have built a strong technology company a leader in RF connectivity for mobile solutions and.
Chris: An expanded dose RF capabilities with analog and mixed signal expertise and our growing broad markets business.
Chris: And over the last 18 years, we have benefited from a truly collaborative partnership with our largest customer who has constantly pushed us to develop innovative high performance and highly integrated RF solutions.
Chris: We have partnered with our customers since the launch of their first phone, which has resulted in significant content and revenue growth over the years.
Chris: However, the last couple of years have been challenging as the competitive landscape has intensified.
Speaker Change: As it relates to the upcoming phone cycle expected to be launched into fall of 2025. The Sky works team developed a suite of high performance RF solutions.
Speaker Change: Despite our rich product offering we did not get the result that we've targeted.
Dolby, we're able to secure multiple sockets, including several highly integrated RF modules, our content position is expected to be down 20% to 25%.
Speaker Change: This decline will start impacting our revenue in the fourth quarter of fiscal 'twenty five and throughout fiscal 2006.
Speaker Change: While we are disappointed with this outcome.
Speaker Change: We remain steadfast in our commitment to invest and innovate around our technology Roadmaps.
Speaker Change: We have already started the development of a new suite of solutions for the next generation for.
Speaker Change: We have an expanding set of products and addressing more opportunities than ever before.
Speaker Change: In addition, we will continue to pursue growth opportunities with our other mobile customers, although on a selective basis focusing on those segments of the market that demand high performance RF and we will continue to drive our diversification strategy supported by multiple secular growth trends in <unk>.
Speaker Change: What markets, we expect those opportunities to partially offset the revenue decline at the large customer in fiscal 2006 and position us for growth in fiscal 2007.
Liam Griffin: Now, let me hand, it back to Liam for some final remarks.
Liam Griffin: To wrap it up I would like to thank all of our Sky works employees and stakeholders for their support during the last 25 years.
Liam Griffin: It has truly been a privilege and the highlight of my career to lead this company.
Speaker Change: Strongly believe the Sky works team with support of our board of directors and under New leadership, we will execute on the strategic path of profitable growth.
Speaker Change: I will turn it over to Chris now who will be taking Q&A this quarter.
Chris: Operator, let's open the line for questions.
Speaker Change: Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone.
Speaker Change: <unk> will need to be announced to withdraw your question simply press star one again.
Speaker Change: As a reminder, given the time constraints, we ask that you. Please limit yourself to one question and one follow up please.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: And our first question coming from the line of Edward Snyder with Charter equity Research. Your line is now open.
Thanks, very much first of all Neil.
Speaker Change: I guess congratulations are retiring I'll get them. This year, you did a phenomenal job.
Speaker Change: Always appreciate how Frank in them.
Speaker Change: You've been on everything and I think.
Speaker Change: You did a bang up job so.
Speaker Change: You go will pull things are better.
Speaker Change: And then Ralph on the Sunset of wherever you are going to wind up doing.
Speaker Change: As for Apple or your largest customer I know.
Speaker Change: It sounds like.
Speaker Change: New competition is in one of your largest modules and I know you guys are making a big push towards that in the fall.
Speaker Change: And there is a whole another round of this coming up in the year out first off I'd like to get a feel for if you think it's.
Speaker Change: Our target you can hit given how rich that parties and BARF filters and secondarily you guys have got to be one of the most favored suppliers to your largest customer there is a lot of the parts on this on this.
Speaker Change: This version and what's going to be the next couple of versions that will change over the years.
Speaker Change: Maybe you could help characterize what the what the content opportunity as in other areas that don't necessarily involve a lot of blood filters.
Speaker Change: But maybe more in Wi Fi Satisfactions, Youll Ultra high band that sort of thing. So maybe you can give us an idea of what you think the landscape looks like in the next couple of years.
Speaker Change: Yes. This.
This is Chris here and so on.
Speaker Change: Thanks for your for your question in your remarks.
Speaker Change: As you know I can't really go into too much specifics as it relates to our largest customer and go into specifics on specific sockets or certain design wins.
Speaker Change: But having said that right I think we have a long partnership relation with that customer.
Speaker Change: We developed really high performance RF solutions.
Speaker Change: And Unfortunately, we didn't really get what we targeted.
Speaker Change: And part of that is most of the sockets that we targeted we actually were able to keep but instead of being single sourced on one particular sockets, it's being dual sourced and thats a little bit of a setback.
Speaker Change: Having said that we are already working on the next generation phone that is expected to be launched in the fall of 2026, we actually have been working for many months on that and as we said in the prepared remarks, we are expanding our reach we are developing more cards than ever.
Speaker Change: Before targeting more opportunities than ever before and we collaborate very strongly with our customer on that.
Speaker Change: <unk>.
Speaker Change: And we want to continue to support our customer base.
Speaker Change: Baseband transition.
Speaker Change: And and that's what we need to do.
Speaker Change: Okay, if I could I'm sorry for the interruption.
Speaker Change: Yes.
Speaker Change: So you are sharing a socket that you may not have shared last year is that what youre, saying.
Speaker Change: That is correct okay.
Speaker Change: Okay. So actually then you are competitive that is though I thought I'm sorry, the way, we'd characterize again I thought you did.
Speaker Change: You Didnt qualify it all so actually you are competitor for that soccer analogy because it would be horse trading from here on out right. So you didn't lose all thing.
Speaker Change: That is absolutely correct again, we have been investing for many years and our technology and product Roadmaps, we have been investing in our field of technology, both Tc saw and ball and as I said many times before.
Speaker Change: I do believe we are the gold standard our ball filters aren't as good as anybody else.
Speaker Change: Now you still need to develop a product and and get to the best performance and in many cases, we do get to the best performance, but as you indicated as well.
Speaker Change: Competition has intensified.
Speaker Change: It used to be there or not about five major RF players and we used to swim in our own swim lanes, but more recently.
Speaker Change: Including Skywest right, we are reaching out and we cross swim lanes and.
Speaker Change: And so the competition has intensified but.
Speaker Change: But we are stepping up.
Speaker Change: Helping more products, we keep expanding our technology and improving our technology and a customer who is asking the customer is demanding and asking for a better and higher RF products in part because as you all know theyre, bringing AI capabilities to the phone, which is increasing the technological burden inside the phone.
They are asking for smaller footprint lower power consumption.
Speaker Change: Lower latency and higher throughput and overall higher performance and we are stepping up.
Speaker Change: We are.
Speaker Change: We demonstrated that our technology and products can do it. Unfortunately, we didn't get a single source. We we're dual sourced totaled one important part.
Speaker Change: Great. Thanks, Chris.
Kim: Thank you Kim.
Kim: And our next question coming from the line of.
Speaker Change: Christopher Rolland with Susquehanna. Your line is now open.
Speaker Change: Hey, Thanks for the question and congrats to Trillium and Phil.
Speaker Change: So yes just.
Speaker Change: A little more clarity on the <unk>.
Speaker Change: Down 20% to 25.
Speaker Change: So.
Speaker Change: It sounds like you're sharing a socket instead of a sole sourced.
Speaker Change: I'm, assuming that would be the.
Speaker Change: The rumors so you've been hearing about diversity receive.
Speaker Change: I don't know if that would fully account for the 20% to 25.
Speaker Change: And.
Speaker Change: The other question is the lost sockets to Qualcomm.
Speaker Change: Would you take those back.
Speaker Change: And then sorry.
Speaker Change: Last question here is this is for all phones coming in the fall or is this just for the ones with the new modem. Thank you.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: The content loss is really a result of the share loss that accounts for all of it because we actually in certain sockets, we have been able to win back slots that we lost that we've talked about nine months ago. So we have been.
Speaker Change: Executing well there we've been gaining content, but unfortunately.
Speaker Change: <unk> slot.
Speaker Change: We lost share as we move from single source to.
Speaker Change: Fuel source.
Speaker Change: And so.
Speaker Change: Assume that answer to your question.
Speaker Change: Yes, I did except just follow ups to that are any any update on the Qualcomm socket and getting that back that you lost and then is this just for all the phones all the phones or just the phones.
Speaker Change: The new modem.
Speaker Change: Right. So again I can't really go into the specifics, but we.
Speaker Change: We've indicated that it's unlikely or impossible that we went back those slots sockets as it relates to the Qualcomm modem, but we've done well as it relates to the internal modem and maybe a last point.
Speaker Change: So we indicated a range of 20% to 25%. The reason of that is because we are dual sourced and so the final results will still depend on the mix.
Speaker Change: And the mix of course, you have to think about.
Speaker Change: New products versus legacy product and also the mix within the new product between different baseband as well as within a certain baseband the mix between certain skus that all lined up and so a lot of it will depend on what the demand will materialize and how that all plays out.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of Karl Ackerman with BNP Paribas. Your line is now open.
Speaker Change: Yes, Thank you gentlemen.
Speaker Change: I wanted to.
Speaker Change: I was hoping you could clarify whether you are able to repurpose.
Speaker Change: Some of the RF designs that you've spent so much time on within R&D.
Speaker Change: Or I assume these new content wins within <unk>, Android and Samsung.
Speaker Change: And then secondarily.
Speaker Change: While the content and iOS devices at least in that hand.
Speaker Change: That is not what you've targeted I was hoping you could discuss.
Speaker Change: Your dollar content opportunities you see across the consumer electronic market, such as watches tablets and Pcs.
Speaker Change: Quarters. Thank you.
Speaker Change: Right. So I mean, we develop technology for our mobile business that of course can be deployed at the large customer and we have been Android, Google Samsung and China and some of that actually does spill over into our broad markets is.
Speaker Change: Well, so that's the technology building blocks as it relates to <unk>.
Speaker Change: The product development for certain products for our largest customer obviously they are proprietary for our large customer and then again.
Speaker Change: Most of the developments, we did all resulting in revenue Unfortunately, not in a single source position, but in a dual source position.
Speaker Change: And typically of course, what we learn from the large customer.
Speaker Change: The technology and the expertise that we learn we can leverage that and develop in the Android market. The Android market as you probably know and we've talked about that before we are going to remain selective we focus on the high end of the market, where the demand high performance RF and we believe that.
Speaker Change: We are well positioned to grow that part of the business.
Speaker Change: Going forward.
Speaker Change: As it relates to your second part of the question.
Speaker Change: As you probably know we have substantial revenue with a large customer with roughly 85% of that revenue is.
Speaker Change: Related to the phone and approximately 15% of that is related to all of their other products.
Speaker Change: That they bring to market to watch the tablet if we see the home pulp.
Speaker Change: The division product.
Speaker Change: And so and.
Speaker Change: And in that part of the business, we continue to do well in terms of design wins and we do expect.
Speaker Change: This year and next year that part of the business will continue to grow.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question coming from the line of Felicia.
Speaker Change: Michelle has been with Goldman Sachs. Your line is now open.
Felicia Michelle: Hi, Thank you so much for taking the question.
Speaker Change: I just had one question for you Chris given the content.
Speaker Change: Dynamics with the largest customer I am curious if you plan on making any permanent changes to the manufacturing footprint of the company.
Speaker Change: And how to think about gross margins going forward as part of that and then similarly for Opex I know you're guiding opex to grow in the near term but.
Speaker Change: Any any intent or any plans to.
Speaker Change: Adjust to the new backdrop, if you will thank you.
Speaker Change: Yes.
Speaker Change: A series of good question, Stan I'll try to address them one by one first of all as it relates to Capex.
Speaker Change: We are currently.
Speaker Change: Operating the business with a lot less capital intensity.
Speaker Change: As you probably know we have underutilization in our factories and so we didn't have any capacity expansion.
Speaker Change: Capex in our plans and obviously now that we recently learned.
Speaker Change: About.
Speaker Change: The down selection for the upcoming phone.
Speaker Change: We do not have to add or subtract any of the capex. So the capex plan will remain on or about the same.
Speaker Change: As it relates to manufacturing footprint.
Speaker Change: We do not plan to make changes to add but of course.
Speaker Change: Independent of what just recently happened, we will always continue to evaluate our overall manufacturing footprint and make the necessary adjustments, if and where we can.
Speaker Change: As it relates to the gross margin.
Speaker Change: I've talked before about gross margin and this basically three major drivers for gross margin improvement first is revenue growth that translates into better factory utilization second its operational efficiencies and cost reductions and our internal factories as well.
Speaker Change: Well as throughout the supply chain and working with our suppliers and then thirdly, it's a mixed tailwind as growth markets grows faster than mobile and broad markets has above average gross margin.
Speaker Change: Obviously here with the latest information.
Speaker Change: Our revenue growth.
Speaker Change: Is going to be challenged and so we are going to remain with underutilization in our factories for a little bit longer than we initially anticipated and so all of that is not going to help in gross margins improvement but of course, we are going to continue and actually doubled down on trying to file.
Speaker Change: <unk> operational efficiencies in our factories.
Speaker Change: As we.
Speaker Change: Deal with this situation.
Speaker Change: And then thirdly, the gross margin tailwind from growth markets, it's actually going to blow stronger as broad markets is going to become a bigger part of the overall business.
And then.
Speaker Change: May be lost on operating expenses.
Speaker Change: We will of course.
Speaker Change: <unk> to manage our operating expenses like we've always have done at Sky works, we run a very tight ship here.
Speaker Change: But.
Speaker Change: We are already as I indicated also we have already started for many months the development of new products, a whole new suite of products in support of our large customer.
Speaker Change: More products than ever before addressing more opportunities than ever before and obviously, we're going to continue with those developments that position us well to capture more content in India.
And the next generation phone that's expected to be launched in 2026 in addition to that and we've.
Speaker Change: Talked a little bit about that in the prepared remarks, our broad markets business is back to year over year growth, we expect that year over year growth to accelerate and improve over time, and we see plenty of growth opportunities based on secular growth engines.
Speaker Change: And of course, we need to continue to invest into the growth of our broad markets as well.
Speaker Change: Having said all of that we understand that.
Speaker Change: Setback on revenue, but will require a deep dive.
Speaker Change: And we will as a management team continue to look at every opportunity.
Speaker Change: To limit the Opex spending obviously, there will be an adjustment to the variable compensation.
As we will not hit the targets that we set for ourselves and we will continue to look at any opportunity to further discrete.
Decrease or discretionary spending.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Next question coming from the line of Peter Peng with Jpmorgan. Your line is now open.
Peter Peng: Thanks for taking my question.
Peter Peng: I think just bigger picture I think for like two years of neuro you've lost some content not because of your technology positioning.
Peter Peng: But.
Peter Peng: How are you thinking about your relationship with that customer longer term and does this kind of.
Peter Peng: Put you into a more diversification I saw your diversification strategy even faster.
Peter Peng: No we are not changing our strategy here again, we've been working with that customer for 18 years.
Peter Peng: We've built a very strong relationship that our relationship remains intact obviously.
Peter Peng: Last couple of years has been challenging.
Peter Peng: In part because the competition has been intensifying in part because of the.
Peter Peng: Multiyear baseband modem transition, which has created some turbulence.
Peter Peng: Amongst the RF cliffs, but.
Peter Peng: But we continue to collaborate very strongly with that customer and as I said before we are developing more parts than ever before addressing more opportunities than ever before.
Peter Peng: In part because we've been asked by that customer to go do that.
Peter Peng: So we definitely will continue that relationship.
Peter Peng: Having said that diversification.
Focusing on broad markets has always been part of the strategy.
Peter Peng: And.
Peter Peng: That will of course remain the case, we like our broad markets business. It's a very diverse business addressing multiple end markets from consumer to enterprise to infrastructure networking and cloud and industrial and automotive markets. We have some key technologies and product offering.
Peter Peng: And in those markets, we have strong customer relationships.
Peter Peng: <unk>.
Peter Peng: And of course, we will continue to invest in that market and drive growth as I said before we think our broad markets business.
Peter Peng: Should be growing double digits more than 10% year over year.
Peter Peng: And Thats the target and we will continue to invest and support that business.
Peter Peng: Got it.
Peter Peng: And then on the Android space, what was the revenue number for the quarter I think last quarter. It was somewhere in that $75 million.
Peter Peng: Do you think that we're at a stable level and we can grow from those levels.
Peter Peng: That is correct it was in December quarter.
Peter Peng: Flat sequentially.
Peter Peng: And as you know the Android segment as Google.
Peter Peng: Samsung in China, there is seasonality in that business and sometimes it's offsetting seasonality, but there is definitely an.
Peter Peng: Seasonality in that business as well we continue to have a strong relationship with Google We have already won.
Peter Peng: <unk> design wins for the quarter.
Peter Peng: For next year and the year after.
Peter Peng: And so I think we are well positioned Dev and then as well as it relates to Samsung in China, We will remain selective.
Peter Peng: But this design win momentum.
Peter Peng: That starts turning into revenue and we do believe that we can grow our <unk>.
Peter Peng: Android business as a whole.
Peter Peng: This year and the year after and beyond.
Peter Peng: Yes.
Peter Peng: Thank you.
Speaker Change: Next question coming from the line of Timothy Arcuri with UBS. Your line is now open.
John: Good afternoon. This is John my upon for Tim Thanks for taking our question and Chris.
Speaker Change: Maybe just first on your largest customer I was hoping you could speak to.
Speaker Change: Competitive dynamics, there in the sense and more specifically do you see this dual sourcing strategy potentially reverse.
Speaker Change: In future.
Speaker Change: <unk> phones.
Speaker Change: So at the large customer you win because you have the best performance parts, that's due to and so if there is only one supplier obviously that supply will win the business. If there are two automotive suppliers, but one supply it has a substantially.
Speaker Change: Better part than anybody else that supplier can get all the business. If there are two or three suppliers and they are high in terms of performance the customer.
Speaker Change: This site to dual source that especially on the larger more expensive pumps and I think thats, a reality and we have to acknowledge that and face that and so it's up to us and the team to again continue to strengthen our technology roadmaps to develop high performance.
Speaker Change: Parts and sockets.
Speaker Change: That are better than our competitors.
Speaker Change: We.
Speaker Change: We have the teams in place we have the.
Speaker Change: The R&D resources into strength and the capabilities in place.
Speaker Change: But we need to focus on execution and get those best performance parts in front of our customer.
Speaker Change: Again in the one particular sockets that.
Speaker Change: That is causing.
Speaker Change: Some pain here, we developed a really high performance part that is as good as our competitors part.
Speaker Change: But it wasn't necessarily much better as a result of that the customer decided to dual source it.
Speaker Change: Got it very helpful. And then maybe just a housekeeping item. If you can just tell us what the percentage of your largest customer was this quarter.
Yes in the December quarter, the largest customer was 72% of total revenue, which was up 9% sequentially as we support that customer.
With the ramp of their current phone.
Speaker Change: Also.
Speaker Change: Again, I want to reiterate that right that revenue with the large customer there is not just on the phone roughly 85% it fluctuates a little bit from quarter to quarter, but roughly 85% of that revenue is related to reform. The other 15% is related to all other.
Speaker Change: That customer has out in the market.
Speaker Change: Thank you.
Speaker Change: Our next question coming from the line of.
Speaker Change: Vivek Arya with Bank of America. Your line is now open.
Speaker Change: Hi, This is liam for on behalf of the back Mario. Thank you for taking my question I wanted to focus on China with a competitor sort of exiting that market. What is your longer term strategy for China, and if you could at least like tariffs come into play to the inventory of the overall market. Thank you.
Speaker Change: Yeah.
Speaker Change: Right, so with China, and Samsung we are remaining selective we have a long standing relationship with those customers, but many years ago, we have decided not to compete for them mid or low end.
Speaker Change: All of their products.
Speaker Change: But we but we compete for.
Speaker Change: For sockets with them and the high end of the markets, that's where they need us or our competitors right. That's what they need high performance RF and and we see opportunities to add as I said before we are getting some design win momentum that is starting to ramp up in revenue.
Speaker Change: And we will continue to do that on a selective basis.
Speaker Change: Thank you and just as a follow up looking forward to June.
Speaker Change: How are you looking at seasonality and how you're seeing that kind of shape out there.
Speaker Change: Yes, so we only guide one quarter at a time, but I don't see anything different right now than normal seasonality in our business.
Speaker Change: Thank you.
Speaker Change: And our next question.
Speaker Change: Coming from the line of Chris Dankert with TD Cowen. Your line is now open.
Speaker Change: Hey, guys. This is Eddie for Krish. Thanks for taking my question.
Speaker Change: It sounds like your competitor has improved the performance of their product meaningfully this year, which pushed your.
Speaker Change: Main customer to dual source.
Speaker Change: But I wonder if you can quantify where where the performance gap stands today between your product and that competitors product and how that compares to last year and I Wonder if you can share any more.
Speaker Change: Metrics or.
Speaker Change: Technical specifications that we can follow that would give us an idea how that gap is developing going forward between you guys and your remains here.
Speaker Change: Right.
Speaker Change: Right. So again, we can't really go into the specifics at that detailed level.
Speaker Change: As it relates to our large customer.
Speaker Change: And performance is being measured on five or 10 different.
Speaker Change: Parameters and so this would become a very technical discussion, but I want to go back to the beginning of your question, it's not that our competitor improved their performance of their part.
Speaker Change: <unk>.
Speaker Change: That competitor in the past has not competed for that product and it was the first year that that competitor competed for that product.
Speaker Change: And so that's the dynamic there.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
McDonald: And our next question coming from the line of Mcdonald with Needham. Your line is now open.
Speaker Change: Hi, Thanks for taking my questions.
Speaker Change: Rod market should see improving growth next quarter and it sounds like that's driven by the large customer and Wi Fi where inventories more in line do you have any indication of how long inventory headwinds will slow the industrial and infrastructure piece when can it reach that.
Speaker Change: Double digit growth year over year that you discussed.
Speaker Change: Yeah.
Speaker Change: That's a very good question.
Speaker Change: But unfortunately visibility is not that great.
Speaker Change: I'm listening to all my peers and competitors that have huge exposure to industrial and infrastructure markets that as well.
Speaker Change: And it seems that we all struggle a little bit with lack of visibility.
Speaker Change: And part of that is because.
There is a persistent excess inventory at the customer level, where we don't really have good visibility.
Speaker Change: The inventory in the distribution channel is clean and it has been cleared out but there is still inventory at the customer level.
Speaker Change: Again for Sky works that is not the biggest part of our broad markets right. We had a much bigger player in our connected Iot devices, which is roughly 40 40, 40% to 45% of the business our automotive.
Speaker Change: <unk> business, which is roughly 20 or so percent of our broad markets business and so we have less exposure on some of those markets, where there is still unfortunately.
Speaker Change: Persistent.
Speaker Change: Inventory correction.
Speaker Change: Thank you and can you expand on the socket or anything around the type of <unk> premium Android content that you won.
Speaker Change: Maybe how big is the combined opportunity any timing. Thank you.
Speaker Change: Sorry, the <unk>.
Speaker Change: <unk> can you repeat that.
Yes, the kind of the first point in your press release talked about a <unk> premium Android content win.
Speaker Change: Yes, I mean again.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: Android we continue to be selective we we have design wins, including with Samsung in the Galaxy and.
Speaker Change: Sure.
Speaker Change: As well as many of their other products.
Speaker Change: And that will continue going forward.
Speaker Change: Okay.
Speaker Change: Thank you.
And ladies and gentlemen that concludes today's question and answer session. I will now turn the call back over to Mr. Fusco for any closing comments.
Speaker Change: Yeah, So I would like to thank everybody for your participation in today's call and Im looking forward to talk to you.
Speaker Change: Together with for RG and Phil.
Speaker Change: At upcoming Investor meetings. Thank you.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. We thank you for your participation you may now disconnect.