Q1 2020 Earnings Call

Good day and welcome to the core vote incorporated first quarter.

<unk> 20 conference call today's conference is being recorded at this time I would like to turn the conference over to Douglas Delieto, Vice President of Investor Relations. Please go ahead Sir.

Okay. Thanks, very much Todd Hello, everybody and welcome to Corvels fiscal 2021st quarter earnings Conference call.

This call will include forward looking statements and involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the safe Harbor statement contained in the earnings release published today as well as the risk factors associated with our business and our annual report on Form 10-K filed with the SEC because these risk factors may affect our operations and financial results.

In today's release and on today's call, we provide both GAAP and non-GAAP financial results. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain non cash expenses or other items that may obscure trends in our underlying performance.

During our call.

Our comments and comparisons to income statement items, we based primarily on non-GAAP results.

For a complete reconciliation of GAAP to non-GAAP financial measures. Please refer to our earnings release issued earlier today available on our web site at corporate outcome under investors and sitting with me today are Bob Rucker worth President and CEO , Mark Murphy, Chief Financial Officer, James Klein, President of Carbos infrastructure and defense products Group aircraft Huston President of Cargos mobile products group as well as other members of corporate management team and with that I will turn the call over to Bob.

Thanks, Doug.

And thank you everyone for joining us today Goro delivered a strong June quarter with double digit growth, both sequentially and year over year and revenue EPS and free cash flow. Our strong performance was driven by several factors first the corbo team is operating extremely well, which allows us to respond quickly to changing market conditions second corbo supplies industry leaders with a broad portfolio of premium products, featuring our award winning quality and third our long term growth drivers are very much intact, including the ramp of Fiveg and the proliferation of Aiotv.

Fiveg has become a reality for our business over 50 operators have deployed fiveg in the last 12 months.

We're seeing new frequencies, and new placements, requiring premium technologies, including high band Ultra high band and millimeter wave applications.

This not only favors our BAW Gan and other premium technologies, it rewards kormos, perficient proficiency and compound semiconductors and high performance front ends quite simply we are in the right place with the right technologies at the right time.

Turning now to IDV Corbo continue to drive the leading edge across targeted growth markets in defense, we want expanded orders on Bob based solutions for us DMD programs, including the F 35.

We released our newest gain amplifiers for K band Satcom, and expand phased array radars, and we expanded gan shipments into SPM and C band radar programs for multiple defense customers.

For space based applications, our wideband gain amplifiers selected to enable low earth orbit satellites, delivering internet connectivity anywhere in the world.

In infrastructure Fiveg deployments continue with auctions for spectrum licenses.

Proceeding on or ahead of schedule in China license as originally expected to be granted this fall were issued in June .

In the US multiple auctions were completed for millimeter wave frequencies.

Also recently in Japan, there were auctions for additional sub six gigahertz frequency.

We are extremely well positioned to serve fiveg with a broad portfolio of products between the transceiver and the antenna.

And massive mimo demand for our transmit and receive components is growing in step with the content increases associated with mimo architectures and larger arrays with up to 64 by 64 channels.

And these applications.

Again continues to take share from Ldmos.

And I would see we extended the frequency range of our bought technology up to 5.9 gigahertz and commenced sampling of our newly released five gigahertz BAW filters.

We also secured key design win for our ball based ifeng, enabling industry, leading range throughput and signal integrity.

Finally, we secured multiple automotive design wins for Ellen Aries and BAW coexistence filters.

We're also excited about our new programmable power management business and the integration of active semi is progressing very well.

We are leveraging our sales channels for these products and we continue to win with our customized IP blocks and program mobility, which enable our customers to achieve shorter time to market.

We expect new trends like the adoption of brushless DC motors to support a broad range of opportunities for controlling and powering next generation devices smart appliances power tools and industrial equipment.

Now turning to mobile products core will continue to leverage our leadership across product categories, including Bob based solutions envelope trackers and tuners similar style LP, we are focusing our portfolio on the highest probability opportunities for growth and profitability.

As fiveg ramps.

We are enjoying increased customer interest and Bob based solutions, including high band pads Hexaplexers co existence filters, and then 10 applicators fiveg devices bring additional frequency band challenges and require enhanced fourg performance, including multiplexing and intent of flexing.

Fiveg devices also place a greater emphasis on 100 megahertz envelope tracking and they require more complex antenna tuning.

All of these requirements favour kormos unique technologies, expanding product portfolio and years of experience in higher frequency applications.

During the quarter, we received orders for newly released fall based antenna applicators.

We also commenced shipments of our BAW based band 137, Hexaplexers to multiple Chinese based smartphone Oems, enabling higher orders of carrier aggregation for their export market.

In addition, we also secured the entire main path, combining our low high and ultra high band solutions at leading China based smartphone OEM for an upcoming Fiveg smartphone.

Finally, we are awarded our first design win for programmable programmable Fiveg antenna tuners capable of performing aperture and improves impedance tuning.

Before I finish I would like to make a few comments about Wally.

After was placed on the VI as entity list.

Hi, along with other members of our senior management team met multiple times with government officials and we work closely with industry leaders and counsel to understand and address the impact on our business.

Ultimately, we were able to begin shipments of certain products late in the quarter.

And we have applied for a license to expand the products we can sell.

Wally as one of the world's largest telecommunications companies and an important participant in our industry.

We will continue to support them consistent with all of clickable legal requirements.

Finally, as our June quarter in September guidance demonstrates where effectively navigating a challenging environment and our products and technologies continue to support solid sustainable results. We're confident our opportunities will continue to expand as fiveg ramps and Aiotv proliferates with that I will turn the call over to Mark for us to provide additional color on our June quarter, and our outlook for September Mark.

Thanks, Bob and good afternoon, everyone.

Carbos revenue for the first quarter was $776 million $36 million above the midpoint of our May 20, onest guidance driven by stronger than expected mobile demand.

Roughly half of the favorable revenue variance in the quarter was from the shipment of select products to Wawa in June .

Which commenced following an extensive legal review.

Sales to la or 22% of total revenue in the June quarter compared to approximately 14% during the same period last year and 15%.

For our full year fiscal 2019.

For the June quarter mobile revenue of $556 million was driven by.

Double digit year over year growth at several of our top customers.

I'd P. grew year over year to over $219 million due primarily to higher demand for infrastructure products.

non-GAAP gross margin in the June quarter was 46.2%.

70 basis points above our guidance due to favorable mix and manufacturing productivity gains.

non-GAAP operating expenses were $168 million below our guidance on lower personnel costs and effective cost control measures.

non-GAAP net income in the June quarter was $165 million and diluted earnings per share was $1.36 21 cents over the midpoint of our guidance and up 42% year over year.

June quarter of cash flow from operations was $257 million on hiring income and favorable working capital effects.

Capex was $50 million, resulting in free cash flow of $207 million.

A record level for the company in the first quarter.

This free cash flow performance reflects our improved operating capabilities and ongoing capital discipline.

During the quarter, we completed the purchase of active semi international.

Adding rapidly growing power management opportunities to our diversified IP portfolio.

Both the integration and business plans are on track.

We repurchased $100 million of stock in the quarter, and we modest modestly increase net debt.

Turning to our outlook in the second quarter of fiscal 2020.

We expect revenue between $745 million, and 600 $765 million or $755 million at the midpoint.

non-GAAP gross margin in a range of 46% to 46.5%.

And non-GAAP diluted earnings per share of $1.30 at the midpoint of our guidance.

Our revenue outlook for the September quarter reflects typical seasonal ramps at our largest customer offset by a significantly lower sales to wawa compared to the June quarter.

For the full fiscal year, we currently project our sales to walk away. It will fall below 10% of Corvels total sales.

Although we have filed for a license and are taking other proactive steps to address our ability to sell products to walk away.

The scope duration and long term financial impact of the restrictions remain unclear and difficult to predict.

Friday pay we project September quarter sales to decline due to these restrictions.

Not recover through the year as the infrastructure market picks up with other customers and Wi Fi and other markets strengthen.

For mobile we expect September quarter sales to increase sequentially.

With higher revenues from seasonal ramps offset in part by significantly lower sales to bawi.

For the fiscal year, we project mobile to be down approximately 10% second half compared to first half.

Due to trade a facts and seasonality.

On gross margin our September quarter guide of 46% to 46.5%.

As roughly flat compared to the June quarter.

Lower volumes enhance weaker than previously forecasted utilization are weighing on gross margins.

non-GAAP operating expenses are projected to decrease slightly in the September quarter to around $166 million as cost control benefits are offset by investments in growth programs and a full quarter addition of programmable power management business.

We expect opex to remain below a $170 million per quarter for the rest of the fiscal year.

We expect a September quarter end fiscal 20, non-GAAP tax rate to be approximately 8.5%.

On capital expenditures, we are projecting spend of less than $200 million. This fiscal year as we continue to be highly disciplined on adding capacity.

Spend remains weighted towards improving our BAW and Gan capabilities.

The June quarter was a chat was challenging with the abrupt disruption of sales to an important customer and other evolving market conditions.

But corvo responded well and delivered a strong quarter of double digit year over year sales growth and record first quarter earnings and free cash flow.

Certain aspects of our markets remain unclear. So we're taking a measured view.

Specifically as it relates to walk away.

We have reduced our outlook to include only modest sales of mobile products.

On the infrastructure side of the business, we expect a pickup in business from other customers.

But this will take time.

And we have a recovery and I'd be modeled in the second half of our fiscal year.

As we demonstrated this quarter, we have the products technologies and operating capabilities to help navigate these evolving market conditions.

With that I will turn the call back over to the operator for questions.

Thank you. Thank you would like.

Question. Please.

Star one on your telephone keypad.

In the speaker phone. Please make sure your mute function is turned off to allow your signal.

Again press Star one to ask a question.

We ask that you limit yourself to one initial question and one follow up.

We'll take our first question from Chris Caso of Raymond James.

Yes. Thank you good evening I guess, the first question on on while way, perhaps you could.

Clarify the types of components that are permitted to ship, which components, you're not where you are.

Trying to get the licenses.

And then with respect to what you're shipping now, perhaps you could talk about.

With what you're shipping in the September quarter, how that compares to what you have to have been shipping on on a on a dollar basis to walk away in the beginning of the year. So we can sort of calibrate.

You how that's changed.

Alright, and take the first part Mark if you want to take the second Florida think in your opening comments, you gave them a little bit about that.

Chris Thanks for your question, let me start with see export regulations are extremely complex.

For companies like ours with global supply chains.

Where those shipments with particular products or restricted depends on a variety of factors.

Including building materials manufacturing flows for each compartment components things like that.

It really requires a detailed part by part analysis.

And Unfortunately, I think it goes beyond the scope of this call to go into a lot more details.

I will tell you before clearing any of the parts that were now able to ship, we do a very detailed analysis as appropriate consult with outside counsel get legal advice given work with government officials for guidance on the export rules and as Mark has said in his opening comments. This is an ongoing process.

So those parts that we don't feel comply as we commented both mark and I, we have applied with encouragement of the US government officials applied for a license.

Well from the Bureau of export enforcement to expand the number of parts, we can ship for both mobile and RTP.

As of now I don't believe the U.S. government has issued any licenses so far so for us to predict or even you estimate one license will be granted will be extremely difficult.

In the case of the mobile products.

It's been clear that some of those products, we can actually ship in volume as it goes for I'd be we've cleared some products, but the shipments.

Have been extremely limited in volume and in dollars.

So I hope that gives you an idea of what were able to ship.

So Chris just just to I think I've provided enough detail my opening comments, but just to maybe add.

Provided mara more directly here, we sold $172 million of.

Of product to Wawa in the first quarter. The vast majority of that was and wasn't pre band.

As I said in my opening comments.

Roughly half for about $18 million of our variance to our our guide was.

While way post span.

We would see levels about about that level. So.

Yes, certainly less than 5% of our sales is what we have models going forward.

And that would be principally mobile.

Okay that that that's that's helpful and I guess with the uncertainty going forward.

On whether or not you would be able to get licenses.

Perhaps you could address.

What what you're.

The what the risk would be.

Of.

Ultimately being designed out.

Permanently.

If not just for perhaps walk away trying to.

Reduce exposure to us vendors or perhaps they would have to and I guess in other words, what what are the substitutes or what you provide to walk away.

While there are substitutes available how difficult that is this and therefore kind of how sticky is are your design wins despite.

All of the restrictions that are in place.

Let me take a shot at that crew centric pretty complicated.

Story to answer number one as you all know, they're having trouble competing outside of China. So those designs actually we're picking up another customer so I'll make my comments somewhat to the China market.

In those design wins that we already had we're keeping those were also picking up design wins on those parts that we can continue to ship for them I think the thing I would like to point out as we supply premium technologies.

And customers like walk away and other customers from around the world like our technology. So I'm not sure I'm in a position to comment I'll always product strategy or their supply chain.

Thats a great question for them to be quite candid.

As Mark said Weve modeled out for you what we think we can gain and what what's in for the fiscal year. So I don't know how much more I can add what I do believe is if we do our granted a license.

We will be able to continue to expand our design wins and grow our business.

Thank you we'll take our next question from Bill Peterson of JP Morgan.

Yes, hi, thanks for taking the question.

My first question is in mobile.

Certainly I hate to bring up the Qualcomm and again, they've talked about a lot more design wins and with the vast majority using our.

On the other home you also have a discussion with our estimate Chinese customer, which I assume would be with de waal intact, but I guess can you give us an update on your fiveg engagements.

Design win pipeline for phones.

And especially the ones that use Qualcomm modems that are going to be launched later this year and into 2040, I guess, where are you seeing most traction in the south and the new sub sub six gigahertz.

And I guess, they talked about purporting advantages of designing around with kind of how should we think about them as a competitor as we look out over the next say 12 to 18 months. Thank you.

Sure Bill this is Eric so.

We are seeing an acceleration really in fiveg activity throughout China, certainly not just walk away, but all of our leading handset customers in China lot of excitement about the rollout and is definitely accelerating as Bob mentioned in his opening comments both in terms of licenses and infrastructure will output in terms of all the exciting new devices that are coming out. So we are seeing.

Broad based activity across all customers and across our entire product families certainly antenna management advanced power management and highly integrated modules covering.

Low mid high and ultra high band frequencies. So it's a very active design cycle now we do see multiple.

Fiveg base spans ramping.

And of course, Qualcomm is doing doing well there we do see.

Large opportunities for content shipping on all all the basebands, including Qualcomm.

Okay. Thanks for that and then I guess base. This is question RTP.

We saw sequential.

The decline here in the in the June quarter, and you're calling for that again in September followed by improving in the back half I guess, all that and how should we think about growth for IBP.

This year and I guess specifically.

Amongst the infrastructure versus Wi Fi and defense and so forth. Thank you.

So let me talk a little bit about current quarter.

We did have a strong base station quarter in the in the current quarter and we are well positioned with most of the major Oems.

That strength has come because of fiveg deployments and with a follow up on Eric.

Because we are seeing strong demand for massive mimo of products and we do CGM continuing to take slots.

Particularly in those massive mimo slots. So base station did have a strong quarter.

As far as projecting out further we.

Have experienced several week quarters of our Aiotv particular, our Wi Fi part of that business.

We believe that still delays associated with the rollout of a index and a little bit to do with trade.

Activities and repositioning of supply chains.

We had a very strong design win quarter in that part of the business. So we're starting to see indications that were.

Coming out of that and that we should have a strong back half. So we are expecting that backup.

We also have talked in the past about our defense business being a bit lumpy.

But it does look like we are positioned to have a very strong back half in the defense business.

On top of that Bill I think we are starting to see some early indications of the infrastructure business.

The supply chain starting to adjust so we are we do have some of our other customers that will begin ramps soon with massive mimo products and that'll start to fill in a bit.

Predominantly though the decline that we've experienced this quarter and next quarter or are associated with our lack of ability to ship to Wally.

Yes, Bill maybe just to help a bit with the with the profile of IP.

Now clearly had had.

Sequential decline in the June quarter, we expect another sequential decline.

In the September quarter.

We expect the business to return to sequential growth in the end they add in the December quarter.

As it relates to year over year.

The business still grew in June despite the the issues with with La.

However in the September quarter, we do expect.

The decline year over year Friday pay and then I'd be returning to growth in that in the back half.

Year over year.

Thank you we'll take our next question from Rajiv Gill of Needham and company.

Yes, thanks for taking my questions I appreciate it I just wanted to get a sense from you in terms of.

Are you seeing any competitive solutions for your HBT solutions in your FEMSA that.

From any Asian customers.

We've seen some.

Commentary Adam.

EFI houses.

That are qualifying and ramping with new Asian customers Im just wondering if that if you see any competition for your main products.

As it relates to the China Trade War.

Any risk in China, China trying to in source where possible.

This is Eric at least I can speak for the mobile business, we saw very few.

Discrete power amplifiers or HBT solutions. The vast majority of what we're selling is combined modules that include filter and advanced switching capabilities. So.

So at least I haven't seen a competitive element there with the with the gas HPG supply.

Okay and on the on the Fiveg side, there has been a one competitor basically indicated that.

There would be a little bit of a pause.

With regard to China, the Buildout in Fiveg after a lot of deployment for a lot of orders of massive mimo deployment.

But that seeks to different from what you're saying in terms of China's ramp.

Just wanted to get to get a sense has there been an overbuild perhaps.

Or.

There are other factors.

This is Bob I'm going to take that.

You know from our conversations with carriers there what all we can see I don't think there has been a slowdown in base stations. In fact, there is another round coming out for an even larger.

RF Q4.

Additional base stations late this year I think it's November so we're not seeing any slowdown in the rollout on the infrastructure side.

Thank you we'll take our next question from Carl Curtis of Barclays.

Hey, guys.

Maybe just on the why we impact of the $172 million there any way to kind of gauge how much of that impacted im just trying to understand is moving pieces than when you said that base stations and a good quarter.

So I assume that in June even though you stop shipping away partial quarter that business is still up and just understand thanks.

Go ahead immediately in the.

June quarter base stations still had nice growth year over year of well well into the double digit range.

And and so the other end of the question as far as.

Amount of revenue by business unit split out.

And we don't we don't split out to provide that.

Hills down at that level by business units.

Got you and then maybe I could ask it the other way if you're looking for some slight growth in mobile into September I talked about seasonal ramps can maybe give us a little color as to where you're getting that growth and obviously as a part of wawa year offsetting there. So I'm just kind of curious if you could talk geography by geography or whatever color you could write would be helpful. Thanks sure sure. This is Eric the.

The growth in mobile in September quarter is driven by normal seasonality of flagship ramps going into into the second half across multiple top tier customers.

And again its muted significantly then by the walkway sequential effect.

Thanks.

Thank you we'll take the next question from Toshiya Hari of Goldman Sachs.

Hi, guys. Thanks for taking the question I was hoping to better understand your September quarter revenue guide on a year over year basis, a little bit better.

I think if we take the midpoint of your guide your revenue is expected to be down about $130 million.

How much of that is while away how much of that is your biggest customer in the us.

Active semi obviously is up.

I am assuming nonqualified RVP is up if you can kind of walk through some of the pluses and minuses on it on a year over year basis. There would be helpful. And then I have a follow up.

This is Bob again at a high level I mean, primarily in our largest customer were roughly flat year over year, while way is the largest part and were down a little bit in China. If you remember last year at this time, we talked about the China market was doing extremely well we were taking a conservative view on it which was accurate so.

In essence, it's while way in China.

No over two thirds of its long way.

This year.

Got it. Thank you and then as a follow up.

Mark in terms of gross margins you guys are guiding September essentially flat sequentially.

Despite being down sequentially and the seasonal ramp in mobile is typically dilutive to gross margin. So I guess, there must be some operational improvements going on.

If the surface. So if you can kind of.

Speak to some of those points and more importantly, I guess going forward into the back half of the fiscal year before the fall way back when you guys had talked about sequential improvements and hitting 48% for the full year I'm, assuming that's no longer the case, but if you can talk about your expectations going into the second half that would be helpful. Thank you.

That's good question to share so we are absolutely.

Undertaking.

Obviously, all the productivity efforts, we can and we're making great progress I mean, the disappointment here is that we were set up for a for a very good year on gross margin.

And.

Yes, Thats couple of hundred million dollars of revenue hit that we we've taken versus.

Versus our may 7th guidance.

Has really reduce the utilization and the factory network.

Yes, Hi, I address gross margin on the May 7th call and as you said and I said, we expected the gross margin to be about 48% for the full year.

Yes, right now.

Yeah, we did beat and the in the June quarter by 70 basis points as you mentioned and I guided to September to be largely flat, that's the negative utilization of facts offset by.

Productivity gains and then some positive mix effects now for the full year, our view at the moment as.

Between 46, and 47% gross margin.

Thank you.

Thank you we'll take our next question from Edward Snyder of charter equity research.

Thanks, a lot Eric there's a lot of talk about substitutes for your of components in China I'm sure you've gotten tired of the question, but our own chip level tear down of always latest phones. It looks like its full filter amps switch modules in envelope trackers for you and modules and tuners for Skyworks.

First of all our any of the advance phones coming out of China, you were from any of the Oems.

Moving back to the screen architecture or are they all kind of moving through this same kind of basic hi.

Hi, integrated modules that Apple's been using for years and secondly.

When you're moving to Fiveg, especially with regard to the antenna and some of the interface between these two does this become more acute or less acute.

As you're trying to handle the new bands and then James if I could real quick it sounds like your defense is on a tear in the second half the year is that primarily gains due to Gan.

On new slots and his defense now back to being the largest.

The largest group.

Eric I'll take first part sure.

So ed regarding the architectures that at our leading customers in China.

Certainly outside of Wal way.

The trend is clear and the acceleration of Fiveg is driving even more demand for higher levels of integration trying to get to LTE advanced pro packed in as small as possible.

We've had several customers that have actually added bands to their fiveg platforms. As we were late and development cycle, they're adding even more of the ultra high band bands in there.

To address more carry requirements and so forth so not only drives towards to the first part of your question or integration.

And into the second part of your question, Yes, it's definitely becoming more acute more difficult to manage the antenna interface with all the new vans being added on top of everything that was in there before so we don't see anything other than an acceleration of all the trends we've been talking about for a couple of years now and.

And if anything even more confidence in the Tam expansion next year.

So as far as defense you answer those businesses I think poised to have a really great back half.

It's pretty broad based growth, but growth, but I would say dans basically of playing a much larger role there and and so most of the growth I think will come from our Gan based products.

Really broad based both domestic international platforms.

And across a broad range of frequencies. You also you saw that we have product wins.

Down in the SNC band, but also up in eggs and all the way up into millimeter wave frequencies.

As far as it being the largest product line I'm really guided all that level, but yes, probably towards the end of the year it'll be.

Close if not the largest.

Business segments that we've got inside I'd Pete.

Right and the marketplace could.

Real quick.

I know.

Utilizations down obviously, because your revenues down here, we used to talk a year or so ago, Bob Bob Theres, a lot of competitors talking about Bosco, which has mentioned several times qualcomm's bundle investors through last quarter. Stan you were talking a bottom on the all that so maybe you can give us an update if you could on just your position in that in that area in this regard to Richardson.

I know utilization is going to be done here, but are we talking higher than it was earlier this year at what can any kind of profile at all on how much either utilizations come Edwards and then ball what percentage of revenue you expect.

To be.

Seeing from BAW filters. Thanks.

Yes, I think and what I would say is that.

We're we're we're confident that our operations plan in Texas, we've done a lot of things there to to position that that plant retrocession, along with farmers branch that be.

Yes, a tremendous asset for us going forward and we believe it will be.

Yes, yes. This revenue hit we've had was was particularly hard because we were seeing a lot of buying activity around phase six and there were some other product movement that.

It's going to lower utilization rates and taxes for the next year or so.

But we see the same trends continuing that Eric talked about.

Increased complexity.

Yes, the density of the RF modules and more stringent requirements on bands and so far so we see.

And the product Roadmaps, we have.

Greater use of BAW add and we see utilization improving and levels, we'd like to see it.

Beyond this year.

Thank you we'll take our next question from Ambrish Srivastava of BMO capital markets.

Hi, Thank you I had a quick one for you Mark actually had two for you what the quick one is.

Was there any active semi in the reported quarter you said that it was that was higher on a year over year basis, but does that include any active semi and my follow up.

Is very strong free cash flow in the reported quarter.

It's I know, it's very uncertain and thanks for trying to give us as much clarity as you guys can certainly appreciate that but.

Would you be able to provide us with a guidance on free cash flow for the full year. Thank you.

Yes.

On free cash flow for the year.

Yes, we do believe we'll have free cash flow growth for the year, a combination of sustaining decent income despite.

Despite this this.

Sales drop relative to our previous view.

Were exhibiting good cost control good working capital management.

And.

Good capex discipline, and and expect to see free cash flow growth.

First question.

Accessing specifically revenue Sammy on active semi there was active sending the IP business embraced it was a small amount IP still grew year over year, if you exclude that.

Okay. Thank you very much.

Thank you we'll take our next question from Ruben Roy.

Good morning.

Hey, Thank you. Thanks, very much I had a quick follow up slots clarification for Eric.

Eric you mentioned, either working with are having design wins with the various spaceband manufacturers for Fiveg I'm wondering if you can clarify if you said you had design wins out there in actual handsets with with the with the group of folks that have fiveg.

Modem technology and then also wondering about the qualification process. How does that work is that qualification for your RF.

By base and manufacture or bye.

And handset OEM or a combination thank you.

Sure, Yes, just to reiterate we can confirm that we have design wins and in fact in production with fiveg content across multiple basebands in China.

Including Qualcomm and the process as it works today really were.

We're in the leadership position of defining a lot of the RF content in placements and interfaces and so forth. So the integration happens largely between our ops team and our customers directly.

Great. That's all I had thank you very much.

Thank you we'll take our next question from Vic ARIA of Bank of America Merrill Lynch.

Thanks for taking my question I had to actually for the first one.

I think Bob you mentioned, while we was about 22% of sales and that is including the disruption I'm curious how much would that have been without the disruption because it just seemed.

A very high number do you sense that there was perhaps some kind of pull forward of sales into June because I realize I think for September youre, saying its going to be.

Less than 5% I'm, just trying to understand how it was such a large number for your June quarter.

Yes, I think that if you remember last quarter, when I talked about wallet.

They grew their share in the first quarter, 50% and if you actually look at a lot of Thats been published this last quarter I think they drove their share even more in China from 31 to about 38%. So they were taking significant share also remind you last quarter, we talked about the our business was growing with wild way, we were gaining back share that as you recall, we didnt price our ATP mix low and we knew we were going to Miss a generation. We thought it was right. It was right. So they were gaining share we were gaining share remember last year, we were 15%. So 22, it doesn't seem like a big number to me an answer your question, yes. It would have been more but they're taking share we were taking share there was a great story.

Got it thanks guys.

And then Bob for my follow up.

How much RF content are you seeing in the Fiveg phones in.

China.

And when you look at the design is it a winner take all kind of approach or is it that youre share endless fiveg falling to similar to the share you had in the broad fourg market, which was in that 20% to 25%.

Range or so just how much is the RF content and the lift you're seeing and how is the share your share doing in those design. Thank you.

Hey, Rick this is Eric I'll take that.

It is.

At this point in time exceeding our expectations as I said, even more bands are being added sooner than we expected and so we're confident in what we've been saying of at least $1 billion and Tam expansion expansion next year, driven by Fiveg, which includes not only the new fiveg bands, but also upgrades to the fourg part of the phone to be compatible with that so all told though we're expecting at least to a $1 billion Tam expansion. When you look at it as the handset level some of the.

You know sort of higher tier within within that tier fiveg handsets that are coming out of China can routinely now 10 to $15 worth a bar of RF content, and we're definitely getting our fair share I think.

There are various models, but it does.

It does seem that our share of the total RF will we'll be expanding as we had fiveg.

Thank you we'll take our next question from Christopher Roland.

Hey, guys. Thanks for the question.

Back to the walk away at 22% that was some great color on gaining share there.

I guess that means that most of that revenue contribution was from handsets and not sort of a large spike in infrastructure there.

Is it kind of your opinion that that was actually natural demand.

Not any inventory building on their part.

Yes, Chris that's a good point the growth that we saw quarter over quarter. As always also was for a lot of the massive mimo, which is our Gan plus our high performance our gas process.

So that was a portion of it I took David's question more on the handset side. So I apologize for that but no. We saw very nice growth in that side of the business where in my opening comments I talked about how Dan is taking share from Ldmos. So thats a very good example of one of the customers were doing that and as James alluded to and Mark in his comments.

We're taking some of that same technology now and we've been working with other customers and they are just ramping behind or walk away was it's not we've moved resources. While way was clearly leading we were the leader who is adopting the technology. So that did drive a large part of our growth and a larger percentage of walkaway being for the total company.

Got it and I guess playing into it to those infrastructure comments as well as we look at Aix Prf.

We move from Fourg to Fiveg, Theres definitely new new players here and new materials, as we kind of move away from LD Mos as well.

And any idea of who your biggest competitors are.

In Fiveg and any early indications on what you think your share of that market is.

Well I mean first of all we do definitely see.

Mimo architectures, starting to get more and more share away from macro so we've talked about that trend last quarter and I think thats trend still continues in fact.

Number of Mimo channels will probably eclipse macro channels this year.

And then you don't number percentage of base stations is certainly trending toward some numbers is probably 30% or so.

Being macro or being massive mimo base stations.

As far as competitors, we really compete at all of the major Oems.

For the entire RF chain.

Both receive side and all the way through transmit side.

And so each components a bit different depending on what.

Individual company's strengths are among the power amplifier side, it's predominantly been.

Competition between the LBC lost conventional players and and then the few of US that have gained capability and as Bob talked about that transition to Gan is going no.

Fairly rapidly.

Moving away from Ldmos in into game.

Thank you we'll take our next question from Craig Hettenbach of Morgan Stanley .

Yes. Thank you you mentioned the traction in the Samsung a series and just curious kind of as you think about kind of the mid tier portfolio. They are kind of where you are today and.

How that could progress as you go forward.

Sure. Thank you Thats.

It's a really exciting story for us and we're really excited with what the team has been able to do there to work closely with key customer we had.

Been out of that series really for several generations as we focus more on the flagship tier and and they were going with less integrated solutions for the most part in that mass tier in the series so.

Working with them on architectures and so forth over over a couple of years, you're seeing the culmination of that now where.

They are beginning to look at.

Just like all the rest of our customers looking at moving up the integration curve in adopting new technologies, and things, which align with our portfolio really well. So this is the first step into it. We've we've been present, there all along and antenna tuning of course, but it gets us into the main path and some of the meteor chunkier bits of revenue in that tier.

Got it thanks, and then just a follow up question from walk on the back of the strong free cash flow. How are you thinking about kind of buybacks versus potential tuck ins like active semi.

Yes, we continue to nothing's changed we've been generating strong free cash flow will continue to look for bolt ons for James's business and.

Technology buys for Rx business.

As we said.

Thrilled to have act the active semi team and corvo and immediately contributing this quarter and.

The integration is going well and plans are on track.

Yes, the extent, we don't have opportunities I've been clear about our leverage targets, we did tick up a bit.

And we continue to be buyers of the stock at these levels, but I'm not going to comment on on rate base.

Thank you we'll take our next question from Shawn Harrison of Longbow Research.

Hi afternoon.

With the farmers branch closure and the others are the farmers branch I guess coming back in line potentially next year versus.

The weaker mobile demand.

What does that cost will linger further into fiscal 21, and then also just so we can mobile demand affect kind of the savings coming back as you consolidate facilities.

The plans are right now still too.

Still to have the facility contributing operationally and fiscal 21.

That we know and this and that sort of slower volume we've taken the opportunity I think we've talked about it a couple of times So Florida.

To look at the plant configuration in different way so.

We are able to.

To do what we thought would be more capital before with a lot less.

To achieve higher levels of capacity in the future. So we feel great about that.

The facilities and capabilities, we have in Texas.

Great team and good leadership down there and.

Yes, we see that utilization improving over the next year and a half.

And then as a brief follow up considering all the Fiveg iPhone launches that could come out in calendar 20, how does that affect typical march quarter seasonality in mobile I know, it's been over the place the past few years, but do you see muted March quarter seasonality with new phone launches in fiveg coming in.

Yes.

We're not going to get again too much detail on the on the on the quarters right now that far out I mean, it's a it's a very difficult year to predict.

I will take the opportunity you mentioned that.

On May 7th call. We gave a view that we thought revenue would be up 4% year over year in fiscal 20.

A lot changed since then.

And.

Yes, theres the Wawa ban there's other items that have impacted our outlook.

So it's yes, we're a few hundred million off.

Where we were on that view now.

It's a tough year to predict and.

Yes, the trade situation improves and handset releases or maybe better than we thank F.

If fiveg spurned some demand.

Our smart some demand and Wi Fi six adoption accelerates, yes, we can be better than that but we're sizing for that more conservative outlook right now.

Thank you we'll take our next question from Jay Rakesh of Mizuho.

Hi, guys as Nazi if you've talked about.

In the second half if you're seeing any inventory issues in China on the handset side.

Our revenue profile in the December quarter looks.

Yes. This is Bob I'll go and take that out in the last two quarters, we've talked about our own channel on how components are at from a days of supply historically low and they remain that way. So we think the channels pretty healthy and.

Most most of the phones that are sold in China actually don't go through carrier sits in their own stores actually so from what we hear from them. It Doesnt appear anything's building up.

Got it.

And just when you look at the competitive landscape I know with all that played one stop.

Wally has probably been building a lot of.

On the auto set out of compliance I believe in house from the high Silicon side.

Do you think with the continued engines that.

The good news source and be good source more of that in house.

Looks like sound I mean, something sourcing is almost up to 30% on the auto side from the high silicon.

Supply based on just wondering what your thoughts so.

Jane do you want to address the progress for your infrastructure business and high Silicon I'm not aware of any but yes, I mean, we we don't see.

Inside high Silicon direct manufacturing everything still relying more on a very similar supply base to the rest of the Oems.

Of course, our ability to get us components is significantly different today, but for the most part there they're relying on a very similar supply chain on the RF side.

All right. Thanks.

Thank you we'll take our next question from Carl Adelman of Cowen.

Hi, good afternoon gentlemen.

If I could go back to Fiveg infrastructure for a moment.

You have a great portfolio, but can you discuss the order progression for your massive mimo.

Annual revenue opportunity that you see in fiscal 20 in fiscal 21 X. If we exclude China based network operators.

I guess is it less than half of your prior view of the six to 700 million for fiscal 2020.

And I have a follow up thank you.

So James Yes, I mean.

Well first I am not going to guide by individual companies I mean, we do see early rollout sort of going on in China, and as Bob talked about that earlier, we see that.

Being on pace, there are multiple suppliers in China.

That will be buying for that business competing for that business.

I think the U.S. will follow with the Rollouts and then likely to go into Europe and other places.

Most of those that commentary was below six gigahertz and we also see millimeter wave activity.

Continuing to ramp up in the United States.

With demos on most of the carrier is going on in multiple cities around the country.

I appreciate that.

For my follow up if I may.

There have been several M&A announcements, where companies have sought to acquire assets tangential to your own portfolio, such as Bluetooth and Wi Fi.

And when we think about your desire to diversify beyond mobile I'd love to hear your thoughts on capturing adjacent content areas within Wi Fi and Bluetooth applications. Thank you.

James you already competed well I mean, we do we did the acquisition a couple of years ago.

And Greenpeak and we've integrated that into our business and and we continue to see that business.

Doing well in.

I've talked about Aiotv in the past I think we see a significant amount of demand and we offer.

A chipset there that really offers our customers the ability to be somewhat agnostic as standards or to to to try to resolve down to probably a few standards that will compete in that place.

And Thats continues to be an area that I think we remain interested in adding capability of the company and we will continue to look.

For acquisitions in that space.

Thank you we have no further questions in queue I will turn it back to management for closing remarks.

We thank everyone for joining US Tonight, we hope to see many of you at upcoming Investor conferences, and we look forward to speaking with you on our second quarter call. Thanks, again and have a good night.

Thank you ladies and gentlemen. This concludes today's conference you may now disconnect.