Qorvo(QRVO)2024-07-31 00:10Financial Data and Key Metrics - Revenue for the quarter was 0.87, above the high end of the guidance range due to higher revenue and gross margin, offset by slightly higher operating expenses [13] - Cash and equivalents stood at 1.5 billion as of quarter-end [13] - Operating cash flow was 38 million, resulting in free cash flow of 16 million sequentially to 727 million, primarily due to WIP and raw materials supporting the seasonal ramp at the largest customer [28] Business Line Data and Key Metrics - The company launched three new highly integrated RF multichip modules for X-band, S-band, and L-band advanced radar applications, which integrate filters, switches, and amplifiers to simplify design and improve performance [8] - In the Android ecosystem, Qorvo remains the primary RF supplier, collaborating with OEMs on product roadmaps and positioning for growth as 4G devices transition to 5G [10] - The company expanded its Ultra-Wideband wins in the Android ecosystem, including a mid-tier smartphone, Motorola's Moto X50 Ultra, which features Qorvo's Ultra-Wideband SoC [11] - In the automotive market, Qorvo is expanding opportunities in EVs, including solid-state circuit breakers using silicon carbide solutions [6] - The company secured new engagements for force-sensing touch sensors, primarily for laptop trackpads and other consumer applications [7] Market Data and Key Metrics - In the defense and aerospace market, Qorvo secured design wins across segments, including AESA radars, large defense programs, and SATCOM deployments [90] - For infrastructure markets, the company launched a single-chip inverse cable equalizer for DOCSIS 4.0 field installations, simplifying operations for cable operators [91] - In the consumer market, Qorvo secured a new engagement to supply a switch-mode DC-to-DC charger for a wearable accessory for an Android OEM [89] - The company is seeing increasing demand for AC-to-DC high-density server power supplies in industrial and enterprise markets [23] Company Strategy and Industry Competition - Qorvo is investing in R&D for future programs, including products currently supplied to customers and new products not yet in the portfolio [10] - The company is leveraging its BAW and LRT SAW processes to ramp multiple new products, including a highly integrated mid-high band pad for an Android OEM [25] - Qorvo is transitioning from mechanical to semiconductor-based electrical systems, particularly in solid-state circuit breakers for residential, commercial, and industrial applications [9] - The company is focusing on expanding its Ultra-Wideband and Matter technologies for smart home and office applications, including door locks, smart lighting, and indoor navigation [21] Management Commentary on Operating Environment and Future Outlook - Management highlighted the trend of transitioning from mechanical to active electronic scanning systems in defense and aerospace markets, driven by increasing system-level functionality and size constraints [22] - The company is optimistic about the adoption of Ultra-Wideband in China for automotive applications, including presence detection and kick sensors [50] - Qorvo expects Android 5G unit volumes to grow by more than 10% in calendar 2024, with content drivers in 5G Advanced including additional transmit paths and non-terrestrial network connectivity [93] - The company is confident in its ability to grow with its largest customer, particularly as AI and 5G trends accelerate, driving higher RF content [68] Other Important Information - Qorvo completed the migration to 8-inch BAW wafers, with BAW lines now exclusively running on 8-inch wafers [95] - The company repurchased 125 million of stock at 1.025 billion for the current quarter, with non-GAAP gross margin between 46% and 47% and non-GAAP diluted EPS between 1.95 [102] Q&A Session Summary Question: Impact of AI smartphones on demand - Management is taking a conservative approach regarding AI smartphones, noting that while Samsung's S24 had a nice ramp, it was not significantly above expectations [37] - The company is not modeling an uplift from AI smartphones at this time but would welcome a reduction in replacement cycle time if AI proves useful [37] Question: Utilization rates and high-cost Android inventory - Qorvo expects a substantial sequential increase in gross margin in the September quarter, driven by product mix and higher utilization rates [39] - Underutilization headwinds are expected to decrease to around 100 basis points in the September quarter and become negligible in the back half of the year [39] Question: China mobile market trends - The company is seeing low single-digit year-over-year growth in China's mobile market, with the 6/18 holiday showing slight improvement [53] - Ultra-Wideband adoption in China is accelerating, particularly in automotive applications like presence detection and kick sensors [50] Question: Revenue decline in the September quarter - The slight year-over-year decline in revenue is primarily related to smartphone revenues, with assumptions in the guide contemplating total smartphone market dynamics [56] - The company is on the other side of strong ramps for key models like the S24 and Pixel, with new design wins expected to ramp later in the year [57] Question: New product developments - Qorvo is tiering its low, mid, high band pad for different product segments in the Android ecosystem, with ramps expected in the December and March quarters [58] - The company is also seeing strong performance from its mid-high band pad, which integrates diversity receive functions [58] Question: Internal production vs. external foundries - The company differentiates between internal production for technologies like BAW and external sourcing for silicon and SOI, leveraging partner scale and R&D investments [65] - In the defense market, internal assembly capability is a key differentiator [66] Question: Content growth in 5G Advanced - Qorvo sees significant opportunities in 5G Advanced, including additional transmit paths and non-terrestrial network connectivity, with AI trends potentially accelerating adoption [68] Question: Mobile content growth at the largest customer - The company is confident in its ability to grow content and gain share at its largest customer, with new products like the low, mid, high band pad expected to ramp in the coming quarters [76]