Qorvo(US:QRVO)2022-11-02 23:24Financial Data and Key Metrics Changes - Revenue for Q2 2023 was $1.158 billion, exceeding guidance by $8 million [21] - Non-GAAP gross margin was 49.2%, impacted by product mix and higher inventory-related charges [23] - Non-GAAP operating income was $338 million, representing 29.2% of sales [24] - Non-GAAP net income was $276 million, with diluted earnings per share of $2.66, $0.11 above guidance [24] - Free cash flow was $220 million, with capital expenditures of $47 million [25] Business Line Data and Key Metrics Changes - High-Performance Analog (HPA) revenue was $228 million, up 8% sequentially and 47% year-over-year, driven by defense and power products [21] - Connectivity and Sensors revenue was $143 million, down 6% sequentially and 19% year-over-year due to weaker consumer electronics spending [21] - Advanced Cellular revenue was $787 million, up 17% sequentially but down 15% year-over-year due to lower smartphone unit volumes [22] Market Data and Key Metrics Changes - China-based revenue was down approximately 20% quarter-on-quarter and about 45% year-on-year [37] - Android-based revenue is expected to represent approximately 10% of total revenue in the December quarter, marking a significant decline [37] - The global handset unit number for 5G is now projected at approximately 600 million for calendar 2022, down from previous estimates [91] Company Strategy and Development Direction - Qorvo is focusing on leveraging core strengths in system solution design, semiconductor manufacturing, and advanced packaging technologies to support growth [9] - The company aims to capitalize on multiyear secular trends like electrification, sustainability, and connectivity [16] - Qorvo is committed to driving process and product development while reducing factory loadings and inventories [17][19] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing weakness in end markets, particularly in consumer-related areas, and a more acute inventory correction than previously predicted [28] - The company expects to see a recovery in Android-based revenue in the March quarter [61] - Management remains optimistic about long-term growth drivers across all business segments despite current challenges [95] Other Important Information - Qorvo signed a long-term supply agreement with SK Siltron for silicon carbide wafers, contributing to growth in the power device business [10] - The company announced a $2 billion share repurchase authorization, replacing a previous authorization [25] - Non-GAAP operating expenses were $233 million, lower than guidance due to cost discipline [23] Q&A Session Summary Question: What was the revenue in China for the quarter? - China-based revenue was down approximately 20% quarter-on-quarter and about 45% year-on-year, expected to represent about 10% of total revenue in the December quarter [37] Question: What is the path to improving gross margins? - The primary headwind for gross margins is underutilization, which is generating over 700 basis points of headwind, with a clear path back to 50% gross margins as volumes return [39][41] Question: How is the Android business trending? - The Android business is experiencing significant weakness, with expectations for a recovery in the March quarter [46][61] Question: What is the outlook for inventory digestion? - Management expects to see some increase in Android-based revenue in the March quarter, indicating a potential recovery [61] Question: What is the expected performance of the connectivity segment? - The connectivity segment is currently underperforming but is expected to become profitable as scale increases and utilization improves [79]