Qorvo(QRVO) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Qorvo reported fiscal third quarter revenue of $993 million, with a non-GAAP gross margin of 49.1% and non-GAAP diluted earnings of $2.17 per share, all of which compared favorably to guidance [15] - The company ended the quarter with approximately $1.3 billion in cash and equivalents and $1.5 billion in long-term debt, with a net inventory balance of $530 million, reflecting a sequential reduction of $75 million [15][16] - Non-GAAP gross margin increased approximately 260 basis points year-over-year, with expectations for similar improvement in the next quarter [16] Business Line Data and Key Metrics Changes - In the ACG segment, December quarterly revenue declined sequentially, consistent with typical seasonality, but saw double-digit revenue growth compared to last December due to content gains from a major customer [6][8] - CSG is expanding its automotive ultra-wideband program, receiving first production orders during the December quarter, while also divesting its MEMS-based sensing solutions business [10][11] - HPA continues to see multiyear tailwinds in defense and aerospace markets, with expected sales of approximately $500 million in fiscal year 2027 [11] Market Data and Key Metrics Changes - Android revenue is expected to decline by approximately $300 million in fiscal 2027, primarily due to strategic actions to reduce exposure to lower-margin segments and the impact of memory pricing on mass-tier Android build plans [8][14] - The company anticipates a mid-single-digit decline in full-year revenue for fiscal 2027, with ACG declining but becoming more profitable, CSG remaining flat, and HPA continuing double-digit growth [14] Company Strategy and Development Direction - Qorvo is pursuing a long-term growth strategy while optimizing profitability and reducing capital intensity through restructuring actions [5] - The company is intentionally resizing its Android business to focus on high-margin premium and flagship tiers, expecting improved product mix to support higher gross margins [9][14] - Qorvo is divesting or exiting underperforming businesses while focusing on high-performing segments, particularly in defense and aerospace [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to compete effectively despite increased competition in certain sockets, emphasizing ongoing investment in R&D [22] - The company expects to deliver full-year FY 2027 gross margins above 50% and EPS approaching $7 per share, reflecting a structurally improved portfolio mix and commitment to operational excellence [14] - Management noted that the ongoing strategic exit from lower-margin Android business is being accelerated by memory pricing and availability constraints impacting customer build plans [27][55] Other Important Information - The transfer of SAW filter production from Greensboro, North Carolina, to Richardson, Texas, is on track, which is expected to enhance operational efficiency [6] - The company generated operating cash flow of approximately $265 million during the quarter, resulting in free cash flow of $237 million [16] Q&A Session Summary Question: Content roadmap and competition in sockets - Management acknowledged opportunities for growth despite increased competition and emphasized ongoing investment in R&D to expand their footprint [22] Question: Android revenue decline and seasonal expectations - Management clarified that the expected decline in Android revenue is due to strategic exits from lower-margin business and not typical seasonal patterns [23] Question: Impact of business divestments on revenue - Management indicated that the majority of revenue decline is related to Android, with minimal impact from divestitures [41] Question: Integrated modules and future prospects - Management noted that while there is a loss of share in ultra-high-band, they are still positioned to benefit from high-band PAD wins [45][64] Question: Memory pricing effects on mobile business - Management confirmed that higher memory prices are impacting mass-tier Android business, accelerating their strategic exit from that segment [55]