Qorvo(QRVO) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for the quarter was $1.1 billion, with non-GAAP gross margin at 47.6% and non-GAAP diluted EPS at$ 2.39, all exceeding the high end of the August guidance [87] - The company expects revenue of approximately $1 billion plus or minus$ 25 million for the current quarter, with non-GAAP gross margin between 43% and 44% [90] - Non-GAAP operating expenses in the quarter were $246 million, slightly higher than guidance due to performance-based incentive compensation [88] - Free cash flow was$ 64 million, and CapEx was $29 million during the quarter [97] Business Line Data and Key Metrics - ACG (Advanced Connectivity Group) was 77% of revenue, HPA (High Performance Analog) was 14%, and CSG (Custom Solutions Group) was 9% [43] - ACG operating margin was 34%, HPA was 17%, and CSG was negative 27%, which includes the impact of the biotechnology division [89] - The company saw significant content gains at its largest customer, driving revenue growth [87] - The company is investing in new product development and targeting multi-year growth opportunities across all three segments [88] Market Data and Key Metrics - The company's largest customer has a significant impact on March quarter performance, with expectations of seasonal decline in China Android business [4][5][6] - Channel inventories of Qorvo components across the Android ecosystem are approaching historical norms, allowing the company to ship more closely to end market demand [69][70] - The company is seeing growth in ultra-wideband adoption, particularly in automotive and Android markets [84] Company Strategy and Industry Competition - The company is focusing on multi-year technology upgrade cycles supported by global macro trends, including connectivity, sustainability, and electrification [71] - Qorvo is leading the transition to DOCSIS 4.0 in broadband and delivering increasing levels of functional integration for 5G massive-MIMO deployments [72] - The company is expanding its presence in power management markets, with initial wins in SSDs, power tools, and appliances [73] - Qorvo is leveraging its ultra-wideband technology for automotive and Android markets, with significant design wins in both areas [84] Management Commentary on Operating Environment and Future Outlook - The company expects revenue growth and margin expansion as product mix favors higher growth investment businesses [93] - Management believes the company can achieve 50% gross margin on a quarterly basis and subsequently on an annual basis as inventory and utilization levels normalize [16][96] - The company is not expecting a significant rebound in end markets but is optimistic about design wins and inventory normalization driving growth [30][81] Other Important Information - The company repurchased$ 100 million worth of shares at approximately $103 per share during the quarter [97] - Qorvo's net inventory balance was reduced to$ 840 million, down $78 million sequentially, with days of inventory decreasing from 210 days to 138 days [98] - The company successfully closed the sale of the Omnia Biotechnology business and will continue to sell BAW filters to support the acquirer [89] Q&A Session Summary Question: Gross Margin Trajectory for Fiscal 2025 - The company expects to achieve 50% gross margin on a quarterly basis before achieving it on an annual basis, depending on macro conditions and utilization levels [106] Question: Seasonal Trends in Q4 - The company expects a seasonal decline in March, particularly in the China Android business, but growth in ACG and CSG segments will offset some of this decline [108] Question: Ultra-Wideband Market Opportunity - The company is seeing significant opportunities in ultra-wideband, particularly in automotive and Android markets, with multiple design wins and expanding applications [38][39] Question: Inventory Levels and Normalization - The company expects to continue reducing inventory levels, with channel inventories approaching historical norms, particularly in the Android ecosystem [99] Question: Competitive Landscape in China - The company does not see significant changes in the competitive environment in China, with local suppliers still behind in key technology areas [21]