Skyworks' third fiscal quarter 2023 earnings call was held and was recorded. Kris Sennesael, the Chief Financial Officer, and Liam Griffin, the Chairman, Chief Executive Officer and President, discussed the company's performance, which included revenue of $1.071 billion, earnings per share of $1.73, and operating cash flow of $306 million. They also discussed their technology roadmap and new solutions, and expected double-digit sequential revenue and earnings growth in the September quarter.

Skyworks has made strides in mobile, IoT, infrastructure, industrial, and automotive markets, delivering 5G content, Sky5 platforms, Wi-Fi 7, tri-band routers, cognitive wireless audio solutions, 5G small cell deployments, timing solutions for AI data centers, and power isolation portfolio for EV suppliers. Additionally, generative AI is proliferating and driving complexity in wireless infrastructure networks, which Skyworks is well-positioned to benefit from with their advanced integrated solutions.

Skyworks' third fiscal quarter of 2023 saw $1.071 billion in revenue, with mobile making up 59% and broad markets making up 41%. Gross profit was $509 million with a 47.5% gross margin, and operating expenses of $182 million were down 4% sequentially and year-over-year. Net income was $276 million, resulting in diluted earnings per share of $1.73. Cash flow from operations was $306 million and capital expenditures were $31 million, resulting in free cash flow of $274 million. Skyworks expects to deliver double-digit sequential revenue and earnings per share growth in the September quarter of 2023.

Skyworks is expecting to see revenue of $1.215 billion for the quarter, a 13% increase sequentially, with a gross margin of 47-48%. Operating expenses are projected to be $178-182 million, a 6.5% year-over-year decrease. The company is expecting to deliver diluted earnings per share of $2.10, a 21% increase, and has announced a 10% increase to its quarterly dividend of $0.68 per share. Despite a challenging macro environment, Skyworks is continuing to deliver strong financial results and advance its cutting-edge technologies and product road maps.

Skyworks is well-positioned to benefit from the electrification and automation of vehicles, the expansion of the Internet of Things, the emergence of augmented and virtual reality, and the rise of artificial intelligence. They expect to capitalize on these opportunities and deliver growth in their profitable business with strong cash generation. In response to a question about their largest customer's upcoming phone, they expect to be among the leaders with their largest customer. To improve their gross margins, they will be dependent on industry trends such as Android and handset unit sales.

Kris Sennesael of Skyworks indicates that the company's gross margins have temporarily dropped to the low 40s due to macroeconomic headwinds and softer demand in the Android ecosystem, as customers are reducing their own inventory levels. Skyworks is also reducing its own inventory levels, which will take a couple of quarters and should help improve gross margins to the low 50s. On the plus side, Skyworks is looking at 30-35% free cash flow, which is sustainable.

Liam Griffin states that the bottom of the inventory correction is here and that they are seeing a turn up in demand from their customers. He believes that this is sustainable and that they are optimistic. He also states that their view is more optimistic than it was last quarter. He then states that they are also seeing a turn up in demand from their China customers.

Skyworks has seen a substantial increase in its automotive revenue over the past two to three years, largely due to the acquisition of Silicon Labs and organic development of IP and technology. Other markets such as Android and Google are also performing well, and the company is having more constructive conversations with their customers.

Skyworks is doing well in the Wi-Fi 6 and Wi-Fi 7 markets, and has also made strategic additions in its sales force to penetrate new markets. The company is investing in its business and controlling its own operating expenses in order to make the most of the opportunities in the broad market. Matt Ramsay asked Kris Sennesael to level set the next few quarters on the OpEx line.

Skyworks is confident in its position in the Wi-Fi market, having already established dominance in the 5-gigahertz and 2.5 space and having great position in Wi-Fi 7. They have also been able to reduce their variable compensation and overall spending in order to remain efficient and effective while still investing in product development and roadmaps.

Wi-Fi is a widely used technology, and the transmit DRx module has become one of the most lucrative modules in high-end phones. However, competition for this spot has increased, and incumbency does not necessarily guarantee success. Liam Griffin states that performance, flexibility, supply chain, and having excellent people on the team are what differentiate them from the competition.

Skyworks' largest customer accounted for 64% of total revenue in the June quarter, which is slightly up from the previous year. This customer purchases Skyworks' products for not only phones, but also iPads, iMacs, home products, and other future products. 15% of the revenue from this customer comes from Skyworks' content. Skyworks has derisked their exposure to China Android, which only accounts for 5% of sales.

Kris Sennesael explains that China and Samsung currently make up less than 5% of their revenue, but there is inventory overhang that needs to be cleared. He predicts that by the start of 2024, the business will start ramping up and they will be well positioned. Christopher Rolland then asks about DOIs and gross margins, to which Sennesael responds that inventory has decreased in the last two quarters, and they expect strong revenue growth in September and December.

Liam Griffin of Skyworks Solutions discussed the company's opportunity in Bulk Acoustic Wave (BAW) technology, which is a difficult technology to master and has applications beyond just handsets. Skyworks has seen success in diversifying its BAW offerings and is looking to further expand its reach with deployments in other markets, such as Wi-Fi and infrastructure products. The company is confident that its BAW technology can move the needle this year.

Skyworks is not currently working with Huawei, but there is still opportunity for growth in the Chinese market due to Android turning back up and the presence of Oppo, Vivo, and Xiaomi. While Skyworks is expecting growth in the December quarter, they will only provide guidance for one quarter at a time.

Kris Sennesael and Liam Griffin are discussing the impact of China banning gallium and germanium exports on their products. Liam reassures that there is very little risk to their business and that they are experts in these solutions and materials. Karl Ackerman then inquires about the outlook between mobile and broad markets for September, to which Kris answers that September is a strong mobile quarter due to the content and ramp that they have supported.

Skyworks typically manages their inventory levels at the component level, but there is an inventory overhang due to customers not selling their products to the end customer at the level they were expecting. This needs to burn off and will take a couple of quarters. Once the inventory overhang abates, Skyworks will be able to refill the channel with healthier levels of inventory.

Liam Griffin of Skyworks states that the infrastructure business is strong and had a record in the last quarter. He believes there is room to grow in the portfolio and expects it to be a driver in 2024. He also mentions the potential for growth in 5G, Wi-Fi, and other technologies.

Liam Griffin reported that design win activity is increasing, customer engagements are improving, and the company's portfolio is more diverse than ever. Operationally, the company has gone through some cyclical hits, but this is turning into a cash flow play that will allow it to make more powerful investments. Griffin expects the business to improve and have double-digit performance as they move forward. He thanked the participants of the call and invited them to attend upcoming investor conferences.

This summary was generated with AI and may contain some inaccuracies.