The Skyworks Solutions Fourth Quarter Fiscal Year 2023 Earnings Call began with Raji Gill, Vice President of Investor Relations, introducing Liam Griffin, Chairman, CEO, and President of Skyworks, and Kris Sennesael, CFO. The call discussed forward-looking statements and non-GAAP financial measures, with a reminder to refer to the company's press release and SEC filings for potential risks. Despite economic challenges, Skyworks had a successful fourth quarter with revenue of $1,219 million, earnings per share of $2.20, and operating cash flow of $366 million. Free cash flow for fiscal 2023 was over $1.6 billion, reflecting the company's efficient business model.

The semiconductor industry is experiencing a return to normal supply and demand balance after two years of disruptions. The company is actively managing inventory levels and making strategic investments to capitalize on future demand. They see opportunities for growth in the mobile market, particularly in expanding RF content. In the broad markets sector, they expect to benefit from three long-term trends: IoT, electrification and safety in vehicles, and high-speed connectivity for AI applications. The upgrade cycle for Wi-Fi 6E and 7 is also expected to drive additional content and use cases.

Skyworks is well positioned to benefit from the growth of the automotive industry, particularly in segments such as power isolation chips, connectivity, and ADAS solutions. They have experience working with top brands and believe that AI will drive the need for more advanced wireless solutions. The company has also made significant investments in BAW technology, leading to competitive differentiation and key design wins in various markets. In the past quarter, they secured 5G and Wi-Fi design wins for premium smartphones and mesh systems.

In the fourth quarter of fiscal 2023, Skyworks saw a 14% increase in revenue, with mobile accounting for 65% of total revenue and broad markets making up the remaining 35%. Gross margin was impacted by temporary factory underutilization and the company reduced internal inventory by $116 million. Operating expenses were down 3% and operating income was $398 million with an operating margin of 32.6%. Other expenses totaled $7 million.

Skyworks reported a net income of $353 million and diluted earnings per share of $2.20 for the fourth fiscal quarter, with an effective tax rate of 9.7%. Their cash flow from operations was $366 million, resulting in a record free cash flow of $296 million for the quarter and $1,646 million for the full fiscal year. They expect their capital expenditures to decrease in fiscal 2023 and plan to pay off their remaining term loan by year-end. For the first quarter of fiscal 2024, they anticipate revenue between $1,175 million and $1,225 million.

The company expects their mobile business to show growth, but their broad markets will continue to be impacted by excess inventory. They anticipate a gross margin of 46% to 47%, operating expenses of $193 million to $197 million, and diluted earnings per share of $1.95. The December quarter guidance suggests that the mobile business will see improvement while the broad markets will decline due to inventory digestion.

In the paragraph, Chris Caso asks Liam Griffin about the inventory correction in the mobile and broad markets. Liam responds by stating that they have a good understanding of the market and opportunities in the mobile business, but the broad markets business has been affected by the semiconductor cycle and inventory issues. However, they are confident in their ability to drive success in this area through their portfolio and efforts in various markets such as automotive and data centers. Karl Ackerman then asks a follow-up question about the Android opportunity.

The speaker, Liam Griffin, discusses the potential for 5G units to grow in the next year, particularly with China Android OEMs. He mentions the risks of inventory glut and the opportunities for growth in the China market. He also notes that there are other players, such as Google and Samsung, who provide a buffer for Skyworks with their larger customers. The company is known for its unique and flexible approach to selling its products.

The speaker discusses the growth potential of the company, particularly in the VOX channel and in comparison to Huawei. They also mention their strong free cash flow and clean balance sheet, giving them the option to invest in their organic business or diversify through potential M&A opportunities.

In response to a question about the broad market, Liam Griffin discusses the strength of Skyworks in the automotive industry, which has been growing thanks to their acquisition of Silicon Labs. He mentions that they have design wins and are investing aggressively in this area. While automotive is not yet a significant portion of Skyworks' business, it has potential for growth. In terms of CapEx, Griffin mentions that they have reached their target for in-sourcing and outsourcing certification.

Kris Sennesael explains that their company differentiates itself by manufacturing most of their technology in-house, which allows them to secure the supply and win over larger customers. They have made major investments to expand their capacity, but are now focusing on operational efficiencies to create additional capacity and drive gross margin improvements and stronger free cash flow. They aim to continue growing their content and diversifying it within the mobile market.

The company is committed to diversification and growth, and is focusing on opportunities in markets like automotive. They have strong execution capabilities and are learning a lot. Gross margins have been impacted by lower utilizations but are stable now. However, there may be a slightly down trend in the next quarter due to a mixed headwind and seasonal trends.

The speaker discusses the expected reduction in gross margins during the first half of the calendar year, with gradual improvements in the second half. They also mention that their largest customer accounted for 68% of total revenue in September, and that mobile revenue is expected to decrease by 20-25% in the March quarter. They also note that the company is currently underrepresented in the Android market.

The speaker agrees that there is pressure on gross margin due to the pricing and performance competition in the Android market. However, they have the capabilities and resources to be more aggressive in this market and are planning to do so. The speaker also mentions that there has been an increase in content in existing modules for their largest customer.

The speaker is asking about the company's content gains and future plans, specifically in regards to the recent acquisition from SLAB and the impact of the current market conditions on the wireless infrastructure and telco exposure. They also mention concerns about the EV market in China.

The speaker discusses the various segments of the industry that Skyworks operates in, including mobile technology, adjacent technologies, automotive, data centers, and Wi-Fi. They mention that the company's scale, execution, and know-how have allowed them to be profitable in these markets, and they are optimistic about the future despite the current slowdown in some areas. They also mention the recent addition of the I&A business from Silicon Labs, which has opened up more opportunities for the company.

The speaker believes that Wi-Fi 7 will drive significant growth in various markets. They have the technology and scale to succeed in these markets, and are excited for future opportunities. The speaker also mentions the current market correction and their ability to withstand it. They are open to potential M&A opportunities, but it depends on market conditions.

The speaker discusses their company's strong financial performance and their ability to take advantage of potential M&A opportunities. They also mention the China smartphone market and the complexities of determining their share and fulfilling orders. The market has excess inventory and a range of models, but the speaker's company focuses on flagship and mid-level models for potential export markets.

The company supports their customers in both domestic and international markets, and there is still excess inventory in China. However, their revenue with China Android has been improving and they have design wins with customers. The company believes there is a gradual process towards completion of the inventory correction and they are well positioned. The competition in China has been developing over the past few years, but the company sees an opportunity for growth in the future in both the lower and higher end markets. They also see potential in other markets such as mobility and IoT.

The speaker discusses the company's success in various markets, including automotive, and credits their strong balance sheet, tenacious team, and in-house operations for their unique position. They see these opportunities as a way to continue their growth and look forward to speaking with investors in upcoming conferences. The call concludes with the speaker thanking participants for their involvement.

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