The operator introduces the Qorvo, Inc. first quarter 2025 earnings conference call and explains the format of the call. Douglas DeLieto, Vice President of Investor Relations, provides a disclaimer about forward-looking statements and encourages listeners to review the Safe Harbor statement and risk factors. He also mentions that both GAAP and non-GAAP financial results will be provided and gives instructions for accessing the reconciliation of these measures. CEO Bob Bruggeworth and other members of management are also present on the call.

At the Investor Day, Qorvo discussed their strategic positioning and opportunities in their six primary end markets: automotive, consumer, defense and aerospace, industrial and enterprise, infrastructure, and mobile. These markets are driven by global megatrends and undergoing multiyear upgrade cycles and technology upgrades. Common drivers across all markets include increasing bandwidth, power efficiency, and demand for system level solutions and improved performance.

Qorvo is a critical player in the market for high-performance, efficient, and compact technology solutions. They have recently secured deals in the automotive market for V2X FEMs and are expanding their presence in the EV market with solid-state circuit breakers. In the consumer market, they have secured contracts for switch mode DC-to-DC chargers and battery management solutions. Qorvo is also utilizing their Matter and Ultra-Wideband technologies for various applications such as smart home control and broadband deployments.

Qorvo is expanding its Wi-Fi portfolio and seeing increased customer interest in its 2, 5, and 6 gigahertz BAW filters. It is also expanding its customer engagements in consumer applications such as touch sensors for laptop track pads. In the defense and aerospace markets, Qorvo has secured design wins for AESA radars, large defense programs, and SATCOM deployments. The integration of Anokiwave has added capabilities in silicon beam-forming ICs and IF to RF conversion, allowing for more highly integrated solutions for customers. Qorvo also launched new highly integrated RF multichip modules for advanced radar applications and a single-chip inverse cable equalizer for infrastructure markets.

The company's single-chip solution has a switched bypass mode for use in all line amplifiers and field extenders. They have also introduced a best-in-class transmit pre-driver for massive MIMO systems and a 4 milliohms silicon carbide JFET for high-density server power supplies. The company is also seeing demand for their Ultra-Wideband technology in Wi-Fi access points for indoor navigation and is expanding into new industrial markets with their force-sensing touch sensor technology. In the mobile market, the company is investing in multiple programs to increase their content and revenue with their largest customer, primarily in smartphones and tablets.

Qorvo's R&D investments for future programs include both current and new products for their primary customer in the Android ecosystem. They are positioned to drive growth as 4G devices transition to 5G and are also prepared for the release of 5G Advanced. Qorvo has ramped up production of new products, including a highly complex multi-chip module that integrates various technologies to improve efficiency and reduce board space requirements. They have also secured multiple design wins for their recently launched portfolio of low, mid, and high band pad, and have been selected as the exclusive supplier for Wi-Fi 7 FEMs by MediaTek for their DX4 Wi-Fi chipset.

MediaTek and Qorvo have collaborated to create a DX4 chipset and Wi-Fi 7 FEMs that are optimized for superior performance in both flagship and mass-market smartphones. Qorvo has also expanded its Ultra-Wideband presence in the Android ecosystem with its first win in a mid-tier smartphone. The company is focused on operational excellence and reducing capital intensity while investing in R&D for long-term growth in each operating segment. In the June quarter, Qorvo successfully completed its migration to 8-inch BAW and is committed to long-term growth and diversification. Revenue for the quarter was $887 million, representing a decrease of 6% sequentially and an increase of approximately 36% year-over-year.

In the June quarter, the company's non-GAAP gross margin was 40.9%, which was at the high end of their guidance range due to higher revenue and product mix. Non-GAAP operating expenses were $265 million, including $4 million for their digital transformation initiative. They expect to provide expense guidance for this initiative on a quarterly basis. Non-GAAP diluted EPS was $0.87, above their guidance range. The company had $1.1 billion in cash and $1.5 billion in long-term debt. They retired $27 million of their 2024 notes and plan to retire the remaining $412 million later this year. The net inventory balance increased by $16 million, primarily due to supporting a seasonal ramp at their largest customer. Operating cash flow was $81 million, with $38 million in capital expenditures, resulting in free cash flow of $43 million. The company also repurchased $125 million of stock in the quarter.

The rate and pace of share repurchase is determined by factors such as financial outlook, cash flow, and strategic considerations. The company expects revenue of $1.025 billion in the current quarter, with gross margin expected to improve over the fiscal year. Non-GAAP operating expenses are projected to be $275 million, with an increase in other operating expenses due to digital transformation. Non-GAAP expense below the operating income line is expected to be between $8 million to $10 million.

Qorvo expects non-operating expenses to increase in the March quarter due to retiring their 2024 notes and changes in tax legislation. The company's three operating segments are performing well and they are confident in their ability to deliver long-term revenue growth. The call was opened for questions and the first one came from Quinn Bolton, who congratulated the company on their results and asked about the potential for AI smartphones from their largest customer.

In this paragraph, the speaker asks about the impact of the AI smartphone trend on demand and the company's largest customer. The response is that the company is taking a conservative approach and has seen good results with the S24. They are not commenting on their largest customer's next-generation phones, but hope that AI will be useful for users and increase the replacement cycle. The speaker then asks for an update on utilization rates and the flush of high-cost Android inventory, to which the response is that there will be a substantial sequential increase in gross margin due to higher mix of customized solutions. This mix includes more externally sourced silicon and SOI content and is not impacted by internal utilization levels.

The company's revenue in the quarter was affected by underutilization of high-cost standard products. This is expected to improve in the September quarter and be negligible in the second half of the year. They have seen a slight improvement in the China mobile market but overall it is expected to be flat to slightly up. Investors are questioning why there is not growth or at least flat revenue year-over-year, especially with content growth at the largest customer and a potential AI refresh cycle. The company remains conservative in their projections.

Grant Brown and Dave Fullwood discuss the slight decline in September's guide year-over-year, which is mainly due to smartphone revenues. They feel comfortable with their assumptions, but it may prove conservative or vice versa. Dave mentions strong ramps in the first half for key models like the S24 and Pixel, and they have purchase orders for low, mid, and high design wins that will ramp up in the future. Bob mentions a low, mid, high product tier for different segments in the Android ecosystem and hints at potential new products in the future.

The company is releasing a lower cost LMH product for the mass tier and entry area. They expect it to ramp up in the next quarter and have different tiers for various markets. They also have a successful mid-high band pad with diversity receive functions. These products have just ramped up and will have similar content next year. The company is in discussions with customers for longer-term plans. They have plenty of new products for other markets.

In response to a question about the trade-off between internal production and using external foundries, the company explains that it is technology dependent and they will continue to produce products containing BAW internally for differentiation. They also mention that they have assembly capabilities that differentiate them in the defense market. In terms of content growth, they expect an increase in placements for antenna tuning and Ultra-Highband pad with the adoption of 5G in premium handsets over the next year or two.

The speaker discusses the opportunities for growth in 5G Advanced, unlicensed spectrum, foldable phones, and AI. They mention that discussions with customers are ongoing and that AI will drive higher data rates and accelerate the adoption of 5G Advanced. When asked about expected content growth in the second half of the year, the speaker asks for clarification on which market and customer the question is referring to.

The speaker is confident in the company's ability to grow and gain market share at their largest customer. They have seen a broad-based rebound in demand in China, particularly in the areas of Ultra-Wideband and power supply efficiency. They are also seeing new opportunities for growth in circuit protection using silicon carbide technology.

The speaker, Robert Bruggeworth, talks about how things have accelerated since the Investor Day and mentions the adoption of V2X in China. He expects this to spread to other regions in the future. The conference has now ended.

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