The paragraph is the introductory segment of Qorvo's Fiscal 2025 Third Quarter Earnings Conference Call. The Operator starts by outlining the structure of the call, indicating it will consist of a listen-only mode and a Q&A session. Douglas DeLieto, Vice President of Investor Relations, then provides an overview, noting that forward-looking statements will be made and emphasizing the importance of reviewing the risk factors outlined in their earnings release and SEC filings. He explains that both GAAP and non-GAAP financial results will be discussed to offer a clearer view of operational performance. The call will focus primarily on non-GAAP results, with reconciliation details available on their Investor Relations website. Key company executives, including the CEO Bob Bruggeworth, CFO Grant Brown, and others are present for the call.

In the paragraph, Bob Bruggeworth discusses Qorvo's focus on six primary end markets, emphasizing global megatrends like electrification, connectivity, and AI. He highlights the company's strategic efforts in various operating segments: growing the defense and aerospace business in HPA, expanding RF solutions and automotive solutions in CSG, and concentrating on 5G advanced products for premium Android tiers in ACG. Bruggeworth notes a shift in focus towards higher-margin, premium-tier products to increase profitability, with changes made to support this strategy, including workforce reductions and a strategic narrowing in Android 5G efforts. Lower-margin programs are expected to phase out by fiscal years 2026 and 2027.

The paragraph discusses financial expectations and strategic actions for a company’s different business segments. For fiscal year 2025, Android 5G revenue in the ACG segment is estimated at $875 million, with a projected annual decline of $150 million to $200 million in the following years, primarily due to the market in China and mid-tier Samsung. ACG revenue is expected to see a single-digit decline in fiscal 2026, with a return to growth by fiscal 2027. In contrast, CSG and HPA segments are anticipated to achieve double-digit growth in fiscal years 2025 and 2026, excluding the silicon carbide business. Efforts are underway to boost gross margin, which faced a 300 basis point headwind, with an anticipated increase of 150 basis points in fiscal 2026 despite flat revenue. Additionally, there was sequential growth in the defense and aerospace, industrial and enterprise, and infrastructure markets, fueled by technological upgrades and diversification, particularly in radar, communications, space, and electronic warfare systems.

The paragraph highlights Qorvo's achievements and expectations across different sectors. In electronic warfare, the company leads with its wideband solid-state PA technology and advanced manufacturing in Texas. Qorvo's D&A business experienced record revenue in December, projecting continued growth. In Industrial and Enterprise, sequential revenue growth was driven by advancements in Ultra-Wideband and WiFi, with commercial production anticipated this year. The infrastructure sector is seeing stabilization and growth, particularly in broadband, with DOCSIS 4.0 deployments, and in cellular base stations. However, automotive revenue declined due to market softness.

During the quarter, Qorvo experienced strong interest from automotive OEMs and Tier-1 suppliers for its Ultra-Wideband products, with a design win from an Asia-based EV OEM. The automotive market offers a significant opportunity, with potential revenue of up to $20 per car for applications like secure access and child presence detection. In the consumer market, revenue declined due to market headwinds, but demand for Qorvo’s Matter SOCs and WiFi 7 FEMs increased, with significant partnerships in the U.S. and Japan. Qorvo also expanded shipments of BAW filters in the U.S. and Europe. In the mobile market, revenue decreased, but Qorvo supported a major product launch for its largest customer, which contributed to over 50% of the revenue for the December quarter.

In the current quarter, Qorvo anticipates a sequential decline in sales to its largest customer, although less sharply than in previous years. However, the company is confident about year-over-year content growth due to its secured wins. Qorvo's revenue is primarily tied to higher-end models like the Pro and ProMax, with changes in model volumes and mix affecting content weight. For FY26, Qorvo forecasts flat to modestly increased revenue from its biggest customer. The company is also engaged with its second-largest customer, a Korea-based Android OEM, with design wins spanning its product portfolio for various smartphone categories. For 2025, Qorvo's content will include several specific technologies. The company is focused on strategic initiatives to boost margins, generate cash, and enhance shareholder value, having seen improvements in gross margins and a reduction in operational expenses. The December quarter results exceeded guidance, with revenue of $916 million and non-GAAP diluted EPS of $1.61.

The paragraph highlights the company's financial performance, noting favorable non-GAAP gross margin and operating expenses due to cost discipline and restructuring. The company ended the quarter with $770 million in cash and cash equivalents after retiring $412 million in 2024 notes. It has $1.5 billion in long-term debt with no immediate maturities. Inventory decreased both sequentially and year-over-year. Operating cash flow was $214 million, with capital expenditures of $38 million, resulting in free cash flow of $176 million. The company repurchased $100 million in stock, balancing growth and shareholder value. Looking forward, it expects revenue of $850 million, gross margin between 43%-44%, and non-GAAP EPS between $0.90 and $1.10, incorporating the sale of its silicon carbide business.

In the upcoming fiscal quarters, the company anticipates minimal silicon carbide revenue in Q4, with projected increases in fiscal '25. Non-GAAP operating expenses are expected to reach approximately $250 million in the March quarter, with ongoing digital transformation costs. Non-operating expenses, driven by interest and other factors, are set to rise post-retirement of certain notes. The non-GAAP tax rate is estimated at 11% for fiscal '25, potentially rising to 18-19% in fiscal '26 due to uncertain new regulations. Gross margin is expected to expand by 150 basis points with flat revenue in fiscal '26, amid a forecasted decline in ACG revenue and growth in CSG and HPA. Specific declines are anticipated in Android 5G revenue, while fiscal '26 revenue with the largest customer is expected to be stable or slightly increased. Seasonal considerations for the June quarter are also noted.

The paragraph discusses the strategic efforts of a company to improve its gross margin across various business segments. It highlights expected growth in their D&A business, enhancements in ACG margins through portfolio management and pricing strategies, and margin gains from divesting a silicon carbide business in HPA. In CSG, they are relocating gas production to a more efficient site. The company is focusing on reducing capital intensity and product costs through process technology advancements and closer collaboration with outsourced partners. They anticipate reaching high 40% gross margins by fiscal '26 and up to 50% by fiscal '27 in robust quarters. Additionally, they have reduced their workforce, especially in the mass-market Android business, and streamlined their digital transformation efforts to align with economic benefits.

The paragraph discusses the positive financial impact of selling a silicon carbide business, which will improve both gross and operating margins and contribute to over $100 million in annual savings across COGS and OpEx by fiscal 2026. These savings will be partly reinvested in key growth areas like D&A and power management, while also mitigating inflationary pressures. Non-GAAP operating expenses are expected to average $250 million per quarter in fiscal 2026. The company is confident in its strategic steps, focusing internal production where it adds value and anticipating the benefits to be evident through fiscal 2026 and 2027. Before opening the floor for questions, the company briefly addresses a filing by Starboard Value, emphasizing the focus of the call on third-quarter results and outlook.

In the discussion, Bob Bruggeworth confirms that revenue from Android customers is expected to decrease from $875 million in fiscal year '25 to less than $500 million over the next five years, with most of the remaining revenue coming from Samsung and high-end customers in China. Gary Mobley seeks clarification on the sustainability of the High-Performance Analog (HPA) segment's recent strong performance, noting potential impacts from an atypical Department of Defense contract. Bob explains that growth in this segment is linked to the timing of defense contracts, which typically results in stronger performance in the second half of the fiscal year due to the fiscal year-end of government contracts.

In the paragraph, the speakers discuss the financial outlook for different business segments. They report good growth in the December quarter, anticipate better growth in March, but expect a decline in June. Despite the drop in June, the Defense business is expected to grow faster than the HPA business for the year. The D&A business, worth $400 million, is also noted to be seasonal, with significant growth in March and a decline in June. Additionally, a conversation takes place regarding the Cellular business's seasonality, particularly with its largest customer, noting a smaller decline than in previous years. Finally, the discussion touches on gross margin aspects without providing detailed insights.

The paragraph discusses strategies to improve gross margins, focusing on two main areas. Grant Brown highlights that exiting some Android business will positively impact revenue mix and, consequently, gross margins. Additionally, efforts are being made to optimize factory costs and leverage outsourced suppliers, aided by recent workforce and cost reductions. Furthermore, process improvements and design optimizations are underway to lower costs. Harsh Kumar acknowledges this before the conversation shifts to Tom O'Malley from Barclays, who inquires about March guidance and seeks clarification on potential weaknesses in growth projections, considering favorable trends and existing guidance.

In the paragraph, Grant Brown discusses expected financial performance for various divisions of the company. For the March quarter, there is a projected negligible silicon carbide revenue compared to the December quarter's $9 million, with an approximate $30 million forecast for fiscal '25. He mentions typical seasonal dynamics, including a ramp-down from their largest customer, Apple's usual seasonal dip, and an increase in revenue from Android due to flagship platform launches. Both the Android and D&A businesses are projected to grow year-over-year. For the overall company, Brown anticipates a 10% to 15% revenue decline going into the June quarter due to seasonal factors, particularly in their defense business, which has become a larger portion of their income.

In this paragraph, the discussion focuses on the impact of seasonal factors and customer order patterns on the company's revenue, specifically regarding the Android ecosystem and flagship models ramping down. Despite these challenges, the company expects overall revenue for the year to remain flat, with growth outside these periods. The conversation shifts to Karl Ackerman from BNP Paribas, who inquires about the future of RF content within the iOS ecosystem, particularly if the largest customer continues to use Qualcomm's baseband modem rather than developing its own. Bob Bruggeworth seeks clarification to ensure he understands the question about the potential for content innovation or reuse in this scenario.

In the discussion, Bob Bruggeworth and Dave Fullwood address questions about the RF requirements for future architectures and the differences in their product offerings for internal and Qualcomm platforms. Vivek Arya from Bank of America Securities questions the long-term growth potential of the company's ACG or Mobile business. Bob Bruggeworth clarifies that the ACG segment is expected to decline in fiscal '26, despite gains in content and anticipated growth in cellular units. He acknowledges challenges from China in-sourcing and Qualcomm competition and emphasizes that the HPA and CSG segments are projected to grow in double digits, leading to an overall flat performance for the company. Additionally, he mentions a reduction in their Android business by $150 million to $200 million due to exiting a specific category.

The paragraph is part of a discussion about a company's financial expectations and plans for the future, particularly in relation to its largest customers and the Android ecosystem. The company plans to maintain its market share in flagship and high-tier Android phones, despite anticipating challenges and a decline in 2026. Grant Brown explains that the company's gross margins will follow historical seasonal patterns, with specific emphasis on Android sales' impact. He also discusses operating expenses (OpEx), which are expected to follow normal seasonal fluctuations, with slight variations throughout the year. Vivek Arya from Goldman Sachs had asked about these financial aspects, prompting Brown's detailed response.

The paragraph discusses a company's ongoing restructuring initiatives, including headcount reduction and shifting production locations. Grant Brown explains that the company is continuously seeking ways to optimize its factory footprint in response to changes in revenue mix and demand. He highlights the company's strategy to manufacture internally when it adds value to their products, citing filters made in Richardson as an example. For other technologies, the company outsources to trusted partners to benefit from their scale and technological advancements. Their approach is to select the most suitable external technologies to enhance product performance and cost efficiency without maintaining each manufacturing technology in-house.

In the paragraph, Bob Bruggeworth discusses the company's approach to managing customer concentration, particularly with Apple as a major client. While Apple’s revenue is stable or growing, the Android business is declining, leading to increased revenue concentration. Investors typically favor diverse revenue streams, and Bruggeworth mentions that internally, diversification will occur over time. However, he indicates openness to mergers and acquisitions (M&A) to accelerate diversification if it enhances shareholder value, referencing past successful mergers like RFMD and TriQuint. Chris Caso seeks clarification on the company's largest customer's content growth, interpreted as modest growth this year, and questions about long-term growth strategies within the ACG business, including potential content expansion or market share gain from competitors.

In the paragraph, Grant Brown and Bob Bruggeworth discuss their company's outlook and strategy regarding their largest customer. Grant explains that they expect revenue from this customer to be flat to slightly increased for the year, with a dip in the first half of fiscal year 2026 compared to fiscal 2025, and an uptick in the second half. Their revenue is influenced by the mix of Pro versus consumer models. Bob Bruggeworth adds that they are working on increasing their market share and content with the customer, particularly if the customer develops their own modem. They aim to take over certain components from competitors and have been invited to participate in developing integrated modules, which aligns with their strategy to grow their business with this customer.

The paragraph discusses potential changes in a company's tax rate, which is currently about 11% but could increase to 18% to 19% due to uncertainties and international or domestic changes. The conversation then shifts to discussing content opportunities with major customers, specifically mentioning the Samsung Galaxy S25. The content in the Galaxy S25 is similar to the previous year, with highly integrated modules in low-band, mid-high band, and WiFi. However, a late change in the modem impacted the company's ability to maintain the Ultra-Wideband socket and some tuners. There is no comment on content opportunities with their largest customer for unreleased products.

In the discussion, Bob Bruggeworth highlights that their largest customer skews towards Pro and ProMax models, indicating more RF content and a larger share in those models compared to standard phones. Bruggeworth notes that China's OEM customers are shifting towards premium models, although there's a challenge with the mid-tier collapsing into the entry-tier, where they no longer participate. They continue supporting customers in the premium and flagship segments. Christopher Rolland asks about revenue assumptions related to their largest customer, clarifying that opportunities include PMIC or envelope tracker but not yet awarded integrated modules.

In the paragraph, Bob Bruggeworth discusses the company's confidence in gaining market share and delivering on promises made during their Investor Day, with a focus on a broad portfolio of products. He mentions providing some guidance on fiscal '26 versus fiscal '25, but declines to share specific details about their largest customer. Christopher Rolland inquires about the company's future capital needs and cash usage. Grant Brown responds by stating there are no changes to the company's approach to capital allocation, which involves reviewing needs such as working capital, CapEx, investment opportunities, debt retirement, and shareholder returns through share repurchases. He emphasizes the importance of manufacturing in-house when it adds value to their products.

The paragraph discusses a company's strategy and market outlook. They are focusing on maintaining their current capacities and exploring maintenance and improvement investments, while leveraging external partners to avoid further capital expenditure in their factory network. Ruben Roy asks Dave Fullwood about visibility in other market segments like industrial, enterprise, and infrastructure, noting mixed signals in these areas. Dave acknowledges current demand weaknesses in automotive and industrial sectors but is optimistic about growth opportunities due to new content and customer engagements. He highlights developments like the transition to WiFi 7 and the addition of ultra-wideband for indoor navigation and real-time location services, which are progressing positively.

The paragraph discusses several business opportunities and growth areas for the company. In Power Management, the company is expanding from solid-state drives into the enterprise segment, which promises content growth. In the automotive industry, there is a strong adoption of ultra-wideband technology expected over the next three to five years, with the company aiming to be a leader in this market. In the defense sector, particularly in SATCOM and LEO satellites, there are significant growth opportunities with potential revenue from content per satellite. Ruben Roy inquires about the company's long-term operating expenses (OpEx) strategy, specifically regarding investment in key areas and the allocation among different segments. Grant Brown responds that OpEx improvements are planned company-wide, with resources allocated based on business size and needs rather than specific operating segments.

The paragraph discusses a conversation during an earnings call about operational expenses and future revenue impact for fiscal years 2026 and 2027, highlighting workforce reductions in the Android sector. Edward Snyder from Charter Equity Research inquires about the company's guidance regarding their largest customer, specifically concerning content gains and the use of different modems in their products. Bob Bruggeworth responds confidently, assuring that the content gain is based on awards already received, though he does not specify details about the number of modems their customer will use. Snyder confirms that these content gains will occur even if other factors remain constant.

The paragraph discusses the growth and opportunities for Qorvo in the defense sector, particularly due to upgrades of radar systems from mechanical to AESA (Active Electronically Scanned Array) radars. Dave Fullwood from Qorvo highlights the significant business potential in providing radar systems for airborne and ground-based platforms, seeing revenue opportunities of hundreds of thousands to a million dollars per system. The discussion shifts to the Chinese market, where handset OEMs are reportedly moving to mid and low-end devices due to government subsidies.

The paragraph discusses the competitive landscape and financial strategies of Qorvo, a company operating in the tech industry. Dave Fullwood mentions that their revenue from the China Android market is approximately $100 million per quarter, with expectations to reduce to around $50 million. Vijay Rakesh queries whether focusing on their top two customers poses a risk due to increased competition. Bob Bruggeworth acknowledges the competitiveness at Qorvo's largest customers, noting no significant change in that aspect over the last decade. He highlights the shift in China's market from mid-tier to entry-level phones as the major change affecting their business. The session concludes with Bruggeworth expressing gratitude for attendee participation and looking forward to future interactions.

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