SKYWORKS SOLUTIONS, INC. Q4 FY2024 earnings call

• Skyworks executed well during the fourth fiscal quarter, posting revenue of $1.025 billion, earnings per share of $1.55, and free cash flow of $393 million. - Mobile revenue grew 21% sequentially, with expectations of further growth in the December quarter as customer orders and channel inventory normalize. - Broad markets showed signs of stabilization and modest growth since the bottom in the December quarter of 2023, with long-term bullishness on broad markets due to secular trends. - In edge IoT, demand improved with Wi-Fi 6E and 7 systems ramping. - Secured 5G content for premium Android smartphones, expanded Wi-Fi 7 design win pipeline, powered advanced audio solutions for wireless gaming and clinical-grade hearing aids, and increased design win momentum in automotive.

Skyworks posted revenue of $1.025 billion for the fourth fiscal quarter of 2024. Mobile was approximately 65% of total revenue, with revenue growing 21% sequentially. Broad markets were approximately 35% of total revenue, up $1 million sequentially. Gross profit was $476 million, with gross margin at 46.5%, growing 50 bps sequentially. Operating expenses were $203 million, resulting in operating income of $273 million and an operating margin of 27%. Free cash flow for the quarter was $393 million.

• Anticipate revenue for Q1 of fiscal 2025 to be $1.05 billion to $1.08 billion, up 4% sequentially at the mid-point. - Mobile business expected to be up mid-single-digits sequentially. - Broad markets anticipated further modest sequential growth and return to year-over-year growth, though pace is more measured due to excess inventory in certain segments. - Gross margin projected to be 46% to 47%. - Operating expenses expected in the range of $209 million to $215 million. - At the mid-point of the revenue range of $1.065 billion, intend to deliver diluted earnings per share of $1.57.

• Excess inventory in select segments like industrial, automotive, infrastructure, and networking is delaying the recovery in broad markets. - Near-term headwinds in automotive and industrial markets as Tier 1s and OEMs work down excess inventory.

Q: On mobile business, talk about Android portion and trends.

A: Have robust pipeline with Android players like Google and Samsung, doing well with design wins and expect more growth.

Q: On broad markets recovery sustainability, talk about it.

A: Broad markets bottomed in Dec 2023, had three quarters of modest sequential growth, guiding for further modest sequential growth in Dec quarter and return to year-over-year growth, with longer-term bullishness on secular trends.

Q: On largest customer, feeling for 2025 and content changes.

A: Great partnership with largest customer, expect more growth, roadmap is potent.

Q: On Wi-Fi 7 upgrade cycle, historical growth inflection and profile.

A: Wi-Fi cycle was muted, but now seeing improvements with activity from various companies and design win pipeline filling.

Q: On broad markets end-markets, which areas worse/better and undershipping.

A: Edge IoT connectivity improving but still undershipping natural demand; networking infrastructure and cloud have excess inventory being worked down but still undershipping; automotive and industrial undershipping natural demand.

Q: On gross margins, puts and takes and expansion to 50%+ in 2025.

A: Gross margin 46.5% in Q4, guiding 46%-47% for Q1 2025, fiscal '25 full year likely flattish, improving towards end of '25.

Q: On inventory days target and relation to gross margin.

A: Been reducing internal inventory for seven quarters, down to less than $800 million, can continue to drive inventory down a bit more, gross margins likely flattish in fiscal '25.

Q: On M&A environment and buyback in 2025.

A: Have strong free cash flow, options like M&A and buybacks, very disciplined, looking for optimum mix.

Q: On AI impact on Edge IoT business.

A: Doing well in IoT space with design wins with meaningful companies, team will continue to drive growth.

Q: On impairment charge and CapEx for fiscal '25.

A: Took impairment charge related to I&A acquisition process R&D, CapEx running at mid-single-digits as percent to revenue in fiscal '24 and expected to remain moderate in fiscal '25.

Q: On broad market components, size of auto, industrial, IoT, infrastructure and cloud inventory build.

A: Broad markets components: Edge IoT connectivity improving, networking infrastructure and cloud have excess inventory being worked down, automotive and industrial undershipping.

Q: On Dec guidance and seasonal expectations.

A: Revenue and business with large customer in line with expectations, guiding slightly below street expectation mostly due to broad markets.

Q: On 2025 growth in 5G and China RF trend.

A: Only guide one quarter at a time, don't do much in China in low-end RF markets, focus on strategic Android players like Google and Samsung.

Q: On specific products in Android opportunity.

A: Engaging with Google and Samsung, as enterprise and technology companies, broad market business within portfolio with great opportunity for growth.