Qorvo, Inc. Q2 FY2025 earnings call

• End markets include automotive, consumer, defense and aerospace, industrial and enterprise, infrastructure, and mobile, underpinned by global megatrends like electrification, connectivity, etc.
• In HPA, continued expansion in defense and aerospace business and growth in power management; expected mid-teens growth for fiscal year.
• In CSG, maintained Wi-Fi leadership, invested in diverse growth businesses like automotive solutions and SoCs for ultra-wideband and Matter; expected mid-teens growth for fiscal year.
• In ACG, supported seasonal ramp at largest customer, but Android mix shifted to entry tier 5G; focus on investing to grow at largest customer.
• Quarterly highlights: Automotive secured V2X design wins, consumer increased force-sensing touch sensor shipments, Wi-Fi 6/7 shipments grew, Connectivity Systems had broad-based demand for ultra-wideband, etc.
• Defense and aerospace had multiyear tailwinds, design activity was a quarterly record, and won key development contracts.
• Industrial and enterprise ramped power management solutions, expanded ultra-wideband into Wi-Fi 7 enterprise access points.
• Strategic investments in core strengths, cost and productivity initiatives to enhance gross margin.

HPA is expected to grow in the mid-teens for the full fiscal year. CSG is also expected to grow in the mid-teens this fiscal year. In the mobile market (ACG), there was a seasonal ramp at the largest customer, but the mix in Android shifted towards entry tier 5G at the expense of mid-tier 5G. Revenue for the second quarter was $1,047 million, representing an increase of 18% sequentially. Non-GAAP gross margin of 47% matched the high-end of the guidance range. Non-GAAP diluted EPS was $1.88, above the midpoint of the guidance range.

• Current quarter outlook: Expected revenue of approximately $900 million, plus or minus $25 million; non-GAAP gross margin approximately 45%; non-GAAP diluted EPS between $1.10 and $1.30.
• Fiscal 2025 revenue expected to be slightly down compared to fiscal 2024 due to Android smartphone mix shift.
• Projected non-GAAP operating expenses in December quarter around $265 million.
• Non-operating expense expected between $8 million and $10 million.
• Non-GAAP tax rate for fiscal year 2025 expected within 10% to 12%.
• Manufacturing initiatives like transition to 8-inch BAW, transferring gallium arsenide production, evaluating strategic alternatives for silicon carbide business.

• Android mix shift impacting margins, with mid-tier shifting to entry tier 5G and price sensitivity increasing.
• Potential impact of interest rate differentials if 2024 notes are retired in mid-December.
• Challenges in the mass market Android segment with unfavorable mix and reduced total addressable market.

Q: Tom O'Malley from Barclays asked about the content and ramp profiles varying in Android and the gross margin profile.

A: Grant Brown explained about the Android mix shift and long-term gross margin targets, noting fiscal Q1 as the low point in fiscal '25.

Q: Aman Gulani from UBS asked about the December guide and revenue down year-over-year.

A: Grant Brown and Bob Bruggeworth discussed the Android dynamic, pivot away from entry tier, and CSG down quarter-over-quarter.

Q: Christopher Rolland from Susquehanna asked about seasonality and SAW footprint change.

A: Bob Bruggeworth talked about SAW opportunities in mid-band and Grant Brown discussed seasonal drivers and SAW vs BAW.

Q: Edward Snyder from Charter Equity Research asked about content shift in Android.

A: Robert Bruggeworth and David Fullwood explained the share loss in largest Android customer's second half models and expectation to regain in next year's first half.

Q: Nicolas Doyle from Needham asked about entry segment of Android and OpEx reductions.

A: Grant Brown and David Fullwood discussed TAM reset, pricing discipline, and OpEx realignment.

Q: Krish Sankar from TD Cowen asked about short-term and long-term guidance.

A: Grant Brown talked about underutilization charges, structural changes, and 50% gross margin target.

Q: Peter Peng from JPMorgan asked about ACG segment shortfall and content variation in largest customer.

A: Grant Brown and Robert Bruggeworth discussed impact of Android mix and content variation by models/SKUs.

Q: Karl Ackerman from BNP Paribas asked about China Android mix and competitive dynamics.

A: David Fullwood and Robert Bruggeworth talked about shift into entry tier, competitive dynamics, and Huawei's impact.