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CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page1of22
Qorvo(QRVO)EarningsReport:Q12016ConferenceCallTranscriptThefollowingQorvoconferencecalltookplaceonAugust10,2015,04:00AMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
DougDeLieto;QorvoInc;VPofIRBobBruggeworth;QorvoInc;President&CEOSteveBuhaly;QorvoInc;CFOEricCreviston;QorvoInc;PresidentofMobileProductsJamesKlein;QorvoInc;PresidentofInfrastructureandDefense
OtherPart icipants
VivekArya;BankofAmericaMerrillLynch;AnalystGabrielaBorges;GoldmanSachs;AnalystMikeBurton;BreanCapital;AnalystHarshKumar;StephensInc.;AnalystEdwardSnyder;CharterEquityResearch;AnalystSteveSmigie;RaymondJames;AnalystVishayRakesh;MizuhoFinancialGroup;AnalystQuinnBolton;Needham&Company;AnalystTomDiffely;D.A.Davidson&Company;AnalystCodyAcree;AscendiantCapitalMarkets;AnalystTimLong;BMOCapitalMarkets;AnalystIanIng;MKMPartners;AnalystBlayneCurtis;Barclays;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
Goodday,ladiesandgentlemen.WelcometotheQorvoQ12016conferencecall.
Today'scallisbeingrecorded.
IwouldnowliketoturnthecallovertoDougDeLieto.Pleasegoahead,sir--VicePresidentofInvestorRelations.
DougDeLieto (VPofIR):
Thanksverymuch,[Katherine]Hi,everybody.WelcometoourJune2015earningscall.
Thiscallwillincludeforward-lookingstatementsthatinvolveriskfactorsthatcouldcauseouractualresultstodiffermateriallyfromManagement'scurrentexpectations.WeencourageyoutoreviewtheSafeHarborstatementcontainedintheearningsreleasepublishedtoday.AswellastheriskfactorsassociatedwithourbusinessinourannualreportonForm10-KfiledwiththeSEC,becausetheseriskfactorsmayaffectouroperationsandfinancialresults.
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page2of22
Intoday'sreleaseandontoday'scall,weprovidebothGAAPandnon-GAAPfinancialresults.Weprovidethissupplementalinformationtoenableinvestorstoperformadditionalcomparisonsofoperatingresults,andtoanalyzefinancialperformancewithouttheimpactofcertainnon-cashexpensesorotheritemsthatmayobscuretrendsinourunderlyingperformance.
Duringourcall,ourcommentandcomparisonstoincomestatementitemswillbebasedprimarilyonnon-GAAPresults.ForacompletereconciliationofGAAPtonon-GAAPfinancialmeasures,pleaserefertoourearningsreleaseissuedearliertoday,availableonourWebsite,www.qorvo.com,underInvestors.
Infairnesstoalllisteners,weaskthateachparticipantpleaselimitthemselvestoonequestion.SittingwithmetodayareBobBruggeworth,PresidentandCEO;SteveBuhaly,ChiefFinancialOfficer;EricCreviston,PresidentofQorvo'sMobileProductsGroup;andJamesKlein,PresidentofQorvo'sInfrastructureandDefenseProductsGroup.I'malsojoinedbyothermembersofQorvo'smanagementteam.
Andwiththat,I'llhandthecallovertoBob.
BobBruggeworth (President&CEO):
Thanks,Doug.Goodafternoon,everyone,andwelcometoourFY16first-quarterearningscall.LedbystrengthinMobileProducts,Qorvo'sJunequarterlyrevenueincreased6%sequentiallyand23%year-over-yearwhencomparedtothecombinedrevenueofRFMDandTriQuintintheJune2014quarter.
WewerepleasedtoseeMobileProductsgrow12%sequentiallyand35%year-over-year,aswecontinuedtosuccessfullycaptureabroadarrayofopportunitiestofortifylong-termtrends.Inparticular,theglobaldemandforbroad-baseddatacontinuestoproliferate,whilefront-endcomplexityandtheperformancerequirementsofRFsolutionscontinuetoexpand.
ThestrengthinMobileProductswassufficienttooffsetasharpsequentialdeclineinwirelessinfrastructurerelatedtoapauseinLTEbasestationdeployments.Outsideofwirelessinfrastructure,IDPrevenuegrewapproximately9%versuslastyear.Withinthisopportunity-richenvironment,Qorvoiswinningbyleveragingourexpandingportfolioofproductsandtechnologies,andofferinghighlyintegratedsystem-levelsolutionstocustomers,channelpartnersandmobileoperators.
Asabroadmeasureofsuccess,ourMobileProductsGroupsurpasseditsoperatingmodelof30%operatingincomeonapreliminarybasis.That'sallthemoreimpressivewhenyouconsiderourmobileproductportfolioinJuneconsistedentirelyoflegacyRFMDandTriQuintparts.Andwe'dyettoin-sourcelegacyTriQuintassembly,ourlargestcostsynergy.
We'redesigninganddevelopinganincreasingnumberofdifferentiatedsystem-levelsolutionsthatintegrateourlegacycapabilities.AndtheseQorvopartswilldrivegrowthandimproveprofitabilitynextfiscalyear.
SomeearlyexamplesincludeourBAW-basedhighbandRFFusion,whichsecuredmultipledesignwinsduringtheJunequarter.AndourrecentlyintroducedBAW-basedRFFusioniFEMformobileWi-Fi,whichwasannouncedlastquarterandhasalreadyreceivedproductionorders.Theseproductsdemonstratewhatourorganizationcanachievebyleveragingourcombinedcorecompetencies.Therewillbemanymoretocome.
WithinIDP,wesawsequentialstrengthacrossallourmarkets,otherthanwirelessinfrastructure.Inparticular,IwouldliketohighlightsomeofourachievementsinWi-FiandGaNapplications.
QorvoistheleadingsupplierofRFGaN,andwehavereleasedover100GaNproductsduringthepast18monthsinbothhigh-powerandhigh-frequencyapplications.Weoffertheindustry'sbroadestportfolioof
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page3of22
GaNcapabilities,withadvancedlow-costpackagingtechniques,andwearetransitioningto6inchwafersthisyear.Withover15yearsexperience,QorvoistheonlyGaNsupplieratmanufacturingReadinessLevel9.Andwearerecognizedgloballyforenvironmentalrobustnessandindustry-leadingreliability.
Wecontinuetoseestrengthinboththecable,anddefenseandaerospacemarkets,whereQorvoistheGaNleader.WealsosampledGaNmacrocellpoweramplifierstomajorbasestationcustomers.AndwecontinuetoseeGaNasadisruptivetechnology,displacingsiliconLDMOS,whichisthedominanttechnologytoday.DuringJune,GaN-relatedrevenueincreased30%comparedtothesamequarterlastyear.
InWi-Fi,thedesignpipeline,especiallyfor5gigahertzintheenterpriseWi-Fispace,isverystrong.Qorvoisexpandingourstrategicrelationshipswiththemajorchipsetproviders,aswellastheleadingsuppliersofenterpriseequipment.Inautomotive,QorvowasrecentlyselectedtobethepreferredsupplierforfouroutoffiveRFcomponentsinanext-generationautomotiveantenna.
LeadingparticipantsfromacrossthemobiledataecosystemareengagingQorvotocontributemorebroadlyandmorestrategicallytoindustrygrowth,givenourabilitytodeliverbest-in-classsystemsolutions.Aswe'vediscussedpreviously,wehavesignedmultipleNDAswithleadingcustomers.
AndintheJunequarter,wepursuedadditionalopportunitiestolayeronincrementalrevenue,andwearemovingaggressivelytomovetheseprogramsfromtheprototypingandsamplingphasetoproduction.We'realsoworkingcloselywiththeworld'sleadingmobileoperatorstoimprovespectralefficiencyandhelpthemtomaximizetheirinvestmentsintheiravailablespectrums.Weareengagedwithdozensofoperators,andwecontinuetoaddtoourcarrierprogram.
BecauseQorvooffersacomprehensivesuiteofproductsandtheindustry'sbroadestportfolioofenablingtechnologies,weareuniquelypositionedtoimplementsystem-levelsolutionsthatleveragebothactiveandpassivesemiconductorcontent,withoutabiasoranyonetechnologyorapproach.Withallmajortechnologiesunderoneroof,wecanmatchtheoptimumtechnologytoeachcustomer'sapplication,balancingthetrade-offbetweenperformanceandcost.
Weareintheearlyinningsofthedeploymentofreceivedcarrieraggregation,whichimprovesspectralefficiency.Thisisanimportanttrendinthemigrationtowardsglobalandsuper-regionaldevices.It'splacingasignificantpremiumonhigher-performancefiltersandswitches,andit'sgivingQorvoexcellentvisibilityintheleadingsmartphonearchitecturesfor2016and2017.
Ascarriersfocusincreasinglyonspectralefficiency,wealsoseetransmitcarrieraggregationdrivingRFcontent,firstinChina,andmigratingelsewhere.Longerterm,theglobalwirelessindustryisworkingtowardsagoalof1-gigabitpersecondspeedonthedownlinkandtheuplink.
AnothersignificantdriverfortheRFTAMisthemigrationfromthree-modetofive-mode,andevensix-modedevices.Lastyear,itwasestimatedthatlessthan40%of4GdevicesinChinawerefive-mode,andweexpectfive-andsix-modedeviceswillrepresentthevastmajoritywithinthenextfewyears.
Lookingatdiversityreceivemodules,anincreasingpercentageofthesesolutionsareexpectedtocombinedpremiumBAWfilterswithhigh-performance,highthrowcountswitches--twoareaswhereQorvomaintainsacompetitiveadvantage.Thismarketisvaluedatapproximately$1billiontoday,andthat'sforecastedtoexpandtoapproximately$2billionoverthenextthreeyears.
SotheincreasingglobaldemandfordataisdrivinganexponentialincreaseinRFcomplexity,RFcontent,whilethetrendtowardsuper-regionalandglobaldevicesmeansgreaterperformanceandmorefunctionalityneedtobepackedinthesmaller-sizeimplementations.Thearrivalof5G,projectedinthe
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page4of22
2020timeframe,willbringmorebands,andlikelyhigherfrequencies,andeventougherRFchallenges,extendingthelong-termrevenuegrowthopportunityforQorvo.
Pullingbackalittlebitcloserin,therearemovingpiecesimpactingindustrydemandandourSeptemberguidance.First,theLTEbasestationmarketissoft.ThisisacontinuationofwhatwesawintheJunequarter,andweexpectwirelessinfrastructuretobedownsequentiallyintheSeptemberquarter.
Forcontext,theinfrastructuremarketprovidedaboutone-thirdofIDPrevenueinMarch.Itdroppedapproximately40%sequentiallyinJune,primarilytoapauseinLTEbasestationdeployments.Thatsaid,thewirelessinfrastructuremarketremainsagreatmarket,whereQorvocandoextremelywell.We'relookingforwardtothereturnofthewirelessinfrastructuremarket,andwe'rebringingoutnewGaNandSOIproductstosupportthismarketandthecontinuedglobalrolloutof4Gnetworks.
Second,we'veseenaslowingamonghandsetcustomersinChina.QorvohassecuredexcellentgrowthopportunitiesinChina,andChinaIncwasourlargestcustomerinJune,ifyoucombineallChina-basedbrands.WecurrentlybelievesomecustomersinChinahaveafewweeksofexcessinventorytoworkdown,andthis,too,isreflectedinourSeptemberguidance.WhiletheChinamarkethasgreatfundamentals,itcanbechoppy,andwe'reseeingabitofthatnow.
Atahighlevel,lookingacrossourbusinesses,weareverymuchlookingforwardtothereleaseofseveralmarqueesmartphonesthroughouttheremainderofthiscalendaryear.Andlong-termindustryfundamentalsarestrong.Designactivityisrobust.Engagementsareexpandingwithcustomers,channelpartnersandcarriers,andweareontracktoachieveourfinancialmodel.
We'reproudofouraccomplishmentsinJune.Weexpecttofinishthecalendaryearverystrong.Andwebelievecalendar2016willbeanevenstrongeryear,andthebestindicatoryetofwhatQorvocanachieve.
Andwiththat,I'llturnthecallovertoSteveforanin-depthreviewofourfinancials.
SteveBuhaly(CFO):
Thanks,Bob.
IntheJunequarter,Qorvogrewrevenue23%year-on-yearto$673million,whencomparedtoRFMDandTriQuintonacombinedbasis.Thisabove-marketgrowthwasledbyMobile,up35%to$551million.
IDP'srevenuedeclined13%to$122million,drivenbyasharpdeclineinbasestationopportunities.Outsideofwirelessinfrastructure,IDPrevenuegrewapproximately9%.Qorvohadtwo10%customers,thelargeratapproximately33%ofrevenue,representingtheaggregateddemandofmultiplesubcontractorsforthisend-customer.Oursecond10%customerduringthequarterwas[Waway].
Grossmarginwasarecord51.5%,upsequentiallyfrom50.4%,andupfrom44.8%intheprior-yearperiodforRFMDandTriQuintonacombinedbasis.TheimprovementinQorvo'sgrossmarginwasprimarilyattributabletofavorableproductmixandsynergies.
Operatingexpenseswere$159millionfortheJunequarter.Year-on-year,operatingexpensesgrewathalftherateofrevenuegrowth.Withinthis,R&Dgrew19%,aswepursueopportunitiesinahealthygrowthmarket.Andallotheroperatingexpenseswereflat.
Therealizationofsynergiesisallowingustogrowinvestmentinproductandprocessdevelopment,whilemakingsolidprogresstowardsouroperatingexpensemodel.Operatingincomewas$187.8millionversus$103.2millionintheyear-agoperiodforRFMDandTriQuintcombined.ThisdramaticimprovementwasledbyMobile,whichonapreliminarybasis,achievedover30%operatingincome,whilegrowingthetop
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page5of22
lineby35%.
NetincomefortheJunequarterwas$168.5millionor$1.09perdilutedshare.Thiscomparesfavorablytotheoriginalguidanceof$1to$110.
We'vebeenQorvoforsixmonthsnow,andthere'salottobeproudof.Revenueisup33%overthecombinedTriQuintandRFMDrevenueayearago.Themostexcitingpartisthegrowthinoperatingincome--up178%.
Synergyachievementandoperatingleveragearedrivingrealimprovementsinourbusiness.Wecontinuetomakegoodprogressonachievementofoursynergygoals,andexpecttoexceedtheminbothyears.
Lookingforward,weseesignificantopportunitiesduringcalendar2016,primarilyingrossmargin.Wehaveadedicatedteamandprocessfocusedonexecutingthecostreductionopportunitiespresentedbythemerger.
Totalcashandinvestmentswas$558million,andcashflowfromoperationstotaled$141million.Capitalexpendituresare$89million,primarilytoaddresscontinuedgrowthincustomerdemandforourpremiumfilters.TheCompanyrepurchasedapproximately602,000sharesatatotalcostof$50million.
Nowlet'sturntoourbusinessoutlook.InQorvo,we'vecreatedanewleaderinRFthatcanoutpacethegrowthrateofourunderlyingmarkets.
TotaladdressablemarketformobileRFisforecastedtogrowatacompoundannualgrowthrateof10%to15%overthenextfewyears,drivenprimarilybyunitgrowthof4GphonesandtheassociatedincreaseinRFcontentandcomplexity.It'snoteworthythatQ1'syear-on-yearrevenuegrowthof23%easilyexceededthis,despitesignificantheadwindsinthebasestationmarket.
Withaproductportfolioservingthefastergrowingpartsofouraddressablemarket,we'reexcitedaboutourgrowthprospects,andfeelwecanexceedtheindustry'sgrowthrate.Achieving28%operatingincomereflectsgoodprogresstowardsourfull-yeargoalof30%.Addinthesubstantialsynergiesyettocome,andwefeelconfidentwecanhitourmodel,whilemakingsubstantialinvestmentsintheprocesstechnologies,andgreatproductsthatsustainandenhanceourcompetitiveadvantage.
Qorvocurrentlybelievesthedemandenvironmentinitsend-marketssupportsthefollowingnon-GAAPexpectationsforthequarterendingOctober3.Quarterlyrevenueofapproximately$690millionto$710million,up4%atthemidpoint.Grossmarginofapproximately50%to51%.
Ataxrateintherangeof10%to15%.DilutedEPSintherangeof$1.05to$1.15,basedonapproximately155millionshares.Actualquarterlyresultsmaydifferfromtheseexpectations,andsuchdifferencesmaybematerial.
WecurrentlyexpecttoreportSeptemberquarterresultsonNovember5.Withthat,wewelcomeyourquestions.
QUESTIONS&ANSWERS
Operator :
Thankyou.
(OperatorInstructions)
VivekArya,BankofAmericaMerrillLynch.
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page6of22
VivekArya(Analyst-BankofAmericaMerrillLynch):
Thanksfortakingmyquestion.Bob,whenIlookattheSeptemberguidance,it's[missive]about$40million,plusorso.CouldyouhelpusquantifyhowmuchisonthefurtherweaknessinIDP?HowmuchisthatexcessinventoryinChina?Howmuchcouldbeweaknessoranycontentchanges,actuallargeUSandKoreancustomer?Ithinkwereallyneedthiskindofdetailtogiveusmorecomfortaroundwhatcausedthemess,andwhetherit'sashort-termeventorwhetherthereissomethingelsehere.
BobBruggeworth (President&CEO):
Vivek,thanksforyourquestion.Asfaraschangestotheoutlook,again,wedidnotguidefortheSeptemberquarteruntiltodaysoIdon'tknowthatIcanbridgetowhatwasinyourmind.ButItriedtosize,inmyopeningcomments,howsignificantthewirelessinfrastructurebusinessisforus.It'swellover$20million--almost$25millionfromthehighthatwesawjustacouplequartersago.It'saverysignificantnumber.Obviouslynogrowththere.There'satleast$25millionofsomeofthatgrowth.Andsomeoftheslowdownthatwe'veseeninChinathatwebelieveisgoingtobedeletedoffoverthenextfewweeksandwillpickbackup,andwe'llbebackontrackintheDecemberquarter.Wefeelprettygoodaboutthat.
Idon'tknowthatIcansizethat,becausewedidn'tgiveanyguidanceforit.Butasfarascontentchangesinanyofthephones,ormajorlosses,Idon'tseeanythingchanginginwhatourexpectationsareforwhatwefeltwehadwon,whatwehadwon,andhowwethinkit'sgoingtoplayoutfortherestoftheyear.Don'tseeanycontentchanges,morejustwhat'sgoingoninthemarketinChina,andwhatwesaidinthewirelessinfrastructuremarket.
VivekArya(Analyst-BankofAmericaMerrillLynch):
MaybeifIaskthatquestionadifferentway,whichis
BobBruggeworth (President&CEO):
Ithinkthat'sagreatquestion,Vivek.Again,that'swhywespentsometimeexplaining.Lastquarter,ifyou'reremember,wesaidwethoughtthattheIDPbusinesswouldbedownslightly.Itendedupbeingdownsignificantly,asStevehaspointedout--downabout13%quarteroverquarter,orthereabouts.Andthatwasmorethanmadeupfromthestrengththatwesawinourmobilebusiness.Thisquarter,weexpectingIDPtobeflat.Soallthegrowthisinthemobilebusinessthisquarter.
DougDeLieto (VPofIR):
Gotit.Andjustlastly--
BobBruggeworth (President&CEO):
Vivek,ifIcould,whatIsaidinmyopeningcommentsis,weareexpectingthewirelessinfrastructuretobedown,offsetifyouwill,bywhat'sgoingoninJames'sotherbusinesses.IDPisroughlyflat.
VivekArya(Analyst-BankofAmericaMerrillLynch):
Andthenlastly,intermsofOpEx,Ithinkitwasin[winorwean]intermsofthecostsynergiesthatyouhadoutlinedbefore.HowshouldwethinkabouttheOpExtrajectoryforthenextfewquarters?Thankyou.
BobBruggeworth (President&CEO):
Steve,doyouwanttohandlethat?Youhadsomecommentsinyourscript.
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page7of22
SteveBuhaly(CFO):
Youbet.IexpectOpExtocontinuetobeinthe150s,probablymid-150s,asweaverageoverthequarters.WedidspendabitinR&Daswepursuedsomeadditionalopportunitiesthatcametoourattention,primarilyengineeringmaterials,prototypematerials,typeexpenses.Ifyoulookyearonyear,orsixmonthstosixmonths,almostanyofthecomparisons,SG&Aisflatyearonyear,despitesignificantrevenuegrowth.Thatreallyreflectssynergiesoffsettinginflation-kindofcosts.R&Disuplessthantherateofrevenuegrowth.Andthesynergiesthereareallowingustopursuesomeoftheseopportunities,whichwefeelverygoodabout.
VivekArya(Analyst-BankofAmericaMerrillLynch):
Thankyou.
Operator :
GabrielaBorges,GoldmanSachs.
GabrielaBorges (Analyst-GoldmanSachs):
Thankyoufortakingmyquestion.
Maybejustalittlemorecolorontheweaknessthatyou'reseeingintheChinamobilemarket?IsitprimarilyontheLTside,or3Gside?Anycoloronwhetherit'sconcentratedonacoupleofcustomersormorebroad-basedthanthat?Andifyouhaveanysenseanecdotallyonwheninventorycouldbebackatmorenormalizedlevels?Thanks.
BobBruggeworth (President&CEO):
Sure.Thankyou,Gabriela.
Onahighlevel--andI'llletEricgivealittlemoreofthedetails.WerestillverymuchenjoyinggrowthinChina.Wethinkthemarketis,likewesaidearlier,intheveryearlyinningsofitsmigrationto4G.Wereseeingthetrendofmovingfromthree-modetofive-mode,six-mode.AllthemacrothingsthatweseeinChinaareallintact.Themarketscontinuetomigrate2Gto3G,andsomegoingto4G.Sosubsarebeingadded.Wefeelrealgoodaboutthat.WedidseealittlebitstrengthlastquarterinourChinamarket,andthey'redigestingsomeofthat.
I'llletErictalkalittlemore.
EricCreviston (PresidentofMobileProducts):
Ithinkyoucoveredthehighpointsreallywell.Long-term,nothing'schanged.WethinktheChinamarketisverymuchontrack,andinoneofourgreatestgrowthopportunities.Wethinkourcontentthereissettogrow,aswellasourshareopportunities.WedidhaveaverybigquarterlastquarterinChina.BasicallyalloftheupsidethatweexperiencedtoourexpectationswereduetoChina.Andconsequently,we'regoingthroughacooling-offperiod,digestingsomeofthatgrowth.Aswesaid,wethinkthisisweeks,notmonths,ofacorrectionhere.Bytheendofthisquarterweexpectthingstobebackontrack,headingoutofthequarter.
GabrielaBorges (Analyst-GoldmanSachs):
Andjustafollow-upthen,onthe(short)positioninChina,relativetothreemonthsorsixmonthsago.AnyupdateonhowyoufeelthetractionforproductslikeRFFlexandRFFusionarematerializingwithallofitsexpectations?Andhowyoufeelaboutyourpositioninreferencedesigns,aswell?Thankyou.
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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EricCreviston (PresidentofMobileProducts):
Thanksforthequestion.WedidannounceintheearningsreleasethatweareinproductionwithRFFlex.Lastquarterwesaidwehaddesign-in,nowwe'realreadyshippingproduction,justaswewereexitingthequarter.Soweareseeingadoptionofthat.Andwe'rehavingalotofdesign-inactivityaroundFusion,bothwithreferencedesigns,aswellaswiththeendcustomersthere.
Sogreattractionwiththehighlyintegratedproducts,whichgivesustheopportunitytoaddressvirtuallyalltheRFcontentinanyofthesehandsets.Wealreadyhavemanyoftheflagshipdevicestherewiththeleadingsuppliers,inwhichwehavemultipledollarsofcontent.Weseeagoodbaseandalotofopportunitytogrowfromthere.
GabrielaBorges (Analyst-GoldmanSachs):
Iappreciatethecolor.Thanksverymuch.
EricCreviston (PresidentofMobileProducts):
Thankyou.
Operator :
MikeBurton,BreanCapital.
MikeBurton (Analyst-BreanCapital):
Thanksforlettingmeaskaquestion.First,atwo-parter.I'mhopingyoucanhelpusunderstandhowyourorderstrackedduringthequarterandintotheSeptemberquartersofar,that'scausingthebelow-seasonalguidefortheSeptemberquarter.Andthensecondly,ifthereissomeinventoryinChina,howdoyouexpecttheDecemberquartertolookatthispointversusnormalseasonality?
Irealizeitbouncesaroundquiteabit,butit'sbeenrightaroundthe5%range.Andlastly,justinlinewiththat,inarecentconferencecall,youguysspokeaboutsecondhalfrepresentingroughly55%to58%oftherevenuefortheyear.I'massumingthat'schangedalittlebit.Iwaswonderingifyoucouldupdateusonthat?Thanks.
BobBruggeworth (President&CEO):
Thanks,Mike.Alotofpartstothat,andI'lltakeastabatthat.Asfarasorderstrackedinthequarter,otherthanthesurprisethatwesawinthewirelessinfrastructure,thingsprettymuchwereontrack.Ifyoutakethedropthatwesawinthewirelessinfrastructure--Imentionedsomewhereintheneighborhoodof$25million--asanexample,Imean,that'sthedifferencebetweenourguideandroughlyan8%guidequarteroverquarter.Whichactuallywouldbequitehealthythisseason.WetypicallyexpecttheSeptemberquarteroverJunetobeinthemid-singledigits,followedbysomethingalittlebithigherintheDecemberquarter.
Weactuallythink,again,themobilebusiness,that'smuchhowourmobilebusinessisrunning.Andwhatwe'reseeingisthelackoftheinfrastructurebusiness--likeIsaid,we'reseeingthatdown.Soifyoutakewhatthat'sdownandaddittoourguideoverwherewewereaquarterago,we'requitehonestlytrackingjustlikeyousaidthere.Asfarastheweightingbetweenthetwoparts,Ithinkwetypicallyhavesaidmorelike45/55.AndSteve,doyouwanttotakethat?
SteveBuhaly(CFO):
Yes,Ithink45/55isasgoodasany.Occasionally,basedonmypriorexperienceatTriQuint,wewould
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page9of22
wanderupintothe57%,58%.Ithinkthough,longterm,55/45isagoodmetrictogowith,andIthinkthat'sasgoodaguessasany.
MikeBurton (Analyst-BreanCapital):
Okay.Andthenalsolookingforwardatthecarryaggregationcommentsthatyoumade,justwonderingonthetimingfromwhatyou'rehearingfromsomeofyourcustomers,astowhenthesearegoingtohappen?ObviouslyyoumentionedfirstonTDLT,butthenlookingforwardtoFTD,Iwaswonderingifyougiveussomevisibilitythatyou'rehearingabout,whenwewouldstarttoseethatimplementedintothehigh-endphones?Thanks.
EricCreviston (PresidentofMobileProducts):
TheconeIthinkyou'rereferringtoisonthetransmituplinksidecarryaggregation,soI'lltalkaboutthat,aswellasonthereceiveside.Asyouknow,receivecarrieraggregationisintheearlyinnings,butalreadybeginningtorollout,ineffect,thepremiumtiers,especiallyintheUS.
Wethinkthereceivecarrieraggregationcontinuestoproliferateglobally,andactuallyintoChinaaswell,earlynextyear.Andthenreallywhatyougetonthereceivecarrieraggregationsideisarealproliferationofmodesandbandcombinations,thatyoutrytobuildglobalskews.That'soneofthelargestdriversfortheRFTAMoverthenextcoupleyears.
Now,thecommentsonTX,oruplinkcarrieraggregation,wedoseethatactuallybeginninginChinabytheendofnextyear.Andthenfromthere,itwillbegintogoouttotherestoftheworld--or2017and2018.You'regoingtoseemostoftheTAMdriverandCAonthereceivesideforthenextyear.Andthenonthetransmitside,kickinginafterthat.
MikeBurton (Analyst-BreanCapital):
Okay,andthen,sorry,justtofollowuponmyfirstquestionagain,becauseI'mrunningthemathherefast.Ithinkthe45/55impliesaprettymassiveDecemberquarter.Wasthatcommentreallyforhowyouexpectthesplittogoonago-forwardbasis?Andthenareweexpectingaseasonalbuildinthemid-singledigits,whichthenIthinkwouldputyouryear-over-yeargrowthkindofflattish?Isthatreallytherightwaytothinkaboutitatthispoint?Justanyhelpthere.Thanks.
SteveBuhaly(CFO):
Ithinkwe'rebetteroffstickingtothatasageneralruleofthumbversusprovidingguidanceforthecalendarfourthquarter.Sopleasetreatitasageneralseasonalitycommentversusanattempttoguidebackintotheyear.
MikeBurton (Analyst-BreanCapital):
Okay,thanks,guys.
Operator :
HarshKumarwithStephens.
HarshKumar (Analyst-StephensInc.):
SothequestionIhadis,Ithinkthebigconcernaroundyourguidetodayisaboutyourgrowthratebeinglessthantheotherguysthatsupplytoyourlargestcustomer.We'vehadacoupleofthoseguysreportthosecompany'sreport.Couldyoucommentrelativetoyourbusinesswithyourlargestcustomer,ifbasicallythatbusinessisuptoyourexpectation,andalliswholewiththatparticularcustomer?Andthe
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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issues,firstofall,arelargelyChinaandIDP?That'sonequestion,andIhaveafollow-up.
BobBruggeworth (President&CEO):
Sure,thanks,Harsh.Eric,doyouwanttotakepartofthat?
EricCreviston (PresidentofMobileProducts):
Sure.Iwouldsay,justasBobsaidearlier,there'snochangeinourcontentexpectationsonanyoftheplatformsthatweseerampinginthesecondhalf.
HarshKumar (Analyst-StephensInc.):
Great,that'shelpful.Andthenthesecondquestion,IwanttocomebacktoVivek'squestion.Ithinkthatthestreetscenethatinvestorswanttotriangulateonsomeparttothemix,.CouldyoumaybetellushowmanyweeksofinventoryisthereinChina?Howmuchofahitthatwas,eitherindollarsorunits,toyou?Andifitis2G,3G,orLT?Andalsosomesimilarcommentary--howmuchofahitdoyouthinkyou'retakingontheinfrastructuresideinyourrevenueguide?
BobBruggeworth (President&CEO):
Ontherevenueguide,Italkedabouttheinfrastructureside.WhatIcan'tansweriswhatthestreetexpectedtheinfrastructurebusinesstodo,Harsh.ButwhatI'vesaidis,we'redown$20million,$25millionoverwherewewerejustacouplequartersago.Ibetthestreetwasexpectingthattogrow,notdeclinesignificantly.
Ithinkfromnormalseasonality,that'sanormalseasonalgrowthforus,is,youtakewhatthestreethadusinat665,goingto745.That'sclosertodouble-digitgrowth,sothat'salotgreaterthantheindustry.Theprimarydeltathatweseeistheinfrastructurebusiness.AndjusttobeclearontheinventoryinChina,wejustsaidit'safewweeks.
HarshKumar (Analyst-StephensInc.):
Gotit.Thanks,Bob.Thanks,guys.
BobBruggeworth (President&CEO):
Thankyou.
Operator :
EdwardSnyder,CharterEquityResearch.
EdwardSnyder (Analyst-CharterEquityResearch):
SoEric,ifordersoutsideofIDPwerefairlynormal,whytheexcessinventoryinChina?Andwhydoyouthinkit'sweeks,insteadofmonths,ofacorrectionthere?Isthatwhatyourcustomersaretellingyou?Aretheseonhubs?Justgiveusafeelif,youcould,onwhyyou'resooptimisticthatit'snotgoingtobealong-termcorrection?
AndthenJames,thebighitobviouslytoinfrastructure--anditsoundslikeit'sgoingtobeflat.Whydoyouthinkit'sgoingtobeflatinsteadofdown?Dotheorderpatternssuggestthat,that'sfirmingup?Andwhatotherbigareasofyourbusinessdoyouhavethatkindofexposureto?IthinkBobsaiditwaslike30%.Soifyoujusthelpusreallyunderstandwhatarethebigchecksthatgouptomakeupyourrevenuethatwouldprobablybehelpfultoo.
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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EricCreviston (PresidentofMobileProducts):
Allright,James,whydon'tweletEricgofirst?
JamesKlein (PresidentofInfrastructureandDefense):
Yougoahead,Eric.
EricCreviston (PresidentofMobileProducts):
Sure,Ed.ItisalittlehardtotrackexactlywhereallthepartsaregoinginChina.Mostofourpartsaresoldacrossmultiplecustomers,aswellasmultiplebasebands,insomecases.Andastheyareshiftedbetweenbasebandsandalsobetweencustomers,andthenwithinmodels,asyourcustomers,it'snotpossibletotrackexactlywhereeverypartisgoing.Again,wesawaverystrongJunequarterinChina,andaveryhealthyshift-in.Andthenwesawalotofmixchangeatourcustomers.AndIthinksomeoftheminparticularendedupwithalotmoreinventorythantheywereplanningbytheendofthequarter,andtheyjusthavetodigestthroughthat.
JamesKlein (PresidentofInfrastructureandDefense):
Eric,letmetalkalittlebitatthischangeaboutwirelessinfrastructure.Weweredown,asBobsaid,about40%quarteroverquarter.Ithinkwefaredalittlebitbetterthansomeofourcompetitorsinthatmarketplace,butweweredownabout40%.Goforwardbasis,wethinkwe'llbedownalittlebitagainthisquarter.Butitdoesfeellikeit'sbottomingout.We'reseeingsomepositivesignsfromthemarket.Andreallyourfocusnowistomakesurewe'rereadyforwhenitbouncesback.Wecertainlyseethatthedemandwillbetherelongterm,andcomeback.Andthere'snoshortageofdemandforthedeploymentof4Garoundtheworld.
Soasfarasotherbusinesses,wehadarecordquarterincable,opticalandWi-Fi,andautomotivebusinesseswereallstrong.Ourdefensivebusinesswasrelativelyflatquarteroverquarter.Butthat'stypicallybeenfairlylumpyforus,andwe'reexpecting,onthedefenseside,tohaveastrongsecondhalf.ToBob'snoteearlier,Ithink,again,itreallywasawirelessinfrastructurepauseforus,andwefeellikewe'restartingtoseethebottomofthat.
EdwardSnyder (Analyst-CharterEquityResearch):
AndthenSteve,yourmarginperformancewasexcellent.You'reguidingforalmostasimilar--alittlebitofadecline.ItwassuchasteepdeclineinIDPintheJuneperiod,whichistypicallymuchhighergrossmarginsthanyourcellularbusiness.Andyourcellularbusinessdidn'ttail--or,theconsolidatedmarginsdidn'ttailoffhere.Doesthatsuggestthatyourblendincellularispermanentlyincreasedtoahighermargin?IsthistheBAWbusinesskickingin?
Iknowwetalkedaboutthepastexpansions,andforthesecondhalf,isthathappeningatthispointnow?AndyourCapExisjustmoreofthesameinthesecondhalf?Justtryingtogetanideaofhowthemarginmixnowbetweenbusinesses--especiallyduringtheBAW--isshakingout.
SteveBuhaly(CFO):
Yourthesisisbasicallycorrect.Wesaw,aswehaveinotherquarters,above-averagegrowthinourhigher-marginpremiumfiltersandswitchesportionofMobile.Andoverall,Ericandteam,alongwithhisfriendsinmanufacturing,didaterrificjobofimprovingtheoverallbaselinemarginsinMobile.Betweenthosetwothings,wewereabletoovercomethehitinthewirelessinfrastructuremarket.
EdwardSnyder (Analyst-CharterEquityResearch):
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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AndSteve,yourconsolidatedmarginsarestilllowerthanIDP,correct?
SteveBuhaly(CFO):
That'scorrect.
EdwardSnyder (Analyst-CharterEquityResearch):
SoonceIDPcomesback,andassumingthatitdoes,thenyourconsolidatedmarginprofilewillbealittlehigherthanJune,giventhesteepdropinIDP.Isn'tthatafairassumption?Ifitweretocomeback--
SteveBuhaly(CFO):
Certainlythelastpartofitwillbeaccretive.Now,mobilealwayshasacapabilityofoutgrowing,James,prettyhandily.Soyourmileagewillvaryalittlebitquarterbyquarter.Butagain,yourthesisiscorrect.Seeingthewirelessinfrastructurecomebackwillbeveryhelpfulforouroverallmargin.
EdwardSnyder (Analyst-CharterEquityResearch):
AndthelasttimewespokeaboutBAWcapacityexpansionIthinkwas--intheDecemberperiod,youweretalkingbutdoublingitbyJune,andIunderstandthathasoccurrednow.Itsoundslikeyou'recontinuingtoexpand.WhendoyourunoutofspaceinTexas?
SteveBuhaly(CFO):
Thebigmovenextforenhancedcapacity--andweretalkingforthe--handlingthepeakdemandthatwe'dtypicallyseeayearfromnow,willbeconversionofasubstantialpartoftheBAWmanufacturinglineto8-inchwafers.
EdwardSnyder (Analyst-CharterEquityResearch):
Historically,that'sbeenrealnightmare.Iknowyouguyshavebeenworkingonit.Whereareyouonthat?Haveyougotproductionstuff,ordoyouhavestuffoutoftheengineeringlabthatlookslikeitcouldbeinproduction?Anyideaatallwhenyou'dhave8-inchrunning?
SteveBuhaly(CFO):
Wehaveapilotlineinplace.We'recomfortablewiththeprogress.WethinkourarchitecturemaymakelifealittlebiteasierthansomeoftheotherarchitecturesoutintheBAWmarket.
BobBruggeworth (President&CEO):
Weexpecttobeprototypingsomesamplesbytheendoftheyear,andinproductionnextyear.Theteamisprettyexcitedaboutwhatthey'reaccomplishedsofar.Andquitehonestly,thingsareontrack.
SteveBuhaly(CFO):
Andasyouknow,Ed,younotonlygetspacesavings,whichhasbecomemoreofanissueforusintheTexassite,youalsogetsomefairlysignificantcostreductions.Sowe'reprettyexcitedaboutit.Isanimportantprogramforus.
EdwardSnyder (Analyst-CharterEquityResearch):
Great.
JamesKlein (PresidentofInfrastructureandDefense):
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page13of22
ThisisJames.IfIcanadd,we'realsotransitioningourGaNto6-inchinTexas,andthat'srightonthetailofmovingourPMto6-inchinTexas,aswell.Soquiteabitoftransition.
EdwardSnyder (Analyst-CharterEquityResearch):
Thanks.CanyoutalkabouthowbigGaNisforyounow?
JamesKlein (PresidentofInfrastructureandDefense):
Well,Iwon'tgointothedetailednumbers,butwearenumberoneinthemarketincableandindefense.Weseebothofthosemarketscontinuingtogrowataprettystrongpace.Defenseisreallyourstrongestnear-termgrowthopportunity,andwe'redoingverywellthere,bothdomesticallyandinternationally.Ithinkaswesample--Bobtalkedearlieraboutsamplingproductsintothebasestation,OEMs.Andwebelievewe'repositionedwellforrevenuereallytostartinthatmarketin2016.Overall,verypositive.Ithinkwe'llgrowfasterthanwhatweseetheGaNmarketpredictedtogrow.
EdwardSnyder (Analyst-CharterEquityResearch):
Great,thanks,guys.
BobBruggeworth (President&CEO):
Thanks,Ed.
Operator :
SteveSmigie,RaymondJames.
SteveSmigie (Analyst-RaymondJames):
Thanksalot,guys.Ijustwantedtofollowupquickly.AswelookouttoDecember,isitpossibletogetsomethinginthat$800millionrevenuerange?Andifthat'sthecase,doesthatrequirearecoveryinthetelcoequipmentbusiness,orcouldyoudothatonwireless?
BobBruggeworth (President&CEO):
Steve,asyouknow,wedonotguideouttwoquarters.Ithinkit'ssafetosaythatwhatwearecomfortablewithis,wecankeepupwithindustrygrowthrates.Andit'sobviously--westayedatourplan,istogoslightlyfasterthanthat.Andwe'regoingtostaywiththosecommentsatthistime.
SteveSmigie (Analyst-RaymondJames):
Okay,fairenough.Andyouguyssaidyoustartedtoseealittlebitofrecoveryinthattelcoequipmentbusiness.SodoesthatsuggesttoyoumaybeQ4isthequarter?Iknoweveryoneistryingtogetatthisacrossmultiplesemiconductorsuppliers.Butdoesitseem,Q4,likeagoodquarterwherewecouldseesomeofthebounce-backfromthatsharpdecline?OrmaybemoreQ1?
JamesKlein (PresidentofInfrastructureandDefense):
Well,again,Ithinkit'simportantthatwefeellikewe'veseenthebottom.Andwe'restartingtoseesomesignsthatit'sgoingtostarttopickbackup.I'mnotprojectingthatwe'llbebackintostrongrevenueinQ4,butIdofeellikewe'reontheuptick,andthingsarestartingtogetbetter.AndIagree--alotofreportsofwhetherit'sgoingtobeQ4orQ1,orwhenthatbusinessreturns.
SteveSmigie (Analyst-RaymondJames):
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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Isitfairtosaythat--obviouslyitdroppedoffsharply,largelyduetoChina.Isitfairtothinkthat,thatmightrecoversharply?Orareweatsomewhatlowerlevels?
JamesKlein (PresidentofInfrastructureandDefense):
Well,Ithinkit'sfairtothinkofthisasrecoveringquickly.Andthat'sreallythegenesisofmycommentsearlieraboutmakingsurewestayveryclosetoourcustomers,andwe'rereadyforthereturn.
SteveBuhaly(CFO):
Remember,theunderlyingexpansionof4GphonesinChinahasnotsloweddownawholelot,right?Andatsomepoint,thosephonesaregoingtoneedbasestationstocommunicatewith.Sowethinkthisisadisturbance,ifyouwill,inthemarket,causedbysomeexternalactivities,versusapermanentreductionindemandfortheseproducts.
SteveSmigie (Analyst-RaymondJames):
Great.IfIcouldstickonelastonein.AndBob,Iapologize,becauseyou'reright,I'vealreadybuggedyouaboutQ4,andI'mgoingtohavetopushitbygoingtoQ1.ItsoundslikeyouweresayingQ4,noreasonyouwouldnotseeindustrystandards.SoisitfairtothinkatthispointforQ1thatseasonalorindustryperformanceiswhatyou'dexpectinQ1also?
BobBruggeworth (President&CEO):
Yes,asyouwell-know,andeverybodyelseonthecallknows,Marchistypicallyadownquarter,andnothingthatwe'veseenischangingwhatwecurrentlyexpectfortheindustry.TheprimarythingIwanteveryonetounderstandis,wedon'tfeelwe'velostanymajorsocketssincethelasttimewetalkedtoyou.Wehaven'tseenanyopportunitiesthatwethoughtweweregoingtowinthatwecan'tstillwinorhavewon,fromallthoseperspectives.Fromthemobilebusiness,wefeelverygoodaboutourposition,andwebelievewecontinuetogrowfasterthanthemarketthisyear,aswellisnextfiscalyear.
SteveBuhaly(CFO):
I'daddtothat.Ithink2017haseverychanceofbeingagreatyear,calendar2016.We'regoingtoseesometrulyintegratedproductdesignscomingoutofJames'sandEric'sshops.Youreallybringswitchesandfilterstogether,forexample,toservecustomerneeds.Andyou'regoingtoseeusreallystartingtoaddtotheCOGsynergies,aswemoveexTriQuintmobilepartsintoournewChinaassemblyandtestfacilities,amongotherthings.Butthat'sthelargestsynergythat'syettocome.SoIthinkcalendar2016,FY17,isreallygoingtohavealotgoingforit.
Operator :
[VishayRakesh],Mizuho.
VishayRakesh (Analyst-MizuhoFinancialGroup):
Justaquestiononyoursecondhalf.WhenyoulookatyourSeptember,Decemberquarters,yourkindofSeptember,Decemberquarters.[Theyarewhileactuallyplanned],youusuallyhaveDecemberquarterstrongerthanSeptemberquarter?Ortheyaresplitequally?
BobBruggeworth (President&CEO):
Typically,weseemid-singledigitsgrowthinSeptemberoverJune,andpushinghigh-singledigitsinDecember.Typically,DecemberismuchlargerthantheSeptemberquarteringrowthrate.
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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VishayRakesh (Analyst-MizuhoFinancialGroup):
Gotit.Andaswelookatyourcapacitythatyou'readdingontheBAWside,haveyouchangedanyexpectationsthere?HowmuchcapacityareyouaddingontheBAWsidefortheyear?Andifyouhavethoughtaboutnextyearaswell.Thanks.
SteveBuhaly(CFO):
Steadyasshegoes.We'vecompletedthemajoraddssupportingthisbusysellingseason,andasstatedearlier,we'reworkingonaconversionofasubstantialpartofourmanufacturingto8-inchcapability,tosupportthe--ayearfromnow.
VishayRakesh (Analyst-MizuhoFinancialGroup):
Allright,thanks.
Operator :
QuinnBolton,Needham&Company.
QuinnBolton (Analyst-Needham&Company):
JustwantedtofollowuponthatsplitofrevsbetweenSeptemberandDecember.IthinkSteve,backatTriQuint,youguysoftencautionedinvestorsthatthetimingoftherampofthelargestcustomer,ifitshiftedoutaweek,itreallyaffectsthetimingofrevsbetweenSeptemberandDecember.I'mjustwondering,isthatatallinplayherefortheSeptemberquarterguide?Areyoutakingamorecautiousviewonthetimingofthatramp?Orit'swhatyoumightcallamorenormalrampforthelargestcustomer,anditreallydoesn'thaveanyimpactonthetimingofrevsbetweenSeptemberandDecember?AndthenI'vegotafollow-up.
SteveBuhaly(CFO):
Quinn,yourmemoryisexcellent.Ioftendocaution,andIcontinuetocaution,thatverylargecustomers'ramptimingcanandhasmoveditaweekhereorthere,andreallypushesthesequentialcomparisonsaround.Idon'tbelievethat'safactorinourguidetoday.Thatdoesn'tmeanit'snotgoingtohappen.Itmeans,ifit'sgoingto,wedon'tknowaboutityet.
QuinnBolton (Analyst-Needham&Company):
Gotit.Understood.Okay,great.
AndthenforEric--youtalkedaboutthetransmitCAstartingtodrivecontentlatein2016.Justwonderingifyoumightbeabletogiveussomesense,what'sthedollarcontentincreasesofphoneimplementstransmitcarrieraggregation?
EricCreviston (PresidentofMobileProducts):
Inthefirstwaveoftransmitcarrieraggregation,itwillbedoneintra-band,whichmeansthatwithinthesameband.Sothere'sminimalimpacts.Thinkofitas$0.50orsoofadditionalcontent.That'sstillsignificantonthetypeofunitswe'redoing.Butwhenwegettothenextphaseafterthat,2017,2018,that'swherewebegintoseemultiplepoweramplifierpacks.Andyoucaneasilygetto$1.50ofadditionalcontentbeyondthat.
Inthenearterm,thereceivecarrieraggregationdrivingmorelike$1to$1.50incontenthappening,andthenandanother$0.50withintra-bandTX,andanother$1.50ontopofthatwithintra-band.Butafter
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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that--allofthat[addstryingtodevelopto]migratingfromthemajoritytoday,three-modegoingtothevastmajoritybeingfive-orsix-modeoverthatsametimeperiod.That'swhywe'reexcitedaboutbeingattheverybeginningofalong-termgrowthintheoverallTAMinChina.
QuinnBolton (Analyst-Needham&Company):
AndEric,justanotherfollow-uponthat.Wouldthatmeanifyouhaveintra-bandtransmitcarrieraggregation,youmightactuallyhavemultiplePAsperfrequencybandorforfrequencybandrange?Isthatwheretheextracontentcomesin?
EricCreviston (PresidentofMobileProducts):
That'sexactlyright.Aswellasadditionalcontentintheswitches,ofcourse,todrivethat,andfiltersandeverythingthatcomesalongwithit,basically.There'salotofthingsundertheplanningnow.Thisisabigpartofourworkwiththecarriers,andourprogramtoworkwiththemobileoperatorsanddrivetheserequirements,andunderstandthebenefitsofitandwhichbandswewanttooperateatthesametime.We'rehelpingtodefinewhatcanbedone.Andofcourse,we'reencouragingthemtomaketheRFrequirementsverystiff.Makeitreallyhard.Becauseweinvesttechnologiestoenablethat,andthey'llgetthemostreturnontheirinvestmentwhentheydo.
QuinnBolton (Analyst-Needham&Company):
Great,thankyou.
BobBruggeworth (President&CEO):
Thanks,Quinn.
Operator :
TomDiffely,D.A.Davidson.
T omDif f e ly(Analyst-D.A.Davidson&Company):
Goodafternoon.FirstSteve,onthemarginside,howmuchmarginvariancedoyouhaveinsideamobile?Andisvolumediscountingthebiggestvariablethere?
SteveBuhaly(CFO):
Sorry,yourlastcommentwasvolumediscounting?
T omDif f e ly(Analyst-D.A.Davidson&Company):
Well,IwaswonderingifvolumediscountswerethebiggestvariableinsidetheMobilemarginstructure?
SteveBuhaly(CFO):
No.Iwouldn'tcharacterizeitasvolumediscounting.Mostofourhighervolume--manyofourhighervolumesarecustom,sothere'snotreallyacomparisonlikethat.Thereisreasonablevariationamongstourmargins,bothbycustomerandbyproduct,andbyproducttype.Sothere'snotareallyveryeasyanswerthere.Butyes,mixisafactor,bothwithinIDPandmobile,andbetweenthetwo.
T omDif f e ly(Analyst-D.A.Davidson&Company):
Onanabsolutebasis,afewhundredbasispointsvarianceiscommon?OrwhatkindofrangewouldyouexpectinsideofMobile?
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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SteveBuhaly(CFO):
Itreallydependsonthemix.Ican'tgiveyouasimpleanswerthere.Toomanyparts,toomanycustomers,toomanyproducts.
T omDif f e ly(Analyst-D.A.Davidson&Company):
Okay.AndontheBAWfilterside,what'syourviewofthemarketrightnow,thetotalmarket,thesupply/demandequation,forBAWfilters?
EricCreviston (PresidentofMobileProducts):
Westillseethat,ofcourse,asoneofthemostexcitingpartsofthemarket,growingveryrapidly.WedoseealotofpotentialnewapplicationsforBAW.We'vetalkedaboutdiversityreceivemodules,forexample,theWi-Fiintegratedfusionmodulesinwhichwe'llreallybeanchoredaroundourBAWfiltercapability.Again,workingwiththemobileoperators.
Lookingoutfurtherandfurther,weseealotofbandsthatweretraditionallydoneinthe[sourTCsaw]thatmayrequireBAWgoingforward.Becausewe'retryingtogetmorethroughputoutofthefrequencyrange.Soallthisaddsuptomoreofthesame.It'soneofthefastest,maybethefastestgrowingpartoftheRFTAMforthenextfewyears.Andintermsofsupply,we'rejustkeepingupwithdemand.It'saveryrationalmarketrightnow.Wehaveprettygoodvisibilityintotherequirements,andwe'rekeepingup,justkeepingpace.
T omDif f e ly(Analyst-D.A.Davidson&Company):
Okay.Itsoundslikeyourcompetitorisjustkeepingpaceaswell,sothere'snot--youdon'thaveperiodslikeglutsinthemarketplace?
EricCreviston (PresidentofMobileProducts):
That'sexactlyhowitfeelsrightnow.It'saverygoodbalanceofdemandandsupply,managingthroughaprettyhigh-growthmarketprettywell.
T omDif f e ly(Analyst-D.A.Davidson&Company):
Allright,perfect.Thankyou.
BobBruggeworth (President&CEO):
Thanks,Tom.
Operator :
CodyAcree,AscendiantCapital.
CodyAcree (Analyst-AscendiantCapitalMarkets):
Thanks.Eric,maybewiththeexcessinventoriesinChina--doyouhaveabalancedviewof2Gand3GversusLTE?
EricCreviston (PresidentofMobileProducts):
Sure.Ithinkwe'rereallytalkingabout4Ghere.2G,3Gis,Ithinkwesaidlastquarter,diminimustous,lessthan5%ofrevenues,basically.So3Gisfallingoffprettyrapidlyintermsofunitsbeingreplacedby4G.Andthedollarcontentdifferencebetween2Gand4Gisdramatic.Reallywhatwe'retalkingabouthereis
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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wholly4G,inourcase.
CodyAcree (Analyst-AscendiantCapitalMarkets):
Andareyouseeinganypositiveornegativeimpactsofthebasebandmarketshareshifts,particularlywithsomeofthelargestOEMs?
EricCreviston (PresidentofMobileProducts):
Longterm,itdoesn'tmakethatmuchofadifferencetous.Wehavegreatopportunitiesonallthebasebandsoutthere,includingtheverticalones,andthemajorindependentones,ofcourse.Nowofcourse,inanygivenquarter,themixbetweenthosebandsandwhichcustomersareusingthemandwhichmodelsyou'rein,candefinitelyhaveabigeffect.Butit'snotfundamentallybecauseoftheshiftbetweenbasebands.It'smorejustmixandchurninthemarket,andhowthingsendattheendofthequarter.
CodyAcree (Analyst-AscendiantCapitalMarkets):
AndSteve,justgiventimingonthelayeringinofsomeofthelargergrossmarginimprovements,thein-sourcingorsomeofthenewproductscomingoutfornextyear?
SteveBuhaly(CFO):
It'salittletoosoontosay,butrightnow,Iwouldjustflyitrateablythroughtheyear.
CodyAcree (Analyst-AscendiantCapitalMarkets):
Allright,great,thanks.
SteveBuhaly(CFO):
Thanks,Cody.
Operator :
TimLong,BMOCapitalMarkets.
T imLong (Analyst-BMOCapitalMarkets):
Thankyou.Twoquestions,ifIcould.
First,anynewchangesinthecompetitivelandscape,particularlyanytractionatallwithanyoftheCMOSplayersinthemarket?Andthensecondly,ifyoucouldtouchontheotherlargevendors--Samsung,theyhadbeenadouble-digit,greater-than-10%customer.Theyarenolonger.Butitseemslikethelatestroundenhancementsdidhavemorecontentthough.Couldyoutalkalittlebitaboutwhatmightbehappeningwiththeotherlarge[hence]vendor?Thankyou.
EricCreviston (PresidentofMobileProducts):
Yes,thisisEric.I'dbehappyto.
Firstofall,regardingourcompetitivelandscape,nosignificantdifferenceatall.AndcertainlynochangeintermsoftractionwithCMOSandsoforth.Overall,verysimilarlandscapetowhatwe'vebeendealingwiththisyear.Sothat'sontrack.ThequestionregardingSamsung,wetalked,Ithink,lastquarteraswell.Wedefinitelyseethatasoneofourgreatestopportunitiesforgrowth.We'renotatallhappywithoursharetherethisyear,andit'sgotalotofroomforgrowthnextyear.
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
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Wedothink,evenonsofttodownunits,thatthedollarcontentatSamsungisgoingtogrownicelyyearoveryear.Wearereallylinedup,withourinvestmentsoffullystaffed.Alotofprogramstocapturesignificantvalueinhandsetswiththatcustomerwillbelaunchingearlynextyearr.
T imLong (Analyst-BMOCapitalMarkets):
Okay.AndwhatyouthinkthemainchallengewithSamsungforyouhasbeenthisyear,makingitatoughyear?
EricCreviston (PresidentofMobileProducts):
It'sreallythatthearchitectureshiftthattheymadegoingtohigherlevelsofintegratedmodulesdidnotfavorRFMDandTriQuintproducts,andwebasicallymissedthegeneration.Ofcourse,that'swhyweformedQorvo,istofixthisproblem.Andnowthosearetheexactproductsthatwe'refocusedon,andprobablythebestpositiontogainin.
Theymadethearchitectureshiftagenerationsoonerthanwethoughttheywould.It'sgoodnewsforusinthelongrun.Butwe'vegottoclosethoseproductgapsandgetourfairsharenextyear.
T imLong (Analyst-BMOCapitalMarkets):
Okay,thankyou.
Operator :
IanIng,MKMPartners.
IanIng (Analyst-MKMPartners):
Thanksfortakingmyquestion.
Eric,earlier,youmentionedamixchangeledtosomeexcessinventoryattheChinahandsetcustomers.WasthatashiftbetweendifferenttypesofSKUsortiers?
EricCreviston (PresidentofMobileProducts):
Iwasreferringnotonlytothat,butprimarilybetweencustomers.It'sprettyremarkablehowvolatiletheactualcustomersharecanbe.Thewinnersandlosers,sotospeak,withinaquartercanchangefairlysignificantly.Ithinkoverall,again,we'vegottremendousopportunitiestogrowwithallthesecustomers.Butthere'sstillagreatvariationbetweenonecustomertoanother,oronemodeltoanother.Soyoucanseethischoppingisreallyaffectingwhatyouendupwith,intermsofinventoryattheendofthequarter.
IanIng (Analyst-MKMPartners):
SoonlysomeChinaOEMsareover-inventoriedrightnow,itsoundslike?
EricCreviston (PresidentofMobileProducts):
Yes,correct.
IanIng (Analyst-MKMPartners):
Okay,great.Andthenmyfollow-up.
Youtalkedaboutsomeco-developedpartsshowingupatthesecondhalfofthisyear.Whatlevelsofco-developmentarepossibleeachmodelyear?Ithinkinitially,you'retalkingaboutmulti-chippackages,
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page20of22
doingsomeintegrationsthere.Whenarefullmonolithicpartspossible,andyoucandojusteverythingpotentiallyoutthere?
EricCreviston (PresidentofMobileProducts):
That'saninterestingquestion.TheinterestingthingaboutRF,andespeciallythewayweapproachit,isthateachindividualcomponenthasitsowntechnologywhichisuniquetoit.We'renotlookingatmonolithicintegrationismuchasmulti-chipmoduleintegration.Whichgivesusnotonlythebestperformance,butthebestflexibilitytoreallycustomizethepartsforeachindividualcustomer.AndtodayatQorvo,we'reveryfortunatetohavethebroadestportfolioofthoseindividualtechnologies,whichallowsustoaddressvirtuallyeverysinglesocketinthemarket.
Sowe'refocusingtheinvestmentsontheoneswherewethinkwe'vegotthemostdifferentiation.ObviouslyBAWfilters,high-performanceswitching,high-performancepoweramplifiers,envelopetracking--thesearetheareaswhereweseeleadershiptoday.We'refocusingfirstonthesemodules.
WetalkedalotaboutthehighbandRFFusionawardsinthepressrelease.We'reseeingalotoftractionforthat.Andwhat'sexcitingis,it'snotjustthetop-tierflagshipguysgoingwiththatkindoffusion--whichisfullofcapabilitymodule--butit'salsogoingintothemid-tier,andintomanyotherhandsetcustomers,andreferencedesigns,andevenintoChinabeforeweknowit.
Thefusionlevelofintegration--whichispoweramplifiers,switching,allthefiltersandpowermanagement,allintegratedintoonehigh-performance,small-placementmodule--thatisdefinitelythetrend.Andit'scertainlyanopportunity-richenvironmentforusnowtoexecuteonthat.
IanIng (Analyst-MKMPartners):
Okay.,thanks,Eric.
Operator :
BlayneCurtis,Barclays.
BlayneCurt is (Analyst-Barclays):
Ijustwantedtofollowbackup,Ithinkyousaidearlierinthecallthatnochangetoyourcontextrotationsinthesecondhalf.Totheextentthatyoucancomment--Iknowit'salwaystough--there'salreadypicturesofyourlargestcustomer'sphone,anditlookslikethere'sahighbandpad.Sowhenyousaynochangetoyourexpectations,couldyoucommentonwhatyouexpectyourcontenttobewiththelargestcustomer?BecauseobviouslyChinaisweakforyou,butthatseeminglyshouldbegoingwellforyou.
BobBruggeworth (President&CEO):
Blayne,asyouknow,it'salwaysdifficulttotalkaboutourlargestcustomer.WhatIcantellyouisthatwehave,betweenus,continuedtogainshare.IfyoucouldaddthetwoCompaniestogetheryearoveryearoveryear,it'sourcurrentexpectationsthisyear,it'sourcurrentexpectationsnextyear.
BlayneCurt is (Analyst-Barclays):
Okay.Andthenasimilarcomment--theopportunityforyouinthesecondhalfwastogainshare.YoujusttalkedaboutSamsung,butalsoChina,someofthemediatechplatformsandsuch.Doesthisinventorycorrectiondelaythat?OrareyoustillabletogainsomecontentwiththosecustomersasyoulookatDecember?
BobBruggeworth (President&CEO):
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page21of22
Eric,doyouwanttotakethat?
EricCreviston (PresidentofMobileProducts):
Yes.
IguessIhadn'tthoughtaboutitasadelay,becauseinanyoneparticularslot,everythingisstillontrack.Butwiththeinventoryandthemixshiftbetweenslots,Iguessyoucouldlookatthatasadelay,yes.Butnotasignificantchangeinthetrajectory,justinthetimingofallthoseslots.Ourcontentgrowthopportunitiesoneachoftheplatformsarestillveryhigh.
BlayneCurt is (Analyst-Barclays):
Great.AndthenIwanttoaskyou,Bob,anothertoughquestion,sodon'thateme.
Asyoulookouttonextyear,obviouslyforthelargeplatforms,youhavetosubmityourpartsalready.Howareyoufeelingabouttheroadmapthatyouhaveinplace?Obviouslythecombinedpartsarecomingtogethernow.Didyouhavetherightpartsinplace,intermsofperformance,tocontinueyourcontentgainstothelargestcustomer?
BobBruggeworth (President&CEO):
Blayne,notthattoughaquestion,soIappreciatethatone.
AndIwanttoclarifymycommentonthepriorquestion.Ishouldhavesaidcontent--thatweexpecttobeabletogrowourcontentthisyearandnextyear.AndIwouldbroadenthistonotjustourlargestcustomer,butmanyothercustomers.Marqueephonesnextyearisreallywherewegetourtechnologyroadmapsandcapabilitiesbetweenthoselegacies--TriQuintlegacy,RFMD--aligned.We'refeelingverygoodaboutnextyear'smodels,thosemarqueephonesthatwillbelaunched,verygoodaboutourpositioningforthosephones.
BlayneCurt is (Analyst-Barclays):
Okay.Thanks,Bob.
BobBruggeworth (President&CEO):
Thankyou.
Operator :
Thankyou.Andatthistime,I'dliketoturntheconference
overtomanagementforanyadditionalorclosingremarks.
BobBruggeworth (President&CEO):
Thankyouforjoiningusonourfirst-quartercall.Evenasweachieveourinitialsynergiesanddeliverrobustleverage,webelieveQorvoisjustbeginningtodemonstratewhatwe'recapableof.We'reexcitedtobuildonoursuccessasweintroducenewproductscombiningourlegacycapabilities,outgrowourmarkets,andrealizethefullrunrateofoursynergies,andachieveourfinancialmodel.Thankyou,andgoodnight.
Operator :
Thankyou.Andagain,ladiesandgentlemen,thatdoesconcludetoday'sconference.Thankyouall
CompanyName:QorvoIncCompanyTicker:QRVOSector:T echnologyIndustry:Electronics
EventDescription:Q12016EarningsCallMarketCapasofEventDate:7.75BPriceasofEventDate:53.87
©2014TheStreet,Inc.Al l R ightsReserved Page22of22
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