Skyworks Solutions Q1 2025 Earnings Call Transcript

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Provided by Quartr
February 5, 2025
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Operator

Good afternoon, and welcome to Skyworks Solutions First Quarter Fiscal Year Earnings Call. This call is being recorded. At this time, I will turn the call over to Raj Gill, Vice President of Investor Relations for Skyworks. Mr. Gill, please go ahead.

Rajvindra Gill
Rajvindra Gill
Vice President - IR at Skyworks Solutions

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' first fiscal quarter twenty twenty five conference call. With me today for our prepared remarks is Liam Griffin, our Chief Executive Officer and President and Chris Sinasol, Chief Financial Officer for Skyworks. Following the conclusion of the prepared remarks, Chris will be available for Q and A. This call is being broadcast over the web and can be accessed from the Investor Relations section of the company's website at skyworksinc.com.

Rajvindra Gill
Rajvindra Gill
Vice President - IR at Skyworks Solutions

In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward looking statements. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10 K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today. Additionally, the results and guidance we will discuss include non GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP.

Rajvindra Gill
Rajvindra Gill
Vice President - IR at Skyworks Solutions

With that, I'll turn the call over to Liam.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

Thanks, Raji, and welcome, everyone. Before we get into the details of the results, I want to address the succession planning we announced today. After an incredible twenty plus years at Skyworks, with the last nine as President and CEO, I will be stepping down. Skyworks has chosen Philip Brace as our next President and CEO. He will join the company on February 17, at which point I will shift to an advisory role for a few months to help ensure a smooth transition.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

Today, we also announced that Christine King, who has been our Skyworks Lead Independent Director, has been appointed Chairman of the Board. She is an excellent choice. Phil's appointment follows a robust succession planning process by the Skyworks Board. Phil is an accomplished technology executive who has served as President and CEO of Sierra Wireless from 2021 to 2023. He currently serves on the Board of Directors of BlackBerry, Lantronix and Inseego.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

He brings a deep knowledge of the technology industry and extensive experience in scaling and leading successful businesses. I want to offer my sincerest congratulations to Phil on his appointment and I'm excited for you to meet him. I look forward to watching Skyworks' business prosper under his leadership through continued innovation, ingenuity and hard work. Let's now move into a discussion of Skyworks' first fiscal quarter of twenty twenty five. Skyworks began the new fiscal year with solid results.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

We posted revenue of $1,680,000,000 We delivered earnings per share of $1.6 and generated free cash flow of $338,000,000 Revenue, gross margin and EPS met or exceeded the midpoint of our guidance. In mobile, our revenue grew 6% sequentially as we successfully supported multiple product launches across our top mobile customers. The global adoption of generative AI on smartphones is still in its nascent stage. We anticipate this to be a multi year trend that will catalyze smartphone upgrades and increase the complexity and requirements for RF solutions. In broad markets, we have experienced modest growth for four consecutive quarters.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

We anticipate further growth as demand signals and backlog improve. In certain segments, supply and demand dynamics are in equilibrium and channel inventories have normalized. Meanwhile, industrial and infrastructure remain subdued due to persistent inventory challenges. Overall, we are encouraged by the recent momentum in broad markets and are energized about new product cycles in automotive, electrification, edge IoT and AI data center fueling long term growth. In Edge IoT, we are observing higher levels of intelligence and combined with more nodes being added to the edge of the network, driving higher levels of RF complexity.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

Artificial intelligence and machine learning increases the range of functionality, running models like voice and computer vision. RF connectivity is the conduit for secure, robust and lower power AI applications. Moreover, the adoption of Wi Fi 6E and seven systems by customers is contributing to the improvement in demand. These systems characterized by enhanced complexity and utilization of additional bands enable transmission of higher value content. We are currently in the emerging stages of a multiyear upgrade cycle with Wi Fi seven shipments experiencing a ramp up.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

We are seeing growth in wireless gaming, wireless home audio and wireless headsets, where customers are adopting Skyworks connectivity and audio technology. In automotive, we returned to year over year growth despite a soft demand environment as design wins in the connected car, onboard charging and infotainment are gradually converting into revenue. Specifically, we expect our RF content per vehicle to grow, driven by five gs cellular, Wi Fi, Bluetooth and V2X. Lastly, the industrial segments remain a headwind as we continue to undership demand. Turning to our quarterly business highlights, we secured five gs content for premium Android smartphones, including Samsung Galaxy, Xiaomi, Asus and several others.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

We supported GemTech's launch of the first AI router with voice enabled AI powered healthcare service. We enabled Asus's award winning quad band Wi Fi seven gaming routers and expanded our design win pipeline in automotive with cellular connectivity and power management solutions. With that, I will turn the call over to Chris for a discussion of last quarter's performance and our outlook for Q2 of fiscal twenty twenty five.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Thanks, Liam. Skyworks revenue for the first fiscal quarter of twenty twenty five was $1,068,000,000 slightly above the midpoint of our outlook. Mobile revenue was 67% of total revenue and increased 6% sequentially, as we successfully supported multiple product launches. Broad markets was up slightly sequentially and returned to year over year growth at 2%. Q1 fiscal twenty twenty five marked the fourth consecutive quarter of modest sequential growth since the Q1 fiscal twenty twenty four bottom, despite a muted demand environment and ongoing inventory digestion across selective end markets.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Gross profit was $497,000,000 with gross margin at 46.5% in line with expectations. Also during Q1, we further decreased our internal inventory slightly below $700,000,000 resulting in eight consecutive quarters of reductions. Operating expenses were $212,000,000 reflecting our strategic investments in our technology and product roadmaps. We delivered $285,000,000 of operating income, translating into an operating margin of 27%. We generated $9,000,000 of other income and our effective tax rate was 12.2%, driving net income of $258,000,000 and diluted earnings per share of $1.6.0.03 dollars above our guidance.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

For the first quarter of fiscal twenty twenty five, we demonstrated robust cash generation with operating cash flow of $377,000,000 capital expenditures of $39,000,000 and a free cash flow of $338,000,000 representing a 32% free cash flow margin. During fiscal Q1, we distributed $112,000,000 in dividends. Our cash and investment balance increased to approximately $1,750,000,000 while we maintain a debt level of $1,000,000,000 providing us with ample financial flexibility. Now let's move on to our outlook for Q2 of fiscal twenty twenty five. We anticipate revenue of $935,000,000 to $965,000,000 We expect our mobile business to decline mid to high teens sequentially, in line with historical seasonality.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

In broad markets, we anticipate additional sequential growth and a further improvement in year over year growth. We are seeing positive momentum in booking trends, backlog and sell through patterns across broad markets. However, inventory headwinds remain acute in industrial and infrastructure. Gross margin is projected between 45.546%, which is seasonally adjusted for lower sales volume. We anticipate operating expenses in the range of $220,000,000 to $228,000,000 utilizing our robust cash flow generation to invest in technology and product roadmaps.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

The sequential increase is mostly driven by a reset of the social charges at the beginning of the calendar year, as well as an increase in R and D project expenses. Below the line, we anticipate $6,000,000 in other income, an effective tax rate of 12% to 12.5% and a diluted share count of approximately 158,500,000.0 shares. Accordingly, at the midpoint of the revenue range of $950,000,000 dollars we intend to deliver diluted earnings per share of $1.2 Finally, our Board of Directors has approved a new $2,000,000,000 stock repurchase program as part of our disciplined capital allocation strategy. Before moving into Q and A, I want to briefly reflect on our business and address our strategic partnership with our largest customer. Over the past twenty five years, we have built a strong technology company, a leader in RF connectivity for mobile solutions and expanded those RF capabilities with analog and mixed signal expertise in our growing broad markets business.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

And over the last eighteen years, we have benefited from a truly collaborative partnership with our largest customer, who has constantly pushed us to develop innovative, high performance and highly integrated RF solutions. We have partnered with that customer since the launch of their first phone, which has resulted in significant content and revenue growth over the years. However, the last couple of years have been challenging as the competitive landscape has intensified. As it relates to the upcoming phone cycle expected to be launched in the fall of twenty twenty five, the Skyworks team developed a suite of high performance RF solutions. Despite our rich product offering, we did not get the result that we targeted.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Although we were able to secure multiple sockets, including several highly integrated RF modules, our content position is expected to be down 20% to 25. This decline will start impacting our revenue in the fourth quarter of fiscal twenty twenty five and throughout fiscal twenty twenty six. While we are disappointed with this outcome, we remain steadfast in our commitment to invest and innovate around our technology roadmaps. We have already started the development of a new suite of solutions for the next generation four with an expanding set of products and addressing more opportunities than ever before. In addition, we will continue to pursue growth opportunities with our other mobile customers, although on a selective basis, focusing on those segments of the market that demand high performance RF.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

And we will continue to drive our diversification strategy supported by multiple secular growth trends in broad markets. We expect those opportunities to partially offset the revenue decline at a large customer in fiscal twenty twenty six and position us for growth in fiscal twenty twenty seven. Now, let me hand it back to Liam for some final remarks.

Liam Griffin
Liam Griffin
CEO, President & Chairman at Skyworks Solutions

To wrap it up, I would like to thank all of our Skyworks employees and stakeholders for their support during the last twenty five years. It has truly been a privilege and the highlight of my career to lead this company. I strongly believe the Skyworks team with support of our Board of Directors and under new leadership will execute on the strategic path of profitable growth. I will turn it over to Chris now, who will be taking Q and A this quarter.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Operator, let's open the line for questions.

Operator

Thank you. Our first question coming from the line of Edward Snyder with Charter Equity Research. Your line is now open.

Edward Snyder
Managing Director at Charter Equity Research

Thanks very much. First off, Liam, I guess congratulations on retiring. I won't get to miss you. You did a phenomenal job. I always appreciate how Frank and straightforward you've been on everything and I think you did a bang up job.

Edward Snyder
Managing Director at Charter Equity Research

So, I'd hate to see you go. Hope things are better when you arrive from the sunset or wherever you're going to wind up doing. As for Apple, our largest customer, I know it sounds like new competition is in one of your largest modules and I know you guys are making a big push towards that in the fall. And there's a whole another round of this coming up in the year out. First off, I'd like to get a feel for if you think it's a target you can hit, given how which that part is in BAW filters.

Edward Snyder
Managing Director at Charter Equity Research

And secondarily, you guys have got to be one of the most favored suppliers to your largest customer. There's a lot of other parts on this version and what's going to be the next couple of versions that will change over the years. Maybe you can help characterize what the content opportunity is in other areas that don't necessarily involve a lot of BAW filters, but maybe more on the WiFi side of the sections, ultra high band, that sort of thing. So maybe give us an idea of what you think the landscape looks like in the next couple of years?

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Yes. This is Chris here. And so thanks for your question and your remarks. As you know, I can't really go into too much specifics as it relates to our largest customer and go into specifics on specific sockets or certain design wins. But having said that, right, I think we have a long partnership relation with that customer.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

We developed really high performance RF solutions. And unfortunately, we didn't really get what we targeted. And part of that is most of the sockets that we targeted, we actually were able to keep, but instead of being single sourced on one particular socket, it's being dual sourced. And that's a little bit of a setback. Having said that, we are already working on the next generation phone that is expected to be launched in the fall of twenty twenty six.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

We actually have been working for many months on that. And as we said in the prepared remarks, we are expanding our reach. We are developing more parts than ever before, targeting more opportunities than ever before. And we collaborate very strongly with our customer on that. And we will continue to support our customer in their baseband transition.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

And that's what we need to do.

Edward Snyder
Managing Director at Charter Equity Research

Okay. If I could, I'm sorry for the interruption. Yes. So you are sharing a socket that you may not have shared last year. Is that what you're saying?

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

That is correct.

Edward Snyder
Managing Director at Charter Equity Research

Okay. So actually then you are competitive. I thought I'm sorry, the way we characterizing it, I thought you didn't qualify at all. So actually you are competitive for that socket, now it's going to be horse trading from here on out, right? So you didn't lose the whole thing.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

That is absolutely correct. Again, we have been investing for many years in our technology and product roadmaps. We've been investing in our filter technology, both DCSAR and BAW. And as I said many times before, I do believe we are at the gold standard. Our BAW filters are as good as anybody else.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Now you still need to develop a product and get to the best performance. And in many cases, we do get to the best performance. But as you indicated as well, the competition has intensified. It used to be there are on or about five major RF players and we used to swim in our own swim lanes, but more recently, including Skyworks, right, we're reaching out and we cross swim lanes. And so the competition has intensified, but we are stepping up.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

We're developing more products. We keep expanding our technology and improving our technology. And the customer is asking the customer is demanding and asking for better and higher RF products in part because, as you all know, they're bringing AI capabilities to the phone, which is increasing the technological burden inside the phone. They're asking for smaller footprint, lower power consumption, lower latency and higher throughput and overall higher performance. And we are stepping up.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

We demonstrated that our technology and products can do it. Unfortunately, right, we didn't get a single source. We were dual sourced on one important part.

Edward Snyder
Managing Director at Charter Equity Research

Great. Thanks, Chris.

Operator

Thank you. And our next question coming from the line of Christopher Rolland with Susquehanna. Your line is now open.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Hey, thanks for the question and congrats to Liam and Phil. So, yes, just a little more clarity on the down 20 to 25. So, it sounds like you're sharing a socket instead of sole sourced. I'm assuming that would be the rumors that you've been hearing about diversity receive. I don't know if that would fully account for the '20 to 25.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

And the other question is the lost sockets to Qualcomm, would you take those back? And then sorry, the last question here is, is this for all phones coming in the fall or is this just for the ones with the new modem? Thank you.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Yes. So the content loss is really a result of the share loss that accounts for all of it, because we actually in certain sockets, we have been able to win back slots that we lost that we talked about nine months ago. So we've been executing well there. We've been gaining content, but unfortunately on an existing slot, we lost share as we move from single source to dual source. And so I assume that answers your question.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Yes, I did except just the follow ups to that. Are any update on the Qualcomm socket and getting that back that you lost? And then is this just for all the phones all the phones or just the phones with the new modem?

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Right. So again, I can't really go into the specifics, but we've indicated that it's unlikely or impossible that we win back those sockets as it relates to the Qualcomm modem, but we've done well as it relates to the internal modem. And maybe last point, we so we indicated a range of 20% to 25%. The reason of that is because we are dual sourced. And so the final results will still depend on the mix.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

And the mix, of course, you have to think about new product versus legacy product and also the mix within the new product between different basebands, as well as within a certain baseband, the mix between certain SKUs that are lined up. And so a lot of it will depend on where the demand will materialize and how that all plays out.

Operator

Thank you. Our next question coming from the line of Karl Ackerman with BNP Paribas. Your line is now open.

Karl Ackerman
Managing Director - Equity Research at BNP Paribas

Yes. Thank you, gentlemen. I wanted to I was hoping you could clarify whether you're able to repurpose some of the RF designs that you spent so much time on within R and D for some of these new content wins within five gs, Android and Samsung. And then secondarily, while the content in iOS devices, at least in the handsets, is not what you targeted, I was hoping you could discuss your dollar content opportunities you see across the consumer electronic markets such as watches, tablets and PCs of the coming quarters? Thank you.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Right. So I mean, we developed technology for our mobile business that, of course, can be deployed at a large customer and within Android with Google, Samsung and China. And some of that actually does spill over into our broad markets as well. So that's the technology building blocks. As it relates to the product development for certain products for our large customer, obviously, they are proprietary for our large customer.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

And there again, most of the developments we did are resulting in revenue, unfortunately not in a single source position, but in a dual source position. And typically, of course, what we learn from the large customer, the technology and the expertise that we learn, we can leverage that and develop in the Android market. The Android market, as you probably know, and we've talked about that before, we are going to remain selective. We focus on the high end of the market where they demand high performance RF, and we believe that we are well positioned to grow that part of the business going forward. As it relates your second part of the question, as you probably know, we have substantial revenue with a large customer, roughly 85% of that revenue is related to the phone and approximately 15% of that is related to all their other products that they bring to market, the watch, the tablet, the PC, the HomePod, the Vision product and so on.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

And in that part of the business, we continue to do well in terms of design wins. And we do expect this year and next year that part of the business will continue to grow.

Karl Ackerman
Managing Director - Equity Research at BNP Paribas

Very helpful. Thank you.

Operator

Thank you. And our next question coming from the line of Vasilya Havan with Goldman Sachs. Your line is now open.

Toshiya Hari
Toshiya Hari
Managing Director at Goldman Sachs

Hi, thank you so much for taking the question. I just had one question for you, Chris. Given the content dynamics of the largest customer, I'm curious if you plan on making any permanent changes to the manufacturing footprint of the company and how to think about gross margins going forward as part of that? And then similarly for OpEx, I know you're guiding OpEx to grow in the near term, but any intent or any plans to adjust to the new backdrop, if you will? Thank you.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Yes. No, that's a series of good questions there and I'll try to address them one by one. First of all, as it relates to CapEx, we are currently operating the business with a lot less capital intensity. As you probably know, we have underutilization in our factories and so we didn't have any capacity expansion CapEx in our plans. And obviously, now that we recently learned about the down selection for the upcoming phone, we do not have to add or subtract any of the CapEx.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

So the CapEx plan will remain on or about the same. As it relates to manufacturing footprint, we do not plan to make changes there. But of course, independent of what just recently happened, we will always continue to evaluate our overall manufacturing footprint and make the necessary adjustments if and where we can. As it relates to the gross margin, I've talked before about gross margin and there's basically three major drivers for gross margin improvement. First is revenue growth that translate into better factory utilization.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Second, it's operational efficiencies and cost reductions in our internal factories as well as throughout the supply chain and working with our suppliers. And then thirdly, it's a mixed tailwind as broad markets grows faster than mobile and broad markets has above average gross margin. Obviously, here with the latest information, revenue growth is going to be challenged. And so we are going to remain with underutilization in our factories for a little bit longer than we initially anticipated. And so that is not going to help in gross margins improvement.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

But of course, we are going to continue and actually double down on trying to find operational efficiencies in our factories as we deal with this situation. And thirdly, the gross margin tailwind from broad markets is actually going to blow stronger as broad markets is going to become a bigger part of the overall business. And then maybe last on operating expenses, we will, of course, continue to manage our operating expenses like we've always have done at Skyworks. We run a very tight ship here. But we have already as I indicated also, we've already started for many months the development of new products, a whole new suite of products in support of our large customer, more products than ever before, right, addressing more opportunities than ever before.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

And obviously, we're going to continue with those developments that position us well to capture more content in the next generation phone that's expected to be launched in 2026. In addition to that, and we've talked a little bit about that in the prepared remarks, our broad markets business is back to year over year growth. We expect that year over year growth to accelerate and improve over time. And we see plenty of growth opportunities based on secular growth engines. And of course, we need to continue to invest into the growth of our broad markets as well.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Having said all of that, we understand that the setback on revenue will require a deep dive. And we will, as a management team, continue to look at every opportunity to limit the OpEx spending. Obviously, there will be an adjustment to the variable compensation as we will not hit the targets that we set for ourselves. And we will continue to look at any opportunity to further decrease discretionary spending.

Operator

Thank you. And our next question coming from the line of Peter Peng with JPMorgan. Your line is now open.

Peter Peng
Equity Research Analyst at JP Morgan Chase & Co

Thanks for taking my question. I think just bigger picture, I think for like two years in a row, you lost some content, not because of your technology positioning, but we're listening. So how are you thinking about your relationship with that customer longer term? And does this kind of put you into a more diversification accelerate your diversification strategy faster?

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

No, we are not chasing the strategy here. I mean, again, we've been working with that customer for eighteen years. We've built a very strong relationship. That relationship remains intact. Obviously, the last couple of years has been challenging, right, in part because the competition has been intensifying, in part because of the multi year baseband or modem transition, which has created some turbulence amongst the RF players.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

But we continue to collaborate very strongly with that customer. And as I said before, we are developing more parts than ever before, addressing more opportunities than ever before in part because we've been asked by that customer to go do that. And so we definitely will continue that relationship. Having said that, diversification and focusing on broad markets has always been part of the strategy and that will of course remain the case. We like our broad markets business.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

It's a very diverse business addressing multiple end markets from consumer to enterprise to infrastructure, networking and cloud and industrial and automotive markets. We have some key technologies and product offerings in those markets with strong customer relationships. And of course, we will continue to invest in that market and drive growth. As I said before, we think our broad markets business should be growing double digits, more than 10% year over year and that's the target and we will continue to invest and support that business.

Peter Peng
Equity Research Analyst at JP Morgan Chase & Co

Got it. And then on the Android space, what was the revenue number for the quarter? I think last quarter it was somewhere in that $75,000,000 Do you think that we're at a stable level and

Peter Peng
Equity Research Analyst at JP Morgan Chase & Co

we can grow from those levels?

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

That is correct. It was in December quarter flat sequentially. And as you know, the Android segment is Google, Samsung in China. There is seasonality in that business and sometimes it's offsetting seasonality, but there is definitely a seasonality in that business as well.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

We continue to have a strong relationship with Google. We have already won substantial design wins for next year and the year after. And so I think we're well positioned there. And then as well, as it relates to Samsung and China, we will remain selective, but there is design win momentum that starts turning into revenue. And we do believe that we can grow our Android business as a whole this year and the year after and beyond.

Operator

Thank you. Our next question coming from the line of Timothy Arcuri with UBS. Your line is now open.

Gianmarco Vella
Gianmarco Vella
Associate at UBS Group

Good afternoon. This is Jamal calling for Tim. Thanks for taking our questions. And Chris, maybe just first on your largest customer, I was hoping you could speak to competitive dynamics there in the sense and more specifically, do you see this tool sourcing strategy potentially reverse in future phones?

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

So at the large customer, you win because you have the best performance parts. That's the rule. And so if there is only one supplier, obviously that supplier will win the business. If there are two or more suppliers, but one supplier has a substantially better part than anybody else, that supplier can get all the business. If there are two or three suppliers and they are tight in terms of performance, the customer could decide to dual source that, especially on the larger, more expensive parts.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

And I think that's reality and we have to acknowledge that and face that. And so it's up to us and the team to again continue to strengthen our technology roadmaps to develop high performance parts and sockets that are better than our competitors. We again, we have the teams in place. We have the R and D resources and the strength and the capabilities in place, but we need to focus on execution and get those best performance parts in front of our customer. Again, in the one particular socket that is causing some pain here, we developed a really high performance part that is as good as our competitors' part.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

But it wasn't necessarily much better. As a result of that, the customer decided to dual source it.

Gianmarco Vella
Gianmarco Vella
Associate at UBS Group

Got it. Very helpful. And then maybe just a housekeeping item. If you can just tell us what the percentage of your largest customer was this quarter? Thank you.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Yes. In the December, the largest customer was 72% of total revenue, which was up 9% sequentially as we supported that customer with the ramp of their current phone. Also, again, I want to reiterate that, right, that revenue with the large customer is not just on the phone, roughly 85% it fluctuates a little bit from quarter to quarter, but roughly 85% of that revenue is related to the phone. The other 15% is related to all other products that, that customer has out in the market.

Operator

Thank you. And our next question coming from the line of Vivek Arya with Bank of America. Your line is now open.

Liam Pharr
Liam Pharr
Equity Research Analyst at Bank of America

Hi, this is Liam Pilar on behalf of Vivek Arya. Thank you for taking the question. I want to focus on China. With the competitors sort of exiting that market, what is your longer term strategy for China? And if you could, how do you expect tariffs to come into play to the inventory of the overall market?

Liam Pharr
Liam Pharr
Equity Research Analyst at Bank of America

Thank you.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Right. So with China and Samsung, we are remaining selective. We have a long standing relationship with those customers, but many years ago, we've decided not to compete for their mid or low end of their products. But we compete for sockets with them and the high end of the market. That's where they need us or our competitors, right?

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

That's where they need high performance RF and we see opportunities there. As I said before, we are getting some design win momentum that is starting to ramp up in revenue and we will continue to do that on a selective basis.

Liam Pharr
Liam Pharr
Equity Research Analyst at Bank of America

Thank you. And just as a follow-up, looking forward to June, how are you looking at seasonality and how are you seeing it kind of shape out in this first half? Thank you.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Yes. So we only guide one quarter at a time, but I don't see anything different right now than normal seasonality in our business.

Operator

Thank you. The next question coming from the line of Krish Sankar with TD Cowen. Your line is now open.

Hadi Orabi
Hadi Orabi
Research Associate at UBS Group

Hey, guys. This is Eddie for Krish. Thanks for taking my question. It sounds like your competitor has improved the performance of their product meaningfully this year, which pushed your main customer to dual source. But I wonder if you can quantify where the performance gap stands today between your product and that competitor's product and how that compares to last year?

Hadi Orabi
Hadi Orabi
Research Associate at UBS Group

And I wonder if you can share any metrics or technical specifications that we can follow that would give us an idea how that gap is developing going forward between you guys and your main peer? Thank you.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Right. So again, we can't really go into the specifics at that detailed level as it relates to our large customer. And performance is being measured on five or 10 different parameters and so this would become a very technical discussion. But I want to go back to the beginning of your question. It's not that our competitor improved a lot their performance of their part.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

That competitor in the past has not competed for that product. And it was the first year that that competitor competed for that product. And so that's a good dynamic there.

Hadi Orabi
Hadi Orabi
Research Associate at UBS Group

Got it. Thank you.

Operator

Thank you. And our next question coming from the line of Nikh Dole with Needham. Your line is now open.

Nick Doyle
Equity Research Analyst at Needham & Company

Thanks for taking my questions. Broad markets should see improving growth next quarter and it sounds like that's driven by the large customer and Wi Fi where inventory is more aligned. Do you have any indication of how long inventory headwinds will slow the industrial and infrastructure piece? When can it reach that double digit growth year over year that you discussed? Thanks.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Yes, that's a very good question. But unfortunately, visibility is not that great. I mean, I'm listening to all my peers and competitors that have huge exposure to industrial and infrastructure markets there as well. And it seemed we all struggle a little bit with lack of visibility there. And part of that is because there is persistent excess inventory at the customer level where we don't really have good visibility.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

By now, the inventory in the distribution channel is clean, has been cleared out, but there is still inventory at the customer level. Again, for Skyworks, that is not the biggest part of our broad markets, right? We are a much bigger player in our connected IoT devices, which is roughly 40% to 45% of the business. Our automotive business, which is roughly 20% or so of our markets business. And so we have less exposure on some of those markets where there is still unfortunately some persistent inventory correction.

Nick Doyle
Equity Research Analyst at Needham & Company

Thank you. And can you expand on the socket or anything around the type of five gs premium Android content that you won? Maybe how big is the combined opportunity, any timing? Thank you.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Sorry, the five gs, can you repeat that?

Nick Doyle
Equity Research Analyst at Needham & Company

Yes, the kind of the first point in your press release talked about a five gs premium Android content win.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Yes. I mean, again, with in Android, we continue to be selective. We have design wins, including with Samsung in the Galaxy and as well as many of their other products and that will continue going forward.

Operator

Thank you. Ladies and gentlemen, that concludes today's question and answer session. I'll now turn the call back over to Mr. Asin Asal for any closing comments.

Kris Sennesael
Kris Sennesael
Senior VP & CFO at Skyworks Solutions

Yes. I would like to thank everybody for your participation at today's call. And I'm looking forward to talk to you together with Raji and Phil at upcoming investor meetings. Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.

Executives
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Key Takeaways

  • Leadership transition: CEO Liam Griffin will step down after 25 years, to be succeeded by Philip Brace as President and CEO on February 17, 2025, with Christine King appointed Chairman.
  • Q1 FY25 results: Reported revenue of $1.68 billion, GAAP EPS of $1.60 and free cash flow of $338 million, with mobile revenue up 6% sequentially.
  • Q2 FY25 outlook: Projecting revenue of $935 million–$965 million, mobile down mid-to-high teens sequentially, gross margin around 45.5% and EPS of ~$1.20.
  • Largest customer content decline: RF content share at key account is expected to drop 20%–25% starting in Q4 FY25 due to dual-sourcing, driving renewed investment in next-gen solutions and diversification.
  • Broad markets momentum: Modest sequential growth in broad markets led by Wi-Fi 6E/7 upgrades, edge IoT intelligence, automotive connectivity and AI data center trends, though industrial/infrastructure inventory remains constrained.
AI Generated. May Contain Errors.
Earnings Conference Call
Skyworks Solutions Q1 2025
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