Qorvo Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Thomas James O'Malley - Barclays Bank PLC - Analyst : So I just wanted to dig into the commentary in the press release on the content and ramp profiles varying by model. You had some comments on Android later. So obviously, maybe more associated with the large North American customer. Can you just kind of parse that out. Obviously, headed into the year, you had talked about a good content outlook, but does mix mean a shift in units more towards the low end. Does that mean RFFE that's lower. When I look at like the first three quarters of your fiscal year, it seems like you're

Question: Thomas James O'Malley - Barclays Bank PLC - Analyst : Appreciate the color there. And then the second is just on the gross margin profile. So if you look at your December guidance, you just gave some OpEx in the commentary, so it implies kind of 44% and change on the gross margin side. You're talking about some manufacturing changes as well to help optimize the business given the lower volumes that you're seeing in the mix shift of the Android. But could you maybe talk about the structural long-term path to kind of get back to the mid-40s or to the high 40s. How long is that going to take? Or do you think that structurally kind of for the foreseeable future, the 44% gross margin level is the right way to think about things? Or does it get worse given their manufacturing decisions?

Question: Christopher Rolland - Susquehanna International Group, LLP - Analyst : So I know it might be a bit early to talk about March, but seasonality, you guys have traditionally been down, I think, 10% or 11%, something like that. I'm a little conflicted here how to think about this. It seems like in one way, you're more reliant on your primary customer. So as we look out, how might this outlook compared to traditional seasonality as you view it today?

Question: Christopher Rolland - Susquehanna International Group, LLP - Analyst : Thank you for squaring that circle for me. And then if I heard it correctly with your footprint change, I believe I heard that you were anticipating growth in SAW. I was wondering if you could flesh that out a little bit? And then how do we think about the dynamics for you guys SAW versus BAW opportunities moving forward?

Question: Christopher Rolland - Susquehanna International Group, LLP - Analyst : Okay. So this sounds like it SAW primarily for Android. Is that right, Bob?

Question: Edward Snyder - Charter Equity Research - Analyst : So you mentioned we shouldn't read anything into the -- in volumes in your guidance for December -- unit volumes in phones anyway. So it seems to imply there's a content shift that maybe was unexpected. Can you elaborate on that? Is that a fair conclusion, first of all? Or is -- content is solid as you thought it was at the beginning of the year when you guided you thought you'd

Question: Edward Snyder - Charter Equity Research - Analyst : Right. Okay. So if we sit back, Bob, (inaudible) you strategically, when you were there during the GSM, the Wideband CDMA days in the early 2000s where it was kind of a zero-sum game because there just wasn't much content being added to phones. That all changed with 4G, and as we kind of expected when you first look at 5G, we're kind of turning to that model here (inaudible) share shift. You're already seeing it just as you guys announced the day, and we've seen it for some time that the Chinese are moving in that direction where they're taking value out of a lot of the phones. Samsung is clearly cut content in their flagships versus what they used to do two or three years ago. And so it sounds like competition and your largest customer has heated up significantly over the last couple of years. So Bob, strategically, I mean, there's only so much you can do with the market that's kind of flattening out and modest growth here and there. What do you think you've got some great assets, especially in the defense side of the business is another area you start engaging in or maybe for more OpEx and R&D and to try to make up for kind of just, I would say, kind of a flagging handset business, which looks like it's going to for some time? Or -- I'm sorry, to make this a paragraph on question, or are we looking at -- well, I mean it's clear from talking to the handset OEMs that in the next couple of years, once your largest customer gets our own modem involved, we're going to start moving into AI enabled phones, which doesn't directly affect you, but it does kind of ancillary effect too in terms of the content is going to go up and the size is going to go down. Is that something that we can look forward to in driving more of your core business?

Question: Nicholas Doyle - Needham & Company, LLC - Analyst : Just, I guess, a clarification on the entry segment of Android, are you guys walking away entirely? Or I mean I'm thinking if Android is mixing down, you guys have talked about the LMH pad gain. So just wondering when that can start to offset. And also, how long will the mix shift to entry phones be an overhang? Does it go away, does the overhang go away entirely? Or do you expect some stabilization at some point in calendar '25?

Question: Nicholas Doyle - Needham & Company, LLC - Analyst : And then my second question is on the OpEx. Could you just expand a little bit on the reductions? I know you mentioned a couple of things in the prepared remarks. But I guess how does that impact the line item near term, I guess, down $15 million or so, so next quarter? And does that continue trending lower?

Question: Sreekrishnan Sankarnarayanan - TD Cowen - Analyst : I actually had a short-term and the long-term question. First, on Bob, on the short term, over the next 2 quarters, when I look at your guidance relative to consensus, it's like about $300 million below. How to think about it in buckets? How much of it is kind of related to the unfavorable mix of the content versus how much of it is related to weak volume ramp from your largest customer?

Question: Sreekrishnan Sankarnarayanan - TD Cowen - Analyst : Got it. I think you kind of answered my next question because the long term, which is kind of like about a 50% gross margin because it looks like some of the headwinds you are facing at (inaudible) some cyclical content-related stuff. There's also some structural changes. So with the TAM reduction, et cetera, is it fair to assume restructuring plus focus on profitable opportunities is kind of what gets you to 50% or do you think there are other levers that you could pull?

Question: Peter Peng - JPMorgan Chase & Co. - Analyst : If I look at where consensus expectations versus the guidance for the ACG segment. It seems like it's about $400 million for a shortfall. Maybe if you can just bucket into the bucket that you described. How much of that is just a shift to the lower tier? How much of that is just different content and (inaudible)?

Question: Peter Peng - JPMorgan Chase & Co. - Analyst : Got it. Okay. And then a follow-up is on your largest customer, does your content vary across the different SKUs? Or do you have a certain index over indexed exposure to certain SKUs? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 9:00PM, QRVO.OQ - Q2 2025 Qorvo Inc Earnings Call

Question: Karl Ackerman - BNP Paribas Exane - Analyst : I have a clarification question and a follow-on, I'll just ask at the same time if I may. What is the right way to think about the mix you have of mid-tier Android of that $100 million per quarter you're running at today? And the reason why I ask is I guess how much of the change in your outlook on China Android is driven by competitive dynamics from Chinese or fee vendors versus market demand dynamics shifting to different smartphone OEMs that you may not have exposure with today?