Qorvo Inc at Goldman Sachs Communacopia & Technology Conference Transcript

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

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Really appreciate the time. I have a bunch of questions. I will open Q&A to the audience, so to the extent you do have questions, please be prepared. I want to kick off with a couple of near-term questions. You reported June quarter results that were above consensus, very strong results. You guided September quarter revenue to grow 16% at the midpoint. Maybe take us back, talk through the key highlights in the June quarter. And what are some of the key drivers that went into your September quarter guide?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Great. A couple of mobile questions before we go to HPA and Philip. Hoping you could characterize the current inventory environment, your customers, you and the broader space. You've been going through an inventory correction for a year, a year plus, depending on how you look at it. How would you characterize where your customers are at from an inventory standpoint? Compare where you are today versus three, six months ago. And if you can differentiate between iOS and Android, that would be great.

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Okay. Great. On your recent earnings call, Bob mentioned that you're not modeling a strong replacement cycle as it pertains to smartphones, but curious what your high-level expectations are for smartphone unit growth over the next couple of years. Your largest customer had a couple of announcements from an AI standpoint. What are the potential killer apps, in your view, that could drive some pent-up demand?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Got it. Grant, you touched on this a little bit. But when we think sort of AI as a smartphone, we think powerful processors, maybe a little bit more DRAM. What role does or will the RF industry play and more specifically Qorvo play as we sort of transition into the AI or RF if you will?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : In your largest customer, you gained significant content in the 15. You also seem very pleased with the continued progress in the 16. You've also been really vocal about the outlook into next year. I guess what's led to your success at your largest customer? And what's giving you the visibility and sort of the conviction to speak to the out-year? Because, typically, you've got limited visibility, but you've been pretty vocal -- or Bob, in particular, has been pretty vocal. So what's giving you the confidence there?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Okay. Great. On the Android side of the portfolio, how should we think about, similar question, how should we think about potential content uplift? I guess what's unique about Android vis a vis iOS is that you still have the 4G to 5G transition that's ongoing. Like where are we in that transition? And how should we think about the incremental content opportunity from here?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Great. Shifting gears a little bit. I want to bring Philip into the conversation. Just for context, I think you joined Qorvo about 2.5 years ago, and now you lead the HPA business obviously. Curious how you're spending your time. And what would you say are your top priorities as the leader of HPA? And to the extent your priorities have shifted over the past 2.5 years, how so?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Great. Quick follow-up on growth going forward. I think you presented a CAGR of 19% for your SAM through 2029. You spoke to opportunities across a range of applications. Maybe to level set, can you first give us a rough breakdown of your business by end market? I think the market is still getting accustomed to the new segmentation of the business. What the key growth drivers are? You spoke to A&D and a couple of others. But yes, what are the key drivers? And how should we thinking -- how should we think about those going forward?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : That's great. The base station business, which you obviously manage, has gone through a cyclical correction post the fairly significant build-out of 5G. Curious what your forward expectations are in that business. And can you remind us what drove the decision to exit from the GaN PA and PAM businesses?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Okay. That makes sense. A question on China, and this could be for Philip. It could be for Grant or both of you guys. The overall business grew 6% sequentially in the June quarter. It was up a nice 30% year-over-year. But when you go back in time, it's still less than half of where you were at the peak. Is the peak to trough decline, is that a function of end demand weakness in China? Is it inventory? Is it competition? Is it all of the above? Maybe, Grant, if you can speak to overall Qorvo; and Philip, to the extent you've got comments on HPA, that would be great.

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Okay. Great. Going back to mobile RF for a second. Curious what you're seeing from a competitive landscape kind of perspective. Relative to a year ago or maybe two years ago, how would you sort of describe the current setup relative to the traditional players, the Broadcoms, the Skyworks, the Qualcomms of the world, and also relative to some of the emerging Chinese players like Maxscend and Vanchip? Are you seeing more of them, less of them? Any changes?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Okay. Great. Maybe a question on gross margin. You're guiding September quarter gross margins to improve, I think, 560 basis points, 46.5% of the midpoint, which is really good sequential improvement. But you are still roughly 350 basis points away from your long-term target of 50%.

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Okay. Okay. Great. I'm going to pause here and see if we have any questions from the audience. I'll keep going. In terms of capital allocation, you guys have been fairly acquisitive over the past several years, mostly tuck-ins to be fair. How would you characterize your appetite as it pertains to M&A today versus a couple of years ago? To the extent you are still considering M&A, what kind of financial or technological characteristics would you look for in a potential target?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : I guess as a follow-up, Philip, you talked about power management being a big focal point for you all. Do you feel like as you sort of compete in that market, pursue that opportunity, you have the complete set of assets to do so? Or do you still see holes that you need to fill?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Okay. Awesome. Outside of M&A, Grant, how should we think about your capital allocation priorities? I think you've, for the most part, focused on opportunistic buybacks. But dividend, does that ever come up in internal debates or with investors for that matter?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Got it. Okay. AI, obviously, is a huge topic these days. I've been asking most of my companies how you're leveraging AI as you operate the business. At Qorvo, has anything changed on that front over the past year or two, to the extent you are leveraging AI internally, whether it be chip design or day-to-day operations, how are you leveraging AI and what kind of benefits or returns have you been able to identify?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Nice. Nice. That's great. I guess in the last 2 minutes, I really wanted to give you the opportunity to speak to anything that we may have missed. I know we've kept you busy with investor meetings all day. Throughout your conversations, anything you feel like, as a collective unit, we missed about maybe HPA business or overall Qorvo? Anything that we underappreciated about the Qorvo story?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Philip, anything from your end?

Question: Toshiya Hari - Goldman Sachs Group Inc - Analyst : Great. Thank you so much. Really appreciate the time.