Qorvo, Inc.

Good day and welcome to the Corvo third quarter 2025 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. We ask that you please limit yourself to one question and one follow-up. And if you have further questions, you may re-enter the question queue. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Douglas DeLito, Vice President in Investor Relations. Please go ahead, sir.

Thanks very much. Hello, everyone, and welcome to Corvo's Fiscal 2025 Third Quarter Earnings Call. This call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statement contained in the earnings release published today, as well as the risk factors associated with our business in our annual report on Form 10-K filed with the SEC, because these risk factors may affect our operations and financial results. In today's release and on today's call, we provide both GAAP and non-GAAP financial results. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain non-cash expenses or other items that may obscure trends in our underlying performance. During our call, our comments and comparisons to income statement items will be based primarily on non-GAAP results. For complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today, available on our Investor Relations website at ir.corvo.com under Financial Releases. Joining us today are Bob Brodworth, President and CEO, Grant Brown, CFO, Dave Fullwood, Senior Vice President of Sales and Marketing, and other members of Corvo's management team. And with that, I'll turn the call over to Bob.

Thanks, Doug, and welcome everyone to our call. Corvo serves six primary end markets. They are automotive, consumer, defense and aerospace, industrial and enterprise, infrastructure, and mobile. Each is underpinned by global megatrends, including electrification, connectivity, mobility, sustainability, datafication, and AI. These trends are driving new functionality and new user experiences that are made possible by the customers we serve and the products our technologies enable. Looking at our business by operating segment, in HPA, we continue to grow our defense and aerospace business while expanding our business and power management. In CSG, we are building upon our strong position in RF solutions across markets while investing in diverse growth businesses, including an expanding portfolio of automotive solutions and SOCs for Ultra Wideband, BLE, Thread, and Matter. In ACG, we are focused primarily on delivering 5G advanced products for our largest customer and for the flagship and premium tiers of Androids. Our largest growth opportunity in ACG is with our largest customer, and we are investing today to continue increasing our share with them in subsequent programs over multiple years. As we said on last quarter's call, the opportunity in mass-tier Android 5G declined at a faster rate than anticipated during our investor day. Android build plans changed to reflect higher consumer demand for entry-tier 5G devices. In response... During the December quarter, we implemented changes across the organization in how we support Android 5G. This included a reduction in force in ACG and other company functions. We narrowed our focus to the premium and flagship tiers to increase profitability and reduce variability. Our 5G product development spend is now focused solely on premium and flagship tiers. While we continue to serve mass tier programs previously awarded, we expect these lower margin programs to go end of life in fiscal 26 and into fiscal 27. Besides the impact for fiscal 25, total Android 5G revenue in ACG is expected to be approximately $875 million. Of this, we expect Android 5G to decline gradually by approximately $150 to $200 million annually in fiscal 26 and again in fiscal 27. The majority of the decline will be China-based, with the balance being mid-tier at Samsung. In fiscal 26, we expect a single-digit decline in ACG revenue and growth of approximately 10% to 12% in CSG and HPA, X, the silicon card by business. Beginning in FY27, we expect ACG to return to growth, where our updated long-term revenue target is for mid-single-digit growth. In HPA and CSG, our long-term revenue targets haven't changed, and we expect double-digit growth in fiscal 25 and double-digit growth again next fiscal year in HPA and CSG. We believe the actions we are taking will have a positive impact on our gross margin. For reference, gross margin in the December quarter included a headwind of approximately 300 basis points attributed to the divested silicon carbide business and the mass tier Android 5G revenue we are in the process of exiting. As we look into fiscal 26, we expect gross margin to expand by approximately 150 basis points on roughly flat revenue. In a moment, Grant will expand on the actions we're taking to improve gross margin and reduce OPEX. Now let's look at our performance and opportunities by market. We saw sequential strength during the quarter in defense and aerospace, industrial and enterprise, and infrastructure. In DNA, revenue was up sequentially in the December quarter, driven by multi-year tailwinds. These include upgrades to non-terrestrial networks and the transition from mechanical radar systems to active electronic scanning radar systems. Tailwinds also include on-shoring, the trend of one-to-many, and system-level functionality requiring advanced RF packaging. Design winds in December were diversified across radar, comms, space, and electronic warfare. In electronic warfare, Corvo offers an industry-leading wideband solid-state PA technology. Corvo is unique in that we can service the opportunity onshore in the U.S. from a mimic up to a full-system solution through our advanced manufacturing facility in Texas. December was a record revenue quarter for our DNA business, and we expect continued strength to support full-year, year-over-year growth this fiscal year and next fiscal year. In industrial and enterprise, revenue was up sequentially. During the quarter, we achieved critical performance milestones related to ultra-wideband and Wi-Fi enterprise access points. We're engaged with two leading Tier 1 equipment manufacturers with ultra-wideband and Wi-Fi 7 content at both, and we expect commercial production to begin this calendar year. We see this as a significant milestone in ultra-wideband adoption, creating the essential infrastructure for new ultra-wideband-driven services enabled by indoor navigation, asset management, and real-time location services. We increased shipments of high-frequency BOS filters in support of enterprise Wi-Fi deployments across geographies, and we expanded power management engagements with new and existing customers and enterprise SSDs. Turning to infrastructure, we believe we are past the bottom and are now seeing stabilization in our broadband and cellular base station businesses. December revenue increased significantly year over year in both markets. In the broadband market, we are supporting DOCSIS 4.0 deployments at multiple operators in North America. We are early in these deployments with significant share and we are positioned for growth in our broadband business this coming fiscal year. In our base station business, we have weathered an industry-wide inventory correction and see opportunities for our small signal portfolio in markets like India. In automotive, revenue for the quarter declined sequentially as end market softness continues. During the quarter, automotive OEMs and Tier 1s continue to show strong interest in our growing portfolio of automotive-grade ultra-wideband products. This includes a design win for an Asia-based EVOM to supply our ultra-wideband solutions in an upcoming vehicle launch. Our sales funnel of automotive ultra-wideband opportunities continues to grow as we bring a broad set of new content and capabilities. The ultra-wideband opportunity in automotive includes multiple anchors and up to $20 per car addressing secure access, child presence detection, kick sensors, and other precision short-range radar applications. This is new content presenting the type of complex RF challenge Corvo is uniquely positioned to solve. In consumer markets, December quarterly revenue declined sequentially, reflecting market headwinds. For Corvo, customer demand continued to build across consumer applications for our Matter SOCs. We are ramping Matter SOCs alongside our Wi-Fi 7 FEMs for a leading provider of Wi-Fi ecosystems based in the U.S. This customer is an early adopter of Matter technology in home networking applications, enabling seamless connectivity across lighting, thermostats, window sensors, and other consumer applications. We supported a U.S.-based network operator in their migration to Wi-Fi 7 with multiple Corvo Wi-Fi 7 FEMs, and we secured a design win to support an upcoming Wi-Fi 7 ramp with a network operator in Japan. Lastly, we expanded shipments of our high-frequency BOS filters for service providers in the U.S. and in Europe. In the mobile market, Revenue declined sequentially. During the quarter, we successfully supported the flagship launch at our largest customer. Shipments during the quarter included discrete placements, such as tuners, as well as integrated placements, like ultra-high-band pads. This customer represented just over 50% of the total revenue in the December quarter. In the current quarter, we expect sales to this customer to decline sequentially, though less than the last couple of years. As we have said previously, we have secured sufficient wins to date to give us confidence in year-over-year content growth in this year's fall launch. Corvo revenue is more heavily weighted towards the Pro and Pro Max models versus lower content consumer models. Volumes and mix across models and model years can change our weighted average content in any given year. Given these variables, for FY26, we're currently forecasting revenue at our largest customer to be flat to up modestly. At our largest customer, we've been invited to compete and are engaged on more product programs than ever before. At our second largest customer, Corvoda's design wins this year with this career-based Android OEM span our product portfolio. We will be broadly represented this year in the flagship launch ramping now. as well as in their high-volume mid-tier, premium-tier, and flagship-tier smartphone programs launching throughout the year. Corvo content in 2025 will include low-band, mid-high-band, and ultra-high-band pads, as well as mid-high secondary transmit, antenna tuning, discrete filters, and Wi-Fi 7 FEMs. Corvo is executing on a broad set of strategic initiatives to expand margins generate strong free cash flow, and increase shareholder value. We remain very focused on driving growth and diversification while finding opportunities to improve operating efficiency and enhance our cost structure. The actions we are taking have already resulted in gross margin improvements and a meaningful reduction in our forward OPEX in the current quarter and for fiscal 26. And with that, I'll turn the call over to Grant.