Qorvo, Inc.

Thanks very much.

Hello, everyone, and welcome to Corvo's fiscal 2026 first 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 and 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 Rugworth, President and CEO, Grant Brown, Chief Financial Officer, Dave Fullwood, Senior Vice President of Sales and Marketing, Philip Chesley, President of High Performance Analog, Eric Creviston, President of our Connectivity and Sensors Group, Frank Stewart, president of our advanced cellular group, as well as other members of Corvo's management team. And with that, I'll turn the call over to Bob.

Thanks, Doug. Welcome, everyone, to our call. Corvo delivered a strong first quarter of fiscal 2026 with notable achievements across our three operating segments. Beginning with ACG, we continue to leverage the breadth and performance advantages of our cellular product portfolio. For our largest customer, we supply four categories of highly differentiated products, They are antenna tuners, high-performance filters and switches, integrated modules, and envelope tracking power management. Corvo's envelope tracking PMIC for this customer has been custom developed to pair with their internal baseband, and this represents a durable multi-year content opportunity. In HPA, our growth investments are in defense and aerospace and power management. Defense and aerospace is HPA's largest market by revenue, and we expect durable year-over-year growth in DNA supported by increases in U.S. and allied defense spending. In power management, we are leveraging our leadership in PMICs and motor controls to diversify across markets, including consumer, defense and aerospace, industrial and enterprise, and mobile. Growth applications include enterprise and AI data centers, wearables, drones, robotics, smartphones, and advanced power management solutions for AESA radars. In CSG, we supported Wi-Fi access points and flagship smartphones with Wi-Fi 7 front ends, while also aligning with market-leading chipset providers to develop next-generation solutions for Wi-Fi 8. CSG is also leveraging our ultra-wideband and matter portfolio to scale new use cases and diversify revenue, Ultra-wideband is our third largest investment area, providing Corvo a significant long-term opportunity for diversification and growth as applications proliferate. We are engaged broadly across markets and maintain a robust ultra-wideband sales funnel with over $2 billion of qualified opportunities. Now turning to strategic highlights by market. In the automotive market, Corva's ultra-wideband technology enables a range of automotive use cases, such as secure access using smartphones and smartwatches, in addition to key fobs, as well as precision short-range radar applications, including child presence detection, hands-free liftgate access, and intrusion detection. During the quarter, Corvo was awarded an Ultra Wideband Design win for a leading automotive OEM based in Japan and secured an Ultra Wideband win in support of the world's leading EV manufacturer. For automotive asset tracking, we were selected to supply Ultra Wideband tags for an automotive OEM based in South Korea. These tags enable the OEM to enhance operational efficiencies as cars are manufactured and transported. In consumer markets, we secured a Wi-Fi 7 design win in augmented reality glasses. This is a growth category, and Corvo is also supplying Wi-Fi 6 and Wi-Fi 7 FEMs for a leading supplier of AR glasses and VR goggles to a company headquartered in the U.S. During the defense and aerospace markets, Corvo's opportunity set continues to expand. our sales funnel increased approximately $2 billion sequentially to over $7 billion. This growth reflects a sharp increase in both U.S. and international defense spending and Corvo's expanding position in high priority programs. Recent U.S. budget reconciliation legislation includes approximately $150 billion in additional U.S. defense funding. This is an incremental tailwind to revenue given CORBO's strategic importance to the DoD and leading defense primes. We are actively engaged across a broad range of advanced programs, including radar, comms, SATCOM, and missile defense, and we stand to benefit from initiatives such as the Golden Dome Multilayer Defense System. We are also a beneficiary in increased EU and allied defense funding in ground, airborne, ship, and space-based sensing platforms. Corvo is uniquely positioned in this market. We offer GAS, GAN, BAW, SAW, and advanced multi-chip packaging, all manufactured onshore in the U.S. These capabilities, coupled with our silicon beamforming technology, are critical enablers for modernizing defense platforms. By integrating these core technologies, Corvo is able to enhance system-level performance, reduce size and weight, and deliver greater value across increasingly complex architectures. During the quarter, we supported a broad range of mission-critical applications, including manned and unmanned airborne radar, space-based radar, SATCOM, electronic warfare, and missile defense. To address increasing requirements for functional density and efficiency, we introduced two highly integrated S-band switch filter bank modules, leveraging BAW and SOI technologies. Additionally, we expanded our SATCOM portfolio with a new GAN-based K-band power amplifier that delivers superior levels of integration, bandwidth, and power efficiency to meet the needs of next-generation LEO constellations. In industrial and enterprise markets, Corvo enabled the demonstration of breakthrough new enterprise networking applications with a leading Tier 1 equipment manufacturer. We've engaged with this customer and other Tier 1 equipment manufacturers for a number of years to incorporate Corvo's ultra-wideband solutions into their network access points. These access points have already begun to shift to end customers as part of their Wi-Fi 7 deployments. This enables a range of ultra-precise applications such as indoor navigation, location awareness, and asset tracking that deliver superior real-time location accuracy in high-density venues such as factories, warehouses, offices, airports, hospitals, campuses, retail locations, and stadiums. In addition to this ultra-wideband engagement, Corvo supports this customer's enterprise ecosystem with Wi-Fi 7 front ends and filtering solutions. Turning to infrastructure, there's strong momentum in DOCSIS 4.0 broadband cable access. Corvo is a market leader, and we are well aligned with industry leaders in the continuing evolution of DOCSIS standards and capabilities. During the June quarter, we released two new GaN-based power doubler amplifiers, supporting the industry's transition to more intelligent and adaptive hybrid fiber coax systems. For the base station market, we sampled key customers' new solutions, including high-efficiency pre-driver and high-rejection ball filter. Corvo's newest small signal solutions offer higher performance and tighter integration for massive MIMO, fixed wireless access, and other 5G deployments. In the mobile market, we are investing to increase our content opportunity at our largest customer in future programs over multiple years. We've expanded our portfolio for this customer with ET power management, and we expect to achieve greater than 10% contact growth in this year's fall launch compared to last year's fall launch. At our second largest customer, our solutions span our smartphone portfolio. Content this year includes low-band pads, mid-high band pads, and ultra-high band pads, as well as mid-high secondary transmit, antenna tuning, discrete filters, and Wi-Fi 7 FEMS. We also supported the ramp of multiple smartphone models by an Android OEM based in North America. Corvo supports this customer with multiple high-value placements across product categories. For Android OEMs based in China, shipments increased sequentially during the quarter as expected and in line with seasonal ramp profile 5G smartphones. We continue to supply mid-tier design wins awarded prior to our pivot from lower margin Android 5G. However, 5G product development ACG now targets the premium and flagship tiers. During the quarter, we secured multiple Wi-Fi 7 design wins across leading Android smartphone OEMs using MediaTek's Dimensity chipset. These wins are concentrated in the flagship and premium tiers, and we are engaged to support Wi-Fi 8 deployments in the upper tiers of the Android smartphones as early as the second half of calendar 26. Looking across our operating segments, we're expanding our content opportunity in ACG with our largest customer while diversifying across markets, customers, and product categories in HPA and CSG. We are operating the business with discipline and continue to evaluate opportunities to optimize costs. Where businesses do not meet our financial or strategic objectives, we will continue to act decisively, whether through divestiture or exit, to focus our resources on core, high-performing areas. Since last year, we have exited base station PAMs, divested our silicon carbide business, pivoted from legacy Android programs, ramped higher-value product categories, begun a sales process related to our MEMS force sensing business and pursued a broad set of actions to optimize our global factory network. Most recently, we transitioned gas wafer production from our Greensboro, North Carolina fab to our Hillsborough, Oregon fab. On last quarter's call, we announced our intent to close our facility in Costa Rica. The closure is on track and will occur in 2026, providing an additional tailwind to margin when complete. To build on this, Today we're announcing the closure of our Greensboro fab and transfer of our saw filter production to our Richardson, Texas fab. In his remarks, Grant will provide additional information on this, including timing and savings. We want to thank all the employees who are supporting us through this closure to make sure it's a seamless transition for our customers. And with that, I'll turn it over to Grant.

Thanks, Bob, and good afternoon, everyone. Corvo's fiscal first quarter revenue of $819 million, non-GAAP gross margin of 44%, and non-GAAP diluted earnings of $0.92 per share all compared favorably to guidance. During the quarter, our largest customer represented approximately 41% of revenue. On the balance sheet, as of quarter end, we held approximately $1.2 billion in cash and equivalents. We currently have approximately $1.5 billion of long-term debt outstanding and no near-term maturities. We ended the quarter with a net inventory balance of $638 million. This represents a slight sequential reduction and a decrease of $89 million on a year-over-year basis. During the quarter, we generated operating cash flow of approximately $183 million and incurred $38 million of capex which resulted in free cash flow of $145 million. From an operational perspective, the closure of our Costa Rica site remains on track and we anticipate a smooth transition. We continue to expect this action will be completed early next calendar year as we move production and complete the sale of the facilities. As Bob mentioned, we have also decided to close our manufacturing facility in North Carolina to further consolidate our internal factory footprint. The closure of a wafer fab requires more time than the closure of a packaging, assembly, and test location, and we currently expect the associated cost efficiencies to benefit non-GAAP gross margin beginning late in fiscal 27. In order to transfer our soft filter production out of North Carolina, we have begun to bring up a new production line in our Texas location and will be working closely with customers to ensure a seamless transition. For modeling purposes, shutdown and restructuring activities such as those related to the closure of our North Carolina and Costa Rica sites, are excluded from non-GAAP results. Conversely, the operating expenses associated with bringing up a new line, as is the case with the SAW line in Texas, are included in non-GAAP results. In fiscal 26, we expect non-GAAP OPEX related to the startup costs for the Texas SAW line of $10 to $20 million, with minimal expense continuing into fiscal 27. Subject to factory volume and mix, we expect the annual savings in non-GAAP COGS for each year after the new line goes live will exceed the one-time startup costs incurred in fiscal 26. Regarding our outlook for fiscal Q2, our guidance reflects strong execution and demand across multiple end markets, while factoring in our current views on macroeconomic and geopolitical dynamics. Our expectations for the September quarter are as follows. Revenue of $1 billion, $25 million, plus or minus $50 million. Non-GAAP gross margin between 48% and 50%. And non-GAAP diluted EPS of $2 plus or minus $0.25. The momentum we are seeing in both revenue and bookings is being driven primarily by robust underlying demand and meaningful content expansion. At our largest customer, we continue to benefit from strong unit volumes across existing platforms and more than 10% year-over-year content growth on the ramping platform. Growth in our defense and aerospace business is supported by increasing content and rising defense spending, both domestically and internationally. Additionally, our infrastructure business is benefiting from the industry's transition to DOCSIS 4.0, where Corvo is a leading supplier of broadband amplifiers. These drivers are being partially offset as we continue to shift away from lower margin, mass tier Android 5G business, which is proceeding as planned. In the June quarter, ACG's Android revenue declined 18% year-over-year to approximately $240 million, with China-based Android revenue down 29% year-over-year to just under $100 million. While we've seen limited tariff-related inventory buffering at a few customers, we believe these effects are modest and secondary to the underlying demand drivers and Corvo specific content growth reflected in our outlook. Gross margin continues to improve on a year-over-year basis. Q1 non-GAAP gross margin increased approximately 300 basis points versus last fiscal year. And Q2 non-GAAP gross margin is expected to increase 200 basis points versus last fiscal year at the midpoint. This improvement is a direct result of multiple initiatives. We've actively managed our product portfolio and pricing strategies to reduce our exposure to mass-tier Android 5G. We have positioned the company to benefit from growth in DNA, which is margin accretive given the high-mix, low-volume nature of the business. We've divested or exited margin-diluted businesses. And finally, we continue to manage manufacturing costs aggressively while consolidating our factory footprint. We project non-GAAP operating expenses in the September quarter to be approximately $265 million, plus or minus 3%. The sequential increase in FX reflects higher incentive-based compensation given the expected outperformance during the first half of the fiscal year. FX headwinds related to the weak U.S. dollar and the impact of tariffs. Total off-exes also includes other operating expense of $5 million associated with the startup of our soft filter line in Texas, among other items. Below the operating income line, non-operating expense is expected to be approximately $10 million, reflecting interest paid on our fixed rate debt, offset by interest income earned on our cash balances, FX gains or losses, along with other items. Our non-GAAP tax rate for fiscal 26 is now expected to be approximately 15%. This is down from between 18% to 19% as was previously communicated. We continue to monitor the situation as the specific implementation of the new tax bill in the U.S., as well as changes to international tax policy, may evolve over time. On the corporate development front, we continue to seek strategic alternatives for our MEMS force-sensing business, which is incurring approximately $5 million of non-GAAP OPEX per quarter. We remain committed to optimizing our portfolio and regularly evaluating each of our investment areas. We are confident the steps we are taking today across our product portfolio, business segments, and manufacturing footprint position the company to expand profitability. The benefits of these strategic initiatives will continue to become evident as we advance through fiscal 26 and into fiscal 27. At this time, please open the line for questions.

Thank you.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. Please limit yourself to one question and one follow-up question. If you have further questions, you may re-enter the question queue. At this time, we will pause momentarily to assemble our roster. The first question comes from Thomas O'Malley with Barclays. Please go ahead.

Hey, guys, thanks for taking my question and nice results. So I just want to start off with the seasonality of this year. It looks like things are tracking kind of relatively in line with 2024 in the June quarter. If you look at the remainder of the year, you guys had previously kind of talked about the largest customer kind of being flat to slightly up modestly, but you're kind of reiterating this view more. that there's double-digit growth in content fall launch over fall launch. Can you talk about the disconnect there? And is December kind of normal seasonal, which gets you to that kind of goal? Just help me understand the seasonality as it compares to last year, just given the strong content up year over year. Thank you.

Hey, Tom, this is Grant. Thank you for the question. Let me start off maybe just with the December question, and then I'll get to the full year. In December, you know, typically seasonality would show that We ship a little bit earlier into the fall ramp, so we would generally see a September quarter that's slightly higher than December. You know, there's no change this year to what we believe the ramp profile would look like. Again, it really depends on how things play out unit-wise. But in terms of the full fiscal 26th year, you know, the last time we provided a full year guidance was in January, and that was prior to the increase in any macroeconomic uncertainty around the tariff dynamics. At that time, our January forecast called for 26 revenue to be roughly flat with fiscal 25, excluding the 30 million of revenue from silicon carbide, which we've since divested that was in fiscal 25. At this time, we're not updating our full year at this stage, but I can walk through some puts and takes by business segment beyond just ACG. But in ACG, our outlook is still for a single-digit decline, and that's unchanged. We remain on track to exit the $150 to $200 million of low-margin business as part of our strategic portfolio shift there in Android 5G. And we currently expect about two-thirds of that year-over-year decline in the Android business will occur in the second half of fiscal 25. So that's yet to come in the second half, which gets to at least partially addressing your December question. At our largest customer, we remain encouraged by the recent strength, and we're seeing unit volumes there on existing platforms come in to our expectations and strong as well as the content gain that we see of 10% or more on the ramping platform, which is encouraging. In some of the changes we've seen in terms of the top line for fiscal 26 are in CSG, which is trending below our earlier expectations due in part to an automotive customer delaying a program ramp there that included our ultra-wideband SOC. That program is now anticipated to ramp in fiscal 27. So we continue to expect year-over-year growth for CSG. However, it'll be in the low single digits versus 10% to 12% as we guided previously. And then lastly, our expectations for HPA remain unchanged and on track for a strong double-digit growth this year in DNA, rebound, and infrastructure tied to the DOCSIS upgrades and some other positive tailwinds. We can get into, you know, while we're encouraged by the first half strength that we've seen, we're also mindful of the seasonality in smartphones in the back half as we shift the portfolio away from mass tier Android. But overall, we remain very confident in the strategy, the execution, and our strong strategic position.

Super helpful. Thank you. And then just to dive down onto the Android point there, so you gave a little extra color this quarter, talking about Android in like the 240 million range. That's up 16% sequentially by my numbers, maybe give or take where people have March set up. But you guys have previously said kind of up slightly. Is that dynamic something that you think is more of a pull forward, or do you think that's customers kind of coming to you, hey, you're exiting the business, this is the end of the life here, we want to take a couple more products before you're done producing? Just maybe explain the dynamic there and what happened versus your original expectations.

This is Dave. I'll take that one. So, yeah, I mean, if you look at the Android ecosystem, we've got customers in China as well as globally. And in the premium tier, remember, we're not exiting that part of the market. So we talked, I think, last time about some share gains that we have in the second half at our large Korean customer. And so we're starting to see the benefit of that as that starts to ramp up. We've also got really good content and a U.S. customer that Bob mentioned in his prepared remarks, and that's ramping now as well. So I think that's some of the dynamics you're seeing. We talked about China a little bit earlier, and we do see a little bit of buffering probably there with some of the uncertainty in the trade dynamics. And so there's probably a little bit of that going on in China. But we've still got engagements there in the high tier, but that business is definitely declining. as we head into the back half of the year.

Thank you. The next question is from Harsh Kumar with Piper Sandler. Please go ahead.

Hey, guys. I also wanted to echo my congratulations. These are extremely great and awesome results. I had two as well. I think you're moving to the 50% or 48% to 50% gross margin mark a lot faster than I think I had anticipated personally. And I was curious, you've got a bunch of things going on. You're exiting businesses. You're doing fab rationalization. But if you were to say which of those initiatives have probably the maximum amount of swing factor that's driving your margins up so much higher, maybe I would be very curious to understand what's making the margins go up so much faster if there's one that's more impactful than the other. And I've got to follow up.

Sure, Harsh. Thanks for the question. If you look at gross margin, at least in Q1, the driver there sequentially is largely mixed. But on a year-over-year basis, it's up largely due to cost improvements. You'll see that we've taken some significant actions on the factory footprint. Some have yet to come, but a number of them in terms of reducing costs you're starting to see in gross margin. There's also an improvement in mix. We've seen growth in the defense and aerospace area, which helps from a business mix perspective. And we've also exited the silicon carbide business, which was dragging against our gross margin profile. And finally, we've moved our Wi-Fi business from an underloaded North Carolina fab to an Oregon fab that's higher volumes, and we're seeing a benefit there. So, I would say that the single largest theme in terms of gross margin improvement is both cost reductions and the other actions we've taken.

Okay. And I assume that applies to September quarter as well?

Yes. That's a continuation of a lot of the same trends.

Got it. And then for my follow-up, you know, you talked a lot about increased content, which you're seeing on the internal modem, but I wanted to ask about the mid-high pad. I believe you are a legit supplier in the Android ecosystem of that pad. And I think from my understanding, you have a window at a large U.S. customer. Am I to assume with the kind of growth that you're talking about in your content that you have a shot at it or you want something or maybe there's contribution there? Or is it just the internal modem perforating through the ecosystem of phone models?

Harsh, this is Bob. I'll take that. For this fall's launch, the team did a great job of delivering dollar content growth that both Grant and I have talked about over 10%. But as far as next year's phone, which is where I think you're hitting, we do remain confident in our position with our largest customer. But there are two factors that we consider when we look at the business there. One is technical. One is commercial. In terms of technical... The technology that we're delivering and our product development we've done, we're delivering results and we're laser focused on an execution. So I like how the team's progressing there. Commercially, with the expiration of a certain long-term supply agreement, you know, that's also helping us. And as we've looked and we've talked about this before, the expansion of their SKUs where they launched the 16E, which to your point, we did have ETP on the internal modem. These all create opportunities for us. So we think we've positioned the business nicely, but we'll see how it all plays out next year.

Our next question is from Christopher Rowland with Susquehanna. Please go ahead.

Hey, thanks for the question and really great results here. So I guess first of all, just following up on the gross margin progress, so this is probably for Grant here. So you guys did mention you could hit high 40s this year, and you're going to do that, looks like. But you mentioned you could hit 50% next year. I was wondering if maybe we could get an update there. And as we look forward into next year, perhaps you can walk us, give us a gross margin walk, what's contributing to what in terms of that improvement. Thanks.

Sure, Chris. This is Grant. Let me take that one. You know, as we look forward, you know, beyond fiscal 26, they're largely the initiatives that we've discussed, right? The Costa Rica and North Carolina closures, and we'll be moving into fabs that will be more heavily loaded. So that'll be beneficial. We'll be changing the business mix. and we'll have growth in DNA above our corporate average, so that'll be margin accretive. We're laser focused on reducing costs. It's an ongoing activity, and we'll be able to benefit from that. You know, but in terms of giving any guidance out into fiscal 27, other than to say we expect gross margin to continue to improve, you know, I won't be providing any incremental guidance today. In terms of walking the overall fiscal 26 improvement, the vast majority of it, as I mentioned, was really cost related and due to the factory actions that we had taken previously. There is some inventory improvement there, better excess obsolete, better quality and yields, other items, but for the most part, the lion's share of the improvement is a direct result of those factory actions and business growth we're seeing in margin accretive areas because of the capital we're allocating to those businesses.

Okay. Thank you for that. Just a clarification and then another question. I apologize. But It sounds like it's like $15 million a year, if I got that right, from those FAB rationalizations there, which is a little under 1% if you just confirm that I got that math right. And then the second question is actually for Bob. So, Bob, you know, you did better than expected for June and September, it seems like here. Any idea on how much, particularly at your largest customer, was pulled in? And then Qualcomm has talked about an expectation of 30%. internal modem at your largest customer. Is that your expectation as well in the September guidance? Thank you.

Let me start, Chris, with the first part of your question, and then I'll let Dave or Bob respond. The $15 million would be relevant for the North Carolina fab closure. We said it would be between 10 and 20 million of cost in fiscal 26 in order to bring up the saw line in our Texas location, and that we would benefit at least that much every year thereafter once the line goes live. So I would say that's on the low side and likely related simply to the North Carolina facility.

And Chris, as far as architectures go to our largest customer, we'll stick with our standard line, though we're not going to comment on that. but clearly it is our expectations over time that they will use more of their internal modem and the percentage will only grow. Dave, you want to take the other part he asked?

Yeah, sure. Hey, Chris. Yeah, as far as your question about pulling demand, I mean, the strength we're seeing is primarily driven by the underlying demand fundamentals we mentioned in the prepared remarks around unit strength and content gains in smartphones, as well as increased spending and expanding content and defense and the broadband infrastructure upgrades. So those are the major drivers. Outside of handsets, we're not seeing any pulling activity. The channel inventories are healthy, and customer behavior supports normal demand patterns. In fact, in some areas, we're seeing the opposite that we do believe is related to tariffs, and especially in our motor control business for power tools and garden equipment, we're starting to see demand push out just because of the uncertainty around the tariffs and trade policy concerns there. Enhanced sets were benefiting from the seasonal ramp we talked about and further supported by some of the content gains, not only our largest customer, but I mentioned Samsung as well and others. But we have seen some limited component inventory buffering due to the tariff dynamics, mostly in Android, and some of that's associated with factory optimization as our customers try and optimize their factory footprints to the different geographies they're shipping to. So we estimate that to be in the range of about $15 to $30 million of added buffer that could be out there. And we expect that will be reduced back down to normal throughout the rest of the calendar year. Having said that, we're projecting our China Android business will be down sequentially about $30 to $40 million in this quarter and then down again in our fiscal Q3. So all of that's contemplated in our guidance. And we continue to monitor these dynamics closely, and we're going to continue to take disciplined and conservative approach to the back half of the fiscal year. And I just do want to point out, we haven't changed our internal smartphone unit assumptions that we started the year with.

So we're kind of maintaining our position there as well.

Our next question is from Jim Schneider with Goldman Sachs. Please go ahead.

Good afternoon. Thanks for taking my question. I was wondering if you could maybe comment a little bit on the defense business. Clearly, it seems like it's tracking a little bit better than what you expected. Can you maybe talk about whether the step-down was less than you expected in the quarter? How much you expect the defense vertical to be up specifically in September? And then maybe as a separate follow-on, can you maybe sort of address the M&A potential specifically in that defense area? that you see out there in the market? Do you see more or less opportunities in that vertical and maybe kind of talk about the price or valuation environment you see for both defense and broader HPA acquisitions? Thank you.

Sure. Why don't we let Philip, you want to cover the business and then I can talk to the M&A environment?

Sure. So I think the strength that we're seeing is not, I mean, we had It's not different than what we had forecasted. You know, I think as Bob mentioned, you know, we're seeing really just our design opportunities and our funnel growth significantly. I think Bob mentioned that we had increased it by over $2 billion in a quarter. You know, we are, you know, we are really critical in most com, radar, satellite, SAPCOM systems. with the U.S. government. And I think, you know, what we're seeing is, you know, when the administration first came in, there was a lot of executive orders. And I think it took some time for our customers to kind of digest that and understand kind of what the priorities are. I think as that is starting to become understood what the priorities are and kind of figuring out where things are going, you know, we're seeing that as a tailwind in the near term as well. So, again, I think, you know, we, whether it's a radar platform, whether it's a drone, whether it is, you know, a satellite, there's just a tremendous amount of opportunity in front of us. And, you know, I think we're well positioned to get our unfair share.

Maybe on the M&A front, the DNA space remains a very attractive area for us. To Philip's point, our strength there with customers and other technologies could lead us to be a better owner of certain businesses. And so we're actively looking in that space. It's generally margin accretive for us. And where the valuations make sense and there's a strategic merit for the transaction, we're expecting to be active. Beyond that, it's a typical deployment of our cash to return value to shareholders in a disciplined manner.

Thank you. Thank you. Our next question is from Joe Moore with Morgan Stanley. Please go ahead.

Great. Thank you. In terms of the tariff-related kind of buffering, I guess, you know, why isn't there more of that? I would feel like Given the dynamic of kind of shifting tariff potential, it would just behoove people to have a little bit more inventory. I guess just, you know, what are those conversations like? And is there any kind of pushback on you from your customers saying, you know, we need to pass along component savings to mitigate this? Any price pressure or anything you might see from that?

You know, it's difficult to precisely isolate it, right, especially as you're coming off of a new seasonal pattern and our largest customer and, you know, with the launch of the spring model that included our ETP-MIC, which was new content, and we're in the early stages of a fall ramp where we've achieved greater than, you know, 10% content gains, which is new as well. So, you know, given the preliminary sell-through data we're seeing, you know, most of the strength that we're seeing aligns with the phones that are being purchased, whether it's third-party data or the carriers themselves.

But I don't know if... The only thing I would say, add to that, the only area we're seeing the tariffs impacting, Dave mentioned, it's the battery-operated power tools. That's the one area, clearly, we've seen it where it's not even buffering. They're just holding off on their production plans to figure out where they're going to make things around the world until they understand what the tariffs are going to be. But as for the other parts of our business, large defense obviously doesn't matter. Red cover the phones. You know, we're not seeing it in other areas. The only area primarily is in the battery-operated power tools area.

That's helpful. Thank you. And then as my follow-up, you mentioned CSG kind of delay and a little bit lower full year. Is there anything we should be aware of there in terms of how to model the rest of the year? Is there a discrete follow-up, or is that just something that, you know, just ramps a little later than you would have thought?

It's something that will affect the top line there, you know, in terms of the growth for the year. Like I said, it would be in the single digits versus the kind of low double digits as we had communicated in the past. That would have been something that would have happened later in the year, so it's pushing to fiscal 27. You know, as you think about that business, you know, it's really the combination of our Wi-Fi business and our SOC business. As Bob pointed out, our SOC business is The third largest investment next to our mobile business initiatives and our DNA franchise. You know, the SOC business, you know, within CSG is generating annual revenues right now of around $60 million. So the pushout is meaningful as you think about that particular business. And it's incurring around $100 million of op-ex. So, you know, this is a meaningful shift for the CSG segment under the Corvo consolidated fund.

Our next question comes from Krish Sankar with Covenant Company. Please go ahead.

Yeah, hi. Thanks for taking my question. I have two of them. First of all, it's kind of a clarification. On the pull-ins, is the pull-ins mainly in June quarter or are you also seeing pull-ins in the September quarter? And within that, amongst your largest customer, how much of the current generation RF and power products are common or shared with the 2026 model? And then I had a longer-term question for Bob after that.

Sure. So in recent to quantify it, David already said earlier that we were expecting maybe $15 to $30 million that we would expect to see. And that's all incorporated in our guidance. So the unwinding of that in our September quarter and throughout the rest of the year is all contemplated in what we've been talking about today. If there's anything more to add or you can ask Bob your second question.

Yeah, and what Grant referred to, and I'm answering that, that's our component inventory. From everything we can see, what we're shipping is being built and sold through. So that 15 to 30 million we're talking about is just some buffering that we've seen around our component inventory, mostly in China, but in other areas as well as customers to optimize their factories and maybe in response to tariffs or other reasons as they move production from one factory to another.

Got it, got it. And then just like a longer-term question for Bob. Bob, kind of curious, your thoughts on edge AI implications for smartphones and RF. It seems like there's, you know, from an RF standpoint, you need more uplink MIMO capability, and also, I mean, the phones need to be upgraded to Power Class 2 for edge AI situation, which could happen as early as the 2026 iPhone launch. I'm kind of curious. your view on edge AI and what it implies for RF content on a go-forward basis.

Thanks for your question. I think you're correct that we are going to need more and better RF. That's something we say all the time. Frank, I think you can handle that question. We've had a lot of discussions about exactly those things. We're not so much hung up on is it being driven by AI. It's just always the carriers want to get people on and off the network faster. particularly as you continue to load more and more data. Whether it's being driven by AI or not, that's secondary to us. What we're focused on is how they keep changing the architectures to drive more and better RF. So, Frank, do you want to handle that?

Yeah, no, it was a great question and simply stated yes, I agree with you. If we take you all the way back to our analyst day, we talked about 5G advanced as something that was going to continue to drive RF content, more and better RF in the phone. And a few of the examples we referenced were exactly things that you highlighted, additional both downlink and uplink RF paths in the phone and an increase in power levels in multiple bands, therefore expanding the power class two levels from just one or two bands to multiple bands in the phone. So Yeah, I think you hit on exactly what we expect to see over the next few years.

Thank you. Our next question is from Gary Mobley with Loop Capital. Please go ahead.

Hey, guys. Thanks for taking my question. I wanted to respectfully push back on some of the guides you're giving for fiscal year 26. Essentially, you're upsizing fiscal year 26, or at least the first half, by about $100 million versus your prior soft views or hard views. And, you know, that's the difference between, you know, having revenue flat for the year or growing 3%, but yet you're saying only 15 to 30 million of that upside is coming from pulled forward. So is this a situation where the year is off to a great start, but it's just too early to upsize your fiscal year 26 outlook? Or is this really a deep-rooted concern about terror pull-forwards?

Hey, Gary. This is Grant. Let me try to take a stab at your question. I mean, generally speaking, as we said, there's upside in demand that's broad-based. It's not just smartphones. We're seeing it in our growth in our DNA business. And then for the full year, I talked about some of the puts and takes by business segments. So we're seeing a push out of some revenue for CSG into fiscal 27 because of a large automotive program there, which changes the full year. We're seeing about two-thirds of our $150 to $200 million of our Android business that we expect to decline in fiscal 26 will also hit the second half. And then on top of that, we do have the overhang of macroeconomic uncertainty. So the combination of all of these factors are leading to our internal views on the full year and why we're not providing an update to our early comments in January. Got it. Thanks, Grant.

Just a follow-up. I wanted to ask about the practicality of separating ACG from the RF businesses of HPA and CSG. How tied is coupling from an R&D or from a manufacturing perspective are all three of those businesses on the RF side?

Sure. So I'll take a first pass, and then I'm sure Bob and Philip would want to weigh in as well. The businesses themselves are rather tightly coupled. They share factories that share process engineering. They share product development in certain cases. There are BOS filters, for example, that are used in defense applications that are also used in Wi-Fi applications for CSG. There is a significant amount of overhead that's that's the same across the different businesses. And in fact, uh, you know, there's a lot of learning that happens, whether it's, you know, base stations to, uh, the, the smartphones themselves or, uh, just customer, uh, customers that are shared, for instance, mobile customers across CSG and, uh, and ACG, for example. So there is a considerable amount of shared resources amongst all the businesses. It's also true that commercially our defense businesses appreciate, our defense customers anyway, appreciate the scale that we have from the size of our high-volume factories that are serving our mobile customers. And vice versa, our mobile customers appreciate the commitment we have to our production lines and the technology advancements. and the diversity of our revenue base and stability that comes along with the DNA business and other areas. So there's a lot of shared resources and shared positive sentiment amongst the customers across the businesses.

The only thing I'll add, Grant, is they all use the same Oregon-Hillsboro FAB for gas, all three business units.

Thank you. Our next question is from Chris Castle with Wolf Research. Please go ahead.

Yes, hi. I guess the first question, just a clarification of, you know, sort of what the Android business looks like exiting the fiscal year, given all you said. And I think what my interpretation is, you'd be sort of a China Android of about maybe 20 to 30 million exiting the year. But I guess I'm not sure if that's complicated by some of the inventory buffering. If you could clarify kind of where you think China Android is at the end of the year.

I think maybe just a clarification, Chris, on your question. Did you say exiting the year at 20 to 30 million of Android-based China business? Yes. Okay. I think that's on the low end. There's still a bifurcation of their product portfolio. They have flagship and premium tier devices, and we'll still look to participate in those. The customers will make their own cost and performance trade-offs amongst the parts, but they'll still need to remain competitive if they want to feel the device that's going to sell well. And consequently, we'll be able to sell into the higher end of their portfolios. It won't be likely in the $20 million to $30 million range. It will probably be higher than that, but the trend is down over time as we continue to execute on our pricing strategies and move forward. As we commented on this last quarter, our China-based Android revenue was just under $100 million, and it'll be trending lower over time.

Got it. Okay, that's helpful to calibrate us. The follow-up question was on Samsung, and there's two dynamics there because I think you're also exiting some of the mid-range there, but you're still focused on the high end. I guess two questions there is as you look into next year, given the exit, the mid-range, some of the gains in the high end, what do you think happens to the Samsung business there? And then secondly, in the event that Samsung is more successful with their internal chipset, which they're trying again on that, is that a benefit for Corvo content?

I'd be glad to take the second part. The answer is yes. We would love for them to be successful with their internal baseband. But for across business units, not just ACG.

Yeah, and you're right about exiting the mask here or there as well. It takes longer. The design cycles are longer. Sometimes they use things for multiple generations. So you can kind of think of it very similar to how our China business is, but further out in time. And so, you know, we've got some strong business still remaining there in the mask here, as well as some of the flagship I talked about. So that'll kind of continue on. And it'll be about a year probably behind the China business. And as we look forward to the, you know, we talked a little bit about our success in the second half flagship. As we look forward in the first half flagship next year, we do expect that our content will probably decline there. They're not introducing any new technology from an RF standpoint. And so, you know, the opportunity there for more competition to come in goes up.

And so you'll probably see some decline in our content on the spring model.

Thank you. Our next question is from Carl Ackerman with BNP Paribas. Please go ahead.

Yes, thank you. With the SAW line moving your Richardson facility, which follows the consolidation of your farmer's branch facility into that business, into that fab two years ago, I guess are you at or near full utilization in the Richardson facility? And then at what point do you need to significantly add capacity here as we think about the free cash flow generation of this business. Another follow-up, please.

Sure, Carl. This is Grant. No, we have room there in our Richardson facility to expand and add the saw line. We've improved the die size and overall device size of a number of our products over the years meaningfully, and that effectively increases your capacity as you don't have to run as many wafers to produce more dye that are smaller. So we've been very successful at the dye size reductions and, again, other device reductions in order to accommodate all of the BA filter production that moved in from Farmer's Branch as well as the projected saw demand that we will move there from our North Carolina facility.

Got it. Thanks for that. Yeah, if I could just go back to I think Gary's question a bit. Given there seems to be no change in your smartphone unit assumption this year, I think you've been pretty consistent about double-digit content gain as your largest customer. There doesn't appear any clear signs of tariff pull-ins, and I believe the Android headwind of roughly $150 million was also consistent. So I suppose barring macro uncertainty and maybe some push out of CSG from automotive, those seem to be the two primary variables that would dictate whether we would move from what was the initial outlook of flat year-over-year growth. Or are there any other mechanics that we should consider when thinking about the growth rate for this year? Thank you.

No, I think you're considering everything that we've said. You know, look, we could be wrong if we're overly conservative. You know, we'll see how the unit volumes play out over the course of the year, as well as the mix of those unit volumes as we see over the course of the year. That can meaningfully change our top line, obviously, depending on share shifts amongst the handset providers.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to the management for closing remarks.

We want to thank everyone for joining us on tonight's call. We appreciate your interest, and we look forward to speaking with many of you at upcoming investor events.

Thanks again, and let's have a great evening.