Skyworks Solutions, Inc.

Welcome to Skyworks Solutions first quarter fiscal year 2024 earnings call. This call is being recorded. At this time, I will turn the call over to Rajeev Gill, Vice President of Investor Relations for Skyworks. Mr. Gill, please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks first fiscal quarter 2024 conference call. With me today is Liam Griffin, our Chairman, Chief Executive Officer and President, and Chris Senesal, Chief Financial Officer for Skyworks. This call is being broadcast live over the web and can be accessed from the investor relations section of the company's website at skyworksinc.com. In addition, the company's prepared remarks will be made available on our website promptly after their 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 complete reconciliation to GAAP. With that, I'll turn the call over to Liam.

Thanks, Raji, and welcome, everyone. Skyworks continued to execute well during the first fiscal quarter of 2024, despite a volatile macroeconomic environment. We delivered revenue of $1.202 billion We posted earnings per share of $1.97 and generated $775 million of operating cash flow. Free cash flow was also a record at $753 million, or 63% free cash flow margin, which reflects strong working capital management and moderating CapEx intensity. Let's review both near and long-term secular trends in our end markets. After two challenging years across Android ecosystems, we see signs that the industry is stabilizing. Excess supply conditions are abating, and inventory levels in the distribution channel and at the OEM level are normalizing. Customers are starting to restock inventory, albeit gradually, as supply and demand dynamics improve and new phones are introduced into the market. Moreover, we've made strategic investments in product development, positioning us to compete for design wins and share gains, focusing on highly integrated platforms for the leading mobile OEMs. We are pleased with our competitive positioning and technology roadmap and are poised to return to growth when the markets recover. Within broad markets, we see cross currents, but many factors are moving in the right direction. In consumer IoT, we believe that we are past the bottom as inventory levels in the channel have normalized and demand signals are improving. Furthermore, we are executing on the upgrade cycle to Wi-Fi 6E and 7. We see significant design wind momentum across our retail, carrier, and enterprise channels. These systems carry substantially higher dollar content. because of the addition of the new six gigahertz band and the inclusion of BOSS filtering technology. We expect wireless infrastructure and traditional data center will remain a headwind throughout 2024 as OEMs continue to digest excess inventory. Despite this, we remain bullish on several new product cycles, including major design wins in ethernet for high bandwidth networks, and 400 gig and 800 gig optical module upgrades. Lastly, automotive and industrial markets are experiencing a near-term inventory correction. However, we see opportunities for growth in our automotive business driven by higher adoption rates of connectivity in the vehicle, along with growing EV penetration, driving demand for our power isolation products. Taken together, we anticipate December quarter represents the bottom in the broad markets business. There are several long-term secular growth dynamics that leverage our differentiated technology, including the proliferation of intelligent edge-connected IoT devices, automotive electrification and advanced safety systems, and AI-enabled workloads, driving cloud and data center upgrades. Each of these trends require intricate connectivity engines, underlying the need for speed, ultra-reliable, low-latency performance. In addition, 5G technology is expanding beyond the smartphone into more use cases in broad markets, including private cellular networks in factories and stadiums, customer premise equipment supporting Verizon and T-Mobile, and multiband automotive telematics. and wearables, to name a few. We also remain bullish on the long-term RF content story in smartphones. Coupled with growing 5G penetration, we see increasing levels of complexity in content with each new generation. For example, 5G Advanced is driving higher RF content, including the addition of satellite bands, 4x4 MIMO on the downlink and uplink, higher bandwidth, more carrier aggregation, upgrades to Wi-Fi and GPS, and other innovations. Lastly, we are energized about the prospect of generative AI migrating to the smartphone, sparking a potential major upgrade cycle. As the performance bar rises every year to support AI-enabled phones, the complexity requirements of RF will continue to increase driving the need for more integration, lower power consumption, smaller footprint, and spectral efficiency. 5G is the ideal standard for on-device AI applications as it takes advantage of lower latency, faster transmission speeds, and higher frequency ranges. In addition, AI-enabled workloads are driving demand for high-speed connectivity for data-intensive infrastructure and cloud upgrades. accelerating the demand for our high-precision timing products. Turning to our quarterly business highlights, we secured several design wins in infrastructure, including optical transport products with a major operator in India, and timing devices for 5G small cells for private networks. We expanded the Wi-Fi design pipeline with Cisco's enterprise access points Linksys tri-band mesh router, and TP-Linx tri-band gaming router. We increased design wind momentum in automotive, including telematics, infotainment systems, and onboard chargers across the leading OEMs. Lastly, in emerging IoT, we delivered next-generation smart energy solutions with Google's Nest temperature sensors and ITRON's residential gas meters. In summary, Skyworks delivered solid financial results despite a challenging macro environment. Our strong balance sheet, record cash flow, and profitability reflect our resilient business model, diverse customer base, and technology scale. With that, I will turn the call over to Chris for discussion of last quarter's performance and our outlook for Q2 of fiscal 2024. Thanks, Liam.

Skyworks revenue for the first fiscal quarter of 2024 was $1 billion and $202 million, slightly above the midpoint of our outlook. Mobile was approximately 71% of total revenue, an increase of 7% sequentially, as we supported the ramp of new high-performance solutions at our largest customer. Android-related revenue with Google, Samsung, and the Chinese OEMs grew modestly sequentially. Broad markets were approximately 29% of total revenue, down 18% sequentially, mostly driven by some specific inventory corrections in wireless infrastructure, automotive, and industrial. Gross profit was 557 million, with gross margin at 46.4%, in line with expectations. Gross margin was down 70 basis points sequentially, driven by an unfavorable mix shift, resulting from lower broke markets revenue. Also, during Q1, we reduced our internal inventory by 193 million to 927 million, well below our target of 1 billion. Operating expenses were 191 million, below the low end of the guidance range. given our ongoing focus on managing discretionary expenses while continuing to invest in our technology and product roadmaps. We generated $366 million of operating income, translating into an operating margin of 30.4%. We incurred $7 million of other expense, and our effective tax rate was 11.7%, driving net income of $317 million and diluted earnings per share of $1.97, which is two cents above the guidance that we provided during the last earnings call. Skyward's business model continues to generate very strong cash flow. First fiscal quarter cash flow from operations increased to an all-time record of $775 million. Capital expenditures were reduced to $22 million, or less than 2% of revenue, resulting in an all-time record free cash flow of $753 million, or 63% free cash flow margin. Strong profitability combined with great working capital management and lowering the CapEx intensity of the business drove the record cash flow numbers. Also, during fiscal Q1, we paid $109 million in dividends and repaid the remaining $300 million on our term loan. We ended the quarter with over $1 billion in cash and investments and $1 billion in debt, creating a net positive cash position and an optimal capital structure, providing us with superior flexibility and optionality. Now let's move on to our outlook for Q2 of fiscal 2024. We anticipate revenue between $1 billion and $20 million and $1 billion and $70 million. We expect our mobile business to be seasonally down, consistent with historical patterns. While in broad markets, we anticipate modest growth off the December bottom, as inventory levels are normalizing in certain end markets. Gross margin is projected to be in the range of 45 to 46%, reflecting our seasonally weakest period of the year. We anticipate margin expansion during the remainder of 2024. benefiting from our disciplined management of our manufacturing and operational cost structure, both internal and external, along with higher factory utilization rates. We will also benefit from a favorable mix shift as our broad markets business recovers and accelerates. We expect operating expenses in the range of 193 to 197 million. as we continue to make strategic investments in mobile and broad markets to drive share gains and increase diversification. Below the line, we anticipate roughly $4 million in other expense and an effective tax rate of 11.5%, and a diluted share count of approximately 161 million shares. Accordingly, at the midpoint of the revenue range of $1 billion and $45 million, we tend to deliver diluted earnings per share of $1.52. Operator, let's open the line for questions.

Thank you. Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your questions, you may press star 1-1 again. Given time constraints, please limit yourself to one question and one follow-up. please stand by while we compile the Q&A roster. And our first question coming from the lineup, Matt Ramsey with TD Cowan. Your line is open.

Thank you very much. Good afternoon, guys. Liam, I wanted to ask a bit about the broad markets trends, and it's obviously, as the name implies, a diverse business. I was a pleasantly, but I was a little bit surprised at the commentary that you had visibility for that business to be up so quickly, I guess, in March. It's been an inventory correction that's lasted a bit longer in some of your peers and in other companies, and we've seen industrial maybe get a little bit worse. So, I mean, if you could maybe expand, I know you did some in the prepared script, but if you'd expand a little bit on maybe some of the individual end market trends you're seeing in broad markets and maybe what the pace of this potential recovery starting from March and through the rest of the year could look like coming off the bottom. Thanks.

Sure, sure, absolutely. You know, one of the interesting things here with our broad markets business is that there's so many opportunities that we haven't yet scaled. So if we look at the business, unlike some of the other mobile markets that are well-defined and there's still great opportunities, we look at the broad markets as more of an open-ended play for us. We're leveraging the technologies that we know how to work with. We have a great set of customers, and that continues to grow and expand. But, yeah, I mean, the team has done a really good job. This has been a tough year across the landscape, across semis. We're happy to deliver some positive results here today, and we do think there's a turn. Again, in that portfolio, it's very diverse, and mobile is a part of it, but the lion's share is really diversified products. with some really great names as well. And most of those broad market companies, we have low share. There's still a tremendous amount of room to grow within those accounts. So I think those are some of the themes. We've been working on this for quite a while and finally putting up some meaningful top line, leveraging that broad markets business. The other thing, we continue to remind our customers and even the investors, a lot of the stuff we do in-house. So we're able to craft and curate specialty products. We have our own fabs. We do things a little bit differently, and I think that helps our outcome.

Got it. Thank you for that. I guess this is my follow-up, and this is going to be a thematic that we talk about in the PC market maybe this year and then into next year, and the smartphone market, as you alluded to, sort of AI making its way into these products and potentially catalyzing a bit of an upgrade cycle. So I guess my question is, I mean, it's pretty straightforward for us to envision if you get air interface upgrades from 4G to 5G to what comes next, that that can expand the RF TAM pretty meaningfully for your smartphone business. Are you anticipating the growth potential from AI and smartphones to be primarily a unit driver for the market and therefore for your company? Or are there things that you guys can do in AI enabled phones that could meaningfully change the content? Or are we sort of waiting for the next air interface before the content could possibly inflect for the TAM again? Thanks.

Yeah, I think it's a secular opportunity. This is a really unique period for us and in the industry. The way we look at it, you look at AI and a lot of that is, you know, really intense servers, data center, and that's extremely important. Then you take it down kind of to the middle ground, and then you're kind of in a different position. But getting that to mobile is going to be a challenge. It's going to be a challenge, but it will happen. The consumer wants that. The consumer wants to have that compute power in their hand. And it's not there yet, but we really believe that it will come. And I think it's going to set up the industry for, you know, a whole range of new opportunities still carrying radio frequency. So really excited about it. And again, we have the building blocks and the know-how to do really interesting things and do it account by account as well. Not everybody wants the same solution. But we really do believe that heavy compute power has got to get matched up with something in your hand. That handheld device has got to step up. It's got to grow. It needs to be faster, lower latency. And that's all good because those are problems that we can solve.

Thank you. And our next question coming from the lineup, Chris Caso with Wolf Research, your line is open.

Yes, thank you. Good evening. First question is about the Android market right now. It sounds like that market has finally grown for you after several quarters of inventory correction. Can you speak to what your expectations are for that as you go through the year? I suppose at this point the inventory correction is behind us. What's your level of optimism of getting back to more normal growth rates in that part of the business?

Yeah, Chris. Yeah, you're right. It's been a little bit bumpy through the ecosystems here, but we see green shoots here popping up and Android. We know how to make these products. I think there was a little bit of a soft spot there in the industry. The newer phones are coming up with a little bit more technology. We like that. And we can broaden that base. So we are going to, in the prepared remarks, we commented on that. And you should expect more growth in the Android ecosystem as we go forward. These are products that we can execute to in the pipeline right now and give us continuing strength going through 24 and 25.

Okay, as a follow-up on gross margins, speak to your expectations, you know, as we proceed through the year. You know, one thing you mentioned is it sounded like your internal inventory was below target. Should we read that to mean utilization starts going higher and, you know, what the effect on that will be on gross margins as we go through the year?

Yes, Chris. So, I'm... I'm really, when you look at gross margins, right, we did 46.4% in Q1. We still impacted there by underutilization, a little bit of a headwind from a mixed point of view as well. And that continues somewhat in the March quarter that we guided. But then when I look beyond the March quarter, we will see some really nice gross margin uplift in the remainder of the fiscal and the calendar year. Part of that is higher utilization because we will no longer have to focus on a reduction of inventory. That is behind us. We reduced the inventory by almost 200 million in the December quarter. There is maybe still a little bit of opportunity there, but we feel good about the inventory levels where they are right now. In addition to that, our broad markets business is going to grow faster than the mobile business, and so that gives us a little bit of a mixed tailwind as well. And then in addition to that, we will really benefit from all the cost reductions that we've done over the last 12 months. We really focused on taking out structural parts of the cost structure We focused on operational efficiency, driving yield improvements and test time reductions. And in addition to internal costs, we also start seeing some benefit from external costs. And so when you put it all together, we will see some nice gradual gross margins improvement after the March quarter.

Thank you. And our next question coming from the line of Christopher Rowland. with Susquehanna, Yolanda Salpin.

Hey, guys. Thank you for the question. I guess, first of all, in broad markets, if you can, you had some great color as to how you break those out into kind of sub-segments. Would love to know kind of what those look like, how they're trending. And then also, you know, you alluded to the gross margin benefits as we move through the year. I don't know if you can

talk to the the broad markets effect on gross margin as we move through the year yeah so as it relates to broad markets roughly 40 45 is iot more consumer iot right where we provide connectivity solutions uh in in tablets and wearables and pcs uh your home connectivity with routers and all the access points that tap into that. In that market, there has been inventory correction for multiple quarters, but we are getting towards the end of the inventory correction there. In addition to that, we see strong growth in that part of the market due to an uplift in content as we transition from Wi-Fi 6 into Wi-Fi 60 and 7 type of solutions that has a substantially higher rf content of skyworks inside the next 30 35 is infrastructure cloud data center enterprise networking um there is definitely an inventory correction going on in uh in that part of the business that has started in the december quarter and and we'll continue for a couple quarters here uh nevertheless there as well i think in that market we're very well positioned with some key customers, including our timing solutions for data centers. And then the last part is 20, 25% is automotive and industrial. There as well, I think we're well positioned, but you've heard it from many of our peers. There is an inventory correction going on. I don't think it will be a long drag out inventory correction. It's probably December, March, two quarters of an inventory correction. and there again we are very well positioned in that market the connected car that eventually become an autonomous car as well as EV where we play with our power isolation solutions and so again when you put it all together December is the bottom for our broad markets we start seeing some sequential growth in March and beyond and as you know yes those markets typically have a higher gross margin compared to broad markets and and that will help us to lift the gross margin.

Thank you for that color, Chris. You guys already talked about AI smartphones, but also you called out AI-enabled workloads driving cloud and data center upgrades. You also talked about 800 gig and this being an opportunity for you. Is that all related to your timing business? you know, from your acquisition or are there other ways that you're leveraging infrastructure around AI as well?

Yeah, largely through the infrastructure business that we have and some of the technology that we brought forth in our Silicon Labs deal. That's driving new vectors for us at Skyworks in the industrial markets and the data center markets and it's a really, you know, vibrant growth source for us and there's a lot of room to grow there as well. So, Lots more to do, but we've been making some great progress in that area.

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

Thank you very much. I'd like to touch on if we could later this year, especially in mobile. It seems pretty clear at this point, given the largest customer scramble to get their thing done by 2025, that most all attention is on that and that we're going to have kind of a, I don't know the best way to put it, but basically kind of an on-hold, not on-hold, but a repeat of what we've seen before. Not much new in the new one, and the competition is clear. So basically, I would expect in the fall you're going to see more competition, or you already know it now, I'm sure Qualcomm's going to talk about it a lot on Wednesday. So I'm trying to get a feel for the profile of your mobile business in the second half of the year. It sounds like it might be weaker than we've normally seen since Qualcomm's share has got to come out of somebody. If you could maybe characterize, without getting into too much detail, what should we look at in terms of the mix in the second half? You already talked about broad markets being much stronger. Mobile, by implication, is going to be a little bit weaker. And is that mostly just organic growth, or is there going to be some share loss, or how do we think about that? And then I have a follow-up, please.

Yeah, well, of course, we're deeply engaged with mobile in all angles, right? So we have a broad set of technologies that are applicable to multiple customers, including the largest, and that's our craft. That's the largest part of our portfolio. We're growing across other markets, but certainly the know-how that we have in RF, the ability to do things in-house, as you know, and the vectors that we put forth to drive this company. So we're all over it at every angle, and we're continuing to work on market share and do innovations, delighting our customers, lowering current consumption, expanding the reach, doing a little bit more in the Android markets that we've kind of hinted around that. We're going to continue to execute there and still drive the best performance solutions that we can.

Okay, maybe I could fall over a different angle here. You're going to grow in Android. You've kind of been under-earning there for several years, I think on purpose because you've done very well outside of that market. R&D is going up in order to address the products because it's a different product market. But margins typically are lower in that whole market. Competition is a lot more intense. One, should we expect to see revenue growth in the second half? It's a little early, but revenue growth in the second half of the year, whether it's on inventory, snapback, or new product wins, In Android, try to take up some of that slack. And then, Chris, maybe you could articulate how you're going to offset the margin, the natural margin dilution of Android over, say, the U.S. customer, and then, of course, all mobile dilution against broad markets in the second half, if you could, please. Thanks.

Yeah, so, yeah, we're with you on that. So there's a lot of opportunity for us to be more aggressive across the Android ecosystem. It's not just China. You get names like Google and Samsung that are tremendous opportunities that we can drive. We're built for this kind of stuff, and we have an end-to-end process that we continue to improve and refine at every turn. It helps our customers. It helps our gross margin, our utilization. We have incredible factories, homegrown stuff that we have here in Irvine that really, really is the solution of choice as far as I know with our technology know-how and the ability to be flexible and customizable to each account. I think that's an asset for us, and I think we'll continue to drive that portfolio.

Yeah, and as it relates to gross margin, the gross margin profile of our mobile customers is not about the same. And part of that is because, you know, we are somewhat selective. We are not sliding down in the mid or low end of the market. We stay at the high end. We stay at the high performance part. And in that part of the market, you compete based on performance. It's not a price competition. You compete based on performance. And again, that's why gross margins are somewhat the same with all the customers in that segment.

Thank you. And our next question coming from the lineup, Gary Mobley with Wells Fargo. Your line is open.

Hi, guys. Thanks very much for taking my question. I want to start out with a quick housekeeping question. What was the mix of revenue from your largest customer in the quarter?

The largest customer was approximately 73% of total revenue, which is high, obviously, because the December quarter is the top quarter with the largest customer. And given that the broke markets was bottoming out in December, you get to about 73%. Obviously, when you look forward on a full year basis or even in March, it will be well below the 73%. Okay.

Thank you, Chris. I want to ask Ed's previous question in perhaps a more direct way. Doing the math, it would indicate that your Android-related mobile customers are trending now at about a $400 million annualized rate, or at least that was the case for the December quarter. But in the past, fiscal year 22, I believe that level was closer to $800 million. And so my question is, you know, if we see a rebound in the Android market, and based on your design and footprint that you currently have today, can we expect that segment of your business to bounce back to the previous level?

Yeah, absolutely. We've got, as I said, a lot of opportunity to go harder and stronger and more direct in the Android ecosystem. We absolutely have the technology to make it work. We have the scale, manufacturing scale, and know how to get it done. Yeah, I mean, it's certainly a play for us there, and I think we'll take advantage.

Thank you. And our next question coming from the lineup, Carl Ackerman with BNP Paribas. Your line is open.

Yes, thank you. Two questions, if I may. On mobile, your largest customer is down on a seasonal basis in March, but at the same time, given your improving execution within Android, Does Android grow sequentially in March? How do we think about that within mobile, please? And I have a follow-up.

Yeah, Android is kind of slightly up into March.

Got it. Thanks for that, Chris. At the same time, I do want to touch on mobile one more time. It's been asked in several different ways, but I guess I'll try it again. You know, you are less tied to China than peers, but are you seeing any changes to the competitive landscape in China? I ask because there are anecdotes supporting China RF suppliers winning content in low band saw and TC saw, but at the same time, as you indicated earlier, Chris, you're not necessarily competing in that particular area of the market. So if you could just highlight the competitive landscape of what you're seeing in China, that would be very helpful. Thank you.

Yeah, I mean, the OVX players, we do some reasonable business there. We could probably do a little bit more on the Android side, but we really don't step down much further there. We're not in the low end at all. We could be, but I think we generate a better outcome for our customers and our shareholders to drive that mid and high end. So it's something we can do, but I think the way our business runs, I think we're more creative as a company going down the playbook that we have today.

Thank you. And our next question coming from the line of, Vivek Aryo with Bank of America Securities. Your line is open.

Hi, this is Blake Freeman. I'm from Vivek. Thanks for taking my question. I just wanted to focus on OPEX. The team's spending has returned a level seen prior to the industry downturn. So I was curious how we should think about the trajectory of OPEX in the remainder of the year.

Yeah, so as it relates to OPEX, I think we did a good job in the December quarter at 191. We are guiding with a little step up in March to 195. Keep in mind that this is the start of a new calendar year, and so you get a reset of the social charges and some of that that kicks in. In addition to that, we are going to continue to invest in our technology and product roadmaps. We feel good about our position with our mobile players. As Liam articulated, we have plenty of opportunity in our broad markets, and we're going to continue to invest. Now, we're going to do it the Skyworks way. We focus on efficiency, effectiveness, We're not wasting any dollars here. And so, but yeah, we're going to continue to invest. And so OPEX will continue to gradually move up in the remainder of the fiscal and calendar year.

Got it. And then kind of quickly circling back on some of your comments. I know the broad markets business is a key initiative for Skyworks. And just with the business kind of returning to this cash positive level and generating pretty strong cash flow from here. Just curious how you think about M&A and anything in particular you guys would look to add to the broad markets assets.

First of all, the cash flow is outstanding and it's definitely something that we focus on. We generate a ton of cash. As you have seen in the last couple of quarters, we have used that cash flow, of course, to continue to invest in the business. We pay our dividends every quarter and we have been paying off the term loan that, as you probably know, had a variable interest rate and was getting a little expensive there. But we're done with that. And so now, again, looking forward, we will continue to drive a very strong free cash flow. It's not going to be every quarter 63%. We feel we have a sustainable plus 30% free cash flow margin on a fiscal or calendar year basis. But that's generating a lot of cash. And of course, we want to put that cash to work. We have optionality. We can switch on the buybacks or we can be active from an M&A point of view. And as you know, yes, we focus on becoming a more diverse company, despite the fact that we like the mobile business, but we focus on becoming a more diverse company in part through organic investments in that business But we have the optionality to accelerate that through M&A, and we're working that.

Thank you. And our next question coming from the line of Thomas O'Malley with Barclays. Your line is open.

Hey, thanks for taking my questions, guys. I just wanted to understand the underutilization charges into the March quarter. Obviously, gross margins being guided down slightly. but you're seeing broad markets step up, so that mix should help you. Where are you seeing more of those underutilization charges? Are those as a percentage basis coming more on the mobile side or more on the broad market side?

So, no, it's not really tied to one of the businesses, but we have been bringing down the utilization of our factories and parts. because the revenue is down year over year, but also because we have been focusing on driving down the inventory, right? We are taking our medicine now. We're not just building inventory to protect the gross margin. Now, it takes a little bit of time for those underutilization charges to hit the P&L. It goes through an inventory cycle, right? That's why you continue to see slightly down gross margins on a sequential basis into the March quarter, but again, we have confidence that March is the bottom in terms of gross margin and you will start seeing gradual improvements after the March quarter.

Helpful. And then just on the moving pieces for the back half of the fiscal year, sounds like Android's getting better. Typical seasonality on your largest customer side in mobile. But I just want to get a feel for what you guys kind of are looking at in terms of the reacceleration of broad markets. If you look at March for your guidance kind of up slightly, you're still down 20% year over year. Do you think that kind of exiting your fiscal year, are you looking to kind of be growing year over year? Can you give us any kind of color on the pace of recovery there just because, you know, things are improving, but just how quickly is something that I think is a little more difficult to wrap our heads around? Thank you.

Yeah, sure. There's a lot there, but I think I get your point. So we definitely believe there's going to be more acceleration in revenue in the broad markets. We have a roster of incredible companies that we're serving right now from a Cisco to a Ford, Daimler, Nest we talked about before, Google company. It's a very diverse set of products and customers in the broad markets portfolio. And that's what we like. Each one has their own vector. And we're continuing to nurture that and grow into that. And it's also a great opportunity on the sales side because, you know, we do have quite a bit of revenue in mobile. But, you know, the number of accounts that we haven't served yet is still very, very high. And that's a great opportunity for us to go after.

Thank you. And our last questioner in queue coming from the lineup, Quinn Bolton with Needham. Your line is open.

Hey guys, thanks for taking my question. There's been a couple of questions on the call that seem to be alluding to perhaps you guys may be losing content at your largest customer in the second half of the year. And I haven't heard you guys specifically address that. Can you give us any thoughts as you look in the second half, how you're feeling content-wise at that largest customer? And then I've got a follow on for Chris on the gross margins.

Yeah, I think we have a great position with our largest customer. nothing really is concerning on that point. I mean, we know exactly who we are and who they are, and we have great partnerships, and we'll continue to drive success.

Okay. And then for Chris, you know, you've kind of talked about the gross margin drivers, you know, and potentially pretty quick recovery post the March bottom. I'm just kind of curious, you know, is there, you know, can you give us any sense, you know, how quickly can you get back to 50%? Is that something you think you can do in the calendar year 24? And does it require you to get to a certain revenue level to get rid of some of those underutilization charges? Or are things like product mix a much bigger factor, as well as the cost reductions you've taken to getting back to that 50%? So it tends to be maybe a little bit less driven by a certain revenue level. Just what's the best way to think about getting back to 50%?

Yeah, I mean, we guide only one quarter at a time, and there's a reason for it, right? There's a lot of puts and takes that go into the equation. But again, we have confidence that March 45, 46 guide is the bottom. We will start seeing gradual improvements from there. We obviously want to get as fast as we can back to the 50%, right? And then once we get back to the 50%, we're not going to stop there. Our long-term target model calls for 53% gross margin. And we believe we can do that. There is no structural impairment in the business that will prevent us that. But obviously, yes, we need revenue growth and we need to get better factory utilization. That in combination with all the cost efficiencies internally and externally that we have been working on and will continue to work on, give us the conviction that We will get back to the 50 in a reasonable amount of time, and then we're going to keep driving it towards our target level of 53. But we'll provide an update on a quarter-by-quarter basis.

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

Thank you all for joining. Look forward to seeing you at upcoming conferences. Thanks.

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