Skyworks Solutions, Inc.

Good afternoon and welcome to Skyworks Solutions' third quarter fiscal year 2024 earnings call. This call is being recorded. At this time, I will turn the call over to Rajat Gill, Vice President of Mass Relations for Skyworks. Mr. Gill, please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' third fiscal quarter 2024 conference call. With me today is Liam Griffin, our Chairman Chief Executive Officer and President, and Chris Finnesol, 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 a complete reconciliation to GAAP. With that, I'll turn the call over to Liam.

Thanks, Raji, and welcome, everyone. Skyworks delivered solid results for the third fiscal quarter of 2024. We posted revenue of $906 million delivered earnings per share of $1.21, and generated free cash flow of $249 million. Revenue, gross margin, and EPS met or were slightly above our prior guidance. Importantly, year-to-date free cash flow was $1.3 billion, or 40% free cash flow margin, which reflects strong working capital management and operational excellence In mobile, we are seeing encouraging signs that inventory levels and order patterns are normalizing. We are energized about the prospects of generative AI catalyzing a meaningful smartphone replacement cycle and driving higher levels of RF complexity. We expect new AI features will only be available on the latest next-generation smartphones, potentially fueling a multi-year upgrade cycle. We are uniquely positioned given our long-standing relationships with the leading smartphone OEMs, best-in-class RF technology, and a global manufacturing footprint. In broad markets, we delivered two consecutive quarters of sequential growth since the December bottom, and we anticipate modest growth for the balance of 2024. In Edge IoT, where demand is improving, we have a strong design wind funnel for Wi-Fi 7 systems, and we expect a healthy multi-year upgrade cycle given faster data transfer speeds and lower latency. In traditional data center and wireless infrastructure, inventory levels remain elevated, which is prolonging the recovery as we continue to undership natural demand. However, once industry conditions stabilize, we expect end customers to replenish inventory back to normal levels. Lastly, in automotive and industrial, we are working through excess inventory levels but seeing signs of stabilization. We remain bullish on our Design One pipeline across our power isolation, RF, and digital broadcast solutions. for the connected car and EV markets. Over the medium to long term, we believe generative AI will migrate to the edge. Most significantly, we believe the rollout of compelling AI applications will drive a smartphone replacement cycle, one that is currently the longest in history, standing at over four years. In edge IoT, AI-enabled devices increasingly incorporate machine learning to support language and computer vision models. Robust RF is critical to facilitate the continuous training to inference between device and cloud. Over time, automotive OEMs will train on big data in the cloud and stream software downloads through over-the-air updates, supporting higher levels of autonomy in vehicles. To facilitate these trends, OEMs need power and extremely fast RF connectivity. For next generation data centers, complex workloads supporting large language models will propel upgrade cycles in switch, compute, and optical networks. Over the medium to long term, Skyworks is well positioned with our high performance timing solutions, targeting 800 gig and 1.6 terabit Ethernet switches and optical modules. Ultimately, our view is there will be a hybrid approach to AI computing, a combo of on-device and cloud-based. Data can be trained in the cloud and deployed to the edge for inference on new inputs. More complex AI tasks will be processed in the cloud and less complex on-device. In addition to these new usage cases, AI-enabled smartphones will further elevate the technological burden, resulting in premium onboard space, requiring higher levels of integration and advanced packaging, energy efficiency translating to lower power consumption, low latency pushing the boundary of signal integrity, and higher throughput and connectivity upgrades with 5G advanced and 6G. These increased technological demands played a Skyworks strength, given our deep customer relationships, exceptional engineering talent, and strong IP portfolio. Turning to our quarterly business highlights, we secured 5G content for premium Android smartphones, including Google Pixel 8a, Samsung Galaxy M, and Oppo Reno 12, among others. We supported the launches of Wi-Fi 7 tri-band routers and access points with Netgear, TP-Link, and Cambium networks. We accelerated our design wind pipeline in automotive, including telematics, infotainment, and CV2X. Despite a challenging demand environment, we continue to make strategic investments in our long-term growth areas, expand our customer base, and diversify the reach of the business. With that, I will turn the call over to Chris for discussion of last quarter's performance in our outlook for Q4 of fiscal 2024.