Good day, and welcome to the Skyworks Third Quarter Fiscal Year 2025 Earnings Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the call over to Raji Gill, Vice President, Investor Relations and Corporate Development. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' Third Fiscal Quarter 2025 Conference Call. With me today for our prepared remarks is Phil Brace, our Chief Executive Officer and President; and Rob Schriesheim, Interim Chief Financial Officer for Skyworks. This call is being broadcast 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 the 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, today's discussion will 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 Phil.

Thanks, Raji, and welcome, everyone. Skyworks delivered strong results this quarter, fueled by an upside in Mobile and sustained strength across Broad Markets. We posted revenue of $965 million, delivered earnings per share of $1.33 and generated free cash flow of $253 million. Revenue, gross margin and EPS exceeded the high end of our guidance. We returned $430 million to shareholders this quarter through share repurchases and dividends and more than $1 billion across the past 2 quarters, supported by strong free cash flow and disciplined working capital management. In Mobile, revenue came in above seasonal trends with strength continuing into the September quarter, supported by healthy sell- through at our top customer and new product launches in Android. While end demand signals remain solid, we're actively monitoring the channel and are maintaining a disciplined approach to inventory. Looking ahead, we see multiple drivers of long-term RF content growth, including opportunities from internal modem adoption, higher RF complexity with AI features and a larger addressable footprint within the smartphone. At the same time, we'll continue to deliver more performance in smaller form factors, enabling richer features within current sockets. Smartphone replacement cycles remain historically long, now averaging over 4 years, even as our top customer maintains a record installed base. The first wave of AI-capable phones is reaching scale and early demand signals are encouraging. As AI capabilities become more intuitive and integrated, we believe this could drive an inflection in upgrade cycles, leading to a potential tailwind to volumes and content over time. Our deep RF expertise, strong customer relationships and advanced manufacturing put us in a strong position to lead through this next phase. Broad Markets continue to gain momentum, driven by new customer engagements across edge IoT and automotive. We are seeing stronger order flow, healthy book-to-bill…

Thanks, Phil. It's a privilege to step in as interim CFO and support the Skyworks team during this transition. Having served on the Board for nearly 2 decades and being a shareholder, I know the company well and have confidence in our strategy, our financial discipline and our long-term growth opportunities. Turning to our third fiscal quarter results. Skyworks delivered revenue of $965 million, exceeding the high end of our guidance range. During the quarter, our largest customer accounted for about 63% of revenue. Mobile represented 62% of total revenue, up 1% sequentially and 8% year-over-year, driven by stronger sell-through at our top customer and new product launches in Android. Broad Markets, which includes edge IoT, automotive, industrial, infrastructure and cloud grew 2% sequentially and 5% year-over- year. This marks the sixth consecutive quarter of growth and reflects stronger end demand and further inventory normalization across key verticals. Gross profit was $454 million, with gross margins of 47.1%, above expectations, driven by product mix and ongoing cost discipline. We see further opportunities to expand margins over time as we execute on our manufacturing efficiency road map. Operating expenses totaled $230 million, aligned with our long-term product road map. We remain disciplined with spend, balancing investment in future growth with prudent cost management. Operating income reached $224 million, translating to an operating margin of 23.3%. Other income was $1 million and our effective tax rate was 11.2%, resulting in net income of $200 million and diluted earnings per share of $1.33, $0.09 above our guidance. Cash flow remained strong, with operating cash flow of $314 million and capital expenditures of $61 million, resulting in free cash flow of $253 million, or 26% of revenue. Over the past 2 years, our free cash flow has benefited from effective working capital management as…

Thank you, Rob. Before I close, I want to thank our employees for their incredible dedication and our customers and partners for their continued trust and collaboration. Operator, let's open the line for questions.

[Operator Instructions] Our first question comes from Chris Caso with Wolfe Research.

I guess the first question is within the handset business, is there anything that you consider that's changed over the last 90 days or with respect to what you expect on content, what you expect on unit sales? Just a little bit of color about what may have been changing within the Mobile landscape.

Thanks for the question. Look, I think, in general, we've just seen strong demand, I mean, strong demand for some of our products. I think our largest customer had a conference call the other day and kind of reflected that in some very strong demand. And we're seeing the benefit of strong unit demand and frankly, shipments that benefit us from a mix point of view. So that continues to be strong as reflected in our results and our forward-looking guidance.

Okay. And just with regard to the extra week that you talked about in the September quarter. Well, how should we think about December quarter seasonality, both given some of the content changes at your largest customer, typical seasonal effects and then the impact of the extra -- the absence of the extra week as you go into the December quarter?

Well, we're not -- obviously, not guiding beyond the current quarter. And I would say that we're seeing solid demand across the board, both in Mobile and in nonmobile. Our book-to-bill remains strong, and we have low inventories at this point. So that's as we are. I think it's been -- December quarter has been a little bit more volatile than others over the past couple of years, I think, just given by other factors. So it's hard for us to say we're just focused on one step at a time, continuing to execute and deliver and our guidance for the quarter kind of stands.

And just a quick follow-up, Chris. This is Raji. The extra week did not have an impact on the revenue for the September guide. It just has an impact on the OpEx.

Our next question comes from Edward Snyder with Charter Equity Research.

So you've talked at length earlier this year about the changes as your largest customer this new product release. I want to touch on a couple of things. Obviously, that has a lot to do with the kind of odd mix of phones that they'll be releasing this year. I know you can't talk about details, but as we move into 2026, if the trends that they've talked about, other companies like Qualcomm have talked about and other folks have hinted at, if they actually play out as expected with the mix starts favoring an internal modem, does that naturally increase your blended content? Not so much on the phones that are being produced now, but if everything -- if we take a snapshot and hold things constant on internal versus external for 2026, would that give you guys a significant boost? Or are things going to change significantly or could change significantly for the next year's model so everything is back up in the air and we got to figure all out from zero again.

Yes. I mean look, for this particular cycle, we've kind of commented that, generally speaking, we have more content available to us in the internal modem as some parts that were previously unavailable to us now become available to us again. So I think that, that apples- to-apples, that remains to be seen through and constant through the cycle. As we look at things that affect our overall business, right, that's one factor. Mix of what the customer ships between the various different phones is another factor, mix of the various different iPhone, particular models, geography. There's a whole bunch of factors that reflected that. And I think right now, we've got a little bit of tailwind with respect to we're getting solid demand across the phones that have our content in them. So as -- what happens going forward, we'll see. But right now, it's good.

But part -- if I could follow up, part of the hand you were dealt this year -- this fall was basically because that internal modem is such a small percentage of total phones sold here that dual sourcing on the part is -- it's clear you have talked about it, we've talked about at length, the transmit [ and receive ] module. It's hard to split that when you're only doing maybe 10% or 15% of total volume. I guess my question is, is it a rational expectation that, that might get split on the internal modem when volumes pick up as a natural consequence of, one, you're gaining back share in that exact part in the upcoming phone on the external [ modem phone ]? So clearly, you qualify for that party against Avago or Broadcom. So I'm just trying to get a handle on, is it a rational assumption to assume that if that volume picks up on that phone, the mix starts favoring you and it's large enough to start splitting you to get a bigger chunk of that? Because if your content is already up on that without the transmit diversity receive, and that's what you said, then one would expect to be up significantly with it, right?

Yes. I mean all things being equal, I think that's probably fair. But I mean all things aren't necessarily equal. It just depends on what phones they ship and all the rest of that stuff. But generally speaking, we do have more content to us available on the internal modem versus the external modem. So as that shifts more to the internal modem, there's a natural tailwind for us there, I would say that.

Our next question comes from Karl Ackerman with BNP Paribas.

This is Sam Feldman on for Karl Ackerman. So you indicated Android revenues were flat on a sequential basis in March quarter at around $70 million. How should we think about your Android business in this quarter relative to last quarter? And going forward, can you grow from these levels?

Yes. So this is Raji. So our Android revenue in the June quarter was up significantly. It was up just under $100 million. And this is really primarily related to our ramp with Google, and we expect continued growth into the September quarter when we're thinking about Android.

Great. And I have a follow-up. So is there any way to discern between demand pulling ahead of tariffs versus improved demand? And what inventory levels are you seeing at your end customers compared to last quarter?

Yes. We're trying to keep a really close eye on it. I think we've talked about in our prepared remarks. So in the past year, we've really been trying to be disciplined to take our inventory down. Our inventories right now are very, very thin lean levels. And so we're trying to maintain focus on that. Obviously, our customers don't always tell us why they're ordering products. We just try and deliver it where we can. And we're just trying to keep our inventories low to manage that. And our current guidance kind of reflects what we believe is the current environment with respect to tariffs and all the rest.

Our next question comes from Christopher Rolland with Susquehanna.

Congrats on the results. Phil, maybe for you now that you've had some more time to look deeply at things at Skyworks, have you kind of solidified your view on the importance of diversification beyond handset? And perhaps, you have any thoughts just broadly without obviously identifying any targets, but thoughts on end markets or products that are desirable for Skyworks? Or alternatively, would you be open to a larger merger within the RF industry? How might you feel on that?

Yes. I mean look, obviously, that's a very broad question. And I would say, certainly, I mean, you just look strategically at the company, and it's hard not to think that the single customer concentration we have is certainly probably suppressing our multiples compared to what it otherwise would be elsewise. So obviously, kind of diversification and growing the business is important. Having said that, right, I mean, we remain incredibly focused on continuing to keep our eye on the ball where our current bread is butter, right? We've got to maintain major focus on that. And so my message internally with the team is you need to walk and chew gum at the same time, right? We need to continue to be focused on executing cleanly, delivering the best parts we can for our largest customer and then frankly, continue to look ways to grow and diversify our businesses elsewhere. I think if you ask me about priorities and how I look at things in general, I'd probably look for things that are gross margin accretive, a little stickier, have a little, we'll say, a longer time constant of the revenue to help balance some of the potential volatility that comes from being in the handset market. So that's how I'd prioritize that. And in terms of size and scale, I mean, I'm really going to be focused on making sure that we can do things that are accretive. And I think that, that's going to be kind of an important focus for us and the management team.

Awesome. And perhaps as a follow-up, are there any economics attached with closing the Woburn facility or consolidating that? Are there any other opportunities? And more broadly, maybe you can just talk to OpEx growth from here, how you kind of view it on a multiyear basis?

Yes. On the factory question, you kind of -- I mean, long term on that is we're not really breaking out specific numbers at this time, primarily because, right, it takes a while to get through that. We've got to manage a bunch of parts and do that. And frankly, the end gross margin that we have is going to be driven by the utilization and all the things we get there. Having said that, I mean, clearly, this will represent a tailwind, both in factory utilization, CapEx reduction, OpEx improvement and overall utilization of fixed cost assets. And so it should remain a tailwind, and we'll continue to guide that as it goes on. Rob, do you have any other comments on that?

Yes, a couple of comments. First of all, having been on this Board for almost, I'm embarrassed to say, 20 years, one of the things we were excited about when we brought Phil in was not only is he got heavy operational focus and chops and discipline, but he thinks very strategically and he acts very decisively, and the fab consolidation or optimization was very much in line with that. He made that decision very quickly, and it was clearly focused on where the business is going, where the industry is going to forward invest in more advanced technologies. As to your second question on operating expenses, as I indicated in my prepared remarks, $235 million to $245 million in the September quarter, and we just did $230 million in the June quarter. Now that $235 million to $245 million in the September quarter includes about $7 million related to the 14th week. So excluding that, OpEx is up only modestly quarter-over-quarter, and we'd expect it to trend lower in the December quarter. So for the full year, the 16% year-over-year increase in FY '25 reflects both the timing dynamic and targeted investments we've made to support R&D programs. But I would also say, looking ahead to FY '26 and beyond, Phil has made it very clear that we're going to be very disciplined.

[Operator Instructions] Our next question comes from Vivek Arya with Bank of America Securities.

This is Liam Pharr on for Vivek. On the first one, just what is your content visibility in flagship phones into next year?

Well, I'm hesitating on the question because, I mean, clearly, it depends on lots of things. If you're asking what the next down- selection happen, that typically doesn't happen until the late fall in the Christmas, January time frame. So we won't have any other visibility other than that, other than what we've already shared. Having said that, right, I mean, I think you can see our results suggest that we've -- our customers shipping good mix of the phones where we have high content now. And if I look out long term, what am I encouraged about? I'm encouraged about RF content growth as more transmit capabilities come online, as the internal modem comes online and as, frankly, if the customer gets a good uptick in the refresh cycle. So all those things will kind of affect our performance going forward.

Makes sense. Okay. So then in terms of kind of this pricing environment and you're bidding for new sockets, has there been any material change there over the last kind of 90 days or 6 months as you kind of continue to work for those sockets for expanding off of your current base, but also maybe regaining the ones that you've lost at your top customer?

Yes. I mean look, the pricing -- it is a highly competitive environment. We compete with very, very capable and credible competitors. And those competition makes us stronger. I mean it's -- when you're playing in this game, you got to like that game. It's a competitive game and you got to thrive in that. And we do. And I think that the pricing environment really hasn't changed. They expect us to deliver the best part at the best price, and we're kind of focused on doing that. I mean long term, what I'm encouraged about is we've got some of the stuff I talked about. Long-term content drivers include the movement to internal modem, more transmit capability, a balance of increased transmit, which will drive more RF content and frankly, a refresh capability on AI. So I kind of look at it. And stepping even further back, I go 99-point as far out as you can go, percent of the devices connected to the Internet are going to be connected wirelessly. And kind of I feel good about that spot, too. So...

[Operator Instructions] Our next question comes from Edward Snyder with Charter Equity Research.

Great. So Phil, I don't know if you want to pontificate about it or not, but we've talked about it before. Do you feel like this year is probably your low point in content at your largest customer, given all the other trends?

Well, yes, look, I mean, we've obviously had a couple of down-selections that have not worked in our favor. And I think someone quoted happiness as an upward sloping line. And so I think we've got to change the trajectory of the downward sloping line to the upward sloping line. I think we're all laser-focused on that.

And then if I could ask, Woburn is being closed out, and I know you don't want to give too many specifics about the factory. But obviously, I would imagine one of the goals here is to increase utilization in Newbury Park.

Yes.

When are we likely to see the first results of that? Is it something we're going to see in a quarter or 2? Do we wait until next calendar year? And then any...

No, not the next quarter or two. I mean some of the products that are there, we've got to actually transition them to the Newbury Park side, and some of them are long lead time items. So it will take a little while. But long term, look, you're 100% correct. Long term, this positions us to invest in leading technology in Newbury Park, drive increased factory utilization, better fixed cost utilization which should benefit gross margin and reduce CapEx and all the rest of it. So that's kind of where we are.

Any color on the timing [ in Woburn ]? Is it 2 years or 1 year?

No comment right now.

Okay. And then am I correct assuming that it's all gas in Woburn? And is most of that gas for Broad Markets or Mobile or is it split?

It's split. I mean the gas technology is used for as for amplifiers, right? So it's split.

But it is all gas, right?

Yes.

Our next question comes from Krish Sankar with TD Cowen.

I actually had like 3 of them. First one, in terms of the auto business, can you say how big the auto business is today? Is it mid-single- digit percentage, 10 percentage? And could this double in the next year? How to think about it? And then I have 2 follow-ups.

Yes. It's a great question, Krish. This is Raji. So automotive is now tracking around $60 million a quarter and up significantly on a year-over-year basis. And in the press release, we talked about a number of programs that we won, particularly at BYD, Nissan, Ford. And it's really across a variety of our products, whether it's 5G telematics, infotainment, power isolation. So we are quite bullish on that business, and it's very long design cycles and more durable revenue stream. So we have a good pathway there to continue to accelerate that revenue.

Got it. And then on the Mobile side, how solid is the visibility of your largest customer versus Android compared to, let's say, 3 months ago? Are you seeing stronger sales due to content or units? Or any color on iOS, Android visibility versus 3 months would be helpful. And then I have one last follow-up.

I don't -- I mean, right now, our -- I mean, if you -- right now, our visibility is strong across the board. Primarily, book-to-bill is higher than 1. Channel inventories are low. And so -- and our visibility is solid at this point. We don't see any material difference between the two.

Got it. And then lastly, how do you think about OpEx into next year like -- or I should say, OpEx this year relative to pursuing opportunities in 2026? Is there flexibility on it? Or should we assume that's going to kind of grow for future revenue growth? How to think about the OpEx?

Yes. I think when I started, I kind of mentioned, look, we're going to be taking a very disciplined view of the OpEx. I think over the past couple of years, the company has made significant increased investments, and you can look at that as OpEx. And that was really designed to, frankly, focus on our R&D. We are an engineering-focused company. And to the extent we do have some -- any modest increase in OpEx, it will be really targeted on core R&D. Having said that, we're going to be disciplined about that. I wouldn't expect anything other than kind of nominal rates of OpEx improvement over time.

Our next question comes from Nicolas Doyle with Needham.

Asking about the infrastructure networking cloud subsegment. In fiscal '24, you guys talked a lot about inventory digestion impacting the business, and I think that lasted through the year. But we're seeing a lot of positive demand signals from those end markets. So can you just talk about how that business is performing in the quarter and any specific demand drivers? I think you mentioned 800 gig and 1.6T transition helping as well.

Yes. I mean I think you got it exactly right. I think in the past couple of quarters, we talked about that, the fact that we did continue to see a little bit of inventory overhang in that space. That does appear to be behind us at this point. Inventory seems to be low, and Yes. Nick, this is Raji. So our top customer in the quarter in June was roughly 63% of sales. The split was roughly 85% Mobile, 15% supply/demand is kind of aligned with consumption at this point.

Okay. On the Apple Broad Markets piece, I mean, any reason to think that's very different from the average 15% of overall Apple revenue in 3Q or 4Q?

Broad Markets, thereabouts, and we expect both a similar percentage of sales and a similar split going into the September quarter.

I'm showing no further questions at this time. I'd like to turn the call back over to Phil Brace for closing remarks.

Great. I'd like to thank everybody for participating on today's call, and I look forward to speaking with you at upcoming investor conferences during the quarter. Thank you.

Thank you for your participation. You may now disconnect. Good day.