Matt Ramsay: I guess, I was going to ask you and I’ll swap the order because they kind of build on Blayne’s last question. But in the BAW filter space, any changes in the competitive landscape there? I think one of your U.S. competitors has made a decent amount of progress on their BAW road map internally in the last couple of years, and it seems like some products might be a little bit closer to impacting sort of the market. So, any — it sounds like you’re really confident in what comes in content gains to the last couple of answers that you’ve given, but any competitive dynamic changes with your primary competitors on BAW.
Grant Brown: Yes. No changes to our primary competitors. And to the earlier follow-on regarding the capacity at Richardson, that is something that we can do over time, not necessarily this year. But that’s something that we have the ability to do in subsequent years to add on to the effective capacity there at Richardson. But again, I just want to make sure that’s clear that we do have to take steps, add equipment, et cetera, in order to make that possible. It will be in the out years, but it’s really a comment around Farmers Branch and supporting the ability for us to do that in the future given our ability to sell the Farmers Branch facility.
Matt Ramsay: Got it. Thanks for the clarification there. As my follow-up, obviously, given how big it is in the revenue, most of the focus of the call here has been on the mobile and smartphone markets. But I wanted to ask quickly on the wireless infrastructure side, there’s some — I don’t know if they’re correlated, but similar inventory dynamics that are happening. If you guys have any commentary about the inventory build up there? Has it come down? What — timing of any potential reacceleration? Is it similar, too, on the mobile side or longer or shorter? Just any context there would be helpful. Thank you.
Bob Bruggeworth: Yes. And I think that’s pretty well known. We’ve seen inventory build up there, and that’s certainly been impactful to our infrastructure business. And it will take some time, we think, for that to bleed off throughout the year. So, it’s probably similar, but may even take longer than what we’ll see in mobile.
Operator: And our next question is from Raji Gill with Needham & Company.
Rajvindra Gill: I just wanted to break down the commentary about September and December and March, if I could. So just the commentary about significant sequential growth in September off the flat June. What’s driving that commentary is seasonally September is higher, but can you maybe frame it in terms of relative seasonal patterns? Is this also be aided by more of a significant rebuild by these customers plus share gains? Just any commentary around qualitatively, what’s specifically driving the September commentary? And then December and March being up year-over-year, obviously, December and March of — December of 2022 and March of 2023 are relatively easy compares in terms of the revenue. So, just kind of thoughts around December and March would be helpful. Thank you.
Grant Brown: Yes, sure. So, as we look into September, again, I would just reiterate, we’re not providing any official guidance into fiscal €˜24, but we’re attempting to shape it just a bit given some of the macroeconomic uncertainty. And obviously, the macroeconomic situation will inevitably dictate the trajectory of revenue. But just looking at some of the drivers that we see seasonally, there is a significant ramp in the September quarter, so. And as Bob stated, we feel as though we are well represented on large platforms across all of our largest customers. So, continued strength at some of those customers as the channel inventories be in clearing will occur as well as a large seasonal ramp gets to a sequential increase in September that’s pretty substantial off of a rather low base as we’re talking about a roughly flattish June.
So, that’s the primary driver, call it around September. And then into December and March, you’re right, the comps get relatively easy. But with the channel inventory picture clearing up by the end of the calendar year, as we talked about earlier, it should provide for a restocking, if you will, or us selling into potentially demand even at just recurring to normalized levels.
Rajvindra Gill: Got it. And for my follow-up, regarding your conversations with the Chinese OEMs and the Korean OEMs, what is the kind of expectation as it stands today in terms of their customer forecast for calendar €˜23 going into calendar €˜24? Obviously, calendar €˜22 was kind of a horrific year in terms of units. Are the forecasts relatively conservative off that very challenging 2022, are some OEMs more aggressive in their forecast plans. There’s more capacity coming online for a variety of different smartphone components. Does that enable new product ramps? Just any commentary in terms of what the customer feedback is and forecast. Thank you.
Bob Bruggeworth: Dave, would you like to take that?
Dave Fullwood: Yes, sure. So, the customer sentiment and their forecast is very cautious. And I think until — we’ve seen some early signs of life in China and the smartphone sell-through. First few weeks of January were promising, but we need to see a couple of months of that. I think our customers do as well before they really start to gain confidence there. So right now, the purchase order patterns, their forecasts remain very cautious through the rest of the calendar year. Does that answer your question?
Rajvindra Gill: Oh yes, it does. Thank you. I appreciate it.
Operator: Our next question is from Chris Caso with Credit Suisse (sic) .
Chris Caso: Question is regarding CapEx and cash flow and both on a shorter-term standpoint on how you plan to manage that as we still burning off inventory here. And then a bit longer term and kind of we’re hearing from you is that it sounds like from a capacity standpoint, you may be set for a little bit, so what can we expect there? Can we expect that as the market normalizes in this inventory start — had burns off and had some benefits to revenue that we see that flow through for cash flow performance?
Bob Bruggeworth: Sure. So, we don’t guide specifically to the balance sheet or cash flow, but I’ll try to give a little bit of color on the drivers. So, having now collected on sales in prior quarters, our cash flow will likely start to follow the path of the P&L, obviously. As we look forward, we still expect to generate free cash flow, and CapEx should be in the 5% to 7% range of sales, representing discipline there and some reduced CapEx intensity as we move forward, having invested in our facilities over the prior years, and looking forward, will be largely capacity driven as we see demand and obviously, improvements in our performance and technology required. But generally speaking, I’d be looking for the cash flow to follow P&L.
Chris Caso: Got it. Okay. Just a follow-on. And again, a lot of the discussion has been on the cellular portion. For the non-handset part of the business, I guess what I heard is some of the infrastructure products that there’s still some inventory to burn off. But what would you say more generally would be the inventory situation for the non-handset part of the business? Is this a situation where this is a little bit slower to come back as compared to the cellular business, or what’s the view of that — those businesses as you proceed through the year.
Grant Brown: Yes, it definitely varies. So, the infrastructure business is probably going to be slower to recover. We’ve got Wi-Fi, a lot of that’s consumer-facing. That is probably very similar to what we see in the smartphone space, but some of that’s also more operator and enterprise-driven. And so, we saw that occur a little bit later. So that will probably take a little bit longer to recover. And then our power management business as well, it’s very consumer-facing with power tools and solid-state drives and other types of devices like that that are more consumer-oriented. So, they’ll go probably very similar to the way the smartphone market goes.
Operator: And our next question is from Harsh Kumar with Piper Sandler.
Harsh Kumar: I wanted to ask about an earlier question that was asked about December growth and March growth. I know you said year-over-year — the question was asked in reference to year-over-year. But did you mean to say that or is it possible that those businesses — given the falloff in revenues and units, is it possible that those business could — your businesses could also work sequentially in this time frame, or will they follow a seasonal pattern?
Grant Brown: Are you referring to our fiscal €˜24 or our just announced December and this March?
Harsh Kumar: No, no, fiscal €˜24.
Bob Bruggeworth: Fiscal €˜24. It’s a little early to comment on that. Certainly, from a year-over-year standpoint, the comps are relatively easy and it’s with a high degree of confidence, we believe we’ll be able to grow. The degree to which would determine whether it was sequential or not, I think it’s a bit premature to comment on. Overall, we still are encouraged by fiscal €˜24 and believe that it will be above fiscal €˜23.
Harsh Kumar: That’s fair. And then I wanted to ask about your gross margins. Your revenues came down for the guidance for March, but your margins are kind of hanging in there. You mentioned a couple of things, small things, the 80 basis points and 30 basis points issues. But what’s the reason why your margins are able to hang in here?
Bob Bruggeworth: I think, generally speaking, if I look back over the productivity gains that we’ve made over multiple years, we’re still seeing those in our margins today, even though the volumes aren’t in the factories. 900-plus basis points of headwind from underutilization is significant. I don’t want to understate that. But in terms of productivity and the work that our operational teams have done is really speaking to the strength of those gains and our ability to hold margins at 40%.
Operator: And our next question is from Joe Moore with Morgan Stanley.
Joe Moore: You talked about changes to your foundry agreements. Can you just speak generally to the cost of foundry wafers? Do you see that continuing to rise? And if so, are you able to pass that through to your customers? And if it reverses, do you anticipate having to pass declines on to your customers? Thank you.
Bob Bruggeworth: Thanks, Joe. And actually, with some of the capacity freeing up, we’re not seeing the increases that I know we saw some of that earlier last year, last calendar year, earlier in the year, so we’re not seeing it. In some cases, to your point, we have been able to pass that on to our customers. And again, as we’ve always said, pricing set by the competition, if we all raise prices, we all get an increase; we all don’t, we don’t get an increase. So we’ve been able to pass some of that along. But as Grant pointed out, the inflation is impacting us in our COGS, about 80 bps. So we’re not able to pass it all along, but there’s other inflation in there, not just foundry parts.
Operator: Thank you. And our next question is from Atif Malik with Citi.
Atif Malik: I have one clarification and one question. When you guys talk about channel inventories to normalize later this calendar year, are you talking about China Android or total Android or total smartphone?
Dave Fullwood: Well, we’re talking about total smartphone inventories, but even some of the other markets that we mentioned earlier in one of the previous questions. We see elevated inventories, not just in smartphones, we see it in a lot of the other markets as well.
Atif Malik: But, when are you expecting China Android inventories to normalize?
Dave Fullwood: It all depends on how well the phone sell-through in the end market. Like I said, January — early indications in January or it’s improving. If that continues through February, March and into calendar Q2, then, of course, our inventory is going to be burned off much more quickly. But we’re not forecasting that. We want to see that sustained before we get too excited about that.
Atif Malik: Understood. And then, is it possible to break out or comment on how big the silicon carbide power device business is as a percentage of HPA sales?
Bob Bruggeworth: Yes. We haven’t given that information. What I can tell you is we’re very pleased with the acquisition. And I think when we — I know when we file our Q, you’ll see why I say that. But it’s been a tremendous acquisition. But I’m sorry, we haven’t sized it. It’s probably bigger than what most people think. It’s smaller than what some other people think. But we haven’t given any of that revenue out yet, but we’re very pleased with it. It’s profitable and it’s doing a fine job.
Operator: And our next question is from Ambrish Srivastava with BMO Capital Markets.
