Skyworks Solutions, Inc. (NASDAQ:SWKS) Q4 2024 Earnings Call Transcript

Skyworks Solutions, Inc. (NASDAQ:SWKS) Q4 2024 Earnings Call Transcript November 12, 2024

Operator: Good afternoon and welcome to Skyworks Solutions Fourth Quarter Fiscal Year 2024 Earnings Call. This call is being recorded. At this time, I will turn the call over to Raji Gill, Vice President of Investor Relations for Skyworks. Mr. Gill, please go ahead.

Raji Gill: Thank you, operator. Good afternoon, everyone and welcome to Skyworks fourth fiscal quarter 2024 conference call. With me today is Liam Griffin, our Chairman, Chief Executive Officer and President; and Kris Sennesael, 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.

Liam Griffin: Thanks, Raji and welcome, everyone. Skyworks executed well during the fourth fiscal quarter of 2024. We posted revenue of $1.025 billion. We delivered earnings per share of $1.55 and generated free cash flow of $393 million. Revenue, gross margin and EPS met or exceeded the mid-point of our guidance. Our business model continues to deliver robust cash generation. For the second year in a row, annual free cash flow was well above $1.6 billion, providing a strong foundation to invest in our technology and product roadmaps to support future growth. In mobile, our revenue grew 21% sequentially, and we expect further growth in the December quarter, as customer orders and channel inventory have normalized, and we continue to support seasonal product ramps.

Based on our technology leadership position and in close collaboration with our mobile customers, we expand our reach, developed best-in-class high-performance connectivity solutions, and drive more integration with advanced packaging, reducing the footprint and increasing energy efficiency. We believe that AI is poised to ignite a transformative smartphone upgrade cycle, propelling the demand for higher levels of RF complexity. As AI capabilities continue to advance, smartphones will evolve into more sophisticated and intelligent companions, demanding more powerful solutions to support their enhanced functionalities. We are in the early stages of this multi-year trend and Skyworks is well-positioned to capitalize on it. In broad markets, we have seen signs of stabilization and have grown modestly since the bottom in the December quarter of 2023, despite uneven demand dynamics and high customer inventory in certain segments.

Long-term, we remain bullish on broad markets given secular trends in edge IoT, automotive electrification and advanced safety systems, as well as AI-enabled workloads driving cloud and data center upgrades. In edge IoT, demand continues to improve as customers adopt Wi-Fi 6E and 7 systems, which carry higher dollar content due to increasing complexity and additional bands. We are in the early stages of a multi-year upgrade cycle with Wi-Fi 7 shipments now ramping. As we indicated, at the beginning of the year, inventory levels in traditional data center and wireless infrastructure remain stubbornly elevated, which is delaying the recovery. We continue to undership natural demand. However, over the medium to-long-term, we remain bullish on our product roadmap and design win funnel targeting AI data centers.

Lastly, global demand remains muted in automotive and industrial markets, as Tier 1s and OEMs work down excess inventory. Despite near-term headwinds, we continue to convert design wins into revenue across our connectivity, power isolation, and digital broadcast solutions for the connected car and EV markets. Turning to our quarterly business highlights, we secured 5G content for premium Android smartphones including Google Pixel 9, Samsung Galaxy, Oppo OnePlus and several others. We expanded our Wi-Fi 7 design win pipeline with Linksys, Charter, NETGEAR, Commscope and TP-Link. For emerging IoT applications, we powered advanced audio solutions for wireless gaming and clinical-grade hearing aids. Lastly, we increased our design win momentum in automotive including 5G front-end modules, infotainment and digital isolators.

In summary, the Skyworks team executed well despite a challenging macroeconomic climate. We intend to leverage our robust cash generation to make critical investments that drive long-term profitable growth while diversifying the overall business. With that, I will turn the call over to Kris for a discussion of last quarter’s performance and our outlook for Q1 of fiscal 2025.

Kris Sennesael: Thanks Liam. Skyworks’ revenue for the fourth fiscal quarter of 2024 was $1.025 billion, slightly above the midpoint of our outlook. Mobile was approximately 65% of total revenue, up 21% sequentially, as we successfully supported the ramp of new products at our mobile customers. Broad markets were approximately 35% of total revenue, up $1 million sequentially. Gross profit was $476 million, with gross margin at 46.5%, in line with expectations. Gross margin grew 50 bps sequentially, reflecting our ongoing cost reduction actions. Also, during Q4, we further reduced our internal inventory, resulting in seven consecutive quarters of reductions. Operating expenses were $203 million, reflecting our strategic investments in our technology and product roadmaps.

We delivered $273 million of operating income, translating into an operating margin of 27%. We incurred $2 million of other expenses, and our effective tax rate was 8%, driving net income of $250 million and diluted earnings per share of $1.55, which is three cents above our guidance During the fourth fiscal quarter, we delivered impressive cash generation, with cash flow from operations at $476 million, capital expenditures at $83 million, resulting in a free cash flow of $393 million or 38% free cash flow margin. For fiscal 2024, we generated well over $1.6 billion of free cash flow, our second year in a row and ended the year with a record 40% free cash flow margin, translating into approximately $10.40 of free cash flow per share and a free cash flow yield of approximately 11.5%.

We continue to drive robust cash flow through steady levels of profitability, prudent working capital management and moderating CapEx intensity. During fiscal Q4, we paid $112 million in dividends. Cash and investments grew to approximately $1.6 billion, and we have $1 billion in debt, providing us with excellent optionality. Now, let’s move on to our outlook for Q1 of fiscal 2025. We anticipate revenue of $1.05 billion to $1.08 billion, up 4% sequentially at the mid-point. We expect our mobile business to be up mid-single-digits sequentially driven by seasonal product ramps. In broad markets, we anticipate further modest sequential growth, and a return to year-over-year growth. The pace of the recovery is more measured than we anticipated, given excess inventory in select segments, like industrial, automotive, infrastructure and networking.

Gross margin is projected to be 46% to 47%, and we expect operating expenses in the range of $209 million to $215 million with sequential increases reflecting typical adjustments made at the start of a new fiscal year, including variable compensation accruals. In addition, we are leveraging our strong cash flow generation to invest in technology and product roadmaps to drive share and increase diversification. Below the line, we anticipate $3 million in other income, an effective tax rate of 12.5%, and a diluted share count of approximately 160 million shares. Accordingly, at the mid-point of the revenue range of $1.065 billion, we intend to deliver diluted earnings per share of $1.57. Operator, let’s open the line for questions.

Q&A Session

Operator: [Operator Instructions] And our first question coming from the line of Peter Peng with JPMorgan. Your line is now open.

Peter Peng: Hey, good afternoon. Thanks for taking my questions. And good job on the execution. Can you, on your mobile business, can you talk about your Android portion of it and what kind of trends are you seeing? I think your peers talk about some weaknesses there. So I know this is a smart grid business that any can collaborate what you are seeing in the Android part of this business?

Liam Griffin: Sure absolutely. We have a very robust pipeline with the Android players, specifically Google. They’ve been doing a great, great job and also Samsung. So we have incredible design wins there. Fortunately, they are investing in technology, the performance that we are seeing in those devices have been amazing for us. It’s a great natural Skyworks to get some opportunity really to demonstrate our technology reach, our scale and also moving into a diversified portfolio, as well. So we are doing very well as a business and we expect much more in that company.

Kris Sennesael: Right, and then, Peter just to level set, right our android revenue in more than $1 billion of revenue, we just did last quarter is less than $75 million of revenue in the quarter. Roughly, less than $75 million of revenue in the quarter, roughly half of that is with Google, 30%, 40% or so is with Samsung and less than 10% is with the China players. So, we definitely have derisked our position with China. We’ve talked about that before. We are very selective as it relates to that part of the android business with Samsung in China. We all playing with those valued customers, but only in the areas where they value what we bring to the table, which is high performance RF connectivity. That plays out really well with Google.

Google is making a lot of investments in their product roadmap who are switching the AI-enabled phones, that drives a lot more complexity inside the phones and that’s all music to our ears and that’s why we have a strong relationship with them.

Peter Peng: Perfect. Thank you. And then, on the broad market could see you guys, driving, I think for the December quarter, that’ll be probably your fourth quarter of sequential growth. I know there’s a lot of puts and takes in that business, but as we kind of look into 2025, can you talk about the sustainability of this recovery? Or do you think that there’s going to be some seasonality that might impact growth into 2025?

Kris Sennesael: Yeah. And so, you you’re absolutely right. Our broad markets business bottomed in the December quarter of 2023 and we had now three quarters in a row of modest sequential growth. We are guiding to further modest sequential growth in the December quarter and a return to year-over-year growth again, somewhat in the mid-single-digits year-over-year growth in our broad markets business. We do anticipate that at a certain point, the sequential growth is going to accelerate. But we have not really seen that for now. And we all know why that is. There is still some excess inventory in certain markets like, automotive industrial infrastructure and networking. We are undershipping natural demand. But if actually that’s going to clear and eventually our growth is going to accelerate.

We are very well aligned with some secular growth engines in our broad markets, as we talked about in the prepared remarks Edge, IoT devices where we see an upgrade from Wi-Fi part 6. Wi-Fi 6, 7 in automotive with Advanced Safety systems and electrification and as well, in AI data centers and networking where we play with our timing solutions. And so, when I put this all together we still believe that in the longer term, in a neutral microeconomic environment, our broad markets business can grow mid-teens year-over-year.

Operator: Thank you. And our next question coming from the line of Edward Snyder with Charter Equity Research. Your line is now open.

Edward Snyder: Thanks a lot. Maybe if we touch on guys, obviously, with what’s going on with your largest customers called kind of a little bit about, temporary up [Indiscernible]. What’s you’re feeling in terms of 2025 now for specific guidance all that, but it’s already clear from what you’re down that there’s some content changes in the last flagship phone and when we can gather there’s going to be some additional changes. There’s a lot of things moving – a lot of moving pieces, here. What’s your view of – let me put it this way, the long term say 2025 to 2026 in terms of your ability to getting back content And then when they make a big shift, and then perhaps go up from there, I know we’ve talked about AI in the past about its impacts on the RFID, given the roadmap suffer three years, what are you seeing in terms of generic content growth in that kind of flagship of front-end from AI? And then I have a follow-up. Thanks.

Liam Griffin : Okay. Okay. I’ll unpack that with you here. I mean, certainly, there’s tremendous opportunity for us to continue to grow in mobile. We got an incredible technology bench with a scale. We have the physical plant and we have the flexibility to do what our customers need and I’m sure as, you know, we have a very good partnership with our largest customer. So that back and forth is always going. But going our way. We’ve got great people on both sides and make it work. And we expect to have more growth. Certainly, we had a last couple of quarters – are great but we are popping up now. If we look at the roadmap that we’re putting forward, it’s very, very potent, and we definitely have the team to make that execution done. It’s got to take a little time, of course, but we have the scale, we have the people. We have the ambition to make it happen. And most importantly, we have the confidence of our most important customer.

Edward Snyder: Okay, maybe if I could follow-up first housekeeping. What was the percentage of your live discussion we are in the second, are you been a representative to Samsung for a while and again stands are shifting there in terms of as we – what’s the prospect for that in the next, let’s say year or so in terms of it becoming a larger customer for you, given that I think their more open slots available to you. Are you seeing good design traction in spring or fall or at the beginning of any occasion of that at all right now? Thanks

Kris Sennesael: So, in the September quarter our largest customer was approximately 69% of our total revenue, which was up 21% sequentially. So the team really executed well supporting our largest customer ramping up their new products. And I’ll turn it over to Liam for the rest of your question.

Liam Griffin : Yeah, sure. I mean, as we spoke this, just tremendous opportunity there. We are diving much deeper in some of those platforms. So, and I would say the technology pipeline that we have at Skyworks and the investments that we’ve been making are really going to yield opportunities for us in growth. So that’s kind of what we’re looking at right now. There’s a lot of opportunity we’re executing our engineers are making incredible progress on the next generation solutions. There is a lot more going, as you get into the AI world. And you can expect that Skyworks is right there ready to go where under the hood so to speak with some really incredible people on our side and with our partners. So should we look forward to that. That work is being done now. And we look forward to putting that into products very shortly.

Operator: Thank you. And our next question coming from the line of Timothy Arcuri with UBS. Your line is now open.

Timothy Arcuri: Thanks a lot. Kris, can you talk about what’s included for the largest customer for December? It seems like you did see some pull-ins in the September, just like most others did. It was a little higher than what I think you thought it would be. Usually that customer is about flat in December, but maybe it’s down a smidge because of the Helene. Can you can you kind of talk about that?

Kris Sennesael: Yeah, first of all, the – we can’t really go into the specifics as it relates with our large customer, but I can tell you that the business and the demand is fully in line with our expectations. So we didn’t see any surprises in September. Didn’t see any – or don’t expect any surprise in December that the demand is in line with our expectations and so as I just answered the question before that the large customer was up 21% sequentially in the September quarter and we expect it to be up further in the December quarter in the 5% to 10% range on a sequential basis.

Timothy Arcuri: Great, great, Kris. Thanks. And then, I noticed that the repo was quite low despite the strong free cash flow, I might have thought it would have been a little stronger. Can you kind of talk?

Kris Sennesael: Yeah, yeah, absolutely. So first of all, I want to highlight here, as well that we do have very strong free cash flow and as we indicated in the prepared remarks, right for the second time in a row more than $1.6 billion of free cash flow and that does take into account that we continue to make the necessary investments in our business. We continue to strengthen our technology and product roadmaps and there’s no hesitation there. We know where the opportunities are. We are making the necessary investments there to capture those opportunities. In addition to that, we continue to invest in our manufacturing footprint although at a much more moderate pace, as we have seen in the last couple of years. But we continue to invest in as well.

And so, our free cash is very strong. Our balance sheet is very healthy. We have $1.6 billion of cash on the balance sheet. And only $1 billion in debt. We have no near-term maturities. And so we have plenty of optionality. We have optionality to do M&A, although you know us, we’re going to remain disciplined but we have that optionality and we have optionality to return excess cash back to the shareholders through a combination of our dividend program and our share buyback program. On the dividend program, we just recently increased the dividend 3% to now $0.70 per share and so that’s turning into a really nice dividend yield and we have the optionality to do buybacks. The Board and the management team are taking into account and into consideration multiple elements.

But as a matter of policy, I can’t really share the details of those considerations. Having said that, it’s our intent to continue to return all the excess cash back to the shareholders over time.

Operator: Thank you. And our next question coming from the line of Krish Sankar with TD Cowen.

Krish Sankar : Yeah. Hi, thanks for taking my question and I think I want to thank for the color on the December quarter and your large customers. I’m just kind of curious, when you look at the December quarter compared to history, how was the demand linearity trending? And what is that implies on March quarter’s seasonality? And I have a follow up.

Kris Sennesael: So again, I will repeat what I just answered them on the previous question, right? It is fully playing in line with what we expected. A strong ramp in September, followed with further ramp going into the December quarter. Obviously, March is seasonally down and we expect here again our March quarter, especially in mobile to be seasonally down. Obviously, we only guide one quarter at a time. So it’s too early to be more specific. We do however, our broad markets business to continue to grow sequentially. And we expect broad markets to be up modestly in the March quarter and beyond. But as combined, of course, for Skyworks, we will have normal or expect normal seasonal declines into the March quarter.

Krish Sankar : Got it. Thanks for that Kris, and I appreciate it. And then a quick follow up on the Wi-Fi 7 upgrade cycle. It seems like it’s been pretty good for you. I’m just curious like historically how long has the growth inflection lasted for a Wi-Fi upgrade cycle and how to think about how this profile would be versus prior cycles? Thank you.

Kris Sennesael : Sure, sure. Yeah, I mean, actually, you’re right. The Wi-Fi cycle had been somewhat muted here for a while. Fortunately, with Skyworks team, we’re in great position. The next-generations Wi-Fi solutions, Wi-Fi 7 we are working with companies like Motorola. We are looking at companies like Logitech. We get them automotive plays in there as well. So the broad market businesses are coming up, it had been kind of a rough right there. But we’re starting to look better. Next year is another player in their Charter Communications, where industrial markets we are engaged with Mercedes Benz even on the auto side. So there has been a lot of activity and strength here. And the broad market is just out of the design win pipeline is filling and we’ll get back to revenue. So we are very encouraged about the signs we are seeing there.

Operator: Thank you. And our next question coming from the line of Vivek Arya with Bank of America Securities. Your line is now open.

Michael Mani: Hi. This is Michael Mani on for Vivek Arya. Thanks so much for taking our questions. To start just across the various end-markets that broad markets plays in, which areas have become maybe incrementally worse or better over the last 90 days and just where are you still undershipping to demand?

Kris Sennesael: So, in broad markets, there is just three parts, there is the Edge IoT connectivity where we play mostly with Wi-Fi with any other wireless connectivity protocol. We are definitely seeing improvements in that area. Again in part driven by a big step up in content as the transitioning – the multi-year transitioning is happening from Wi-Fi 6 and 7. I think we are still somewhat undershipping natural demand there. But there is definitely improvement in that area. The second part is our networking infrastructure and cloud. I think that’s very well documented there. There is excess inventory that’s being worked down. That will take multiple quarters. I think we start seeing some improvements there. Bookings is improving.

Backlog is improving, but it’s still shipping way under natural demand. And then, last but not least, you have automotive and industrial, I think that’s very well documented as well by many of our peers who talked about that part of the business that would definitely undershipping natural demand there. Again, we are, I think we are doing fairly well given some design wins that we have able to put on the book a year or two years ago. Those design wins continue to ramp up and turn into revenue but it’s a soft environment. And so, I think that it will continue to improve over time here and that’s why as a whole, we are pleased on one hand that our broad markets continue to grow sequentially, although modestly. But eventually that sequential growth will accelerate.

Again, December year-over-year growth and that year-over-year growth will accelerate over time, as well.

Michael Mani: Great, thank you and just on gross margins. Given that broad markets might be taking a more measured up turn expected previously. What are the puts and takes with the gross margin expansion from here? I know you guided somewhere not at the midpoint. But how do you think of about expansion into 2025? And then maybe more broadly, as you think about an eventual return to 50% or greater gross margins, what would you rank order as the most important drivers to achieve this between utilization, product mix and a recovery in broad markets or any other factors? Thank you.

Kris Sennesael: Yeah. So as it relates to gross margin, we did 46.5% in September, which was up 50 basis points. So that’s, that’s a step in the right direction. For December we guide 46% to 47%. So kind of flattish at the midpoint, but the range is 46% to 47%. Looking ahead to fiscal ’25 and longer term, as you called out correctly, we drive gross margin improvements through better factory utilization, through cost reductions, and we have a mix tailwinds because broad markets has above average gross margin compared to the mobile. I think the team continue to execute well. We start seeing some improvement on the factory utilization. The team is executing well on cost reductions internally, as well as externally. But as we talked already, the mix tailwinds is not blowing as strong as we initially anticipated.

Right? I think over time broad markets will accelerate. But currently the sequential growth is modestly and so the mix tailwind there is not as strong as expected. As a result of that for now, we think that fiscal ’25 on a full year basis, gross margins is going to be flattish, compared to fiscal ‘24. It will, of course start improving towards the end of fiscal ‘25 and sets us up well for further gross margins expansions in fiscal ’26 and beyond. We want to get as fast as we can back to the 50% gross margin. And then we are going to keep grinding to our long-term target model of 53%.

Michael Mani: Thank you. And our next question coming from the line of Karl Ackerman with BNP Paribas. Your line is open.

Karl Ackerman: Yes. Thank you. Kris, I just want to follow up on that gross margin comment with regard to fiscal ’25. I guess, do you have an inventory days target? Because you continue to make good strides in reducing inventory days now in the 130 range, broad markets continues to improve. And so if inventory days are at normal, presumably, margins should go up. So, again, maybe tying the inventory days comment with what your comments just were around gross margin as how we see it stepping up over the next couple quarters.

Kris Sennesael: Yeah. First of all, we have been reducing our internal inventory for seven quarters in a row now. It’s peaked up well above $1.2 billion and we are down to less than $800 million. I think we can continue to drive inventory down a little bit more. Obviously, that’s not helping from a factory utilization point of view and it’s not helping from a gross margin point of view, but I think it’s the right thing to do. We want to right-size the inventory and I think we still can reduce that a little bit. And so, again, when you put it all together there, I think gross margins going to be flattish and fiscal ’25 start improving towards – and we will have seasonality there, right? We will have seasonality typically gross margins go down in the March and June quarter and then start improving in the September and December quarter.

Inventory days, again there is seasonality and so revenue goes up and down. The inventory doesn’t follow necessarily the seasonality on the revenue side. But from an absolute dollars point of view, we are sub 800 continue to drive it down a little bit further.

Michael Mani: Got it. Thank you. As my follow-up, do you believe the M&A environment is more favorable from a regulatory and funding perspective in ’25? And if not, because of your very strong free cash regeneration then perhaps ability to further reduce inventory, can you be more aggressive on a buyback if so? Thanks.

Kris Sennesael: Yeah, I mean there’s all kinds of options that we have with the cash flow that we’ve put in forth, which is a great, great tool for us. So, we’re always looking for the optimum mix, whether it’s an M&A play. Whether another factor. And so those are great options for Skyworks. And it’s a testament of the ability to drive that cash and it’s going to be a hallmark of this company. So we look at everything. We are very disciplined. We think about our shareholders. We think about the longevity of the technology. And it’s been a strategy that’s worked quite well and I think it will continue to be really purposeful for us as we go forward.

Operator: Thank you. And our next question coming from the line of Ruben Roy with Stifel. Your line is now open.

Ruben Roy: Thank you. Liam, I had a question on Edge IoT to start with. And, just wondering, how are you thinking about AI impact if any, on the Edge IoT business. You’ve talked a lot about the smartphone side of it. Just wondering if there’s anything investors should be thinking about in terms of AI and potential impacts as we look out over the next 12 to 18 months?

Liam Griffin : Yeah, absolutely. So, I think, we got a couple of things. Certainly, on the smartphone side, we are deeply entrenched with the most important customers learning together executing and driving excellence. So that’s really, really key and we are doing great work there. And then, but that’s flipping back to the broad markets, so we’re doing very, very well in the IoT space. And really engaging with companies that are real hallmarks in the business. We talked about Google and Samsung, but also the broad markets businesses. We’ve got design wins with Mercedes. We have design wins with Netgear, Ambient Networks, Motorola. Really, really meaningful companies that are now part of that portfolio that we have in broad markets. And I’m 100% confident that our team will continue to drive that with more opportunities, more diversification and more cash and more earnings for us. So look forward to that. But things look much better there in that market.

Ruben Roy: Thanks, Liam. And a couple of quick ones for Kris. Kris, can you uh, tell us about the impairment charge during the quarter? And was that was your related to and then, finally on CapEx. It picked up a little bit. Any initial view on how we should think about CapEx for fiscal ’25? Thank you.

Liam Griffin : Right, so, we did take an impairment charge in Q4 of fiscal ‘24, which was related to a process R&D related to I&A acquisition we did with Silicon Labs. So you should probably know at the time of an acquisition, you have to identify all the in-process R&D projects and have to put evaluation around that. As time goes by, some projects are being accelerated. Some projects are being pushed out. Some projects are being redefined and so that’s all being taken into account and could potentially result in an impairment charge, which we took in Q4. The business itself that we acquired is part of our broad markets business. We are going through some inventory correction there. Of course, a lot of that business plays in the industrial, automotive area, but we are still very pleased with that business.

That business has great technology, great people, good customer contacts and as we get through the inventory correction is well positioned for growth. As it relates to CapEx, CapEx is running in fiscal ‘24 on or about 3% to revenue, which has been one of the lowest in many, many years. Part of that of course is we didn’t have to do any capacity expansion, CapEx during fiscal ‘24, but all the CapEx we did was mostly for technology reasons. But going forward, we think CapEx will remain moderate – mid to longer term in the mid-single-digits as a percent to revenue.

Operator: Thank you. And our next question coming from the line of Srini Pajjuri with Raymond James. Your line is now open.

Srini Pajjuri: Thank you. A couple of follow-ups. Kris, on the broad market side. There are lot of moving parts in there. Just trying to understand how big auto, industrial and IoT and infrastructure businesses are individually and also you talked about some inventory on the infrastructure and cloud networking, I think you have a bit more exposure on the telcos. I just want to make sure, because from everything that we see in here, the cloud business is very strong right now. So I am just curious as to what’s causing that inventory build.

Kris Sennesael : Yes. So, our broad markets, it’s roughly 40% 50% is the Edge IoT, connectivity, 35% 40% or so is our networking infrastructure and cloud and then 20%, 25% is industrial and automotive. As it relates to cloud and data center, we do see some good traction in the AI-related investments that, where we play with our timing solutions. But investments in the more traditional cloud and data is somewhat muted. And there is still some ongoing inventory correction in that part of the market.

Srini Pajjuri: Okay, that’s clear. And then, on the – I guess on the December guidance you talk – you kind of mentioned that everything is kind of tracking as you expected originally but it is slightly below your normal seasonality I think historically you have done kind of high-single-digits in December. So my question is, is that primarily on the Android side, the weakness, or broad markets? And then, given the lower base, should we expect your March quarter to be slightly above seasonal? Thank you.

Kris Sennesael : Right. So the revenue and the business with the large customer is fully in line with expectations. And more normal from a seasonal point of view. We’re guiding slightly below street expectation, mostly because of broad markets. Again, on one hand pleased that we continue to see for a fourth quarter in a row, sequential growth but the sequential growth is less than what we anticipated three or six months ago.

Operator: Thank you. And our next question coming from the line of Vijay Rakesh with Mizuho Group. Your line is now open.

Vijay Rakesh : Hi Liam and Kris. Just wondering on 2025, if you were to take a look at how do you see adds in growth year-on-year within that 5G? And then a follow-up.

Liam Griffin: So, we only guide one quarter at a time and we’re going to stick to that. I mean, visibility is I think, okay. It’s not bad or great. But as a matter, we only guide one quarter at a time and we are going to stick to that.

Vijay Rakesh : Right. Talking more of the industry, but as you look at one of the things that one of your peers have talked about is in China there is a trend towards entry level and some of RFs side moving to discrete. Are you seeing any of that? That’s it. Thanks.

Liam Griffin: Yeah, we actually don’t do much in China in those markets. And if we were in it we really low end stuff. And so we are naturally kind of out of that space and upgrading more with some of the other players that we talked about earlier, the Googles and Samsungs, et cetera. So, we still have a great Android business it just happens to be much more important strategic one.

Operator: Thank you. And our next question coming from the line of Nicholas Doyle with Needham & Company. Your line is now open.

Nicholas Doyle : Hi guys. Thanks for taking my question. You mentioned tremendous opportunity in Android? Can you be any more specific in terms of products or maybe the connectivity if it’s RF or a Wi-Fi type opportunities and I guess I assume that’s mostly with Google? Thanks.

Liam Griffin: Yeah, I mean, you have two really strong players here that we are engaging with Google and Samsung. And what I really like about those companies is that, they are – these are enterprise companies. It’s great that they’re smartphone players and we can engage that’s wonderful. But they are also technology companies. They are companies that play in AI and other markets. So it’s really a great opportunity for us. We are pleased that we are able to engage at that level. We are learning a lot from those customers, very, very smart people with a lot of ideas and a lot of applications. So it’s a broad market business of its own within the portfolio. So, you should expect more from us with those companies. We’re making great progress and looking forward to continuing to raise the bar and so we are happy to be there.

Nicholas Doyle : Okay, thanks. And maybe just a broader strategy question. You’ve seen broad markets grow modestly, quarter-over-quarter, yet you’ve been undershipping kind of this whole time. So, why not halt those shipments more aggressively at the beginning of the year? And kind of burn through that inventory quicker. Is there any sort of business strategy around that decision or that’s just how business goes? Thanks.

Liam Griffin: No, no. I mean, we always very careful and when we talk about inventory, we talk about inventory in the channel and at the customer level. And we always trying to get a good read about that and there’s no advantage or any good reason to go and build up channel inventory or excess inventory at the personal level. We always trying to ship in line with real end-customer demand. Now, sometimes our customer don’t have it right either than they are prominent able to get more parts and then their end-customer demand doesn’t materialize and you end up with excess inventory somewhere in the channel could be at the distribution or could be at the end customer. Nobody wants that and we always try to manage that very carefully.

Operator: Thank you, ladies and gentlemen, that concludes today’s question and answer session. I will now turn the call back over to Mr. Griffin for any closing comments?

Liam Griffin: Thanks for participating on today’s call. We look forward to talking to you at upcoming investor conferences during the quarter. Thank you.

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