Qorvo Inc (QRVO) Q4 2024 Earnings Call Transcript Highlights: Strong Fiscal Performance and Strategic Acquisitions

Qorvo Inc (QRVO) reports a robust fiscal Q4 with significant revenue growth and strategic advancements in defense and aerospace sectors.

  • Revenue: $941 million for the quarter, a 49% year-over-year increase.
  • Non-GAAP Gross Margin: 42.5% for the quarter.
  • Non-GAAP Diluted EPS: $1.39 for the quarter.
  • Operating Cash Flow: $202 million for the quarter.
  • Capital Expenditures: $33 million for the quarter.
  • Stock Repurchases: $100 million at $112 per share during the quarter.
  • Long-term Debt: Approximately $1.5 billion as of quarter end.
  • Cash and Equivalents: Over $1 billion as of quarter end.
  • Net Inventory Balance: $711 million, a sequential decrease of $16 million.
  • Full Year Revenue: $3.8 billion.
  • Full Year Non-GAAP Gross Margin: 44.5%.
  • Full Year Non-GAAP EPS: $6.21.
  • Current Quarter Revenue Outlook: Approximately $850 million, plus or minus $25 million.
  • Current Quarter Non-GAAP Gross Margin Outlook: Between 40% and 41%.
  • Current Quarter Non-GAAP Diluted EPS Outlook: Between $0.60 and $0.80.
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Release Date: May 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Qorvo Inc (QRVO, Financial) reported a strong fiscal Q4 with revenue of $941 million, exceeding the midpoint of guidance, driven by growth in defense and aerospace.
  • Non-GAAP gross margin improved to 42.5%, reflecting efficient management despite higher Android 5G mass market product costs.
  • Successful acquisition of Anokiwave, enhancing Qorvo Inc (QRVO)'s capabilities in defense and aerospace with advanced silicon ICs for array antennas.
  • Record annual and March quarterly revenue in defense and aerospace, supported by large defense programs and SATCOM growth.
  • Strategic investments in power management and new technologies like WiFi 7 and ultra-wideband solutions are positioning Qorvo Inc (QRVO) for future growth across various sectors.

Negative Points

  • Expectation of weak demand environment in the base station business, with a cautious outlook on the immediate future despite securing design wins.
  • Anticipated low gross margin in the June quarter due to higher percentage of Android 5G mass market products manufactured during periods of lower factory utilization.
  • Challenges in the infrastructure market, particularly with the slower rollout of DOCSIS 4.0 affecting near-term revenue prospects.
  • Concerns over global economic conditions and market volatility that could impact consumer demand and investment in technology sectors.
  • Ongoing need to manage high-cost inventory which is expected to continue affecting financial performance into the June quarter.

Q & A Highlights

Q: Grant, could you provide more detail on what's going on with ACG and defense after the strong quarter in March, and walk us through the moving parts in the 3 segments as we think about the guidance for the June quarter?
A: (Grant A. Brown, CFO) The sequential decline in the June quarter revenue guidance primarily reflects the ramp patterns of our 2 largest customers in ACG, seasonal timing of large defense programs, and a slower rollout of DOCSIS 4.0. ACG is expected to decline in the high single digits, HPA will decline in the low double digits, and CSG is expected to be approximately flat. Defense and aerospace represent the largest percentage of HPA revenue and set a record in fiscal Q4. We expect our D&A business to grow year-on-year in fiscal '25, but program timing and seasonality are impacting the sequential performance in the June quarter.

Q: In the press release, you talked about expecting modest growth in fiscal '25 over '24. Has anything changed in your view about this since last quarter?
A: (Grant A. Brown, CFO) No change to our view on inventory; channel inventory, especially within the Android area, looks relatively clear. We expect June to be the last quarter we'll really be talking about the high-cost inventory and the energization impact associated with that. We still expect to grow both revenue and gross margin modestly in fiscal '25 on a year-over-year full fiscal year basis.

Q: Can you clarify if the lower gross margin guide is driven by seasonally stronger Android sales in June? And does the increase in gross margins in September suggest Android is weaker in the second half?
A: (Grant A. Brown, CFO) Our gross margin guidance for June reflects primarily selling through higher cost inventories burdened by past underutilization, typical seasonal decline in our largest customer, and a seasonal decline in defense programs. For September, gross margin is expected to improve substantially as these headwinds reverse, reflecting more external content and growth in defense revenue.

Q: Could you provide an update on content growth and strength in the second half, now that most of those wins have been awarded and you're probably working on qualifying them?
A: (Robert A. Bruggeworth, CEO) We're very confident in our outlook with our largest customer, confident in gaining share this year and still very confident in our outlook for FY '25 and FY '26, gaining share and growing revenue.

Q: What are your thoughts on the recovery of the silicon carbide business, particularly in industrial and defense?
A: (David Fullwood, SVP of Sales & Marketing) We've had success in data centers, and that part of the market looks quite good. However, markets like solar have been heavily impacted by the interest rate environment and are extremely soft right now. Our silicon carbide business is still quite small, but we're growing into new markets with a strong sales funnel.

Q: Are you seeing any inventory build at your largest customer as some of your peers have indicated?
A: (Robert A. Bruggeworth, CEO) We do not see any channel inventory between us and our largest customer. We ship directly to their manufacturers, so there is no inventory build-up that we can see.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.