Qorvo Inc (QRVO) — Q3 2024 Earnings Call Transcript

Hello, everybody, and welcome to Qorvo's Fiscal 2024 Third Quarter Earnings Conference Call. This call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release published today, as well as the risk factors associated with our business in our Annual Report on Form 10-K filed with the SEC because these risk factors may affect our operations and financial results. In today's press release and on today's call, we provide both GAAP and non-GAAP financial results. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain non-cash expenses or other items that may obscure trends in our underlying performance. During our call, our comments and comparisons to income statement items will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today available on our Investor Relations website at ir.qorvo.com under Financial Releases. Joining us today are Bob Bruggeworth, President and CEO; Grant Brown, CFO; Dave Fullwood, Senior Vice President of Sales & Marketing; and other members of Qorvo's management team. And with that, I'll turn the call over to Bob.

Thanks, Doug, and welcome everyone to Qorvo's fiscal 2024 third quarter call. I would like to start by complimenting the team for delivering another solid quarter. The demand environment in the December quarter improved versus our November outlook, and this is reflected in our strong performance. Looking at our business from a high level, Qorvo is capitalizing on secular trends, including connectivity, sustainability, and electrification. These trends are playing out over many years and they are fueling the transition to new technologies and new standards like 5G advanced, WiFi 7, and DOCSIS 4.0, among others. As a result, customers across our businesses are increasingly seeking higher levels of efficiency and performance, where performance is measured in power out, talk time, or time between charges. Qorvo is central to these transitions, and we are critical to enabling these capabilities. We leverage unique competitive strengths to supply our customers with best-in-class solutions that enhance efficiency, increase throughput, and reduce form factor. We are a preferred supplier with leading products and a robust technology roadmap and are positioned favorably for broad-based growth across our three operating segments. Now let’s turn to our strategic highlights, beginning with HPA. Customer demand in end-markets, excluding base station, is improving and supports our view for a return to year-over-year growth in HPA in the March quarter. In defense and aerospace, we won an expanded radar design with a major DoD contractor and received new standard product orders in support of several large domestic and international ground-based radar systems. We also enjoyed increasing demand for our solid-state PA products and our switch filter bank products across multiple customers and programs. There are multi-year secular trends driving our D&A business, including the trend of one-to-many and the transition of mechanical systems to active electronic scanning systems, both of which increase the requirements for more advanced systems-level RF solutions. Earlier today, we announced the signing of a definitive agreement to acquire Boston-based Anokiwave. Anokiwave is a leading supplier of high-performance integrated silicon ICs for intelligent active array antennas. We are excited to have the Anokiwave team join Qorvo and expand our offerings for defense and aerospace, SATCOM, and 5G applications. In power management, we are extending our reach in markets where Qorvo enjoys a strong presence, such as wearables and other consumer products. Our most recent award is a PMIC chipset with multiple placements for wearable and charger at a leading Android OEM. Complementing this, we began to see a rebound in SSDs for PC and enterprise markets. We are continuing to expand upon our strong position with an additional power management win in support of a leading manufacturer of laptops. Lastly, our recently launched QSPICE, circuit simulation software, was honored as the design tool and development software product of the year at the 2023 Elektra Awards. In power devices, we're shipping into power supplies for blockchain applications, and design activity in data centers continues to be strong. We are also seeing increased activity in circuit protection, where our JFET technology brings unique advantages. In automotive, design activity remains strong, not only for onboard chargers but also for other emerging applications and electric vehicles. In infrastructure, Qorvo is leading the DOCSIS 4.0 upgrade cycle. We commenced volume shipments of our newest DOCSIS 4.0 hybrid power doubler in support of multiple cable OEMs. In the cellular base station market, inventories continue to be consumed, and we expect demand conditions to remain soft through the calendar year 2024. Turning to CSG, customer activity for ultra-wideband is increasing in secure access automotive applications. We're also seeing new applications for ultra-wideband in automotive, including presence detection and other radar-based sensors. This momentum builds upon our recent wins in ultra-wideband, including an in-vehicle car access platform and a flagship Android smartphone launch. As we demonstrated at CES, we are actively involved in a wide array of enterprise and connected home solutions, leveraging radar and ultra-wideband for applications such as door locks, smart lighting, and indoor navigation. In force-sensing touch sensors, we received the first production orders for an automotive supplier in support of a leading career-based automotive OEM. We are seeing increased traction across a growing set of customers and markets, including automotive, laptop trackpads, wearables, and smart home. In WiFi, design activity and collaboration remain strong across reference designs, customers, and operators. Within the Android ecosystem, the demand environment for mobile WiFi is improving with the normalization of Android channel inventories. In access points, WiFi 6 volumes continue to grow with certain provider rollouts in India. In WiFi 7, Qorvo secured design wins across operator, retail, enterprise, and mobile segments. In ACG, we commenced shipments in support of the spring 2024 flagship smartphone launch by a leading Android smartphone OEM. On our last earnings call, we highlighted our content gains in the flagship tier. In addition to the ultra-wideband, Qorvo content this year includes the low band, mid-high band, ultra-high band, secondary transmit and receive, tuning, and WiFi. We are ramping up now and building upon our momentum with a broad set of design wins in this customer's high-volume mass-market portfolio. Android mass-market smartphones are set to transition to 5G through the decade. Our collaboration with Android customers on their long-term product roadmaps positions Qorvo to be a primary beneficiary as these new 5G units are rolled out. To that end, Qorvo was recognized by the top four China-based Android 5G OEMs with 2023 awards for innovation, quality, supply, technology, and strategic partnership. To simplify 5G adoption and sustain our position as the leading global strategic supplier to Android OEMs, we continue to launch new architectures and new products that enhance performance and reduce form factors. During the quarter, we expanded customer sampling of our newly launched main path LMH pad. This highly integrated solution is optimized for mass-market smartphones. It combines in a single placement the low, mid, and high band main path content traditionally offered in two placements. This reduces surface area by 40%, simplifies design, and accelerates time to market. In addition to developing highly integrated solutions with increasing levels of functional density, we're also advancing technology in our high-performance discrete portfolio, including our BAW filters. During the quarter, we received purchase orders for discrete BAW filters using our recently released next-generation BAW technology. During the quarter, we continued to bring channel inventories down, and now our shipments are more closely aligned with end-market demand. We are also seeing incremental improvement in end-market demand in the Android ecosystem. For calendar 2024, we expect total smartphone units to grow in low single digits, with 5G units growing over 10%. To compete and win, we collaborate with customers on their three-year product roadmaps, and we supply them industry-leading solutions. We enjoy our position as the preferred strategic RF supplier for all the customers we serve in the Android space, and we are very well positioned to benefit as their portfolios continue to transition to 5G. In summary, demand for Qorvo's products has improved, primarily due to our proactive efforts to align channel inventories with end-market demand and content gains on key customer programs. We are delivering customers industry-leading products and technologies, and design activity remains robust. This positions Qorvo favorably for continued strong content and durable long-term growth. And with that, let me hand the call over to Grant.

Thanks, Bob, and good afternoon, everyone. Revenue for the quarter was $1.074 billion. Non-GAAP gross margin was 43.8%, and non-GAAP diluted EPS was $2.10, all exceeding the midpoint of our guidance range. Revenue increased approximately 44% year-over-year and continued to benefit from significant content gains at our largest customer. As communicated last quarter, ACG achieved year-over-year growth in September, CSG achieved year-over-year growth during the September quarter, and we expect HPA to achieve strong year-over-year growth in the March quarter. Regarding gross margin, a larger portion of December revenue was manufactured internally during periods of lower utilization, which led to higher unit costs compared to the September quarter. Factory utilization is improving, and the impact from underutilization in factory-related variances continues to moderate. Non-GAAP operating expenses in the quarter were $234 million. We continue to invest in new product development as it is a critical catalyst for driving multi-year growth across all three business segments. Alongside these growth-oriented investments, we continue to launch productivity initiatives across the enterprise. These initiatives, also spanning multiple years, are designed to support future growth, augment productivity, and enhance profitability. In total, non-GAAP operating income in the quarter was $237 million or 22% of sales. Non-GAAP net income was $206 million, representing diluted earnings per share of $2.10. Turning to the cash flow statement. We're pleased to report that during the December quarter, we generated a free cash flow of $467 million, setting a new quarterly record for Qorvo. Our capital expenditures for the period were $26 million, and we repurchased approximately $100 million of stock at $94 per share. The rate and pace of our share repurchases consider several factors, including our long-term financial outlook, free cash flow, debt maturities, alternative uses of cash, and other relevant strategic considerations. This approach ensures that our capital allocation strategy balances future growth with the return of capital and aligns with our underlying goal of delivering long-term shareholder value. On the balance sheet, as of quarter end, we had approximately $1.6 billion of long-term debt outstanding and over $1 billion of cash and equivalents. Regarding balance sheet presentation, the 2024 notes have been reclassified as current and will mature in December. Subject to changes in the interest rate environment and other factors, we currently expect to retire these notes later this year. In line with the expectations shared during our previous earnings call, we successfully reduced our net inventory balance over the period. We ended the quarter with a net inventory balance of $727 million, a sequential decrease of $113 million. In terms of days of inventory, this represents a decrease from 138 days in the September quarter to 118 days in the December quarter. This reduction reflects our commitment to efficient inventory management, and we expect continued improvement in the March quarter. Turning to the current quarter outlook, we expect revenue of approximately $925 million plus or minus $25 million, non-GAAP gross margin of approximately 42%, and non-GAAP diluted EPS of $1.20 at the midpoint of the revenue range. Relative to December, we expect March revenue to reflect a larger percentage of higher cost inventories previously manufactured internally during periods of lower utilization. As these higher cost previously manufactured inventories sell through, it paves the way for future gross margins that reflect increasing levels of utilization. We currently expect to have sold through most of these higher cost inventories and associated costs by the second half of this calendar year. We project non-GAAP operating expenses in the March quarter will be approximately $245 million, with variability related to labor-related expenses and the timing of program development spend. Below the operating income line, non-operating expense is expected to be approximately $10 million, reflecting interest paid on our fixed-rate debt, offset by interest income earned on our cash balances, FX gains or losses, along with other items. Our non-GAAP tax rate for fiscal 2024 is expected to be within a range of 11% to 13%. In December, we announced a new partnership with Luxshare related to the divestiture of our Beijing and Dezhou assembly and test facilities. Upon the closing of this transaction, Luxshare will acquire each facility's operations and assets, which includes the property, plant, and equipment, as well as the existing workforce, to enable the seamless continuity of operations. Qorvo will continue to maintain our sales, product and test engineering, and customer support employees in China. We believe that adding Luxshare as a strategic partner will strengthen our position to serve our customers globally. As it relates to our manufacturing strategy, this is a further step in our ongoing efforts to reduce capital intensity. This move aligns with previous actions, including the closure of our Florida manufacturing operations and the recent sale of our Farmers Branch facility in Texas. We are efficiently managing a complex supply chain, including our internal factories, which support all three operating segments and will remain an ongoing focus. We will leverage internal manufacturing where it uniquely differentiates our products and outsource production where we maintain a strong network of foundry and OSAT partners. Qorvo is well positioned to capitalize on multiple growth drivers within each of our three operating segments. We are confident that our investments in our technology portfolio, product development, and advanced manufacturing will broaden our addressable market, diversify revenue, expand margin, and accelerate growth. At this time, please open the line for questions. Thank you.

Hi. Thank you so much for taking the question. I have two questions. The first one on content growth for this year. Bob, obviously you guys did a really good job last year in gaining content, not only at your largest customer but across the board. I know it's a little bit early, but I'm curious how you're thinking about your potential to grow content this year, again, at the largest customer, as well as on the Android side. You gave great color on your career-based customer, but I'm curious how you're thinking about the year across the board? Thank you.

Toshiya, thanks for your question. There were some reports last night that created some confusion about our business. So I think it's best I go ahead and address it now that you gave me the opportunity with your first question. Based on our known design wins and engagements with our largest customer, one of our competitors, which has been named Qualcomm, we don't believe they're competing on any of the sockets we're engaged in. They did not win any sockets that we've been in, nor do we see them challenging our share in any sockets we're competing for or investing in at our largest customer. In fact, you can ask them. We're quite confident they would tell you the same thing. Now specifically to ultra-high band, we've made it clear on past calls that it was a multi-source socket, and we were the only company that consistently won over the last three years. We've never had 100% market share of the ultra-high band. In fact, you can look at teardowns of the latest iPhone and see Qorvo won the ultra-high band in the Pro and Pro Max models. I know I've said and many of our teams have said consistently that this is a performance-driven customer and we're winning based on multi-year engagements, our technology investments, and clearly our product performance. And we expect to grow with our largest customer in FY 2025 and grow even more in FY 2026. I wish I could give you more specifics, but I think that answers your question, Toshiya.

Yes. I appreciate the color. Thanks, Bob. And then as my follow-up, one for Grant on the gross margin side. I think three months ago you had shared the underutilization charge of, I think it was 550 basis points for the September quarter. Curious what the headwind was in December, what's embedded in your March quarter guidance? And more importantly, as you progress through the year, how should we think about the trajectory of gross margins? And sorry, one last one. The Luxshare deal, how should we think about that potentially benefiting gross margins medium to long term? Thank you.

Sure, Toshiya. Let me try and take all those in order. So the first one in terms of the impact from the underutilization charges, it's about half, maybe a little less than half of what we had previously reported. And as I pointed out, we'll be working through those higher cost inventories over the balance of this year and should clear them in the second half. So that should give you a sense of the timing there. There are a lot of moving factors that influence gross margin in addition to underutilization. The timing of where something was built, when it was built, and then in any given period when it's sold. In the September quarter, for example, we had a relatively high percentage of product mix that was manufactured at external silicon foundries and then processed at third-party OSATs versus a higher percentage in the December and what we anticipate in March to be manufactured internally during prior periods of lower utilization. So there's this lag effect I described last quarter. The underutilization in past periods obviously confers in the products sold in future periods. But beyond March, there's no change to our guidance of returning to 50% plus gross margin over time. We have line of sight to get there. Once we sell through the high-cost inventories, as I mentioned, it's encouraging on the utilization front as it's improving and will continue to execute on further productivity opportunities as well. I've commented in my prepared remarks that we expect to have worked through all of that as I mentioned in the second half, and that'll clear the path for margins that reflect higher levels of factory utilization going forward.

Thank you. Bob, first of all, on the unit assumptions that you have for the year, low single digits, I think you said for the total smartphone market and then 5G, 10% or so. How are you thinking about sort of non-China Android and China Android as you think about your mix going forward? It would seem like you're doing quite well, obviously, in Korea and elsewhere. Just wondering kind of where you think things shake out with China Android as you progress through calendar 2024.

Hey, thanks for the question. This is Dave. I'll take that one. So as Bob mentioned, as we said before, we enjoy a really strong position as the preferred strategic supplier for all our Android customers. We engage with them on multiple years out on their product roadmaps. And it's really a special seat at the table that we have as their leading global supplier. They care deeply about our products, our technology, but also the quality and the supply assurance that we deliver. And we've been that trusted supplier for all of our Android customers for many, many years. The one thing we've learned is that you have to be there for them over the long term. You can't just come in and out of a market and expect to gain any meaningful share. So at our China customers, as Bob mentioned, we received top supplier awards for innovation, quality, supply, and strategic partnership for 2023. That includes awards from Honor, OPPO, Xiaomi, and Vivo. We're also proud of our position in Android outside of China as well. Bob highlighted the great content in the new Samsung Galaxy S24. For multiple years now we provide a full lineup of ultra-high band, mid-high band, secondary transmit path, low band, tuning, and Wi-Fi, and this year we added ultra-wide band. We're also excited to receive initial purchase orders for our next-generation mid-high band with integrated diversity receive. We announced that product a few quarters ago, and we have our first purchase orders for a U.S.-based Android customer. This part brings a new level of integration for size and performance, leveraging our latest filter technology for BAW and SAW. We also have a lot of other great content on that phone that we're excited to tell you about in the future as well. We believe we're best positioned to grow with our Android customers as their products continue to transition to 5G over the coming years. We have a lot of great new opportunities in content we can address with ultra-wideband, touch sensors, and power management. So we feel really good about our position across the entire Android ecosystem.

That's great. Thank you for all that detail. Quick follow-up for Grant on the Luxshare commentary. How are you thinking, Grant, about sort of longer-term CapEx? Clearly, this is part of the longer-term strategy around CapEx, but if you could speak to that. I know the deal is going to close in the first half of 2024, so maybe a little bit early, but has anything changed, I guess, with the strategy around CapEx and cash flow assumptions that you have as you think about the next 12 to 18 months?

Certainly. Regarding cash flow, as we look ahead, we will align ourselves with the profit and loss statement. This will primarily be influenced by the growth mentioned by Bob for fiscal 2025 and 2026. We anticipate our capital expenditures will remain at or below 5% of revenue. If we make any capacity additions, it will be in response to demand and the necessary capacity to meet it. Regarding the sale of our Beijing and Dezhou sites, we are excited to collaborate with Luxshare during this transition. The agreement spans multiple years and offers significant benefits for Qorvo as our volume grows. We believe we have found an excellent partner to help lower our capital intensity, and we are confident in their ability to deliver the cost improvements we anticipate over time, similar to the cost structure we currently have at those locations.

Thank you, Bob, for clarifying that. I really appreciate it as it helps eliminate a lot of confusion. Now, regarding the Android market in China and the inventory suggestions, I think that's fairly clear. However, when we return to the normal run rate, it seems that the content game has shifted a bit. Chinese suppliers have made some advancements, but they don’t appear to pose a significant threat in the module space. You're now discussing highly integrated modules that set you apart from other competitors, with only Skyworks having that capability at this point. On the content side, by merging everything into a single module, it seems that the whole is not equal to the sum of its parts. Are you experiencing a decline in content overall, or are you integrating new content that you didn’t have before, or are they paying a premium for it? I’m trying to understand how this will play out once China returns to a normal run rate. I also have a follow-up question.

Yes, this is Dave. It kind of depends. Bob mentioned our low, mid, and high ranges, which combines what used to be the mid-high band where we typically had a significant share, and the low band where we also had a decent share but faced competition. When we integrate low, mid, and high together, we can gain additional content overall as we assist customers with that platform. It's also important to consider the various SKU strategies of our customers. Depending on the markets they serve, there might be varying amounts of filter content. As Bob and I have indicated, we collaborate with them on their long-term roadmaps to help design support for their solutions across these different tiers. Whether they are creating a global SKU or regional SKUs, we can tier the product accordingly to meet their needs.

Great. Historically, you haven't sold discrete filters for a long time due to memory constraints, but I understand you're doing so now. Can you provide some insight into where these filters are being used? Are they predominantly for WiFi? Who is the target audience and what markets are you focusing on? Is this shift primarily due to your increased capacity in Texas, especially as you might not see as much demand for some of the modules you previously offered? Let's start with that.

Yes, and it's an interesting one. So we've been in the discrete filter market. It's just not been a huge business for us because we focus more on the modules, as you said. But it's a very good performing module. It is for 5G, not for WiFi. Customers even in that tier of the market are paying for performance. They want the latest and greatest technology from us. Even on a very basic product like a discrete filter, they're still looking for performance. So we're pretty excited about those products.

Yes, thank you. Two, if I may. A question first for Grant. With shutdowns of your Florida facility, which I believe was historically SAW, and the sale of Farmers Branch, but also expansion of your Richardson facility, I guess, why wouldn't gross margins exceed 50% on a lower revenue base than the prior peak as 5G unit volume continues to grow from here?

Sure. Those are all productivity enhancements, and as we talked about, it's largely a function of utilization. In addition to just shuttering some of those facilities that you mentioned, we're also producing significantly smaller die. We have effective capacity that has grown regardless of the number of wafers. So you can get more die out of a given wafer. So there's productivity there. I would say there are a lot of productivity opportunities for us looking forward as we work into that across the board. So, there are productivity initiatives that we still have to do, and in terms of why we haven't achieved 50%, it's again, largely a utilization issue.

Sure. Thanks for that, Grant. I guess, Bob, you also mentioned that 5G units would grow over 10% this calendar year. I'm curious if that is done predominantly in mid-range across maybe the China Android OEMs, or is that only from Korean and US OEMs? If you could give us some color on the constitution of the 5G unit growth in calendar 2024, that would be very helpful. Thank you.

Yes, thanks for the question, Karl. It's primarily the Android ecosystem, so it would include all the Android manufacturers because we're seeing some manufacturers in China who are also moving into 5G. So it's a broad comment across the Android ecosystem that we see driving most of that growth.

Thank you. I guess on your March quarter outlook, pretty solid guide by the way. Bob, just trying to understand the puts and takes by different segments. I think you said HPA is going to grow nicely in the March quarter, which seems to imply that the smartphone business is probably seasonal. But based on what you said, it looks like Android is coming back a bit and your content is increasing. So I'm just curious as to why it's not better than seasonal as we look into the March quarter?

Sure. Hi, Srini, this is Grant, I'll take that question. We don't guide specifically by segment, but our views are incorporated in the total guidance. I will give a bit of color on each. In APG, we expect substantial year-on-year growth despite the typical sequential decline associated with our largest customers fall ramp; partially offsetting that seasonal decline is healthier channel inventories and improving smartphone unit demand in China, as well as the flagship launch by our largest Android customer. In HPA, we also expect year-over-year growth across all the businesses except base station. From a mixed perspective, the more capital-intensive end markets we serve, such as base station and some others, including infrastructure, face headwinds due to the interest rate sensitivity of those customers and some of those larger build-outs. Consequently, defense and aerospace now represent over half of the HPA top line, making that segment a bit more sensitive to the timing of some of those defense programs quarter to quarter. In CSG, we also expect year-over-year growth in the March quarter, supported by our WiFi revenue, which we've talked about. It'll be up meaningfully from Q4 last fiscal year. Slower than expected ramps in IoT-related areas are expected in March, probably persisting through the first half of 2024. Although the auto market appears to be weakening, in general, our secular opportunities there lie in the automotive connectivity areas which are supported by the growing adoption of 5G, WiFi, and ultra-wideband. I think Dave commented on earlier. We've already announced some significant design wins there in CSG for automotive and smartphone. We are targeting additional areas including industrial enterprise and smart home.

Great. That's great color, Grant. I appreciate that. And then Grant, on cash flow, very, very strong here. Obviously, you had a little bit of a headwind in the first half with working capital. Now I think that has become a tailwind, but quite impressive nevertheless. Can you talk about how you are thinking about cash flow going forward? I think you mentioned CapEx is going to be relatively small and you also suggested that inventory might come down again. So just want to hear your thoughts on cash flow generation going forward. And then what are the uses for the cash going forward? I guess it looks like you made an acquisition and obviously you've been buying back shares. So if you can talk about that, that would be helpful. Thank you.

Sure. In terms of cash flow next quarter, as you point out, there are a few puts and takes. I would expect CapEx to be up. It's going to follow the level of support for the top line and our capacity additions for our customers' demand. I would expect that to be up in the March quarter, but remain under our limit of around 5% well under. The monetization of our receivables is something that I expect will continue. That's been a significant tailwind last quarter, along with the reduction in inventory balances. Now you're starting to see that come down as we're able to sell through inventories rather than purchase as much new material. So, that helps cash flow. Looking forward, as I've pointed out, the rate and pace of our buyback will fluctuate. It's dependent this year on our maturing 2024 notes, which we'll look to take out by December, and then obviously we'll be continuing to grow throughout the calendar year and into fiscal 2025. Overall, we should see some improvement, but on a quarter-to-quarter basis in March, there's some additional items there.

Thank you very much, everyone. Good afternoon. My question is about the market's growing expectations regarding AI adoption in client devices, especially flagship models. I'm curious about how this relates to your insights on potential accelerated content gains with your large customer. As AI becomes more prevalent in the handset market, do you see it as a factor that drives total addressable market or RF content for your company? Or do you believe that the increased resources in phones, such as improved compute and memory capacities, will create additional constraints on RF, where your company could stand out through research and development by reducing costs, board space, and power requirements? I'm trying to understand what elements you believe will influence the visibility of content as AI integrates into these devices.

Yes, this is Dave. It's early days, as you know, with AI, but it's pretty exciting. I think you hit on a lot of the key points already. I mean, definitely it could be a catalyst that can help improve the replacement rate as people want to upgrade to take advantage of the new AI capabilities that show up in phones. It should drive more data over the network, and that of course means more and better RF. As you pointed out, there will be more computing processing power in the device, which will put more pressure on the rest of the phone. That translates into performance. We can deliver better RF and lower power consumption to help solve those problems. But also we can deliver power management, and there are a lot of areas in the phone to address with power management that we can use our IP to help reduce current consumption, improve battery life, and make more room to run the AI on the phone. But it's early, and so we have to see how this plays out. But definitely, we're looking forward to how AI can help drive the smartphone market further.

Got it. Thanks for the comments there. That's helpful. I guess as my follow-up, it's just a quick one. I know you guys didn't discuss financial terms or whatnot, but you did announce an acquisition today. Maybe you could give us a little context around the technologies that you're bringing in, the people that you're bringing in. Just any color there would be helpful. Thanks.

Thanks for the question, Matt. This is Grant. I'll take that one. We're really excited to bring the Anokiwave team on board here at Qorvo. They bring a highly experienced talent in RF silicon antenna and phased array systems to our D&A group. The technology will complement our existing product portfolio, especially the beam-forming capabilities, where we can leverage those with our advanced packaging capabilities. In terms of the deal, we didn't announce the terms as you mentioned, but we do expect to close this quarter and the impact is factored into our guidance. Initially, it'll add revenue in the low single digits per quarter and be slightly dilutive to EPS but accretive to gross margin, and all of that is factored into our guidance.

Yes, thank you. I wonder if you could speak to seasonality for the rest of the year and recognize that you only want to guide for one quarter. But with some of the inventory corrections, certainly in the mobile business looking like it's behind us. Is the expectation to return to normal seasonal patterns? And then, how does that apply to the non-mobile businesses, which I guess are still going through some degree of correction?

It's a little early to comment with any specificity on what would be our fiscal 2025 or the balance of this calendar year largely. But absent any macro-related disruptions, as I pointed out, we do expect to grow and improve our gross margins year-on-year. It's worth pointing out that given the content gains and success we're having in our largest customer and the success in our defense and aerospace areas, our revenue seasonality were closely aligned to those customer programs and ramp profiles. As we anticipate that quarterly profile or the shape of revenue across 2025, we expect it to look very similar to 2024. Beyond 2025, we're proactively investing, focusing on diversifying our business and pursuing substantial customer platforms where we have the technology to win and the customer engagement to justify that product development. Thank you.

We want to thank everyone for joining us on the call tonight. We appreciate your interest, and we look forward to speaking with many of you at upcoming investor events. Thanks again, and have a great evening.