Skyworks Solutions Inc (SWKS) — Q3 2022 Earnings Call Transcript

Thank you, Joanne. Good afternoon, everyone. And welcome to Skyworks third fiscal quarter 2022 conference call. With me today are Liam Griffin, our Chairman, Chief Executive Officer and President; and Kris Sennesael, our Chief Financial Officer. 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 to Liam.

Thanks, Mitch, and welcome everyone. Skyworks delivered record third quarter results with double-digit year-over-year growth in revenue and non-GAAP earnings per share, highlighting our resilient business model and disciplined execution. With strong design win momentum across an expanding and diverse customer set, we are well positioned to drive sequential growth into the second half of the calendar year. Looking at the quarter in more detail, we delivered record Q3 revenue of $1.23 billion, above consensus and up 10% compared to last year. Highlighting our content expansion in premium 5G enabled smartphones along with growth in automotive, data center, and network infrastructure. We achieved gross margin of 51.2%. We posted earnings per share of $2.44, up 13% year-over-year. We have continued to return cash to shareholders through dividends and share repurchases. And today, we announced an 11% increase to our quarterly dividend that marks our eighth consecutive year of dividend increases. In addition to generating solid results in a challenging macro environment, we are leveraging decades of targeted investments to drive a pipeline of design wins, spanning an array of market-critical solutions. Specifically in mobile, we delivered Sky5 platforms to the leading smartphone OEMs, including launches at Google, Samsung, and many others. Skyworks Technology leadership, innovation, and scale have allowed us to continue to capture an outsized share of our mobile revenue from high-performance 5G platforms. In Enterprise and IoT, we powered tri-band access points at Cisco, ramped Orange Livebox 6, Europe's first carrier-grade 6E platform. We launched advanced solutions with Verizon for integrated WiFi and cellular gateways and supported Google's newest Pixel Watch with our cellular GPS, WiFi, and Bluetooth technologies. In automotive, we achieved an all-time record revenue in the last quarter as we executed on our vision to drive connectivity and lead the shift to electrification. During the quarter, we ramped next-generation wireless and EV power technology across multiple top OEMs. We leveraged our timing solutions with a market-leading robo-taxi and driverless vehicle provider. Finally, in infrastructure and industrial, we captured multiple design wins at European equipment and service providers, fueling massive MIMO deployments. We delivered integrated timing solutions to the market leaders in data center and network infrastructure. And we shipped modules for high-power industrial and IoT applications, supporting a prominent brand in smart energy. Moving forward, we see a continued expansion in data consumption, dependent on seamless, reliable, and ubiquitous wireless connectivity. A few statistics illustrate this point. Global wireless data traffic is expected to grow at a 27% annual rate over the next five years. Machine-to-machine connections, the fastest growing IoT category, will soon surpass 15 billion users. By 2030, we expect 650 million connected cars, each consuming 25 times the data that we see in today's smartphones. Over the past two decades, Skyworks has made critical investments to power this connectivity transformation, addressing all key network technologies from cellular to advanced WiFi, enhanced GPS, and Bluetooth among others. Capitalizing on both organic growth and strategic acquisitions, we are gaining momentum in high-growth verticals, while at the same time diversifying our revenue and customer set. Looking ahead, our design win pipeline and unique in-house capabilities are positioning us for continued outperformance. Leveraging decades of innovation, we deliver purpose-built solutions underpinned by in-house gallium arsenide temperature-compensated SAW filters and bulk acoustic wave technologies. With that, I will turn the call over to Kris for discussion of Q3 and our Q4 outlook.

Thanks, Liam. During the third fiscal quarter of 2022, Skyworks delivered record revenue of $1.23 billion, an increase of 10% year-over-year. The growth was fueled by expanding our technology reach at the largest smartphone OEMs including Samsung and Google, partially offset by soft demand from China customers, mainly as a result of the lockdowns early in the quarter. In addition, broad markets revenue was up 38% year-over-year as we continue to drive design wins and revenue with innovative solutions for fast-growing end-markets, including automotive, industrial, data center, and network infrastructure. Gross profit in the second quarter was $631 million, resulting in a gross margin of 51.2%, up 60 basis points compared to Q3 of last year. Operating expenses were $191 million, slightly down on a sequential basis. We generated $440 million of operating income, translating into an operating margin of 35.7%. We incurred $11 million of other expenses, and our effective tax rate was 8.1% driving net income of $394 million. Based on a further reduction of our weighted average share count to 161.5 million shares, we achieved earnings per share of $2.44, exceeding consensus estimates, and up 13% year-over-year. Turning to cash flow, our third fiscal quarter cash flow from operations was $214 million, and our capital expenditures were $125 million. In terms of capital allocation during the quarter, we returned $209 million to shareholders, paying $90 million in dividends and repurchasing 1 million shares of our common stock for a total of $119 million. During the first nine months of the fiscal year, Skyworks has returned more than $1 billion to shareholders through dividends and share purchases, representing 129% of our free cash flow. In summary, the Skyworks team delivered another solid quarter with Q3 record revenue and earnings per share, while making the investments in our technology and product roadmaps to support future growth. Now let's move on to our outlook for Q4 of fiscal 2022. We expect to deliver double-digit sequential revenue and earnings per share growth in the September quarter. Specifically, we anticipate revenue between $1.375 billion and $1.425 billion. At the midpoint of $1.4 billion revenue for the quarter is expected to increase 14% sequentially. This outlook takes into account the seasonal impact from major product launches, leveraging our technology leadership, deep customer engagements, and world-class in-house manufacturing capabilities. Gross margin is projected to be in the range of 51% to 51.5%. We expect operating expenses of approximately $190 million to $194 million. Below the line, we anticipate roughly $12 million in other expense and a tax rate of approximately 9%. We expect our diluted share count to be approximately 161 million shares. Accordingly, at the midpoint of the revenue range, we intend to deliver diluted earnings per share of $2.90, an increase of 19% sequentially. Lastly, given our conviction in Skyworks' long-term strategic outlook and consistent cash generation, we announced an 11% increase to our quarterly dividend to $0.62 per share. And with that, I'll turn the call back over to Liam.

Thanks, Kris. Skyworks' decades-long investments are driving increasing opportunities across the market's fastest growing segments, fueling our momentum going into the second half of the calendar year. With our customer count doubling year-over-year in a broad markets portfolio on pace for $2 billion in annualized revenue, our business is more diverse than ever. Finally, our consistently strong profitability, cash generation, and diverse revenue streams fund our ability to invest and win while returning cash to our shareholders. That concludes our prepared remarks. Operator, let's open the line for questions.

Yes. Thank you for taking my questions and congratulations on managing, providing good results through a kind of a crazy cycle. Just a question on China. I know it's about 10% to 15% of your revenue, but wondering kind of what you're seeing in terms of the inventory situation there across the China handset OEMs? And just in general, if you can make a distinction on the premium level of handsets in the overall market versus low-to-mid tier, how would you characterize the demand landscape there and the level of channel inventory in the market as you see it today?

Sure. Yeah, it's been certainly a challenging market in China and there's several factors that played out here. Of course, you had lockdowns in some of the major provinces and across many of the factories that impeded demand even with the larger customers. And then you also had a group of folks that were just a little bit less prepared for the lockdowns as well. So if you look at the high-end market, China is still a market where you can get some very, very strong activity, tempered a bit by lockdowns, which we think are going to abate rather quickly. But on the lower-end, the OBX brands really hadn't performed too well at all. So that was an area that was weak generally. But if you look at the way Skyworks has been positioned, our aperture has been much more towards the mid-to-high tier. So our exposure to the OBX market has come down. In many cases, it was our position to do that and our choice to do it. At the same time, we had tremendous wins with names like Google and some of our other flagship players, Samsung, even doing quite well. China was definitely bumpy, but it's still a market that consumes the technology. We do think that some of the manufacturing issues and supply chain problems are going to abate, and we see even more of a tailwind.

Appreciate that. For my follow-up, last quarter that you cited $50 million push-out related to your top customer as they were having challenges assembling final components given the lockdowns in China and in Singapore. And to account for that last month in April, you attempted to kind of de-risk the June quarter and guided it down 7% to 8%, and you're kind of falling in that range. Wondering how you're thinking about the ramp in the September and December quarters as your top customer is through that process and starts to launch new platforms with your content.

Sure. We have a lot more clarity on that side of the field. Again, we work with everyone, but we have a high degree of visibility in some of those premium brands and we feel very good about that. For two reasons, we think the appetite for technologies continues to grow, and the use cases continue to increase around connectivity and mobility. Moreover, the market leaders are actually consolidating. We know who the market leaders are and we're very well positioned. So we're excited about that. We feel very good about where our technologies are going and the breadth of our offerings, driving incredible technologies with our bulk acoustic wave and in-house gallium arsenide packaging, doing all of this in our amazing fabs amidst a market where everyone's challenged with supply chains. A lot of good work is going on there, and we do expect strength as we go into the second half of the year, buoyed by some of the content gains that we've been discussing.

Yeah. Maybe Raj, just to add there. So we just guided September up 14% sequentially, and obviously, that is based on the known design wins that we are shipping today, and we do expect further sequential growth in the December quarter with that customer as well, total Skyworks revenue.

Hey guys, thanks for taking my question. Could you share with us how big your largest customer was in the quarter and were there any other greater than 10% customers in the quarter?

Yes, so we have two plus 10% customers in the June quarter, obviously the large customer, which was approximately 55% of total revenue. Just to compare, last year in June, that was 53%. We've continued to execute very well with that. And then Samsung is yet again a plus 10% customer. Again, great execution, great design wins at their flagship level as well in the rest of their product lineup.

Okay. So I know not all of your sales to your largest customers go into smartphones, but I think a dominant portion of it does. And so kind of doing a back-of-the-envelope calculation in your mobile business, I presume your business with customers outside that large customer is in the ballpark of about $90 million to $100 million for the quarter?

It's about $90 million with the large customer in broad markets.

What I'm trying to get to is trying to get a sense of how much of your mobile business is comprised of customers outside of your largest. And just trying to get a sense of maybe where you stand with respect to bottoming in the Android market and whatnot?

Yeah, the vast majority of our broad markets revenue is not related to the large customer, right. We have more than 6,000 customers spread over connectivity solutions, automotive—which was an all-time record revenue—industrial customers. We have our audio business, and we have our infrastructure networking business in there, and that's now on a $2 billion annualized run rate.

Yeah, and I would just say, in addition to the largest customer, we have several other significant ones. We mentioned, obviously Samsung, very strong and even Google. So it's a balanced mix here.

Thanks for taking my question. Liam or Kris, I'm curious how much of a year-on-year headwind has China Android been for June and September, and does China Android bottom for you in December or March or when? So just how much of a headwind year-on-year, because when I look at your implied September mobile guidance, it still seems to be kind of flattish to down somewhat year-on-year. So I imagine that's the China Android headwind. So how much is that? And when does China bottom for you?

So as it relates to China, we definitely saw some softness from a demand point of view. That's very well documented. We played it very carefully. Even in the December quarter, almost a year ago, we started pushing the brakes. We actually pushed the brakes pretty hard in March and June. We did not want to end up with major inventory in the channel. We do expect relatively minor revenue in the September guidance for the China customers, but we do expect beyond that, of course, that the demand will bounce back. You already started seeing that in the June numbers where they were close to 29 million, 30 million phones being sold in China. So we do expect the bounce back, but that's not included in this September guidance.

Yeah, and I'll just add one more comment, is that the complexity in the performance nodes is getting more and more difficult and more challenging, which is great for us. And that's what we want to see. So there are some pockets in China that are very, very low-end, that are not really interesting for us, and that's fine. But we're building up a strong base in mid-tier and certainly leading the pack when it comes to the premium players.

Got it. And for my follow-up, I wanted to ask about your balance sheet inventory. So I understand and appreciate the need, that your customers have for supply assurance, and you are making a very wide range of products, I get that, but when I look at inventory days, I think that among the highest that we have seen. So how are you planning to manage utilization and what impact, if any, will it have on your gross margins for the next handful of quarters?

Yeah, so Vivek, so we feel good about the business, right? And we just guided up 14% sequentially for September. We do expect further sequential growth into December, and that is all based on known design wins with the large customer, with other mobile players and even within broad markets. And as you know, we always level load our factories. We have higher filter content in many of those new devices that we bring to market. Filters typically are built many weeks or months in advance of product shipments and that accumulated into higher inventory, but the inventory is fully in line with our expectations and will help us in supporting the steep ramp here in September and December.

Yeah. Hey guys, first of all, congratulations in a very tricky environment managing the business so well. We certainly appreciate it. Maybe I missed it in the press release, but could you—would you mind giving us a breakdown of the mobile business versus the broadband business in June? And the second part of that same question is how do you see the trends in September? I would suspect that mobile would be up in September given the largest customer, or is that incorrect assumption?

Yeah. So the breakout was, broad market was 38% of our total revenue. It was up 38% year-over-year, so very strong performance there. Mobile was 62% of total revenue. It was slightly down on a year-over-year basis despite the fact that we had strong performance at a large customer, strong performance with Samsung and Google, but offset with the softness that we just discussed in the China market. And going forward, looking forward to the September quarter, obviously that is a very strong mobile quarter as we execute on some of those launches with the large customer as well with many of our other customers, but we still expect our broad markets to be up double digits year-over-year in the September quarter.

Yeah. And remember that, as we discussed at the beginning here, the lockdown dynamics and some of the supply chain volatility did put a little pressure on what would be a normal seasonal guide. So all those factors played together, and we had much less exposure to China, which is very helpful, but these weren't issues that were related to demand. I mean, the demand is there. The demand was there and it still is. And we need to go execute on that, but some of the early lockdowns and the ripple effects there in supply chain added a little bit of nip-tuck to the quarter.

Understood, Liam. And maybe from my follow-up question, Liam, one for you, so the 5G handsets went through a rapid period of growth and sort of feature addition, mode and band addition. Are you still seeing very good content increase in the flagship mobile phones, even at this point? Like the ones that are coming up, maybe you can talk about? And maybe talk to us about some of the things that are driving that, are the bands still being added or is it things like wireless, DRX just any color we would appreciate that?

Yeah, I mean, there's a great deal of enhancements that come through the cycle with the leading players and we have to back that up with great technology. And if you look at CapEx that we've been delivering, one of the themes that we've been talking a lot about is the level of customization and basically crafting those technologies in-house, right? We're a rare breed that manufactures end-to-end from high-end bulk acoustic wave, temperature compensated soft filtering, in-house gallium arsenide, in-house customized assembly and test. All those vectors come together and allow us to do very unique things customer-by-customer. So we're able to go after a much broader set of accounts when we have that level of customization and technology know-how. And that's one of the reasons why the mid-to-high tier really appreciates Skyworks because we can do a lot of good work with those partners and really help lift their business with our teams beneath them under the wings here, supplying the right kinds of technology. So it's a good partnership there for both sides.

Hey, thanks for taking my question. I just want to ask on September guidance. Two things, one, you said broad markets would still be up double digits. I guess that doesn't give me an idea of which direction it is sequentially. So you had the issues that I think you talked about supply chain in June. What's the outlook for broad markets in September?

So as I just said, September will still be up double-digit year-over-year. It will actually be slightly down on a sequential basis. You have to keep in mind in broad markets that we continue to see very strong demand. In some cases, the demand is higher than the supply; that's the case in our audio business. That's the case in some of the automotive and infrastructure business that we have. In addition to that, we also continue to see many of our customers still having kitting issues. They don't have the complete BOM as a result of that; they don't need the parts for now. But assuming that the chip shortage will get resolved over time, they will have to catch up, and that will then further fuel the growth for Skyworks content as well.

Okay. And then maybe just some comments on your own supply chain. I mean, the fact that you're able to build that much inventory. Can you just talk about the constraints, if any, that you're still seeing on your business from a foundry and back-end perspective?

Yeah. As I just said, in the vast majority of our business, we are able to supply to what our customers want, especially as it relates to the products, and the vast majority of the products that we do in-house. We have proactively invested in capacity and technology in our gallium arsenide fabs, in our filter operation, in our back-end operation. Where we struggle is on some of the smaller businesses that we have that are in a fabless business model where we depend on foundries and/or back-end, where in some cases we don't have enough capacity. We are working hard, we are making improvements; we are getting and securing more capacity to fulfill the strong demand that we have in some of those areas, and we'll continue to work it.

Yeah. And I'm just going to add. I mean, there's been a tremendous amount of technology investment in the portfolio. And a lot of that really has come through; you can see in the CapEx line. So with some really important things playing that we're doing that sort of are under the hood, so to speak, really driving performance in bulk acoustic wave, which is a tough technology. We've improved the efficiency of our TC-SAW capabilities. We have, as you know for years, had customized gallium arsenide. It's a very unique technology in RF, and we've been upgrading that at every cycle. So there's a lot of really interesting building blocks that go into the finished product here, and the flexibility that we can bring. I think it's one of the reasons why the discerning higher-end customers really appreciate that they have a voice in the decision with us. There's a lot of collaboration when we launch technologies and products; we can do a great deal of customization, understanding where the carriers are going to be and where those phones will roll. So there's a lot going on, and it comes with the capital that we put forth. And I think it's an advantage right now. And despite the ups and downs in the supply chain, I'd rather have that in-house that we can deal with it. We can make decisions; we have a voice, and we can do the right thing for the customers.

Thank you. Kris, I just wanted to come back to the days of inventory and actually more importantly, free cash flow. I know in the past you have said that inventory does go up in March and June. So that's fine. That's consistent with your past comments, but I was looking at free cash flow to sales, and I had to go back to many years past. As a percent of sales, it's really at a very low number. And I had to go back to June 2018 to get that number. I get the change in working capital, but how should we think about the trajectory of free cash flow and good to see that you raised your dividend, but I just want to understand if I'm not missing anything on the actual absolute free cash flow number.

Yes, Ambrish. So we can't manage the free cash flow quarter by quarter, and I look at it more on a 12-month trailing basis or a 12-month rolling forward basis. Our free cash flow now is in the mid-20s as a percent of revenue, and based on further growth of the top line and further expansion of the profitability, we have line of sight to get to plus 30% free cash flow margin. I think that's a pretty good number. Also take into account what Liam just said, right. While we continue to invest in our technology roadmaps and in our product roadmaps and continue to invest in our own factories, that gives us a very strong competitive advantage to deliver high-performance products to our customers. I think that's a pretty darn good number. Again, I'm not concerned about the June free cash flow, which is indeed a little bit muted because of the inventory build that we did, fully supported by the known design wins and the revenue ramp that we will experience in the September and the December quarters.

Got it, Kris. I understand. And I don't look at just on a quarterly basis. I just want to make sure I wasn't missing anything. Just a quick clarification on the December quarterly, what's the rate for, to think about it? You did say you'll grow, should we think seasonal, sub-seasonal, or how should we think about it for modeling purposes? Thank you.

Yes, I mean, it's still a little bit early, but I can tell you what moves the needle is the technology and what we're able to do to drive that. What we call is kind of really a technology reach; how do we create something more impactful for the customers? And we're doing that. It's not one or two parts. I mean, the breadth of the technology and the reach of our performance, the engineer-to-engineer lineup is awesome. The relationships are awesome with the largest customer. We certainly feel good about execution and the opportunity for the second half of the year, very much so. There's a lot of new invention going on, so to speak, and a lot of technologies that are opening up, that are providing even more revenue opportunity for Skyworks as we go forward. So we feel really good about that cycle, great collaboration with the people that matter, and getting in again, shoulder to shoulder in our fabs together. It's a lot of really good work being done to ensure leadership at the high end. We feel very good about that and I absolutely expect that to play out in revenue and in our numbers.

Thanks a lot. Liam, can we sit back and look at mobile from a holistic point of view? I would think from what we know of your product line and from what you said here, that you're much more exposed to high-end models than mid-tier. I know you don't do much on low-end; no one does. But if you had to break it out, I mean, you're not big in China. You're big in, you mentioned Samsung in the flagship. I'm not sure if that means you're getting big gains in A Series and of course, your largest customer's all high-end. So I'm just trying to get an idea if you could maybe bracket it for us if you had to break out mobile, would you say it's 60/40, and I know it's an approximation, but just in general, 60/40 high-end, or is it something closer like 75/25?

Yes, it's probably more 70% high-end, Ed. What we're trying to do is actually take the low end and bring them along towards a higher level of technology and performance. As a result, it would be revenue for us and also great for the consumer that gets a better product. Our business, the way I think about it is that we want to hit the fastball first, right? We want the hundred-mile-an-hour pitch. From there, we can go downhill and take care of everybody else. The DNA in our company is to go after the hard things and solve the hard problems and delight the customer, right? Sometimes, the customer doesn't even realize the amount of work and energy and technology know-how that comes through this, but ultimately it's a great solution that they get. That's the way we can do this. Now, we like to start with the tough problems and then go downhill, as I mentioned. There's still a lot of really good work to do. You hear a lot of discussion about some other customers that we haven't talked about too much, Samsung, Google; there are many others in mobile and many others in connectivity that we can serve. It's a model that's worked for us, and it's all about customer performance and uplifting their product and their ability to drive to their consumer market. So it's always been a challenge for us, but we love that challenge, and it makes what we do really matter for us here at Skyworks.

Okay. And given that, if I could, it seems clear from the report so far, what was reported last night and PI and everybody else talking that in the low and mid-tier they're getting hit a lot harder with weakness due to varying factors; the recession now obviously is starting to take hold on that. It hasn't really hit the high end yet at all. But if it gets worse, obviously most people think that it will. In that kind of a profile, especially with regard to your largest customer because it's kind of a unique relationship, when it sometimes starts building the new model, it's like the gate opens and you can ship as much as you want, but you have to true up in the end of the year. And I know the last time they had a basic dislocation was many years ago of success, but I'm just trying to get a feel with this of when you normally would get indications that things are slowing down on that high end or at Samsung's the high end. I mean, the launch starts, you usually sell a lot of phones to the people, etc., but then the real demand starts showing up in January or February, right? So last time I think it all happened in December and January. So just visibility-wise, I know it looks good for a while. When do you think, if there were a problem, you'd first see it?

Yes, no, that's a good question. It's interesting, Ed, now is the curveball is the lockdown situation. It's kind of an unusual thing. We all went through COVID, and we knew what was going on there, and it was just dark everywhere, right? There weren't really any pockets of opportunity. I think what's happening now is just a little bit of a bifurcation. You've got those that played very hard in China and the OBX land, I think are much more exposed to the downside. On the other hand, at Skyworks, we were continuing to raise mid and high-end, which has been beneficial for us and more profitable. It's a tale of two different markets and different stories. We want to pursue opportunities globally across every account, obviously. But the way our business has grown up here is, like I said, the high-end going down; we have an opportunity to do more in some of the low-end markets. It's really more of a choice for us than a technical problem. We know how to do it, but we do think that the opportunities are still looking very good. There's a lot of demand that was not shifted, with these issues in China. Some of these lockdowns really pinched some supply chain areas that are still not unplugged today, and that's real. We can measure that in our hubs, and we have good visibility on where that demand is. So it gives us a positive view on where we see the second half and maybe there's a delay, which could stretch into the early part of next year as well. There is a lot going on; the nuance being this supply chain wrinkle— not COVID-related necessarily, but the hard lockdown that we saw at the end of the quarter—even so, we still feel really good about the opportunity. Of course, we have great communication with our customers, so we're always in sync with what they need.

Thank you. I have a question on broad markets, Liam. Obviously, it's growing nicely on a year-on-year basis, but sequentially, it was down almost 10%. And then you're guiding down for another sequential decline, environment which seems pretty stable. Especially on the consumer side, you have a lot of secular drivers like WiFi, IoT, etc. So I'm just curious as to what the headwind is for that business in the short term. And then along the same lines, some of that business is probably still sourced from external foundries, and obviously the costs have been increasing. Have you implemented any pricing actions to kind of offset those cost increases? And if you can talk about where we are in that cycle in terms of the pricing actions, that'll be helpful. Thank you.

Yes, no, very good question. Yes, certainly the challenges in the broad markets business, we can see more of an impact there with supply chain issues. We don't have kind of the clarity that you have in a mobile device that’s very, very—you know exactly where we're going and where it's headed. Broad markets is more diverse. It goes to multiple customers with a broader set of technology. So it ties back to your question on supply chain. If you think about broad markets, it wasn't a demand constraint; it was a supply chain constraint. That's an area, less so in mobile but more so in broad markets that we saw that. With respect to pricing, we did take some action in pricing that was necessary. We do everything we can to keep our customers healthy and strong, but together as partners it was required that we had to raise our prices a little bit; it was fine. I think that was healthy, but we do feel like the opportunity in broad markets is still a really strong part of our portfolio, lots of opportunities. We talked about the growth rates at 38% year-over-year revenue in broad markets—that's outstanding. There's still a lot of opportunity out there that we haven't hit. It's a huge pool of broad market opportunities that await us as we go forward, a lot of great things that are not at all tagged into our mobile business, a lot of unique markets, unique customers that are on their own vector in terms of top line so looking forward to that.

Hi guys, thanks very much. And just maybe as a follow-up to that, just wondering how much pricing inflation has played into your overall revenue growth versus, say, unit volumes or just mix trending higher? And then as a follow-up, I know this is one of your favorite questions. What should we expect in terms of generational content growth going forward? Where does content begin to max out? Are we even close to that?

So on the pricing, as Liam just explained, right? In certain parts of our broad market business, especially which is based on the fabless foundry model, we've experienced some input cost increases, and we've been passing that on to our customers; that is a relatively small part of the overall Skyworks business. So I think that answers your first question.

Yes, and with respect to content and content reach, we thought most of us here at the table have been in this market for quite some time. We do see incremental opportunities year after year. But I think what's changing now is that the, if you think about Skyworks, it isn't just mobility. Mobility is great and wireless technologies are great, but what's different right now is the customer set and the application set that we're playing in. We talked today about data centers; we talked about electric vehicles much more in the infrastructure side. We have high-performance audio. We have technology nodes that were not available to us two, three years ago. We created these new technologies, bulk acoustic waves, etc. in-house with our own people and our own capital. So I guess what I would say to you is think about connectivity at large and think about the markets that require this, right? It's a mobile phone, of course, but IoT, industrial, healthcare, business to business. All these interesting end markets rely very much on the kind of technologies that we bring. So we're looking forward to that. We'd love to give you guys more information around that vector, but we certainly see pools of opportunities that Skyworks and Skyworks Technologies can address.

Excellent. Thanks very much.

Thank you.

Good afternoon. Thanks very much, guys. I wanted to ask a couple of questions about the acquisitions of the I&A business and sort of how that's playing out. So the first one is on the timing segment, I guess the thesis there was, there were some really good timing technologies at the Silicon Labs, and you guys were going to add scale to those in the telco market, in the switching market, and then maybe into cloud over time. And I just – there's some big server disruptions that are going on in the cloud space. I wonder if you might give me a little bit of an update as to how that thesis on the timing side is playing out there and what you're seeing. And then I have a follow up on the automotive market. Thank you.

Yes, Matt, let me just start high level. I've said before, we are not breaking out every sub product line, but let me tell you that we are very pleased with the performance of the acquired business. It's exceeding our expectations by a lot, both from a revenue, gross margin, and operating margin point of view. There are still a lot of opportunities that we are working on. Keep in mind that, again, that business is supply constraint. The demand currently is a lot higher than what we are able to supply, but despite all of that, it's exceeding our expectations. I will turn it over to Liam to answer your question on timing.

Yes, so certainly great opportunities coming out of what we call the MSF portfolio, which was the I&A business of SLAB, really pleased with not only the products but with the people and the execution. So all good, markets like data centers right now are critical for the timing solutions that we have—very high-performance timing solutions and growing that with additional investments from the larger core of Skyworks. We're also looking at a lot of EV work coming out of that portfolio as well. The I&A team had some great technology there that we're scaling. I think it's a case where you've got super technology, great performance, and great engineering talent. Now it's really going to be about scale, right? It's really going to be about scale. One of the things that we do very well at Skyworks, you've heard that from us, we’re vertically integrated. We do a lot of hardcore manufacturing, technology development in-house, but we also do very, very well in high scale, big dollar markets. It sounds easy to say, but there's a lot of work behind that. If you look at our business and the way that we talk to our customers and markets and the way we communicate to investors. We really are a company that looks at markets that can really move the dial. We've got some of these here. These are coming up; they're growing right now for us, it's early stage, but the tough part is getting the technology right. The team and MSF from Silicon Labs have gotten it right. So it's about scaling now and driving our sales and marketing teams further and capturing a great deal of opportunity that we haven't seen. We're excited about it. We'll certainly give you more color in the next call.

Yes. Thanks for that, guys. As my follow-up, I'm going to ask, I was kind of intrigued with some of the automotive announcements. A lot of the call here is focused on handsets, but I guess the question in the automotive space for you guys is the opportunities that you're seeing, how would you characterize them in terms of split and in terms of the competitive landscape across cellular, WiFi, V2V, V2X? There are RF opportunities in a lot of different domains in automotive that are different from the handset market. So I just—be interested in where you're seeing the traction and what the competitive landscape looks like.

Yes, there's a lot of interesting nodes that come together here in the EV side. You've got certainly technology coming through wireless, wireless nodes, and 5G. We've got a lot of EV accounts right now that are being developed, and we have design wins in now. There is a lot of investment that we're putting forth. When you go further into EV, connectivity and wireless connectivity are going to be pivotal; it will be one of the most critical elements in the whole process. Think about from a safety perspective, from a latency perspective; there is going to be a lot of technology development that hasn't yet come through around electric vehicles and autonomous vehicles in that whole specter. We're looking forward to it. We've got a beachhead with our partners in Texas and great engineering minds and know-how across the greater Skyworks team to turn that into big dollars as we move forward. It will be one of the bigger markets going forward for sure, and it is a market that absolutely needs high performance, low latency, high-quality solutions. Those are the kinds of things that we like to do. We've already been working with many players in the EV space. Many of those customers don't want to have the conversations publicly about what we do, so we will respect that, but please note that we're deeply involved in the development, and we're putting a great deal of investment into that part of the market.

Thank you all for participating in today's call. We look forward to talking to you at upcoming investor conferences. Thank you.