Q & A Highlights

Q: Can you explain the impact of the content and ramp profiles varying by model, particularly in relation to your largest customer? A: Grant Brown, CFO: Fiscal '25 is expected to be slightly down compared to fiscal '24 due to a shift in Android 5G towards entry-tier levels. The flagship and premium tiers are holding up well, but there are unfavorable trends in unit volumes and content by model. At our largest customer, we expect a low single-digit decline in revenue due to these variables, but we are optimistic about future opportunities and are investing to increase our content.

Q: What is the long-term path to improving gross margins, given the current guidance and manufacturing changes? A: Grant Brown, CFO: Our long-term gross margin target remains at 50% plus. In the near term, we expect headwinds from the mix shift in Android devices, but we anticipate margins in the mid-40s for fiscal '25. We are working on structural changes, such as transitioning to 8-inch BAW and optimizing our factory footprint, to improve margins over time.

Q: How does the mix shift in Android affect your long-term growth targets for mobile? A: Robert Bruggeworth, CEO: We are maintaining our strong single-digit growth target for ACG. While the Android market is declining, we are confident in our ability to grow this business by focusing on flagship and premium tiers and leveraging our technology strengths.

Q: Can you elaborate on the impact of the mix shift to entry-tier Android phones and your strategy in response? A: Grant Brown, CFO: The shift to entry-tier Android phones is a significant headwind, leading us to intentionally pivot away from this segment due to margin compression. We are focusing on higher tiers and mid-tier areas where we add the most value. This shift is expected to result in a reset of the TAM, with growth resuming from there.

Q: What are the expected impacts of the strategic alternatives for the silicon carbide business? A: Grant Brown, CFO: We are evaluating strategic alternatives for our silicon carbide business to reduce operating expenses and avoid capital expenditures. Exiting this market will allow us to focus on areas with higher growth potential and profitability. The business remains part of our financial guidance until a definitive course of action is determined.

Q: How does the current market environment affect your resource allocation and OpEx strategy? A: Grant Brown, CFO: We are realigning resources to focus on the best investment areas, reflecting changes in the Android business. This involves ongoing resource allocation to prioritize profitability and align with strategic objectives. We expect OpEx to reflect these changes, but we won't provide specific guidance beyond the current quarter.

Q: How does the mix of mid-tier Android affect your current revenue and competitive dynamics? A: David Fullwood, SVP of Sales & Marketing: Historically, we've been concentrated in high and mid-tiers. The shift to entry-tier is a headwind, and competitive dynamics in this segment are challenging due to discrete solutions and pricing pressures. We are focusing on areas where we add value and maintain pricing discipline.

Q: What is the impact of the mix shift on your largest customer's content and how does it vary across SKUs? A: Robert Bruggeworth, CEO: Our content varies by model and SKU at our largest customer, which affects our revenue mix. This variability is consistent with past years and is factored into our guidance and strategic planning.

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

This article first appeared on GuruFocus.