Key highlights from Skyworks Solutions Inc (SWKS) Q3 2023 Earnings Concall
Management Update:
- [00:05:19] SWKS continues to post double-digit year-over-year revenue growth in automotive.
- [00:09:28] SWKS expects to deliver double-digit sequential revenue and EPS growth in 3Q23.
Q&A Highlights:
- [00:13:18] Harsh Kumar from Piper Sandler asked about the content of the new phone that SWKS’ largest customer typically releases in Sept. Liam Griffin CEO replied that the company is unable to disclose specific details about the content in the new phone, but is confident that it will be a leader in the supply chain.
- [00:14:15] Harsh Kumar with Piper Sandler enquired about the drivers of SWKS’ gross margin improvement, and whether it will be more industry-dependent or company-specific. Kris Sennesael CFO replied that SWKS expects GM to trend sideways in the near term due to macro headwinds and lower demand in the Android ecosystem. However, the company expects GM to improve over time as the business gets back to normal and as it reduce its own inventory levels.
- [00:17:07] Chris Caso of Wolfe Research queried about the status of the inventory correction at SWKS’ customers and the implications of it on revenue outlook. Liam Griffin CEO believes that the bottom is in for most of the markets the company addresses and it expects to see improving financials in the coming quarters.
- [00:18:46] Chris Caso of Wolfe Research asked if SWKS’ expects demand from its China customers to improve and what’s expected to be seen in the coming quarters. Liam Griffin CEO answered that SWKS’ revenue from the Android ecosystem is still bumpy, but it is seeing signs of improvement from other customers in the mobile market.
- [00:22:54] Matt Ramsay with TD Cowen asked about SWKS’ view on opex in the next few quarters and how this may be affected by the company’s focus on GM improvement and investment in growth opportunities. Kris Sennesael CFO replied that SWKS is focused on investing in growth opportunities while also controlling costs and operating efficiently. The company has been able to trim down operating expenses without cutting into key technology developments or product roadmaps.
- [00:24:36] Edward Snyder from Charter Equity enquired if SWKS is likely to lose market share in WiFi and high-end handsets in 2H23. Liam Griffin CEO replied that SWKS is well-positioned in the Wi-Fi market, with a strong position in Wi-Fi 6 and Wi-Fi 7. SWKS is confident that it will continue to grow in this market in the coming years, as Wi-Fi becomes increasingly important in a variety of applications.
- [00:28:20] Blake at Bank of America asked for the percentage of revenue that came from SWKS’ largest customer and the percentage of broad market sales that came from the same customer. Liam Griffin CEO said SWKS’ largest customer accounted for 64% of total revenue in the June quarter, which is slightly up from the previous year. The company also sees opportunities to grow its revenue with this customer in other products, such as the iPod, iMac, and home products.
- [00:29:42] Blake at Bank of America enquired how SWKS expects its long-term China hardware exposure to change, given that it has already de-risked its exposure in the short term. Liam Griffin CEO answered that SWKS’ exposure to China, Samsung, and Google is currently very low, and the company expects this to remain the case in the near future. However, the company sees an opportunity for significant upside as these customers start ramping up their businesses in 2024.
- [00:31:24] Christopher Rolland with Susquehanna enquired about SWKS’ inventory levels, days of inventory on hand, and gross margins. Kris Sennesael CFO said that SWKS expects to continue reducing its inventory levels in the coming quarters, which will lead to higher GM in the future. However, this process will take some time, and GMs are likely to remain under pressure in the near term.
- [00:33:22] Christopher Rolland with Susquehanna queried about SWKS’ expectations for its business in BAWs in the coming year. Liam Griffin CEO answered that SWKS’ BAW technology is a key differentiator for the company, and it is seeing strong demand in a variety of applications, including handsets, Wi-Fi, and infrastructure.
- [00:35:37] Joe Moore with Morgan Stanley asked about the long-term ramifications of Huawei potentially coming back with its own 5G solution for SWKS. Liam Griffin CEO replied that SWKS is not currently working with Huawei, but the company sees opportunities for growth in the China market with other Android smartphone manufacturers.
- [00:36:46] Srini Pajjuri from Raymond James asked if SWKS expects the Dec. quarter to be somewhat seasonal, given that the company is coming off of a cyclical trough in Android. Kris Sennesael CFO answered that SWKS expects the December quarter to be up sequentially, following normal seasonal growth patterns.
- [00:37:25] Srini Pajjuri with Raymond James enquired about the impact of China’s ban on gallium and germanium exports on SWKS. Liam Griffin CEO said SWKS is not concerned about the impact of China’s ban on gallium and germanium exports. The company has a diversified supply chain for these materials and is confident that it can continue to meet its customers’ needs.
- [00:38:28] Karl Ackerman at BNP Paribas asked about the outlook for SWKS’ mobile and broad markets businesses in September. Kris Sennesael CFO said Sept. quarter is expected to be strong, driven by SWKS’ mobile business. However, its broad markets business is expected to be flat to slightly down, due to inventory overhang in some end markets.
