Welcome to the Qorvo Inc. Second Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded. I would now like to turn the conference over to Douglas DeLieto, Vice President of Investor Relations. Please go ahead.

Thanks very much. Hello, everybody and welcome to Qorvo's fiscal 2024 second quarter earnings 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 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 and 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 second quarter call. Revenue, margin, and EPS were all above the high end of our outlook provided during our August earnings call. Customer demand during the September quarter improved versus our August guidance. The primary driver was a large smartphone customer ramp. In addition, channel inventories of Qorvo components across the Android ecosystem continued to be consumed with OEMs indicating inventory levels are approaching historical norms. Channel inventory digestion is allowing Qorvo to ship more closely to end market demand, even as pockets of channel inventory remained in markets such as base station. We have worked closely with our customers to address inventories, while continuing to deliver highly differentiated products. They have rewarded us with new opportunities and new design wins and this underpins our expectations for growth this year and beyond. Across our three operating segments, Qorvo enjoys multi-year technology upgrade cycles supported by global macro trends, including connectivity, sustainability, and electrification. New protocols and new technologies are offering improved performance and enhanced functionality and Qorvo is critical in enabling these capabilities. This is playing out in aerospace and defense, automotive, base station, broadband, connected home, power devices, power management, smartphones, Wi-Fi, and other markets. Where the performance is measured power out, data throughput, talk time, battery life, or distance between charges, customers increasingly require higher levels of power efficiency, integration, and functional density. To enable their future architectures and deliver successive improvements in our next-generation products, they rely on Qorvo's best-in-class technologies and solutions. In HPA, we are a strong beneficiary of the trends in our defense and aerospace business towards what we call one to many. Put simply, Qorvo's technologies are supporting higher customer volumes requiring more electronics and higher levels of integration. This applies to unmanned vehicles like drones, upgrades to existing radar systems, low earth orbit satellites, and other applications. Lastly, we are leading the transition to DOCSIS 4.0 in broadband, and we continue to deliver base station customers increasing levels of functional integration for their 5G massive-MIMO deployments. Looking at our power franchise, we offer a highly differentiated solution with our silicon carbide JFET architecture. Our technology offers the lowest RDS(on), which translates into faster battery charging, longer battery life, and lower current consumption for applications like EVs, solar inverters, and data centers. These are relatively new markets for Qorvo that are early in the transition to silicon carbide and offer significant growth. We also offer a differentiated portfolio in power management, where our initial wins have been in SSDs, power tools, and appliances, and we are leveraging our unique IP to expand in defense, infrastructure, smartphones, wearables, and other markets. In CSG, new technologies are transforming user experiences in automotive, connected home, enterprise, industrial, and other markets. Ultra-wideband is a critical focus area and we're very excited about recent developments. Ultra-wideband is in the very early innings of adoption and we are seeing exciting opportunities, given expanded smartphone adoption, multiple in-vehicle placements, and an array of new capabilities such as ranging and precision location for indoor navigation. Wi-Fi is another primary driver and the transition to Wi-Fi 6E and Wi-Fi 7 is very early on. Wi-Fi 7 devices recently launched by Qorvo's customers are offering breakthrough advances in speed, latency, and network capacity. Qorvo also offers components and full system solutions that incorporate Bluetooth Low Energy, Zigbee, Thread, and now Matter. Matter is a recently launched technology overlay, essentially a common language that improves interoperability across smart home devices regardless of protocol or manufacturer. It is supported by iOS, Android, and major smartphone platform providers, and it's widely expected to simplify and accelerate the adoption of smart home devices. It is also early days for our force-sensing touch sensors. These are ultra-sensitive MEMS-based sensors that enable new use cases and enhanced device functionality. We have broad engagements across automotive smart interiors, trackpads, true wireless headsets, smartphones, wearables, and other consumer applications and our opportunities are expanding as customers engage with our technology and develop new use cases. Looking at ACG, fewer than half of the Android smartphones this year will be 5G. Android 5G units are expected to grow in the low double-digits for several years. That's a big growth opportunity for Qorvo as we move from very little content in 4G phones to significant dollar content in 5G phones. Another driver is 5G Advanced, which leverages new releases of the 5G standard. 5G Advanced smartphones will include additional transmit and receive and satellite bands favoring Qorvo's product and technology portfolio. 5G will migrate to 5G Advanced over time and bridge us to new development efforts and new content required to accommodate 6G frequency spectrum at the end of the decade. Big picture, Qorvo enjoys a range of opportunities supported by multi-year upgrade cycles. Many of these transitions are very early on and Qorvo is recognized by customers as a leading technology innovator. We've made great progress developing new technologies and winning customer designs. With that said, we want to make it clear that our end markets have not yet turned and our outlook does not contemplate a significant change in the macro-economic environment. The customer demand environment for Qorvo is more a reflection of strong design win activity and the early actions we took to improve channel inventory. When end markets recover, that will represent an additional driver of growth for Qorvo. Now, let's turn to some quarterly highlights. In defense and aerospace, we increased shipments of X-Band transmit and receive FEMs and secured first orders for our 50-watt PAs in support of new LAN-based C-band radar programs. We introduced the world's highest power Ku-band satellite communications amplifier, which enables an 80% size reduction and is optimized for multiple applications. We also received a large production order for recently launched cell-to-satellite solutions. These solutions incorporate advanced technologies from across our aerospace, base station, and mobile portfolios to enable low-earth-orbit satellite connectivity. In infrastructure, we were selected by Tier-1 base station OEM to supply switch LNA modules for next-generation 5G massive MIMO radios. We also continue to lead DOCSIS 4.0 broadband upgrade cycle with production orders from multiple customers and broad-based design wins. For power management markets, we released QSPICE, a significant improvement over current industry offerings for analog and mixed-signal circuit design in simulation. QSPICE improves the speed, functionality, and reliability of circuit simulation, extending the value Qorvo is providing designers. Since its launch, the tool has surpassed 15,000 unique downloads. In automotive applications, we were selected to support a major in-vehicle car access platform by a leading German automotive Tier-1. This multiyear program has a lifetime value over $250 million, marking a major milestone for our ultra-wideband portfolio. Within this program, Qorvo will supply ultra-wideband solutions for in-vehicle applications for a leading German automotive OEM. We also secured a design win from another leading German automotive Tier-1 to supply V2X solutions for communications platforms launching this year. Lastly, we were selected to supply force sensing touch sensors that enhance smart interior functionality and a recently launched EV from a Korean based automotive OEM. Complementing the large ultra-wideband win in automotive, Qorvo was selected by the leading Android smartphone OEM to supply ultra-wideband for their Spring 2024 flagship launch. It's worth noting that the ultra-wideband wins in automotive and Android markets are significant as these two customers represent the largest volume opportunities in their respective markets. To extend our reach, we're sampling ultra-wideband solutions across fleet management, logistics, agriculture, and other applications, leveraging our precision location capabilities to advance operational efficiencies. In Wi-Fi, we secured multi-year design wins with Tier-1 network operators in the US and in India. These wins support next-generation wireless infrastructure for retail, enterprise, and home applications. Across the Android ecosystem, we increased shipments of our highly integrated modules in support of Android smartphones from the high tier through the mass market. Notably, we extended our strong share position with the leading Android smartphone OEM in their flagship smartphone. In addition to the ultra-wideband win, we were also selected to supply the low-band, mid-high band, ultra-high band, secondary transmit receive, tuning, and Wi-Fi. Lastly, we expanded customer sampling of our recently launched mid-high band pad. Qorvo's newest integrated architecture leverages next-generation BAW and SAW technologies and advanced packaging to combine main path content with receive paths commonly included in the diverse receive modules. This and other highly integrated Qorvo architectures for the Android ecosystem free board space and improve efficiency to support future 5G form factors and content like flip and fold architectures and transmit and receive non-terrestrial network connectivity. I want to thank the Qorvo team for continued operational excellence. We have moved aggressively to reduce channel inventories by securing broad-based customer design wins. In the December quarter, our outlook reflects the seasonal profile of a large smartphone customer ramp as well as healthier channel inventories across most markets. In the March quarter, we expect revenue to be more closely aligned with end-market demand. Longer-term, we expect revenue growth and margin expansion, and product mix favors our higher growth investment business. And with that, I'll hand the call off to Grant.

Thanks, Bob, and good afternoon, everyone. Revenue for the quarter was $1.1 billion. Non-GAAP gross margin was 47.6%, and non-GAAP diluted EPS was $2.39, all exceeding the high end of our August guidance. Revenue increased approximately 70% sequentially and benefited from significant content gains at our largest customer. Consistent with our guidance, factory production levels improved but remained below historical averages. During the quarter, the impact from underutilization and factory-related variances was approximately 550 basis points versus approximately 800 basis points last quarter. The increase in gross margin above the high end of our August guidance range was largely the result of revenue upside and product mix. A larger portion of September revenue was manufactured at external silicon foundries and processed at third-party OSAPs. By comparison, our December and March revenue will reflect a larger percentage of higher-cost inventories manufactured internally during periods of lower utilization and a lower percentage of products manufactured at external silicon foundries and OSATs. Beyond this fiscal year, we continue to see a clear path back to 50% plus gross margin initially during specific quarters and then on a full-year basis. Non-GAAP operating expenses in the quarter were $246 million, slightly higher than our guidance due to performance-based incentive compensation. We are investing in new product development and targeting multi-year growth opportunities across all three segments. In addition to growth-oriented investments, we're also investing in enterprise-wide productivity initiatives. These multi-year efforts will support future growth and enhance profitability as we upgrade, modernize, and standardize around the latest tools and best practices. In total, non-GAAP operating income in the quarter was $279 million for 25% of sales, which increased from 7.2% last quarter. Breaking out operating margin by each segment, ACG was 34%, HPA was 17%, and CSG was negative 27%, which includes the impact of the biotechnology division. During the quarter, Qorvo Biotechnologies generated $0.5 million in revenue and reduced operating income by approximately $7 million. Just following quarter-end, we successfully closed the sale of the Omnia Biotechnology business and will continue to sell BAW filters to support the acquirer. Non-GAAP net income was $236 million, representing diluted earnings per share of $2.39. Moving on to the cash flow statement. Free cash flow was $64 million, and CapEx was $29 million. During the quarter, we repurchased $100 million worth of shares at approximately $103 per share. The rate and pace of our repurchases is based on our long-term outlook, free cash flow, low leverage, alternative uses of cash, and other factors. Turning to the balance sheet. At the quarter-end, we had approximately $2 billion of debt outstanding with no near-term maturities and $707 million of cash and equivalents. Consistent with our expectations and commentary from the prior earnings call, our net inventory balance was reduced in the period and ended the quarter at $840 million, down $78 million sequentially. Looking at days of inventory, this represents a decrease from 210 days to 138 days. Turning to our current quarter outlook, we expect revenue of approximately $1 billion plus or minus $25 million, non-GAAP gross margin between 43% and 44%, and non-GAAP diluted EPS of $1.65 at the midpoint of the revenue range. We project non-GAAP operating expenses in the December quarter will be $235 to $240 million. 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 ‘24 is expected to be within a range of 13% to 15%. We expect our inventory balance will decrease again in the December quarter. In terms of channel inventory, the environment continues to improve, with Android OEMs indicating inventory levels are approaching historical norms. Outside of the Android ecosystem, there are smaller pockets of channel inventory that will take longer to digest. We continue to forecast fiscal ‘24 revenue above fiscal ‘23. For the full fiscal year, fiscal ‘24 non-GAAP gross margin is expected to be 44% or slightly better, with variability primarily tracking utilization and mix. Qorvo enjoys multi-year growth drivers across all three of our operating segments. We offer a broad portfolio of technologies and capabilities, and we are uniquely positioned across leading customers and large markets. We expect continued strength on large customer programs, and we are investing to drive outsized growth in diverse businesses to broaden our market exposure and accelerate growth. At this time, please open the line for questions. Thank you.

We will now begin the question-and-answer session. And our first question comes from Tim Arcuri of UBS. Please go ahead.

Hi, thanks for taking my question. This is Iman jumping in for Tim. Just looking into fiscal 2025, I actually think about the trajectory of gross margin as utilization starts to come back, is there a certain level of revenue we should be thinking about for our core loan to be back at that 50% range?

Sure, I'll take that. This is Grant. Thanks for the question. There are a large number of factors that can influence gross margins such as revenue mix and input costs including utilization impacts. So I wouldn't think of it in terms of an absolute revenue level. Some products carry a higher gross margin than others due to the nature of that business or end market. For instance, looking at our base station product line, which is generally accretive to gross margins, but with base station demand weaker, coupled with the excess channel inventories we've been talking about there, this is currently a headwind to margin versus historical levels. Product mix can also impact gross margin based on where it's manufactured. As I mentioned in my prepared remarks, for instance, last quarter we shipped a higher portion of products that were manufactured at external silicon foundries and processed at third-party OSATs, and those products are not impacted by our internal factory utilization, which as we've mentioned, is running below historical averages. Aside from product mix, unit cost is the other half of the equation. It's a bit more complex given that input costs can affect gross margin on a lagging or leading basis. For example, historical underutilization will create higher unit costs in that inventory and as it's sold in future periods, that impact lags. Alternatively, in anticipation of lower future demand, production volumes can be cut and utilization will fall. And in that sense, the impact tends to lead those anticipated changes in demand. So there's a number of factors that impact gross margin. I, again, wouldn't think of it in terms of an absolute revenue level, but rather a time for us to move through our high-cost inventory, return utilization levels back to normal, run the factories efficiently, and we'll be on a path back to 50% plus.

Thank you.

The Next question comes from Gary Mobley of Wells Fargo Securities. Please go ahead.

Hi, Grant. I wanted to follow up on your detailed response to the last question. In your prepared remarks, you mentioned that gross margin throughout fiscal year '25 will sometimes exceed 50%. I assume this would occur during your seasonally strong periods. Did you indicate that 50% or above is the target for the full year or just for the specific peak quarters?

Sure. I said that I think it will achieve 50% on a specific quarter before it achieves 50% across the whole year. And that's somewhat macro dependent and obviously the volumes will dictate at what levels we return to a utilization where that's possible.

Sure, Gary. I'll discuss the high-level overview to ensure we're clear about what we usually observe in the fourth quarter. As we've mentioned before, what's typical anymore isn't truly typical since we constantly face different challenges, from losing our second-largest customer to the impacts of COVID and various economic factors. My comments were focused on the current economic outlook, where we don't anticipate a market rebound. As we navigate through the general inventory we've discussed, we will reach what we believe is the end market demand. Typically, and according to our current forecasts, we observe that our largest customer's growth will decline in March. March is usually the weakest quarter for our China Android business, although some of that is balanced by an increase from our largest Android customer. I won’t specify percentages, but from our perspective, these are the dynamics influencing most of our business. Grant mentioned that our ACG business is growing year-over-year. Our CSG business is set to start growing this quarter and is expected to increase in March. The lagging sector for us is our HPA business, and we've discussed the challenges there, especially with what used to be our largest business in the infrastructure segment, which is not performing well now. When we put all this together, we're confident that we will see a significant increase in March compared to the previous year, and we're also positive that fiscal year '24 will be better than '23. Grant, do you want to add anything to that, considering all the moving parts?

Sure. No, I think you covered it, Bob. I'd say, maybe 10%, but certainly not 15%, right? We're committed to the comments, any macro-related disruptions aside, that we see growth in fiscal ‘24.

The next question comes from Karl Ackerman of BNP Paribas. Please go ahead.

Yes, thank you. I have a clarification and a follow-up. I guess, just given the content gains in your largest customer, is it fair to say that customer now exceeds 50% of your revenue in the quarter?

We won't comment on any customers within the quarter, but we'll sum it up on the 10-K. The only thing I'd say about 10% plus customers is that we did have more than one in the quarter.

Thank you for that. For my follow up, MediaTek suggested that 5G units should grow double-digits next year, certainly above overall smartphone unit expectations of low singles. Most of your exposure to incremental gains in 5G do come from China Android OEMs. I was hoping you could address how you think Huawei does or does not impact your China Android opportunity, both near-term and longer-term? Thank you.

I'll take the first part of that, Karl, and I'll let Dave take the second part since he was just recently in China. Actually, a large part of our growth for 5G Android is still at the largest Android manufacturer being Samsung. The second point I would like to make is, you're right, we do have China exposure in 5G, but most of that is actually in the export market for what they're trying to do to build their brands outside of China. So just keep those two facts in mind. Dave was just in China just a couple weeks ago, and I'll let him talk a little bit more about that and what we're seeing, talking to all of our customers there, along with your comment about Huawei.

Thanks, Bob. I'll start with Huawei and share what we're observing. Before the launch of their new phone, they were shipping around 2 million units per month. We've experienced the typical ramp-up for a premium phone, but in the last couple of weeks, we've noticed sales decreasing, suggesting they may be past that peak. When considering overall annual growth compared to their previous shipments, it's approximately 10 million to 20 million additional units. While that represents solid growth for them, it is relatively minor in the context of the total smartphone market, which is about 1.2 billion units per year. Regarding our customers in China, as Bob mentioned, a significant portion of their growth is coming from international markets. We have strong representation among our China OEM customers, particularly in their overseas operations, where we see considerable growth opportunities. Therefore, it's important to consider both their domestic situation in China and their international business, as many of these customers hold substantial market shares in those foreign markets.

The next question comes from Toshiya Hari of Goldman Sachs. Please go ahead.

Hi. Thank you. I just wanted to follow up on the China Android market. I guess specifically, what kind of trends did you see in the September quarter on a sequential basis? And what's embedded in your guidance for December? And related to that, we've been getting more questions about the competitive landscape in China. You guys have pretty good visibility and obviously you've got good relationships with your customers. As you think about models coming out in 2024, any concerns around market share, how should we think about gen-to-gen content growth, particularly as it pertains to your OEM's export business? Thanks.

Dave, you want to handle that?

Yeah, sure, Bob. Let's see, where to start. The China customer base in the export market as well as in the domestic market, they've got some pretty compelling products. As Bob said, I was just over there a few weeks ago, I got to meet with all of our customers. Our relationships continue to be very strong. They place a very high value on what we bring. And they all reinforce that Qorvo is their main global strategic supplier for RF. So we have deep discussions with them on roadmaps to align their needs to our product plans. And they're very highly engaged on our new low, mid, high S-PAD platform that we announced a couple of quarters ago. Additionally, they're looking at expanding their business with us in other areas such as power management, sensors, and the L2 wideband. So the overall market, as Bob mentioned, the channel inventories are approaching normal, many of those customers are getting to pretty healthy levels. So as we've been saying all along, what was a headwind is now becoming a tailwind. So we're starting to see that growth. We had our largest bookings quarter in over two years. So our customers have now gotten past the concern about inventory and they're looking forward now and starting to place orders more aligned to what their true production plans and unit demand is. So that's certainly improved a lot. Now having said that, as Bob mentioned also, we're not anticipating any major rebound in the end market. We're just excited about the design wins that we've had and the inventory in the channel being cleared out and that's driving a lot of our growth as we go forward.

Got it. And then as a quick follow-up outside of mobile, some of your broader analog peers have talked about signs of weakness or clear signs of weakness in industrial and parts of automotive. I think comms infra has been weak for a couple of quarters now. But I guess the question is, outside of mobile, what kind of trends are you seeing, and what sort of trajectory are you assuming as you sort of progress through the December quarter and go into March outside of mobile? Thank you.

Sure, Toshiya, this is Grant. Let me take that one. We don't explicitly guide by segment, but the views for each of those businesses is factored into our total guidance. I'll try to provide you a little bit of color there and then Dave can jump in and add. We have a pretty diverse collection of businesses that serve a number of end markets, and they're not all in phase. As Bob pointed out last quarter in fiscal Q2, ACG returns to the year-over-year growth that we expected, and we'll continue to see that for the rest of the year. And then this quarter, our fiscal Q3, we forecast our CSG segment will return to year-over-year growth. And then finally, in Q4, we expect HPA to return to year-over-year growth. So the businesses are a bit out of phase, if you want to think of them that way. Just continuing with HPA as an example, directly to your question, if you look inside of HPA, there's various trends within each end market. It probably won't surprise you, but the base station market being weak is an example. Our revenue is down over 50% year-over-year for the last four quarters. A few years ago, actually, we hit $200 million in that business before the Huawei ban and the 5G base station rollout slowed. But outside of China, only 25% of that mid-band 5G infrastructure has been built, so there's a lot of opportunity. But that's one area where we continue to see some meaningful headwind and market weakness. Beyond that though, there's also the broadband area within HPA. We have a very strong position there, high level of share, but the DOCSIS 4.0 upgrade cycle may be a bit slower and there could be some pockets of inventory in the very end products there. So the situation within infrastructure is very different than, say, our defense and aerospace group where we're benefiting from significant strength and expect to grow in fiscal Q3 and fiscal Q4. So, there's a lot of cross currents there when you get into the details, but this is why we maintain a diverse set of businesses. And a lot of them share the same manufacturing footprint, which creates the operating efficiencies, but also scale and the diversification on the top line.

What I'll add to that is in the cellular IoT market, we actually noticed a decline start about two quarters ago. With CSG coming back and, as Grant pointed out, expecting growth next quarter, we're not anticipating a recovery in the IoT cellular business. It has been down for us, and we've been working through inventory in that segment as well. I believe this has been part of our discussion.

Yeah, I think you mentioned automotive as well. And we're growing from a pretty small base there. So Bob talked about a lot of the design wins. We're pretty excited about the growth opportunity there. So that's all new programs. It'll be ramping over the next couple of years to help drive that growth for us. But it's coming off of a relatively small base. So we're not as exposed there to really maybe see some of the things you're seeing from some of our peers.

The next question comes from Ruben Roy of Stifel. Please go ahead.

Yeah, hi, thank you. Bob, I wanted to ask about the ultra-wideband marketplace. I think in the past you've had a few system wins in the Android ecosystem for ultra-wideband. I don't know if they were characterized as flagship back then, so maybe if you could talk about the rollout opportunity in smartphones specifically that you're seeing and then expanding outside of handset? Again, in the past I think you've characterized the market as several hundred million dollars of opportunity. You're talking about a $250 million lifetime opportunity in the auto win. So has anything changed? Are you seeing accelerating development? And if you can give us an update on how you characterize the opportunity, that'd be great.

Sure. Thanks, Ruben. I’m extremely excited about the team’s accomplishments and significant wins in ultra-wideband. We’ve been working with Google, one of the Android phone manufacturers, for a couple of generations now. We’ve discussed that and you can find details in our comments regarding who the next partner is. What has surprised us about ultra-wideband is that when we acquired Decawave, we expected it to take off in phones first and then in automotive. However, we’re actually seeing more traction in the automotive sector, with handsets lagging behind in adoption. It does take longer to bring products to market in cars, but they are currently securing platforms and integrating them. We anticipate leading in design wins for automotive while seeing a rapid increase in phone adoption too. Dave mentioned earlier that we are collaborating with many Chinese handset OEMs to bring ultra-wideband to market. It’s also worth noting that our current win with a Tier 1 German manufacturer is set to support other US and global manufacturers, incorporating that same platform. We’re also exploring other platforms aimed at automotive applications, presenting us with considerable opportunities. The number of placements in automotive can range from five or six to nine or ten, leading to substantial wins based on how they decide to implement ultra-wideband. It's more than just keyless entry, which makes these opportunities exciting. Additionally, we previously discussed ultra-wideband and Wi-Fi access points for indoor navigation as a promising area. We are currently observing it being integrated into various other products, and we’re collaborating with several manufacturers on technologies for home applications. We’re very enthused about everything that’s happening in this space. I appreciate your question.

Thank you for all that detail, Bob. I have a quick follow-up for Grant. Just in terms of inventory, and I see the on-balance sheet inventory coming down, ahead of hopefully and potentially a growth year next year. Do you have sort of a target level either in DOI or dollar for inventory or how you're thinking about that as you go forward post December quarter?

Yeah, sure, and we usually have commented on our target around four turns. So high threes to four would be a pretty typical range for us to look to achieve.

The next question comes from Edward Snyder of Charter Equity Research. Please go ahead.

Thanks a lot. First, a housekeeping. Can you give us a percentage of revenue for each of the three businesses? Sorry, if I missed that. And then, Grant, if I take a look at your China revenue over the years, actually, it looks like if you exclude the period when you were over-shipping and the period when you were under-shipping, your average is probably close to $250 million to $300 million a quarter. And I know you did about $150 million last quarter. We haven't seen the cadence for September yet, but doesn't it suggest you're dealing with maybe $100 million, $150 million of inventory burn per quarter? I'm just trying to bracket those numbers.

Yeah. Sure, Ed. I can help you with the percent of revenue, but we haven't commented on the China revenue in the quarter. ACG was 77%. HPA was 14%, and CSG was the balance of about 9%. And yeah, we haven't commented on what a normalized level of Android revenue or China revenue would be outside of the comments we've already made, but I don't know if there's...

All we'd add is we are still under-shipping to end demand best we can tell. But we're coming up near the end of it.

Yeah. And maybe, Ed, I would also make the distinction between channel inventory and our own inventories. So, channel inventories, we think, are relatively healthy, maybe even earlier than we had commented on in the past where we thought it would take until December. So that's an improving situation. Our own inventories as we're selling through them requires us to achieve the mix shift that we're going to see in the second half. So we'll start selling through our own high-cost inventories in Q3 and Q4 largely and we do expect growth in Q3.

When you said you saw the largest bookings in two years in the last quarter and normally those bookings are for what, a year out or so, I know it varies, but...

No, not a year ahead.

The next question comes from Srini Pajjuri of Raymond James. Please go ahead.

Thank you. Just a clarification on the China business, either Bob or Grant. I think one of the comments is that, yeah, the inventories are coming down and businesses from the trough levels is growing sequentially. But at the same time, I think, Bob, you said in your comments about the March quarter, you're expecting China to be seasonal. Given that inventories have kind of pretty much normalized, I would have thought China would be better than seasonal in March. So just if you can give some clarification on why it will only be seasonal in March?

Because what I meant was from a demand perspective, in March, that's typically a seasonally low point for China. That's what I said.

Okay. But, doesn't mean that your business is going to decline seasonally in the March quarter for your China business?

What I also mentioned is that we have nearly eliminated most of the inventory. As a result, we are observing growth in our Android business in China this quarter.

Yeah. Maybe I'll restate what Bob had commented on earlier. Just in terms of next quarter, we do see growth in Android. But March, we do expect to see the typical decline there, which is on the other side of our largest customer's ramp and March is also historically a seasonally low point for handset sales in China. So those two factors are somewhat offset by the largest Android customer and their timing of phone launches, plus the fact that the channel is healthier. So with all that said, we do think it will be better than typically seasonal. But again, it's anyone's guess as to what seasonality means.

Our largest customer has the largest impact on March. So let's see how their sales do.

Got it. Got it. Makes sense. And then this year has been in terms of the content expansion for you, Bob, it's been pretty impressive. And I think some of those content gains also came from share gains. So as you look out to the next six to twelve months, how are you feeling about, because I do get this question about sustainability of some of the content gains from this year. So if you could help us maybe to the extent you have visibility, how should we think about your content gains both in premium as well as in the mid-tier.

Yeah. I can speak to the high-end phones. And I'll start with our largest customer because it's been questioned before. But our growth this year and our largest customer really speaks to the strong position we have there, and we are one of their trusted suppliers as well as the investments we've been making to deliver them these great technologies and products. This year, we grew mostly from new content and gained some share in sockets that we held for many years. So we feel good about that. Now remember, they are a performance-driven customer. We're winning where we're bringing strong capabilities and have consistently done well. Now if you look at the available TAM there, we remain underrepresented. So clearly, that's a target of growth for us, and we'll continue to invest to be able to win there. Now that's also regardless of the baseband they decide to use. We enjoy multiple opportunities to grow our content not only in the areas where we've been strong in the past, but also in areas that will be new sockets for Qorvo. Again, that's about our largest customer. In my prepared remarks, I talked about the leading Android smartphone manufacturer and our ability to continue to gain share there. and we talked about ultra-wideband along with all those types of components. Dave also spoke about in China and bring out our new technologies where we've integrated the mid-high band plus the diversity received into that module. That's going to be the ability to grow there as well. Dave also talked about ultra-wideband in some of those handsets, some of our sensors, power management. So I think as we look across the portfolio, we feel pretty good at our ability to continue to grow our dollar content in handsets whether it's a flagship premium tier or the mass market.

The next question comes from Vivek Arya of Bank of America Securities. Please go ahead.

Thank you for taking my questions. For the first one, you were guiding December sales down 9% sequentially or so. I thought the original intention was to kind of stay flattish. The large customer, I imagine, should be flattish. And I think one of your competitors mentioned a sharp ramp in terms of their China shipments getting into December. So I'm curious, Bob, what is leading you to kind of guide sales down when some of these big customer trends seem to be growing sequentially? Or is it just conservatism? Or is it noncellular market that's guiding that outlook?

Thanks, Vivek. And I know I've said this before, but I'll remind you and the audience, we ship a majority of our parts that are not on the motherboard. So the timing of when we see the ramp is different than maybe you're talking about a baseband customer, I don't know. They're on the motherboard. A lot of what we have goes to the flex circuits. So they build those ahead of the motherboard. So our timing can be different. So I just want to make sure that. That's also, if it's the baseband customer, if you remember, they had an inventory build that they blamed at that customer. We didn't see that build. So therefore, we naturally follow the progression of the builds. They may have had a pause. And as you point out, the inventory will go down, then they would see a quick ramp up. So I can't comment on their business, but I can tell you the timing, we typically lead the ramp because of how much product we have on flex circuits, which is different than most of the products that are on the motherboard.

Maybe, Vivek, I'll just pick up from there. In terms of our prior discussion around the December quarter, the flat comment was relative to $1 billion Q2, and we've just exceeded that by $100 million. So to Bob's point on timing, plus or minus a couple of weeks that our largest customer can make a very big difference. But those two quarters combined are still ahead of where we were communicating previously. So on the net, a positive trend in the top line.

Got it. Makes sense. And then on gross margins. So December, 43.5%, I guess, at midpoint. March, I guess, seem to be implying closer to 41%. And I think the explanation you're giving is that because these two quarters, you are using your internal high-cost inventory. So does that impact get over by March as we start conceptually thinking about modeling gross margins from June onwards? What is that starting baseline that we should keep in mind? Is it low 40s? Is it mid-40s? I understand you're not going to give guidance for next year, but I just don't know how to think about what is normalized gross margins as we start thinking about your next fiscal year?

Sure. And, now some of this depends on the inventory, as you pointed out, that we're carrying the high unit cost inventory that we sell through and the mix of that in the March quarter. Some of this also relates to the utilization within the March period as we start to look forward to the demand that we see in the coming year. So it's a difficult or complex question to answer prospectively. But nonetheless, in terms of the gross margin for the March quarter, as I mentioned, our full year guide of 44% and now saying a bit better than that could imply that we have upside to the March to what you've just described. And then in terms of our fiscal '25, it's going to be a gradual continuation from there upwards, I would expect, because the June quarter is still seasonally weaker for us as we head into the larger ramp in September from a seasonal perspective. Hopefully, that gives you at least some idea of how we're going to track into fiscal '25. Maybe going back to some of my prepared remarks, I did say that I believe we could achieve 50% gross margin at first on a quarterly basis and then subsequently on an annual basis across an entire year when we get through the inventory as well as return utilization levels to more normalized levels.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

We want to thank everyone for joining us on today's call. We appreciate your interest in Qorvo and we look forward to speaking with you at upcoming investor events. Thanks and have a great night.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.