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Kris Sennesael

Thanks, Liam.
Skyworks' revenue for the first fiscal quarter of 2025 was $1.068 billion, slightly above the midpoint of our outlook.
Mobile revenue was 67% of total revenue and increased 6% sequentially, as we successfully supported multiple product launches. Broad Markets was up, slightly, sequentially and returned to year-over-year growth at 2%.
Q1 fiscal '25 marked the fourth consecutive quarter of modest sequential growth since the Q1 fiscal '24 bottom, despite a muted demand environment and ongoing inventory digestion across selective end markets.
Gross profit was $497 million, with gross margin at 46.5%, in line with expectations. Also, during Q1, we further decreased our internal inventory, slightly below $700 million, resulting in eight consecutive quarters of reductions.
Operating expenses were $212 million, reflecting our strategic investments in our technology and product roadmaps. We delivered $285 million of operating income, translating into an operating margin of 27%.
We generated $9 million of other income and our effective tax rate was 12.2%, driving net income of $258 million and diluted earnings per share of $1.60, $0.003 above our guidance.
For the first quarter of fiscal 2025, we demonstrated robust cash generation, with operating cash flow of $377 million, capital expenditures of $39 million, and a free cash flow of $338 million, representing a 32% free cash flow margin.
During fiscal Q1, we distributed $112 million in dividends. Our cash and investment balance increased to approximately $1.75 billion while we maintained a debt level of $1 billion, providing us with ample financial flexibility.
Now, let's move on to our outlook for Q2 of fiscal 2025.
We anticipate revenue of $935 million to 965 million.
We expect our Mobile business to decline, mid- to high-teens sequentially, in line with historical seasonality.
In Broad Markets, we anticipate additional sequential growth and a further improvement in year-over-year growth. We are seeing positive momentum in booking trends, backlog, and sell-through patterns across Broad Markets.
However, inventory headwinds remain acute in Industrial and Infrastructure.
Gross margin is projected between 45.5% and 46%, which is seasonally adjusted for lower sales volume.
We anticipate operating expenses in the range of $220 million to $228 million, utilizing our robust cash flow generation to invest in technology and product roadmaps. The sequential increase is mostly driven by a reset of the social charges at the beginning of the calendar year, as well as an increase in R&D project expenses.
Below the line, we anticipate $6 million in other income, an effective tax rate of 12% to 12.5%, and a diluted share count of approximately $158.5 million shares. Accordingly, at the midpoint of the revenue range of $950 million, we intend to deliver diluted earnings per share of $1.20.
Finally, our Board of Directors has approved a new $2 billion stock repurchase program, as part of our disciplined capital allocation strategy.
Before moving into Q&A, I want to briefly reflect on our business and address our strategic partnership with our largest customer.
Over the past 25 years, we have built a strong technology company, a leader in RF connectivity for mobile solutions and expanded those RF capabilities with analog and mixed signal expertise, in our growing Broad Markets business.
And over the last 18 years, we have benefited from a truly collaborative partnership with our largest customer, who has constantly pushed us to develop innovative, high-performance, and highly-integrated RF solutions.
We have partnered with that customer since the launch of their first phone, which has resulted in significant content and revenue growth over the years. However, the last couple of years have been challenging, as the competitive landscape has intensified.
As it relates to the upcoming phone cycle, expected to be launched in the fall of 2025, the Skyworks team developed a suite of high-performance RF solutions. Despite our rich product offering, we did not get the result that we targeted.
Although we were able to secure multiple sockets, including several highly-integrated RF modules, our content position is expected to be down 20% to 25%. This decline will start impacting our revenue in the fourth quarter of fiscal '25 and throughout fiscal '26.
While we are disappointed with this outcome, we remain steadfast in our commitment to invest and innovate around our technology roadmaps. We have already started the development of a new suite of solutions for the next-generation phone, with an expanding set of products and addressing more opportunities than ever before.
In addition, we will continue to pursue growth opportunities with our other mobile customers. Although, on a selective basis, focusing on those segments of the market that demand high-performance RF. And we will continue to drive our diversification strategy, supported by multiple secular growth trends in Broad Markets.
We expect those opportunities to partially offset the revenue decline, at a large customer, in fiscal '26 and position us for growth in fiscal '27.
Now let me hand it back to Liam for some final remarks.

Liam Griffin

To wrap it up, I would like to thank all of our Skyworks employees and stakeholders for their support during the last 25 years. It has truly been a privilege and the highlight of my career to lead this company.
I strongly believe the Skyworks team, with the support of our Board of Directors and under new leadership, will execute on the strategic path of profitable growth.
I will turn it over to Kris now, who will be taking Q&A this quarter.

Kris Sennesael

Operator, let's open the line for questions.

Question and Answer Session

Operator

(Operator Instructions)
Edward Snyder, Charter Equity Research.

Edward Snyder

Thanks very much.
First off, Liam, congratulations on retiring. I'm going to miss you. You did a phenomenal job. I always appreciate how frank and straightforward you've been on everything. And I think you did a bang-up job. So hate to see you go. Hope things are better when you run off on the sunset or whatever you're going to wind up doing.
As for Apple -- or your largest customer -- I know it sounds like the new competition is in one of your largest modules and I know you, guys, are making a big push towards that in the fall. And there's a whole another round of this coming up in the year out.
First off, I'd like to get a feel for if you think it's a target you can hit, given how rich that part is in BAW filters.
And secondarily, you, guys, have got to be one of the most favored suppliers [by] your largest customer. There's a lot of other parts on this version and what's going to be the next couple of versions that will change over the years. Maybe you could help characterize what the content opportunity is in other areas that don't necessarily involve a lot of BAW filters but, maybe, more in the Wi-Fi side of the sections, your ultra-high-band, that thing. So maybe give us an idea of what you think the landscape looks like in the next couple of years.

Kris Sennesael

This is Chris here. Thanks for your question and your remarks.
As you know, I can't really go into too much specifics, as it relates to our largest customer, and go into specifics on specific sockets or certain design wins.
But having said that, I think we have a long partnership relation with that customer. We developed really high-performance RF solutions. And unfortunately, we didn't really get what we targeted.
And part of that is most of the sockets that we targeted, we actually were able to keep. But instead of being single-sourced on one particular socket, it's being dual-sourced. And that's a little bit of a setback.
Having said that, we are already working on the next-generation phone that is expected to be launched in the fall of 2026. We actually have been working for many months on that.
And as we said in the prepared remarks, we are expanding our reach. We are developing more parts than ever before, targeting more opportunities than ever before, and we collaborate very strongly with our customers on that.
And we will continue to support our customers in their baseband transition. And that's what we need to do.

Edward Snyder

Okay.
If I could -- I'm sorry for the interruption -- so you are sharing a socket that you may not have shared last year. Is that what you're saying?

Kris Sennesael

That is correct.

Edward Snyder

Okay.
Actually then, you are competitive. I'm sorry, the way we're characterizing it, I thought you didn't qualify at all. So actually, you are competitive for that socket. Now, it's going to be horse-trading from here on out, right? You didn't lose the whole thing.

Kris Sennesael

That is absolutely correct. Again, we have been investing, for many years, in our technology and product roadmaps. We've been investing in our filter technology, both (TC) SAW and BAW.
And, as I said many times before, I do believe we are at the gold standard. Our BAW filters are as good as anybody else.
Now, we still need to develop a product and get to the best performance. And in many cases, we do get to the best performance. But, as you indicated as well, the competition has intensified.
It used to be -- there are only about five major RF players and we used to swim in our own swim lanes. But more recently -- including Skyworks, right? We're reaching out and we cross swim lanes.
And so the competition has intensified. But we are stepping up, we're developing more products. We keep expanding our technology and improving our technology.
And the customer is asking. The customer is demanding and asking for better and higher RF products, in part because, as you all know, they're bringing AI capabilities to the phone, which is increasing the technological burden inside the phone.
They are asking for smaller footprint, lower power consumption, lower latency, and higher throughput and, overall, higher performance.
And we're stepping up. We demonstrated that our technology and products can do it. Unfortunately, we didn't get a single source. We were dual-sourced on one important part.

Edward Snyder

Great. Thanks, Kris.

Operator

Christopher Rolland, Susquehanna.

Christopher Rolland

Hey. Thanks for the question. And congrats to Liam and Phil.
Just a little more clarity on the down 20% to 25%. It sounds like you're sharing a socket instead of it sole-sourced. I'm assuming that would be the rumors. So you've been hearing about diversity [received]. I don't know if that would fully account for the 20% to 25%.
And the other question is the lost sockets to Qualcomm, would you take those back?
And then, sorry, the last question here is this for all phones coming in the fall or is this just for the ones with the new modem?
Thank you.

Kris Sennesael

The content loss is really a result of the share loss. That accounts for all of it because we, actually, in certain sockets, have been able to win back slots that we lost, that we talked about nine months ago.
So we've been executing well there. We've been gaining content. But unfortunately, on an existing slot, we lost share as we moved from single-sourced to dual-sourced.
I assume that answer to your question.

Christopher Rolland

Yes. I did.
Except -- just the follow-ups to that -- any update on the Qualcomm socket and getting, that back that you lost?
And then, is this all the phones or just the phones with the new modem?

Kris Sennesael

Right.
Again, I can't really go into the specifics. But we've indicated that it's unlikely or impossible that we win back those sockets, as it relates to the Quaker modem. But we've done well, as it relates to the internal modem.
And maybe last point we, we indicated a range of 20% to 25%. The reason of that is because we are dual-sourced. And so the final results will still depend on the mix.
In the mix, of course, you have to think about new product versus legacy product. And also, the mix within the new product between different basebands, as well as within a certain baseband -- the mix between certain skews that are lined up.
And so a lot of it will depend on what the demand will materialize and how that all plays out.

Operator

Karl Ackerman, BNP Paribas.

Karl Ackerman

Thank you.
I was hoping you could clarify whether you're able to repurpose some of the RF designs that you spent so much time on within R&D for some of these new content wins within 5G Android and Samsung.
And then, secondarily, while the content in iOS devices, at least in the handsets, is not what you targeted, I was hoping you could discuss your dollar content opportunities you see across the consumer electronic markets such as watches, tablets, and PCs of the coming quarters.
Thank you.

Kris Sennesael

Right.
We developed technology for our Mobile business that, of course, can be deployed at a large customer and within Android, with Google, Samsung, and China. And some of that actually does spill over into our Broad Markets as well. So that's the technology building blocks.
As it relates to the product development for certain products for our large customers, obviously, they are proprietary for our large customers. And, there, again, most of the developments we did are resulting in revenue. Unfortunately, not in a single-sourced position but in a dual-sourced position.
And typically, of course, what we learn from the large customer -- the technology and the expertise that we learn -- we can leverage that and develop in the Android market. \
The Android market, as you probably know and we've talked about that before, we are going to remain selective. We focus on the high end of the market where they demand high-performance RF. And we believe that we are well-positioned to grow that part of the business, going forward.
As it relates -- your second part of the question, as you probably know, we have substantial revenue with a large customer. Roughly 85% of that revenue is related to the phone and approximately 15% of that is related to all their other products that they bring to market: the watch, the tablet, the PC, the home port, the vision products, and so on.
And in that part of the business, we continue to do well, in terms of design wins. And we do expect, this year and next year, that part of the business will continue to grow.

Christopher Rolland

Very helpful. Thank you.
Toshiya Hari, Goldman Sachs.

Toshiya Hari

Hi. Thank you so much for taking the question.
I just had one question for you, Kris. Given the content dynamics of the largest customer, I'm curious if you plan on making any permanent changes to the manufacturing footprint of the company. And how to think about gross margins, going forward, as part of that.
And then, similarly, for OpEx, I know you're guiding the OpEx to grow in the near term but any intent or any plans to adjust to the new backdrop if you will?
Thank you.

Kris Sennesael

That's a series of good questions there. I'll try to address them one by one.
First of all, as it relates to CapEx, we are currently operating the business with a lot less capital intensity. As you probably know, we have underutilization in our factories and so we didn't have any capacity expansion CapEx in our plans. And, obviously, now that we recently learned about the downselection for the upcoming phone, we do not have to add or subtract any of the CapEx. So the CapEx plan will remain on or about the same.
As it relates to manufacturing footprint, we do not plan to make changes there. But, of course, independent of what just recently happened, we will always continue to evaluate our overall manufacturing footprint and make the necessary adjustments if and where we can.
And as it relates to the gross margin, I've talked before about gross margin and there's basically three major drivers for gross margin improvement. First is revenue growth that translates into better factory utilization. Second, it's operational efficiencies and cost reductions in our internal factories, as well as throughout the supply chain and working with our suppliers. And then thirdly, it's a mixed tailwind as Broad Markets grows faster than Mobile and Broad Markets has above average gross margin.
Obviously, here, with the latest information, revenue growth is going to be challenged. And so we are going to remain with underutilization in our factories for a little bit longer than we initially anticipated.
And so that is not going to help in gross margins improvement. But, of course, we are going to continue and actually double down on trying to find operational efficiencies in our factories as we deal with this situation.
And thirdly, the gross margin tailwind from Broad Markets is actually going to blow stronger as Broad Markets is going to become a bigger part of the overall business.
And then, maybe, last, on operating expenses. We will, of course, continue to manage our operating expenses like we've always have done at Skyworks. We run a very tight ship here. But we have, already, as I indicated also, started, for many months, the development of new products -- a whole new suite of products -- in support of our large customer.
More products than ever before, right? Addressing more opportunities than ever before. And, obviously, we're going to continue with those developments that position as well to capture more content in the next-generation phone that's expected to be launched in 2026.
In addition to that, we've talked a little bit about that in the prepared remarks, our Broad Markets business is back to year-over-year growth. We expect that year-over-year growth to accelerate and improve over time. And we see plenty of growth opportunities based on secular growth engines. And, of course, we need to continue to invest into the growth of our Broad Markets as well.
Having said all of that, we understand that the setback on revenue will require a deep dive. And we will, as a management team, continue to look at every opportunity to limit the OpEx spending. Obviously, there will be an adjustment to the variable compensation, as we will not hit the targets that we set for ourselves.
And we will continue to look at any opportunity to further decrease our discretionary spending.

Operator

Peter Peng, J.P. Morgan.

Peter Peng

Hey. Thanks for taking my question.
Just bigger picture, I think for, like, two years in a row, you've lost some content, not because of your technology positioning but (inaudible)
How are you thinking about your relationship with that customer, longer term? And does this put you into a more diversification -- accelerate your diversification strategy even faster?

Kris Sennesael

No. We are not changing the strategy here. Again, we've been working with that customer for 18 years. We've built a very strong relationship -- that relationship remains intact.
Obviously, the last couple of years has been challenging, right? In part, because the competition has been intensifying; in part, because of the multi-year baseband or modem transition, which has created some turbulence amongst the RF players. But we continue to collaborate very strongly with that customer.
And, as I said before, we are developing more parts than ever before, addressing more opportunities than ever before. In part, because we've been asked by that customer to go do that. And so we definitely will continue that relationship.
And having said that, [depacification] and focusing on Broad Markets has always been part of the strategy. And that will, of course, remain the case. We like our Broad Markets business. It's a very diverse business, addressing multiple markets from consumer to enterprise to infrastructure, networking and cloud, and industrial and automotive markets. We have some key technologies and product offerings in those markets, with strong customer relationships.
And, of course, we will continue to invest in that market and drive growth. As I said before, we think our Broad Markets business should be growing double digits, more than 10% year over year. And that's the target. And we will continue to invest and support that business.

Peter Peng

Got it.
And then on the Android space, what was the revenue number for the quarter? I think last quarter was somewhere in that $75 million.
Do you think that we're at a stable level and we can grow from those levels?

Kris Sennesael

That is correct. It was in December quarter, flat sequentially. And as you know, the Android segment is Google, Samsung, and China.
There is seasonality in that business and sometimes it's offsetting seasonality. But there is definitely a seasonality in that business as well.
We continue to have a strong relationship with Google. We have already won substantial design wins for next year and the year after. And so I think we're well positioned there.
And then, as well, as it relates to Samsung and China, we will remain selective. But there is design win momentum that starts turning into revenue. And we do believe that we can grow our Android business, as a whole, this year and the year after and beyond.

Operator

Timothy Arcuri, UBS.

Good afternoon. This is [JaMar], calling for Tim. Thanks for taking our questions.
Kris, first, on your largest customer, I was hoping you could speak to competitive dynamics there? More specifically, do you see this dual-sourcing strategy potentially reverse in future phones?

Kris Sennesael

At large customer, you win because you have the best performance parts. That's the rule.
And so if there is only one supplier, obviously, that supplier will win the business. If there are two or more suppliers but one supplier has a substantially better part than anybody else, that supplier can get all the business. If there are two or three suppliers and they are tied in terms of performance, the customer could decide to dual-source that, especially on the larger, more expensive parts.
I think that's the reality and we have to acknowledge that and face that. And so it's up to us and the team to, again, continue to strengthen our technology roadmaps to develop high-performance parts and sockets that are better than our competitors.
We, again, have the teams in place. We have the R&D resources and the strength and the capabilities in place. But we need to focus on execution and get those best performance parts in front of our customers.
Again, in the one particular socket that is causing some pain here, we developed a really high-performance part that is as good as our competitors' part. But it wasn't necessarily much better. As a result of that, the customer decided to dual-source it.

Got it. Very helpful.
And then, maybe, just a housekeeping item. If you could just tell us what the percentage of your largest customer was this quarter?
Thank you.

Kris Sennesael

Yes. In the December quarter, the largest customer was 72% of total revenue, which was up 9% sequentially, as we supported that customer with the ramp of their current phone.
Also, again, I want to want to reiterate, right? That revenue with the large customer is not just on the phone, roughly 85% -- it fluctuates a little bit from quarter to quarter -- but roughly 85% of that revenue is related to the phone. The other 15% is related to all other products that that customer has out in the market.

Operator

Vivek Arya, Bank of America.

Liam Pharr

Hi. This is Liam Pharr, on behalf of the Vivek Arya. Thank you for taking the question.
I want to focus on China. With the competitor exiting that market, what is your longer-term strategy for China?
And if you could, how do you expect tariffs to come into play in terms of the inventory of the overall market?
Thank you.

Kris Sennesael

Right. So with China and Samsung, we are remaining selective. We have a longstanding relationship with those customers. But, many years ago, we've decided not to compete for their mid- or low-end of their products.
But we compete for sockets with them in the high-end of the market. That's what they need us -- or our competitors, right? That's what they need high-performance RF. And we see opportunities there.
As I said before, we are getting some design win momentum that is starting to ramp-up in revenue. And we will continue to do that on a selective basis.

Liam Pharr

Thank you.
And just to follow-up. Looking forward to June, how are you looking at seasonality? And how are you seeing it shape out through this first half?

Liam Griffin

Thank you.

Kris Sennesael

We only got one quarter at a time. But I don't see anything different, right now, than normal seasonality in our business.

Operator

Krish Sankar, TD Cowen.

Hey. This is [Eddie], for Krish. Thanks for taking my question.
It sounds like your competitor has improved the performance of their product, meaningfully, this year, which pushed your main customer to dual-sourced. But I wonder if you can quantify where the performance GAAP stands, today, between your product and that competitor's product and how that compares to last year?
And I wonder if you can share any metrics or technical specifications that we can follow, that would give us an idea how that GAAP is developing, going forward, between you guys and your [main-tier]?
Thank you.

Kris Sennesael

Right. Again, we can't really go into the specifics, at that detailed-level, as it relates to our large customer.
And performance is being measured on 5 or 10 different parameters. So this would become a very technical discussion.
But I want to go back to the beginning of your question. It's not that our competitor improved, a lot, their performance of their part. That competitor, in the past, has not competed for that product. And it was the first year that that competitor competed for that product. And so that's the dynamic there.

Got it. Thank you.

Operator

Nick Doyle, Needham.

Nick Doyle

Okay. Thanks for taking my questions.
Broad Markets should see improving growth next quarter and it sounds like that's driven by the large customer and Wi-Fi, where inventory is more aligned.
Do you have any indication of how long inventory headwinds will slow the Industrial and Infrastructure piece? When can it reach that double-digit growth, year over year, that you discussed?
Thanks.

Kris Sennesael

That's a very good question. But, unfortunately, visibility is not that great.
I'm listening to all my peers and competitors that have huge exposure to industrial and infrastructure markets there as well. And it seemed we all struggle, a little bit, with lack of visibility there.
And part of that is because there is persistent excess inventory at the customer level, where we don't really have good visibility. But, now, the inventory and the distribution channel is clean -- has been cleared out. But there is still inventory at the customer level.
Again, for Skyworks, that is not the biggest part of our Broad Markets, right? We're a much bigger player in our connected IoT devices, which is roughly 40% to 45% of the business. Our Automotive business, which is roughly 20% or so of our Broad Markets business.
And so we have less exposure on some of those markets, where there is still, unfortunately, some persistent inventory correction.

Nick Doyle

Thank you.
And can you expand on the socket or anything around the type of 5G premium Android content that you won? Maybe, how big is the combined opportunity, any timing?
Thank you.

Kris Sennesael

Sorry. The 5G -- can you repeat that?

Nick Doyle

The first point in your press release talked about a 5G premium Android content win?

Kris Sennesael

In Android, we continue to be selective. We have design wins, including with Samsung -- in the Galaxy -- and as well as many of their other products.
And that will continue, going forward.

Operator

Ladies and gentlemen, that consists today's question-and-answer session.
I'll now turn the call back over to Mr. Sennesael for any closing comments.

Kris Sennesael

Yes. I would like to thank everybody for your participation at today's call.
And I'm looking forward to talk to you, together with Raji and Phil, at the upcoming investor meetings.
Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call.
We thank you for your participation. You may now disconnect.