Good day, everyone. Welcome to the Qorvo Incorporated Q1 2021 Conference Call. Today’s call is being recorded. At this time, I’d like to turn the conference over to Mr. Douglas DeLieto, Vice President of Investor Relations. Please go ahead sir..

Thanks very much. Hello, everybody, and welcome to Qorvo’s fiscal 2021 first quarter earnings conference 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 and 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 complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today, available on our website at qorvo.com, under Investors.

Joining us today from multiple locations are; Bob Bruggeworth, President and CEO; Mark Murphy, Chief Financial Officer; James Klein, President of Qorvo’s Infrastructure and Defense Products Group; Eric Creviston, President of Qorvo’s Mobile Products Group; as well as other members of Qorvo’s management team. And with that, I’ll hand it over to Bob..

Thanks, Doug, and welcome everyone. Qorvo began our fiscal year with an exceptional first quarter. Quarterly revenue, gross margin and EPS were each well above guidance. IDP returned a robust year-over-year growth and represented a record percentage of total Qorvo revenue. Infrastructure was especially strong.

We increased our support for 5G specifically sub-six gigahertz 5G massive MIMO deployments. And we achieved record GaN product revenue, also contributing were multi-year defense programs and the continued ramp of Wi-Fi 6.

In the smartphone market, demand was more resilient than anticipated and 5G smartphones represented an increasing percentage of total units. Looking more closely at 5G, we’re in the early stages of a multi-year upgrade cycle supporting growth across both businesses.

In mobile products, we’re benefiting from the need for more and better RF fueled by higher front-end integration and increased complexity. This includes the move to higher frequencies, the addition of new band combinations and the adoption of dual transmit architectures to support 5G.

Content expansion and increased complexity supporting 5G architectures favor our design expertise and technology at scale. We’re securing broad based design wins for our most highly integrated low, mid-high and ultra high band solutions, in some cases supplying customers the entire main path.

We’re seeing increased demand for a broad based multiplexing solutions across a range of baseband, across a range of band combinations. Both smartphone units are forecasted to be down over 10% year-over-year. RF content expansion in 5G devices of approximately $5 to $7 is mitigating the impact of fewer units.

For the year, we continue to expect approximately 250 million 5G smartphones globally. In infrastructure, our opportunities in small signal devices like LNAs are growing in line with the increase in massive MIMO antenna elements while revenue related to GaN PAs is added content.

Our GaN leadership and infrastructure is built on decades of advanced technology development, commercial experience in other markets and proven ability to scale.

Globally, we expect 5G base station deployments to outpace the initial deployments of 4G with over three quarters of a million deployments this calendar year growing to more than a million in 2021. In the U.S. and Europe, we see deployments picking-up next year, adding to this multi-year investment cycle by the carriers.

This will drive strength in IDP given our technologies, design capabilities, and operational excellence. In the June quarter, infrastructure revenue was a record and we secured record design wins in support of ongoing 5G base station deployments. We also began sampling GaN amplifiers for upcoming C-band spectrum allocations in the United States.

It's been over a year now, since we added our programmable power management business and the team is doing a great job of driving growth across diversified markets.

During the June quarter, we ramped the programmable power management solution, along with a Wi-Fi 6 front-end module for the leading drone manufacturer, enabling longer flight times, greater range and larger payload.

We also ramped shipments of programmable power management and motor control solutions, improving the efficiency of solid state drives in places like data centers and enabling brushless motors used in a range of consumer products. In the future, we see opportunities for our power management technologies in defense, in other markets.

We delivered a strong quarter in GaN for the defense market, led by radar programs, and we signed several long-term agreements with the defense firms firming up our expectations for double-digit growth in defense this fiscal year.

We were also awarded design wins for an integrated GaN multi-chip broadband transmit receive module and a 50-watt GaN power amplifier for defense radar programs. These wins are notable as Qorvo supply more integrated solutions into the defense market.

In connectivity, we experienced continued strong demand for Wi-Fi 6 products, including front end modules and BAW filters. Driven by work from home trends, we commend shipments of our integrated ultra-low power multi-protocol Zigbee, BLE and Thread IoT solutions supporting one of the largest providers of smart home infrastructure solutions.

We requested an emergency use authorization from the FDA for COVID-19 antibody testing using Qorvo bio technologies platform. This innovative device features unique sensor technology, and it's designed to address the needs of medical clinicians for rapid and accurate results.

On the same technology platform, we also received initial production orders for our biosensor platform for high sensitivity vetinary point-of-care applications. Turning to mobile products, we supported multiple production ramps, and benefited broadly from integration trends at multiple customers.

Revenue was diversified across categories, including modules, integrating PAs, switches, BAW install filters, as well as antenna flexors, antenna tuners, and specialized RF power management. We were selected by leading Korea based smartphone manufacturer to supply a highly integrated high-band solution for this year's flagship smartphone.

We're also supplying an Innovative antenna flexor solution that addresses antenna network complexity and optimizes system efficiency for an upcoming foldable smartphone.

Across our customers, we are engaged on the most critical 5G challenges and enabling them to introduce innovative new designs, enhance performance and bring products to market faster.

At multiple Android smartphone manufacturers, we captured the complete main path, including low band, mid-high band and ultra-high band modules for upcoming 5G smartphone launches. We supported customers across all major chipset providers, and notably began production shipments in support of leading customers using Mediatek’s 5G baseband.

In ultra wideband, we commenced high volume shipments of our UWB solutions enabling superior accuracy and reliability in contact tracing and social distancing applications for numerous customers globally. As an example, we're working with Kinexon, whose SafeZone tag is being used by the NBA and the NFL in their training camps.

Qorvo’s UWB technology delivers a short burst of energy spread over a large bandwidth to precisely measure the distance between ultra wideband enabled devices. We’re interacting very closely with the mobile community and we’re actively engaged across other applications, including automotive and IoT.

In power management, we increased shipments of mobile power management solutions, driven by the adoption of 4G, 5G dual transmit and the associated complexity it introduces.

Across our markets, Qorvo is advancing a range of best-in-class technologies, supporting our customers with a broad set of high performance and highly integrated solutions, our R&D investments, and product and technology roadmaps are aligned closely with our customers and with long-term market drivers.

The same can be said for our recent acquisitions. The June quarter marked our first full quarter for Custom MMIC and Decawave and just over a year, since acquiring Active-Semi. The integration activities are progressing nicely, and the teams are performing extremely well.

Before handing the call over to Mark, I'll briefly address some of the active measures we continue to take in light of COVID-19. Qorvo is operating under enhanced safety protocols to keep our employees and operations safe while supporting our customers.

In addition to social distancing practices, temperature scanning and restrictions on travel and site visits, we conduct rigorous screening and quarantine processes for suspected or confirmed cases. Thanks to these and other efforts, we've experienced no material disruptions in our business or operations.

Our design teams are releasing best-in-class products. Our sales and application engineers are designing our solutions in our customers next generation products and our factories are operating well. I'm extremely proud of the Qorvo team and thank them for their ongoing efforts.

In summary, we're pleased with our financial and operating performance in the June quarter, and we’re confident in our outlook for September. And with that, I'll hand the call over to Mark..

Thanks, Bob, and good afternoon everyone. Qorvo’s revenue for the June or first quarter of fiscal 2021 was $787 million, $57 million above the midpoint of our guidance on stronger than expected demand in both our Mobile Products and Infrastructure and Defense Product segments.

Mobile Products revenue of $468 million exceeded our expectation as handset demand remained more resilient and global supply chain disruptions less impactful than we anticipated at the time of our guide.

In the September quarter, we expect mobile to increase sequentially driven by new handset launches and increased content due primarily to the adoption of 5G.

Infrastructure and Defense Products revenue increased to $319 million, over 40% of the company's revenue as the ongoing build out of 5G networks drove demand and we successfully ramp new GaN products.

During the quarter, IDP returned to robust year-over-year growth and we expect IDP to sustain healthy double-digit year-over-year growth through the year with strength in 5G, Wi-Fi and Defense.

Non-GAAP gross margin in the June quarter is 48.6%, which was 110 basis points over our guidance due to lower than expected manufacturing costs and favorable mix effects. Our efforts to improve the portfolio and drive productivity are yielding favorable results.

And we expect this progress to continue as we’re forecasting approximately 50% gross margin in the September quarter. Non-GAAP operating expenses in the June quarter were $179 million and lower than expected due in part to spend discipline on discretionary activities.

Non-GAAP net income in the June quarter was $175 million and diluted earnings per share of $1.50 was $0.37 above the mid-point of our May guidance. Cash flow from operations in the June quarter was $214 million and CapEx was $30 million yielding free cash flow of $184 million. We repurchased $75 million of shares during the quarter.

We continue to invest ahead of customer and market needs while sustaining responsible capital return. During the June quarter, we raised over $300 million through an add-on to our 2029 unsecured notes, augmenting liquidity and further extending the weighted average maturity of our outstanding debt to October of 2027.

Our leverage remains low and we have no near-term maturities. We ended the quarter with $1.1 billion of cash and an untapped $300 million unsecured revolver.

With this financial flexibility, we can focus on advancing technology supporting customers and making prudent organic and inorganic investments that support long-term earnings and free cash flow growth. As Bob mentioned, our recent acquisitions have been integrated quickly and are performing well.

On ultra-wideband, we see a wide array of applications emerging with this wireless technology, and have significant customer engagement on the design of new products and solutions. We expect this business and our MEMS technology acquisition to contribute meaningfully to Qorvo over time. Our other recent acquisitions are already accretive.

Custom MMIC, a bolt-on to our IDP segment exceeded plan in its first full quarter and further strengthens our defense and aerospace franchise.

Programmable power management is serving customers advanced power management needs, is delivering in line with our expectations and is on track to grow revenues strong double-digits this quarter versus the same period last year. Turning to our current quarter outlook, we expect revenue between $925 million and $955 million.

Non-GAAP gross margin of approximately 50% and non-GAAP diluted earnings per share of $1.90 at the midpoint of our guidance. As mentioned in the guidance section of our press release, our fiscal year 2021 is a 53-week fiscal year and our September quarter is a 14-week quarter versus a typical 13-week quarter.

Our last 14-week quarter occurred in September of 2015 or fiscal 2016, which was the last 53 week fiscal year reported. Our current quarter revenue outlook reflects the additional week, strong sequential growth in mobile and over 50% year-over-year growth in IDP. And mobile demand for 5G is adding more complex parts and driving higher content.

And we forecast revenue in the current quarter to be approximately $640 million. In IDP, we project the business to be approximately $300 million in the current quarter reflecting the timing of base station deployments.

We do forecast IDP to sustain strong year-over-year growth through the year, as infrastructure demand remains robust and defense Wi-Fi and power management strengthen.

While there is considerable economic uncertainty associated with the ongoing effects of the pandemic, currently, we expect end market demand to support full fiscal year revenue growth for Qorvo.

Our September quarter gross margin guide of approximately 50% reflects volume growth and ongoing efforts to improve the quality and efficiency of our business.

Specifically, we've invested early and adequately in the technologies that markets need, focused our product portfolio on where we can best serve customers, gained productivity across our operations and reduced our capital intensity recognizing that a potential impact to our demand and supply chain remains, given the uncertainty due to the pandemic, we believe our work to minimize inventories and reduce our cost structure will help us sustain approximately 50% gross margin through the balance of the year.

Non-GAAP operating expenses are projected to increase in the September quarter to approximately $207 million due to the additional week in the quarter, higher personnel costs including raises increased product development activities, and the resumption of some discretionary spend.

Excluding the additional week, OpEx will be closer to $196 million for the quarter and we expect OpEx to remain below that level for the balance of the year. Other expense will increase to over $20 million driven by the full-quarter effect of the net interest charge from debt added in June.

We expect our current quarter and full-year non-GAAP tax rate to be approximately 8%. We project capital expenditures to remain below $200 million in fiscal 2021 and focused on BAW, GaN and other areas which advanced is differentiated position for Qorvo to best serve customer needs.

As the June quarter results and our September quarter outlook show, Qorvo continues to operate well through a challenging period while serving customers in 5G infrastructure and smartphones, Wi-Fi, IoT, defense and other growth markets. In closing, I'd like to join Bob and thanking Qorvo employees for their efforts during this time.

Now I'll turn the call back over to the operator for questions..

Thank you. [Operator Instructions] We'll hear first today from Gary Mobley with Wells Fargo..

Hey everyone, thanks for taking my question. Wanted to ask about how that extra week in the September quarter may impact your seasonal expectations for the December quarter, mass works out correctly.

That might be roughly a $60 million impediment to what would normally be a seasonally up December quarter, so maybe if you can help us think about that December quarter?.

Gary, it’s Mark. You’re right, the effect is about is over $65 million, adjusted the quarter, September quarter would be around $873 million or so. And so even without the additional week, it's still a very strong quarter for us. We're up over 10% sequential for that adjusted number. And we're going to be just under 10% year-over-year..

Okay. As my follow-up, I wanted to ask about sort of the emergence of the mid-tier in 5G in particular in China.

And so maybe if you can just walk us through under a scenario where the sub-$600 portion of the smartphone market becomes the leading driver in the second half of the year for 5G, mobile handset sales in particular in China, how this plays out for Qorvo?.

Sure, this is Eric, I'll be happy to take that. We've said previously, and it's still true today that we were seeing this $5 to $7 worth of content for any 5G phone that's holding even as you go into the mid-tier, you're coming-off a smaller base of content, obviously but the 5G adder is still roughly the same.

So as a percentage it's actually quite a bit more of an increase and while you might expect that there could be less integrated, more discrete implementations to save costs, the fact is that most of the band combinations and requirements are the same.

And so the fully integrated solution just offers an awful lot of value with time to market given all the complexity, and so we're seeing just a lot of design activity across the tiers.

We brought out our Fusion 20 this year, absolutely industry leading best-in-class performance, highly integrated, full-band coverage, low-band, mid-high and ultra-high bands, integrated shielding, so the parts are already shielded, you put them down, you don't have any sort of issues with interference, integrated the LNAs now as well.

So when you look at that capability, just a few placements have a complete 5G phone, RF section regardless of the tier is a very, very compelling offering..

Great, appreciate it. Thanks guys..

We’ll hear next from Bill Peterson with JPMorgan..

Yes, hi. Congratulations on the results in the strong guide. My first question is a follow-up to the question on China. And it sounds like you have a lot of wins that are now across multiple devices for the four main path. But I guess in the past, you've had really good content in phones. And sometimes the phones don't sell as well.

So try and get a feel for the breadth of your design wins. Maybe in which cases you might just hasn’t been high in some cases or other parts.

Try to get a feel for the breadth of your design wins here for the phones launching in the back half of the year in China?.

Sure Bill, this is Eric again. It's actually quite broad, with our Fusion 20 portfolio, we're talking about this year, we're engaged with every single 5G baseband, our parts are universal, so they can be used with all the 5G basebands on the market today, we're engaged with every Android customer with this portfolio.

In some cases, we’re doing maybe just the ultra-high band section or the high-band or low band, but in many cases, we are looking at the full solution. The very same parts are seeing design traction broadly across all 5G Android customers..

Okay, thanks. Thanks for that color.

My second question is for James, James huge upside I was hoping you could help us understand where the upside came in June and where you see the upside here in September, I presume infrastructure but if you can rank, you said defense was strong and some of the other areas, help us rank where the upside was coming from and expected to come from here in the September quarter?.

Yes, thanks Bill. In the first quarter, we continue to have significant ramps in both 5G and in Wi-Fi 6.

We supported both of these markets with a really broad set of products, including GaN power amplifiers and driver modules, integrated front-end modules, BAW filters and numerous discrete products, and we supported a broad set of customers in both of those markets.

GaN power amplifiers are a great example of one of the ramps, we brought a broad set of products to the market to support 5G different frequencies, different power levels and supporting different customers. And our GaN revenue for the quarter doubled from what it was at the same time last year.

Wi-Fi 6 products were also doing very well in both the retail and set top box markets and we believe a large part of that is due from work from home. So we've seen strength particularly in the high-end retail space. Defense stayed a good foundation for the business.

And as we move into Q2, we'll see a similar type story, we will continue the ramp in Wi-Fi 6, defense will also pick-up quite a bit again based on some of those long-term supply agreements that Bob talked about in his earlier comments.

The base station business itself will also be very strong in Q2, we will start to see that come down a bit in Q3 as we finish calendar year 2020 deployments and then we expect that to ramp back up as we move into our fiscal Q4 to support the calendar year 2021 deployments..

We’ll move next to Harsh Kumar with Piper Sandler..

Yes, hey guys, another one for James, James you’re very popular today.

How come all of a sudden this massive explosion of growth? Did you just have like a series of design wins that that kicked-in all -- did you just have a series of design wins that kicked in all simultaneously? Or was it one or two customers that that predominantly drove the upside?.

Yes, it will. Thanks Harsh for the popularity. I appreciate it. As I've been saying for the better part of a year as I expected us to return to growth in about a year.

And I couldn't be more proud of the broad team here of designers and sales teams, and the manufacturing folks, it really allowed us to recover the business from what was obviously a significant downturn for us about a year-ago. So we've been projecting this, I think it's fairly broad based.

Massive MIMO or 5G rollouts have been a really positive for us and I talked about in the past that we see content games about 10X on a MIMO base station compared to conventional macro.

Now, that uplift is because of element count and because also we now can supply the GaN power amplifiers where in the past those would have been LDMOS, so we've picked up a tremendous amount of content in 5G and that's really helped drive the growth. But we're setting records in our Wi-Fi space as well.

With Wi-Fi 6 coming on board over the last couple of quarters, this was our third consecutive quarter of double-digit quarter-over-quarter growth in that part of the market.

Defense is a good foundation, and we don't talk about it relatively small business but our power management business is doing very, very well exceeding our expectations and growing in strong double-digits on top of everything else. So I think we've just got a great portfolio, some great technologies and the markets have aligned fairly well for us..

Okay, and then my follow-up question for Mark or Bob, margins of 50% truly, truly fantastic to see that and you're actually calling. I think if I heard it correctly, that neighborhood for the rest of the year, correct me if I'm wrong there.

But what again, the uptick of roughly 140 basis points, how much of that is mix and how much of that is just simply straight-up utilization?.

Yes, hi. So Harsh, I think first of all, we're really pleased to hit a milestone which you know has been bugging us for some time. Yes and I think if you go back couple of years, we had had a lackluster mobile handset volume period. And then we had Huawei and then we had the pandemic.

And so there were just a series of headwinds that kept us from that milestone. Took us a bit longer than we thought, but we were confident, we’re going to get there. We feel that we're doing the right things.

And we're going to continue doing these things, investing in the technology, managing our portfolio the right way to where we're most valued by customers, driving productivity very hard.

And I've got certainly compliment Paul Fego and his team for just a tremendous job doing all the things around cycle time improvement and the wafer expansions and we shut down a facility and seamlessly and dye shrink, so I can go on and on. But we're seeing those results and the numbers, so it's real.

And we're making real progress despite the headwinds we've had. So and then finally, we've reduced capital intensity. And you've seen that pretty dramatically for us. We're not constrained in growth. We've just been very selective about what we're doing and being smart about how we expand and get more out of the assets that we have.

On the walk from Q1 to Q2. It's partly we still have some period costs Harsh, we still have Farmers Branch period costs and we have some idle equipment. So the higher revenue helps us in the sense of those period costs are a smaller percentage of higher revenue. So that helps us a bit on the margin, most of the rest of it is lower manufacturing costs.

So my point earlier about Paul and his team, excellent spend control, this higher volume gives us better absorption and the mix is such that we have good absorption. And then finally, we had very good test shields as we look from this new forecast. Now, as we look out rest of the year, our inventories are in a really good spot.

Our inventory only ticked-up a little bit, sequentially for the first quarter, and our terms are sort of historical levels, so they don't look bad. I'm never going to say we're pleased with our inventories. But they've been managed and the channel is very healthy. So that's important. So that gives us confidence that we're running the operation lean.

We have a little bit of flexibility. But there's a healthy tension in our business between trying to keep costs down and trying to keep inventories low, trying to keep the fabs level loaded. I mean there's a healthy dynamic that occurs here that we think we've been playing okay.

So having said all that, if the market holds up and the mix is what we think it will be then or favorable, we believe we have a high degree of confidence in 50%, approximately 50%. If the market softens in the back half or somewhat worsened than anticipated on mix, then we would be on the South side of 50.

But we feel good, we're in that neighborhood and we intend to stay there and actually expand margins..

And from Morgan Stanley, we will move to Craig Hettenbach..

Yes, thanks.

On the wireless infrastructure front, can you touch maybe on just the competitive landscape, particularly you’re positioning within GaN, is that helping, is that market really starts to take-off, what you're seeing competitively?.

Well, I think -- this is James, the dynamic is fairly similar to what we talked about in the prior quarters. Our focus right now is just making sure that we've got best-in-class technology.

And we continue to innovate and drive technology, improved performance with our GaN and then really focused on scale and driving up our manufacturing capabilities, getting our yields up. And I think we proved that in this quarter.

And again, next quarter that we were able to go through a pretty aggressive ramp on these sub-5 gigahertz deployments, sub-6 gigahertz deployments. So that's been our focus, we will continue to focus that way. I think on the small signal side, we've got a great set of competitors there as well. And we're doing the same thing.

We're just continuing to focus on innovation, bringing more highly integrated modules to play, bringing BAW filters as an example into our mix in the infrastructure side. So I would say competition has been fairly stable and we're just focused on being able to bring innovative new products to the market and ramp them quickly..

Got it. Thanks. And then just a follow-up on the smartphone side.

As it relates to 5G, can you talk about just what you're seeing from an antenna tuning perspective, and how that plays into some of your expectations around content?.

Sure, we've got as you know a lot of presence there all around the antenna structures and with 5G not only because of the higher bandwidth, but also new bands, some coming in, and even higher frequencies and the implications of running in dual transmit mode where you're running on multiple bands at the same time.

When you put all that together, the antenna issues that our customers are struggling which is continue to get exponentially worse every year, especially with 5G. So we're seeing just a tremendous amount of interaction. We've got absolutely the best team in the world working on these solutions.

And it's not just the antenna tuning, but also just the routing around all of these advance antenna structure, so an awful lot of like multiplexing in and out what we're calling antenna flexors, there's just a lot of activity there. And of course, as you know, this is part of the industrial design. So it's not sort of part of the modem proper.

It's done after the fact is they're just getting the phones to market. So it's usually on a very tight time schedule and working with some very unique expertise, we've got a great team in the field and a great team in product design bringing absolutely state-of-the-art solutions to really a very serious problem that our customers have..

Move next to Edward Snyder with Charter Equity Research..

Thanks a lot. Couple of questions.

Eric congratulations on the antenna flexors, is this your first production launch of that and why should we expect margins on that part to be exceptional given it's probably just ball on a package and is this driven by the 5F bands being added especially dual transmit which kind of makes up everything in the antenna side of it.

And then James, GaN doubling year-over-year which is surprising, could you help clarify or remind us to. You do not have a license to ship GaN directly to Huawei, is that correct and you do have ZTE as a customer again and then if I could mark on the (inaudible) gross margin, you said is productivity efficiency in production.

But it would sound like given the modules you're shipping in the module into high-end smartphones now that includes just about everything and James's increased use of both GaN and BAW, would mix start becoming a bigger issue in the move to 50 plus percent gross margin or is it used on Boeing for a while? Thanks..

Hey thanks for your question. Eric, why don't you take part one? James, you can take part two and Mark, you'll take part three..

All right, sounds good. This is Eric here and yes, as you pointed out, antenna flexing is relatively new for us. It is a category that's it's really, as I just said in the previous answer becoming really critical for our customers.

It comes down to really the filter R&D, and we’re really hitting our stride now in terms of the team getting out the latest technologies and band coverage, we've got very cost effective and very high performance BAW filters across every single band, even going up into higher frequencies.

And so then, we developed the capability of multiplexing those into very high order.

multiplexers is driven by our main path modules, and then it's a short step from there into the antenna flexing business, essentially leveraging all of that work to get the multiplexing capability, that really comes down to absolute state-of-the-art in BAW filter process technology. That's what's enabling this.

And as I said, we've got a lot of experience around the antenna sections of our customers phones. So we're very well placed to help them there..

Thanks Eric, James?.

Hey, so we weren't surprised to see GaN double at all. We've been planning and ramping-up for quite some time. And again, I got to go back to really congratulating our team on the work that they've done.

But the direct answer to Huawei is no, we don't have a license and our deliveries to Huawei are pretty much not material at this point in time, and that's a IDP comment. We’re engaged with virtually all of the rest of the Tier-1s and Tier-2 in the space. I won't talk about what we do with any particular ones.

But we do see all of those customers moving towards massive MIMO solutions. All of them are engaged in GaN. And so we’re as confident as we ever have been that the technology will continue to proliferate. And that we will see big content pickups in the space.

And that that will not just be a China story, but that'll continue as 5G proliferates around the rest of the world. So this is we think a long-term trend for us over the next four or five years as the networks get deployed everywhere in the world..

To add-on gross margin. Yes, I hate the single one-out is more important than the others because it's, I mean, it really does take all this to expand the margins in our view and so we spend a lot of time on productivity and Ops and all the programs over the years and great efforts there, it’s a critical part of getting there.

We’ve also as you know have gone through a lot around right sizing our footprint and making sure that incremental CapEx dollars are directed at the right place and we're getting good return for those.

But to your point, specifically on mix, that's why it's related about the investments you make in technology and when you make them and how you make them and we feel like we've put ourselves in a good position to compete where we want to compete, and that's where customers will value us the most where we bring the most differentiated products.

And that's the portfolio management. So we do have, it's difficult quarter-to-quarter depends on the comparison quarter and as to how big an effect mix plays from quarter-to-quarter, but over the time here, over the long-term that we've been expanding our margins and we expect to continue to expand our margins. Mix is playing an important role..

Thank you..

We’ll go next from Chris Caso with Raymond James..

Thank you, I guess first question would be what we should be thinking about with regard to seasonality for the December quarter. And there's a few differences this year with the extra week that you have in the September quarter.

In addition, some of your peers have talked about seasonality, the timing differences because of a flagship, the different timing of flagship ramp this year. Qualcomm talked about it in their call this evening.

And is that a factor for you? We should be thinking about with regard to the December quarter?.

Now Chris, it's Mark. I'll take that and then maybe just provide a bit more color on the year. It's been a tough year for everyone. And there remains a lot of uncertainty. So I'll provide some general comments realizing that there's still a lot of risk and we can't be too specific.

I would certainly point everybody as always to the risk factors in our K which includes the pandemic and trade. But on the second quarter, we did put up a very strong guide, and we've been very clear that included that extra week for our 53-week fiscal year, because excluding that, it's still a very strong guide.

And as we said as Gary asked at the beginning, we're over $870 million for the second quarter. As we look at December, we expect December to be down on an absolute basis, of course. But on an adjusted basis, we would expect December to be roughly flat with the September quarter.

And it's a function of a few things, you've got IDP is going to be over $275 million through the back half each quarter, but it's timing of infrastructure projects.

And then in mobile, we'll see this normal seasonal ramp into September, and then you'll have a normal March seasonal downtick as we have a plan now and so where December falls in that is tough to call at this point. But we think it's probably going to be roughly flat to the September quarter adjusted. As I mentioned, we expect to grow full-year.

I think as folks are thinking about that, keep in mind, we've got one this extra week, I laid out the acquisition impact year-over-year on last quarter's call. So you have that, and then we've had this good start to the first half of fiscal 2021.

But I think given all the uncertainty in the outlook and broader macro, I think it's prudent to call below 5% year-over-year. I talked about just kind of filling things out. We've covered gross margin, now called approximately 50% in the September quarter and then approximately 50% through the back half.

And again, that's going to be, that's going to be above or below that based on the strength of the broader economy, our end-markets and the mix of the business..

That's very helpful. If I get return to gross margin a bit and just the avoidance of doubt, are you talking about 50% gross margin through the end of the calendar year, not the fiscal year, I assume..

That's good question, Chris. And I'm glad you asked it. I was talking about the fiscal year..

Fiscal year? Okay, well then that leads to another question which is the elements of strength which allow the gross margin to stay high in the March quarter despite seasonality and then does that provide a runway for continued gross margin improvement as you go into fiscal 2022?.

Listen, we're constantly working, Chris to expand gross margins and covered at length in a previous question. It depends on how well the markets hold up of course and our ability to absorb costs of our factories and spend there. We're doing a good job of keeping CapEx down. So our footprint, we're very sensitive to that. And then it matters.

Are we investing in the right technologies? We think we’re. We have the right capabilities to develop the most advanced products customers want and then do are we managing the portfolio in a way that we're winning business and the sockets we want to that are going to bring the most value to customers and hopefully with that, carry the margins..

We’ll move onto Ambrish Srivastava with BMO..

Okay, thank you very much, Bob, I had a question on the total 5G units for the year, I thought I heard you say 250 million that seems to be in the high side. And I haven't seen what Qualcomm said that.

So I was wondering if that is indeed the number you gave us, where are we year-to-date and so how much is remaining, and I'm assuming majority of that is bulk of that is China. And then follow-up for James, IDP is doing really well, good to see it return back to growth and you seem pretty confident for the remainder of the year.

It would be helpful if you could please give us a rough breakout of what the business looks like today in terms of other end markets, or product categories, however you choose to delineate within the business? Thank you..

James, I'll go and take the first part. In my prepared remarks, I did say that we expect 250 million smartphones globally this year consistent with what we said, when we reported our March results. We have seen many analysts that also cover the industry bringing their numbers up. We feel pretty good about it.

As far as the amount of subscribers to-date, it's tracking in line with our model to potentially even slightly ahead. So we still feel very good about our number of 250 million units this calendar year for 5G and obviously significant growth as we look into the next year.

James?.

Yes, typically I don't want to break it out in great detail. But certainly base station business remains to be about a quarter or so and growing at a pretty rapid pace as we go, defense is about a quarter. Our IoT business is about a quarter and then we have various other markets that we serve, represent the rest of the business.

Definitely we’re growing faster this year in the 5G space around wireless infrastructure, so that that will start to take a larger and larger part of the business as we go through the year..

And from Needham & Company, we'll move to Raji Gill..

Yes, thanks for taking my questions. Just going back to the great traction in GaN. I’m wondering if you could describe kind of the market towards GaN adoption in China as well as outside of China, the shift from away from LDMOS to GaN base stations.

What's been the traction there? Obviously, you're kind of well positioned with the major Chinese base station vendor.

What's your positioning or your view on GaN adoption outside of China and your ability to kind of leverage your technology in those markets?.

Yes, great, great question. Probably the best way to think about GaN adoption today is, one very, very broad based really across all of the customer base. All the OEMs are evaluating GaN or implementing GaN in some version or the other. What's driving big adoption today is really the 5G deployments that are using Massive MIMO antennas.

So antenna element counts are significantly up. And for the first time, I think last year, we saw Massive MIMO antenna actually become a larger amount of the transceivers than macro. And the vast majority of those are using GaN today. So I think that's what's been driving the adoption is 5G in the shift to Massive MIMO.

It is definitely broad based in what's going on in China. I would say most of the base stations that are getting deployed with this 5G rollout in China are using GaN, especially those that are in frequencies up around 2.6, or 3.5, which is a good share of what's getting deployed.

If you go to the rest of the world again, pretty much every OEM Tier-1, Tier-2s are in progress of designing GaN solutions into their portfolio. So I do think that this trend will continue. And how many base stations are of what configuration as we go out over the next four or five years, I don't think it's completely clear.

But we definitely do see GaN as a continued growth for the business. And we do see that MIMO antennas will also continue to adopt in an ever increasing rate. And I think that'll hold for the whole world..

Yes, thanks for that and just a follow-up on the GaN. So here my understanding is your expertise is kind of low-power sub-10 watt, wanted to get a sense in terms of your roadmap to high-power or high wattage and what the competitive landscape exists in those markets? Thank you..

Yes, today we've got products in the base station market that serve both the eight and 16 watt slap. So I would say, that's certainly where we've centered our focus today. And really because that's where we seen the biggest part of the market.

We also are working on additional technology developments that will really help us compete more heavily in really two aspects in base station one, much higher levels of integration, which we see coming and then also to be able to get into the high power spots in macro.

So we’re developing those technologies and certainly expect to play in those parts of the market as we continue to expand. Now from a power perspective, you can tell from our defense related comments over the last few quarters that we definitely have experienced in very, very high power.

We started in the defense business, we've developed very high voltage and very high products, high power products for years. So we understand how to deal with the thermals, how to deal with the high current loads, those sort of things. So definitely, we will move in that space.

We wanted to make sure we were focused on MIMO because we saw that as the biggest content gain in the market..

And at this time, I'd like to turn things back to management for any closing remarks..

Thank you for joining us on our call tonight. We will be presenting via webcast at upcoming Investor conferences and we invite everyone to listen in. Thanks again, and have a good night..

And that does conclude today’s conference. Again thank you all for joining us..