Stephen Ferranti - Senior Director, IR David J. Aldrich - Chairman and CEO Donald W. Palette - EVP and CFO Liam K. Griffin - President.

Harsh Kumar - Stephens Inc. Rick Schafer - Oppenheimer & Co. Inc. Vivek Arya - Bank of America Merrill Lynch Siddharth Sinha - Canaccord Genuity Anthony J. Stoss - Craig-Hallum Capital Cody Acree - Ascendiant Capital Craig Ellis - B. Riley Caris Edward Snyder - Charter Equity Research Vijay Rakesh - Sterne Agee & Leach Inc.

Steve Smigie - Raymond James Mike Burton - Brean Capital Suji De Silva - Topeka Capital Markets Alex Gauna - JMP Securities Ian Ing - MKM Partners Thomas Diffely - D.A. Davidson & Co. JoAnne Feeney - ABR Investment Strategy LLC Quinn Bolton - Needham & Company.

Good afternoon, and welcome to Skyworks Solutions First Quarter Fiscal Year 2015 Earnings Call. This call is being recorded. At this time, I will turn the call over to Stephen Ferranti, Senior Director of Investor Relations for Skyworks. Mr. Ferranti, please go ahead..

Thank you, Rochelle. Good afternoon everyone, and welcome to Skyworks' First Fiscal Quarter 2015 Conference Call. Joining me today are David Aldrich, Don Palette and Liam Griffin. Dave will begin today's call with a business overview followed by Don's financial review and outlook. We'll then open the lines for your questions.

Please note that our comments today will include statements relating to future results that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially and adversely from those projected, as a result of certain risks and uncertainties, including, but not limited to, those noted in our earnings release and those detailed from time-to-time in our SEC filings.

I'd also like to remind everyone that the results and guidance we will discuss today are from a non-GAAP income statement, consistent with the format we've used in the past. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP.

With that, I'll turn over the call to Dave for his comments on the quarter..

Thanks Steve and welcome everyone. Well we are off to a great start to fiscal 2015 with first quarter revenue, profitability, and earnings all exceeding our guidance driven by strong demand across our served markets and increasing adoption of our integrated systems solutions. We increased revenue by 59% year-over-year.

We grew EPS by nearly 90% and we posted record cash flow as we continued to efficiently convert our strong earnings growth into cash returns. These financial results reflect our success in capitalizing on a number of powerful industry dynamics while expanding our addressable opportunities and enhancing our value add in the marketplace.

In particular we are benefitting from the proliferation of many forms of wireless data as more and more applications leverage the power of connectivity.

Along with this we are seeing a dramatic increase in analog complexity driven by higher performance requirements and these market dynamics have created greater content opportunities, closer engagements with our customers, and higher value solutions across the board with a narrowing field of capable competitors.

Skyworks is uniquely positioned to capitalize in this environment by providing integrated RF and analog solutions which enable our customers to navigate increasingly more complex design challenges resulting in above market growth and superior financial returns for our shareholders.

This is playing out across our served markets today as evidenced by our first quarter results. Specifically during the quarter we delivered revenue of $806 million that's ahead of our guidance and up more than 59% year-over-year.

We produced operating income of $282 million, that's roughly double that over a year ago translating into a 35% operating margin. We posted $1.26 in earnings per share that is up 88% versus a year ago. We generated $383 million in cash flow from operations and we ended the quarter with over a billion dollars of cash on hand with no debt.

Looking ahead we see our momentum continuing and while March is normally a seasonal slower quarter in the mobile industry, our broadening market footprint, our new product ramps, and an expanding solutions portfolio enable us to mitigate these seasonal patterns, a clear testament to our diversification.

Our Q1 design wins highlights some of these diverse opportunities. In mobile or more notable -- our more notable wins include diversity received modules in Smartphone platforms at several OEM customers including Samsung. Now this is a new product category for us representing a compelling growth avenue for Skyworks. We also launched SkyLiTE.

These are highly integrated systems supporting MediaTek's latest SoC reference design across multiple Smartphone platforms. Switching and connectivity modules across Xiaomi’s leading Smartphone platforms as well.

And in the broad markets we’ve successfully captured a suite of 10 Skyworks products for Cisco’s latest home gateway solution supporting multiple cable operators.

Multiple analog devices in a leading telematics platform for GM vehicles, high reliability analog ICs and avionics systems for Talus, Zigbee connectivity modules for smart light bulbs with Philips LG and others, local area connectivity solutions for Echo and Fire TV streaming media devices at the leading -- and streaming media devices at the leading online retailer.

And we captured more than $10 of analog content supporting Technicolor's latest set top box platform for DirecTV. So in total 2015 is shaping up to be another great year for Skyworks.

With the design momentum we have in place today, we’re poised to continue our track record of above market revenue growth, expanding profit margins, and earnings leverage. Before providing a more detailed view of our market position I’ll turn the call over to Don for a more in-depth review of the financials. .

Thanks Dave and thanks for joining us everyone, we appreciate that. Revenue for the first quarter was $805.5 million ahead of our prior guidance of $770 million and up more than 59% versus the year ago quarter. Gross profit was $376.4 million, a 46.7% of revenue ahead of our guidance and up 220 basis points from the first quarter of fiscal 2014.

Operating expenses were $94.4 million consisting of R&D expense of $58.7 million and SG&A expense of $35.7 million. We generated $282 million of operating income, roughly twice that the year ago quarter yielding a 35% operating margin.

Our cash tax rate for the quarter was 13.5% resulting in net income of $244.8 million or $1.26 of diluted earnings per share as compared with diluted EPS of $0.67 in the year ago quarter, that's $0.08 ahead of our guidance surpassing $5 in annualized EPS.

Turning to our first quarter balance sheet and cash flow statement, we generated $383 million in cash flow from operations, invested $87 million in capital expenditures with depreciation of $36 million, and we exited the quarter with just over $1 billion in cash on hand and no debt.

Moving to our product mix, for the first quarter of fiscal 2015, power amplifiers represented 31% of revenue, integrated mobile systems was 48%, and broad markets was 21%. We saw healthy growth across all product categories with the strongest being integrated mobile systems which benefits from strong December quarter seasonal patterns.

As a reminder this product category includes SkyOne, SkyLiTE, and our power amplifier duplexers as well as analog products like power management, WiFi, and GPS.

It’s also worth noting that our broad markets product lines will serve the connected home, networking, media, automotive, and medical markets grew to 26% year-over-year significantly outpacing the broader semiconductor industry.

Now for our second quarter business outlook, we expect second quarter revenue to be $750 million representing 56% year-over-year top line growth and significantly better than normal seasonality. At this revenue level we suggest modeling gross margin in the range of 46% to 46.5% with operating expenses of approximately $95.5 million.

Online we anticipate 100,000 in expenses of interest income and other expenses and a cash tax rate around 13.5%. We project our tax rate to remain at these levels for the remainder of our 2015 fiscal year. We expect the share count to be around 194.5 million shares resulting in second quarter EPS of $1.12.

Many of the drivers that support a strong 2015 are already in place, giving us a high level of confidence in our road trajectory. We continue to see opportunities for sustainable margin expansion as we leverage our ongoing capital investments and benefits from growing demand for our custom integrated solutions and precision analog products.

We recommend modeling 52% incremental gross margin providing a path to continued margin improvement. Longer term we are targeting a growth of 50% gross margin for the company and we have a number of initiatives in place to accelerate our progress towards achieving this goal.

All of this gives us a high confidence level on our abilities to extend our track record of investment class financial results putting us on a path towards our goal of $7 in annualized EPS over the long term. With that I will turn the call back over to Dave for his comments on our market trends and growth strategy. .

Thank you Don. Well it is clear that our business is performing at a high level as we execute on our strategy and maintain a clear focus on operational excellence.

For the remainder of the call I would like to provide some additional perspective on the positive trends in our end markets and how we are positioned and how we position the company to capitalize. By all measures wireless connectivity is exploding as an enabling technology.

In fact this year's CES was a showcase of groundbreaking new devices leveraging the power of wireless connectivity to enhance our daily lives.

Much of the excitement in CES was around innovations in the connected car, the automated home, wearable technologies and previously unimagined new categories like drones all utilizing enabling technologies like 4G, like TPS, local area networking, and near field protocols like ZigBee and Bluetooth.

Our overarching mission is to make it effortless for customers to embrace these forms of connectivity leveraging our decades of experience in mobile to enable more and more devices in adjacent markets to become seamlessly connected.

Powering these will be a combination of sensors, micro controllers, and most importantly for Skyworks connectivity and power management solutions with a high proportion of analog content and comparatively low digital processing needs.

These products require high levels of integration and will need customized solutions produced in massive scale and attractive cost points. All of these attributes play directly into Skyworks core strengths. In this way Skyworks is a conduit into the Internet of Things.

This is an exciting opportunity but just one of many tailwinds we are capitalizing on today. More broadly as we enter the calendar 2015 we see four major trends driving our growth. First, leverage of our leadership and high performance integrated systems.

In high-end connected devices performance is paramount for our customers to enable seamless any time access to on demand content, social media, streaming services, and cloud data.

At the same time technical challenges like band proliferation, like the adoption of advanced uplink architectures, and the implementation of 802.11AC and precision location services are resulting in an explosion in analog complexity. And the net result for Skyworks is an expanding addressable market significantly outpacing unit growth.

Second, enabling connectivity in emerging markets. We see tremendous opportunities for 4G devices in markets like China, India, Latin America, Eastern Europe where broadband penetration rates are low and population densities are high.

Strategy analytics estimates that Smartphone shipments into India alone will grow at 40% compounded rate through the year 2020. This new generation of devices is replacing a global installed base of billions of 2G voice only phones where we have minimal addressable content.

Over the next few years we see significantly increased content opportunities in these markets driven by more stringent performance requirements and much higher complexity. Third, cultivating the Internet of Things. Market analysts estimate that the number of connected devices is poised to explode over the next five years.

Analysts project that the machine-to-machine connections alone will increase fourfold through 2020 accounting for nearly 800 million connections, adding to our other opportunities in the connected home in wearable and other markets.

These applications all rely heavily on efficient connectivity solutions providing incremental new growth opportunities to Skyworks and enhancing our diversification while dramatically expanding our served addressable markets. And finally aggressively expanding into new vertical markets.

We are investing heavily to increase our market footprint in traditional analog segments like automotive, like medical, and industrial. These are highly attractive markets for us characterized by longer product life cycles, fewer competitors, and higher margins.

These new growth verticals outside of mobile remain a strategic priority for us and we are investing significant resources in building out our presence in these markets.

These elements of our strategy have enabled us to consistently expand our served markets and to significantly outpace the growth of the semiconductor industry while offsetting the seasonal trends to mobile markets. So in closing we are quite optimistic about our prospects for the remainder of 2015 and beyond.

We’ve created a unique business model combining strong consistent top line growth with the financial returns by best in class diversified analog company. And we’ve established a solid track record of delivering on that vision to produce superior financial returns. This concludes our prepared remarks. Operator lets open the lines please. .

[Operator Instructions]. First question comes from the line of Harsh Kumar of Stephens. Please go ahead. .

Hey guys, first of all congratulations, stellar quarter, stellar guide, and special congratulations on hitting that 35% mark. That’s like the go standard in the semi business. .

Thank you..

Thanks..

I just wanted to say, your numbers in March, your guidance in March is better than seasonal I guess if there was any overarching reason why that is so if you would just give us some color around that?.

Yes, thank you very much. Some of these assumptions in our Q2 guidance that allow us to offset seasonality at first, our broad markets products and the aggregate of all of our vertical markets are much less than seasonal. So that’s helping.

We’re seeing new opportunities that were ramping and specifically in the connected home, significant wearable products in fact. We also have some customers that are starting to ramp with new mobile platforms for 2015 and they are doing so in the March quarter.

So we are seeing content gains, we are seeing more high value added analog systems both in the mobile and in non mobile, and that’s helping Q2. .

Great and then as a follow-up, if you look beyond March I think one of your customers had a pretty substantial ramp.

As you look beyond March, just I am not asking you to give color but just maybe some I am not asking to give numbers but just some color, what would be the puts and takes on growth let’s say in the June and the September quarter and the rest of the year?.

Well, that’s a good question. Obviously we don’t provide guidance for the year but if you look at our Q1 results and add our Q2 guidance, we are well over 50% top line growth through the first half.

If one would take just normal seasonal patterns for the rest of the year and our track record of growing faster in the market we are looking at a very attractive we think another high growth 2015. And plus we got strong visibility today because we are actually ramping programs now.

So I think the positive dynamics that are going to continue to fuel this above market performance for us, we are continuing to see big content gains in mobile and connectivity particularly 4G and 11ac by the way.

We continue to see a small number of competitors and consolidation of share favoring those companies led by Skyworks that can do a complete overall solution. And our broad markets and vertical segments continue to outperform. I think all of these will play out not only Q1 and Q2 but over the long haul. .

Okay, thank you. Next question is from the line of Rick Schafer of Oppenheimer. Please go ahead. .

Great, thanks and I’ll add my congratulations guys, nice job on the quarter. I had a quick follow up question just kind of talking about the or looking at what you guys sort of expect to see or what’s your expectations are for content increases this year with your two top wireless customers as well as China and emerging markets.

I mean is it too early to have a sense of what kind of content increase you could see at particularly your two largest OEMs?.

Okay, well thanks Rick. So obviously we can’t comment specifically on customers. However, in general these analog architectures are getting much more complex and that’s across our entire customer base in mobile and non mobile by the way. But in terms of our largest customers this provides a tailwind for us.

We have consistently more addressable content with each successive design. And in fact we continue to look out two to three years as we become more of a system producer or engaging very early in architectural selection. So we have very good visibility in terms of how the architectures are going.

And so I guess I would say our clearly stated goal has been for a long time is to gain content with each model and as an incumbent we have been very successful in maintaining and in fact growing our footprint and that's aided of course by complexity that all of our customers need help in solving particularly on the analog side and that's our strength.

Maybe Liam could comment on China. .

Sure Rick, this is Liam on China. So if you look at the China dynamic we are very excited about the LTE opportunities. This year we were seeing an LTE number in China that was probably about 92 million or so. We think that number could go up 2X maybe 3X over the next 12 months. Here we have an opportunity to bring in our multimode systems solutions.

Invariably there is WiFi, there is GPS, there is power management, very content rich opportunities. And then adjacent to that you mentioned emerging markets, so yet another set of developing markets that are looking for their first wave of connectivity.

We support that and often times that could be $2 to $3 of incremental content in markets where there really was no subscriber. So we are excited about both of those opportunities and it is early for that cycle to evolve. .

Great, and then just kind of switching gears onto auto, I know Dave mentioned auto in his prepared remarks, can you give us an idea I guess maybe what you are targeting and what you have kind of -- how you look at growth in that business whether it is this year or the next couple of years however you are comfortable talking about it in terms of are you going to outgrow the auto unit market by 2X to 3X or just some kind of target on what kind of growth rates we could see there and actually what's primarily driving growth there for you guys?.

Sure, sure. As we have outlined with CES and as you have seen with some of the new models that have been released, the connectivity, infotainment all are big part of the auto story.

So what we have been doing so far is really leveraging our strength in SOI switching and GPS technology and in WiFi technology, and leveraging some of the great products that we have built through our mobile portfolio. And we are growing that business quite well. We have initiatives to further increase content.

We are looking at unique solutions, even some cellular based solutions are entering into automotive. So we look at that as a key part of the IOT portfolio. We have design wins with companies that we named here in the call and we think that is going to continue to proliferate and we are excited about it.

We have dedicated teams working that market as well and we will report more to you as the quarters transpire. .

Thank you and the next question comes from the line of Vivek Arya of Bank of America Merrill Lynch. Please go ahead. .

Thank you for taking my question. Dave, when you look at the high end of the market and mobile phones I think there is a perception that perhaps overall content might have saturated because these phones already have so many LTE bands and it is just not possible to grow any more bands.

What are you seeing on the ground, what do you think can help to drive content up even in the high end phones so even if that's a unit decelerator or flattish you can still see growth even in the high end of the market?.

Yes, thank you Vivek. It is a little bit of complicated question. I would say from a band standpoint into the foreseeable future and I am talking a few years out, we don’t see any trend that is narrowing the number of bands.

In fact we see the opposite and if you pay attention to some of the auctions that are occurring right now for spectrum, I mean, they are moving higher and higher in frequency on narrow band. So I think that is going to drive a lot of complexity.

And the higher in frequency you go by the way, the more differentiated the kinds of technologies we can produce. So, that is a very good trend for us, that implies complex switching, complex amplification, filtering and so on. On the receive side by the way, now it is becoming equally important to have it more and more streaming.

So we are starting to see downlink architectures get very, very complicated. That is adding a lot of content in the next five years we think because it isn’t just that you are transmitting all the time, you are actually streaming.

So the performance of the battery, the bandwidth and so on is very, very important, how the antenna plays in that environment. And remember Vivek Skyworks is unique because as for example, as connectivity moves to AC and multiple modes of these battery compatibility and WiFi that is the real strength of ours. We are the leader in that space.

Power management and the voltage of these devices you see is important so we have suite of power management devices. We are in the camera flash particularly in dual and high performance and so on.

So our systems capability is serving us very well but I think it would be a mistake to interpret the current suite of phones as being some kind of the high point in band proliferation. I don’t think there is anything that can stop that for the next several years. .

Got it, very useful.

And then as my follow up more on the operational and the supply chain side, you are growing at this 50% rate probably seven to eight times in the broader semiconductor industry and I am wondering do you see any supply constraints on that growth, how are your frontend and backend facilities holding up and supporting this kind of growth? Thank you..

Well if you look at our CAPEX for the last couple of years you could see that we’ve had to grow our capacity. We’ve done that significantly. We’ve maintained our flexible model where we have outsourced partners for all of our critical processes and -- assembly and test and so on.

We’ve made provisions for that, we have the capacity, our on-time delivery remains very high. I think we are all set but we have had to make a significant investment over the last several quarters. .

Yes, Vivek look we spend over 200 million last year and we had 87 million Q1, so it's as Dave said it's spending the CAPEX to maintain that right ratio and those products that we do both internally and externally.

And then remember we outsource a significant percentage of our products, the SOI products for power management were fabulous so it’s a nice balance and we feel very comfortable about our ability to get products. .

Yes Vivek I’ll make one final comment, the other piece in last couple of quarters you have seen a significant investment in filter capacity. Our high performance temp comp duplexers were on track now to ship a billion in 2015, a billion. And we are in good shape to do that as well. So we know how to do this but it’s a lot of capacity I will admit. .

Thank you and next question from the line of Sid Sinha of Canaccord Genuity. Please go ahead. .

Great, thanks for taking my questions and congratulations on the strong results. Dave one of your leading Korean customers is trying to introduce a number of SKUs or handset models it produces by roughly a third and focus perhaps more on super regional phones.

I interpret this as more out of dollar content for Skyworks as these ones should not support more regional bands and frequencies, is that a fair assessment?.

Yes, I’ll let Liam address that. .

Sure, I understand what you’re alluding to there and so what we are seeing with one of our larger customers is a move towards fewer SKUs but the SKUs that are being provided are much more complex and will handle more of a broader geography. That’s actually a great trend for us.

I mean that’s what we do best, we integrate solutions, we are able to provide the breadth of not only the amplification but the filtering, the power management, switching, and WiFi.

So we see an opportunity uniquely with this customer now to gain significant content platform over platform and enable what we think to be a step up in functionality and performance on their end. So we are excited about it. You were on to that by your question and we are seeing that coming to fruition this year. .

Great, thanks and just a follow up to that question, the very same OEM is of course facing competitive market dynamics from the Chinese Smartphone OEM base.

I guess simple way to ask is if the Chinese Smartphone makers gain share from some of your existing non Chinese android customers would that in totality be a net positive or negative or a neutral for Skyworks?.

Well actually I think it’s a net positive. We are starting to see a tremendous growth here in China. We talked about that in the prior question. You are seeing names like Xiaomi and Oppo and TCL and Lenovo that are executing very, very well in China which is a huge market.

But they are also delivering some compelling solutions into another set of emerging markets outside of China. So we are benefitting from that and we think that the unit volume opportunity there coupled with content gains is a real compelling driver for us and that will be around here for many, many years. .

Thank you. Next question from the line of Anthony Stoss of Craig-Hallum. Please go ahead. .

Hi guys, my congrats as well to all Skyworks employees..

Thank you..

Two parts if you guys could talk a little bit more on what you are seeing on the infrastructure side, what you saw in December and what you might think infrastructure related business up down or flat in the March quarter? And then we have a bigger picture Dave, now let it seems like the handful of the RF players in this space are all playing within their sub segments.

Are you seeing less pricing pressure overall now than you did say a couple of years ago since everybody seems to be doing well and focused on their niches, thanks?.

I’ll answer that and then Liam can talk about infrastructure. I will say that we continue to see dramatic changes in the competitive dynamics in the market for a couple of reasons one is that the simple reality is that our customers don’t want, in fact in many cases don’t know what to do with these key component.

So even the best in breed companies with whom we used to compete are unable to compete many of them in these advanced system architecture. And so that’s allowing us to capture content simply because we have a solution of direct [ph] product and we have scale in the solution dynamic.

We understand it, we approach it as a system not as a bag of chips if you will that’s helping us. So we see consolidation of share with or without consolidation of companies.

Where we have seen consolidation that you alluded to, it is actually I think healthy long-term for the market because we are really encouraged to see a reduction in underutilized manufacturing assets where we are seeing some of these RF companies come together.

That seems to be the trend which is to shut our underutilized assets in the form of foundries and so on, consolidate design centers. So we are finding it, making it easier for us to hire the absolute best inbred engineers and we are certainly seeing less, more rational environment from a pricing standpoint I would put it that way. .

Sure and with respect to infrastructure we are seeing that market slowly improve, commencing with the increases in LTE developments and increasing data rates and demand for screening and services.

Some of the beneficiaries that we see, that we also supply to companies like Nokia, Siemens, Huawei, Ericsson, DTV all now are starting to show brighter signs of demand going into 2015 and even into 2016, a long-term forecast. So that market as we have outlined in the past is a margin rich portfolio for Skyworks.

It is a big part of our story and broad market and we are looking forward to rolling out some new design wins here this year. .

Thank you. Next question from the line of Tim Long of BMO Capital Markets. Please go ahead. Tim Long your line is open. .

Let's will move on, right. .

Okay, thank you. Next question is from the line of Cody Acree of Ascendiant Capital. Please go ahead. .

Thanks for taking my questions and congratulations guys.

Maybe if we can look at a split of revenue to the best you can, the details that you can give us on handset versus non-handset, obviously the March quarter is much better than seasonal and to the extent maybe you can give us a mix split that is helping to drive that?.

Well, I think clearly December marked a high point in terms of the amount of mobile revenue you see because obviously that is where you see the big programs ramping. Our March guidance is to be much less than seasonal so we expect a strong March quarter and that will be driven by a lot of broad market activity.

There will be some mobile phones launching but in general the outperformance there is broad market based. You will see a reduction in mobile volume and an increase in broad market vertical markets.

Within mobile, where we are seeing by far the greatest strength is in these integrated system solutions, the power amplified duplexers, SkyOne, WiFi based products, power management and the like so I hope that answers your question. .

Well Dave and I guess as you look into Q relative to the first half are you seeing the non-handset markets grow as quickly as you are seeing opportunities of the handsets in units or are you just seeing numerous new applications coming in and driving that.

I would also like to get maybe your view on the inventory health as we have kind of wrapped up the year both China and non-China handsets?.

Well Cody I think if you looked at our last quarter, our year-over-year growth in broad markets was about 26% and so we have been growing that business 25% to 30% which is far greater than anybody's estimation of what broad market semiconductor content is growing.

We are doing it with connectivity, we are doing it in the home, we are doing it in the automobile. And I expect that to continue. Now, over time we see our mix shifting less discreet power amplifier like products, more integrated mobile systems within our mobile products in more and more vertical market, broad market.

But we are performing pretty darn well in our mobile business so we don’t see dramatic shifts in that overall split. .

Okay, thank you. Next question is from the line of Craig Ellis of B. Riley. Please go ahead. .

Thank you for taking the questions and congratulation on the very strong execution. Dave I wanted to follow up on the helpful color you have provided around calendar 2015 growth drivers. When talking about Internet of Things and machine-to-machine you mentioned a number of technologies.

Clearly Skyworks is very, very strong in connectivity but there are other areas like MCU and sensing where you can go down different paths either developing or acquiring that technology or partnering up, what makes the most sense for Skyworks longer term?.

Well, that is great question, a complex one again.

If you look at some applications, -- the hottest selling thermostats for example like Next [ph] you will see a module that has a combination of controllers and codes that has been provided by a partner where we have added connectivity, switching, filtering to create a module that is really easy for the system to use.

We like that model, it leverages our strength. We are doing more than yes, its connectivity but it’s also the switching, the antenna, tuning the filtering and all of the logic that drives that -- the adoption of these connected devices in markets you describe. The long-term strategy is not to be a microcontroller company.

We think that the relative level of processing horse power required is nominal and so we think that we can partner, acquire, and license frankly MCU technology.

We are looking in investing in various forms of sensors [ph] so we could -- you could picture that we have connectivity analog system wrapped into an MCM that we produce perhaps in our Mexicali factory with all the requisite componentary.

We license in MCU and the piece of the puzzle that we are working very hard on right now is how to do the sensing and control and we are on track to use a couple of different approaches but they’ll likely be with partners. .

That’s helpful and then I just wanted to clarify a related comment that you had, you indicated that broad market strength is helping to offset seasonality, was that pointedly at the current quarters outlook or is that longer term should we expect to see a year from now relative to historic patterns, a little less seasonality from the December quarter into the March quarter?.

Yes, I think it’s both. It is clearly the case that the shift from mobile to broad market in Q2 was helping moderate some seasonality. If your company was focused purely on mobile, purely on high-end mobile you’d see far more seasonality that we are able to see.

And if you go back and look last year, the year before that, and I would expect you to think this way in years to come we will be far less seasonal as a result of the diversification of our business model both within mobile but outside mobile..

Okay, thank you. Next question from the line of Edward Snyder of Charter Equity. Please go ahead. .

Just needed a clarification have you or are you adding premium filter capacity right now and will you offer discreet filters in the open market or are you planning on just consuming all that you built for your own use?.

We are -- in fact we are significantly more than doubling our filter capacity. I think we’ll probably ship our plan is if not a billion very close to a billion in 2015 and these are all high performance TC duplexers, high frequency narrow band.

We’re expanding into new bands that previously weren’t addressable by SAW, by temperature compensating was some really slick processes. We are doing it across multiple customers and multiple applications both on the transmit and the receive side. And no I don’t think for the time being we will offer merchant discreet filters. .

Okay, thank you. Next question from the line of Vijay Rakesh of Sterne Agee. Please go ahead. .

Hi guys, congratulations on a strong quarter here and a good guide.

Looking at your content as you go into 2015 you talked about filters here going to 1 billion, is that also doubling year-on-year into 2015 and how have you been able to improve the opportunity or improve the performance on SAW, TC-SAW versus let’s say -- as you go into the high frequency modes? Thanks..

Sure, well yes, I mean I think when you do a comparison year-over-year of course we didn’t have that joint venture in house the prior year. But it is true that we are ramping our production substantially. We have customers lined up that consume that capacity as Dave mentioned.

We are going to continue to add capital and that’s going to be a great driver for us.

And I think we have an opportunity now to leverage a proprietary temp comp process that will move us up from some of the traditional frequency bands that would be to remain to SAW or TC-SAW and move into areas that allow us to address an even greater set of end devices.

And when we talk about less devices going discreetly or today really no device discreetly, what we are saying is these billion filters are enabling systems level solutions, PAD like solutions, SkyOne like solutions that have very rich ASPs and a tremendous amount of systems level knowledge and know how that comes in through our team at Skyworks.

So it’s not just a filter but it’s our ability to leverage our gallium arsenate technology or switching technology, the Mexicali configurability of custom assembly and test house. Bringing all of that together is really special and we are starting to see the benefits of that today..

Got it and just moving on to the capital allocation side, obviously very strong cash flow and you have a big vault just of cash now.

What do you see in terms of dividends or share repurchase or M&A, thanks?.

Yes, thanks Vijay. Our allocation strategy I think we have been pretty clear that and we are going to continue to focus on trying to distribute about 40% of the free cash flow to shareholders. We returned over 35% in 2014.

We initiated a dividend in 2014, we have actually increased that in two quarters in 2014, and we have repurchased a significant amount of shares. We are going to continue evoke those.

And as far as the dividend, the model looks really good, earnings look good, we added a minimum, we are going to look adjustments to that on an annual basis that's at a minimum. So we like that having a strong cash balance gives us a competitive advantage. We like being in that position. .

Okay, and then next question is from the line of Steve Smigie of Raymond James. Please go ahead. .

Great, thanks a lot.

I was hoping you guys could talk a little bit about market share in terms of units of handsets that you are on and some dynamics around that such as LTE increases as a percentage of the mix, does that suggest you might gain shares, you are typically providing some higher performance solutions or is it as you say maybe a proliferation of more customers like more Chinese handset guys, is it difficult to have the resources to keep up with all the new players there, so assuming you could talk about your market share potential from a unit basis, thanks?.

I think it is a little hard to answer because if you look at our product portfolio within Smartphones, there aren’t very many Smartphone, there are no Smartphone manufacturers where we don’t have a position. And in fact there aren’t very many Smartphone platforms in the world today where we don’t have something. The real -- so they are so complex.

It isn’t like you have 30% PA share or whatever, that's not case. We are participating with virtually everybody and on every base band platform.

So some cases like MediaTek where we will go to a broad market, we are on that platform and we gain lot of content and pull through by working together with for example the indigenous subset of China customers. So for us it is more about more content. Now the tailwind is that there is more content period to given complexity.

There is more WiFi, more modes of WiFi, there is more bands, there is more filtering, there is more downlink architectures, there is more need for power and voltage management. So that trend is going to happen anyways.

And what's helping us in addition to that tailwind is that we see consolidation of share benefitting us because our customers simply aren’t going to the traditional discreet customer base any longer.

They are looking for a system solution that maybe a complicated set of integrated circuits integrated in a multitude module with filtering and passive and that is what we think we do better than anybody in the world. So it is those two things, it is share capture by virtue of our system solution, our strong customer relationships.

And it is the tailwind of content continuing to increase. .

Okay, thanks. And just a question on fully integrated solutions, could you talk about what 2015 SkyOne solution might incorporate.

I realize you had multiple wins but they are not all the same but is it, you are putting three power amplifiers, two filters switch or something in there, just give a sense of at least when you have had in terms of just to get some sense of the complexity of what you are building for 2015?.

Sure Steve, absolutely. Well in SkyOne it has really become the mainstream part of our portfolio and as you have outlined and what we have learned is that one size does not fit all and our ability to customize and configure account by account has been critical to our success.

So we have SkyOne solutions that could be six or seven bands with multiple filters, with power management, some switching of course all integrated with a very, very rich ASP.

We could find some customers that want very specific regional SKUs where you might have three or four filters and three or four frequency bands of amplification with maybe some receive side technology and some power. It is really a unique development for each account.

What makes it special for us again is our ability to do that systems work, knowledge of multiple base band partners. Now this is a base band agnostic set of solutions. And now with our filtering technology in house we can be much more agile on how we pick and place and manage and select the right frequencies, the right technologies for that customer. .

Okay, thank you. Next question is from the line of Mike Burton of Brean Capital. Please go ahead. .

Hey guys and congrats on the great results and guidance.

Don, first for you, just wondered if you could help us understand how we should be looking at OPEX going forward this fiscal year especially as you have to support the broad markets ramp of many products across a bunch of diverse customer set?.

Sure Mike. We just spent 94.5 for our Q1 results and guided up million dollars from that. I would expect we have a merit increase midyear in our fiscal year so I would expect to add a 1.5 million to 2 million a quarter to remodel out to the balance of the year. That’s a safe thing to do as we continue to grow when you add the model.

When you look at the revenue, the top line revenue opportunities that we have you’ll see there is still tremendous amount of leverage. .

Okay, great and then for Dave and Liam, a very impressive guidance relative to seasonality.

I was hoping you can help us understand how the China market has done for you in December and the outlook for that important region in the March quarter as in the Chinese New Year, thanks again?.

Sure with respect to China, actually we are seeing China as a grower here in the March quarter where there are some interesting dynamics now with LTE really picking up. We mentioned some of our lead customers Xiaomi, TCL, Lenovo, etc.

So we are seeing that pick up and we are also seeing as Dave outlined in the content opportunity in each one of these phones increase. And of course our ability to grow one of that content has been important as well. So China looks good. Last quarter was about flat so we go into the December quarter it wasn’t a big part of our growth story.

We continue to work on design wins and we’re much more of the 4G play and as you know in China the 2G and 3G market is sort of robust with the uptake of LTE which is very good for us. And it is early stages. I mean this is a long term growth cycle while we’re well positioned.

We have talked about some of our relationships with players like MediaTek and [indiscernible] and of course Qualcomm. So we’re real fortunate to be in that position and we will look forward to a long term growth cycle there. .

Thank you and the next question is from the line of Suji De Silva of Topeka please go ahead. .

Hi guys, congratulations on the quarter.

In terms of the overall filter capacity for the industry not just for you guys, would you say it’s tight and the people are chasing demand or you’re taking share versus other guys?.

I think it's tight across the board. In the case of high performance filters which is where we are producing our own that is something where we are servicing our customers with very specific proprietary designs but in general it’s the filter capacity industry wide is quite tight. .

Okay great and then on SkyOne it occurs to me I mean you guys are providing a lot of value with integration and helping to it will get to market quickly I know if you talked about the relative margins of SkyOne versus your core margins but are they I mean 10 points higher or something like that and you can walk people up the price curve with that and I mean is that is that something that SkyOne growth that could leave a – tailwind for your margin for several quarters?.

Yes, we haven’t given a specific number as high as 10 points but they are meaningfully above our standalone power amplifiers and they are accretive to where the business is typically today. So it is a value add proposition for sure. .

Okay, thank you. And next question from the line of Alex Gauna of JMP Securities. Please go ahead. .

Good afternoon guys.

Just wondering has the favorable exchange rates specifically for the yen improved or changed the way people are thinking about the value proposition of TC-SAW versus F-BAR [ph] alternative?.

No, I would say it has a minimal impact. It’s a minimal impact on our results. .

Okay, you guys have had a great track record of exceeding your guidance like you absolutely crushed it now a couple quarters in a row.

I am wondering is there something that has materially exceeded your calculus that’s led to such upside, where were you off in terms of how you set guidance over the past couple of quarters, is it a single customer, or is it a certain platform ramp, can you give us some color on that?.

I think we are capturing more of the – we were probably more successful in the last few quarters relative to our expectations it would have to be in the amount of content we’re sweeping in. So if we capture let’s suppose we engage with a kind of not a full op but a SkyLiTE, kind of a light version of our SkyOne product for regional phone.

And then of course we’re competing to try to then capture the receive side, we are trying to capture the antenna switching and tuning, we are trying to capture both WiFi bands or if there are more than one.

And so we’re continuing to do a better and better job of making the argument that it's easier for you to engage with Skyworks as a customer for the complete solution.

Fewer moving parts, you let us handle more of the complexity, we can help you solve the overall analog system solution that’s such a benefit that when we are surprised we are being surprised with more content within an existing win I would say. .

Okay, thank you. And next question from the line of Ian Ing of MKM Partners. Please go ahead. .

Yes, thanks and sharing my congratulations.

In mobile you got top reference design exposure to the merchant base band partners but how are your relationships with the internal base band teams and OEMs that are trying to in source and what do you think their prospects are for a success?.

Yes, that’s a good question. We certainly our engage with every potential developer on the chipset side and we have seen in some cases specifically in Korea there’s been some success with a in-house solution and will be lined up with our product as well. We do still see couple of real big players out there who you know.

I mean Qualcomm and MediaTek are very powerful. We have a great position with both and there is just a lot happening in the space right now. As Dave mentioned lot of complexity, our customers are having to do much, much more with this technology in addition to things outside of mobile.

If your look at the processing speed display so we are finding for the most part our job is to enable connectivity, enable solutions, be customer friendly, be flexible, we are doing that and our products will work with just about very base now. .

Great, and for my follow up the China 4G opportunity potentially doubling or tripling this year, what’s your reliance on the two smaller carriers in China.

To the best of my knowledge they currently have trial 4G licenses in FTD but not full commercial at this point?.

Yes, I mean we are still believing that we’re going to see a number here if you go off of a 90 million or so LTE shipment in 2014. And if your look at the estimates the estimates are as high 250 million or 300 million. We think the number even if it's below that is going to be very explosive for us.

We worked directly with the carriers but we also work closely with all the OEMs that we mentioned and the chipset partners that we mentioned. We just had a special note here with MediaTek and our SkyLiTE reference design with close collaboration and that’s tied closely to their OEM suite. .

We are not seeing any particular advantage or disadvantage from one carrier to the next if that’s your question. We really don’t see a particular difference one way or another. .

Okay, thank you. And next question from the line of Tom Diffely of D.A. Davidson. Please go ahead. .

Yes, good afternoon. Then maybe one question on the Chinese market then, do you see the relative pricing or margin trends dealing with either the large or the smaller Chinese customers versus your traditional customers. .

No, not really and again we’re going in and selling systems based solutions. We think the market there has been great. We don’t have any pricing issues there. .

And Tom they are often different but not often. They are usually very different products designed for that price point and designed for perhaps that regional approach or whether it’s a three mode design versus a five mode design. So the products are different, so the margins there are very good but the products are usually quite different.

Tailored that product, we know what the market can bear. So we are able to sort of tailor our design around that price point. .

Okay, thank you. Question from the line of JoAnne Feeney of ABR Investment please go ahead..

Yes, congrats everybody, great execution. I wanted to get into a longer term question. I think we all understand the content increase is driven by entire bands and carrier aggregation. We’re clearly in a situation where carrier aggregation is just being implemented first for uploads and then as you pointed out to speed download streaming.

One question that I think is important is what happens after a couple of years, do you think the second level of carrier aggregation is complete in a couple of years and do you have your sight on other technology changes and complexities that might come after we get through that download improvement from the secondly league of carrier aggregation, what is that’s going to drive content higher once we are through that stage?.

Well, I think the content I think downlink you’re right there will be successive future generations of downlink because they are going to be increasingly important.

You could see what’s being driven by the carrier or user models and simply what the user appetite is for streaming and streaming of video and streaming of 4K video and so you can just imagine that there will be constant demand from all bandwidth. So we think complexity is downlink.

We think complexity is in the transmit side and I will tell you our experience in our design activity today is very much around solving more and more complexity with more high frequency bands, crowded on top of one another. Co-existence issues across the board.

I don’t see anything turning the tables on this natural tendency towards complexity for the next five years. I mean there really isn’t any elegant solution that somehow says we got it, you can do this a lot easier. It’s going to be more of this kind of approach to analog design and our ability to integrate more functionality into a system. .

Okay, thank you. And you have a question from the line of Quinn Bolton of Needham. Please go ahead. .

Hey, guys nice job on the results.

Just wanted to ask, you talked about the received diversity opportunity in your prepared comments, wondered if you could shed a little bit more light on that, what number of bands are you seeing being aggregated and those received your first few modules? And then a second question, you talked about emerging markets specifically India as a future opportunity, it sounds like India 4G has been pretty quiet today, when do you think India starts to see a ramp on the 4G handset side, thank you?.

Sure, sure on the diversity received solution that really varies customer by customer we have seen some of that. The carrier aggregation bands account could be quite small but it is still incrementally beneficial.

But as Dave has mentioned, if we look out at the road map and some of the designs that we are cementing today, we see very rich diversity received technologies on downlink that have up to six or seven filters, multiple L&A, load amplifiers and their functions to receive that signal and amplify it back through the chipset.

So we are seeing that happening, SOI switching is embedded there, and it is a content rich opportunity that we are seeing today just in the few leading OEMs but if you look out through 2015 and 2016 roadmaps, more and more customers will adopt this technology. .

Okay, thank you. And ladies and gentlemen that concludes today's question-and-answer session. I will now turn the call back over to Mr. Aldrich for closing comments. .

Hey, well thank you so much everyone for participating and we look forward to seeing you at upcoming conferences. .

Okay, thank you. And ladies and gentlemen that does conclude today's conference call. We thank you for your participation. You may now disconnect..