Mitchell J. Haws - Skyworks Solutions, Inc. Liam K. Griffin - Skyworks Solutions, Inc. Kris Sennesael - Skyworks Solutions, Inc..

Craig Ellis - B. Riley FBR, Inc. Blayne Curtis - Barclays Capital, Inc. Chris Caso - Raymond James & Associates, Inc. Ambrish Srivastava - BMO Capital Markets (United States) Vivek Arya - Bank of America Merrill Lynch Craig M. Hettenbach - Morgan Stanley & Co. LLC Edward Snyder - Charter Equity Research, Inc.

Timothy Arcuri - UBS Securities LLC Srini Pajjuri - Macquarie Capital (USA), Inc. Bill Peterson - JPMorgan Securities LLC Karl Ackerman - Cowen & Co. LLC Harsh V. Kumar - Piper Jaffray & Co..

Good afternoon and welcome to Skyworks Solutions Fourth Quarter and Fiscal Year 2018 Earnings Call. This call is being recorded. At this time, I will turn the call over to Mitch Haws, Investor Relations for Skyworks. Mr. Haws, please go ahead..

Good afternoon everyone and welcome to Skyworks' fourth fiscal and year-end 2018 conference call. With me on the call today are Liam Griffin, our President and Chief Executive Officer; and Kris Sennesael, our Chief Financial Officer.

Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements.

Please refer to our earnings press release and recent SEC filings, including our Annual Reports on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today.

Additionally, the results and guidance we will discuss include non-GAAP financial measures consistent with our past practice. 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 the call over to Liam..

Thanks, Mitch, and welcome, everyone. The Skyworks team delivered record Q4 and fiscal 2018 results, demonstrating the resilience of our business model, within a choppy end market environment. Let me begin with a few fourth quarter financial highlights. We grew our top line by 13% sequentially and exceeded our guidance of $1 billion in revenue.

We expanded gross margin by 30 basis points sequentially to 51.2%. And we produced earnings per share of $1.94, up $0.30 or 18% sequentially, and $0.03 better than our guidance. From a fiscal year perspective, we generated revenues of $3.9 billion, up 6% with earnings per share of $7.22, up 12% on a year-over-year basis.

And perhaps most importantly, we returned over $1 billion to shareholders through share buybacks and dividends, representing a 55% growth in cash returns, as compared to the prior fiscal year.

Notably, the Skyworks team delivered our 9th consecutive year of record revenue and EPS, with strong design win traction across Internet of Things and mobile ecosystems. Specifically, last quarter, we validated world-class performance of our Sky5 suite of 5G new radio solutions.

Powered Samsung's Galaxy flagship phones, launched millimeter wave RF technology at major avionics suppliers and we secured wireless networking sockets at Cisco for high-density enterprise applications.

We supported DOCSIS 3.1 cable TV gateways with 2.4 and 5 gigahertz front-ends, enabled smart audio solutions across Sony, Microsoft and Nintendo gaming consoles. We captured LTE Cat M content within u-blox's machine-to-machine modules.

And finally, we demonstrate exceptional momentum in automotive, ramping our connectivity and telematics solutions with BMW, Geely, Hyundai, Tesla and Toyota.

In short, we are capturing large scale design wins across all key segments, spanning industrial, home automation, enterprise, automotive and defense, as well as numerous flagship mobile platforms.

At a higher level, Skyworks is uniquely positioned to capitalize on the rapidly approaching 5G upgrade cycle and build upon the strong foundation we've established over the past decade. Our conviction is based on a number of strategic catalysts.

First, we're seeing a significant uptick in demand for our base station and small cell massive MIMO solutions, as carriers around the world require LTE advanced technologies to achieve multi-gigabit speeds, driving network efficiency, higher capacity and greater coverage.

Skyworks' vast experience is at the forefront of these initial deployments, leveraging our complete portfolio, including amplifiers, circulators and switches, as well as system level highly-integrated engines. We are well positioned to support the rapid deployments of the world's leading infrastructure OEMs.

Second, on the other hand of the broadband connection, our smartphone opportunity is poised for a step up in architectural complexity, which in turn drives a dramatic increase in addressable content for us.

This expansion is driven by entirely new bands, complementing existing systems, refarmed frequencies and expanded use of multi-channel carrier aggregation. And keep in mind, Skyworks already offers the industry's broadest portfolio for 4G LTE, proven and selected by the most discerning market leading customers.

We've demonstrated technology leadership across a vast set of critical product categories, as our market-tested solutions resolve increasingly complex architectures, preparing us for the performance gains demanded in 5G.

Our solutions uniquely cover the spectrum from low to high and ultra-high-bands, leveraging SkyOne and DRx modules to optimize transmit and receive performance. And beyond cellular, we augment this portfolio with equally innovative Wi-Fi, power management, precision GPS and tuning solutions.

Further, we see compelling TAM growth driven by new product functionality, including 4x4 MIMO, antenna multiplexing and new millimeter wave technologies. At the same time, the broader IoT category continues to accelerate. With expanded 5G network capacity on the horizon, we expect 75 billion devices will be connected by 2025.

That's three times today's installed base.

Leveraging our leadership across all major wireless standards including 802.11ac and ax, LoRa, Bluetooth, ZigBee, Thread and Z-Wave, as well as 4G LTE and 5G, we are well positioned to capture a disproportionate share of this growth, particularly with the advent of autonomous vehicles, virtual reality, industrial IoT, and frictionless commerce.

Finally, our complementary and synergistic acquisition of Avnera provides a strategic set of differentiated solutions, as we see voice becoming a critical means of communication across a diverse array of AI and IoT applications.

The acquisition of Avnera will enable us to capitalize on the rapid proliferation of cognitive radios and its convergence with our advanced connectivity engines. With that, I will turn the call over to Kris for a discussion of last quarter's performance and our outlook for Q1..

Thanks, Liam. Skyworks' revenue for the fourth fiscal quarter of 2018 was $1.008 billion, up 13% sequentially, exceeding our guidance and consensus estimates. Gross profit was $516 million, resulting in a gross margin of 51.2%, up 30 basis points sequentially, following 20 basis points of sequential improvements in the June quarter.

Operating expenses were $136 million or 13.5% of revenue. We generated $380 million of operating income, translating into an operating margin of 37.6%, up 130 basis points from fiscal Q3. Our effective tax rate was 9%, driving net income of $350 million or $1.94 of diluted earnings per share, up 18% sequentially and exceeding our guidance by $0.03.

Turning to the balance sheet and cash flow, fourth fiscal quarter cash flow from operations was $209 million and capital expenditures were $112 million. We paid $68 million in dividends and repurchased 2.5 million shares of our common stock for a total of $235 million. As this is the fourth quarter of fiscal 2018, let's also review our annual results.

We delivered a record $3.9 billion of revenue, up 6% year-over-year. Operating income was $1.5 billion and net income was $1.3 billion, translating into $7.22 of diluted earnings per share, up 12% year-over-year. In addition to our solid top and bottom line growth, we generated cash from operations of $1.3 billion.

We returned over $1 billion to shareholders in fiscal 2018, well over 100% of our free cash flow, with $243 million of dividend payments and $760 million in share buybacks, as we repurchased just under 8 million shares throughout the fiscal year. We ended the fiscal year 2018 with cash and investments of $1.050 billion and we have no debt.

Now, let's move on to our outlook for Q1 of fiscal 2019. Continued strength in broad markets coupled with the launch of a diverse set of new high performance mobile solutions is offsetting unit declines in premium smartphones and overall China softness.

As a result, in the first fiscal quarter of 2019, we anticipate revenue to be between $1 billion and $1.020 billion. We expect gross margin of 51.2%, plus or minus 10 basis points, and operating expenses of approximately $140 million. Below the line, we anticipate roughly $3 million in other income and a tax rate of 10%.

We expect our diluted share count to further reduce to approximately 179 million shares. Accordingly, at the midpoint of these ranges, we intend to deliver diluted earnings per share of $1.91. With that, I will turn the call back over to Liam..

Thanks, Kris. Skyworks delivered record results in fiscal 2018. Despite the near-term market weakness, we have a clear path to deliver our 10th consecutive year of revenue and earnings growth in fiscal 2019.

This outlook is driven by sustained double-digit growth across our broad markets business, a powerful and expanding design win pipeline encompassing a wide range of customers and applications, world-class operational execution and scale, and finally, our unwavering commitment to creating shareholder value. That concludes our prepared remarks.

Operator, please open the lines for questions..

And our first question comes from the line of Craig Ellis from B. Riley. Please go ahead..

Thanks for taking the question, guys, and congratulations on the Avnera deal close. So, just the first question is following up on some of the prepared remarks regarding some of the things that you're seeing on the integrated mobile side.

Is it possible to break out the relative impact of the unit issue that you're seeing with high-end smartphones versus the China softness that you're seeing vis-à-vis a flat headline guide versus what I think would be plus 5% to 6% seasonality?.

Sure, Craig. This is Liam. Yeah. If we look at Q4 and moving into Q1, I mean, what we have here is a great demonstration of content gain and moving up to some very complex engines within premier smartphones and that had been a lot of hard work that we've done over the last six months to nine months to make that happen.

So, those devices were ready and rolling and demonstrated strong performance in Q4 and that same set of platforms rolling into Q1 were discounted on a unit basis. So again, a lot of great content and premier Tier 1 smartphones, but a bit of a unit miss here that came in kind of late for us entering Q1.

On the China front, China continues to be an important market for us. We have a very diverse position, strong relationships with Huawei, Oppo, Vivo, great alignment with the media tech platforms as well.

So, that market tends to have a little bit of seasonality going into Q1 as the premier Tier 1s tend to occupy and contain most of the share in the December quarter. But the China business is relatively in line with our expectation there..

That's helpful. And then the follow-up, maybe two-part question, one part for you, one part for Kris.

Kris, can you specify what the Avnera contribution is in both fiscal fourth quarter and what you baked into your fiscal first quarter guide? And then longer term, Liam, can you provide some parameters around how we should think about the way this business can scale within your broad markets group and to what extent is it going to gain leverage and fraction from the channels that you have within integrated mobile? Thanks, guys..

Sure, Craig. This is Kris here. So, we closed the Avnera acquisition on August 17, so we basically had six weeks of Avnera on our books in the September quarter. Revenue was approximately $6 million, at above average gross margin. So, we are very pleased with the acquisition there.

In the guidance for the December quarter, we included $15 million to $16 million of revenue for Avnera..

Right. And alongside that, Craig, just to kind of follow-up on the broad markets piece. The Avnera portfolio lines up very well with the technologies that we've deployed already today.

So, if you think about historically the acquisition of SiGe that we made several years ago, how we levered that unique technology, very specific technology and brought that through our channel, not only in smartphones but through a broad set of IoT customers, that same strategy will be deployed with Avnera and early innings look really good there..

Thanks, guys..

And our next question comes from Blayne Curtis from Barclays. Please go ahead..

Hey, guys. Thanks for taking my question.

Just curious, I know in this environment, you probably don't want to venture too far into March, but just kind of curious given its reset and a quarter that's typically stronger, do you have any perspective as to how that translates into March?.

Sure, Blayne. Yeah, I mean, it is a little tough to go into March here, but we feel that the dynamics that we're describing that are imputed in our guidance right now capture most of the pain here into Q1 and we expect – I would expect normal seasonality going into the March quarter. That's the way we look at it.

You still have a broad markets business that has been able to offset weakness in mobile when that occurs. We typically do have kind of some mobile seasonality in March, but there's nothing that we see today that would give us any kind of concern that there's going to be problems there. So, we feel good about it.

We are seeing more and more gains in the broader markets. The Avnera business is going to help. So, we're in better position than we had been in the past to weather the storm in a March quarter..

Then maybe just a question for Kris on gross margins. The Avnera deal is accretive gross margins, obviously you're seeing a unit headwind, so that should hurt some of your absorption. Can you just walk us through the moving pieces there? I mean, if you look year-over-year, margins are down a little bit.

I know you've talked about kind of that margin clicking up over a longer horizon, 10 bps, 20 bps a quarter, can you just maybe walk us through the moving pieces there?.

Yeah. Absolutely. So, first of all, in the September quarter we further improved our gross margins with 30 basis points, in addition to 20 basis points that we added in our second fiscal quarter. So, I'm pleased with that. We will continue to drive further gross margin improvements. Obviously, volume growth always helps with that.

And so the guidance for the December quarter is kind of flattish from a revenue point of view and so also flattish from a gross margin point of view, but as we look into the back half of fiscal 2019, we will continue to make further improvements on gross margin towards our target of 53%..

Our next question comes from the line of Chris Caso from Raymond James. Please go ahead..

Yes. Thank you. Good evening. I guess first question would be with regard to 5G content and I guess Liam, I'm not sure I feel like we have the whole picture here with regard to where your content is going to stand with 5G with some of the new frequency bands. Last quarter, I think the word you used is that you're being crafty.

Is it safe to say there's some new technologies that perhaps you're not ready to talk about now, but things that would strengthen your position, allow them to – allow you to address some of the new frequency bands and some new technologies needed as we go into 5G, more than what's been disclosed so far?.

Sure, Chris. Absolutely. Good question. So, let me just begin with the fact that we are extremely well positioned to lead in 5G. There's a big step-up in technical performance. We're working with customers today. We're sampling. We're getting feedback. We're getting validation on what we're doing and how that's going to work in their system.

So, that's for sure. And that will include enhancing and upgrading even the backward compatibility in 4G. Even those devices will need to be altered in some way to work in a 5G world. And then when you move into 5G proper, when you start to really deliver frequencies above 3 gig and above 6 gig, there's some new technologies.

Millimeter wave is an opportunity and a technology that we have some great expertise on and we think that would be compelling and differentiated in our customer solutions and it's a technology that we're being asked to deliver now and asked to sample now. You're going to see more and more work done in our filtering technology.

Not only on the low-band that gets enhanced and the mid band, but we're going to start to really step up in high-band. And having said that, actually, we've done a lot of work to develop our filter technology and we've talked a little bit about it, but we didn't fully disclose some of the work that we've been doing. And today, we're ready in BAW.

We're developing BAW in-house. We've made targeted investments.

It's part of Kris' CapEx number here and we're working on sampling and we have number of customers that are very interested and we're iterating through the normal process that we have with all of our technologies, but we will be ready when 5G comes for full capability across the whole spectrum..

All right. That's pretty helpful. Thank you. And if I could just return to some of your earlier comments with regard to some of the unit headwinds you were facing now and my interpretation of your comments is that, that was Tier 1 unit headwinds is what you were referring to.

As you went to last year, there was some abnormal seasonality with regard to shipments. The timing was a little bit different. Did that have something to do as we're looking at the year-on-year growth that you're looking into December quarter, does that also have something to do with it as well? And if you could help us to do the math there..

Yeah, the timing is tricky. I mean, as you know, Chris, our job is to put forth the most compelling content and grow that content and advance our customers' performance and we did all of that. So, it's tricky to see how the dynamics are playing out.

I think some of the signals that the Tier 1 players have provided have been helpful, that everybody's understanding and digesting that. As we get into March, as I mentioned on the last question, it is kind of early to tell, but we don't expect anything out of the ordinary. We still have a solid robust broad markets business.

I mean, some of the APAC players don't have the negative cycle in the March quarter. In some cases, that can be offset. The other thing I would say is just reflecting back on the prepared remarks, we are still modeling growth in 2019. So, we're absolutely committed to delivering top-line and EPS growth through the fiscal 2019 quarter.

So, it's only Q1 here that we're talking about, but we're comfortable with that..

And our next question comes from Ambrish Srivastava from BMO. Please go ahead..

Hi. Thank you very much. Liam, just so that we're all on the same page, how would you characterize normal seasonality for the March quarter? I know the business has now it's got a little bit more of the broad-based segment as well. And then I had a follow-up for Kris..

Yeah, I mean, market seasonality, it tends to be 10% to 15%-ish or so, I'd say, 12% at the midpoint. I mean, we always aspire to do better. It is early to make that call. We're just concluding Q4 and guiding Q1. But, that's the typical range that we see.

We certainly do expect some of the things that we do in non-mobile areas to offset potential mobile volatility. But net-net, as I said, we're committed to growth in the year. March, I'm sure, we'll be fine in March, but that quarter's not fully guided..

Okay. And then on the modeling front, Kris, what is the CapEx and then also the OpEx implications from the acquisition, please? Thank you..

Yeah, so from a CapEx point of view in fiscal 2018, we spent slightly over $400 million in CapEx, which was just over 10% to revenue. We continue to expand the capacity in our filter operation as well in our back-end operation.

And as Liam indicated as well, we continue to advance the technology in those factories and make the necessary technology-related CapEx investments as well. So, going forward, I do expect CapEx to stay on or about the same level as a percent to revenue as it was in fiscal 2018.

In terms of OpEx, you can see a little bit of a step-up here in the December guidance and that's mainly driven by a full quarter of the Avnera OpEx that will hit us in the December quarter..

And our next question comes from the line of Vivek Arya. Please go ahead..

Thanks for taking my question. First, just a clarification.

Kris, could you give us the mix of mobile and broad markets for September and what you're expecting for the December quarter?.

Sure. So, in the September quarter, broad market was approximately 28% of total revenue. It was growing double-digit on a year-over-year basis, as well on a full-year basis, broad market was growing double-digits. So, we're very pleased with the performance there.

We have now an annualized run rate of $1.1 billion in our broad market and looking ahead into Q1 of fiscal 2019, we continue to see very strong double-digit year-over-year growth. So on the flip side, of course, we have our mobile business which was 72% of total revenue in the fourth quarter of fiscal 2018..

And then maybe Liam, one more on the visibility as we look forward, right. You mentioned that December is perhaps the bottom here and that you could get back to seasonal trends in March.

I'm curious what is giving you that confidence? If you could perhaps give us some real-time sense of orders, have they stabilized? Just in general, right, give us some more confidence that December is the bottom and things could get back to normal for March.

Or is it primarily predicated on your broad market seasonally doing better and China are returning back to growth and offsetting whatever remaining declines are at your larger U.S.

customers?.

Right, no, that's a great question. As I said, it's really hard to give a full, complete view of the March quarter. What I would say is from where we stand today, we comprehended what we thought were the magnitude of the reductions that we could see and we've contemplated those in our guidance.

We look at the March quarter and we expect it to be in the range that I just articulated, somewhere in the 10% to 15% sequential, which is normal. We do have some positive catalysts around broad markets. So, we think a better China environment in that period. And then we'll see what happens with Tier 1 smartphone units.

But we should be positioned to outperform and hopefully the market warms up a little bit. But in any case, again, we are committing to a full year, full fiscal year of growth in earnings, top line and bottom line..

Thank you. And our next question comes from the line of Craig Hettenbach with Morgan Stanley. Please go ahead..

Yes. Thank you. Liam, just to follow-up on that point, just looking at how the fiscal year could potentially play out.

So, December and March would be down roughly 3% or 4% year-over-year and to grow in the full fiscal year, is there anything unique happening right now from an inventory perspective or unique in the back half of next year? You have kind of line of sight from a content just as to get to growth after the first half looks to be a little challenged?.

Yeah.

I think we should expect some recovery going into the second half of the year and then we have a lot of new design wins and platforms and programs that we're ramping mobile, but in many cases, some of the broad market work that we're doing, lots of opportunity with the Avnera channel we're already seeing customers embrace the Skyworks brand and our scale.

Quite frankly, what we offer there is more than just a sales and marketing team. We have a tremendous reach operationally to do some high levels of integration where they have a discrete product line, so all of that's going to roll in, in addition to the core organic business.

So, those are some of the things that give us a sense of bullishness as we look out into the second half and through the full 2019..

Got it. And then just a follow-up on Avnera, and you mentioned kind of the SiGe success story. Anything else you can kind of tie into that in terms of the playbook or how you see, because Avnera has been around for a while, but just really your distribution and the ability to kind of ramp that business more strongly on the Skyworks ownership..

Yeah. Absolutely. So, a couple of things. There is certainly an element around customer engagement and we have a great opportunity to leverage the years and years of customer work that we've done and the trust that we've built with our accounts to now bring Avnera through that channel. That's one.

We also have some amazing ability to create new solutions that would be very difficult for them to do on their own, leveraging our ability to package and test and bundle, kind of think of it as a point product versus an integrated solution, i.e., SkyOne, right, how we've taken fundamental technology and wrapped it up into an engine, a system that made it much easier, much easier for the customers to consume.

So, they're doing some really special work in cognitive radio. So, it's not just the audio portion, but it's also these highly sensitive microphones that listen and discern the voice or the signal to create a connection. So, some incredible things that we can do together and the partnership should really form well.

It'll take some time before we see all the revenue build up. But we do think it will be an impact positively in 2019 and in outer years certainly a significant opportunity..

Thank you. Our next question comes from the line of Edward Snyder with Charter Equity Research. Please go ahead..

Thank you. Liam, what do you mean by you're ready today in BAW? Have you sampled duplexers in BAW? If so, what bands? We've heard of single band Rx filter samples. Beyond that, we've not seen anything. So, I'm just curious, you seem to make a much stronger statement about BAW this quarter than I've heard in any of your periods in the past.

What's changed?.

What's changed? What's changed is that we've done a lot of hard work, Ed. We've made investments in the technology. Our engineering teams have been working this for a long time and I haven't been talking about it, because we weren't ready. But we're ready now. And we are sampling with key accounts. I don't want to get into all the details there.

But we are sampling. We're getting feedback. There's credible iteration around the process and around the end products. And as you know, we do it differently. We're not going to be a discrete filter company. We're going to be a systems level company. We're going to leverage that technology in our Sky5 suite and just stay tuned for more developments..

Is most of this going to be focused then in some of the new products, the future products that you're putting out, especially with regard to Sky5 and attacking – and now there's going to be higher frequency bands in 5G? Is that what we can expect to see the first samples of this?.

Yeah, yes. So, we wouldn't – our role here and our ambition is to move forward into 5G and there may be an opportunity for us to go back in the legacy architectures, but I don't think that's really the sweet spot.

It's really the leverage that we have in providing customers a full suite of proven LTE solutions from SkyOne to diversity we see, augmenting that with 5G technology and then bringing some really compelling stuff in the high-band to our customers. And I mean, clearly this is something that's been on our agenda for a long, long time.

We haven't talked much about it, but we're ready now. And you're right. This is a lot more than we've said in the past and there's a good reason for it..

Okay. That makes a lot more sense. And then if I could, it seems clear from this standpoint already that next year's premium phones, especially Tier 1 manufacturers, running head-long into this antenna problem. And it looks like they'll be pulling some BAW-based DRx functionality into this. And I know they kind of redesigned the whole thing.

Where does that put Skyworks? You've got a huge amount of content in that tear-down show you've got, significant increase year-over-year in content in that section too. I don't expect you to be locked out, giving you the premier supplier.

But does that put you at a little bit of a disadvantage for those bands that are looking at lowering insertion loss? Or is it something that you could do with this new technology you're talking about?.

Yeah. No, we're very solid in the whole DRx family from low to mid to high. And that's been in place for a while and there's obviously iterations and improvements in performance that we make annually. On the antenna multiplexing, I think that's a new opportunity for us that we will also pursue.

So, we will certainly protect our core on low-band and high-band and DSM as we go forward. And our filtering technology today is perfect for that and we know how to curate and alter that if we need to. But some of the other opportunities that are out there are still on the drawing board and we'll have the technology to address.

It's not going to all happen in one cycle, but I'm really pleased with the team's performance, their patience, their diligence, the hard work, some of the devices that we're putting forth today. I'm really happy with and I think we'll be able to demonstrate that in the market very soon..

Thank you. And our next question comes from the line of Timothy Arcuri with UBS. Please go ahead..

Hi. Thanks. If I look at the overall revenue growth, you guys have sort of barely grown year-over-year, despite all the content growth the past couple quarters and despite broad markets growing kind of like low teens year-over-year.

So, if I look into March and I assume sort of a down 10% to 12% normal seasonal, you're going to be, it looks like down again year-over-year in March. So, can you just again highlight why is that the case? Is it really high-end smartphone? Is that why the company's not really growing the last four quarters? Thank you..

Yeah, I mean, listen, we just grew fiscal 2018. We're going to grow fiscal 2019. We talked about that. The fundamental change here from what would have been a more bullish guidance is really the unit change with some of the premier higher-end players, where the content has been very significant. I mean, that's the fundamental issue.

I mean, there's some China softness, but that's not a big surprise for us. I mean, that's something we've contemplated. And we have a broad set of accounts. We have a broad set of technologies that we're bringing to market. We have new solutions coming out into 5G.

We have an IoT landscape that continues to grow at double-digits and a broad markets that continues to grow at double-digits. So, we're not guiding the whole quarter-by-quarter, but we are comfortable with providing an outlook for the year in total, which will be top-line growth and bottom line growth..

Thank you. And our next question comes from the line of Srini Pajjuri with Macquarie. Please go ahead. Your line is open..

Hi. Thanks for taking my question. I guess, Liam, just I want to understand the – I understand the outlook being a little bit weaker because of the unit weakness, but given your content expansion, I would have expected a little bit more upside to the quarter.

You came in line which is pretty decent, but I'm curious, did you – I mean, have you started seeing the weakness in the quarter itself? Or were there any other puts and takes that impacted the quarter?.

In the Q4 period, not really. A little bit of softness in China. I think it was a fairly strong quarter for us. We exceeded guidance. We grew EPS by $0.30, 18%. The Q1 impact is what we're seeing now and we're talking through. So, I think that's something that we've imputed into the guidance.

We think we've taken the right amount of pain in the guidance on that. Our content position is solid. There's no share loss in our leading platforms. So, it's not a case where we fumbled and didn't execute or weren't able to win the sockets that we pursued. But across the most compelling platforms, the larger Tier 1s, there's a bit of an impact there.

We'll be able to recover from it. There's other parts of the business that are doing really well. And I think this part of the business will recover as well..

Great. And then just to follow-up on that Liam.

As we look out to the next fiscal year, I'm guessing 5G, it's a little bit early, but over the next four quarters, can you talk a little about the competitive environment in 4G? It looks like Qualcomm is definitely making some progress and the market is not growing in terms of units and are you seeing any more pricing dynamics out there and any more intensity in terms of the competitive nature? Thank you..

Yeah, what I'm seeing and this has been a theme that's been going on for a while, is that the competitive landscape, honestly, is getting more and more driven by two or three players, right, maybe four. And you have to have a broad set of technologies and you have to have the agility to work with multiple customers and solve their problems.

And the complexity within mobile platforms, especially at the high end, and the high end is where all the money is being made by the way. It's where the money is being made by the OEMs, and they rely upon suppliers that can do the hard work for them.

The hard work delivering very, very high performance transmit and receive Wi-Fi, tuning, having the scale and having the techniques to do the filtering that we've talked about in the last few questions, all of that. So we don't really – in fact, that environment has been very good for Skyworks.

It's given us a chance to outperform and leverage our technical expertise, our manufacturing scale and the investments that we've made in some of these high-performance filters.

So, I think the competitive field is going to narrow and the complexity and challenge is going to be very, very high and those that can deliver and meet that challenge will do well. And we'll be among the few that can do that..

And our next question comes from the line of Bill Peterson with JPMorgan..

Yeah. Hi, thanks for taking the question. I guess, when we think about the full-year growth that you're talking about next year, and implied it's going to be stronger in the second half.

What is this driven by? Is it 5G? Is it more content in China? Increased content in some of the flagships? What type of products? Is it tuning plexing? More diverse to receive? If you can help us understand what's going to drive this growth next year, that'd be helpful..

Yeah. I mean, there's certainly there's new developments across multiple parts of the business. In the mobile side, we're continuing to drive a content move across all parts of the portfolio. So, we talked a little about the high end, but also in the mid tier.

There's an equally important opportunity to take mid-tier players in China and other markets and even some of the Samsung portfolio, to take mid-tier phones up a level to advance their technology in 4G.

And we are starting to see, and we are developing right now, 5G solutions that we know are going to market and they're going to create a meaningful catalyst. We talked about that in the prepared remarks. There will be meaningful new technologies in 5G product.

That's an opportunity for everyone in our space to pursue and I certainly like our opportunity, given our experience with customers, the manufacturing assets that we have, the technologies that we have, and the ability – and I'll use the word crafty again – the ability to do very, very hard things with very high demand from customers and be able to have the flexibility to make it work for each and every one.

The more you go long in the technology and you move into 5G, people do it differently. Customers do it differently. They select different bands. They have different performance budgets, current budgets, and it makes it more challenging for the suppliers.

And having that know-how and that broad breadth of experience with baseband providers and multiple customers puts us in a good position. So, we'll start to see that in the second half of this calendar year, more and more complex engines. The IoT space continues to move up. The Avnera opportunity, we're getting our first year of that.

That's going to be incrementally positive for us as well. So, there's a number of very positive catalysts going on here as we get through the Q1 and Q2 periods..

Okay. As my follow-up, maybe sticking on 5G, you talked earlier about millimeter wave. A competitor discussed in their call yesterday that millimeter wave would be required at launch next year.

I guess the first question is, do you agree with that? And I guess I would think that sub-6 would be more likely to start in millimeter perhaps later, but if you can expand on your expectations from the market perspective and then as well as expand on your own millimeter wave products both for maybe infrastructure as well as a smartphone..

Sure. Yeah, we are seeing a kind of a stepped up pace on millimeter wave and we'll be positioned to deliver on that. So, that's something that could be a very positive catalyst for the industry. We are absolutely positioned to execute in that area, certainly on the handheld side and also on the infrastructure side.

There's a lot of IP in our company that goes back into the infrastructure days where we have a lot of IP around millimeter wave and some other technologies that we can deploy that typically hadn't been used, quite frankly, in handheld devices. So, if we're able to deliver that, I think would be exceptional. We are working on it. It's not new for us.

It's just about the pace in which our customers want to deploy the technology. We'll be ready on the semiconductor and system side. It's really a matter of when does the market want to see this technology in a commercial use..

Our next question comes from the line of Karl Ackerman with Cowen and Company. Please go ahead..

Good afternoon, Kris and Liam. It would appear the acquisition of Avnera is a precursor for additional bolt-on M&A.

Are voice applications a primary focal point going forward? Or are other areas such as networking infrastructure, more palatable as you build your economic around 5G? And separately, how much cash do you think you need to run the business today? Thank you..

Sure, I'll start and then I'll pass it over to Kris. Yeah, I think one of the things, Karl, that we like is – in our deals and obviously we haven't done many and those that we've done have worked out pretty well. We had a very discerning view on these transactions.

But one of the things that we like about this technology is that it dovetails so well into the areas that we've already created some real value. So, there's common set of customers in some areas, both in IoT and in somewhat in mobile.

There's an opportunity for an integration process to occur, leveraging their core IP more at the chip level and then wrapping that up with our MCM technology and our packaging technology to do something even bigger.

And then we just have kind of a real broad customer scale opportunity across the globe, but we have a big team at Skyworks that's in just about every mobile and IoT customer you could imagine and comparing that with a great organization at Avnera, but just much, much smaller. So, you could see how that leverage plays.

And the technology today is really good. We don't have to fix their technology. It works. It's great. It's just a matter of bringing it to market and maybe changing some of the form factors to create more upside and more configurability..

And so on the question of the cash to run the business, well, we ended last quarter in the fiscal year with just over $1 billion of cash and investments on the balance sheet. That's definitely a level that's very comfortable. We actually need a little bit less of cash just to run the business. So, we do have still excess cash.

Given also the fact that we generate a ton of cash, we have a very strong cash flow from operations and very strong free cash flow. We continue to target free cash flow margin of 30% and we will also continue with our cash returns to the shareholders.

As we indicated in the prepared remarks, we returned more than $1 billion of the cash to the shareholders during fiscal 2018 and we will continue to do so in fiscal 2019 through our dividend program as well as our share buyback program..

Great. Thank you, gentlemen..

Thanks..

Thank you. And our final question comes from Harsh Kumar with Piper Jaffray. Please go ahead..

Yeah. Hey, guys. Thanks for squeezing me in. I had a follow-up on BAW. Congratulations, by the way, on getting BAW done in-house. We are hearing that the 5G handsets, at least some models, will be out in the second half of calendar next year.

Liam, do you think your BAW products would be ready commercially around that timeframe?.

Yeah. It's possible. We're in the middle of our design work and our sampling right now. So, I don't want to hang a date on that, but certainly in the next 12 months to 18 months, as I indicated. So, it's possible. It could be sooner. There's a lot of work to be done to validate and kind of leverage that spectrum.

So, we'll wait and see, but we're definitely going to be a player in that segment..

Got it. And then for my follow-up, I wanted to ask another question on China. I assume that China is down in December. Did I hear you say correctly that by the March timeframe that China would be back to normal seasonal trend? And maybe you could tell us what that might be.

Is China usually ticking up in March or is it usually down for you in March?.

No, the seasonal trend is a sequential decline into the December quarter, a pretty strong sequential decline into the December quarter; but then typically in March, we see the business coming back with a sequential increase..

Thank you guys..

Okay. Well, thank you all for participating on today's call. We look forward to seeing you at upcoming conferences during the quarter..

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