Good afternoon, and welcome to the Skyworks Solutions Fourth Quarter Fiscal Year 2023 Earnings Call. This call is being recorded. At this time, I will turn the call over to Raji Gill, Vice President, Investor Relations for Skyworks. Mr. Gill, please go ahead..

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' fourth fiscal quarter 2023 conference call. With me today are Liam Griffin, our Chairman, Chief Executive Officer, and President; and Kris Sennesael, Chief Financial Officer for Skyworks.

This call is being broadcast live over the web and can be accessed from the Investor Relation section of the company website at @skyworksinc.com. In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call.

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 report 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 to Liam..

Thanks, Raji, and welcome everyone. Despite macroeconomic headwinds and volatility, Skyworks executed well during the fourth fiscal quarter. We delivered revenue of $1,219 million, posted earnings per share of $2.20, and generated $366 million of operating cash flow.

During fiscal 2023, free cash flow was well above $1.6 billion, which reflects our efficient business model despite a challenging macroenvironment. While excess supply conditions are modestly improving in the Android market, we continue to under ship to natural demand as the industry rebalances.

Within broad markets, we see softer demand extending from consumer to certain durable sectors as customers adjust to normalize lead times and reduce excess inventory. After two years of unprecedented events due to COVID and historical supply chain shortages, the semiconductor industry is returning to a normal supply and demand balance.

We are responding to these dynamics by actively managing our inventory levels, making strategic investments in growth areas, and diversifying the reach of our business. We are well positioned to capitalize when demand inflects from a technology and roadmap, manufacturing capacity and financial perspective.

Over the medium to long term, we remain bullish on several sectors and trends. In our mobile business and our broad markets businesses, in mobile we see opportunities to expand RF content over the coming years.

On the path to 6G, we anticipate RF content increases will be driven by additional bands, enabling satellite connectivity, growing usage of uplink carrier aggregation, further adoption of 4x4 MIMO, and other innovations in RF. Switching gears to broad markets, which accounted for approximately 37% of our total revenue in fiscal 2023.

We expect to benefit from three long-term secular trends. First, the proliferation of intelligent IoT connected devices on the edge. Second, the rapid transition towards electrification and advanced safety in vehicles. And third, high speed connectivity for AI enabled data intensive infrastructure in cloud applications.

Within IoT, we are excited about the upgrade cycle with Wi-Fi 6E and 7. Driving additional content as incremental higher frequency bands drive more stringent filter requirements, including the need for BAW. Wi-Fi 7 has several use cases, including 8K video screaming, immersive AR and VR, cloud gaming, industrial IoT and telemedicine.

Shifting to automotive, Skyworks is well positioned to benefit from the electrification and adoption of advanced safety in vehicles. According to internal analysis and third party estimates, we expect RF automotive semiconductor TAM to reach $1 billion.

Within automotive, we are focused on high growth segments and content opportunities, including power isolation chips for onboard chargers, powertrains, and battery management systems in EVs.

Connectivity, such as cellular engines, Wi-Fi, Bluetooth, and GPS, in-vehicle infotainment systems, driven by digital radios, and lastly, ADAS solutions for autonomous driving. We have the experience and ability to execute at scale with some of the leading brands in the world.

In addition, we believe AI can be a catalyst for more efficient wireless communication and could fuel the need for more complex and higher performance wireless solutions. Over time, we expect high performance smartphones will be a critical platform for advanced AI capabilities, and in turn could spark a major upgrade cycle.

Furthermore, over the past two years, we've made significant investments in BAW technology and scale, which has led us to competitive differentiation. We've expanded our reach within the smartphone market, and today, nearly 50% of our mobile revenue is tied to BAW. That's more than double from last two years.

Our BAW investment has also resulted in key design wins in our broad markets business, which represents more than 10% of our business. Wi-Fi 7 is a perfect example of BAW technology being a critical requirement for the new standard.

Now, turning to our quarterly business highlights, we secured 5G design wins for premium Android smartphones, including Google, Samsung, and several models in the VOX ecosystem. We accelerated design wins in Wi-Fi, including NETGEAR’s Wi-Fi 7 mesh system, Linksys 6E tri-band mesh router and TP-Link’s quad-band Wi-Fi 7 router.

We expanded our reach in automotive segments by winning several designs for onboard chargers, battery management systems, and digital broadcast products across the leading brands. And lastly, in emerging IoT, we enabled next-generation smart energy solutions with Trilliant and Samsara.

In summary, Skyworks continues to deliver solid results despite a challenging macroenvironment. At the same time, our advanced technology and product roadmaps are aligned to long-term secular trends, further expanding and diversifying our customer base.

Our strategic customer engagement, resilient business model, and experience will help us weather through this cycle's volatility. With that, I will turn the call over to Chris for discussion of last quarter's performance and our outlook for Q1 of fiscal 24..

Thanks, Liam. Skyworks revenue for the fourth fiscal quarter of 2023 was $1,219 million, up 14% sequentially and slightly above the midpoint of our outlook. Mobile was approximately 65% of total revenue, an increase of 25% sequentially, as we supported the ramp of new high-performance solutions at our largest customer.

Broad markets were approximately 35% of total revenue, down 3% sequentially. We continue to see inventory digestion within broad markets, including consumer IoT, enterprise, and telecom infrastructure. Grosso profit was $575 million, resulting in a gross margin of 47.1%.

Gross margin continued to be impacted by temporary factory underutilization as we right-sized our inventory levels. During Q4, we reduced our internal inventory by $116 million to $1,120 million. And we are on track to further reduce it below $1 billion by the end of the December quarter.

Operating expense of $177 million was down 3% sequentially and down 8% year-over-year, given our ongoing focus on managing discretionary expenses. We generated $398 million of operating income, translating into an operating margin of 32.6%. We incurred $7 million of other expense.

And our effective tax rate was 9.7%, driving net income of $353 million and diluted earnings per share of $2.20. EPS was $0.10 above the guidance that we provided during the last earnings call. Now turning to cash flow, Skyworks business model continues to deliver robust cash generation.

Fourth fiscal quarter cash flow from operations was $366 million and capital expenditures were $70 million, resulting in free cash flow of $296 million. For the full fiscal year, we generated $1,856 million of cash flow from operations. Capital expenditures were $210 million or 4% of revenue.

As a result, we delivered a record $1,646 million of free cash flow, an increase of 76% year-over-year, driving a record free cash flow margin of 34.5% and translating into approximately $10.30 of free cash flow per share and a free cash flow yield of approximately 12%.

In fiscal 2023, we significantly reduced our capital expenditures in line with our business model. After major investments during prior years to expand our manufacturing footprint, including bar filtering, we expect our capital intensity to moderate.

We focus on driving operational efficiencies through yield improvements, dice rings and test time reductions, creating additional available capacity. We believe we are currently well positioned from an equipment and tooling standpoint to support a demand to recovery.

Also, during fiscal Q4, we paid $108 million in dividends and repaid $200 million of our term loan. In early October, we repaid $150 million of outstanding borrowings under the term loan, and we intend to pay off the remaining $150 million by yearend.

Entering calendar year 2024, we are comfortable with our capital structure and debt levels of $1 billion, which provide us with superior flexibility and optionality. Now, let's move on to our outlook for Q1 of fiscal 2024. We anticipate revenue between $1,175 million and $1,225 million.

We expect our mobile business to demonstrate momentum, while in broad markets, we expect to continue digesting excess inventory affecting our revenue outlook.

Gross margin is projected to be in the range of 46% to 47%, reflecting the ongoing cyclical impact of lower factory utilization, reduction of internal inventory, and an unfavorable mix shift given the lower proportion of broad markets as a percentage of total revenue.

We expect operating expenses in the range of $193 million to $197 million as we continue to make strategic investments in mobile and broad markets to drive share gains and increase decertification. Below the line, we anticipate roughly $6 million in other expense and an effective tax rate of 12% for Q1, as well as full fiscal year 2024.

We expect our diluted share count to be approximately 161 million shares. Accordingly, at the midpoint of the revenue range of $1,200 million, we intend to deliver diluted earnings for share of $1.95. Operator, let's open the line for questions..

[Operator Instructions] Our first question comes from Chris Caso with Wolfe Research..

Yes, thank you. Good evening. I guess for the first question, if you could give some color with regard to the December quarter guidance, the prepared remark suggested that the incremental weakness was still coming from broad markets if you can give some more granular detail about what you expect from mobile and broad markets in the December quarter..

Yes, Chris. So you have it right. We do expect in the December quarter our mobile business to be up sequentially as we continue to execute to ramp with our largest customer and as we will continue to see some further modest improvement in the Android mobile part of the business as well.

On the flip side, we have our broad market business which we expect to be down sequentially as we will continue the digestion of access inventory in the channel as well as at the end customer level..

That's helpful. As a follow-up, and obviously we've been going through this for a bit of a while in the mobile space, burning off inventory and I guess broad markets was affected a little bit later.

Where do you think we are with regard to the inventory correction in each one of those markets particularly as we look into the March and June quarters? What's the prospect for when we can get some bottoming out here and we go back to shipping to actual real consumption?.

Sure Chris, this is Liam. There's actually kind of like two dynamics there. In the mobile business we absolutely know where the dollars are and where the opportunities are and we have eyes on all that and we'll continue to drive that portfolio very strong.

On the other side, the broad markets business is still a wonderful opportunity for us but unfortunately going through the semiconductor cycle and the inventory issues that we just mentioned on the call here have been a bit of a problem. Now we know how to fix it.

These products are all solid but they just slow down through the channel and I think in some cases, levels of distribution and another layer between the buy and sell position can sometimes mute some of the results. So we understand it.

Some of that stuff we can just handle ourselves directly and also drive more and more opportunities broadly in those markets. There's a lot of opportunity, Chris. I mean it goes way beyond what you see today. Portfolio that we've been driving with I&A business, the automotive gains.

We're in data center today just a really whole different set of broad markets opportunities, but we certainly have our teams working hard to execute and demonstrate that success..

Our next question comes from Karl Ackerman with BNP Paribas..

Yes, thank you. I have two questions, please. First and foremost, if I could just narrow down on your Android opportunity. Media Tech earlier suggested that 5G units should grow double digits next year, certainly above overall smartphone unit expectations of maybe flat to up low singles next year.

And I'm just curious to hear about some of the expanding opportunities you have with China Android OEMs. I mean, you kind of mentioned how that is picking up in the December quarter and I think going forward for you. So at the same time, Huawei I think is also coming back in the market.

So I wanted to hear your perspective on what is your opportunity in China Android near-term, both in the summer quarter and then, secondarily, how does Huawei impact your TAM opportunity for the China Android ecosystem, both near-term and perhaps in calendar ‘24? Thank you..

Yes, sure. A little bit to unpack here. Clearly, we know the players. We know the landscape in China. Very familiar with the VOX ecosystem and great opportunities for us to continue to grow. Although, we've been conservative in that area because of the risks of inventory glut. And as you know, we've been running really lean. So there's no downside there.

As we start to go further. You have opportunities that can continue to grow. A lot of these handsets in China have a lot of upside ability to drive more content and more benefits for the user. Those products are still sub-scaled vis-à-vis a US-type product.

So the appetite for the China consumers to get more technology, to have higher speeds and data rates and more efficiency in their solution. So that can come through VOX, of course. But don't forget big players like Google and Samsung, really strong Android players that create a nice buffer from us with our larger customers.

So it's a really good mix and as you know about our business, we're very flexible. We don't sell one part to everyone. It's very, very unique engagements. I think that's a signature for Skyworks. But always room to grow from here and we are starting to see, I think, light in the tunnel I would say in the VOX channel.

And with Huawei, I don't think that that's a big issue. We can certainly deliver product that's better than Huawei right now, but it's not really where we want to be as a company. And I think the technology is really lagged for Huawei to reengage. But we've got a lot of opportunity in front of us that we can execute and deliver..

Yes. Thanks, Liam. Kris, perhaps a question for you. You talked about the significant amount of free cash with the generation that you had just this upcoming this most recent quarter.

Are you taking a step back? How are you and the management team thinking about M&A, longer term, just given the fact that valuations have come down across the space, in areas within your broad markets business. Just any commentary on that would be helpful as well. Thank you..

Yes, Karl, first of all, you're absolutely right. I mean, we have very strong free cash flow. The good news there is that it's sustainable. So for many years to come, we target a free cash flow well above 30%.

In addition to that, we have a clean balance sheet, right? By year end, the debt will be on or about $1 billion with on or about $1 billion of cash. And so we have a clean balance sheet. We continue to generate a ton of free cash flow. That gives us a ton of optionality, right.

And so on one hand, of course, we will continue to invest in our organic business, making sure we invest in our technology and product roadmaps. But we also have optionality to further diversify the business. As you know, we've done a very successful transaction in 2021. We're very happy with that transaction.

And so there is definitely optionality there..

Our next question comes from Ruben Roy with Stifel..

Yes. Hi. Thank you for letting me ask a question.

Kris or Liam, I want to go back to the broad market and I think in the prepared commentary in terms of the, kind of the areas of weakness you were seeing, consumer obviously has been weak for a while and I think you mentioned a couple of other areas that weakness spreads to, but I didn't hear industrial and automotive.

And so can you maybe give us a little bit of detail on what you're seeing there, what you saw there in the September quarter and how you see that playing out over the next quarter or two. Thank you..

Yes, that's a great question and I'm glad you brought it up. We talked a little bit through the prepared remarks, but our business and automotive is actually really moving well. We're growing the portfolio. We hadn't really been in that market at all two, three, four years ago.

This is another kind of nod to the Silicon Labs transaction because they were significant in that piece. We continue to do very, very well. We rattled off a number of the brands and a number of the names that are in the industry and we have design wins. We're investing aggressively.

We see that as an incredible opportunity for Skyworks and we're underweight. We have the technology to win, but we're not big enough yet and so we're continuing to grow. But I would say on a ballpark level, Chris, I mean we're in hundreds of millions of dollars in terms of automotive.

So it’s not, relative to the scale of Skyworks, it's not a significant piece, but on an absolute basis, it's got some real opportunity to grow and we look forward to that..

Thanks, Liam. Thanks for the detail. I guess just a quick follow-up in terms of the CapEx commentary and kind of where you sit from the utilization and capacity perspective.

Can you remind us of where you ended up now? Sort of in source to outsource? I guess are you at target there? I guess that means you are at target, but can you remind us of these details around in source to outsourced certification..

Yes, Ruben, as you know, we are a not only a developer of world-class technology, we also manufacture most of that technology in-house, and that's a key differentiator. That's how we win at our largest customers being able to secure the supply. As you know, we do all our gallium arsenide power amplifiers in-house.

We do all our filters, TC SAW, N BAW, in-house, and we do most of the very complex assembly and packaging and testing in-house. Some parts of the business, like the business we've acquired from I&A, and some other parts of the business is being outsourced, but the vast majority is in-house. And again, that's a key differentiator for us.

Having said that, we for many years we have done major investments, expanding our capacity footprint. Currently, we are focusing more on driving operational efficiencies into that footprint that is creating additional capacity for us. And so going forward the capital intensity will be much lower. You saw last year it was on or above 4% revenue.

Going forward we expect it to be in the mid-single digits as a percent to revenue. And so we have a tremendous amount of upside there that will further drive gross margin improvements and stronger free cash flow..

Our next question comes from Christopher Rolland with Susquehanna..

Hey guys, this is Matt Myers on for Chris. So you guys have talked historically about 10% annual content increases. So I was curious about how we should think about it from this past cycle.

And then again looking into next year, do you think you can grow content another 10 %?.

Well certainly our ambition is to continue to grow that content and diversify the level of content as well. And I think what you're going to see from Skyworks and it's already embedded in some of our numbers is diversification within mobile.

So it's not going to just be one or two products as you know, but the breadth of the technology is right there for us. So we're going to continue to do that.

You've already seen us demonstrate very well execution and getting into things like all acoustic wave, very, very tough technology, years and years of work, and then the scale to actually produce. So those are the kind of challenges and opportunities that we like.

I know we talked a little bit about automotive already, but markets like that have a tremendous time TAM opportunity for Skyworks and we're really just scratching the surface there. So we're going to take some of that core technology and port it out into multiple applications.

So it's really kind of a fungible asset and look at the pools of opportunity and revenue that we can address. And I think it's going to be a great journey for us along the way. We're learning a lot more. Our teams together are executing an outstanding way.

And we're committed to growth and diversification and certainly matching the challenges with our top tier customers..

Got it, that's helpful. And then on gross margins, I know you guys have had gross margins hit from lower utilizations, but curious where utilization stand now versus 90 days ago. And where do you expect them to be in the next quarter? I would assume down again, given the gross margin guide down.

And how are you guys thinking about your outlook for gross margin into next year?.

I mean, the utilization of our factories is stable right now. On one hand, the demand is improving, but on the other hand, we are still further reducing our internal inventory levels. And so that will be played out by the end of December. In addition to that, as we alluded to in the prepared remarks, we have a little bit of a mixed headwind.

Now with broad markets temporarily, a little bit softer due to the excess inventory. And that's why we guided slightly down in the December quarter. Looking ahead, couple quarters, obviously March and June are our seasonally slower quarters in terms of top line. And typically you see a modest reduction of gross margins during those quarters.

And then beyond that, you look at the second half of the calendar year, September and December, we will start ramping up again, and you will see gradual improvements of the gross margins..

Our next question comes from Tim Arcuri with UBS..

Thanks a lot. I had two quick ones.

Kris, first of all, can you talk about your largest customer as a percent of revenue in September?.

Yes, the largest customer was in September was approximately 68% of total revenue on a full year basis, it was approximately 66% of total revenue. Keep in mind that the vast majority of that is for the smartphone, but we also have great content in every other device that that customer brings to the market..

Thank you for that. And then as a quick one, can you give us a sense, Kris, for what you consider off of this base, what you consider sort of a normal seasonal March would be? I think mobile is usually down 25% in March.

Is that a reasonable number off of this base to sort of think about? I know that broad market is kind of all over the place and going through digestion, but I guess I'm just asking about, seasonality in mobile in March?.

Yes, so we're not going to guide to March, but directionally you think about it the right way, right? So, and you were referring just to mobile. This is not total Skyworks revenue, but yes, mobile is down in that 20% -25% sequentially in the March quarter from our top quarter, which is the December quarter. Yes, going normal seasonality..

Our next question comes from Edward Snyder with Charter Equity Research..

Thanks a lot. So, Liam, I mean, you're underrepresented in Android today.

It happened for a while, but given the pricing for many of the modules that sell in Android, especially relative to your largest customer, why shouldn't we consider gains in the Android as an increased pressure on gross margin? Because I think it's widely understood that price competition is a bit more and performance is a bit less in the Android chain and it is at your largest customer.

So, I'm just kidding. I feel we talk about diversification mobile. That's it. Then I have a follow-up..

Yes. I mean, on the initial question, I agree with you on that. I think, as you know, and you go deep in the technology and you see what we do, and so we're very, very capable to do more. Quite frankly, the attractiveness of the portfolio at the time was pretty weak.

It wasn't as compelling as some other opportunities, and we deployed our resources in different places successfully. But now, kind of taking a look at the landscape a bit, I think it's time for us to be a little bit more aggressive. We absolutely have the knowledge and the execution and the scale in our factories to do more.

So it's been more of a choice, rather than a no-go from the customer. The customers won’t sense. So, I think we're going to do a little bit more work there and get a little bit more aggressive. And I think it'll be good for the company and our shareholders..

Yes, that's been our impression too. So then if I could, on your largest customer, you had fewer modules than you had last time, and I know that's not where all content is. Clearly, year-to-year, there's increases in existing modules. But we've done the chared and a lot of it, especially the largest modules, looked to be identical to last year.

So one, did you see material increase in content in existing modules? If not two, I'm just trying to get a feel for where your content gains were in the latest round, and mostly to try to get a feel for what's going to happen in the future, because if you're kind of giving up a few modules to marauder, marauder mostly, I guess, why wouldn't that trend persist in the next year? Thanks..

Yes, I mean, we're going to do everything we can, as we always do, to create the best answer and the best outcome for the shareholders and our customers. And that's what we always do. I mean, as you know, our business and our company, we have a very, very extended bench of opportunities and technologies and knowhow.

We can do a lot of really interesting things, and we've created a lot of categories that just didn't exist. And so we'll lean on that and continue to leverage the high-class engineering talent that we have at Skyworks, the scale that we have, the customer relationships.

Also, really happy to see that we're doing more outside the largest customer, great customer, but we'd like to do more with others. So the setup process is certainly going to improve.

We're going through this cyclical load that we're all in, in the industry, but we look forward to executing and clicking the steps again to continue to drive the RF technology..

Our next question comes from Matt Ramsay with TD Cowen..

Thank you very much. Good afternoon. Liam, I don't think it's a huge surprise given what’s going on. What's so many of your peers with the industrial markets that Broad Markets is the source of the weakness. But I wanted to spend a little bit of time trying to unpack the different pieces of Broad Markets.

So I would have, I mean, the timing business that you guys acquired from SLAB had wireless infrastructure and telco exposure to it. I'd be interested to hear about that, given what's going on there. There's been Tesla unit weakness and consternation about EVs in China and maybe that's turning. So there's some voltage isolation business in there.

Just things that might have to do with IoT, given what's going on in some of those places. If you could just, maybe, and I'm sure I'm missing some sub segments for sure. So if you could just kind of walk through those different buckets and are there any where we're closer to the end in the beginning of the correction is what I'm trying to get at.

Thanks..

Yes. No, I got you, I appreciate it. And I'm going to start with, I think it's going to get better for everybody in the industry. I really think that we're getting through it.

But one of the things that's interesting, and I'm really glad that you threw the question here, with Skyworks, we obviously, we have an incredible franchise built around mobile technology and adjacent technologies. We'll continue to leverage that. And we're very profitable in those markets with our scale, with our execution, and our know-how.

But I'll tell you what, we have, as I said, a tremendous opportunity to take the technology knowhow that we have, the scale that we have, and go into broader markets. So the automotive right now, maybe on a macro level slow, but for us, would not that be where it's going to be a problem.

So when you're really big and you're a 30%, 40% share player, and you get knocked down, it's going to hurt you. But when you're going from 5%, 10%, 15% to 20%, growing up into the markets, like automotive, you look at Skyworks three or four years ago, we wouldn't talk about cars at all. And now they're a meaningful piece.

Adding the I&A business from Silicon Labs is only fueled more opportunities for us. So there's a lot of opportunities like that. We've got design wins and data Center now. Didn't have that two, three years ago. The Wi-Fi portfolios are really strong right now.

I think everybody in the industry is going to recognize that Wi-Fi 7 is going to be a catalyst for significant growth, enabling a lot of broad categories from consumer to industrial. So we're really excited about that. We have the technology to do that today.

So I think the difference is you've got mobile, and we all understand it, and everyone on this call probably has a really good view on that technology and that market. But when you go to the broad markets, the real broad markets, there are so many different endpoints.

We're trying to pick and choose the right ones, but the good news is we're not heavily concent-, other than mobile. There's not a lot of concentration, so you are getting big diversified technology play at Skyworks with scale, with technology knowhow, with the ability to hit the fastballs with the toughest customers.

We can deploy that across multiple markets. If we're doing that today, but it's a long way from now on how we can get even better. Our teams are excited about that..

Thank you very much for all the perspective there. Maybe just building on some, I mean, we've been going through this correction and sort of the broader markets for a while now, and companies like yourselves have the balance sheet and the margin structure to sort of lean into it and bear it until it gets better.

I imagine there are smaller competitors in lots of those diverse end markets that maybe don't have the balance sheet and the scale to get through.

So, I guess my question is, how active is the M&A funnel right now? And if it's not, why isn't it?.

Yes, well, it's one of those things that's off until it's on, right? So clearly, the dynamics, it feels like 10 years have happened in one, right? A lot of activity up and down, seeing some pretty wild swings with significant companies that are really strong players.

So we are fortunate, and we've worked hard to get there to deliver the kind of cash performance that will put us in position to do the right kind of transactions. And as you know, at Skyworks, we're very, very picky. But I think in this case, honestly, I think there's more opportunities for M&A and the like than I've seen in a long time.

This has been kind of a really interesting time in semiconductors and in other markets. And I think the stronger going to get stronger, and I think the weaker, probably not going to do as well. And I know what side we're going to be on.

So it's an opportunity for us to take advantage, leverage the balance sheet, you look at the free cash flow margins that are sustainable. I mean, these aren't one quarter stats. And so yes, I mean, we will continue to be very, I will say picky, I guess, I've run some of these transactions because we know how good our company is.

So but the opportunity to step up on that is definitely there..

And our last question comes from Vivek Arya of Bank of America..

Hi, this is Blake Friedman on for Vivek. Thanks for taking my question. One of the questions on the China smartphone market. I know in the past it's been hard to precisely nail down share.

[Inaudible] So how do you make that determination in the future on how many orders to fulfill? So there no inventory issues thereafter just walking us through that process would be helpful. Thanks..

So in the China market there is still some excess inventory, right? But as you point out, it's a complex market. There are multiple players. Some of that is for the domestic market. Some of that is for the export market. They also have flagship models all the way down to mid-level, low-level, going into 4G and 3G.

Obviously, we focus mostly on the flagship level, maybe one or two steps below that, that of course translate with a potential bigger focus on their export markets. But we also of course support them in their domestic market as well. And there is still some excess inventory. It has been coming down.

It's improving, our revenue for three, four quarters now with China Android has been up substantially on a percentage basis, not necessarily on an absolute dollar basis, but has been up substantially on a sequential basis on a relative percentage basis. And I think we are, as Liam said, we're seeing light at the end of the tunnel.

We are nearing towards completion of the inventory correction. We have the design wins with those customers. We are ready to go. And I think you will continue to see that in the next couple quarters. It's going to be a gradual process. I personally don't believe in a snapback. It's a gradual process.

And we're there, we're well positioned, and you will see us there..

Got it. And then just following up as well, just kind of domestic competition within China. I guess maybe if you can walk us through how you've seen the developments there over the past two to three years, and maybe moving forward what you think domestic competition will be like, I guess two to three years from now..

Yes, certainly we have the technology to handle the broader markets there and the mobile markets in China. Ultimately, we think that there's an upside opportunity there and the gap is widening from a technology perspective. So you think about kind of the have and have nots there. There's a segment in China that really is lower end.

It's great for some consumers, but it hasn't been a driver force. But if you go back to the VOX ecosystem, a lot of opportunity for us to continue to drive that. We haven't been as aggressive as we should be there and we will take a look at that again.

But also just throughout the other markets as well that we talked about, there's a lot of energy around mobility. There's a lot of energy around IoT. Some of the markets we talked about before, of course, automotive are great, but the aperture continues to widen. And what happens with us is when we penetrate a segment, we go in hard.

And this is where the balance sheet, the tenacity of the team, the scale of our operations, where a lot of our stuff is done in-house, makes us very unique. And it's an opportunity for us to continue to demonstrate the growth curve as well..

Ladies and gentlemen, that concludes today's question and answer session. I'll now turn the call back over to Mr. Griffin for any closing remarks..

Thank you all for participating on today's call. We look forward to talking to you in upcoming investor conferences during the quarter. Thanks again..

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