Qorvo, Inc. (NASDAQ:QRVO) Q3 2019 Earnings Conference Call Transcript

Feb 07, 2019 • 05:00 pm ET


Qorvo, Inc. (NASDAQ:QRVO) Q3 2019 Earnings Conference Call Transcript


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Good day, everyone, and welcome to the Qorvo Incorporated Q3 2019 Conference Call. Today's call is being recorded.

At this time, I would like to turn the call over to Douglas DeLieto, Vice President, Investor Relations. Please go ahead.

Douglas DeLieto

Thanks very much, and hello, everybody, and welcome to Qorvo's fiscal 2019 third quarter earnings conference call.

This call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release published today, as well as the risk factors associated with our business and our Annual Report on Form 10-K filed with the SEC because these risk factors may affect our operations and financial results.

In today's release and on today's call we provide both GAAP and non-GAAP financial results. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain non-cash expenses or other items that may obscure trends in our underlying performance. During our call, our comments and comparisons to income statement items will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today, available on our website qorvo.com under Investors.

Sitting with me today are Bob Bruggeworth, President and CEO; Mark Murphy, Chief Financial Officer; and James Klein, President of Qorvo's Infrastructure and Defense Products Group; Eric Creviston, President of Qorvo's Mobile Products Group; as well as other members of Qorvo's management team.

And with that, I'll turn the call over to Bob.

Robert Bruggeworth

Thanks, Doug, and welcome everyone. Qorvo delivered a strong December quarter, with record EPS of $1.85, and record free cash flow of $261 million. Total revenue for the quarter was $832 million, above our updated guidance, and gross margin was in line at 49.5%.

Our performance last quarter is especially noteworthy given that the smartphone market weakened considerably after we entered the quarter. Today, the outlook for smartphones is being affected by a range of factors, including trade tensions, and other macroeconomic headwinds, longer replacement cycles, and what may be a pause in demand ahead of 5G smartphone launches.

Despite these factors, we believe our inventory in the channel is healthy, the adoption of BAW-based architectures across all leading OEMs continues and we're excited about our many market drivers. Investments in 5G are accelerating, the roll out of WiFi 6 is coming soon and IoT continues to proliferate. The robust demand we're enjoying for infrastructure solutions supports the outlook that 5G capabilities are coming sooner than our industry had originally expected.

In China, carriers have been allocated spectrum for countrywide 5G networks using multiple frequencies, while in the US carriers are launching 5G services in select markets, with plans to go nationwide in 2020, using both sub-6 gigahertz and millimeter wave frequency. Early use cases in millimeter wave will include applications like point to