U.S. Markets close in 2 hrs 11 mins

Edited Transcript of QRVO earnings conference call or presentation 3-May-17 9:00pm GMT

Thomson Reuters StreetEvents

Q4 2017 Qorvo Inc Earnings Call

Greensboro May 6, 2017 (Thomson StreetEvents) -- Edited Transcript of Qorvo Inc earnings conference call or presentation Wednesday, May 3, 2017 at 9:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Doug DeLieto

Qorvo, Inc. - VP of IR

* James L. Klein

Qorvo, Inc. - President of Infrastructure and Defense Products

* Mark J. Murphy

Qorvo, Inc. - CFO

* Robert A. Bruggeworth

Qorvo, Inc. - CEO, President and Director

* Steven Creviston

Qorvo, Inc. - President of Mobile Products

================================================================================

Conference Call Participants

================================================================================

* Ambrish Srivastava

BMO Capital Markets Equity Research - MD of Semiconductor Research and Senior Research Analyst

* Blayne Peter Curtis

Barclays PLC, Research Division - Director and Senior Research Analyst

* Cody Grant Acree

Drexel Hamilton, LLC, Research Division - Senior Equity Research Analyst

* Craig Matthew Hettenbach

Morgan Stanley, Research Division - VP

* David M. Wong

Wells Fargo Securities, LLC, Research Division - MD and Senior Equity Technology and Services Analyst

* Edward Francis Snyder

Charter Equity Research - MD and Principal Analyst

* Harsh V. Kumar

Stephens Inc., Research Division - MD

* Michael Austin Burton

Longbow Research LLC - Senior Analyst

* N. Quinn Bolton

Needham & Company, LLC, Research Division - Senior Analyst of Communication ICs and Consumer Semiconductors

* Srinivas Reddy Pajjuri

Macquarie Research - Senior Analyst

* Timothy Michael Arcuri

Cowen and Company, LLC, Research Division - MD and Senior Analyst

* Toshiya Hari

Goldman Sachs Group Inc., Research Division - MD

* William Chapman Peterson

JP Morgan Chase & Co, Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, everyone, and welcome to the Qorvo, Inc. Q4 2017 Conference Call. Today's conference is being recorded.

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

--------------------------------------------------------------------------------

Doug DeLieto, Qorvo, Inc. - VP of IR [2]

--------------------------------------------------------------------------------

Thanks very much, Dana. Hello, everybody, and welcome to Qorvo's Fourth Quarter Fiscal 2017 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 in 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 noncash 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.

(Operator Instructions)

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

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

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [3]

--------------------------------------------------------------------------------

Hello, and welcome, everyone, to our fiscal 2017 fourth quarter call. March quarterly revenue was approximately $642 million. Gross margin expanded 190 basis points sequentially to 46.2%, and we achieved EPS above the midpoint of our provided range. For the year, we delivered revenue of approximately $3 billion, representing 16% year-over-year growth, driven by 23% growth in IDP and 14% growth in Mobile Products. We're very proud of what the Qorvo team delivered in fiscal 2017, and we're excited about our opportunities for continued growth in fiscal 2018.

Qorvo offers the industry's broadest portfolio of products, technologies and integration capabilities, and we are rapidly introducing new products that enable increasingly advanced and complex architectures. We are building a business that best addresses where our markets are headed.

In fiscal 2018, we expect continued strong revenue growth and margin expansion. In both Mobile Products and IDP, we are expanding our product portfolios to deliver superior performance and increasing functionality. This is translated into large design wins and has given us greater confidence in our growth drivers.

Specifically, we expect to expand our dollar content at our largest customer later this year, and we're forecasting expanding dollar content at our second and third largest customers as next-generation flagship and mass-market platforms are launched.

Operationally, we continue to make progress in our conversion to 8-inch BAW and 6-inch temp-comp SAW, and we are on track to significantly reduce our BAW and SAW filter die sizes. We've completed multiple operational initiatives to reduce costs and enhance productivity, and we expect to see the benefits of these accomplishments in fiscal 2018, supporting an improvement in our return on invested capital.

Looking to mobile. Qorvo is a leader across multiple categories with exciting growth opportunities from the transceiver to the antenna. We are improving the RF performance of our customers' devices with highly integrated solutions, complemented by our expanding portfolio of highly differentiated discrete components. We recently launched our BAW 5-based products, and customer pull has been strong. Our first BAW 5 shipments commenced in the March quarter, with our industry-leading RF Fusion for WiFi iFEMs supporting Xiaomi, OPPO and Vivo.

We are broadly integrating BAW 5 filters across the portfolio. In mobile WiFi, we are combining our BAW 5 filters with our WiFi front-end modules, and we expect recent design wins will translate into strong growth. We believe the performance advantage of Qorvo's iFEMs will ultimately prove disruptive to the costly SIP architectures in use today in many marquee smartphones.

The breakthrough performance of Qorvo's BAW 5 resonators and our proven design capabilities have received customer validation. That's led to close collaboration with a key customer to support a major custom-product development project. We are combining multiple high-order multiplexers with PAs, switches and low-noise amplifiers to participate in the industry's most complex and most difficult-to-address product category. We're extremely pleased to have earned this opportunity that requires a multiyear commitment, and we're competing to win. It's opportunities like this that we expect will drive BAW-based revenue to represent approximately 40% of mobile's revenue in fiscal 2019.

Now turning to premium-tier smartphones. We're enjoying strong demand for RF Fusion for cellular. In the March quarter, we added ZTE to the list of customers buying our full suite of RF Fusion solutions, combining low-band, mid-band and high-band placements. These highly compact solutions cover multiple modes and bands and require more temp-comp SAW and more BAW.

For the performance tier, design activity for RF Flex has been robust across Huawei, OPPO, Vivo, Xiaomi and others. During the March quarter, we achieved full certification of the first single-placement integrated module covering low, mid- and high bands on a MediaTek reference design. To be clear, this module integrates all major RF functions required in the main path, including amplifiers, switches and filters for low, mid- and high frequencies in a single Qorvo placement.

On our highly differentiated discrete solutions, Qorvo's ET capabilities are also driving growth. Envelope trackers significantly enhance power efficiency and improve battery life. This is a unique competitive edge, and we expect solid year-over-year growth, with growth accelerating in the second half.

We're also forecasting strong year-over-year growth for Qorvo's switches and tuners. During the March quarter, we secured multiple design wins at Samsung, Huawei, Xiaomi and others in support of our performance-tier smartphones.

We also released our third-generation configurable impedance tuner for multimode, primary and secondary antenna applications, including 4-by-4 MIMO. Similar to envelope tracking, we expect our switch and tuner revenue will expand this year with significant growth in the second half.

Turning to Infrastructure and Defense. Qorvo continued to connect and protect with robust year-over-year revenue growth, reflecting the successful repositioning of our product portfolio to target high-growth segments. This is the seventh consecutive strong quarter for IDP, with key wins across all end markets and customer design wins pointing to another year of above-market growth. IDP is a vertically integrated diversified business with a strategic focus on 6 secular growth markets: defense, base station, WiFi, optical transport, automotive and IoT. The markets we are addressing represent a combined $4 billion opportunity that's forecast to grow at a 5-year compound annual growth rate in the mid-teens.

In the Defense and Aerospace markets, we achieved over 20% year-over-year growth, driven by GaN-based products. In addition, we're supporting a large portfolio of multiyear defense production programs.

In base station, we continue to drive the migration from 4G to 5G. We launched highly integrated receiving modules for pre-5G massive MIMO networks. When combined with Qorvo's GaN-based integrated drivers and power amplifier modules, these dual channel, switched LNA modules provide a complete highly integrated solution for our wireless infrastructure customers seeking to quickly and cost effectively implement pre-5G massive MIMO networks.

We are also actively engaged with all major OEMs on next-generation 4G and 5G -- excuse me, pre-5G macro base station GaN power amplifiers. We continue to expand our portfolio of receive-and-transmit solutions for additional frequency bands for pre-5G and 5G wireless infrastructure.

In WiFi, IDP grew greater than 40% year-over-year, with notable strength in 5 gigahertz PAs and 802.11ac FEMs. Our product development emphasis is now on 802.11ax products. We have sampled key customers and believe we are positioned for strong growth and expanding market presence in fiscal 2018.

During the quarter, we secured an important 802.11ac win in the recently released Sonos soundbar for home audio networks. This is strategically significant since this win includes a BAW filter, and integration of BAW filters into our WiFi solutions is a focus for IDP.

We also secured a win in a recently launched dual-band 802.11ac wireless router, delivering up to 1.2 gigabits per second. We are quickly filling the WiFi sales funnel, including for 802.11ax programs, and we anticipate strong growth well above the underlying WiFi market in fiscal 2018.

In automotive connectivity, we launched auto qualified filtering and amplifier products to address the growing industry requirements for robust connectivity solutions. During the quarter, our Beijing facility achieved TS 16949 certification, recognizing that our quality management systems meet stringent automotive standards. This is our fifth facility to earn automotive certification, further validating our long-term commitment to the automotive market.

In other IoT applications, Qorvo continues to support the proliferation of open-standard solutions, with the launch of our SoC that supports multiple protocols, including ZigBee, Bluetooth low energy and Thread. Our SoC solution is ideally suited for remote control applications and opens the door for opportunities in additional connected home markets.

Qorvo's opportunities in optical markets continue to expand. During the March quarter, we released 5 PAM4 solutions for data center interconnect applications. In the optical space, leading customers want greater speed and capacity with lower power consumption and costs, positioning our products for growth in fiscal 2018. Across both mobile and IDP, Qorvo's focus on product and technology leadership is supporting large design wins, giving us greater confidence in our growth drivers.

In IDP, our focus on higher-growth segments continues to fuel an expanding sales funnel. In mobile, we expect to increase our dollar content at our largest customer later this year, and we are forecasting expanding dollar content at our second and third largest customers with the launch of next-generation flagship and mass-market smartphone platforms. We look forward to discussing these and other opportunities at our upcoming Analyst Day on May 25.

And with that, I'll turn it over to Mark for commentary on our financials.

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [4]

--------------------------------------------------------------------------------

Thanks, Bob, and good afternoon, everyone. In the fourth quarter, Qorvo delivered continued year-over-year growth, higher sequential gross margin, and EPS in the upper end of our guidance range. Our fourth quarter non-GAAP revenue was $642 million, a year-over-year increase of 6% or approximately $35 million. Mobile Products revenue increased 2% year-over-year to $474 million. IDP revenue increased 18% year-over-year to $168 million on continued growth in defense, WiFi and IoT.

Qorvo revenue for the full fiscal year '17 exceeded $3 billion, up 16% versus fiscal '16. This exceptional growth reflects our strong technology position, broad market product portfolio and growing supply capabilities. We expect our technology and product pipeline to continue to drive strong revenue growth in fiscal year '18.

Gross margin in the quarter was 46.2%, a sequential increase of 190 basis points. We expect our positive gross margin trend to continue into the June quarter. Operating expenses were in line with expectations at $163 million, and operating income for the quarter was approximately $133 million. Non-GAAP net income was $112 million. Diluted earnings per share was $0.85 or $0.05 over the midpoint of our guidance range. We ended fiscal '17 EPS at $4.57.

Fourth quarter cash flow from operations remain strong at $247 million, over 50% higher than last year. Capital expenditures were $166 million, primarily related to timing of filter capacity additions. Free cash flow was $81 million, and cash at quarter-end increased to $545 million.

We returned $51 million to shareholders in the quarter under our $500 million share repurchase program. We intend to continue buying as part of an ongoing commitment to return capital to our shareholders.

Let's turn to our outlook. In the fiscal year 2018 first quarter, we expect non-GAAP revenue between $610 million and $650 million, gross margin expansion to approximately 47%, a tax rate below 10% and diluted EPS between $0.70 and $0.90. This guidance reflects normal seasonal effects at our largest customer and weaker-than-expected near-term China demand. Operating expenses are forecast to increase sequentially approximately $5 million, in part to R&D related to custom product development for our largest customers.

Our view on full year fiscal '18 remains positive. We forecast revenue to strengthen through the year. We expect strong revenue growth, along with higher BAW-based product mix, higher utilization rates and ongoing productivity and quality improvements to help us achieve our 50% gross margin target exiting fiscal year '18. We expect OpEx efficiency to continue to improve and forecast operating expenses to be approximately 20% of sales for the year. We are resolute in hitting our operating model of 30% operating margin during the fiscal year '18. Our non-GAAP tax rate is projected to remain below 10%. CapEx spend in '18 is currently forecast to decline to around $400 million as we complete our expansion to support multiyear above-market growth for our filter-based products.

With strong revenue growth, expanding gross margins, improving OpEx efficiency and lower CapEx, we expect free cash flow to double from fiscal year '17 to '18.

In summary, for the fourth quarter, we again delivered on our financial commitments. We also made progress on positioning the company for growth and margin expansion. Our newly released BAW 5 technology has immediately gained commercial traction in cellular, WiFi and other applications. This technology, along with our proven design capabilities, is providing us the opportunity to work on the industry's most complex integrated modules and enabling us to participate in the largest and most attractive markets in RF.

IDP's portfolio continues to grow more attractive with broad-based exposure to many high-growth markets, including 5G, WiFi, automotive and other IoT. Though we're a bit slower out of the gate than expected due to near-term softness in China demand, our forecast outlook for the full year fiscal '18 looks good. Operationally, we continue to make solid progress on yield improvements, wafer size conversions, capacity rationalizations, sourcing initiatives and other productivity efforts to drive margin expansion. We are serving our customers better and performing more consistently and efficiently in the process. We are on track to meeting our operating margin target of 30%, and as mentioned, expect to double free cash flow in fiscal year '18.

With that, I'll turn the call back over to the operator for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And we'll go first to Harsh Kumar with Stephens.

--------------------------------------------------------------------------------

Harsh V. Kumar, Stephens Inc., Research Division - MD [2]

--------------------------------------------------------------------------------

Bob and Mark, I had a quick question. I think I want to take you back to last quarter. You had issues in China with 2 models that didn't come out. Curious if the guide for June has some of that impact. Have the models started to ramp or come out? Is the issue that you're talking about in this call in China, is that different? Or similar or part? And is there some optical impact, as we're hearing a lot of optical companies that are sort of struggling in China as well. Could you just clarify some of that for me?

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [3]

--------------------------------------------------------------------------------

Harsh, it's Mark. So the guide we gave in June was 7% to 10% sequential growth off of the $630 million midpoint we had for the March quarter. So that would've been $680 million, $685 million. As you can see from our guide now, we're $50 million, $55 million off that. The vast majority of that is China, and it's China Mobile specifically, China Mobile, our business. About $30 million of it is related to inventory not at our distributors, but at the end manufacturers that we were unaware of from December. And we became aware of it just recently and as a result, it's a $30 million variance to what we thought June would be, as the market works through that inventory. Additionally, we talked to you about handset delays. One of those handsets, one of the regional models actually ended up getting canceled. So that was a $10 million impact. And then the remaining $10 million was just we didn't see the recovery after Chinese New Year that we typically have seen. And that was accountable for about $10 million of the variance.

--------------------------------------------------------------------------------

Harsh V. Kumar, Stephens Inc., Research Division - MD [4]

--------------------------------------------------------------------------------

Got it. Mark, extremely helpful. I'm going to switch over to technology. Bob, you mentioned a lot about winning in BAW. You're winning at a lot of the Chinese guys. Can -- are you winning also at what we would consider as your typical U.S.-based Tier 1 guys? Also, when can we expect shipments of some of these BAW wins to come in? And then you mentioned BAW could potentially be going to 40% by, I think, you said fiscal '19, which is like 1.5 years out. Could you give us an idea of where it's at today, if possible, so we can try to size the expansion there? And then you -- last question, you mentioned that you're doing a custom project for somebody to combine PAs, RF. Are we talking about PAs and RF on the same chip? Just any color would be helpful.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [5]

--------------------------------------------------------------------------------

All right. Harsh, I'll do my best to answer that, and I'm sure Eric would love to chime in. So let me start with the opening comments I made about 40% of the mobile revenue in FY -- or 40% of the mobile revenue in FY '19 will be BAW based. Today, it's under 30%, and we talked about this on the last call, and growing in '18, growing to about 40% based on the products that we're working on and the wins that we have. And Harsh, that's what gives us the confidence to be able to continue to invest the capital in BAWs. We made large investments in FY '17 and as Mark outlined for our capital expenditure in this FY '18, we will continue to expand our BAW. And as we mentioned on the prior calls that we need to get all that qualified before we can really ramp it in FY '19. So we have to put the capital in place about a year ahead, and we talked about Farmers Branch. So that's pretty much how all that's going. As far as BAW revenues go, yes, we talked a lot about BAW 5 going into WiFi, also into the cellular, so into many of the phones made in Korea as well as in China, so broad-based. The product that I talked about in my opening comments that was one of the most challenging and complex that the industry has really seen is taking very complicated multiplexers that are BAW-based, putting them in a module with power amplifiers, switches and LNAs. Some of those, obviously, Harsh, are on different technologies. So I hope that answers your question.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

We'll go next to Ed Snyder with Charter Equity Research.

--------------------------------------------------------------------------------

Edward Francis Snyder, Charter Equity Research - MD and Principal Analyst [7]

--------------------------------------------------------------------------------

A bunch of questions, let's stick with the BAW topic since we're on it already. Last time we spoke, Bob, I think you were backing off the expansion of Farmers Branch. Is that back on? Are you spitting that fab up now? Or is it still all just Richardson? And on your 40% of revenue for mobile, how many of those designs that would drive that number are, one, in hitting for production now versus what you're working on? Just trying to get an idea of the visibility of that revenue versus -- I know there's a ton of projects out there that are pulling in BAW, but they're not -- they're still in the design phase.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [8]

--------------------------------------------------------------------------------

So Ed, let me clarify what we implied with Farmers Branch is. We put in a single thread of line that we were up at bringing up in the factory and qualifying. That's what's in place and that's what we're working on right now, and it's going extremely well. We're seeing distributions in the processing parameters. They're very similar to what we're seeing in Richardson, so that's going well. The capital that we're talking about spending this year will be going into Farmers Branch, so we're not backing away from that. What we said is the timing of when we are in production will most likely be in FY '19. That really hasn't changed. And the capital that we spent mostly in winding up right now is finishing the build-out of Richardson. So hopefully that's helpful. And Ed, I believe the second question was what percent or coverage do we have of that 40%? Don't have that at my fingertips, Ed. What we did talk about was the BAW-based products, some of our high-band products that are going into various customers in China and Korea that's driving a lot of that growth this year and then the following year will be that continuation along with others that I talked about.

--------------------------------------------------------------------------------

Edward Francis Snyder, Charter Equity Research - MD and Principal Analyst [9]

--------------------------------------------------------------------------------

Great. And then Eric, if I could, you led off the conference call talking about WiFi modules, which is a brand-new area for you and one of your competitors. Most of the time, you've been supplying components to other aggregators like Murata. And I know you guys have been working on this for a while. It sounds like you're continuing on that progress. Could you give us an update? Are you just looking at designs that you're working on? It sounds like you've got a couple of your customers who are getting kind of excited about pulling your [quality]. When do you think you're going to see production revenue on that product, if at all? And Mark, if you could, I think you said you're going to grow revenue in fiscal year '18. Last quarter, recall, you were talking about double-digit revenue for the year in '18 over '17. Is that still your target, double-digit revenue? Or have you kind of backed off that?

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [10]

--------------------------------------------------------------------------------

Want to take the WiFi first, Mark with a follow-up?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [11]

--------------------------------------------------------------------------------

Sure. Yes, we're very excited about the WiFi portfolio and have been now for a few quarters for sure as we've seen it -- that outgrowing a lot of other products. The actual concept of taking our leadership in BAW coexist filters and combining it then with power amplifiers, switches and LNAs, that's sort of one of our first Qorvo products that came about from the merger. As we started that development about 2 years ago and we're already shipping those previously with the past several quarters we've been ramping that business. Now the opportunity, though, is to take our BAW 5 technology, which is really groundbreaking for that, and put that in the modules. And that's what is beginning to ramp into production. And you're right, we are seeing just a lot of adoption for that. It really, in some way, simplifies, lowers the cost and increases the performance in WiFi when you do away with the SIP and go with our solution. So the Chinese manufacturers, in particular, some of our leading customers there are really moving that way very rapidly.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [12]

--------------------------------------------------------------------------------

And before handing it off to Mark, I mean, Ed, also in James' business in IDP, we're seeing the same phenomenon with people wanting to take that coexist filter and put into the same module. So we're also -- that's beginning to drive our growth there with BAW 5, and I mentioned that in my opening comments as well as it's in the press release.

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [13]

--------------------------------------------------------------------------------

So Ed, it's Mark. Still see growth of double digits in fiscal year 2018. With the slow start in China, I'd say, yes, it's closer to 10% at this point. And as you can imagine, there's a lot of back half of the year not great visibility on timing and mix. But we still see 10% as a number that we're preparing to build to based on industry reports and customer demand signals. With that, you can imagine we would have a sizable ramp June quarter to September quarter. That'd be over 30% sequential growth. Then you'd see a peak in the December quarter, and then you'd see normal seasonality in the March quarter, down.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

And we'll go next to Ambrish Srivastava with BMO.

--------------------------------------------------------------------------------

Ambrish Srivastava, BMO Capital Markets Equity Research - MD of Semiconductor Research and Senior Research Analyst [15]

--------------------------------------------------------------------------------

Mark, I just wanted to follow up on that commentary that you're providing for fiscal '18. Gross margin, given the fact that you don't have great visibility on the mix as well as the ramp, why and how are you feeling comfortable that you can deliver on the trajectory that you laid out a couple quarters ago?

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [16]

--------------------------------------------------------------------------------

Yes, Ambrish. We feel great about the trajectory. And yes, the best data point is actuals, and we've beat our gross margin target in the December and March quarters. And even if you add back the issues we had in the September quarter, we're actually very close to our guide there. So we're in control and steadily increasing our margins. We have a guide with another 80 basis point margin expansion, and we see that expansion continuing through the year. As you say, there's a lot of issues with mix and customer ramp timing. And in order to get these productivity or to get these margin expansion benefits, there's a lot of productivity programs in flight. But we're doing very well. We still have visibility to 50%. But as you point out, there are a lot of risks.

--------------------------------------------------------------------------------

Ambrish Srivastava, BMO Capital Markets Equity Research - MD of Semiconductor Research and Senior Research Analyst [17]

--------------------------------------------------------------------------------

Okay. And I -- and you should be commended on hitting the 2 quarters on the gross margin. I wanted to just -- and I'm just struggling with this. I'm sure others on the call are as well, to try to compare your results with Skyworks. And we all get it, 1 quarter is not a barometer. But now 2 quarters the divergence between you, your results and theirs is huge. Is it a mix issue at your specific program that you're in? Is it a pricing or a content that you're losing that you had anticipated earlier on? Just trying to get a better sense and with any perspective along those lines would help.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [18]

--------------------------------------------------------------------------------

Thanks, Tony, and you're right -- sorry, Ambrish. Sorry. You're right about that. It is hard to judge us on 1 or even 2 quarters. Because I think when we look out over the last 4 quarters, our fiscal year growth of 16%, I think that compares very favorably. The last call, when we talked about June, we did share with you guys that we've lost a little bit of share at Huawei. On this call, I did talk about gaining that back. We talked about at Samsung. Quite honestly, we said we were going to grow our dollar content, but we didn't think we're going to grow our share. So if you recall, they did talk a lot about their growth at Huawei and Samsung. So that must be what's driving their growth today. But again, we're confident in our growth. I look at the first 2 full fiscal years that we've grown as a company. We've grown very nicely double digits, and we just said we're going to do it again. So we're not really trying to compare ourselves to Skyworks. We're saying we're going to grow as fast as the market and sometimes faster. So we feel good about what we're doing.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

We go next to Cody Acree with Drexel Hamilton.

--------------------------------------------------------------------------------

Cody Grant Acree, Drexel Hamilton, LLC, Research Division - Senior Equity Research Analyst [20]

--------------------------------------------------------------------------------

Maybe just on the Chinese side. Can you just talk about maybe the overall percentage of revenue that China made up for mobile specifically? And then what is your level of visibility into the excess inventory situation, I guess? What's your degree of confidence that this gets cleaned up in the relatively short term?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [21]

--------------------------------------------------------------------------------

Cody, this is Eric. I'll take that. Percentage of mobile revenue total China was about 35%, including Huawei. And in Huawei, it was just over 10% of mobile rev. So open market China was about 24%, certainly lower than it traditionally is. And then the other question about all the visibility into the inventory. Yes, it's -- so essentially, what happened is there are a lot more closer examination of the sell-through of the channel and looking at [GFA] reports and so forth and working with the customers, that's where we've uncovered the extra inventory that was being held over. As we began to go through April and saw actual recovery in the handsets, we saw that our recovery wasn't following, and that's how we were able to peel down and find the extra inventory. I think now we've had enough detailed discussion with our customers, and it's really limited to really just a couple of customers there that we're expecting a lot stronger ending to the last calendar year. I think we've got very, very good visibility, both into the inventory as well as the new models and our design content, which continues to grow, and how they address the year's going to unfold.

--------------------------------------------------------------------------------

Cody Grant Acree, Drexel Hamilton, LLC, Research Division - Senior Equity Research Analyst [22]

--------------------------------------------------------------------------------

I guess, Eric, are you doing anything differently now to make sure that you guys don't get surprised like this with excess inventory?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [23]

--------------------------------------------------------------------------------

Well, it's -- there's always opportunities to improve. There's better data there always improving the visibility into that market as it gets bigger. So we're changing systems and adding tools continuously to try to learn from each of these and tighten up the controls going forward.

--------------------------------------------------------------------------------

Cody Grant Acree, Drexel Hamilton, LLC, Research Division - Senior Equity Research Analyst [24]

--------------------------------------------------------------------------------

And then lastly, I guess, any issues with pricing that's maybe played into this particularly in China?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [25]

--------------------------------------------------------------------------------

No, not at all.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

We'll go next to Craig Hettenbach with Morgan Stanley.

--------------------------------------------------------------------------------

Craig Matthew Hettenbach, Morgan Stanley, Research Division - VP [27]

--------------------------------------------------------------------------------

First question, just following up on China and really the trajectory of the market, understanding some of this is inventory digestion. But we're also hearing just kind of the end growth has slowed a bit and then you actually have Apple into the back half of the year which probably soaks up some units. So could China stay relatively muted as we go through the year because of those dynamics?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [28]

--------------------------------------------------------------------------------

This is Eric. I'll take that as well. I think we continue to see a lot of exciting trends going on in our customer base in China as we're working very closely with the architectures going forward going from Phase 2 to 3 to 5 to 6. We continue to see the opportunity to lead there and bring more and more differentiation and actually more dollar content. We see the content itself increasing as they're looking to export to various regions and adding those bands and also adding more carrier aggregation complexity and so forth. But what's uniquely exciting, I think, for Qorvo is, as we've progressed through each of these phases of architecture, where we have the opportunity to bring in a lot of our leading filter technology, like BAW 5 as well as our SAW and TC-SAW portfolio, adding multiplexers and seeing how we can increase our ability to help the customers get to market more quickly. With MediaTek, as an example, we kind of lead those space architectures from 2 through 6, as I mentioned. Every generation, we've seen a closer interaction and we believe we've gotten into more and more of a leadership position there. One example of that, we just announced that we've achieved a full certification of the first fully integrated module for MediaTek reference design. So that includes all the RF functionality of the main path. It also has a mix of SAW and BAW filters in it covering low, mid and high. Extremely high performance, at least a 40% size reduction. And it, of course, helps customers get to market very rapidly. You place the part and you're ready to go. So overall, the trends in terms of units, we see increases in terms of content. We see increases and more and more we see that favoring our technology portfolio.

--------------------------------------------------------------------------------

Craig Matthew Hettenbach, Morgan Stanley, Research Division - VP [29]

--------------------------------------------------------------------------------

Okay. If I can ask a follow-up. You talked about increasing content in the flagship launch in the back half of the year. Any context around that? I know it can differ depending on baseband SKUs. So is that a call in terms of where you're seeing that play out? Or what gives you the confidence in terms of growing content in the [8th]?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [30]

--------------------------------------------------------------------------------

So from what we have visibility into in terms of our content and the architectures and so forth, we have confidence in growing dollar content, and that comment is not tied to any particular split of their platforms.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

We'll take our next question from Timothy Arcuri with Cowen and Company.

--------------------------------------------------------------------------------

Timothy Michael Arcuri, Cowen and Company, LLC, Research Division - MD and Senior Analyst [32]

--------------------------------------------------------------------------------

First question, China was down, it looks like about 40% in March quarter-on-quarter. What is embedded for China in the June guidance?

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [33]

--------------------------------------------------------------------------------

For China in the June guidance, it's roughly flat, Tim. It's roughly flat, Tim.

--------------------------------------------------------------------------------

Timothy Michael Arcuri, Cowen and Company, LLC, Research Division - MD and Senior Analyst [34]

--------------------------------------------------------------------------------

Okay, Mark. Awesome. And then I have a question about this custom BAW product at your largest customer. They had a 3-year deal with one of your competitors. So is this just beyond the 3-year window? Or is this incremental to what they're doing with that peer?

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [35]

--------------------------------------------------------------------------------

Sorry, don't know much about their deal to be able to be specific. I don't even know when their quote "deal" started. I only know what we're working on, to be honest. Sorry, about that Tim. I don't know. Eric, do you have anything that you can add?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [36]

--------------------------------------------------------------------------------

No, we can't really discuss anything along those lines. We're very excited about the work we're doing though. The complexity of the module is phenomenal. It's got more than a dozen BAW filters in it, highly complex, combined with all the other RF functionality. It is the single largest opportunity in our space, and we've had a long road competing for the right, I think there, to get the technology competitive, get our higher-order multiplexers working and then demonstrate fully-functional modules. All that's behind us now. We're in the running for the real business.

--------------------------------------------------------------------------------

Operator [37]

--------------------------------------------------------------------------------

We'll go next to Blayne Curtis with Barclays.

--------------------------------------------------------------------------------

Blayne Peter Curtis, Barclays PLC, Research Division - Director and Senior Research Analyst [38]

--------------------------------------------------------------------------------

Mark, I just wanted to go back there comments about the growth for the full year. Just kind of struggling to get there. Maybe you can help me. Just -- if September is up 30%-plus. It's just hard to get to 10%, I guess. You've typically not grown in December. But I'm just trying to make sure I understood your comments correctly. Is plus 30% really closer to 40% or 50% to kind of get there?

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [39]

--------------------------------------------------------------------------------

Yes, Blayne. We don't have the total demand signal all the way out through the year, as I try to make clear. There's still mix of business. There's still timing of rollout of programs, all sorts of factors. We do believe that September will be over 30% sequential from the June quarter. We do believe at this point that December will be bigger quarter than September. And then we'll see a normal seasonal decline off of -- more or less off of December into the March quarter.

--------------------------------------------------------------------------------

Blayne Peter Curtis, Barclays PLC, Research Division - Director and Senior Research Analyst [40]

--------------------------------------------------------------------------------

And then just on the OpEx side. I wanted to understand also. You had one of these OpEx costs for a specific product before and I just want to know, is this something that you get the plus $5 million and then it comes back out later in the year? It's just tape out cost or expedite cost? Or is that the new kind of baseline OpEx to go off?

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [41]

--------------------------------------------------------------------------------

Yes. We should stay, and I'm not going to make an OpEx call on every given quarter through the year. We've given full year OpEx guidance. That would suggest we'll stay below $170 million. I mean, this is an investment worth making, so we're working OpEx down in other areas in order to fund this. And we'll keep OpEx in control on a year-over-year basis. OpEx as a percent of sales will go down, and I would anticipate that it would go down in future years.

--------------------------------------------------------------------------------

Blayne Peter Curtis, Barclays PLC, Research Division - Director and Senior Research Analyst [42]

--------------------------------------------------------------------------------

Got you. And then I think I got this from your free cash flow doubling. But just in terms of CapEx for June and the rest of the year, what's the right range. You had talked about less than 10% of sales, but...

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [43]

--------------------------------------------------------------------------------

Yes, there's a lot of -- we can modulate the CapEx spend based on certain requirements of capacity and again, customer rollout and so forth. And so I hesitate to give a number on a given quarter, plus there's just timing of payments and things like that. We paid a bit more in fourth quarter than we thought and gives us more confidence that our actual spend in '18 will be $400 million-ish. But I'm not going to call a quarter.

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

We'll go next to Mike Burton with Longbow Research.

--------------------------------------------------------------------------------

Michael Austin Burton, Longbow Research LLC - Senior Analyst [45]

--------------------------------------------------------------------------------

So just wanted to finish, circle the loop here on China. It sounds like now what you said was that you're actually expecting kind of flattish in June. Just curious, as you look at the second half, following this inventory correction, sounds like we might be coming -- or through the worst of it. How do you expect, based upon your projected ramps with those customers, for that to progress in September. Presumably, I would expect some growth there before your largest customer kind of eats up all the supply in the channel.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [46]

--------------------------------------------------------------------------------

Eric, you want to take that?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [47]

--------------------------------------------------------------------------------

We are projecting that continued growth throughout the fiscal year until the normal seasonality in March.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [48]

--------------------------------------------------------------------------------

So Mike, we are seeing the end demand, as Eric pointed out, increasing now. It's just we're depleting that inventory that was at our customers in their -- actually, in their factories. So the demand has already started to pick up.

--------------------------------------------------------------------------------

Michael Austin Burton, Longbow Research LLC - Senior Analyst [49]

--------------------------------------------------------------------------------

Okay. And then also, on -- sorry, if I missed on 10% customers, but then also, I presume that Samsung was beneath that. I think in the past, we've talked about some expectation to get Samsung back over 10%. Based upon your visibility in the second half or next year, how is that progressing? And some opportunities, maybe if you could talk around that, maybe some high end or mid-tier or low end.

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [50]

--------------------------------------------------------------------------------

Yes, maybe on the percent customer. So we had 1, 10% or better customer in the March quarter. One was very close. And then in the June quarter, we expect 3, 10% customers.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [51]

--------------------------------------------------------------------------------

Eric, talk a little bit about Samsung. It was one of the bright spots going forward, so...

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [52]

--------------------------------------------------------------------------------

Yes. So actually, Samsung and Huawei both were 10% customers for mobile in the March quarter. The opportunities at Samsung do continue to grow. We actually grew sequentially in March and will grow again sequentially with Samsung in June. So we have a solid position there, but we're not where we want to be. So we're really focused on turning that around and gaining significant share. We see opportunities to do that certainly by the next flagship launch. Also, some really nice opportunities opening up in the mid-tier in the portfolio as it begins to move as well towards our strength, really adding complexity and higher performance. So we're happy with the business with Samsung. We know we can do a lot better, and we have the visibility into how we're going to do that.

--------------------------------------------------------------------------------

Operator [53]

--------------------------------------------------------------------------------

We'll go next to Quinn Bolton with Needham & Company.

--------------------------------------------------------------------------------

N. Quinn Bolton, Needham & Company, LLC, Research Division - Senior Analyst of Communication ICs and Consumer Semiconductors [54]

--------------------------------------------------------------------------------

Just wanted to see if you can give a little bit more detail. You talked about this custom product, I think it was your biggest customer, that has BAW, PA multiplexers, switches. Sounds kind of like a high-band PAD, so what's different for you to call it out? Is that kind of combination of mid-band and high-band? Or is there some other functionality? Can you give us any more details?

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [55]

--------------------------------------------------------------------------------

Yes. I'm sorry, Quinn, we can't. What I can tell you is that we're excited in the work that we put in the last couple of years in developing an improved BAW 5 process, the work that we've done with a resonator performance, demonstrating our ability to design. We talked a lot about hexaplexers, et cetera. That's why we're calling it out. We feel very good about the engagement that we have with our customer on the application, and it's driving some of our OpEx expenses as well. And I think it's worthy of the investors to know that we're out there fighting hard for the hardest product to be produced in the industry for RF, but a very valuable part, very significant dollars per unit. But we're developing it and working hard to go get it. And we thought it was important for investors to understand that.

--------------------------------------------------------------------------------

N. Quinn Bolton, Needham & Company, LLC, Research Division - Senior Analyst of Communication ICs and Consumer Semiconductors [56]

--------------------------------------------------------------------------------

Got it. And you talked about 40% of mobile product revs in '19 would be BAW-based. Does that include any assumptions for this customer or if you got that socket, would that be something that drives upside to that 40% figure you gave for fiscal '19?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [57]

--------------------------------------------------------------------------------

This is Eric. I'll take that. There's multiple ways to get there. There's a lot of growing opportunity for BAW, and our BAW 5 has got a lot of adoption again across many cellular slots as well as WiFi working it into even the China ecosystem as we mentioned. So there's a lot of ways to get there. There's no question it's a lot easier with this module. But we can get there, I think, either way.

--------------------------------------------------------------------------------

Operator [58]

--------------------------------------------------------------------------------

We'll go next to Toshiya Hari with Goldman Sachs.

--------------------------------------------------------------------------------

Toshiya Hari, Goldman Sachs Group Inc., Research Division - MD [59]

--------------------------------------------------------------------------------

So my first question is on content. Bob, you talked about growing content not only in Europe at your top customer, but also your #2, #3 customers as well. But the recent teardowns, some of them at least would suggest otherwise and I realize teardowns can be spotty and oftentimes even misleading. But if you can help us reconcile your comment with some of the teardowns, that would be helpful.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [60]

--------------------------------------------------------------------------------

Well, that would be quite challenging when you consider how many phone models our #2 and #3 customers have. But we have a very strong position at Huawei in the mass-market phones, which usually don't get torn down, and we feel pretty good about that. I also commented that it was a second half phenomenon, so these phones hasn't been released, some of them. So I think from that perspective, it's hard for me to say if you're comparing to what's already shipping, and I'm talking about things that are launching in the second half. But we are confident in our ability there and when we talk about our Samsung, Eric went through the [mast] here and how things look there for some phones that they are going to be launching later this year. We feel good about our content there. Also, we said we're going to grow our content, so I don't know if your question was over share or dollars. We're looking at dollars that we can drive, and we don't always have visibility into who's winning what on every RF application. But we feel good about our ability to grow our dollars at our second and third, along with our largest customer in the second half of the year.

--------------------------------------------------------------------------------

Toshiya Hari, Goldman Sachs Group Inc., Research Division - MD [61]

--------------------------------------------------------------------------------

Okay. Got it. And then I had a follow-up on gross margins as well. You're guiding June quarter margins up 80 basis points despite revenue being flat to down. Can you kind of reiterate what's driving that? And then Mark, I think you were kind enough to provide a bridge a couple quarters ago, a relatively long-term bridge for gross margins. If you can help us understand what drives your margins from 47% in fiscal Q1 to 50% exiting the fiscal year, that will be very helpful.

--------------------------------------------------------------------------------

Mark J. Murphy, Qorvo, Inc. - CFO [62]

--------------------------------------------------------------------------------

Yes. The -- on the first question, going from 46% to 47%, it's a function of just continued tracks on number of productivity projects, better yield, higher-quality items such as that. And then on the visibility to 50%, same factors are at play that I laid out, I believe it was November. And 3 major buckets, manufacturing-related activities, wafer conversions, yield improvements, other items, improve utilization across the fab network, and that's happening through the loading, which should occur in the second half and then the consolidation of some excess capacity into places like Oregon for GaAs and Texas for GaN. And then the -- just a raft of supply chain sourcing initiatives in silicon and other areas, GaAs and [cams] and other areas make up the difference, along with a number of other productivity programs. And that mix, it changes in any given period. But it's roughly the same as I laid out then.

--------------------------------------------------------------------------------

Operator [63]

--------------------------------------------------------------------------------

We'll go next to Srinivas Pajjuri with Macquarie Securities.

--------------------------------------------------------------------------------

Srinivas Reddy Pajjuri, Macquarie Research - Senior Analyst [64]

--------------------------------------------------------------------------------

Just want to go back to that custom product comment. Given that you said it's roughly 12 filters and PAs and other RF components, I'm guessing the ASPs are pretty healthy. And just going by the number of units that customer ships, I would have thought that -- the 30% sequential growth is actually conservative. I'm just trying to understand if you expect to supply into 100% of the volume or you expect to supply into only certain SKUs? Any color on that would be helpful.

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [65]

--------------------------------------------------------------------------------

Sure. This is Eric. We should clarify that. This product is in development now and targeting our production launch next calendar year second half.

--------------------------------------------------------------------------------

Srinivas Reddy Pajjuri, Macquarie Research - Senior Analyst [66]

--------------------------------------------------------------------------------

So next calendar. It's not impacting your September quarter in '17?

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [67]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [68]

--------------------------------------------------------------------------------

Correct.

--------------------------------------------------------------------------------

Srinivas Reddy Pajjuri, Macquarie Research - Senior Analyst [69]

--------------------------------------------------------------------------------

Okay. And then maybe you can help us understand the 30% sequential growth in September then. Is it primarily because of the seasonality at your largest customer? Or you're expecting China to also recover in September?

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [70]

--------------------------------------------------------------------------------

Clearly, the timing of marquee smartphones definitely impacts our September quarter, so that'll be the majority of it. But as Eric's already commented, we're expecting continued growth at Samsung. I talked about some of the work that we're doing at our Huawei, along with some of the rebound that we saw -- we said we're already starting to see an end demand in China as well. So all will be drivers and let's not leave out IDP. James is having a really good start to the fiscal year as well, so we're expecting IDP to grow. And James, you want to talk a little bit about that, feel free.

--------------------------------------------------------------------------------

James L. Klein, Qorvo, Inc. - President of Infrastructure and Defense Products [71]

--------------------------------------------------------------------------------

I'd love to talk about it. We did have a great year, particularly strong in WiFi, combining some of our best-in-class power amplifiers, our BAW coexist manage filters, and our integration capability has really led us to get significant traction in the market. So we're focused on those high-end solutions of our customer in enterprise, and we're laying the foundation for this new WiFi 802.11ax standard coming through. I also have to mention defense. Very strong year in defense. GaN was a big part of this, growing over 25%. And we're also seeing significant growth with our ongoing multiyear defense contractors. Of note, our largest defense customer over doubled in FY '17 from FY '16, so that was a great accomplishment for us. The defense market is a place where our brand promise really comes true. Innovation, scale, speed, product leadership, those have really been the key for us growing in that part of the market.

--------------------------------------------------------------------------------

Srinivas Reddy Pajjuri, Macquarie Research - Senior Analyst [72]

--------------------------------------------------------------------------------

Okay. Got it. Then maybe one final question. Bob, obviously, you've been talking about BAW and the investments in CapEx, et cetera. Looks like your utilization is around 60% today. And if I look at the China market, LTE is mostly penetrated and the frequencies are fairly high in Band 39 [and about]. I'm just curious as to why you're not seeing more demand for BAW filters in China today. Obviously, you're expecting that to change going forward. But I'm just curious, given that there is definitely a need and then as you look out the next year, what do you think will change that make the customers switch from TC-SAW and SAW to BAW next year?

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [73]

--------------------------------------------------------------------------------

First, let me say a couple of things. One is you're correct, our utilization is low and it's actually lower than what you said there, and that's part of what's going to drive our margins as we continue to layer on. We've got a couple things going on there. We are seeing demand increases, but as we're doing that, we're continuing to reduce our die sizes as well as expand our diameters from 6 to 8. We're just really in the beginning of that as well. But just want to make sure that we're clear that we're seeing the demand increases, but are also expanding the capacity. So utilization doesn't quite go up, as you pointed out. But I'll let Eric talk about the end market.

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [74]

--------------------------------------------------------------------------------

Yes. So we are definitely seeing demand for BAW in China, both for WiFi coexist filters as well as for advanced multiplexers and in some cases, even for other discrete filters. So what's really going to drive it going forward is the increased complexity, as there's more demand for higher levels of carrier aggregation over across more bands so there's more loss. Then the [insertion loss] of the filter is more important. So high-performance filters side have a premium and the new multiplexers that we're just bringing out right now in BAW 5 are seeing a lot of adoption that will be ramping into production later this year.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

We'll go next to David Wong with Wells Fargo.

--------------------------------------------------------------------------------

David M. Wong, Wells Fargo Securities, LLC, Research Division - MD and Senior Equity Technology and Services Analyst [76]

--------------------------------------------------------------------------------

With the expansion of your BAW footprint and revenues, can you give us some idea what proportion of the incremental BAW-based units are going into new sockets for you as opposed to replacing your own non-BAW products?

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [77]

--------------------------------------------------------------------------------

Well, we can say in WiFi, I would say it's a little different phenomenon. We're picking up the PA portion, the LNAs and the switches, matching them up to our BAW, so let's get that one out for WiFi, [typically] growing the other way. And then clearly, as Eric talked about, the multiplexers for carrier aggregation and things like that, that's all new revenue for us. I think about the other ones. Eric, I don't know...

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [78]

--------------------------------------------------------------------------------

Yes, David, did you say replacing our other non-BAW products? Is that what you said?

--------------------------------------------------------------------------------

David M. Wong, Wells Fargo Securities, LLC, Research Division - MD and Senior Equity Technology and Services Analyst [79]

--------------------------------------------------------------------------------

That's right. Yes.

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [80]

--------------------------------------------------------------------------------

Yes. I don't think that's much of a factor at all. In my mind, I can't come up with any case of that. So we are replacing our older BAW with our new BAW, but mainly expanding the market. The new BAW is significantly higher performance than in our previous, so that's allowing us to kind of bring more functionality and high performance to the market.

--------------------------------------------------------------------------------

Operator [81]

--------------------------------------------------------------------------------

And we'll go next to Bill Peterson with JPMorgan.

--------------------------------------------------------------------------------

William Chapman Peterson, JP Morgan Chase & Co, Research Division - Analyst [82]

--------------------------------------------------------------------------------

I guess, when thinking about the, let's say, other products such as [tween], virtually receive, some of the WiFi parts you've been speaking about. How should we think about the revenue growth opportunities and where -- obviously, what would be the highest growing? And try to square away your comments to get to like a 10% year-on-year fiscal year growth and how much of a contribution these are going to have within that.

--------------------------------------------------------------------------------

Steven Creviston, Qorvo, Inc. - President of Mobile Products [83]

--------------------------------------------------------------------------------

Yes. That's a big topic, and of course, as you know, one of the unique opportunities we have is that we can compete everywhere, so we have the full suite of technologies needed to address each of these markets. And we are trying to align our best opportunities not just in terms of dollar growth, but also in terms of profit growth and differentiations. So that's where the BAW 5-based products really rise to the top there. And so our WiFi integrated modules, we already talked about BAW 5. Those are going to the large growth leaders this year. As we focus on higher-order multiplexers and then integrating those into modules, one of the cases is the one for China we mentioned with the MediaTek certification. That's got a lot of dollar content. It does have a BAW-based multiplexer at the heart of that thing, so that's going to drive dollar content, lot of differentiation in profit growth. Then we have these big, chunky modules like Bob mentioned, this custom product we're working on that also drive not only a lot of revenue dollars, but an outsized sort of differentiation or profit potential there to leverage the BAW technology. Tuners, though, are another dramatic growth opportunity for us that's also outgrowing our overall market. We have a highly differentiated position there, many years and successive generations of pushing the limits of what can be done. And tuning is really beginning to increase its complexity and its value in the handsets. If you look at 4-by-4 MIMO, obviously, you got 4 antennas. There's a lot more tuning challenges. But what's not so obvious is you can use the tuners to actually increase performance in MIMO sort of applications. So tuners, another great, great growth market for us. And then, of course as well, our envelope tracking power management, very unique opportunity there to enable much better battery life in very complex phone front ends.

--------------------------------------------------------------------------------

William Chapman Peterson, JP Morgan Chase & Co, Research Division - Analyst [84]

--------------------------------------------------------------------------------

Okay. And I'm going to switch over to IDP, I guess. It's nice to hear Jim as well. I guess you exited the year with sort of significant [Jan] growth and now you're speaking about new opportunities in WiFi. Maybe a sneak preview in your March Analyst Day, but how would you rate your growth opportunities this year within IDP?

--------------------------------------------------------------------------------

James L. Klein, Qorvo, Inc. - President of Infrastructure and Defense Products [85]

--------------------------------------------------------------------------------

Yes. I mean, looking forward, we're currently forecasting double-digit growth again in IDP, pretty similar story strength in IoT, strength in defense. We're going to maintain our focus on these 6 high-growth markets that Bob talked about earlier: defense, base station, WiFi, optical, automotive and IoT. To talk a little bit about GaN in particular, we grew GaN 25% in the year. I think even better than that, we positioned ourselves for strong growth next year, perhaps as much as doubling our GaN revenue. So far that our strength is been in defense and in cable TV, and those should continue to be strong, but we're now starting to add wireless infrastructure into the mix. And we're actively engaged with pretty much all the OEMs on both lower power slots from acid MIMO and higher power slots from macro base stations. So I think in general, we expect to see really good growth as we go through 2018 and GaN and our IoT slots will play a big part of that.

--------------------------------------------------------------------------------

Operator [86]

--------------------------------------------------------------------------------

And with no further questions in the queue at this time, I'd like to turn the conference back over to management for any additional or closing remarks.

--------------------------------------------------------------------------------

Robert A. Bruggeworth, Qorvo, Inc. - CEO, President and Director [87]

--------------------------------------------------------------------------------

Thank you for joining us tonight. Qorvo's leveraging our unique combination of competitive strengths to address our market's most complex, most rewarding and fastest-growing opportunities. We are expanding our product portfolios to deliver superior performance and functionality, and our customer engagements are becoming increasingly more collaborative. In fiscal '18, we expect strong revenue growth, margin expansion, operating leverage, significant EPS growth and accelerating free cash flow. Thanks again for joining us. Have a good night.

--------------------------------------------------------------------------------

Operator [88]

--------------------------------------------------------------------------------

And that does conclude today's presentation. We thank you for your participation.