思佳訊 (SWKS) 2015 Q4 法說會逐字稿

Good afternoon and welcome to Skyworks Solutions fourth-quarter FY15 earnings call.

This call is being recorded.

At this time, I will turn the call over to Steve Ferranti, Vice President of Investor Relations for Skyworks.

Mr. Ferranti, please go ahead.

Thank you, Kathy.

Good afternoon, everyone, and welcome to Skyworks FY15 fourth-quarter conference call.

Joining me today are Dave Aldrich, Don Palette, and Liam Griffin.

Dave will begin today's call with a business overview followed by Don's financial review and outlook.

We will then open the lines for your questions.

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

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

I'd also like to remind everyone that the results and guidance we will discuss today are from a non-GAAP income statement consistent with the format we have used in the past.

Please refer to the press release within the Investor Relations section of our Company website for a complete reconciliation to GAAP.

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

Thanks, Steve, and welcome, everyone.

I'm pleased to report that we delivered a strong close to FY15, producing fourth-quarter financial results that once again significantly outpaced the growth of the broader semiconductor market.

During the quarter, we posted revenue of $881 million.

That's representing 23% growth from the prior year.

We delivered operating income of $335 million.

That's up 42% versus last year.

We earned $1.52 in diluted earnings per share, which is up 36% year-over-year.

We generated over $230 million in cash from operations, and we are guiding for December quarter revenue to be up again sequentially with gross margins of 51% and EPS of $1.60.

Given that Q1 guidance exceeds our previous 50% gross margin target, we're introducing an updated midterm model which Don will provide the details of later in the call.

Our fourth-quarter performance closed another record year for our Company.

And, for the full year, we posted revenue of $3.26 billion.

This represents a 42% annual growth.

We expanded our operating margins by 600 basis points, exiting Q4 at over 38%.

And, we grew earnings per share by 63%, continuing to demonstrate strong financial leverage.

We also generated roughly $1 billion in cash flow from operations, and we returned over $360 million to shareholders through a combination of dividend payments and share repurchases, while increasing investments in R&D, expanding production capability, and extending our technology roadmap.

All in all, this was an outstanding year for Skyworks, and we continue to see numerous opportunities to capitalize on the powerful technology trends that are fueling the long-term growth in our served markets.

These include exploding data consumption across the consumer and enterprise landscape.

These include soaring adoption of cloud services from the likes of Amazon, Google, and others, the proliferation of connectivity throughout the emerging markets and the rise of the Internet of Things.

These global trends are all in the early innings and all rely on seamless connectivity to efficiently and reliably move massive amounts of data anytime and anywhere.

The end result is a boom in connective devices and worldwide data consumption, fueling tremendous opportunity but also creating major technical hurdles within the industry.

By virtually every measure, consumer appetite for streaming services is growing dramatically as traditional broadcasters and new content service providers like Netflix, Amazon, and Hulu race to gain a foothold in the new online world of content distribution.

In fact, analysts estimate that mobile data usage will increase at nearly 60%, compounded through 2019.

This places significant strains on network infrastructure and on devices.

As an example, consider that an hour of streaming high definition video consumes roughly 1 to 2 gigabytes of network bandwidth.

4K streaming devices consume two to three times this amount.

And, further exacerbating the industry's challenges is the limited amount of spectrum and network capability available to address this pending surge in data.

Market forecasts estimate that only around 1/3 of the spectrum needed to meet bandwidth requirements over the next few years is in service today, and to solve this imbalance, carriers are either deploying new spectrum or finding ways to increase the throughput of existing frequency bands.

Finally, this rising data trend directly impacts battery life of today's devices.

As technologies like LTE advanced, eventually 5G demand, and they demand higher and higher power levels.

This comes at a time when our customers are already wrestling with power budgets to implement more capable processors, higher definition screens, and other power-consuming features.

As customers struggle to adapt to these market realities, we are increasingly being brought into the architectural discussions much earlier in the design cycle.

This is the primary reason we are shaping next-generation solutions to implement higher band counts and the use of unlicensed bands; increasing carrier aggregation combinations; tighter and tighter filtering requirements; more complex receive architectures; advanced Wi-Fi configurations; and more sophisticated techniques to manage power and increase efficiency.

As customers implement this next level of functionality, they are increasingly demanding more system-level solutions and higher levels of integration, and these are playing directly into Skyworks' strengths.

We see all of these dynamics increasing our addressable content across the breadth of our service markets for years to come.

As I mentioned earlier, this backdrop provides us with a high confidence level in our business trajectory, and we are introducing a new midterm earnings model, which Don will discuss in more detail following his review of our financial results.

With that, I'll turn it over to Don.

Thanks, Dave, and thanks for joining us, everyone.

Revenue for the fourth quarter was $880.8 million, ahead of our prior guidance of $875 million, and up 23% versus the year-ago quarter.

Gross profit was $440.1 million, or 50% of revenue.

That's a 100 basis-point sequential increase from the June quarter and a 400 basis-point increase from the prior year.

Operating expenses were $104.9 million, consisting of R&D expense of $70.8 million and SG&A expense of $34.1 million.

We generated $335.2 million of operating income, up 42% year-over-year yielding a 38.1% operating margin.

Below the line, we had expenses of roughly $1.1 million from interest and other expense.

Our cash tax rate for the quarter was 11.4%.

That's in line with our guidance, and resulting in net income of $296.1 million, or $1.52 of diluted earnings per share, up 36% year-over-year and $0.01 better than our guidance.

Turning to our fourth-quarter balance sheet and cash flow statement, we generated $233 million in cash flow from operations, invested $151 million in capital expenditures with depreciation of $46 million, and we exited the quarter with over $1 billion in cash on hand and no debt.

Moving to our product mix for the fourth quarter of FY15, power amplifiers represented 20% of revenue, integrated mobile systems was 59%, and broad markets was 22%.

It is worth noting that integrated mobile systems were up 84% year-over-year during the quarter.

In Q4, we distributed $160 million to shareholders through our dividend and stock repurchase plans.

Our quarterly dividend and ongoing share repurchase activity remain important components of our commitment to return excess free cash flow to shareholders, while continuing to fund internal growth initiatives and seek out accretive M&A targets.

For FY15, we returned approximately 64% of free cash flow to shareholders, higher than our goal of 40%, based on our recent share repurchase activity.

Longer term, we continue to view an allocation of roughly 40% of free cash flow as an appropriate balance between internal investment for growth initiatives and shareholder returns.

Turning to our first-quarter FY16 business outlook, we expect revenue to be between $925 million and $930 million, up 5.3% sequentially, and 15% year-over-year.

At the midpoint of the range, we anticipate gross margin to be 51%, representing a 430 basis-point year-over-year improvement.

We expect our operating expenses to be around $108 million, driven by ongoing investments in engineering and development teams as we expand our footprint within new verticals and further enhance our integration capabilities.

We expect first-quarter operating margins to exceed 39%.

Below the line, we anticipate around $900,000 in expenses from interest and other expense and a cash tax rate around 14.5%.

For the remainder of FY16, we recommend modeling a cash tax rate in the 14.5% range.

We expect Q1 share count to be around 195 million shares, resulting in EPS of $1.60 at the midpoint of the revenue range.

Our Q1 gross margin guidance exceeds our previous target of 50%, and we are within striking distance of our previously outlined $7 EPS target.

Given our confidence in our Business trajectory, which is driven by visibility into future architectures and our internal gross margin initiatives, we are introducing a new organic midterm model, and that's driven by the following assumptions.

First, we continue to see our served market opportunity growing at a mid-teens pace for the foreseeable future, based on our ability to address more systems level functionality and expand our footprint.

Second, we are targeting continued gross margin expansion driven by the positive contribution from our latest generation products, which incorporate higher levels of integration and functionality with greater differentiation.

The growth of integrated mobile systems in broad markets, product areas as a percentage of our revenue, scale benefits associated with increased volume, continuing efficiency gains from our filter business, and our ongoing efforts to optimize cycle times, yields, and supply chain efficiencies.

And, third, we anticipate ongoing R&D investments in systems, engineering, and field applications teams to extend our technology advantages and build out our footprint in adjacent vertical markets.

The end result is within a six to eight-quarter period, we are targeting organic annualized EPS of $8 at a revenue run rate of around $4.5 billion with gross margins in the 53% range.

Longer term, based on our internal margin initiatives, we are driving the business towards gross margins in the 55% range on an organic basis.

With that, I'll turn the call back over to Dave.

Thank you, Don.

As we enter FY16, our deep customer engagements, visibility into future generation architectures, and internal margin enhancement initiatives provide us with a unique perspective on our future growth opportunities, providing a high confidence level in our organic business trajectory.

Before opening the calls to questions, I'd like to provide a brief update on the acquisition of PMC.

On October 30, we announced that we have entered into an amended and restated merger agreement to acquire PMC for $11.60 in cash per share of PMC common stock, which we intend to fund through a combination of cash on hand and fully committed debt financing.

The agreement has been approved by both Board of Directors and is expected to close some time in the first half of calendar 2016.

It's worth noting that the acquisition of PMC is additive to the organic $8 mid-term model that Don just described and a mid-50% gross margin goal.

In closing, we remain poised to continue outperforming the broader semiconductor market and extending our track record of above-market top line growth, enhanced financial returns, and earnings leverage.

We've created a unique business model, tethered to the global wave of connectivity, and combining consistent above-market top line growth with the financial returns of a Best-in-Class diversified analog Company.

That concludes our prepared remarks.

Operator, let's open the line for questions.

(Operator Instructions)

Our first question will come from Mike Walkley with Canaccord Genuity.

Go ahead, please.

Thank you very much and congratulations on the new -- .

Thank you.

Mike?

We lost you.

I apologize.

Mike, are you there now?

I am.

Can you hear me now?

Yes.

Okay.

Sorry about that.

Just going to follow up on the design win activity with marquee customers.

You've shared this new target which is great to see the $8 target.

One of your competitors today in their press release is talking about securing design activity with marquee smartphones.

Is it just that these smartphones are more and more complex, and there's more opportunities?

Or, maybe could you just address your comfort and visibility into these marquee customers and design win activity into next year?

I think in general the visibility we have continues to improve because as we mentioned in our prepared comments, we're being invited into the design cycle much, much earlier because we have a bigger footprint.

We have a bigger piece of the overall system, and the system requirements are increasingly dependent upon strong analog performance which is our sweet spot.

As a result of that, we are seeing fewer competitors -- a definite consolidation of share as we address each customer.

So, in general, the content is increasing with Wi-Fi functionality, tuning functionality, power management, amplifiers, filters, and the like.

And, we're seeing a narrower competitor base.

That's why we continue to see -- and tear-down reports for example will bear this out, we continue to see increased content with each successive generation of design.

Thank you very much.

Thank you.

Thanks, Mike.

Thanks.

Our next question will come from Alex Gauna with JMP Securities.

Go ahead, please.

Good afternoon, everybody, and congratulations as well.

Thank you.

Was wondering, Dave, in your setting a mid-teens growth, does that assume an underlying market growth rate in smartphones consistent with what Qualcomm just outlined yesterday in the low single digits?

And, is there room for variance around that?

What are the puts and takes around the market doing better than or worse than in underlying low single digits growth rate?

I think when we look at our addressable market, two things are driving it, Alex.

One is that we do see, for example, in China, we're really focused on 4G.

We're focused on smartphones in 4G.

We've deemphasized 3G to the extent that it's a standalone product.

We don't do any 2G anymore.

We tend to focus on segments of the market that are at the highest growth that really demand the level of system performance for which we get paid a premium.

We think the growth rate of smartphones and how we address SmartPhones is a little higher than that.

And, clearly, we get a multiplier because we are increasingly addressing on the analog side increasing band content, carrier aggregation, more high functionality, Wi-Fi and MIMO and 2X2s, more power management voltage functions.

We are broader than any of our competitors at the system level.

So, our content continues to grow, driven by complexity of the device, and also we continue to add more blocks of functionality in the overall system.

Dave, that reminds me of an additional question for you.

You've done a great job historically of focusing like you are now on 4G or the key customers, and in going after PMC Sierra here, that's a Company that's gotten caught looking at some legacy-type of markets before.

How far are you willing to take this bidding war you're in now?

It has taken you decades to build up $1 billion war chest.

What's the urgency in going after this now?

Well, as we stated in our earlier remarks, Alex, we do have a definitive agreement.

We have our committed financing.

We expect to close sometime in early -- first half of 2016.

And, given that the transaction hasn't yet closed, that's about all we can say.

The only thing I will add is that if you look at Skyworks, the sweet spot of what we're very good at.

We've been leveraging high speed data and the consumption and mobility.

So, it's a natural extension to mobility and connectivity for us to extend it to access to the cloud.

We think it's just another high-end growth driver that will be both accretive to margin but also sustainable for a generation.

Thank you.

Our next question is from Cody Acree with Drexel.

You went in the summer with a lot of concerns about excess handset inventories.

I guess I'd just like to get your view on where the health of inventory as we head into holidays.

Sure, Cody.

We actually see inventory levels right now at normal run rate.

We have great visibility into our Tier 1 accounts.

We have visibility into China and other markets, and nothing really unusual there.

You're right.

There was a little bit of a softness at some points earlier in the year.

We feel good about the position today.

And, I guess, Dave, just maybe on a strategic question with your position in filters and the growth in capacity that you've made.

What is your long-term strategic objective in filters?

Is it the market that you can address with what you have?

Or, do you need to get up into the BAW filter territory to really address the opportunities in that market?

Well, that's a great question.

If you think about the way we're approaching filter technology, it's very much the way we approach semiconductor technology where we try to be as process-agnostic as we possibly can and look for the best function for the -- I mean, the best process for the function.

And, we've done that very successfully in Wi-Fi and transmit path and power management and so on.

In the case of filters, it's really no different.

We don't sell discrete filters.

All of our filters are integrated into a higher level system where we're able to leverage our MCM capability, our amplifiers, our switches, our filters to come out with the best overall data handling capability at the lowest current consumption.

And, we'll continue to do that here.

We find that TC saw has been a wonderful addition in technology for us.

We are also extending the advantages of temperature-compensated, surface acoustic devices to do higher and higher frequency, and frankly, picking off bands that were previously only addressable by BAW.

And, with respect to bulk acoustic technology, we do see that there are bands that we're going to need and so between partnerships and our own internal development, we expect to be in production with BAW devices by 2017.

Thank you.

We'll go next to Craig Ellis with B. Riley.

Go ahead, please.

Thanks for taking the questions and congratulations on the results and strong outlook.

The first question is for Dave.

Dave, I think it was about 10 months ago or so that you identified that the performance of the business in the fiscal second quarter would behave better than it had historically because of the growth of the broad markets business.

Is that still your view?

You mean our fiscal second quarter, is that what you're talking about?

Yes, the fiscal second quarter, the calendar March quarter.

The answer is yes, it is our view.

March normal seasonality in the market is down perhaps 8% to 10%.

Some customers will be down more.

Other customers will likely do better.

But, despite that, we have a couple of tailwinds.

One is that we are consistently adding content.

And, that quarter will be no different than prior quarters and the quarter we just completed.

Broad markets for us is usually better than normal seasonality in March.

So, our expectation is that we will outpace that normal seasonality in March.

Thank you.

And then, the follow-up is for Don.

Don, very robust gross margin performance the last two quarters in the outlook.

The incremental gross margins, I think, on average are around 70% for those three quarters.

So, given the strength of the new midterm model, are you suggesting that the business can stay on that trajectory?

Or, are there things happening in the business that would cause some deviation from the recent strength we've seen in the gross margin line?

The way to create a model of that going forward is we still have a high confidence when we take a look at what products we're shipping in the forecast.

At a minimum, you're going to see a 57% as we've discussed before incremental drop-through.

What's different as you're looking at our margin profile is that our new product releases and generations as they're shipping, they're tending to have higher margins, and that's based on the integration, based on functionality, based on value to customer.

So, you can have some swings in that on the upside -- not on the downside -- on the upside, as you roll through that.

The best way to do that, as we've just given you this 53% six quarters out basically in the new midterm model.

I would just as you roll through the trajectory, I would just take a look at what that drop-through would mean during that period of time.

And, that's how to model it.

That's the best way to do that.

Thank you.

Our next question is from Atif Malik with Citigroup.

Go ahead, please.

Hi, thanks for taking my question and congratulations on another strong quarter.

Dave, a question on the gross margins.

If I look at other component makers in smartphone market application processors, those guys are talking about ASP pressures next year, and you plan to expand your gross margin.

Help me understand why the pricing environment or the gross margin profile for RF guys should remain strong into next year in a decelerating year-over-year smartphone unit environment?

It's relatively simple.

It isn't a year-over-year, part-to-part comparison.

We are increasingly integrating more functionality as these devices get more complex, and we're seeing fewer competitors able to do it.

Customers can't handle discrete components any longer, and that level of integration required to have a product that consumes low current.

That's small.

That is highly integrated requires many, many different functional blocks with process technology know-how pulled together in a low-cost manufacturing platform with great system architectures.

So, we are able to work with our customers to give them a differentiated system performance which is increasingly becoming analog and RF-dependent.

Less digital and more analog and RF-dependent.

And, that's our sweet spot.

And so, our customers, it isn't as if we're charging our customers more per se per function, it's that they're giving us more of the system requirement.

And, they're paying us for it because we generate a great -- we add a great deal of value for them.

Great.

And then, follow-up.

On your last call, you talked about selling 1 billion-plus TC saw filter units this fiscal year and 1.2 billion end of this calendar year.

If you can update us on those numbers, and what your expectations are for next year?

Sure.

Yes, we are actually well on the way to beat our estimate on TC saw production.

We will exit the calendar year over 1.2 billion in TC saw devices.

As Dave articulated, all of those devices are being consumed internally by these highly complex system architectures.

So, we're wrapping up multiple bands, very, very high precision devices that allow our customers to put Best-in-Class solutions into their products.

It's a great opportunity.

It's early innings.

We continue to invest in [funding] CapEx.

We expect another strong year in 2016 for our filter integrated solutions, and it's a great opportunity for us and our customers.

Thank you.

We have a question from Rick Schafer with Oppenheimer.

Go ahead, please.

Thanks.

I'll add my congratulations.

Thanks, Rick.

My first question, was curious if you could provide some early color on how you see the March quarter shaping up?

Are there any factors at play we should be thinking about that would make it better or worse than what we've seen the last couple of years?

No, I don't think so.

Maybe Liam could chime in.

Again, as I mentioned a moment ago, we think the market is down 8% to 10%.

I think what you're maybe getting at is we do see the opportunity for OEM share shifts.

We factored that into our forecast.

We understand that.

We have a great deal of experience with all of our large OEM customers so we're able to understand their buying and consumption patterns so we think we handicap that in a very conservative fashion.

I don't think that's an issue for us.

Our broad markets continue to add not only content, but add more new opportunity for us which are growing sequentially each quarter, and we don't think March will be any different than that.

Exactly.

I think that that's the real change is that the broad market portfolio continues to grow.

It's highly diversified.

We go from connected home to broad IoT devices, starting to even move into markets like automotive.

So, there's a segment of our Company now that really doesn't revolve around that typical seasonality in the March quarter.

We hopefully can do a great deal of work to offset the normal cycle.

Okay.

Just as my follow-up, maybe can you comment on the content trends with some of the China smartphone OEMs?

I know Apple's success there, is it having any sort of noticeable impact on the RF content complexity plans for the second Gen 4G phones from the China -- the big China OEMs?

And, if there's any way you could you put numbers to that.

Or, give a sense of if you've got in the $4 the content on average now, what that might look like in the next year or two?

That's a great question.

And, we certainly look at the China opportunity as a long-term secular trend for Skyworks.

We're going to do very well.

We've been doing well.

And, as you've a articulated the 4G cycle is significantly meaningful.

We do address that with the global Tier 1s.

You named a few.

As well as the local brands.

What we've been seeing is the local providers, names like Huawei, names like Xiaomi, OPPO, Vivo have now become much more comfortable with developing the higher end solutions in 4G.

It's a major content gain for us when you compare with the 3G devices where we may have $1, $1.25 of opportunity, now we move to $3 to $4.

And, it's not just traditional transmit devices.

It's receive-side technology.

There's Wi-Fi technology.

There's power.

There's GPS.

It's a powerful cycle.

There's going to be some share shifts in that market.

Not everyone is going to win.

The local brands are sorting it out.

We see three or four companies emerging.

The foreign brands, the global players will participate.

One of the things to note about Skyworks is we're highly diversified.

We're diversified with the China brands.

We're diversified with the global brands, and we'll do well in that market as it grows.

Thank you.

We now have a question from Steve Smigie with Raymond James.

Please go ahead.

Hi.

Thanks.

This is Vince Celentano in for Steve.

Going back to the broad markets, it looks like you grew around mid-teens this year.

Given the growth in wearables and as you're saying, the content growth in networking gear.

Do you think this mid-teens growth is a sustainable growth rate for 2016?

Or, do you expect more growth because of that?

In general, what are the main drivers you see determining what happens?

Yes, no, absolutely.

So, the broad markets it's getting quite exciting because it's really the sum of many, many different segments.

We talked a lot about our Wi-Fi business and access points and connected home, and now you do have the emergence of markets like wearables.

And, what we're seeing in those markets is early stage, it's been relatively light duty with respect to connectivity.

They may incorporate Wi-Fi.

We have ZigBee.

We even have Bluetooth products that are participating through that space.

But, we're starting to look further out in architectures with lead customers, and they're bringing in higher levels of complexity even in wearables and in IoT devices.

We're seeing LTE being embedded in solutions that will launch in the back half of 2016.

So, it's very early innings for mass adoption with consumers.

But, it's quite likely that the content trends that we've observed in smartphones could play out in IoT as well and in wearables.

Okay.

Great.

Thanks.

And then, just a quick line item question.

Was there any particular reason for the jump in accounts receivable this quarter?

No, our DSO for the quarter was the same as Q3.

Q3 and Q4 were right around 43 days.

It was just the timing of when the revenue shift in the quarter, that's all it was.

Not a collection or velocity issue.

Thank you.

We have a question from Vijay Rakesh with Mizuho.

Go ahead, please.

Congratulations on a great quarter and guide.

Thank you.

Couple of questions on the TC saw side.

Obviously, is growing 120%, 140% year on year looks like.

How much capacity are we adding in RF as we look into next year?

We've added about a tripling of capacity with the new factory, a Hitachi-class factory we acquired.

We've been outfitting.

That's why you saw a little bit of an increase in the capital.

We're beginning to ship into that new factory, and we'll see a good doubling of expansion.

And, further to that, think of this as a high performance filter site.

All topologies, so bulk acoustic wave opportunities, temperature-compensated surface acoustic wave, standard surface acoustic wave.

It is a first-class facility.

We're funding it in the right way.

We've got great people, qualified proven people.

We're upping our game in design engineering.

We've got a war chest of IP.

This is going to be a real driver, competitive driver for us.

Just to clarify, the new facility is a leased facility.

It wasn't a big CapEx investment for us.

The equipment we're investing in, but the facility itself was just a lease.

I know it has been asked before, but as you look at 2016, your comfort at the content growth, the marquee phones.

It's very high.

We have really quite good visibility.

It's really a function of two things.

One is that the content in general is going up as more bands are brought to market, more carrier aggregation bands, more sophisticated Wi-Fi, more power challenges that need to be solved in the analog functionality.

So, we're able to do that.

We have increasingly been able to put more functional blocks on the table to try to sweep in more whether it's in our module or at the IC level.

I feel very comfortable that this increasing content generation over generation will continue.

Thank you.

Our next question comes from Edward Snyder with Charter Equity.

Go ahead, please.

Hello.

Mr. Snyder, your line is open.

Okay.

We will move on then to Mike Burton with Brean Capital.

Please go ahead.

Hello.

Thanks for taking my questions and congrats on a strong quarter, especially in this environment.

First, for Don, great execution on the margin front and a nice update there.

Sorry, I missed it.

But, did you say that we should be using a 57% contribution margin going forward?

Then, what are the puts and takes for OpEx as we go through the next fiscal year relative to normal seasonality and planned program ramps?

Yes, Mike.

As far as the drop-through, if you were to look at going from the guide we just gave to December to the target revenue quarter of $1.125 billion and you looked to 51% to 53% and you just did the drop-through on that volume change.

It's 62%.

Why I'm saying use the 57% is because it's going to be a little different than that.

It's based on the timing of shipments.

There may be some quarters that will be a little higher than that.

I would look at that time frame, and you can smooth that out over that.

If you just did it on a straight line basis it would be 62%.

There's going to be some quarters, it could be 57% and 70%.

That's why I'm answering the question I am.

But, it's all good news, obviously.

Okay.

And then, on the OpEx side?

Yes, I would say to model that the way we've done when you look to six quarters out we're adding about $3.5 million a quarter in OpEx.

Thank you.

We have a question now from Harsh Kumar with Stephens.

Please go you ahead.

This is Richard.

Let me echo my congratulations as well.

Thank you.

Wanted to talk about the broad markets.

Clearly the IoT market is going crazy.

Could you quantify the CAGR you're seeing there?

And then, in terms of your automotive strategy.

Can you talk about your design wins there?

And then, when should we start to see the acceleration of revenues?

Sure.

So, within broad markets this last year we grew about 20% year-over-year with all segments.

The IoT elements and segments have been the fastest growers.

We have IoT growing faster than that 20%, and then, we have some markets like infrastructure that have been a little bit slower.

Net-net you get to 20%.

We think that's sustainable.

We're adding new customers.

There's a roster of names that we participated with this year.

We talked about some of the marquee solutions with Google's OnHub and other devices.

Automotive -- we're starting to get design wins in a couple of places.

We started with some of the infotainment-like solutions with Wi-Fi and power management in dash.

More recently, we've seen customers adopt LTE-based roaming hot spots, if you will, and gobble up a great deal of 4G technology.

Those solutions will be shipping later in 2016.

It's still very early for us.

Automotive is still a new market for Skyworks.

But, yes, you should expect a lot more there from each of the segments.

The traditional IoT, the connected home, and then eventually more on the auto side.

That's very helpful.

Thank you for that color.

In terms of the December quarter guidance, what are the puts and takes to get to your guidance level on revenues?

Okay.

This is Dave.

December is normally a strong quarter for us.

It's a holiday seasonal ramp.

We'll continue growth in emerging market LTE upgrade cycle.

We've got some nice content.

We've got really good position with the SoC partners.

I think we'll see another strong broad markets quarter, particularly in the connected home and in IoT.

This will be offset a little bit maybe by some of the markets we address like industrial, so we see a little bit of softness there.

But, net-net, broad markets will be up in December.

So, we're guiding revenue up to be about [15%] year-over-year, margins will expand.

And, as Don mentioned, strong earnings leverage.

Great.

Thanks.

Congratulations.

Thank you.

Thank you.

Our next question is from Vivek Arya with Bank of America Merrill Lynch.

Go ahead, please.

Thanks for taking my question.

I'll echo my congratulations.

Very good results and guidance despite all the noise and headwinds in the markets.

Good to see that.

Thank you.

Maybe as my first one -- Dave, I'm trying to understand, if let's say for whatever reason growth shifts from your large marquee customer to let's say customers in China, how is Skyworks positioned?

And, is it fair to think that when I look at your absolute content, it may be roughly similar in both situations because at the large market customer you probably have less share and a higher bill of materials.

Whereas at the Chinese customers, you may have higher share and a lower bill of materials.

So, is it possible that there is that kind of balancing?

So, even if growth shifts from one class to the other you can still continue to do well?

I think, yes, we can continue to do well.

I think we continue to do very well because content is going up across our customer base.

It's interesting that you commented on -- it's kind of a winner take all with some of these indigenous suppliers -- providers rather.

OEMs within China and our content is going up among those.

So, I think it really remains to be seen.

But, it has been the case that the leaders in the smartphone space have been driving technology that has been later adopted by others.

And so, there's a little bit of a time delay.

I think your thesis is fine.

And, as my follow-up, even after you complete the announced PMC acquisition, you'll still have a relatively strong balance sheet and low leverage.

How do you think about uses of cash and the debt capacity given where the stock is right now versus what you think is a strong growth trajectory as you look at next year?

Okay.

Well, I think with respect to M&A, you're right.

We'll have light leverage, and we will have an opportunity to pay it down very, very fast because as you've seen, we're quite a strong -- very strong cash generator.

We generate a lot of free cash flow at Skyworks.

And so, if I look at the long term, we continue and will continue to look for accretive acquisitions that have a couple of characteristics.

One is they have stickiness to the end customer so there's a technology envelope or market being addressed that is highly valued where we can leverage perhaps customer relationships, manufacturing expertise, process know-how, system capability and create solutions that have a great deal of value.

We're also looking for opportunities to leverage our position in mobile and connectivity for adjacent markets, vertical markets if you will, that again have those same characteristics.

We're very interested in looking for analog opportunities that are outside of our current target market scope and look for logical extensions where we can continue to reduce -- increase margins while having more legs to the stool, if you will.

Vivek, just to follow on that.

As Dave said, if you look at our EBITDA and our strong cash flow, we certainly have the powder to lever up more than those [fet] deals.

PMC would be about 1.2 times EBITDA.

We still would have room to go if we so desired.

We like the 40% return to the shareholders.

So, we'll continue to look at annual dividend increases.

That's the smart play for us, and then we'll do opportunistic share buybacks.

That's the right formula.

Obviously, we could take that number up.

We think the best long-term value is to continue to focus on how we're going to grow the top line of the business.

That's the balance that we're trying to strike.

Thank you.

We have a question from Edward Snyder with Charter Equity.

Go ahead, please.

Thank you.

Sorry about that.

So, a couple things.

First, Dave, you did better on the phase 2 MediaTek than I think a lot of people anticipated here.

I first want to confirm that that was something like SkyLiTE, correct?

Does it represent an increase in RF content both for that platform or the last one and for Skyworks?

And, is that the trend you're seeing in even the white box guys at this point?

This is Liam.

That's a great pickup on that.

We did win some meaningful share with MediaTek.

It is our SkyLiTE product line.

What SkyLiTE is actually is think of it as our SkyOne ex-filters.

There's a couple of themes there.

The content with MediaTek on those platforms is going to be an upgrade from where we were on the prior region.

But, over time, if you can envision -- if we start to develop our filter strategy and out integration strategy with a Company like MediaTek taking the SkyLiTE and now embedding high performance filters.

You could see a real pop in opportunity and it's something that our chipset partners want to see.

So, yes, you called that correctly with the technology.

We're happy with the position.

We love MediaTek.

We worked with them for years.

They were a little late to the game in 4G.

As you've seen, they're accelerating gains.

And then, you have been talking a lot about BAW here, and I know you work at it.

This is kind of an FBAR-type process -- I think it is -- is it not?

Does Panasonic have IP in that?

Do you think you'd cross over anything that Avago has got here.

How do you feel about the IP situations given that there's only two other guys doing this right now?

Panasonic has, as you can imagine, a great deal of fundamental IP around filters in general, and so filters have been around for a long time.

Bulk acoustic filters have been around a long time as have surface acoustic filters, and so we have a lot of IP in filters.

Panasonic brought us a great deal of expertise and leverage.

Thank you.

Ladies and gentlemen, that concludes today's Q&A session.

I'll now turn the call back over to Mr. Aldrich for any closing remarks.

Thank you very much for listening, and we look forward to seeing you at upcoming conferences.

Thank you.

Ladies and gentlemen, that does conclude today's conference call, and we thank you for your participation.