Qorvo, Inc. (QRVO) Q4 2014 Earnings Report, Transcript and Summary

Doug DeLieto - Vice President of Investor Relations Robert A. Bruggeworth - Chief Executive Officer, President, Director and Member of Corporate Development Committee William A. Priddy - Chief Financial Officer, Corporate Vice President of Administration and Secretary Steven E. Creviston - Corporate Vice President and President of Cellular Products Group Norman A. Hilgendorf - Corporate Vice President and President of Multi Market Products Group

Michael A. Burton - Brean Capital LLC, Research Division Harsh N. Kumar - Stephens Inc., Research Division Vivek Arya - BofA Merrill Lynch, Research Division Edward F. Snyder - Charter Equity Research Cody G. Acree - Ascendiant Capital Markets LLC, Research Division JoAnne Feeney - ABR Investment Strategy LLC Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division N. Quinn Bolton - Needham & Company, LLC, Research Division Philip Lee - JPMorgan Chase & Co. Blayne Curtis - Barclays Capital, Research Division Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the RF Micro Devices Q4 2014 Conference Call. [Operator Instructions] This conference is being recorded today. And at this time, I'd like to turn the conference over to Doug DeLieto, Vice President, Investor Relations for RF Micro Devices. Please go ahead, sir.

Thanks very much, Vincent. Hello, everybody, and welcome to our conference call. At 4 p.m. today, we issued a press release. If anyone listening did not receive a copy of the release, please call Samantha Alphonso at the financial relations board at (212) 827-3746. Sam will email a copy to you and verify that you are on our distribution list. Website rfmd.com under the heading Investors. At this time, I want to remind our audience that 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 our most recent SEC filings for a complete description. 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 unusual items that may obscure trends and 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, rfmd.com, under Investors. In February, we announced the definitive merger agreement under which RF Micro Devices Inc. will combine with TriQuint Semiconductor Inc. in a merger of equals. On April 14, 2014, the new holding company, currently named Rocky Holding, Inc., filed a registration joint proxy statement on Form S4 with the SEC. The filing may be found through EDGAR on the SEC's website, which is located at www.sec.gov under the company named Rocky Holding, Inc. We urge you to read the registration joint proxy statement and other documents filed with the SEC as they will contain important information about the transaction. Now in fairness to all listeners, we ask that each participant please limit themselves to one question and a follow-up. Sitting with me today are Bob Bruggeworth, President and CEO; and Dean Priddy, Chief Financial Officer. I'm also joined by Eric Creviston and Norm Hilgendorf, who lead our Cellular Products Group and Multi-Market Products Group, respectively, as well as other members of RFMD's management team. And with that, I'll hand the call over to Bob.

Thank you, Doug, and welcome, everyone. We're very pleased today to report strong financial results and outstanding execution by the entire RFMD team. Revenue for the quarter was in line with our guidance provided January 28, at $256 million while earnings per share of $0.12 was well ahead of guidance on the strength of robust margin expansion and operating leverage. Despite the seasonal decline in March revenue, RFMD's gross margin for the quarter expanded sequentially by 230 basis points to 42%. That's 2 percentage points ahead of our original guidance of 40%. On our quarterly earnings call, 1 year ago, we highlighted our goal to expand RFMD's gross margin by 300 to 400 basis points in 4 quarters. Four quarters later, we've nearly doubled that goal, expanding gross margin by 760 basis points. RFMD is executing on multiple long-term structural initiatives that are enhancing our operating model and delivering robust improvements on our financial performance. Today, we have greater than 75 initiatives underway that roll up into one comprehensive effort, spanning our entire organization. We are reducing our costs, in our fab, in our packaging and test facilities, across our supply chain and in how we design our products, and we're confident we can drive margins even higher. We're also confident in our ability to outpace our industry's growth rate in fiscal '15. One of the reasons for that is the market for RF Solutions is growing faster than the handset market. As an example, the dollar content available to RFMD in today's LTE and LTE-Advanced smartphones can easily exceed $10, versus $7 to $8 in the highest tier smartphones just a few years ago. That's significantly ahead of the year-over-year growth rate in smartphone units. That's due to a number of factors. First, smartphone manufacturers and carriers are acquiring more modes and more bands, as well as 802.11ac connectivity in order to maximize data throughput and better monetize the carrier's investments in spectrum and network capacity. To support these additional modes and bands, the industry is adopting technologies like envelope tracking, carrier aggregation and transmit MIMO, all of which expand our RF content opportunities further and add complexity to the device, thereby creating greater demand for our services. In terms of timing, we are beginning to support the volume ramps of many of this year's most popular devices, and we expect this to accelerate into the September quarter with the ramp of this year's marquee smartphones and tablets, weighted towards the back half of this calendar year. We're seeing a similar dynamic play out in midtier phones. The 3G feature phones of yesterday are evolving to include additional LTE bands, and this is increasing the RF content by $2 to $3. In developing geographies, the migration from 2G voice only phones to higher dollar content 3G entry devices is increasing our content opportunity in the entry-level by as much as 2 to 3 times, depending on the band count and the addition of WiFi. What's even more exciting and is a much larger opportunity for RFMD, is the deployment of 4G TD-LTE in China. RFMD has historically enjoyed a very strong presence in China, with both customers and channel partners, and we're in the very early stages of the deployment of TD-LTE. We enjoyed meaningful revenue related to multi mode TD-LTE devices this quarter, and we see the increasingly, rapid -- we see that increasing rapidly to tens of millions of dollars per quarter, across a broad portfolio of PAs, switches and antenna-tuning components. In fact, one large multinational customer based in China, RFMD has secured as many as 10 of our parts per phone, in support of their upcoming flagship smartphone launch. The demand we're seeing today related to 5-mode TD-LTE is ahead of where many industry analysts had forecast, and some of our largest customers are telling us there could be more than 150 million TD-LTE devices produced this year. Supporting this view, TD-LTE is driving significant new investment in wireless infrastructure. According to the China News Service, China Mobile aims to install 500,000 new base stations in 2014, and another 500,000 by 2016, driving up demand for MPG's range of base stationed components. So our end markets are growing, and the RF PAM is growing even faster. There are distinct, long-term growth drivers that favor RFMD, like TD-LTE in China, two-by-two MIMO WiFi connectivity in smartphones, additional LTE bands and feature phones, additional 3G bands and entry smartphones and the advent of new cellular technologies like envelope tracking, carrier aggregation on the downlink and later, carrier aggregation on the uplink. More specific to RFMD, we're capturing additional content in new categories like antenna tuning, impedance tuning, diversity switches, power management circuits, highly integrated receive modules and soon, RF Fusion, a complete RF front-end solution for 4G world phones and tablets. RFMD is also positioned to capture additional growth created by the Internet of Things, which is beginning to add sensing, processing and connectivity capability to nearly any object imaginable, and encompasses a broad array of global macro trends like embedded connectivity, wearable technology, the connected home, automotive WiFi and others. RFMD is capturing broad opportunities in Smart Energy and home area networks, with our ZigBee and WiFi solutions, and we're at the forefront of new standards in development, like the sub-1 gigahertz standards enabling long-range mesh networks and the 802.11p standard for automotive networks. We are enjoying broad-based design win activity in WiFi for both mobile and non-mobile applications like routers, access points, set-top boxes and televisions. We see double-digit growth opportunities in WiFi, especially where device requirements favor RFMD's performance leadership. So looking at our diversified growth opportunities, our diversified product portfolio and the multiple efforts underway to expand gross margin and enhance our operating model, we are confident in delivering revenue growth ahead of our underlying markets, gross margin at the top of our industry, powerful operating leverage, robust EPS growth and strong free cash flow. And with that, I'll turn the call over to Dean.

Thanks, Bob, and good afternoon, everyone. Consistent with January guidance, revenue for the March quarter was $256 million. CPG revenue was $203 million and MPG revenue was $53 million. RFMD had 2, 10% customers. Gross margin for the March quarter increased 230 basis points sequentially and 760 basis points year-over-year to 42%. Gross profit totaled $107.6 million. RFMD has an intense focus on gross margin. We're employing advanced analytics to make material reduction in our manufacturing footprint, our cost structure and our fixed asset base. We're achieving multiple points of benefit as well as more predictable margin profile. How much more benefit do we see? Back in December, I made a statement at an Investor Conference in New York, that we have an internal goal of having the highest gross margin in our industry. Today, we believe RFMD is on a path to industry-leading gross margin. Again, that is the highest gross margin in our industry. We challenged our organization to be the best, and we're very pleased with the progress they're making. We anticipate significant gross margin expansion in the June quarter, and longer term, we believe the actions we're taking will continue to drive multiple points of margin improvement. Returning to P&L, operating expenses were $74 million compared to $74.6 million last quarter. With G&A of $10.2 million, sales and marketing of $16.2 million and research and development of $47.6 million. Operating income for the March quarter was $33.6 million, representing approximately 13.1% of sales. Other income was approximately $0.5 million, and non-GAAP taxes were approximately $0.8 million. Net income for the quarter was $33.4 million or $0.12 per diluted share, based on 289.5 million shares. Moving to the balance sheet. Cash, cash equivalents for short-term investments totaled approximately $244 million. Cash flow from operations was $31.7 million and free cash flow was $24.4 million. DSOs were 49.8 days, and RFMD's inventory balance declined by $10.6 million, resulting in terms of 5. Net PP&E was $196 million and capital expenditures during the quarter were $7.3 million, with depreciation of $11.7 million and intangible amortization of $7.5 million. As an update on our convertible debt, RFMD retired the remaining principal balance of $87.5 million of convertible notes on April 15, and today, RFMD is debt-free. Regarding our proposed merger with TriQuint, we have submitted our HSR application to the FTC, and we have filed our S-4 with the SEC. We anticipate filing with Moscom very soon. Now for the financial outlook and business commentary for the June quarter. RFMD expects quarterly revenue to increase approximately 19% sequentially to approximately $305 million. RFMD expects non-GAAP gross margin to expand sequentially by approximately 150 to 200 basis points. RFMD expects non-GAAP operating expenses to be approximately flat sequentially. RFMD expects a non-GAAP tax rate of approximately 15% and RFMD expects non-GAAP earnings per share of approximately $0.17. And with that, we'll open the call up to your questions. Thank you.

[Operator Instructions] Our first question is from the line of Mike Burton with Brean Capital.

First, Bob or Eric, can you help us understand where in the June quarter you're seeing the outperformance versus your normal seasonal patterns, is it more China versus Tier 1s, or something else and any comment about the shape of the rest of this year? Are you benefiting from anything that might be getting pulled into the June quarter that you might not normally see out in September?

Mike, as far as what's driving the growth, I think as I touched in my prepared remarks, it's pretty broad-based, we're seeing it across a number of different areas, but clearly what we're seeing in the TD-LTE market with the expanding dollar content and then, not just being PAs, but also being the work that we've done with switches and antenna tuning. So it's not just a PA comment, we're just seeing an expansion in the RF content there. But we're still seeing the 2G voice-only phones also migrating to 3G. We're also seeing that midtier phones starting to add, the feature phones starting to add LTE. So when we look at it, it's very broad-based, that's we're starting to see it. But I would say the initial ramp up that we're seeing right now is primarily LTE, TD-LTE and again, more than just PAs, it's PA switches, and antenna tuning like that. And further out through the year, we're just going to have the watch as further marquee phones are launched. Several of them are lining up, and one of our major customers continues to release "marquee phones" throughout the year, so we'll just have to see how the sell-through goes. WiFi is also being added into the phones, and we're starting to see that as well, and our business is continuing to grow in WiFi for mobile. So again, it's not just the cellular components, but also the WiFi. Right, Eric, or Norm, add any more color, need be? That good?

And then, Dean, great progress on the margins. You stated before the expected 45% gross margins by the end of next year, can we get an update on that, or if not, maybe can you help us with the, how we should expect gross margins to trend, going out past June and likewise with OpEx, flat or into the June quarter, how do you expect that to trend with the RF fusion launching in the second half?

Yes, we see another improvement in gross margin past the June quarter. So we're getting pretty good visibility off the hill into how the margin profile is beginning to shakeout. And it's really how well the organization has done in responding to the -- our challenge for margin improvement. And we've broken it down into buckets, like our manufacturing footprint, our flexible sourcing model, our relentless pursuit of cost-reductions, including design for cost and filing our product portfolio management. So it's really a broad-base, across the entire organization. The margin improvement initiatives are working, and I think we're going to continue to work throughout the year.

Our next question comes from the line of Harsh Kumar with Stephens.

I wanted to ask a question, Dean, on the gross margin uptick, perhaps in the big uptick in the March quarter, relative to what you were thinking, and then also again in the June quarter. If I had to say, what was the one big thing that drove it more than anything else, or maybe the 1 or 2 big things that drove it?

In fact for the March quarter, it was the relentless pursuit of cost reductions throughout the supply chain. To some extent, we're beginning to see the benefit of our design for cost initiatives, but they're more towards the back half of the year. Product mix may have helped a tad during the quarter, but more than anything else, it was a very, very good work that our sourcing organization's done on getting calls out of our products. For instance, in our wafer fab, our variable costs for wafer has declined 40% year-over-year. And that's because of our war on gold, our war on chemical usage, and other activities within the fab. So it's really an across the board effort from the organization. We're also seeing the full realization of sizing our manufacturing footprint appropriately and did see some improvement in gross margin because of our CMOS PAs as well.

Got it. As my follow-up, if I can ask you, I know the merger's going to happen soon and the numbers will change dramatically, but assuming that's -- put that aside for a second, would your growth, with your OpEx where you're at, how much revenue can you support in your organization, with this level of OpEx in keeping that flat?

We can support significantly higher revenue growth. We have manufacturing capacity. It takes significant amount of our manufacturing outsource silicon, and I would say it could easily top $100 million per quarter of additional growth.

Our next question comes from the line of Vivek Arya with Bank of America Merrill Lynch.

Hey Bob, you mentioned very strong pickup in TD-LTE, should we expect that to sustain, even in the back half? And I think maybe what we are all trying to get a sense for is that, how much of the growth you are seeing right now could be like the first major step function in China, that perhaps stays up the back half, or really how much of this growth is sustainable, and how should we think about seasonality as we get into the back half of the year?

Vivek, great question, and I think Eric would like to answer them.

Sure. So regarding TD-LTE, I -- really, it's just getting started now. We're beginning to ramp up in the March quarter, just to put [indiscernible] into the quarter. We'll have a full quarter shipment this quarter. I looked at the models for the year. What we're hearing from our customers and it's really about a 1/3 of the annual demand that China Mobile is targeting and others, we ship in the first half, which we tell you, we should still see a pretty good second half of growth on TD-LTE. As you probably know, recently that's changed significantly with China Mobile requiring 5-mode phones on the network, and we also see a lot of other networks uptick in TD-LTE. So I know on the call last quarter I commented a target of 50 million TD-LTE handsets for this year, and you heard in Bob's prepared remarks now, our customers are telling us to expect more than 150 million TD-LTE, and it could be, in fact much higher. And we see the growth really continuing on through next year as well, because a lot of the, not just the carriers, but the large China handset OEMs, see this as a real opportunity to take the main stage with smartphones and see tremendous financial growth coming from these adoptions with the TD-LTE into their portfolio.

Got it. Very helpful. And I'm wondering where you are with your ultra low-cost CMOS power amplifier, and I'll ask other question what I'm at it, which is, Skyworks formed this joint venture with Panasonic on the NDC software's doing around. Wondering if it changes the competitive landscape in any way for you guys?

So first off, with the 2G CMOS TA, that continues to go very well, as a percentage of our TD portfolio. It's growing significantly. Over all, as we've been saying for the past couple of quarters, 2G continues to decline in general, but in the March quarter our 2G CMOS pay was actually flat, and in fact, up slightly, so as a percentage of the overall 2G, it's going quite nicely. It's ramping into the Tier 1s now and so forth. So that's continuing to go well and that's, I think, and also a contributor to the margin expansion, as we said it would be. The second question was about the Skyworks/Panasonic joint venture. Yes, I think that makes a lot of sense. I don't think it has any negative implications on us, we do source them parts from Panasonic today, of course, and we'll continue to. We have a supply agreement there. We see, of course, our plans with our merger, we see that there is indeed to help customers with higher levels of integration being able to codevelop and coproduce the filters for at least some of the filter bands within your products, can definitely help you optimize the products and -- so we think it makes perfect sense.

Our next question is from the line of Edward Snyder with Charter Equity research.

So 2 each, right? Eric, you mentioned the 2G, the 3G business was flat this quarter, but you said it was ramping into top-tier OEMs, does that suggest that you expect that to either remain flat or move-up in the out periods? And as you see more this 4G, et cetera, I mean, they all require 2G amps. Are you finding -- are you getting any traction with the CMOS parts into some of the more sophisticated -- or are still doing GaAs there? And then just along the same lines, how do you expect to beat Samsung, now they've launched GS4G, expect up flat or down year-over-year, and has the mix moved away from GaAs to SOI at Samsung? And then, Dean, you guided for 10% to 15% non-GAAP tax rate last quarter. It was 0% this quarter -- it certainly helped the net income number. Did I just push out of quarters or was something else going on there? And you've always said that you'd get better leverage on OpEx. Looks like that's happening now. Should we be modeling relatively flat this year, given what you just said about the incremental growth in the top line, being another $100 million or so?

I will attempt to take care of this and be the quarterback here. Eric, question was on the CMOS PAs, making progress at the Tier 1s, and how that's going, and then also, I think as he related into some of the higher tier phones, and what's going on with SOI and GaAs, and talk about your old portfolio, and then Dean will take the financials.

I think it's also a question sprinkled in there on Samsung as well.

Correct.

So starting off the 2G CMOS, just be clear, I said that overall, the 2G portfolio is still declining sequentially, but our 2G CMOS PA was flat sequentially. So it increased as a percentage of the portfolio. We do see it ramping throughout the year, and some of that, as you said, is potential placements into other 3G entry handsets, although so far that has not happened yet. A lot of the 3G entry handsets are adopting multi-mode, multi-band power amplifiers with 2G included. So we do expect to see continued adoption and ramp up in 2G CMOS PA even outside of the 3G entry tier. And then on Samsung generally, that was a -- in fact, a highlight of our March quarter, in fact we grew nicely within in the March quarter on their new platform ramps [ph] , we're positioned very nicely across the portfolio, all the expense providers and all product functionality, too. Discrete PAs, Multi-mode PAs, both APTN, ET, antenna switches, discreet switches, infinituners, and even power management ramping as well there. So we have a very broad and healthy relationship with them, and we're definitely expecting to grow.

Yes, and regarding the tax rate, you remember this was the end of our fiscal year. So it was a true-up for our cash taxes. So we got just a little bit of a benefit, given where we were going into the quarter. Looking at next fiscal year, I do believe the tax rate is going to increase. We'll have the cash taxes that we pay, which has been predominantly in international entities, and given the level of profitability that we expect to generate, there's also the possibility that we could be paying some cash taxes here in the United States as well. I mean, obviously, we're going to do everything we can to minimize our cash taxes, but I think that the 15% is a good going-in position for fiscal year '15. Regarding advances, you may have already seen the highest expense for the year. Especially given that the payroll taxes and all that hit the hardest in the March quarter. I think the June quarter will be relatively flat-ish, but we could actually see a small decline throughout the rest of the year.

Great. And then for my second question, if I could, real quick, on the Panasonic/Samsung, I'm sorry, Skyworks/Panasonic filter thing, you were probably Panasonic's second-largest customers in filters. I know you have an agreement with them, the announcement said they were going to close in the third Q, or planned on it, and I know you'll close with TriQuint around that time. But the transition, once you're part of a new co., to starting sourcing filters from them, may take a bit longer. Is there -- how confident do you feel that your source of filters from them, could they do TC-SAW? And then one of the guy, I guess, obviously besides TriQuint, that's got a good source of that, will remain uninterrupted and will it impact your design plans for early 2015 or so, or you're just not worried about at all, based on what you think you can get from TriQuint?

Ed, this is Bob. Number one, it was not a surprise to us what transpired. Number two, as we put in place our supply agreements, we had anticipated the potential of someday that, not staying part of Panasonic, so we're not worried about any supply interruptions. And just, we commercially have done business where we bought from Skyworks in the past, Skyworks has bought from us in the past, and if we need to buy from them in the future, we would. But again, I think the most important thing is, this was by no way a surprise to us. And again, as we set up our own sourcing agreements with them, we're not worried.

Our next question comes from the line of Cody Acree with Ascendiant Capital.

Maybe, Eric, if you could, to the extent that you can, in CPG, could you give us some degree of breakdown, particularly maybe what -- how the market share and percentage of revenue in China? And then, newer products like your aggregation envelope tracking and some of your antenna control solutions, just give us a sense of how that shakes out?

Yes, hi Cody. We're not going to be able to break out in all the different product categories. I think we can give you at least what the China business was, as a percent of the Cellular business. We're really not going to get into all the different categories. I mean, what's driving our growth, as I said in my opening comments, is everything that's in the Cellular business, to what's going on in MPG and we're just seeing broad-based growth in various components. But you want to give your China business?

Yes, in the March quarter, as CPG, first thing it's just CPG revenues China was in the low 20% range, between 20% and 25%.

And, Dean, on the gross margins, you got multiple initiatives you're still working through, some of those are longer tailed. I guess, if you kind of have to characterize what inning we are in, in that margin expansion, how much do you think there is left as you push through '14 and into '15?

Well, like we commented, we've -- we don't plan to stop improving margins until we have the highest margin structure in the industry. There is obviously, at some point, trade-offs between -- in our growth rate and margin structure. But, when I look at the list, I mean, we have 75 active projects that we're tracking in the company. We're in various stages of executing on those projects. Yes, we had several pretty big things. Now we've got a lot of little things that do add up though, to nice cost reductions with margin expansion. So I think we're still on a very steep curve though, regarding our margin improvement profile.

Our next question comes from the line of JoAnne Feeney with ABR.

Question for you on your view of unit growth this year, versus your content gains, and then the usual ASP decline that we eventually see in all semiconductors. For the third parties, are estimating about 19%, 20% unit growth in smartphones, heavily weighted towards the low end. Obviously, you're seeing a lot of RF content gains. So I'm wondering, what you think about this year, in terms of the unit growth as a contributor to your growth, versus the content gains? And then, how much should we expect to see individual component prices either through integration or just through natural pricing pressures decline year-over-year?

Well first off, responding to the cellular market, at least. In total, the unit growth is roughly flat for the year that we're modeling. So all of our growth would be attributed to content gains, essentially. If you said that where there is growth, adjusting higher RF content phones like LTE and TD-LTE and so forth. So it's all content gain from here.

Okay. So you're including feature phones and low-end phones, I was referring just to smartphone unit growth, which has been estimated to be somewhere around 20% for the year?

Yes, I think that's correct. But I think what Eric was communicating when we look at our total RF TAM, which we have to include all of that, what we analyze is the overall market is going roughly be flat, and the TAM is going to be growing, and that's roughly out of the addition of RF content. You're in the ballpark for what that category of funds will do, but we look at every tier to look at our total business, and that's why in our prepared remarks, we talk about 2G, voice moving to 3G entry and plus for us, that's a tripling in dollar content. That's pretty meaningful to us as well. So we kind of look at that whole thing. And then also the addition of WiFi, we also consider that.

Okay, perfect, really helpful. And then back to the follow-up on the gross margin and others have been asking, what is it about RF Micro Devices that makes you confident that you can achieve industry leading gross margins? Is it ASTs, is it your particular mix versus the others? Do you feel like you have an advantage in the manufacturing side, Why did you have confidence that you can do better than the rest of the companies here?

I think the discipline and the process that we've instilled in the company. We talked about the 75 different projects that we're actively tracking. We're talking about taking some of the hard, strategic steps over the past 3 to 4 years or so, for instance, selling our MBE facility, selling our GaAs fab in the U.K., adopting a sourcing manufacturing model and just when we take into account what we expect to be average ASP erosion, and look at the cost structures that we expect to be able to achieve, through our sourcing and our own manufacturing, the result is what we believe will be the highest margin structure in the industry.

Our next question comes from the line of Anthony Stoss with Craig-Hallum.

Bob, if you wouldn't mind talking a little bit more on the TD-LTE 4G base station, following up on the comments you made, I'd love to hear your view on just the growth rate of that segment for your business. Also, are you able to pick up any more in the gross margin side there, given the 75 different projects you have? And then secondly, on the IOT, I'd love to hear your view on how you think RFMD's going to attack the market, what products you might be launching into the IOT?

All right, Tony, I think, as we haven't heard from Norm, he'd like the jump in and respond. Thanks for asking about his business.

TD-LTE is a -- is very exciting right now for us in the wireless infrastructure category. We've had some very strong growth last quarter, double-digit quarter-over-quarter growth for us. And this is in an area where we sell a wide variety of products, gain blocks, power amps, triple gain amps, attenuators, switches, in an area that's traditional strength for RFMD and above average gross margins for MPG. So it's a strong category, and we see legs in this throughout 2014. There's quite a ways to go yet with the installations for China Mobile. So it's continued strength there in TD-LTE for us in wireless infrastructure, we also mentioned Internet of Things. Our initial foray in the Internet of Things is with WiFi, where we see a lot of people using WiFi because it works. But we're also seeing a lot of new activity in ZigBee, and ZigBee being adopted in categories where perhaps they don't need the hefty data rates you can achieve with WiFi these days. But they may still need a front-end module or an external power amplifier to extend the range of those ZigBee devices. And since they operate, the ZigBee operates in the same frequency band as mo band WiFi, we're able to very beautifully adapt our WiFi products for ZigBee applications, which supports appliances and other home networking applications, and automated meter reading and smart grid applications as well. So we're seeing very good activity throughout the industry in that area.

Our next question is from the line of Quinn Bolton with Needham & Company. N. Quinn Bolton - Needham & Company, LLC, Research Division: Just a quick first question for Bob, and then one for Eric. Bob, I think on the last call, if I'm not mistaken, you sort of thought that the company could be positioned to grow 10% year-on-year in fiscal '15, given the better-than-expected gains for June, I assume you're still comfortable with that. Just wanted to touch base on that expectation?

Thanks for asking, Quinn. We are absolutely comfortable with that. It's still our intent to grow faster than our underlying market, and as I said on the call last quarter, greater than 10%. N. Quinn Bolton - Needham & Company, LLC, Research Division: Great. And then for, Eric, I know you talked a lot about TD-LTE strength, seems like the China 3G market, especially quad core, and maybe even octo core platforms, you're still seeing pretty good strength. Are you seeing, good attach rates there, on some of the 3G platforms? Or is your growth in China predominantly from the TD-LTE phones?

Yes, that's a good question. Actually, we see great attached tests to all the 3G platforms as well. I think, why we're talking so much about TD-LTE is that it just frankly, exploded over the past couple of months in terms of the demand and the outlook for the year. So it's layering on top of the 3G platforms as well.

Our next question comes from the line of Christopher Danely with JPMorgan. Philip Lee - JPMorgan Chase & Co.: It's Philip Lee on for Chris. You highlighted LTE as a major driver, can you comment on your current split?

I guess, how we've done really in the past, which is 2G to 3G, 4G.

Yes, so 2G as a percentage of revenues and CPG is becoming less meaningful now, but it's down under 15% of CPG, so 85% of the business is in 3G and 4G combined, but we haven't been breaking 3G and 4G out, separately. Philip Lee - JPMorgan Chase & Co.: Got it. And as a follow-up, moving beyond the June quarter, do you see more of the growth being driven by China, with the TD-LTE stuff, or with the flagship phones from your top 2 customers?

Actually, if you look at our year-over-year growth that we're projecting, it's about half from our marquee smartphones, if you will. And the other half would be attributed to the 4G transition into low tier or basically, TD-LTE in China.

Our next question comes from the line of Blayne Curtis with Barclays.

Maybe if you could just talk, just as far as your outlook, I apologize if this was covered, but between CPG and MPG, the entire business up 19%, are you seeing any -- is it CPG is seeing stronger growth, you mentioned base stations and assuming that carries forwards for MPG, but if you could give any color between the 2 segments, that would be helpful.

Yes, Blayne, we're seeing growth in both business units. Last quarter, we commented MPG would grow, and they did, and we're expecting them to grow this quarter as well as CPG, and CPG is going to grow a little bit faster than MPG this quarter.

Great. And then maybe, Eric, if you can talk about, you talked about a 3 or actually you mentioned about a 3X content between 3G versus 2G. You make the same comparison, TD-LTE versus 3G, any way that you could frame how much additional content, PAs, and then maybe switches and filters as well, if you can highlight all 3, that would be helpful.

Yes, I can't really break out between each of these product categories, although well for you here, but the transition from 3G versus 2G was of that tripling of content that Bob referenced, and it's about another doubling then, from there to get to the TD LTE content. For the most part now, we're building 5-mode phones with 10 bands, there are some that are adding even more content and more bands of course, but on average, we're seeing in the $4 to $6 worth of RF content for TD-LTE. And that's the total RF content, so that includes filters, switches and the power amplifiers.

And I guess, pre-deal, is that PAM all -- can you address the entire TAM, I guess is, what I'm trying to figure out is, your addressable PAM pre-deal for PAs and switches, versus including the filters as well, which is obviously a great tailwind once you do the acquisition?

Yes, that's correct. So today, the way the architectures are being put together, especially since this is a relatively new requirement, they're still fairly discrete. They're a multi-mode power amplifiers, where they cover some of the band, then there are satellite power amplifiers, and then, antenna switch module, and several discrete switches as well, and potentially antenna tuners, but the filters are generally not included or integrated into our products today. So to your point, we are not addressing any of filtered TAM today. Longer-term, obviously, with the merger we'll have that content and be able to operate in higher levels of integration to address that market, too.

Our next question comes from the line of Steve Smigie with Raymond James. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: Something we could look out a little bit in the future here. You've obviously had great numbers here, and you still have some Skyworks and TriQuint as well, I think, so it seems like the industry, overall, is doing quite well as we've expanded here, something like 43 bands, just trying to get a sense of how long does this continue? I think we've talked in the past, maybe expands 100 bands, or something like that. So how quickly do we expand to the next set of bands, and is that going to be soon enough that you can keep the big dot [ph] content trend going here?

Well, it's not just about bands, although that is a key driver, but it's also just about bandwidth and being able to get more data through the pipe, if you will, and so that's what drives multi-mode operation as well, like the 5-mode bands that we're talking about, the China Mobile as an example, to allow people to have a big pipe into their mobile device, but also being able to roam across geographies and so forth. And so we see continued expansion, this would go on for some time, of the available bandwidth getting into the mobile device. Some of that is band-related, some is mode related, but then you have also carrier aggregation mode. So the carriers, having the capability of pumping a device to and from a mobile device, over multiple channels, is another big trend, which will again, add RF content, and switching and even in power amplifiers as well, driven by that trend. And then the next step beyond that, we talk about antenna tuning, and then just general tuning, with impedance tuning and so forth, to really extend the battery life and lower the actual operating temperature of the device. That is really just getting started, I think. The tunability in these handsets is something that, 5 years from now, will look totally different. I think that would be a much bigger market. It's just getting started. So it's not just about band proliferation it's about solving that total system problem for the customer, and that's was really driving a solution like RF Fusion, because it is getting so complicated to put all this together, and do system architecture and have the ability to make that very compact and easy-to-use for the customers, and that trend as well, is really just beginning. So we think we're still very early stages of a long-term growth trend here for the RF industry. Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division: I did want to follow-up on the RF Fusion. It was going to be my next question, anyway. And so as you look at the R&D investment, you have to make here, does it become a little bit more of a high-stakes bet in a sense, where if you have to put all this stuff together for a particular RF Fusion Solution, are you making a big bet that, hey, these are the bands people are going to want, or is it more you're working closely enough with customers that there isn't a flexibility there that it's not really a bet in that sense?

That's a great question. And it may be surprising, but actually it's not the big bet you might expect it is. You may recall, over the past couple of years RFMD has already begun marketing complete reference design. So we been working closely with customers to really optimize the system architectures and build solutions. Now were just taking it to the next level, in terms of packaging technology, to really make it compact and in a single footprint. So a lot of the R&D that we've been spending for several years has really been in anticipation, and set us up to deal, to drive us across the goal line.

That concludes our question-and-answer session for today. At this time I'd like to turn the conference back to management for any closing remarks.

Thank you for joining us tonight. RFMD is executing on multiple, long-term structural initiatives that are enhancing our operating model, and delivering robust improvements in our financial performance. We are confident in delivering revenue growth ahead of our underlying markets, gross margins at the top of our industry, powerful operating leverage, robust EPS growth and strong free cash flow. Thanks again, and good night.

Thank you, sir. Ladies and gentlemen, if you'd like to listen to a replay of today's conference, please dial 1 (800) 406-7325 or (303) 590-3030 using the access code of 4678178, followed by the pound key. This does conclude the RF Micro Devices Q4 2014 conference call. Thank you very much for your participation. You may now disconnect.