Good day, and welcome to the Qorvo, Inc. Q2 2021 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Douglas DeLieto, Vice President of Investor Relations. Please go ahead, sir.

Thanks very much. Hello, everybody, and welcome to Qorvo's Fiscal 2021 Second Quarter Earnings Conference Call. This call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the safe harbor statement contained in the earnings release published today as well as the risk factors associated with our business 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 about 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 complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today available on our website at qorvo.com under Investors. Joining us today are Bob Bruggeworth, President and CEO; Mark Murphy, Chief Financial Officer; James Klein, President of Qorvo's Infrastructure and Defense Products Group; and Eric Creviston, President of Qorvo's Mobile Products Group; as well as other members of Qorvo's management team. And with that, I'll turn it over to Bob.

Thank you, Doug, and thanks to everyone for joining our call. In our second fiscal quarter, Qorvo outperformed our updated guidance on revenue, gross margin and EPS. Strength was broad-based across customers and supported by multiyear technology upgrade cycles. Both businesses had strong year-over-year growth, supported by new product launches, 5G and WiFi 6. In Mobile Products, the transition of 5G is fueling a shift from discrete products to higher-value content, including integrated modules in flagship and mass market 5G smartphones. Driving growth, Qorvo is leveraging our deep technology portfolio and pursuing opportunities throughout the front end, at the antenna, in the main path, in the diversity path and across the frequency spectrum. At the antenna, the introduction of new bands and band combinations is creating significant design challenges for OEMs. Qorvo solves these challenges with a range of products, including an expanding portfolio of antennaplexers. In the September quarter, we increased volume shipments of our BAW-based antennaplexers solutions to multiple Tier 1 OEM smartphone manufacturers. In the main path, Qorvo's highly integrated 5G solutions include low-band, mid-/high-band and ultra-high-band modules. Customer design activity has been robust, and we expect our main path solutions to grow across customers as demand for integrated solutions expands throughout the high-volume mid-tier. In September, we expanded shipments of our complete main path solutions across multiple Tier 1 Android smartphone OEMs. In the diversity path, the adoption of dual transmit architectures is creating new requirements for integrated transmit and receive filtering. This is especially meaningful for Qorvo because our dual connectivity modules leverage many of the technology advantages we enjoy in the main path, including high-performance BAW multiplexing. We said previously, we anticipate approximately 250 million 5G smartphones in calendar '20, with that number approximately doubling in 2021, and that remains our view. In ultra-wideband,…

Thanks, Bob, and good afternoon, everyone. Qorvo's revenue for the fiscal '21 second quarter was $1.060 billion, $45 million above the midpoint of our updated guidance provided on September 8. Following our updated guidance, customer demand continued to strengthen, and we were able to support some of that demand within the quarter. Mobile Products revenue of $754 million exceeded our expectations, driven by seasonal demand effects and the ramp of 5G smartphones. Infrastructure and defense products revenue of $306 million was down sequentially as expected but up strongly year-over-year in support of the ongoing buildout of 5G networks and the deployment of WiFi 6. As a reminder, our fiscal year 2021 is a 53-week fiscal year, and our September quarter was a 14-week quarter versus a typical 13-week quarter. Our last 14-week quarter occurred in the period ended October 3, 2015, during our fiscal '16, which was the last 53-week fiscal year reported. Non-GAAP gross margin in the second quarter was 51.7%, which was above our updated guidance due to better-than-expected mix and favorable manufacturing cost variances. Our efforts to improve the portfolio, drive productivity and carefully manage inventories continue to yield favorable results. Non-GAAP operating expenses in the second quarter were $219 million, higher sequentially on the additional week, incentive compensation and other labor costs. Non-GAAP net income in the second quarter was $282 million, and diluted earnings per share of $2.43 was $0.29 above our updated September guidance. Cash flow from operations in the September quarter was $281 million, and CapEx was $44 million, yielding free cash flow of $237 million. We repurchased $105 million of shares during the quarter. During the quarter, we took steps to reduce our cost of debt and further improve our financial flexibility. We renewed our unsecured credit facility at more favorable terms…

[Operator Instructions]. We'll take our first question from Karl Ackerman with Cowen and Company.

Very solid results. I guess for my first question, I know you're having a record year for IDP, and it's great to see the sustained margin improvement. I know you don't provide a quantitative outlook beyond 1 quarter, but I was hoping you could talk about the opportunities you have in IDP next year and perhaps whether you think that segment can grow year-over-year.

Yes. Karl, this is James. Thanks for the question. I think the underlying trends for the business are where we said they've been for the last several quarters. We've got a great position in 5G with the rollout of massive MIMO, with the adoption of GaN and the adoption of higher frequencies. I think those are all very good trends for us, and we've got great momentum coming out of this first year of deployments, predominantly in China. WiFi 6 continues to roll out. We've had a string of record quarters for that part of the business. And again, I expect that to continue. And as Bob mentioned, we see 6E coming right at the end of that string of results and really allows for another opportunity to update hardware. And then our defense business just continues to provide a very solid base to the business with really some of the same underlying trends that we've seen before with the adoption of GaN and phased-array antennas coming to play in that market. So overall, I think we're positioned very well for the business to continue on this 10% to 15% trend that we've been on for several years.

Very helpful. And if I may, for my follow-up, you have a record amount of cash on the balance sheet, and you're going to generate record free cash flow this year. Your recent capital allocation priorities have centered on IP-focused M&A. What are your thoughts on buybacks and/or perhaps a dividend given your robust multiyear outlook?

Karl, this is Mark. No change in our capital allocation message. We have -- our primary source of capital return has been share repurchase, which, as you can see, we did about 44% of our free cash flow this quarter. If you remember, we were -- since we're doing an updated guide, and we were also on the capital markets, we had periods of the quarter we were unable to repurchase outside of the 10b5-1. So -- but we still view share repurchase as our capital return source. To your broader question on our capital returns overall, we've -- I want to point out that we reached a milestone this quarter, and that the last 12 months, free cash flow margin of the business reached about 25%, which is noteworthy in our view. And we've generated about $860 million of free cash over the last 12 months. We've deployed about $700 million of that to acquisitions, and we've repurchased over $400 million worth of stock. So we've deployed $1.1 billion on $860 million of free cash. And then the last six quarters, we've deployed even more. We've generated $1.2 billion of cash. We've bought about $1 billion worth of companies, and we've repurchased about $700 million worth of stock. And since inception, we've returned to shareholders 113% of our free cash flow or $3.1 billion at an average price of $63. So we've had a successful capital return plan, and we continue to look at acquisitions. We've done 5 now in the past 6 quarters. We continue to look at where it makes sense, in markets, customers, technology. As you've mentioned, we've been focused on bolt-ons, which we've done 2 bolt-ons for James' business and technology additions, which we've done 3 of those. And we're feeling very good about what we've done, the capital we've deployed and have a lot of confidence going forward. Of the five that we've done over the past 1.5 years, we feel very strongly they serve important and growing markets. We've been able to integrate them very quickly, and the teams are thriving within Qorvo. They're performing as or better than expected. And then finally, we're -- as you can see from the 7Hugs, we're investing in the assets we've acquired. So feeling good about both deploying capital inorganically and then feel our capital return has been strong to shareholders.

We'll take our next question from Toshiya Hari with Goldman Sachs.

Congratulations on the very strong results. I had 2 as well. For my first question, I wanted to ask on the ultra-wideband opportunity long term. Mark, I think it was you, you talked about contribution from this business potentially being meaningful over the long run. Just for context, how big could this business be over the next, call it, 2 to 3 years as a percentage of Qorvo's revenue? And how are you thinking about the relative size of revenue contribution between mobile, IoT and automotive? And then I've got a quick follow-up.

Yes. Thanks, Toshiya. This is Eric. Just to talk about ultra-wideband, how big it could be, we haven't really set public numbers for what the internal revenue for ultra-wideband might be. But as you know, there's very few players in the area, and the Decawave team that we've acquired really pioneered the latest version of ultra-wideband, the impulse radio type, which is what gives it the capability of proximity awareness and internal navigation and so forth. So we see those as being the key real opportunities for ultra-wideband going forward. And as Mark said, we think that proliferation in the mobile phone will become sort of the infrastructure of the hub for many, many applications like consumer IoT, smart home. Of course, automotive, you will access your car from your phone. And even in industrial IoT applications as well there'll be opportunities there. So it's just a very target-rich environment. And we have said that we expect within 4 years, kind of in calendar '24, it's somewhere between 2 billion and 4 billion units. Again, very limited number of people supplying that market. We think we have the broadest approach to the solution. We have the ability to not only serve the mobile phone but all the accessories that talk to the mobile phone as well as automotive and all the industrial IoT verticals. So we're really excited about the capability and the growth prospects for the business, for sure.

Toshi, as far as IoT revenues, they're very meaningful, but we have not broken those out, but it is sizable and growing very nicely. We're very pleased with that. And our automotive business today is reasonable size but also growing very nicely and should grow substantially over the next few years.

Got it. And then, Mark, as my follow-up on gross margins, great job here. And then, I guess, into the December quarter, you're guiding margins, I think, up 80 basis points sequentially despite IDP revenue being down, which should be a headwind for mix. What are some of the puts and takes in terms of gross margins in the quarter? And I guess more importantly, going forward, I think you talked about sustaining 50% or higher in the back half. But when you think about gross margins on a multiyear basis, where is the ceiling? Or where's the potential for Qorvo given some of the initiatives in place?

So Toshi, as it relates to the December quarter gross margin, as you mentioned, we're forecasting 52.5%, so 80 basis points up. You're correct in that we've got an increased mobile mix, but there are many forms of mix, one of which is product mix. So we've got some favorability there. About half of that 80 basis points is actually mix effects. The other half is manufacturing costs continue to be a tailwind for us and just outstanding performance by the ops team. We've got higher volumes, of course, which is helping us on absorption, but we've also had very good test yields, which we forecast to improve. And then we've had excellent spend control. And then -- and all these things have been contributing. We expect that to continue to help us in the December quarter. Since I am talking -- before I talk to a longer-term margin trend, Toshiya, I'll mention that we do expect -- as you see in our business sometimes, we do expect gross margins to decline actually in the March quarter. Some of that will be mix effects. We expect lower volumes in the March quarter. So we'll have some absorption effects and then -- and some other factors. And we expect gross margins to go down about 150 basis points or so from the third quarter to the fourth quarter. Longer term, we continue to -- we've -- it's taken us a number of years to sort of get things aligned in the company. And I would go back to the merger where there was a recognition that we needed to get the best-in-class technologies and the ability to scale them to serve what was going to be a multiyear technology trend, and we're here. So it started from efforts to invest in…

We'll take our next question from Bill Peterson with JPMorgan.

Nice job on the quarterly execution and guide. I'd like to try to understand where you saw upside in September. At the time you preannounced, you cited better smartphone demand. You called it pretty broad-based, but that even appears to have come in better than expectations. I guess how broad across the 6 major smartphone customers you have, including Huawei? Where do you see the upside there? I think you also saw a little bit of upside in IDP relative to your expectations. And I guess looking at December, compared to your prior view of somewhat flattish and now you're calling for some nice mobile growth, what's driving that upside relative to your prior view? Is that coming from -- I guess is Android still sequentially increasing like it did in September? If you can help us understand the upside, that would be great.

Thanks, Bill. It's Bob, and I appreciate your questions. As far as the upside, after we gave the guidance in early September, it was broad-based, but it was not Huawei. And I've said that, I think, in a couple of other public forums. And it was broad-based across our other 5 customers that you said the big 6. Huawei was not one of them during that period. We saw a little bit of upside in IDP. And as James pointed out, our WiFi business is doing extremely well. And that was a little bit of that and a little bit of defense, a little bit here and there. But overall, business is running extremely well. And our operations team did a good job of keeping up with some of that demand. So real pleased with that. Eric, do you want to take the second part of Bill's question there?

Yes. Looking into December and that strength, it's again not Huawei, as we said. But other than that, it's really pretty broad-based across Android as well as iOS. But also within Android, China is still continuing to look very strong. We're still in the very early innings of the 5G rollout, and there's a lot of subs there. So it's really fairly broad-based in the current view.

Yes. And I guess maybe the second question for James, and I think earlier you said that the 5G infrastructure should start to improve after December. But I guess for the composite of the business, assuming you have better visibility across areas like defense and longer-term opportunities, how should we think about the seasonality of that business? Should we assume WiFi still sustains into the first half of next year based off work-from-home trends and other factors? Just trying to get a feel for how you see that business trending here in the next couple of quarters.

Yes. Thanks for the question, Bill. As Mark said last quarter, and I think we're tracking pretty close to that, you'll see us -- Q3, we've already said 270. I think Q4 will be very similar to the mark -- to the range that Mark talked about last quarter. And then we'll see that growth start back in Q1 of next fiscal year. And as I said before, I think the underlying markets really support our ability to grow at 10% to 15% and perhaps somewhere in the high range of that, we'll see. We had an absolutely great first half. If you look at our first half of this year compared to the same period last year, we grew 55%. And the year-over-year growth rate for the quarter we're guiding now is about 30%. So we've got some very, very nice trends going on in the business. We've got great technology. Really, really strong partnerships with our customers. So I think we're going to go through some lumpiness with the deployment of 5G, and then it's going to pick right back up as we go into our fourth quarter and into the first part of our FY '22.

We'll take our next question from Vivek Arya with Bank of America Securities.

Congratulations on the strong results. First question, I'm curious what your sense is of the sell-through of 5G smartphones across your customer base and what that says about seasonality for the March quarter. A part of me say that, look, we are in the early stages of 5G that -- and March, the 5G strength and content gains can continue. So that would argue for perhaps a more measured seasonality going into March, down 8%, 9%. But then you had set a strong second half that maybe it could be more traditional seasonality, down something in the mid-teens. I'm just curious, what side are you leaning towards? And just conceptually, what is your sense of sell-through in 5G smartphones?

Yes. Vivek, it's Mark. We're not going to give detailed guidance on March but maybe make a couple of comments here. I think the most important thing is that we believe the technology upgrade cycle for 5G is multiyear in both handsets and infrastructure. So -- and that applies to broader connectivity trends as well which we think are durable. So -- but there is a lot of uncertainty still on the broader market on the rate and pace of the rollout and maybe in the immediate term. And then, of course, we've got the associated effects of the pandemic, the global economic recovery and other factors. I would add that the pickup in 5G and work from home and other demand factors are actually straining parts of the supply chain. And as you said, we do need to watch sell-through. I mean fortunately for us, our inventories are good and our -- and we've also got -- the supply chain inventories are lean. And we're focused on doing everything we can to meet customer needs. But to your -- directly to your question for March, we think it's reasonable to assume some sort of decline over what's a very, very strong December. We would say 10% or more sequential decline would -- is a view we have currently for our guide. And then we would expect, as I mentioned, Vivek, gross margin to decline sequentially 150 basis points or more on lower volumes, some mix effects and other factors. We would still be up on gross margin year-over-year 100 basis points or more. And then we would expect OpEx to be flat to up as we continue to invest for the long term. But I would leave it with we -- again, we view this as a multiyear secular trend and are investing appropriately.

Got it. Very helpful, Mark. And then for my follow-up, what do you think about the competition from Qualcomm? They spoke about a 50%, 60% plus kind of growth rate in their RF front-end business. Is that apples-to-apples to what you sell? Are you starting to see them in more places? Do they have some kind of advantage because they're able to bundle some of their RF components with the 5G modem and the strong position they have on the 5G modem? I'm just curious, has the competitive landscape changed for you from a Qualcomm perspective from what you're seeing right now?

Yes. Thanks for the question, Vivek. I don't think there's really been any change. We've talked a bit about this before. I think different companies view the RF TAM differently or what they choose to put into their RF business. And in the case of Qualcomm, they got a lot of other features and functionalities that they include that aren't addressed by the RF community generally. So power management pieces, I think they're probably benefiting quite well from the initial rollout of millimeter wave. In that there, we believe, at least, including a great deal of functionality and content that is not RF at all by nature. So it's just a question of what they put into what they call RF, I think, more than anything else. In terms of their attach rate and true RF components under their baseband, we haven't seen any real change in that dynamic there. We're -- our customers are looking for best-in-class RF components, and the vast majority of the actual RF content is not generally addressable by them competitively, at least in the mass market. So there's a lot of opportunity, and we haven't really seen the dynamic change.

We'll take our next question from Harsh Kumar with Piper Sandler.

First of all, solid congratulations on tremendous performance. So I'll pick it up right where the previous question was. So with respect to millimeter wave, my understanding is the traditional sub-6 players in the RF are not there yet, including yourself, so that remains an opportunity. Do you think it's a matter of coverage, it's a matter of time before you're able to play in there? Or is -- there's just not a use for your technology over there? Or is it some other industry dislocation type thing where the baseband change happened and you have a shot to get in? Just some color would be appreciated.

Yes. Thanks, Harsh. This is Eric again. When we look at millimeter wave, I think it's important to realize, I mean, Qorvo is certainly a technology leader in millimeter wave. The work that James and his group has been doing for decades to provide millimeter wave in incredibly high-performance situations is second to none. And our customers have validated that. If we go up and do component-level evaluations of various functions in the millimeter wave front end, there's no question, there'd be a huge advantage to the system at going with our technology. So the question is really the rate and pace of the rollout and seeing how the economics play out. I think as of now, we're sort of testing the waters in millimeter wave. So customers are employing sort of easy-to-use integrated solutions. They don't have the best performance. But for now, the real question is whether there's any infrastructure to talk to. There's rollouts, of course, across dozens of cities, but they're incredibly limited in terms of coverage area and real-world dynamics of getting the signal in and out in a reasonable way. And the cost of employing the infrastructure and being able to be mobile, but they need device on a millimeter wave network. There's just a lot of questions that haven't been sorted out. So I think it's great that it's being tested. As an RF company, we would be thrilled if it becomes mainstream, and we would love to participate in it. I think customers have all evaluated our technology. It's really a matter of waiting to see if the need really survives the first 1 or 2 generations.

Understood. And then for my follow-up, do you see RF content increasing again next year associated with 5G after this initial wave of 5G content uptick? And if so, like, what would be some of the big broad drivers? Is it just the same as expanded bands, expanded channels and things of that nature? Or do you see something else happening?

Yes. So see, there's probably two ways to think about it. So we said the units for 5G we expect to roughly double again next year, so from 250 to 500. But on that doubling, the content increase is staying at roughly the same at $5 to $7, depending upon the tier and the exact model, right? So in that sense, you're seeing the units are same. But then longer term, I think you're going to see the same dynamic that's driven 4G. So we're still very early in the 5G cycle. There are new bands still coming. And within the bands, they're trying to find ways to use more of the spectrum. And so there's going to be a priority on higher technology to monetize all that spectrum and get the data out of it that 5G promises. We're also just beginning to see these dual connect modules where we've got dual transmit antennas now for 5G, and some of these are really challenging, frequency allocations and the bands that they want to transfer on simultaneously. That's going to add an awful lot of complexity and challenge for RF, which will drive even more value there, I think. And so we're investing in the areas that we think are going to be our customers' toughest challenges. So as the RF gets harder and more complex and more valuable, we're going to be positioned to provide the best technology to solve the problem.

Congratulations.

Thanks, Harsh.

We'll take our next question from Gary Mobley with Wells Fargo Securities.

I want to ask about the different moving pieces in the China smartphone market. You mentioned you have perhaps a limited license with Huawei tied specifically to their handset business. I think some others have commented that they as well have received a limited license from the U.S. Commerce Department. And so curious if they have their supply chain sort of shored up to feed into their mobile handset business. Or do you -- I'd like to hear your opinion on whether or not they perhaps could lose share and how Qorvo could benefit as your market share at alternative customers may be higher. Any thoughts there.

Yes. Thanks, Gary. Number one, as you pointed out, our license is for certain mobile products, not IDP. So you're correct, let's get that clean. And we're working with the customer. But I think we pointed out on our last quarter call that we're very fortunate that we have the same products that we sell to all these customers, and they go with multiple basebands. So from a supply perspective, we're very fortunate with our inventories that we sell the same components to all these guys. And the mobile team has done a fantastic job of designing products that will work across customers and across basebands.

Okay. As my follow-up, I wanted to ask about Huawei again, but on the GaN power amplifier side, I believe they've been pretty much the driving force of that portion of your business as a lead customer in China. But I'm curious to hear your thoughts on the adoption of some non-Huawei 5G RF players.

Yes. We haven't shipped GaN to Huawei for quite a long time, well over a year, over a year. So we've been seeing tremendous growth in our GaN business, as James loves to talk about, and I'll let him go through that, to multiple customers, as I said in my opening remarks. But I can tell James would love to answer this. So James, go ahead. The show is yours.

Yes. I mean adoption has really been broad-based, Gary. So we see pretty much all of the OEMs, and I guess I can say all of the OEMs, have programs related to GaN. Multiple of those OEMs have those products into production and typically in a massive MIMO construct, so relatively high content in all of those. We've got wins across, again, multiple of those OEMs that are supporting both deployments in China and in other parts of the world. So I think adoption is going very, very good. We had a great GaN quarter. We tied our record from the quarter before. And we've almost quadrupled our GaN business from period -- the same period last year. So I think those trends are just like we have projected that 5G is really going to drive MIMO and higher frequencies, and that's going to drive the adoption of GaN. We're very focused on scaling the technology and continuing to improve the performance and -- so that we can continue this ramp as we go because we very much are in the early innings of 5G deployments around the world.

We'll take our next question from Craig Hettenbach with Morgan Stanley.

I had a question on the gross margin and really from a mix perspective within mobile, any context you could share in terms of perhaps some of the tailwinds that integration is helping as well as maybe the BAW business increasing as a percent of total as you go out in time?

Yes. Craig, we typically don't break out mix in detail, but you're correct. I mean what's helping us is this ongoing trend of integration, and particularly BAW-related modules. As you know, our largest fab is Richardson, so largest cost structure. So volumes and continued growth in BAWs is important, and that's helping. And there are other products where we have highly specialized technology that is helpful in the mix as well. But certainly, BAW and -- both BAW and other integrated modules is a part of the favorable mix.

Got it. And then just a follow-up for Eric. In terms of integration within mid-range phones or mass market, can you talk about perhaps kind of where we are in that cycle, if you will, in terms of -- that's been an important growth driver, but just how much more do you see that in terms of the market moves towards integration and how much does 5G also play a role in terms of the need versus discrete parts?

Yes. It's a good question. As you know, 4G sort of grew up discrete, and as it became more complicated and more bands, integration became required really to fit everything into the space. And 5G is essentially launched with fully integrated modules. And to date, I don't believe we're aware of any design that's going discrete. It's just very, very, very complex. And once you're used to having a highly integrated fairly miniaturized compact RF solution, it's really hard to undo that and go to discrete solutions because you still have to do all of this on multiband operation and multiplexing and so forth. So it's very hard for a phone customer to match these things on the phone board. So if not 100%, the vast majority of 5G phones are continuing to use fully integrated solutions.

We'll take our next question from Edward Snyder with Charter Equity Research.

If I could, Eric, between Bob's comments and the details from our own teardowns, it seems as if most of the strength you're seeing in your businesses are the main path modules in -- and probably tuners, which both have been very good. But Skyworks is doing very well in diversity, even with the new transmit versions, and there's been a huge increase in antennaplexers at Apple, which seem to all have gone to Broadcom. I know you've got the technology to play in all these areas, but we really haven't seen a lot of it just yet. Will we see more participation from Qorvo in these areas as these technologies move into the Chinese phones? Or do you think, because you've only really shifted in the last year or so, to focus more on all these other, I would say, lucrative but lower ASP stuff than the big mid-/high-band? Is it just a matter of time that you think you might make inroads into the non-Chinese OEMs? And then Mark -- go ahead. Please.

Yes. So I think that since we formed Qorvo, we really had a focus on looking at the full architecture because we've got visibility into it and investing in the key technologies that are going to solve the customers' toughest problems. And you're right, we've got tremendous expertise around the antenna systems, not just tuning, but also multiplexing and antennaplexing and switching and LNAs and all the things you need to make the antenna networks work. And you know that's getting to be more and more and more important regardless of the tier or the customer base, right? But also the advanced power management that we have, which is a very specialized power management to help in these high-modulation standards, we're going to continue to invest in that. We think there's new opportunities there. Our BAW filtering, we believe we're second to none now. And we're not slowing down. We've got many, many more improvements and steps-up in performance and cost, as well reduction for BAWs. So that's going to be the anchor of a whole suite of modules, as you're indicating, even the receive modules that have transmit capability in them. And then all of the main path modules will continue to rely heavily on BAW. So I don't think we're limited at all of where we play. It's a target-rich environment for us. We're kind of prioritizing our investments to where we think we'd get the best ROI. I think it's going really well. And we're going to continue to build out the portfolio and continue to play in more and more areas as we see them being attractive.

Great. And then, Mark, if I could, and I had a short one for James, too. But Mark, last time, Qorvo hit 51.5-ish gross margin was June of '15, revenue was about $670 million. It's about 60% higher last quarter. And unlike at '15, you're now shipping a lot more GaN, BAW and tuners, all of which carry very good gross margins. Is the difference in revenue to gross margin something structural in the fab? Or is it more of a reflection of Qorvo capturing all those filters and passive devices that used to be supplied by the discrete component vendors that are now being rolled into your big modules because obviously it increases your ASP but maybe dilutes margin a bit more. And I know that was the vision when Qorvo was formed, that you guys could start capturing a lot of this other discrete content.

Yes. Ed, I'm not sure exactly what your question is. Your figures are correct in that historical data, but we've invested a lot in the business since then. And as you know, there were efforts to rationalize the footprint, make it suited to how we want to take the business forward and, as Eric just said, a lot around active portfolio management. We're at a point now where we've steadily increased gross margins from a low September '16. And we feel good about -- well we feel great about the technology and the business. As Eric talked through, we're making the right product decisions that are best for our customers and for us. The operations team is performing very well and there's a lot of runway on productivity, and we'll continue to -- that will continue to hopefully be a tailwind on margins or should be. And then we've got -- we're reducing our capital intensity. And all that points to we should be able to sustain these levels, and over time, don't see why we shouldn't be able to expand margins.

Thank you. This concludes today's question-and-answer session. I'll now turn it back to management for closing remarks.

Thank you for joining us on our call tonight. We'll be presenting via webcast at upcoming investor conferences, and we invite everyone to listen in. Thanks again, and have a great night.

This concludes today's call. Thank you for your participation. You may now disconnect.