Good afternoon, and welcome to Skyworks Solutions Third Quarter Fiscal Year 2021 Earnings Call. This call is being recorded. At this time, I will turn the call over to Mitch Haws, Investor Relations for Skyworks. Mr. Haws, please go ahead.

Thank you, Rachel. Good afternoon everyone and welcome to Skyworks' third fiscal quarter 2021 conference call. With me today are Liam Griffin, our Chairman, CEO and President; and Kris Sennesael, our Chief Financial Officer. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or maybe considered forward-looking statements. Please refer to our earnings release and recent SEC filings, including our Annual Report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. Additionally, the results and guidance we will discuss include non-GAAP financial measures, consistent with our past practice. Please refer to our press release within the Investor Relations section of our company Web site for a complete reconciliation to GAAP. With that, I'll turn the call to Liam.

Thanks, Mitch, and welcome everyone. Skywalks delivered record third quarter results with strong year-over-year growth in both revenue and earnings per share. Further, the completion of our acquisition of the Infrastructure and Automotive business of Silicon Labs, we have significantly expanded our market opportunity while accelerating our top and bottom line growth. Here are a few highlights. In the quarter, we delivered revenue of $1.116 billion, 52% above Q3 of last year. We posted a new Q3 record for earnings with EPS of $2.15, above consensus and representing a year-over-year increase of 72%. And given our strong and predictable cash generation, we announced a substantial increase to our quarterly dividend. Looking ahead, we expect continued momentum as we execute on strong design wins with our mobile and broad market customers, levered by the performance gains of 5G. We are seeing a tipping point with 5G acting as the catalyst transforming entire industries from telemedicine and autonomous driving to factory automation and intelligent energy management. By increasing efficiency, these 5G-enabled applications are also lowering carbon footprints and driving renewable energy. Skyworks is at the center of this unique technological shift and its reliance on wireless connectivity, with innovative solutions developed over 20 years and across multiple technology transitions. The combination of our innovative solutions, broad customer reach and unrivaled manufacturing scale drove another quarter of strong design win execution. In mobile, we expanded the reach of our Sky5 portfolio, powering upcoming smartphone launches at Tier 1 manufacturers, including Google, Oppo, Vivo, Xiaomi, among others. In IoT, we secured wins across a diverse set of customers. Specifically, we delivered Wi-Fi front-end modules to Facebook for their new portal launch, captured design wins at Peloton supporting home fitness applications. Partnered with Linksys on their newest Wi-Fi 6E mesh network system, and ramped additional…

Thanks, Liam. Skyworks posted another quarter of strong financial results, delivering record Q3 revenue of 1.116 billion, exceeding the midpoint of our guidance. Total revenue grew 52% year-over-year, demonstrating exceptional performance across both mobile and broad markets. Mobile revenue grew 52% year-over-year, as we capitalized on technology-rich content, powering an impactful set of 5G customers. In parallel, broad markets revenue was 50% year-over-year, benefiting from strong demand for IoT solutions, including Wi-Fi 6 and 6E, and smart audio, as well as emerging use cases in industrial and automotive markets. Gross profit in the quarter was 565 million, resulting in a gross margin of 50.6%, up 50 basis points year-over-year. Operating expenses were 161 million or 14.5% of revenue, demonstrating spending discipline while continuing our strategic investments to drive growth. We generated 403 million of operating income, translating into an operating margin of 36.1%, a 480 basis points improvement over Q3 of last year. Other expense was 3 million, reflecting a partial quarter of interest expense associated with the recently completed acquisition of the Infrastructure and Automotive business of Silicon Labs. Our effective tax rate was 10.4%, resulting in net income of 359 million or a net income margin of 32.1%. Execution on top and bottom line growth, while expanding gross and operating margins, drove record Q3 diluted earnings per share of $2.15, beating the guidance by $0.02 and an increase of 72% when compared to fiscal Q3 of 2020. Turning to the balance sheet and cash flow. Third fiscal quarter cash flow from operations was 273 million, capital expenditures were 115 million, and we paid 83 million in dividends. We ended the quarter with a net cash position of 1.5 billion, with 3 billion in cash and investments and 1.5 billion in debt. Moving to our outlook now for Q4…

Thanks, Kris. Skyworks is clearly on track to deliver record financial results for fiscal 2021. As mentioned, the addition of the I&A business further propels our expansion into strategic growth segments. And with a widening array of usage cases, the proliferation of 5G is driving significant momentum for Skyworks. Our powerful cash generation capabilities, technology-centric operational scale, and global reach are fueling a robust design win pipeline. And finally, the strength of our balance sheet allows us the flexibility to invest to win, while delivering consistent shareholder returns. That concludes our prepared remarks. Operator, let's open the line for questions.

Thank you. [Operator Instructions]. And given time constraints, please limit yourself to one question and one follow up. Our first question comes from the line of Craig Ellis from B. Riley Securities. Sir, your line is open.

Yes, thanks for taking the question and congratulations on the financial results, guys. Kris, I wanted to start with you and just see if I could get you to put a finer point on the contribution from A&I in the fiscal fourth quarter. Can you be a little bit more specific on what you expect from a revenue standpoint and the earnings contribution from the deal?

Yes, Craig. So we are not going to report on any specific business line or product line within the quarter. But given that you asked, first of all, we are very excited about conclusion and the closing of the acquisition on July 26, so earlier this week. It's a great business, very diversified, new revenue streams and high growth markets for us. The business was running. And we told you that when we announced the deal at approximately $400 million of revenue on an annualized basis, so approximately $100 million of revenue on a quarterly basis if it's a full quarter. But this is only a partial quarter. So we only get two out of three months in this September quarter. We will get three out of three months in the December quarter. So I hope that answers your question.

That helps. And then I'll just stick with A&I, but make it a longer term, more strategic question, and I'll flip it to you Liam. Under Silicon Labs, this was a very high quality business that steadily grew over time in two different end markets and now you have it. And I'm just hoping that you could spend a minute talking about your vision for what you can do from a synergy standpoint with channels, with customers, with product roadmaps, and what do you think that means for the growth rate of the business on a multiyear basis from the base that Kris talked about, which is a $400 million business.

Yes, absolutely. Well, first of all, as Kris mentioned, we really are excited about taking on this acquisition; great people, great technology, fabulous end markets. And the other really important thing is this is all uncorrelated to what we do in mobile. So this is really unique for us. One of the things, Craig, that we absolutely will capitalize on is the quality of the technology that the Silicon Labs team has brought and our ability at Skyworks to scale at high level. So we look at these products now that are great, and we think we can take them as is and bring them to newer customers, broader scale opportunities, proliferate much further than what we see today. And it's going to be a lot of fun doing that. And our folks at Skyworks, our operational team, the ability to do work in our own fabs, which is very strategic right now, we'll definitely put some fuel behind it. So we're excited about a lot of great end markets, improves margin, improves versification. There's some customers that we know very well that we can take these products, and there's some new accounts that we're going to find together. So we're really excited about the opportunity. It's very early, but we're very excited about what we can do.

Got it. Thanks, guys, and good luck.

Thanks.

Thank you. Our next question comes from the line of Ambrish Srivastava from BMO. Sir, your line is open.

Hi. Thank you very much. Liam and Kris, can you comment on shortages? In this case is a public comment Apple makes, so I can name them. I know we're not supposed to name your customers. But they talked about shortages getting worse than the third quarter. From your perspective, are you seeing that impact your business in the third quarter -- in the calendar third quarter? And then I had a quick follow up please.

Sure. Well, on a general basis, there is a supply chain crunch around semiconductors. I think we all understand that. And it's affecting everybody to some degree. I would say that Skyworks, and if you know the company here, right, we’re an investor in technology and we have the lion's share of our technologies in-house, in our own fabs all the way from Gallium Arsenide to assembly and test the bulk acoustic wave filtering, TC-SAW, a lot of really complex portfolios that we have and technologies that we bring in our own house. So we have a -- the benefit of that scale and the investments that we've made over the years fortify our position in supply chain. Now having said that, as we all know that any given platform, whether it's a smartphone or a piece of the infrastructure pie, all the components have to come together to create a solution for the customer. So if anything is short anywhere in the food chain, it can impede demand, right, execution around demand. So, we are certainly seeing that. I feel like our teams are doing a good job navigating through, but it's clear that there's more demand opportunity now, that hasn't really been executed. So I think we're going to do work on our end to support our customers. We're certainly doing the work in our fabs, in our labs to be a little bit more efficient there and driving the technology. But it's clear that there is an impediment in demand right now globally in supply chain. So that is a real issue.

Got it. Thank you. And you did set your supply chain capability, if I remember correctly, in the December quarter. I had a question on gross margin. Maybe Kris, you can address that. And I'm just trying to do my math on the fly. Is it the delta, and we haven't seen this level in a while. This delta is coming from impact from the contribution from the Silicon Labs business, because the cost headwinds are there and it seem to be getting -- not getting any better. So can you just walk us through the delta in gross margin please? Thank you.

Yes. Well, first of all, I'm pleased with our execution on gross margin. We did 50.6% gross margin in the June quarter, up 50 basis points year-over-year and that's just pure organic. We guided 51 to 51.5. So that's up another 65 basis points sequentially, or up 85 basis points on a year-over-year basis. As we indicated before, the I&A business is helping there because that's running at or on about 60% gross margin. But you can clearly see as well that we continue to make further improvements in gross margins in our organic business as well, as we execute on our technology roadmaps, get more and more 5G, Wi-Fi 6, Wi-Fi 6E, higher level of complexity, higher performance parts in our product mix.

Thank you.

Thank you. Our next question comes from the line of Karl Ackerman from Cowen. Sir, your line is open.

Great. Thank you very much. I wanted to focus first on the SLAB I&A division that just closed. I know you just closed it a couple of days ago. But during your due diligence process, have you been able to find areas of cost overlap that may drive incremental synergies over the next few quarters? And I guess as you address that question, could you also describe any early indications on sale synergies in the broad markets division, now that that acquisition has closed that actually will allow you to have a much broader solution set for customers?

Yes, absolutely. So on the cost side, clearly, the ability to take Skyworks $5 billion run rate revenue company and the infrastructure that we already have in-house and the technology knowhow that we have is definitely a strategic piece of the equation with the Silicon Labs deal for sure. And then on the customer side, there's some great products that are ready to go right now that we just have as a team can lever up some of those portfolios so that the Silicon Labs team is brought to us and we know where to take it. And we're also a big volume player at Skyworks. So we are absolutely ready to go after big game. We have the scale for it, we have the appetite for it, we have the technology knowhow and prowess to make that happen. So there's a lot of really good technologies that are there in the SLAB I&A team that we can scale with known customers and known markets. And that's going to be an important part here. And we've spent a lot of time working on it as we went through diligence on this process. And both of those vectors are going to be strategic for us as we go forward. And we have the game plan to make it happen.

I appreciate that, Liam. For my follow up, your outlook for September looks to be up 11% sequentially on even just an organic basis on par with one of your RF peers who reported this week. That peer indicated that some of the slowdown in Android production did impact results, but is more really due to supply constraints. And I guess some of that would improve in the September quarter. My question and maybe dovetailing to an earlier question today, I was hoping you could address whether you see improvements in assembly and test or other areas of constraint that could allow you to propel strong results from here? Thank you.

Sure. No, that makes total sense and that's what we're seeing. So for the most part, we have a great deal of control in our supply chain, because we have our assets. But it only takes one or two devices that you don't make to create an impediment of demand. So there's clearly levels of demand that are being delayed in terms of execution due to supply chain constraints. It's kind of a global issue right now. We're doing some really good work on our end. We're levering what we can on our side and working with our partners where -- the outside partners that we may have. And I don't think this is going to be a long-term problem. But it's certainly a problem that it is making its way through the semiconductor cycle. Some companies have it worse than others. Again, with our internal capabilities, I think we have some strengths there that others may not have. But it is certainly a unique case where demand is being impeded to some degree with supply chain issues. And that is just kind of a global issue now in the semiconductor space, a lot of work being done to get that free flow of demand again. But the demand opportunity is there. So I want to make that clear. I think the demand opportunity for the products that we have and the appetite from our customers is still very strong. The technologies that are coming to market are rich and powerful. And I think that's all going to come to market here soon.

Thank you.

Thank you. Our next question comes from the line of Timothy Arcuri from UBS. Sir, your line is open.

Thanks a lot. Kris, this is probably a tough question to answer given the addition of the SLAB revenue, but I'm just kind of wondering as you look into December, if you were to strip that out, like it seems like December is normally up low teens. So I'm wondering if you can look out into December and if you excluded SLAB, is that sort of how you see things trending into December?

Yes. So, Tim, as you know, we only guide one quarter at a time. And we feel really good about the guide that we provided for September. Having said that, looking to December, you're absolutely right. We typically see further strong sequential growth into that December quarter as we execute on some high content rich, 5G phone ramps. And we do expect our broad markets business organically to further continue to grow into the December quarter. And so -- plus in addition, as I mentioned before, we will have three months of the I&A business in the December quarter. And so when you put that all together, we feel really good about December.

Thanks, Kris. Thanks for that. And I guess, typically, your concentration from your largest customer in the June quarter is somewhere in the 45% to 50% range. And I just -- typically it sort of gives us a sense of where that came in. Was it in that same range, 45% or 50%? Thanks.

Yes. So in June, it was slightly above 50%, which by the way was exactly the same percentage a year ago in the June quarter of 2020.

Thank you, Kris. I appreciate it.

Thank you. Our next question comes from the line of Ed Snyder of Charter Equity. Sir, your line is open.

Thanks a lot. Liam, I think SLAB is a great acquisition. But if I look at this, it's very different than something else that you’ve done. I think one of the best -- probably the best you ever did, one of the best in the industries was SiGe back in 2011. But that was a screamer, primarily because the technology they had was excellent and was coveted by some of your largest customers, your largest customer, but they couldn't buy from them because you're too small. So when Skyworks got a hold of it, off to the races you went, and it's been a huge success I'm sure. This looks to be more like TI National acquisitions where it's kind of plug-and-play diversification role. I'm not clear. I know you plan on growing it. I know they've got a lot of great technologies and excellent profile in terms of margins. But can you give us some examples of ways that you can grow this into your customer base? And most of it I imagine is going to be in broad markets, so there's probably little chance that you'd see anything close to the growth in this revenue line that you saw with SiGe, because it's not going to go into your mobile customers, right? So maybe you can help us flesh that out a little bit more on what the growth rate could be like, and where you're going to see that go specifically, if you could? Thanks.

Sure, Ed. So, obviously, through the process, we had deep dives into all the elements of the I&A business. They have a very strong timing portfolio, which we can take the multiple customers and customers that we have right now. They have an isolation business that's very strong. Their automotive portfolio is outstanding. There's a lot we can do there. There's quite a bit of customer and sales synergy here that we can unlock. One of the things I would say is, is their portfolio’s very strong technically, but hadn't been as broad in terms of scale, right, going after the very, very large players. And that's something that we do very well here. So we're going to lever up the scale. We're going to enhance the technology. We're going to invest in this portfolio. Some great, great folks there, some people, great end markets that we can pursue. And we think it's going to really be a special deal for us. And the early innings here what we're seeing and the engagements with their customers and what we're doing with our sales channel, I think is going to be unique. And then the manufacturing benefits, right. For the most part, the I&A business has been outsourced. And I think there's a great deal of synergy that we can use in our assembly and test operations, even if there's some fabless elements. Just having the packaging, assembly and test in-house is a strategic advantage as well. So we're really excited about it. And we spent a great deal of time working through this transaction. And we haven't done a lot of deals here at Skyworks. We're very conservative with that. And it has to fit before we go about an acquisition. And this is one of those transactions that as we move through the process, we liked it more and more. And we really like it now and look forward to demonstrating that opportunity as we go forward.

Great. And then if I could shift to mobile perhaps. I mean your largest customer leads the field and the complexity and sophistication [indiscernible]. I think everybody knows that. And some of the things that they implemented last year and look to implement this year, [indiscernible] to Skyworks’ strength, obviously. We saw the December quarter of last year was phenomenal. But in terms of the rest of the world, especially in regard to China, they lag and it looks like they're moving in that direction. Now if you step back [indiscernible] Skyworks is kind of under earned in China over the last several years, maybe over earned domestically. But I'm wondering, as those technologies move into the Vox [ph] group, does that present opportunity? Do you think you'll be able to exploit that to gain a larger share? So should we expect to see more acceleration in growth in the Chinese OEMs Android [indiscernible] for Skyworks next year?

Yes, great comment. I'm glad you brought it up. And the answer is, we are seeing a great opportunity there. We went through the last calendar year with great success. We'll continue to do that with flagship models, largely domestic U.S. players. And we're starting to see now the incremental move with the Oppo, Vivo, Xiaomi, MediaTek players as they bump up and bring their technology along in 5G. And that's a great opportunity. And the content delta there can be substantial. And we're working that very hard. We mentioned it in our prepared remarks. And that's a very strategic lever for Skyworks. And we're engaged. So this isn't a case we have to break in and form a relationship. We're already a supplier to these key players. But we're seeing the technology lift within their devices. It’s exactly what we anticipated. So we should expect more from that corner of the world.

Next question?

Thank you. Our next question comes from the line of Gary Mobley from Wells Fargo Securities. Sir, your line is open.

Hi, guys. Thanks for taking my question. One of your competitors on the RF side has been talking about certain available opportunity of roughly $10 billion that has opened up largely because of Huawei business essentially dying on a vine and that being redistributed amongst more influential customers. I’m wondering -- I was hoping to get your perspective on how that has benefited Skyworks in recent quarters, what inning we may be in with respect to that redistribution of market share, and how it may impact you guys looking forward?

Yes. That's an interesting question. As we just mentioned with the last caller, we're deeply engaged in China across all the platforms, and we have good relationships there. We formed those for years. So we've always been a trusted partner. We have the knowhow to create custom engines with our Sky5 portfolio that allows our end market customers to step in quickly with a solution that we've architected. So we see that demand opportunity as well as anyone. We have a more diverse portfolio that can address those markets as well. So it's not a single solution. We can crack it. We can customize it. We can reach into our Sky5 portfolio and do exactly what the customer needs. And so we look forward to that growth. So we see that same opportunity, and it can be upside for us as we see China move into 5G accelerate.

Okay. For my follow up, I want to ask you about content growth at your lead customer, but I won't go there. But I was hoping maybe you can give us a little more detail on sort of the frequency band support that will be needed as we move from one 5G phone to the next generation. In other words, the cycles within a cycle, so to speak, as it relates to air interfaces. What sort of content growth do you think you can see long term in broad market related as these flagship phones need to support more frequency bands, in particular things like millimeter wave support. And then related to that, perhaps what your current stance is with respect to millimeter wave? Thank you.

Sure. Well, as you've seen, the frequency opportunities continue to expand. If you look at the C-band option, for example, that opened up a tremendous amount of technology, 3 to 6 gig where we can capitalize immediately. I think the appetite -- if we go high level, the appetite for this technology is really strong, right? The mobile technology that we see every year gets more complex and more challenging, whether it's in China, whether it's in the U.S., and we love that, because we're a company that focuses on the high end, we focus on technology, we focus on excellence in our products. And we see that opportunity be rewarded with our customers. So we can hit all of those nodes, whether it's a China play, whether it's the high end of the U.S., and we've grown the technology along with it. So that's how we go to market. There's nothing new about the news around Huawei or anything like that. All that stuff is completely understood. Millimeter wave you mentioned, millimeter wave is an interesting technology. It works in certain areas. It has some drawbacks as well that are well known. We listen to our customers and we have great engagement with all the players that we need to work with. And together, we resolve the complexity and work on the end market solution. So, we have investments across that entire spectrum. We know what we need to do to win. We also know what we need to do to allow our customers to win. And that's the recipe that's been working.

Thank you. Our next question comes from the line of Blayne Curtis from Barclays. Sir, your line is open.

Thanks for taking my question. I just want to revisit the September guide. So I guess when you look at it on an organic basis, it's a little over $100 million sequentially. If you look back last year, your lead customer kind of contributed that amount. And with the earlier launch and content gains, you’d think it would be some more. So just trying to understand, are there some segments that are down? Are you adding some conservatism? Just trying to understand with the acquisition, I know it's a great sequential, but just from looking at the moving pieces should be a bit more in my mind. So just trying to figure out what I'm missing?

Blayne, I think as we indicated, organically we see double digit sequential growth into September, both in our mobile and broad markets business. And we have really done well and executed well on the design win side. We have higher content in multiple forms at all OEMs that are launching, and that will be launched here in the next couple of months or so. And so sometimes it becomes a little bit of a unit place. As you know, we always are somewhat conservative in our unit assumptions. There is definitely strong demand for the products. We do take into account, as Liam earlier expressed, some of the global supply issues which are there, right, and we need 100 parts to make a phone. If there are only 95, including the Skyworks parts, but they are missing some other parts from somebody else, you can’t make a phone. So that's all being taken into account. Again, the growth will continue into the December quarter. And so when you look at how we will execute in the second half of the calendar year, September and December combined, I think you will see some really nice strong year-over-year growth.

Got you. And I guess maybe just drilling a finer point on broad markets. I know you don't want to break out the contribution, but maybe can you talk about would it be up on an organic basis into September?

Yes, that's exactly the point. So our broad markets business will be up double digit sequentially, excluding any contributions from the I&A business. And when you look on a year-over-year basis, it's up strong double digits. We continue to be in that, call it, on or about 30% year-over-year growth.

I appreciate it. Thank you.

Thank you. Our next question comes from the line of Chris Caso of Raymond James. Sir, your line is open.

Yes. Thank you. First question on broad markets, and I know that Wi-Fi is a big part of the broad markets or organic business and that's been strong on the Wi-Fi 6 ramp. I guess the question is for how long do you expect that Wi-Fi 6 ramp to continue? It has been -- Wi-Fi has been one of the segments that's benefited from work from home. But I guess we've also heard is there's also an enterprise refresh on Wi-Fi 6 that has to happen, and I guess I'm not sure on the size of those particular segments on whether that gives it enough strength, even if some of the work from home trends should subside, if that allows that Wi-Fi 6 trend to continue?

Yes, Chris, the Wi-Fi cycle in some way is almost parallel to what we're seeing in 5G. We're seeing high complexity moving into 6E, really complex stuff from consumer to enterprise. It continues to grow. We have really good technologies in this area. We have great relationships with our customers. It's kind of a ubiquitous player in terms of connectivity. So it's been a strong driver for us and the complexity in the devices continues to go up. We have really good business. Wi-Fi enhances it. But then we also have incredible opportunities when we look at the access point in routers that we're seeing today that are really scaling up significantly in terms of the performance and the data rates. And so that's continuing to move. I don't think it's really just a work from home. I think we're starting to see that become a really must-have type of technology. So that's been a play for us. Other areas in broad markets continue to grow. We're doing really good work on the infrastructure space. We got customers like Honeywell in the industrial area. The wireless infrastructure side with names like Nokia and Ericsson are stepping up a bit. And as Kris mentioned, you're talking about 50% year-over-year in that business. So it is a unique portfolio. It continues to grow, very diverse and also a great partner to tag with our I&A portfolio. So I think we're going to be able to bring some cross selling and new customer engagement through that process as well. So we look forward to -- the Wi-Fi as you said at the beginning is really strategic and we're very well positioned.

Okay. As a follow up with some of the costs that you've been absorbing that have been a headwind to margins, particularly some of the COVID costs that some of the production facilities haven't been running quite as efficiently as you've wanted. We've seen some reports that some of the subcontractors in Southeast Asia have had to take some shutdowns again. What's your view of that? What the headwind that you're still seeing from these costs? And is there a timeframe that you could see that some of these costs would come out and therefore be a positive for gross margins?

Yes. Chris, so again we executed well on gross margin with 50.6%, up 50 basis points year-over-year, despite the fact that there are still a couple of headwinds. The COVID-19 headwind costs are still there. And I think honestly they're going to stay there for a couple more quarters. We’re working it hard. We're getting better at it. But those headwinds are still there. In addition to that, as we discussed earlier, it's a very tight supply environment. And so, again, that's not really helping us. But despite that, we are further improving our gross margins. A lot of that, of course, helps as we scale up the business. Last year, we did $3.3 billion, $3.4 billion of revenue. This year, we will be doing more than $5 billion of revenue. So we are able to mitigate some of those headwinds. And as I said before, we keep on climbing the technology ladder, right, higher complexity, higher performance, more 5G, more Wi-Fi 6 and 6E. And then in addition, you have the I&A business at higher margin. So you combine all of that, you will see continue further gross margin improvements. Once some of those headwinds will start turning and become tailwinds, we will make further improvements towards our target model of 53%.

Thank you.

Thank you. Our next question comes from the line of Toshiya Hari of Goldman Sachs. Sir, your line is open.

Hi. Thank you so much for taking the question. I've got two as well. My first one is on broad markets. In the June quarter, it grew really nicely on a year-over-year basis. I think you said 50%. On a sequential basis, I think it was down about 10, which was a little bit below what you guys had guided to. So just curious what the delta there was with some of the puts and takes? And then on the flipside, obviously you're guiding that business up double digits in September. So if you can kind of speak to the drivers in September within broad markets, that would be super helpful?

Yes. First of all, we went up 50% year-over-year in broad markets in June. So I would say great execution. Maybe it was slightly below what we anticipated. And some of that, to be honest, is supply because the demand is a lot stronger there but we weren't supplying. And as Liam pointed out, we had some minor bumps. And so that's part of it. Again, we continue to see strong growth into September, guiding up sequentially double digits, continue to see very strong year-over-year growth across all those end markets.

Got it. And then as a quick follow up, I wanted to ask about cash usage going forward. Congrats on closing SLAB. You talked about raising the dividend as well. So that's pretty clear. Between CapEx and perhaps deleveraging the balance sheet and buybacks, how should we think about the balance going forward? Thank you.

Yes. In terms of cash and cash usage and cash allocation, I would say, first of all, we will continue to invest in technology and innovation with our research and development activities. That is key to what Skyworks is doing. Secondly, we will also continue to further expand our manufacturing assets in Gallium Arsenide, in filter, advanced packaging, and so we will continue to contribute substantial amounts of CapEx to further expand our reach and expand our manufacturing assets. Despite all of that, we will continue to deliver strong free cash flow. We have a free cash flow target of 30%. We'll continue to make further improvements towards that target. And the free cash flow will be used first of all to pay the dividend. And we just announced a 12% increase in dividend now at $0.56, and there is further room for improvement there. Secondly, we will focus on repaying the debt. We have 2.5 billion of debt on the balance sheet as of today, including 1 billion term loan. We are going to focus on repaying that term loan. We do have an authorized share buyback program, but we have temporarily suspended that, as we for now focus on repaying that term loan. But at a certain point in time, we can, of course, switch that back on.

Thank you for the details.

Thank you. Our next question comes from the line of Tristan Gerra of Baird. Sir, your line is open.

Hi. Good afternoon. I just wanted to expand a little bit on a prior question about RF content in next generation 5G phones. That increase in the first gen 5G phone was probably in the 30% range year-over-year. You even mentioned things like C-band that's going to continue to drive content increases. But how should we look at that in second gen 5G phones this year? Wouldn't be the increase down to maybe high-single digit year-over-year in terms of content? And then the follow-up question is in China. You did mention opportunities in China. But the adoption rate for 5G phones there is almost 80%. So are you expecting to gain market share, or is it that the second gen 5G phones in China are going to use much more RF content than the first generation, because clearly the adoption rate is up there already?

Sure. Let me try and unpack that question here. Well, first of all, what I would say is there's tiers of 5G in China. So you have a 5G phone that has a certain level of complexity. But you could have another 5G phone that has much higher complexity and performance. And we can scale through all of those nodes. So the penetration may be still relatively high. There's still a tremendous amount of 5G phones in China that need another click in performance to really move. And we know that, because we see the entire market. We see the market from end-to-end from the U.S. to Europe to Asia. And so there's a lot of opportunity for content gains from the current position in China. If you look at other markets, we're seeing the same push for technology higher performing. We're seeing more features or applications and a higher burden that's put on these smartphones in 5G. And that's all good stuff for us. It gives us the opportunity to come in with our solutions all the way from TC-SAW, bulk acoustic wave, assembly and test, packaging in-house [indiscernible]. So we're really excited about it. So we do see continuous growth and continuous growth in content, but the content is getting harder. It's not more things. It's more complex things. And so you need to have an architect that can bring this together and make it easier for our customers to assimilate. That's what we do. So every year, it's not just phone to phone. The technology, the complexity within the device is rising. And that for us is very, very good. And it limits the competition, and it puts us in a great position to delight the customer. So we look forward to that. And overall, 5G penetration at a high level is still very low right now. There's a lot of room to move from here. And there's a lot of upgrades that haven't yet commenced. So we're looking forward to it. But the technology is not stagnant. It continues to get tougher and tougher, higher bar and opportunities for just a few players like Skyworks to execute.

Great. Thank you.

Thank you. Our last question comes from Kevin Cassidy of Rosenblatt Securities. Sir, your line is open.

Thank you. Thanks for taking my question. Just wanted to understand a little more about your order visibility. Are you getting orders that are -- do they have to be scheduled now into the fourth quarter or even going out to the fourth quarter calendar quarter, that would be -- or the first quarter of calendar 2022?

Yes. Well, in general terms, the ability to get that demand through has been impeded, right, as we discussed through the call today. I would say that Skyworks uniquely with our own fabs, our own assembly and tasks and assets, we're a manufacturer as well as a developer of technology. So we should be able to do better than peers that are more fabless. But at the same time, we're all dealing with this global chip shortage as we say. And so that is an impediment to demand. We talked a bit about that and hopefully that can be unstuck to some level, but we are working with our customers closely. We're doing a -- our teams are working very hard to resolve any impediments in demand execution, and we certainly think that it will abate over time, but it does play through in the current quarter and into the second half a bit.

Okay, great. And just to make sure I understand that. So if your customer isn’t getting the full bill of material, they're asking you to hold up deliveries? They're not building inventory of your product, waiting for other products.

Yes, somewhat that's true. It just depends on how it's going. Sometimes all parts are ready. And we're not holding anybody up but someone else is holding us up, right. So it's kind of a -- everything has to be complete for an end product to ship. So anything in the food chain that goes sour, it can be an impediment. But I think we'll navigate our part. And we do see some – the clouds kind of cleared here in the next couple of few quarters, and we should benefit from that.

Okay, great. Thank you.

Thank you. Ladies and gentlemen, that concludes today's question-and-answer session. I'll now turn the call back over to Mr. Griffin for any closing comments. Sir, please go ahead.

Thanks everyone for participating today. We look forward to talking to you at upcoming conferences in the quarter. Thank you.

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