Skyworks Solutions, Inc. (SWKS) Earnings Call Transcript & Summary

All right. We'd like to get started. Good afternoon, everyone. My name is Toshiya Hari. I cover the semiconductor and semi cap equipment space here at Goldman Sachs. Very honored, very pleased, very excited to have Liam Griffin, Chairman, CEO and President from Skyworks with us this afternoon. Liam, thank you so much for being here.

Thank you, Toshi, and the Goldman Sachs team for hosting today. I appreciate it. There's a little bit of volatility today. So hopefully, we can get ourselves steady through that.

And calm things down a little bit. So again, thank you for coming, Liam.

Before we spend more time on some of the longer term strategic aspects of the business, I was hoping you could give us an update in terms of what you're seeing in the marketplace today. It's been a little bit over a month since you reported earnings and gave guidance for September. You guided revenue up in sort of the mid-teens. I think you spoke to December being up just given the seasonality around your largest customer and what you're seeing in broad markets.

Right.

Any changes from a demand perspective, supply perspective?

Sure. Yes. I mean, the ecosystem for us, again, volatility today aside, we've really seen some great opportunities in our core businesses. We continue to do very well extending technology growth with some of the larger players in the industry, really creating a reach now that goes well beyond what you would see 2, 3, 4 years ago. I mean a lot of investments there too and a lot of capital, a lot of capital investments to put us in those positions. Our customer set has never been wider. By the way, the breadth of our customer set has never been wider. And the opportunity of technology growth with some of our larger customers has never been better, quite frankly. And that's come through with a lot of engineer, lab to fab work, and crafting and curating some really unique solutions that can -- proliferates a number of end markets. That continues to be strong. We've also done a very good job and it's more to go on diversification. We know when the markets want to talk to Skyworks, there's the mobile side, there's the diversification side. I'll tell you that both fronts are in very good position to grow and continue to deliver accretive earnings for us in growth. On the broad market portfolio, we have a tremendous set of diverse customers now that continue to grow and continue to reach into new end markets. And then on the mobile side, there's a lot of very unique technology investments that we're making now. Some have already been -- been already squared away that you'll see in the next year. And the opportunity for growth is there. Despite some of the headwinds in the market, we're going to continue to put up top line strength. Our operating margins right now are in the 40% like range. The EBITDA margins are probably like 40% to 42% actually. Gross margin is a little bit above 50%. So business is solid. We certainly want to drive growth to a higher level. But what we're doing today and the technology reach that we have and the engagements with our key customers give us a very optimistic view as we see the rest of the year going into 2023.

Got it. Definitely, I want to come back to the broad markets and your I&A acquisition, which has been going really well. I did want to go through a couple of mobile questions. And to kick off, how are you thinking about the smartphone market? I appreciate content tends to be the primary driver of that business, but we spent a lot of time talking about units. What are you seeing in the marketplace in the smartphone market overall? And what are you seeing in 5G specifically?

Sure. Well, the smartphone market is a very, very vital piece of technology. The smartphone industry is very critical to what we all do. And we continue to see opportunities to get better. We have very unique strategic engagements with customers that matter. We have great people relationships with customers that matter. And there's a lot of collaboration around how to make things better and now how to make things cheaper, how to make them better, how to well the outside accounts? So we've done a lot of work inside Skyworks, developing bulk acoustic wave technologies, temperature compensated SAW filtering, our homegrown gallium arsenide RF, doing that in our own factories. And the ability to curate that and deliver unique solutions account-by-account is a differentiator. And no one does that in our industry. Only a few companies that will do that all the way through a test, assembly test. And it comes with a lot of capital allocation, right, and a lot of investment to CapEx. One of the benefits, though, is a lot of that invested capital is now peaking. So we should be able to ride that curve as we look out in '23-'24 with the capital investments that we've made already. So there's some things there that are -- don't always show up in the P&L. But if you go behind the curtain and look at what we're doing in terms of cash and how we're investing that and bringing in new technologies and solutions. The larger customers, they want to see that. They want a partner. They want a company that says, listen, let's work together to make something amazing and not worry about the nip, tuck of $0.05 here and there. We're talking about big strategic moves and how we can do that together. And I think it's one of the things that has put us in a position to have such a strong mobile portfolio. It's diverse and it's very large. But it really was a homegrown technology and with a lot of coaching and a lot of collaboration with our partners to get that right. And there's tremendous upside from here. We're nowhere close to where the market can be in terms of mobility.

Got it. And then, Liam, a question on sort of the largest customer that you have. I understand you don't want to get too specific here, but I think the market tends to see that concentration on the P&L and oftentimes discount your stock. But in reality, you've executed really, really well. And you guys doubling down on that customer has been a home run. You've got a lot of content in their high-end phones. You've got the low band. You've got the diversity path. You've got ultrahigh-band. As you think about that relationship and the outlook over the next couple of years, what kind of growth, content growth are you contemplating?

Yes. I think you're going to have a couple of things. If we look at the physical devices of mobile phone and that kind of creates its own imagery and portfolio management play. And that's going to continue. But what we really believe and I think if we all look long at this, it's the technology that really drives it. It's not the physical device. So over time, the wireless technologies, as they improve in speed and latency and performance, you move into things like EV, right? You look at ADAS, the electrification of a vehicle. Those vectors are in the sweet spot of what we do. It's wireless, right? We can call it whatever we want. But it's essential, high-performance, incredibly reliable technology. And that can play in so many end markets. Happens to be smartphone-centric today, but think about all the opportunities that are coming forward in IoT, in automotive, in data center even, right? So that part of our portfolio is just really starting to lift off. And if you look at our mix, when we look at broad market and mobile, you can see that our broad market business has done really well. It's about 40% of our revenue now. And we're looking at a $5 billion, $5.5 billion Skyworks. So those are not small numbers. But the core essential know-how and hard work that we built within wireless, whatever the end market it goes, the technology itself, the vector there is going to be really important. And we think we can take that technology and those vectors to multiple end markets and that's part of our journey here.

Okay, got it. And then I guess shifting gears a little bit to more of the Android side, which has been problematic for not just you guys but everyone from a near-term demand perspective. Based on what you reported in the most recent quarter, China as a region is down big time, right? But to your point on the call, it sort of de-risked at this point. I think it's 8% or 9% of total revenue. How do you see that business going over the next couple of quarters? Are we close to trough? How strategic is China for you going forward? If you can kind of touch on those ones, that will be helpful.

Yes. No, that's a great question. And I think there has been some significant changes in the markets in China across the board, not just wireless and not even in tech here. There's a lot of things that have changed that weren't anticipated. For us, we've always been a higher-end player even in China. And so when we look at the ecosystem that we play with and the key customers that we looked out at China, primarily the Oppo, Vivo, Xiaomi play, they started to erode a little bit. And part of it was, in my view, we had these lockdowns. There were so many things going on in China. And but very strong still did well. The very, very strong players were able to endure that. The U.S. companies, for example, were able to endure some of that headwind. But some of the smaller players in China, the Oppo, Vivo, Xiaomi they didn't have enough financial muster to get through it, didn't do as well. Now for the Skyworks team, we had anticipated some of this. And we were significantly underweight in the OVX market and that was tactical. We did that for a reason. And we were able to take this scale and the production powder to larger customers. Google right now is a strategic customer for us now. That's a new name actually, not a new name in the industry. But for mobile, it's a great company with a great opportunity; Samsung, really good returns at Samsung, right? So there's a lot of good stuff happening there. And we like to play in those areas. And those customers also are much more appreciative of high performance. It's not just the transaction. They want to do amazing things. They want to be the #1 player. So we love that. And we like to be at the table and help everybody to create a great outcome. But the OVX, pretty steep declines in that market. Fortunately, we've de-risked that portion. We'd love to see it come back and if thus great, wonderful, we'll be there. But I think our team did a really good job of navigating through some of those bumps.

I appreciate that point about perhaps reallocating resources away from your Chinese customers. But when you think about the near-term demand dynamics, is there a point in time, is there a quarter where you feel like things bottom out and start to turn for the better? Or is there a ton of uncertainty to make that call as it pertains to China specifically?

Yes, absolutely. I mean there's no reason why there couldn't be a comeback there. There's no question about that. And also, if you take away the brand, you still see a lot of consumption in China for the high-end player here in the U.S. So it isn't -- it's not a case where there's no appetite for wireless technology. It's really about what kind of performance can you get? What will the buyer of the technologies seek for? And what are they looking for, right? So that's kind of where it goes. And it felt to me, what we saw was some declines, maybe some declining technology, not as interesting, yet the larger players, the more sophisticated players actually did better on a relative basis. That's the way we saw it. Does that make sense?

Got it. Yes. That's helpful. And then you just touched on some of the success at Samsung and Google. Can you kind of expand on that and kind of speak to what drove those significant wins?

Yes. Everybody -- it's a very competitive market and customers go to market and go and have their track that they want to pursue. And the fortunate thing for us is that we're a universal donor when it comes to this. And we want to help everybody to do great things and mobility and connectivity, whether it's a handset, whether it's IoT, whatever it may be. And I feel like we are viewed from the customer side as a great company to partner with as we try to just develop the solutions for our customer to make amazing products. So we're able to do that. And so -- but the approach is that we take are very novel. We -- it's not one size fits all. We have to talk about what geographies are going to roam and what's important to your customer set. Our Google product is very different than our Samsung product and the Samsung product is different than another player in the U.S. But our approach is very customer specific. It isn't a platform that goes -- it is a curated customer-specific solution. Now there are elements of it that are core and that leverage our core technology, our bulk acoustic wave, our TC-SAW, our homegrown gallium arsenide, our homegrown assembly and test in-house in our building. And again, 90% of our technologies are curated and built at Skyworks facilities. That's a great, great opportunity to get flexible. And so the conversations that we have truly are one-to-one account by account and taking into respect for each -- the needs for each one of our partners that we have and try to serve them in the best way possible and very often collaborate in ways that makes their company better and certainly for us to be able to serve. So it's a great collaboration. We work on that all the time. We're a customer-first company for sure. And again, the investments that we make in fabs with all the things that have been going on with supply chain to have your customers come in and look at your facility that's delivering billions of units a year and high-speed, highly automated -- automotive that's super, super, super high technologies and our customers can come in and look at that and see it. If there's something that they want differently done, we can make it happen. So there's some unique stuff there that really cements a long-term engagement with the players that matter.

Got it. Liam, you just touched on your BAW technology. I remember 5, 6, 7, 8 years ago, the lack of BAW technology or the nascency of your technology was a knock on you guys relative to some of your competitors. You've made a ton of progress. Can you kind of walk us through that journey and what the outlook is going forward?

Yes, absolutely. So filtering technologies are unique, right? They're not classical semiconductors, right? They're not silicon-based, for example. And if you look at the journey in mobile, early days, you could use a standard SAW filter. And then you could move up. With performance, you could overlay that with temperature compensation to make it more robust at the TC-SAW. And that would bring you up into different levels of spectrum. But to get to the highest levels of spectrum, you have to introduce a new technology, and that's BAW, bulk acoustic wave, and it's a different structure. And if you look at TC-SAW, it's a laminate kind of thing, right? You're creating layers and layers and layers on your filter. If you think about bulk acoustic wave, it's a vertical structure. Very, very different, really hard. That's why you look at companies that offer that technology, get a premium and they should because it's really difficult to do. So what we did is we spent a lot of time in our own labs, working on a process that we built with our IP to create a really strong solution there. We have a long way to go. But we've made some exceptional progress on this. And bulk acoustic wave can be used in smartphones. It can be used in multiple applications that we see over the world, even things like timing. Really cool applications that we are just now knocking on the door, but we have the bulk acoustic wave technology today. Bulk acoustic technology today is largely going to high-end smartphones. But we can scale that and bring it into other markets to do so. A lot more to come there. We -- again, we did not want to go get over our skis and talk about how great the technology was until we made it the way we wanted to make it and we're there now. So we're really excited about it, but there's so much more to go, so much more to go in many more markets that we can bring that technology to.

Got it. And then to your earlier point, from a CapEx perspective, it sounded like you're past the peak from a BAW spending perspective. Is that the right understanding?

Yes. In general, yes. We've been a company that invest, I would say, aggressively in our own facilities and it helps. And the bulk acoustic wave investment was substantial where, for the most part, most of the really hard things we're getting through and now it's just scale. We'll continue to invest there. And again, but the know-how with our technical team, our in-house collaboration, the ability to put it all together really matters. So I think to net it all out, the big dollars in CapEx right now are behind us. But of course, if things change, right, I mean there's opportunities for us to scale. As we grow as a company, we would expect to be obviously bringing up more capital as we go forward. But the big jump in some of these markets that we really weren't in, a lot of those hurdles have been already met. And that will flow through when you look at free cash flow margins still as well.

Got it, makes sense. And then shifting gears a little bit, on the broad market side, it's oftentimes a little confusing from the outside to appreciate what's growing, what's not growing. Help us understand some of the near-term dynamics in broad markets. I know there's a supply element in the near term as well. So if you can kind of summarize what you're seeing in that business today, that would be helpful.

Yes. Yes. And the broad markets business has been really, really good. And for a while, we really didn't do a lot of breakouts on our business. We just kind of gave you the full complement of the revenue. But we, in the last year or 2, have been talking more about broad and mobile. If you look at the portfolio right now, the broad markets business is growing at an incredible rate, a lot of opportunity. It's about 40% of our business right now, and we're roughly a $5 billion -- we haven't finished our fiscal, we're in the $5 billion, $5.5 billion range for a company, so a lot of dollars. So if you look at it, you've got a broad markets business that's about $2 billion plus at today's rate, with a very wide set of customers and applications, names and companies that we never would see names like Tesla, for example, going into the data center. Google on the data center, not just the handset, right, infrastructure business, incredible IoT opportunities. All of these things are building up this broad markets portfolio in ways that are really, really cool and very diversified. It isn't just broad markets because it's not a handset. It's a broad market and diverse. So that helps, too. As you think about a $2 billion highly diversified business, this is broad markets by itself with great technology know-how, still leveraging all of those assets that we talked about in the fab. We can -- we still do a lot of that crafting in the fab for broad markets. That makes for a very unique recipe for our customers. So there's a lot of that going on. We did the I&A business -- we acquired the I&A business from Silicon Labs that has been going incredibly well, better than we -- we have very high parts at Skyworks were pretty tough on ourselves internally. That portfolio is doing really well. And there's some really unique elements to it where some of the products that they have are just exceptional, but they haven't scaled. They haven't scaled. They haven't gone to the big, big names in the industry. What we do, we go big game hunting. That's kind of our thing at Skyworks and then we go downhill. So we've learned a lot together in taking the best out of both of the portfolios, the core Skyworks and the great things that we got out of the I&A team. So that's going to be really cool as we go. And so far, it's been meeting its marks and exceeding its marks on the M&A side. So that was the -- again, more to come on that, but we're really happy with what we're seeing so far.

Yes. I guess on that point with the I&A acquisition, I guess what specifically has surprised you to the positive side? And to the extent there are things where there's still scope for improvement, what would those things be?

Yes, there's a lot there. First of all, really impressed by the roster of customers. If you just think about the number of accounts or high quality, there's a lot of customers that are now Skyworks customers. There's a lot of markets that we haven't been in that they're introducing us to. There are some places where we're both in there together, but with different applications. Their timing business is really good. Power isolation and automotive were really, really, really good. They've got some interesting things in audio. They've got some interesting things in vehicles. Really cool stuff that we -- and so what we're doing is the same kind of approach we're at Skyworks. We want to hunt down the most important things and grow them. It's nice to have diversification. But you also want to have the ability to grow in a meaningful way. So there's been great collaboration with the original Skyworks team in bringing in I&A. The DNA of the big game hunter, works very well when you have a technology that's great, but you haven't taken everyone, right? So we're taking some of the really special high-performance technologies and opportunities that they brought to us and we're taking them everywhere, and meeting customers that have never really met that piece. So it's going to be great. And leveraging the capital assets that we have, too, it doesn't snap right away. It's going to take time. But the big investments that we have in Mexicali and in Japan, all these facilities that we own, we're going to bring that technology here. We're going to bring it inside Skyworks. We won't have to go to TSMC every day or GlobalFoundries. We can do a lot of that stuff ourselves. So there's some really cool things that came about and some upside surprises on the SLAB deal, and it's really kind of left brain, right brain kind of thing here. And when matched up together, it's been an exceptional partnership and we look forward to more as we go forward.

Got it. So it sounds like in the near term, it's more of a cross-sell go-to-market kind of thing from a synergy standpoint. Longer term, it's in-sourcing as well as the manufacturing side.

Well, yes, but it's also in R&D. So it's a cross-sell, it's the end. But there's also core research and development work going on with some really smart people from the original core Skyworks team and the SLAB team getting together and working on solutions. So the cross-sell, yes, that's good and that's easy. But there's also some really good technical work, where in the some really smart engineers that came through that deal as well and we have a great team too. But the collaboration there has been exceptional. And I'll be honest with you. That wasn't something that we looked at in the deal and said, "This is the reason why we're doing it." We're looking at the opportunity, looking at the revenue, looking at the EPS, wonderful. But the people side and the know-how really strong, better than we expected.

Got it, got it. And then maybe talk a little bit about the automotive opportunity. I think you called out that business -- that part of your business being record high in the quarter. The breadth and the depth perhaps in that business and the outlook on a multiyear cadence?

Yes. So we haven't done a lot of breaking out the portfolio in terms of dollars. But I'll give you a ballpark range. We're hundreds of millions of dollars of automotive revenue. I'll just tell you that. And I couldn't tell you that, 2 years ago. But that's where it is. And the engagements within the vehicles are actually quite diverse. There's a lot of wireless stuff that you'd expect, right, especially when you're getting into ADAS and other drive other kind of things. There's also some rich timing solutions activity going on there that we work on; power isolation within automotive, big market for us. But the dollars, for us, we look at a couple of hundred million dollars in that, but there's a lot of growth from there. And I think, again, the partnership with the SLAB I&A team helped us because just a different way to think about where to go and how to go. But that's going to be a meaningful driver for us. We're really just getting started on this. And we're already putting up a couple of hundred million dollars a year. And I would tell you that that's probably going to be one of the fastest growth areas for us as a company. And of course, as you get into autonomous driving, the need for connectivity and wireless tech annuity, 0 wait and see, super high performance, no failure, right? That's the kind of stuff when you have that legacy and that's kind of our thing that we've been doing in wireless. You've got to take that to the next level. And we're the right kind of company to go do that. I mean we're a trusted name. If you're thinking about wireless connectivity and reliability, the speeds, the latencies, the craftsmanship and the know-how, I think that is going to be a differentiator for us. And that's revenue that hasn't happened yet. That hasn't happened yet. That's on the come. But in today's world, $200 million, $300 million of automotive for us is definitely in the cards. So -- and that's something, again, we weren't doing much of that a few years back.

Got it. And just given the long design cycles in automotive, I would guess you've got pretty decent visibility on a multiyear view? Is that fair to say or...

It is. It is. And like -- and we're still, from a market share position, there's a whole lot of room for us to go. I mean this is far from the factoring. This is new stuff for us. But it's got a pretty strong vector in terms of opportunities. So within broad markets, there's a lot of really cool things we can talk about, really cool stuff. Some of it is WiFi-enabled, some of it could be long-haul stuff. Even the infrastructure markets now are getting a little bit better for us too. But automotive, I would say, over the next 3 to 5 years could be one of the bigger drivers for us overall.

Got it. And then on consumer WiFi, I think there's a perception that you guys are over-indexed to that market. And that market has been inflated through the pandemic and yet the risk going forward. How would you kind of address that?

Yes. I don't know how it works with everybody else in this room. But when WiFi is down, it's the problem in my house. I just tell you how much. But I mean it's some things -- they're necessary technologies. And they've gone through their own cycle, where we're seeing WiFi6, WiFi7, 7E, 6E. There's a lot of need for that. And you can look at WiFi as its own cycle, the way you look at 2G, 3G, 4G. You can still get some lower end kind of consumer edge WiFi. And then you can go all up to really industrial-grade, high-speed WiFi, if you go all the way up to a 6E solution. And the appetite for WiFi, the way we see it, is still pretty strong. And it has its own cycle similar to a mobile phone type of cycle. So there's a lot of dollars to be earned there. We have a really good position. We have a really -- no shame in that. We have a really good position in that portfolio. It is growing. The usage cases on WiFi are very strong, group with all the key players in the industry. And it can go anywhere from -- you can go from low end WiFi, they could have at the airport or something, to go to really industrial-grade enterprise grade WiFi with redundancy and speeds and latencies are very, very different than we get in the consumer device. We can play through all of that. So that's an element within our diversification theme within the broad markets business.

Got it. And Liam, I think supply has been still an issue in broad markets. What are the key pain points today? When do you expect them to ease and where you're at from a supply perspective?

Yes. Yes. In general, we've done better than most in the whole supply chain world that we've gone through this year and still we're still dealing with it, right? And so why would we be better than that? Well, we put a lot of investment in if we have our own facilities. We're very unique to do that, very unique. And so with that, we are able to kind of navigate some of the challenges, right? But the lion's share, 75% to 80% of the product, is made in a Skyworks facility, homegrown whole thing and we may be limited sometimes just by sometimes our customers. Our customers got 98% of their bill of material ready and 2% of it isn't there. And that 2% could be a problem -- it could be a company I don't even know. It doesn't -- it could be a fab issue. It could be a downstream fab issue. It could be a piece part problem on the other end. And the customer is saying, "Hey, I got everything I need. But I can't finish my product because I'm waiting for this guy over here." So that's the kind of supply chain problem that we've had this year. It's been more around making sure our customers get a complete solution. And we can provide everything that we could do to make it complete. But if there are some tangential technologies that are short and that's happened, it makes it really hard for the customer, right? So I think that's cleaning up a little bit. We haven't had too much internal flux and change. But at the same time, when you're running a fab, you don't want to turn it on and off, right? You want that to run at a steady state and high performance. So a couple of things, headwinds there, where customers, like I said, they had orders. They had to delay it because they couldn't get the rest of the bills and materials, that kind of thing, stopping and starting. It's getting better. It's definitely getting better. I don't think we're through it. And Skyworks isn't the only company that's dealing with a lot of these headwinds. But I would look at where we are now, it's definitely improving. We've also won a lot of customers through this thing. That wasn't the intention. The intention wasn't to try to solve all of our partners that have had problems. That's not really the goal. But when things went wrong, we were the fireman that would go in and fix things. We've done that. And we've been very collaborative with our customer set and being really open about paths that they wanted to go if there's an issue. And we've had conversations about what's the best place to go now if this went this way. And it's made us a better supplier to our customers. So that's going to continue to go. But we've also -- we've always had a really strong operational edge at Skyworks and I'm proud of that. There's nothing wrong with that at all. That's important. At the end of the day, these are physical products that have to work together and be efficient and unified as you deliver a complete solution. So we do a little bit more of that hard hat work than most companies in the space. But it's another reason why the engagements with really important customers stand tall every year.

Makes sense. Thanks for that. I'm going to pause here. We have about 8 minutes left. Any questions from the audience? Raise your hands if you have a question. If not, I'll keep going. I guess, in terms of how to think about profitability, your gross margin profile has been extremely stable throughout the ups and downs. OpEx leverage has been really, really good. As you think about some of the levers that you can push and pull and some of the mix dynamics and so on and so forth, how are you thinking about gross margins, operating margins over the next couple of years?

Yes. No, that's a good question. I mean, we have a pretty strong position today, but we definitely want to improve. I think I would say, the metric that we would like to get after the first is gross margin. I mean we have been and been very honest. We've been hanging around the 50%, 51-ish range, 52% in that ballpark. Op margins have been steadily strong and so at 40%. And by the way, we can run that business fine at that level. It's not -- we're not starving the company. We're developing world-class products, great people, great talent, making strategic investments in our fabs, all that's there. So that's not -- we've got something to say, well, your gross margin. Well, what 40%. That's really fine. We can do it. This is a high scale business. We know how to do that. But getting at the gross margins, I think that we know we're working. And we have great vision on what we can do and how we can handle it. It's been -- this year has also been kind of mucked up a little bit with pricing that part of the whole supply chain issue, you had a lot of craziness in pricing. But we got -- we have some partners. I'm not going to name who they are, but just pro-contracts, just focal, right? We would not -- as long as I'm the CEO, I would never do that. But that was done to us. But we dealt with it. We figured it out and it created a gross margin headwind in some cases. But the fact that we had the vast majority of our technology in our house, we would protect it. And you've got a few little windows that are open every once in a while, we've got a problem here because this supplier couldn't give it to me or this supplier will give it to me with a 3x price increase is something crazy, right? That kind of stuff had been banged around. That's going to clean up. It's almost done. And that's when we can get a really good clear view on what our capabilities are on the GM line. Stay vigilant on the OpEx line. There's no reason we're totally comfortable with that, hit the GM line a little harder. We can do that. And I think coming through the supply chain issues and the headwinds and the inefficiencies of the market that we've all seen, the physical market, not the stock market. We've all in this ecosystem had to kind of deal with it in a certain way. And I think that's going to improve. It's actually -- I think it's going to improve for the whole industry. This is Skyworks stock. I think we're going to get back to a healthier position. But the pricing dynamics got a little wonky. We were not a company that would go in and raise prices. We had a few little things we had to do, but very, very little compared to what would have been put on us. And we were able to navigate through that, which is, in a way, it's a testament of our ability to sort of endure some hardship on the cost side. But we got through that. We don't want to go through that again, but we've got through that. We don't want to go through that again. But we've learned a little something from it too.

And when you say partners breaking contracts, you mean jacking up pricing?

Yes, yes.

The kind of figure, yes. Okay. And then you've been cash flow generative throughout. You just talked about perhaps capital intensity peaking and moderating a little bit. How should we think about allocation of cash and capital going forward? Do you just close the I&A acquisition? You do talk about diversification further. So M&A, investing in the organic business, steady growth in dividend buybacks. How do you think about the puts and takes there?

Yes. There's a lot more opportunity now than there was a year ago, if you think about it, right, and think about valuations and opportunities. We've always been great with shareholder returns or the buybacks and dividends and great. We've been doing that for a long, long time. There's some opportunities now too with M&A, given where valuations are, opportunities are. I would also say the confidence in our team, the way that we handled the transaction, the I&A transaction, has been great and hats off to the guys in Texas on that too, that really smart, engaged people that were working with us on that. So I feel like we have a lot more choice now. The financials in the company are outstanding. I mean if you look at the numbers, I mean look at the free cash flow margin, look at the EBITDA margin, all of that. What's not outstanding is the multiple today, quite frankly, right? So that matters. That's my job and our team's job to do better on that front. But everything is available right now. I mean it's -- the upside of the situation is choice now. We have choice. We have the ability to do more on buybacks, more on dividends, more on M&A. I think M&A given some of the things that are popping up now would be a little bit more interesting than it was 6 months ago. And we're -- we would be ready to do something if it makes sense. But again, we're going to be cautious. We're going to be smart about it and we'll look through it. And we also want to continue to grow the business internally. So it's actually not a bad position to be in.

Got it. Great. And then I guess in terms of M&A, what do you look for in a company or in a business? What are some of the top 3 things that you sort of have to tick the box, if you will?

Yes. I would say we want growth and we want purpose in the technology. We want growth, but we want growth that has vibrancy, that has legs, that's going to be around and is going to be relevant. That's important. I think it's really important. We don't want -- we don't -- we will not do deals just to create more top line. There needs to be something strategic that we really are intrigued and are really excited about because it's hard, transactions are hard. Everybody knows, I mean the industry knows that. Even good deals are hard to do. But conditions are moving around now to create potentially some different opportunities. And our financial position is very strong despite what we see in multiples today. The business is strong, the opportunity is strong. And I think we have more choice at this space.

Got it. And is there a sharp focus on reducing mobile exposure or is that not necessarily? You talked about liking that market?

Yes, I would not -- I would definitely not reduce mobile exposure itself. But I would like to see the business grow to a level where mobile would be lower as a percentage. So we want -- we don't want mobile smaller right now in absolute dollars. As a percentage, that's fine.

Sure. That's what I meant there.

You got me? But we also have -- what happens every year as we do really, really well with a lot of these mobile guys. And the broad markets business doing great. But the mobile business is big and design wins there moved the needle quite a bit. And the vectors that we're seeing are not just with the largest customer, but the need for the technology, go back to the very beginning of this thing. The technology that we're talking about is essential. It's vital. People cannot live with this. This is some really important stuff and it's going to get more and more difficult. And it's going to create more and more end applications that we can populate. So we're excited about it. But again, working on the broad market side, we've got a great pace to that this year and feel really confident about what we can do as we go forward.

Awesome. In the last 60 seconds plus, anything that we may have missed or based on all the one-on-ones and meetings that you've had with investors, anything that we collectively underappreciate at all?

No, what I would say, honestly, for -- take this mobile broad market hat off for a moment and just look at the business as it is today, the growth rates. I mean, we were at $3.1 billion in revenue in the COVID area and now we're at like $5.5 billion, okay? So this is a business that can grow. This is a business that can generate cash. This is a company that has unique technical assets that are very, very different than our peers. We have some of the best customers in the world and we know how to delight them every day. And we can go with customers that are start-ups and uplift their business and create an opportunity. And our teams fired up about demonstrating that. We know what our stock price looks like and our valuation should be. And we're looking to see that really change as we get through into 2023 and beyond.

Awesome. Liam, thank you so much.

All right.

Appreciate it. Thank you, all.