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RF Micro Devices (NASDAQ:RFMD)

Q1 2013 Earnings Call

July 24, 2012 5:00 pm ET

Executives

Doug DeLieto - Vice President of Investor Relations

Robert A. Bruggeworth - Chief Executive Officer, President, Director and Member of Corporate Development Committee

William A. Priddy - Chief Financial Officer, Corporate Vice President of Administration and Secretary

Steven E. Creviston - Corporate Vice President and President of Cellular Products Group

Norman Hilgendorf - Vice President of Corporate Development and President of Multi Market Products Group

Analysts

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Ittai Kidron - Oppenheimer & Co. Inc., Research Division

Harsh N. Kumar - Stephens Inc., Research Division

Blayne Curtis - Barclays Capital, Research Division

Edward F. Snyder - Charter Equity Research

Parag Agarwal - UBS Investment Bank, Research Division

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

Anne Edelstein

Daniel Toomey

Sameer Kalucha - JP Morgan Chase & Co, Research Division

Quinn Bolton - Needham & Company, LLC, Research Division

Aalok K. Shah - D.A. Davidson & Co., Research Division

Blaine R. Carroll - Avian Securities, LLC, Research Division

T. Michael Walkley - Canaccord Genuity, Research Division

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the RF Micro Devices' First Quarter 2013 Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, July 24, 2012.

Now I would now like to turn the conference over to Doug DeLieto, Vice President, Investor Relations of RF Micro Devices. Please go ahead, sir.

Doug DeLieto

Thanks very much, Britney. Hello, everyone, and welcome to our conference call. At 4 p.m. today, we issued a press release. If anyone listening today did not receive a copy of the release, please call Samantha Alphonso at the Financial Relations Board at (212) 827-3746. Sam will fax a copy to you and verify that you are on our distribution list. In the meantime, the release is also available on our website, rfmd.com, under the heading, Investors.

At this time, I want to remind our audience that this call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the Safe Harbor statement contained in the earnings release published today, as well as our most recent SEC filings for a complete description.

In today's release and on today's call, we provide both GAAP and non-GAAP financial measures. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain noncash expenses for unusual items that may obscure trends and our underlying performance.

During our call, our comments and comparisons to income statement items will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today, available on our corporate website, rfmd.com, under Investors. [Operator Instructions]

Sitting with me today are Bob Bruggeworth, President and CEO; and Dean Priddy, Chief Financial Officer. I'm also joined by Eric Creviston and Norm Hilgendorf, who lead our Cellular Products Group and Multi-Market Products Group, respectively, as well as other members of RFMD's management team.

And with that, I'll turn the call over to Bob.

Robert A. Bruggeworth

Thank you, Doug, and welcome, everyone. RFMD's quarterly results demonstrate our sharp focus on product, and technology leadership is successfully transitioning our organization into a highly diversified, growth-oriented supplier of RF components and compound semiconductors.

June quarterly revenue increased approximately 8% sequentially, supported by solid growth in both our Cellular Products Group and in our Multi-Market Products Group. The broad nature of our revenue performance is a credit to the entire RFMD team, and it highlights the strength of our expanding product portfolio for smartphones, tablets, high-performance WiFi and other wireless and wireline growth markets.

Of note, we are especially pleased with our sequential growth in 4G LTE, 3G entry and high-performance WiFi. From a market perspective, the rapidly expanding demand for data-intense mobile applications is creating an abundant growth opportunities for RFMD, given our comprehensive product development capabilities, our broad technology access and our world-class systems level expertise.

RFMD is winning in the marketplace today by delivering best-in-class products to the world's leading OEMs. Through product and technology leadership, we are solving the increasingly complex RF challenges related to multi-mode complexity, thermal management and high-powered data sessions and solution size.

In the cellular market, we are strengthening our relationships with customers and platform providers and winning additional content at the world's leading smartphone manufacturers.

The new products driving this growth and diversification include PowerSmart, our ultra-high efficiency 3G/4G PAs; our switch-based products; our high-performance WiFi front-end modules; and our industry-leading antenna control solutions.

In the market for converged power amplifiers, PowerSmart is the industry leader with volume shipments across multiple base bands and new opportunities for incremental growth, as tablets and ultra-books evolve to offer broadband connectivity.

On smartphone platforms with single band and multimode, multiband architectures, RFMD's ultra-high efficiency 3G/4G PAs, are optimized to provide the improved talk time and thermal performance that are key-buying criteria for today's smartphone consumers.

Our ultra-high efficiency PAs achieved robust sequential growth during the June quarter, and we are leveraging this expanding product portfolio to target new design wins at leading smartphone manufacturers.

Beyond the power amplifier, RFMD's discrete switches, antenna switch modules, switch filter modules and antenna control solutions continue to proliferate across the world's leading smartphone manufacturers. Again, by concentrating on product leadership and leveraging our system level expertise, we are supplying our customers breakthrough RF semiconductor solutions containing all RF semiconductor content, while also working with our customers and channel partners to define their next-generation roadmaps and system solutions.

This is solving our customers' challenges related to multimode, multiband front-end complexity and increasing RFMD's dollar content in the world's leading mobile devices.

In MPG, we're executing on a same product and technology leadership strategy to drive growth in 3 targeted growth markets: High-performance WiFi, GaN power and wireless infrastructure. In WiFi, the demand for higher data rates is driving up system requirements related to power output and linearity by also accelerating the rollout of more complex systems and modulation schemes. This is increasing the demand for RFMD's high-performance front-end modules while also effectively expanding our TAM.

WiFi revenue increased greater than 20% sequentially in the June quarter, and we expect continued robust growth as we expand our alignment with the leading WiFi platform providers for 802.11n and 802.11ac. For the 802.11ac market, we recently released new front-end modules providing superior dynamic EVM performance, a key performance metric for high-end WiFi systems.

Of note, we secured a critical reference design win on Broadcom's highly anticipated 802.11ac reference design for CPE applications, and we're already ramping production to support this key second half of the year revenue driver. In addition, we've captured 802.11n socket wins with multiple smartphones, tablets and netbooks.

In GaN power, there's a growing demand for RFMD's newest GaN products and technologies in next-generation military radar and in cable TV line amplifier applications.

Our cable hybrid business was up significantly in the last quarter, driven in part by our industry leading GaN devices.

And finally, in the wireless infrastructure market, network operators must expand capacity in both macro base stations and backhaul networks. For microwave backhaul, MPG has released over 2 dozen new products in the last year. These complete chipsets, which operate in key frequency bands from 6 to 20 gigahertz, are gaining traction in a variety of new radio systems.

Overall, RFMD is executing on a diverse set of incremental growth drivers, and we are achieving key design wins across a broad set of customers. We are especially enthusiastic about new key customer program ramps that we anticipate will support robust growth beginning later this quarter and continuing into calendar year 2013.

As such, we anticipate our improving financials in the December quarter will be highlighted by a return to robust sequential revenue growth, as well as continued margin expansion and operating leverage.

With that, I'll now turn the call over to Dean.

William A. Priddy

Thanks, Bob, and good afternoon, everyone. Revenue for the June quarter increased approximately 8% sequentially to $202.7 million. CPG revenue was $152.5 million, up 7% sequentially; and MPG revenue was $49.3 million, up 9% sequentially.

Gross profit was $69.1 million, with gross margin improving 100 basis points to 34.1%, with improved product mix being the primary contributor.

Operating expenses were $65.9 million, with G&A of $11.4 million; sales and marketing of $14.4 million; and research and development of $40.1 million. Operating income was $3.1 million. Other expense was $827,000, and non-GAAP taxes were approximately $375,000.

Net income for the quarter was $1.9 million or $0.01 per diluted share, based on 282.2 million shares.

Going to the balance sheet. Cash, cash equivalent and short-term investments totaled $250 million. During the quarter, RFMD retired approximately $48 million par value of debt. Additionally, RFMD repurchased approximately 1.9 million shares of stock at an average price of $3.75. To-date, RFMD has repurchased $50 million of stock within a $200 million share repurchase program.

DSOs were 51 days, and RFMD's inventory balance of $129.7 million resulted in 4.3 turns. Net PP&E was $168.6 million compared to $197.9 million last quarter.

During the quarter, RFMD successfully transitioned to a complete outsourced model for wafer starting material. We expect this transition to provide RFMD with lower MBE and MOCVD [ph] pricing, resulting in higher return of invested capital and more predictable operating results.

Capital expenditures during the quarter were $9 million, with depreciation of $13.8 million and intangible amortization of $4.6 million. Cash flow from operations was $15.6 million, and free cash flow was $6.6 million.

Now the business outlook and financial targets. RFMD's current financial outlook reflects the timing of key customer program ramps and moderating growth among certain customers. During the September quarter, RFMD expects to expand its alignment with the industry's leading customers and channel partners targeting 3G/4G products and high-performance WiFi. RFMD expects multiple new customer product launches commencing later in the quarter, will support sequential revenue growth beginning in the December quarter.

RFMD currently believes the demand environment and our end markets supports the following financial expectations and projections: RFMD expects September quarterly revenue to be approximately flat to down, approximately 5%, with sequential growth resuming in the December quarter; RFMD expects non-GAAP gross margin will expand sequentially approximately 50 basis points, and non-GAAP operating expenses will be approximately flat; RFMD expects a non-GAAP tax rate of approximately 17%; and RFMD expects non-GAAP EPS of breakeven to a profit of $0.01 per diluted share.

And with that, we'll open the call up for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Dale Pfau with Cantor Fitzgerald.

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Could you talk a little bit about -- PowerSmart and Phenom sequentially and how you're looking at both of them into the September quarter? And then as a follow-up, I'm kind of curious into what programs or what is ramping, what is the little hiatus we're seeing here in the September quarter? And is that specifically related to either a PowerSmart or a Phenom ramp?

Robert A. Bruggeworth

I'll tell you what, Dale, why don't we let Eric go ahead and talk about it. Both of those are growth drivers as you pointed out, doing extremely well year-over-year, as well as quarter-over-quarter. And I'll go ahead and let Eric talk a little bit about expectations throughout the rest of the fiscal year.

Steven E. Creviston

Sure, I'd be happy to. PowerSmart itself has basically doubled year-over-year, still continues on a strong growth trajectory, had very good design win momentum last quarter in particular. In fact, some of the legacy platforms that had moved to second sources are now coming back our way, beginning in the December quarter along with new program ramps on our new 4G PowerSmart, which we'll be also ramping late this quarter or in the December quarter. So good overall long-term momentum, with PowerSmart continuing to proliferate with many, many customers as well in different segments, as we talked about last quarter, ramping end-to-end in multiple baseband providers. So it's on a trajectory. However, it is mature compared with the ultra-high efficiency 3G/4G PAs. They are growing sequentially at a higher rate as they did last quarter as well. And that if anything accelerated in the June quarter, driven of course, by the smartphone market and pickups there, and we'll be seeing that accelerate even further as LTE becomes more meaningful later in the year. But also, even in the lower tier, in the 3G entry market and some of our China customers, they're also picking up those power amplifiers as well. So that -- the ultra-high efficiency 3G/4G PAs is definitely is a strong driver for us right now.

Dale Pfau - Cantor Fitzgerald & Co., Research Division

And then the hiatus in September, is that related to a particular ramp for one of these product lines?

Steven E. Creviston

I think it's fair to say that timing of certain product platforms, and as our customers shift the portfolio due to other constraints and so forth, it may have some effect. Overall, I think we're taking a pretty cautious stand from a September quarter with a lot of macro headwinds potential in the mass market, our entry segments for sure. And then just -- I think the smartphone market, people are waiting. Everyone is waiting anxiously to find out what the next release is going to be on a couple of marquee platforms. And once the releases are out there and the phones are out there, I think you're going to see a lot of pent-up demand get realized. But for now, I think that's what's built into our guidance.

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Is there something specific from a forecast point of view on your customers? Or you're just layering in some conservatism?

Robert A. Bruggeworth

I think, Dale, what we're seeing, as Dean and I both have commented about some of the -- reflects some of the timing of new program ramps, coupled with, as Eric pointed out, there's some marquee LTE phones that I think people are waiting for, a lot of consumers on the high-end are waiting for. And then -- so that's more or less forecast we're getting in from our customers. And then when we talk about some of the lower-end 2G, 3G entry even, I think we are taking a little more cautious stance in the outlook that we see given the global economic situations that are going on around us. I guess the bottom line is though what we feel very good about is that our drivers for our growth are very much intact. And as these new higher-end phones come through with much more dollar content from RFMD, we'll definitely return to significant growth.

Operator

Our next question comes from the line of Ittai Kidron with Oppenheimer.

Ittai Kidron - Oppenheimer & Co. Inc., Research Division

I guess I have a few questions. I'm a little bit confused on your September. Historically, when you look at the RF vendor's performance, it's not as weighted towards the December quarter, given that they need to ship ahead of product ramps or typically they have high single-digit September growth and high single-digit December quarter growth. I understand that you're ramping on several platforms, but maybe you can tell me what is ramping down, what is declining for you sequentially into September to offset?

William A. Priddy

Yes. We did say that we're taking a cautionary stance on certain customers. For instance, it's no secret that some of the previous leading smartphone manufacturers are having difficulties in the marketplace. And now, there's a couple of more marquee smartphone manufacturers where individual ramps of new products can have a much more meaningful impact on any particular quarter or growth rates. So I think we're taking a cautionary stance on some of the companies that we historically have had a relationship with. And that's more of the -- maybe it's the effect of the macro environment, maybe it's the effect of product cycles. It's a little difficult for us to really know.

Ittai Kidron - Oppenheimer & Co. Inc., Research Division

Can you -- but -- I'm just trying to narrow that down a little bit. Nokia, clearly has been significantly deemphasized at this point. And I can understand how that customer is still down for you sequentially into September. But can you talk about Samsung and the Chinese vendors, specifically, how do you anticipate their behavior into the September quarter?

Robert A. Bruggeworth

I think it's -- let me start with a high level. There's 2 large players that are doing extremely well in the high end, and we expect them to continue and that's in our guidance. I think when you drop below that, more than just the one customer you mentioned, clearly, there was at least 3 guys that all announced their quarters were not going as well and their outlook for the following quarter as well. So we're being impacted more there than I would say in the China market. And quite honestly, in the China market, our 3G business, 3G entry, grew extremely well quarter-over-quarter, and we're expecting that to continue.

Ittai Kidron - Oppenheimer & Co. Inc., Research Division

Okay. And lastly on the gross margin, your guidance for the next quarter, does that -- is that improvement in gross margin mainly, if not solely, due to the same effect you had this quarter, meaning a change in mix, meaning the MPG growing faster than CPG? Or there's something there? I'm just, again, struggling how enough flat-down revenue environment your actually gross margin's going up?

William A. Priddy

Yes, well, we've been signaling for a while that gross margin has some tailwind, and product mix is definitely playing into that. So whether it's a bit of strength in the MPG business or in some of the new products that CPG is introducing, that plays into it as well. And also, don't forget that we did say that outsourcing the starting material would also have a favorable impact on gross margin.

Operator

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

Harsh N. Kumar - Stephens Inc., Research Division

Guys, a couple of questions. Just listening to you and reading your press release, sounds like you have a couple of design wins that you feel very comfortable about ramping in December. I'm curious -- or ramping late, call it September quarter and then going to into December. I'm -- could you talk about what those are, what customers? Are they your top 2 customers or just some color on that?

Robert A. Bruggeworth

First, Harsh, this Bob. Number one, it's more than a couple of design wins. It's a lot broader than that. I think what we can say is, a lot of those design wins are with LTE, where we've got multiple PAs, switches, other components, WiFi, much chunkier dollars in that sense. I prefer not to get into the customer-specific topics, only because it impacts the timing of some of their new models and handsets, and we rather not get tied into that. But what I can say, again, is it's broader than 2 customers and it's broader than 2 design wins.

William A. Priddy

And, Harsh, last quarter, we mentioned purchasing some capital equipment for new product category in our antenna control solutions, antenna tuners, if you will, and that very much remains intact and will be a significant ramp for RFMD.

Harsh N. Kumar - Stephens Inc., Research Division

So my next question, as a follow-up is, I'm wondering if you could help us out maybe not give us a number for December growth rate, but just kind of paint the picture for us, would you do better than the industry in the December quarter, because some of the stuff would've shifted out there? Or just maybe give us some color again on how you view December growth?

Robert A. Bruggeworth

Thanks, Harsh. I think predicting what's going to happen in the macroeconomic would probably be quite challenging. What I do believe is because many of these design wins are in flagship phones, which typically are their high-volume phones, given what we see there with the ramp of some other phones where we're gaining share that Eric already talked about, I think we have a good probability of growing a little faster than the market. Defining what that market growth rate is going to be, at this point in time, I think it would be a little bit challenging. But I do believe we'll be a net share gainer in the December quarter.

Operator

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

Blayne Curtis - Barclays Capital, Research Division

Just the clarity on the guidance, I just want to make sure I heard it right. I mean, clearly, there's a pause at the high end. I think everybody understands that. You said that the 3G China was growing. But I thought I also heard you say that some of the entry-level phones were slower. So maybe if you could just provide some color there. And then in that same context, if you could just talk about the mix of 3G versus 2G. Clearly, you're seeing LTE ramp. Is that moving higher?

Robert A. Bruggeworth

Blayne, I'll go ahead and take some of that. Number one, as far as the entry-level phones go, they are primarily going into a lot of the developing countries coupled with a lot of the places in Europe and South America. And let's be honest, the macro environment is not that strong. I think it's common knowledge. The 2G market is declining. We're also seeing a little more price pressure in that place as well. So with that said, the China market, as I talked about, is still mixing into the 3G entry, coupled with a kind of a smartphone 2.5G EDGE segment as well that we're starting to see. And we think that's going to drive some growth a little bit later. So if you will, 2G smartphone. So we see that coming. And as far as our mix goes, it continues to grow substantially more 3G than 2G, not just in the China market, we're past that 50-50. And our total cellular business continues to expand 3G versus 2G.

Blayne Curtis - Barclays Capital, Research Division

I got you. But are you seeing weakness in 2G? It's sort of unclear.

Robert A. Bruggeworth

Yes. But it's an...

William A. Priddy

Yes. That's been a bit of a trend that we've called in 2G and the number of units will decline this year. And certainly, that TAM is declining. And we're very quickly mixing to 3/4 of our business being 3G/4G. 2/3 roughly last quarter and so we're on that trajectory.

Robert A. Bruggeworth

Yes, I guess what I would add [indiscernible] -- that is running pretty much to plan. Let me put it at that perspective. It's the high end in the chunkier dollars is what we're expecting. It's been delayed a little bit.

Blayne Curtis - Barclays Capital, Research Division

I got you. And then, the MPG saw a big pick up in June. I just want to make sure, is that growing again into September and CPG is down, or are they both down?

Norman Hilgendorf

We see -- this is Norm. We see MPG growing in the next quarter, and it's fairly broad-based. It's been in the same drivers that we have this last quarter, especially very strong growth in WiFi. The cable business remains strong. And -- so those are the key things that have been driving our business this quarter. But WiFi stays very strong for us going forward.

Blayne Curtis - Barclays Capital, Research Division

And then, Dean, just last question on the supply agreement or the shift of the -- the shift to those resources, did you see all the benefits in the September quarter? Or does that carry into December?

William A. Priddy

I think it carries into December and beyond. The more -- actually, the more starting material we buy and the more gallium arsenide production we have, the more the benefit we'll see.

Operator

Our next question comes from the line of Edward Snyder with Charter Equity Research.

Edward F. Snyder - Charter Equity Research

Eric, I thought I heard you say that PowerSmart revenue has doubled over the last year. But if that's true, does that imply a greater than 50% sequential increase in PowerSmart? Is my math off there? And then, Dean, we spoke, I think, last quarter about the ramp of the production of the antenna tuners with the goal, I guess, of production in September. That seems like it might be pushed out a bit, is that correct? Or are you still on the original trajectory that you thought in April when we first chatted about that? And then, on MPG, the .11ac stuff, we've just heard Broadcom report they're guiding for a very big ramp in connectivity in the second half of the year. Are you tied heavily into the .11ac stuff with Broadcom? Just trying to get an idea how that translates to what you could possibly see in terms of revenue growth in September in WiFi.

Robert A. Bruggeworth

Ed, as far as PowerSmart, it was up, as Eric said and I commented as well. It's more than doubled year-over-year, but the 50% sequential is way off, I would say, I'll let Norm go ahead and talk a little about the 802.11. And I think your middle question had to do with our antenna control solutions. Is that correct?

Edward F. Snyder - Charter Equity Research

Yes.

Norman Hilgendorf

Yes. The ramp, the production ramp of antenna-controlled solutions has begun and will be ready to support the demand from the customer, and that's about all that we're going to comment on.

Steven E. Creviston

And for WiFi, that's an extremely busy category for us right now. The customer activity and activity with our reference design partners is tremendous right now. We've been focusing on major reference design partners, such as Broadcom and Qualcomm. You mentioned Broadcom specifically. We have a key reference platform wins with them for 802.11ac and their CPD equipment design and also an 11n mobile design. It's a new platform that is just being rolled out. So we see very strong attach rates also coming from customers in a variety of applications that being from the routers for CPE; to mobile applications including handsets, tablets, notebooks and other WiFi applications like set-top boxes.

Edward F. Snyder - Charter Equity Research

So -- and you were typically tied more to TI in the past than WiFi. I know -- as they reported yesterday, that's been a waning and it's getting weaker for them with every quarter given their Nokia exposure here. Is Broadcom at parody with that platform or -- and will it be -- any idea over the next couple of quarters or how do we size these 2?

Robert A. Bruggeworth

Ed, this is Bob. I'm going to take that. At the real high level, I think your comment about TI and their trajectory versus Broadcom's, I think the real key point here is this is our first major reference design win with Broadcom. So we're just really beginning to see that ramp. And I think, directionally, over time, that is what's going to drive a lot of our WiFi revenue. And clearly, just because of their market position versus our legacy partners there, we would expect, obviously, that to be the lion's share of somebody like a Broadcom followed by a Qualcomm. So I think the products that we're bringing out, their performance in getting data through the devices efficiently, I think you're going to see significant traction and growth for us with those 2 players.

Operator

Our next question comes from the line of Parag Agarwal with UBS.

Parag Agarwal - UBS Investment Bank, Research Division

I just want to understand the growth drivers going forward. So if I understand correctly, PowerSmart has least declined of maturity. And going forward, the key growth driver would be the high-efficiency LTE power amplifiers. Did I get it right or did I miss anything here?

Robert A. Bruggeworth

Eric, why don't you go ahead and talk about next-generation PowerSmart, as well as what's going on with the high-performance 3G/4G LTE PAs. What are the drivers?

Steven E. Creviston

Yes. The first-generation PowerSmart certainly has reached maturity. We're releasing a new generations and of course, encompassing LTEs drive further growth in that product line. So it still has a lot of growth ahead of it. My point about maturity was just that the growth rate is not going to be as great as the ultra-high efficiency 3G/4G PAs. We've talked in the past about the total available market for those products being about twice the available market for PowerSmart in the first place. And of course, they came to market about a year later. So they're still going aggressively up the ramp, very early innings in that entire ramp. So as we look forward from here, we're very excited about new opportunities for PowerSmart across a wide range of platforms with many OEMs. The high-efficiency 3G/4G PAs will continue to proliferate at an increasing rate, I think, for the next few quarters. And then the switch business as well has been a strong driver for us and is really getting into a whole new chapter as the new control solutions ramp. And then, as we've looked at bringing all these solutions together, and our systems expertise is being applied to help the platform providers, as well as the leading OEMs architect their next generations, we're seeing a lot of opportunity where we can capture the entire [indiscernible] contents through one reference design, if you will. So I think that's where all these drivers begin to sort of come together, coupled with our long history in systems engineering. And we're going to see a lot of growth next year, just due to combining all of these into very unique platforms based on individual customer needs.

Norman Hilgendorf

And for the Multi-Market Group, there are 3 main market drivers for us in the focus areas: The first being WiFi, which we just covered somewhat, selling high-performance WiFi front-end modules into a whole host of applications. The second category being gallium nitride or GaN-based, high-power amplifiers, where we've been getting very good traction in the cable TV networks, military radar applications and also some other broadband communications applications. And the third area is an area of traditional strength for us, wireless infrastructure. In the near term, we're seeing growth opportunities and drivers that are really in the backhaul part of the network, with microwave NYMEX sold to provide an increased data rates in the backhaul of the network systems. And secondly, in the long run, we expect to see more and more growth coming from, what's referred to as small cells, pico cells, femtocells, microcells. And that market is still taking shape, but there's a lot of activity in that category. So near-term and long-term drivers both for that category.

Parag Agarwal - UBS Investment Bank, Research Division

Okay. And, Dean, just wanted to get a feel for the margins. Are there any levers you can pull to expand margins, like maybe more volumes and capacity or some restructuring that would impact the margin?

William A. Priddy

Yes. Actually, the current plan is to utilize the capacity. That's more than anything else. The revenue base, they're still a significant amount of margin tailwind as utilization rates improve. I mean, this is -- we've been able to improve gross margins several points while factory utilization rates have stayed pretty much constant, perhaps maybe even down a tad. But we don't see those rates staying at those levels for very much longer.

Operator

Our next question comes from the line of Vijay Rakesh with Sterne Agee.

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

Just trying to tie all of this together. When you look at the December quarter, given the September year is flat, do you see erroneous [ph] get back to the $230 million, $240 million range? And if that's the case, how do you see -- has the gross margin profile changed for those regulars [ph]?

William A. Priddy

We would expect gross margin to expand at the $230 million to $240 million range. I think it's a little too early to guide quite that aggressively for the December quarter. But let's face it, if everything were to align, it's certainly in the realm of reasonableness. However, that's not something that we're currently looking at or guiding to for the December quarter.

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

Got it. And where -- as you look at the December quarter, what were the puts and takes? What are you seeing ramped there? Obviously, all the big customers obviously slow. I think everybody's seeing that. But outside of that, what other guys you see ramping?

William A. Priddy

Yes, it's a multiple -- multitude of things. And it really boils down to a couple of handful of key LTE ramps for the company and key WiFi ramps for the company, along with just the usual business, such as the China 3G market. Any type of uplift in that market would definitely be upside to what we're currently expecting. And the antenna control solutions also is -- and switch-based products are definitely in that mix.

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

And last one housekeeping question, what was the handset versus multi-market products mix? And who are the top 10% customers here?

William A. Priddy

Yes, we had one 10% customer during the quarter, and that was Samsung. And CPG was $152.5 million, and MPG was $49.3 million of the $202.7 million.

Operator

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

Anne Edelstein

This is Anne Edelstein calling in on Vivek's behalf. And just had a question or 2 on your WiFi platform specifically. We were wondering if you guys could just elaborate on any ways to gauge your design win momentum with Qualcomm's baseband. For instance, how have your design wins next to the Qualcomm baseband trended over the last several quarters?

William A. Priddy

Sure. This is actually relatively new activity in the last year for us. If you go back a year or 2, Qualcomm was really looking to integrate all the PAs into the transceivers. But in the last year, with the -- the higher data rates for new WiFi systems and driving increased performance requirements in the power amplifiers in the front end, they've been making a move to really take that PA out of the transceiver IC. And so it's driving a lot more requirements for power amplifiers and front-end modules with Qualcomm, especially for high-band PAs. So in the 5-gigahertz band, there's a tremendous need for high-performance PAs to support the new system requirement. So in the last year, we've been working very closely with Qualcomm, and the relationship just gets tighter and tighter as we're moving forward. It's too early for us to claim victory. I would just say that we are working on the newest standards with Qualcomm, and we have some -- a high level of activity going on there. And when I have something to announce there, you'll be the first to know.

Anne Edelstein

And then just a pricing question. If you guys could just comment on how the landscape is changing as 2G declines in favor of 3G/4G solutions? I know that last quarter, you said that 20% of your total handset units accounted for something like 50% of the revenue. I believe that was 3G handsets accounted for 50% of your CPG revenue. Is it about the same this quarter?

Steven E. Creviston

I think -- this is Eric, by the way. I think that was a mistaken interpretation. I was referring to 20% of the China market would assume 3G handsets, the other 80% being -- of volume being 2G, whereas we were getting 50% of our revenue from the 3G part. Meaning, that we had higher share in that 20% of the market, and the dollar content is about 3x higher in that 20% of the market. So that was the reference. I'm sorry if that was confusing. The trend has continued. As we mentioned, our strength in 3G in China continued. The revenues that we derive from China continue to mix towards 3G. It's now well over half of our revenues there. And so we are seeing a decline, I think, as we covered, in the 2G portion of that business. And as Bob also noted, the pricing there is intense as it's always been. And that is a highly competitive part of the market with above average ASP erosion.

Anne Edelstein

Okay, great. And then just a final housekeeping, I think you guys mentioned that 3G/4G was 2/3 of the CPG revenue? Is that correct for the June quarter?

William A. Priddy

Yes. Maybe a tad above that and on a trajectory to 3/4, I think, fairly, fairly quickly.

Operator

Our next question comes from the line of Dan Toomey with Raymond James.

Daniel Toomey

This is on behalf of Tavis McCourt. Just wondering if you could comment on any ideas you have around any levers you could pull on cost-containment?

William A. Priddy

Yes, I think we've already covered the -- some of the margin tailwinds that the company has. And the answer was, we expect to begin improving factory utilizations as we get into the end of the calendar year and into next calendar year. So that is one very clear way to improve gross margins. I think outsourcing the starting material is already having some impact on gross margins. But I think more than anything is that the products that we're bringing now, the products and technology leadership have a higher margin overall. So the products are just in general mixing towards a higher margin, as MPG continues to grow and as the 3G/4G part of our business, along with our switch-base business continues to grow.

Operator

Our next question comes from the line of Sameer Kalucha with JPMorgan.

Sameer Kalucha - JP Morgan Chase & Co, Research Division

This is Sameer Kalucha calling in for Chris Danely. I just wanted to check on your comments about inventory in the channel. If you could please talk about it a little in terms of what you're seeing over there. I know your inventory has been above average for the last few quarters. And I was just wondering what are the targets, and how do you plan to get there?

William A. Priddy

Channel inventory is a little difficult for us to comment overall. You didn't name specifically what region. I don't know if you're referring to China, to -- so that's a very broad question. I think in terms of inventory turns, we did improve from 4 turns last quarter to 4.3 turns this quarter. We see no reason why the company can't operate somewhere between 5 and 5.5 inventory turns. And we think that's the type of trajectory that we're on. Now does it mean a straight line getting there? No, not necessarily because I think we have some very key ramps coming up beginning this quarter and into the December quarter that we absolutely positively have to protect. And we will protect those ramps. So if that means putting a little additional wafer inventory in stock or even finished goods inventory, we're going to do that.

Sameer Kalucha - JP Morgan Chase & Co, Research Division

Got it. And just a little follow-up on the next quarter's guide that we've talked about, maybe normal seasonality would have been something like, say, mid-single digits. And you're guiding like sort of down low-single digits. If you were to quantify, how much of that is coming from the macro caution that you're referring to? And how much is -- how much of that is coming from the pushouts? Is there any way to quantify that?

Robert A. Bruggeworth

Yes. I think it'd be pretty difficult to quantify. And I think what normal is anymore is quite challenging to predict because I think if you look at the June quarter, what used to be normal is no longer normal. I mean, we've been down the last 2 years in the June quarter, and we guided up and grew. So I think you could say that was probably more share gains. Going forward, we might be in family with the market. I think it's a little too soon to call and for us to make those comments. I just think it's a little risky at this point in time.

Operator

Our next question comes from the line of Quinn Bolton with Needham & Company.

Quinn Bolton - Needham & Company, LLC, Research Division

I just wanted to kind of come back to the September quarter guidance. You guys, I think, were at the Stephens Conference second week of June and kind of talked about a significant acceleration in orders and seemed to be pretty upbeat about the outlook for September, December. And I'm kind of wondering what's change? Is it just that the China market got a little bit more challenging? Was it some of the programs just -- sort of pushed from September into December? Is there something else going on or a combination of all those factors?

William A. Priddy

Yes, I'll take the question because I actually made the presentation. And we have just completed about 5 or 6 weeks of exceptional order activity. And then came the actual month of June, where we saw quite a bit of I'll say lumpiness and choppiness and slowdown in order activity. I don't think we're alone. I think there have been others who have commented on that affect. So we were looking at a very bullish scenario there for several weeks in a row in terms of orders. And it was very broad-based, it was MPG and CPG. Now MPG managed to have some above-average growth for the quarter, and CPG managed a very solid quarter as well. And we were down the middle of a fairway in terms of our guide for the June quarter. However, I did take a bit of caution, and given the order activity during the month of June and the lumpiness that we saw. And clearly, too, the couple of key ramps are also having a bearing on our guide for the September quarter. So it's still early in the quarter though, but I think caution is in order.

Quinn Bolton - Needham & Company, LLC, Research Division

But, Dean, from those comments, it sounds like it's more just short of some of the broader strength you saw for 4 or 5 weeks ahead of June, just sort of slowed through June, less so that -- it's not specifically a shift-out in a couple of these ramps that you keep referring to.

William A. Priddy

It's a combination.

Quinn Bolton - Needham & Company, LLC, Research Division

Okay. And just a quick clarification -- and apologize, Eric, if I missed this. But did you give a split within CPG between 2G and 3G? I know that's been trending very strongly towards 3G/4G for a while, but I just didn't catch that if you had mentioned it.

Steven E. Creviston

Yes, we did. It was -- it's over 2/3 3G now, and we're on track to get to 75% by end of this year.

Operator

Our next question comes from the line of Aalok Shah with D.A. Davidson.

Aalok K. Shah - D.A. Davidson & Co., Research Division

Just a quick question for Eric, maybe. I'm a little confused, it seems like you have good market share in 2G in China. And 3G in China, you're indicating for a pretty good share. We're hearing positive things on the 3G side, so I'm trying to get a sense of how your market share looks of 3G in China at this point.

Steven E. Creviston

Yes. We are still comfortable. We've got a very nice position in the 3G market, and it is definitely growing as you say. It's not growing nearly as quick as it was predicted at the beginning of the year. But there has been reasonable sequential growth in units and dollar TAM, of course, for us in 3G in China. So that has continued.

Aalok K. Shah - D.A. Davidson & Co., Research Division

Eric, do you think that 3G market's more competitive there for you than it -- than the 2G market? Just because maybe people exit out of the 2G market given that it has lower ASPs and maybe lower margin, in 3G, you're starting to see more competition?

Steven E. Creviston

Well, I would agree that we are starting to see more competition. It's still nowhere near as competitive as 2G.

Aalok K. Shah - D.A. Davidson & Co., Research Division

Okay. And so do we kind of guess as to what your market share for 3G look likes in China at this point in terms of percentage?

Steven E. Creviston

We don't typically talk about our share in any specific segment, but it's greater than our average share in the industry for sure.

Operator

[Operator Instructions] Our next question is a follow-up question from the line of Dale Pfau with Cantor Fitzgerald.

Dale Pfau - Cantor Fitzgerald & Co., Research Division

Just a housekeeping. What was your percent of revenues from China in the quarter?

William A. Priddy

Dale, I really don't know if competitively it would do us any benefit to give an exact percentage. We said last quarter, it was in the low 20s, and so, it was in that range. But maybe ticked up just a tad.

Operator

And our next question is a follow-up question from the line of Edward Snyder with Charter Equity Research.

Edward F. Snyder - Charter Equity Research

So is it fair to say that most of your GM improvement in this quarter was primarily because of MPG's growth? Or, Eric, did you see a materially improved mix in CPG that also contributed to that? And then, Dean, you're G&A was up significantly this quarter. Do you expect that to follow historic seasonal patterns off this base? Or is this kind of a one-off peak that we hit in the current period?

William A. Priddy

Yes. Eric, I don't know if you wanted to take the first part about their -- your best margin improvement. But it was broad based but go ahead.

Steven E. Creviston

Yes, sure. I'd be happy to. Because we did see a nice gross margin improvement in CPG as well. So it's not just due to the mix in MPG. As we've talked for some time, our growth drivers are not only driving revenue growth, but they're accretive to our average margin as well, and you're just seeing that play out essentially.

William A. Priddy

Yes. And actually, I think we've got a little room for improvement of margins in the MPG area where we saw some revenue, but we saw some costs that I don't think are necessarily going to be recurring costs. So that's also an area where we might be able to see a bit of pick up.

Edward F. Snyder - Charter Equity Research

So is that speaking to the G&A question, Dean?

William A. Priddy

Ed, the G&A question, some of that has to do with the litigation expense that we saw during the quarter, that we guided to last quarter. And the other part would be actual headcount increases, not necessarily net adds for the company, but how we classified certain people within the company such as the head of our new business development initiative and a couple of his direct reports are now being classified in G&A. So that's basically it.

Edward F. Snyder - Charter Equity Research

So it should stay elevated then, basically?

Robert A. Bruggeworth

Ed, in one way, the legal expense, that could tick up a little bit. The other was really a shift out of marketing to G&A. So that -- when you say elevated, there's a put and a take there.

William A. Priddy

The expenses where we're going to stay the course is definitely with the R&D.

Edward F. Snyder - Charter Equity Research

Okay. And then, Eric, you said your margins improved too. That plays to my next question on a shift -- switch in signal products. That was the largest of the 3 new product categories probably last quarter. Is that still the case this quarter? And is that where most of your leverage for margins is coming from given that's a silicon?

Steven E. Creviston

I would say, both the switch and signal conditioning, as well as the ultra-high efficiency 3G/4G PAs are considerably accretive to average gross margin, and both grew pretty robustly during the quarter. So of the 2, our switch business is currently larger of the 2, but the ultra-high efficiency 3G/4G PAs is catching up quickly. So I guess your comment is directionally correct.

Edward F. Snyder - Charter Equity Research

And then you mentioned in your comments that there were some of the legacy platforms that they went to second sources on, probably early this year, late last year, are now coming back to you on a new platforms or are you talking -- obviously, Infineon in the PowerSmart is it has 2 sources for that platform, you and Skyworks. And I know Skyworks is brought on as the second source for Samsung last year. Is that the one you're addressing? Or is ST-Ericsson actually getting out with a version that uses PowerSmart?

Steven E. Creviston

I was referring to the former. They were talking about the legacy flagship platforms that begin to be taken down-tier into more mass-market volumes as they take on a longer life cycle. And they've refreshed the supply base and then it's coming back our way now beginning December quarter.

Robert A. Bruggeworth

Do you want to comment on STE as well?

Norman Hilgendorf

Yes. And very, very strongly represented in all of the STE platforms, Broadcom platforms, and so forth that are with that customer and across that entire line of products.

Edward F. Snyder - Charter Equity Research

But when you say Broadcom and ST-Ericsson, you're talking about the high-efficiency amplifier. It's not PowerSmart, right?

Steven E. Creviston

The 3G/4G -- we'll try efficiency 3G/4G amplifiers for sure on the Broadcom platform, as well as our 2G platforms and switches, so we have a complete semiconductor solutions there. And then on ST-Ericsson, we have the PowerSmart solution.

Operator

Our next question comes from the line of Blaine Carroll with Avian.

Blaine R. Carroll - Avian Securities, LLC, Research Division

Dean, can you talk about maybe some gives and takes on the cash position -- and as we look out to the September quarter, whether it's incremental CapEx or some capital needs? And then secondly, how booked are you for the guidance into the September quarter? And you talked about this strong order growth that you saw, but were there any cancellations or I guess there were probably pushouts related to those orders?

William A. Priddy

Yes, we're booked about where we were last quarter this time for our guide, so nothing out of the ordinary there. If anything, maybe MPG is a tad ahead of where they were last quarter. Regarding cash, I expect it to be roughly equivalent to last quarter as well. We'll have somewhat solid cash flow from operations. CapEx may be down a bit during the quarter. So the net cash will be dependent on what we do in terms of a share repurchase.

Operator

And our next question comes from the line of Mike Walkley with Canaccord Genuity.

T. Michael Walkley - Canaccord Genuity, Research Division

Just a quick clarification on just the China outlook. As you look to that stronger December quarter, would China be included in that type of outlook? And then also, with some of your September quarter guidance impacted by the 28-nanometer shortages, do you see customers in that platform maybe push out some timing with you guys?

Robert A. Bruggeworth

Let's see. So the first question regarding China in whether that's part of the December uplift we see. We don't typically count on an uplift from China in December, and that's not factored in here as well. We're really referring to new smartphone platform design wins that are going to drive that growth that we're expecting. So we'll see what happens with China when we get there. And then the second question was regarding -- oh, shortages in 28-nanometer, whether that's affecting results. I think it's clearly affected the mix of platforms in the market. And you might see some legacy platforms running a little longer than they would have and maybe it is delaying some of the LTE ramp-ups. Clearly, a possibility, and that could be what's partially what's affecting some of the platform mix that we're seeing.

Operator

Thank you. And there are no further questions in the queue. I'd like to turn the call back to management for any closing remarks at this time.

Robert A. Bruggeworth

Thank you very much for joining us tonight. RFMD's current expectations for the September quarter and into the December quarter reflect the breadth of our product portfolio and the momentum behind our new product cycles and our increasing alignment with the industry's leading customers and channel partners. Despite a challenging macro environment, RFMD is forecasting continued margin expansion in the September quarter and a resumption of solid sequential revenue growth in December. Thank you, and good night.

Operator

Thank you. That does conclude the RF Micro Devices' First Quarter 2013 Conference Call. If you would like to listen to a replay of today's call, you can dial (303) 590-3030, or 1 (800) 406-7325, and enter the access code of 4551801 followed by the # sign. We thank you for your participation. You may now disconnect.

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