Grant Brown
Senior Vice President and Chief Financial Officer at Qorvo
Thanks, Bob, and good afternoon, everyone. As a reminder, our references today will be to our three operating segments, High Performance Analog or HPA, Connectivity and Sensors Group or CSG, and Advanced Cellular Group or ACG. In our upcoming 10-Q, we will provide historical financial information that reflects these operating segments. Additional historical information will be made available in our fiscal 2023 10-K to be filed this May.
I'll now turn to our latest quarterly results. Revenue for the third quarter of fiscal 2023 was $743 million, $18 million above the midpoint of our guidance. We enjoyed relatively strong performance in automotive, broadband, defense and silicon carbide power devices. However, elevated channel inventories and weak end-market demand pressured revenue and order activity across all three operating segments.
Looking at each operating segment individually. HPA revenue of $155 million in the quarter compares to revenue of $182 million in the same quarter last year. In HPA, growth in areas such as defense and silicon carbide power devices was offset by inventory consumption in the 5G base station market and softness in consumer-facing markets like SSDs and battery-powered tools.
CSG revenue of $97 million in the quarter compares to revenue of $158 million in the same quarter last year. This reflects weakness in end market demand for Wifi products and channel inventory consumption. Finally, ACG revenue of $491 million compares to revenue of $775 million in the same quarter last year. This reflects lower smartphone unit volumes and channel inventory digestion within the Android ecosystem.
On a non-GAAP basis, gross margin in the quarter was 40.9%. Gross margin fell sequentially due to lower factory utilization and higher inventory-related charges, including a quality issue at a supplier. Non-GAAP operating expenses in the quarter were $206 million, $19 million lower than our guidance and down $8 million versus last year due to opex discipline, the timing of product development spend and lower employee-related expenses, including incentive-based compensation.
In total, non-GAAP operating income in the quarter was $99 million or 13% of sales.
Breaking out operating margin by each segment, ACG was 20%, HPA was 19%, and CSG was negative 32%. Non-GAAP net income was $77 million, representing diluted earnings per share of $0.75, which is at the high end of our guidance range. Free cash flow was $203 million, capital expenditures were $34 million and we repurchased approximately $200 million worth of shares during the quarter. The rate and pace of our repurchases is based on our long-term outlook, low leverage, alternative uses of cash and other factors.
Turning to the balance sheet. As of quarter end, we had approximately $2 billion of debt outstanding with no near-term maturities and $919 million of cash and equivalents. Our net inventory balance ending the quarter was up slightly at $857 million.
Now turning to our current quarter outlook. We expect quarterly revenue between $600 million and $640 million, non-GAAP gross margin of approximately 41% and non-GAAP diluted earnings per share in the range of $0.10 to $0.15. Our current view reflects ongoing demand weakness across end markets as well as our expectations for further consumption of channel inventory. We continue to expect sales to Android smartphone customers will increase sequentially in the March quarter. For historical reference the March quarter Revenue in fiscal 2022 for each of ACG, HCA and CSG, was $777 million, $211 million and $179 million respectively. At the volume levels assumed in our guidance, we expect Qorvo's inventory position will decline in March, but remain elevated.
In terms of channel inventory, the picture has begun to improve. For example, total channel inventory for our components in the Android ecosystem was reduced by over 20% in the December quarter. We expect continued improvement this quarter and anticipate the channel to normalize later this calendar year. We are actively working with customers to consume channel inventories. And in doing so, we expect production levels to remain compressed. This will lead to continuing underutilization charges related to inventories, which will weigh on gross margin during fiscal Q4 and carry into next fiscal year. We project non-GAAP operating expenses in the March quarter, we'll be up approximately $20 million, sequentially due to the timing of product development spend seasonal payroll effects and other employee related expenses.
Below the operating income line, non-operating expense will be approximately $15 million, reflecting interest paid on our fixed rate debt, offset by interest income earned on our cash balances, FX gains or losses, along with other items. Our non-GAAP tax-rate for fiscal Q4 is expected to be consistent with fiscal Q3. The rate remained elevated due to the absolute level and geographic mix of pretax profit including FX-related gains within high tax jurisdictions as well as the impact of the US tax law change related to R&D capitalization among other factors.
With regards to operations, I wanted to highlight the outstanding progress our teams have made in terms of productivity gains. We continue to make improvements in product development, filter design, process engineering, factory planning, manufacturing efficiency and many other areas. Today, these gains have significantly increased our effective BAW capacity. And as Bob indicated, the progress continues and, looking forward, we can double our BAW capacity in the Richardson facility versus our current maximum theoretical thresholds today.
Increasing the throughput of an existing asset not only reduces cost that can reduce complexity within the factory network as production is consolidated. The BAW productivity gains in our Richardson facility allow us to achieve our long-term growth goals across all of our customers, including the most demanding BAW-based placements. As a result, we have decided to sell our Farmers Branch facility. We're in the early stages of marketing the site and initial interest has been encouraging. For reference, the site has been incurring approximately $12 million of non-GAAP COGS per year.
We are also evaluating strategic alternatives for our biotechnology business to accelerate and maximize its potential value. The Omnia platform, which is based on our BAW sensor technology, has demonstrated significant promise as a diagnostic testing solution. The biotechnology unit currently resides in our CSG segment, while the revenue impact from the transaction would be negligible, it would reduce total expenses by approximately $32 million per year.
At this stage, it's too early to comment on the eventual outcome, timing or potential valuation. These actions will sharpen our focus and resources on the many growth drivers across our three operating segments. Our long-term outlook is positive, and we are well-positioned to weather current macroeconomic challenges. Product performance requirements continue to increase in our end markets, sustainability initiatives underscore the increasing global reliance on power efficiency and connectivity and electrification trends are accelerating worldwide.
We have diversified our opportunities across markets, customers and product categories, while maintaining our commitment to technology leadership, portfolio management, productivity gains and reduce capital intensity. This has supported strong financial performance during the challenging environment and has positioned us for long-term increasingly diversified growth.
At this time, please open the line for questions. Thank you.
