SMTC - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to Semtech Corporation's Fiscal Year 2020 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

to Director conference of like host, to now Harrison, Sandy Investor would turn over the your I Relations. Thank you.

You may begin.

Sandy Harrison

and results our Officer. quarter and Chief Thank discuss Chief will be Speakers Financial Devon, welcome Officer; Semtech's conference call Semtech's you, President Maheswaran, call for our today's financial fiscal and for of second Executive Mohan the year XXXX. to to Emeka Chukwu,

was website issued is A semtech.com. after to market cause results unaudited press these the release include and our announcing actual anticipated from closed include uncertainties statements. will available call results on that risks at our Today's today results statements that materially in the forward-looking differ and could

Harbor statement in release more other factor Exchange in with press detailed risk included the of and and Securities a filed of Commission. periodic and reports discussion recent Safe our uncertainties, the most section risks today's For the these please review

comments only, call current or made from are this change. on should call undertakes As update information to Semtech a obligation circumstances and reminder, the today's today facts of as no

non-GAAP to will refer such financial in call to Mohan's useful, with results During discussion we unless accounting measures detailed GAAP why financial formal press to references A on measures, are measures, most this team such with to of comparable generally refer in measures otherwise today's call, and the All are included non-GAAP release. accepted in principles. non-GAAP presentations noted. that financial of management Emeka's the not non-GAAP the financial prepared considers measures accordance reconciliations along

Officer, call Chief the turn Semtech's I Emeka? Chukwu. Financial With that, Emeka to would over

Emeka Chukwu

Good afternoon, Sandy. you, everyone. Thank

North guidance. XX%. above of to sales $XXX.X America distribution sequentially approximately direct net represented to Europe into represented XX%. sales. approximately and XX% million. Total X% and sales our This shipments the was represented XX% For QX, represented net represented sales Asia QX XX% of fiscal XXXX, midpoint In increased

total the of and from end balanced, and the with end high-end Our consumer computing business total coming XX% enterprise markets. the of up industrial POS distribution remains POS XX% from coming and communications markets,

book-to-bill Bookings grew sequentially of bookings and [Current] [ph] shipments in for XX% the during resulted quarter. accounted approximately above X. a

GAAP GAAP XX.X%. rate was sequentially was tax. at expected, XXXX XX.X%, tax transition treasury flat QX to impact, a finalized XXXX the million discrete US tax fiscal and QX margin gross reflects regulations, As resulting from related provision $X.X

in We expect tax our for the of year the GAAP to XX% of be XXXX rest rate fiscal XX%. to range

of down margin inventory and to to non-GAAP due And at GAAP expect the was bring Moving gross results, amortization lower as other the acquisition XX intangibles, exclude compensation, points charges. we non-GAAP on QX non-recurring related as of expected. flat, levels. to acquired which to overhead non- to want XX.X% target our share-based sequentially we to impact basis absorption margin XX basis QX manufacturing of points decline gross

X% In fiscal to expense. non-GAAP year supplemental non-GAAP higher expectations. gross higher slightly was operating expect with to QX, engines. operating flat QX our In expense line than strength as driven expense higher we to lower compensation sequentially, expenses $XX.X levels growth margin by normal demand margin overall return to XXXX, QX is million, expect we in product be down by offset and non-GAAP are new as

to While to higher expense be operating growth prior our modestly year. fiscal compared flat our key for maintaining in non-GAAP only investment expect we the or drivers, our approximately XXXX year

in increased of flow from net rates We In operations QX, the XXXX and expect XX% at to to more to tax non-GAAP XX% normalized our levels QX. compared to returned net X% cash remain sales sales XX% in range. of fiscal

supplemental our includes As annual reminder, disbursements QX compensation. for a

stands at $XX our stock We repurchase approximately quarter. the $XXX during for approximately now million repurchased XXX,XXX authorization And million. shares approximately

cash linearity our receivable opportunistically represented improved days. use pay shipments to make to of XX% XX to XX within QX, down decreased In our expect accounts due investments continue shares, XX and which to our sequentially, repurchase target range to and days debt. strategic We sales, our is of

absolute of days, inventory X% days in increased absolute in days. increased above line which XXX sequentially target to inventories XX work In inventory we range the days, Net we to dollars inventory of to back range. with target in net QX, and expect to dollars is XXX get both our and decline as

despite with difficult our environment. pleased macro In summary, we execution, QX this were very in

Our were growth and expenses cash generation was under control, model stable, flow strong. operating was

our of contribute our the well believe diversified the uncertainty, has near-term growth customer to to end customer geopolitical growth. While along for and positioned future engine the challenges base we markets, with recent continues nature secular us

hand I'll over Mohan. call now the to

Mohan Maheswaran

Good quarter prior you, XXXX Emeka. I then posted will fiscal In for year million. everyone. of and group, XX.X% non-GAAP our year of discuss QX QX We per net QX afternoon, of end by increased margin gross to X% market earnings by Thank provide diluted revenues XXXX. share outlook fiscal non-GAAP $X.XX. of over performance and $XXX.X fiscal and the our XXXX, year product

In XX% revenues from fiscal business, computing the end by represented revenues. of of our XX% QX and the led from of revenues. XX% increased strong very year market from and increased sequentially, represented LoRa market Net X%, industrial XXXX, end growth revenues net enterprise

XX% increased of approximately devices to driven and sequentially and consumer demand, from XX% XX% net to was of other market by lower prior revenues. systems. of represented and net Approximately, XX% high-end total decreased attributable attributable end from revenues total the over was mobile quarter XX% represented XX% consumer high-end smartphone the revenues. communications consumer Net net market the Net revenue revenues

the the of from of XX% net QX our increased revenues. of year discuss Integrity each total XX% groups. will fiscal In our XXXX, of revenues Group performance prior now represented product and I Product quarter, Signal net over

As wireless base the market the center station expected, demand the data markets, PON sequentially across increased and soft. remained while

customer cloud hyperscale demand center data as center rebounded to inventory appears of providers QX levels reduced two have and fiscal last In the demand have and from data stabilized. over year quarters, XXXX,

QX, we CDRs, saw bookings used our optical In gigabit NRZ ClearEdge strong XXX modules. per in for second

global continue center deployments. to increase, CDRs cloud ClearEdge driven data by our for to mega demand expect and We

In we QX, PAMX that are of progress customers. data to center we the pleased now sampling our Tri-Edge with CDR are platforms

QX year, We revenues expect accelerating the in next with growth this our second first fiscal in of Tri-Edge half of year.

Our Tri-Edge latency delivers power performance low and modules. for optical cost, based low platform low PAMX ideal

and for In CDRs of and PAMX consists September, builds modules. part demonstration power The optical PAMX second of Semtech of optics Eye Interop per which will cost companies, to enable kilometer gigabit Open XX the Eye PAMX performance be Open MSA, links. advancements XX MSA key on XX lower lower

platform, DSP CDR our key continues we also gain targeting ClearEdge optical complements modules. and PMD module collaborated which with data to PAMX Tri-Edge FiberEdge where PAMX have partners, Our center customers, platforms, with momentum,

to FiberEdge our expect also We revenues ramp PAMX in see XXXX. FY

station market In and to wireless triple opportunity is deployments from increased. XG due QX additional of XG compared Semtech's CDR from fiscal XG expected to year base market the volumes content. XXXX, demand to higher the

XXXX, the expect growth from modestly XG of to For FY FY increase expected deployments and with XG in XXXX. XG we rest platforms much stronger

impact soft government driven business, investment our which in and of ban. of the FY the remained China, by largely XXXX, to China Huawei due In PON lower is PON, QX

ban. the due the weakness to We second expect mostly continue through Huawei to half, this

and integrated X the increase Over by driven demand and and gig at higher gig for greater PON deployments. FiberEdge ClearEdge, the XX power demand do The X.X PON expect rates providing for optical is remains driving platforms. the demand Tri-Edge greater highly leader platforms. data we XX next the Semtech gig market lowest solutions few years, PON to gig, PON market Semtech's cost for

gig And by these SIP driven and the the group cloud expect XX product expect hyperscale our global to trends XG transition global of We to stations trend and to expansion benefit centers, continue, we years. from the next over few data this the of global base acceleration PON.

few has we of Our for opportunity very are to broadcast to growth finally business business. significant last video And in the years. stable this acquisition an been AptoVision, see with starting drive the

we through primary Video equipment standard from are The industrial, Software over transitioning focus the expensive adoption based and focused of Defined industry a AV healthcare, on market enterprise, been reminder, solutions Ethernet. the entertainment. Pro proprietary has to IP As

in functional of have platform, We to to year. of this by Recently, end adoption the uncompressed be our we delivering of of this catalyst expect SDVoE be believe definition network. TV now we benefits ultra-high Pro will silicon first silicon the realize significant customers of for received SDVoE over a and the as production a all content AV gig XK appears Ethernet applications, XX which standard

the of future on on AptoVision progress our We update platform you earnings will calls.

Signal QX net to expect FY of revenues Product modestly. to Integrity XXXX, For from flat we be up our Group

by increases, As Huawei the offset we'll global ban. demand be

prior the net XXXX, In Protection Moving X% on our net QX over to grew of year and Protection of revenues. our total Product Group. Product from represented XX% Group revenues fiscal quarter

in automotive, growth the business Our based demand and Protection increases by from broad was consumer driven markets. industrial,

growth our higher XXXXP saw Chinese driving interfaces. these increasing most performance demand. Ethernet from the automotive our Korean by demand. smartphone for nice proliferation lower somewhat Several business. and speed protection business offset our were In deliver our The market as HDMI, such is the multiple increases in North interfaces of sectors USB and released particular, smartphone we high American RClamp advanced parts, of and across newly These from

high systems to particular, advanced adoption products. protection performance such the demand of systems contributing and interfaces for as communication automotive infotainment growing high speed in Semtech's In these vehicle the rapid assistance in driver is

QX from expect and automotive protection America of from to our XXXX, segments the from demand we and strength North In to business due fiscal smartphone Korea. year industrial continued increase stronger and

year represented Wireless flat Groups prior Sensing our quarter and Turning the from of net XXXX, total XX% were our to Product revenues Groups. and fiscal and QX In revenues. from net of Sensing Wireless approximately Product

offset from interest used by our due sensing In strong, LoRa business cases weak our sequential and more IoT ban. momentum seeing emerge nicely. and to for LoRa we strong The proximity LoRa the Very and very products Huawei enabled our business was day. are grew more QX, demand is every growth in very

is standard sensor to over see we the as low critical networks becoming acknowledged and networks, for wide low-power facto a the LoRa few technology, emerge LoRa area rapidly IoT power years. next expect as de

its used consumption, temperature, recent efficiency LoRa noteworthy more Universal the the used in it announced the operational be and networks of has increase park. in energy include partnered Resorts across assets with -- monitor cases to parks. parks will Comcast its & monitor to track deploy sensors to LoRaWAN Some Parks

has energy more Seluxit, usage in grid and to a Customers real-time. waste worldwide. in energy a leading cost IoT energy their closely LoRa reduction into patterns, and reduction insight get that energy Seluxit enable enables a and a their to consumption sustainable provider using cloud customers meter enabling smart energy developed monitor European platform usage

refrigeration Axino, smart reduce to added food LoRa food its an food track ensuring solutions European into integrator customers and IT helping used temperature, safety. wastage solutions

Solutions, in is IoT IoT accurate, of a real deploying XX,XXX provider conservation for Airport. a sensors Conserv, Skysens, asset Istanbul tracking low museums sensors LoRa that smart has based solutions time. developed provide museum provider simple art Turkish and metrics at solution on utilizes health with based LoRa its leading and art smart applications efficient in power to solutions

solution applications smarter IoT to provider Tata optimize India LoRa LoRaWAN smart farmers to enabling Communications farms. an and environmental create deploy efficient solutions, Oizom, their for in infrastructure leveraging and is more agriculture using its usage water

are coverage And of in its the remote. of that completed LoRa over sensors LoRa Lacuna of range by mission used IoT it demonstration Lacuna's anywhere completed phase global the complete however emerging a end in year. world, Europe handful just the to this constellation of Lacuna for Space of in These examples cases provide new connectivity in of ecosystem. will demonstrated also first XXX announced its miles. be a has satellite testing LoRa

includes a demonstrate LoRa-based Interest in announced our been which value start we to LoRaWAN very based location services, has unique service high, our recently of LoRa geo geolocation as services, cloud-based offerings. the

recurring geo and and our that assured to and next expect Cloud revenues location on location, rates growth other from to qualification early million year. the $XXX services Based asset we commercialization in will customers transitioning believe next years. begin within our of sensors services, five tracking attach LoRa grow testing in our anticipated the to We LoRa geo services sensor

nicely very momentum across seeing and the are LoRa underscored globe build momentum key we LoRa the we to by metrics track. continues Our exciting

private FY end or approximately Our increased key in QX public 'XX. at from XXX to network metrics of the operators update includes the of number XXX LoRa

network the LoRa by end fiscal 'XX. XXX expect year of We operators

connected over estimated to LoRa networks The FY of countries. LoRa These than more we the number By LoRa with increased XXX,XXX. expect end gateways number countries to billion XX of grew have more of support The X.X countries end nodes. than to will gateways 'XX, XX approximately deployed networks.

to exceed end end deployed X number billion of nodes. LoRa by 'XX, We capacity of XXX,XXX FY LoRa the expect supporting the gateways over end of node

number $XXX million. now over will end convert pipeline million $XXX the LoRa LoRa expect The number feeding increased timeline. pipeline. million, the deployed million a is FY The with end cumulative opportunity an pipeline that of reach $XXX of deployment month leads on this opportunity this by 'XX. We to of over nodes $XXX now of to XX XX% average, We to additional anticipate XX% full to

balanced of includes growing geographically pipeline well where significantly and the be of consumer opportunities is volumes also Our number used could a cases higher.

$XXX 'XX, to LoRa revenues will extremely start given enabled we $XX future China, We earnings FY soft to expecting continue the demand LoRa to on year, from our expected the in come million slower driven and are provide updates than between million. calls. metric In by now

updated rate closer the next the we LoRa become We industry. cases continue the anticipate still and the what we expect five to next high this a be years the de multi-billion to XX% unit LPWAN run for of to expect to We expect a year in few end CAGR quarterly a standard over years, facto range. used at to exit over

Huawei fiscal of driven by for the our expected, platforms proximity year ban. sensing QX lower due demand, China In as decreased smartphone demand 'XX, to

While will we with regulations radios. a our will proximity increasingly benefit believe global business from our associated the continue as health powerful to Huawei smartphone recognize be risks SAR increasingly governments sensing business XG stringent challenge,

system majority sensors wearable to Over we their the in of included next and few expect soft designs. years, have smartphones the devices

year expect sensing fiscal due wireless increase net demand. to group stronger and of our LoRa from 'XX, to QX For we enabled revenues product

products X,XXX new a we wins. new onto achieved of products Moving In 'XX, and and design QX year wins. XX design fiscal record released new

Now, 'XX. outlook of year let the me discuss quarter our fiscal for third

our $XXX of approximately range, attain are million approximately To QX XX% or the net at guidance million, beginning orders the net $XXX million. be QX. currently of we to needed between $XXX estimating We revenues of and midpoint term

We be share. expect earnings to between diluted $X.XX QX $X.XX our non-GAAP per and

guidance in Huawei Our direct quarter. this QX shipments to assumes fiscal no further

I will questions. and to operator. be I now the happy will hand the Operator? to Sandy and call answer And back any Emeka

Operator

session. live. conducting question-and-answer [Operator you. is we'll At time, this Cody, be Thank a Instructions] your line

Cody Acree

Thank the you taking for very much question.

clarification point. a Just that on last

not expectations you this any any to portion prior many out going forward? as this Are And other your are your You're revenue? Huawei further shipping quarter. are, Huawei quarter, shipping you zeroing companies of

Mohan Maheswaran

plan are we is more, anything and them. ship to as really Huawei ship course, our to Huawei that's of shipping related we're guidance to to Cody, we allowed requests The us even if Yeah. ship. have comment in that backlog we though to and don't

able -- their there's mentioned we then know, impact, component but indirect to where product, if an another ship they from previous component they've get another anyway. can't from on You as maybe key calls, ship can't the a they manufacturer, system

need the of kind is they're is, components in And of all difficulty they assembling systems. that that so have to build to our going part approach assuming their

Cody Acree

seen your seeing broadly, in grow just necessarily ban trade versus implications. conflicts market? activity, share not? particularly smartphone shifts might the any are broader the see you any Chinese Chinese if you you could or And you are that How seeing Not Huawei have that impact give the even hesitation encouragement China Huawei but you PON, then is just the or the

Mohan Maheswaran

an much impact for situation Yeah. so I is the think tariff don't us.

us. compounded and are on is, that and major China has don't has the the of -- I those But there's issue tariff situation. think that. was demand think is think the tariff impact know, really The it some obviously, been for for uncertainty I softness an I before the you everybody more, situation elements going

is the that's Huawei think direct the really a major Outside and high clearly still we impact. impact, have pretty think China. I in ban expectations that, growth I of

Cody Acree

Great. guys. you, Thank

Operator

Svanberg comes next Our with Tore with Please question from proceed of the your Stifel. question. line

Tore Svanberg

Yes, thank you.

so the First on close Huawei. to of all, just loop

going million the to So roughly your that and math? it's $X in October that's quarter, the revenues of about last quarter, So right? is go away X%

Mohan Maheswaran

aware for the may but this about a from of indirect estimated about again, direct million. Tore, impact million $XX direct we're impact be $XX and standpoint. not We've impact is quarter, us additional There

Tore Svanberg

we talked of mentioned last as quarter That's center data low, Very look then outside the were you know and as about good. pretty And Huawei, China you firming. backlog at in market. helpful. Inventories I

days would now we later, are of the you here healthy? XX China, relatively As still is that, say outside environment

Mohan Maheswaran

little inability Huawei Yeah, ship. of I think and say. bit fair I to skewed that's market is the a Huawei's smartphone mean, to because I think

So we if up else don't know there. up that really picking when up they're a is going or see that pick pick we someone to

that that, that sure sure, though, market, are doing think of center data outside I for for reasonably rest okay. IoT do So the

segment it's other yeah and specific issues. see So any very regional I don't

Tore Svanberg

good. Very

question are where on revenues last going year, line talk next as Just to this you the be seeing early perhaps a is to perhaps you're a LoRa, geographic services start contributing separate to implementation about lot cloud there? Or item? going

Mohan Maheswaran

the start as we to it geolocation of it more break number, we'll revenues from Yeah, course, and material get we to color get a as out. the will services start becomes

Tore Svanberg

you very much. Thank Great.

Operator

comes next question. Rick proceed Our your from question Please line with with the of Oppenheimer. Schafer

Rick Schafer

we LoRA, that. question, slower I is first than going but solid back expected probably Yes. you growth, to Obviously, maybe Thanks. continues that to I believe year. think on my really show Mohan, business starting expected just last or

the three as like So there second, years surprise if a down just your slowing or just as I here. And surprisingly even ago? maybe simple biggest China versus maybe don't expectation spend it's it's just what's know said, you been two can you

we that of kind milestones you part certainly should hockey the to toward, next million I'm on for? run in years, in curious is, $XXX LoRa good just to that then And question know stick have of the as revs some future at a three I What watch track that $X pretty second guys implies billion to hit we about point five rate. the talked what

there, that’ll be next if you be could Thank year frame of some stick you. So, color maybe hockey helpful? that any that or just year,

Mohan Maheswaran

Yeah.

now a for think started China. no LoRa's Obviously, soft we've XX% So out point generated was growing XX% revenue still of some with standpoint this year from year is, is very the and different. our key of at we expectation I our China. all revenue China been year, of a

opportunity is to one pipeline pipeline. But the opportunity balanced. things key is at really The of the look more

I more used more of cases. There's balanced. going types geographically be think a lot different it's to

think I out to one that's look So thing for.

in As we're CAGR I still XX% the years. going said my that five anticipating remarks, next forward for

layer top CAGR. cloud on would You like services that generate a of probably something XX%

for really so out the of think what the node indicates, I the key can end support. we to number pipeline, opportunity deployed, rate, gateways the capacity look which are And things still of conversion type

node opportunity, home very more more catalyst. consumer-ish, then think are The themselves. as be said, deployments could expecting we have just general very of in some we building, high, this smart kind a that end cases potentially use And and of momentum, pipeline we real you very, good, smart

we going it's ways about LPWAN. go. we're I at hard we're and But, to to everybody still those Obviously, still think optimistic fairly that them. cases be become clearly use obvious facto And see the de once for momentum go, that will a standard LoRa working to

Rick Schafer

then And the base quick gears just follow-up station. -- Thanks. shifting a on to

that's And you I assume business that I modestly the kind a Huawei. around back of know I without half. revenues. contributor single-digit talked think to growing sort it's about mid of in

gain that Nokia’s, that the that non-Chinese really remarks? sort you for of Samsung’s? of you Is be would in function great. as like the OEMs, there prepared your Any is content, Ericsson’s, the -- wireless is just at mentioned share it higher is -- guys So color a

side. Samsung, a with the for have handset obviously instance, guys great relationship You on

opportunity if So I was for you better don't guys. know a that

Mohan Maheswaran

it's mentioned, Yeah, you bit a Rich. everything of

demand I XG but it's in think would pickup. are I generally it's we modest, a it I seeing because very huge. wouldn't deployments. a pickup of is say say

Huawei a we on smartphones, the us know, for with someone demand a, bit can't ship. is expect think up you Huawei else to as a that overtime headwind of that. I do pick But Obviously,

expectation. we'll see plays out, how our that but So, that's

Rich Schafer

Thanks.

Operator

Our question question. B. with comes Ellis of Riley line Craig your from next Proceed with the FBR.

Craig Ellis

that's saying Yeah. the $XX Thanks to but make was for don't you effect. sure $XX clear that headwind? of fiscal second taking you in million to be the the there million Huawei expect And just quarter, there Huawei question. revenue sequential the any Are I'm on so

Mohan Maheswaran

shipped not more, some but any we're to is Yeah. Craig, expecting We've total and impact ship million $XX so about us. already, the for

Craig Ellis

then following-up questions, on the And Got LoRa of it. some Mohan.

look Is node good I the we exceed versus we that look tracking revenue as beginning of the else seems to countries getting year. it ago. targets fair of China, operators to end the and there target. would did is actually network updated as really the had fast business from node and believe. business it months three I that to the data, potentially that end set $XXX the And that in I if outside you the on? target, as performance seem reduce deployments And the that or So you're at yet at something $XXX a suggest traction not you at depiction six million then million, going getting had But thought of is maybe perhaps but target

Mohan Maheswaran

think depiction. Craig. No, a that's fair I

really the deployments of is turn remember the to turn the thing only proof revenue, -- the how think into deployments. into is that, opportunities node concepts predicting actual I predicting mean, end I fast and

And really a guesstimate so is it now. right

small at a moment As business a million LoRa we business. it's and the it, look $XXX is still sub at still

balanced starts softness smart And small But business pipeline like scale think that. as the then gets larger and and can and I I impact being change won't that if so, to those, mentioned changes, we or look convert pipeline going the the that's more to example, in CAGR opportunity And a for China, opportunity when as the XX% significant we can such being large, a I at small impact. see more those projecting. have think we're we're so metering,

Craig Ellis

Signal Integrity. And helpful. then to switching That's Okay. over

the is parts start parts, So calendar ClearEdge in parts the or be has we'd the PAMX were enterprise -- I specific given expect point And and that the quarter. there half momentum the that it the first expect should then for XXXX, of like softer PAMX pleased to again with with revenues But really it more of company think fourth the some in second see you Tri-Edge these seems the the parts? your data similar business and there of revenue is would spending is something else demand seasonally just center in going the to profile half and we a year, on? for ClearEdge we

Mohan Maheswaran

Yeah, related I to the market think when more for it's PAMX. is ready

think interested. design think see customers the We see still I next back and year. activity, towards of revenue is I we but end

momentum And may half in with at our point bring think we as a we this them, phenomenon. next year revenue. first are and working see time, project we very out half maybe obviously, we But products second change more closely that I

Craig Ellis

relates Okay. what would driven The that valuation, guidance? fiscal range would helpful. any to levels. was is is plus? you. included micro The back I you. as the for Last that "normal" services I racing XX% that's it be normal revenue Thank one by color, That's towards on Emeka. but in XX% it that gross helpful question XXXX take margin to haven't And is there XX% guidance be Emeka, is, or the more forgotten about

Emeka Chukwu

to, the responding we've if about levels normal the I'm XX% that last quarters, been look at several for above. and think you I

for normal So us. that's what of as sort consider I

much as as our that where we getting the year, from growth center, get with at go expectations. look into we LoRa, expect the would margin know Pro next expect from come products. we all These gross from, are that fiscal to growth AV growth I Now getting products, markets hyperscale getting end from data we from and industrial protection higher growth

is to why back into the also it can we of get that the normal overall activity. have levels, manufacturing I strengthens levels do back fiscal as to we to to come demand same year believe get and as has that So especially next

XX% levels to reasons back the we those of I do that should So believe normalized get and are above. the why

Craig Ellis

Thank color. you the for

Operator

Our of line next with Baird. Gerra question comes the Please Tristan with question. from your proceed

Tristan Gerra

in XG content When does year? some afternoon. also of of base content translate you per increase the opportunity to that and next terms for give you us color XG good Hi, could you triple, that on in how mentioned pace expect dollars station

Mohan Maheswaran

Tristan. Yes,

are is customers beneficial it's that us. that's are be deployment. we difficult for that the requires stations least architecture just everybody's seeing architecture. obviously, so we content telling demand to CDR I think in likely say, increase our system How backhaul, there's many links fronthaul, obviously Also, it more and -- on each is so in case. depends middle to to the more XG at in are us and are general base seeing, What

there'll more and stations be of content. more the base that so base different types So drives stations, and CDRs

pickup, modest I We're see a already starting to mentioned. as

we'll I out think next year, again, see if plays it in the half. first

the from the in second pull is there think a more but market. definitely like it's I half,

it's the ready money question of the to is And So ready the I technology is and whether the put -- ready whether need to service providers are now just are there. think a customers in.

to going happen So I think next it's starting year.

Tristan Gerra

phone? XG side. time from XG, the your ways have the you benefit moving consumer to then on power this in your per Are Does of content of any expect potentially that on protection an business the the regulatory cell environment phones? in would impact that for changes phone And impact Okay. on XG but there modem

Mohan Maheswaran

And distance more shift you main of increase your have radios mentioned the powerful. more we in think XG on, is range, And expect the high. SAR radios bandwidth the functionality because in those get the XG and so therefore as to powerful -- I be Typically, proximity today there. most Yeah, have are a for we going fairly be to you you and the things radios higher rate not attach expect pretty sensing are as sensing, of more have think what whereas a proximity need as I I more phones, one would of is call to to potentially that our dangerous. power

for much going be to it's XG think I higher. phones,

a us. really for good that's so And opportunity

In addition, protection. for

see we so the it's proximity a for more that's as -- And more protection required, advanced requiring interfaces, type speed more challenging more more sensing same So high advanced and processes, faster environment just displays different protection. improvements of is and lithography, a standpoint, advanced everything has from displays.

So, sensing, forward quite also. again, expect protection due to and proximity XG going well do to we

Tristan Gerra

last terms model for new down up see total Do embedding one, would target percentage we to is to LoRa China? of year-over-year? you the Great. China you And as for China that actually in Or should a I growth this be be decline of How the year. LoRa flat have China year? to thought revenue. expect year-over-year then this

Mohan Maheswaran

I whole know going this very have would I a anticipate up we Tristan is comment end to thing from momentum the year, did planned reason. and would of lot we market balanced of on And it's did would be for over having we But America. fair, on is that to higher in is balance just this and year North ourselves the the happen think of that geographical slightly where just we going more the China make the one to that one tariff year-over-year, balance. China. know don't reasons, things regionally. is what's I growth can't of opportunities we growth All be things. we predict maybe good to And think be it this also lead those pride type expect we the a much being as We but

growth. Europe. to projection be and growing in going it's be that yeah, for faster muted But would was very good China year, have think I this momentum We the fairly

Tristan Gerra

Very great. you. useful. Thank Okay,

Operator

with Our line your comes next Cowen Ackerman with and question Company. Please Karl of proceed from question.

Karl Ackerman

already. Mohan, XXX or think comments Hey, optimistic peers optical on peers. more have little components But than Emeka largely I demand sound reported bit good who you China gig PON a echo afternoon. your on

here seeing of bookings year? you half are later what as of business XXX for for we about ramps the So gigs opportunity your in should the terms PON XG think how year? for this second And, the

Mohan Maheswaran

I separate Karl, – think the data PON Well, from so center.

majority mostly PON. we're playing. is markets PON mostly X gig X.X and two China gig really there's today So, that's one the China, driven,

key the Huawei with gig drivers in that us around has challenges growth of seeing puts that is deployments. PON obviously business. and one in Huawei been business ban really are China challenge We of XX that for the with some that, The

the has China other China deployments. volume. far by There deploying, the regions region that, PON the main to addition been for In but been has – highest are

investments that China the – And then headwind in the combine that combine so government by in and with Huawei in a ban modest business. PON investments you PON, on reduction really slightly puts

be Now, better by bit to QX to expect of gig more balanced those separate business, QX, center of center free data started that deployments. gig, to little data The we've started We a IC builds in see data the talked and business. year and up X XXX center about for this that inventory in and we QX. optical XX most get the rest now just and from module

CDRs. And there benefit so the on see where we our that's

Karl Ackerman

was but minus under question, half or, My you I Understood. guess XXXX? business you elaborate smartphone outside last Could calendar Huawei I impression of at understand back the should clip. the is proximity or I if plus the may. for on the kind of expect overhang, grow of a sensing an high-teens from what that business that I

on may That helpful. more So, of you're bit you. elaborate could be seeing a Huawei/smartphone? market what Thank in outside you that would

Mohan Maheswaran

major body. volume obviously, But China. getting America quite the it's are in today touching business in majority wins Korea also well you of Korea, the it's China. handful mostly that is I the areas mostly volume outside Yeah. sensing And wearables other smartphone North smartphones, big The the the and so think is radio even is still though, obviously know, human where then most, the doing as drivers smartphones. proximity manufacturers design and and today It's we're in

year, business. all actually this proximity China driven. with China But job used to Korea had because business the were of diversifying a a really Huawei And It be have of phenomenal this our done obviously, drivers in we've main who sensor challenges. of

the to year-to-date. a in little half, now strong so back They expecting we're bit. up Samsung a And haven't pick had

someone shape demand better. some up be, and do that proximity as will And sensing if I in or mentioned, think we expect who can't demand. world. that it's they is pick that Not I Huawei I to that, think China, us form likely there in ship benefit may phones clear, do that the but it outside that indications will

Karl Ackerman

you. Thank

Operator

Jaffray. with Piper proceed your Please Our next Harsh question Kumar of comes question. line from with

Harsh Kumar

July or called places? Hey, further, Are U.S. and based this come you Mohan for pretty of Yeah. come if not China? and data in, China center, strong LoRa on it that China, enterprise curious, you geographic came growth Emeka, center from data guys. was and LoRa dependent. centers then this And called saw Europe similar the quarter. you growth And other out been cloud just you highly seeing clarify out Couple did data you from quarter between guys I in you could growth. I'm some historically hyperscale? of sort July questions, But or from and Did has growth question. from curious, in in maybe it reported.

Mohan Maheswaran

Yes.

So -- let's last the that first, Harsh. start question first with question

be mostly to China, end America. So data out But be because center shipments The we of being chain might the North clearly is into is North demand service shipping is today, might there. driven America. -- supply the

So centers that's and data that mostly say, data answer hyperscale for of a well, without question to cloud I mix would hyperscale is centers. today, mostly but it's as the

of And then a say, world. on the it also would is large it's the of growth China, yes, side, that but chunk China, is I rest LoRa

from a a softness. would you I a but pickup As that is balanced, driven by had saw still of yet think it's little weak say, I pretty driven And China's was we bit China. -- LoRa business in growth lot but know, and a mostly of And by more the QX. QX, that we

Harsh Kumar

have and like, Most bottomed sentiment already -- for say, business? other said lot of would numbers course. June that out, some you Mohan, your would that July. had say have of the them them companies, of even that then of actually And ex-Huawei that you share reported China it. reported the Got you a Would

Mohan Maheswaran

fairly would I although Harsh, significant that's the is in true, say a Huawei influencer probably region. Yes.

look exclude I the But around China think, to ecosystem have them. them, then now. seems that think better I doing be to whole And do so, at if I you you think outside yes, that,

tariff are now the so to I indications uncertainty, is which our total As better do really much. impact the doesn't there that demand outside a China demand as starting mentioned,

doing think uncertainty just be nervousness. the think I China it, kind think of of, creates shadowing it's demand better. outside seems But an to I that, I over

Harsh Kumar

Great. Thanks. had. That's all I

Operator

next of question Mobley with your Wells Gary from line Our comes Fargo. Please with question. proceed

Gary Mobley

a To the Emeka with question quick OpEx. Hi, for guys. start on

more lower to OpEx year-over-year is just or the lower travel accruals that your there get on question putting not? sort bonus any implies So what to than of QX for level, of $X a just decrease. guide And sustainability the anything cap expenses, million

Emeka Chukwu

year, No, coming much can more imagine the there's current not had expectations for as better that into to I much we you the actually think, it, year.

were aligned expect not much but pay to so as those very So don't we had as programs those, programs anticipated. our out and we we're seeing bonus much to unfortunately the

expenses And about We overall, that XX% our managing of as probably have still we operating is well. do expense something XX% to very operating variable.

opportunities So keep in those for are things control. us to

our isn't there anything it's extraordinary that that expenses. manage So are to operating doing we

Gary Mobley

odd an Kind of question. Okay.

accelerate chip taught banned and shipment this try Western So trade issues companies the one -- on and China is companies. or their to reduce dependence Huawei has thing U.S.-China

of today anti-U.S. revenue of even you sit relates based any to XX% design be may of as win viewed what here Have it seen maybe as China. as sort you from which LoRa, adoption technology? sentiment activity U.S. So, or driving the

Mohan Maheswaran

good really a it's question. actually, Yes,

that's whole been was more seen unusual. on in region. tariff but before component I suppliers of nothing driving mean think that, a having think have vision of going the kind The have we situation. that I Chinese I

performance And achieve. for I they stuff mean, are the of, we their that Fortunately companies the we think, challenged achieve really kind do, is us, of challenged, do high stuff. end I most were to of levels

of of -- the drive to specifications like may we actually ban, accommodate the Huawei we change the the situations said, customers that to performing because a poor Now, their customers have, end devices. some

And faced we to be have so, with that.

of just may accommodate that's addition lower one with be with side to have devices. faced as competition challenges being think the performing deal in I specs Chinese changing their to we customers to

opportunity SAM to opportunity. expand still China said, Asia across I of the regions think and and our have for other That both and that we us, our world enough of the rest

Gary Mobley

Okay, I appreciate that. guys. Thanks,

Operator

Our and next Needham Proceed from question question. your Company. of comes with the Quinn line Bolton with

Quinn Bolton

shipping guys. you even half through the be business. Wanted may data think in the guidance in you year, for now think Hey, you're in modules under into ask consumption uptick second second the you nice the growth calendar or the data on optical do of sort to that With do of centers? saw the and continued of end all inventory second you still of quarter the a center first the correction half

Mohan Maheswaran

call through. seeing seeing, inventory seen think It's Quinn, not quarters gone I it's been now the modest now we it. softness most I of a difficult increase. we're in think has two are data where we've mean, centers, but huge we to increase

And bit so half our second be a there's feeling is, little stronger. the going yeah, in to

is the that mostly inventory is reduced. think from I assumption So, that

Quinn Bolton

in then And know high very company the set smartphone the the on a great. business. just share Okay, question I market. OLED historically display protection

manufacturers. share have with see newer displays, ramping with Korean OLED did manufacturers. OLED the I you with the Korean you Chinese Chinese some the manufacturers side think manufacturers on the that the you same protection case But if the certainly of OLED that market was

Mohan Maheswaran

Yeah, I think so.

share First so display position, have -- the smartphone wouldn't of still pretty do will of but the relationship a is we and emerging. that Korean for very time we would our I it's some as Korean China as been always Korean the across of believe lot but yeah, all, strong quite lot on are But reasonable phones the so. the have a I a using, say China we think, good I we our displays with I side, globe. still area, good in and say has say Samsung relationship think

Quinn Bolton

business. question just LoRa it. my on a And last Got

slower to of that a new of year next XXXX. implies sure increase discussed kind and start of expect sort a bit was this five It fiscal You've a for little maybe the that for below single-digit mid-XX% years. low it that a the year-on-year you XX% of CAGR target revenue

going that given a that XX% the best encourage growth for XXXX you've is business be level that think a off could you that closer the XXXX rebound about above way base year? you that into, of -- to better us Or that is XX% to we economic Should would sort just the to we us? environment that to think that fiscal get LoRa think much rate in

Mohan Maheswaran

have Quinn, XX%, think was would expectation coming so, our I So right? about way The growing we been that this year. it, a into

to over that a when does on process And it's drive next that's is kind mentioned execute are we it. need the indicate to do demonstrate then to a us the value POC still of major think and our we ways numbers. growth. CAGR. happens, something the that what But a that still out reset catalyst can about talk going still one faster XX% a to through off But and that that to I've XX, or will -- obviously, much here to they're for and so And the We volume. customers go of that's that two going I as lot mention, we've then drive thing we that I months expecting XX

number XX% in. a model I for good to now, think is So the

Quinn Bolton

Great. Mohan. you Thank

Operator

line Capital. the Roth question. with Searle of with Proceed Scott your Our next question comes from

Scott Searle

overall, Hey, my sequentially, question. Sensing the correct? to but for sure into the the on just Is third I make clarification guidance, want and I taking to Group clear, proximity good to expected increase is sensors, down that expecting Quick was afternoon, quarter. thanks Wireless you're be

Mohan Maheswaran

correct. That's

Scott Searle

Okay.

for So historically been customer follow-up, slightly Samsung has a larger to just you.

million, a in Is else? is you this to to there, back normalized something have here something before more just think or been it loss running, share It sensing like on? the little $XX I expect to issue demand there some quarters level? proximity clearing come softer going that of inventory a million bit was the part last there but several was sounds $XX else quarter. We're

Mohan Maheswaran

business? you're -- about cell talking to You're referring Samsung phone

Scott Searle

Yes.

Mohan Maheswaran

in been as hasn't us just first half. the strong for Samsung Yeah,

be half, we're smartphone to QX I they in been the the strong able at, And that's of anticipated. part China think, going bit as them. some demand looking whether pick a told the think first thing we're anticipating Huawei. demand hasn't to they from had But is stronger little as as their I of us they're from up

-- and have those been China But -- in it's they been become smartphone and first But, to Korea because half. us yeah, smartphone, the I sorry has don't know more Asia Korea really China in Huawei regions. in weak aggressive I the set maybe think for business

that come We bit a QX. to are little expecting back in

Scott Searle

data Got quarter. center. of questions you. And in around to follow-up couple the earlier second snapback on Nice a

Sounds Is that all in of mainland. being still coming outlook and of that the like Chinese part that sustained third internal sequential for centers your to had of been growth you're recovery kind continuing Or recovery being this quarter. to in new component see built to America environments? out expected look China from be still back? data in going for domestic a a cloud into is increase the forward built or consumption demand hyperscale North

Mohan Maheswaran

is just Huawei. included not that, China in No,

customers. Yeah. other think China So include we I

Scott Searle

more Okay. that type China expectation to just fourth And on as of a What exit component been component of in rate, quarter, big what the wrap has fourth is than quarter? million your China run lastly, as you the a $XXX million of $XX up that. LoRa,

else? expecting Thank bit a comment, little I or your wonder you're Is then drive big catalyst something on little a of And tags color. bit. lower a that us front growth. upon to earlier you is the just on if expand to follow-up Give could that it you.

Mohan Maheswaran

Yeah.

to really the But about have it's of end the think of revenue. that. see will I we a -- we XX% China So, year, lot evidence as pipeline Scott, And the think be is I their exit more still balanced.

in and regions change geographically. And the the can into turning LoRa shift change shift, those change we that doesn't it locations -- revenue revenue other other move profile usually before quickly. The in

So go a we see XX% like that XX% something or may XX% China from catalyst. to or until big

I mean, I think many. one. are catalysts The not is there

smart the things higher just cases. and to city, of smart than industrial there building on and smart devices consumer-ish smart But also have a lot think metering, are a type tags they home. volume use use I kind of cases, related

so we're that's referring what to. And

true segments, for, it of IoT and and of that being including kind IoT really we're catalyst. will sensor consumer that type enterprise, industrial a for and being for And do different that's what industrial LoRa a looking what is many to from move

Scott Searle

Thank Great. you.

Operator

comes of from the question. Hamed Our next your question line with BWS Proceed with Khorsand Financial.

Hamed Khorsand

Hi.

on issue weakness any China? pressure seeing this couple of a Outside to pricing this creating growing LoRa. questions that's fast not China, are revenue here you with the of Just in offset

Mohan Maheswaran

Hamed. see any We No, really. don't pressure pricing

just I conversion more POCs. think it's a of

China. other system and reasons have adopter revenue China, generating in one engineers, revenue why It's faster rapid regions. they the more providing North been hardware solving developers and momentum seeing software engineers, and to LoRa And be regions, integrator they little to sensor us get America more to the That there. foster region. tend very, China a in to typically and of are is starting challenging of but has access issues. We just, solution in in it's Europe takes very more fast, a other bit bottlenecks

Hamed Khorsand

And a how in playing of factor much is role in your production the the industry slowdown automotive business? a

Mohan Maheswaran

us. Not driven really in by mostly all. nicely today at segment I business, our our is protection smartphones, the then as Hamed, for It's script. new and protection think my for relatively protection our I mentioned automotive impacting growing quite business business is

that in We're need seeing ADAS, they all and protection, vehicle because high-end very the of of new emerging advanced them. a applications features have lot infotainment, other

so, now today. for nicely it's -- and that growing -- we it's is small, business yeah, us protection our small so in And space, but

Hamed Khorsand

you. Thank Okay.

Operator

FBR. line the your Proceed from question. comes of Craig question with final B. Riley Our with Ellis

Craig Ellis

have I'd hard the if extent just the environment would this Thanks any the think can ask you. seasonality a juncture. quarter for some it's question could question. of least there, Tim, from macro fiscal taking at appreciate to see in you share the given to crosscurrents, the quarter look I this of you that see would all fourth Thank early but negatives you color. and wanted how follow-up to view at follow-up about that the I seasonality, positives of and a

Mohan Maheswaran

say. I Yeah. of to It's would Huawei, tough because call Craig mostly

I we down QX, have obviously another expect but think, year. would Samsung be in to an they great

may be not their QX a So had normally that they've so fairly weak. as downward, modest sometimes is as extreme not when year

strong. continue LoRa IoT be Obviously be to will we datacenter quite think and quite to I strong. expect

tough be So, to it's call going to it.

that just unfortunately. I one impact in China to QX thing and think impact expect we'll is the see does wait of out and us type have similar Huawei how would ban we plays obviously the a

at to look we QX than normally my we So, better that, would have see is sense could be it. but would

Craig Ellis

that could headwind a fourth mean headwind Mohan? is be quarter incremental just or mean, You an million you $XX margin there the in the fiscal there

Mohan Maheswaran

I we the have No, million would in $XX the think be included numbers.

So on Korea. run then at if you would standpoint I take my comments QX normal you from anticipate rate, seasonality look and that

see. QX have in could say say. past for be X% So, to much, I stronger as we'll would would at than but as I it's terms -- the down down it's of typically not us seen the in probably be least going we

Craig Ellis

you for Got it. Thank that.

Operator

to back any We closing I the reached like for Maheswaran the have end question-and-answer would session. our And of to turn call over Mohan remarks.

Mohan Maheswaran

that and Thank mobile engines, in of Semtech first that we you. to recovery half of contributed balance confident to IoT, growth your the look markets. that behind overall With strength ongoing the industry. you and geopolitical our and in our product quarter. the despite headwinds several we of remain the secular updating end remain underlying targeted a support the slower despite are seeing all Yes we closing, modest markets drivers the uncertainty to Huawei forward and and of in confident next appreciate ongoing signs geographical continued ban, that, outperform We and datacenter enable will market in us

Operator

concludes teleconference. This today's

your now you a your and for Thank wonderful disconnect may You have lines at time. this day. participation

Semtech (SMTC) 28 Aug 192020 Q2 Earnings call transcript