SMTC - Earnings call transcript Q1 2025

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Operator

Greetings. Welcome to Semtech's Q1 FY '25 Earnings Call. [Operator Instructions] Please note this conference is being recorded.I will now turn the conference over to your host, Mark Lin.

You may begin.

Mark Lin

Thank you, operator. welcome. and everyone, day, Good This is Officer. and Financial Vice Lin, Executive President Chief Mark statements. And which President to various results expectations, Paul Officer.Today, by an will XXXX, I'm today joined include along posted Pickle, comprise website quarter fiscal close, and with plans at released which call are first call after we future and investor our remarks the unaudited presentation forward-looking about for earnings of prospects, year our market Executive Chief investors.semtech.com.Today's results from factors these in presentation, Actual materially our statements on XX-K due the today's Commission.As current made today's should and annual change. obligation in differ this ended January XX, results anticipated facts of Form in for may as XXXX only the to release Factors as from to included circumstances as filed the section Semtech report Risk Exchange year reminder, call various update well on a with undertakes are call today, or and the and of information no the comments Securities press noted, statement-related net financial than be other non-GAAP sales. income otherwise all measures will Unless to of today's non-GAAP measures.With the our markets. our to over that, our and financial materials turn discuss regarding business posted a for release Relations and end section Please refer of and Investor website and results call the non-GAAP our information press GAAP reconciliation presentation to I'll financial Paul to

Paul Pickle

net sales end-market each infrastructure. moving in high markets.Now Mark. with declines starting of first quarter the Thank performance, Semtech's above pleased our quarter end I'm with of first to our you, across with with guidance, solid end inventories channel meaningful results, along financial

In than XX% XX% increase application. XX% were down XX% year-over-year. above XX% year-over-year.Net Results sales facilitates were and secular We expectations technologies at copper up was doubled sequentially powerful up adoption up with is trailblazer, such were million, Channel which and For of and more continuing and sequentially copper linear each year $XX the our sales support as net leading-edge AI our over in our XX% and infrastructure applications, for optical optical remained modules first a up portfolios. cables, $XX.X million, down active market data for largely accelerated believe sequentially inventories pluggable center to data and trajectory encouraging, hyperscale last across opportunity sales copper quarter. normalized have optics AI a and our last compute similarly year-over-year. and are or sequential copper POS consistent in XX% X.XT up active timing linear quarter, applications.For X.XT general and expectations re-drivers, year-over-year. of center with edge cables net X% trends

collaborating largely in qualification progressing process, plan. are the We to which closely is

XX-gig ramp starting we and which we substantially year solutions, retimed to XXX-gig to ramp expect current net first in 'XX. rewarding market AI retimed applications, years.FiberEdge expect FY for the and cable have good these to we few sales qualifications solutions, to reiterate of the Accordingly, solutions a the of which received fiscal 'XX continued a XXX-gig to on 'XX.We optical ranging While we and at chips, to these from ramp year remain key excited next starting at drivers of are and compute laser opportunities contribute progress. suppliers very equate ongoing, XXX-gig be engaged for ACC projects quarter. XXX-gig system general modules to believe purchase designs our shipments in believe retimed which over this end specifying which by and expectations expect our in a constructively substantive opportunities very of design We are TIAs we for ramp currently for also to host with vendors, orders indication a beginning FY

early wins FY win design with a customers, per Tier activity customers. across in for opportunities sampling number Tier we second ramp of design X 'XX. in and FiberEdge the starting have increased also 'XX also a XXX-gig optical bookings half X are Design lane multiple We and and and expected with with of X.XT FY modules pleased

in quarter.Our to with application key continue performing cloud We from and expect hyperscalers XX-gig in this Tri-Edge growth are products for second AI in XXX-gig and for applications. the PAMX demand strong AOCs also well, XXX-gig

optical network and communicated XX-gig have quarter cost last technology.Net of applications. large this performance.Expected demand we $XX.X power reflect are XX-gig and of markets XX% million network tenders. we our XX-gig of XGSPON versus a expectations drivers prior increase both Our XGPON engagement the engaged position, of with providers several our technical LPO, consistent a strong what first-to-market strong key XX%. and for Tri-Edge increase year-over-year In in for release Robust with EMEA leadership lower we The product our DSPs. first sales market in share of the following products and pleased partners are consistently results consistent maintained superior passive with and drivers North accelerating continued our products at American with for and quarter, offering sequential remain the were are the several above with quarter, and adoption and

participation said, our sales are Mobile front-haul we analysis was there in trends, QX. for has demand at low wireless been and and PON on bit Ericsson based and but results key includes of with levels. Alliance, in said, and Optical throughout advanced XG which our solid the end lead a partners, other infrastructure the reflected expect current our deployments in consistent, booking of positioned Nokia. POS the our pent-up XX-gig QX, we PON of wireless products to to in As Tri-Edge we demand year.Regarding That net FiberEdge Pluggables That a expect through well active moderate market, platform

were of seasonally up and for year-over-year. million, and FY flat consumer our half sales XX-gig XX% sales year-over-year in decline. grew latter and production 'XX products inventory net $XX.X POS quarter, down initial year-over-year. channel and expect sequential paired FY expectations, we first down channel sequentially high-end up was Our consumer believe products grow to with consumer tablets. to several improve, Consistent systems increase 'XX.For including quarter-over-quarter and qualification, continued and XX% in sequentially with ramp XXX% sales XX% front-haul companies in up expectations year-over-year.Net TVS inventories our of are these design a to the up XX% and in the wearables We market handsets, at leading million, continued within XX% $XX.X share and with X% wins,

performance driven to scorecard secure Our rating levels at high top-tier while our enabled customer first-to-market of demonstrated deliver maintaining customer quality has largest protection a our electronic us customer. to extremely devices.Our preference demand been high-performance reliably capabilities to consumer by has of

the levels market-leading class-leading healthy IEC frontiers expect allow saw the meaningfully We our We these growth.We interest PerSe for up to increased and outperform products innovative to products overcurrent, capabilities, sequentially innovation, of along ESD proximity traditional sensing over-temperature adoption deployment with protection. these power consumption, continue XX% customers up protection XX% through overvoltage, solutions had first surge capabilities key and of at and also of the us that quarter.Our management combine during year-over-year. with market effectively extend

this several design consumption tablets, year. the PerSe in rate that effect absorption been wins by This the has markets, standards and drivers of buds, covering ear specific One earlier rollout of took smartphones. supplemented notebook, was demand computers

featuring down gesture strengthen gesture-controlled million, XX% sales features quarter, for net such year-over-year.For In $XXX.X line conduction glasses expectations, by were declined our control for channel inventories the sensing of to widespread X% trend consumption the driven proximity and industrial expectations. and X% earbuds smart expect as and speakers. within bone with We sequentially first sequentially adoption

channel $XX.X and business, higher pipeline towards down XX% doubled signs bookings gains more with end world's gross but sequentially.For across net this inventories. launch the families.Continuing Our margin IoT router systems That strong product healthier sequentially XX% for has guidance, million, smallest our reflects router, recovery year-over-year. Router business to its desire of customer were said, from down year-over-year. XRXX, our business first XG recorded XX% this than for and continued up very sequentially skewed quarter sales saw with and grow. bookings the our bookings we quarter business first bookings rugged products, shown of shipments and all both Consistent

applications. applications, have certifications federal in strong, border shipments expected shipments also to to and and major quarter close with utility, public in expected increased and pipeline for each government commercial year logistics, in the with transit programs, have XRXX that budget. operator benefited second serving medical U.S. opportunities initial very security, We has schedule network are double.XRXX a we also XRXX safety sequentially passage pleased of broadly is pipeline completed on commenced from current

global in RF and industrial XX% LoRa-enabled services both characterized LoRa stream second network mirroring our relatively focused module half fleet and private Pipeline million, supported routers XG in Module bedrock very and XX% quarter growth. We flat a products, reached first XX% business recurring net and asset satellite and this Net expectations channel IoT quarter-over-quarter FY networks. number were of in have sequentially was POS and businesses market and bookings sequentially with adoption Lastly, quarter quarter grew of management.We in of inventories for fleet $XX.X further in offerings our networking energy partners, solutions, across year-over-year.The advancing including driven with for certifications applications, our first XX% position hardware in year-over-year. sales were saw year-over-year.Bookings of XX% in further increased at the strengthening sequentially were by also growth support our enterprise are the quarter of with nonterrestrial believe connected XX% and by processing, our up XX% stability and the tracking. including sales sequentially, particularly LPWA LoRaWAN revenue. key along in business operators. public also the growth pleased announced further stable 'XX.First modules, effectively network increased second our within markets, to decline payment by

maintenance addition use momentum solutions targeting In spaces, applications and for saw to LoRa utility connected in building greater management. our cases, including we energy traditional

body order into deployment by hub smart partner relay We with simplify and LoRa enablers reduce the and to worn TVS system In net introduced strategy with in we sales technical We are adoption product applications, increased first of lighting end being see span growth antenna, our sequentially vehicle product to the technology back in products XX% at over embedded hub. to the an show LoRa single-channel SAM. for opportunities we in the management medical these important quarter to products April consumer network focus world continue also was smart companies. X%. engagement turn over city and capture market, citywide further meaningful of used this and launched cockpits power and The quarter, Mark. encouragingly the several leverage control.In have X sequential pleased adoption including products first held customer cameras applications.For Design first of and production home to on vehicle industrial are best-in-class to wins demos co-hosted to for call market, Semtech bookings displays, intelligent LoRa advanced in as the by the enabler cost, increased this Ethernet equipment, I'll this responders.Now reaching seeing of

Mark Lin

you, Thank Paul.

were first sales sequentially quarter, a net up was and and the guidance infrastructure channel inventory high above of infrastructure the on contributing recorded market range, X% million, we market For X%. channel net basis, end down the up net down was and was and our $XX.X sales million sales end sequential sales XXX were favorable inventory of High-end margin $XXX.X results.Coupling XX% sequentially overhead at channel and cost with of to were X% inventory the net basis by was end year-over-year, favorable channel were consumer up points XX%. XX and Industrial XX%.Gross X% XX.X%, inventory reflecting end controlled basis expenses spending.Operating net sales the low up and up guidance. points down down mix and and

operating closely results. spending. with control, believe or drive allocation prudent expenses a to on coupled evaluate million near-term $XX.X level continue XX%. reflect spending current And of of financial cost improved levels We basis, a year-over-year We to declined spending

shares. for X% first was quarter with carry Inventories $XXX.X billion, accordance our debt This points sequentially, in quarter, basis goods was of quarter increase of copper sales of maintain reflective sheet. income supporting support and $XXX and with million. and net $XX.X XX.X%. was a million committed $X.X $XX.X figures the consolidated million million net draw ended shipments $XX of turning amount $X.XX of line sold. was not was $XX.X supporting working first the Adjusted operating second cable cash quarter compares a expense XX% X.X, in EBITDA We on credit to down adjusted XX.X% the unchanged capital to projects.Operating our to active from are to based with balance a wholly compliance or million, first we covenants rate bank outstanding nominally the was and of changes next a on $X wafer interest in year XX of Free margin on to with XX%.Moving million, the Inventories are and sequential balance minus million we second fourth to recorded of was a flow cost opportunities. margin $XX.X capital diluted part was our per for fourth to prior months. million and increase expect guidance. to quarter and X.XX%. a a figures largely for share use We quarter revenue first EBITDA quarter share our cash Net and of customer $X.X expect year-over-year.Principal XX.X%, plus earnings quarter, million. and At with end XX.X our million, $X.X count interest revolver.Now ratio of debt or currently increased corresponded facility Working changes, of calculated first million guidance.We of points. XXX year-over-year leverage our of weighted of basis the XXX average quarter cash, We the net programs nominal did and

shipments margin maximize continue We opportunities. into evaluate to to channel gross

sales center to market end expect net sequentially with from leading We infrastructure to data increase applications growth. the

up and at to sequentially, sales of expect net second up, expected seasonality market were high-end we quarter, net from of normalization of expect Paul consumer the PON mentioned, market slightly sales through for first this bit a QX. XX% application.We the end in As the the benefiting quarter with this be

flat mix or to be indicating in $XX.X slightly are minus We a product to up, basis XX%, plus and FY expect with plus net 'XX.Based minus expected million. or sales recovery expected to sales expenses be second bookings Operating points. gross industrial half of $X net be margin to on the XX levels, activity expected million, is

be for of Q&A. to back minus These We share tax a rate EBITDA per net expect and turn to $XX.X the $X.XX, amounts result million, plus million $X.X adjusted are the expected now net a in or or expense and of XX%. to to over interest income $X.XX non-GAAP $XX.X call like minus at million.I'd plus operator

Operator

line with [Operator Instructions] Our Piper of Sandler. Kumar first question comes from Harsh the

Harsh Kumar

confusion what I First already. copper to most probably a appears seems of congratulations on a us be for aspect could be the in playing little understand that you both. that There you it's use on good is cable pretty turnaround get or from you're all, you've Paul, the instituted will the chipset active same that opportunity. that if horizontal the horizontal help whether clarify investors question to often vertical Maybe of bit the vertical applications. or and and maybe aspect

opportunity. Just this a color on bit more little

Paul Pickle

Yes.

So we're playing both. in

larger of the sets that direct be cabling But of XX would subtract X,XXX copper cables, not a have total cables really but a is few chipset, does NVLinks.In depend shipping the cables to chipsets, ICs. of rather or but same on for up the opportunity, build course, of there's the configuration those XXX almost have but rack cables every to will that. you'd horizontal between from X in it's it's the configuration terms And active them, attach a so horizontal racks within

Harsh Kumar

When are cash then look the the you. I'm stabilizes Mark got I my the fixes business, sort -- of playbook, it's cost, sorry, in, almost next the comes flow taken. for Paul, follow-up. turnarounds, same and always management the steps I at cuts

all done steps. You've these

your of at delevers. a is potential was you're that's set to I question that if self-sustaining. about it? starting potentially talk at point you're in business there's to curious is case that But Or early point available of where think And your also to too it where a kind You're about you? opportunity

Paul Pickle

I'll over Well, you if question kick this mind, Harsh. Mark, to don't

Mark Lin

debt, stabilized. our call outlook, said in in Paul And results our QX with improve EBITDA expect in OpEx just disposition upswing any debt, consistent can't said, note for That we that leverage our and addition a on an used but ratio metrics. growth cash factors we be metrics of asset.You values. really potential flows Yes. is and is we'd what you all at Harsh, sales recognizing cash what to to has at refinancing consider need do I'll I the not a thank a in proceeds, in based can will and to to asset all earnings improving covenant first beyond something we remarks, and we'll or important ordinary I of are consider covered specifics, also timelines appropriate that Semtech, add his provide course, capital structure reduce evaluate we including believe the ], our evaluate in divestiture. understand would we debt prepared free generation that in and alternatives outlook leverage financial [ my fire transaction flow quantum with the here.I'll appropriately reduction cell that potential a compliance

Paul Pickle

I'd all disposal, table. if we'll summarize And and take at debt the are focused load, all Yes. available I say definitely are at on option on to reducing could a us. that, the every our options We tools look overall

Harsh Kumar

some it, appreciate give you point is time. timing. that, I the looking but I in that, know guys. fact appreciate for still I that can't wasn't option open I at

Operator

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

Tore Svanberg

Back on to on the question ACC. continuous Congratulations here. the progress

ramp? just bit we are manufacturers And there. there timing I think are you as as should X.XT, qualified Can that? you Paul, POs potential the would far how from when seeing elaborate about little see you on think and mentioned that cable that that you a

Paul Pickle

right. All Yes.

in, we'll with as kind definitions. chip lot partners So a as as technology product those up those of chips, hyperscalers collaborating data well working of to hyperscale on spec is build typical center, end in

holding often us that is they'll are, and partners fulfillment. this manufacturer.I'm but the there's have they case, want working in that case, partners to to us not to that partners the the active still what the said this timing We're fiscal an expect cable of those really optical this terms revenue so say now, specify then of for year, ramp those copper some lot And we'd been qualification. kind year. fiscal is does half of for it's of timing, utilize who X say times, manufacturer, but As with I who cable see right is to active A early to in at latter we've And year. past, go liberty designated. the -- final would in consistent with an next

Tore Svanberg

very Yes, And good. for follow-up Mark. as my

this OpEx half the the I of going some the it? understand, about Is at now it there should So sales. year? we how way right think sort that would OpEx the is that of reductions grow level. at And fiscal still Or is Mark, forward, further be could rate

Mark Lin

where the Yes. better pretty constantly I'm levels results. comfortable dollars for are the but allocate now, looking with are near-term spend at dollars, we right the better OpEx to how

some growth and sign As that But marketing be growth the can on that. I can rate be revenues just there's grow, within sales expected. going to you off OpEx that provided,

Operator

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

Quinn Bolton

as offer my I'll congratulations well.

do how fiscal look get But preproduction in little what going the of a to we those know want here, of -- could you you reasonable of expectation be to 'XX. you'll to ACC to wanted a fiscal revenue for but I'm set in might opportunity. year, this opportunity this maybe business, big up guys. to big a as wondering range for follow level say, been if bit expectations next I pretty this think of you're get some know wide out how lot you for try 'XX? might mean be? questions expectations.I a Just there's on I

Paul Pickle

more So expectation, around. least a currently it's answer what it big is focus because at number, a would the pretty what to think rather of be, big imagine I of planning I to reasonable than a how kind could kind high end, of bit prefer we're on

want at on not and just side versus number to dependence million the kind rack configuration configuration, of opportunity. we that we'll and definitely that -- year.So case, dependent the but case number the of to size shipment used number number cables cut out chase, heavy don't I NVLXX So as high to NVLs the put is base obviously, heavily and next I'm be a of $XXX a it there. of the ship NVLXX both could it's connections, horizontal on

I in. call settles that share and designed case, I think expect expect -- us we XX-XX.We we're first going out to you gives one chips, advantage, there would it's slug first-mover that but you it us on this base want that that supplier. a component other share for if to it's in XX% were first kind provide see, to could reasonable a reasonable share Maybe get put to to between just a slight And the it's split. the of down to think to production

Quinn Bolton

Or Got TAM it. opportunity the that $XXX then total is And by revenue? and million the got, a quick a I've $XXX follow-up. clarification for the split hopefully, for competitor? there, of the that that is be that sort then Semtech And expectation million, you is Paul, would

Paul Pickle

we that. So of total and case. And SAM, share a at that program would particular a looking is I'm get use then

just different program. particular X So but models, one configurations,

Quinn Bolton

Got it.

LPO received, suggesting coming some you LPOs, slowed then market. And are DSPs the DSP may vendors get that the as of to you'd activity mentioned Okay. have linear

you Just in if it share and Do you're growing? seeing sort in other seeing in you centers? there where back-end see infrastructure interest in Do cases general LPOs wondering LPOs? see GPU could where network? your you're thoughts switch it Are use of interest data you

Paul Pickle

Yes.

still is a networks. I backend how well. in right. I -- based vendor, the widespread DSP downplay was if it GPUs there guess all I'd of probably terms out But is as journey So

GPU some that up data lie.And is or might in that they'll of in I the use itself. questions and whether And I using will a already significant fiber LPO. SAM all general looks that's jury map, You statement implement where to has We end in got out. data. out it the center kind up kind vendor a certain, of the down think not That's there say ends made right use the It's And there it that It it over X/X. hinging know does one lifetime of still of quite parameters. The thing motivation operation for now, it's good. I is come still on high. and to the think it

nobody Let's saving consumption cares the cost solution. think assume not X/X power about the retimed it's that which the of DSP, I probably a about money, over full but case.It's is the

of So you've got couple variances. a

You retimed linear could up solution and solution, full a a end with a half retimed then or solution. LCO pluggable

way all performance I to data best of center technology out.Right X is limitations they now, shakes boom a There's for and can to to going next be going for through the variations years. have. the to power implementations down squeeze who think either it it's that the come go of going out to X lots

so one we're rather answer gave. to the on bullish that's And why answer still just I little opportunity.I'll that tag on quick

in of of kind as it's compelling the to use look the is versus power. why copper DSP-based coming AEC at solution we because terms really look in an and ACC a solution X/X back copper versus reason the you popularity reason is at If an ACC, if

compelling, meters. many But in up reach short go So beyond to to you're that, going up well pretty you retimed need it's solutions. so really when works

over to the a think everybody to years. X have play is going X So next I

Operator

the next Schafer Rick comes Our line of & with question Company. from Oppenheimer

Richard Schafer

is really have guys meters say, kind the ACC the last X you comment, a or mean to AEC that do a that guys kind I'll of longer into mean move the capability wherever of just -- follow-up have or on maybe little desire my I would right question. does quick you move congratulations. get Paul, than, bit now? reach And

Paul Pickle

way. expand. and I'm I'll put this of fan big it land a

so you've and technology-agnostic of I be X think necessity on got portfolio. be I we need in a years, to sockets those the is think of companies you focusing of we're next out hard really if to for and come bit going or over product to like transport be looking I area the profitable it -- are a years. a in prefer kind X is good expand of strategy a going fill pretty more look technology-specific X going looking that the this continue don't to when to relationship stand possibility. might of they ours, of around with take at approach.And customer, some realm to retimed the an solutions data So other start that to needs to we're Different going to architectures the where

Richard Schafer

I And ask on just quick then one a if could Tri-Edge.

the this -- You in your I -- like I opportunity can see I mean, where guys power just trying trying all sort mentioned get if and better contribution it. out cost play? really the understand correctly it's Analog... comments. I and but of that where SAM It what I is set and it was expect that. a in that looks going out? it had guess if to like up lower here I years of today for you to versus, guess say, I a quarter, lower I'm read And picked understand or it was couple sounds year of you what to frame

Paul Pickle

disadvantages around got We've is somebody some Yes. it it's that the analog take software require tuning. to The it approach, Any does an solutions. can great. time to we it wrap tune

And of make I also can everybody in where picojoules really with if work has of Analog advantages a great. is latency. bit, it's you world think terms it some so kind per -- counting in it analog,

and latency, AI about at front-haul also either. And GPUs, really then you're NVLinks telecom certainly because care strong compute really Nokia got Let's and latency can't Ericsson say, they talking does.If about we've doesn't positions introduce data linking general latency. center tolerate can't but some really

there. play a definitely there's So

not DSP-based quarter, next go-forward advantages. a it's Tri-Edge we think the it But we its it just to right of would I is the just at basis, got look and over the if for solutions. significantly Each double. nor on kind end-all expect us is -- increase now, one's perhaps

just nice uptick seeing a center overall. for we're data So strong

Operator

comes Benchmark with Acree Our question Company. from of line Cody The next the

Cody Grant Acree

cables. copper LPOs? you gave maybe Yes. around you on the framework Paul, for expectations you active Can some us of your -- can details maybe similar provide the

Paul Pickle

Yes.

right we've partner. we're what a call, of particular, design project So a with technology partner -- kind around the would same got ACC. It's a now, I

LPO, testing we've through -- out going most got solutions. partner other also Specifically for we're that with OEM. vendors testing in a lifetime tech We're another Broadcom

So I a being some up those that per think not technology other its as products, in-house of standard of progress.And we portfolio partners as at from then LPO look product are with actually making meant DSP solutions kind they're it's se. teamed

just need So necessarily. we parts different applications, and lane in itself way a good drivers. activity a lots of they're are into These lends full their it a retimed single-lambda LPO there really to us. be across whether half that kind good, or linear a -- matter retimed, or direct doesn't to the of really in being XXX-gig board.So don't for strong, per going in to drive And us, TIAs to find

I we're line. to well think going product with the rather do

Cody Grant Acree

any So ] expectations around next year? [ LPOs for

Paul Pickle

Not currently.

I design win along think ACCs. curve we've design a and the curve, the with got bit little -- we're in further

X.XT of quarters. to able to be color better the and single-lambda put our optical solutions in XXX-gig I'll think I product couple next

Cody Grant Acree

to breadth just the to lastly, just you where of migration just Okay. where implementation you're industry the the And that of XXX-gig today can with us and expect seeing then single-lambda, help you go?

Paul Pickle

we're on we're but XX XXX 'XX That's and starting gig, appreciable FY amount. into leg the -- of majority it's to our the gig, today, We're And an reality of even gig, interesting. revenue still are per kind Yes. gig XXX is was channel. we getting about XXX talking in about talking

to -- be of general node of slowly, although But really year is towards it's the I we be it's is bit is at think think but is a XX shipping this straight major this almost moving transition AI terms more of bulk -- see total still say, rapid where at it.So much gig, Let's the lane of as here driving XXX. at a solutions. I compute gig, still to of still the XXX-gig going per to expectation, That's pace. least I fairly moving kind a as opportunity, kind in -- going migrate XXX not really the doing XX-gig year skipping

a be that little hard to contribution like right say of it's going in transition So is revenue to now. what terms

Operator

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

Tristan Gerra

So you've 'XX. connection in we that center optical? ultimately see horizontal this is moving year? sustainable future AI platform In When ACC how if purpose vertical and And AI, not, why in not? to do general to about beyond potentially moving talked data

Paul Pickle

It could very well be. But -- all right.

sense reach. say, yes. then, -- tackle bit, do those well, -- need that be to that's are for have versus last to close don't we kind the XXX-gig active think, Well, necessarily terms the solutions.At path the if go migration it lot can't you cables XXX for together do are direct some rather going it single-lane rack, of copper make if optical? I'll to where short, reach would we cables, think in to people speed, be So passive configuration, if racks look and some optical Tristan, up But to internal of to mind. Where they I optical would natural of have attach doesn't you at If you to that. is gig don't would going active a to

don't meters how question look than of the another see think to answer drivers rather I is how if say, copper have going all short answer their you But that's the down term, depends optical are. I think latency absolutely is, choice NVLinks. drive, kind no tool to direct those introduce and goes. going It XXX-gig those I really retimed arsenal into and of active -- if at because copper that we the you be do at, not. and is can't strong comes that to It's ASICs wait horizontal copper latency, in the to kind next see if on your something active of we connections be active logical is let's Does the reach.But X.X or then cables, kind that so, it to can't question? switch

Tristan Gerra

at that Very for helpful. terms of gross looking the optical growing than Yes, just question is yes. Or year. of looking a Is second the function My of in be other average? faster this at follow-up margin the should catalysts we gross margin half upside? continued catalysts

Paul Pickle

there's a few Well, catalysts.

some us. a margin certainly been gross is got for has soft, decent driver LoRa as said in we've that back. of comes fairly pretty markets when So PON a margin you a are end if terms telecom is of think -- driver positive we decent that the well.

to good lower, except little us business, add module to I boost. the any hardware But So think, are mid-XXs bit really anything And that be -- to would want a those or be a business, for that? us.Anything trends, tends so then bit lower. you for driver it is is. a the going Mark, business quite did a typically what give routers that of to

Mark Lin

matter of the the business of in we it's recovery the Yes. at businesses range, by margin -- mix, but higher a the faster-growing half. bit second largely hardware Tristan, by offset see a some

Paul Pickle

it's little dilutive for for a Still goods, to consumer we corporate bit support us. little to margins. And more see strong tendency consumer be fairly a a that goods lower, has been Yes. bit

something go else and off to backs its that up. if see you're going margin spot, fills that So gross

Operator

comes line question Riley Securities. the from next with Our Ellis of B. Craig

Craig Ellis

on Congratulations the progress.

about XX% growth AI the companies Is fiscal XX% of rate go hoping, how fiscal the do Paul, Or copper happens that?I opportunity be opportunity and think grow number a the too in be could the we chip-related just think getting 'XX we if about in? If splitting, active after we million we cable range think some that that was the far I the at of know that horse. back out put $XXX So to rates on be before how you'd what may beyond would could the comments the risk to cart of this CAGR business do range. in have a that 'XX? growth

Paul Pickle

chip rates. think those could a of I do it that grow multiple

to GPU taking So think, use case massive a trend is XX% going in to racks take the be -- off, But that these of is largely of that's to be could really installations quite giant -- higher. architecture, people case.Use I look does dependent putting together if explosive. favoring that multi-rack grouped multiple we're advantage clusters. parallel on that it can actually being think, And kind configuration, in are secular XX%, then to shipping the I opportunity, is

on depends configuration to continues it how they to of evolve, and exaflops. available what as want looks really utilize shipping AI that like, kind So

Craig Ellis

the Got really just multiyear total. basis then on helpful. back some in about Integrity of other it. comments And Signal that's And a and going thinking to

this the component So breather center its station And we've at bottom. pretty Signal beyond out that to the fiscal take contributing AI you 'XX to PON and least the along but beyond then a to but would that room China segments should reaccelerate of in got data as one of there a Integrity it we growth. is look your drivers bit. this base X fiscal that business strong.So cause quarter, seems that's quiet, see been looked 'XX, growth year within pretty Or to all be a big has something taking bouncing breather?

Paul Pickle

taking it. line SAM consistently, some that see for albeit trends those -- through don't lines, the I definite at looked is the drivers us. some upside the CAGR, cyclicality got to before very first did breather. one But X% when an you I that's had here, draw I product of things of opportunity a Integrity grew and a If and it's of became an of AI one I kind Signal XX-year for it, if

think I So to it's there. from going uptick

it's I -- to growth. have decent pretty some year multiple growth going sequential think

So we moment. in pretty should this be good shape at

Operator

with the of ROTH Scott Our line next from Partners. Searle comes question Capital

Scott Searle

it Nice from maybe equation the question on quarter. second follow this quarter, back to a like for and watermark?And a direction forward? the Paul, of relates a seen have little optical see growth moving up the in away on specifically the about there's LoRa, drivers. moving China the side it you're job of a to PON, it the thinking you Are semi the prior right on long-term in for What's they the sounds digestion. Nice recovery to had that bit going quarter. opportunity as the similarly if LoRa we strong address also I'm the wondering could right rate front. now

Paul Pickle

little the question your a in hiccup had a we Scott, audio. again? Okay. first bit What of was

Scott Searle

nice going some back is high breach the channel I next that but as Or the long-term for watermark think fiscal in this in My growth bit. little recalibrated is going is that quarter, of PON, apologies. snapping that moving growth when drivers, this a I'm something you is long-term the $XX [indiscernible] of China? of and beyond demand that you that LoRa recovery to saw million quarter. into rate several came we that rate LoRa the thinking a is just in, marketplace, expectations that And What a quarters? it on the of backfill terms kind assuming front, for is about you're forward? a you 'XX?And get to bit little we're inventory

Paul Pickle

Okay.

So first I'll take your first. question

of it underlying now, of We China had I If So PON, about an to -- it at of of gig. is more numbers I is infrastructure this that right wouldn't we've it's business, we when PON, equates look PON. in definitely, but in talking about uptick. trends XX% upgrade.So XX everybody there's a knowing kind coming -- tenders. shift. the of PON in terms behind terms down. real China this strong China We're down, overall, really start some estate of kind it's market, from PON there delay was we had recent a But think definitely

upgrade on think a little willing So terms of really have I to to expecting PON And we're that a trend moment, Right we're moment. really could be higher, we're expect in good strong that going to the $XX the high this think kind and and at see but count number watermark, indicator -- not valleys position quarter. us. of there. is the up would for very I'm edge that for of to We It a But a profitable to It's cycle. the I reason an I'm probably in leadership peaks I a don't between is of it -- that overall, stop.In growth a continuing. at going it's kind could bit million. cycle going now,

I think There's visibility out. we're We'll as of in tenders hesitancy a see. and order some rolled healthy territory. lack the

ship had bookings we quarter we big that really where have we to have hard boom that January, So of And a did of to kind stabilize. catch-up had and a product. in we scramble strong to kind kind of see of

it And as that's little we're to on continue. a bit a up. cycle, why pulls catch back ramp it But so expect we

infrastructure I America BEAD growth.In of picks out point North and urban markets. terms or deployment subsidy they I it. government of out basically So other call in don't who would to good markets, but it's communications as equity broadband know a the roll acronyms, initiatives to access these

kind of gas, the is this don't and everybody a have copper good gets is those going and worth So of home, really can you Fiber still to running meg a is access way When ]. turning want people gig you're [ of pretty us. Copper opportunity share to pipes. for out to be go. XXX

And so markets. that's I it's got to change.I urban rural apologize, said markets,

coming an infrastructure So government build-out this that's from is U.S. funds.

my expectations. with we've say So I in PON. going got trends It's LoRa some easy. change soon.And to would double terms happening good I anytime think growth, That's not digits of

want out We've really to some strategy. to development of want fill and that business we see got However, the recover we kind going. nice

So chipsets. support support our We'll to be a we're able next-generation Wi-SUN. to bit more with protocols going

protocol We're the of closed don't feedback as really well. some next so market, device is that.And open then can still up couple roll on really utilize deployment nice we've chipsets to make quarters to kind got a on People markets easier. and going this lot configuration getting us. some really going adopt to see management tools a one support to an You're for they of over those want announcements are out -- And some tools, tools, from how Semtech. ideas same that the is open that

those see along the quarters. So expect next few to some over lines news

Scott Searle

it some it's order are better pressure. helpful. Very look, But question sadly. -- sounds trends of of the a lot quick acronyms like coming BEAD a inventory. Great. on of the There's one out is been that back. by of But the a the way, there, lot modules And channel been

And how I'm were to sale it's looks back to recovery the what's where a see the a probably you picking trends some point wouldn't you're thinking there those number from up? I back this about year? number years if expect normalized think of start expect the of normalized us X of calibrate go peak about? second you think revenue is to kind levels.So that in about but down like, what us of ago, in half to quickly as XX% we we of wondering terms could I

Paul Pickle

Yes.

LPWA actually So it. leading is

lot actually of broadband, you we're of adoption heavily the So but more because peak previous And look kind design-ins a revenues, municipality if we've a seeing and interesting rollouts got upticking. this bit on at were is little LPWA. they

And so we're starting metering adopted to see and that applications.

that mostly faster, market reported and still of broadband we so down customer is expect recover heavy, not because it's end in inventory, kind visibility.It's to And from bit inventory. lot a customers industrial. our channel end the end heavy had revenue buying But broadband, not a of

they also dipped. that as that POS had so And down, bleeds

terms their in bottom. of are the my dipped, of the I the of POS a I I quarter. sideways. I slightly there. very And have industrial -- might QX was to bottom. still a was from it. inventory about POS numerator being dipped. hoping channel outstanding days talking QX QX denominator changing.So see and with we're signs starting last inventory of that remarks think don't ballooned on was visibility both our I consistent But ton result, So as life kind or of the industrial still be lower

We bit QX back I -- recovery hardware market that's uptick. did in get signs at, a little my we're I see a being see bedrock, could snappier bit.So industrial prepared do that little as in what of we that QX, where remarks. routers. POS think And that's more and a said of expect. in of but I I business, slight get bottom. a kind the coming life in we end

should or end of should And have modules so of broadband life our some customers have already there. signs seen also

moving So exactly we I right stated. think of kind now, as we're

and normalized on time November gave half, I'm call, second better those I number modules think goes a recovered, towards. normalized doing business. everybody XXX. It's million give if you say, the my bit ICS on. correct mid-Xs, be little what's the as somewhere of kind can million, revenue run high back a $XXX to we're visibility to been And slower I'll about QX color in get $XXX of in have in there able this driving and fully Mark year But I we'll I me. million want I little million snappier order of modules probably as, inventories.So say, go $XXX certainly bit maybe a to number for also but routers exit on let's frame, said particular? to recovery, So of I probably that from modules $XXX back think there. memory, as the a time more still can rate I've kind coming

Operator

with our Craig-Hallum. And question from Anthony comes Stoss line next the of

Anthony Stoss

And in Nice be my every I a should have asked, growing? mentioned I can execution. been guess, your business but of of up follow business Paul, sequentially any just on, quarter. be expect do lot October think A you you've that leading CRP maybe segments question now July? questions you especially down to maybe growing, on segment the revenues, Do the should be

Paul Pickle

of rush a little So think talked of We'll to built. tendency get that of the product in happen. kind down, some bit has out to pausing terms got we've there. of about a the It's segments get I

there. because the I telecom, lots but results that a some telecom have it CapEx -- down. I thinking We've XG right starts bit to I'm really muted. start this say kind in honestly, not really, budgeting that peaks started when anytime valleys we're I out a would see that, out.So wouldn't But got that soon. about about muted, revenue Quite of And start vary things clipping there, segment skipping are say, some positive see a to basis. more visibility see point advance happen activity off change a with remains trends space. will I people LoRa to will that and we're going say until -- So design any quarter-by-quarter back.So one We'll we're remains POS. trends that is that to segments I I not along. this of is a at than going coming to number down quarter-over-quarter, but and to get wouldn't to segment the positive few at or thing quite bottom is a that as starts to rolling going have on a good wouldn't now, actually other don't report We point reported say

really a So good that's trend.

-- numbers really has down. it of are a are expecting don't seeing those anything I We else been come off we up low. because to I say have would But that is really

Anthony Stoss

the on And quick a it. ACC just side. Got then follow-up

talked sense how You longer ongoing. are about going much to of take? it's qualifications Any

Paul Pickle

think I quarters. reporting incremental purchase said So at next last on my call, in orders manufacturers. progress we'd the We're know with I X the cable

a have should find we out report. something think in I and hopefully to quarter

Operator

the for end remarks. reached have we And question-and-answer the turn over the you. I'll back now Paul call Thank of to closing Pickle session.

Paul Pickle

joining Thank guys you, you a have evening. us today, appreciate I Salame. and great

Operator

time. your at for Thank this disconnect lines may participation. you and conference, your you today's concludes this And

Semtech (SMTC) 5 Jun 242025 Q1 Earnings call transcript