Q3 2019 Earnings Call
This time, all participants are in listen only mode I.
I would like to welcome everyone to the lattice semiconductor third quarter fiscal year 2019 earnings release Conference calls.
Nature, we will conduct a question and answer session.
At that time, if you have a question you will need to press star one on your push buttons Foley.
Replay will be available approximately two hours after the call today.
The replay dial in number.
For example for 5.37.
But he 406.
The conference I'd number it's 91915 to nine.
He will also be accessible online web site at lattice semi dot com.
I'd now like to talk a little over to Rick Shane. Please go ahead.
Thank you operator, and good afternoon, everyone with me today or Jim Anderson Lattices, President CEO and surety Luther glasses, CFO will provide the financial and business review of the third quarter 2019, and the business outlook for the fourth quarter of 2019, if you have not attained a copy of our press release. It can be found at our company website.
In the Investor Relations section Atlanta semi dotcom.
I would like to remind everyone that during our conference call today, we may make projections or other forward looking statements regarding future events for the future financial performance of the company. We wish to caution you that such statements are predictions based on information that was currently available and actual results may differ materially refer you to documents the company files with the FCC, including.
Our 10-K's 10-Q's can acres. These documents contain and identify important risk factors that could cause actual results to differ materially from those container projections or forward looking statements.
This call includes constitutes the company's official guidance for the fourth quarter of 2018, if at any time. After this call we communicate any material changes to this guidance, we intend that such updates will be done using public for such as the press release or publicly announced conference call.
Some financial information presented buyouts during the call, we'll be providing both GAAP and non-GAAP basis.
But excluding certain non-GAAP information management intends to provide investors with additional information to permit further analysis of the company's performance underlying trends.
Management uses non-GAAP measures to better assess operating performance and to establish operational goals.
For historical periods, we provide reconciliations of these non-GAAP financial measure measures to GAAP financial measures that can be found on the Investor Relations section of our website at lattice semiconductor.
Let me now turn the call over to Jim Anderson, our CEO .
Thank you Rick and thank you everyone for joining us on our call today I'm pleased with the strong results. We delivered in Q3 at 29 team as we achieved a new tenure high and non-GAAP operating margin for the company.
Highlights for the third quarter of 2019 included revenue growth in line with our expectations.
Gross margin expansion of 240 basis points year over year into 80 basis points sequentially to 59.8% on a non-GAAP basis.
non-GAAP operating profit for the company was 25% of revenue a new tenure high and non-GAAP bps increased 55% on a year over year basis.
Let me know provide an overview of our business by end market.
Communications and computing market revenue increased 5% sequentially in Q3, as we continue to experience strong sequential growth in year over year growth in this segment.
In computing, our revenue in servers for enterprise and cloud data centers increased sequentially with growth driven by both our higher attach rate in DSP versus the prior generation.
We remain focused on increasing our content in next generation servers by adding security functionality with our new mock XOMA three d. product family.
In the communications market, we're benefiting from increased by GE infrastructure deployment or find GE revenue increased sequentially in Q3, as we continue to expect by GE revenues to grow moving forward as the Fiveg wireless infrastructure build out progresses.
Turning now to the industrial and automotive market revenue declined to 4.5% sequentially in Q3, as we experienced some demand softness towards the end of the quarter related to the macroeconomic climate and continued trade tensions. Despite some near term softness. We believe this segment will remain a long term growth back.
There for us given the breadth of applications that we serve.
Long term growth drivers include the proliferation of robotics and industrial automation in the steady increase in electronic content in autos.
Turning now to the consumer market revenue declined 4.5% sequentially. In Q3. This reflects continued demand softness related to macroeconomic conditions. We remain focused on serving the higher margin areas of the consumer market, where solutions are enabling customers to differentiate their products.
As an example, we're seeing strong adoption of our AI technology in prosumer applications.
For development of next generation human presence and gesture detection.
I'll now provide an update on our product road map execution.
First is sensei on our award winning low power. He I solution Stag last week, we released an update that further extends our innovation in ultra low power AI. This new version introduces enhanced support capabilities, enabling faster in French performance and lower latency, including in hand.
Spends to reference designs for key phrase detection and human facial recognition.
Moving to mock Xothree D. Our new secure control at PGK. We recently received the National Institute of standards and technologies Cryptographic program certification. This security standard is extremely important for our enterprise customers and makes our solution even more compelling.
We're pleased with the accelerated a broad customer traction were seen with this product kind of next generation server platforms.
We also launched in sampled our new Crosslink plus product in Q3 developers are using this product to enhance their users experience by adding multiple image sensors or displays to embedded vision systems.
We're very pleased to sample or customers ahead of schedule and as a result, we expect to generate initial revenue for this product in Q4 this year.
Finally at our Investor Day. This pass me, we committed to sampling or next generation MPG a platform in early 2020.
I'm very pleased to say that we are executing ahead of schedule and we now expect to sample customers before the end of the year.
This new product platform based on FD Soi technology has been architected from the grounds up for low power operation, which enables a significant power reduction for our customers across many different applications. We're looking forward to sharing more details about this innovative next generation platform at a special product launch of.
Tend to plan for this December .
In summary, we're pleased with our strong financial results in Q3, However, we're even more excited about the solid execution of our product roadmap.
Specifically, the accelerated product Rollouts, a barrel crosslink Clos and our next generation MPG platform.
This execution fidelity is a direct result of the key strategic portfolio management and resource deployment decisions. We made in late 2018.
Those actions drove a sharp focus across the company on delivering high ROI products and accelerating the cadence and time to market for our new product roadmap. We remain focused on executing our business strategy and product road map for sustained long term revenue and profitability growth I'll now turn the call over too.
Our CFO Sherry loser.
Thanks again.
We are pleased to deliver revenue growth gross margin expansion record profitability and a further delevering our balance sheet.
We are making substantial progress on our commitment from our Investor day, as we move closer toward our target model.
Let me now provides a summary of our results.
We achieved third quarter revenue of 103.5 million up 1.1% sequentially from the second quarter.
Hi Tech revenue growth and communication and computing helped offset a sequential decline in industrial and automotive as well as consumer.
Our key long term growth drivers remain intact.
Gross margin on a GAAP basis was 59.4% compared to 58.7% in the second quarter and up from 57.5% in the year ago third quarter.
Our non-GAAP gross margin expanded to 59.8% from 59% and the prior quarter.
And from 57.4% and the year ago third quarter.
This was due primarily to product cost reduction.
Pricing optimization and higher IP revenue.
We have now delivered three consecutive quarters of gross margin expansion.
Well, we have made meaningful progress I continue to execute we still have a lot of opportunity ahead of us for further improvement as we work toward achieving our long term target model.
Q3, GAAP operating expenses were 44.8 million compared to 45.6 million in the second quarter.
On a non-GAAP basis operating expenses were 35.9 million compared to 35.5 million in the second quarter.
As a percentage of revenue operating expenses were flat at 34.7% in Q3 from the prior quarter.
R&D increased to 17.8% of revenue well as you know decreased to 16.9% revenue.
The mix of Opex continues to gradually shift toward our target model of R&D at 20% of revenue and EPS DNA at 15% of revenue.
Our GAAP EPS for the third quarter was up 67% sequentially and increased 100% from a year ago third quarter.
On a non-GAAP basis EPS for the third quarter was up sequentially, 6% per basic share and 13% per diluted share.
And increased 55% from a year ago third quarter.
Accelerating cash flow generation remains a priority for the company.
Year to date, we have generated approximately $85 million and cash flow from operations, which is four times the cash generated over the same period and 2018 underscoring our focus on cash generation.
We ended Q3 with a cash balance of 97.4 million compared 222.6 million at the end of Q2.
At our Investor Day, we detailed our plan to actively de lever the balance sheet.
Year to date, we have made 107 million in total debt payments, including 33.4 million in Q3.
As a result, our non-GAAP that leverage ratio as defined in the credit agreement is now below 1.5.
To put this in perspective, we haven't improved our leverage ratio from 3.5 a year ago.
Additionally, the Q3 discretionary debt payment allowed us to reduce the interest rate by another 25 basis points for a total reduction of 300 basis points and 29 team.
Let me now review our outlook for the fourth quarter.
Revenue for the fourth quarter of 2019 is expected to be between 97 million and 103 million.
Gross margin is expected to be 59.5%, plus or minus 1% or the non-GAAP basis.
Total operating expenses for the fourth quarter are expected to be between 35.5 million and 36.5 million on a non-GAAP basis.
As we look forward our priorities and focus are unchanged, we remain committed to expanding our profitability, increasing our cash flow generation and delevering, our balance sheet to build additional value for lattus and our shareholders.
Operator, we can now open the call for questions.
As a reminder to ask a question you want me to press Star one on your telephone.
We have a question from Tristan Gerra from Baird. Your line is now open.
Hi, good afternoon, given your increasing exposure in data center and also ongoing changes in mix how should we look at typical seasonality going forward by quarter end, including for Q1 in terms of sequential changes you know why did you.
Yes, Thanks, Tristan I would say that you know in general our business over the last year. In particular, you know you've seen a shift in the makeup of our revenue towards higher percentage of comps and compute in industrial and automotive.
Versus for instance, consumer segment and so our revenue shifted to those segments and let's say that's made our business a little bit less susceptible to seasonality. There is still some seasonality in our business with respect to specifically consumer right normally we would expect.
For instance, consumer to be down from say Q4 to Q1, but it's really.
Consumer that's the only segment that exhibit significant seasonality now.
Okay, Great and then as it sort of what you would you like so the increase nicely sequentially was there any particular end market that was the driver for that increase.
Trusting could you repeat the which sales for U.S., but could you repeat yes, so to do the non distribution was viewed the direct sales.
<unk> increased sequentially I wish there, particularly catalyst for that increase sequentially.
No I that can vary from quarter to quarter distribution versus direct so I don't think there was any particular catalyst for that but a bid that we viewed that as within the normal sort of variants that we can see from quarter to quarter.
Okay, great. Thank you.
Your next question comes from the mine, Matt Ramsay from Cowen. Your line is now open.
Thank you very much good afternoon.
Jim I wanted to ask.
A question you called it out in your and your script about some of the the AI applications facial recognition and the whole bunch of others that you listed that some of your low power STG is our or enabling and I wondered if you might expand upon that a little bit what are the customers that are driving that.
Oh, I guess, the brothers engagements and it might they continue to expand on on your new generation that BJ platform as you guys roll it out thanks.
Yeah. Thanks for the question, Matt you know so first of all a lot of that's related to our son say I software stack. So our sensei I software stack is a soccer stack that we introduced first about a year ago. We made refinements over the course of this year introducing new versions that have improved performance and.
Features in capability.
And what that soccer stack really allows our customers to do is to make it very easy to use our MPG products in AI applications, particularly at the edge of the network and.
In particular for inference processing at the edge, where you want to make basic decision, making in edge computing applications and we've seen really good adoption of that and quite a bit of customer traction in interest and it's across the number of different segments. We've certainly seen consumer reach.
Got it applications for that.
Whether its facial detection or keep raise recognition you know we can also analyzing the audio or video video signal and.
Pick out different patterns in the audio or video so not just consumer applications, but also we've seen a applications in the industrial segment for as well for instance, analyzing production line says.
In the manufacturing line and.
And detecting manufacturing excursions for instance, and things like that so we're quite pleased with the progress that we're making with a sense AI in AI in general and yeah. It's been broad based across a number of different applications.
Got it thank you for that as my follow ups area.
The whole team laid out some I'm pretty ambitious gross margin targets at the analyst day, six odd months ago, and looks like you're coming in and even you didnt fit and those are those expectations and you mentioned in the script.
You had a number of different levels levers to continue working on margins. As you go forward, maybe you might expand on those and sort of remind us what your long term ambitions are on the gross margin line. Thank you.
Yeah sure Matt Yeah. So so as we outlined at our Investor Day, we talked about some of the levers to of course margin expansion related to pricing optimization and part of product cost reductions and so the improvement that we have seen to date QC over Q3 to 240 basis points you can see Israel.
He delivering on those levers that we mentioned that our analyst day and their long term target that we laid out our analyst day of over 62% and your spite years three and four out there.
It's really looking at those levers, including mix and so the way we laid it out there in terms of the pricing optimization, we said roughly a 500 basis point increase from 2018 to get to our target model gross margin and we laid that out in terms of the I'm about 200 basis points improvement and pricing optimization, another 200 and.
Got it cost reduction and then another 100 and mixed into that kind of the way to think about the progress that we're making a you know moving forward with the 240 basis improvements that we've achieved so far and really the levers that we're looking at I'm continuing to to pull on Q2 of our target model.
Thanks very much.
Sure.
Thanks Man.
<unk>.
[noise] [noise] operator did you want to bring our next caller on.
Our next.
She comes from the line of Christopher Rolland from soft.
No.
[noise] thanks for the question.
Yes, maybe you guys could talk about your outlook for next quarter by end market. You know how you see those trending and then [noise].
I know, it's early but you know some people it given thoughts on Q1 expectations versus typical seasonality just given the difficult macro out there I wonder if you guys have any thoughts there as well.
Yes.
Yeah. Thanks, Chris.
First on the Q4 guidance if you take a look at the midpoint of our guidance.
From a year over year perspective, it's up from a sequential perspective its size down sequentially. If I speak about kind of what are the key drivers that we see sequentially a couple things driving the expectation for a sequential decline one would be we're expecting our IP revenue to.
Actually we.
We had a little bit higher than normal IP revenue in Q3, and we expect in Q4 for IP revenue.
To decline back to what is kind of considered by us to be the normal run rate. So that's maybe a $1 million to $2 million sequential decline and then the other factor I would say is in the industrial automotive segment towards the end of Q3, we did see a little softening in demand at the end of Q3.
Three related to the macroeconomic conditions and continued conservatism around trade negotiations and the dynamic nature trade negotiations and we're expecting some that softness to continue into into Q4. So those are kind of the main factors for the you know the sequential movement from Q3 to Q4.
And then you don't probably early too early for us to give you know any thoughts on Q1 in specific but it will say you know if we go back to our our Investor Day in me, where we see over the long term growth coming from for the company is in those two main sectors of ours in first of all in.
Coms and compute and then secondly in industrial and automotive, we really see those two sectors as a long term growth drivers for the company.
Great well I guess, a great gross margin guidance, particularly given that IP decline sequentially there as well.
As the second question, maybe you can just talked about Fts July .
How do you see this.
I think topline is it a revenue accelerator for you guys.
And that's it really about taking share here are these new kind of greenfield opportunities that could refugees haven't been able to trust before how are you thinking about [noise].
So I opportunity.
Yes, I think so first the fts why is the technology that our new SPG a platform is based on right. So.
That platform, it's not just about Fts July it's about a new architecture that we're bringing to market with new features new capabilities and then that's built on top of the Fts why semiconductor.
Technology and you know what Fts why brings is at a transistor level a much more power efficient transistor level.
And so for instance, you roughly 50% lower power than for instance, a regular bulk Cmos technology and on top of the than we had our own low power architecture and other features and capabilities. We're really excited about that next generation platform I as I mentioned in the prepared remark.
Thanks.
We were actually executing a bit ahead of schedule I'm. If you remember back in May.
At our Investor day, we talked about for samples for this.
This platform being in the first half of 2020, we're now expecting to provide for samples to our customers before the end of the year I'm quite pleased with the engineering teams execution on this and.
And and we're excited to get this in the hands of customers. We're also expecting ABA.
Special launch event in December to rollout to the new product console, we'll talk more about it at that time, but in terms of the business impact or revenue impact from that product, we would expect that to be to begin to generate.
Avenue for us in probably the second half of next year that would be a typical typical time period from.
Samples to the very first initial levels of revenue and so that's when we would expect to see the the business benefit and then of course and the follow on years, we expected to be a bigger bigger revenue benefit.
Thanks, so much.
Thanks, Chris.
Again as a reminder to ask a question you will need to press star one on your telephone. Your next question comes from the line of rich.
From Craig Hallum. Your line is Nelson.
Okay guys. Thanks for taking my questions I apologize I got on little bit late so I may have missed some of their prepared remarks, but let me ask a question on the calm segment. It looks like it was up a few percentage points I think you've made some comments about fiveg benefiting maybe if you could kind of replay those comments and maybe unpack whether a there the coms business would have been up sequentially.
Without fiveg.
Yeah. Thanks, Richard so in a comps in compute.
We saw good sequential growth and also in that segment very very good year over year growth I think around 27% year over year growth in that segment.
But in terms a sequential growth we saw growth in both the compute and communications parts of that segment.
A couple the growth drivers are Fiveg, you mentioned that so we saw sequential growth from Q2 to Q3 and five G. But we also saw a nice growth in our server revenue from Q2 to Q3, as we continue to benefit from or higher attach rate than the hiring Sps that we have in the current server platform general.
Ration versus the prior generation so not a segment has been.
Good growth factor for us over the last couple of years in certainly in the most recent corridor.
Maybe a follow up on the.
Just looking at the columns part of that segment again is it.
This is the business outside of Fiveg is that growing obviously, we have some trade tensions with a very large OEM author sanctioned by the US government. Maybe if you can kind of help us understand those dynamics in third quarter and whether you have any worries about that going forward.
Yeah from a sequential standpoint, Q2 to Q3 I think it was relatively stable.
Across those two quarters and you know look is moving forward. The main driver for that segment will certainly be fiveg.
Wireless infrastructure deployments over the coming year, assuming 2019 is really just the beginning of the Fiveg wireless infrastructure build out it's really only happened in a couple of countries a couple of geographies.
Moving into next year in the following years, we'll start to see greater Buildouts in North America, and eventually in Europe to and so we think that.
Fiveg wireless infrastructure and are very healthy position in that will be a nice long term growth factor for us.
Great. My last question I'll jump, but align us was clean the automotive space, you're seeing some some difficult numbers coming out of the some of the major automakers worldwide, particularly in Europe , and I know strictly lattices had a pretty good exposure in Europe , maybe if you could help us understand the degree to which you've seen an impact from a unit perspective, and maybe offsetting as how much.
You've been gaining share to offset that.
Yeah in the industrial automotive segment into automotive is still a relatively small part of our revenue in that segment and so.
Certainly we are we have a number of different customers there and so were subject to any any.
Now a macroeconomic slowdown that affects automotive, but we do believe automotive electronics is a good long term growth engine for us we're seeing very healthy design win funnel in automotive electronics, obviously, there's increasing electronics and automotive is moving forward and we're seeing.
I mean, as I said very healthy design win funnel with customers and so we think this will be a nice growth propellant for us for a number of years to come.
Okay I appreciate all the thoughts that's all the questions from me. Thank you.
Thanks Richard.
I'm sorry, Mike a question you will need to press star one on your telephone.
Your next question comes from the line Charlie Anderson from Barclays. Your line is now open.
Yes, thanks for taking my questions I'll start with kind of a two parter our margins I wonder as empty. So I start to layer in backed out for next year. As you mentioned what are the affecting gross margins he can speak to that none.
So.
On the Opex side, we sort of flatten out here, a little bit I think I see it on an absolute dollar standpoint sort of flattened out I know you guys want to get to 15% up at some point. So is that more of a revenue growth. So that gets you. There's there's still some opportunities determined they ask you they side.
Hello.
Thanks, Charlie so on the the Fts July or Nexgen SPG a platform, yes, we are planning that.
That program or that set of products that will be based off of that platform.
To be Oh, a margin benefit to us we're trying to build into that the design of those products and the in the marketing in the positioning of those products a margin tailwind for us as those products such as those products ramp I would say in the second half of next year, we expect to see some initial revenue.
But I think the actual impact to our margin would be pretty muted in the first year, just because the the level of revenue would be pretty small in the first year, but.
Moving to the outer years, who as it as that program or is that generation products can didnt contribute to higher higher amount of revenue would have more of an impact positive impact to our margin and then on the second question on the Opex on SP any yet in terms of absolute dollars. It was roughly flat Q to Q.
Three.
But we are not done then SGN a yet we still are looking at areas to continue to try to drive SPD to that 15% target and that is still we still expect that to be a combination of absolute dollar declines as well as.
Just better better scale as revenue ramps as well so I would say, we're still looking at additional absolute dollar declines in the SGN a bucket.
And then there was some commentary in the script about the and I think there was the press release two in the quarter about the and I ask the standard and securities as a source of content gain for you. So I wonder if the biggest speak to the ramifications of that standard and some of the content opportunities that are out there.
Markets I want to adopt the security thanks.
Thanks, Charlie Yeah, that's on our mock Ekso threed product and that one we launched in Q2 and what that is that product is an f. PVA that we've added specific security technology too and it allows that product to provide.
Platform root of trust and essentially allows our product to ensure that the hardware firmware in a system has not been tampered with whether its tampered with in production or in transit or when it's been deployed and so we're really excited about that product we've seen very good.
Traction with for instance server Oems.
For next generation server platforms. The reason that that that particular standard is important the NIS standard is that's a basically a good stamp of approval that this meets the right security requirements and so it's an important it's an important stand for our customers to know that.
We meet those security requirements and.
Again, we're very pleased with the customer progress and beyond the server customers. We see this product has potentially applicable in a number of different markets to basically provides security in all sorts of endpoint devices, whether those should be playing computing platforms or other endpoint devices in the in the network.
Thanks, so much.
Thanks, Charlie.
I would like to remind everyone in order to ask a question. Please press star one on your telephone keypad.
Your next question comes from the line of David Do you from Steelhead. Your line is now open.
Thank you very much I was wondering it seems like your new product introductions have been accelerated versus.
Previous conference calls and your analyst day I'm just wondering.
The acceleration of new products does that mean that you'll achieve higher levels.
Well hit your.
Accelerated levels of revenue growth sooner than you had before and could you just remind us what the long term revenue growth goal is.
Yes, let me start with the last part of your question Dave.
And that's at our analyst day in.
In may of the earlier this year, what we provided is that over this year next year, our revenue growth would be expected beacon in the mid single digits in terms of year over year percentage and then in the three to four year timeframe, we would accelerate revenue growth into the low double digits is what we expected.
And.
And yes, certainly to the extent that we can accelerate the product road map or get things to market quicker in the hands of our customers quicker that certainly helps help solidify our long term growth.
Growth objectives, and I would say you know, yes, a little bit about.
The products and why they were accelerated today.
If you recall at the end of last year and we've talked about this previously we did a pretty extensive portfolio optimization, where we looked at every single product in project that the R&D team is working on and really justified that each project. According to you know it's ROI.
And strategic value and we proved out a lot of projects that we believed were low ROI or just didnt have the right value for the company. What we did then as we took that the resources that we saved a pruning out some of those projects and we doubled down on the high ROI projects and really focused R&D team on dry.
I mean, the higher IRI programs to market quicker to increase a cadence of our roadmap and to increase the time to market and so a couple that programs that I mentioned that have had some schedule acceleration I really view that as a direct result of that portfolio optimization and in R&D focusing that we did last.
Here and so our crosslink plus product, which launched in Q3.
Thats.
That's sampled a little earlier to customers unexpected right we're actually.
Expecting to generate initial revenue from that product this quarter and then I mentioned, our next generation MPG platform as well originally we thought samples early next year now samples before the end of year. So yeah I'm pleased with the progress on the product roadmap and R&D team has done a good job to execute to the schedules and actually pull in a bit.
Okay next question is.
As far as your server business goes in the <unk> with the cloud computing guys.
You've talked about increasing content there with the with the next generation platforms that are being rolled out could you help us understand where are we on.
The next generation server platforms being rolled out but.
The big customers whoever they might be in terms of the world I guess.
No.
What we should expect going forward from this segment.
With that progression of.
Well the customers adopting the new platform.
Sure in the current generation, that's really ramping today, sometimes it's called Bates code named the early generation in that current generation that started ramping last year has been ramping this year one of the reasons out that's a big growth opportunity for US there has been a good growth.
Performer for us is that versus the prior generation of servers, we increased both our attach rate and our eas piece or attach rate roughly tripled from prior generation to this generation.
And our MSP wins.
Went out as well and so that helped drive a significant amount of growth for us. That's for instance, part of the reason that our comps and compute sector. This quarter in Q3 was up 27%.
Year over year now if we look forward to the future generations of the server, which aren't haven't started ramping yet what we're focused on there is of course, maintaining our high attach rate, but also continuing to bring more value to the customers.
And a higher SP, along with that value as well. So we're trying to bring more content more value to the server customers and then that Mark Xothree product that I mentioned earlier is part of that.
That product brings new security functionality, we're working with the server customers to get that designed into future server generations to again bring more value and continue to drive growth in that segment over the long period.
Just as a follow on.
What about what you just talked about did your server unit volumes grow this quarter or was it more of an A.S.P. increase and then just as a final clarification.
Could you just talk about.
Any revenue into China and are you.
Recognizing revenue that you sell to wawa.
Yes on the first unity SP and the sequential increase from Q2 to Q3. It was a combination of both and both unit in SP relative to certainly the prior generation and then in terms of China, while way revenue specifically.
So we are shipping to walk away, we are shipping only those products that we deemed compliant with export restrictions and so.
Near the end of Q2 of this year, we did a very extensive legal analysis of which products are compliant with export restrictions using both internal council as well as leveraging multiple external legal firms as well. So we did very extensive analysis and we're shipping those products that we.
Deemed deem compliant at this point.
Thank you.
Yes.
There are no further questions at this time I would like to trend the call back to matters.
Mr. Anderson for closing comments.
Alright, Thank you operator, and thanks, everybody for joining us on our call today.
So in summary, we achieved a new tenure high in or non-GAAP operating profit as a percentage of revenue on the product side. Our solid execution has enabled us to launch and sample Crosslink plus ahead of plan and to pull in sampling of our next generation EFG platform, which is based on FD Soi technology and overall, we remain focus.
Based on executing to our business strategy in our product roadmap. We appreciate your support and look forward to updating you on our progress moving forward operator that concludes today's call.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.