Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by at this time, all participants are in a decent Holden.
I'd like to welcome everyone to the lattice semiconductor fourth quarter fiscal years 2019, and its release conference call.
Later, we'll conduct a question answer session.
Time, you feel the question really good press star one on your push button phone.
A replay will be available approximately two hours after the call today.
A replay dial in numbers because for all four five Z seven three 406.
The conference I'd number is 81769 statistics.
A replay will be also festival lot to subside outlet is suddenly dotcom.
I'd now like to turn the call all but to reshape. Please go ahead.
Thank you operator, and good afternoon, everyone with me today, our Jimmy I sense, that's as president and CEO, Jerry Luther, but as the CFO.
Provided financial and business review of the fourth quarter of 2019, and the business outlook for the first quarter of 2020.
You have not obtained a copy of our earnings press release. It can be found in our company website <unk> Investor Relations section that is semi dot com.
I'd 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 is currently available but actual results may differ materially.
Refer you to documents the company files with the FCC, including our 10-K's 10-Q's in each case. 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 and constitutes the company's official guidance for the first quarter of 20 Twond.
If at any time after this call we communicate any material changes to this guidance, we intend that such UBS updates will be done using public for such as a press release for publicly announced conference call.
Some financial information presented by Us during the call will be provided on both the gap any non-GAAP basis.
By disclosing certain non-GAAP information management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends.
Management uses non-GAAP measures to better assess our brand performance and to establish operational goals.
For historical periods, we provided reconciled reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website.
To summarize dot com.
Ill now turn the call over to Jim Anderson, our President and CEO [laughter]. Thank you Rick and thank everyone for joining us on our call today.
As I reflect back on 2019, my first full year with lattice want to thank all of our customers our partners and investors for supporting US as we began transforming lantus and putting the company in a much stronger trajectory I'd also like to especially think my Lantus team deeply appreciate all of your hard work and dedication while we made good progress.
A date I'm, even more excited about where we're headed.
Highlights from our full year of 2019 included significant improvements across our key financial metrics. For example, non-GAAP gross margin expansion of 210 basis points year over year, as we began execution of our product cost reduction strategy and our pricing optimization strategy.
Non-GAAP net income increased 88% year over year, as we optimize their spending and refinance your debt to reduce our interest expenses.
We delivered much stronger cash generation in 2019, as we more than doubled our cash flow from operations on a year over year basis. In addition to the improvements in our financials over the past year. We've established an executed on a much stronger product road map, we began delivering products on a faster more predictable cadence with a great example, this.
During the launch of our Nexus platform. This past December ahead of schedule.
Over the past 12 months, we've also dramatically increase the depth of our engagement across our key strategic customers.
We are encouraged with our progress in 2019, but we have much more work to do as we realized the full potential of lattice.
Let me now provide an overview of our business by end market 2019.
In the communications and computing market revenue increased 27% year over year as we experienced strong growth in this segment throughout the year.
In computing, we continue to benefit from customer adoption of our products that are used in both server and client computing platforms. For example in servers were benefiting from increased attach rates and higher asps versus the prior sure regeneration and we're working closely with our key server customers to add more value to their future.
Platforms by providing increased hardware security functionality.
In the communications market, we're benefiting from Fiveg infrastructure deployments, we saw healthy growth in Fiveg revenue in 2018, and we expect revenue to continue to grow as a fiveg wireless infrastructure buildout progresses over the coming years.
Turning now to the industrial and automotive market revenue declined only 4% in 2019, despite the challenging macroeconomic climate and trade tensions that impacted this segment. We continue to believe this segment will remain a long term growth factor for us given the breadth of applications that we serve including robotics factory automation.
Embedded vision and the increasing level of electronic content in autos.
Turning now to the consumer market revenue declined 25% in 2019 as a result to both demand softness related to macroeconomic conditions and a continued shift in our revenue mix towards our other market segments within consumer our focus is on applications with multiyear revenue streams and higher profitability.
Where our solutions add value by enabling customers to differentiate their products.
Ill now shift to some highlights of our recent product roadmap execution in late 2018. Shortly after I joined line as we went through an extensive R&D portfolio optimization process, where we eliminated low return programs and concentrated our R&D investment on the most strategic and highest return programs in the.
Second half of 2019, we started to see the benefit of this optimized product strategy and we expect to further benefit from this over the coming years. For example, our Crosslink plus product, which was launched ahead of schedule in Q3 of 2019 quickly entered production and generated meaningful revenue for us in Q4, we continue to be.
Pleased with the customer adoption and expect this product to continue to ramp.
Another example of our accelerated roadmap cadence is the launch of our Nexus platform ahead of schedule. This past December.
The next platform has been architected for power efficiency, which enables us significant power reduction for our customers across a broad range of applications. In addition to up to 75% better power efficiency compared to our competitors. We also demonstrated significantly better performance in applications such as AI in embedded vision.
Yes.
We're very pleased with the broad customer traction on our Nexus platform.
I'm also pleased to announce that is part of our strategy to increase our investments in application specific software solutions will be launching the first version of our embedded vision stack in late February.
This is another proof point of the comprehensive buildout of our soccer solutions portfolio.
Also we were we remain on track for the launch of our security solution stag targeted for the second half of 2020.
In summary, 2019 was an important year for us and I'm very pleased with the progress. We made we've strengthened our product roadmap accelerated the cadence of new products and deepened our relationships with key customers in all verticals, while dealer driving major improvements in the Companys financial results as we begin 2020, our team has entered.
Jay has been focused on executing our strategy for sustained long term growth and profitability.
Ill now turn the call over to our CFO Sherry loser.
Thank you again in 2019 were pleased that we delivered significant profit expansion record cash generation any further de leveraging of our balance sheet.
We continue to make substantial progress toward the long term financial model, we communicated at our Investor day.
Let me now provide a summary of our result.
We achieved fourth quarter revenue at 100.2 million down 3.1% sequentially, but at 4.4% year over year.
Revenue growth in industrial and automotive was offset by sequential decline in communication and compute as well as consumer.
Gross margin on a GAAP basis, let's 59.2% compared to 59.4% in the third quarter and up from 56.6% and a year ago fourth quarter.
Our non-GAAP gross margin was 59.6% compared to 59.8% in the prior quarter.
And up from 56.7% in the year ago fourth quarter.
In Q4, our product margin increase offsetting some of the reduction in gross margin from lower IP revenue compared to Q3.
For the full year 2019 gross margin on a GAAP basis expand into 59%.
Up 400 basis points from 2018.
Our non-GAAP gross margin for the full year 2019 was 59.3%.
Up 210 basis points from 2018.
The gross margin improvement any year demonstrate meaningful progress as we continue to execute on our product cost reduction and pricing optimization strategy.
Q4, GAAP operating expenses were 43.8 million compared to 44.8 million in the third quarter.
On a non-GAAP basis operating expenses with 35.3 million compared to 35.9 million and the third quarter.
As a percentage of revenue operating expenses were approximately 35% in Q4, which is consistent with our target model.
In Q4, R&D increased to 18% of revenue well as Danny was approximately 17% of revenue.
For the full year 2019, GAAP operating expenses declined 19.4% from 222.6 million end 2018 to 179.4 million in 2019.
On a non-GAAP basis operating expenses for the full year 2019 declined approximately 10.5% to 144.7 million.
We continue to focus on driving SDMA efficiencies to achieve our target model.
Well prioritizing investments in support of our product pipeline and growth opportunities.
EPS was flat sequentially in Q4 with Q3 2019.
For the full year 2019, GAAP EPS improved to 32 cents per share from a loss of 21 cents per share in 2018.
EPS on a non-GAAP basis increased to 59 cents per share from 33 cents per share.
Driving cash flow generation continues to be a key area of focus for the company.
For the full year 2019, we generated a record 124 million in cash from operation more than doubling the cash generation in 2018.
We ended the year with the cash balance of approximately 118 million.
At our Investor Day, we detailed our plan to actively de lever the balance sheet.
In 2019, we made 117 million in total debt payment.
As a result, our non-GAAP debt leverage ratio as defined in the credit agreement is now 1.3 as compared to a leverage ratio of three at the end of 2018.
Let me now review our outlook for the first quarter.
Revenue for the first quarter of 2020 is expected to be between 96 million and 104 million.
Gross margin is expected to be 59.5% plus or minus 1% on a non-GAAP basis.
Total operating expenses for the first quarter are expected to be between 36 million and 37 million on a non-GAAP basis.
As we began 2020, we are excited about the opportunities in front of US we remain committed to expanding our profitability and increasing our cash flow generation to build additional value for lattus and our shareholders.
Operator, we can now open the call for questions.
Ladies and gentlemen, if you have questions at this time, please press star, but the number one on the telephone keypad. If a question has been answered or wish to solve them the Q rest of punky.
Our first question cost and the like Charlie Anderson from Dougherty and company blended dolphin.
Yes, thanks for taking my questions and congrats on a a really solid year I wanted to start with the the guidance, it's a little bit of a wider range. Then what last quarter's older. Maybe you could kind of speak to what went into that and I'm. Assuming this was maybe part of it just the corona virus in parts that you're assuming you're going to be dealing with here in Q1, whether it be on.
Demand side or disruption side, you know what have you not going to follow up.
Yeah. Thanks, Charlie Yeah, that's exactly right. So we did widened the range for the revenue guidance slightly on the gross margin in Opex ranges, we left those similar to prior quarters, but on revenue range, we widened slightly under your rated the it's related to potential uncertainty around the crop.
And we just thought it would be prudent to widened the range just a little bit.
And then you had a follow up Charlie.
Yeah.
Next this Ah you know came out a toward the beginning of December I know, it's only been a couple of months here now, but I wondered maybe Jim if you could kind of speak do no initial traction that you're seeing I know you'd hope to potentially get some revenue by the end of the year, but maybe more so next year, just kind of update us on how that's going so far.
Yeah, Great Yeah. As you know, we launched our new Nexus platform in December of last year I'm actually it was originally scheduled to be launched the first half of this year, but our engineers were able to execute ahead of schedule and we were able to launch in December which I'm very happy about and I want to thank you Ken the lattice engine.
Two years for all their hard work on that.
As we talked about in December initially initial customer traction has been very strong.
We have over 65 customers that are engaged with an excess platform.
We've got over 35, or so customers ever part of our early access program and so we've had quite strong engagement I think that really speaks to the competitiveness of the platform Nexus is a a full grounds up rebuild of our PPA platform, both from a hardware and software perspective.
We launched the very first device in the family in December when we look at that versus competitor devices. What we're measuring is up to 75% better power efficiency and for our customers. That's that's a big deal that's a meaningful difference and a big competitive advantage and so yeah, we're quite pleased with the customer.
Traction we've as we also shared in December we plan to introduce a couple of additional nexus devices. Throughout this year 2020 targeting a new device launch in the first half of this year and another one in the second half of this year. So yeah customer traction we're quite pleased with and then you mentioned.
Revenue expectations, Yes, I would still say.
For this year, we may see a little bit of revenue from the Nexus products towards the end of this year, but would expect to ramp to be more material in 2021 next year.
Okay, great. Thanks, so much.
Yes, Thanks Charlie.
Our next question comes from the line.
This is from Jefferies. Your line is now open.
Hi, Thanks for taking my question.
I had two on the first on the comps compute it looks like was it down sequentially.
I guess.
If I looked at in telling named it seemed like they have pretty solid sequential growth in the fourth quarter. So I was just trying to reconcile the difference between the two that's the first question than I had a follow up.
Sure. Thanks Bye.
Yes, there was a decline in comes in compute sequentially from Q3 to Q4, I will point out that on a year over year basis. In Q4, if you go Q4 to Q4.
I think the growth was about 18% year over year, and then that segment grew I think 27% year over year for full year, but we did see a sequential decline. If you look within that segment actually the computing portion of that segment was relatively flat Q3 to Q4 and the decline was primarily driven by communications.
We saw a drop off in demand across a number of a number of communications customers.
That's okay. That's really helpful. And then on the next this platform what what kinds of customers. Our applications are you seeing the most interest where do you think you'll you'll see the most success in that.
As you start to ramp thank you.
Yeah. Thanks, a great question I said, we're seen.
Customer adoption and traction across all markets.
We're seeing some.
Nice early access customer activity around industrial and things like industrial automation robotics automotive electronics comps compute consumer basically all of our segments. We have customers customer traction. It's active you know the competitive differentiation or the value that Nexus springs, especially around power official.
Let's see so I mentioned earlier, you know up to 75% better power efficiency relative to our competitors, that's really compelling to customers across multiple markets, especially when you're talking about edge feuding applications aiotv industrial aiotv or inference at the edge of the network and so yes, we're pleased with the customer traction.
And it's pretty broad spread across multiple different markets.
Thank you.
Okay.
Next question comes from the line as Tristan Gerra from Baird. Your line is open.
Hi, good afternoon.
Gross margin outlook is now.
Pretty close to 60% what are the gross margin levers for this year.
Before that awareness Nexus and I know so if you could talk about to de de other upgrading upgrading our neighbors for this year.
I think stressed and so first of all on gross margin I'll take you back to our Investor day in May of last year, and just as a reminder, that our long term business model is to be a gross margin levels at or above 62%. We're very focused on that goal and have plans in place to do.
Drive towards that goal over the coming over the coming years.
I would say that the gross margin improvement that we are driving comes across.
Comes across three categories first categories pricing optimization. This was a strategy that we built out actually at the end of 2018, we started implementing and at the beginning of 2019 and that's about really pricing our products I would say really optimal early in the market really getting the fair value for our products.
Pricing in the market and then we had a second strategy. Your second category a cottage product cost reductions again, we have built out pretty comprehensive strategy end of 2018 started executing that in early 2019 net yield to benefit for us in 2019, we're expecting that to continue moving forward and thats about driving just a constant treadmill.
Bill of reductions in our product costs and then the third category is as we shared at the Investor day was over the coming years, we're expecting growth primarily come from our industrial audit and auto segment. Our comes in computing segments. Those as the growth comes from those segments and our mix shifts towards.
Those segments.
That naturally provides some gross margin uplift in terms of mix shifts. So those are really the three categories that were driving overtime to achieve that over 62% gross margin target.
And then in terms of some of the other operational things that we're focused on we continue to focus on Opex for instance, now we are at approximately at our target models are for total Opex. Our target model is 35% of sales were at about that in total, but if you look within that.
R&D and SGN eight we're a little bit underneath our target of running R&D at about 20% and we're a little over our target of running SGN a at 15%. So on SG any we have some work we still need to do that will come from direct dollar cost reductions as well as better scale.
Well as the revenue grows and on R&D, we can expect over the coming quarters for R&D to.
So in a gradual careful way as we continue to invest in our product line. So that would be kind of what to expect on Opex and then Jerry maybe you want to add a we're.
Assuming this year some improvements in terms of interest expense, maybe you want to comment on yeah.
With that I'll, just add that in terms of SNA. That's in 2019, we ended the year with SGN at 17.7% of revenue, which is down quite significantly from 2018, which is 21% lots of progress made but as John mentioned, we've got more work to do to get down to our target level and for us DNA.
Operationally, you'll also notice in Q4, we had some favorability and interest expense and Thats, because I think Q3, we really locked into the lowest interest rates here on for our debt until Q4, you saw fourth quarter benefited that you'll continue to see that benefit into 2020 and from the lower interest rate.
So that's pretty exciting thanks Gerry.
Great. Thanks for the details and then any color on that.
End market.
This quarter over quarter.
Yeah Q1 guidance.
Yeah, a little bit of color on the on Q1 guidance. If you will take the midpoint of our Q1 guidance, it's roughly flat to Q4 to Q1, but within that we would probably expect consumer to be down a bit typically consumer is a bit seasonally down from Q4 to Q1, and we would expect that to be offset by.
The industrial automotive comps and compute segments.
Great. Thank you.
Yes. Thank you.
Next question comes with a lot of understand of Ritchie from William Blair lend itself.
Hi, guys. Congratulations on a wonderful quarter I just wanted to touch base on the Crosslink platform or I should specify crosslink plus I think in the past you had said you expected initial revenue in Q4. So just wondering how that was trending how adoption was looking and it really.
How we should think about the contribution there as we move out into 2020 and beyond.
Yeah. Thanks, Alex So crosslink plus product if you recall, we launch that in Q3 of last year. In fact that was another product that we actually launched a bit ahead of schedule. The engineering team did a great job executing on that was able to launch in Q3, and then we started to ramp that product actually very quickly.
As.
We ramped it started ramping in Q4 and did generate a meaningful amount of revenue.
In Q4, which I'm quite quite pleased by our product engineering team did a great job getting that into the market. In there were some really strong initial customer demand for that we expect that product to continue to ramp this year and into the following years, it's really a nice unique product with some unique capabilities and we've seen a strong.
Customer adoption and traction for that.
Super and then similar in the same vein just on the a mock XOMA three D. Thank you guys. Initially had been targeting serve our customers and were sampling at quite a few there.
Any sort of early traction or feedback or samplings or on the client side.
Yes, so we've seen the initial traction and focuses primarily on the on the server site as you mentioned and we're quite pleased with that progress.
We launched that product.
Last year, we expect that product to enter meaningful production this year and to start to ramp into production in server server platforms. So we're excited about that and yeah, you're right that product what that does is provide hardware level security or platform root of trust that is applicable beyond the server plateau.
Form that could be used in client devices that could also be used for instance in networking platforms anywhere where you want to provide.
Very basic hardware level root of trust security on the platform and so we are pursuing those applications as well probably a little bit early for me to comment more specifically on that but we're certainly engaged in those opportunities also.
Perfect.
Just lastly, more out of curiosity. Since you guys have been delivering had a schedule on products was the embedded vision stock I know you had talked about on the December event, two new software stacks coming this year was the embedded vision, one a little bit earlier than expected or was it sort of in line with your thoughts.
Yes. It was about to it was a month or two ahead of schedule, we really pushed Thats mean, yes, we were really pushing the team to be ready for embedded world and embedded world happens at the end of February and so.
Yes, we wanted them, we wanted to basically rollout that software stack at embedded world and Thats. The schedule that we're currently so yes. So be it was a bit ahead of schedule, which we appreciate from the engineering team.
Great. That's it that's it for me. Thank you so much.
Thanks, Alex.
Next question comes from the line about currency from Cowen plant is now open.
Hey, this is Josh Buckhalter on behalf of Matt. Thanks for taking my question and congrats on the results.
It was nice either returned to year over year growth the last couple of quarters.
As we start thinking about moving towards that double digit target over the next few years.
How much would you say is dependent on new product traction from Nexus portfolio build out versus mix away from legacy consumer or any type of and demand recovery that's embedded in those expectations. Thank you.
Thanks, Josh Yes, I would remind you that does not just nexus that we launched last year, but we actually launched a couple of port products ahead of that which Weve already mentioned a little bit on this call, which is montek. So three d. remember, we launched that the first half of 2019 and.
That's the product that's providing platform root of trust security in applications like servers, and then Crosslink plus which we talked about we expect those products.
To help drive revenue in 2020 and beyond and the Nexus would come along a little later in time.
But yes, we remain focused on our long term business model goal, which is to get to that low double digit consistent sustainable revenue growth and certainly of the new products that we're launching.
Like the crossing plus Mark Xothree D., the Nexus the different nexus products on a come out this year as well as the software stacks that we're rolling out this year will will help contribute and solidify that growth the future.
Thanks, That's helpful. And then you guys put up a pretty decent number in industrial and automotive year over year growth. We heard from some of your peers. If there is they're seeing signs of end market stabilization in some said recovery.
I guess, how would you characterize it as youre seeing is it more of a macro trend or new product traction that you would say is driving the year over year growth. Thanks, guys and congrats again.
Yes, Thanks, Josh.
I would say that.
If you look at our results in industrial idle.
In 2019.
Certainly we were impacted by the same macroeconomic.
Slowdown or softness that was pretty broad based across that sector that.
Other companies were affected by as well, but we do have some lattice unique growth drivers within that segment that helped us I think perform a bit better than the rest of the industry.
Just some examples of that would be.
Industrial automation industrial robotics, industrial safety applications as well as just a number of different automotive electronics applications. So there's some nice.
Design wins and customer engagements that we have in there that are helping us perform I think a bit better than the general market and you know as we mentioned at our Investor day back in May of last year. We do believe this is a long term growth market for us over over the coming years, it's really this market industrial auto as well as comes in.
With that our primary growth factors over the coming years.
Okay.
Again, ladies and gentlemen, they've have questions at this time simpler press Star then the number one on the telephone keypad again Thats far one last question.
Next question comes from the line of Christopher Roland from 60 Honda.
Let's open.
Great. Thanks, guys.
The long term model should or shouldn't for double digits here.
2019.
It was obviously pretty pretty challenging for for everybody, but do you think you could hit that that double digit outlook for for 20 Tony.
Perhaps talk about the products that bill to help you get there. Thanks.
Thanks, Chris Yes, we remain committed to our.
Our financial model that we put out at that me investor meeting and not just the revenue growth, but as I mentioned, a little earlier in the call. We also put out goals around gross margin expansion and expansion of operating income as well and so we remain committed and focused on all of those goals on the revenue growth in particular, yeah. The model.
That we put out was to achieve low double digit revenue growth in the outer years Theres a number of different contributors to that.
Both from a market perspective, and from a product perspective from a market perspective, it's really constant compute industrial auto within cons and compute it server and client computing platforms, helping drive that growth as well as fiveg wireless infrastructure build out we're still in the very early stages of Fiveg infrastructure build out we have.
Good position across multiple Oems in that in that application is and as Fiveg wireless infrastructure is built out over the coming years, we expect that to be a growth area for us and then in industrial and automotive in some of the things that I mentioned earlier industrial automation automotive electronics and really the products that will help.
Drive that.
Our some of those products that that we launched just this past year mock Xothree de for instance is used in servers and will help drive our growth in in the computing space.
Crosslink plus product is actually used across a wide variety of different applications in markets and then nexus as well our brand new APG platform for which we'll be rolling out new family members over the this year as well that will help help drive growth across those segments as well and so there is really quite a number of different grow.
Factors across those markets.
Thanks, Jim and then one clarification and a question as well the clarification is around compute.
Intel has had pretty strong guidance here and AMTI as well.
Just wondering why can compute was flat and then.
For kind of a follow up question.
Sure you're pretty close to.
Getting getting to that cash at some point here.
And so in terms of the balance sheet.
How do we think about what you're going to do with some of that cash or are you guys have you thought about a dividend does that too early.
Growth process here.
Or is it more about acquisition.
Are you looking for talk and in that PG space or other areas adjacent see just that anyhow.
Any color there would be great.
Yeah, Chris on your first question around compute.
In Q4 and sequentially from Q3 to Q4.
I will take the opportunity to point out that on a year over year basis, the comps and compute segment did grow 18% year over year, which is not shabby growth rate, but.
From a Q3 to Q4 sequentially, yes, it was roughly flat from from quarter to Gordon to quarter domain and fluctuate, but I think we're seeing very good positive growth in that segment on a year over year basis and Sheree. Once you go ahead with the Cashcall sure Yep. Thanks, guys for the question. So yes work.
Q4, we rented not net cash of about 29 million.
For the quarter, so pretty excited about that but in terms of and of course, obviously, having paid down the debt quite substantially with a leverage ratio of 1.3.
Clearly paying down the debt with the key focus on top of making investments in the business and the R&D investments that we talked about as well.
As we look forward will continue it can continue to evaluate the best use of our cash.
Well I mentioned in Q3 that we locked into the lowest interest rates here. So we're already at that low interest rate.
And won't go any lower than where it is right now in our debt, but we'll continue to evaluate the best use of our cash looking at all options continuing to invest in R&D.
Valuing would it be whether we continue to pay down debt and other alternative of our cash them all will be evaluated as bina alright.
Thank you Kathy.
Thanks Fedex Chris.
Next question comes from the line of Richard Shannon from Craig Hallum. Your line is now open.
Hi, Jim in surety, Thanks for taking my questions as well maybe ask question on the calm space you talked about computing within your bucket being kind of flat sequentially.
In calms down wondering if you can help delve into the relative trends are two wired and wireless there was there a pause in fiveg in any way I know, it's we're very early but maybe a quick comment quickly on the.
How that was going in the fourth quarter.
Yeah sure. Thanks, Richard Yes, we did see as I mentioned earlier sequential decline in comps from Q3 to Q4, it was across the number of different customers and.
Was across both wireline and wireless and I do think there is a little bit of pause or slowdown in fiveg related Buildouts, we're still early in Fiveg wireless infrastructure.
Builds and so it can be lumpy from quarter to quarter in terms of the demand.
That said you know if we look at full year 2019.
We were actually quite pleased with our Fiveg wireless infrastructure revenue and that certainly was a contributor to the 27% year over year growth that we saw in communications in computing and we remain.
You really we remain.
Convince that over the long term fiveg wireless infrastructure is both a growth driver for the industry as well as lattice as we have good position in control plane applications and in Fiveg wireless infrastructure across the number of different customers. So we do think that is a multiyear growth opportunity for us.
Okay, and just a follow up on that quickly Jim a near term do you expect to see Fiveg wireless start to pick up here is that embedded in your guidance for this quarter.
Yes, I would see in in Q1 as I mentioned really consumer we expect to be down slightly and then the comps compute industrial auto those segments together, we would expect to be up.
Sequentially.
In general we would expect Fiveg to help.
Help contribute to growth in in 2020, but also beyond that as well since the fiveg wireless infrastructure build out will be over multiple years as it rolls out across multiple geographies.
Okay quick question for sure actually a few multiple a few questions here on the financials opex up a little bit.
Sequentially into the first quarters that some sort of structural increase there or is that more of the kind of the payroll taxes that come and then from for taxes and non operating income or other income or those expect to be kind of similar in the first quarter that you had in the fourth.
Yes, sure thanks to care for the question so for Opex guidance up slightly from a from Q4 and that's really a function of.
The timing of.
Some of our spending and we've talked about on increasing our investment in R&D for example, and they got closer to our target model, 20% to expect to continue to make investments in R&D on the timing of program expenses will fluctuate quarter over quarter, so that sort of a normal thing that you would expect to see.
I would look at that in terms of the Hawaii. If you look at tax expense I think if you look at at 2019, our effective tax rate was somewhere around 2% and so that's sort of what I would look at going forward I think it made a model and then on our interest expense as I mentioned Q4, you saw the full quarter impact of our lower interest rate and so.
Lastly, you can look at linked forward.
Okay perfect. This all the questions for me. Thank you.
Thanks Richard.
As far less pressure, we have Hans Mosesmann from most on blood you line is now open.
Hey, Thanks, Congrats guys for solid debt year, Hey, Jim.
Quarter to quarter as you look now into 2020 are you at the same level of caught cautiousness are you more optimistic.
Are we getting out of it down cycle like some of said if you can just give us some color if you're kind of attitude as we entered 2020 can I have a follow up.
Sure I think one positive that we saw right at the end of 2019 is related to industrial and automate on automotive at the end of Q3 of last year, we started to see a little bit of.
Further weakening in that sector, and then that rolled into the beginning of Q4, but towards the end of Q4, we started to see an uptick in demand and so that was a nice indication that we may have that market may have stabilized and we may have hit bottom there and that it may improve moving forward. So that one sign that we were happy to see.
But beyond that I would say that.
In general if we look across the markets.
North America looks quite strong to us.
In Asia market continues to be relatively soft, but I would say stable.
With the kind of the unpredictable element being the krona virus, and then Europe being kind of somewhere in between there. So thats kind of color I'd give you by end market.
Yes, Thats very helpful. Jim.
And then my follow up in terms of since December one.
One two months.
For Nexus.
In the designs that you're being considered are you displacing other.
EFG days or what kind of solutions are you coming up against.
For Nexus and design space.
Yes, Thanks, Hans I would say it's both.
Classical PG competitors, but in some cases and some applications were going up against things like for instance, microcontrollers and so against the PPA competitors, we're able to bring a pretty significant power efficiency advantage.
The initial nexus device that we launched in December we showed at our launch event. Some real time measured power efficiency comparisons versus our two primary competitors and we were measuring up to 75% better power efficiency versus our competitor devices and so when we engage at the customer level.
That power efficiency.
Vantages has been a big benefit to our customers and has given us some some really good strong momentum against our PJ competitors and then in other applications, maybe where typically an M.C. you has been used in the past there certainly the power efficiency advantage helps but also it helps that.
Our PPA days can be programmed for parallel data pass or for parallel processing, which is very useful in artificial intelligence inference algorithms. So the processing of inference algorithms, we've been able to demonstrate very very good performance and especially good performance per watt and Thats helped us to disc.
Place microcontroller applications, and so I would say, we're seeing kind of.
Good traction and good competitive footing versus both those types of competitors.
Okay, great. Thank you.
Excellent.
It's in telling me that concludes today's grannies session I wouldn't like to have the cologuard to lattices, President and CEO Mr., Jim Anderson for closing remarks.
Yes, Thank you operator, and thank everybody for joining us on our call today.
So in summary, 2019 was a strong year for lattice and we made significant progress across many fronts with improvements in our product road map, our execution customer relationships and certainly our financial results and I'd like to think again the lattice team for all their hard work and dedication we're starting to see the results of that hard work.
But as I often remain the lattice team we're still in the early stages of what we believe lattice can achieve as we continue to execute our strategy and build shareholder value.
Want to say, we appreciate your support and look forward to updating you on our continued progress operator that concludes today's call.
Ladies and gentlemen, this good because it is conference. Thank you for your participation and have a wonderful day.
All disconnect.
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