Q4 2020 Earnings Call
[music]. Good afternoon. My name is Christina and I will be your conference operator today I would like to work.
Hi, everyone to the Xilinx fourth quarter and fiscal year 2020, <unk> earnings release Conference calls.
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time. Please press the star and then the number one on your telephone keypad. If he would like to withdraw your question press the pound key please limit your questions to one.
And one follow up to ensure that management is adequate time to speak to everyone would now like to turn the call over to Mike Fournier.
Thank you Mr points, you may begin the conference.
Thank you Christina and good afternoon, everyone with me are Victor paying CEO bright still our new CFO and submit Gagnaire <unk>, our chief accounting officer.
Since brights only recently joined Xilinx and wasn't here during the last quarter for this call Victor will provide the financial and business review of the March quarter, and the business outlook for the June quarter.
Let me remind everyone that during our conference call today, we make projections or other forward looking statements regarding future events for the future financial performance. The company, we wish to caution you that such statements are predictions based on information currently available and the actual results may differ materially.
We refer you to the documents the company files with the FCC, including our 10 case excuse me case. These documents contain and identify important risk factors that could cause the actual results could differ materially from those contained in our projections or forward looking statements.
In addition to GAAP financial measures will be disclosing certain supplemental non-GAAP financial measures used by management to evaluate the company's finished result.
We provide these measures to facilitate period to period compare ability for purposes of evaluating continuing business operations by excluding the effects of nonrecurring and unusual items, such as the amortization of intangibles and certain onetime items related to acquisitions. We believe that sharing these non-GAAP measures will be help for analyst and investors and analyzing the company's ongoing Corp.
A reconciliation of non-GAAP financial information to the closest GAAP measure is included in our earnings release, it hasn't posted on our Investor Relations website.
This conference calls open call and is being webcast life. It can be accessed from aren't Xilinx Investor Relations website, Let me now turn the call detector.
Thanks, Matt and thanks, everyone for joining todays call I'm excited to have price, telling you CFO joining us today price welcome to your first Salix earnings call.
Thank you Victor it's nice to meet all of you on line virtually and I'm thrilled to join.
Links I'm impressed with the products strategy, the vision of the company and especially the leadership team at just excited to contribute to the future. So thanks Victor.
Thanks Bryce.
Let me start by spending a few minutes on actions were taken to address covered 19 challenges.
And our assessment of potential impact our business before moving onto Q4 and 520 results at our outlook for Q1.
Because of the in certain business environment due to Corona virus, we will not be providing full year guidance for 21.
I hope that each one of you and your families are staying safe and healthy our hearts go out to those who have been personally impacted by coping 19, I also want to take this opportunity to express our sincere gratitude to all healthcare workers around the globe. We're on the front lines of fine. This once in a century pandemic.
It's rolled up into new ways of living and working the physical and mental well being of our employees remains our highest priority.
We have implemented work from home globally, except in China with employees have been allowed return to work, we've often for social dispensing practices have adopted strict travel restrictions as part of many other measures we've taken for health and safety is our employees.
We've worked hard to <unk> improve our employees work from home experiences and their productivity.
In addition to conductivity enhancements, we've increased internal communications to keep our employees both informed and engaged.
Alleviating exciting and enable better focus.
Communicated for my teams that there will be no workforce reductions during the rest of this calendar year.
Well control expenses as appropriate by means other than job eliminations.
As a company we're doing our part the fight covert 19 far health care industry customers. We formed a task force to provide special assistance prioritize product fulfillment and expedite shipments.
Proud that our technology, which powered millions of medical devices like ventilators patient monitors respirators.
Patient I few beds play a role in combating the krona buyers.
In late January we supported China's largest medical equipment maker mine Ray with thousands of Spartan seven ft Jays power patient monitoring systems. We're currently working to support some of the largest medical suppliers in the U.S., such as GE healthcare as well as companies in Europe, and Asia to supply products for testing and treating koby 19.
In addition, xilinx donated a total of 1.1 million to several organizations, including the W.H., so as well as regional and local nonprofit institutions.
Turning now to our update on our supply chain and demand impact from Koby 19.
Our supply chain remains intact without significant disruption.
However, if we started seeing covered 19 demand related impact midway through the quarter with weakness in our automotive broadcast and consumer business.
The weakness was more pronounced in the automotive business as car sales in China in around the globe declined significantly.
We also saw weakness in broadcast in the trying to channel businesses.
Nonetheless, our teams execute extremely well and the overall business impact in the quarter was relatively modest keeping us within our guidance range.
Now I'll talk about our fiscal year 2020.
Fiscal 2020 was much more challenging than we anticipated by business was materially impacted by the U.S. export restrictions the wall way early in the fiscal year any overall challenging global trade environment, coupled with general weakness in the semiconductor market in calendar 2019.
Despite these challenges we had another record year with 3.2 billion in revenues growing 3% year on year.
This is a testament to the resilience of our business, which attributed to the diversity of markets, we serve and the strength of our product leadership.
If I 20, we also generated 1.2 billion and cash flow from operations.
Returned significant value back to shareholders with 372 million in dividends paid and spending over 1.2 billion the buyback 12.9 million shares.
Now moving on to fourth quarter highlights the advanced products category constituted approximately 70% of total revenues I think based revenues grew 2% year over year, despite the impact of weakness in wired and wireless and the automotive businesses and represented 20% of our total revenues.
Zinc revenue and design win momentum continues to be strong across our target markets.
And the communications market, we recently announced a strategic engagement with Samsung for the second generation Foggy radio design that it cleans beamforming based on our seminars reversal a cat.
This engagement is driven by the compelling versus value proposition, particularly our AI engine architecture as well as our commitment to deliver optimized and differentiated platform solutions for our customers.
Telefonica multinational telecom carrier announced its plans to build next generation wireless radio networks using already collaborating with xilinx than other leading companies.
Our RFS a fee products will be used in their fourg and fiveg radios.
And the data center, we announced the answer is first comprehensive smartness platform. The Aldo you 25.
It combines a highly optimized spartan platform with a powerful and flexible SPJ based engine.
In addition, we're working with Nimbic consents on Smart SSD storage group to deliver intelligence storage using F. PJ base computational accelerators.
Across our core markets being announced a range of new advanced machine learning capabilities that our products for the professional audio video and broadcast market.
On the software front, we have had over 20000 vitesse downloads since we announced by this this past November.
We have changed over 10000 developers to date, an increase of <unk> over 250% since last year.
We have around 1000 software partners working with us and a growing library of applications.
Lastly, we doubled the number of production applications running on our platform since the previous year.
Moving to a review of our business groups in core markets for the fourth quarter.
Our core markets performed largely as expected we saw strong sequential revenue growth as programs ramped at multiple emulation and prototyping customers.
Andy and I said were both up as expected with Andy revenues growing double digits.
We'd expected auto revenue to recover but auto revenues were flat due to covert 19 impacts.
As expected Abbey consumer were weaker but the weakness was more pronounced due to covert 19.
The data Center group performed as expected with strong sequential growth primarily due to contributions from compute acceleration driven by a mix of both cloud and high performance compute customers.
We saw notable strength from a hyperscaler deployment of a fee based smart mics.
And our DCG opportunity pipeline continues to grow double digits, particularly in video HPC database and Fintech applications.
The wired and wireless good performed better than expected, we had expected wired revenues to decline, but the market grew due to some strength in optical transport networks and excess.
Wireless revenues performed better than expected due to stronger radio shipments.
Lastly, as expected the trend basic transition would be talked about at length in the past is largely complete.
Now moving on to financials for the fiscal fourth quarter Q4 revenues was in line with our guidance range. Despite the mid quarter impact from covered 19 total revenues were 756 million up 5% sequentially and down 9% year over year.
Data Center group revenue increased 77% year over year and was up 14% sequentially.
Wired and wireless group revenue declined 46% your year over year and was down 19% sequentially.
Yes, Ti revenue increased 15% year over year and was up 30% sequentially.
ABC revenue increased 2% year over year, but was down 13% sequentially.
Gross margin was higher than expected, primarily due to product mix with GAAP gross margin of 70% and non-GAAP gross margin of 71%.
GAAP operating expenses at 350 million and non-GAAP operating expenses at 317 billion would both below midpoint of guidance due to reduced hiring and discretionary spending.
GAAP operating expenses included a pretax charge of 28 million related to severance pay pay expenses as we completed the restructuring that we announced in late January.
GAAP operating income was 170 million or 24% operating margin.
Non-GAAP operating income was 218 million or 29% operating margin.
Our GAAP tax rate was approximately 15% and non-GAAP tax rate was approximately 16%.
The higher tax rates were primarily related to larger contribution of revenues and profitability from higher tax jurisdictions.
GAAP net income was 162 million diluted earnings per share was 65 cents, 32% year over year decrease in a 2% sequential increase.
Non-GAAP net income was 193 million non-GAAP diluted EPS was 78 cents.
A 17% declined from last year, and a 15% increase sequentially.
Diluted share count decreased to 249.3 million.
Gross cash was 2.27 billion was 1.25 billion and long term debt.
Accounts receivable increased the 273 million is at 33 days compared to 32 days last quarter.
Overall, we generated 345 million in operating cash.
During the quarter, we repurchased approximately 5.7 million shares at an average price of $83 per share and pay dividends of 91 million.
Turning now to the outlook for fiscal first quarter 2021.
We expect first quarter revenue to be between 660 million and 720 million, which at the midpoint is down approximately 19% year over year and down approximately 9% sequentially.
Our guidance incorporates the current assessment of the impact from Coven 19.
With the somewhat broad arrange also reflecting the fluidity of the environment.
In addition, customer related program timing and dynamics, which I'll go into shortly also contributed to the steepened their normal sequential revenue decline.
That said, we're entering the quarter with backlog ahead of our historical average what gives US a degree of confidence in our revenue expectations.
The sequential decline in first quarter revenue is expected be driven by lower AI T. A b C and D.C.G. sales, partially offset by growth in W. W.
Now within 80, TMB sales are expected to be down, but coming off of a record quarter in fiscal Q4 as MP customers.
Programs continue bed at more modest pace.
Andy sales are also expected decline primarily due to a very meaningful purchase of the specific customer program in fiscal Q4, that's not repeating in Q1.
Hi, seven is expected to be flat due to strengthen the medical marketing the medical market despite headwinds related to cover 19 and the other markets.
All ABDC end markets are being impacted by week.
Demand, resulting from Covidien team automotive is expected to be meaningfully down well broadcast consumer are expected to be slightly down.
DCG sales are expected decline from last quarter as I've said in the past our DCG business continues have greater quarterly revenue fluctuations compared to other businesses as we're in the process of driving our DCG businesses scale.
We are laser focused on sustaining double digit growth on an annual basis over the long term.
WWJ is expected to grow modestly with improvement in wireless and to some extent lesser extent excuse me in wired business.
Fiscal Q1, non-GAAP gross margin is expected to be between 68 and 70%.
Non-GAAP operating expense is expected to be between 307 million to 311 million.
Which reflects our new adjusted spending profile.
Non-GAAP other expense is expected to be approximately $13 million due primarily to expected lower interest income and foreign exchange hedging losses.
Finally, our non-GAAP tax rate is expect to be between 9% to 11%.
Turning to slide 20 in overall, well, we're not providing full year guidance. We believe the impact of cover 19 related distribute disruptions will be more evident and some portions of our core markets, including automotive broadcast consumer industrial and semiconductor test.
We expect the rest of our core markets be relatively less impacted by Copel 19, but we're continuing to monitor the situation very closely.
Despite a modestly slower fiveg deployment ramp we continue to see a strong pipeline of opportunities in W.W.G.
We also expect DCG to continue to build it pipeline as customer engagements go into deployment at Hyperscale.
Regarding our shareholder return programs, we plan to be more conservative with our buyback activity as we focus on capital preservation further improving our strong liquidity position.
Our board has approved a quarterly dividend increase of approximately 3% to 38 cents per share and we remain committed to growing our dividend over the long term.
We are focused on being good stewards of darlings capital and continue to drive free cash flow generation.
So in conclusion extremely grateful and proud of our employees for their dedication they've exhibited and can keeping our commended store customers and running the business will coping with covered 19 pandemic.
Despite today's challenges our belief in commitment to our growth opportunities in the datacenter fiveg infrastructure and automotive markets remain on diminished.
As the leader in adaptable platforms, we're driving Sam expansion share gains across our diverse and resilient core markets with innovative products like zinc RFS, we'll see in vertical.
We remain 100% focus on executing our strategy to empower more customers with powerful adaptable platforms and deliver long term shareholder value.
Operator, we'll now open the call for questions.
[noise] Kristina will turn to you for question.
Certainly thank you.
Time, I would like to remind everyone.
The floor is now open for questions. If you do have a question. Please press the star and then the number one on your telephone keypad. Once again that is star followed by the number one on your telephone keypad.
Please limit your questions to one and one follow up to ensure that management has adequate time to speak with everyone. Your first question is from 20 sheet.
Harry from Goldman Sachs. Your line is open. Please go ahead.
Hi, guys. Good afternoon. Thank you for taking the question.
Victor I wanted to ask a question on Tobin 19, and the demand impact that you're seeing in your business. You gave great color in your prepared remarks, but I was hoping you could elaborate a little bit in terms of what you saw in the quarter.
From from a revenue standpoint, if you can provide some some numbers.
Around the impact that would be helpful.
Similarly for the current quarter.
Appreciate the level of uncertainty.
You can kind of speak to what exactly you're seeing across your customer base as it relates to coping 19.
To be helpful or are there or cancellations pushouts downsizing of projects.
If you could kind of speak to those that would be that'd be great that I've got a quick quick follow up thank you.
Okay sure Toshi, so on fourth quarter.
We did see some impact, but I'd say all things considered relatively modest because it just started happening midway through the quarter and I shared the end markets like automotive I think some are pretty as you would typically expect.
In terms of the.
Current quarter, obviously, we're seeing more meaningful impact.
I I would say that as I said in the prepared remarks, it's not only koby 19, but if I did point to one single thing on why the both the midpoint and then the range, we're providing as broader is due to covert 19.
And I think kind of went through some of the end markets that are more exposed to that we are of course not only.
Increasing communications that our employees, but very much so with all key customers.
With Avnet, a partner with our supply chain.
With our customers customers and a lot of end market. So we're doing everything we can on this uncertain environment to collect a lot of information and so what I would tell you is that you know we're not seeing cancellation.
We do not see things like double booking because of concerns around material.
A few areas where there is people are.
Creating buffer stock, but not very not very sensitive and again overall, we have historically higher backlog that we ordinarily have.
So you know I would say that.
We do have some confidence in that because of that and because of a high level of communication that we have engaged.
That said look we were definitely uncharted territory right. So we have factored in some degree of.
Hey turns a degradation over time and just the general uncertainty so.
So I think we're we're really trying to be the balance there.
I hope that helps.
That's great and then as a quick follow up on.
On the Samsung Fiveg when you first of all I was hoping you can help us.
Again sort of quantify.
The potential impact your business over the next couple of years.
I'm sure it's can take some time, but.
Both in terms of timing as well as magnitude.
How meaningful.
This specific when could be for your business can kind of touched on that won't be helpful. Thanks. So much.
Yes, So Samsung is that's a very meaningful a win for us an opportunity and again. This is for their second generation of Fiveg and I think you know, we don't breakout specifics of customer real revenue, but.
It is a very meaningful engagement for us and I think but bigger picture here is again, we're still in the early stages of Fiveg.
You know what's shipping today is first generation and what as you can see what we're engaged in development is the second generation and pretty much all our customers talk about there being at least three generations. So so we're still in our stages and we absolutely are confident that this is still going to be a very large long term opportunity for us.
I think the other thing as we said in the past two is it tends to be even a normal circumstances somewhat lumpy.
And now the coded situation that adds more uncertainty so I think the timing as more challenged.
But you know.
Pre co, but we still would have probably said that this is sort of later in the calendar year and then you know me being more robust and next calendar year, but now of course, a lot to see with the Covance situation.
Yeah.
Thank you.
Okay.
Your next question comes from Joe Moore from Morgan Stanley.
Your line is open. Please go ahead.
Great. Thank you.
Following up on that last question that W.W.G. segment.
Revenues are down I think well superstar probably down could below 40 levels at this point, so it seemed like a pretty compelling growth opportunity.
The analyst day last year, you talked about what you see the total area under the curve growing by pretty impressive numbers. Obviously, you expected the actually transition, but you didnt expect why wait to become more challenge that how you've seen that opportunity out in the next two three years do you still see significantly larger business didn't didn't and Fourg, even you know missing.
While it from forecast.
Yes, Joe Great question, I think two to three years out we should Ah well knock on wood certainly some of the challenges that we see is visibility with a pandemic.
Out and that's how it kind of timeframe, we do believe it will still be meaningfully larger than fourg. Despite.
Not having the walk away business.
And again I know again, considering that there was a significant drop off but the fact that we were still able to have this being north of $1 billion. After losing one of our top customers. I think gives you an idea of that even in the early innings of Fiveg. This is strong for us. So yes, I think when we get through some of these.
Out of near term headwinds and uncertainty, it's definitely still going to be a very significant opportunity for us and again. This is both because of fiveg is can be much bigger kind of deployment and we're offering a heck of a lot more value.
Between our RFS, we'll see lines are versus aligned.
And just the way, we're working with the key suppliers.
I think we're really working very closely with them to get there or optimize architectures out.
So so we still feel very very good solid about that and I guess the only other thing I would say is at one thing about.
The the covert issue is that in some markets. You know you could argue that there could be demand destruction and this situation I think it's really delay as opposed to demand.
Disruption and of course timing of guessing what how does that play recovers or how that plays out as difficult.
Great and then just to clarify I mean, you still selling some trailing edge product. While we I believe can you can you quantify that and as it is or is there much why wait to think about on your forecast.
Yeah, No Joe it's really pretty de Minimis, I mean, we don't really count on it and because it is pretty much more modest and it's just not something we counted on but from time to time, we have some amount of while we revenue.
Okay. Thank you.
Your next question comes from C.J. Muse from Evercore and up from sign is open. Please go ahead.
So.
Yes.
CJ Your line is open.
Maybe aren't maybe on mute.
Moving on to Ross Seymore from Deutsche Bank. Your line is open. Please go ahead.
Hi, guys can you hear me.
You can russ.
Perfect glad my mute button doesn't work.
A question on the Victor you said, no double ordering or no buffer to speak of I noticed your turns really popped up to kind of at the higher and are the highest end of what you guys do in the last couple of years I guess, how do you judge whether you're seeing those pull ins and why would the turns have popped up so much if it wasnt Poland.
Behavior.
Well you know I.
I think since recovered somebody different markets, it kind of depends a little bit on what areas but.
I'd say look China is coming back after shutdown and obviously, they're pretty committed to driving their fiveg deployments, but that's that's one aspect where that you could imagine some catch up.
You know I think some of the other areas people are where may be concerned, although our lead times in our ability to deliver and shipped from people have not been affected but it could be in some of that but we are talking to everyone very closely and again I. There's some instances where people are doing that.
It's still pretty modest and we absolutely have not had any cancellations and.
So far but we understand that.
With things could could change, which again is why we're putting in a bit of a broad range. We also factored into.
That into our our midpoint.
Got it and then one longer term question you mentioned about the wide array of engagements that you have in software development et cetera that can benefit your data Center group I just wondered if you've seen the activity on your customer side change at all during the cold side on one hand, those are the customers that can keep their longer term development going.
Because they're so well financed and see growth et cetera, but people are fearing that even that market. If the recession gets nasty would clamped down in some of the new launches that were otherwise planned and your company would benefit a lot from those new launches so any sort of update on the activity you're seeing from an engagement level from a longer term perspective, as well as kind of the near term.
Yeah. That's a good question, that's something that talk to my my team and sales group.
Pretty specifically about and.
People are really remarkable I think you know.
Our current businesses current customers excuse me and the commitments that we've engaged in some meaningful kind of.
Proof of concepts and things getting to try to production, we're not seeing any follow up there I mean everybody's pretty committed to try and keep the business is running.
Well, we you know where we could see if this is very prolong over a period of time is capturing whole new customers as you know, where we're gaining share as well as Sam expansion and we've already done a good deal that but you know I would say right now we see no no impact to opportunity pipeline is there anything I'm, just saying that short this prolong for very long.
Time.
People are mainly focused on their current suppliers of course and driving what they're doing there.
But we don't see anything material right now.
Got it thank you.
Okay.
Your next question comes from Aaron Rakers from Wells Fargo. Your line is open. Please go ahead.
Yeah. Thanks for taking my question I wanted to talk a little bit about the data center business. It sounds like you're you're a bit more confident in the visibility that we're seeing on proof of concepts moving into kind of production.
Deployments can you just talk a little bit more about what you're seeing there.
How much traction have you been team from the smart new category, obviously, the solar flares that Neil you 25 products that have a follow up.
Yeah, I think that again it gets back to the kind of a quality and intensity in the agents and the results that were seeing people are getting I mean day people yeah. Your new platform, they're only going to move to the two into platform. They really do see significant improvements and we're very encouraged about what what were seeing.
And also the fact that again that is very strong interest in the expansion of.
Of our alveoli, even though the revenue is still.
Out in front of us as far as that goes.
I think you know I guess I'll also say, even even in the pandemic.
I have a customers that are using our accelerated to accelerate there.
Genomic.
Analysis, and simulations and things like that and so that's that's again shining a bright light on the power of what some of our acceleration technology can do for some of these applications. So so that is all encouraging that said again.
The exact timing of how that you know ramps up tends to be that bursty and there is definitely going to be a little uncertainty here with a.
With the the impending or the looming recession that we seem to be going into.
Well I pulled off and then on the all on the personal products, obviously, some lumpy heels of the Samsung Bosket can you just remind us again, where we stand for how we should think about materializing revenue contributions and are you still on track with probable product lineup expansion what you've previously.
Thank you.
Yes.
Again, when we when we did the.
Reduction enforce and that we announced in late January in some of the other expense.
Reduction measures, we're very thoughtful and making sure that we were not going to do any harm to anything strategic at our long term.
Active to drive sustained double digit growth in the long term and I think we've we've managed do that and we're going to continue to take that posture. Even through this downturn. We do have other levers that we can pull should this worsen.
But you know what we're going to do is make sure that we're positioned to.
To take advantage of when the recovery does occur in a very fulsome way.
We're also very committed during this very trying time to be a very good supplier to all key customers and so.
We are going to manage things fiscally responsible, but we don't want to.
Do things jeopardize the longer term programs and that's not only tape outs by the way that is as you heard me talk about the factors improvement we made in the ecosystem. We made in the software development invite us and just being a ready for download for a few months and the traction we're getting there so we're definitely going to.
Keep on the the gas pedal so to speak in driving.
Driving the ecosystem as well as the key programs.
And just specifically on seven nanometer, we do expect that to contribute to revenue toward the end of this year late in the year. Yeah. I mean, we what we will position for production of the first part, but then through next year next several years as you know, it's a very broad product family and we'll be doing lots of tape outs that will address many different market segments.
From price and performance and Powerpoints, though.
So we're still in the early days of that but it's hard seven entry that it will become.
Who will start it will really start to ramp next fiscal year I would say, but yes, we are poised to go into production.
Late this year.
Thank you.
Your next question is from Ambrish Srivastava from BMO.
Your line is open heart go ahead.
Yes. Thank you very much Victor I just had a question.
Well, we we're heading into.
I was little confused why would that club beyond.
What is your perspective on.
You know what we are heading into versus what we need to Anite yesterday, we had a misstep again from T. I tell us that he's keeping all of them the two no not dripping.
Opening up the 2008 2009 playbook, you kind of thing through revenue so.
Having lived through many cycles, what is your perspective on what you're heading into versus the last one and then I had a up a little bit longer term product question.
Okay, well I guess it was first point about the backlog you know I mean again it is very different depending upon market I mean automotive very very many meaningfully said that their forecast we down from what they originally gave us I mean more than one very.
You know.
Significant customer that supplies the major Oems.
We also obviously as I said see I'm pretty pretty strong amount of weakness in SVB. There's no sporting events of the Olympics is delayed by year.
So some of those things are pretty clear and so obviously, we're not seeing backlog there, but I never had aerospace and defense. It's really unaffected I think there are certain areas that in the long term would actually in increase the potential upside.
You know.
It's a little hard to know when or how but you know just clearly there's a lot more activity both work from home as well as entertainment from home. So video streaming which was hot before the pandemic. It's that's clearly going to go and increase and one of the applications really good accelerating is actually video transcoding and other kinds of video processor.
You know and that doesn't have anything to do with AI and we could also do AI coupled together with some of those video processing applications.
I think also communications infrastructure again.
Capex is we'll have to see how that plays out, but it's just going to be a lot more traffic.
So I think some of those elements are probably why that occurred and again as you can imagine we're very sensitive to make sure that isn't just.
Inventory builds or things of that nature.
So I think on the other part of the question about 2008 2000 I. We you know we definitely are looking at multiple scenarios right and that does include looking at that and so I won't tell you that doesn't inform how we think about you know looking in the future and trying to be prepared from downsides as well as upsides.
But you know we're very different company from 2000 hit 2000, and I mean think we have well over 40% more revenue, we zinc didn't even exist.
Just to bring Thats perspective that product didn't even exist let alone RFS. So see let alone verso eight cap and we weren't pursuing the datacenter market right AI Didnt exist back then as far as any kind of big opportunities. So so we feel that well we consider that we think about that.
For us anyways, our decision is that's not the right blueprint in fact, you know there's uncharted territory, it's unclear, there's really any existence blueprint.
At least from the way we look at it.
So.
The last part of your question are you.
Yes, no I had a project related question, that's actually pretty helpful perspective, and thank you.
Well, the Samsung design, but I'm, just going back to the ixia the I forgot the gentleman from Samsung had some and presented.
And then relationship between you guys and then so this is for the next Gen. Can you just have just going to understand because you guys had been on the backflip and using old tickets analogy for much we could days.
In terms of.
Moving now design wins and a sick.
Replacing you another SSD solutions. So this sounds like something pretty meaningful and just focus.
Claimed the opportunity versus what you had in the first gen.
And again competing solutions not necessarily against any competitor.
That would be helpful. Thank you.
Okay and you know.
And I recognize that you know, there's there's just an awful lot of a narrative going on for multiple different players here, so, but I won't say I think I've been pretty consistent in saying that you know when we had an initial much larger pop we were I think just opened in Canada that.
You know we ended up being shipped in production in the base, there, which is not something we had expected to hold onto persistently.
We've always said that we and it's true historically been strong and radio, but we feel like we have further strengthen our radio capabilities with the RFS, you'll see family and then I've always said that once versatile comes out at all even strengthen further compared to a suspension ASIC opportunities because.
The significant increase in compute density at the level of integration. The fact that it is such a powerful true platform right out of fixed solution.
I always felt that that was going to significantly improve our competitive positioning and you know.
The diverse so Samsung gauge, but I think is bearing that out and.
You know again remember we're not in production with our full yet we will be parity.
Production at the end of this calendar year, and then you're going to start seeing the train of all the other products coming out so.
We definitely feel that we're gonna have a very significant position and I've said in the past two that it is a very competitive market, but competing and say six of the nothing you right. I mean, we've been doing that yeah, I'm not going to Fourg generation.
Essentially the same customers with the exception to now we are unable to work.
With that way, but I mean, I think it's a it's obviously a core market we've known about for for decades.
Thank you.
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Your next question comes from Christian Gebara from Baird. Your line is open. Please go ahead.
Hi, Good afternoon, I could you talk a little bit about any meaningful changes.
No inventory Daniel.
Distributors and and any potential supply chain disruptions that.
Impacted.
Q2 guidance.
Yes so.
In terms of our channel inventory.
It's not that much there's some fluctuations, but it's really pretty minor and we're not concerned about at all we we do talk very closely with Avnet of course.
So we don't see any issues there by the way I know you asked about channel, specifically, but our own inventory did did reduce likely.
In terms of you said Q2, I think you've met Q1 guidance, but for us fiscal Q1 guidance.
I think you know.
Again, we.
You don't have supply chain disruption you know, we are with TSMC and still and so.
So we don't have any meaningful supply chain in China itself, which obviously you had the biggest impact.
And Oh, we have excellent patient with our strategic suppliers. So we don't see that we and we in fact have reached out to all our customers to really.
Reashure them in terms of our lead times and our ability to deliver for them.
So so it's not we don't see supply chain related impacts.
Okay, and then any signs of that.
Trying to see the progress that you're making ways. This item.
Tesla platform and how much compatibility.
You are providing so far I know that it's Tim.
The work in progress any metrics that you could provide a Swiss you know such as maybe how many.
10 cents functions Vitesse is supporting lease currently you any anything that would gauge you know that 200 analysts to gain at the type of traction you have and what you're targeting for the next to the next year.
Yeah, I mean, I don't know that should give you tend to flow functions, but.
On the others might grew CAD of course, but but I think that you know again, we've had 20000 downloads and willing ounces thing in November so I think to the interest is very strong we do have we've also done.
Training, we know we have engagements with customers, but it is pretty early days, but it's also not a static picture right. We continue to.
Add more optimized libraries.
Which by the way on the libraries, we provide and.
We also provide.
Some reference.
Neural networks for different kind of applications markets. We open source all of that so we are seeing.
Very encouraging activity and really good momentum.
But of course it it will take some time for that flow through to actual.
Revenue of course, but we're very encouraged and very excited about the traction we have so far.
Great. Thank you.
Your next question comes from C.J. Muse from Evercore. Your line is open. Please go ahead.
Yeah, Hi, sorry about earlier and thank you for taking the question I guess first question was hoping to do a handover to back to WWJ and and I guess outside of even Sampson bristle wind and what you're doing inside your overall can you comment on what you're seeing in terms of your legacy.
Networking business, both wireline and wireless.
And how we should think about trends for that business.
We are still shipping fourg and and we do so think that there'll be some ongoing business there even even as Fiveg storm starts more fulsomely ramping.
So we do see on the wireless side business there.
On the wired as as we said you know we actually thought that was going to be weaker in it was a little bit stronger.
You know and I do think clearly there two things again I think there is a lot of traffic going on right because of both.
Commercial activity with work from home, but also just.
Kind of streaming and ultimately as its more wireless bandwidth infrastructure built out then obviously the core now we'd have to be upgraded as well.
So I think we do see opportunity there again it won't be.
From a percentage growth quite as robust as we expect wireless will be over time once we get through maybe some of the near term uncertainty and.
And some of the engagements we have in development go to full production.
But you know we see that there will be strengthen both but again wireless will definitely still be stronger than the wired side.
Got you very helpful and understandably with covert document for years that makes perfect sense, but curious on what you can control can you offer any thoughts on how should we think about opex through the year.
Yes, since we had done some reductions before we are in one sense for ended up being fortuitous that were already in somewhat of a leaner mode.
You know I think that you know there are some additional levers that we could pull.
As this plays out if it turns out to be longer or deep or whatever at the same time the way CJ like.
Talk about is what we're going to try and do is make sure there were position to measure if it gets you know more severe as well as if it does improve we absolutely we hit where were bigger stronger company then the financial crisis were more strategic to a number of our customers and we're building new relationship with new key customers like in the Hyperscalers right.
We weren't even going after days and back then right. So we absolutely want to make sure that where there for them when they either even just to make sure we could deliver what products they need even the downturn or things are starting to reflect and want to be there for them. So.
You know again I don't want you to think that we're going to go wild here, but we're definitely going to try and make sure that will help our customers and we are cells as well to come out even stronger from this downturn.
Great. Thank you.
Your next question comes from John Pitzer from Credit Suisse. Your line is open. Please go ahead.
Yes. Good afternoon venture. Thanks told me ask the question just kind of curious just given that the D.C.G. story is very much sort of a customer penetration rate of adoption story.
How does that work in an environment, where many people are shelter in place and we're working from home is it can you give us come sort of a qualitative assessment of how you think your team is doing.
Along the launch of customer engagement to try to drive growth in that business longer term.
Yeah, I think you know the.
Customers in those markets of course of all are probably the ones that are more profession of being able to switch to working from home.
You know the kind of client engagement, we have and so forth and again since those are really deep engagement at the technical level that are not just commercial kind of engagement.
That's absolutely proceeding.
Orange and teams are having the same kinds of in some place weekly meetings and calls and you know people are able to whiteboard within technology that we have a collaboration these days so.
So I think thats really not been an issue.
And again as I said in some cases that this is driving people to even more vigorously wants to look for.
Putting acceleration in place.
Kind of referred to people doing you know genomics kind of acceleration those kinds of applications. We're definitely seeing that we're also seeing we talked about streaming of course again I think.
Streaming was was big before now it's even more so because even more people who are doing entertainment and just you know everybody is creating their own tick tock videos or whatever that's right.
So I I do think that.
That's.
Continuing without without any kind of interruption and you know.
Again, you could argue that in maybe when things really settled down it should drive that up opportunity to be even.
Even greater.
Okay. That's helpful. Victor number I apologize for this question much one that I get asked to often by investors Im just kind of curious there's been a lot of rhetoric and talking sort of the popular press at this administration might actually potentially banned all left pgas going into China. It feels to me like a slippery slope argue makes I'm not sure.
The difference between that and in general purpose computing devices, but can you help us sort of handicap that risk and how should we think about mitigation factors on your end.
Well you know I think as many you probably know you know I am also on the board of the Sian both the Sian, we individually our engagement and constructive dialogue with the government to help them both understand the complexity of the global supply chain.
And the key care about the semiconductors and you know, there's certainly trying to drive some meaningful trade issues. However, we've been very clear both as part of essay and signing on our own that blanket kinds of things like that these sort of bludgeon hammers are gonna do damage to the industry as a whole and the U.S. as the world leader in semiconductors and.
The last thing you want to do is really do you know material damage to the industry as a whole and so we do not and we've been clear about that we don't think thats the effective approach to resolve some of these issues.
So you know whether that zone at PJ technology, or it's just blanket you know everything needs a license gone to China kind of thing. Those are examples of you know one instrument kind of things right.
I think the only other thing more specifically is like you know I mean.
Well I'll weigh revenue, we're precluded from shipping from them in you know clearly, they're finding some way to still build some fiveg infrastructure I won't get into a debate about what that looks like and the details, but I think.
No.
It'd be hard puts a sort of say over a long period of time, how any specific technology can be.
Withheld forever and other than doing some unintended consequence damage.
So I don't know how to put a probabilities on this [laughter] to me on C.J. I hope, you understand but or clear about positions and and again I think we've had good some good constructive conversation so.
All right. Thank you.
Got it that budget the answer.
Your next question comes from William Stein from Suntrust. Your line is open. Please go ahead.
Thanks for taking my question Victor I know you answered a question on this already but I'm going to ask if you could linger on this comment you made earlier about the sick transition I think you said, it's largely complete maybe you can just remind us.
Historically, where have you played in the base station in places that you both get designed out of in where you can retain a position and.
Confirmed that did I heard you correctly did that transition as it relates to Fiveg is complete already and what content do you have in Fiveg you didnt have in Fourg, but sort of a long question. That's my only one thank you.
Sure.
Look I mean, we've had.
Traditionally we've had a position in radio and that's been our strength, where we've had more persistent.
I don't want to make it sound like we've had no content and base band, but typically what we've had a base band as.
A much smaller percentage in terms of the content.
In other words, you know a smaller companion EFI, Jay if you will together with some sort of the fear or whether it's in a sick or some other SSP.
So it's not that we haven't had any based and but in the beginning you know as everybody recalls fiveg deployments started sooner than people where people thought and.
South Korea, and we were being shifted both in the base band as well as in the radio and not just in South Korea, we saw a bit of that and other markets and that was the part that we kind of said look we don't expect to have that persistent level of content there.
And so one or I'd say, it's largely over that that's what I was referring to no no look I don't want to so to say that okay. You know there will be no replacement whatsoever look it's a competitive market, we always have to deliver value to our customers and that's we aim to do which is why we're not just doing PRP Jayson.
Significantly increased the value that we delivered to our customers and we'll continue to do that not only in the products, but also just how closely we engaged we're doing a lot of close I'd say almost collaborative engineering work together to help them.
Delivered there so they are both Tony the combination of all of those so you know, but but it's complete as far as everything that we see on the horizon and of course will continue to compete vigorously and I think the Samsung when is one example, and you'll hear more more overtime.
Thanks again.
Your next question comes from Matt Ramsey from Cowen. Your line is open. Please go ahead.
Thank you very much good afternoon, guys I'm.
Just one quick one and then product related follow up.
First question is just within your APC segment since automotive is obviously going to be challenged if you could give us a little bit of just rough picture of how big the automotive businesses within that segment and just kind of the magnitude.
Of maybe to draw down into the June quarter that you're seeing given the sharp declines in auto production et cetera, that'd be helpful and I've got a follow up thanks.
So.
Okay. So.
Auto.
Okay odor auto we don't we don't give exact details, but auto is on the order of.
No somewhat over.
200 dish to 50 million on an annual basis, just as far as.
You know a DC.
That's the order of magnitude in terms of that that part of the BC basket of markets.
And one thing I would say that I think everybody knows that that can be quite challenged it probably take a bit longer to work through but again similar to the question on.
You know.
Fiveg for instance, if you kind of go out you know to certainly three years and beyond.
You know, there's still a very big opportunity here right because you know.
The Oems are still going to be rolling out new model.
We have very strong position and advanced driver assistance, So safety systems and those safety standards keeps going up with each model year right. So they have to deliver you know even more safety capability and what used to be.
Kind of like options are now spreading into standard equipment, not only in premium mid range, but even into the value parts of People's line ups.
So there's well things will challenge and it probably take awhile for and unit sales to go up.
Content is still going up or automobile and because there is a timeline on when they have to meet safety standards and so forth than we have strong positions and things like fund cameras surround view.
New thing is monitoring turn systems driver as well as passenger monitoring systems and automatic automated valet parking.
We do feel good when you get more out to that two to three or timeframe that we'll have.
You know very strong opportunity there and then certainly even going further out.
Fully autonomous driving we are definitely being designed into those as well.
I think we've already said that even before the situation that of the three big growth drivers of datacenter Fiveg and auto auto was something that tends to take longer time anyways right.
This probably just pushes out a bit more.
Got it thanks for the granularity on the and the context there Victor.
As a follow up I I just wanted to ask in India datacenter business Theres, obviously the.
The networking and storage in addition to the compute pieces, but.
On the compute side, specifically can you talk a little bit about your software and eight cap engagements I'm just wondering.
A cap parcel is a very different type of product it mixes.
General purpose and accelerators NPL Dealogic and just how the reception has been within the compute sliver of that business, specifically and how those engagements have been going thank you.
Yeah.
You know maybe first I'll just say.
In the compute segment in General I think we've always said that we see in the long term that would be the biggest opportunity but that also is the area that requires the most heavy lift and.
Buildout in terms of.
Our ecosystem right applications regenerate, having a fulsome set of eyes fees and covering different applications.
So but in the meantime of course, we so we're making good progress there for the meantime, things like Smart, Nick and then the smart storage areas.
Don't need those sorts of things and so it's a much more direct engagement with a highly technical teams of of the of the customers.
So that's why you know you hear us talk about like recently, we've seen some good smart Nick activities and others, but coming back to two to the the compute side a few things one is.
You know we did.
Announced birthday, Vitesse excuse me and as you see that that it's early days, but we're seeing really good traction. There reversal is still also it's just a pretty new and I'd say that for instance, our alveolar boards and some of the work that's being done there's still a lot of work that's being done on our Ultrascale plus architectures.
You know, especially now that we believe these new boards like that you 50, which has got HB, a memory and a half height halfway kind of form factor. So really really dense compute compute density and that form factor and then the you 25 now for smart Nick first time that we have that out so I think that you know we foresee.
And good traction there.
In terms of applications within.
The compute side I think we've mentioned video several times I think database analytics is another one we're starting to case some good interesting traction in high performance computing.
And then as Fintech.
And now genomics is something we've done and typically medical takes a long time too, but that's happening a little bit more accelerated now so there's a lot of different applications and I think verso, we'll take a bit longer just because we're just in the very first product going to production, but once that there. We think the barriers are very high because that's a very powerful architecture.
And again.
As a very high degree of.
I'd say software element to it which again maxes stickier.
Thanks very much.
And operator, I think we have time for a couple more questions.
Certainly your next question comes from Christopher Roland from Susquehanna. Your line is open. Please go ahead.
Great. Thanks for the question I'll try to do two quick ones I guess the first just just in relation to the last question I think the first time you called out smart assets. These maybe if you could just talk about computational storage how large do you think that is.
The percentage of D.C.G.
And what kind of growth rate are you expecting versus your double digit segment growth rate overall.
Yeah, I think you know we've got some good engagement there I again, we don't break into find granularity each of those I wouldn't say that it's.
Today, a very large portion of the revenue, but I think that.
You know we.
We do think overtime, it's a pretty substantial you know serviceable market for US you know if you kind of go out maybe about three years. We think this could be you know 800 million.
Kind of level of of opportunity. So we're still again in a relatively early stages, but.
It's sizeable you know I want to say that I.
I don't think the the breakdown of our revenue today is necessary reflective of the opportunity of that.
I think everybody knows that there is really disruption across the entire datacenter and where you do the computes and a lot of.
There's a lot of moving towards trying to do the compute closer to where the data stored. So you don't use bandwidth and burn a lot of power in the data center moving data around so I think it's a good opportunity, but today I would say it's relatively modest.
Great and then.
I've been following you guys for awhile and in the old days it used to be altera versus xilinx, and who is getting to the next node the first.
And I understand that Victor under your leadership, you know you really taking a different approach where you've emphasized architecture over no changes.
Well I guess my question is why Didnt you push said then.
As well simultaneously why does it seem like it's one or the other and then should we believe that youre decisions that you made it seven nanometer should also inform off to the speed of seven in which you will take.
So let me just.
Let me just make sure I understand when you say why didn't we just push seven I think what you mean why didn't we just pushed trying to get out.
In seven really really quickly is that what you're referring to.
Exactly seven has been out for awhile. So so walk why didn't you move more quickly in the old days it used to almost be a race to the next node.
Yeah, and and again I think the reason why in the old days as rates. The next node because both us and the former Altera, we're just basically producing pure EFI Jays.
And.
Being a pure if PJ the main way deliver value to your customer as by increasing your capacity of gates right because that's how they implement more functions. So if he gets the next out first and you have a higher density of usable gate, then you're delivering more value to customer quicker once we started doing.
And things like adding a multi core SLC like with zinc we started adding other things, we can deliver value or not by just increasing our program will get count right.
No it's a little bit of an oversimplification write me like obviously, we have some of the best Thirtys quality in the industry and certain other things, but but that was really wide back then when you're doing just pure.
Programmable devices.
It was really mainly a race to the next gate.
I will also point held had you know now.
Everybody is very hard on ship lists and other forms of advance integration and as you know we've been doing as society or what TSMC Hall as their co us technology since the 28 nanometer generation. So that's the point out that because we were already able to do more than was lot. If all you didn't want was masked we've all.
A few j., Paul we are already there back and 28 nanometers, and we've had our society portion of our product portfolio or ever since right.
So I think a combination of architectural innovation other forms of integration beyond just monolithic and then the case of RFS I'll see you know integrating very advanced analog together with digital technology. That's yet another form of integration that we've been a leader on so so I guess, maybe the way to really think about.
Got it is we've continued to integrate more value each generation, but we're not doing it totally out of getting to the next node.
Does that make sense.
It does it.
Just wondering why you couldn't do both at once and whether anything might change as we move to five millimeters.
Well.
That's the hired a bit I guess, if you go down so the next a level of detail on is that keep in mind that you know ultrascale plus is an extremely successful products. So there is also just the pure because we have MPS will see right now we have our fellow C and you know we've come.
We continue to also increase on the high end interest terms of really large capacity of pj's with a view 19 Pea that was just recently released by far and away the leader and just maximum capacity. So part of this is also the great success for our 69 and products. Its doesn't didnt requires us racing to the next node.
And then part of it is you know the personal eight cap as such.
Powerful, but complex architecture that takes quite a while to sort of developed and it's going to take awhile for our customers to fully adopted but once they adopted it'll be a very strong.
Very strong level of incumbency I believe.
And operator, I think we have time for one more question Yep.
Thank you. Your next question comes from BJ Rokosz from Citi.
Your line is open. Please go ahead.
Hi, guys, just wondering and you look at a year fiscal <unk>, a 21, you mentioned Essex.
Transition, mostly complete just wondering.
How you see the growth in the W.W.G. now that you don't tell that headwind.
No one follow.
Well you know again, we're not providing full year guidance because of all the uncertainty in the environment, but I guess I want to go back to my comment that we overall still feel fiveg is going to be a very big opportunity for us and even despite.
No not being able to serve walkaway anymore. So we still feel very good about the growth overtime in the long run.
No RFS, we'll see is continuing to get great traction most of that volume deployments in front of us. Although we have had volumes appointments in different geographies with different Oems and then oversold in front of US right. That's all in front of US and we're just talking about the very first design when we were getting with Versal. So we feel very.
Hey, good about the opportunities we see in W.W.G., but I wouldn't I wouldn't try to predict right now at 21.
Got it and I'm actually already answered this but you mentioned two windset Samson M. B one on the I do not being farming site for Fiveg and one on a lesson for us.
Actually the computing Samson just wondering if you if you sized booked opportunities I should look at the ramps. There. Thanks I think we most we talked about the verso Samsung Fiveg engagement. The other referenced the Samsung with their smart SSD and that's still a 69 me your ultrascale.
Plus based engagement, but clearly you know with all our key customers, where we're talking together about a complete roadmap.
Well, we have nothing specific to say about versus what you know with respect to Samsung stores at the moment.
But yeah, we've got really good engagements and 16 nanometers with multiple.
You know customers that served in the data center as well as.
Good good traction and.
In personal.
Great. Thanks.
So christiana Nicola will wrap it up there I want to thank everyone for joining us today, we'll have the playback of this call beginning at five P.M. Pacific eight PM Eastern time for a copy of our earnings release. Please visit our Investor Relations website. Our next earnings release date for the first quarter fiscal year 2021 will be Thursday.
July Thirtyth after the market close this completes our Colin Thank you very much for your participation.
Thanks, everyone.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
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