Q2 2020 Lattice Semiconductor Corp Earnings Call

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Sure, Okay director of Investor Relations, Sir you may begin.

Thank you operator, and good afternoon, everyone.

With me today, or Jim Anderson, Vice President and CEO and Cherry Luther Madison CFO.

You provided financial and business review second quarter of 2020, and the business outlook for the third quarter of 2020.

If you have not obtained a copy of our earnings press release. It can be found at our company website <unk> Investor Relations section that at some point dotcom.

I would like to remind everyone that during our conference call today, we may make projections or other forward looking statements regarding future events for the future financial performance of the company.

We wish to caution you that such statements are predictions based on information that is currently available in an actual results may differ materially.

We refer you to documents that the company files with the FCC, including or Kincaid 10-Q's, and eight case.

These documents contain and identify important risk factors that could cause actual results to differ materially promotes contained in our projections or forward looking statements.

This call includes and constitute the company's official guidance for third quarter, that's what each one.

Anytime after this call we communicate any material changes since guidance, we intend that such updates will be down using a public forum, which is a press release publicly announced conference call.

So financial information that we present during the call will be provided on both the GAAP and non-GAAP basis like excluding 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 operating performance and to establish operational goals.

For historical periods, we provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website that it sound like Dot com.

Let me now I'll turn the call over to Jim Anderson, our CEO.

Thank you Rick and thank you everyone for joining us on our call today I'm pleased with our results in Q2 of 2020 as we continue to execute on her product roadmap and build momentum with our customer base. Let me cover a few highlights from our second quarter, we drove strong growth in our communications and computing segment as her position.

And continues to grow in shoulder cloud computing and Fiveg infrastructure.

We continued to make steady progress on gross margin expansion as non-GAAP gross margin increased 150 basis points sequentially and 230 basis points year over year. We also continue to expand profitability with a 17% sequential increase in non-GAAP net income and we launched our news service Center next Gen probe.

So P.G. a onetime as promised.

Finally, we remain on track for our third minus Nexus product launch in the second half of 2020.

Let me now provide an overview of our business by end market.

In the communications and computing market revenue was up 19% sequentially and 15% on a year over year basis in computing, our revenue grew sequentially and year over year due to strong growth in both Sherborne client computing.

Sure virtually benefited from increased attach rates and higher ASP age as well as higher revenue for data center customers due to the increased demands on data center infrastructure as people work from home.

In closing computing, we benefited from the start to the new client computing platform from one of our key customers.

In the communications market, we continue to benefit from ongoing fiveg infrastructure deployments with Fiveg revenue higher both sequentially and year over year, we expect by GE revenue will continue to grow over the long term. That's if I do wireless infrastructure Buildout progressions, turning now to the industrial and automotive market revenue decreased 6% Chicago.

Actually it was up slightly on a year over year basis. Despite the impact to near term demand from Cobra 19. We continue to believe this segment will remain a long term growth factor for us given the breadth of applications that we sure, including robotics industrial automation and safety embedded vision and automotive electronics.

Turning now to the consumer market revenue declined 17% sequentially and 43% year over year. The decline reflects a full quarter of cobot 19 demand impact as well as he expected shifting the mix of our revenue profile overtime.

We remain focused on sherbini areas of the consumer market that include applications with consistent multiyear revenue streams and higher margins, where our solutions are enabling customers to differentiate their products.

I'll now provide some highlights are recent product road map execution.

When we launched or in excess of P.G. platform. This past December we also launched our first device based on that platform. The cross Lincoln acts device at that time, we committed to really see two additional nexus these devices in 2020.

We delivered on that promise with the June launch Absurdistan ex representing the second device from the Nexus platform.

We're excited about the Certus index family, which relative to comparable LPG age offer 70% faster performance Forex lower power and up to three X smaller footprint. Each of these advantages provides meaningful differentiation of value for our customers applications and systems, we remain on track to launch or third Nexus.

He's product in the second half the 2020, we continue to be very pleased with the enthusiastic and broad adoption for Nexus platform as a number of customer engagements in opportunities continues to increase we're now introducing products at a pace that is roughly three times faster than in the past this accelerated cadences provided our customers abroad.

One of your portfolio of wireless solutions to choose from.

As part of the long term investment strategy that we shared at our Investor day in May of last year, we continue to invest in tools solutions in soccer stacks to make it easy for customers to designer products into their systems. In Q2, we launched wireless propel our new embedded system design environment for processor based designs.

Propel is an easy to use tool that enables MPG based processing in a wide variety of applications.

We also remain firmly on track for the launch of our third solution stack, which is focused on security applications and plan for delivery to customers in the second half of 2020.

This follows the two solutions to acts that were previously launched sensei ally, which is focused on low power in Prince processing at the edge of the network and envision our solutions to act for embedded vision applications.

In summary walk over 19 continues to create some uncertainty in the near term business environment. We remain focused on executing our business strategy and product roadmap for sustained long term revenue growth and profitability.

I want to thankful addus employees for their continued execution to our plan. Despite the current environment I'll now turn the call over to our CFO Cherry loser.

Thank you Jim.

Second quarter revenue was 100.6 million.

3.4% sequentially from the first quarter.

And down roughly 2% year over year.

The sequential increase from Q1 was driven by the communications and computing segment was partially offset by a decline in consumer and industrial.

Gross margin on a GAAP basis was up 110 basis points to 60.2% in Q2 compared to the prior quarter and was up 150 basis points compared to the year ago Claire.

Our non-GAAP gross margin expanded 150 basis point to 61.3% in Q2.

There to the prior quarter.

And was up 230 basis point compared to the year ago quicker.

Both the sequential and year over year increases in gross margin were driven by execution on our pricing optimization strategy as well as continued credit cost reduction with some benefit from mix.

Q2, GAAP operating expenses were 48.1 million compared to 47.8 million in the first quarter and 45.6 million in Q2 2018.

On a non-GAAP basis operating expenses were 36.6 million compared to 36.1 million in the first quarter and 35.5 million in Q2 2019.

In Q2, R&D increased sequentially to 20.1 million or 20% of revenue as we continue to make investments in our product roadmap.

After DNA declined sequentially to 16.6 million and 16.5% of revenue as we continue to drive SGN, a spending closer to our target model.

Q2, GAAP earnings per basic and diluted share was eight cents compared to six cents in Q1, 2020 and six cents in Q2 2019.

Q2, non-GAAP earnings per basic and diluted share was 17 cents compared to 15 cents in Q1, and 16 cents per basic share and 15 cents per diluted share in the year ago period.

We continue to have a strong balance sheet.

Capitalizing on that strength, we made 21.9 million in debt repayment and the second quarter.

This included an acceleration of quarterly payments, which reduced our leverage ratio as defined in our credit agreement to approximately 1.5.

This is compared to a leverage ratio of 1.9, and a year ago corridor and allowed us to reduce our interest rate by another 25 basis point.

Our year to date cash from operation was approximately 37 million with an ending cash balance of approximately 165 million.

Let me now review our outlook for the third quarter.

Revenue for the third quarter of 2020 is expected to be between 96 million and 106 million.

Gross margin is expected to be 60.5% plus or minus 1% on a non-GAAP basis.

Total operating expenses for the third quarter are expected to be between 36.5 million and 37.5 million on a non-GAAP basis.

Well I'm pleased with our progress in Q2, we remain cautious with how the cobot 19 situation will evolve in the near term.

However over the long term, we continue to focus on growth and profitability extension driven by the strength and differentiation of our product roadmap.

Operator, we can now open the call for questions.

Ladies and gentlemen, I certainly am I doing if he would like to ask the verbal question. Sam. Please press Star then the number one on your telephone keypad, okay, but it's started one.

Our first question is from Christian Gebara from Baird. Your line is open.

Hi, good afternoon.

Question about a 2021 of you see we expect Nexus to reach an inflection point.

In terms of volume alive is the operating margin leverage going to be.

Comedy based on top line extension or is there any type of phase G and a reduction that we should be looking at then I'm assuming it tape out activity is going to remain next year at a similar levels as this year.

Yeah. Thanks Christian are interested in for the question appreciate it yeah on the Opex part of your question in General if you remember our overall target for Opex seems to be around 35% of revenue. That's the target that we put out last year as part of our Investor day back in May.

Of that we're targeting to keep R&D around 20% and for SG any to be targeted at 15%. We've made some progress on SGN, a on bringing that percentage closer to the target you can see we made pretty steady progress in the most recent quarter Q2 again, we sequential.

Really reduced SGN any expenses and are approaching that 15% targets I think moving forward you can assume that we'll continue to make progress on SG enabled in terms of absolute dollar reductions, but I'll show and as revenue grows full scale into that 15% and then in terms of you know just operating.

Margin overall on the other the other factor is on a gross margin expansion as well we've made some good progress on gross margin expansion we're still.

Focused on driving Tar overall gross margin goal of over 62% as well as much as well so topline growth that you mentioned earlier as well.

Great and then.

Any anyway to quantify the impact of the earlier why wait put in that simple companies have talked about on the last earning season.

As a potentially impact on your second has how so keep putting Q3.

Yeah interest in a very difficult to gauge that we've seen a you know when the most recent quarters relatively I would say normal ordering patterns from.

From walk away.

So it would be difficult for us to gauge what impact that would be for the second half probably the certainly our guidance for Q3 incorporates all the best data that we had to this point for all of our customers in terms of their demand for this quarter, which includes the Wally demand as well.

Great. Thank you very much.

Thanks, Jason.

Thank you. The next question is from probably Anderson from called your Securities.

Yes. Thank you for taking my questions and congrats great quarter, Jim I went to pick up on the inventory question. You you addressed inventory the general sounds like but I'm curious you guys did double little bit of inventory and I recall the commentary last call.

Well, it's sort of looking to have a little bit of buffer there for the hard winning products. It looks like you did that so I wonder if maybe you can just update us your thoughts on what you want to do as far as your inventories concerned and.

I'll step back versus no snapped back about a couple of for sure.

Yes.

Yeah. Thanks, Charlie.

So just real quick since you mentioned inventory in the channel, we ended Q2 with inventory out or distributors.

Well within the normal range for the business. So we didn't see any unusual building inventory in the channel in Q2, which was good in terms of Ladha specific inventory, we did mention a quarter ago. When we did our earnings call that.

We anticipated that we need build inventory strategically on some of our higher running parts. We did that in Q2 show our inventory or lattice inventory is up sequentially from Q1 to Q2 and that was deliberate to build some buffer of lattice inventory again, specifically for high running products, especially associated with CA.

Customers that.

And in anticipation of if there is a.

Snap back in demand, we want to be able to service that upside. So that should we did build inventory in Q2 in terms of Q3, we may choose to build a inventory slightly in Q3 as well we that could happen in Q3, we haven't.

Decided on that yet, but we feel like we're in a pretty good position in terms of flattish inventory at this point.

Great and not enough for my follow up Sherry, but dsos were maybe a little bit toward the high said relative don't were used to since you guys took over so I wonder if you can address that and then also in the leverage ratio you did mention you got under one and a half I Wonder if you could just remind us what level you're comfortable with you know I should.

Saying I'm, an M&A opportunity present itself, that's interesting financial insurgency clean thanks.

Yeah sure. Thanks, Thanks, Charlie for the question, we did see an increase in our D.S., though in Q2 versus Q1, that's really the result of our shipments being weighted more towards the end of the corner.

It's really driven by two main factors are the first being we had got our suppliers had supply chain constrained due to cobot 19 government restrictions, which constrain shipments early in the quarter and then the second reason as we had more significant shift in our mix created a.

You know some maintenance and latency in the system as we adapted to that change.

I have to say, though the ops team did an amazing job being able to meet the demands of our customers.

But not not result, if that is really that we had lighter shipments in the beginning of the quarter heavier shipments for the yen I clearly impacting our dsos.

As we look I had to Q3, you know it anticipate more and more steady mixed in Q3 and would expect the dsos would start to improve and put it in Q3 as a result of that.

And then your second question regarding the leverage ratio. So we did accelerate meet accelerated that payments during the quarter to de lever down back down to 1.5 or the driver there was really to reduce our our interest rate by 25 basis points on when we looked at look ahead. It at you know how much leverage we would be willing to take on.

You know, giving any any kind of M&A activity it really depends on the specifics of.

Of the particular, you know deal and the synergies and that type of thing that really presents itself. So it's really deal specific I would say that in that respect.

Great. Thanks, so much.

Thank you Charlie.

Thank you for the next question is from Christopher Nolan from Susquehanna International.

Good afternoon, it's David I really on behalf of Chris Rolland, Thanks for taking my questions today.

Yes, first started out I'm talking about the strength in constant computing. It seems like a really solid to Q. There maybe you could sort of parse out what was stronger for us with the comps are the computing I know you highlighted the new PC platform is that the big driver and the growth. There and then also any color you could give on the segment's third quarter would also be helpful.

Thanks, David.

Incomes and computing Q2.

Yeah, there were really three contributors, we did see nice growth again.

Rubbers fall sequentially and year over year.

We have been increasing our.

Attach rate Tunius peas in servers should we continue to benefit from that as well as in servers. We did we do think that there was an uptick in demand related to.

Corporate 19 people working from home that putting additional pressure and data center infrastructure and so there was an uptick in demand for service going into data centers. So all of those factors contributed to our our server result, we did also see sequential and year over year growth in client computing, yeah. As we mentioned in the prepared remarks the risk.

The new platform.

We started shipping for in Q2, so that was good to see that's a new client computing platform an application, we're really happy about that and then the third contributing factor was fiveg infrastructure related products. So we saw nice sequential and year over year growth in our products going into fiveg infrastructure and that we do.

You as you know certainly long term growth driver as well, we expect to Fiveg infrastructure buildout to happen over the course of multiple years and our position in Fiveg infrastructure. If you look at a base station in Fiveg infrastructure relative to Fourg, we have over 30% more content to the Fiveg base station until as Fiveg.

The infrastructure ranch, we expect to benefit from that so those were kind of the three main factors contributing to the good performance in comps and compute and then on your second question, which I think was about.

It kinda segment level color for Q3, when we look at our market segments for Q3, we're anticipating that kind of the percentage.

Of each segment contributing to overall revenues roughly the same in Q3 as Q2 shore expecting the mix across our major segments to be roughly the same for Q2 to Q3.

Great. Thanks for the color gentlemen, if I could sneak in one for Sherry real quick.

And on the debt repayment you made this quarter versus the opportunity to buy back shares I know back in March you guys authorized the repurchase that doesn't look like you've done anything with that yet.

You just talked about kind of your thoughts going forward on capital deployment as the share repurchases still on the table or if the environment has changed too much someone that authorization went through back back in March.

Yeah. So thinks the question so in terms of capital allocation to be our first upright first in primary focus is on you know and investing in our product roadmap and R&D that that's our primary objective with respect to cash we did de lever down to 1.5. This quarter again that was to reduce our interest rate.

Ticket to reduce it by 25 basis points on the stock buyback program, we get to get a board authorization in Q1 of 40 million. That's that's an effect for till February of 2021, we have not had any activity under that plan to date and what we what we've said and we continue to feel that we want to be conservative.

On any potential buyback activity as we work you know to preserve capital so no plans to execute on that in the near term.

Got it thank you very much.

Yeah.

Thank you again as a reminder, if he would like to asking for a couple of question.

Please press Star then the number one on your telephone keypad.

Our next question is from other Sandro Vecci from William Blair.

Hi, everyone. Congratulations on a solid quarter in a tough environment.

Just to sort of expand the questioning along the lines of of the different segments can you went a little more color in particular, just on on industrial and and where are you primarily seen the impact that's covered related is it isn't it in factory automation some of the touchless control.

Sort of any additional color you could provide there and how we think about it going forward.

Sure. Thanks, Alex.

Yes, certainly in the industrial segment it was pretty broad based it it wasn't concentrated in any one particular.

Customer application it was as I said pretty broad based if you look at our first half overall, so first half of this year versus prior year a year over year, we grew about 7% in the first half versus prior year, so pretty good growth overall, obviously our Q2.

Results were weaker than Q1, we saw cobot 19, starting to hit our industrial segment in Q2 period and again.

Really not any one particular area pretty broad based.

Okay that whole and then the second part yes, that's the second another question in terms of Oh.

In terms of you had asked about just sort of go forward. We continue to see a industrial is a key growth area for US. We're you know we were quite pleased with the growth that we saw the first half of this year over the long term. We expect this segment to continue to grow and the number of applications that we're getting designed into.

Some examples would be robotics industrial automation industrial safety touchless control things like that and so and we actually believe that the the whole cobot 19 experience will accelerate.

The move towards industrial automation and in many of the industrial customers and so over the long term, we expect to benefit from that that sort of acceleration of industrial automation, because we're well positioned across the number of different systems and applications in that area.

That makes sense and then just on uncertainty and act.

I know it we just launched at the at the end of June, but if you can provide a little color on I know on initial customer feedback and perhaps how it compared to initial feedback on Crosslink Nx.

In terms of early adoption or or alpha customers and if we should expect at a similar time to to revenue was as crosslink.

Yes, Thanks, Alex.

So initial feedback from customers is quite good as you can imagine we actually engaged customers well ahead of the launch, especially our strategic customers. We've been engaged with them I'm curious and acts well ahead of the actual product launch and customer reaction is very positive. When you look at the performance benefits that were bringing you look at the power.

Our efficiency as well as a smaller size, it's three X smaller footprint than competing up Pgas. It's just it's a really compelling device for our customers and it's more of a general purpose device and so that means its clickable and just across all of our different market segments, and we're seeing nice customer interest across each.

One of our different market segments, and so yes, we're quite pleased with the initial reaction to the shirt ascent acts the overall for the Nexus platform, which now we've launched two devices on the Nexus platform. Our original Cross Lincoln X, which was launched in December and now sort of Synnex, which was launched just this past June.

You know overall customer engagement in the platform continues to grow.

We now have over 150 unique customer engagements across the across that platform and so we're we're quite pleased with the customer reception and the growth and engagements and just as a reminder, we do have one more device that we committed to launch on the from the next platform. This year that device will launch in the SEC.

Can happen this year that remains execution remains on track and we're really excited about that third devices, while show yet quite pleased with the progress on on the Nexus platform in general and I.

I want to take the opportunity I think our engineering team because they've continued to do just a great job executing despite some of the work from home challenges and some coal that 19, they've done a great job executing on our roadmap.

Perfect that's wonderful here and that's it for me.

Thanks, Alex.

Thank you again I sort of Mitre, if he would like to ask a question simply press Star then the number one on your telephone keypad.

Yes that is part of one.

The next question is from Richard Shannon from Craig Hallum. Your line is open.

Hi, Jim ensuring thanks for taking my question as well maybe a quick question on a gross margin guidance for the third quarter. Obviously your gross margin was excellent and the second quarter above the midpoint I you seem to talk about benefits there were mostly structural in nature and.

Not much related to mix here and since the mix isn't changed I'm curious why the the midpoint of the gross margins down almost 100 basis points years or some other dynamic that's driving that or is just a level of conservatism built in.

Yes, thanks, Richard but I'm just to recap a little bit on Q2, and then all our bridge to Q3 is yes Q2, we did see we were quite pleased with our performance on gross margin in Q2 number different factors going into that but the two main ones were.

Pricing optimization and product cost reductions if you remember back in late 2018, we built on a pretty comprehensive strategy to drive pricing optimization, and then a second strategy to drive product cost reductions road map overtime and so we started implementing those at the beginning of 2019 and we're still seeing the benefits.

So that strategy and we expect to continue to execute both of those strategies moving forward and so.

Most of the benefit we saw in Q2.

Both sequentially and year over year was from pricing optimization and that product cost reduction, we saw a little bit of benefit from mix as well. So now moving into Q3, a couple of reasons why the midpoint of our gross margin is lower than where we landed for Q2, one is that our IP revenue.

Vary from quarter to quarter. It can fluctuate tenant. She is this is normal for IP revenue, but we tend to be a bit more conservative on the IP revenue because of that fluctuation and that that revenue was 100% gross margin and so that can have a significant impacts on our gross margin second is we are anticipating a bit of the headway.

Wind on mix within a couple of our segments in Q3 relative to Q2, so little bit of mix headwind as well and so that's what's going into the gross margin midpoint guide for Q3.

Just to follow that up to the headwinds on the mix here can you can you specify were those come from a seemed like you're one of the prior question you suggested the segments at the high level that we know about our roughly unchanged going into third quarter.

Yeah, it's mix within those segments, so even even if our segment mix stays relatively constant we can see product mix changes within segments from quarter to quarter and that can fluctuate from quarter to quarter and so just based on the demand that we can see to date, we expect a bit of Uh huh.

Headwind in a couple segments.

That can change as we as we execute through the quarter that can improve but at least at this point, we're seeing a bit of headwind in a couple segments.

Okay and my follow up Jim is.

Again diving into the comps a competing segments a again your your guidance here in your.

Indication of kind of unchanged split between the segments, just basically a flat segments, there and thats a it sounds like you have a very nice design win with a client server platform and one would expect fiveg to be good. So there must be some some offsets in other parts of their comps are computing segments.

Servers, one we expect to be.

Keeping up with a general trend or is there some softness coming there or any other thoughts on kind of the mix within concert computing that's a notable.

Sure within comes in computing, certainly as you know in our server business. We do have a high attach rate or attach rate is now over 80% in in servers and so if there isn't any change in the underlying.

Server market, we're certainly impacted by vault as well, we would expect server unit shipments to be.

A little bit lower in Q3 of them. They were in Q2, we think Q2 service shipments were benefiting from an initial.

No initial no cobot 19 people working from home and they're being an up tick in shows or demand do we think that will will normalize a little bit in Q3 and should we expect that but overall if you. If you zoom out we comes in computers performed very well for us over the last couple of years, it's one of our key growth.

Areas, we believe for the long term.

We expect to continue to grow in servers over the long term as we continue to grow the content that we have in servers, and thus or else fees as well as growth in client computing and Fiveg infrastructure. So we still believe that comes into boot as a long term growth driver for us.

Okay, great. Thanks, all for all the Teligent.

Yeah. Thanks Richard.

Thank you the faster to migrate if he would like to ask a question simply press Star then the number one on your telephone keypad again that as far as one.

Our next question is from David the Lee from Steelhead. Your line is open.

Yep, Thanks for taking my question.

I was wondering as far as your targets I think with their sometime next year to double digit revenue growth do you think this to the coal that are the pandemic has had any impact on your customer roadmap plans or on your internal plans for product launches to achieve those goals and then.

As a follow up to that which segments would you expect to be the.

Contribute to this higher level of growth that you might expect sometime next year.

Yes, Thanks, David on the first part of your question. Let me first talk about our internal Roadmaps and then what we're seeing out the customers in terms of our internal roadmap no. We are not letting cobot 19 slow us down in terms of our R&D progress on our product development progress.

Our investments in our product road map, our long term investments were really excited about our product road map. We think we've got to winning product roadmap and we're full speed ahead on and our product roadmap and I will just take the opportunity say again, our engineering team has done just an outstanding job of continuing to execute to the key product milestone.

And that's your attention to continue that I'm on the customer road bans on the customer engagement side customer engagements have been quite quite good and very active I'm certainly for any customer programs I would say that are entering production in say the next six to 12 months, we haven't seen.

I mean any drop off in customer activity.

Our customers are equally kind of moving at equal speed to get those on a near term production programs into production and we're fully supporting them and so I would say the customer activity has remained robust and our sales team. Our application engineering team is very busy which is good.

And then.

In terms of the longer term growth drivers, we the to mean segments that we see as long term growth drivers are columns, and computing and industrial and automotive incomes and computing already touched on a number of those different growth areas. We expect to continue to grow in servers as we expand our content in servers and bring.

And have higher Sps in servers, we expect client computing to be a growth area for us and Fiveg infrastructure is really just starting we're still early in the deployment of Fiveg infrastructure, where should we expect to benefit from that.

You over the coming years as well and then.

On industrial and automotive most of our the vast majority of our revenue today is based on in that segment is industrial.

We expect to see growth in some of those applications I talked about earlier robotics industrial automation and then further out we expect growth from automotive we have a very robust.

Design win pipeline in automotive electronics that accounts for.

Relatively small part of our revenue today, but we see a nice.

Design win pipeline and expect that to be a growth contributor.

Over the coming years as well so that's a little bit of color on where we see the growth coming over the coming years.

Thank you.

Thanks, David.

Thank you again as a reminder, if he would like to ask a question simply press Star then that number one on your telephone keypad.

Again, but as part of what.

So, possibly just several to see if they are still questions.

Your last question comes from the line of Matt Ramsey from Cowen Your line is open.

Hey, folks good afternoon, I think for let me jump on we had a bunch of these tonight. So I appreciate the patient congrats on the results guys from from my end. Jim You you had talked about strength and our analysis kind of shows the same thing that expected strength from.

Your compute platform on the server side no secret within the industry that though.

And it server processor vendors going through some challenges I wonder if you might talk about how the visibility of your server business grow.

Is affected by some roadmaps changes that they might be going through and and argue represented across the breadth of server processor vendors that might be ramping thanks.

Yeah. Thanks, Matt So the great thing about our products that are used in servers is that there.

Architecture agnostic so they can be used with either flavor of X 86, so whether that's an intel or any of the processor. In fact, they can even be used with for instance, and arm processor or any other processor. So we're able to provide our functionality that we bring to the server kind of regardless of the GPU architecture, Indeed, where we're not just.

Designed into Intel platforms were designed on M.D. platforms as well so to the extent that there's potential share shift over time between Intel and D.

We're buffered from bad because we have good position with us on both types of platforms in terms of romance changes in general.

We do have a high attach rate.

So we enjoy a high attach rate to servers to over 80%. We are anticipating Sps to continue to grow we've already grown our asps and continued and we expect that to continue to grow as new platforms ramp to the extent that a platform is delayed where we would see any ASP increase we could see.

Some temporary effect from that but in general as again as you can assume out over multiple years. We believe that this will continue to be a good growth area for us.

Perfect. Thanks, and then just one follow up from from me.

Think about.

Ramping the whole Nexus portfolio.

Some of the vector some in the segment specific product and also the general purpose stuff, that's just been announced.

And you look forward in the design win pipeline, if you could talk a little bit about with any specificity that you can.

The segments, where you feel like Nexus may ramp the quickest any particular use case examples I think some some concrete examples of the wins that you guys are considering and the visibility that you might have to when they might ramp in volume would be really helpful to the investor base. Thank you.

Thanks, Matt Let me talk could first kind of on the products and then I'll come back to this segment.

So the first product that was this launch was Crosslink index, which we launched in.

December of last year in and we would expect that product to go to market year to go to revenue first.

We are still driving to to get.

Some revenue this year on that on that product as we've always said it will probably be a small amounts of revenue. This year, but we are still targeting to deliver some revenue in Crosslink index. This year and then it would.

Start to really ramp next year, Certus Nx, which we just launched that would be more of revenue contributor next year. So each product as we launch it is.

Contributor out out in time, it's across Lincoln ex would be the first product to contribute revenue in terms of the segment each segment has different.

A different profile in terms of time to revenue generally consumer as our fastest segment in terms of time to revenue computing can also be a fast relatively fast segment for instance, client computing could be a faster.

Segment, Surber takes a bit longer communications, and industrial or much longer time to revenue and automotive business longest tied to revenue. So in terms of which segments could we see revenue from per se, but most likely be.

A key client computing or consumer application those are generally the fastest.

Fastest ramp.

Thanks, Jim appreciate it.

Thanks, Matt.

Oh.

Thank you, ladies and gentlemen that concludes DQ any abortion.

I'll now turn it back to let us as CEO Mr., Jim Anderson for closing.

Thanks, operator, and thanks, everybody for being on our call today I appreciate it want to once again, thank the entire lattice team as well as our partners for all the dedication and the great execution, especially in the current environment. We're very pleased with our progress to date.

And we're even more excited about future of lattice, we remain very focused on consistent execution of both our business strategy as well as our product roadmap operator thinks that concludes today's call.

Thank you, Sir ladies and gentlemen, this concludes todays conference call. Thank you for your participation can have a wonderful day.

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