Q3 2020 Silicon Laboratories Inc Earnings Call
[music].
Good morning, My name is Colin I will be your conference operator today at this time I would like to welcome everyone to the Silicon Labs third quarter physical 2020 earnings call Conference call.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please.
Please note. This event is being recorded I would now like to turn the conference every to George Lane Director of Investor Relations and International Finance George. Please go ahead.
Thank you Cole and good morning, everyone Tyson Tuttle, Chief Executive Officer, and John Hollister, Chief Financial Officer on today's call we.
We will discuss our financial performance and review our business activities for the third quarter.
After our prepared comments, we'll take questions.
Our earnings press release, and the accompanying financial tables are available in the Investor Relations section of our website at <unk>.
Www Dot satellite Dot com.
Call is also being webcast and a replay will be available for four weeks.
Our comments today will include forward looking statements are subject to risks and uncertainties based these forward looking statements on information available to us as of the date of this conference call and assume no obligation to update these statements in the future.
We encourage you to review, our SEC filings, which identify important risk factors that could cause actual results could differ materially from those contained in any forward looking statements.
Additionally, during our call today, we will refer to certain non-GAAP financial information.
Conciliation of our GAAP to non-GAAP results is included in the company's earnings press release and in the Investor Relations section of the Silicon Labs' website.
I would now like to turn the call over to Silicon Labs', Chief Financial Officer, John Hollister.
Thanks George.
We are pleased to announce a strong finish to the third quarter with revenue ending at $221 million exceeding the top end of our guidance range.
Third quarter revenue was up approximately 7% sequentially.
Revenue from our I O T product set a new all time record in Q3 at $133 million up more than $18 million from Q2 were about 16%.
During the quarter, we saw particular strength from ramps in smart home and lighting products with product sales from our wireless connectivity technologies.
Growing 29% sequentially.
As expected revenue from our infrastructure and automotive products declined in the third quarter ending at $88 million.
[noise] timing revenue was down significantly due to lower demand from our customers coming off a strong first half.
We also had a linked quarter impacts to our timing products due to the stoppage of shipments to walk away.
Revenue from broadcast products increased in Q3 with seasonal strength from sales of TV tuners, as well as a slight recovery in automotive radio.
Turning to end markets revenue from industrial and consumer was up in the third quarter due to strong growth in aiotv.
Automotive revenue was roughly flat.
Revenue in communications was down significantly due to weakness in timing.
Geographically revenue in the Americas was strong in the third quarter on Aiotv growth.
Sales into Europe also increased whereas APEC rep APAC revenue was about flat to second quarter.
For I O T wireless customers moved into our top 10 customer list during the quarter and a us based Io t. customer became our top customer.
Our top 10 customers now include five Io T. customers all these in the Americas and Europe.
Revenue from the top 10 customers increased to 22% of revenue up from 20% in Q2.
Distribution sales were 78% of total revenue in the third quarter and we ended Q3 with Dxi at around 48 days down from 53 days at the end of Q2.
Non-GAAP gross margin was 59.5% in Q3.
This was lower than we expected due to product mix in the quarter as we experienced a large rebound from top tier I O T wireless customers and broadcast consumer products combined with a larger than expected decline in higher margin infrastructure and automotive products driven by the decline in timing.
I would like to note that our I O T wireless products earned some of the highest gross margins in the industry, owing to our feature rich and highly differentiated technology offering as well as high levels of seamless integration.
Given the strong recovery in the semiconductor industry and strong design win momentum we are seeing sharp ramps in customer demand for our I O T wireless products and we are aggressively working with our supply chain to expand production capacity and build inventory.
Non-GAAP operating expenses ended the quarter at $94 million up about $4 million, primarily due to increases increases in variable compensation with an improving business outlook in the second half of this year.
Non-GAAP R&D expenses were $56 million and non-GAAP SGN expenses were $39 million.
Non-GAAP operating margin ended at 16.9% and non-GAAP earnings per share was 73 cents, our non-GAAP effective tax rate for the quarter was 12.8%.
On a GAAP basis gross margin for Q3 was 58.8% total GAAP operating expenses were $120 million with GAAP R&D at $72 million and GAAP EPS unit expenses of 48 million.
Stock compensation expense was $15 million for the quarter and amortization of intangible assets was $12 million.
GAAP operating margin was 4% for the quarter with GAAP earnings of seven cents per share.
Turning now to the balance sheet, we ended the quarter with cash and investments of $700 million account.
Accounts receivable ended up approximately $10 million add 80 million or 33 days sales outstanding.
Our inventory balance declined in the quarter to $66 million, representing inventory turns of 5.5 times.
Cash flow from operations on a year to date basis was approximately $127 million down about 6% from the same period of fiscal 2019.
In Q3, we also executed approximately $18 million in open market repurchases of our 2022 convertible notes and ended the quarter with a total debt balance of $681 million.
Our revolving credit facility remains in effect with no drawn balance we have ample liquidity available to us to execute our long term capital deployment strategies.
I will now cover guidance for the fourth quarter.
We expect revenue in the fourth quarter to be in the range of $221 million to $231 million with both aiotv and infrastructure and automotive increasing.
We expect non-GAAP gross margin to be approximately 59%.
Our gross margin outlook continues to be influenced by trends, we experienced in the third quarter.
We expect our Iot mix to grow, particularly from continued ramps of wireless products and tight supply chain capacity.
Due to these factors, we expect to be operating toward the bottom end of our non-GAAP gross margin range.
We expect non-GAAP operating expenses to be $95 million and our non-GAAP effective tax rate to 13% for the fourth quarter.
We expect non-GAAP earnings per share in the range of 68 to 78 cents.
On a GAAP basis, we expect gross margin to be 59%.
Operating expenses to be $123 million and GAAP earnings per share to be in the range of two to 12 cents.
I will now turn the call over to Tyson.
Thank you John.
Third quarter revenue with considerably stronger than expected with our key products, leading the way with a record quarter with.
We see sustained acceleration toward a more connected world, which our products are well suited to address.
Okay third quarter design win lifetime revenue and bookings set records highlighting the strength of our strategy and product portfolio.
In particular, we are delighted that Bluetooth design wins continue to set new records.
Design wins were up 49% sequentially and in Q3 and up 100% year over year.
We continue to see upside in demand for our IC products, now, making up 68% of our design wins and 65% of our total opportunity funnel.
Our IR key opportunity funnel grew 8% sequentially to over $9 billion of lifetime revenue.
Moving on to product category updates and Aiotv, we are seeing increasing demand for connectivity smart home consumer and industrial solutions are driving design wins that we continue to strengthen our wireless portfolio, adding new differentiated capabilities, while advancing security growing ecosystem partnerships.
In Q3, we announced our collaboration with Amazon to support sidewalk, a secure network created by neighbors, who share a small portion of the brawn bad broadband connection enabling their devices to work better at home and beyond the front door.
Sidewalk is a free software application layer that works on top of our wireless gecko series two products to support sidewalks sub gigahertz and low Bluetooth low energy protocols and per at Ironkey devices to securely connect to each other for the club.
Sidewalk is simple to setup free to use and is expected to have a tangibly positive quality of life impact.
We're glad to have bring founder and chief and vendor Jamie seminar join us during our works with smartphone developer conference last month to share more details about how sidewalk extended the working range of low bandwidth aiotv devices and helps them stay online even when those devices are outside their homes Wi Fi range.
Millions of consumers will enjoy the many new identity experiences sidewalk will enable such as tools and home appliances that can self diagnose problems in order replacement parts smart locks with improved wireless range and reduced energy consumption and the ability to quickly locate lost pets are missing valuables throughout the neighborhood.
Silicon labs wireless solution for Amazon sidewalk easily enables developers to create products with encrypted cloud communication across wireless protocol.
This is an exciting development further in conversion to biotech wireless protocol that we are well positioned to serve.
We have built our business to be the ultimate connector with the broadest portfolio of Aiotv wireless products.
As a result, we are uniquely positioned to bring players across the smartphone industry together as we did last month in our first virtual works with smartphone developer conference.
Over 6000 people from the Americas, Europe, and Asia Register, making it one of the most attended smartphone industry events held to date.
The conference provided an onramp for smartphone developers to engage directly.
The biggest most popular smartphone Mecca systems in the world.
Including Amazon Cam costs, Comcast and Google through co authored curriculum, featuring 40 technical sessions 12 hands on workshops, and six keynotes spanning 40 hours of high quality engaging content.
We are thrilled with the turnout and feedback received from purchase participants and will continue to play a leading role in shaping the future of smart home industry.
In combination with works with we launched simplicity studio five which is the latest of our free to use class, leading aiotv developer developer environments.
Simplicity studio five now offers universal access and enhance developer experience across a wide range of wireless protocol, all within a new intuitive and responsive web style user interface.
Simplifying and accelerating the development of wireless Silicon simplicity studio five also give aiotv developers support for open for it.
And paves the way for future development of project connected home over IP based.
We continue to be excited about the Bluetooth opportunity in front of us.
The Bluetooth Sig forecast annual device shipments will grow from 4.6 billion units in 2000 26.2 billion units in 2024.
To build on our record Bluetooth design wins this quarter, we expanded our Bluetooth low energy portfolio with the launch of the PGM to 20, SMB GMT 20, P. module at just six by six millimeters. The BGM to 20-F is one of the world's smallest Bluetooth models. It provides ultra low small size low cost and long battery.
I'd like to add turnkey Bluetooth connectivity to a variety of end product.
BGM to 20 Osten, it's larger PCB variant the PGM to 20 key are among the first Bluetooth modules to support Bluetooth direction, finding all while delivering up to 10 year battery life from the single point itself.
Secure vault, our suite of state of the Art Aiotv Security features debuted in September in Silicon Labs, Multiprotocol wireless gecko series two platform.
We identified the need to address growing security threats and regulatory history for IC devices early on in Silicon Labs has taken the lead in delivering the world's best Aiotv security solutions to the market.
Our secure vault products are the world's first radios to earn arms TSA level to security certification.
Secure vault also received smart Cert security certification from the IUB X T Alliance, which is recognized as the global standard for Aiotv security.
Finally secure vault was awarded a 2020 Leap awards gold medal for best in class security honoring secure vault as a new.
Temporary solution to an ever evolving problem, an independent panel of judges recognize just how far silicon labs' advanced connected privacy and security for I have a device biopsy devices with secure vault.
In September we announced our collaboration with Stratus on a new smart home solution built specifically for apartment complexes. The Stratus 3.0 Gateway uses silicon labs associates to deliver multiprotocol wireless capabilities connecting smart devices throughout apartment community.
Okay devices are placed strategically throughout buildings to offer a connected network of smart devices that enable energy efficiency security voice controls and remote control capabilities that were previously unavailable outside of single family homes.
Residents can use their smartphones as a credential to entered residential buildings common areas gates elevators in their own fully equipped equipped smart apartment unit.
The system also allows property managers and staff to securely control energy usage in smart technology and vacant units as well as monitor common area.
The Stratus Gateway is also designed to address adjacent markets, such as hospitality retail and small to mid sized commercial application.
As the pandemic continues and we enter the heart of this year's holiday shopping season, I would like to talk about smart retail.
Amazon Prime day kick things off with a 60% year over year increase in online sales underscoring just how heavily consumers and retailers alike are depending on connected technology.
We see two trends in smart retail first.
People are shopping online due to more due to the pandemic second those who do shop in brick and mortar stores want to do so safely meaning time men.
Minimal time spent shopping indoors and minimal physical contact these.
These two trends are having a profound impact requiring retailers to develop and deploy omnichannel strategies, which effectively blend online and offline shopping.
Our connected solutions are at the heart of this omni channel strategy, we facilitate online shopping by bolstering backend bandwidth infrastructure and helping to make manage stock in stores and warehouses.
We are also facilitating a safe convenient in store experience through electronic shelf labels, which reduced the need for assort Stuart's staff, the touch inventory and allow customers to easily locate products and see how much that cost.
Our location technology helps guide shoppers and store staff to have products precise location in the store and smart tags allow shoppers to see product and pricing information on their smartphone and even purchase product securely without having to go through a checkout lane.
As part of our focus on addressing the needs of health and safety during the ongoing pandemic, we continue to collaborate with our customers to expedite time to market of impactful product.
For example, this quarter, we worked with Belgian based social distancing device startup Maggie to begin shipping their new compact social distancing wearable that warrants user users when the distance between people becomes too small and poses a risk of COVID-19 infection.
Silicon Labs, Bluetooth solution was a critical design element that streamline to Maggie engineering in wireless development time, allowing the company to focus on design simplicity and accelerate time to market.
Turning now to infrastructure automotive, despite the headwinds related to walk away and the delay in Fiveg infrastructure rollout, we continue to see a strong opportunity for our portfolio in the areas of Internet infrastructure, Datacenters and electric vehicle.
This quarter, we launched a new family of small form factor high performance critical off flavors.
Datacenter operators and telco networks are deploying lower cost smaller form factor optical modules for line side and client site application delivering the need for space optimized high performance timing solutions.
Unlike traditional solutions, which may require multiple off layers to generate all required frequency.
New oscillators or a single unified solution that delivers any rate performance in the industry's smallest footprint.
This month, we introduced a new family of isolated gate drivers offering a combination of faster and safer switching low latency and high noise immunity capabilities.
New advancements in these gate drivers helped power converter designers meet or exceed increasing energy efficiency standards in size constraints in a variety of applications, including datacenter and industrial power supplies Microinverters for solar power and traction inverters for the electric vehicle market.
Turning to our leadership team I am happy to congratulate serving accounted for promotion to senior Vice President and Chief people officer as CTO, serving as a responsible for the company's global talent strategy people programs and values driven inclusive culture.
Since joining silicon labs in early 2017 Arena has had a positive impact on many fronts, including global content acquisition deepening deepening our diversity equity and inclusion efforts and ensuring continuity during the ongoing global pandemic under.
Underscoring his leadership I'm confident that our global culture and employee initiatives are an excellent hands.
I want to extend our best wishes and deepest thanks, Lori Knowlton, our previous Chief people officer for the outstanding comp contributions he made to our business and culture.
Laurie played a key role fostering our winning culture with a focus on diversity equity inclusion.
And she also helped build a world class recruiting team, which has attracted the best and brightest talent to silicon labs.
Looking ahead, we expect robust growth in IP. Despite a turbulent macro environment, we delivered record Aiotv design wins and revenue with an acceleration of demand during the quarter. We continue to innovate silicon software and tools to shape the future of biotech and are well positioned with our broad connectivity portfolio to continue this momentum.
Thank you for your time and attention before we take your questions I'd like to turn the call back to George George.
Thank you Tyson before we open the call for a question and answer session I'd like to announce our participation in the Barclays Global TMT Conference on December 10th using virtual platform.
I would now like to open the call up for your questions to accommodate as many people as possible before the market opens we ask that you. Please limit your questions to one with one follow up.
And as a reminder to those on the phone if you'd like to ask a question. Please press Star then one youre using a speakerphone. Please pick up your handset before pressing the keys and if youd like to withdraw your question. Please press Star then too.
And our first question today will come from Blayne Curtis with Barclays. Please go ahead.
Hey, guys. Thanks for taking my questions I had to just kind of curious the think about the strength you're seeing in Iowa, you mentioned smart home and consumer I'm, assuming there's some benefit from all this homes driven people are doing while they are sitting around so just kind of curious how you think about what you saw in outside and and any kind of perspective into next year.
Sure and then second question just on gross margin.
The bottom of the range, you said mix and.
You mentioned wireless being 68% of the design wins Im assuming wireless will continue to increase as a percent of nics any perspective, where wireless is the percent of Nics in September and then just thoughts on gross margin as that becomes a bigger part.
Thanks for the question Blayne ill cover the first part and then I'll, let John covered the gross margin. We are seeing really robust growth ahead, and aiotv and there are large ramps in wireless with that with top tier customers.
And as we mentioned smart home consumer retail, it's really very very broad there is a lot of industrial applications.
That that are coming on line, we've got we've got things like smart lighting home security systems building automation.
Retail asset tracking Theres Theres, just a lot of.
A lot of design win activity and some very very strong strong ramps and we see really a path to double digit revenue growth next year.
As as the Sam expansion, we take share in wireless and that double digit revenue growth is really for the whole company, we see the design win fund.
Funnel.
Everything very very strong the wireless.
Growth I think we did 29% here in Q3, and we see an opportunity to continue that growth.
30%.
Up next year kind of same as what we've seeing were seeing a.
A lot of the work that we've been doing for the last couple of years is now starting to ramp into production and some of the trends that we've seen in the pandemic, having accelerated some of some of those programs and and just the general trend towards.
T and connected devices in general so so yes, the trends and I have here very very very positive and it's it's both at the tier one customers as well as the broader base of customers.
Yes, Blayne. This is John so on the gross margin topic, but you're right. It's really is a function of mix.
With both a combination of factors strengthen I O T and as a reminder, our Iot see gross margins are a bit below the corporate average gross margin.
Combined with weakness in timing we saw the.
The.
Restrictions placed on walk away and also a general pullback in timing in the third quarter coming off of what was a very strong first half in that part of our business. So it's really a combination of of those two factors and yes, we do see that continuing.
Yes, Glenn I would like to just mention that our I O T.
Gross margins are there in the in the in the high Fiftys.
But they are a little bit below.
The overall corporate gross margin levels.
And certainly less than timing so when you swap timing revenues for Aiotv gross margin.
You'll see that that mix shift occur and that's what we're seeing here.
Second half.
Thanks, I guess.
A quick follow up if the IC margins in the high Fiftys, we think about the wireless within that being lower or is that not not the case.
Yes, it's it's.
It really gets into customer specific and application specific the technology itself without going into too much detail there, but as you know there is a blend and various mix factors within aiotv.
Yes, I think if you look at the IOTV wireless mix and.
Or the IR team mix in wireless is more than two thirds of the revenue and it is in the high Fiftys on.
On the wireless side. There is there is a mix depending on the various technologies and then that gets blended in with the microcontroller Mark.
Margins, which are in the in the same range. So I would say that across the wireless and everything.
Wireless is in the high fiftys as well, but it's not quite the 60% that.
We have is our target.
Okay. Thanks.
And our next question will come from Gary Mobley with Wells Fargo Securities. Please go ahead.
Hey, guys. Thanks for taking my question went to double click on the topic of gross margin.
Speaking about the mix within the mix of survival.
Would you characterize the gross margins in the wireless radio mix is being lower for sales.
Standards based wireless like why Fi Bluetooth versus some of these are more proprietary like Z wave and you see a significant difference in the growth rates of each unit and you mentioned some tight supply in your supply chain are you seeing some maybe outsized weaker inflation.
Gary I can I can cover kind of the mix of standards and there's also the mix between modules and chips and and then you've also got the difference between large volume customers and smaller customers.
We if you look we're seeing very strong.
Uptick in 15 dot for which include Zigbee and thread.
And.
Those margins.
As well as the wave in the smart home.
Tend to be in line.
Bluetooth is.
A lot of more consumer higher volume applications were seeing very strong growth, there and very respectable margins.
Why is still a smaller portion of the business and those are in line as well. So we don't see too much variation I would say that on the proprietary side.
Which I would maybe include Z wave in there, but we have a lot of stuff in sub gigahertz proprietary that goes into industrial networks. This is a very broad range of things that that's maybe a little bit about but overall the variation between needs is not.
Not that.
There is not that huge of a range between the top and the bottom end of the.
On the wireless customers any blend in the eight bit and 32 bit its use in sensors into that mix.
But I would I would say that the variation probably is more based on volume than it is than it is based on standard and John I'm on once you cover being the other part of that question.
Yes, Thats right Tyson and on the on the tight supply chain. Gary I mean, you are seeing this across across the sector with a strong reports a strong order.
Rebound.
Here in the second half and yes. There is some added pressure on the manufacturing cost profile, we're working carefully with our suppliers to ensure capacity and service customers, but there is a bit of pressure there yes.
Catches my follow up I wanted to.
Get a sense of what's missing from the export restrictions targeting wild way what was while we as a customer in the third quarter.
Yes.
The the steady state run rate for four way has been in the 2% range and that includes both direct as well as some indirect business to addressing the while we supply chain. So it's about 2%.
Thanks, guys, yes.
Yep.
And our next question will come from machining for jewelry with SMBC. Please go ahead.
Thank you good morning, guys, John just curious what you're seeing in terms of your Disti channel trends in terms of inventory et cetera, given the given the strong demand I'm. Just curious as you look into Q4. If you are seeing erosion channel inventories go up or down.
Yes sure Reni.
POS has been very strong we expect strong Pos in the fourth quarter.
Ideally, we would like to add some disti inventory, we're going to we're going to try to do that we will see how we can process everything through the balance of our order flow this quarter, but.
We just reported days actually declined five days from 53 to 48 days.
In the third quarter, our goal would be to hold that stable if not grow it slightly but I I do not expect a large increase in days as we round out the year.
Got it and then just to follow up on the auto business I know you said it grew sequentially.
Some of your peers are reporting very strong auto numbers I guess, you know the demand is coming back to production has.
Recovered very strongly I am just curious as to how big that business is for you and why we are not seeing.
On the recovery there.
Okay.
Yes, you know auto is not tremendously.
Tremendously large for us it's on the order of about.
Seven 8% of our total revenue and it's more targeted we have particular.
Focus with the infotainment sockets as well as an emerging footwear.
The current intellectual vehicle I think I think what you're seeing across both peers did a more broad based nature of their auto exposure more than anything.
Got it thank you.
And our next question will come from Tories from Stifel. Please go ahead.
Yes. Thank you a question for for for Tyson or maybe you could just elaborate a little bit more you said you starting to see the fruits of a lot of hard work on the PC side, and obviously expecting some pretty strong growth.
Hoping you could just elaborate a little bit more on that is that still going to be broad based growth are you talking about some some really big customers driving that growth.
It's it's really both Tory the ER.
The demand is quite broad based.
In Aiotv in particular on the wireless side and we've had a very strong design win numbers.
Numbers and a strong funnel the IOTV funnel now is it at $9 billion.
And and continuing to move customers through that we.
We do have a number of tier one customers. We mentioned that we now have five customers in our top 10 list.
That are that are in aiotv and our top customers now in I O T. Actually we had our top customer had been the same top customer for about 20 years.
And and they were just surpassed by by the ramp of a of a large eye on t. customers. That's it's really both and it's really across segments as well as you know Aiotv has has just a variety of different applications and the diversity of applications is both.
An opportunity because it's it's it's stable and it's it's a.
Yes.
<unk> has has a lot of different components to it but it's also a challenge in being able to address that both from a platform concept to make sure that you have the functionality across thousands of applications and that you are efficient and supporting those tens of thousands of customers that are out developing with this study in the <unk> the launch of our new simplicity studio five tool.
As we continue to evolve our ease of use to make it easier for customers to design in our products and we continue to expand our portfolio to add additional wireless capabilities and to keep up with the standards and to continue to push the integration levels and cost.
To the point points, where it needs to be so we're really excited about the opportunity is very broad range and we continue to try to get better and better in terms of our portfolio and our R&D.
And the efficiency around that and a lot of the software as well as the customer support side and to be able to take as much of that opportunity and converted into design wins as possible.
Okay.
Hi, Thank you for that and as my follow up you guided led an infrastructure to be up sequentially. In Q4. So are you starting to see a recovery in the amount and the timing business.
Or is it just more the broader category being up.
Yes, it's really more of the broader category Tori.
We expect timing to be down slightly in the fourth quarter.
Great. Thank guys congrats.
Thank you.
And our next question will come from Rajvindra Gill with Needham and company. Please go ahead.
Yes, Thank you and congrats on the IR team momentum.
Just digging in a little bit deeper into him tee it pretty tight and you had mentioned that.
The wireless is more than two thirds of the royalty revenue.
Oh I'm wondering how we should think about that mix going into into 2021, how do we also think about red pine.
Contribution and how do we think about kind of D wave in the module business to just the components of that of the attitude business, we moved to 21.
Yes. So in Q3 wireless was was over two thirds of the total.
And we talked about wireless next year growing.
30%.
And and we have a we have a good shot at that given the design win momentum and traction that we've got that that includes the refined products and include the way.
A lot of stuff on the proprietary industrial side industrial commercial.
A number of consumer and smart home applications as well.
We don't break out the revenue by standard and that.
That varies very forbid Z wave continues to see a lot of a lot of momentum in the market.
If you know in particular with like security customers on the smart home side.
Certainly Wi Fi has.
As a you know an important place there and we continue to develop the next generation products and drive design wins with the 90 116.
And the existing existing silicon and we are.
Ramping a number of tier one customers.
In into production with with our Wi Fi solution with Red plans and so continue to be happy with that with the team that we have over in Hyderabad, but you'll see next year, the mix shift going more and more towards wireless a lot of times customers are going from separate microcontrollers into either a connected device that adds wireless or the integrate.
I don't have a microcontroller and wireless and you've got you've got to think about all of our wireless solutions as essentially having an integrated microcontrollers to overtime that wireless mix is going to continue to to to click out and we'll have a higher and higher concentration.
Hello.
Of revenue coming out of the wireless.
Our proportion of IP.
Very good and a question on your thoughts on ultra wide band as a technology.
Given the nature of it regarding precise localization.
We're starting to see ultra wideband kind of move into.
Applications outside of mobile phone.
In Aiotv in auto wondering what your thoughts are on that technology.
Yes, I mean, you WD is a bit of a narrow technology and its not.
Universally deployed like if you take Bluetooth or Wi Fi or where a lot of these other ones.
They are they are more universal than than you WD you WB does give you a better.
The ability to get precise.
Location technology, although with Bluetooth now you can get angle of arrival and you can get distance within.
Within one to two feet, which is good.
Which is pretty good and its and its a.
Universal kind of technology that that people can use so it's an interesting thing it's got a narrow range of applications, it's mostly for communication in with handsets, whether that handset is in automotive or.
Or other applications are between handsets. So you can see where various people are so I think it's a little bit more of a niche and it's still very very early in the adoption phase. So we're certainly monitoring that technology, but I don't see that as one of the core technologies required for success in IP.
It also has very slow range are very very low range. It doesn't doesn't travel very far so that also limits its useful.
If I can to squeeze in one more question I think you had mentioned and just correct me if I'm wrong.
The path to double digit growth for the entire company calendar 21 or was that for Aiotv.
Yes, given the momentum that we see here in Q3 and continuing into Q4.
We believe that we've got a good shot at double digit growth for the entire company next year and certainly within Aiotv wireless we talked about.
Shot at 40% growth in the in the ice tea segment next year and that depends on the macro in a lot of other factors and not giving formal guidance here, but those are those that we look at where the business is today, we feel very confident in our ability to.
To grow and we'll see when the market turns out next year as well, but very very positive momentum right now in bookings and and and design wins, which point in that direction.
Great. Thank you.
And our next question will come from do you just silver with Roth capital. Please go ahead. Good morning. Thanks. Good morning, guys you mind, John Congratulations on the progress here on.
On the Bluetooth I'm going to characterize I guess your newer products as single Bluetooth versus past multi vertical focus for lack of a term I'm just wondering if that high volume wins, you're seeing now in Bluetooth are you capturing share in existing.
Design to the next generation are you seeing new applications, where you're coming into the the Bluetooth socket any color there would be helpful.
As we moved into our series, two which which brought our portfolio into into 40 nanometer and we were able to take a lot of the feedback and learning.
We introduced a new set of products, which were more optimized for for many of the Bluetooth applications. There's still capable of some degree of multiprotocol capability, depending on the version, but we also have versions that are highly optimized for the very high volume.
Applications and so there we are taking some existing sockets from competitors.
And certainly you see you see a lot of new applications.
For Bluetooth, it's really a mix, but we see this as an opportunity for share gain Bluetooth.
100% year over year in terms of design wins, we had very strong growth out of all the wireless protocols, we see.
Probably the strongest growth coming out of the Bluetooth applications and that includes Bluetooth by itself as well as Bluetooth in combination with something like a.
Thread or or zigbee or or even Z wave were proprietary application you can use a lot of times, you'll connects with network with a different different standard whether that's why fire for Z wave or or Zigbee or thread, but you will commission device with Bluetooth Bluetooth and allows the connectivity to a mobile phone and really.
Across application Thats, a very common way of onboarding devices onto the network and so the Bluetooth capability is very important from a multi protocol standpoint, but we also have an extremely competitive solution in terms of integration cost performance features.
And adopting all the latest versions of the capabilities of the standard for instance direction finding an angle of arrival. So we have a very competitive on a standalone basis in a very flexible platform, depending on how customers want to mix up the different protocols.
Okay helpful color and then second question follow up for John perhaps with the increase it seems in the profile of the Te connectivity and large customer design wins, which are helping drive success is there a shift to how should we think about seasonality for the first quarter, perhaps in 21 versus past years or is that not an.
Tough to kind of move that seasonality concept, yes.
Yeah. It's so it's a good question and that it is an unusual time right now typically one would expect first quarter to be down some.
Due to a variety of factors, including what you're referencing.
Given the strength and momentum that we see in our bookings.
We'll have to see how this plays out as we head into the year end and onward.
First quarter.
Outlook, but it's a.
It would typically you would think of seasonal down yet, but bookings are very strong right now.
Okay more secular growth thanks, guys.
And our next question will come from Matt Ramsay with Cowen. Please go ahead.
Yes, good morning on everybody. Thanks, Thanks for taking the questions.
Hi, Tyson just to.
One thing to just clarify on the comments you made for next year on on iOS. He was that 30% growth is on the higher of the wireless portion. So that two thirds of your franchise. There are either you or your goal is potentially 30% growth of the whole Aiotv segment. Thanks.
That was particular to wireless without being about two thirds. So you can with the with the remainder are on our microcontroller side the growth there is.
This is much more modest it's in and there are a lot of applications in microcontrollers that are moving to wireless so you see some.
The the mix shift more over to wireless, but certainly the wireless is the 30% portion of that.
Got it got it thank you for clearing that up.
For a couple of questions on my end. The first one is in the the timing business. Obviously, the walkaway headwind is hit yourselves and lots of folks in the industry.
I Wonder if you might characterize across.
Wired and wireless applications, how honest if why waste business remains impaired overall, not just that you guys can't sell to them, but that they're at their own business remains impaired for other reason maybe.
Maybe you how you're positioned with the rest of the competitors that might step in and fill some of those voids and any appreciable difference and content margins any of those things with the rest of the infrastructure providers in those key markets.
Yes, so we sell we sold a.
Pretty broadly to walk away, we had some very good designs that we've heard for years on.
In Fiveg, we also sold into there.
Optical communications equipment networking equipment.
And ER and into the broader ecosystem. There I think if you pull in that John mentioned about 2%. We have some other suppliers that go in there. But then we also see other companies you know for instance, we TV Samsung.
Samsung.
Uh huh.
Nokia Ericsson Cisco all all kind of maybe taking up the slack depending on on the region to where all that you're talking about with Fiveg Fiveg was an emerging opportunity for us it's not that the bulk of the timing revenue, but it's an important piece.
We have four out of the top fives.
Fiveg infrastructure makers, we essentially sell to the top 12.
Networking equipment vendors, we have very strong position in the long haul.
Metro markets and emerging position in data center.
Depending on the area, we're not in the data data path, but we're in providing.
Providing that the timing the high performance timing within the data Center and then we have an emerging opportunity in automotive, but the bulk of the revenue there and timing is really in the core network.
In long haul type of applications, where high performance is important and we have a very broad we sell to pretty much everybody.
Okay.
Got it thanks for that and just one last I guess bigger picture question on on the Io tea markets.
I think there and you and particularly as you talk about maybe some bigger customer programs ramping I Wonder if you might step back and give a little perspective on how you're seeing the the usability ecosystem come together I don't know if that's a real term but I.
I've been going through as everybody sort of trapped at home during the Covance situation, we've been doing lots of home automation upgrades.
For me personally and I can automate about everything in my own now I need 37, iPhone apps to do it.
So I just wonder if your company is involved in any industry consortiums any of these bigger customers that you're dealing with might be doing some work on consolidating the usability of ecosystems like that that might accelerate adoption. Thanks.
Well, it's not funny, you should ask I actually am upgrading all of the lighting controls offset we speak so it's a I think there's a lot of us that are that are implementing new smart homes stuff and trying out trying to figure out how to not have those 30 apps on our phone.
We had our <unk> our conference in fact, if you havent checked it out at that works with that Biolabs Dot com.
And we did did a virtual conference there was going to be an in person Congress is actually a really great.
Lesson on on on just events in general we had planned on about 1200 people in person here in Austin.
We ended up with 6000 people registering virtually and attending from around the world and this is with companies like Google Amazon Com cast and really the whole purpose of this this conference.
As to to talk about how are we going to converge the exact with systems and converge the standards and make it easier for consumers to be able to onboard networks I mean everything from Apple Homekit.
To Amazon Alexa.
The Google home and all of that and so that theres less consumer confusion and more convergence of really the user interface and onboarding devices, and all that as well as how do you actually make devices and connect them into these ACA systems. So I see tremendous progress in the convergence of these equity.
Systems, and the ease of use and a strong focus by the largest companies in tech.
They see this is something that we need to be working together on and we took a leadership position in in this event. It was a groundbreaking event and.
Extremely well attended and lots of media coverage. So I think we'll see some progress there.
As we know Aiotv is this is a long path and it's it's the momentum is starting to build but I think that you know that.
Thats going to continue every year and it's you're going to continue to see new technologies and new capabilities added, but I think the ease of use is also something that must get addressed through to scale.
Thanks, very much guys appreciate it.
Okay.
And this concludes our question and answer session I would like to turn the conference back over to George Lane.
Thank you Nicole Thank you all for joining US. This morning. This concludes todays call.
Okay.
Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
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