Q3 2020 Lattice Semiconductor Corp Earnings Call

Please be advised that today's conference is being recorded and readout tricky delay I would like to hand, it over to your speaker today Mr., Rick Mushy director of Investor Relations.

Thank you operator, and good afternoon, everyone with me today are Jim Anderson, lattices, President and CEO and Sherri Luther Madison CFO.

We'll provide a financial and business review of the third quarter of 2020, and the business outlook for the fourth quarter of 2020.

If you have not obtained a copy of our earnings press release. It can be found at our company website in the Investor Relations section that semi dotcom.

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

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

We refer you to the documents that the company files with the FCC, including our 10 Ks 10, Qs and 8-K. These.

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

This call includes and constitutes the company's official guidance for the fourth quarter of 2020.

If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release for publicly announced conference call.

Some financial information that we present during the call will be provided on both a GAAP and a non-GAAP basis.

Disclosing certain non-GAAP information management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends.

Management uses non-GAAP measures to better assess operating performance and to establish operational goals.

For several 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 at <unk> Dot com.

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

Thank you Rick and thank you everyone for joining us on our call today to start off I'd like to once again, thank our customers and partners for their support and I, especially like to think the lattice team for their continued dedication and execution, while I'm pleased with our progress I'm, even more excited about the potential of the company moving forward.

Let me cover a few highlights from Q3 and 2020.

We continue to see year over year revenue growth and our two main segments of communications and computing and industrial and automotive. We also expanded non-GAAP gross margin by 170 basis points year over year, non-GAAP operating margin expanded to 26.5% and non-GAAP net income increased 16% year over year.

We launched our century solution stack, which is focused on providing platform security in applications such as data Center servers. This solution stack was a third installment in our expanding portfolio of application specific software solutions.

Finally, we remain on track to launch the third product based on our Nexus platform later this year.

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

In the communications and computing markets revenue was down 4% sequentially, but up 6% on a year over year basis after.

After a strong Q2, we saw a modest sequential decline in communications and computing due to a decline in units shipped for servers as well as a decline in communications.

Year over year growth of 6% was driven by growth in servers and cloud computing. We continue to see this segment as a long term growth opportunity as we expand our business in computing as well as in Fiveg infrastructure deployments.

Turning now to the industrial and automotive markets.

New increased 8% sequentially in Q3, and it was up 14% on a year over year basis Q.

Q3 growth in the industrial segment reflects an improvement in end market demand and increased use of our products used in a broad range of applications, including industrial automation safety robotics and embedded vision.

Turning now to the consumer market revenue declined 8% sequentially in Q3, and 45% year over year. This.

This segment has been impacted this year by lower end market demand due to COVID-19, as well as an expected mix shift in our business.

We remain focused on securing design wins and consumer applications with multiyear revenue streams and higher margins and where our solutions are enabling customers to differentiate their products.

I'll now provide some highlights of our recent product roadmaps execution.

As we discussed at our Nexus platform launch last December we're investing in a portfolio of higher level software that enables our customers to dr. solutions quickly and go to market faster.

First installment in our software portfolio was our award winning CENTRIA I Shocker stack, which is focused on low power infringe processing at the edge of the network.

Earlier this year, we launched envision our soccer snack focused on embedded vision applications, which was the second installment in our portfolio.

We built on the strong foundation with the launch of our third installment in Q3, which is our security staff called century. The century stack provides customers a comprehensive software solution to implement platform for more resiliency in applications, such as servers networking and cloud computing in.

In parallel with a century lunch, we introduce a lot of supply guard Schervish supply guard extends the system protection provided by century throughout the supply chain. This.

This was accomplished by delivering factory lock devices to enable dynamic trust for our customers and the end users and their products.

When we launched our Nexus Hep B G platform last December we also launched our first product based on that platform called Crosslink annex.

At that time, we committed to releasing two additional nexus based products in 2020.

In June we launched sure to send access promotion and I'm pleased to report that we remain on track to launch or third Nexus based product in Q4.

We continue to be pleased with the customer engagement on her nexus platform, where the power efficiency and faster performance are helping our customers differentiate their applications and systems.

In summary, we're pleased with our strong results in Q3, and we remain focused on executing our strategy for sustained long term revenue growth and profitability.

Now I'll turn the call over to our CFO Sheri winter.

Thank you Jim.

Third quarter revenue was 103 million up 2.4% sequentially from the second quarter and was roughly flat year over year.

The sequential increase from Q2 was driven by the industrial and automotive segments, Unlike anything but.

While partially offset by a decline in consumer and communications and computing.

Gross margin on a GAAP basis was up 30 basis points to 60.5% in Q3 compared to the prior quarter and.

And was up 110 basis points compared to the year ago quarter.

Our non-GAAP gross margin increased 20 basis points to 61.5% in Q3 compared to the prior quarter and was up 170 basis points compared to the year ago quarter.

We continue to make steady progress on gross margin expansion.

As we benefit from our ongoing pricing optimization strategy quite a cost reduction and some mix.

Q3, GAAP operating expenses were 49.5 million compared to 48.1 million in the prior quarter and 44.8 million in the year ago quarter.

On a non-GAAP basis operating expenses were 36 million compared to 36.7 million in the prior quarter and 35.9 million in the year ago quarter.

We continue to invest in our product road map, while at the same time, we remain committed to driving S. DNA spending closer to our target model.

Q3, GAAP earnings per basic and diluted share was nine cents compared to eight cents in the prior quarter and 10 cents in the year ago quarter.

Q3, non-GAAP earnings per basic share was 20 cents and 19 cents per diluted share compared to 17 cents in the prior quarter and 17 cents in the year ago quarter.

We continue to strengthen our balance sheet and remain focused on cash generation with our year to date cash from operation at approximately 69 million.

A key driver for the healthy cash generation in Q3 was an improvement of 14 days and DFL compared to the prior quarter.

Our ending cash balance increased to approximately 182 million, resulting in a positive net cash position.

Let me now review our outlook for the fourth quarter.

Revenue for the fourth quarter of 2020 is expected to be between 99 million and 107 million.

Gross margin is expected to be 61% plus or minus 1% on a non-GAAP basis.

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

Well call. It 19 continues to create some near term uncertainty over the long term, we are focused on growth and profitability expansion driven by the strength and differentiation of our product roadmap.

Operator, we can now open the call for questions.

That's your mind did you ask a question he will eat press star one on your telephone to drive question pressed to Sandy.

Your first question comes from the line of Matrimony from Cowen. Your line is now open.

Yes. Thank you very much good afternoon everybody.

I guess for both <unk> and Sherry, if you could talk a little bit about.

Break down by.

Segment.

Revenues in the guidance and how it might relate to gross margin being down slightly sequentially and Jim and you guys talk about that.

I got a few questions until guidance there are DCG business down I think 25% in the fourth quarter. I know you guys you guys have pretty broad exposure to the server market through all vendors, but that was a pretty alarming number for some so if you could address that as you talk about mix in the fourth quarter that would be really helpful. Thank you.

Yeah I got it thanks, Matt So on the first part of your question on the Q4 segment outlook. So what we're expecting at this point is for communications and computing segment to be sequentially up.

We're expecting the IP revenue to be down to go back to sort of it's more normal run rate to usually ranges within three to 5 million such where we expect it to go down to in Q4, and then for the other segments to remain roughly flat sequentially, such a little bit more color by by segment and then.

And in terms of sequential gross margin guidance, you will see that our sequential gross margin is down a little bit relative to Q3 and that really reflects IP revenue being down sequentially from Q3 to Q4, which is clearly out at a high gross margin. So.

And then on the last part of your question with respect to in Poland Sherbert, What I would say is I know I can just speak for our business were Ah you know, we expect a communications and computing overall to be Oh, we are seeing good strength in computing in Q4 should we expect that overall sales.

I want to be up for us and.

Maybe just as a reminder, we're used to and bolt a intel servers as well as the servers. So our products are used in in both types of X 86 platforms and so but back to the to your question, Yes, We expect communications or computing to go up sequentially.

Thanks, Jim that that's really helpful. Just as a follow up.

You gave a number of milestones in the new product portfolio, both on the hardware side and on the software side.

The company has hit some of those ahead of schedule.

And I know the ones that you intend to hit going forward I'm, just sort of stepping back Jim If you think about the design win traction that you're seeing for for the new product portfolio. If you could help sort of characterize that where where it is versus where maybe you expected it to be 12 months ago, and and what that means for.

Piece of revenue acceleration as those design wins come into revenue over the coming quarters. Thank you.

Yeah, Thanks, Matt a young children product milestones you know specifically with respect our Nexus platform. If you recall, we launched the first Nexus probably product across Lincoln acts in December of last year, We launched the second to none in June of this year called shirt S.N.X. and then we're on track to launch.

Third before the end of this year and so yeah execution remains on track a design win traction and I would say general customer engagement on Nexus, but I would say across our entire portfolio is quite healthy. We're very pleased with the design win progress that we're making a this year. The sales team has been doing really.

Good job on that and I think the last part of your question was more towards [laughter] revenue and revenue growth I think a you know maybe a couple two or three key milestones to point out on some of those new products is if you recall on last year, when we launch Crosslink Nx, we also.

Said that we would expect to see initial revenue from cross link on X. I'm, our first Nexus based product before the end of the year, we still expect to see that it'll be a small amount of revenue this quarter, but we expect to see a production revenue this quarter and then it would grow obviously next year and then maybe a couple of other products that we launched.

Last year that are now in production.

That I'd point out is crosslink cost product, which we launch launched in Q3 of last year.

We saw revenue growth in that this year, we expect to see revenue growth again next year from that product and then also the Macbook. So three D product that we launched.

Last year, that's our F.P.G. with specific security technology that.

That makes it a able to provide platform root of trust in lots of different types of systems such as servers.

We saw the first production revenue in Q3 of this year. So this most recent quarter production revenue will grow in Q4, and we expect it to again to grow next year. So that gives you a few proof points around some of the new products and how they're starting to get revenue and beginning to ramp.

I really appreciate all the color Jim Congrats on the results and I'll get back. Thank you appreciate it.

Thanks, Matt.

Your next question is from Charlie Anderson from called your Securities. Your line is now open.

Yes, thanks for taking my questions and congrats on being a net cash position for the first time, an awfully long time.

So just to kind of.

And on your prior answer about the segments I think if I keep a consumer and industrial flat sequentially and punch in $4 million or sort of licensing implies something like 20% year over year growth for comps computing. So just want to make sure I'm getting that right and if that's indeed the case I'm just kind of elaborate on some of the growth drivers underlying that.

Coming off of this sort of mid single digit growth rate year over year, that's again in Q3.

Yes, I can also be kinda sequentially I'm show constant computing relative to Q3.

You know first of all one headwind that we have in that segment is Wally.

Obviously, there were new U.S. government restrictions put in place with respect to walk away.

Earlier in Q3 until we stop shipment to Wawa per the new regulations ahead of that mid September deadline that have been put in place by the government and so in Q4, we're not we're assuming no contribution from one way in Q4, and so that's a little bit of a headwind in our communications and.

Computing segment in Q4, but we're seeing strength in other areas and in particular in our computing segment and should we expect that to offset the headwind and actually that segment. Overall, we expect to grow sequentially and then yeah, you're right that would give us a very healthy year over year growth as well.

Okay, Great and then Jim I don't know if you wanted to wait at all on the M.B. Riley transaction I was I was very keep competitor you you're very familiar where they have the numbers your team familiar with xilinx. So just kind of curious how that you know over the long term or you think that impacts the strategic positioning of.

Of of their company and yours.

Yes, you'll have your various approaches to the market. Thanks.

Yes, Thanks, Charlotte, Yeah, we don't see it changing the environment for the portion of the market that we're focused on so just as a reminder of kind of where what is our strategy where is our focus so lattice is focused on being the absolute industry leader in small power efficient LPG days and so these are programs.

Mobile devices that are used in a wide range of applications across edge computing I O T industrial I O T a control and security and all sorts of different types of systems and a you know look when we look at our product portfolio today, we're very happy with the portfolio today, we think it's very strong.

Very pleased with the Nexus platform and its adoption and we're we're actually even more excited about the roadmap that we have in front of us and when we look at the industry. We see that we're really the only MPG a company that's focused on investing in this part of the market small power efficient WG age and and I don't see that changing with this announcement.

And so and certainly our customers you know see our commitment to this space the customer engagements are very strong as I mentioned earlier and there.

There they see the new products that we're launching the new road map that we have coming in and they're pretty excited and so you know we remain focused on our strategy and executing to our road map and continuing to deliver to our long term business goals.

Okay, great. Thank you so much.

Your next question is from Tristan Gerra of Baird. Your line is now open.

Hi, good afternoon.

Could you elaborate on your expectation for communication to be up sequentially in Q4 is that right.

She base station driven and also how sustainable is that trend into the first half of next year and I notice who is it.

Mostly outside of China, any any color you could provide would be would be helpful.

Yeah interesting on my earlier comments were with respect to the the overall segment to communications and computing. So we have that as a single segment.

So I was saying that overall segment, we expect to be sequentially up and then you don't look side GE is Ah, we see as a long term revenue growth driver for us we're seeing good growth from Fiveg. This year, we should at least have.

More significantly more fiveg infrastructure revenue this year than we had last year and we still we believe we're still early in the Fiveg global deployments and.

If you might recall at our Investor presentation back in May of 2019, we shared that in a fiveg base station, we have over 30% more content in a five b G base station relative to similar Fourg base station. So we see it as a long term growth.

Vector for the for the entire industry, but also specifically for lattice as well should we expect it to contribute to growth next year as well.

Okay, and then a as a part of that we talked last quarter about the key pieces when that.

Sounds like it's with one OEM and you've mentioned the opportunity that over time. This could surpass the you know the time that the data center given the PC units.

What level of conviction do you have that you're going to win additional or PC OEM.

And second the weather problems holding does U.S.P.G., providing key that's unique enough.

To get other PC Oems to use your products.

Yeah, So a inclined computing we on our last earnings call. We shared that we had a new program that started production that you know obviously that continued into Q3 continued into Q4 and into next year, we're quite pleased with.

The progress on that program and the revenue that we're seeing from that program and you know we're also engage more broadly in the industry to continue to win.

More business and the client computing space, we do believe we can bring some pretty unique value propositions to the client computing space one.

You know one of the areas around artificial intelligence processing infringe processing in particular, where we can do things like human presence detection. As one example, also video connectivity video integration overall connectivity integration within the PC platform. So there's a number of different here.

Areas, where we are we think we bring a pretty unique value proposition with our combination of you know great power efficiency program ability and flexibility I artificial intelligence algorithms says you know, we're constantly evolving and so having a solution like ours that is re programmable and can adapt to change.

As an AI algorithms over time as it is a big cost for customers and so yeah. We see this as a good long term growth area for us and in the computing segment.

Great. Thank you very much.

Thanks, Jason.

Your next question is from Martha Sanchez of Jefferies. Your line is now open.

Hi, Thanks for taking my question.

Jim You had mentioned you mentioned kind of the introduction of this the the software platforms since I envision a century can.

Can you give us a sense of like where where do you think.

Where do you think you are in the deployment of these are or where your customer base is embracing these products and to what extent.

From your standpoint are these is that are these kinds of software.

You will help you to to grow the market versus to help you kind of like you know like customers into you know more of a sticky longer term design wins, because they get they kind of get entrenched in the sportswear.

[noise], Yeah, Mark maybe I'll start with just a reminder of kind of what's our overall strategy with respect to our software. So beyond the typical LPG development environments that are that we provide what we've been investing in as a portfolio of higher level software solution stacks that are application specific and.

And what that does for our customers is that makes it very easy for customers to design our products into their systems, and then really speeds up the time to market for them to get those systems to.

Mark at the first one that we introduced was 79 and that was around infringe processing. The second one that we introduced was earlier this year in February and that was our ambition stack around to better vision processing and then we just recently brought out or third version.

Which is century, which is specifically around security and platform level security and as you as you can imagine we we have on our roadmap additional additional software stacks that we're planning to bring out for instance, next year as well. So we're going to continue to build out. This this platform or oh or this portfolio of software solutions stacks.

And the deployment, what we're seeing is a actually.

Those being deployed across every market that we serve so we're.

We're seeing now it's over time, depending on the market but.

For instance, some say I were seen that software stack are being used in computing applications that can be used in industrial applications. Obviously, it is consumer applications as well, we're seeing interest in century I crossed I'm certainly server applications, but there's other computing applications.

Greetings and industrial applications, where that has relevance and so it's pretty broad based deployment.

And you know in terms of you asked about you know it is it does it is it does it grow our market yeah. It does in the sense that it makes it.

It much easier for customers to adopt our products and so what we're seeing is some examples of where customers may not have.

A history using MPG A's and may not have a lot of comfort with LPG age by providing them a complete solution stack I'm, we're able to help those customers switched our devices very easily. So for instance switch from a microcontroller device over to our devices along with our software solution stack. So it helps.

New customers make that transition more easy and then also as you mentioned it does create a much more sticky sticking it with our customers as they integrate that software into their system level software that makes our solution is very sticky over a multi generational basis.

Great. That's really helpful. Thank you and I had a question follow up question on the gross margins. If I may as you kind of you know a.

Approach see you know that the the the low sixtys and I and I apologize I forgot your target gross margin was 62% or 60% plus maybe if you could just remind us of of that longer term gross margin target is as you approach that is that do you do you think about re.

Valuating that target is there.

<unk> limited in the low 60 range or is you know other you know like signings I think is in the high Sixtys for.

For another you know a PPA benchmark. There is that is there is there like a physical limit to the gross margin here or is this kind of you know your initial target is that kind of like a.

A milestone that you work towards and then you reassess as you as you head. Thank you yeah.

Yeah. Thanks, Thanks, Mark Yeah, it's more as you just summarized I think thats, an initial milestone and we'll reassess once we've achieved that milestone just to be clear and so was the target that we had put out was greater than 62%. We had shared that time at our Investor day back in May of 2019, and clearly we've made significant.

Progress since then I mean, just this most recent quarter in Q3 gross margins went up I think it was 170 basis points year over year. So we remain focused on continuing to expand gross margins are obviously, our first focus is to get to that greater than 62% targets and I think once we get there.

We'll re evaluate you know what a what the target should be but I don't see ER as you would call. It a hard limit that 62, I think there's there's room beyond that to but we will share that once we get past the 62 milestones and just as a reminder of the gross margin expansion kind of where that is.

Coming from is a part of it as our pricing optimization strategy. We built that strategy out in late 2018, we started implementing that to 2019 that continues to yield benefits and we continue.

To drive that strategy moving forward.

That strategy is really about making sure that our products are priced there for the right value in the market. They bring a significant amount of differentiation to our customers. We want to make sure those products are priced correctly in the market place and then the other part to the gross margin expansion has been.

The road map of product cost improvements that we've had so we've had a multiyear roadmap of product cost improvements, we've been executing to it and that's the other piece.

Portion or the other driver of the gross margin expansion and then there's been some mix change as well, but the two main drivers said that pricing optimization product cost improvements.

Gotcha. Thank you very much.

Your next question is from Christopher Rolland of Susquehanna. Your line is now open.

Hey, guys. Thanks for the question I guess first on the industrial ought to be I was wondering if maybe we could isolate automotive more specifically here, how how big is that.

And then perhaps if you could talk about the kind of sequential but bounced back we had for automotive more specifically here and and what applications might be driving that thanks.

Yeah. Thanks, Chris.

In industrial idle Shabad segment for US is the vast majority of the revenue is industrial automotive is still a pretty small part of that segment. Although we did we do see automotive is a long term growth driver for us and we have a healthy design win funnel in automotive electronics were getting designed into a number of different.

New types of applications in automotive electronics of course that part of the market ramps slowly those are long a long time to revenue design wins cycles I'm sure.

So it drives more long term growth, but we do see it as a good long term growth driver, but as it for today. Its that segment is mostly industrial so that sequential.

Prudent that a that we saw from from Q2 to Q3 of 8% up sequentially or 14% up year over year, that's almost all driven by industrial and and I would say a couple of things going on there in terms of the sequential improvement. If you recall back in Q2, we did see some softness in end.

Estriol related to COVID-19, and the mark to market impact of COVID-19, we started to see that end market demand strengthened a in Q3. So that was good to see industrial end market demand strengthened but on top of that there's flattish growth in the industrial segment.

In applications like industrial automation robotics industrial safety embedded vision, that's growing on top of that that end market improvement. So we're quite pleased with the overall progress that we've been making in industrial and automotive and.

Like our performance in this segment has been quite strong despite the COVID-19 backed.

Backdrop this year.

Okay.

And I guess, one for Sherri too.

For licensing almost kind of unexpectedly strong I'm, assuming nothing's changed here.

With with licensing if their house I'd love to know about any updates there, but you know I think it was 150 basis point benefit there to gross margin for the quarter Sherri I don't know if you have any thoughts on that.

How gross margins kind of flowed here, if you ex out that benefit maybe versus expectations.

Yeah. Thank you.

I think the question so in terms of the lower.

Higher rather IP licensing revenue in Q3 versus what we had expected it it did come in higher than we expected on this.

This area can be difficult to forecast.

When we look at Q4, we expect it to be more in the normal range of three to 5 million versus versus a slightly higher amounts than it was in Q3. When you look at the the product gross margin. It was down about 60 basis points sequentially. So when you exclude the IP a component that you mentioned and that was down sequentially.

But if you remember in our Q2 earnings call. We said that we anticipated that we would experience some gross margin headwinds within our market segments and that's ultimately what happened and so when you look at our product gross margin year over year, we saw an increase of 170 basis points and that's really coming from our gross margin expansion strategy is.

Jim mentioned with pricing optimization quite a cost reductions and some mix. So as we continue to execute our long term model of greater than 62% that we laid out in our at our analyst day next year that that's the way to think about that.

Thanks, Jerry Thanks, guys.

Sure.

Your next question is from Alessandro William.

William Blair. Your line is now open.

Hey, everyone. Congratulations on a on a great quarter Sherri I have a question for you is as well if you can it looks like your dsos decreased nicely this quarter from last quarter, a if I recall I believe last quarter you had some one time things like due to supply constraint.

James and mix and backend nature.

As of the quarter, but can you maybe remind us how we should be thinking about the D.S. so target going forward.

[noise], Yeah, I think I. Thank you for the question, Alex though we did see D.S.L. improvement in Q3, we have the improvement of 14 days, we achieved 65 D. S. Though we ended the quarter and that was really due to improved shipment linearity as you referenced in Q2, we did experience a supplier.

Constraints within the supply chain due to public 19th restrictions. So our ops team worked through those constraints last quarter, and really enabling them to generate an improvement and shipment linearity in Q3, and that's what generates a 14 day improvement during the quarter.

We're going to continue to work on improving our D.S., though.

But there can be fluctuations on a quarterly basis, just didnt due to the timing of when our customers what they want the product, but we <unk>. Our goal is to to generate further improvements there and but again there could be some fluctuations on a quarterly basis.

Great. Thank you that's it that's helpful. And then similarly on the operating expense line Lattus has done a tremendous job sort of keeping those in shock and and in coming in sort of at the lower end or or better than expected as we look forward to next year and the continued new product introductions.

Wow, it's at times, they gaining traction and.

Potentially new and Martik <unk> end markets and verticals, how should we think about opex growth relative to two maybe a revenue growth for or some other metric.

Yes, so the way the way we look at Opex I'll comment on the short term and then kind of I direct you to our to our long term model that we laid out at our analyst day last year.

During the quarter Opex spending was down we had some spending efficiencies as well as some benefits from lower payroll taxes.

When we looked to our Q4 guide, which is a slightly higher at the midpoint.

And that's going to be due to primarily to due to program costs are higher program costs as we rollout. Our you know our nexus that product in Q4 that Jim mentioned.

And then when you look into you know further out beyond beyond the next quarter at our analyst day last year, we talked about our goal for opex to be at 35%. So we're actually up 35% in Q3, but what we are going to continue working on it sort of dialing in on the mix between R&D enough CMO and so the goal that we laid out.

Last year was a 15% target for S. DNA, and then for R&D to be around 20%.

And so we've got a little ways to go on asking I forget yet further down to the 15% a goal, but that's how you can think about overall opex target of 35% and then within that the R&D and that's DNA composition.

Okay, great. Thank you that's it for me.

Your next question is from sense Mosesmann hospitals and lets your line is now open.

Yeah. Thanks, Congrats guys good execution, Jim I don't know, if you've ever kind of split out.

On the computing side of your data center business specifically between.

Your Oh geez that are aligned with the actual motherboard or server GPU and say acceleration a six a jeep user network interface cards and storage I'm not sure if you've done that but if you could provide us some flavor of your exposure in those other markets that seem to be growing quite nicely.

Yeah, I'd say, yeah, we haven't broken that out I would say most of the revenue, though is associated with LPG age on the vein CPQ Board I'm, usually doing control or security type functionality on main cheap you a motherboard. Although we are used on other cards as well so where are you.

Who's done a daughter cards.

Accelerator cards, and and other type of sort of ancillary cards ancillary to the main motherboard, but.

But I would say that most of the revenue is from that part of the market is driven from the mean CP motherboard.

Okay.

On why way can you give us a reference point since there's no part of why we included in your outlook for Q4, how much was it roughly in Q3 and also Q2, just as a reference point.

Yeah, maybe I'll just give you the full year since since we know what a while we revenue is going to be at this point given that we haven't we haven't assumed any for Q4.

Wally revenue for this year would have been let's say low single digits. This year kind of in the in the 2%, maybe 2% to 3% range from low single digits.

Okay. That's.

That's helpful and then the last question I have.

On five Gee I don't know if you I I may have missed it.

How is that two here.

End market doing for you guys, but it's an area of penetration or market share gains or any update there would be helpful.

Yeah, Hans on Fiveg or we were pleased again in Q3 Fiveg grew from a year over year standpoint, we've seen really good growth in revenue for Fiveg through the first three quarters of this year relative to last year was a nice growth contributor.

This year and we expect it to grow again next year.

It's still early in the Fiveg rollout cycle. If you look at world wide deployments were still early in that cycle and again, we've got 30% more content in a fiveg base station than we did in afford you use we expect it to be a good long term growth driver good multiyear growth driver for us.

As you know as deployments happened worldwide over the coming years.

Okay. Thanks, a lot.

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

Hi, Richard if you're speaking you might be on mute a tweak in Ontario.

So Richard Richard.

Richard we can't area.

Richard Shannon. Your line is now open you may ask your question.

Once again he asked a question. Please press star one on your telephone.

Operator, do you want to go ahead and move to the next caller.

There's no further questions I would like to turn it back to Mr.

<unk> Sturgeon Anderson CEO.

Any further comments.

Okay. Thank you operator, and thanks, everybody for being on the call today with US. We are pleased with our continued progress, but we have a lot more work to do as we unlock the full potential of flattish. We're excited about the future lattice and we remain focused on consistent execution in both our business strategy and our product roadmaps. Thanks, everybody for joining us today.

Operator that concludes todays call.

Ladies and gentlemen, thank you for participating.

You may now disconnect.

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