Q1 2021 Broadcom Inc Earnings Call

Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

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Okay.

Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

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Welcome to Broadcom, Inc. First quarter fiscal year 2021 financial results conference call at this time for opening remarks, and introductions I would like to turn the call over to G. U director of Investor Relations of Broadcom, Inc. Please go ahead ma'am.

Thank you operator, and good afternoon, everyone. Joining me on today's call are Hock Tan President and CEO, Kirsten Spears, Chief Financial Officer, Tom Krause, President of infrastructure software group and Charlie Collier, Chief operating officer.

Broadcom also distribute the press release and financial tables. After the market closed describing our financial performance for the first quarter of fiscal year 'twenty. One if you did not receive a copy you may obtain the information from the investors section of Broadcom for website at Dotcom dotcom.

This conference call is being webcast live and the recording will be available via telephone playback for one week it.

It will also be archived in the investors section of on website at Broadcom Dot com.

During the prepared comments Hakan, Kirsten who will be providing details of our first quarter of fiscal year 'twenty one results guidance for our second quarter as well on the commentary regarding the business environment.

We will take questions. After the end of our prepared comments.

Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward looking statements made on this call.

In addition to the U S GAAP reporting that kind of course of.

Certain financial measures on the non-GAAP basis of.

A reconciliation between GAAP and non-GAAP measure is included in the tables attached to todays press release.

Comments made today during today's call will primarily refer to are non-GAAP financial results I'll now turn the call over to Hock.

Thank you Jim.

And thank you everyone for joining us today.

We delivered net revenue of $6 $7 billion.

Up 14% year on year semi.

Semiconductor solutions revenue was $4 9 billion, increasing 17% year on year.

Infrastructure software revenue was $1 7 billion.

5% year on year.

Let me turn first to semiconductor solutions.

But before I get into the numbers, perhaps it would be very constructive for me to give you my perspective.

On the situation today.

And in the thing.

It's actually true evolved over the past nine months.

You may recall in our earnings call.

Q2 fiscal 'twenty around the middle of last year that we highlighted.

Supply chain supply chain challenges.

Since then.

We have stopped the extending lead times across our product portfolio.

We stretch this lead times further over the past nine months.

We saw on the mend within the end markets.

The increase.

So for the fast forward to today.

We see customers.

The salary thing the of bookings for early deliveries and the attempting to build buffers.

And creating the demand supply balance you're all here all day.

And then the station of this phenomena.

We put in place in mid 'twenty 'twenty of.

Very rigorous discipline discipline process of.

Our fully reviewing of backlog.

I didn't define real end user demand and aligning our supply chain to more closely match and use the consumption.

Of course, not all end markets are behaving the same way.

But we believed.

We have done a very good job.

And all of balancing demand and supply you know end markets and what I'm reporting today.

That's the reason bleed reflect.

What's being consumed by the end users.

With that let me get into the numbers.

In semiconductors, we.

Grew 17% year on year organically.

Starting with wireless.

We hit the seasonal peak in Q1.

One of wireless was up 52% year on year on.

And reach 40% of semiconductor revenue mix.

These sharp increase was in large part due to a higher content.

And bond content, what's up and.

And we ship in the high volume Wifi six.

And Wifi six E. The next generation of Wi Fi six.

And for expected.

Q2 wireless revenue will now show a typical seasonal decline sequentially.

The net anticipated revenues will be up 30% to 40% year on year.

And as we look into the second half of the year.

We're planning for typical revenue revenue in.

In this space and structuring our in house of bus that capacity appropriately.

These should result in sustaining the year on year growth trend.

We now see into true through the second half of the year.

Moving on net working represented approximately 29% of our semiconductor solution revenue in the quarter and grew 15% year on year the.

Demand is strong.

Or even largely by data center spend in the cloud and global Telcos, who continue to upgrade the infrastructure and networks.

Sustainability of this strength is evidenced by bookings.

As the John 80% year on year and 62% sequentially.

Demand for switching and routing platforms.

Both of the current and next generation is robust.

But as anticipated our.

Uh huh.

GPU business.

Well the seasonally down this quarter.

Moving on to Q2, we expect net working to be up sequentially and continuing the trend of being up year on year driven by continued strength, we see in club and telcos offset partially by continued weakness in the endo.

Price.

Turning to broadband, which represented approximately 15% of semiconductor solutions.

Revenue was up 8% year on year, driven by the work from home environment multiple telcos Euro in Europe, and the U S continued rollout pawn and cable DOCSIS.

Embedded in this wire line.

Gateways.

Our next generation Wifi six access points.

South zones in the enterprise well, it's more than offset by the strong demand from retail home routers, even as telcos continued to Spain.

Looking at Q2.

We are enabling the launch of new Wi Fi six enabled platforms.

Of higher value content for North American and European Telcos.

The result.

We do see demand accelerating consumption and the end consumption, increasing and we expect to generate double digit year on year revenue growth in broadband.

Server storage connectivity represented approximately 12% of Q1 semiconductor revenue.

The segment is luxury driven by enterprise demand as we know and not surprisingly server storage revenue was down 22% year on year, reflecting continued softness in the end user demand.

As well as all year ends of original equipment manufacturers depleting the inventory in this space, while bookings kind of improve.

These are largely for the man in the second half and accordingly, we expect revenue in Q2, the continued to be down year over year by double digit percentage.

However, we do expect some recovery.

Based on our bookings received in the second half.

And finally industrial represented approximately 4% of Q1 semiconductor solution revenue.

Resales grew per day.

The percentage year over year in Q1, driven by a recovery of most of multiple economic sectors in China.

Turning to Q2, we expect <unk> sales to grow at roughly the same level as receipt of recovering now occurring as well in Japan and Europe.

Inventory in the channel for US continues to deplete and we may have to increase shipments and revenues to replenish channel inventory this quarter.

So in summary semiconductor solution revenue segment revenue was up 17% year on year in Q1 Q2.

We expect this year over year percentage revenue to continue.

And the similar around the similar among inspite of the seasonal decline in wireless the.

It looks now is relatively strong trend appears to be sustaining through most of twin peaks for a new one.

However, you know view is very high and unusual secular growth rate, mainly highlight and accelerated the adoption of our connectivity platforms during the spend.

[noise].

Turning to our other segment software.

Q1.

'twenty 'twenty, one was our first quarter debt on a year on year basis.

<unk> provides and the gaming comparison following the cement acquisition in <unk>.

Q1 infrastructure software revenue growth was 5% year on year.

In dollar terms bookings average of 122% all the expiring contracts.

While core accounts or average 137 per se.

Now over 90% of these bookings represented recurring subscription and maintenance.

Our strategy of focusing on core accounts continues to perform well as we cross sell of portfolio of software tools.

The other was our software portfolio continues to perform as we had the plan and continues to be on track with our long term financial model for gaming software revenue growth of around mid single digit percentage year over year, and that's something that we expect the continued to see.

In Q2.

So in summary of Q1 consolidated revenue net revenue grew 14% year on year.

Bank of similar growth trajectory in Q2, which could bring revenue to $6 5 billion all of our 13% year on year growth.

So with that I'll now turn the call over to Chris.

Thank you hock.

Let me now provide additional detail on our financial performance net.

Revenue was a record $6 7 billion for the quarter.

Teen percent from a year ago.

Gross margins were 73% of revenue on the quarter and up approximately 30 basis points on here on.

Operating expenses were $1 1 billion down 8% year on year reflective of the full benefit of the completed the Symantec integration.

Operating income from continuing operations for the quarter was $3 8 billion and is up 23% from a year ago.

Operating margin was 57 per cent of revenue up 420 basis points year on year adjust.

Adjusted EBITDA was $3 9 billion, 59% of revenue this figure excludes the 138 million of depreciation.

Now over at the new of the P&L for our two segments.

Revenue for semiconductor solutions was $4 9 billion and represented 74% of total revenue in the quarter. This was up 17% year on year.

Gross.

<unk> for semiconductor solutions were approximately 67% in the quarter up to 20 basis points year on year, notwithstanding the higher mix of lower margin wireless revenue.

Operating expenses for $750 million in Q1 down 3% year on year as we invested in R&D and streamline SG&A.

Cause of this operating margins increased to 52 per cent in Q1 of 350 basis points year on year. So while semiconductor revenue was up 17% operating profit grew 25% all organic.

Moving to the P&L for our infrastructure software segment.

Revenue for infrastructure software was $1 7 billion and represented 26 percentage of revenue this was up 5% year on year.

Gross margins for infrastructure software, we're 90% on the quarter up 190 basis points year over year on.

Operating expenses were $346 million on the quarter down 18% year on year as we completed the integration of Symantec.

Operating profit was up 17% year on year on top line growth of 5%.

Hurting margins of 70% in Q1 of 740 basis points year on.

Per year.

Moving to cash flow.

Free cash flow on the first quarter was approximately 3 billion, representing a 45% of revenue.

This is up 35 per cent year over year as we carefully managed working capital days sales outstanding for 35 days in the first quarter compared to 57 days a year ago. We ended the quarter with the inventory of 952 million a decrease of $51 million of 5% from the end of the prior quarter.

We should also note in Q1, we spend of 114 million on capital expenditures.

On the financing front, we extended our weighted average debt maturity of approximately nine years from six by issuing notes that we used to refinance unredeemed existing debt.

The average coupon increased about 23 basis points to three eight per cent.

We ended the quarter with $9 6 billion of cash and $41 9 billion of debt of which.

$843 million of short term.

Turning to capital allocation in the quarter, we paid our common stockholders was $1 5 billion of cash dividend. We also paid $225 million of withholding taxes due on vesting of employee equity, resulting in the elimination of approximately 521000 E. P. G O shares.

We ended the quarter with 408 million outstanding common shares and 450 million diluted shares note that we expect the diluted share count for me $450 million in Q2.

Based on current the current business trends and conditions our guidance for the second quarter of fiscal 'twenty. One is for consolidated net revenues of $6 5 billion and adjusted EBITDA of approximately 59% of projected revenue.

That concludes my prepared remarks, operator, please open up the call for questions.

Thank you, ladies and gentlemen to ask the question you will meet the press star one on your telephone we ask that you. Please limit yourself to one question to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Our first question will come from Ross Seymore with Deutsche Bank. Please go ahead.

Hi, guys. Thanks for letting me ask the question Hock some good color on the supply side of the equation in a little bit about your lead times, extending I wanted to dive a little bit into that last quarter, you talked about of backlog I think the number was $14 billion can you talk a little bit about the composition of your backlog today, how it is.

On an absolute level and the sustainability of it as investors are wondering if if the demand is just too good to be sustainable and what does it mean to.

Excess bookings double ordering that sort of inventory digestion that will inevitably follow thereafter.

Oh, well that's a very interesting question on the very very appropriate question and at this time.

And it's the same.

We have had as I indicated we started this process nine almost nine months ago.

Of course, we are seeing the main debt.

Quite strong and and and we start the process of thinking how we balance.

The insurer very very good use of the outlook.

Supply chain capacity.

And basically as I said, we went through this process of rigorously drunk scrubbing, our backlog and by the way on entire bank law virtually and dial back book.

Fall of set of terms of the key set of things we've mentioned before which is noncancelable for any of the customers who book those.

And they still applying more so than ever so double bookings from my point of view is not it's never been the nishu.

And as we stretch out lead times, we have seen customers obviously.

Book.

For the delivery dates for customer request dates that are for the al So that makes sense too and that's why it makes the process of creating of being able to.

Mitch.

Customer consumption close of our schools as we could do it the gains what we supply.

To be to be something that makes sense.

And we've done debt and I think we are fairly.

You know, we could always do better, but we feel pretty good that we have the reasonable process in place that represent ensures that our customers get their products.

And maybe just in time, but they do get the products when they need it.

And when we believe we have managed this process of.

Supply demand imbalance of fairly for very very well as I indicated and in fact.

To repeat the point of highlight the although the revenue yield.

Year on year in Q1 was on.

17%.

But as I also indicated our bookings.

Well, it's up 63%.

That by itself <unk>.

Days of lot of demand and people are booking out very far we are virtually 90% booked for 2021.

And I view laid out what we need and we believe.

From this Israel the go.

They can pencil it and obviously in order to do reach that point to your one of your points.

Hence all day long as we begin to the Q2 increase from when we began Q1, yes. It is.

The enhanced and quite significantly.

As we start to see lead times, even stretch out more and the strength.

We believe alpha products.

The only products debt income button and cash.

And used to be but what is coming down the pike as next generation products, which have already released but we await launching.

Is proven by the think that we have customers many of them and reflecting the back book, while willing to book.

For the delivery of those products.

Got it through the rest of 2021.

Thank you. Our next question will come from Harlan sur with Jpmorgan. Please go ahead.

Good afternoon. Thanks for taking my question Hock, you know the biggest concern by investors like knowledge the ability to drive growth in the seasonally stronger second half of your fiscal year year of July and October quarters. When you start the ramped into your flagship smartphone customers. If I just apply normal seasonal trends in the wireless combined.

With lets say sustained networking strength and as you mentioned recovery in storage that would get any revenues in the second half and that sort of 677 billion dollar range now I'm not asking you to endorse those numbers, but I guess the question is from a supply chain perspective has the team secured enough capacity.

To drive higher revenues in July and October quarter, if your backlog supported that profile.

Yeah.

If you on really asking me to guide you on that in June and I'm not guiding you on.

I do understand your question and you have seen in my prepared remarks.

Just the earlier of where we see ourselves playing.

The other trend the goal we have I've also specifically mentioned, where we are manufacturing life and for in house, which is a big part of of what is the up cycle in the seasonal up cycle in the back half on the on the.

Wireless site that we have put in place the capacity to handle it.

The simple answer to your question is yes, we have done the decent Jiang as I say over the last six months and we can stay on what to do a decent jump of being able to meet.

Our credit the critical needs of all of our customers.

Thank you. Our next question will come from Vivek Arya with Bank of America Securities Go ahead. Please.

Thanks for taking my question Hock, you mentioned you expected the study, 40% kind of feet on the growth rates in wireless to sustain in the back half I was hoping if you could give us some color on what kind of content growth you are expecting this.

This year and then looking forward how much does broadcom benefit from all of these the C band spectrum auctions that were conducted recently I assume that's more of an out of the benefit.

On the latter part yes, he has announced the fifth thing doesn't get implemented so fast and on the formal part of your question I kind of answered that.

I'm sorry.

And for fall of this reasons.

It's too early we'll tell you about it when the time is the appropriate thank you.

Thank you. Our next question will come from John Pitzer with Credit Suisse. Please go ahead.

Yes. Thanks for let me ask the question Hock I just want to get back to the supply demand imbalance you did a really good job kind of explaining how you guys are trying to call. Your backlog of I'm kind of curious as you look out over the next couple of quarters. What do you think supply will catch up to demand enough such that your customers don't feel obligated to have to.

Bill debt cushion.

And on the way on the question answering that question. John I think is when do you see lead time to reduce Alan maybe it does not reduce and perhaps normalize.

And that's probably the other way of looking at debt equation.

And.

Right now I don't know the answer to the what we.

We have extended lead time to day in place and we've been extending the lead time over the past several months as I indicated.

And the and we have unfairly.

On fairly extended lead times per day, and we're getting the bookings from the pass through and when the book booking disappeared, it's probably when you'd know you'll hit the two a situation of.

All of the men starting to disappear.

We have not reached that point yet.

Far from it at this point.

Thank you. Our next question will come from Stacy <unk> with Bernstein Research. Please go ahead.

Hi, guys. Thanks for taking my question so.

So hock you, you're saying that you're stretching of lead times I get it but I think before you told us the lead times were six months. So if you're stretching them out where are they actually sit in today and how does that maybe vary by end market and I guess to that end.

You said, you're kind of convinced of what you're shipping out of sort of represents the end user consumption. How do you actually have any visibility into that and do you think the users I mean, the or the part of it is actually going into end products. How do you know the users on stockpile of them.

In order of ordering them quite well the WOMAC him Howdy.

How do you have any visibility into what they're doing with them.

That's a hell of a good question and by the way and it cuts the true until the book to.

To the core of the work we've been doing the never been working hard the simply because the one is.

Don't forget we supply we do supply of I mean, we supply a range of products and we do supply to a bunch of customers, but keep in mind.

Hey, if I could remind you of the.

Of the business model with Bill on the.

On the structure would go up.

We.

Provide thank Noel gene leadership.

In multiple verticals.

Mostly connectivity into the space.

Where are we on where the lead it weighted the way we play we tend to be leader and we play with leading customers worldwide.

We know who those guys. So we know the level of consumption.

And in some in many of areas, where we go and we're talking and user demand, we're not talking about middle people middlemen like distributors for show we indicate that we don't fall of leading customers. We don't go through distributors and for OA Ames true.

But because of who they sell debt and diminish that dose for our products.

Two is the way it count at the end of the day and in many cases of the wet in the in one segment in particular for the storage by the also a place of Tau.

To some extent and part of our networking business and to a much lesser of explained in the broadband business for sure.

We actually see the difference.

In terms of whether it's just the inventory depletion at all regional equipment manufacturers.

I'll, even buffer of inventory sitting in end users versus actually using the product.

In the same quarter, we ship them the product we checked it.

And that's really for us, it's not that complex when you're thinking about of revenues.

In semiconductors.

75% of about on the revenues.

Really goes to just over 100.

Customers worldwide.

We can take the.

Thank you. Our next question will come from Craig Hinton book with Morgan Stanley. Please go ahead.

Yes, I appreciate the color on the software bookings relative to revenue you know now that you have for Mantech for a year and see a for a couple of years can you just talk about the the confidence of the growth rates on a longer term basis that you're talking about I know you touched on the 90% recurring but just really how the the global large accounts.

Or kind of.

You know how that transition is playing out.

Yes.

As I indicated in my prepared remarks on some of the key metrics of the goldmine.

Very very good about those two we feel very good that the day.

Things are moving along.

Tracking along the way we the.

Both of the business of financial model, where we expect them to go which is about focusing on call customers and truly.

Uplifting capacity entitlements products to those call tough for most of cross our portfolio and then and you've seen the metrics we indicated the increase and on non call. You are also weak.

While we don't see what I've said previously is we do see a level of attrition manner.

Manageable, but it will and then stay of treat but on balance offset by improvement in call. We expect to be able to reach of stabilization as I say around mid single digits on the very consistent basis.

And we have seen that two years the home that we have gone through over two years, though and we've seen that happen and we have seen a great eight quarters.

Nine quarters to be exact of debt level of performance and growth is a great line of sight the.

All of the thing on my end debt. It's also interesting and I know the stating the obvious for some extent.

Most of all of our customers if not all of them are.

Enterprises.

Even in this environment you heard one of its all by and the price in semiconductors and how.

On the approach of the different approach the different characteristics of the Ava enterprises have in terms of demand requirements in this environment.

All of the pandemic work from home to compared to tell Coles broadband and public cloud.

We don't see that in softwood in the infrastructure software if we had simply because these are mission.

Mission critical products tools and embedded in the business process of this largest enterprises in the world.

If anything else the only move this environment.

On the SKU more of those products.

Other than that.

Thank you. Our next question will come from Timothy Arcuri with UBS. Please go ahead.

Hi, Thanks, a lot I guess I also had a question on the supply demand.

Hock orders, obviously were up quite a bit in fiscal Q1 Q.

Q on Q.

Given that revenue was up in backlog I think he said it was up significantly. So as you look into fiscal Q2 wireless orders are obviously going to come down a lot. So I'm wondering if orders in the other parts of the business are going to be strong and as such the total orders will be up.

The fiscal Q2 again thanks.

The team.

If we're talking about when you say all of those.

I hear you say all of those let me be the let.

Let me say the orders actually ramp up.

To this day.

Is this current generation of Oleds for a large north American customer as we ramp it up for this current generation.

Bookings.

Started ramping up.

As early as of Q3 really shot up in Q4 and start the declining late Q4 and Q1.

The bookings that's already declining and when I index indicate the Q1 bookings year on year the improvement of 80%.

And the one I'm also saying is that is netting out of decline in bookings of our wireless in the fairly substantial man.

It would.

Thanks, Susan the only so the answer is yes, what we have seen one on one of them reflecting out to you guys finish all of those bookings of revenue is.

The bookings.

We are showing in Q1.

Which is fairly strong.

The flanks.

Declining bookings in the wireless as we all fully expect seasonally in debt during that timeframe.

Thank you. Our next question will come from Toshi Hari with Goldman Sachs. Please go ahead.

Thanks, so much for taking the question Hock I wanted to ask about capital allocation the dividend component is pretty predictable, but outside of the dividend how are you thinking about paying.

Paying down debt buying back stock and M&A in software.

On the markets are clearly very volatile right now, but how are you thinking about those three buckets on a relative basis. Thank you.

That's a very interesting question and I was wondering when on one of your guys will get the debt and sure enough Youre right. We are accumulating cash and use you heard kiss the mentioned it we are generating cash.

In Q1, we generated $3 billion of cash.

And that was the Q1 of them. So what is the time, we pay out bonuses to all of our employees. So he might affect the normalized that that's the.

Bob.

With generally thing at $3 1 billion of quarter.

Is the free cash flow so he's building half of it.

Both the dividends almost half of it as you correctly say so the pre determined.

And the other half for now we are putting into and increase increasing cash portfolio and your range.

We on the <unk> business model and strategy as you know long term is to.

Quiet.

And and and and on to our portfolio and on the earnings stream for our shareholders.

And we think the very seriously and we continue to look at it very seriously.

And so and debt this takes time.

And we're continuing to look at it and we will take the approach.

My point on my point that we would be somewhat flexible to debt as we accumulate cash and need by end of this kellan the physical yeah.

Are we ever done on acquisition will obviously.

Take a hard look at.

After one of the choices one is paid on debt and that may even happen before then pay down debt, but interest rates are very low and money is already available and we're still investment grade.

And the other alternative is buy back shares and all of these are open.

Yeah.

Thank you. Our next question will come from Blayne Curtis with Barclays. Please go ahead.

Hey, good afternoon, Thanks for taking my question Hock.

I was just curious a little bit more on the wireless we don't have the right compared year over year.

If you just give us a little color as to what you're expecting I, just don't know what that 30% to 40% year over year of really kind.

It kind of compares to maybe just some color as to what Youre seeing for net wireless channel.

The first normal seasonal patterns that would help us kind of dialing that sort of what youre really saying for April.

Well Anthony.

Indicators in my opening in my prepared remarks, when it comes to wireless digital for the 2021 don't forget day is some.

Timing adjustment by quarter to bleeding in the sense that the.

What used to be of peak quarter.

In all of the wireless seasonality of of fiscal Q4.

In the this recent generation the peak quarter as I indicated of became Q1 of 'twenty one.

So obviously things roll down, perhaps somewhat slow and because we also assuming as it rolls on slowly in the course of fiscal 'twenty One day.

Net.

Are we can we have to assume for lack of knowing no better debt, we might be bank to our normal <unk>.

And on the cadence of a lot of of wireless seasonality of wireless launch on launch of new Neil of phones.

And assume that you will be back to the normal cadence so of 'twenty, one might look on its kind of compressed only thing so in terms of.

Revenue in terms of available.

Availability of for.

Well for market for us to address and then couple debt we've.

Our content increase between 2020 one.

Therefore in the.

Net understand why we stopped when the I indicate that debt for the ramp of 'twenty, one beginning to look like a fairly significant.

Again, 30% to 40% increase on the year on year basis, as we run through each of the remaining quarters of 'twenty one.

Thank you. Our next question will come from C. J Muse with Evercore. Please go ahead.

Yeah. Good afternoon. Thank you for taking the question.

I guess, one wanted to dig a little into your EBITDA margin guidance.

It would suggest that Arthur gross margins are flat, which would not seem likely given the falloff in wireless or Opex is moving higher can you kind of walk through of the moving parts of Marin as part of that can you help us understand how to model of gross margins of opex through the remainder of the fiscal year. Thank you.

So in Q1 of our we said that from the year over year.

Gross margins were up 30 basis points on and that's largely because of wireless. So when you look at Q2, we'll have lots of wireless revenues and the margin mix and so therefore, the look back at Q4.

The model Q2.

And then as you look at margins for the rest of the year the Sim.

Miller.

For Q2, the back of Q4, and then confines of the fact that we'll have you know probably more than normal seasonality on wireless towards the second half.

Thank you. Our next question will come from harsh Kumar with Piper Sandler. Please go ahead.

Yeah, Hey, Thank you Hey, guys congratulation solid numbers Hock I had a question for you on trying to wrap my head around some stunning numbers you true up for networking, 80% of inclusion bookings from 62% of at sequential increase I. Appreciate the process of identifying real demand. So the bank is there something going on in bookings.

But specific to your your end markets show you a product set that is driving it could you just highlight what is going on there.

Yeah, Great question, and I have been dancing around on saying nice what let me call them directly.

People need our products each of our product and particularly whether it's broadband on networking.

Our customers' ally and use of customers.

Truly we need the products I mean, they're in the business day in the business of ex <unk>.

Launching more broadband improving the net was.

On the cloud guidance has the scale out data centers, because that's more of the main for.

On our hosting and demand from public cloud in this work from home environment of social media and also on the line the.

Retail and everything else so on the need to book.

Those products of all of us whether it's the current generation, which we have debt was all seem to be the next generation. So if we stretch on lead time during the extended basis the thing.

And the mine is these are noncancelable all of those the lifestyle needed six months nine months from now they needed. They play for all of them otherwise they are of a gap in being able to scale up capacity of scale all of our launches.

They'll do that.

It's the real tax of how strong.

Our product.

<unk> franchises and how mission critical is it is to our end users.

And so typically that's the way as we stretch on lead times, whether it goes from three months to six months for eight months. They just book what they need eight months out of US three months out for us than six months on and eight months old.

And you only do debt if you truly believe unique the products to enable the business and what I'm trying to say is.

If nothing is nothing more fundamentally there's nothing more fundamental bin.

Why we are seeing as we stretch out lead times, because we match it against the ability to get those products of all.

He is a great way to indicate whether all products.

The need.

And the.

They don't need it now as much as the book as soon as people might seem to indicate they may need at three and six months from now, but they are willing to locking and see they need it so that we can.

Many of our supply chain to get them that those product, which is why most of the <unk> the management of our supply chain for Mitch.

The men, it's not that extreme manganese simple as maybe meet all day and debt.

You hit the wrong, it's all about being able to tell their customers and get your of customers to behave in the rational manner.

And for us to manage it in the rash of amendment.

I mean, if I should ease of mind ship on line hub of mine type backlog today, assuming I couldn't even do that of course, they will take it because they're on the pending mode.

But on the other side they know they can get the when they needed six months from now on the happy to wait until then Meanwhile, on the book. It ahead of time, because that's what I need to reserve my capacity.

And that.

The perspective I want to get for you guys. It is one of it is not of panic mode. This is a very structured.

And reads on both process, which we believe at the end of it all still shows and the.

The real underlying demand.

And the way we want to report it.

Oh.

Ladies and gentlemen, thank you for participating in today's question and answer session I would now like to turn the call back over the Miss you for closing remarks.

Thank you operator in closing please note that Broadcom and Morgan Stanley will be hosting of presentation on our broadband business on Monday April 12th after market close Hock will be joined by Rich Nelson and Greg Fisher General managers of our broadband businesses.

That will conclude our earnings call today. Thank you all for joining operator, you may end the call.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Tom.

One of them.

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