Q4 2021 Semtech Corp Earnings Call
Greetings and welcome to the some Tech Corp, Q4 fiscal year 'twenty one earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being run.
It is now my pleasure to introduce your host Sandy Harrison Vice President of Investor Relations. Thank you Sandy you may begin.
Thank you Paul and welcome to <unk> conference call to discuss the financial results for our fourth quarter on fiscal year 'twenty. One speakers for today's call will be more on mass war on some tax President Chief Executive Officer on the Massachusetts, <unk>, our Chief Financial Officer.
Yes release announcing our unaudited results was issued after the market closed today and is available on our website on some tech dot com.
Today's call will include forward looking statements that include risks and uncertainties that could cause actual results to differ materially from the results anticipated in these statements for a more detailed discussion of these risks uncertainties. Please review the Safe Harbor statement included in today's press release, and then the other risk factors section of our most.
Recent periodic reports filed with Securities and Exchange Commission as a reminder, comments made on today's call are current as of today only that's on.
<unk> undertakes no obligation to update the information from this call should facts or circumstances change during the call. We refer to non-GAAP financial measures that are not prepared in accordance with generally accepted accounting principles. All references made to financial results and bonds and the Max's prepared remarks during this call.
Refer to non-GAAP financial measures unless otherwise noted on <unk>.
Gosh of why the management team considers such non-GAAP financial measures useful along with detailed reconciliations of such non-GAAP measures to the most comparable GAAP measures are included in today's press release.
With that I will turn the call over to <unk>, Chief financial officer of magnitude Mecca.
Yes.
Thank you Sandy and good afternoon, everyone.
For Q4 fiscal 'twenty, one net sales was 164 7 million dogs.
Which came in above the upper end of our guidance.
This represented a 7% sequential increase of 19% growth total body same period a year ago.
Despite the challenges presented earlier in the year by the pandemic.
Fiscal year 'twenty, one and that's true increased 9% to 500 on 95 $1 million driven by the strength of the underlying secular themes driving our growth engines.
In Q4 shipments into Asia represent debt. So looking at 8% up net sales North America represented 12% on Europe represented 9%.
Total direct sales represented approximately 13% on.
On sales to distribution represented approximately 87 per cent.
Our distribution business remains balanced with 33% on the total appeal is coming from the high end consumer end market.
Sorry, 7% coming from the infrastructure and what day and 30% from the industrial end market.
Q4 bookings increased significantly both on a sequential and year over year basis on what the new quarterly as well off on new record for fiscal year 'twenty one on.
On the resulted in a book to Bill was significantly above one.
But those bookings accounted for approximately 24% of shipments during the quarter.
The bookings.
The threat has continued into Q1.
Q4, GAAP operating expense increased 12% sequentially due to the impact of your 14 week.
Quarter impact of the weaker U S dollar holler on new product, especially if our stock based comp, especially on express.
Loss, yet debt with an increase in our stock price.
We expect our Q1 GAAP operating expense to decline from Q4 on debt it talk to a 13 week quarter low.
Based on price.
Yes.
Slightly offset by the cost of motor reset of expenses associated with the start of the new year hard on new product expenses.
On the impact of the weaker U S dollar.
Q4, GAAP operating expenses was $2 7 million versus.
So it's $1 6 million in Q3, primarily due to the impairments on some of our minority investments and higher foreign exchange losses due to the weaker U S dollar.
In Q4 on a GAAP tax rate was five 5% as a result of more favorable regional mix of income.
In Q1, we expect our GAAP tax rate to range between nine and 11%.
Our GAAP.
Tax rate forecast excludes consideration of impact from discrete items.
Including excess tax benefits are depreciated from the exercise of stock options.
Moving on to the non-GAAP results.
Which exclude the impact on share based compensation on.
Amortization of acquired intangibles acquisition related and other non recurring charges.
Q4, non-GAAP gross margin of 61, five percentage was in line with our expectations.
We expect Q1 non-GAAP gross margin to be generally flat with Q4.
Local is reflecting a higher mix of consumer revenue.
In fiscal year 'twenty, two we expect our gross margins to trend higher from a more favorable mix as we expect much of our revenue book to come from our higher margin growth.
Platforms.
We expect that any increase is due to the global supply.
Genco trips should be mitigated by slower customer pricing reductions on.
In some case these price increases.
As a reminder, on long term gross margin.
So I guess more door is 58 per se to 63 per se.
Q4, non-GAAP operating expense increased 9% to 62 points net 50.
52 per $3 million driven by the impact of the 14th week the negative impact of the weaker U S. Dollar on how that new product expenses.
In Q1, we expect.
Non-GAAP operating expense to be approximately flat with Q4 levels.
The benefits of bringing on more 13 week quarter is offset by higher new product expenses increased payroll expenses associated with the new year.
On the impact of a weaker U S dollar.
For fiscal year 'twenty, two we expect our non-GAAP operating expenses to grow on about a half day rates up on revenue growth.
In fiscal year 'twenty, one non-GAAP operating margin was 23, 4% ex <unk>.
50 basis points increase from fiscal year 'twenty.
We expect to leverage revenue growth stable on the expanding gross margins on a reasonable operating expense growth to drive the operating margin to our target model of 42% to 46 per se.
Yeah.
In Q4, our non-GAAP tax rate decreased to 95%.
As a result of a favorable regional mix of income on discrete tax benefits.
Beginning with our fiscal year 'twenty two results, we will use a non-GAAP normalized.
Tax rate for the full fiscal year.
We believe this will provide better comparability across our portfolio results by reducing the variability and non-GAAP tax rate that can I'll call throughout the year.
We plan to all debt this tax rate annually at the beginning of each fiscal year.
For fiscal year 'twenty two.
Non-GAAP normalized tax rate is 13%.
In fiscal year 'twenty, one cash flow from operations was approximately $119 million or 20% of on net sales on free cash flow was approximately $87 million or 15% of on net sales on a long term.
Target for free cash flow is 25% to 30% of net sales.
We repurchased approximately a $1 6 million or $71 million of our shares in fiscal 'twenty one.
Which represents 82% of our free cash flow.
The board recently increased our stock repurchase authorization by $350 million, resulting in approximately 300 on $8 million to $9 million of outstanding authorization.
We expect to continue to use our cash to opportunistically repurchase our shares make strategic investments on pay down our debt.
Accounts receivable in Q4 represented.
Obviously, some days of sales, which is below our target range of 40 to 45 days.
In Q4 net inventory increase.
12% in absolute dollars from Q3, while days of inventory remained consistent at 118 days I remains a global target range of 90 to 100 days.
In Q1, we expect net inventory to increase in absolute dollars on days to support higher sales on to address the tight supply chain.
In summary, we are very pleased with our solid financial performance in fiscal year 'twenty one despite the many challenges from the pandemic.
Our business fundamentals remain strong and we are well positioned to benefit from this secular drivers in the high growth market of Iot communications infrastructure on mobile devices.
We expect to leverage our stable on the expanding gross margin on a well controlled operating expenses to grow our earnings much faster than the revenue continues to generate.
Strong cash.
Cash flow I will now hand, the call over to Mohan.
Thank you <unk>. Good afternoon, everyone I will discuss our Q4 fiscal year 'twenty, one performance by end market and by product group.
Our fiscal year 'twenty, one performance and then provide our outlook for Q1 on fiscal year 'twenty two.
In Q4 fiscal year 'twenty, one net revenues increased 7% sequentially to $164 $7 million higher demand across all three of our end markets drove better than seasonal Q4 results.
Posted non-GAAP gross margin of 61, 5% and non-GAAP earnings per diluted share of 51.
In Q4 fiscal year 'twenty, one net revenues from the high end consumer market increased 10% sequentially and 32% over the prior year and represented 30% of total revenues Approx.
Approximately 90% of high end consumer net revenues was attributable to mobile devices on approximately 11% was attributable to other consumer systems.
Net revenue from the industrial end market increased 9% sequentially and 25% over the prior year and represented 33% of total net revenues.
Net revenue from the infrastructure end market increased 3% sequentially and 7% over the prior year and represented 37% of total revenues.
I will now discuss the performance of each of our product groups.
In Q4 fiscal year 'twenty, one our signal integrity product group grew 1% sequentially and represented 38% of total revenues.
From the demand from our PON and wireless base station business contributed to the growth.
In Q4 demand from the data center market remained soft as.
As customers continue to consume excess inventory following the strong first half we.
We believe inventory levels have reduced and we are expecting data center revenues to grow in Q1.
Customer activity around at Tri edge, Pam four <unk> remains high and we now have multiple design wins that are in various stages of qualification in 100 gig 200 gig and 400 gig Pam for optical modules.
We expect that play edge revenues increased nicely in FY 'twenty, two as customers move to full production.
Our fiber rich PMD platform, which complements our carriage and triad CVR platforms as well as DSP continues to gain solid momentum from 400 gig and 800 gig Pam optical systems. We are confident that tri edge is lower power lower cost and lower latency together with fiber edge as high performance.
Will enable us to continue to grow our Hyperscale data center business and achieved another record in fiscal year 'twenty two.
In Q4, but all of FY 'twenty, one our PON business grew nicely driven by record 10 gig PON revenues as the ongoing demand for high bandwidth connectivity is resulting in an increase in PON demand globally, while the China market is expected to lead on deployment growth in FY 'twenty two other global.
Service providers, including in the U S, India and Europe have also announced deployment plans that we believe bodes well for our two five gig and 10 gig PON platforms.
<unk> remains a leading supplier to the global on market, providing the most comprehensive PON PMD portfolio.
We expect to have on business to continue to grow and achieved another record performance in FY 'twenty two.
In Q4 of FY 'twenty, one revenue from our wireless base station business increased nicely as a clear edge platform continued to establish a leadership position in <unk> from coal optical modules. We also recently announced the availability of our new Tri edge 50 gig Pam four platform platform targeted at five <unk>.
From Paul optical modules, we believe our established position in <unk>, along with a five day momentum from our nuclear rich and Tri edge platforms targeted at front haul and mid haul optical module applications should enable our wireless base station business to deliver another record performance in FY 'twenty two.
The underlying secular demand driven by the quest for higher bandwidth globally, and Datacenters PON and wireless broadband networks is expected to drive solid growth from our signal integrity product group in Q1 and in fiscal year 'twenty two.
Moving on to our protection product group.
In Q4 of fiscal year 'twenty, one net revenues from our protection product group increased 15% sequentially and 26% over the same period last year and represented 29 percentage of total revenues.
In Q4, our protection consumer business experienced better than seasonal demand led by a recovery in smartphones following the weak start to the year due to COVID-19.
Stronger demand from our Asian smartphone customers, along with record revenue from our North American smartphone customers contributed to the Q4 strength.
In Q4 demand from the broad based industrial markets was also stronger as our protection product group continues to diversify into a broader range of industrial and communications markets, including the automotive and Iot markets.
<unk> is the global leader in high performance protection solutions, and our system designers use more advanced process geometries, the need for more robust protection to protect the sensitive devices will continue to increase.
In addition, many of today's new industrial systems, and mobile platforms are using higher speed interfaces and advanced charging solutions, where high performance protection is required. We believe these secular trends will drive increasing adoption of our protection platforms using mobile systems displays.
Accessories and increasingly across broad based industrial automotive and communications platforms in.
Q1 of fiscal year 'twenty, two we expect our protection revenues to be approximately flat.
Turning to our wireless and sensing product group.
In Q4 of fiscal year 'twenty, one revenues from our wireless and sensing product group increased.
6% sequentially and 32% over the prior year to achieve a new quarterly record and represented 33 percentage of total revenues.
In Q4, our Lora enabled platforms also delivered a new quarterly record and we announced several key initiatives that demonstrate the increasing acceptance of lora in low power Iot applications.
Include the following AWS announced the integration of the Loral land protocol with AWS as Iot Corp. A fully managed service that enables Iot developers to easily connect low power Lora based sensors to the AWS cloud.
Swarm technologies, a global satellite Communications company integrated Lora into that platform that enables two way communications to and from its Leo satellites, Laura is well suited for these long distance low power applications, enabling satellite based use cases from logistics agriculture.
Connected cars and energy.
White track, a developer of real time location and telemetry capabilities integrated lora into its global track and trace platform to enable customers to guarantee delivery times and maintain appropriate temperature on fresh food inside refrigeration units throughout the entire cold chain and.
And referral networks, a provider of IP networking on low power devices announced the use of Lora in its IP mesh tweedy location tracking software.
To help secure naval ports with 20 kilometers sensor connectivity range and 10 year battery life is required.
These are just a few examples of emerging use cases, when low as low power long distance and flexibility demonstrate the value of Lora technology, and enabling a smarter more connected and sustainable planet.
In Q4 fiscal year 'twenty, one we also experienced record quarterly demand for our proximity sensing platforms led by strength from our Asian smartphone customers.
Global RF regulations are increasing the proximity sensing requirements on smartphone manufacturers that wish to compete on a global stage, we expect our proximity sensing business to benefit from these enhanced requirements and recent design win activity and new <unk> smartphones and wearable devices.
Where there are an increasing number of high performance radios being used indicate that our proximity sensing business will continue to grow nicely.
For Q1 on fiscal year 'twenty, two we expect net revenues from our wireless and sensing product to increase and delivered another record quarter led by growth from our Lora business.
Moving on to new products from design wins in Q4 of fiscal year 'twenty. One we released 18, new products and achieved 3080, new design wins.
Now, let me comment briefly on our fiscal year 'twenty, one performance and.
In fiscal year 'twenty, one net revenues increased 9% to $595 $1 million from driven.
Driven by strength from all of that product groups.
In FY 'twenty, one we had 56 new product releases and achieved a new design win record of 11271, new design wins.
In FY 'twenty, one our signal integrity product group grew 15% over the prior year as infrastructure spending increased.
Our Sip product group achieved record bookings and had record 100 gig revenues record <unk> base station revenues and record <unk> 10 gig PON revenues.
We expect these businesses along with our Pam four and pro businesses to all achieved records in FY 'twenty, two and contribute to strong growth in our signal integrity product group in fiscal year 'twenty two.
In FY 'twenty, one our protection product group grew 3% over the prior year as the high end consumer market strengthened and our diversification strategy began to yield results.
We expect our protection business to achieve double digit growth in FY 'twenty two.
Our diversification efforts continue to bear fruit in both the consumer market and the broader industrial automotive and communications markets.
In FY 'twenty, one on wireless and sensing product group grew 6% over the prior year.
Despite the slow start to the year due to COVID-19 are low.
Lora enabled revenue grew 19% to approximately $88 million in FY 'twenty one.
In FY 'twenty, one on Lora business met or exceeded most of the metrics we targeted at the beginning of the year. These.
These metrics included the number of countries with public Lora networks in FY 'twenty, one <unk> to 100 countries from 91 at the end of FY 'twenty.
As Laura is well established in most regions of the World We will no longer report on this specific metric.
The number of public or private Lora network operators grew to 150 at the end of FY 'twenty one from.
133 in FY 'twenty.
And we expect our 165 Lora network operators by the end of FY 'twenty two.
Number of Lora gateways deployed more than doubled from 642000 gateways in FY 'twenty to over $1 3 million gateways at the end of FY 'twenty one.
We expect the number of Lora gateways deployed to increased over 2 million by the end of FY 'twenty two.
The cumulative number of lower end nodes deployed increased to $178 million at the end of FY 'twenty, one from $135 million at the end of FY 'twenty.
We expect and we expect this number to exceed 235 million cumulative end nodes by the end of FY 'twenty two.
More opportunity pipeline, which includes both opportunities and leads ended FY 'twenty, one at approximately $700 million.
We anticipate that on average 40% to 50% of the opportunities currently in the pipeline will convert to deployments over a 24 month timeline.
Our opportunity pipeline is geographically well balanced with use cases, primarily in smart utilities smart logistics on that asset tracking smart home and smart cities at the end of FY 'twenty. Two we are anticipating our total opportunity pipeline should exceed $850 million.
In FY 'twenty, one our Lora business achieved several major accomplishments. These include our partnership with Amazon on several projects, including the Amazon Sidewalk network designed for smart home community in consumer applications, providing low low power, who will coverage for indoor on neighborhood area.
<unk> devices, we expect revenues from on Amazon activities to start to ramp this fiscal year.
Lower global platform that uses a two four gigahertz version of Lora has been adopted in a number of global use cases that require high bandwidth connectivity in areas with lower one net once you may not be presence.
And a lower edge platform enabled our first device to cloud platform and associated cloud services in FY 'twenty, one we launched our first Lora cloud services.
Morning device provisioning device management and geolocation services.
We have closed on our first cloud services agreements and expect initial cloud services revenues. This fiscal year, we anticipate signing up over 20 cloud services agreements with customers by the end of fiscal year 'twenty two as we fine tune our capability and service offerings. This is a new metric that we will report on quarterly.
<unk>.
These accomplishments demonstrate the evolving maturity and acceptance of Lora.
Growing momentum and along with the continued influence of the Lora Alliance, we expect to continue to drive Lora to become the de facto standard for the global LPWAN market and what we expect to be a multibillion unit industry in the next five years.
For FY 'twenty, two we are expecting positive momentum from our Lora business and anticipate a 40% CAGR for our Lora enabled business over the next five years.
Now, let me discuss our outlook for the first quarter of fiscal year 'twenty two.
Following a record bookings Q4.
And a record bookings year, we entered Q1 with record backlog. We are currently estimating Q1 net revenues to be between $164 million on $172 million.
To attain the midpoint of our guidance range or approximately $168 million.
We needed net turns orders of approximately 16% at the beginning of Q1.
We expect that Q1 non-GAAP earnings to be between $49 55 per diluted share.
I will now hand, the call back to the operator, and Sandy <unk> and I will be happy to answer any questions.
Operator.
Thank you we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
All information tone will indicate that your line is on the question queue. You May Press Star two if you would like to remove your question from the queue.
For participants using speaker equipment that may be necessary to pick up your handset before pressing the star keys in the interest of time, we ask that participants limit themselves to one question and one follow on.
One moment, please while we poll for questions.
Yeah.
Okay.
Okay.
Thank you. Our first question comes from tore Svanberg with Stifel. Please proceed with your question.
Yes. Thank you on congratulations on day record results.
Mohan you talked about.
Getting 20 service agreements by the end of fiscal 'twenty two from Lora.
Could you elaborate a little bit more on the size of those I mean a day.
It's kind of like million dollars agreements.
Just trying to understand you know how quickly the services revenue can vary but I know eventually obviously your target is about hundred millions, but just wanted to understand for fiscal 'twenty two how much is ramping.
Yes, the thinking toward is that on the agreements will really be focused on.
Connecting devices and so obviously, if there is a very high volume of devices and usage.
Those devices accessing the cloud services than the revenues will go up so it depends on use case it depends on number of devices.
So each one is kind of individually on its own but that's the way they're thinking it. So the revenues will be generated by a number of times. The algorithms are accessed in the number of devices etcetera things like that so.
Obviously FY 'twenty two for US this is a.
Almost on a trial year to see make sure we fine tune the system.
The three areas, we're starting off with design device.
Provisioning, which is about connectivity to the network on the cloud device management, which is about monitoring.
The device itself from making sure the battery telling you what the number of the battery is and things like that.
Geo location, which is about.
Locating the device and.
Tracing it.
On things like that so we have to demonstrate the value, but as we demonstrate the value I think as customers recognize the value of each of those aspects of the service then there'll be quite happy to pay for.
On pay for it and Thats, the thinking and we'll see how it plays out.
Yes, thank you for that and as my follow up you sound pretty confident that gross margin could expand this year, obviously driven by mix.
Does that mean that your visibility and your infrastructure markets, including <unk> and data center.
It's pretty decent right now because I know those markets have been a bit softer as of late but it sounds like you have pretty good visibility of debt out.
Yes, sorry, there's some net cash sorry, yes, I think we feel very good about what is happening in the optical infrastructure space.
We've continued to see a whole lot of design wins with some of our newer products.
Platform on so the expectation on our side is that we have a lot of good things going on on on the gross margin side a lot of debt.
The new new products are driving the topline revenue, but speaking on the gross margin and the other one thing that it is still out there that we're trying to really assess what is the impact of cash.
Cost increasing its work on your supply chain, although our feeling is that any negative impact would get from that should be.
Mitigated by not giving us much price share reduction so actually in some cases going back on.
Oscar for higher prices from our customers. So to your point to definitely like I said before towards the latter what last quarter I'm still anticipating seeing gross margin expansion anywhere from 50 to 100 basis points.
We feel pretty good about debt based on the visibility that we have at this time.
Very good congrats again.
Thank you. Our next question comes from Tristan <unk> with Baird. Please proceed with your question.
Hi, Good afternoon, just following up on the on the same topic.
Any concerns about value.
Debt at Es.
Any component.
In terms of wafers for this year and also have you implemented any type of non Ken suitable on order policies with your customers.
So Tristan I think on the on the first part of the question we have.
You can see from leaf since the.
Second half of last year, we've been building more internal inventory in one of the reasons for that is the increasing.
Lead times on supply chain. So we don't anticipate any major issues in the at least in the first half of the year. We think we're going to begin from most of the year.
Obviously with a daily.
We're looking at it daily and it depends on demand how we have a couple of constraints around the business in terms of supply, but fairly small modest day nature I would say less than a few million dollars. So I think here on them.
And then we just wait and see what the upside where the upside is and as I said, we think we haven't covered with our demand management and inventory management and on the way we're managing the business. So I think we're okay.
Then.
On a macro pointed out.
We think we have some supply constraints and in those cases, we are going out and looking at whether we can.
When we get increases in the supply side on the cost side, we are going out and deliberately looking specifically at and where we can also offset that with raising prices in some cases I think it's also being more disciplined about how we work with our partners in general at the moment, we don't have to do anything I think first half is going to be.
Fine I think it's really going to be a question on how the second half plays out on this.
Demand continues to be extremely strong and.
Improves on the markets continue to improve then.
We may have to do some of those things, but I think at this point we're okay.
Great. Thank you.
Thank you. Our next question comes from harsh Kumar with Piper Sandler. Please proceed with your question.
Yeah, Hey, guys first of all congratulations on some very good numbers and some very good guidance. Despite all the challenges in the market. So we do appreciate that as investors.
I wanted to ask you Mohan us all the things that you see positive that are going on with your company. What are some of the things that you are the most excited about or you feel that will grow the fastest for you and then I have a follow up.
Well this year I think is going to be the year, where lora is really moves into the mainstream I've said that before that will be catalysts and I think we are starting to see that obviously the Amazon sidewalk announcement was exciting the Amazon.
WSI Ot core announcement was exciting in the cloud services you know the first time, we've really gone out there with cloud services as a capability and we're going to test and check that out and see.
We're very excited about that obviously, we'll see how the results play out over the next few years, but that's obviously exciting all of our businesses in the.
Infrastructure side on the signal integrity product side are doing extremely well, obviously, it's largely to do with the.
The world moving to more higher bandwidth across different segments of the market, but because we play in all areas.
Data center base stations and on the access side with <unk>, we can see that there is demand in all areas and one feeds the other if you have core bandwidth increase you need.
This station bandwidth increase if you've got a base station bandwidth increased you need access based on bandwidth increase and so we're seeing that.
Definitely become playing playing out and I think the other thing that's exciting about that is that it's becoming more global.
For a large part of our last five years. If you look at it there's a lot of the growth has come from China and what we're seeing now is.
A lot more.
Growth in other regions.
Very excited by Tri edge.
Great momentum with that and so we'll see how that plays out but we're very excited by that.
The work that's going on with customers on the feedback.
We started to get very good orders in that area. So so that's very exciting and then I think the protection business is.
We made the decision to diversify it a few years ago, that's starting to play out nicely for us and I think that could be.
The positive force as well so there are lots and lots of areas harsh is tough for me to pick out one but I think if you have to if we have to pick out one of them is still the lora.
Okay Awesome. Thank you Mohan and then thanks for mentioning triage I was going to ask about that so I'll ask you now about what kind of interest are you seeing regarding your cloud services from customers as you talk to the folks out there that are going to buy. These services are they are they excited or is it just more of a push or a show me the current.
GAAP kind of thing at this point.
It's a little bit of both I think the initial.
Show Me show me, but once they see what we have I think theres a lot of excitement I think it's very unique platform right on where the only real guy out debt provider, providing device to cloud services that offer this type of capability. We can we can offer.
Very good security in terms of device provisioning joining network, obviously, because we we are.
In both the end devices on and the gateways and obviously I have worked with the cloud guys. So.
On the device management side.
That's also a very unique capability of being able to update the device itself over the year on software.
And the Geo location the unit.
Obviously, another unique capability for us with what we have with Wi Fi sniffing.
And GPS sniffing.
Sniffing, essentially being able to allow the device to be tracked indoors and outdoors.
It is a very nice feature as well so lots of nice things we have to you know it's embryonic come in it's very new.
But.
The opportunity is clearly there the market is huge and now I think if we execute.
We should do very well.
Thank you Mohan.
Yes.
Okay.
Thank you. Our next question comes from Gary Mobley with Wells Fargo Securities. Please proceed with your question.
Hey, guys, let me extend my congratulations on a strong finish to the year.
We have.
Seen and heard out there in the marketplace.
Manufacturing constraints.
Constraints for automobiles as shortages automotive semiconductors.
Her just yesterday, Samsung talking about smartphone supply chain constraints and so my question to you is to what extent have you factored into your guidance any supply chain constraints unrelated to your specific products.
Unrelated to our specific products is tricky because we don't really know until we hear about it right Gary but.
I would say you can tell from our tons number required we are.
Obviously, we are guiding to a number we feel comfortable with.
Based on how.
How much tons, we need.
The question really is whether our customers change.
Change their demand outlook and then.
Reduced debt reduced the need for the devices I doubt thats going to happen if anything I think it will go the other way which is.
As lead times continue to extend out they'll want more material and need more material, if they're going to continue to be successful and so I don't think it changes much from our perspective, obviously, there could be a surprise if some customers come back and cancel phones and things like that but the likelihood is it.
Just a.
Temporary blip in the next quarter will probably be even stronger.
Yes.
Choose to to grow their businesses right.
Okay I appreciate that Mohan, but follow up I had a couple of quick housekeeping questions could you share with us perhaps how much the extra week in the quarter impacted the sales and as well could you give us an update on what your distributions.
Distributor inventory stand in terms of days or weeks.
So Gary with regard to the impact over four channel reach on sales.
It's really kind of hard for us too.
We estimate the back book.
What most people hospital quickly Don is just look at it on a linear basis right.
And with regards to distribution, what we've done on now.
Days publicly but I can tell you that.
We're very pleased with where the distribution inventory value is probably a little bit on the lower side, if I. If I, if I were to add some color to that.
Alright, thanks, so much and thanks everybody.
Thank you. Our next question comes from Quinn Bolton with Needham. Please proceed with your question.
Hey, guys.
Offer my congratulations as well.
Apologize on my call dropped during the Q&A. So I apologize if someone else asked a question, but Mohan you talked about a strong outlook for the Lora business in fiscal 'twenty to really starting to hit the mainstream and a 40% longer term.
Five year CAGR wondering if theres any reason to think that.
The growth in fiscal 'twenty, two per Laura would be wildly off that 40% year on year.
Rates implied by by the debt.
The longer term CAGR youre looking at.
Nothing.
I can think of a quaint other than macro events.
Last year a pandemic.
Something like that occurring just all bets are off right on what types of things are going on but the pipeline is good the activity is good.
The number of new big initiatives like the Amazon initiatives I mentioned, we've got more on the pipeline on those that will be announced soon I think.
Services as I mentioned, we've just got great momentum in one of the things about Lora and Iot and specifically the LPWAN market. It's a market that's being created and a lot of the.
Use cases are.
Around climate.
Pollution.
Climates initiatives pollution initiatives Green initiatives energy savings initiatives, and then Theres just great momentum. So my own sense is that if anything the momentum will be better but at.
At this point in time, we just we're just monitoring it.
Case by case, we look at all the use cases, we look at all the proof of concepts that are in place and how we can move those to revenue.
But yes, I think theres a lot of initiatives, obviously, the Amazon sidewalk initiative as an example of that.
It's once it starts to really get out there and I think it's more of a second half of this fiscal year, but as it starts to ramp I mean that could really ramp very very nicely very quickly.
May not right and so we'll have to wait and see but we're confident about it.
And just a quick clarification Mohan on the Amazon side, what are you talking about the second half of 'twenty. One ramp is that more on the gateways or is that on the on the <unk> side.
Well once the once the.
We know obviously.
They talk about it too in too much detail, but what we do know is that work is going on in both low things both devices and gateways.
From a use case standpoint, you really kind of meet the gateways out there first and then.
That will drive a more.
And nodes and more sensors on once the gateways are in place of course, you can then add infinite amount of sensors and so I think.
Once once they're in place and you have an installed base of gateways out there I think.
And the next five to 10 years will be very interesting to see how many sensors are actually connected.
Great and then the second question I had was just on the protection business. I think you said that outlook for for growth in fiscal 'twenty, two which was 10% or better I might've missed it but did you give an outlook for signal integrity. It sounds like base station on data.
Data center are all going to be pretty good growth here. So just wondering if you had kind of a fiscal year fiscal year 'twenty two target for that for signal integrity business.
I expect it to have another record year Clinton and grow double digits again, so very strong all areas of the business I expect the data center base station on Palm to do very well and then as I mentioned the Pam four sides of the triage is doing very well so I expect that to grow very nicely in FY 'twenty two and then some of the segments that are.
Struggled in FY 'twenty, one, particularly video broadcast probably the stuff.
Really struggled in FY 'twenty, one through Covid I think some of that is going to come back quite nicely in FY 'twenty two we will see.
It may be second half loaded again as live events come back on and as more people start to get out there to sports bars and things like that I do expect.
Our ramp up of Pearl IV as well.
I hope you're rooting for the for the video broadcast business that thanks a lot.
Thank you.
Thank you. Our next question comes from Karl Ackerman with Cowen. Please proceed with your question.
Yes. Good afternoon, gentlemen, appreciate you letting me ask the question two if I may 1st.
Some five G networking supply chain players have noted a pause in China infrastructure.
Infrastructure projects until tenders are granted.
Given your unique position within the supply chain.
Guess what level of activity are you seeing in China infrastructure spending today.
And I guess also on the context of 10 10 gig PON order rates.
For the April quarter.
Well, let's see we see strength in both areas.
10 gig PON and <unk> base stations.
As you know calm is sometimes lumpy and one quarter, where he is sometimes.
No.
But in general Everything's up into the right and that's not a surprise infrastructure across the globe is increasing.
<unk> base stations are increasing in <unk> also is increasing.
PON is doing nicely and as I mentioned 10 gig PON, specifically because of the bandwidth.
On expansion needs is increasing quite nicely. The other thing is it's not just China and I think that's an important takeaway is that we are starting to see a lot more activity in both <unk> and North America, and Europe and other regions of the World. So which is which is also quite good very positive.
And remember with <unk>, we have more content than we have with <unk>. So.
With five G. Obviously that we have now <unk> as well as PMT function.
Also with <unk>, there's typically more frontal modules.
And so and then you have the expansion on the geographical side.
And then on the PON side, our not only do we have two five gig and 10 gig PON, but in 10 gig PON and we also have the OLED side. So <unk> on <unk> side, so kind of the CPE and Central office side, if you like.
That's also giving us more content so.
Both of these segments of the market, we're doing extremely well I would say that both markets are also doing quite well.
Yeah.
Got it no appreciate that Mohan.
From my follow up you spoke about how protection business can grow double digits. This year, how does automotive play into that outlook and how should we think about the incremental revenues.
Here and I guess the margin profile.
For those as you look to expand into this area. Thank you.
So our protection is doing very well on automotive it does take longer though.
This is all fairly new design wins in automotive and those take some time, so that they kind of have more of our industrial growth rate I think but yes, I do expect to do well and anything.
In any protection that goes into automotive or into Iot or into communications infrastructure or into broader industrial will be at either our corporate average on much higher actually so.
In general it's the consumer protection business, that's lower margin for us and so I think as a macro pointed out if.
We get the right mix.
And both our different businesses, but across the company that should be accretive to gross margins.
Operator.
Thank you. Our next question comes from Rick Schafer with Oppenheimer. Please proceed with your question.
Hi, This is Andy Hummel on for Rick Thanks for taking my question.
First one just on Uh huh with low risk.
Right.
Some of that.
The Amazon wind that you announced this morning, Barbara Mark specifically on the AWS.
The AWS Iot side, but can you just talk a little bit more about the opportunity with that platform. What are some of the factors that.
That Amazon has it helps you accelerate lora adoption on that no more broadly if you could just remind us what your revenue opportunity yet.
On the Amazon partnership.
Yes, so AWS Iot core is really an important initiative.
Second several years I think to come up with and develop and create but it essentially creates a plug and play experience for enterprise solution providers that are in.
Enables them essentially to connect their Iot sensors directly to Amazon cloud.
And on why that's important is essentially as a time to market.
The thing on and also a competence thing because AWS already has.
Software developed for applications has different unique kind of.
Our vertical application software that it can be applied to different segments, and so not only the connectivity.
Enablement.
Which is easier and faster, but then also the ability to provide a kind of end to end solution quicker.
Also.
Important so.
I would say that's the that's the key thing and so for enterprise, it's really an enterprise play.
Different than sidewalk, which is more of a kind of a.
Smart home consumer play.
That gateway connectivity directly to the cloud is really significant for large enterprises and so we do expect that to be part of our $100 million in five years with Amazon is tied to sidewalk on some of it is tied to AWS Iot core, but I think thats kind of the goal.
Okay, great. Thanks.
And then as a follow up just on that the 10 gig PON.
Market. So you guys have a sense for you know for where customers are at in the upgrade cycle like auto ex.
Is there a way to quantify I guess like what percentage of our customers that that might end up upgrading at some point have already upgraded to 10 gig.
What about 50% of our revenues that are coming in quarterly now are for 10 gig. So so.
That's a very rapid increase.
I wouldn't have expected that.
We knew 10 gig.
I was going to ramp up but that tells me that the market is moving to higher bandwidth PON quite quickly.
And we're expecting that to continue to grow that way. So so yes, it's moving fast.
Think about it 10 gig is a natural handoff from <unk> and it's also on natural connectivity for HDTV, you know things like that so it's really a nice.
A data point 10 gig typically is really a good.
Handoff point for high speed data and so I think 10 gig PON has an option to do very well and we look at it if you're if you've got a greenfield site essentially in China.
But I think it's also applies to other regions of the world.
Well you don't have optical cable, but you are going to lay out optical cable you would go with the higher bandwidth.
Optical connectivity right. So that's why you'll go with 10 gig PON or above even we have customers who are looking at higher bandwidth as well, so which again will help some tech.
Okay, great. Thanks, I appreciate it and congrats on the quarter.
Thank you. Our next question comes from Craig Ellis with B Riley Securities. Please proceed with your question.
Yes, thanks for taking the question and congratulations on the results.
Mohan I wanted to start with with four but before I ask the question. Thanks for keeping the dashboard fresh and kind of the metrics relevant to the things that are evolving in the business. The question on Lora.
If we look back a year ago I think it was a priority to really increase the mix of a design win and engagement activities.
U S and European and the team clearly did that and get that well.
As you look ahead to 2022 are there any areas of geographic emphasis as you look at and pursuing some of the metrics that you've talked about in the sheer slower dashboard.
I think we still have to execute on on that Craig I would say, it's moved now and so a lot of the opportunities are outside China, I don't think that we necessarily on changing our strategy in China with our momentum in China, It's still very good.
It's more a question of let's make sure we have momentum in other regions of the World and clearly North America now.
With Amazon and some of the things that are going on.
In the enterprise space in North America was extremely good and in Europe as well. So I think it's more more of the same we just want to keep doing that and executing on that.
And now as I mentioned really Laura has cut quite well adopted around the world globally I mean, it's really.
Acknowledged as a great technology for LPWAN. So I think our focus now is on.
Executing on on the proof of concepts and making sure.
This end to end solutions is enough sensors.
Enough gateways as high quality software out there there's cloud connectivity.
Those types of things and really focusing now on the use cases make sure that.
The customers themselves, who are implementing those use cases on not having any challenges with.
The use of Lora from an end to end.
Solutions standpoint, and therein lies the opportunity with lower cloud I think in and with some of the things we're doing with Amazon on the AWS Iot core for example.
Got it and then the follow up from ACA is for you.
In your prepared remarks, you mentioned.
Rising input costs from the potential to make some some pricing moves.
Ken I, just wanted to dig into a little bit further on what was possible. For example, I would expect in some parts of the business. It may not possible to raise prices due to you know your relationship with existing tier one customers, but in other parts of the business. It may be more feasible. So can you just provide some further.
Color on what the company might be able to do and what impact the company might be able to make some moves if it chose to act on that direction. Thank you.
Thanks, Craig I think we have already seen like Mohan did mentioned, we already see us on many associates were.
We're getting indications of price increases from the supply chain on a warehouse total debt is not really is pretty much going to be across the board, where we continue to look at where we know which product lines, which areas are reshaping the impact of different triggers on then I'll have to figure out whether the strategy is going to be.
As you come into every year you plan for a certain amount of ASP reductions may be the on.
Sales are going to be okay, we're not going to give those plan to aspira dark sales. So I guess from Kirsty CPI increases on the supply chain is previous significant debt will have two aspect of our customers to help us on a <unk>.
Sure some of those buckets, but it is a very I'm not sure that I can come up now and tell you exactly where we are seeing faster but.
Our first <unk> that we should be able to find opportunities to offset the impact of cost increases that we get one thing to remember Craig as I mentioned earlier is that we have done a really a fantastic job at my view of building more inventory in anticipation of some of these issues and so I think at least for the.
First half I think we're we feel pretty good about.
Where we are from a supply standpoint. The question really is in the second half as demand increases and we need to go to our suppliers and get more material than it is going to come at a higher price right and for those we may have to go to our customers and.
Request higher pricing.
Well certainly you wouldnt be the first doing so they're so hi, guys. Thanks, very much and good luck.
Okay.
Thank you. Our next question comes from Chris Roland with Susquehanna. Please proceed with your question.
Hey, guys. This one will be for Mohan.
So I recently ordered a familiar on the hotspot.
So I am back loaded on that.
But if you look at the the token value market cap.
Slide by the network, we're in the hundreds of millions now which would imply this will be a.
A real thing.
So I was wondering on if you could talk about this do you think this could be a real thing.
Is this something that maybe you thought Comcast was going to be.
Can you talk about kind of where we are now and if this how youre viewing.
This whole network.
Yes, that's a really interesting question from Chris I would say that that was our vision and dream with Comcast.
For whatever reason night.
<unk> decided not to go down on continued to execute on that list and involved but not now.
With the ambition that we thought they initially had.
We do think that that's the same kind of concept which is on.
Amazon sidewalk is hasn't and others that are on the pipeline.
And <unk> approach is very interesting and very unique.
Very creative.
Obviously, it fits well with Laura and all the things that are going on so yes, I think he could work.
To some extent with some of these.
Networking approaches.
It's the beauty of Lora, which is very flexible very couldn't have very low cost very secure networks that connect together and it just changes the world of networking to some extent and I think that's the ambition right. So take it away from the big guys.
And give it to the small guys and see what happens and so we'll see it's early and I think.
With helium, obviously being a startup.
They have to.
Execute but we see this in several countries in the world going on it's not just in the U S.
As I say I think definitely the momentum is there we will see how it plays out the use cases on the key in my view as more and more use cases become.
Available and make the network sell very valuable.
Then I think it could work for sure.
Yeah.
Understood.
My second question was around China, both on the handset side on the optical side. Thank you said, China handset was was good do you have any viewpoint.
On China inventories.
How much you are helped by inventories that may have been built.
Huawei has been struggling here. The other guys have been said so from building inventory and then secondly on the five infra side I think you mentioned from optical strength is that where it came from.
Was it China optical on five G.
Well I'll take that on first the fight.
Our strength today is mostly China, but I think we are starting to see.
New opportunities now on much from other regions of the World, which is as I said are very encouraging.
No.
And.
It's well understood I think around the world that some of the North America American and European companies, Nokia Samsung Ericsson and Cisco are all engaged in trying to build <unk> systems and equipment and so we see we see definitely a good momentum there more globally.
<unk>.
And then on the smartphone question on mobile question for sure China has ramped up.
Specifically non Huawei.
<unk> manufactures have ramped up there.
Demand and are looking to get more material.
We are.
Seeing that strength I would say, it's also north America on the strength is there.
Korea has been slightly not so strong I do think that that might come back in Q1 and beyond but.
Certainly for Q4, China was strong.
And probably will be for the first half of this year.
Don't know how much of that is.
Supply chain driven.
I don't think it is I think we start to see that well in advance I think it's more in anticipation of may be winning some of Huawei business.
But at the end of the day.
We look at across all of our customers and on looking at carefully.
How much what is demand and on whats being consumed in on how much material is out there in the channel in pain.
A lot of attention to that.
Yeah.
Thanks, guys.
Thank you. Our next question comes from Cody Acree with loop capital. Please proceed with your question.
Yes. Thank you guys for taking my question if.
If you can go back maybe toward the beginning I'm just trying to get a better sense of the velocity of your bookings level as we push here through the first part of the year just on.
On a linearity basis and then what is that is there a correlation between net bookings uptick and expansion are they.
Expanded lead times.
Okay.
I would say that the demand came first Cody I mean, we definitely start.
C.
Bookings very strong bookings in <unk>.
October November December I mean, very very strong Chinese new year soften a little bit, but then bookings have been very strong since then.
Lead times have been gradually increasing supply lead times of gradually increasing so customers, obviously want to give you more visibility.
As they get concerned about supply constraints, but I.
I think it's held.
A healthy.
And positioned for.
For someone like US we built inventory we have enough material to support our customers. It's just a question now making sure that the materials, we ship out being consumed effectively and I think that's what we're as I said, we're keeping a close eye on but.
Yes, that's that's kind of how the way we think about it.
Mohan I guess given your position.
How much visibility do you have do you do you feel comfortable with.
Having on.
<unk> double ordering or just it just inventory restocking efforts.
We all know how their fans, but what visibility do you have and then maybe why.
Why the 16% tern guidance physical he is so high why not a higher guidance, if you're that much book for the quarter.
Well, so we do have very good visibility actually and that's the good thing and as I said, that's not a surprise the tons number.
And the reason for the low percentage tons is mostly because of that consumption questions as I'm on.
One such as debt.
While customers are asking for more.
We want to be cautious about.
Making sure that there's no excess channel inventory and so we pay a lot of attention to that as a Mecca said, it's kind of the low end and we'd like to keep it there and so we are making sure that whatever we ship out is being consumed effectively and it's not double ordered and things like that so we're taking specific steps on.
That front and that's the way that's the reason why on tons numbers on it is.
Great. Thank you guys.
Yeah.
Thank you. Our next question comes from tore Svanberg with Stifel. Please proceed with your question.
Yes. Thank you I just had a few follow up housekeeping ones.
On Mohan you talked about the Lora pipeline being centered on 1 million I believe in the past you've talked about the funnel that leads to the tunnel. So is that 700 million might now basically just adding those two up.
Yes, its opportunities and leads a Tory I would say.
This last year.
By 'twenty one.
Normally is the lot of the rule leads come from shows conferences events and.
Things like that and of course, we went in.
In Q1 into a into a period, where nothing was happening so.
That's going to change this next fiscal year when things start to get back to normal in terms of some conferences being open shows starting to open up a little bit on people traveling a little bit more we will start to see those leads expand but yes to answer your question. It's a combination of both opportunities that are in the pipeline at all.
Sure.
Running proof of concepts and leads.
Got it got it and then I just had a question on so that the math on the.
The debt the number on the gateways on the end nodes versus your revenues. So I think and nodes grew about 30% gateways I think doubled year over year. Your revenues grew 20%. So how should I just think about the math there and of course I'm not I'm not looking at perfect tied here, but.
So any sales.
Yes, the way to think about it that's all I remember gateways is installation is equation on the network right. So the creating the network's first they put it in gateways, whether that's a private network or a public network. The end nodes are tied to <unk>.
Actual census, being connected to those gateways.
Now remember the end nodes.
The timing of an endo when we ship a device out device typically will go to a distributor distributor will then ship it to a customer the customer will then put that for example that device. We just sell the radio components. They will put it into a system built the whole sensor node and then it gets connected to the to the gateway. So there are there was a different timing.
Components here, but the reason why.
I share these metrics obviously the gateways are important because it tells you about the capacity that's out there to support.
Laura so with.
The current capacity of $1 3 million gateways that can support about 5 billion census, there. So there's no. There's no there's plenty of availability of networks to support centers and then the cumulative end nodes is important because it tells you exactly how how many nodes are now connected to the gateways in terms of our revenue it's when we <unk>.
Devices to our customers right.
Right now that's very helpful. Thank you so much.
Yeah.
Thank you there are no further questions at this time I would like to turn the call back over to Mohan for any closing comments.
Okay. In closing we were pleased with our strong Q4 and fiscal year 'twenty one results. Despite the impact of the pandemic on multi sourcing initiatives our investments in operations and sales infrastructure limited the impact of Covid on our business operations.
Also benefited from the strengthening of several secular themes driving our key growth engines targeted at the data center Internet of things and mobile device segments, we remain committed to considering the impact of environmental social and governance factors in our decision making processes.
Our diverse product offering balanced end market approach and strong customer relationships, we expect to see growth on a strong financial performance in fiscal year 'twenty two.
We appreciate your continued support of <unk> and look forward to updating you on next quarter. Thank you.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful evening.
Okay.