Synaptics Incorporated Q3 2023 Earnings Call
Speaker 2: Good day and thank you for standing by. Welcome to the Synaptics 3rd quarter fiscal year 2023 financial results conference call. At this time all participants are enlisted only mode. After the speakers presentation there will be a question and answer session. Thank you.
Speaker 2: To ask a question during the session, you'll need to press star 1-1 under telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.
Speaker 2: Please be advised that today's conference is being recorded. I would now like to have the conference over to your first speaker today, Mundrao Shah. Please go ahead.
Speaker 3: Thanks, Sean. Good afternoon. And thank you for joining us today on Synafix Third Corps fiscal 2023 earnings call. My name is Manjal Shah and I'm the head of investor relations.
Speaker 3: With me on today's call, Carmichael Holston, our president and CEO and Dean Butler, RCAFOL. This call is also being broadcast live over the web and be accessed from the investor relation section of the company's website at synaptics.com.
Speaker 3: In addition to a supplemental flight presentation, we have also posted a copy of these prepared remarks on our Investor Relations website.
Speaker 3: In addition to the company's gap results, management will also provide supplementary results on a non-gap basis, which excludes share-based compensation, taxes and relative costs, and certain other non-cash or recurring or non-recurring items.
Speaker 3: Please refer to the press release issued after the market close today for a detailed reconcilation of GAM and non-GAP results. It can be accessed from the investor relations section of the company's website at synapics.com.
Speaker 3: Additionally, we would like to remind you that during the course of this conference call, synaptics will make forward-looking statements.
Speaker 3: Overlooking statements give our current expectations and projections relating to our financial condition, results of operation, plans, objectives, future performance and business. Although synapics believes are at submit and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control to may prove to be inaccurate. Synapics caution that actual results may differ materially from any future performance suggested in the company's bold looking statements. Synapics caution that actual results may differ materially from any future performance suggested in the company's bold looking statements.
Speaker 3: We refer you to the company's current and periodic reports filed with the SEC, including a most recent annual report on Form 10K and quarterly report on Form 10Q for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement.
Speaker 3: The NAFTAX expressly disclaims any obligation to update this forward-looking information.
Speaker 2: Thanks, Minjol. I'd like to welcome everyone to today's call. Our fiscal third quarter revenue was slightly above the midpoint of our guidance range, a solid result against the challenging economic backdrop. We maintained strong gross margins which ultimately drove EPS above the midpoint of our guidance. Let me start by highlighting how the recent macro events are impacting our business. We reported previously we've been focused on reducing customer and distributor inventories in our consumer facing businesses such as virtual reality and Wi-Fi.
Speaker 2: However, we have been surprised by the slower pace of inventory drawdown. Cell-through hasn't returned to the degree we expected largely because our customers have further reduced their forecasts in response to weakening and demand.
Speaker 2: Another anticipated macro change was the deterioration in corporate confidence toward the end of the quarter. This led to reduced IT spend impacting our enterprise-facing businesses such as Video Interface and audio headsets. Given these dynamics recovery will take longer than we initially forecast, and we now anticipate that the inventory bleed will take us deep into calendar 2023. In response to these near-term demand challenges, we are working with customers allowing them to align backlog to demand in a concerted effort to reduce inventory to normalize levels.
Speaker 2: lowering all non-essential spending.
Speaker 2: We are confident in our ability to return to growth once the inventory of digestion is behind us.
Speaker 2: Verisher and Direct TV. We expect to emerge from the current downturn in better shape, consolidating share positions and advancing technology in our franchise product areas. During the quarter, we stayed focused on executing our plans. We won new Wi-Fi designs, and the activity level continued to increase throughout the quarter. We introduced our second triple combo device that doubles throughput for high-speed Wi-Fi connectivity and integrate LE Audio for multiple concurrent Bluetooth 5.3 audio streams. The solution is ideal for intense streaming applications.
Speaker 2: advanced automotive entertainment systems, and high-end multimedia systems. Additionally, we have a new mid-range, cost-effective Wi-Fi 6E product that will be sampling to customers in the summer.
Speaker 2: While our business has taken a step back as we bleed off inventory, we still believe that we are on track to have $1 billion in business in 3-5 years. In fact, our Wi-Fi opportunity funnel has grown more than 30% year over year. We had several new customer product ramps this quarter, unifying any seed for enterprise telephony products, razor and jambra for new gaming headsets and speaker phones, and less centoyote for automotive TDI solutions among others. We are also expanding our product offerings at ADT.
Speaker 2: with the integration of our smart voice glass break detection technology security systems.
Speaker 2: While we are winning new sockets in our IoT portfolio, we also continue to cross-sell increasing content and existing platforms such as Operator Setup boxes and Enterprise to Leffeany.
Speaker 2: Another bright spot for the portfolio was our mobile business.
Speaker 2: Revenue was ahead of expectations due to higher demand from China with customers like Oppo seeing stronger than expected product ramps.
Speaker 2: Overall, our market position is strong and high-end flexible OLED screens, and we expect to see an increasing cam as the technology moves down into higher-volute tiers. To conclude, the near-term is challenging, but our secular opportunities are unchanged. The number of connected devices is expected to increase significantly over the next few years, driving our wireless business and keeping us on track to our long-term goal.
Speaker 2: Infatainment content is growing in new cars which should lead to continued strength and our automotive business.
Speaker 2: We still believe in wireless workspaces and the opportunity to drive content gains in the docking station platform.
Speaker 2: We are in an extremely strong position with design winds, new product innovation and portfolio expansion, given the confidence in our long-term growth prospects.
Speaker 2: I'll start with a review of our financial results for the recently completed quarter and then provide our current outlook. Revenue for the March quarter was $327 million above the midpoint of our guidance. March quarter revenue from IoT, PC and mobile were 71%, 16% and 13% respectively. Year over year, consolidated March quarter revenue was down 31% with declines across all three product areas of our portfolio.
Speaker 2: March quarter, IOT product revenue was down a modest 3% sequentially.
Speaker 2: but down 23% on a year over your basis. The year over your decline is most pronounced in our virtual reality, wireless and audio headset products. As these markets continue to face macro headwinds.
Speaker 2: In PC, our March quarter revenue was down 6% sequentially and down 41% year-over-year as we continue to undership and demand.
Speaker 2: We expect the PC market to continue its bottoming process as customer inventories are being depleted.
Speaker 2: However, corporate enterprise IT spending likely remains muted due to macro pressures, complicating the recovery trajectory expected in the second half of the calendar year.
Speaker 2: Our March quarter mobile product revenue was down 27% sequentially and was down 47% on a year over your basis.
Speaker 2: Mobile, however, was better than our prior expectations as the customers in China experienced better than forecasted new product sales.
Speaker 2: We expect continued improvement in the juke quarter, but remain cautious as the end-demand this geography is still volatile. For the March quarter, our gap gross margin was 52.8%, which includes 23.7 million of intangible asset amortization.
Speaker 2: and $900,000 of share-based compensation costs. Marge quarter non-GAAP gross margin continued to be strong at 60.3% within our guidance range, but a bit lower than our expectation due to product mix.
Speaker 2: The operating expenses in the March quarter were $138.1 million, which includes share-based compensation costs of $28.9 million, intangibles amortization of $8.5 million, and amortization of prepaid development costs of $800,000.
Speaker 2: March quarter non-gap operating expenses continued to track as expected at 100 million, which was the midpoint of our guidance, and is up only 1% over the last four years, despite being a larger and more diversified company.
Speaker 2: On a year-to-date basis, our gap tax rate was 43% in our non-gap tax rate was 17%.
Speaker 2: In the March quarter, we had gap net income of 10.4 million or gap net income of 26 cents per diluted year.
Speaker 2: Our non-YAP net income for the March quarter was 57.3 million, a decrease of 15% from the 1.25 million.
Speaker 2: And a 51% decrease from the same quarter one year ago. Our non-GAPEPS per diluted share of $1.89 was above the midpoint of our guidance range with higher net interest income during the quarter. Now turning to our balance sheet. We ended the quarter with 934 million of cash.
Speaker 2: cash equivalents, and short-term investments on hand.
Speaker 2: an increase of 75 million from the preceding quarter with cash flow from operations of 109 million, partially offset by 26 million of cash used under our share repurchase program during the quarter.
Speaker 2: As Michael mentioned, the board has approved an additional 500 million for share repurchases.
Speaker 2: Bring our total plan to 2.3 billion with an available authorization of 977 million.
Speaker 2: We continue to be steadfast in our capital allocation philosophy.
Speaker 2: Our balance sheet is extremely healthy, and we continue to allocate our cash usage between share repurchases, debt management, and potential tuck-in acquisitions seeking the best long-term return for shareholders.
Speaker 2: Capital expenditures were 14 million and appreciation for the quarter was 7.6 million.
Speaker 2: receivables at the end of March, or 218 million, and days of sales outstanding, or 60 days, a reduction of five days from 65 last quarter.
Speaker 2: Days of inventory were 102, below 112 days last quarter, and ending inventory of 148 million was down 30 million as our shipments out once again exceed our inbound new inventory purchases.
Speaker 2: We anticipate a further reduction in the June quarter given forecasts, but are cautious about drawing inventory down too far once demand turns.
Speaker 2: Now, let me show you the outlook for our June quarter.
Speaker 2: the macro situation continues to weigh on our customers' forecasts, with their focus squarely on lowering inventory levels.
Speaker 2: Even in markets where demand is reached close to truck levels, recovering is taking longer than we have originally anticipated. Given the need for further burn customer inventory, we expect revenue for the June Corps to be in the range of 210 million to 240 million.
Speaker 2: a sequential decline of approximately 31% at the midpoint. We expect our revenue mix from IoT, PC, and mobile products in the June quarter to be approximately 57%, 19%, and 24% respectively. IoT-based customers have experienced the most acute inventory position including including an input that determines entry to end results. The Whoever looks at interpretive
Speaker 2: June quarter, but are seemingly close to trough levels, while our mobile products likely increase during the June quarter as demand plus new product launches move these customers back to modest growth.
Speaker 2: As a result of these next dynamics, we expect GAAP gross margin for the June quarter to be in the range of 44% to 47% and expect non-GAP gross margin in the range of 56% to 58%. The decline from the previous quarter and are comparable to prior periods where IOT products represented. Re entails a
Speaker 2: to be in the range of $98 million to $102 million, consistent with the March quarter.
Speaker 2: We're taking actions to maintain our expense discipline, including freezing hiring, cutting outside services, and reducing discretionary spend. Synaptics has strong expense controls, having expanded spending by only 1% over the past four years since 2019.
Speaker 2: We remain committed to our focused investment areas to drive long-term growth opportunities for the company, and therefore continue our prudent stance despite lower revenue levels, which we believe will ultimately prove to be temporary. As a result, June quarter, GAAP net loss.
Speaker 2: per basic share is expected to be in the range of 55 cents to 85 cents and non-GAAP net income per diluted share is anticipated with the range of 25 cents to 65 cents per share.
Speaker 2: on an estimated 40 million fully distributed shares.
Speaker 2: We expect non-GAAP net interest expense in the June quarter to be approximately 7 million. And finally, we expect our non-GAAP tax rate to remain unchanged in the range of 16 to 18%.
Speaker 2: This wraps up our prepared remarks. I'd like to now turn the call over to the operator to start the Q&A session. Operator.
Speaker 2: Thank you. At this time we will conduct the question and answer session. As a reminder, to ask a question you will need to press Star 1-1 on your telephone and week for your name to be announced. To withdraw your question, please press Star 1-1 again.
Speaker 2: Please stand by while we compile the Q&A roster. Our first question comes from Kevin Cassidy of Rosenblatt Securities. Your line is now open.
Speaker 4: Thank you for taking my question. With your guidance at the midpoint being 57% and that's your long-term target, should we assume that this is the mix you're going to be expecting going forward, meaning anything going forward.
Speaker 2: the IOT somewhere in the 55% of revenue range as we come out of this or is there some other factor about the 57% long-term gross margin target? So good question, Kevin. I think you got it right, which is this is largely mixed. We would not expect our mix between the three product areas to maintain at this level. We think the mix.
Speaker 4: Okay, great. Thanks. And just your internal inventory, even though it did come down, but it's elevated compared to history. Are you comfortable with this level or is that going to come down more? And maybe is that why?
Speaker 4: You're going to ship from inventory.
Speaker 4: I guess are you cutting back on your suppliers with the wafers and just going to ship from inventory and work it down or maybe what is the optimal inventory level internally?
Speaker 2: Yeah maybe just a couple comments on that one. We do expect our internal inventory to continue to come down you know as we look forward into June and probably a little bit beyond that.
Speaker 2: Our typical goal on inventory would be to hold closer to 70 days versus where we are now about 100 days.
Speaker 2: What we're doing is we're certainly cutting back on shipping into channel. So we've cut back in a considerable way on our inbound inventory from our suppliers just to keep that in balance.
Speaker 2: Yeah, on the flip side, we are being a little bit cautious on, hey, when the demand does turn back, that we don't get caught sort of in a bad situation. So we are sort of keeping a close eye on it, but NetNet, I think it probably continues to come down a little bit over the next couple of quarters.
Speaker 1: All right.
Speaker 4: Okay, great. Thank you.
Speaker 2: One moment for our next question. Our next question comes from Rajeej Gil with me. Yes, thank you for taking my questions. Question on the IOT business.
Speaker 3: or IoT customers. So that appears to guess to be taking longer to purge. And then we're kind of seeing I guess softness in the enterprise side.
Speaker 2: So just on the enterprise portion of the IoT business, is there a way to quantify that as a percentage of sales or percentage of IoT? And I would assume that the IoT budgets are going to be set for the year, so we should not kind of anticipate a recovery in the enterprise IoT portion of that business.
Speaker 2: I just want to get a sense of what's going on the consumer IoT, the consumer wireless. You know, when do we think that will bottom in terms of inventory and any indications of healthy demand. Thank you. Yeah, Rajeev, maybe let me give you just sort of a rough characterization of sort of yes, what's the kind of size of inventory or size of enterprise.
Speaker 2: Roughly within IoT, enterprise is nearly the same size as consumer, so they both make up a pretty sizable chunk of the end market that we service.
Speaker 2: Michael, do you want to talk about some of the market dynamics around a few of these? I mean, Haraji, I think you got it right in your remarks. If you look at docking stations, you look at enterprise telephony, we've just seen a softness there.
Speaker 2: And we have, to your point, seen recovery in the consumer. So consumer is kind of hanging around where it was when we last updated you guys. But then that's obviously been compounded by the additional weakness that we've seen in the enterprise over the last.
Speaker 2: you know, handful of weeks, that's definitely taken a fairly significant turn for the worse.
Speaker 3: Right, okay. And then in terms of just the gross margins at 57%, trying to kind of keep that as the floor. In the past, you've articulated on numerous occasions that...
Speaker 2: 57% would be the floor. Obviously, the IoT business is at a, hopefully at a trough level. But if, I guess the question is, if we see more declines in IoT,
Speaker 3: and combined with the fact that their higher input costs, you know, still from TSMC, is there more downside to the 57% growth margin or is there other offsets you could implement?
Speaker 2: Well, what I would say, Roger, there's probably two factors at play here. In the near term with the inventory corrections, IoT is taking a step down.
Speaker 2: enterprise, end customers being a good portion of that, that's really going to play against us in the gross margin mix.
Speaker 2: And over like the next couple of quarters, how that next plays out is going to have an effect on how our gross margins move from here. But I think the important thing to note is when demand is back at its normal levels and we sort of get through this inventory correction, we continue to believe 57 is the right level and the right sort of target. Stiction in action created that will be ??? 3x
Speaker 2: And that we're continuing to feel very good about. So really sort of near term, hey, how the mix plays out. Is really sort of the pluses or minus. There's a little bit on the input cost. So input cost continues to be.
Speaker 2: a bit of concerns or we work through that. Unfortunately, it's kind of an environment that it's less likely to be able to be passed on to many of the customers. So that's gonna be a little bit of the headline, but I wouldn't think about it as...
Speaker 2: Hey, there's like a significant sort of change
Speaker 2: there's like a significant sort of change long term.
Speaker 2: I just want to run you to your point. Yeah, just to add to what Dean said, I think structurally we feel the business is in the same place and 57 is the kind of the floor. I think there's going to be some potentially near-term shopiness, but if you look out the right way to think about it is still 57. 57. Problem Nothing.
Speaker 3: Got it. Just this last question, Dean, and I'll step back into Q. You talked about kind of op-x spending controls, but the guide is where op-x is, you know, I guess roughly flat, sequentially in terms of total op-x, and you've been kind of running around 100 million a quarter.
Speaker 3: in the past. So where are the spending controls? Should we be expecting lower off-ex as we progress throughout the year given kind of a significant decline in revenue? Or is $100 million kind of where you need to operate the business at?
Speaker 2: Yeah, I think for the near term, we're probably going to continue to target kind of around this 100 mark. I mean, there's a couple of dynamics as we cross the new fiscal year boundary. There's some resetting of OPEX that probably has a bit of a headwind. And so we're trying to mitigate.
Speaker 2: Any sort of up on the op-ax and a keep at least flat if not down a little bit. Really what we want to do is sort of work through this inventory correction and size the business for the real run rate and not the inventory correction rate.
Speaker 2: Yeah, I think that's important to understand, Rajee, is we don't believe that the structural revenue run rate is 225, right? We believe it's something significantly higher than that as we tried to outline. I definitely think that there are going to be some things we do around the edges on OPEX, but I wouldn't expect big changes on that line.
Speaker 2: You know, if we see this process, and suddenly there is a few point change from us in terms of the structural nature of the business, and we'll make modifications as appropriate. Got it, thank you. One moment, as we bring up our next question.
Speaker 4: Our next question comes from Anthony Stoss with Craig Hellam. Hey Michael, hey Dean. Two things, Michael I'd love to hear more so your talk or comment here about adding designs to the Wi-Fi solution.
Speaker 4: to assemble into the March quarter, actually close the March.
Speaker 2: That good question, Tony. I mean, the way I think about the Wi-Fi business is where we're probably going to turn the corner on that one, you know, again calendar 2024. We have a pretty appreciable inventory situation to dig out from. But I think we get back to our run rate level just on the win.
Speaker 2: we start seeing that business grow from the levels it was.
Speaker 2: pre-inventory build up. We've got a lot of good things going on in that business with operators, with some of the consumer applications, some of the enterprise applications, the Dean discuss. So we continue to be pretty confident, but it's mass right now with inventory, and so we've got to break through that first.
Speaker 2: So the update we gave was we expected in December quarter, but then, you know, didn't make the milestone and inspected in March quarter. That deal did close. So we completed all the necessary milestones there. And so that deal, as we put it in our guide that we told everyone, so that did close in the March quarter.
Speaker 4: got a named K ?
Speaker 4: outside of PCs. Anything new to report on that outside of PCs?
Speaker 2: Nothing material to report Tony, good question. I think what we're, you know, this is sort of a long range statement. I think what we're looking to do is expand that platform from PCs to other computer vision types of application. I mean, essentially this is computer vision.
Speaker 2: for the present section, but then expands into other areas.
Speaker 2: that have the need necessitate low power computer vision. So that's kind of the idea. Obviously we want to expand our footprint even in the computer vision area, computer vision. You got it right. We're kind of down to two OEMs. We think we should be able to do better in the near term.
Speaker 2: across the OEM base, but nothing there to report. Got it, best of luck guys, thank you. Thanks Tony.
Speaker 2: OEM base but you know nothing there to report. Got it. Best of luck guys. Thank you. Thanks Tony. One moment for our next question.
Speaker 2: Our next question comes from Christopher Rowland with Susquehanna. Hey guys, thanks for the question. So you guys talked about shipment holdbacks and that's kind of an interesting topic because there are some in the industry that don't hold back anything.
Speaker 2: Was just wondering your philosophy there, how you kind of handle that and what are the cases in which you kind of, I wouldn't say force people to take it, but strongly urge them to take shipment.
Speaker 2: just wondering your philosophy there how you kind of handle that what are the cases in which you uh... kind of force people to take it but strongly urge them
Speaker 2: You know, eventually, Chris, the piper comes calling, right? And I think that, you know, we obviously expected to turn the corner kind of now ish when we talked to you guys last time.
Speaker 2: And that clearly hasn't happened. And I think the situation has been compounded by the enterprise weakness that we've talked to a couple of times here. So our view at this point is rip the bandage off.
Speaker 2: and really allow the current state of demand to settle in. And I think,
Speaker 2: We're there. It's unfortunately a pretty significant drop, obviously, from peak to trough. But we believe that by now allowing this to settle out, allowing the bleed through to happen, and not jamming more and more into the channel, will be better off long term.
Speaker 2: I think some of those behaviors that you're describing causes.
Speaker 2: churn with customers and they remember that. It causes churn with distributors and channel partners and they remember that. We certainly heard and seen some of the same things that you're discussing, but we took a slightly different path here and decided, look, we need to let
Speaker 2: think this happened? Why didn't it happen at this point in the cycle and why were they overordering? Did this go way back to the time in which there were shortages or why is this hitting now? Almost feels like we should be coming out in consumer.
Yeah, I know. I think it goes back to your point. It goes back several quarters ago to when there were the semiconductor shortages. And I think everybody expected there to be a drawdown by now. Certainly, you know, in our thinking there was going to be this drawdown, but
there simply hasn't been a drawdown. I don't know, Dean, did you want to add?
Yeah, I mean, the only thing I would say is, you know, just as customers sort of ratcheted their forecast up during sort of the...
supply crunch, I think customers are a little bit reticent to change their forecast into us as suppliers in a rapid way. I think what you see is this slow ratcheting down.
And that has caused sort of the supply chain along the way to sort of move that, honestly, a much slower pace than what we had expected relative to just a few quarters ago. Thanks. That's great color.
One more for our next question. Our next question comes from Chris Sankar with TD Cowan. Hey guys, this is Eddie for Chris.
Thanks for taking my question. There were reports of Amazon discontinuing their Hello product.
Our understanding is that you had exposure there at some point. First, is that accurate and second in case that is through how much of the IOT weakness is due to that product line? And I have a follow-up please.
I think you got it right, Eddie. We had exposure to Halo. Our understanding is it's canceled because it didn't sell very well. So in terms of any revenue exposure we had there was not at all material.
It never really took off. So even from an inventory perspective, it's not a driver of the inventory that we're talking to. That probably captures it in a thumbnail there. Oh, thank you, Michael. That's a great color. And what we need to do is look at all our data,
Or maybe another way to frame it. Did you have to walk away from some opportunities because of some irrational behavior from competitors? Thank you. Yeah, again, a good question. At least as far as I know, we have no losses. Pricing competition, I think we've outlined this on previous calls, has increased. So there's no question about that. But at least as far as I know, we haven't lost a single socket. So nothing that's out there for our end is due to competition. Even from a pricing perspective, the gross margin.
Great. Thank you, Michael. Thanks, Eddie. One moment for our next question. And our next question comes from Nancy McCurry with Wells Fargo. Hi, this is Ashley McCurry on for Gary Mobley at Wells Fargo. Curious in terms of ASP versus unit dynamics going into next quarter, how are you guys thinking about the trade-off there in terms of...
your quarter over quarter decline in the guide, is that driven by volume versus pricing pressure? And are there any areas where you guys are seeing a more resiliency in pricing?
Yeah, so Ashley, I think to answer your question, it's largely unit driven. At this point in time, there's not, at least from our perspective, a great trade off on the elasticity on demand and ASP. So lowering your ASP in this environment isn't spurring demand.
So really what we see is it's almost entirely unit driven. Now as Michael spoke just on I think on the very last question, there is a little bit of ASP pressure from competitors and it's coming from sort of a few areas where in sort of times of desperation you do get some competitors.
that will start lowering their ASP to see if they can spur demand. But what we've seen so far is that hasn't been true. And relatedly, are you guys still seeing increased boundary quotes? See people talked about that on their earnings calls this week. And how are you guys passing along those cost increases to customers?
I mean, there are little pockets where actually, you know, foundry pricing is coming down, but it's actually in pretty, you know, small, discrete pockets. So I wouldn't expect, you know, sort of the ability to pass along increased input prices here in the near term. I think if anything, that's going to be a bit of a headwind probably throughout calendar 23, is my guess. Thank you. One moment for our next question. Our next question comes from Martin Yang with OPCO.
Hi, thank you for taking my question. My question is on your Wi-Fi funnel where it highlighted 30% European growth. Can you talk about where does that growth come from?
Is any particular verticals that were driving the mouth growth? Yeah, thanks, Martin. We see strength across the portfolio. I think if you look at our Wi-Fi business, it's...
largely driven as we've characterized before in high performance applications, cameras, operator set-top boxes, video streamers, things of that nature. What I'd say here is it's less application driven and more customer driven. It's less application driven and less application driven. It's less application driven and less customer driven.
Some new, I'd say very significant customers that are driving a lot of this activity and those customers supply a whole host of products. I mean, across various, various verticals, we think that we can start moving into some of these tier one customers. If you look at our business today.
We are characterized by these module, one module guy that ships it to lots, our Wi-Fi products to lots and lots of different end customers. And then really only one big tier one customer. I think what's changing for us now is there's a handful of larger customers that we expect.
to come online here over the next year or so, that as I said in my prepared remarks, gives us confidence that we're going to continue to build toward this one billion dollar business over the next three to five years. So it's probably more customer driven than it is necessarily application driven. Just make sure that understood.
So you had one tier one customer that you already have, is that OEM versus module maker? Yeah, that's right, Martin. I mean, we have one, you know, what I would call has a big, we obviously have lots and lots of different customers, but one, you know, big OEM makes up a decent chunk of our Wi-Fi revenue.
We expect to continue to do well with that guy. Then another big chunk is this module maker. So we have two guys that are relatively big poles in our business. We expect to get three, four, and five big poles here over the next little bit.
And would that come from other larger OEM customers or module makers? No, these are OEMs. These are specifically OEMs. Although to your point we do expect that we'll be bringing on additional module partners as well. We like that channel. That's been a pretty effective channel for us to serve a distributed customer base.
all of you who are joining us today. We look forward to speaking to you at our upcoming investor conferences during the quarter, and of course, during our analyst day that we'll do in the fall. Thank you.
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