Q3 2024 Synaptics Incorporated Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the Synaptics Inc. third quarter fiscal year 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Munjal Shah, Vice President of Investor Relations. Please go ahead.
Good day and thank you for standing by welcome to the Synaptics, Inc. Third quarter fiscal year 'twenty 'twenty four financial results conference call.
Operator: At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
Munjal Shah: Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today <unk> Shah.
Munjal Shah: President of Investor Relations. Please go ahead.
Munjal Shah: Thank you, Brianna. Good afternoon, and thank you for joining us today on Synaptics' third quarter fiscal 2024 conference call. My name is Munjal Shah, and I am Head of Investor Relations. With me on today's call are Michael Hurlston, President and CEO, and Matt Padfield, our Vice President of Finance. This call is being broadcast live over the web and can be accessed from the investor relations section of the company's website at Synaptics.com.
Munjal Shah: Thank you.
Munjal Shah: Good afternoon, and thank you for joining us today.
Munjal Shah: Third quarter of fiscal 2024 conference call.
Munjal Shah: A copy of these prepared remarks and a supplemental slide presentation are also posted on the investor relations website. In addition to the company's GAAP results, management will provide supplementary results on a non-GAAP basis, which excludes share-based compensation, acquisition-related costs, and certain other non-cash and recurring or non-recurring items.
Munjal Shah: The name is sharp and I'm head up.
Munjal Shah: Please refer to the press release issued after market close today for a detailed reconciliation of GAAP and non-GAAP results. The information can also be accessed from the investor relations section of the company's website at Synaptics.com. Additionally, during the course of this conference call, Synaptics will make forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance, and business. Although Synaptics believes its estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate.
Munjal Shah: Investor Relations.
Munjal Shah: With me on today's call are Michael Wilson, President and CEO and Matt Cassel.
Munjal Shah: This precedent.
Munjal Shah: This call is being broadcast live.
Munjal Shah: And can be accessed from the Investor Relations section of the company's website at Synaptics dotcom.
Munjal Shah: A copy of these prepared remarks, and a supplemental slide presentation.
Munjal Shah: Posted on the Investor Relations website.
Munjal Shah: In addition to the company's GAAP results management will provide supplementary results on a non-GAAP basis, which exclude share based compensation.
Munjal Shah: Related cost.
Munjal Shah: Noncash and recurring or nonrecurring items.
Munjal Shah: Please refer to the press release issued after.
Munjal Shah: Market close today.
Munjal Shah: Reconciliation of GAAP and non-GAAP results.
Munjal Shah: The information can be accessed from the Investor Relations section of the company's website at Synaptics Dot com.
Munjal Shah: Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking strategy. We refer you to the company's current and periodic reports filed with the SEC, including its most recent annual report on Form 10-K and quarterly report on Form 10-Q, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. Synaptics expressly disclaims any obligation to upgrade this forward-looking information. I will now turn the call over to Michael.
Munjal Shah: Additionally, during the course of this conference call Genoptix, we will make forward looking statements.
Michael: Looking statement.
Michael: Our current expectation and projections relating to our financial condition results of operations plans objectives future performance and business.
Michael: Although synaptics believes our estimates and assumptions to be reasonable.
Michael: Subject to a number of risks uncertainties beyond.
Michael: Beyond our control and may prove to be inaccurate.
Michael: Netflix cautions that actual results may differ materially from any future performance suggested in the company's forward looking statements.
Michael: We refer you to the company's current and periodic reports filed with the SEC, including our most recent annual report on Form 10-K, and quarterly report on Form 10-Q.
Michael: Risk factors that could cause actual results to differ materially from those contained in any forward looking statement.
Michael: Synaptics expressly disclaims any obligation to update this forward looking information.
Munjal Shah: I would now turn the call over to Michael.
Michael E. Hurlston: Thanks, Munjal. I'd like to welcome everybody to today's call. This quarter, we delivered results that were in line with expectations. Revenue, margin, and EPS met or were slightly above our prior guidance. Growth in core IoT offsets seasonal weakness in mobile. Over the last few months, we started building the foundation for our second driver of core IoT growth, our line of embedded AI IoT processors. That initiative culminated in the launch of our Astra processor platform at Embedded World in Germany in April.
Michael: Thanks Joel.
Michael E. Hurlston: Like to welcome everybody to todays call. This quarter, we delivered results that were in line with expectations revenue margin and EPS met or slightly above our prior guidance growth in core Iot offset seasonal weakness in mobile.
Michael E. Hurlston: Over the last few months, we started building the foundation for our second driver of core Iot growth.
Michael E. Hurlston: Your line of embedded AI Iot processors.
Michael E. Hurlston: That initiative culminated in the launch of our Astra processor platform at embedded world in Germany in April.
Michael E. Hurlston: Astra is an AI-native IoT compute platform targeting 20 billion plus, $1.00 Semiconductor Silicon Market, Opportunity for IoT Edge IoT devices. Running AI models on the device rather than in a data center gives devices security, power, and latency advantages. Synaptics differentiates by incorporating AI in every part of the flow, from chip development to software to the tool chain. In addition, with a novel gearing approach, we can deliver more inferences at any system power level than the competition.
Michael E. Hurlston: Australia is an AI native Iot compute platform targeting a 20 billion plus.
Michael E. Hurlston: Semiconductor silicon market opportunity.
Michael E. Hurlston: Opportunity for Iot edge edge Iot devices running AI models on device rather than in a data center gives devices security power and latency advantages.
Michael E. Hurlston: Synaptics differentiates by incorporating AI in every part of the flow from chip development to software to the tool chain.
Michael E. Hurlston: In addition, with a novel gearing approach, we can deliver more influencers in any system power level than competition.
Michael E. Hurlston: We believe that the totality of our approach will make Synaptics the absolute leader when it comes to delivering AI processing solutions for IoT devices. With the ASTRA framework, which considers AI end-to-end, customers can bring their data to run on Synaptics AI reference models or bring their own AI models and optimize them to run efficiently and securely on Synaptics. Customers don't have to build a new AI model for every application, increasing adoption, efficiency, and Time-to-Mark.
Michael E. Hurlston: We believe that the totality of our approach will make synaptics the absolute leader when it comes to delivering AI processing solutions for Iot devices.
Michael E. Hurlston: With the Astra framework, which contemplates AI end to end customers can bring their data to run on Synaptics AI reference models.
Michael E. Hurlston: Or bring their own AI models, and optimize them to run efficiently and securely I'm Synaptics <unk> <unk>.
Michael E. Hurlston: Customers don't have to build a new AI model for every application increasing adoption.
Michael E. Hurlston: <unk> and time to market.
Michael E. Hurlston: The Astra platform includes a family of processors, an open software platform, and an AI Development Toolkit and Model Framework, as well as seamless wireless connectivity. The SL family of processors are AI-enabled MPUs targeted for the edge and are our first products to be released under the Astra umbrella. Two and four-core versions are now sampling. The SR series of processors are AI-enabled MCUs and incorporate our pioneering gearing technique, which actively manages power as inferencing requirements increase or decrease.
Michael E. Hurlston: The Astral platform includes a family of processors and open software platform and.
Michael E. Hurlston: And AI development tool kit and model framework as well as seamless wireless connectivity.
Michael E. Hurlston: The S. L family of processors, our AI enabled M. P use targeted for the edge and our first products to be released under the Astra umbrella.
Michael E. Hurlston: June four core versions are now sampling.
Michael E. Hurlston: DSR series of processors, our AI enabled mcu's and incorporate our pioneering gearing technique, which actively manages power as enforcing requirements increase or decrease.
Michael E. Hurlston: Flexible, innovative software platform extends across both product families and supports Linux and Android, as well as leading RTOS offerings. In addition, both families leverage the deep institutional knowledge at Synaptics around computer vision and audio machine learning algorithms.
Michael E. Hurlston: Flexible innovative software platform extends apart cross both product families and supports Linux and Android as well as leading <unk> offerings.
Michael E. Hurlston: In addition, both families leverage the deep institutional knowledge at Synaptics around computer vision and audio machine learning algorithms.
Michael E. Hurlston: The launch of the Astra family of processors at Embedded World was a great success, with customer interest from a broad-based set of industries, including automotive. Consumer, Industrial, Security, and Home Appliance. Thousands of customers and developers visited our showcase, and the team generated a significant number of qualified customer leads. We hosted multiple technical presentations and a first-of-its-kind hands-on embedded AI workshop for product designers, creating strong demand for the Astra development. To top it all off, Synaptics SL Series Embedded Compute Processors received the Best in Show award ahead of solutions from several incumbent suppliers and competitors. Astra is an offshoot from our application-specific processors, which are currently in volume production.
Michael E. Hurlston: The launch of the Astra family of processors at embedded World was a great success with customer interest from a broad based set of industries, including automotive.
Michael E. Hurlston: Consumer industrial security and home appliances.
Michael E. Hurlston: Thousands of customers and developers visited our showcase in the team generated a significant number of qualified can customer leads.
Michael E. Hurlston: We hosted multiple technical presentations and a first of its kind on hand first of a kind hands on embedded AI workshop for product designers, creating strong demand for the Astra development kit.
Michael E. Hurlston: To top it all off Synaptics S. L series embedded compute processors received best in show Award ahead of solutions from several incumbent suppliers and competitors.
Michael E. Hurlston: Astra is an offshoot from our application specific processors, which are currently in volume production with.
Michael E. Hurlston: We saw improvement in this part of core IoT as inventory is generally returned to a more normal level. We had a major win at Deutsche Telekom for our video processors with AI capability, which will contribute to revenue in fiscal 2025. In addition, we had a win on Cisco's next-generation AI-enabled collaboration devices with our high-end quad-core processor.
Michael E. Hurlston: We saw improvement in this part of core Iot as inventories generally returned to a more normal level.
Michael E. Hurlston: Had a major win at Deutsche Telekom for our video processors with AI capability, which will contribute to revenue in fiscal 2025.
Michael E. Hurlston: In addition, we had a win on Cisco's next generation AI enabled collaboration devices with our high end Quad core processor.
Michael E. Hurlston: In both wins, we were able to pull through wireless connectivity products, continuing our successful cross-selling initiative. While Astra grabbed the headlines, our wireless product delivered the news, driving core IOT revenue 26% higher compared to the prior quarter. Wireless product inventory has been worked down, except for a couple of skews.
Michael E. Hurlston: In both wins, we were able to pull through wireless connectivity products, continuing our successful cross selling initiative.
Michael E. Hurlston: Well Astral grabbed the headlines our wireless product delivered the news.
Michael E. Hurlston: Driving core Iot revenue high 26% higher compared to the prior quarter.
Michael E. Hurlston: Wireless product inventory has been worked out except for a couple of Skus design wins in Wearables security systems home automation and action cameras are starting to ramp.
Michael E. Hurlston: Design Wins and Wearables, Security Systems, Home Automation, and Action Cameras are starting to ramp. We expect these trends to continue, driving sequential revenue growth in Core IoT next quarter. In addition, we remain on track to sample both our first broad market device and Wi-Fi 7 device later this year. The enterprise and automotive products were roughly flat this quarter.
Michael E. Hurlston: We expect these trends to continue driving sequential revenue growth and core Iot next quarter.
Michael E. Hurlston: In addition, we remain on track to sample both our first broad market device and Wi Fi seven device later this year.
Michael E. Hurlston: The enterprise and automotive products were roughly flat in quarter. However, next quarter, we expect to see growth in this piece of our business. The volume of our docking station products is beginning to increase again.
Michael E. Hurlston: However, next quarter, we expect to see growth in this piece of our business. The volume of our docking station products is beginning to increase again, though demand is off historic norms. In addition, our PC, touchpad, and fingerprint solutions are tracking the normal seasonal patterns, and we have opportunities to take some market share. Our HPD solutions are performing as expected, and we continue to see opportunities to increase share as platforms start to refresh.
Michael E. Hurlston: <unk> is off historic norms. In addition, RPC touchpad and fingerprint solutions are tracking the normal seasonal patterns and we have opportunities to take some market share.
Michael E. Hurlston: Our <unk> solutions are performing as expected and we continue to see opportunities to increase shares platform start to refresh.
Michael E. Hurlston: Demand across the rest of the enterprise products is suppressed as IT spending on hardware and accessories continues to be at historically low levels with no signs of an uptick. Further out in the calendar year, we keep hearing talk of a refresh cycle and new AI PCs driving unit volume higher, which would be good for us. However, we have yet to see orders consistent with anything like this.
Michael E. Hurlston: Demand across the rest of the enterprise products is suppressed as it spending on hardware and accessories continues to be at historically low levels with no signs of an uptick.
Michael E. Hurlston: Further out in the calendar year, we keep hearing talk of a refresh cycle and new AIP sees driving unit volume higher which would be good for us. However, we yet to see orders consistent with anything like this.
Michael E. Hurlston: In the automotive industry, our TDI products are seeing strong demand and performing better than expected. Our design wins at several OEMs in North America and Europe, including Audi, Chevy, Ford, Porsche, and Volkswagen, are starting to ramp. Additionally, some other OEMs are extending their current models for another one to two years, which benefits us given our high market share in these designs. However, the strength of our TDI products is somewhat offset by a slowdown in legacy DDI standards.
Michael E. Hurlston: In automotive our TDI products, we're seeing strong demand and performing better than expected.
Michael E. Hurlston: Our design wins at several Oems in North America, and Europe, including Audi Chevy Ford Porsche and Volkswagen are starting to ramp. Additionally, some other Oems are extending their current models for another one to two years, which benefits us given our high market share in these designs.
Michael E. Hurlston: To strengthen our TDI products is somewhat offset by a slowdown in legacy <unk>.
Michael E. Hurlston: Longer term, we would expect to increase content per car with smart bridges and Wi-Fi Bluetooth combos. However, our mobile products performed largely in line with our expectations, and revenue was down from the prior quarter, driven both by seasonality on our touch products and by a decline in revenue from our large legacy DDIC customers. As that product finally goes to zero, which you'd expect at some point in the next fiscal year, it will present a headwind to fiscal 2025 mobile revenue.
Michael E. Hurlston: Longer term, we would expect to increase content per car with smart bridges, and Wi Fi Bluetooth combos.
Michael E. Hurlston: Our modal mobile products performed largely in line with our expectations and revenue was down from the prior quarter driven both by seasonality on our touch products and by a decline in revenue from our large legacy <unk> customer.
Michael E. Hurlston: As that product finally goes to zero.
Michael E. Hurlston: I expect at some point in the next fiscal year. It will present, a headwind to fiscal 2025 mobile revenue.
Michael E. Hurlston: Aside from that, we expect our shipments to track seasonality for high-end Android phones. Additionally, we see potential opportunities for further growth as the adoption of OLED technology expands into mid-tier phones. To summarize, we continue to be excited about our core IoT business. For the first time, Synaptics is selling differentiated general purpose products into large potential markets. Meanwhile, our traditional product lines, where we have leadership positions in smaller, more defined markets, are beginning to recover as inventory burns off, and demand slowly returns.
Michael E. Hurlston: Aside from that we expect our shipments to track seasonality for high end Android phones, we see potential opportunities for further growth as the adoption of OLED technology expands into mid tier phones.
Michael E. Hurlston: To summarize we continue to be excited about our core Iot business for the first time Synaptics is selling differentiated general purpose products into large potential markets.
Michael E. Hurlston: Meanwhile, our traditional product lines, where we have leadership positions in smaller and more defined markets are beginning to recover is in the inventory burns off and demand slowly returns.
Michael E. Hurlston: The combination of the two gives us confidence as we enter our next fiscal year. Before I pass the baton, I wanted to update you on the progress on our CFO search. We have had discussions with dozens of highly qualified internal and external candidates. If all goes according to plan, we should have someone in place well before our next earnings call. Now, let me turn the call over to Matt for a review of our third quarter financial results and fourth quarter outlook.
Michael E. Hurlston: The combination of the two gives us confidence as we enter our next fiscal year.
Matt: Before I pass the Baton I wanted to update progress on our CFO search we have had discussions with dozens of highly qualified internal and external candidates.
Matt: If all goes according to plan, we should have someone in place well before our next earnings call.
Michael E. Hurlston: Now, let me turn the call over to Matt for a review of our third quarter financial results and fourth quarter outlook.
Matt Padfield: Thanks Michael, and good afternoon to everyone. I will first review the financial results for our recently completed quarter and then provide an outlook for our current quarter. Revenue for the March quarter was $237.3 million, which was slightly above the midpoint of our guidance. Revenue from Core IoT, Enterprise, and Automotive, and Mobile was 20%, 57%, and 23%, respectively. Year over year, consolidated March quarter revenue was down 27% but flat compared to the prior quarter, which reflects continued stabilization in our business.
Matt: Thanks, Michael and good afternoon to everyone I will first review the financial results for our recently completed quarter and then provide an outlook for our current quarter.
Matt Padfield: Revenue for the March quarter was $237 3 million, which was slightly above the midpoint of our guidance.
Matt Padfield: Revenue from core Iot enterprise on automotive and mobile, where 20%, 57% and 23% respectively.
Matt Padfield: Year over year consolidated March quarter revenue was down, 27%, but flat compared to the prior quarter, which reflects continued stabilization in our business.
Matt Padfield: Our core IoT revenue was up 26% sequentially, but down 49% year over year. We believe inventories are now at normal levels in this product sector, and we expect to continue to see sequential growth in our fiscal fourth quarter. In Enterprise and Automotive, March quarter revenue was down 1% sequentially and down 30% year over year. Several enterprise products are stabilizing, though there are still pockets of excess inventory, which we expect to work through in the coming quarters.
Matt Padfield: Core Iot revenue was up 26% sequentially, but down 49% year over year. We believe inventories are now at normal levels and that the product sector and we expect to continue to see sequential growth in our fiscal fourth quarter.
Matt Padfield: And enterprise and automotive March quarter revenue was down 1% sequentially and down 30% year over year.
Matt Padfield: Several enterprise products are stabilizing, though there are still pockets of excess inventory, which we expect to work through in the coming quarters.
Matt Padfield: For the March quarter, our mobile product revenue was up 33% year over year, but down 12% from the prior quarter, mainly due to seasonality in our touch controller products for the Android ecosystem. Our legacy DDIC product sales were also down, and we expect them to continue to decline over the next year.
Matt Padfield: For the March quarter, our mobile product revenue was up 33% year over year, but down 12% from the prior quarter, mainly due to seasonality in our touch controller products for the Android ecosystem.
Matt Padfield: Our legacy <unk> product sales were also down this quarter and we expect them to continue to decline over the next year.
Matt Padfield: In fiscal year 2024, our primary customer for these products accounted for a low to mid single-digit percentage of the company's total revenue. During the quarter, we had one customer greater than 10% of revenue at approximately 12%. For the March quarter, our gap gross margin was 46.5%, which included $14.3 million of intangible asset amortization and $1 million of share-based compensation costs. March quarter non-GAAP gross margin was 52.9%, in line with the midpoint of our guidance range.
Matt Padfield: In fiscal year 2024, our primary customer for these products accounted for at low to mid single digit percentage of the company's total revenues.
Matt Padfield: During the quarter, we had one customer greater than 10% of revenue at approximately 12%.
Matt Padfield: For the March quarter, our GAAP gross margin was 46, 5%, which includes $14 3 million of intangible asset amortization and 1 million of share based compensation costs.
Matt Padfield: March quarter non-GAAP gross margin was 52, 9% in line with the midpoint of our guidance range.
Matt Padfield: GAAP operating expenses in the March quarter were $127.7 million, which included share-based compensation of $28.9 million and intangible asset amortization of $4 million. March quarter non-GAAP operating expense of $95 million was within our guidance range and up $3 million from the preceding quarter. Our prior quarter had a benefit from a partial reversal in the accrual for our bonus program. We continue to maintain tight discipline around our operating expenses.
Matt Padfield: GAAP operating expenses in the March quarter were $127 7 million, which includes share based compensation of $28 9 million and intangible asset amortization of $4 million.
Matt Padfield: March quarter, non-GAAP operating expense of $95 million was within our guidance range and up $3 million from the preceding quarter.
Matt Padfield: Our prior quarter had a benefit from a partial reversal in the accrual for our bonus program.
Matt Padfield: We continue to maintain tight discipline around our operating expenses.
Matt Padfield: During the quarter, we recorded a GAAP tax benefit of $5.2 million and maintained our expected non-GAAP tax rate of 17%, creating a $4.3 million expense. The March quarter gap net loss was $18.1 million, or a gap net loss of $0.46 per basic share. Non-GAAP net income in the March quarter was $21 million, a decrease of 7% from the prior quarter and a 72% decrease from the same quarter a year ago. Non-GAAP earnings per diluted share of 53 cents was above the midpoint of our guidance range. Now, turning to the balance.
Matt Padfield: During the quarter, we recorded a GAAP tax benefit of $5 2 million and maintained our expected non-GAAP tax rate of 17%, creating a $4 $3 million expense.
Matt Padfield: March quarter, GAAP net loss was $18 1 million or a GAAP net loss of 46 cents per basic share.
Matt Padfield: non-GAAP net income in the March quarter was $21 million, a decrease of 7% from the prior quarter and a 72% decrease from the same quarter a year ago.
Matt Padfield: non-GAAP earnings per diluted share of 53 was above the midpoint of our guidance range now.
Matt Padfield: Now turning to the balance sheet.
Matt Padfield: We ended the quarter with $829 million of cash, cash equivalents, and short-term investments, a 2% sequential decrease. Cash flow used in operations was $13.2 million due to approximately $27 million of tax payments associated with prior fiscal years. Capital expenditures were $9 million, and depreciation for the quarter was $6.8 million. Receivables at the end of March were $144.7 million, and day sales outstanding were 55 days, an increase of seven days from the last quarter.
Matt Padfield: We ended the quarter with $829 million of cash cash equivalents and short term investments a 2% sequential decrease cash.
Matt Padfield: Cash flow used in operations was $13 2 million due to approximately $27 million of tax payments associated with prior fiscal years.
Matt Padfield: Capital expenditures were $9 million and depreciation for the quarter was $6 8 million.
Matt Padfield: Receivables at the end of March were $144 7 million and days sales outstanding were 55 days, an increase of seven days from the last quarter.
Matt Padfield: The ending inventory balance was $114.1 million, down $11 million as we continue to cautiously manage our inventory purchases. Our calculated days of inventory on our balance sheet also declined to 91 compared to 99 at the end of the prior quarter.
Matt Padfield: Ending inventory balance was $114 1 million down $11 million as we continue to cautiously manage our inventory purchases are.
Matt Padfield: Our calculated days of inventory on our balance sheet also declined to 91 compared to <unk> 99 at the end of the prior quarter.
Matt Padfield: Now, let me turn to our June quarter outlook. Our business is seeing stabilization as we have worked down channel inventories across multiple product areas. However, we are seeing a slow recovery due to curtailed spending by enterprises on hardware products.
Speaker Change: Now, let me turn to our June quarter outlook.
Matt Padfield: Our business is seeing stabilization as we have works down channel inventories across multiple product areas.
Matt Padfield: However, we are seeing a slow recovery due to curtailed spending by enterprises on hardware products.
Matt Padfield: At a consolidated level, we anticipate revenue in the June quarter to be in the range of $230 million to $260 million, an increase of approximately 3% from the March quarter at the midpoint. Our core IoT products are expected to benefit from the normalization of channel inventory levels, improving demand, and the ramp-up design. We expect double-digit sequential revenue growth to continue in the June quarter. Enterprise and Automotive Products in Aggregate are expected to improve slightly in the June quarter. Mobile is expected to decline due to seasonality and declines in legacy products.
Matt Padfield: At a consolidated level, we anticipate revenue in the June quarter to be in the range of $230 million to $260 million, an increase of approximately 3% in the March quarter at the midpoint.
Matt Padfield: Our core Iot products are expected to benefit from the normalization of channel inventory levels, improving demand and the ramp up design wins.
Matt Padfield: We expect a double digit sequential revenue growth to continue in the June quarter.
Matt Padfield: Enterprise and automotive products in aggregate are expected to improve slightly in the June quarter.
Matt Padfield: Mobile is expected to decline due to seasonality and declines in legacy products.
Matt Padfield: Given these dynamics, we expect our revenue mix, IOT, Enterprise, and Automotive, and Mobile Products, in the June quarter to be approximately 22%, 57%, and 21%, respectively. We expect GAAP gross margin for the June quarter to be in the range of 44.5% to 46.5%. We expect a non-gap gross margin in the range of 52.5% to 54.5%, a small improvement from the March quarter. We expect GAAP operating expenses in the June quarter to be in the range of $127 million to $132 million, which includes intangible amortization and share-based compensation.
Matt Padfield: Given these dynamics, we expect our revenue mix from core Iot enterprise and automotive and mobile products in the June quarter to be approximately 22%, 57% and 21% respectively.
Matt Padfield: We expect GAAP gross margin for the June quarter to be in the range of 44, 5% to 46, 5% we.
Matt Padfield: We expect our non-GAAP gross margin in the range of 52, 5% to 54, 5% a small improvement from the March quarter.
Matt Padfield: We expect GAAP operating expenses in the June quarter to be in the range of $127 million to $132 million, which includes intangible amortization and share based compensation.
Matt Padfield: We expect non-GAAP operating expenses in the June quarter to be in the range of $97 million to $101 million.
Matt Padfield: GAAP net loss per basic share for our June quarter is expected to be in the range of 45.
Matt Padfield: 285 cents and non-GAAP net income per diluted share is anticipated to be in the range of 35.
Matt Padfield: 275 cents per share on an estimated $39 9 million fully diluted shares.
Matt Padfield: We expect both GAAP and non-GAAP net interest expense to be approximately $6 million in the June quarter.
Matt Padfield: We expect non-GAAP operating expenses in the June quarter to be in the range of $97 million to $101 million. Gap net loss per basic share for our June quarter is expected to be in the range of $0.45 to $0.85, and non-gap net income per diluted share is anticipated to be in the range of $0.35 to $0.75 per share on an estimated 39.9 million fully diluted shares. We expect both GAAP and non-GAAP net interest expense to be approximately $6 million in the June quarter. That wraps up our prepared remarks. I'd like to now turn the call over to the operator to start the Q&A session. Thank you.
Speaker Change: 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: 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 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from Christopher Rolland of Susquehanna. Your line is now open.
Speaker Change: Thank you at this time, we will conduct a question answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby will be compile the Q&A roster.
Operator: Our first question comes from Christopher Rolland of Susquehanna. Your line is now open.
Christopher Adam Jackson Rolland: Thanks, guys. And congrats on the solid quarter. I guess my question is inventory. I guess for Corey, you described it as a more normal level. Would love to know kind of what you see as the overhang going forward. And then, you know, where inventory has the most challenges and least challenges. That would be great to start.
Operator: Okay.
Christopher Adam Jackson Rolland: Thanks, guys.
Christopher Adam Jackson Rolland: Congrats on the solid quarter.
Christopher Adam Jackson Rolland: I guess my question is inventory I guess for quarter you described it as.
Christopher Adam Jackson Rolland: More normal level would love to know kind of what you see as the overhang going forward and then where inventory has most challenges at least challenges.
Christopher Adam Jackson Rolland: That would be great to start.
Michael E. Hurlston: Yeah, I Chris, good to hear from you. I hope you're well. I, you know, thanks for the thanks for the positive note.
Corey: Yes, Chris good to hear from you I hope you're well.
Michael E. Hurlston: Yeah.
Speaker Change: Thanks for the thanks for the positive note.
Michael E. Hurlston: General speaking, I would say that, as we said on the last call, inventory has been worked out. We feel that Our challenge that we're largely facing, particularly enterprise, is more demand-related. As we were working through the inventory, I think demand fell, and we have this challenge that we highlighted in the prepared remarks around enterprise spending for accessories and kind of small hardware, which is largely where we play. There are still pockets of inventory.
Speaker Change: Generally speaking I would say that as we said on the last call.
Michael E. Hurlston: Inventory has been worked out and we feel that.
Michael E. Hurlston: The challenge that we're largely facing particularly enterprise is more demand related as we were working through the inventory I think demand fell and we have this challenge that we highlighted in the prepared remarks around enterprise spending for accessories and kind of small hardware.
Michael E. Hurlston: Which is largely where we play there are still pockets of inventory.
Michael E. Hurlston: A couple of notable examples are in our audio headset business, our enterprise headsets. You know, a little bit in our docking station area, particularly around our display link product line. But generally, I would say we're kind of out of inventory jail, and we feel good. And as demand returns, we should see a pullback in the numbers.
Michael E. Hurlston: A couple of notable examples in our audio headset business, our enterprise headsets.
Michael E. Hurlston: A little bit in our docking station area, particularly around our display linked product line, but generally I would say, we're kind of out of inventory jail and.
Michael E. Hurlston: We feel good and as demand returns, we should see a pull up in the numbers.
Michael E. Hurlston: Great, thank you Michael. And then just so we can kind of understand the legacy DDIC drag, roughly how big was it in 24 and how big would you expect it in 25?
Speaker Change: Great. Thank you Michael.
Speaker Change: And then just so we can.
Speaker Change: Kind of understand the.
Michael E. Hurlston: The legacy DDI see drag.
Speaker Change: Roughly how big was it in 'twenty four and how big would you expect it in 'twenty five.
Michael E. Hurlston: Yeah, I mean, I think we called Matt, Matt said in his remarks, sort of a mid to low percentage of revenue. You know, I think that we'll see a good part of that continue for the next couple of quarters, but probably by the second half of the year, that will go down to a de minimis level, Chris. I mean, it probably hits zero by the fourth, or part of the fourth quarter.
Speaker Change: Yes, I mean, I think we called Matt Matt said in his remarks sort of a mid to low percentage of of revenue.
Michael E. Hurlston: I think that we will see a good part of that continue for the next couple of quarters, but probably by the second half of the year that will go down to <unk>.
Michael E. Hurlston: De minimis level, Chris I mean, it probably hit zero by the some part in the fourth quarter. So it's a drag though not a big one, but but it's something that we thought we should call out I think everybody has been aware of it first for some time and it hasn't gone into our thinking around the numbers because we knew it was eventually going to go to zero, but I thought the <unk>.
Michael E. Hurlston: So it's a drag, not a big one, but it's something that we thought we should call out. I think everybody's been aware of it for some time, and it hasn't gone into our thinking around the numbers because we knew it was eventually going to go to zero. But I thought the time was right to highlight that it's coming off the table.
Michael E. Hurlston: <unk> was right to highlight that it's coming off the table.
Christopher Adam Jackson Rolland: understood. Thank you very much, guys.
Speaker Change: Understood. Thank you very much guys.
Operator: Thank you, and please wait one moment for our next question. Our next question comes from Quinn Bolton of Needham & Company. Your line is now open.
Speaker Change: Thank you and one moment for our next question.
Operator: Our next question comes from Quinn Bolton of Needham <unk> Company. Your line is now open.
Nathaniel Quinn Bolton: Hey, Michael. Have you ever thought about the puts and takes between the inventory, you know, kind of normalizing and soft demand? I mean, several quarters ago, I think you guys thought you might be undershipping end consumption by $100 million or more. Now that you're at the tail end of the inventory correction and getting revenue, you know, up a smidge, it feels like consumption must be down meaningfully. And I'm wondering if you have any updated thoughts on consumption.
Nathaniel Quinn Bolton: Hey, Michael.
Nathaniel Quinn Bolton: And about the.
Nathaniel Quinn Bolton: Puts and takes between the inventory kind of normalizing and soft demand in several quarters ago. I think you guys thought you might be under shipping.
Nathaniel Quinn Bolton: And consumption by 100 million or more.
Nathaniel Quinn Bolton: Now that you're at the tail end of the inventory correction and guiding revenue.
Nathaniel Quinn Bolton: Up a smidge.
Nathaniel Quinn Bolton: It feels like consumption must be down meaningfully and I'm wondering if you had any updated thoughts on consumption should we be thinking.
Nathaniel Quinn Bolton: You know, should we be thinking, you know, something that $245 million is indicative of where consumption is across a good part of the enterprise IoT base? Or do you think consumption is higher than that given there are still some pockets of inventory out there that you just mentioned?
Nathaniel Quinn Bolton: Something in the $245 million is indicative of where consumption is.
Nathaniel Quinn Bolton: Across a good part of the enterprise Iot base or.
Nathaniel Quinn Bolton: Do you think consumption is higher than that given there are still some pockets of inventory out there that you just mentioned.
Michael E. Hurlston: Yeah, Quinn, no, I look, I think that the natural demand is something significantly higher than where we are. I mean, we stated that a bunch of times. I think what sort of surprised us is that we had two pieces moving in parallel; we had inventory.
Speaker Change: Yes Quinn.
Michael E. Hurlston: Look I think that the.
Michael E. Hurlston: Natural demand is something significantly higher than where we are I mean, we stated that a bunch of times I think what <unk>.
Michael E. Hurlston: Sort of surprised us as we add two pieces moving in parallel we had inventory and as we're working through the inventory. We also hit a low point in demand.
Michael E. Hurlston: And as we were working through the inventory, we also hit a low point in demand. And so right now, we think we're at a very low point in natural demand and as enterprise spending returns. As automotive returns, we would expect to see a pull-up in the numbers. So we don't believe, by any stretch of the imagination, that sort of 245, 250, 255 is where we should be. We think that when demand normalizes, and we think demand is still quite a bit lower than it would naturally be, we're going to see a pull-up in our numbers. So I think the surprise, again, is that as we work through the inventory situation, we hit a point where the current demand is far lower than we'd expect natural demand to be.
Michael E. Hurlston: And so right now we think we're at a very low point in the natural demand and as enterprise spending returns.
Michael E. Hurlston: As automotive returns, we would expect to see a pull up in the numbers. So we don't believe.
Michael E. Hurlston: By any stretch that sort of $2 45 to $52 55 is where we should be we think that when demand normalizes and we think demand is still quite a bit lower than then it would naturally be we're going to see a pull up in our numbers. So I think the surprise again is as we.
Michael E. Hurlston: As we work through the inventory situation, we hit a point, where the current demand is far lower than we'd expect natural demand to be.
Nathaniel Quinn Bolton: Got it. Okay, now that's pretty clear.
Speaker Change: Got it Okay, that's pretty clear and then I guess, just thinking about signs of a recovery.
Nathaniel Quinn Bolton: Things are you sort of tracking.
Nathaniel Quinn Bolton: No.
Nathaniel Quinn Bolton: Point to our recovery is it is it kind of things like bookings backlog.
Nathaniel Quinn Bolton: Or is it customers, particularly interest rate sensitive and you think the demand might not turn until we get it right. Hopefully later this year, what do you think the biggest factors might be.
Michael E. Hurlston: And then I guess, you know, just thinking about signs of a recovery, you know, what, what, what things are you sort of tracking that might point to a recovery? You know, is it, you know, kind of things like bookings, backlog? Are the customers particularly interest rate sensitive? And do you think the demand might not turn until we get a rate cut, hopefully later this year? You know, what do you think the biggest factors might be? Kickstarting the demand in especially the enterprise segment, which seems to be softening?
Michael E. Hurlston: Two.
Michael E. Hurlston: Kickstart that demand and especially the enterprise segment, which seems to be softness.
Michael E. Hurlston: Yeah, I think the first thing is obviously, IT budgets going away from sort of AI and big compute, these large language models that are running in the data center and back towards monitors, docking stations, places where we have a presence. I mean, I think we talked about it with you in the last call.
Speaker Change: Yes, I think the FERC. The first thing is obviously it.
Michael E. Hurlston: Budgets going away from sort of AI and to big compute. These large language models that are running in the data center.
Michael E. Hurlston: And back toward <unk>.
Michael E. Hurlston: Pcs monitors docking stations places, where we have have a presence I mean, I think we talked about it with you in the last call.
Michael E. Hurlston: It seems a little bit counter-intuitive because IT spending is flat or even slightly up if you look at the numbers. But the underlying detail is that the spending on gadgets, on PCs, on docking stations, on headsets, on enterprise telephony is clearly way down, and the balance of the budget is going towards IoT. I'd say that's one thing.
Michael E. Hurlston: It seems a little bit counter because it spending is flat or even slightly up if you look at the numbers, but these underlying detail is that the spending on gadgets on Pcs on docking stations on headsets on enterprise telephony is clearly way down.
Michael E. Hurlston: And the balance of the budget is going towards Iot.
Michael E. Hurlston: I think the second thing for us, too, is we've got a bunch of new product introductions that are beginning to kick in. We used, as we talked to you about, the downturn to invest in the business and start running on our wireless platform. Some new docking station products are beginning to kick in. So, we've got different parts of the portfolio that are going to start to ramp, and even if demand remains soft, our NPI introduction should help us pull those numbers up.
Michael E. Hurlston: I'd say, that's one thing I think the second thing for US too is we've got a bunch of new product introductions that are beginning to kick in we used as we talked to you about we use the downturn to invest in the business to start running on our wireless platform.
Michael E. Hurlston: Some new docking station products are beginning to kick in.
Michael E. Hurlston: So we've got different parts of the portfolio that are going to start to ramp and that should even even if demand remains soft our NPI introduction should help us pull those numbers up.
Nathaniel Quinn Bolton: Got maybe a lot of clarification for me, the core IOT growing double digits in June, you know, I know it's still a fairly low base, but do you think that that double digit growth rate will continue in the back half of the calendar year?
Michael E. Hurlston: Maybe one clarification for me the.
Nathaniel Quinn Bolton: Core Iot growing double digits in June.
Nathaniel Quinn Bolton: I know, it's still a fairly low base do you think that that double digit growth rate continues in the back half of the calendar year.
Michael E. Hurlston: Certainly, it's going to grow. I mean, we've been growing very hot. You know, we talked about double digit growth.
Speaker Change: Certainly it's going to grow I mean, we've been growing obviously very hot.
Michael E. Hurlston: We talked about double digit growth.
Michael E. Hurlston: In that business over an extended period of time, where kind of outgrowing that right now so I would say it will grow it certainly is going to grow the growth rate is is TBD and we haven't provided that guidance.
Nathaniel Quinn Bolton: I understand. Okay. Thank you, Michael.
Speaker Change: Understood. Okay. Thank you Michael.
Operator: Thank you, and please wait one moment for our next question. Our next question comes from Kevin Cassidy of Rosenblatt Securities. Your line is now open.
Speaker Change: Thank you and one moment for our next question.
Operator: Our next question comes from Kevin Cassidy of Rosenblatt Securities. Your line is now open.
Kevin Edward Cassidy: Yes, thanks for taking my question. You know, as long as we're on the topic of wireless connectivity, the Wi-Fi standards, can you say what your revenue split is right now? And you know, how quickly is Wi-Fi growing? And then my follow-up question will be about Wi-Fi 7, and what are the forecasts for that as far as the adoption rate?
Kevin Edward Cassidy: Yes, thanks for taking my question.
Kevin Edward Cassidy: As long as around the topic of <unk>.
Kevin Edward Cassidy: Wireless connectivity.
Kevin Edward Cassidy: Wi Fi standards can you say what your revenue split.
Kevin Edward Cassidy: Right now how quickly Wi Fi growing and then.
Kevin Edward Cassidy: Follow up questions, we'll be around Wi Fi seven or more of the forecast for that as far as the adoption rate.
Michael E. Hurlston: Yeah, hey, Kevin, good to hear from you. You know, number one, we don't break it up.
Speaker Change: Yeah, Hey, Kevin good to hear from you.
Speaker Change: Number one we don't break it out I think that now we've tried to give you and the rest of the folks that follow the stock.
Michael E. Hurlston: I think that now we've tried to give you and the rest of the folks that follow the stock a better look into the business by breaking out core IoT, but within core IoT, we certainly don't break out what's processors and what's wireless. I will say it's mostly wireless. I mean, today our processor line is there. We talked about some wins in that space in the prepared remark. But generally, Wi-Fi is the story. Wi-Fi is doing well. We're getting that business back on track. It was plagued by quite a bit of inventory.
Michael E. Hurlston: A better look into the business by breaking out core Iot, but within core I'd.
Michael E. Hurlston: We certainly don't break out what's processors and whats wireless.
Michael E. Hurlston: We'll say, it's mostly wireless I mean today our processor line is there and we talked about some wins in that space in the prepared remarks, but generally Wifi is the story Wi Fi is doing well, we're getting that business back on track. It was plagued by quite a bit of inventory and now we're starting to see that.
Michael E. Hurlston: And now we're starting to see that business come back in a fairly appreciable way. So we feel pretty good about that. You know, for us, you touched on that, and you might have a different question around that when we get there.
Michael E. Hurlston: Business come back in in a fairly appreciable way.
Michael E. Hurlston: So we feel pretty good about that.
Michael E. Hurlston: For US you touched on it and you might have a different question around it when we get there, but why five seven.
Michael E. Hurlston: But Wi-Fi 7 is, we haven't launched Wi-Fi 7. Wi-Fi 7 generally still isn't available from an infrastructure standpoint. Our biggest issue right now is actually transitioning the customer base from Wi-Fi 5 to Wi-Fi 6. And we've got a full suite of Wi-Fi 6 products. Our mix is still less than 50% on Wi-Fi 6, so we see a pretty significant opportunity to transition the customer base from Wi-Fi 4 and 5 to 6.
Michael E. Hurlston: As we Havent launched Wi Fi seven Wi Fi seven generally still isn't available from an infrastructure standpoint, our biggest issue right now is actually transitioning the customer base from Wi Fi five to Wi Fi six and we've got a full suite of Wi Fi six products.
Michael E. Hurlston: Our mix is still less than 50% on Wi Fi six so we see it.
Michael E. Hurlston: Pretty significant opportunity to transition the customer base from Wi Fi four and five to six we will as I said in the prepared remarks be introducing Wi Fi seven ship at the end of the year and look we think we're going to be first for an Iot class product that incorporates Wi Fi seven Stan.
Michael E. Hurlston: We will, as I said in the prepared remarks, be introducing a Wi-Fi 7 chip at the end of the year. And look, we think we're going to be the first for an IoT class product that incorporates the Wi-Fi 7 standard, but I think that's going to be a while before it really grabs any sort of meaningful foothold.
Michael E. Hurlston: <unk>, but I think that's going to be a while before it really grabs any sort of meaningful foothold.
Kevin Edward Cassidy: Okay, great. Thanks for that detail. And on the docking station, you know, enterprise is slow, but is there inventory on top of that? Does the inventory still have to be depleted? And we're just waiting for enterprise to come back, and then it might still be a quarter or so before we see that business growing again.
Speaker Change: Okay, great thanks for that detail.
Kevin Edward Cassidy: Sure.
Kevin Edward Cassidy: The.
Kevin Edward Cassidy: Documentation is.
Kevin Edward Cassidy: Enterprise is slow.
Kevin Edward Cassidy: Is there inventory on top of that inventory still has to be completed.
Kevin Edward Cassidy: We're just waiting for the enterprise come back from that.
Kevin Edward Cassidy: A quarter or so before we see that business growing again.
Michael E. Hurlston: Yeah, so, I mean, first of all, Kevin, it did grow, so I think we're coming off the bottom on the dock. There still are pockets of inventory. I think I may have said to a previous questioner that we have kind of two halves of the business, as you know well, the display link and display port sides of the business. The display link, which is the dock anywhere, has a bit more inventory that I think we need to work through, and, you know, that's a big piece of our gross margin profile, so that's been particularly slow.
Speaker Change: Yes, so I mean first it Kevin it did grow so I think we're coming off the bottom on dock.
Michael E. Hurlston: There are still are pockets of inventory I think I.
Michael E. Hurlston: I may have said on a previous questioner did.
Michael E. Hurlston: We have kind of two halves of the business as you know well the display link and display port sides of the business the display link which is the dark anywhere.
Michael E. Hurlston: It has a bit more inventory that I think we need to work through and that's a big piece of our gross margin profile. So that's been particularly slow the display port side of the business I think we're probably at equilibrium now thats the piece that kind of grew on quarter.
Michael E. Hurlston: The display port side of the business, I think we're probably at equilibrium now. That's the piece that kind of grew quarter after quarter, and that's facing more of this demand challenge that I highlighted in Quinn's question where we see pretty suppressed demand across the enterprise and automotive portfolio. As demand normalizes, we'd expect that docking business universally to pull back.
Michael E. Hurlston: And.
Michael E. Hurlston: That's facing more of this demand challenge that I highlighted and Quinn's question, where we see pretty suppressed demand across the enterprise and automotive portfolio as demand normalizes, we'd expect that docking business universally to pull back up.
Kevin Edward Cassidy: Okay, I understand. Thanks.
Speaker Change: Okay understood. Thanks.
Operator: Thank you, and please wait one moment for our next question. Our next question is from Krish Sankar of TD Cohen. Your line is now open.
Speaker Change: Thank you Ed one moment our next question.
Krish Sankar: Our next question is from Krishna Shankar of TB Cowen. Your line is now open.
Krish Sankar: Hi, thanks for taking my question. Michael, I had two of them too.
Krish Sankar: Yes, hi, Thanks for taking my question might go ahead drove them to postpone on gross margin you keep hearing about lagging edge foundries input prices have come down.
Krish Sankar: First one on gross margins, you know, you keep hearing about the lagging edge, foundry wafer prices have come down, but you're not seeing any gross margin benefit for you. So I'm just kind of curious, is your gross margin really tied to volume or enterprise auto segment, or is there something else going on?
Krish Sankar: But youre not seeing any gross margin benefit for you. So I'm just kind of curious does your gross margin is really tied to volume will end the enterprise all go segmental.
Krish Sankar: Is there something else going on.
Michael E. Hurlston: Yeah, Krish, fair question. I mean, I think there's two factors for us. One, and the dominant factor is mix.
Speaker Change: Yes, Chris Fair question.
Speaker Change: Theres two factors for us.
Krish Sankar: And then the dominant factors mix and we you and I have talked about this a couple of times.
Michael E. Hurlston: And we've you and I have talked about this a couple of times. And, you know, our mix, gross margin for our gross margin profile. The Enterprise and Automotive business is our strongest driver, and again, there are mixed issues within Enterprise and Automotive, but the slowest part right now of our E&A business is also our highest margin. That's comment number one.
Michael E. Hurlston: Our mix gross margin for our gross margin profile.
Michael E. Hurlston: Enterprise and automotive is our strongest driver and again, there's mix issues within enterprise and automotive, but the slowest part right now of our E&S business is also our highest margin that's comment one comment too I would agree with you that the foundry pricing seems to move a lot.
Michael E. Hurlston: Comment two: I would agree with you that the foundry pricing seems to move a lot. We are partnered with one particular foundry guy, as you know; we kind of moved our strategy to be, very, very heavily weighted toward one supplier. That one supplier has been the slowest to move on price. So I would say that we are hearing the same things that you are, that there's price relief across the semiconductor supply chain.
Michael E. Hurlston: We are partnered with one particular foundry Guy as you know, we kind of moved our strategy to be.
Michael E. Hurlston: Very very heavily weighted toward one supplier that one supplier has been the slowest to move on pricing. So I would say that we are hearing the same things that you are that there are price theres price relief across the semiconductor supply chain.
Michael E. Hurlston: I think that's less true with some of the bigger suppliers, and we are certainly partnered with one of the biggest, and that particular supplier has been less apt to move and respond to the kind of current pricing conditions.
Michael E. Hurlston: That's less true with some of the bigger suppliers and we are certainly partnered with with one of the biggest then and that particular.
Krish Sankar: Got it, got it. That's very helpful, Michael. And then a follow-up.
Krish Sankar: Particular supplier has been less apt to move and respond to kind of current pricing conditions.
Speaker Change: Got it got it that's really helpful. Michael and then a follow up thanks. So some of the color you gave on the Astral platform.
Michael E. Hurlston: Thanks for some of the color you gave on the Astra platform. It seems like you've seen some Edge IoT devices for AI come out lately, but the issue seems to be around latency. From Astra's standpoint, you require a smaller, more optimized AI model to run full inference on devices. So you think that with the model sizes today, you can actually run full inference with no latency with your Astra platform. Thank you.
Michael E. Hurlston: <unk> seen some edge Iot devices come out lately, but the issue seems to be at.
Michael E. Hurlston: Latency.
Michael E. Hurlston: From a flow standpoint, quite a small and more optimized AI model.
Michael E. Hurlston: <unk> devices are you seeing the model today, you can actually run full in terms of low latency with you I'll jump back.
Krish Sankar: Yeah, Krish, good, good, again, very good question. Look, I think on Astra, you know well, you know the technology. We can't run large language models or gene sequencing or things like that. But within the two and four core portfolio, we can run a whole gamut of AI models. And those AI models are large in size; they come from a traditional AI source, such as an NVIDIA being trained in the data center. Our trick is we have a compiler.
Speaker Change: Thank you.
Speaker Change: Yes, Chris could again very good question look I think on an asteroid.
Krish Sankar: You know well you know the technology.
Krish Sankar: We can run large language models or gene sequencing or things like that but within the 2% and four core portfolio, we can run.
Krish Sankar: We'll gamut of of AI models, and those AI models are large in size they come from.
Krish Sankar: Traditional AI source, such as an Nvidia being trained in the data center. Our trick is we have a compiler that takes those models and compile them into our code size.
Krish Sankar: It takes those models and compiles them into our code size. And at least as far as I understand it, and you know, we've spent a lot of time on this with our division head, those models run without latency problems. I mean, that's one of the advantages that we highlight in this business that we have very little latency, high security, and high power efficiency across this product line. And that's one of the advantages we bring. Rather than having to go back and forth to the data center, you can run these AI models on the chip, and obviously, that has significant latency advantages.
Krish Sankar: And at least as far as I understand it and we've spent a lot of time on this with our our division had those models run without latency problems I mean thats one of the advantages that we highlight in this business that we have very little latency.
Krish Sankar: High security and high power efficiency across this product line and Thats one of the advantages, we bring rather than having to go back and forth to the data Center you can run. These AI models on chip and obviously that has significant latency advantages.
Michael E. Hurlston: Thanks, Michael. Thank you. Thank you.
Speaker Change: Thanks, Michael Thank you.
Operator: Thank you, and one moment for our next question. Our final question comes from Peter Peng of J.P. Morgan. Your line is now open. Hey, thanks.
Speaker Change: Thank you and one moment our next question.
Operator: Our final question comes from Peter Peng of J P. Morgan Your line is now open.
Kaykin Peng: Hey, thanks for taking my question, too, as well. Just for the wireless portion of your core allocate, it was kind of at that $200 million revenue run rate. I think where are we, and are you still confident in getting back to those?
Kaykin Peng: Hey, Thanks for taking my question I have two as well just for the wireless portion and your core Alex here. It was kind of at that $200 million revenue run rate I think where are we and are you still confident in getting back to those levels.
Kaykin Peng: Yes.
Michael E. Hurlston: Yeah, Peter, no, I mean, we're obviously very confident in being able to get back to those levels. I think, like, we've been talking about with enterprise and automotive, there's a demand issue in the wireless, it's, it's some of its consumer facing, we actually have quite a bit of it that's enterprise facing. Our inventory, as we said in the prepared remarks, is largely worked through, so now it's a little bit of a suppressed demand environment.
Kaykin Peng: Yes, Peter No I mean, we are obviously very confident and being able to get back to those levels I think like we've been talking about with enterprise and automotive there is a demand issue in the wireless its some of its consumer facing we actually have quite a bit of it that's that's enterprise space.
Michael E. Hurlston: Saying that we are.
Michael E. Hurlston: Our inventory as we said in the prepared remarks is largely worked through so now it's a little bit of a suppressed demand environment. We would expect that we continue to work through that demand will return and when it does we would expect that to go to $200 million and beyond and then in addition, as we talked about we have a lot.
Michael E. Hurlston: We'd expect that we'd continue to work through that. Demand will return, and when it does, we'd expect it to go to $200 million and beyond. And then, in addition, as we talked about, we have a lot of new products, our new products that are coming online, and we also have new design wins that are coming online. So the sum total of those obviously gives us a lot of confidence in that wireless business. We would expect, we haven't seen that snap back to 200 million, but we'd expect to get there and beyond as time goes forward.
Michael E. Hurlston: New products, our new products that are coming online and we also have new design wins that are coming online. So the sum total of those obviously it gives us a lot of confidence in that wireless business.
Michael E. Hurlston: We would expect we haven't seen that snap back to $200 million, but we'd expect to get there and beyond as time goes as time goes forward.
Kaykin Peng: Great, thank you. And then my thoughts on your mobile. So, you know, that low single digit, that's like a nine to $10 million revenue drop off per quarter. And so you have, you talked about potentially winning some in the mid-tier Android space. And then you combine that with the Android coverage. So, like, as we kind of think about Cisco 25 for your mobile, is this gonna be flat down, or up? Any indication would be helpful.
Speaker Change: Great. Thank you and then my follow up on your mobile so.
Kaykin Peng: That low single digit that's like almost.
Kaykin Peng: Almost a $9 million to $10 million revenue drop off per quarter, and so you have you talked about.
Kaykin Peng: Potentially winning some in the mid tier Andrew.
Kaykin Peng: Android space and then you combine that with the Android coverage. So like as we kind of think about fiscal 'twenty five for your mobile is this going to be flat down up any indication would be helpful.
Michael E. Hurlston: Yeah, I mean, probably too early to call you got the puts and takes right. I mean, I think that, in general, we'll be sort of a, you know, low double digits type of hole that we have to fill due to the DDIC socket. I think the numbers are about right, and we've talked about that on lots of different calls. So I think that you have the framing of it roughly correct.
Michael E. Hurlston: Yeah, I mean...
Kaykin Peng: Yeah.
Speaker Change: Yes, I mean, probably I would say too early to call you got the puts and takes right I mean, I think that in general.
Michael E. Hurlston: We will be sort of.
Michael E. Hurlston: Low double digits type of hole that we have to fill due to the DDI socket I think the numbers are about right and we've talked about that on on lots of different calls. So I think that you have.
Michael E. Hurlston: The framing of it roughly correct.
Michael E. Hurlston: We are winning. We did really well last year by flipping one of the large Android customers over. Ah, we seem to be holding up really well in China, so our Chinese handset business is very, very strong, and we have a high market share. We do, as you called out, expect to win now in the mid-tier, so kind of the sum total of that, you know, I would expect... that, on balance, you know, flattish is probably where we end up in that business. But again, it's too early to sort of call.
Michael E. Hurlston: We are winning we did really well last year with flipping one of the large android customers over.
Michael E. Hurlston: We seem to be holding up really well in China. So China handset business is very very strong and we have high market share. We do as you you called out we expect to win now and the mid tier.
Michael E. Hurlston: So kind of a sum total of of of that.
Michael E. Hurlston: I would expect.
Michael E. Hurlston: That on balance flattish is probably where we end up in that business, but again too early to sort of call.
Speaker Change: Great. Thank you guys.
Michael E. Hurlston: Thank you. I am showing no further questions at this time. I would now like to turn it back to Michael Hurlston, CEO, for closing remarks.
Michael E. Hurlston: Thank you I'm showing no further questions at this time I would now like to turn it back to Michael Holston CEO for closing remarks.
Michael E. Hurlston: I'd just like to thank all of you for joining us today. We look forward to speaking to you at our upcoming investor conferences during the quarter. Thanks a lot.
Michael E. Hurlston: I'd just like to thank all of you for joining US today, we look forward to speaking to you at our upcoming investor conferences during the quarter. Thanks a lot.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
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