Q1 2025 Synaptics Inc Earnings Call
Operator: Good day and thank you for standing by.
Good day and thank you for standing by welcome to Synaptics first quarter fiscal year 2025 financial results Conference call. At this time, all participants are in a listen only mode.
Operator: Welcome to Synaptics' first quarter fiscal year 2025 financial results conference call. At this time, all participants are in a listen-only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
After the Speakers' presentation there'll be a question answer session to ask a question. During this session you will need to press star one on your child. So you'll then here an automated message advising your hand is right.
Draw. Your question. Please press star one again please.
Operator: Please be advised that today's conference is being recorded.
Please be advised that today's conference is being recorded I would now like to turn the conference over to your first speaker today, Montreal Shah Vice President Investor Relations. Please go ahead.
Munjal Shah: I would now like to turn the conference over to your first speaker today, Munjal Shah, Vice President in Investor Relations.
Munjal Shah: Please go ahead. Thank you, Kathy. Good afternoon and thank you everyone for joining us today on Synaptics' first quarter fiscal 2025 conference call.
Lynn Jolliffe: Thank you Kathy good afternoon, and thank you everyone for joining us today on Synaptics first quarter fiscal 2025 conference call. My name is Lynn Jolliffe shop, and I'm, the head of Investor Relations.
Munjal Shah: My name is Munjal Shah, and I'm the head of investor With me on today's call are Michael Hurlston, our President and CEO, and Ken Rizvi, our Chief Financial Officer. This call is also being broadcast live over the web and can be accessed from the investor relations section of the company's website at synaptics.com. In addition to the supplemental slide presentation, we have also posted a copy of these prepared remarks on our investor relations website. In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis. Share Based Compensation, Acquisition Related Costs, and certain other non-cash or recurring or non-recurring Please refer to our earnings press release issued after March.
Lynn Jolliffe: With me on today's call are Michael hosting our president and CEO and Kent.
Speaker Change: <unk> financial officer.
Speaker Change: Call is also being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at Synaptics Dot com.
Speaker Change: In addition to the supplemental slide presentation. We have also posted a copy of these prepared remarks on our Investor Relations website.
Speaker Change: In addition to the company's GAAP results management will also provide supplementary results on a non-GAAP basis, which excludes share based compensation acquisition related costs and certain.
Speaker Change: Other noncash or recurring or nonrecurring items.
Speaker Change: Please refer to our earnings press release issued after market close today for a reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures presented which can be accessed from the investor Relations section of the company's website at Synaptics dotcom.
Munjal Shah: for a reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures.
Munjal Shah: Additionally, we would like to remind you that during the course of this conference call, Synaptics will make forward-looking statements in our prepared remarks and may make additional forward-looking statements in response to your questions. These forward-looking statements give our current expectations and projections relating to our financial conditions, results of operations, plans, objectives, future performance, and Although Synaptics believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our understanding. Synaptics cautions that actual results may differ materially from any future performance suggested in the company's forward-looking report. Therefore, 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-A.
Speaker Change: Additionally, we would like to remind you that during the course of this conference call Synaptics will make forward looking statements in our prepared remarks and may make additional forward looking statements in response to your questions.
These forward looking statements give our current expectations and projections relating.
Speaker Change: Our financial condition results of operations plans objectives future performance and business.
Speaker Change: Although synaptics believes our estimates and assumptions to be reasonable, yes, subject to a number of risks and uncertainties beyond our control.
Speaker Change: <unk> cautions that actual results may differ materially from any future performance suggested in the company's forward looking statements.
Speaker Change: Therefore, 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 for important risk factors that could cause actual results to differ materially from those contained in any forward looking statement.
Munjal Shah: These are important risk factors that could cause actual results to differ materially from those contained in any forward-looking study.
Munjal Shah: expressly disclaims any obligation to update the forward And now, turn the call over.
Speaker Change: Synaptics expressly disclaims any obligation to update the forward looking information.
Michael: I would now turn the call over to Michael.
Michael Hurlston: Thanks, Munjal.
Michael Hurlston: I'd like to welcome everyone to today's delivered very solid performance. Revenue increased 8% year-over-year and exceeded the midpoint of our guidance range, driven by continued strength in core IoT products.
Michael: Thank you Mitchell I'd like to welcome everyone to today's call. We delivered very solid performance. This quarter revenue increased 8% year over year and exceeded the midpoint of our guidance range driven by continued strength in core Iot product sales.
Michael Hurlston: were dropped 55% compared. Our profitability continues to improve with non-gap gross and operating margins higher compared to the prior quarter and the year ahead. We delivered strong EPS growth with non-gap EPS increasing 56% year-over-year. We had another great quarter in Core IoT, led by our wireless and process... We are introducing new products, winning new designs, and increasing our pipeline. Our core IoT funnel has grown nearly 30% since our last update a year ago, increasing from about $2.2 billion in September of 2023 to over $3 billion today. This design pipeline supports a compounded revenue growth of 25 to 30 percent over the next five years.
Speaker Change: Were up 55% compared to the prior year.
Speaker Change: Our profitability continues to improve with non-GAAP gross and operating margins higher compared to the prior quarter and a year ago.
Speaker Change: We delivered strong EPS growth with non-GAAP, EPS, increasing 56% year over year.
Speaker Change: We had another great quarter in core Iot led by our wireless and processor products, we are introducing new products, winning new designs and increasing our pipeline our core Iot funnel has grown nearly 30% since our last update a year ago, increasing from about $2 2 billion in September of 2023 to over three.
Speaker Change: $3 billion today.
Speaker Change: This design pipeline supports a compounded revenue growth of 25% to 30% over the next five years.
Michael Hurlston: In wireless, we're making progress in broad market. which we defined as a part of the wireless connectivity market that requires a lower power and lower cost solution. At our analyst day just over a year ago, we outlined our SAM from this market segment as approximately $3 billion. Our first broad market chip is back from Fab and is on track to sample this allowing us to address this opportunity for the first time. Given our level of differentiation, we expect to build share in broad markets and establish a meaningful position over the next... Meanwhile, in high-performance Wi-Fi, we continue to build our position with new customer wins and market share gains.
Speaker Change: In wireless we are making progress in broad markets, which we defined as a part of the wireless connectivity market that requires a lower power and lower cost solution.
Speaker Change: At our analyst day, just over a year ago, we outlined our Sam from this market segment is approximately $3 billion.
Speaker Change: Our first broad market ship is back from fab and is on track to sample this quarter, allowing us to address this opportunity for the first time.
Speaker Change: Given our level of differentiation, we expect to build share in broad markets and establish a meaningful position over the next two years.
Speaker Change: Meanwhile, in high performance Wi Fi, we continue to build our position with new customer wins and market share gains.
Michael Hurlston: The pace of new wins accelerated, nearly doubling in number as compared to just three months expand across a broad range of customers and In addition, we remain on track to sample the first Wi-Fi 7 device designed specifically for the IoT market later this year. While our overall share is still modest, we continue to believe that we can be a leading player in the next...
Speaker Change: The pace of new wins accelerated nearly doubling in number as compared to just three months ago and spanned across a broad range of customers and applications.
Speaker Change: In addition, we remain on track to sample the first Wi Fi seven device designed specifically for the Iot market later this month.
Speaker Change: While our overall share is still modest we continue to believe that we can be a leading player in the next few years.
Michael Hurlston: Moving to processors, our Astra products recently earned recognition from industry experts. by winning the 2024 Edge Awards in the Machine Learning and Deep Learning category. Our solutions are gaining market traction with our funnel growing $300 million in the Our primary progress to date has been in designs for home automation, security, and appliance Additionally, we are seeing interest from ODMs and customers for an AI hub that connects to multiple devices. Reducing or Eliminating the Need for Cloud Connectivity. Customers are drawn to our products because they bring AI capability to edge devices at very competitive prices. In this way, a decision doesn't need to be made immediately as to the AI use case.
Speaker Change: Moving to processors are Astro products recently earned recognition from industry experts by winning the 2020 for edge awards in the machine learning and deep learning category.
Speaker Change: Our solutions are gaining market traction with our funnel growing $300 million in the quarter.
Speaker Change: Our primary progress to date has been in designs for home automation security and appliances.
Speaker Change: Additionally, we are seeing interest from Oems and customers for an AI hub.
Speaker Change: Can I ask to multiple devices, reducing or eliminating the need for cloud connectivity.
Speaker Change: Customers are drawn to our products because they bring AI capability to edge devices at very competitive price points. In this way a decision does it need to be made immediately as to the AI use cases, because our products are plug and play replacement for existing <unk>.
Michael Hurlston: Because our products are plug-and-play replacement. for Existing M.D.
Michael Hurlston: In enterprise and automotive, we're seeing gradual improvement across the enterprise portfolio. Our PC product revenue increased by a high single-digit percentage in the quarter, benefiting from market seasonality and incremental share. While 2024 was a year of stabilization in the PC market and notebook units didn't grow quite as expected, there is an increasing belief that demand will grow more appreciably in 2025, driven by multiple factors, including the age of the fleet, Windows 10 end of life, and new AI. given our market position in fingerprint sensors, touchpads, and user presence detection. Any growth will be beneficial to our top line number.
Speaker Change: In enterprise and automotive were seeing gradual improvement across the enterprise portfolio, our PC product revenue increased by high single digit percentage in the quarter benefiting from market seasonality and incremental share gains.
Speaker Change: While 2024, it was a year of stabilization in the PC market and notebook units didn't grow quite as expected. There is an increasing belief that demand will grow more appreciably in 2025, driven by multiple factors.
Speaker Change: Including the age of the fleet Windows, Ted end of life and new AIP CS.
Given our market position and fingerprint sensors touch pads and user presence detection.
Speaker Change: Any growth will be beneficial to our top line numbers.
Michael Hurlston: Even with limited growth in units next year, we expect our UPD products to double in FY25, albeit off a relatively small budget. We are ramping design wins at our lead customer and sit on Intel's reference design for their Panther Lake platform. Progress with both Intel and our major customer shows the significant advantage we have. We expect to be able to bring those differentiators to new PC customers and to other. growing revenue for this product line over the next five.
Speaker Change: Even with limited growth in units next year, we expect our <unk> products to double in FY 'twenty five.
Speaker Change: It offers relatively small base.
Speaker Change: We are ramping design wins at our lead customer and sit on Intel's reference design for their Panther Lake platform the.
Speaker Change: The progress with both Intel and our major customer shows the significant advantage. We have we expect to be able to bring those differentiators to new PC customers and to other applications growing revenue for this product line over the next five years.
Michael Hurlston: Next, our Video Interface products are showing signs of life again, as we have mostly worked While revenue from these products improved a double digit percentage compared to the year ago quarter, they are still 40% or more below the normal run rate. Irrespective of the PC market, we believe our video interface products will see improvement in 2025 due to technology standard upgrades and increased manageability requirements. For example, next year's notebook models will include Thunderbolt 5 and our latest devices uniquely support its high bandwidth requirements. Our latest video interface product, Carrera, should see a high rate of adoption as it enables more displays, higher refresh rates, and faster charging capabilities.
Speaker Change: Next our video interface products are showing signs of life again, as we have mostly worked down inventory.
Speaker Change: While revenue from these products improved a double digit percentage compared to the year ago quarter, They are still 40% or more below the normal run rate.
Irrespective of the PC market, we believe our video interface products will see improvement in 2025 due to technology standard upgrades and increased manageability requirements.
Speaker Change: For example, next year's notebook models will include Thunderbolt, five and our latest devices uniquely support its high bandwidth requirement.
Speaker Change: Our latest video interface product Correira should see a higher rate of adoption as it enables more displays higher refresh rates and faster charging capability.
Michael Hurlston: Further benefiting this product line is the advent of new ARM-based PCs. Our newly introduced DisplayLink Pro is CPU and GPU agnostic and the only solution available that can support both ARM and x86 processors.
Speaker Change: Further benefiting this product line is the advent of new arm based Pcs, our newly introduced display link pro is CPU and GPU agnostic and the only solution available that can support both arm in X 86 processors.
Michael Hurlston: In automotive, end market demand has deteriorated and these products were actually down year over year. We remain cautious regarding this product line, given the broader market slowdown, the continued decline in legacy DDIC products, and delays in the adoption of new technologies. In mobile, our touch controllers are aligned with the high end of the Android market and are seeing good strength. We continue to win replacement designs with major customers and see opportunities downmarket with... We are also introducing a new frequency-based touch controller, which should not only help build share in handsets, but also potentially unlocks new non-mobile applications.
Speaker Change: In automotive end market demand has deteriorated and these products were actually down year over year.
Speaker Change: We remain cautious regarding this product line given the broader market slowdown the continued decline in legacy <unk> products and delays in the adoption of new technologies.
Speaker Change: In mobile our touch controllers are aligned with the high end of the Android market and are seeing good strength, we continue to win replacement designs with major customers and see opportunities down market with some Oems.
Speaker Change: We are also introducing a new frequency based touch controller, which should not only help build share in handsets, but also potentially under lock unlocks new non mobile applications.
Michael Hurlston: We also plan to begin deploying capital this quarter. Ken will provide more details in his prepared remarks, but our focus will be on share repurchase.
Speaker Change: We also plan to begin deploying capital this quarter, Ken will provide more details in his prepared remarks, but our focus will be on share repurchases.
Michael Hurlston: To conclude, we are making progress in core IoT, gaining share in high performance Wi-Fi while building a foundation in broad market connectivity and edge IoT processes. In addition, our enterprise product sales are growing again, and any further increase in end demand should result in an improved market. Finally, we are driving higher earnings and starting to return capital to shareholders.
Speaker Change: To conclude we are making progress in core Iot gaining share in high performance Wi Fi while building a foundation in broad market connectivity and edge Iot processors.
Speaker Change: In addition, our enterprise product sales are growing again and any further increase in end demand should result in improved margins.
Speaker Change: Finally, we are driving higher earnings and starting to return capital to shareholders.
Ken Rizvi: Let me turn the call over to Ken for review of our first quarter financial results and the second quarter outlook. Thanks, Michael, and good afternoon to everyone. I will focus my remarks on our non-GAAP results, which are reconciled to GAAP financial measures. and the earnings release tables found in the investor relations section of our website. Now let me turn to our financial results for the first quarter of fiscal 2025. Revenue for fiscal Q1 was $257.7 million. above the midpoint of our guidance, with sequential improvements. across CoreIO. Enterprise and Automotive, and Mobile Products. Q1 revenues were up 8% on a year-over-year basis and up 4% Revenue mix in the first quarter was as follows.
Speaker Change: Let me turn the call over to Ken for a review of our first quarter financial results and second quarter outlook.
Thanks, Michael and good afternoon to everyone.
Ken: I will focus my remarks on our non-GAAP results, which are reconciled to GAAP financial measures in the earnings release tables found in the Investor Relations section of our website.
Ken: Now, let me turn to our financial results for the first quarter of fiscal 2025.
Ken: Revenue for fiscal Q1 was $257 $7 million above the midpoint of our guidance with sequential improvement across core Iot enterprise and automotive and mobile products.
Ken: Q1 revenues were up 8% on a year over year basis and up 4% sequentially.
Ken: Revenue mix in the first quarter was as follows.
Ken Rizvi: 23% for IoT. 57% Enterprise and Automated. and 20% mobile product. Core IoT product revenues increased 55% year-over-year and 10% sequentially, reflecting new design ramps as well as further recovery in the overall wireless end market. Enterprise and Automotive Products. 3%. Thank you. and was down 5% on a year-over-year basis. Our PC products continue to improve sequentially, helped by both share gains and seasonality. The year-over-year decline was primarily due to our automotive product. which were impacted by the overall market slowdown and the decline in legacy products. Mobile product revenue was up 14 percent year-over-year and 3 percent sequentially.
Ken: 3% core Iot.
Ken: 57% enterprise and automotive and 20% mobile products.
Ken: Core Iot product revenues increased 55% year over year, and 10% sequentially, reflecting new design ramps as well as further recovery in the overall wireless end market.
Ken: Enterprise and automotive product revenue improved 3% sequentially and.
Ken: And was down 5% on a year over year basis.
Our PC products continued to improve sequentially.
Ken: <unk> by both share gains and seasonality.
Ken: The year over year decline was primarily due to our automotive products, which were impacted by the overall market slowdown and the decline in legacy products.
Ken: Mobile product revenue was up 14% year over year.
Ken: And 3% sequentially.
Ken Rizvi: And as a reminder, our mobile products are largely driven by the high-end Android market. During the quarter, we had two customers greater than 10% of revenue, each at approximately 12%. First quarter, non-gap growth. above the midpoint of our guidance. First Quarter Non-Gap Operating was $95.9 million, and at the midpoint of our guidance... Our non-GAAP operating income strengthened again in the first quarter, coming in at 16.7%, up by over 400 basis points. on a year-over-year basis and up by over 200 basis points sequentially. driven by improved revenue and continued operating expense control. Non-gap net income in Q1 was $32.5 million.
Ken: And as a reminder, our mobile products are largely driven by the high end Android market.
Ken: During the quarter, we had two customers greater than 10% of revenue each at approximately 12%.
First quarter non-GAAP gross margin was 53, 9%.
Ken: Above the midpoint of our guidance.
Ken: First quarter non-GAAP operating expense was $95 9 million and at the midpoint of our guidance range.
Ken: Our non-GAAP operating income strengthened again in the first quarter coming in at 16, 7% up by over 400 basis points on a year over year basis and up by over 200 basis points sequentially driven by improved revenue and continued.
Ken: Operating expense controls.
Ken: non-GAAP net income in Q1 was $32 5 million.
Ken Rizvi: non-gap EPS per diluted share came in above the midpoint of our guidance. at $0.81 per share. an increase of 56% on a year-over-year basis. 27% sequential. Now, turning to the balance. We ended the quarter with approximately $854 million of cash and cash equivalent. down approximately $23 million from the prior quarter. Cash used in operations was $11.4 million, primarily due to the $30 million of cash tax. related to the on-shoring of our intellectual property last quarter. Capital expenditures were $9.1 million. and depreciation for the quarter was $7.2 million. The receivables at the end of September were $135.8 million.
Ken: non-GAAP EPS per diluted share came in above the midpoint of our guidance at <unk> 81 per share.
Ken: An increase of 56% on a year over year basis, and 27% sequentially.
Ken: Now turning to the balance sheet.
Ken: We ended the quarter with approximately $854 million of cash and cash equivalents down approximately $23 million from the prior quarter.
Ken: Cash used in operations was $11 4 million, primarily due to the $30 million of cash taxes, including a onetime cash payment related to the onshoring of our intellectual property last quarter.
Ken: Capital expenditures were $9 1 million and depreciation for the quarter was $7 2 million.
Ken: Receivables at the end of September were a $135 8 million and days sales outstanding were 47 days.
Ken Rizvi: And Day Sales Outstanding, or 47 days, down from 52 days last quarter. Our ending inventory balance was $119.6 million, up slightly compared to the last We support customer demand for our second quarter. The calculated days of inventory on our balance sheet were 93 days.
Ken: <unk> from 52 days last quarter.
Ken: Our ending inventory balance was $119 $6 million up slightly compared to the last quarter to support customer customer demand for our second quarter.
Ken: The calculated days of inventory on our balance sheet were 93 days.
Ken Rizvi: Now, let me turn to our capital allocation priority. First, we will continue to invest in our organic. as we see significant opportunities for growth, especially in our core IoT and enterprise and automotive products. We will continue to augment our internal capabilities with M&A in a disciplined manner, which we have done successfully over the last several years. Third, we will return capital via share repurchase. And finally, we will continue to maintain a strong balance sheet and liquidity profile, enabling us to remain nimble and allocate capital in an efficient manner. Today, our cash balance is higher than our operational requirement.
Ken: Now, let me turn to our capital allocation priorities.
Ken: First we will continue to invest in our organic business as we see significant opportunities for growth.
Ken: Especially in our core Iot and enterprise and automotive products.
Second.
Ken: We will continue to augment our internal capabilities with M&A.
Ken: Disciplined manner, which we have done successfully over the last several years.
Ken: Third we will return capital via share repurchases and finally, we will continue to maintain a strong balance sheet and liquidity profile, enabling us to remain nimble and allocate capital in an efficient manner.
Ken: Today, our cash balance is higher than our operational requirements and in addition, we have ample dry powder for tuck in acquisitions.
Ken Rizvi: And in addition, we have ample dry powder for tuck-in acquisition. As a result, we intend to return a portion of our cash to shareholders. while also continuing to maintain a strong balance. We are earmarking approximately $150 million.
Ken: As a result, we intend to return a portion of our cash to shareholders. While also continuing to maintain a strong balance sheet.
We are earmarking, approximately $150 million or 150% of the free cash flow generated in fiscal 2024 four share repurchases over the next 12 months.
Ken Rizvi: or 150% of the free cash flow generated in fiscal 2024 for share repurchases over the next 12 Now let me turn to our second quarter of 2025 guidance. We expect revenues to be approximately $265 million at the midpoint, plus or minus $15 million. Our guidance for the second quarter reflects an expected revenue mix from core IOT, enterprise and automotive, and mobile products in the second quarter to be approximately 24, 59, and 17 percent, respectively. We expect non-GAAP gross margins. 53.5% at the midpoint, plus or minus 1%. Non-GAAP operating expense in the December quarter is expected to be approximately $96 million at the midpoint of guidance, plus or minus $2 million.
Ken: Now, let me turn to our second quarter of 2025 guidance, we expect revenues to be approximately $265 million at the midpoint plus or minus $15 million.
Ken: Our guidance for the second quarter reflects an expected revenue mix from core Iot enterprise and automotive and mobile products in the second quarter to be approximately 24, 59 and 17% respectively.
Ken: We expect non-GAAP gross margin to be 53, 5%.
Ken: At the midpoint plus or minus 1%.
Ken: non-GAAP operating expense in the December quarter is expected to be approximately $96 million at the midpoint of guidance plus or minus $2 million.
Ken Rizvi: And we expect non-GAAP net interest and other expense to be approximately $5 million in the December quarter. and our non-GAAP tax rate to be in the range of 13 to 15 percent. Non-GAAP net income per diluted share is anticipated to be $0.85 per share at the midpoint, plus or minus $0.20, on an estimated 40.5 million fully diluted shares. We are expecting another quarter of sequential growth in Q2. We have also worked through our internal inventory challenges, and our channel inventory is lean, and even below normal in certain pockets. However, as revenue growth is still relatively muted, we will continue to appropriately manage the business and overall expenses.
Ken: And we expect non-GAAP net interest and other expense to be approximately $5 million in the December quarter.
Ken: And our non-GAAP tax rate to be in the range of 13% to 15%.
Ken: non-GAAP net income per diluted share is anticipated to be 85 per share at the midpoint plus or minus 20.
Ken: On an estimated 45 million fully diluted shares.
Ken: We are expecting another quarter of sequential growth in the in Q2.
Ken: We have also worked through our internal inventory challenges and our channel inventory is lean and even below normal in certain pockets.
Ken: However, as revenue growth is still relatively muted we will continue to appropriately manage the business and overall expenses, while also ensuring adequate investments for our long term growth.
Ken Rizvi: while also ensuring adequate investment. for our long-term growth.
Operator: This wraps up our prepared remarks, and I'd like to turn the call over to the operator to start the Q&A. Thank you. As mentioned, at this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll 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 our Q&A roster.
Speaker Change: This wraps up our prepared remarks, and I'd like to turn the call over to the operator to start the Q&A session.
Speaker Change: Thank you as mentioned at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please stand by while we compile the Q&A roster.
Christopher Rolland: Our first question comes from the line of Christopher Rolland with Susquehanna. Your line is now open. Hey guys, thanks for the question and congrats on the quarter.
Speaker Change: Our first question comes from the line of Christopher Rolland with Susquehanna. Your line is now open.
Christopher Rolland: Hey, guys.
Speaker Change: Thanks for the question and congrats on the quarter I guess first of all.
Michael Hurlston: I guess first of all, roadmaps and timelines for new products. Have you guys pulled any in or moved any out? And I think you have a broad markets chip coming. Perhaps you could talk about your expectations for that chip in the near term. Thanks so much guys.
Speaker Change: Roadmaps and timelines for new products.
Speaker Change: Have you guys pulled any in or moved any out.
Speaker Change: And I think.
Speaker Change: You have a broad markets chip.
Coming perhaps you could.
Speaker Change: Talk about your expectations for that chip.
Speaker Change: In the near term thanks, so much guys.
Michael Hurlston: Hey, Chris. Thanks for the question and thanks for paying attention to the call. Appreciate it very much. You know, number one, I think our timelines have remained consistent. We talked about in the Wi-Fi area being in a position to Sample a Wi-Fi 7 chip this quarter for IOT applications, that's very much on target. And for our broad markets chip that we spent some time talking about. This question speaks to, again, on target to sample this quarter.
Speaker Change: Hey, Chris Thanks for the question and thanks for.
Speaker Change: Paying attention to the call appreciate it very much.
Speaker Change: Number one I think our timelines have remained consistent we talked about in the Wi Fi area being in a position to.
Speaker Change: Sample of Wi Fi seven chip this quarter for Iot applications, that's very much on target and for our broad markets chip that we spent some time talking about it in your question speaks to again are on target to sample. This quarter. So we've we've held our schedule is fairly well.
Michael Hurlston: https://www.kenricks.com.au generally. So giving schedules, hitting those schedules, I think the engineering team has done a good job. With respect to broad markets, I think that we are expecting that particular unit. If you remember when you came to the Annals Day in New York, we talked about three segments, high performance, broad markets, and BLE. I think the revenue contribution in the 2028 time frame was roughly $150 million, just from broad markets. And that appears on track, given the funnel. Given the sales opportunities we're generating in broad markets. I don't want to give a new number, I'd say generally we're tracking above that number given early traction, but I think we sort of outlined that that would be somewhere in the $150 to $200 million contributor in that 2028 time frame.
Speaker Change: In the processor area, where obviously in production with several of our edge AI processors, we have a pretty big one coming out mid year next year. So that schedule is also holding up.
Speaker Change: So in the core Iot area I'd say.
Speaker Change: Generally were.
Speaker Change: Giving scheduled heading about schedules I think the engineering team has done a good job with respect to broad markets.
Speaker Change: I think that we are expecting that particular unit. If you remember when you came to the analyst day in New York, We talked about three segments pipe performance broad markets and a.
BLA I think the revenue contribution in the 2028 timeframe was roughly $150 million just from broad markets and that appears on track given the funnel.
Speaker Change: Given the sales opportunities were generating in broad markets.
Speaker Change: I don't want to give a new number I'd say generally were tracking above that number given early traction but.
Speaker Change: I think we sort of outlined that that would be somewhere in the 150 to 200 million dollar contributor in that 2028 timeframe and that seems very good right now.
Michael Hurlston: That seems very good.
Michael Hurlston: Excellent.
Michael Hurlston: Thank you, Michael.
Speaker Change: Excellent. Thank you Michael also perhaps a follow up on.
Michael Hurlston: Also, perhaps a follow up on the core IoT funnel. Seems like great growth there. Great revenue, CAGR 25 to 30 over the next five years, really strong there. Perhaps you can put a finer point on growth. Where is it coming from? How much is Wi-Fi? How much is Bluetooth? How much is processors? Just kind of work up where you're maybe most excited and where you think needle moving growth is really going to be coming from here to track to that 25 to 30. Yeah, good. Very good question, Chris. I mean, I think, you know, obviously, near term, it's all Wi-Fi.
The core Iot funnel seems like great growth there great.
Speaker Change: Great revenue Tiger 25 to 30 over the next five years really strong there.
Speaker Change: Perhaps you can put a finer point on growth where is it coming from how much is Wi Fi how much is Bluetooth how much as processors.
Speaker Change: Just kind of work where you're.
Speaker Change: Or maybe most excited and where you think like needle moving growth is really going to be coming from here.
Speaker Change: To track to that 25 to 30, yeah. Good very good question, Chris I mean, I think obviously near term, it's all Wi Fi So our high performance Wi Fi as we outlined in the call doing super well.
Michael Hurlston: So, our high performance Wi-Fi, as we outlined in the call, doing super well. We're actually, again, I'd say, exceeding expectations at this point relative to design wins and projections we have coming out of our funnel. That is all kind of carries us through this fiscal year. In 2026, we start seeing contributions from this broad market chip. I mean, I don't think it's going to contribute. fiscal 2025, just given its sampling schedule. And then in 2026, we start to see the very early.
Speaker Change: We're actually again I'd say exceed.
Speaker Change: Exceeding expectations at this point relative to design wins and projections, we have coming out of out of our funnel that is all kind of carries us through this fiscal year.
Speaker Change: In 2026, we'd start seeing contributions from this broad market chip I don't think it's going to contribute in fiscal 2025, just given its sampling schedule.
Speaker Change: And then in 2026, we start to see the very early.
Michael Hurlston: . But, it's really just a knee up of the processor initiative, right? We've got our existing processors, as you know well, that are focused in these narrow verticals that are contributing revenue today, but the broad market processor with the AI capability, we'd expect to see, find a first revenue late fiscal 26, but really contributing meaningful in 27. So that's kind of the rank order.
Speaker Change: Neither of the processor initiative fried we've got our existing processors as you know well that are focused in these narrow verticals that are contributing revenue today, but the broad market processor with the AI capability, we would expect to see final first revenue late fiscal 'twenty, six but really contributing.
Speaker Change: In 2007.
Speaker Change: So that's kind of the rank order.
Michael Hurlston: BLE, you talked about. I think BLE, we've got to look at very carefully. Our BLE strategy, that's one area where we are tracking behind a bit. We've got to look at how we can find a way to accelerate our BLE opportunity, which I think in our 2028 projection and the stack up that we gave to you at Analyst Day was somewhere between $50 and $100 million of contribution. So the smallest of the three Wi-Fi segments. But I would say right now, Chris, we're tracking a little bit behind on.
Speaker Change: BLE you Todd talked about I think BLE, we got to look at very carefully our BLA strategy. That's one area, where we are tracking behind a bit.
Speaker Change: We've got to look at how we can find a way to accelerate our BLA opportunity, which I think in our 2028 projection in the Skus and the stack up that we gave to you at analyst day with somewhere between 50 and $100 million of contribution so the smallest of the three Wifi segments, but I wouldn't.
Christopher Rolland: Say right now, Chris we are tracking a little bit behind on BLA.
Michael Hurlston: Excellent, that AI product sounds really cool too. Thanks so much guys. Thanks Chris.
Speaker Change: Excellent that AI product sounds really cool too. Thanks, so much guys. Thanks, Chris.
Operator: Thank you.
Thank you.
Kevin Cassidy: Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open. Yeah, thanks for taking my question and congratulations on the great results. You know, maybe my question is along the same line as Chris's, the Wi-Fi 7 as you're coming into that market, how would you compare that upgrade cycle to past Wi-Fi upgrade cycles? You know, is it, is it, are you getting more pull on that? You know, maybe just give me a, give a description of what's happening in that market.
Speaker Change: Our next question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open.
Speaker Change: Yes, Thanks for taking my question and congratulations on the great results.
Speaker Change: Maybe my question is along the same lines as Christmas.
Speaker Change: 157% as youre coming into that market, how would you compare that upgrade cycle to past Wi Fi upgrade cycles.
Speaker Change: Is it are you getting more pull on that maybe.
Speaker Change: Maybe just give me give a description of what's happening in that market.
Michael Hurlston: Yeah, Kevin, good. As always, thanks for paying attention to the company and giving us all the coverage that you do. I would say very consistent, actually.
Speaker Change: Yeah.
Speaker Change: Kevin Good as always thanks for thanks for paying attention to the company and given US all the coverage you do.
Speaker Change: I would say very consistent actually I mean, what happens is you're going to get kind of a kind of a step function up and we'd expect to see that in our fiscal 2026, probably a little earlier than the broad markets, where you go from sort of zero penetration in the Iot segue.
Michael Hurlston: I mean, what happens is you're gonna get kind of a step function up and we'd expect to see that in our fiscal 2026, probably a little earlier than the broad markets where you go from sort of zero penetration in the IoT segment to something like 20 to 25% penetration relatively rapidly, a pretty big step function because there are certain devices that are gonna gravitate very naturally to Wi-Fi 7. A lot of other video transfer products that we've talked to you about before, drones, set-top boxes, things of that nature. Then it takes some time from 20 to 25 to let's say 50% penetrated probably takes two to three years, right?
Speaker Change: Meant to something like 20% to 25% penetration relatively rapidly a pretty big step function because there are certain devices, they're going to gravitate very naturally to Wi Fi seven a lot of other video transfer products that we've talked to you about before drones set top boxes things of that nature.
Speaker Change: Sure.
Speaker Change: It takes some time from 'twenty to 'twenty five to let's say, 50% penetrated probably takes two to three years right. That's kind of a normal curve and then to get the last 50% you start kind of mixing in it it just thinking about legacy Wi Fi standards are.
Michael Hurlston: That's kind of the normal curve. And then to get the last 50% you start kind of mixing in, you know, just thinking about legacy Wi-Fi standards and by then we'll probably have Wi-Fi 8. You're really never going to see any one standard occupy more than 50 to 60% of the shipments. You're going to have older technologies occupy a good chunk and then you're going to see probably a similar step up in Wi-Fi 8 as you do in Wi-Fi 7 getting to that 20 to 25%. So for us to expect much more than 50 to 60% of all shipments on Wi-Fi 7, that would kind of defy historic norms, but we would expect a fairly fast step up and then kind of a slow dribble from there up to kind of a normal share of the market.
Speaker Change: And by then we'll probably have Wi Fi eight you really never going to see any one standard occupy more than 50% to 60% of the shipments you're going to have older technologies occupy a good chunk and then youre going to see us probably a similar step up and Wi Fi eight as you do it.
Why five seven getting to that 20% to 25% so.
Speaker Change: For us to expect much more than than 50% to 60% of all shipments on Wi Fi seven that would kind of define historic norms, but we would expect a fairly steadfast step up and then kind of a slow dribble from there up to kind of a normal a normal share of the market.
Michael Hurlston: Okay, great. I see. And so as long as you're showing their customer product roadmap for upgrades, they stay with you through the cycle. Yeah, I mean, the way it works, Kevin, is, you know, when Wi-Fi 7 comes on, it'll obviously ease into the Wi-Fi 6 share. Wi-Fi 6 is probably now at that... 50 maybe slightly below 50% penetrated and Wi-Fi 4 and 5. still occupy a significant share of the overall market. So now as Wi-Fi 7 comes online, you'll see Wi-Fi 6 still hang in there for a good period of time, probably squeezing out Wi-Fi 4 and 5.
Speaker Change: Okay, great. Thank you so as long as they're showing their customer.
Speaker Change: On a roadmap for upgrades.
Speaker Change: They stay with you through the cycles.
Speaker Change: Yes, I mean, it's it is the way it works Kevin is you know.
Speaker Change: When when Wi Fi seven comes on at all obviously, you didn't do the Wi Fi six share Wi Fi six is probably now at that.
Speaker Change: 50, maybe slightly below 50% penetrated.
Speaker Change: And why five four and five.
Speaker Change: There's still occupy a significant share of the overall market. So now as Wi Fi seven comes online Youll see Wi Fi six still hanging there for a good period of time, probably squeezing out Wi Fi four and five and then when we get to Wi Fi eight similarly.
Michael Hurlston: And then when we get to Wi-Fi 8, similarly, you'll probably see very little Wi-Fi 4 and 5, and Wi-Fi 6 will start to get squeezed out. So that's kind of how it works. You pretty much have somewhere between 3 and 4 standards shipping at any one time, and it just depends on the application, the price point, and so on. The good news for us, at least right now, is we have all of those standards covered, 4, 5, 6, and 7, so we're in pretty good shape.
Speaker Change: We see very little Wi Fi, four and five and Wi Fi six will start to get squeezed out so that's.
Speaker Change: That's kind of how it how it works you pretty much have somewhere between three and four standard shipping at any one time.
Speaker Change: And it just depends on the application the price point and so on the good news for us at least right now as we have all of those standards covered 456 and seven so we're in pretty good shape.
Michael Hurlston: Okay, great. Thanks. Thanks for that detail.
Speaker Change: Okay, great. Thanks, Thanks for that detail, maybe for just a little more details.
Kevin Cassidy: And, you know, maybe for just a little more details, what, what are your end market exposures as far as say, consumer, you know, the IoT Wi Fi in consumer or maybe in the home, versus industrial? And, you know, it seems in this earnings period that industrial has still been weak, and maybe home is getting better. But I'd like to hear what you see is happening in the end markets.
Speaker Change: What are your end market exposures as far as a consumer.
Speaker Change: The Iot Wi Fi in consumer and maybe in the home.
Speaker Change: <unk> industrial.
Speaker Change: Okay.
Speaker Change: It seems in this earnings period that industrial has still been weak and maybe it's the home is getting better but I would like to.
Speaker Change: What you see is happening in that market yes.
Munjal Shah: Yeah, we have very little industrial. So, you know, that's one, we have very little automotive, I think we've talked about one when we are making progress in the automotive market with our with our Wi Fi, but nothing to speak of yet other outside of one when I think we talked about two earnings calls or so ago. Our exposure is predominantly consumer. and then a reasonable mix of enterprise. That's kind of how we think about the Wi-Fi business probably. I don't know, Munjal, 65% consumer, 35%... Yeah. Enterprise. Yeah. And then... Yeah, that's the right way to do it.
Speaker Change: We have very little industrial so.
Speaker Change: That's one we have very little automotive I think we've talked about one when we are making progress in the automotive market with our with our Wi Fi, but nothing to speak of yet outside of one way and I think we talked about two earnings calls or so ago.
Speaker Change: Our exposure is predominantly consumer.
Speaker Change: And then a reasonable mix of enterprise, that's kind of how we think about the Wi Fi business, probably I don't know about you all 65% consumer 35%.
Enterprise, Yes, and then yes, that's the right way to think about it.
Munjal Shah: And we may have some other end markets, but to your main end markets, Michael is the best. Okay, great.
Speaker Change: And we may have some other end market, but to your main end markets.
Speaker Change: Michael is right.
Speaker Change: Primarily consumer some enterprise little in.
Speaker Change: To know in industrial and automotive.
Operator: Thank you. Thanks, Kevin.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thanks, Kevin.
Krish Sankar: Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Ken Rizvi: Our next question comes in the line of Krish Sankar with T.D. Cowan. Your line is now open. Yeah, thanks for taking my question. I told them, Michael, one is you had nice sequential revenue growth this year, every quarter. So as you look into March quarter, do we expect seasonality to impact this revenue growth cadence? Or do you think there are any green shoes that can help avoid the seasonality in March?
Speaker Change: Our next question comes from the line of Krishna Shankar with TD Cowen. Your line is now open.
Speaker Change: Thanks for taking my question I told them. Michael One is you had nice sequential revenue growth. This year every quarter. So as you look into the March quarter do we expect seasonality to impact this revenue growth cadence or do you think that any green shoots that can have a wide the seasonality in March.
Ken Rizvi: Yeah, thanks, Chris.
Speaker Change: Yeah. Thanks, Chris It's Ken here I appreciate the question ongoing or if we look into we don't provide guidance more than one quarter ahead right got it for our fiscal Q2, but as we look at March typically we would see.
Ken Rizvi: It's Ken here. Appreciate the question and ongoing support. If we look into, you know, we don't provide guidance more than one quarter ahead, right, guided for our fiscal Q2. But as we look at March, typically, we would see some seasonality, especially if we look at areas like of the March quarter. We expect a little bit of seasonality and right now the automotive market is a little sluggish so we would expect those two factors. Got it, got it.
Speaker Change: Some seasonality.
Speaker Change: Especially if we look at areas like the PC space.
Speaker Change: To the March quarter, So we would expect a little bit of seasonality in and right now the automotive market is a little sluggish. So we'd expect those two factors to impact the March quarter.
Speaker Change: Got it got it and then just a quick follow up I know you spoke a lot about the Wi Fi seven I'm kind of curious how to think about the ESP and gross margin differential between Wi Fi seven compared to Wi Fi six yes.
Krish Sankar: And then just a quick follow-up, you know, you spoke a lot about the Wi-Fi 7.
Michael Hurlston: I'm kind of curious how to think about the ASP and gross margin differential between Wi-Fi 7 compared to Wi-Fi 6. Yeah, we have a first mover advantage, Krish, so we... Definitely, definitely like our ASP and margin position. It's probably somewhere in the $1 to $2 range on a like-for-like. Of course, you have one-by-ones and two-by-twos, but if you think about on a like-for-like basis, you're going to get between a $1 and $2 ASP uplift and probably somewhere in the 8 to 10% margin uplift. That'll decay over time. Wi-Fi is a pretty competitive market, as you know, but we'd be able to, just given our first mover advantage, we would think that we could maintain that for, you know, a year or so, until we start seeing a lot more price competition.
Speaker Change: Yes, we have a first mover advantage crashed.
Speaker Change: Definitely definitely like our ASP and margin position.
Speaker Change: It's probably somewhere in the one to $2 range on a like for like of course, you have one by one and two by twos, but if you think about on a like for like basis, Youre going to get between one and $2 ASP uplift and probably somewhere in the 8% to 10% margin uplift.
Speaker Change: That will decay over time, Wi Fi as a pretty competitive market as you know, but we were able to just given our first mover advantage. We would think that we can maintain that for.
Speaker Change: A year or so.
Speaker Change: Until we until we start seeing a lot more price competition.
Krish Sankar: Thank you very much.
Speaker Change: That's very helpful.
Krish Sankar: It was very helpful.
Operator: Thank you.
Speaker Change: Thank you.
Quinn Bolton: Our next question comes from the line of Quinn Bolton with Needham & Company. Your line is now open. Hey, guys, thanks for taking my question. I just wanted to start to kind of follow up to that green shoot question, you saw 3% growth, I think it was quarter to quarter in enterprise. And it sounded like you might be starting to see signs of demand stabilization, or at least you may perhaps a better outlook and wondering if you could just expand on what you're seeing in enterprise IT or you see in corporate IT budget starting to firm.
Speaker Change: Our next question comes from the line of Quinn Bolton with Needham <unk> Company. Your line is now open.
Speaker Change: Hey, guys. Thanks for taking my question I just wanted to start so you kind of a follow up to that Green shoot question. You saw 3% growth I think it was quarter to quarter in enterprise and it sounded like you might be starting to see signs of demand stabilization or at least.
Speaker Change: Maybe perhaps a better outlook and wondering if you could just expand on what youre seeing in enterprise I T or.
Are you seeing in corporate budgets starting to firm.
Michael Hurlston: And then the second question, is, you know, can you just describe what you're seeing on or in the general pricing environment, you know, across the processor and the wireless segments? Is it stable? Are you starting to see some pricing pressure, especially from Asia competitors?
Speaker Change: And then the second question.
Speaker Change:
Speaker Change: Is can you just describe what you're seeing on or in the general pricing environment.
Speaker Change: Across the processor in the <unk>.
Speaker Change: The wireless segment is it stable or are you starting to see some pricing pressure, especially from Asia.
Michael Hurlston: Thank you.
Speaker Change: Competitors. Thank you.
Michael Hurlston: Thanks, Quinn.
Speaker Change: Yeah. Thanks Quinn.
Michael Hurlston: You know, first of all, I think you got the tone and tenor right. We certainly are liking enterprise for the first time in a while. We're seeing, you know, much better results in the enterprise area. I'm not totally sure that it's driven necessarily by some magic uptick in IT spending. I think it's driven a lot by refresh cycles or video interface products. We talked about being up sequentially. There, we've introduced two new devices that have pretty compelling use cases that are, you know, very, very powerful. driving adoption. So I'd say that's happening there. In PC, we're kind of bubbling with the market, but I think we've actually had some share gains that have led to some incremental revenue growth.
Speaker Change: First of all I think you've got the tone and tenor right. We certainly are liking enterprise for the first time in a while we are seeing much better much better results in the enterprise area I'm not totally sure that it's driven necessarily by some magic uptick.
Speaker Change: Nick in it spending.
Speaker Change: It's driven a lot by refresh cycles, our video interface products, we talked about being up sequentially. There we've introduced two new devices that.
Speaker Change: Have a pretty compelling use cases that are.
Speaker Change: Driving adoption, so I'd say, that's happening there and PC.
Speaker Change: We're kind of Bubbling with the market, but I think that we've actually had some share gains that have led to some incremental revenue growth in the PC area. So if you look across the portfolio. We would expect now ish as we've talked about.
Michael Hurlston: So, if you look across the portfolio, we would expect a now-ish, as we've talked about, that we get a much better sense for IT budgets. We feel that the IT budgets will be better. It looks like all the things that we've talked about relative to assets being sweat for longer, necessary updates coming to roost, looks like that could be better.
Speaker Change: That we get a much better sense for it budgets.
Speaker Change: We feel that the budgets will be better it looks like all of the things that we've talked about relative to assets being sweat for longer necessary updates coming to roost looks like that could be better and so I think outside of some of the season.
Michael Hurlston: And so I think outside of some of the seasonality that Ken talked about in Q1, which who knows where it ends up, but I think it's good to provide some caution, generally we feel pretty good.
Speaker Change: <unk> that Ken talked about in Q1, which who knows where it ends up but I think it is good to provide some caution.
Speaker Change: Generally we feel pretty good.
Speaker Change: Right.
Michael Hurlston: Oh, yeah, Quinn asked about pricing. Yeah, also good question. You know, still the pricing environment has not been that challenging. We certainly see it in the areas that we've highlighted, Wi-Fi. To a certain extent, in mobile, we see it. We don't have a lot of China exposure, and so the Chinese pricing environment, as we understand it, is a little bit of a challenge. But, I would say, right now... The pricing pressure is.
Speaker Change: I can't quite asked about pricing, yes also a good question.
Speaker Change: Still the pricing environment has not been that challenging we certainly see it in the areas that we've highlighted Wifi.
Speaker Change: To a certain extent in mobile we see it.
Speaker Change: We don't have a lot of China exposure and so that the Chinese pricing environment as we understand it is a little bit of challenge.
Speaker Change: But I would say right now.
Speaker Change: The pricing pressure.
Michael Hurlston: Plus, I mean, in other words, if I, you know, look at it historic in the semiconductor business, I don't think it's nearly as bad as it was, you know, 2015, 2016, maybe even 2017. It seems to be holding up relatively well. Yes, there are pockets of price pressure, the Wi-Fi, touch controllers, some of the others. uh... mostly were able to to hold pricing you know on the other side uh...
Speaker Change: Is plus I mean in other words if at all.
Speaker Change: Look at it historically in the semiconductor business I don't think it's nearly as bad as it was.
Speaker Change: 2015, 2016, maybe even 2017 it seems to be holding up relatively well, yes. There are pockets of price pressure the Wi Fi touch controllers, some of the others, but.
Speaker Change: Mostly we're able to hold pricing on the other side.
Michael Hurlston: we we don't see a lot of help from the suppliers on Cost Reductions on the Inputs.
Speaker Change: We don't see a lot of help from the suppliers on <unk>.
Speaker Change: Cost reductions on the input side.
Michael Hurlston: Quinn, maybe I'll just jump in here as well to Ken. Good to talk to you. Let's see, if you look at some of We serve in some of the markets, we serve in some of the products that we have, we have very strong privileges. So on those products. There's very little pricing pressure.
Speaker Change: And maybe I'll just jump in here as well, it's Ken good to talk to you.
Speaker Change: Let's say if you look at some of.
Speaker Change: The markets, we serve and some of the products that we have we have very strong positions. So on those products.
Speaker Change: Little pricing pressure, just given our print position.
Quinn Bolton: Got it. Thank you.
Speaker Change: Got it thank you.
Operator: Okay, thank you.
Speaker Change: Okay. Thank you.
Peter Peng: Our next question comes to the line of Peter Peng with J.P. Morgan. Your line is now open. Good afternoon, and congratulations on the strong guidance. Sounds like you know, enterprise is starting to finally move in the right direction. How would you kind of think about the recovery profile of this? Does this kind of follow how we would observe in the core IoT? Do you think this is more muted? And then and then what kind of margin implications does this have given that this is a higher margin segment?
Speaker Change: Our next question comes from the line of Peter Peng with Jpmorgan. Your line is now open.
Peter Peng: Hey, good afternoon, and congratulations on the strong guidance.
Peter Peng: It sounds like enterprises, starting to finally move in the right direction, how would you kind of.
Peter Peng: Think about the recovery profile of there's just kind of follow how we would observed in the <unk> do you think this is more muted and then and then what kind of margin implications does this have to give them that this higher margin segment.
Michael Hurlston: Yeah, I mean, I think, you know, consistent with what we've said previously, it's going to really depend on IT budgets and IT spending. We definitely see signs of life. So that's the good news. I think you got the headline right. I do think that that's, as I said, the previous question from Quinn, I think it's driven mostly by are things in our control. Some new features, some market share gains, and things like that.
Speaker Change: Yes, I mean, I think you know.
Speaker Change: Consistent with what we've said previously it's going to really depend on it budgets and spending we definitely see signs of life. So that's a good news you guys think you got the headline right.
Speaker Change: I do think that Thats as I said to a previous question from Quinn I think it's driven mostly by.
Speaker Change: Or kind of are things that our control. Some new features some market share gains and things like that on aggregate, we haven't seen a lot of of.
Michael Hurlston: On aggregate, we haven't seen a lot of IT spending increases, but I would say we feel better about that happening now in 2025. And should that happen, look, you're right. I mean, it's mixed within the mix. Always our margins are impacted by what we ship. You know, if PC comes up, like we said in the prepared remarks, that won't help a whole lot on margin. If we're able to see a better increase on our video interface products, some of our audio products, some of our enterprise telephony, that really does help the margin profile. So it depends a bit on where it comes from.
Speaker Change: Spending increases, but I would say, we feel better about that happening now at 2025 and should that happen look you are right. I mean, it is mix within the mix always our margins are impacted by what we ship.
Speaker Change: If PC comes up like we said in the prepared remarks that won't help a whole lot on margin. If we're able to see a better increase on our video interface products. Some of our audio products some of our enterprise telephony.
Speaker Change: That really does help the margin profile. So it depends a bit on where it comes from a P. C. As you know kind of in line with the corporate average in terms of margin, where these other segments will depth or product lines will definitely drag it out.
Michael Hurlston: PC is, you know, kind of in line with the corporate average in terms of margin, where these other segments will definitely, or product lines will definitely drag it up.
Michael Hurlston: Great, thank you. My follow-up is on, and thanks for disclosing your funnel for your Astra platform. Maybe you can provide some color in terms of your customer engagement. How broad is it? Is there any geographic concentration? Maybe you could give us some more color on that.
Speaker Change: Great. Thank you my follow up is on and thanks for disclosing or funnel for your Astral platform maybe.
Speaker Change: Maybe if you can provide some color in terms of your customer engagement. How broad is it is there any geographic concentration maybe give us some more color on that.
Michael Hurlston: Yeah, I mean, it's the right question. I mean, I was just debating our... division leader on the phone just prior to our call on this topic. The answer is, it's pretty broad, and what's going on right now is we're generally hunting and we're finding opportunities across segments and we're trying to figure out where we best fit. I mean, our products are very unique. They're super low power, very low cost, kind of in this $5, $6, $7 price point. and enabling quite a bit of compute. We're talking about 10, 12 tera-ops of inferencing that these devices are capable of.
Speaker Change: Yes, I mean, it's a.
Speaker Change: It's the right question.
Speaker Change: I was just debating or.
Speaker Change: Division leader on the phone just prior to the prior to our call on this topic. The answer is it's pretty broad and what's going on right now is where we're generally hunting and we're finding opportunities across segments and we're trying to figure out where we best fit our products.
Speaker Change: Our very unique they're super low power very low cost kind of in this $567 price point.
Speaker Change: Enabling quite a bit of compute we're talking about 10 12 Tera ops are influencing that these devices are capable of so you put that together they can fit in a lot of different end applications home security.
Michael Hurlston: So you put that together, they can fit in a lot of different end applications. Home security, appliances, home automation, industrial. I think somebody was, it was maybe Kevin was asking about that segment a minute ago. There's a lot of different areas in which we can go.
Speaker Change: Clients is.
Speaker Change: Home automation industrial I think somebody was it was maybe Kevin was asking about that segment a minute ago. There's a lot of different areas in which we can go so right now we're kind of going broad with these devices. Our goal is probably first quarter second quarter next year to really finish the exploration.
Michael Hurlston: So right now we're kind of going broad with these devices. Our goal is probably first quarter, second quarter next year to really finish the exploration process and narrow down on two or three segments and really go after it. So we feel good about where we are. I mean, the funnel size speaks to that. A lot of opportunity in this area. As I said, our value proposition to customers right now is look, we can replace processors from our competitors in a plug and play type of fashion, no cost increase at all. And then you get all this AI capability.
Speaker Change: Process and narrow down on two or three segments and really go after it so.
Speaker Change: We feel good about where we are I mean, the funnel size speaks to that a lot of opportunity in this area as I said, where our value proposition to customers right. Now is look we can replace processors from our competitors in a plug and play type of fashion no cost increase at all and then you get all.
Speaker Change: This AI capabilities. So when you figure out your AI use case, you're good to go and you don't need to have that in mind right out of the chute.
Michael Hurlston: So when you figure out your AI use case, you're good to go. And you don't need to have that in mind right out of the gate.
Michael Hurlston: Great. Thank you, guys.
Speaker Change: Great. Thank you guys.
Operator: Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Michael Hurlston: I'm showing no further questions at this time and would now like to turn it back to Michael Hurlston for closing remarks. I'd 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 so much.
Speaker Change: I'm showing no further questions at this time and would now like to turn it back to Michael for Austin for closing remarks.
Speaker Change: I'd 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, so much.
Operator: This does conclude the program and you may now disconnect. Thank you. Thanks for watching!
Speaker Change: This does conclude the program and you may now disconnect. Thank you.
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