萊迪思半導體 (LSCC) 2013 Q3 法說會逐字稿

Good afternoon.

My name is Toni and I will be your conference operator today.

At this time I would like to welcome everyone to the Lattice Semiconductor third quarter 2013 conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions).

Thank you.

I would now like to turn the conference over to David Pasquale of Global IR Partners.

Sir, you may begin.

Thank you, Operator.

Welcome, everyone, to Lattice Semiconductor's third quarter 2013 results conference call.

Joining us today from the Company are Mr. Darin Billerbeck, the Company's President and CEO, and Mr. Joe Bedewi, Lattice's Chief Financial Officer.

Both executives will be available for Q&A after the prepared comments.

If you have not yet received a copy of today's results release, please email Global IR partners using lscc@globalirpartners.com, or you can get a copy of the release off of the Investor Relations section of Lattice Semiconductor's website.

Before we begin the formal remarks, I will review the Safe Harbor statement.

It is our intention that this call will comply with the requirements of SEC Regulation FD.

This call includes and constitutes the Company's official guidance for the fourth quarter of fiscal 2013.

If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum, such as a press release or publicly-announced conference call.

The matters that we discuss today, other than historical information, include forward-looking statements relating to our future financial performance and other performance expectations.

Investors are cautioned that forward-looking statements are neither promises nor guarantees.

They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements.

Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our fiscal year 2012 Form 10-K and our quarterly reports on Form 10-Q.

The Company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call.

Our prepared remarks also will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles, or GAAP.

At this time I would like to now turn the call over to Mr. Darin Billerbeck.

Please go ahead, sir.

Thank you, David, and thanks to everyone for joining us on the call today.

Q3 was another record quarter, as revenue came in ahead of our guidance.

Our gross margin stayed at a healthy 52.4% as we continued to see strength from our consumer, with stability in communications.

Industrial and other remains sluggish.

Net-net, it was a great quarter, and ended up pretty much where we expected.

We're differentiating our Company and outgrowing the broader semi sector as we ramp our major customer wins.

We're also broadening our reach to the next round of key customers.

Our business mantra remains, expand our market share in current markets and new markets, pursue acquisitions and strategic partnerships, and defend the markets we own.

We are staying focused on the specific areas where we can create both an advantage for our customers and ourselves.

We've changed the perception that FPGAs are power-hungry, big, expensive and need to be on leading-edge technology.

In our space, it's about enabling innovative solutions while being efficient and keeping costs down; then, continuing to invest in strategic capabilities to drive future growth.

We remain bullish in the opportunities before us.

We are gaining momentum in our business, and we continue to have a strong balance sheet with no debt.

Let me take a few minutes just to give you some additional detail on Q3.

Q3 revenue came in at $87.2 million, up 2.9% compared to Q2.

This was above our guidance of flat to plus or minus 2% on a sequential basis.

Our growth in consumer has been solid and significant.

Even with our exceptional consumer growth in Q1 and Q2, the consumer market revenue in Q3 was up 22% over Q2, and more than 300% over a year ago.

Importantly, this reflects that we're now shipping volume at two of the top three consumer mobile OEMs.

We are keeping the pedal to the metal with respect to the new product growth.

We continue to grow at a very healthy pace, driven by XO2 and our iCE product families.

ECP3, which is up 28% year-to-date, was slightly lower Q3 to Q2.

Our multiple product lines allow us to tailor customer solutions at different price points based on key feature sets.

In addition to our success in consumer, we continue to focus on broadening our overall footprint in industrial, medical, scientific and communications.

The revenue mix of new, mainstream and mature was 51%, 41% and 8% respectively in Q3.

On a year-to-date basis, revenue from new more than doubled to 46% of revenue compared to 20% in the first 9 months of 2012.

Mainstream was at 43% for the first nine months of 2013, compared to 56% for the same period in 2012.

Mature was at 11% for the first 9 months of 2013 compared to 24% in the first 9 months of 2012.

This shift in our revenue mix underscores the success we have had in executing our business strategy.

On a quarterly basis, revenue from new products was up again, growing approximately 13% quarter on quarter.

Revenue from mainstream products was essentially flat when compared to Q2.

Revenue from mature products was down about 26% compared to Q2, reflecting continued softness in industrial, automotive and other.

On a geographic basis, revenue from Asia, including Japan, increased approximately 6% on an absolute dollar basis quarter on quarter, to around 76% of the total revenue.

This reflects the growth of our consumer mobile ramp.

Revenue from North America comprised 10% of the total revenue, which was down 11% on an absolute dollar basis in Q3 compared to Q2.

Sluggish demand in North America was consistent with computing and industrial and other tapering off slightly.

Europe was essentially flat at approximately 14% of total revenue on an absolute dollar basis.

Europe declined approximately 2%, reflecting the struggles with the overall European economy.

On an end market basis, communications represented 35% of the revenue in Q3 compared to 38% in Q2.

Computing was 9% of revenue in Q3 as compared to 8% in Q2.

Industrial and other was about 20% of the total revenue in Q3 compared to 23% in Q2.

We have and will lay groundwork for a rebound in the auto sector, where we continued to see growing demand for programmable technology -- again, a market where expensive, power-hungry devices are not welcome, and where we expect to achieve competitive advantage.

Consumer increased to 36% of revenue from Q3, from 31% in Q2.

This is the first quarter in the Company's history where consumer revenue was bigger than comps.

This reflects our successful strategy of ramping our iCE and XO2 product families into a market that did not exist in the past.

That concludes my initial comments.

I will now turn the call over to Joe.

Joe?

Thanks, Darin.

As noted earlier, revenue for the third quarter was $87.2 million, an increase of 2.9% from the second quarter and an increase of 23% from $70.9 million in the year-ago period.

Gross margin for Q3 was 52.4%, compared to 53.3% in the prior quarter and 54.4% in the year-ago period.

Gross margin was above the midpoint of our guidance.

Our Q3 gross margin benefits from the impact of significant product cost savings achieved in prior quarters.

Compared to Q2, gross margin reflects a richer mix of consumer revenue.

In addition, the quarter -- in addition, during the quarter, in order to enable more advanced and efficient manufacturing processes, we initiated our 130-nanometer to 90-nanometer process transition at Fujitsu for certain mainstream products.

This transition adversely impacted gross margins by approximately 0.5% in the third quarter.

We expect costs associated with this transition to impact margins through the first half of 2014.

We expect margins to continue to fluctuate due to our increasing penetration in the consumer market.

Our long-term gross margin target remains unchanged in the mid-50% range.

Operating expenses for the third quarter came in at $37.5 million.

This is approximately $630,000 lower than Q2, driven by decreased mask costs and compensation and benefits savings which were offset by facility costs associated with our site move in San Jose.

Q3 OpEx was approximately $560,000 above our guidance, driven by higher-than-expected variable compensation and severance charges.

Net income for the quarter was $8.2 million or $0.07 per basic and diluted share, as compared to net income of $5 million or $0.04 per basic and diluted share in the second quarter; and a net loss of $2.2 million, or a loss of $0.02 per basic and diluted share in the year-ago period.

Q3 2013 financial results included approximately $400,000 of income tax expense and $737,000 of amortization expense from acquired intangibles.

Q2 2013 financial results included a $1.9 million or $0.02 per basic and diluted share income tax expense, and $737,000 of amortization expense.

Q3 2012 financial results included $1.9 million or $0.02 per basic and diluted share income tax expense and $729,000 of acquisition-related expenses.

Our effective tax rate for the quarter was 4.9%, compared to 27.6% in Q2.

Our quarterly tax rate is based on our expected annual effective rate.

Due to forecasted revenue and profitability improvements in Q3 and Q4, when compared to previous forecasts, as well as a more favorable geographic mix of profitability, our expected annual effective rate has declined, producing an abnormally low effective tax rate in the third quarter.

We now expect our 2013 annual effective tax rate to be in the mid to high teens.

For the quarter, diluted share count was approximately 117 million shares.

No shares were repurchased during the quarter.

We ended the quarter with cash, cash equivalents and short-term and long-term marketable securities of $215.5 million, an increase of $36.5 million from the June quarter.

We continue to have no debt.

Accounts receivable at September 28 were down $10.6 million, or about 17%, to $53 million, as compared to $63.6 million at the end of the last quarter.

Days sales outstanding were 55 days compared to 68 days last quarter.

Inventory at September 28 was $42.3 million compared to $49.7 million last quarter, a reduction of $7.4 million, or about 15%, from Q2.

We continued to effectively manage our lead times and forecast demand for customer programs that are ramping and ongoing.

Months of inventory now stands at 3.1 months compared to 3.8 months at the end of Q2, 2013.

We spent approximately $3.4 million on capital expenditures and incurred $5.2 million in depreciation and amortization expense during the third quarter, compared to $3.8 million and $4.9 million respectively in Q2.

This concludes the financial review portion of the call.

I'm going to turn it back over to Darin for the fourth quarter business outlook.

Darin?

Thank you, Joe.

In summary, our team's done a great job through the first three quarters of the year.

If we meet our Q4 objectives, our revenue will grow around 15% this year while margin trends continue to improve.

Our focus this year is to be win -- is to -- has been to win two of the -- two of the three top consumer mobile OEMs, and we've done just that.

Our focus for next year is to continue to ramp our existing large OEM customers and win even more.

Let's not forget about XO2 and our newly-released XO3.

While XO2 clearly leads the market with key features and low cost per I/O, XO3 creates additional industry leadership by pushing low cost per I/O even further.

XO3 adds future improved features such as MIPI M-PHY and higher-performance LVDS.

Customers in the communications, industrial, automotive and scientific have responded enthusiastically over our focus on low-cost, low-power and affordable innovation.

FPGAs are no longer considered pricey, big and power-hungry.

Lattice FPGAs get customers to market fast, with compelling features at a price that fits their budget.

In terms of our specific expectations for fourth quarter 2013, we expect revenues to be minus 5% to 9% compared to Q3.

Q4 gross margins are expected to be approximately 53% plus or minus 2 points.

Total operating expenses are expected to be approximately $37.5 million, including about $1 million in mask charge.

This concludes our prepared remarks.

Operator, we would now be happy to take any questions.

(Operator Instructions).

Tristan Gerra.

Last quarter, you had mentioned that you had some variable SG&A expenses starting to kick in at the $81 million, $82 million revenue run rate per quarter.

And it looks like, excluding the mask costs, you're at the $36.5 million, at that level.

As you eventually get to $90 million in revenue per quarter, what type of OpEx should we be looking at?

And maybe if you can help us quantify the percentage of SG&A that's variable.

We're looking at probably this $37.5 million range, when you talk of the number that you spoke.

That's pretty close.

That's where we're targeting, moving into next year.

That would include additional mask sets.

As we learned this year that we need to do quick-term products, we're going to plan for that, going into the next year.

I don't really have a percent of variable spending that I can give you, related to SG&A.

I mean, our target is to get SG&A into the 17% range, roughly.

We're going to have probably R&D be closer to 21%, 22% as we move through next year.

Does that answer your question?

Yes.

That's very useful.

Thank you.

And then, as a follow-up, has there been any significant change in end -- for any end market, in terms of the outlook since the summer, in terms of either strengthening or weakening?

And if you could give us some color of the end market trends into the -- embedded into the Q4 revenue guidance.

Yes.

So -- hi, Tristan.

It's Darin.

So, for consumer it's about what we thought.

So, we had forecasted consumer to ramp almost identically to what it did for Q2, Q3, and then into Q4.

So, nothing really significant has changed there.

I think communications, in one sense, has actually done pretty well.

Even though it looks like it's flattish, some customers are doing very well and other customers aren't.

So, it's kind of specific, and it's all kind of targeted at China Mobile.

So, if you look at that, you're -- we're starting to see some of the build-out in that area already.

Surprisingly, not everyone has seen it, but we did.

But then that gets offset by some of the sluggishness in Europe.

So, I think comms, overall, for us, looks flattish even though specific customers are way up and other customers are down.

Right?

Industrial, auto and all of that stuff just is kind of nothing really big to write home to.

Right?

It's just kind of [eh].

And that's what we've been seeing for the whole year.

So, unless the European macro events significantly change, I think next year you're going to see about the same thing.

Right?

You're going to see comms move up because of the LTE build-outs.

You're going to see the industrial/medical stuff sit there.

And our consumer's based on entering a new market.

Which helps us, right?

Doesn't matter whether it grows; we'll grow in it.

Great.

Thank you very much.

Sundeep Bajikar.

Congratulations on picking up a second major consumer customer.

In consumer, during the third quarter, to what extent did you benefit from shipments into another high-end platform ramp at either one of your two major smartphone customers?

And how should we think about the seasonality of -- or platform transition in consumer, during the fourth quarter?

So, there's two or three different guys out there, right, that are pretty big.

And they're all offset, as you know.

Right?

Some of them launch in the February/March timeframe.

Some of them launch more around September/October.

Right?

So, it's not as Christmas-specific as it used to be.

So, I think as we build the base, we won't see a lot of cyclicality out of it.

This year, as we mentioned before, because we were in one of the big OEMs, we're going to see a slight downtick in Q3 -- or, sorry, Q4.

And as we move into Q1, that's when the next ramp of those phones occur.

Right?

And that's -- traditionally what happens is, they'll ramp them from end of Q1 all the way through Q2, Q3, and then Q4 is down slightly.

The other ones ramp at different rates.

Okay.

But did you see the new win that you mentioned, contributing to your Q3 revenues, or is that in front of you?

Yes.

Not as substantial, but yes, there was material shipments in Q3 and we expect more in Q4.

Okay.

Great.

And then, on the communications side, it -- I guess you said there wasn't a big change relative to your expectations.

But revenues did actually tick down a little bit instead of increasing sequentially.

So, how should we interpret this in terms of the mix of 3G versus LTE demand, as well as Lattice's specific exposure to those markets?

Let me change it a little bit.

China's up.

The rest of the world is down except for specific areas.

And that's really it.

It's, China's up, and everything else is flattish to slightly down.

And so, all those flattish to slightly downs are what drag us down.

Okay.

And then, on computing there was a slight uptick in the quarter.

Is that -- should we take that to mean that your customers are finally starting to grow again?

Or is it the case that Lattice picked up new customers who are better levered to the growing portion of the market?

I think it's within the noise.

It's just within the noise today.

And until computing comes back and you get more build-outs in, like, server farms and those things that -- I think it's going to stay relatively flat.

Okay.

Great.

Thank you very much.

Ruben Roy.

Hey, Darin, just to follow up on the Q4 guidance, just so I understand.

It sounds like on the consumer side, you know, you said, you know, consumer's doing what you thought it would do, and one of your customers potentially downticks into Q4.

So, if I assume that consumer's driving the biggest portion of the kind of down guidance, quarter on quarter, that would be consistent with what you're saying, right?

Yes.

Okay.

And, historically, last year, I mean, the compares are a little tough because consumer was around a quarter of your business, if you look on the year-ago quarter, Q1 2013, and you look ahead.

And traditionally, consumer and handsets and things like that are a little bit of a seasonal headwind early in the year.

But it sounds like some of your customers might be ramping some new products.

So, how are you looking at seasonality, in that traditional PLDs have been seasonally strong in Q1?

And so, if you have large customer ramping, should we assume that seasonally the first quarter is going to be kind of an uptick from what we're seeing in Q4?

So -- all right.

Firstly, we can't give guidance out there.

But what I'll tell you is this -- since I've been here for the last three years, Q1 -- Q4 has always tanked.

It just has done it every year I've been here.

And it's always been worse.

This Q4 hasn't really tanked.

This Q4 is just down because of some of the specific customer items we mentioned in consumer.

Q1 is usually not as strong as Q2 and Q3, and then Q4 is down.

That's -- at least, what traditional FPGAs.

But you spoke about different ramps.

Last year in Q4, we had a major tablet -- kind of -- I don't even know what you would call it.

A phone tablet, or phablet, or whatever, that took off, which wasn't a phone.

So, what people forget is, when you're shipping to all the consumer mobile devices, they ramp at different rates.

Because they don't just put everything out in one big fell swoop.

It's just -- you'll have tablets ramp; you'll have the smaller, like, notes and different things.

They all ramp at different rates throughout the year.

So, in many cases, even though you might be on one big platform win that ramps heavily in two or three quarters, you also have these -- all those -- all these other wins that you've been working on, that fill those gaps that you might have from that one big ramp.

So, as we get broader in the playing field, that'll start -- it'll start dampening that effect.

Because what ends up happening is, one customer ramps; the other one's dropping down.

Because they're all going for share at different times in the year.

So, hopefully, as we get into the bigger, broader OEM base itself, then you'll see more of a stabilized base.

And then stuff will go up on top of it.

Today, you're seeing us with one big ramp.

It kind of comes down.

Other things are filling it in.

And then we expect next year to have another profile that's very similar.

Okay.

Makes sense.

Thanks, Darin.

And then finally, in terms of the second consumer OEM that you're now shipping into -- and congrats on that -- I'm wondering, in terms of that design, who drove that design?

Was it the customer or was it Lattice?

And is it a similar application to what your current or existing customer is doing with your chip?

Of course it's us.

No, I'm just -- I'm joking.

It's a combination of things.

We have situations with a lot of the OEMs.

There's probably 10 major cellular OEMs out there -- or mobile -- I don't know what you want to call it -- consumer mobile OEMs, out there.

And those guys -- it used to be, people were kind of, I don't know.

And now, people are calling you, and we're doing design surfaces for them, which makes it sticky for us.

So, it's kind of a nice thing today.

As we're just blasting our way through, trying to broaden the overall base.

Today, we have design wins with probably seven out of the ten total, but they're not all ramping because they're in various stages.

Great.

Thanks very much.

All right.

Thanks.

Thanks, Ruben.

(Operator Instructions).

Richard Shannon.

I guess, a few questions from me.

I just wanted to clarify the extent to which you're able to -- on your guidance, you just mentioned consumer as the big component of reason why you're looking for a down sequential.

What are you thinking about for comms?

Is that something that -- I know in the last two fourth quarters has not been very good for you.

Sounds like it could be relatively better than that.

Any way you can more definitively spec that out for us?

Actually, in our model, we modeled it down.

So, we don't have comms going up in Q4.

We modeled it down slightly.

So, we didn't take a bullish look at comms.

Okay.

How do you see that relative to what looked like at least some sort of ramp coming at China Mobile and China in general, versus what you typically have seen with kind of inventory reductions ending the year?

How does that -- ?

(Multiple speakers).

I think what people do is,\ they're -- everyone's going after those contracts.

Right?

So, they build up an inventory, which they did.

And they always overbuild, which they do, because they don't want to be short any unit.

Because whoever has that -- whoever has an order and has the supply, gets the order by shipping the supply, right?

So, they build a ton up.

And then they always do this correction in Q4, and then I expect it to go back up in Q1, Q2, Q3.

It'll take time, right?

Because they always kind of bleed it down in Q4.

Some of it goes over a little bit in Q1, and then you're back on the same gyration next year.

So, I don't expect them to change their behavior.

And there's not much we can do except ship to the demand.

Okay.

Fair enough.

A couple more questions from me.

Your gross margin guidance for the fourth quarter is up here nicely.

If you can just kind of spec us out the puts and takes that get you there.

I would have thought, with kind of consumer mobile being down a bit, it might have been up a little bit more than 53 midpoints.

Is there a little bit more impact from certain comms OEMs?

Or, just help us out there a little bit, Joe, if you could.

There's a little more impact from comms OEMs.

And again, it's back to the specific product that we talked about -- the one high-end product.

That impacts us.

The other side of it is, our consumer business is not as far off where we'd like it to be in terms of model.

We've been getting nice improvements.

And I alluded to cost improvements from prior quarters.

We're seeing those flow through now.

Volume is incredibly helpful for us on cost.

We still have some more avenues to reduce those costs as we look at packaging and so forth, going forward.

So, comms hasn't been as big a drag as it may be perceived in the market for us.

The other side is, industrials are still somewhat languishing.

So, that makes it difficult for us also, because they're typically our high-end number.

So, 53% is really an impact of volume and a slight mix change related to the comms market.

Okay.

Fair enough.

A question on mobile, as well, following up some of the other ones here.

Can you give us a sense of this second customer?

Or maybe I'll just refer specifically to the design you're in with this second customer.

How would you see the overall volume opportunity with them, or with that design, compared to the obviously large design you have with your biggest customer so far?

Well, they always start smaller than you like, and then they get bigger than you think.

And so, in this particular case, I think it's going to be very similar to what we saw last Q4 -- last Q3 and Q4, we shipped into a platform that was -- it was a nice platform for us.

We'll see some of that.

And then we've got some other design wins out in time that, we'll see how those ramps.

And again, it's getting into the platform that's the challenging part.

And that's what we're doing.

We're getting into people's platforms where, once you get into one, you're into multiple things.

And for us, obviously we want to win all ten out of the top-ten guys, which is what we're trying to do.

So, we're off to a pretty good start.

Last year I would have said, oh, we have one, with a few out there; now, we've got design wins at seven out -- seven in ten -- maybe even eight out of ten.

Which means you've got people in the smartphone industry saying, FPGAs have a place, and it's not just a fluke at one customer.

Okay.

That's great perspective.

Great, guys.

I will jump out of line.

Thank you very much.

(Operator Instructions) David Duley.

Just maybe another way to ask the -- what I think people are trying to figure out is, could you help us understand what the growth rate in your consumer business might be in 2014?

You know, you had one big customer this year, and it ramped significantly.

Will we see the same type of growth next year?

Or, maybe just try to frame it for us.

We hope so.

But, you know, that's one of those things that you have to look at.

It depends on how well they do in the market.

It depends on which model you're in.

There's a lot of just unpredictability with the whole thing.

So, our goal is this.

We get in those platforms.

We develop products that are cool and add value to what they're trying to accomplish.

And if they're successful in the markets, then we're good.

We happened to get very fortunate this year.

A lot of hard work.

Couple of years to get there.

We're doing the same thing with everybody else.

So, no, I can't give you guidance.

All I know is that this year it grew like a weed.

And next year we're hoping the same things; but it is unpredictable.

Is there a chance you -- this produces another 10% customer next year?

There's always a chance that things like that can occur.

Okay.

And then, just when you think next year about the overall PLD space, do you have an idea what you think the market's going to grow, and do you think you'll grow faster or slower?

Well, yes.

If you talk PLDs by the -- or FPGA/PLDs -- you know, if you just combine all those stuff -- for us, the growth in consumer helps us a lot.

Right?

Because even if comms or everything else is sluggish, or industrial, medical and automotive is sluggish, like we've had for the last two or three years, we're able to find growth in the market that didn't exist before.

So, I think if you look at consumer today, we're primarily talking about smartphones and a few tablets here and there.

But if you look at consumer being bigger and broader -- being everything connected to the Internet, and possibly connected to your wall -- there's a lot more opportunity than what we're servicing today.

So, we're really focused not only on smartphones, tablets and everything that's mobile; we're focusing on everything that's consumer.

So, we're expecting to get some big bangs out of some other places as we march through our path at consumer.

The rest of the stuff -- it has to be fixed by macro.

We have all the design wins.

We've had them for a long time.

But for -- in Europe, stuff just isn't moving as fast as you would think it would move.

And the older stuff fell off faster than what we thought, and we're making it up with all the new products, and still having the margins move up.

Which is significant.

Right?

Because you don't have all that old industrial, medical, high-margin stuff to offset.

Unless things start to come back, yes.

(Multiple speakers).

But if it comes back, we're in great shape.

But we're not assuming it is, for next year (inaudible).

And so, as consumer grows as a percentage of revenue, it sounds like it's going to be the fastest-growing space next year.

How will that impact the gross margin line in 2014?

Can you achieve a 55% gross margin with that segment being the most rapidly-growing segment?

Or do you need the industrial stuff to come back?

Oh, we can achieve it with consumer.

And again, it's dependent upon the mix.

Right?

How much is true consumer, consumer mobile -- there's different margin models within consumer also.

So, we see a path to 55%.

We see it even with a healthy growth in consumer.

Clearly, it's easier for us if we see growth in our mature markets and in the industrial space -- that's helpful -- and comms remains stable.

So -- but we see a way to get there.

And that's why we haven't come off that model.

I mean, we're still targeting mid-50%s.

Right.

Great.

Thank you.

Thanks.

(Operator Instructions).

Matt Dhane.

I was curious -- of the seven or eight OEMs that you have contact with and have design wins with, what's your belief that your product will actually end up within their end products that they're selling on market here with time?

Do you believe that you'll get greater than four?

I mean -- just trying to sense your confidence that this is going to lead to revs here over the next couple of years for these other wins.

Well, so far it suggests 100%.

I'm sorry, what was that?

So far the data suggests 100%.

We like that.

Yes.

So -- yes.

It's like -- because what people do is, they don't -- it's not like comms or something else, where they say, hey, I'm going to design an FPGA and I'm going to design it out later.

The reason it's in there to begin with is, it's either creating a value proposition that they need, or it's doing a glue logic function that they have to have.

Right?

Because they're sitting here going, oh, (expletive).

So, it's not just, we're doing really cool functions for them; it's the fact that we've had people come in and say -- fix this.

And they've fixed it because there's such a short life, they don't have a chance to go back and do an ASIC to fix that.

Because an ASIC then takes them another 4 months.

They want to get to market.

So, in the opportunities that we've had, the only time we get moved out is if they change a feature on a phone set, where then they say, okay, on this phone shipping to this geography, I don't want that.

And then they'll yank it out.

But we kind of know that upfront, that you're not going to count on the entire platform.

So, upfront, we know which ones we're in and which ones we're out.

So, that's more of the game.

Less of the, I'm going to replace you with an ASIC.

The risk, though, if you don't continue to innovate, is in the next model, the next year, you could be out.

So, our challenge is always, like, innovating the features, creating lower power, smaller form factor, adding more stuff for them, hardening what we did last year, and moving it forward.

And if we can do that, then your likelihood of being successful is really high.

But where we play today, it's rare that we fall out of the thing.

Okay.

That's helpful.

Thank you.

(Operator Instructions).

There seem to be no further questions at this time.

I would now like to turn the call back over to CEO Darin Billerbeck.

Okay.

Thank you very much.

Just to close for everyone, 2013 -- it's been a solid year for Lattice.

We continue to execute and grow with new products in new markets.

And as always, we're going to stay focused on shareholder value and focusing on getting the markets -- new markets and new products in those markets.

So, thanks again for joining us on the call.

We'll talk to you guys later.

Bye.

Thank you for your participation.

This does conclude today's conference call.

You may now disconnect.