Semtech Corp (SMTC) 2012 Q2 法說會逐字稿

Good afternoon. My name is Steve, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter fiscal-year 2012 Semtech Corp. earnings release conference. (Operator Instructions). Thank you. I'll now turn the call over to Linda Brewton. You may begin your conference.

Thank you, Steve. Welcome to Semtech's fiscal year 2012 second-quarter conference call. I am Linda Brewton, Senior Manager of Investor Relations.

Speakers for today's call will be Mohan Maheswaran, Semtech's President and Chief Executive Officer; and Emeka Chukwu, our Chief Financial Officer.

A press release announcing our unaudited results for the quarter ended July 31, 2011, was issued after the market closed today and is available on our website at www.Semtech.com.

Today's call will include forward-looking statements that include risks and uncertainties that could cause actual results to differ materially from the results anticipated in these statements. For a more detailed discussion of these risks and uncertainties, please review the Safe Harbor statement included in today's press release, as well as the other risk factors section of our most recent periodic reports on Forms 10-Q and 10-K filed with the Securities and Exchange Commission.

As a reminder, comments made on today's call are current as of today only. Semtech undertakes no obligation to update this information in this call should facts or circumstances change.

During the call, we may refer to pro forma or other financial measures that are not prepared in accordance with generally accepted accounting principles. A discussion of why the management team considers non-GAAP information useful, along with detailed reconciliations between GAAP and non-GAAP results, are included in today's press release.

I would also like to mention that Semtech will be presenting at the 2011 Citi Technology Conference in New York City on September 6 at 1120 A.M. Eastern. A webcast link to the presentation will be available at the investor relations section of Semtech's corporate website.

With that, I will now turn the call over to Semtech's Chief Financial Officer, Emeka Chukwu.

Thank you, Linda. Good afternoon, everyone. Our fiscal 2012 second quarter was another solid quarter with revenue being up approximately 6% sequentially to $130.3 million and up 15% from the same quarter last year.

In Q2, 62% of shipments were derived from customers in Asia, 25% from North America, and 13% from Europe. Sales in Asia were up 10%, driven by demand for our protection product in the high-end consumer applications, as well as demand for 40Gb and 100Gb solutions in the communications end markets. Europe grew 7% with broad-based strength across the consumer, the communications, and the computing end markets, while industrial sales were muted. Revenue in North America declined 1% sequentially as industrial end market sales were more than offset by softness in other end markets.

Direct sales represented approximately 53% of total revenues, while distribution made up 47%. Our book to bill was less than one, as bookings were relatively soft during the quarter. Net account orders accounted for 31% of shipments during the quarter.

Gross margin on a GAAP basis for Q2 was 60.4%, the same as last quarter. In Q3, we expect gross margins to be down approximately 60 to 100 basis points, primarily due to a higher mix of consumer and computing revenue and lower manufacturing volume due to the softer revenue outlook.

Operating expenses on a GAAP basis were lower than expected, declining 1% sequentially to $46.8 million. Increases in our new product [as best as], especially our commercial microwave product platforms, as well as foreign exchange losses resulting from a weakened dollar, were offset by lower equity compensation expenses. It should be noted that a significant portion of our equity awards can be settled in cash, and as a result have to be marked to market based on the stock price at the end of the quarter.

In Q3, we expect operating expenses on a GAAP basis to be down approximately 4% as we take steps to align our expenses with softer revenue outlook. These steps include headcount reductions, including certain executives; reducing employee work hours; and reductions in overall variable expenses.

GAAP operating profits were $31.9 million, or 24.5% of sales, up from 21.7% in Q1.

Interest and other was a loss of $117,000 in Q2, as interest income was offset by foreign exchange losses resulting from the dollar weakening against all major currencies. We expect interest and other income of approximately $100,000 in Q3.

The Q2 GAAP tax rate was 14.6%, up from 13.4% in Q1, driven by regional income mix. We expect our GAAP tax rate for the remainder of the year to be between 13% to 15%.

The diluted share count for Q2 was 68.2 million shares. We expect a fully diluted share count of approximately 68 million shares in Q3, reflecting the impact of the lower stock price.

Our GAAP net income for the quarter was a record $27.1 million, or $0.40 per share on a fully diluted basis, up from $0.34 in Q1. On a non-GAAP basis, due to the impact of equity compensation, amortization of acquired intangibles, and stock options related legal expenses, gross margin was 60.6%, the same as last quarter. We expect Q3 non-GAAP gross margin to be down 60 to 100 basis points.

Non-GAAP net income for Q2 grew 10.8% sequentially to $33.2 million, or $0.49 per diluted share. Our non-GAAP effective tax rate for Q2 was 13.9%, down from 16.3% in Q1. We expect our non-GAAP tax rate to be between 14% to 16% for the remainder of fiscal year 2012.

We ended the quarter with approximately $315 million of cash and investments, up 14% from Q1. We generated approximately $34 million, or 26%, of revenue and cash flow from operations in the quarter.

We did not buy back any shares during the quarter. The Board of Directors recently approved a share repurchase of $36 million. This is in addition to the approximately $14 million remaining on a previously authorized program, bringing our total authorized share repurchase to $50 million. We expect to actively start repurchasing our shares this quarter.

The Company spent approximately $8 million on property, plant, and equipment in the quarter. In Q3, we expect to spend approximately $8 million primarily for manufacturing and new product equipment, IT infrastructure, and the expenses associated with the relocation of our Swiss office.

Depreciation for Q2 was approximately $2.2 million. In Q3, we expect depreciation to be approximately $2.4 million.

Accounts receivables grew 1.8% sequentially in Q2, and our days sales outstanding declined to 36 days from 38 days in Q1. Net inventory declined 2% sequentially, in line with the softer revenue outlook. Inventory days decreased to 88 days from 92 days in Q1.

In summary, this was a very good quarter and was a solid first half of fiscal year 2012. Looking ahead to the second half, we have taken steps to align our operating expenses with revenue expectations to protect our earnings. I will now hand the call over to Mohan.

Thank you, Emeka. Good afternoon, everyone.

I will discuss our Q2 fiscal year 2012 performance by end market and by product group, and then comment on our outlook for Q3 fiscal year 2012.

Q2 of fiscal year 2012 was another record revenue quarter for Semtech. We achieved net revenues of $130 million, up 6% from Q1 of fiscal year 2012 and up 15% from Q2 of fiscal year 2011.

For the quarter, our non-GAAP gross margin was 60.6% and our non-GAAP diluted earnings per share increased to a record $0.49 per share.

In Q2, revenue from the communications end market increased and represented approximately 39% of total revenues. Revenue from the high-end consumer end market also increased and represented 35% of revenues. Approximately 23% of this revenue was attributable to handheld devices and approximately 12% was attributable to other consumer systems.

Revenue from the industrial end market increased sequentially and represented 18% of revenues.

Revenue from the computing end market increased from the prior quarter and represented 8% of revenues.

Now let me discuss the performance of each of our product groups. In Q2, revenue from our protection business grew 11% sequentially to achieve yet another record level and represented 43% of Semtech revenues. Growth was driven by high-end consumer applications, including LCD TVs and portable devices, and computing applications, driven mostly by the notebook sector.

Our protection business continues to benefit from the increasing sensitivity of electronic devices to ESD events. The protection [san] growth is being driven by three industry trends -- A, increasing number of ports on electronics devices; B, increasing performance requirements for those ports; and C, the transition of advanced microprocessors to next-generation lithography nodes that are more prone to catastrophic ESD events.

During the quarter, we experienced very strong design win momentum for our protection solutions. In Q2, we expanded our protection offerings with the introduction of our first automotive qualified protection solution. This small form factor, low-voltage device is ideal for protecting analog video ports in automotive vehicles.

We also expanded our popular Rail Clamp family of products with the introduction of a single-line bidirectional protection device for use in space-constrained portable applications, such as RFID antennae used in the near field communications.

In Q3, we expect our protection business to be approximately flat with Q2, due to softness in the LCD TV and smartphone segments.

Turning to our advanced communications and sensing business, revenue in Q2 increased 5% sequentially and represented 40% of total revenues, resulting in another quarterly revenue record. The increase was driven primarily by demand for our 40Gb per second and 100Gb per second SERDES platforms for optical networking, which remained as strong as carriers continue to convert lower bandwidth networks to 40Gb per second and 100Gb per second networks.

We also saw sequential revenue growth from the timing synchronization and industrial wireless markets.

In Q2, we saw strong design win traction for our wired and wireless platforms and our touch-sensing platforms. During the quarter, we announced our first 40Gb per second modulated driver for long-haul applications. We also expect to take out a new 100Gb per second driver platform in Q3. The combination of our modulated drivers with our SERDES devices provides customers perfectly tuned chipsets for the longest reach and greatest bandwidth utilization in the long-haul telecom market.

We also debuted the world's first resistive touchscreen controller platform that detects proximity and pressure with no additional components. Our new four-dimensional touch family of products provides resistive touchscreen controllers with integrated proximity sensing, haptics control, and best-in-class on-chip ESD protection. These devices are targeted for use in a variety of industrial and consumer applications, including automotive displays, point-of-sale terminals, tablets, and other mobile devices.

Our expertise and innovation in developing leading-edge RF technologies was acknowledged by our industry peers in Q2 as our SX1233 low-power RF transceiver, which is used in home and industrial systems that monitor and control energy, was named Best Product of the Year by a leading European magazine.

Our advanced communications and sensing business continues to execute well across a broad range of markets. In Q3, we expect revenue from our advanced communications and sensing business to be down due to lower revenues in our communications business. Specifically, we see weakness in our 40Gb per second long-haul segment in Q3, somewhat offset by strength in the 100Gb per second short-reach market. Based on recent customer feedback, we do expect the communications market demand to improve in Q4.

In Q2, our power management revenue declined sequentially by 7% and represented 10% of revenues. The decrease resulted from lower demand from the communications market.

We continue to leverage our expertise in designing highly-efficient, small form factor, high-performance power management solutions for a broad range -- broad array of applications. In Q2, we expanded our buck-controller platform with the four-amp dual point-of-load regulator. This device allows designers to optimize power conversion to support more features in less space without the inventory challenges associated with using multiple regulators.

We also introduced the world's smallest 300-mA buck-boost regulator for use in tablets, modems, set-top boxes, smartphones, and other high-end consumer and portable computing devices. The key feature of this device is its tiny 10-millimeter square footprint.

While we are making good progress in our power management product group, I have not been entirely satisfied with the speed of this progress, and have therefore decided to make an executive change in this business. I expect to announce a new general manager for our power products group in Q3.

In Q3, we expect our power management revenue to grow significantly, driven by communications and computing applications.

In Q2, our microwave and high reliability revenues increased 10% sequentially to represent 7% of total revenues. Growth was driven by industrial and space applications.

In Q2, we began sampling our integrated point-to-point silicon germanium platform. The performance of this new platform appears to be very promising, and we expect to achieve our first design wins in Q3 and first revenues in Q4.

We are also investing in next-generation microwave technology platforms as we believe this to be another exciting future growth market.

As with our power management business, I believe that our high-reliability business is not performing as well as it should be, and I have therefore also made a change to the leadership of our microwave and high-reliability product group.

In Q3, we expect sales for our microwave and high-reliability product group to decrease due to softness in the military and avionics end markets.

In Q2, we saw distribution POS increase by approximately 9%, driven by strength in Asian markets, to achieve a new POS record. Our distributor business, much like the overall Semtech business, is very well balanced with 55% of the total POS coming from consumer and computing end markets and 45% of total POS coming from industrial and communications end markets.

Distributor inventory increased by two days from 60 days in Q1 to 62 days in Q2. We believe that our channel inventory remains relatively low, given the POS strength we saw in Q2.

Moving on to new products and design wins. In Q2, we released seven new products and recorded over 964 new design wins. We believe that we are uniquely positioned to benefit from long-term trends driving growth for our industry and expect to see a continuation of the strong design win momentum in Q3.

Now, let me discuss our outlook for next quarter. In light of the current macroeconomic conditions, the current demand environment appears to be softening. Based on our backlog entering the quarter and limited visibility, we are currently estimating Q3 net revenue to be down 2% to down 8%.

To attain the mid-range of our Q3 guidance, or approximately $124 million, we needed net terms orders of approximately 44% at the beginning of Q3. We expect non-GAAP earnings to be between $0.45 and $0.49 per diluted share and GAAP earnings to be between $0.34 and $0.38 per diluted share.

I will now hand the call back to the operator, and Linda, Emeka, and I would be happy to answer questions. Operator?

(Operator Instructions). Steve Smigie, Raymond James.

Thanks a lot for the question. First off, good job on getting the expenses down quickly here for the outlook. Obviously, the environment out there is reasonably soft for everybody.

I guess I want to talk a little bit about looking forward to -- you guys typically, or at least in the past here, had had the Samsung inventory adjustment as we had gone on later in the year. So just curious, given the softness you're seeing now, the typical seasonality from the Samsung inventory stuff, should we continue to be cautious into maybe the January quarter as well as we're thinking about revenue trends?

I would say currently, Steve, the Q3 guidance and the demand softness is not really tied to Samsung inventory. I think it's a broader market issue.

I think if you look at communications' outlook for Q3 as relatively soft, I think the industrial applications in the markets are relatively soft. LCD TV space, in general, seems to be weak. Smartphones is a little bit weaker. So it's fairly broad.

And Q3 is typically a very strong consumer segment for us, and for our business to not see that consumer growth suggests to me that Q2 strength was probably a little bit stronger than one would've expected for consumer. So, maybe it's the strength in Q2 is now going to offset in the second half and we're not going to see that strength in Q3.

So I wouldn't tie it to Samsung inventory. I don't see a ton of inventory out there. I think our channel inventory is light. As I mentioned, POS was very strong.

I think a lot of the questions are going to have to be, are we going to see a strong back to school, Christmas kind of thing going on, which will force our customers to start placing backlog ahead of that? And at this point in time, visibility is pretty light. That's the biggest challenge we have.

Right. I understand. And the Samsung piece was more for just -- more of a Q4, January type question.

And it does sound like -- I know you guys maybe aren't comfortable guiding that far ahead, but it does seem like you did mention that at least on the communications on the -- the [guarded] communications on the 40 -- 100Gb product, sounds like that is going to see an uptick in Q4. You maybe did say that in your commentary, so it seems like maybe there's just -- as you've discussed in the past, just some lumpiness on that side.

Comm is -- if I look at the Q2 -- the performance, record performance we had, the traditional communications systems was relatively weak. The strength was really from our 40Gb and 100Gb and the timing sync platforms, which is very strong.

As I look at Q3, every area of comm is relatively weak, including our 40Gb and 100Gb and timing sync. So as we talk to customers, we are hearing that they expect Q4 to be stronger. Obviously, we need to see that in terms of the backlog, and that's just why I made the comment. But at this point in time, the demand for Q3 is weak.

Last question, if I could just sneak it in, I guess basically overall on smartphones, generally you seem to be doing reasonably well, and I know you mentioned some softness here. Would you attribute that more to customer issues with their maybe market-share issues as opposed to any real change you're seeing in demand for smartphones?

Well, you know, again, smartphones was pretty strong in Q2. And we don't know -- we try to judge whether there was some extra advanced build of product or material because of the Japan earthquake situation. Q2 was extraordinarily strong for the consumer and Q3 appears to be relatively weak for consumer.

Definitely LCD TVs is weak. Smartphones is weak. I would say there are pockets of strength, but clearly there are also pockets of weakness in terms of customers. There are some customers who are doing a little bit better than others, but in general I would say for this time of year, the overall strength that one would expect at this time of year is not there.

Rick Schafer, Oppenheimer.

Just a little more maybe color on the order patterns you've seen so far this quarter. You're about a month into it now. Have you seen a noticeable slowdown, let's say, versus the beginning of the month or any signs of a spike in sort of order cancels or anything like we saw, say, a couple of years ago?

So I would say actually, Rick, we came into the quarter needing 44% turns, which is quite a high number for the midpoint of our guidance. But the actual bookings have been pretty good and the turns rate has been very good.

So it just suggests to me that the customers have less visibility of what's going on in their end markets and end customers and therefore not willing to place orders and put as much backlog in place as they have historically.

And so, that's kind of what we see. The bookings are fairly linear. They were through Q2 and I think they continue to be in Q3. And as I mentioned, the turns orders are quite good at this point in time.

So nothing remarkable on the cancels side like we saw (multiple speakers), let's say, in 2008 or anything like that?

No, no. We don't see any of that.

Okay, and then on the inventory, I know you talked about disti a little bit, but can you talk about where you think inventories are going to go in the third quarter in the channel with disti or even internal for you guys? Any idea of trends there for 3Q?

Well, internally we expect inventory to be flat to slightly down, I would say. In the channel, I think it's going to be similar to what we have at this moment in time, especially with Q3 demand coming down. We'll start to look at Q4 over the next period here and see if the demand is looking stronger, then we may decide to increase the channel inventory. But I think at this point in time, we'll probably try to keep it flat.

Okay. And then on the OpEx cuts, I'll echo Steve's compliments there. That's a good job obviously jumping on that. But how much of those OpEx cuts do you expect are going to be permanent and what sort of percent will sort of bounce back with the top line?

So with the top line, I think at this point the variable expenses, and that would be our bonus payments and things like that, your traveling, is probably driving about 55% of the reduction, and I'll probably expect some of that to come back, we think, with higher revenues.

But in terms of the headcount actions, which is probably about 25%, about $750,000 a quarter, we do expect that to last a whole lot longer.

And then, just one last -- I just want to sneak another one in here. I didn't hear you talk a lot about tablet on this call. Can you talk about the order patterns you're seeing there? Is that business one of the stronger businesses still in the consumer, should I assume? Are you guys going to be able to leverage your relationship with your big tablet customer at some point to win some handset business there, do you think?

I think the answer to that is yes. I think the answer to the first question was that tablets is reasonably strong -- it was reasonably strong in Q2, is okay in Q3 as far as we can see.

I think the major issues in consumer in Q3 that we see are mostly TV related and smartphone related, and there's some TV. I think it's across the board. Smartphones is more some specific customers, but yes, I think we do expect that it will come back.

I would say that the tablets that we've been designing to many different tablet customers, as I know many of our competitors claim as well, and it does appear that there is only one or two that are really doing well in that space.

(Operator Instructions). James Schneider, Goldman Sachs.

Good job on the OpEx control. First of all, I just wanted to ask you, maybe Mohan, can you give us some color on which of the segments you expect to decline most versus least, and whether you expect any of the end markets to be up in next quarter?

I think computing could be flat to slightly up next quarter. Computing isn't a huge business for us. We have about 8%, and last quarter was exposed to the computing segment, so I'm not sure whether that's an indicator of strength in the computing space or just us doing a little bit better there.

I do expect that the consumer business will be flat, flattish to slightly down. Remember in Q3, one would expect consumer to be much stronger, so that's somewhat of a concern, that it will be flat to down. But as I mentioned, I think Q2 was incredibly strong for consumer, so it's partly that and I think partly the overall consumer confidence in the macroenvironment.

Communications will probably be down in Q3, almost certainly, I would say, mostly -- a combination of both traditional communications systems but even some of the newer systems, the 40Gb, 100Gbg, IP aggregation boxes and things I think are going to have a little bit of a break in Q3.

Those businesses, by the way, have been doing very, very well. They've been growing for some time, and I think it's not unreasonable that one quarter they kind of come down, and then we see a little bit of growth again in Q4, which is [makes the patient].

Industrial is the one that I find difficult to call at the moment. I think it will be probably slightly down. So, that's kind of a summary, Jim.

Thanks. That's very helpful. And on the communications space, you talked about the decline in 40Gb in particular. Do you think that's just customers taking a pause in terms of deployments, or do you feel there are any potential market share or port pricing issues going on embedded in that?

I think it's all customers taking a little bit of a breather on the deployments, and partly it's those same customers in the same regions figuring out what they want to deploy. Should they go to more 100Gb? Should they go for 40Gb? Should they deploy more 10Gb -- and some of the economics associated with that, but I think it's entirely due to that.

I don't believe, as we look at our product areas and the customers and the businesses, that we've lost any share in any 40Gb or 100Gb or IP aggregation boxes.

Fair enough. That's helpful. And then, just on the strategic questions, in terms of the power management space and the Hi-Rel space where you're announcing changes, what are your expectations in terms of how long do you think that could take to turn around and those businesses start to be big growth drivers, or do you think there are things that are already in the hopper that could drive some growth in the next few quarters?

I think the power management is likely to grow in the next couple of quarters here. I think there are some good things going on. We have some good design wins. We have really good products out there. Margins have been improving quite nicely. So, I do think there is some opportunities there.

On the Hi-Rel side, unfortunately the problem that we have is the military businesses is very soft. Offsetting that with other industrial kind of space products that drive revenue quickly is quite tough. So we have some other longer-term strategies there.

It's not a significant part of our overall business, so I think it doesn't really impact -- the weakness in military doesn't really impact the overall business, but I think it's going to take longer than three to four quarters to see a significant shift there.

Li-Wen Zhang, Pacific Crest.

Thank you for taking my question. The first one is, would you talk about competitive landscape and price erosion and your market share in the protection business?

In the protection business, the main competitors are -- ON Semiconductor, NXP, ST Micro are the three main guys we come across.

We don't see them a lot in the very high-end applications where the performance requirements are. We think we're a leader there and we're the only ones out there. They tend to play in the volume sockets. So, where there is high volumes, and particularly that might be smartphones, for example, we do see them coming in and the price pressure is there.

But it's always -- as long as the market is fragmenting so that you have higher-end smartphones and low-end cell phones, I think there is always the opportunity for us to maintain our share because these spaces are growing.

Plus as I mentioned in my comments, the trends are going in our favor. I think the lower voltages, the highest bandwidths, the advanced lithographies, those trends are driving more typical requirements for protection devices, and so I think that we can maintain our share and grow it in the high end.

Okay, I thank you. And my next one is that you mentioned that a weakness in the 40Gb and 100Gb in Q3. Would you please detail it by geography?

The majority -- so the 40Gb, 100Gb (inaudible), a large part of our revenues came from deployments in China, at least the customer in China, and those deployments are more global, so it was obviously China, South America, Middle East, some of those regions. So, I would say that it's across the board.

I don't think there is one region of deployment that's weaker or softer than another. I think in general there's a little bit of a pause in the deployment of some of this equipment, and I do think it's partly driven by the uncertainties that are out there. There is a lot of confidence issue out there.

The good thing is, I think, as customers start to deploy networks, they're going to 40Gb and they're going to 100Gb, so we are seeing some of the traditional communication systems are getting replaced with more advanced -- the higher bandwidth systems. So that's the good news. I just think this is a one-quarter event.

Steve Smigie, Raymond James.

I know you've stopped breaking out the 40Gb and 100Gb per second stuff from AC&S specifically, but could you just provide color there? I think you described it a little bit, but would you say it's increased as a percentage of that overall category in July? And how might you think that as a percentage of revenue over, say, the next several quarters as a percentage of AC&S?

I think it's still -- the largest piece of our comm business is the 40Gb and 100Gb product area, Steve. The second is probably the timing synchronization area. Those are still the biggest pieces of our comm business.

So yes, if you see a decline in our overall comm area, you can assume that it's driven by those two -- weakness in those two areas, I think. We do have power management products and protection products that go into the comm sector, but I don't know how much of that is -- that's probably -- most of that is going into the traditional comm, which has been weak, certainly even in Q2 was weaker.

So as we go to Q3, the weakness in 40Gb and 100Gb and the IP aggregation, I think, is in conjunction with the weakness in the other product areas in communication.

I'm not sure if I missed it, but could you give a little update on potential revenue ramp for the microwave product? I know it's very early stage, but just sort of color on that?

We're expecting design wins this quarter. I expect to get some initial revenue Q4, and if those go to plan, then I think next year we're going to see some significant revenue from the microwave space.

Okay. And the last question was just on protection. During the 2008 downturn, I think that business actually grew. So it seems to be pretty countercyclical or at least non-cyclical, and if there continues to be softness, do you think there are enough design wins, et cetera, that you could maybe again prove that business more of a solid secular trend rather than a cyclical one? Thanks.

I think, definitely. I mean, it just grew 11%. On an annual basis, it grew 13%. We just had another record quarter. I think it will have another record year and I think it's going to continue to grow.

I just think what we're seeing with weakness in LCD TVs, with some weakness in smartphones in certain customers, with set-top box weakness, with the communications sector being weaker, even though we're offsetting that with some strength in tablets and some strength in some smartphones and some strength in some other areas, it just is not going to be able to grow at the same rate for Q3, which is typically a strong quarter for us in that protection business because of the consumer exposure.

But I think on an annual basis, it's going to do quite well, and I think -- we are hoping that Q4, which is typically down in Q4, maybe we can offset (technical difficulty)

There are no further questions at this time. I'll turn the call back to Mr. Maheswaran for closing comments.

Thank you. Let me summarize by saying that the second quarter of fiscal year 2012 was a very strong quarter for Semtech.

Revenue increased by 15% year over year. Gross margin remained above our 60% target. We achieved record operating profit, and we grew our cash and investments balance by $37 million to $314 million.

While we recognize the growing uncertainty in the global economic environment, we believe our balanced end market exposure, diverse product portfolio, broad customer base, and global presence will help provide stability against macroeconomic headwinds we may encounter.

In addition, our exposure to several of the fastest-growing segments in the analog space, along with the recent release of several exciting new platforms, will enable us to continue outperforming our peer group and positions us well to benefit from any improvement in the economy.

With that, I would like to thank you for your continued support of Semtech and look forward to updating you all next quarter.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.