Semtech Corp (SMTC) 2015 Q1 法說會逐字稿

Good afternoon. My name is Tonya, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Semtech Corporation Q1 FY15 earnings release conference call.

(Operator Instructions)

Thank you. Sandy Harrison, Director of Business Finance and Investor Relations, you may begin your conference.

Thank you, Tonya. Welcome to Semtech's first-quarter FY15 conference call. I'm Sandy Harrison, Director of Business Finance and 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 April 27, 2014 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 will 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 form 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 the 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 the detailed reconciliations between GAAP and non-GAAP results, are included in today's press release.

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

Thank you, Sandy. Good afternoon, everyone.

Q1 of FY15 was a solid quarter for Semtech, with net revenue of $132.9 million, coming in at the upper end of our guidance range. This represented growth of 5% from the prior quarter and a decline of 18% from the first quarter of FY14.

The broad number of new platform ramps in high-end consumer and strength in enterprise computing from the wireless infrastructure and data center [butiles] contributed to the favorable results. In Q1, sales into Asia represented 74% of revenue. North America represented 14%. And Europe was 12% of total revenue.

Due to the reduced OEM shipments as we exit the long-haul service business, distribution sales now represent a greater portion of our revenue at 53% of total revenue, while direct sales represented approximately 47% of total revenue. Bookings were strong in Q1 of FY15, resulting in a book-to-bill of greater than 1. Bookings accounted for approximately 52% of shipments during the quarter.

Gross margin on a GAAP basis for Q1 of FY15 was 58.8%, of which approximately 12 basis points came from the sale of previously written off inventory. This is an increase from 42.5% in Q4 of FY14.

The improvement was driven largely by the absence of special charges we took in Q4 of FY14 as a result of the realignment of our businesses in Q4. This benefit was somewhat offset by the additional $1 million inventory reserve taken in Q1 as part of the realignment activity. In Q2 of FY15, we expect GAAP gross margins to expand as a result of higher manufacturing volume due to stronger demand and the normal reoccurence of the special charges associated with the realignment efforts.

Operating expense on a GAAP basis was $66.9 million, compared to $220.5 in the prior quarter. The decrease was mostly attributable to the lower level of the special charges recorded in Q1 of FY15 as a result of the realignment actions taken in Q4 of FY14. In Q2 of FY15, we expect our operating expense on a GAAP basis to be approximately down 2% to up 1% as increases in new products development expenses are offset by lower restructuring expenses.

In Q1, we recorded a GAAP tax provision of $1.6 million or 17% versus a tax provision of $42.3 million in Q4 of FY14. As a reminder, in Q4 of FY14, we recorded a $53.2 million valuation reserve against deferred tax assets due to utilization concerns. For the remainder of FY15, we expect our GAAP tax rate to be between 13% and 15%.

In Q1 on a non-GAAP basis, excluding the impact of equity compensation, amortization of acquired intangibles, acquisition-related expenses and other one-time expenses, gross margin was 59.8%, up 20 basis points from Q4 due to a favorable product mix. At the midpoint of guidance, we expect Q2 non-GAAP gross margin to be up approximately 30 basis points on higher manufacturing volumes driven by stronger demand.

Q1 non-GAAP operating expense was $52.2 million, down approximately 5% sequentially, reflecting the benefit of the realignment actions we took in Q4 of FY14. In Q2, we expect non-GAAP operating expense to be flat to up 3% sequentially driven by new product development expenses.

Non-GAAP net income for Q1 was sequentially up 41% to $21.8 million, or $0.32 per diluted share due to a 5% revenue growth and a 5% operating expense reduction. Our non-GAAP effective tax rate for Q1 was 15%, and that is the rate we expect for the remainder of the year.

On the balance sheet, cash flow from operations during the quarter was up [33]% from a year ago due to good management of working capital. Our cash balance at the end of the quarter was approximately $244 million of cash and investments, down about 1% from Q4 of FY14 as the strong collections in the quarter were not enough to offset the traditionally higher Q1 cash disbursements.

Our priority for the use of cash remains buying back our stock opportunistically, given our current stock price, and paying down our debts. In Q1, we used $10 million to repurchase approximately 385,000 shares of our stock.

Our total remaining authorization is approximately $52.5 million. We also paid down our debt by approximately $5 million, and the debt outstanding is approximately $287 million.

The Company acquired approximately $6.1 million of property plant and equipment in the quarter. In Q2, we expect to spend approximately $10 million, primarily for manufacturing equipment as a result of stronger demand and for information technology infrastructure improvements.

Depreciation for Q1 was approximately $5.3 million. In Q2, we expect depreciation to be approximately $5.5 million. Accounts receivable declined 7% sequentially in Q1, and our days sales outstanding improved to 44 days from 51 days in Q4 of FY14 in line with our target range of 40 to 45 days.

Net inventory in dollar terms declined 8% sequentially to $55.3 million in Q1 of FY15. On a days basis, net inventory was up 13 days to 96 in Q1, a reflection of the impact of the special charges taken in Q4 of FY14. We expect our Q2 inventory to increase slightly based on the stronger demand outlook.

In summary, Q1 was a solid quarter. We believe we have put the challenges in the second half of FY14 behind us, and are off to a good start in FY15. There is leverage in our model. Operating income is growing much faster than revenue as we see broad-based strong demand for our products.

Gross margin is stable at the high- end of our 55% to 60% target range, and operating expenses are under control. In addition, we are focused on driving free cash flow back to our target range of 20% to 25% of revenue. I will now hand the call over to Mohan.

Thank you, Emeka. Good afternoon, everyone. I will discuss our Q1 FY15 performance by end market and by product group and then provide our outlook for Q2 of FY15.

In Q1 of FY15, we achieved net revenues of $132.9 million, an increase of 5% from Q4 of FY14 and a decrease of 18% from Q1 of FY14. For the quarter, our non-GAAP gross margin was 59.8%, and our non-GAAP diluted earnings per share was $0.32 per share.

In Q1 of FY15, revenue from the high-end consumer market increased from the prior quarter and represented 32% of total revenues. Approximately 24% of this revenue was attributable to hand-held devices, and approximately 8% was attributable to other consumer systems.

Revenue from the enterprise computing end market increased from the prior quarter and represented 19% of total revenues. Revenue from the industrial end market was flat and represented 25% of total company revenues. Revenue from the communications end market decreased and represented approximately 24% of Semtech's total revenue.

I will now discuss the performance of each of our product groups. As a reminder, we are now reporting our results under three product groups.

Q1 of FY15 was a solid quarter for our protection, power and high reliability product group, which grew 11% sequentially and represented 47% of total revenues. We experienced strength from all end markets except for computing, with particular strength on the high-end consumer market driven by smartphones and from the communications end market where we benefited from increased demand from the wireless infrastructure buildout in China.

Our protection business continues to perform very well and grew approximately 19% sequentially. There are early indications that the demand from Samsung's new S5 smartphone release will exceed original expectations, which is promising for our Q2 and Q3 demand.

In addition, we see the ongoing trends of more interfaces, higher bandwidth interfaces and advanced lithographies all driving the need for Semtech's high-performance Protection Products in both current and new emerging electronic applications. During the quarter, we expanded our TClamp protection platform with the introduction of several new devices, including the TClamp 1202P, the smallest high surge transient voltage protection array in its class. This new device protects two IO lines in an ultra small package and is targeted for safeguarding sensitive communications transceivers from electrostatic discharge events and lightning surges.

Our power management and hi-rel business was down 10% sequentially in Q1 due to seasonality. However, we are excited by the improved execution in this business and the increasing product diversity that we expect to see this year. In Q1, we saw our industrial power business increase driven by an increase in automotive infotainment applications, and we saw initial revenues from the alternative energy market driven by the use of micro-inverters and solar applications.

Semtech's new product execution engine is beginning to yield a number of new power platforms, and we expect to release many new power products in the next few quarters that will drive both revenue growth and gross margin expansion for our power and hi-rel business. In Q2 of FY15, we expect revenue from our protection power and high reliability product group to be up nicely driven by all end of markets, but with particular strength from the high-end consumer industrial and communications markets.

Moving on to our signal integrity product group, this product group is the combination of our Gennum business and our Sierra Monolithic 40 gig 100 gig long-haul transport business. In Q1 of FY15, revenue declined 4% sequentially and represented 39% of total revenues. Our Gennum business increased 6% sequentially while our long-haul studies business declined 36% as anticipated.

Strength from the enterprise computing end market was driven by data center cloud computing and palm applications where our broad Gennum portfolio of 1 gig, 10 gig and 25 gig physical media devices and clock data recovery platforms are best in class. These products serve many customers in several different application spaces.

The strength in our Gennum business in Q1 was offset by continued weakness from our 40-gig and 100-gig long-haul [serties] revenues. In Q1, we also saw demand improve in our video surveillance and video broadcast business, driven by the increased deployments of both high-definition surveillance systems and the emerging ultrahigh definition forecast market.

During the quarter, at the National Association of Broadcasters show, we highlighted our first ultrahigh definition 6G adaptive cable equalizer and 6G re-clocker, adding to Semtech's solutions for ultrahigh definition multirate connectivity. These components enable multirate operations with best-in-class reach at 6G ultrahigh definition, 3G high definition and standard definition data rates at low power. We expect the video broadcast market to be a continuous transition to ultrahigh definition and contribute nicely to growth in our video products over the next few years.

In Q1 of FY15, we had record bookings for our Gennum business with order strength from enterprise computing, communications and industrial markets. In Q2 of FY15, driven by very strong Gennum orders, we expect our signal integrity product group revenue to increase significantly. This also assumes revenues for our long-haul optical business to stabilize at around $5 million per quarter starting in Q2.

Turning to our wireless sensing and timing product group, revenue in Q1 of FY15 increased 14% sequentially and represented 14% of total revenues. Wireless sensing and timing revenues was primarily driven by growth in the high-end consumer markets from the ramp of our new proximity sensor platforms and initial prototype volumes of our new touch sensing platform. In Q1, our Wireless and Sensing business grew sequentially 13%.

In the sensing market, we continued to see increasing interest and demand for our leading proximity sensing solutions. In Q1 of FY15, we started to see an increase in revenues and increased design win momentum with tier one tablet OEMS. In addition to the tablet segment, we are starting to see the potential use of proximity sensors in both smartphone and other applications that have LTE-based wireless connectivity.

During the quarter, we also shipped prototype quantities of our new touch sensing platform and remain confident this product should ramp and to drive growth in the second half of this fiscal year for our wireless sensing and timing product group. We expect to be able to discuss more details about this technology on our Q2 earnings call.

During the quarter, our wireless business announced several important partnerships in the rapidly emerging Internet of Things ecosystem. We announced that Homerider Systems, a specialist in environmental data collection, is deploying a next-generation system based on Semtech's long-range wireless technology known as LoRa. Homerider Systems is a worldwide water utility leader offering a complete solution to improve efficiency with a broad range of capabilities and sensors for leak detection, water quality analysis and pressure monitoring.

Additionally, we announced that our LoRa platform has been chosen by KERLINK end-to-end technologies for its new long-range IOT Gateway. This Gateway enables IOT networks to provide bidirectional communication with thousands of sensors, automated meters and other connected devices located up to tens of kilometers away.

In addition, two service providers are now in network files using LoRa technology, and several others in different regions are in discussion on the timing of their own trials. These market opportunities are in the early stages but are expected to drive the demand for longer range low-power battery driven wireless connectivity that is at the core of the Semtech RF platforms. We're very excited about the strong growth potential over the next few years from the increasing deployment of LoRa in the Internet of Things market.

During Q1 of FY15, our timing business grew 19% sequentially as wireless base stations and aggregation boxes increasingly rely on timing and synchronization technology to operate the next generation LTE networks. We also continue to see increasing interest in our Logita high-performance frequency synthesizer timing products. These PLL products complement Semtech's timing and synchronization platforms targeted at wireless base stations and high-end telecommunications infrastructure.

We continue to expect to see modest revenue growth in FY15 from our timing business. In Q2 of FY15, we expect revenue from our wireless sensing and timing product group to be up significantly from Q1 and potentially achieve record revenues as we see growth across the consumer communications and industrial end markets. In Q1, we saw distribution POS increase sequentially by approximately 3% to achieve a new quarterly POS record.

Distributor inventory decreased 2 days from 59 days in Q4 of FY14 to 57 days in Q1 of FY15 and continues to be well below our target model of 70 to 80 days. And is at the lowest level in over two and a half years. 43% of the total POS came from the consumer and computing end markets and 57% of the total POS came from the industrial and communications end markets.

Moving on to new products and design wins, in Q1 we released 23 new products and achieved 2209 new design wins. We believe Semtech's focus on driving analog innovation into fast-growing markets and focusing on key industry trends for analog semiconductors along with our breadth of analog mixed-signal products serving multiple end markets positions us well to continue to benefit from growth in our industry, and we're very excited by the number and diversity of our new growth engines.

Now let me discuss our outlook for next quarter. Based on recent bookings trends, and our backlog entering the quarter, we are currently estimating Q2 net revenue to be between $138 million and $146 million. To obtain the midpoint of our guidance range, or approximately $142 million, we needed a net turns orders of approximately 34% at the beginning of Q2. We expect that Q2 GAAP earnings to be between $0.18 and $0.24 per diluted share and non-GAAP earnings to be between $0.36 and $0.42 per diluted share.

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

(Operator Instructions).

Ian Ing, MKM Partners.

You've got a nice wins here in the pipeline, tablets and smartphones. How should we think of mix, is there any mix things we should be targeting in the next few quarters, or is it largely top line revenue that drives gross margins?

The gross margin is mostly a mix question for us. Obviously some driven by volume. If we get the high revenue, that drives higher volumes for us. But more comm, industrial, also enterprise computing is a higher gross margin generator for us. So it's mostly mix, Ian, but obviously the high revenue drives higher volumes as well. Those are the most -- the two biggest contributors.

Okay. Great. And then the low-power wireless win, I think you referred to it as LoRa, can you give us a sense of the product lifecycles here? Are they very short like consumer or are they very multi year?

The LoRa technology which is long-range wireless technology has two components to it. One is really more industrial in nature. So a little bit longer time to revenue but much longer lifecycle. But it's at both ends, so you have a Gateway transceiver and then you also have the other side of the device side. And that can have a slightly shorter lifecycle but much higher volumes, so we are seeing obviously a lot of opportunity in both sides. And also in private and public networks. So it really depends on the network itself. I would suggest in private networks that the lifecycle will be much longer than the public networks.

Thanks. And then my last question, looks like -- just want to confirm ultra long-haul is stabilized here, it's down to $5 million a quarter. I think that's even lower than some of your [US] target of $30 million a year so you're still able to put up the results and guidance?

Yes. It's going to be in that range. I think $5 million to $7 million. We think that $5 million is the low point and then probably $7 million, $8 million is the high point and it's sitting in that range. So that's probably about right.

Okay. Thank you.

Andrew Huang, Sterne Agee.

This is John Shen for Andrew. Thanks for taking the question and congrats on the good results. On the improvement in bookings, can you talk about which products you're seeing the most strength?

Well, it's pretty broad. Obviously our Gennum products bookings are very strong. We had a record bookings quarter as I mentioned there. And that's across the data center side. Also on the wireless base station side. The video side also strong. So bookings in general in our Gennum business was very good.

Then our protection business, obviously driven by smartphones, but also other areas within protection doing quite well -- was strong. And then wireless sensing side, the sensing business is doing very well. The proximity sensing we mentioned our first orders of and shipments of our touch sensing platform also. So I would say in general, across all of our businesses, the bookings were quite strong.

Okay. Great. And can you talk about the impact of the ramp in China LTE on the businesses in Q1 and the rest of the year?

Well, certainly in Q1, I mentioned it did impact us positively in both protection and power. And our Gennum products as well. So very positive. We will continue to see good demand for Q2, clearly that's part of the reason why our Q2 guidance is strong. And our indications are that actually the strength will be there for at least part of the second half. Not sure whether it's Q3 or Q4, but certainly we're anticipating strength, some strength in the second half also.

Okay. Thank you very much.

Harsh Kumar, Stephens Inc.

Congratulations. I know you guys went through a rough patch with the long haul. Great execution in bouncing back. Mohan, I had a quick question for you. You sound extremely optimistic about the prospects of the Company in the second half. Can you tell us maybe just looking at everything, which is the one area that you're most optimistic about, would that be wireless sensing or data center? Connectivity or any of the other areas you're involved in?

Well, it's hard to choose one area to be honest with you, Harsh, but I will and that's the wireless and sensing area. And that is because that's new and fairly small for us today. So the other areas you know about obviously protection and as we grow, we gain sockets we grow in that business. The Gennum business is [along with] the enterprise computing driven and some video driven. There is some new stuff there as well in the video side, but the biggest area of new emerging growth for us is clearly the wireless and sensing side and both the proximity sensing and the touch sensing side. So all three of those areas within that wireless and sensing business are pretty exciting for us and are just starting.

Got it. And as my follow-up, Mohan, can I ask you on touch sensing, this is a product that I think was supposed to come out a few months ago. How optimistic are you that this will ramp in the second half at some point in time? What kind of visibility do you have? Then also maybe talk about scope of how big this can be for you?

Well, first of all on the timing, the timing was -- it was originally supposed to be ramping in Q4. That pushed out and Q2 is now the initial prototype ramping and production Q3 of this year. That's still the timing. We still anticipate that to be quite good. We do have pretty good visibility of the time schedule and the revenue numbers. Obviously I'm not going to give you too much information there, but we've said I think publicly that this could be a $20 million, $30 million revenue business for us this year.

That's great. Thank you.

Rick Schafer, Oppenheimer.

This is [Joe] on for Rick. Let me add my congrats here. I was wondering if you could give a little bit of clarity on the 2K prospects. Timing of the ramp, how you see it from a linearity perspective, and then where it could potentially be as far as size in the business? Thank you.

Are you talking about the video business?

Correct. The broadcast.

The broadcast video business, the nice thing about this for us is we already are a leader in the video broadcast business, and Gennum has historically got very good brand recognition in this space. Have a lot of products, very good relationships with the customers, and it was just a question of whether the market was going to move from 3G to 6G and the timing of that. So what we're starting to see is that most of the infrastructure customers are starting to now deploy -- build and deploy 6G related equipment, and that's a positive sign for or us.

So we're seeing good activity and lots of promises of increased demand. It's still early days. I think it's still going to take some time. Obviously the TVs and other equipment that you have to lead the charge in terms of driving -- putting the demand on the infrastructure. So we see that as potentially taking over basically replacing the old video equipment. And it should drive good growth for us which would probably be in the high single-digits.

Okay. Great. And on the [sureties] business, it seems like the headwinds are behind you. You're down below that $30 million run rate you'd spoken about earlier. You think there's any growth in the business from here? Just where do you see it trending longer term now? Thanks.

We've essentially exited it. We're not planning on it growing. If it is, it will be opportunistic. As I said in the previous two calls, it's a bit of a surprise how quickly it came down, but it is what it is. We've taken the actions and moved out of it, and we're not putting a lot of R&D investment in the long haul side of it. So if it comes back as I said, it will be driven by CapEx infrastructure in the long haul side. We don't see much at the moment. There's still promise that it may be coming onto the second half, but we're not counting on it.

All right. Thanks a lot, guys.

Steve Smigie, Raymond James.

I will add my congratulations. Can you talk a little bit more about the proximity sensor business, actually the touch sensor business? So it was discussed it had originally been pushed out and now you're getting the production orders. Have they told you at this point that issues that they were facing in terms of the processor and software have been fixed and so now it's just a matter of timing and them actually selling their units?

All what you said is correct, Steve. The only issue with the smart ones as you know, it's the same with any smartphone manufacturer, when they release the phone, they have anticipation of a certain level of demand, and then what transpires is are we all going to go out and buy the phones? And so I would say that the forecast is quite conservative that we've been given. I don't think that there's a huge expectation. And so I think it's very doable, but one has to wait and see. From an execution standpoint, I think everything's on track.

Okay. Great. And then on the proximity sensor, I think you touched on this a little bit already and I think I just missed part of the discussion, but I think you guys had gotten some nice wins on some tablets. And I think it was maybe you were getting maybe three units per tablet. Can you talk about how that proliferates in other tablets or beyond tablets, and is that right to think you're getting three per device and why would it be three? The dynamics around that potential there?

The number of units per device is really dependent on the architecture and what the manufacturer is doing. Essentially what the proximity sensing device is doing is determining how close the tablet or phone is to your hand or your ear or inert material like a table or something like that. So the number of devices is really dependent on what they're trying to do. It isn't going into all tablets and all systems. It's really where you have a wireless connectivity, LT wireless connectivity, so there's a limitation there, in terms of which tablets it goes in, but that's what we see. And most of the mobile devices are starting to have LT connectivity, so that's driving the growth for us.

Now, today we have pretty good penetration of the tablet market. What's emerging is that quite a lot of the other applications including smartphones are starting to look at proximity sensing for a number of different functions also. Just to again determine how close your hand is or your ears are to the phone and things like that.

Great. Just returning to the gross margin, as all these sensors ramp, you obviously had pretty high gross margins that's ramping down. Meaning some of the surety stuff. Is what's ramping enough to keep us at a [50%] gross margin? Seems like more consumer oriented products might have somewhat less, but now that you've had a chance to look at these products that they're ramping, any better sense of what happens at the mix there?

Steve, based on my prepared remarks, I said that we do expect our gross margins to stay at towards the high-end of our 55% to 60% range. The key drivers for that is that if you look at the mix of products that we have from Gennum, there's a very good high gross margin business. We start to see more growth from the video products, those are actually on the gross margin products. And also Mohan did talk about being excited about the business opportunities from our wireless and sensing. The lower products are also very [distinct] gross margin businesses significantly above the high-end of our range.

So definitely we do expect that we're going to see a lot of growth from our consumer-driven products. And that has a softer gross margin. We expect that we see from all these other product areas, the Gennum products, the growth in the sensor business, the growth in the video business. I think that is enough mix there to allow us to maintain the current gross margins that we have. And also in addition, as we continue to see the ramp in revenue, the higher manufacturing volumes would allow us to be able to absorb our fixed expense a lot better.

I think, Steve, also our power business is starting to reach new products, and that should be -- all the new products that we're re-leasing in power should be accretive to our gross margins as well.

Okay, guys. Thanks and congrats on getting the ramp of the new sensing products.

Earl Hege, RBC Capital Markets.

I'm calling on behalf of Doug Freedman. I guess with respect to the distributor channel, when do you guys expect an inflection there? Are you guys seeing any signs of that in the current quarter?

Well, POS for us is very strong. Channel inventory is very low. So to me, the demand is quite good. And we're probably at risk of having too low inventory in the channel. So we're just really making sure that we have the right mix to support our customers. I didn't quite understand the question. Do you want to repeat the question?

Sure. Yes. Just wondering in terms of distributor channel, when do you see them building inventories again, at what point do you believe they will become comfortable?

Yes. So I think probably we should start to see that in Q3 and Q4. Depends again on the POS. POS is very strong at the moment, so replenishing the channel is kind of tough.

Great. Okay. And looking through the year, what do you guys see for OpEx in terms of linearity? How should we think about that?

Right. So during the call last quarter, I think I had guided quarterly updates of about $50 million to $53 million. I still expect on an annual basis for it to average out in that range. There could be some quarter-over-quarter fluctuations, so it's possible that in some cases we may be in the $52 million to $54 million range, which is what we are currently guiding to. I think the key takeaway here is that at the end of the year when you average it out on a quarter-over-quarter basis, I still expect us to be in the $50 million to $53 million range per quarter.

Great. Thank you.

There are no further questions at this time.

Great. In summary, Q1 marked a solid start to FY15 for Semtech and sets the stage for what we believe will be another solid year. Our strong design win momentum coupled with a strong backlog are positive indicators of continued traction. We remain confident that our position in the key markets where we compete, our balanced portfolio of highly differentiated products and our long-standing partnerships with diverse customers will enable us to continue moving towards our goal of $1 billion in revenue. With that, we thank you for your continued support of Semtech and look forward to updating you all next quarter. Thank you.

This concludes today's conference call. You may now disconnect.