Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sequential revenue growth across all business units, with a favorable outlook for the third quarter.
- Strong performance in the data center segment, with net sales up 28% sequentially and 37% year over year.
- Significant growth in LoRa enabled solutions, with net sales up 34% sequentially and 72% year over year.
- Gross margin improvement to 50.4%, up 60 basis points sequentially and 80 basis points year over year.
- Operating expenses reduced by 9% year over year, resulting in an operating margin increase of 200 basis points sequentially and 60 basis points year over year.
Negative Points
- Wireless net sales declined, although they remained within expectations.
- Free cash flow for the second quarter was a negative $8.4 million, primarily due to working capital changes.
- Principal outstanding on debt remains high at $1.2 billion.
- Inventory levels increased by 5% sequentially, which could indicate potential future challenges in inventory management.
- Limited public comments on asset sales and the status of the process, creating uncertainty around balance sheet improvements.
Q & A Highlights
Q: Can you talk about your active copper cable expectations and the elements of the TAM calculation?
A: We have expanded our engagement with customers and now have several discussing ACC opportunities. The total available market (TAM) is above and beyond the floor case we guided last quarter. As data rates and connection lengths increase, the progression from passive copper cables to ACC is inevitable. We expect revenue contributions to start in Q3 and ramp from there. - Hong Hou, CEO
Q: Can you clarify the ACC TAM opportunity? Is it north of $100 million?
A: The TAM mentioned is for a single platform and customer, and we expect it to be higher than the floor case. We are also engaging with multiple customers in the AI connectivity ecosystem, which are not accounted for in the increased opportunity compared to the floor case. - Hong Hou, CEO
Q: What is the use case for LPOs, and when do you expect shipments to begin?
A: LPOs can be used to scale out clusters and replace DSP-based transceivers, providing low latency and low power consumption. We expect LPO shipments by the latter portion of FY 2026. Our TIA is considered the best in the industry, and we are confident in entering production with limited quantities for LPOs. - Hong Hou, CEO
Q: Can you elaborate on the strong recovery in LoRa revenue?
A: The industry demand is resuming after inventory depletion in the channels. Additionally, new use cases, such as the Mercedes-Benz implementation, are driving growth. We are excited about the opportunities and plan to mobilize the ecosystem to create more use cases. - Hong Hou, CEO
Q: What is the opportunity in LoRaWAN, and how does it compare to ACCs?
A: LPOs and ACCs both provide significant opportunities. LPOs can replace DSP-based retimers, while ACCs can replace DAC cables as data rates increase. Both products have many years of runway in the AI-based connectivity era. - Hong Hou, CEO
Q: Can you help understand the scope and size of the ACC business? Are you the leader in technology?
A: We are one of the two sources for a critical application, and we aim to earn more than our fair share allocation through technology differentiation and operational excellence. We are already working on the next generation product to stay competitive. - Hong Hou, CEO
Q: What is the timeline for other ACC opportunities to commercialize?
A: We are finishing system validation and product qualification, with limited shipments expected in Q3 and a meaningful ramp in Q4. Beyond the specific customer, we are in early engagement stages with other customers and will provide more details in future earnings calls. - Hong Hou, CEO
Q: What is the competitive environment for high-speed interfaces?
A: The primary competitors in analog expertise are Infi, MACOM, and (inaudible). Establishing capabilities in design, testing, and operations takes time, and we are well-positioned to capture the opportunities ahead. - Hong Hou, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
