Analyst Conference Summary

conference date: April 25, 2018 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2018 (fourth fiscal quarter 2018, Q4)

Forward-looking statements

Overview: Record 2018 annual revenue, strong Q4 growth and record revenue. Increased the dividend.

Basic data (GAAP):

Revenue was $673 million, up 7% sequentially from $631 million and up 10% from $609 million in the year-earlier quarter.

Net income was $166 million, up sequentially from $12 million, and up 8% from $153 million year-earlier.

Diluted EPS (earnings per share) were $0.64, up sequentially from $0.05, and up 12% from $0.57 year-earlier.

Guidance:

For the June quarter revenue is expected between $660 and $690 million, with gross margin of 69% to 71%. Operating expense about $260 million. Other income $3 million. Tax rate 10 to 14%.

Conference Highlights:

Moshe Gavrielov, Xilinx President and CEO, said growth was broadly based driven by multiple markets.

The dividend will be $0.36, for shareholders of record on May 15, 2018, and payable on June 4, 2018.

New category is ACAP (Adaptive Compute Acceleration Platform) for applications including AI.

Revenues by end market:

Communications and Data Center 34% of total. Down 8% y/y. Data Center growth was strong, continued software development, including a Machine Learning suite on AWS supporting TensorFlow.

Industrial, Aerospace & Defense 48%, or $ million, a record, up 25% y/y.

Broadcast, consumer and automotive 18% of total. Up 17% y/y.

Revenue by product type:

57% Advanced products: UltraScale, Virtex-7, Kintex™-7, Artix™-7, UltraScale+ (these are at 28 nm, 20 nm, and 16 nm). "Broad-based growth was driven by the Zynq SoC platform and the industry-leading 20nm and 16nm technology nodes. Zynq platform revenue increased more than 60% during the year with growth driven largely by applications in Advanced Driver Assist (ADAS), Industrial, Aerospace and Defense, Communications, and Consumer. Revenues from the 20nm node increased more than 50% from the previous year and the 16nm node continued its accelerated ramp with sales more than quadrupling during the same period."

43% Core products. So all the older, standard products.

70.7% gross margin, up sequentially from 70.2%. 30% operating margin.

Cash, equivalents and long-term investment balance was $3.45 billion. $1.2 billion long-term debt. Operating cash flow was $217 million. Depreciation $12 million. Capital expenditures $21 million. $163 million of stock was repurchased. $207 million share repurchase authorization remains. Stock based compensation expense was $49 million. The dividend payment required $89 million.

Revenue by geography: North America 31%; Asia 39%; Europe 22%; Japan 8%.

Cost of revenues (GAAP) was $197 million, leaving gross profits of $476 million. Operating expense total was $286 million, consisting of: research and development $162 million; selling, general and administrative $89 million; and amortization $1 million. Leaving operating income of $190 million. Interest and other net expense was $4 million, and the income tax provision was $20 million.

Full year 2018 revenue was $2.54 billion. Net income was $512 million. EPS $1.99 per share. There was a significant negative impact from tax reform.

Q&A:

Accounts receivable increase? Not due to new accounting standard. It is due to the shipment pattern during the quarter, which was back-end loaded. Would like to drive that number down, but there are no collectability concerns.

ACAP opportunity? Goal is to enable software developers to use the platform. ACAP is a quantum leap beyond the Zynq platform. We are taping out this year, with most revenue out another year.

ZTE? We are aware of the denial order and are in compliance with it. We have no customer even close to being 10% of sales. With Huawei we are just monitoring the situation. We can continue to grow despite this headwind.

So zero ZTE revenue going forward? For this quarter, except the 2 weeks before the order came out.

Cryptocurrency, is the tailwind falling off? It was becoming somewhat material last quarter, it is volatile, not much has changed, it is in our guidance.

Expand cash buyback given cash flow? We will address that at analyst day, but our principles remain unchanged: priority is to invest in the business. We are open to M&A activities.

5G is mainly a 2020 revenue story.

Communications revenue decline, directionality? We don't have good ZTE visibility, we hope to have more by the time of the investor conference. It is hard to model at present.

ACAP for edge or data center? Broadly applicable, both edge and cloud, a scalable architecture. It is a heterogeneous multicore architecture, we will share more as the year goes on. It will be a mainstream targetted platform like CPUs and GPUs.

Automotive end market update? 70 to 75% is ADAP for us, and most of that is Zynq base and 28 nm. It continues to grow. The second generation products are not yet in production.

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