Analyst Conference Summary


conference date: April 22, 2020 @ 2:00 PM Pacific Time
for quarter ending: March 28, 2020 (fourth fiscal quarter 2020, Q4)

Forward-looking statements

Overview: Continued y/y revenue decline due to Trump's trade war, coronavirus.

Basic data (GAAP):

Revenue was $756 million, up 5% sequentially from $723 million and down 9% from $828 million in the year-earlier quarter.

Net income was $162 million, flat sequentially from $162 million, and down 34% from $245 million year-earlier.

Diluted EPS (earnings per share) were $0.65, up 1% sequentially from $0.64, and down 32% from $0.95 year-earlier.


For the first fiscal quarter of 2021 expects revenue betwee $660 and $720 million, a sequential and y/y decline. GAAP Gross margin 67% to 69%. Operating expenses $312 to $316 million. Other expense $13 million, tax rate 8% to 10%. Non-GAAP gross margin 68% to 70%, op ex $307 to $311 million, other expense $13 million, tax rate 9% to 11%.

Conference Highlights:

Victor Peng, Xilinx President and CEO, said "Despite our fiscal 2020 being uniquely challenging, particularly related to the US trade-related restrictions with Huawei as well as some COVID-19 impact during our Q4, we were able to deliver another record year with revenue of $3.16 billion, a 3% increase over fiscal 2019. The strength and diversity of our business were reflected in the results of our fiscal fourth quarter with strong sequential growth in both revenue and profitability. There remains a high degree of uncertainty in the global business environment given the impact of COVID-19 which creates challenges with visibility beyond the near term." Plans to be more conservative with share buy-backs while demand is weak.

Xilinx's Chinese employess have been permitted to return to work with safe distancing practices. No workforce reduction is planned. The supply chain remains intact, but saw demand-related impact starting mid-quarter.

In May 2019 Xilinx suspended all shipments to Huawei, but since then started shipping the lower-end products again. Cannot predict government action.

A dividend was declared of $0.38, due stockholders of record on May 13, 2020 and payable on June 3, 2020. That is an increase of $0.01 per share.

In December, Xilinx announced that Vitis AI was available for download. Combined with the Vitis unified software platform, Vitis AI empowers software developers with deep learning acceleration. Vitis AI integrates a domain-specific architecture (DSA) and configures Xilinx hardware to be optimized and programmed using industry-leading frameworks such as TensorFlow and Caffe.

In Q4 fiscal 2020, leveraging the Solarflare acquisition, Xilinx shipped Alveo U25 SmartNIC, the first internally developed SmartNIC solution. SmartSSD is also gaining traction with hyperscale customers.

Versal production shipments are expected in FY 2021, but samples are already generating revenue and feedback is very positive. In April 2020 Xilinx announced a strategic engagement with Samsung on a second generation 5G radio design that includes beamforming technology leveraging the 7 nm Versal platform.

Non-GAAP results: net income $193 million, up 13% sequentially from $171 million, and down 20% y/y from $242 million. Diluted EPS $0.78, up 15% sequentially from $0.68, and down 17% y/y from $0.94.

Revenues by end market:

Industrial, Aerospace & Defense and TME 50% of total, up 15% y/y.

Automotive, Broadcast, and Consumer 16% of total. Up 2% y/y.

Wired and Wireless 24% of total. Down 46% y/y.

Data Center 10%. Up 77% y/y. Increased hyperscale adoption.

Channel 0% of total.

Revenue by product type:

70% Advanced products: UltraScale, Virtex-7, Kintex™-7, Artix™-7, UltraScale+ (these are at 28 nm, 20 nm, and 16 nm).

30% Core products. All the older, standard products.

Cash, equivalents and long-term investment balance was $2.27 billion, down sequentially from $2.43 billion. $1.25 billion long-term debt. Operating cash flow was $345 million. Depreciation $29 million. Capital expenditures $32 million. $471 million stock was repurchased. Stock based compensation expense was $44 million. The dividend payment required $91 million.

Revenue by geography: North America 37%; Asia 37%; Europe 18%; Japan 8%.

Cost of revenues (GAAP) was $221 million, acquisition related amortization $7 million, leaving gross profits of $528 million. Operating expense total was $350 million, consisting of: research and development $215 million; selling, general and administrative $1043 million; and amortization $ million. Leaving operating income of $178 million. Interest and other income was $12 million, and income tax was $27 million.


COVID-19 demand impact on Q4, Q1? In Q4 we saw relatively modest impact, mostly automotive. In Q1 we are seeing more impact. Talking to customers and supply chain. We are not seeing cancelations, we have higher-than-usual backlogs. But we are in unchartered territory.

Samsung versal 5G outlook? It is a meaningful win. We are still in the early stages of 5G, shipping first generation while developing second generation, and most customers expect it to go to three generations. Ramping more likely next calendar year than this one.

Wired and wireless segment outlook? Two to three years out, we expect 5G to be larger than 4G, despite losing the Huawei business. We are offering a lot of value in 5G. We hope demand is being delayed, not destroyed. Sales to Huawei are now minimal.

Datacenter new product deployments? People are getting great results from our new platform. Interest is very strong, revenue is just starting to ramp. The exact timing of the ramp is hard to predict now.

Versal revenue ramp? We are focusing on supplying key customers. This includes software support. 7nm should contribute to revenue by late this year. It will be a broad family of products, with tapeouts over time. The major ramp will be next fiscal year.

Increased backlog? Varies by application. For instance, heavy video processing for streaming demand. But coronavirus puts us in unchartered territory.

We are against requiring licenses for semiconductor shipments to China. It is counterproductive for the U.S. economy.


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Disclaimer: My analyst call summaries may include both condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. This is journalism, not financial advice.

Copyright 2020 William P. Meyers