Analyst Conference Summary


conference date: October 21, 2020 @ 2:00 PM Pacific Time
for quarter ending: September 30, 2020 (second fiscal quarter 2021, Q2)

Forward-looking statements

Overview: Sequential revenue growth, but down y/y, still has a way to go to recover from pandemic and Trump trade policies. Expects to return to y/y revenue growth in the December quarter.

Basic data (GAAP):

Revenue was $767 million, up 5% sequentially from $727 million and down 8% from $833 million in the year-earlier quarter.

Net income was $194 million, up 107% sequentially from $94 million, and down 15% from $227 million year-earlier.

Diluted EPS (earnings per share) were $0.79, up 108% sequentially from $0.38, and down 11% from $0.89 year-earlier.


For the December quarter (fiscal Q3 2021) expects revenue between $750 and $800 million. Gross margin: GAAP 67.5% to 70.5%; non-GAAP 68.5% to 71.5%. Operating expense: GAAP $338 to $352 million; non-GAAP $33 to $347 million. Other expense $12 to $16 million. Tax rate: 5% to 8% GAAP, 6% to 9% non-GAAP.

Conference Highlights:

Victor Peng, Xilinx President and CEO, said "Revenue was better than the midpoint of guidance for the quarter.. . In core markets almost back to pre-pandemic level, and set to resume growth. " We do not comment on the AMD merger rumor.

Saw best growth in automotive and in data center sales. Hurt mainly by wired and wireless [WM: that is, by crazy Trump anti-China policy]. Margins were good.

In Q2 2020 Xilinx released the new Virtex UltraScale+ VU57P FPGA for latency-sensitive workloads where fast data throughput and fast memory are key requirements. Xilinx issued $750 million in 2030 Notes with net proceeds to be used for general corporate purposes, which lowered its cost of capital.

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 November 11, 2020 and payable on December 2, 2020.

Vitis AI is available for download, has over 43,000 downloads to date. 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.

Subaru selected Xilinx to power the new version of its vision-based advanced driver-assistance system (ADAS), EyeSight, which will provide advanced features including adaptive cruise control, lane-keep assist, and pre-collision braking. Announced the T1 Telco Accelerator Card for O-RAN distributed units (O-DUs) and virtual baseband units (vBBUs) in 5G networks, which enables the O-DU to deliver greater 5G performance and services while reducing overall system power consumption and cost.

Versal production shipments are expected in FY 2021, but samples are already generating revenue and feedback is very positive.

Non-GAAP results: net income $203 million, up 27% sequentially from $160 million, and down 15% y/y from $240 million. Diluted EPS $0.82, was up 26% sequentially from $0.65, and down 13% y/y from $0.94

Revenues by end market:

Industrial, Aerospace & Defense and TME 44% of total, up 11% y/y. Aerospace and Defense had a record quarter, industrial is recovering. VU19P now in production.

Automotive, Broadcast, and Consumer 16% of total. Up sequentially but down 8% y/y. Growth mainly from auto recovering.

Wired and Wireless 26% of total. Down 36% y/y. RFSOC deployment in North America is doing well, including Versal ACAP.

Data Center 14%. Up 30% y/y. Increased hyperscale adoption. Had a $100 million design win with a particular hyperscaler.

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 $3.10 billion, up sequentially from $3.0 billion. $1.49 billion long-term debt, from $1.5 billion. Operating cash flow was $248 million. Depreciation $30 million. Capital expenditures $15 million. $0 million stock was repurchased. Stock based compensation expense was $58 million. The dividend payment required $93 million.

Revenue by geography: North America 29%; Asia 48%; Europe 18%; Japan 5%.

Cost of revenues (GAAP) was $218 million, acquisition related amortization $7 million, leaving gross profits of $542 million. Operating expense total was $336 million, consisting of: research and development $220 million; selling, general and administrative $114 million; and amortization $3 million. Leaving operating income of $205 million. Interest and other expense was $11 million, and income tax was $1 million.


AIT not a strong as expected? Emulation prototyping revenue just slid with a particular customer.

Datacenter December growth? Yes, we had some pull into the Sept. q, so not as strong growth in the current quarter, it has some lumpiness.

5G, Verizon pace in US? We are seeing deployments in America and around the world. We see 5G as a significant opportunity for us with Versal and RFSOC. Right now is just the first wave. The second generation of equipment is yet to deploy, and there will be a third.

Breakdown within datacenter: Led by datacenter, then networking, then storage. We are strong in video and database. We are seeing a lot of smartNIC pull.

Datacenter in fiscal 2022? We see strength improving in multiple markets, but we don't want to give guidance, especially because of unknowns of the pandemic.

Size of medical equipment business? We do not break that out, we saw some acceleration for COVID, and we do see it as a long-term driver and devices become more sophisticated. We also are seeing more cloud-based medical demand.

Why are we not seeing more 5G, given our WWG expectations a while back? We were there early with Samsung. We do well early, get displaced over time in baseband. We believe we will beat the 4G run rate. But the hit from Chinese trade restrictions is a major headwind; out top customer, Huawei, went to zero. This is a long journey. Qualcomm announcement shows it is a big opportunity so people with adjacencies will try to move in.

Design win environment v. Intel/Altera? The adaptable SOC strategy is getting design wins, gaining new sockets over the traditional FPGAs. Automotive and Broadcast should grow quickly as the economy recovers. Radar utilization will be a driver for us. Our 35 billion transistor product is optimized for its market. We are seeing them (Intel) less in the group of finalists for high-end design wins.

Inferencing vs. Nvidia? This goes well beyond the datacenter, to edge devices. We can accelerate the whole application, not just the AI portion.

Tax rate going forward? Low in Q2 because of share-based awards vesting. Q3 should be more normal, then over time some 1% increase as Singapore rate goes up.

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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