Analyst Conference Summary

conference date: July 25, 2018 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2018 (first fiscal quarter 2019, Q1)

Forward-looking statements

Overview: Record revenue and raised guidance.

Basic data (GAAP):

Revenue was $684 million, up 2% sequentially from $673 million and up 13% from $603 million in the year-earlier quarter.

Net income was $190 million, up 14% sequentially from $166 million, and up 21% from $157 million year-earlier.

Diluted EPS (earnings per share) were $0.74 (a record), up 16% sequentially from $0.64, and up 25% from $0.59 year-earlier.

Guidance:

For fiscal Q2 2019 revenue is expected between $700 and $720 million.

For the full fiscal year 2019 Revenue expected between $2.8 and $2.9 billion. Gross margin GAAP and non-GAAP 68.5% to 70.5%. Operating expense GAAP $1.147 to $1.167 billion; non-GAAP $1.12 to $1.14 billion. Tax rate 10% to 14%. Share count (diluted) 256 million.

Conference Highlights:

Victor Peng, Xilinx President and CEO, said "We made excellent progress executing to our Data Center strategy with significant design wins with hyperscalers, training an additional 500 AWS F1 developers and completing multiple investments in our ecosystem. We also acquired DeePhi Tech, an Artificial Intelligence (AI) company with innovative Deep Neural Network (DNN) technology for the cloud and the edge."

Six of nine categories showed growth in the quarter. Had strong momentum in the automotive market. Shipments to ZTE should resume this quarter.

The dividend will be $0.36, for shareholders of record on August 8, 2018, and payable on August 28, 2018.

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

Revenues by end market:

Data Center and TME 19% of total for $127.8 million. Up 11% y/y. Dropped sequentially due to lower use for cryptocurrency.

Communications 31% of total for $210.7 million. Down 7% y/y.

Industrial, Aerospace & Defense 33% of total for $223.8 million, up 30% y/y.

Automotive, Broadcast, and Consumer 16% of total for $113.7 million. Up 13% y/y.

Revenue by product type:

56%, growing revenue 21% y/y. Advanced products: UltraScale, Virtex-7, Kintex™-7, Artix™-7, UltraScale+ (these are at 28 nm, 20 nm, and 16 nm).

44% Core products. So all the older, standard products.

Cash, equivalents and long-term investment balance was $3.36 billion. $1.2 billion long-term debt. Operating cash flow was $176 million. Depreciation $12 million. Capital expenditures $26 million. $137 million of stock was repurchased. Stock based compensation expense was $36 million. The dividend payment required $91 million.

Revenue by geography: North America 28%; Asia 45%; Europe 19%; Japan 8%.

Cost of revenues (GAAP) was $207 million, leaving gross profits of $477 million. Operating expense total was $262 million, consisting of: research and development $171 million; selling, general and administrative $91 million; and amortization $0.4 million. Leaving operating income of $216 million. Interest and other net expense was $3 million, and the income tax provision was $23 million.

Q&A:

DeePhi Tech thoughts? They have used our platform since the beginning. They have expertise in a variety of disciplines. They match well with our strategy. We have done joint marketing with them with some of our customers. They don't have material revenue yet.

Drivers of increase in guidance? Organic business growth is broad. It is not mainly ZTE, though it is a factor. Data Center, industrial, communications in general are all coming to us with new opportunities.

We are selling standards driven boards into datacenters. Our projections are conservative, it is new territory for us. It is a modest amount of revenue at this point. We expect it to become more material next year.

We now expect communications will be up, not just back to flat. We are seeing some 5G, but still expect bulk to come in 2020 time frame.

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