Analyst Conference Summary

conference date: April 24, 2019 @ 2:00 PM Pacific Time
for quarter ending: March 30, 2019 (fourth fiscal quarter 2019, Q4)

Forward-looking statements

Overview: Strong revenue and profit growth; to acquire Solarflare.

Basic data (GAAP):

Revenue was $828 million, up 4% sequentially from $800 million and up 30% from $638 million in the year-earlier quarter.

Net income was $245 million, up 2% sequentially from $239 million, and up 68% from $145 million year-earlier.

Diluted EPS (earnings per share) were $0.95, up 2% sequentially from $0.93, and up 70% from $0.56 year-earlier.

Guidance:

For the first fiscal quarter 2020 (June 2019 calendar quarter) revenue is expected between $835 and $865 million. 66% gross margin. $315 million op ex GAAP, $308 non-GAAP. $15 million other income. 7% to 9% tax rate. Expects datacenter revenue to rebound in Q1. Q2 expected relatively flat from Q1, then return to growth in 2H.

Conference Highlights:

Victor Peng, Xilinx President and CEO, said "Fiscal year 2019 was truly an exceptional year for Xilinx. For the year, we exceeded $3 billion in annual revenues for the first time and posted 24% growth from last year, driven by Advanced Product revenues which grew 40% year over year. In addition, we demonstrated strong profitability by posting over 30% growth in both non-GAAP operating income and non-GAAP diluted earnings per share. We are executing to our strategy and focusing on growth across our portfolio as we continue our transformation to a platform company." Beginning what should be a record 5G cycle. Will be changing end market reporting groupings starting next quarter.

A dividend was declared of $0.37 per share to holders at close on May 16, payable on June 3. That is a $0.01 increase.

Xilinx announced a definitive agreement to acquire Solarflare Communications, a leading provider of high-performance, low latency networking solutions for customers spanning FinTech to cloud computing. This acquisition will enable Xilinx to combine its industry leading FPGA, MPSoC and ACAP solutions with Solarflare's high-speed network interface card (NIC) technology and Onload application acceleration software, to enable a new converged SmartNIC platform.

New category is ACAP (Adaptive Compute Acceleration Platform) for applications including AI. Taped out Versal, the industry's first ACAP at the end of the Q3 2019. Sampling will be in the second half of 2019. Built on TSMC's 7nm FinFET process technology, Versal is the first platform to combine programmability with domain-specific hardware acceleration and the adaptability essential for today's rapid pace of innovation

Non-GAAP results: net income $242 million, up 4% sequentially from $237 million, and up 34% y/y from $181 million. Diluted EPS $0.94, up 2% sequentially from $0.92, and up 34% y/y from $0.70.

Revenues by end market:

Data Center and TME 18% of total for $159 million. Down sequentially from $168 million. Down 7% y/y.

Communications 41% of total for $197 million. down sequentially from $280 million. Up 74% y/y. 5G is ramping in Korea and prepping in China. Wireless strength resulted from momentum across both radio and baseband applications with OEM customers. During the year, Xilinx and Samsung jointly enabled the world's first 5G NR commercial deployment. Xilinx also expanded its breakthrough RFSoC portfolio to the full sub-6GHz spectrum support that is required for 5G.

Industrial, Aerospace & Defense 27% of total for $221 million, up sequentially from $216 million and up 1% y/y.

Automotive, Broadcast, and Consumer 14% of total for $96 million. Up sequentially from $120 million. Up 20% y/y.

Channel 0% of total, or $-35 million.

Revenue by product type:

68% Advanced products: UltraScale, Virtex-7, Kintex™-7, Artix™-7, UltraScale+ (these are at 28 nm, 20 nm, and 16 nm).

32% Core products. All the older, standard products.

Cash, equivalents and long-term investment balance was $3.18 billion. $1.23 billion long-term debt. Operating cash flow was $288 million. Depreciation $22 million. Capital expenditures $28 million. No stock was repurchased. Stock based compensation expense was $39 million. The dividend payment required $91 million. $500 million of debt repayed in fiscal Q4.

Revenue by geography: North America 27%; Asia 47%; Europe 18%; Japan 8%.

Cost of revenues (GAAP) was $269 million, leaving gross profits of $559 million. Operating expense total was $309 million, consisting of: research and development $200 million; selling, general and administrative $107 million; and amortization $2 million. Leaving operating income of $250 million. Interest and other income was $9 million, and the income tax provision was $15 million.

For the full fiscal year 2019, revenue was $3.06 billion, up 24% y/y. GAAP net income was $890 million or $3.47 per share. Non-GAAP net income was $892 million or $3.48 per share.

Q&A:

Normal com cycle, base bands moving to ASICs over time? Historically over time ASICs do replace FPGA in baseband, but we retain some revenue flow. Not a problem for radios. It is built into the plan.

Gross margins compared to last peak? The magnitude is going to be greater, and we are only at the very beginning of 5G. These are very advanced technologies. Mix does impact margins, but we should see other markets strengthen besides wireless.

5G proportion of you com sales at this point? We are in very early stages of 5G. Full year guidance at investor day. Deployments tend to be bursty.

March quarter datacenter drop? Crypto had been small, but went essentially to zero. One other type of customer took a pause, we expect that to rebound. The bigger picture is datacenter is an emerging area. Versal was taped out as expected, we should get silicon in house soon. We are seeing very strong interest in it.

It is not just 5G. Our broad markets will provide substantial growth in the long run.

5G v. 4G content? Our content will be higher, particularly in radio. More radio units will be shipped, with many different form factors.

M and A strategy? It will be strongly aligned with our strategy. We look at any size opportunity that makes sense to us. D5 had deep expertise in machine learning. SolarFlare is more a networking opportunity, more software. So we are going higher up the solution stack.

Numbers on 5G market share? We think we have higher market share now than we had in 4G. We have innovations out our competitors don't have. We are leading on multiple dimensions.

We had no greater than 10% customers for the year.

Our position on radio is strong and getting stronger. We don't see ASIC diplacement there.

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