Semtech Corporation

Welcome to CEMTEC Corporation's first quarter 2027 earnings conference call. At this time, all participants are in a listen-only mode. Following our prepared remarks, there will be a question and answer session. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mitch Haas, Senior Vice President of Investor Relations for CEMTEC. Please go ahead.

Thank you and welcome to CEMTEC's first quarter 2027 financial results conference call. Participants on today's conference call are Hong Ho, President and Chief Executive Officer, and Mark Lin, Executive Vice President and Chief Financial Officer. Today, after the market closed, we released our unaudited results for the first quarter end at April 26, 2026, which are posted along with an earnings call presentation to our investor relations website at investors.semtech.com. Today's call will include various remarks about future expectations, plans, and prospects, which comprise forward-looking statements. Please refer to today's press release and see slide two of the earnings presentation, as well as the risk factors section of our most recent annual report on Form 10-K for a number of risk factors that could cause our actual results and events to differ materially from those anticipated or projected on today's call. You should consider these risk factors in conjunction with our forward-looking statements. We will refer primarily to non-GAAP financial measures during today's call, and we'll also be referring to results for our first quarter of fiscal year 2027, unless otherwise noted. Please see today's press release and slides three and four of the earnings presentation for important information regarding notes on our non-GAAP financial presentation. The press release and earnings presentation also include reconciliations of our GAAP and non-GAAP financial measures. With that, I will turn the call over to Hong.

Thank you, Mitch. Good afternoon to all of you joining today. Semtech is off to an exceptional start in fiscal year 2027, delivering record quarterly revenue supported by very strong bookings and backlog. We drove strong sequential and year-over-year revenue and earnings growth. expanded our data center, and lower design wind pipeline, all while advancing our R&D and strategic initiatives. We believe we have built a robust foundation to solidify and expand our presence in key markets. My strong conviction in Semtech's positioning is rooted in the transformation we have seen across Semtech employees. Motivation to engage in the partner across the ecosystem, and an appreciation for the benefits of collaboration. The time I have invested has been energizing, and I have appreciated opportunities to join my Semtech colleagues in meeting with hyperscalers, device designers, end customers, module manufacturers, and our technical partners to understand their technology roadmap firsthand Those conversations shaped our R&D priorities and gave us first insights into where the industry is heading and how Semtech can remain at the forefront. My team and I spent time with the key suppliers and distributors to round out our understanding of how Semtech can partner with our customers to win from design to delivery. Looking at the Q1, Revenue was $291 million, up 6% sequentially and up 16% year over year, driven by continued outperformance in both data center and Elora. Adjusted diluted earnings per share were 51 cents, up 34% year over year. In addition to delivering strong revenue and earnings growth, we're laser focused on executing our portfolio optimization initiatives. We are pleased to report that the investiture process for our cellular module business is at its final stages. Discussions which are transition and integration in nature are progressing well. We remain confident this business is a compelling opportunity for the right acquirer, and we look forward to bringing this process and transaction to a successful close. Now let me move on to a discussion of our end markets. For Q1, infrastructure net sales were $98.8 million, up 14% sequentially, up 36% year over year, strongly supported by our growing data center business. Our net sales for data centers in Q1 were a record $71.6 million, up 14% sequentially, and up 39% year over year. Benefiting from strong demand across our broad portfolio, the result of sustainably increased customer engagement, portfolio alignment, and supply assurance. The strength is anchored by our strong position in our 800 gig fiber edge portfolio. Demand for leading PIA solutions is exceptionally strong, growing across a wide range of transceiver programs. Based on our differentiated technology and ability to supply, both established and emerging module suppliers have qualified us on several new sockets, some on a sole-source basis. We understand these module suppliers are winning shares in key megadata center deployments. On 800-gig linear pluggable optics, or LPO, our fiber edge linear TIA and driver solutions are deployed by several leading hyperscalers across both the US and in China, which contributed to sequential LPO revenue growth, a trend we expect to accelerate over time. We remain confident Our foundation in 800 gig will continue to drive revenue growth throughout this year, further augmented by significant opportunities at our 1.6T shipments, launching in Q2 and gaining momentum in the second half of the year. On 1.6T optical, we generated significant design wins with the major optical module makers for their 1.6T transceivers incorporating the latest generation DSPs. This contributed to exceptionally strong bookings and backlog to support module ramps in the second half of the year. We're also seeing increased convection from hyperscalers around 1.6T linear receive optics or LRO and LPO as a preferred solution for a first layer scale of fabric due to the substantial power savings. Looking further ahead, we are participating in the development of the MPO, or Near Package Optics MSA. And to see MPO as a meaningful content expansion opportunity for Semtech, that's 800 gig and 1.60 successes in LPO and LRO give hyperscalers confidence in the next evolution of high-density and low-power optical solutions. We're also developing derivative components with the same core IP in different form factors to support several MPO projects for leading hyperscalers. We are actively participating in and support the XPO MSA, and the many XPO module designs incorporate our FiberEdge chips as they do in OSLP modules. We believe XPO provides a very compelling alternative to CPO scale-out. By leveraging liquid-cooled capabilities, proven technologies and components, and establish the innovative optical module ecosystem, XPO can provide significant rack space savings along with improved serviceability and better reliability. On the Copper side, we are very enthusiastic on Copper Edge deployment. ACC continues to gain meaningful traction. Customers evaluating ACC against incumbent solutions are seeing compelling advantages in link margin versus direct attached and power savings versus DSP-based solutions. Consistent with our expectations, in Q1, we started shipping CopperEdge 1.60 ICs to our cable partners for deployment at a US hyperscaler. In onboard integration applications, including active backplane, CopperEdge linear equalizers are gaining momentum. Just as we were confident of ACC's acceptance and ramp in the market, we have increased confidence this engagement will convert into design wins and widespread market adoption. Based on our engagement across different sectors of the industry, we believe we are creating a multi-year pipeline of corporate edge opportunities, design wins, and revenue. Looking forward, We are excited by the opportunity from the HIFO acquisition we completed in March. HIFO is reported in our signal integrity product segment, and its indium phosphide photonic products are reported in the data center and market. These products are a strategic building block in 1.6T and 3.2T optical modules. and a key pillar in our strategy to support next-generation data center requirements. We believe our GaN chips has become the industry standard, providing higher power and serving as reliable building blocks in tunable lasers for coherent modulation applications in metro and data center interconnects. GaN chip demand currently exceeded our supply, but our capacity expansion plan is on schedule. We believe our continuous wave of CW laser design is uniquely differentiated to deliver higher conversion efficiency, superb far-field beam profile and over-temperature performance, and narrower land width. These lasers have been sampled to and evaluated by several major module manufacturers for coherent light modules in scale across applications. concurrently we are optimizing our laser drivers and tias for coherent light applications we plan to provide a comprehensive suite of photonic and electronic component solutions for this emerging high volume applications in addition we're also working with the key customers to make dense wavelength division multiplexing of DWDM lasers optimized for emerging CPO scale-up applications based on the newly established OCI MSA. This is exactly the kind of strategic investment we believe creates durable and compounded value. Not just a single product win, but a platform capability that strengthens our position across a broad spectrum of optical architectures our customers are building to work. STEMTech is uniquely positioned at this intersection with a portfolio that spans scale-up, scale-out, and scale-across, addressing the full hyperscale interconnect stack across both near-term deployment and next-generation architectures at 800G, 1.6T, 3.2T, and beyond. Finally, given the strength and depth of our backlog, expanding design wind momentum and the 1.6T fiber edge and copper edge inflection building into the second half, we are targeting 35% sequential revenue growth in Q2 for data center, which would represent 85% growth over the same period last year. Based on the current order trend, we expect accelerating demand throughout fiscal year 2027 and beyond. Now, moving to the high-end consumer end market. Net sales for Q1 was $38.4 million, up 5% sequentially and up 8% year over year. Our TVS business continues to demonstrate impressive resilience and momentum, with the revenue growth outpacing underlying handset volumes. We continue winning shares and expanding content at the premium brand handset manufacturers. Our differentiated technology is aligned with the right customers and the alignment is translating into consistent design with momentum that we expect to continue. Beyond handsets, we are actively expanding the TVS franchise into higher value applications. Our newest surge switch solution is the industry's first circuit protection device to deliver near-constant clamping voltage for high-voltage power delivery applications, addressing a meaningful protection gap at the more demanding power standards extending into rugged mobile devices and high-performance portable systems. These are elements that require consistent reliable protection across extreme temperature range and operating conditions. And our solution is purpose-built to meet that bar. We see this as a natural and incremental content expansion that broadens the TVS opportunity beyond our core handset market. We continue to expand our per se capacitive sensor design wins in specific absorption rate and smart variable applications. The addition of the four-center business enriches our high-end consumer portfolio, expands application verticals, and pulls through some cap and TVS sales with the same customer base. The synergies have played out as we planned. For the high-end consumer end market, we expect sequential revenue growth driven by improving seasonality layered on top of the share and content gains that are becoming a defining characteristic of this business. Moving to our industrial end market, Q1 industrial net sales were $153.9 million, up 2% sequentially and up 8% year over year, driven by another great quarter for LoRa. LoRa enabled net sales were $44.5 million, up 12% quarter over quarter, and up 14% year over year, supported by continued expansion across several application verticals, such as smart utilities, smart building, smart city, and asset management. As Edge AI transitions from concept to deployment reality, LoRa Plus is emerging as a key enabler. Our fourth-generation LoRa platform delivers dual-band capability while dramatically expanding data throughput to 2.6 megabits per second, a step-change increase that unlocks new AI application classes. At the same time, LoRa Plus maintains the best-in-class sensitivity, multi-protocol flexibility, and ultra-low power consumption that define the LoRa advantage. preserving the extended reach and the long battery life our customers depend on. We are seeing LoRa Plus gaining traction across a broad set of use cases. LoRa connected public safety sensors can now transmit high fidelity audio and AI verification rather than simple alert. In health care, fault detection systems can relay visual confirmation before dispatching responders. In industrial environments, predictive maintenance sensors can analyze vibration, thermal, and acoustic profile with a level of detail that legacy low-power sensors could not support. We have established three distinct and complementary pillars of low-power connectivity platforms. LoRaWAN for industrial and commercial deployments, LoRa Plus with multiple protocol flexibility for smart home and security market, and Amazon Sidewalk for mass market consumer applications. Together, these growth vectors give rise to accelerated growth in our LoRa business as we target LoRa revenue at an all-time high with greater than 15% sequential quarterly revenue growth for Q2. Our IoT systems and connectivity business recorded Q1 net sales of $88.3 million, down 2% sequentially and up 2% year over year. Our newly released AirLink RX400 and EX400 routers are generating strong industry reception. These are industry-leading low-power 5G cellular systems, purpose-built for mission-critical applications, and the feedback from customers has been consistently positive. I recently attended our annual Airlink Partner Summit alongside national carriers, integration partners, and value-added resellers. And the enthusiasm for both the router performance and our upgraded Airlink management software was clear. The close collaboration with our channel partners position us to scale successful use cases from regional to national deployment and accelerate this high margin business. We are off to a strong start, and the momentum is building. Our data center business is firing on all cylinders. LoRa is entering a new chapter of growth, and the strategic decisions we have made in prioritizing key R&D efforts Enhancing supply assurance and portfolio optimization are all translating into tangible results and the financial flexibility to pursue strategic opportunities. Our priority for fiscal 2027 are straightforward. First, accelerating growth by supporting customer ramps with availability and operational excellence required to compete in this capacity-constrained environment. Second, intensifying R&D investment to add new growth drivers and deepen our solution differentiation, specifically in component offerings for coherent light, CPO, LoRa, and sensors. And third, continuing to transform Semtech by strengthening our culture and completing the initial steps of portfolio optimization. We are just getting started, and the opportunities ahead have never been more compelling. With that, I will turn the call over to Mark for additional details on our financial results and our second quarter outlook. Mark?