Greetings and welcome to the Semtech Corporation Conference Call to discuss the Second Quarter Fiscal Year 2024 Financial Results. Speakers for today's call will be Paul Pickle, Semtech's President and Chief Executive Officer; and Emeka Chukwu, Semtech's Executive Vice President and Chief Financial Officer. Please note that this conference is being recorded. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. I would now like to turn the call over to Semtech's Executive Vice President and Chief Financial Officer, Emeka Chukwu.

Thank you, operator. A press release announcing our unaudited results was issued after the market close today and is available on our website at semtech.com. Today's call will include forward-looking statements that include risks and uncertainties that could cause actual results to differ materially from the results anticipated in these statements. For a more detailed discussion of these risks and uncertainties, please review the Safe Harbor statement included in today's press release and in the Other Risk Factors section of our most recent periodic reports filed with the Securities and Exchange Commission. As a reminder, comments made on today's call are current as of today only and Semtech undertakes no obligation to update the information from this call should facts or circumstances change. During this call, all references made to financial results other than net sales will refer to non-GAAP financial measures unless otherwise noted. A discussion of why the management team considers such non-GAAP financial measures useful along with detailed reconciliations of such non-GAAP measures to the most comparable GAAP financial measures are included in today's press release. Turning to Q2 fiscal 2024. The company delivered net sales of $238.4 million in line with the midpoint of our guidance and an increase of 1% sequentially and 14% year-over-year. Gross margin of 49.6% and earnings per share of $0.11 was above the high end of our guidance range. In Q2 shipments into North America, China, Europe and the Rest of the World represented 24%, 29%, 14%, and 33% respectively. The additional Sierra Wireless has increased our geographic mix towards North America and Europe. Total direct sales represented approximately 36% of net revenue and distribution represented the remaining 64%. In Q2, gross margin was 49.6% above the guidance range driven by some one-time benefits. For Q3, we expect gross margin to decrease approximately 160 basis points sequentially at the midpoint of our guidance as the favorable impact of a higher mix of IC components revenue is offset by the one-time benefits in Q2 and lower absorption. Due to the softer demand environment and subsequent lower absorption, we expect our gross margins for the rest of the year to remain around current levels. In Q2, operating expenses was $86 million, 6% below the midpoint of guidance due to full cost reduction actions in addition to synergies. We expect these cost reduction actions and incremental synergies to drive Q3 operating expenses lower to between $81 million and $85 million. In Q2 cash flow from operations was at $12 million use of cash impacted by demand softness and interest expense on our debt. Our cash flow from operations will remain a challenge in Q3 due to a softer demand environment. Our gross debt at the end of Q2 was $1.4 billion or approximately 5.3 times leverage on a net basis. We expect our leverage levels to increase for the remainder of the year as we navigate this softer demand environment. We expect to be in compliance with the financial covenants included in our debt agreements. The Q2 weighted average cash interest rate was approximately 6.37%. In summary, our financial performance continues to be impacted by macroeconomic headwinds. Meanwhile, we are taking focused actions to realign our operations to enable us not only to manage the current headwinds, but also to position us for strong earnings growth when the demand environment improves. I will now hand the call over to Paul.

Thank you, Emeka. While our net sales for the second quarter met expectations, I'm proud to note that our cost-saving measures enabled us to surpass estimates on both gross margin and EPS fronts. Yet as we navigate today's economic climate, our Q3 outlook remains cautiously reserved reflecting elevated channel and customer inventories stemming from previously optimistic projections. We are intensifying our focus on cost control and operational enhancements in response. IC component sales after an initial dip this fiscal year are now showing stability with a 16% sequential growth in net sales. Further improvement is anticipated for the rest of the year and into the next due to customer design engagements being primed to boost consumption in the upcoming quarters, particularly in the infrastructure and consumer end markets. Our IoT systems product group witnessed an 11% sequential decline, bringing the total to $119 million on a pro forma basis, while we have experienced a decline in demand for both module and router products. Modules revenue is presenting a particular challenge in the current quarter. However, we are seeing silver linings in the broadband module business horizon with legislative discussions putting our low-cost APAC competitors under the spotlight. This presents us with an unexpected opportunity to expand our market share. In the quarter, pipeline engagements have significantly increased as a result and we are gearing up to seize this window to our advantage. Despite a minor drop in wireless radio-enabled component sales, LoRa end-node sales increased slightly. LoRa's potential for private networks, especially where power reach and mobility are crucial, remains significant. While LoRa may not be a cellular infrastructure substitute, its unmatched value proposition for specialized private networks remains unabated. We are envisioning a more inclusive strategy to harness this vast potential, especially at the outer fringes of the IoT realm. Q2 IoT Connected Services remained relatively consistent at $24 million, a 20% year-over-year growth was achieved from smart and enhanced carrier connectivity. Given the relatively low attachment rates for our cloud services platform, we will be focusing on enhancing hardware revenue with high-margin software sales and a renewed focus for our IoT-managed connectivity in cloud platforms. The Signal Integrity Products group grew 12% sequentially in Q2 quarter to $46 million. Cloud Hyperscale Data Center revenue was significantly up sequentially in the quarter benefiting from the momentum in AI-driven applications. Product sales were driven by strong 100 gig, 200 gig, and 400 gig data center and broadcast revenue. TriEdge and FiberEdge applications all improved sequentially with the large US hyperscaler placing initial orders for a 400 gig active optical cable application. These gains were offset by weaker 10 gig China PON and wireless infrastructure revenue. Channel inventories remain high amidst improving although cyclically weak end market demand. China infrastructure demand, although stable, remains muted. Our product portfolio in PON is well-positioned and is poised to benefit when this market rebounds in the upcoming quarters. The advanced sensing and protection products grew 35% sequentially, primarily driven by anticipated production of new design in secured and smartphone applications. We are especially well-positioned with new protection circuitry for North American smartphone vendors. Proximity sensing or our PerSe product was also up in the quarter ahead of anticipated regulations in China for specific absorption ratio limits starting in fiscal year '25. PerSe is still in the early innings of the design cycle, but the penetration and early ramp are encouraging. We continue to make progress in diversifying our end markets for the advanced sensing and protection products group, with approximately half of product revenue coming from industrial, telecom, and automotive applications. For Q3 2024, we project net sales between $190 million and $210 million. Non-GAAP earnings for Q2 are expected to range between minus $0.09 and plus $0.22 per diluted share. We are steadfast in our commitment to the synergy plan presented to investors earlier this year and aim to fulfill it ahead of schedule. Post my induction, I launched a robust cost reduction initiative, which along with other measures has decreased our OpEx run rate by about $100 million compared to last year's combined entity pro forma. Further refinements are on the horizon. During my short tenure at Semtech, I've been immensely impressed by our team's dedication and talent. Our unique state-of-the-art products create a competitive barrier setting us apart. After extensive discussions with team members, I'm optimistic about navigating current market challenges. The tech industry has seen fluctuations due to pandemic-driven demand, but the need for electronic advancements remains robust. At Semtech, our vision is clear: Enable a smarter, more connected planet. Our focus for the upcoming months will be to execute this vision. I'll now turn it over to the operator for Q&A.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from Quinn Bolton with Needham & Company. Please proceed with your question.

Hey guys, thanks for taking my question. Paul, welcome to Semtech. I guess first question, obviously guidance coming in, I think, much below expectations on a revenue basis. The semiconductor business has already been hit pretty hard by the combination of weak demand and market inventory. Paul and Emeka can you give us some sense for the October guide at $200 million? Is the semiconductor business flat down or up? And where do you see this Sierra Wireless contribution coming in the October quarter? It looks like it's got to be well below $100 million if the semiconductor business, as I think you indicated in the script might be flat trending higher in the back half of the fiscal year.

Yeah, thanks for the question, Quinn. I think for the most part, we definitely see a bottoming out of semiconductors that happened fairly early in the cycle. And of late, I think we've seen a little bit of pullback in hardware. Routers are off in terms of end-market demand, and when I say end-market demand I'm really looking at POS numbers. So it's off slightly, but modules have substantially pulled back. The mix between those routers has it tends to be heavy channel-dependent. Those inventories are not too terribly out of whack given the POS pullback, but modules is largely a direct business and we've seen at least some indicator from our direct customers that they are sitting on substantial inventories over the next several quarters. So I've seen the hardware business pullback, semiconductors conversely is doing fairly well, skipping along the bottom. Perhaps we are beyond the dead cat bounce that one looks forward to resume a normal rate. And then I'd say for the most part going forward, we'd expect continued improvement in the high-margin semiconductor business versus the hardware.

Great. Thanks for that color. And then a follow-up question. Paul, you referenced sort of having already reduced the OpEx run rate with synergies and other actions by $100 million. You guided OpEx in Q3 to a level of $81 million to $85 million. Is that the right baseline to think, when modeling going forward? Do you think you can bring GAAP OpEx even lower? And how long will you hold OpEx at kind of that baseline level, before you start to increase OpEx?

It's a good question. I wouldn't view the current quarter as a baseline. We'll experience some fluctuations in that number due to R&D projects that were scaled back in previous quarters, which are now coming to fruition. This suggests that our baseline may be somewhat better than what we currently show. As for how much better it can be, I think it's important to consider that the company had inflated expenses during the COVID period. If we look back at the operational expense levels prior to COVID, we should be able to return to those easily. While I can't provide an exact number, there are definitely improvements to be made. The first set of changes might not be easy, but decision-making should be a bit simpler. The second set will require more careful consideration, and I plan to spend more time understanding the organization to identify optimization opportunities. I expect to see ongoing improvements, as I believe there is more efficiency to be gained.

Great. Thank you. I'll get back in queue.

Thank you. Our next question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question.

Thanks for taking the question and trying again. Paul, welcome to the call. I wanted to start Paul with an intermediate-term question for you. Since this is your first call, can you just take a step back and look out over the next 6 to 12 months? And just frame up what your priorities are as you come into the role and start to interact with the street and look at the initial phase optimizations you can make with the Semtech business?

That is a great question. When you join a company, you want the chance to learn and go through a proper discovery process. Given the current state of the economy and our company, we need to manage multiple tasks simultaneously while making necessary cuts. My priorities are somewhat divided because we need to focus on structuring the company for optimal profitability while also evaluating our strengths, technology, and developing a strategic plan for long-term vision and operations. I believe we are making significant progress on these fronts. Recently, I’ve been focusing a lot on urgent matters, but we have a strong team, and once we identify issues, I can delegate and also consider long-term strategies. The immediate goal is to restore our financial health while establishing a constructive long-term operating model that enhances shareholder value.

That's real helpful, thank you. And then I'll follow up with Emeka on a couple of clarifications. So Emeka, can you just help us understand how we compare the prior $50 million Sierra-related synergies target with $100 million in expense reduction that Paul just mentioned? And then with respect to the gross margin color, what are the biggest changes that have occurred from where we were expecting 100 basis points to 150 basis points of expansion through the year or two flattish from here? Thank you.

Hi, Craig. I think so with regards to the synergies I think the last time I gave a number for the synergies, I said it was about $50 million that we were expecting. I think we are doing a little bit better than that now. I don't have an exact number, but we are doing a little bit better than that. And then in addition to some of the other actions that Paul has already taken when the company that is how we are getting to a $100 million reduction from a pro forma number. With regards to gross margin, it is actually very simple. We are seeing the benefit of the mix of a higher mix of the IC component revenues that is good for gross margin. However, when the guidance was initially discussed, Craig, the expectations was that the revenue levels will be much higher and we will be able to improve the utilization of our manufacturing business and stuff like that. So right now we have a lot of fixed manufacturing overhead, that we are not able to absorb and that is the primary reason for coming off of the previously expectation that was set for about 100 basis points and 150 basis points in gross margin improvement.

That's helpful. If I could just sneak one more in for Paul. Paul, you commented in your prepared remarks about the strength in signal integrity and it looked like it was within data center. Can you just talk about the visibility you have to that strengthened? And what some of the specific program drivers are for that? Thanks, guys.

We have a good amount of visibility, but planning for those specific customers is challenging. When they decide to move forward, they act quickly, and we don't have much inventory ready to meet their needs. We're aware of this and actively engaging in proof-of-concepts to prepare for incoming programs and to be ready for when orders are placed. However, planning for these orders in a specific quarter is somewhat more complex. We believe this will become a more significant factor for us in the coming quarters, but determining the exact timing is more difficult.

Thank you. Our next question comes from Anthony Stoss with Craig-Hallum. Please proceed with your question.

Thanks. Hey, Paul. Just to put a finer point on what Quinn was asking on OpEx. So if there was some, I guess one-time things that elevated the OpEx. Should we think about OpEx coming down to a couple million dollars each quarter sequentially? And at what point do you think your goal of getting to $100 million cost taken on in total will be done, in which quarter? And I have a couple of follow-ups.

So I don't think I said a couple of $100 million dollars, but I think on a run rate basis, we are a $100 million off. I think we can improve that. I won't put a number on it at this juncture. In terms of the rate of fall-off, I think don't expect it to be significant windfall chunks that happened, but we'll be looking to execute as quickly as possible. And I'll say through Q1 is the current plan to have most of those operational efficiencies in place, after that, it would be continual improvement, that we would look to enact. So I am trying to give you a little bit of a timeline, avoid putting an exact number on it until I have a good feel for what that budgeting exercise is.

Got it. And then, at what point are you going to reach a determination of what assets you may want to keep either from Sierra or Semtech? Are you getting closer to that?

I believe that currently, any asset contributing positively should be retained unless I can meet certain clearance ratios tied to those assets, which is more of a short-term focus. In terms of the long-term, I have already identified which assets are strategic and essential for our future. Beyond that, we do not require specific assets to achieve our long-term vision. I want to dedicate more time to that plan, and I have a clear idea of which assets I could sell, depending on whether I can achieve those clearance ratios. However, I don't think this is the right environment for making deals or running processes. Therefore, my aim is to position the company in a way that we are not compelled to divest but are open to it if it is strategically beneficial. I consider it more of a long-term debt reduction effort.

Got it. And last question, just your comments related to the FCC coming out last week, highlighting the Chinese module makers and you said your pipeline is increasing. This has been discussed from the Commerce Department and other agencies for almost three years. What's giving you confidence now that they actually might do something?

We noticed a substantial increase in our pipeline, and one customer mentioned that while they don't see it as a risk, they feel overwhelmed by the politics involved. If we consider this perspective, I believe that if I can provide higher quality and better security, potentially at a slight premium compared to what they are currently paying for a low-cost APAC provider, there's no reason they wouldn’t choose our solution since we will address their challenges effectively. We also have the capability to implement TIA-compliant modules if needed. Ultimately, in terms of infrastructure and critical industrial applications, we will be the leading choice, and we are committed to ensuring that we remain the top contender.

Thank you. Our next question comes from Harsh Kumar with Piper Sandler. Please proceed with your question.

Hi. Thank you. Paul, congratulations on your first earnings here at Semtech.

Thank you, Harsh.

For what you've got here is, you've got two companies, a couple of different product lines. And as an analyst, I am trying to understand what is Semtech? What is Sierra Wireless? And I was wondering if, just from the sake of simplicity, you would be willing to give us how much is core Semtech revenues? And how much is core Sierra Wireless revenues? And within Sierra Wireless, if you don't mind breaking our routers versus modules, because you called out, I think you said the routers were off slightly and modules were down quite a bit. So, I was wondering if you could help us level set some parts and pieces, so we can be better at modeling.

In the current quarter, my comments focused on the performance of modules compared to routers. To provide some guidance, I can give you approximate figures: we have around $300 million in module business, $100 million in connectivity, and $100 million in routers. While this is a simplification, it shows that router sales have decreased by about 30% to 35%. However, I believe that module sales will significantly improve in the upcoming quarter, although I don't foresee them maintaining these low levels. Inventory should be utilized since placing purchase orders for chipsets requires ensuring that the modules are ready as well. Many of these orders are non-cancelable and non-returnable, which led to a buildup of inventory even at the end customers, despite about 80% of module sales being direct. We have good visibility into our customers and demand, but overall, their consumption and market demand have softened slightly, primarily due to the ordering patterns that have contributed to this situation.

Thank you, Paul. That was very helpful. Many of our customers and investors are asking how much longer we can expect to deal with excess inventory before we start to see similar positive trends at Sierra Wireless. Can you provide some insight on this?

Sure. I'm looking closely at the demand and consumption aspects of the business, especially on the IC side, and I've analyzed that quite thoroughly. We have solid data within our analytics systems. I can confidently say that we've seen a couple of quarters where market consumption has stabilized, and we are starting to observe some increases. While there is potential for some positive surprises in Q4, we haven't included that in our forecast. It seems like we're currently at a low point in the semiconductor business. In hardware, there are various factors at play. The surge cycle occurred alongside semiconductors, but due to supply chain issues and cycle times, there may be some delayed effects. Overall, I remain very confident about the business's health. There's nothing indicating that any part of the business will decline prematurely or suddenly accelerate significantly. It's largely about managing channel inventories and directing our sales efforts effectively. Regarding inventory levels, I don't foresee a quick rebound. I'm not anticipating a rapid recovery to previous levels, as that would be an overstatement. While there were good orders, customer optimism about product needs was misplaced. I believe we're looking at more of a gradual recovery, potentially aligning with a strategic reduction in channel inventory, along with a steady increase in point-of-sale activity back to moderate levels by mid-next year.

Can I sneak in just one last one. Do you think things get worse from the guidance that you gave of roughly, call it $200 million? Do you think we got to take another step down or do you think we are troughing out at the bottom for your total business?

I believe it's at the bottom.

Thank you. Our next question comes from Tore Svanberg with Stifel. Please proceed with your question.

Thank you. Welcome Paul, and Emeka, I assume this is your last call, so thank you for all the interactions over the years. My first question for you, Paul. It seems like you're identifying a bottom, but assuming we remain at this level for a while, when would you need to take action regarding the balance sheet? You're currently at 5.3 times leverage, and that number is likely to rise next quarter. At what point would you consider implementing more drastic measures?

The first step is understanding the size of the business. Based on the current market consumption, I want to avoid cutting too deeply into R&D, which could hinder our future growth. We are examining all support functions and aiming to optimize the organization. I believe there is significant potential for optimization. The spending levels did not need to be as high as they were in the combined entities to support the businesses. There are improvements to be made, and I think we will be in a good position. Given the current state of the capital markets, it's not an ideal time for divestitures, but we are open to all options for addressing the balance sheet. My focus is on ensuring we can improve organically and developing a plan that provides confidence over the next 12 to 18 months regarding our financial covenants. Anything beyond that would be additional improvement. I believe we will be stable for at least the next year and a half. If we see a recovery by mid-next year, as predicted, it will only enhance our position. I am taking a cautious approach to recovery expectations and am not relying on market growth. I will ensure that we align our business size with our spending, so as the market improves, we will be better positioned for upside.

That's very useful. For my follow-up, Emeka, regarding gross margin, the mix and fixed cost absorption make sense. However, at what level does the semiconductor gross margin need to improve significantly? You mentioned some fixed cost absorption that you cannot currently overcome. What does the semiconductor business need to achieve in order to see more substantial improvements in gross margin? The mix is overall moving in the right direction, but I'm trying to clarify the fixed cost absorption aspect.

So, first of all, thank you for your kind words. I really enjoyed working with both you and all the sell-side analysts, all over through the years, and hopefully, our paths are going to cross somewhere else in the future. With regards to your question, I think we would expect that to see the gross margin for the semiconductor business as we see maybe a change in some of the mix and an increase in the 10 gig PON which is pretty high gross margins for us, seeing some recoveries in the LoRa business from the current levels. The LoRa business is suffering a little bit from high levels of inventory in the channel at this point. So we continue to see a mix of the ITA industrial and automotive revenues for our advanced protection system. So it is a combination of the mix of revenues in addition to higher levels of revenues for the semiconductor business, but I think like Paul said, we have seen definitely very good signs that a semiconductor business looks like it is poised to start going back up. So I would expect that as we go forward to start seeing some higher levels of gross margin as well.

Got it. So it sounds like for at least the October quarter, this will be a higher sort of revenue mix in consumer, especially with some of your smartphone design wins and things like that, but then beyond that given, you could start to see PON and LoRa and other contributions.

Yes, exactly. I think you got that right. And then just with overall higher levels of revenues, I actually driving the need for more inventory deals and stuff now would drive absorptions higher so and consequently as a result, the gross margins will start to tick up again.

Thank you. Our next question comes from the line of Scott Searle with Roth MKM. Please proceed with your question.

Hey, good afternoon. Thanks for taking my questions. Paul, congrats on your first quarter and nice job on the cost front. And Emeka I want to wish you all the best in your future endeavors. It's always been a pleasure working with you.

Thank you.

I want to quickly address compliance, Paul and Emeka. You've made significant progress on managing costs. We're seeing a decline in revenue. Is it possible to regain compliance without a substantial increase in revenue? Are there additional operational expense strategies we can explore or flexibility we can achieve with the debt covenants? I would like to understand the strategy and planning as we move into fiscal '25.

So I believe the answer to that is yes for the next 12 to 18 months. As the leverage ratio cap continues to decrease, we will require some recovery in the business beyond a year and a half into FY26. I view it this way: we took immediate actions to ensure compliance with the covenants, which gives us a buffer in that area. We also need to keep optimizing cash generation to manage the debt, and then the focus will shift to paying down the principal. This is essentially a two-year effort, but in the short term, I don't foresee any issues with covenant compliance. We have sufficient resources to maintain that compliance. However, for long-term sustainability and to pay down this debt, we will need some recovery. Looking further ahead, with market recovery, we will have more options available, including potential divestitures and refinancing opportunities. So, while this will be a lengthier journey, I think we are well positioned for the next 12 to 18 months.

Perfect. Very helpful. And if I could, I guess, kind of a multipart question following up on some earlier questions. From a revenue standpoint, a couple of the product lines that are seeing some headwinds routers were down in the current quarter, modules are looking to take that step down and normalize from an inventory standpoint. I'm wondering on both fronts there when do you see router starting to recover? Are you seeing that supply-demand balance come back in? And then with modules, it sounds like you've got some other potential upside opportunities with Chinese OEMs not being welcoming the US, and starting to see that in your order book now. So I'm kind of wondering what you're factoring in on that front. And lastly, I think LoRa took a big step down in the quarter. I'm wondering, how long do you see it at these levels before starting to recover? And then kind of putting them all together, what is the normalized level of sales that we should be thinking about 12 months from now? The combined companies who go back 12 months ago was around $400 million obviously below that, obviously not a normalized environment, but what's kind of the number that we should be thinking about as the world starts to recover. Thanks.

So Scott, I just have to ask a clarification question. So were you saying routers, modules, and LoRa together, those revenue levels, or you are talking about the whole?

The whole. The whole.

I don't have a complete answer for you at this moment, but if I were to evaluate demand and predict a moderate recovery back to normal levels, I can look at the trends during the COVID period, observe the surge in demand, and draw a line through that data. There are some businesses that have historically achieved specific compound annual growth rates over the last decade, making it straightforward to establish expected growth independent of cycles. However, I believe we are still looking at a figure above $1 billion. I’m trying to pin down a specific number but I must admit I haven’t thoroughly examined every product line. This is my estimate for now on a combined basis. Regarding routers, I think their recovery is temporary. They didn’t experience much of a spike during the COVID period. There was a minor increase in demand during the heightened buying phase, but it wasn't as significant as what we saw with modules. The situation with modules is more complex due to some 3G transitions which caused a panic and led to excessive ordering, contributing to a larger inventory backlog. Thus, it will take longer to resolve the module situation. Nonetheless, I appreciate that we've seen several hundred million in pipeline growth this quarter as a result of ongoing legislative discussions about who will be on the entity exclusion list. This presents a solid opportunity for us, likely translating to market share gains and potentially reducing inventory levels in North America and EMEA as we capture that share. I see this as an optimistic perspective. We will strive to secure as many sockets as possible. Additionally, in terms of routers related to fire safety applications, we've launched a few new platforms and products, and the response has been quite positive. However, the channel did a lot of purchasing last year up until the acquisition's close. Therefore, you should expect a gradual reduction in stock, although point-of-sale numbers did not experience a significant increase and are not decreasing as rapidly as others. I believe I’ve addressed all your questions, and I hope that was helpful.

Thank you. Our next question comes from Christopher Rolland with Susquehanna. Please proceed with your question.

Thank you for the question, Emeka, and welcome, Paul. Following up on what Quinn and Harsh asked, do you think the Sierra business will be in the combined $85 million range for the next quarter? I noticed there tends to be some seasonality in Q3 for that business before your acquisition, and I was curious if that's a factor this time, which might positively impact the January quarter. Additionally, we should expect both Signal Integrity and Protection and Sensing to show an increase in October as well. Thank you.

I think that's correct. Regarding the Sierra business, we are separating it in terms of connectivity. I want to emphasize that connectivity remains strong. It's a $100 million business that continues to grow, and we will gradually increase our market share. This business also has a good gross margin, which we acquired with Sierra Wireless, and it remains solid despite the decline in hardware revenue. The $85 million might be slightly low, but I expect a rebound in routers moving forward. For modules, depending on our performance with the current opportunities, we could see some upside in the next couple of quarters as projects get initiated. Typically, there is a certification process involved in designing an embedded module, which takes time, but I don't anticipate significant issues. I would usually estimate this process to take around 60 to 90 days.

Excellent. And Paul, when do you think we could get a new long-term model for the company overall? And what would be kind of a platform for doing that? Would you do that on a quarterly call? Would you put an Analyst Day together? And yeah, the timeframe on any update would be great as well.

Yeah, that's a great question. Certainly, it would be very reasonable to have that in the 12-month timeframe, and perhaps before, but I think we would target the Analyst Day 12 to 18 months out and just kind of give a broad overview of an invigorated strategy, if not new strategy at that point and then we would lay out the long-term targets, at that point as well.

Thank you. And maybe just one last one. You guys typically give turns needed in the guide to make the guide that would be great. And then lastly, would we ever expect any LoRa metrics again, or is that a thing of the past?

The turns metric.

I think that was above 50% for the quarter.

Yeah, the turns needed in the quarter is just over 50%. I'll be honest, I'm not a huge fan of giving turns, because it's not indicative of very quickly ramping revenue. And so it can cause you to draw some misconceptions or wrong conclusions about the directionality of the business, but at this point, we are approximately 50% turns.

Great. And LoRa metrics?

So, Chris, the 50% was at the beginning of the quarter and not now.

Not. Sorry, at the beginning of the quarter.

Yeah, understood. And LoRa?

I'm sorry, what was your question on LoRa?

You used to give a ton of LoRa metrics and I think that stopped since the combination of Sierra. You used to give LoRa-related revenue, revenue guidance operators, gateways, ton of information. Is that ever going to come back?

I don't expect it to return on its own. I'm pleased to share that LoRa generates around $100 million annually. We will be shifting our focus towards an end-node connected approach and identifying the necessary components to support the rollout of Private Networks. The adoption of LoRa at the last mile of IoT edge is valuable, even if some may not like the term last mile; let's call it the fringe. The overall elements previously referred to as LoRa have included infrastructure and helium among other things, but I currently don't see them as viable, and it's not something I want to promote. So, if you could allow us a few quarters to clarify our LoRa rollout strategy or wireless strategy, we would be glad to discuss it in future quarters.

Okay. Thank you, Paul. Thanks for the help.

Thank you. Our next question comes from Harsh Kumar with Piper Sandler. Please proceed with your question.

Yeah. Hey, Paul. The example you just described, actually fits perfectly for smart meters. And I was curious if you've received any interest from any kind of utility companies for similar deployments because I think it would simplify smart meter installations in small cities extremely well.

It would also lower the cost and maintenance of those smart meters. So if you just look at power consumption LPWA as opposed to LoRa, if you just look at bandwidth requirements and you could argue that bandwidth costs are fairly low on LPWA, but they are essentially free when you go to LoRa. So I do think, I'm saying private networks, but that doesn't mean that it can't be a rather large private network that's rolled out by utility or a municipality as well. So I think LoRa is a perfect fit in those areas. And I guess, from our standpoint, we would be able to support both applications. There might be some applications where they need an LPWA solution. We are happy to accommodate those, but we can also accommodate a LoRa-based solution as well.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Paul Pickle for closing comments.

All right. Well, thank you guys for joining us today. Thank you for taking it easy on me for my first time around and look forward to talking to you in the future. Thank you very much.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.