Good afternoon, and welcome to today's call. The speaker's remarks, there will be a question and answer Thank you. I would now like to turn the call over to our host, David Pasquale with Global IR Partners.
Welcome everyone to Lattice Semiconductor's first quarter 2019 results conference call. Joining us today from the company are Mr. Jim Anderson, Lattice's President and CEO and Ms. Sherry Luther, Lattice's CFO. Both executives will be available for Q And A after the prepared comments.
If you have not yet received a copy of today's results release, please email Global IR Partners using lsccglobalirpartners.com or you can get a copy of the press release off of the Investor Relations section of Lattice Semiconductor's website. In addition to today's results, we would ask that you please note on your calendars that Lattice's management will be hosting our Analyst and Investor Day in New York City at NASDAQ's Market Site in Times Square on 20th, analysts and institutional investors that have not already registered, but would like to attend can RSVP by emailing to LSC cglobalirpartners.com. Before we begin the formal remarks, I will review the Safe Harbor statement. It is our intention that this call will comply with the requirements of SEC Regulation FD. This call includes and constitutes the company's official guidance for the second quarter of 2019, If at any time form such as a press release or publicly announced conference call.
The matters that we discuss today, other than historical information, include forward looking statements relating to our future financial performance and other performance expectations. Investors are cautioned that forward looking statements are neither promises nor guarantees. They involve risks and uncertainties that may cause actual results to differ materially from those projected the forward looking statements. Some of those risks and uncertainties are detailed in our filings with the Securities And Exchange Commission, including our Form 10 K for the fiscal year ended December 29, 2018, claims any obligation to publicly update or revise any such forward looking statements to reflect events or circumstances that occur after this call. Our prepared remarks will also be presented within the requirements of SEC Regulation G regarding Generally Accepted Accounting Principles or GAAP.
Some financial information presented by us during the call will be provided on both management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. Management uses non GAAP measures to better assess operating performance and to establish operational goals. Non GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. At this time, I would like to now turn the call over to Lattice Semiconductor's President and CEO, Mr. Jim Anderson.
Please go ahead, sir.
Thank you, David, and thank you everyone for joining us on our call today. I'm pleased with the strong results we had in Q1 of twenty nineteen with revenue up sequentially and a significant sequential expansion of both gross margin and net profit. Operational improvements that we began implementing in Q4 of last year to improve the company's overall performance delivered initial benefits in Q1 of this year. For example, the sequential improvement in gross margin in Q1 was driven primarily by the initial benefits of the strategic pricing optimization and product cost reduction strategies that we built out in Q4. And while we are in the early stages of our and enhancements, we are encouraged by our progress and improve results.
We expect these benefits to be sustainable moving for highlights from the first quarter included sequential revenue growth, driven primarily by our communications and computing market segment, sequential gross margin expansion of 190 basis points on a non GAAP basis, operating profit of 20 percent of revenue and EPS expansion of 2x on a year over year basis. We also made another discretionary debt payment to less than 2.5 as we exited Q1. With these improvements, we are firmly on track to unlock additional value for Lattice and its shareholder as we continue communications and computing market, revenue was up 9% sequentially in Q1. We continue to benefit from growth in our products that are used in both server and client computing platforms. Our strong footprint across a number of different server vendors positions us growth as the current server platform generation continues to ramp as it is replaced by the prior generation.
We also continue to see strong customer interest in our security. In the communications market, our 5G revenue grew sequentially from Q4 to Q1 as we continue to benefit from early 5G infrastructure deployments. Although it is still early in the ramp of 5G, it's good to see sequential revenue growth we expect this to become contractor build out progresses. Over the long term, we believe that 5G will be a more significant opportunity for Lattice than 4G based on our platform position across 3% as we saw a slight uptick in demand in this market segment. We expect the industrial and auto market to be a long term growth driver for our business as we expand our position in industrial automation, robotics and automotive electronics.
Turning now to the consumer market, revenue was down sequentially in Q1 by roughly 7%. Related to macroeconomic from higher and in Q1, we taped out the value of this new generation products will bring to our customers, particularly in applications that require power efficiency. We look forward to providing generation platform at our Investor Day in May. Separately, on our last call, we noted that Lattice is gaining traction in our solution in automotive video bridging for ADAS and infotainment systems. In Q1, we continued to build on this momentum with the launch the first in a series of new reference designs to make it even easier for our automotive customers to design in our products.
This is part of our broader strategy of investing we made in Q1. The strategies we implemented to improve the company's overall operational performance and put us to farms and growth from many different industrial and automotive applications. We remain focused on execution and unlocking additional value for the company in shareholders. Let me now turn the call over to our CFO, Sherry Luther.
Thank you, Jim. Let me now give you a summary of our results. We are pleased with the results percent sequentially from the 4th quarter. Product revenue growth in communications and computing as well as in industrial and automotive offset 0.6% in the 4th quarter. Our non GAAP gross margin expanded to 58.6% from 56.7% in the prior quarter due primarily to initial benefits of the strategic pricing optimization and product cost reduction strategies that we built out in Q4.
We expect the benefits of our initiatives to continue throughout 2019, and we remain committed to expanding gross margin over the longer term. On a non GAAP basis, operating expenses were 38 $1,000,000 compared to $37,800,000 in the 4th quarter. As a percentage of revenue, OpEx declined to 38.7% in Q1 30 9.4 percent in Q4 on a non GAAP basis. Q1 GAAP operating expenses were $45,200,000 compared to $56,000,000 in the 4th quarter. This includes approximately $1,300,000 in restructuring costs related to the consolidation of our Portland facility into our Hillsboro facility in Q1.
Our GAAP net income for the first quarter was $7,400,000 or $0.06 per basic and $0.05 per diluted share compared to a net loss of $7,100,000 of one $300,000 compared to $11,900,000 in Q4. On a non GAAP basis, 1st quarter net income was $14,600,000 or $0.11 per basic and diluted share as compared to $11,100,000 or $0.09 per basic and $0.08 per diluted share in the 4th quarter. During the first quarter, we generated $21,800,000 of cash and improving overall cash generation in discretionary debt payment in Q1. Finally, we ended Q1 with a cash balance of approximately $130,400,000 compared to $128,700,000 at the end of Q4 after the $25,000,000 discretionary debt payment. Let me now review our outlook Revenue for the second quarter of 2019 is Gross margin is expected to Total operating expenses for the 2nd quarter GAAP basis.
As we look forward our priorities and focus are unchanged. We remain committed to increasing our profitability and cash flow as well as de levering our balance sheet. We view this as the best way to build additional value for Lattice and our shareholders.
And your first question comes from the line of Charlie Anderson Wood Dottery Company.
Congrats on the strong results execution and also the cash flow. That's great. So I wanted to, to start on gross margin, obviously, big improvement sequentially there, fairly similar business mix. So I wonder maybe just speak to some of the levers that, you were able to pull there. You mentioned price optimization and also cost reduction.
Just kind of roughly where are you, on on those initiatives? How does Q2 compared to Q1 through the rest of the year? How does And then I've got a follow-up.
Okay. Hey, thanks for the question, Charlie. Appreciate it. Yes, we are quite pleased with the progress that we made on gross margin. From Q4 to Q1.
The source was really kind of 3 different components. One you already mentioned was our strategic pricing optimization initiative. We had started work on that in Q4 really got that planned out in Q4 and began to implement that in Q1. So we started to see the initial benefits of that in Q1. And we expect to continue to see benefit from that moving forward.
And then kind of the second component was product cost reductions. We put a plan in place to drive incremental product cost reductions also in Q4 and and that began to yield benefit in Q1 as well. And then the 3rd component, which was a little bit of a smaller component, but was max. We did see a slightly better mix in Q1, a higher percentage of revenue coming from comps and compute, industrial and auto as an overall percentage of revenue. So those 3 kind of things combined to give us a nice uptick in gross margin, Q4 to Q1.
I think you also asked for Q1 to Q2 gross margin. If you look at the midpoint of our guidance, roughly flat Q1 to Q2. Underneath there is, if you look at just product revenue, we are expecting gross margin on just pure product revenue, to go up sequentially from Q1 to Q2, but that's, we're expecting that to be offset by expected decline in revenue from IP, IP revenue, which carries a high gross margin. And so the 2 kind of offset each other, but we are expecting to see some improvement in product, gross margin from Q1 to Q2.
Great. Thank you so much for the color, Jim. And then as my follow-up, kind of curious on the various end markets, what you're seeing on progression, Q1 to Q2, as we sort of un the second quarter guidance from revenue perspective? Thanks.
Yes, sure. Thanks, Charlie. Yeah, from a segment perspective, market segments perspective, we had a nice, we had nice growth in comps and compute from Q4 to Q1, and we're anticipating some growth in comps and compute again from Q1 to Q2. So sequential growth in that segment. Industrial auto, we expect to be roughly flat, flattish.
And then on the consumer segment, we expect it to be flat to maybe slightly up with a little bit better, just consumer normal consumer seasonality for that market. Maybe a slight uptick. And then as I just mentioned, we do expect IP revenue to decline sequentially from from Q1 to Q2. That's a little bit of color by segment.
And your next question comes from the line of Christopher Rolland with Susquehanna.
Hey guys, congrats on the results and guide. So I wanted to first talk about 5G and the second half opportunity for you guys. If you can talk a little bit more about some of the functions that you may be providing into the base station there and maybe even some color on what you think your content per base station is? Thanks.
Yes, sure. Thanks, Chris. So on 5G, So we're on 5G infrastructure. We're primarily if you look at a like a macro base station, primarily on the radio head of a macro base station or the remote radio head, usually you'll find us doing functions like control path functions on the remote radio head. Our products because they're their low power, their small size can also be designed in small cells for instance.
And we feel pretty good about the position that we have across the OEMs and platforms. We're well assorted across the OEMs, the primary OEMs and in their platforms. So we feel like we've got good And we saw initial revenue start from 5G deployments in Q4 of last year. We saw sequential growth from Q4 to Q1 in revenue from 5G. And then we're expecting it to kind of be a more material contributor to our revenue in the second half of twenty nineteen.
And then definitely into 2020, as the bulk of, we expect more 5G deployments to be in 2020. I mean, we're just seeing initial deployments now. And so, we also the other thing I would add is, we believe that the total the total, sort of area under the curve for 5G deployments relative to 4G deployments and an industry level 5G will be a bigger technology deployment. And so we see this as really a good multi year growth factor, for the company. And And so I hope that provides a little bit more color on where we're headed.
Yes, for sure. Thanks, Jim. And then as a follow-up here, I'm surprised you didn't mention AI at the edge as one of your 3 growth drivers that you called out at the end of prepared remarks. Maybe you can talk about your AI product or your new products there? Thanks.
Yeah, sure. AII at the edge, some of that is included in industrial automation that I talked about, we're seeing a lot of customer activity around artificial intelligence inference, inference processing at the edge. And that goes across a number of different types of applications. So for instance, in industrial automation that might be object detection, it might be monitoring a video stream to detect a manufacturing excursion, etcetera. And so we're seeing it in industrial, but we're also seeing it in consumer applications as well.
And so we've we last year, we launched our SenseAI software stack, which is a specific software library to allow customers to design our solutions into their systems very easily, and provide that artificial intelligence capability at very low power levels that our chips it's just across a number of different market segments.
And your next question comes from the line of Matt Ramsay with Cowen.
Hi, Matt. If you're on mute, we can't hear you. Operator, maybe you wanna skip to the next caller. It looks like we don't have Matt available.
And the next question comes from Christopher Roland
could ask another one, but perhaps
we should go
to the next. Yeah.
Sorry, Chris. Yeah, operator, let's try to let's try to move to the next caller. Can we get Matt back?
Yes. One moment.
Okay. Your caller is Matt Ramsay. Hey,
Jim. Hopefully you can hear me this time.
Yeah, we got you, man. Go ahead.
All right. Awesome. No, thank you. And, I guess the question I had is maybe a longer term one, which is, Maybe you could talk a little bit about the at the SOI based products and it sounds like you just had some tape out there. Both from maybe what kind of differentiation those products might add for the company in terms of low power?
And then secondarily, the software that you guys are working on that complements those products in a low power setting. Be helpful. Thank you.
Yes, thanks. Thanks, Matt. We're actually there's a lot of excitement at the company right now. About the first tape out of this is really the first version in a family of devices that will be based on our new FPGA platform. And so it's a new architectural platform that we've developed and it does utilize FD SOI technology.
And so As you know, with FTSI, there's a nice power efficiency benefit. And so we expect, especially in applications where this need for power efficiency for this to have a nice competitive benefit for us. We're excited about that. But also just at the architectural level, we've added a number of different features and capabilities that we're really excited about. And so, yeah, it's a platform that will build a number of different products.
From, we expect to share some more details about that platform generation and some of the capabilities that we built in at our, Analyst Day on May 20th. So I'd say kind of stay tuned. We're going to provide more details there and we'll actually have our head of R&D. Steve Douglas come and talk a little bit more about the platform, but that's something that we've got a lot of excitement within about.
Got it. No, thank you for that. And look forward to the update in a couple of weeks. As a follow-up, I was encouraged, but maybe a bit surprised at the commentary in your prepared remarks that sort of I know you guys put industrial and auto together, but a lot of peer companies have had some challenges in both of those end markets. Maybe you could a little bit about what you your company and the product portfolio that Lattice has might be doing are exposed to that are a bit different than some pretty broad based weak we've seen in both of those end markets from other peers?
Thanks.
Yes, thanks, Ben. Certainly, we're subject to the same market conditions that other companies and semiconductor companies are. But what I would say is, we do have some nice lattice specific growth vectors within that segment. We're seeing a lot of adoption of our products in industrial in all sorts of automation and robotics applications. And just as an example, and as people automate the factories, a lot of robotics that get designed in and we're in the motor control loop of those robotic arms for instance.
And so seeing nice design wins across a number of different areas and good growth in industrial. And then in automotive as well, it's a segment we've been working on for quite a while some of those initial automotive designs have begun to ramp nicely. And so, yeah, we are seeing, we are pleased with the progress that segment. And more from a long term perspective, we see industrial and automotive as a key long term growth factor. The company.
And our next question comes from the line of Tristan Gerra with Baird.
Hi, good afternoon. Just a quick follow-up on the prior question and you provided some very useful color on where you see adoption in industrial. Could you also provide some color on what you're seeing in terms of new sockets in the automotive? You've mentioned those design starting to ramp, you could provide some color on the functionality and what type of circuit status?
Yes, thanks Tristan. So in automotive, it's primarily in ADAS and infotainment systems. And there's a number of different types of functions we can provide, one example would be, you know, in autos now, both gas and electric hybrid vehicles, a lot of sensors being added to the vehicle, parking sensors, driving sensors, etcetera. And all that's infrastructure information needs to be aggregated and sometimes preprocessed before it's sent back to the main processor. So you might find Lattice FPGA used in sensor input aggregation, video connectivity, video bridging of those of the multiple video cameras that are getting added to autos.
It's just power management, for instance, of certain subsystems. So there's just a number of different places that we're getting added in. And we're, and we're pleased about the progress in the automotive segment. Okay.
That's useful. And then, could you talk also about the new product roadmap before you get 28 nanometer to reach volume, you've mentioned some new products with security features. Anything else? So in terms of color you could provide on existing platform for you have this big, genitry node migration?
Yes, Tristan, yes, absolutely. We do have products that are coming out even ahead of that. That next generation platform that's on the FDSOI technology. So one of the products that I mentioned in the past is, we added security functionality to one of our FPGAs, which allows, it to provide, root of trust and platform firmware resilience functionality in different types of platforms. An example would be a server platform, but it could be used in other types platforms like client computing platforms, even network and network platforms.
And so we sampled, that new device to OEMs a number of different months ago, a number of different server OEMs that that program is progressing well. And actually, we're planning at that at our Analyst Day May 20th to provide an outlook for a number of new products that we'll be launching over the near term over the next 12 months. And so there will be additional product details that we'll provide at that May 20th meeting. So, so stay tuned.
And your next question comes from the line of Mark Lipacis with Jefferies.
Off of Market Buses. So a question on your client computing side. Do you hear me fine though? I just want to check Yeah.
Yeah. We can hear you. Go ahead. Thank you.
Perfect. So on the data center side, so how how do you see your penetration going into the next in-depth platform? So if you could elaborate on that, that would be great.
Yes. So in data center, we're talking about servers that go into both hyperscale data center as well as enterprise data And, on the current server generation that's ramping up now, we're providing manageability function on that server platform. You know, functionality for instance managing the board as it boots up and we have a very high attach rate on the current generation. And if you look at our attach rate on current generation versus prior generation, it's much higher. And so as the industry transitions to the new generation, we see a natural growth from the higher attach rate on the server platforms.
And so that's been a good growth vector for us that that growth even started year, we're expecting that to continue into this year. And so that's a nice growth factor for us.
Yes, thank you for the question.
And your next question comes from the line of Richard Shannon with Craig Hallum.
Great, Jim, and Sherry. Thanks for taking my question and congratulations on the nice numbers. Let me peel back a layer on the gross margins that you're talking about for the second quarter. So you're talking about essentially flat And I think your comments were that you expected licensing down and, products up. And then within products, you're talking about industrial being I think down a little bit, which is your best gross margin category in general.
So wondering if that that growth that product gross margin improvement is implied in there, is that coming from mix or is it from pricing optimization or can you help us understand where that's coming from?
Yes. So, just to crack on industrial auto, I said flattish, right. So we're expecting that just kind of be flat sequentially. But if you look at, set aside IP revenue for a second, you look at pure product revenue, which clearly is a vast majority of our revenue. We are expecting some sequential improvement in gross but we are also expecting a sequential decline in consider the normal run rate for IP revenue.
And because the IP revenue is at a gross margin of nearly 100 and, it, as that IP revenue declines, it sort of offsets in Q2, some of the gross margin expans we're expecting from the product, from the product revenue side. Does that help, help answer the question? Reaching?
Yes. I guess I just want to make sure I guess to understand how much is baked into your gross margins for the pricing optimizations you talked about maybe relative to the benefit you got from that in the first quarter?
Yes, yes. Okay. So if you look at just again, just at the revenue. We are still expecting improvement from pricing optimizations, which started to kick in in Q1. We'll see some benefit also from Q1 to Q2, but also product cost reductions.
So, I also talked about product cost reduction improvements that we had seen from Q4 to Q1. Expect to benefit incrementally from that Q2 as well. So both of those would be a factor in the improved product margin in Q2.
Okay. That's helpful. Let me jump over to on the computing side, which I think makes sense. Dropping over to the comp side of that, I know, I think bigger part of your that comp segment is in the, I guess, we'll call it the wired space here, but you've made some very positive comments about 5G maybe give us a sense of a degree to which the growth in the second half are in 2020. When does wireless become a bigger piece of your comms bucket?
Yes. Wireless, remember, we're in 4G as well, right? So, so we're in both 4G and 5G when I talk about 5G becoming a more significant contributor, that's really we're expecting that to really kick in more in the second half of this year. So we just saw some early revenue in Q4 of last year, Q1 of this year. But we expect it to contribute more meaningful in a second or meaningfully in the second half of this year and into 2020.
Okay. I guess, Jim, my question was to what degree or when does wireless become a contributor equal to kind of your wired comms business?
Yes. We haven't really broken it out that, that way. So, yeah, not able to provide any guidance on when there might be a crossover point something like that. We haven't broken it out at that level of granularity.
Okay. Well, I thought I'd give it a shot anyway. Maybe one last quick question. So, your OpEx guidance for the second quarter is down a bit. How should we think of this in the cadence of OpEx going forward?
How much of the decrease here is from sustaining trends versus one time? And any thoughts you want to give us beyond the second quarter would be helpful too? Thanks, Sherry.
Sure.
Yes, our model in general for OpEx is, as we've shared before is, if I separated out in R and D and SG and A is R and D, we're running at roughly 20% a little bit underneath that, but we believe that the right level for R and D for the company is at around 20%. And so our intention is to keep R and D around that level. And we want to continue to invest in our product and the future innovation in our product line. And then in SG And A, we're also at about 20%, but we believe that the right model for the company is more in the mid teens level. And so we are going to try to work the SG and A percentage down over time.
Now that will happen over time, but it is something that we're going to try incrementally improve over time and get it closer to the mid teens, which we believe is the right target for the business. Okay. Thanks, Richard.
And your next question comes from the line of Hans Mossman with Rosenblatt Securities.
Hi, guys. This is Kevin Garrigan on for Hans Mosesman. We were just kind of wondering, have you seen any safety inventory being accumulated by OEMs in China? And if so, how widespread has it been and how has that impacted your sales?
We haven't seen any indications
of that. That's something that we actually watch very closely. We actually watch inventory at our distributors customers quite closely. And we haven't seen any direct indication of that. We also look for double ordering patterns and things like that.
And we haven't seen, like I said, I haven't seen any indications of that. Our business is, we, we, for instance, in Q1 was about 79, 80 sent through distributors. And if we look at distributor inventory in Q1, Actually, we ended at a very healthy level in Q1 in terms of distributor inventory well within our what we view as the normal range for the business. Actually, a little bit on the lower side of the normal range. And in fact, we saw a drawdown or a slight reduction in distributor inventory from Q4 to Q1.
So I would say in summary, we're not seeing any indications of inventory pockets.
Okay, great. That's very helpful. And then just one quick follow-up. What's the competitive dynamic like with other FPGA players so far this year?
Yes, the competitive dynamic has been pretty stable. Look, we the part of the market that we focus in is we focus in the low power, small size FPGAs. And in that part of the market, we think we have a really strong portfolio today and then with some of the new products that are coming out, that'll strengthen our portfolio even further. And we think we've got a nice strong competitive position. And there hasn't been any real recent changes in
that. Great.
Thank you. Thanks.
And your next question comes from the line of Roy Song with Arrow Partners.
Hey guys, thanks for taking my question. Understanding that there's been a good amount of discretionary pay down in the term loan B in the last a couple of quarters. Just want to see where your thoughts on in terms of the cap structure, obviously, delivered a good amount in the past year. And see what your guys thoughts on that. Thank you very much.
Yes, sure. Thank you for the question. We have, had a very strong focus on cash generation, and expanding our cash flow through continued improvements in working capital. So as we mentioned, we did do a $25,000,000 discretionary debt pay down during the quarter. And we are focused on continuing to use our cash flow from operations to really continue to make discretionary payments going forward.
We were able to delever for the quarter down to 2.4 by the end of Q1, which is down quite a bit from a leverage ratio of 3 at the end of Q4. So we're pretty pleased with that.
And your next question comes from the line of Vit Duley with Steelhead.
Yeah, thanks for taking my questions. Most of them have been answered, but as far as the industrial automation segment of your industrial and auto business. How can you just give us an idea about how big that is as percentage of revenue or dollar And what's the trajectory of growth there? And just one final clarification. Did you mention that you're in robotic arms or just mentioned the application to in?
Yes, sure. So, 1st of all, Industrial And Automotive. If we look at the most recent quarter, Q1 was 30 7% of our revenue. So that just gives you a sense of, what size or what contribution it provides start revenue. In Q1, we saw a growth of about 3% from Q4 to Q1 But we see this, if we just look longer term, we believe that this is a long term growth factor for the company.
We've had quite a bit of growth over last year or so in this segment. And we do believe it's a long term growth factor for the company too. And then, in terms of the applications, it just, gosh, it just spans a number of different applications in industrial, from I mentioned, precision motor control for instance robotic arms, but embedded vision, collision avoidance, for instance, if you have If you had robots or automated vehicles moving around factory, collision avoidance, there's just there's a number of different locations in that segment.
Okay. And then two final questions from me is just as far as the 5G, if structure build you have seen, has that been mostly concentrated in China? And then could you just give us an idea of what you expect your interest expense to be in the balance of the year per quarter? Thanks.
Sure. On 5G, initial build outs for 5G infrastructure really started in Korea now we're moving to China and the U. S, Japan as well. And so that's kind of the geographies that are leading the initial deployments of 5G. And because we're pretty well dispersed across the 5G OEMs, we've been participating in that initial build out.
And And that's why we've seen some sequential growth in our 5G revenue from, for instance, from Q4 to Q1. And I'll ask Sherry Dan to the interest question.
Sure. We expect interest expense to be somewhere in the neighborhood of $4,000,000 to $4,500,000 for the quarter.
And do you will you make other if your cash flow is strong, will you make other incremental debt payments through the balance of the year? And I guess I'm wondering is that number going to go continue to go down?
Yeah. I mean, we, we expect to continue to make discretionary debt payments. So yes, we don't guide to the amount that we'll make during the quarter. But the fluctuation in interest expense would also be a function of what LIBOR is and as I adjust. But yes, will continue to make discretionary debt payments.
Yes, David, it's our intention to de lever, use our excess cash to de lever.
Thank you.
Thanks, David.
And now I'd like to turn the call back over to Mr. Pasquale.
I think I'll wrap up the call. So thank you, operator. And thanks again everybody for joining us on our call today. We really appreciate you spending with us today. So just to summarize, in Q1, we started to demonstrate the leverage in our operating model with solid improvement in both gross margin and profitability.
On the product side, we're really excited about the tape out in Q1 of the first version of our next generation FPGA platform. And overall, we're focused on continuing to deliver sustained improvements in profitability expansion, improved cash flow and a stronger balance sheet. And so we appreciate your continued support and look forward to sharing more details with you at our Analyst and Investor Day in on May 20
call.