Operator: Good afternoon. My name is Rob and I will be your conference operator. I would like to welcome everyone to the Xilinx Third Quarter Fiscal Year 2020 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

[Operator Instructions] I would now like to turn the call over to Matt Poirier. Thank you. Mr. Poirier, you may begin your conference.

Matt Poirier: Thank you and good afternoon.

With me are Victor Peng, CEO; and Sumeet Gagneja, our Corporate Vice President and Chief Accounting Officer. As a search for our new Chief Financial Officer remains ongoing; for this call, Victor will provide a financial and business review of the December quarter and the business outlook for the March quarter of fiscal year 2020. Sumeet and I will participate in a Q&A portion of the call as needed. Let me remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events, or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially.

We refer you to the documents that the company files with the SEC, including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. In addition to GAAP financial measures, we will be disclosing certain supplemental non-GAAP financial measures used by management to evaluate the company’s financial results. We provide these measures to facilitate period-to-period comparability for purposes of evaluating continuing business operations by excluding the effects of non-recurring and unusual items, such as amortization of intangibles and certain one-time items related to acquisitions. We believe that sharing these non-GAAP measures will be helpful for analysts and investors in analyzing the company’s ongoing core business.

A reconciliation of non-GAAP financial information to the closest GAAP measure is included in our earnings release and has been posted on our Investor Relations website. This conference call is open to all and is being webcast live. It can be accessed from our Xilinx Investor Relations website. Let me now turn the call over to Victor.

Victor Peng: Thanks, Matt and good afternoon, everyone.

Let me jump right into our results for the third quarter and provide an update on our expectations for the fourth quarter of fiscal 2020. Overall, the quarter played out largely as we anticipated. Total revenues were $723.5 million near the midpoint of our expected revenue range. We made a concerted effort to reduce operating expenses and achieve better-than-expected operating margin and GAAP earnings per share of $0.64 non-GAAP operating earnings per share of $0.68. Now, I’ll turn to highlights for the third quarter.

The Advanced Products category constituted approximately 70% of total revenues in third quarter, a decrease of 4% year-over-year. Zynq-based revenue grew 26% year-over-year despite the impact of a weaker wired and wireless business. The Zynq SoC platform, which includes Zynq at 28 nanometer and both MPSoC and RFSoC at 16 nanometer, represented 23% of total revenues, which is higher than the year-ago period. We continue to see strong Zynq tracked in across our target markets, which is a positive indicator of our progression transitioning to platforms. Our overall customer engagement momentum continues to build as we positioned for the long-term profitable growth by executing on our strategy of growth in the data center, 5G and the automotive market as well as accelerating growth in our core markets.

In the communication markets, we are actively engaged with a global non-Chinese OEM for second generation 5G radio design that includes beamforming and is based on our 7-nanometer Versal ACAP. Beyond communications, Versal continues to be well received by customers across several end markets. Well, our production shipment of Versal is expected to begin in late FY 2021. We have already recognized initial revenue from early shipments to customers. In the data center, Alibaba Cloud announced that Xilinx is powering the data center and is being used by their cloud services enterprise customers.

They also shared that unprecedented traffic during Singles Day in China has proven the reliability and security of their systems platform running on RFPGAs. In addition Supermicro unveiled two new Alveo systems that power compute platforms to accelerate some of the most algorithmically demanding workloads in the enterprise and in the cloud. On the software front, as announced earlier, the latest Vitis platform is now available for download and free to users, who purchased Alveo development board. We also announced the availability of the Vitis AI inference development platform that empowers software developers to utilize deep learning acceleration framework like TensorFlow and Caffe. Lastly, we announced our Zynq MPSoC is powering Baidu’s production-ready Apollo Computing Unit for automated valet parking, the industry’s first dedicated computing solution for this emerging automotive application.

Moving to a review of our business groups and core markets of the third quarter. Our core markets performed as expected with some adjustments and mix across our AIT and ABC markets. We saw less-than-expected declines in A&D and ISM while macroeconomic and trade related headwinds impacted automotive more-than-expected. We saw increased revenue from emulation and prototyping customers in TME market, albeit somewhat less-than-expected. This mix of revenue helped drive a higher blended corporate gross margin in the quarter.

The data center group performed as expected and benefited from sales of both compute and networking products to hyperscale customers. Networking revenue from Solarflare somewhat outperformed expectations in the quarter. We also saw increased revenue from customers shipping storage class memory; however, this was offset by weaker demand from high-performance computing and some crypto customers. The wired and wireless group performed largely as anticipated with both wireless and wired down sequentially. Wireless revenue meaningfully declined because of the anticipated baseband ASIC transition and some program related delays with one of our global OEMs.

Now, moving onto the financials. As I mentioned, total revenue was $723.5 million down 10% year-over-year and down 13% sequentially. Data center group revenue increased 8% year-over-year that was down 16% sequentially from a record quarter. Wired and wireless group revenue declined 18% year-over-year and was down 29% sequentially. Note that we had one communications customer that represented greater than 10% of revenues in the third quarter.

AIT revenue declined 10% year-over-year and was down 5% sequentially. ABC revenue increased 10% year-over-year and was up 2% sequentially. Gross margin was in line with expectations with GAAP growth margin of 67% and non-GAAP gross margin of 68%. GAAP operating expense at $324 million and non-GAAP OpEx at $318 million were both meaningfully below guidance of $330 million due to significantly reduced hiring and discretionary spending. GAAP operating income was $159 million or 22% operating margin.

Non-GAAP operating income was $174 million or 24% operating margin. Our GAAP tax rate was approximately 2% and non-GAAP tax rate was approximately 5%. GAAP net income was $162 million and diluted earnings per share were $0.64, a 31% year-over-year decrease. Non-GAAP net income was $171 million and non-GAAP diluted EPS was $0.68, a 26% decline from last year. Diluted share count decreased to $252.8 million and gross cash was $2.4 billion with $1.2 billion in long-term debt.

Accounts receivables decreased to $254 million and is at 32 days down from 37 days last quarter. Overall, we generated $324 million in operating cash flow. During the quarter, we’ve repurchased approximately 2.8 million shares at an average price of $93.70 per share and paid dividends of $93 million. Turning now to the outlook for the fourth quarter. We still believe Q3 will be our low quarter for fiscal 2020 from a revenue perspective.

However, our revenue recovery is now expected to be more gradual than we had anticipated at the start of the last quarter. We expect total fourth quarter revenue to be between $750 million and $780 million, which at the midpoint of the guidance is down approximately 8% year-over-year, but up approximately 6% sequentially. Fourth quarter revenue growth is being driven by meaningful improvement in our core markets and moderate growth in DCG, but it’s significantly offset by greater-than-anticipated weakness in WWG. We expect modest growth from our distribution channel. For core markets, we are on track with our prior expectations for strong sequential revenue growth as programs for multiple emulation and prototyping customers’ ramp.

Both A&D and ISM are expected to be up in Q4. Auto is also expected to recover in Q4 as ADAS demand increases relative to Q3. AVP and consumer are expected to be somewhat weaker. The DCG revenue is expected to grow moderately, albeit somewhat less than prior expectations. We expect continued contributions from compute acceleration driven by a mix of cloud and high performance compute customers.

We expect to see slower revenue ramp from the storage and networking customers, and we expect additional cloud customer POCs to move into production. The revenue will likely continue to be lumpy given that we’re in the early stages of scaling the DCG business. The most significant change for outlook is in WWG. We now expect Q4 revenue from both wired and wireless customers has declined more than previously anticipated. The additional negative impact to our wireless business are a result of a slowdown in 5G rollout across multiple regions as many operators take a pause before the next wave of infrastructure deployment.

In addition, wired revenues are being impacted by a broad based weakness in demand across multiple customers. Now, that these headwinds are in addition to the impact of the loss of revenue from Huawei since last may. We now expect WWG revenue to be down in FY 2020 versus FY 2019. Fiscal Q4 non-GAAP gross margin is expected to improve to approximately 69.5%. Given the more persistent revenue headwinds we’re facing, we’re taking several actions to drive structural operating efficiencies across the company.

We plan to reduce our global workforce by approximately 7% to a targeted reduction of force and meaningfully slower attrition replacement. In addition we are taking several actions to reduce discretionary spend and realize additional operating efficiencies across the business. Excluding severance charges related to the reduction of force, non-GAAP operating expense is expected to be approximately $318 million, which reflects the adjusted spending profile. This includes approximately $17 million to $20 million of savings from various operating expense reduction actions we plan to take in the fourth quarter. This is offset by expenses related to 7-nanometer tape-out in the quarter and increased legal expenses.

Non-GAAP other income is expected to be approximately $8 million due primarily to an anticipated IP settlement for the customer that was recently acquired. Finally, our tax rate is expected to be approximately 8%. In closing, we are faced with persistent trade-related impacts with our business and other headwinds. We were taking thoughtful and decisive actions that were painful, we believe are in the best interest of all Xilinx’s stakeholders. We continue to see a great long-term opportunity in the second secular growth trends in data center, 5G infrastructure and automotive markets as well as TAM expansion and share gains across our foundational core markets.

We remain extremely focused and committed to our strategy to drive profitable growth as a leader in adaptable platforms. Operator, we now open the call for questions.

Operator: [Operator Instructions] And your first question comes from the line of Joe Moore from Morgan Stanley. Your line is open.

Joe Moore: Great, thank you.

I wonder before you had said that the impact of the baseband transition would be largely done by the March quarter is that still the case and what are you – what are you kind of thinking about the progression of wireless beyond that particularly as you know, assuming that we don’t get Huawei back into the mix. Can you grow from there? Is it going to take awhile? Just what do you think is the progression there?

Victor Peng: Yes, Joe, I mean, what we said is the baseband impact did occur in the last quarter as expected. So that’s – you’re correct, if you’re applying, that’s not new news. You’re right. That’s not new news.

Really, the additional pressure we’re feeling in the current quarter is from slowdown in the deployments across multiple geographies and then both weakness – both on the wireless side as well on the wired side. That level of weakness we did not anticipate last quarter when you kind of gave the overall guide for the second half. In terms of how we see things going forward, we’re not giving guidance for FY 2021, but I guess in a broader picture what I would say is, clearly, in the near-term, we have some meaningful headwinds here, Huawei remains on the entity list. but I really think that from that perspective, we don’t think about that is even if that were to change in the entity list that account revenue would be at levels that it used to be. I think it’s just the reality of it and that’s how we think about it now.

However, we’re still relatively speaking in the first days of the point for 5G. And you’ve heard me and I’m sure other people talk about when we talked to all our customers, they see like three waves of technology rollouts. and so it’s certainly been more challenges first wave, but when we think about the longer-term, we still think this is a good growth opportunity design. Particularly, because we’ve been innovating with things like RFSoC and Versal ACAP. And we’ve got really good engagement as I had reviewed my prepared comments already with some customers for the second generation, and that’s actually using our some non-Versal ACAP.

So, that’s how we think about the big picture.

Joe Moore: Great. And just to clarify my question in terms of the baseband transition. is there an ongoing headwind beyond the March quarter or is the impact to that kind of mostly done in the current quarter?

Victor Peng: I guess, we – the way we think about it, it’s mostly done, it’s factored in. Exactly.

It’s not – it’s not like a one-time event. It was we expected it would happen. It did happen in that quarter and we keep it out.

Joe Moore: Okay. Thank you.

Operator: Your next question comes from the line of Toshiya Hari from Goldman Sachs. Your line is open.

Toshiya Hari: Hi guys. Thanks very much for taking the question. Victor, when you were talking about the wireless business in your prepared remarks, you talked about the ASIC transition, you mentioned something about our program delay on one of your customers, how significant or insignificant were those two dynamics in the December quarter? And I guess more importantly, at your Investor Day, you guys talked about three to four X more opportunity in 5G relative to 4G given more base stations, higher content and higher market share.

Outside of Huawei, having issues, has anything changed there or is everything still very much intact long-term? Thank you.

Victor Peng: Sure. Let me do the last portion first, it’s exactly as you said, Huawei is significant, but if you sort of – okay, understand that and move on from that, we still do think it’s a significantly larger opportunity than 4G. Now back to sort of the issue around one customers program delay, really the bigger hired a bit on the headwinds that we’re seeing in Q4 causing us to see a more gradual recovery from the Q3, which we didn’t anticipate was going to be kind of a confluence of a kind of a perfect storm thing. Is really the general slowdown deployment in multiple geographies and that’s affected, essentially all the OEMs that we’re working with, right, that we’re still working with and allowed to work with.

The program delay was another factor, but I think the way you should think about it is the highest order bit is just a pause or slower deployment that we are seeing across from the carriers and that’s reflected in the OEM customers that we have in multiple of them in all the different regions.

Toshiya Hari: Thank you.

Operator: Your next question comes from the line of Christopher Rolland from Susquehanna. Your line is open.

Christopher Rolland: Hey guys, thanks for the question.

So, I guess first on WWG. So, this pause, is it purely geographic or is it also, does it have something to do with the applications that are addressing, for example, moving from basebands, remote radio head or to massive MIMO. And then if you could talk about where we are with RFSoC and how you think that rollout will go?

Victor Peng: Yes. On the broader question, I don’t think it has to do with a rollout of a particular technology and you’re right; there are different types of technologies that fall under the umbrella of 5G. It just seems as though the multiple operators that cover multiple regions are done some initial deployments and are just taking a pause, my position is that they’re seeking more profitability for they further invest.

But in any event, we talked to both carriers as well as our OEMs and we see that fairly broad. So, I guess again then in terms of the longer-term view and all that, again, I think that the long-term view still seems very – like a very good opportunity for us. And again, we have to keep in perspective that we’re only in the very first phase and deployments will come back, it’s just like we have a pause right now that we didn’t anticipate.

Christopher Rolland: Great. And then on data center…

Victor Peng: I’m sorry, what I just realized, I didn’t quite answer your RFSoC.

Christopher Rolland: Oh, sorry.

Victor Peng: So RFSoC, we do have that being deployed and with different OEMs that cover different multiple regions as well, both in sub-segs, but also we think there’s some strength there in millimeter wave bands. We’re still relatively speaking in the early stages, but it is deployed. So, it is out there in the multiple regions and through multiple OEMs. So, I apologize, I didn’t quite cover that initially.

Christopher Rolland: No problem. Thank you, Victor. And on the data center side, a nice progress on the Alveo cards. But I think in your roadmap, you had AI core either coming out soon or actually maybe even sampling now. Maybe, talk about where we are there and have you had any feedback from any hyperscalers or customers?

Victor Peng: Yes, I think so.

I think when you’re talking about the AI engine, I think that’s respect to our Versal product and we do have some – the early Versal development board. So, just to clarify some of the brand names. I think there is good excitement in multiple markets; I kind of alluded to the 5G, but certainly, in data center, that’s being evaluated and also in other markets as well, even in – let’s see one application that even though it’s just in the initial silicon, people are already doing some deployments in terms of a very high-resolution camera, where they’re also doing some image recognition to do some augmented reality for an interesting entertainment experience. And so I think that’s a good indicator of not only the quality of our initial silicon, but also the breadth that people are using AI on that platform, not just in what’s considered the cloud, but maybe, you would call that, some people might call that an edge application, right. So, it’s still early days, but it was – we’re pretty excited about the diversity and the traction that we’re getting.

Christopher Rolland: Thanks, Victor.

Operator: Your next question comes from the line of CJ Muse from Evercore. Your line is open.

CJ Muse: Yes. Good afternoon.

Thank you for taking the question. I guess a question on the restructuring. Can you walk through what is permanent versus temporary and can you help us kind of understand how you will plan to deliver both the operating margins in this more subdued environment as well as obviously invest, I guess most importantly in the coming – as well as the software stack in the coming few years? Thank you.

Victor Peng: Yes, CJ. it’s a good question.

Look, I mean, now when we first started seeing some weakness, we took some proactive actions to control our expenses that’s reflected in the Q3. Really what happened is, late in the year, as we saw that some of these headwinds that we just walked through were more severe and also, I think the ongoing persistent effects of the whole China-U.S. trade situation and the Huawei business that reflected, it was clear that we had to do something that was more structural, right. It was very painful something for us as a company to impact some of our employees. But a good portion of this it is a matter of reducing labor and that’s both from that targeted reduction in force as well as significantly controlling even attrition replacement.

So, that labor component obviously is an ongoing thing. Now, some of the other things that we’re doing just many other actions in terms of discretionary spend, but we also even looked at programs. I think that’s what you’re alluding to. We’ve spent a lot of time thinking about that of course; because our goal and I think we’ve achieved that and how we’re coming out here is to not further impact both near-term business nor degrade our long-term opportunity, which we remain very confident in. And I think you heard me mention in the prepared remarks that we expect a certain level of OpEx savings in the quarter, but we’re doing a tape-out in seven nanometer in the quarter.

So that somewhat offsets all of that. So, we are still very much committed to executing sort of strategy. And I think, again, there’s some difficult decisions here, but I think we’ve struck a good balance of things that will bring us in a more reasonable profitability profile, like you said, in a more subdued, near-term revenue environment, but not in any way materially impacting anything in the future or for that matter, even the near-term business. I do think that as we drive in recovering, grow out of it, those position knows to have maybe more efficiency in the business and leverage, because we will watch very carefully our OpEx even as we get back towards growth trends.

CJ Muse: Thank you.

Victor Peng: You’re welcome.

Operator: Your next question comes from the line of Tristan Gerra from Baird. Your line is open.

Tristan Gerra:
,:

Victor Peng: Yes. I mean, as you know, we really serve virtually all the OEMs that support all the different geographies, including of course, the U.S.

and without getting into specific customers. We do see the broad softness and feedback we’re getting is because they’re also not seeing some demand materialize across the regions and that includes the U.S. I do think that this is not necessarily something that is it’s hard to tell the visibility right now, but I don’t think this is something that’s going to necessarily persist until the second wave comes. It’s just that clearly after they’ve done some deployment, it just appears from both when we talked to carriers as well, the multiple OEMs that there seems to be a pause now and again, we’re – that’s what we see right now. Yes, it’s hard for us to predict exactly the timing of when that rule restarts.

But again, I come back to, when I look at the engagements, we already have going actively in the next wave of equipment. I feel good about that we still have good opportunity there. and when there’s more deployment, the current generation of equipment, then obviously, that could also help our business recover.

Tristan Gerra: Okay. And then could you give us a quick sense of your mix at seven nanometer versus 16 nanometer?

Victor Peng: Yes.

16 is – 16 nanometer is our portfolio there is on track to break all the records that we have and we hold the most successful product family in the programmable space with our seventh series back in the 20 nanometer generation. We’re clearly outpacing that and that’s due not only to the fact that, we are out executed, but the innovations we have with MPSoC, RFSoC and a number of other areas, that’s tremendously successful and that revenue is going to continue to grow for some number of years. Seven nanometers, remember is just still in the sampling stage, right? So, we’re not in the production. But we’re getting very good traction and I mentioned multiple markets, communications. And one area that more of you know, video and broadcast kind of area, data center, we’re getting good looks, aerospace and defense, a lot of strong demand.

But that will take time as it usually does for us in some of these markets to ramp to sort of more meaningful revenue. But we have a lot of revenue already, particularly in the development board. So, a very encouraging sign.

Tristan Gerra: Great. Thank you.

Operator: Your next question comes from the line of Matt Ramsay from Cowen. Your line is open.

Matt Ramsay: Yes, thank you very much. Good afternoon. Victor, I wanted to ask – and I guess it’s a little bit related to CJ’s question on the reduction in force, but more specifically, as you guys look at prudent cost cuts and the like going forward, the level of investment and has that level of investment changed in the Vitis software stack that you guys introduced? And I guess the second part of the question is separate from the investment, how the early engagement being on that software stack with customers across the business.

And if there’s anything to highlight there on that progression, that would be really helpful. Thank you.

Victor Peng: Okay. Yes. Yes, thanks.

maybe, I didn’t touch on that part of it. first, I guess, so we’re going to like to say on a relative basis, some of the labor related productions that we’re doing on a relative basis, we’re doing more in SG&A than in R&D in general, okay. We are also again, continuing to invest in the areas that are critical for our growth. So, I think you’re both making the point that it’s not just silicon roadmap, it’s also what we’re doing on the software IP and so forth and we fully agree. So, my comments weren’t – didn’t mean to sort of imply that we just looked at tape-out.

We are also – yes, we are also focused more on everything we need, all the items we need to execute towards strategy and move into platforms and be a much more mainstream targeted platform. Everything we see in terms of, for instance, Vitis those be dial-ins when we announced new webinars or training, they fill out immediately. So that’s really encouraging. I know at the end of the day, everyone’s – as we certainly are looking for the revenue, but when I look at other things to measure in terms of developers, in terms of just hits we get on various videos that we do in training. It’s all looking very promising.

So…

Matt Ramsay: Thank you. And just as a quick follow-up. In the data center portfolio, I wanted to ask you to give us an update on the traction you guys might be having on the design win side and the SmartNIC space and if that revenue can be material to the company over the next 12, 18 months. Thanks.

Victor Peng: Yes, I think, I kind of mentioned that for instance, Solarflare revenue last quarter was a little higher-than-expected.

I think that was a record for them. It’s still relatively modest revenue. I think that does bode well. And we – that integration is going very well. And clearly, I think the position will get even stronger when we really fully realize all the positive synergies of their expertise in software and system level expertise with our execution on hardware platform.

So, I do think, that the smartNIC opportunity is significant. And I think thinking in terms of a year and beyond is reasonable. And I think it’ll be – it’ll grow for multiple years.

Operator: And your next question comes from the line of Ambrish Srivastava from BMO. your line is open.

Ambrish Srivastava: Hi, thank you. Victor, I just had a question on the ASIC transition that you experienced this time. And you said that this was a – so this is the one-time and it’s done, but when wireless starts to ramp again, why should it not occur again, i.e. you see growth and then you’ll see a headwind again? just kind of help us understand the dynamic and why would this not repeat or would it repeat again, was my first question. And the second was, given the – what seems to be a pretty sizable reduction, what does it say about the longer-term mid-teens growth target that you have laid out for the company? Thank you.

Victor Peng: Yes. look, on the first part, I think when we said that we expected ASIC replacement in the basement. I think from the very early stages when we had strong upside and in 5g deployment, we said that we ordinarily don’t get baseband wins and because there was an early rapid deployment in South Korea and the only way anybody can get the market was using our technology, which is one of the value adds that we had was we now enable people to be agile and get things to market quickly. We had that, but we didn’t expect longevity there. I know it’s a competitive marketplace, everybody hears about that.

but I want to bring people back to, we’ve competed against ASIC at our customers for well over a decade. I mean Huawei has high silicon and has had high silicon for a long time. Clearly, everybody is aware that there was a meaningful impact when we couldn’t ship the Huawei and clearly, we weren’t totally replaced by ASIC by high silicon Huawei. That’s just one example. I mean, I know you guys are familiar with all the other OEMs they have ASIC teams, right? So, this is nothing new.

and I don’t – I don’t take that lightly, by any means either. I think we are able to still win against ASIC, even our own customers, because we are continuing to innovate – innovative with things like RFSoC, with things like Versal on the software and IP side. So yes, look, I mean, could this happen again? It could. but we traditionally have really good strength in radio. We’re innovating, we’re moving rapidly and we continue to be very focused on this business.

So, we maintain that we feel like in the long-term that this is a very big opportunity despite those very significant impacts of the trade situation here. So that was all on the ASIC side, so I’m sorry, can you repeat the second part of question?

Ambrish Srivastava: Yes. Yes. So that’s helpful perspective. Thanks for that.

What I was asking was given the reduction what seems that, I can’t remember the last time we saw such a big reduction for you guys, but what does that speak to the mid-teens growth that you have laid out for the company.

Victor Peng: Yes. Look, I – we’re not, as I said before, we’re not going to give guidance of FY 2021 now. We look to do that in the next call. But what I would say is that we absolutely are committed to getting back to double-digit growth.

I think this is a recognition of the fact that it’s going to come up a little bit more gradually to get to that kind of a run rate. We’re committed to doing that and we’ve recognized that because it is going to take longer. We’ve had to take some difficult steps here, but I think we’re building this to – continue to execute our strategy and fulfill, I think, a very significant opportunity we have not only 5G, but again, data center, our core markets and in automotive as well.

Ambrish Srivastava: Okay. Thank you.

Good luck.

Victor Peng: Thank you.

Operator: And your next question comes from the line of Ross Seymore from Deutsche Bank. Your line is open.

Jihan Shang: Hi, this is Jihan for Ross.

Thank you for letting me ask the question. It looks like DCG, even with some moderating growth in the March quarter; looks to be potentially up 20% for the year versus the prior guidance were up 30%. So, I guess what has changed in DCG growth? Are some of the transitions from a customer proof-of-concept to production actually being moving slower-than-expected previously?

Victor Peng: Yes. Look, I mean we’re not giving you an overall reassessment of that. But I think, the takeaways, it is still growing double-digit.

And in fact, when we close out this fiscal year, that’d be two consecutive years of double-digit. I think in general, it’s still a reflection as you said some of these things like proof-of-concept have taken a bit longer. I think it’s also just, we’re growing the business. It’s an emerging market. it’s not quite scale, where you get the usual puts and takes of certain things are maybe, a little bit slower than you get other upsides, it’s fairly small business so far in an absolute sense, even though it’s growing very well.

And I think I’ve said on a previous call that as we get the higher scale and just more diversity of design wins and different timing of the different programs that we’ll see less quarter-to-quarter volatility. But I do think, for the continued near-term, I think, the better measure to see is where are we sustaining that good double-digit kind of growth and the quality of kind of wins that we get the engagements that we have and on those bases, we’re still feeling very good about the business.

Jihan Shang: Okay. Thank you. And if we just compare as Xilinx’s growth to Intel's PSG business, clearly the company, Xilinx has had some good market share gains in the last calendar year.

So, I guess even within the head face of Huawei challenges. So, I guess can you talk a little bit about the competitive dynamic?

Victor Peng: Yes. I mentioned a few times in my prepared markets that our core markets, it’s a key part of our strategy to continue to accelerate growth in our core markets. And if you look at how that played out, I mean our core markets are growing very solidly, right? And to your point, some of that is share gains, some of it’s also TAM expansion, right? Those markets have different types of profiles, if you will, in terms of how quickly things move to market. But even in those markets, we’re seeing the transitions of Zynq being very, very strong; RFSoC, a strong interest in some early design and activity that haven’t fully played out, just because the time constant tends to be a little bit longer, but it’s a key to our business and has been progressing quite well and we do fully expect to continue to take share, but also grow the TAM, right.

Operator: And your next question comes from the line of Vivek Arya from bank of America. Your line is open.

Jamie Zakalik: Hi, this is Jamie Zakalik on for Vivek. Thanks for letting me ask a question. Is the pace of 5g FPGA replacement similar to the pace that you’ve seen in past cycles and is this a replacement limited to the baseband? And then on the radio side, do you see Marvell’s Avera business as a direct competitor in the digital front-end or is it more a complimentary product?

Victor Peng: I guess first, the thing of how to think about as 5g similar to the 4g or what is the level of similarity? And I really must say, I know that there’s been a lot of marketing hype around 5G, but I really must say it is a radically more disruptive standards, set of standards and sets of technologies.

So, I think it is significantly different, which is why we and many other companies have invested so much and are saying how it’s going to be changed; once it’s fully deployed, how much will it change things from your automobiles, the homes, the IoT, it’s simply not data and voice, right, which works 4G is all about. So, I really do think it is meaningfully different even when you cut through some of the marketing buzz. Now, in our side of it, where also the value we deliver to our customers in 5G is meaningfully different to, meaningfully upgraded, right. A good – a good portion of our products are not just pure FPGAs and our – now state-of-the-art FPGAs are so much more powerful than back in the 4g era. So, I think on both fronts, the opportunity, the magnitude of disruption is larger.

And then what we bring to the table is larger. on the competition side, everybody’s up their game. There’s a lot of people that have been consolidated out. the players left are pretty good at what they do, right, ourselves included. I don’t want to get into specifics about a specific competitor.

All I would say again is it’s not anything new for us to compete with ASIC solutions with ASSP solutions. including ASIC solutions from our own customers, it’s not new. It’s not easy and we have to create real value. We have to provide excellent support, great quality and those are the things that we’ve been doing, and that’s what we will remain focused on.

Jamie Zakalik: Great.

And then on – a quick follow-up, you mentioned one customer, I think that was greater than 10% of sales in Q3. Could you give some details on who this customer was? Was it Huawei? If not, could you give any details on what percent of revenue Huawei was in the quarter and just confirm that you’re still removing Huawei from forward-looking guide? Thank you.

Victor Peng: Okay, so quick clarification. We don’t have any meaningful revenue from Huawei, because there’s still only entities with. So – and we had taken Huawei out starting from the last quarter like comments about Huawei is really about, even on a go-forward basis, even if they were moved from any, it’s pretty clear now.

Given that they’ve remained only in the list as long as they have that, that revenue will never be at the level that we used to have. So, it’s definitely not Huawei, but we don’t share the details of the specific customer for 10%.

Jamie Zakalik: Got it. Thank you.

Operator: And there are no further questions at this time.

I will turn the call back over to mr. Victor Peng, CEO for some closing remarks.

Victor Peng: Okay. Yes. Look, before we close the end of this call, I just want to share that clearly, not where we expect to be if we go back to the start of this fiscal year.

I think the unprecedented change in U.S.-China relations in trade, clearly, has an impact on the industry and specifically, our business and at a time that’s really unfortunate right at the beginning of deployment of 5G. We proactively made some very difficult decisions including the very painful one of doing a targeted reduction in force. But I think that is the appropriate thing to do, given a slower, a near-term revenue growth trajectory. And I think what that does do is, again position us very well once we get back to a growth trajectory in terms of efficiency in the business and leverage. But I think it’s important not to lose sight of the fact that our core markets as we’ve discussed a few times, both in prepared marks as well as in the QA is very, very solid.

It’s growing very well on an annual basis. It’s a core part of our strategy to accelerate that growth. At the same time, data center business, while it’s an emerging market and still not fully at scale, tends out some worthiness [ph] from a quarter-to-quarter basis, it looks like we will achieve double-digit growth on an annual basis for two consecutive years. And we continue to see greater opportunity there. And even with 5G, we’ve talked about that quite a bit.

It is important to remember we’re still in the relatively early innings on 5G and it started out much stronger and earlier than people predicted. Now, we’re having a soft spot, but we’re engaged. We have the right kind of engagements with top OEMs and there’s still may more innings to come. So, we remain bullish in terms of our overall long-term outlook in those growth drivers. So with that, thank you for being on the call and turn it back over to Matt.

Matt Poirier: So, thanks for joining us today. We’ll have a playback of this call beginning

at 5:00 PM Pacific, 8:00 PM Eastern time today. For a copy of our earnings release, please visit our Investor Relations website. Our next release date for the fourth quarter of fiscal year 2020 will be Wednesday, April 22nd after the market close. Please note that we will be attending the Goldman Sachs conference in February and the Morgan Stanley conference in March.

Both events will be webcast live and will be accessible through our IR website. This completes our call. Thank you very much for your participation.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating.

You may now disconnect.