Good afternoon. My name is Rachel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Semtech Corporation Q4 Fiscal Year 2014 Earnings Release Conference Call. (Operator Instructions). Thank you. And I’ll now turn the call over to Sandy Harrison; you may begin your conference.

Thank you, Rachel, welcome to Semtech’s fourth quarter and fiscal year 2014 yearend conference call. I’m Sandy Harrison, Director of Business Finance and Investor Relations. Speakers for today’s call will be Mohan Maheswaran, Semtech’s President and Chief Executive Officer; and Emeka Chukwu, our Chief Financial Officer. A press release announcing our unaudited results for the quarter ended January 26, 2014 was issued after the market closed today and is available on our website at www.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, as well as the Other Risk Factor section of our most recent periodic reports on Forms 10-Q and 10-K filed with the Securities and Exchange Commission. As a reminder, comments made on today’s call are current as of today only. Semtech undertakes no obligation to update the information in this call should facts or circumstances change. In addition, the financial statements released today as part of our press release and earnings conference call are preliminary and include a number of special charges for impairment and restructuring related expenses. These estimates constitute forward-looking statements under applicable securities laws. The final special charges reported in our Form 10-Q for the fourth quarter of 2014 could differ preliminary estimate that we announced today. Any change in amount of these special charges could have an effect our net loss for the fourth quarter of 2014. During the call, we may refer to pro forma or other financial measures that are not prepared in accordance with Generally Accepted Accounting Principles. A discussion of why the management team considers non-GAAP information useful, along with detailed reconciliations between GAAP and non-GAAP results, are included in today’s press release. With that, I’ll now turn the call over to Semtech’s Chief Financial Officer, Emeka Chukwu.

Thank you Sandy. Good afternoon, everyone. Semtech’s revenue for the fourth quarter of fiscal year 2014 was $126.5 million, slightly ahead of the midpoint of the revised range we provided in our December 18, 2013 update, and represented a sequential decline of 10% from Q3, and a decline of 16% from Q4 of fiscal year 2013. The quarterly decline in revenue was primarily attributable to the on growing weakness in CapEx spending in the optical long-haul communication infrastructure market. And the seasonal softness in the consumer market we typically see in our fiscal Q4. Full year fiscal 2014 revenue was a record $595 million, up approximately 3% from fiscal year 2013. The increase was attributable to growth in our Gennum product group. In Q4 of fiscal year 2014, 73% of shipments were derived from customers in Asia, 15% from North America and 12% from Europe. Also in Q4, the direct sales represented approximately 53% of total revenue by wire distribution net up 47%. Booking improved throughout the first quarter and our book-to-bill was solidly above. First book is accounted for 47% of shipments during the quarter. Due to which CapEx spending in the long-haul optical communication infrastructure market and the resulting steep erosion in ASPs and a potential transition to internet solution by some of our customers. The Company made a strategic decision in the fourth quarter of fiscal year 2014 to reduce the level of its investment in the long-haul optical market. The Company also reorganizes for our group to take advantage of all products synergies and align the spending to current demand levels. These actions included reducing worldwide headcount by approximately 6%. Terminating certain new product development associated with the long-haul optical market and suspending some discretionary spending. As a result in Q4, the company recorded special charges…

Thank you, Emeka. Good afternoon, everyone. I would discuss our Q4 fiscal year 2014 performance by end market and by product group, discuss our fiscal year 2014 performance, discuss the reorganization of our product groups and then provide our outlook for Q1 of fiscal year 2015. In Q4 of fiscal year 2014, we achieved net revenue of $126.5 million; it was down 10% from Q3 of fiscal year 2014, down approximately 16% from Q4 of fiscal year 2013. We experienced weaker demand from the communication, industrial and consumer end markets while demand in the enterprise computing end market increased. For the quarter, we posted non-GAAP gross margin of 59.6% and non-GAAP diluted earnings per share of $0.23 per share. Our revenues by end market were as follows. Communication revenue decreased and represented approximately 22% of total revenue. High end consumer revenues decreased and represented 28% of total revenue of which approximately 18% was attributable to handheld devices and approximately 10% was attributable to other consumer systems. Revenues from the industrial end market decreased and represented 26% of total revenue and revenue from the enterprise computing end market increased and represented 23% in total revenue. Now let me discuss the performance of each our product groups. In Q4, our Protection business declined 11% sequentially and represents 32% of Semtech’s total revenue. The decline was primarily driven by seasonal softness in high end consumer and computing markets. We believe the continued growth in the number of ports required in protect Protection increasing of speeds of these ports and the increasing sensitivity of advanced lithography devices to ESD events provide continued future growth opportunities for Semtech in the high performance Protection market. Q4 was once again another record design win quarter for our Protection business. As we solid design wins activity for regions.…

And your first question is from the line of Steve Smigie with Raymond James. Your line is open.

Great, thanks a lot guys. Just real quickly on the sensor products, I hope if you could talk a little bit more about the touch sensor and what is it? Does that actually does and how it is may be unique from other touch sensors?

Yes, Steve, it is a new technology. It is new capability. We are under NDA with customer until they released it is like can’t give you too much details unfortunately but it is very different. It has been in development for about three years with the customer and it is very specific to their platform. So it is a new approach, it remained to be seen how successful that approach will be with the end consumer but it is promising.

Okay and then with the proximity sensors, can you give us any more detailed on what type of proximity sensor that it is? And provide some other –

Yes, proximity sensors are essentially just detecting the difference between human and other materials like table and stuff like that. When you have an LTE based radio in a tablet or any type of mobile device, it is very important that the power is reduced when you put the device on your laptop or something like that so our proximity sensing devices are somewhat differentiated. They have a very good sensitivity and they also have very good immunity to our signals, we have seen to be getting very good traction there.

Okay and then just finally on the margin side. Can you talk a little bit about how we should think about the OpEx dollars going over the next couple of quarters or we still see some dollar decline as the restructuring actions take place?

Yes, you have probably seen as never before but I think my guidance will be that we would expect operating expenses to be in the $50 million to $53 million range for quarter.

Okay, great, excellent.

Your next question is from the line of Ian Ing from MKM Partners. Your line is open.

Yes, thank you. Just a clarification on the way the old advanced com segment stabilizes. I hear you’re going to talk about long-haul sureties going to $30 million a year. I thought the top sync products were about 50, 60 – $50 million to $60 million a year, so I’m getting about $20 million a quarter, which is where you are right now. Is there something I’m missing here, or are we shipping below end demand right now?

The top sync revenue is much more than that. And I think we are closer to $20 million a year in a number.

Okay and any implications on gross margin. I thought these are sort of richer mix products in long-haul SerDes or you might be able to sell some written down inventory?

The gross margin in our SerDes business were very high. They are being offset by the strength in our Gennum business. So ordinarily with the decline in our optical long-haul business we want – one would expect the company’s gross margin to come down but I think because of some of our other businesses are doing so well and I think it is offsetting that. Emeka, do you have any –

I think I just want to make the point with the decline in the 40 gig or 100 gigs that headwind to gross margin but I think because our Gennum business is actually doing very well and as Mohan did allude to the timing business is also very high gross margin, it is also doing very well. I think they are really helping us to keep our gross margin towards the high end of our target range.

Okay. If I could fit one more in on Protection April guidance, people obviously expect some strong seasonality in smartphone. You’re also talking about wearable and tablets, could you talk about those little bit more about those opportunities? And can they really move the needles versus smartphone?

Yes, well we hope so. I mean we got good traction. The question is really will be consumers end up buying these things. The good news is that I think smartphone business obviously Samsung got a new launch coming up and there is some other opportunities – with other manufactures and on top of that these wearable and tablets and all these are doing quite well for us. So we have good design wins, good momentum, it is really just a question I think of how well adopted those devices become.

Okay, thank you very much.

Your next question is from the line of Harsh Kumar with Stephens. Your line is open.

Hey, guys, this is Richard in for Harsh. Just wanted to ask a question on your booking. You said it improved during the quarter. Is there a particular product or end market that you are seeing the strength is coming from?

Well booking out of our Gennum business has been very strong. I would say driven mostly by the – well I see all areas, the optical area from the base station, very strong, the datacenter side strong, even the video side is doing okay I’ll say. Protection obviously because of its – as I just mentioned we are starting to see the pickup of the consumer business as well is doing quite well and then our – in general I would say wireless and sensing also starting to pick up so it’s really pretty broad. But I would say specifically the consumer and enterprise computing segment is doing very well.

Great and then moving on to the Gennum product line. Can you give us a sense on what you’re seeing from the competitive landscape there?

Nothing very changed, I think on the optical side the datacom, enterprise computing side we see TI, I think Mindspeed a little bit, Maxim same competitors and then on the video side it is mostly Mindspeed and TI, no new competitors in those areas. And the Gennum business is continue to do very well.

Great, thank you.

Your next question is from the line of Andrew Huang with Sterne Agee. Your line is open.

Thanks. I just wanted to kind of take step back and looked at fiscal 2015 for full year. So clearly you are having some big issues with advanced communications but should we think about the rest of the business – there is going to be enough strength in the rest of business to basically get flat in revenue for the full year? Is that kind of good way to think about it?

That’s a good way to think about it, Andrew. We are going to try obviously; a lot depends on how strong the second half is and specifically some of the new areas that I talked about. We have number of good opportunities and good things happening. For example on the touch sensing which I talked about, the proximity sensing and the wireless side, protection side of the smartphone again. And we have a bunch of other areas that I think are potentially good growth drivers for us in the second half. But yes we do have this headwind; obviously we got large revenue to offset yes.

Okay. And then along those lines like if you do manage to be flat for the year, then that would imply pretty steady ramp up each quarter. So should we expect that there would be some opportunities for operating leverage as that happens throughout the year?

Yes, so definitely not is against plan, I got this original one, we took some of the actions that we took with regard to operating expenses and obviously it was to respond to the current state of demand that we see now but more importantly, we took those actions to position us very nicely to really grow our earnings much faster than the revenue growth. That’s the opportunity, that is decline and hopefully that comes up.

Thank you very much.

Your next question is from the line of Doug Freedman with RBC Capital Markets. Your line is open.

Great, thanks for taking my question, guys. Mohan, could you focus in on the Protection business for us a little bit. If that business in the back half of last year definitely struggle a bit as you mentioned the handsets some inventory. You are guiding it if I heard correctly but we are still long way from getting back to sort of peak revenues that you saw there. What will it take for us to see that happen again?

Well, so if I go back to the peak was back in Q1, FY14, Doug, really the quarter before that the Q4, FY13, Samsung was building up lot of inventory for its S4 release. And there was a huge expectation of what that demands going to look like and so in the end I think everyone realize that in the first half it was too inventory builds, the demand wasn’t strong and that affects everybody who had any Samsung business in the second half I think. What we now gone through that now we are seeing the growth in Q1 again coming from not only build for Samsung but other product devices. But this time I think the demand is more muted. I don’t think there is – the quite the same level of expectations. So as I mentioned in response to another question, we have a lot of design wins and lot of different applications, wearable, different types of smartphones and different communication equipment and I am pleased with the little bit more diversity in the wins and obviously if one or two these smartphones does very well then I think we can back to those high numbers. But it’s going to be a little bit more challenging I think to get back to the $58 million – $68 million level without one of those main drivers.

All right. If you could also look at – when we look at our business, can you give us a sense of what you think seasonality is going to look like? Are there things that you would expect to happen this year that might alter what we have been modeling for the rest of the businesses in a seasonal nature?

For sure this year we expect the second half to be quite strongly driven by our touch sensing platform. Customers that I mentioned they will be ramping in Q3 and so that will definitely drive second half strength for us. And if that occurs also I think the design wins in the proximity sensing and the wireless side will both materialize in the second half. So we probably are going to go back to what was historical seasonality which is Q2 and Q3 particularly much strong I think than end of the year. And in the previous few years, comp which is a bit lumpy has been somewhat challenging to get any time of seasonality forecast going but I think this year we should see a strong Q3.

Great, thanks for taking my questions.

Your next question is from the line of Rick Schafer – Oppenheimer & Co

Yes, thanks, guys. I guess my first question’s on the – back on the optical business for a second. When do we expect the optical business to bottom out? Or I guess how fast or when do we get to that $30 million run rate?

What we have modeled then that’s for Q1, Ric, so that’s what we modeled in, we are basically that we have the bottom and we will see what happens after that.

Okay, we are treating optical is upside, it sounds like if anything could be better than that – is that the right way to think of it?

We believe so. It is difficult to say. What’s happening in our optical business we have the (Inaudible) and the demand obviously dropped in the second half and in this business, at least in my experience in this business, many of the optical systems don’t move so quickly? It is not like a consumer business where you get designed out so quickly so my sense if a lot of carrier CapEx spend that comes back then we might see the demand come back to some extent but – we don’t want to closed up way, we have reduced our investments in this area. It is strong for us because of the move up Huawei to an internal ASIC and so my sense is that I don’t think it is such an attractive space and therefore I think it is better to model it up at lower number and then we plan on other areas driving the growth.

Got it, got it. And my second question just real quick just to clarify that – I know last quarter you talked about a push out of one big order from one large new customer. Is that the same customer that we are talking about for touch in the third quarter ramping?

Yes.

Okay.

They just moved up by six months basically.

Got it, got it. And my last question is just you guys have obviously got a pretty good successful M&A track record, I mean big of rule is M&A going to play in that billion target you threw out there for revenues? And sort of if you could give us any color or kind of steers towards what kind of technology potentially if it is interesting to you guys?

Well, I think it is still going to play an important role in our future growth. We have really transformed the way Semtech looks today. Our competency, our capabilities, our product lines, our new customer base, really we’ve transformed that and SMI was the first deal and while they have some challenges now we still have lot of competencies that we acquired through that acquisition that are helping us in many areas. So I think it’s important for us to continue to do that. That is our goal to become a diversified analog company and continue to drive that approach. It’s important for us to execute organically as well, and I think we’ve always said that we won’t just go do acquisition to offset an issue we have in the company. We have to fix the issue first and then get ourselves back on track before we can acquire new growth engines. And so I think with what we have going on in the company the beauty is there are so many new exciting emerging applications spaces that we are touching. I think we are going to find some new opportunities to acquire some assets in potential companies. You can look at the wireless side, you can look at the sensing side, you can look at when power comes back, there is also a lot of additional product areas and IP areas we haven’t really participate in the past. And I think they are important for us to participate in the future. So we will see. I don’t want to give you any specific areas Ric.

Okay, all right, thank you.

Your next question is from the line of James Schneider with Goldman Sachs. Your line is open.

Good afternoon and thanks for taking my question. With regard to the proximity sensors, the ramps that you have coming up, are that primarily with one customer or are that across broader suite of customers we can talk about? Exactly how broad that will be helpful?

Yes, so let me clarify Jim. So we have two areas. One is proximity sensing and other is touch sensing side. On the proximity sensing side we have a number of products they are going to many different customers, many different application areas. The one that are most likely to drive the revenue are on the tablet side, handheld and kind of mobility kind of application on the proximity side. On the other side is the touch sensing side. And the touch sensing side is a specific customer that we develop a product with over the last few years that is going to build – has already build this capability into their smartphone and will release – due to release the phone in the second half of last year, and that pushed by six months and they are going to release their first phone with this capability, pre-production Q2 and then release it in Q3.

Understand, so just to clarify, you are seeing the benefit of proximity even now in the first quarter?

Yes.

Okay. And then as a follow up, just want to get a sense on what you’re seeing on the distributor side of things? You talked about the channel being under inventoried? Have you seen any evidence that the POS is picking up some materially? And if so in what geographies are you seeing that?

POS seems to be quite strong at the moment and I would say it is very broad the regions that seemed to be doing best actually are Asia, Japan, North America, are the ones that are seemed to be doing the best and then Europe also so it is fairly broad, it is not one specific area. It is a quite positive sign actually.

That’s helpful, thank you.

Your next question is from the line of Craig Ellis with B. Riley. Your line is open.

Thank you for taking my question. Mohan, I wanted to go back to the three new product groups for the higher level question. Can you characterize the growth rate that you be satisfied with those three may be as function of TDP and as we look across the three new groups, can you help us segregate where we might see the best growth and which would be the run the list.

Yes, so first of all obviously as a company we normally stay– we wanted to grow three percentage point above industry, this year will be a little more challenging to do that just because of our advanced comp headwind. And that is Craig goes back to our signal integrity product group. So it will be more challenging for that group to grow. However, our Gennum business is really growing very nicely. And I expect that to continue to grow double digit percentage may below low teens. So that will somewhat offset the decline in our optical long-haul business. The fastest growing business without question if thing go to plan will be our wireless sensing and timing business because all of those sub product groups are have new growth engines and new traction and so we should see really I would say in the 20% type of range in a lot of sensing and timing business. And then the Protection Power and the High Rel business, Protection probably in the low single digits and the Power and High Rel hopefully in the high single digit and then accelerate as we get more traction, will be the way I would look at it.

That’s helpful. And a follow up on protection. Through your last year there was an emphasis on penetrating some of the local China smartphone manufactures, is that part of the growth strategy this year? Or should we really be focused on some of the things that you mentioned like new applications as wearable?

I think both. We do have good relationships in Asia. We have good traction in the China region and so I do expect to get some traction there and some growth there. We don’t know enough about how successful their phones are doing in other parts of the world but certainly it is our plan to be successful in China.

Okay and then my last question. And it may be more for Emeka, at a time on the same theme working at the business with the three product groups. Emeka, why wouldn’t there overnight or immediate period of time be an opportunity for another round of expense tightening? As the company moves to this new structure after other group have some synergies together and you can really look at where the – core capability are driving some leverage of this core capabilities?

Right, so like I said in my prepared remarks, Craig, in working out expense reduction, I think (inaudible) to account, do remember that in the first half of last year, OpEx run rate was in the range of $60 million a quarter and now we are second down from $60 million to $ 50 million – $53 million so there is a significant reduction and I know it is probably I think I give a lot of credit to our team here, we identified the issues, we met this client we organized their businesses and that the benefit of follow up that is already incorporated into the OpEx guidance that I have given.

And let me add Craig, I think as we are at company very focused on return R&D and if we don’t see return on R&D materializing then we will change things. But I think at the end of the day we are growing very fast, now the company is diversifying and we see plenty of opportunities for us to keep driving new innovation into the market place. So we should continue to do that I think.

Okay, last one for me. I thought when I heard your response to the earlier question from Ric on M&A, Mohan, that there seemed to be more of open door towards doing something than what I thought I detected last year which was I thought a greater emphasis on debt pay down. Has there been a change at the margin and how are you looking at M&A? And if so how significant is it?

No. I wouldn’t say it is changed. It is just fine. We acquired Gennum, I look for two years for us to integrate an acquisition and to get the benefit of it and start to really drive the strategies supplies and then I think with Gennum that’s doing very well. So obviously we have this bit of headwind which has changed our thinking a little bit in a sense that we look around look at the optical long-haul space and there are some areas that are less attractive now to us. But other than that now I think we’ve always been open to it. We just have to find the very right strategic fit and then the right financial fit also.

Make sense, thanks.

Your next question is from the line of Liwen Zhang with Blaylock. Your line is open.

Thank you for taking my questions, the first one is in terms of gross margins. You mentioned earlier gross margin would stay – likely stay at the high end of the target range. Is this for long term?

No, I struck in more by the expectations for probably this fiscal year, I guided for this quarter our gross margin would 59% to 60%, I would probably expect gross margin to be in that range for the year. As you know, Liwen, the key driver for our gross margin is the mix of revenues. So if there is a quarter where you have more of bit mix towards the consumer and high end computing, you probably feel a little bit more pressure on gross margins and if we have some more of mix coming from industrial and communications, probably half more of it positive buyers towards the high end of that range. So in the next few quarters I am expecting us to play within the 59% to 60% range.

Okay, thank you, and next one is to Emeka. I’m sorry, I’m not an engineer. Can you tell me something about touch sensing products; is this a function that’s similar to hovering feature?

Yes, I would say similar. That’s all I can say Liwen. As I said we are under NVA, I can’t give you any more technical details on this. But it is differentiated feature. It doesn’t exist out there today as far as I am aware.

Okay and I believe your product is like a two channel ones and some competitors’ products are one channel. What’s the difference? Maybe you can’t teach me if you don’t want to answer on the call. What’s the difference between one two channel and a one channel?

Well, it is just the way that the sensing is being done on the type of display and the different features set. It is really simple as that. I think each manufacture has their own architecture and they try to do different things. And some requirements just require two channels some require one.

Thank you.

(Operator Instructions). Your next question is from the line of Steve Smigie with Raymond James. Your line is open.

Great, thanks for the follow up opportunity. Mohan, on the growth on a power side you showed reference to future growth in Power and High Rel together, just on power and could we see that portion more like a double digit type growth?

Well, we should. I think it will take probably another I want to say six to eight months before we start to really get the traction we need. And the power business is driven by mostly giving out new products. And so we have a lot of new products that are come out last year. And we have got lot more new products coming up this year. And as we get those new products out and we get design win we will start to see the revenue pick up. The reason why I am more bullish about the power and high rel business than I have been in the past is that we’ll always promise to get new products out but we haven’t really got out. Now for the first really we are starting to see the products come out. And so we are seeing new switches, different type of switches, LDOs, different types of regulators, MOSFET driver, just a whole bunch of different types of products coming out that are being targeted to different application spaces. And this is going to I think give us the opportunity to grow at a faster rate than it’s being for quite sometime.

Okay and then just with long-haul communications portion, can you talk a little bit what is still there? I mean is there some 40 gig revenue and I know you are not investing anymore; there is still some 40 gig rollout so that you translate into the datacenter or something like that?

Well, let’s be clear. The datacenter side we are still investing in and we are doing 40 gigs and we are doing 100 gig and we are doing probably beyond that. We will continue to invest in that space. But the products that we are not investing in are the 40 gig, SerDes components that came out of the SMI acquisition. We already target that long-haul space and so it is handful of customers and the ongoing revenue stream is both 40 gig and 100 gig and it is existing line cost, existing infrastructure, we believe that those – there will be replacement, there will be add on equipment for those networks and systems and as I said quite often when you have this internal architectural change shift to internal ASIC or other products what happens is once they really deployed in the field they may see some issues, they may need to go back to the first generation solution. All of those could drive upside for us on the optical side. But I wouldn’t plan on it, I mean our plan is at the moment to say look –that’s kind of bottoms out unless just to leave it to that and then move on we will see and part of the reason for that is the carrier CapEx push up is being going on for a while now. It is – I think this is now third or fourth quarter I have been mentioning it so I don’t that we should just hope that it is going to come back. When it comes back we will see with what transpires.

Okay, if I think just last one in just, within Gennum outside of the broadcast business but cost to data recovery, PMD, can you talk a little bit about what products in there will probably the addition drivers of the next year?

Well, they are all doing very well. I mean the back plan CDRs products are doing very well. The low power CDRs doing very well. So I think those are going to continue drive growth for us. The PMD products are doing well. Amplifiers, drivers are also product all are doing quite well. So at the moment part of it is driven by the China infrastructure deployments. I think we are gaining some share in some of these areas. And I think that because of the technology that we Semtech have been able to bring to the table and the competence we have been able to helped with the Gennum team and sales channels also and relationship I think we are going to see more momentum in these areas.

Okay, great, thank you.

Your next question is from the line of Ian Ing with MKM Partners. Your line is open.

Yes, sorry if I missed did you report the number of designer wins in the quarter and the number of new products and how much should we rate that given your advanced comp restructuring?

We did report it. I had in my script, design win numbers and design new products.

From the design win perspective it was – third quarter 2398, new design wins or it is followed by new products. New products on the quarter we introduced 89

That for the year.

Outside for the year.

We will get back to you on that.

We will get you on follow up again.

Lots of that is outside the advanced comp 40 gig and how many gig side?

Okay, so record design wins despite the advanced comp exit, okay, I got it. Thanks.

There are no further question at this time. I will turn the call back over to our presenters.

Okay, in closing fiscal year 2014 was a mix year for Semtech. We achieved record revenues, released many new products, achieved record design wins and reduced operating expenses to better align our spending with demand. We also maintained our non-GAAP gross profit margin of high end of our target range. Our focus for the coming year will be to invest in new areas to grow the top line and execute on our cost reduction objectives as we strive to achieve our long-term operating target model of billion dollars in revenue, 60% gross margin and 30% operating margin on a non-GAAP basis. We believe our end market balance, customer diversification and refined focused with the three new product groups will enable us to continue to return value to our shareholders. With that we appreciate your continued support of Semtech and look forward to updating you on next quarter. Thank you.

Ladies and gentlemen, that concludes today’s conference call. And you may now disconnect.