Good afternoon. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Semtech Corporation Q4 FY 2015 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] Thank you. Sandy Harrison, Director of Business Finance and Investor Relations. Sir, you may begin your conference.

Thank you, Lisa and welcome to Semtech’s conference call to discuss our financial results for the fourth quarter and fiscal year 2015 ended January 25, 2015. I am 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 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 other Risk Factors section of our most recent periodic reports on Form 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. 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 will now turn the call over to Semtech’s Chief Financial Officer, Emeka Chukwu. Emeka?

Thank you, Sandy. Good afternoon, everyone. Before I proceed with the results of operations for Q4 of fiscal 2015, I would like to provide you with a summary of key strategic events that have recently occurred. First, we implemented a new enterprise resource planning system based on the SAP platform. Second, we have made a number of strategic investments including the acquisition announced earlier today of Triune Systems. Third, we have made a decision to further reduce investments in the businesses associated with our Sierra Monolithics acquisition made in 2009. At the beginning of Q1 of fiscal 2016, we successfully transitioned to a new enterprise resource planning system based on the SAP platform. We have now been conducting our operations in SAP for the past five weeks. And so far, there has been no major technical issue. Over the past two and a half years, we have invested approximately $28 million in the project and expect to derive several benefits from the new system. Some of these benefits include productivity enhancements driving operating leverage as we scale the company, enhancing our interactions with our customers and suppliers, and supporting our strategic activities. As a result of this transition, in Q1 of fiscal 2016, we expect to incur approximately $3 million for depreciation and initial support of the new ERP system, which will then decline to approximately $2 million in Q2 and $1 million thereafter per quarter. In the past two months, we have made a number of strategic acquisitions. In January 2015, we acquired the assets of EnVerv Incorporated for $5 million, which we funded by drawing on our existing line of credit. These assets provide us with innovative long-range powerline communications technology, which complements our current long-range wireless technology. Also as announced today, we obtained Wireless Charging Technology with…

Thank you, Emeka. Good afternoon everyone. I will make a few brief comments on the implementation of our enterprise resource planning system, discuss our Q4 fiscal year 2015 performance by end market and by product group, discuss our fiscal year 2015 performance and then provide our outlook for Q1 of fiscal year 2016. As Emeka stated, we are pleased to report [indiscernible] our new SAP enterprise resource planning system at the beginning of FY 2016. The system is up and running and operating as we had expected and we have successfully transitioned away from over 25 years of legacy systems and databases. This has been an approximately two-year $28 million resource-intensive journey for Semtech, which was absolutely necessary for us to scale in the future. We believe that our robust and scalable ERP platform is a critical component for our future growth as it enables us to more rapidly integrate acquisitions into Semtech. Additionally, we believe the automation efficiencies and capabilities we are expecting to gain from SAP will help us to improve our productivity, execution and our overall performance in the future. Now let me comment on our Q4 FY 2015 performance. In Q4 of fiscal year 2015, we achieved net revenue of $130.4 million, which was a decline of 12% from Q3 of fiscal year 2015 and up approximately 3% from Q4 of fiscal year 2014. We experienced increased demand from the industrial end market, while demand from the enterprise computing, high-end consumer and communications end markets all decreased from the prior quarter. For Q4 fiscal year 2015, we posted non-GAAP gross margin of 60.1% and non-GAAP diluted earnings per share of $0.34 per share. In Q4 fiscal year 2015, net revenue from the industrial end market increased from the prior quarter and represented 30% of total revenues.…

[Operator Instructions] And your first question comes from the line of Craig Ellis from B. Riley.

Thank you for taking the question. My first question is just on the impact of Triune to your fiscal first quarter. What are your assumptions on revenue and operating expense from that deal in the income statement?

Craig, so the revenue assumptions for Q1 is not that much earlier, probably in the range of about half a million dollars, and operating expense is probably going to be about half of that. So the Triune Systems, their numbers are not really that significant in the Q1 guidance.

Okay and on the deal, the press release stated you expect modest accretion this year, is that on a full-year basis or is that in reference to a particular quarter later in the year?

No on a full-year basis we do expect about $0.05 of earnings from this acquisition.

Okay and then the second question I have is on operating expense, for the operating expense guidance that you gave for the quarter, does that incorporate the 1.5 million per quarter benefit that you are getting as you discontinue your SerDes initiatives?

Yes, Craig, everything is incorporated and I think in my prepared remarks I said as we look ahead for the total of FY 2016, when everything is said and done we would have averaged on a non-GAAP operating expenses of $54 million to $56 million. However, as per the guidance, it starts off a little bit higher in Q1. And then it works its way down as go through the rest of the year.

Okay, thank you and then the last one will be for Mohan, and I will make a two-parter here. Mohan just looking at the top line guidance for the first quarter I think typically the business grossed closer to 5% or better, and the midpoint looks like 2%. Why wouldn’t be – we be closer to that midpoint. And then three months ago, I asked you about long-term growth in the portfolio and I think you said wireless sensing would be one of the bigger drivers for this year. Given the portfolio changes, is that still the case. And if there are other key drivers, can you please highlight what those are?

Yes, so first of all on the Q1 guidance, obviously the Korean smartphone manufacturer, we have put in some increase, but it’s fairly modest and a lot depends on how well the new phones at Samsung and LG do. And I think, we’ve learned from the couple of years and they have learned that having very large expectations and building inventory and those type of things is the wrong way to manage through their expectations. And so, this a little bit more modest expectation that that. And I think in the China infrastructure build, we’re starting to see that pick up a little bit, but I think its going to be more backend loaded and more of a Q2 event, so that’s really why the modest Q1 guidance. And then with regard to growth drivers, I think on LoRa wireless and proximity sensing are still two of our fastest growth engines and they’re going to continue to grow. Although they are -- especially the LoRa wireless is more of an industrial wireless place. We’re just going to take longer to generate revenue. Obviously with the addition of Triune Systems, our expectation is that the wireless charging platform, both in the industrial and the automotive and some of the wearable applications will be a fast growing new engine for us. And then of course we have the exposure to the 100-gig datacenter and base station side of things and PON side of things on the optical business. One of the beauties really I think with the power management business now that we have some new growth engines within that is that I think we should see also a little bit more growth from our power business this year because of the Triune acquisition just the pull through of the other components the power components around the wireless charging platform, so we should see some growth there, and I think also on protection, even though there is softness in the Korea side, we are seeing some good growth there on the China - from the China region. So that’s encouraging and then video surveillance is also another area where we are expecting good growth.

Thanks for the very detailed color Mohan.

And your next question comes from the line of Rich Schafer from Oppenheimer.

Yes, hi, thanks. Just a quick follow-up on Triune, maybe [indiscernible], but could you give us an idea of the overall magnitude of revenues you expect to see this year from those guys or maybe Emeka or Mohan if you could walk us through sort of how those blend into the model in the next - looking forward the next two or three quarters I guess through the year?

So I think the top line expectation that we are expecting now from both acquisitions that we’ve announced, the one in January and the one today, is that they should contribute revenues in the range of $10 million to $20 million in this current fiscal year. Even though we have said that we do expected it to be more backend loaded, but in terms of the model, we don’t expect these two businesses to have actually very nice gross margins that are at or above the high end of our target range. The operating expense is definitely very reasonable and so we do not expect to see any change to the target models of 60% gross margins and making good progress towards our 25% to 30% operating margin on a non-GAAP basis.

Got it. Thanks. Mohan you mentioned the Microsoft, Nokia 3D touch business, I know you said near to medium term that sort of I guess it’s kind of stalled. But maybe can you define or give us some more color on what near to medium term is, how soon could you start to see revs maybe outside of that customer if you want to call that, I guess how long could - before we see real revs there?

Well, I think the challenge Rich is that we have to find now I know that our customer that’s willing to engage with us and our partners on the software side, and that - it maybe faster, but I don’t want to set expectations there based on history. We need one of the larger Tier 1 smartphone manufacturers to really adopt the technology and then go with it in a big way. It’s not out of the question that some of those - the technology is actually being demonstrated at Mobile World Congress this week, but there is a long - I think there is long path from showing the technology and implementing it in your smartphone. So I would say it’s at least 12 months, Rick maybe 24 months is probably more realistic.

Great, that’s really helpful. And then my last question is just you mentioned the China branded phones being a source of strength. Can you give us a sense of what the dollar content is there for you guys versus say it through a largest handset customer?

I think actually it’s kind of similar to what we have in the Korea phones are lot depends on the - it is high-end phone or medium-end phone probably between $0.50 and $0.70 Rick, something in that range.

Okay, great. Thanks a lot guys.

And your next question comes from the line of Steve Smigie from Raymond James.

Great, thanks a lot guys. I just wanted to follow-up on the comments on the ERP system, so again you said that the cost for that would be declining throughout the course of the year, again that’s included in your $54 million to $56 million OpEx guidance, is that correct?

Yes, that is correct.

Okay, great. And so you did not do buyback I think you said this quarter would have you saw $50 million authorized would that pick-up again in the future or since you use some cash here in acquisitions maybe take a pause on that for a little while?

Yes, we do expect to pick it up and the reason we wouldn’t active stock, during the past quarter was where we actively holding the negotiations for the acquisition of Triune Systems, so we chosen all to participate in the market.

Okay. In terms of the - say I like you going back to the four segments here with protection and power are you going to provide sort of historicals on this segments, so we can get some sense of how you guys are now bucketing those segments?

Yes, we will do that.

Great, and then just on the proximity sensors I think you got a lot of traction on the laptop you have been talking about the handsets and you mentioned it in your caller. How quickly can that handset portion for the proximity sensor ramp?

While the tablets are ramping and the proximity sensing will ramp in smartphones now this year quite nicely, actually the only challenges which smartphones are going to actually have the proximity sensor in them and which will not. Not all the phones will have it implemented. So we are just kind of waiting to see which ones will had them implemented.

Okay. So I’ll just take one more and just on the wireless charging it sounds like you are going to do industrial and wearable, but didn’t really sound like you are going to go after the handset market, is that correct?

Well the plain technology actually, platforms are both transmitters and receivers, they can go on both end, the portfolio also has a range of power options, so its configurable from 0.1 watts all the way up to 20 watts and as I mentioned as very high power capability as well. So the option exists there for us to go after almost any segment. I think its more important for us though to focus on the segments where we believe cost and integration of the platform itself are not the major focus for the customers and so I think an automotive applications, industrial applications and variables kind of make the most sense for the differentiators that we have. So we will learn more about it, obviously its early days for us as we’ve just closed the deal, but our focus is probably going to be industrial automotive and variables.

Okay great. Thank you.

And your next question comes from the line of Gabriela Borges from Goldman, Sachs.

Great. Thank you so much for taking the question. I think you mentioned $0.20 in non-GAAP EPS accretion for the out year, maybe you could talk a little bit about the level of confidence in achieving that target and what the biggest swing factors would have to be for market adoption in the two acquisitions that you just announced in order to hit that target. Thanks.

Well so Gabriela if I talk about the wireless charging side of it, our expectation is that there are increasing power requirements as devices get bigger, bigger phones and bigger displays, people wanting to charge in multiple locations and the convenience of having a wireless charging capability versus having wires around there. So the market is expected to grow quite nicely over the next three to five years both on the transmitter side and on the receiver side and so our expectation is that with the multi-mode dual mode and tri mode capabilities that Triune brings to the table is that we have a very good opportunity to grow that business. And as a result our expectations are quite high on that side of things. On the EnVerv acquisition I would say that it’s a little bit longer term, its more industrial smart grid network doesn’t ramp up so quickly, but its very stable and obviously LoRa wireless play we already have strategic customers who are interested in gauging on both the PLC side and the LoRa wireless side. So growth is expected, but probably a little bit further out. I'm making a comment on the…

Yes and also just like I mentioned before these two businesses have very high gross margins you know like I said above the high end of our target range and there are operating expenses I expected just like the rest of Semtech to grow in a very reasonable manner. So now as long as we get a top line growth that we except to get, as Mohan did mention, we do expect a lot of the top line growth to drop to the bottom line.

Appreciate the color and as a follow up if I may on the broader M&A strategy in the context of the two announcements today maybe you could just give us an update on how you are thinking about tuck-in acquisition versus larger deals and then maybe as well the potential of partnering with the larger company to accelerate the scale? Thanks very much.

Yes, all our options are opened, we look at bringing in technology to the company, Semtech has over the last 10 years really developed a very nice portfolio of differentiated analog technologies and we’ll continue to do that and EnVerv and Triune are examples of that. We’ve obviously done a set of previous acquisitions that have also bought in new technologies. The key thing for us on this side of things on the tuck-ins is looking at which markets are going to grow and what’s our participation in those markets and how we can play in those markets. So that’s why the Triune acquisition was a critical acquisition for us in my opinion because it really did help us – its going to help us I think really drive out power management portfolio into some fast growing applications. But equally you know acquisition like Gennum acquisition or similar size acquisitions if they make strategic sense for us, then I think we will continue to look at them and build our analog franchise. As for the larger deals, one can’t control those. Those are deals that have to come to us but our board is always been open to all strategic initiatives.

Appreciate the color thanks again.

And your next question comes from the line of Liwen Zhang from Blaylock.

Thank you for taking my questions and congratulations for entering wireless charging industry. I have a couple of questions on Triune Systems. So how much revenue did the company generated last year. And the next one is does their platform, wireless charging platform support older standards?

Yes, so the revenue last year was modest and I think especially on the wireless charging side really I think it was in the million dollar kind of range very, very small. I guess their charging devices support old standards that they have dual mode platform, they have tri mode platform to support old standards. And that’s one of the beauties all the Triune technology, it really has a very flexible and configurable platform. And the key to this business is that these guys are power experts. They’re really power management experts and that compliments well the Semtech’s power management experts and I think that’s what’s going to be our advantage in the marketplace.

Thank you. And my next one is for the 3D touch, just to clarify regarding your comments earlier. So is that means Microsoft and the Nokia has allowed Semtech to pursue other opportunities with other OEMs right?

Well, yes. So the situation with Microsoft and Nokia is that Nokia decided not to take their phone to marketplace. And so we have the opportunity to partner with customers with our IP partners to try to bring that technology to marketplace. But we need a lead customer, so Nokia was that lead customer and so now we are exploring with other opportunities. But I can’t tell you that we have anybody today that’s really lined up to bring that technology to market.

Thank you, best of luck, good luck for that. That’s all I have.

Your next question comes from the line of Harsh Kumar from Stephens.

Yes, thanks guys. This is Richard in for Harsh. Congratulations on the acquisition. Just wanted to touch based on kind of your general product broadcast has been an area of strength lately, what are you seeing in that market and what are some of the growth drivers there?

Yes, the Gennum business which is part of our Signal Integrity Product Group continues to do very well as you mentioned in the video broadcast ultra-high definition is starting to get some momentum, we also like the video surveillance, the high definition video surveillance market we think is a going to continue to grow nicely and be a good growth engine for us. The majority of the growth today at this point in time is really been driven from datacenter, the PON market and the base station market and Gennum business and products are very broad, we have a broad portfolio of one-gig to 10-gig products for back plane, we have a portfolio of one-gig to 25-gig PMD kind of devices that to go into a multiple different applications and then our CDRs which are best-in-class are doing very well in all of the 100-gig module. So good growth from the Gennum business, as I mentioned on a record year last year in FY 2015 and we’re expecting another record year this year.

Great, thanks for all that color and then kind of shifting focus to the protection business. I know you talked about many new opportunities there should we think about this more is just a unit growth story in terms of smartphones and tablets or there other areas or applications to really accelerate growth here?

Yes well its really the other areas, you know everybody knows about our presence in the smartphone space and how well we’ve done in the Korean smartphone manufacturers and across the board actually, most of the smartphone manufacturers. The challenge of course is that some of those customers loose share or don’t loose share or don’t do so well then we get impacted by that and so we have been trying to diversify our protection in the business somewhat and I think quite successfully we now have a little bit more China presence and then we also have as I mentioned we’ve announced the several platforms that are already targeted at different segments of the marketplace. The automotive is a good growth market for us, we continue to do well in the computing space with the USB 3.0 and then some of the other platforms targeted more in the industrial space. So continue to diversify, but its in general a portfolio that serves the broader market quite well and we’ll continue to play in the smartphone market and continue to bring very good new technology to the marketplace, but a lot depends on of course the success of the customers in those space.

Great. Thanks guys and congratulations again.

Thank you. End of Q&A

And there are no further questions in the queue at this time.

In closing fiscal year 2015 had its challenges and we saw our first sequential annual decline since fiscal year 2010. However, we did not let this impact our strategic focus or investments in core analog mixed signal platforms that will enable us to drive growth in the future. We managed our operations with a strict OpEx control and maintained our non-GAAP gross margin at the high end of our 55% to 60% target range and released many new exciting platforms. Our focus for the coming year will be to integrate the recent acquisitions, drive revenue and earnings growth and continue to diversify our portfolio. With that we appreciate your continued support of Semtech and look forward to updating you all next quarter. Thank you.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.