Rick Muscha - IR Moshe Gavrielov - CEO Lorenzo Flores - CFO Victor Peng - COO

Ambrish Srivastava - BMO Capital Markets Blayne Curtis - Barclays C.J. Muse - Evercore John Pitzer - Credit Suisse David Wong - Wells Fargo John Vinh - KeyBanc Capital Markets Ross Seymore - Deutsche Bank Tristan Gerra - Robert W. Baird William Stein - SunTrust Chris Caso - Raymond James Chris Danely - Citigroup Christopher Rolland - Susquehanna International Srini Pajjuri - Macquarie Securities

Good afternoon. My name is Victoria and I will be your conference operator. I would like to welcome everyone to the Xilinx Third Quarter Fiscal Year 2018 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 Rick Muscha. Thank you. Mr. Muscha, you may begin your conference.

Thank you and good afternoon. With me are Moshe Gavrielov, CEO; and Lorenzo Flores, CFO and Victor Peng, COO. We'll provide a financial and business review of the December quarter, and then we'll open the call for questions. 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 actual results may differ materially. We refer you to documents 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. 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 Moshe.

Thank you, Rick. Welcome everyone and thank you for joining what is my 41st and final Xilinx earnings call. Been a great privilege to have lead Xilinx over the past 10 years. Needless to say I'm extremely proud what the Xilinx team has accomplished. On the business side, we're questionably on the very consistent growth trajectory having just delivered our ninth straight revenue growth quarter while attaining a 30% operating margin target. In addition, we're quite confident that we'll make it 10 in a row potentially exceed our revenue target of $2.5 billion of this fiscal year. On the operations and technology front we've delivered three consecutive generations of technology leadership by developing both world class silicon and highly optimized software capability. This has facilitated the strategic transition from our FPGA roots of the premier All Programmable Company thereby enabling Xilinx to participate in a much broader and deeper way in our customers multi-market solution and expand beyond our traditional market. I'm delighted to have this opportunity to hand over the CEO of reigns at Xilinx to my long-term colleague Victor Peng, a huge contributor to our success over the past 10 years. I'm very confident in the future success Xilinx under this stewardship. This time I'll turn the call over to Lorenzo.

Thank you Moshe and it's been a pleasure to work with you for almost 10 years I've been here particularly to serve with you as the CFO over the past almost two years.

That is great.

It's not but I'm adlibbing. I'll go back to the script now. But we do wish you well. Sales in the December quarter increased for the ninth consecutive quarter to a record of $631 million, up 2% sequentially and up 8% on a year-over-year basis. Sales for the ninth months of fiscal year-to-date were up 7% versus the same period of the prior year. Revenue growth in the quarter was driven by our advanced products which grew 10% sequentially and 30% year-over-year to a new record. Gross margin was 71.1% higher than our guidance as product mix was more favorable than expected. Operating expense was $259 million in line with our forecast, we continue to execute to the plan we outlined at our analyst day last May. Operating income for the quarter increased 2.4% sequentially to $189.7 million. Our operating margin hit 30.1% one quarter ahead of schedule. As a result of the enactment of Tax Cut and Jobs Act of 2017, we incurred a tax expense of $183.2 million or a rate of 94% in the December quarter. This one-time tax impact was related to the transition tax on accumulative foreign earnings and the remeasurement of certain tax assets and liabilities somewhat offset by the reduction in the US Statutory rate. Our net income for Q3 was $11.9 million or $0.05 per share. For comparison purposes if our tax rate had been in the middle of our forecasted range, our EPS would have been $0.67 per share. Now onto the balance sheet and cash flows. We ended the quarter with $3.6 billion in gross cash and $1.9 billion net cash after our debt. Operating cash flow was $185 million. We returned $162 million to shareholders during the quarter in the form $89 million in dividends and the repurchase of approximately 1 million shares or $73 million, an average price of $71.34 per share. During the first nine months of the fiscal year we have returned nearly 100% of our operating cash flow back to shareholders in the form of dividends and share repurchases. As we have said in the past, we continue to invest in our business to capitalize on our leadership position and will continue to return capital to our shareholders. We are still executing on our share repurchase program and have $372 million remaining on that authorization. We expect ending share count in the March quarter to be in the range of $255 million to $260 million diluted shares. For guidance, in the March quarter we're expecting sales to be between $635 million and $665 million. Our backlog is up strongly as we begin the quarter and we continue to expect growth in our advanced products. With regards to end markets we expect communications and data center to be up. Industrial and A&D will be approximately flat. Broadcast, consumer and automotive is also expected to grow. While auto and broadcast are growing. A significant amount of growth in this set of end markets will be from consumer which bear some explanation. We've treated crypto currency as it has emergency as a consumer business. This business has become larger and more durable driving growth in the fiscal Q4 though it is still potentially volatile, Victor will also talk more about this. Our gross margin for the quarter will be approximately 69% to 71%. We expect core operating expense to decrease to approximately $255 million. However, in this quarter we will recognize one-time expenses of approximately $30 million related primarily through our CEO transition. Finally, our tax rate is expected to be between 0% and 5% for this quarter as impacted by the Tax Reform Act. Our financial performance year-to-date and our guidance for the fourth quarter indicate to us that we're on track to meet or exceed our annual guidance on all operating parameters. Let me now turn the call over to Victor.

Thank you, Lorenzo and my sincere thanks to you, Moshe. I'm going to stay on script because well this is your 41st call. This is my first. And I probably shouldn't blow it at. Good afternoon, everyone. I'm truly honored and extremely excited to be speaking with you on my first Xilinx's quarterly earnings call. And I'm particularly fortunate to be assuming leadership not only with Moshe taking this company to such a great position, but and truly a very dynamic time in our industry. By focusing on delivering unique values and emerging areas as well as our traditional markets, we will build on this revenue growth we've established and create the next wave of shareholder value. In an era where the pace of Morris [ph] law has showed. Xilinx is in a unique and unprecedented position of strength. Enormous amounts of data being created, stored and processed presents tremendous opportunities with Xilinx. Applications like machine learning, computing and storage acceleration, autonomous driving and 5G all promise to make an enormous impact on people's lives. Tomorrow's compute intensive applications require optimize platforms and are capable of delivering both acceleration and adaptability. Xilinx presents the right technologies and capabilities to take leadership position. And I'm delighted to have this opportunity to help the company maximize this potential. I would like to add my comments about both December quarter and the outlook for the March quarter. I'm very pleased with our consistent execution as demonstrated in our December quarter results. Revenue grew as Moshe said for the ninth consecutive quarter to the records $631 million. Additionally our operating margin exceeded 30% one quarter ahead of our plan driven by better than expected gross margin. Our overall revenue growth was again driven by our advanced products. Revenue from these products increased 10% sequentially and 30% year-over-year. This category now represents 56% of our overall revenue significantly up from 52% last quarter and 47% a year ago. Both our industry leading 20-nanometer and 16-nanometer technology node had significant sales records. With our 16-nanometer portfolio we're now delivering 43 unique products to approximately 1,160 customers. Revenues from our Zynq SoC platform an integral element of our multi-market expansion efforts increased nearly 40% from the year ago quarter and is expected to grow again in the March quarter. This platform has established sales traction in all of our end markets with significant success in the automotive, industrial, wireless and consumer market. As Lorenzo noted, our product is finding some success in crypto currency mining system. We're finding that our products and customer support capabilities really fit the need of this emerging market and we do anticipate future growth while being cautious about the volatility of this segment. With regards to end markets the industrial, aerospace and defense markets had another quarterly record. With sales of $297 million, an increase of 7% sequentially and 23% from the year ago quarter. This growth was driven by both semiconductor test and the emulation applications. Our unrivaled technology leadership has been a very significant driver for this record setting revenue performance. Our strong momentum in the data center continues unabated. Market leader Alibaba recently announced plans for two generation of FPGAs as a Service. The F2 and F3 using Xilinx Ultrascale plus FPGA. And beyond the public eye, we're seeing strong activity in workload specific compute acceleration, storage and smart mix. These data center opportunities continue to be one of our key medium to long-term market expansion opportunity. As we look forward to the March quarter, our guidance of $635 million to $665 million is again expect to be driven by the continued growth of our advanced product portfolio. If we achieve this guidance we will establish another sales record with Xilinx. Our overall revenue performance through the three quarters of the year and our Q4 guidance gives us confidence that we will exceed our $2.5 billion plan for fiscal 2018 and as we mention, we already reached our goal of 30% plus operating margin a quarter [indiscernible]. Now I'll turn it back over to the operator for Q&A.

[Operator Instructions] Your first question comes from the line of Ambrish Srivastava with BMO.

And I'm going to adlib here, Moshe. Thanks for being a gentlemen as these years. We've not always seen eye-to-eye but you always treated us very fairly. So good luck and on the next innings. Question on the up margin and also kudos for hitting the target and my question is for you, Victor. How should we think about sustainability of that given the increase in the next node and that's been the case forever but it seems like a step jump in that and also you're spending more on the FPGA as a Service model. So just help us understand how should investors have confidence that this has been a bogey that has been illusive on a consistent basis for Xilinx. So how should we think about that? Thank you.

So from a gross margin, that has a lot of factors, but a big factor is mix. So in terms of the way the segment came out, we had really strong growth in segments for which we generally have very good value. Of course it's more complicated that, there's a lot of things we're doing for controlling the COGS and so forth. So I would say we absolutely can excuse me, I was referring to gross margin but in terms of the operating margin obviously that's all true but, so at that level in terms of operating margin. I think we've been very careful about investing where we see bigger returns and also being mindful of where we are on the gross margin line. So I think that we're going to be balancing those things right. We generally give a range of the upper 60s up into the 70s and I think if we look at how return we would get by investing further we'll do that aggressively and other places we absolutely want to give return to the shareholders, so.

So Ambrish, I'm going to think maybe I'm going to ramp some other questions on this. We're - I guess outside of tax which I'll help you guys out a little bit on for the future. We're going to stick with our traditional cadence of providing specific financial guidance initially in our Q4 earnings call and then more in detail at our analyst day. So I think the kind of fundamental principal both that Victor and I laid out will be what we apply, right? Which is we're investing in the company and we're continuing to manage it to return the mostly to the shareholder.

And I think the piece that you have given us is the scale and I think that's what I was hoping to hear from you, is that you're reaching, you're about to reach the inflection point on the FPGA as a Service model, which will help fund that.

I'm sorry I didn't even mention, I didn't answer that piece of the question. Look I think we've been pretty consistent in saying FPGA as a Service is a more mid-term to longer term opportunity. From a revenue perspective that is not yet in a very material state. And also point out, that FPGA as a Service is only one segment of the compute acceleration which is only one segment of our opportunity in the data center. I think we've been pretty consistent in saying that, we have many opportunities not only in the compute side but also in storage and the networking side. So I think that a little less connected to your question regarding sustainability of the operating margin. I think on the operating margin side again you're seeing right that we have achieved our goal ahead of plan and we do think there is legs [ph] there on the other hand, if we feel like the right thing to do is invest to ensure the strong growth, we'll do that but we'll always be mindful of returning good value to the shareholders.

Okay, thank you good luck.

Your next question comes from the line of Blayne Curtis with Barclays.

Moshe, best wishes on your next adventure here. I was just wondering if you could just talk about the consumer bucket. Obviously the crypto currency is been a big driver for a lot. Maybe just talk about December and then outlook in the March if you can kind of frame how big that's getting and how much of driver is it for that segment in the March.

Blayne I'm glad you asked that because we're flagging it because in the past this has been really not materially enough to even mention because of the fact that. It's growing and this is - we're talking about like in the below tens of millions. We wanted to flag this however this is not like a GPU size kind of exposure right. And again you heard both Lorenzo and I say that there's a lot of volatility here. So I wouldn't we're mentioning it because now it's not something that's totally negligible but just to give you right order of magnitude. It is not something we're - we suggest you try and model, it's very volatile and it's very new and emerging thing.

Okay, thanks.

Your next question comes from the line of C.J. Muse with Evercore. C.J. Muse: I guess first I'll start - Moshe congrats, pleasure working with you and Victor, look forward to working with you and congrats to you as well. I guess for my question maybe a kind of follow-up to the first one, as you think about tax reform and access through all that cash, how does that change your thinking if at all in terms of R&D investments as you project to head into beyond fiscal 2018.

I don't think there is a first order impact from tax reform on our operating model. It comes mostly into play for us in terms of capital allocation. So I think regardless of tax reform and regardless of the quarter-to-quarter specifics we'll maintain very highly profitability and very high cash flow generation. So we see as the primary benefit as tax reform is freer uses of cash on a global basis. I think we're right now understanding some of the longer term impacts of it because there is some second order or more detailed aspects of tax reform that will impact cash payment, so we're modeling that as best we can out into the future and we'll use that to influence what we do on capital allocation, that's still on the works and again we'll probably talk more in detail about that at our analyst day. C.J. Muse: Do you have a sense of your gap and or cash tax rates or that's something for the analyst day?

Sure. Like I said totally I think it's unfair to you guys to say okay one quarter 93%, the next quarter it's going to be 0% to 5% and not leave with you any guidance past that. We actually wrap all the considered caveats around this, but as we understand it right now our forward tax rate should be between 10% and 15%. So pretty much like we had experienced in the recent past. So that's our best guidance right now, but it's obviously not without some caution on the potential for regulatory changes as more technical guidance comes out in different aspects of that, but right now it's the best we can get. C.J. Muse: Thank you.

Your next question comes from the line of John Pitzer with Credit Suisse.

And Moshe I'll echo the sentiment. Thanks for all the help - helping to understand Xilinx through the years, greatly appreciated. I guess my question is sort of follow-up on the margin side. I want to focus really on the gross margin side. This is only the second time in corporate history that I can see in our model that you've had gross margins above 71% and Victor I understand the importance of mix. So I guess part of one of the question is, can you help me understand what happened in the quarter from a mix perspective to make things this rich. And I guess more importantly just given that your broadening your lead against the competition and broadening the number of applications that you can address, why shouldn't we think that there is a continued structural upward biased on gross margins overtime. The caveat being no one should - have to apologize for 71% gross margin.

Thanks for that.

Yes, thanks for that. As I said I talked about mix that was really oversimplification. Look on the one hand, we are creating a lot of value, where our products, our leadership not only because we've executed well and delivered what we said but we've done innovations the most recent one for instance the RFSoC, where we integrated RF class data converters monolithically whereas 16-nanometer digital process. Right. Where that's saving the customer power, cost, size, weight all these things. And some of the other areas we have the larger capacity by factor. So part of this is, you got to be creating value right and then if you do that and on top of that you execute and you get out and so forth and you're going to get value. There is also just of course the natural factor, the mixed piece is that, the different segments have natural different levels of margin, right. So but crypto currency side, well of course consumer to the extent that we play is more price challenges, more margin leanness other places that we play in aerospace and defense for instance so forth and in general if you're delivering value you can get the value. So on the one hand I would agree with you is that, I think with our innovation and what we're doing that we're getting value and we're giving value to the customers, but you know the variability does become when you have certain markets if they pick up very strongly and they're naturally in that market have more ASPs competitive and you know that can change mix. But we certainly think that with leadership and the products and continue to innovation that in generation we can and will get good solid gross margin. They always have that variability and then of course.

The gross margins are just to remind you all John, I know we've had this conversation before. It's not reflective only of one quarter shift in mix. There is a decade now long legacy of focus on improving the gross margin of the company and our approach to it, I think it does provide us with a solid basis for just as Victor said consistently strong expectations on gross margin. But we're in very competitive markets in the lot of places and in markets where by the nature of those markets you're under consistent cost pressure. So yes while we have a firm basis saying we're keep growing it, I think it's probably a little aggressive.

And Lorenzo, what specifically this quarter about mix was such a tailwind.

So we had actually the benefit from Victor and Moshe both mentioned our advanced product growth particularly our newer products which happened to be the highest value products we can provide, those provided and uplift and we also had good business in the general, in the industrial and aerospace, defense test measurement and emulation end markets which generally provide an uplift for our margin structure.

Thanks a lot, very helpful.

Your next question comes from the line of David Wong with Wells Fargo.

Reading off my carefully crafted questioned script. Can you fill us in on what percent of overall revenues came from automotive and how much automotive was that year-over-year?

Auto was up year-over-year on the order of a little more than 20%, but I think that's a little bit of measurement anomaly. We had somewhat of a low point last year this quarter in auto and we are seeing it still in around 7%-ish of overall sales. Most of that business again is ADAS related and most of the growth is ADAS and Zynq based for us going forward.

Great. Thanks very much.

Your next question comes from the line of John Vinh with KeyBanc Capital Markets.

Good luck to you, Moshe and Victor, congrats on your new role. My question is around comms last night you heard TI kind of call it out as a source of area of weakness that they're seeing. It looks like comms where you came in, maybe slightly below what you're expecting but you did guide comms to be up in March, so wondering if you could give us some color in terms of what sort of demand trends you're seeing there and also if you could comment on what you're seeing between wireless and wireline, that will be great.

Sure. So wireless is actually up some. I think we've mentioned several times that we're virtually all of the pre-5G prototyping so we saw some growth there. We also saw some strength in 4G deployments in India. Wired slowdown some mainly due to some of deployment of some products, but when we look at the current quarter we see that wired will be back up and wireless will probably be about flattish.

Got it. Thank you.

It's not inconsistent with what we've been saying, wireless will bounce around this level until we see the 5G inflection point.

Great. Thanks and I had a follow-up question on M&A. it seems like M&A activity is starting to pick up and seem really with the tax reform ability to repatriate cash seems like activity in the sector could pick up. One does that give you an opportunity to be a little bit more proactive on the M&A front. And can you also remind us in terms of how much offshore cash you will have an opportunity to repatriate.

So let me take the more specific the cash question, first. I think Victor can elaborate on the market situation for M&A. the easiest way to think about it right now is, after we pay the transition tax which for the most part is a book number because the structure is deferred over eight years. Pretty much our cash balance is free to move about the world. So that's part of this assessment that we're doing overall so gross cash at $3.6 billion net cash of $1.9 billion. We don't foresee limitation on [indiscernible] deploying that cash anywhere in the world or seeing any sort of tax penalty for doing it. We'll have ongoing tax which on a cash basis will be higher than we've experienced in the past, but there won't be restrictions on cash utilization or maybe better put economic disincentive to use it anywhere. So that's a good news part of tax reform for us.

On the M&A side I viewed as our focus is what is our strategic objective and goal and M&A could be a tool to sort of further add, so we look at it that way and we obviously consider that as along with other many option. Ultimately of course you want to maximize shareholder value that the financial sectors is the main goal. But I would say that the focus is to think about what all our options are in the strategic concepts and we're trying to accomplish and if M&A is the thing then that would be considered along with that option. Now clearly on this call, this isn't the time to talk about that kind of vision. I think there will be time later in the quarter where we'll have the opportunity to talk a little bit more about direction in vision.

Your next question comes from the line of Ross Seymore with Deutsche Bank.

Also I want to echo the congratulations to Moshe and Victor. Just wanted to follow-up on the end market splits. You guys have done a great job growing for I think it's nine consecutive quarters on a sequential basis and the annual guidance range, is you've given been very helpful and it sounds like you're going to beat those for this fiscal year but there is some pretty big deltas between what you guided by segment and what you delivered with the comms and data center side being well below your guidance but the industrial, aerospace and defense being well above. So I guess with that all being said the question is what was surprising in those two segments versus what you originally thought and what's the duration of the new trajectory. You think it's phased this week on one side and strong in the other or is something in the mean revert [ph].

So versus where we thought I think you've gotten the primary point which are the industrial and A&D that have been markets which includes true industrial, aerospace and defense and test measurement and emulation. We're very pleasant surprise with their strength this year and that's pretty much across the board in those end markets. The consumer automotive and broadcast sentiment markets is on track with maybe automotive not as strong as we initially thought, but as I said earlier still growing in ADAS applications and so good platform for us in the future. And the wireless, wired communications data center end market that is underperformed partially because wired and data center is not a strong collectively as we thought and then wireless was bouncy and tough to predict to being with. But as we go forward, without being very specific about the direction like I said we'll provide more of that later on this year. The characteristics that are driving industrial and A&D seemed to be sustainable. The consumer automotive and broadcast business as we talked about, we could see some good upside from the, as we talk about it now from applications like the crypto currency and we look to maintain our position in automotive. Wireless, we still think is going to have that same basic characteristic of flattish with up and downs until we see the 5G and wired and data center I think we're going to continue to slow growth.

Can I just? I'm not going - I do want to add a little just to certain applications. A&D has been strong that is not a surprise frankly I think that is something that is something that's been strongly and we definitely see that continue and test measure and emulation. I think we expect to be strong maybe is a little stronger than we expected, but I wouldn't say it's a surprise. I think some of the other comments that Lorenzo shared we agree, but I mean overall I don't want you to think that some of these things we didn't anticipate I just happens that a lot of the growth sell in that single bucket right, if you break it down as Lorenzo said there is good growth in multiple sub segments. I would also say that in general if we're talking about by segments. We talked also about the fact that I mentioned in my remarks I think is also a very strong platform I see that strengthening across multiple market. So I think there are definitely areas where we've been seeing and we see that sustained.

That's helpful color. Thank you.

Your next question comes from the line of Tristan Gerra with Robert Baird.

I'll join my peers and congratulate both Moshe on many years of significant achievements and also Victor on your new role. Regarding 5G is it fair to assume that this ramp is going to be more small cells based versus base station based and so as such should we view 5G as potentially being more of a higher unit but lower [indiscernible] content opportunity and perhaps if you could refresh us a little bit on when you think the ramp beyond field test can become more meaningful overtime.

Let me and answer that last part first. So I think we've been pretty consistent in saying we really see the ramp more in the 2020 timeframe. I mean there is some early things going on now and we've got like approximately 90% of those early pre-5G and proof of concepts and then I also referred to really disruptive product in the RFSoC but of course that's just getting out. Now it's a transition to the first part of your answer is that? let me start with RFSoC in that regard, I mean RFSoC is something that is something that is not just 5G, it's the right technology and really the way to deal with any massive MIMO kind of architecture so that's a very large [indiscernible] and that's a trend that's being moved to across in general not only in wireless infrastructure but even in other very adjacent applications, right. And then in terms of small cells. Yes in small cells but I think that it's really a range of different types of infrastructure so I wouldn't say that it's just small cells. So in general I would say we see good very strong position there but again the ramp is more in the 2020 timeframe and as far as RFSoC we're seeing great momentum, but it's really not a meaningful revenue at this point. People are just starting to design with that, that goes into production in this calendar year.

Okay great and then just a quick follow-up. So it looks like the tens of millions of revenue target that you had for this fiscal year for [indiscernible] potentially gets pushed out a little bit, how should we look at the ramp, is there a timing at which we see more [indiscernible] inflection point and any quantification that you may want to put forward for the next year or two from a data center and this customer.

I'm sorry were you referring to the tens of millions on being pushed out, could you?

I think that was a somewhat of soft target that Xilinx had put in place regarding this fiscal year in terms of data center ramp.

Okay, I see I mean again what I would say is that, first of all data center. The traditional portion of our data center revenue right, the kinds of deployments we've been in the past largely in storage, but not only in storage that still is actually the larger part of the revenue overall. I think the revenue is the emerging part that we referred to and I think what you're probably really targeting early the discussion about FAS and so forth. I mean that's, that is in the smaller number that you're talking about, now it's still in those tens of millions, I don't see this as a push out. I think we've been pretty much consistent in saying that, this is the period where we're building applications, we're getting the tools and the infrastructure out there, we're building an ecosystem and so forth. Just to put this in perspective in the re:Invent Conference that Amazon had back in November 2016, that's when they announced and they were the first ones to announce FPGA as a Service. They actually announced it, but it didn't even start going online until April, 2017 since that time we now have five announced FAS deployments, but again many of them are just coming online. In the re:Invent Conference Amazon just had this past November. They announced the fact that they have now instead of just one region, there are three region which FPGA accelerated or deployed including the secure US GovCloud and I think a total of 11 [indiscernible] regions. So I think what I'm trying to suggest here is that, it is not at this stage where we're talking about big revenue growth. This is all about building the applications, the infrastructure, getting the deployments and we're seeing very good momentum on that perspective. I don't see that there is a push out per se, I think it's just again building that the foundation and getting the applications out and getting these engagements going. Does that [technical difficulty]?

Great. Very useful. Thank you very much.

Your next question comes from the line of William Stein with SunTrust.

And again my congrats to Moshe as well. If you could help us understand the commentary on crypto it will be helpful. Specifically you're saying you think it's more durable or maybe [indiscernible] sustainable, is there something about your position in that market or demand trends that you think reflect something that indicates sustainability in that marketplace. Thank you.

The crypto currency is extremely volatile and so I think one in some situations what happens is, that things change so much that A; it's hard in that sense to sort of predict. In terms of the sustainability though we do see as we said, we do see that we've had revenue in the low tens of millions, we see that kind of level of revenue continuing, but we also are providing support for these customers. Okay, it's not secret there's so much involved there that people doing custom ASICs for this and they're also using GPUs. Now the reason why we do see some flip here is because it's a very dynamic situation to a different and Bitcoin gets a lot of press, but really there is multiple different currencies and there is lot of things happening, so with that kind of change the flexibility we have that has that value. But we are very cautious here because of the volatility of it and we don't want to you to over read in what we're saying, right? That's why in the TPU space they've had much bigger exposure, but nonetheless it's gotten to the point where we don't want to just have it not lease rate.

I think the durability point comes from when we first saw it, it was very small business and then it grew significantly but we didn't have any line of sight to any future business path what was currently in the book. We now have better line of sight by working closely with some of these customers to what their plans are and the future potential of the business, that's really what I was going after when I said that because it's something we understand a little bit better, but again as we keep saying we're cautious about the macro factors that drive the core demand for these products.

It helped. Thank you.

Your next question comes from the line of Chris Caso with Raymond James.

The question about the revenue turns [ph] percentage that seems to have been steadily dropping is that a function of where product lead times are now, if you could explain that relationship and basically what you're seeing both turns perspective how it gives you visibility for the business before you're seeing lead time.

We don't really have any lead time issues and actually that's one of the things our customers have appreciated about us, which our ability to support them. I do think it's more function of us continuing to drive the business and get the orders on the book as soon as we can and it does help us plan and it does help us from some downside variability it if ever occurs. We just - trying to drive the business not to say that it will be always be this way but we're making a deliberate effort to get the orders on the book.

Thank you.

Your next question comes from the line of Chris Danely with Citigroup.

Moshe thanks for everything over the years. Mazel Tov caim sheli. Anyway. That's Hebrew for those of you who don't know out there. I don't know if you guys. [Foreign Language]. I don't know if you guys went into the relative growth rate you expect in your three main end markets for the calendar years, if you could just run through those real quick.

I'm sorry, so you said for the calendar year or for the last quarter.

For this calendar year what's your relative growth rate expectations between comm, industrial and broadcast.

I don't think that on this call I want to give guidance for the quarter, right. But I mean for the calendar year but in terms of where we see now in the quarter that we're in, the aerospace, industrial, A&D that we definitely see will be a very strong quarter. I mean overall that basket. I think the AVB consumer and auto will be holding slightly up.

Yes, well so I think Chris so the for the year I mean the calendar year is three quarters over next fiscal year and I guess we'll do that guidance first in at the end of this quarter and then more completely at Analyst Day. But for this current quarter the fourth quarter with respect to the third quarter with what I had reference in my guidance piece earlier.

Yes, I was talking about the fiscal year. I'm sorry. I was referring to this fiscal year of which sub segments was going to show pretty strong growth.

Yes, so I got I think we're both little bit confused about the time and horizon your question, sorry about that. But for this quarter the industrial, aerospace and defense end market set will be relatively flattish as the two industrial and aerospace and defense segment growth offsets decline from actually a record setting performance on test measurement and emulation. The communications and data center end markets will be up slightly and the consumer automotive and broadcast business will be up and that's where the right now we've bucketed the crypto currency business and that's where we spent a little bit more time explaining that.

And that's for the quarter.

For the quarter, yes.

Sorry, I thought you were saying when we complete the fiscal year, how it would look?

Yes, I'll wait for the long-term guidance for the analyst day.

Okay, yes great thanks.

Thanks guys.

Next question comes from the line of Christopher Rolland with Susquehanna International.

Congrats Victor on the promotion and congrats Moshe on a great career. So I just Victor wanted clarification first. So you said low tens of millions from crypto was at per quarter or for the full year and then I assume that's most heavily weighted for this last quarter here. And then also the 30% growth in broadcast consumer and auto, great job there. And I know Dave already asked about auto growth here. But what was consumer growth year-over-year and broadcast growth. Thanks.

I guess in general in terms of the crypto currency like we said that kind of came from a very low number to in that order of tens pretty quickly, so when you sort of said how was it, was that on a quarterly basis, actually that would be for like the whole year, but you know it kind of came up from a year ago virtually zero. So yes, so the answer to first part is yes. Yes, it is stronger in the recent quarter but you know for the year it's still be in that order of magnitude.

So the other aspects of the business, the AVB end markets are on the order of 10% up and consumer business is up substantially more but I think again there is some data anomalies that you wouldn't want to use that as a predictor of the future just because the way that business had bounced around historically.

Again as you know consumers are very in general a more opportunistic one for us, that is in - we definitely when we see certain opportunities go after it on the other hand that doesn't have the kind of emphasis that we have in some of the other markets. And again we flagged the crypto because that became from quickly essentially zero to something that you wanted to flag.

Yes, I certainly understand you don't want to leave anything on the table. Thanks guys.

Yes, we won't do that.

You have a follow-up question from John Pitzer with Credit Suisse.

Just quickly on the balance sheet. Inventories were up a little bit more than I would have thought and so are receivables and so Lorenzo I know you talked about not having any availability issues. Is this just a new norm for inventories, what should we expect going into the March quarter or how should we think about that. Thank you.

In general you will see our inventory grow in anticipation of the business. We've had I think there's one quarter in the past we actually had a higher dollar value of inventory that was for specific business area I think that was getting ready to support wireless ramp and last generation. Again I think that was the case, but we see just in general broader end market strength particularly in our advanced products and that for we're focusing our inventory builds. So I think the inventory number is quite consistent with what you'll see in the business. It should growth as the business grows, but periods it will drain down a little bit and others it will build up a little bit, just depending on what we're actually seeing in the market. On AR, this is been a story that I've told a couple of times it is relatively high and it is again driven by how consumers take shipments and during the quarter and payment patterns. I will reassure you all we have no collectability issues on the AR, so that's just high quality and it's purely a timing thing.

Perfect. Thanks guys.

Your next question comes from line of Joe Moore with Morgan Stanley.

This is Vinayak calling in for Joe. I wanted to follow-up on your ADAS business. Now that's one space where you have seen good traction for using product. So when you look at your customer design and pipeline, could you just discuss how happy and applications sort of ADAS evolved overtime and what are the applications your most [indiscernible] going forward?

ADAS again has been as I mentioned for Zynq automotives is one of the areas that we have [indiscernible] strength. For the most part this is all 28-nanometers by the way, right and of course the ADAS requirements for the market keep going up, right they keep raising the safety standard, so there is already been quite a bit activity and design ins for the next generation ADAS. As everybody knows that there is also a lot of development and excitement around autonomous driving and these things are evolving from advanced driver assist systems towards autonomous driving, so we have a natural set of relationships, design activities and in fact some wins frankly that move us along that whole continuum the earlier events driver assist systems to more sophisticated ones to the earlier levels or autonomous driving. So yes it's I think that we're definitely participating that entire evolution because of our flexibility we're participating in all of the major sub portions of the architecture meaning like we have engagements where we're in the central unit, we have [indiscernible] some of the sensors, aggregation points and so forth. So yes, we're quite well engaged there and think that's one of the definite areas we think out in good, very good traction. First generation in our 16-nanometer MPSoC as well.

Got it very helpful. Thank you.

You have another follow-up question from Blayne Curtis with Barclays.

I just want to follow-up on the March guidance for consumer. Given you said your [indiscernible] seems like should be up double digits and obviously we talked about crypto currency. I'm just trying to understand how strong automotive is because that business has had kind of unpredictable path typically it's seasonally strong but sometimes it's up larger if you could just look at the sequential growth in the March and maybe kind of get any color between the segments there.

That's sort of end market in a percentage basis, the consumer aspect will grow the more substantial as you just pointed out. Both AVB and auto will grow in the low single-digits.

Very helpful. Thanks.

Victoria, we can take one more question.

Certainly. Your last question will come from the line of Srini Pajjuri with Macquarie Securities.

Moshe, let me echo my congrats and again thanks for all your help over the years. Just a quick question I know you guys don't make CPUs but you do sit next to a lot of them. Just curious if you know the recent security issues with Meltdown and Spectre and if you're seeing any impact one way or the other, directly or indirectly in the near term. Do you expect any impact from those issues?

I know that's a quite a lively topic. Of course we lead the industry in integrating in RMSoC into All Programmable FPGA so and as you know we license those cores from ARM. So one is, I'll say that we absolutely know that there is no susceptibilities of the Xilinx specific implementation of the Arm cores that we license from ARM and according to information, we work very closely with ARM. We don't believe there is any susceptibility to the meltdown aspect of it. Regarding Spectre there is no known susceptibility in terms of the 16-nanometer Zynq MPSoC and in terms of the first generation Zynq SoC, we use there the ARM Cortex A-9 which has the possibility of having some of that however I'll point out that, most of our customers do and closed embedded systems. And if that's the case that's highly unlikely that there will be exposure to that. In addition if the customer does have something to get, gets user kind of code exposure if they use authentication, security features that are there then that exposure is also same thing highly unlikely. We haven't heard anything from customers but of course we monitor that very closely and we're working with ARM very closely on any further news or mitigation. Just to round out the basis, by the way we've had our proprietary Microblaze SoC [ph] embedded processor. We know that there is no vulnerability there in that architecture is very simplistic so there is no vulnerability in either of the Meltdown or the Spectre. Does that?

Yes. Great. That's it.

Great. Well thanks for joining us today. We'll have a playback of this call beginning at 5 PM Pacific Time, 8 PM Eastern Time today. For a copy of our earnings release, please visit our Investor Relations website. Our next earnings release date for the fourth quarter fiscal year 2018 will be Wednesday, April 25th after the market close. We'll be attending the following conferences this quarter: The Goldman Sachs Internet and Technology Conference in San Francesco in February 13. The Morgan Stanley TMT Conference also in San Francesco on February 27 and the BofAML APAC Conference in Taiwan on March 15. Also we'll be hosting an analyst meeting in New York City on May 22nd, please do save the date and we look forward to seeing you there and will have many more details to follow. This completes our call. Thank you very much for your participation.

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