Good afternoon, and welcome to today's call. [Operator Instructions] Thank you. I'd now like to turn the call over to our host David Pasquale with Global IR Partners..

Thank you, Operator. Welcome everyone to Lattice Semiconductor's first quarter 2019 results conference call. Joining us here from the Company are Mr. Jim Anderson, Lattice's President and CEO, and Ms. Sherri Luther, Lattice's CFO. Both executives will be available for Q&A after the prepared comments.

If you have not yet received a copy of today's results release, please e-mail Global IR Partners using lscc@globalirpartners.com or you can get a copy of the press release off of the Investor Relations section of Lattice Semiconductor's website.

In addition to today's results, we would ask that you please note on your calendars that Lattice’s management will be hosting our Analyst and Investor Day in New York City at NASDAQ's Market Site in Times Square on May 20.

Analysts and the institutional investors that have not already registered, but would like to attend, can RSVP by emailing to lscc@globalirpartners.com. Before we begin the formal remarks, I'll review the Safe Harbor statement. It is our intention that this call will comply with the requirements of SEC Regulation FD.

This call includes and constitutes the Company's official guidance for the second quarter 2019. If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly announced conference call.

The matters that we discuss today, other than historical information, include forward-looking statements relating to our future financial performance and other performance expectations. Investors are cautioned that forward-looking statements are neither promises nor guarantees.

They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements.

Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended December 29, 2018 and our quarterly reports on Form 10-Q.

The Company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call. Our prepared remarks also will be presented within the requirements of SEC Regulation G regarding Generally Accepted Accounting Principles or GAAP.

Some financial information presented by us during the call will be provided on both a GAAP and on a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the Company's performance and underlying trends.

Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance with GAAP. And at this time, I would like to now turn the call over to Lattice Semiconductor’s President and CEO, Mr. Jim Anderson.

Please go ahead, sir..

Thank you, David, and thank you everyone for joining us on our call today. I'm pleased with the strong results we had in Q1 of 2019 with revenue up sequentially and a significant sequential expansion of both gross margin and net profit.

Operational improvements that we began implementing in Q4 of last year to improve the company's overall performance delivered initial benefits in Q1 of this year.

For example, the sequential improvement in gross margin in Q1 was driven primarily by the initial benefits of the strategic pricing optimization and product cost reduction strategies that we built out in Q4 and while we are in the early stages of our planned enhancements, we are encouraged by our progress and improve results.

We expect these benefits to be sustainable moving forward.

Highlights from the first quarter included sequential revenue growth, driven primarily by our communications and computing market segment, sequential gross margin expansion of 190 basis points on a non-GAAP basis, operating profit of 20% of revenue and EPS expansion of two acts on a year-over-year basis.

We also made another discretionary debt payment of $25 million, which reduced our leverage ratio to less than 2.5 as we exited Q1.With these improvements, we're firmly on track to unlock additional value for Lattice and its shareholders, as we continue to execute on our strategy. Let me now provide an overview of our business by end market.

In the communications and computing market, revenue was up 9% sequentially in Q1.We continue to benefit from growth in our products that are used in both server and client computing platforms, our strong footprint across a number of different server vendors positions us for growth as a current server platform generation continues to ramp as it is replaced by the prior generation.

We also continue to see strong customer interest in our early access program for our new platform security solution, given the need for greater data center security. In the communications market, our 5G revenue grew sequentially from Q4 to Q1, as we continue to benefit from early 5G infrastructure deployments.

Although it is still early in the ramp of 5G, it's good to see sequential revenue growth and we expect this to become a material contributor to our revenue in the second half of this year and into 2020 as a 5G wireless infrastructure buildout progresses.

Over the long-term, we believe that 5G will be a more significant opportunity for Lattice than 4G, based on our platform position across the leading OEMs. Turning now to the industrial and automotive market, revenue was up sequentially in Q1 by about 3% as we saw a slight uptick in demand in this market segment.

We expect the industrial and auto market to be a long-term growth driver for our business as we expand our position in industrial automation, robotics and automotive electronics.

Turning out to the consumer market, revenue was down sequentially in Q1 by roughly 7%.This was due to a combination of normal consumer market seasonality, continued softness related to macroeconomic conditions, particularly in Asia and product lifecycle transitions.

In the consumer market, our focus remains on driving new business from higher margin multi-year revenue streams, where our solutions help designers competitively differentiate their products with value add features such as voice recognition and face detection.

Let me now transition from talking about our end markets to providing a couple recent product highlights. We are pleased to report that in Q1 we taped out the first version of our next-generation FPGA platform on FDSOI technology.

We’re very excited about the value of this new generation products will bring to our customers, particularly in applications that require power efficiency. We look forward to providing more details about our next-generation platform at our Investor Day in May.

Separately, on our last call we noted that Lattice is gaining traction in our solution, in automotive for Video Bridging for ADAS and Infotainment Systems. In Q1 we continued to build on this momentum with the launch of the first in a series of new reference designs to make it even easier for our automotive customers to design in our products.

This is part of our broader strategy of investing in customer enablement solutions and software across our portfolio.

Overall, we’re pleased with the progress we made in Q1.The strategies we implemented to improve the company's overall operational performance delivered initial benefits in Q1 and put us on a good path toward continued improvement in our business. These were just a few of our recent highlights.

We continue to be well-positioned to benefit from multiple long-term growth drivers, such as growth from the 5G infrastructure buildout, growth from server and client computing platforms and growth from many different industrial and automotive applications.

We remained focused on execution and unlocking additional value for the company and its shareholders. Let me now turn the call over to our CFO, Sherri Luther..

Thank you, Jim. Let me now give you a summary of our results. We are pleased with the results for our first quarter with revenue of $98.1 million, up 2.2% sequentially from the fourth quarter. Product revenue growth and communications and computing as well as in industrial and automotive offset a sequential decline in consumer and IP revenue.

Growth margin on a GAAP basis was 58.8% compared to 56.6% in the fourth quarter. Our non-GAAP gross margin expanded to 58.6% from 56.7% in the prior quarter, due primarily to initial benefits of the strategic pricing optimization and product cost reduction strategies that we built out in Q4.

We expect the benefit of our initiatives to continue throughout 2019 and we remain committed to expanding gross margin over the longer term. On a non-GAAP basis, operating expenses were $38 million compared to $37.8 million in the fourth quarter.

As a percentage of revenue, OpEx declined to 38.7% in Q1 from 39.4% in Q4 on a non-GAAP basis Q1 GAAP operating expenses were $45.2 million compared to $56 million in the fourth quarter. This includes approximately $1.3 million in restructuring costs related to consolidation of our Portland facility into our Hillsboro facility in Q1.

Our GAAP net income for the first quarter was$7.4 million or $0.06 per basic and $0.05 per diluted share compared to a net loss of $7.1 million or $0.05 in the fourth quarter. The first quarter includes restructuring charges of $1.3 million compared to $11.9 million in Q4.

On a non-GAAP basis, first quarter net income was $14.6 million or $0.11 per basic and diluted share as compared to $11.1 million or $0.09 per basic and $0.08 per diluted share in the fourth quarter.

During the first quarter, we generated $21.8 million of cash flow from operation, as we continued to improve working capital by driving down DSO and improving overall cash generation in the business.

We've been actively working to delever our balance sheet and made a $25 million discretionary debt payment in Q1.We expect to continue to reduce our debt balance through discretionary payments.

Finally, we ended Q1 with a cash balance of approximately $130.4 million compared to $128.7 million at the end of Q4 after $25 million discretionary debt payment. Let me know review our outlook for the second quarter. Revenue for the second quarter of 2019 is expected to be between approximately $98 million and $102 million.

Gross margin is expected to be approximately 58.5% plus or minus 1% on a non-GAAP basis. Total operating expenses for the second quarter are expected to be between $37 million and $38 million on a non-GAAP basis. As we look forward, our priority and focus are unchanged.

We remain committed to increasing our profitability and cash flow as well as delevering our balance sheet. We view this as the best way to build additional value for Lattice and our shareholders. Operator, we can now open the call for questions..

And your first question comes from the line of Charlie Anderson with Dougherty & Company..

Congrats on the strong results execution and also the cash flow that's great. So I wanted to just start on gross margin obviously big improvements sequentially there fairly similar business mix. I wonder if you could maybe just speak to some of the levers that you are able to pull there you mentioned price optimization and also cost reduction.

Just kind of roughly where are you on those initiatives, how does Q2 compared to Q1 through the rest of the year how does that look? And then I have follow-up?.

Thanks for the question Charlie appreciate it. We are quite pleased with the progress that we made on gross margin from Q4 to Q1. The source was really kind of three different components one you already mentioned which was our strategic pricing optimization initiative.

We had started to work on that in Q4 really got that planned out in Q4 and began to implement that in Q1. So we started to see the initial benefits of that in Q1 and we expect to continue to see benefit from that moving forward.

And then kind of second component was product cost reductions we put a plan in place to drive incremental product cost reductions also in Q4. And that began to yield benefit in Q1 as well and then the third component which was a little bit of a smaller component, but was mix we did see a slightly better mix in Q1.

A higher percentage of revenue coming from comps and compute, industrial and auto is an overall percentage of revenue. So those three kind of things combined to give us a nice uptick in gross margin Q4 to Q1. I think you also asked for Q1 to Q2 gross margin if you look at the midpoint of our guidance it’s roughly flat Q1 to Q2 underneath there is.

If you look at just product revenue, we are expecting gross margin on just pure product revenue to go up sequentially from Q1 to Q2, but that's we’re expecting that to be offset by an expected decline in revenue from IP, IP revenue which carries a high gross margin.

And so the two kind of offset each other, but we are expecting to see some improvement in product gross margin from Q1 to Q2..

And then as my follow-up I just kind of curious on the various end markets what you're seeing on progression in Q1 to Q2 as we sort of unpack the second quarter guidance from revenue perspective?.

Yes, from a segment perspective, market segments perspective we had nice growth in comps and compute from Q4 to Q1. And we’re anticipating some growth in comps and compute again from Q1 to Q2 so sequential growth in that segment industrial and auto we expect to be roughly flat, flattish.

And then on the consumer segment we expect it to be flat to maybe slightly up with a little bit better just consumer normal consumer seasonality for that market maybe a slight uptick. And then as I just mentioned we do expect IP revenue to decline sequentially from Q1 to Q2 that’s a little bit of color by segment..

And your next question comes from the line of Christopher Rolland with Susquehanna International..

Congrats on the results and guide. So I wanted to first talk about 5G and the second half opportunity for you guys. If you can talk a little bit more about some of the functions that you may be providing into the base station. And maybe even some color on what you think your content per base station is? Thanks..

So on 5G so around 5G infrastructure we’re primarily if you look – like a macro base station primarily on the Radiohead the macro base station or the remote Radiohead. Yeah usually you’ll find us doing functions like control path functions on the remote Radiohead.

Our product because they’re low-power they’re small size can also be designed in small cells for instance. And we feel pretty good about the position that have across the OEMs and OEM platforms we’re well assorted across the OEMs the primary OEMs and in their platforms.

So we feel like we got good position and we saw initial revenue start from 5G deployments in Q4 of last year we saw sequential growth in Q4 to Q1 in revenue from 5G deployment in Q4 of last year. We saw sequential growth from Q4 to Q1 and revenue from 5G.

And then we’re expecting it to kind of be a more material contributor to our revenue in the second half of 2019. And definitely into 2020 as the bulk of we expect more 5G deployments to be in 2020 and we’re just seeing initial deployments now.

And so, we also the other thing I would add is, we believe that the total sort of area under the curve for 5G deployments relative to 4G deployments and an industry level, 5G will be a bigger technology deployment. And so we see this is really a good multiyear growth factor for the company.

And so I hope that provides a little bit more color on where we’re headed..

And then as a follow-up here I surprised you didn’t mention AI at the edge is one of your three growth drivers that you called out at the end of your prepared remarks.

Maybe you can talk about your AI products or your new products that are?.

The AI at the edge some of that is included in industrial automation that I talked about. We’re seeing a lot of customer activity around our artificial intelligence inference, inference processing at the edge and echoes across just a number of different types of application.

So for instance in industrial automation that might be object detection, it might be monitoring a video stream to detect how manufacturing excursion trends.

So we’ve seen it in industrial but also seen it in consumer applications as well And so, last year we launch our sense AI software stack which is a specific software library to allow customers to design our solutions into their systems very easily and provide that artificial intelligence capability at very low power levels that are chips provided.

And so yeah we are seeing good activity across it's just across the number of different market segments..

And your next question comes from the line of Matt Ramsay with Cowen..

Matt if you are on mute we can’t hear you. Operator maybe you want to skip to the next caller it looks like we don’t have Matt available..

And the next question comes from Christopher Rolland..

I could ask another one but perhaps we should go to the next guy..

Sorry Chris operator let’s try to move to the next caller can we get Matt back..

Yes, one moment. Okay your caller is Matt Ramsay..

Jim hopefully you can hear me this time?.

Yes, we got you Matt. Go ahead..

And I guess the question I had is maybe a longer-term one which is maybe you could talk a little bit about the FD-SOI based product. And it sounds like you just had tape out there both from maybe what kind of differentiation those products might add for the company in terms of low-power.

And then secondarily, the software that you guys are working on that complements those products in a low-power setting that will helpful? Thank you..

We’re actually there is a lot of excitement at the company right now about the first tape out of. This is really the first version in a family of devices that will be based on our new FPGA platform. And so it’s a new architectural platform that we developed and it does utilize FD-SOI technology.

And so as you know what’s FD-SOI there's a nice power efficiency benefits. And so we expect especially in applications where there is need for power efficiency for this to have a nice competitive benefits for us we’re excited about that.

But also just at the architectural level we've added a number of different features and capabilities that we’re really excited about. And so yeah it's a platform that will build a number of different products from.

We expect to share some more details about that platform generation and some of the capabilities that we built in at our Analyst day on May 20th.

So I’d say kind of stay tuned we’re going to provide more details there and will actually have our Head of R&D, Steve Douglas come and talk a little bit more about the platform but that's something that we got a lot of excitement within the company about..

And look forward to the update in a couple weeks.

As a follow-up, I was encouraged but maybe a bit surprised that the commentary in your prepared remarks says that - I know you guys put industrial and auto together but a lot of peer companies have had some challenges in both of those end market maybe you could talk a little bit about what your company and the product portfolio that Lattice has might be doing are close to that are a bit different than some pretty broad-based weakness we’ve seen in both of those end markets from other peers.

Thanks..

Certainly, we’re subject to the same market conditions that other companies and semiconductor companies are. But what I would say is, you know, we do have some nice Lattice-specific growth factors within that segment. We're seen a lot of adoption of our products in industrial in all sorts of automation and robotics applications.

Just as an example, you know and as people automate the factories, there's a lot of robotic they could designed and we’re in the motor control loop of those robotic arms for instance and so seeing nice design wins across the number of different areas and good growth in industrial.

And then in automotive as well, it’s a segment we’ve been working on for quite a while and some of those initial automotive designs have begun to ramp nicely and so you we are seeing – we’re pleased with the progress in that segment and more from a long-term perspective, we see industrial and automotive as a key long-term growth factor for the company..

And our next question comes from the line of Tristan Gerra with Baird..

Just a quick follow-up on the prior question and you provided some very useful color on the where you adoption in industrial. Could you also provide some color on what you see in terms of new sockets in automotive, you mentioned those design wins starting to ramp.

You could provide some color on the functionality and with the circuits?.

So in automotive, primarily need as infotainment systems and there's a number of different types of functions that we can provide. One example would be, in autos now both gas and electric hybrid vehicles, a lot of sensors being added to the vehicle, parking sensors, driving sensors etcetera.

And all that sensor information needs to be aggregated and it sometimes preprocessed before it sent back to the main processor. You might find Lattice FPGA used in the center input aggregation.

Video connectivity, video bridging of those of multiple video cameras that are getting added to autos, it's just power management for instance of certain subsystems. So there's just a number of different places that were getting added in and we’re pleased about the progress in the automotive segment..

And then could you talk also about the new product roadmap, before you get 28-nanometer to reach volume, you had mentioned some new products with security features, anything else so in terms of color you can provide on existing platforms before you have this big Jim, remote migration?.

Yes, Tristan, yeah, absolutely, we do have products that are coming out even ahead of that that next-generation platform that's on the FDSOI technology.

So one of the products that I mentioned in the past is we added security functionality to one of our FPGAs, which allows it to provide route of trust and platform for more resilience functionality in different types of platforms.

An example would be a server platform but it could be used in other types of platforms like client computing platforms, network platforms and so we sampled that new device to OEMs, a number of different months ago, a number of different server OEMs that that program is progressing well and actually we’re planning at that, at our Analyst Day on May 20 to provide an outlook for a number of new products that we will be launching over the near-term over the next 12 months.

And so there will be additional product details that will provide at that May 20 meeting, so stay tuned..

And your next question comes from the line of Mark Lipacis with Jefferies..

This is [Li] on behalf of Mark Lipacis. So a question on your client computing side.

Do you hear me fine? I’d just wanted to check?.

Yes. We can hear you. Go ahead. Thank you..

Perfect.

On the data center side, so how do you see your penetration going into the next in those platforms or if you could elaborate on that would be great?.

In data center we’re talking about servers that go into both hyperscale data center as well as enterprise data centers and on the current server generation that's ramping up now, we’re providing manageability functionality on that server platform you know, functionality for instance, managing the board as it boots up and we’ve a very high attach rate on the current generation and if you look at our attach rate and current generation versus prior generation, it's much higher.

And so as the industry transitions to the new generation, we see a natural growth from the higher attach rate on the server platforms and so that's - that's been a good growth factor for us that that growth even started last year, we’re expecting it to continue into this year and so that's a nice growth factor for us..

[Operator Instructions] Your next question comes from the line of Richard Shannon with Craig-Hallum..

Let me peel back later on the gross margins that you’re talking about for the second quarter.

So you’re talking about essentially flat and I think your comments were that you expected licensing down and products up and then within the products you're talking about industrial being I think down a little bit which is your best gross margin category in general.

So wondering if that growth - that product gross margin improvements implied in there is that coming from mix or is it from pricing optimization or can you help us understand where its coming from?.

Yes, so and just a cracked on industrial, auto, I said flattish, right.

Just can be flat sequentially but if you look at set aside IP revenue for second, if look at just pure product revenue which clearly is a vast majority of our revenue, we are expecting some sequential improvement in gross margin and product revenue but we are also expecting a sequential decline in our IP revenue.

We’re expecting IP revenue to settle back to more of what we consider the normal run rate for IP revenue and because the IP revenue is at the gross margin nearly 100%, as that IP revenue declined to sort of offsets in Q2 some of the gross margin were expecting from the product - from the product revenue side.

Does that help answer the question, Richard?.

Yeah, I guess, I just want to make sure – I understand how much is baked into your gross margins for the pricing optimizations you talked about it.

And maybe relative to the benefit you got from that in the first quarter?.

So if you look at just again, just as a product revenue, we are still expecting improvement from pricing optimizations, which started to kick in Q1.We will see some benefit also from Q1 to Q2 but also product cost reduction.

So I'll talk about product cost reduction improvements that we've seen from Q4 to Q1, we expect to benefit incrementally from that two as well. So both of those will be a factor in the improved product margin in Q2..

Let me jump over to your computing and communications buckets. You were already asked a couple questions on the computing side, which I think makes sense. Drop me over to the comp side of that.

I know – I think a bigger part of your - that comp segment is in the I guess, we’ll call wired space here but you've made some very positive comments about 5G.Maybe give us a sense of agreed to which the growth in the second half or in 2020,when does wireless become a bigger piece of your comps bucket?.

Wireless, remember we’re in 4G as well, right. So we’re in both 4G and 5G.When I talk about 5G becoming a more significant contributor that's really. We’re expecting that to really kick in more in the second half of this year.

So we just saw some early revenue in Q4 of last year, Q1 of this year, but we expect it to contribute more – meaningfully in the second half of this year and into 2020..

I guess, Jim my question was, to what degree or when does wireless become a contributor equal to kind of your wired comps business?.

Yes, we haven't really broken it out that way. So yeah, not able to provide you any guidance on whether it might be a crossover point or something like that. We haven’t [indiscernible] that level of granularity..

I thought I'd give it a shot anyway, may be one last quick question so your OpEx guidance for the second quarter is down a bit. How should we think of this in the cadence of OpEx going forward? How much of the decrease here is from sustaining trends versus one-time.

And any thoughts you want to give us beyond the second quarter would be helpful too? Thanks Sherri..

Sure yes, I am not only general for the OpEx is, as we've shared before is, if I separated out into R&D and SG&A is, R&D we're running at roughly 20%, a little bit underneath that. But we believe that the right level for R&D for the company is at around 20%. And so, our intention is to keep R&D around that level.

And we want to continue to invest in our product line in the future innovation our product line. And then in SG&A, we're also at about 20%, but we believe that the right model for the company is more in the mid-teens level. And so, we're going to try to work the SG&A percentage down over time.

Now that'll happen over time, but it is something that we're going to try to incrementally improve over time and get it cultured to the mid-teens, which we believe is a right target for business..

And your next question comes from the line of Hans Mosesmann with Rosenblatt Securities..

This is Kevin Garrigan on Hans Mosesmann.

We just kind of wondering, have you seen any safety inventory being accumulated by OEMs in China? And if so, how widespread has it been and how has that impacted your sales?.

Yes, we haven't seen any indications of that. That's something that we actually watch very closely. We actually watch inventory at our distributors and our customers quite closely, and we haven't seen any direct indication of that. We also look for a double ordering patterns and things like that.

And we haven't seen, like I said, haven't seen any indications of that. Our businesses is, for instance, in Q1 was about 79%, 80% through distributors. And if we look at distributor inventory in Q1 actually we ended had a very healthy level in Q1 in terms of distributor inventory.

Well within our – what we used the normal range for the business actually a little bit on the lower side of the normal range. And in fact, we saw a drawdown or a slight reduction in distributor inventory from Q4 to Q1. So I would say in summary, we're not seeing any indications of inventory pockets..

And just one quick follow up.

What's the competitive dynamic like with other FPGA players so far this year?.

Yes. The competitive dynamic has been pretty stable. Look the part of the market that we focus in is, we focus in the low power small size FPGAs. And in that part of a market we think we have a really strong portfolio today. And then with some of the new products that are coming out that will strengthen our portfolio even further.

And we think we've got a nice strong competitive position and there hasn't been any real recent changes in that that..

[Operator Instructions] Your next question comes from the line of Roy Song with Arrow Partners..

Understanding that there has been a good amount of discretionary paydown the term loan fee in the last couple of quarters. Just want to see where your thoughts on in terms of the cap structure obviously delivering a good amount in the past year and see what your guys thoughts on that? Thank you very much..

We have had a very strong focus on cash generation and expanding our cash flow through continued improvements in working capital. So as we mentioned we did do a $25 million discretionary debt paydown during the quarter.

And we are focused on continuing to use our cash flow from operations to really continue to make discretionary payments going forward. We were able to deliver for the quarter down to 2.4 by the end of Q1 which is down quite a bit from a leverage ratio of three at the end of Q4. So we're pretty pleased with that..

And your next question comes from the line of David Duley with Steelhead..

Most of them have been answered, but as far as the industrial automation segment of your industrial and auto business, can you just give us an idea about how big that is as a percentage of revenue or dollars? And what's trajectory of growth there and just one final clarification, did you mention that you’re in robotic arms or just mentioned the applications again?.

Yes, sure so first of all, industrial and automotive. If we look at the most recent quarter, Q1 was 37% of our revenue. So that just gives you a sense of what size or what contribution it provides from a revenue. In Q1, we saw growth of about 3% from Q4 to Q1.

But we see this, if we just look longer term, we believe that this is a long-term growth factor for the company. We've had quite a bit of growth over the last year or so in this segment. And we do believe it's a long-term growth factor for the company too.

And then in terms of applications, it just gosh it just spans a number of different applications in industrial.

From I mentioned, precision motor control for instance, robotic arms, but embedded vision, collision avoidance for instance, if you have – if you had robots or automated vehicles moving around factory, collision avoidance – there’s a number of different applications in that segment..

And then two final questions from me. As far as the 5G infrastructure built you have seen, has that been mostly concentrated in China? And then, could you just give us an idea of what your – interest expense to be in the balance of the year per quarter? Thanks..

Sure on 5G, initial build outs for 5G infrastructure really started in Korea and now we’re moving to China and the U.S., Japan as well. And so that's kind of the geographies that are leading the initial deployments of 5G.

And because we're pretty well dispersed across the 5G OEMs, we've been participating in that initial build out and that's why we seen some sequential growth in our 5G revenue for instance from Q4 to Q1. And I'll ask Sherri to answer the interest question..

So we expect interest expense to be somewhere in the neighborhood of 4 million to 4.5 million for the quarter..

And will make other - if your cash flow is strong, will you make other incremental debt payments through the balance of the year.

And I guess, I'm wondering if that number is going to continue to go down?.

Yes, I mean we expect to continue to make discretionary debt payments. So yes, we don't guide to the amount that we’ll make during the quarter, but the fluctuation and interest expense will also be a function of what LIBOR is and that’s all adjust. But yes, we will continue to make discretionary debt payments..

Yes, David, it's our intention to delever - use our excess cash to delever..

And now I like to turn the call back over to Mr. Pasquale..

I think I'll wrap up the call. So thank you, operator and thanks again everybody for joining us on our call today. We really appreciate you spending time with us today. So just to summarize in Q1 we started to demonstrate the leverage in our operating model with solid improvement in both gross margin and profitability on the product side.

We're really excited about the tape out in Q1 of the first version of our next generation FPGA platform. And overall we're focused on continuing to deliver sustained improvements and profitability expansion, improved cash flow and a stronger balance sheet.

And so we appreciate your continued support and look forward to sharing more details with you at our Analyst and Investor Day on May 20th in New York. Thank you operator that concludes today's call..