Semtech Corp (NASDAQ: SMTC) Q1 2021 Earnings Call Transcript

Semtech Corp (SMTC) Q1 2021 earnings call dated May 27, 2020

Corporate Participants:

Sandy Harrison — Director of Business, Finance and Investor Relations

Emeka Chukwu — Executive Vice President and Chief Financial Officer

Mohan Maheswaran — President and Chief Executive Officer

Analysts:

Tore Sandberg — Stifel — Analyst

Scott Searle — Roth Capital — Analyst

Quinn Bolton — Needham & Company — Analyst

Christopher Rolland — Susquehanna Financial Group — Analyst

Rick Schafer — Oppenheimer — Analyst

Gary Mobley — Wells Fargo Securities, LLC. — Analyst

Harsh Kumar — Piper Jaffray — Analyst

Tristan Gerra — R.W Baird — Analyst

Craig Ellis — B. Riley FBR — Analyst

Karl Ackerman — Cowen & Company — Analyst

Mitch Steves — RBC Capital Markets — Analyst

Hamed Khorsand — BSW Financial — Analyst

Presentation:

Operator

Greetings and welcome to Semtech Corporation’s First Quarter Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded.

I would now like to turn the conference over to your host, Sandy Harrison, Head of Investor Relations. Thank you. You may begin.

Sandy Harrison — Director of Business, Finance and Investor Relations

Thank you, Devon and welcome to Semtech’s conference call to discuss our financial results for the first quarter of fiscal year ’21. 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 was issued after the market closed today and is available on our website at 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 and in the Other Risk Factors section of our most recent periodic reports filed with the Securities and Exchange Commission.

As a reminder, comments made on today’s call are current as of today only and Semtech undertakes no obligation to update the information from this call should facts or circumstances change. During the call, we will refer to non-GAAP financial measures that are not prepared in accordance with Generally Accepted Accounting Principles. Discussion of why the management team considers such non-GAAP financial measures useful along with detailed reconciliations of such non-GAAP measures to the most comparable GAAP measures are included in today’s press release. All references to financial results in Mohan’s and Emeka’s formal presentations on this call refer to non-GAAP measures unless otherwise noted.

Also, beginning this quarter, we will be reporting our business under three end markets compared to the four previously, which we believe better reflects the ongoing consumption of our products. We have combined what was previously our enterprise computing and communications end markets together to form the infrastructure end market while our high-end consumer and industrial end markets are largely unchanged.

With that, I will turn the call over to Semtech’s Chief Financial Officer, Emeka Chukwu. Emeka?

Emeka Chukwu — Executive Vice President and Chief Financial Officer

Thank you, Sandy. Good afternoon, everyone. For Q1 fiscal year ’21, the net sales decreased 4% sequentially and increased 1% over the prior year to $132.7 million, which was above the midpoint of our guidance. In Q1 shipments into Asia represented 80% of net sales, North America represented 12% and Europe represented 8%. Total direct sales was approximately 22% of net sales and sales to distribution was approximately 78%. Our distribution business remains balanced with 40% of the total POS coming from the infrastructure end market, 34% from the industrial end market and 26% from the high-end consumer end market.

Bookings increased strongly over the prior quarter and resulted in a book-to-bill significantly above 1. Turns bookings accounted for approximately 34% of shipments during the quarter. Q1 GAAP gross margin declined 20 basis points to 60.9% due to lower absorption associated with COVID-19 shutdowns and we expect our Q2 gross margin to improve slightly as impact of higher mix of infrastructure revenue is slightly offset by COVID-19 driven lower absorption.

Q1 GAAP operating expense decreased 12% sequentially, as expected, due to lower share-based compensation and pension expense and in Q2, we expect GAAP operating expense to increase between 2% to 5% sequentially primarily due to higher share-based compensation expense. Q1 GAAP operating expenses increased to $4.8 million from $3.1 million in Q4. In Q1 we wrote down the value of some of our minority investments by $3.6 million due to COVID-19 driven liquidity constraints [Phonetic].

Moving onto the non-GAAP results, which exclude the impact of share-based compensation, amortization of acquired intangibles, acquisition related and other nonrecurring charges. Q1 non-GAAP gross margin declined 20 basis points sequentially to 61.3% due to lower absorption associated with the shutdowns. We expect our Q2 non-GAAP gross margin to improve slightly as impact of the higher mix of infrastructure revenue is slightly offset by lower absorption. Q1 non-GAAP operating expenses decreased 1% sequentially to $53.2 million. In Q2, we expect our non-GAAP operating expense to be flat to 3% higher. For the remainder of fiscal year 2021, we expect our non-GAAP operating expenses to be flat to slightly up from current levels.

In Q1, cash flow from operations was unseasonably strong at 20% of revenue due to shorter cash conversion cycle and lower fiscal year ’20 annual bonus payments. We repurchased approximately 855,000 shares or $30 million of our stock in Q1 and our stock repurchase authorization now stands at approximately $81 million. We expect to continue to use our cash to opportunistically repurchase our shares, make strategic investments and pay down our debt.

In Q1, accounts receivable decreased 20% sequentially due to lower net sales and improved linearity of shipments and represented 38 days of sales, which is below our target range of 40 days to 45 days. To support our strong Q2 demand, net inventory in absolute dollar terms increased 5% sequentially and days of inventory increased by 10 days to 131 days, which remains above our target range of 90 days to 100 days. In Q2, we expect our net inventory to remain flat in absolute dollars, but to decline in days.

In summary, we were pleased to deliver Q1 results that were once again above the midpoint of our guidance and we are expecting a strong sequential growth in Q2. Despite the ongoing challenges presented by COVID-19, the secular trends behind our growth engines remain very solid. Our gross margin is stable. Our operating expenses are under control. Cash flow is healthy and liquidity is strong. We believe we are very well positioned to deliver solid financial results in fiscal year ’21.

I will now hand the call over to Mohan.

Mohan Maheswaran — President and Chief Executive Officer

Thank you, Emeka. Good afternoon, everyone. I will discuss our Q1 fiscal year ’21 performance by end market and by product group and then provide our outlook for Q2 of fiscal year ’21. Before I go over our Q1 performance, I want to take a moment to discuss some of the areas where COVID-19 has impacted Semtech and what we have done to address the challenges from this terrible pandemic. As a global company, Semtech was impacted by the actions taken by different countries and we have operated under the direction of the various regions where our employees are located and we will continue to follow their guidelines for the safety of all of our employees.

Over the last several years, we have invested heavily in dual sourcing strategies and in IT, operations and sales infrastructure and systems to provide a collaborative environment for our employees and to attract and retain the best talent. These investments have enabled and will continue to enable us to minimize the impact of site closures and supply chain disruptions to our overall business.

In Q1 of fiscal year ’21, net revenues decreased 4% sequentially to $132.7 million. Stronger demand from the infrastructure end market was offset by softer demand and some temporary supply constraints in the high-end consumer and industrial end markets. We posted non-GAAP gross margin of 61.3% and non-GAAP earnings per diluted share of $0.35.

In Q1 of fiscal year ’21, net revenue from the infrastructure market increased 1% sequentially and 24% over the prior year and represented 43% of total revenues. Net revenues from the industrial market decreased 9% sequentially and represented 30% of total revenues while net revenues from the high-end consumer end market decreased 5% over the prior quarter and represented 27% of total net revenues. Approximately 16% of high-end consumer net revenues was attributable to mobile devices and approximately 11% was attributable to other consumer systems.

I will now discuss the performance of each of our product groups. In Q1 of fiscal year ’21, net revenue from our Signal Integrity Product Group increased 2% sequentially and 19% over the prior year and represented 45% of total net revenues. Continued strength from our hyperscale data center customers and record demand for 10 gig PON and 5G PMD products contributed to the growth.

In Q1 of fiscal year ’21 strength from the data center markets continued driven by our ClearEdge CDRs used in 100 gig optical modules. Our hyperscale data center customers are increasing their demand for 100 gig optical modules as the global shift to working from home places an increasing bandwidth and analytics burden on cloud-based infrastructure. We expect the demand for 100 gig optical modules to continue to increase.

Customer interest for our Tri-Edge PAM4 platform also remains very high and we recently recorded our first design win for our first Tri-Edge PAM4 chipset for use in 200 gig and 400 gig PAM4 optical modules. We have customers in multiple regions at various stages of system tests using Tri-Edge and we expect to see many more design wins over the next few quarters.

We expect our Tri-Edge revenues to ramp up over the next few years as hyperscale data center customers deploying 100 gig, 200 gig and 400 gig optical modules recognize the clear benefits of using an analog PAM4 implementation that includes lower cost, lower latency and lower power than alternative solutions. We expect the positive trends in the data center market together with our new product platforms to provide nice growth for our data center business in FY ’21 and beyond.

In Q1 of fiscal year ’21, our PON business grew nicely over the prior quarter, led by record 10 gig PON revenues. Semtech remains a leading supplier to the PON market providing comprehensive offerings for 1 gig, 2.5 gig and 10 gig PON systems. We expect strong growth from our new PON-X 10 gig PON product this year, led by a number of new global carrier PON initiatives that enable gigabit to the home, enterprise, and campus networks. Increasingly, carriers building out 5G infrastructure are looking at PON-X driven systems to offload high bandwidth data for these access networks.

In Q1 of FY ’21, overall demand from the wireless base station market remained healthy as 5G infrastructure deployments increased. Our ClearEdge CDRs and our FiberEdge PMD platforms are being used in front-haul and mid-haul optical modules. During Q1, we announced the production release of our newest ClearEdge integrated CDR with DML driver for 5G wireless base stations 25 gigabit per second front-haul applications. Also in Q1 our FiberEdge PMD devices delivered record revenues as emerging 5G base station opportunities accelerate. Our FiberEdge PMD products complement our ClearEdge NRZ and Tri-Edge PAM4 CDR platforms. As 5G infrastructure deployments increase globally, we expect our 5G opportunity to triple versus that of 4G.

As network providers work to upgrade and increase the capabilities of their data center, PON and wireless networks, we expect the secular demand for our higher bandwidth, higher data rate platforms to drive growth across Semtech’s Signal Integrity Product platforms and we remain very confident in our strategy and position in all our target markets. For Q2 of fiscal year ’21, we expect net revenues from our Signal Integrity Product Group to increase strongly driven by anticipated record revenues from the data center end market and strong revenues from the 5G base station market.

Moving on to our Protection Product Group. In Q1 of fiscal year ’21, net revenues from our Protection Product Group increased 5% sequentially and represented 30% of total net revenues. Our diversification strategy targeting a broader set of industrial applications continued to yield dividends in Q1 as we saw strong sequential and annual growth from the broader market. This strength in demand helped offset a weaker high-end consumer market. We are seeing an increasing number of opportunities for our protection solutions as new high-speed interfaces such as USB-C, HDMI 2.1 and 10 gigabit Ethernet proliferate into multiple end applications that are also using more advanced lithography processes. These trends combined with our own acceleration of new protection products targeted at broader markets is fueling further growth for our protection business. In Q2 of fiscal year ’21, we are expecting our protection business revenues to decline modestly as strength from our broad based industrial market is expected to be offset by continued softness from the high-end consumer market.

Turning to our Wireless and Sensing Product business [Phonetic], in Q1 of fiscal year ’21 net revenues from our Wireless and Sensing Product Group decreased 20% sequentially and represented 25% of total net revenues. In Q1, our wireless and sensing business was negatively impacted by several regional shutdowns associated with COVID-19. The shutdowns impacted both demand and supply. We believe that most of these issues are behind us and we expect to see a meaningful rebound in Q2 for our Wireless and Sensing Product Group.

Q1 was another strong quarter — another quarter of strong achievements in our LoRa business, including record quarterly bookings. Interest in our LoRa technology has continued to expand and most recently, we have seen an increase in LoRa opportunities associated with COVID-19 when LoRa is ideally suited for applications such as contact tracing, distance tracking, hygiene and health monitoring and occupancy management. Several examples of use cases in this area that have recently been announced include LoRa cloud-based platforms in China from Alibaba and Tencent for quarantine scenarios to help provide health care workers with community health data. Polysense Technologies developed a smart cloud-based human body temperature monitoring system using LoRa to provide real time temperature sensor data to screen individuals with a high temperature. The system is initially being deployed in Italy.

Everynet is working with its partners to deliver LoRaWAN solutions over a secure wireless IoT network to connect urgent care facilities in Spain. And Kerlink together with Microshare announced a simple low-cost contact tracing system using LoRa and Bluetooth-enabled badges, earrings or wristbands that enables work a proximity detection. The flexibility, low cost, long range and low power of LoRa networks are critical components of any successful LPWAN IoT deployment and we expect to see more use cases emerge as local governments, municipalities and enterprises look to execute on their COVID-19 management strategies.

We also continue to see other emerging use cases announced that demonstrate the benefits and efficiencies of LoRa. These announcements included the Pallet Alliance, an innovator in pallet management programs, integrated LoRa into its IntelliPallet, the first of its kind in the logistics industry that enables scalable pallet location and environmental sensors to be built into wooden pallets. Sweden-based iioote introduced new functionalities to its web IoT platform using LoRa with AI algorithms to detect mode and humidity in at-risk locations in homes and businesses. And EasyReach developed its EasyPlug platform that leverages LoRa to detect changes to the usage status of various appliances. These are just a few of the examples of recent use cases introduced that demonstrate the value of LoRa technology in enabling a smarter, more connected and more sustainable planet.

We recently announced our LoRa Edge platform that is our first software defined radio platform that enables true silicon to cloud connectivity. LoRa Edge includes Wi-Fi and GPS sniffing functions that uniquely position this platform for asset tracking and asset management use cases. We expect this platform to enable a large number of new opportunities for LoRa over the next few quarters.

In Q1 of fiscal year ’21, we were pleased with the progress we made against the LoRa metrics we targeted at the beginning of the year despite the COVID-19 related challenges and shutdowns. These metrics included the number of countries with LoRa networks grew to more than 92 countries from 91 countries at the end of FY ’20 and we expect over 100 countries to have LoRa networks by the end of FY ’21. The number of public or private LoRa network operators grew to 137 from 133 at the end of FY ’20 and we expect 150 LoRa network operators by the end of FY ’21. The number of LoRa gateways deployed grew to over 800,000 from the 642,00 gateways deployed at the end of FY ’20 and we expect the number of LoRa gateways deployed to increase to over 1 million by the end of FY ’21. The cumulative number of LoRa end nodes increased to 145 million from 135 million at the end of FY ’20 and we expect this number to exceed 180 million cumulative end nodes by the end of FY ’21. The LoRa opportunity pipeline, which includes both opportunities and leads, remains at approximately $500 million at the end of Q1 with approximately $200 million of leads feeding the opportunity pipeline. We anticipate that on average 40% to 50% of this pipeline will convert to full deployment over a 24-month timeline.

At the end of FY ’21, we are anticipating our opportunity pipeline will exceed $700 million with an additional $300 million of leads feeding these opportunities. Our opportunity pipeline remains geographically well-balanced with approximately 68% of the opportunities now coming from the Americas and Europe and includes an increasing number of use cases in the smart home and consumer markets where the volumes could be significantly higher. For FY ’21, we continue to expect our LoRa enabled revenues to be between $90 million and $120 million. While the impact of COVID-19 in Q1 led to a slower start at the beginning of the year, we believe the positive momentum from our LoRa metrics and the geographic diversity of our opportunity funnel should drive our LoRa enabled business to grow at 40% CAGR over the next five years and become the de facto standard for the global LPWAN market and what we expect to be a multi-billion unit industry in the next five years.

In Q1 of fiscal year ’21, revenue from our proximity sensing platforms was lower due to a softer smartphone market. Customer interest remains high for our proximity sensing platforms in smartphones, as well as other mobile systems as global RF regulations and awareness of the dangers of high power RF signals increases. We also continue to see solid design win activity in new 5G smartphones where there is an increase in the number of high-performance radios used. However, we do anticipate the weak smartphone market to continue into Q2. For Q2 of fiscal year ’21, we expect net revenues from our Wireless and Sensing Product Group to increase strongly, led by anticipated record revenues from our LoRa enabled business.

Moving on to new products and design wins. In Q1 of fiscal year ’21, we released 10 new products and achieved 2,202 new design wins. Now let me discuss our outlook for the second quarter of fiscal year ’21. Despite the geopolitical and macroeconomic concerns associated with COVID-19, we believe the underlying secular demand for our key growth platforms remains solid. Based on our strong Q1 bookings and much higher backlog entering the quarter and our record POS in Q1, we are currently estimating Q2 net revenues to be between $138 million and $146 million.

To attain the midpoint of our guidance range or approximately $142 million, we needed net turns orders of approximately 20% at the beginning of Q2. Our guidance assumes no more shipments to Huawei this quarter and also takes into consideration the additional Entity List restrictions put in place recently by the federal government. We expect our Q2 non-GAAP earnings to be between $0.40 and $0.44 per diluted share.

I will now hand the call back to the operator and Sandy, Emeka and I will be happy to answer any questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Tore Sandberg with Stifel. Please proceed with your question.

Tore Sandberg — Stifel — Analyst

Yes. Thank you and congratulations on the results. First question is on your bookings and kind of linearity. So we’ve heard from a lot of companies that have actually gone into their future quarters with high backlog. How about Semtech? Have you continued to see solid bookings even so far in the month of May?

Mohan Maheswaran — President and Chief Executive Officer

Yeah, Tore, bookings continued to be strong for us. It’s obviously a mixed bag. Obviously, the infrastructure segments and IoT appear to be strong. Consumer has to be fairly weak. Again mixed bag, even within consumer and I would say industrial is fairly weak at the moment. But bookings at the moment, still appear to be quite strong.

Tore Sandberg — Stifel — Analyst

Very good. And as a follow-up, it sounds like LoRa is going to have a pretty good quarter here in July. You did note that it was a little bit weaker than expected this last quarter. So if you look at the strength, is it coming from sort of a catch-up or are you now really starting to see some new deployments actually drive that strength?

Mohan Maheswaran — President and Chief Executive Officer

A little bit of both, Tore. I think — remember in February and March China was essentially shutdown. So we really — I mean, literally shutdown. So there wasn’t much going on at all. And so I think in April, we saw some catch-up there and then obviously continuing May. But I think in general what’s happening with LoRa now is that we’re starting to see some broader usage, more use cases. And actually, as I mentioned on the — in my script here that COVID-19 also is potentially driving some pickup in opportunities. And I mentioned — as I mentioned before, that we’re starting to see a broader set of geographical use cases as well, so more North America and in Europe as well. And those tend to be different use cases in the metering and smart building use cases in China. So just generally quite positive for LoRa at the moment.

Tore Sandberg — Stifel — Analyst

Sounds good. I’ll get back in queue. Thank you.

Operator

Our next question comes from the line of Scott Searle with Roth Capital. Please proceed with your question.

Scott Searle — Roth Capital — Analyst

Hey, good afternoon. Thanks for taking my questions. Nice quarter. Hey, just to dig in on the protection front, Mohan. You indicated that it would be flat to down for the year. I was wondering if you could give us some clarity on how that looks going into June and maybe give us an idea — differentiate between domestic China and non-China shipments. And as well on LoRa, it sounds like we’ll get a nice snapback in the June quarter, but you got the range out there for fiscal ’21 of $90 million to $120 million. Could you give us an idea about what has to happen, what kind of inflection do we need to see to get to the higher end of that range? Thanks.

Mohan Maheswaran — President and Chief Executive Officer

Yeah. So let’s start with protection. Protection, you break that into two segments, really the consumer business, which is mostly smartphone and then the non-consumer business, which is doing quite well. It’s a broader kind of market. All the rest of the markets, including comm and industrial, which is doing very well at the moment for us. The consumer side, specifically obviously smartphone, which is the largest piece of our business within consumer, it’s a mixed bag within the smartphone business. I would say that Q1 was definitely weak of the China smartphones. Korea smartphones was about flat and North America was actually better than expected.

In Q2 we’re expecting a little bit of an increase in China smartphones. We expect probably Korea to be again flat to maybe down and then North America to be okay. But the second half we are anticipating that most of the smartphone business, at least in Q3, will be down and some of that is supply constraints from some of our customers that we’ve been hearing about, again, all COVID-19 driven. So that could change in a heartbeat, as you know and that could strengthen the second half. But at the moment consumer is looking weak. But in the general — the rest of our broader protection business is looking quite good. I don’t know if it can offset the consumer weakness. So we just have to wait and see.

And then on the LoRa front, we haven’t yet seen any pickup from our smart home — the catalyst of smart home business that I’ve been talking about for a while. We do anticipate that in the second half to start growing nicely, but again with COVID-19 maybe that gets delayed. We don’t know. So a lot depends I think on those kind of more consumerish segments. And I’ll call smart home, smart consumer and maybe even asset tracking and logistics to be in that category to determine whether we get to the high end of the range. But my sense is things are going in the right direction. I think — obviously, last year was a disappointing year for us because of the China issues, but I think we’re starting to see the momentum across the board, across all regions and across many different use cases. And as I mentioned, COVID-19 is actually driving its own set of use cases for us, which is quite encouraging with those pickup as well. So we’ll see.

Scott Searle — Roth Capital — Analyst

All right. Thank you.

Operator

Our next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question.

Quinn Bolton — Needham & Company — Analyst

[Indecipherable] let me also say congratulations on the nice results and outlook. I guess, first quarter was record POS, record bookings. Just wondering if you have any sense whether your customers are buying ahead or trying to build buffer inventories given the COVID outlook or do you think most of this product is moving through to end-use applications?

Mohan Maheswaran — President and Chief Executive Officer

Yeah, we’ve been looking at that very closely, Quinn. And I think the encouraging thing for us is it’s across multiple product lines, across multiple geographies and across multiple end markets. So if we look at base station, 5G base station is strong, PON — 10 gig PON is strong, data center obviously is strong and some of those segments are cut across different regions of the world, some in China, some in North America, some in different parts of Europe and then obviously LoRa is also pretty broad. So yeah, we don’t think there’s much. We haven’t seen much cancellations or push-outs or anything to suggest that it’s weakening at all. I think it is very much — infrastructure is very much going to continue to see growth and I think that’s where we’re seeing most of the strength, both in the POS side and the booking side.

Quinn Bolton — Needham & Company — Analyst

Great. Second question, just to follow up on Scott’s question about the more consumer use cases or smart home use cases for North America. You mentioned you continue to see or expect that ramp to begin in the calendar second half. I guess, to the extent that these are devices that have to go through DVT and EVT testing, I would think that a lot of those devices are well into that process right now. Do you see that testing activity taking place and that’s what gives you the confidence that these devices are still on track for second half or have you seen some COVID-related delays in the testing and qualification of those products, just given mobility and flight restrictions and that kind of leads you to the comment that there may be some delays due to COVID?

Mohan Maheswaran — President and Chief Executive Officer

Yeah, the answer to that is yes and yes, Quinn, [Phonetic] to be honest with you. I think we have seen testing, we do see that stuff is going on and see the progress. But COVID-19 is a very unique phenomenon, obviously, and we just don’t know whether customers are equipped and ready to kind of drive the strategy the way they were driving the strategy. There is nothing to suggest anything has changed. I just think a quarter delay given what’s happened with COVID-19 around the world wouldn’t be a surprise. That’s not what we’re hearing at the moment. We’re hearing everything is on track and things are going quite well. But I just want to caution you that things — with COVID-19 there’s just so many unknowns. We just — there is too many uncertainties on supply, there is too many uncertainties on regional shutdowns, there is a lot of uncertainties around the macro events surrounding us. But if you take those out of the equation, I think things are on track.

Quinn Bolton — Needham & Company — Analyst

Great. Thank you.

Operator

Our next question comes from the line of Christopher Rolland with Susquehanna. Please proceed with your question.

Christopher Rolland — Susquehanna Financial Group — Analyst

Hey. Thanks guys. I think you guys are the first to report since the Department of Commerce broadened the Entity List. I guess first of all, if you could remind us what you were shipping to Huawei last quarter and why you decided to ship nothing to Huawei this quarter? And then secondly, the broadening of the Entity List, what’s the revenue impact from that, perhaps you can help us size that? Thank you.

Mohan Maheswaran — President and Chief Executive Officer

Yeah. So I said in my prepared script, my remarks that that’s all built into our guidance. So we looked at the Entity List, the extended Entity List and there was a minor impact and we included that in our numbers. So the guidance takes that into consideration, it’s very small.

From a Huawei perspective, we shipped about $9 million to $10 million in Q1. Our guidance assumes no more shipments into Huawei this quarter. So that’s the comment I’d make. From our perspective, the risk is taken out of our guidance. But, yeah, we still expect to ship some revenue into Huawei. I think it’s more a question of do they — can they ship their systems, do they need the products and those type of things with the increased restrictions on them. So as far as Huawei is concerned, we pretty much de-risked Huawei business from our numbers as best as we can.

Christopher Rolland — Susquehanna Financial Group — Analyst

Okay. And just to make sure — guys like FiberHome and some of the other entity guys, just wanted to make sure those aren’t going to affect any of your businesses. And then separately, just talking about data center demand, if you could talk about that a little bit more, particularly around the PAM4 opportunity? The analog short range side that you guys are more focused on, maybe you can talk about how that markets developed? Thank you.

Mohan Maheswaran — President and Chief Executive Officer

Yeah, so as I said, FiberHome and all the other companies on the Entity List, at this point in time we don’t see any issue for us. Obviously, things change daily on that front. But at this point in time, at least for Q2, we don’t expect any — it’s all built into our guidance anyway, any impact. And if there is an impact, it’s very small, I would say even for companies like FiberHome.

Now coming back to the data center side. Yeah, data center business is going well. 100 gig modules are ramping up nicely. As I said with ClearEdge doing very well and now we’re starting to sample our Tri-Edge platforms, the first PAM4 platform, which goes together with our FiberEdge PAM4 PMD products. And so we’re starting to see some good interest there, both on the 200 gig and 400 gig side. We’ll also have longer reach products out this year. So my sense is, we’ll be able to expand our PAM4 portfolio and get a little bit more momentum there. Obviously, this year the revenues will be fairly small, but next year we’re expecting that to ramp quite nicely. So, yeah, good progress generally. We’ll just have to wait and see. We still think at the moment 100 gig is the primary market for us to focus on and then 200 gig and then eventually probably end of this year 400 gig will start to see some revenues in the next year.

Christopher Rolland — Susquehanna Financial Group — Analyst

Great. Thank you, Mohan.

Operator

Our next question comes from the line of Rick Schafer with Oppenheimer. Please proceed with your question.

Rick Schafer — Oppenheimer — Analyst

Yeah, thanks. And let me add my congratulations, guys. I just have a couple of follow-ups, I guess. The first is back to Quinn’s question. I mean, can you describe your approach or give some color on the way you approach sort of betting your order book? How do you scrub for the potential for double orders or how do you kind of look and see what’s a pull-in versus a normal order from a customer — [Indecipherable] that’s a broad question, I know, but I’m just curious how you guys do that.

Mohan Maheswaran — President and Chief Executive Officer

Yeah. It is a broad question and it’s a tough question as you know, Rick. But I think what we tend to do is we do go out talk to the end customers, we do look at tenders that are out there, for example, on 5G that we know about and the number of, for example, base stations that are going to be built, and then who is going to get those base stations and how many optical modules that drives and how many ports that drives for us and how many — so you can kind of get a feel for that. We can do the same on the PON side. So you can start to do it that way.

I think it’s more difficult when you have a broader market, area like in the industrial side for our protection business, for example, where it’s more mass market and distribution focused. It’s a little bit more tricky. But in general, you can, but typically what you see, if you’re getting a lot of double ordering, you’ll start to see more cancellations as things fall off for one guy or they’re not going to be — they don’t want to be left with a lot of inventory. So you’ll start to see that and you’ll start to see push-outs of orders and things like that. I would say that outside the consumer space, so we haven’t really seen that, I would say some in industrial, but mostly consumer, we see that a little bit but not so much in the infrastructure side. So my commentary, and I think this is validated by the bookings being stronger on the infrastructure side because [Phonetic] I do think it’s driven by real demand and need out there. Also POS being strong indicates that as well.

Rick Schafer — Oppenheimer — Analyst

Thanks, Mohan. And then maybe just another follow-up and it’s on PAM4. I am just curious because you — I think you have a pretty unique perspective, you guys are obviously the incumbent in 4×25 [Phonetic] CDR, large market share there. I’m curious why has DSP dominated that PAM4 market to date and I’m curious how you see that market evolving over time. Thanks. Oh, and maybe just at the very end of that question, I’m curious — I know you’ve talked about PAM — Tri-Edge really picking up next year. Can it be a material revenue driver for you guys in the next year in fiscal ’22?

Mohan Maheswaran — President and Chief Executive Officer

So — yeah, let me answer that first. I think it will be. I think Tri-Edge, this year is the test year really for design wins and design-ins and validating the performance of the technology and making sure our assumptions are correct and things like that. But I expect we’ll have design wins this year and I think it will become meaningful revenue probably towards the latter part of this year and then certainly next year. So that’s the first comment.

The second comment is on DSP. As you know, we invested in DSP, we went down that path and then chose not to continue down that path. So the incumbents are there and they have a leading position and I think it’s the first technology to implement PAM4 and I think that’s the reason for success there. But we made — it was a strategic decision to continue down the analog path. And I think we have to demonstrate that it was the right — good decision for us and I think we can. I think certainly for 200 gig and 400 gig we will over the next six months here demonstrate that value.

Rick Schafer — Oppenheimer — Analyst

Thanks and congrats again.

Operator

Our next question comes from the line of Gary Mobley with Wells Fargo. Please proceed with your question.

Gary Mobley — Wells Fargo Securities, LLC. — Analyst

Hey, guys. Let me extend my congrats as well. If my math serves me correct, you are expecting your July quarter sales to grow, what, roughly 10% sequentially, netting out the headwind from Huawei. Just to sort of clarify what’s driving that? It’s a bounce back in the LoRa business, it’s telco and data center related bookings strength and whatnot? And if I’m not mistaken, the new tighter export restrictions don’t kick in until the end of June. Any chance of generating turns business with Huawei between now and then?

Mohan Maheswaran — President and Chief Executive Officer

Well, so Huawei — the way we are planning doing business with Huawei is somewhat opportunistically. As I said, I’ve taken it out of the guidance for Q2. We’re not expecting any more shipments, but if it comes in we’ll look at it and therefore you can ship. And largely most of our products we can ship to them. There are a few that are — we cannot ship, but most of the products we can ship. The issue is more can they get the components from other suppliers or are there other restrictions, especially with the recent more restrictive approach in terms of what they can. HiSilicon, for example, not being able to ship, I think or not being able to get access to some foundries is more of a challenge. So I think in general I would say the impact of the additional restrictions is somewhat minimal to us and unless things change, we don’t see any change to that.

Gary Mobley — Wells Fargo Securities, LLC. — Analyst

Okay. And — all right. So let’s move on to the strength in end market demand. So your point of sales significantly increased your — exceeded your reported sales, but can you share with us by how much and what the net impact was to the channel inventory?

Mohan Maheswaran — President and Chief Executive Officer

So POS was a record for us in Q1. Obviously, because of the record, the channel inventory came down. So channel inventory is in good shape for us. And the good thing about the POS, both the POS and I think our bookings, it’s fairly broad for us. So base station, as I mentioned, is looking good, driven by 5G. We know of the tenders out there and we know that we have a significant opportunity to get a large chunk of that business. And so that’s going quite well and that’s driven stronger bookings for us for — obviously for shipments in Q2 and beyond.

The PON business, I mentioned, the 10 gig PON is doing very well, continues to be going quite strong and then data center is clearly probably outside LoRa the strongest area of growth at the moment. Both the 100 gig also FiberEdge for PAM4 side, so that’s doing quite well, and then LoRa, as I mentioned, has — booking is very strong and we expect a strong Q2 there as well.

Gary Mobley — Wells Fargo Securities, LLC. — Analyst

Okay. Thanks for the color, Mohan.

Operator

Our next question comes from the line of Harsh Kumar with Piper Sandler. Please proceed with your question.

Harsh Kumar — Piper Jaffray — Analyst

Yeah. Hey, guys. First of all congratulations, very, very strong results. Actually when I look at your guidance, it’s I think a little bit better than most of the companies are reporting this time. And I heard all the questions on double ordering. So I’m trying to understand for as long as I can remember, you’ve had turns in the about 34%, 35% range. My understanding listening to you is that you’re 80% booked. I think you said the turns were estimated at about 20% this year. So, question for you is why not guide higher and/or alternatively, is this the sort of padding in terms in case cancellations do happen?

Mohan Maheswaran — President and Chief Executive Officer

Yeah. So, Harsh, first of all the 20% is accurate. That’s all the turns we need and it’s probably the lowest percentage of turns in my — since I’ve been with the Company as CEO of the Company and that’s 15 years. So it’s obviously — it’s a relatively low number to what we used to achieving. Having said that, there are a lot of unknowns. I think there was a lot of uncertainty around still the consumer business, I think the broader industrial and COVID-19, is there going to be another resurgence of cases, especially here in North America that’s starting to — just starting to get back to normal, I think. So there is still uncertainty and we just took the approach that I think several other companies have taken, which is just to make sure that we plan conservatively and guide conservatively and that’s what we’ve done.

Harsh Kumar — Piper Jaffray — Analyst

Thanks, Mohan. Thanks for the color. And then I had a question on LoRa. Do you think the — first of all, was LoRa the fastest sort of bookings area for you in this second quarter, going into the second quarter? And do you think the reason is that because China is back and that hurdles are removed that the bookings ramped up dramatically? But then as we look at the landscape, the tensions are flaring up again. I know this is an open-ended question and nobody knows the answer, but is there a possibility that LoRa could get caught up in that or do you think because it’s outside of infrastructure that it will probably get saved or set aside?

Mohan Maheswaran — President and Chief Executive Officer

Let me start with the first part first, Harsh. The bookings were strong across the board, especially on the infrastructure side. So data center was very strong, base station was very strong and LoRa was very strong for us, as well as on the protection — broader protection business. So those are the four main areas.

Now within the LoRa domain, obviously still today 50%, 55% of revenues of LoRa are from China. But remember that February and March, China was really shut down — I mean for a large part of February and March, really shut down. So as I said, it did pick up in April, came back. But I would say, as I’ve said, now the opportunity pipeline for LoRa and where we’re seeing a lot of the new revenue is, and I can say new revenue versus old revenue, is not smart metering and smart buildings and smart cities, but it’s starting to look like smart home, smart logistics, some other areas are going to pick up and do quite well. And then the other thing that I mentioned is that COVID-19 itself is driving some use cases that — it’s not material yet, but could be quite significant and quite soon, I think if they play — start to play out, then smart health and smart temperature monitoring and things like that start to come into play. So a lot of different use cases.

So I think we’re not really that worried about additional restrictions. I mean, of course, you can never say, something could happen and things could get worse. But our — most of our opportunity pipeline, about 80%, is outside China now. So while we continue to work on with China and continue to do well in terms of new design wins and working with our partners there, we also have a lot of opportunity outside China that’s going to drive growth for us.

Harsh Kumar — Piper Jaffray — Analyst

Thank you, Mohan. I’ll get back in line.

Operator

Our next question comes from the line of Tristan Gerra with Robert W. Baird. Please proceed with your question.

Tristan Gerra — R.W Baird — Analyst

Hi. Good afternoon. So given the restrictions that HiSilicon is going to have, notably not being able to build NB-IoT chips at TSMC and knowing that the Chinese government has pushed NB-IoT and I know that it’s obviously not a perfect overlap with LoRa, but does that change the competitive landscape longer term where to the extent that China’s own NB-IoT and IoT efforts have potentially impaired for a longer amount this time that it could actually create actually more demand for LoRa in the medium term?

Mohan Maheswaran — President and Chief Executive Officer

Well, I’d like to think so, Tristan, but we’re not depending on that. For us the use cases drive really where LoRa is winning. The Chinese are going to — Chinese government is going to continue to push NB-IoT, the cellular guys around the world will continue to push for NB-IoT. We’re not going to stop that. I think that’s not going to be our strategy. Our strategy is always deliver the technology to provide the best use case implementation for our customers so that they really can’t [Phonetic] get the lowest battery life the — and use the technology to deploy the system that they need to deploy in an efficient way. And — so our feeling is as we get more and more of our new products out like LoRa Edge, they’re just — we’re just going to create a quite a large gap between what LoRa can do in certain use cases and what NB-IoT or any other technology can do, and that’s really the way to win and I think that’s what we will do even in China.

Tristan Gerra — R.W Baird — Analyst

Okay. And then a quick follow-up on LoRa. In fiscal — last year we basically saw a little bit of a decline in your average node per gateway based on the data that you’re providing. Given the re-acceleration that you see for LoRa this year, should we expect the number of node per gateway to actually increase year-over-year? And also given again that LoRa was probably pretty weak earlier this year in China, do you expect this coming quarter for LoRa to be up year-over-year?

Mohan Maheswaran — President and Chief Executive Officer

So yes, I do expect LoRa to be up year-over-year. The other comment on end nodes per gateway, remember gateway deployments are doing very well actually. And that’s another metric that we look at obviously around the world, how many gateways are being deployed. As I mentioned, in Q1 800,000 gateways from 640,000 at the end of FY ’20. So, yeah, significant increase in gateways. And that tells us that the use cases, all the opportunities that we have are starting to get into their proof of concepts and they are moving from proof of concept to deployment. And that’s really what drives the end nodes.

So you can look at it on a real-time basis and say how many end nodes we have deployed in how many gateways, but the gateways allow a lot more end nodes to be connected. So at the moment, 800,000 gateways drives around 3 billion sensors. So the 3 billion sensor nodes or end nodes can be connected to those gateways. So there’s plenty of capacity out there and that’s the goal we have is to drive enough capacity. And then the end nodes will follow. That’s just the use case driven. So as the use cases start to get deployed and merge then you’ll start to see more and more end nodes deployed.

Tristan Gerra — R.W Baird — Analyst

Okay, great. Thank you.

Operator

Our next question comes from the line of Craig Ellis with B. Riley FBR. Please proceed with your question.

Craig Ellis — B. Riley FBR — Analyst

Yeah. Thanks for sneaking me in and congratulations on the good quarterly execution, guys. I was hoping I could just start with a clarification before a couple of questions. The clarification is I think I heard you say that wireless sensing was down 20% quarter-on-quarter. But within that, can you tell us how proximity sensing performed versus LoRa?

Mohan Maheswaran — President and Chief Executive Officer

They both were down quite significantly. Do you have that?

Emeka Chukwu — Executive Vice President and Chief Financial Officer

No.

Mohan Maheswaran — President and Chief Executive Officer

Let’s see. Just hold on a minute. I’ll give you that information. Yeah, both were down and both quite down by about the same amount I think from a percentage standpoint, Craig. So I think proximity sensing coming down was driven by obviously LoRa smartphones consumer. LoRa enabled mostly was down because of the — China was shut down for February and March. So two different dynamics going on, but both came down significantly.

Craig Ellis — B. Riley FBR — Analyst

That’s helpful. Thanks. [Phonetic]

Mohan Maheswaran — President and Chief Executive Officer

And then there was some — yeah, the other thing, Craig, sorry, is that there was some supply constraints that really drove both for — in both — mostly in the proximity sensing and in some other areas of our business — in the wireless and sensing business that drove that business to be down.

Craig Ellis — B. Riley FBR — Analyst

Got it. And then for the first question, Mohan, it sounded like as you went through the different LoRa metrics that you’ve retained all your metric targets for calendar ’20. So, congratulations on that. My question is with the retained revenue range of $90 million to $120 million, what would make the difference between the business coming in closer to the low end, the $90 million, versus coming at the high end, the $120 million?

Mohan Maheswaran — President and Chief Executive Officer

The main delta will be the emergence of some new use cases that I mentioned, a little bit more consumerish, more smart home that we know are in play. It was scheduled for Q2. We’ll see if things happen in Q2. And if they do, they should drive us probably towards the, I would say, more the mid to high end, but we’ll see. A lot depends on the pickup and how that’s — how those use cases are adopted and how quickly.

And as I mentioned, with COVID-19 the difficulty is not — it’s really — we don’t think it’s going to have a long-term impact to the business, it’s just the timing of some of the things that are going on and whether consumers and smart home and even some enterprises doing smart logistics are going to delay programs by a quarter or two. I don’t think it’s going to be that significant, but it may delay it by a quarter and if it does, it moves into next year, but we’ll see, we will have to monitor it and I’ll report on it as it happens.

Craig Ellis — B. Riley FBR — Analyst

Okay, that’s helpful. And then lastly for you, I think in your answer to an earlier question you noted that within Signal Integrity, it looked like the hyperscale part of the business, the data center part of the business was the strongest of the different opportunities in the near term ahead PON, ahead of base station. The question is given that investors are worried about the duration of near-term strength for chip companies, where do you have the greatest confidence as you look out into the back half of the year that some of this near term strength can be maintained?

Mohan Maheswaran — President and Chief Executive Officer

Yeah. The back half being Q4 it’s difficult to project now. I think we’re getting indications that Q3 will be okay. And I think part of that is knowing that the base station market, for example, in China, we know they are deploying some amount, we know that they’re going to do it this year, we know how the different customers are planning and we know our position in those customers and we think we have a very good position in that market. So we think that’s going to play out this year.

The PON business, as we know, as I mentioned, one of the nice things about PON, especially the PON-X 10 gig play that we have is that becomes a kind of a handoff to the 5G for the — a lot of the 5G networks. And so that’s a new — really a new thought, a new architectural kind of value that PON brings and that’s very encouraging.

I think the other thing that’s really often not really understood is that both base station and PON while China is by — clearly by far the biggest opportunity today, we’re starting to see now AT&T, Verizon talking about gigabit PON and we’re starting to see the — obviously, the US market and European markets talking about 5G and deployments, and so a broadening of the opportunity geographically, which I think is very encouraging and very good as well.

So we don’t see much slowdown even in the second half, to be honest with you, but obviously a lot depends on COVID-19. But from a need standpoint, the need is clearly there for more bandwidth for consumers, for enterprise and so that drives more base station, that drives more PON, clearly drives more data center. So at least for this year we think that will continue.

Craig Ellis — B. Riley FBR — Analyst

That makes sense. And if I could sneak one in for Emeka. Feel like he has been a bit neglected. Emeka, you mentioned that with the second quarter gross margin, mix would be a tailwind but absorption would be a headwind or utilization would be a headwind. I guess that’s the flow-through effect of first quarter revenue.

As we look beyond the fiscal second quarter, do you get both of those things working your way and could we see gross margins getting to the 62% level as we exit this year? Thanks guys.

Emeka Chukwu — Executive Vice President and Chief Financial Officer

Yeah, Craig, I think that is the expectation. I mean, as you listen to all the growth areas that we have, a lot of those are coming with a pretty high gross margins. So the data center, the 5G, the PON, the 10 gig PON, and then the protection of industrial applications as well. So we think a higher mix of those type of revenues and demand stays strong and going up, driving higher absorptions allows us to move our gross margins up to around the 62% level.

Craig Ellis — B. Riley FBR — Analyst

That’s helpful. Thanks, guys.

Operator

Our next question comes from the line of Karl Ackerman with Cowen & Company. Please proceed with your question.

Karl Ackerman — Cowen & Company — Analyst

Thanks. Thank you and good afternoon, gentlemen. Two quick ones, if I may. Mohan, just kind of curious how do you think about the FCC decision to make available the 6 gigahertz band for Wi-Fi. I’m just kind of curious, some investors have been a little bit worried that this may limit the 40% annual CAGR of LoRa adoption in consumer environments as consumers opt for higher performance, but much more expensive routers for in-home connectivity. I was just kind of hoping if you could talk about that how it would impact your consumer LoRa business longer term.

Mohan Maheswaran — President and Chief Executive Officer

Yeah, I don’t think — so the way to think about it really is that they are different use cases and they are complementary. Actually Wi-Fi is a great complement to LoRa in many ways. Thinking about how they operate and even our latest platform, our LoRa Edge platform has Wi-Fi sniffing function, but still needs Wi-Fi routers and those type of systems to enable its use case. So really no impact at all.

I would say, if anything, Wi-Fi and LoRa becoming more complementary and we’re seeing more and more use cases where a high bandwidth Wi-Fi capability plus LoRa for low power sensing and monitoring and things like that is really valuable to most use cases. So just much like 5G plus LoRa or Bluetooth plus LoRa, we don’t really see that as a competitive issue. We see it more as a complementary.

Karl Ackerman — Cowen & Company — Analyst

Very helpful. Just one last one, if I may. On your Tri-Edge opportunity, yeah, there is a competitor who appears to have one — maybe most of the early designs in PAM4, just given the fact it’s largely relegated to one hyperscale customer. First do you expect more diversified cloud adoption in the US of PAM4 interconnects inside the data center this year where you have the opportunity to be a strong number two provider? Second you noted that Tri-Edge could be more material for next year, but I was just hoping you could speak to your perhaps relative position and quantify the opportunity as the market transitions to both 200 gig and 400 gig solutions. Thank you.

Mohan Maheswaran — President and Chief Executive Officer

Yeah. We just — so the first important thing is we just started to sample the Tri-Edge platform. So it is very early days for us and I think that has to be noted. But we do have a pretty good position in the data center space and we know the customers and we know what’s needed. And we have a very strong 100 gig position. And so now the question is moving those customers to use our platform for 200 gig and 400 gig initially for short reach and then for longer reach applications is the goal that we have. But yeah, we know that there’s some work to do here. It’s not a slam dunk and there’s a lot of challenges. But we do think — I mean, we made the strategic decision to go the analog PAM4 route because we felt that power was extremely important, we felt that the cost was very important, we felt in a lot of the use cases latency was very important. And so that was the reason why we chose this path and now we have to go to make sure that the fact that we are somewhat late to the PAM4 space, I think we have to kind of catch up that. And that’s the goal this year is to get more design wins and then next year we should see that ramp up nicely. We’ll see revenues this year. I just don’t think there’ll be huge revenues this year. I think next year will be much stronger.

Operator

Our next question comes from the line of Mitch Steves with RBC Capital Markets. Please proceed with your question.

Mitch Steves — RBC Capital Markets — Analyst

Hey guys. Thanks for taking my question. It looks a pretty substantial beat-and-raise here, but I had a question, it’s more on kind of like ’21 and ’22. I think it’s a big investment to beat. So it sounds like you guys had some sort of view of what the back half looks like. So is there any way to, at least, give us maybe a qualitative metric and how to model out the back half of the year if it should be similar to July growth or something that’s going to decelerate or accelerate, anything that would help there, I think would be very useful?

Emeka Chukwu — Executive Vice President and Chief Financial Officer

Yeah. Mitch, I think from everything that we see right now, we’ll expect to have a decent second half of the year. However, there are still things out there that we know we’re not in control of, right. There is a talk of a recession and things like that. And like Mohan said before with regards to COVID-19 nobody really knows how that whole thing is going to play out. So we still have — we feel very good about the second half, but also just have a little bit of a hint of a caution around it. So my expectation would be that we’ll probably see maybe some sort of a flattish to slightly up second half of the year.

Mitch Steves — RBC Capital Markets — Analyst

Okay. That’s very helpful. And then just a follow-up real quick on LoRa. You had cited [Phonetic] $90 million to $120 million. It sounds like there wasn’t much in April, hence the pretty significant contribution in July. So when we look out to next, like call it ’22 and ’23, are you guys still sticking with kind of like the 40% to 50% growth rate, because it’s just infrastructure build-out or has that changed, got pushed out in any meaningful way?

Mohan Maheswaran — President and Chief Executive Officer

No, we will stick with the 40% CAGR over the next five years. And it’s really driven not only by — I believe that these gateways that are being deployed have a lot of use cases, there is plenty of capacity out there. We’re really seeing the need for low power sensing. So the low power wide area network market which is tiny today, we’re starting to see it grow. There are clearly some emerging use cases. And I think as I mentioned if the smart home, smart consumer, smart logistics, smart asset tracking start to take off, which we believe they will, then I think we’ll start to see a much more higher volume of connectivity to gateways and that will drive the FY ’22, FY ’23 number and the 40% CAGR.

Mitch Steves — RBC Capital Markets — Analyst

That is all. [Phonetic] Thank you.

Operator

Our next question comes from the line of Hamed Khorsand with BSW Financial. Please proceed with your question.

Hamed Khorsand — BSW Financial — Analyst

Hi. Just one question. Can you quantify the sales slippage from Q1 to Q2? And it was from all the supply constraints and is it all-in wireless and sensing?

Mohan Maheswaran — President and Chief Executive Officer

Hamed, when you say sales slippage, so I think Q1–

Hamed Khorsand — BSW Financial — Analyst

[Speech Overlap] your 10-Q towards the bond 10-Q, you’re talking about — there is a — there was a impact to Q1 sales and you are shifting it to Q2 on the guidance. So I am just trying to get a clarity on that.

Mohan Maheswaran — President and Chief Executive Officer

Yeah, I think — I mean — so yeah, there were some — we had some areas of supply constrained. For example, our facilities in Mexico for our high rail business was shut down. We couldn’t build anything. So clearly that’s — we have to — and that’s — and we’re not planning actually to start that facility again until June. So that’s still shutdown, so we can’t ship anything from that. So that has some impact. It’s fairly small, I would say, $3 million to $4 million. And then we have reduced capacity in our — some of our operations in our protection business. Again a few million dollars from the standpoint of capacity and then Malaysia shutdown, some constraints there. So it’s broad — fairly numerous different sites and locations. But all in all, it adds up and I don’t think it’s so significant that it’s going to make a material difference in Q2, we should be able to pick most of it up.

Hamed Khorsand — BSW Financial — Analyst

Okay. Thank you.

Operator

Our next question comes from the line of Tore Sandberg with Stifel. Please proceed with the question.

Tore Sandberg — Stifel — Analyst

Yes. I just had two quick follow-ups. First of all and just to sort of reconcile, you had record POS, yet you’re guiding about $30 million lower than your historical record on the top line. Is that again just you being careful with the economy, is it some related to Huawei, help us understand what that $30 million and I know it’s not perfect times, right, POS versus sales, but it’s still a fairly large number.

Mohan Maheswaran — President and Chief Executive Officer

Yeah, I think all of the above, Tore, so some constraints in terms of, look, we’re not going to guide — put anymore Huawei shipment in the guide. I’ve done that in the last two quarters and I think that’s the way to do it because we just don’t know what new regulations will come out or what new restrictions will come out. So it doesn’t really matter. So the guide assumes no more shipments into Huawei. That’s the first one.

I think the other aspect is the — obviously, we have a lower turns percentage required in the quarter. But as I said part of that is not really knowing enough about how COVID-19 is going to play out in the different regions. And from a demand standpoint as North America and Europe come back and start to go back to work, whether we’re going to see another virus impact and we’re going to be shutdown again or is it going to continue to be okay. So some conservatism there. But in general, I would say that we feel good about our guidance. And could we have guided more aggressively, I think probably we could have done. But I think with the supply constraints and uncertainties in demand, we still have to — one of our sites shut down and another one at 50% capacity, things like that, just you don’t know, you don’t want to be too bullish out there, right.

Tore Sandberg — Stifel — Analyst

Yeah, that’s fair. And just the last question, it sounds like you’re seeing quite a bit of activity on the health care side with LoRa. I was just wondering if you’re seeing enough where you may actually dedicate sort of a business unit towards LoRa smart health care. Seems like a lot of companies are sort of using the health care market as a big opportunity here in the downturn. Just wondering if you guys are being a bit more dedicated to health care industry [Phonetic] with LoRa. Thanks.

Mohan Maheswaran — President and Chief Executive Officer

Yeah, that’s a good question, Tore and I’m not sure of the answer to that yet. We are starting to see use cases, as I said, and we’ve got customers deploying LoRa around the world to help with COVID-19. I said — I mentioned contact tracing, remote temperature sensing, LoRa is perfect for that, occupancy management and smart quarantining. But I’m more of a believer of just kind of thinking through strategically whether longer term it makes sense or whether it’s a short-term opportunity. The nice thing is I think we have some good partners working on this and they’ll start to indicate to us if LoRa is really being successful in this area and that will then probably drive kind of a separate set of strategic thinking in that area.

Our new LoRa Edge platform that we just brought to market, we just announced, which has both Wi-Fi sniffing, GNSS sniffing and the LoRa functions, so three separate radios, all in the same chip. Actually we designed it and the focus is on smart logistics and asset tracking, which we think is going to be a huge market. But that same platform I think has got a really good opportunity in the smart health market. So we’ll see — especially for contact tracing and things like that. So we’ll see how it plays out. But it’s one of those areas that we have to keep a close eye on to see if the market is going to adopt it and accelerate.

Tore Sandberg — Stifel — Analyst

Sounds good. Thank you very much.

Operator

Our final question comes from the line of Christopher Rolland with Susquehanna. Please proceed with your question.

Christopher Rolland — Susquehanna Financial Group — Analyst

Hey guys. Thanks for the follow-up. And just kind of a follow-up also to Tore’s. On the bookings side of things, we’ve kind of noticed a correlation between book-to-bill and Huawei previously as a customer from some of your competitors. I think you guys said you had a strong book-to-bill. I don’t know if you guys would maybe want to describe what that is a little bit further, was it 1.3 or above. And then just as you think about those extra marginal bookings, were they elongated, are they cancellable or is there anything about that that’s different than otherwise?

Emeka Chukwu — Executive Vice President and Chief Financial Officer

So, Chris, our book-to-bill was — it was pretty much of the — sort of the range that you have referred to. And on the bookings side, they are strong. Like Mohan said on the call, they have actually continued. And I think one of the things that we do consistently is to track how much cancellations we’re getting, how much push-out requests that we’re getting. And so far we have not seen anything that is apart from the ordinary. We’ve been very pleased with all the indications that we’re seeing is that the bookings are really something that is being driven by actual demand.

Mohan Maheswaran — President and Chief Executive Officer

Yeah. And I would point out that a lot of the strength, as I mentioned, was — the bookings strength has been in infrastructure and IoT related areas. We’re not seeing the same in some other segments. So that — and within the infrastructure it has been fairly broad. So normally you see one or two areas where you see a lot of strength, but it’s fairly broad within infrastructure, I would say, it’s base station, it’s data center, it’s PON, it’s board communication and IoT.

Christopher Rolland — Susquehanna Financial Group — Analyst

Thank you very much, guys.

Operator

Since there are no further questions left at this time, I would like to turn the floor back over to management for any closing remarks.

Mohan Maheswaran — President and Chief Executive Officer

In closing, COVID-19 has provided us all with its fair share of challenges. I want to thank all of our employees and partners for their efforts to quickly adjust to the challenges faced from this global pandemic. They have adapted and responded and leveraged the infrastructure we have built over the last several years, resulting in limited impact to our business operations. We believe our diverse product offering, balanced end market and balanced geographical approach along with our strong customer relationships should help us outperform our peers in this uncertain times.

With that we appreciate your continued support of Semtech and look forward to updating you all next quarter. Thank you.

Operator

[Operator Closing Remarks]