Greetings. Welcome to Semtech's Investor Conference. Speakers for today's call are Semtech's CEO and CFO. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Semtech's CFO. Thank you. You may begin. Thank you, operator. The press release announcing Semtech's intent to acquire Sierra Wireless 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 statements shared today. For a more detailed discussion of these risks and uncertainties, please review the safe harbor statement included in today's press release. 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. I will now hand the call over to Mohan. Thank you, Emeka. Good afternoon, everyone. Today, we completed a definitive agreement to acquire Sierra Wireless for $31 per share in an all-cash transaction valued at approximately $1.2 billion. We are delighted to be entering into this important and exciting transaction for many reasons, some of which we will discuss on this call. We will provide additional details on our quarterly earnings call on 31 August, and further financial guidance after the transaction closes later in the year. The acquisition of Sierra Wireless will bring together the ultra-low power, long range, and network flexibility benefits of LoRa technology, together with the low latency, high bandwidth, and global network coverage benefits of cellular technology, along with a uniquely differentiated chip to cloud services platform that will bring IoT deployment simplification to the entire IoT industry. The acquisition will approximately double the scale of Semtech and increase our anticipated growth rate to an approximate 15% CAGR for the company over the next five years. At close, our revenue will reach approximately $1.5 billion, and we have increased our new five-year target to $3 billion. We expect the acquisition to be immediately accretive to our non-GAAP earnings at closing. Sierra Wireless is a leading IoT solution provider that delivers cellular-based modules, gateways, and advanced cloud services to the broad IoT market globally. Their IoT cloud software platform offers device management, network management, and end-to-end security to enable the digitization of industrial assets. The company has over 25 years of expertise in cellular technologies, and today has a complete portfolio of cellular IoT modules supporting leading protocols and a portfolio of mission-critical IoT enterprise gateways and a cloud software and services platform that delivers greater than $100 million of recurring revenues annually. Sierra Wireless sells and supports products into a broad range of OEMs, system integrators, and solution providers in over 200 countries today. Headquartered in Vancouver, Canada, with major design centers in Canada, India, and France. We believe that Sierra Wireless is an extremely good fit strategically and culturally, and we are very excited by both the short-term and the long-term opportunities that the acquisition brings to Semtech. Sierra Wireless has been on a transformation journey over the past few years, shifting their business to a full IoT platform offering, and I believe they have done an exceptional job. Their revenue has grown substantially, both with the market and due to the incredible efforts of their team. They have put a strong focus on improving operating margins through improved execution and efficiencies, all while continuing to deliver excellent customer satisfaction. While Sierra's financial model is different than Semtech's, we believe the combined business, together with innovative new products we will deliver in the future, will support the continuation of Semtech's financial model. As a pioneer in the IoT managed service business, Sierra's horizontal cloud platform service supports all of Sierra's products and offers full device-to-cloud management support. Sierra's cloud software supports customers in over 164 countries, offering device management, managed connectivity, and end-to-end security from the device through the network edge and in the cloud. Combining these capabilities with Semtech's LoRa cloud platform will make it even easier to connect, manage, and move data from LoRaWAN-based sensors to existing networks and to the multi-radio networks of the future. A combined management platform supporting all protocols, device connectivity, and network management services accessible through a single easy-to-use platform will enable our customers to simplify their IoT deployments. The combination will eventually enable a suite of cloud microservices, including end-to-end security, indoor and outdoor geolocation, device management and provisioning, and network management. These additional features will further enhance the benefits and advantages of LoRa and enable our customers to better optimize their end-to-end IoT applications and use cases for the lowest power. I am confident this unique capability will support significant growth in managed services and provide a healthy recurring revenue stream in the future. Companies globally are adopting cellular and LoRa connectivity solutions to connect ultra-low power sensor networks to the cloud to improve operational efficiencies, reduce waste, manage our natural resources, and enable numerous other smarter planet objectives. Sierra Wireless works with its customers to develop the right industry specific solution for their IoT deployments, whether this is an integrated solution to help connect edge devices to the cloud, a software API service to manage processes with billions of connected assets, or a platform to extract real-time data to improve business decisions. The combination of optimizing LoRa and cellular technology is a highly strategic decision to position Semtech as the leader in the fast-growing IoT market. Our vision is to be the premier chip to cloud IoT platform provider that helps our customers accelerate their digital transition to the Internet of Everything for all use cases globally. This acquisition comes at a very important time in the market as we believe the world is at a critical inflection point in utilizing technologies, technology solutions to enable a smarter and more sustainable planet. The world needs the digital transition to a smarter planet to move quickly, and our customers need IoT solutions that simplify their deployments. I'm optimistic that with this transaction, we will be able to accelerate new IoT solutions that enable our customers to create and deploy new IoT use cases rapidly. This acquisition immediately expands Semtech's addressable market. With the addition of the Sierra Wireless business, we have expanded our market access to almost $13 billion, of which $10 billion is the IoT market, and almost 10x growth by 2027. The LoRa business continues to grow nicely, reaching new growth and adoption records each quarter. The Sierra Wireless acquisition will significantly benefit the LoRa business through access to Sierra's broader established IoT channels and relationships with key enterprise customers and system integrators, as well as from the increasing opportunities in end markets where Sierra Wireless has strong market share. These include the energy and natural resource management, transport and logistics, industrial IoT, and the public safety and smart city segments. With a strong culture of innovation and a strong engineering team, over 400 wireless patents, strong high bandwidth RF competencies, IoT systems engineering competencies, and cloud microservices and software expertise, added to Semtech's silicon and ultra-low power RF competencies, we will create a very strong engineering team and comprehensive IoT portfolio for the future. Our two organizations will immediately begin to optimize and deliver a broader product portfolio and enhanced service model to customers across a variety of use cases and markets. We are all excited to welcome the Sierra Wireless team to Semtech and to begin working more closely with them. This acquisition will be the largest in Semtech's history and will significantly expand our competencies, our portfolio, our engineering talent, and our SAM. The acquisition of Sierra Wireless will create a uniquely differentiated company that has leadership positions in several categories. Along with our signal integrity and protection businesses, we are now well positioned to accelerate growth nicely over the next five years. Now I would like to turn it over to Emeka to expand on the financial details of the acquisition. Emeka? Thank you, Mohan, and good afternoon to everyone. Thank you all for joining us today. This truly is a transformational event in Semtech's journey to enable a smarter and more sustainable planet. Just to reiterate the announcement this afternoon, Semtech and Sierra Wireless boards of directors each approved a definitive agreement under which Semtech will acquire all of the outstanding shares of Sierra Wireless for $31 per share in an all-cash transaction, representing a total enterprise value of approximately $1.2 billion. This is a compelling acquisition that we expect will approximately double our annual revenue, significantly increase our market opportunity in IoT, and position us nicely towards our new long-term annual revenue target of $3 billion by calendar year 2027. We are acquiring a high-quality team that has been able to drive significant top-line revenue growth while improving Sierra's operations and profitability, positioning the Sierra Wireless business for healthy long-term growth. This acquisition will create one of the largest and most comprehensive IoT portfolios in the industry and will bring many new revenue opportunities to Semtech based on the complementary portfolios. As Mohan described, our vision of a comprehensive horizontal platform, IoT cloud services are a key element of this offering and one of the fastest growth elements of IoT at approximately 10%-15% annually. Sierra Wireless has done an excellent job building out a cloud services management platform that today has a recurring revenue and service stream of greater than $100 million a year, and that is poised for growth. We expect that leveraging Sierra's experience in cloud and software services will enable us to grow and accelerate our LoRa cloud services revenue significantly. We expect to see LoRa adoption to further accelerate from Sierra's established IoT channels, customer relationships, and the numerous use cases that this combination will enable. This acquisition will shift the profile of our current and long-term revenue significantly in several important ways. First, our wireless IoT business is about 21% of our annual revenue today, but immediately upon close, will represent approximately 54% on a pro forma basis, providing a solid position for us to scale and grow from. The acquisition will significantly increase the mix of our revenue from the industrial market segment as well, and our revenue contribution from North America and Europe, thereby reducing our exposure to the consumer segment and to China. We believe that with these shifts, together with our strong balance sheet and the increasing purchasing power from our combined scale, we can drive lower manufacturing costs and further enhance our gross margin. We are currently estimating $40 million in run rate synergies from the elimination of dual public company costs, consolidation of business systems, and efficiencies from combining dual administrative functions and services. We expect to achieve these operational synergies over 12-18 months after the transaction closes. This transaction is expected to be immediately accretive to our non-GAAP earnings per share. We are also reiterating our long-term non-GAAP gross margin target of 58%-63% and non-GAAP operating margin target of 32%-36%. The acquisition is expected to close during Semtech's fiscal year 2023, subject to approval by Sierra Wireless shareholders, certain regulatory bodies, including the Supreme Court of British Columbia and other customary closing conditions. We intend to finance this transaction with a combination of internal cash and approximately $1.15 billion of committed debt financing from JP Morgan. We expect to have a debt leverage ratio of less than 4x at the time the transaction closes, and we expect to pay it down quickly from a combination of profit growth, low capital intensity of the combined business, and strong cash flow generation. In summary, we are thrilled with the world of possibilities that this transaction opens up to us. Combined with our protection products helping to minimize electronic waste and our signal integrity products supporting low power expansion of bandwidth, we believe that our journey to enabling a smarter and more sustainable planet will be a financially rewarding journey for our employees, our shareholders, our customers, and our suppliers. Please note that along with our press release, we have posted a deal overview deck to our investor relations website that shares more on the deal specifics. With that, I will now hand the call back to the operator for questions. Operator? Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question is from Tore Svanberg with Stifel. Please proceed. Yes, thank you, and congratulations on the announcement. Just first one on the financials. I appreciate that, you know, you are gonna maintain your long-term target for both gross margin and operating margin. I assume to get there, you know, especially at $3 billion in revenue, you would have to have a very high percentage of revenue coming from software and services. I guess my question is, you know, today the mix for Sierra 70/30, how rapidly will that shift more towards software and services over the next few years? Tore, thank you. This is Emeka. I think from the prepared remarks, you can see that we are really very excited about the opportunity to accelerate the growth of both the Sierra Cloud and services revenue, but more importantly, the LoRa opportunity, the LoRa cloud revenues that we are, you know, that we've been talking about. I think this acquisition really gives us a very big confidence that we should be able to see more momentum in that business. You know, as you correctly pointed out, the growth in that business is going to be one of the key elements of getting us back to our long-term gross margin target. You know, we do believe that as we get to the $3 billion revenue target, that we would expect to see probably about 15% of that revenue coming from our cloud and services revenue. Yeah. Let me add some color on that, Tore, in terms of the you know the application side. LoRa strength is really in the end nodes, the LoRa end nodes being extremely low power. That device management side of knowing where a sensor is in terms of locating it, in terms of managing that sensor, in terms of the health of the sensor, in terms of the provisioning of the sensor, the security of the sensor, that's really on the LoRa side. Then if you look at the network side and the cloud side, that's really on what Sierra Wireless cloud platform is doing today. There's a really nice fit between the two, offering customers the ability to do end-to-end IoT, cloud, location, and provisioning and end-to-end security. We believe that's game changing. That's kind of why we're very bullish about the growth in the cloud side from this acquisition. Very good. As my follow-up question, you know, Sierra obviously they sell systems and I assume they probably buy semiconductors, right? So, is there a role there where you will try and maybe displace some suppliers in favor of your products? Obviously, you know, LoRa is very different from cellular, right? Yeah, just trying to understand the dynamics there, you know, as you become more and more of a vertically integrated company. Yeah. The initial concept and idea is actually to include more LoRa devices into modules and into you know systems whether they be gateways or whether they be whatever system it is. That's the initial concept. I think obviously there's also opportunities in the future to do more different types of technologies multiple radios and how they work. But I think the priority is gonna be on the integration of LoRa and cellular modules and then the cloud services aspect of the business. Great. Just one last logistics one. Is this gonna require China approval? No, we don't think so. No, I don't think so. Okay, great. Thank you very much. Our next question is from Craig Ellis with B. Riley Securities. Please proceed. Yeah, thanks for taking the question and congratulations on the announcement, guys. I wanted to start by taking a different approach at one of the things that Tore Svanberg inquired about, which is gross margin. If we look at where the pro forma business is at 51% to the low end of the target model range of 58%, that's about 700 basis points of gross margin expansion. Emeka Chukwu, can you just break down what the bigger execution items are to get to that? You talked about the software and services, but I imagine that's not all of the path to close that 700 basis point gap. What how much is COGS optimization? How much is other items, as we think about the path back to 58%? Craig, with regards to the gross margin expansion, our expectation is that it's going to be a steady expansion back to our target range. You know, like I said in the prepared remarks, there are three key vectors of this gross margin expansion. I think the growth in the cloud services and software services revenue is going to be a key contributor, as you can imagine, with very high gross margins. We're very, like Mohan said, we're very bullish that we'll see the attraction that we're expecting. We've actually started seeing certain opportunities, but we'll have to harness that and give you more color on that as we have our future calls. The second driver for the gross margin is just going to be, you know, just being able to sell more LoRa devices into some of the cellular SAM opportunities, getting more LoRa chips, you know, into the modules that they have out there. That is also going to help lift the gross margin. We do know that there are opportunities that we've actually seen that can help, where we can help improve certain things and bring some operational efficiencies. If I were to rank all the contributors to the gross margin expansion, I would expect the primary one to be the improvement in the LoRa Cloud. Not just the LoRa Cloud, but the overall cloud and services revenue. The growth in adoption of LoRa by being integrated more into the modules that Sierra is selling, and then, the operational efficiencies. The more immediate opportunity though is going to be the operational efficiencies. Got it. Just to understand some of the things that you need to execute on the first item where, you know, driving greater cloud and software and services. I know you're bullish, but what are the execution items to drive that? Is it awareness through, say, the LoRa Alliance? Is it development kits? What are the things that the companies will have to execute on to achieve that then? On the second item, if we're adding content into a cellular SAM, by definition, the BOM cost is going up. For some customers, the ROI would go down. How do we think about kind of the pros and cons if BOM costs are going up to endpoints and greater endpoint units? Yeah. Craig, let me touch on both of those. On the cloud side. Thanks You know, we have our own cloud services platform that we started. Sierra has a very significant cloud platform that they've had for some time, and it's been in the market for some time, and they're generating significant revenues from that platform. The first challenge is really to bring those together. Obviously, as I mentioned, the end nodes themselves and being able to manage those type of end devices, as well as the network, offers a great advantage to customers. That's really what the priority will be, is bringing the cloud platforms together, adding to that the capability to do device management and geolocation and some other microservices. I think that's really the vision, and I think it's gonna be a very, very powerful platform once we execute on that. Going to the module side, you know, actually it's really straightforward because we have customers today, a lot of customers who are using LoRa sensors as the kind of a low power sensor networks. The backhaul is in a gateway or something like that that has cellular backhaul or Wi-Fi backhaul or Ethernet backhaul. Cellular is definitely the platform of choice and the technology of choice and the network of choice for mobile assets for mission critical assets and things like that. We already have a lot of those customers. That's kind of why... That was really the trigger for this type of assessment and acquisition, which is that customers, you know, have been telling us for a while that the network coverage of cellular is really something that's never gonna go away. It's gonna be there for a long time. It's very complementary to the LoRaWAN networks and the LoRa devices, and therefore, you know, it kind of makes sense to try to bring those two technologies together, and that's what we're doing. That's really helpful, Mohan. Thanks for that. Can I just follow up because it raises an issue that's come up in investor conversations as they've called in, and that is on the current Sierra Wireless portfolio. There has been some recent portfolio pruning. As you look at what's really strategic to driving synergies off of this deal and driving future quality growth back into your target model, is there room for further portfolio rationalization? If so, can you provide any color on the potential magnitude and timing for when that might occur? Yeah. There perhaps is, Craig. I don't know. We have to get the devil in the details on this. I would look at it more from the standpoint of it opens up more IoT use cases. There's almost every use case you can imagine now that is really a target for both LoRa and cellular when you bring the two technologies together. You know, LoRa is an extremely good control plane. It really is extremely low power, can be used to be a trigger point for bringing on and connecting higher bandwidth technology. That's one application kind of value. Another application value is the backhaul, as I mentioned. You know, there's so many different opportunities here that I think the way I think about it and the way the market should think about is as IoT evolves, there are really many use cases that will use both multi-radio approach and including other technologies as well. That means that we're going to see kind of a plethora of different use cases emerge that use these technologies, and that's what we're excited about. You know, we have seen over the last 10 years how IoT has evolved as we've grown LoRa, and we've seen the use cases, and we've seen the need for network coverage, and we've seen the need for, in some cases, very low latency, high bandwidth applications, and we've seen the need for cloud based services. All of this kind of really drove us to, well, we're doing everything organically. You know, this is an opportunity to accelerate a lot of those capabilities. That's what we're doing. Yep. Totally agree that the pie is very significant and growing rapidly, and it seems like you are scaling up to attack that. Let me ask two more housekeeping questions, if I could, before I hop back in the queue. The first would be just on cost savings. Emeka, I think you said $40 million. I thought that was reduced public company costs. So if so, why wouldn't cost savings be a little bit higher? And then secondly, Emeka, can you just reconfirm the exact amount of debt and what we should expect on cost of debt associated with the deal? Thank you, guys. All right. With regards to the savings, as you can imagine, Craig, we still have to get in there and see everything else that is possible. From the early results of what we have looked at, we see opportunities with regards to public company costs. We see opportunities with regards to functions that are duplicative of each other, right? There will probably be additional opportunities as we get in there for a little bit more synergies on the manufacturing side, you know, being able to leverage our strong cash position and our new scale to see what we can do in terms of some of the manufacturing expenses. You know, we're very hopeful that maybe we can find more in terms of opportunities for savings. At this point, this is what we have been able to get our arms around. I think your other question was how much debt we're going to have. I think in my prepared remarks, I said we are bringing on new debt of approximately $1.2 billion to help us fund the transaction in addition to our cash that we have on our balance sheet. With regards to the cost of capital, it is tough to say at this point because we still have to go into the credit markets and talk to our commercial banking partners and to the institutional lenders out there. I don't have a number to give you, but our expectation is that whatever we end up with is going to be very competitive. Would you expect to use term loans, Emeka? Are you gonna term this up on longer-term debt? We're still working through all of that, and the good news is that all the options are available to us. Got it. Thanks, guys. Our next question is from Scott Searle with Roth Capital. Please proceed. Good afternoon, and thanks for taking my questions. Hey, Mohan, I think you kind of hit on this on answering the last question, but are you planning to keep all of the businesses as core? Certainly, cellular modules in terms of complementing what you're doing from an IoT connectivity standpoint with LoRa, the IoT platform business. But gateway seemed like it had been maybe a little bit of an outlier, but now you're talking about that in terms of the overall solution. Is the plan to keep all three businesses, or is that still to be determined? Yeah, it's still to be determined, Scott. One of the reasons is that in IoT, there are use cases where, you know, mission-critical gateways are required, for example. You know, that's what Sierra does, and they do it extremely well. They're very high quality. They're very well known. It's very, very tough for an average gateway guy to do those type of products. We have to look at each use case and each application, and then as I mentioned, the application with LoRa and to kind of figure out whether, you know, there's value in keeping that. Our goal is just very simple. It's to simplify IoT deployments across the planet. In that way, when you sometimes think about it that way, you say, "Well, what, how do you do that? What's the idea?" The thing that you wanna do is to take all of the hardware implementation as much as you can away from the end deployment and leave it into the cloud and software and those type of things. Some of these things, really to answer your question, we're gonna have to look at it on a case-by-case basis and determine, are there some use cases which, you know, if they're big enough and they're profitable enough, and they're strategic enough that they warrant keeping some of the businesses that, you know, Sierra has. It's early days for that, Scott. Okay, fair enough. If I could, you know, the multi-radio approach to solutions right now, I'm wondering if you're seeing a lot of customers at the current time that are looking for combined LoRa and cellular, not necessarily in the same device, but in the overall solution that you're bringing to the party, right? Now you could bring the platform as well. If I could just, Emeka, follow up on the gross margins. To get to 58% again, you know, requires some mix issues. You know, near term, cellular modules tends to be a challenged gross margin business, and it tends to be a lot of strength right now in terms of what we're seeing in the marketplace. I'm wondering if you're contemplating of, as part of that gross margin journey and expansion, hardware as a service where you kind of blended that into a leased module or a leased hardware model as well. Thanks, guys. Congratulations. Yeah. Scott, let me talk about the multi-radio platform aspect. It's really the customers that drove this acquisition. When I look at the different use cases, whether it's utilities, smart cities, you know, asset tracking, logistics, as I mentioned, cellular networks are everywhere. They're not going away. They provide a very good backhaul for, you know, all the LoRa sensor devices and low-power sensor networks that are out there. I think that we already have many use cases where we're already using LoRa, and we already have cellular connectivity in the same module or the same gateway or the same system. I think as I mentioned, I think there's going to be a plethora of new use cases as cellular connectivity continues to grow and expand. I can see, you know, in asset tracking, logistics for sure, some of the utilities, you know, I think there's many use cases. Yeah, I think to answer your question, I think that's just gonna continue, and this really is customer driven. With regards to your question on hardware as a service, you know, in my prepared remarks, I talked about the acquisition of opening up a world of possibilities for us, right? Our business models are going to evolve. You know, we're really very excited about what we see ahead of us. We know we're going to definitely pursue a combination of revenue growth and gross margin expansion. We'll talk a little bit more and provide more specifics as we go forward here as to what which way that we're going to go. Great. Thank you. Our next question is from Quinn Bolton with Needham & Company. Please proceed. Hey, guys. I hope you can hear me. I'm on a train, so I apologize for that connection. I wanted to follow up on Scott's question about the multi-radio applications. You guys, years and years, have sort of touted the benefits of LoRa relative to cellular. LoRa's longer range, lower power, lower cost. I guess I scratch my head a little bit about picking up a cellular end node sort of capability where you sort of said LoRa is better positioned. I get the cellular is a backhaul solution, but can you give us a sense how much of Sierra Wireless business today is cellular modems for, you know, end node to this, where it'd be a better solution. Yeah, Quinn, you were cutting in and out there, but I got the gist of the question. It is very clear to me that LoRa is extremely successful and doing very well on the end node devices. Cellular from a networking standpoint, in other words, backhaul back to the cloud, is doing extremely well also. There are some use cases where the end device has a cellular connectivity, typically where it's moving maybe or where it's a you know, mission critical kind of use case. But a lot of the use cases I think are gonna be you know, LoRa end nodes and then aggregation points being cellular. Remember, cellular networks are already there, and they're going to continue to proliferate. You know, whereas we've been very aggressive and done a fantastic job really of building out LoRaWAN networks. Still, when it comes to a lot of IoT use cases, I think the advantage of having a cellular network as an option there to connect to, I think is really quite important for IoT simplification and IoT kind of acceleration of IoT use cases. LoRa is not going anywhere. LoRaWAN networks is gonna be continue to grow, but I think it's complementary, and that's the way we're looking at it. LoRaWAN and cellular is really a complementary technology, and we've always viewed it that way, to be honest with you. LoRa is really perfect for very low power, long range, network flexibility, low cost, low power sensor networks. Cellular is really a perfect solution for low latency, high bandwidth, you know, kind of established networks, obviously mission critical and where the cost is a little bit higher. I think it's a good complement, and that's the way we see it. Thank you, Mohan. The second question is for Emeka. Give some sense, you know, I know Semtech's LoRa microservices have come nearly 100% gross margin. Is that the right gross margin range to be thinking about, Sierra Wireless? I think- Sorry, my line is breaking. I think, Quinn, you cut off there, you were- Yes, sir. You were trying to get an assessment. Yeah. I think of the cloud services. Of the cloud services, yeah. I think what I can tell you, Quinn, is that the LoRa cloud services, their gross margins are pretty high. I don't know that it's 100%, but it's very high. The Sierra cloud services and the software service also has a very high gross margins as well. Thank you, Emeka. Our next question is from Harsh Kumar with Piper Sandler. Please proceed. Yeah. Hey, guys. First of all, congratulations on the deal. Mohan and Emeka, you know, I've been a big fan of LoRa, but at this point, I'm struggling to understand why a customer would need both LoRa and wireless on the same board. I think, Mohan, you said on the product side, this would be a big driver for you to drive LoRa in. If they already have wireless, they already have the bandwidth, the ability to charge, so on and so forth, you wouldn't really need LoRa. If you had LoRa, you've got, my understanding is five to 10 mile radius, you shouldn't in theory need cellular. Maybe you could maybe help me understand. Maybe I'm not looking at it correctly, but maybe help me understand that. I had a question on the margins. Yeah. Harsh, you know, LoRa can operate standalone, that is true. Cellular can operate standalone. What we have seen, though, over the last five years is that most use cases are using a combination of radios. For example, LoRa's value is in the end device, in the end node, where the low sensor power, for example, can be extremely low. Now the range is long, as you rightly point out, but now when you connect, you know, million sensors together and you have a gateway that needs to provide a network backhaul, Cellular is actually a good option, and we see many customers doing that. We also, for asset tracking purposes, for mobility, you know, where there's a network, sometimes there's a LoRaWAN network, but sometimes there isn't. Cellular is pretty much everywhere. What we're really saying is that, you know, this network bottleneck, if you like, is not no longer gonna be a bottleneck for LoRa and LoRaWAN connectivity. I think that's the way to think about it, is that cellular and LoRaWAN can work together and kind of really kind of live together because they have different values that they bring. We've been very much over the years thinking that LoRaWAN can basically run and take on all IoT use cases. What we found around the globe is that there are a lot of areas where we just don't have the network coverage. For asset tracking and logistics, for example, I think being able to just switch on a cellular connectivity, I think is very valuable. That's really the way to think about it. That's fair, Mohan. Thank you for that explanation. For Emeka, I apologize, it's the middle of earnings, so I didn't get a chance to look at Sierra Wireless' numbers in tremendous detail. My understanding is they're running at 51% gross. I think you said you're gonna take out $40 million out of the mix in terms of company savings. That'll help you out. How close do you think that $40 million, or let's say even if that $40 million becomes $45 or $50 million, how close do you think that gets you to your long-term goal on an op margin basis? Then it sounds like you'll need cloud services to take off to fill the gap in, right? Am I thinking about that correctly? Yeah, let me just, I think the 51% you referred to is a gross margin on a pro forma basis after the deal closes, right? Yes. Harsh, it is very simple. As with most stories of gross margin expansion, it's going to be mostly driven by the mix of revenue. We've talked about seeing a higher revenue contribution from the cloud and services revenue, both for ours and also for Sierra Wireless's. Then just being able to see LoRa being sold into more cellular-based modules out there. Of course, LoRa being a very nice high gross margin, that will be accretive to gross margin. I also talked about, you know, the fact that we think there are some operational efficiencies that we can bring to the manufacturing flow and things like that. You know, taking advantage of our cash position, taking advantage of the new scale that we have as a combined company, to be able to drive some of these efficiencies that we're thinking about. As you can imagine, you know, this is early days. You know, we've done a lot of work, but it's not the same as when you get in there and then start to look at everything. My expectation would be that I will find more good things as we go through the planning phase and, as we have more calls in the future, we'll provide additional updates on what we have been able to find. Yeah, appreciate it, guys. Thank you. As a reminder to star one on your telephone keypad if you would like to ask a question. Our next question is from Chris Rolland with Susquehanna. Please proceed. Hi there. Thanks for the question. I guess in the end, how much accretion are we talking about at this point? What kind of financing in terms of an interest rate are you guys expecting? Emeka, if you could break down that $40 million again, I think I might have missed it. It's been a busy night between COGS, R&D, SG&A, and G&A. Yeah, I don't think, Chris, I'm not sure that I can answer all the questions you have at this point, because just like I said before, it's still early days here, right? You know, what I can tell you with regards to the interest cost is, I think I answered a question before that. I can't really give you a number at this point because we still have to go out to syndication. We're pursuing different alternatives and that, you know, what I said is that I do expect that whatever we end up with is going to be very competitive. What was your other question? You had a question on debt? Was it, [inaudible]? You did that accretion overall for you guys. Also, if you could break down that $40 million in synergies between COGS, R&D, SG&A, and G&A. Right. Okay. Got it. We do expect this transaction to be accretive immediately upon closing the deal. In terms of quantifying the accretion, obviously, you can, I'm sure you will understand when I say we have to figure out what the interest expense is going to be before we can start giving specific levels of accretion. We do expect this transaction to be very, very accretive to our earnings, especially as we get into the 12th month, the 24-month window here. With regards to the synergies, you know, the expectation right now is that probably about just a small portion of the synergies is going to come from the manufacturing side, maybe about 5%, and the rest of that is operating expenses. I don't have a breakdown now in terms of G&A and R&D, but most of the operating expense synergies that we've been able to identify very solidly, as you would imagine, are more on the SG&A side, and that has to do with the public company reporting expenses, you know, dual functions in the G&A arena, your finance teams, your human resources teams, and things like that. That's all the breakdown that I can provide at this point. I don't have a breakdown by R&D, SG&A stuff. Okay. I was wondering, did you guys have confidence in supplying modules into, let's say, a high volume win overall? Did you have confidence in third parties doing that? Or did you feel like that you needed to really get involved here to control quantities, to control quality, and kinda do it yourself in order to support a high volume win, whether you guys have one or one might come? Did that have anything to do with this decision? No. No, Chris, I would say no. I think it's more that customers were very clear to us that, you know, they were. The multi-radio approach works very well for most of them. In other words, they were using cellular for backhaul and the network was available. Also the use of LoRa is very complementary. That kind of theme has been there for a while. We just felt that together with the cloud services, which we think is a huge opportunity, is really what drove this acquisition. It's all about simplification of the IoT deployment, and enabling our customers to get there quickly, and to be able to provide the different levels of service offering, and to give flexibility on the modules and have some type of, you know, ability to bring cellular and LoRa together. We think they're very complementary technologies and that's kind of the goal and the vision now going forward, is to try to find more and more use cases, and I think we will use both technologies. Okay. Then lastly for me, sometimes people quantify revenue synergies, and that's just basically an acceleration of the top line from a combination, and it sounds like you think cloud services are gonna accelerate with this combo. Was wondering if maybe you could quantify that for us or speak about it more broadly. Also, I know the Helium network is moving from LoRa to their new mobile token, which is around cellular. Did that come into your thinking on this tie-up as well? With regards to Helium, no, it didn't really. I mean, we're seeing that across the board. There's many different use cases and that's just another example, again, where a lot of use cases I think will need a high bandwidth network in addition to the low power sensor networks. From a scale standpoint, I mean, yeah, we believe once we have gotten the two platforms together and worked out all of the details and really go out there aggressively in the market offering this to customers, that it's going to become a very nice platform for IoT cloud services across the board, from geolocation to security to device provisioning to device management. We're very bullish about that. With regards to your question on the synergies for revenue, you know, one of the things that has really been very encouraging, I think, Mohan said this before, that this acquisition was a customer-driven acquisition. You know, I know that early responses after the announcement are already coming in from a lot of our customers saying very well done, that they really appreciate us doing this. You know, it's good to see that because it starts to provide further validation of the belief that we have that, especially when we look at the competencies that Sierra brings and combining that with the work that we have done on the cloud services, we really do believe that there are a whole lot of opportunities for synergies at the top line, both in terms of cloud and the services and also in terms of just hardware being able to sell more LoRa devices. Got it. Thanks. Our next question is from Craig Ellis with B. Riley Securities. Please proceed. Yeah, thanks for taking the questions. I just wanted to follow up on the organization that you'll be taking over, Mohan, and how you're looking at some of the key players to drive continued growth in that business. Because what I've heard on this call is this acquisition is all about growth. One, at what level will you be retaining people, all the way to the top or up to what level? And two, for those individuals that you and the board have determined to be key players on the Sierra side, do you have employment contracts or other agreements to ensure that post-close, they're sticking around to help drive execution and synergies? Yeah, we're going through that process now, Craig. It's a little bit early. We have to look at it, you know, structurally, strategically, and then, you know, really kind of assess the capabilities. That's gonna be taking place, I think, over the next few months here. I don't wanna go out there and say, "This is what we're doing and this is what we're not doing." We're very open. We've done this before. This is obviously a different, slightly different business. There's areas where I think the synergies might come on the Semtech side, you know. I think operationally and functionally, we believe that Semtech has a really good tool set, very good automation, and, you know, we've invested a lot in those areas, and we think that's gonna help on the Sierra side. As far as people goes, that's still work we need to do. Yep. Lastly, Emeka, I take it with this transaction should expect that, the company would not be repurchasing shares or paying down further debt between here and close, or would you expect that you would continue with some of those activities? No, we'll definitely prioritize paying down the debt. I think that is the right thing to do. We may continue to just do a little bit of the repurchase just to make sure that we're offsetting the impact of grants to our employees, right? Got it. Thanks, guys. Good luck. We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing comments. Thank you. To summarize, this is an all-cash purchase valued at $1.2 billion. It's expected to approximately double Semtech's annual revenue. The consolidation of our companies enables the ultra-low power benefits of LoRa and the complementary higher bandwidth capabilities of cellular to bring total IoT solutions together for a wide variety of markets and vertical applications. The transaction opens up a $10 billion IoT SAM for us, including high-margin IoT cloud services revenues. Together, Semtech and Sierra Wireless deliver a comprehensive industry-leading IoT platform for a more sustainable and smarter planet. I will thank you all for your attendance, I will hand the call back to the operator to close. Thank you. Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.