MCHP - Earnings call transcript Q4 2024 | Microchip Technology Incorporated

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Microchip Q4 and Fiscal Year 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Eric Bjornholt, Senior Vice President and CFO. Thank you. Eric, you may begin.

J. Bjornholt

afternoon, good and you, everyone. Thank

Microchip's of of During such be or statements call, wish performance will are predictions conference projections the the caution and that financial events course making materially. future that results that other we and recent to filings business regarding We the refer SEC that this forward-looking you our may well press events or We as our company. actual releases the important as factors risk identify and future to impact may differ operations. of you of statements today results with

Investor update fiscal discuss as full results guidance, In Steve I our will on quarter are our Sanghi, will today Microchip's XXXX as will Ganesh Ganesh and strategy. CEO; well Chair; environment fourth Executive an President of performance, our Rich year commentary Simoncic, Steve and our Daudi, attendance then Relations. with Microchip's on provide Sajid COO; financial comment on Moorthy, me the and and cash Microchip's business return Head Microchip's current and provide

We will to then investor to questions. be and analyst specific available respond

GAAP our are call various We and and this non-GAAP in release on measures. conference including press information

non-GAAP Relations our will find to useful GAAP reconciliation have a which you believe in release, results. posted and we reconciliation We full our when website and information our on page the included non-GAAP www.microchip.com, Investor of at earnings GAAP press comparing

our gross posted effects is compensation press basis operating release our operating through in Other in a also on the margin a our some debt as reconciliation to on expenses results other go the sales, and activities, I share-based net and website. these including to acquisition our the sales, expenses. prior non-GAAP described based adjustments of have which We earnings of now metrics of on certain referring be the and net will than results, our will outstanding and summary I leverage of

quarter March XX.X% the was Net were sales $X.XXX sequentially. down in which billion,

on for charges a margins We reference. our at a website was have operating On of of by posted income underutilization sales our including operating gross million, and $XX net geography were your expenses capacity basis, and XX.X% summary XX.X%. were XX.X%, line product non-GAAP

better diluted operating our $XXX.X of and in share taxes midpoint $X.XX was than midpoint income net was and our than forecasted. our was the non-GAAP Although of came guidance, Non-GAAP per earnings million, at guidance. higher income our the cash

resulting the income of were primarily and March XX.X%. On an margins of quarter, special expenses the at million operating a diluted in, was settlement Total what million, audit $XXX.X a $X.XX value points for. $XX.X $XXX.X net million, we which $XX.X Share-based in unclaimed and income amortization of $X.X intangible acquisition GAAP GAAP basis, earnings had by was were was compensation than XXX million less share. per of gross property included of driven expenses. other that accrued in million in

of sales share. net sales. For XXXX. XX% per income net fiscal XX.X% $X.XXX sales gross XX.X%, were and X.X% sales year billion, net were income operating non-GAAP in $X.XX fiscal margins down was operating expenses of were basis, billion and was On and Non-GAAP $X.XXX from EPS diluted a XXXX, were was

and diluted $X.XXX billion, basis, operating share. was was were income were of gross expenses XX.X% was per sales GAAP a margins On XX.X% Net XX.X%, of income sales. EPS operating $X.XX

years. in exclusive which fiscal the tax prior taxes XX.X% be was tax related quarter March XXXX. Our expected XXXX year for transition tax year XX%, for rate the is and tax non-GAAP and to about settlements is XX.X% in cash of any rate to Non-GAAP fiscal accrued fiscal audit

point would capitalize rules favorable anticipate requiring adjustment to or out repealed. XXX Microchip's pushed were hopeful the R&D are that expenses we If tax basis rate this be in periods. tax future still to companies happen, We to about non-GAAP will a

the the June XXXX, guidance, the our goods revenue the Our days cost level XX, at We dollars was would on we up and expect for expectations modestly believe had the at up which of the inventory with of inventory balance depressed XXX we prior from our given March current the XXXX in March is billion. of driven line quarter and we XX based the at inventory to experienced. Microchip. lower quarter, point difficult quarter's by levels days end At to days of low revenue $X.XXX quarter of be increase of cycle the inventory sold which was midpoint

inventory March whose XX buys end being time days, represented and We invest inventory was in were of building in also the continue days which high-margin products March is quarter quarter our life higher March. lower for partners at by supply last XX these as million is The in of at $XXX days Microchip at for level. that this long-lived, sell was of Inventory this inventory end distributors sell-through quarter of the our to their in manufacturing reflective prior X capacity up much chain down from increased than used the sales the distribution the of Distribution quarter's cost in. inventory in days about calculation. March as took distribution is the

in was March Our $XXX activities flow the quarter. cash from operating million

$XXX.X adjusted quarter. million free flow in was the Our cash March

and cash position XX, $XXX.X total was consolidated million. As our of March investment

by increased million increased debt in $XXX.X Our by debt the March quarter, total net million. $XXX our

sales. quarter in and XX.X% $XXX adjusted Our March the million was EBITDA of

expenditures XX, net adjusted million $XXX.X year trailing X.XX billion, XXXX. from quarter our EBITDA March XXXX. up March were in to at adjusted $X.XXX XX-month for Our $XX.X fiscal million at and XX, XXXX, was and EBITDA the Capital was debt X.XX March

is capital March million. year quarter for in for $XX.X expense expectation the about Depreciation expenditures $XXX Our XXXX fiscal was million.

of our quarter give the comments will business as to turn well I in the quarter. performance Ganesh? for over it March the now Ganesh to on as guidance the June his

Ganesh Moorthy

Eric, and you, everyone. Thank good evening,

than we sales the control down sequentially was XX.X% endured gross margin a in expected, down Non-GAAP at non-GAAP with results better XX.X% in came had through and XX.X% to correction. from XX.X% guidance, major inventory as net March place. strong ago due programs the expense quarter were our as operating we expected Our quarter consistent and with margin year

However, at tax met as was only as Eric per non-GAAP and share. consolidated $X.XX expectations higher than diluted expected, EPS result, a rate mentioned, our our

revenue Our quarter decline And leverage as a resulted in March rose net X.XXx. EBITDA our result, to dropping. ratio

EBITDA our net year strong, plan. weaker stronger We quarters adjusted and rise quarters. when quarters committed few we current our replacing return [indiscernible] year as capability XX-month expect to with are leverage modestly a capital to trailing prior drops remains

of free the cash flow [ quarter June we free adjusted in to to our March flow capital continue year shareholders increase of Our return ] of the to quarter our calendar XXX% to as path by March XXXX. quarter adjusted on shareholders cash our will XX.X% return

our a on 'XX was correction. major results, inventory positive that fiscal it start with a followed Reflecting was by year roller a coaster year

'XX, as $X.XX year dividends declined required 'XX fiscal compared major 'XX. $X.X billion. to as return Non-GAAP resilient compared fiscal in inventory XX.X% took was growth and to As correction. representing the a revenue to to was to Capital the actions operating billion, a share margin XX.X% respond to fiscal X.X% of combination buybacks through we at shareholders

difficult and support, their for a we team hard actions that navigated on work as focus worldwide our to believe thanks environment and we diligence My

to us well position in term. thrive the long

XX.X% our 'XX sales signal mixed of Microchip's represented down fiscal revenue. year from a perspective, Taking product sales line at net a were microcontroller net XX% and overall our look

sales analog net XX.X% revenue. represented Microchip's down Our were and of overall XX.X%

and compared exceeded well million don't fiscal we fast We mid-range line fiscal to intelligence FPGA opportunities of $XXX suited year results, power, FPGA grew for 'XX While and the margins deliver as our emerging noteworthy delivered and that around north with normally revenue record. out revenue corporate artificial especially of low operating the another average. our break best-in-class product FPGA FPGA it are XX% 'XX security is and over at reliability edge. market-leading solutions set

is design across FPGA multiple end Our markets. overall strong momentum win

increase for with camera-based assistance and a few and convenience in-cabin A with the connectivity driver more SerDes notes leadership. digital systems, raw monitoring, acquisition and networking and cockpit Soul to higher Alliance VSI product DASH highly vehicles. software-defined and anticipated Motion in This asymmetric Standard ASA portfolio next-generation we to features software-defined extend advanced bandwidth Ethernet requirement PCIe in are Lake video cockpits and automotive for there Microchip's a Motionlink our other acquisition vehicles, ADAS and our next-generation known enable digital adoption multiscreen to of market broad otherwise safety Korea-based pioneer automotive networking significant. adds of closed growing data ML technology, Open supports. April, the Early line as the is links automotive ASA

image power-efficient for increases Labs edge Also our intelligent last whose acquisition technology reduction capabilities. in and for edge This while expands FPGAs. accuracy. semantic object capabilities sparcity in technology power, neural we maintaining Neuronix software Neuronix of such closed innovative segmentation provides deployed the AI-enabled solutions enhances network AI optimization technology as detection and AI high month, enables networking classification, size neural solutions and Labs calculation our that AI-enabled tasks

the July, products, processing tools microprocessor market announce into our our for AI-enabled higher strong engineers. historically development extend tools embedded Finally, suite including to applications XX-bit address requirements development entry support a embedded in other edge of expect with we and to of embedded strong will increased make design ecosystem adoption performance capabilities embedded system microprocessor to portfolio ease XX-bit Microchip's while This to preserving solutions. leading and high-performance

to the a widest XX-bit and to work processing well embedded and of as a only development their FPGAs reuse from the offer Microchip innovate common as that's and wide is spectrum tool markets platform X-bit applications. company with control empowering customers ecosystem to across

environment. and color the end significantly Aerospace of artificial distribution some and on end Now product believe of the the lower All quarter. drained of that our markets subset world for inventory March channels during of were shipments were of quarter most business Defense the We centers data and exception the regions general the the our and than with our weak. market consumption intelligence

no well of and is as buy target and business their a multiple short customers of lead that and an our as reduction customers Our base our uncertain buy destocking from constraints, us, customers' at indirect our in distributors levels cases, with direct macro their who in At coupled adjust through macro customers we inventory distributors midst our times very believe some supply is customers. underway levels. plans and inventory With lower there the weak environment and environment, continued inventory outlook. in weak to major a broad who

We are, green of seeing our business. shoots however, also signs in early

started subside. level the pushouts of request and the to First, cancellations has

bookings bookings pick were X all and fiscal months. February in 'XX low the were higher have April bookings albeit the highest from than bookings in to up, highest March. of our Second, levels. started were March

of formation period over we Third, and of are shipment to pulling and expedites are a of growing. believe, time; new number green bottom. aging the are a pointing the bookings the shoots, requests these shorter fourth, Collectively,

to average continue Our less. weeks lead times or be X

of backlog the best a with believe uncertainty, lead customers During we are short quality navigate the times environment placed and us. period of business the help to way improve successfully

in lead However, the visibility time is significant in also business. reduction our reduced resulting for near-term

running of X our severity the and rates in the the the around major the quarter shutdown another fabs Given correction, world help at growth June X-week of lower in utilization our control order take inventory factories to are will inventory.

paused. actions Our remain internal capacity expansion

our in year as will prepare business. capital We of even 'XX we expect growth investments long-term for be fiscal our the low,

CHIPS grants towards seeking office has their report. an for nothing new CHIPS the front, working On Act agreement. the and are we diligence The have we to are we completed

for of market of be below we backward-looking as is that At the distributors off a baseline major consumption inventory a believe this the at. days indicator correction, end metric for where believe can where a of Decepta stage we that this is well measuring Microchip inventory is our

focused where therefore, run running is consumption believe inventory For the are, on we likely in and we quarters. will planning, coming

their our continue customers, distribution requirements the right inventory to their and required flow of attempt spinning eventual work find be conditions. through to to to business cash We with of balance serve the positioned for partners manage

our efforts shared and long-standing The members nonmanufacturing quarter. shutdown and are cuts and rewards we sacrifices salary members team The last for up quarter, continuous are cycles. culture operating pay down cycles consistent of expense implemented and manufacturing shared sacrifices team this for reduction with including broad-based

design Our business to strengthen maintain win from of layoffs, culture new introductions. protects helps done enable pace valuable teams us manufacturing development helps quickly of our helps to can shared support ensure be enable as sacrifice solution that their product -- and maintain our conditions our momentum, capacity employees customers

quarter. June get into for let's Now the the genes

environment It we turns been While Operating backlog last we Microchip. see a number and within need of meet indicators, experience. industry other and high have historically over our for position orders shoots the a supply-constrained have years in a in not still high green turns quarter the is just to to found we normal the a and few guidance. we ourselves

we Taking between expect quarter. business our in the and call XXXX the have billion. all for quarter the quarter we that the revenue Microchip to June consideration, September to be believe factors our the net the cycle today on of discussed into We the marks June return billion XXXX sequential will of $X.XX $X.XX growth and that bottom

We of expect sales. and between XX% XX% our non-GAAP gross be margin to

operating non-GAAP XX.XX% and expect to sales. We expenses between XX.XX% be of

We expect between to expect diluted we operating and of $X.XX. profit non-GAAP to non-GAAP and be $X.XX XX.XX% and between XX.XX% be share earnings our per sales,

remain of We characteristics cash believe and fundamental the our generation business of that profitability growth, intact.

of applications innovation confident for end We we the serve. markets are that the solution and and our engine

momentum, key above-market win which We committed X.X remain strategic and continue solutions believe Our to fuel executing will design growth. market long-term imperatives, we expect substantial sustained megatrends focus deliver total results strong our shareholder and drive Microchip which we value. to will on system

many Last that capacities, we appointed expanding Simoncic with years but that the for month Rich I is Lifer leadership least, and and global a are in which combined XX to different us. Microchip us years, not Rich has challenges jointly opportunities of been as has Operating so will the the been ago, our who a his Microchip engage ahead lead Chief Officer. he last and can over role capacity apply enterprise few we

return talk With shareholders. to that, to cash pass our me on about Steve? it to let back Steve more

Steve Sanghi

I to to $X.XXX an in provide our of from the like update everyone. share. on return increase of with Board per afternoon, good The a would dividend quarter you strategy. and further Ganesh, you, a Directors Thank record cash approved year XX% ago the

stock the During market. we of the open purchased last record quarter, a million in $XXX.X our

of dividends. return This December We million quarter. $XXX.X XX.X% in million. a Thus, million record our free flow amount $XXX.X cash was also was actual during paid adjusted the of total out the $XXX.X recurred cash XXXX

at leverage X.XXx. XXXX net March the was end of Our

Ever of since capital to March of XX, increasing a dividends in our a and debt returned XXXX, shareholders $X.XX billion return we have to for through pivoted buybacks. achieved and an we rating investment-grade combination XXXX November to shareholders, total through our share

will our the period, current the representing the cash for buyback open was flow are target million shares, our commitments this In returned the X.X% free payments to purchase flow level June During adjusted approximately outstanding. free to quarter, collected XX.X in we our market of supply amounts approximately we quarter share adjusted of shares March the shareholders. are use cash excludes cash fulfilled. refundable from These amount long-term The customers when assurance payments. from

return free quarter our adjusted for amount. XX.X% flow to so be or cash shareholders $XXX.X $XXX.X March of million was Our the target million, that would

complete this did However, in as small we acquisitions Ganesh mentioned, June X quarter.

million, reducing will and So be are million stock the expected $XXX.X of approximately our the out $XX.X Thus, for million. to are amount to to buyback shareholders reflect in dividends we be is expected our deals. those $XXX to June buyback be share our approximately cash return cash quarter, expected outlay which

dividends to our over Going and forward, to They increase shareholders and shareholders return continue take every by quarters, until cash points we that XXX% approximately XXX X time we flow our of cash adjusted adjusted cash reach expect basis XX% we buybacks. represent dividends plan more share free free will flow to will returned through to of quarter returns. to

operator, for With poll you will that, questions. please

Operator

Instructions] Vivek Our with question Securities. Bank of first from America [Operator Arya is

Vivek Arya

grow green fair, were the be suggested for shoots you suggesting But bottom shoots. sequentially on call September June men of as also. green the because last to to Ganesh, be to

for also also bottom, the trough between So June the if it margin, XX% gross gross does is difference the what's trough for mean the last is margins? XX% the

Ganesh Moorthy

right, see Great. green that Thank and the can and began earnings that did are over we're basis April mentioned of in is on bookings at it frame. to that. more we you, we through momentum and of go at. one Vivek. we last doing up, our shoots that relative we mentioned time, we I time sessions asking banking but May. the the picking the was how was the pull-ins many for don't think as see I that first March people a say March expedites And we call, time were and And what all

quarter looking how reflects qualitative June or that the a it's our in So customer momentum in, bottom is view at is is where last the integrate growth. we coming where X the months that and of view September quarter is X coming the feedback

J. Bjornholt

in on is I margin guidance believe out. our along obviously, that me factors haven't of would yet June I we'll a then think case. know yet, to if on revenue product terms the if factories. for on mix bottom don't bouncing And that And in be would I margin. that we gross the and trough to question the mean, that, gross we that was apply given and gross where bottom there's margin. are expect And follow-up we that running be But I

Operator

Our next with Caso Research. Wolfe from question is Chris

Christopher Caso

I you've that talked different from there's end end if stabilization you're seeing improvement How you of any the about of is question seen. markets? among would booking difference guess markets? I mean, that the the characterize you the some that any different

Ganesh Moorthy

market both and or the on aggregate, doing really are -- doing not. data aerospace point I and of to in particular well. segment AI stabilization, don't I can't better I a the defense end the said or center

up. so pulling And is it that part

end other customers there come speaking into to with the bottom to in rush others the see who goes as orders weakness, well. be are industrial that markets and who the trying back can others, some seeing On are still

market their inventories are. on bottoming out where end the that no distinguishable is of So particular trend

Christopher Caso

trough well, June things talked for June follow-up, the then Eric, gross likely the margins is a and you perhaps about as well. As bottom go if

As margins? I trajectory go I way that still what fact gross as guess this, you consideration our the do forward, the And think that we asked internal is you be of inventory high. pull your out of would taking

you to we the how gross bring down think of as margins have about own So recovery normal? in would context your inventories to

J. Bjornholt

trajectory run depend to respond we to then does on would the it factories that. how So our revenue and

question prices a still structures selling Average not XXX% answer hanging can it's our today. so there. are And cost I in shape. the in absolutely But are that

long-term get model confidence which very trajectory get factories. how with revenue to drive our to but is going there So output that, we much to ability be our have we and from our back and the actions in certain will there, dependent, increase

I So we answering specifically not do your know that's think best but can question, that's I now. right the

Operator

from is JPMorgan. Harlan question Sur next Our with

Harlan Sur

sell-through distributors you starting Can customer coming that million you mentioned are in assume talk sell-in. higher is delta distributors? June seeing a $XXX bottom? you your I Got what's grow. sell-through distribution end quarter? dynamics that channel you here the that would excess the about is And global this And is confidence similar to at this down, sell-through quarter. just maybe from March, In giving versus Are inventories June if also

Ganesh Moorthy

for the always is our The been not question. customers what us. with thanks level has had Harlan, So our visible of to that distributors inventory that past is

sell-through we the a is. inventory that get factor, I reducing is want from months the some they of to customers of there's think carry. also But are distribution which those second also of can some sense what

of it. what of that multipronged But a additional orders see us. it's So the part can on distribution is placing we to answer is

their So on are us. placing end incremental orders they customers, and managing they are how their seeing inventory

I sell-in have at versus sell-through viewing on relevance to at quarter, time. in how some have answer up June don't going must the that here definitive where they're a is least So not this but things, to end

Harlan Sur

follow-up. quick a just then And

this X were shipments down sequentially, of if XX%. have shipments March. only And almost XX% suggest So a were bit only guys direct more inventories direct your end down quarter. your We're visibility while customer XX% weeks, sequentially are you in the through excess times maybe at customers? that pronounced are Does almost sub disti that

really you So looking growing and what dynamics? aren't shipments direct confidence visibility sequentially into that as the sell-through will gives have to beyond be that their Microchip post team don't you customers

Ganesh Moorthy

know are quarter. quarter, we So the the backlog into and December placing September customers into

to there's that more So not And solving. basis. predominant single bookings can see next X they into the rising, is as a answer are X the them are everybody placing a months we on that

is or gives be a So of the what bottom of is this where and are is going in sense is into coming backlog and in that how to level momentum where the us the things quarters. we September coming as

Operator

is Our Fargo. with from Mobley next question Gary Wells

Gary Mobley

OpEx sense guys you how hold any there non-GAAP basis. what, $XXX the know temporary wages trying communicated I as than And clawback My today, of is, long I the it's how revenue that And is this the ops million down? think should expected. held visions lost during you increasing get lower think I'm And on that can you a cut? about for increase? we just salary to question a

J. Bjornholt

I'll to. start with the to can Ganesh response it he if add wants and

terms is salary there a not our of clawback a doing what employees. sacrifice So for in we're from

market share sacrifice cycle past, has well this things the gained revenue we've implemented share important reward as our like everybody shared the the something the program. upward when for we have And turns on working that. growth through to are that out and that employees have drive that the in worked We

results employees higher rewards been bonuses and to at able great financial taking the out with time. coming had we've and pay so And share of then appropriate the away it cuts through those

money There's top there's line we've results back. clawback the revenue perspective. that actions that will It be would how taken, So go retroactive plays we're around my achieve no they're the be implemented. same out going but of going this no to have this a from would employees to that to get with promise perspective that see to this we types

Ganesh Moorthy

part that investor appreciable from community. not This easily is an is our of a as culture always

in the have participating world XX% around employees voluntary. that are We of this

requested volunteered in from powerful a another for have have them. these what to higher type culture who we role how of It's difficult XXX salary employees We plays a have quantify reduction very the into times how the And of rewards are solution. well. are as that of get come the we and situations they of course, that part much part up employees better as shared difficult than

program this worked to it that is successful. many is be it, time another and has we're much expect and a very the in times applying of we past So

J. Bjornholt

for other that The I thing and is exists, know employees. a think inflation I'd employees. difficult is challenge this we is still add the this for

So appropriate. time, it's hope levels to that we place. not guiding revenue for as that as back we're And want the it's in at But to quarter keep these with we where and things salary the these soon earnings current possible. revenue of we can restore normal

Gary Mobley

my on more strike court don't for know Is to follow-up, ask qualitative have or lifetime perhaps year. you give maybe with if and wanted stats some wins. us win I measure I the a if design the value but you positive design fiscal you, of quantitative can about handy of the those just metrics

Ganesh Moorthy

And from put they on the the triage we So look some back do out course addition did, look how the we is different running they this. priorities of pipeline don't in hold. at that usually all to bringing doing slightly had and in break their we for that we is customers What we shifting constantly at the progressing. the saw which that ways innovation of also into in have were shortages we design work XXXX that

to months XX there just development customer of was because all put you progressing There's than the in bandwidth XX lot there if so win months, with. together, the was design were be simply in able activity that a the pipeline prior that last program they strong. more is the to run And in design

Operator

Coronado Our next is Carlos with UBS. question from

Timothy Arcuri

It's on. Tim

So And you but did month above just below March, that like was for Ganesh, can a you to of message sounds give book-to-bill confirm is know could wanted the that. one better that be getting think say are the for But it It you June I that month. us quarter. X book-to-bill. orders I sense by

wondering can talk if book-to-bill? to you So I'm just

Ganesh Moorthy

X. So book-to-bill was below

an However, where going an lead times as our indicator book-to-bill has of is as never the much for are. been of business where indicator us

XXXX expect the the times book-to-bill are shortages, with times out During But lead going be have, now to multiples complete. short what and in reflecting May they June lower. and bookings at, many, we I XXXX, were can't we the to where of we lead many had long quite that right are rising, book

So I be. going more times the where of really don't booking consistent as the as the lead book-to-bill reflection is replace It's get have look of don't short, at a necessarily anything. We shorter growth times. people an with indicator to lead

Timothy Arcuri

it. Got

Okay. you. Eric, And then, for one

So a gross June? March into down that and of on higher June? in about yes, coming talk you balance out little where impact margin. you the line And of understand thought drawing Can just us of the just bring of on the sheet Are of kind you're plan to the inventory kind talk about in and think in its be. inventory loadings some sort was would how it you thinking factory loadings I and about

J. Bjornholt

Yes.

sure about XXX. We days had I'm expected midpoint. We between Street quite be about conference call came So in XXX had in XXX that The modeled. honestly to not days inventory talked last are us at to our at the where

on deliver told we we we Street what going So to do. were of I kind The think

of big -- I March maybe picture a significantly lower. modestly relatively the utilization modest. fewer can things quarter, of quarter, In factories. have the it's attrition was our some will But And utilization have the current in can we in just in start terms of having we because than in it on of that, because basis be been think a less different than monthly we number employees. don't we wafers

Operator

question from Svanberg Our Stifel. with next is Tore

Tore Svanberg

microcontrollers. me question Let on move on from XX-bit cyclical I And have a questions.

acquisition IO had You quarter. the in also an

the it's edge get hear trying visibility at we with Ganesh, to Just that. AI hard understand, true lot, to on for your customers, conversations us but a

when what your more So become will Edge you a meaningful think? of -- part much AI revenues,

Ganesh Moorthy

medical. predominantly in medical smaller The in segment that. automation, all of some Edge AI extent, Our industrial, target for markets factory industrial automotive,

So they over XX they've X of state will are been XX probably months. last to over designs in months XX to the time. progress They just and taking place

either amounts time just on. small can and these give accelerate the are it's which similar product that that providing from line each as those So go of it meaningful but announcement in or think some becomes some solutions. it I designs place, how where more us of others and more specific And solutions positions, part of taking goes can time. technologies, be differentiated There's a already our

Tore Svanberg

you consumption. my as you're that And below Great. said shipping follow-up, basically

You're about running your certain a Obviously, you're trough. inventory $X billion at from level.

us? must is. you where idea with number the assumption you a that So share some could have Is

Ganesh Moorthy

Not with precision. any level of

excluding divided get even I ballpark. X-quarter will think book to, a by But right? that and June that consumption. you at I begin that back any people quarter to quarter. not as that is to there's determinable. form make the clearer starts X where of number between level this into they unclear, you're need quote But to ago a a an way seeing think buy It's to clearly where guidance to the number was revenue take get just get our easy for peak year the to So in a any

Operator

from question Sachs. Toshiya Goldman with Hari next is Our

Toshiya Hari

I two quick ones. had

First, on inventory, maybe for Eric.

whether the you what think then want got you the But XX know I inventory. quick when pricing. managing we on out, inventory dollars cycle through know months follow-up way be strategic how your to So management I better days, out, business in search months to? you you've customers about XX on should think And term? or are up. or longer

potentially pricing I you it, do holding think is or as reverting that Or you feel would I think that up. about But have a near think agree down, call about peers with in that your of share? to patterns pre-pandemic think on some singles. the pricing trends low talked pricing? 'XX, you the or you differently term, view Is mentioned

J. Bjornholt

Okay. right. All

So what from and changed Analyst model term, is, really shared XXX on XXX our in and hasn't to inventory our this Day longer days, Investor we days. we're ] back that targeting [

think customers a from the on we not a still I'm get but long today, put environment, that ways in a level can there, will to with level. more we're short when we and We support normalized Now goal, times appropriately lead horizon time and that's our have with that going that right?

to Ganesh. over question pricing the turn I'll So

Ganesh Moorthy

product very we're which last additive buys put situational will I that are we when more situation. would with high one also and time add into depending they gross of And on that be place those is we faced have thing, these on lines, kind margin

have predominantly of pricing design. with is the to at what itself, a pricing point the of we function compete On our

so applications. is don't consumer the other lot designs near where cycles and months And a long X, won things out. going unlikely really And at. markets, they or into they what historically every pricing really life term, that are have XX products don't by change, of end we in really these them driven electronics were

in designs X, have that many X, as for years products We been well. have X, XX in cases

need be, We being pricing we with. we but have products competitive also with are we compete where designs to new that new on

to of a And business will of years look And done to how pricing, products on. new go most will that been design And margins as what then so pricing. not we've back XX something for historically existing most is time we And the at business And we goes time new we new go the that are good existing we'll competitive if that's use we continues, expect a fight new price-sensitive gross come. at have spend be new applications. Microchip, long, it. have long that's prices and in new. how business have And that at lot

Operator

with question Joshua TD Our next from is Buchalter Cowen.

Joshua Buchalter

guess start, on I up I one. to can follow the maybe previous

observing becoming operating in correction and design shortages wins. normal entered and the You competitive sensitive new overall, or you of any this as competitive but competing price price we've conditions? Have sort of those ease more still mentioned are wins more design pricing mode? Or on -- hanging new those more

Ganesh Moorthy

It's with been competitive. have to trying New always implications. are where people platforms winning work on multiyear highly designs

that. years, So of the and it's last before but are to in for of in the is consistent doing. the be having years the platforms, has it's customers designs, it couple that of were X years fewer sense designs new competitive been there from constraints, with or X XX it yes, over new different intensity what competitive new But

Joshua Buchalter

a clear. that maybe to confidence ship importantly, the more my CapEx your geometries investment products years what was then ago. you appreciate likely on? you at there. And in meaningfully I just the perhaps obviously for having off color That's and capacity internally speak down process guidance your Could from partners peak your the of X enough follow-up, both is foundry

Ganesh Moorthy

Yes.

as partners, add when well plan at foundries running. We're both capacity if, go concerned work So and constraints planning the we're partner We with may quite OSAT in begins to to people long medium the term. horizon as in underutilized, have internal of business confident for and as And there obviously across look that have. the much feel then moment, we we internal we running. But capacity, any their the that fact, -- don't bigger It say there a on capacity short, change to as come we it. are they for piece available and rise is a much capacity they're the that ready the and and installed both as demand that But our is our might some we're as then it's a about. both pie consistently, our confident we predicting. what a eventually with particular back, small very what sharper both what well is we're

Operator

Chris Citibank. next question is with Our [Operator Instructions] from Danely

Christopher Danely

like correction And be total it, if So hopefully now we're of competitors. coming of something that. revenue, quarter your that your going another into worse terms at it's to XX%, like most probably the in look than of yet we and that's out drop

else you your guess, that's geographic going some think for Do the something or there ordering? for PSP I Is encouraged that think happened? you why some take So little on? looking Just do is? program on that why a double

Ganesh Moorthy

peak look boy, try could peak when it do group in to a do No, that when You've at bottom of a great it that Chris. And right? was quarter. it out, way question peer it. up And all one start? question, one of does to say, as you you our does When seen one companies

as to respond always try to been Our objective has the business is changing.

markets in And this component substantially automotive in what anybody responding a those in of had of markets the deeper And at correcting our downturn some ones as that the mix different may well. some expected and cycle And so we those than markets we've were of or end exposure. that consumer the And are the of But amplified on had to lot lot that. industrial. things, We we in cetera. has it had have the a PSP case, predominantly is correction later those are times. with of that of than cycle. They that's started different end And probably were later, are more represented stronger. kind et later a PC, phone do and in that with perhaps we the or higher

Operator

Vijay next Rakesh is from with Our Securities. question Mizuho

Vijay Rakesh

question guess, around Is out aggressive you landscape, you competitive of at quick are them those on any coming supply. What on I a kind China there? as look microcontroller Just the in being supply from trends? the especially seeing worry there

Ganesh Moorthy

Clearly, are And the phones a into for can into that take in applications. other can quicker. competitive of cycle, and that has supplies the into competitor places that the kind attention going different different. they of been And their also little electronics other a approach bit a them areas today. products that a go power are that is in. things. always lot of lot tend be to spaces not China design environment faster those to things end They in consumer we're many cell that of and like market making Their those faster is have

and by argue we win is and of that we'll we've have. business perhaps China And lot else. new fight customer products, we new priority the for to what gone that which win that better You in that with can they a that anywhere with way solution get have. the continue win we in we they But than And competitive a otherwise. with remains attendant to providing there's could solutions market,

Vijay Rakesh

I significantly know you And year? parts looks to a way as of to a cut I that. I help. do there's look so to the But it. the that number moving gave what CapEx hard should that utilization, at any know through don't rest the Got you you know look lot out how see playing like? then of we pretty there. at if But utilization

J. Bjornholt

Yes.

specific we varies break by it in So utilization much -- a factory. we don't total, out have very

a some drive capacity We change to earlier from I'm go attrition as huge to I just down depending like the then our understanding headcount, which rest where actions is response would March have expecting mentioned what come looks lower. And confidence a year rehiring gain outlook heading obviously, makes in little it as in revenue little by utilization business months of an aren't and is more will June, that we question that employee bit we on inventory had modestly. over and months. the on in a the maybe just bit what not coming the the

Operator

from next with Our Truist is Stein William question Securities.

William Stein

forward about wondering to a Great. relative or, that product tuck-in development It relative was if capital could I'm talk to you of say, quarter. the couple going see this interesting focus let's acquisitions approach to of deployment development? internal

Ganesh Moorthy

we're the of us. solution that XX% opportunities the we organically. these to we provided, and time applied driving tuck-in strike done that margin. which We've of can term the do the operating So long to we and apply front speed could do And a to or it prioritization as years on about X have been of since. X time where for of From longer we're acquisitions do, we have the X do consistent external that agenda always opportunities in. to major trying want way with we then. get continue growth the up more did. where acquisition with them public ever we in activities involve or different for be something Microsemi which we to X a last have at would ones time, areas speed can for we've in on direction a That expense, pinpoint internal our the to our And it while. speed for or as our development just over the will what there, a if a find or time X lot XX% now internal it operating on And is gross the to we last of in do that to acquisition to model X in the as well. we what works were following about smaller we a we those interested up done we have are XX% that allows that margin, since very was have able the an And it

say Let's of That's our an part strategy. essential public. we've been always

William Stein

approximately that's the the words, that same have June? as you that a other Do does I maybe revenue in you further help it follow-up, while if think think a done expect in actually you when happen reductions does is where at of burn wonder isn't September, the you it's -- even will the can Or do you more mostly understand demand? situation when In anticipate us I your misread should we revenue As June. inventory I to imagine in and done? would or like inventory end September be grow out?

J. Bjornholt

all at. to customers So in of what the have impossible a that's corrected it that think I'll right somewhat with is majority we're the when moving start and well, times customers, they inventory -- as is bottom of mean customers a kind with adjust based lead in level I cycle point on response the line target is, and know XXX,XXX I their to whatever the here. think

give good quarter. So at able correction have customers, quarter, and for going have inventory share beyond more think to Obviously, question last guidance that information your there. this we to But I answer time. to we this next answer be don't a is that the that can from we'll

absolutely that think case. I the is

Ganesh Moorthy

Yes.

customers certain to there's of viewed Many gave how continue the they were. markets strength where where thoughtful, what business, very strong players other thought well. customers think their many as they're end they own be at. and were on you I some And as prospects indications their mistakes we made

and people the weighted begins into and/or for back over done the in preponderance their that now to shift, shift seeing. and all they buying consumption into growth going are their it's be may So as The that average to of And just begins that's place. inventory correction September. are a average who with weighted

Operator

BNP. next David Our from question O'Connor is with

David O'Connor

side. can perspective? continue as Or it my that you from seeing the shoots, and on geographical you how a talk would now Europe mainly China driven? from the Maybe And geographically? firstly, Is in Two U.S.? them describe just you're Great. it about green

Ganesh Moorthy

Yes.

customers to across shoots them. in doing. to any look green or get both market. end not and with an starting geography it's as at limited really continued limited market, of going the I are So who to to customers And end they're what all one not have geography, pain one you're how any back to are mode into and mentioned, other growth

market or end leading green to specific no So shoots. geography the

David O'Connor

And Okay. that your next-gen of more kind about Got those much run portfolio how the on AGI AI models? give customers for Neuronex for maybe products of content Labs of would kind that MCUs Can color are then address acquisition, the AGM it. Or us maybe generate? GI the on your can any tailwind you It just talk Can you the acquisition. in like helpful. looking to market content add MCU this be to seems the you helps it

Ganesh Moorthy

there's a that. give if to numerical way you know don't I

intelligent it and better now how security people add will further they AI adding with the just think is than products intelligence to I to And the Then time, to make added them next finally, added then out go capability they intelligence back make I a said. because in are -- chronology added can I I embedded have you in that could believe think solutions the people XX AI what the -- from all that's ago, used you than be customers even now a thing. people way connectivity different how from delivering better. thinking better years in No about make better leg first if of past. product as in

AI better previous to in products But a generation should AI. generations. So don't in it of able who I it's all take a platforms customers the with next think and journey, and They're them products. are looking seeing that gives many customers. you their the think advantage innovate. Others the to and there's opportunity, continuum provide be who their be to of we'll do of as another need going to of anything than to innovate opportunity

Operator

Our Lipacis next with question Evercore Mark ISI. from is

Unknown Analyst

visibility. difference. I can think Microchip's for is you the the bottom seems X similarities, tell this the a they downstream of supply is then own customers take setup build they are I'm down every you the -- lot for see shock out there's orders a next that you decide and demand and them, chain there so need difference going don't from the supply and over of orders Ganesh kind between recognize our I'm see months It or the me themselves then is they that that, similarities I Steve. the at inventory wondering and or or The of hoping cancel and inventories, like business some setup of to they're what their cycle? big

your sometimes scrambled from utilization in quarters here downside everybody get components. So in an the that epiphany take you rates and overcorrected up on to peers do taking X everybody your and and is your down temporary and And have shutdowns. their they fab X, then customers numbers

the too. you see. So hear over I'd that, the similarities have to And What a disagreement love those I if are are similarities, differences? those

Steve Sanghi

have answered any you couldn't question. think I We Mark, your say better.

asked you question You the perfect. it's think I when answered it,

Ganesh Moorthy

many differences And in depth affects you -- Obviously, the times, or cycle the than and out seen back is think I other as you down length said, you that, are the cycle that similar. welcome this a But to of are there. one. as that play elements going cycle. the I was know we've don't answered very you sometimes elements I of proposed answer the Mark, well. the up of any elements this the

Unknown Analyst

hoping chain over a there's I cycle visibility that you Well, and has time. years say the might need lessen X the have to was you recognize guys last because learned or supply manufacturing

same doing chain anything it Is from and downstream the So -- that is -- not is the learned over you? over supply we're just again?

Ganesh Moorthy

No.

they come senior different cycle had how our with works supply to semiconductors be would understanding they But a need forgotten more customers back semiconductor was that been I and So and with yes, to they people the quickly returned have better of what assumed having have would they your out tap. with water people how in Basically, the this depth used the during to surprised the that I think. of at like are discussions quickly of be think I at way strategic. constraints executives how all the to have

and off tap water the goes the away. comes on turn you and it and tap, turn You the

no, that am go I be those carried the a how the most will But learnings for we'll has not relearned so -- part, as And those belief there of lessons goes. cycle the have have the there to few. But again not through are any cycle. been forward. see we And

Unknown Analyst

repeat last the So off is bottom?

Steve Sanghi

be from has time to cycles Mark, time, written about not have and talked industry or there Yes. any anymore. some will matured, people

be think has I been have will all those wrong. always been Industry predictions cyclic and always cyclic.

now And new in, these come the in. people downside. distributors, lessons come this our they but And on and we're was forgotten learn. upside never don't the people customers, our Ganesh I described, think change suppliers, I managers And cycle, very new going the vendors, on rapidly, as pronounced just cycles seeing one think leading away. I've most the

J. Bjornholt

of we inventory down months make they very going to not our XX lead to the I before these I today. XX Yes. products seen had this mean and just over times vast of have times is point we weeks short period go steroids, contracted view a lead on as was majority I to our correction the for then that right?

Operator

question Stanley. next Morgan Our is from Joe with Moore

Joseph Moore

that? like seen us good Can -- some of year. the business. on And relative give about the the it FPGA Has you fiscal been there it's obviously for for peers wonder, pretty Have talk you as that? relative some of similar sounded that Can you color outperformance trajectory can going to the talk growth FPGAs I you tough And about looked well. your business? there? Has forward market rest in prospects been your patch share a to an to the

Ganesh Moorthy

Sure.

historical other new opportunities been X, Microchip businesses. creating aerospace historically last FPA years, got to the in the because business in market part, over to longer strengths than grow Now had and design the and FPGA our industrial a the better end performed component And our our for the and we before had in automotive and in X we has defense term large have, that -- continues So business business. FPGA it's FPGA has, fact,

other the designs -- and And this mix in Xilinx take got is Erstwhile term But it falling to some that all Those mid businesses course, And of of are over Ultera a away or right? business. Erstwhile, and not have go. that to going end they years up performed it immune our that of as and better. from care are than FPGA therefore, more end-of-lifeing so where off are we focus has has many better market creating products, opportunities are our things picking long they for the done

very, optimistic am very FPGA for our I about prospects so And business.

Operator

with Susquehanna. Christopher from is question next Rolland Our

Christopher Rolland

products going of I there you than Ganesh, they or or a all, guess, burn markets are have expected you this and either this in markets? is to normalized these that inventory take surprised any longer products or like quicker that for inventory, first that of terms

Ganesh Moorthy

So but in asking their examples product, we And have expedited inventory say, new who times. if burned specific you in even customers my through end customers, of I and right? have think much so look at back industrial. for market, not we same can the think certain orders they're market, I cases, an have many at

same taking also and burning where other goes. still longer We are who industry through inventory have customers, it

And I difference what that's is do their and stories customer, market to executing? been their lot they how the grow different. customer, did it's by they a are are that So the depends create really prospects, so customer think business and a well on

Christopher Rolland

is think hearing in seasonal inventory more can September at Yes. I'd we this still to overall? your Do that you idea of the And at drag Understood. is September if you're bottom. based. June A I'm of position inventory the generally? going like inventory you Or how correctly, an get in forward? you think lot looking and then there back trends customers is

Ganesh Moorthy

points No, be there's in cycle. think going I at different to the customers correction

on. moved and be still corrected have will will Others correcting. Some

We think of before seasonality perhaps all out. you you need of one these things of been some level okay. say, So now is period the time variables normalcy have I for that have a can taken which

in correction, out not their that all say have they're the can incrementally, say going to on a there of customers that be So but seasonality I I inventory can't we who quarter. are are done. average September weighted basis, more

Operator

with Tore is Svanberg Our from next question Stifel.

Tore Svanberg

Just you quick follow-up. Ganesh, you quite a quarter. of said one that this still need turns bit

with Just wondering compare what is that does And the requirement? churn's previous setoffs? the how

J. Bjornholt

do amount down are our lead quarter. going to break guidance have are short. turns But but guidance, the take is we meet So another not turns times have are we obviously of required, out and to our and to that

give our good as we when commentary are to these which September requests can getting of it we out and comparison don't in If for a be for that kind terms cycles. through we about will, believe move bottom. give probably We pull-in. this talk you guidance to of I we have turns some prior the us, bottom hit

Ganesh Moorthy

where people one is harder is -- a can most the there to about percent lot is that's So But to it from up of to assessment there there. done burn of those turns What those be, to to show they're things we isn't I there's do into though are hesitation to it. turns begin uncertainty. and they have say, and a some a out which the of where best And build environment will insight of it's is our in inventory going because some done turns of aren't guidance. provide going x we we when the people inventory have historical difficult trying more where know hey, be inventory, going basis. place know what normal the we talk And before our it to we think

headwinds that so about way the that inventory think into from to present I would are cause otherwise is And that's it that turns to we quarter. the in have the think taken risks account best

Operator

from Our America. next of is with Bank question Arya Vivek

Vivek Arya

grow. down put is in in seen a clarify Microchip I June fact in the quarter you acquisitions it's to that much just has that gone it to seasonal downturns, fiscal recovering? wanted say we also to based number had what back the contribution of or what on you sharper then, the quarter, it. 'XX? you expect on think you understand just start But have of prior the that do I the to when I And peak to from Ganesh, did recovery so back September should trough, expect to kind

Ganesh Moorthy

all small of your that. They're tuck-in design our accelerate on So and to these answer design-ins and first are question, intended acquisitions. wins to effort

contribution any quarter don't June or September the they quarter, that So for have revenue in matter. the in

of happens, yes. the happens terms revenue correction as the what In and

and a stages itself it You they've tell I well. needing just There's back the to a September should that recovery. will the can't is which most or get are played it. to point, will first December, to in think driving is That's out which growth think buying they macro cycles macro see at is sharper see burned consumption. just of is then And for what and And -- you an at other back people XX -- how you to to the it further stage, you there phase, above into in we some us the it as next of alone inventory to X that, is through in sharper flattened many has all doing? over environment And tell their give a might the I consumption is get line And should there's second look least us. if what need them recovery. forward months,

Operator

like Moorthy This to the to hand question-and-answer I any back closing floor Ganesh for concludes our session. would comments. over

Ganesh Moorthy

to ran in joining for know over. call. you. I many of as on well and the questions, many and we of to coming to are Great. us that the appreciate seeing we Thank up. days as want I conferences everybody the forward I thank look coming talking the you

Operator

conference. today's concludes This

participation. your this Thank disconnect lines for may You your time. you at

Microchip Technology (MCHP) 6 May 242024 Q4 Earnings call transcript