Q4 2020 Earnings Call
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Ladies and gentlemen, thank you for standing by the end welcome to them like a cheap Q4 and <unk> I, that's fine all participants line I I'm innocent.
I'm afraid of speakers or something isn't there there'd be a question and answer session to actually strange during the session you will need depressed by one on your telephone.
And needs to be advised method based on frenzy being recorded if you require any further assistance Eastspring stars you know now I would like to hide the conference Overthinking speaker today.
You start Eric Bjornholt Micro Chief Financial Officer Showpiece go ahead.
Thank you I'm good afternoon, everyone.
During the course of this conference call, we'll be making projections on other forward looking statements regarding future events for the future financial performance of the company.
We wish the costs from you that such statements our predictions not actual events results may differ materially.
Refer you to our press releases up today as well as our recent finalize with the F.C.C. that identifying <unk> microchips business results of operations.
And the tennis with me today, or Steve <unk>, Microchips, Chairman and C.E.O. International worthy Microchips presidents and seal.
I won't comments on a fourth quarter and full fiscal year 2020 financial performance.
You can get Nashville, then get their comments on the results and discuss the current does this environment as walls or guidance.
We will then be available to respond to specific investor analyst questions.
We're including information or press release on on this conference call <unk> measures, we opposed to the full gap come on gap reconciliation on the industrial relations page the website at W.W.W. Dot Microchip Dot Com, which we believe you will find useful when comparing aren't gap and on gap results.
We have also posted the summary of our outstanding debt and Leopard's metrics on a website.
I will now go through some of the operating results, including that sales gross margin of operating expenses other than that sales I will be referring to these results on an ongoing basis, which is based on expenses part of the effects of acquisition activities sure based compensation and certain other adjustments as described in our press release.
Next they open the marks quarter, well 1.3 to 6 billion, which was up three per cent sequentially.
<unk> guidance from March 2nd 2021, net sales were expected to be adult bought sequentially.
We have posted a summary of our gap net sales as well as and market demand by product line in geography on our website for your reference.
I don't mind got basis gross margins were strong at 62%.
Britney expenses were at 25.4% and operating income was 36.6% compared to 35.1 per cent in the previous quarter.
Non-GAAP net income was 375.5 million.
Nongaap earnings per share was $1.46, which was up significantly from a dollar pretty to produce an upper corner.
I got basis on the marks quarter gross margins were 61.4% and include the impact of 5.1 million Sharebased compensation and 3.3 million of corporate 19 shelter and place restrictions on manufacturing activities.
Toll operating expenses were 653.2 million and include acquisition and tangible amortization of 248.5 million.
Special charges up to 17.2 million.
15.3 million of acquisition related and other costs and sure based compensation of 35.6 million.
The gap that income was 99.9 million for 39 cents per diluted share.
Marks clever gap tax benefit was impacted by variety of factors, including tax reserve releases associated with the statute of limitations expiring deferred tax adjustments related to intercompany movement of intellectual property.
Reserve releases associated with tax audits on other matters.
Fiscal year 2020, net sales for 5.7, excuse me 5.274 billion.
Yeah basis gross margins were record, 61.9% operating expenses were 25.7% sales and operating income was 36.2% sales.
<unk> net income was 1.44 billion any P.S.
It's $5 in 62 cents precluded show.
And a gap basis gross margins were 61.5% operating expenses were 49.2% sales and operating income was 12.3% sales.
Net income is 570.6 million and he P.S. was $2.23 per diluted share.
The non gap task tax rate was seven per cent in the March quarter, and 6.3% for fiscal year 2020.
We expect or non get cash tax rate for fiscal 21 to be between 6% and 7% exclusive lived the transition tax any potential packed associated with restructuring with the microsemi operations in the microchips global structure and <unk> settlements related to taxes accrued and prior fiscal years.
We have many pack attributes and that operating losses tax credits as well as U.S. interest deductions that we believe will keep our cash tax payments low.
The future cash tax payments associated with it took the with the transition tax are expected to be about 245 million.
Will be paid over the next six years, we post to the schedule obese projected transition tax payments on the I.R. page for website.
<unk> balance at March 31st 2020, with 685.7 million, we had 122 days of them and Tory at the end of the marks quarter down seven days from the prior cold is level.
And then tornadoes trivia was on the March quarter worked 29 days compared to 28 days are being censored.
Distribution inventory levels for microchip are still quite low compared to historical average Joes.
And the marks quarter, we exchanged kaftans shares of our common stock to retire 650 million a principal plus accrued interest about 2025 convertible senior subordinated notes.
The cash used to pay the principal and US exchange was funded by a 364 Bay bridge loan.
Exchange will significantly reduce your account dilution to the extent microchips stock price appreciate some of the future.
During the quarter, we also amount of our credit facility. That's disclosing on March 21st 2020 press release, the total leverage in senior leverage covenants work favorably modified as part of being men men getting microchip greater financial flexibility.
The cash flow from operating activities was 371.7 million into March quarter as was March 31st a consolidated cash in total investment position was $403 million.
Paid down 236 million of told that than the March quarter.
Over the last seven four quarters since we close the Microsemi acquisition and occurred over $8 billion in debt to do so we have paid down $2.222 billion, a debt and continue to allocate substantially all of our excess cash beyond dividends to aggressively bring down but that.
We have accomplish this despite the adverse mackerel and market conditions. During most of this period, which we feel to testimony the cast generation capabilities of our businesses.
As well as our ongoing operating discipline.
We continue to expect or debt levels to reduce significantly over the next several years.
Adjusted either died in the March quarter was 548.1 million and our trailing 12 month adjusted EBITDA was 2.1 to 9 billion.
Our net debt to adjust it even though excluding are very long, David convertible bet that matures and 2037, and there's more equity like a nature.
4.46 at March 31st 2020, and.
And our dividend payment into March quarter was $88 million.
Capital expenditures were 11.9 million and the March quarter.
And 67.6 million for fiscal year 2020.
We expect between 12 and $18 million in capital spending and the gym quarter and overall capital expenditures for fiscal 21, it'd be between 50 million and $70 million.
We continue to add capital to maintain an operator internal manufacturing operations.
The production capabilities for a new products and technologies as well as to selectively bring inhouse somebody assembly and tests operations that are currently outsource.
We expect these capital investments will bring some gross margin improvement tour business, particularly pretty outsourced at Mel and Microsemi manufacturing activities that we are bringing into our own factories.
Preciation expense and the March quarter was 41.8 million.
I will now turn it over to <unk> to give his comments on the performance of the business on the March quarter Gosh.
Thank you right hand out good afternoon, everyone.
Let's talk by taking a closer look at Microcontrollers.
When it got basis, a micro controller revenue like sequentially up 5.9%.
Compared to the December core.
<unk> ends market demand standpoint, a micro controller business sequentially up 2.9%.
Coming in marketing standpoint, 32 bit Microcontrollers into March corridor represented an all time record of just over $340 million or 47% upon micro controller in there.
We continue pretty pretty to stay steady stream of innovative you microcontrollers.
Including the new chromatography enable 30 micro controller designed to stop now where [laughter], but boot from X. tunnel flash memory.
As well as a new high in eight but microcontroller product calmly put improved design in real time control in connected application.
Micro controller overall represented 55.2% upon his market demand into March core.
Last month, Gartner released a micro controller marketing report for 2019.
<unk> microchip retain the number one position or eight but Mike microcontrollers.
Once again, we gain market share as we grew faster and the overall a micro controller market.
In fact, we are now almost twice as big as and number two player.
Into 16 bit microphone market, we remain doesn't number five position and continue to gain market share it'd be good faster and the overall 60 that microcontroller market.
In the 32 bit micro controller market, we remained in the number of fixed position for the gardener report.
Game significant market share again.
B grew faster than the overall pretty good microphone total market.
These results are despite Gardner rolling up our budget for the micro controller rubber you could be about 400 million dollar lower tend to 1.2 billion worth of we actually achieved in 2019.
<unk> they use our actual calendar year 2000, 1932 with microcontroller results.
We've whatever treat the number four ranking.
And as I shared with you earlier 30 to put myself, it's all a business in the market quota right at a approximately 1.6 billion analyze runway based on in marketing man.
Well Microcontrollers overall, we were made to the number three position.
Gartner building up our revenue to be about $400 million lower than our public you reported results for calendar year 2019.
Using our public it reported results, we would be approximately 7.5%.
From the number two player.
Teen and a half percent away from the number one player ahead of us.
We continue to relentlessly March toward number one spot.
Hold microcontroller portfolio load that have never been stroller, we believe we have to your product momentum and customer engagement.
Community game, even more share in 2020 that'd be farther bill.
Call Me, Michael Foucault franchise in the industry.
I'm, hoping catalog when it got paid our analog revenue, but sequentially up 1.1% compared to the December corner.
Permanent marketing standpoint around a lot of business I think once we down 1.8%.
During the quarter, we continue to introduce a steady stream innovative animal products.
Looting the industry first space qualified radiation tolerant internet friends here.
As well as an expanded silicon carbide family of power electronics.
Level improvements in efficiency.
And reliability.
700, Bold 1200 Bowl and 1700 bold power modules.
<unk> represented 27.6% how about end market in the March corner.
Correct P.G.A. revenue on a gap faces was up 4.6% sequentially as competitive December quarter.
Oh man market demand standpoint, or F.P.G., a business I think we're actually up 1%.
Have P.D.A. represent or 7%.
In market demand in the corner.
Oh and licensing memory and other products.
Which we to forward to it and I know.
According to lay down 10.7% have compared to the December quarter.
Market demand perspective.
During the quarter, we introduce a new miniaturised video.
The clock the industry highest performance on o'clock or size and power.
Hello, I'm all represent a 10.1% on n. market demand the March corner.
And update regarding called a virus.
Impact on our operations.
Regretfully, we've had nine employees, who tested positive for the buyers.
Over 18000 employees worldwide. This so they never though.
The paint delete the old recovering nicely or have already have a cup.
Most of on non factory employee base is working from home How's the rapidly prints phone business process he used to run remotely.
Local team have been hired engaged collaborative.
Under the circumstances.
Thing and enhance customer engagement.
Design and high effectiveness in our product development programs.
You would like to thank our world like tea rapidly adopting the changing conditions and making the best of worthless.
Possible under difficult circumstances continued delivering results.
Or manufacturing operations at varying degrees of constraints last quarter.
As what started the China shutting down for several weeks.
And at the many other locations I shut down the filling orders.
How old operations team nimbly adjusted to constrain marks.
Implemented our contingency plans were needed.
Sure that'd be continue to serve customers customer need.
Despite the challenges.
Most of 'em any second location, we were able to get essential services designation.
I products out quite as ubiquitous in medical work from home defense and communication infrastructure applications.
Our Philippines operations has the largest impact but restriction on People's movement being so strict that we had had a large number of I've dedicated employees living in our two factory there since mid March.
Production.
Customer.
Oh, it's local team also successfully work through a myriad of ground and logistics issues grow up the quarter as conditions change regionally overtime.
Our customers and our supply chain partners also enjoy constraints, but they're factory in logistics.
Made the marks quarter challenging.
We ought to appreciate it off our global people engaged and work who are rolling stuff I've customers and suppliers challenges.
Even as we work of telling doesn't constraints I played from our own factories.
I'm demicks are inherently unpredictable.
They may be yet other twists and turns to come into days ahead.
Continue to process the news daily.
Well if monitor information from the center for disease control.
Health organization.
And we will adopt that respondent that's needed and focus on the things that we can control.
Given the current market uncertainties, we are providing some qualitative insight into our principal and markets.
Areas frankly C.R.
Data center.
And by continued straying from the exponential rate at which data is being created and the concept consequent seemingly insatiable demand data storage.
For computers printers monitors and other accessories.
Enabled by the increased shift working from home.
For medical devices.
19 related items like ventilators respirators are because in order to an ultrasound machine.
But also a host of other hospital equipment needed or increase patient loads.
<unk> consumer and industrial products my hands free dispenser, suppose so water paper hand sanitizers.
Oh in prevented from monitors.
Barcode <unk> readers for retail shopping.
Oh and this pen to prevent was crandall coded 19.
And then pull communication infrastructure in part because of work from home related network loading change it but also in part the stimulus investment in infrastructure, especially in China.
Areas, a weakness C.C.N.N. market perspective are <unk>.
Updates industrial.
You learn home appliances and aviation or airspace.
Oh, it depends some space business remains relatively even keel.
Let me know popping, 50% comments about how business and I guidance going forward deep.
<unk> and a good afternoon everyone.
Today, I would like to look on that as though.
Fourth quarter of 2020.
The whole fiscal year 2025, and then provide guidance was the fiscal quarter of 2021.
<unk> I'm usual business challenging.
The effects of corporate 19 condemning <unk>.
<unk> in many dimensions.
I'm proud of how desperate need the microchip team adapted the new constraints, we phase so that our employees would be safe for the customers would it be roast food and other partners engage to ensure the mutual.
Despite the challenges we traits.
Despite the covered 19 condemning challenges, we deliver three per cent sequential growth.
<unk> compared to early March update your <unk>, which was for next students should be about flat.
I would find out as much more to the gap next to came in at $1.3 billion to $6 billion <unk> three person sequentially and don't just 0.3% from year to grow corn March corridor.
Oh <unk> in market demand based on some too.
Was approximately $3.8 million lower than gaps in.
After seven quarters book in market demand being higher than selling bayes.
<unk> too much quarter was nearly even put in market demand person selling upstairs.
We also delivered outstanding non get gross margin of 62% just above the high end up for originally guidance on the ability for 2020.
<unk>.
The margin of 36.6% near the high end up <unk>.
And we did all that while reducing over days.
From 129 days 122 days.
I would consolidated non get U.P.S. $1.46.
We did not provide U.P.S. guiding wouldn't be revised <unk> guidance on March 220, 20 or.
<unk> U.P.S. guidance divided or the other means really been so good ready for 2020 $1.35 dollar 51 with the midpoint over dollar 43, when we beat that original guidance by two cents.
On non get basis. This was also a little 118 consecutive profitable corridor.
In the <unk>, we paid down $236 million up for debt.
Are totally <unk> June 2018 has been about $2.22 billion.
Pace of debt payments has been strong despite the week uncertain business conditions.
Underlying the strong cash generation characteristics of our business.
<unk> I would actually the first you couldn't change to squeeze working capital efficiency.
Plenty of food fiscal year 2020 bases are with nets is worth $5.274 billion down 1.4% over fiscal year 2019.
Now I ever discuss discuss our guidance for the German border <unk>.
Donation who's prepared remarks to discuss the impact we are seeing on our supply chain.
<unk> customs diminish also describes the end markets, where we are seeing string and doors.
<unk> coding or expected weakness.
<unk> bookings would double digit percentage.
Quarter booking.
The book to be racial <unk> very strong at 1.17.
That resulted in our starting back log for June corridor, it'd be strong compared to the starting back long for the marks Florida.
You know, but it <unk> age 2020, plus really we said that we believe that the string can bookings maybe it has those books customer concerns.
About supply chain disruption you to cope with 19 brighter.
<unk> economies that owned divorce constructing rapidly.
With millions of people getting laid off and with customers factory closures due to shouldn't put in place ordering into invidious country.
We believe that product demand is like you do we can significantly.
With another month indoor but a better now.
We have seen some of the customer order push ups and cancellation.
Backlog for the June quarter compared to the backlog from multiple here at the same point in time.
No do Chideya did some but the last month.
We believe the Bachelor condition compared to my score to.
Continue to do to to you you do get combined check supposed to supply chain disruption.
That's where factory closures and demand destruction.
Kicking all these factors into consideration.
We expect over the next foods for June court, or he'll be down 2% to 10 per cent sequentially.
The guidance manages to help account for the uncertainty associated to.
<unk> I don't know by this situation, we have nobody to model.
Quarterly play out for the current situation.
And what the consequences business impacting maybe.
We believe that our guidance range incorporates of a best judgment for the possible scenarios.
We have prepared looking piece by the downside scenario by putting the employees on 10% so liddy, but.
No just seemed affected by the abuse Workovers locating time.
We have also fluids and all business travel.
Cut discretionary expense.
Regarding Catholics.
Finish fiscal year 2020, with a cat picks up $67.6 million.
Significant reduction from fiscally in 19 cat backs of $229 million.
This is consistent with what we have said before that over Catholics is divided between girls Capitan maintains capital.
A new products from technology capital, but.
Fiscal year like.
2020.
Whichever Netscape declined the growth camper too, which is the largest portion of cutbacks.
Lines to work to mean, nothing and therefore, the perfect Catholics declined significantly we expect a Catholic.
21 of them in low in the range of 50 million $37 million.
For June quarter, we expect <unk> to be between 60 point for soon 61.2% looks too we expect a non get operating expenses to be between 24.4 Christine.
In 25.2% of soon we expect <unk>.
Would be between 35.2 person in 36.8% us to.
Can we expect over non gap I mean push to be between dollar 25 per share two dollar 45, but shit.
We believe that despite the near term pandemic driven challenges.
We are confident in the string 10 diversity of the businesses and markets we in.
Which you long term growth in excess of the average semiconductor market goes.
Given all the complications of accounting for acquisitions, including amortization nothing tangible restructuring charges into these light up when acquisition.
<unk> really continued to provide guidance and check it for the those on non get this is <unk>.
Except for nets in which would be on a get basis.
We believe that non gap is does provide.
<unk>, meaning from competitors then.
To private quarters and be depressed that'd be analysts continue to report <unk> <unk> <unk> <unk>.
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Again, ladies and gentlemen, if he has a question. It next time <unk> and the number one key on your Catched, one kind of or something.
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Yeah, I don't think that's possible what's.
Let's stay open here for awhile.
Or Investor Relations manager says to indicate that we're we're having quite a few problems here. So, let's let's let's hold and see if we can get the salt because I know there's questions to be asked.
[noise]. So I've been told we have 12 questions and Q., we just need to figure out how to get them available.
So those questions can be ass.
Some delay.
<unk>.
Okay go ahead.
Thank you.
Good good afternoon, so I I guess for the first question.
If if you could give us some thoughts about.
Ah.
Perhaps the the the magnitude of of of the the the downturn that I get.
We're all expecting I I realize that's difficult question with what's going on with the backlog here, but.
I I guess <unk>.
Competitors have compared to what's what we're seeing now to the 2009 cycle I'm not sure.
The right way to look at it right now, but I I guess microchip is different company as compared to 2009 and what's your guiding too is not quite as bad.
As we put all that together how are you thinking about things going forward.
So so I think you know.
I never to speak about anybody else's business for our own.
<unk> I believe all companies have.
<unk> and market in customer exposure.
We have been building dispense right for many years now.
Organic efforts as little as the acquisition then have <unk>.
<unk> large numbers are very very good assets and then.
Deployed a program called R.T.S.S. total system solutions that we have discussed with you in which we are.
I'm living large buttons are just shoot up the customers board with our product.
So the outperforming sick you may have you seen from us in business today.
There's really nothing to do with what you have done today or last year to screen.
It is all talk really many years, though perhaps work and new products organically as well as to acquisition.
Customer sport customer support activities are distributed relationships and everything else over the past several years.
Notice that helped too.
Okay <unk>.
I guess, perhaps you could.
<unk>.
Yeah.
And you put through some of that in your.
Marks about what you've been seeing since March I I guess, what's interesting now is that the customers came in or the the channel waste came into that.
This crisis.
I guess unusual in in in it.
In our industry, how how does that affect things going forward and you know what sort of visibility do you have on what customers maybe doing with the image my levels here.
So you know this is a very unique psycho you know we have.
Oh. This is the first time ever read expedient thing it demands shock and supply shop.
You know we have seen the demands shocks before like 2008 2009 cycle. You mentioned you also saw you need your demands shock during the 2001 check Bucks.
And I think we we saw a little mini demand shocked really even doing Sars in 2004, O.T. or whenever it was.
And and we have seen some supplies shocked when they industry.
The two that I remember.
<unk> duty tsunami in Japan, and South East Asia, <unk> I'm going to affect you.
Where it goes down not shut down into the major commands shock.
The other dimensions shock ready to call. The during the image of floods in piloting a few years ago, where many of.
You know peers <unk> Microchip Tech he was okay, though.
So we have seen easy really use it it's supply sharkwater demands shock.
This is the first time ever in my you know 40 years of experience that.
Simultaneous demand shocking supply Srock Fonda supplies shock is driven by.
You know just radio shows don't include <unk> talked about it extensively Philippines being the worst in Malaysia being that second.
Well, we couldn't get a what goes into the factory and.
<unk> living in the factory because you believe that would not be able to come back.
And number two.
<unk> random those factory.
Produce too limited output because the whole workforce wasn't working.
<unk> filtered into a supply shortage any supplies shocking somebody that need time to run out and that kind of <unk> drove some of the demand further from customers in distributors.
In on the on demand side effect of a customer respect to shut down the worst being M.D. automotive business with.
I think you know.
You guys keep track of Star data when if you look at the far data.
Saying that to Europe has been the worse.
U.S. the 13, an artifact English <unk>, so that those factories are coming back in automotive so the automotive business and going to just to get 10 children demands shock.
And industrial some.
And while on the other hand like you because <unk> like <unk>.
Demand Chuck is in the airport detection with all the data and work from home.
Unions is that demand has gone up.
The other the idea of which is really quite sleepy put us in general I don't think it's a very large.
Business is medical we we moved out into industrial.
The medical is really contacting the industrial.
But you know <unk> half ago I wouldn't know.
What a ventilator was.
And we now we found that all the ventilator designed around the world everyone is using our products in the demand has gone up 100 expert.
Oh.
The hospitals will hook to retrieve interlagos only for emergency purposes, and now it's Tingle Hospital is required and I was in 2000 <unk>. So that demand has gone up you know 50, X. 200 x.
I'm thinking on digits for the moment those too.
Automatic soap dispensers in back from Florida, where you put your hand, and you know the soap falls down. They all use you know micro controller since the the minimum for products. So that's kinda reading and marketing.
So in a in certain market demand is very strong other market demand is <unk>.
In some cases, the the impact is because the supply chain disruption when another kid to the end product is because of who stronger demand.
So I think you know how do you make sense with all that.
We started june quarters, or the truly strong backlog.
And our backlog for June coordinates to higher than a Bachelor worked for the <unk> the same point in time, but.
But it has deteriorated significantly compared to where it was on.
On it to one.
The rate, we're seeing customer adjustments pushouts in cancellation.
Where's the customer may have ordered more but.
Oh really shows.
You know this deterioration in Backlogging June compared to March will continue.
How much we lost in one month, we've got two months ago, putting all got into the equation really just sort of how does the point of minus six and it Ain't of mine is to the minus 10.
Sorry for the long answer, but I can get the question deserved it.
I think that's that's a discussion we're looking for thank you.
Yeah.
Thank you. The next question comes from the line F. <unk>.
Huh.
Sorry, your line or something.
Hi, Thank you very much team lots of details there can you focus on the gross margin and just <unk>.
Send the dynamics, it's more than hanging in despite you actually drawing down.
<unk> sheet.
And <unk> didn't really go up on that so it just kind of help us understand the factors the seems to be a struck true.
Change and Chris <unk>, a question about the difference between Microchip from 10 years ago, and all that stuff that'd be pulling your for awhile, but it just talked to the structural changes then and then you you mentioned that.
Some manufacturing <unk>, the cutbacks, which enable you to bring more microsemi N.F.L. indoor and that'll have some positive and this is obviously a longer term kind of question that <unk>.
So let me ask or that'd gone horribly answer the question and all that something neutered up Yeah go ahead at.
Okay. So I mean gross margins hold up extremely well and the marched quota like posted 62% non gap smart.
Outstanding as you know, we've been running our factories that less than optimal levels and well recorded a a other utilization charge on a quarter of about $14 million.
It was actually $3 million better than the prior quarter as we were running our assembly and test factories harder and we had in the previous quarters and we were training finished goods. So the strong gross margins are really driven by a variety of factors, including Anable product mix and then just ongoing cost reduction in cost containment activists.
He's in our factories so.
Current corner, where guiding the gross margins could be down at 60.8% at the mid point, we expect higher under utilization charges in June compared to March due to some of the rotating time off that we're going to be doing in the factories and just lower production output, but we believe we're we're really well position for the long term.
Gross margin improvement in the future as we grow back into our factory capacity.
So we're we're we're you know there's a number of things that endpoints that other than the factory capacity. We'd been also does a good job of really holding average selling price is flat.
Customers and that has long term gross margin done if that's all so that's the general summer there see what would you like to add.
No that's good.
Well we.
Down Psycho.
<unk>, let me out a couple of sentences I think we started this down psycho.
Would probably the lowest mmm entity we had.
You know 122 days at the end of March.
I I had a call upside down Psychos live we started with.
Only hiring them into the.
And and so I think you know, it's such a low intensity and we're keeping it little by effectively locating time ups and others.
When we get on the other side of it then started renting effect keys back up and we're starting with the gross margin into 60, you guys, who will be biddy biddy better position longer time, but a very good <unk>.
Okay.
Second Keith's and versus question related to a cap x. and.
Yeah, we we we will still focus longer term on brain, some more assembly and <unk> house, but you know, where we've really lock down capital pretty significantly see what our forecast is for fiscal 20 wiring up between <unk> $70 million, So where there's no benefits to be gained downfall valuate those couple of being pretty conservative that are posture in terms.
Making adjustments right now.
Thank you seated the for for my other Federal said guys.
Sure.
Next question comes from the line of scary.
<unk>.
Hey, guys makes particularly questions.
Interest to time I'll.
Close my questions now I see by be interests you get your opinion on the recent export recent change and export control rules in the impact. This may have on the owners process of applying for licenses to shift trying to customers or any sort of limitations on that and then.
Yeah I'm asking this question really on behalf of so many different people, but I'd interests you get your perspective on on how safe you're giving it is thank you.
Yeah.
Sure. So I'll pass on to <unk> answer the question about to export control and then then I'll come back and answer the question on the dividend.
So <unk>.
Yeah. The recent announcement that was made yeah, we're still sorting through what's the Commerce Department rules are.
The specific item that we are paying attention crew is it possible military use products and how we can provide a confirmation that is not going to go with applications. We think it's fairly straightforward to be able to do it we have time until the 29th of due to be able to implemented.
This point in time, we do not expect that didn't have an issue into the microphone.
Right.
So the gardening that given your question was how searches or David and everything is the very very safe.
Oh, we were we were one company that did not cadaver dividend back in 2009.
You know when no from peak to bother them or whatever you went down almost 36%.
There we are so much more traffic they'd been on grossing operating margin.
We have done any stress tests or no business you can find a number.
Low enough to where you could lose it.
Large amount of two then too.
Companies still it's cash flow positive.
$1.2 billion, though.
Money to me any one line of credit so I keep your really we are unable to Mars listen to radio.
<unk> away the dividend would be address.
And if we felt that the division was at risk, we certainly wouldn't that be increasing the different in which we are a little bit every quarter.
Alright, Thank you guys.
The next question comes from the right Craig.
From Morgan Saturday.
Okay.
Yes. Thank you question Christie just on kind of that the downturn played buck.
Costs type.
Options and Cat back you know you've done this before I cycles.
You mentioned this is very different cycles are just trying to gauge.
Thinking about adaptive cycle and some of the things we're doing.
Protect margins it plays out.
So I think you know.
<unk>, we learned a little bit to everything.
Why not for goal is to never let us take a look away.
You know what happened in 2008 2009.
The the cycle really hitting now only part of October <unk> age.
And the business was down goodies substantially into of December Florida in down <unk>.
Export or.
And we didn't into men to pay cuts and all that can be <unk> well into the psycho with the stone was already there and we would be better you know just just <unk>. So this time, but you have done is.
No understanding deck with 33 million people 18 already lost jobs in U.S. alone I don't know how many around the world. You know these people are not gonna be buying cars in a few today too.
And other stuff that really would have a product. So you know this time, we better than to have two.
And booted up the Windows ahead of time before the strong really hit.
But we've finished on March quoting a few sequentially up cheapest hmm.
And we implemented the picket starting you can 20.
You know and at that time, a business really haven't even beacons no wait on June quarter, but still backlog of higher than the marks quarterback log at the same point in time. So what we have you done is really are ducks abundance of caution.
I'm just thinking that you know this this stone internally at Microchip, we have described that could be a.
Category fixed I'm waiting in the wing.
Oh, where you know category five is the highest category because we have never seen this before simultaneous demand and supply shock endemic and no place to hide in.
I'm 33 million people laid out in five weeks in U.S. alone. So we have prepared the company.
With the we get cost structure into June guidance. We have given you has <unk> paycheck, you know pay cuts for June quota dialed in but not on the gold quarter, because we started in the middle of the corridor in September expenses wouldn't be down even slightly further from that.
So we essentially hooked positioned at Florida.
Any extreme kids that new material, it's not easy to give the money back onto the undo the clicks on the salad the change them from experts in the white person over there and it's much easier to do that didn't really have spent all the money and then delete fight the stone in your office supply.
Condition. So that's really how we're looking at it we're looking at it as a we don't know.
No one can anybody knows anybody hey, he knows the their line.
They don't so what we have done is really abundance of question prepared the company for the worst case analysis is unwilling and give them money back if we didn't need it.
Helpful colors <unk>. Thank you just get to the follow up on the push out can cancellations is is it pretty broad base are there any certain products.
Data, you're seeing it more than others.
It's not the by product.
It is a motorbike into market.
The worst use at a motive.
The second would be industrial in general consumer like appliances, and all that.
And I think <unk> Where's the string is.
The strongest idea is data center.
<unk> the next to the really five g. related.
Work from home related P.C.'s printers computers, and all that.
Medical is extremely strong so those are the ideas when I've seen for shows in cancellation, we're seeing those in the automotive and some general industrial.
Got it thank you.
The next question comes from the line.
From credits needs.
Mmm.
Yeah get up and you got shrink frequently asked questions.
Heard comments.
Clearly the gym backlog is deteriorating but at least.
<unk>.
Suggest a potential for sequential growth in the June quarter, or something just kind of curious when you think about the range of revenues of getting for June.
The expectation isn't going to May and June does does the rate of deterioration the backlog celebrate from here to kind of get your mid point or just kind of give us any sort of color you feel comfortable with with helping us understand.
What's your embedding and further deterioration to back off from here.
Well you know, there's any way to monitor that so there are two challenges maybe three.
No one is that it just seemed backlog.
The cancer that pushes out to the following Florida.
Chicken is we still need turns to pick if there is zero cancellation from head on.
But we get no more terms for the corridor.
That's pretty good scenario either.
You know then you know so that that would be fairly soft to.
End up hurting the supply depending on what products.
The demand comes on.
A bit of products, but if you placed an order today.
The the easiest I mean, if they can give you the July August and those are from the most constrained idio directories that have had a.
You know six weeks do you know for six weeks, they haven't been able to run for the production.
Now, where they're coming back to production, we're so far behind in delinquency.
We'll leave the June quarter with a fairly large amount of product delinquent same thing happen at the end of March corridor.
So in a way you know some day you know when we catch up all that sort of get shipped it's a good news.
But for now we're not going to be able to ship all the backlog into <unk>, neither would be able to ship that on March poodle. In fact, it's just a supply side shock heading out to happen.
In effect use was running for <unk>, we would have meant.
What exceeded other regional guidance, which was about 25%.
Only did tea.
And that was largely because we couldn't supplies apart.
The <unk>, but then you also mentioned that some of the optics control that you put in place.
Quarter or old or not in for the fall quarter. So I'll have a positive effect on off after declining again in September I'm curious are there more leverage you can pull on our backs and should we take objects being down sequentially in September.
Sign that you feel like revenue might be down again in September as well.
So.
The only reason that the September objects from you down below June would be because the pick us would be for the entire corridor.
And <unk> didn't kicking till June June 20 in U.S. and probably made one this one some of the international geography, depending on.
You know the radius international laws, but the September quarter, we get the phone corridor.
If your question is you know what if you didn't need anything that isn't it says well you know then then you'd be mother. Lick. Then you you know change that pick up from 10% to 6% of 5% or you know what you see growth can make a do I mean anything is possible, but I'm seeing right now.
<unk> gain prepared for the categories fixed.
We structure to take the June quarter expenses below the March Florida, because of the full quarter saving.
And then on December to come here to September we'd be about the theme. If you don't make any changes and they'll pick books end at the end of December.
Let's cut into the kids, we have announced to the employees at the paper and at the end of December So the monks quarter up X. blue laser gain and hopefully we'll run out of the words from the cycle if they're not then.
Do something different.
Helpful. Thanks to you.
Mhm.
The next question comes from the line of course, Beanie sounds pretty good.
Okay.
Hey, Thanks, Dave can you just expand on I guess, what percentage of your revenue is dealing with these supply issues and other supply issues sort of worsening as we speak or do you think you gotta <unk> handle on them and they should get better as a quarter progressive.
Let me finish comment on it I don't think we have quantitative numbers, but then each can talk qualitatively.
Yeah. So it's not our entire protocol. So we build a lot of product in many countries, Thailand, Huh, Philippines, Malaysia, depending on if it's <unk> subcontracted factories are principle issue I'm, a constraints 10 point or in the Philippines and in Malaysia.
At this point effectively has turned on 100% they don't have it running at 100%, but they don't notice corrections and data as I I stopped as they can bring their direct labor workforce how'd, they will catch out bad because for the court.
<unk> operating under restrictions, we have been able to improve from March to the to quarter by having more people residing in our factory. So this.
We've got five 600 employees living fulltime inside the factory can be able to get the utilization to be higher.
Expected that will get turn those restrictions will come off as we go into the latter part may maybe in the middle of May.
Control and that that happens we will have more I'll put that comes out of it so I believe.
Constraints manufacturing constraints are you know coming off and coming off rapidly, but there's catch up.
What is left from when the constraints, but there plus ongoing support that has to come through.
Got it thanks, <unk> and from my follow up to see if you kinda call. This weakness after a little bit of strength.
Last quarter, you know <unk> what is your Spider since tell you on how long this weakness could last me do you think that some of these and markets that are very strong right now like data center could they start getting weaker in the second half of the year any guesses how long. This this weakness could last last in the next quarter.
I I don't currently expect data center to weaken 19.
90% of the word data has been created in the last two two years.
And you know any company index related together and I, just got up the board up for a mellanoxs it.
Onto the D. close to do but by the video and 27.
And they announced a quarter of their March board or just a couple of days before the deal closed it was very very strong corridor.
You have seen you to live as those from the video so I'm, sorry, I I just think.
You know determined to market is really really strong then I think.
You know how are we have designed dean up into position on the customers board so that one looks pretty good.
I I think as the other more effectively or go back to work.
Let's start buying cars again that market is the most destroyed today in bed market, but it sure huge potential.
Or getting back to normal in industry would be the same way.
Okay. Thanks.
Yeah.
The next question comes from the line.
Some bank of America. Okay go ahead, you're nine or something.
That's the thing my question I had that.
Steven I look at your peak to trough since the kinds of from September last year to hopefully that chauffeuring, if I just take the midpoint.
What you got into in June or even take the low end of that it's introduction of 7% to 11% that's actually much better than what we have seen that get Osama feel an analog and and micro controller appears that are down almost 25 per cent.
In that same period. So the question to you is what is helping you state.
And I appreciate the visibility is not bad, but if let's say doors competitor starts to come back in September.
Is that anything that prevents microchip seems to also rebound in in September.
Yeah. So no I think I little bit answered that question of me is that.
You know we think wood was he is a year's worth of F. or in a building a stronger position in the customers boards with total system solutions and also acquiring product lines, but you know synergy with our products.
You know what they brought in from at Madeleine Michael and Microsemi.
Decree product lines with you know radio stuff that can go into similar borders on micro controller.
And and much stronger distributive relationships I think.
You know some others have been tweaking their distribution policies or maybe to the detriment maybe not <unk>, but I think we we are seeing a stronger effect of a stronger just to go to relationships.
And the effect of in my Kids like we discussed so I don't really know why anybody else who's doing better or worse than awesome show the other companies doing better than awesome.
We're more closer competitors are doing worse than Ah. So we're happy to beginning shoes, but I don't know we can totally I look at presented as to how much is because of what reason.
And some of that follow up a gross margin I see your guiding down to I think about 120 basis sponsor so down to 61% I I understand that I supply 10, disruptions et cetera, but the last time, you'll gross margin but under.
These 61 nation for central below leverage you would have a news what 20%.
Billion dollar or so over two years ago at that time.
Even have microsemi, which has been a creative margin. Since then some curious why this conservatism and and gross margins of video transition is it anything else right and then how should protest marches behave assuming that sand stock to rebound in September.
Did you want to take that.
Sure I'll take it so you know <unk>, the the midpoint of our guidance as a quarter of 60.8%.
No our our long term model or 63% so quite honestly I thanked me on a large types of held up extraordinarily well.
You know if you look at the fall, we hadn't gross margins and back in 2008 2009, you know that margins went down significantly now we've got a little more balance between what we do internally versus what we do externally production standpoint.
Bottom line as with with revenue being down as you mentioned about 7% to 11% from keep the trough.
We have to <unk> factories that low level I think we've got a a very good job in Charlotte controlling inventory levels and in this last quarter at 122 days, that's a very good position to be.
What what's in front of that so I think it just comes down to utilization of our of a factory footprint that we have them as we grow back into it we can p. very cost effective.
It's just a trough though.
How can you question is you know so much higher than.
Last time or whatever you.
You know last time or margin, but there's kinda number somebody's margin got hired I think was it I think that's your question.
<unk>.
Backward two years ago. It was a different company you know when we didn't have.
Microsemi all of their factories around the world or.
Oh, the probably different cost structure some of those factories up no demand some of those that okay. I mean, it's you know it's not a.
It's not the same company you know combined with Microsemi now you know microsemi was about.
No between 40% to 50%, but that'd be on company has totally changed.
Okay.
The next question comes from the 9 million signs I'm, sorry, sorry go ahead.
Great. Thanks for taking my question do you I apologize if you answered this already it seems clear you're expecting.
Some further order cancels or pushouts or downsized.
Degree understand that but when we think about the pace of cancellation it.
Have you commented on that yet <unk> is that starting to slow down all aware.
Early reduction in backlog here.
To a point, where those changes are smaller and smaller.
Hi, I don't know if I can definitely say that I think.
It's a in market bay in market in geography by geography, but.
Overall may have slowed down somewhat but in some other jungle piece and in some other markets. It's continuing.
I don't tend to.
If if if the cancellations were over or under for Sharks were over.
You know revenue would be higher than watch court or that's not what the guiding investment broker attention.
Okay that helps next one if I can perhaps for Eric but whoever wants to take it most semi companies in the past few months as a couple of nonsense.
Taken to try to <unk> debt and you know sort of protect themselves on the balance sheet microchips moves here have been a little bit more.
No looks like opportunistic or aggressive you make characterized by pulling down the revolver to to to pay off a part of the convert.
If you can walk us through what the thinking was the games the company the courage to do that in this environment.
Let me pick that.
So you know, we we began the F. word.
<unk> or convert back.
When the stock to hit about 60 dollar you know like you know low sixties.
And that was down from about it Pico hundred 10.
The amount did you should we get from these can words.
And this time goes from left to $65 $210 are so large because it has a hyper feature where.
The stock complete said, one and a half time that it for that'd be the one dollar increase and stuck right.
And it was just very quickly diluted so when the.
Stock price because of that assertion been down 110 into low sixties.
We decided not to with the recession and get tired of pushing African word.
But to do so we needed the money.
And you said, we took the money out of the line up there we didn't we didn't take any money at it we we first wanting to raise the money in the public market to have debt.
But to the extreme volatility the debt markets clothes for a period of time.
And so we went to the direction I'm getting a.
Oh, it's 364 days bridge.
Oh, so we got $615 million, though.
Bridge at a very very low interest rates same interests with <unk>.
And with that we bought 615 million dollar looked at face value convertible.
And by the time, we executed those convertibles talk had already been bounded to about 70 71.
We we average will be bought them and where the started now at 80 550, you could just imagine how much dilution we have to say that we would have incurred so we think that was the basically opportunistic good movies.
And we didn't stress the credit line to do that we we got a separate goods sort of as a brand new money separate bridge that we have to pay out someday.
Within a year.
Got it I didn't maybe I didn't appreciate the distinction. Thank you.
I I, just would say I wish I was able to raise more money than I would have but even more.
But it was a very very difficult time, there were no company that was it on on the banks people, who are drawing their credit lines completely and bentwood under a lot of stress and in that environment.
$615 million, a new money sounded like medical at that time.
<unk>.
Oh.
<unk>.
Hey, guys. Thanks for the question I guess first maybe talk about cycle times times, you know solve our data suggests that your lead times are up a little bit I think he did talk about the Philippines, Malaysia.
Maybe just talk about lead times from that perspective, I know, they're low historically.
But <unk> <unk> talk about where you are there with any increases and then I guess balance that with anything Tory it looks like you're not increasing it.
I guess you guys are.
Worried but maybe talk about that lead time on the ballot.
Wow.
<unk> have you take a little question.
So the time for most of our products remain relatively stable lead time in the factory that have that constrained by sheltering place have gone out and they've got a lot by I would say on average about a couple of weeks.
And so whatever you are hearing or seeing as on sucking product line, particularly the ones that go through it in Philippines.
Or Malaysia.
Yeah, but for the most park neat times outside of that all remaining stable.
And we expect to have me times will catch back to normal.
Club, probably close to the end of a quarter as we catch up <unk>.
Now, they're able to both shift normal, but also do any catch up shipments.
Okay.
Great.
Steve you're the Big picture Guy and you touched on this a bit already but.
You know looking for what do you think that the biggest risks are to your business here and you know if you have to start pulling some contingencies <unk>. What are you thinking you what's in your control from here that you plan on doing thank you.
Well you know the the bigger risks to their business is <unk> not can tune.
As we are talking about true from state to state anyway.
<unk> internationally, not nationally and internationally for rushing through to go to places as people go back to work here in the <unk>.
Question is do we see it 13 waiver for corporate 19 cases are starting to go back out those people that need to go back to work.
You know I think.
As people go to work.
All the precautions are from that same thing and others.
And hopefully we were not <unk>, but it's it's tricky in ways.
According to go back to show during <unk>.
The largest <unk>.
Because there are long.
The times from doing which the thirties would be shut down their demand would be though people who do by encouraging huh.
That I see those are bigger for now.
Terms or or you know working leverage.
Or you know we've already empty Mister <unk>.
<unk>.
<unk> <unk> <unk>.
Implementation these measures to especially crazy categories 60 huh.
Mmm.
Good.
<unk> look pretty even couldn't even more efficiently expenses.
She is covered could go down further and.
<unk>.
I mean organization I and others are ridiculous because every time, but.
Usually it's certainly must be predicting or pick or.
Because you don't ask for word right increase.
<unk>.
Oh, so it has no bonuses to play there then Catholic or another.
But like a minister 19 answer to another question.
You know, we we've tried to market listen videos are trying to see what how much for W. has to go down.
You know before we because castro negative or do we didn't come to a questionnaire blue you know it's way too low.
I think it says.
Business is too strong today.
Mr business is so good at that.
Really.
<unk> it is not there Grad school.
Oh, Okay cool.
<unk>.
Thank you on congrats on buying that convert bonds.
Nice price.
Huh.
The next question concerning the line hi lengths away from people Morgan.
Good afternoon thinks taking the question just more of a sort of geographical question back in March you know when we saw the team down shift at that time, you know the township was given by sort of a shortfall in China right at the country was studying to open backup but at a slower pace, but you also did point.
And at that time that orders getting business activity at that time in China, We're starting to pick back up and since then you know we've seen more opening up of activity in China, We've seen auto production picking up disk or factories are starting to open up consumer starting to spend so have you seen follow smell that China improvement trend as maybe.
This is the world's demand is weakening into into the June Carter or are you also seen degradation and deterioration in China orders in bookings as well.
So so I think.
Okay, Yeah monthly or you look at your bike corridor. When you look at it by court or you know Turner was really weak for for the month quarter, because you know Chinese new year <unk> extended to two to three weeks for one week and then all these factories were close sort of a trigger business, but <unk>.
If you should really look at it for the court, where do you feel good or monthly basis.
As the current 19 situation got compete and and people are going back to work to train a business.
Seems like that <unk>.
However, the concern is it may look like back to normal because it's really kind of making up for.
Some of the shortfall and all that it had and once that demand is Matt <unk> demanding trainer back in the room or not.
Dance needs to be answered in the months up made in June.
But it through a trainer was released from late brought up marching train or gray stripes.
As if it would be.
Better.
Yep, Okay appreciate the inside their Stephen and just.
You know on the back end operations, you talked about Malaysia, you talked about philippians, but you guys actually have a pretty large test facility in Thailand <unk> to the end of this month, so how's the team been able to.
I didn't quite nicely to the movement control in Thailand, and his Thailand running at full run rate.
Yeah, So Thailand did not really have any strong loading and let me have finished comments on the <unk>.
Yeah, so they could Tyler locked down really a curfew at night come about 10, P.M. until eight A.M. it doesn't affect our ships audibility to operate out plans and so and there's been no logistical other issues that'd be run into so.
Ah thankfully kind than for the entire episode has been running full screen <unk>.
Great.
Q.
The next question concerning the line of <unk>.
This is our shusterman on behalf of raunchy Gill. Thank you for a kicking my question <unk>.
My first wanted to talk about automotive.
Auto which products have shown degraded strength and I can you talk about attraction you have been saying in silicon carbide.
Thank you [noise].
<unk>.
So I think when you have such a large.
Demand production, an automotive there is no segment I can pull out and say hey strong.
And so automotive across the board when we look at our many different product line to go into a lot of mine that all down in the thing.
Two a question to silicon carbide, it's it's already days right in Silicon carbide here.
Dominantly and new technology that Hussein Dhaka electric cars from a high volume standpoint electric cars as a percentage of the total automobiles produced car or sold our you know if it's one 2% pen so tell a small percentage, we're making good inroads without products to the new designs you activities are taking place.
But it's really not a factor in any revenue that is taking place for automotive today, but making very good progress because.
<unk> solution for Microchip are extremely of a box.
And then an automotive environment, which is very hard.
<unk> temperature standpoint.
This is one of the most important factor that they take into account for you think silicon carbide products.
And as a quick follow up with regards to your F.P.G.A. business, what a translator than C.N.N. and how would you say your F.P.J.'s compared to widest next altaira. Thank you.
Oh my goodness.
So alright, yeah business that continues to be you know reasonably strong it had a nice <unk> as they showed you in the in the March quarter responsible analogy.
You know R.F.P.G. also have a ah leave something quick exposure into defense.
Face application those n. markets are not as badly affected at some of the other that market we have.
And you know it'd be quite honest that we don't really see not it in some of the other names that frequency and what's the what's going on up into the market. We play predominantly into the mid range.
But the lower end up the Oh C.F.D.J. market, we have some unique positioning relative to a security low power, but <unk>.
And and those that.
<unk>.
Yeah, they're pushing up there.
Yes. The next question comes from the line of Craig.
On the radio F.B.I., sorry go ahead.
Yeah. Thanks for taking the question and and team. Thanks for all of the detailed information so far Steve I wanted to go back to a couple of comments that you made about how unique this environment is and and the fact that we've got more dynamics of clay when in the past, we haven't had to contend with those.
And the question for you is given.
Given how dynamic things are.
What's microchip doing what are you doing to kind of S.S. wherever you are.
<unk>.
Demand compresses overall, and then potentially react celebrates and.
Can do shit orders and backlog or have you expanded the things that you look at C. Quinn, we'll get the turn then.
And you have if you want when we would turn whether it be.
Temper some other time.
Well, you know I management team.
<unk> and and the other members of the management can really keep it really really strong finger.
On the poster the business, we are watcher goody large number up indicators internal an extra and.
On a weekly basis in more often than that if needed you don't know in specific indicators. So.
Would that logs stack up for indicators in gas that we constantly monitor.
We have added a few.
To really you know for the assessed that situation frequently.
And some of the teams we are looking at is much more frequently or.
Like $2, a push our sin cancellation.
A number of Corona brightest cases name.
Radius job, if he's really affect trees customers.
Whether they're picking this table, they're going they're coming down.
We're also you know just watching a number for the indicators to implement too late to the first time unemployment claims and all that so there is really a large amount of data that we are absorbing.
This doesn't even include the data we get from our own customers to you know salespeople remotely, but bookings and design <unk>.
Customers.
You know kinda you.
You know customers comments on whether they businesses are going to there's something or falling away would go and watch happy. So there's so much more intelligence that goes into really before we come to you.
Focus on getting older than the intelligence today.
Okay, and and the fact, giving you any sense for when we could be at a bottom.
No I think I think that is too early.
To really have that kind of confidence where it is about.
That's very that's certainly a certain.
The numbers are so broad.
You know, though.
You know just heard the guidance of minus two two minus 10 is just so broad.
We cannot yet to see what September <unk> green largely depend on.
Where the as the people go back to work towards the corner. Why this is kind of guys down on the second wave well, we don't know where it is coming back when we're dealing with it took effect you shut down we went in August and September if that happens.
Isn't here yet.
Certainly.
If I could ask a follow up by just relating December the things that.
Are happening inside the the business given how dynamic thinks are one does it cause to tend to think any any differently about the level of inventory that should be stock to properly or customers and too.
Given <unk> characterization of what strong and watch squeeze pets cause the tend to think any differently about where it's emphasizing incremental r. and d. on products and that kind of thing.
Thank you very much.
You know so you know our long term.
Or your target for isn't meant to be level is 115 to 120 and we've finished a much broader at 122 I don't know you get any more precise and so <unk> really liked exactly what we want <unk> to be.
And you know I lived pretty good little bit high elderly doing the U.S. and you know trade related supplements and.
And then we have been bringing it down for my score to him and he was nearly perfect.
Because of this going to write a situation, though we didn't want but in 32 substantially grow. So therefore, we have put on factories on.
Reduce work load to go taking time off produce.
Or whatever.
To call. It so that as does everyone you in the June quarters declining.
We don't want to inventories to grow very substantially and sort of human human believes in the late dreams and we're comfortable with it.
In terms of <unk> <unk>, an instrument a comment on there.
Yeah, So I I think no one should take short term.
It is a negative that's the way in which we're investing from an already perspective I, that's what they're seeing into cycle at this point in time.
R. and D. is really a longer term view where are the market's going we have the opportunities and we're guided there by the six mega trends that we have I shared with you you know we believe it was an x. five to 10 years growth is going to be available at a faster level or higher level in five g. data centers ate out the economist try Dan Hi.
The electric vehicles, and artificial intelligence, she's running and so.
Many product line, if microchip are working on how can they create complete solutions told us to come solution.
For the isn't that good friends.
And what may be strong today, and maybe not so strong in six months at 12 month isn't how we do are already spent.
Thanks, guys.
Okay. Okay.
Okay.
No further questions I missed that.
Okay.
Thank you up but I didn't thanks old investors in analysts do it on this call.
You know the trouble is really totally banned or so we'd be attending some of the consensus discord. They will only be what's really conferences and a little daughter for home. So we'll talk to you. Some a few more at those from from true. So thank you very much.
Bye-bye.
Ladies and gentlemen complexity San Francisco, Thank you for.
You mean.
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