Q4 2020 ON Semiconductor Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the on semiconductor first quarter 2020 earnings conference call at the time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session you'll need of press star one on your telephone please be advised for today's.
Conference maybe recorded.
If you require any further assistance. Please press Star then zero I would like to hand, the conference over to one of your speakers today Parag Agarwal, Vice President of corporate development and Investor Relations. Sir. Please go ahead.
Thank you Michele good morning, and thank you for joining on semiconductor Corporation's fourth quarter on country partner into the conference call.
I'm joined today by our founder of Coty, and on our President and CEO and Bernard Gutmann, our CFO. It's.
This call is being being back on the Investor Relations section of our website at Www Dot all the time, we start the call.
A replay of this webcast along with our content on the fourth part of honestly, maybe every day.
On our website approximately one hour following this conference call and the recorded webcast will be available for them from approximately 30 days following.
Following this conference call.
Additional information related to our end markets and the segments.
The segment's geographic channel share count and 'twenty 'twenty, one for Scott kind of done on also posted on our website.
Our earnings release and this presentation includes certain non-GAAP financial measures reconciliations of these kind of non-GAAP financial measures for the most directly comparable GAAP measures under GAAP on all.
Also included in our earnings release, which is posted separately on our website.
The Investor Relations section.
During the course of this conference call.
Make projections or other forward looking statements regarding our future team on our future pricing pressure for us.
First of all of the company. The words believe estimate project anticipate intend may expect will non insured losses.
Expressions are intended to identify forward looking statements.
In the schools.
Such statements are subject to this kind of uncertainties that could cause extra on eight months on investor day.
Much of the from predictions.
For the factors, which can affect on our business, including the factor that could pump extra on investor demand from all of our forward looking statements at this time an hour from turnkey form 10, Qs and other filings with the Securities and Exchange Commission.
Additional factors are described in our uninsured is one of the.
For the car from a counterparty on that.
The minutes are other forward looking statements may change and the company assumes no obligation to update forward looking statements.
Two of the jobs.
Did you have a chance on I thought you weren't okay.
Except as a part of my mom.
We have changed the day for our analyst day now the plant the horse power on that.
The on August five of.
As you know from Australia.
With the recent gene into the shape of the company and believe that could be rid of neat even in the U S. B.
The bill to provide for them a complete view of our updated strategy and Congress on on.
Now, let's mcdonalds well work on my phone Hasan thank.
Thank you parag and thank you everyone for joining us today.
I want to start by expressing how excited I am to be part of the story at the company and its incredibly talented motivated work force.
I will start by sharing with you for your initial observations and updating you on the process. We will use the evolved the future strategy on direction of the company.
I will then address our first the fourth quarter 2020 results and turn the call over to Bernard to discuss financials and forward looking guidance.
I took the role of CEO, because I can clearly see the tremendous potential we have even as I looked at it from the outside.
I haven't been on the role for a few months now I can see the company with outstanding assets, including a highly talented and motivated work force and intellectual property sales channels products customer relationships brand and industry, leading operational prowess to name a few.
We are focused on the right markets, which are the fastest growing semiconductor end markets with solid margin potential.
I'm excited about the opportunities we have in front of us the <unk>.
The mines the value for our shareholders customers and employees.
As I dove deeper into the company during the last eight weeks I have been positively surprised and have grown increasingly bullish about our prospects.
For the opportunities in front of us far exceed my initial expectations and I'm working with my team to turn D. The these opportunities into the strategy with incredible execution plan on.
Very confident that we will be able to deliver the full potential of the company to our stock stakeholders.
At this time I don't have all the answers to one of the future strategy on direction of the company will be however, I can walk you through the process, we will be following to get there and be able to share. The details with you at our analyst day in August.
It should come as no surprise that our primary value driver will come from our gross margin expansion initiatives at.
At this time, we aim to maintain the over market revenue growth in our strategic markets, while being opportunistic in others. We.
We will focus on maximizing free cash flow to Delever, our balance sheet and set us up to remain a consolidator.
To achieve our objective of maximizing shareholder value, we are ready to make substantial changes in our strategy business and organization.
We have begun the process of reevaluating, our current product portfolio and our investments across the board, we will reallocate investments in resources to accelerate our growth in high margin businesses away from non differentiated products end markets, which have had a historically low margin profile.
We will reduce complexity streamline the organization and improve the efficiencies.
After the re aligning our investments with our products and market strategy, we will double down on R&D to accelerate growth and margin expansion.
We will rationalize our manufacturing footprint to align with our investment priorities and your corporate strategy. Our primary goal is to reduce volatility in our margins and maximize the return on our manufacturing investments.
Our product strategy will drive our manufacturing footprint and capital investments, we intend to transition to a lighter FAP model in which our margins are not on heavily influenced by our fab loadings.
As you can already tell we have hit the ground running and we are making progress on a short period of time, we will provide you with greater insight into our strategy and targets at our analyst day on August 5th in the meantime, we plan to continue to provide updates as we make progress.
Now moving on to the fourth quarter 2020 results.
Revenue for the fourth quarter of 2020 was $1 $45 billion, an increase of 3% year over year, we saw a steep improvement in demand in the fourth quarter and the momentum has continued thus far in the current quarter.
The surge in demand is driven by a broad based improvement in global macroeconomic conditions, and lean channel and end market inventories.
The automotive end market had the steepest recovery in the fourth quarter.
Based on current demand trends in the global macro outlook, we expect to continue to see above seasonal demand trends in the near term.
On the supply side, we have been able to manage our customers requirements for our products thus far.
And semiconductor vendor increased supply and customers fulfill pent up demand the temporary supply demand imbalance to subside in a few quarters.
Let me discuss a few highlights of our key strategic end markets starting with automotive.
The revenue for the automotive market in Q4, 2020 was a record $491 million and represented 34% of our revenue and an increase of 6% from Q4 of 2019.
2020, automotive revenue declined by seven 5% year over year by significantly outperformed the 2020 global automotive production unit, which declined by 16% over the same period.
The significant outperformance was driven by increasing content for our products and fastest growing applications in the automotive market.
Our design win funnel continues to expand we want Adas and viewing sockets on many of the recently announced platforms. We also secured of wind for a lidar products with the European automotive OEM.
We expect this win to ramp later this year.
Other significant design during the fourth quarter was where the major tier one for our sensor module, which feature of the lens of integrated and of sensor pocket package for in vehicle experience applications.
We continued to see strong momentum for our silicon carbide and IGT products for electric vehicles and expect to see strong ramp in our <unk> related revenue with various models models going production in 2020 in 2022.
The industrial end market, which includes military aerospace and medical contributed revenue of $384 million from the fourth quarter of 2020 of 24% of our revenue.
Year over year, our fourth quarter of industrial revenue increased by 2%. This increase was driven by broad based pickup in global industrial activity, partially offset by geopolitical issues related to a specific customer.
And the industrial end market, we continue to see strong momentum for our power modules and alternative energy applications, our customer base for power semiconductor and alternative energy has expanded by approximately 50% in 2020, we expect to see strong growth in this business as the new administration is focused on the <unk>.
Reduction in global carbon emissions.
We're seeing strong traction for machine vision and factory automation applications with our exit ex Gf's family of image sensors.
In the communications end market, we expect strong growth in 2021 for <unk> related revenue driven by increased five G capital expenditure by cap by carriers.
Now I will turn the call over to Bernard to provide additional details on our financials and guidance Bernard.
Thank you Ms on you.
In the fourth quarter of 2020, we saw continuing recovery in business from these Midland by robust growth in global economics.
Order activity accelerated sharply across most end markets as customers are ramping production and replenishing inventory to meet the steep increase in end market demand.
Along with the strong broad based recovery in macroeconomic conditions.
One of Mega trends in automotive industrial and cloud power markets continues to drive of our business.
Gross margin improvement is the primary strategic priority for the company.
Non indicated in his remarks, we're going through a detailed review of our product portfolio. The primary objective is to reallocate on careful to drive margin expansion and growth.
On a revised product strategy will determine our capital expenditures and investments and other resources needed for the business.
We'll update you with our progress as we go through the profit.
We are on track with the manufacturing consolidations.
And discussions are ongoing with various party parties regarding the previously announced intended for.
In Belgium, and eager to Japan.
We have closed our operations and sold the fact in Washington.
And we should begin to realize annual savings of 15 million starting in the first of all.
When do you want.
Now let me provide you with additional details on our results.
Total revenue for the fourth quarter of 2020 was $1 $45 billion, an increase of 3% as compared to revenue of one point for.
Oh billions of dollars in the fourth quarter of 2019.
The year over year increase in revenue was driven by growth in on key strategic end markets.
GAAP net income for the fourth quarter was 21 cents per diluted share as compared to a net income of 14 cents per diluted share in the fourth quarter of 2019.
Non-GAAP net income for the fourth quarter of 2020 was 35 cents per diluted share as compared to do anything for you look here in the fourth quarter of 2019.
GAAP and non-GAAP gross margin.
Of 2020.
Tony for 4% as compared to 34, 6% in the fourth quarter of 2019 the.
The year over year decline in gross margin was driven primarily by the weakening U S dollar against the currencies in most region in which we operate out of manufacturing facilities.
Our GAAP operating margin for the fourth quarter of 2020.
Once the 11, 6% as compared to nine 9% in the fourth quarter of 2019.
Our GAAP, our non-GAAP operating margin for the quarter of 2020 with 14, 2% as compared to 12, 3% in the fourth quarter of 2019.
The year over year increase in operating margin was driven largely by lower operating expenses.
GAAP operating expenses for the fourth quarter of 2021 of $329 6 million of compared to $346 8 million in the fourth quarter of 2019.
Non-GAAP operating expenses for the fourth quarter of 2020.
$292 4 million as compared to $313 6 million in the fourth quarter of 2019.
The year over year decreased non-GAAP operating expense was driven primarily by restructuring and cost saving measures undertaken by the company.
Fourth quarter of 2020 free cash flow was 284 million in operating cash flow was $400 million.
Full year 2020 free cash flow increased to $501 million from $160 million in 2019, despite of 5% decline in revenue.
Total expenditures for the fourth quarter of 2020, $116 4 million, which equates to the capital intensity of 8% a syndicate.
As indicated previously we are directing most of our capital expenditures in the evening or the 300 millimeter of capability of the east Fishkill fab.
Total capital expenditures for 2020 with 384 million.
We exited the fourth quarter of 2020 with cash and cash equivalents of one point of wave 1 billion as compared to one six for.
Five 4 billion at the end of the third quarter of 2020.
The decline in on our cash balance was primarily related to the repayment of our 2020 convertible note principal.
Jewelry in December 2020.
At the end of the fourth quarter of 2020 days of EBIT on the here with 120 days down 13 days of compared to 133 days in the third quarter of 2020.
At this time, we're comfortable with the level of on balance sheet.
In the fourth quarter of 2020 distribution inventory.
The decreased marginally of sales through the system.
Channels increased significantly quarter over quarter the.
Distribution inventories are within our target range of 11 to 13 weeks.
Let me provide you on update on the performance by business unit, starting with the power solutions.
Yes.
Revenue for PSG for the fourth quarter was $760 million.
Revenue for the advanced solution for ESG for the fourth quarter was $520 million and revenue for intelligent sensing for ISG was 200 and the ATM.
Moving onto guidance based on product booking trends backlog levels and estimated current levels. We anticipate the toll on semiconductor revenue will be in the range of one for 1 billion. The 151 billion in the the first quarter of 2021.
For the first quarter of 2021, we expect GAAP and non-GAAP gross margin between 34, 1% and 36, 1%.
We expect total GAAP operating expenses for the first quarter of 2021 of $345 million to $360 million.
Non-GAAP operating expenses include the amortization of intangibles restructuring asset impairments and other changes the charges, which are expected to be the <unk>.
The $6 million range.
We expect total non-GAAP operating expenses.
The Q3 hundred 27 million the first.
First quarter, the expected increase in our first quarter operating expenses as compared to those in the fourth quarter is driven by the expected the accrual for variable compensation in anticipation of a strong financial performance in 'twenty and 'twenty one.
And it's in line with the 25 to 30 million of includes foreshadowed in the last quarter's earnings calls the prepared remarks.
In our 2020 operating expenses the theory will complete the component of compensation was not significant.
For the first quarter of 2021, we anticipate GAAP net other income and expense, including interest expense will be on expense of $34 million to $37 million, which includes the noncash interest expense of 45 million.
We anticipate our non-GAAP net other income and expenses, including interest expense will be on expense of $30 million to $32 million.
Net cash paid for income taxes in the first quarter of 2021 is expected to be the $18 million to $24 million.
For 2021, we expect cash pay for income taxes to be in the range of $80 million to $90 million.
We expect total capital expenditures of $90 million to $100 million in the first quarter of 2021.
We expect the share based compensation of 15 to 17 million in the first quarter of 2021.
Of which approximately 3 million of expected to be in cost of goods sold and the remaining amount is expected to be an operating expense.
These expense do you think you know of non-GAAP financial measures.
Our GAAP diluted share count for the first quarter of 2021, you can expect the GBP, 438% for 39 million shares based on our current stock price.
From a non-GAAP diluted share count for the first quarter of 2021 is expected to be 431 million shares based on our current stock price.
Further details on share count and the earnings per share calculations are provided regularly.
Orderly in annual reports on form 10-Q, and 10-K, respectively.
I would like to end my comments on a personal note as you are on.
All of the Weird I have decided to retire after 39 years with on semiconductor process of.
The company has truly been on honest the sort of the company and shareholders employers and customers while all of these years.
Joyce interacting with all of you over the years.
The kept me on my toes and always helped me strives to do a better.
At my job.
On semiconductor kind of a very bright future in the company is well positioned to deliver significant value to its shareholders customers and employees.
With that I would like to start the Q&A session. Thank you and Michelle Please open the line for questions.
Thank you again, ladies and gentlemen, if you wish to ask a question at this time. Please press Star then one on your telephone is your.
The question has been answered all of you wish to remove yourself from the queue. Please press the pound Keith to prevent any background noise. We ask that you. Please place your line on mute. Once your question has been stated.
Our first question comes from the line of Ross Seymore with Deutsche Bank. Your line is open. Please go ahead.
Hi, guys. Thanks for letting me ask the question in the first Bernard the great.
Great working with you all of the year. Congrats on the retirement of my first question is for Hassan you mentioned, a laundry list of actions you're gonna take structurally for the company I know you're not going to go into exceedingly detailed levels before the analysts meeting in August, but I wondered how you're balancing the gross margin side versus the Opex and operating margin side, you mentioned about doubling down.
On R&D, how do you balance the the.
The gross margin versus the operating margin priority for the company.
Sure Ross, Let me, let me give you kind of how how old the approach has been because we started doing that work.
At a high level, you can think about it as self funding, meaning I.
I don't like to dabble.
Whether we say we're working on it or not if we are create.
Creating products and low margin businesses or markets that are not our strategic markets for those investments are going to stop that's kind of release capital for us to reinvest and that's where the doubling down so and and.
Don't think about it as we're kind of double down on Opex is kind of click up beyond the level, we're going to actually reallocate opex and with the simplicity and removing complexity on the way we run our operations a year, that's going to relieve a lot of more capital for us to reinvest.
So I'm not worried about having enough.
The investments that we can reallocate, while maintaining at or below our opex, which obviously will drive our operating margins favorably.
Thanks for the details on that and I guess, one for either you or Bernard the guidance is better than seasonally you said, that's going to continue for a bit.
It was the better than seasonal comment just about the first quarter was the longer than that and any color between the different segments to get to your guidance for the first quarter.
Yeah. This is the sign again.
Our focus right now is in the first quarter. Obviously, you were coming out of a very lean inventory both of our customers and in the supply chain. So that's the rebound youre seeing in Q1 better than seasonal I remain cautiously optimistic for the rest of the year, but it's too soon to call. The rest of the year at this 0.0 on the paper.
The remarks, we talked about it may take a few quarters to kind of stabilize the supply and demand situation. That's when we'll get a little bit more clarity.
Obviously, if you've seen the news a lot of the strength is coming from automotive and we see it the same way, which is which is the big market on a focused market for us. So we're watching it closely but I remain cautiously optimistic until we get out of the you know the the trend of supply demand imbalance.
Thank you.
Thank you and our next question comes from the line of Chris Danley with Citi. Your line is open. Please go ahead.
Thanks, guys.
Okay first of all of Bernard congratulations coming out of I'm jealous.
The first question.
Just on Opex I guess, what's the thought process of on.
Upfront payment to everybody in front of the upturn versus afterwards and is this should we consider this as the new baseline for Opex for could trend down after this.
So it is not on upfront payment and the cool.
Accounting accrual as we are we have an annual plan, which actually was the cash wise.
At year end of February.
We achieved the number of facilities is just the on accounting of promote comprising the.
The liability book reading the delivering.
Delivering results.
The needs of the U S that you plan.
Just put put that stake on the ground. We are 100% focused on pay for performance are.
We have the accrued throughout the year.
But PE will occur in 2022 in the first quarter just like it did this time for the prior year. So it's after the fact, we don't do any advance planning as far as cash payment in any form of two employees until after the performance period is done and validated.
Great and then.
For your question about the the trend on the Opex that we believe we of the step function increase.
The much after that it should be fairly.
Fairly steady.
Okay.
Thanks, Bernard and for my follow up.
Sam you mentioned, you're going to take a look at the product lines I guess what sort of.
A rough percentage of revenue are we talking about that's being targeted as far as these low margin product lines and can you shed any light on what are these low margin product lines is that some MOSFET. The RGB teasers. Some other sort of passive types of products you guys have.
Sure it's too soon to tell as far as to give you of the percent because literally I am looking at everything.
But the way I look at it is in our strategic alignment or end market strategic alignment to our margin target and really strategic alignment to the growth that we want to set for the company. Both on gross margin expansion and revenue so to put a percent on how much of that it's hard to tell.
But it's not going to be like you were expecting of Oh, I G B T or.
The fact of whatever whatever kind of.
Because we're not looking at it as just a product family.
Give you. An example, we have <unk> that goes into the E D.
I love that that's the growth market. It's good margin and we have a very good position of that market, that's going to be but you know obviously of growth product and market for us.
But <unk> in a low margin.
Consumer.
Not going to be an investment for us. So that's the surgical approach we are actually proceeding in order to get the right balance.
Talking about already.
Got it that makes sense thanks, guys.
Yeah.
Thank you and our next question comes from the line of cash the Hari with Goldman Sachs. Your line is open. Please go ahead.
Good morning, Thanks, very much for taking the question on Bernard Thank you for all of the help.
I saw on you talked about.
You guys of addressing demand, so far I'm being pretty successful on addressing demand so far.
Can you speak to where lead times are for your business today versus three months ago, six months ago and sort of related to that.
How is the how is the pricing outlook for your business over the next six to 12 months.
In relation to all of you guys have seen over the past few years.
So let me address the lead times the heart the.
The law they have been inching up.
They're still in the meat in the teens, but moving upwards.
<unk>.
Yeah for them for the pricing I mean, we see a hell of a healthy pricing environment. Obviously, there are price increases that we have incurred from our supply chain and we are working with customers to pass those on down down the supply chain from where we are are there of course with supply and demand we are always reviewing our.
Our pricing posture, and we're doing that as we speak.
And it's not just only let me read for a little bit on it's not just the supply and demand we do have high value products and the high value products demand a higher margin.
I'm reviewing all of our pricing discipline outside of just the supply and demand and that's something you should see from US moving forward as a structural change we're implementing in the company, where that's kind of get us and where its kind of land as far as tangible result that I can.
Credibly talk to you that's going to be in the in the August of meeting because that will give me enough runway to establish that process and see the impact.
Great. Thank you and then as a quick follow up just on sort of the long term model again I appreciate it.
Youre not going of preview of your August the analyst day, but when you look at some of the numbers that you know Keith in the Bernard put up.
During the last during the last Investor day in mid single digit revenue growth, 43% gross margin you know 22, 21% Opex intensity.
Given what you've seen so far for us on where do your views differ the most is it more on the growth side is it more on the margin side of the boats any any color would be super helpful. Thank you.
Look it's not about the you know as the top line or gross margin my focus is on the timing of it.
That's kind of where I'm I'm, putting my energy right now.
And then we will talk about what does that yield on the topline and how quickly do we get to the kind of call. It. The 43, because that's the only number that is available externally.
You know a lot of people ask me what should we be looking for as far as as the financial model and my answer and I'll reiterate it here just hold us accountable to whatever we the company has done already even though it was not Pete personally until I stand in front of all of you in August and change it.
But for now just full of the carnival to the the.
The target and the financial model that we have made available already at the company.
Thanks, so much.
Thank you on our next question comes from the line of Rajiv Gill with Needham. Your line is open. Please go ahead.
Yes, Thank you and best of luck Bernard and congrats of the Sun on the new role.
So on a question on the.
On the 300 millimeter the transition.
That's been undergoing for a couple of years any thoughts on on how that progresses as is happening and what are your thoughts on.
On on that transition to 300 millimeter are there steps that you want to try to accelerate the transition and what what would they be.
Sure obviously.
The 300 millimeter transition.
Is that transition that we need as the company.
We have it internally in the company has already set itself on a path to Oh to have an in source fab for that Theres. Obviously, we're looking at the baseline to see if we need more how do we get it it doesn't necessarily mean, we're going to have.
The multitude of Fabs at the 12 inch.
It's going to be driven to answer your question more directly it's going to be driven by the product portfolio that were going on.
And we want to be investing in over the next five years and that's part of the portfolio rationalization I can't really address a need for a manufacturing footprint until I know exactly what we want to do where the margin is going to come from and what the manufacturing footprint needed in order to support it inside or outside.
So that's the work we're doing on right. Now however, we do have the east Fishkill engagement, we have been making progress on it where products are taping out some products are already sampling and so the technology.
And all of your development and product moving into that fab is ongoing and I'm happy with where we are.
To accelerate is going to be dependent on as I mentioned product and margin focus and that's going to be with the capital associated with it. That's the work in progress we have to do with have not completed yet, but I expect it to be complete by the time I give an updated financial model on the August meeting, which will <unk>.
<unk> capital and manufacturing footprint targets.
And for my follow up the Sun you talk.
Talked about product rationalization and I think you had mentioned.
Cheating that either through potentially M&A or divestment of maybe maybe correct me if that's if that's not the case, but.
Wondering how you would think about product rationally profit.
Rationalization and with respect to those two possible strategies.
Sure, but its not those are obviously part of the strategy, but that's not the one that's kind of go to the most of the impact on that kind of gets you. The most impact is literally the focusing on products that we don't see a bring us any.
Whether it's top line growth or margin expansion and by the focusing there are multiple ways you put it on harvest you all of it.
It's short lived if you talk about the U L anywhere from six months to 18 months, depending on the engagement with the customer as far as when we're going to exit that business will notify customers, we'll support them in a transition the transition to our products, which are better margin structure. So we will force the conversion.
Or we will just exit the business and the exit that customer at the top line and we're looking at everything equally.
Where is that going to be as far as divesting you know if there is a business that we believe has value for somebody outside of on semiconductor we will monetize it instead of doing the UL like I mentioned, we will monetize it through a divestiture.
The leading up to the third tenant which is the M&A.
M&A just going to be a complementary of view of what we are able to do with our portfolio rationalization. Once we have a portfolio of footprint that we like in the market and markets that we want that M&A would be a inorganic growth within these markets, we're not going to use M&A to solve our internal issues going on.
You're just creating chaos after chaos, we're going to rationalize our internal.
Markets, our internal portfolio that M&A will just strength in that posture.
It makes the ton of sense congrats on thinking.
Okay.
Thank you and our next question comes from the line of Matt Ramsey with Cowen. Your line is open. Please go ahead.
Thank you very much good morning, hi, Thanks, and congrats Bernard.
That's on it's kind of an interesting call right. Because you guys are clearly going to put out longer term targets in August but the folks are poking abroad, and you're trying to get a little bit of a hint about where that's going but.
I might just ask a couple of questions.
Along those lines one is.
You talked a little bit on your script about potentially taking the company a little bit more towards being fab lite.
And obviously the product portfolio will I would imagine mostly inform that decision.
On no secret the U S government.
Thinking about incentivizing, the semiconductor manufacturing and R&D in the states. So I Wonder I guess the first question is how much is that kind of inform your decision and then the second piece is around the channel Texans, taking on an interesting strategy of going more direct.
You guys have a pretty broad distributor footprint how.
How are you thinking about that in terms of making your decisions going forward. Thank you.
Sure, let me tackle the fab light comment I mean, so far of light obviously as an analog.
Range.
Of that goes between Fabless and only internal manufacturing.
So where are we are a life for fab, which means we're going to be shrinking our manufacturing footprint from where we are today. So that's the fab light comment and that's going to be a result of what we need to manufacture internally versus.
What there are foundries that do a better job at the manufacturing that we do.
And that's the balance of where we're going to be doing and we started that effort. Obviously that was the management change that did occur.
To start looking at that in parallel with me looking at the portfolio rationalization. So that that's ongoing and the results and the reporting of I knew of real time.
Uh huh.
From the government side of it.
Listen we're going to make the best decision for our company that drive shareholder value.
That's the first and foremost decision making.
If at the end of that first tranche of decisions, there's alignment with where all of the administration's going or what stage we are in.
That's great.
But we're not going to make a short term decision based on the current politics that will.
Hinder us from potentially achieving our maximum value creation that we couldn't otherwise so our focus is on value creation as we see it for the company of our shareholder of customers on our employees and then we'll we'll figure out how we landed the politics at that time.
From the distribution.
Other work we have been doing is the channel rationalization just like the portfolio. Once you know where you want on growth and how aggressively you want to grow on which market youre going to partner with the distributors that are strong indeed and that same arena you want to play in.
And that's going to be an outcome of the portfolio and that's why I keep going back to the portfolio work. We're doing is going to drive a lot of those dependencies.
Because it's all interlock, but it definitely starts with a portfolio rationalization to market on the strategy everything else is really how do you execute the strategy for the best you can.
Thanks, very much all of the best as you put things together and are excited to see what comes thanks guys.
Yeah.
Thank you and our next question comes from the line of Vijay Rakesh with Mizuho. Your line is open. Please go ahead.
Yeah, Hi, yes on them, but not the current guide here.
But I couldn't.
That isn't on a great.
Just a couple of questions.
Wondering on the automotive side, you mentioned, a sensor module and some pick up on the E.
Electric vehicles side, you see the guide still for longer term, 9% to 11% of about what the automotive market growth. This or do you see upside based on some of the mainstay of would you say that you have for you and then a follow up.
Good day.
Yeah, we we were basically thinking sort of high single digits above the current levels.
And we actually are confirmed that with all of our 2020.
The performance.
Got it and then send you made a comment on the inventory can you give us some level of is that like two to three weeks of inventory versus non weather like floor for six weeks.
Part of the inventory levels yeah. Thanks.
Yeah.
So Vijay I can't give you a target right now I'm looking at it because not all of business is obviously, we have here are created equal some of them need more inventory than than others and.
And there's going to be a lot of ins and outs to be fair you know as we figure out our as I mentioned before our E O L. Some bridge build or some fab moves that we need to make that's going to kind of put a bumps in the road for our inventory and we're going to manage it.
As such but theres going to be the few ins and outs before we get to a model.
So I'll be ready to give you a model where we want to end up in the August meeting, but between now and then I'm really going to be opportunistic about what we need to do in order to quickly shift to where I want us to be at the company, whether its portfolio or manufacturing footprint.
Got it thanks.
Thank you and our next question comes from the line of harsh Kumar with Piper Sandler. Your line is open. Please go ahead.
Yeah, Hey, Bernard first of all of the thank you for all of the help over the over the years, we've worked together and we really appreciate it and enjoy your retirement.
And then for my question.
So everybody is talking about tightness of the auto industry. Hassan you guys have plenty of capacity here at least available to you is there any opportunity for you to be able to take some incremental share or is that just not how things work in automotive given the long design cycles.
Sure harsh so obviously for for areas, where we are double source of where one of two suppliers are.
Some of these on our product lines.
If we're able to support it we will.
Of course, we're going to ship, we've already engaged with customers, where we know we don't have 100% share in order for us to help if they are if they need it so that that's ongoing and that's the way we're running the business the day to day.
The challenge that we are looking at is okay. Even if we do ship that product is that customer getting the rest of the product from you know.
Number two to three and for.
That's what I don't know so you know to be able to evaluate how much share is actually going to go into revenue.
That's going to be call it towards the end of the quarter when the dust settles.
And we're ready to help but the problem is our product line is not the bottleneck as far as creating the end.
Product if that makes sense.
We're watching it we're going to go after it because like you said, if we have the capacity, we're going to sell it and we're going to give it to the end customer not you know sit on distributor shelf or even on our shelves. It's going to go on as quickly as we can see the demand for it.
Got it and for my follow up is on can you just talk about the activity that debt on semi skiing in the EV space in China specific to the charging and Chargers.
This has been an area I think that on it's been very active in that particular geography could you just talk about what you think of your position there.
Yeah, we were.
The very active in that area. Obviously, when you have the products that customers value as far as the technical prowess and the portfolio that we're in.
Able to manage.
We're the we're definitely always considered and most of them more often than not we are the ones being selected that has not changed our posture in China EV specifically.
The strong and we've had design wins actually in the tail of the second half of 'twenty 'twenty that support that that view on the market.
Thank you.
Thank you on our next question comes from the line of Chris Caso with Raymond James Your line is open. Please go ahead.
Yes. Thank you good morning, and my congratulations to you Bernard as well, it's been a pleasure working with you.
Hassan I just wanted to ask a follow up question regarding some of the comments about refocusing the product line and.
Essentially consolidating the manufacturing footprint and I recognize that we're asking some unfair of questions because of the plan isn't always together isn't all of the altogether, yet, but you don't want to look at the gross margins for on now versus the prior peak are at similar revenue levels. You know the Delta is about 300 basis points and most of that is.
<unk>. So I guess the question is as you've done the initial review of of manufacturing is there enough flex in the system potentially selling fabs or where such such that you would be able to make a meaningful debt and that depreciation if your business review.
Would warrant that smaller footprint is the ability to consolidate if that's the final if that's the decision that you want to make.
The answer is yes.
There's always opportunity and we're looking at everything and it's not just depreciation I mean once you when you start a consolidating there's obviously the utilization for the fab the receiving fabs.
And really there's overhead simplification when I say about rationalizing the portfolio and manufacturing footprint. All of this is going to drive costs out of the company, it's not going to be sucked in anywhere else and it's not going to be allocated it's going to be managed out of the company.
Of course, some timing difference depending on what category of spend on Cogs versus opex, and where the Opex and Cogs, but we are tracking every dollar that is the outcome of every decision we make in order to decide where it's going to end up.
But to answer your question more generally.
I'm optimistic about the levers that we have to drive gross margin expansion since ive been hearing for the company.
So that has not been a worry of mine of great now what I do there's enough to do and my focus is putting it in a executable strategy that I will ask starting with our board of directors, but more importantly, our shareholders and you all outside to all of this.
Carnival too and that's the work we're doing right now is how do we translate that into a executable plan.
That's great. Thank you.
As a follow up if I could ask a nearer term question regarding production and if you could talk about where the utilization is now as compared to where it was last year.
And you know how how does that track as you go into next year as you tried to address some.
Some of the bottlenecks and then finally, you know maybe you could talk about where the bottlenecks are they more on the front end of the back end or perhaps that at some of the outside suppliers.
Yeah.
So the so definitely.
The last year, where it was like the will sort.
I think that at that time.
Especially the word.
The end up with by the pandemic.
And the shelter in place closings that we have an example of of our factories.
China.
The Philippines and Malaysia.
We did see a little bit of the increase in utilization.
On the low 70 70 75.
And we expect debt as we ramp.
In 2020 went into the first quarter.
In the second quarter, primarily.
On the on the Fab side, you can see it helping a little bit of improve.
The improved utilization.
The other thing yeah.
Yeah, the most of the.
On again most of our constrained are primarily on the outside.
Not internally.
And the front end and the backend for US is all of it I would call. It a balanced loading there's gives and takes depending on the product line.
But managing the supply constraint externally is really with the with the foundry of disconnect.
Alright, thank you.
Thank you and our next question comes from the line of David <unk> with Bank of America. Your line is open. Please go ahead.
Alright, Thanks for taking my question on and congratulation and best wishes to vote, the Hassan on and Bernard.
As on for my first question I'm curious as to your insights on the current demand environment.
I think you mentioned all the units.
Now on kind of on the mid teens book, but just say is the only.
The down seven 5% of Ostia and in fact on that.
In Q4, and the Delta between all the units in auto semiconductor sales is perhaps one of the widest that'd be athene. So my question is how much are you shipping to the real end demand versus customers stocking up when they just read about the shortages.
And on the auto production shutdowns, how do we get the confidence that these above seasonal quarters that youre seeing in Q4 and Q1 on <unk>.
<unk> be followed by some process of normalization later in the book what is your level of insight into actual consumption of what you're shipping.
For the automotive supply chain.
Sure So I'm going to answer of direct as it relates to getting to our call center, which are the tier one and I will skip any conversation about you know does it go on through this day or not distinct because.
For <unk>, we ship it to the see if it ships out right away to an end customer. So that's kind of how we're dealing with the <unk>. So we don't have a stranded inventory that could go to the demand.
So then to answer your question directly how do we deal with the with the tier one is literally direct engagement.
We know what the production rates are and we know what we're shipping in.
And.
And we know which Oems, we all know it this way and this on this side as far as what OEM are not manufacturing, which products. So we know where our product ends with which OEM for which model year. Two of you call. It 98 percentile and that's how we manage it.
If we know for example, there's a shortage in an area or a shutdown of the OEM plant and we do have products that are targeted for that we are going to redirect our products.
To somebody else.
Sometimes that engagement is with the OEM. They say, we're shutting down this factory, but we want our capacity to go to the other factory, we know it's going to a call it a vehicle.
Versus a just the tier one making a box that may not end up in the vehicle now.
Obviously, youre not going to get it 100% right, but if we get.
80% to 90 per cent of it I'll be very happy.
And we monitor our inventory it's a.
There is a lot of demand and like you said, we're rationalizing all of that demand to make sure the supply to match the demand.
And I use the term cautiously optimistic because it will take a couple of quarters, which is call. It a full of manufacturing cycle time from start to finished goods to kind of get that through the system and see what the real demand is in that timeframe.
We're it's guerrilla warfare day, we're doing every day, but I'm happy with what the teams insights are for us to make the decisions.
Got it and so on as my follow up.
The gross margins for Q1 guide.
Got it up about 70 basis points at the midpoint, even though sales are kind of flattish and I heard some mention of the benefits of some prior on the fab closure of decisions. So I was hoping if you could Bernard could walk us through on the gross margin improvement kind of level set us on Q1 on.
Now looking at and all of the benefits of pricing and fab closures on everything until you make new decisions like is this Q1 gross margin of the new baseline or are you still seeing the headwinds from a utilization and.
And other perspective, or maybe a different way to ask the same question. What is the incremental gross margin we should be modeling from Q2 onwards. Thank you.
So definitely from one number.
The benefit of it.
What's your sort of that's fully executed.
And the.
That is having an effect on it.
We said before it's $15 billion of year. So that's having an effect on this one.
On a gross margin as.
As far as the you know moving forward and what you should expect I will start with our Q1 guide.
And that's part of the regular updates I'll be giving you on until I give you a trajectory for our gross margin and then Vivek you know what what the trajectory and how committed I am once they deploy a step function by caused by.
The quarters based on my prior life.
That's the one we're building right now are now how much of this is in Q1 for the Rochester clothing closure or the pricing the pricing a judgment that I've talked about or other levers. We're doing it's actually there's a lot of line items that we have been pulling on I'm not waiting obviously total from August.
Till Q2 to start the work we've made tremendous progress youre going to see you know a few weeks in Q1 on some items or a full month or two months of in Q1 on others, depending on when we pulled the trigger.
My focus, though is what I'd call structural gross margin improvement and what I mean by structural is gross margin improvement that we drive and it doesn't happen to us all.
I'll take the stuff the favorable things that happened to us, but there has to be the structural baseline that is.
Up into the right gross margin baselines out of you can hold us accountable to and that's the plan, we're going to be deploying.
Thank you and net good luck.
Thank you and our next question comes from the line of Christopher Rolland with Susquehanna International Group. Your line is open. Please go ahead.
Thanks for the question and Bernard I Echo My congrats thank you for all the time, we spent together it was great. There's no business like no business enjoy your retirement.
All of the good questions have been asked for the most part.
Two quick ones I guess first of all 50 revenue has traditionally been maybe in the fifties and we've had two strong quarters now and $63 60 for.
Maybe talk about.
What you're seeing on the <unk> side or are there shortages direct and people are going just the.
At some of your competitors for example, whats driving that just the number sort of much higher than typical.
The lease sales have been pretty strong in the channel. We are we are managing all of the human disease.
The 11th can do it.
The that we.
So it's more just the overall strength, yeah, but I don't I don't know the the discrepancy that you're mentioning as far as I'm guessing. The 60 on the 15 numbers are per cent mixed from distribution its been very consistent at about the 60 per cent range. So there hasn't been really a.
Change in behavior, because you know of direct customers are not going to switch to this day, because they can't get products from us and that's why the comment I gave to Vivek earlier.
We are driving the dish the inventory to be able to be a straight shot through the city to our end customer Theres no point on building inventory on the shelf at this.
So if the customer cannot get of direct from us I can guarantee it they're not going to be able to get it from the district.
The bypassing.
That's not a driver, but it's been consistent I don't see any any.
Any change in distribution percentage for.
For the company.
Sure.
My second question on the comp side of that that was better than we had expected.
Could you talk about the importance of maybe North America into the as you put handsets in the comms.
Versus rest of the World China, China on others, just talk about maybe where we're seeing outside of strength and how important that north American customers in particular.
I mean, obviously at the North American customer of it is important because of the deployment of the capital expenditure is happening.
And given our position with the <unk>.
<unk> power side of the the market.
We are very well positioned across the regions you know, there's a there's a certain level of the total market.
And you know as things lose share regionally, we will gain it somewhere else and that's the work we're really monitoring on a global global basis, regardless of where the design and happens.
Understood. Thank you guys Congrats Bernard.
Thank you and our next question comes from the line of Craig Ellis with B Riley Securities. Your line is open. Please go ahead.
Yeah. Thanks for taking the question on and Bernard Congrats it's been great working with your for the years.
I wanted to start just by following up on compute sequential strength in and dig into it the following by.
One can you help us understand just the distinction between what the server power might've done versus notebook given the strength of notebook units and then it is.
If you look at the things that distinguish where you'll want to allocate resources any initial views on the ability to drive high gross margins and value out of those two different sides of the business going forward would be helpful.
Yes, so our focus in the computing space, it's more on the server and cloud that's where we are.
On the opportunities for the for enhanced shareholder value of the pizza in the meantime, we're taking opportunities of the.
The fact that the client computing has been quite strong and and and in that sense of we really use the movies from the of work from home.
The obviously we are we are we are taking advantage of that but the focus in the long run where we see better margins.
Also the enhanced growth per se.
Yeah, and that fits kind of when you overlay or the strategic markets. You know I talk about automotive and industrial are there are other I'd call. It submarkets that you're familiar with like.
The server within the compute that is a focused market because I look at it as an adjacent technology market.
If we are able to create high value products in auto and industrial those are very valuable for the submarkets that I'm talking about that will drive growth and margin accretion for the company and those would be things.
You're not going to see us invest as the point product in them.
But we're definitely going to be addressing them as part of the adjacency, we drive and that's effectively the opex efficiency metric.
Got it and then for the follow up Hassan you mentioned early in your script. The since you've been aborted on you you've had some notable positive surprises I was just hoping you could list two or three of those and talk about them and their implications as you think about driving the business for it and creating additional shareholder value.
Thanks, guys.
Sure I'll give you I don't want to steal my own Thunder for the August meeting, but I'll give you one that we have if you look at the product portfolio mapping versus the gross margin profile.
I really like the distribution I thought the distribution is going to be you know more.
You know, let less levers and much higher gross margin businesses other than what I found so we do have some very healthy gross margins and the focus for me is how do we double down on those and grow them in order to start effectively shifting the mix, while we disposition the dilutive tail.
The.
Theres more of levers in that view of the business than I have thought walking in and that gets me excited because I don't have to wait five years to change of mix, we can actually try to manage a mixed shift effectively and we control it.
That's great. Thank you.
Thank you and our next question comes from the line of Kevin Cassidy from Rosenblatt Securities. Your line is open. Please go ahead.
Yeah. Thanks for taking my question and congratulations Bernard.
Just on the foundry side, how many different foundries do you use and are they all raising prices is this what you were talking about when you say the supply chain as well.
Your your supply chain is increasing prices.
So we use we use the same usual suspects that the pretty much everybody else uses the.
The big ones and small ones.
We have a pretty.
The long list of the foundries.
And we are subject to the same pressures that we all of us.
First of all of them.
The competitors are subject, yeah, but you know the comment I made about the supply chain has not really foundry versus internal you need to look at it as material.
There is also it's not really the supply shortages that everybody is seeing but more importantly, with that I look at the materials.
That is required.
So there are pockets you know the debt.
Our suppliers have asked for and if we're able to absorb them. We are if not you usually have a dual source strategy. So we'll move on.
On where else, but with a you know.
The supply constraint that everybody is seeing some of it we just have to basically eat in order for us to support our customers and in those cases, we are going to pass it down, but it's not at foundry versus internal cost conversation. It's more you know call it raw material.
For our supply chain.
Okay understood Thanks and.
Maybe just a quick follow up and maybe part of your strategy development is there.
Consideration for consolidating the foundries are or you know trying to get prices down by putting more into one foundry.
Well, obviously, if you are able to consolidate even your business on the foundry, you'll get the volume pricing benefit versus being able to be spread across multiple.
We don't always have the choice because of the technology footprint that you need you know some foundry just doesn't do a wide range of the technology, we need and but that's part of how we are looking at it so when I say manufacturing consolidation.
It's both internal and external in order to get the best pricing and the best Posh posture, we can to service our end markets.
Okay, great. Thank you.
Thank you and our next question comes from the line of gain for the O'connor with ex Paribus. Your line is open. Please go ahead.
Great. Good morning, and thanks for taking my questions, maybe one or two just follow ups on my side, you mentioned that the <unk> positively surprised.
When you when you came in and started looking at the business was there any negative surprises that Sam kind of stood out for you that's the way.
The first question and then maybe as the follow up the <unk>.
Industry has been constantly surprised by the phone we take this.
How does how do you think that changes the relationship if at all with phones and the kind of longer term is there anything in terms of securing the capacity that needs to change or just even as the relationship. Thank you.
Sure.
It's hard for me to answer the negative surprises because I don't have any my mind works differently. If I see something that is not what I expected I look at it as a positive opportunity.
So it's always positive whether it's a surprise or an opportunity.
You know of course, there were a couple of debt I just didn't know I didn't have an opinion, one way or another because their internal I didn't have the the privilege of of getting in and looking at the you know.
Non public information before I joined that I discovered but I looked at it as well that's part of the part of the reason I took the job is in order to be able to identify all of these opportunities and turn them into positive surprises for for us and our shareholders.
But I will tell you in general the umbrella that I would answer is there hasn't been a day of the last eight weeks, where I woke up thinking what the heck did I just do it's always been let's go out of less write more things down unless start executing that's been kind of the mindset I've had and really the might of the response from the team has been tremendous and that's why you see.
The energized workforce, but more importantly, the results we're going to start shortly.
So that's on this side now how do we deal with the long term kind of the industry caught by surprise and so on it's really once you have a strategy on a five year outlook with the three year incredible window, then you start having those strategic conversations with your suppliers and turning the conversation from a tactical tool.
Strategic where if you're able to commit this is your growth.
And you're able to keep their factories not lumpy you know up and down.
Then you have a bunch of better relationship I have a lot of those relationships personally Wade Cheung, who we brought in as the.
The head of global manufacturing and operations has a lot of these relationships and we're going to strengthen those but it's all going to start with we are the company what do we want to do strategically and how can day help.
Very helpful. Thank you.
Thank you and our next question comes from the line of Harlan sur with Jpmorgan. Your line is open. Please go ahead.
Good morning Hassan welcome for the team and thank you to Bernard for your contributions and support of the past number of years.
That's the part of your strategy of Hassan you know focus on the high margin high growth products and markets.
The part of that is you need with certain leadership products and drive further dollar content attached given the breadth of the portfolio of what's your assessment of the current sales and marketing organization and focus and the ability to cross sell and drive higher attach rates to targeted opportunities.
Yeah, I think from our direct sales force and on marketing the mindset there.
And my.
Drive for these groups is really adding the focus.
If you are of a sales force in order of marketing I would call the sales and marketing with a very heavy bag to sell and portion of that back is not going to drive the value I'd, rather lightened the bag and have them really hot.
Hardcore cell of the things that we want them to sell still at a breadth of net bill of material coverage.
That's how I'm thinking about it and that by the way is going to match. Our distribution you know I answered. The prior question where portfolio rationalization is going to drive of our distribution footprint I'm going to be looking at distribution of the same way I look at our direct sales and marketing.
It's going to be how do we maximize the content that I want to maximize.
Yeah makes sense and then maybe if you could just give us your thoughts on the silicon carbide power portfolio I know the team has been talking about the growing portfolio and design win pipeline of generation Silicon carbide based power solutions in both automotive and industrial but wanted to get your views.
Sure.
Put that under one of the positive surprises.
That I've seen since the since joining I think our products are.
A very competitive I like where we are on the technology development for that and really more importantly is the design wins that we've had the NDS in these markets. The obviously as far as revenue drive as we all know the the mix of <unk> versus Silicon carbide, you know, we're going to see that crossover probably over the next.
I don't know of four to five years.
But we're here, we're playing and we're gonna start taking share based on where our products are going to be sort of I see that as a positive surprise for me and it's.
It's going to be definitely part of the strategic intent that we're talking about.
Great. Thank you.
Thank you and our next question comes from the line of John.
Pittsburgh with credit Suisse. Your line is open. Please go ahead.
Yeah. Good morning, guys, what's on congratulations and thanks for letting me ask the question Hassan you mentioned earlier that we're all trying to steal your Thunder for the August analyst day, and I apologize. If this is an attempt but you talked about of.
The margin targets that are out there today and that they wouldn't change until August potent.
The preamble you also talked about timing to get there was being a big focus on kind of curious relative to the existing targets that are out there. How quickly do you think you can get there and if you could help me understand where the low hanging fruit is versus the stuff, that's a little bit harder to do.
Sure.
So you see already Q1 is a <unk>.
Moving the right direction as far as margin.
So that Oh I'll, just tell you that you're not going to wait until we have one more quarter before the August.
The discussion we will have so you'll see more progress then.
As far as the timing of course fab changes will.
We will take the longest because you know it takes time to change your manufacturing footprint between transferring technology and getting customer calls.
But you're also not going to hear me say wait for me for three years before we unwind all of this we have and there are enough levers for us to make a positive impact on margin of what I'm hesitating, because I really haven't done the full scope of it is the.
The scale of that positive impact we can do in the short term.
And again all of them asking for is the August.
But but youre not going to see Oh, yeah.
We're stuck with manufacturing so it's kind of take a long time, that's not what you can expect.
You'll expect something much more favorable.
That's helpful. Sam. This is my follow up just going back to your M&A comments I know you are not going to be too specific but I was hoping you could give us some broad strokes of how you're thinking about M&A, you've clearly created a lot of value at cypress with the Broadcom Iot acquisition. If you look at the history with on the sort of been the tension between M&A.
And profitability targets and oftentimes the M&A set the profitability targets back what kind of principled views do you have on M&A around accretion around the model around what it needs to add to the business.
Sure, there's not really one a recipe for for M&A.
In parallel to what I talked about the strategy for the company I do have the M&A strategy very specifically that matches up to that.
And what do I mean, you know some deals or strategic deals where they may not be accretive right in the first year or when we do it or at the at the synergy, but they're strategic to give us a you know a position in the market that we would like the.
<unk> positioned you know we're gonna be looking at those for example, there are some that are financial deals where you don't you do the you do a deal because of strength in your current markets.
Or capability that you are growing organically, where you can give it a adrenaline shot on the arm and accelerate the attainment versus doing it organically. So I look at M&A and you've seen it the way we've done it at Cypress.
In order to fit a certain purpose and that's the thesis that I I form prior to going into the M&A, because if I can't explain it to all of our employees I sure as heck cannot explain it to all of you out there so focusing on why we are doing it Keith.
But we're not going to do a bad deal just.
Just to do a bad deal you know we do have the scale. We have the growth we have a lot of opportunity for us to create value.
So youre not going to see us rushing doing something just for the sake of of doing something.
We're going to be very disciplined, but when we do something you can expect that it's going to be to achieve the very specific pieces that is very well aligned with our strategy.
Helpful. Thank you.
Thank you and our next question comes from the line of William Stein with true of Security. Your line is open. Please go ahead great.
Great. Thanks for letting me ask the question for.
For my congrats again to Bernard and.
So that's on the prop.
For you.
I'm.
Hoping you can dig into the end markets a little bit more in particular, I think we didn't hear about consumer and compute in the quarter, maybe that's the Mattel.
Mattel as to the strategic focus of the Zen.
The markets, but maybe you can talk also about the Q1 outlook by end market a little bit. Thank you.
Sure you of Com.
Rent is very accurate.
I'm starting to set the stage of where we're going to be and obviously the the Q&A session is the.
Very.
Very long.
But it's very also important just to kind of set the stage of where we are but you're going to start expecting. These these commentary in order for us as a company to start driving the narrative of where we are and what our strategy is and that's why you didn't see a lot of commentary on as far as.
Some of the end markets debt I'll gladly take if they support growth at the right margin profile that we have but you know what I call. They are opportunistic markets.
I'm not going to be delving into a lot of those details of moving forward.
But if there's anything notable we will just tell you regarding debt.
And that includes kind of given the breakdown of forward looking guidance by all of these end markets I don't think that that dilutes, a little bit of what we are doing so I want to keep the message on point.
Okay. Maybe then I can ask the little bit about the backlog.
We've heard a lot about.
No shortages that stimulate double ordering because customers get nervous it sounds like that's not so much happening with with your business, but maybe you can.
Give us some idea as to the size of the backlog now and the duration of the backlog relative to what it looks.
Typically.
So the listen there's always a risk.
The risk of double ordering and we have a lot of the metrics our sales force and of our operations team have.
Way more data than I can.
Tells you about how do we trend and make sure that there are of inconsistency between what we expect what the market tells us and what the orders on our books on.
So I'll leave it at that and whatever we see risk of double ordering we pick up the phone and have to engage directly we don't depend just on the backlog to drive our inventory and our wafer starts. So we do that again of the other day to day typically in normal times, we don't have to do this but again if.
It goes back to the comment I made earlier when we get on order I want to make sure to whatever confidence I can 80, 9100% confidence that it's going to be on a board at a customer that's going to shift to an end consumer.
That's the focus so where we're trying to plow through it but there are indications of some level of bookings that we just.
Ignore I guess.
Okay.
Sun and congrats on the great results and guidance.
Thank you.
Thank you and this does conclude today's question and answer session and I would like to turn the conference back over to Parag Agarwal for any further remarks.
Thank you everyone for joining the accordingly.
We look forward for seeing directly of conferences and we of non deal road shows total Parker, Thank you and goodbye.
Ladies and gentlemen. This concludes today's program you may all disconnect everyone have a great day.
Yes.
Yeah.
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