Q3 2021 Analog Devices Inc Earnings Call
Good morning, and welcome to the analog devices third quarter fiscal year 2021 earnings conference call, which is being audio webcast via telephone and over the web.
I'd now like to introduce your host for today's call Mr. Michael Lucarelli Senior director of Investor Relations, Sir the floor is yours.
Thank you Shelby and good morning, everybody.
Thanks for joining our third quarter of fiscal 2021 conference call.
With me on the call today are 80, ICL, Vincent Roche Adi's CFO <unk> Mahendra Rajah.
The one who missed the release you can find it and relating financial schedules at investor analog Dot com.
Now onto the disclosures the information we're about to discuss includes forward looking statements, which are subject to certain risks and uncertainties. As further described in our earnings release and our most recent 10-Q and other periodic reports and materials filed with the SEC.
Actual results could differ materially from these forward looking information as these statements reflect our expectations only as the date of this call.
We undertake no obligation to update these statements except as required by law.
Our comments today will also include non-GAAP financial measures, which exclude special items when comparing our results to our historical performance special items are also excluded from prior periods.
Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release and with that I'll turn it over to 80 ICL Vincent Roche Vince. Thank you Mike tend to very good morning to everybody. So Adi delivered a second consecutive quarter of record revenue and earnings despite.
The challenging supply environment, our strong performance was driven by continued operational excellence and insatiable demand semiconductors power the modern digital age.
Broadly speaking the economic recovery continues to take shape with demand still far exceeding supply.
We like many others in our industry will face a constrained supply environment into 'twenty 'twenty two despite.
Despite this backdrop our business continues to achieve record results as our investments in design wins over the last few years are matched with strong demand across our end markets.
So looking ahead, the combination of robust bookings clean inventories and ongoing capacity additions position Adi to close fiscal 'twenty one on a high note and continue to grow in the next year.
So moving to our third quarter results revenue was $1.76 billion up 21% year over year.
All markets increased sequentially with industrial and automotive once again achieving records.
Gross margin expanded to over 71% and operating margin to over 43%.
Adjusted EPS of $1.72 increased 27% year over year.
Despite elevated capital spending to increase our capacity free cash flow over the trailing 12 months was $2.2 billion. This.
This equates to a 34% free cash flow margin, maintaining our position in the top 10% of the S&P 500.
So overall I'm very pleased with our performance and our team's outstanding execution.
As you know Adi our ethos of innovation and deep customer engagements ensure that we stay ahead of what's possible.
We invest more than $1 billion annually in R&D.
Our focus on strengthening our core franchises and capturing market opportunities presented by secular growth structures, which have accelerated in the economic recovery.
Now let me share some recent highlights with you.
Our industrial business is our most diverse segment across customers products and applications and features sticky long product life cycles.
Our largest industrial segments instrumentation on test is comprised of automated test equipment electronic test and measurement and scientific instruments.
This is truly a performance driven market that aligns perfectly to our high performance precision signal chain power management and RF portfolios.
Importantly, <unk>.
Instrumentation and test is aligned with all secular growth trends from connectivity.
So E vs sustainability the.
The growing technology complexity of these applications requires more testers with more advanced performance capabilities.
Today Adi is the leader in communications test and we're collaborating with key sites for example to advance the development of Oran solutions. This partnership will enable the fastest path for.
For designing cost effective and power efficient radio units.
Looking ahead, we're already beginning to partner with our customers to test emerging <unk> technologies.
Our renovations in the instrumentation market also have a positive impact on human and cemetery helps one particular area is our environmental monitoring business, where there is an increased need for highly reliable and accurate instruments to improve the standard of living globally.
Our market leading portfolio of precision converters enables 10 times greater measurement resolution, a fine particulate matter better identifying trace pollutions.
The next largest industrial segment is factory automation.
Over the last year, many of our customers are rethinking their factory floors and supply chains to make them more resilient cost effective and flexible through automation and connectivity.
To achieve this our customers will further automate their businesses with intelligent and connected factories and increase their use of robots and popups.
Specifically cobalts require areas precision signal chain and power franchises sensing technologies and.
Robust wired and wireless connectivity.
This new vector of growth increases or some opportunity by three times.
That of a traditional robot.
To that end, our precision motion control business is on track for a record year of design wins, including a recent win at a leading Japanese robotics company for its next generation Cobalts and.
In addition.
We're leveraging our domain knowledge and system level expertise and our collaboration with Universal robots.
On smaller smarter and easier to use robots that help scale task safely and transform workforces.
Turning now to our communications business.
Five G is beginning to broaden globally, especially in North America as carriers look to deploy newly acquired C band spectrum.
<unk> continues to gain momentum also with several of the largest European carriers setting ambitious 2025 Oran deployment targets.
This includes Vodafone, where our technologies are very well represented.
This quarter, we extended our market leading position in five G radio solutions with the introduction of the industry's first software defined transceiver that includes a fully integrated digital front end.
Our innovative radio architecture greatly improved power efficiency, thereby reducing radio weight size and Cartier expenses.
This high level of integration eliminates F. P G H.
To simplify implementation and facilitate the proliferation of these emerging <unk> networks.
Our next generation from Super platform.
He is already designed in at a major tier one global supplier that is gaining share in these five G and oram deployments across North America as well as Europe.
Stepping back we expect our communications business to return to growth in 2022, we have strong design momentum and our geographic mix has shifted with North America, Europe, and Korea, representing our largest sources of revenue.
Moving now onto Automotives.
Over the last two years, we've realigned our business to focus on electrification and the in cabin human experience. We're seeing the benefits of this strategy as we continue to scale, our market leadership and battery management power management audio systems and connectivity.
Starting firstly with our battery management systems, our BMS are wired and wireless portfolios provide unmatched accuracy to deliver market, leading vehicle range and can measure all key battery chemistries, including zero cobalt LLP.
Additionally, our solutions incorporate <unk> functional safety.
Ultra low power continuous monitoring feature that ensures the battery remains stable, even while park, which is a first in the market.
In addition, this quarter marked the first time, we recognized revenue for our wireless BMS solution.
General Motors prepares to ship its first the 30 EV models power by the <unk>.
<unk> battery platform.
And this is just the beginning.
This groundbreaking BMS technology as Oems realize the power of wireless data and scaling their fleets.
Turning to audio systems activity as complexity continues to increase there's very strong demand for our market, leading audio systems with signal processing needs.
To be connectivity and active road noise cancellation.
Our solutions offer the highest fidelity performance in the markets, while reducing vehicle weight, removing nearly 100 pounds per vehicle.
During the quarter, two leading Oems adopted a to b and a top three European vehicle manufacturer implemented it to be as its audio connectivity standard across its entire fleet.
In total.
It could be as no designed into over 30, Oems, including 18 of the top 20 global automotive companies.
Furthermore, interest in our active road noise cancellation feature continues to intensify.
We're designed in at nine Oems up from five just a year ago, including Hyundai and the leading EV manufacturer.
Is that a capability can more than double the value of our <unk> solution.
You know these are just a few of the countless examples of the tremendous work underway at Adi we remain focused on delivering breakthrough innovations to stay ahead of our customers' needs.
So in closing I've never been more confident about adi's future over the last decade, we've built an industry, leading portfolio with unparalleled breadth and depth of capabilities.
That's aligned with more profitable end markets and our portfolio and leadership position will only get stronger with the acquisition of Maxim, enabling us to deliver strong returns in the years to come.
And so with that I'll hand, you over to Chris Schott.
Thank you Vince good morning, and welcome to our third quarter earnings call My.
My comments today with the exception of revenue and non op expenses will be on an adjusted basis, which excludes special items outlined in today's press release.
Adi delivered exceptional third quarter results.
Underpinning our ability to increase production.
Revenue and EPS reached all time highs for the second straight quarter with continued gross and operating margin expansion.
If we look at performance by end market industrial represented 57% of revenue and increased 3% sequentially and 29% year over year.
Notably this business surpassed $1 billion of quarterly revenue for the first time.
We experienced broad based strength across applications and geographies.
All sub segments increased double digits year over year, except health care, given the elevated pandemic demand a year ago.
Communications represented 16% of revenue and decreased 21% year over year, while up 4% sequentially with growth in both wireless and wireline.
As we outlined last quarter, we believed our communications revenue has bottomed and will continue to grow at five G deployments broadened globally, especially in North America.
Automotive represented 16% of revenue and increased 13% sequentially and 80% year over year.
Strength was broad based with double digit growth across every major application.
BMS and <unk> remain our fastest growing applications and both are on track to nearly double in size this year.
As Vince shared earlier Adi has been strategically pivoting resources to focus more aggressively on electrification and the in cabin human experience as.
As part of this strategy, we are licensing select radar IP to a large European tier one auto supplier.
This resulted in the immediate revenue recognition of 24 million in the quarter.
Consumer represented 10% of revenue and increased 16% both sequentially and year over year.
Our strategy to diversify and grow this business in fiscal 'twenty, one is working as strength across home entertainment terrible and wearables more than offset a decline in portables.
And now moving to the P&L gross margin expanded sequentially and year over year, finishing at 71, 6%, mainly due to the cost savings from the LTC manufacturing optimization and the IP license agreement.
Opex in the quarter was $493 million up modestly sequentially due to a full quarter of merit increases and continued strong variable comp.
This netted an op margin of 43, 6%, which marks the fifth straight quarter of year over year op margin expansion underscoring the strong leverage in our business.
Non op expenses were $37 million below our typical quarterly run rate of approximately 43 due to an investment gain.
And our tax rate was approximately 12%.
Which gives us an adjusted EPS at $1.72, including type sense of upside attributable to the IP licensing agreement.
Yes.
Moving on to the balance sheet, we finished the quarter with an ending cash balance of $1.5 billion and a net leverage ratio of one two times.
Relative to the second quarter inventory dollars increased $16 million driven entirely by raw materials and work in process.
Days of inventory were unchanged at 118 and weeks of channel inventory remained well below the low end of our seven to eight week target as shelf through remained stronger than selling.
Capex for the quarter was $86 million up meaningfully sequentially as we continue to add capacity to support our robust and growing order book that now stretches into fiscal 'twenty two.
We will continue to increase capacity in the fourth quarter.
Salting in full year capital intensity above our long term model of 4%.
And turning to free cash flow generated more than $2.2 billion over the trailing 12 months up 23% from a year ago.
And this represented a 34% free cash flow margin.
Over the same period, we have returned nearly 85% of free cash flow after debt repayment.
$970 million in dividend and over $500 million in share repurchases.
And now onto the fourth quarter outlook revenue is expected to be 1.78 billion, plus or minus $70 million up sequentially as additional capacity comes online.
At the midpoint, excluding the automotive IP licensing revenue.
We expect each of our b to B markets to increase sequentially.
Led by communications and consumer to be up high single digits.
Based on the midpoint of guide, we expect to deliver a record gross margin and for operating margins to be 43, 7% plus or -100 bps.
Our tax rate is expected to fall toward the upper end of our range.
And based on these inputs adjusted EPS is expected to be $1.72, plus or -11.
So before moving to the Q&A I'd like to give a brief update on Maxim.
Our discussions with the Chinese regulatory regulatory authorities have been productive and we're working towards closing within the initial timeframe.
We plan on closing no later than the third business day after China approval has been granted.
As we shared before shortly after the close we will hold a conference call to provide an update on our capital return plans.
Once combined we anticipate having nearly 4 billion of cash on our balance sheet.
Leverage ratio well below one and more than 3 billion of annual free cash flow.
I'll now turn it over to Mike to start the Q&A.
Thanks, Vishal, let's get to our Q&A session.
We ask that you limit yourself to one question in order to allow for additional participants on the call. This morning.
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If you are listening on a speaker phone please pick up the handset when asking your question well pause for just a moment to compile the Q&A roster.
Okay.
Your first question is from Vivek Arya of Bank of America Securities.
Thanks for taking my question. Once you mentioned demand far exceeds supply I was hoping if you could help us quantify that are you under shipping by 5%, 10% how much of a demand question. That's 80 I have right now and kind of part b of that is how much incremental capacity.
Are you planning to bring online in the next year and is that and is that kind of a proxy for what kind of sales growth.
B looking at thank you.
Thanks, Vivek so demand continues to grow across our markets. All end markets are up and our book to Bill was with above 1.2 suppliers also expanding we grew 4% sequentially in the third quarter and were at the midpoint, we're gonna be up another 3% for the fourth quarter.
So you look at that map and it says the supply demand graph supply demand gap is growing or set another way backlog is increasing quarter over quarter and it now extends well into 2022.
Our view is this gap is likely to persist into calendar year 'twenty two given the long lead time it takes to add supply in the industry plus just the broad strength of the demand.
Yeah, I think the second part of that.
Question, Vivek, just a little bit of color. So.
We're nearing an investments in capex to support our growth objective, so, particularly on the on the backend of our operation Assembly and test.
And.
We need the capital now to meet the meet the demand, but also in the longer term.
We're very very optimistic about the tailwind in.
Right across our business from automation to electrification connectivity and so on and so forth. So.
The outlook, we've just given you is supply feasible and.
It is certainly the governor I would say right now on revenue for the company.
Thank you. Thanks Vivek go to next question. Please.
Your next question is from Tories Vonbargen Stifel.
Yes. Thank you I was hoping you could just elaborate a little bit more on the.
Maxim.
Merger, you said that you would still expect it to happen within the timeframe that you had announced that I believe you had said in the summer of 2021, correct me if that was wrong.
And REIT.
Related to that is again, China, the only remaining obstacle before you close the deal.
Yeah. Thanks story, so look our confidence of the closing remains unchanged and as we've said in the prepared comments our discussions.
With the Chinese regulatory authorities.
Doctor.
Does it have been productive.
We are working towards closing within the initial timeframe. So China is the only outstanding regulatory approvals need at this point in time, and I will remind you as well.
You know all of the other.
Our regulatory bodies across the globe have approved our deal without condition without remedies.
Great. Thank you for that.
Thanks Corey.
Our next question.
Question is from John Pitzer of Credit Suisse.
Yes. Good morning, guys. Thanks for letting me ask the question Vince I wanted to pick up on your prepared comments about your industrial business, you're not going into the third consecutive quarter of sort of record revenues in that business. You have to go back to I think April of 18, before which was the last peak, but the year to date fiscal year to date that business is up about 30 <unk>.
<unk> year over year and for a lot of investors. They are concerned that perhaps that represents more cyclical excess then sort of structural sustainability and so I'm kind of curious as you break apart your industrial business. What do you think is being driven by the quote unquote cycle versus stuff, that's a little bit more sustainable.
Yeah, Thanks, John I think.
First and foremost I'd like to remind everybody that adi's industrial business is built on a foundation of many.
Individual market segments like automation instrumentation, but I've talked about health care.
Our space business energy is it removed as it moves to renewables and charging infrastructure for example.
The whole need for grid efficiency in stabilization. So that's the foundation.
It's a highly diverse business, we've got many tens of thousands of customers.
You know the life cycles in the business are kind of 15 years plus.
And it's a very very very sticky sockets that we've got so.
You know those of you who followed ATI for a long time, you'll remember we about a decade ago, we fairly dramatically increased our focus in terms of R&D go to market activities.
You know in ensuring that we could really grow that business.
The last few years have shown that we've been getting market share across the board there. So.
I think theres, a certain about John of.
There were a lot of programs where stores last year. So there's a certain amount of touch up there, but I do think that the breadth of the portfolio that we know have the investments we've been making.
In terms of customer engagement R&D activities and the secular trends that we've got all these concurrent secular drivers are propelling the business beyond the markets.
Yeah, I'll just add one thing John you're right have you set a prepared comments all of the market as did increased double digits year over year.
All of our six application that Vince outlined two are still below pre peak levels, but we do think fiscal 'twenty. One marks a record for all of them and we don't see why they won't hit another record in 'twenty two given the strong trends that Vince outlined and with that we'll go to our next question.
Your next question is from Stacy RASK of Bernstein research.
Hi, guys. Thanks for taking my questions.
On the pricing environment and given the.
Tight supply in the shortage situation.
We're going to see some some hints of some of your peers starting to take prices up and I was curious what you guys are seeing in the pricing environment are you seeing data you are you able to actually do that are you treating your own pricing environment down more conservatively.
Yes, thanks for the question Stacy so.
I would say that for the results that we printed.
Pricing is a net neutral we're passing on cost increase so that we're not impacting margins, but we've made a decision not to take advantage of our customers by structurally increasing pricing in this in this.
Environment, our long term model is unchanged and that is 70% plus so the goal really is to drive the revenue growth and make the trade offs that are necessary to drive that revenue growth focusing on delivering on the op margin and the free cash flow.
So you'll see you'll see on a if you back out the IP license impact we had a 71, 2% gross margin in the third quarter and while we don't guide to gross margins. If you impute. It from the guide that we gave you we gave you.
Fourth quarter is going to be a probably a record for Adi in terms of gross margins.
Got it that's helpful. Thank you.
Thanks Stacy.
Next question.
Your next question is from Toshi Hari of Goldman Sachs.
Hi, guys. Good morning, Thanks for taking the question I wanted to ask about the Coms business, Vince you talked about 2020 to being a growth year.
And you talked about North America, Europe, and Korea being the key drivers for you guys going forward, how should we think about the shape of the recovery going forward is it going to be a fairly.
Gradual.
Recovery could it be sort of a V shaped recovery over the next couple of quarters and when you talk about return to growth in 'twenty, two what sort of implicit assumptions are you making for China. Thank you.
Okay. Thanks, we're going to we're going to split that into two let me just quickly talk about about what happened and then I'll, let I'll, let Vince speak to kind of more broadly so in the second quarter. As a reminder, we did call the bottom on coms and said that we would grow.
On a sequential basis, we delivered that in third quarter and we are on track to deliver that for the fourth quarter. So we believe we're really well positioned for strong growth into fiscal 'twenty two.
And between kind of the two sub segments. There why your demand remains strong and we expect that to continue as both carriers and Datacenters continue to to do the upgrades to their networks and wireless while it's always lumpy growth in the past quarter was really driven by rest of the World North America, We do think China bottomed in the third quarter, so that should all.
Also represent some some growth momentum for us as we go forward and then I'll hand off to Vince to kind of speak more broadly about what we're seeing.
Why do I have the confidence I have about 2022 being a strong growth year. So maybe I can unpack that a bit for you.
So you know I think our coms revenue mix.
As is.
Seeing a benefit from the rest of world beginning to emerge and five G. So.
Today rest of world outside of China is three X in terms of time, So that's number one.
If you look at then the geographies North America, the auction to C band auctions complete.
Revenue is really just beginning here.
And you know.
All the indications are that <unk> revenue here will accelerate in 2022 and indeed beyond.
Europe.
Yeah.
I would say is stuck behind but we're beginning to see good signs of life.
In that region.
But I think it will be more of a late 2022 driver.
We've talked to them several times on various calls here about Oran, what's happening, but we're beginning to see revenue we've talked before the rocket trial in Japan that business continues to accelerate.
And our European carriers.
Are looking right now to make it also an important part of their five G offering.
I mentioned during the prepared remarks as well that.
Vodafone is a major player there and we happened to be very well represented in their systems.
And you know them.
I'm also having conversations with customers about the use of five G and all run beyond the classical consumer market. So.
It's early days, but.
You know the characteristics of flexibility scalability quicker time to market cost savings and so on.
As enabling private networks to be configured and factory environments. For example, so that's that's all still on the come but.
That gives you a sense for our confidence in 2022 and beyond.
Thanks, So CHF will go to the next question.
Your next question is from Umbrae Srivastava of BMO.
Alright, Thank you and good morning.
<unk>.
Maxim and.
So my investment case for Adi has not been met.
And you have a very sticky shareholder base, who have been with you before maxon did I get this question a lot. So I think it's a fair question to ask.
If maxon was not to go through.
What do you think about capital allocation do you then go back to the playbook can say you would be changing how you think about capital allocation or.
You would continue on the M&A path and look at other opportunities. Thank you.
So let's do this let me let me just remind everyone. What the capital allocation policy is today, because I think that we have a very.
Shareholder friendly capital allocation policy, which is that first call is really to invest in the business in that.
Although not a traditional definition, we do consider that organically kind of how we how we spend our R&D and that is heavily pointed towards the <unk> market and then we think about inorganic really more as it helps the technology portfolio.
Or find other ways to help us become more important to customers, but our commitment is to return 100% of free cash flow to customers. So we are we're at a $1 two.
Level of leverage today, we do not need to reduce debt. So on a in a in an environment.
Despite the confidence that we have in in the Maxim deal closing in an environment, where that was not to have happen would not look for us to really.
Be changing that view.
Having all our incremental free cash flow go into go into the return to shareholders either through buybacks or through dividend dividend and as a reminder, I think over the past three years, we've averaged about a 10% increase in our dividend. So a very healthy commitment for our fixed income focused investors as well as the as well as the <unk>.
So I think we're on track this year for an all time high in terms of our repo activity.
Back to the M&A I'm going to hand that one to Vince to talk more about the alternatives there.
Yeah. So as you know you've seen.
Over the years, we've all was acquired very very high quality assets and that will remain to be.
Our view on things in the years ahead as well.
Okay. Thank you.
Thanks I'm bearish.
Next caller.
Your next question is from Blayne Curtis of Barclays.
Hey, good morning, Thanks for taking the question just curious on if you look at the BW got into fairly flattish I think industrial probably is flat given the thugs segment guidance you gave so I'm just kind of curious as you look at this.
Lee you had strong comments on the bookings is that gap really supply or are you starting to see.
Demand 10 started to settle out at this level.
That is that is purely purely supply I think I mentioned in maybe the first or second question that book to Bill for the quarter was was over 1.2 and that's across all markets. So we are we're seeing very strong interest in products across all markets, Mike indicated in one of the other Q&A.
That we're likely to have the.
The industrial market hit an all time high collectively for.
For fiscal year, 'twenty, one and expect that to continue.
To be on track to another record in FY 'twenty, two so very much.
By constrained environment.
And I just wanted to follow up on the gross margin. So you.
You indicated the gross margin would be up and I think that with the license.
Packed as well so.
You saw a benefit from the linear I was curious how much more there is of that as a benefit and then maybe just talk about utilization and other pulls on gross margin as you look over the next couple of quarters.
Yes, so I presume, you're asking kind of.
With respect to the guide so.
In the fourth quarter.
And we're not guiding gross margins, but we're pretty confident we're going to hit a new record for gross margins that is coming from the LTC synergies. We're continuing we I think we hit the final phase of closing down the <unk>.
Manufacturing operation in California, we still have an opportunity as soon as the.
The supply environment allows us to to get some additional savings out of Asia, because we haven't closed that facility yet because we have no. We have no time to ship the tools to their new location utilization is also going to provide some level of increase I would say mix is a bit of a headwind in <unk>.
Into the fourth quarter and fourth quarters typically have have some level of.
Challenges in terms of in terms of holiday shutdown. So we need to we need to to manage through that which can provide a little bit of a headwind for us as well that we got to work ourselves around.
The foundation for our gross margins being where they are.
This is number one innovation.
We produce the best forming the best performing solutions.
Between the physical and digital worlds and we get a premium we got very very well paid for doing that.
Also the diversity of our product and customer portfolios 125000 customers.
With I think I've said this before 85% of our sales come from products that individually contribute less than.
0.1%.
On the pricing environment as we said earlier on the call has been very very stable very steady.
Thanks, Blayne for that two part one part question.
We will go to the next caller please.
Your next question is from Harlan sur of J P. Morgan.
Good morning, and congratulations on the strong results and quarterly execution.
Inventories continue to remain below your target seven to eight week range. You guys can also monitor direct customer inventories at least for those that are on consignment programs any signs that customers have been able to build inventories I mean it seems.
Unlikely because the entire value chain appears to be sort of.
Hand to mouth, how much supply perspective.
But wanted to get your views and when do you believe customers will be in a position to start to build back inventories.
The soonest is sometime in calendar 'twenty, two but wanted to get your views as well.
Thank you Harlan.
Take that.
So first a couple of comments on inventory inventory on our balance sheet is up year over year and sequentially, but that is exclusively due to raw materials and when we can't we can't keep a finished good in stock. So when it when it's produced either goes to the customer or it goes into the channel and then it goes out of the channel immediately so we are struggling to be.
<unk> finished goods inventory, both in Adi warehouses as well as in our channel partners.
Roughly yeah, well lets say a significant amount of our auto business is on consignment, which gives us good visibility for that direct business as to what's happening there and that is also we are where we're seeing that demand kind of pull through pretty quickly and no opportunity for those auto customers to build the inventory within their warehouses.
But that's on our books.
It's still very much a hand to mouth and the focus that we have as we've talked throughout this call.
And in the prepared remarks is on increasing our capacity or ability to supply by making some significant investments in capacity I don't see this balanced coming coming into.
And just some sense of normalcy until sometime in calendar year 'twenty two.
Okay. Thank you.
Alright.
Last question please.
Your next question is from William Stein of Truth Securities.
Great. Thanks for taking my question.
Push out you just talked about.
Inventory.
So level of ability to rebuild that he take until September 22, you talked about.
The supply debated balanced lasting well into 'twenty two.
Book to Bill et cetera.
When we look out to the the next next quarter the January quarter, typically that's a sequentially down quarter.
In automotive industrial consumer and for the and for the whole business as well, but given these supply constraints in this very significant backlog should we think about that seasonality is different in the coming year should we expect.
Expect maybe some visibility to sequential growth for the next several quarters. Thank you.
Yeah.
I think the way to answer that would be say that.
Seasonality in today's environment is a bit of a meaningless concept because revenue growth is really dictated completely by supply.
So the print.
Print for Q1 is likely to be driven by what more capacity, we can get online between the fourth.
Over the fourth quarter to allow us.
Again now we've got a couple of things we need to work through in the first quarter that won't that would be a little bit of an offset in first there is the holiday season, but we do need to to adjust the factory capacity for that and consumer.
Fourth quarter is kind of a key quarter for consumer that when they build for the holiday season. So.
There's always going to be a little bit of seasonality impact for consumer just because of the.
<unk>.
They they don't need it and in the first quarter of our fiscal first quarter as that is the holiday period.
So maybe that's kind of where all of it.
Ooh finished Mike anything you want to add to that is yes sure. So I guess, if we look back you're right I mean, we talked about seasonality not being as meaningful now, but just give you a bit of a history lesson. If you look past over the past 10 years. Your I R. <unk> markets I would say in good times, which I would call now good times, it's usually flat to down slightly in <unk> and consumer I'll say in good and even kind of normal times are down five.
5%, maybe more in <unk>.
And with that I want to say.
Thanks, everyone for joining the call. This morning, a copy of the transcript will be available on our website and all reconciliations and additional information can also be found in the quarterly results section and thanks again for joining and your continued interest in Adi.
This concludes today's analog devices conference call you may now disconnect.
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