Q2 2023 Analog Devices Inc Earnings Call
Yeah.
Good morning, and welcome to the analog devices second quarter fiscal year 2023 earnings conference call, which is being audio webcast via telephone and over the web.
I'd like to now introduce your host for today's call Mr. Michael Lucarelli, Vice President of Investor Relations and F. P. N a sir the floor is yours.
Thank you Liz and good morning, everybody. Thanks for joining our second quarter fiscal 'twenty three conference call with me on the call today are Adi's CEO and chair of Vincent Roche Adi's CFO for shock Mahindra Rajat.
But he wanted to Mr. At least you can find it and relating financial statements.
And schedules at Investor analog dot com onto the disclosures 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 other periodic reports and other materials filed with the SEC.
And results could differ materially from these forward looking statements.
And these payments reflect our expectations only as of the date of this call. We undertake no obligation to update these damage except as required by law.
Our commentary will also include non-GAAP financial measures, which exclude special items.
Paragon 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 Adi's CEO sure Vince.
Thanks, Mike and good morning to you all well I'm very pleased to share that ATI continue to execute well in the second quarter.
We delivered our 13th consecutive quarter of revenue growth and record earnings per share.
Notably revenue was 3.26 billion growing 10% year over year.
And once again.
This was driven by record results in our industrial and automotive sectors gross.
Gross margin was 74% and operating margin surpassed 51%, reflecting the innovation premium our portfolio come on and our strong financial discipline and.
And EPS increased an impressive 18% year over year.
Now I'd like to spend a moment on the current business conditions. We previously shared that our business was at an inflection point due to uncertain economic and geopolitical backdrop.
After three years of steady growth customers are beginning to adjust their forecasts and rebalanced their inventories.
This is most pronounced in Asia, while North America, and Europe demand is moderating.
But at a more measured pace, we expect this normalization of revenue will persist through the second half of 2023.
Importantly, given our customer conversations and proactive decisions to improve lead times and rightsize our backlog.
We're in a position to deliver on our goal of delivering a soft landing.
Stepping back we've successfully navigated macro challenges many many times before.
Today, Adi had some even more durable franchise defined by an unmatched diversity of products customers and applications, our hybrid manufacturing model that better adapt to demand fluctuations and of course, a fortified balance sheet.
These characteristics instead of resiliency that helps Adi mitigate market weakness and invest throughout economic cycles in critical areas that will define our future.
Notably unlike previous economic cycles, we have numerous concurrent secular growth drivers across all of our markets that drives more semi content per dollar of capex.
And we have exposure to sectors that will transcend the macro uncertainty, including areas like digital healthcare aerospace defense and the electrification ecosystem.
So to that end I want to highlight is our digital health care business, which resides in our industrial end market.
Health care is a market that is ripe for innovation and is one that requires the highest levels of performance.
Now currently the United States leads the world in health care spending with more than four trillion dollars spent in 2022 alone approaching.
Approaching 20% of GDP.
This amount has steadily increased over several decades, and unfortunately does not correlate to world leading health outcomes.
Both the U S along with most international healthcare systems are still reliant on serving the majority of patients with critical or chronic conditions in large centralized acute care hospitals.
We're specialized expertise and equipment resides.
The pandemic highlighted the fragility of the system underscoring the urgent need for remote physician consultation and distributed clinical grade patient care.
This vision of a decentralized system to improve the accessibility affordability and efficacy of global health care can only be realized.
Through the proliferation of edge based diagnostic and therapeutic technologies.
Adi saw this promising opportunity early and made digital health care, a strategic focus area over a decade ago.
Over that time, our R&D investments have expanded our portfolio from core signal processing sensing and power technologies.
Two more highly integrated application specific products to know full system level solutions. The results. Our healthcare franchise is delivered seven straight record revenue years generating $900 million annually.
And we're on track to achieve a new high watermark in 23, despite the macro backdrop.
Importantly, 80.
<unk> has become an industry leader in three primary areas.
The first is medical imaging.
Where our highly integrated products perform critical functions. This includes enhancing image quality.
Minimizing radiation dosage, improving system assembly and simplifying field maintenance.
We have strong share positions in areas like Cte Scudder's digital X Ray and ultrasound.
Next is automation and instrumentation.
For example, our broad portfolio enables us to create the optimized signal chains required in applications, such as infusion pumps ventilators and defibrillators.
Third his personal health monitoring.
Here, our highest performance products are used throughout the operating room and the ICU, while more compact versions with lower power are designed into wearable devices, performing both clinical and consumer wellness monitoring functions.
Now, let me share some of the examples of how we're seeing Adi's solutions shape the future of healthcare.
The ultrasound industry is migrating from large cart based equipment to more complex mobile systems.
Recently.
Adi wanted to design as a market leader for their compact ultrasound system or.
Our solution Leverages, our complete portfolio.
Including high speed signal chain and high voltage power technologies.
To deliver the highest quality images at the lowest power in a smaller footprint.
We're also developing <unk> technology to Untether, the ultrasound modality from the hospital.
And enable hospital, great care and even the most remote locations our solution uses proprietary ultra low power analog technology.
That performs both the data acquisition and beam forming functions at extremely low power levels.
With embedded software algorithms.
This allows the user to get cart based performance in our handheld form without compromising image quality resolution or functionality.
Now turning for a moment to robotic surgery.
Currently only about 15% of the world's surgical procedures use robotic technology. Despite the many benefits.
These include greater precision flexibility and control during surgery, and shorter hospital stays fewer complications and lower levels of pain for patients.
We're already designed.
At the largest robotic surgical suppliers with our suite of precision motor control signal processing power management and sensing solutions.
And with content per system in the thousands of dollars and.
And performance demands increasing exponentially. This application is poised to deliver significant growth in the years ahead.
In the area of personal health monitoring clinical grade vital signs monitors are converging with consumer wellness wearables.
This is an emerging market for our comprehensive suite of technologies.
Including our sensor.
<unk> controllers, and ultra low power technologies, which has been strengthened by the integration of Maxim.
For example.
In diabetes management Adi has long been a leading supplier of blood glucose monitoring technology now.
Now, we're working with key customers in the next generation of continuous glucose monitoring.
Our solution increases the level of robustness accuracy and power efficiency of the glucose sensor.
Thereby extending its life from days to weeks.
And there is much much more to come.
We're extending our reach into innovative medical products that connect our hardware with cloud based connectivity analytics and service.
I'm delighted to share with you that our first noninvasive chronic disease management device.
Is undergoing marketing clearance with the FDA and I look forward to sharing more as this new market has the potential to significantly expand our health care side.
So big picture, we're shaping the digital Revolution in health care.
<unk> ability to go from components to systems supplier underscores our deep domain expertise and unrelenting focus on innovation setting.
Setting us apart from the pack not only in healthcare, but in all of our markets.
So while there's near term uncertainty.
Excited about the long term opportunities that lie ahead.
Center of gravity for data processing is shifting from the cloud to the edge.
And Adi for data is born is at the center of this evolution.
Enabling the next waves of innovation for our customers.
Now before I hand over to <unk> I want to address our announcement that he will be leaving at the end of the fiscal year.
I want to recognize <unk> for his many contributions and for his partnership over these past six years.
He has played an important role during a period of extraordinary growth and value creation for Adi.
Including help build a robust finance function and fostering strong investor community engagement.
No that <unk> will be remaining in its full capacity and continuing to engage with all of you. While we identify our next CFO through a search process that is now underway.
And with that I'll hand, it over to push up.
Thank you Vince.
It has been an honor to serve as the CFO of this phenomenal company and lead this world Class Finance organization.
As Vince mentioned I am fully committed to ensuring a smooth transition and I look forward to engaging with all of you during the coming quarters.
I do want to express my deep appreciation to Vince both as a coach and mentor, but also for introducing me to this magical world of semiconductors as my boss often says we truly are the bedrock upon which the global technology industry is built.
Now turning to our second quarter results as.
As usual my comments today with the exception of revenue will be on an adjusted basis, which excludes special items outlined in today's press release.
We delivered another very strong quarter record revenue of $3 $2 6 billion exceeded the midpoint of guidance and represented adi's 13th consecutive quarter of sequential growth.
On a year over year basis, we grew 10% led once again by all time highs in industrial and automotive.
Breaking it down by market industrial our most diverse and profitable business represented 53% of revenue and finished up 3% sequentially.
Year over year growth of 16% was broad based notable gains in sustainable energy Aerospace and defense.
These markets in addition to healthcare, which Vince just highlighted are much better positioned to withstand cyclical slowdowns and together they represent roughly 40% of industrial revenue.
Automotive, which represented 24% of revenue once again exhibited broad based strength growing 10% sequentially and 24% year over year.
Secular tailwind fueling content growth continued to drive Adi's, leading battery management and in cabin connectivity solutions, which combined increased nearly 40% year over year.
Communications, which represented 14% of revenue decreased both sequentially and year over year due to the ongoing inventory corrections across this end market.
And lastly, consumer at 9% of revenue was down more than 20% sequentially and year over year. After several quarters of softness consumer revenue is close to its colgate low suggesting that the correction is nearly complete.
Moving onto the P&L gross margin of 73, 7% was up slightly sequentially due to favorable product mix opex at $733 million was in line with last quarter.
And op margins of 51, 2% up roughly 100 basis points year over year set a new record.
Non op expenses were $48 million and our tax rate was 11, 4% remember that Q2 is typically our lowest rate.
All told EPS came in at $2 83.
Up an impressive 18% year over year.
Moving to the balance sheet, we ended the quarter with approximately $1 2 billion of cash and a net leverage ratio of 0.8.
We've discussed many times our decision to hold more finished goods inventory versus restocking the channel.
Our days of inventory increased to 168 and channel inventory weeks were basically unchanged.
As we outlined a quarter ago, we expect inventory dollars will decline in the second half as we balanced the replenishment of die bank and moderate external purchases.
Moving to cash flow Capex was $284 million in the quarter and $930 million over the trailing 12 months, representing 7% of revenue.
As a reminder, we outlined at our Investor day that we expect capex to be high single digits as a percentage of sales in 2023, and then decline in subsequent years to our longer term target of mid single digits.
These investments will support our long term growth plans and enable strategic swing capacity between our Fabs and our foundry partners.
Flexibility of our hybrid model across different geographies enhances our resiliency. It offers our customers additional optionality and it provides an important financial shock absorber during times of volatility.
Of note our Capex spend to date does not include the benefit of both.
The U S and the European tax credit and grant funds that we anticipate from both the U S and European Chip Socs.
Over the trailing 12 months, we generated $4 billion of free cash flow or 31% of revenue.
We've returned $5 1 billion to shareholders, three and a half in buybacks and $1 six via dividends.
We remain committed to our shareholder friendly policy of returning 100% free cash flow over the life.
Now before moving to the outlook I do want to provide some additional details on the evolving business conditions.
As Vince shared in his remarks customers are adjusting forecast and rebalancing inventory.
At the same time, our lead times continue to improve with over 70% of our portfolio now shipping and under 13 weeks.
This gives customers high confidence into the timeliness of our supply.
The result book to Bill as we outlined last quarter remains below parity in all markets and our backlog due in the current quarter has returned to its typical coverage range.
As a result total backlog continues to decline, but at just under a year of revenue, it's still two <unk> regular levels.
And lastly, after a strong start to the second quarter demand quickly deteriorated in Asia impacting channel sell through.
As a result, we plan to reduce channel inventory in this region and in the third quarter. We are planning for sell in to be below sell through for the total company.
Given these dynamics, we are guiding third quarter revenue to be $3 1 billion, plus or minus $100 million.
At the midpoint of our outlook, we expect industrial and auto to be down low to mid single digits sequentially communications down around 10% sequentially, while consumer will increase sequentially.
Op margin is expected to be 48, 5% plus or minus 70 bps decline in op margin relates to our annual merit increases change.
Changing product mix and a reduction of manufacturing utilization given the softer environment.
Our tax rate again between 11% and 13%.
And based on these inputs adjusted EPS is expected to be $2 52.
After minus 10.
While the near term operating environment is a difficult one our diversification and exposure.
Key secular trends is expected to help mitigate the revenue impact.
In addition, we have key levers to help us minimize our margin volatility.
This includes our flexible hybrid manufacturing model, which allows us to quickly reduce spend on external wafers and moderate the impact on internal utilizations.
Our variable compensation program, which has a true accordion like function, allowing us to reduce spend while still investing in key long term areas.
As a result, we expect a durable earnings stream and solid free cash flow generation, enabling us to take advantage of any share price dislocations.
Before handing off to Mike I want to remind folks that in June we will be doing a deep dive on the burgeoning opportunity for Adi in the construction of Giga factories and with that let me pass it to Mike for Q&A.
Thanks, Prashant on Echo <unk> comments and thank you for the partnership over the past six years, but I will warn you. It's not done yet we are called more earnings calls together, so with that let's get to the 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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Hi.
Okay.
Our first question comes from Vivek Arya with Bank of America Securities.
Thanks for the question and thanks, and best wishes to <unk>.
So my question really is trying to understand where does the incremental weakness is it limited to Asia.
And within Asia that industrial or automotive or or both and what about our non Asia demand how has that changed versus what you thought three months ago.
Yes. Thank you. Thank you Vivek, it's been it's been a pleasure to work with you all when we still have a few quarters together.
Everyone is focused on a quarter quarter over quarter, but before I get to your answer I do want to take a step back and look at the year over year, because I do think that tells the story of share gains and increasing content per dollar of Capex, which is what we believe delivers that long term shareholder value if.
If you look at our industrial and auto business. They are up year over year at the midpoint of guidance industrial I'll call. It roughly mid single digits and auto mid teens year over year and this comes at a time when PMI is at or below 50, and auto Saar is relatively modest.
So while the economics in the cycle dictate the number of units our customer sell which will impact our business our share gains are increasing content per dollar of capex.
Is what we expected to help us outperform which means we're going to declined less in bad times and accelerate good <unk>.
To your specific question, China definitely was the sort of the piece of new information that has developed over the over the more recent period. We are we've had three quarters of decline in China, and we're expecting our fourth we did see an uptick following the resumption of the return to office after Chinese.
New year, but that did fade quickly.
And the result was we've got inventory a little higher in the channel there than we expected.
Very confident that this is not a share issue. This is a reflection of what's going on in those markets and it's broad based across both the industrial and auto.
Outside of China, I would say that industrial and auto is holding up relatively well, especially North America, Europe , and Japan, not as strong as it was prior quarter, but it's not falling rapidly and I would characterize it more as a as a measured slowdown.
In consumer we've been talking about those in all those geographies those remain weak.
Thank you thanks Vivek.
Okay.
Our next question comes from the line of tourist Svanberg with Stifel.
Yes. Thank you Prashant this thing go.
Working with you wish you all the best I now work together for a few more months, but anyway I wish you all the best.
My question is on utilization and inventory levels. So could you give us a sense of where utilization is today.
What's your plan for the second half you did talk about inventory in dollar terms.
Coming down in the second half, but if you could give us any color on the extent of that we'd really appreciate it. Thank you.
Yes. Thank you. Thank you target and it's been great working with you. So if we think about inventory inventory is going to remain higher than normal because we're keeping the channeling. This is something we started two or three quarters ago.
From a dollar basis inventory has peaked in second quarter as I mentioned in my prepared remarks, and you should see dollar start to trend down from here given the actions that we're taking which is both reducing our external wafer builds which is an opportunity that we have because of our swing capacity and our hybrid manufacturing model and that also allows us to balance out the die bank.
Building in our internal factories with softer demand and tap the brakes uninteresting Utilizations Utilizations I would say still are at elevated levels. So we expect them to start getting closer to to what we would consider normal levels in the in our fiscal fourth quarter.
So I'll just give a little context and in the outlook. We gave we have about 48, 5% operating margins that assumes gross margins come down from where they are today that mix and also it is utilization as Christophe mentioned and then Opex goes up a little bit in the third quarter based on merit increase offset some by the variable compensation. So that's how kind of.
The math around that and then as you say as you as you look out relations probably don't go higher from enforced after three Q to Scott to give you a feel for the back half of the year.
Great. Thanks for the question will go to next one.
Our next question comes from the line of Ambridge Srivastava with BMO capital markets.
Hi.
Okay.
Our ambitious barrier alright.
First off thank you for Sam a pleasure working with you as well.
Wanted to come back to the.
To be.
Backlog.
You just went through this comment a little bit too quick for me. So the backlog as you said two X regular levels, but book to bill below and.
It is where the typical coverage ranges at this point.
Sure what that means we're importantly book to Bill should then be trending lower.
As we go over the next couple of quarters is that the right conclusion, I should take away from those comments.
What I would I guess, let me.
Let's do this in two pieces first.
Let's talk about.
Our view on this correction obviously no correction is the same but if you look over at history umbrella. Most of these sort of downturn to last for somewhere between two to four quarters and it's <unk>.
Our view that we're going to have a weakness for the second half, but a couple of points around that first.
We are really seeing this as a rolling correction across the market. Because obviously you know market is fully immune but I do think that we're better positioned comms and consumer I think you would agree with us the worst is largely behind us.
We've seen those correct over the last couple of quarters, and we're actually seeing a little bit more optimistic about consumer as we go forward industrial and auto we're starting to see some softness, but that's probably not going to just last quarter. It's important to point out that we do have some areas of strength in industrial we mentioned that in the prepared remarks.
And in auto really it's going to continue to be a function of the.
Of the Saar activity.
Bookings and backlog standpoint, the takeaway if you want is bookings overall continue to decrease but they are basically sitting at about a year of revenue and the total backlog.
That means is that the backlog for the current quarter is now to normal levels, which means that we're back to a point, where we will be relying on some book and ship to hit the guide and that's back to normal pre COVID-19 levels and on a book to Bill were below parity, which we had said for a couple of quarters now that this was coming.
And that's pretty broad based it's sort of all markets industrial and auto are a little bit better, but all markets all geographies I did call out on that.
Thank <unk> question that China is certainly the weakest of that.
Got it. Thank you I'll just go back for another follow up thanks, Operator next question.
Okay.
Our next question comes from the line of Joseph Moore with Morgan Stanley .
Great Hi, let me add my congratulations to percent.
Can you talk about the backlog being out over a year.
70% of lead times or below 13 weeks.
How much I know you've been pretty aggressive scrubbing that backlog.
How confident are you that that reflects real demand and then.
Can you sort of describe it seems like you are still getting a pretty decent amount of bookings considering that people have booked out 52 weeks and can get product within within 13 can you just kind of are people still placing orders beyond lead time to try to assure continuity. Thank you.
Yes, great Great question, Joe. Thank you so first yes.
Yes, Youre exactly right when we talk about backlog being out kind of roughly a year in value. That's phased over several quarters. So we have delivery dates from customers that are in future quarters, which sort of gives us confidence to what the future looks like and now we're sort of back to that stage that we've always operated in pre COVID-19 levels, where there is.
A percentage of the current quarter's revenues that comes from turns business. So where we are back to that state of normalcy with with the lead times down as as they as they have improved with our manufacturing capacity additions now there is no incentive for customers to keep giving us orders out with <unk>.
Difficult advance notice they can get most of what they need pretty quickly and thats the transition that you're seeing being reflected in the in the in the book to bill rate, but.
Again as I mentioned, we are expecting and Vince as Vince has talked for a couple of quarters now that that we were expecting the macro impact to hit us, but we remain very confident that the content story. We have is going to help mute the impact relative to others and given our end market.
<unk> as I mentioned, it's sort of going to be rolling through us.
Consumer and comms are largely behind US we will see auto pressure on units for a couple of quarters, sorry, industrial pressure on units for a couple of quarters and auto we can't give you a good sense of except to say, we know we have a phenomenal content story growth there and it really will depend on consumer purchases.
Yes, I think Joe.
The margins I think our customers have changed their behavior. It used to be that the world is expected to be able to operate on a very rapid turn cycle no I think thats it.
That will persist, but what will also persist as the change in behavior around aligning.
Along to customers aligning their long term or longer term demands with wood supply.
These are conversations that we're having continuously so I think the behavior has changed somewhat and perhaps we have got a new normal.
Thanks, Joe.
Your next question.
Our next question comes from the line of Chris Danley with Citi.
Hey, Thanks, guys.
I'll add my congrats to Prashant I wish I was retiring too.
Hey, I just had a I guess a question or some more color on the correction. What do you think triggered it do you think it was just a function of the shortages going away and people always had a little bit of inventory out there and now they can.
They can start to cancel orders and then how bad do you think it could get your auto business has tripled in your industrial business has doubled in the last.
Two years and change so what what should we be thinking for like the October quarter and beyond.
Yes, Chris I don't know that I would call. It a trigger per se I think that as I mentioned, we've been sort of rolling through this is Jeff that theres been enough growth in subs as parts of our market that have overshadowed the pressure we've seen on comms and consumer now industrial which is really the flagship is starting to feel a little bit of that.
Impact from the from the higher interest rate environment. So that's coming through but again I would I would call out that we've got a pretty sizable portion of that industrial market that is very.
Recession resistant that's the healthcare business, which Vince talked about the aerospace and defense as well as our energy business.
I think what what I mentioned I think too ambitious question is the piece that perhaps the most surprising to us as we were expecting a stronger bounce in China as they reopen from Covid and they've got on the other side of Chinese new year and that recovery has not tests has not happened and again as I mentioned, we know.
That is not a share issue.
It is a macro issue to that market.
And what was that what was the second part of your question.
Just how bad do you think it can get any color on October .
I'm going to turn to the 40 year veteran of this business, who has seen multiple cycles and let Vince take that Chris.
Chris I think first and foremost what we're seeing now in our business is that the trucks are not as deep in the in the peaks are steeper than they used to be there is more and more content in every one of the market segments that we participate in.
So I think.
The way to look at the troughs are probably going to be.
They're probably going to be shallower and also we've been very careful managing our factories and making sure that we don't unnecessarily build inventory and ship product for her.
Isn't needed.
So.
My sense is we have set ourselves up for a softer lending just given how we've managed through the cycle.
Tried to match demand of our customers as typhoons, we come with a with the supply system. So.
I think perhaps just given where PMI as a REIT, we would see at least a couple of quarters here of music demands.
My sense is.
When the when the sentiment begins to turn it will turn quickly.
Yes of course.
Yes.
Demand for the couple of quarters here, it's good to think like we've grown 13 quarters in a relative I think investors and sell side people forget that you do have down quarters, sometimes and we're kind of going back to I will call a bit more normal and a more normal <unk> you kind of you see industrial kind of flat to down from three Q auto is about flat constant how much activity happening right now in that market.
And consumers, usually up a little bit and if you look at our <unk>, our normal won't you for us the <unk> markets, which is industrial auto and comms are down kind of low mid single digits and consumers down a bit more due to holiday belt and then you get a <unk> pick up now that's not an outlook that's kind of what the normal shape was pre COVID-19.
I can tell you is low for us from conversations with with our industrial and automotive customers.
Sentiment is quite strong.
I met the.
One of the one of the largest industrial automation companies very very recently.
They see.
Tremendous secular growth drivers.
There is a rebound in demand from the from the pandemic stage, where a lot of factories, the capex to improve factory efficiencies and so on.
It was not spent so that continues.
The whole sustainability challenge is on everybody's mind.
So there are many reasons to believe that.
We're going through a short term period here of reconciliation normalization of demand and supply, but my sense is things will recover in the industrial market.
Pretty rapidly.
In automotive, it's a case of.
We're getting more and more share in the areas that comes with our connectivity products to electric vehicle portfolio that we've got.
They are still reasonable demand I would say for mid to high end automobiles. So.
We see this as a relatively short term.
<unk>.
Thanks, guys. Thanks for the color.
Our next question comes from the line of Ross Seymore with Deutsche Bank.
Hi, guys just wanted to echo the congrats for Pasha a.
A quick clarification and then a question. The clarification is when you talk about the second half being a little bit weaker is that fiscal year calendar year and then the two question is on the automotive side of things you've mentioned a couple of times that its kind of Saar dependent but the bigger trend in automotive over the last few years has been mainly content and you guys have benefited from that as well I think youre in.
One of the first companies in the semi side to guide that down, albeit minimally on a sequential basis has something changed there.
That you're seeing that others aren't as that inventory is it demand just any more color on that would be helpful.
Yes, I'll go the first part Rosemarie I gave a little bit of calm.
Comments around kind of what I thought would be for our fiscal fourth and fiscal <unk> outlook based on kind of normalization.
So you can kind of take from that and parse that with your question about is it fiscal second half calendar second half and put it a lot of that is built for.
I'll pass it to.
On the auto side.
Oh.
I'll take it alright so.
Look we've grown we've grown 10 quarters in a row and the growth was for the last quarter was very broad based again across all applications. As we think about the outlook. We are beginning to see some softening, though the underlying content growth continue in our topline should still proved to be a strong multiple of Saar.
There is some decline that relates to our strong position in China EV. So when you asked about what's different for Adi Ross I think that the.
The share position, we have in China, EV is probably one of those differentiating factors and that is going through an adjustment as well, while Chinese China Evs are still expected to grow it's not going to be growing as fast as we had originally thought and so as this market comes back it's going to provide the tailwind we need for our automotive businesses, because we have very high.
Sure again take a step back we remain very confident that this is a business with the strong product portfolio. We have battery management in cabin connectivity with <unk> <unk> and functional safe power. These represent about half of our business and in a flat Saar environment, we're still going to be able to do double digit growth.
Yes.
Thank you.
Thanks, Ross and listen we go to our last question. Please.
This question comes from the line of William Stein with <unk> Securities.
Okay.
Thank you for taking my questions.
Two quick ones, if I can squeeze them in first I Wonder you have been.
Very optimistic.
We're relatively optimistic about pricing in the past few discussions we've had.
Essentially highlighting that foundries are.
Either still raising our certainly not lowering and you are having no problems passing that on.
Like you to comment if there is any update on that.
In that regard and then the other is just to try to get maybe linger a moment you can get a better understanding for what happened in China because.
Earlier in the quarter.
You've met with us and some other investors and discussed how.
Business there was recovering what.
How can you explain how quickly this seems to have changed from improving in China to suddenly getting even worse. Thank you very much.
Thanks, I'm going to do the China, one first so Vince can wins can address the the pricing won the China one is pretty straightforward.
As most of the industry. We were we were watching the recovery coming out of the multi quarter shutdown in China as well as the Chinese new year activity looking to see business begin to return to normal levels. Given that we had had that a couple of down quarters, we saw a pop.
In activity and order activity in the.
As we came out of Chinese new year based on that we made supply available to the channel that supply did not move as things kind of quickly got softer or didn't move as much I could say didn't move as much and therefore, that's why we've now set for the current quarter, we're going to ship in less than we sell through to help readjust that.
Level in primarily in Asia, and with that I'll hand off to Vince to take the pricing question, yes. Thanks, Krishna, yes, well I think the headline on pricing is that it is very very resilient.
Expect that to.
To persist.
In general we're getting.
We're passing more value to our customers, we are giving more value to our customers.
And in fact the.
Core ASP of our product portfolio has been increasing not including incidentally, the inflationary costs that we pass to our customers.
So.
I think.
One thing we can say for sure about our franchises our products are very very sticky our products persist for many many decades for example in the in the industrial sector.
And we're in the post Moore's law era, where the economic conditions have changed fundamentally so I expect the.
Pricing.
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To be very steady across the industry in general.
In the years ahead.
We will look for opportunities to pass on inflation, which is going to be persistent in the industry I believe in the coming years.
Okay.
Thank you.
Well I, thank everyone for joining us this morning, a couple of items before I. Let you go on your way first we are planning to combine our general Ledger ERP systems this quarter.
Represents one of our final steps for the Maxim integration, given our typically fast reporting cycle, we're giving ourselves an extra week to ensure everything runs smoothly as such we plan for our earnings call will be held the third week of August versus the second also I wanted to flag that during these more uncertain times and consistent with our commitment for transparency for owners, we plan being even more available for investors.
Based on first half will be in New York.
Boston The Bay area in London in the next quarter. Please reach out to the IR team. If you have been notified winter. When we are in your neighborhood and with that kind of the transcript will be available on the website. Thanks again for joining us and your continued interest in analog devices have a good day.
This concludes today's analog devices conference call you may now disconnect.
Okay.
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Okay.
Okay.
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