Q3 2024 Analog Devices Inc Earnings Call

August 21, 2024

[music].

Yeah.

Good morning, and welcome to the analog devices third quarter fiscal year 2024 earnings conference call, which is being audio webcast via telephone and over the web.

Operator: Good morning and welcome to the Analog Devices third quarter fiscal year 2024 earnings conference call, which is being audio webcast via telephone and over the web.

Good morning and welcome to the Analog Devices Third Quarter Fiscal Year 2024 Earnings Conference Call, which is being audio webcast via telephone and over the web.

Good morning, and welcome to the Analog Devices Third Quarter Fiscal Year 2024 Earnings Conference Call, which is being audio webcast via telephone and over the web.

Michael Lucarelli: I now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and SPNA. Sir, the floor's yours.

Speaker Change: I'd now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and SP&A.

Speaker Change: To introduce your host for today's call Mr. Michael Lucarelli, Vice President of Investor Relations and S. T N H, Sir the floor is yours.

Speaker Change: Sir, the floor is yours.

Speaker Change: Thank you, Kevin, and good morning, everybody.

Speaker Change: You, Kevin and good morning, everybody. Thanks for joining our third quarter of fiscal 'twenty 'twenty four conference call.

Speaker Change: Thanks for joining our Third Quarter Fiscal 2024 Conference Call. Submitting the call today are ADI CEO and Chair, Vincent Roche, and ADI CFO, Richard Puccio.

Speaker Change: The call today are Dr Terabits erosion.

Speaker Change: I see about ready to show.

Speaker Change: For anyone who missed the release, you can find it in the latest schedules at investor.analog.com.

Speaker Change: Anyone who missed the release you find it schedules at Investor analog dotcom.

Speaker Change: On to disclosures.

Speaker Change: All of the disclosures the information about it is it's got a good forward looking statement.

Speaker Change: 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 PRF reports and other materials filed with the SEC.

Speaker Change: Subject to certain risks uncertainties as further described in her eagerly interference report and other materials filed with SEC.

Speaker Change: As a result, the different material from the forward-looking information in these statements, reflects our expectation only at the date of this call. We undertake no obligation to update these statements except as required by law.

Speaker Change: After it all could differ materially from the forward looking information that these statements reflect our expectation always in this call.

Speaker Change: We undertake no obligation to update these statements except as required by law.

Operator: References to growth margins, operating, non-operating expenses, operating margins, tax rights, EPS, and pre-capital in our comment today will be on a non-GAAP basis. These excluded special items, and comparing our results are short for form, and special items are also excluded from prior periods.

Speaker Change: Revenue gross margin operating nonoperating expenses operating margin tax rate EPS and free cash flow and our comments today will be on non-GAAP basis.

Speaker Change: References to growth margin, operating, non-operating expenses, operating margin, tax rates, EPS, and pre-tax flow in our comments today will be on a non-GAAP basis. These exclude special items. When comparing our results or historic performance, special items are also excluded from prior periods.

Speaker Change: Excluding special items when comparing our results of our historic performance special items are also excluded from prior periods reconciliations of these non-GAAP measures. The most directly comparable GAAP measures and a different information about it and I'll get measures are included in today's earnings release, and with that I'll turn it over to Adi's CEO Vincent Roche.

Speaker Change: Reconciliations of these non-GAAP measures, the most directly comparable GAAP measures, and additional information about our non-GAAP measures are included in today's earnings release.

Operator: Reconciliation of these non-GAAP measures to most directly comparable GAAP measures and additional information about a non-GAAP measure are included in today's earnings release.

Operator: And with that, I'll turn it over to Eddie, I.D. on Chair.

Speaker Change: Thank you, cabinet.

Speaker Change: And with that, I'll turn it over to ADI CEO and Chair, Vincent Roche.

Vincent Roche: Thank you very much. Thanks very much, Mike, and a very good morning to you all. A stronger demand for a high-performance product portfolio and skillful execution resulted in third quarter revenue of more than $2.3 billion, operating margin north of 41%, and EPS of $1.58, all above the midpoint of our outlook. These favorable results, combined with improved customer inventory levels and order momentum across most of our markets, increase my confidence that our second quarter marked the cyclical bottom for ADI.

Speaker Change: Good morning, everybody.

Speaker Change: Thanks very much, Mike, and a very good morning to you all.

Speaker Change: Very much Mike and a very good morning to you all.

Speaker Change: Thanks for joining our third Corps of Fiscal 2024 conference call.

Speaker Change: Well, stronger demand for our high-performance product portfolio and skillful execution, resulted in third-quarter revenue of more than $2.3 billion, operating margin north of 41%, and EPS of $1.58, all above the midpoint of our outlook. These favorable results, combined with improved customer inventory levels, and order momentum across most of our markets, increase my confidence that our second quarter marked the cyclical bottom for ADI.

Speaker Change: But still no demand for high performance product portfolio and skillful execution resulted in third quarter revenue of more than $2 3 billion.

Speaker Change: Operating margin north of 41% and EPS of $1 58.

Speaker Change: All above the midpoint of our outlook.

Speaker Change: These favorable results combined with improved customer inventory levels.

Speaker Change: And order momentum across most of our markets.

Speaker Change: Increased my confidence that our second quarter, Mark the cyclical bottom for Adi.

Vincent Roche: By optimism remains guarded; however, this challenging economic and geopolitical conditions are limiting a sharper recovery. We continue to balance near-term fiscal discipline with strategic investments in our long-term growth initiatives, positioning ADI to capitalize on the extraordinary opportunities that we see ahead. Now I'd like to draw attention to our industrial end market, which is our largest, most diverse, and most profitable business, generating durable revenue streams that last close to two decades on average. As our business begins to recover from the pandemic's volatility, we're excited about the tremendous long-term growth opportunities of the industrial market. We offer our customers an unparalleled suite of high-performance solutions stretching from antenna to bits, sensor to cloud, and none of what to kill of us.

Speaker Change: But optimism remains garden, however, as challenging economic and geopolitical conditions are limiting a sharper recovery.

Speaker Change: My optimism remains guarded, however, as challenging economic, and geopolitical conditions are limiting a sharper recovery.

Speaker Change: We continue to balance near term fiscal discipline with strategic investments in our long term growth initiatives.

Speaker Change: We continue to balance near-term fiscal discipline with strategic investment, in our long-term growth initiatives, positioning ADI to capitalize on the extraordinary opportunities that we see ahead.

Turning to Adi to capitalize on the extraordinary opportunities that we see ahead.

Speaker Change: Now I'd like to draw attention to our industrial end market, which is our largest most diverse and most profitable business.

Speaker Change: So we're going to call today our ADI CEO and Chair, Vincent Roche, and ADI CFO, Richard Puccio.

Speaker Change: Now I'd like to draw attention to our industrial end market, which is our largest, most diverse, and most profitable business, generating durable revenue streams that last close to two decades on average.

Generating durable revenue streams that lost close to two decades on average.

Speaker Change: As our business begins to recover from the pandemic volatility.

Speaker Change: For anyone who missed the release, you can find it and the latest schedules at Investor.

Speaker Change: As our business begins to recover from the pandemic's volatility, we're excited about the tremendous long-term growth opportunities of the industrial market.

Speaker Change: Analog.com, On to disclosures, the information we're about to discuss includes forelooking statements, which are subject to certain written uncertainties, as further described in our earnings release and our PRF reports and other materials filed with the SEC.

Speaker Change: We're excited about the tremendous long term growth opportunities of the industrial market.

Speaker Change: We offer our customers an unparalleled suite of high performance solutions stretching from antenna to bits sensor to cloud.

Speaker Change: After results could differ materially from the forelooking information, these statements reflect our expectation only the date of this call. I undertake no obligation to update these statements except as required by law.

Speaker Change: We offer our customers an unparalleled suite of high-performance solutions, stretching from antenna to bits, sensor to cloud, and nanowatts to kilowatts. Our extensive technology portfolio, combined with our deep domain expertise, and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors. Now, with growing digital, software, and algorithmic capabilities, augmenting our cutting-edge analog portfolio, ADI is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more.

Speaker Change: None of what's the kilowatts.

Vincent Roche: Our extensive technology portfolio, combined with our deep domain expertise and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors. Now, with growing digital software and algorithmic capabilities, augmenting our cutting edge and log portfolio, ADI is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more.

Speaker Change: References to growth margin, operating, non-operating expenses, operating margin, tax rate, EPS, and pre-tax flow in our comments today will be on a non-GAAP basis. These excluded special items. When comparing results or historic performance, special items are also excluded from prior periods. Reconciliations of these non-GAAP measures, the most directly comparable GAAP measures, and additional information about our non-GAAP measures are included in today's earnings release.

Our extensive technology portfolio.

Speaker Change: Bind with our deep domain expertise and engineering muscle has enabled us to secure leading positions across the most attractive industrial sectors.

Speaker Change: No with.

With growing digital software and algorithm capabilities, augmenting, our cutting edge and loan portfolio.

Speaker Change: <unk> is strongly positioned to solve our customers' most difficult challenges and factory and process automation and energy efficiency secure connectivity and many many more.

Speaker Change: To illustrate the power and potential of our industrial franchise, let me share with you, a few examples of how our recent innovations are unlocking new revenue streams and positioning us for strong growth in the years ahead.

Vincent Roche: to illustrate the power and potential of our industrial franchise. Let me share with you a few examples of how our recent innovations are unlocking new revenue streams and positioning us for strong growth in the years ahead. For example, our instrumentation and test business, which includes scientific instruments, electronic test and measurement, and automated test equipment, is essential to the important scientific and technological advancements of the digital era. Within automated test equipment, for example, our next generation solutions increase channel density and throughput by reducing energy consumption by up to 30% per system. These are crucial parameters for testing complex, high performance, compute GPUs and high bandwidth memory systems for AI.

Speaker Change: To illustrate the power and potential of our industrial franchise, let me share with you a few examples of how our recent innovations are unlocking new revenue streams.

Speaker Change: And with that, I'll turn it over to ADI CEO and Chair, Vincent Roche.

Speaker Change: And positioning us for strong growth in the years ahead.

For example, our instrumentation and test business, which includes scientific instruments electronic test and measurement.

Speaker Change: For example, our instrumentation and test business, which includes scientific instruments, like test and measurement, and automated test equipment is essential to the important scientific and technological advancements of the digital era. Within automated test equipment, for example, our next generation solutions increase channel, density and throughput, while reducing energy consumption by up to 30% per system. These are crucial parameters for testing complex, high-performance compute GPUs and, high-bandwidth memory systems for AI.

Speaker Change: And automated test equipment is essential to the important scientific and technological advancements of the digital era.

Speaker Change: With it an automated test equipment for example.

Speaker Change: Our next generation solutions increased channel density improvement.

Speaker Change: While reducing energy consumption by up to 30% per system.

Speaker Change: These are crucial parameters for testing complex high performance compute Gpus and high bandwidth memory systems for AI.

Vincent Roche: As the AI infrastructure bill that remains a priority for global hyperscalers, we expect growth to continue into 2025 and indeed well beyond. Turning now to aerospace and defense, which has been our most resilient business during this downturn, ADI's domain expertise and high performance portfolio across our other microwaves, high speed and precision converters, power and men's unique positions to deliver complete edge solutions, offering our customer scale, velocity, and lower total cost of ownership. As an example, we're building upon our programmable Apollo signal chain platform today to create full software defined RF communications and sensor systems, which has the potential to increase our sound by five times in commercial defense and aerospace communication systems. Indeed, we see a path to double digit revenue growth in this sector in 2025, fueled by several high value design wins that are going to production.

Speaker Change: As the AI infrastructure buildup remains a priority for global Hyperscale orders, we expect growth to continue into 2025, and indeed well beyond.

Speaker Change: As the AI infrastructure bill that remains a priority for global hyperscalers, we expect, growth to continue into 2025 and, indeed, well beyond.

Speaker Change: Turning now to aerospace and defense, which has been our most resilient businesses during this downturn.

Speaker Change: Turning now to aerospace and defense, which has been our most resilient business during, this downturn, ADI's domain expertise and high-performance portfolio across orifice and microwaves, high-speed and precision converters, PAR and MEMS, uniquely positions us to deliver complete edge solutions, offering our customers scale, velocity, and lower total cost of ownership.

Speaker Change: Adi is domain expertise in high performance portfolio across RF and microwave.

Speaker Change: Hi, speed and precision converters power in mens.

Speaker Change: Mainly positions us to deliver a complete edge solutions offering our customers scale velocity and lower total cost of ownership.

Speaker Change: As an example, we're building upon our programmable Apollo signal chain platform today to create, full software-defined earth communications and sensor systems, which have the potential to increase our sound by five times in commercial, defense, and aerospace communication systems.

Speaker Change: As an example, we're building upon our programmable Apollo signal chain platform today to create both software defined RF communications and sensor systems.

Good morning and welcome to the Analog Devices third quarter fiscal year 2024 earnings conference call, which is being audio webcast via telephone and over the web.

Operator: Good morning and welcome to the Analog Devices third quarter fiscal year 2024 earnings conference call, which is being audio webcast via telephone and over the web.

Speaker Change: Which has the potential to increase our son by five times and commercial defense and aerospace communication systems.

Speaker Change: I now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and SPNA, Sir the Floors yours.

Michael Lucarelli: I now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and SPNA, Sir the Floors yours. Intertake no obligation to update these statements, except the report by law. References to growth margins, operating, non-operating expenses, operating margins, tax rights, EPS and pre-capital in our comments today will be on non-gap basis. These include special items, when comparing our results and stroke performance, special items are also excluded from prior periods. Reconciliation of these non-gap measures, the most directed comparable gap measures, and additional information about a non-gap measure are included in today's earnings release.

Speaker Change: Indeed, we see a path to double-digit revenue growth in this sector in 2025, fueled by several, high-value design wins that are going to production.

Speaker Change: Indeed, we see a path to double digit revenue growth in this sector in 2025.

Speaker Change: Fueled by several high value design wins that are going to production.

Vincent Roche: In automation, though we've seen a slower recovery today, we remain strongly confident in its future growth potential as the benefits of increased productivity are ever more clear. Customers are prioritizing enhanced digitization and ITOT integration on the factory floors. Their deployments of in-line instrumentation and advanced robotics are driving the need for more sensing, edge processing, secure connectivity, and car management. Within robotics, we're seeing a progression from fixed-down machines to autonomous and mobile robots to eventually humanoid robots. This evolution creates additional opportunities for a precision signal chain franchise and sensing connectivity and motion control subsystems, with fully isolated and efficient power solutions that can drive content from hundreds of dollars in robots today.

Speaker Change: In automation, though we've seen a slow recovery to date, we remain strongly confident in its future growth potential.

Speaker Change: In automation, though we've seen a slow recovery to date, we remain strongly confident in its, future growth potential, as the benefits of increased productivity are ever more clear.

Speaker Change: As the benefits of increased productivity are ever more clear.

Speaker Change: Customers are prioritizing enhanced digitalization and <unk> integration on the factory floors.

Speaker Change: Customers are prioritizing enhanced digitalization and IT-OT integration on their factory floors. Their deployments of inline instrumentation and advanced robotics are driving the need, for more sensing, edge processing, secure connectivity, and car management.

Speaker Change: Their deployments of inline instrumentation and advanced robotics are driving the need for more sensing edge processing secure connectivity and power management.

Speaker Change: Intertake no obligation to update these statements, except the report by law.

Speaker Change: References to growth margins, operating, non-operating expenses, operating margins, tax rights, EPS and pre-capital in our comments today will be on non-gap basis. These include special items, when comparing our results and stroke performance, special items are also excluded from prior periods.

Speaker Change: Within robotics.

Speaker Change: Within robotics, we're seeing a progression from fixed-arm machines to autonomous and mobile robots, to eventually humanoid robots.

Speaker Change: Doing a progression from fixed our machines to autonomous mobile robots to eventually humanoid robots.

Speaker Change: Reconciliation of these non-gap measures, the most directed comparable gap measures, and additional information about a non-gap measure are included in today's earnings release.

Speaker Change: This evolution creates additional opportunities for our precision signal chain franchise.

This evolution creates additional opportunities for our precision signal chain franchise.

Speaker Change: And sensing connectivity and motion-controlled subsystems with fully isolated and efficient, power solutions can drive content from hundreds of dollars in robots today to thousands in autonomous and humanoid robots.

Speaker Change: And sensing connectivity and motion control subsystems with fully isolation and efficient power solutions.

Speaker Change: And with that, I'll turn it over to ADICO and Chair, Mr.

Vincent Roche: And with that, I'll turn it over to ADICO and Chair, Mr. Rush. Thanks very much, Mike, and a very good morning to you all. The standard amount for high performance product portfolio and skill of execution resulted in third quarter revenue of more than 2.3 billion, operating margin north of 41% and EPS of $1.58.

Speaker Change: Rush.

Mr. Rush: Thanks very much, Mike, and a very good morning to you all.

Speaker Change: Can drive content from hundreds of dollars and robust to date to thousands and autonomous humanoid robots.

Vincent Roche: To thousands in autonomous and humanoid robots. What is additionally exciting with these advances is their broader applicability beyond factories, such as surgical robots and imaging systems in healthcare. Adi's products have the potential to dramatically improve a surgeon's effectiveness through a more precise surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer complications. The evolution in robotics is expected to unlock billions of dollars of potential opportunity for our high-performance analog mix signal power connectivity and sensing solutions. We see the potential for a doubling of a robotics revenue in the years ahead.

Speaker Change: What is additionally, exciting about these events as they are broad applicability beyond factories, such as surgical robots and imaging systems in health care.

Speaker Change: What is additionally exciting about these advances is their broad applicability beyond, factories, such as surgical robots and imaging systems in healthcare. ADI's products have the potential to dramatically improve a surgeon's effectiveness through, a more precise surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer, complications.

Speaker Change: The standard amount for high performance product portfolio and skill of execution resulted in third quarter revenue of more than 2.3 billion, operating margin north of 41% and EPS of $1.58. All above the midpoint of our outlook.

Vincent Roche: All above the midpoint of our outlook. These favorable results, combined with improved customer inventory levels and order momentum across north of our markets, increase my confidence that our second quarter marked the cyclical bottom for ADI. By optimism remains guarded however, this challenging economic and geopolitical conditions are limiting a sharper recovery. We continue to balance near-term fiscal discipline with strategic investments in our long-term growth initiatives, positioning ADI to capitalize on the extraordinary opportunities that we see ahead.

Speaker Change: These favorable results, combined with improved customer inventory levels and order momentum across north of our markets, increase my confidence that our second quarter marked the cyclical bottom for ADI.

Speaker Change: Adi's products have the potential to dramatically improve our surgeons effectiveness through a more precise surgical experience with lower latency connectivity.

Speaker Change: Additionally, patients getting the potential benefits of shorter hospital stays and fewer complications.

Speaker Change: By optimism remains guarded however, this challenging economic and geopolitical conditions are limiting a sharper recovery.

Speaker Change: The evolution in robotics is expected to unlock billions of dollars of potential opportunity for our high performance analog mixed signal power connectivity and sensing solutions we.

Speaker Change: The evolution in robotics is expected to unlock billions of dollars of potential opportunity, for high-performance analog, mixed-signal power connectivity and sensing solutions.

Speaker Change: We continue to balance near-term fiscal discipline with strategic investments in our long-term growth initiatives, positioning ADI to capitalize on the extraordinary opportunities that we see ahead.

Speaker Change: We see the potential for a doubling of our robotics revenue in the years ahead.

Vincent Roche: Now I'd like to draw attention to our industrial end market, which is our largest, most diverse and most profitable business, generating durable revenue streams that last close to two decades on average. As our business begins to recover from the pandemic's volatility, we're excited about the tremendous long-term growth opportunities of the industrial market. We offer our customers an unparalleled suite of high-performance solutions stretching from antenna to bits, sensor to cloud, and none of what to kill us.

Vincent Roche: Turning now to energy transmission and distribution, our customers are modernizing and digitizing the electrical grid to respond to exponentially accelerating energy demand driven in part by the proliferation of electric transportation and rapid AI adoption. This process is resulting in a grid that is distributed, dynamic, and bidirectional, a paradigm shift from the past model of linear stable supply. We're working with traditional suppliers and disruptors to enable the necessary intelligence for the new grid from decentralized power plants to the distribution edge. We're leveraging our analog and algorithm capabilities in cutting-edge energy monitoring and management solutions. Additionally, our battery management technology increases capacity and improves energy utilization in the grid's renewable energy storage systems. This reimagined intelligent grid of the future has potential to expand our sound by over 10 billion dollars and creates tailwinds for our energy franchise for many years to come.

Speaker Change: Turning now to energy transmission and distribution, our customers are modernizing and digitalizing, the electrical grid to respond to exponentially accelerating energy demand, driven in part by the proliferation of electric transportation and rapid AI adoption.

Speaker Change: Now I'd like to draw attention to our industrial end market, which is our largest, most diverse and most profitable business, generating durable revenue streams that last close to two decades on average.

Speaker Change: By the proliferation of electric transportation and rapid adoption.

Speaker Change: This process is resulting in a grid that is distributed dynamic and bi directional <unk>.

Speaker Change: This process is resulting in a grid that is distributed, dynamic, and bidirectional, a, paradigm shift from the past model of linear, stable supply. We're working with traditional suppliers and disruptors to enable the necessary intelligence, for the new grid, from decentralized power plants to the distribution edge.

Speaker Change: <unk> shift from the past model of linear stable supply.

Speaker Change: We are working with traditional suppliers and disruptors to enable the necessary intelligence for the new grid.

Speaker Change: As our business begins to recover from the pandemic's volatility, we're excited about the tremendous long-term growth opportunities of the industrial market.

Speaker Change: From decentralized power plants to the distribution edge.

Speaker Change: We're leveraging our analog and algorithm capabilities and cutting edge energy monitoring and management solutions.

Speaker Change: We're leveraging our analog and algorithm capabilities in cutting-edge energy monitoring, and management solutions.

Speaker Change: We offer our customers an unparalleled suite of high-performance solutions stretching from antenna to bits, sensor to cloud, and none of what to kill us.

Speaker Change: Additionally, our battery management technology increases capacity and improves energy utilization, in the grid's renewable energy storage systems.

Speaker Change: Additionally, our battery management technology increases capacity and improves energy utilization and the grid renewable energy storage systems.

Speaker Change: This re imagined intelligent grid of the future has the potential to expand our son over $10 billion.

Speaker Change: This reimagined intelligent grid of the future has the potential to expand our stand by over, $10 billion and creates tailwinds for our energy franchise for many years to come.

Speaker Change: Our extensive technology portfolio, combined with our deep domain expertise and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors. Now, with growing digital software and algorithmic capabilities, augmenting our cutting edge and log portfolio, ADI is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more, to illustrate the power and potential of our industrial franchise.

Speaker Change: Let me share with you a few examples of how our recent innovations are unlocking new revenue streams and positioning us for strong growth in the years ahead.

Vincent Roche: Let me share with you a few examples of how our recent innovations are unlocking new revenue streams and positioning us for strong growth in the years ahead. For example, our instrumentation and test business, which includes scientific instruments, electronic test and measurement, and automated test equipment is essential to the important scientific and technological advancements of the digital era. Within automated test equipment, for example, our next generation solutions increase channel density and throughput by reducing energy consumption by up to 30% per system.

Speaker Change: Creates tailwind for our energy franchise for many years to come.

Vincent Roche: Given the synergies across our industrial portfolio, our pace of innovation, and the emergent signs of Marcus recovery, we were optimistic for our industrial business as it has turned the corner, and 25 will be a roll-up year.

Speaker Change: Given the synergies across our industrial portfolio.

Speaker Change: Given the synergies across our industrial portfolio, our pace of innovation, and the, emergent signs of market recovery, we're optimistic for our industrial business that has turned the corner and 2025 will be a robust growth year.

Speaker Change: Our pace of innovation and the emerging signs of market recovery.

Speaker Change: For example, our instrumentation and test business, which includes scientific instruments, electronic test and measurement, and automated test equipment is essential to the important scientific and technological advancements of the digital era. Within automated test equipment, for example, our next generation solutions increase channel density and throughput by reducing energy consumption by up to 30% per system. These are crucial parameters for testing complex, high performance, compute GPUs, and high bandwidth memory systems for AI.

Speaker Change: We are optimistic for <unk>.

Speaker Change: Our industrial business that has turned the corner and 25 will be a robust growth year.

Speaker Change: So in closing our investments in high performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle.

Speaker Change: So in closing, our investments in high-performance analog solutions are enabling us to intersect, with and leverage the numerous concurrent secular trends that transcend the business cycle and will propel us into the future.

Speaker Change: And will propel us into the future.

Vincent Roche: Our commitment to our customer success and to impact the innovation will be the path that carries us there, ultimately increasing long-term shareholder value.

Speaker Change: Our commitment to our customers' success.

Speaker Change: Our commitment to our customers' success and to impactful innovation will be the path that, carries us there, ultimately increasing long-term shareholder value.

Vincent Roche: These are crucial parameters for testing complex, high performance, compute GPUs, and high bandwidth memory systems for AI. As the AI infrastructure bill that remains a priority for global hyperscalers, we expect growth to continue into 2025 and indeed well beyond.

Speaker Change: And two impactful innovation will be the path that carries us there.

Speaker Change: Ultimately, increasing long term shareholder value.

Richard Puccio: And so with that, I'm going to turn it over to Rich, who will take you through the numbers. Thank you, Vince. Let me add my welcome to our third quarter, Ernie's call. Third quarter revenue of 2.31 billion came in above the midpoint of our outlook, finishing up 7 percent sequentially and down 25 percent year over year. Industrial represented 46 percent of revenue in the third quarter, finishing up 6 percent sequentially and down 37 percent year over year. Every major application increased sequentially, except for automation, which declined at a much slower pace than it had in previous quarters.

Speaker Change: As the AI infrastructure bill that remains a priority for global hyperscalers, we expect growth to continue into 2025 and indeed well beyond.

Speaker Change: And so with that, I'm going to turn it over to Rich, who will take you through the numbers.

Speaker Change: And so with that I'm going to turn it over to rich who will take you through the numbers.

Rich: Thanks very much, Mike, and a very good morning to you all.

Rich: Thank you Vince let me add my welcome to our third quarter earnings call.

Rich: Thank you, Vince.

Rich: But stronger demand for a high performance product portfolio and skillful execution resulted in third quarter revenue of more than 2.3 billion, operating margin north of 41%, and EPS of $1.58, all above the midpoint of our outlook, combined with improved customer inventory levels and order momentum across most of our, Increase my confidence that our second quarter marked the cyclical bottom for ADI.

Rich: Let me add my welcome to our third-quarter earnings call. Third-quarter revenue of $2.31 billion came in above the midpoint of our outlook, finishing, up 7% sequentially and down 25% year over year. Automotive represented 46% of revenue in the third quarter, finishing up 6% sequentially, and down 37% year over year.

Rich: Bioptimism remains guarded, however, as challenging economic and geopolitical conditions are limiting a sharper recovery.

Rich: Third quarter revenue of $2 31 billion came in above the midpoint of our outlook.

Rich: We continue to balance near-term fiscal discipline with strategic investment in our long-term growth initiative.

Speaker Change: Turning now to aerospace and defense, which has been our most resilient business during this downturn, ADI's domain expertise and high performance portfolio across our other microwaves, high speed and precision converters, power and men's unique positions us to deliver complete edge solutions, offering our customer scale, velocity, and lower total cost of ownership.

Vincent Roche: Turning now to aerospace and defense, which has been our most resilient business during this downturn, ADI's domain expertise and high performance portfolio across our other microwaves, high speed and precision converters, power and men's unique positions us to deliver complete edge solutions, offering our customer scale, velocity, and lower total cost of ownership. As an example, we're building upon our programmable Apollo signal chain platform today to create full software defined RF communications and sensor systems, which has the potential to increase our sound by five times in commercial, defense, and aerospace communication systems. Indeed, we see a path to double digit revenue growth in this sector in 2025, fueled by several high value design wins that are going to production.

Rich: Positioning ADI to capitalize on the extraordinary opportunities that we see ahead.

Rich: <unk> up 7% sequentially and down 25% year over year.

Rich: Now I'd like to draw attention to our industrial end market, which is our largest, most diverse and most profitable business.

Rich: Industrial represented 46% of revenue in the third quarter, finishing up 6% sequentially and down 37% year over year.

Rich: Every major application increased sequentially, except for automation, which declined at a much slower pace than it had in previous quarters.

Richard Puccio: Automotive represented 29 percent of revenue, finishing flat sequentially and down 8 percent year over year. We saw continued double-digit growth year over year for our industry-leading connectivity and functionally safe power plants. Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses. Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year. Slowing customer inventory digestion enabled both wireless and wireline growth sequentially. And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022.

Rich: As our business begins to recover from the pandemic's volatility.

Speaker Change: As an example, we're building upon our programmable Apollo signal chain platform today to create full software defined RF communications and sensor systems, which has the potential to increase our sound by five times in commercial, defense, and aerospace communication systems.

Rich: Automotive represented 29% of revenue, finishing flat sequentially and down 8% year over year.

Rich: Every major application increased sequentially except for automation, which declined at a, much slower pace than it had in previous quarters. Automotive represented 29% of revenue, finishing flat sequentially and down 8% year over year.

Rich: We're excited about the tremendous long-term growth opportunities of the industrial market.

Rich: We saw continued double-digit growth year over year for our industry-leading connectivity, Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses.

Rich: We saw continued double digit growth year over year for our industry, leading connectivity and functionally safe power platforms. Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses.

Rich: Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year. Slowing customer inventory digestion enabled both wireless and wireline growth sequentially.

Rich: Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year.

Rich: We offer our customers an unparalleled suite of high performance solutions stretching from antenna to bit.

Rich: <unk> customer inventory digestion enabled both wireless and wireline growth sequentially.

Rich: And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022.

Rich: We saw diversified growth across applications with notable strength in portables and gaming.

Richard Puccio: We saw diversified growth across applications with notable strength in portables and gaming.

Rich: We saw diversified growth growth across applications with notable strength in portables and gaming.

Rich: Now let's move from the top line to the rest of the P&L. Third quarter gross margin was 67.9%, up 120 basis points sequentially, driven by higher revenue, higher utilization, and favorable mix. Operating expenses in the quarter were $619 million, up modestly sequentially, driven primarily by higher variable compensation.

Rich: Now, let's move from the topline to the rest of the P&L.

Rich: Sensor to Cloud, and Nanowatts to Kilowatts.

Rich: Our extensive technology portfolio, combined with our deep domain expertise and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors. Now, with growing digital, software, and algorithmic capabilities, augmenting our cutting-edge analog portfolio, ADI is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more. To illustrate the power and potential of our industrial franchise, let me share with you a few examples of how our recent innovations are unlocking new revenue streams, and positioning us for strong growth in the years ahead.

Rich: Third quarter gross margin was 67, 9% up 120 basis points sequentially, driven by higher revenue higher utilization and favorable mix.

Operating expenses in the quarter were $619 million.

Rich: Modestly sequentially, driven primarily by higher variable compensation opt.

Vincent Roche: This evolution creates additional opportunities for a precision signal chain franchise, and sensing connectivity and motion control subsystems with fully isolated and efficient power solutions can drive content from hundreds of dollars in robots today. To thousands in autonomous and humanoid robots. What is additionally exciting with these advances is their broader applicability beyond factories such as surgical robots and imaging systems in healthcare. Adi's products have the potential to dramatically improve a surgeon's effectiveness through a more precise, surgical experience with lower latency connectivity.

Rich: Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at $70 million, and the tax rate for the quarter was 10.8%. The net result was EPS of $1.58, which finished near the high end of our outlook.

Richard Puccio: Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at 70 million, and the tax rate for the quarter was 10.8%. The net result was EPS of $1.58, which finished near the high end of our outlook.

Rich: Operating margin of 41, 2% exceeded the high end of our outlook.

Rich: Nonoperating expenses finished at $70 million and the tax rate for the quarter was 10, 8%.

Rich: The net result was EPS of $1 58, which finished near the high end of our outlook.

Richard Puccio: Our financial position is solid, and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than 2.5 billion of cash and short-term investments and a net leverage ratio of 1.2. Inventory decreased $51 million sequentially, and days declined to 178 from 192. As planned, we reduced channel inventory further this quarter, with weeks ending near the low end of our 78-week target. Operating cash flow for the quarter and trailing 12 months was 0.9 billion and 4 billion, respectively. CapEx for the quarter and trailing 12 months was 154 million and 1 billion respectively.

Rich: Our financial position is solid and I would like to call out a few items from our balance sheet and cash flow statement we.

Rich: Our financial position is solid, and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than $2.5 billion of cash in short-term investments and a net leverage ratio of 1.2.

Rich: We ended Q3 with more than $2 5 billion of cash and short term investments and a net leverage ratio of one two.

Rich: Inventory decreased $51 million sequentially, and days declined to 178 from 192. As planned, we reduced channel inventory further this quarter, with weeks ending near the low end of our 7- to 8-week target.

Rich: Inventory decreased $51 million sequentially and days declined to 178 from 192.

Rich: As planned we reduced channel inventory further this quarter with weeks ending near the low end of our seven to eight week target.

Vincent Roche: Additionally, patients gain the potential benefits of shorter hospital stays and fewer complications. The evolution in robotics is expected to unlock billions of dollars of potential opportunity for our high-performance analog mix signal power connectivity and sensing solutions. We see the potential for a doubling of our robotics revenue in the years ahead.

Rich: Operating cash flow for the quarter and trailing 12 months was $0.9 billion and $4 billion, respectively. CapEx for the quarter and trailing 12 months was $154 million and $1 billion, respectively.

Rich: Operating cash flow for the quarter and trailing 12 months was <unk> 9 billion and 4 billion respectively.

Rich: Capex for the quarter and trailing 12 months was $154 million and $1 billion respectively.

Richard Puccio: For fiscal 24, CapEx is tracking to our $700 million plan, which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers.

Rich: For fiscal 24, CapEx is tracking to our $700 million plan, which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers.

Rich: For fiscal 'twenty, four capex is tracking to our $700 million plan, which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle papers.

Rich: Not included in these figures are the anticipated benefits from both the European and U.S. chip sacks.

Richard Puccio: Not included in these figures are the anticipated benefits from both the European and US Chips Acts. During the last 12 months, we generated 2.9 billion of free cash flow or 30% of revenue. Over this same time period, we have returned 2.8 billion via dividends and share repurchases. As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Rich: Not included in these figures are the anticipated benefits from both the European and U S chipsets.

Rich: During the last 12 months, we generated $2.9 billion of free cash flow, or 30% of revenue. Over this same time period, we have returned $2.8 billion via dividends and share repurchases.

Rich: During the last 12 months, we generated $2 9 billion of free cash flow or 30% of revenue.

Rich: Over this same time period, we have returned $2 8 billion via dividends and share repurchases. As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Rich: As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Rich: Now I will turn to the fourth quarter outlook. Revenue is expected to be $2.4 billion, plus or minus $100 million, up 4% sequentially at the midpoint. We expect sell-through to be roughly equal to sell-in this quarter. At the midpoint on a sequential basis, we expect industrial and consumer to increase, communications to be flattish, and automotive to decrease.

Richard Puccio: Now I will turn to the fourth quarter outlook. Revenues expected to be 2.4 billion plus or minus 100 million, up 4% sequentially at the midpoint. We expect sell through to be roughly equal to sell in this quarter. At the midpoint on a sequential basis, we expect industrial and consumer to increase, communications to be flatish, and automotive to decrease. Operating margin is expected to be 41% plus or minus 100 basis points. Our track rate is expected to be between 11 and 13%, and based on these inputs, EPS is expected to be $1.63 plus or minus 10 cents.

Now I will turn to the fourth quarter outlook.

Rich: For example, our instrumentation and test business, which includes scientific instruments.

Rich: Electronic Test and Measurement, and automated test equipment is essential to the important scientific and technological advancements of the digital era.

Rich: Within automated test equipment, for example, Our next generation solutions increase channel density and throughput, by reducing energy consumption by up to 30% per system. These are crucial parameters for testing complex high-performance compute GPUs and high-bandwidth memory systems for AI.

Rich: As the AI infrastructure bill that remains a priority for global hyperscalers, we expect growth to continue into 2025 and indeed well beyond.

Revenue is expected to be two 5% excuse me $2 4 billion, plus or minus $100 million up 4% sequentially at the midpoint, we expect sell through to be roughly equal to sell in this quarter.

Rich: At the mid point on a sequential basis, we expect industrial and consumer to increase communications to be flattish in automotive to decrease.

Vincent Roche: We're leveraging our analog and algorithm capabilities in cutting edge energy monitoring and management solutions. Additionally, our battery management technology increases capacity and improves energy utilization in the grid's renewable energy storage systems. This reimagined intelligent grid of the future has potential to expand our sound by over ten billion dollars and creates tailwinds for our energy franchise for many years to come.

Rich: Operating margin is expected to be 41%, plus or minus 100 basis points.

Rich: Operating margin is expected to be 41% plus or minus 100 basis points.

Rich: Our tax rate is expected to be between 11% and 13%, and based on these inputs, EPS is expected to be $1.63, plus or minus 10 cents.

Rich: Our tax rate is expected to be between 11% and 13% and based on these inputs EPS is expected to be $1 63, plus or minus 10 sets.

Rich: In closing, our third-quarter results and fourth-quarter outlook support our view that, we have passed this cycle's trough. However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Richard Puccio: In closing, our third quarter results and fourth quarter outlook support our view that we have passed the cycle's trough.

Rich: Turning now to aerospace and defense, which has been our most resilient business during this downturn.

Rich: In closing, our third quarter results and fourth quarter outlook support our view that we have passed the cycle's trough, however, challenging economic and geopolitical conditions are limiting our faster demand recovery.

Rich: ADI's domain expertise and high-performance portfolio across RF and microwave.

Richard Puccio: However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Speaker Change: Indeed, we see a path to double digit revenue growth in this sector in 2025, fueled by several high value design wins that are going to production.

Vincent Roche: Given the synergies across our industrial portfolio, our pace of innovation and the emergent signs of Marcus recovery, we're optimistic for our industrial business as it has turned the corner and twenty-five will be a roll of growth year.

Michael Lucarelli: I will now get it back to Mike for Q&A. Thanks, Rick. Let's get to our Q&A session.

Rich: I will now give it back to Mike for Q&A.

Rich: Thanks, Rich.

Rich: Let's get to our Q&A session.

Mike: Thanks, Rich, 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.

Rich: We ask that you limit yourself to one question in order to allow for additional participants, on the call this morning.

Rich: If you have a follow-up question, please re-queue, and we'll take your question if time allows.

Rich: With that, we'll go to our first question, please.

Rich: For those participating by telephone dial-in, if you have a question, please press star-one-one, on your telephone to enter the queue.

Speaker Change: Question. Please re queue and we will take your question. If time allows with that we are first question. Please.

Speaker Change: High-Speed and Precision Converters, Power and Men.

Speaker Change: He uniquely positions us to deliver complete edge solutions offering our customers scale, velocity, and lower total cost of ownership.

Speaker Change: As an example, we're building upon our programmable Apollo signal chain platform today to create full software-defined earth communications and sensor systems, which has the potential to increase our sound by five times in commercial, defense, and aerospace communication systems.

Operator: For those participating by telephone dial-in, if you have a question, please press star 1-1 on your telephone to enter the queue. If your question has been answered, you wish to be removed from the queue, please press star 1-1 again. If you're listening on the speaker phone, please pick up the handset when asking your question. We'll pause for just a moment to compile our Q&A roster.

Vincent Roche: So, in closing, our investments in high-performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle and will propel us into the future. Our commitment to our customer success and to impact the innovation will be the path that carries us there ultimately increasing long-term shareholder value.

Speaker Change: Indeed, we see a path to double-digit revenue growth in this sector in 2025, fueled by several high-value design wins that are going to production.

Speaker Change: For those participating via telephone dial in if you have a question. Please press star one on your telephone to enter the queue. If your question has been answered or you wish to be removed from the queue. Please press star one again.

Speaker Change: In automation, though we've seen a slow recovery to date, we remain strongly confident in its future growth potential, as the benefits of increased productivity are ever more clear.

Speaker Change: Customers are prioritizing enhanced digitalization and IT-OT integration on their factory floors. Their deployments of inline instrumentation and advanced robotics are driving the need for more sensing, edge processing, secure connectivity, and car management.

Speaker Change: Within Robotics.

Speaker Change: We're seeing a progression from fixed arm machines to autonomous and mobile robots to eventually humanoid robots.

Speaker Change: If your question has been answered and you wish to be removed from the queue, please, press star-one-one again.

Speaker Change: This evolution creates additional opportunities for a precision signal chain franchise, and Sensing Connectivity and Motion Control Subsystems with Fully Isolated and Efficient Power Solutions can drive content from hundreds of dollars in robots today to thousands in autonomous and humanoid robots.

Speaker Change: What is additionally exciting about these advances is their broad applicability beyond factories, such as surgical robots and imaging systems in healthcare. ADI's products have the potential to dramatically improve a surgeon's effectiveness through a more precise surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer complications.

Speaker Change: The evolution in robotics is expected to unlock billions of dollars of potential opportunity for high-performance analog, mixed-signal, power connectivity, and sensing solutions.

Speaker Change: We see the potential for a doubling of our robotics revenue in the years ahead.

Speaker Change: If you are listening on the speakerphone, please pick up the handset when asking your, question.

Speaker Change: We're listening on a speakerphone please pick up the handset when asking a question, we'll pause for just a moment to compile the Q&A roster.

Speaker Change: Turning now to energy transmission and distribution, our customers are modernizing and digitalizing the electrical grid to respond to exponentially accelerating energy demand, driven in part, by the Proliferation of Electric Transportation and Rapid AI Adoption.

Speaker Change: This process is resulting in a grid that is distributed, dynamic, and bidirectional, a paradigm shift from the past model of linear stable supply. We're working with traditional suppliers and disruptors to enable the necessary intelligence for the new grid, from Decentralized Power Plants to the Distribution Edge.

Speaker Change: We're leveraging our analog and algorithm capabilities in cutting edge energy monitoring and management solutions.

Speaker Change: Additionally, our battery management technology increases capacity and improves energy utilization in the grid's renewable energy storage system.

Speaker Change: We'll pause for just a moment to compile our Q&A roster.

Speaker Change: This reimagined intelligent grid of the future has the potential to expand our sun by over $10 billion, and creates tailwinds for energy franchise for many years to come.

Speaker Change: Sure.

Tore Svanberg: Our first question comes from Tore Svanberg with Steeple; your line is open. Yes, thank you so much. Great to see the turn here.

Speaker Change: Our first question comes from tore Svanberg with Stifel. Your line is open.

Speaker Change: Given the synergies across our industrial portfolio, our pace of innovation, and the emergent signs of Marcus' recovery, We're optimistic, for our industrial business that has turned the corner and 25 will be a robust growth year.

Speaker Change: Our first question comes from Torrey Svenberg with Stifel.

Speaker Change: Your line is open.

Speaker Change: Yes.

Richard Puccio: And so with that, I'm going to turn it over to Rich who take you through the numbers. Thank you, Vince.

Speaker Change: Thank you so much.

Tore Svanberg: Yes. Thank you so much great to see the turn here.

Tore Svanberg: So in closing, our investments in high-performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle, and will propel us into the future.

Tore Svanberg: Great to see the turn here.

Tore Svanberg: Our commitment to our customer success, and to impactful innovation will be the path that carries us there, ultimately increasing long term shareholder value.

Tore Svanberg: Vince, could you maybe elaborate a little bit more on this sort of mixed environment, right?

Vincent Roche: Could you elaborate a little bit more on this sort of mixed environment, right? Because inventories have bottom, the same time and demand seems to be kind of mixed. So, as you navigate through this period, could you elaborate a little bit on your visibility, how's backlog trending? Are you starting to see new products ramping more into production? Because these are typical signals. The signals that you want to see at the beginning of a new cycle. Yeah, thanks, sorry.

Tore Svanberg: Vince could you maybe elaborate a little bit more on this sort of mixed environment right because inventories have bottomed.

Speaker Change: In automation, though we've seen a slower recovery today, we remain strongly confident in its future growth potential as the benefits of increased productivity are ever more clear.

Richard Puccio: Let me add my welcome to our third quarter earnings call. Third quarter revenue of 2.31 billion came in above the midpoint of our outlook, finishing up 7 percent sequentially and down 25 percent year over year. Industrial represented 46 percent of revenue in the third quarter, finishing up 6 percent sequentially and down 37 percent year over year. Every major application increased sequentially except for automation, which declined at a much slower pace than it had in previous quarters. Automotive represented 29 percent of revenue, finishing flat sequentially and down 8 percent year over year. We saw continued double-digit growth year over year for our industry leading connectivity and functionally safe power plants.

Tore Svanberg: Because inventories have bottomed, you know, inventory has bottomed at the same time and, demand seems to be kind of mixed.

Speaker Change: Customers are prioritizing enhanced digitization and IT OT integration on the factory floors. Their deployments of in-line instrumentation and advanced robotics are driving the need for more sensing, edge processing, secure connectivity, and car management.

Tore Svanberg: Inventory at the bottom at the same time and demand seems to be kind of mixed. So as you navigate through this period could you elaborate a little bit on your visibility how is backlog trending are you finding starting to see new products ramping more into production because these are typical.

Tore Svanberg: So as you navigate through, you know, this period, could you elaborate a little bit on, your visibility?

Speaker Change: Within robotics, we're seeing a progression from fixed-down machines to autonomous and mobile robots to eventually humanoid robots.

Tore Svanberg: You know, how is backlog trending?

Tore Svanberg: Are you finally starting to see new products ramping more into production? Because these are typical signals that you want to see at the beginning of a new cycle.

Tore Svanberg: Signals that you want to see at the beginning of a new cycle.

Tore Svanberg: Yeah.

Tore Svanberg: Thanks, Torrey.

Yes, Thanks, Alright, well I'd say.

Tore Svanberg: And so with that, I'm going to turn it over to Rich, who will take you through the numbers.

Tore Svanberg: Well, I'd say, I mean, first and foremost, we run this company on POS signals.

Vincent Roche: Well, I say, first and foremost, we run this company on POS signals. That's how we plan our production; how we run the company operationally. So we pay very, very close attention to what's happening in terms of the end market demand. And, you know, my confidence has increased since last quarter, that indeed 2Q was the cyclical bottom. You know, we've exited 3Q with very, very lean channel inventory. We've taken emergency of our own balance sheet. So we're positioned with, with a very, very healthy backlog of inventory on our own balance sheet. So that the anticipated demand, absolutely expect in 25.

Speaker Change: First and foremost we run this company on Pls signals, that's how we plan our production how we run the company operationally. So we pay very very close attention to what's happening in terms of the end market demand.

Tore Svanberg: That's how we plan our production, how we run the company operationally.

Speaker Change: Thank you, Vince.

Speaker Change: This evolution creates additional opportunities for a precision signal chain franchise, and sensing connectivity and motion control subsystems with fully isolated and efficient power solutions can drive content from hundreds of dollars in robots today. To thousands in autonomous and humanoid robots.

Speaker Change: So we pay very, very close attention to what's happening in terms of the end market demand. And you know, my confidence has increased since last quarter that indeed 2Q was the, cyclical bottom.

Speaker Change: Let me add my welcome to our third quarter earnings call.

Speaker Change: Third quarter revenue of $2.31 billion came in above the midpoint of our outlook, finishing up 7% sequentially and down 25% year-over-year. Industrial represented 46% of revenue in the third quarter, finishing up 6% sequentially and down 37% year over year.

Speaker Change: Every major application increased sequentially except for automation, which declined at a much slower pace than it had in previous quarters. Automotive represented 29% of revenue, finishing flat sequentially and down 8% year over year.

Speaker Change: What is additionally exciting with these advances is their broader applicability beyond factories such as surgical robots and imaging systems in healthcare. Adi's products have the potential to dramatically improve a surgeon's effectiveness through a more precise, surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer complications.

Richard Puccio: Performance. Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses. Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year. Slowing customer inventory digestion enabled both wireless and wireline growth sequentially. And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022. We saw diversified growth across applications with notable strength and portables and gaming.

Speaker Change: We saw continued double-digit growth year over year for our industry-leading connectivity and functionally safe power platforms.

Speaker Change: The evolution in robotics is expected to unlock billions of dollars of potential opportunity for our high-performance analog mix signal power connectivity and sensing solutions.

Speaker Change: And my confidence.

Speaker Change: <unk> has increased since last quarter that indeed, <unk> was was the cyclical bottom.

Speaker Change: We've exited <unk> with very very lean channel inventory.

Speaker Change: You know, we've exited 3Q with very, very lean channel inventory. We've taken inventory off our own balance sheet, though we're positioned with a very, very healthy backlog of inventory on our own balance sheet so that the anticipated demand up surge that we expect in 25, we're very, very well equipped and ready to meet that. So you know, in the fourth quarter, as we've said, we expect to see continued sequential, growth.

Speaker Change: We see the potential for a doubling of our robotics revenue in the years ahead.

Speaker Change: We've taken inventory off our own balance sheet, though we're positioned with.

Speaker Change: Turning now to energy transmission and distribution, our customers are modernizing and digitizing the electrical grid to respond to exponentially accelerating energy demand driven in part by the proliferation of electric transportation and rapid AI adoption. This process is resulting in a grid that is distributed dynamic and bidirectional, a paradigm shift from the past model of linear stable supply.

Speaker Change: With a very very healthy backlog of inventory on our own balance sheet. So that the anticipated demand up stores that we expect in 'twenty five we're very very well equipped and ready to meet that so.

Vincent Roche: We're very, very well equipped and ready to meet that. So, you know, in the fourth quarter, as we've said, we expect to see continued sequential growth. And indeed, we'll also see, I think, particularly in the industrial area, continued improvement on customer inventory levels.

Speaker Change: And four in the fourth quarter as we've said, we expect to see continued sequential growth.

Speaker Change: And indeed, we'll also see, I think, particularly in the industrial area, continued improvement, on customer inventory levels.

Speaker Change: And indeed, we'll also see I think.

Richard Puccio: Now let's move from the top line to the rest of the P&L. Third quarter growth margin with 67.9% up 120 basis points sequentially driven by higher revenue, higher utilization, and favorable mix. Operating expenses in the quarter were 619 million, up modestly sequentially, driven primarily by higher variable compensation. Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at 70 million and the tax rate for the quarter was 10.8%. The net result was the EPS of $1.58 which finished near the high end of our outlook.

Speaker Change: Particularly in the industrial area continued improvement on customer inventory levels. So.

Vincent Roche: So look at, it's all the, the whole recovery, the, you know, the ramp of the recovery will depend on the macro situation. But nonetheless, given the design wins, we've a record design win pipeline in the company. So we're facing many, many secular tailwinds with a very strong pipeline, very, very good supply line. And with a very, very lean inventory on the customer's balance sheet. So that gives me the optimism to worry that we're very, very well positioned coming into the new year.

Speaker Change: So look, it's all the whole recovery, you know, the ramp of the recovery will depend on the, macro situation.

Okay.

Speaker Change: The whole recovery.

Speaker Change: The ramp of the recovery will depend on the on the macro situation, but nonetheless, given the design wins, we've got we have a record design win pipeline.

Speaker Change: But nonetheless, given the design wins, we've a record design win pipeline in the company.

Speaker Change: And the company.

Speaker Change: So we're facing many, many secular tailwinds with a very strong pipeline, very, very good, supply line, and with a very, very lean inventory on the customer's balance sheet.

Speaker Change: So we are facing many many secular tailwind with a very strong pipeline very very good supply line.

Speaker Change: With a very very lean.

Speaker Change: Inventory on the customers' balance sheets, so that gives me the optimism.

Speaker Change: So that gives me the optimism, Tory, that we're very, very well positioned coming into, the new year.

Richard Puccio: Our financial position is solid and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than 2.5 billion of cash and short term investments and a net leverage ratio of 1.2. Inventory decreased 51 million dollars sequentially and days declined to 178 from 192. As planned, we reduced channel inventory further this quarter with weeks ending near the low end of our 7 to 8-week target.

Speaker Change: Sorry.

Speaker Change: We're very very well positioned coming into the new year.

Operator: Thank you. One moment for our next question.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Joseph Moore: Our next question comes from Joseph Moore with Morgan Stanley; your line is up. Thank you. My question is on the trajectory of automotive versus industrial. It seems like automotive entered into inventory correction a little bit later, and so far has been much less severe. I guess you sort of talked about some ongoing headwinds in that space. Can you just talk about what overall drawdown might you expect in automotive and where are we and customers kind of drawing down safety, documentary?

Speaker Change: Our next question comes from Joseph Moore with Morgan Stanley. Your line is open.

Speaker Change: Our next question comes from Joseph Moore with Morgan Stanley.

Speaker Change: Your line is open.

Speaker Change: Yes, thank you.

Joseph Moore: Yes. Thank you my question is on the trajectory of Automotives versus industrial it seems like automotive entered into.

Speaker Change: Inventory correction a little bit later.

Speaker Change: And so far has been much less severe.

Richard Puccio: Operating cash flow for the quarter and trailing 12 months was 0.9 billion and 4 billion respectively. CapEx for the quarter and trailing 12 months was 154 million and 1 billion respectively. For fiscal 24, CapEx is tracking to our $700 million plan which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers. Not included in these figures are the anticipated benefits from both the European and US chips acts. During the last 12 months, we generated 2.9 billion of free cash flow or 30% of revenue. Over the same time period, we have returned 2.8 billion via dividends and share repurchases. As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Speaker Change: So you sort of talked about some ongoing headwinds in that space can you just talk about what overall drawdown might you expect in automotive and where are we in customers kind of.

Growing down safety stock inventory.

Speaker Change: My question is on the trajectory of automotive versus industrial.

Richard Puccio: So, Joe, this is Richard. I'll take your crack at that one. So, I'll just a level set a little bit, you know, from our perspective and what we're seeing in the market. Cars continue to become more electric and software defined, which is also driving our semi-content growth, likely trying to address increased battery densities, more sensors, displays, and we do expect that data is going to be a long-term tailwind to our business. However, and this is where we're starting to see some of the pullback. The vehicle market has often been near-term. We're seeing our customers pull back on the production, and at this point we're seeing them start to choose to burn off some inventory.

Rich: So Joe this is rich.

I'll take a crack at that one so.

Speaker Change: Just to level set a little bit from our perspective, and what we're seeing in the market cars continue to become more electric and software defined which is also driving our semi content growth.

Speaker Change: Slightly trying to address the increased battery densities more sensors displays and we do expect that that is going to be a long term tailwind to our business. However, and this is where we're starting to see some of the pullback. The vehicle market has has softened in the near term, we're seeing our customers pull back on their production.

Speaker Change: It seems like, automotive entered into an inventory correction a little bit later, and so far has been much less severe.

Speaker Change: I guess you sort of talked about some ongoing headwinds in that space.

Speaker Change: And at this point, we're seeing them start to choose to burn off some inventory. So we are seeing that the softness is evidenced in our results by orders being down year over year for two straight quarters, and we expect it will be down again in <unk>.

Richard Puccio: Now I will turn to the fourth quarter outlook. Revenues expected to be 2.4 billion plus or minus 100 million up 4% sequentially at the midpoint. We expect self-fruit to be roughly equal to sell in this quarter.

Richard Puccio: So, we are seeing that, right? The softness is evidence in our results. By autumn, down year over year for two straight quarters, and we expect it will be down again in 4Q. From a bookings perspective, we did see a decline in bookings in auto. In particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios when we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers. However, to your question around the peak to trough, you know, and let's start returns to, you know, to pandemic levels, you know, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Speaker Change: And from a bookings perspective, we did see a decline in bookings.

Richard Puccio: At the midpoint on a sequential basis, we expect industrial and consumer to increase communications to be flatish and automotive to decrease. Operating margins expected to be 41% plus or minus 100 basis points. Our track rate is expected to be between 11 and 13%, and based on these inputs, EPS is expected to be $1.63 plus or minus 10 cents.

Speaker Change: In auto in particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios. When we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers. However to your question around the peak to trough unless SAR return.

Speaker Change: Conversely, automotive production costs are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses.

Speaker Change: Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year.

Speaker Change: Can you just talk about what overall drawdown might you expect in automotive, and where are we in customers kind of drawing down safety stock inventory?

Speaker Change: Slowing customer inventory digestion enables both wireless and wireline growth sequentially.

Speaker Change: And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year-over-year for the first time since 2022.

Speaker Change: We saw diversified growth across applications with notable strength in portables and gaming.

Speaker Change: Now let's move from the top line to the rest of the P&L.

Speaker Change: Third quarter gross margin was 67.9 percent, up 120 basis points sequentially, driven by higher revenue, higher utilization, and favorable mix.

Speaker Change: Operating expenses in the quarter were $619 million, modestly sequentially, driven primarily by higher variable compensation.

Speaker Change: Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at $70 million, and the tax rate for the quarter was 10.8 percent. The net result was EPS of $1.58, which finished near the high end of our output.

Speaker Change: Our financial position is solid, and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than $2.5 billion of cash in short-term investments and a net leverage ratio of 1.2.

Speaker Change: Pandemic levels, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Richard Puccio: In closing, our third quarter results and fourth quarter outlook support our view that we have passed the cycles trough. However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Richard Puccio: You know, the underlying secular growth trends that I described, you know, driving higher semi-content. Also, we've continued to see more penetration and value capture across all vehicle types, whether it's ICE, plug-in hybrid of electric, or full electric, in the fastest growing applications. If you think about that, eight-ass digital cost and electrification.

Speaker Change: The underlying secular growth trends that I described driving higher semi content.

Speaker Change: Also we've continued to see more penetration and value capture across all vehicle types, whether its ice plug in hybrid or electric or full electric.

Michael Lucarelli: I will now get it back to Mike for Q&A. Thanks, Rick. Let's get to our Q&A session.

Operator: We want to tell you to limit yourself to one question in order to allow for additional persistence on the college morning. If you have a follow-up question, please refuse. We will take your question and time allows. With that, through our first question, please. For those participating by telephone dial-in, if you have a question, please press star 1-1 on your telephone to enter the queue. If your question has been answered, you wish to be removed from the queue, please press star 1-1 again. If you're listening on the speaker phone, please pick up the handset when asking your question. We'll pause for just a moment to compile our Q&A roster.

Speaker Change: The fastest growing applications in if you think about that aid at digital cockpit and electrification.

Richard Puccio: So, we will be down, but we don't expect that the cycle depth to be as severe as we saw, for example, in industrial. Great.

Speaker Change: So we will be down, but we don't expect that the cycle that to be as severe as we saw for example in industrial.

Speaker Change: Great. Thank you very much and I guess I was a follow up are you seeing that behavior any different regionally is the China automotive market different in the western markets in terms of where they are.

Operator: Thank you very much.

Richard Puccio: And I guess as a follow-up, are you seeing that behavior any different regionally? Is the China automotive market different than the Western markets in terms of where they are? No, I'll say overall, it's pretty inanimate across all markets. I'll say China all of us, he did okay. We talked about some design and branding there, if that's something offset some of the softness, but it's an overall comment auto a bit weaker today than it was 90 days ago, whether it's North America, Europe, or Asia. Great.

Speaker Change: No I would say overall, it's pretty unanimous across all markets at the psychology that did okay. We talked about some design win ramping there. So that's helping offset some of the softness but as an overall comment out a little bit weaker today than it was 90 days ago, whether it's North America, Europe or Asia.

Tore Svanberg: Our first question comes from Tore Svanberg with Stiefle, your line is open. Yes, thank you so much. Great to see the turn here.

Vincent Roche: Could you elaborate a little bit more on this sort of mixed environment, right? Because inventories have bottom, the same time and demand seems to be kind of mixed. So as you navigate through this period, could you elaborate a little bit on your visibility, how's backlog trending? Are you starting to see new products ramping more into production? Because these are typical signals. The signals that you want to see at the beginning of a new cycle. Yeah, thanks. Sorry.

Speaker Change: Great. Thank you very much.

Operator: Thank you very much. One moment for our next question.

Speaker Change: One moment for our next question.

Speaker Change: So, Joe, this is Rich, and I'll take a crack at that one.

Vivek Arya: Our next question comes from Vivek. Are you with Bank of America Securities? Your line is open. Thanks for taking my question. I'm been glad to hear about your optimism about turning the cyclical corner. Do you think the environment allows for sequential growth to continue into Q1? You know, seems like industrial could grow. Autos are not sure given some of the bookings commentary, and consumer tends to be down seasonally.

Speaker Change: Our next question comes from Vivek Arya with Bank of America Securities. Your line is open.

Speaker Change: So, just to level set a little bit, you know, from our perspective and what we're, seeing in the market, cars continue to become more electric and software-defined, which is also driving our semi-content growth, largely trying to address increased battery densities, more sensors, displays, and we do expect that that is going to be a long-term tailwind to our business.

Vivek Arya: Thanks for taking my question I'm glad to hear about your optimism about turning the cyclical corner do you think the environment allows for sequential growth to continue into Q1, it seems like industrial could grow autos im not sure given some of the bookings.

Speaker Change: We're working with traditional suppliers and disruptors to enable the necessary intelligence for the new grid from decentralized power plants to the distribution edge.

Vincent Roche: Well, I see the first and foremost, we run this company on POS signals. That's how we plan our production, how we run the company operationally. So we pay very, very close attention to what's happening in terms of the end market demand. And, you know, my confidence has increased since last quarter that indeed, 2Q was the, was the cyclical bottom. You know, we've exited 3Q with very, very lean channel inventory. We've taken emergency of our own balance sheet.

Speaker Change: However, and this is where we're starting to see some of the pullback, the vehicle market, has softened in the near term. We're seeing our customers pull back on their production, and at this point, we're seeing them start to choose to burn off some inventory.

Speaker Change: We're leveraging our analog and algorithm capabilities in cutting edge energy monitoring and management solutions.

Inventory and consumer tends to be down seasonally so just conceptually how should we model the shape of.

Speaker Change: Additionally, our battery management technology increases capacity and improves energy utilization in the grid's renewable energy storage systems.

Richard Puccio: So just conceptually, how should we model the shape of this recovery into Q1? Thanks. Thank you. Yeah, well, at this point, you know, it's hard to call, given that the environment is still a little, that's it, a little bit of this equilibrium. But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the first quarter, and then, you know, bounce back in the second. I think that's the, that's the sentiment, but overall, you know, I maintain my outlook that we would see at-risk growth here in 25. If I know how to be a little about a seasonal decline, it's been a few years now; you've seen seasonal trends in our business.

Speaker Change: The company into Q1, thank you.

Speaker Change: This reimagined intelligent grid of the future has potential to expand our sound by over ten billion dollars and creates tailwinds for our energy franchise for many years to come.

Speaker Change: Yes, good point.

Speaker Change: It's hard to call given that the environment is still a little.

Speaker Change: Let's say, there's a bit of this equilibrium.

But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the first quarter.

Vincent Roche: So we're positioned with, with a very, very healthy backlog of inventory on our own balance sheet. So that the anticipated demand, absurdity, expect in 25. We're very, very well equipped and ready to meet that. So, you know, in four in the fourth quarter, as we've said, we expect to see continued sequential growth. And indeed, we also see, I think, particularly in the industrial area, continued improvement on customer inventory levels. So look at, it's all the, the whole recovery, the, you know, the ramp of the recovery will depend on the macro situation.

Speaker Change: Then a bounce back in the second.

Speaker Change: I think thats, the thats the sentiment, but overall.

Speaker Change: I maintain my outlook that we can see a brisk growth year in 'twenty five.

Speaker Change: Hope you all about the seasonality question. It's been a few years now and have you seen a seasonal trend in our business. You are right. If you look back at the past 10, 15 years for Adi consumers down, 10% plus sequentially in <unk> and the <unk> markets of industrial auto and calmed down low single digits, and then Thats, probably don't believe today that would be any better than seasonal given where we are today.

Richard Puccio: You're right, if you look back or have had 10, 15 years or 80, I consumer down 10% plus the quenchedly in one queue, and to be the market of industrial, auto and comms, or down low single digits. And since then, it's probably the most elite data that would be any better than seasonal in where we are today, but we'll update you in 90 days of how we feel about one queue. Yeah, I think the big marginator for us will be what happens in industrial in particular, and what I can tell you is that the various C-suite conversations I've had with our industry and customers would suggest that their optimism is also strong for 25.

Speaker Change: Given the synergies across our industrial portfolio, our pace of innovation and the emergent signs of Marcus recovery, we're optimistic for our industrial business as it has turned the corner and twenty-five will be a roll of growth year.

Speaker Change: But we'll update you in 90 days and how do you feel about lung.

Speaker Change: The big multi matter for us will be what happens in industrial in particular, and what I can tell you is that.

Vincent Roche: But nonetheless, given the design wins, we've, we've a record design win pipeline in the company. So we're facing many, many secular tailwinds with a very strong pipeline, very, very good supply line. And with a very, very lean inventory on the customer's balance sheet. So that gives me the optimism to worry that we're very, very well positioned coming into the new year. Thank you.

The various C suite conversations I've had with our industrial customers would suggest that their optimism is also strong.

Speaker Change: So, in closing, our investments in high-performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle and will propel us into the future.

Operator: One moment for our next question.

Operator: Thank you.

Speaker Change: Thank you.

Timothy Arcuri: One moment for our next question. Our next question comes from Timothy Arkari with UBS.

Speaker Change: One moment for our next question.

Speaker Change: Our commitment to our customer success and to impact the innovation will be the path that carries us there ultimately increasing long-term shareholder value.

Our next question comes from Timothy Arcuri with UBS. Your line is open.

Speaker Change: So, we are seeing that, right?

Speaker Change: The softness is evidenced in our results.

Operator: Your line is open. Thanks a lot. I just wanted to ask on that answer.

Speaker Change: And so with that, I'm going to turn it over to Rich who take you through the numbers.

Timothy Arcuri: Thanks, a lot I just wanted to.

Timothy Arcuri: Ask on that answer so you were above seasonal in fiscal Q3 or above seasonal in fiscal Q4, it sounds like youre not willing to commit that youre going to be above seasonal in fiscal Q1, the street's modeling like five or 6% above seasonal for fiscal Q1 was there something that happened in bookings did bookings like slow in the last couple of weeks or the last month.

Operator: So you were above seasonal and fiscal queue three, or above seasonal and fiscal queue three.

Rich: Thank you, Vince.

Richard Puccio: So fiscal queue four sounds like you're not willing to commit that you're going to be about seasonal and fiscal queue one. The streets modeling, like five or six percent above seasonal four, you know, fiscal Q1. Was there something that happened in bookings?

Joseph Moore: Our next question comes from Joseph Moore with Morgan Stanley, your line is up. Thank you. My question is on the trajectory of automotive versus industrial. It seems like automotive entered into inventory correction a little bit later, and so far has been much less severe. I guess you talked about some ongoing headwinds in that space. Can you just talk about what overall drawdown might you expect in automotive and where are we and customers kind of growing down safety sock inventory?

Speaker Change: Auto has been down year over year for two straight quarters, and we expect it will be down again in 4Q, and from a bookings perspective, we did see a decline in bookings in auto. In particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios, and we expect that that's going to continue into at least the 4Q, particularly when you consider the challenging purchasing environment that currently exists for customers.

Rich: Let me add my welcome to our third quarter earnings call.

Speaker Change: However, to your question around the peak to trough, you know, unless SAR returns to, you know, to pandemic levels, you know, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Richard Puccio: Did bookings like slow in the last couple weeks or the last month or something to make you not want to commit to the fact that fiscal queue one would be about seasonal or just that it's 90 days away and you just don't want to comment on it. Thanks.

Rich: Third quarter revenue of 2.31 billion came in above the midpoint of our outlook, finishing up 7 percent sequentially and down 25 percent year over year. Industrial represented 46 percent of revenue in the third quarter, finishing up 6 percent sequentially and down 37 percent year over year.

Speaker Change: Something to make you not want to commit to the fact that fiscal Q1 would be about seasonal or just that it's 90 days away.

Rich: Every major application increased sequentially except for automation, which declined at a much slower pace than it had in previous quarters.

Speaker Change: Can you just don't want to comment on it.

Speaker Change: You know, the underlying secular growth trends that I described, you know, driving higher semi-content.

Rich: Automotive represented 29 percent of revenue, finishing flat sequentially and down 8 percent year over year.

Richard Puccio: I'll start out on the street expectations, and we've enriched on the little bookings. We never got in one queue. I think the street make up the street expectation for one queue. I think the street is everyone better than seasonal for a calendar for two or fiscal one queue. I'm in hope of a snapback. I would say that there are things that change in 90 days, but we're off to miss about 25 in a full year. We just don't know the above seasonal in that outlook for a good year and 25.

Speaker Change: I'll start out on the street expectations, and then Rick talked.

Speaker Change: Also, we've continued to see more penetration in value capture across all vehicle types, whether it's ICE, plug-in hybrid electric, or full electric, in the fastest growing applications.

Speaker Change: If you think about that, ADAS, digital cockpit, and electrification.

Rick: Our level of bookings, we never guide once you I think the street right down the street expectation for <unk> I think the street is everyone a better than seasonal from a calendar fourth your fiscal <unk> on a whole lot of other snapback I would say, yes. There are things that have changed in 90 days, but we're optimistic about 25% of full year. We just don't know above seasonal in that outlook for a good year in 'twenty five.

Speaker Change: So, we will be down, but we don't expect that, the cycle depth to be as severe as we saw, for example, in industrial.

Richard Puccio: So Joe, this is Richard. I'll take your crack at that one. So I'll just a level set a little bit, you know, from our perspective and what we're seeing in the market cars, continue to become more electric and software defined, which is also driving our semi-content growth largely trying to address increased battery densities, more sensors displayed. And we do expect that that is going to be a long-term tailwind to our business.

Speaker Change: We saw continued double-digit growth year over year for our industry leading connectivity and functionally safe power plants.

Speaker Change: Great.

Richard Puccio: That's the rich go through some of the booking dynamics. From a bookings perspective, you know, up until Q2, as we talked about, we've seen three straight quarters of broad-based bookings improvement. However, Q3 was different. We saw continued bookings growth for industrial, consumer, and communications, but we did see automotive orders decline, which resulted in a modest drop in our total bookings during the quarter. We did still end with a book-to-bill around parity. You know, if I look at it from a geographic perspective, regionally, bookings were the weakest in Europe. America's was modestly weaker, which offset bookings growth in Asia.

Rich: I'll pass it to rich colors on the book and dynamics, yes, so from a Tim from a bookings perspective up until Q2 as we talked about we've seen three straight quarters of broad based broad based bookings improvement. However, Q3 was different we saw continued bookings growth for industrial consumer and communications.

Speaker Change: Thank you very much.

Speaker Change: Performance.

Richard Puccio: However, and this is where we're starting to see some of the pullback. The vehicle market has had softened in the air term. We're seeing our customers pullback on the production. And at this point, we're seeing them start to choose to burn off some inventory. So we are seeing that, right? The softness is evidence in our results. By auto been down year over year for two straight quarters, and we expect it will be down again in 4Q.

Rich: But we did see automotive orders decline, which resulted in a modest drop in our total bookings during the quarter.

Speaker Change: Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses.

Speaker Change: Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year. Slowing customer inventory digestion enabled both wireless and wireline growth sequentially.

Rich: We did sell and with a book to bill around parity.

Speaker Change: And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022.

Speaker Change: And I guess as a follow-up, are you seeing that behavior any, different regionally?

Speaker Change: We saw diversified growth across applications with notable strength and portables and gaming.

Rich: Look at it from a geographic perspective regionally bookings were the weakest in Europe.

Speaker Change: Is the China automotive market different than the western markets in terms of where they are?

Speaker Change: Now let's move from the top line to the rest of the P&L.

Rich: Americas was modestly weaker which offset bookings growth in Asia.

Speaker Change: Third quarter growth margin with 67.9% up 120 basis points sequentially driven by higher revenue, higher utilization, and favorable mix.

Richard Puccio: And from a bookings perspective, we see a decline in bookings in auto. In particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios. When we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers. However, to your question around the peak to trough, you know, unless our returns to, you know, to pandemic levels, you know, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Operator: Thanks a lot. One moment for our next question.

Speaker Change: Thanks, a lot.

Speaker Change: Operating expenses in the quarter were 619 million, up modestly sequentially, driven primarily by higher variable compensation.

One moment for our next question.

Speaker Change: No.

Toshiya Hari: Our next question comes from Toshai Harry with Goldman Sachs. Hey, good morning. Thanks for taking the question. It was good to see inventory on your balance sheet come down again, and you guys spoke to channel inventory coming down as well.

Speaker Change: Our next question comes from <unk> Hari with Goldman Sachs. Your line is open.

Speaker Change: I'd say overall, it's pretty unanimous across all markets.

Hey, good morning, Thanks for taking the question.

Speaker Change: Inventory decreased $51 million sequentially, and days declined to 178 from 192. As planned, we reduced channel inventory further this quarter, with weeks ending near the low end of our 7- to 8-week target.

Speaker Change: Operating cash flow for the quarter and trailing 12 months was $0.9 billion and $4 billion. CapEx for the quarter and trailing 12 months was $154 million and $1 billion respectively.

Hari: For fiscal 24, CapEx is tracking to our $700 million plan, which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers.

Hari: Not included in these figures are the anticipated benefits from both the European and U.S. CHIPS Act.

Hari: It was good to see inventory on your balance sheet come down again, you guys spoke to channel inventory coming down as well.

Hari: During the last 12 months, we generated $2.9 billion of free cash flow, or 30% of revenue. Over this same time period, we have returned $2.8 billion via dividends and share repurchases.

Hari: As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Richard Puccio: As you look forward, what are your thoughts on utilization rates internally? How are you engaging with your foundry partners and what's embedded in your October quarter outlook as it pertains to the channel? Thank you. So, you know, as I noted in the last call, you know, we said both utilization and, in fact, growth margins and bottomed in Q2, and that is proving to be true. From an inventory in the channel perspective, you know, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at 7 to 8 weeks.

Speaker Change: As you look forward what are your thoughts on on utilization rates internally.

Richard Puccio: You know, the underlying secular growth trends that I described, you know, driving higher semi-content. Also, we've continued to see more penetration and value capture across all vehicle types, whether it's ICE, plug-in hybrid of electric or full electric, in the fastest growing applications. If you think about that, ADAS, digital cop and electrification. So we will be down, but we don't expect that the cycle depth to be as severe as we saw it, for example, in industrial.

Speaker Change: How are you engaging with your foundry.

Speaker Change: Partners and what's embedded in your October quarter outlook as it pertains to.

Speaker Change: Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at 70 million and the tax rate for the quarter was 10.8%. The net result was the EPS of $1.58 which finished near the high end of our outlook.

Speaker Change: The channel Thank you.

Speaker Change: So.

Speaker Change: I noted in the last call.

Speaker Change: We had both utilization in fact gross margins and bottled bottomed in Q2.

Speaker Change: Our financial position is solid and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than 2.5 billion of cash and short term investments and a net leverage ratio of 1.2. Inventory decreased 51 million dollars sequentially and days declined to 178 from 192.

Speaker Change: As planned, we reduced channel inventory further this quarter with weeks ending near the low end of our 7 to 8-week target.

Speaker Change: And that is that is.

Speaker Change: Proving to be true from an from an inventory in the channel perspective. The expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at seven to eight weeks.

Speaker Change: Operating cash flow for the quarter and trailing 12 months was 0.9 billion and 4 billion respectively. CapEx for the quarter and trailing 12 months was 154 million and 1 billion respectively.

Speaker Change: For fiscal 24, CapEx is tracking to our $700 million plan which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers.

Speaker Change: Not included in these figures are the anticipated benefits from both the European and US chips acts.

Speaker Change: During the last 12 months, we generated 2.9 billion of free cash flow or 30% of revenue. Over the same time period, we have returned 2.8 billion via dividends and share repurchases.

Richard Puccio: Great. Thank you very much. And I guess was a follow-up. Are you seeing that behavior any different regionally is the China automotive market, different than the Western markets in terms of where they are? No, I'll say overall, it's pretty inanimate. So across all markets, I'll say China automotive did okay. We talked about some design and grantee there, something offset some of the softness. But it's an overall comment auto a bit weaker today than it was 90 days ago, whether George America, Europe or Asia. Great. Thank you very much.

Richard Puccio: I think we've mentioned previously if we saw continued improvements, we would start shipping to end demand. So, we will do that in the fourth quarter.

Speaker Change: And I think we've mentioned previously if we saw continued improvements we would start shipping to end demand. So we will do that.

Speaker Change: As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Operator: One moment for our next question.

Speaker Change: In the fourth quarter.

Speaker Change: Now I will turn to the fourth quarter outlook. Revenues expected to be 2.4 billion plus or minus 100 million up 4% sequentially at the midpoint.

Richard Puccio: Thank you. Obviously, when it comes to, you know, the balance, we've a hybrid manufacturing system which enables us to keep utilization rates as high as possible internally, and, you know, when our factories run out of capacity, then we have lots of choices externally for silicon capacity. So, you know, obviously, we've got a lot of inventory on the balance sheet, and our factories are, you know, well, well capable of improving utilization rates as the demand continues to improve over the coming quarter.

Speaker Change: Thank you obviously when it comes to.

Speaker Change: We expect self-fruit to be roughly equal to sell in this quarter.

Speaker Change: The balance we have a hybrid manufacturing system.

Speaker Change: Which enables us to keep utilization rates as high as possible internally.

Speaker Change: Our factories run out of capacity, then we have lots of choices externally.

Vivek Arya: Our next question comes from Vivek Arya with Bank of America Security. Your line is open. Thanks for taking my question. I'm very glad to hear about your optimism about turning the cyclical corner. Do you think the environment allows for sequential growth to continue into Q1? You know, seems like industrial could grow. Autos are not sure given some of the bookings commentary and consumer tends to be down seasonally. So just conceptually, how should we model the shape of this recovery into Q1?

Speaker Change: For silicon capacity.

Speaker Change: Obviously, we've got a lot of inventory on the balance sheet and our factories are.

Speaker Change: Well capable of improving utilization rates of the demand continues to improve over the coming quarters.

Speaker Change: At the midpoint on a sequential basis, we expect industrial and consumer to increase communications to be flatish and automotive to decrease.

Speaker Change: Operating margins expected to be 41% plus or minus 100 basis points.

Richard Puccio: As a quick follow-up, I think your internal utilization rates last quarter were in the mid-50s, if I'm not mistaken. Are you at or above 60 percent at this point, or we're coming on that. Give an outlook on utilization in order to be given the rate. I would say there were lower last quarters who would hire here in 3 and 4-2, and there were well-off to the normal levels of law, called 85 90-percent utilization.

Speaker Change: As a quick follow up I think your internal utilization rates last quarter were in the mid fifties, if im not mistaken are you at or above 60% at this point or.

Speaker Change: Our track rate is expected to be between 11 and 13%, and based on these inputs, EPS is expected to be $1.63 plus or minus 10 cents.

We don't comment on that given outlook on utilization, nor do we give them. The right I would say there were lower last quarter moving higher here in three and four here and.

Speaker Change: In closing, our third quarter results and fourth quarter outlook support our view that we have passed the cycles trough.

Vivek Arya: Thanks. Thank you. Yeah, well, at this point, you know, it's hard to call, given that the environment is still a little, that's it, a little bit of this equilibrium. But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the first quarter, and then, you know, bounce back in the second. I think that's the, that's the sentiment, but overall, you know, I maintain my outlook that we would see at risk growth here in 25.

Speaker Change: They are well off the normal.

Speaker Change: However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Speaker Change: Levels of I'll call, it 85% to 90% utilization.

Richard Puccio: And if you've got to thank me, I'll give you some little context: what does it mean at utilization ramp? What does it mean for gross margin? If you look at the decline of gross margins over the past year or so, about half the decline in relation to utilization; the other half relates to mix. So, you can see, at utilization, pick up what that means for gross margin expansion.

And then you got it thanks and content I guess that'll be obviously more contact with what does it mean adulation ramp with any for gross margin. If you look at the decline in gross margins over the past year or so about half the decline relates to utilization. The other half relates to mix. So you can see adulation pick up what that means for gross margin expansion.

Speaker Change: I will now get it back to Mike for Q&A.

Speaker Change: Thanks, Rick.

Vivek Arya: If it's not going to be a little bit of a seasonal decline, it's been a few years now, it's been a seasonal trend in our business. You're right, if you look back, or have had 10, 15 years or 80, I consumer down 10% plus the quenchedly in one queue. And to be the market of industrial, auto and comms, or download single digits. And since then, it's probably going to lead to data.

Helpful. Thank you.

Operator: Helpful, thank you.

Speaker Change: Let's get to our Q&A session.

Operator: One moment for our next question.

Speaker Change: One moment for our next question.

Hari: I'd say China did okay.

Speaker Change: We want to tell you to limit yourself to one question in order to allow for additional persistence on the college morning.

Hari: We toggled some design with ramping there, so that's helping offset, some of the softness.

Stacy Raskin: Our next question comes from Stacy Raskin with Bernstein Research; your line is open. Hi guys, thanks for taking my question. I was hoping you'd give us a little more granularity on the segment guide for next quarter, and then you sit in industrial and then consume your app and auto down. Any more for the color that like is consumer usually up, is that double digits, is industrial at mid single, auto down like low single, like big, any further color you could give us some respect and should be helpful.

Stacy <unk>: Our next question comes from Stacy <unk> with Bernstein Research Your line is open.

Hari: But as an overall comment, auto is a bit weaker today than it was 90 days ago, whether it's North America, Europe, or Asia.

Hari: Great.

Speaker Change: If you have a follow-up question, please refuse.

Hari: Thank you very much.

Mike: We will take your question and time allows.

Vivek Arya: We'll be any better than seasonal in where we are today, but we'll update you in 90 days of how we feel about one queue. I think the big motivator for us will be what happens in industrial in particular. And what I can tell you is that[inaudible] 4. Sounds like you're not willing to commit that you're going to be above seasonal in fiscal Q1. The streets modeling like 5 or 6% above seasonal for fiscal Q1.

Stacy <unk>: Hi, guys. Thanks for taking my questions.

Hari: One moment for our next question.

Speaker Change: With that, through our first question, please.

Stacy <unk>: Now I will turn to the fourth quarter outlook. Revenue is expected to be $2.4 billion, plus or minus $100 million, up 4% sequentially at the midpoint. We expect sell-through to be roughly equal to sell-in this quarter. At the midpoint, on a sequential basis, we expect industrial and consumer to increase, communications to be flattish, and automotive to decrease.

Speaker Change: For those participating by telephone dial-in, if you have a question, please press star 1-1 on your telephone to enter the queue.

Speaker Change: Double digit is industrial up mid single auto down by low single I think any further color you could give us some of the segments would be helpful.

Stacy <unk>: Our next question comes from Vivek Arya with Bank of America Securities.

Stacy <unk>: Your line is open.

Stacy <unk>: Thanks for taking my question.

Stacy <unk>: I've been glad to hear about your optimism about, turning the cyclical corner.

Richard Puccio: Sure, Stacy, I'll grab that one. Yeah, so let's start with consumer; you're right. And two of us are about double digits again, about 10% or so, embedded in our outlet. And Delcio has another, I'll call solid growth quarter, probably high single digits sequentially. Three of these is about flatish plus minus, depending on how things go here, and all those, the week market as we discussed and hit a little bit early on to qualify down low single digits sequentially. Got it, folks, helpful.

Speaker Change: Sure I'll grab that one yes, so let's start consumer you can see was up about double digits again about 10% ourselves embedded in our outlook industrial had another I'll call. It solid growth quarter, probably high single digits sequentially communications about flattish plus or minus depending on how things go here and the weak market as we discussed it a little bit early on a qualified down low singles.

Stacy <unk>: Do you think the environment allows for sequential growth to continue into Q1?

Stacy <unk>: You know, it seems like industrial could grow.

Stacy <unk>: Autos, I'm not sure, given some of the bookings, commentary, and consumer tends to be down seasonally.

Stacy <unk>: So, just conceptually, how should we model the shape of this recovery into Q1?

Stacy <unk>: Thank you.

Speaker Change: If your question has been answered, you wish to be removed from the queue, please press star 1-1 again.

Stacy <unk>: Thank you.

Speaker Change: Sequentially.

Stacy <unk>: Yeah.

Stacy <unk>: Well, at this point, you know, it's hard to call, given that the environment is still, a little... Let's say there's a bit of disequilibrium, but I think generally speaking, we would probably, expect to see a bit of a seasonal decline in the first quarter, and then, you know, a bounce back in the second, and I think that's the sentiment, but overall, you know, I maintain my outlook that we would see a brisk growth year in 2025.

Speaker Change: If you're listening on the speaker phone, please pick up the handset when asking your question.

Stacy <unk>: And I'll help you out a little bit on the seasonality question.

Speaker Change: Got it that's helpful and if I could get a quick follow up just how are you thinking about opex growth into next quarter. It was it was pretty well under control this quarter.

Stacy <unk>: It's been a few years now since we've seen seasonal trends in our business.

Richard Puccio: If I can give a quick follow-up just, how are you thinking about opx growth in the next quarter? It was; it was pretty well under control this quarter. Is there anything that drives that up, like what do you think about the OPX trends, as you're going to the end of the year?

Speaker Change: We'll pause for just a moment to compile our Q&A roster.

Vivek Arya: Was there something that happened in bookings? Did bookings like slow in the last couple weeks or the last month or something to make you not want to commit to the fact that fiscal Q1 would be above seasonal or just that it's 90 days away and you just don't want to comment on it. Thanks. I'll start out on the street expectations and we've enriched on the little bookings. We never got in one queue.

Speaker Change: Our first question comes from Tore Svanberg with Stiefle, your line is open.

Speaker Change: Is there anything that drives that up like what do you think about the opex trends as we go into the end of the year.

Stacy <unk>: You're right.

Richard Puccio: Stacy, yeah, I'll take that one. So, you know, obviously, exceeded the high end of our look in the third quarter, you know, given the beat on gross margin and revenue, as well as our continued cost management. Our Q4 guide obviously does imply a modest margin contraction sequentially, despite our expectation for higher revenue and gross margin. You know, the main driver of that is our increase for merit increases that will go into effect during the fourth quarter. So, that will be a downward pressure as we head into the fourth quarter. I mean, the big margin on our opx, Stacy, is obviously the bonus.

Speaker Change: Yes, I'll take that one so obviously, we exceeded the high end of our outlook in the third quarter.

Stacy <unk>: If you look back over the past 10, 15 years for ADI, consumers down 10% plus sequentially, in one queue, and the B2B markets of industrial, auto, and comms are down low single digits, and as Vincent said, there's probably...

Stacy <unk>: There's no belief today that we'd be any better than seasonal, given where we are today, but, we'll update you in 90 days on how we feel about one queue.

Stacy <unk>: Yeah, I think the big modulator for us will be what happens in industrial in particular, and what I can tell you is that the various C-suite conversations I've had with our industrial customers would suggest that their optimism is also strong for 2025.

Speaker Change: Yes, thank you so much.

Vivek Arya: I think the street make up the street expectation for one queue. I think the street is everyone better than seasonal for a calendar for two or fiscal one queue. I'm in hope of a snapback. I would say that there are things that change in 90 days, but we're off to miss about 25 and a full year. We just don't know if the above seasonal in that outlook for a good year and 25.

Speaker Change: Given the beat on gross margin and revenue as well as our continued cost management.

Speaker Change: Great to see the turn here.

Speaker Change: Could you elaborate a little bit more on this sort of mixed environment, right?

Speaker Change: Our Q4 guide, obviously imply a modest margin contraction sequentially.

Speaker Change: Despite our expectation for higher revenue and gross margin. The main driver of that is our increase.

Speaker Change: For Merit increases that will go into effect during the fourth quarter. So that will be that will be a downward pressure as we head into the fourth quarter I mean, the big margin hammer on our on our Opex Stacy is obviously the bonus.

Vivek Arya: That's the rich go through some of the bookings dynamics. Yeah. So from, from, from a bookings perspective, you know, up until Q2. I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I[inaudible] So, as I noted in the last call, we said both utilization and in fact growth margins had bottomed in Q2 and that is proving to be true.

Speaker Change: Because inventories have bottom, the same time and demand seems to be kind of mixed.

Richard Puccio: and that obviously, with declining profit and revenue over the past several quarters, that dropped accordingly. now, with increased growth and revenue and improvement in profitability, that will obviously increase, but that's self-funding, so to speak. How much do the OPEX go up then? For our fourth thorough outlook, out of the equitably increased in OPEX around 5 percent.

Yeah.

Speaker Change: <unk>.

Speaker Change: That obviously with the declining profit and revenue over the past.

Speaker Change: Several quarters.

Speaker Change: That dropped accordingly, now with with increase with growth in revenue and improvement in profitability.

Speaker Change: That will obviously increase but.

Speaker Change: Self funding so to speak.

Speaker Change: So how much of the Opex go up then.

Speaker Change: For our fourth our outlook.

Speaker Change: The quarterly increase in opex around around 5%.

Operator: That's great. Thank you so much; I appreciate it, guys.

Speaker Change: That's great. Thank you so much appreciate it guys.

Operator: One moment for our next question.

Speaker Change: Well remember foreign exchange.

Christopher Danely: Our next question comes from Chris Danely: what city your line has opened? Thanks, guys. First, just a little clarification on inventory in the auto market. Vincent said that I think at the beginning you talked about inventory being very lean out there, but then you're also saying that there's inventory digestion going on in the automotive market. Can you just expand on that a little bit? John, we've got that in the big topic of overall customer inventory, yeah I think every market is on a different cadence inventory digestion. We feel good about industrial consumer comms having normalized inventory levels. There are pockets on the auto side that still I'll call it digesting. The production levels have been cut with the past quarter of whether it's an ice car or an EV car, that impact inventory levels and desire to hold inventory on their balance sheets. And that standpoint Chris, I know a bit of anything to add.

Cristina <unk>: Our next question comes from Cristina <unk> with Citi. Your line is open.

Stacy <unk>: Thank you.

Hey, Thanks, guys first just a little clarification on inventory in the auto market Vince I said I think at the beginning you talked about.

Stacy <unk>: One moment for our next question.

Cristina <unk>: Inventory is very lean out there, but then youre also saying that there is inventory digestion going on.

Speaker Change: In the automotive market can you just expand on that a little bit.

Stacy <unk>: Our next question comes from Timothy Arcari with UBS.

Stacy <unk>: Your line is open.

Doug.

Vince: Overall customer inventory, yes, I think every market spot a different cadence that inventory digestion.

Stacy <unk>: Thanks a lot.

Stacy <unk>: I just wanted to ask on that answer.

Speaker Change: We feel good about industrial consumer comps haven't really normalized inventory levels. There are pockets on the auto side, it's still I'll call. It digesting I mean production levels have been cut over the past quarter, whether it's an ice car or an EV car that impact inventory levels and desire to hold inventory on their balance sheet.

Stacy <unk>: So, you were above seasonal in fiscal Q3. You're above seasonal in fiscal Q4.

Stacy <unk>: Sounds like you're not willing to commit that you're going to be above seasonal in fiscal Q1.

Stacy <unk>: The street's modeling like 5% or 6% above seasonal for fiscal Q1.

Speaker Change: So as you navigate through this period, could you elaborate a little bit on your visibility, how's backlog trending?

Vivek Arya: From an inventory in the channel perspective, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at 7 to 8 weeks. I think we'd mentioned previously if we saw continued improvements. We would start shipping to end demand, so we will do that in the fourth quarter. Thank you. Obviously, when it comes to the balance, we have a hybrid manufacturing system which enables us to keep utilization rate as high as possible internally.

That standpoint, Chris Arnold regimen can add.

Speaker Change: Are you starting to see new products ramping more into production?

Richard Puccio: I think, Chris, overall, we've seen the worst is behind us. I think in industrial, consumer, and comms markets, but automotive, I think, is a sector where we will see some inventory digestion issues into at least the early part of 2025.

Speaker Change: Yes, I think Chris overall, we've seen the worst is behind us I think.

Speaker Change: Because these are typical signals.

Chris Arnold: Industrial consumer and comms market.

Speaker Change: The signals that you want to see at the beginning of a new cycle.

Chris Arnold: But automotive I think is a sector, where we will see some inventory digestion issues into the at least the early part of 2025.

Speaker Change: Yeah, thanks.

Speaker Change: Sorry.

Richard Puccio: Great, thanks, that's helpful, and then just a quick clarification on industrial: how would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago? Is it roughly the same or has it improved a little bit? Chris, I would say visibility is pretty consistent, and as we talked about, we're seeing continuing growth sequentially across all of the sub elements of industrial, with the exception of automation, which we are seeing improvements, but not yet seeing growth. Got it, thanks, Rich.

Speaker Change: Great. Thanks, that's helpful. And then just a quick clarification on industrial how would you characterize your I guess bookings slash visibility on the industrial market now versus three months ago is it roughly the same or has it improved a little bit.

Speaker Change: Well, I see the first and foremost, we run this company on POS signals.

Vivek Arya: Obviously, when our factories run out of capacity, then we have lots of choices externally for silicon capacity. So obviously, we've got a lot of inventory on the balance sheet and our factories are well capable of improving utilization rates as the demand continues to improve over the coming quarter. As a quick follow-up, I think your internal utilization rates last quarter were in the mid-50s if I'm not mistaken. Are you at or above 60% at this point?

Speaker Change: Okay.

Rich: Hey, Chris this is rich.

Speaker Change: That's how we plan our production, how we run the company operationally.

Rich: I would say.

Chris Arnold: Visibility is pretty consistent.

Chris Arnold: And as we've talked about what we're seeing we're seeing continued continuing growth sequentially across.

Speaker Change: All of the sub sub sub elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth.

Speaker Change: So we pay very, very close attention to what's happening in terms of the end market demand. And, you know, my confidence has increased since last quarter that indeed, 2Q was the, was the cyclical bottom.

Chris Arnold: Got it thanks rich.

Speaker Change: You know, we've exited 3Q with very, very lean channel inventory.

Speaker Change: One of them one of them for our next question.

Operator: One moment, one moment for our next question.

Speaker Change: We've taken emergency of our own balance sheet.

Vivek Arya: We're coming on that. Give an outlook on utilization in order to be given the rate. I would say there were lower last quarters who would hire here in 3 and 4, 2. And there were well-off those that have done a normal level of the law calling 85 to 90% utilization. Thank you. I'll give you some little context. What does this mean? What does it mean for gross margin? If you look at the decline of gross margin over the past year or so, about half the decline in relation to utilization, the other half relates to mix. So you can see, as you take up what that means for gross margin expansion.

Speaker Change: Yeah.

Stacy <unk>: Was there something that happened in bookings?

Operator: Helpful, thank you.

Harlan Sur: Our next question comes from Harlan Sir with JetP Morgan; your line is open. Good morning, thanks for taking my question.

Harlan Sur: Our next question comes from Harlan sur with Jpmorgan. Your line is open.

Operator: One moment for our next question.

Stacy <unk>: Did bookings slow in the last couple of weeks or the last month or something to make you, not want to commit to the fact that fiscal Q1 would be above seasonal, or just that it's, 90 days away and you just don't want to comment on it?

Stacy <unk>: Thanks.

Harlan Sur: Good morning, and thanks for taking my question so for fiscal 'twenty, three China domestic consumption. It was about 18% of our total revenues it was the worst performing geography.

Richard Puccio: So for fiscal 23, China domestic consumption, this is about 18% of their total revenue. It was the worst performance geography. Last couple of quarters where bookings in China have been growing sequentially, did that translate into sequential revenue growth out of the region in the July quarter? And then looks like orders from the China region grew sequentially in July. How are they trending so far quarter to the date? Are you still seeing sort of positive signs out of this region? We continue to see strong performance from a bookings perspective in China. We did see double-digit growth across industrial, auto, and comms, being slightly offset by a decrease in consumer.

Stacy <unk>: I'll start out on the street expectations, and then Rich can talk a little about bookings.

Speaker Change: So we're positioned with, with a very, very healthy backlog of inventory on our own balance sheet.

Harlan Sur: Last couple of quarters bookings in China have been growing sequentially does that did that translate into sequential revenue growth out of the region in the July quarter, and then it looks like orders from the China region grew sequentially in July how are they trending so far quarter to date are you still seeing sort of positive signs out of this.

Speaker Change: So that the anticipated demand, absurdity, expect in 25.

Stacy <unk>: We never got to 1Q.

Speaker Change: We're very, very well equipped and ready to meet that.

Stacy <unk>: I think the street makes up the street expectation for 1Q.

Stacy <unk>: I think the street has everyone better than seasonal for a calendar 4Q or a fiscal 1Q, in the hope of a snapback.

Stacy <unk>: I would say, yeah, there are things that have changed in 90 days, but we're optimistic about, 25 as a full year.

Harlan Sur: Region.

Speaker Change: Yes, we excuse me, we continue to see strong performance from a bookings perspective in China.

Stacy Raskin: Our next question comes from Stacy Raskin with Bernstein Research. Your line is open. Hi guys. Thanks for taking my question. I was hoping to give us a little more granularity on the segment guide for next quarter and then you sit in industrial and then consume a rapid auto down. Any more further color on that is consumer usually up? Is that double digits? Is industrial at mid single, auto down by low single, like big? Any further color you could give us some respect and should be helpful. Sure Stacy, I don't have that one.

Stacy <unk>: We just don't know if it's above seasonal in that outlook for a good year in 25.

Speaker Change: We did see double digit growth across.

Speaker Change: Industrial auto.

Speaker Change: So, you know, in four in the fourth quarter, as we've said, we expect to see continued sequential growth.

Speaker Change: And comps being slightly offset by.

Stacy <unk>: I'll pass it to Rich to go through some of the bookings dynamics. From a bookings perspective, up until Q2, as we talked about, we'd seen three straight, quarters of broad-based bookings improvement. However, Q3 was different. We saw continued bookings growth for industrial, consumer, and communications, but we did see, automotive orders decline, which resulted in a modest drop in our total bookings during the quarter. We did still end with a book-to-bill around parity.

Stacy <unk>: If I look at it from a geographic perspective, regionally, bookings were the weakest in Europe.

Speaker Change: A decrease in consumer so it can China that has continued to perform well and our design win in our pipeline there are very strong.

Stacy <unk>: America's was modestly weaker, which offset bookings growth in Asia.

Stacy <unk>: Thanks a lot.

Richard Puccio: So China and that is continued to perform well, and our design win and our pipeline there are very strong.

Operator: Yes, thank you.

Speaker Change: Yes. Thank you.

Stacy <unk>: One moment for our next question.

Joshua Buchalter: One moment for our next question. Our next question comes from Joshua Buchalter with TD Cowan; your line is open. Hey guys, thanks for taking my question.

Speaker Change: One moment for our next question.

Speaker Change: And indeed, we also see, I think, particularly in the industrial area, continued improvement on customer inventory levels.

Richard Puccio: Yeah, so let's start consumer. You're right. And two of them about double digits again, about 10% or so embedded in our outlet. And don't you have another, I'll call solid growth quarter, probably a high single digits, clinically. Three of these is about flattest plus my head, depending on how things go here. And all of the week market as we discussed and hit a little bit early on the call, probably down low single digits, eventually. Got it. Top.

Speaker Change: Okay.

Speaker Change: So look at, it's all the, the whole recovery, the, you know, the ramp of the recovery will depend on the macro situation.

Speaker Change: But nonetheless, given the design wins, we've, we've a record design win pipeline in the company.

Our next question comes from Joshua bus shelter with TD Cowen Your line is open.

Stacy <unk>: Our next question comes from Toshihari with Goldman Sachs.

Speaker Change: So we're facing many, many secular tailwinds with a very strong pipeline, very, very good supply line.

Stacy <unk>: Your line is open.

Stacy <unk>: Hey, good morning.

Speaker Change: Hey, guys. Thanks for taking my question.

Stacy <unk>: Thanks for taking the question.

Stacy <unk>: It was good to see inventory on your balance sheet come down again, and you guys spoke, to channel inventory coming down as well.

Richard Puccio: Maybe you can walk through some of the puts and takes into gross margin into the October quarter. Back the envelope, I'm getting to roughly stable, sequentially, despite the revenue increase in, and I imagine, utilization is improving as well. How much of that is mixed and, in particular, any changes in the pricing environment as we get sort of through the suggestion into what I would imagine is the more competitive environment. Thank you. Yeah, I would say it's, you know, as we previously mentioned, it is significantly impacted by the favorable mix. You know, obviously we get a benefit out of the revenue upside.

Speaker Change: Maybe you could walk through some of the puts and takes into the gross margin.

Speaker Change: October quarter back the envelope on getting to roughly stable sequentially. Despite the revenue increase and I imagine utilizations improving as well.

Stacy <unk>: As you look forward, what are your thoughts on utilization rates internally?

Richard Puccio: If I could give a quick follow up just, how are you thinking of the op x growth in the next quarter? It was, it was pretty well under control this quarter. Is there anything that drives that up like what do you think about the op x trends, as you're going to the end of the year? So, Stacy, I'll take that one. So, you know, obviously we exceeded the high end of our look in the third quarter, you know, given the beat on gross margin and revenue, as well as our continued cost management.

Speaker Change: Much of that is mix and in particular any changes in the pricing environment as we get sort of through this digestion into what I would imagine it is a more competitive.

Speaker Change: Environment. Thank you.

Stacy <unk>: How are you engaging with your foundry partners, and what's embedded in your October quarter, outlook as it pertains to the channel?

Speaker Change: Yes, I would say it.

Speaker Change: As we previously mentioned it is it is.

Speaker Change: Significantly impacted by the favorable mix.

Stacy <unk>: Thank you.

Stacy <unk>: So, you know, as I noted in the last call, you know, we said both utilization and, in, fact, growth margins had bottomed in Q2, and that is proving to be true.

Speaker Change: Obviously, we get a benefit out of the revenue upside.

Richard Puccio: Our Q4 guide, obviously does imply a modest margin contraction sequentially, despite our expectation for higher revenue, gross margin. You know, the main driver for that is our increase for merit increases that will go into effect during the fourth quarter. So, that will be a downward pressure as we head into the fourth quarter. I mean, the big margin on our op x, Stacy, is obviously the bonus, and you know that obviously with declining profit and revenue over the past several quarters, that dropped accordingly now with increase with growth in revenue and improvement in profitability, that will obviously increase but that's self-funding so to speak. How much of the topics go up then? For our fourth thorough, I'll look out at the equitably increase in affects around 5%. That's great. Thank you so much.

Speaker Change: Okay.

Richard Puccio: From a pricing perspective, you know, and I talked about this before, we continue to see pretty stable pricing, and I do expect that to continue. Obviously, it's different by geography and for big and small customers, but on balance, we are continuing to see stable pricing and expect we will see that going forward. You know, once our products are installed in a particular customer's design, they tend to, I mean, in the industrial business, they will stay for decades, and pricing is very, very stable there. Where the pricing or the competitiveness of itself is for new, new sockets, new wins, but nothing is new there.

From a pricing perspective.

Stacy <unk>: From an inventory in the channel perspective, you know, the expectation is we will ship, to end demand. We are currently at the very low end of our range in the channel at seven to eight weeks. And I think we've mentioned previously, if we saw continued improvements, we would start, shipping to end demand. So we will do that in the fourth quarter.

Speaker Change: I've talked about this before we continue to see pretty stable pricing and I do expect that to continue obviously, it's different by geography and for big and small customers, but on balance we are continuing to see stable pricing and I expect we will see that going forward.

Operator: Appreciate it guys.

Stacy <unk>: So obviously, when it comes to, you know, the balance, we have a hybrid manufacturing, system, which enables us to keep utilization rates as high as possible internally, and, you know, when our factories run out of capacity, then we have lots of choices externally for silicon capacity.

Christopher Danely: One moment for our next question.

Speaker Change: Our products are installed in the particular customers design that 10 2 million in the industrial business through safer.

Speaker Change: For decades on pricing is very very stable, there, where the pricing or the competitiveness.

Speaker Change: As for new new sockets, new wins, but nothing is new there.

Speaker Change: We as a company.

Richard Puccio: You know, we as a company, we play in the high end of the game in terms of innovation, service, support, and so on and so on. That's the game we play, and the game we will continue to play. You know, we significantly higher ASPs than most. You know, those ASPs increase with each new generation of products. So I think overall, as Rich said, the pricing environment is stable, and so I don't see that there's a headwind on margin. Thank you.

Speaker Change: We play in the high end of the game in terms of innovation service.

Speaker Change: Core concerns before so.

Speaker Change: That's the game we play in the game, we will continue to play significantly higher asps than most.

Stacy <unk>: So, you know, obviously, we've got a lot of inventory on the balance sheet, and our factories, are, you know, well, well capable of improving utilization rates as the demand continues to improve over the coming quarters.

Speaker Change: And those asps increase with each new generation of product so.

Stacy <unk>: As a quick follow-up, I think your internal utilization rates last quarter were in the, mid-50s, if I'm not mistaken.

Speaker Change: I think overall as rich said the pricing environment stable.

So I don't see that as a headwind on margin.

Vincent Roche: Our next question comes from Chris Danely, what city your line is open? Thanks guys. First just a little clarification on inventory in the auto market. Vincent, I think at the beginning you talked about inventory is very lean out there, but then you're also saying that there's inventory digestion going on in the automotive market. Can you just expand on that a little bit? John, we've got that. There's a big topic overall, customer inventory.

Stacy <unk>: Are you at or above 60% at this point, or...

Stacy <unk>: We have to comment on that.

Stacy <unk>: Given our look on utilization in order to give the rate, I would say they were lower, last quarter, moving higher here in the three and four Q.

Speaker Change: Thank you.

Operator: Thanks, Josh.

Speaker Change: Thanks, Jeff I think Thats all the time, we have for questions today I have a little more time, but it's August you guys can go out there and enjoy the weather.

Operator: I think that's all the time we have for questions today. That way a little more time, but it's August. You guys can go out there and enjoy the weather.

Stacy <unk>: And they're well off the normal level, the low, call it 85 to 90% utilization.

Speaker Change: And with a very, very lean inventory on the customer's balance sheet.

Stacy <unk>: And if you want some context, I guess I'll give you some little context, is what does, this mean as utilization ramp, what does it mean for gross margins?

Operator: So thanks for joining us, Paul, for future calls with you guys, and have a great rest of the summer. Thank you.

Speaker Change: So thanks for joining the call and look forward to future calls with you guys and have a great rest of summer. Thank you.

Operator: This concludes today's Analog Devices conference call. You may now disconnect. Thank you.

Speaker Change: This concludes today's analog devices conference call you may now disconnect.

Stacy <unk>: If you look at the decline of gross margins over the past year or so, about half of the, decline relates to utilization, the other half relates to mix. So you can see as utilization pick up what that means for gross margin expansion.

Vincent Roche: Yeah, I think every market spawns in different cases, inventory digestion. We feel good about industrial consumer comms have really normalized inventory levels. There are pockets on the auto side. I'll call it digestion. I mean production levels have been cut with the past quarter, whether it's an ice car or an EV car. That impact inventory levels and desire to hold inventory on their balance sheets. That's the end point Chris. I know a bit of anything to add. Yeah, I think Chris overall, you know, we've seen the worst is behind us I think in industrial consumer incomes markets.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: So that gives me the optimism to worry that we're very, very well positioned coming into the new year.

Speaker Change: Thank you.

Richard Puccio: But automotive I think is a sector where we will see some inventory digestion issues into at least the early part of 2025. Great. Thanks. That's helpful.

Speaker Change: One moment for our next question.

Speaker Change: Okay.

Speaker Change: Our next question comes from Joseph Moore with Morgan Stanley, your line is up.

Speaker Change: Thank you.

Joseph Moore: My question is on the trajectory of automotive versus industrial.

Richard Puccio: And then just a quick clarification on industrial. How would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago? Is it roughly the same or has it improved a little bit? Yeah, Chris is rich. I would say visibility is pretty consistent. And as we talked about what we're seeing, you know, we're seeing continuing growth sequentially across, you know, all of the sub elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth. Got it. Thanks, Rich.

Speaker Change: [music].

Speaker Change: It seems like automotive entered into inventory correction a little bit later, and so far has been much less severe.

Operator: One moment, one moment for our next question.

Speaker Change: I guess you talked about some ongoing headwinds in that space.

Speaker Change: Can you just talk about what overall drawdown might you expect in automotive and where are we and customers kind of growing down safety sock inventory?

Speaker Change: So Joe, this is Richard.

Joe: I'll take your crack at that one.

Speaker Change: So I'll just a level set a little bit, you know, from our perspective and what we're seeing in the market cars, continue to become more electric and software defined, which is also driving our semi-content growth largely trying to address increased battery densities, more sensors displayed.

Speaker Change: And we do expect that that is going to be a long-term tailwind to our business.

Harlan Sur: Our next question comes from Harlan Sir with JetP Morgan. Your line is open. Good morning. Thanks for taking my question. So for fiscal 23, China domestic consumption. Because about 18% of their total revenue is the worst performance geography. Last couple of quarters where bookings in China have been growing sequentially. Did that translate into sequential revenue growth out of the region in the July quarter? And then looks like orders from the China region grew sequentially in July.

Speaker Change: However, and this is where we're starting to see some of the pullback.

Speaker Change: The vehicle market has had softened in the air term.

Speaker Change: We're seeing our customers pullback on the production.

Speaker Change: And at this point, we're seeing them start to choose to burn off some inventory.

Speaker Change: So we are seeing that, right?

Harlan Sur: How are they trending so far quarter to the date? Are you still seeing sort of positive signs out of this region? We continue to see strong performance from a bookings perspective in China. We did see double-digit growth across industrial auto and comms, being slightly offset by a decrease in consumer. So China and we continue to perform well and our design win and our pipeline there are very strong.

Operator: Yes, thank you.

Operator: One moment for our next question.

Joshua Buchalter: Our next question comes from Joshua Buchalter with TD Cowan, your line is open. Hey guys, thanks for taking my question. Maybe you can walk through some of the puts and takes into gross margin into the October quarter. Back the envelope, I'm getting to roughly stable sequentially, despite the revenue increase in, and I imagine, utilizations improving as well. How much of that is mixed and in particular, any changes in the pricing environment as we get sort of through the suggestion into what I would imagine is the more competitive environment.

Operator: I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed I'm going to go to bed, I'm going to go to bed I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go to bed, I'm going to go Good morning and welcome to the Analog Devices third quarter fiscal year 2024 earnings conference call, which is being audio webcast via telephone and over the web.

Speaker Change: The softness is evidence in our results.

Joshua Buchalter: Thank you. Yeah, I would say it's, you know, as we previously mentioned, it is significantly impacted by the favorable mix. You know, obviously we get a benefit out of the revenue upside. From a pricing perspective, you know, and I talked about this before, we continue to see pretty stable pricing. And I do expect that to continue. Obviously, it's different by geography and for big and small customers, but on balance, we are continuing to see stable pricing.

Speaker Change: By auto been down year over year for two straight quarters, and we expect it will be down again in 4Q. And from a bookings perspective, we see a decline in bookings in auto. In particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios. When we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers.

Speaker Change: However, to your question around the peak to trough, you know, unless our returns to, you know, to pandemic levels, you know, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Speaker Change: You know, the underlying secular growth trends that I described, you know, driving higher semi-content.

Speaker Change: Also, we've continued to see more penetration and value capture across all vehicle types, whether it's ICE, plug-in hybrid of electric or full electric, in the fastest growing applications.

Speaker Change: If you think about that, ADAS, digital cop and electrification.

Joshua Buchalter: And I expect we will see that going forward. You know, once our products are installed in a particular customer's design, they tend to mean in the industrial business to stay for decades. And pricing is very, very stable there where the pricing or the competitiveness itself is for new, new sockets, new wins. But nothing is new there. You know, we as a company, we play in the high end of the game in terms of innovation, service, support and so on.

Speaker Change: So we will be down, but we don't expect that the cycle depth to be as severe as we saw it, for example, in industrial.

Speaker Change: Great.

Speaker Change: Thank you very much.

Speaker Change: And I guess was a follow-up.

Speaker Change: Are you seeing that behavior any different regionally is the China automotive market, different than the Western markets in terms of where they are?

Joshua Buchalter: That's the game we play and the game we will continue to play. You know, we significantly higher SPs than most. And, you know, those SPs increase with each new generation of products. So I think overall is rich at the pricing environment stable. And so I don't see that there's a headwind on margin. Thank you. Thanks, Josh.

Speaker Change: No, I'll say overall, it's pretty inanimate.

Speaker Change: So across all markets, I'll say China automotive did okay.

Speaker Change: We talked about some design and grantee there, something offset some of the softness.

Speaker Change: But it's an overall comment auto a bit weaker today than it was 90 days ago, whether George America, Europe or Asia.

Speaker Change: Great.

Speaker Change: Thank you very much.

Speaker Change: One moment for our next question.

Operator: I think that's all the time we have for questions today. That way a little more time, but it's August. You guys can go out there and enjoy the weather. I think.

Speaker Change: Our next question comes from Vivek Arya with Bank of America Security.

Speaker Change: Your line is open.

Speaker Change: Thanks for taking my question.

Operator: So thanks for joining the call.

Speaker Change: I'm very glad to hear about your optimism about turning the cyclical corner.

Operator: I look forward to future calls with you guys and have a great rest of summer.

Speaker Change: Do you think the environment allows for sequential growth to continue into Q1?

Operator: Thank you.

Speaker Change: You know, seems like industrial could grow.

Operator: This concludes today's analog devices conference call. You may now disconnect. Thank you. [inaudible] David. David. [inaudible] David. David.

Speaker Change: Autos are not sure given some of the bookings commentary and consumer tends to be down seasonally.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: So just conceptually, how should we model the shape of this recovery into Q1?

Speaker Change: Thanks.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: [music].

Stacy <unk>: Helpful, thank you.

Michael Lucarelli: Operating margin is expected to be 41% plus or minus 100 basis points.

Michael Lucarelli: Good morning, and welcome to the analog devices third quarter fiscal year 2024 earnings conference call, which is being audio webcast via telephone and over the web I would now like to introduce your host for today's call. Mr. Michael Lucarelli, Vice President of Investor Relations and SG&A, Sir the floor is yours.

Michael Lucarelli: I now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and FP&A. Sir, the floor is yours.

Michael Lucarelli: One moment for our next question.

Operator: Thank you, Kevin.

Michael Lucarelli: Our tax rate is expected to be between 11% and 13%, and based on these inputs, EPS is expected to be $1.63, plus or minus 10 cents.

Michael Lucarelli: Good morning, everybody. Thanks for joining our third quarter fiscal 24 conference call.

Michael Lucarelli: Thank you Kevin and good morning, everybody. Thanks for joining our third quarter of fiscal 2024 conference call.

Operator: So, we're going to call today our ADIC on share of Mr. Roche, NADIC, F.O. Rich Puccio, very one who missed the release, find it, and links scheduled at investor.anlog.com. How does this call it here? The information about the discuss of whose floor is looking same as, which are subject to certain risk uncertainties, as code described in an earnings release and empirical reports and other materials filed at SEC. After the results could get from material from the floor of this information, as these statements reflect our expectations, only a data is called. I'm going to take all obligations of these statements, except required by law.

Speaker Change: On the call today are Adi's, CEO and chair of its erosion Adi's CFO rich Blue shield.

Speaker Change: Anyone who missed the release schedule.

Speaker Change: Schedule, an investor day handle on Dot com.

Speaker Change: Closures information about to discuss includes forward looking statements, which are subject to certain risks uncertainties. As further described in our earnings release interference reports and other materials filed with SEC.

Speaker Change: Results could differ materially from the forward looking information. These statements reflect our expectation only a day of this call.

Speaker Change: We undertake no obligation to update these statements except as required by law.

Operator: References to growth margins, operating, non-operating expenses, operating margins, tax rights, EPS, and free cash flow, in our comments today, will be on a non-GAAP basis.

Speaker Change: References to gross margin operating nonoperating expenses operating margin tax rate EPS and free cash flow and our comments today will be on non-GAAP basis.

Operator: These include special items. When comparing our results or historical performance, special items are also excluded from prior periods. Reconciliation of these non-GAAP measures to most directly comparable GAAP measures and additional information about a non-GAAP measure included in today's earnings release.

Speaker Change: These exclude special items when comparing our results our historic performance special items are also excluded from prior periods reconciliations of these non-GAAP measures. The most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release.

Michael Lucarelli: Our next question comes from Stacey Raskin with Bernstein Research.

Speaker Change: In closing, our third quarter results and fourth quarter outlook support our view that we have passed the cycles trough.

Operator: And with that, offering up to 80 ID on share. Thank you very much.

Speaker Change: I'll turn it over to Adi's characteristic Ralph Thanks, very much Mike and a very good morning to you all.

Speaker Change: Your line is open.

Vincent Roche: Thanks very much, Mike, and a very good morning to you all. A stronger demand for a high-performance product portfolio and skillful execution resulted in third quarter revenue of more than 2.3 billion, operating margin north of 41%, and EPS of $1.58, all above the midpoint of our outlook. These favorable results, combined with improved customer inventory levels and order momentum across most of our markets, increase my confidence that our second quarter marked the cyclical bottom for ADI. By optimism remains guarded, however, as challenging economic and geopolitical conditions are limiting a sharper recovery. We continue to balance near-term fiscal discipline with strategic investments in our long-term growth initiatives, positioning ADI to capitalize on the extraordinary opportunities that we see ahead.

Speaker Change: However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Adi: I will now give it back to Mike for Q&A.

Adi: Well a standard amount for our high performance product portfolio on the skillful execution resulted in third quarter revenue of more than $2 3 billion.

Adi: Operating margin north of 41% and EPS of $1 58.

Adi: All above the midpoint of our outlook.

Adi: Hi, guys.

Adi: Thanks, Rich.

Adi: These favorable results combined with improved customer inventory levels and.

Adi: And order momentum across most of our markets.

Adi: Let's get to our Q&A session.

Increased my confidence that our second quarter, Mark the cyclical bottom for Adi.

Adi: Thanks for taking my question.

Speaker Change: We ask that you limit yourself to one question in order to allow for additional persistence on the call this morning.

Speaker Change: My optimism remains Darden, however, this challenging economic and geopolitical conditions are limiting a sharper recovery.

Speaker Change: I was hoping you can give us a little more granularity on the segment guide for next, quarter.

Speaker Change: If you have a follow-up question, please re-queue, and we'll take your question if time allows.

Speaker Change: We continue to balance near term fiscal discipline with strategic investments in our long term growth initiatives possess.

Speaker Change: Yeah, well, at this point, you know, it's hard to call, given that the environment is still a little, that's it, a little bit of this equilibrium.

Speaker Change: With that, we have our first question, please.

Speaker Change: Positioning Adi to capitalize on the extraordinary opportunities that we see ahead.

Vincent Roche: Now I'd like to draw attention to our industrial end market, which is our largest, most diverse, and most profitable business, generating durable revenue streams that last close to two decades on average. As our business begins to recover from the pandemic's volatility, we're excited about the tremendous long-term growth opportunities of the industrial market. We offer our customers an unparalleled suite of high-performance solutions stretching from antenna to bits, sensor to cloud, and none of what's to kill us. Our extensive technology portfolio, combined with our deep domain expertise and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors.

Speaker Change: And then you said industrial, and I think consumer up and auto down.

Speaker Change: For those participating by telephone dial-in, if you have a question, please press star 11 on your telephone to enter the queue.

Speaker Change: Now I'd like to draw attention to our industrial end market, which is our largest most diverse and most profitable business.

Speaker Change: Generation durable revenue streams that lost close to two decades on average.

Speaker Change: Any more further color on that?

Speaker Change: If your question has been answered and you wish to be removed from the queue, please press star 11 again.

Speaker Change: As our business begins to recover from the pandemic volatility.

Speaker Change: If you're listening on a speakerphone, please pick up a handset when asking your question.

We're excited about the tremendous long term growth opportunities of the industrial market.

Speaker Change: We'll pause for just a moment to compile our Q&A roster.

Speaker Change: We offer our customers.

Speaker Change: And the unparalleled suite of high performance solutions stretching from antenna to bids sensor to cloud.

Speaker Change: Our first question comes from Tore Svanberg with Stiefel, your line is open.

Speaker Change: And none of what's the kilowatts hour.

Speaker Change: Yes, thank you so much.

Speaker Change: Our extensive technology portfolio combined with our deep domain expertise and the engineering muscle has enabled us to secure leading positions across the most attractive industrial sectors.

Vincent Roche: Now, with growing digital software and algorithmic capabilities, augmenting our cutting-edge and log portfolio, ADI is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more.

Speaker Change: Great to see the turn here.

Speaker Change: No.

Speaker Change: With growing digital software and algorithm capabilities, augmenting, our cutting edge and loan portfolio.

Speaker Change #100: <unk> is strongly positioned to solve our customers' most difficult challenges and factory and process automation and energy efficiency secure connectivity and many many more.

Speaker Change #100: Vince, could you maybe elaborate a little bit more on this sort of mixed environment, right, because inventories have bottomed, you know, inventories have bottomed at the same time, and demand seems to be kind of mixed.

To illustrate the power and potential of our industrial franchise, let me share with you a few examples of how our recent innovations are unlocking new revenue streams.

Speaker Change #100: So, as you navigate through, you know, this period, could you elaborate a little bit on your visibility?

Speaker Change #100: And positioning us for strong growth in the years ahead.

Speaker Change #100: For example.

Speaker Change #100: Our instrumentation and test business, which include scientific instruments electronic test and measurement and automated test equipment is essential to the important scientific and technological advancements of the digital era.

Speaker Change #100: Within automated test equipment for example.

Speaker Change #100: Our next generation solutions increased channel density improvement.

Speaker Change #100: While reducing energy consumption by up to 30% per system.

Speaker Change #100: These are crucial parameters for testing complex high performance compute Gpus and high bandwidth memory systems for AI.

Vincent Roche: As the AI infrastructure bill that remains a priority for global hyperscalers, we expect growth to continue into 2025 and indeed well beyond.

Speaker Change #100: As the AI infrastructure buildup remains a priority for global Hyperscale orders, we expect growth to continue into 2025, and indeed well beyond.

Vincent Roche: Turning now to aerospace and defense, which has been our most resilient business during this downturn, ADI's domain expertise and high performance portfolio across ourathon micro waves, high speed and precision converters, power and men's unique positions us to deliver complete edge solutions, offering our customer scale, velocity, and lower total cost of ownership. As an example, we're building upon our programmable Apollo signal chain platform today to create full software defined RF communications and sensor systems, which has the potential to increase our sound by five times in commercial defense and aerospace communication systems. Indeed, we see a path to double digit revenue growth in this sector in 2025, fueled by several high value design wins that are going to production.

Speaker Change #101: Turning now to aerospace and defense, which has been our most resilient business during this downturn.

Speaker Change #101: Adi is domain expertise in high performance portfolio across RF and microwave.

Speaker Change #102: Hi, speed and precision converters power in mens.

Speaker Change #102: Mainly positions us to deliver complete edge solutions offering our customers scale velocity and lower total cost of ownership.

Speaker Change #102: As an example, we're building upon our programmable Apollo signal chain platform today to create both software defined RF communications and sensor systems.

Speaker Change: But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the first quarter, and then, you know, bounce back in the second.

Operator: Good morning and welcome to the Analog Devices third quarter fiscal year 2024 earnings conference call, which is being audio webcast via telephone and over the web. I now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and FPNA, sir, the floor's yours. Thank you, Kevin. Good morning, everybody. Thanks for joining our third quarter fiscal 24 conference call.

Speaker Change #102: Which has the potential to increase our son by five times and commercial defense and aerospace communication systems.

Speaker Change: I think that's the, that's the sentiment, but overall, you know, I maintain my outlook that we would see at risk growth here in 25.

Speaker Change #102: Indeed, we see a path to double digit revenue growth in this sector in 2025.

Michael Lucarelli: So, we're going to call today our ADIC on share of Mr. Roche, NADIC, F.O. Rich Puccio, very one who missed the release, find it, and links scheduled at investor.anlog.com. How does this call it here? The information about the discuss of whose floor is looking same as, which are subject to certain risk uncertainties, as further described in an earnings release and empirical reports and other materials filed at SEC. After the results could get from material from the floor of this information as these statements reflect our expectations, only a data is called.

Fueled by several high value design wins that are going to production.

Vincent Roche: In automation, though we've seen a slower recovery today, we remain strongly confident in its future growth potential as the benefits of increased productivity are ever more clear. Customers are prioritizing enhanced digitization and IT OT integration on the factory floors. Their deployments of in-line instrumentation and advanced robotics are driving the need for more sensing edge processing, secure connectivity, and car management. Within robotics, we're seeing a progression from fixed-arm machines to autonomous and mobile robots to eventually humanoid robots. This evolution creates additional opportunities for a precision signal chain franchise, and sensing connectivity and motion control subsystems with fully isolated and efficient power solutions can drive content from hundreds of dollars in robots today.

In automation, though we've seen a slower recovery to date, we remain strongly confident in its future growth potential.

Speaker Change #102: As the benefits of increased productivity are ever more clear.

Speaker Change #102: Customers are prioritizing enhanced digitalization and <unk> integration under factory floors.

Speaker Change #102: Their deployments of inline instrumentation and advanced robotics are driving the need for more sensing edge processing secure connectivity and power management.

Michael Lucarelli: I'm going to take no obligation to update these statements, except required by law. References to growth margins, operating, non-operating expenses, operating margins, tax rights, EPS, and pre-cat flow. In our comments today, we'll be on non-gap basis. These include special items. When comparing our results or structural performance, special items are also excluded from prior periods. Reconciliation of these non-gap measures to most directly comparable gap measures and additional information about a non-gap measure are included in today's earnings release.

Speaker Change #102: Within robotics.

Speaker Change #102: Doing a progression from fixed our machines to autonomous mobile robots to eventually humanoid robots.

Speaker Change #102: This evolution creates additional opportunities for our precision signal chain franchise.

Speaker Change #102: And sensing and connectivity at Mo.

Vincent Roche: And with that, I'll turn over to A.I.D. O. Chair.

Vincent Roche: Thank you very much. Thanks very much, Mike, and a very good morning to you all. A stronger demand for a high performance product portfolio and skill for execution resulted in third quarter revenue of more than $2.3 billion, operating margin north of 41% and EPS of $1.58, all above the midpoint of our outlook. These favorable results combined with improved customer inventory levels and order momentum across most of our markets increase my confidence that our second quarter marked the cyclical bottom for A.I.

Speaker Change #102: <unk> controlled subsystems with fully isolation and efficient power solutions.

Speaker Change: If it's not going to be a little bit of a seasonal decline, it's been a few years now, it's been a seasonal trend in our business.

Speaker Change #102: Can drive content from hundreds of dollars and robust to date to thousands and autonomous humanoid robots.

Vincent Roche: To thousands in autonomous and humanoid robots. What is additionally exciting with these advances is their broad applicability beyond factories, such as surgical robots and imaging systems in healthcare. Adi's products have the potential to dramatically improve a surgeon's effectiveness through a more precise surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer complications. The evolution in robotics is expected to unlock billions of dollars of potential opportunity for our high-performance analog mix signal power connectivity and sensing solutions. We see the potential for a doubling of our robotics revenue in the years ahead.

Speaker Change #102: What is additionally, exciting about these events as they are broad applicability beyond factories, such as surgical robots and imaging systems in health care.

Speaker Change: You're right, if you look back, or have had 10, 15 years or 80, I consumer down 10% plus the quenchedly in one queue.

Adi: Adi's products have the potential to dramatically improve our surgeons effectiveness through a more precise surgical experience with lower latency connectivity.

Adi: Additionally, patients getting the potential benefits of shorter hospital stays and fewer complications.

Vincent Roche: Bioptimism remains guarded, however, as challenging economic and geopolitical conditions are limiting a sharper recovery. We continue to balance near-term fiscal discipline with strategic investments in our long-term growth initiatives, positioning A.D.I, to capitalize on the extraordinary opportunities that we see ahead.

Speaker Change #103: The evolution in robotics is expected to unlock billions of dollars of potential opportunity for our high performance analog mixed signal power connectivity and sensing solutions we.

Speaker Change #104: We see the potential for a doubling of our robotics revenue in the years ahead.

Speaker Change: And to be the market of industrial, auto and comms, or download single digits.

Speaker Change #104: Turning now to energy transmission and distribution, our customers are modernizing and digitizing the electrical grid to respond to exponentially accelerating energy demand driven in part.

Speaker Change: And since then, it's probably going to lead to data.

Speaker Change #104: By the proliferation of electric transportation and rapid adoption.

Speaker Change #104: This process is resulting in a grid that is distributed dynamic and bi directional <unk>.

Speaker Change #104: <unk> shift from the past model of linear stable supply.

Speaker Change #104: We are working with traditional suppliers and disruptors to enable the necessary intelligence for the new grid.

Vincent Roche: Our extensive technology portfolio, combined with our deep domain expertise and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors. Now, with growing digital software and algorithmic capabilities, augmenting our cutting-edge and log portfolio, A.D.I, is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more, to illustrate the power and potential of our industrial franchise.

Speaker Change #104: From decentralized power plants to the distribution edge.

Speaker Change #104: We're leveraging our analog and the algorithm capabilities and cutting edge energy monitoring and management solutions.

Speaker Change #104: Additionally, our battery management technology increases capacity and improves energy utilization and the grid renewable energy storage systems.

Speaker Change #104: This re imagined intelligent grid of the future.

Speaker Change #105: Potential to expand our son over $10 billion.

Speaker Change #105: Creates tailwind for our energy franchise for many years to come.

Vincent Roche: Given the synergies across our industrial portfolio, our pace of innovation, and the emergent signs of market recovery, we're optimistic for our industrial business that has turned the corner, and 25 will be a robust growth year.

Speaker Change #105: Given the synergies across our industrial portfolio, our pace of innovation and the emerging signs of market recovery.

Speaker Change #105: We're optimistic for our industrial business.

Speaker Change #105: Turn the corner and 25 will be a robust growth year.

Vincent Roche: So, in closing, our investments in high performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle and will propel us into the future. Our commitment to our customer success and to impact the innovation will be the path that carries us there, ultimately increasing long term shareholder value.

Speaker Change #105: So in closing our investments in high performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle.

Speaker Change #105: And will propel us into the future.

Speaker Change #105: Our commitment to our customer success.

Vincent Roche: These are crucial parameters for testing complex, high performance compute GPUs and high bandwidth memory systems for AI. As the AI infrastructure bill that remains a priority for global hyperscalers, we expect growth to continue into 2025 and indeed well beyond.

Speaker Change #105: And to impactful innovation will be the path that carries us there.

Speaker Change #105: Ultimately, increasing long term shareholder value.

Richard Puccio: And so, with us, I'm going to turn it over to Rich, who took you through the numbers. Thank you, Vince.

Speaker Change #105: And so with that I'm going to turn it over to rich who will take you through the numbers.

Rich Blue: Thank you Vince let me add my welcome to our third quarter earnings call.

Richard Puccio: Let me add my welcome to our third quarter earnings call. Third quarter revenue of 2.31 billion came in above the midpoint of our outlook, finishing up 7% sequentially and down 25% year over year. Industrial represented 46% of revenue in the third quarter, finishing up 6% sequentially and down 37% year over year. Every major application increased sequentially, except for automation, which declined at a much slower pace than it had in previous quarters. Automotive represented 29% of revenue, finishing flat sequentially and down 8% year over year. We saw continued double-digit growth year over year for our industry-leading connectivity and functionally safe power flat.

Rich Blue: You know, how's backlog trending?

Rich Blue: Like is consumer usually up, is it up double digits?

Rich Blue: Are you finally starting to see new products ramping more into production?

Rich Blue: Third quarter revenue of $2 31 billion came in above the midpoint of our outlook, finishing up 7% sequentially and down 25% year over year.

Vincent Roche: Turning now to aerospace and defense, which has been our most resilient business during this downturn, ADI's domain expertise and high performance portfolio across orphan microwaves, high speed and precision converters, power and men's, unique positions us to deliver complete edge solutions, offering our customer scale, velocity, and lower total cost of ownership. As an example, we're building upon our programmable Apollo signal chain platform today to create full software defined RF communications and sensor systems, which has the potential to increase our sound by five times in commercial defense and aerospace communication systems.

Rich Blue: Because these are typical signals that you want to see at the beginning of a new...

Rich Blue: Is industrial up mid-single, auto down like low single, like any further color you could, give us on which segments we're talking about?

Rich Blue: Industrial represented 46% of revenue in the third quarter, finishing up 6% sequentially and down 37% year over year.

Rich Blue: Yeah, thanks, Tori.

Rich Blue: Sure, Stacey.

Rich Blue: Well, I'd say, first and foremost, we run this company on POS signals.

Rich Blue: I'll grab that one.

Rich Blue: Every major application increased sequentially, except for automation, which declined at a much slower pace than it had in previous quarters.

Vincent Roche: Indeed, we see a path to double digit revenue growth in this sector in 2025, fueled by several high value design wins that are going to production. In automation, though we've seen a slower recovery today, we remain strongly confident in its future growth potential as the benefits of increased productivity are ever more clear. Customers are prioritizing enhanced digitization and IT OT integration on the factory floors. Their deployments of in-line instrumentation and advanced robotics are driving the need for more sensing, edge processing, secure connectivity, and car management.

Automotive represented 29% of revenue, finishing flat sequentially and down 8% year over year.

We saw continued double digit growth year over year for our industry, leading connectivity and functionally safe power platforms. Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses.

Richard Puccio: Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses. Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year. Slowing customer inventory digestion enabled both wireless and wireline growth sequentially. And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022.

Rich Blue: Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year.

Rich Blue: Boeing customer inventory digestion enabled both wireless and wireline growth sequentially.

Speaker Change: We'll be any better than seasonal in where we are today, but we'll update you in 90 days of how we feel about one queue.

Rich Blue: Yeah, so let's start with consumer.

Rich Blue: And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022.

Speaker Change: I think the big motivator for us will be what happens in industrial in particular.

Richard Puccio: We saw diversified growth across applications with notable strength in portables and gaming.

Rich Blue: We saw diversified growth growth across applications with notable strength in portables and gaming.

Speaker Change: And what I can tell you is that[inaudible] 4.

Richard Puccio: Now let's move from the top line to the rest of the P&L. Third quarter gross margin with 67.9% up 120 basis points sequentially, driven by higher revenue, higher utilization and favorable mix. Operating expenses in the quarter were 619 million, up modestly sequentially, driven primarily by higher variable compensation. Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at 70 million, and the tax rate for the quarter was 10.8%. The net result was EPS of $1.58, which finished near the high end of our outlook.

Rich Blue: That's how we plan our production, how we run the company operationally.

Rich Blue: Now, let's move from the topline to the rest of the P&L.

Rich Blue: So we pay very, very close attention to what's happening in terms of the end market demand. And, you know, my confidence has increased since last quarter that indeed 2Q was the cyclical bottom. You know, we've exited 3Q with very, very lean channel inventory.

Rich Blue: Third quarter gross margin was 67, 9% up 120 basis points sequentially, driven by higher revenue higher utilization and favorable mix.

Vincent Roche: Within robotics, we're seeing a progression from fixed-arm machines to autonomous and mobile robots to eventually humanoid robots. This evolution creates additional opportunities for a precision signal chain franchise, and sensing connectivity and motion control subsystems with fully isolated and efficient power solutions can drive content from hundreds of dollars in robots today. To thousands in autonomous and humanoid robots. What is additionally exciting with these advances is their broad applicability beyond factories such as surgical robots and imaging systems in healthcare.

Rich Blue: Operating expenses in the quarter were $619 million.

Rich Blue: Modestly sequentially, driven primarily by higher variable compensation opt.

Rich Blue: Operating margin of 41, 2% exceeded the high end of our outlook.

Rich Blue: Non operating expenses finished at $70 million and the tax rate for the quarter was 10, 8%.

Rich Blue: The net result was EPS of $1 58, which finished near the high end of our outlook.

Richard Puccio: Our financial position is solid, and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than 2.5 billion of cash and short-term investments and a net leverage ratio of 1.2. Inventory decreased $51 million sequentially, and days declined to 178 from 192. As planned, we reduced channel inventory further this quarter, with weeks ending near the low end of our 7-8 week target. Operating cash flow for the quarter and trailing 12 months was 0.9 billion and 4 billion, respectively. CapEx for the quarter and trailing 12 months was $154 million and $1 billion respectively.

Rich Blue: We've taken inventory off our own balance sheet, though we're positioned with a very, very healthy backlog of inventory on our own balance sheet so that the anticipated demand up surge that we expect in 2025, we're very, very well equipped and ready to meet that.

Rich Blue: Our financial position is solid.

I'd like to call out a few items from our balance sheet and cash flow statement we.

We ended Q3 with more than $2 5 billion of cash and short term investments and a net leverage ratio of one two.

Rich Blue: Inventory decreased $51 million sequentially and days declined to 178 from 192.

Vincent Roche: Adi's products have the potential to dramatically improve a surgeon's effectiveness through a more precise surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer complications. The evolution in robotics is expected to unlock billions of dollars of potential opportunity for our high-performance analog mix signal power connectivity and sensing solutions. We see the potential for a doubling of our robotics revenue in the years ahead.

Rich Blue: As planned we reduced channel inventory further this quarter with weeks ending near the low end of our seven to eight week target.

Rich Blue: Operating cash flow for the quarter and trailing 12 months with <unk> 9 billion and 4 billion respectively.

Capex for the quarter and trailing 12 months was $154 million and $1 billion respectively.

Richard Puccio: For fiscal 24, CapEx is tracking to our $700 million plan, which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers.

Fiscal 'twenty four capex is tracking to our $700 million plan, which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle papers.

Richard Puccio: Not included in these figures are the anticipated benefits from both the European and U.S. chips acts. During the last 12 months, we generate 2.9 billion of free cash flow, or 30% of revenue. Over the same time period, we have returned $2.8 billion via dividends and share repurchases. As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Rich Blue: Not included in these figures are the anticipated benefits from both the European and U S chip sacks.

Rich Blue: During the last 12 months, we generated $2 9 billion of free cash flow or 30% of revenue.

Rich Blue: Over this same time period, we have returned $2 8 billion via dividends and share repurchases. As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Richard Puccio: Now I will turn to the fourth quarter outlook. Revenue is expected to be 2.4 billion plus or minus 100 million, up 4% sequentially at the midpoint. We expect self-fruit to be roughly equal to sell in this quarter.

Rich Blue: You're right, consumer's up about double digits again, about 10% or so embedded in, our outlook.

Rich Blue: You know, in the fourth quarter, as we've said, we expect to see continued sequential growth.

Rich Blue: Now I will turn to the fourth quarter outlook.

Rich Blue: Industrial has another, I'll call it solid growth quarter, probably high single digits, sequentially.

Rich Blue: Revenue is expected to be two 5% excuse me $2 4 billion, plus or minus $100 million up 4% sequentially at the midpoint, we expect sell through to be roughly equal to sell in this quarter.

Richard Puccio: At the midpoint on a sequential basis, we expect industrial and consumer to increase, communications to be flatish, and automotive to decrease. Operating margins are expected to be 41% plus or minus 100 basis points.

Rich Blue: At the mid point on a sequential basis, we expect industrial and consumer to increase communications to be flattish in automotive to decrease.

Rich Blue: Operating margin is expected to be 41% plus or minus 100 basis points.

Richard Puccio: Our track rate is expected to be between 11 and 13%, and based on these inputs, EPS is expected to be $1.63 plus or minus 10 cents.

Rich Blue: Our tax rate is expected to be between 11% and 13% and based on these inputs EPS is expected to be $1 63, plus or minus 10 sets.

Rich Blue: Communication is about flatness plus minus, depending kind of how things go here.

Richard Puccio: In closing, our third quarter results and fourth quarter outlook support our view that we have passed the cycle's trough. However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Rich Blue: And indeed, we'll also see, I think, Particularly in the industrial area, continued improvement on customer inventory levels.

Rich Blue: In closing, our third quarter results and fourth quarter outlook support our view that we have passed the cycle's trough, however, challenging economic and geopolitical conditions are limiting our fastener demand recovery.

Rich Blue: Look, it's all the whole recovery, you know, the ramp of the recovery will depend on the on the macro situation.

Speaker Change: Sounds like you're not willing to commit that you're going to be above seasonal in fiscal Q1.

Vincent Roche: Given the synergies across our industrial portfolio, our pace of innovation and the emergent signs of market recovery, we're optimistic for our industrial business that has turned the corner and 25 will be a robust growth year. So, in closing, our investments in high-performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle and will propel us into the future.

Michael Lucarelli: I will now give it back to Mike for Q&A.

Rich Blue: But nonetheless, given the design wins, we've we've a record design win pipeline.

I will now give it back to Mike for Q&A.

Rich Blue: And auto is the weak market, as we discussed and hit a little bit earlier on the call, probably down low single digits sequentially.

Rich Blue: Got it.

Michael Lucarelli: Thanks, Rich.

Mike: Thank you.

Mike: Thanks, Rich, 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.

Operator: Let's get to our Q&A session. We want to tell you to limit yourself to one question in order to allow our digital persistence on the college morning. If you have a follow-up question, please re-cut, and we'll take your question and time allows.

Mike: That's helpful.

Mike: And if I could get a quick follow-up on that.

Question. Please re queue and we will take your question. If time allows with that we have our first question. Please.

Mike: One moment for our next question.

Operator: With that, through our first question, please.

Operator: For those participating by telephone dial-in, if you have a question, please press star-1-1 on your telephone to enter the queue. If your question has been answered, you wish to be removed from the queue, please press star-1-1 again. If you're listening on the speakerphone, please pick up the handset when asking your question.

Mike: Our next question comes from Joseph Moore with Morgan Stanley.

Mike: For those participating by telephone dial in if you have a question. Please press star one on your telephone to enter the queue to ask your question has been answered you where should be removed from the queue. Please press star one again, if youre listening on a speakerphone. Please pick up the handset when asking a question, we'll pause for just a moment to compile the Q&A roster.

Mike: Got it.

Mike: That's helpful.

Mike: And if I could get a quick follow-up, just how are you thinking about OPEX growth in, the next quarter?

Mike: It was pretty well under control this quarter.

Operator: We'll pause for just a moment to compile our Q&A roster.

Vincent Roche: Our commitment to our customer success and to impact the innovation will be the path that carries us there ultimately increasing long-term shareholder value.

Mike: Okay.

Okay.

Tore Svanberg: Our first question comes from Tore Svanberg with Stefler.

Speaker Change #107: Your line is open.

Speaker Change #107: Is there anything that drives that up?

Speaker Change #107: Our first question comes from tore Svanberg with Stifel. Your line is open.

Vincent Roche: Your line is open. Yes, thank you so much. Great to see the turn here.

Speaker Change #107: Like what do you think about the OPEX trends as we're going to the end of the year?

Speaker Change #107: So, Stacey, I'll take that one.

Richard Puccio: And so, with us, I'm going to turn it over to Rich, who took you through the numbers. Thank you, Vince.

Tore Svanberg: Yes, thank you.

Tore Svanberg: Yes. Thank you so much great to see the turn here.

Tore Svanberg: So, you know, obviously we exceeded the high end of our outlook in the third quarter, you, know, given the beat on gross margin and revenue, as well as our continued cost management.

Vincent Roche: Could you elaborate a little bit more on this sort of mixed environment, right? Because inventories have the same time and demand seems to be kind of mixed. So, as you navigate through this period, could you elaborate a little bit on your visibility? How's backlog trending? Are you starting to see new products ramping more into production? These are typical signals. The signals that you want to see at the beginning of the news cycle. Yeah, thanks. Sorry. Well, I say, first and foremost, we run this company on POS signals. That's how we plan our production; how we run the company operationally.

Tore Svanberg: Vince could you maybe elaborate a little bit more on this sort of mixed environment right because inventories have bottomed.

Speaker Change: The streets modeling like 5 or 6% above seasonal for fiscal Q1.

Tore Svanberg: Our Q4 guide obviously does imply a modest margin contraction sequentially, despite, our expectation for higher revenue and gross margin. You know, the main driver for that is our increase for merit increases that will go, into effect during the fourth quarter. So that will be a downward pressure as we head into the fourth quarter.

Speaker Change: Was there something that happened in bookings?

Speaker Change #108: Inventory at the bottom at the same time and demand seems to be kind of mixed. So as you navigate through this period could you elaborate a little bit on your visibility how is backlog trending are you finally, starting to see new products ramping more into production because these are typical.

Speaker Change #108: Signals that you want to see at the beginning of the new cycle.

Tore Svanberg: I mean, the big margin on our OPEX, Stacey, is obviously the bonus.

Speaker Change #109: Yes, thanks, sorry, well I would say.

Tore Svanberg: And, you know, that obviously with declining profit and revenue over the past several quarters, that dropped accordingly.

Tore Svanberg: Now, with increase, with growth in revenue and improvement in profitability, that will obviously increase. But that's self-funding, so to speak.

Speaker Change #110: First and foremost we run this company on PFS signal, that's how we plan our production how we run the company operationally. So we pay very very close attention to what's happening in terms of the the end market demand.

Richard Puccio: Automotive represented 29 percent of revenue, finishing flat sequentially and down 8 percent year over year. We saw continued double-digit growth year over year for our industry-leading connectivity and functionally safe power flat. Performance. Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses. Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year. Slowing customer inventory digestion enabled both wireless and wireline growth sequentially. And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022. We saw diversified growth across applications with notable strength and portables and gaming.

Tore Svanberg: Got it.

Tore Svanberg: How much did the outputs go up then?

Vincent Roche: So, we pay very, very close attention to what's happening in terms of the end market demand. And, you know, my confidence has increased since last quarter that indeed, 2Q was the cyclical bottom. You know, we've exited 3Q with very, very lean channel inventory. We've taken emergency of our own balance sheet. So, we're positioned with a very, very healthy backlog of inventory on our own balance sheet. So, that the anticipated demand upstairs, we expect in 25. We're very, very well equipped and ready to meet that. So, you know, in 4Q, as we've said, we expect to see continued sequential growth.

Speaker Change #110: And my.

Speaker Change #110: My confidence has increased since last quarter that indeed, <unk> was was the cyclical bottom.

Speaker Change #110: We've exited <unk> with very very lean channel inventory.

Speaker Change #110: We've taken inventory off our own balance sheet, though we're positioned with.

Speaker Change #110: With a very very healthy backlog of inventory on our own balance sheet. So that the anticipated demand up stores that we expect in 'twenty five we're very very well equipped and ready to meet that so.

Tore Svanberg: For a fourth quarter outlook, I would say the sequential increase in outputs is around 5%.

Speaker Change #110: And four in the fourth quarter as we've said, we expect to see continued sequential growth.

Tore Svanberg: That's great.

Vincent Roche: And indeed, we'll also see, I think, particularly in the industrial area, continued improvement on customer inventory levels.

Tore Svanberg: Thank you so much.

Speaker Change #110: And indeed, we will also see I think.

Richard Puccio: Now let's move from the top line to the rest of the P&L. Third quarter growth margin was 67.9%, up 120 basis points sequentially driven by higher revenue, higher utilization and favorable mix. Operating expenses in the quarter were 619 million, up modestly sequentially, driven primarily by higher variable compensation. Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at 70 million and the tax rate for the quarter was 10.8%. The net result was EPS of a $1.58 which finished near the high end of our outlook.

Speaker Change #110: Particularly in the industrial area continued improvement on customer inventory levels. So.

Vincent Roche: So, look at, it's all the, the whole recovery, the, you know, the ramp of the recovery will depend on the macro situation. But nonetheless, given the design wins, we've a record design win pipeline in the company. So, we're facing many, many secular tailwinds with a very strong pipeline, very, very good supply line. And with a very, very lean inventory on the customer's balance sheet. So, that gives me the optimism to worry that we're very, very well positioned coming into the new year.

Tore Svanberg: Appreciate it, guys.

Speaker Change #110: Okay.

Speaker Change #110: The whole recovery.

Speaker Change #110: The.

Speaker Change #110: The ramp of the recovery will depend on the on the macro situation, but nonetheless, given the design wins, we've got we have a record design win pipeline.

Speaker Change #110: And the company.

Speaker Change #110: So we are facing many many secular tailwind with a very strong pipeline very very good supply line.

Speaker Change #110: With a very very lean.

Speaker Change #110: Inventory on the customers' balance sheets, so that gives me the optimism.

Richard Puccio: Our financial position is solid, and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than 2.5 billion of cash and short-term investments and a net leverage ratio of 1.2. Inventory decreased 51 million dollars sequentially and days declined to 178 from 192. As planned, we reduced channel inventory further this quarter with weeks ending near the low end of our 7-8 week target.

Sorry that.

Speaker Change #110: We're very very well positioned coming into the new year.

Operator: Thank you. One moment for our next question.

Speaker Change #111: Thank you one moment for our next question.

Tore Svanberg: One moment for our next question.

Tore Svanberg: Our next question comes from Chris Danely with Citi.

Speaker Change #112: Our next question comes from Joseph Moore with Morgan Stanley. Your line is open.

Tore Svanberg: Your line is open.

Joseph Moore: My question is on the trajectory of automotive versus industrial.

Joseph Moore: Yes. Thank you my question is on the trajectory of automotive versus industrial it.

Speaker Change #113: You know, it seems like automotive entered into an inventory correction a little bit later, and so far has been much less severe.

Speaker Change #113: It seems like automotive entered into.

Speaker Change #114: Inventory correction a little bit later.

Richard Puccio: Operating cash flow for the quarter and trailing 12 months was 0.9 billion and 4 billion respectively. CapEx for the quarter and trailing 12 months was 154 million and 1 billion respectively. For fiscal 24, CapEx is tracking to our $700 million plan which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers. Not included in these figures are the anticipated benefits from both the European and US chipsax. During the last 12 months, we generate 2.9 billion of free cash flow or 30% of revenue. Over this time period, we have returned 2.8 billion via dividends and share repurchases. As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long-term.

Speaker Change #115: And so far has been much less severe I guess, you sort of talked about some ongoing headwinds in that space can you just talk about what overall drawdown might you expect in automotive and where are we in customers kind of.

Speaker Change #115: I guess you sort of talked about some ongoing headwinds in that space.

Speaker Change #115: Can you just talk about, you know, what overall drawdown might you expect in automotive, and where are we in customers kind of drawing down safety stock inventory?

Richard Puccio: Can you just talk about what overall drawdown might you expect in automotive and where are we and customers kind of growing down safety stock inventory? So, Joe, this is Rich, and I'll take a crack at that one. So I'll just a level set a little bit you know from our perspective and what we're seeing in the market. Cars continue to become more electric and software defined, which is also driving our semi-content growth. Lightly trying to address increased battery density is more sensors displays, and we do expect that that is going to be a long-term tailwind to our business.

Speaker Change #115: Growing down safety stock inventory.

Rich Blue: So, Joe, this is Rich, and I'll take a crack at that one.

Rich Blue: So Joe this is rich I'll take a crack at that one.

Rich Blue: So, just to level set a little bit, you know, from our perspective and what we're seeing in the market, cars continue to become more electric and software-defined, which is also driving our semi-content growth, largely trying to address increased battery densities, more sensors, displays.

Joe: Just to level set a little bit from our perspective, and what we're seeing in the market cars continue to become more electric and software defined which is also driving our semi content growth.

Speaker Change #117: Slightly trying to address the increased battery density as more centers displays and we do expect that that is going to be a long term tailwind to our business. However, and this is where we're starting to see some of the pullback. The vehicle market has has softened in the near term, we're seeing our customers pull back on their production.

Speaker Change #117: And we do expect that that is going to be a long-term tailwind to our business.

Richard Puccio: However, and this is where we're starting to see some of the pullback. The vehicle market has had softens in the near-term. We're seeing our customers pull back on the production, and at this point we're seeing them start to choose to burn off some inventory. So we are seeing that, right. The softness is evidence in our results by auto's been down year over year for two straight quarters, and we expect it will be down again in 4Q. From a bookings perspective, we did see a decline in bookings in auto. In particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios when we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers.

Speaker Change #117: However, and this is where we're starting to see some of the pullback, the vehicle market has softened in the near term. We're seeing our customers pull back on their production. And at this point, we're seeing them start to choose to burn off some inventory.

Speaker Change #117: And at this point, we're seeing them start to choose to burn off some inventory. So we are seeing that the softness is evidenced in our results bipartisan down year over year for two straight quarters, and we expect it will be down again in <unk>.

Richard Puccio: Now I will turn to the fourth quarter outlook. Revenue is expected to be 2.4 billion plus or minus 100 million up 4% sequentially at the midpoint. We expect self-fruit to be roughly equal to sell in this quarter.

Speaker Change #117: So, we are seeing that.

Speaker Change #117: Right?

Speaker Change #117: The softness is evidenced in our results.

Speaker Change #117: Auto's been down year over year for two straight quarters, and we expect it will be down again in 4Q. And from a bookings perspective, we did see a decline in bookings in auto. In particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios, and we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers.

Speaker Change #117: And from a bookings perspective, we did see a decline in bookings.

Richard Puccio: At the midpoint on a sequential basis, we expect industrial and consumer to increase communications to be flatish and automotive to decrease. Operating margins is expected to be 41% plus or minus 100 basis points. Our track rate is expected to be between 11 and 13% and based on these inputs, EPS is expected to be $1.63 plus or minus 10 cents.

Speaker Change #118: In auto in particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios. When we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers. However to your question around the peak to trough unless our return.

Speaker Change #118: However, to your question around the peak to trough, you know, unless SAR returns to, you know, to pandemic levels, you know, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Richard Puccio: However, to your question around the peak to trough, you know, unless our returns to, you know, to pandemic levels, you know, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets. You know the underlying secular growth trends that I described. You know driving higher semi content. Also, we've continued to see more penetration and value capture across all vehicle types, whether it's ICE, plug-in hybrid, or electric, or full electric in the fastest growing applications. If you think about that eight-ass digital cop and electrification.

Speaker Change #118: Pandemic levels, we don't see that peak to trough being nearly as dramatic as we saw in our other end markets.

Speaker Change: Did bookings like slow in the last couple weeks or the last month or something to make you not want to commit to the fact that fiscal Q1 would be above seasonal or just that it's 90 days away and you just don't want to comment on it.

Speaker Change #118: You know, the underlying secular growth trend that I described, you know, driving higher semi-content.

Speaker Change #118: The underlying secular growth trends that I described driving higher <unk>.

Speaker Change: Thanks.

Speaker Change #118: Also, we've continued to see more penetration and value capture across all vehicle types, whether it's ICE, plug-in hybrid electric, or full electric in the fastest growing applications.

Speaker Change #118: Semi content also we've continued to see more penetration and value capture across all vehicle types, whether its ice plug in hybrid electric or full electric.

Speaker Change: I'll start out on the street expectations and we've enriched on the little bookings.

Michael Lucarelli: I will now give it back to Mike for Q&A. Thanks, Rich. Let's get to our Q&A session.

Speaker Change: We never got in one queue.

Speaker Change: I think the street make up the street expectation for one queue.

Speaker Change: I think the street is everyone better than seasonal for a calendar for two or fiscal one queue.

Operator: We want to tell you to limit yourself to one question in order to allow our digital persistence on the college morning. If you have a follow-up question, please re-cute and we'll take your question and time allows. With that, through our first question please. For those participating by telephone dial-in, if you have a question, please press star 1-1 on your telephone to enter the queue. If your question has been answered, you wish to be removed from the queue, please press star 1-1 again. If you're listening on a speaker phone, please pick up the handset when asking your question. We'll pause for just a moment to compile our Q&A roster.

Speaker Change #118: The fastest growing applications in if you think about that aid as digital cockpit and electrification. So we will be down, but we don't expect that the cycle that to be as severe as we saw for example in industrial.

Speaker Change #118: And if you think about that, ADAS, digital cockpit, and electrification.

Speaker Change #118: So we will be down, but we don't expect that the cycle depth to be as severe as we saw, for example, in industrial.

Richard Puccio: So we will be down, but we don't expect that the cycle depth to be as severe as we saw, for example, in industrial.

Richard Puccio: Great, thank you very much, and I guess what's the follow-up? Are you seeing that behavior any different regionally? Is the China automotive market different than the western markets in terms of where there are? No, I'll say overall it's pretty inanimate, so across all markets.

Speaker Change #119: Great.

Speaker Change #119: Great. Thank you very much and I guess it was a follow up are you seeing that behavior any different regionally is the China automotive market different in the western markets in terms of where they are.

Speaker Change #120: No I would say overall, it's pretty unanimous across all markets. At this time I'll ask you did did okay. We talked about some design wins ramping there. So that's helping offset some of the softness but as an overall comment a bit weaker today than it was 90 days ago, whether it's North America, Europe or Asia.

Tore Svanberg: Our first question comes from Tore Svanberg with Steifler. Your line is open. Yes, thank you so much. Great to see the turn here. Could you elaborate a little bit more on this sort of mixed environment? Because inventories have bottom, the same time and demand seems to be kind of mixed. So as you navigate through this period, could you elaborate a little bit on your visibility, how's backlog trending? Are you starting to see new products ramping more into production? Because these are typical signals that you want to see at the beginning of the news cycle. Yeah, thanks. Sorry.

Richard Puccio: I think all of you just did okay. We toggled some design and branding there, so that's helping offset some of the softness. But it's an overall common auto that's a bit weaker today than it was 90 days ago, whether it's going to America, you're up for it. Great, thank you very much.

Speaker Change: I'm in hope of a snapback.

Speaker Change: I would say that there are things that change in 90 days, but we're off to miss about 25 and a full year.

Speaker Change #121: Thank you very much.

Speaker Change #121: Great. Thank you very much.

Vivek Arya: One moment for our next question. Our next question comes from Vivek Arya with Bank of America Securities. Your line is open. Thanks for taking my question. I'm been glad to hear about your optimism about turning the cyclical corner. Do you think the environment allows for sequential growth to continue into Q1? You know, seems like industrial could grow. Autos I'm not sure given some of the bookings commentary and consumer tends to be down seasonally, so just conceptually how should we model the shape of this recovery into Q1. Thanks.

Speaker Change #121: One moment for our next question.

Speaker Change #123: And I guess as a follow-up, are you seeing that behavior any different regionally?

Speaker Change #123: Hey, thanks, guys.

Speaker Change #123: Our next question comes from Vivek Arya with Bank of America Securities. Your line is open.

Speaker Change #123: Is the China automotive market different than the Western markets in terms of where they are?

Speaker Change #123: First, just a little clarification on inventory in the auto market.

Thanks for taking my question.

Vivek Arya: No, I'd say overall, it's pretty unanimous across all markets.

Vivek Arya: Glad to hear about your optimism about turning the cyclical corner do you think the environment allows for sequential growth to continue.

Vivek Arya: I'd say China did okay, we toggled some design with ramping there, so that's helping offset some of the softness.

Vincent Roche: Well, I'd say the first and foremost, we run this company on POS signals. That's how we plan our production, how we run the company operationally. So we pay very, very close attention to what's happening in terms of the end market demand. And, you know, my confidence has increased since last quarter that indeed 2Q was the, was the cyclical bottom. You know, we've exited 3Q with very, very lean channel inventory. We've taken emergency of our own balance sheet.

Speaker Change #124: Into Q1, it seems like industrial could grow autos nacho given some of the bookings commentary and consumer tends to be down seasonally so just conceptually how should we model the shape of the company.

Speaker Change #124: But as an overall comment, auto is a bit weaker today than it was 90 days ago, whether it's North America, Europe, or Asia.

Speaker Change #124: Vince, I think at the beginning you talked about inventory is very lean out there, but then you're also saying that there's inventory digestion going on in the automotive market.

Speaker Change #124: Can you just expand on that a little bit?

Speaker Change #125: Any into Q1, thank you.

Speaker Change #124: So I'll grab that, and then Vince talks about overall customer inventory.

Speaker Change #124: Yeah, I think every market responds in different cases to inventory digestion.

Richard Puccio: Yeah, well at this point, it's hard to call, given that the environment is still a little, that's a little bit of this equilibrium. But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the fourth quarter, and then bounce back in the second. I think that's the sentiment. But overall, I maintain my outlook that we will see a risk growth here in 25. If I now have a little bit of a seasonal decline, it's been a few years now to see a seasonal trend in our business. You're right, if you look back or have had 10, 15 year of 80, I consumer down 10% plus a quenchedly in one queue, and the B2B markets of industrial, auto and condor, download single digits, and then it's hard to know, delete the data.

Speaker Change #124: We feel good about industrial consumer comms have really normalized inventory levels.

Speaker Change #124: There are pockets on the auto side that are still, I'll call it, digesting.

Speaker Change #126: Yes, good point.

Speaker Change #127: It's hard to call given that the environment is still a little.

Speaker Change #128: Let's say, there's a bit of this equilibrium.

Speaker Change #124: I mean, production levels have been cut over the past quarter, whether it's an ICE car or an EV car.

Speaker Change #129: But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the fourth quarter.

Speaker Change #124: That impacts inventory levels and desire to hold inventory on their balance sheets.

Speaker Change #124: From that standpoint, Chris, I don't know if there's anything to add.

Vincent Roche: So we're positioned with, with a very, very healthy backlog of inventory on our own balance sheet. So that the anticipated demand, absolutely expect in 25, we're very, very well equipped and ready to meet that. So, you know, in four in the fourth quarter, as we've said, we expect to see continued sequential growth. And indeed, we also see, I think, particularly in the industrial area continued improvement on customer inventory levels. So look at, it's all the, the whole recovery, the, you know, the ramp of the recovery will depend on the macro situation.

Speaker Change #129: Then a bounce back in the second.

Speaker Change #129: I think thats, the thats the sentiment, but overall.

Speaker Change: We just don't know if the above seasonal in that outlook for a good year and 25.

Speaker Change #129: I maintain my outlook that wed see a brisk growth year in 'twenty five.

Speaker Change #130: I hope you all about our seasonality.

Speaker Change: That's the rich go through some of the bookings dynamics.

Speaker Change #131: Been a few years now obviously a seasonal trend in our in our business. You are right. If you look back over 10, 15 years, Adi consumers down 10% plus sequentially in <unk> and the <unk> markets of industrial auto Comed are down low single digits and this added probably don't believe today that would be any better than seasonal given where we are today, but we'll update you in 90 days and how.

Speaker Change #124: Yeah, I think, Chris, overall, we've seen the worst is behind us, I think, in industrial consumer and comms markets.

Speaker Change #124: But automotive, I think, is a sector where we will see some inventory digestion issues into at least the early part of 2025.

Speaker Change: Yeah.

Richard Puccio: It would be any better than seasonal, given what we are today, but we'll update you in 90 days of how we feel about one queue.

Speaker Change: So from, from, from a bookings perspective, you know, up until Q2.

Richard Puccio: Yeah, I think the big margin there for us will be what happens in industrial and, particular, and what I can tell you is that they, the very sweet conversations I've had with our industrial customers would suggest that their optimism is also strong for 25. Thank you.

Speaker Change #131: We feel about <unk> I think the big multi matter for us will be what happens in industrial in particular.

Speaker Change #132: What I can tell you is that.

Speaker Change: I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I mean, I[inaudible] So, as I noted in the last call, we said both utilization and in fact growth margins had bottomed in Q2 and that is proving to be true.

Speaker Change #133: The various C suite conversations I've had with our industrial customers would suggest that their optimism is also strong for Spotify.

Speaker Change: From an inventory in the channel perspective, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at 7 to 8 weeks.

Operator: One moment for our next question.

Speaker Change #124: Yeah.

Speaker Change #134: Thank you.

Timothy Arcuri: One moment for our next question. Our next question comes from Timothy Yarkari with UBS. Your line is open. Thanks a lot. I just wanted to ask on that answer. So you were above seasonal and fiscal queue three or above seasonal and fiscal queue four.

One moment for our next question.

Speaker Change #124: Great.

Speaker Change: I think we'd mentioned previously if we saw continued improvements.

Speaker Change #134: Great.

Our next question comes from Timothy Arcuri with UBS. Your line is open.

Speaker Change #134: Thanks.

Speaker Change: We would start shipping to end demand, so we will do that in the fourth quarter.

Speaker Change #134: That's helpful.

Timothy Arcuri: Thank you very much.

Timothy Arcuri: And then just a quick clarification on industrial.

Timothy Arcuri: Thanks, a lot I just wanted to.

Timothy Arcuri: Ask on that answer so you were above seasonal in fiscal Q3 or above seasonal in fiscal Q4, it sounds like youre not willing to commit that youre going to be above seasonal in fiscal Q1, the street's modeling like five or 6% above seasonal for fiscal Q1 was there something that happened in bookings the bookings like slow in the last couple of weeks or the last month.

Speaker Change: Thank you.

Speaker Change: Obviously, when it comes to the balance, we have a hybrid manufacturing system which enables us to keep utilization rate as high as possible internally.

Richard Puccio: Sounds like you're not willing to commit that you're going to be above seasonal and fiscal queue one. The streets modeling like five or six percent above seasonal four, you know, fiscal Q1. Was there something that happened in bookings? Did bookings like slow in the last couple of weeks or the last month or something to make you not want to commit to the fact that fiscal queue one would be above seasonal or just that it's 90 days away and you just don't want to comment on it. Thanks. I also got on the street expectations, and then we've enriched on the little bookings.

Speaker Change: Obviously, when our factories run out of capacity, then we have lots of choices externally for silicon capacity.

Joseph Moore: Our next question comes from Joseph Moore with Morgan Stanley, your line is up. Yes, thank you. My question's on the trajectory of automotive versus industrial. You know, it seems like automotive entered into a inventory correction a little bit later. And so far has been much less severe. I guess you sort of talked about some ongoing headwinds in that space.

Speaker Change: So obviously, we've got a lot of inventory on the balance sheet and our factories are well capable of improving utilization rates as the demand continues to improve over the coming quarter.

Speaker Change: As a quick follow-up, I think your internal utilization rates last quarter were in the mid-50s if I'm not mistaken.

Speaker Change: Are you at or above 60% at this point?

Speaker Change #135: Something to make you not want to commit to the fact that fiscal Q1 would be above seasonal or just that it's 90 days away.

Speaker Change: We're coming on that.

Speaker Change #135: And you just don't want to comment on it.

Speaker Change: Give an outlook on utilization in order to be given the rate.

Timothy Arcuri: How would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago?

Speaker Change #137: One moment for our next question.

Speaker Change #137: I'll start out on the street expectations.

Speaker Change: I would say there were lower last quarters who would hire here in 3 and 4, 2.

Richard Puccio: Can you just talk about, you know, what overall drawdown might you expect an automotive and where are we and customers kind of growing down safety, documentary? So, Joe, this is Rachel. I'll take your crack. I'll just a little bit, you know, from our perspective, and what we're seeing in the market cars continue to become more electric and software defined, which is also driving our semi-content growth, largely trying to address increased battery densities, more sensors displays.

Speaker Change #138: A little of bookings, we never guide once you I think the street make up the street expectation for <unk> I think the story is all everyone a better than seasonal from a calendar fourth your fiscal <unk> on a whole lot of other snapback I would say, yes. There are things that changed in 90 days, but we're optimistic about 25 in the full year. We just don't know, it's an above seasonal in that outlook for a good year in 'twenty five.

Richard Puccio: We never guided one queue. I think the street expectations for one queue. I think the street is of everyone better than seasonal for a calendar for you or fiscal one queue. I'm in hope of a snapback. I would say yeah, there are things that have changed in 90 days, but we're off to miss about 25 and a full year.

Speaker Change #138: Our next question comes from Vivek Arya with Bank of America Securities.

Speaker Change: And there were well-off those that have done a normal level of the law calling 85 to 90% utilization.

Speaker Change: Thank you.

Speaker Change #138: Is it roughly the same, or has it improved a little bit?

Speaker Change: I'll give you some little context.

Richard Puccio: We just don't know if the above seasonal in that outlook for a good year in 25.

Richard Puccio: I'll pass the first vote for some of the bookings dynamics. Yeah, so from Tim, from a bookings perspective, you know, up until Q2, as we talked about, we've seen three straight quarters of broad-based bookings improvement. However, Q3 was different. We saw continued bookings growth for industrial, consumer, and communications, but we did see automotive orders decline, which resulted in a modest drop in our total bookings during the quarter. We did still end with a book to build around parity. You know, if I look at it from a geographic perspective, regionally, bookings were the weakest in Europe.

Tim: That's correct sculptors on the bookings dynamics, yes, so from a Tim from a bookings perspective up until Q2 as we talked about we've seen three straight quarters of broad based broad based bookings improvement. However, Q3 was different we saw continued bookings growth for industrial consumer and communications.

Speaker Change #138: Hey, Chris, it's Rich.

Speaker Change #138: I would say our visibility is pretty consistent.

Speaker Change #138: And as we talked about, we're seeing continuing growth sequentially across all of the sub-elements of industrial with the exception of automation, which we are seeing improvements but not yet seeing growth.

Speaker Change: What does this mean?

Richard Puccio: And we do expect that that is going to be a long term tailwind to our business. However, and this is where we're starting to see some of the pullback. The vehicle market has had so often in the near term. We're seeing our customers pullback on the production. And at this point, we're seeing them start to choose to burn off some inventory. So we are seeing that, right? This office is evidence in our results by auto's been down year over year for two straight quarters.

Speaker Change #138: Got it.

Speaker Change: What does it mean for gross margin? If you look at the decline of gross margin over the past year or so, about half the decline in relation to utilization, the other half relates to mix.

Speaker Change #138: Thanks, Rich.

Speaker Change: So you can see, as you take up what that means for gross margin expansion.

Speaker Change #140: But we did see automotive orders decline, which resulted in a modest drop in our total bookings during the quarter.

Speaker Change: Helpful, thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Stacy Raskin with Bernstein Research.

Speaker Change #140: We did sell and with a book to bill around parity.

Speaker Change: Your line is open.

Speaker Change #140: I look at it from a geographic perspective regionally bookings were the weakest in Europe.

Speaker Change: Hi guys.

Richard Puccio: And we expect it will be down again and for Q. And from a bookings perspective, we did see a decline in bookings in auto in particular. We've seen inventory digestion in our legacy auto and in our BMS portfolios when we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers. However, to your question around the peak to trough, unless our returns to pandemic levels, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Richard Puccio: America's was modestly weaker, which offset bookings growth in Asia.

Americas was modestly weaker which offset bookings growth in Asia.

Speaker Change: Thanks for taking my question.

Operator: Thanks a lot. One moment for our next question.

Speaker Change #141: Thanks, a lot.

Speaker Change: I was hoping to give us a little more granularity on the segment guide for next quarter and then you sit in industrial and then consume a rapid auto down.

Speaker Change #138: One moment for our next question.

One moment for our next question.

Speaker Change #141: Okay.

Toshiya Hari: Our next question comes from Toshai Hari, with Goldman Sachs. Hey, good morning. Thanks for taking the question. It was good to see inventory on your balance sheet come down again, and you guys spoke to channel inventory coming down as well. As you look forward, what are your thoughts on utilization rates internally? How are you engaging with your Foundry partners? And what's embedded in your October quarter outlook as it pertains to the channel? Thank you.

Speaker Change #142: Your line is open.

Speaker Change #142: Our next question comes from Harlan, sir, with JP Morgan.

Speaker Change #142: Our next question comes from Toshi Hari with Goldman Sachs. Your line is open.

Speaker Change #142: Your line is open.

Speaker Change #142: Good morning.

Speaker Change #142: Thanks for taking my question.

Hey, good morning, Thanks for taking the question.

Speaker Change #142: Thanks for taking my question.

Toshi Hari: It was good to see inventory on your balance sheet come down again, you guys spoke to channel inventory coming down as well.

Speaker Change #144: As you look forward what are.

Speaker Change #145: Have your thoughts on on utilization rates internally.

Richard Puccio: The underlying secular growth trends that I described, driving higher semi-content. Also, we've continued to see more penetration and value capture across all vehicle types, whether it's ice, plug-in hybrid of electric or full electric. In the fastest growing applications, if you think about that, ADAS, digital cop and electrification. So we will be down, but we don't expect that the cycle depth to be as severe as we saw, for example, in industrial. Great.

Speaker Change #142: So for fiscal 23, China domestic consumption, I think it was about 18% of their total revenues.

Speaker Change #146: How are you engaging with your foundry.

Speaker Change #142: It was the worst performing geography.

Speaker Change #147: Partners and what's embedded in your October quarter outlook as it pertains to the channel. Thank you.

Speaker Change #142: Last couple of quarters, bookings in China have been growing sequentially.

Richard Puccio: So, you know, as I noted in the last call, you know, we said both utilization and, in fact, growth margins and bottomed in Q2, and that is proving to be true. From an inventory in the channel perspective, you know, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at seven to eight weeks. And I think we've mentioned previously, if we saw continued improvements, we would start shipping to end demand. So, we will do that in the fourth quarter. Thank you.

Speaker Change #147: Vince, glad to hear about your optimism about turning the cyclical corner.

Speaker Change #147: So.

Speaker Change #148: As I noted in the last call.

Speaker Change #149: We said both utilization in fact gross margins have bottomed in Q2.

Speaker Change #149: Do you think the environment allows for sequential growth to continue into Q1?

Speaker Change #150: And that is and that is.

Speaker Change #150: Proving to be true.

Speaker Change #150: Seems like industrial could grow, autos I'm not sure, given some of the bookings, commentary, and consumer tends to be down seasonally.

Speaker Change #150: Did that translate into sequential revenue growth out of the region in the July quarter? And then it looks like orders from the China region grew sequentially in July.

Speaker Change #150: From an inventory in the channel perspective, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at seven to eight weeks.

Speaker Change #150: So just conceptually, how should we model the shape of this recovery into Q1?

Speaker Change #150: Thank you.

Richard Puccio: Thank you very much. And I guess as a follow-up, are you seeing that behavior any different regionally is the China automotive market different than the western markets in terms of where they are? No, I'll say overall, it's pretty inanimate across all markets. I'll say China, I'll let you just did okay. We talked about some design and branding there, so that's helping offset some of the softness, but it's an overall comment auto a bit weaker today than it was 90 days ago, whether it's North America, Europe or Asia. Great.

Speaker Change #150: Yeah, well, at this point, you know, it's hard to call given that the environment is still a little, let's say there's a bit of disequilibrium.

Speaker Change #150: But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the first quarter, and then, you know, a bounce back in the second. And I think that's the sentiment.

Speaker Change #150: We had mentioned previously if we saw continued improvements we would start shipping to end demand. So we will do that.

Speaker Change #150: How are they trending so far, quarter to the date?

Operator: Thank you very much.

Speaker Change #150: In the fourth quarter.

Richard Puccio: Obviously, when it comes to, you know, the balance, we've a hybrid manufacturing system which enables us to keep utilization rate as high as possible internally. And, you know, when our factories run out of capacity, then we have lots of choices externally for silicon capacity. So, you know, obviously, we've got a lot of inventory on the balance sheet and our factories are, you know, well, well capable of improving utilization rate as the demand continues to improve over the coming quarter. As a quick follow-up, I think your internal utilization rates last quarter were in the mid-50s, if I'm not mistaken.

Speaker Change #151: Thank you obviously when it comes to.

Vivek Arya: One moment for our next question.

Speaker Change #152: The balance we have a hybrid manufacturing system.

Speaker Change #152: Which enables us to keep utilization rates as high as possible internally.

Speaker Change #152: When.

Speaker Change #152: Our factories run out of capacity, then we have lots of choices externally.

Vivek Arya: Our next question comes from Vivek Arya with Bank of America Securities. Your line is open. Thanks for taking my question. I'm glad to hear about your optimism about turning the cyclical corner. Do you think the environment allows for sequential growth to continue into Q1? Seems like industrial could grow. Autos I'm not sure given some of the bookings commentary and consumer tends to be down seasonally, so just conceptually how should we model the shape of this recovery into Q1?

Speaker Change #152: For silicon capacity.

Speaker Change #152: So.

Speaker Change #152: Obviously, we've got a lot of inventory on the balance sheet and our factories are.

Speaker Change: Any more further color on that is consumer usually up?

Speaker Change: Is that double digits?

Well capable of improving utilization rates of the demand continues to improve over the coming quarters.

Speaker Change: Is industrial at mid single, auto down by low single, like big?

Speaker Change: Any further color you could give us some respect and should be helpful.

Speaker Change #152: Yes.

Speaker Change #153: As a quick follow up I think your internal utilization rates last quarter were in the mid fifties, if I'm not mistaken.

Richard Puccio: Are you at or above 60 percent at this point, or? We're coming on that.

Speaker Change #150: Are you still seeing sort of positive signs out of this region?

Speaker Change #154: Are you at or above 60% at this point or.

Speaker Change #155: We don't comment on that given our outlook on utilization nor do we give them. The right I would say there were lower last quarter moving higher here three or four here.

Richard Puccio: Give an outlook on utilization in order we give the rate. I would say there were lower last quarters who would hire here in 3 and 4Q.

Speaker Change: Sure Stacy, I don't have that one.

Vincent Roche: Yeah, well at this point, it's hard to call, given that the environment is still a little, that's a little bit of disequilibrium. But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the fourth quarter, and then bounce back in the second. I think that's the sentiment. But overall, I've maintained my outlook that we would see a brisk growth year in 25. If I now have a little bit of a seasonal decline, it's been a few years now that we've seen seasonal trends in our business.

Operator: And there were well off those of the normal levels of law, called 85-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90-90 One moment for our next question.

Speaker Change #156: And they are well off the normal.

Speaker Change: Yeah, so let's start consumer.

Speaker Change #157: Levels of I'll call, it 80, 590% utilization.

Speaker Change #150: I'm not sure.

Speaker Change #158: And then you got it thanks, and I guess that'll be obviously contacted.

Speaker Change #159: Does it mean adulation ramp with any for gross margin. If you look at the decline in gross margins over the past year or so about half the decline related utilization. The other half relates to mix. So you can see adulation pick up what that means for gross margin expansion.

Speaker Change: You're right.

Speaker Change: And two of them about double digits again, about 10% or so embedded in our outlet.

Speaker Change: And don't you have another, I'll call solid growth quarter, probably a high single digits, clinically.

Speaker Change #160: Helpful. Thank you.

Speaker Change: Three of these is about flattest plus my head, depending on how things go here.

Vincent Roche: You're right, if you look back or have had 10, 15 years or 80, I consumer down 10% plus sequentially in one queue, and the beauty markets of industrial, auto, and condor, download single digits, and then it says it's probably, don't believe today, that would be any better than seasonal, given what we are today. But we'll take you 90 days to how we feel about one queue. I think the big modulator for us would be what happens in industrial and particular, and what I can tell you is that they are very sweet conversations I've had with our industrial customers would suggest that their optimism is also strong for 25.

Speaker Change #161: One moment for our next question.

Stacy Raskin: Our next question comes from Stacy Raskin with Bernstein Research.

Stacy <unk>: Our next question comes from Stacy <unk> with Bernstein Research Your line is open.

Richard Puccio: Your line is open. Hi guys, thanks for taking my question. I was hoping to give us a little more granularity on the segment guide for next quarter, and then you could industrial and then consumer up and auto down. Any more further color, like it's consumer usually up, is that double digits. It's industrial up mid single, auto down like low single, like big.

Stacy <unk>: Hi, guys. Thanks for taking my questions.

Speaker Change: And all of the week market as we discussed and hit a little bit early on the call, probably down low single digits, eventually.

Operator: All right, thank you.

I was hoping you could give us a little more granularity on the segment guide for next quarter. I know you said industrial and then consumer up in auto down any more further color on that like as consumer usually up double digit in industrial up mid single auto down by low single like Greg any further color you could give us on the segments would be helpful.

Speaker Change: Got it.

Timothy Yarkari: One moment for our next question.

Richard Puccio: Any further color you could give us on this page and should be helpful. Sure, if they don't have that one. Yeah, so let's start consumer. You're right. I can do a couple of about double digits again, about 10% or so, and bend it around a little bit. And don't you have another, I'll call solid growth quarter, probably high single digits sequentially. We have pages about flatish plus my head, depending on how things go here. And all those, the wheat market as we discussed and hit a little bit early on to qualify down low single digits sequentially.

Speaker Change: Top.

Greg: Sure I'll grab that one yes, so look our consumer youre right conservative about double that again about 10% ourselves embedded in our outlook industrial had another solid growth quarter, probably high single digits sequentially, we occasions about flattish plus or minus depending on how things go here and although the weak market as we discussed and hit a little bit early on the qualified down low single digit.

Richard Puccio: Our next question comes from Timothy Yarkari with UBS. Your line is open. Thanks a lot. I just wanted to ask on that answer. So you were above seasonal and fiscal queue three or above seasonal and fiscal queue four. Sounds like you're not willing to commit that you're going to be above seasonal and fiscal queue one. The streets modeling like five or six percent above seasonal four, you know, fiscal queue one.

Speaker Change: If I could give a quick follow up just, how are you thinking of the op x growth in the next quarter?

Richard Puccio: And was there something that happened in bookings, did bookings like slow in the last couple weeks, or the last month or something to make you not want to commit to the fact that fiscal queue one would be above seasonal, or just that it's 90 days away. And you just don't want to comment on it. Thanks. I also got on the street expectations and we've enriched on the little bookings. We never guided one queue.

Greg: Sequentially.

Greg: Sure.

Richard Puccio: Got it, that's helpful.

Speaker Change #163: Got it that's helpful and if I could get a quick follow up just how are you thinking about opex growth in the next quarter. It was it was pretty well under control this quarter.

Richard Puccio: And if I can give you a quick follow-up, just how are you thinking about Opt X growth in the next quarter? It was it was pretty well under control this quarter. Is there anything that drives that up like what do you think about the opt X trends as you're going to the end of the year. So I'll take that one. So obviously we exceeded the high end of our look in the third quarter, you know, given the beat on gross margin and revenue as well as our continued cost management. Our Q4 guide obviously does imply a modest margin contraction sequentially.

Speaker Change #164: Is there anything that drives that up like what do you think about the opex trends as we go into the end of the year.

Speaker Change #165: Yes, I'll take that one so obviously, we exceeded the high end of our outlook in the third quarter.

Speaker Change #166: Given the beat on gross margin and revenue as well as our continued cost management.

Richard Puccio: I think the street expectations for one queue. I think the street is up everyone better than seasonal for a calendar four or fiscal one queue. So I'm in hope of a snapback. I would say there are things that have changed in 90 days, but we're off to miss about 25 and a full year. We just don't know if it's above seasonal in that outlook for a good year or 25. That's the risk of some of the bookings dynamics.

Speaker Change #167: Our Q4 guide, obviously imply a modest margin contraction sequentially.

Richard Puccio: Despite our expectation for higher revenue and gross margin, you know, the main driver for that is our increase for merit increases that will go into effect during the fourth quarter. So that will be that will be a downward pressure as we head into the fourth quarter. I mean, the big margin on our on our on our up X Stacy is obviously the bonus. and you know that obviously with declining profit and revenue over the past several quarters, that dropped accordingly. now with increase, with growth and revenue and improvement and profitability, that will obviously increase, but that's self funding, so to speak.

Speaker Change #167: Despite our expectation for higher revenue and gross margin. The main driver of that is our increase.

Speaker Change #167: For Merit increases that will go into effect during the fourth quarter. So that will be that will be a downward pressure as we head into the fourth quarter I mean, the big margin hammer on our on our Opex Stacy is obviously the bonus.

Speaker Change: It was, it was pretty well under control this quarter.

Richard Puccio: Yeah, so from Kim from a bookings perspective, you know, up until Q2, as we talked about, we've seen three straight quarters of broad-based bookings improvement. However, Q3 was different. We saw continued bookings growth for industrial consumer and communications, but we did see automotive orders decline, which resulted in a modest drop in our total bookings during the quarter. We did still end with a book to bill around parity. You know, if I look at it from a geographic perspective, regionally bookings were the weakest in Europe. America was modestly weaker, which offset bookings growth in Asia. Yeah. Thanks a lot.

Speaker Change #100: Is there anything that drives that up like what do you think about the op x trends, as you're going to the end of the year?

Toshiya Hari: One moment for our next question.

Speaker Change #167: And.

Speaker Change #100: So, Stacy, I'll take that one.

Speaker Change #167: That obviously with the declining profit and revenue over the past.

Speaker Change #167: Several quarters.

Speaker Change #167: That dropped accordingly, now with with increase with growth in revenue and improvement in profitability.

Speaker Change #101: So, you know, obviously we exceeded the high end of our look in the third quarter, you know, given the beat on gross margin and revenue, as well as our continued cost management.

Speaker Change #102: Our Q4 guide, obviously does imply a modest margin contraction sequentially, despite our expectation for higher revenue, gross margin. You know, the main driver for that is our increase for merit increases that will go into effect during the fourth quarter. So, that will be a downward pressure as we head into the fourth quarter.

Speaker Change #167: That will obviously increase but.

Speaker Change #167: Self funding so to speak.

Richard Puccio: How much of the affects go up then? For our fourth thorough outlook out of the sequential increase in the affects around 5%.

Speaker Change #168: Got it and how much of the Opex go up then.

Speaker Change #102: I mean, the big margin on our op x, Stacy, is obviously the bonus, and you know that obviously with declining profit and revenue over the past several quarters, that dropped accordingly now with increase with growth in revenue and improvement in profitability, that will obviously increase but that's self-funding so to speak.

For our fourth our outlook.

Speaker Change #103: How much of the topics go up then?

Speaker Change #169: Sequential increase in opex around around 5%.

Operator: That's great. Thank you so much.

Speaker Change #169: That's great. Thank you so much appreciate it guys.

Operator: Appreciate it, guys. One moment for our next question.

Speaker Change #171: And remember foreign Exchange Inc.

Speaker Change #104: For our fourth thorough, I'll look out at the equitably increase in affects around 5%.

Richard Puccio: Our next question comes from Toshai Hari with Goldman Sachs. Hey, good morning. Thanks for taking the question. It was good to see inventory on your balance sheet come down again, and you guys spoke to channel inventory coming down as well. As you look forward, what are your thoughts on utilization rates internally? How are you engaging with your Foundry partners? And what's embedded in your October quarter outlook as it pertains to the channel? Thank you.

Speaker Change #105: That's great.

Christopher Danely: Our next question comes from Chris Danely. What city? Your line is open. Thanks, guys. First, just a little clarification on inventory in the auto market. Vince, I think at the beginning you talked about inventory is very lean out there, but then you're also saying that there's inventory digestion going on in the automotive market. Can you just expand on that a little bit? John, we've got that in the big topic of overall customer inventory. Yeah, I think every market spawns a different case of inventory digestion, because we feel good about industrial consumer comms have really normalized inventory levels.

Cristina <unk>: Our next question comes from Cristina <unk> with Citi. Your line is open.

Speaker Change #106: Thank you so much.

Speaker Change #107: Appreciate it guys.

Cristina <unk>: Hey, Thanks, guys first just a little clarification on inventory in the auto market and then as I said I think at the beginning you talked about.

Cristina <unk>: But overall, I maintain my outlook that we will see a brisk growth year in 2025.

Speaker Change #107: One moment for our next question.

Cristina <unk>: Inventory is very lean out there, but then youre also saying that there is inventory digestion going on.

Speaker Change #172: In the automotive market can you just expand on that a little bit.

Speaker Change #172: And I'll help you out a little bit on the seasonality question, because it's been a few years now since we've seen seasonal trends in our business.

Speaker Change #172: Doug.

Speaker Change #173: Overall customer inventory, yes, I think every market spot a different cadence of inventory digestion.

Richard Puccio: So, as I noted in the last call, we said both utilization and in fact growth margins and bottomed in Q2 and that is proving to be true. From an inventory in the channel perspective, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at 7 to 8 weeks. I think we've mentioned previously, if we saw continued improvements, we would start shipping to end demand.

We feel good about industrial consumer comps haven't really normalized inventory levels. There are pockets on the auto side is still digesting and production levels have been cut over the past quarter, whether its an <unk> or an EV car that impact inventory levels and desire to hold inventory on their balance sheet.

Richard Puccio: There are pockets on the auto side that still I'll call it digestion. I mean production levels have been cut with the past quarter, whether it's an ice car or an EV car. That impact inventory levels and desire to hold inventory on their balance sheets. And that's that point, Chris. I know a bit of anything to add.

Chris Arnold: Standpoint, Chris Arnold regimen can add.

Richard Puccio: Yeah, I think Chris overall, you know, we've seen the worst is behind us, I think, in industrial consumer income markets, but automotive I think is a sector where we will see some inventory digestion issues into at least the early part of 2025. Great, thanks. That's helpful.

Yes, I think Chris overall, we've seen the worst is behind US I think in.

Chris Arnold: Industrial consumer and comms market.

Richard Puccio: So, we will do that in the fourth quarter. When it comes to the balance, we have a hybrid manufacturing system which enables us to keep utilization rates as high as possible internally. When our factories run out of capacity, then we have lots of choices externally for silicon capacity. Obviously, we've got a lot of inventory on the balance sheet and our factories are well, well capable of improving utilization rates as the demand continues to improve over the coming quarter.

Chris Arnold: But automotive I think is a sector, where we will see some inventory digestion issues into the at least the early part of 2025.

Chris Arnold: Okay.

Speaker Change #174: Great. Thanks, that's helpful. And then just a quick clarification on industrial how would you characterize your I guess bookings slash visibility on the industrial market now versus three months ago is it roughly the same or has it improved a little bit.

Richard Puccio: And then just a quick clarification on industrial. How would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago? Is it roughly the same, or has it improved a little bit? Yeah, Chris is rich. I would say visibility is pretty consistent. And as we talked about, we're seeing, you know, we're seeing continuing growth sequentially across, you know, all of the sub-elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth.

Chris Arnold: Okay.

Rich Blue: Hey, Chris this is rich.

Chris Arnold: I would say our visibility is pretty consistent.

And as we talked about what we're seeing we're seeing continued continuing growth sequentially across.

Speaker Change #175: All of this up.

Speaker Change #176: Elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth.

Richard Puccio: As a quick follow-up, I think your internal utilization rates last quarter were in the mid-50s, if I'm not mistaken. Are you at or above 60% at this point? Are you coming on that? I'm giving an outlook on utilization in order to give the rate. I would say there were lower last quarter who would hire here in 3 and 4Q. And there were well off those of the normal levels of law, called 85 90% utilization.

Operator: Yeah, thanks, Rich. One moment, one moment for our next question.

Chris Arnold: Got it thanks rich.

Speaker Change #177: You're right.

Speaker Change #177: One of them one of them for our next question.

Speaker Change #177: Okay.

Harlan Sur: Our next question comes from Holland, sir, with JPMorgan; your line is open. Good morning, thanks for taking my question. So for fiscal 23, China, domestic consumption. It was about 18% of their total revenues.

Harlan Sur: If you look back over the past 10, 15 years for ADI, consumers are down 10% plus sequentially in one queue, and the B2B markets of industrial, auto, and comms are down low single digits.

Harlan Sur: Our next question comes from Harlan sur with Jpmorgan. Your line is open.

Harlan Sur: And as Vincent said, there's no belief today that we'd be any better than seasonal, given where we are today.

Harlan Sur: Good morning, and thanks for taking my question so for fiscal 'twenty, three China domestic consumption. It was about 18% of our total revenues it was the worst performing geography.

Richard Puccio: It was the worst performance geography. Last couple of quarters, like bookings in China have been growing sequentially. Did that translate into sequential revenue growth out of the region in the July quarter? And then looks like orders from the China region grew sequentially in July. How are they trending so far quarter to the date? Are you still seeing sort of positive signs out of this region? We continue to see strong performance from a bookings perspective in China. We did see double-digit growth across industrial, auto, and comms, being slightly offset by a decrease in consumer. China is continuing to perform well, and our design win and our pipeline there are very strong.

Operator: I'll give you some little context. What does this mean? What does it mean for growth margins? If you look at the decline of growth margins over the past year or so, about half the decline in relation to utilization, the other half relates to next. So, you can see, as you take up what that means for growth margins expansion. Helpful, thank you.

Speaker Change #178: Last couple of quarters bookings in China has been growing sequentially does that did that translate into sequential revenue growth out of the region in the July quarter, and then it looks like orders from the China region grew sequentially in July how are they trending so far quarter to date are you still seeing sort of positive signs out of this.

Operator: One moment for our next question.

Harlan Sur: Yeah, we continue to see strong performance from a bookings perspective in China.

Harlan Sur: Jim.

Speaker Change #179: Yes, we excuse me, we continue to see strong performance from a bookings perspective in China.

Speaker Change #108: Our next question comes from Chris Danely, what city your line is open?

Stacy Raskin: Our next question comes from Stacy Raskin with Bernstein Research. Your line is open. Hi guys, thanks for taking my question. I was hoping to give us a little more granularity on the segment guide for next quarter. Is that double digits? Is industrial at mid-single, auto down by close single, like big? Any further color you could give us on this page and should be helpful. Sure, if they don't have that one. Yeah, so let's start in two more.

Harlan Sur: We did see double-digit growth across industrial, auto, and comms, being slightly offset by, a decrease in consumer.

Speaker Change #179: We did see double digit growth across.

Speaker Change #109: Thanks guys.

Speaker Change #180: Industrial auto.

Speaker Change #110: First just a little clarification on inventory in the auto market.

Speaker Change #180: And comps being slightly offset by.

Speaker Change #180: A decrease in consumer so it can China that has continued to perform well and our design win in our pipeline there are very strong.

Harlan Sur: So China does continue to perform well, and our design win in our pipeline there are very, strong.

Harlan Sur: Yep.

Richard Puccio: Yes, thank you.

Yes. Thank you.

Operator: One moment for our next question.

Speaker Change #181: But we'll update you in 90 days on how we feel about one queue.

Speaker Change #181: One moment for our next question.

Stacy Raskin: You're right. Two of them about double digits again, about 10% or so, embedded in or out of it. And don't you have another, I'll call solid growth quarter, probably high in the digits sequentially. Three of these is about gladdest plus my head, depending on how things go here. And all of the week market as we discussed and hit a little bit early on the call, probably down low single digits sequentially.

Speaker Change #181: Okay.

Joshua Buchalter: Our next question comes from Joshua Buchalter with TD Cowan. Your line is open. Hey guys, thanks for taking my question.

Speaker Change #182: Yeah, I think the big modulator for us will be what happens in industry in particular.

Speaker Change #182: Thank you.

Speaker Change #182: Our next question comes from Joshua bus shelter with TD Cowen Your line is open.

Speaker Change #182: One moment for our next question.

Speaker Change #182: Our next question comes from Joshua Buchalter with TD Cowen.

Speaker Change #183: And what I can tell you is that...

Speaker Change #183: Hey, guys. Thanks for taking my question.

Speaker Change #183: Your line is open.

Speaker Change #183: The various C-suite conversations I've had with our industrial customers would suggest that their optimism is also strong for 2025.

Richard Puccio: Maybe you can walk through some of the puts and takes into the growth margin into the October quarter. Back the envelope, I'm getting to roughly stable, sequentially, despite the revenue increase, and I imagine utilization is improving as well. How much of that is mixed and, in particular, any changes in the pricing environment as we get sort of through the suggestion into what I would imagine is the more competitive environment. Thank you. Yeah, I would say it's, you know, as we as we previously mentioned, it is significantly impacted by the favorable mix. You know, obviously we get a benefit out of the revenue upside.

Maybe you could walk through some of the puts and takes into the gross margin in the <unk>.

Speaker Change #110: Vincent, I think at the beginning you talked about inventory is very lean out there, but then you're also saying that there's inventory digestion going on in the automotive market.

Speaker Change #184: October quarter back the envelope on getting to roughly stable sequentially. Despite the revenue increase and I imagine utilizations improving as well.

Speaker Change #183: Hey, guys.

Speaker Change #183: Thanks for taking my question.

Speaker Change #111: Can you just expand on that a little bit?

Richard Puccio: Got it, that's helpful. If I could give a quick follow up just, how are you thinking of the opx growth in the next quarter? It was, it was pretty well under control this quarter. Is there anything that drives that up? Like, what do you think about the opx trends? Is it going to the end of the year?

Speaker Change #112: John, we've got that.

Speaker Change #185: One moment for our next question.

Speaker Change #185: Maybe you could walk through some of the puts and takes in the gross margin into the October, quarter.

Speaker Change #185: How much of that is mix and in particular any changes in the pricing environment as we get sort of through this digestion into what I would imagine as a more competitive <unk>.

Speaker Change #113: There's a big topic overall, customer inventory.

Speaker Change #185: Back the envelope, I'm getting to roughly stable sequentially, despite the revenue increase, and I imagine utilization is improving as well.

Speaker Change #185: How much of that is mixed, and in particular, any changes in the pricing environment as, we get sort of through this digestion into what I would imagine is a more competitive environment?

Speaker Change #185: Thank you.

Speaker Change #185: Yeah.

Speaker Change #186: Thank you.

Speaker Change #187: Our next question comes from Timothy Arcuri with UBS, your line is open.

Richard Puccio: So, I'll take that one. So, obviously, we exceeded the high end of our look in the third quarter, given the beat on gross margin and revenue, as well as our continued cost management. Our Q4 guide, obviously, does imply a modest margin contraction sequentially despite our expectation for higher revenue and gross margin. And, you know, the main driver for that is our increase for merit increases that will go into a factor in the fourth quarter.

Speaker Change #187: Yes, I would say is as.

Speaker Change #188: As we previously mentioned it is it is.

Speaker Change #189: Significantly impacted by the favorable mix.

Speaker Change #187: I would say it's, you know, as we previously mentioned, it is significantly impacted by, the favorable mix.

Speaker Change #187: You know, obviously, we get a benefit out of the revenue upside.

Speaker Change #190: Obviously, we get a benefit out of the revenue upside.

Speaker Change #190: Okay.

Richard Puccio: From a pricing perspective, you know, and I talked about this before, we continue to see pretty stable pricing, and I do expect that to continue. Obviously, it's different by geography and for big and small customers, but on balance, we are continuing to see stable pricing and expect we will see that going forward. You know, once our products are installed in a particular customer's design, they tend to mean in the industrial business, they will stay for decades. And pricing is very, very stable there. Where the pricing or the competitiveness of itself is for new, new suckers, new wins.

Speaker Change #190: Thanks a lot.

Speaker Change #190: From a pricing perspective, you know, and I've talked about this before, we continue, to see pretty stable pricing, and I do expect that to continue. Obviously, it's different by geography and for big and small customers, but on balance, we are continuing to see stable pricing, and I expect we will see that going forward.

Speaker Change #190: From a pricing perspective.

Speaker Change #191: I've talked about this before we continue to see pretty stable pricing and I do expect that to continue obviously, it's different by geography and for big and small customers, but on balance we are continuing to see stable pricing and I expect we will see that going forward.

Speaker Change #191: I just wanted to ask on that answer.

Richard Puccio: So, that will be a downward pressure as we head into the fourth quarter. I mean, the big margin on our opx, they see as obviously the bonus, and that obviously with declining profit and revenue over the past several quarters that dropped accordingly, now with increase, with growth and revenue and improvement and profitability, that will obviously increase. But that's self-funding, so to speak. How much of the effects go up then? For our fourth thorough outlook out of the sequential increase in the effects around five percent. That's great.

Operator: Thank you so much. Appreciate it guys.

Speaker Change #192: So, you were above seasonal in Fiscal Q3, you're above seasonal in Fiscal Q4.

Speaker Change #192: You know, once our products are installed and a particular customer's design, they tend, to – I mean, in the industrial business, they will stay for decades, and pricing is very, very stable there, where the pricing or the competitiveness ends up is for new sockets, new wins, but nothing is new there.

Speaker Change #192: Sounds like you're not willing to commit that you're going to be above seasonal in Fiscal Q1.

Speaker Change #192: Our products are installed in the particular customers design that time too.

Speaker Change #192: The street's modeling, like, 5 or 6 percent above seasonal for, you know, Fiscal Q1.

Speaker Change #192: Was there something that happened in bookings?

Operator: One moment for our next question.

Speaker Change #193: In the industrial business through safer.

Speaker Change #193: Did bookings, like, slow in the last couple weeks or the last month or something to make you not want to commit to the fact that Fiscal Q1 would be above seasonal or just that it's 90 days away and you just don't want to comment on it?

Speaker Change #193: For decades and pricing is.

Speaker Change #193: Very very stable, there, where the pricing or the competitiveness of our new new sockets, new wins, but nothing is new there.

Richard Puccio: But nothing is new there. You know, we as a company, we play on the high end of the game in terms of innovation, service, support, and so on and so forth. So that's the game we play, and the game we will continue to play. You know, we significantly higher ASPs than most. And you know, those ASPs increase with each new generation of products. So I think overall, as Rich said, the pricing environment is stable. And so I don't see that there's a headwind on margin.

Speaker Change #193: You know, we as a company, we play on the high end of the game in terms of innovation, service, support and so on and so forth, so that's the game we play and the game we will continue to play.

Speaker Change #193: Right.

Speaker Change #193: We as a company we play on the high end of the game in terms of innovation service support and so forth. So.

Speaker Change #193: I'll start out on the street expectations, and then Rich can talk a little about bookings.

Speaker Change #193: We never got to 1Q.

Speaker Change #193: I think the street makes up the street expectation for 1Q.

Speaker Change #193: I think the street is, everyone, better than seasonal for a calendar 4Q or a fiscal 1Q, in hope of a snapback.

Speaker Change #193: I would say, yeah, there are things that have changed in 90 days, but we're optimistic about 25 as a full year.

Speaker Change #193: We just don't know if it's above seasonal in that outlook for a good year in 25.

Speaker Change #193: I'll pass it to Rich to go through some of the booking dynamics.

Speaker Change #193: Yeah, so, Tim, from a bookings perspective, up until Q2, as we talked about, we'd seen three straight quarters of broad-based bookings improvement. However, Q3 was different. We saw continued bookings growth for industrial, consumer, and communications, but we did see automotive orders decline, which resulted in a modest drop in our total bookings during the quarter. We did still end with a book-to-bill around parity.

Speaker Change #193: If I look at it from a geographic perspective, regionally, bookings were the weakest in Europe.

Speaker Change #193: Thats the game, we play in the game, we will continue to play significantly higher asps than most.

Speaker Change #193: America's was modestly weaker, which offset bookings growth in Asia.

Speaker Change #193: You know, we significantly hire ASPs the most, and, you know, those ASPs increase with each, new generation of product, so I think overall, as Rich said, the pricing environment is stable, and so I don't see that as a headwind on margin.

Speaker Change #193: Thanks a lot.

Speaker Change #193: One moment for our next question.

Speaker Change #193: Our next question comes from Toshiya Hari with Goldman Sachs, your line is open.

Speaker Change #193: Hey, good morning.

Speaker Change #193: Thanks for taking the question.

Speaker Change #193: It was good to see inventory on your balance sheet come down again, and you guys spoke to channel inventory coming down as well.

Although asp's increase with each new generation of product so.

Speaker Change #193: As you look forward, what are your thoughts on utilization rates internally?

Speaker Change #193: How are you engaging with your foundry partners?

Speaker Change #193: And what's embedded in your October quarter outlook as it pertains to the channel?

Speaker Change #193: Thank you.

Speaker Change #193: So, you know, as I noted in the last call, you know, we said both utilization and, in fact, gross margins had bottomed in Q2, and that is proving to be true.

Speaker Change #193: Overall, as rich said the pricing environment stable.

Speaker Change #193: From an inventory in the channel perspective, you know, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at seven to eight weeks. And I think we've mentioned previously if we saw continued improvements, we would start shipping to end demand. So we will do that in the fourth quarter.

Speaker Change #193: Thank you.

Speaker Change #193: Obviously, when it comes to, you know, the balance, we have a hybrid manufacturing system, which enables us to keep utilization rates as high as possible internally, and, you know, Our factories run out of capacity, then we have lots of choices externally for silicon capacity.

Speaker Change #193: So, you know, obviously, we've got a lot of inventory on the balance sheet and our factories are.., you know, well, well capable of improving utilization rates as the demand continues to improve over the coming quarter.

Speaker Change #193: I'll give you some context, what does this mean as utilization ramps, what does it mean for gross margins? If you look at the decline of gross margins over the past year or so, about half of the decline relates to utilization, the other half relates to mix.

So I don't see that as a headwind on margin.

Speaker Change #193: As a quick follow-up, I think your internal utilization rates last quarter were in the mid-50s, if I'm not mistaken.

Speaker Change #193: So you can see as utilization picks up, what that means for gross margin expansion.

Christopher Danely: Our next question comes from Chris Danely, what city your line is open? Thanks guys. First just a little clarification on inventory in the auto market. Vincent, I think at the beginning you talked about inventory is very lean out there, but then you're also saying that there's inventory digestion going on in the automotive market. Can you just expand on that a little bit? John, I've got that. And then the big topic is overall customer inventory.

Speaker Change #193: Are you at or above 60% at this point?

Speaker Change #193: Helpful, thank you.

Speaker Change #194: We have to give an outlook on utilization in order to give the rate.

Speaker Change #194: One moment for our next question.

Operator: Thank you. Thanks, John.

Speaker Change #194: I would say the lower last score is moving higher here in 3 and 4Q.

Speaker Change #194: Thank you.

Speaker Change #194: Our next question comes from Stacy Rasgon with Bernstein Research.

Speaker Change #194: Thank you.

Speaker Change #194: And they're well off of a normal, leveled, I'll call it 85 to 90% utilization.

Speaker Change #194: Thanks, Josh.

Speaker Change #194: Your line is open.

Speaker Change #194: I think that's all the time we have for questions today.

Speaker Change #194: Hi, guys.

Operator: I think that's all the time we have. The questions that I mean, one more time. But it's August. You guys can go out there and enjoy the weather. Okay.

Speaker Change #194: Thanks, Jeff I think that's all the time, we have for questions today I have a little more time, but it's obviously you guys can go out there and enjoy the weather effect.

Speaker Change #194: Thanks for taking my question.

Speaker Change #194: I thought we had a little more time, but it's August, so you guys can go out there and enjoy, the weather a bit.

Speaker Change #194: Um, I was hoping you could give us a little more granularity on the segment guide for next quarter.

Speaker Change #194: And you said industrial, and I think consumer up and auto down.

Speaker Change #194: So thanks for joining the call.

Speaker Change #194: Any more further color on that?

Speaker Change #194: Like is consumer usually up?

Speaker Change #114: Yeah, I think every market spawns in different cases, inventory digestion.

Speaker Change #194: Is it up double digits?

Operator: So thanks for joining us all for future calls with you guys, and have a great rest of summer. Thank you.

Speaker Change #194: Is industrial up mid single, auto down like low single?

Speaker Change #194: One member for our next press conference.

Speaker Change #194: I look forward to future calls with you guys, and have a great rest of the summer.

Speaker Change #194: Like any further color you could give us on this segment would be helpful.

Speaker Change #194: Our next question comes from Chris Danely with City, your line is open.

Speaker Change #194: Thanks for joining the call in the future calls with you guys and have a great rest of summer. Thank you.

Speaker Change #194: Sure, Stacy, I'll grab that one.

Speaker Change #194: Hey, thanks, guys.

Speaker Change #194: Yeah, so let's start at consumer.

Speaker Change #194: First, just a little clarification on inventory in the auto market.

Speaker Change #194: Thank you.

Speaker Change #194: You're right, consumer's up about double digits again, about 10% or so embedded in our outlook.

Speaker Change #194: Vince, I said it, I think at the beginning you talked about...

Speaker Change #194: Thank you.

Speaker Change #194: This concludes today's analog devices conference call. You may now disconnect.

Speaker Change #195: Industrial has another, I'll call it solid growth quarter, probably high single digits sequentially.

Speaker Change #195: Inventory is very lean out there, but then you're also saying that there's inventory digestion.

Speaker Change #195: Yeah, I would say it's, you know, as we previously mentioned, it is, it is significantly impacted by the favorable mix.

Speaker Change #195: This concludes today's Analog Devices conference call. You may now disconnect.

Operator: This concludes today's Analog Devices conference call. You may now disconnect.

Speaker Change #195: Music, Good morning and welcome to the Analog Devices 3rd Quarter Fiscal Year 2024 Earnings Conference Call, which is being audio webcast via telephone and over the web.

Speaker Change #195: We have cases of about flattish plus minus, depending kind of how things go here.

Speaker Change #195: Automotive Market.

Speaker Change #195: You know, obviously, we get a benefit out of the revenue upside.

Speaker Change #195: Good morning and welcome to the Analog Devices Third Quarter Fiscal Year 2024 Earnings Conference Call, which is being audio webcast via telephone and over the web.

Speaker Change #195: This concludes today's analog devices conference call you may now disconnect.

Speaker Change #195: I'd now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and SP&A.

Speaker Change #195: And auto is the weak market, as we discussed and hit a little bit earlier on the call, it's probably down low single digits sequentially.

Speaker Change #195: Can you just expand on that a little bit?

Speaker Change #195: From a pricing perspective, you know, and I've talked about this before, we continue to see pretty stable pricing, and I do expect that to continue. Obviously, it's different by geography and for big and small customers, but on balance, we are continuing to see stable pricing, and I expect we will see that going forward. You know, once our products are installed in a particular customer's design, they tend to, I mean, in the industrial business, they will stay for decades, and pricing is very, very stable there.

Speaker Change #195: I'd now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and FP&A.

Speaker Change #195: Sir, the floor is yours.

Speaker Change #195: Got it.

Speaker Change #195: So I'll grab that and then Vince talks about overall customer inventory.

Speaker Change #195: Where the pricing or the competitiveness ends up is for new sockets, new wins, but nothing has changed.

Speaker Change #195: Sir, the floor is yours.

Speaker Change #195: This concludes today's Analog Devices conference call. You may now disconnect.

Speaker Change #195: Thank you, Kevin, and good morning, everybody.

Speaker Change #195: That's helpful.

Speaker Change #195: Yeah, I think every market spawns a different case of inventory digestion.

Speaker Change #195: We as a company, we play on the high end of the game in terms of innovation, service, support and so on and so forth, so that's the game we play and the game we will continue to play.

Speaker Change #195: Thank you, Kevin, and good morning, everybody.

Speaker Change #195: Thanks for joining our 3rd Quarter Fiscal 2024 Conference Call.

Speaker Change #195: And if I could get a quick follow up, just how are you thinking about OPEX growth in the next quarter?

Speaker Change #195: We feel good about industrial consumer comms have really normalized their inventory levels.

Speaker Change #195: We significantly hire ASPs the most, and those ASPs increase with each new generation of product.

Speaker Change #195: Thanks for joining our Third Quora Fiscal 2024 conference call.

Speaker Change #195: We're going to call today our ADIC-owned chair, Vincent Roche, and ADICFO, Richard Puccio.

Speaker Change #195: It was it was pretty well under control this quarter.

Speaker Change #195: There are pockets on the auto side that still, I'll call it digesting.

Speaker Change #195: I think overall, as Rich said, the pricing environment is stable, and so I don't see that as a headwind on margin.

Speaker Change #195: So we're going to call today our ADIC-owned chair, Vincent Roche, and ADICFO, Richard Puccio.

Speaker Change #195: Okay.

Speaker Change #195: For anyone who missed the release, you can find it in the latest schedules at investor.analog.com.

Speaker Change #195: Is there anything that drives that up?

Speaker Change #195: I mean, production levels have been cut over the past quarter, whether it's an ICE car or an EV car.

Speaker Change #195: Thank you.

Speaker Change #195: For anyone who missed the release, you can find it and related schedules at investors.analog.com.

Speaker Change #195: On to disclosures. The information we're about to discuss includes forward-looking statements, which are subject to certain risk uncertainties, as further described in our earnings release and our PRF reports and other materials filed at the SEC.

Speaker Change #195: Like, what do you think about the OPEX trends as you're going to the end of the year?

Speaker Change #195: That impacts inventory levels and desire to hold inventory on their balance sheets.

Speaker Change #195: Thanks, Josh.

Speaker Change #195: On the disclosures, the information we're about to discuss includes forward-looking statements which are subject to certain written uncertainties, as further described in our earnings release and our PRS reports and other materials filed at the SEC.

Speaker Change #195: After results could differ materially from the forward-looking information, these statements reflect our expectations only at the date of this call.

Speaker Change #195: So, Stacy, I'll take that one.

Speaker Change #195: From that standpoint, Chris, I don't know if Vince you have anything to add.

Speaker Change #195: I think that's all the time we have for questions today.

Speaker Change #195: After results could differ materially from the forward-looking information, these statements reflect our expectation only the date of this call.

Speaker Change #195: We undertake no obligation to update these statements except as required by law.

Speaker Change #195: So, you know, obviously, we exceeded the high end of our outlook in the third quarter, you know, given the beat on gross margin and revenue, as well as our continued cost management.

Christopher Danely: Yeah, I think every market spawn in different cases, inventory digestion. We feel good about industrial consumer comms have really normalized inventory levels. There are pockets on the auto side that still I'll call it digestion. And the production levels have been cut with the past quarter, whether it's an ice car or an EV car that impact inventory levels and desire to hold inventory on their balance sheets. And that's that one Chris on a bit of an ad. I think Chris overall, you know, we've seen the worst is behind us, I think in industrial consumer and comms markets.

Speaker Change #195: Yeah, I think, Chris, overall, you know, we've seen the worst is behind us, I think, in industrial consumer and comms markets.

Speaker Change #195: I thought we had a little more time, but it's August.

Speaker Change #195: I undertake no obligation to update these statements except as required by law.

Speaker Change #195: References to growth margin, operating and non-operating expenses, operating margin, tax rates, EPS, and pre-tax flow in our comments today will be on a non-GAAP basis. These exclude special items. When comparing our results or historic performance, special items are also excluded from prior periods.

Speaker Change #195: Our Q4 guide, obviously, does imply a modest margin contraction sequentially despite our expectation for higher revenue and gross margin. You know, the main driver for that is our increase for merit increases that will go into effect during the fourth quarter. So that will be that will be a downward pressure as we head into the fourth quarter.

Speaker Change #195: But automotive, I think, is a sector where we will see some inventory digestion issues into at least the early part of 2025.

Speaker Change #195: You guys can go out there and enjoy the weather a bit.

Speaker Change #195: References to growth margin, operating, non-operating expenses, operating margin, tax rate, EPS, and pre-tax flow in our comments today will be on a non-GAAP basis. These excluded special items. When comparing results or historic performance, special items are also excluded from prior periods.

Speaker Change #195: Reconciliations of these non-GAAP measures, the most directly comparable GAAP measures, and additional information about our non-GAAP measures are included in today's earnings release.

Speaker Change #195: I mean, the big margin on our on our uptick, Stacy, is obviously the bonus.

Speaker Change #195: Great, thanks, that's helpful.

Speaker Change #195: So, thanks for joining the call.

Speaker Change #195: Reconciliations of these non-GAAP measures to most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release.

Speaker Change #195: And with that, I'll turn it over to ADIC-owned chair, Vincent Roche.

Speaker Change #195: And, you know, that obviously with the declining profit and revenue over the past.., several quarters.

Speaker Change #195: And then just a quick clarification on industrial, how would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago?

Speaker Change #195: We look forward to future calls with you guys, and have a great rest of the summer.

Speaker Change #195: And with that, I'll turn it over to ADI CEO and Chair, Vincent Roche.

Speaker Change #115: We feel good about industrial consumer comms have really normalized inventory levels.

Speaker Change #195: Thanks very much, Mike, and a very good morning to you all. These favorable results, combined with improved customer inventory levels and order momentum across most of our markets, increase my confidence that our second quarter marked the cyclical bottom for ADI.

Speaker Change #195: That dropped accordingly.

Speaker Change #195: Is it is it roughly the same or has it improved a little bit?

Speaker Change #195: Thank you.

Speaker Change #195: Thanks very much, Mike, and a very good morning to you all.

Speaker Change #195: My optimism remains guarded, however, as challenging economic and geopolitical conditions are limiting a sharper recovery.

Speaker Change #195: Now with growth in revenue and improvement in profitability, that will obviously increase, but that's self-funding.

Speaker Change #195: Hey, Chris, it's Rich.

Speaker Change #195: But stronger demand for a high performance product portfolio and skillful execution resulted in third quarter revenue of more than 2.3 billion, operating margin north of 41%, and EPS of $1.58, all above the midpoint or outlook.

Speaker Change #195: We continue to balance near-term fiscal discipline with strategic investment in our long-term growth initiatives, positioning ADI to capitalize on the extraordinary opportunities that we see ahead.

Speaker Change #195: How much of the op-eds go up then?

Speaker Change #195: I would say our visibility is pretty consistent.

Speaker Change #195: These favorable results, combined with improved customer inventory levels and order momentum across most of our markets, Increase my confidence that our second quarter marked the cyclical bottom for ADI.

Speaker Change #195: Now I'd like to draw attention to our industrial end market, which is our largest, most diverse, and most profitable business, generating durable revenue streams that last close to two decades on average.

Speaker Change #195: For a fourth-order outlook, I would say the sequential increase in op-ecs is around 5%.

Speaker Change #195: You know, and as we talked about, we're seeing, you know, we're seeing continuing growth sequentially across, you know, all of the sub elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth.

Speaker Change #195: My optimism remains guarded, however, as challenging economic and geopolitical conditions are limiting a sharper recovery.

Speaker Change #195: As our business begins to recover from the pandemic's volatility, we're excited about the tremendous long-term growth opportunities of the industrial market.

Speaker Change #195: That's great.

Speaker Change #195: Got it.

Speaker Change #195: We continue to balance near-term fiscal discipline with strategic investment in our long-term growth initiative.

Speaker Change #195: We offer our customers an unparalleled suite of high-performance solutions, stretching from antenna to bits, sensor to cloud, and nanowatts to kilowatts. Our extensive technology portfolio, combined with our deep domain expertise and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors. Now, with growing digital, software, and algorithmic capabilities augmenting our cutting-edge analog portfolio, ADI is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more.

Speaker Change #195: Thank you so much.

Speaker Change #195: Thanks, Rich.

Speaker Change #195: Positioning ADI to capitalize on the extraordinary opportunities that we see ahead.

Speaker Change #116: There are pockets on the auto side.

Speaker Change #195: To illustrate the power and potential of our industrial franchise, let me share with you, a few examples of how our recent innovations are unlocking new revenue streams and positioning us for strong growth in the years ahead.

Speaker Change #195: Appreciate it, guys.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Now I'd like to draw attention to our industrial end market, which is our largest, most diverse and most profitable business, generating durable revenue streams that last close to two decades on average.

Speaker Change #195: For example, our instrumentation and test business, which includes scientific instruments, like test and measurement, and automated test equipment is essential to the important scientific and technological advancements of the digital era. Within automated test equipment, for example, our next generation solutions increase channel, density and throughput, while reducing energy consumption by up to 30% per system. These are crucial parameters for testing complex, high-performance compute GPUs and, high-bandwidth memory systems for AI.

Speaker Change #195: Our next question comes from Harlan Sur with JP Morgan, your line is open.

Speaker Change #195: As our business begins to recover from the pandemic's volatility.

Speaker Change #195: As the AI infrastructure bill that remains a priority for global hyperscalers, we expect, growth to continue into 2025 and, indeed, well beyond.

Speaker Change #195: Good morning.

Speaker Change #195: We're excited about the tremendous long-term growth opportunities of the industrial market.

Speaker Change #195: Turning now to aerospace and defense, which has been our most resilient business during, this downturn, ADI's domain expertise and high-performance portfolio across RF and microwaves, high-speed and precision converters, PAR and MEMS uniquely positions us to deliver complete edge solutions, offering our customers scale, velocity, and lower total cost of ownership.

Speaker Change #195: Thanks for taking my question.

Speaker Change #195: We offer our customers an unparalleled suite of high performance solutions stretching from antenna to bit.

Speaker Change #195: As an example, we're building upon our programmable Apollo signal chain platform today to create, full software-defined RF communications and sensor systems, which have the potential to increase our sound by five times in commercial, defense, and aerospace communication systems.

Speaker Change #195: So, for Fiscal 23, China domestic consumption, I think it was about 18 percent of your total revenues.

Speaker Change #195: Sensor to Cloud, and none of what the killer was.

Speaker Change #195: Indeed, we see a path to double-digit revenue growth in this sector in 2025, fueled by several, high-value design wins that are going to production.

Speaker Change #195: It was the worst performing geography.

Speaker Change #195: Our extensive technology portfolio, combined with our deep domain expertise and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors. Now, with growing digital, software, and algorithmic capabilities, augmenting our cutting-edge analog portfolio, ADI is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more. To illustrate the power and potential of our industrial franchise, let me share with you a few examples of how our recent innovations are unlocking new revenue streams, and positioning us for strong growth in the years ahead.

Speaker Change #195: In automation, though we've seen a slow recovery to date, we remain strongly confident in its, future growth potential, as the benefits of increased productivity are ever more clear.

Speaker Change #195: Last couple of quarters, right, bookings in China have been growing sequentially.

Speaker Change #195: For example, our instrumentation and test business, which includes scientific instruments.

Speaker Change #195: Customers are prioritizing enhanced digitalization and IT-OT integration on their factory floors. Their deployments of inline instrumentation and advanced robotics are driving the need, for more sensing, edge processing, secure connectivity, and car management.

Speaker Change #195: Did that translate into sequential revenue growth out of the region in the July quarter? And then it looks like orders from the China region grew sequentially in July.

Speaker Change #195: Electronic Test and Measurement, and automated test equipment is essential to the important scientific and technological advancements of the digital era.

Speaker Change #195: Within robotics, we're seeing a progression from fixed arm machines to autonomous and mobile robots, to eventually humanoid robots.

Speaker Change #195: How are they trending so far quarter to date?

Speaker Change #195: Within automated test equipment, for example.

Speaker Change #195: This evolution creates additional opportunities for our precision signal chain franchise.

Speaker Change #195: Are you still seeing sort of positive signs out of this region?

Speaker Change #195: Our next generation solutions increase channel density and throughput, by reducing energy consumption by up to 30% per system. These are crucial parameters for testing complex, high-performance compute GPUs and high-bandwidth memory systems for AI.

Speaker Change #195: And sensing connectivity and motion-controlled subsystems with fully isolated and efficient, power solutions can drive content from hundreds of dollars in robots today to thousands in autonomous and humanoid robots.

Speaker Change #195: Yeah, we continue to see strong performance from a bookings perspective in China.

Speaker Change #195: As the AI infrastructure bill that remains a priority for global hyperscalers, we expect growth to continue into 2025 and indeed well beyond.

Speaker Change #195: What is additionally exciting about these advances is their broad applicability beyond, factories, such as surgical robots and imaging systems in healthcare. ADI's products have the potential to dramatically improve a surgeon's effectiveness through, a more precise surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer, complications.

Speaker Change #195: You know, we did see double digit growth across industrial, auto, and comms, you know, being slightly offset by a decrease in consumer.

Speaker Change #195: Turning now to aerospace and defense, which has been our most resilient business during this downturn.

Speaker Change #195: The evolution in robotics is expected to unlock billions of dollars of potential opportunity, for our high-performance analog, mixed-signal power connectivity and sensing solutions.

Speaker Change #195: So China does continue to perform well.

Speaker Change #195: ADI's domain expertise and high-performance portfolio across RF and microwave.

Speaker Change #195: We see the potential for a doubling of our robotics revenue in the years ahead.

Speaker Change #195: And you know, our design win and our pipeline there are very strong.

Speaker Change #195: High Speed and Precision Converters, Power and Memory.

Speaker Change #195: Turning now to energy transmission and distribution, our customers are modernizing and digitalizing, the electrical grid to respond to exponentially accelerating energy demand, driven in part by the proliferation of electric transportation and rapid AI adoption.

Speaker Change #195: Yep, thank you.

Speaker Change #195: He uniquely positions us to deliver complete edge solutions, offering our customers scale, velocity, and lower total cost of ownership.

Speaker Change #195: This process is resulting in a grid that is distributed, dynamic, and bidirectional, a, paradigm shift from the past model of linear, stable supply. We're working with traditional suppliers and disruptors to enable the necessary intelligence, for the new grid, from decentralized power plants to the distribution edge.

Speaker Change #195: One moment for our next question.

Speaker Change #195: As an example, we're building upon our programmable Apollo signal chain platform today to create full software-defined earth communications and sensor systems, which have the potential to increase our sound by five times in commercial, defense, and aerospace communication systems.

Speaker Change #195: We're leveraging our analog and algorithm capabilities in cutting-edge energy monitoring, and management solutions.

Speaker Change #195: Our next question comes from Joshua Buchalter with TD Cowen.

Speaker Change #195: Indeed, we see a path to double digit revenue growth in this sector in 2025, fueled by several high-value design wins that are going to production.

Speaker Change #195: Additionally, our battery management technology increases capacity and improves energy utilization, in the grid's renewable energy storage systems.

Speaker Change #195: Your line is open.

Speaker Change #195: In automation, though we've seen a slow recovery to date, we remain strongly confident in its future growth potential, as the benefits of increased productivity are ever more clear.

Speaker Change #195: This reimagined intelligent grid of the future has the potential to expand our stand by over, $10 billion and creates tailwinds for our energy franchise for many years to come.

Speaker Change #195: Hey guys, thanks for taking my question.

Speaker Change #195: Customers are prioritizing enhanced digitalization and IT-OT integration on their factory floors. Their deployments of inline instrumentation and advanced robotics are driving the need for more sensing, edge processing, secure connectivity, and car management.

Speaker Change #195: Given the synergies across our industrial portfolio, our pace of innovation, and the, emergent signs of market recovery, we're optimistic for our industrial business that has turned the corner and 2025 will be a robust growth year.

Speaker Change #195: Maybe you could walk through some of the puts and takes in the gross margin into the October quarter.

Speaker Change #195: Within Robotics.

Speaker Change #195: So in closing, our investments in high-performance analog solutions are enabling us to intersect, with and leverage the numerous concurrent secular trends that transcend the business cycle and will propel us into the future.

Speaker Change #195: Back the envelope, I'm getting to roughly stable sequentially, despite the revenue increase, and I imagine utilization is improving as well.

Speaker Change #195: We're seeing a progression from fixed arm machines to autonomous and mobile robots to eventually humanoid robots.

Speaker Change #195: Our commitment to our customers' success and to impactful innovation will be the path that, carries us there, ultimately increasing long-term shareholder value.

Speaker Change #195: How much of that is mixed, and in particular, any changes in the pricing environment as we get sort of through this digestion into what I would imagine is a more competitive environment?

Speaker Change #195: This evolution creates additional opportunities for a precision signal chain franchise, and sensing connectivity and motion control subsystems with fully isolated and efficient power solutions, can drive content from hundreds of dollars in robots today to thousands in autonomous and humanoid robots.

Speaker Change #195: And so with that, I'm going to turn it over to Rich, who will take you through the numbers.

Speaker Change #195: What is additionally exciting about these advances is their broad applicability beyond factories, such as surgical robots and imaging systems in healthcare. ADI's products have the potential to dramatically improve a surgeon's effectiveness through a more precise surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer complications.

Speaker Change #117: I'll call it digestion.

Richard Puccio: But automotive, I think, is a sector where we will see some inventory digestion issues into the at least the early part of 2025. Great. Thanks. That's helpful.

Speaker Change #195: Thank you, Vince.

Speaker Change #195: The evolution in robotics is expected to unlock billions of dollars of potential opportunity for high-performance analog, mixed-signal, power connectivity, and sensing solutions.

Speaker Change #195: Let me add my welcome to our third-quarter earnings call. Third-quarter revenue of $2.31 billion came in above the midpoint of our outlook, finishing, up 7% sequentially and down 25% year over year. Automotive represented 46% of revenue in the third quarter, finishing up 6% sequentially, and down 37% year over year.

Speaker Change #195: We see the potential for a doubling of our robotics revenue in the years ahead.

Speaker Change #195: Every major application increased sequentially except for automation, which declined at a, much slower pace than it had in previous quarters. Automotive represented 29% of revenue, finishing flat sequentially and down 8% year over year.

Speaker Change #195: Turning now to energy transmission and distribution, our customers are modernizing and digitalizing the electrical grid to respond to exponentially accelerating energy demand, driven in part, by the Proliferation of Electric Transportation and Rapid AI Adoption.

Speaker Change #195: We saw continued double-digit growth year over year for our industry-leading connectivity, Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses.

Speaker Change #195: This process is resulting in a grid that is distributed, dynamic, and bidirectional, a paradigm shift from the past model of linear stable supply. We're working with traditional suppliers and disruptors to enable the necessary intelligence for the new grid, from Decentralized Power Plants to the Distribution Edge.

Speaker Change #195: Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year. Slowing customer inventory digestion enabled both wireless and wireline growth sequentially.

Speaker Change #195: We're leveraging our analog and algorithm capabilities in cutting edge energy monitoring and management solutions.

Speaker Change #195: And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022.

Speaker Change #195: Additionally, our battery management technology increases capacity and improves energy utilization in the grid's renewable energy storage system.

Speaker Change #195: We saw diversified growth across applications with notable strength in portables and gaming.

Speaker Change #195: This reimagined intelligent grid of the future has the potential to expand our sun by over $10 billion, and creates tailwinds for energy franchise for many years to come.

Speaker Change #195: Now let's move from the top line to the rest of the P&L. Third quarter gross margin was 67.9%, up 120 basis points sequentially, driven by higher revenue, higher utilization, and favorable mix. Operating expenses in the quarter were $619 million, up modestly sequentially, driven primarily by higher variable compensation.

Speaker Change #195: Given the synergies across our industrial portfolio, our pace of innovation, and the emergent signs of Marcus' recovery.

Speaker Change #195: Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at $70 million, and the tax rate for the quarter was 10.8%. The net result was EPS of $1.58, which finished near the high end of our outlook.

Speaker Change #195: We're optimistic, for our industrial business that has turned the corner and 25 will be a robust growth year.

Speaker Change #195: Our financial position is solid, and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than $2.5 billion of cash in short-term investments and a net leverage ratio of 1.2.

Speaker Change #195: So in closing, our investments in high-performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle, and will propel us into the future, and to impactful innovation will be the path that carries us there, ultimately increasing long term shareholder value.

Speaker Change #195: Inventory decreased $51 million sequentially, and days declined to 178 from 192. As planned, we reduced channel inventory further this quarter, with weeks ending near the low end of our 7- to 8-week target.

Speaker Change #195: And so, with that, I'm going to turn it over to Rich, who will take you through the numbers.

Speaker Change #195: Operating cash flow for the quarter and trailing 12 months was $0.9 billion and $4 billion, respectively. CapEx for the quarter and trailing 12 months was $154 million and $1 billion, respectively.

Speaker Change #195: Thank you, Vince.

Speaker Change #195: For fiscal 24, CapEx is tracking to our $700 million plan, which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers.

Speaker Change #195: Let me add my welcome to our third quarter earnings call.

Speaker Change #118: I mean production levels have been cut with the past quarter, whether it's an ice car or an EV car. That impact inventory levels and desire to hold inventory on their balance sheets.

Richard Puccio: And then just a quick clarification on industrial. How would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago? Is it roughly the same or has it improved a little bit? Hey, Chris is rich. I would say our visibility is pretty consistent. And as we talked about what we're seeing, you know, we're seeing continuing growth sequentially across, you know, all of the sub sub elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth. Thanks, Rich.

Speaker Change #195: Not included in these figures are the anticipated benefits from both the European and U.S. CHIPS Acts.

Speaker Change #195: Third quarter revenue of $2.31 billion came in above the midpoint of our outlook, finishing up 7% sequentially and down 25% year over year. Industrial represented 46% of revenue in the third quarter, finishing up 6% sequentially and down 37% year over year.

Speaker Change #195: During the last 12 months, we generated $2.9 billion of free cash flow, or 30% of revenue. Over this same time period, we have returned $2.8 billion via dividends and share repurchases.

Speaker Change #195: Every major application increased sequentially except for automation, which declined at a much slower pace than it had in previous quarters. Automotive represented 29% of revenue, finishing flat sequentially and down 8% year over year.

Speaker Change #195: As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Speaker Change #195: We saw continued double-digit growth year over year for our industry-leading connectivity and functionally safe power platform.

Speaker Change #119: That's the end point Chris.

Operator: One moment, one moment for our next question.

Speaker Change #195: Now I will turn to the fourth quarter outlook. Revenue is expected to be $2.4 billion, plus or minus $100 million, up 4% sequentially at the midpoint. We expect sell-through to be roughly equal to sell-in this quarter. At the midpoint on a sequential basis, we expect industrial and consumer to increase, communications to be flattish, and automotive to decrease.

Speaker Change #195: Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses.

Speaker Change #195: Operating margin is expected to be 41%, plus or minus 100 basis points.

Speaker Change #195: Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year.

Speaker Change #195: Our tax rate is expected to be between 11% and 13%, and based on these inputs, EPS is expected to be $1.63, plus or minus 10 cents.

Speaker Change #195: Slowing customer inventory digestion enables both wireless and wireline growth sequentially.

Speaker Change #195: In closing, our third-quarter results and fourth-quarter outlook support our view that, we have passed this cycle's trough. However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Speaker Change #195: And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year-over-year for the first time since 2022.

Speaker Change #195: I will now give it back to Mike for Q&A.

Speaker Change #195: We saw diversified growth across applications with notable strength in portables and gaming.

Speaker Change #195: Thanks, Rich.

Speaker Change #195: Now let's move from the top line to the rest of the P&L.

Speaker Change #195: Let's get to our Q&A session.

Speaker Change #195: Third quarter gross margin was 67.9 percent, up 120 basis points sequentially, driven by higher revenue, higher utilization, and favorable mix.

Speaker Change #195: We ask that you limit yourself to one question in order to allow for additional persistence, on the call this morning.

Speaker Change #195: Operating expenses in the quarter were $619 million, modestly sequentially, driven primarily by higher variable compensation.

Speaker Change #119: I know a bit of anything to add.

Speaker Change #195: If you have a follow-up question, please recue, and we'll take your question if time allows.

Speaker Change #195: Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at $70 million, and the tax rate for the quarter was 10.8 percent. The net result was EPS of $1.58, which finished near the high end of our outlook.

Speaker Change #195: With that, we'll do our first question, please.

Speaker Change #195: For those participating by telephone dial-in, if you have a question, please press star, 11 on your telephone to enter the queue.

Speaker Change #195: If your question has been answered and you wish to be removed from the queue, please, press star 11 again.

Speaker Change #195: Operating cash flow for the quarter and trailing 12 months was $0.9 billion and $4 billion. CapEx for the quarter and trailing 12 months was $154 million and $1 billion respectively.

Speaker Change #120: Yeah, I think Chris overall, you know, we've seen the worst is behind us I think in industrial consumer incomes markets.

Speaker Change #195: If you are listening on a speakerphone, please pick up a handset when asking your question.

Speaker Change #195: For fiscal 24, CapEx is tracking to our $700 million plan, which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers.

Speaker Change #195: We'll pause for just a moment to compile our Q&A roster.

Speaker Change #195: Not included in these figures are the anticipated benefits from both the European and U.S. CHIPS Act.

Speaker Change #121: But automotive I think is a sector where we will see some inventory digestion issues into at least the early part of 2025.

Speaker Change #195: Our first question comes from Torrey Sandberg with Stifel.

Speaker Change #195: Your line is open.

Speaker Change #195: As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long term.

Speaker Change #195: Yes.

Speaker Change #195: Now I'll turn to the fourth quarter outlook. Revenue is expected to be $2.4 billion, plus or minus $100 million, up 4% sequentially at the midpoint. We expect sell-through to be roughly equal to sell-in this quarter. At the midpoint, on a sequential basis, we expect industrial and consumer to increase, communications to be flattish, and automotive to decrease.

Speaker Change #195: Thank you so much.

Speaker Change #195: Operating margins expected to be 41 percent, plus or minus 100 basis points.

Speaker Change #195: Great to see the turn here.

Speaker Change #195: Our tax rate is expected to be between 11 and 13 percent, and based on these inputs, EPS is expected to be $1.63, plus or minus 10 cents.

Speaker Change #121: Great.

Speaker Change #195: Vince, could you maybe elaborate a little bit more on this sort of mixed environment, right?

Speaker Change #195: In closing, our third quarter results and fourth quarter outlook support our view that we have passed this cycle's trough. However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Speaker Change #195: Because inventories have bottomed, you know, inventory has bottomed at the same time and, demand seems to be kind of mixed.

Speaker Change #195: I will now give it back to Mike for Q&A.

Speaker Change #195: So as you navigate through, you know, this period, could you elaborate a little bit on, your visibility?

Speaker Change #195: Thanks, Rich.

Speaker Change #195: You know, how's backlog trending?

Speaker Change #195: Let's get to our Q&A session.

Speaker Change #195: Are you finally starting to see new products ramping more into production? Because these are typical signals that you want to see at the beginning of a new cycle.

Speaker Change #195: We ask that you limit yourself to one question in order to allow for additional persistence on the call this morning.

Speaker Change #195: Yeah.

Speaker Change #195: If you have a follow-up question, please repeat and we'll take your question if time allows.

Speaker Change #195: Thanks, Torrey.

Speaker Change #195: With that, we have our first question, please.

Speaker Change #195: Well, I'd say, I mean, first and foremost, we run this company on POS signals.

Speaker Change #195: For those participating by telephone dial-in, if you have a question, please press star 11 on your telephone to enter the queue.

Speaker Change #195: That's how we plan our production, how we run the company operationally.

Speaker Change #195: If your question has been answered and you wish to be removed from the queue, please press star 11 again.

Speaker Change #195: So we pay very, very close attention to what's happening in terms of the end market demand. And you know, my confidence has increased since last quarter that indeed 2Q was the, cyclical bottom.

Speaker Change #195: If you're listening on a speakerphone, please pick up a handset when asking your question.

Speaker Change #195: You know, we've exited 3Q with very, very lean channel inventory. We've taken inventory off our own balance sheet, though we're positioned with a very, very healthy backlog of inventory on our own balance sheet so that the anticipated demand up surge that we expect in 25, we're very, very well equipped and ready to meet that. So you know, in the fourth quarter, as we've said, we expect to see continued sequential, growth.

Speaker Change #195: We'll pause for just a moment to compile our Q&A roster.

Speaker Change #195: And indeed, we'll also see, I think, particularly in the industrial area, continued improvement, on customer inventory levels.

Speaker Change #195: Our first question comes from Tore Svanberg with Stiefel, your line is open.

Speaker Change #195: So look, it's all the whole recovery, you know, the ramp of the recovery will depend on, the macro situation.

Speaker Change #195: Yes, thank you so much.

Speaker Change #195: But nonetheless, given the design wins, we have a record design win pipeline in the, company.

Speaker Change #195: Great to see the turn here.

Speaker Change #195: So we're facing many, many secular tailwinds with a very strong pipeline, very, very good, supply line, and with a very, very lean inventory on the customer's balance sheet.

Speaker Change #195: Vince, could you maybe elaborate a little bit more on this sort of mixed environment, right?

Speaker Change #195: So that gives me the optimism, Tory, that we're very, very well positioned coming into, the new year.

Speaker Change #195: Because inventories have bottomed, you know, inventories have bottomed at the same time and demand seems to be kind of mixed.

Speaker Change #195: Thank you.

Speaker Change #195: So as you navigate through, you know, this period, could you elaborate a little bit on your visibility?

Speaker Change #121: Thanks.

Speaker Change #195: One moment for our next question.

Speaker Change #195: You know, how's backlog trending?

Speaker Change #195: Our next question comes from Joseph Moore with Morgan Stanley.

Speaker Change #195: Are you finally starting to see new products ramping more into production?

Speaker Change #121: That's helpful.

Speaker Change #195: Your line is open.

Speaker Change #195: Because these are typical signals that you want to see at the beginning of a new.

Speaker Change #195: Yes, thank you.

Speaker Change #195: Yeah, thanks, Tori.

Speaker Change #195: My question is on the trajectory of automotive versus industrial.

Speaker Change #195: Well, I'd say, first and foremost, we run this company on POS signals.

Speaker Change #195: You know, it seems like automotive entered into an inventory correction a little bit later and so far has been much less severe.

Speaker Change #195: That's how we plan our production, how we run the company operationally.

Speaker Change #195: I guess you sort of talked about some ongoing headwinds in that space.

Speaker Change #195: So we pay very, very close attention to what's happening in terms of the end market demand. And, you know, my confidence has increased since last quarter that indeed 2Q was the cyclical bottom. You know, we've exited 3Q with very, very lean channel inventory.

Speaker Change #195: Can you just talk about, you know, what overall drawdown might you expect in automotive and where are we in customers kind of drawing down safety stock inventory?

Speaker Change #195: We've taken inventory off our own balance sheet, though we're positioned with a very, very healthy backlog of inventory on our own balance sheet so that the anticipated demand upsurge that we expect in 2025, we're very, very well equipped and ready to meet that.

Speaker Change #195: So, Joe, this is Rich, and I'll take a crack at that one.

Speaker Change #195: You know, for in the fourth quarter, as we've said, we expect to see continued sequential growth.

Speaker Change #121: And then just a quick clarification on industrial.

Harlan Sur: Our next question comes from Holland, sir with JP Morgan. Your line is open. Good morning. Thanks for taking my question. So for fiscal 23, China domestic consumption. It was about 18% of their total revenues. It was the worst performance geography. Last couple of quarters, like bookings in China have been growing sequentially. Did that translate into sequential revenue growth out of the region in the July quarter? And then looks like orders from the China region grew sequentially in July.

Speaker Change #195: So, just to level set a little, bit, you know, from our perspective and what we're seeing in the market, cars continue to become more electric and software-defined, which is also driving our semi-content growth, largely trying to address increased battery densities, more sensors, displays, and we do expect that that is going to be a long-term tailwind to our business.

Speaker Change #195: And indeed, we'll also see, I think, Particularly in the industrial area, continued improvement on customer inventory levels, so, Look, it's all the whole recovery, you know, the ramp of the recovery will depend on the on the macro situation.

Speaker Change #195: However, and this is where we're starting to see some of the pullback, the vehicle market has softened in the near term. We're seeing our customers pull back on their production, and at this point, we're seeing them start to choose to burn off some inventory.

Speaker Change #195: But nonetheless, given the design wins, we've we've a record design win pipeline.

Speaker Change #195: So, we are seeing that, right?

Speaker Change #195: Thank you.

Speaker Change #195: The softness is evidenced in our results.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Auto has been down year over year for two straight quarters, and we expect it will be down again in 4Q, and from a bookings perspective, we did see a decline in bookings in auto. In particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios, and we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers.

Speaker Change #195: Our next question comes from Joseph Moore with Morgan Stanley, your line is open.

Speaker Change #195: However, to your question around the peak to trough, you know, unless SAR returns to, you know, to pandemic levels, you know, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Speaker Change #195: Yes, thank you.

Speaker Change #121: How would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago?

Speaker Change #195: You know, the underlying secular growth trend that I described, you know, driving higher, semi-content.

Speaker Change #195: My question is on the trajectory of automotive versus industrial.

Speaker Change #195: Also, we've continued to see more penetration and value capture across all vehicle types, whether it's ICE, plug-in hybrid electric, or full electric in the fastest growing applications, and if you think about that, ADAS, digital cockpit, and electrification.

Speaker Change #121: Is it roughly the same or has it improved a little bit?

Speaker Change #195: You know, it seems like automotive entered into an inventory correction a little bit later and so far has been much less severe.

Speaker Change #195: So, we will be down, but we don't expect that the cycle depth to be as severe as we, saw, for example, in industrial.

Speaker Change #195: I guess you sort of talked about some ongoing headwinds in that space.

Speaker Change #195: Great.

Speaker Change #195: Can you just talk about, you know, what overall drawdown might you expect in automotive and where are we in customers kind of drawing down safety stock inventory?

Speaker Change #122: Yeah, Chris is rich.

Speaker Change #195: Thank you very much.

Speaker Change #195: So, Joe, this is Rich, and I'll take a crack at that one.

Speaker Change #195: And I guess as a follow-up, are you seeing that behavior, any different regionally?

Speaker Change #195: So, just to level set a little bit, you know, from our perspective and what we're seeing in the market, cars continue to become more electric and software-defined, which is also driving our semi-content growth, largely trying to address increased battery densities, more sensors, displays.

Speaker Change #195: Is the China automotive market different than the Western markets in terms of where they are?

Speaker Change #195: And we do expect that that is going to be a long-term tailwind to our business.

Speaker Change #122: I would say visibility is pretty consistent.

Speaker Change #195: No.

Speaker Change #195: However, and this is where we're starting to see some of the pullback, the vehicle market has softened in the near term. We're seeing our customers pull back on their production. And at this point, we're seeing them start to choose to burn off some inventory.

Speaker Change #195: I would say overall, it's pretty unanimous across all markets.

Speaker Change #195: So we are seeing that, right?

Speaker Change #195: I would say China auto, LSE did okay.

Speaker Change #195: The softness is evidenced in our results.

Speaker Change #195: We tuggled some design with ramping there, so that's helping offset some of the softness, but it's an overall comment.

Speaker Change #195: Auto's been down year over year for two straight quarters, and we expect it will be down again in 4Q. And from a bookings perspective, we did see a decline in bookings in auto. In particular, we've seen inventory digestion in our legacy auto and in our BMS portfolios. And we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers.

Speaker Change #195: Auto is a bit weaker today than it was 90 days ago, whether it's North America, Europe, or Asia.

Speaker Change #195: Right.

Speaker Change #195: You know, the underlying secular growth trends that I described, you know, driving higher semi-content, also, we've continued to see more penetration and value capture across all vehicle types, whether it's ICE, plug-in hybrid electric or full electric in the fastest growing applications.

Speaker Change #195: Great.

Speaker Change #195: If you think about that, ADAS, digital cockpit and electrification.

Speaker Change #195: Thank you very much.

Speaker Change #195: So we will be down, but we don't expect that the cycle depth to be as severe as we saw, for example, in industrial.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Great.

Speaker Change #195: Our next question comes from Vivek Arya with Bank of America Securities.

Speaker Change #195: Thank you very much.

Speaker Change #195: Your line is open.

Speaker Change #195: And I guess as a follow-up, are you seeing that behavior any different regionally?

Speaker Change #195: Thanks for taking my question.

Speaker Change #195: Is the China automotive market different than the Western markets in terms of where they are?

Speaker Change #195: I've been glad to hear about your optimism about turning, the cyclical corner.

Speaker Change #195: No, I would say overall, it's pretty unanimous across all markets.

Speaker Change #195: Do you think the environment allows for sequential growth to continue into Q1?

Speaker Change #195: I would say China, although I think it did okay.

Speaker Change #195: You know, it seems like industrial could grow.

Speaker Change #195: We toggled some design with ramping there, so that's helping offset some of the softness.

Speaker Change #195: Autos, I'm not sure, given some of the bookings, commentary, and consumer, tends to be down seasonally.

Speaker Change #195: But it's an overall comment.

Speaker Change #195: So just conceptually, how should we model the shape of this recovery into Q1?

Speaker Change #195: Auto is a bit weaker today than it was 90 days ago, whether it's North America, Europe, or Asia.

Harlan Sur: How are they trending so far quarter to the date? Are you still seeing sort of positive signs out of this region? We continue to see strong performance from a bookings perspective in China. We did see double-digit growth across industrial, auto, and comms being slightly offset by a decrease in consumer. China is continuing to perform well and our design win and our pipeline there are very strong.

Speaker Change #195: Thanks.

Speaker Change #195: Great.

Speaker Change #195: Thank you.

Speaker Change #195: Thank you very much.

Speaker Change #195: Yeah.

Speaker Change #195: One moment for our next question.

Operator: Thank you.

Speaker Change #195: Well, at this point, you know, it's hard to call, given that the environment is still, a little, let's say, there's a bit of disequilibrium. But I think generally speaking, we would probably expect to see a bit of a seasonal decline, in the first quarter, and then, you know, a bounce back in the second.

Speaker Change #195: Our next question comes from Vivek Arya with Bank of America Securities.

Speaker Change #195: And I think that's the sentiment.

Speaker Change #195: Your line is open.

Speaker Change #195: But overall, you know, I maintain my outlook that we will see a brisk growth here in 2025.

Speaker Change #195: Thanks for taking my question.

Speaker Change #195: I'll help you out a little bit on the seasonality question, because it's been a few years now, since we've seen seasonal trends in our business.

Speaker Change #195: Vince, glad to hear about your optimism about turning the cyclical corner.

Speaker Change #195: You're right.

Speaker Change #195: Do you think the environment allows for sequential growth to continue into Q1?

Joshua Buchalter: One moment for our next question.

Speaker Change #195: If you look back over the past 10, 15 years for ADI, consumers are down 10% plus sequentially, in one queue, and the B2B markets of industrial, auto, and comms are down low single digits.

Speaker Change #195: You know, it seems like industrial could grow.

Speaker Change #195: And as Vincent said, there's no belief today that we'd be any better than seasonal, given, where we are today.

Speaker Change #195: Autos, I'm not sure, given some of the bookings, commentary, and consumer tends to be down seasonally.

Speaker Change #195: But we'll update you in 90 days on how we feel about one queue.

Speaker Change #195: So just conceptually, how should we model the shape of this recovery into Q1?

Speaker Change #195: Yeah, I think the big modulator for us will be what happens in industrial in particular.

Speaker Change #195: Thank you.

Speaker Change #195: And what I can tell you is that the various C-suite conversations I've had with our industrial, customers would suggest that their optimism is also strong for 2025.

Speaker Change #195: Yeah, well, at this point, you know, it's hard to call, given that the environment is still a little, let's say there's a bit of disequilibrium.

Speaker Change #195: All right.

Speaker Change #195: But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the first quarter, and then, you know, a bounce back in the second. And I think that's the sentiment.

Speaker Change #123: And as we talked about what we're seeing, you know, we're seeing continuing growth sequentially across, you know, all of the sub elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth.

Speaker Change #195: Thank you.

Speaker Change #195: But overall, you know, I maintain my outlook that we will see a brisk growth year in 2025.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Evan, I'll help you out a little bit on the seasonality question.

Speaker Change #195: Our next question comes from Timothy Arcari with UBS.

Speaker Change #195: It's been a few years now since we've seen seasonal trends in our business.

Speaker Change #195: Your line is open.

Speaker Change #195: You're right.

Speaker Change #195: Thanks a lot.

Speaker Change #195: If you look back over the past 10, 15 years for ADI, consumers down 10% plus sequentially in one queue, and the B2B markets of industrial, auto, and comms are down low single digits.

Speaker Change #195: I just wanted to ask on that answer.

Speaker Change #195: And as Vincent said, there's probably no belief today that we'd be any better than seasonal, given where we are today.

Speaker Change #195: So you were above seasonal in fiscal Q3, you're above seasonal in fiscal Q4.

Speaker Change #195: But we'll update you in 90 days on how we feel about one queue.

Speaker Change #195: Sounds like you're not willing to commit that you're going to be above seasonal in fiscal, Q1.

Speaker Change #195: Yeah.

Speaker Change #195: The street's modeling like 5% or 6% above seasonal for fiscal Q1.

Speaker Change #195: I think the big modulator for us will be what happens in industrial in particular.

Speaker Change #195: Was there something that happened in bookings?

Speaker Change #195: The various C-suite conversations I've had with our industrial customers would suggest that their optimism is also strong for 2025.

Speaker Change #195: Did bookings slow in the last couple of weeks or the last month or something to make you, not want to commit to the fact that fiscal Q1 would be above seasonal, or just that it's, 90 days away and you just don't want to comment on it?

Speaker Change #195: One moment for our next question.

Speaker Change #195: Thanks.

Speaker Change #195: Our next question comes from Timothy Arcuri with UBS, your line is open.

Speaker Change #123: Got it.

Speaker Change #195: I'll start out on the street expectations and then Rick's on a little bit about bookings.

Speaker Change #195: Thanks a lot.

Speaker Change #195: We never got to 1Q.

Speaker Change #195: I just wanted to ask on that answer.

Speaker Change #195: I think the street makes up the street expectation for 1Q.

Speaker Change #195: So, you were above seasonal in Fiscal Q3, you're above seasonal in Fiscal Q4.

Speaker Change #195: I think the street is, everyone, better than seasonal for a calendar 4Q or a fiscal 1Q, on the hope of a snapback.

Speaker Change #195: Sounds like you're not willing to commit that you're going to be above seasonal in Fiscal Q1.

Speaker Change #195: I would say, yeah, there are things that have changed in 90 days, but we're optimistic about, 25 in the full year.

Speaker Change #195: The street's modeling, like, 5 or 6 percent above seasonal for, you know, Fiscal Q1.

Speaker Change #195: We just don't know if it's above seasonal in that outlook for a good year in 25.

Speaker Change #195: Was there something that happened in bookings?

Speaker Change #195: I'll pass it to Rick to go through some of the bookings dynamics.

Speaker Change #195: Did bookings, like, slow in the last couple weeks or the last month or something to make you not want to commit to the fact that Fiscal Q1 would be above seasonal, or just that it's 90 days away and you just don't want to comment on it?

Speaker Change #195: Yeah.

Speaker Change #195: Right.

Speaker Change #195: So, Tim, from a bookings perspective, up until Q2, as we talked about, we'd seen three straight, quarters of broad-based bookings improvement. However, Q3 was different. We saw continued bookings growth for industrial, consumer, and communications, but we did see, automotive orders decline, which resulted in a modest drop in our total bookings during the quarter. We did still end with a book-to-bill around parity.

Speaker Change #195: I'll start out on the street expectations, and then Rich will talk a little about bookings.

Speaker Change #195: You know, and if I look at it from a geographic perspective, regionally, bookings were the, weakest in Europe.

Speaker Change #195: We never guided 1Q.

Speaker Change #195: America's was modestly weaker, which offset bookings growth in Asia.

Speaker Change #195: I think the street makes up the street expectation for 1Q.

Speaker Change #195: Thanks a lot.

Speaker Change #195: I think the street is, everyone, better than seasonal for a calendar 4Q or a fiscal 1Q in the hope of a snapback.

Speaker Change #195: One moment for our next question.

Speaker Change #195: I would say, yeah, there are things that have changed in 90 days, but we're optimistic about 25 as a full year.

Speaker Change #195: Our next question comes from Toshihari with Goldman Sachs.

Speaker Change #195: We just don't know if it's above seasonal in that outlook for a good year in 25.

Speaker Change #195: Your line is open.

Speaker Change #195: I'll pass it to Rich to go through some of the booking dynamics. Yeah.

Speaker Change #195: Hey.

Speaker Change #195: Tim, from a bookings perspective, up until Q2, as we talked about, we'd seen three straight quarters of broad-based bookings improvement. However, Q3 was different. We saw continued bookings growth for industrial, consumer, and communications, but we did see automotive orders decline, which resulted in a modest drop in our total bookings during the quarter. We did still end with a book-to-bill around parity.

Speaker Change #195: Good morning.

Speaker Change #195: If I look at it from a geographic perspective, regionally, bookings were the weakest in Europe.

Speaker Change #195: Thanks for taking the question.

Speaker Change #124: Thanks, Rich.

Joshua Buchalter: Our next question comes from Joshua Buchalter with TD Cowan, your line is open. Hey guys, thanks for taking my question.

Speaker Change #195: America's was modestly weaker, which offset bookings growth in Asia.

Speaker Change #195: It was good to see inventory on your balance sheet come down again, and you guys spoke, to channel inventory coming down as well.

Speaker Change #195: Thanks a lot.

Speaker Change #195: As you look forward, what are your thoughts on utilization rates internally?

Speaker Change #195: One moment for our next question.

Speaker Change #195: How are you engaging with your foundry partners, and what's embedded in your October quarter, outlook as it pertains to the channel?

Speaker Change #195: Our next question comes from Toshiya Hari with Goldman Sachs, your line is open.

Speaker Change #195: Thank you.

Speaker Change #195: Hey, good morning.

Speaker Change #124: One moment, one moment for our next question.

Speaker Change #195: So, you know, as I noted in the last call, you know, we said both utilization and, in, fact, growth margins had bottomed in Q2, and that is proving to be true.

Speaker Change #195: Thanks for taking the question.

Speaker Change #195: From an inventory in the channel perspective, you know, the expectation is we will ship, to end demand. We are currently at the very low end of our range in the channel at seven to eight weeks. And I think we've mentioned previously, if we saw continued improvements, we would start, shipping to end demand. So we will do that in the fourth quarter.

Speaker Change #195: It was good to see inventory on your balance sheet come down again. And you guys spoke to channel inventory coming down as well.

Speaker Change #195: So obviously, when it comes to, you know, the balance, we have a hybrid manufacturing, system, which enables us to keep utilization rates as high as possible internally, and, you know, when our factories run out of capacity, then we have lots of choices externally for silicon capacity.

Speaker Change #195: As you look forward, what are your thoughts on utilization rates internally?

Speaker Change #124: Our next question comes from Harlan Sir with JetP Morgan.

Richard Puccio: Maybe you can walk through some of the puts and takes into Gross Margin into the October quarter. Back the envelope, I'm getting to roughly stable sequentially despite the revenue increase and I imagine utilization is improving as well. How much of that is mixed and in particular any changes in the pricing environment as we get sort of through the suggestion into what I would imagine is the more competitive environment. Thank you. Yeah, I would say it's you know, as we previously mentioned it is it is significantly impacted by the favorable mix.

Speaker Change #195: So, you know, obviously, we've got a lot of inventory on the balance sheet, and our factories, are, you know, well, well capable of improving utilization rates as the demand continues to improve over the coming quarters.

Speaker Change #195: How are you engaging with your foundry partners?

Speaker Change #195: As a quick follow-up, I think your internal utilization rates last quarter were in the, mid-50s, if I'm not mistaken.

Speaker Change #195: And what's embedded in your October quarter outlook as it pertains to the channel?

Speaker Change #195: Are you at or above 60% at this point, or...

Speaker Change #195: Thank you.

Speaker Change #195: We have to give an outlook on utilization in order to be given the rate.

Speaker Change #195: So, you know, as I noted in the last call, you know, we said both utilization and, in fact, growth margins had bottomed in Q2, and that is proving to be true.

Speaker Change #125: Your line is open.

Speaker Change #195: I would say they were lower last quarter, moving higher here in the three and four Q.

Speaker Change #195: From an inventory in the channel perspective, you know, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at seven to eight weeks. I think we've mentioned previously if we saw continued improvements, we would start shipping to end demand.

Speaker Change #195: And they're well off the normal level, so I'll call it 85% to 90% utilization.

Speaker Change #195: So, we will do that in the fourth quarter.

Speaker Change #195: Got it.

Speaker Change #195: Thank you.

Speaker Change #195: Obviously, when it comes to, you know, the balance, we have a hybrid manufacturing system, which enables us to keep utilization rates as high as possible internally, and, you know, Our factories run out of capacity, then we have lots of choices externally for silicon capacity.

Speaker Change #195: I guess to help you, I'll give you some little context.

Speaker Change #195: So, you know, obviously, we've got a lot of inventory on the balance sheet and our factories, our, You know, well, well capable of improving utilization rates as the demand continues to improve over the coming quarter.

Speaker Change #195: What does this mean as utilizations ramp? What does that mean for gross margins? If you look at the decline of gross margins over the past year or so, about half the decline, relates to utilization.

Speaker Change #195: As a quick follow-up, I think your internal utilization rates last quarter were in the mid-50s, if I'm not mistaken.

Speaker Change #195: The other half relates to mix.

Speaker Change #195: Are you at or above 60% at this point?

Speaker Change #195: So you can see, as utilizations pick up, what that means for gross margin expansion.

Speaker Change #195: We have to give an outlook on utilization in order to give the rate.

Speaker Change #195: Helpful.

Speaker Change #195: I would say the lower last score is moving higher here in the 3 and 4Q, and they're well off of a normal, levels of alcohol at 85 to 90 percent utilization.

Speaker Change #126: Good morning.

Speaker Change #195: Thank you.

Speaker Change #195: And if you want some context, I guess I'll give you some little context.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Our next question comes from Stacey Raskin with Bernstein Research.

Speaker Change #195: The other half relates to mix.

Speaker Change #195: Your line is open.

Speaker Change #195: So you can see, as utilizations pick up, what that means for gross margin expansion.

Speaker Change #195: Hi, guys.

Speaker Change #195: Helpful, thank you.

Speaker Change #195: Thanks for taking my question.

Speaker Change #195: One moment for our next question.

Speaker Change #195: I was hoping you could give us a little more granularity on the segment guide for next, quarter.

Speaker Change #195: Our next question comes from Stacy Rasgon with Bernstein Research.

Speaker Change #195: You said industrial, and I think consumer up and auto down.

Speaker Change #195: Your line is open.

Speaker Change #195: Any more further color on that?

Speaker Change #195: Hi, guys.

Speaker Change #195: Is consumer usually up?

Speaker Change #195: Thanks for taking my question.

Speaker Change #127: Thanks for taking my question.

Speaker Change #195: Is it up double digits?

Speaker Change #195: Um, I was hoping you could give us a little more granularity on the segment guide for next quarter.

Speaker Change #195: Is industrial up mid-single, auto down low single?

Speaker Change #195: And then you said industrial, and I think consumer up and auto down.

Speaker Change #128: So for fiscal 23, China domestic consumption.

Speaker Change #195: Any further color you could give us on those segments would be helpful.

Speaker Change #195: Any more further color on that?

Speaker Change #195: Sure, Stacey.

Speaker Change #195: Like is consumer usually up?

Speaker Change #195: I'll grab that one.

Speaker Change #195: Is it up double digits?

Speaker Change #195: Yeah.

Speaker Change #195: Is industrial up mid single, auto down like low single?

Speaker Change #195: So let's start with consumer.

Speaker Change #195: Like any further color you could give us on those segments would be helpful.

Speaker Change #195: You're right.

Speaker Change #195: Sure, Stacy, I'll grab that one.

Speaker Change #195: Consumer is up about double digits again, about 10% or so, embedded in our outlook.

Speaker Change #195: Yeah, so let's start with consumer.

Speaker Change #195: Industrial has another, I'll call it solid growth quarter, probably high single digits, sequentially.

Speaker Change #195: You're right, consumer's up about double digits again, about 10% or so, embedded in our outlook.

Speaker Change #129: Because about 18% of their total revenue is the worst performance geography.

Richard Puccio: Obviously we get a benefit out of the revenue upside. From a pricing perspective, you know, and I talked about this before, we continue to see pretty stable pricing and I do expect that to continue. Obviously it's different by geography and for big and small customers but on balance we are continuing to see stable pricing and expect we will see that going forward. You know, once our products are installed in a particular customer's design, they tend to mean in the industry of business, they will stay for a decade and pricing is very very stable there.

Speaker Change #195: Communication is about flat-ish, plus-minus, depending on how things go here.

Speaker Change #195: Industrial has another, I'll call it solid growth quarter, probably high single digits sequentially.

Speaker Change #195: And auto is the weak market, as we discussed and hit a little bit earlier on the call, probably down low single digits sequentially.

Speaker Change #195: Communications is about flattish, plus minus, depending kind of how things go here.

Speaker Change #195: Got it.

Speaker Change #195: And auto is the weak market, as we discussed and hit a little bit earlier on the call, it's probably down low single digits sequentially.

Speaker Change #195: That's helpful.

Speaker Change #195: Got it, that's helpful.

Speaker Change #195: And if I could get a quick follow-up, just how are you thinking about OPEX growth in, the next quarter?

Speaker Change #195: And if I could get a quick follow up, just how are you thinking about OPEX growth in the next quarter?

Speaker Change #195: It was pretty well under control this quarter.

Speaker Change #195: It was it was pretty well under control this quarter.

Speaker Change #195: Is there anything that drives that up?

Speaker Change #129: Last couple of quarters where bookings in China have been growing sequentially.

Speaker Change #195: Like, what do you think about the OPEX trends as you're going to the end of the year?

Speaker Change #195: So, Stacey, I'll take that one.

Speaker Change #195: So, Stacy, I'll take that one.

Speaker Change #195: So, you know, obviously we exceeded the high end of our outlook in the third quarter, you, know, given the beat on gross margin and revenue, as well as our continued cost management.

Speaker Change #195: Our Q4 guide obviously does imply a modest margin contraction sequentially, despite, our expectation for higher revenue and gross margin. You know, the main driver of that is our increase for merit increases that will go into effect, during the fourth quarter. So that will be a downward pressure as we head into the fourth quarter.

Speaker Change #195: I mean, the big margin on our OPEX, Stacey, is obviously the bonuses.

Speaker Change #195: I mean, the big margin on our on our uptick, Stacy, is obviously the bonus.

Speaker Change #195: And you know that obviously with declining profit and revenue over the past several quarters, that dropped accordingly.

Speaker Change #195: And, you know, that obviously with declining profit and revenue over the past.., several quarters.

Speaker Change #195: Now with increase, with growth in revenue and improvement in profitability, that will obviously increase. But that's self-funding, so to speak.

Speaker Change #195: That dropped accordingly.

Speaker Change #195: How much did the outputs go up then?

Speaker Change #195: Now with increase, with growth in revenue and improvement in profitability, that will obviously increase, but that's self-funding.

Speaker Change #195: For a fourth quarter outlook, I would say the sequential increase in outbacks is around 5%.

Speaker Change #195: How much should the op-eds go up then?

Speaker Change #195: That's great.

Speaker Change #195: For a fourth-order outlook, I would say the sequential increase in op-ecs is around 5%.

Speaker Change #130: Did that translate into sequential revenue growth out of the region in the July quarter? And then looks like orders from the China region grew sequentially in July.

Speaker Change #195: Thank you so much.

Speaker Change #195: That's great.

Speaker Change #195: Appreciate it, guys.

Speaker Change #195: Thank you so much.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Appreciate it, guys.

Speaker Change #195: Thanks.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Our next question comes from Chris Danely with Citi.

Speaker Change #195: Hey, thanks, guys.

Speaker Change #195: Your line is open.

Speaker Change #195: First, just a little clarification on inventory in the auto market.

Speaker Change #195: Hey, thanks, guys.

Speaker Change #195: Vince, I said it, I think at the beginning you talked about...

Speaker Change #195: First, just a little clarification on inventory in the auto market.

Speaker Change #195: Inventory is very lean out there, but then you're also saying that there's inventory digestion.

Speaker Change #195: Vince, I think at the beginning you talked about inventory is very lean out there, but then you're also saying that there's inventory digestion going on in the automotive market.

Speaker Change #195: Automotive Market.

Speaker Change #131: How are they trending so far quarter to the date?

Speaker Change #195: Can you just expand on that a little bit?

Speaker Change #195: So I'll go to that, and then Vince will talk about overall customer inventory.

Speaker Change #195: So I'll grab that and then Vince talks about the overall customer inventory.

Speaker Change #195: Yeah, I think every market responds to different cases of inventory digestion.

Speaker Change #195: Yeah, I think every market's found a different cadence of inventory digestion.

Speaker Change #195: We feel good about industrial consumer coms have really normalized their inventory levels.

Speaker Change #195: We feel good about industrial consumer comms have really normalized their inventory levels.

Speaker Change #195: There are pockets on the auto side that still, I'll call it digesting.

Speaker Change #195: I mean, production levels have been cut over the past quarter, whether it's an ICE car or an EV car.

Speaker Change #195: That impacts inventory levels and desire to hold inventory on their balance sheets.

Speaker Change #195: From that standpoint, Chris, I don't know if Vince you have anything to add.

Speaker Change #195: Yeah, I think, Chris, overall, you know, we've seen the worst is behind us, I think, in industrial consumer and coms markets.

Speaker Change #195: Yeah, I think, Chris, overall, you know, we've seen the worst is behind us, I think, in the industrial consumer and comms market.

Speaker Change #195: But automotive, I think, is a sector where we will see some inventory digestion issues into at least the early part of 2025.

Speaker Change #195: Great, thanks.

Speaker Change #195: That's helpful.

Speaker Change #195: And then just a quick clarification on industrial.

Speaker Change #131: Are you still seeing sort of positive signs out of this region?

Richard Puccio: Where the pricing or the competitiveness of itself is for new new sockets, new wins, but nothing is new there. You know, we as a company, we play on the high end of the game in terms of innovation, service, support and support. So that's the game we play and the game we will continue to play. You know, we significantly hire SPs the most and you know, those SPs increase with each new generation of products. So I think overall as Ritsha, the pricing environment is stable and so I don't see that as a headwind on margin. Thank you. Thanks, Josh.

Speaker Change #195: How would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago?

Speaker Change #195: Is it roughly the same, or has it improved a little bit?

Speaker Change #195: Is it roughly the same or has it improved a little bit?

Speaker Change #195: Hey, Chris, it's Rich.

Speaker Change #195: I would say our visibility is pretty consistent.

Speaker Change #195: You know, and as we talked about when we're seeing, you know, we're seeing continuing growth sequentially across, you know, all of the sub elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth.

Speaker Change #195: Got it.

Speaker Change #195: Thanks, Rich.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Our next question comes from Harlan, sir, with JP Morgan.

Speaker Change #195: Our next question comes from Harlan Sur with Jeff P. Morgan, your line is open.

Speaker Change #195: Your line is open.

Speaker Change #195: Good morning.

Speaker Change #132: We continue to see strong performance from a bookings perspective in China.

Speaker Change #195: Good morning.

Speaker Change #195: Thanks for taking my question.

Speaker Change #195: So, for Fiscal 23, China domestic consumption, I think it was about 18 percent of your total revenues.

Speaker Change #195: So for fiscal 23, China domestic consumption, I think it was about 18% of your total revenues.

Speaker Change #195: It was the worst performing geography.

Speaker Change #195: Last couple of quarters, right, bookings in China have been growing sequentially.

Speaker Change #195: Did that translate into sequential revenue growth out of the region in the July quarter? And then it looks like orders from the China region grew sequentially in July.

Speaker Change #195: How are they trending so far quarter to the date?

Speaker Change #195: Are you still seeing sort of positive signs out of this region?

Speaker Change #195: Yeah, we continue to see strong performance from a bookings perspective in China.

Speaker Change #195: You know, we did see double digit growth across industrial, auto, and comms, you know, being slightly offset by a decrease in consumer.

Speaker Change #195: We did see double-digit growth across industrial, auto, and comms, being slightly offset by, a decrease in consumer.

Speaker Change #195: So China does continue to perform well.

Speaker Change #195: So China does continue to perform well, and our design win and our pipeline there are, very strong.

Speaker Change #195: And you know, our design win and our pipeline there are very strong.

Speaker Change #195: Yep, thank you.

Speaker Change #195: One moment for our next question.

Speaker Change #195: Our next question comes from Joshua Buchalter with TD Cowen.

Speaker Change #195: Your line is open.

Speaker Change #195: Hey, guys.

Speaker Change #195: Hey guys, thanks for taking my question.

Speaker Change #195: Thanks for taking my question.

Speaker Change #195: Maybe you could walk through some of the puts and takes in the gross margin into the October quarter.

Speaker Change #195: Maybe you could walk through some of the puts and takes in the gross margin into the October, quarter.

Speaker Change #195: Back the envelope, I'm getting to roughly stable sequentially, despite the revenue increase, and I imagine utilization is improving as well.

Speaker Change #133: We did see double-digit growth across industrial auto and comms, being slightly offset by a decrease in consumer.

Speaker Change #195: How much of that is mixed, and in particular, any changes in the pricing environment as, we get sort of through this digestion into what I would imagine is a more competitive environment?

Speaker Change #195: Thank you.

Speaker Change #195: Yeah, I would say it's, you know, as we as we previously mentioned, it is it is significantly impacted by the favorable mix.

Speaker Change #195: Yeah, I would say it's, you know, as we previously mentioned, it is significantly impacted by, the favorable mix.

Speaker Change #195: You know, obviously, we get a benefit out of the revenue upside.

Speaker Change #195: From a pricing perspective, you know, and I've talked about this before, we continue, to see pretty stable pricing, and I do expect that to continue. Obviously, it's different by geography and for big and small customers, but on balance, we are continuing to see stable pricing, and I expect we will see that going forward. You know, once our products are installed in a particular customer's design, they tend, to, I mean, in the industrial business, they will stay for decades, and pricing is very, very stable there.

Speaker Change #195: Where the pricing or the competitiveness ends up is for new sockets, new wins, but nothing, is new there.

Speaker Change #195: We significantly hire ASPs the most, and those ASPs increase with each new generation of product.

Speaker Change #195: You know, we as a company, we play on the high end of the game in terms of innovation, service, support, and so on and so forth, so that's the game we play, and the game we will continue to play.

Speaker Change #195: I think overall, as Rich said, the pricing environment is stable, and so I don't see that as a headwind on margin.

Speaker Change #195: You know, we significantly hire ASPs the most, and, you know, those ASPs increase with each, new generation of product, so I think overall, as Rich said, the pricing environment is stable, and so I don't see that as a headwind on margin.

Speaker Change #195: Thank you.

Speaker Change #195: Thanks, Josh.

Speaker Change #195: I think that's all the time we have for questions today.

Speaker Change #134: So China and we continue to perform well and our design win and our pipeline there are very strong.

Speaker Change #195: I think that's all the time we have for questions today.

Speaker Change #195: I thought we had a little more time, but it's August.

Speaker Change #134: Yes, thank you.

Speaker Change #195: I thought we had a little more time, but it's August.

Speaker Change #195: You guys can go out there and enjoy the weather a bit.

Speaker Change #134: One moment for our next question.

Operator: I think that's all the time we have for questions today. I tell you a little more time, but it's August. You guys can go out there and enjoy the weather. Okay.

Speaker Change #195: You guys can go out there and enjoy the weather a bit, so thanks for joining the call.

Speaker Change #195: So, thanks for joining the call.

Speaker Change #195: We look forward to future calls with you guys, and have a great rest of the summer.

Speaker Change #195: Thank you.

Speaker Change #195: This concludes today's analog devices conference call. You may now disconnect.

Speaker Change #135: Our next question comes from Joshua Buchalter with TD Cowan, your line is open.

Operator: So thanks for joining the call.

Speaker Change #136: Hey guys, thanks for taking my question.

Operator: The future calls for you guys and have a great rest of summer.

Joshua Buchalter: Maybe you can walk through some of the puts and takes into gross margin into the October quarter.

Operator: Thank you.

Speaker Change #138: Back the envelope, I'm getting to roughly stable sequentially, despite the revenue increase in, and I imagine, utilizations improving as well.

Operator: This concludes today's analog device this conference call. You may now disconnect.

Speaker Change #139: How much of that is mixed and in particular, any changes in the pricing environment as we get sort of through the suggestion into what I would imagine is the more competitive environment.

Speaker Change #139: Thank you.

Speaker Change #139: Yeah, I would say it's, you know, as we previously mentioned, it is significantly impacted by the favorable mix.

Speaker Change #139: You know, obviously we get a benefit out of the revenue upside.

Speaker Change #140: From a pricing perspective, you know, and I talked about this before, we continue to see pretty stable pricing. And I do expect that to continue. Obviously, it's different by geography and for big and small customers, but on balance, we are continuing to see stable pricing. And I expect we will see that going forward. You know, once our products are installed in a particular customer's design, they tend to mean in the industrial business to stay for decades.

Speaker Change #141: And pricing is very, very stable there where the pricing or the competitiveness itself is for new, new sockets, new wins.

Speaker Change #141: But nothing is new there.

Speaker Change #141: You know, we as a company, we play in the high end of the game in terms of innovation, service, support and so on.

Speaker Change #141: That's the game we play and the game we will continue to play.

Speaker Change #141: You know, we significantly higher SPs than most. And, you know, those SPs increase with each new generation of products.

Speaker Change #141: So I think overall is rich at the pricing environment stable.

Speaker Change #141: And so I don't see that there's a headwind on margin.

Speaker Change #141: Thank you.

Speaker Change #142: Thanks, Josh.

Speaker Change #142: I think that's all the time we have for questions today.

Speaker Change #142: That way a little more time, but it's August.

Speaker Change #142: You guys can go out there and enjoy the weather.

Speaker Change #142: I think.

Speaker Change #142: So thanks for joining the call.

Speaker Change #142: I look forward to future calls with you guys and have a great rest of summer.

Speaker Change #142: Thank you.

Speaker Change #143: This concludes today's analog devices conference call. You may now disconnect.

Speaker Change #144: Thank you.

Speaker Change #145: [inaudible] David.

Speaker Change #145: David.

Speaker Change #146: [inaudible] David.

Speaker Change #146: David.

Speaker Change #147: Good morning and welcome to the Analog Devices third quarter fiscal year 2024 earnings conference call, which is being audio webcast via telephone and over the web.

Speaker Change #147: I now like to introduce your host for today's call, Mr. Michael Lucarelli, Vice President of Investor Relations and FPNA, sir, the floor's yours.

Kevin: Thank you, Kevin.

Speaker Change #149: Good morning, everybody.

Speaker Change #150: Thanks for joining our third quarter fiscal 24 conference call.

Speaker Change #151: So, we're going to call today our ADIC on share of Mr. Roche, NADIC, F.O.

Speaker Change #151: Rich Puccio, very one who missed the release, find it, and links scheduled at investor.anlog.com.

Speaker Change #152: How does this call it here?

Speaker Change #153: The information about the discuss of whose floor is looking same as, which are subject to certain risk uncertainties, as further described in an earnings release and empirical reports and other materials filed at SEC.

Speaker Change #153: After the results could get from material from the floor of this information as these statements reflect our expectations, only a data is called.

Speaker Change #153: I'm going to take no obligation to update these statements, except required by law.

Speaker Change #153: References to growth margins, operating, non-operating expenses, operating margins, tax rights, EPS, and pre-cat flow.

Speaker Change #153: In our comments today, we'll be on non-gap basis.

Speaker Change #153: These include special items.

Speaker Change #154: When comparing our results or structural performance, special items are also excluded from prior periods. Reconciliation of these non-gap measures to most directly comparable gap measures and additional information about a non-gap measure are included in today's earnings release.

Speaker Change #155: And with that, I'll turn over to A.I.D.

Speaker Change #155: O.

Speaker Change #155: Chair.

Speaker Change #156: Thank you very much.

Speaker Change #157: Thanks very much, Mike, and a very good morning to you all.

Speaker Change #158: A stronger demand for a high performance product portfolio and skill for execution resulted in third quarter revenue of more than $2.3 billion, operating margin north of 41% and EPS of $1.58, all above the midpoint of our outlook.

Speaker Change #159: These favorable results combined with improved customer inventory levels and order momentum across most of our markets increase my confidence that our second quarter marked the cyclical bottom for A.I.

Speaker Change #159: Bioptimism remains guarded, however, as challenging economic and geopolitical conditions are limiting a sharper recovery.

Speaker Change #160: We continue to balance near-term fiscal discipline with strategic investments in our long-term growth initiatives, positioning A.D.I, to capitalize on the extraordinary opportunities that we see ahead.

Speaker Change #161: Now I'd like to draw attention to our industrial end market, which is our largest, most diverse and most profitable business, generating durable revenue streams that last close to two decades on average.

Speaker Change #162: As our business begins to recover from the pandemic's volatility, we're excited about the tremendous long-term growth opportunities of the industrial market.

Speaker Change #162: We offer our customers an unparalleled suite of high-performance solutions stretching from antenna to bits, sensor to cloud, and none of what to kill us.

Speaker Change #163: Our extensive technology portfolio, combined with our deep domain expertise and engineering muscle, has enabled us to secure leading positions across the most attractive industrial sectors. Now, with growing digital software and algorithmic capabilities, augmenting our cutting-edge and log portfolio, A.D.I, is strongly positioned to solve our customers' most difficult challenges in factory and process automation, energy efficiency, secure connectivity, and many, many more, to illustrate the power and potential of our industrial franchise. Let me share with you a few examples of how our recent innovations are unlocking new revenue streams and positioning us for strong growth in the years ahead.

Speaker Change #163: For example, our instrumentation and test business, which includes scientific instruments, electronic test and measurement, and automated test equipment is essential to the important scientific and technological advancements of the digital era. Within automated test equipment, for example, our next generation solutions increase channel density and throughput by reducing energy consumption by up to 30% per system. These are crucial parameters for testing complex, high performance compute GPUs and high bandwidth memory systems for AI.

Speaker Change #163: As the AI infrastructure bill that remains a priority for global hyperscalers, we expect growth to continue into 2025 and indeed well beyond.

Speaker Change #164: Turning now to aerospace and defense, which has been our most resilient business during this downturn, ADI's domain expertise and high performance portfolio across orphan microwaves, high speed and precision converters, power and men's, unique positions us to deliver complete edge solutions, offering our customer scale, velocity, and lower total cost of ownership.

Speaker Change #164: As an example, we're building upon our programmable Apollo signal chain platform today to create full software defined RF communications and sensor systems, which has the potential to increase our sound by five times in commercial defense and aerospace communication systems.

Speaker Change #165: Indeed, we see a path to double digit revenue growth in this sector in 2025, fueled by several high value design wins that are going to production.

Speaker Change #165: In automation, though we've seen a slower recovery today, we remain strongly confident in its future growth potential as the benefits of increased productivity are ever more clear.

Speaker Change #165: Customers are prioritizing enhanced digitization and IT OT integration on the factory floors. Their deployments of in-line instrumentation and advanced robotics are driving the need for more sensing, edge processing, secure connectivity, and car management.

Speaker Change #165: Within robotics, we're seeing a progression from fixed-arm machines to autonomous and mobile robots to eventually humanoid robots.

Speaker Change #166: This evolution creates additional opportunities for a precision signal chain franchise, and sensing connectivity and motion control subsystems with fully isolated and efficient power solutions can drive content from hundreds of dollars in robots today. To thousands in autonomous and humanoid robots.

Speaker Change #167: What is additionally exciting with these advances is their broad applicability beyond factories such as surgical robots and imaging systems in healthcare. Adi's products have the potential to dramatically improve a surgeon's effectiveness through a more precise surgical experience with lower latency connectivity. Additionally, patients gain the potential benefits of shorter hospital stays and fewer complications.

Speaker Change #168: The evolution in robotics is expected to unlock billions of dollars of potential opportunity for our high-performance analog mix signal power connectivity and sensing solutions.

Speaker Change #169: We see the potential for a doubling of our robotics revenue in the years ahead.

Speaker Change #170: Turning now to energy transmission and distribution, our customers are modernizing and digitizing the electrical grid to respond to exponentially accelerating energy demand, driven in part by the proliferation of electric transportation and rapid AI adoption.

Speaker Change #170: This process is resulting in a grid that is distributed, dynamic and bidirectional, a paradigm shift from the past model of linear stable supply. We're working with traditional suppliers and disruptors to enable the necessary intelligence for the new grid from decentralized power plants to the distribution edge.

Speaker Change #170: We're leveraging our analog and algorithm capabilities in cutting edge energy monitoring and management solutions.

Speaker Change #170: Additionally, our battery management technology increases capacity and improves energy utilization in the grid's renewable energy storage systems.

Speaker Change #171: This reimagined intelligent grid of the future has potential to expand our sound by over ten billion dollars and creates tailwinds for our energy franchise for many years to come.

Speaker Change #171: Given the synergies across our industrial portfolio, our pace of innovation and the emergent signs of market recovery, we're optimistic for our industrial business that has turned the corner and 25 will be a robust growth year.

Speaker Change #171: So, in closing, our investments in high-performance analog solutions are enabling us to intersect with and leverage the numerous concurrent secular trends that transcend the business cycle and will propel us into the future.

Speaker Change #172: Our commitment to our customer success and to impact the innovation will be the path that carries us there ultimately increasing long-term shareholder value.

Speaker Change #172: And so, with us, I'm going to turn it over to Rich, who took you through the numbers.

Rich Puccio: Thank you, Vince.

Rich Puccio: Let me add my welcome to our third quarter earnings call.

Rich Puccio: Third quarter revenue of 2.31 billion came in above the midpoint of our outlook, finishing up 7 percent sequentially and down 25 percent year over year. Industrial represented 46 percent of revenue in the third quarter, finishing up 6 percent sequentially and down 37 percent year over year.

Rich Puccio: Every major application increased sequentially except for automation, which declined at a much slower pace than it had in previous quarters.

Rich Puccio: Automotive represented 29 percent of revenue, finishing flat sequentially and down 8 percent year over year.

Speaker Change #174: We saw continued double-digit growth year over year for our industry-leading connectivity and functionally safe power flat.

Speaker Change #174: Performance.

Speaker Change #175: Conversely, automotive production cuts are extending inventory digestion across customers, particularly impacting our legacy automotive and electrification businesses.

Speaker Change #175: Communications represented 12% of revenue, finishing up 10% sequentially and down 26% year over year. Slowing customer inventory digestion enabled both wireless and wireline growth sequentially.

Speaker Change #176: And lastly, consumer represented 14% of revenue, finishing up 29% sequentially and increased year over year for the first time since 2022.

Speaker Change #176: We saw diversified growth across applications with notable strength and portables and gaming.

Speaker Change #176: Now let's move from the top line to the rest of the P&L.

Speaker Change #177: Third quarter growth margin was 67.9%, up 120 basis points sequentially driven by higher revenue, higher utilization and favorable mix.

Speaker Change #177: Operating expenses in the quarter were 619 million, up modestly sequentially, driven primarily by higher variable compensation.

Speaker Change #177: Operating margin of 41.2% exceeded the high end of our outlook. Non-operating expenses finished at 70 million and the tax rate for the quarter was 10.8%. The net result was EPS of a $1.58 which finished near the high end of our outlook.

Speaker Change #178: Our financial position is solid, and I'd like to call out a few items from our balance sheet and cash flow statement. We ended Q3 with more than 2.5 billion of cash and short-term investments and a net leverage ratio of 1.2. Inventory decreased 51 million dollars sequentially and days declined to 178 from 192.

Speaker Change #178: As planned, we reduced channel inventory further this quarter with weeks ending near the low end of our 7-8 week target. Operating cash flow for the quarter and trailing 12 months was 0.9 billion and 4 billion respectively. CapEx for the quarter and trailing 12 months was 154 million and 1 billion respectively.

Speaker Change #178: For fiscal 24, CapEx is tracking to our $700 million plan which is down roughly 45% versus 2023 as our hybrid manufacturing investment cycle tapers.

Speaker Change #178: Not included in these figures are the anticipated benefits from both the European and US chipsax.

Speaker Change #179: During the last 12 months, we generate 2.9 billion of free cash flow or 30% of revenue. Over this time period, we have returned 2.8 billion via dividends and share repurchases.

Speaker Change #180: As a reminder, our strategy is to return 100% of our free cash flow to our shareholders over the long-term.

Speaker Change #180: Now I will turn to the fourth quarter outlook. Revenue is expected to be 2.4 billion plus or minus 100 million up 4% sequentially at the midpoint.

Speaker Change #180: We expect self-fruit to be roughly equal to sell in this quarter.

Speaker Change #180: At the midpoint on a sequential basis, we expect industrial and consumer to increase communications to be flatish and automotive to decrease.

Speaker Change #180: Operating margins is expected to be 41% plus or minus 100 basis points.

Speaker Change #180: Our track rate is expected to be between 11 and 13% and based on these inputs, EPS is expected to be $1.63 plus or minus 10 cents.

Speaker Change #180: In closing, our third quarter results and fourth quarter outlook support our view that we have passed the cycles trough.

Speaker Change #180: However, challenging economic and geopolitical conditions are limiting a faster demand recovery.

Speaker Change #180: I will now give it back to Mike for Q&A.

Speaker Change #181: Thanks, Rich.

Speaker Change #182: Let's get to our Q&A session.

Speaker Change #183: We want to tell you to limit yourself to one question in order to allow our digital persistence on the college morning.

Speaker Change #184: If you have a follow-up question, please re-cute and we'll take your question and time allows.

Speaker Change #185: With that, through our first question please.

Speaker Change #186: For those participating by telephone dial-in, if you have a question, please press star 1-1 on your telephone to enter the queue.

Speaker Change #187: If your question has been answered, you wish to be removed from the queue, please press star 1-1 again.

Speaker Change #188: If you're listening on a speaker phone, please pick up the handset when asking your question.

Speaker Change #188: We'll pause for just a moment to compile our Q&A roster.

Speaker Change #188: Our first question comes from Tore Svanberg with Steifler.

Speaker Change #189: Your line is open.

Speaker Change #190: Yes, thank you so much.

Speaker Change #191: Great to see the turn here.

Speaker Change #192: Could you elaborate a little bit more on this sort of mixed environment?

Speaker Change #193: Because inventories have bottom, the same time and demand seems to be kind of mixed.

Speaker Change #194: So as you navigate through this period, could you elaborate a little bit on your visibility, how's backlog trending?

Speaker Change #195: Are you starting to see new products ramping more into production?

Speaker Change #195: Because these are typical signals that you want to see at the beginning of the news cycle.

Speaker Change #195: Yeah, thanks.

Speaker Change #195: Sorry.

Speaker Change #196: Well, I'd say the first and foremost, we run this company on POS signals.

Speaker Change #196: That's how we plan our production, how we run the company operationally.

Speaker Change #197: So we pay very, very close attention to what's happening in terms of the end market demand. And, you know, my confidence has increased since last quarter that indeed 2Q was the, was the cyclical bottom. You know, we've exited 3Q with very, very lean channel inventory.

Speaker Change #197: We've taken emergency of our own balance sheet.

Speaker Change #198: So we're positioned with, with a very, very healthy backlog of inventory on our own balance sheet.

Speaker Change #198: So that the anticipated demand, absolutely expect in 25, we're very, very well equipped and ready to meet that.

Speaker Change #198: So, you know, in four in the fourth quarter, as we've said, we expect to see continued sequential growth.

Speaker Change #198: And indeed, we also see, I think, particularly in the industrial area continued improvement on customer inventory levels.

Speaker Change #198: So look at, it's all the, the whole recovery, the, you know, the ramp of the recovery will depend on the macro situation.

Speaker Change #198: But nonetheless, given the design wins, we've, we've a record design win pipeline in the company.

Speaker Change #198: So we're facing many, many secular tailwinds with a very strong pipeline, very, very good supply line.

Speaker Change #198: And with a very, very lean inventory on the customer's balance sheet.

Speaker Change #198: So that gives me the optimism to worry that we're very, very well positioned coming into the new year.

Speaker Change #198: Thank you.

Speaker Change #199: One moment for our next question.

Speaker Change #199: Our next question comes from Joseph Moore with Morgan Stanley, your line is up.

Speaker Change #200: Yes, thank you.

Speaker Change #201: My question's on the trajectory of automotive versus industrial.

Speaker Change #202: You know, it seems like automotive entered into a inventory correction a little bit later. And so far has been much less severe.

Speaker Change #203: I guess you sort of talked about some ongoing headwinds in that space.

Speaker Change #204: Can you just talk about, you know, what overall drawdown might you expect an automotive and where are we and customers kind of growing down safety, documentary?

Speaker Change #204: So, Joe, this is Rachel.

Speaker Change #205: I'll take your crack.

Speaker Change #206: I'll just a little bit, you know, from our perspective, and what we're seeing in the market cars continue to become more electric and software defined, which is also driving our semi-content growth, largely trying to address increased battery densities, more sensors displays.

Speaker Change #207: And we do expect that that is going to be a long term tailwind to our business.

Speaker Change #208: However, and this is where we're starting to see some of the pullback.

Speaker Change #208: The vehicle market has had so often in the near term.

Speaker Change #209: We're seeing our customers pullback on the production.

Speaker Change #209: And at this point, we're seeing them start to choose to burn off some inventory.

Speaker Change #209: So we are seeing that, right?

Speaker Change #210: This office is evidence in our results by auto's been down year over year for two straight quarters.

Speaker Change #210: And we expect it will be down again and for Q.

Speaker Change #210: And from a bookings perspective, we did see a decline in bookings in auto in particular.

Speaker Change #211: We've seen inventory digestion in our legacy auto and in our BMS portfolios when we expect that that's going to continue into at least the fourth quarter, particularly when you consider the challenging purchasing environment that currently exists for customers.

Speaker Change #212: However, to your question around the peak to trough, unless our returns to pandemic levels, we don't see the peak to trough being nearly as dramatic as we saw in our other end markets.

Speaker Change #212: The underlying secular growth trends that I described, driving higher semi-content.

Speaker Change #213: Also, we've continued to see more penetration and value capture across all vehicle types, whether it's ice, plug-in hybrid of electric or full electric.

Speaker Change #213: In the fastest growing applications, if you think about that, ADAS, digital cop and electrification.

Speaker Change #213: So we will be down, but we don't expect that the cycle depth to be as severe as we saw, for example, in industrial.

Speaker Change #213: Great.

Speaker Change #213: Thank you very much.

Speaker Change #213: And I guess as a follow-up, are you seeing that behavior any different regionally is the China automotive market different than the western markets in terms of where they are?

Speaker Change #213: No, I'll say overall, it's pretty inanimate across all markets.

Speaker Change #214: I'll say China, I'll let you just did okay.

Speaker Change #215: We talked about some design and branding there, so that's helping offset some of the softness, but it's an overall comment auto a bit weaker today than it was 90 days ago, whether it's North America, Europe or Asia.

Speaker Change #215: Great.

Speaker Change #215: Thank you very much.

Speaker Change #216: One moment for our next question.

Speaker Change #216: Our next question comes from Vivek Arya with Bank of America Securities.

Speaker Change #217: Your line is open.

Speaker Change #218: Thanks for taking my question.

Speaker Change #219: I'm glad to hear about your optimism about turning the cyclical corner.

Speaker Change #220: Do you think the environment allows for sequential growth to continue into Q1?

Speaker Change #221: Seems like industrial could grow.

Speaker Change #222: Autos I'm not sure given some of the bookings commentary and consumer tends to be down seasonally, so just conceptually how should we model the shape of this recovery into Q1?

Speaker Change #222: Yeah, well at this point, it's hard to call, given that the environment is still a little, that's a little bit of disequilibrium.

Speaker Change #223: But I think generally speaking, we would probably expect to see a bit of a seasonal decline in the fourth quarter, and then bounce back in the second.

Speaker Change #223: I think that's the sentiment.

Speaker Change #223: But overall, I've maintained my outlook that we would see a brisk growth year in 25.

Speaker Change #224: If I now have a little bit of a seasonal decline, it's been a few years now that we've seen seasonal trends in our business.

Speaker Change #225: You're right, if you look back or have had 10, 15 years or 80, I consumer down 10% plus sequentially in one queue, and the beauty markets of industrial, auto, and condor, download single digits, and then it says it's probably, don't believe today, that would be any better than seasonal, given what we are today.

Speaker Change #225: But we'll take you 90 days to how we feel about one queue.

Speaker Change #226: I think the big modulator for us would be what happens in industrial and particular, and what I can tell you is that they are very sweet conversations I've had with our industrial customers would suggest that their optimism is also strong for 25.

Speaker Change #226: All right, thank you.

Speaker Change #226: One moment for our next question.

Speaker Change #226: Our next question comes from Timothy Yarkari with UBS.

Speaker Change #227: Your line is open.

Speaker Change #227: Thanks a lot.

Speaker Change #228: I just wanted to ask on that answer.

Speaker Change #229: So you were above seasonal and fiscal queue three or above seasonal and fiscal queue four.

Speaker Change #230: Sounds like you're not willing to commit that you're going to be above seasonal and fiscal queue one.

Speaker Change #231: The streets modeling like five or six percent above seasonal four, you know, fiscal queue one.

Speaker Change #232: And was there something that happened in bookings, did bookings like slow in the last couple weeks, or the last month or something to make you not want to commit to the fact that fiscal queue one would be above seasonal, or just that it's 90 days away.

Speaker Change #232: And you just don't want to comment on it.

Speaker Change #232: Thanks.

Speaker Change #232: I also got on the street expectations and we've enriched on the little bookings.

Speaker Change #233: We never guided one queue.

Speaker Change #234: I think the street expectations for one queue.

Speaker Change #234: I think the street is up everyone better than seasonal for a calendar four or fiscal one queue.

Speaker Change #234: So I'm in hope of a snapback.

Speaker Change #234: I would say there are things that have changed in 90 days, but we're off to miss about 25 and a full year.

Speaker Change #234: We just don't know if it's above seasonal in that outlook for a good year or 25.

Speaker Change #234: That's the risk of some of the bookings dynamics.

Speaker Change #234: Yeah, so from Kim from a bookings perspective, you know, up until Q2, as we talked about, we've seen three straight quarters of broad-based bookings improvement.

Speaker Change #235: However, Q3 was different.

Speaker Change #236: We saw continued bookings growth for industrial consumer and communications, but we did see automotive orders decline, which resulted in a modest drop in our total bookings during the quarter. We did still end with a book to bill around parity.

Speaker Change #237: You know, if I look at it from a geographic perspective, regionally bookings were the weakest in Europe. America was modestly weaker, which offset bookings growth in Asia.

Speaker Change #237: Yeah.

Speaker Change #237: Thanks a lot.

Speaker Change #237: One moment for our next question.

Speaker Change #238: Our next question comes from Toshai Hari with Goldman Sachs.

Speaker Change #239: Hey, good morning.

Speaker Change #240: Thanks for taking the question.

Toshai Hari: It was good to see inventory on your balance sheet come down again, and you guys spoke to channel inventory coming down as well.

Speaker Change #242: As you look forward, what are your thoughts on utilization rates internally?

Speaker Change #243: How are you engaging with your Foundry partners?

Speaker Change #243: And what's embedded in your October quarter outlook as it pertains to the channel?

Speaker Change #243: Thank you.

Speaker Change #244: So, as I noted in the last call, we said both utilization and in fact growth margins and bottomed in Q2 and that is proving to be true.

Speaker Change #245: From an inventory in the channel perspective, the expectation is we will ship to end demand. We are currently at the very low end of our range in the channel at 7 to 8 weeks. I think we've mentioned previously, if we saw continued improvements, we would start shipping to end demand. So, we will do that in the fourth quarter.

Speaker Change #245: When it comes to the balance, we have a hybrid manufacturing system which enables us to keep utilization rates as high as possible internally.

Speaker Change #245: When our factories run out of capacity, then we have lots of choices externally for silicon capacity.

Speaker Change #246: Obviously, we've got a lot of inventory on the balance sheet and our factories are well, well capable of improving utilization rates as the demand continues to improve over the coming quarter.

Speaker Change #247: As a quick follow-up, I think your internal utilization rates last quarter were in the mid-50s, if I'm not mistaken.

Speaker Change #248: Are you at or above 60% at this point?

Speaker Change #249: Are you coming on that?

Speaker Change #250: I'm giving an outlook on utilization in order to give the rate.

Speaker Change #251: I would say there were lower last quarter who would hire here in 3 and 4Q.

Speaker Change #252: And there were well off those of the normal levels of law, called 85 90% utilization.

Speaker Change #252: I'll give you some little context.

Speaker Change #252: What does this mean?

Speaker Change #252: What does it mean for growth margins?

Speaker Change #252: If you look at the decline of growth margins over the past year or so, about half the decline in relation to utilization, the other half relates to next.

Speaker Change #252: So, you can see, as you take up what that means for growth margins expansion.

Speaker Change #252: Helpful, thank you.

Speaker Change #252: One moment for our next question.

Speaker Change #252: Our next question comes from Stacy Raskin with Bernstein Research.

Speaker Change #253: Your line is open.

Speaker Change #254: Hi guys, thanks for taking my question.

Speaker Change #255: I was hoping to give us a little more granularity on the segment guide for next quarter.

Speaker Change #256: Is that double digits?

Speaker Change #257: Is industrial at mid-single, auto down by close single, like big?

Speaker Change #257: Any further color you could give us on this page and should be helpful.

Speaker Change #257: Sure, if they don't have that one.

Speaker Change #257: Yeah, so let's start in two more.

Speaker Change #257: You're right.

Speaker Change #258: Two of them about double digits again, about 10% or so, embedded in or out of it.

Speaker Change #258: And don't you have another, I'll call solid growth quarter, probably high in the digits sequentially.

Speaker Change #258: Three of these is about gladdest plus my head, depending on how things go here.

Speaker Change #259: And all of the week market as we discussed and hit a little bit early on the call, probably down low single digits sequentially.

Speaker Change #259: Got it, that's helpful.

Speaker Change #260: If I could give a quick follow up just, how are you thinking of the opx growth in the next quarter?

Speaker Change #261: It was, it was pretty well under control this quarter.

Speaker Change #262: Is there anything that drives that up?

Speaker Change #263: Like, what do you think about the opx trends?

Speaker Change #263: Is it going to the end of the year?

Speaker Change #264: So, I'll take that one.

Speaker Change #265: So, obviously, we exceeded the high end of our look in the third quarter, given the beat on gross margin and revenue, as well as our continued cost management.

Speaker Change #266: Our Q4 guide, obviously, does imply a modest margin contraction sequentially despite our expectation for higher revenue and gross margin. And, you know, the main driver for that is our increase for merit increases that will go into a factor in the fourth quarter. So, that will be a downward pressure as we head into the fourth quarter.

Speaker Change #267: I mean, the big margin on our opx, they see as obviously the bonus, and that obviously with declining profit and revenue over the past several quarters that dropped accordingly, now with increase, with growth and revenue and improvement and profitability, that will obviously increase.

Speaker Change #268: But that's self-funding, so to speak.

Speaker Change #268: How much of the effects go up then?

Speaker Change #268: For our fourth thorough outlook out of the sequential increase in the effects around five percent.

Speaker Change #268: That's great.

Speaker Change #268: Thank you so much.

Speaker Change #268: Appreciate it guys.

Speaker Change #268: One moment for our next question.

Speaker Change #269: Our next question comes from Chris Danely, what city your line is open?

Speaker Change #270: Thanks guys.

Speaker Change #271: First just a little clarification on inventory in the auto market.

Speaker Change #271: Vincent, I think at the beginning you talked about inventory is very lean out there, but then you're also saying that there's inventory digestion going on in the automotive market.

Speaker Change #272: Can you just expand on that a little bit?

Speaker Change #273: John, I've got that.

Speaker Change #274: And then the big topic is overall customer inventory.

Vincent: Yeah, I think every market spawn in different cases, inventory digestion.

Speaker Change #276: We feel good about industrial consumer comms have really normalized inventory levels.

Speaker Change #277: There are pockets on the auto side that still I'll call it digestion.

Speaker Change #278: And the production levels have been cut with the past quarter, whether it's an ice car or an EV car that impact inventory levels and desire to hold inventory on their balance sheets.

Speaker Change #279: And that's that one Chris on a bit of an ad.

Speaker Change #280: I think Chris overall, you know, we've seen the worst is behind us, I think in industrial consumer and comms markets.

Speaker Change #281: But automotive, I think, is a sector where we will see some inventory digestion issues into the at least the early part of 2025.

Speaker Change #281: Great.

Speaker Change #281: Thanks.

Speaker Change #282: That's helpful.

Speaker Change #282: And then just a quick clarification on industrial.

Speaker Change #282: How would you characterize your, I guess, booking slash visibility on the industrial market now versus three months ago?

Speaker Change #282: Is it roughly the same or has it improved a little bit?

Speaker Change #283: Hey, Chris is rich.

Speaker Change #284: I would say our visibility is pretty consistent. And as we talked about what we're seeing, you know, we're seeing continuing growth sequentially across, you know, all of the sub sub elements of industrial with the exception of automation, which we are seeing improvements, but not yet seeing growth.

Speaker Change #285: Thanks, Rich.

Speaker Change #286: One moment, one moment for our next question.

Speaker Change #287: Our next question comes from Holland, sir with JP Morgan.

Speaker Change #288: Your line is open.

Speaker Change #289: Good morning.

Speaker Change #290: Thanks for taking my question.

Speaker Change #291: So for fiscal 23, China domestic consumption.

Speaker Change #291: It was about 18% of their total revenues.

Speaker Change #291: It was the worst performance geography.

Speaker Change #291: Last couple of quarters, like bookings in China have been growing sequentially.

Speaker Change #292: Did that translate into sequential revenue growth out of the region in the July quarter? And then looks like orders from the China region grew sequentially in July.

Speaker Change #293: How are they trending so far quarter to the date?

Speaker Change #293: Are you still seeing sort of positive signs out of this region?

Speaker Change #293: We continue to see strong performance from a bookings perspective in China.

Speaker Change #293: We did see double-digit growth across industrial, auto, and comms being slightly offset by a decrease in consumer.

Speaker Change #293: China is continuing to perform well and our design win and our pipeline there are very strong.

Speaker Change #293: Thank you.

Speaker Change #293: One moment for our next question.

Speaker Change #294: Our next question comes from Joshua Buchalter with TD Cowan, your line is open.

Speaker Change #295: Hey guys, thanks for taking my question.

Speaker Change #296: Maybe you can walk through some of the puts and takes into Gross Margin into the October quarter.

Speaker Change #297: Back the envelope, I'm getting to roughly stable sequentially despite the revenue increase and I imagine utilization is improving as well.

Speaker Change #298: How much of that is mixed and in particular any changes in the pricing environment as we get sort of through the suggestion into what I would imagine is the more competitive environment.

Speaker Change #298: Thank you.

Speaker Change #298: Yeah, I would say it's you know, as we previously mentioned it is it is significantly impacted by the favorable mix.

Speaker Change #298: Obviously we get a benefit out of the revenue upside.

Speaker Change #299: From a pricing perspective, you know, and I talked about this before, we continue to see pretty stable pricing and I do expect that to continue. Obviously it's different by geography and for big and small customers but on balance we are continuing to see stable pricing and expect we will see that going forward. You know, once our products are installed in a particular customer's design, they tend to mean in the industry of business, they will stay for a decade and pricing is very very stable there.

Speaker Change #300: Where the pricing or the competitiveness of itself is for new new sockets, new wins, but nothing is new there.

Speaker Change #301: You know, we as a company, we play on the high end of the game in terms of innovation, service, support and support.

Speaker Change #301: So that's the game we play and the game we will continue to play.

Speaker Change #301: You know, we significantly hire SPs the most and you know, those SPs increase with each new generation of products.

Speaker Change #302: So I think overall as Ritsha, the pricing environment is stable and so I don't see that as a headwind on margin.

Speaker Change #302: Thank you.

Speaker Change #303: Thanks, Josh.

Speaker Change #303: I think that's all the time we have for questions today.

Speaker Change #303: I tell you a little more time, but it's August.

Speaker Change #304: You guys can go out there and enjoy the weather.

Speaker Change #304: Okay.

Speaker Change #304: So thanks for joining the call.

Speaker Change #305: The future calls for you guys and have a great rest of summer.

Speaker Change #305: Thank you.

Speaker Change #306: This concludes today's analog device this conference call.

Speaker Change #307: You may now disconnect.

Q3 2024 Analog Devices Inc Earnings Call

Request a DemoDemo

ADI

Analog Devices

Earnings