Q3 2024 Texas Instruments Inc Earnings Call

Dave Pahl: Welcome to the Texas Instruments 3rd Quarter, 2024 Earnings Conference Call. I'm Dave Pahl, Head of Investor Relations, and I'm joined by our Chief Executive Officer, Haviv Ilan, and our Chief Financial Officer, Rafael Lizardi. For any of you who missed the release, you can find it on our website at ti.com slash IR. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our website.

Welcome to the Texas Instruments' third quarter 2024 earnings conference call.

Speaker Change: Dave Pahl head of Investor Relations and I'm joined by our Chief Executive Officer of Evil on and our Chief Financial Officer Raphael was already.

Speaker Change: For any of you who missed the release you can find it on our website at Ti Dot Com Slash IR.

Speaker Change: This call is being broadcast live over the web and can be accessed through our website.

Speaker Change: In addition, today's call is being recorded and will be available via replay on our website.

Dave Pahl: This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today, as well as TI's most recent SEC filings for a more complete description. Today we'll provide the following updates. First, Haviv will start with a quick overview of the quarter. Next, he'll provide insight into third quarter revenue results, with some details of what we're seeing with respect to our end markets. And lastly, Rafael will cover the financial results, given update on our capital management, as well as share the guidance for the fourth quarter of 2024.

This call will include forward looking statements that involve risks and uncertainties that could cause ti's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward looking statements contained in the earnings release published today as well as Ti's most recent SEC filings.

Speaker Change: For a more complete description.

Speaker Change: Today, we will provide the following updates.

Speaker Change: First heavy will start with a quick overview of the quarter.

Next he'll provide insight into third quarter revenue results with some details of what we're seeing with respect to our end markets.

Speaker Change: And lastly, Raphael will cover the financial results give an update on our capital management as well as share the guidance for the fourth quarter of 'twenty 'twenty four.

Haviv Ilan: With that, let me turn it over to Haviv. Thanks, Dave. Let me start with a quick overview of the third quarter. Revenue in the quarter came in about as expected at $4.2 billion and increase of 9% sequentially and a decrease of 8% year-over-year. Analog revenue declined 4% year-over-year, and embedded processing declined 27%. Our other segment declined 5% from the year-ago quarter. Now I'll provide some insight into our third quarter revenue by end market. Our results continue to reflect the asynchronous market behavior that we've seen throughout this cycle. Similar to last quarter, I'll focus on sequential performance as it is more informative at this time.

Speaker Change: With that let me turn it over to Habib. Thanks, Dave Let me start with a quick overview of the third quarter.

Habib: Revenue in the quarter came in about as expected at $4.2 billion, an increase of 9% sequentially and a decrease of 8% year over year.

Habib: Analog revenue declined 4% year over year and embedded processing declined 27%.

Habib: Our other segment declined 5% from the year ago quarter.

Habib: Now I will provide some insight into our third quarter revenue by end market. Our results continued to reflect a synchronous market behavior that we've seen throughout this cycle.

Habib: Similar to last quarter I'll focus on sequential performance as it is more informative at this time.

Haviv Ilan: First, the industrial market was down low single digits as customers continued to reduce their inventory levels. The automotive market increased upper single digits, primarily due to strengthen China. Personal electronics grew about 30%; enterprise systems was up about 20%; and communication equipment was up about 25% as the cyclical recovery continued in these three markets.

Habib: First the industrial market was down low single digits as customers continued to reduce their inventory levels.

The automotive market increased upper single digits, primarily due to strength in China.

Habib: Personal electronics grew about 30% enterprise systems was up about 20% and communication equipment was up about 25% as the cyclical recovery continued in these three markets with that let me turn it over to Rafael to review profitability capital manager.

Rafael Lizardi: With that, let me turn it over to Rafael to review profitability, capital management, and our outlook. Thanks, Haviv, and good afternoon, everyone. As Haviv mentioned, third quarter revenue was $4.2 billion. Gross profit in the quarter was $2.5 billion, or 60% of revenue. Sequentially, gross profit margin increased 180 basis points, primarily due to higher revenue. Operating expenses in the quarter were $920 million, about flat from a year ago and about as expected. When trailing to a month basis, operating expenses were $3.7 billion or 24% of revenue. Operating profit was $1.6 billion in the quarter, or 37% of revenue, and was down 18% from the year ago.

Rafael: Rent and our outlook, thanks, Habib and good afternoon, everyone.

Rafael: David mentioned third quarter revenue was $4 $2 billion gross profit in the quarter was $2 $5 billion or 60% of revenue.

Sequentially gross profit margin increase of 180 basis points, primarily due to higher revenue.

Rafael: Operating expenses in the quarter were $920 million about flat from a year ago and about as expected on a trailing 12 month basis operating expenses were $3 $7 billion or 24% of revenue.

Rafael: Operating profit was $1.6 billion in the quarter or 37% of revenue and was down 18% from the year ago quarter.

Rafael Lizardi: Quater. Net income in the quarter was $1.4 billion, or $1.47 per share. Earnings per share included a three-cent benefit for items that were not in an original guidance. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $1.7 billion in the quarter and $6.2 billion on a trailing twelve-month basis. Capital expenditures were $1.3 billion in the quarter and $4.8 billion over the last 12 months. Free cash flow on a trailing to a month basis was $1.5 billion. As a reminder, free cash flow includes benefits from the chipset investment tax credit, which was $220 million in the third quarter and $532 million on a trailing twelve-month basis.

Rafael: Net income in the quarter was $1 $4 billion or $1 47 per share.

Rafael: Earnings per share included three cent benefit for items that were not in our original guidance.

Rafael: Let me now comment on our capital management results, starting with our cash generation.

Rafael: Cash flow from operations was $1 $7 billion in the quarter and $6 $2 billion on a trailing 12 month basis.

Rafael: Capital expenditures were $1 $3 billion in the quarter and $4 8 billion over the last 12 months free.

Rafael: Free cash flow on a trailing 12 month basis was $1 $5 billion.

Rafael: As a reminder, free cash flow includes benefits from the chipset investment tax credit.

Rafael: Which was $220 million in third quarter and $532 million on a trailing 12 month basis.

Rafael Lizardi: In the quarter, we paid $1.2 billion in dividends and repurchased $380 million of our stock. In September, we announced we would increase our dividend by 5%, marking our 21st consecutive year of dividend increases. This reflects our continued commitment to return free cash flow to our owners over time. In total, we returned $5.2 billion to our owners in the past 12 months. Our balance sheet remains strong with $8.8 billion of cash and short-term investments at the end of the quarter. That outstanding is $14 billion. We have waited average coupon of 3.8%. Inventory at the end of the quarter was $4.3 billion, up $190 million from the prior quarter, and days were 231, up to days sequentially.

Rafael: In the quarter, we paid $1.2 billion in dividends and repurchased $380 million of our stock.

Rafael: In September we announced we would increase our dividend by 5%, marking our 20 <unk> consecutive year of dividend increases.

Rafael: This reflects our continued commitment to return free cash flow to our owners over time.

Rafael: Total, we returned $5 $2 billion to our owners in the past 12 months.

Rafael: Our balance sheet remains strong with $8 $8 billion of cash and short term investments at the end of the third quarter.

Rafael: Total debt outstanding is $14 billion with a weighted average coupon of three 8%.

Inventory at the end of the quarter was $4 3 billion up $190 million from the prior quarter and days were 231 up two days sequentially.

Rafael Lizardi: For the fourth quarter, we expect the revenue in the range of $3.7 to $4 billion and earnings per share to be in the range of $1.07 to $1.29. We continue to expect our effective tax rate to be about 13% in the fourth quarter. As you are looking at 2025, based on current tax law, we would expect our effective tax rate to remain about the same. In closing, we will stay focused in the areas that add value in the long term. We continue to invest in our competitive advantages, which are manufacturing and technology, a broad product portfolio, reach of our channels, and diverse and long live positions.

Rafael: For the fourth quarter, we expect the <unk> revenue in the range of three $7 billion to $4 billion and earnings per share to be in the range of $1 seven to $1 29.

Rafael: We continue to expect that our effective tax rate to be about 13% in the fourth quarter.

Rafael: As you are looking at 2025 based on current tax law, we would expect our effective tax rate to remain about the same.

In closing, we will stay focused in the areas that add value in the long term, we continue to invest in our competitive advantages, which are manufacturing and technology, our broad product portfolio reach of our channels and diverse and long lived positions.

Rafael Lizardi: We will continue to strengthen these advantages to the disciplined capital allocation and by focusing on the best opportunities, which we believe will enable us to continue to deliver free cash or per share growth over the long term.

We will continue to strengthen these advantages through disciplined capital allocation and by focusing on the best opportunities, which we believe will enable us to continue to deliver free cash flow per share growth over the long term with that let me turn it back to Dave. Thanks, Raphael Operator, you can now open the lines for questions in order to provide as many of you as possible.

Rafael Lizardi: With that, let me turn it back to you. Thanks, Rafael.

Operator: Operator, you can now open the lines for questions. In order to provide as many of you as possible an opportunity to ask your questions, please limit yourself to a single question. After our response, we'll provide you an opportunity for a follow-up. Operator? Thank you.

Dave Pahl: An opportunity to ask questions. Please limit yourself to a single question.

Dave Pahl: After our response, we'll provide you an opportunity for a follow up operator.

Speaker Change: Thank you.

Operator: Again, we will now be conducting a question and answer session. If you would like to ask the question, please press star 1 on your telephone keypad. A confirmation tool will indicate aligners in the question queue. You may press star 2 if you would like to remove yourself from the queue for participation of the speaker equipment. It may be necessary to pick up your handset before pressing the star key. One moment, please. I have a poll for questions.

Speaker Change: We will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove yourself from the queue participants using speaker equipment. It may be necessary to pick up your handset before pressing the star one.

Speaker Change: Please pull for questions.

Timothy Akiri: Our first question comes from the line of Timothy Akiri. Would you be it? Please proceed with your question. Thanks a lot. I guess the first question is Auto's brew. I think that was a little bit of a surprise to a lot of us. Can you talk about what's going on there? You did say China, but did orders weaken late in the quarter at all? I mean, we saw pretty much every automaker negative pre and out. So can you talk about maybe what you're seeing in autos and maybe if you can provide a little commentary for December, what the outlook is there?

Speaker Change: Our first question comes from the line of Timothy Arcuri with UBS.

Speaker Change: Please proceed with your question.

Speaker Change: Thanks, a lot I guess the first question is autos grew I think that was a little bit of a surprise to a lot of us can you talk about what's going on there you did say China.

But did orders weaken late in the quarter at all I mean, we saw a pretty much every automaker negative pre announce so can you talk about maybe what you're seeing in autos and maybe if you can provide a little commentary for December what the outlook is there is it sort of anything you'd call out in December in terms of end markets.

Vivek Arya: Is it sort of anything you'd call out in December in terms of? And Mark? Okay, Tim, let me start with that. This is Vivek. So regarding the automotive market, yes, it did grow with the high single digits, around between 7 and 8%. And that was really driven. Most of the growth came from our business in China. I think I mentioned also in the second quarter, we saw strength in China, and automotive drove that growth as well. It kind of recurred in the seller quarter just to give some high level numbers. It grew 20% in Q2 and another 20% in Q3.

Speaker Change: Okay, Let me, let me start with that.

Speaker Change: This is <unk> so regarding the automotive market, yes, it did grow.

Speaker Change: The high single digit around between 7%, 8% and that was really driven most of the growth came from our business in China I think Ive mentioned.

Speaker Change: And also in the second quarter, we saw strength in China, and automotive drove that growth as well it kind of recur in the third quarter just to give you. Some high level numbers grew 20% in Q2 and another 20% in Q3.

Vivek Arya: I think it's not a surprise that there is momentum for EVs in China. Our content is growing there. And that's what really drove the growth in the sale quarter. I expect that to, I mean, that I think this is not the one quarter thing. I think there is growing momentum there. Our automotive revenue in China is in an all-new time high. So I don't think that goes down in the near future. Now, the rest of the automotive market is different. Okay, we are seeing a continued weakness over there. That revenue picked in the sale quarter of 23.

Speaker Change: It's not a surprise that there is momentum for evs in China, our content is growing there and thats, what really drove the growth in the in the third quarter I expect that to I mean, I think this is not a one quarter thing I think.

Speaker Change: Growing momentum there I, our automotive revenue in China is in an all new time high so I don't think that the.

Speaker Change: It goes down in the near future now the rest of the automotive automotive market is different okay. We are seeing.

Speaker Change: Continued weakness over there that revenue baked.

Speaker Change: In the third quarter of 2003 and in general trended down if I put China. Aside just had a quick correction in Q1.

Vivek Arya: And in general, it's rendered down. If I put China aside, it had a quick correction in Q1 or Q4 and Q1. The rest of the markets, I see it contribute to the weakness. I think that's part of, you know, part of our political, seasonal forecast for Q4. Yeah, but I'm done. I do. Yeah.

Speaker Change: Q4, and Q1, the rest of the markets I see a continued weakness I think thats part of our you know part of our M cord Susan.

Speaker Change: Our forecast for Q4.

Speaker Change: Yes, Tim.

Speaker Change: I do yeah, I'm Raphael so if I look at the guidance Opex is usually I think downloaded mid single digits for December. So if you assume even down mid singles you get gross margin sort of in the mid fifties. It sounded like 200 basis points stripping out deep deep appreciation. So that's a pretty big decline so.

Rafael Lizardi: Rafael, so if I look at the guidance, OPEX is usually, I think, down a mid-single digits for December. So if you assume even down mid-singles, you get gross margin, sort of, in the mid-50s. It's down like 200 basis points, stripping out deep, depreciation. So that's a pretty big decline. So I guess are you taking down loadings in December? I do see that finished because it was up a lot. So if you can talk a lot about that, thanks. Yeah, so a couple of things in your questions. I may try to address them OPEX. Nothing unusual, but we do expect it to be flat to slightly up.

Speaker Change: So I guess, if you are taking down loadings in December I do see that finished goods was up a lot. So if you can talk about that thanks.

Yes, so a couple of things in your question. So let me try to address them Opex nothing unusual about who we do probably expect it expect it to be flat to slightly up so so consider that.

Rafael Lizardi: So consider that. As far as the fourth quarter, you know, with revenue at the mid-point decreasing, that takes the hit on margins, of course. So we do expect gross margins to be down. Also, depreciation will continue to increase. And in fact, in October, we began depreciating the building and the clean room for SM1. So that continues to put, that's going to put even more upward pressure on the depreciation in the fourth quarter. Thank you.

Speaker Change: As far as our fourth quarter.

With revenue at the midpoint decreasing.

Speaker Change: That takes the hit on on margins of course, so we would expect we do expect gross margins to be down.

Speaker Change: Also depreciation will continue to increase and in fact in October we began depreciating the building and the clean room for SM. One so that continues to put a.

Speaker Change: That's going to put even more upward pressure on our on depreciation.

In fourth quarter.

Speaker Change: Okay.

Operator: We'll go to the next caller, please. Thank you.

Speaker Change: Thank you we'll go to the next caller please.

Speaker Change: Thank you.

Vivek Arya: Our next question comes from the line of Vivek area with Bank of America's Judy. Please proceed with your question. Thanks for taking my question. So first, thanks for providing the end market commentary. I think you mentioned personal electronic demand went up. I think 30 percent sequentially is what I recall. It was up mid-teens in Q2 also. How do we square your strength in personal electronics with the more kind of sluggish demand that we see for PCs and phones? Is it something outside of those areas, or are those areas doing better? Just what do you attribute this strength in personal electronics?

Speaker Change: Our next question comes from the line of Vivek.

Speaker Change: Here with Banc of America Securities. Please proceed with your question.

Speaker Change: Thanks for taking my question I'll leave you.

Speaker Change: Thanks for providing the end market commentary I think you mentioned.

Speaker Change: Personal electronic demand went up I think 30% sequentially is what I recall it was up mid teens in Q2 also how do we square your strength in personal electronics with the more kind of sluggish demand.

Speaker Change: For Pcs and phone does it something outside of those areas or are those areas are doing.

Speaker Change: Better just what do you attribute the strength in personal electronics or do you think the market just you know.

Vivek Arya: Well, you think the market just, you know, it's just kind of we feel respected. Yeah, I think that's a great question. Let me just work through what we've seen over the last even couple of years. So, I mean, that revenue in the personal electronics market, it picked in the third quarter of 2021. By the way, the third quarter is typically our pick quarter every year during the seasonality strength, and every third quarter for PE. And it dropped in the first quarter of 23. And since then we have seen continuous improvement, but I will say, Vivek, that then I look at our third quarter of 24, it's still running at a lower level than the peak.

Speaker Change: It's just kind of bottomed from a cyclical perspective.

Speaker Change: Yes, I think.

Speaker Change: That's a great question, let me just walk through what we've seen over the last even couple of years, So I mean that revenue.

Speaker Change: In the personal electronics market. It peaked in the third quarter of 2021 by the way in the third quarter is typically our peak quarter or every year there is a seasonality strength.

Speaker Change: Third quarter.

Speaker Change: <unk> and.

Speaker Change: A trough in the first quarter of 'twenty three and since then we have seen continuous improvement continuous improvement, but I would say very good then I look at our third quarter with 24, it's still running at a lower level than the peak is running about 20% lower than the 21 peak. So there is still room to grow.

Vivek Arya: It's running about 20% lower than the 21 peak. So, there is still room to grow. And in our case, as I think I mentioned in some of the calls, when we were shorting with supply capacity back in 2021-22, where we had to take some calls where was to bias our supply towards, you know, industrial and automotive. The personal electronics has a shorter design cycle. We said we'll go attack that once the capacity and inventory are back in place. That's the case right now. So, I think we are coming off of a very low trust. Plus, again, having the right parts to go back and win soccer because it's still before.

Speaker Change: And in our case as I think I've mentioned in some of the calls.

Speaker Change: When we were short in.

Speaker Change: Supply capacity back in 'twenty, one 'twenty, two where we had to take some calls.

Speaker Change: It was through bias our supply toward.

Speaker Change: Industrial and automotive.

Speaker Change: Personal electronics has a shorter design cycles. We've said we'd go attack that once that capacity and inventory are back in place that is the case right. Now. So I think we are coming off of a very low trough.

Speaker Change: So again, having the right part to go back and win sockets that we couldnt sell before so that's what I'm seeing right now in terms of specific leading to the third quarter I think growth was across all the sectors most of the sectors.

Vivek Arya: So, that's what I'm seeing right now. In terms of specifically into the third quarter, I think growth was across all the sectors and most of the sectors. The main ones are phones and notebook PCs, but in general, you know, the third quarter, as I said, is a typical strong quarter for our PPE.

Speaker Change: The main ones are phones in notebook Pcs, but in general you know the third quarter as I've said is a typical strong quarter for FP follow after that.

Vivek Arya: So, follow up the deck. Yes, thank you, Dave. So, bigger picture question, Vivek is on in the last few calls. You know, there's been a suggestion that perhaps by calendar 26, TI will, you know, conceptually, we close, if not more than what you were in calendar, 22. And people have kind of rightly then pushed back and said, well, that requires mid team sales growth. In the next two years, you know, well above the trend line. At what point do you think you will start to see those above-seasonal quarters to help us, you know, get to that above-trend growth for the next two years.

Thank you Dave.

Bigger picture question Aviv is on in the last few calls.

Speaker Change: There has been a suggestion that perhaps by calendar 'twenty six.

Speaker Change: D I will confess.

Speaker Change: Conceptually be close if not more than what you would in calendar 'twenty two.

Speaker Change: And people have kind of rightly then pushed back and said well that's quite mid teen sales growth in the next two years well above the trend line at what point do you think you will start to see those above seasonal quarters too.

Speaker Change: To help us get to that above trend growth for the next two years I understand youre, not giving guidance, but what are you seeing in the broader end markets and do you think you guys at a point where.

Vivek Arya: I understand you're not giving guidance, but what are you seeing in the broader and markets? And you think TI is at a point where, you know, those kind of above seasonal quarters are line of fine, or is it too early to make that judgment. Thank you. Yeah, first just to recap on your question, Vivek. Thanks. I think you're referring to our capital management call we had in August, so I just would ask people to look at what exactly we presented there. I think you referred to a 2026 scenario, a settle scenario that we've presented there from flat to growth versus 2018.

Speaker Change: Those kind of above seasonal quarters, our line of sight or is it too early to make that judgment. Thank you. Yes first just a recap on your question Vivek. Thanks.

Speaker Change: I think youre, referring to our capital management call, we had in <unk>. So I just would.

Speaker Change: As people to look at what exactly we presented there I think you referred to a 2026 scenario.

Speaker Change: A set of scenarios that we've presented there.

From flat to growth versus 2018 and.

Vivek Arya: And, you know, we didn't say we are predicting what revenue would be, but it allows investors to kind of have a view on free cash over share according to, you know, the revenue scenario. And I think it allows you guys to modulate up or down revenue and know what free cash flow will do during that year. Now, more specifically to your question. Look, the, you know, we talked about three markets that are already in the midst of a cyclical recovery. I think they are not done yet, but they are pointing in the right direction. That's a personal electronics enterprise systems and communication system for us coming from a very low trust, but you know, showing momentum.

Speaker Change: We didn't say we are predicting what revenue would be but it allows the investors to kind of have a view on free cash flow per share. According to the revenue scenario and I think it allows you guys to modulate up or down revenue and know what free cash flow was due during that year and now more specifically to your question.

Speaker Change: <unk>.

Speaker Change: Luke.

Speaker Change: We talked about three markets that are already in the midst of a cyclical.

Speaker Change: Recovery I think they are not done yet, but they are pointing in the right direction.

Speaker Change: Personal electronics enterprise systems, and communications system for us coming from a very low trough.

Speaker Change: You know showing momentum and I think that we are in.

Vivek Arya: And I think that we are in the, you know, in the process of strengthening. Unfortunately, these markets were about 25% of our revenue in 23. And in our case, we really need the broad industrial market and the automotive market to join. Okay, so if I go to industrial first revenue picked in the third quarter of 22, we've seen eight quarters of decline. We are more than 30% down versus the peak. So, I don't think the. I hope I can't predict it. I don't think we have a lot left. Okay, I think the inventory correction is still ongoing, but I do expect that to start to recover.

In the process of strengthening Unfortunately, these markets, but about 25% of our revenue in 'twenty three and in our case, we really need the broad industrial market and the automotive market to join okay. So if I go to industrial.

Speaker Change: <unk>.

Revenue peaked in the third quarter with 22.

We've seen eight quarters of decline.

Speaker Change: We are more than 30% down versus the peak.

Speaker Change: So I don't think we I hope I cant predict it I don't think we have a lot left okay. I think the inventory correction is still ongoing but I do expect that to start to recover I cannot predict quarter, because usually when we see it we call it.

Vivek Arya: I cannot predict the quarter because usually when we see it, we call it. I will just say we haven't seen it yet. And it's been quite persistent. Okay, that's on the industrial side, and I can go even into the sector. Most of the sectors are showing either still searching for a bottom or hovering at a very low level. Okay, so it's about time, but we haven't seen it yet. On the automotive market, I think it's more complex because this is what we see: a different story between China and the rest of the market. You know, unfortunately, China is about 20% of our business, so it cannot move the overall automotive number for the company.

Speaker Change: I will just say, we haven't seen it yet and it's been quite persistent okay. That's on the industrial side and I can go even into the sectors. Most of the sectors are showing either still searching for a bottom all hovering at the very low level. Okay. So it's about time, but we haven't seen it yet.

On the automotive market I think it's more complex because this is what we see.

Speaker Change: Different story between China, and the rest of the market. Unfortunately, China is about 20% of our business. So it cannot move the overall automotive number for the company, but I think as I mentioned before we are right now at a lower single digit versus the peak kind of hovering in that my notes.

Vivek Arya: But I think, as I mentioned before, we are right now at the lower single digit versus the peak, kind of hovering at that minus. Sorry, it's not lower single digit. I would say upper single digit, but some of it between 5% to 10% versus the peak on automotive. In China, we have new records being established. And I think there is momentum over there. But the other markets or the other geographies, sorry, on automotive are still searching for that bottom. I do expect when it all adds up, automotive will establish a lower peak to drop cycle.

Speaker Change: So it is not lower single digit I would say upper single digit, but somewhere between 5% to 10% versus the peak on automotive in China, We have new records being established and I think there is momentum over there, but the other markets. The other geographies sorry on automotive are still searching for that bottom I do.

Speaker Change: Expect when it all adds up automotive will establish a lower peak to trough cycle not close to the industrial side, but I can't give you a precise time for that Vivek.

Vivek Arya: And not close to the industrial side, but I can't give you a precise time for that, Vivek. Thank you for that.

Speaker Change: Alright, Thank you vivek.

Operator: And we'll go to the next question.

Next caller please.

Speaker Change: Yes.

CJ: Next question comes from the line of CJ, this with cancer. This was received with your question. Yeah, good afternoon. Thank you for taking the question. I guess first question, you know, bigger picture, I guess given the cyclical uncertainty. How are you thinking about kind of running utilization rates in the queue for the first half of? 25 and as part of that with inventory at 4.3 billion, are you looking to continue to grow that and elevate utilization or keep it where it is until you really see signs of that cyclical recovery? Would love to hear your thoughts there.

Our next question comes from the line of C J Muse with cancer.

Speaker Change: Proceed with your question.

Speaker Change: Yes. Good afternoon. Thank you for taking the question I guess first question bigger picture I guess, given the cyclical uncertainty how are you thinking about kind of running utilization rates into Q4 and first half of <unk>.

Speaker Change: 25, and as part of that with inventory at $4 3 billion or are you looking to continue to grow that.

Speaker Change: And elevate utilization or keep it where it is.

Speaker Change: And you really see signs of that cyclical recovery, we'd love to hear your thoughts there.

CJ: Yeah, I know. Happy to do that. So first a bigger picture, and then I'll get into maybe some specifics, but the objective for inventory is to support revenue growth as we prepare for the upturn, as I've even described in our expectations going forward, particularly in 2025. We do expect to grow inventory in the fourth quarter. So we grew a couple hundred million in third quarter. We expect probably a few hundred million of inventory growth again in fourth quarter. But that is we have moderated the factory loadings of factory loadings, expect us to go slightly down, going into fourth quarter, but despite that will still grow additional inventory.

Speaker Change: No happy to do that so first bigger picture and then I'll get into maybe some specifics, but the objective for inventories to support revenue growth as we prepare for the upturn as we've described in our expectations going forward, particularly in 2025.

Do expect to grow inventory in fourth quarter. So we grew a couple of hundred million dollars in third quarter, we expect probably a few hundred million dollars of inventory growth again in fourth quarter.

Speaker Change: But that is we have moderated.

Speaker Change: Factory loaded factory loadings, I expect those to go slightly down.

Speaker Change: Going into fourth quarter, but despite that we will still grow additional inventory just.

CJ: Just to comment a little more on the inventory, we have detailed plans by device at the finished goods level at the chips level, and those plans are grounded on purchasing behavior and expected demand. And this inventory is very low risk. It sells to many, many customers and has a long life cycle. So we feel really good, really good about that. That's great. I do. I would hope to follow up on an audio. You talked about that as a surprise in China. I'm curious if you could speak to Chinese OEMs taking share in Europe. That's something that we've kind of picked up and curious.

Speaker Change: Just to comment a little more on the inventory we have detailed plans.

Speaker Change: <unk> device at the finished goods level of the chips level and those plans are grounded in purchasing behavior unexpected demand and this inventory is very low risk. It sells to many many customers and he has a long lifecycle. So we feel really good really good about that.

Speaker Change: That's great Jay pharma.

Speaker Change: I would hope.

Speaker Change: I hope to follow up on auto.

Speaker Change: You talked about.

Speaker Change: That is a surprise in China I'm curious if you could speak to Chinese Oems taking share in Europe, that's something that we've kind of picked up.

Vivek Arya: Perhaps maybe the data points were picking up in Europe related a little more to share loss there to some of the Chinese OEMs. Are you seeing that? That's our first annual surprise. I think not a surprise because we've seen that trend starting in Q2. So to me, you know, the automotive market in China for TI, it again picked in that end of 23, call it second half of 23. We saw a very sharp correction in Q1. I think it was mainly inventory correction and then a growth in Q2. Growth in Q3 is 20% on top of 20%.

Speaker Change: I'm curious, perhaps maybe the data points, we're picking it up in Europe.

Speaker Change: Weighted a little more to it.

Share loss there to some of the Chinese Oems are you seeing that.

First I was surprised I think thats not a surprise because we've seen that trend starting in Q2, So to me.

Speaker Change: The automotive market in China for Ti again baked in there in that.

Speaker Change: End of 'twenty three call it second half of 'twenty three.

So a very sharp correction in Q1, I think it was mainly inventory correction and then.

Speaker Change: Growth in Q2 growth in Q3, 20% on top of 20% So think about it running it at 45% of the of the dropping at a new peak I think that is mainly driven by the China market right. If you think about.

Vivek Arya: So think about it running at 45% of the tropening and a new pick. I think that is mainly driven by the China market, right? If you think about. I'm just there a couple of months ago, most of the new, I think the now majority of new cars are easy, right, of some sort of hybrid, and these tend to have more content. And again, our position there is good; the TI is very competitive, so I think that drives growth. Now, our customer base in China is a set of allians that also T01, and you guys know the OEM sharing, you know, the experts there, but you know, the T01s, they also, I think they can build systems, they are very efficient in cost, performance is pretty good, so I think they also complete full market versus the worldwide T01s, and I think the spot of the dynamics we see in the China market, we see momentum on both.

Speaker Change: I was just there.

Speaker Change: A couple of months ago, most of the new I think but now majority of new cars are evs right or some sort of hybrid.

Speaker Change: And to have more content.

Speaker Change: And again our position there is good that is very competitive so I think that drives growth now our customer base in China is a set of.

Speaker Change: Of Oems that also tier one and you guys know the OEM sharing.

Speaker Change: Experts there but.

Speaker Change: Tier ones are also I think are they are they can.

Speaker Change: Billboard systems, they are very efficient in cost performance.

Speaker Change: Performance.

Speaker Change: Pretty good so I think they also compete for market share versus the world by tier ones and I think thats part of the dynamics, we see in the China market, we see momentum on both.

Operator: Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Alina Ross: Next color, please. Thank you.

Speaker Change: Next caller please.

Speaker Change: Okay.

Thank you. Our next question comes from the line of Ross Seymore with Deutsche Bank. Please proceed with your question.

Alina Ross: Our next question comes from Alina Ross; see more with Deutsche Bank. Please proceed with your question. Hi guys, thanks for my question. You talked a couple of times about China going up 20% sequentially, two quarters in a row. Is there any reason that the other 80% of the business shouldn't have that sort of a cyclical rebound at some point? Is there something that's unique about China that allows it to be more volatile? Or is the expectation that you would have that the other 80% of your business, at some point in time, should do the same thing?

Speaker Change: Hi, guys. Thanks for asking a question.

Ross Seymore: You talked a couple of times about China going up 20% sequentially two quarters in a row is there any reason that the other 80% of the business shouldn't have that sort of a cyclical rebound at some point is there something thats unique about China that allows it to be more volatile or is the expectation that you would have at the other 80% of your business at some point in time should do the same thing.

Alina Ross: First, I think it's some part of time; all the horses will, you know, point in the same direction, and we all are waiting for that. It's been a while, but I think that happened. Again, I think on its behavior; it's so clear to us, and you can see an opposite behavior between geography, between markets. I will say that again, as we talked about in the previous response of my previous answer, there is a stronger EV momentum in China. On top of it, I think the China political culture, the environment is the design cycles are quick, inventory corrections are quick.

Speaker Change: First I think at some point of time, all the horses will lift pointed the same direction and we all are waiting for that.

Speaker Change: Been a while but I think that happens again, it's a synchronous behavior. So clear to US you can see an opposite behavior between geographies between markets I will say that again as we talked about the previous response. So my previous answer there is.

Speaker Change: Stronger EV momentum in China.

Speaker Change: Top of it I think the China Polyculture call. It the environment is the design cycle. So quick inventory corrections are quick. So there is a little bit of everything is more accelerated I would say it over there and I think thats why were seeing shorter cycle in terms of the way up the way down.

Alina Ross: So there is a little bit of everything is more accelerated, I would say, over there. And I think that's why we're seeing shorter cycles in terms of the way up, the way down. That would be my guess. But I think we'll all be able to be smarter only when that thing is done or played out completely. All I can say is that I've not seen the played out completely on the automotive market outside of China. But I don't think, again, I don't think the pick to throw on the automotive market is going to be as pronounced as industrial simply because the secular growth over there, I believe, is stronger in the short term.

Speaker Change: That would be my guess, but I think we will all be able will be smarter only when that thing is.

Speaker Change: He's done all played out completely all I can say that I've not seen be laid out completely on the automotive market outside.

Outside of China.

Speaker Change: But I don't think again I don't think the peak to trough on the automotive market is going to be as.

Speaker Change: Pronounced as industrial simply because of the secular growth over there I believe is stronger in the short term.

Alina Ross: Yeah.

Rafael Lizardi: Yeah, I do one for Rafael on the up excited things. Just a conceptual question is we look into 2025, kind of what would be the puts and takes on up X? And I guess the punch line is you guys have kept up X in certain periods of time. We've been fairly growing year over year, and other years inflation has been something you guys have had to endure as well. So how do we think about OPEX kind of structurally in 2025? Yeah, in fact, for 25 and beyond, the way to think about it is we continue to have a discipline process, as you alluded to, on our investments and our OPEX.

Speaker Change: Yeah, a follow on Ross.

Ross Seymore: Yes, I do one for Raphael on the Opex side of things just a conceptual question as we look into 2025 kind of what would be the puts and takes on Opex and I guess the punch line is you guys have kept opex in certain periods of time barely growing year over year and other years inflation has been something you guys have had to endure as well so.

Speaker Change: How do we think about opex kind of structurally in 2025, yes.

Speaker Change: In fact, 425 and beyond the way to think about it is we continue to have a disciplined process as you alluded to on our investments and our opex, but when it comes to R&D. We will continue to invest there. So youll see our investments grow over time and continue to grow.

Rafael Lizardi: But when it comes to R&D, we'll continue to invest there, so you'll see our investments grow over time and continue to grow. Whereas in SGNA the focus there is is efficiency, so continue to drive efficiency. So there they probably grow, but a much lower base than R&D, and of course revenue. The goal is for both of those to be under the revenue growth for the foreseeable future. Thank you, Roger. Thank you, Ross.

Speaker Change: Whereas in SG&A. The focus there is efficiency so continuing to drive efficiency. So there.

Speaker Change: We'll probably grow but.

Speaker Change: The much lower base than R&D and of course.

Speaker Change: Revenue. The goal is is for both of those to be under the revenue growth for the foreseeable future.

Speaker Change: Great. Thank you and we'll go to the next caller. Please.

Operator: And we'll go to the next color, please. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Stacy <unk> with Bernstein Research. Please proceed with your question.

Stacy Rasgon: Our next question, it comes with a line of Stacy Raizyd with Burns being research. Please proceed with your question. Hi guys, thanks for taking my question. I wanted to drill a little bit more into that China strength. So you're seeing it in auto. Are you seeing any signs of like China strength in analog or anywhere else in any other end market? Is it just completely focused on auto? I guess what I'm getting at is I'm trying to judge the propensity of some of the Chinese guys maybe to be buying more. We've got an election coming up.

Hi, guys. Thanks for taking my question I wanted to drill a little bit more into that trying to string so you're seeing it in auto.

Speaker Change: Are you seeing any signs of like China strength in analog or anywhere else in any other end market is it just completely focused on.

Speaker Change: On automotive it at this point.

Speaker Change: And I guess, what I'm getting at is I'm trying to judge the propensity of some of the Chinese guys. Maybe you could be buying more we've got an election coming up and nobody exactly knows what's.

Stacy Rasgon: Nobody exactly knows what's going on with the general geopolitical environment. What do you think more broadly in China, both in and outside of auto? Yes, Stacy, I can tell you what we see. And again, I, it's helping to speculate behind beyond what we see, but in general, just a reminder, as I said, during the upcycle, we had to buy us our supply into the industrial and automotive market. So clearly the, and I think we said the company was at about 75% in industrial and automotive in 2023. China was similar, maybe even higher because we had to take some calls on the consumer P side.

Speaker Change: Going on with the general geopolitical environment, what are you seeing more broadly in China, both in and outside of auto.

Speaker Change: Yes, actually I can tell you what we see and again it's.

Speaker Change: It's hard to speculate beyond what we see but in general just a reminder, as I said during the upcycle, we head too.

Speaker Change: Bias, our supply into the industrial and automotive markets. Okay. So clearly.

Speaker Change: And I think we said the company was at about 75%.

Speaker Change: And in automotive in 2023, China was similarly, maybe even higher because we had to take some calls on the on the on.

Speaker Change: On the consumer side, so just to nowhere, we starting for France. So.

Stacy Rasgon: So just to know where we're starting from. So you know the motive. I think it's as I said before; I can't I can't tell you the reason for that, but I think part of it is the I think the China customers are fast moving. I think they are gaining momentum worldwide, not only in China. The second thing is I think it's acceptance of even China. And there may be some other reasons, as you have mentioned, but we have not seen a clear evidence for that. Okay. Of a very large inventory builder for anything like that.

Speaker Change: I think as I've said before I can I can tell you the reason for that but I think part of it.

Speaker Change: <unk>.

Speaker Change: I think the China customers.

Speaker Change: Our fast moving.

Speaker Change: I think they.

Speaker Change: They are gaining momentum worldwide not only in China. The second thing is I think its acceptance of Evs in China and there may be some other reasons as you have mentioned, but we have not seen a clear evidence for that okay of a very large inventory buildup or anything like that.

Stacy Rasgon: That's that's on your direct question of automotive on the industrial side. We have not seen China recovering from the cycle yet. So we again, we it has picked somewhere in 2022 in China included, and since then, you know, it had a little bit of a sequential growth in Q2, but then it went down again in Q3, so kind of hovering at the bottom. That's the way I would describe it. So we are waiting for that to happen. We have seen a very strong recovery, you know, the motive actually within you high, but the industrial numbers are still trending, you know, about 40% or so, maybe even hiring China versus the peak.

Speaker Change: On your direct question is on automotive.

Speaker Change: On the industrial side, we have not seen China recovering from the cycle yet so we again we.

Speaker Change: Peak somewhere in 2022 in China included and since then it has a little bit of a sequential growth in Q2, but then it went down again in Q3, so kind of hovering at a bottom that's the way I would describe it. So we are waiting for that to happen. We have seen a very strong recovery in automotive actually with a new high.

Speaker Change: But the industrial numbers are still trending about 40% or so maybe even higher in China versus the peak. So a lot of work for us to do in China.

Stacy Rasgon: So a lot of work for us to do in China. I don't think I think it's just, you know, I think customers, as we said in my, as I said in my prepared remarks, are still working through some inventory over there on the industrial side. And maybe just to add one thing, when you look at the face of the other three markets that are cyclically recovering, personal electronics comes and entertainment, all of the regions are growing and contributing to that. Yeah, China included, right. But again, all of the very low number, if you will, in 23.

Speaker Change: I don't think I.

I think it just.

Speaker Change: <unk>.

Speaker Change: I think customers as we're selling as I said in my prepared remarks are still working through some inventory.

Over there on the industrial side and maybe just to add add one thing when you look at Stacy. The other three markets that are cyclically recovering personal electronics comms and entertainment all of the regions are growing and contributing to that yes in China included right, but again off of a very low number if you will in 'twenty three contract.

Speaker Change: Yes.

Operator: I do.

Speaker Change: I do thank you.

Operator: Thank you. I know you guys don't guide two quarters ahead, but just mathematically, you know, we've been sort of looking at performance versus normal seasonality. How would you guys define typical seasonality for Q1? And maybe like what is it over the last seven years, and how would you define it like versus like pre code? So maybe I'll talk about Q4, Stacy, and you know, some people depends how you define seasonality. I like the way you do it; you know, you kind of need to take the outliers away. And I think 2020 and 2021 were the outliers doing the off-site.

Speaker Change: I know you guys don't guide to quarters ahead, but just mathematically.

Speaker Change: We've been sort of looking at outperformance versus normal seasonality, how would you guys define typical seasonality for Q1.

Speaker Change: Maybe like what is it over the last several years and how would you define it like versus like pre.

Speaker Change: Pre COVID-19 levels.

Speaker Change: So maybe I'll talk about Q4 as Stacy and.

Speaker Change: Some people.

Depends how you define seasonality I like the way you do it you know you kind of need to take the outliers away and I think 2020 in 2021, where the outliers are doing the uptake in <unk>.

Operator: And then typically in the fourth quarter, we see kind of a minus seven to even sometimes close to minus ten. Dave, the Q1 ones, can you add what? Yes, it's more; it's usually more flat. It's more flat. I should maybe down down a little bit, but fourth quarter and first quarters definitely are seasonally weaker quarters. Second and third are obviously the stronger quarters. Okay, thank you, guys.

Speaker Change: In the fourth quarter, we see kind of a minus 7% to even sometimes close to minus 10.

Speaker Change: David Q1, once you add or.

Speaker Change: Yes, its more its usually more flat.

More flattish, maybe down a little bit but.

Speaker Change: Fourth quarter, and first quarters definitely are seasonally weaker quarters second and third are obviously the stronger quarters.

Speaker Change: Okay. That's helpful. Thank you guys. Okay next caller please.

Operator: Okay, next caller, please.

Thomas O'Valley: Thank you. Our next question comes from the line of Thomas Ovali with Bargley. Please proceed with your question. Hey, thanks for taking the question. Haviv, I just wanted to clarify some comments you made in the preamble. You kind of talked about the three markets: enterprise, he income, still correcting, but showing momentum. So not finished, but showing some progress. Are those still sequentially declining, or are one or two of those actually coming off of the bottom and improving? No, I think all three are sequentially growing in a fast pace. So I think I just repeat the numbers.

Speaker Change: Thank you. Our next question comes from the line of Thomas O'malley with Barclays. Please proceed with your question.

Thomas O'malley: Hey, Thanks for taking the question I just wanted to clarify some comments you made the preamble you kind of talked about the three markets enterprise E com still correcting, but showing momentum so not finished but showing some progress are those still sequentially declining or one or two of those actually coming off of the bottom and improving.

Speaker Change: No I think all three are sequentially.

Speaker Change: Growing fast pace, so I think that just to repeat the numbers.

Haviv Ilan: I think PE grew 30% sequentially, and enterprise grew 20% sequentially, and comms grew 25% sequentially. My point is that they are still not at the previous peak. Okay, so to me, when I think about momentum, I think I expect momentum to continue to build. I think we are still running below the previous peak that was somewhere in the year 2022. And I expect that momentum to continue. I think also, as I mentioned before, specifically for TI, these are the markets where we were, in some cases, short in the previous upcycle. And it's our job to go back and address these markets now when we have enough supply and inventory.

Speaker Change: Think p/e grew 30% sequentially and enterprise grew 20% sequentially and Com grew 25% sequentially My point is that.

They are still not at the previous peak, Okay. So to me when I think about the momentum I think I expect momentum to continue to build I think we are still running.

Speaker Change: Below the previous peaks that are somewhere in that mid year 2022.

I expect that momentum to continue and I think also as I've mentioned before specifically for Ti. These are the markets, where we were.

Speaker Change: In some cases short in the previous up cycle and it's our job to go back and address the sockets now when we have enough supply and inventory okay.

Haviv Ilan: Thank you for clarifying. Yeah. And then just broadly, kind of during the pandemic, you saw a lot of growth. And I think most of your peers and yourself started being more vocal about describing both auto and industrial as double-digit growers. So, as this kind of correction continues, you're seeing the string from China in your auto business. And obviously, that's a part of the broader business and contributes to that double-digit growth. But, you know, looking back now and as you see the recovery, would you think any differently about the growth profiles of those two businesses? You obviously have your competitors coming up in a couple of weeks, kind of going to restate their long term counters as well.

Speaker Change: Thank you for clarifying and then.

Speaker Change: Just broadly kind of during the pandemic you saw a lot of growth and I think most of your peers and yourself started being more vocal about describing both auto and industrial is a double digit grower. So as this kind of correction continues youre seeing the strength from China in your auto business and obviously, that's a part of the broader business and contribute to that double digit growth but.

Looking back now and as you see the recovery what do you think any differently about the growth profiles of those two businesses. You. Obviously have your competitors coming up in a couple of weeks kind of going to restate their long term CAGR as well do you still see that double digit growth profile is the right way to look at those two businesses.

Haviv Ilan: Do you still see that double-digit growth profile as the right way to look at those two businesses? Yeah, and again, the short answer is yes. I see the same. I will say that even the current cycle on the automotive side is proving it. And I think we will all see that in a short term. And I talk about short term with five, five to ten years. I think the growth in industrial is multi-decades. I think we are on this in some of the quality sectors in industrial. We are only in the very, very beginning or early innings.

Speaker Change: And again.

Speaker Change: The short answer is yes, I see the same I will say that even the current the current cycle on the automotive side, we are proving it and I think we will all see that in the short term and I talk about short term. It's five five to 10 years I think the growth in industrial is multi decades I think we are on these in some of the.

Speaker Change: Call it.

Speaker Change: Sectors in industrial we are only in the very very beginning early innings. So I think the industrial and I don't I don't know, if we say double digit, but I think ti grew.

Haviv Ilan: So I think the industrial, and I don't know if we say double digit, but I think TI grew 10% in the last decade, 2013 to 2023. I think the market date may be a little bit lower than that. I would guess, but call it high single to maybe 10% would be a good guess. I think the automotive market for TI and also for the market grew faster. But I think it's going to be, you know, I don't think it's going to run multiple decades. Okay, the certain point of time there is going to be kind of some sort of saturation in terms of content per vehicle.

Speaker Change: <unk> grew 10% in the last decade 2013 to 2023.

Speaker Change: I think the.

Speaker Change: The market may be a little bit lower than that I would guess, but call it high high.

Speaker Change: Single to maybe 10% would be a good guess I think the automotive market for Ti and also for the market grew faster.

Speaker Change: But I think it's going to be.

Speaker Change: I don't think he's going to run multiple decades, okay at a certain point of time, there is going to be.

Speaker Change: Some some sort of saturation in terms of content per vehicle I don't think we are close to that.

Haviv Ilan: I don't think we are close to that date now, specifically not in this decade. Hopefully, that helps.

Speaker Change: Now specifically not in this decade, hopefully that helps.

Operator: Thank you, Tom, and we'll go to the next scholar, please.

Speaker Change: Thank you Tom and we'll go to the next caller. Please.

Joe Moore: Thank you. Our next question comes to the line of Joe Moore. We're more than standing. Please proceed with your question. Great. Thank you. I wonder if you could help characterize industrial. And I know you've talked about the various sub-segments underneath of that. But is it, you know, is there an inventory correction that's uniform? Are there are there are there areas of strength and just any sense of, you know, inventory versus demand issues that are kind of dragging. Yeah, Joe, a question. I mean, I think we have more than 10 sectors, about 12 sectors in industrial and the.

Thank you.

Speaker Change: Our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question.

Joe Moore: Great. Thank you.

I Wonder if you could help characterize industrial and I know you've talked about the various sub segments underneath of that but as it.

Joe Moore: Is there an inventory correction that uniform or there are there areas of strength and just any sense of inventory versus demand issues that are kind of dragging that business down.

Speaker Change: Yes, Joe a great question I mean, I think we have more than 10 sectors about 12 sectors in the industrial and the.

Joe Moore: The overall, they all add up to a continuous decline since the cell quarter or 22. So it's the eighth quarter of decline. We are seeing most of the sectors I would characterize as a founder bottom, but are kind of hovering at that bottom. Okay. And, and think about areas for us. Like building automation, the energy infrastructure, medical kind of hovering at that bottom on factory automation. We are seeing Steve, and it's a lot sector for us. You can think about factory automation and water drive. It's all this process and factory automation type of plants. We are still seeing a decline.

Joe Moore: The overall, they all add up to.

Joe Moore: A continuous decline since the third quarter was 22, so the eighth quarter of decline.

Joe Moore: Are seeing most of the sectors I would characterize our have found the bottom, but I'll kind of hovering at that bottom, okay in and thinking about areas for us like building automation to energy infrastructure.

Joe Moore: Medical.

Joe Moore: Hovering.

Joe Moore: At the bottom.

Factory automation.

Joe Moore: We are seeing Steve and it's a large sector for US you can think about factory automation and motor drive all of these.

Joe Moore: Process and factory automation type of.

Joe Moore: Plants, we are still seeing a decline so they have not found a bottom and then you see a couple of friends areas appliances. Some people don't have it in industrial we do.

Joe Moore: So they have not found a bottom. And then you see a couple of strengths areas, you know, appliances. You know, some people don't have it in industrial. We do appliances decline very early, and we've seen some recovery there. And I would also add, in our case, we have a power delivery power delivery. Think about it. The main market is server, right? So that fits at the bottom of the rack. So we see growth over there. But this is about the only two out of 12. So overall weakness in the industrial market. Hopefully, that provides more color.

Appliances declined very early and we have seen some recovery there.

I would also add in our case, we have power delivery power delivery think about who the main market silver right, though that sits at the bottom of Iraq. So we see growth over there.

Joe Moore: But these are the only two out of 12, the overall weakness.

Joe Moore: In the industrial market hopefully that.

Joe Moore: Provides more color.

Joe Moore: Our onshore.

Joe Moore: Yeah, I do. That's helpful. Thank you. In terms of analog versus embedded. I know, you know, there's a that's been happening for a while that embedded has underperformed. And there's a focus on kind of turning that around around the narrow narrow or focus area. I wonder if you could just characterize, you know, what's different about the embedded market on a sequential basis that's weaker. Yeah, I started strategically. I we are very pleased with the progress we are seeing in embedded, you know, embedded is more think about is higher, you please and more visibility. I would say on design.

Speaker Change: Yeah. That's helpful. Thank you.

Joe Moore: Of analog versus embedded.

Joe Moore: I know that's.

That's been happening for a while then embedded has underperformed and theres a focus on kind of turning that around around scenario narrow narrower focus area. I'm wondering if you could just characterize whats what's different about the embedded market on a sequential basis.

Yes ill start strategically we are very pleased with the progress we are seeing an embedded.

Joe Moore: Embedded is more think about these higher IOP than more visibility I would say on design in place abroad. So when we look at the progress when we look at momentum with customers I think it's.

Joe Moore: It's less broad. So when we look at the progress, when we look at momentum with customers, I think it's we are excited about the future. And you know, they are going through a cyclical process. Exactly like the analog team has done, but they are kind of a year later. So again, embedded is almost 95% industrial and automotive. They've seen growth in 2023 versus the industrial business versus the animal business that declined double digits. So they started almost a year after analog. Think about kind of middle of 23. We've seen four quarters. I think they're also looking at the seasonal quarter in Q4, but momentum there is strong, and I'm excited about the future there.

Joe Moore: And we are excited about the future.

And.

Joe Moore: They are going through a cyclical.

Joe Moore: Process.

Joe Moore: Exactly like.

Joe Moore: The analog team has done but they are kind of a year later, so again embedded is almost 95% industrial and automotive.

Joe Moore: <unk> growth in 2023 versus the industrial business versus the animal business the decline double digits. So they started almost a year after.

Joe Moore: And then I have to think about kind of middle of 'twenty, three and we have seen four quarters. I think they are also looking at a seasonal quarter in Q4.

Joe Moore: But.

Joe Moore: Momentum there is strong and I'm excited about the future there.

Operator: Thank you.

Speaker Change: Okay. Thank you.

William Stein: We'll go to the next caller, please. Thank you.

Speaker Change: We'll go to the next caller please.

Speaker Change: Thank you. Our next question comes from the line of William Stein with <unk> Securities. Please proceed with your question.

William Stein: Our next question comes with a line of William Stein with true or security. Please receive two questions. Great. Thanks for taking my question. I think earlier on the call, the question was asked that Haviv used answered it for one or two end markets, but I'm hoping you can talk about how the pacing of orders progressed in the last couple of months. I wonder if you might have seen things accelerate to then only decelerate if there's been any sort of ups and downs that have surprised you. And then I have a follow-up, please. Yeah, I think we, what I said about the stealth quarter, I think you, you know, think about it as not a lot of change that I see right now going into the fourth, but there is, it's Q4, right?

William Stein: Great. Thanks for taking my question I think earlier in the call.

William Stein: The question was asked.

William Stein: <unk>.

William Stein: Answered it for one or two end markets, but I'm, hoping you can talk about how the pacing of orders progressed.

William Stein: The last couple of months I Wonder if you might have seen things accelerate to then only.

William Stein: Decelerate.

William Stein: And any.

William Stein: Sure.

William Stein: Sort of ups and downs that has surprised you and then I have a follow up please.

Speaker Change: Yes, I think what I said.

William Stein: About the third quarter I think you.

Speaker Change: Think about it there's not a lot of change that I see I see right now going into the fourth but it's Q4 right. So there is a seasonality effect in that sense I don't see any any change versus what we've seen in Q3. If we have if we would see something I would call it out.

William Stein: So there is a seasonality effect. In that sense, I don't see any change versus what we've seen in Q3. If we have, if we would see something, I would call it out, but I cannot call out anything. Dave, do you want to add anything on the order of order? Yeah, in order of rates, I think we behave normally that they increased each month and the quarter, which is very typical. So I wouldn't see any large drop-offs or acceleration or deceleration on that front. And Bill, maybe just to wait on that reminder, we have built good service levels of inventories.

Speaker Change: But I cannot call out anything Dave do you want to add anything about orders or not yes in order rates.

Dave Pahl: Think for behave normally.

Dave Pahl: The increased each each month in the quarter, which is very typical so we didn't see any large drop offs or acceleration or deceleration on that front and bill maybe just to add on that.

William Stein: Just a reminder, that we have built a good service levels of inventories Rockwell mentioned, our lead times are very low so we get a lot of business kind of real time as it comes.

William Stein: Raphael mentioned our lifetimes are very low. So we get a lot of business kind of real time. If it comes, people will call it turn business or so we simply don't have a ton of visibility right now. And customers also, they take parts only when they need it. I don't think the reason that they cannot provide more color beyond what they've said. Yeah, if I can follow up it, it actually dovetails with the follow-on, which is when you all have inventory, your customers may not be all charged up about placing tons of backlog. And when they have inventory, even more so, our checks recently have revealed that customers have more inventory than many suppliers thought.

William Stein: People, who call it turn business or so.

So we simply don't have a ton of visibility right now and customers also they take parts only when they need it I don't think they are building inventory.

William Stein: That's the reason that we cannot provide more color beyond what they've said.

Yes.

Speaker Change: Yes, I can a follow up it actually dovetails with the follow on which is.

Speaker Change: When when you all have inventory.

Speaker Change: Your customers may not be.

Speaker Change: All charged up about placing comes backlog and when they have inventory even more so.

Speaker Change: Our checks recently revealed that customers have more inventory than many suppliers thought.

William Stein: They were not really close to the end of the inventory digestion at end customers. And I wonder if you could either dispel that or provide any insight as TICs. Thank you. Yeah, I'll just answer in a high level, and Dave, maybe you can chime in. But look, in general, we don't have visibility into our customer inventory levels. I do think, as we all know, I mean, interest rates are high at the end of the year. I don't think there is a lot of desire to build inventory with our customers' shelves, especially when our inventory position is strong.

Speaker Change: Where we are.

Speaker Change: Not.

Speaker Change: Really close to the end of the inventory digestion in customers and I Wonder if you could either just spell that or provide any any insight at TICC. Thank you.

Yes, I'll just answer it in a high level and Dave maybe you can you can chime in.

Speaker Change: Look in general we don't have visibility into our customers' inventory levels I do think as we all know interest rates are high at the end of the year I don't think there is a lot of desire to build inventory at our customers.

Speaker Change: <unk>, especially when our inventory position is strong and that's what we want to be we.

William Stein: And that's where we want to be. We want to take that burden away from our customers to us, that means level of service. And we want to do it through not only the downcycle, but also the upcycle. And the preparation of capacity and inventory is, Raphael said, that's the game we want to play in the next upcycle. And that's what drives a capital allocation decision. Dave, anything specific about the customer inventory? Yeah, I think the inventory you made that were essentially operating from a very healthy position on inventory. That means that customers don't have to place orders.

Speaker Change: We want to take that burden away from our customers to us that means level of service and we want to do it through not only the down cycle, but also the up cycle and the preparation of our capacity and inventory as Rafael said, that's the game, we want to play in the next up cycle and Thats what drives our capital.

Speaker Change: The allocation decision there.

Speaker Change: If anything specific about customer, yes, I think the inventory you made.

Speaker Change: We're essentially operating.

Speaker Change: From a very healthy position on inventory that means that customers don't have to place orders.

William Stein: And that's keeping visibility low, but we want to be able to be ready for the upcycle. When it comes. Yeah, many of our lead times are well below 10 weeks today. So, I mean, we, we provide, I call it extra and customer service, and then customers need the part; we have it for them. Right.

Speaker Change: And Thats.

Speaker Change: That is keeping visibility low, but we want we want to be able to be ready for the upturn when it when it comes yes. Many of our lead times are well below 10 weeks today. So I mean, we provide I call it excellent customer service and when customers need the part we haven't.

Operator: Thank you. Well, we'll go to our last, last caller, please.

Speaker Change: Alright, Thank you will and we'll go to our last the last caller. Please.

Operator: Thank you. And our last question comes from the line of tours, Zamburg with people. Please receive, which are questions. Yes. Thank you for squeezing me in. I had a follow-up question from the industrial market. Obviously. Basically, you know, lead times are short and, you know, you have inventory, but I'm just wondering from an end market or a self perspective. If it's fair to say that that market is stabilizing, is it getting worse? I know you called out those two segments that are perhaps starting to stabilize, but any, any further read on the end consumption, they're actually getting better or worse.

Speaker Change: Thank you Andrew.

Speaker Change: Last question comes from the line of.

Speaker Change: Sandburg with Stifel. Please proceed with your question.

Speaker Change: Yes. Thank you for squeezing me in.

Sandburg: I had a follow up question is on the industrial market.

Speaker Change: Obviously.

Speaker Change: Lead times are short and.

You had inventory I'm, just wondering from an end market or a sell through perspective.

Is it fair to say that that market is stabilizing is it getting worse I think anybody I know you've called out those two segments that are perhaps starting to stabilize but any any further read on the end consumption they are actually getting better or worse.

Operator: Yeah, just what I just to repeat. Sorry, thanks for the question. Just repeating what I said. I think most of the sector. Are hovering because we've seen like three or four quarters hovering at the same level more. So, okay, so I would say now you call it, is there an inventory correction there or not. I mean, seasonality would say that, you know, industrial would grow, for example, in Q2 or Q3, and he didn't. So, you know, you can argue that there is some inventory correction and customers, and that's that's the reason for my prepared remarks.

Speaker Change: Yes, just what I just to repeat alright. Thanks for the question I'm repeating what I said I think most of the sectors.

Speaker Change: Sure.

Speaker Change: Hovering because we've seen like three or four quarters hovering at the same level morning, Okay. So I would say your quality is there an inventory correction, there or not I mean seasonality would say that.

Speaker Change: Would grow for example in Q2 or Q3 any dividend. So you can argue that there is some inventory correction that customers in that.

For my prepared remarks.

Operator: But at least I do believe that they have stabilized from a revenue perspective. I believe I will say that the only and these are lots, you know, sectors for TI. I will say that this is not done on the faculty automation and world drive, which is kind of this automation sector for TI. That was my only other color that I've editor in, and I don't know where they've anything to add here. I think that's good. Okay, yeah, just one last question. So, going back to the topic about visibility orders and sort of so forth, when you talk to your customers, especially some of your non-Chinese customers, is there a sense that everyone is just waiting for, you know, rights to come down, getting through the US election.

Speaker Change: But at least.

I do believe that they have stabilized from a revenue perspective.

Speaker Change: I will say that the.

Speaker Change: Only in this large sector for Ti I will say that.

Speaker Change: Don on the factory automation and motor drive, which is kind of this automation sector for Ti.

Speaker Change: That was my only other color that editorial and I don't know.

Speaker Change: Anything to add here I think thats good thats good okay Im sorry, yes.

Speaker Change: Yes, just one last question, so going back to the topic about visibility orders and so forth. When you talk to your customers, especially some of your non Chinese customers.

Speaker Change: Is there a sense that everyone's just waiting for rates to come down and getting through the U S election.

Operator: But it does feel like there's like some sort of a capping cycle coming that everyone is waiting on the sidelines. When you talk to some of your biggest industrial customers, do you get a sense that they're waiting for that? Or is this more just about, hey, you know, once spending comes back with better rates and sort of so forth, we're sure to back to the races. Sure, answer is no; we don't, I don't hear that at least. I don't think if they think that they would tell me anyhow, but what I think is important to remember, and I think they value that because I hear it from the meetings I have that when they need it, we have it.

Speaker Change: It does feel like there's like some sort of the capex cycle coming just waiting on the sidelines. When you when you talk to some of your biggest industrial customers do you get a sense that they are waiting for that or is this is more just about hey.

Speaker Change: Once.

Speaker Change: Spending comes back with better rates and sort of a sofa was sort of back to the races.

Speaker Change: Short answer is no. We don't we don't I don't hear that at least I don't think they think that they would tell me anyhow, but what I think is important to remember and I think they value that because I hear it from them.

Speaker Change: <unk> I have that when they immediate we have okay and we are most of our portfolio is very diverse.

Operator: And we are, you know, most of our portfolio is very diverse, long lived, and we let the customers know what, where we have enough inventory to serve them as they needed. And when, you know, there are more kind of a little unique and smaller part of our portfolio, but the lead times are a little longer and we require more visibility. I think we are differentiated in that sense; customers appreciate it, and hopefully we can maintain that level of support through the next cycle and, you know, work on our market share. And I think that that is what customers expect, and I think the eye can outperform in that.

Speaker Change: Long lived and we let the customers know.

Speaker Change: What will we have enough inventory to serve them as they need it and when there are more kind of call. It unique.

Speaker Change: Smaller part of our portfolio, where the lead times are longer and we require more visibility.

Speaker Change: I think we are differentiated in that sense customers appreciate it and hopefully we can maintain that level of support through the.

Speaker Change: The next cycle and work on our market share and I think that is what customers expect and I think ti can outperform in that sense.

Operator: Thank you.

Speaker Change: Very helpful. Thank you.

Haviv Ilan: Okay, so let me wrap it up and with what we've said previously. At our core, we are engineers and technology is a foundation of our company, but ultimately our objectives and the best metric to measure progress and generate value for owners is the long-term growth of three Tesla per share. While we strive to achieve our objectives, we will continue to pursue our three ambitions. We will act like owners; we will own the company for decades. We will adopt and succeed in a world that's ever changing, and we will be a company that we are personally proud to be proud of and would want as our neighbor.

Speaker Change: Okay. So let me wrap it up and with what we've said previously at our core we are engineers and technology are the foundation of our company, but ultimately our objective and the best metric to measure progress and generate value for owners is the long term growth of free cash flow per share, while we strive to achieve our objectives. We will continue to pursue our three ambitions.

Speaker Change: We will act like owners, who will own the company for decades, we will adapt and succeed in a world that's ever changing and we will be a company that we are personally proud to be part of and would want as our neighbor. When we are successful our employees customers communities and owners all benefit.

Operator: When we are successful, our employees, customers, communities, and owners all benefit. Thank you and have a good evening.

Speaker Change: Thank you and have a good evening.

Dave Pahl: And this concludes today's conference and made this connection line. Thank you for your participation. . Welcome to the Texas Instruments 3rd quarter, 2024 earnings conference call. I'm Dave Paul, Head of Investor Relations, and I'm joined by our Chief Executive Officer, Haviva Lawn, and our Chief Financial Officer, Raphael Lazardi. For any of you who missed the release, you can find it on our website at ti.com-IR. This call is being broadcast live over the web and can be accessed through our website. In addition, today's call is being recorded and will be available via replay on our website.

Speaker Change: And this concludes today's conference you may disconnect your lines.

Speaker Change: You for your participation.

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Speaker Change: Welcome to the Texas Instruments' third quarter 2024 earnings conference call.

Speaker Change: Dave Pahl head of Investor Relations and I'm joined by our Chief Executive Officer at <unk>, and our Chief Financial Officer Raphael was already for any of you who missed the release you can find it on our website at Ti Dot com Slash IR.

Speaker Change: This call is being broadcast live over the web and can be accessed through our website.

Speaker Change: In addition, today's call is being recorded and will be available via replay on our website.

Dave Pahl: This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today, as well as TI's most recent SEC filings for a more complete description. Today we'll provide the following updates. First, Haviv will start with a quick overview of the quarter. Next, he'll provide insight into third quarter revenue results, with some details of what we're seeing with respect to our end markets. And lastly, Raphael will cover the financial results, given update on our capital management, as well as share the guidance for the fourth quarter of 2024.

Speaker Change: This call will include forward looking statements that involve risks and uncertainties that could cause ti's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward looking statements contained in the earnings release published today as well as Ti's most recent SEC filings.

Speaker Change: For a more complete description.

Speaker Change: Today, we will provide the following updates.

Speaker Change: First heavy will start with a quick overview of the quarter.

Speaker Change: Next he'll provide insight into third quarter revenue results with some details of what we're seeing with respect to our end markets.

Speaker Change: And lastly, Raphael will cover the financial results give an update on our capital management as well as share the guidance for the fourth quarter of 2024.

Haviv Ilan: With that, let me turn it over to Haviv. Thanks, Dave. Let me start with a quick overview of the third quarter. Revenue in the quarter came in about as expected at $4.2 billion, an increase of 9% sequentially and a decrease of 8% year over year. Analog revenue declined 4% year over year, and embedded processing declined 27%. Our other segment declined 5% from the year-ago quarter. Now I'll provide some insight into our third quarter revenue by end market. Our results continue to reflect the asynchronous market behavior that we've seen throughout this cycle. Similar to last quarter, I'll focus on sequential performance as it is more informative at this time.

Speaker Change: With that let me turn it over to Habib. Thanks, Dave Let me start with a quick overview of the third quarter.

Revenue in the quarter came in about as expected at $4 $2 billion, an increase of 9% sequentially and a decrease of 8% year over year.

Speaker Change: Analog revenue declined 4% year over year and embedded processing declined 27%. Our other segment declined 5% from the year ago quarter.

Speaker Change: Now I'll provide some insight into our third quarter revenue by end market.

Speaker Change: Our results continue to reflect a synchronous market behavior that we've seen throughout this cycle.

Speaker Change: Similar to last quarter I will focus on sequential performance as it is more informative at this time.

Haviv Ilan: First, the industrial market was down low single digits as customers continued to reduce their inventory levels. The automotive market increased upper single digits primarily due to strengthen China. Personal electronics grew about 30%. Enterprise systems was up about 20%, and communication equipment was up about 25% as the cyclical recovery continued in these three markets. With that, let me turn it over to Rafael to review profitability, capital management, and our outlook. Thanks, Haviv, and good afternoon, everyone. As I've mentioned, third quarter revenue was $4.2 billion. Gross profit in the quarter was $2.5 billion, or 60% of revenue.

Speaker Change: First the industrial market was down low single digits as customers continue to reduce their inventory levels.

Speaker Change: Automotive market increased upper single digits, primarily due to strength in China first.

Speaker Change: Personal electronics grew about 30% enterprise systems was up about 20% and communication equipment was up about 25% as the cyclical recovery continued in these three markets.

Speaker Change: With that let me turn it over to Rafael to review profitability capital management and our outlook.

Rafael: Thanks, Kevin and good afternoon, everyone.

Speaker Change: We've mentioned third quarter revenue was $4 2 billion gross profit in the quarter was $2 5 billion or 60% of revenue.

Rafael Lizardi: Sequentially, gross profit margin increased 180 basis points primarily due to higher revenue. Operating expenses in the quarter were $920 million, about flat from a year ago and about as expected. On a trailing to a month basis, operating expenses were $3.7 billion or 24% of revenue. Operating profit was $1.6 billion in the quarter, or 37% of revenue, and was down 18% from the year-ago quarter. Net income in the quarter was $1.4 billion, or $1.47 per share. Earnings per share included a 3 cent benefit for items that were not in an original guy. Let me now comment on our capital management results, starting with our cash generation.

Speaker Change: Sequentially gross profit margin increased 180 basis points, primarily due to higher revenue.

Rafael: Operating expenses in the quarter were $920 million about flat from a year ago and about as expected on a trailing 12 month basis operating expenses were $3 7 billion or 24% of revenue.

Rafael: Operating profit was $1 6 billion in the quarter or 37% of revenue and was down 18% from the year ago quarter.

Rafael: Net income in the quarter was $1 4 billion or $1 47 per share.

Rafael: Earnings per share included a <unk> <unk> benefit for items that were not in our original guidance.

Rafael: Let me now comment on our capital management results, starting with our cash generation.

Rafael Lizardi: Casulo from operations was $1.7 billion in the quarter and $6.2 billion on a trailing to a month basis. Capital expenditures were $1.3 billion in the quarter and $4.8 billion over the last 12 months. Free Casulo on a trailing to a month basis was $1.5 billion. As a reminder, free Casulo includes benefits from the CHIPSAC investment tax credit, which was $220 million in the third quarter and $532 million on a trailing-to-a-month basis. In the quarter, we paid $1.2 billion in dividends and repurchased $380 million of our stock. In September, we announced we would increase our dividend by 5%, marking our 21st consecutive year of dividend increases.

Rafael: Cash flow from operations was $1 7 billion in the quarter and $6 $2 billion on a trailing 12 month basis.

Rafael: Capital expenditures were $1 3 billion in the quarter and $4 $8 billion over the last 12 months free.

Rafael: Free cash flow on a trailing 12 month basis was $1 5 billion.

As a reminder, free cash flow includes benefits from the chipset investment tax credit.

Rafael: Which was $220 million in third quarter and $532 million on a trailing 12 month basis.

In the quarter, we paid $1 2 billion in dividends and repurchased $380 million of our stock.

Rafael: In September we announced we would increase our dividend by 5%, marking our 20 <unk> consecutive year of dividend increases.

Rafael Lizardi: This reflects our continued commitment to return free Casulo to our owners over time. In total, we returned $5.2 billion to our owners in the past 12 months. Our balance sheet remains strong with $8.8 billion of cash and short-term investments at the end of the third quarter. Total debt outstanding is $14 billion with a weighted average coupon of 3.8%. Inventory at the end of the quarter was $4.3 billion, up $190 million from the prior quarter, and days were $231, up two days sequentially. For the fourth quarter, we expect the revenue in the range of $3.7 to $4 billion and earnings per share to be in the range of $1.07 to $1.29.

Rafael: This reflects our continued commitment to return free cash flow to our owners over time.

Rafael: In total we returned $5 $2 billion to our owners in the past 12 months.

Rafael: Our balance sheet remains strong with $8 $8 billion of cash and short term investments at the end of the third quarter.

Rafael: Total debt outstanding is $14 billion with a weighted average coupon of three 8%.

Inventory at the end of the quarter was $4 3 billion.

Rafael: $190 million from the prior quarter and days were 231 up two days sequentially.

Rafael: For the fourth quarter, we expect Ti revenue in the range of three 7% to $4 billion and earnings per share to be in the range of $1 seven to $1 29.

Rafael Lizardi: We continue to expect our effective tax rate to be about 13% in the fourth quarter. As you are looking at 2025 based on current tax law, we would expect our effective tax rate to remain about the same. In closing, we will stay focused in the areas that add value in the long term. We continue to invest in our competitive advantages, which are manufacturing and technology, a broad product portfolio, rich of our channels, and diverse and long live positions. We will continue to strengthen these advantages to discipline capital allocation and by focusing on the best opportunities, which we believe will enable us to continue to deliver free cash flow per share growth over the long term.

Rafael: We continue to expect that our effective tax rate to be about 13% in the fourth quarter.

Rafael: As you are looking at 2025 based on current tax law, we would expect our effective tax rate to remain about the same.

Rafael: In closing, we will stay focused in the areas that add value in the long term, we continue to invest in our competitive advantages, which are manufacturing and technology.

Rafael: <unk> product portfolio reach of our channels and diverse and long lived positions.

Rafael: We will continue to strengthen these advantages through disciplined capital allocation and by focusing on the best opportunities, which we believe will enable us to continue to deliver free cash flow per share growth over the long term with that let me turn it back to Dave. Thanks, Raphael Operator, you can now open the lines for questions in order to provide as many of you as possible.

Rafael Lizardi: With that, let me turn it back to you. Thanks, Rafael. Operator, you can now open the lines for questions in order to provide as many of you as possible an opportunity to ask your questions. Please limit yourself to a single question. After our response, we'll provide you an opportunity for a follow-up. Operator? Thank you. Hey, again, we will now be conducting any question and answer session. If you would like to ask the question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove yourself from the queue.

Speaker Change: Will an opportunity to ask your questions. Please limit yourself to a single question.

Rafael: After our response, we'll provide you an opportunity for a follow up operator.

Speaker Change: Thank you.

Speaker Change: We will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star one.

Operator: If our participants use the speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment, please, as we pull for questions. Our first question comes from the line of Timothy Aakiri with UBS. Please proceed with your question. Thanks a lot. I guess the first question is, autos grew; I think that was a little bit of a surprise to a lot of us. Can you talk about what's going on there? You did say China, but did orders weaken late in the quarter at all? I mean, we saw pretty much every automaker negative pre and out.

Speaker Change: Please pull for questions.

Speaker Change: Our first question comes from the line of Timothy Arcuri with UBS. Please.

Speaker Change: Please proceed with your question.

Timothy Arcuri: Thanks, a lot I guess the first question is.

Timothy Arcuri: <unk> grew I think that was a little bit of a surprise to a lot of us.

Speaker Change: Can you talk about what's going on there you did cite China.

Speaker Change: But did orders weaken late in the quarter at all I mean, we saw it pretty much every automaker negative pre announce so can you talk about maybe what youre seeing in autos and maybe if you can provide a little commentary for December what the outlook is there is it sort of anything you'd call out in December in terms of end markets.

Timothy Akiri: So can you talk about maybe what you're seeing in autos? And maybe if you can provide a little commentary for December, what the outlook is there? Is it sort of anything you'd call out in December in terms of end marks? Okay, Tim, let me start with that. This is Vivek. So regarding the automotive market, yes, it did grow with said high single digits, around between 7 and 8%. And that was really driven. Most of the growth came from our business in China. I think I mentioned also in the second quarter, we saw strength in China and automotive drove that growth as well.

Speaker Change: Okay.

Speaker Change: Start with that.

Speaker Change: This is <unk> so regarding the automotive market GIC did grow.

Speaker Change: High single digit around between 7% and 8% and that was really driven most of the growth came from our business in China.

Speaker Change: I had mentioned also in the second quarter, we saw strength in China, and automotive drove that growth as well it kind of recur in the third quarter just to give you. Some high level numbers grew 20% in Q2 and another 20% in Q3 I think it's not a surprise that there is momentum for evs in China our content.

Vivek Arya: It kind of recurred in the cellar quarter just to give some high level numbers. It grew 20% in Q2 and another 20% in Q3. I think it's not a surprise that there is momentum for EVs in China. Our content is growing there. And that's what really drove the growth in the cellar quarter. I expect that to, I mean, that I think this is not the one quarter thing. I think there is growing momentum there. Our automotive revenue in China is in an all new time high. So I don't think that goes down in the near future.

Speaker Change: <unk> is growing there.

Speaker Change: What really drove the growth in the in the third quarter I expect that to I mean, I think this is not a one quarter thing I think there is growing momentum there.

Speaker Change: Automotive revenue in China is in an all new time high so I don't think that.

Speaker Change: Goes down in the near future now the rest of the automobile automotive market is different okay. We are seeing.

Vivek Arya: Now, the rest of the automotive market is different. Okay, we are seeing a continued weakness over there. That revenue picked in the cellar quarter of 23. And in general, it's printed down. If I put China aside, it had a quick correction in Q1 or Q4 and Q1. The rest of the markets, I see it continued the weakness. I think that's part of, you know, part of our seasonal forecast for Q4. Yeah, far on ten. I do, yeah. Raphael, so if I look at the guidance, OPEX is usually, I think, down a mid-single digits for December.

Speaker Change: Continued.

Speaker Change: Weakness over there.

Revenue baked in the third quarter of 2003 and in general trended down if I put China. Aside just had a quick correction in Q1 Q.

Speaker Change: Q4, and Q1, the rest of the markets I see a continued weakness I think thats part of.

Part of our.

Speaker Change: Susan.

Speaker Change: Our forecast for Q4.

Timothy Arcuri: Yes, Tim.

Tim: I do yes.

Speaker Change #100: Raphael So if I look at the guidance Opex is usually I think download to mid single digits for December. So if you assume even down mid singles you get gross margin sort of in the mid $50, it's down like 200 basis points stripping out deep appreciation.

Rafael Lizardi: So if you assume even down mid-singles, you get gross margins sort of in the mid-50s. It's down like 200 basis points, stripping out deep, depreciation. So that's a pretty big decline. So I guess are you taking down loadings in December? I do see that, you know, finish because it was up a lot. So if you can talk about that, thanks. Yeah, so a couple of things in your questions. Let me try to address them OPEX. Nothing unusual, but we do expect it to be flat to slightly up. So consider that. As far as a fourth quarter, you know, with revenue at the mid-point decreasing, that takes the hit on margins, of course.

Tim: <unk>, so that's a pretty big decline.

Tim: So I guess, if you are taking down loadings in December I do see that finished goods was up a lot. So if you can talk about that thanks.

Speaker Change: Yes, so a couple of things in your question. So let me try to address them Opex nothing unusual, but we do fully expect it expect it to be flat to slightly up.

Speaker Change: So consider that.

Speaker Change: As far as the fourth quarter.

Speaker Change: With revenue at the midpoint decreasing.

Speaker Change: That takes the hit on on margins of course, so we would expect we do expect gross margins to be down and also depreciation will continue to increase and in fact in October we began depreciating the building and the clean room for SM. One so that continues to put.

Rafael Lizardi: So we do expect gross margins to be down. Also, depreciation will continue to increase. And in fact, in October, we began depreciating the building and the clean room for SM1. So that continues to put that's going to put even more upward pressure on the depreciation in fourth quarter. Thank you. We'll go to the next caller, please. Thank you. Our next question comes from the line of VVAC area with Bank of America's Judy. Please proceed with your question. Thanks for taking my question. Have you, so first, thanks for providing the end market commentary. I think you mentioned personal electronic demand went up.

Speaker Change: That's going to put even more upward pressure on depreciation.

Speaker Change: In fourth quarter.

Speaker Change: Okay.

Thank you and we'll go to the next caller please.

Speaker Change #101: Thank you our next.

Speaker Change #102: Question comes from the line of Vivek Arya with Bank of America Securities. Please proceed with your question.

Vivek Arya: Thanks for taking my question have you.

Vivek Arya: Thanks for providing the end market commentary I think you mentioned.

Vivek Arya: Personnel electronic demand went up I think 30% sequentially is what I recall it was up mid teens in Q2 also how do we square your strength in personal electronics with the more kind of sluggish demand.

Vivek Arya: I think 30% sequentially is what I recall. It was up mid-teens in Q2 also. How do we square your strength in personal electronics with the more kind of sluggish demand that we see for PCs and phones? Is it something outside of those areas, or are those areas doing better? Just what do you attribute this strength in personal electronics? Well, you think the market just, you know, it's just kind of bottom from the Michael perspective. Yeah, I think that's a great question. Let me just work through what we've seen over the last even couple of years.

Vivek Arya: For Pcs and phone does it something outside of those areas or are those areas doing.

Vivek Arya: Better just what do you attribute the strength in personal electronics or do you think the market.

Vivek Arya: It's just kind of bottomed from a cyclical perspective.

Speaker Change #104: Yes, I think.

Speaker Change #105: That's a great question, let me just walk through what we've seen over the last even couple of years, So I mean that revenue.

Vivek Arya: So, I mean, that revenue in the personal electronics market is picked in the third quarter of 2021. By the way, the third quarter is typically our pick quarter every year. There is a seasonality strength and every third quarter for PE. And it dropped in the first quarter of 23. Since then, we have seen continuous improvement. But I will say Vivek at the night, look at our third quarter of 24. It's still running at a lower level than the peak. It's running about 20% lower than the 21 peak. So there is still room to grow. And in our case, as I think I mentioned in some of the calls, when we were shorting with supply capacity back in 21, 22, where we had to take some calls where was to bias our supply towards, you know, industrial and automotive.

Speaker Change #105: In the personal electronics market. It peaked in the third quarter of 2021 by the way the third quarter is typically our peak quarter or every year during the seasonality strength.

Speaker Change #105: Every first quarter.

Speaker Change #105: In a trough in the first quarter of 'twenty three and since then we've seen continuously.

Due to the improvement, but I would say very good and I look at our third quarter with 24, it's still running at a lower level than the peak is running about 20% lower than the 21 peak. So there is still room to grow and in our case as I think I've mentioned in some of the calls.

Speaker Change #105: When we were short in.

Speaker Change #105: Supply capacity back in 'twenty, one 'twenty, two where we had to take some calls.

Speaker Change #105: It was to bias our supply towards.

Speaker Change #105: Industrial and automotive.

Vivek Arya: The personal electronics has a shorter design cycle. We said we'll go attack that once the capacity in inventory out back in place. That's the case right now. So, I think we are coming off of a very low trust. Plus, again, having the right parts to go back and win circuits that we couldn't sell before. So that's what I'm seeing right now. In terms of specifically into the third quarter, I think growth was across all the sectors and most of the sectors. The main ones are phones and notebook PCs. But in general, you know, the third quarter, as I said, is a typical strong quarter for AP.

Speaker Change #105: Personal electronics has a shorter design cycles. We've said, we'll go attack that once their capacity and inventory are back in place that is the case right. Now. So I think we are coming off of a very low trough plus again, having the right part to go back and win sockets that we couldnt sell before so that's what I'm seeing right now in terms of specific.

Speaker Change #105: Turning to the third quarter I think growth was across all the sectors most of the sectors.

Speaker Change #105: The main ones are phones in notebook Pcs, but in general the third quarter as I've said is a typical strong quarter for a follow up vivek.

Vivek Arya: Follow up the deck. Yes, thank you, Dave. So bigger picture question, Vivek is on in the last few calls. You know, there's been a suggestion that perhaps by calendar 26. Ti will, you know, conceptually we close, if not more than what you were in calendar, 22. And people have kind of rightly then pushed back and said, well, that requires mid-team sales growth in the next two years, you know, well above the trend line. At what point do you think you will start to see those above-seasonal quarters to help us, you know, get to that above-trend growth for the next two years.

Thomas O'malley: Thank you Dave So bigger picture question Aviva is on in the last few calls.

There has been a suggestion that perhaps by calendar 2006.

Thomas O'malley: Ti win concept.

Thomas O'malley: Conceptually be close if not more than what you would in calendar 'twenty two.

Thomas O'malley: And people have kind of rightly then pushed back and said well that's quite mid teen sales growth in the next two years well above the trend line at what point do you think you will start to see those above seasonal quarters too.

Thomas O'malley: To help us get to that above trend growth for the next two years I understand youre, not giving guidance, but what are you seeing in the broader end market do you think is at a point where.

Vivek Arya: So I understand you're not giving guidance, but what are you seeing in the broader and markets? And you think Ti is at a point where, you know, those kind of above-seasonal quarters are line of fine or is it too early to make that judgment. Thank you. Yeah, first just to recap on your question, Vivek. Thanks. I think you're referring to our capital management call we had in August, so I just would ask people to look at what exactly we presented there. I think you refer to a 2026 scenario, a set of scenarios that we've presented there from flat to growth versus 2018.

Speaker Change #106: Those kind of above seasonal quarters, our line of sight or is it too early to make that judgment. Thank you. Yes first just a recap on your question Vivek. Thanks.

Speaker Change #107: I think youre, referring to our capital management call, we had in <unk>. So I just would.

Speaker Change #107: As people to look at what exactly we presented there I think you referred to a 2026th scenario.

Speaker Change #107: A set of scenarios that we've presented there.

Speaker Change #107: From flat to growth versus 2018 and.

Vivek Arya: And you know, we didn't say we are predicting what revenue would be, but it allows investors to kind of have a view on free cash over share according to, you know, the revenue scenario. And I think it allows you guys to modulate up or down revenue and know what free cash flow will do during that year. Now, more specifically to your question. Look, the, you know, we talked about three markets that are already in the midst of a cyclical recovery. I think they are not done yet, but they are pointing in the right direction. That's a personal electronics enterprise systems and communication system for us coming from a very low trust, but, you know, showing momentum.

Speaker Change #107: We didn't say we are predicting what revenue would be but it allows the invest those to kind of have a view on free cash flow per share. According to the revenue scenario and I think it allows you guys to modulate up or down revenue and know what free cash flow is due during that year and now more specifically to your question.

Speaker Change #107: Luke.

We talked about three markets that are already in the midst of a.

Speaker Change #107: A cyclical recovery I think they are not done yet, but they are pointing in the right direction.

Speaker Change #107: Personal electronics enterprise systems, and communications system for us coming from a very low trough.

Vivek Arya: And I think that we are in the, you know, in the process of strengthening. Unfortunately, these markets were about 25% of our revenue in 23, and in our case, we really need the broad industrial market and the automotive market to join. OK, so if I go to industrial first, revenue picked in the third quarter of 22. We've seen eight quarters of decline. We are more than 30% down versus the peak. So I don't think the. I hope I can't predict it. I don't think we have a lot left. OK, I think the inventory correction is still ongoing, but I do expect that to start to recover.

Speaker Change #107: Showing momentum and I think that we are in.

Speaker Change #107: In the process of strengthening unfortunately, these market, but about 25% of our revenue in 'twenty three and in our case, we really need the broad industrial market and the automotive market.

Speaker Change #107: Market to join Okay. So if I go to industrial.

Speaker Change #107: First revenue peaked in the third quarter was 22.

Speaker Change #107: We've seen eight quarters of decline.

Speaker Change #107: We are more than 30% down versus the peak.

Speaker Change #107: So I don't think the Idaho I cant predict it I don't think we have a lot left okay. I think the inventory correction is still ongoing but I do expect that to start to recover I cannot predict the quarter equalled usually when we see it we call it.

Vivek Arya: I cannot predict the quarter because usually when we see it, we call it. I will just say we haven't seen it yet, and it's been quite persistent. OK, that's on the industrial side, and I can go even into the sector. Most of the sectors are showing either still searching for a bottom or hovering at a very low level. OK, so it's about time, but we haven't seen it yet on the automotive market. I think it's more complex because this is what we see: a different story between China and the rest of the market. Unfortunately, China is about 20% of our business, so it cannot move the overall automotive number for the company.

Speaker Change #107: I will just say, we haven't seen it yet and it's been quite persistent.

That's on the industrial side and I can go even into the sectors. Most of the effects of showing either is still searching for a bottom all hovering at the very low level. Okay. So it's about time, but we haven't seen it yet on the automotive.

Speaker Change #107: Multi market I think it's more complex because this is what we see a different story between China and the rest of the market. Unfortunately, China is about 20% of our business. So it cannot move the overall automotive number for the company, but I think as I mentioned before we are right now at a lower single digit versus.

Vivek Arya: But I think, as I mentioned before, we are right now at the lower single digit versus the peak, kind of hovering at that minute. Sorry, it's not a lower single digit. I would say upper single digit, but somewhere between 5% to 10% versus the peak on automotive. In China, we have new records being established. And I think there is momentum over there. But the other market or the other geographies, sorry, on automotive are still searching for that bottom. I do expect that it all adds up. Automotive will establish a lower peak to drop cycle. Not close to the industrial side, but I can't give you a precise time for that, Vivek.

Speaker Change #107: The big kind of hovering at my notes.

Speaker Change #107: So it's not lower single digit I would say upper single digit, but somewhere between 5% to 10% versus the peak on automotive in China, We have new records being established and I think there is momentum over there, but the other markets. The other geographies sorry on automotive are still searching for that bottom I do expect.

But it all adds up automotive will establish a lower peak to trough cycle not close to the industrial side, but I can't give you a precise time for that Vivek alright.

CJ: Thank you for that. And we'll go to the next part. Our next question comes from the line of CJ. This was cancer. This was received with your question. Yeah, good afternoon. Thank you for taking the question. I guess first question, you know, bigger picture. I guess, given the cyclical uncertainty. How are you thinking about kind of running utilization rates into Q4 and first half of 25, and as part of that, with inventory at 4.3 billion, are you looking to continue to grow that and elevate utilization or keep it where it is until you really see signs of that cyclical recovery? Would love to hear your thoughts there.

Speaker Change #108: Alright, Thank you Vivek and we'll go to the next caller. Please.

Speaker Change #108: Okay.

Speaker Change #109: Our next question comes from the line of C J Muse with cancer.

Speaker Change #109: Proceed with your question.

Speaker Change #110: Yes, good afternoon, and thank you for taking the question I guess first question bigger picture I guess, given the cyclical uncertainty how are you thinking about kind of running utilization rates into Q4 and first half of.

Speaker Change #110: 25, and as part of that with inventory at $4 3 billion or are you looking to continue to grow that.

Speaker Change #110: And elevate utilization or keep it where it is until you really see signs of that cyclical recovery, we'd love to hear your thoughts there.

CJ: Yeah, I know. Happy to do that. So first bigger picture and then I'll get into maybe some specifics, but the objective for inventory is to support revenue growth as we prepare for the upturn, as I've described in our expectations going forward, particularly in 2025. We do expect to grow inventory in the fourth quarter. So we grew a couple hundred million in third quarter. We expect probably a few hundred million of inventory growth again in fourth quarter. But that is we have moderated the factory loadings of factory loadings expect us to go slightly down going into fourth quarter, but despite that will still grow additional inventory.

Speaker Change #111: Yes, no happy to do that so first bigger picture and then I'll get into maybe some specifics, but the objective for inventories to support revenue growth as we prepare for the upturn as <unk> described in our expectations going forward, particularly in 2025.

Speaker Change #111: Do expect to grow inventory in fourth quarter. So we grew a couple of hundred million dollars in third quarter, we expect probably a few hundred million dollars of inventory growth again in fourth quarter.

Speaker Change #111: But that is we have moderated.

Factory loaded factory loadings.

Speaker Change #111: Those two go slightly down.

Speaker Change #111: Going into fourth quarter, but despite that we will still grow additional inventory.

CJ: Just to comment a little more on the inventory, we have detailed plans by device at the finish goods level at the chips level, and those plans are grounded on purchasing behavior and expected demand. And this inventory is very low risk. It sells to many, many customers and has a long life cycles, so we feel really good, really good about that. That's great. Did you get the following? I do. I would hope to follow up on an audio. You talked about that as a surprise in China. I'm curious if you could speak to Chinese OEMs taking share in Europe.

Speaker Change #111: Just to comment a little more on the inventory we have detailed plans by device at the finished goods level at the tips level and those plans are grounded in purchasing behavior unexpected demand and this inventory is very low risk. It sells to many many customers and he has a long lifecycle. So we feel really good really good about that.

Speaker Change #114: That's great Jay pharma.

I would hope.

Speaker Change #115: I hope to follow up on auto.

Speaker Change #112: You talked about.

Speaker Change #113: That is a surprise in China I'm curious if you could speak to.

Speaker Change #113: Chinese Oems taking share in Europe, that's something that we've kind of picked up and I'm curious, perhaps maybe the data points, we're picking it up in Europe.

Vivek Arya: That's something that we've kind of picked up and curious. Perhaps maybe the data points were picking up in Europe related a little more to share lost there to some of the Chinese OEMs. Are you seeing that? First, I know a surprise. I think not, not a surprise because we've seen that trend starting in Q2. So to me, you know, the automotive market in China for TI, it's again fixed in that end of 23, call it second half of 23. We saw a very sharp correction in Q1. I think it was mainly inventory correction and then a growth in Q2 growth in Q3.

Speaker Change #113: Weighted a little more to share loss there to some of the Chinese Oems are you seeing that.

And I was surprised I think not so not a surprise because we've seen that trend starting in Q2, So to me.

Speaker Change #113: The automotive market in China for Ti again big thing in that.

Speaker Change #113: End of 'twenty three call it second half of 'twenty three.

Speaker Change #113: So a very sharp correction in Q1, I think both of them was mainly inventory correction and then.

Speaker Change #113: <unk> growth in Q2 growth in Q3, 20% on top of 20%. So think about it running it at 45% of the of the Tropicana and <unk> I think that is mainly driven by the China market right. If you think about.

Vivek Arya: It's 20% on top of 20%. So think about it running at 45% of the tropening and a new pick. I think that is mainly driven by the China market. Right. If you think about. I'm just a couple of months ago, most of the new, I think the majority of new cars are EVs, right, of some sort of hybrid, and these tend to have more content. And again, our position there is good; the TI is very competitive, so I think that drives growth. Now, our customer base in China is a set of OEMs that also T01, and you guys know the OEMs sharing the experts there, but the T01s, also I think they are, they can build systems, they are very efficient in cost, performance is pretty good, so I think they also complete full market just versus the world by T01s, and I think the spot of the dynamics we see in the China market, we see momentum on both.

Speaker Change #113: I was just there.

Couple of months ago, most of the new I think but now majority of new cars are evs right or some sort of hybrid.

Speaker Change #113: We have more content.

Speaker Change #113: And again our position there is good that <unk> very competitive so I think that price growth now our customer base in China is a set of.

Speaker Change #113: Oems that also tier one and you guys know the OEM sharing.

Speaker Change #113: There but.

Speaker Change #113: The ones that also I think are they are.

Speaker Change #113: They can build those systems they are very efficient in cost.

Performance.

Speaker Change #113: Pretty good so I think they also compete for market share versus the world by tier ones and I think thats part of the dynamics, we see in the China market, we see momentum on both.

Vivek Arya: Thank you. Next color, please. Thank you. Our next question comes from Alina Ross; see more with Deutsche Bank. Please proceed with your question. Hi guys, thanks for asking a question. You talked a couple times about China going up 20% sequentially, two quarters in a row. Is there any reason that the other 80% of the business shouldn't have that sort of a cyclical rebound at some point? Is there something that's unique about China that allows it to be more volatile, or is the expectation that you would have that the other 80% of your business at some point in time should do the same thing.

Speaker Change #113: Thank you.

Speaker Change #113: Okay.

Speaker Change #116: Next caller please.

Speaker Change #117: Thank you. Our next question comes from the line of Ross Seymore with Deutsche Bank. Please proceed with your question.

Ross Seymore: Hi, guys. Thanks for asking a question.

Ross Seymore: You talked a couple of times about China going up 20% sequentially two quarters in a row is there any reason that the other 80% of the business shouldnt have that sort of a cyclical rebound at some point is there something thats unique about China that allows it to be more volatile or is the expectation that you would have at the other 80% of your business at some point in time should do the same thing.

Vivek Arya: First, I think it's some part of time; all the horses will, you know, point in the same direction, and we all are waiting for that. It's been a while, but I think that happened. Again, I think on its behavior, it's so clear to us; you can see an opposite behavior between geography, between markets. I would say that again, as we talked about in the previous response. So, my previous answer, there is a stronger EV momentum in China. On top of it, I think the China political culture, the environment is the design cycles are quick, inventory corrections are quick, so there is a little bit of everything is more accelerated, I would say.

Speaker Change #118: First I think at some point of time older horses will lift pointed the same direction and we all are waiting for that.

Speaker Change #118: It's been awhile, but I think that happened again say synchronous behavior.

Speaker Change #118: So clear to US you can see an opposite behavior.

Speaker Change #118: Queen geographies between markets I will say that again.

Speaker Change #118: As we talked about the previous their response so my previous answer there there is.

Speaker Change #118: A stronger momentum in China.

Speaker Change #118: Top of it I think the China.

Speaker Change #118: <unk> culture of call. It the environment is the design cycle. So quick inventory corrections are quick. So there is a little bit of everything is more accelerated I would say over there and I think thats why we are seeing shorter cycle in terms of the way up the way down.

Vivek Arya: Over there, and I think that's why we're seeing shorter cycles in terms of the way up, the way down; that would be my guess. But I think we'll all be able to be smarter only when that thing is done or played out completely. All I can say is that I've not seen the played out completely on the automotive market outside of China. But I don't think, again, I don't think the pick to throw on the automotive market is going to be as pronounced as industrial simply because the secular growth over there, I believe, is stronger in the short term.

Speaker Change #118: Would be my guess, but I think we will all be able will be smarter only when that thing.

Speaker Change #118: He's done all played out completely all I can say that I've not seen played out completely on the automotive market.

Speaker Change #118: Outside of China.

Speaker Change #118: But I don't think again I don't think the peak to trough on the automotive market is going to be us.

Speaker Change #118: Pronounced as industrial simply because of the secular growth over there.

Speaker Change #118: Believe it's stronger in the short term.

Rafael Lizardi: Yeah. Yeah, I do one for Raphael on the OPEX side of things, just a conceptual question. We look into 2025; what would be the puts and takes on OPEX? And I guess the punchline is, you guys have kept OPEX in certain periods of time, barely growing year over year, and other years inflation has been something you guys have had to endure as well. So how do we think about OPEX kind of structurally in 2025? Yeah, in fact, for 25 and beyond, the way to think about it is we continue to have a discipline process, as you alluded to, on our investments and our OPEX.

Speaker Change #121: A follow on Ross.

Speaker Change #119: Yes, I do one for Raphael.

Speaker Change #120: Opex side of things just a conceptual question as we look into 2025.

Speaker Change #120: B the puts and takes on Opex and I guess the punch line is you guys have kept opex in certain periods of time barely growing year over year and other years inflation has been something that you guys have had to endure as well. So how do we think about opex kind of structurally in 2025.

Speaker Change #122: Yes in fact 425 and beyond the way to think about it is we continue to have a disciplined process as you alluded to on our investments and our opex, but when it comes to R&D will continue to invest there so youll see our investments grow AUM.

Rafael Lizardi: But when it comes to R&D, we'll continue to invest there, so you'll see our investments grow over time and continue to grow. Whereas in SGNA, the focus there is efficiency, so continue to drive efficiency. So there they probably grow, but at a much lower base than R&D. And of course, revenue; the goal is for both of those to be under the revenue growth for the foreseeable future. Thank you, Roger. Thank you, Ross. And we'll go to the next color, please. Thank you. Our next question. It comes with a line of Stacy Raizyd with Burns Dean Research.

Speaker Change #122: Over time and continuing to grow.

Whereas in SG&A. The focus there is efficiency so continuing to drive efficiency. So there.

Speaker Change #122: It will probably grow but.

Speaker Change #122: Much lower base than R&D and of course.

Speaker Change #122: Our revenue the goal is is.

Speaker Change #122: For both of those to be under the revenue growth for the foreseeable future.

Speaker Change #123: Great. Thank you, Rob and we will go to the next caller. Please.

Speaker Change #124: Thank you. Our next question comes from the line of Stacy.

Stacy Rasgon: Please proceed with your question. Hi guys. Thanks for taking my question. I wanted to drill a little bit more into that China strength. So you're seeing it in auto. Are you seeing any signs of like China strength in analog or anywhere else in any other end market? Is it just completely focused on auto? I guess what I'm getting at is I'm trying to judge the propensity of some of the Chinese guys maybe to be buying more. We've got an election coming up. Nobody exactly knows what's going on with the general geopolitical environment. What do you think more broadly in China, both in and outside of auto?

Speaker Change #124: Bernstein Research. Please proceed with your question.

Speaker Change #125: Hi, guys. Thanks for taking my question I wanted to drill a little bit more into that China strength youre seeing it in auto are.

Are you seeing any signs of like China strength in analog or anywhere else in any other end market is it just completely focused on automotive at this point.

Speaker Change #125: What I'm getting at is I'm trying to judge the propensity of some of the Chinese guys. Maybe you could be buying more we've got an election coming up and nobody exactly knows what's.

Speaker Change #125: Going on with the general geopolitical environment, just what are you seeing more broadly in China, both in and outside of auto.

Stacy Rasgon: Yes, Stacy, I can tell you what we see. And again, I, it's helping to speculate behind beyond what we see. But in general, just a reminder, as I said, during the upcycle, we had to buy us our supply into the industrial and automotive market. So clearly, I think we said the company was at about 75% in industrial and automotive in 2023. China was similar, maybe even higher because we had to take some calls on the consumer P side. So just to know where we're starting from. So you know the motive. I think it's as I said before; I can't I can't tell you the reason for that.

Speaker Change #126: Yes, thanks for the I can tell you, what we see and again I E.

Speaker Change #126: It's hard to speculate beyond what we see but in general just a reminder, as I said during the upcycle, we head too.

By us our supply into the industrial and automotive markets. Okay. So clearly.

Speaker Change #126: And I think we said the company was at about 75%.

Speaker Change #126: <unk> automotive in 2023, China was similar and maybe even higher because we had to take some calls on the on the.

On the consumer side, so just to nowhere, we're starting for France. So in automotive I think is as I said before I can I can tell you the reason for that but I think part of it.

Stacy Rasgon: But I think part of it is the I think the China customers are fast moving. I think they are gaining momentum worldwide, not only in China. The second thing is I think it's acceptance of views in China. And there may be some other reasons, as you have mentioned, but we have not seen a clear evidence for that. Of a very large inventory buildup or anything like that. That's on your direct question of automotive. On the industrial side, we have not seen China recovering from the cycle yet. So we again, we it has picked somewhere in 2022 in China, included.

Speaker Change #126: <unk>.

Speaker Change #126: I think the China customers.

Speaker Change #126: Our fast moving.

Speaker Change #126: I think they.

Speaker Change #126: They are gaining momentum worldwide not only in China. The second thing is I think its acceptance of <unk> in China and there may be some other reasons as you have mentioned, but we have not seen a clear evidence for that okay of a very large inventory buildup or anything like that.

Speaker Change #126: First on your direct question with automotive.

Speaker Change #126: On the industrial side, we have not seen China recovering from the cycle yet so we again it is.

Speaker Change #126: Peak somewhere in 2022 in.

Speaker Change #126: In China included and since then it has.

Stacy Rasgon: And since then, you know, it had a little bit of a sequential growth in YouTube. But then it went down again in Q3. So kind of hovering at the bottom. That's the way I would describe it. So we are waiting for that to happen. We have seen a very strong recovery; you know, the motive actually within you high. But the industrial numbers are still trending, you know, about 40% or so, maybe even hiring China versus the peak. So a lot of work for us to do in China. I don't think I think it's just, you know, I think customers, as we said in my, as I said in my prepared remarks, are still working through some inventory over there on the industrial side.

Speaker Change #126: Little bit of a sequential growth in Q2, but then it went down again in Q3, so kind of hovering at a bottom that's the way I would describe it.

Speaker Change #126: So we are waiting for that to happen, we have seen a very strong recovery in automotive actually with a new high but the industrial numbers are still trending about 40% or so maybe even higher in China versus the peak. So a lot of work for us to do in China.

Speaker Change #126: I don't think I think it just.

Speaker Change #126: I think customers as we've said and as I said in my prepared remarks, we're still working through some inventory.

Speaker Change #126: They're on the industrial side and maybe just to add add one thing when you look at safety. The other three markets that are cyclically recovering personal electronics comms and entertainment all of the regions are growing and contributing to that.

Stacy Rasgon: And maybe just add one thing. When you look at the space, is the other three markets that are cyclically recovering: personal electronics, comes and entertainment. All of the regions are growing and contributing to that. Yeah, that in China included, right. But again, all of a very low number, if you will, in 23 countries. I do. Thank you. I know you guys don't guide two quarters ahead, but just mathematically, you know, we've been sort of looking at performance versus normal seasonality. How would you guys define typical seasonality for Q1? And maybe, like, what is it over the last seven years?

Ana included right, but again, although of a very low number if you will in 'twenty three contract.

Speaker Change #127: I do thank you.

Speaker Change #128: I know you guys don't guide to quarters ahead.

Speaker Change #129: Welcome Natalie.

Speaker Change #130: We've been sort of looking at outperformance versus normal seasonality, how would you guys define typical seasonality for Q1.

Maybe like what is it over the last several years and how would you define it like versus like pre.

Operator: And how would you define it like versus like preco? So maybe I'll talk about Q4, Stacy, and you know, some people, depends how you define seasonality. I like the way you do it; you know, you kind of need to take the outliers away, and I think 2020 and 2021 were the outliers doing the off-site. And then typically in the fourth quarter, we see kind of a minus 7 to even sometimes close to minus 10. Dave, the Q11, can you add what's, or... Yeah, it's more; it's usually more flat, it's more flatish, maybe down a little bit, but fourth quarter and first quarter are definitely our seasonally weaker quarters.

Speaker Change #130: Pre COVID-19 levels.

Speaker Change #131: So maybe I'll talk about Q4 as Stacey.

Speaker Change #131: Some people.

Speaker Change #132: Depends how you define a seasonality I like the way you do it you kind of need to take the outliers away and I think 2020 in 2021, where the outlier doing the uptake and then typically in the fourth quarter, we see kind of a minus 7% to even sometimes close to minus 10.

Speaker Change #132: David Q1, once you add or.

Speaker Change #133: Yes, it's more essentially more flat.

Speaker Change #132: More flattish, maybe down a little bit but.

Speaker Change #132: Fourth quarter and first quarter are definitely are seasonally weaker quarters second and third are obviously the stronger quarters.

Operator: Second and third are obviously the stronger quarters. Okay, thank you guys. Okay, let's call it please. Thank you. Our next question comes from the line of Thomas O'Valley with Bartley. Please proceed with your question. Hey, thanks for taking the question. Haviv, I just wanted to clarify some comments you made in the preamble. You kind of talked about the three markets: enterprise, he income, still correcting, but showing momentum, so not finished, but showing some progress. Are those still sequentially declining, or are one or two of those actually coming off of the bottom and improving? No, I think all three are sequentially growing in a fast pace, so I think I just repeat the numbers.

Speaker Change #134: Okay. Thank you helpful. Thank you guys. Okay next caller please.

Speaker Change #135: Thank you. Our next question comes from the line of Thomas O'malley with Barclays. Please proceed with your question.

Hey, Thanks for taking the question have you, but I just wanted to clarify some comments you made in the preamble you kind of talked about the three markets enterprise E com still correcting, but showing momentum so not finished but showing some progress are those still sequentially declining or are one or two of those actually coming off of the bottom and improving.

Speaker Change #136: No I think all three are sequentially.

Speaker Change #137: Growing in a fast pace, so I think that just to repeat the numbers.

Haviv Ilan: I think PE grew 30% sequentially, and enterprise grew 20% sequentially, and comms grew 25% sequentially. My point is that they are still not at the previous peak. Okay, so to me, when I think about momentum, I think I expect momentum to continue to build. I think we are still running below the previous peak that was somewhere in the year 2022, and I expect that momentum to continue. I think also, as I mentioned before, specifically for TI, these are the markets where we were, in some cases, short in the previous upcycle. And it's our job to go back and address these markets now when we have enough supply and inventory, okay?

Speaker Change #137: Think p/e grew 30% sequentially and enterprise grew 20% sequentially and Com grew 25% sequentially My point is that.

Speaker Change #137: They are still not at the previous peak, Okay. So to me when I think about the momentum I think I expect momentum to continue to build I think we are still running.

Speaker Change #137: Below the previous peak somewhere in that mid year 2022.

Speaker Change #137: I expect that momentum to continue I think also as I've mentioned before specifically for Ti. These are the markets, where we were.

Speaker Change #137: In some cases short in the previous up cycle and it's our job to go back and address the sockets now when we have enough supply and inventory okay.

Haviv Ilan: Thank you for clarifying. Yeah, and then just broadly, kind of during the pandemic, you saw a lot of growth, and I think most of your peers and yourself started being more vocal about describing both auto and industrial as double-digit growers. So, as this kind of correction continues, you're seeing the string from China in your auto business, and obviously that's a part of the broader business that contributes to that double-digit growth. But looking back now, and as you see the recovery, would you think any differently about the growth profiles of those two businesses? You obviously have your competitors coming up in a couple weeks, kind of going to restate their long term CAGRs as well.

Speaker Change #138: Thank you for clarifying.

Speaker Change #138: And then.

Speaker Change #139: Just just broadly kind of during the pandemic you saw a lot of growth and I think most of your peers and yourself started being more vocal about describing both auto and industrial is a double digit grower. So as this kind of correction continues youre seeing the strength from China in your auto business and obviously, that's a part of the broader business and contribute to that double digit growth but.

Looking back now and as you see the recovery what do you think any differently about the growth profiles of those two businesses. You. Obviously have your competitors coming up in a couple of weeks kind of going to restate their long term CAGR as well do you still see that double digit growth profile is the right way to look at those two businesses.

Haviv Ilan: Do you still see that double-digit growth profile as the right way to look at those two businesses? Yeah, and again, the short answer is yes. I see the same. I will say that it's even the current cycle on the automotive side is proving it, and I think we will all see that in a short term. And I talk about short term; it's five, five to ten years. I think the growth in industrial is multi-decades. I think we are on this in some of the call it sectors in industrial. We're only in the very, very beginning or early innings.

Speaker Change #139: And again.

Speaker Change #140: The short answer is yes, I see the same I will say that even the current the current cycle on the automotive side, you're improving it and I think we will all.

Speaker Change #140: See that in the short term and I talk about short term is five five to 10 years I think the growth in industrial is multi decades I think we are on these in some of the.

Speaker Change #140: Call it.

Speaker Change #140: Sectors in industrial we are only in the very very beginning early innings. So I think the industrial I don't know, if we say double digit, but I think ti.

Haviv Ilan: So I think the industrial, and I don't know if we say double digit, but I think TI grew 10% in the last decade, 2013 to 2023. I think the market date may be a little bit lower than that. I would guess, but call it high single to maybe 10% would be a good guess. I think the automotive market, 40, and also for the market grew faster, but I think it's going to be, you know, I don't think it's going to run multiple decades. Okay, at a certain point of time, there is going to be kind of some sort of saturation in terms of content per vehicle.

Speaker Change #140: <unk> grew 10% in the last decade 2013 2023.

Speaker Change #141: Thank you.

Speaker Change #142: A market that may be a little bit lower than that I would guess, but call it high high.

Single to maybe 10% would be a good guess I think the automotive market for Ti and also for the market grew faster.

Speaker Change #142: But I think it's going to be.

Speaker Change #142: I don't think he's going to run multiple decades, okay to a certain point of time, there is going to be.

Speaker Change #142: Some some sort of saturation in terms of content per vehicle I don't think we are close to that.

Haviv Ilan: I don't think we are close to that date now, specifically not in these decades. Hopefully that helps. Thank you, Tom, and we'll go to the next caller, please. Thank you. Our next question comes from the line of Joe Moore; we work with Danny. Please, we'll see what your question is. Great, thank you. I wonder if you could help characterize industrial, and I know you've talked about the various sub-segment underneath of that, but is there an inventory correction that's uniform? Are there areas of strength and just any sense of inventory versus demand issues that are kind of dragging that business down?

Speaker Change #142: Now specifically not in this decade, hopefully that helps.

Speaker Change #143: Thank you Tom and we'll go to the next caller. Please.

Thank you.

Speaker Change #144: Our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed with your question.

Joe Moore: Great. Thank you I Wonder if you could help characterize industrial and I know you've talked about the various sub segments underneath of that but is it is there an inventory.

Joe Moore: Sorry correction thats uniform or there are there areas of strength and just any sense of inventory versus demand issues that are kind of dragging that business down.

Joe Moore: Yeah, Joe, a great question. I mean, I think we have more than 10 sectors, about 12 sectors in industrial, and the overall they all add that up to a continuous decline since the cell quarter of 22. So it's the eighth quarter of decline. We are seeing most of the sectors I would characterize are found at bottom, but are kind of hovering at that bottom. Okay, and think about areas for us. Building automation, the energy infrastructure, medical, kind of hovering at that bottom. On factory automation, we are seeing Steve, and it's a large sector for us.

Speaker Change #145: Yes, Joe a great question I mean, I think we have more than 10 sectors of our 12 sectors in the industrial and the.

Speaker Change #145: The overall, they all add up to.

Speaker Change #145: A continuous decline since the third quarter was 22, so it's the eighth quarter of decline.

Speaker Change #145: We are seeing most of the sectors I would characterize our have found a bottom, but I'll kind of hovering at that bottom okay and.

Speaker Change #145: And thinking about areas for us like building automation to energy infrastructure.

Speaker Change #145: Medical.

Speaker Change #145: Kind of hovering.

Speaker Change #145: At the bottom.

Speaker Change #145: Factory automation.

Speaker Change #146: We are seeing Steve and it's a large sector for US you can think about factory automation and motor drive all of these.

Joe Moore: You can think about factory automation and water drive. It's all this process and factory automation type of plants. We are still seeing a decline. So they have not found a bottom. And then you see a couple of strengths areas, appliances; some people don't have it in industrial. We do appliances decline very early, and we've seen some recovery there. And I would also add, in our case, we have power delivery, power delivery. Think about it, the main market is silver, right. So that's the bottom of the rack. So we see growth over there. But this is the only two out of 12.

Speaker Change #146: Process and factory automation type of.

Speaker Change #146: Plants, we are still seeing a decline so they have not found a bottom and then you see a couple of strength areas appliances. Some people don't have it in there.

Speaker Change #146: In industrial we do.

Speaker Change #146: Appliances declined very early and we have seen some recovery there.

Speaker Change #146: I would also add in our case, we have power delivery power delivery think about it the main market silver right, though that states have the bundle of Iraq. So we see growth over there.

Speaker Change #146: But these are the only two out of 12, the overall weakness.

Joe Moore: So overall weakness in the industrial market; hopefully that provides more color. If I want to. Yeah, I do. That's helpful. Thank you. In terms of analog versus embedded. I know, you know, there's a that's been happening for a while that embedded has underperformed. And there's a focus on kind of turning that around around the narrow narrow or focus area. I wonder if you could just characterize, you know, what's different about the embedded market on a sequential basis that's weaker. Yeah, I started strategically. I we are very pleased with the progress we are seeing in embedded. You know, embedded is more think about is higher, you please.

Speaker Change #146: In the industrial market hopefully that.

Speaker Change #146: To provide more color.

Speaker Change #146: Our onshore.

Yeah. That's helpful. Thank you.

Speaker Change #146: We have analog versus embedded.

Speaker Change #146: No.

Speaker Change #147: That's been happening for a while then embed it has underperformed and Theres a focus on kind of turning that around around scenario narrow narrower focus area I wonder if you could just characterize whats what's different about the embedded market on a sequential basis.

Yes ill start strategically we are very pleased with the progress we are seeing an embedded.

Speaker Change #147: With embedded is more think about these higher IOP than more visibility I would say on designing 50, plus broad so when we look at the progress when we look at momentum with customers I think it's.

Joe Moore: And more visibility, I would say, on designing. So when we look at the progress, when we look at momentum with customers, I think it's we are excited about the future. And you know, they are going through a cyclical process exactly like the analog team has done, but they are kind of a year later. So again, embedded is almost 95% industrial and automotive. They've seen growth in 2023 versus the industrial business versus the annual business that decline double digits. So they started almost a year after. And I think about kind of middle of 23. We've seen four quarters.

Speaker Change #147: And we are excited about the future.

Speaker Change #147: <unk>.

Speaker Change #147: They are going through a cyclical.

Speaker Change #147: Our process.

Speaker Change #147: Exactly like.

Speaker Change #147: The analog team has done but they are kind of a year later, so again embedded is almost 95% industrial and automotive.

Speaker Change #147: <unk> growth in 2023 versus the industrial business versus the animal business the decline double digits. So they started almost a year after analog to think about kind of middle of 'twenty three and we have seen four quarters. I think they are also looking at the seasonal quarter in Q4, but.

Joe Moore: I think they're also looking at the seasonal quarter in Q4. But momentum there is strong, and I'm excited about the future there. Thank you. We'll go to the next caller, please. Thank you. Our next question comes with a line of William Stein with two of the securities. Please receive two questions. Great. Thanks for taking my question. I think earlier on the call. The question was asked that Haviv used answered it for one or two end markets, but I'm hoping you can talk about how the pacing of orders progressed in the last couple of months. I wonder if you might have seen things accelerate to then only decelerate.

Speaker Change #147: Momentum there is strong and I'm excited about the future there.

Speaker Change #148: Okay. Thank you.

Speaker Change #149: We'll go to the next caller please.

Speaker Change #150: Thank you. Our next question comes from the line of William Stein with <unk> Securities. Please proceed with your question.

William Stein: Great. Thanks for taking my question I think earlier in the call.

William Stein: The question was asked.

William Stein: You just answered it for one or two end markets, but I'm, hoping you can talk about how the pacing of orders progressed in.

William Stein: In the last couple of months I Wonder if you might have seen things accelerate to then only.

William Stein: If there's been any sort of ups and downs that have surprised you, and then I have a follow-up, please. Yeah, I think we, what I said about the third quarter, I think you, you know, think about it as not a lot of change that I see right now going into the fourth, but there is, it's you four, right? So there is a seasonality effect. In that sense, I don't see any change versus what we've seen in Q3. If we have, if we would see something, I would call it out, but I cannot call out anything.

William Stein: Decelerate if theres been any.

William Stein: Yes.

William Stein: Sort of ups and downs that has surprised you and then I have a follow up please.

Speaker Change #151: Yes, I think what I said about the third quarter.

Speaker Change #151: Thank you.

Think about it there's not a lot of change that I see right now going into the fourth but it's Q4 right. So there is a seasonality effect in that sense I don't see any any change versus what we've seen in Q3. If we have if we would see something I would call it out.

But I cannot call out anything Dave you want to add anything about whether or not yes in order rates.

William Stein: Maybe we want to add anything on the order or order rates. I think for behaved normally that they increased each month and the quarter, which is very typical. So I wouldn't see any large drop-offs or acceleration or deceleration on that front. And Bill, maybe just wait on that reminder that we have built good service levels of inventories. Raphael mentioned that our lifetimes are very low. So we get a lot of business kind of real time. As it comes, people will call it Turn business. So we simply don't have a ton of visibility right now. And customers also, they take parts only when they need it.

Speaker Change #151: Thank for behave normally.

Dave Pahl: They increased each each month in the quarter, which is very typical so we didn't see any large drop offs or acceleration or deceleration on that front and bill maybe just to wait on that.

Dave Pahl: Just a reminder, that we have built a good service levels of inventories Rockwell mentioned, our lead times are very low so we get a lot of business kind of real time as it comes.

Dave Pahl: People, who call it turn business or so.

Dave Pahl: So we simply don't have a ton of visibility right now and customers also they take parts only when they need it I don't think they are building inventory.

William Stein: I don't think they are building inventory. So that's the reason that they cannot provide more color beyond what they said. Yeah, if I can follow up, it's actually tough tails with the fall on, which is, you know, when you all have inventory, you know, your customers may not be all charged up about placing comes back log, and when they have inventory, you know, even more so. Our checks recently have revealed that customers have more inventory than many suppliers thought like what they were, they were not sort of really close to the end of the inventory digestion at end customers.

Dave Pahl: That's the reason that we cannot provide more color beyond what they've said.

Dave Pahl: Yes.

Speaker Change #152: Yes, I can a follow up it actually dovetails with the follow on which is.

Speaker Change #153: When when you all have inventory.

Speaker Change #153: Your customers may not be.

Speaker Change #153: All charged up about placing comes backlog and when they have inventory even more so.

Our checks recently revealed that customers have more inventory than many suppliers thought.

Speaker Change #153: Sure.

Speaker Change #153: Not.

Speaker Change #153: Really close to the end of the inventory digestion and customers and I Wonder if you could either dispel that or provide any any insight at TICC. Thank you.

William Stein: And I wonder if you could either dispel that or provide any insight as TIC. Thank you. Yeah, I'll just answer in a high level, and maybe you can join me in, but look, in general, we don't have visibility into our customer inventory levels. I do think, as we all know, I mean, interest rates are high at the end of the year. I don't think there is a lot of desire to build inventory with our customers' shelves, especially when our inventory position is strong. And that's where we want to be. We want to take that burden away from our customers to us; that that means level of service, and we want to do it through not only the down cycle, but also the up cycle.

Speaker Change #153: Yes.

Speaker Change #154: Answer at a high level and Dave maybe you can you can chime in.

Speaker Change #155: Look in general we don't have visibility into our customers' inventory levels I do think as we all know interest rates are high at the end of the year I don't think there is a lot of desire to build inventory at our customers.

Speaker Change #154: <unk>, especially when our inventory position is strong and that's what we want to be.

Speaker Change #154: We want to take that burden away from our customers to us that means level of service and we want to do it through not only the down cycle, but also the up cycle and the preparation of our capacity and inventories Rockwell said, that's the game we want to play in the next upcycle.

William Stein: And the preparation of capacity and inventory is, Rafael said, that's the game you want to play in the next up cycle. And that's what drives a capital allocation decision. Do they have anything specific about the customer? Yeah, I think I think the inventory you made that were essentially operating from a very healthy position on inventory. That means that customers don't have to place orders and that that that is keeping visibility low, but we want we want to be able to be ready for the up to. When it comes. Yeah, many of our lifetimes are well below 10 weeks today.

And Thats what drives our capital.

Speaker Change #156: The allocation decision, Dave anything specific about customer yes.

Dave Pahl: The inventory you made.

Speaker Change #156: We are essentially operating.

Speaker Change #156: From a very healthy position on inventory that means that customers don't have to place orders.

Speaker Change #156: And that.

Speaker Change #156: That is keeping.

Speaker Change #156: Visibility low, but we want we want to be able to be ready for the upturn when it when it comes there are many of our lead times are well below 10 weeks today. So I mean, we provide I call it excellent customer service and when customers need the part we haven't.

William Stein: So, I mean, we provide I call it extra and customer service, and then customers need the part we have it for them. Right, thank you. Well, we'll go to our last, last caller, please. Thank you. And our last question comes from the line of tours, Amber with People. Please receive with your questions. Yes. Thank you for squeezing me in. I had a follow-up question from the industrial market. Obviously. You know, the times are short and you know, you have inventory. But I'm just wondering from an end market or a self perspective. If it's fair to say that that market is stabilizing, is it getting worse?

Speaker Change #157: Alright, Thank you will and we'll go to our last the last caller. Please.

Speaker Change #158: Thank you Andrew.

Speaker Change #158: Last question comes from the line of.

Speaker Change #160: <unk> with Stifel. Please proceed with your questions.

Speaker Change #161: Yes. Thank you for squeezing me in.

Speaker Change #161: I had a follow up question is on the industrial market.

Speaker Change #160: Obviously.

Speaker Change #160: Lead times are short and.

Speaker Change #160: You had inventory I'm, just wondering from an end market or a sell through perspective.

Speaker Change #163: Is it fair to say that that market is stabilizing is it getting worse is it I know you've called out those two segments that are perhaps starting to stabilize but any any further read on the end consumption they are actually getting better or worse.

Operator: I know you called out those two segments that are perhaps starting to stabilize, but any further read on the end consumption, they're actually getting better or worse. Yeah, just what I just to repeat. Thanks for the question. Just repeating what I said, I think most of the sectors. Are hovering because we've seen like three or four quarters hovering at the same level more. So, okay, so I would say now you call it, is there an inventory correction there or not. I mean, seasonality would say that, you know, industrial would grow, for example, in Q2 or Q3, and he didn't.

Speaker Change #164: Yes, just what I just to repeat alright. Thanks for the question and repeating what I said I think most of the sectors.

Speaker Change #164: Javier.

Speaker Change #164: <unk>, because we feel like three or four quarters hovering at the same level more or less okay. So I would say you call. It is there an inventory correction, there or not I mean seasonality would say that.

Speaker Change #164: Yeah.

Would grow for example in Q2 or Q3 any dividend. So you can argue that there is some inventory correction that customers in that.

Operator: So, you know, you can argue that there is some inventory correction and customers, and that's the reason for my prepared remarks. But at least I do believe that they have stabilized from a revenue perspective. I will say that the only and these are lots; you know, sectors for TI. I will say that this is not done on the faculty automation and world right, which is kind of this automation sector for TI. That was my only other color that I've editor in, and I don't know where they've anything to add here. I think that's good. Okay.

Speaker Change #165: For my prepared remarks.

Speaker Change #164: But at least there.

Speaker Change #164: I do believe that they have stabilized from a revenue perspective.

Speaker Change #164: I will say that the only in this large sector 40, I will say that this is not done on the factory automation and motor drive, which is kind of this automation sector for Ti.

Speaker Change #164: That was my only other color the editorial and I don't know where they are.

Anything to add here I think that.

Operator: Yeah, just one last question. So, going back to the topic about visibility orders and sort of so forth, when you talk to your customers, especially some of your non-Chinese customers, is there a sense that everyone's just waiting for. Or, you know, rights to come down getting through the US election, but it does feel like there's like some sort of a capping cycle coming, but everyone's just waiting on the sidelines. When you talk, when you talk to some of your biggest industrial customers, do you get a sense that they're waiting for that, or is this more just about, hey, you know, once what once a spending comes back with better rates and sort of so forth, we're sure to back to the races.

Speaker Change #164: Sure.

Speaker Change #166: Yes, just one last question, so going back to the topic about visibility orders and so on and so forth when you talk to your customers.

Speaker Change #167: Actually some of your non Chinese customers.

Speaker Change #168: Is there a sense that everyone is waiting for rates to come down and getting through the U S election does it does it does.

Just feels like there's like some sort of the capex cycle coming but everyone's just waiting on the sidelines. When you when you talk to some of your biggest industrial customers do you get a sense that they are waiting for that or is this is more just about hey.

Speaker Change #168: Once.

Speaker Change #168: Months.

Speaker Change #168: Spending comes back with better rates and sort of soap with we're sort of back to the races.

Haviv Ilan: Sure, answer is no, we don't. I don't hear that, at least I don't think. If they think that, they would tell me anyhow. But what I think is important to remember, and I think they value that because I hear it from the meetings I have, that when they need it, we have it. Okay, and we are, you know, most of our portfolio is very diverse, long lived, and we let the customers know what, where we have enough inventory to serve them as they needed. And when, you know, there are more kind of quality unique and smaller part of our portfolio, but the little time that we longer and we require more visibility.

Speaker Change #169: Short answer is no. We don't we don't I don't hear that at least I don't I think if they think that they would tell me anyhow, but what I think is important to remember and I think they value that because I hear it from the meetings I have that when they need it we have it okay and we are most of our portfolio.

Speaker Change #168: Very diverse.

Speaker Change #168: Long leave and we let the customers know.

Speaker Change #168: What where we have enough inventory to serve them as they need it and when they are more kind of call. It unique.

Speaker Change #168: The smaller part of our portfolio, where the lead times are longer and we require more visibility I think we are differentiated in that sense customers. Appreciate it and hopefully we can maintain that level of support through the.

Haviv Ilan: I think we are differentiated in that sense; customers appreciate it, and hopefully we can maintain that level of support through the next cycle and, you know, work on our market share. I think that that is what customers expect, and I think the eye can outperform in that. Okay, so let me wrap it up and with what we've said previously. At our core, we are engineers and technology is the foundation of our company, but ultimately our objectives and the best metric to measure progress and generate value for owners is the long-term growth of free Tesla per share.

Speaker Change #168: The next cycle and work on our market share and I think that that is what customers expect and I think ti can outperform in that sense.

Speaker Change #170: Very helpful. Thank you.

Speaker Change #171: Okay. So let me wrap it up and with what we've said previously at our core we are engineers and technology are the foundation of our company, but ultimately our objective and the best metric to measure progress and generate value for owners is the long term growth of free cash flow per share, while we strive to achieve our objective will continue to pursue our three ambitions.

While we strive to achieve our objectives, we will continue to pursue our three ambitions. We will act like owners; we will own the company for decades. We will adopt and succeed in a world that's ever changing. And we will be a company that we are personally proud to be proud of and would want as our neighbor. When we're successful, our employees, customers, communities, and owners all benefit. Thank you, and have a good evening.

We will act like owners, who will own the company for decades, we will adapt and succeed in a world that's ever changing and we will be a company that we are personally proud to be part of and would want as our neighbor. When we are successful our employees customers communities and owners all benefit.

Speaker Change #171: Thank you and have a good evening.

Speaker Change #172: And this concludes today's conference you may disconnect your lines.

Speaker Change #173: Thank you for your participation.