Q1 2026 Microchip Technology Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the micro Chief q1 fiscal 2026 Financial results conference call at this time, all lines are in less than only mode.
Following the presentation, we will conduct a question and answer session.
If at any time during this, call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 7th, 2025. And I would now like to turn the conference over to Mr. Steve, sanghi, thank you, please. Go ahead.
Thank you, operator, and good afternoon everyone.
During the course of this conference call, we will be making projections and other forward-looking statements regarding future events or the future financial performance of the company.
We wish to caution you that such statements of predictions.
And that actual events or results May differ materially.
We refer you to our press releases of today.
As well as our recent filings with the SEC.
That identify important risk factors that may impact microchips business and results of operations.
In attendance with me today, a rich Simon SEC microchip. Co
Eric Beyond hold microchip CFO.
And Sajid dowi microchips head of investor relations.
I will provide a reflection on our fiscal first quarter 2026 Financial results.
Eric will go over our financial performance.
And Rich will then review some product line updates.
I will then provide an overview of the current business environment. And our guidance for second quarter of fiscal year 2026,
We will then be available to respond to a specific investor and analyst questions.
Microchip employees are often referred to as chippers.
I will begin with a question for all of you.
And then, I will provide the answer.
How many chippers does it take to deliver a good quarter?
The answer is that it takes quite a few.
But they all showed up.
To deliver an outstanding quarter. Like we produced in the June 2025.
and that is the point I want to make
18,000 employees of Microchip worked all last year on a pay cut.
Have not received a bonus or a salary increase in a year and a half.
And suffered through a gut-wrenching, Global layoffs. Earlier this year in March.
These employees working with high morale came together.
To deliver an outstanding quarter.
I tip my hat to all 18,000 employees of microchip worldwide.
I will highlight a few Salient points of our financial results.
10.8% sequential, sales growth.
Net sales were up, sequentially in all geographies.
Sales from our microcontroller and analog businesses were both up.
In double digit, percentages sequentially.
Non-gaap gross margin was 230 basis. Point sequentially.
And incremental non-gaap gross margin was 76% sequentially.
Non-gaap operating margin was up 677%.
And incremental non-gaap operating margin was 82%, sequentially.
Inventory went down by 124 million sequentially.
Our Target for the whole fiscal year.
Is a 350 million reduction.
So we are off to a very good start.
Inventory days were 214 days.
From 266 days to 251 days.
To 214 days.
we expect inventory at the end of September quarter,
To be between 195 and 200 days.
The inventory right off in the June quarter.
Was 77.1 Million.
Down from 90.6 million in the March quarter.
The inventory, right? Offs are expected to decrease again in the September quarter.
Under utilization in our factories, in the June quarter was 51.5 Million down from 54.2 million in the March quarter.
We expect the underutilization will modestly, decrease again, this quarter.
With a more significant decrease in the December quarter.
Adding 77.1 million of inventory right off.
And $51.5 million of underutilization charge.
Makes a total of 128.6 million of charges.
Divide that by the net sales of 1.075 billion.
And you get a non-gaap gross margin impact of 12 percentage points.
Adding it to the reported non-gaap gross, margin of 54.3%.
We have posted a summary of our net sales by product line and geography on our website for your reference.
On a non-gaap basis. Gross margins were 54.3% including capacity under utilization charges of 51.5 million, new inventory, Reserve charges of 77.1 million.
Operating expenses were at 33.7% of sales. And operating income was 20.7% of sales.
Non-gaap. Net income was 154.7 million and non-gaap earnings per diluted. Share was 27 cents, which was 1 cent above the high end of our updated guidance.
On a gap basis. In the June quarter, gross margins were 53.6%.
Total operating expenses were 544.6 million and included acquisition, intangible amortization of 107.6 million, special charges of 22.2 million, which was primarily driven by Foundry contract, exit costs, and our activities associated with the closure of Fab 2.
Sharebase compensation of 45.2, million and 7 and 12 million dollars of other expenses.
The Gap. Net loss attributable. Attributable, to Common shareholders was 46.4 million or 9 cents per share.
Our non-gaap tax rate for fiscal year 2026 is expected to be about 10.25%.
Which is exclusive of the transition tax and any tax audit settlements related to taxes accured. And prior fiscal years and was positively impacted by the impacts of the recently passed 1, big, beautiful bill.
our inventory balance at June 30th, 2025 was 1.169 billion and down 124.4 million from the balance at March 31st 2025
We had 214 days of inventory at the end of the June quarter, which was down 37 days from the prior quarters levels.
By our inventory, reduction actions is what drove this.
Included in our June ending inventory with 16 days of long life, cycle high margin products whose manufacturing capacity has been end of life by our supply chain partners.
Inventory at our distributors, in the June quarter was at 29 days which was down 4 days from the prior quarters level.
Distribution sell through was about 49.3 million higher than distribution sell in.
Our cash flow from operating activities was 275.6 million in the June quarter. Our adjusted free cash flow was 244.4 million in the June quarter and as of June 30th, our Consolidated cash and total investment position was 566.5 Million.
Our total debt decreased by 175 million in the June quarter and our net debt increased by 30.2 million.
Our adjusted ibida in the June quarter was 285.8 million and 26.6% of net sales.
Our trailing 12-month adjusted, ibaa was 1.167 billion.
And our net debt to adjusted ibaa was 4.22 at June 30th 2025.
Capital expenditures were 17.9 million in the June quarter and we expect Capital expenditures for fiscal year 2026 to be at or below a hundred million dollars.
Depreciation expense in the June quarter was 39.5 million.
And I will now turn it over to Rich, who will provide some commentary on our product line Innovations in the June quarter rich.
Thank you, Eric and good afternoon everyone.
I am pleased to share our operational progress. This quarter highlighting strong momentum across Aerospace defense, AI applications and network connectivity. As a leading semiconductor supplier to the Department of Defense and our NATO allies our Aerospace. And defense business continues to strengthen amid increased Global defense spending driven by geopolitical tensions and NATO, monetization with over 60 years of Aerospace, and defense Heritage, including from our Acquisitions. We have recently achieved significant defense, industry device qualifications and continue to expand our product portfolio to support commercial Aviation defense systems and space application.
Microchip plays a key role, supporting products to many modern defense platforms. Also, our radiation tolerant fpga Solutions can deliver up to 50%. Power savings while maintaining the highest levels of security and reliability,
We have recently expanded our fbga portfolio by introducing cost optimized solutions that deliver up to 30% cost reduction while maintaining industry-leading performance and security. This positions us firmly across both High reliability defense applications and broader industrial markets.
Microchip continues to be a leader in a microcontroller industry and enabling customers with our AI coding assistant.
Aiding customers to achieve up to a 40% productivity Improvement in programming our microcontroller devices.
At Masters, our major technical conference this week, we previewed further, advancements for the attendees with the inclusion of AI agents into the AI coding assistant. That will be released into the market in September this year, further improving productivity and reducing time to market for our customers.
The AI buildout continues to create substantial opportunities across our portfolio.
We have secured design wins in data center infrastructure. Spanning AI acceleration storage.
Inch and compute offerings, for AI and data center applications, as well as intelligent power modules for AI at the edge.
Security remains Paramount as defense and AI deployments proliferate. We have made significant advances with embedded controllers. That feature immutable post-quantum cryptography support, which has re, which was recently, mandated by the NSA. This support enhances the security of platforms. Using our digital signing for secure Boot and secure firmware over the air updates.
These capabilities are essential enablers to protect our defense and Industrial, and AI applications, well into the future, and compliance with critical standards, such as cnsa 2.0 and the European cyber resiliency Act.
With that, I will pass the call to Steve with comments about our business and guidance going forward. Steve
Thank you, rich.
During the last quarter earnings conference call, I talked about a trifecta effect.
On our Revenue growth.
We saw that effect in action last quarter.
First, our Distributors customers inventory is getting corrected. And we saw the first sequential increase after 2 years, in distribution sales out last quarter.
Second, the Distributors sell in versus sell through Gap shrunk.
From 103 million in the March quarter to only 49.3 million in the June quarter.
So distribution selling is rising to meet the sell through.
And we believe there is more to go.
And third, our direct customers inventory is getting corrected, and we saw the first sequential increase in direct sales in 2 years.
This Trifecta effect led to a 10.8% sequential growth in our net sales in the June quarter.
We believe that this dynamic is still in effect.
Importantly, we believe that we are seeing what we believe what we are seeing.
Represents structural demand recovery as we remain below normalize and market demand levels.
after 2 years of Correction,
we believe we are feeling a supply chain deficit rather than experiencing any significant pull forward activity.
The second effect I have spoken about is the impact on Gross margins.
As the inventory comes down, our inventory. Right off will decrease thus growing, our gross margin percentage.
And as the inventory comes down and we start to grow the factories. Again, our underutilization charge will decrease, and will further grow the gross margin? We saw these 2 effects in action last quarter.
Our inventory, right off, decrease from 90.6 million in the March quarter.
To 77.1 million in the June quarter. Our Factory underutilization charge dropped from 54.2 million in the March quarter to 51.5 million in the June quarter. This combined effect is adding to our gross margin
We expect the increase in.
Gross margin percentage will continue as the inventory, right of continues to decrease and we ramp the factories, which will lower the under-utilization charge.
We currently plan to start, increasing wafer starts under December quarter.
Now, the market environment.
We are seeing some recovery in our keyn markets.
Automotive industrial communication data center Aerospace. And defense markets and consumer are all looking somewhat better.
While we had not seen any material.
tariff related pullings in April and May
we saw from selective acceleration of orders from Asia which appear to be tariff related.
We believe that such pullings amounted to only mid to high single-digit. Millions,
However, it is important to provide context on Poland's more broadly.
We are still shipping below normalized and market demand across most of our markets. After 2 years of inventory, correction this deficit to normal demand levels means that any pulling we are seeing represents underlying demand,
The customers rather than borrowing from future quarters.
Now, let's go into our guidance for the September quarter.
We Believe substantial inventory. Destroying has occurred at our customers Channel partners and downstream customers. And the trifecta effect is in play our backlog for the September quarter, started higher than the starting backlog for June quarter. And as of this time, the backlog for September quarter is Comfortably higher than the backlog for June quarter at the same point in time.
The bookings for July.
Were higher than booking for any month in the last 3 years.
I will make a comment about lead times.
while lead times for products, have been full to 8 weeks for some time,
We are experiencing a lead time. Bounce off the bottom.
An increase is on some of our products.
While we have sufficient inventory, it is mostly held in the dye form.
We still have to package and test the products.
We're running into challenges on certain kind of lead frames substrates and subcontracting capacity.
While these challenges are isolated to specific areas, we expect them to broaden.
And Lead times go from the 4 to 8 weeks range to more like 6 to 10 weeks, range out in time and on certain products they're likely to go to 8 to 12 weeks range.
The customer and distributor inventories have begun to run low on many products.
We are increasing increasingly getting short-term shipment requests and pulling of the prior prior orders.
Our customers will be well, advised to manage their backlog.
And have 12 to 16 weeks of their needs on backlog. So they are not caught short.
The emerging lead time, pressures and increasing customer requests.
For expedited shipments, reflect the reality that inventories have run too low on certain products. This Dynamic supports our view that we are seeing demand normalization from a severely corrected starting point rather than speculative buying on any sign or any significant pull forward activity.
Taking all of these factors into account, we expect our net sales for the September quarter to be 1.13 billion dollars.
Plus or minus 20 million.
We expect our non-gaap gross margin to be between 55% and 57% of sales.
We expect our non-gaap operating expenses to be between 32.4% and 32.8% of sales.
We expect our non-GAAP operating profit to be between 22.2% and 24.6% of sales.
We expect our non-gaap diluted earnings per share to be between 30 cents and 36 cents per share.
I want to again, highlight The Leverage in our business model.
with a
54.5 million.
Sequential increase in net sales at the midpoint.
We would expect to see approximately 77% of such amount. Go to the bottom line as non-gaap operating profit.
As the inventory drains, further in inventory, right? Offs decrease, we expect our gross margin recovery will accelerate. And with the incremental profits going to the bottom line, we will have tremendous Leverage.
Finally, a comment on a capital return program for shareholders.
After this September quarter. We expect our adjusted free cash flow.
To exceed our dividend payment driven by increasing revenue and profitability, low capex and liberating cash from the inventory.
Therefore, we do not expect to have to borrow money to pay our dividend after this quarter.
In future quarters, we intend to use this excess, adjusted cash flow to bring down our borrowing.
With that operator, will you please call for questions?
Back in the queue by pressing *1 again.
1 moment, please for your first question.
Thank you. And your first question comes from the line of vivec area. Thank you. Please. Go ahead.
Uh thank you for taking my question. Um Steve um many of us equate um better than seasonal um sequential Trends as a sign of recovery. So when you look at your September quarter Outlook uh, sales of 5% or so sequentially, would you call that seasonal above seasonal? Um, I think basically what we are all trying to get our hands on is that? Yes, there is a recovery. But are we done with that? Um, stronger? Uh, you know, recovery, as in lot more above seasonal quarter. So, just, how would you describe September seasonal above seasonal, and then, what does that kind of inform us as to how December could Shape Up in kind of similar terms?
So, thanks. Uh, the September quarter guidance of 5.1% sequentially would be considered, uh, well above seasonal.
You know, our seasonal, increase usually per quarter are really in the 3% range.
um, you know, in the
You know, in the September quarter and December quarter usually is the weakest quarter of the year. And
you know, ordinary times, uh,
In a totally normal inventory times. Uh, December quarter will be sequentially slightly down and March quarter will be up again. So we were strongly about seasonal in the June quarter, we strongly above seasonal in the September quarter.
and I would expect that will continue to be above seasonal in December and March,
All right, thank you Steve. And, um, you know, when we look at Several of your peers, uh, they had a strong June, you know, the kind of guided September lineage, but they expressed some caution as they looked at December onwards, mainly, because that, that seems to be kind of the renewed, uh, threat about the delayed impact of, of tariffs and, and whatnot. What's your receipt of of the macro? Um, environment? Do you think that as you look out Beyond, uh, September that, uh, the recovery is as strong as you thought. Uh, 3, uh, 3 months ago, just how would you kind of contrast the kind of recovery you are seeing versus uh the slightly more, conservative tone um that some of your analog peers have indicated on their earnings calls. Thank you.
You know, our sales went down much more significantly than others.
Um because of really excessive inventory at the Direct Customer as well as channels, you know, driven by our, you know, PSP program which was, you know, launched during the co years and continued well afterwards.
um, you know, many of our competitors and peers
You know, got off the non-cancer level non-returnable treadmill.
you know, I think a year earlier than microchip did and we therefore we continue to ship
Um, large amount of products to our customers and distributors in accordance with the PSP rules. So, therefore
You know, when we eventually corrected our sales went down much, much harder than others. So what we are seeing right now is the trifecta effect, we talked about inventory is going down at our Distributors customers.
They're going down at Distributors, our sales in our caching to sales out from Distributors. Our Direct Customer inventory is going down. So we believe the Dynamics that are taking place at microchip, are more driven by those kind of factors and uh, not any kind of tariff related pull in. We have, you know, done substantial analysis.
um,
Uh, on on the Tariff question. So, you know, part of our normal process each quarter.
Is to ask a distributor to explain any significant fluctuations in their customers quarterly sales.
You know, this is done at a very forensic level, so covering a large percentage of our customer base.
We did this and we identified a small number of customers.
that identified tiffs as a reason for the sequential change in their revenue when we extrapolated this data.
We believe the impact came out to be only mid to high.
you know, single digits, you know 7 8, 9 million dollar range,
Um, we have no direct customers, that indicated that terrorist was the reason for their increase in Revenue.
Actually.
Um, is manufactured in free trade zones.
You know that we are not impacted by tariffs.
So therefore uh the phenomena we're seeing at microchip.
Is really related to.
Uh, inventory digestion.
Than any kind of tariff plan activity.
Thank you.
Thank you, and your next question comes from Harsh Kumar. Thank you. Please go ahead.
Yeah. Hey Steve, I've got 2 as well. Uh, Steve, I was hoping that for September quarter, you could help us understand the growth between the the 2 key and markets Auto and what I would call as pure industrial and and why I'm saying pure industrial is because you're in defense and defense is very strong for obvious reasons and it's queuing things for, for the, for the industrial category. So I was, I was hoping that just outside of Defense, if you could just talk about
In September, which ones, you know, how do you see auto versus pure industrial playing out?
So you know, with such a strong growth of 10.8% sequentially, which you analyze. It it's a phenomenal, you know, in enormous rate of growth. So with a very very strong June quarter
you know, we actually saw a growth across all of our
Uh, product lines and markets microcontrollers analog. Uh, so it was very very broad-based and all geographies. Um, so therefore, I think my my simple answer would be. We saw recovery, pretty much in all end markets.
Okay. Fair enough. Um, can I ask you Steve at this point?
You feel like sell through is equal or higher than selling at your Distributors and if there's a gap, what kind of Gap there are, you know, so the best of your knowledge. I know it's a difficult 1 to answer. What can a gap exists and your inventory dollars came down, I think about 124 million which is a big number. How far do you think you are from where you want to be in terms of optimal, uh, inventory level?
So, I think we gave you the number and I prepared remarks. Let me pull it out again. Yeah. So maybe I missed it. Steve, sell sell through and distribution was 49.3 Million higher than what sell in was. And, you know, that that's just the distribution piece of our business, which is a little, a little less than 50%. We, we, we absolutely believe that our direct customers are draining inventory, too. And consuming more that we're shipping to them, but we just don't have real time data to show you but that, that 49.3 million compares to 103 million the quarter before. So the Gap is shrinking, but there's still a gap.
There's still a 49.3 million gap. So selling is rising to meet sell through. You know, we closed half the Gap last quarter and you know we don't know if we take a couple of more quarters to close the rest of the gap.
The other question.
Yeah, 1 progress. We're making towards inventory, right? The inventory Target overall, and Steve. Do you want to address or do you want me to? Yeah, so I'll, I'll address it. So we, um,
We are the bringing inventory down in days of sales and pretty heavy chunks.
Uh, it was 266 days of inventory at the end of December.
That came down to 251 days. At the end of March came down to 214 days, very large drop.
At the end of June and we are forecasting, that will break the 200 and be between 195 and 200 at the end of September.
In dollars of inventory reduction, we reduced inventory last quarter by 124.4 million. So we're making massive progress.
By shutting down 1 of our Fab, the Tempe Fab 2.
And it's substantial scaling down of our other Fabs.
We are producing products in our factories, which is well, well, below the rate of consumption. That's why the inventors are dropping by a very large amount. And, you know, that essentially will continue
Uh, we will start growing.
You know, wafer starts in December quarter as I said in my remarks.
Um, and not that, you know, I didn't mean to hit fully come down.
But if we wait till our inventory is totally normal to then start growing the Fabs we're going to have to grow the Fabs by 30 40% in a single quarter.
Um, and that's not possible at, you know? So therefore we have to start early.
And asymptotically, reach the number where the fairs need to run.
Understood Steve and Eric, thank you so much.
Thank you. And your next question comes from the line of Chris Casso from Wolfe Research. Please go ahead.
Yes, thanks. Good evening. Uh, I guess, the first question, may may be following on some of your prior comments is, you know, just getting a sense of how far below in demand. Uh, you you think you're really shipping now, and, you know, recognize you have your best data, uh, with Distributors. And you talked about how low point of sale is and I, I guess, the quick math, it, it would seem like, I guess you're about maybe 10%, uh, below, uh, point of sale and distribution, but the distributed inventories also, you know, not not at bad levels. Do you have a sense of, uh, how much by, how much you you might be under shipping, you know, real and demand that your direct customers.
we have a sense but the sense is not added proof and really can't be discussed outside
um,
You know, the the number that that we could share and we have shared is the gap between selling and sellout because those are 2 actual numbers.
Um, other than that, how much inventory I would distribute. A customers have is very anecdotal.
by asking a Distributors by asking some of the customers that we jointly visit, and since the customer base is so broad having 100 10,000 plus customers, you know, even if you do the analysis based on larger customers, it's really
You know, it's not Auto audit proof.
And then when you get to your direct customers, the analysis, even more difficult, many of our large industrial customers by, you know, 900 different line items and produce the product in 26, different factories around the world. Um, you know, and and some products have inventory and some products are showed and they're Expediting those products. So to get a total
seal for it is very difficult, but
anecdotally as we do the analysis, we know many, many line items that have a run rate.
And and they are not buying because they still have inventory.
And on other line items, they were not buying two months ago or three months ago, and they're buying now, which means the inventory is running low.
so I think when I put it all together I I believe uh
Inventory. Correction, will continue for some time.
And our sales will continue to grow towards the more normalized levels.
Exactly how far are we? And when will that end?
I don't think I can put a um, number with very high confidence.
Right? I mean it sounds like in, in maybe, if I get asked a different way, which would be easier to answer, do you think that you're under shipping, the direct customer's buy more or less or more or less than than than than the distrib distribution? Customers based on the you know, rough analysis you've been able to do
Um again, um, just a directionally.
You know, during the Google days, we prioritize shipping to direct customers more than to to distributors.
So direct customers got a, you know, more than fair share of the product.
And therefore, direct customers in most cases build a higher amount of inventory, you know, than the distributors were able to do.
so, you know, I think just by
You know, by that statement I would say the the inventory at direct customers is probably higher than the inventory at distributors.
Right.
All right, but that's helpful call it. Thanks Steve.
Thank you. And your next question comes from the line of Lane Curtis from Jeffrey's. Please go ahead.
Hey guys. Good afternoon. Thanks for taking my question. Uh, I wanted to maybe I missed or did I just wanted to know the timing. You talked about lead times extending from 48 to 6, to 10 8 to 12? Is that now? Where is that where you expected to go?
um,
so lead times, uh, you know, broadly on most of our products lead times of 4 to 8 weeks.
but on certain products like I said in a certain package,
Um, the lead times have gone longer in some of them are 6 to 10 weeks and some are even headed towards 8 to 12 weeks and those are, you know, cases where we are short of lead frames or short of for substrates or in a given pocket. Given package type a subcontractor to the over booked
We're trying to find a negotiator place. So, you know, this always starts party like this.
Recovery to go through, in our sales still, uh, because we're shipping so much below the Inn in consumption. So this is just a warning shot to our customers.
You know, to really bring their backlog healthy because lead time being insured.
You get very short-term booking; you get very short-term visibility.
So it's it's a message to our investors, but more than that, it's a message to our customers.
to make sure that they look at their demand for, you know, 12 to 6 weeks and
Give us that backlog. So we can buy a lead frames and substrate and start Wafers and do everything in the Right Mix to be able to meet their needs.
Gotcha. So I think you kind of answered it but you said that you had more bookings at this time versus last time the same time frame last quarter. Uh yeah I I guess if it lead times is you know kind of the duration is the part we don't know. Is the when you look at how you set the guide is the level of turns you're looking for in the quarter, the same, or is it different?
Yeah. So so July bookings. Were the largest bookings for any month in the last 3 years.
Any, any month of June quarter, but any month of the prior 3 years? So we had a very, very strong, uh, month of July
Now.
Um you know bookings. Every quarter are different based on how much backlog you begin with. And what the lead times are, if the lead times are short, you get higher change of the late time, the longer you get less chance.
Um, and our backlog started in September quarter stronger than June quarter.
and you know, the terms requirement is about the same and with the same kind of terms, requirement roughly
I think, uh, I think we'll have a good quarter.
Thank you.
Thank you.
Question.
Please go ahead.
Good evening. Thanks for taking my question. I was wondering if you could maybe comment on any and markets that you think are, you know, materially lagging, uh, in terms of end demand, Steve. I, I know you talked about a number that are they're doing. Well, is most of them, I believe any of that are lagging. And uh, you know, do you see any Improvement in the ones that are lagging? The reason I ask the question is because I believe you're you're other products didn't really grow much sequentially and think that they were down slightly sequentially. Just trying to understand what happened there.
I I I would say oh this is a rich Simon check. Uh I would say Automotive is still lagging uh
More than any of our other markets, uh, today.
If you went to the be specific about that, uh, uh, AI data centers or data centers are doing very well and recovering. Um,
Industrial, you know some of the smaller and medium-sized customers are starting to recover. Um it seems that the 1 that's probably lagging. The most is uh Automotive at this point in time.
Yeah, and that that other category of Revenue that you're referring to is, you know, everything other than the microcontrollers and analog and includes licensing and some other things that tend to be a little bit more lumpy so that that can drive some of that fluctuation quarter to quarter gem.
Okay, that's helpful. Thank you. And then maybe just as a follow-up, uh, you know, relative to the uh, president Trump's uh uh press conference yesterday, where he talked about terrific exemptions for companies with us-based investment or increased us-based. Manufacturing investment, just wanted to confirm, is it your understanding that your existing us manufacturing Investments? Qualify you for that exemption? Or do you have to do more, or do you not know yet?
yeah, so so I think, you know,
Anything president Trump says is never clear.
And often changes, uh, a week or 2 weeks later.
uh, but the way we understand what he said,
Is it's not buy products that are made in us, and the products are made overseas.
Um, so we make some products here and we make some products overseas and tsmc and other places.
So it's not that you have to pay a tariff on the products that are made overseas, but you qualify as a company.
Now, as a company we make large amount of manufacturing in US.
And then we also buy wafers from foundries outside. So, because we make so many investments in the U.S.
And large amount of our Manufacturing in US.
our interpretation is that we will qualify to be exempt from
terrorists.
And if that is the case, and if that holds
Then I think we are okay. And maybe.
In better shape than some of our competitors, like the Japanese competitors and others.
Thank you. And your next question comes from the line of Timothy archery from UBS. Please go ahead.
Thanks a lot. Um, Steve, you said, bookings are the highest since July 2022. But uh, but in reference to a, you know, another question. You're guiding up 5%. Yes. It is better than seasonal but it's not that much better. And then you just said that turns are about the same in Q3 unless I misunderstood what you said. So to me, that kind of implies that a lot of these bookings are filling in Q4, uh, as in
as in the
December uh, you know, rather than you know, calendar Q3. So is it fair that you can say at this point that December should be another really good quarter.
I think I I'm not willing to get
you know, that far I
That I work. I expect uh,
us to continue to be above seasonal in September December, and even into March.
Um, you know, good quarter is anybody's definition. I don't know without numbers. What that means?
Uh, but what happened in, uh,
On on July 1.
Our our backlog for this September quarter.
Was meaningfully higher than our backlog.
For the June quarter on April 1.
and if you get about the same on the terms, this quarter, as we got last quarter,
then we'll have a good September quarter.
Um,
You know, having said that, there are, uh, strong bookings this quarter of summer terms, and some are going into the calendar fourth quarter.
Okay, thanks, and then, um, you did say that lead times are lengthening and, and you actually said, you're encouraging customers to expedite orders. I think a lot of us, see what happened to, you know, last cycle and worry that we that when we hear that, that it could scare customers off a little bit because of the potential to get back into, like, a PSP sort of the dynamic. Um, so if lead times are already sort of doubling for some products and we barely even come off the bottom. How are you managing this messaging to customers to avoid? What kind of you know happened last cycle? Thanks.
So, first of all, you know, we're not asking any customers to expedite orders.
We're simply asking them to place the order with a scheduled backlog.
You know, today a lot of the orders are very short-term orders because lead times are very short, and what they need in Q4. They think they can place the order in late September and still get the product. We're simply saying, look, a little bit farther ahead and later in the backlog for every month going out for months.
Uh, which is not the same as expediting orders. We're not asking them to take the product early; we're not trying to ship above demand.
Uh, we're simply asking them to place the orders. Secondly, uh, we're not changing the rules of cancellation.
So if they give us a higher visibility and their demand changes higher or lower or they want to change the product. Um, the the product is cancellable, it's not non-cancellable order.
Um, so they have complete flexibility. Therefore there is no.
Comparison to a uh PSP environment here, right? The, the other thing that we are seeing from customers and Steve kind of a alluded to this earlier is we are seeing them, they'll they'll have an order already on the books and then they asked to pull that in and sometimes that can be challenging without visibility to be able to meet their new requested dates. So you know, having having better backlog, visibility helps us better service the customer so that that's really all we're saying here. Yeah. And and at least having the extended, uh, backlog even if they do wind up,
Pulling that in, that is still better for us because it allows us to plan, uh, capacity and purchase materials that we may need to build that product.
Okay, thank you. All.
Thank you. And your next question comes from the line of Harlander from JP Morgan. Please go ahead.
Hi, good afternoon. Thanks for taking my question. Um Steve on the accelerated demand signals from Asia Asia was up about 14% sequentially versus Europe and North America at about 8, even if I exclude the mid to high single digits millions of dollars, which may be pulled forward, Asia was still up strongly at about 12, or 13% sequentially. And then on a year-over-year basis, Asia, and the first half,
Was down only about half of what the US and Europe was um to the first half of the year. So what's driving the relative strength in Asia, both sequentially and to the first half of this year
Is a proxy on what's happening in us and Europe.
Because, you know, we build our customers.
Um, you know, European and U.S. customers build a lot of their products in Asia.
So we report sales by, you know, where we sell, where we ship the product.
not where it is designed or where the origin of the customer is
so, a lot of for us customers are
You know, asking us to ship the product to China, Taiwan, Vietnam, or Asia, or wherever.
So I don't think you can quite look at it, you know.
By numbers, you could say, you know, Asia is stronger. But a lot of that strength is coming from us and European customers. Yeah, I think another impact that we see and saw on the June quarter is you are the you're comparing it to the March quarter, which has the Chinese New Year, right? So there's some of that effect that's reflected in the June quarter results. That's true.
No shipping days.
Yeah, that makes a lot of sense. Okay. And I apologize if I missed this. I think you did mention something about the insurance business, but, you know, in addition to the strong rising order that you saw in March, June, and a typical recovery, we typically do see stronger turns business, right? Orders placed and fulfilled in the same quarter. I know your turns business rose as a percentage of sales in March. Did that turns percentage grow in the June quarter? And what are you guys seeing thus far here in the September quarter?
Yes, I, I, I would say that, you know, turn turns were strong in the June quarter. And, you know, that's, that's not surprising because we obviously beat on Revenue. So turns were turns were higher. And, and Lead times are really short for the vast majority of products. And we would expect turns to continue to be a pretty high number for us. Um, given where lead times are today, and I've obviously, if lead time stretched that'll change over time.
Great. Thank you.
Thank you. And your next question comes from the line of Queen Bolton from Mid Ham and Go. Please go ahead.
Okay, so just wanted to ask on the gross margin guidance. Can you give us some sense of what total charges for underutilization and write-offs you're assuming in the 55% to 57% range?
So we don't we don't break that out. And, you know, we did say that we'd expect uh, the underutilization charges to be modestly lower and I would say that is that is mainly driven by activities increase in our back-end factories. Um, that that's driving most of that, you know, the the wafer starts as Steve indicated, a really plan to go up in the December quarter and we expect the, uh, the the inventory right offs to be lower. It's a, it's a hard number to forecast quite honestly, but we do expect it to be lower as, uh, you know, the comparison because we, we start this by looking at 12 months of trailing demand.
For the calculations and, uh, that that is getting to be a better metric for us with the revenue increases that we're seeing. And then obviously, our, our overall inventory dollars are coming down also which which helps with that. So it will be lower but giving you an exact number is is difficult to do. We ship, you know, hundreds of thousands of
You know, SKUs in the quarter.
And this write-off inventory, right? Off is Q by Q.
You know, looking at every SKU, what its inventory is in comparing it to the last 12 months of shipments.
Um, so it's a, you know, it's a complicated calculation and...
You can't make an accurate forecast of it.
Okay. Um, and then the second question I have is just on those products where you're seeing lead times stretch out to the sizes of 6 to 12 weeks. How much of that is sort of substrate or packaging related versus wafer related? And if it's wafer related, is it mostly outsourced wafers or internal wafers? As obviously, wafers take probably the longest in the manufacturing cycle. So I'm kind of wondering on at least on those products where you're seeing lead times extend why you wouldn't be increasing the wafer starts now rather than waiting until December.
The majority of that is, uh, in substrate or packages, and that's typically how that all starts as business starts to turn around. We still have quite a bit of die stores or die inventory on many of our devices.
So, it tends to be a matter of just pulling that product out of the dice stores and ensuring that the substrates and the rest of the assembly materials are in place to bring that out. And that's what shifts it a few weeks at a time.
Yeah, we're not seeing shortages on our internally produced product yet.
Lie back in like Richard and...
You know, there could be one or two places where we have our products coming from a large number of fabs at foundries because these companies are built up of acquisitions with Microsemi, Atmel, and SMSC, and everybody bought products from different fabs.
So, we buy products from a large number of fabs, and I think there are...
You know, a handful of fabs where certain nodes are constrained.
So, it's just very, very spotty. There are a few places where...
You know, external dye is constrained, and we're trying to, you know, beef that up. But all the rest of it in Foundry and all of the technologies internally.
Uh, we are planning on catastrophe, and we are planning a day.
Yeah, but it sounds like it's more back end than front end.
At the current point in time,
Yeah. Okay. Thank you.
Thank you. And your next question comes from the line of Joshua Bush, shelter from Kitty. Please go ahead.
Hey guys, thank you for taking my questions. Um, maybe to follow up on Quinn's, you know, can you maybe speak to us about what, you know what you're looking for? That's going to give you the signal that. It's all clear to raise utilization rates. Is there a certain inventory Target is there, um, sell through demand, that, you're looking for. I guess I'm curious to hear, you know, why? There's so much conviction that December will be the the right time giving you.
You are seeing some cyclical signals improving. Um, and you know, while at the same time, inventory levels are elevated, just curious to how you're thinking about that holistically. Thank you.
so, um,
So I think the, you know, the fact is that our current production output from a 2-fabric closed,
is so far below our shipment rate.
that if we,
Do not start increasing utilization in the effects.
Then there'll be a point where we'll have to double the capacity.
Just to get to the shipment rate.
And traps take a long time to ramp. You can, you know, grow a certain percentage every quarter. Therefore, we have a forecast over the next two years.
And how much dye will be needed for that?
Bounce off the dye inventory. How long will it take for that to deplete?
And then what is the rate of growth by which we can grow our both Oregon and the other fairs? And then let's see the solving a math problem. And when do we need to begin?
Okay, thank you. And then, oh, go ahead.
You just have to begin well before.
You know, well before, um, your dignity goes too low because once a dignitary goes too low.
You know, then you get in trouble very rapidly because we're producing only half the product that we need every quarter.
Okay, thank you. And and I guess on, you know, on that note, um, I understand you don't want to break out the underutilization and and write down charges, um, you know, by quarter. But any rules of thumb that we should think about as to how those charges should unwind. Is there a certain Revenue level um or or any other factors that we could think of? As again as we think about modeling, those charges coming out or coming out of the model, thank you.
Can we give you incremental, gross margin? Didn't we give you incremental growth? We we did, but maybe maybe it'd be helpful to say that. You know, we, we expect those underutilization charges to take longer to come out of the system than the, uh, the, the, the inventory right Downs. I think the inventory right Downs, happen quicker. And the, the ramping of our factories will be gradual over time, so hopefully that helps a little bit. Yeah.
Okay, thank you both.
Thank you. And your next question comes from the line of William Stein from Truist. Please go ahead.
Great, thanks for taking my questions. Um,
Product gross margin, as you highlighted, was 66.3%. And, um, your long-term target is lower than that at 65%. Um, and I wonder, um, does that imply that there's...
That you are somehow exceeding your long-term target because of mix or pricing, or maybe help us reconcile why product gross margin, once these unusual charges go away, would decline from where it is now.
Number one charges. Don't ever go to zero. Now there's always.
Some mixed issues with certain products that were built resulted in a decline in demand.
Um, you know, number 2, when...
You're 12 percentage points away.
You know, I wouldn't quibble about a percent here and there.
Um,
You know what? I'm simply trying to say is.
Many, many investors ask us how we're confident that we'll get to a 65% growth margin.
And we're saying that, you know, that is achievable based on the math.
But what I am really trying to ask is mix or something else.
Um, going to change such that, you know, perhaps it's the...
Um, defense and market exposure, that's, you know, quite high now. As that mix normalizes, does that have an effect of dragging gross margins?
You know, we
Hundreds of thousands of SKUs every quarter.
You know, we have 20 business units or some exchanges every quarter.
you know, um,
Some of our, you know, so I think you're making too much of that.
You know, 65 versus 66. I I I don't differentiate those 2 numbers. Yeah, I I would agree with that and you know, we you you shouldn't. You shouldn't look at this that long term. We think that our product gross margins are going to go down, you know, we're introducing lots of really high margin products and we talked about 10 base t1x, you know, our ethernet product, those are going to be higher than corporate average. You know, we have a lot of confidence and how our fpga business is going to grow over time, that's higher than corporate average. So it's there's a lot of moving Parts there. Well, I, I understand your question. But uh, as Steve said, we're really just trying to frame this that we have confidence in getting to our long-term model. And you know, the mix will have some effect over time. But uh, you know, we're we we've got high confidence that we can get there and it's just going to take us some time
That helps a lot if I can squeeze 1 more in if um selling and sell through sort of continue, uh, in. Um, September as they did in June, you should be pretty well aligned. By the end of the quarter, um, is that the right way for us to think about this? Such that maybe by the time we get to December. Uh, we're looking at sell in uh, being aligned or maybe even higher than sell through.
I would not think that. I think, uh, there is a lot of.
Slow-moving product in distribution. We call it sludge.
And, uh, it’s just not a perfect mix. You know, the product was bought 2 years ago in a certain mix, and the demand always comes out in a different mix. So I think this will take, uh,
You know, more than just a September quarter to close. We're not
we're not telling you that.
September quarter will be selling and sell through will be equal. Yeah, they'll be, they'll be a different still and, you know, I I've kind of been saying, you know, I think maybe by the end of the fiscal year, we're pretty much aligned, but that's, that's a guess. Yeah.
Thank you.
Thank you. And your next question comes from the line of Christine Lee from CT. Please go ahead.
Hey, thanks guys. Um, just real quick on the, on the info gross, margins. Eric, I think you said 76% for the September or excuse me for the June quarter, um, for the December quarter, since you guys are uh turning the Fabs back on or at least increasing utilization rates would that uh incremental gross margin uh go up and if so roughly how much
No, I I I think it will be roughly in that same ballpark. If you look at our our guidance, you'd look at the the, the revenue change and where we've guided gross margin to. I think it'll be about the same, and I think our, uh, our fall through, to operating profit to would be in a similar range, to what we've saw, what, what we saw in uh, in the June quarter.
Great, thanks. It's super helpful. And then a question for Steve. So, Steve, now that you've um,
Been back, uh, in the front seat of the microchip minivan here for, you know, a good 9 months. How would you uh, describe microchips competitive positioning, especially on microcontrollers? Um, are you, you know, have you seen any Improvement? Has it been better than you thought? Worse than you thought? How do you see your share going forward? Maybe talk about a you know, path to gaining back market, share anything there.
so,
so I think, uh,
You know, market share is kind of hard to decipher when you're dealing with such a large inventory change.
When you, you know, simply measure by revenue, divided by the total revenue of the industry,
But if some of their revenue comes back when our customers' inventory goes away,
And if you grow higher, then you know the overall industry, which seems to be the case. I have compared.
You know, our numbers against semiconductor industries.
June ending report from Microchip Technology Inc, and we grew substantially more in microcontrollers. It will grow double digits. Roughly, we did. Yes. Yeah, and the industry was up only about 66.5% sequentially. So that means, you know, we gained share in the June quarter. Some of that share gain is coming back.
I think it's going to take a little longer, um, for us to go down this journey.
Before we can really tell what happened.
Um,
But one of the things we have corrected is.
Uh, we were weaker at the very low end of, uh, 32-bit microcontrollers.
Because we were serving those functionalities with 8-bit microcontrollers.
And, uh, as customers wanting to be in 32-bit microcontrollers, we had a good portfolio of mid-range parts and high-end parts, but we didn't have entry-level parts. You know, we were competing with 8-bit on that.
And I think that's one thing I corrected after I returned.
And, uh, there are, you know, a couple of...
Very, very good. Low-end 32-bit parts that...
Uh, we're developing at a very, very good price point. So first one of them gets introduced to the market.
Uh, nearly the start of the next calendar year.
Uh, so those will strengthen our position further.
But I think, uh, you know, more than that, there are a few things we have done.
um, 1, other thing was
You know, for 8-bit and 16-bit, we had our own proprietary architecture. You know, pick an architecture; we don't use ARM or any industry-standard architecture. Therefore, all the tools were ours; we developed our own tools.
So, we went when we went to 32-bit microcontrollers and adopted ARM as well as MIPS architectures to build it.
Our internal strategy remained, uh, that we brought those parts on our own tools, which were proprietary tools.
And, uh, I'm has a substantial market share at a 32-bit level, and all other competitors build ARM-based.
Products, and many of those companies don't even build the tools because they just simply send the customers to more industry standard tools from like IAR and SEGGER and others.
Uh, Kyle and a number of other companies.
So, basically, when we compete with a customer...
You know, we're trying to jam our proprietary tool where the customer already has an industry-standard tool. If our products simply work on that industry-standard tool, we will have a lower resistance level.
So I think that's one thing. We have changed, you know, in the last nine months where...
We have enabled all of our 32-bit products to be able to run on industry-standard tools, and we're even working with at least one company that will support them.
Our 16-bit DSSP on industry standard tools. So there are, you know, things we are doing to make our lines more competitive.
Uh, make it easier for our customers to do business with us and adapt our products.
Uh, the other thing that Rich talked about was.
Uh, this, uh, coding system that we have developed, which is a first in the industry.
And we're giving it to our customers.
It saves almost 40% time for development, and it basically writes code for you.
Um, and nobody else has come up with a tool like that. So, you know, everybody would, but we are the first.
So, you know, I would say, you know, I think our position is still good. Still very competitive. Uh, but we did lose share with our PSP strategy.
and, and we hope that
Some of it is not permanent, and as sales are growing, we will come back.
All right, thanks a lot, Steve.
Thank you. And your next question comes from the line of stories, Fandre.
Thank you, please. Go ahead.
Do we see more step function, you know, declines in the utilization charge, is that going to be when you get to that, 130, 150, uh, inventory they target or could we potentially already see it before you get to that level?
It would happen. Well before that, as I said,
If we wait until the inventory comes down to between 130 and 150 days, then we're going to require a very large step-function increase in our fabrication output in the following quarter, which is impossible. Therefore, we have to grow over 5 to 6 quarters, and we have to start much earlier. Utilization will start improving.
You know, well before inventory gets to those kinds of levels, I think you should see a substantial improvement in utilization. Probably in the December quarter, and then continue every quarter after that.
Yeah, that’s a great call. And then on, um,
Is only number as approximate, you know, Eric may have more numbers. I think we borrowed about, through this quarter, we would have borrowed about $300 million. It's about $350 million, about $350 million dollars.
To cover the dividend in the last X number of quarters, since our cash flow became less than the dividend.
So, the next $350 million of excess cash flow over dividends will go to bring that debt back to where it really was. So that's Factor Number 1. Factor Number 2 is...
You know, leverage is still very high. We just finished a quarter with a leverage of 4.2.
And if you recall, when we started to increase the dividend and started to buy back, you know, stock and all that. We had said, we want the leverage to be 1 and a half or lower. So it's quite a way to go before we
You know, we aim to get back to that kind of leverage and a very strong investment-grade rating.
So, I wouldn't look for a, you know, stock buyback in the near term.
Right caller. Thank you, Steve.
Thank you. And your next question comes from the line of PJ Rash from Zoo. Please go ahead.
Yeah. Hi Eric and Steve. Um, just a quick question on the under-under. I think your inventory write-downs, so under-utilization is kind of running 50/50. Do you guys think most of the inventory write-downs will get done by the September quarter?
I don't, I don't, I think, I think it takes longer than that. BJ. Um, but what we expect is that the amount of the inventory, right? Downs will continue to decline as we move through the fiscal year. So, um, you know, it it's going to take some time. But, uh, yeah, the charge dropped from 90 million to 777 Million. Last quarter, we expected to be lower than the 77 this quarter and that Cadence to continue now for, uh, multiple quarters. As we see into the future and underutilization, I think we've talked about a little bit more in response to some of the other analyst questions. It's going to go down modestly this quarter. And when we increase increase wafer starts in the factories, in the December quarter, it will take, uh, another step function down. But that, that 1's going to take a little bit longer is because we are significantly underutilizing, our factories today and, uh, we'll, we'll grow it back over time as inventory, declines and revenue, improves.
Got it and Steve in response in in your transaction, 232, uh, on some of the exceptions that microchip could get with the with investing, uh, in the US, uh, is your understanding that, you know, it puts you at a much better, uh, position versus uh, like this St, micro and Infineon, and NSS, and some of your peers there.
Thanks.
well, um,
I would hope so. I don't really know fully. You know what the rules are?
Um, but I think we produce.
higher percentage of our product in the U.S.
You know, then from the companies you mentioned, do…
Uh, but I don't know whether it makes a difference. What percentage is it?
I think it's going to be more black and white. If you do some manufacturing in the U.S., and
You know, you qualify for no terrorist. I don't know what the rules will be.
Um,
You know, I think some of those companies have fabs in the U.S.; some others don't. I don't know the rules clear enough to be able to interpret that. I hope we have an advantage.
um,
but I'm not sure.
Got it. Thank you.
Thank you. And your next question comes from the line of Christopher Rowland from Susquehanna. Please go ahead.
Hey, thanks for the question. Um, just maybe a clarification or just understanding tone here. Um, I guess, first of all, typical seasonality for December and March, I know it changed since the addition of appeal. Um, I think the last update was maybe down 5% in December and negligible for March, but down a little bit. Um, maybe if you could update us on that.
He's only, if you could, uh, update us there, that'd be great.
Let me maybe start by saying, you know, I don't think seasonal in December is down 5% for us. I think maybe it's down a couple percent and then maybe seasonal.
You know, it's been a long time since we've been seasonal, but maybe seasonal in March would be up a couple percent, so maybe start with that. Um, and you know, we are not at a point where we want to provide any guidance or are able to provide any guidance yet for December. Um, we think our business is trending in the right direction. Um, but, uh, we're not ready to provide guidance, so I'll start with that and see if Steve wants to add anything to it. I think exactly. I wanted to say that, you know, your numbers have a larger bracket on it.
I think December is usually down a couple, and March is up, you know, 2 or 3 maybe.
Uh, and I'm sorry, up by, you know, 2 or 3.
and my expectation is that
The business would be better than seasonal in both quarters, without being able to put numbers on it.
Okay, uh, thank you for that. Um, and then, secondly, maybe, uh, on AI. I know there was, uh, some stuff in the, um, in the prepared remarks. But if you guys had any updates on, um, the percentage or the dollars, uh, contributed from AI, and if there were any products that are just going gangbusters.
Is just above your expectations whether they're like pcie switches or ret timers or fpgas um or timing products uh just anything, that's significantly outperforming your expectations uh around AI, that would be great.
But we haven't broken that out. Um, but we are seeing more and more uptick from our customers, using the tools, uh, you know, it's still relatively new. We just launched this in the February time frame in terms of uh, AI code support. Uh, it's been used behind our firewall for over a year by our internal engineers and our support Engineers supporting customers. Uh, and it's improved productivity within our own engineering Force quite a bit, um, on the fpga front, uh, where we're seeing most of the uptick or use of AI uh, is envisioned detection or Vision systems.
For detecting, uh, people or visual inspection and factories are, are probably the, the fastest growing areas that we're seeing, uh, Ai and acceleration and, uh, used in our products.
Uh, yeah, any data center products. Not the AI coding tool. I apologize.
No, we, we have not put out, uh, data in terms of, uh, pertaining to the AI coding tool in terms of what it benefits right now. The only number that we've given is that typically uh, customers and Engineers that are using it are reporting about a 40% productivity Improvement.
Which, in the end, translates to time-to-revenue improvements.
Thanks guys.
Thank you. And your next question comes from the line of Janet Ramekin from Claudia Capital. Please go ahead.
Congratulations. And a nice turnaround guys. Um uh, most of my questions have been asked but just a couple of little things, uh, given the recent decline in the US dollar, how does that affect you? And if we see higher uh budget deficits and higher need to uh um uh sell more debt and which may lead to a further decline in the dollar. How is that likely to affect you in the next couple of quarters?
You want to take them?
Yeah. So you know the the the foreign currency fluctuations don't have as as large as impact on us and some of our, our competitors that are that are not as us, bases us, you know, we we really sell 99% plus of our revenue is in US Dollars. A lot of our assets are going to be US dollar base. So I think that the impact to us is is smaller than what you would see with some of our European competitors as an example.
Okay. And, uh, secondly, if I may, uh, any comments about your Chinese business or trends? Any insights on what's going on in that market?
Thank you.
Chinese business.
Chinese business.
Back very strong from the March quarter, which is a Chinese New Year quarter, to the June quarter, up I think 14% or something.
So, a business is doing very, very well. Um,
You know, everybody is talking and concerned about what's going to happen with tariffs, and I think that's dominating the agenda. But at a business level, it's not really having an impact today.
Okay. Thanks very much. I'm glad, again.
Thank you. There are no further questions at this time. I will now hand the call back to Steve Sammy for any closing remarks.
Well, I want to thank all the investors and analysts for hanging in with us. I think, uh,
We're on our way, making a very, very strong recovery from the lows in the business environment.
And we'll see.
Many of you at a number of conferences will go to starting at least September, I think. Yeah, we actually had a conference as early as next week. So we'll be. We got a lot of conferences this quarter, and we look forward to further discussions with everybody. Thank you.
For participating. You may all disconnect.
Wow.