Please stand by. Good day, everyone, and welcome to Microchip's fourth quarter fiscal 2022 financial results. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Microchip's Chief Financial Officer, Mr Eric Bjornholt. Please go ahead, sir. Thanks, Sarah, 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 are 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 Microchip's business and results of operations. In attendance with me today are Ganesh Moorthy, Microchip's President and CEO, Steve Sanghi, Microchip's Executive Chair, and Sajid Daudi, Microchip's Head of Investor Relations. I will comment on our fourth quarter and full fiscal year 2022 financial performance. Ganesh will then provide commentary on our results and discuss the current business environment as well as our guidance. Steve will provide an update on our cash return strategy. We will then be available to respond to specific investor and analyst questions. We are including information in our press release and this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on our investor relations page of our website at www.microchip.com and included reconciliation information in our press release, which we believe you will find useful when comparing our GAAP and non-GAAP results. We have also posted a summary of our outstanding debt and leverage metrics on our website. I will now go through some of the operating results, including net sales, gross margin, and operating expenses. Other than net sales, I will be referring to these results on a non-GAAP basis, which is based on expenses prior to the effects of our acquisition activities, share-based compensation, and certain other adjustments as described in our press release. Net sales in the March quarter were $1.844 billion, which was up 4.9% sequentially and near the high end of our quarterly guidance. We have posted a summary of our GAAP net sales by product line and geography, as well as our total end market demand on our website for your reference. Going forward, we will only be providing GAAP net sales by product line and geography, consistent with the standard practice by our peer companies. We will continue to provide information each quarter on changes in distribution inventory levels. On a non-GAAP basis, gross margins were a record 66.6%, operating expenses were at 21.9%, and operating income was a record 44.7%. Non-GAAP net income was a record $764.6 million. Non-GAAP earnings per diluted share was a record $1.35, $0.10 above the midpoint of our guidance, $0.07 of which was driven by favorable events in the March quarter benefiting our cash tax expense. On a GAAP basis in the March quarter, gross margins were a record at 66.2%. Total operating expenses were $670.9 million and included acquisition intangible amortization of $215.5 million, special charges of $9.1 million, $3.8 million of acquisition-related and other costs, and share-based compensation of $39 million. GAAP net income was $437.9 million or $0.77 per diluted share and was adversely impacted by an $11.8 million loss on debt settlement associated with our convertible debt refinancing activities. Our March quarter GAAP tax expense was impacted by a variety of factors, notably the tax benefits recorded as a result of releasing the unrecognized tax benefit due to the closing of an audit in Europe. For fiscal year 2022, net sales were a record $6.82 billion and were up 25.4% from net sales in fiscal year 2021. On a non-GAAP basis, gross margins were a record 65.7%, operating expenses were 22.2% of sales, and operating income was a record 43.5% of sales. Non-GAAP net income was a record $2.611 billion, and EPS was a record at $4.61 per diluted share. On a GAAP basis, gross margins were a record 65.2%, operating expenses were 38.1% of sales, and operating income was 27.1% of sales. Net income was $1.286 billion, and EPS was $2.27 per diluted share. Our non-GAAP cash tax rate was 1.3% in the March quarter and 4.9% for fiscal year 2022. The non-GAAP cash tax rate in the March quarter was lower than originally forecasted due to a variety of factors, including the receipt of a tax refund that had not been forecasted to be received until a later date, lower taxes in certain jurisdictions, and tax benefits from our convertible debt exchanges. We expect our non-GAAP cash tax rate for fiscal 2023 to be between 7.5% and 11.5%, exclusive of the transition tax, any potential tax associated with restructuring the Microsemi operations into the Microchip global structure, and any tax audit settlements related to taxes accrued in prior fiscal years. The midpoint of our June quarter tax rate guidance is 9.5%. Our fiscal 2023 cash tax rate is higher than our fiscal 2022 tax cash rate for a variety of factors, including lower availability of tax attributes such as net operating losses and tax credits, as well as the impact of current tax rules requiring the capitalization of R&D expenses for tax purposes. Our inventory balance at March 31st, 2022 was $854.4 million. We had 125 days of inventory at the end of the March quarter, which was up 9 days from the prior quarter's level. Our levels of raw materials and work in progress increased in the quarter, which helps position us for the increased production we are expecting from our internal factories and helps buffer us against unexpected shortages or changes in material lead times. The carrying cost of our inventory has been and will be increasing due to the rising input costs from our supply chain. We are continuing to ramp capacity in our internal and external factories so we can ship as much product as possible to support customer requirements. Inventory at our distributors in the March quarter were at 17 days, which is a record low level and down from 19 days at the end of the prior quarter. Following on the heels of our upgrade to investment-grade BBB- in the December 2021 quarter, during the March 2022 quarter, we were upgraded to the equivalent of BBB by both Moody's and Fitch, reflecting the strength of our balance sheet, financial results, and our franchise. In the March quarter, we exchanged a total of $64.9 million of principal value of our 2027 convertible subordinated notes for cash and shares of our common stock. We used cash generation during the quarter to fund the principal amount of the convertible debt exchanges, and we believe that these transactions will benefit stockholders by significantly reducing share count dilution to the extent our stock price appreciates over time. The principal amount of convertible debt on our balance sheet at March 31st was $838.1 million. This includes $665.5 million of convertible bonds maturing in November of 2024, with a capped call option in place that offsets any potential dilution from these convertibles up to stock prices of $116.79. At the beginning of calendar year 2020, Microchip had $4.481 billion in convertible bonds outstanding, so today our overall capital structure is in a much better long-term position. Our cash flow from operating activities was $747.7 million in the March quarter. Our free cash flow was $633.1 million and 34.3% of net sales. As of March 31st, our consolidated cash and total investment position was $319.4 million. We paid down $205.9 million of total debt in the March quarter. Over the last 15 full quarters since we closed the Microsemi acquisition and incurred over $8 billion in debt to do so, we have paid down almost $5 billion of debt and continue to allocate substantially all of our excess cash beyond dividend and stock buyback to bring down this debt. We have accomplished this despite the adverse macro and market conditions during the earlier years of this period, which we feel is a testimony to the cash generation capabilities of our business, as well as our ongoing operating discipline. We continue to expect our debt levels to reduce significantly over the next several years. Our adjusted EBITDA in the March quarter was a record at $902.6 million and 48.9% of net sales. Our trailing 12-month adjusted EBITDA was also a record at $3.246 billion and 47.6% of net sales. Our net debt to adjusted EBITDA was 2.32 at March 31st, 2022, down from 2.58 at December 31st, 2021, and down from 3.76 at March 31st, 2021. Our dividend payment in the March quarter was $140.8 million, and we repurchased $259.6 million of our stock during the quarter. Capital expenditures were $114.6 million in the March quarter and $370.1 million for fiscal year 2022. We had originally forecasted capital expenditures of about $140 million in the March quarter, and we experienced delays in receiving some of our capital equipment from our suppliers. Our expectation for capital expenditures for fiscal year 2023 is between $450 million and $550 million as we continue to take actions to support the growth of our business and ramp our manufacturing operations. We continue to prudently add capital equipment to maintain, grow, and operate our internal manufacturing operations to support the expected long-term growth of our business. We expect these capital investments will bring gross margin improvement to our business and give us increased control over our production during periods of industry-wide constraints. Depreciation expense in the March quarter was $59.3 million. I will now turn it over to Ganesh to give us comments on the performance of the business in the March quarter, as well as our guidance for the June quarter. Ganesh? Thank you, Eric, and good afternoon, everyone. Our March quarter results were very strong across the board and set several records in the process. Revenue grew 4.9% sequentially and 25.7% on a year-over-year basis to achieve an all-time record of $1.84 billion. Despite a number of operational challenges, including the rapid spread of the COVID Omicron virus, which affected several of our factories, the shutdowns in several cities in China, and the suspension of shipments to Russia, we finished just shy of the high end of our revenue guidance. This was our fifth consecutive quarter of new revenue records. Non-GAAP gross margin was another record at 66.6%, up 50 basis points from the December quarter and at the high end of our guidance, as we continue to ramp our internal factories and benefit from improved operational efficiencies as well as product mix changes. Non-GAAP operating margin was also a record of 44.7%, very close to the high end of our guidance. At 21.9% operating expenses, we are 60 basis points below the low end of our long-term model of 22.5%-23.5%. Our long-term operating expense model will continue to guide our actions to invest for the long-term growth and profitability of our business. Our consolidated non-GAAP diluted EPS was a record $1.35 per share, well over the high end of our guidance and up 45.2% from the year ago quarter. Even after excluding the tax benefit we received, our March quarter non-GAAP diluted EPS at $1.28 was at the high end of our guidance. Adjusted EBITDA at 48.9% of revenue and free cash flow at 34.3% of revenue were both very strong in the March quarter, continuing to demonstrate the robust cash generation capabilities of our business. Net debt declined by $209.8 million, driving our net leverage ratio down to 2.32 in the March quarter as we continue to relentlessly drive down our net leverage. During the March quarter, we returned $400.4 million to shareholders, representing 52.5% of the prior quarter's free cash flow. Reflecting on our fiscal year 2022 results, it was one for the record books and one of our best years ever. We made dramatic progress on all fronts, revenue growth in operating margins, earnings per share, free cash flow generation, debt and leverage reduction, and last but not least, we significantly increased the capital return to shareholders through dividend increases and the initiation of a programmatic share buyback program. At our Investor Day in November 2021, we outlined our plan to increase the capital return to shareholders every quarter as our net leverage continues to drop. We are making consistent and meaningful progress toward our net leverage goal every quarter. I would like to take this opportunity to profusely thank all our stakeholders who enabled us to achieve these outstanding results, and especially thank the worldwide Microchip team for their never give up attitude and concerted effort to consistently deliver results to support our customers in the face of a historic and persistent imbalance between supply and demand. Taking a look at our revenue from a product line perspective, our microcontroller revenue was sequentially up a strong 7.6% as compared to the December quarter and was another all-time record. On an annualized basis, our March quarter microcontroller revenue broke through the $4 billion mark for the first time. On a year-over-year basis, our March quarter microcontroller revenue was up 28.3%. All microcontroller product lines, 8-bit, 16-bit, and 32-bit, experienced strong growth and achieved record revenue milestones. 32-bit microcontrollers had the highest growth and is now the largest microcontroller product line for us at 46.5% of our microcontroller revenue. Microcontrollers represented 56.7% of our revenue in the March quarter. Our analog revenue sequentially increased 3% in the March quarter, setting another record in the process. On a year-over-year basis, our March quarter analog revenue was up a strong 24.2%. Analog represented 27.9% of our revenue in the March quarter. Taking a look at our revenue from a geographic and end market perspective, Americas was up 21.4% over the prior year quarter. Europe was up 25% over the prior year quarter. Asia was up 27.9% over the prior year quarter. All end markets remained strong and were supply constrained. Business conditions continued to be exceptionally strong through the quarter. Our preferred supply program, or PSP backlog, continued to grow and remained well over 50% of our aggregate backlog and 100% of our backlog in the most constrained capacity product areas. Demand continued to be insatiable despite the significant capacity increment increases we have implemented so far. As a result, our unsupported backlog, which represents customer backlog, that backlog that customers wanted shipped to them in the March quarter, but which we could not deliver in the March quarter, climbed substantially again as we exited the March quarter with our highest unsupported backlog ever. We continued to experience constraints in all our internal and external factories and their related manufacturing supply chains. We are ramping our internal factories as fast as reasonably possible, and we are working closely with our supply chain partners to secure additional capacity wherever possible. Our supply chain partners, as well as some of our customers, were adversely impacted by the lockdowns in China during March, which continued into April and May. Our operations team worked to redirect our manufacturing activities and sourcing wherever possible to other locations that are not locked down. Looking at the magnitude of the demand supply imbalance, the size of our non-cancelable backlog, the rate at which new backlog continues to come in, and the rate at which we're able to bring on new capacity, we expect that we will remain supply constrained throughout 2022 and into 2023. Our growth is predominantly limited by how quickly we can bring on additional capacity to support demand. To reiterate what we first shared with you in March this year, we expect our five-year compounded annual growth rate using fiscal year 2021 as a baseline to be 10%-15%. We expect our capital spending in fiscal year 2023 to be at the high end of the range we have shared with you as we respond to growth opportunities in our business, as well as fill gaps in the level of capacity investments being made by our outsourced manufacturing partners in specialized technologies they consider to be trailing edge, which we believe will be workhorse technologies for us for many years to come. We believe our calibrated increase in capital spending will enable us to capitalize on growth opportunities, serve our customers better, increase our market share, improve our gross margins, and give us more control over our destiny, especially for specialized trailing edge technologies. We will, of course, continue to utilize the capacity available from our outsourced partners, but our goal is to be less constrained by their investment priorities in areas where they don't align with our business needs. Now let's get into the guidance for the June quarter. Our backlog for the June quarter is very strong, and we have more capacity improvements coming into effect. Taking all the factors we have discussed on the call today into consideration, we expect our net sales for the June quarter to be up between 4% and 8% sequentially. Our guidance range assumes capacity additions as well as continued materials and capacity challenges, some of which we expect to work through during the quarter, others that will carry over to be worked in future quarters. We have also included the anticipated effects of the lockdowns in China on our supply chain partners, as well as our customers. At the midpoint of our revenue guidance, our year-over-year growth for the June quarter would be a strong 24.6%. For the June quarter, we expect our non-GAAP gross margin to be between 66.8% and 67.2% of sales. We expect our non-GAAP operating expenses to be between 21.6% and 22% of sales. We expect our non-GAAP operating profit to be between 44.8% and 45.6% of sales. We expect our non-GAAP diluted earnings per share to be between $1.32 per share and $1.36 per share after comprehending the higher tax rate that Eric shared with you. Finally, as you can see from our March quarter results and the June quarter guidance, every element of our Microchip 3.0 strategy is firing on all cylinders as we continue to build and improve what we believe is one of the most diversified, defensible, high growth, high margin, high cash generating businesses in the semiconductor industry. To summarize the essential elements of Microchip 3.0, they are organic growth rate of 10%-15% in the fiscal year 2022-2026 time frame by focusing on Total System Solutions and our six key market megatrends. Long-term non-GAAP operating margin target of 44%-46% and free cash flow target of 38%. Consistently increasing capital return to shareholders as net leverage drops such that 100% of free cash flow is returned to shareholders by the time net leverage drops to 1.5x. A CapEx investment of 3%-6% of revenue and an inventory investment of 130-150 days over the business cycles. Last but not least, a strong company foundation built on culture and sustainability. Let me now pass the baton to Steve to talk more about our cash return to shareholders. Steve? Thank you, Ganesh, and good afternoon, everyone. I would like to reflect on our financial results announced today and provide you further updates on our cash return strategy. Reflecting on our financial results, I continue to be very proud of all employees of Microchip that have delivered another exceptional quarter and fiscal year while making new records in many respects, namely record net sales, record non-GAAP gross margin percentage, record non-GAAP operating margin percentage, record non-GAAP EPS, and record adjusted EBITDA. All of that in a very challenging supply environment. The board of directors announced an increase in the dividend of 9.1% from last quarter to $0.276 per share. This is an increase of 33.7% from a year ago quarter. During the last quarter, we purchased $259.6 million of our stock in the open market. We also paid out $140.8 million in dividends. Thus, the total cash return was $400.4 million. This amount was 52% of our actual free cash flow of $762.7 million during the December 2021 quarter. Our paydown of debt as well as record adjusted EBITDA drove down our net leverage at the end of March 2022 quarter to 2.32 from 2.58 at the end of December. In the current June quarter, we will use last quarter's actual free cash flow of $633.1 million and expect to return $348.2 million, which is 55% of that amount, to our shareholders. Out of this $348.2 million, the dividend is expected to be approximately $153.2 million, and the stock buyback is expected to be approximately $195 million. With that, operator, will you please poll for questions? Yes, thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question. Again, please press star one to ask a question. We will take our first question from Joe Moore with Morgan Stanley. Great. Thank you for letting me ask a question. I wonder if you could just talk to your visibility into the supply remaining tight in the context of, you know, markets that you guys don't serve. If you're seeing smartphones be a little bit weaker, you should be seeing foundry capacity free up in other places. Do you see that showing light at the end of the tunnel in the supply situation or no? Because we're not in the end markets you described like smartphones, we don't have direct visibility into what they're facing. We do read the same industry reports as to what might be happening. There is sometimes a delay between when something is perceived to be in the market to when it actually filters into the supply chains. At this point in time, we do not see any major relief in the capacity as a result of some other end market that is weak. You know, that may happen in time, but not at this point. Great. Thank you very much. Thank you. Our next question will come from Gary Mobley with Wells Fargo Securities. Hey, guys. Let me extend my congratulations to a strong finish to the fiscal year. You mentioned that your first quarter guide contemplates a lot of the different issues that we're all dealing with, including supply chain issues and customers' inability to manufacture. I was hoping maybe you could break that down, quantify the total impact that you have embedded in your first quarter guidance and what the split may be between customer-specific issues and your own supply chain issues. You know, it's a good question, but it's a very difficult question to quantify the way that you're looking for. There are upsides and downsides in the different risks that we're dealing with. What we have applied is a way to look at all of that and come up with an aggregate risk that we have built into the guidance. I don't have a specific breakdown that would be helpful to you on China customer or China supply or Russia, et cetera. It's all built into what we have. You know, we know that they're gonna come at us with slightly different twists than what we're thinking about, and all that is built into the guidance we've provided. Okay. Eric, if I can ask a follow-up question. You mentioned that distribution inventory is at an all-time record low down two days sequentially, but I think you've now had maybe three quarters in a row of sell into the distribution channel greater than sell out, albeit, you know, a fairly minor difference. What's the reason for the divergence there? Well, I just view the difference as really small. If you look at our fiscal year, I think there's an $11 million difference between GAAP revenue and what sell through was through distribution channels. I think it's minor. Distributors are challenged just like customers are today in terms of getting the product that they need to support their customers. We're generally seeing that what we're shipping into them is shipping out almost immediately to support their customers. You know, they also have a lower percentage of their backlog typically that is on the PSP program, and that has impacted their availability to get supply as some of the direct customers that got into PSP earlier or have a stronger presence in PSP have that priority of supply. Gary, what I would also add is that, you know, as business grows, distribution almost by definition needs more product shipped into them, in order for them to be able to prepare for that growth. The days of inventory is a more normalizing indicator that tells you how is what they're getting as a function of what is it that they're shipping through. So there is no concern with the fact that we are shipping in slightly more, and as Eric mentioned, it's pretty small in the grand scheme of things. Despite that, and despite the growth, their days of inventory are declining quite significantly, going from 19 to 17. I think that is a more meaningful indicator as to what's going on in distribution. Thanks, guys. You're welcome. Our next question will come from Vivek Arya with Bank of America. Thanks for taking my question. You know, there's a lot of concern about the possible, you know, downturn, whether it's late this year or next year. Ganesh, wanted to get your thoughts on reality versus perception. Let's say in a scenario if Microchip sales were to decline, you know, 5% or 10% next year, hypothetically, what happens to gross margins? Because if I go back in history, you know, the last time there was a meaningful sales decline was in 2009, and gross margins declined about six points or so. Is that the kind of decline that could potentially happen? Just, you know, give us your thoughts on a potential for a downturn if you're seeing anything. Then if there were to be one, what happens to gross margins? Thank you. You know, it's a hard question to take in the hypothetical, but let's look at where some of the cushions are, if and when that change happens, right? I think we were just talking about distribution inventory at 17 days, right? I mean, distribution is running on fumes. To run healthy, they need to be in that high 20s kind of days of inventory, sometimes slightly higher than that. I think that is the first part of what we would need to do is utilize the opportunity if there is this down cycle at some point to replenish distribution to run healthy for a normal business. Second is when you look at our inventory, right? Our inventory is up in a few days, but really when you look at the inventory at the points that are in die bank, in finished goods, those are all still running on fumes for us, given the mix of our products. We have a significant amount of internal inventory replenishment, et cetera, to be done. Finally, you know, I think we have conveyed that our products are such long-lasting products that we intend to build inventory in a down cycle because that is the most effective capacity we can have rather than trying to get CapEx to go up when the next upcycle comes about. We had constraints in doing that in the last cycle when we were more cash constrained given the debt that we have. We don't have those same constraints. Our products last 10, 15, 20 years, and we fully expect that we will utilize our capacity and be more capital efficient through the cycle whenever that cycle happens. I'd like to add to that, Vivek. You know, your question began with if Microchip goes down 5%-7%, and then you compared it to 2009, when over a six-month period, industry and Microchip's revenue was down 35% in the middle of a global financial crisis. I don't think anybody's looking for that kind of downturn next year, where the revenue goes down, you know, that much percentage. You know, I think a 6% gross margin drop in 2009 environment is scary, and I don't think we ought to be expecting that kind next year, even if the sales were to drop 5% for the elements that Ganesh pointed out. It will take us, you know, a period of a year at least to really rebuild our own inventory, restart distribution, and get everything healthy. I don't really think there is that much concern about gross margin dropping that much. Thank you. Tore Svanberg with Stifel has our next question. Yes, congrats on all the record numbers. Question on CapEx. You didn't quite get to the number you wanted this quarter. You cited some delays in equipment sales. I was just wondering if the situation there is improving or not, you know, just quarter-over-quarter, because clearly last quarter things felt pretty constrained to get equipment, but are you seeing any improvement there at all? No, I think it's still a challenge to get equipment, and over the last four or five qu arters, it's become more challenging to get equipment in on time. Delays are there. It's a bit of a vicious cycle. Many of the delays are caused by shortages in semiconductor components. Those in turn delay the equipment, which delays the ability to solve that problem. We have in fact taken the initiative to prioritize supply for many of the semiconductor equipment manufacturers so that we do our part to both help the industry and help ourselves in doing that. I believe others are doing it as well. At the moment, the equipment lead times are getting worse, not better. Great. Thank you. You're welcome. Our next question comes from Chris Caso with Raymond James. Yes, thank you. New question about some of the capacity additions and specifically the timing of when we could expect more substantial capacity to come online. I think what you've said previously is that your capacity would come on in a fairly linear, even fashion as you brought on more supply. With some of the CapEx jump that you'd have into fiscal 2023, when does that start to have an impact? Then there's a bit of an inflection point in your ability to supply and therefore revenue once that CapEx turns into actual capacity. Chris, there's no single point at which there is a step function change in our capacity, right? We are getting capacity increases every quarter as equipment comes in, it gets qualified, installed and begins to run production. Some of that is in our front-end fab, some of that is in our back-end factories, as the case might be. In certain cases, we are expanding clean room, and that clean room space comes on at a certain point in time, which allows us to put in place more equipment. It's more of a continuum of capacity increases that is taking place. Every quarter, we are increasing capacity. In some cases, it requires equipment. In other cases, it's really just hiring the people to run the equipment that we have. All that is kind of a more continuous process every quarter rather than a step function in any given quarter. Got it. As a follow-up, I wonder if you could give some color on some of your end markets. You know, are there any areas where you've seen, you know, demand substantially increase or decrease? I mean, elsewhere from other industry reports, you know, where we've seen, you know, some changes are largely areas you don't participate very much in some handset and PC. Interesting if you've seen anything of note within your end markets that you'd wish to talk about. As I mentioned, all end markets are strong. Maybe the one of note would be we are seeing more strength in the defense aerospace end of the market. Commercial aviation is coming back, and so some of the folks that were not building are starting to build more. There are gonna be some defense-related items, given some of what's going on geopolitically that will come through. You know, that's a small part of our overall business, so, it's still got significant strength in the other five end markets that we're in. Thank you. Welcome. Our next question comes from Chris Danley with Citi. Hey, thanks, guys. A longer-term question. In the past, I guess in the recent past, we've asked you about additional acquisitions. You said that avenue has pretty much been closed because there's, to paraphrase you, not much out there, and things are expensive. I'm just wondering if your thought process has changed at all, given that the stocks have sold off, that you think that this upturn will be more sustainable than in the past, and there's extra capacity seems like it's at a premium out there. Has anything changed as far as the thought process goes? Not really. I think what we had said is, you know, we met the major objectives we had when we went on our multi-year acquisition path. The two big ones at that time was to be able to build scale, and the other one was to build out the portfolio to be broader than what it was 10 years ago. Having reached both those objectives, we think there is more to be had in focusing and harnessing organically what we have and getting the best of what we have. So we were doing more acquisitions when the available growth was also limited, and we wanted to augment our organic growth with the acquisitions. We believe we're at a point in time where there is a substantially higher organic growth opportunity available. The most cost-effective growth we think is organic, and that is where we're focused with the many, you know, specific strategies that we have put in place, for that. We have large acquisitions and of course, we still do small pinpoint acquisitions that are tuck-ins intended for technology market or customers from time to time. Yeah. Thanks, Ganesh. You're welcome. Plus, in today's environment, you couldn't, you know, get the benefit of, you know, cross-selling on a new acquisition because there's no capacity. You'll simply be inheriting the capacity challenges of an acquiree, and if there are any cross-selling opportunities to grow revenue, you wouldn't have capacity for it because we're constrained even just shipping our organic growth. Got it. Thanks, Steve. Once again, if you'd like to ask a question, please press star one. We'll now hear from William Stein with Truist Securities. Great. Thanks so much for taking my question. Congrats on the great results and outlook. I'm hoping you might dissect the growth either year- over- year or sequentially by units versus pricing. If you could also comment on the effect that that's having on gross margins because, of course, pretty sure you guys use FIFO inventory, so you have lower cost product flowing through the P&L on higher priced products to customers. Any clarity on those would really help. Thank you. Directionally, when I look at it year-over-year, is there a component of the growth that comes from price? Yes. The majority of the growth is coming from units. You know, price, as we have talked about before, is predominantly for us to be able to address cost increases that we have incurred, which we batch and pass on from time to time to our customers. The gross margin benefits of the price increase are really not something we target to go get. I'll let Eric speak to maybe the timing of the FIFO inventory and all that. But largely, we're not trying to goose up gross margins through the price changes that we're making. Yeah. From a timing perspective, as Ganesh said, we try to batch these price increases as things are starting to flow through the P&L. It's not a perfect process, but you know, that's what we try to do. Again, we're not trying to gouge customers. We're trying to pass along the cost and earn what I would call a standard margin on that, but not be a gross margin percentage enhancer. With you know, 100,000 SKUs in the portfolio, again, it's not a perfect process, but I think we've done a good job of doing that and being fair with our customers. Thank you. Our next question will come from Harsh Kumar with Piper Sandler. Yeah. Hey, guys. First of all, congratulations. You know, great results, great guide. Steve, the question that a lot of us have been trying to ask in a variety of different ways, I think is this, that, you know, when you look at the revenue growth of not just Microchip, but the industry associated with the auto business overall, the chip business overall, and you look at the growth rate, and you try and compare that with the growth rate in autos and you account for the content gains, which I know are very strong, we still end up with a lot of gap. That's probably the area that I get the most amount of questions from the buy side. I was curious if you might have some thoughts on what is happening, why is the semiconductor industry benefiting to such a great degree, and that gap is so wide? Let me take that. Sure. You know, I think if you look at the automotive industry, in some ways, I look at their results over the last four or five quarters, and I think a semiconductor shortage is probably the best thing that's happened to them. Every one of them has record results, record profitability, whether that is at the OEM level or the tier one level. Why? What they have done is really utilized the available semiconductor supply they have to build the richest product line that they can build. If you try to go to a dealer today and try to buy a de-featured car, it's not available. You can get it in a year's time or whenever they tell you it is. The semiconductor content per car on average has grown up because the mix has become much richer. Things that perhaps were optional or not available before are becoming more standard because in a smaller number of cars they wanna sell, they are utilizing as many semiconductors as become available for that smaller number of cars to have the richest product line. Secondly, from an automotive standpoint, there are no discounts available. All of the discounting that took place is a gross margin tailwind for the automotive guys. The chips we're selling. By the way, our shortages that we deal with the automotive customers hasn't really abated in the last year. We still have significant escalations and issues that we're working with not just automotive, but you know, just about every industry, but automotive specific, since you asked that. There is no indication that all is quiet on the automotive front with respect to the getting product that they need. They are still fighting through shortages in order to be able to build exactly the cars and the mix of product that they wanna make. Very helpful, guys. Thank you so much. Our next question will come from Christopher Rolland with Susquehanna. Hey, guys. Thanks for the question. Also, congrats. Microcontrollers, you guys had some interesting revelations there, I guess, on 32-bit becoming the majority there. Would love to know kinda how you see longer term growth rates between maybe 8-bit and 32-bit. As 32-bit accelerates, is that a tailwind for you guys for gross margin? Thanks. First maybe to parse out, right? All three, 8-bit, 16-bit, and 32-bit, are still setting new records, so all are growing. Clearly there is a higher growth rate on the 32-bit, which is why, you know, it grew the most and, you know, it's now approaching almost half of the microcontroller revenue. Now, we continue to expect that the usage of microcontrollers and the embedding of intelligence in lots and lots of end applications is a critical secular trend that has tailwind for our business overall. We've kind of represented and shown that in the six mega trends and how what we do fits in those kind of or end applications and drives growth for us. Now to your second question on gross margin, you know, the gross margin of the microcontroller business is not dramatically different between 8, 16s, and 32s. You know, we go to market with an approach that allows any one of our products to be utilized depending on what is most appropriate in the customer situation. The pricing is to the value that we bring into that application. The general gross margin, we don't believe is affected by the mix of 8, 16s, and 32-bit. Great. Thank you, Ganesh. One for either you or Steve. A lot of people have talked about potential overcapacity for the industry in 2023 and 2024. Would love to get kinda your views on whether you think that's a thing or not and what its effect on industry pricing might be. Thanks. I'll give you my view, and then maybe Steve will add to it as well. You know, it's a bit of a misnomer when you talk about overcapacity in 2023 or 2024. When you look at where's the CapEx being spent by the industry, right? Industry spent over $100 billion of CapEx last year. The vast majority of that CapEx, over 90% of it, is being spent on the bleeding-edge nodes. These are the nodes that are, you know, 16 nanometer and smaller, so 16, 10, 7, 5, 3, etc., is where all that is being spent. Where the capacity is not being, you know, invested in at the rates that are required and where, for example, all of the constraints that the industry is fighting through short, medium, and long term are on these trailing edge specialty technologies. On 300 millimeter, that is typically anything which is 40 nanometer and larger in size, very little capacity investment coming online to be able to help that. On 200 millimeter, eight-inch wafers, there's almost nothing that is being done outside of what some of the IDMs have been doing, and which really is still a far cry from what is needed. While there is CapEx spending taking place of quite significant amount, it is being spent disproportionately on the bleeding-edge technologies, and there is still significant constraints left on the trailing edge specialty technologies that we don't see easing up into 2023 and 2024. Steve, do you wanna add some more to it? Yes, yes, I would. What has happened historically is that the foundries built a leading-edge fab. It depreciated it fully over 40 years, providing leading-edge chips to, you know, the likes of Qualcomm and AMD and others. When the leading-edge guys moved to the next node, then they took that capacity, a depreciated fab, and repurposed it for microcontroller, mixed signal, you know, connectivity and those kind of products. That's how over many years trailing-edge capacity became available. Now, what has happened now is that link is broken. The leading-edge lithography has gone to 14 nanometer, 10 nanometer, even 7, 5, and 3 nanometer. While the microcontrollers and analog, because of, you know, functionality needed, are still in the range of 65-nanometer to 180-nanometer. Therefore, the trailing edge capacity no longer easily becomes available because somebody moved to the next node. Secondly, you know, starting at 90 nanometer, the wafers became 12-inch. Less than 90 nanometer, the wafers are 8-inch. Eight inch is largely aluminum back-end, and 12-inch is largely copper back-end, and one is not compatible with the other. The 12-inch fab becoming available doesn't easily give the capacity for an 8-inch product to move to 12-inch. Combination of those factors and the fact that the foundries are adding almost no capacity on the trailing edge, you know, it is quite possible that the trailing edge capacity is forever constrained. That's why we are making aggressive attempts to add capacity internally to provide that, you know, growth to our business and to our customers, and you're seeing some of our competitors do the same thing. Very illuminating. Thanks, guys. Thank you. We'll now take a question from Harlan Sur with JP Morgan. Good afternoon. Congratulations on the strong margins and overall execution. Currently, you know, you're not quite where you wanna be on OpEx as a% of sales, but your business is growing strongly, so it's hard to bring on personnel at a faster pace than your business is growing. Won't you guys have the same challenge longer term, given your new long-term revenue CAGR of 10%-15%? Given your revenue scale, can the team really grow its OpEx by double-digit percentage points going forward to maintain your OpEx target? I guess my point is, with the accelerated rated revenue growth targets and $8 billion of revenue scale, it would seem that you'll be driving stronger leverage on the operating margin than what your model implies because you kept your operating margin targets unchanged when you increased your four-year revenue CAGR. Am I missing something? I'll give you my view, and then Eric probably will wanna add to it as well. You know, I think investments in the operating expense are not just in people alone. That is clearly one of the large investments we've got to make. Beyond that, there's intellectual property, there's you know, work we have to do, there's research and development work that takes place, which has wafers and other things we have to do. We do believe that strong gross margin and strong growth businesses don't fall out of the sky. They need to be thought through, invested in, and executed. You know, we need to make sure that while today's gross margins are strong and where they're at, that we continue to build for the future in a competitive world that ensures that continued new products and technologies, and the associated marketing and other activities we need to do, will be able to keep those gross margins high and keep the growth rates high in where we're at. You know, today's environment is a bit challenging also because of the availability of people is a thing. You know, that won't be there forever. We do expect that in time, we will solve some of those shortages of being able to hire people, et cetera, and do need to get back into the range that we have provided. You know, that's what creates a sustainable high-growth, high gross margin business. Do you wanna add to it? I think the only other thing I would add is just a point of clarification on the statement that you made in your question, Harlan, is that, you know, we are targeting this 10%-15% CAGR on revenue based on fiscal 2021 as a baseline, right? We just completed fiscal 2022, which is a very strong growth year. We're expecting another strong growth year. Yep. I don't want you or investors to necessarily just put in your model 10%-15% on a perpetual basis going forward. We'll have to see how that plays out over time, but that's a five-year CAGR based off of fiscal 2021 as a baseline. Nope. Understood. Thank you. Thank you. Our next question comes from Pradeep Ramani with UBS. Hi. Thanks for taking my question. Can you speak to maybe the trends with respect to how your backlog and largely unsupported backlog how it sort of grew in June versus March? Maybe even address it from the perspective of PSP. Is your PSP duration stretching quarter-over-quarter, or is it about the same? Can you help us with that? Thanks. The PSP program requires 12 months of continuous non-cancellable backlog. Many customers choose to go longer than that, and we don't really track what is the, you know, what percentage that is above or below where it is. We make sure that everybody's in compliance with the program. We do have a meaningful amount of that backlog that is more than 12 months, and we do have overall PSP backlog continuing to grow. That's one part of the question. On the other part of it is exiting the March quarter, our unmet backlog grew again quite significantly, and that is the sixth or seventh or some consecutive quarter of continuing expansion of unmet, just giving you the sense of how no matter how much incremental capacity we have brought on, we continue to be falling behind versus the intensity of demand. So it's just, it's not that supply isn't coming online, it's just demand is outgrowing supply multiple quarters and expanding that gap between supply and demand. Yeah. I think I would just add two points. Ganesh said one of these already, but in the quarter, total backlog grew, u nsupported backlog grew and PSP backlog grew. All of them were up quarter-over-quarter. Thank you. We'll now take a question from Ambrish Srivastava with BMO. Hi, thank you for fitting me in. I had a question on lead times. Have lead times stabilized? You folks have been adding capacity, which should translate into some alleviation. Just a question on lead times. Then Ganesh, you talked about the price increase, and as it relates to the PSP, what has been the reaction to the price increase programs that you have in place? Thank you. Lead times are long. I wouldn't say that they're stabilized. Some of the constraints, you know, are still quite acute. To the extent that demand continues to grow faster than supply, the only way to solve is on lead time. Lead times have been stretching out more so on some products, perhaps than other products, and where they're at. On the pricing increase and PSP. Anytime we increase prices, our customers have a small window in which they have the opportunity to refuse the price increase and cancel the backlog if they so wish. We have the opportunity to adjust the price if we so wish, which we have not done. What customers have, you know, in the course of the price increase that we have done, the amount of backlog that they have chosen to cancel is so small, it's almost, you know, immeasurable in the grand scheme of what we have. There has been no final impact of the price increase on our PSP backlog. Sorry, just a clarification. What I meant to ask on lead times was that are lead times continuing to go up or the rate of the increase has slowed down considerably because I forget, what is the capacity that you have brought online on a year-over-year basis? There's no easy answer to give you on what capacity. You know, it's capacity is a function of our internal capacity, our external capacity, specific packages, some materials which have constraints on the industry like substrates, et cetera. In any given product package combination, the constraints can be quite large and can be well over a year in lead time. In others, as we are alleviating them, you know, we may get to where it's not pushing out as much or at least stabilizing there. But in the aggregate, I would say that lead times have not stabilized and that constraints continue to grow. As our imbalance between supply and demand grows every quarter, it solves on time. Got it. Thank you, Ganesh. Okay. Our next question will come from Chris Danley with Citi. Hey, guys. Let me ask a follow-up, just a quick one. I guess for Ganesh or maybe the sage of semiconductors, Steve, saying we'll take a shot at it. Did you guys quantify the impact from the China COVID shutdowns on your business? Also, any insights as to, you know, how come you are managing to have it affect you a little bit less than some of your peers? We did not break out what the China COVID impact is. Clearly, there are impacts from both supply, where we have manufacturing partners and supply chains that are affected, and there are customers who are in the regions that are shut down and unable to conduct business in what they're doing. We have comprehended the impact from both the supply and the demand side into the guidance that we have provided. You know, beyond that, we're not trying to break it down any further than that. As far as you know, what other people have done and how do we think, I honestly don't know because it's all a function of what percent of their manufacturing or customer base is in the affected area, and that is not very knowable for us. I presume each company has the insight into their business to provide the guidance that they think is right. Okay, thanks. Let me add to that. I think the amount of China exposure, both on the supply chain as well as, you know, customers, is different for different companies. When it comes to supply chain, you know, we had moved a fair amount of our supply chain out of China when there were tariffs put on China back in 2019. A lot of them we left outside of China, so we had substantially lowered our exposure for the supply chain. That could be one. In terms of the impact we're having on Chinese customers in Shanghai, yes, we have finite impact on that, but we were able to take that supply and ship it elsewhere because of the large delinquencies. We were largely able to mitigate the impact of customers not wanting to accept a product because they were closed. Okay. Thanks, Steve. Welcome. Our next question will come from Matthew O'Connor with BNP Paribas. Great. Good afternoon, and thanks for taking my question. Maybe Ganesh, a question on silicon carbide. You had some new product announcements on silicon carbide in the quarter pretty much around charging stations and on the industrial side. Can you just talk about Microchip's strategy and positioning there within? Silicon carbide, is that just really focused on high voltage and very particular applications? Related to that as well, you know, as silicon carbide ramps up, is that a headwind to growth margin? That's my first question. Maybe just to follow up on the CapEx for next year, mentioned at the high end of the range. Could you give us any sense what portion of that is maintenance versus capacity expansion? Thank you. Sure. You know, our silicon carbide technology came to us from the Microsemi acquisition, has a heritage started in aerospace and defense, and therefore has a substantial DNA that is built around robustness and reliability for where it's at. We have since continued to build that technology out and expand its focus into industrial and automotive with a higher interest in industrial because it's faster time to market but also because it has far more you know gross margin characteristics that align with where Microchip's interests are at. That's what we have done, is continue to bring out new products that have higher voltage capabilities. High voltage is an indication of robustness and its ability to operate in these, you know, harsh environments, bring out more product categories. I think we at this point probably have one of the larger catalog of silicon carbide products in the market. We are prosecuting these in a broad range of applications with obviously a high degree of industrial customers, some in automotive. In industrial, the one example you just cited, which is EV chargers, is a key reference design for us for our Total System Solutions, not just for silicon carbide, but for many other parts of that solution that we bring that we're finding great success in. The second piece of your question was on CapEx, and it was, you know, maintenance versus expansion. I would say the majority of our capital is going to be expansion. There's always some maintenance. You can look at, you know, some down years that, you know, we've seen or the industry has seen in the past, and our CapEx is relatively minimal, might be $60, $70, $75 million. We're also running our factories very hard now, and with that, you know, there is required maintenance that has to happen. I don't have a specific percentage for you, but the largest portion of it will be expansion capital. Very helpful. Thank you. Thank you. Our next question will come from Nikolay Todorov with Longbow Research. Yeah, thanks for squeezing me in, congrats on great results. I wanted to go back on the question about lagging edge capacity. Steve, I think your comments were very illuminating into explaining one of the reasons why lagging edge capacity is not as much as probably historically. I just wonder, why do you think it is gonna remain constrained? Given the fact that you and other peers are seeing substantial amount of unmet backlog, tons of orders into visibility and for years ahead. It seems like there's definitely demand out there. Also profitability for you and peers that are operating in that lagging edge capacity is an all-time high. Can you talk maybe one of the other factors why lagging edge investments are not going up? When you talk to the foundry companies, their opportunity cost of investing in trailing edge is high as compared to making that same investment in leading edge. They have finite resources, finite bandwidth, and they need to decide where to put it. Right now, what we see and what they tell us is that is going in the way that they are investing their CapEx, which is mostly at the leading edge, where they're at. There is also not always sufficient understanding of how trailing edge is a critical part of certain markets, particularly for certain product types, where the benefits of going to leading edge are very small to sometimes it's a negative to go take it to leading edge in terms of cost and performance, et cetera. That understanding is among a smaller set of companies, and typically, they will be the ones that are, you know, closer to their own manufacturing and understand what it takes. We just don't see a broad-based, you know, capacity investment by external foundries in trailing edge capacity, given both their knowledge of the market, but also their priority in a constrained environment for their people, their CapEx, and their bandwidth. I appreciate the answer. We'll take a question from Craig Ellis with B Riley Securities. Yeah, thanks for taking the question, and congratulations on the really strong margins, team. I just wanted to follow up on that last point and a few of the capacity-related points, but my question is really around external supply. Can you just talk about some of the gives and takes very recently with external supply and, given the commentary around foundries not investing as intensively, help us understand how the company feels about the external supply's contribution to the 10%-15% longer-term growth rate. Do you feel like that with your partners, you've got commitments to supply that can get you to that 10%-15%? Or what will that part of supply do, if you can't get the supply that you need? Yeah. We have every confidence that the capacity that we need to support our growth through a combination of internal and external actions will be there. You know, we will continue to work with existing partners. In some cases, we will work with new partners. We will in many cases partner in new and unique ways where we need to ensure that the capacity is there. We are doing quite a bit on our internal capacity, right? That's where all the CapEx that we have talked about is also aimed at in order to ensure that high growth, high margin, long-term business can continue to be done internally where we can do it cost effectively. Great. Thank you. We have no further questions queued at this time, so I'll turn things back over to Ganesh Moorthy for any additional or closing remarks. Great. Well, thank you everyone for joining us this afternoon. We look forward to seeing many of you on the circuit over the next couple of months as we're out at different conferences. Thank you. Bye-bye. That does conclude today's conference call. Once again, thanks everyone for joining us. You may now disconnect.