Greetings, and welcome to the Microchip Technology Q2 Fiscal Year 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Eric Bjornholt, Chief Financial Officer. Good afternoon, everybody. 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 second quarter fiscal year 2024 financial performance. Ganesh will then provide commentary on our results and discuss the current business environment, as well as our guidance, and 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 the Investor Relations page of our website at www.microchip.com, and included reconciliation information in our earnings press release, which we believe you will find useful when comparing GAAP and Non-GAAP results. We've also posted a summary of our outstanding debt and our 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 earnings press release and the reconciliations on our website. Net sales in the September quarter were $2.254 billion, which were down 1.5% sequentially. 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 68.1%, operating expenses were at 20%, and operating income was a record 48.1%. Non-GAAP net income was $889.3 million, and non-GAAP earnings per diluted share was $1.62. On a GAAP basis in the September quarter, gross margins were 67.8%. Total operating expenses were $642.4 million and included acquisition and tangible amortization of $151.4 million, special charges of $1.8 million, share-based compensation of $38 million, and $1.1 million of other expenses. GAAP net income was a record $666.6 million, resulting in a record $1.21 in earnings per diluted share. Our non-GAAP cash tax rate was 14.2% in the September quarter. Our non-GAAP tax rate for fiscal year 2024 is expected to be about 14.2%, which is exclusive of the transition tax and any tax audit settlements related to taxes accrued in prior fiscal years. Our fiscal 2024 cash tax rate is expected to be higher than our fiscal 2023 tax rate for a variety of factors, including lower availability of tax attributes, such as net operating losses and tax credits, lower depreciation with our expectation for lower capital expenditures in the U.S. in fiscal 2024, as well as the impact of current tax rules requiring the capitalization of R&D expenses for tax purposes. We are still hopeful that the tax rules requiring companies to capitalize R&D expenses will be pushed out or repealed. If this were to happen, we would anticipate about a 200 basis point favorable adjustment to Microchip's non-GAAP tax rate in future periods. Our inventory balance at September 30, 2023, was $1.331 billion. We had 167 days of inventory at the end of September quarter, which was flat to the prior quarter's level. Although we reduced inventory dollars in the quarter, we were not able to make as much progress as we would have liked, as we continued to accommodate requests by customers to push out delivery schedules for products that were very far through the manufacturing process. We also continued to invest in building inventory for long-lived, high-margin products whose manufacturing capacity is being end-of-lifed by our supply chain partners, and these last-time buys represented 10 days of inventory at the end of September. We expect dollars of inventory on our balance sheet to reduce in the December quarter. Inventory at our distributors in the September quarter was at 35 days, which was up six days from the prior quarter's level. Our cash flow from operating activities was $616.2 million in the September quarter. Included in our cash flow from operating activities was $87.5 million of long-term supply assurance receipts from customers. We have adjusted these items out of our free cash flow to determine the adjusted free cash flow that we will return to shareholders through dividend and share repurchases, as these supply assurance payments will be refundable over time as purchase commitments are fulfilled. Our adjusted free cash flow was $454.3 million in the September quarter. As of September 30, our consolidated cash and total investment position was $256.6 million. Our total debt increased by $45.6 million in the September quarter, and our net debt was up by $60.2 million. Over the last 21 full quarters since we closed the Microsemi acquisition and incurred over $8 billion in debt to do so, we have paid down $6.72 billion of the debt and continue to allocate substantially all of our excess cash beyond dividends and stock buyback to bring down, to bring down this debt. In the September quarter, we issued a $750 million Term Loan A, and retired $1 billion in bonds that matured on September 1, 2023, with the Term loan A and proceeds from our line of credit. We also issued $1 billion of commercial paper during the September quarter, taking advantage of about a 90 basis points lower interest rate on the commercial paper compared to our line of credit rate. Our line of credit had $39 million of borrowings against it at September 30, 2023. During the September quarter, we also retired 18.2 million of total principal amount of our 2027 convertible bonds for a total cash payment of $42.7 million. The amount paid above the principal amount essentially works like a synthetic stock buyback, reducing any current and future share count dilution that could result if these convertible bonds were ever converted into shares. The $24.5 million we paid above the par value for the convertible bonds was in addition to our normal share buyback activity that we executed during the quarter, resulting in an additional reduction in the dilutive share count outstanding. Our Adjusted EBITDA in the September quarter was $1.152 billion and 51.1% of net sales. Our trailing 12-month Adjusted EBITDA was a record at $4.57 billion. Our net debt to Adjusted EBITDA was 1.28 at September 30, 2023, down from 1.84 at September 30, 2022. Capital expenditures were $74.4 million in the September quarter. Our expectation for capital expenditures for fiscal year 2024 is between $300 million and $325 million, which is down from the $300 million-$350 million we shared with investors last quarter, as we are delaying certain capital, given the more challenging economic backdrop. We expect that our capital investments will continue to provide us with increased control over our production during periods of industry-wide constraints. Depreciation expense in the September quarter was $47 million. I will now turn it over to Ganesh to give us comments on the performance of the business in the September quarter, as well as our guidance for the December quarter. Ganesh? Thank you, Eric, and good afternoon, everyone. Our September quarter results were about as we expected, with net sales coming in just under the midpoint of our guidance and well within our guidance range. Net sales were down 1.5% sequentially and up 8.7% on a year-over-year basis. Non-GAAP gross and operating margins remained strong at 68.1% and 48.1%, respectively. Our consolidated non-GAAP diluted EPS was at the midpoint of our guidance at $1.62 per share, up 11% from the year-ago quarter. Adjusted EBITDA was 51.1% of net sales, and adjusted free cash flow was 20.2% of net sales in the September quarter, continuing to demonstrate the strong cash generation characteristics of our business. Our net leverage exiting September dropped to 1.28x. We had higher cash flow outflows in the September quarter compared to the June quarter due to the timing of tax payments and because of record capital return to shareholders in dividends and share repurchases, totaling $562.6 million. This was 61% higher than the capital return to shareholders in the June quarter. Our capital return to shareholders in the December quarter will increase to 77.5% of our September quarter adjusted free cash flow, as we continue on our path to return 100% of our adjusted free cash flow to shareholders by the March quarter of calendar year 2025. My thanks to all our stakeholders who enabled us to achieve these results, despite the increasingly challenging macro environment, and especially to the worldwide Microchip team, whose effort and engagement enables us to navigate effectively through the business cycles. Taking a look at our September quarter net sales from a product line and geographic perspective, our Mixed-S ignal Microcontroller net sales were down 1.7% sequentially and up 8.5% on a year-over-year basis. Our Analog product line, our net sales were down 1.7% sequentially and up 8.8% on a year-over-year basis. On a sequential revenue basis, Asia was down, Europe was about flat, and the Americas were slightly up. Now for some color on the September quarter. Our business slowed down as expected, as our customers continue to respond to the effects of increasing business uncertainty, slowing economic activity, and a resultant increase in inventory. The combined effects of persistent inflation and high interest rates, we believe, are contributing to the weak macro environment. All regions of the world and most end markets experience varying degrees of weakness. We continue to receive requests to push out or cancel backlog as customers sought to rebalance their inventory in light of the weaker business conditions and increased uncertainty they were experiencing, and we were able to push out meaningful amounts of backlog to later quarters to help many customers with inventory positions. We are seeing customers continue to adjust the demand expectations as they de-risk their inventory position wherever possible. Our experience from prior cycles is that at this stage of the cycle, customers tend to overcorrect their inventory and backlog due to their business uncertainty, combined with the availability of product with very short lead times. This is, in effect, the flip side of what we saw during 2021 and 2022, when demand was historically strong and seemingly insatiable. Reflecting the slow macro environment, our channel inventory grew to 35 days. We are working with our channel partners to find the right balance of inventory required to serve customers, as well as to be positioned for the eventual strengthening of business conditions. Most of our internal capacity expansion actions remain paused, and we expect this will result in lower capital investments in fiscal year 2024 and fiscal year 2025, even as we prepare for the expected robust long-term growth of our business. In the meanwhile, we have been driving our lead times down and have reduced average lead times from approximately 52 weeks at the start of 2023 to approximately 26 weeks at the end of June, and exited the September quarter at approximately 13 weeks. We expect to continue to drive average lead times down further to less than eight weeks by the end of 2023. During a period of macro weakness and business uncertainty, we believe short lead times are the best way to help customers navigate the environment successfully and improve the quality of backlog placed on us, as it enables our customers and Microchip to engage an uncertain environment with more agility and effectiveness. However, the significant reduction in lead times is also resulting in lower bookings and reduced near-term visibility. Now let's get into the guidance for the December quarter. As our customers take further actions to adjust to a weakening macro environment and uncertain business conditions, we are continuing to support customers and channel partners with inventory positions to push out their backlog. Taking all the factors we have discussed on the call today into consideration, we expect our net sales for the December quarter to be between down 15% and down 20% sequentially. At the midpoint of our net sales guidance for the December quarter, our year-over-year decline for the quarter would be 14.3%. We expect our non-GAAP gross margin to be between 64% and 65% of sales. We expect non-GAAP operating expenses to be between 22.7% and 23.3% of sales. We expect non-GAAP operating profit to be between 40.7% and 42.3% of sales, and we expect our non-GAAP diluted earnings per share to be between $1.09 and $1.17 per share. Given the current macro weakness and resultant business uncertainty, combined with our lower bookings and reduced near-term visibility, we anticipate that our March quarter revenue is likely to decline again sequentially, although to a lesser extent than the December quarter decline. Notwithstanding any near-term macro weakness, we are confident that semiconductors remain the engine of innovation for the applications and markets we serve. Our focus on total system solutions and key market megatrends is fueling strong design win momentum that we expect will drive above-market long-term growth. If you review Microchip's peak-to-trough performance on a trailing 12-month basis through the business cycles over the last 15+ years, which is included in the investor presentation posted on our website, you will observe our consistent and resilient cash generation, gross margin, and operating margin results. We remain confident that our non-GAAP operating margins on a trailing 12-month basis should remain above 40% through the business cycles. With that, let me pass the baton to Steve to talk about more about our cash return to shareholders. Steve? Thank you, Ganesh, and good afternoon, everyone. I would like to provide you with a further update on our cash return strategy. The board of directors announced an increase in the dividend of 33.8% from the year ago quarter to $0.439 per share. During the last quarter, we purchased $339.8 million of our stock in the open market. We also paid out $222.8 million in dividends. Thus, the total cash return was a record $562.6 million. This amount was 72.5% of our actual adjusted free cash flow of $776 million during the June 2023 quarter. Our net leverage at the end of September 2023 quarter was 1.28 x. Ever since we achieved an investment-grade rating for our debt in November 2021 and pivoted to increasing our capital return to shareholders, we have returned $3.248 billion to shareholders through September 30, 2023, by a combination of dividends and buybacks. In the current December quarter, we will use the adjusted free cash flow from the September quarter to target the amount of cash returned to shareholders. The adjusted free cash flow excludes a net $87.5 million that we collected from our customers for long-term supply assurance payments. These payments are refundable when purchase commitments are fulfilled. The adjusted free cash flow for the September quarter was $454.3 million. We plan to return 77.5%, or $352.1 million of that amount to our shareholders, with the dividend expected to be approximately $237.5 million, and the stock buyback expected to be approximately $114.6 million. Going forward, we plan to continue to increase free cash flow return to shareholders by 500 basis points every quarter until we reach 100% of adjusted free cash flow returned to shareholders. That will take five more quarters, and dividends over time, we expect will represent approximately 50% of our cash returned. With that, operator, will you please poll for questions? Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We also would like to suggest that you limit your questions to one question and one follow-up. One moment, please, while we poll for questions. Our first question comes from the line of Toshiya Hari with Goldman Sachs. Please proceed. Hi, thank you so much. I guess my first question is on the December quarter outlook. I think you gave a little bit of color by geo, but I was hoping you could provide a little bit of context by end market, if any of the end markets stand out, either to the downside or the upside. And, is this mostly volume that's driving the sequential decline in revenue, or are you starting to see price, pricing erode a little bit as well? Thank you. Sure. So firstly, there is no pricing that is driving the changes. It's all volume. The weakness is very broad-based, across the different geographies, across the different end markets, with perhaps, you know, the one end market which continues to have reasonable resilience is aerospace and defense, as you might expect. But it's extremely broad-based at this point. Got it. And then as my follow-up, maybe one for Eric on gross margin and I guess utilization rates as well. You know, how, you know, how are your factories running today, both wafer processing and packaging and test? And as you continue to adjust to sort of the evolving demand environment, how should we see that impacting gross margins beyond the December quarter? And how, how should we think about the trough? Thank you. Okay. So on, on utilization, you know, we, we have let the, the wafer fabs, you know, kind of reduce from where they were at the peak when they were running just full out, and that, that has dropped modestly. You know, we're still not in a situation where we are taking underutilization charges, and that's not anticipated in the gross margin guidance that we've provided. But they are running, you know, at lower levels and not as efficiently. On the assembly and test side, we definitely have reduced the activities in assembly and tests. We'd rather build the product through die bank, through the wafer fabs, and then have it ready when orders come in to be able to turn it quite quickly with short lead times through the assembly and test process. The assembly and test is more kind of in line with where consumption is. We actually reduced finished goods last quarter, and we'll continue to be very focused on that. Our next question comes from the line of Ambrish Srivastava with BMO. Please proceed. Hi, thank you very much for taking my questions. Ganesh, you, you mentioned cancellations in your prepared remarks, and I just wanted to get if you could provide us with a little bit more, details around that. This is the first time you've mentioned that. And so what, what, percentage is it of your orders? And then what is it for you is just starting the year-over-year decline, which is kind of related. Second part question is the typical cycle, I don't know, 5-7 quarters a year-over-year decline. What's your sense of how long does the year-over-year decline last, given the programs you had in place? Now, if you, if you look back, and clearly you were over shipping over the last few quarters, so, color on both would be very helpful. Thank you. So first of all, you know, inside of 90 days, any orders that a customer has are cancelable. So that's our, just our standard terms. And then there are the longer-term, non-cancelable orders that we have worked, and we don't really work on cancellations there as much as rescheduling and pushing out, where that backlog would be. You know, a lot of the backlogs that have been placed over the last many quarters were based on very long lead times, and the conditions for the market for many of our customers have changed over that time. And so what they believed their businesses were gonna do, and what their businesses are doing today, are a little bit different from when they placed those orders, and that's where they're making adjustments to what they require. And, if their run rates come down, then whatever units they have in inventory or they have placed on us are at a higher run rate than they really need. And that's what reflects some of the correction you're seeing, to bring, our shipments, and the customer's inventory more into line. And then the period of year-over-year declines on a, if you just compare it to the last few cycles? So I know every cycle is different. I don't know about the year-over-year decline necessarily, but when you look at historically how cycles have played out, you know, typically there's a two, three-quarter period of time over which the digestion of that inventory takes place. And upon that being completed, the consumption, which is normally ahead of the shipments, catches back up, and, you know, that's how the cycle gets reborn in what we have seen. Got it. Thank you. You're welcome. Our next question comes from the line of Gary Mobley with Wells Fargo. Please proceed. Hi, guys. Thanks for taking my question. You commented in your prepared remarks that you expect a further sequential decrease in the March quarter, and I would assume that that would come with perhaps some lower gross margin attached to it. And that puts you pretty close to that 40% operating margin threshold without any OpEx adjustments. So maybe if you can just speak to, you know, whether or not that lower revenue comes with lower gross margin, and as well, what sort of measures you'd be willing to take to make OpEx adjustments. So, you know, I think in any given quarter, as revenue declines, the operating margin at a very large change in revenue is not, you know, you can't draw a line and say, "Okay, it'll never fall below this line." We look at our operating margins on a trailing 12-month basis. That's what we've always had in terms of the data we've presented, the trough number that we have put out there. And, you know, we don't know exactly what the magnitude of what might take place in March is. But, we're confident that if you look at a four-quarter rolling or a trailing 12-month, we will still be at that 40% trough as where we see it going. I guess I would add to that, what investors and analysts have seen from Microchip over time when we face these cycles, is we are pretty nimble, and we adjust our business appropriately to the environment, whether that's on the expense side or, you know, if we need to do something with utilization. And, you know, right now, we're continuing to run the factories at a pretty high level, but lower than they were before. And OpEx, we have, you know, some levers that we can pull, depending on, you know, what business environment we're going to be facing in March and beyond. Okay. In the follow-up, I wanted to ask about distribution inventory, which, you know, was up, up sequentially. I know you don't really have a sense of how quickly the sink is draining or the channel is draining, but maybe if you could just give us a sense of when you could get, you know, see that work down a bit. So, you know, in terms of timing, some of that's going to be based on, you know, what the distributors want to take in terms of inventory, and then obviously, what the end market consumption is going to be. So it's hard to forecast. You know, our distributors are tasked with having, you know, the right level of inventory in place to support their customers, and we will work with them to achieve that level. And, you know, just like customers, some distributors need inventory and some distributors are over-inventoried, are going to work through that, and it takes some time. So don't have a specific way to answer your question, but I imagine over the next couple of quarters, that distribution inventory will get more right-sized to whatever the distributors think is the best place for them to be. Thank you, guys. The next question comes from the line of Timothy Arcuri with UBS. Please proceed. Thanks a lot. One thing that made you a little different than your peers during the upturn was the, you know, PSP and your NCNRs. And, and the idea was that you don't, you know, just let customers push that out and, you know, push that out and, and, you know, push that out. But it does sound like that's actually what's happening. So are you, are you sort of being a little more proactive about maybe cleaning that out and forcing them to come back and place new orders? And I'm just kind of wondering about the discussions that you're having with these, you know, customers that have been under these NCNRs. So this is not the first quarter in which we have been doing that. We have mentioned that at prior calls as well. You know, when customers are trying to place orders farther out in time, they do the best they can. And as conditions change, we will have discussions with them to see what we can do to help and what they can do to help us in terms of what future business is. And in any business relationship, there's give and take. And, of course, we have done, you know, significant amount of push-outs, to help them out. Okay. And then, Eric, can you give us an idea of inside of December, how much of the guidance depends on turns? We do not break that out, but it's a small number. Small number. Okay, thank you. Yeah. I would say that we still have more backlog on our books in total than what would be typical for us. But lead time is coming down. Thanks, Eric. Our next question comes from the line of Vivek Arya with Bank of America Securities. Please proceed. Thanks for taking my question. I had one on sales and one on gross margins. On the sales side, I think, Ganesh, you mentioned that the March quarter could decline again, and I'm wondering if there is a conceptual way to size it. So let's say if you assume that June and September have kind of been the peak of this cycle, should we be thinking, I don't know, 25% peak to trough, that kind of put, March sales down mid-single digit. Is that a reasonable way to think about it? Just bigger picture, do you think 25% peak to trough is a reasonable expectation of decline in this cycle? What does history kind of tell us? In fact, the history is all over the place. And so it's unclear for us to be able to give you, and especially when we have low visibility into the March quarter, and we have, you know, a fair amount of turns to take in the March quarter itself. The business hasn't gone away, the customers haven't gone away, the designs haven't gone away, so we know they're all there. It's now a matter of where's the macro telling our customers what their builds should be, where is their inventory at, and, you know, where they will be building to as they go into the March and June quarters for themselves. But, you know, at 17.5% in the December quarter, I think this is probably one of the larger declines historically for Microchip than the first quarter of the global financial crisis. So you can see there's a pretty big chunk that is taking place here in the December quarter. Okay. On the gross margin side, I'm trying to get a sense of both kind of the downside risk from here, and then, you know, whenever we get back to kind of these revenue levels in the next cycle, will gross margins get back to prior levels? So on the downside, I think you're guiding gross margins down about 350 basis points. That's also below what we have seen in prior down cycles. Is there a way to think about what is the kind of the trough-ish potential level? I think, Eric, you mentioned you're still keeping utilization high, if I recall. So, you know, what happens if you have to start cutting them? So what's the downside risk? Then, you know, part B of that is, let's say we come back to these revenue levels sometimes, right, over the next several quarters. Will gross margins get back to 68, or will it be different because the 68%, right, ±, was achieved during a period of very strong industry pricing and shortages? Yeah, so there's a lot in that question, and I wish I had a crystal ball to answer it specifically. But, you know, the bottom line is we, as I said in my response before, we will adjust our operations based on the environment that we're faced with. And, you know, with needing quite a bit of turns in the March quarter at this point in time, with short lead times, which again, is not unusual, but not something that we've faced over the last couple of years, there is some uncertainty. But we have confidence in our business longer term, and the products that we build in our factories, you know, sell for years and years and years. So sometimes the offset between taking utilization down and then building the product and taking an inventory reserve charge for a period of time, those things can somewhat offset each other. So, you know, we'll evaluate that based on what we're facing when we get into March and beyond, and adjust accordingly. But we fully expect our gross margins to stay strong. Yes, they are taking a drop this quarter, but still, you know, exceptionally high gross margins. And I wouldn't expect a huge drop from where they're at. But again, that kind of depends on, you know, if the environment requires us to do something different. If there's something we aren't seeing at the moment, we'd evaluate that and share that with analysts and investors at that time. Ganesh, would you want to add anything at all to that? I would say, you know, if the revenue is back at the levels that we've been at, I see no reason why our gross margin wouldn't be back to the levels that we are at. Yeah. Thank you. Our next question comes from the line of Tore Svanberg with Stifel. Please proceed. Yes, thank you. I know this is a tricky one, but we talk about, you know, overshipping and undershipping. Do you have a sense for what the true consumption is of your business, at this point, on a quarterly or annual basis? A hard question to come up with because, you know, our customers' demand has also shifted over the last six months or so, as they are trying to figure out where is the macro going and what is their real demand. And so, I don't know if there's a clear number we could give you that says this is what is consumption. But as we go through this correction, we believe we will be shipping under consumption. But to what extent? I can't tell you. That's fair. And then moving on to the operating margin, and not to sort of, like, focus on the math here, but when you, when you position as a, as a trailing twelve months, I mean, you know, one quarter, one quarter could be as low as 25%, right? So I'm just trying to understand just conceptually, with your OpEx, you know, how much variability do you have if we continue to see, you know, sequential declines in revenues? So we have more flexibility in our OpEx compared to what we've guided the current quarter for. You know, we are not ready to size that for the street at this point in time. But, you know, as I said before, you guys have seen us work through cycles before, and, you know, if the cycle gives us something that's extreme to work with, we will take more measures in our business. That is not what we're hoping that we need to do. But, we do have levers that we can pull, that we've pulled historically, that if we're faced with a more difficult environment than we anticipate, you know, OpEx can come down from what you're seeing here in our guidance for the current quarter. Very helpful. Thank you, Eric. You're welcome. Our next question comes from the line of Joshua Buchalter with TD Cowen. Please proceed. Hey, guys. Thanks for taking my question. I wanted to follow up on the utilization comments. So you mentioned, you know, matching utilizations to the business environment, but, you know, clearly you're seeing weakness at your end customers. I guess, what are the signals that would drive you to lower utilizations? Like, what are the, you know, what would you need to see? And then can you maybe expand a little bit more on the rationale behind keeping utilizations high as you're trying to work through inventory, both on books and in the channel? Thank you. So I'll start, and Ganesh and/or Steve can add to this. But again, our products have very, very long life cycles. If we were to cut utilization in the factories significantly, there is a large portion of the cost that you can't take out because of the very heavy fixed cost environment. And so the balance, you know, does it make sense to build the inventory, have that higher inventory, have it available to support your customers when the business environment turns positive, which it will? And, you know, that's kind of how we're managing it right now. Now, you can obviously get to a point where that inventory is too high, and it doesn't make sense, and, you know, we don't think that we're in that position today. But, you know, we have let fab utilization fall from where it was, and we'll continue to monitor it on a, you know, really a weekly, monthly basis and make decisions as we go. Yeah, what I would add to it is, you know, ramping a fab, after you take it down drastically, takes time to get people hired, trained, get the equipment, and the remaining process, work to be done, takes time. So, you know, as we saw in 2021 and 2022, you know, we put the foot on the accelerator, but it took time to get the ramps going. So I think you want to be careful as you make some of those changes, and we are making small changes to get them to where we want to be. But because we have the good fortune of products with extremely long life cycles, right, all of the inventory is in good shape. And in fact, all that inventory allows us to do two great things. One, respond quickly when the business changes, and we know when it changes, it will change faster than we expect on the upside. And second, push the capital that is required to be deployed in order to generate those products farther out in time. So I think it is a good asset utilization in terms of being able to be careful with how we take capacity down. I appreciate all the color there. Thank you. For my follow-up, I wanted to ask about pricing. I guess it's encouraging to hear pricing still hanging in, but, you know, there's a big investor concern that it will roll over. Can you, I guess, provide some anecdotes or, like, what do you think is allowing firmer pricing than in past cycles? Because that's what's allowing margins to hang in, I think, better than fear, given the top line, but also a major concern for investors. Thank you. The pricing on our product line, which are long design cycles, very sticky product lines, in past cycles, has never been something that rolled over. Nor are we prone to, you know, trying to use price as a way to leverage any short-term demand change because it, it doesn't help in where we're going. So our cycles of experience with how we have handled other cycles for pricing, plus, you know, where we are and how we're navigating this cycle, we don't feel price is the, is the place where change is expected to happen. Thank you. You're welcome. Our next question comes from the line of William Stein with Truist Securities. Please proceed. Great. Thank you for taking my question. Guys, I know you're only guiding a quarter, but you made this comment on March, I think, about a sequential decline. By my math, I think typical seasonality is down at least a couple percentage points. And just to help us sensitize our models, would you anticipate another, as you called it last time, I think, amplified or magnified seasonality in Q1? Or do you think it's possible that we're more like a normal seasonal result? Well, there's so little, you know, visibility that we can apply to any kind of intelligent answer at this point in time. You know, we, we need to get farther down the time to see how next quarter takes shape, and we're guiding to just one quarter, the December quarter at this point in time. We've given you some directionally where our sense is for the March quarter, but in terms of the magnitude, there's nothing that we can provide at this point that would be helpful. Understood. I have a follow-up, if I can. I'm hoping you can size for us the amount of sales in the December quarter that you anticipate will be filled as part of the PSP program. And similarly, how much PSP backlog you have after December still on the books? It just seems to me with lead times at 13 weeks going to, I think you said 8, it's hard to imagine customers are, you know, lining up for that still. Thank you. So you're right. You know, PSP had a time when it was far more important for customers to be enrolled and to be taking advantage of that priority. As cycle times come down, there are fewer PSP orders that are needed from any customers. It's not that it's gone away, it's still there in a reasonable amount, but it's typically the customers who are very long cycled in their design and very high value in their end products. Because quite honestly, there are many parts of the market that are concerned about what happens on the flip side of this cycle, whenever that is in, you know, in the second half of 2024, et cetera. So, it's a customer choice. No customer has to use PSP unless they believe it provides them a tool, and we made adjustments to the program to give them more flexibility, have shorter, you know, amount of window of time, et cetera. And we'll continue to evolve the program, and if there's use for it, customers will take advantage of it, and if they won't, if there isn't, then they won't. Thank you. Welcome. As a reminder, ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Chris Danely with Citi. Please proceed. Hey, thanks, guys. Question on the geos, I guess. So in terms of all these, cancellations and pushouts in the forecast, have any geographies fared any better, or worse as we're going through this correction? No, because a lot of our customers can be in multiple geographies, can be headquartered in the U.S., but manufacturing in a different geography. And so, the intensity or the requirements for pushout and help has no geographic signal that would be different. Okay. Yeah, I know you said North America was flattish in the previous quarter. I was wondering if anything was still holding up or worse. As my follow-up, so we've seen some of these internal China OEMs finally start to do their own analog or mixed- signal chips, you know, BYD doing their own BMS solution is one of them. And it seems like, you know, they don't really care about quality or cost or what have you. You know, can you give us a sense, if you know, of roughly how much of your business goes to, you know, domestic China? And do you see any risk that the, you know, non-China MCU business could have issues with this? So, you know, the proportion of what goes into China for China, of a broad-based product line, I would say is probably, you know, under 5%-ish or in that range. I don't have an exact number, so don't hold me to that. The difference is that this is not new, that we have competition in China. The business is extremely fragmented. You know, there's hundreds, thousands of customers and applications that are there. And so even previously, we would have had some designs where somebody didn't care about quality or didn't care about something else and said, "I'm just gonna overuse this," and that's not unusual in where it's happened. So it is something we are paying attention to, but not something which is creating a dramatic change in the business itself. Got it. Thanks, Ganesh. You're welcome. Our next question comes from the line of Christopher Rolland with SIG. Please proceed. Hi, guys. Thanks for the question. Can you guys talk about or give us a rough idea of what percent of bookings coming into any of these quarters are being pushed out each quarter? And is that representative, basically, of the December sequential drop that we're getting here? As you guys mentioned, like, that you really didn't have any turns business into the quarter, and I think December has traditionally been somewhat flat. And are these levels of pushouts increasing progressively as we move along here? So let me start, and then Eric might wanna chime in here as well. So firstly, you know, new bookings are not the place where people are trying to push things out, because if they're new bookings within the last 3-6 months of time, those are with much more informed sense for demand, supply, market, et cetera. A lot of the pushout requests are for backlog that was placed, you know, nine, 12, or longer months, where, as time has gone on, the need as they perceived it when they placed the orders and the need as they see it today, when they are facing the reality of what the markets have changed to, are different. So new bookings actually are in far better shape just because they are much more informed about current market conditions. Right. What I guess, what I would add to that is, you know, that those new bookings have been pretty modest that have been coming in, right? So the bookings have been lower. We don't break out a book-to-bill, but bookings have been low. And, you know, the bottom line is, I think it's very difficult for customers to know what they need, you know, particularly with those orders that, as Ganesh was saying, they were placed nine or 12 months ago. But we have had certain instances where customers have actually asked for a pushout, and then the next month they're coming back to us and asking for us to pull it in. So I think it's just a very uncertain environment at the customer level, and obviously, that causes some churn on our backlog and the requests that we get for pushout activity. They have a benefit today of knowing that supply is readily available, that lead times are short, and they are taking advantage of that, which would make sense. Yeah, I think that's a great tie-in, maybe to my next question. I guess with hindsight, how do you guys evaluate instituting that 12-month PSP? Was that a good thing, a bad thing? Would you do it again? And if so, were there any changes you would make? It's a question we ask ourselves all the time, but I think you also have to look at not 12 months as a standalone piece of information, right? It is, what were the lead times? So when lead times are 52 weeks, you really can't offer somebody something inside of that because there isn't the capacity—all the capacity within that window is already consumed. So like all programs, they have to be designed with a sense of the information at a given point in time, and they have to evolve as that information changes. And so even on PSP, right? It used to be 12 months, today it's 6 months. We made that change several months ago. The flexibilities, et cetera, around it have changed, and each program is designed to create a customer solution, and that solution has to be sensitive to what problem we're trying to solve at a given point in time. PSP was a fantastic program for 2021 and 2022, and parts of 2023, when there was very long lead times, and the customers who participated got the most benefit from there. Today, it has less value when cycle time, when lead times come down dramatically, and for, other than a small set of customers, it is not as important to provide that much visibility. Yeah, and, you know, I, I've said this at, to investors time and time again, that if we had not had PSP, I am confident that our backlog would have been higher, but we wouldn't have known what was good backlog and what was bad backlog, and we would have made the wrong decisions in terms of foundry orders that we made, capital equipment that we were putting in place. And so, you know, the PSP program was designed in a way where we were trying to service customers in a very long lead time environment, where we were capacity constrained, and, you know, give the customer an option to do that, but then have skin in the game also, where just not all that risk fell on Microchip. So there's a lot of good things that came with PSP. Obviously, when the cycle changes, you know, customers can feel differently about the backlog that they place than they did when they placed the order. But, you know, there were a lot of happy customers that were serviced well because of the program. Makes sense. Thanks, Eric. Thanks, Ganesh. You're welcome. Our next question comes from the line of Chris Caso with Wolfe Research. Please proceed. Yes, thank you. The question is on the cash return program and the buybacks. I understand that the program is really meant to be formulaic, but the question is: is there any flexibility within that program to be more opportunistic, you know, at times like these? And obviously, you guys are still generating a good amount of cash, but you know, taking advantage when the downturn in the stock is down. Have you contemplated that? Let me get it kicked off, and then I think Steve might want to weigh in here as well. So the program is something that the board looks at on a constant basis, and there is nothing that would prevent us from doing something which is opportunistic for the right reasons, if the board believes that's the right action for us. Steve, do you want to add to that? Yes. So, you know, while the main body of the program is formulaic, where we are increasing the cash return to shareholders by 500 basis points every quarter and increasing our dividend by about 7% or so every quarter, and the remaining amount becomes the stock buyback. The program doesn't prohibit us from taking advantage of an environment where stock gets into a severe downdraft for any reason. We can certainly, you know, have the cash resources on our credit line and all that to, you know, to forward buy the stock from the following quarter and then buy less in the following quarter. So it doesn't stop us from doing that. We have not done that so far. I think, you know, stock just has been kind of reasonably constant in the range of between $70 and $90. But if there was to be a substantial, you know, opportunity at a lower stock price, which was to emerge, for any reason, then Microchip has the flexibility to do anything we want it to do. Chris, we have the headroom in what's the approved buyback. There's over $2 billion of headroom available there, and we have the headroom in our line of credit. Got it. That's helpful. As a follow-up, I just want to return to gross margin and the utilization. And I guess asking perhaps some of the questions that have been answered in a different way, is there a particular level of inventory that would make you uncomfortable, that would cause you to reduce the utilization? And I guess part of this depends upon somewhat the duration of the downturn, you know, how long this downturn should last. I think that's a key point to look at there, because if you're looking at your inventory on a backward-looking basis or current quarter-type basis and what that drives, but you have confidence that two quarters, three quarters, four quarters, six quarters, whatever out in time, that the business is going to go back and exceed, you know, prior highs, you know, you're gonna take a different action than if you think the business is in decline mode or in stagnant mode. So, you know, those are all the things that we need to evaluate when determining how we're gonna run our factories and what's the right position for the inventory. And, you know, we've got our position today, and, you know, as I've said, we'll continue to evaluate that based on the environment that we see in front of us. Yeah. Thank you. Our next question comes from line of Vijay Rakesh with Mizuho. Please proceed. Yeah, I, I was just wondering, is there like a target inventory level that you want to maintain? Or, or the flip side of that is, you know, when at what point do you start to throttle back utilization use? So, you know, our target levels that we set at our Analyst and Investor Day back in November of 2021 was 130-150 days. We are obviously above those levels today, and then there's reasons for that. And, you know, I think some of your question I responded to in response to the prior question. So, you know, we're not uncomfortable with where the inventory is today. You know, we're going to watch it closely, depending on the environment, and then that's gonna be what the outlook is in terms of, you know, are we comfortable continuing to run the fabs at the levels that they're running at today, or if we need to do something different. You know, we're not at that point today where we're gonna do something different. Yes, inventory is above our target levels, but I think we're managing it appropriately, and we'll, we'll continue to do so. You know, I would add that- Got it. In steady state is where the 130-150 is where we wanna be. If you look back at the last cycle, I think we were down to, like, 108, 109 days, and that was when it was in the, you know, the place where demand was so high, it was depleting our inventory. Today, we're at 167. Ten days of that are really last time buy, so you take that out, we're around 157. So we're not, you know, dramatically outside of the steady state range that we would need to be. Got it. No, the reason I asked is because the revenues take a step down, the DOI might spike, but I got it. And then as you look at the market conditions, can you talk to where the inventory levels are trending? And does that prompt, are you seeing any, you know, pushback on pricing, in the supply chain, you know, as supply comes on or as demand conditions soften a bit? If you can give some color on that. So firstly, you know, at our distributors, we have a view into the inventory they have. At our customers, we use their requests for pushout, pushouts and all that as a proxy for understanding it. But, you know, customers have many business units, many product lines, and they could be, you know, on certain product lines, wanting to push out, and other ones they wanna pull in, so it's all over the place. And there was a second part of your question. About pricing. Pricing, yeah. I wasn't quite sure if that was a customer pricing or a supplier pricing, so is it supply chain pricing or our customer pricing that you're asking about? Your customer pricing in terms of, you know, as the market conditions change, as the supply improves, as inventory levels go up, is that, is that now becoming a part of the discussion? You know, all good purchasing managers are gonna ask for lower price in an environment that is softer. But these are products where the price elasticity isn't there, where somehow, if we took a lower price, we'd get more shipments this quarter or next quarter, et cetera. And these are long design cycles. Prices are set, you know, 18, 24, 36 months ago. They're very low. Pricing is at the point of designing, and, you know, we will be competitive at the point where we do the designing. Business itself, in the short term, is not affected by the pricing. All right, thank you. Welcome. Our next question comes from the line of Harlan Sur with JP Morgan. Please proceed. Yeah, good afternoon. Thanks for taking my questions. Maybe another one on just the inventories. You know, last quarter, you talked about the lower-than-expected sell-through in China, which was largely responsible for the rise in channel inventories in June, when I think days increased, you know, I think it was five days back in June. Days increased another 6 days here in the September quarter. Was this primarily continued disti sell-through weakness in China, or was the pickup more pronounced in other geographies? I'd say that, you know, disti sell-through was not strong in any geography, so, you know, we did not see any significant improvement in distribution sell-through, so, China has continued to be weak. It has. We have not seen the level of improvement we expected out of China, and there's plenty of news information about, you know, what's happening from an economy standpoint there. Then, Ganesh, you talked about the relative strength in aerospace and defense. Your data center and compute franchise, I think, probably now it's about 20% of your business. You know, mixed demand trends here as well, but you guys are exposed to some of the stronger areas, like accelerated compute. How is this end market trending for the team? So I think on data center, I think the last breakout was about 17% or so in that range. But, you know, there are many subsegments that go into it. We clearly have a, you know, tailwind on anything and everything that goes into the artificial intelligence and, the, generative AI, space, et cetera. But in terms of the volume that that drives and the dollars that it drives, while it is meaningful, it's not big enough to offset some of the other weakness we have in other parts of data center. Thank you. You're welcome. Our next question comes from the line of Joe Moore with Morgan Stanley. Please proceed. Great, thank you. You know, Ganesh, you talked about every cycle being different. You know, in this cycle, in the upturn, it seemed like the shortages were more severe. You did see prices go up more on a like-for-like basis, and your margins got higher than we've seen before. So I guess, you know, as you think about the downturn, is that gonna reverse, or do you have a situation where there's more awareness of the supply chain, people wanna hold more inventory because of the intensity of those shortages? Can you just tell us, like, how the strength in the last couple of years might portend for the next couple of quarters? I think different customers have different levels of strategic versus tactical thinking. You know, last night, I had dinner with the CPO of one of our largest customers, and they're extremely thoughtful about not just the next one quarter, but about the next three, four years of time and how they wanna plan for it. I've also had similar discussions with people who, you know, were for two or three years suffering from lack of product, and all of a sudden have forgotten about all the things that they need to be able to do. So it's all over the place, and it really depends on what are the pressures they're under. But for the most part, what we see is our customers or our customer's customer, in many cases, who are people who build many of the high-value systems, are much more thoughtful about how a small piece of the bill of materials is not where they need to be able to make a saving while they have, you know, substantial value that they're trying to create at the overall system. So there's no single answer because we serve, you know, 100,000 customers. It's all over the place. But without a doubt, short lead times are giving them more flexibility in terms of, you know, what are they trying to, you know, place on us and how much time do they need to give us, in many cases. That's helpful. Thank you. Thank you, Joe. Our next question will come again from the line of Ambrish, Ambrish Srivastava with BMO. Please proceed. Hi, thanks for squeezing me in with a follow-up. I had a quick one for you, Eric. What's the target days of inventory for distributors? So we don't really have a target. You know, it's been all over the place. Historically, it's been as low as 17 days, and it's been as high- Hmm ... as I think is 47 in our history, and probably as high as 41 over the last maybe 10, 12 years. So it's a broad range, and, you know, ultimately it's the distributor's decision on the product that they purchase and how they support their customers. And, you know, obviously, they need a certain amount of inventory to effectively serve their customer base, and if they don't hold that inventory, the end customer will find another, another channel to buy that product through. So, we don't, we don't drive it to a certain number of days. I would not be surprised in the current environment if distributors, with interest rates where they are, if they try to take their inventory down to some degree. But, you know, where, where that goes to, it's very hard for us to predict. Thanks. And may I ask- If I can add to that. Sure. You know, distributors' business- Yeah -over time has also changed. They do- Yeah the warehousing services for many OEMs, where they actually carry and pipeline inventory for them. So they have programs that are not the traditional distribution, where they are carrying the product and, you know, the turns rate is not the same when they are pipelining for a very large OEM. So inventory is, as Eric said, something that each distributor has a model for what they're trying to accomplish, and what they want and what they need is where they end up at. Right. And your business has changed a lot also over the years. You have aero, aerospace and defense, which you didn't have several years ago. So that's why I was asking, and I think you gave a helpful answer, a tidbit on the target of inventory days, Ganesh, that the 10 is also you're carrying as the end of life, so you're not that far out of the range on where you are on versus your target shared at the Analyst Day. So anyway, thank you. Great. Thank you. Ladies and gentlemen, there are no further questions at this time. I'd like to hand the call back to management for closing remarks. Okay. I wanna thank everybody for participating in the call today, and we do have many events that we will be at during the course of this quarter, and we look forward to talking to you more at those events. Thank you. This concludes today's conference. You may now disconnect your lines.