All right, we're live, day three at our conference here, the Raymond James Institutional Investors Conference. Good morning, everyone. I am Melissa Fairbanks. I cover Analog Semis and some of the IT Supply Chain names here at Raymond James. We are really happy to have Eric Bjornholt from Microchip, CFO of Microchip. We've also got Sajid Daudi, who handles investor relations for them. They've had a busy week this week. They did a business update on Monday morning that was pretty monumental and I think pretty important. We're going to dig into that, but Eric, welcome. Thank you for coming back again. Thanks, Melissa, and good morning, everybody, so during the course of this discussion, I'll be making certain forward-looking projections about the financial performance of Microchip. I refer you to our filings with the SEC that identify important risk factors about the company, so as Melissa said, we had a business update. We've got Steve Sanghi back as CEO, and he's been back for about 100 days now, and when he first came and talked to the market. Uh-oh. So I got to say all that again. Okay. Quick Safe Harbor review. They heard me at least. Sorry about that. So good morning. Technical difficulties. Safe Harbor will be short. Look at our SEC documents that identify important risk factors about the company so we gave a business update after Steve Sanghi, our CEO, has been back at the company for about 100 days. We did that Monday morning pre-market. He identified back in early December a nine-point plan of different things that he wanted to review and make some decisions on, and we can go through each of those one by one as part of this discussion, but we've done a couple of things. We've adjusted our manufacturing footprint to get this inventory, high inventory that we've established here over the last 18 months or so, heading back in the right direction so we shut down one of our fabs. We announced that actually back in early December, Fab 2, that is ahead of schedule, and Fab 2 will be closed by May. The last wafer starts have been started, and we need to get those through the facility. The bridge build is happening, and then we'll transfer production over time to our other two larger factories, so inventory was a high emphasis point for Steve. We did announce on Monday also that we're going through a corporate-wide layoff, and in addition to doing some additional things in manufacturing to right-size the manufacturing footprint, we also are taking out about 10% of our operational R&D, SG&A headcount as part of that to get the company right-sized and get us back on track to get to the new business model that we introduced, which we'll talk about more, but that's setting our non-GAAP gross margin target at 65% and our non-GAAP operating target at about 40% operating margin, and we've been there before. We've got a clear path, I think, to get there. We're excited about it. We think we're making a lot of changes. And with that, I'll turn it back to Melissa for questions. And we can also take questions from the audience to talk about any of these nine points. I have a feeling we might have a lot. I would, just to begin, I would highly recommend you go check out their website. They do have a presentation up from Monday's business update. There's a lot of data in that presentation that the company has never shared before, and I think it's very helpful in understanding the path and already some of the returns that you've started to see from some of the actions that you've taken. It might be helpful, though, to start: how did we get here? For those that may be unfamiliar with the semi cycle, or if you can even call this a cycle, the past several years, Microchip took a little bit of a unique approach to managing through the shortages, but if you don't mind kind of walking us through a little bit of that plan. Sure. So the cycle kind of started around the COVID time period. And what happened with that is because of demand, there was fear from customers on one end, and they weren't placing orders because they didn't know what the end environment was going to be because of COVID. And other areas just exploded in demand. So medical things, just the demand for that took off significantly and consumed capacity. People were working from home. So computers and cameras and systems that you need to work from home, that exploded and that absorbed capacity that was previously allocated elsewhere. And when customers found out that, hey, maybe COVID isn't going to have as big an impact on my business as we thought it would, lead times had pushed out. And when lead times pushed out, customers can't get inventory as quickly as possible. And backlog started to build, lead times pushed out further. And we found ourselves in a situation where the average lead times, the amount of time between when a customer places an order and we can deliver it, extended to 52 weeks+ for the majority of our products. And historically, that had been less than 12 weeks, eight weeks or less for many of the products. So a big change from our customer's perspective. So that created all sorts of havoc in the supply chain. To say the least. Yeah, where we were having to place significant orders for equipment for our factories. We had to order large amounts of foundry wafers, had to enter into long-term agreements because supply was constrained everywhere, and we did those things, and as part of that process, we introduced a program called PSP. It's a Preferred Supply Program where customers would give us 12 months of NCNR, Non-Cancelable, Con-Reschedulable backlog. In exchange for that, they would get priority of supply, so that program was very popular. It exploded, and we had massive amounts of backlog that customers told us and we felt was real. As the cycle progressed, customers were getting inventory at later dates than they wanted it to be and kept placing this backlog, and we had multi, multi-quarters of backlog in place and had sized our capacity to be able to support that. And eventually, when lead times started to come down, that demand started to dry up. And we had all these commitments for equipment, all these equipments for supplies for this backlog that customers said was real. And then customers said, hey, well, I would like to push out or cancel that backlog. And we didn't want to get caught in the middle of having to take everything from our suppliers, but then have built this inventory for customers and get stuck with it. So it was a tough situation. And we probably held on to that PSP program for a couple of quarters longer than we should have. And what that did is that had us peak at a higher high and later than some of our peers. And now we have fallen to a lower low at the bottom of the cycle. But we're seeing positive change in the business today. We showed a bookings chart that showed kind of our monthly bookings over the last year-plus period of time. And our bookings have jumped up notably over the last two months in January and February to a much higher level. And that chart is on the website. You can take a look at it. But that's a positive sign. We think that distribution is definitely going to bottom in terms of what we're selling to them in the current quarter. It doesn't mean that they're going to get back to buying at what end consumption is because there still is inventory in the channel. There's still inventory at the distributor's customers. But we can see an inflection in distribution bookings that it's starting to increase. And we think that piece of the business is bottoming this quarter. Direct is following behind that. We think we are either at or near the bottom of the cycle finally. I think that's a really important point. Bookings would not be increasing if there was still a glut of inventory in the channel somewhere. It would be absorbed from the channel. And I think that's an important point. So yeah, we're encouraged to see that for sure. That kind of. And just maybe one more point to make on backlog. So we had a second chart that we showed because we did have a bit of a false start last year at this time where bookings started to improve, February over January, March over February, et cetera. But you'll see that on this chart. But then it just plateaued after that for about nine months. And now we've seen a significant bump up from there. We also showed a total backlog chart. And that backlog was quite high and was falling and falling and falling. And over the last five or six weeks, it's stabilized and is starting to increase. And so that also kind of tells us that things are normalizing out there. Customers, in many cases, are running out of inventory and now are ordering again. So at the rate we're on, we could have a positive Book-to-Bill ratio. The only way you have a positive Book-to-Bill is if you're booking at a rate that's higher than what you're billing. And so far for the last six weeks, that's been the case. Great. All very good signs. You did mention that you had built out, increased some capacity in order to deal with the big upsurge in demand. As part of the nine-point plan, you have announced some pretty significant restructuring actions in terms of your manufacturing footprint, and maybe if you could go over that, what the impact on the margin profile and how that helps support your margin profile through the cycle, that would be helpful. Sure. So as I mentioned and we announced back in December, we are closing the smallest of our three large wafer fabs located in Arizona. We do not feel like we are limiting our capacity by doing that. We expanded our cleanroom space in our Oregon and Colorado factories during the upcycle. We can transfer equipment into that and get to the same level and higher levels of revenue that we were at the peak without having Fab 2 in place. And also, Fab 2, 70% of the process technologies that were running in Fab 2 had already been qualified in the other two factories. And so that's going to allow us to kind of build this transition inventory in the medium term and then transition those products to be manufactured in the other factories. But our production output that we are sizing us to today that we will be producing is going to be lower than what we're shipping, and that will allow us to bring inventory down. We talked about taking out about $300 million+ of inventory over the course of the next year by the end of March of 2026, and that is going to be a benefit to a couple of things. One, it's going to be a benefit to cash flow. We've got too much cash tied up in inventory today. Secondly, we have been taking large accounting charges for inventory reserves based on our policies, and Steve Sanghi highlighted those amounts to you. For the last quarter that we completed was the December quarter, our gross margin was 55.4% on a non-GAAP basis. Within that, we had $82 million of inventory reserve charges, new charges. Inventory that has been written off. It's still available to sell if we get orders for that. And we have very long lifespan for our products. So hopefully that occurs. And on top of that, we had $43 million of underutilization charges. So in total, $125 million of charges in a single quarter. If we even get $100 million of that back, that would take our margin last quarter from 55% ot 65%. So the underlying product margins are still very good. And that's where we set our new target at 65%. We have high confidence that we can get there. The product mix is good. The cost structure is going to be in good shape after these changes that we've made. But we've got to get inventory down. We ended last quarter with 266 days of inventory. Our long-term target is 130-150 days. So we've got about twice as much inventory as we really need to support our customers effectively and still have short lead time. So that's going to take us some time. But we're going to make good progress here over the coming quarters in bringing the inventory down. Great. Great. As you're trying to work through bringing down channel inventories coming down nicely, I think your channel inventory levels are actually slightly below some of your peers, which is good, and then working on bringing down the inventories internally, how has the supply chain crisis that we endured over the past four or so years, how has that changed the way that you deal with your customers directly or with your distribution partners? Okay. So distribution inventory to start was at about 37 days as of the end of December. And I'd say that's higher in days than kind of where it has averaged out over time. And so I think distribution inventory still needs to come down. But the issue is just like the Microchip inventory can be out of mix in terms of what customers need. Distribution inventory is too. When they built up inventory, it's not a perfect match for what their customers need. And what we've seen is that sell-through has been continuously falling. But last calendar year, we had distribution sell-through $425 million more in revenue than what we sold to them. So there has been a significant drain that's happened. And we think that now they will last quarter alone, there was $118 million that sell-through exceeded sell-in. Sell-in is our GAAP revenue recognition. So we think that that difference between those two is going to close and eventually get back and be in line with each other. And again, we're getting closer to the end of that with that closing than we are to the start. Great. Remind me, distribution is about 45% of your sales. That's right. And then you go direct for the balance. That's right. And ultimately, that's a customer choice. Obviously, a lot of large customers we service directly. We have a website called Microchip Direct that a lot of product is sold through. But distribution is an important piece of how we reach our customers. We have the global distributors like the Arrow, the Avnet, and the Future Electronics. We've got the catalog distributors like the DigiKey and Mouser of the world. And then we have a lot of regional distributors that typically only carry one microcontroller line. So they carry Microchip. They are trained on our products just like our sales force and then can go out there and advocate with our customers why they should use Microchip and really act as additional design resources for us. So it's a good split. Distributions come down as a percentage of sales over the years a little bit. But I expect it to stay relatively in the ranges that it is today. We aren't making changes to really modify that significantly. Perfect. Perfect. Maybe pivoting a little, and this is a topic that's come up all week and pretty much every meeting and almost every call I do, China. I think Steve highlighted kind of a really unique approach that you're using to address the China for China manufacturing and then how that kind of helps to protect some of your business. We'll get into competitive dynamics in China next. But I would like to highlight this because it is pretty unique for Microchip. Yeah. So maybe let me start by saying China is about 18% of our revenue. We think about half of that is designed outside of China for use outside of and consumption out of China. So the design decisions aren't made there. It's just manufactured there for cost purposes. Of that 9% that is left over, we think about half of that is highly complex proprietary products to Microchip where the Chinese don't really have a solution. But that leaves about 4.5% of our revenue that is exposed, I'll call it, because it's kind of standard product, standard microcontroller analog product where Chinese companies have been making investment. Now, there's a lot of reason that that business is defensible for us over time. The customers have chosen Microchip because we have great products. We have great support. We've got an amazingly large portfolio to service their needs. But there is pressure from the Chinese government for these companies to use domestic suppliers or China suppliers. So the strategy that we have is we are partnering with a company in China where we will sell them the die, the product that's gone through our wafer fabs, sell them the die. That party will then contract with a local assembly and test suppliers. So the point of manufacturing, which is designated by where it's assembled, will be China. It will be marked as a Chinese brand. It will be sold directly, marketed that way through a Chinese website, local language. We will help that partner come up to speed in terms of bringing the assembly and test contractors up. But the majority of the IP for our product is in the die. And we will continue to have control of that. Anybody in the world can buy our die and try to reverse engineer it. But that IP is very complicated and that's not easy to do. So we think this gives us an option for customers. And it's really what customers are asking for because they want to continue to use Microchip is give us an option that we can use that allows us to purchase from a Chinese company for that part of the business. And it will be the customer's choice what they do. I think without such a strategy, that 4.5% of our revenue is subject to decline over time. And it doesn't happen quickly. A lot of these products that we've designed have very long life cycles. But we want to provide an option to these customers to continue to use Microchip in the future. Okay. Great. I think you kind of touched on it a little bit. We always get asked about threats from the Chinese suppliers from the upfront. My view has always been that there's a bigger focus on discrete commodity-type products. You're able to offer some level of differentiation even just at the die level. Maybe discuss. You highlighted the percentages of your exposure to China. That 4.5% is in theory what would be at risk to maybe competing against direct Chinese suppliers. Is that correct? It's in theory what is at risk over time. But. It doesn't happen overnight, of course. It doesn't happen overnight. And customers want options, right? I mean, the challenge is if you have a new entrant to the marketplace that's got 20, 30, 40 products, right? That really limits the customer that this is what their choices are. And we've said this for years that 75% of the time a customer starts designing a product, they go to market with something different because through that design process, they figure out that they need to add features or not hitting their cost point, whatever it might be. And having a robust broad portfolio of 100,000 products to choose from gives them options. And that's a key benefit to working with Microchip and some of our larger competitors here that China just can't offer today. Right. So I'd like to extend that conversation on competitive advantages to even just in your overall business. Finally, moving beyond just the next 100 days, but let's talk about the longer-term strategy of Microchip. Maybe focus on explain the Total System Solution. When we talk about TSS, that's a way that Microchip has increased their competitiveness against even some of the Western suppliers. But maybe highlight some areas where you have this competitive advantage, whether it's by end market or by platform, total integrated system software. Sure. So TSS, what we call Total S ystem Solutions, is essentially trying to capture as much of the silicon content on a customer's board that we can. Typically, the first choice that a customer makes in their design is what's the brains in the system? And many times that's going to be a microcontroller where we have a very strong position. It could be a microprocessor where we have products. It could be an FPGA as an example. And then the customer builds out the rest of their board around that. And Microchip is well positioned with other products. We've got a very large analog portfolio. We have timing products. We have security products. We've got some sensors in the portfolio, many, many things. And we can bundle those things together, bring the customer a working reference design, say, "Hey, we've designed this type of system 100 times before. Here's a place to start." They know that when they work with us as a single partner, that we can speed their time to market. They're not going to have a problem if they're trying to get a Microchip part to work correctly with one from five different competitors. And all of our customers have engineering resource limitations. And this just helps them tremendously from that perspective. And obviously, it's good for Microchip. It's good for our investors if we're selling more and more silicon at every customer solution. So we're at various stages of this TSS opportunity for us. And we shared some data for the first time in the investor presentation that's posted on our website on Monday. And it shows some of the product lines that have been around for a much longer period of time. Decades. Yes, some of them. I'll use an example. It's labeled on the slide as UNG, and that's our USB and Networking G roup. A lot of that business came to us in the SMSC acquisition back in 2012, so we've owned that business for a dozen plus years. The TSS from that is, I don't remember the exact numbers, but it's four or five products per system where that UNG networking product is the anchor product, and then we're selling these other products around it, and you can see that the growth of TSS for that is continuing, but it's at a smaller rate. Two other examples that's on that slide is our data center business and our FPGA business that came to us from our more recent large acquisition of Microsemi Corporation. You can see a very steep climb in the parts per system that's coming from those opportunities because when we acquired the FPGA business from Microsemi, Microchip had some content around those products, but it was very limited. If there's 12 analog product opportunity around that FPGA as an example, and we were only getting two before, we want all 12, right? It doesn't mean that we can service all 12, right? That's great if we can, but in many cases, maybe we can do seven. Maybe we can do six. Winning more and more of that is what we're trying to do, training our sales force to do and having our business units work together to make us successful in those efforts. Those charts show that we are successful and there's more to come. Great. Great. I think Steve was also talking about, on the call, some of your opportunities in automotive like around Ethernet that also came from one of those acquisitions fit perfectly within the portfolio. And now all of a sudden, we're seeing this inflection point coming in the demand for those types of products. So. Yeah. So we introduced two additional products that we're calling out as what would be an anchor product for TSS, and anchor just means that's kind of the lead product that you're going into the customer with, and then you're bundling the rest of the Microchip portfolio around that. One of those was PIC64, which is a 64-bit microcontroller and microprocessors. The one that you're talking about is called 10BASE-T1S. And that is an Ethernet-based product that is going to be very heavily used in automobiles in 2027, 2028, 2029, and beyond, and also has a large play in industrial. And so the purpose of sharing that, I'm not going to get into the technicalities of it today, is that we have more and more products that are coming to the market that have this TSS opportunity around it. Actually, the size of that opportunity, I think we sized it at about a $4 billion TAM. We put the source of that on the presentation so you can see it. But we're really one of the very early leaders in this market, and we're excited about that opportunity. Sure. Great. It's important to highlight that stuff because sometimes those types of innovations get lost in the discussion. I think that kind of segues into my next question about pricing. The more content that you're able to capture on a board or around a lead product obviously helps support your content contribution, but then also helps support pricing. We have heard some of your peers talk about more recently now that at least the demand environment has somewhat stabilized. I wouldn't say it's normalized yet. Channel inventories are starting to come down. There is an expectation that we return to normal annual price concessions. Are you starting to see that yet? Is that impacting maybe some of the inventory that you have on hand? Or I think Microchip was probably one of the more disciplined in not raising prices through the supply chain crisis. I could be wrong on that, but. Yeah, so everybody raised prices during this. Of course. Of course, everyone. There was massive inflationary pressure that we did pass on to customers. So we did participate in that. But pricing today, I'd say, is generally stable. But at the point of design, right, everybody has excess capacity at this point in time. And it's a very competitive market, like it always is at the bottom of any cycle. And we are being aggressive in pricing on new design opportunities. And we're leading with our new most advanced products that have a good cost structure. Maybe they've been shrunk from 180 nanometer down to 55 nanometer or whatever it might be. But the cost structures are good and allow us to lead with very competitive pricing and be competitive against the competition, which is also leading with competitive pricing. Now, what does that mean? We think probably in the short term, over the course of the next year, it probably means low to mid-single-digit pricing declines. But we think over time that our pricing is going to continue to be very stable. We started taking the approach about 10 years ago that competition is at the point of design. That's where pricing is competitive. Once you get designed in and have won that proprietary socket, that pricing should be able to be held pretty stable over the course of the life of the product. That's been a very successful tactic for us. Customers understand it. Great. Great. I want to open it up, just see if anyone has any. Yep, we have a question. Thanks, Bruce. One quick question on pricing. You mentioned low single-digit pricing. Low single-digit to single-digit pricing declines. Is that just for new business, or is that for the overall growth? I'd say that is probably for the overall business over the course of the next year. If the existing growth is stable and your average customer, an average duration of a specific order or of a specific engagement, might be five to 10 years, then would that imply that the existing business is stable and that new business is down 50%? No. It's not saying that. It's saying that new designs, yes, are going to be aggressive. In some cases, when you are winning a new design, you have an overall pricing discussion with the customer. And that could be, "Hey, you win this new design, but you've got this existing business, and you give them a price concession on that of 2% to win the new." And you look at the total business opportunity that you have and weigh that. So I don't want to say that we never reduce prices on existing business. That is a piece of the discussion. But we're pretty disciplined in that approach. Maybe can you discuss how you think about the next peak in terms of the revenue or the next cycle? If you think about the prior cycle where you had COVID and products that maybe are more mature with benefits and patents, et cetera, how do we think about the revenue of the next peak? Yeah. So it's a common question that we're getting. Everybody wants to know where baseline revenue is. I think you're asking about the next peak. So we don't know where baseline is today. And I know it's hard for investors to hear that. But we went from a peak quarterly revenue of close to $2.3 billion. And now kind of at the bottom of the cycle, we're doing $960 million this quarter. Clearly, the right run rate is somewhere in between that, but that's a large gap. I don't know where that run rate is going to be. I don't know where the next peak revenue is going to be. This cycle was like no other cycle that I've seen in my almost 30 years now at Microchip. And a typical cycle might be, lead times extend from 8 weeks to 20 weeks. And this instance, it went from eight weeks to 52 weeks+. And we didn't know how to deal with it well. Our customers didn't know how to deal with it. Our suppliers didn't know how to deal with it. And I am hoping that this is a once-in-a-career thing that we've just gone through and we won't see a cycle like this again. And obviously, we're learning from it. We're going to figure out how to deal with the next upcycle better. But this is a cyclical industry, and it's always going to be cyclical. We can't take that piece out of it, but we can put things in place that help us manage our inventory better, help us manage our customer relationships and run rates of customers, and understand those better to ask more direct questions of really every customer and have essentially AI and ML help us in that data analysis because we're servicing 120,000 customers. And those 120,000 customers are buying many different parts from us. So it's not an easy thing to control, but I think we're putting things in place to be able to deal with it better. I don't know if I've responded to your question. I don't know what the next peak revenue is going to be. I don't know where the baseline is today. I know it's a lot higher than where we're at in the current quarter. I think it's important there isn't a specific revenue target set to achieve that 65%, 40% gross and operating margin. There is not. I mean, clearly, one of the charts we put out, we put together an inventory projection graph. And that graph has assumption on not only what we're producing, but it has assumptions on what we're going to be shipping. We feel that those projections are likely conservative. We would rather provide upside to the street than downside at this point in time. The business model that we've introduced, we think, is highly achievable. I kind of talked about the margin implications on the gross margin side, and we can start digging into that more. But there's lots of opportunity to improve this. We're coming off very low gross and operating margins today, and the upside potential is quite high. Okay. We are surprisingly out of time. Unfortunately, we didn't get a chance to talk about the capital return strategy. I would recommend that people check out the presentation on the website. I think it's very important to highlight you are still committed to the dividend. We are. You are still committed toward staying on the path of returning 100% of free cash flow to shareholders. And that's another very important factor when looking at Microchip. Any closing remarks before we head downstairs for the breakout? No. I just want to. I think we covered a lot. We covered a lot and emphasized that this is going to get significantly better from where we're at today. Up and to the right. Up and to the right is what Steve has called it, Up and to the Right 2.0. So we've done this before. We'll do it again. Thank you. Great. Thank you. Thank you.