Microchip Technology Inc at Morgan Stanley Technology, Media & Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Sure. Well, maybe starting on the business update. This time last year, Ganesh was here and talked about bookings improving and the stock kind of got really strong, and that ended up being somewhat of a full start. What is it that's different when you sort of look at the distribution trends and end market trends that you're seeing, what gives you the confidence in stabilization that you're talking about now?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Great. And if I could just have one quick question on other way because it's coming up a lot. Do you -- is any of this, do you think, related to tariffs, people building stuff to get ahead of potential tariffs that kick in?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Great. That's helpful. And then before we go through the nine-point plan, there's a through line of questions. I don't talk to a few investors this morning after your session. And it all kind of comes back to where is the actual revenue level once you get back to shipping demand. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 03, 2025 / 5:15PM, MCHP.OQ - Microchip Technology Inc at Morgan Stanley Technology, Media & Telecom Conference So you were doing over $8 billion in revenue at the peak. You're close to $4 billion, a little more than $4 billion run rate now. Obviously, the consumption is somewhere in between those two things. But all of this planning of manufacturing footprint, OpEx profile, long-term growth rate? Like what's -- and I know you don't know exactly, but just goes through your thought process of how do you approach all those decisions, not knowing exactly where the starting point is?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Great. So maybe we could walk through the nine-point plan, and I really -- my way you did here, you came in a very short time ago, made a very candid assessment of some of the challenges that the company was undergoing. And then you've made a lot of progress in a short period of time, and you gave us the update this morning. So maybe if we just kind of go in the sequence of the 9 points. If we start with manufacturing, the consolidation of the manufacturing footprint. Can you give us an update there? And again, what's the ultimate goal of that?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : And maybe if you could talk a little bit to the idea of head count reduction in your book you kind of talked about the importance of sharing pain in 2001, 2009, you were able to mostly avoid that. Maybe it's a testament to how challenging the situation is. But can you just talk a little bit to that? And does that impact the corporate culture? How do you think about that?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Great. And then just one last manufacturing question on the business mix of 40% internal fab, 60% foundry. You said on the call, you intend to maintain that. Is there any thought, I mean, you have this kind of fixed cost of factories that have put into place in-sourcing some of the foundry wafers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 03, 2025 / 5:15PM, MCHP.OQ - Microchip Technology Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : So the second point of the nine inventory management, the inventories got very high. You're taking aggressive action. Maybe you could just talk else what's going on there?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Okay. And then the third initiative is the growth drivers. Maybe you can talk about this a little. I mean, there's so many businesses that Microchip acquired that had really rich growth trajectories that are sort of, I think, of as separate from the three segments that you guys give. And I think you've elected to kind of not talk about a lot of those things over the last few years. But can you just -- as you kind of reevaluate the growth portfolio of businesses you've acquired, what are you most excited about? And how are you reorienting the investment around those things?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : And how do you assess the investment levels around those businesses coming back to the company after some time away, these growth initiatives FPGAs is an area where you've grown your presence? Are you investing the correct amount into those businesses?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : And then I guess for the next couple of points, the same question with regards to distribution strategy and customers how have you found the situation with most distributors and customers? And what are you doing to improve that situation?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Great. And I do want to ask about the financial model. Maybe starting with growth. You talked about growing industry growth plus. I assume that's kind of a consumption comment. So you're not saying revenue from today. You're saying when we sort of get back to consumption, that's the level?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Okay. And then with regards to the margin structure, 65% gross, 40% operating, very healthy targets. I guess, how do you make those targets without committing to a revenue level and what adjustments might you have to make to get to that depending on where revenue ends up?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Okay. And then similarly on the OpEx to get to 25%, the decision-making there?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : So just to wrap up, I mean, you come back, you were away from the -- from the CEO role for the last couple of years, you came back. You feel like the growth drivers are intact and the margin is achievable. And after 100 days, it's obviously still some work to get there, but you still feel pretty confident in the direction of the company? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 03, 2025 / 5:15PM, MCHP.OQ - Microchip Technology Inc at Morgan Stanley Technology, Media & Telecom Conference