Financial Data and Key Metrics Changes - Net sales for March were $970.5 million, down 5.4% sequentially and down 26.8% year-over-year, indicating a significant inventory correction following a post-COVID super cycle [14][25] - Non-GAAP gross margins were 52%, while GAAP gross margins were 51.6% [14][15] - Non-GAAP net income was $61.4 million, with non-GAAP earnings per diluted share at $0.11, exceeding the midpoint of guidance by $0.01 [14][15] - For fiscal year 2025, net sales were $4.402 billion, down 42.3% from fiscal year 2024 [15][16] - Total debt decreased by $1.125 billion in March, and net debt decreased by $1.31 billion [18] Business Line Data and Key Metrics Changes - Revenue from microcontroller and analog business units was down sequentially, while FPGA remained flat, and other businesses, mainly driven by technology licensing, were up sequentially [25] - The company aims to reduce inventory by over $350 million during fiscal year 2026, targeting an inventory level of 130 to 150 days [6][8] Market Data and Key Metrics Changes - Geographically, business was seasonally down in the Americas and Asia, while Europe saw a seasonal increase [25] - The company reported a book-to-bill ratio of 1.07 in March, indicating a healthy demand environment [26] Company Strategy and Development Direction - The company is executing a nine-point recovery plan, which includes resizing manufacturing, reducing inventory, and strengthening customer relationships [5][10] - The focus has shifted from 5G to artificial intelligence and from ADAS to network and connectivity, reflecting changes in megatrends [8] - The company is committed to returning 100% of adjusted free cash flow to investors in the form of dividends, while also planning to reduce borrowings as cash flow improves [31][32] Management's Comments on Operating Environment and Future Outlook - Management believes substantial inventory destocking has occurred, and customers are starting to increase purchases, marking the last quarter as a revenue bottom [25][26] - The company expects net sales for June to be approximately $1.045 billion, with non-GAAP gross margins between 52% and 54.2% [27] - Management expressed optimism about the September quarter, with higher backlog compared to previous quarters [82] Other Important Information - The company completed a $1.485 billion mandatory convertible preferred stock offering to reduce debt and preserve its investment-grade rating [18] - The company has seen a notable shift in end markets, with aerospace and defense now representing a larger portion of the business due to increased defense spending [39][40] Q&A Session Summary Question: Demand signals and potential pull-ins from tariffs - Management noted that demand signals began improving in early January, with bookings significantly higher than December, and no tariff-related activity impacting demand [35][36] Question: Recovery relative to key end markets - Aerospace and defense have become a significant market, increasing from 11% to 17% of the business, driven by high defense budgets and geopolitical factors [39][40] Question: Macro impact of tariffs - Management indicated that direct impacts of tariffs on their products are minimal, as less than 4% of parts are made in China, and they have moved production to other countries [49][50] Question: Margin leverage and headwinds - Current headwinds include underutilization charges and inventory reserve charges, but these are expected to decrease as revenue increases [54][56] Question: Visibility on order patterns - Management highlighted improved visibility due to increased distribution sales and higher bookings, indicating a positive trend in demand [102] Question: China strategy - The company is revising its China strategy due to changes in regulations, focusing on production in Taiwan and other regions to avoid tariffs [73][75]

Financial Data and Key Metrics Changes - Net sales for March were $970.5 million, down 5.4% sequentially and down 26.8% year-over-year, indicating a significant inventory correction following a post-COVID super cycle [14][24] - For fiscal year 2025, net sales totaled $4.402 billion, a decrease of 42.3% from fiscal year 2024 [15] - Non-GAAP gross margins were 52%, while GAAP gross margins were 51.6% [14][15] - Non-GAAP net income was $61.4 million, with diluted earnings per share at $0.11, exceeding the midpoint of guidance by $0.01 [14] - Total debt decreased by $1.125 billion, and net debt decreased by $1.31 billion [19] Business Line Data and Key Metrics Changes - Revenue from microcontroller and analog business units was down sequentially, while FPGA remained flat, and other businesses, mainly driven by technology licensing, were up sequentially [24] - Non-GAAP operating income was 14% of sales, while GAAP operating income was 6.7% of sales [14][15] Market Data and Key Metrics Changes - Geographically, business was seasonally down in the Americas and Asia, but seasonally up in Europe [24] - The aerospace and defense segment grew from 11% to 17-18% of total business, becoming the second largest market after industrial [39] Company Strategy and Development Direction - The company is focused on a nine-point recovery plan, including resizing manufacturing footprint, reducing inventory, and strengthening customer relationships [4][5][9] - The company aims to reduce inventory by over $350 million during fiscal year 2026, targeting an inventory level of 130 to 150 days [6][17] - Strategic initiatives include investments in next-generation technologies and enhancing product lines to drive top-line growth and improve profitability [21][22] Management's Comments on Operating Environment and Future Outlook - Management believes substantial inventory destocking has occurred, with a healthy book-to-bill ratio of 1.07 in March, indicating a positive outlook for revenue growth [25] - The company expects net sales for June to be approximately $1.045 billion, with non-GAAP gross margins projected between 52% and 54.2% [26] - Management expressed optimism about the September quarter, with higher backlog compared to previous quarters [80] Other Important Information - The company is returning nearly 100% of adjusted free cash flow to investors in the form of dividends, with plans to improve cash flow as inventory is liberated [31] - A mandatory convertible preferred stock offering of $1.485 billion was completed to reduce debt and preserve investment-grade rating [19] Q&A Session Summary Question: Demand signals and potential tariff impacts - Management noted that demand signals began improving in early January, with no significant tariff-related activity observed [35][36] Question: Recovery in key end markets - Aerospace and defense have shown strong growth, while other segments are experiencing a broad-based recovery driven by inventory depletion and new designs [39][42] Question: Macro impact of tariffs - Management indicated minimal direct impact from tariffs due to strategic production shifts away from China [48][49] Question: Margin leverage and headwinds - Current headwinds include underutilization and inventory reserve charges, but margins are expected to improve as revenue increases [54][55] Question: Visibility on future revenue - Management highlighted improved visibility due to increased distribution sales and higher bookings in recent months [98][102] Question: Changes in China strategy - The company is revising its China strategy due to changes in trade rules, focusing on local assembly and production outside of China [70][72]