Core Insights - Madison Mid Cap Fund's fourth-quarter 2025 investor letter indicates a challenging market environment for high-quality, profitable businesses, as the Russell Midcap Index recorded a full-year return of 10.6% with a focus on more volatile and speculative companies [1] - The Fund experienced a decrease of 1.2% in Q4 2025, underperforming the Russell Midcap Index, which increased by 0.2% [1] Company Insights - Microchip Technology Incorporated (NASDAQ:MCHP) is highlighted as a significant holding, with a market capitalization of $35.35 billion [2] - The stock closed at $65.33 per share on March 10, 2026, with a one-month return of -19.10% and a 52-week gain of 25.88% [2] - The company has faced supply chain challenges over the past 24 months, leading to customer over-ordering due to lengthening production lead times [3] - The return of founder Steve Sanghi as CEO has been noted as a positive development, with efforts to reduce excess inventory and position the company for market share recovery [3] Investment Sentiment - Microchip Technology is not included in the list of the 40 Most Popular Stocks Among Hedge Funds heading into 2026, although it was held by 61 hedge fund portfolios at the end of Q4, up from 56 in the previous quarter [4] - The investment community acknowledges the potential of Microchip Technology but suggests that certain AI stocks may offer greater upside potential with less downside risk [4]

Company Announcement - Microchip Technology Incorporated will present at the Raymond James Institutional Investors Conference on March 2, 2026, at 1:05 p.m. Eastern Time, with Mr. Sajid Daudi, Head of Investor Relations, as the presenter [1] - A live webcast of the presentation will be available on the Microchip website [1] Company Overview - Microchip Technology Inc. is a broadline supplier of semiconductors focused on providing innovative design solutions that address challenges at the intersection of emerging technologies and durable end markets [3] - The company offers a comprehensive product portfolio and easy-to-use development tools that support customers throughout the design process, from concept to completion [3] - Microchip is headquartered in Chandler, Arizona, and provides solutions across various markets, including industrial, automotive, consumer, aerospace and defense, communications, and computing [3]

Group 1 - Microchip Technology Incorporated will present at the Morgan Stanley Technology, Media & Telecom Conference on March 3, 2026, at 1:05 p.m. Pacific Time [1] - The presentation will be made by Mr. Richard Simoncic, Chief Operating Officer, and Mr. Eric Bjornholt, Senior Vice President and Chief Financial Officer [1] - A live webcast of the presentation will be available on the Microchip website [1] Group 2 - Microchip Technology Inc. is a broadline supplier of semiconductors focused on innovative design solutions that address challenges in emerging technologies and durable end markets [3] - The company provides easy-to-use development tools and a comprehensive product portfolio to support customers throughout the design process [3] - Microchip serves various markets including industrial, automotive, consumer, aerospace and defense, communications, and computing [3]

Core Viewpoint - The automotive industry is experiencing a shift in policy, leading to collaborations among major companies like Renault and Ford to mitigate the financial burden of developing both electric vehicles (EVs) and internal combustion engine (ICE) vehicles [2][7]. Group 1: Policy Changes and Industry Impact - The EU has decided to allow the continued sale of ICE vehicles after 2035 under certain conditions, such as using "green steel" in production, which may benefit manufacturers like Toyota and Honda known for hybrid vehicles [2][11]. - The EU's decision to relax its 2035 ban on ICE vehicles and the U.S. easing emissions regulations reflect a slower-than-expected adoption of EVs, prompting automakers to balance the development of both EVs and ICE vehicles [2][6]. - The EU plans to create a new category for small EVs under 4.2 meters to lower costs and promote adoption, alongside requiring a certain percentage of corporate vehicles to be zero-emission by 2030 [5][6]. Group 2: Collaborations Among Automakers - Renault and Ford announced a partnership to develop and produce EVs in Europe, aiming to enhance operational efficiency in the region [7][8]. - Other notable collaborations include General Motors and Hyundai in North America, Nissan and Honda in the U.S., and Mercedes-Benz and BMW discussing engine supply cooperation [8]. - The trend of collaboration is driven by the need to reduce costs and streamline operations amid rising pressures from competitors, particularly from Chinese EV manufacturers [7][9]. Group 3: Competitive Landscape - Chinese EV manufacturers, led by BYD, are gaining market share in Europe, increasing from 9% to 12% within a year, thanks to government subsidies and cost advantages [11]. - The dominance of China in the rare earth production and processing necessary for EV batteries strengthens its position in the global EV market [11]. - The pressure from Chinese companies and the need for industry restructuring compel European and American automakers to accelerate the development of next-generation technologies while leveraging the extended timeline for ICE vehicles [11].

Group 1 - Renault and Ford have decided to collaborate on vehicle development in Europe to alleviate the burden of redundant investments in electric vehicles (EVs) and internal combustion engine (ICE) vehicles [2][8] - The EU has announced a plan to allow the continued sale of ICE vehicles after 2035 under certain conditions, including the use of "green steel" [4] - The EU will create a new category for small EVs under 4.2 meters in length to promote their adoption by lowering technical requirements and providing incentives for locally produced small EVs [6] Group 2 - The EU's decision to allow the sale of ICE vehicles while promoting EVs has been criticized for creating confusion within the automotive industry [7] - Major automotive companies are increasingly collaborating to reduce costs, with Ford and Renault's partnership being a notable example [8] - Chinese EV manufacturers, led by BYD, are gaining market share in Europe, increasing from 9% to 12% within a year, due to strong cost competitiveness and government subsidies [13] Group 3 - The EU's new regulations will require a certain percentage of company vehicles to be zero-emission vehicles (ZEVs) starting in 2030 [6] - The automotive industry is facing pressure to accelerate the development of next-generation technologies while leveraging the time and funds gained from the continued sale of ICE vehicles [14] - Japanese automakers like Toyota and Honda are expected to benefit from the EU's focus on hybrid vehicles (HV), which offer better fuel efficiency and environmental performance [4]

Market Overview - The U.S. market has shown volatility, with returns of 19.2% for the Nasdaq Composite, 15.8% for the S&P 500, and 13.7% for the Dow Jones Industrial Average over the past year [1] - Concerns are rising regarding the moderating pace of the economy, influenced by a cooling labor market and high valuations in the technology sector [1] Federal Reserve Actions - The Federal Reserve cut its key interest rate by a quarter percentage point in December to support the job market and stimulate growth, with inflation trending near the 2% target [2] - The Fed has reduced borrowing costs three times this year, bringing the overnight borrowing rate to a range of 3.50-3.75% [2] Labor Market Conditions - The job market is showing signs of cooling, with softer hiring, rising unemployment at 4.6%, and a narrowing gap in job openings [3] - Nonfarm payrolls increased by 64,000 jobs in November after a decline of 105,000 jobs in October, the largest drop since December 2020 [3] Investment Opportunities - Investors looking to diversify can consider dividend-paying stocks, which indicate a healthy business model and tend to outperform non-dividend-paying stocks in volatile markets [4] - Notable dividend-paying companies include: - **Pentair (PNR)**: Declared a dividend of 27 cents per share with a yield of 1% and a payout ratio of 21% [5][6] - **nVent Electric (NVT)**: Declared a dividend of 21 cents per share with a yield of 0.8% and a payout ratio of 26% [7][8] - **CenterPoint Energy (CNP)**: Declared a dividend of 23 cents per share with a yield of 2.3% and a payout ratio of 51% [10][11][12] - **Marriott Vacations Worldwide (VAC)**: Declared a dividend of 80 cents per share with a yield of 5.5% and a payout ratio of 44% [10][13][14] - **PG&E (PCG)**: Declared a dividend of 5 cents per share with a yield of 0.7% and a payout ratio of 7% [15]

Core Insights - Renault is leveraging Chinese supply chain efficiency to revive its Twingo model, which will be sold in Europe as an electric vehicle, despite having exited the Chinese market for passenger cars since 2020 [4][6][7] - The new electric Twingo has a starting price of under €20,000, comparable to BYD's Seagull in Europe, showcasing Renault's strategy to compete against Chinese EVs in the European market [4][6] - Renault's approach involves utilizing a significant portion (46%) of components sourced from Chinese suppliers, which has allowed for reduced development costs and faster production timelines [11][12] Group 1: Renault's Market Strategy - Renault has historically struggled in the Chinese market, with its joint ventures failing to gain significant traction, leading to a strategic withdrawal from the passenger vehicle segment [6][7] - The company has shifted focus to utilizing its Chinese supply chain to enhance competitiveness in Europe, indicating a strategic pivot towards leveraging cost advantages from China [8][12] - The decision to revive the Twingo model is based on its historical significance and brand recognition among European consumers, aiming to lower psychological barriers for new buyers [8][11] Group 2: Supply Chain and Development Efficiency - The development of the new Twingo was expedited by a collaborative effort between Renault's teams in France and China, achieving a prototype in just nine weeks and preparing for production in under 24 months [11][12] - Renault's procurement strategy emphasizes using mature modules and existing solutions from Chinese suppliers, resulting in significant cost savings (50% reduction in development costs and 40% in tooling costs) [11][12] - The collaboration with Chinese suppliers is seen as a model for other foreign automakers, allowing them to benefit from China's advanced manufacturing capabilities without the burdens of joint venture complexities [12][13] Group 3: Future Plans and Market Positioning - Renault plans to replicate the successful model of utilizing Chinese supply chains for other vehicle lines, including models from its Dacia brand and future Nissan vehicles [13] - The strategy reflects a broader trend among foreign automakers to tap into China's manufacturing prowess to enhance their global competitiveness, particularly in the EV sector [12][16] - The rise of Chinese suppliers in the global market is expected to elevate their profit margins and brand recognition, as they meet the stringent requirements of international automakers [14][15]

Company Overview - Microchip Technology Incorporated is a leading provider of smart, connected, and secure embedded control solutions [1] - The company is headquartered in Chandler, Arizona, and offers a comprehensive product portfolio that supports customers throughout the design process, from concept to completion [3] - Microchip serves various markets including industrial, automotive, consumer, aerospace and defense, communications, and computing [3] Upcoming Event - Microchip will present at the Barclays 23 Annual Global Technology Conference on December 11, 2025, at 1:20 p.m. Pacific Time [1] - The presentation will be made by Mr. Rich Simoncic, COO, and Mr. Eric Bjornholt, Senior VP and CFO [1] - A live webcast of the presentation will be available on the Microchip website [1]

Core Viewpoint - Microchip Technology Incorporated will present at the UBS Global Technology and AI Conference 2025 on December 3, 2025, at 12:55 p.m. Mountain Time, with CEO Steve Sanghi as the presenter [1]. Company Overview - Microchip Technology Inc. is a leading supplier of semiconductors, focusing on innovative design solutions that address challenges at the intersection of emerging technologies and durable end markets [3]. - The company provides easy-to-use development tools and a comprehensive product portfolio that supports customers throughout the design process, from concept to completion [3]. - Headquartered in Chandler, Arizona, Microchip serves various markets, including industrial, automotive, consumer, aerospace and defense, communications, and computing [3].

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $26.4 million, representing a 14% year-over-year increase [5][12] - Non-GAAP operating income was $3.7 million, compared to $1.1 million in Q3 2024 [14][15] - Non-GAAP net income was $4.6 million, or $0.10 per diluted share, compared to $1.3 million, or $0.03 per diluted share, in the same quarter last year [15] - Cash and investments totaled $81 million as of September 30, 2025, up from $59 million at the end of 2024 [15][16] - Recurring revenue as a percentage of total revenue increased to 63% in Q3 2025 from 58% in Q3 2024 [13] Business Line Data and Key Metrics Changes - Revenue from the CCAS (Cybersecurity as a Service) segment was $7.3 million, up 60% year-over-year, accounting for 28% of total revenue [12][5] - CCAS annual recurring revenue (ARR) as of September 2025 was $27.6 million [12] - The Smart product line also contributed to revenue growth, with a strong backlog and visibility heading into the next year [9][10] Market Data and Key Metrics Changes - Increased sales in the Americas were noted, aligning with the strategy to boost business in this region [12] - The company is seeing strong traction among major telecom operators for its cybersecurity solutions [7][8] Company Strategy and Development Direction - The company is focused on a cybersecurity-first strategy and a renewed go-to-market approach [7][10] - There is an emphasis on expanding the CCAS offering and enhancing the Smart product line to maintain technology leadership [9][10] - The company is optimistic about long-term growth, expecting CCAS ARR to surpass 60% year-over-year growth by year-end 2025 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong financial position and growth trajectory, citing a robust pipeline and backlog [10][11] - The competitive landscape is viewed as more favorable, with unique technology providing a competitive edge [29] - Management raised full-year 2025 revenue guidance to between $100 million and $103 million [11] Other Important Information - The company completed a $46 million follow-on share offering, enhancing its financial resources [15] - Allot has no debt, positioning it well for future growth [16] Q&A Session Summary Question: Increased traction with major telecom customers - Management noted positive trends in both tax rates and new service launches contributing to significant growth in CCAS revenue and ARR [18] Question: Details on the first customer for OPNET Secure - The first customer aims for 24/7 protection for their customers, combining Allot's network security with OPNET [19][20] Question: Continued strength in the Smart pipeline - Management confirmed a strong pipeline with opportunities from both new and existing customers, particularly for the Terra 3 product [23] Question: Drivers of CCAS growth - Growth is primarily from new customer contracts and existing accounts expanding their services [27] Question: Competitive landscape for network intelligence offerings - The competitive environment is currently favorable, with unique technology providing a competitive edge [29] Question: Impact of ad campaigns on CCAS adoption - Management identified four drivers for CCAS growth, including new customer additions and upselling existing services [31][32]