Maxim Integrated Products, Inc.

Good morning, and welcome to the Analog Devices third quarter fiscal year 2023 earnings conference call, which is being audio webcast via telephone and over the web. I'd like to now introduce your host for today's call, Mr. Michael Luccarelli, Vice President of Investor Relations and FP&A. Sir, the floor is yours.

Thank you, Michelle, and good morning, everybody. Thanks for joining our third quarter fiscal 23 conference call. Moving on the call today are ADICO and Chair Vincent Roche, and ADI CFO Prashanth Mahendra Bajaj. For anyone who missed the release, you can find it and relating financial schedules at investor.analog.com. On to the disclosures. The information we're about to discuss includes forward-looking statements which are subject to certain risks and uncertainties as further described in earnings release and other periodic reports and other materials filed with the SEC. After results could differ materially from the forward-looking information as these statements reflect our expectations only at the date of this call. We undertake no obligation to update these statements except as required by law. Our comments today will also include non-GAAP financial measures, which exclude special items. When comparing our results to our historical performance, special items are also excluded from prior periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures and additional information about our non-GAAP measures are included in today's earnings release. And with that, I'll turn it over to ADI's CEO and Chair, Vincent Roche. Vince?

Thank you, Mike, and a very good morning to you all. ADI executed well in the third quarter and delivered results within our expectations, despite the challenging operating environment. Revenue was nearly 3.1 billion, led by growth in our industrial and automotive markets once again. Gross margin remained strong, above 72%, operating margin was nearly 48%, and EPS was 249. This continued profitability reflects our portfolio's resilience as well as the innovation premium that it commands. I want to turn to the current business environment now just for a moment. As we shared last quarter, we believe we're in a period of customer inventory reconciliation following three consecutive years of steady growth. Through our customer conversations, it's evident these accelerating inventory adjustments relate to the weakening macro backdrop and ADI's rapidly improving lead times. Importantly, we believe we shipped below-end market consumption in the third quarter and expect to do so again in the fourth. This will help normalize our customers' inventory more quickly and position us to return to growth more quickly in the coming quarters. Stepping back, while near-term dynamics are turbulent, our long-term confidence remains undiminished. Over the last several decades, we have enhanced the resiliency of our global business, defined by our diversified customer and product portfolio and flexible hybrid manufacturing model. This enables us to endure softer demand periods while sustaining strategic investments to ensure that we capitalize on the upside when the business inflects. It's these characteristics and our alignment to numerous concurrent secular growth trends that give us confidence that ADI will deliver on our long-term model of 7% to 10% revenue CAGR. Now, one area underpinning this growth outlook are the applications tied to sustainable use cases, which currently represent about one-third of our total revenue. And today, I want to unpack a vital part of this, the evolving electrification ecosystem that is driving growth in our industrial and automotive markets. As the world marches to net zero, we need to eliminate 51 gigatons of global greenhouse gases emitted every year. Fossil fuels are by far the largest contributor, accounting for more than 75% of all emissions. At the same time, global energy consumption is forecasted to increase by 50% by 2050. A major and necessary energy transition is underway, and an upgraded and expanded energy grid is foundational to support a decarbonization pathway. Making the shift to renewable energy sources in both commercial and residential infrastructure, as well as electric vehicles and global transportation, will reduce greenhouse gas emissions. These moves also create new challenges in the generation, distribution, consumption, and smoothing of energy supply. ADI solutions are embedded across all phases of this electrification journey, from upgrading the grid infrastructure to forming and managing the vehicle battery. The common thread woven through all these applications is the high-performance precision signal processing, control, and power management capabilities they require, capabilities in which ADI excels. Now, today, I'll bring this story to life at the application level, starting with grid infrastructure. Overall, today's electrical grid is undergoing modernization to meet current and future demands. Historically, traditional energy sources like coal, oil, and gas were centralized and distributed in one direction from the grid to the consumer. Today, renewable energy sources like wind and solar are more distributed, necessitating a dynamic transition bidirectional flow of energy. To achieve this, the grid must be able to adjust performance across the network in real time, which requires an exponential increase in monitoring and storage capabilities. And for example, our collaboration with the Enel Group provides smart meters and grid digitalization solutions for distribution system operators. Here, ADI's control and sensing technologies are enabling high-performance precision monitoring and data creation at the heart of the digital substation. And we're leveraging our mixed signal digital and algorithm technologies to enable greater intelligence at the grid's edge. Now moving to energy storage systems, which are critical to mitigate intermittency issues across the network. ADI is a leader with our technologies used in 60% of energy storage systems across residential, commercial and grid-scale networks. Leveraging our battery management system technology, or BMS, we're increasing capacity and improving energy utilization in energy storage systems, which maximizes the battery's lifetime value. These monitoring and storage challenges extend to the grid's edge as well, including EV charging stations, ADI's energy metrology, isolation and sensing technologies, help enable a broad range of applications in AC and DC charging equipment. In addition to these important applications in our highly diverse industrial segment, our high performance signal processing platforms and domain expertise are helping to electrify the automotive market. Here, our technology is a key enabler in the transition from combustion engines to cleaner electric vehicles by increasing range and lowering cost. And I'll start with BMS. As we've shared before, we're the leader in this area with our BMS solution designed into 16 of the top 20 EV manufacturers. We're currently sampling our eighth generation solution, which utilizes software and algorithms to enable physical measurement capabilities all the way into the battery cell. These advances in edge processing change the game in how the internal battery health is managed, supporting faster charging and better range prediction. An extension of this is our wireless BMS solution, a first in the industry. It has all the benefits of our wired solution and enables a scalable battery architecture with quicker and more cost-effective production cycles. Currently, our wireless BMS is designed in at four OEMs, and we expect another large OEM to adopt it in the coming quarters. Given this momentum and the cutting-edge value proposition, we believe the wireless platform will represent a large portion of our BMS revenue by the end of the decade. And looking ahead, we're broadening our EV capabilities beyond battery management and storage to power conversion solutions. Specifically, we're developing a silicon carbide-based smart switch for bidirectional onboard charging that significantly reduces charger size and weight by over 50%, thus driving down cost. Notably, this intelligent integrated switch enables the EV to transfer energy back into the network, creating a more reliable grid. And this innovation solution more than doubles our content opportunity per EV power train. So in summary, ADI is driven by a deep sense of purpose and a desire for our innovations to positively impact all stakeholders. We're immensely proud of the role our technologies play to improve the well-being of humanity and indeed the planet. And I remain very confident in our future. Our portfolio of cutting-edge technologies, world-class talent base, are aligned with an unprecedented number of attractive secular trends where the semiconductor content per dollar of CapEx is increasing tremendously. This presents ADI with continued profitable growth opportunities, as well as the ability to shape the future of industries. And so with that, I'll hand it over to Prashant.