Texas Instruments Incorporated

Good day, and welcome to the Texas Instruments 3Q20 Earnings Release Conference Call. Today's conference is not being recorded at this time. I would like to turn the conference over to Dave Paul. Please go ahead, sir.

Good afternoon, and thank you for joining our third quarter 2020 Earnings Conference Call. For any of you who missed the release, you can find it on our website at ti.com. This call is being broadcast live over the web and can be accessed through our website. a replay will be available through the web. This call will include forward-looking statements that involve risks and uncertainties that could cause TI's results to differ materially from management's current expectations. We encourage you to review the notice regarding forward-looking statements contained in the earnings release published today, as well as TI's most recent SEC filings for a more complete description. Our Chief Financial Officer, Rafael Lazzardi, is with me today and will provide the following updates. First, I'll start with a quick overview of the quarter. Next, I'll provide insight into the third quarter revenue results with more details than usual by end market, including some sequential performance since it's more informative at this time. And then lastly, Rafael will cover the financial results, capital management, and our guidance for the fourth quarter of 2020. Let me start with a quick overview with three key points. Revenue was higher than expected and grew 18% sequentially with notable strength from the rebound of automotive and growing demand from personal electronics. Revenue increased 1% from the same quarter a year ago. In April and again in July, we explained we would maintain high optionality with our operating plan so we could support customers, particularly during a time when their ability to forecast will be limited. This approach has served us and our customers well and will continue this posture in the fourth quarter. Finally, while visibility for the near-term demand has improved, we remain cautious as the broader economic impact of the global pandemic could continue for several years. Our approach in an environment like this is to maintain high optionality with our operating plan in the short term, to continue critical investments in R&D and in new capabilities like those for TI.com, and finally, to invest to ensure long-term manufacturing capacity, particularly for the 2022 to 2025 timeframe. We've made these decisions with our overall ambitions in mind, which include running the company with the mindset of a long-term owner. These decisions have continued to serve us well. Looking at our segments, analog grew 18% and embedded processing grew 19% sequentially. On a year-over-year basis, analog grew 7% and embedded processing declined 10%. Our other segment declined 19% from a year ago, primarily due to lower calculator sales where COVID-19 impacted back-to-school sales. Moving on, I'll now provide some insight into our third quarter revenue by end market. First, the automotive market rebounded with about 75% sequential growth and returned to levels similar to a year ago. Revenue has grown from the bottom we saw in May as North American and European automotive assembly plants resumed operations. Next, the industrial market was down low single digits sequentially, roughly a sequential decline, and about even from a year ago. Not surprisingly, there were areas of strength and there were areas of weakness. The diversity within industrial results in relative stability, reinforcing the attractiveness of this highly diverse market. Personal electronics was up more than 20% sequentially and up about 15% compared to a year ago. The strength was broad-based across personal electronics, combined with TI being in a position to support unforecasted demand in the third quarter. Next, comms equipment was down about mid-single digits sequentially and up mid-single digits from a year ago, and enterprise systems was down in both comparisons. Lastly, I'll note a housekeeping item. We've simplified our analog business structure into our power business and our signal chain business. Starting this quarter, our reporting will reflect these changes. Rafael will now review profitability, capital management, and our outlook.

Thanks, Dave, and good afternoon, everyone. Third quarter revenue was $3.8 billion, up 1% from a year ago. Growth profit in the quarter was $2.5 billion, or 64% of revenue. From a year ago, growth profit margin decreased 60 basis points. Operating expenses in the quarter were $793 million, up 2% from a year ago and about as expected. On a trailing 12-month basis, operating expenses were 23% of revenue. Over the last 12 months, we have invested $1.5 billion in R&D. Operating profit was $1.6 billion in the quarter, or 42% of revenue. Operating profit was up 1% from the year-ago quarter. Net income in the third quarter was $1.4 billion, or $1.45 per share. Let me now comment on our capital management results, starting with our cash generation. Cash flow from operations was $1.4 billion in the quarter. Capital expenditures were $146 million in the quarter. Free cash flow on a trailing 12-month basis was $5.2 billion. In September, we announced we would increase our dividend by 13%, marking our 17th consecutive year of dividend increases. In the quarter, we paid $825 million in dividends and repurchased $15 million of our stock. In total, we have returned $6.4 billion in the past 12 months, or 123% of free cash flow. Over the same period, our dividends represented 64% of free cash flow, underscoring their sustainability. Our balance sheet remains strong with $5.5 billion of cash and short-term investments at the end of the third quarter. Regarding inventory, TI inventory dollars were down $64 million from the prior quarter and days were 137. Distribution-owned inventory declined in third quarter by about $100 million, the eighth consecutive quarter of planned reductions, as we have continued the transition to have fewer distributors and bring more customers direct. As a reminder, as we build closer direct relationships with our customers, we further strengthen one of our competitive advantages, the reach of our market channels. Tactically and strategically, we're pleased with the progress of the transition and the impact for our customers. For the fourth quarter, we expect tier revenue in the range of $3.41 to $3.69 billion and earnings per share in the range of $1.20 to $1.40. Our annual operating tax rate has not changed much, but now runs up to 14% from the year. And that's what you should use for your models in the fourth quarter. For next year, we expect our annual operating tax rate to remain at about 14%. In closing, we continue to invest to strengthen our competitive advantages and in making our business stronger. With that, let me turn it back to Dave.

Thanks, Rafael. Operator, you can now open the lines for questions. in order to provide you as many as possible the opportunity to ask a question. Please limit yourself to a single question. After our response, we'll provide you an opportunity for an additional follow-up. Operator?

If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. And we'll go ahead and take our first question from Sushiya Hari with Goldman Sachs.

Hi, guys. Good afternoon and thanks for taking the question. Rafael, Dave, my first question is on automotive. You guys saw very strong results in the September quarter. I think you spoke to that 75% sequential increase in revenue. in the automotive end market. What's your view on December as it relates to automotive and how are you thinking about sustainability into the early part of 2021? And then I've got a quick follow-up. Thanks.

Sure, Kushia. Yeah, I think that, you know, that 75% sequential obviously was very strong, but is probably best explained looking at the previous quarter. And as we talked about last quarter, You know, the majority of the automotive revenue is on consignment. So as the North American and European manufacturers had closed plants, that revenue reacted very quickly, and we were down 40% sequentially and year on year. And so as those factories opened up, we saw the bottom in May, and we expected revenue to grow, and as they opened up, Obviously, that revenue reacted very quickly in the other direction. So that's really the story that we saw in third quarter. Again, as we've given color last quarter on the automotive market and talked about how that was moving pretty significantly, in the fourth quarter, you know, we're not breaking out any particular end market or specific color on that front. There's not a reason to as we look into the fourth quarter. So you have a follow-on?

I do. Thanks, Dave. My follow-up question is on gross margins in Q3. Rafael, you mentioned that gross margins were down 60 base points on a year-over-year basis, and I was just trying to better understand what the puts and takes were. Overall revenue, I think, was up 1%. your mix of businesses improved with analog up, you know, 7% year-over-year, embedded processing down 10%, and 12-inch versus 8-inch, I'm guessing 12-inch was up year-over-year. So I'm just trying to understand what the negatives were on a year-over-year basis that drove gross margins down a little bit. I appreciate you guys don't run your business for gross margin, but just curious. Thank you.

Yeah, no, happy to answer that. So, yeah, on a year-on-year basis, revenue was up 1%. Gross margin dollars were up, but a little less than that, maybe half a percent or so. But, you know, when you're looking at such big numbers that then the delta is so small, it's difficult to look at the fall through like we normally look at it, right? So, in the big scheme of things, revenue was up a little bit and gross margin dollars were up a little bit. But having said that, you know, I would also point out that the mix of personal electronics revenue was higher in third quarter than it's been, you know, whether it was the third quarter last year or even second quarter. Great.

Thank you, Tush. And we'll go to the next caller, please.

We'll take our next question from Craig Heddenbach with Morgan Stanley.

Yes, thank you. Maybe just follow up on the last point on the strength in personal electronics, you know, really as you look out to Q4, you know, Dave, how you feel about kind of inventory versus end-demand sell-through, and then as part of that and perhaps other segments as well, how you think about Huawei in terms of perhaps kind of last shipments there and how you're seeing that as you go forward.

Let me go ahead and start, and then Dave can address the Huawei question or anything else, but At the highest level, we are very well positioned to handle whatever comes at us, whether it's personal electronics or any other market. But personal electronics is one that by having the inventory strategy that we have followed, having that optionality that we have talked about for now 180 days or so, the last two quarterly releases, has put us in a really, really good position. Now, that is not just having that kind of tactical strategy or tactical position. It's also having the strategic position of being the supplier of catalog parts that are highly diversified, that sell to many, many customers. We have over 100,000 different customers, sell 80,000 different parts. So it put us in a position where we can build the inventory, have the asymmetric bet, so that if revenue is strong, we can support it. If it's not, then, you know, we hold inventory a little longer than usual, but that's okay. It's just, you know, a little working capital. With that, I also want to make the point that, you know, inventory we think very – it's a strategic asset, as we have talked about earlier. We're comfortable holding high levels of inventory, and, in fact, we're going to update – we're going to give you an update on our range on inventory at the next capital management call in February. Sure.

Yeah, I'll make the comment on Huawei. So Huawei was about 2% of our revenue in the third quarter. That was a little higher than what they were in the first half of 2020. So certainly we're in compliance with U.S. export restrictions and stopped shipping to them on September 14th. and they are not included in our fourth quarter revenue guidance. So, do you have a follow-on, Craig?

Sure. No, thanks for all the color there. I guess just how you think about it as a business rebound, just from an OpEx perspective, any puts and takes there, you know, for Q4 and into next year? Sure.

Nothing significant that I would point to. You know, in OPEX, of course, R&D is a big part of that. It's about $1.5 billion a year. That's a big component of our competitive advantage of having the broadest portfolio in the industry. We continue to put out some of the best products, catalog products that go into automotive, industrial, personal electronics, communication markets. So we'll continue to strengthen that advantage. Another one that goes into OPEX in the GNA portion, in the SGNA portion, is the investment that we're making in TI.com to strengthen the reach of our channels. So we continue to strengthen that tool, that ability to reach channels, reach customers better and keep them engaged longer and selling more and more products to those customers. You know, so at the highest level, OPEX has been running $3.1, $3.2 billion a year on a trailing 12-month basis. I would expect for that to run at about that level, maybe over time up 1 or 2% year-on-year, but in that neighborhood. Great. Thank you.

And we'll go to the next caller, please.

We'll take our next question from Stacy Vasken with Bernstein Research.

Hi, guys. Thanks for taking my questions. For the first one, I wanted to touch on the strength from PE. I wanted to know if you can give us a little more color on how much of that would be PCs versus smartphones. I know that you had talked about some of that strength coming from your ability to satisfy unexpected demand. I assume that was maybe more a PC statement, but any color you could give us on sort of the relative mix and growth of those two sub-end markets would be helpful.

Yeah, Stacy, you know, I'd say that, you know, as the pandemic, you know, first started back in March, and even in last quarter, a lot of the strength was initially driven by PCs and tablets, but we have seen that strength broaden. So, even the TVs and, you know, smart speakers and other things that are used in the home. Our best estimate or guesstimate of what's going on is that as people are spending more time at home, they're upgrading the things that they're using more. So that spend is broadening beyond just the PC. And as Rafael was talking about, our portfolio of products serves us well and puts us in a position to be able to support that demand. Do you have a follow-on?

I do. Thank you. So, I know you talked about continuing to hold high inventory levels and maintaining high service into Q4 and beyond, and I get that. I just wanted to know if you could give us any color on what that implies for your utilization and loading going forward. I'm assuming your utilization was up sequentially in Q2, in Q3, I mean. Please let us know if that was the case, and what are your plans for utilization, factory loadings as we go into Q4 and the end of the year?

Sure. So, Stacy, as you know, we only talk about utilization when there's a big inflection point or something unusual. So we did talk about it in April going into second quarter because, you know, most people, most of the worst competitors decrease their loadings. And instead, we kept them flat at that point to first quarter to maintain that optionality, to have that optionality that, frankly, has served us tremendously well during this last six months. Since second quarter, you know, we have biased up our loadings. So we did that, you know, from second to third a little higher. And You know, third and going to fourth, we'll probably bias that up. We are biasing that up higher. It's nothing significant, but it is biased up so that we maintain that optionality and we can maximize revenue and support our customers with any potential offsides that they have that would be unsupported otherwise.

Okay. Thank you, Stacey. We'll go to the next caller, please.

We'll take our next question from Timothy Arcuri with

Thanks a lot. I guess my first question is on the share buyback. It was quite small, even lower than in the depths of the financial crisis back in 08, yet your business has already snapped back a lot. What's the thinking there? You've always been pretty astute about the intrinsic value of your stock. So how should investors sort of read that? Thanks.

Yeah, no, first let me step back and remind everybody how we think about cash returns. We talk about this during capital management every year in February and when we meet with investors. But when we think about cash returns, the objective there is to return all free cash flow to the owners of the company via buybacks and dividends. We use both. And if you look at in the last – on a trailing 12-month basis, which is the best way to look at that, we have generated $5.2 billion of free cash flow and have returned $6.4 billion. So, you know, $1.2 billion more than the generation. So well ahead of the generation the return has been. Do you have a follow-up?

I did. I did. So I wanted to double-click just a little bit on the drop-through and Analog, it seemed like the drop-through and embedded was fine, but you're still a little below where the out margin was back in sort of the, you know, late, you know, 2018 timeframe at sort of similar levels. Is there something going on with mix? Is that maybe the PE mix that you were talking about before within Analog? Thanks.

You know, there's nothing unusual there to comment. You know, clearly Analog is – is the biggest segment that we have. So anything that we come in at the company level applies, likely came from from analog. So and they have a fair amount of P in fact, a disproportionate amount of personal electronics, given that embedded doesn't have much personal electronics. Oh, yes.

Yeah. And embedded is essentially industrial and automotive for the most part by 90%. Right. Those two. So that's where that's where that growth would would come from. So thank you, Tim. And we'll go to the next caller, please.

I'll take our next question from with J.P. Morgan.

Good afternoon. Great job on the quarterly execution. Can you guys just give us the quarter and quarter and year-over-year trajectories by geography? I know they're just shipped to locations, but I think it's still useful as a proxy for demand and overall economic activity, just depending on the breadth of the participation.

Sure, Harlan. Yeah, a year ago, Asia was up and all of the other regions were down. And sequentially, all of the regions were up and Japan was down. Do you have a follow-on?

Great. Yeah. So you guys mentioned last quarter that there may have been some industrial customers that were building some inventory to potentially buffer against future supply chain disruptions and just you know, prudent business continuity planning. Did you guys continue to see that in Q3, or are these customers starting to work down these inventories or just sustaining the higher levels as we head into the winter months and flu season?

Yeah, and Harlan, I think our comments last quarter were, one, just more of an observation of history in our industry, you know, that basically it's taught us that whenever we've seen supply constraints that customers react by building some inventory. So, you know, it's just our belief that it would be naive that, you know, this would be the first time that that wouldn't happen, right? So I think that those supply constraints in our industry still exist. So to that extent, you know, that could still be the case. And now our lead times have remained stable our product availability is still very high. I think today you can go to ti.com and get immediate availability of over 40,000 different devices. And that doesn't mean that we don't have pockets of delivery problems. We'll always have that at any time. But overall, our lead times are very solid and availability is high. But that's not true for the industry. Yeah, I think it just would be naive to believe that that wouldn't be the case. So, thank you, Harlan. We'll go to the next caller, please.

Our next question comes from John Pitzer with Credit Police.

Yeah, good afternoon, guys. Thanks for letting me ask the questions. Congratulations on the solid results. David, if you look at kind of your guidance over the last two quarters, it looks like you sort of rightfully discounted kind of what the bottoms-up bookings was telling us. You said as much when you guided for the June quarter, and just given the magnitude of beat in September, it kind of feels the same way. And that, to me, seems to make sense in the midst of a global pandemic. I'm just kind of curious. You're guiding the December quarter to plus or minus about seasonal, inclusive of what sounds like a 200 basis point. It had the one from Huawei, but I guess I could argue maybe phone builds started a little bit later this year that should help December. I guess as you forecast the December quarter, was seasonal kind of the metric you were going for, and are you discounting kind of your bottoms up in the December quarter as much in hindsight as you did in June and September?

Yeah, no, I think you've covered a lot of good points, John. And like you point out, in any quarter, there's puts and takes. You know, you've got the headwind of Huawei. You know, we've got the unwind of the distributor program, which, in fact, you know, we've actually wound that up this past quarter. And just with the growing demand and the inventory needs and positions that the We've essentially completed that. So, we depleted about, as Rafael, I think, mentioned, about $100 million worth of inventory in that quarter. So, you know, you've always got puts and takes. But I'll tell you that the most important thing that we see and the most important input that we get is the demand that our customers tell us they want. You know, we get that from the orders and the backlog that our customers provide us as well as demand fees that we get through consignment. And so, that is really what drives and informs the outlook that we provide. So, do you have a follow-on, John?

Yeah, Dave. It's fair to say that there's been nothing typical this year, but you and I have talked about this in the past. If you look at the year-over-year growth discrepancy between analog and embedded. It's fairly wide. I'm wondering, now that we're 90 days more into this kind of disparity, difference in year over year growth, is there a good explanation in your mind? And importantly, as we look forward, when do you expect the embedded business to kind of catch up to analog on a year over year basis?

Yeah, sure. You know, I think that certainly the embedded business isn't performing the way that we would want it to, you know, over over the last multiple quarters. And I think that if you look over the most recent quarter here, certainly we're encouraged by the progress or the numbers that that would show. But we've been working very hard on turning that business around and getting it performing like we would like it to be performing. And, you know, we're making investments there because we believe that it will be a great contributor in the coming years. And so, you know, we're busy building that business stronger, but it will take time. You know, and success in that business will be not measured over, you know, this quarter or even over a couple of quarters, but will be measured over time. So thank you for that, John. And with that, we'll go to the next caller, please.

Our next question comes from Ross Seymour with Deutsche Bank.

Hi, guys. I wanted to follow up on that same last question of John's on the embedded side of things. Dave, last quarter where embedded was sequentially weak and year-over-year weak. You talked about the over-indexing to automotive and industrial. But given that automotive was up 75% sequentially, I'm a little surprised embedded was basically the same as analog from a sequential perspective. Were there some offsets in that business? I know you said industrial was down a little bit, but it doesn't seem like it would be enough to offset that over-indexing on the automotive side.

Yeah, well, embedded grew a little faster than analog. And essentially, just as last quarter, as you pointed out, Ross, that It didn't have any offsets, you know, to the business. Essentially, all you have left is industrial. So, it's those two end markets. And so, with the return of revenue, it's performing, you know, about the same as analog is. Those are really the two components driving this.

Yeah, so it doesn't have nearly as much P.E. or, in fact, hardly any P.E. personal electronics, and personal electronics was a big contributor to growth in third quarter, sequential growth.

That's right. That's right.

Great. I guess for my follow-up, yeah, if I can pivot over to the industrial side, just a higher-level question. You guys seem to be flat up year-to-date in your industrial segment. How do you explain the actual growth in that segment versus the global GDP and the general economic activity dropping? It doesn't seem like the inventory concerns are as high as what you had last quarter, where you first said it would be naive to think otherwise. It seems like some of those concerns have gone by the wayside. But you're still nonetheless outperforming the global economy. If it's not inventory, I guess, what is it?

Well, you know, the longer-term thesis, of course, is that content is expanding inside of those markets. And I think if you look below, we talked about there's areas of strength and there's areas of weakness. So, you know, if you look at, you know, certain markets like aerospace and defense that, you know, is obviously weak, people aren't taking deliveries of planes as an example. There's other areas of strength like appliances. If anyone that's listening on the call that is doing any home renovations like my wife is, you have to wait multiple months to get home appliances. And so we're seeing very, very strong strength in those types of areas. But I think the diversity of that market coupled with the content expansion, you know, I think just proves out why it's such an attractive market for us. And our products are really tailor-made, well-positioned to take advantage of that market.

Right. And, you know, the other thing I would add is, listen, we have 100,000 different customers, 80,000 different products. The vast majority of those sell into industrial. That is the most diverse market. end market. So it's impossible for us to know what those customers are doing and what that adds up to. The important part is the way we run the company to give ourselves the highest possible optionality so that if it is driven by the secular trends or as it is driven by the secular trends over the long haul, maybe And in one quarter or two quarters, it could oscillate, and it could be inventory building. But over the long term, those secular trends are there, and we put ourselves in a good position tactically to have that inventory available to support our customers. And if we have a correction, inventory correction, or something of that sort, we'll go through that, and that inventory will not go bad. We'll have it in storage for years, and then we'll sell it at the other end of that cycle. of whatever correction we may have.

Okay. Thank you, Ross. And we'll go to the next caller, please.

Our next question comes from Tori Sandberg with .

Yes. Thank you. I wanted to ask John's question a bit differently. Does it feel like bookings are now kind of back to reflecting true-end demand? Obviously, this year, everything's been abnormal, right? As I think about your fourth quarter guidance, is it safe to say that bookings are now running very much aligned with end demand?

Well, Torrey, that's always, you know, a question that we don't have precise insight to, right? We don't have a system that tells us that. I think you have to even go back to third quarter 18 where, you know, the market had turned. We're going through a classic inventory cycle. We worked our way through that through 19. And just as we bottomed out and saw signs of inflection, you know, COVID-19 hit. So, you know, so that kind of changed things. But certainly, you know, we started this year with inventories, you know, at lower levels. And so that, you know, certainly that's where we started the year, right? So, but inventories and demand are certainly tied together. And So I don't believe that they were ever, you know, largely disconnected over time.

And so much of our business is on consignment or just-in-time demand that the bookings versus revenue trend is really not that meaningful.

That's right, yeah. So it's almost what inventory our customers have that's downstream. And, you know, so that's why I think that we from an optionality standpoint, try to ensure that we've got product available, that if things want to continue to strengthen from here, we're in a position to support it. And that that's, that's the posture that we're taking. If it doesn't, you know, we certainly know what to do in the other direction as well. Yes, following Tori.

Yeah, that's fair. Thank you. So I know communications is smaller for you, and it may even be less of a strategic end market for you, but it did take a sequential breather. It was still off the year-over-year direction. Do you have any views on where that market is headed?

Well, it, you know, I think that our longer-term thesis is that it's not a structural grower, just there's, you know, not new subscribers being added to the network overall. You know, we've made investments in 5G and will benefit from it, but as you say, it's just not a very large portion of our revenues. Certainly there's noise, you know, in this quarter's numbers with Huawei. But, you know, growth will resume. And as it always does, I think everyone in the industry describes it as a choppy market. And it doesn't make it a bad market. It just makes it choppy. So we'll continue investments there. It's a good market for us. And, you know, we'll continue to make investments in it. And, you know, we continue to like it. So, and thank you, Tori. And I think we've got time for one last caller, please.

We'll take our last question from Amber Srivastava with BMO.

Hi. Thanks for suiting me in. Dave and Rafael, I had a question on the industrial business as well. So, clearly, it's seemingly very resilient back at the past cycles. But is it also because, and I know you guys look at it very long-term as well, 2019, for four consecutive quarters and for the full year, it was down. So, is it because as we, and I think, Dave, you mentioned that in an answer to an earlier question, is that when we entered the year, the, really, it was the supply chain was drained out of any excesses because of what you have seen. despite all the problems we've seen and the demand collapsing in certain end markets and industrials, it's held in also because of that factor that the supply chain inventory was pretty lean?

Yeah, you know, I think we've just completed seven quarters of year-on-year declines. This is the first quarter of year-on-year growth that we've had. So, you know, industrial has been a piece of that. I think those year-on-year declines, a good part of that was just, you know, our industry cyclicality, you know, as you pointed out. So, you know, but structurally, you know, industrial with its breadth, and if you look, we've got 13 sectors that we're investing in. All of them have content that's growing, and so I think we're very positioned positioned very well to be able to support that growth. So what we can't call and what we don't know is in the short term, you know, how the economy is going to behave. And even in a weak environment, you know, that market has done reasonably well compared to some of the other markets. Do you have a follow-on?

Yeah, just a quick one on the embedded side. I think last morning, Scott, also you mentioned that you were encouraged by the science of stabilization. I just wanted to just help us understand what are some of the steps you have taken to write the business? And as you said, it doesn't happen overnight. And you talked about investments, and I know several years ago you said that you were going to de-emphasize comms infrastructure because that's longer term. You didn't see growth there, at least on the comms, on the embedded side. So is the investment profile in this business looking a little bit different as you look forward? And what are some of the other steps that you guys have taken to, to quote unquote, write the business and get it back on track?

Yeah, the Yeah, so you've highlighted a couple of steps that we have taken in the past, I think none of those have been secrets. The decisions on the comm side was something that we had talked about, I think, going back six seven years ago now, as we didn't believe that Tom's Equipment was going to be a structural grower. And specifically on the embedded side, we did believe that there was some opportunities on the analog side, so we took up investments there and we're enjoying the benefits of those investments on the analog side today. But that did provide a headwind We talked about, I think it was a couple of quarters ago now, some of the restructuring that you mentioned inside of the embedded business. And we've got, I think, eight different product groups. And we took down some of the resources in some and took up some of the resources in others. And really just getting resources onto the best opportunities for overall and making sure that we have resources into the places that we believe will be the best growth opportunities. And, you know, I'd just say in general what we're trying to do is leverage our competitive advantages, ensure that the products that we are investing in have a broad base, appeal in a customer-based standpoint. And there'll be products that will generate cash flow for a long time to come. And just taking a step back, again, I'd say that, you know, we're investing in that business because we believe it'll be a great contributor when we look at the years ahead. And so, again, there's a lot of effort going into building that business stronger. but it will take time so that success will be measured over years, not just in a quarter or two. So with that, I'll turn it over to Rafael to wrap us up for the night.

Thanks, Dave. Let me wrap up by emphasizing what we have said previously. At our core, we're engineers, and technology is the foundation of our company. But ultimately, our objective and the best metric to measure progress and generate long-term value for owners is the growth of free cash flow per share. Our strategy to maximize free cash flow per share growth has three elements. A great business model focused on analog and embedded products and built around four sustainable competitive advantages. Two, discipline in allocating capital to the best opportunities. And lastly, efficiency. which means constantly striving for more output for every dollar spent. While we strive to achieve our objectives, we will continue to pursue our three ambitions. We will act like owners who will own the company for decades. We will adapt and succeed in a world that's ever-changing. And we will be a company that we are personally proud to be a part of and would want as our neighbor. When we're successful, our employees, customers, and communities and owners all benefit. Thank you, and have a good evening.

This concludes today's call. Thank you for your participation. You may now disconnect.