William Stein

William Stein asked about Amphenol's record book-to-bill ratio, inquiring if it included extended duration orders, its concentration in IT Datacom, and the underlying reasons for such high order levels, specifically if it was driven by lead time considerations or minimum order requirements related to CapEx.

Answer

CEO Adam Norwitt explained that orders were broadly strong across all markets, with significant contributions from AI investments. He noted that customers had opened their order windows, particularly for substantial projects, driven by the advanced technology involved and the need for shared investment risk. Norwitt clarified it wasn't about minimum orders but rather customer commitments providing comfort for Amphenol's capital investments, reflecting robust customer intentions and confidence.

William Stein asked about Amphenol's record book-to-bill, inquiring if it included extended duration orders, was concentrated in IT datacom, and if it was driven by lead time, minimum order requirements, or CapEx commitments.

Answer

Adam Norwitt (CEO) confirmed broad-based strong book-to-bill, significantly driven by AI investments in IT Datacom. He explained that customers are opening their order windows due to the complex technology and shared investment risks, providing Amphenol comfort for capital commitments, rather than minimum order requirements.

William Stein asked for further clarification on Amphenol's incremental automation efforts, particularly in the IT Data Communications business, and how it aids in meeting performance requirements, quality standards, and improving time-to-market/volume. He also inquired if these automation strategies are being extended beyond the IT Data Communications market.

Answer

CEO Adam Norwitt elaborated on Amphenol's long-standing, in-house automation efforts, which are crucial for meeting high product performance and quality standards, and for accelerating time-to-market and volume, especially for next-generation products with shortened lifecycles. He confirmed that these automation strategies, driven by decentralized general managers and collaborative entrepreneurship, are being adopted across "every one of our end markets" where it makes sense, resulting in flexible, cost-effective solutions.

William Stein sought further clarification on Amphenol's incremental automation efforts in the IT Data Comm business, and whether these efforts extend beyond that specific end market.

Answer

CEO Adam Norwitt explained that in-house automation capabilities, developed over 10-15 years, are crucial for meeting high product performance, quality, and time-to-market requirements, especially for sensitive, high-speed products. He confirmed that automation is adopted across all end markets where it makes sense, driven by decentralized general managers and company-wide collaboration.

William Stein of Truist Securities asked about Amphenol's record operating margin, noting it surpassed the company's historical targets, and questioned if it was time to establish a new, higher conversion margin goal.

Answer

SVP & CFO Craig Lampo acknowledged the exceptional performance, attributing it to strong organic growth and a shift towards higher-technology products. He stated that while some cost normalization is expected, the company is now targeting an incremental conversion margin of approximately 30%, a significant increase from the previous 25% target.

William Stein of Truist Securities noted that incremental margins were significantly above the typical 25% target and asked if it was time to formally raise this target, perhaps to around 30%.

Answer

CFO Craig Lampo acknowledged the excellent margin performance, driven by strong execution and operating leverage on higher sales. He stated that while the company is well-positioned to "modestly exceed" the historical 25% target this year, they want to remain prudent given the dynamic environment. He deferred on formally setting a new, higher target but expects to continue outperforming the 25% level in the near-to-midterm.

William Stein asked for a specific update on the industrial automation sub-segment, inquiring if it is recovering and whether its weakness is driven by demand or inventory, given its European focus.

Answer

CEO R. Norwitt confirmed that industrial automation is Europe-centric and sales were down year-over-year. However, he noted a 'smidgen of growth' on a sequential basis but cautioned against interpreting it as a sign of recovery. He expressed continued concern about the European industrial market, noting its link to the auto industry and that the timing of a broader recovery remains uncertain.

William Stein asked about the linearity of orders during the quarter, specifically if new orders typically fade into December, and inquired about the current duration and visibility of Avnet's backlog.

Answer

Phil Gallagher, CEO of Avnet, explained that bookings typically trail off in late December, but billings continue. He noted positive book-to-bills and an increase in 'drop-in' orders inside lead times, suggesting inventory depletion. Gallagher also stated that visibility from customers for longer-term forecasts is improving but not yet at desired levels.

William Stein inquired about the linearity of orders during the second fiscal quarter of 2026, specifically how bookings and billings trended, and asked for an update on the duration and visibility of Avnet's current backlog.

Answer

CEO Phil Gallagher explained that while billings continued through the quarter, bookings typically tail off in late December. Despite this, book-to-bills remained positive. He noted an increase in 'drop-in' orders within lead times, suggesting depleting customer inventories. Gallagher also confirmed improving visibility, with Avnet and suppliers actively seeking longer-term forecasts from customers. CFO Ken Jacobson clarified that actual price increases had not significantly impacted the quarter's results yet.

William Stein inquired about Avnet's revenue exposure to the data center and AI application categories, seeking an update on its current metric and scale relative to overall sales. He also asked for clarification on inventory days, cash flow impact, and future expectations for inventory levels.

Answer

Phil Gallagher (CEO) clarified that Avnet's exposure to hyperscalers is relatively small, approximately 7% of Asia-Pac business, with opportunities in storage, connectivity, power, cooling, and connectors, and significant future potential in downstream edge applications like MCU/MPU. Ken Jacobson (CFO) explained the inventory days calculation, noting a decline in the EC business (down 10 days year-over-year) despite a sequential increase due to investments in Asia and supply chain services. He expects continued reduction, aiming for the 80s by next quarter, with Phil Gallagher adding that inventory quality is good.

William Stein asked for details on Farnell's better-than-expected performance, particularly its margin improvement, and its long-term outlook. He also explored the dynamic of Avnet's inventory strategy, questioning why levels did not decrease more significantly despite a revenue decline and whether the company might target higher inventory levels long-term.

Answer

CEO Philip Gallagher described Farnell's performance as "encouraged," citing a plan that is driving efficiency and targeting a return to double-digit operating margins through steady improvement. On inventory, Gallagher defended its strategic value, stating that while they aim to reduce excess stock in specific areas, they will not sacrifice competitiveness. CFO Ken Jacobson added that while progress on inventory reduction has been modest, they expect further progress in the coming quarter.

William Stein asked for quantification of any foreign exchange impact and questioned the nature of inventory reduction, probing whether there is 'sludge' inventory complicating the burn-off.

Answer

CFO Ken Jacobson clarified that foreign exchange had a minimal impact on the sales line but did help reduce working capital on the balance sheet. Regarding inventory, Jacobson explained it's a complex issue involving aged stock and lower demand, but not a high risk for major write-offs. CEO Phil Gallagher added that while inventory will continue to be reduced, the pace depends on market growth, and the company is still making strategic investments in necessary inventory while managing non-moving stock.

William Stein from Truist Securities asked if management expects a return to year-over-year revenue growth during fiscal 2025. He also questioned whether the increase in turns business is a positive demand signal or simply customers relying on Avnet's inventory in a short lead-time environment. Finally, he requested an updated breakdown of Avnet's end-market exposure.

Answer

CEO Phil Gallagher stated that Avnet is anticipating and modeling for a sales increase in the second half of its fiscal year. He agreed that the modest increase in turns business is likely more a function of customers delaying orders due to stable lead times rather than a sign of strengthening end demand. Gallagher then provided a high-level end-market breakdown: Industrial at 30-40%, Compute/Communications at 30-35%, Transportation at 10-15%, Consumer at 10-15%, and Aerospace & Defense at 5-10%.

William Stein from Truist Securities inquired about the strong bookings, asking if the company could disclose its book-to-bill ratio and whether the duration of its backlog has changed. He also followed up by asking if customers are placing orders further into the future, either due to their willingness or Texas Instruments' lead times.

Answer

CFO Rafael Lizardi confirmed that backlog built during the quarter, with strong 'turns business' reflecting real-time demand, but did not provide a specific book-to-bill ratio. CEO Haviv Ilan stated that customers are indeed placing orders 'a little bit more forward,' though this is not driven by extended lead times, which remain competitive. He highlighted TI's flexible terms and strategic inventory position to support immediate customer needs.

William Stein asked about the strong bookings mentioned, inquiring if the company could disclose the book-to-bill ratio and if the duration of the backlog has changed. He then followed up by asking if customers are placing orders further out into the future, either due to their willingness or TI's lead times.

Answer

CFO Rafael Lizardi confirmed that backlog built throughout the quarter but did not provide a specific book-to-bill number, noting that TI transacts most revenue directly, leading to real-time insights and strong turns business. CEO Haviv Ilan confirmed that customers are placing orders 'a little bit more forward,' but clarified this is not due to extended lead times, which remain competitive (below 13 weeks, many at six weeks). He emphasized TI's customer-friendly terms and inventory position allow for real-time demand support.

William Stein asked management to reconcile their prior quarter's optimistic 'signal vs. noise' commentary with the Q3 guidance, which implies a year-over-year growth deceleration. He followed up with a question about TI's current and future exposure to the AI market within its enterprise segment.

Answer

CEO Haviv Ilan explained that while the underlying cyclical recovery signal remains strong, Q2 contained 'noise' from tariff-related demand pull-ins, justifying a more responsible Q3 forecast. On AI, Ilan confirmed that TI's data center business is growing very well and that the company is developing new application-specific products to expand its share, viewing it as a potential tailwind for 2026 and beyond.

William Stein of Truist Securities asked for a breakdown of growth between pricing and volume, particularly if tariffs were being passed on as price increases. He also requested an update on the competitive landscape in China.

Answer

CEO Haviv Ilan stated directly that recent growth was based on shipping more volume to customers, not price increases related to tariffs. Regarding competition, he acknowledged it is intensifying in China across all product types, not just general-purpose parts. However, he believes TI's competitive advantages—product breadth, quality, scale, and its 'geopolitically dependable' supply chain—are highly valued by Chinese customers who are currently focused on securing supply.

William Stein of Truist Securities asked about the progression of order pacing over the past few months and if there were any surprises. He followed up by asking for insight into customer inventory levels, especially in the context of TI's own healthy inventory position.

Answer

Head of IR Dave Pahl stated that order rates behaved normally, increasing each month during the quarter without any large drop-offs. CEO Haviv Ilan added that with TI's short lead times and high inventory, visibility is low as customers buy in real-time. He noted there is likely little desire for customers to build their own inventory given TI's ability to supply parts on demand.

William Stein sought to reconcile TE Connectivity's Q2 outlook with strong bookings, noting that Q2 guidance appears a few points below normal seasonality, and asked if this is primarily related to weaker auto production in China, specifically for EVs.

Answer

CEO Terrence Curtin explained that the Q2 guide reflects different segment movements, with Industrial Solutions expected to be up double-digits year-on-year, but a typical 3 million unit auto production downtick from Q1 to Q2 impacts Transportation sequentially. He clarified that Q1 was higher than seasonal due to industrial trends, and the overall momentum from orders provides confidence for the year, aligning with the 88 million global auto units forecast.

William Stein sought to reconcile the outlook with bookings, noting that March quarter guidance appears a few points below normal seasonality, and asked if this relates to weaker auto production in China, specifically for EVs.

Answer

CEO Terrence Curtin explained that the Q2 guide reflects two different segment movements: Industrial Solutions will be up double digits year-over-year, while Transportation Solutions will be down sequentially due to a typical 3 million unit auto production downtick from Q1 to Q2, aligning with the 88 million units forecast for the year. He noted that Q1 was higher than seasonal due to industrial trends, but overall, the orders provide confidence for Q2 and the full year.

William Stein acknowledged strong revenue and earnings results and outlook but raised a lingering question about profitability. He noted that despite revenue and earnings beats, conversion margins seemed slightly below consensus, and inquired if there was any specific factor currently dragging on profitability.

Answer

CFO Heath Mitts stated that the company has consistently maintained a roughly 30% flow-through rate. He clarified that the amortization change was implemented to better represent cash profitability and that, fundamentally, there is no specific drag on profitability. Mitts mentioned that in certain parts of the business, the recovery of tariff pricing, which adds revenue without margin, can create some noise in reported margins, but overall operational performance remains strong.

William Stein of Truist Securities pointed out that the book-to-bill ratio was slightly below one, driven by Transportation, and asked for color on what is dragging the segment down and if the metric is important to focus on.

Answer

CEO Terrence Curtin explained that the book-to-bill reflects a normal seasonal trend where automotive production typically declines sequentially from Q3 to Q4. He noted that global auto production is expected to fall from 21 million units in Q3 to 20 million in Q4, which is the primary driver and not a cause for concern, as it is factored into the company's strong Q4 guidance.

William Stein questioned TE's assertion of not seeing meaningful pull-ins in its AI data center business, given broader industry activity, and asked about customer concentration in that market.

Answer

CEO Terrence Curtin reiterated that TE did not see pull-ins from its AI customers. He stated the growth is a direct function of ramping production for programs already won across multiple hyperscalers. The confidence in the raised revenue forecast is based on direct customer demand signals and collaborative efforts to increase capacity.

William Stein asked about the practice of cross-licensing technology in the AI connector space and its potential impact on TE Connectivity's revenue and margins.

Answer

CEO Terrence Curtin explained that cross-licensing is a long-standing practice in the datacom industry, driven by customer needs for supply security during significant technology ramps. He viewed it as a collaborative effort necessary to meet customer demand and a positive indicator of a strong growth trend, rather than a negative for revenue or margins.

William Stein of Truist Securities asked for commentary on the sequential decline in Communications orders despite strong results, and for more details on the product exits within the Sensors business.

Answer

CEO Terrence Curtin explained that the sequential order decline in Data & Devices is due to natural lumpiness, pointing to the combined $1 billion in orders over the past two quarters as the key indicator of strength. Regarding Sensors, he confirmed the company is continuing its portfolio pruning to focus on four key markets. These exits will create a headwind of approximately $50 million in sales in fiscal 2025, with the program expected to be completed by the end of that year.

William Stein asked for an estimate or best guess on when underutilization charges and inventory write-downs might reach a normalized level, allowing product margins to be more directly reflected in the non-GAAP P&L, and then sought clarification on whether gross margins could exceed the 65% target from utilization leverage, given that underutilization charges simulate a 90% utilization level.

Answer

President and CEO Steve Sanghi stated he was not comfortable forecasting an absolute timeline but expects substantial improvement in the next fiscal year, starting with March. CFO Eric Bjornholt clarified that the 67% product gross margin is not a target, and the long-term model is 65%. He explained that normal utilization levels vary by factory (e.g., 75-90%) and while upcycles can push margins higher (e.g., 68% with 100%+ capacity), the focus is on reaching the 65% target.

William Stein asked for an estimate on when underutilization charges and inventory write-downs would normalize, allowing product margins to be more directly reflected in the non-GAAP P&L. He also sought clarification on whether gross margins could exceed product gross margins from utilization if utilization rates surpassed 90%.

Answer

President and CEO Steve Sanghi expressed discomfort providing an absolute timeframe but expected substantial improvement in the next fiscal year. CFO Eric Bjornholt clarified that inventory write-offs normalize quicker than underutilization, and while the 67%+ product gross margin is not a model target, the company is focused on reaching its 65% long-term gross margin goal.

William Stein questioned why the current product gross margin of 66.3% is above the long-term target of 65%, and asked if the distributor sell-in/sell-through gap would be closed by the end of the September quarter.

Answer

CEO Steve Sanghi stated the main point is that the 65% long-term target is achievable and advised against over-analyzing the small difference. Regarding the distribution gap, Mr. Sanghi said it would not be closed by September due to slow-moving inventory, with CFO Eric Bjornholt guessing it might align by the end of the fiscal year.

William Stein questioned why Microchip's long-term gross margin target of 65% is below the current calculated product gross margin of 66.3%, asking if this implies a future headwind from mix or pricing. He also asked if distributor sell-in and sell-through would be aligned by the end of the September quarter.

Answer

CEO Steve Sanghi advised not to 'quibble about a percent here and there,' emphasizing the main point is that the 65% target is achievable as the 12 percentage points of temporary charges abate. CFO Eric Bjornholt added that new high-margin products should support margins. Regarding the channel, Sanghi stated that alignment will take more than one quarter due to slow-moving 'sludge' inventory, and they do not expect sell-in to equal sell-through in September.

William Stein asked for an update on Microchip's competitive positioning in China and its 'China-for-China' strategy, referencing earlier comments that some standard products were less competitive there.

Answer

CEO Steve Sanghi clarified that the issue is not product competitiveness but pressure from the Chinese government to use local brands. The strategy was to offer Western-quality products under a local brand. This was complicated by a rule change defining origin by fab location, not assembly. CFO J. Bjornholt added that competition is primarily in lower-end standard products, not higher-end, more complex ones. The company is re-evaluating its approach.

William Stein sought to distinguish whether the 'green shoots' were true demand signals or simply customers taking advantage of short lead times. He also asked for a view on the normalized rate of end demand, given the current undershipping and past long-term growth targets.

Answer

CEO Ganesh Moorthy clarified that green shoots reflect real consumption, as customers who had paused ordering are now returning and pulling in shipments. Regarding normalized demand, he stated the noise in the current cycle is too high to provide a useful number, just as they didn't raise targets at the cycle's peak. Executive J. Bjornholt added that their focus on megatrends and TSS is expected to drive market share gains over time.

William Stein from Truist asked for a reminder of Sensata's longer-term margin outlook, including any targeted margin floor or multi-year expansion views.

Answer

Andrew Lynch, Sensata Technologies' Chief Financial Officer, reiterated a commitment to a 19% margin floor on a full-year basis, citing confidence in defending it despite market volatility. He also pointed to demonstrated sequential margin expansion throughout the year and potential margin help from a recovery in higher-margin HVOR and industrial markets.

William Stein asked for a reminder of Sensata Technologies' longer-term margin outlook, including past targets for single-year or multi-year expansion.

Answer

Andrew Lynch, Sensata Technologies' Chief Financial Officer, reiterated the company's commitment to a 19% margin floor on a full-year basis, acknowledging end-market volatility and mix. He highlighted the demonstrated ability to sequentially expand margins and noted potential margin benefits from a recovery in higher-margin HVOR and industrial markets.

William Stein sought clarification on Sensata's long-term strategic priorities, asking if the focus is on stabilizing margins around 19% versus expanding them, and if the company has a new long-term outgrowth target.

Answer

CEO Stephan von Schuckmann clarified the company's transformation goals, stating that 19% operating margin and 80% cash conversion are floors, not ceilings, with plans for continued margin expansion. He reiterated a target of returning to a 2-4% organic growth rate over the next 12-18 months by winning business across all key end markets.

William Stein asked for a reminder of the CEO search timeline and for early views on 2025 auto production growth and the company's potential for market outgrowth.

Answer

Executive Martha Sullivan confirmed the CEO search is expected to conclude within the previously guided 6-to-12-month timeframe. CFO Brian Roberts and Martha Sullivan added that it is too early to forecast 2025 auto production, and while important product launches are planned, market volatility could cause delays, making it prudent to wait before defining outgrowth expectations.

William Stein asked NXP to clarify the strategic purpose of its recent acquisitions (TTTech Auto, Kinara, Aviva Links) and how they relate to the broader automotive business. He also inquired about the competitive dynamics in the infotainment (IVI) part of NXP's automotive business, its size, and an update on the competitive situation.

Answer

Rafael Sotomayor, President and CEO, explained that the acquisitions align with NXP's strategy of intelligent systems at the edge for industrial and automotive. TTTech Auto (software) accelerates the system-defined vehicle and S32 platform with functional safety IP. Aviva Links (SERDES technology) standardizes sensors (radar, cameras, lidar) around the S32 processor. Kinara (AI capabilities) brings high-performance, low-power GenAI to the edge. Kurt Sievers, Executive Director and Advisor, addressed IVI, noting it comprises visualization and audio. He stated NXP remains a dominant player in IVI Auto, though performance in visualization is "a little below some of our peers," which is a well-known situation.

William Stein asked for a reminder of the strategic purpose of NXP's recent acquisitions (TTTech Auto, Aviva Links, Kinara) in relation to its automotive business. He also inquired about the size of the infotainment portion of NXP's auto business and an update on the competitive dynamics in that segment.

Answer

President and CEO Rafael Sotomayor explained that the acquisitions align with NXP's strategy for intelligent systems at the edge in industrial and automotive. TTTech Auto is a software company accelerating the system-defined vehicle approach around S32s, bringing IP in functional safety. Aviva Links provides innovative SERDES technology critical for standardizing sensors (radar, cameras, lidar) around S32 processors. Kinara brings high-performance, low-power GenAI capabilities to enhance edge intelligence. Executive Director and Advisor Kurt Sievers noted that NXP remains a dominant player in IVI (in-vehicle infotainment) Auto, which includes visualization and audio, acknowledging that NXP's performance in visualization is 'a little below some of our peers.'

William Stein expressed confusion about the weakness in the Industrial & IoT segment, given its significant China focus where conditions were reportedly strong.

Answer

CEO Kurt Sievers clarified that while the segment has a majority of its business in China, the weakness in the U.S. and Europe is severe. Furthermore, he explained that 80% of the segment's sales go through the distribution channel. NXP's strict discipline in keeping channel inventory low means it is fully exposed to the weak end demand in Western markets, which the strength in China was not large enough to overcompensate for.

William Stein of Truist Securities asked for an updated timeline on achieving the company's 60%+ gross margin target and requested a high-level outlook for Data Center segment growth in the upcoming fiscal year.

Answer

President and CEO Stephen Daly projected that MACOM is on a trajectory to exit fiscal 2026 with gross margins closer to 59%, making the 60% target more likely a fiscal 2027 event. For the Data Center segment, he advised against modeling another 48% growth year for fiscal 2026 but stated that, big picture, MACOM expects to continue delivering double-digit top-line growth with even faster bottom-line growth.

William Stein sought to understand if the strong performance in the Telecom segment was due to fundamental demand or inventory replenishment, and also asked for clarification on the weakness in the industrial market.

Answer

President and CEO Stephen Daly attributed the Telecom strength to market share gains in a flat 5G market, growth in SATCOM, and recovery in cable infrastructure and 10G PON as inventory burn-down completes. He also noted strong demand for metro long-haul coherent solutions. For the industrial market, Daly stated that the weakness is due to soft end demand rather than just an inventory overhang.

William Stein asked about the customer trend of purchasing silicon carbide chips versus modules and whether it impacts the market's attractiveness. He also questioned if a major customer's potential move to a hybrid SiC/IGBT inverter changes Onsemi's market view.

Answer

President and CEO Hassane El-Khoury explained that the chip vs. module trend is not new and is factored into their baseline; Onsemi wins on die performance regardless of format and offers flexibility. He also stated that the potential move to hybrid inverters by some customers is consistent with the company's long-held view, first shared at their Analyst Day, that different vehicle segments will use different technologies (full SiC, hybrid, or IGBT). This does not change their market perspective as they provide solutions across all technologies.

William Stein asked for clarification on the short lead time environment and inquired about the product development and revenue trajectory for three specific growth areas: modules, data converters, and e-motion products.

Answer

Founder, Chairman, President & CEO Michael Hsing gave a detailed update: module business is growing well and is expected to be 10-15% of total revenue next year; data converters are slow-moving but part of a larger system solution; and e-motion has surpassed $100 million in recent years and has strong potential from AI-driven robotics. EVP & CFO Bernie Blegen added that channel inventories are lean, indicating they are meeting real demand.

William Stein asked whether tariffs had any direct or indirect impact on the Q2 guidance and inquired about customer reactions to the unique, full-system products like building automation and audio amplifiers showcased at the Analyst Day.

Answer

CFO Bernie Blegen and CEO Michael R. Hsing gave a direct 'No' to both questions about tariff impacts on Q2 guidance. Regarding new products, Hsing explained the strategy is to monetize the company's silicon-based know-how by offering higher-value solutions. He reported that these system-level offerings have been 'much, much welcomed' by very large companies, marking a key part of MPS's transformation into a full-service solutions provider.

William Stein asked for help dimensionalizing the sequential decline in enterprise data for Q1 and questioned if microcontrollers (MCUs) should be expected to become a more meaningful part of revenue over time.

Answer

EVP and CFO Bernie Blegen declined to provide a precise figure for the enterprise data decline, pointing to the total Q1 outlook as the most reliable guide due to the company's diversification. Regarding MCUs, CEO Michael Hsing explained that while MPS doesn't sell them as standalone standard products, they are a key part of their evolution into a 'silicon-based solution company.' He noted that many ongoing projects and shipping products across various applications include MPS microcontrollers, often integrated into the solution.

William Stein asked about potential future growth drivers from the home automation market, referencing CEO Michael Hsing's known interest in the area. He also inquired about the company's traction with its newer data converter products.

Answer

CEO and Founder Michael Hsing detailed MPS's broad involvement in home automation, including lighting, thermostats, and security actuators. He revealed that MPS is now making MCUs to act as a central brain and is selling complete, easy-to-use kits that he believes will change the building automation market. On data converters, Hsing confirmed the segment is growing, though revenue is still small due to long design cycles. He noted wins in industrial and medical markets and expects to gain more share as new standard product families roll out in the coming quarters.

William Stein from Truist Securities asked for an update on customer inventory levels, seeking to understand the difference between large OEMs and the broader mass market. He also questioned if supplier lead times remain short or if they have begun to normalize or extend.

Answer

CEO Sean Kerins explained that inventory levels are normalizing among large OEM customers, driving replenishment orders. However, he noted that the mass market customer base still has inventory to destock, as they received components later in the shortage cycle. Regarding supply, Mr. Kerins confirmed that lead times have been stable for the past few quarters at pre-pandemic levels, without significant movement in either direction.

William Stein sought further detail on inventory, asking if current levels represent a new long-term target or are still considered elevated. He also questioned if the strong performance in the Enterprise Computing Solutions (ECS) business was driven by customers pulling in orders ahead of potential tariffs.

Answer

President and CEO Sean Kerins explained that while there is still some excess inventory, current levels are in the 'right neighborhood,' partly due to a strategic commitment to the IP&E market. CFO Rajesh Agrawal noted inventory is down $1 billion from its peak. Regarding the ECS business, Kerins stated confidently that the strong results did not reflect order acceleration from tariff concerns, but rather continued momentum in cloud, hybrid cloud, and software, highlighting the underlying health of the business.

William Stein of Truist Securities asked for clarification on the Q4 inventory dollar levels, long-term inventory targets, and management's assessment of customer inventory levels.

Answer

President and CEO Sean Kerins explained that while inventory is taking longer to sell, there are no significant pockets of slow-moving stock. He noted the company focuses on inventory turns, which are approaching historical pre-pandemic rates. He added that customer inventories are believed to be slowly 'creeping down,' with a broader recovery dependent on the overall economic environment.

William Stein from Truist Securities asked for more detail on the customer and geographic mix shifts impacting results and guidance. He specifically questioned if any policy changes from large suppliers were influencing Arrow's performance, alluding to potential changes in distribution models.

Answer

CEO Sean Kerins stated that no significant supplier programmatic changes affected Q3 results or the Q4 outlook. He characterized the current customer mix, skewed towards larger OEMs, as typical for this stage of a market cycle, with the mass market lagging in recovery. Kerins emphasized that Arrow is well-positioned to benefit from any long-term channel consolidation and sees no changes altering its view of long-term market potential.

William Stein from Truist Securities questioned the cause of lower sequential incremental margins, asking if tariff pass-throughs were a factor. He also explored Belden's data center strategy, specifically its efforts in high-performance "white space" connectivity.

Answer

CFO Jeremy Parks confirmed that sequential margins were impacted by the pass-through of higher copper and tariff costs, but stated the underlying incremental margin remains healthy at around 25%. CEO Ashish Chand explained that while the company is active in both data center "white space" and "gray space," it is being selective in the highly competitive white space market, focusing on where its IT/OT convergence strategy adds unique value.

William Stein of Truist Securities inquired about the impact of U.S. reshoring initiatives on customer sentiment and investment plans. He also asked for a breakdown of the Smart Infrastructure segment's book-to-bill ratio, specifically between smart buildings and broadband.

Answer

CEO Ashish Chand confirmed that customers are showing more long-term confidence in U.S. manufacturing, driving discussions around IT/OT converged backbones, though some near-term uncertainty exists. CFO Jeremy Parks clarified that while smart buildings orders were up 8% year-over-year, broadband orders showed stronger growth at 18% (or 12-13% organically).

William Stein asked if Belden observed customers pulling in orders from Q1 into Q4 ahead of potential tariff volatility. He also requested more detail on the 'shorter-term friction' mentioned by management and its impact on order backlog and visibility for the Q1 guide.

Answer

CEO Ashish Chand stated that the company did not experience any significant order pull-ins during Q4, noting that Belden's in-region manufacturing model mitigates customer concerns about tariffs. CFO Jeremy Parks added that the order backlog has been stable at just over $500 million for several quarters, meaning visibility into Q1 is not materially different than in a typical quarter. He reiterated the Q1 guide assumes normal sequential order patterns.

William Stein of Truist Securities inquired about the financial contribution of the recent Precision Optical acquisition, the strategic rationale for highlighting the small Voleatech acquisition, and the expected strength of the rebound in industrial end markets.

Answer

CEO Ashish Chand and CFO Jeremy Parks confirmed that the Precision Optical acquisition closed at the end of Q2 and contributed approximately $34.5 million in revenue in Q3, aligning with expectations. They explained that while the Voleatech acquisition was small ($6 million price, <$1M revenue), it is strategically significant because it dramatically accelerates the unification of the security layer across all of Belden's active products. Regarding the industrial market rebound, Ashish Chand noted that while the discrete automation vertical remains weak, other verticals are showing strength due to Belden's integrated solution approach, suggesting a powerful rebound in those specific areas.

William Stein of Truist Securities asked about the product overlap within the new reporting segments, the drivers behind strong incremental operating margins, the anticipated cost structure of the Eau Claire facility, and the specific margin drag from the Penang facility.

Answer

President & CEO Thomas Edman clarified the new segments, noting the Commercial segment is primarily printed circuit boards (PCBs), while Aerospace & Defense is roughly 50% PCBs and 50% integrated electronics. He attributed the strong operating margin performance primarily to a favorable product mix. Edman projected that the Eau Claire facility's costs would be substantially higher, requiring customer commitments to absorb pricing at least 50% above China levels. He also disclosed that the operating margin drag from the Penang facility had increased to approximately 210 basis points.

William Stein of Truist Securities inquired about the financial performance and operational ramp-up of TTM's new Penang facility, asking for details on its Q1 revenue, margin impact, and future trajectory. He also questioned the slight sequential decline in the aerospace and defense (A&D) program backlog.

Answer

CEO Thomas Edman reported that the Penang facility generated $2.2 million in revenue in Q1 with an operating loss of approximately $11.5 million. He reiterated the goal of reaching breakeven, which requires $30-35 million in quarterly revenue, by the end of Q3. Regarding the A&D backlog, Edman explained the decline from $1.56 billion to $1.55 billion was minimal, with a near 1:1 book-to-bill of 0.96, and noted that strong operational execution helped reduce past-due orders.

William Stein asked about the factors enabling TTM to smooth its historical operating margin seasonality and requested details on the Penang facility's ramp, including Q4 revenue, Q1 expectations, and the timeline to breakeven.

Answer

CEO Thomas Edman attributed the reduced seasonality to an increased Aerospace & Defense (A&D) revenue mix, the prior sale of the highly seasonal Mobility business, and stronger commercial customer relationships. Regarding the Penang facility, Edman stated that Q4 revenue was not material, Q1 revenue is expected to be in the $4 million range, and the company is still targeting Q3 for the facility to reach breakeven.

William Stein of Truist Securities inquired about the significant foreign exchange impact on earnings, asking if it was a one-time, unhedged event. He also sought an update on the Penang facility's execution, its P&L drag in Q3, the timeline to break-even, and the expected margin recovery thereafter.

Answer

CFO Daniel Boehle clarified the FX impact was an unhedged, non-cash translation loss on Asian balance sheets and that operational earnings were stronger than the nominal figures suggest. He stated the Penang facility's drag was a consistent 180 basis points on operating margins, with break-even still expected by mid-2025. CEO Thomas Edman added that customer qualifications are progressing steadily. Boehle further explained that once at break-even, the 180 bps quarterly drag would be eliminated.

William Stein questioned Intel's AI strategy, asking how it could compete as a new full-stack supplier and whether an ASIC approach was being considered. He also asked for clarification on the Q2 write-downs.

Answer

CEO Lip-Bu Tan acknowledged Intel is behind in AI but aims to find differentiated areas to compete, leveraging its x86 strength, and confirmed they are 'very open' to pursuing an ASIC strategy for custom platforms. CFO David Zinsner clarified the write-downs were primarily impairments on older equipment being replaced, not significant inventory charges.

William Stein of Truist Securities pressed for more detail on Intel's AI strategy, questioning the 'full stack' approach in a competitive market and asking about the potential for an ASIC strategy. He also asked for clarification on the Q2 write-downs.

Answer

CEO Lip-Bu Tan confirmed the goal is a full-stack solution, acknowledging Intel is behind but aims to find areas to differentiate, leveraging its x86 strength. He also affirmed that Intel is very open to working with system companies on purpose-built ASICs. CFO David Zinsner clarified the write-downs were primarily non-cash impairments on older-generation equipment that was replaced by newer tools, not significant inventory write-downs.

William Stein asked for an update on the cost-reduction features of the upcoming lower-cost model and questioned how Elon Musk manages the division of effort, talent, and capital between Tesla and xAI, given their potential to compete.

Answer

CEO Elon Musk declined to share specific details about the lower-cost model but emphasized that the primary goal is to address affordability. He explained that xAI was created partly to attract AI engineers focused on Artificial Superintelligence (ASI) who might not join Tesla, preventing that talent from going to competitors and clarifying that Tesla's focus remains on real-world AI.

William Stein of Truist Securities asked about the progress of the VMware integration, specifically how far along Broadcom is in converting customers to the new subscription model and how much longer the process is expected to take.

Answer

CEO Hock Tan estimated that the renewal process is more than halfway complete. Based on typical three-year contract cycles, he projected that the conversion effort has "at least another year plus, maybe a year and a half to go" before the bulk of the customer base is transitioned.

William Stein from Truist Securities asked about the progress of the VMware integration, specifically how far along the company is in converting the legacy VMware customer base to its new subscription model.

Answer

CEO Hock Tan explained that with typical VMware contracts lasting three years, the company is now 'more than halfway through the renewals.' Based on this, he estimated that the conversion process has at least another year to a year and a half remaining before it is largely complete.

William Stein commented on the rapid acceleration of Broadcom's organic business driven by AI and asked if this newfound growth changes the company's interest level or strategic focus for future M&A.

Answer

President and CEO Hock Tan affirmed that the company's M&A strategy remains unchanged. He stated that Broadcom is 'always open' to acquiring high-quality franchise assets in both semiconductors and infrastructure software, as long as they meet the company's stringent strategic and financial criteria.

William Stein asked if a reported shift in AI spending from cloud service providers to enterprise customers could negatively impact Broadcom's AI revenue outlook, given the company's strong focus on cloud clients.

Answer

President and CEO Hock Tan stated that Broadcom does not focus on the enterprise AI market. He clarified that Broadcom's AI products, particularly custom accelerators and networking, are almost exclusively targeted at large hyperscalers and cloud platforms, so the company does not see the enterprise shift impacting its business.

William Stein of Truist Securities requested a revenue outlook for each end market in Q1 and questioned the company's operating leverage, asking if positive leverage could be expected as revenue recovers.

Answer

Executive Emily Yang provided a cautious Q1 outlook, citing ongoing inventory rebalancing in Automotive and Industrial and seasonal softness in Compute, Consumer, and Communication. Executive Brett Whitmire addressed operating leverage, stating he expects good leverage as revenue grows and that OpEx as a percentage of revenue should decline as the company benefits from its existing infrastructure and manufacturing footprint.

William Stein requested disclosures on the revenue split between distribution and direct channels, the breakdown of growth between units and pricing, and clarification on seasonality. He also asked if the better-than-seasonal Q4 guidance signals a more solid turn in the business cycle.

Answer

Executive Emily Yang stated that for Q3, the revenue split was 64% distribution and 36% direct, compared to 63% and 37% in Q2. Executive Brett Whitmire noted a year-over-year pricing impact of approximately 10%. Regarding the outlook, Emily Yang explained that the Q4 guidance is better than the typical 5% seasonal decline. While visibility is limited, she expressed confidence that 2025 will be a growth year as markets recover. She also confirmed that typical Q1 seasonality is a 5% sequential decline.

William Stein asked for more detail on the data center power management opportunity, including design win traction and the role of technology from the Maxim and Linear acquisitions.

Answer

CEO Vince Roche outlined ADI's data center strategy, which includes power solutions for compute chips and control units like hot-swap supervisors. He highlighted traction in optical control solutions up to 1.6 terabits and emphasized an 'ecosystem game' approach, partnering with processor and data center companies on high-end energy solutions from the grid to the chip.