Monolithic Power System Inc (MPWR) — Q3 2015 Earnings Call Transcript

Thank you. Good afternoon and welcome to the third quarter 2015 Monolithic Power Systems conference call. Michael Hsing, CEO and Founder of MPS is with me on today's call. Over the course of today's conference call, we will make future projections and statements that involve risks and uncertainty, which can cause results to differ materially from management's current news and expectations. Please refer to the Safe Harbor statement contained in the earnings release published today. Risks, uncertainties and other factors that can cause actual results to differ are identified in the Safe Harbor statements contained in the Q3 earnings release as well as in our SEC filings, including our Form 10-K filed on March 2, 2015, and a Form 10-Q filed on August 3, 2015 which are accessible through our website, www.monolithicpower.com. MPS assumes no obligation to update the information provided on today's call. Today, we will be discussing gross margin, operating expense, operating income, net income and earnings on both a GAAP and a non-GAAP basis. These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for or superior to a measure of financial performance prepared in accordance with GAAP. Included in our earnings release, which we have filed with the SEC, is a table that outlines the reconciliation between the non-GAAP financial measures and GAAP financial measures. Investors should refer to the Q1 through Q3 releases for 2014 and 2015, as well as the reconciling tables posted on our website. I'd also like to remind you that today's conference call is being webcast live over the Internet and will be available on our website for one year, along with the earnings release filed with the SEC earlier today. Once again, MPS delivered record-breaking quarterly revenue of $91.2 million, representing a 16.4% increase from the third quarter of 2014. For nine consecutive quarters, MPS has enjoyed double-digit, year-over-year quarterly revenue growth. In addition, MPS's non-GAAP gross margin expanded 20 basis points year-over-year to 55.1%. Our non-GAAP operating income of $23.8 million grew 21.3% from the year-ago quarter. Our third quarter operating margin also rose from 25% in the year-ago quarter to 26.1% in the third quarter of 2015. More importantly, non-GAAP earnings of $0.55 per share represented an all-time record and grew 19.6% over the third quarter of 2014. Looking at year-over-year quarterly revenue growth by market segment, computing and storage revenue was up 40.9%, industrial grew 36.9% and consumer revenue also increased by 11%. Let me speak to the results of each end market. Storage and computing revenue rose to $18 million driven by growth in cloud computing, high-end PCs and storage. In the industrial market, revenue grew to $18.9 million fueled by product sales for applications in automotive and power sources. Revenue from consumer markets increased to $39.5 million, largely attributable to growth in high-value consumer markets like home appliances and battery management. Revenue in the communications market of $14.8 million was down on lower networking and telecom revenues. Turning to the financials. Our revenue for the third quarter was $91.2 million, which was above the midpoint of our guidance. Compared with the second quarter of 2015, our revenue increased $9.8 million primarily due to growth in computing, industrial and consumer markets. This sequential growth of 12% was well above industry average. Looking at our revenue by end market, computing revenue grew sharply by $5.4 million from the second quarter on strong growth in SSD storage, as well as growth in high-end PC markets and servers. Consumer revenue increased by $4 million due to increasing demand from our newer high-value markets such as gaming, home appliances and battery management as well as from the markets we have traditionally served. Fueled by higher demand in the automotive and power sources market, industrial revenue, which represents 20.7% of our revenue in the third quarter, ramped up $2.6 million from the previous quarter. Communications revenue declined by $2.2 million due to soft demand primarily in our traditional gateway markets. Moving on to gross margin. Our third quarter non-GAAP gross margin increased 10 basis points over the prior quarter to 55.1%. On a GAAP basis, our gross margin was 54.2% in both Q2 and Q3 with the only difference between the GAAP and non-GAAP gross margin being stock compensation expense and charges for acquisition-related amortization. Let's review operating expenses. Our non-GAAP operating expenses for the third quarter of 2015 increased approximately $1.5 million to $26.5 million. In the third quarter, GAAP operating expenses were $36.1 million compared to $34 million in the second quarter. The difference between non-GAAP operating expenses and GAAP operating expenses for these quarters is stock compensation expense, as well as expense or income on an unfunded deferred compensation plan. Stock compensation was $10.2 million in Q3 compared to $9.2 million in the prior quarter. Q3 GAAP operating expenses benefited from a $500,000 increase in investment income related to the deferred compensation plan. In the prior quarter, GAAP operating expenses included $100,000 of investment income related to the deferred compensation plan. Switching to the bottom line. On a non-GAAP basis, our Q3 net income was $22.4 million or $0.55 per fully diluted share. This result is computed with an estimated tax rate of 7.5%. Q3 2015 GAAP net income was $11.2 million or $0.28 per fully diluted share. During Q2, MPS resolved the tax issues arising from the IRS's audit of the 2005 to 2007 tax years, where we recorded a net one-time charge of $1.6 million for tax and $1.1 million in interest related to prior years in the second quarter of 2015. Now let's look at the balance sheet. Cash, cash equivalents and investments were $235 million at the end of the third quarter of 2015, slightly below the $236.4 million at the end of the prior quarter. This reduction in cash was attributable primarily to the $13.6 million we spent to purchase 284,000 shares under our stock buyback program, payment of an $8 million quarterly dividend and $2 million of capital equipment purchases. In Q3, MPS generated operating cash flow of about $21 million. Cash proceeds from employee stock plan purchases and from the exercise of employee stock options contributed another $1.3 million. Accounts receivable ended the third quarter at $30.5 million, up from the $26.8 million at the end of the prior quarter on higher third quarter revenues. Days of sales outstanding were 30 days in both the second quarter and third quarter of 2015. Our internal inventories at the end of the third quarter were $67.3 million compared with the $65 million at the end of the prior quarter. Days of inventory decreased from 159 days at the end of Q2 to 147 days at the end of Q3. Days of inventory in the distributor channel decreased for the second consecutive quarter. I would now like to turn to the outlook for the fourth quarter of 2015. Despite the softness in the economy, MPS expects to achieve a record fourth quarter. Our revenue guidance is in the range of $84 million to $88 million. At the midpoint of the guidance we are projecting 13.6% growth over the comparable quarter from a year ago and a 17.6% growth for the year. We also expect the following: Non-GAAP gross margin in the range of 54.6% to 55.6%, GAAP gross margin in the range of 53.9% to 54.9%. Total stock-based compensation expense of $9.5 million to $10.5 million, including approximately $300,000 that would be charged to cost of goods. Litigation expenses of $200,000 to $400,000, non-GAAP R&D and SG&A expense in the range of $25 million to $26 million. This estimate excludes stock compensation and litigation expenses. Other income of $200,000 to $300,000 before foreign exchange gains or losses. Fully diluted shares in the range of 41.1 million shares to 41.5 million shares before share buyback. In conclusion, as expected we outperformed the market. I'll now open the microphone for questions.

Yes, thank you. My first question on your consumer business. I know the high value segment has become a larger and larger percentage of that business. Could you give us a ballpark on where you are with the high value as percentage of the consumer bucket?

It's more than a third of our consumer revenue, approaching 40%, I would say in the third quarter.

Okay, very good. Okay, and...

Yeah, Tore, the application is a variety of Internet of Things. If it's related to the Internet and also some wearable stuff in sports cameras, and that kind of things, and we see there's a lot more activity in recent years.

Very good. And the strength you're seeing in server storage, it sounds like that's primarily SSD related. So when we think about the opportunity that you have in the server market, especially on things like core power, that hasn't even started right just yet, right?

The core power we have a few customers from last year; we start to ramp, and the bulk of a core power ramp would be by the end of next year, early 2017.

Okay, very good. And, Meera, I think you mentioned that distribution inventories were down again this quarter. Could you maybe add some color there, how low can they possibly go, and what types of visibility discussions are you having with some of your end customers at this point?

Sure. As we have done in the past, anytime we hear any suggestions of macro weakness, we typically hold inventory in the channel and that's what we have done now for two quarters in a row. And as you're aware, if we continuously keep it down, there's sometimes panic of shortage, so we'll continue to watch inventory in the channel and manage it as low as we can without generating any panic.

Sounds good. Congratulations on the results. Very impressive. Thank you.

Thank you.

Thank you.

Hey, guys, this is actually Matt on Ross' behalf. Congrats on the great results as well.

Thank you.

I wanted to ask you about the communications market. I know that it was mentioned that softness in the traditional gateway market happened in 3Q, but if you could extrapolate a little bit further on that, just to get a better idea of how long the weakness is expected to persist and what could catalyze its rebounding?

Most of the traditional market is – the traditional gateway market is something that's got lower gross margins, so it's not a market that we pursue aggressively. So if the demand is low, we just let it play out. We are more strategically focused on other markets, which have higher gross margin profile.

Duly noted. And the OpEx plan, it was mentioned last quarter that there's a little bit of a step-up given the ramp in the fourth foundry. I just wanted to calibrate that for the fourth quarter. Should we still expect – heading into 2016, rather, should we still expect a little bit of alleviated OpEx heading into 1Q or has something occurred to change that?

No. One of the things you would have noticed is we have reduced our OpEx a little bit this quarter on the fourth foundry, and you'll see that spill over into the first half of next year. So we continue to invest in our fourth foundry.

Excellent. Thanks very much.

Great. Thanks a lot and add my congratulations on pretty good results in a pretty tough environment. I was hoping you could comment a little bit on how you think about seasonality going into the first calendar quarter. I mean, you have a very nice guide here which to me looks better than seasonal, so does that mean we should be a little bit more cautious on the March quarter before you got some big ramps next year?

You know, at this point we don't give guidance for Q1, so we tend to look at – seasonally, we are typically down 5% to 10%, then it's a question of how much growth do we have to offset it and more importantly what's the macro. So at this point, I can't give any color on Q1.

Okay, great. But overall as you pointed out, you guys have been getting double-digit growth year-over-year for quite a while. Is it fair to think that calendar 2016, we could probably see continued double-digit growth there, could that be 15% or something even higher like we saw this year?

I think the growth will be accelerating and if not like 16%, will be in the 17%s, and we are really targeting more than 20% growth, and you see the results, just the recent results, this is at the beginning, and since the last couple of years we released all the right product to the right customers and the result in a couple of years – well, two years or three years since last year and that will really accelerate MPS growth.

Okay, great. And last question was just, can you give any new color on motion control programmability? Any new color there would be great? Thanks.

The motion controls products we'll release in the first half of next year, and this is the product, not the same as what we do before and before we always have fixed products and you have design wins and once the product is ready and now there's all – F solution based and a lot of them is based on FPGAs and even before we have a product ready, and we could engage with a lot of those customers. And so we have a lot of tremendous design activity going on now.

Great. Thanks. And then any color on – update on color on the programmability that you mentioned at Analyst Day?

Yeah. The other one is the module ones and the power modules and also the FPB, FPPM and Field Programmable Power Modules and the Field Programmable Power IC. And those are still very much on schedule. As we're speaking we're releasing many products now.

Thank you very much. Could you give us some idea as to how your R&D expenses might trend out the next few quarters and what your highest priorities will be in terms of new projects that you're investing in?

So in terms of R&D, as well as sales and marketing, we will continue to invest because everything that we do in terms of resources we bring on board next year actually sets us up even better for growth a year or two out. So we will continue to do that, but we expect at the end of the day, they'll be leverage to the bottom line. Places where we'll spend on R&D, one is going to be the fourth foundry, the bring up the foundry. The second is going to be on differentiated products, which are targeting at different markets, some of which we have discussed in the past, some of which we will be discussing over the next year or two.

Overall, the R&D growth and expenses growth will be much less than the revenue growth and you see our history.

Hi, guys. Let me second my congratulations. Just wanted to come back, Meera, looking at the breakout by end market, the compute was up nicely and telecom down to the lowest level in probably five quarters or six quarters. Just trying to get a sense on the compute side, do you think that SSD strength continues or was there sort of some one-time business that you were able to take advantage of in the quarter? And then similarly on telecom, I know that the telecom market has been fairly weak, especially in some of the wireless comm infrastructure. But some of your peers have started to say, they're starting to see some uptick in comm infrastructure, wondering if you're seeing any pickup there.

Sure. When we look at computing, in storage, SSD storage, we had a new design win that started ramping up for us in Q3 and that was part of the growth. In Q4, as far as storage is concerned, I see two things playing out. We typically sell our SSD products both to enterprise as well as high-end client, and there's usually seasonal weakness in both Q4 and Q1 on the high-end PC side of it. The second I think, overall, there is some softness in both HDD and SSD, particularly as we go into Q4. In terms of our communications, a lot of the weakness that we're seeing there has been in our gateway business. These are things like modems, routers, LAN cards that are sold to the home and the home office. There's also a little bit of weakness, I would say, in the networking and telecom side of the business, and there it's a mix of wired markets as well as wireless, so we're seeing a little bit, but I'd say more of the weakness is in the gateway side of the house.

And just sort of two follow-on questions, can you give us any sense what percent gateways might be of the overall comm bucket? And then if you take a step back looking out at the broader business, across all end markets, obviously, the economy seemed to take a little bit of a breather. Over the summer, we saw a lot of the analog, mixed signal group indicating order softness. To the extent that you saw that slowdown late summer, would you say things have stabilized now or orderly times still fairly short and difficult to predict? I mean, a couple of your peers have said think we're through the worst of it, wondering if you might be able to make a similar comment.

In terms of the automotive momentum, we typically record six weeks to eight weeks lead time to our customers, except for a few new products, which might have a slightly longer one, and we have not seen any change from that standpoint. I mean, we are – I guess, we are in so many different markets that we never feel comfortable quite calling the macro. We depend upon our larger, more stable competitors to call the macro for us. So if I were to say markets where we have seen some weakness, I would say it's in the traditional gateway business for the home and home office. I'd also say there's some in storage. Beyond that, I couldn't really comment about the macro.

That's the beauty of the MPS. We are in a position we don't know, so okay. Everything is a good opportunity for MPS.

Okay. Great. Thank you.

Thank you. I had a follow-up on that last discussion topic as it relates to the distributor channel inventory. Meera, you talked about the inventory down for second consecutive quarter and you answered a question around that. I'm just wondering, what's going on in Bisbee? Is that being actively managed down for any reason, would you say? Have you guys seen any change in the way distributors want to hold inventory at this point based on what they're seeing from the macro? And also I don't think I caught it, but can you give us the range, historical range in weeks that you typically see in distribution and where you are within that range at this point? Thank you.

Sure. Our typical range is about 30 days to 45 days of inventory. And we typically prefer to hold in the upper half of that, so we have not seen any particular push from distributors to hold less. This has been more something that we have actively managed and we have done in prior years as well, whenever we start seeing signs of a macro weakness, we start managing the inventory and the channel to the best we can so that the days come down and that's what you see played out for the second time.

Okay.

Yeah, hi, Ruben. I try to convince our shareholders that our inventory is not really like a traditional mature semiconductor company. It's indicative of a future business. I'm guessing I'm losing the battles. This is the growth company, and we have a lot of product released, and what kind of inventory we hold really depends on what kind of product we release. So that's how I can best put it. So slight inventory change doesn't mean our futures.

Yes. Add on to that, in terms of the inventory, the internal inventories that we hold, we are now at about 147 days. Internal model is about 135 days to 155 days, and we expect in the next few quarters, there will be more around the 150 days for all the reasons that Michael talked about, particularly the new products, as well as inventory needed to support our strategic customers.

Right. Yeah, that's helpful. I was trying to see – get to whether or not anything had changed in distribution behavior, but I understand what you're saying, Michael. So thank you for that. Just a quick follow-up. In terms of the end market mix, obviously, there's some near-term issues going on in communications and you had a new design win ramping within storage. But as you look out into next year, would you say that the mix would be sort of similar to historical levels with communications still sort of in the low to mid-20%s as a percentage of revenue, and maybe if you could comment on if there are any changes that you're seeing with mix as you look ahead to 2016 based on design wins, et cetera, if any of that may impact gross margin. Thank you.

So, when we look out into 2016, I'd expect to see growth in computing, consumer, and industrial markets. Communications, I'm guessing, is going to be mostly flat. And all the revenue drivers are essentially all the different drivers we have talked about in the past. I continue to believe that industrial is going to see strong growth next year with automotive markets leading the way, but you'd also expect to see growth in smart meters, in security, in power sources. In consumer, we expect to see the newer high-value markets continue to grow and in the computing section, it would be SSDs, servers, as well as high-end computing, and a module business would also continue to grow and AC-DC, which is distributed among all these markets, would also be growing next year. So, we expect to see multiple areas of growth.

Okay. Thank you, Meera.

You're welcome.

Hey, thanks. Michael, you mentioned strong design win momentum for e-motion. Can you talk a little bit about the number of design wins, or quantify the number of design wins you guys have so far. I know it's a new product and it's early days, but just to give a sense of maybe what that equates to in terms of dollars of backlog or any kind of color around that you could give?

Yeah. I'm so far as you know, we talked about, we have a separate chip now, and a real e-motion chip that we're going to release next year, and those we use – now use a programmable third-party product and that's FPGAs to do the feasibility study in our customers' systems. And so, it's hard to quantify in a dollar sense, but the portion of it we have a – we generate revenues, and I don't know what is the revenue numbers now. It's not small. Well, small means, in our case, it's still – now, small means it's still some millions, okay, and for the entire next years.

Okay. And maybe a follow-up to that is, are there any hints of competition? I mean what are you seeing from the legacy guys? How are they responding in that space, or are they responding?

Okay, to them it's shocking and the good or bad, and the good thing is, wow, you can do this. And then now is the bad thing is really a behavior change. Okay. People change the design of their system in a different way. And they don't have to use the encoders. They don't have to use the step models, and they don't have to use a brushed model anymore. And there's a momentum, think the brushless models, whether encoders costs very, very high, and now when you look at this solution, its cost is so low. And overall they had to get over this barrier somehow in terms of how they design in their systems. And so obviously, and it is a large market segment in printers and some of the traditional robots and they were adopting first, and so still these design cycles – is a one year or just a couple of years.

Okay. And I know you've talked in the past about sales and marketing, maybe as a gating factor on your growth. I mean, this sounds like a perfect example, where you're going to have to help kind of get people over the hump or get people comfortable with the new solution as compelling as it is. I mean, should we read anything into that in terms of like looking into 2016, 2017, should we expect to see some of your sales and marketing expenses maybe take a step up as a percent of revenues or any change, I guess, maybe to the model you've been running? I think, Meera, correct me, but I think you've been running overall OpEx at sort of 50%, 60% of your top-line growth. But just basically looking to see if any of that was going to change.

That's a very sensitive question, and let me answer in that way. Our long-term shareholder, everything we do affects us three years, four years out. So, for long-term investors who have the same kind of a length that our company's goals are perfectly lined up with our investors, but other long-term is shorter than three years, four years, like one year to two years, then it's not quite aligned with it. We published the models and we're going to grow the OpEx in slightly less than half of a revenue growth, which to me doesn't quite make sense and – but we balanced our shareholders' interest there.

All right. Thanks, Michael.

Hey, guys, congrats on the great results.

Thank you.

Couple questions. On the auto side, Meera and Michael, can you remind us how much is the contribution as part of industrial? And also with the recent controversy on Volkswagen, does that have any impact? I know you guys are very small in this overall market, but would love to hear some feedback on that because we get questions from clients on that.

Well, we are very small and secondly, we're not in engine stuff. It doesn't really affect us, in terms of automotive. We're more into lighting, infotainment, and more the lightings, all kinds of lightings, so you have security, you have lightings and illuminations, and also the dashboards and we have – the other one is the camera side, and we have a lot of design activities, and it really doesn't affect.

And what is the contribution, Meera, of auto to the overall industrial?

I'd say among the four growth drivers in industrial, it's the biggest.

So we don't give a percentage out. Okay. And next year we have to break out.

Okay. Okay. So it's going to be material, that's good to know. Now, typically on the telecom side when we look at the big metal guys, when we go to the slump or weakness, we've historically seen based on precedence call it a three quarter air pocket and we come back. Now, Meera and Michael, based on your experience, with even the gateway business, I mean, I'm thinking it should be shorter air pockets, but do you have any experience with the duration of softness once you get into the space from MPS's point of view, any perspective?

I mean, we have seen it be one quarter like we did last year. The two years prior to that, it was two quarters each. Before that, it has been three. When it comes to macro weaknesses and stuff, we just don't feel comfortable. I can look at it afterwards and say what we saw. I want to emphasize again that the gateway business is low margin and we just play in opportunistically. So we don't spend a lot of time doing any soul searching in the space.

Okay. And finally, Michael, on the – I saw some press release from TI, some product, now it was not brushless, it was around brush, but it was around sensing, could have been one of those small ancillary press releases. But coming back to your question, what is competition doing on it? Are they trying to beef up their assets in this space, or they're totally clueless or they're not focusing on it?

They are, I think they do some current sensing. The current sensing and I don't know if you refer to that one. I know there's a product release and there's a current sensing, integrated with a current sensing. The current sensing – the model driver, we released two years ago.

Okay.

Our sensing is the sensing that rotor of the models and that's Siemens technology. So it's entirely different.

Yeah. So e-motion product stocking is much more advanced than the products that you were just talking about.

Okay. Very good. And congrats once again.

Thank you.

Thank you.

Yes, thank you. I just had a few follow-ups. First of all, your business has been remarkably stable here the last few quarters, stable meaning you have very consistent double-digit growth year-over-year. Now, you probably turned quite a bit of each quarter, but it just seems remarkably stable. So is that mainly because of the new markets that you're getting into have longer lead-times, or is it mainly just because you have multiple design wins hitting all at the same time?

I think it's a combination, right. I mean, we have multiple growth drivers, we are playing in different markets, some markets we are growing market share. So, as a result of all that, we have actually continued to see growth. I mean, that is the key reason why we were focusing so much on diversification. It helps us at a time like this. Yes, we see weakness in a few markets, but we kind of see growth in a whole lot of other markets and that's, I think, what's really helping us at times like this. It really showcases the strength of the diversification model.

Yeah.

Very good. And not to – yeah, go ahead, Michael.

Well, Tore, I might – as I added, okay, and give you a longer story. Four years ago, we set up this model; two years ago, we changed our focus, and then we start knocking on the door for these new customers. And two years ago, we were in the door. And two years later, we have a lot more product. And what I see is why we are growing 15%, 18% a year, why not faster? And all the products that we released in the last couple of years indicate that in 2017 and 2018 we will grow faster. So this is at the beginning.

Very good. And not to nitpick on the P&L but, Meera, in the other income line, it seems like maybe there was a negative impact. Was that from foreign exchange, and how should we think about that for the following quarters?

So we actually had a positive effect to interest income line from foreign currency. This is more on payments, our payments to our subsidiaries; there's a foreign exchange difference and it turned out to be positive. So typically when we give guidance, we guide it to a $0 of gain or loss because we don't know until each quarter plays out whether it's a gain or a loss. We have had quarters of loss, and we have had quarters of gain. So what we guide to specifically is the pure interest income portion of it.

Sounds good. Great. Thank you very much.

You're welcome.

Great. Thanks for the opportunity for the follow-up. Just, you gave a great answer, Meera, earlier on how the segments would perform in the coming year. Any sense that you could give us more short term just how you think Q4 each of the segments will do sequentially?

I think you will see the seasonal – seasonality play out in the gateway portion of communications. You will see some seasonal impact on the SSD for the high-end computing, consumer, of course. Industrial, I think, will relatively have less of a seasonal play and that's the best I can describe at this point. As you know, with such a distributed revenue base, we are actually dependent on the resale reports we get to actually pinpoint which markets we sell into.

Okay. Great. And just any color on the lighting market? I think you've had some success there with LED lighting. Just curious, does that – how that's doing into Q4 and how you think about that for 2016?

Lighting has – is one of these markets where we haven't seen seasonality play in before – in the fourth quarter and it's a market where we continue to do well because we play in the high-end of the market with a very good dimming solutions, and so we continue to see that play out.

Okay. Last question was just around auto. I know you guys are extremely diversified, which is great, but just to give us some increased confidence around how we could think about potential opportunity there. Would you say at this point you're on annually tens of millions of vehicles, out of the 90 million or 100 million maybe autos are you on 10 million, 20 million and you've got a little bit on each, are you more concentrated on the vehicles you get in with multiple solutions?

So what we are seeing is mostly revenue that we got from design wins that we got about four years ago, and since then every year we have increased the pace of our design wins here. We started with infotainment and then we have gone on to safety and lighting and a whole bunch of other products. So like Michael said, we are not under the hood, thankfully, at this point, but we see on an annual basis there are more and more design wins. So when we look at revenues for automotive, we are increasingly confident that we will see higher revenues each year looking at next year's.

Actually, yeah, we have – in Analyst Days that we have a slide, and we have a couple of slides and now I think it will be – is online, right? And you can look at our product and our design cycles. Four years ago, we started knocking on doors with existing products and, again, two years ago, we were in the door and we engage with all these auto customers and we design specifically for automotive. These products will be – since two years ago will be four years later, which is 2016/2017 and 2016/2017, we're getting to productions, so these are very predictable and very sustainable revenues.

Okay, great. All right. Thank you very much.

Okay. Thank you.

I'd like to thank you all for joining us on this call and look forward to talking to you again at our next earnings call in February. Thank you and have a nice day. Bye-bye.