Earnings Call: Q4 2018

Feb 12, 2019

Good day ladies and gentlemen, and welcome to the Monolithic Power Systems 4th Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow that time. As a reminder, today's conference is being recorded. I'd now like to introduce your host for today's conference, Mr. Bernie Bliggin, Chief Financial Officer. Sir, please go ahead. Good afternoon, and welcome to the 4th quarter 2018 monolithic power systems conference call. In the course of today's conference call, we will make forward looking statements and projections that involve risks and uncertainty, which could cause results to differ materially from management's current views and expectations. Please refer to the Safe Harbor statement contained in the earnings release published today. Risks, uncertainties and other factors that could cause actual results to differ are identified in the Safe Harbor statements contained in the Q4 earnings release and in our SEC filings, including our Form 10 K filed on March 1, 2018, and Form 10 Q filed on November 2, 2018, both of which are accessible through our website, www.monolithicpower.com. MPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expenses, R and D and SG and A expense, operating income, interest and other income, net income and earnings on both a GAAP and 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 measures of financial performance prepared in accordance with GAAP. Table that outlines the reconciliation between the non GAAP financial measures to GAAP financial measures is included in our earnings release which we have filed with the SEC. I would q33, 2018, and Q4 2018 earnings releases, as well as to the reconciling tables that are 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 for replay on our website for 1 year, along with the earnings release filed with the SEC earlier today. I'd like to begin today's comments with a few highlights of what was a very successful year for MPS. For the full year, 2018 MPS achieved record revenue of $582,400,000, 23.7 percent higher than revenue from 2017. The $111,000,000 increase in year over year revenue was the largest annual highest growth rate for MPS since the company redirected its focus in 2010 to the industrial cloud Computing automotive and high end consumer markets. Although we cannot escape the current macroeconomic conditions, we see momentum in these segments continuing strong for the next several years. This was the 6th consecutive year of double digit growth. 2018 was a significant year for On the technology front, we widened our lead with BCD5 solidly in volume production and with the development of BCD6. A 55 nanometer process designed on a 12 inches wafer. Both of these advancements will significantly increase our products functionality, improve energy efficiency, reduce our solution size, ease our customer's adoption efforts and keep our product cost competitive. In addition, we are increasing production capacity, both in 12 inches 8 inches wafer in anticipation of future revenue growth. On the customer front, MPS penetrated a number of new Tier 1 companies in the automotive and cloud server markets, generated an initial and meaningful We expect these partnerships to drive substantial technological advancements and represent an important source of MPS's future revenue growth. A few examples include: developing specific leading edge system solutions using QS Mod Technologies for GPU based artificial intelligence and machine learning applications. Using MPS's 48 Volt QSMod Technology for both cloud based and automotive applications, working with automotive companies to develop specific solutions for smart driving systems and unique lighting applications with a 2020 target for market introduction. Developing a mechanical relay replacement servicing the IoT and automotive markets using MPS's high current high density process technology for improved reliability in a compact form. And we completed the integration of high current programmable power modules for communications applications such as 5g Networks. The target market applications for these modules are base stations and switchers which require compact and reliable solutions. In addition to these exciting co development projects, 2018 was important as we launched our e commerce website allowing engineers to design their own customized solutions from their desktop. This catalog of programmable solutions will greatly enhance our customers' time to market, lower their total cost of ownership and optimize the efficiency of their designs. Now let's look at our full year 2018 revenue by market segment compared with 2017. Computing and storage, up 57.9 percent, automotive, up 48.6%, industrial, up 40.7% and communications revenue up 11.0%. Consumer revenue was down 3.0%. Full year computing and storage revenue grew $58,300,000 to $159,100,000 in 2018. This increase primarily reflected strong sales high end notebooks and initial GPU power management sales. Computing and storage total revenue in 2018 compared with 21.4 percent in 2017. Automotive revenue grew $26,200,000 to $80,100,000 This growth primarily represented increased sales of infotainment, safety and connectivity application products. Automotive represented 13.8 percent of MPS's full year 2018 revenue compared with 11.4% in 2017. Industrial revenue grew $25,600,000 to $88,500,000 in 2018, This growth reflected sales for applications in power sources, security, and industrial meters. Industrial revenue represented 15.2 percent of MPS's full year 2018 revenue compared with 13.4% in 2017. Communications revenue grew $7,000,000 to $70,600,000. This improvement was primarily due to higher sales of our legacy home router and wireless gateway products. More importantly, though, we see initial ramping in the 5G market segment. Communications revenue represented 12.1 percent of our 2018 revenue compared with 13.5% in 2017. Switching to Q4, while we started to see the impact of macroeconomic headwinds in Q4, MPS still had a record 4th quarter with revenue of $153,500,000, 4 point 0% lower than the revenue generated in the third quarter of 2018, but 18.6% higher than the comparable quarter 2017. By market segment, revenue for industrial grew 66.6% over the same period of 2017, Computing and storage grew 63.2% and automotive grew 40.2%. Communications revenue, communications grew 27.1 percent due primarily to increased revenue from MPS's legacy home router and wireless gateway products. 4th quarter revenue for Consumer fell 25.9 percent from the prior year. MPS experienced continued weakness in high volume consumer related businesses, with especially the soft demand in the Greater China region. In the fourth quarter, MPS continued to see strong design win momentum. However, many customers concerned about the economic outlook and trade policies delayed their production ramps for new products in automotive, computing and industrial. Which resulted in a less desirable was 55.6%, fifty basis points lower than the third quarter of 2018 and 10 basis points lower than the fourth quarter of 2017. Our non GAAP operating income compared to $49,200,000 reported in the prior quarter and $38,200,000 reported 4th quarter 2018 GAAP gross margin was 55.1 percent, 50 basis points lower than the third quarter of 20 18, but 10 basis points higher than the fourth quarter of 2017. Our GAAP operating income was $33,100,000 compared to 33 point $5,000,000 reported in the third quarter of 2018 $25,100,000 reported in the fourth quarter of 2017. Let's review our operating expenses. Our GAAP operating expenses were $51,500,000 in the 4th quarter compared with 55.5 $1,000,000 in the third quarter of 2018 $46,100,000 in the fourth quarter of 2017. Our non GAAP $5,000,000 we spent reported in the fourth quarter of 2017. On both 4th quarter litigation expenses were $409,000 compared with $343,000 expense in Q3, twenty eighteen and a $340,000 expense in Q4 2017. The difference between non GAAP operating expenses and GAAP operating expenses for the quarters discussed here are stock compensation expense and income or loss from an unfunded deferred compensation plan. Total stock compensation expense including $504,000 charged to cost of goods sold for the fourth quarter of 2018 was $14,800,000 compared with $14,800,000 recorded 4th quarter 2018 GAAP net income was $27,600,000 or $0.61 per fully diluted share compared with $0.71 per share in the third quarter of $2,018.27 per share in the fourth quarter of 2017. Q4 non GAAP net income was $44,600,000 or $0.99 per fully diluted share, compared with $1.06 per share in the third quarter of 2018 and $0.82 per share in the fourth quarter of 2017. Fully diluted shares outstanding at the end of Q4 2018 were $45,100,000. Now let's look at the balance sheet. Cash, cash equivalents and investments were $380,500,000 at the end of the fourth quarter of 2018, compared to $353,100,000 at the end of the third quarter of 2018. For the quarter, MPS generated operating cash flow of about 47.6 4th quarter 2018 capital spending totaled $4,500,000. Accounts receivable ended the fourth quarter of 2018 at $55,200,000 or 33 days of sales outstanding compared with the $59,900,000 or 34 days reported at the end of third quarter of 2018 and the $38,000,000 or 27 days reported in the fourth quarter of 2017. Our internal inventories at the end of the fourth quarter of 2018 were $136,400,000 down slightly from the $136,800,000 at the end of third quarter of 2018. Days of inventory rose to 180 days at the end of Q4 2018 from the 175 days at the end of third quarter of 2018. I would now like to turn to the outlook. 1st, MPS is announcing a 33% increase in our quarterly dividend to $0.40 per share from $0.30 per share for shareholders of record as of March 29, 2019. We are forecasting Q1 twenty nineteen revenue in the range of 138 $144,000,000. We also expect the following: GAAP gross margin in the range of 54.8 4%. Non GAAP gross margin in the range of 55.3% to 55.9%. Total stock based compensation expense of $17,600,000 to $19,600,000. Including approximately $600,000 and A expenses between $55,000,000 $59,000,000. Non GAAP R and D and SG and A expense to be in the range of $38,000,000 to $40,000,000. This estimate excludes stock compensation and litigation expenses. Our income is our other income is expected to be in the range of $1,400,000 to 1 $600,000 before foreign exchange gains or losses fully diluted shares to be in the range of 44,700,000 to 45,700,000 shares. In conclusion, despite uncertainty in the macro economy, we expect to continue winning market share in the cloud computing Automotive And Telecommunications market. We believe the future is bright. I'll now open the phone lines for questions. Our first question comes from the line of Ross Seymore with Deutsche Bank. Your line is now open. Hi guys, congrats on the solid execution. Michael or Bernie, just wanted to get your view on the macro environment. You guys have a lot of company specifics where you can take share, but you're not immune if that tides rising or if it's falling like it is right now. So any color on the linearity of demand you saw and how you view 2019 growth potential relative to what the overall market is doing versus what sort of incremental share gains you guys can take in any number of product as where you have new design wins? Ross, okay. So good questions. As you know, all the NPS growth is from the new product. And, and then you in the news market segment that Bernie mentioned, Automotive Committee, Automotives And Industrials And and a computing. And, in a later, especially in the Q4, last year, we see, slowing down dramatically. And We asked around our customers and, it's all due to the, It seems to me it's all due to all this economy uncertainty in the futures. And However, in the middle of all of these, okay, we see not all the products will stop. And delayed their introductions. But some of the stop, some of the end product still introduced or still we have a replacement. We gained some market shares. And in 2019, we still expect to grow and have a very healthy years, but the percentage, okay, the growth, whether the same as the last couple of years, that we cannot tell. And if I could add to that, Ross, that, what we're observing, again, only from our specific position is that, the design wins are in place our end customers are interested in going to market. But they're just not the right conditions for them to invest in that type new product ramp. And so I don't have any view as far as how long this will last or when we start to see the improvements come around, but I do, I believe very confidently that we're well positioned to take full advantage of that turnaround. Thanks for all that color. I guess as my follow-up, just on the inventory side, I know you guys have talked about increasing your own internal inventory to be ready for those ramps. So I guess a 2 part question. 1, is that still the case? Or should that inventory come down if those ramps continue to be delayed? And then 2, you give us an update on what the channel inventory situation is and what your expectations are for that as well? Ross, I like that question now. The inventory, I think that we see it as a lag, okay. Clearly, it is very valid. Okay. And in this kind of a transitional market conditions, and we watch very carefully. So that's why I like that question. Of course, there's a delay, right? And we see if it's a, of course, demand is slowing down, okay, we we control our we will the inventory will come down so they can we control very highly. Okay. Now Bernie, you can answer them more. Yes. On the second side of that question, as far as how the channel performed, is what we do is we fill orders based upon our customer demand and that's 90% distributor related. And then the distributors are creating that demand or those orders on us based on the information they're getting from their customers. And, the slowdown occurred during the quarter. So we ended up in a position where the, in terms of both dollars and days, that the channel inventories did increase and managing that going forward some of the management of that is reflected in our guidance for Q1. Our next question comes from the line of Quinn Bolton with Needham. Your line is now open. Hey guys, I'll apologize missed most of the prepared comments, but obviously a slightly weaker guide for March. I'm just wondering as you look into the full year you typically see a much stronger second and third quarter in terms of seasonality. Is there any reason to think some of the near term effects you've you've seen that are hitting Q1 extend into Q2, Q3 or should we be thinking about a more traditional seasonal pattern as we get out to the June September quarters? Yes. I think when we responded to Ross on this, is that, we really don't have good visibility. There's a lot of uncertainty relative to the out quarters. So when we look more short term at Q1, even let me go back to a Q4 for a second, we put up some very significant numbers in all of our groups, except for consumer, which was most price sensitively impacted by trade and tariffs and the macro, particularly in Greater China. So, the point that we also observed is that, a lot of the new product ramps that our customers We're building, expectations around, have been pushed out in this period in time. And so it's hard for us say concretely, how that's going to affect our overall growth rate for the year? Or when do we expect a turnaround to begin? Okay, great. And then just a second question. Again, I'll apologize. Did you sort of give a backlog number? I think you've most of the past 3, 4 years, you tended to be at 80 or so percent of guidance in backlog starting the quarter. Are we in that metric range for the March quarter? Yes, we are. Great. Thank you. Our next question comes from the line of Rick Schafer with Oppenheimer. Your line is now open. Yes, thanks and nice result in a tough environment, guys. I guess, I was hoping to understand gross margin, at least in the term just a little better. I know it's obviously softer. I mean, it's the primary driver that just simply mix. I mean, I would have assumed a better mix in 1Q, but are we Bernie, if you could provide me maybe a little more color there, what's your expectations are by segment, maybe it almost seems like consumer is going to be a bigger contributor to mix in the first quarter. And then the second part of that question is just how fast if you guys can give any color on how fast that gross margin might rebound? Sure. So when we look at Q4, let's just start with that, that was clearly mixed. Because, when you look at the influx of revenue into the communications that was predominantly lower margin business and we discussed that in Q3 as well. So the continuation is the same. But then you had some of our high margin and it was pretty broad based. For example, SSD, power management for GPUs, and a couple of things in industrial, that underperformed expectations And so as a result, those are very high margin, and we off it was the offset was against lower margin business and that accounted for the 50 basis points. When we look at Q1, we still have some, overhang of mix issues. It's not all of it. And even though we don't have a specific number, we are anticipating that we'll need to look at our inventory provisions in a different like with lower demand. Again, we've talked in the past that, Our inventory has a long shelf light and we believe that all the products are ultimately going to be sellable but the mechanic of how we determine our inventory provision is based upon near term demand. And that may not support, or may support a higher inventory provision. And as far as looking forward, I don't have guidance beyond But obviously, with the new products that when they start to ramp, as Michael is describing, those will contribute very positively and immediately, to our gross margin. Yes, we foresee the, the, going forward, if all the new product delays, okay. And the margin will stay as close as now. Okay. We don't see a dramatic change Well, dramatic change is all relative. Now we have a 0.5% change, okay, that's pretty small to me. And, but we analyzed it And that is against our very consistent result in the last 4 or 5 quarters. And, that is due to the mix. And all the newer product the new revenue, high quality revenue gets delayed. And, going forward, And that was we expect to grow the gross margin as a very consistently as the economy recovered. Got it. Thanks for all that color. And then just shifting gears to server. You've talked I know in the past about the potential server content for you guys around 50 today, but going to 70 next year. I'm just curious because you were talking about 48 volts in your prepared remarks. How much of that 50 to 70 captures any content gains associated with 48 volt core power market share for gains for you guys. I mean, is 48 volt a material content driver for MPS Yes. We actually expected it in the Q1 walk in, in a Q1 2019. And, obviously, a much it's a it's actually the number is much smaller. So like I mean, We so all as actually as we see it, it's not in the first half anyways. And like it will be in the second half of twenty eighteen than the early part of 2020. Got it. Thanks. Our next question comes from the line of William Stein with SunTrust. Your line is now open. Great. Thanks for taking my question. Based on the backlog and the order patterns, would you expect or I should say it seems to me that we'd expect lower than maybe typical seasonality heading into Q2 Is that the right way to think about the model given that you maybe you started seeing this weakness a little bit later than others and seems to be at least a couple of quarters of, of weakness for what everyone else is seeing? Yes, I don't see there being a quick, a catalyst that would create a quick turnaround. So I think, while we only guide 1 quarter ahead, that I could support that thesis. Okay. And then as it relates to inventory, Bernie, I think you mentioned that channel inventory on days and dollars were up again in the quarter. Does your guidance for Q1 combined with what you, let's say, expect to sell through Would that support lower dollars and days at the end of Q1 or something different? It's more likely that we will be down in dollars, but probably close to flat in days because you have a smaller denominator. Great. Thanks, Bernie. Thank you, Will. Our next question comes from the line of Tore Svanberg with Stifel. Your line is now open. Yes, thank you and congratulations on the record year. I'll spare you from the macro stuff. And I'm pretty interested in BCD 6. Could you elaborate a little bit more, what that means for products going forward? I mean, you talked about 55 nanometer and 12 inch wave first, but any other color you could add? Yes. I'm okay. These are, as a, actually, as a as usual. Every other years and every year, so we introduce, okay, we'll develop your technologies. And that is really our foundation for the future growth. And So the BCD 6, we said the BCD 5, we're including the memories. And okay, now we're including much denser logics. And so now we mentioned that Bernie mentioned it is a 55 nanometer and that we will have those type of a logics, okay, designed it in. So you can think of that way we really put an entire systems on a single chip, which means we included the microcontroller. And that will give access to lawnmower market segments and and a lot more capability. And then from simply a cost point of view. There is a lower unit cost involved with this process and this geometry And how we choose to deploy that cost advantage will basically depend upon the end market. So for example, in Consumer, that will extend our ability to be price competitive in other markets, it'll allow us to improve our gross margins. And in other still, it'll make us able to, with the technological advantage to compete in markets that we hadn't previously been able to enter into. Thank you for that color. And also you mentioned obviously e commerce on your website up and running last year. Could you give us some color on how how the feedback has been so far? How the learning curve going for customers? We yes, you call it a website, yes, it's up running, but I said that we're still learning. As expected, actually, this is the very new frontier to everybody. And nobody, attempted that before. And We still try to figure out why the when we give the floppy disc because it's a lot more effective and then we go through our website. So so we still try to figure out. There's some things obviously, it's not quite right. But the product self. When we give a traditional ways and they give them all the tools, they give them a CDs and they're giving them download the program and everybody likes that. And we see more and more customers rather use a fixed product and then they choose a programmable parts. And, they're going we see a clear direction. And, but how effectively using the websites we still try to figure out. Very good. One last question. Go ahead, Bernie. I just wanted to caution that, I think we've tried to set expectations around the fact that, We would have 0 revenue in 2018, 0 revenue in 2019. That's not entirely true because we are generating revenue. But then we'll have a good slow ramp in 2020 2021. And it's really 2022 is when we expect it to contribute materially. Are you talking about the e commerce? Yes. Yes. And that strictly sells through a website. And now we see the earliest actually we do see some revenues of meaningful revenues, but in terms of a programmable side. And why people just don't use online tools, whether it's our online tools, not good enough, or whether have ordering kind of whether it's too difficult for them to order. And In that respect, we haven't generated any revenues on a programmable parts revenue from our website. No, that's very fair. Just one last question. You mentioned communications coming back. It sounds like that's more kind of your legacy business Should we assume that the new 5G products will kind of get the gross margin going again in the communications revenue? Absolutely. As I said, I remember the last year, some quarters, and I think it's Q2. I mentioned that. And we will get some communication revenues and we see the opportunities and and it's even though a lower margin, but it's a good dollars. And at the same time, I mentioned, I haven't given up as on the higher margin communications once we introduce the right product. And we did have it in the we did have in the last year, okay? And we just had a just a release And then now we design it in and when the 5G happens, we'll we will be on the wave. Next question comes from Bernie, I'm wondering if you I guess this is maybe a little bit of a different way to ask Rick's question from earlier around mix and gross margin, but maybe perhaps you could give us a little bit of color by division about how you're thinking that sequential growth or decline the different business units might be going into Q1? I think that would be helpful. Thank you. Yes, sure. We look at mix. Obviously, the traditional way to sort of view it is that, consumer is, at lower end. Also, the legacy comms business is on the lower end. And just as far as the transition from Q4 to Q1, we've guided at about flat gross margin, but the mix is less bad in Q1 than in Q4, because we continue to see growth in our computing, and, automotive. Automotive. Yes. And then there's some declines in industrial, and that you have to have as a backdrop that industrial has the last two quarters, really outperformed any of its historic patterns. So that's not coming to the total surprise. And then you have, a consumer that's doing a little bit of an exaggerated step down from Q4 to Q1. So that's really the mix that we're looking at is computing and automotive are continuing to perform, outperform expectations. And we've got some declines or exposure to both high and low margin opportunities. Got it. That's helpful on the mix. I guess if we look forward in the compute and storage business, maybe you could remind us again about exactly the mix and to the computing side and the storage side, it seems like there's some catalysts on obviously on the computing side from a share perspective, and 48 volt, but this has been a pretty ugly environment on the storage side from a macro perspective. So, update on the mix and how you're thinking about those 2 different segments there recovering as we go through the year would be helpful. Thank you. Sure. So, storage is a significant part of our business, but it's declined as a percent only because it hasn't grown at the same rate as what we've seen on the compute side. And, there was, if you look at last year, 2 2018, SSD in particular ramped very early and sustained that growth all the way through the mid part of Q3, for starting to decline. In that area, I see sort of a stabilization and, currently storage if you looked at, Q4, for example, is about a third of that line item. Then when you look at the, computing, Obviously, we've had significant run up in our server and workstation So that's at an elevated level. And then as we were talking about earlier is that, some initial sales related to GPUs are falling off as that marketer, those customers take a pause. Thanks for the color. I appreciate it. Thanks. Our next question comes from the line of Alessandra Vecchi with William Blair. Your line is now open. Hi, thanks for taking my taking my question. Just on the extension of the, end markets or segments in Q1, when you guys commented that you saw sort of new product launches delayed. Was there any particular vertical you're seeing that in? Is it a delay in sort of the new smart meter industrial products? The delay in the automotive products? Could you just give a little bit of color on that? Actually, Bernie mentioned that in the only earlier. And, we see a pretty much across the board automotive industrials and, as well as computing. And, is that NCO questions? Yes, that does. Apologies if I missed it. Okay. All right. No, it's okay. All my other questions were answered. Our next question comes from the line of William Stein with SunTrust. Your line is now open. Thanks for taking the call up guys. Any update on the emotion product revenue traction? We're afraid of this is too much of a and yes, okay, we actually starting January pretty meaningful revenue. And, the new integrated solutions and, as you've seen it, our website, we sell the reference design including the models. And we receive very good feedback on these. Great. I'm pretty But the revenue is still, Early ramp. It's early ramp, but is it a ramp It's a ramping very high percentage. Will, thanks for giving us a chance to respond. We actually had an internal discussion on whether we have too many items out there. So, we're not shying away from it. It's just it was competing against a lot of other opportunities to talk about. I understand. One other opportunity you mentioned a couple of times tonight is 48 volt. Think there's one small semi company that's pretty well known to have a big share in that in that market. And we're also aware that one of the main consumers is GPU's Are you seeing revenue for that product today, or is it more a couple of quarters out? And is it, of course, we know automotive is moving in that direction too, but in which market do you expect to generate revenues first? How close are we? And actually both, and automotive has been in 48 volts or in the high end cars. Okay. I think now the trickle down. And Last year, we expected it to have in the second half of twenty nineteen. And, as we see it, okay, probably it's still going to happen, because these are very high these are high end products. I think they're still going to launch because the demand is still there. Is it regards to market? What you have product that's competitive and ready and recognizing revenue in the back half of this year? I believe so. Yes, I believe so. In terms of what is the impact to our revenue, that's difficult to say now. So I think these are high and these are IR or these are AR systems And you always need it somewhere somewhere. It's just a matter of how many. Got it. Thank you. Our next question comes from the line of Chris Casa with Raymond James. Your line is now open. Yes, thank you. Good evening. Just one question for me. Bernie, could you clarify one of the comments you made earlier on on the inventory provisions. You said you need to take another look on that. Is the right interpretation of that just changing the quarterly reserves that you typically make. And what's about the magnitude? Is there any impact on margins from that? Yes, I haven't specifically calculated any exposure to what we've done in the forecast for the guidance is just provide a little bit of a step up And the rationale behind it is that we have a mechanical way of determining that number, which is based upon the next 6 months demand. So it sort of, inferred that if your 6 month demand, looks to be going down, that that could increase your likelihood of having an exposure. That's not to call out any specific product or end market. It's just sort of being generally conservative in the guidance we're providing. Yes, as of today, we don't see any dramatic change, okay, and it's all small numbers of change, okay. But when Bernie is talking about when the market dramatically changes, okay, again, it's lacking the in last year, December at the end of the quarters. And then we'll it may changes again. So we at this times, we see it's pretty normal now. Got it. Okay. Thank you. Our next question comes from the line of Tore Svanberg with Stifel. Your line is now open. Yes, thank you. I just had a quick follow-up and back to BCD 6. I think you've talked about having a $17,000,000,000 SAM And I'm just wondering what BCD 6 does to that SAM number? Yes, we haven't got to the far yet. That's a very good question. And certainly, we see in our in the application that we targeted in a targeted We can integrate a lot of many microcontroller, microcontroller features. And just to be clear, yes. And just to be clear, so those micros, you would develop your sell it, right? I mean, you wouldn't buy off the shelf ones? It depends on our applications. Some of the and as we know now, okay, we rebranded. And, but we do have our our firmware in the micro. And as of into the total integrated solutions. And first of all, so I have a total integration has a clear reason, has a cost effective and and all in all by size limitations. And if it's integrated and then we have to we are not going to develop a ground up developer microcontrollers. And, those are not cost effective for us. And those are where most likely is licensing. Sounds good. Thank you very much. Okay. Thank you. I'm showing no further questions in queue at this time. I'd like to turn the call back to management for closing remarks. I'd like to thank you all for joining us for the conference call and look forward to talking to you again during our first quarter 2019 conference call. Will likely be in April. Thank you. Have a great day. This concludes the program and you may now disconnect. Everyone, have a great day.