芯源系統 (MPWR) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Monolithic Power Systems Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded. I'd now like to introduce your host for today's conference, Mr. Bernie Blegen, Chief Financial Officer. Sir, please go ahead.

Good afternoon, and welcome to the Fourth 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 risk 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 the 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&D and SG&A expense, operating income, interest and other 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, measures of financial performance prepared in accordance with GAAP.

A 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 refer investors to the Q4 2017, Q3 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 would 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 $582.4 million, 23.7% higher than revenue from 2017. The $111 million increase in year-over-year revenue was the largest annual gain in the company's history. The 23.7% annual increase was the 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 sixth consecutive year of double-digit growth.

2018 was a significant year for MPS. On the technology front, we've widened our lead with BCD5 solidly in volume production and with the development of BCD6, a 55-nanometer process designed on a 12-inch wafer. Both of these advancements will significantly increase our product's 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-inch and 8-inch 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 market, generating initial and meaningful revenue. More importantly, we are codeveloping next-generation products with a number of these Tier 1 companies that will revolutionize their industries. We expect these partnerships to drive substantial technological advancements and represent an important source of MPS' future revenue growth.

A few examples include: developing specific leading-edge system solutions using QSMod technologies for GPU-based artificial intelligence and machine learning applications; using MPS' 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 riding applications with a 2020 target for market introduction; developing a mechanical relay replacement servicing the IoT and automotive markets using MPS' 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 to these modules are base stations and switchers, which require compact and reliable solutions.

In addition to these exciting codevelopment 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 customer's 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%; 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 $58.3 million to $159.1 million in 2018. This increase primarily reflected strong sales growth for cloud computing, SSD storage, high-end notebooks and initial GPU power management sales. Computing and storage revenue represented 27.3% of MPS' total revenue in 2018 compared with 21.4% in 2017.

Automotive revenue grew $26.2 million to $80.1 million in 2018. This growth primarily represented increased sales of infotainment, safety and connectivity application products. Automotive represented 13.8% of MPS' full year 2018 revenue compared with 11.4% in 2017.

Industrial revenue grew $25.6 million to $88.5 million in 2018. This growth reflected sales for applications in power sources, security and industrial meters. Industrial revenue represented 15.2% of MPS' full year 2018 revenue compared with 13.4% in 2017.

Communications revenue grew $7.0 million to $70.6 million. 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% 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 fourth quarter with revenue of $153.5 million, 4.0% lower than the revenue generated in the third quarter of 2018 but 18.6% higher than the comparable quarter of 2017.

By market segment, revenue for industrial grew 66.6% over the same period 2017; computing and storage grew 63.2%; and automotive grew 40.2%. Communications revenue -- communications grew 27.1% due primarily to increased revenue from MPS' legacy home router and wireless gateway products. Fourth quarter revenue for consumer fell 25.9% 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 sales product mix.

As a result, fourth quarter 2018 non-GAAP gross margin was 55.6%, 50 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 was $46.6 million compared to $49.2 million reported in the prior quarter and $38.2 million reported in the fourth quarter of 2017. Fourth quarter 2018 GAAP gross margin was 55.1%, 50 basis points lower than the third quarter of 2018 but 10 basis points higher than the fourth quarter of 2017.

Our GAAP operating income was $33.1 million compared to $33.5 million reported in the third quarter of 2018 and $25.1 million reported in the fourth quarter of 2017.

Let's review our operating expenses. Our GAAP operating expenses were $51.5 million in the fourth quarter compared with $55.5 million in the third quarter of 2018 and $46.1 million in the fourth quarter of 2017. Our non-GAAP fourth quarter 2018 operating expenses were $38.7 million, down from the $40.5 million we spent in the third quarter of 2018 and up from the $33.9 million reported in the fourth quarter of 2017.

On both a GAAP and a non-GAAP basis, fourth quarter litigation expenses were $409,000 compared with $343,000 expense in Q3 2018 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 $14.8 million compared with $14.8 million recorded in the third quarter of 2018.

Switching to the bottom line. Fourth quarter 2018 GAAP net income was $27.6 million or $0.61 per fully diluted share compared with $0.71 per share in the third quarter of 2018 and $0.27 per share in the fourth quarter of 2017. Q4 non-GAAP net income was $44.6 million 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 45.1 million.

Now let's look at the balance sheet. Cash, cash equivalents and investments were $380.5 million at the end of the fourth quarter of 2018 compared to $353.1 million at the end of the third quarter of 2018.

For the quarter, MPS generated operating cash flow of about $47.6 million compared with Q3 2018 operating cash flow of $52.2 million. Fourth quarter 2018 capital spending totaled $4.5 million.

Accounts receivable ended the fourth quarter of 2018 at $55.2 million or 33 days of sales outstanding compared with the $59.9 million or 34 days reported at the end of the third quarter of 2018 and the $38.0 million or 27 days reported in the fourth quarter of 2017.

Our internal inventories at the end of the fourth quarter of 2018 were $136.4 million, down slightly from the $136.8 million at the end of the 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. First, 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 2019 revenue in the range of $138 million to $144 million.

We also expect the following: GAAP gross margin in the range of 54.8% to 55.4%; non-GAAP gross margin in the range of 55.3% to 55.9%; total stock-based compensation expense at $17.6 million to $19.6 million, including approximately $600,000 that would be charged to cost of goods sold; GAAP R&D and SG&A expenses between $55 million and $59 million; non-GAAP R&D and SG&A expense to be in the range of $38 million to $40 million. This estimate excludes stock compensation and litigation expenses.

Our income is -- our other income is expected to be in the range of $1.4 million to $1.6 million before foreign exchange gains or losses. Fully diluted shares to be in the range of 44.7 million to 45.7 million shares.

In conclusion, despite uncertainty in the macroeconomy, 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.

(Operator Instructions) Our first question comes from the line of Ross Seymore with Deutsche Bank.

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 the tide's 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 areas where you have new design wins.

Ross, okay. So good questions. As you know, all MPS' growth is from the new product. And then you -- in the new market segment that Bernie mentioned, the automotives and industrials and the computing. And in the later -- especially in the Q4, last year's, we see slowing down dramatically. And we asked around our customers and all due to the -- they said to me, it's all due to economy and uncertainty in the futures. And however, in the middle of all of these, okay, we see -- not all the products have stopped, and a delay that there, they're introductions. But as some have stopped -- some the -- their end product still introduced, or still we have a replacement, we gained some market shares. And in 2019, we still expect to grow and grow -- have a very healthy year. But the percentage -- okay, the growth, whether it's 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 of 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 believe very confidently that we're well positioned to take full advantage of that turnaround.

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. One, is that still the case? Or should that inventory come down if those ramps continue to be delayed? And then two, do give us an update on what the channel inventory situation is and what your expectations are for that as well.

Hey Ross, I like that question now. The inventory, I think we see it as a lag, okay. Clearly, it's very valid, okay. And in this kind of a transitional market conditions, we watch very carefully. So that's why I like that question. And of course, there's a delay there, and we see -- it was -- of course, demand's slowing down, okay. We control our -- the inventory will come down, so we control very highly -- now Bernie, you can answer the more important numbers.

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 that, 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.

Hey guys, I'll apologize because I missed most of the prepared comments. But obviously, a slightly weaker guide for March. 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 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 and September quarters?

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 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 in the macro, particularly in Greater China. So it's the -- the point that we also observed is that a lot of the new product ramps that our customers were building expectations around have been pushed out in this period in time. And so it's hard for us to say concretely how that's going to affect our overall growth rate for the year or when do we expect the 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 for most of the past 3 or 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.

Our next question comes from the line of Rick Schafer with Oppenheimer.

I guess that I was hoping to understand gross margin at least in the near term just a little better, I know it's obviously softer. Is the primary driver, that's just simply mix? I would have assumed a better mix in 1Q, but are we -- Bernie, if you can provide any, maybe a little more color there, what's your expectations are by segment, maybe it almost seems like consumer's 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 the gross margin might rebound?

Sure. So when we look at Q4, let's just start with that, that was clearly mix. 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 it's continuation of 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 -- 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 light with lower demand. Again, we've talked in the past that our inventory has a long shelf life and we believe that all 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.

What we foresee, going forward, is all the new product delays and the margin will stay as closer than that, so okay. We don't see a dramatic change. But dramatic change is all relative. And now we have 0.5% change, okay, that's pretty small to me. Okay? And -- but we analyze that -- and that's against our very consistent result in the last 4, 5 quarters. And that is due to the mix. And all the newer products -- newer revenue, high-quality revenue gets delayed. And going forward, and we expect to grow the gross margin as -- very consistently as the economy recovered.

And then just shifting gears quickly 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. And I'm just curious because you were talking about 48-volt 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? Is 48-volt a material content driver for MPS?

Yes. We actually expected it in Q1 -- what, in Q1 2019. And obviously, much -- it's actually -- the numbers are much smaller, so like we and -- so all -- actually, as we see it. It's not in the first half anyway, so it would be in the second half of 2018 and early part of 2020.

Our next question comes from the line of William Stein with SunTrust.

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 sort of started seeing this weakness a little bit later than others and seems to be at least a couple of quarters 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.

Our next question comes from the line of Tore Svanberg with Stifel.

I'll start here from the macro stuff, and I'm pretty interested in BCD6. Could you elaborate a little bit more what that means for products going forward? You talked about 55-nanometer and 12-inch wafers. But any other color you could add?

Yes, okay. These -- as, actually, as usual, with every other years and every years, we introduced, okay, we develop newer technologies, and that is really our foundation for the future growth. And -- so the BCD6 that we set at BCD5, we, including the memories, and okay, now it's like we're including much denser logics. So now we mentioned -- Bernie mentioned it is a 55-nanometer, and we will have those type of logics. So you can think of it that way. We really put entire systems of -- on a single chip, which means we included the microcontroller. And that will give us access to a lot more market segments 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 will allow us to improve our gross margins. And in others still, it will make us able to, with the technological advantage, to compete in markets that we hadn't previously been able to enter into.

And also you mentioned obviously, e-commerce and your website up and running last year. Could you give us some color on how the feedback has been so far? How the learning curve going for customers?

Yes. We -- you call the website, yes, operating okay. But I said, we're still learning. As expected, actually, this is a very new frontier to everybody, and nobody attempted that before. And we still trying to figure out why the -- when we give the floppy disk because it's a lot more effective, but then we go through our website. So we're still trying to figure out. Something's, obviously, is not quite right. But the product itself, when we give a traditional way and give them all the tools, they give them a CD and give them -- download a program, everybody likes that. And we see more and more customers would rather use a fixed product than they choose the programmable parts. And going -- we see a clear directions. And but how effectively using the website, we're still trying to figure out.

Very good. One last question...

(inaudible)

Yes, go ahead, Bernie.

I just wanted to caution that I think we tried to set expectations around the fact that we would have 0 revenue in '18, 0 revenue in '19, that's not entirely true because we are generating revenue. But then we'll have a good slow ramp in '20 and '21. And it's really 2022 is when we expect it to contribute materially.

Are you're talking about the e-commerce?

Yes.

Yes. And that's strictly sales through website. And now we see the early -- actually, we do see some revenues -- some meaningful revenues. But in terms of a programmable site and why people just don't use online tools, whether the online tools are not good enough or whether have ordering kind of was too difficult for them to order. And we try -- in that respect, we haven't generated any revenues on a programmable parts revenue from our website.

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've said, in a -- 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 it's even though a lower margin, but it's good dollars. And at the same times, I mentioned, I haven't given up on the higher-margin communications. Once we introduce the right product, and we did have it in the last years, okay, and we just haven't just release it. And now we design it. And when the 5G happens, we were -- we will be on the way.

Our next question comes from the line of Matt Ramsay with Cowen.

Bernie, I wondered 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 of sequential growth or decline in the different business units might be going into Q1? I think that would be helpful.

Yes, sure. When we look at mix, obviously, the traditional way to sort of view it is that consumer is lower and 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've continued to see growth in our computing and...

Automotive. Yes.

Automotive. And then there's some declines in industrial, and that you have to have as a backdrop that industrial has, the last 2 quarters, really outperformed any of its historic patterns. So that's not coming as a total surprise. And then you have 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 form -- 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, if you could remind us again about exactly the mix and exposure to the computing side and the storage side? It seems like there's some catalyst 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 some update on the mix and how you're thinking about those 2 different segments out there, recovering as we go through the year would be helpful.

Sure. So storage is a significant part of our business, but it's declined as a percent only because it hadn't grown at the same rate as what we've seen on the compute side. And there was, if you look at last year, 2018, SSD in particular, ramped very early and sustained that growth all the way through the mid part of Q3 before starting to decline. In that area, I see sort of a stabilization. And currently, storage, if you looked at Q4 for example, it's about 1/3 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 market or those customers take a pause.

Our next question comes the line of Alessandra Vecchi with William Blair.

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? Is it a delay in the automotive products? If you could just give a little bit of color on that.

Actually, Bernie mentioned it in the earnings earlier. And we see pretty much across-the-board, automotive, industrials and as well as computing, and -- does that answer your questions?

Yes, that does. Apologies if I missed it.

That's okay.

All my other questions were answered.

(Operator Instructions) Our next question comes from the line of William Stein with SunTrust.

Any update on the e.Motion product revenue traction?

Yes. We're afraid of, this is too much of -- and yes, we actually, starting January, pretty meaningful revenue. And the new integrated solutions, as you've see it. Our website, we sell the reference design, including the models. And we received very good feedback on these. But the revenue is still...

Early ramp.

It's early ramp. But it is ramping. It's 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 that we, we've -- 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. I think there's one small semi company that's pretty well known to have a big share in that market. And we're also aware that one of the main consumers is GPUs. 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?

It's actually both. And automotive has been in the 48-volts in all in high-end cars, okay, now it's trickled down. And last year, we expected to have -- in the second half of 2019. And as we see it, okay, probably still going to happen because these are very high -- these are high-end products. I think it's still going to launch because the demand's still there. It's regardless, regardless of the market.

You'll have product that's competitive and ready and recognizing revenue in the back half of this year?

I believe so. Yes, I believe so, that in terms of how -- what is the impact to our revenue, that's difficult to say now. I think these are high -- these are AR systems, and you always need it somewhere, but it's just a matter of how many.

Our next question comes the line of Chris Caso with Raymond James.

Just one question for me. Bernie, could you clarify one of the comments you made earlier on the inventory provisions? You said you needed 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. So what we've done in the forecast or 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's 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 and change, okay. When -- but -- when, what Bernie is talking about when the market dramatically changes, okay, again, it's likely in last year, December -- 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.

Our next question comes with a line of Tore Svanberg with Stifel.

I just had a quick follow-up, and back to BCD6. I think you've talked about having a $17 billion SAM. And I'm just wondering what BCD6 does to that SAM number.

Yes. We haven't got to that point yet. That's a very good question. And certainly, we see in our -- in the application that we targeted, and targeted, we can integrate a lot of -- many microcontroller features.

And just to be clear...

Yes, yes?

Yes, and just to be clear, so those micros, you would develop yourself, right? You wouldn't buy off-the-shelf ones?

It depends on applications. Some of the -- and as we know now, okay, we rebranded. And but we do have our firmware in the macro. And as of -- into the total integrators solutions, and first of all, so have a total integration, has a clear reason, has a cost-effective in all by size limitations. And it was integrated, and then we had to wait -- are not going to -- ground up, develop a microcontroller. And as those are not cost-effective for us, and those are way most likely is a licensing.

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, which would likely be in April. Thank you. Have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone, have a great day.