Good day, everyone, and welcome to this Microchip Technology First Quarter and Fiscal Year 2017 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Microchip's Chief Financial Officer, Mr. Eric Bjornholt. Please go ahead, sir. J. Eric Bjornholt - Chief Financial Officer & Vice President: Thank you. Good afternoon, everyone. During the course of this conference call, we'll be making projections and other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions and that actual events or results may differ materially. We refer you to our press releases of today as well as our recent filings with the SEC that identify important risk factors that may impact Microchip's business and results of operations. In attendance with me today are Steve Sanghi, Microchip's Chairman and CEO; and Ganesh Moorthy, Microchip's President and COO. I will comment on our first quarter and fiscal 2017 financial performance, and Steve and Ganesh will then give their comments on the results, discuss the current business environment as well as our guidance, and provide an update on the integration activities associated with the Atmel acquisition. We will then be available to respond to specific investor and analyst questions. I want to remind you that we are including information in our press release and this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on the Investor Relations page of our website at www.microchip.com, which we believe you will find useful when comparing GAAP and non-GAAP results. I will now go through some of the operating results, including net sales, gross margin, and operating expenses. I will be referring to…

We'll go first to Craig Hettenbach with Morgan Stanley. Craig M. Hettenbach - Morgan Stanley & Co. LLC: Yes. Thank you. First question – just encouraging to see the Atmel accretion level but there has also been some questions just on sales, so just your point that it bottomed in the March quarter, Ganesh also made the point that customer confidence is helping. So anything else you could add in terms of context from a visibility perspective as you look at Atmel's sales as we go forward? Steve Sanghi - Chairman & Chief Executive Officer: We basically see no issues. We do not see a decline in Atmel sales. We think we have turned around the decline of Atmel sales rapidly. A lot of the sales decline was happening during all the time when Atmel was on sale, starting almost May of last year when the CEO first told the world that he was going to step down, which began the sales process. And there were some sales decline related to the touch business even happened in the previous years. We think the meetings we have had with the major customers, the messages we have given to the Street, the messages we have given to the sales force, the meetings we have had with the distribution, rapidly we have given the market confidence that number one, we're not obsoleting a large number of products like many times acquisitions companies tend to do. Microchip has a culture of not obsoleting products and providing long-term service to the clients. The only business we put on sale was just this mobile touch business which was a relatively small business and the other concerns, which actually investors had more than the customers, was what was going to happen to the 8-bit AVR business, what…

We'll go next to Vivek Arya with Bank of America Merrill Lynch.

Thank you for taking my question. I was just wondering, Steve, if you would call the current demand environment seasonal and if you could give us some color on end markets which are behaving at or better or different than what you would expect from a seasonal perspective in the current quarter? Steve Sanghi - Chairman & Chief Executive Officer: Well, I'm not going to call the demand environment anything. The demand environment is what it is, and based on the guidance we have given. Because any adjective I add to it and everybody tries to read that and apply that to the rest of the industry and other people and I'm just not going to do that.

And just in terms of end markets that you are seeing, which are different than – or instead of comparing it versus seasonal, if you could just give us some color on an absolute basis that as we look from Q2 to Q3 and we look at the midpoint of your outlook of about 2% sequential growth, what end markets could be above or below that number? Thank you. Ganesh Moorthy - President & Chief Operating Officer: We serve such a large number of customers and a broad base of applications that we're not end-market-focused on what we go do. So I think what you're seeing in both our guidance and the relative comparisons are, it's normal business. There is nothing that stands out as bad, or stands out at good. It's just normal.

Got it. And then just maybe as a follow-up, if you look at M&A, that has been a key part of your strategy longer term. But with all the consolidation that has taken place in semis, do you see enough interesting targets to go after – I realize Atmel will probably occupy your attention for some period of time, but what's your view overall on the consolidation in the sector and do you see enough interesting targets to go after? Steve Sanghi - Chairman & Chief Executive Officer: Well, there is no shortage of interesting targets. The shortage right now I have is basically one financial shortage for the leverage which is already 3.22 as we reported today. So I don't really have sufficient more cash to do anything short term. And the second issue is the management bandwidth. As you mentioned, it's really very, very busy on consolidating seven different business units of Atmel and all the financial and IT and other systems. So those are the challenges, financial as well as the management bandwidth. There is no shortage of target.

Thank you.

We'll go next to Chris Caso with CLSA.

Thank you. Good afternoon. First question is regarding some of your efforts to instill some pricing discipline. You talked about this at length in your prepared remarks. How long does it take for some of this price discipline to work its way through the system and is that included in the accretion target that you've already provided or would that be potentially be a source of upside for those targets? Steve Sanghi - Chairman & Chief Executive Officer: Those are included in us taking the accretion targets up from $0.25 before to $0.40 now. They're not all driven by price. They're driven by just being so far ahead in the first two quarters and then modeling the third and fourth quarter. Some of the price increases are embedded in there but it's really very hard to model it really, because it could take a few quarters for it to really get in based on new projects, new orders, new quotes, some of the old quotes have an expiry and so on and so forth. So it's probably at least a nine-months process.

Okay. That's helpful. As a follow-on question, obviously the business has changed quite a bit with the acquisition. Can you help us in how we should think about seasonality over, say, the December quarter and even into the March quarter, how has the integration of the acquisition changed what we would be considered...? Steve Sanghi - Chairman & Chief Executive Officer: Well, first of all, we haven't seen a full year of Atmel under our clock. So the correct answer would be I don't know. But based on what we have seen, we believe that I don't think seasonality will change a whole lot. Q1, the calendar Q1 usually Microchip has been sequentially up in Q1. And because of a little more consumer exposure, Atmel's Q1, calendar Q1 has not been up, has been down. But they're about less than half of our business. So you combine it together, I think you take a little bit from the Q1 and where you add it we've got to figure out where you add it. Maybe you add it in the June. Maybe you add some in December, maybe we're not down as much. We've just got to kind of figure it out over time.

Okay. That's helpful though. Thank you.

We'll take our next question from John Pitzer with Credit Suisse. John William Pitzer - Credit Suisse Securities (USA) LLC (Broker): Yeah. Good afternoon, guys. Thanks for letting me ask the question and congratulations on the strong result. I guess my first question is for either Steve or Eric. Stock-based comps in the quarter was a lot higher than I would have thought. It was a lot higher if I just added Microchip plus Atmel coming out of the March quarter. So is there something related to the acquisition going on there and is close to $60 million a quarter the new baseline or how should I think about that? J. Eric Bjornholt - Chief Financial Officer & Vice President: So there is a lot of Atmel-specific related activity in there related to – Steve talked about 31 of the 40 something VPs no longer being with us and change of control and acceleration of equity and things like that. So that had a significant impact on the share-based comp in the quarter. So that is not the ongoing run rate. If you give me a minute I can kind of look up what it will be, estimated, for the next couple quarters and give you that as the baseline. John William Pitzer - Credit Suisse Securities (USA) LLC (Broker): That's helpful. And then guys, maybe as my follow-on question, just going back to the $0.40 of accretion, Steve, you gave us $0.08 in June, you're guiding midpoint to sort of $0.10 in September. It sort of implies only $0.11 and $0.11 in the next two quarters, if I'm doing the math properly. And just given sort of everything you've talked about on the hard work you guys have done on integrating Atmel, it seems like there could be significant…

We'll go next to Harlan Sur with JPMorgan.

Good afternoon, and congratulations on the solid quarterly performance. On the increased accretion targets for fiscal year 2017, you're analyzing first half at about $0.36. And so on the better results and the potential for more to get to your $0.40 target for the full fiscal year, can you guys just help us understand what specific product segments or business process rationalizations, or manufacturing initiatives you've executed on to drive these accelerated synergies? Steve Sanghi - Chairman & Chief Executive Officer: Well, these will be very long answers. I think what we said, both Ganesh and I in our prepared remarks, some of the things we did. I laid out how much we took out in the operating expense, how we combined the businesses. We took nearly – 500 people are no longer on the payroll, among them about 33 executives, so there was a large amount of expense taken out, large amount of other things done. Mix is improving, product mix is improving, less focus on low margin mobile touch products, and high focus on high margin micro and others and adjustment of prices. There were just hundreds of line items. And we just, Ganesh and I and many of our executives, that's all we did last quarter, we worked on Atmel.

Yes, good insight there. Thanks for that. And then the channel strategy for both companies, as you mentioned before have been somewhat complementary, although you've mentioned about a much broader channel presence for Microchip. You've also talked about cross-franchising distributors, getting the Atmel products fully integrated into the order system, field sales trained, et cetera. I think you previously talked about a target of November 1 for the go live initiative. Maybe, Steve, you could just give us an update on this initiative. Steve Sanghi - Chairman & Chief Executive Officer: So it is still on schedule for go live on November 1. There are 100 different milestones, weekly milestones for really what needs to be accomplished for that to stay on schedule. And it's on schedule right now. After this call we have another review of the Atmel integration plan for November when we go live. And I'm sure I'll hear that in the last week since I heard the report, the next set of milestones have been met and we're on schedule.

Great. Thank you. Steve Sanghi - Chairman & Chief Executive Officer: Yeah.

We'll take our next question from William Stein with SunTrust Humphrey.

Great. Thanks for taking my question and congrats on the very strong results and outlook. I'm wondering if you can characterize the upside in the quarter on the top-line or detail for us whether there was anything in that that resulted from higher prices as you alluded to negative gross margins on the Atmel business. Did that correction help revenue in the quarter or is this more of an organic sort of unit-driven upside? Steve Sanghi - Chairman & Chief Executive Officer: So when you're saying higher prices, are you saying customers trying to buy ahead or are you saying just the effect of higher prices on revenue?

Either. Steve Sanghi - Chairman & Chief Executive Officer: So I don't think either of them, because you couldn't really have any meaningful impact on prices within the quarter. Many times it's raise the prices, it's you expire a quote, the new prices on a new quote, and it just takes some time to have an effect; to have its impact that moves the needle in the very first quarter, I don't think there was any of that. Regarding the second part where expecting price increase where the customers buy product at lower prices ahead of time, we had heard that concern from the Street, maybe one of the analysts. And we don't really find evidence of that. Six weeks have gone into the quarter and the OEM bookings and shipment patterns and all that are really continuing good. We're marching well towards our guidance. And on the distribution, as I mentioned in my prepared remarks, we marked the distribution inventory up on July 1 with a new price book. And the point of sales in the last six weeks in the quarter is – does not show any problem.

That's very helpful, Steve. Thanks. One more if I can. It seems very early to talking about cross-selling opportunities, but I think you talked about either, I forget, in the press release or in the prepared remarks about cross-selling analog. Can you remind us what the expectations are from a timing and magnitude perspective for cross-selling analog or other product? Steve Sanghi - Chairman & Chief Executive Officer: So the cross-selling is already visible at the design-in level – in one of Atmel's socket, let's say, there was Atmel microcontroller, there was an Atmel wireless chip but – the LDO, the A to D converter or some sort of power management was from some other company. And there are already signs as we go through reviews of customers with the salespeople, they're already showing evidence of where some of those have been replaced by Microchip at the design level. Those are not in production at the design level in the funnel. So that's already visible. In terms of dollarizing it, it's very hard to dollarize. But when I was at a conference in New York last quarter, I essentially – what they are modeling is that there is a $300 million attach opportunity on Microchip's analog products attaching it to microcontrollers and wireless products of Atmel. And it's about $1 billion of business, $0.30 of attach rate. That's really kind of how we came about. It's not as scientific, but those are experiences on other opportunities we have done where we have attached analog.

Thank you.

We'll take our next question from Kevin Cassidy with Stifel. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc.: Thanks for letting me ask a question. The pricing in the new price book, maybe to help answer some of my questions, what percentage increase were you putting in for the Atmel product? Steve Sanghi - Chairman & Chief Executive Officer: We're not going to tell you that. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc.: Okay. And one thing, well, you haven't talked much about the licensing business. Can you say what the – are there new contracts in process or can you talk about the licensing business? Steve Sanghi - Chairman & Chief Executive Officer: So licensing business is doing very well. Essentially, in the licensing business, we have won the entire enchilada at the 55-nanometer and 40-nanometer, essentially every major foundry, all three large foundries, and many of the smaller foundries, they have all adopted our technology at the 90-nanometer, our technology at the 55-nanometer, our technology at the 40-nanometer. Main foundries have adopted what has been won in the last two or three years is 55-nanometer and 40-nanometer. And half of them have also signed up on the 28-nanometer and that's still under works. So I mean, basically it's all being designed with our technology. Now, it's a question of, in the microcontroller world, the technology kind of lags the microprocessor world by quite a few years. So what portion of the microcontrollers are built on 55-nanometer and 40-nanometer. If you ask the question today, that's a very small number. But it's on a very fast curve as all the new products being designed are in 55-nanometer and 40-nanometer. So as they go into production, the royalty rates will increase dramatically. So we're very positive on…

We'll take our next question from Rajvindra Gill with Needham & Company. Rajvindra S. Gill - Needham & Co. LLC: Yeah. Thanks for taking my questions and congratulations on excellent results. Steve, you talked about in the past when you look at acquired companies that you kind of focus on 50% of the portfolio or so and try to expand on that. With respect to Atmel, using that kind of logic, how are you approaching Atmel's new products – Atmel's products and kind of end markets based on that framework? Steve Sanghi - Chairman & Chief Executive Officer: What's that framework? 50% of what? I didn't understand your question. Rajvindra S. Gill - Needham & Co. LLC: I think in the past when you had made an acquisition – when you made acquisitions, you've talked about focusing, I believe, you had said either 50% or majority of the revenue where you feel there's the most growth. Ganesh Moorthy - President & Chief Operating Officer: Raji, I think what you're referring to is, we've made some comments about the top 50% of opportunities of acquired companies are better than the bottom 50%. I think that's what you're getting at. Steve Sanghi - Chairman & Chief Executive Officer: I remember that when I said that and subsequently I saw it in a report, which was a gross mischaracterization of really what I had said. So let me clarify it. So, let's say we have 100 opportunities at Microchip. And the company we acquire has 100 opportunities. To make the assumption that all of our 100 opportunities are better than all of their 100 opportunities and they should be at the bottom would be highly egotistical and would be incorrect. So what I said is that many times we find that the top…

We'll take our next question from Chris Danely with Citi.

Hey. Thanks for squeezing me in, guys. I'll be brief. Just two quick clarifications. Steve, on the upside from Atmel and Microchip, was there anything in common in terms of the upside between the two businesses, whether it's by geography or end market, or where there any areas where things were a little bit worse than you expected? Steve Sanghi - Chairman & Chief Executive Officer: Well, end markets we didn't look at. I mean, we don't really do that breakdown. But when I look at geographies and product lines, I would say everything was pretty broad-based.

Okay. And then on the pricing where you talked... Steve Sanghi - Chairman & Chief Executive Officer: Much across the board.

Okay, great. And then on the pricing where you talked about improving the pricing, have you ever done that with any previous acquisitions, maybe give us some examples of have you done that in the past? Steve Sanghi - Chairman & Chief Executive Officer: We've done that pretty much with every acquisition. Micrel was the most recent one before Atmel and the pricing practices were also very sell-in driven to distribution, making quarter end deals on heavy discounts and some of the OEM pricing were very low in Asia and we did exactly the same thing. You'll take – there were some very equivalent products from Microchip and Micrel whether they were LAN or they were in the power management area, I mean, those products, customers could choose one product or the other. And our prices would be substantially better than theirs. And after we combined Micrel, we essentially changed the pricing to our pricing. And so whether you buy their product or you buy our product, you're going to buy at our price. So we did that. We did some other things with Supertex. We did a fair amount of it with SMSC. J. Eric Bjornholt - Chief Financial Officer & Vice President: With SST. Steve Sanghi - Chairman & Chief Executive Officer: We did it with SST. J. Eric Bjornholt - Chief Financial Officer & Vice President: At the end of the day if it's bad business, it's bad business. We're not interested in continuing to go forward with it. So price increases – and not all business is bad. There's always a percentage at the low end of the distribution that we have to go correct. Steve Sanghi - Chairman & Chief Executive Officer: SST was making some negative gross margins on flash business, taking very low margins and we sold some bad business. In a couple of deals we did back then and rest of it we raised the prices. We brought some into our testing, our system, our assembly and lowered the cost, and for years now that was 2010 and we have been running the flash business very profitably. So there's no business at Microchip is entitled to lose money.

Great. Thanks, guys. Congratulations. J. Eric Bjornholt - Chief Financial Officer & Vice President: Thanks.

So next to Harsh Kumar with Stephens.

Hey. Most of my questions have been answered. Just a quick question for Eric. Eric, this difference between the GAAP and non-GAAP revenues, how many more quarters do you expect this to last if you didn't say that already? J. Eric Bjornholt - Chief Financial Officer & Vice President: Well, there's going to be another leg of that that happens when we integrate business systems, because that's generally the point in time where we actually change the contracts with the distributors that historically had sell-in revenue recognitions change them to a Microchip-like contract. And so we're targeting that now to happen in Q3. And depending on the date that we integrate, that can continue for a couple of quarters though. You're going to see bits and pieces of that for the rest of the fiscal year.

Got it. Great. And otherwise great quarter, great guide, guys. Congratulations. J. Eric Bjornholt - Chief Financial Officer & Vice President: Thanks Harsh. Steve Sanghi - Chairman & Chief Executive Officer: Thank you.

Next question comes from Craig Ellis with B. Riley. Craig A. Ellis - B. Riley & Co. LLC: Yeah. Thanks for taking the question and congratulations on the good start to Atmel integration. Steve, I just thought I'd take a more qualitative follow-up on the point you made regarding the upside on accretion and not wanting to be too precise on whether it was a pull-in or upside to synergies. But can you give us some examples that would indicate that it's either, A, a pull-in of what you had outlined for fiscal 2018 or it's upside to what you and the team had been expecting? Steve Sanghi - Chairman & Chief Executive Officer: Well, I think – so if you look at the elements of it, there is revenue, there is gross margin, and there's OpEx, really only those three things. And then there is attach rate, let's say, attaching analog and all that. If you take those four major components where the long-term accretion would come from, the upside in the quarters from a revenue side was real. That's not a pull-in. That's a real revenue upside which will continue quarter after quarter. The OpEx piece is, there's a certain amount of OpEx you need to take out and remove the bad R&D and remove the bad stuff. So any accretion we would get on OpEx if we get the job done in one year rather than two years or three years and that push-in will not have further upside, because there's a certain amount OpEx correction we got to do. And we're doing it much faster than we thought. And honestly, one of the reasons for that, in my mind, is our earlier expectation was that we will find a disaster in Europe, and Europe is harder…

We will take our final question from Lena Zhang with Summit Redstone.

Thank you for taking my questions and congratulations on the results and the guidance and also very decent work on the integrating Atmel business. I apologize if I missed this. Just as to note your pricing strategy on the Atmel products, are these prices effective for the shipping in this quarter or it will be affecting for the future orders – the timeframe? Steve Sanghi - Chairman & Chief Executive Officer: It's all over the place. We work with 100,000 customers, and some you do it in two steps, and some you're able to do it all, in some there was a contract in place, you couldn't do it at all. So it has to be with a new quote next year on January 1, it's all over the place.

And also some were already started, for example, in tail end of Q2. Steve Sanghi - Chairman & Chief Executive Officer: Some increased prices are already in effect.

Okay. Thank you. Steve Sanghi - Chairman & Chief Executive Officer: I would look at it as a glide path from July 1 to March 31 or something like that. J. Eric Bjornholt - Chief Financial Officer & Vice President: It's an analog change that's going to be continuous over time.

I see. Thanks.

And as we have no further questions, I would like to turn the conference back over to Steve Sanghi for any additional or closing remarks. Steve Sanghi - Chairman & Chief Executive Officer: Well, thank you, everyone, for attending the conference call today and we'll see some of you on the road as we go to a couple of conferences later on this quarter . Thanks.

Ladies and gentlemen, that does conclude today's conference. Thank you for your participation. You may now disconnect.