Good day, everyone, and welcome to this Microchip Technology fourth quarter and fiscal year 2018 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 President (sic) [Chairman] and Chief Executive Officer, Mr. Steve Sanghi. Please go ahead, sir.

Thank you. I'd like to turn the call to Eric Bjornholt, Chief Financial Officer, first. Eric, go ahead.

Okay. Good morning, everybody. During the course of this conference call, we will 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 fourth quarter and full fiscal year 2018 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 make some specific comments on the pending acquisition of Microsemi. 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 these results on a non-GAAP basis prior to the effects of our acquisition activities and share-based compensation. Non-GAAP net sales in the March quarter were just over $1 billion, above the high end of our guidance and up 0.8% sequentially from net sales of $994.2 million in the immediately preceding quarter. We have posted a summary of our revenue by…

Thank you, Eric, and good morning, everyone. We performed better than we expected in the seasonally slower March quarter, with a sequential revenue growth of 0.8%. March quarter 2018 revenue over March quarter 2017 revenue grew 11%, all organic growth, as there was no contribution from acquisitions in the last four quarters. On a fiscal year basis, fiscal year 2018 revenue grew a strong 13.7% over fiscal year 2017. The Microchip 2.0 transformation continues to make good progress, especially in terms of new design opportunities, as we enable our clients' innovation with the very best smart, connected and secure solutions. Taking a closer look at microcontrollers, our Microcontroller business has performed well for a March quarter, with revenue down sequentially only 0.6% as compared to the December quarter. March quarter 2018 revenue was up a very strong 13.2% over March quarter 2017. On a fiscal year basis, fiscal year 2018 Microcontroller revenue at $2.6 billion was an all-time record and grew a strong 17.5% over fiscal year 2017. Microcontrollers represented 65.6% of Microchip's overall revenue in the March quarter. Last month, Gartner Dataquest released their microcontroller market share report for calendar 2017. We are pleased to report that Microchip retained the number one position for 8-bit microcontrollers. We were the fastest-growing 8-bit microcontroller franchise and gained substantial market share in calendar 2017, as we grew much faster than the 8-bit microcontroller market, so much so we are now approximately 60% larger than the number two 8-bit microcontroller player. In the 16-bit microcontroller market, we remained in the number five position but continued to gain significant market share, as we grew much faster than the 16-bit microcontroller market, and we're the fastest-growing franchise. In the 32-bit microcontroller market, we remained in the number six position but also gained significant market share,…

Thank you, Ganesh, and good morning for you, everyone. Today, I would like to first reflect on the results of the fiscal fourth quarter of 2018 and fiscal year 2018. I will then provide guidance for the fiscal first quarter of 2019. Our March quarter financial results were excellent. Our net sales were up 0.8% sequentially and up 11% from the year-ago quarter and were above the high end of our revised guidance. The sales in our Atmel-originated business was down, consistent with Atmel seasonality. Our core Microchip business was very strong and up significantly sequentially. Our non-GAAP gross margin of 61.7% of sales was a record and at the high end of our guidance. Operating profit of 39.5% of sales was better than the high end of our guidance and made a new all-time record. And earnings per share of $1.40 was $0.055 better than the midpoint of our revised guidance. Reflecting on the fiscal year 2018 results, it was clearly the best year in the history of Microchip, in which we made many new records. Fiscal year 2018 net sales were up 13.7% from fiscal year 2017, and it was all organic growth. I want to thank all the employees of Microchip worldwide for delivering an outstanding quarter and fiscal year 2018. On a non-GAAP basis, this was also our 110th consecutive profitable quarter. Now, I will provide you with an update on Microchip 2.0. We are continuing to experience an enormous customer preference to design with our microcontroller solutions in all 8-bit, 16-bit, and 32-bit customer applications. Our various acquisitions have now built a powerful diversified product line, through which we are able to provide total system solutions to our customers. We are winning incremental design wins with multiple products in the same boards of our customers.…

Thank you. We will take our first question from William Stein with SunTrust. Please go ahead.

Great, thanks so much for taking my question. You highlighted earlier in your prepared remarks that you've added capacity, I think, as it related to the Atmel products to reduce the lead times there. I'm wondering if you can talk about your anticipation for lead times as we go forward. Do you expect that to get in the normal range in the current quarter? And I'd also like to know as it relates to your raw materials and lead time from foundries, whether you see that as already within the normal range or if it's extended. And if there's anything remarkable about that, I'd love to hear details. Thank you very much.

So thank you, Will. The normal lead times are 4 to 8 weeks usually on 85% – 90% of the products. That's what we call a normal lead time. There will always be some strange products or specialized projects that need extra work or extreme circumstances where the lead time would be longer. So for a majority of the products, 4 to 8 weeks lead time is normal. We are currently at 4 to 10 weeks, so we've got a little more progress to make. And as we have been saying for about a year or longer is that we expect the lead times to essentially become normal by the end of June, and we are really on schedule for that. The other part of your question was lead times at suppliers and foundries and all that. Scattered issues here and there, but in general, the foundry lead times are normal. We're able to get the capacity we need from our foundries. We're able to get the assembly/test equipment that we're acquiring. Again, the lead time could be 2 to 4 weeks longer to get some of the test equipment, but it also largely depends on what you're buying and what the mix of equipment is, what you're trying to buy, and what particular setup you need. But lead times are really not excessive either on foundry wafers or on assembly and test equipment.

Helpful, thanks so much and congrats on the good results and outlook.

Thanks.

Our next question comes from Craig Hettenbach with Morgan Stanley. Please go ahead. Craig M. Hettenbach - Morgan Stanley & Co. LLC: Yes, thank you. Steve, any update on industry pricing, be it from some of the consolidation, some of the favorable impact there, also relative to just the tight conditions today and how that might be influencing pricing?

Type of what? Craig M. Hettenbach - Morgan Stanley & Co. LLC: The pricing environment today, just if you can, talk about just how the consolidation in the industry is influencing that as well as just the tight industry conditions.

Okay, tight industry conditions. So the pricing is very normal. We've been saying for quite a while that the historic industry practice where the prices went down every year, we are really no longer following that trend. We have seen some others follow it. We are winning a lot more often at customers not giving them year-to-year price reduction. Five years ago, we'll succeed some of the times; today we succeed most of the time. So industry pricing for us really looks very normal. We did some price increases in the last two years. I think that's largely behind us. Now prices are stable but they're not going down. Meanwhile, we are continuing to improve cost on a lot of products by bringing assembly/test inside with the die shrinks and others. And in those cases, some of those are improving the gross margin as you're seeing it. Now in terms of tight industry conditions, they're obviously helping pricing. The consolidation is also helping prices, but where the industry conditions are tightest are really not on microcontroller, analog, and Wi-Fi and other products we make. Industry conditions are the tightest on passives. There could be 40 – 50 weeks lead time to really get capacitors and products like that, and I think that's where we are seeing price increases. We don't sell those devices. We don't compete with them, but we buy some of those devices for our development tool and all that. It's not a very high-cost component for us because development tool is a very small business, but we are seeing long lead times and tight supply especially on passives. Craig M. Hettenbach - Morgan Stanley & Co. LLC: Got it, thanks for sharing that. And then just a follow-up for Ganesh on the Microchip 2.0 cross-selling, and any additional milestones you can share with us on the progress you're making?

All our internal indicators look good. As Steve mentioned, attach is one of those things we are continuing to measure how that is growing quarter over quarter and year over year. It's a long-term process, but we're sowing lots of seeds and taking care of those seeds to make sure that they bloom, and we're very confident that it will continue to grow and provide growth for us as an incremental growth driver. Craig M. Hettenbach - Morgan Stanley & Co. LLC: Got it, thanks.

Our next question comes from Mark Delaney with Goldman Sachs. Please go ahead. Mark Delaney - Goldman Sachs & Co. LLC: Yes, good morning. Thanks for taking the question. I realize Microchip's own inventory came down and is a little bit below your target range. I was hoping you could extend that discussion a bit further and talk about where you think inventory is in the channel and any changes you expect distributors to be making with their inventory.

The inventory was a little lower than our expectation because sales were higher than our expectation. Our guidance at the midpoint was minus 1% sequentially. And based on that, inventory would be slightly higher and in the range of 115 days to 120 days. Instead, we reported sales which were up 0.8%, so 1.8% beat. Its net result was the inventory days were slightly lower. I think inventory is fine. Two, three days don't really make that kind of difference. We're comfortable with the inventory position. Inventory, there are always products which are showed and the product was a little high. So there's a continuous effort constantly to get the inventory in the perfect mix. And there's no such thing as perfect, but our inventory is in good shape. Mark Delaney - Goldman Sachs & Co. LLC: Okay, that's helpful. And there was a lot of discussion in the last earnings call and at the Analyst Day about what new seasonality for the company is. I was hoping you could help us better contextualize how you think about guidance for this coming quarter of up 1% to 6% sequentially. How does that compare to what that new seasonality may be? And are there any headwinds or tailwinds relative to normal seasonality that you're trying to factor into your guidance for this coming quarter?

So I think at the Analyst Day, we said June quarter was 5%, if you recall, sequentially, but we beat the March quarter by 1.8%. So when you put it all together, at the 3.5%, we're slightly better than that guidance. We did better in manufacturing last quarter in shipping some delinquency that originally we thought we were going to ship it in the June quarter, but we were able to do better and were able to ship some more in the March quarter, which resulted beating the March quarter, and then a little bit of the product went from June into March. We're facing a lot of one-time issues. There is a slight impact because of ZTE. We can't ship to ZTE. There are long lead times on passive that we talked about, so certain customers are telling us that they don't need our product because they cannot get passives to complete their boards and systems. China. That has been lowered from 17% to 16%. It doesn't sound much, sounds trivial, but a number of customers asked us to delay shipment from April into May because the lower VAT was effective on May 1. So that pushed some shipments from April into May, but that's kind of a wash for the quarter. But you never know whether they didn't do some production in April and whether there will be any net result for the quarter, hopefully not. The overall trade tensions, we're not seeing any impact of that, but if anything else crazy happens, then you have to account for that. None of those items I talked about really are significant. They're all 0.1% – 0.2% issues sequentially, but you add all four or five of them and it could be in a 0.5% to 1% probably impact driven by many of these factors together. I think what we guided June quarter is really seasonal, especially if March quarter was minus 1% and the June quarter would have been totally seasonal. So we don't have years of experience with Atmel and the numbers for that seasonality, but what we're guiding seems to be close to seasonal. The other point is this is all going to change again when the Microsemi deal closes in June. And all the rest of the quarters again, we don't have experience on seasonality. And then when we come to the next March and next June, we're going to have to go through same learning process again. And we barely finished the learning process on Atmel, so that is the challenge of growth through acquisitions.

We will take our next question...

Did that answer your question? Mark Delaney - Goldman Sachs & Co. LLC: Thanks so much.

And we'll take our next question from Craig Ellis with B. Riley FBR. Please go ahead.

Thank you for taking the question and congratulations on the nice execution. Steve, I wanted to start with two clarifications. One, if you could, provide any color for us on whether this round of approvals, especially through MOFCOM, is different than what you've seen in the past. And secondly, I thought I heard the statement that the company is expected to borrow about $8 billion related to the upcoming Microsemi transaction, but I thought on the initial announcement it was $8.6 billion. So has there been a modest reduction in the expected debt that's undertaken to complete that transaction?

So answering your second part of your question first, the number that we had stated was really going off the December numbers. And from December to June, we are substantially a cash generating entity, so we have generated $0.5 billion-plus of cash in that time, and so has Microsemi. So there's a portion reduction coming from there. I think that's the only change. Eric, do you want to add anything to that?

No, that's exactly right, so that essentially just represents the cash flow between the end of December and the expected closing date.

And the debt level that Microsemi has is a bit lower from what it was at that time. They have paid some debt down.

That's helpful, and then any color on how this process through MOFCOM would differ from prior?

So last time we had MOFCOM approval was when we bought Microsemi (sic) [SMSC], which was in 2012. At that time, MOFCOM didn't have a lot of resources. The M&A activity wasn't as brisk, and it was largely few deals used to require MOFCOM and was a long process. It seemed relatively unorganized back then. Any of the deals we have done in between, including ISSC, Supertex, Micrel, and Atmel, none of them required MOFCOM. You require MOFCOM if both entities, buyer and the seller, exceed a threshold of revenue in Mainland China. I think the number is $83.6 million, but don't exactly hold me to it. It's in that range, and none of our other acquisitions have required MOFCOM. So since 2012, this is the first time we applied for MOFCOM, and we have found that MOFCOM is now substantially very well-organized, has a very good procedure. They take the first month to identify a given transaction to be a simple procedure or a normal procedure. Simple procedure usually is cleared within 30 days, and a normal procedure takes a little longer. So that's why when our transaction was rated by MOFCOM to be under simple procedure, that was encouraging news and we shared it with the investors. That happened on May 19 (sic) [April 19] (40:17), so 30 days really end on May 18. There's no guarantee that even under simple procedure, you get it on that day or not or it takes longer or any new questions emerge, but we're pretty optimistic that this is going very, very smooth and we should be getting approval very rapidly here.

That's very helpful. If I could ask one question to either you or Ganesh, impressive performance with Microchip 2.0 initiatives driving a 20% increase in parts per system board. As you look ahead to Microsemi, how does Microsemi impact that growth rate on your design wins on a per system board basis? Thanks, guys.

Go ahead, Ganesh.

So it's early days. What we are very encouraged by is the methodology that Microsemi uses for their equivalent of Total System Solutions. I showed some examples during the Investor Day on March 1, and they have an extremely well organized approach of how to take products from multiple business units and position them into the end markets that they're providing solutions for. And in the early discussions between the two companies, we have both identified places where each other's products can further strengthen those demo boards or reference designs or customer propositions that we can get. So it's too early to tell you what the rate will be, but I am very encouraged by how the approach is common and the employees of the two companies are looking for ways to exploit that farther after the close.

Great, thanks again.

Our next question comes from Chris Danely with Citigroup. Please go ahead.

Hey. Thanks, guys. Steve, now that we're working through the June quarter, can you just give us your best guess of combined seasonality for you guys plus Atmel for the September and December quarters, and then also maybe compare this deceleration that we've just seen versus the deceleration that occurred at the end of 2014?

So I think – I don't really have numerical numbers for all the quarters for seasonality. I believe that the December and March quarters continue to be weak quarters, and June and September continue to be strong quarters, so we're guiding good sequential growth in June. And I would expect the same thing for September, and then December is usually the weakest quarter for the combined companies. And March, also driven by the Atmel seasonality, is slightly negative although this quarter we just announced was slightly positive. So I don't think that has changed, strong June, strong September, weakest December, and a weak March. Mind you, this is all going to change with Microsemi, whose seasonality we do not understand yet. And the second part of your question was what?

Yes, just compare the deceleration that we've seen with lead times coming in to what happened in 2014. We had a deceleration back then. It was obviously a little bit sharper, but it seems like the time period was roughly the same. Would you agree with that?

2014 deceleration was driven by a significant slowdown in China that everybody saw. I don't recall what caused that. I think there were some government regulations change, reduced some of the subsidies from the various markets. There were a lot of things, and it was so clearly driven by China. This deceleration is not driven by any place. World economies are synchronously going up, and I think the business environment is pretty good worldwide. This is just as the longer lead times are coming in, basically business is going back to normal, so I don't really think it's at all like 2014.

Okay, thanks. That's helpful.

Investors and analysts have been trying to compare this to 2014. Ever since we put the letter out on April last year, there has been the talk, everybody trying to compare it to 2014, and it's nothing like 2014. We've been telling you that this will soft-land, and I think you've got to give it to me that we have soft-landed it completely.

Our next question comes from Harsh Kumar with Piper Jaffray. Please go ahead. Harsh V. Kumar - Piper Jaffray & Co.: Hey, thank you, Steve, and congratulations, excellent results. So a perfect segue into my question, so now that the soft landing I think you said is complete, would you give us an idea of what you're thinking in terms of just your part of the business, not MSCC, but just your part of the business and how it plays out as far as growth is concerned? And I have a question that's a follow-up.

I think it's the same question I just answered, strong June, strong September. You should see good results from us for this quarter and the next quarter, and then we go into a slow December and slow March. I think the numbers we have talked about before, mid to high single-digit growth, I think that's where we are and that's what the current guidance is, and I think the business has gone to normal after a soft landing. Harsh V. Kumar - Piper Jaffray & Co.: Fair enough, Steve. And then your MCU business is pretty strong. I think you mentioned 2.5 times the growth rate. A lot of the large players play in the same markets as you. Everybody's targeting industrial and automotive, but you guys are doing substantially better. Is share take all of it, or are there other things going on, Steve, in your opinion?

Go ahead, Ganesh. Do you want to take that?

A substantial portion of it is taking share. I think we're also consistent in an approach that isn't picking we're only going to do 32 bits and not focus on others. We are broad-based between 8 bits, 16 bits, and 32 bits. We find the spots that each of them succeed in. Each of them is growing. They're setting new records as they're growing. And so that breadth of what we have in solutions, how we go to market in many ways differentiates us from other people who may have a little different way of how they want to go to market. And I think the results show that, and year-in and year-out the market share has been growing, the position in that ranking has been growing. So I think there's no one silver bullet that's causing it, but our approach in go-to-market across the microcontrollers is contributing to the differentiated results in microcontrollers. Harsh V. Kumar - Piper Jaffray & Co.: Thanks, guys.

I would add to that, Harsh, that we are rapidly being perceived as the most reliable microcontroller supplier. They have seen significant challenges in delivery and other problems from our competitors both in Japan and Europe, and you know the names of those companies. Those companies have discontinued or end-of-life'd their large number of products from some of the companies they have merged with and created significant havoc at the customers. And the other company that is in play right now waiting for the China MOFCOM, they have seen significant dislocation or the customers have seen inconsistent supply and challenges. Microchip absorbed a very large acquisition of Atmel and other companies we have bought before. And what we have done for the customer is then not end-of-life any of the microcontrollers. The customers have a very positive experience with us through all that, and so I think we are the preferred supplier, that's why. Harsh V. Kumar - Piper Jaffray & Co.: Congratulations, guys. Thank you.

Thanks.

Our next question comes from Rajvindra Gill with Needham & Company. Please go ahead. Rajvindra S. Gill - Needham & Co. LLC: Yes, thank you, and I echo my congratulations. Steve, I was wondering if we could shift the conversation away from inventory and distribution, et cetera, and characterize the demand environment from a qualitative perspective, what you're seeing in industrial IoT, automotive and ADAS, how that's maybe different from last year trends and going forward.

I think the demand environment is really as normal as it can be described. There are always outliers, but the demand environment is normal. I just think last year, some of the lead times went out and the environment was more heated. After many, many years of low single-digit growth in the industry, last year industry growth was very positive. This year the growth is less than last year, but growth is still quite healthy, and the business environment is more normal this year than it was last year. I don't think anybody argues the industry can grow 13% – 14% per year. That's what it grew last year, but this year seems to be more normal. Rajvindra S. Gill - Needham & Co. LLC: Okay, got it, so more normalized growth rate versus last year. And then, Eric, in terms of the CapEx, is this kind of – the CapEx is going to change with Microsemi, but I'm wondering if you could give us some insight on how we should think about CapEx in fiscal year 2019 but also more on a longer-term basis.

So for fiscal 2019, we just guided today for CapEx to be between $200 million and $250 million for the year, but that includes about $70 million of building projects. And there can always be some building projects going on, but we've got four different projects around the world that are adding to that that set us up nicely for efficient growth going forward, and we reduce lease costs and things like that. So I'd call that one out of the ordinary. So if you take building projects out of the last fiscal year, fiscal 2018, as well as fiscal 2019, at $170 million to $175 million range for CapEx, I think that's normal in a growth environment. If for any reason we saw growth decline, our maintenance CapEx is significantly lower than that, and we've seen how that can come down dramatically. But we're investing for growth, we're investing to bring manufacturing activities in house, which enhance our gross margin going forward and give us more control over the overall supply chain, so we'll continue to make those investments. Rajvindra S. Gill - Needham & Co. LLC: Okay, got it, and just one question on deleveraging rapidly. Can you talk about any specific tranches that you're going to start taking out, what the impact will be on the interest expense in the near term and the medium term? Thanks.

So I'll take that question. We're not ready to give specifics yet, but Steve did say in his prepared remarks that really all of our cash flow outside of what we have for investing in the business and CapEx and dividend will be used to rapidly delever. If you look at the combination of Microchip and Microsemi, these are two very high-quality, high-operating margin, high cash flow companies, and those models combined will improve from where they are on day one. And really all that cash generation over the first couple of years is absolutely going to be pay down debt and drive us to that 2.5 times leverage target that Steve mentioned in his prepared remarks. So I don't have specifics by quarter or by year, but I think you can do your modeling and come up with a pretty good estimate.

You can see what we did with the Atmel delevering as well. Rajvindra S. Gill - Needham & Co. LLC: Excellent, thank you.

We're going to pay the highest interest first, kind of a no-brainer. And with some regards to looking at what's the fixed debt and what's the variable debt and basically a combination of paying down term loan and the line of credit, some combination of that.

Our next question comes from Gil Alexandre with Darphil Associates. Please go ahead.

Good morning and congratulations. On the Microsemi acquisition, I don't recall what you thought the earnings accretion might be year one and three. And as you did your due diligence, can you comment on any positive or negative surprises? Thank you.

It's a very general question. Since we announced the transaction, we haven't seen any positive or negative surprises. During the diligence prior to announcement of the transaction, we didn't know as much about the company before, so we didn't really have a baseline against we could see that this was a positive or negative. But there always are as we went through various business units and corporate profiles, there were things we liked and the things we did not like. I think it will be probably a longer discussion to go into it, not a way to remember it (54:49) offhand. I think the next step is when we close the transaction and then spend 90 days with the company, that's when we will see probably what we found as a positive or negative surprise. So probably ask that question in another couple of earnings calls later.

And maybe I can just add to that to refresh people's memory of what we said on March 1. Things haven't changed from that standpoint. We were assuming a June 2018 close, which is still our expectation. We had indicated that Microsemi would add $0.75 of non-GAAP EPS accretion on an annualized run rate basis in the first year after close, and in the third year after close that we would achieve $300 million in synergy from cost savings and revenue growth, and Microsemi would contribute $1.75 of non-GAAP EPS.

All right. Thank you very much, congratulations.

Thank you.

Our next question is from Kevin Cassidy with Stifel. Please go ahead. Kevin Edward Cassidy - Stifel, Nicolaus & Co., Inc.: Thanks. Within your microcontroller business, what was the fastest-growing, 8-bit, 16-bit or 32-bit? And is it units driving the growth or dollars?

Steve, I can take that. We don't break out growth rates for revenue by segment of the microcontrollers. As you can follow from the prepared remarks, all of them have been setting new records, so there's no one of them that is providing the growth that is offsetting any of the other ones. We're very happy with all three of them. And I think outside of that, there's nothing more to say. Kevin Edward Cassidy - Stifel, Nicolaus & Co., Inc.: Okay, I know you don't break it out by end markets, but can you say what area of the world that you're seeing the best growth from?

So our growth is reflected in how revenue for the company is broken out by the regions of the world, so we have just under 20% in the Americas, just over 20% in Europe, and the balance is all in Asia. Now, Asian revenue reflects not only local consumption and local demand creation, but also represents business that is manufactured there for U.S. or other European companies, which then go back to the originating country. So that growth is very similar to the growth rates by end market, and the microcontrollers being such a dominant portion of Microchip at 65% revenue are going to be in the same range as what Microchip is growing in any of those regions of the world. Kevin Edward Cassidy - Stifel, Nicolaus & Co., Inc.: Okay, thank you.

Our next question comes from John Pitzer with Credit Suisse. Please go ahead. Charles Kazarian - Credit Suisse Securities (USA) LLC: Hi, this is Charlie Kazarian on behalf of John Pitzer. Thanks for letting me ask a question today. I was hoping to dive a little bit deeper into the March quarter revenue. Specifically, you narrowed rev guidance on March 1 with a midpoint that was mostly unchanged. Could you just talk a little bit more about what specific buckets of revenue saw upside over the remaining month of the quarter? Thank you.

I don't think we have that data by bucket. By buckets, I don't know whether you mean geographically buckets or you mean by end markets or you mean by product line? Charles Kazarian - Credit Suisse Securities (USA) LLC: Just generically end markets or product lines or whatever you could provide would be helpful. Thank you.

End markets we don't know because on a quarterly basis, we cannot break our business by the end markets across 115,000 customers where 53% of the business is through distribution. So we only provide that data once in a while after we do some painstaking amount of work, so we don't really have the data by end market. By product line, Eric, any nuggets of where the extra growth came from?

Honestly, I think from March 1 to the close, we saw strength across really all of the product lines. They all performed well. You will definitely see that in the quarter the analog business performed better than the microcontroller business, but that was the opposite the quarter before that. So Europe was very strong. That's typically what we see in the March quarter and it closed out strong, but I really don't think that we can peg it down like that, just good overall growth across the various product lines.

And we cleared some delinquencies that helped in the month of March, helped the growth that we had been expecting versus what we actually saw. Charles Kazarian - Credit Suisse Securities (USA) LLC: Thank you.

Our next question comes from Christopher Rolland with Susquehanna. Please go ahead.

Thanks, guys, and nice execution on the quarter. So I like the sell-through that you guys are going to report. I wish more people would do that as well. Perhaps you guys can describe how big that difference is between sell-through and sell-in that we've seen in the past. And then, Steve, I almost get the sense that you philosophically are against sell-in. Some people think it creates bad behaviors. You're not going to incentivize your sales force on sell-in. I was wondering if you could talk about philosophically how you view that. Thanks.

So you're absolutely correct. We are philosophically against sell-in because in sell-in, your relationship with distributors is built on commercial making the deals with the buyers in distribution to stuff the channel essentially. Hey, buy more of my parts, buy more of my parts. In a sell-through, the incentivization of the sales force to your effort is in driving design wins to revenue, so that the parts are going out from distributor shelves to the end customer, and that's the main difference. Company after company that we've been involved in, the companies we have bought, Atmel and Micrel and others, they all had sell-in revenue recognition. And now we know their history, we have their records, we have their books, and the amount of managing the quarter that goes on at the end of the quarter by giving distribution deals, from pricing concessions to payment terms to buddy-buddy distribution, please take another $10 million from me, all that happens is really bad behavior, and it doesn't represent demand. During the last few years as FASB was looking at defining revenue recognition, we fought that. I think we wrote a paper on it a long time ago, but FASB went down their decision where the revenue recognition for GAAP has to be sell-in. So we lost that battle, and so therefore, we have to announce GAAP based on sell-in, but we're not going to throw our religion away. We're going to manage the business based on sell-through. We're going to create demand. Our motto is drive design wins to revenue. We're going to incentivize our people. All bonus programs will be based on sell-through. We're going to measure distribution based on sell-through, but we'll go through an SEC-required GAAP exercise to report as sell-in.

Great, thanks for that color, and thanks for offering sell-through. Going forward for me, OpEx was a tiny bit higher as a percentage of revenue. Perhaps just if you guys could, talk about where those investments are going, thanks.

I don't think the changes are meaningful in terms of any conscious investments we made anywhere. I think it's just a large juggernaut, and there are lots of moving parts, exchange rates too. In the first quarter, you have some of the social security payments come back in for some of the people who are maxed out in the later quarters, and you could have slightly lower turnover, higher turnover and not being able to replace the people. So it's just a whole bunch of moving parts. There was really nothing – no conscious decisions were made to invest more or less.

Great. Thanks, guys.

Thank you. Do you have anything to add, Eric?

I'm just going to add one thing onto that. So we've been operating below what Microchip has said has been our operating expense model. And to drive a 40% operating margin company, you have to make investments in R&D, in technical salespeople, in support functions and everything that goes into it. We have a lot of open requisitions in the company and we're going to continue to make those investments to make sure our business just isn't strong today but it's strong 3, 5, 10 years from now.

Great. Thanks, Eric.

Our next question comes from Harlan Sur with JPMorgan. Please go ahead.

Good morning, great execution on the fiscal 2018 performance. The analog business drove about half of the incremental upside in the March quarter and it grew about 5% year over year. That's nice acceleration from the 1.5% growth in the prior quarter and a deceleration trend prior to that, and this is despite the reclassification headwinds. Is the year-over-year reacceleration a reflection of the increased attach rates you're achieving per program, as you highlighted at Analyst Day, or do you think it's just normal quarterly fluctuations?

Ganesh?

So there's certainly some of that, which is a reflection of work we have done previously from an attach standpoint. And we've been telling you for several quarters that the headwind is only because of the way we reclassify it, but that the underlying fundamentals of the analog business and what we're doing to create growth and attach and all those other things remain intact. Quarter to quarter you're going to see fluctuations on it, but I think the longer-term trend you should expect is that analog will have nice growth associated with what we can do with selling it as a part of our total system solutions.

Great, thanks for the insights there. And aerospace and defense is only about 2% of core Microchip business pre-Microsemi. That percentage mix increases about 5.5x with Microsemi. I've heard that AMD is more sticky than your industrial products. I hear margins in AMD are better than industrial. First of all, would you agree with that? And does Microchip have a family of high-rel radiation-hardened MCUs, or is that something you guys hope to achieve with the Microsemi team? Thanks.

Ganesh?

So clearly, the portion of our business that will be aerospace, defense, and space will grow up with Microsemi. It is very sticky business. It is high-margin business. And so in that sense, it joins the family of industrial and automotive and other product lines we have that have similar characteristics. Some of the work technically that we have to do also take advantage of what we have to do for industrial and automotive. Specific to the rad-hard product line, yes, we do have rad-hard microcontrollers. Some of that work obviously started from Atmel and what they had been doing prior to the acquisition. And Microchip had been building more products that were ready for defense business but the rad-hard portion came really from the Atmel heritage. And it will grow significantly with Microsemi's portfolio, which is quite rich in other areas as well of defense and aerospace.

Great, thank you.

And we have no additional questions. At this time, I would like to turn the call back to Mr. Steve Sanghi for any additional or closing remarks.

We want to thank all the investors for joining this call and for being investors in Microchip. All the best from us, and we'll see you during the quarter maybe at some of the conferences. Thank you.

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.