Good day, ladies and gentlemen, and welcome to the Monolithic Power Systems Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-answer-session and instructions will follow at that time. And as a reminder, this conference is being recorded. I would now like to hand the floor over to Bernie Blegen, Chief Financial Officer. Please go ahead, sir.

Thank you very much. Good afternoon and welcome to the second quarter 2017 Monolithic Power Systems conference call. Michael Hsing, CEO and Founder of MPS, is with me on today's call. In the course of today's conference call, we will make forward-looking statements and projections that involve risks and uncertainty, which could cause results to differ materially from management's current views and expectations. Please refer to the Safe Harbor Statement contained in the earnings release published today. Risks, uncertainties and other factors that could cause actual results to differ are identified in the Safe Harbor statements contained in the Q2 earnings release and in our SEC filings, including our Form 10-K filed on March 1, 2017, and Form 10-Q filed on May 5 2017, 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'll be discussing gross margin, operating expense, 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 Q2 2016, Q1 2017 and Q2 2017 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 one year, along with the earnings release filed with the SEC earlier…

Thank you. And our first question comes from the line of Tore Svanberg with Stifel. Tore Svanberg - Stifel, Nicolaus & Co., Inc.: Yes. Thank you and congratulations on the record quarter. My first question is on the outlook for the September quarter. Could you maybe talk a little bit about what are some of the main growth drivers for the quarter? I know you have a couple of specific product cycles coming up, but if you could just add some color there that's be great.

Sure, Tore. Thank you very much. So, as you know, Q3 tends to be a seasonal quarter for consumer and we're seeing good traction and are good anticipating good demand actually in several of our different product lines – market segments there. In addition, we believe that automotive is going to continue to do very well. And then also, we have a number of areas in computing that are going to be continuing strong into Q3. Tore Svanberg - Stifel, Nicolaus & Co., Inc.: Very good. And I noticed that your inventory days, I think you said around (12:26) 165 days now. So is it purely a reflection of the demand that is coming here in the second half of the year or is this more sort of a long-term project for you to keep the inventories – or the inventory days just as elevated?

Yeah. I think that about a little over a year ago that we started slowly elevate our inventory levels as we introduced a lot of new products design for new markets. And then, as we're looking at entering the second half of the year, there have been concerns about fab capacity and so we wanted to get ahead of that so that we were able to meet demand. And so that's reflected in our inventory as they stand today. We expect them to exit the quarter probably about the same – similar level, but then come down probably in the subsequent quarters. Tore Svanberg - Stifel, Nicolaus & Co., Inc.: Very good. One last question – yeah, Michael.

Another factor is that we – all these greenfield market segments, which are of a much higher levels and a higher quality than in the past, five years ago, those are more consumer oriented, not in the industrial, automotive and cloud computing. And those customers require us to carry high inventory. Tore Svanberg - Stifel, Nicolaus & Co., Inc.: Very good. And last question also for you, Michael. Could you give us an update on the website and if we're going to see a launch here pretty soon?

Yes. If you're looking at our website now, they've really changed. And MPS is transitioning from selling ICs, now we're selling solutions. Okay. Of course, it's based on IC. And we will sell a lot more higher content other than MPS product and that's included in our solutions. Now, you look – lock (14:40) on our MPS website, you will see it. However, MPS in the past, always a hardware company, now, we are doing a lot more software and a lot more Internet development. And it's a little bit slow than I thought, but our website will be launched in the second half of this year. In addition, what we have now, actually, is a bigger part of e-commerce business, is that the interacting with the users, and that the users start to order parts, and also configure parts from our website. You see it in the later second half of the year. Tore Svanberg - Stifel, Nicolaus & Co., Inc.: Sounds good and congratulations again.

Thank you.

Thanks, Tore.

Thank you. And our next question comes from the line of Quinn Bolton with Needham & Company. Quinn Bolton - Needham & Co. LLC: Hey, guys. Let me echo the congratulations on the record quarter and the nice outlook. Just wanted to come back to automotive, obviously, you guys are seeing strength. I think one of your larger competitors, Maxim, was talking about perhaps a little bit of a slowdown in their market. So, wondering what's sort of giving you sort of a better outlook than perhaps some of your peers? Do you think it's just strength of your design wins going to production? Are there pockets of automotive where you're perhaps seeing strength where maybe competitors are not as well positioned? Just any thoughts you might have on that. And then, I've got a couple of follow-up questions.

Yeah. Quinn, it's Michael. In automotive segment, we are so new and we haven't really scratched the surface. So our growth should be regardless what the automotive industrial condition is. So our revenues, our opportunity is – the ratio is very, very high in that case. So we have a lot of opportunity to grow. Quinn Bolton - Needham & Co. LLC: Okay, great. And then, just looking at the compute strength, Purley was just launched a couple of weeks ago, obviously, that's a big power management cycle for you. Wondering, now that we've had the official launch of Purley, how you're looking at the ramp in the server power management into the second half of 2017 and into 2018 as well?

I think that now you see that we move the needles. We'll move the revenue noticeable. And in the next years, we'll probably grow at a similar rate or even higher.

And I think one of the interesting components here is that we're getting significant contribution from storage, primarily SSD, as well as the high-end notebooks, and we're only at the very early stages of the Purley conversion. So to echo Michael's point here, we see this being able to develop over the course of the next 12 months. Quinn Bolton - Needham & Co. LLC: Okay, great. And then just lastly sort of capital returns. You guys have done a very nice job growing EPS, reported $0.68 this quarter. Cash dividend has been sort of flat at about $0.20 a quarter since I think the first quarter of 2015. Any changes in how you're thinking about that dividend and whether there's a chance that we could see that moving higher over the next few quarters?

Quinn, we continue to look at our capital allocation model and it's something that we're mindful of, as far as what our investor feedback is, as well as what we think is best as far as the cash management for the company. So, at this point, again, it's under evaluation, but there's no firm direction. Quinn Bolton - Needham & Co. LLC: Great. And then just, sorry, last quick clarification, Bernie. The CapEx seem to be much higher this quarter than in a typical quarter for MPS. Was there a big outlay for testers, or what was behind that jump in CapEx? I assume it's probably temporary.

Well, we have a lot of automotive qualification, and as well as industrial and cloud computing, and a lot of qualification equipment we had to buy. Quinn Bolton - Needham & Co. LLC: Got it. Thanks, guys.

We've also, as you know, been buying office space over time and that contributed as well.

Thank you. And our next question comes from the line of Anil Doradla with William Blair. Anil Kumar Doradla - William Blair & Co. LLC: Hey, guys. Congrats from my side to Michael and Bernie. First question, if you look at Q1 and Q2, it was close to 19% year-over-year growth. If I look at the high-end of your guidance, that suggest about a 20% year-over-year growth. Now, I know, Michael and Bernie, you guys have talked about aspiring to get to 20%. And without talking too much about Q4 and everything, but just qualitatively, could we even potentially exit this year at a 20%? I mean, is that realistic or maybe that's more kind of a – it spills over into next year?

That's very possible. As I said about a year ago or so, this year, we'll see some of the greenfield market segment that we entered in the last two or three years, or three or four years ago, and this year, we start to see the revenues. So it's only got a few percentage change. It doesn't mean to me a lot.

Yeah. I think that the substance that we're really looking at, and while certainly the 20% number is a number that we've had in our long-term guidance, but it's really the quality of the new product launches and how successful that they're being viewed that we're very interested in. And all of the initial signs, as far as both the demand and acceptance in the market, has been very, very positive.

Yeah. I don't look at whether 19.5% or the 18%, 21%. These are – the 20% seems to me as a psychological barrier and that I don't get it. Okay. Anil Kumar Doradla - William Blair & Co. LLC: Right, right. Well, it is definitely impressive. And as a follow-up, I mean, Michael, you talked about the e-commerce platform. Obviously, there's some resources and energy are being allocated to that. So, Bernie, whenever you have the e-commerce development platform, is that part of the R&D spending or is that part of its SG&A? And if I look at the next 12 months, how should I be looking, qualitatively, the growth of SG&A versus R&D? Should SG&A revert to a higher growth rates than R&D, given some of these initiatives? Just a qualitative kind of feel.

Sure. The e-commerce is part of our R&D spend. And I think that you're fairly comfortable with our management of operating expenses. And while we have significant opportunities ahead of us that we want to invest in, including the e-commerce platform, I think that we've always demonstrated a strong discipline, particularly on the G&A side. Anil Kumar Doradla - William Blair & Co. LLC: Great, and congrats once again, guys.

Thank you very much.

Thank you. And our next question comes from the line of Rick Schafer with Oppenheimer. Rick Schafer - Oppenheimer & Co., Inc.: Yeah. Thanks. I'll add my congratulations to you guys. I guess, my first question is, could you talk a little bit about your new gaming business and how it'll impact seasonality in your consumer segment in the second half? I mean should we expect sort of the typical fourth quarter slowdown, or is there still enough ramp left to kind of blow through that a little bit? Or could you just give us some color maybe on the consumer segment?

Yeah. Again, we don't offer guidance more than one quarter ahead. So I'm not going to try and add too much color that we would give way any thinking there. But I will say that there's nothing currently – when I look at what the analysts and how you have us modeled out, there's nothing in that cycle that gives me pause. Rick Schafer - Oppenheimer & Co., Inc.: Okay. And then within computing and storage, if you had to, how would you rank the growth, maybe the second half or in 2018, if you're ranking growth sort of between server and notebook and the SSD business?

Well, I think that it's hard to actually rank them, because a lot of the parts have so much similarity that we kind of make a very educated guess as far as which end market they go into. But I think that server, which has just been introduced right now with Purley, probably would be the number one grower over the course of the next 12 to 15 months. And then, SSD really has only been limited by NAND availability because that transition away from HDD has been very clear and apparent in the marketplace, so we see that continuing to go. And then high-end notebooks, we have such an underpenetrated position that we see that all as upside. And probably that would be sort of my rough ordering of it. Rick Schafer - Oppenheimer & Co., Inc.: Okay.

Probably number one is the server.

Yeah.

Products we're selling to servers and computing and desktop, I mean, not that are workstations, and the servers and the high-end PCs, these are very much – a lot of them are convoluted. But I would correct Bernie that, on the SSDs, they are different product. So if we rank them, I think of servers on the highest and then probably SSDs (25:19) second. Rick Schafer - Oppenheimer & Co., Inc.: Yeah, got it. Thanks for that color, and then maybe just one follow-up on server. Can you talk about any new server customers that come on with Purley? And maybe would they be primarily point of load and E-Fuse-type customers or could they take QS MOD sort of out of the gates as well? Thanks.

Yeah. Our servers, they're just the very beginning. Rick Schafer - Oppenheimer & Co., Inc.: Okay.

And the significant growth will be in 2018 and 2019 for MPS. Rick Schafer - Oppenheimer & Co., Inc.: Got it. Thanks, Michael.

Thank you. [Operating Instructions] Our next question comes from the line of Ross Seymore from Deutsche Bank.

Hi, guys. Just sticking on the computing side. Mike, earlier you said a comment about the business staying strong growth rate wise and maybe even accelerating going forward. Without pegging you down to anything too specific, were you referring to the growth rate kind of this year going into next year or was that a comment that was more specific about the year-over-year growth rate in the second quarter alone?

No. I'm talking about year-over-year growth rate and – not growth rate, the absolute numbers, and will be a significant portion of MPS revenues. So I'm looking at what kind of product. This year is mainly ramping up from a point of load, E-Fuse and some portion of core power. In the next couple of years, the core powers will start to ramp. And now, we have all the first tier customers.

We're in the very early stages, particularly, in the server workstation as far as being able to grow and develop that market.

Great. And I guess following on with the new product side of things, you've talked about the OpEx being a little bit higher because you have so many new products coming on, so many new end markets you are gravitating towards. Do you expect in general for these markets to generate revenue in kind of a consistent steady – might improve a little bit or slow a little bit year-over-year, but more of a steady pattern? Or is there going to be a time where you're going to have numbers that are significantly above what we view as seasonal patterns because these new products really kick in? And it's not meant to be a single quarter comment, Bernie, because you don't want to comment on 4Q or any other thing beyond that.

No, no, no. I think that one of the things that we're known for here is our level of predictability even managing a level of higher growth – significantly higher growth than the market is enjoying. And within that, we're not looking for seismic shifts that create a hockey stick, but what we want to do is a groundswell where we continue to grow. And we look at it over a two or three year horizon, not just how can we get to next quarter.

Ross, look at the market segment that we entered, and we really announced about five years ago. And those are very slow – a slow changing market, and customer will not design us in and the design us out in a couple of years. Not in five, six years, these are 10 years plus. And that takes – the cycles take that long. So nothing changes very quickly. So once we roll-out all these products, the doors are open to MPS now and we need to grab all these sockets. So we will see some acceleration in growth, but very steady state.

Got you. I guess my follow-up or my final question is one on the gross margin. You guys have had a steady, predictable execution on that to use your words, Bernie. With these new markets kicking in and becoming a bigger percentage of your revenue over the course of the back half of this year and even more so in the next year, year and a half, does that change any of that kind of 10 basis points per quarter trend? Has it accelerated, decelerated, any change whatsoever?

The advantage of some of these new markets that we're developing in, they have much longer lead times. And so what we're able to do is, as we're looking even two quarters out, we have a very strong sense of what the sales mix is going to be. And if there's an opportunity to introduce lower margin business as a means of accelerating revenue growth and also continuing to increase gross margin by 10 to 20 basis points quarter-over-quarter, that's what we're trying to do. So, if we have the good fortune of having very high margin business come through, what we'll probably do is level that out with lower margin business in order to get a higher overall growth rate.

Great. Thank you.

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over to Monolithic management for any closing comments.

Great. I'd like to thank you all for joining us for this conference call and look forward to talking to you again during our third quarter conference call, which will likely be at the end of October. Thank you. Have a great day.

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