Good day, ladies and gentlemen, and welcome to the ON Semiconductor Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time [Operator Instructions] I would now like to introduce to your host for today's conference, Mr. Parag Agarwal, VP of Corporate Development and Investor Relations. Sir, you may begin.

Thank you, Danielle. Good morning and thank you for joining ON Semiconductor Corporation's second quarter 2017 quarterly results conference call. I'm joined today by Keith Jackson, our President and CEO, and Bernard Gutmann, our CFO. This call is being webcast on the Investor Relations section of our website at www.onsemi.com. A replay of this broadcast, along with our earnings release for the second quarter of 2017 will be available on our website approximately one hour following this conference call and the recorded broadcast will be available for approximately 30 days following this conference call. The script for today's call and additional information related to our end-markets, business segments, geographies and channels are also posted on our website. Our earnings release and this presentation include certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to most directly comparable measures under GAAP are in our earnings release, which is posted separately on our website in the Investor Relations section. During the course of this conference call, we will make projections or other forward-looking statements regarding future events or future financial performance of the company. The words believe, estimate, project, anticipate, intend, may, expect, will, plan, should or similar expressions are intended to identify forward-looking statements. We wish to caution that such statements are subject to risk and uncertainties that could cause actual events or results to differ materially from projections. Important factors, which can affect our business, including factors that could cause actual results to differ from our forward-looking statements are described in our Form 10-Ks, Form 10-Qs and other filings with the Securities and Exchange Commission. Additional factors are described in our earnings release for the second quarter of 2017. Our estimates may change and the company assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions or other factors, except as required by law. For all synergy-related discussion on this call, we have used Fairchild's 2015 results as a base for all comparisons. During the third quarter, we will be attending Citi Technology Conference in New York on September 7, and Deutsche Bank Conference in Las Vegas on September 12. Now, let me turn it over to Bernard Gutmann, who will provide an overview of the second quarter 2017 results. Bernard?

Thank you, Parag, and thank you, everyone, for joining us today. We once again delivered solid financial results which exceeded our guidance and street consensus for all key metrics. Our second quarter results clearly demonstrate the consistent and strong execution on the operational front and strength of our broad range of product portfolio for automotive, industrial and communications end-markets. Strong operating leverage and free cash flow generation in the second quarter clearly demonstrate the strength of our operating model. Visibility into our business continues to remain strong as we benefit from our design wins in automotive industrial and communications end markets. Diversity in our customer base, product portfolio and end-markets have insulated us from volatile - from the volatility cost by weaknesses in certain end-market and geographies. With our largest end-customer contributing less than 5% of our revenue and the product portfolio weighted towards end-markets with fastest growing semiconductor content. We generally have lower customer and product related risk. At the same time, we are well positioned to benefit from secular and macro trends in the semiconductor industry. We continue to make strong progress in the integration of Fairchild and remain on track to deliver the targeted synergies. At the same time, we have taken steps to optimize our product portfolio to drive margin expansion for the company. During the second quarter, we exited the mobile image sensor market as the margin profile for that business was not comparable with our target financial model. Furthermore, we monetize the value of highly differentiated mobile imaging technology, through an intellectual property licensing agreement with a third-party. We have excluded the gain of approximately $24 million related to this transaction from our second quarter non-GAAP results. We delivered robust free cash flow performance during the second quarter. As we indicated earlier, we intend…

Thanks, Bernard. Once again, I am very pleased with our results. Our second quarter results clearly demonstrate the strong momentum of our power, analog and sensor portfolio for automotive, industrial and communications end-markets. At the same time, our robust free cash flow generation, strong margin performance and solid operating leverage demonstrate the strength of our operating model. While we have benefited from a favorable industry and macroeconomic environment, a significant part of our outperformance has been driven by company-specific factors such as accelerating traction in automotive, industrial and communications end markets and solid execution on the operational front to realize synergies and cost savings. Our results over the last many quarters demonstrate progress that we have made in transforming ON into a highly diversified and broad-based supplier of power, analog and sensor solutions for automotive, industrial, and communications end-markets. As Bernard indicated earlier, this highly diversified base of customers, products and end-markets has insulated us from demand volatility from certain end-markets and geographies. Customers are realizing the depth and breadth of our power, analog and sensor portfolio, and they are increasingly relying on us for key enabling technologies that are disrupting existing business models. We are engaging at a very early stage with key players in artificial intelligence for automotive, machine vision and robotics applications. Also, we continue to extend our leadership in the ADAS markets for automotive, and we are investing in sensor fusion solutions for ADAS. We believe that our exposure to secular growth drivers and emerging applications will enable us to continue to outgrow the semiconductor industry. We continue to make strong progress in the integration of Fairchild. Integration of Fairchild's IT systems is expected to be complete in fourth quarter of 2017. Also, we are on track to begin realizing manufacturing synergies from Fairchild towards the…

Thank you, Keith. Based on product booking trends, backlog levels and estimated turns levels, we anticipate that total ON Semiconductor revenues will be approximately $1.340 billion to $1.390 billion in the third quarter of 2017. The exit from the mobile image sensor business is slightly impacting the sequential revenue growth in the third quarter. Backlog levels for the third quarter of 2017 represent approximately 80% to 85% of our anticipated third quarter revenue. For the third quarter of 2017, we expect GAAP gross margin in the range of 36% to 38% and non-GAAP gross margin in the range of approximately 36.2% to 38.2%. Factory utilization in the third quarter is likely to be up sequentially. We expect total GAAP operating expenses of approximately $315 million to $336 million. Our GAAP operating expenses include the amortization of intangibles restructuring asset impairment and other charges, which are expected to be approximately $30 million to $37 million. We expect total non-GAAP operating expenses of approximately $285 million to $299 million. We anticipate third quarter GAAP net income, net other income and expenses including interest expense will be approximately $35 million to $38 million, which include non-cash interest expense of approximately $8 million to $9 million. We anticipate our non-GAAP net other income and expenses including interest expense will be approximately $27 million to $29 million. Cash paid for income taxes in the third quarter of 2017 is expected to be approximately $13 million to $17 million. We expected total capital expenditures of approximately $105 million to $125 million in the third quarter of 2017. As I indicated earlier, capital intensity in the second half of 2017 will be higher to compensate for the low level of capital intensity in the first half of the year. Our target of 6% to 7% annual capital intensity remains unchanged. We also expect share-based compensation of approximately $16 million to $18 million in the third quarter of 2017, of which approximately $2 million is expected to be in cost of goods sold and the remaining amount is expected to be in operating expenses. This expense is included in our non-GAAP financial measures. Our diluted share count for the third quarter of 2017 is expected to be approximately $427 million shares based on the current stock price. Further details on share count and earnings per share calculations are provided regularly in our quarterly and annual reports on Form 10-Q and Form 10-K. With that, I would like to start the Q&A session. Thank you and Danielle, please open up the line for questions.

Thank you. [Operator Instructions] And our first question comes from the line of Ross Seymore from Deutsche Bank. Your line is open.

Thanks guys, let me ask you a question. The first question is on margins in general, you guys said solid upside in the gross margin, but the OpEx was a little bit higher in the second quarter than expected. Can you just Bernard walk us through the puts and takes in the gross margin upside and then the OpEx side the variable aspect of it, I think everybody understands if revenues are stronger the OpEx can be higher. But just walk us through what drove it so high and why you have confidence that should we have more upside in the revenue side of the equation, the OpEx intensity will go down in the second half as you guided?

Thank you, Ross. So on the gross margin front the puts and takes are the same we have articulated in our Analyst Day mainly revenue fall through, cost reductions mix and synergies, those are the major ones. The - on the OpEx front, as we stated in our prepared remarks pretty much all of the increase, sequential increase is due to variable comp. As we go further up there is a limit to that, so we expect that will not continue also we guided our stock-based comp to be slightly lower which is just based on normal calculation of the - of our shares. So its mainly stock-based comp and variable compensation for which we know we have limits based on our bonus plan.

Great, thanks for that. And I guess this is my follow-up, Keith one for you…

Sorry Furthermore, we also expect to still continue generating more and more synergies coming from Fairchild that will help us also moderate and reduce the intensity of our OpEx for the second half of the year.

Great. Thanks for that Bernard. Keith, one for your quickly, you and your script went through reasons talking about lead times in bookings and no abnormal behavior. Just talk a little bit more about what you are seeing there, I get a lot of investor questions about the peak in the cycle and what does it mean for ON et cetera. So, if you can go into maybe quantifying where those lead times are and what you've seen in cycles past and retrospect that peaks and how we might be different currently from those former peaks?

I think there was a couple of things that put us in a good situation, one is, there has been a good discipline on capacity expansion in the industry in the last couple of years and what we have seen here is a relatively low amount of increase quarterly, but it's been a steady increase for the last several quarters. So, without capacity being added, you end up with fuller factories, little more supply tightness and a little better positioning on pricing. As opposed to something that as ramped quickly in respond to some new market demands has really just been slow and steady with the controlled discipline on new capacity.

Thank you.

Thank you. And our next question comes from the line of Vivek Arya from Bank of America. Your line is open.

Thanks for taking my question and a good job on the results. Just follow on that capacity utilization, if you could help quantify what utilization is right now? And then, importantly I think CapEx was sub-5% in the first half, but you are expecting a ramp in the second half to get back to your 6% to 7% outlook, what's driving that.

So, the utilization rates are high 80s right now and will remain there in the next quarter. From a CapEx perspective, it's really just the cycle times on getting new capital things that have been ordered for some time, lead times extended out on those and they just appear to be landing in the third quarter versus the second quarter.

Got it. And as my follow-up, good to see the strong free cash flow generation, I think in your prepared remarks you mentioned commitment to delevering the balance sheet, at your Analyst Day you had set out a target to getting to 2x leverage by the end of the next year. Given the strong free cash flow, do you think it's time to rethink that target and perhaps pull it in somewhat? Thank you.

Based on what we are seeing right now the possibilities of pulling in are very real. And we will -- it is our priority number one to delever the balance sheet.

Okay. Thank you.

Thank you. And our next question comes from the line of Chris Danely from Citigroup. Your line is open.

Hey, thanks guys. For the gross margin up surge, we assume that this is the new baseline for the synergies going forward and then maybe talk about the gross margins going forward, the other drivers?

In general terms, yes, it is the new mark, obviously the revenue -- we have increased revenue growth as compared to what we had in our target mall and that's basically helping us. But, yes, it is the new base to which we can count on our synergies and we still expect about a 50% fall through on incremental revenue, and then the incremental savings coming from the different plans we have already articulated in the past.

Great. And then, my follow-up on lead times, can you just give us kind of where they are, do you expect them to go down this quarter, when do you think, you could bring them back to normal?

So, they are in the -- over the mid-teens and we expect them to be relatively flat even though we are bringing on significant new capacity in the third quarter.

Great. Thanks.

Thank you. And our next question comes from the line of Mark Delaney from Goldman Sachs. Your line is open.

Yes. Good morning and thanks very much for taking the question. First question is, another one on gross margin, gross margin is guided up next quarter even though I think the end market mix gets a little bit more challenging with the industrial market down, wondering how much of that is some of the Fairchild COGS synergies starting to come through. I think you guys have planned for a little over $100 million in total of Fairchild COGS synergies which would I think get you another couple of hundred basis points to gross margin. Are you seeing some of that already in the September quarter as most of the starting to come?

That's mostly still to come. We expect most of the Fairchild related manufacturing synergies to come towards the end of the year and in 2018. There were some supply chain related synergies in the second quarter and we expect that will continue. So, it is more others than Fairchild synergies that will help in the third quarter. Remember we also said we exited the mobile center business which has margins that were not -- we didn't like that should also help. And in [GL] [ph] terms the way we are guiding, we are guiding for a 50% fall through on the incremental revenues.

That's appropriate. The follow-up question about seasonality in the fourth quarter obviously, Fairchild, so maybe you can help us think about what combines seasonality is for the December quarter and the move to sell-in versus sell-through in terms of the revenue recognition through distribution. How is that also playing into the seasonality this year? Thank you.

I don't think sell-in to sell-through is affecting in any meaningful way, we are -- we have the controls in place to make sure we don't grow inventories in the abnormal way. Seasonality for the fourth quarter has typically been down. Fairchild historically has been down more than ON legacy and ON legacy in the 2% range. So, it's probably in that 2% to 4% range is what we are expecting that to be.

Thank you. And our next question comes from the line of Rajvindra Gill from Needham & Company. Your line is open.

Yes. Thank you and congrats on solid results, the question on the automotive business, it seems that you are well positioned on kind of two fronts, one the proliferation of ADAS systems with respect to your CMOS sensor portfolio and your radar portfolio, but also the trend towards electric vehicles on your power management portfolio. So, wanted to get your sense on how you are looking at total content for both sensors and power management modules and how you are kind of position to specifically expand the sensor portfolio to incorporate or to support more higher levels of ADAS systems?

On the car content, there is quite a bit of difference between the electric vehicles and non-electric vehicles, it is as much as $300 per automobile increase for electrification so that very, very significant. On the image sensing or ADAS side, we are seeing like a 25% CAGR growth rate on that as cars adopt more cameras for more safety features and so we see that as being sustainable for at least three or four years that kind of CAGR.

Okay. Great. And last question for me, in terms of the industrial side, on the machine vision, can you talk a little bit about the trends towards machine vision and factory automation and how that's driving your business going forward?

It's a big part of the outgrowth in the industrial market over years passed basically the advent of affordable sensors plus artificial intelligence being added to automation in the industrial side gives a real boost. We are also seeing from a power perspective in industrial automation, the new technologies we have provide significant increases in energy efficiency and so there is a replacement cycle, it goes on with that.

And you had mentioned that you are working on artificial intelligence partnership or development, could you maybe elaborate further on that? Thank you.

Can't give any specifics on it. Just to say there are some partners that we are working very closely with TUs both our power and sensor solutions in artificial intelligence at the moment.

Thank you.

Thank you. And our next question comes from the line of Craig Ellis from B. Riley. Your line is open.

Thanks for taking the questions and congratulations on the execution guys. Keith, I wanted to follow-up on activity and the compute areas specifically server power, that's a nice win that starting for the team, can you just talk about how server power could evolve over the next few years after getting in on the niche initial beachhead. What should investors expect from a share and content standpoint as subsequent server generations for a while?

Yes. So, we have stated with our current power stage participation is about $30 per server. We expect that is not with significant market share. We do expect that the power will be increasing in new server platforms and so you'll get more dollar content perhaps another $15 over the next couple of years. And then from market share perspective, we would be participating in that power stage market plus the control market would add more money to that. So, you should see similar kinds of performance as we had in the desktop, notebook ramps from a share perspective and a dollar content perspective.

That's helpful. And then a product question with regard to pricing and activity there, another company that is also based in the Phoenix area last week indicated that they are seeing perming pricing in their portfolio on the MC. So, I don't think that's a meaningful or a material part of the ON portfolio, but it brings up one of the trends that we're increasingly seeing in the semiconductor sector. Are you seeing any signs of perming pricing in your product groups, if so where and if not, do you think they could emerge either later this year or next year? Thank you.

No. We see the pricing environment perming across the board as you would suspect with little extended lead times and continued growth in the marketplace, the supply demand dynamics have become more favorable for us.

And you've seen environment where pricing would actually be flat quarter-on-quarter or just looking at more moderate decline, say in the half percentage claim area?

I think we are at the flatness stage.

All right. Thank you. Good luck.

Thank you. And our next question comes from the line of Tristan Gerra from Baird. Your line is open.

Hi, good morning. Given some softness in the U.S. other market, what's your expectation for non-GAAP growth in automotive revenue this year?

So, auto revenue 2017 versus 2016 for the company should be up above around 30% year-on-year.

And excluding Fairchild?

About more 10% if you exclude Fairchild.

Okay. Great. And then, is your Q3 revenue guidance based on the expectation that channel inventories remain flat in Q3 given some concern in the supply chain that there could be some tightness and if you're outlook is for flat inventory levels, when do you think there is an opportunity for the channel to start replenishing inventories a bit?

So, we do expect it be roughly flat, I think we headed in our guidance quarter-on-quarter not much change and from a replenishment perspective actually we think we're managing it quite well. So we're not looking for any replenishment cycle, just really managing our sell-through basis even though we are now sell-in.

Great. Thank you.

Thank you. And our next question comes from the line of Chris Caso from Raymond James. Your line is open.

Yes. Thank you. Good morning. Just to ask about like the September guidance and the context of some of the stronger business conditions you are seeing now. I mean it seems like the guidance is on lower end of what we would say to be normal seasonality, is that a function of conservatism on your part is it, perhaps different definition of seasonality given Fairchild just for some perspective there, please.

So, as a reminder, the exit of the mobile business is indeed affecting the seasonality or the growth, sequential growth of approximately 1%, also within our numbers not the most aggressive.

Okay, fair enough. As a follow-on to that, and you talked about in your prepared remarks about no evidence of inventory build or enormous booking on the part of customers, I mean given your experience how high the lead times typically get when, you typically see that, I guess, perhaps as the way we're asking it is, what's different right now from prior years where we have seen some of those enormous bookings?

Well, lead times definitely had reached higher levels when we had the last peak. So this is more moderate at this stage. And I think the other piece of it is even though the lead times have gone now, generally speaking the suppliers, is keeping up the demand. So there is not a health tremendous imbalance there.

Great. Thank you.

Thank you. And our next question comes from the line of Vijay Rakesh from Mizuho. Your line is open.

Hi, thanks guys. Congratulations on your margins, finally breaking out to the 37% level. Just on the automotive side, if you look at the automotive ADAS, can you talk about what are the tailwinds there especially, what is AB penetration the U.S. and you see any tailwinds from China in CapEx especially if you look at 2018?

Yes. So specifically on ADAS that continues to be a global phenomenon just, not just Europe or U.S. phenomenon there are fewer cars with advanced ADAS in China, but the share number that are being built there and the growth particularly in the SUV arena is contributing nicely to a very quick ramp. So what we do see is continued global demand, I mentioned earlier, we're expecting something in the mid-20s CAGR there as a result of not just more content in the higher end cars, but in China as well with the lower end.

Got it. And on the use of cash, I know you mentioned, delivering was the top priority, is there any update to that 2x net leverage that you talked about by end of 2018 does that get pulled in now? Thanks.

It is very likely will be pulled in, yes.

Great. Thanks.

Thank you. And our next question comes from the line of Kevin Cassidy from Stifel. Your line is open.

Thank you. Going back to pricing question or comments, if you are seeing better pricing than expected and your estimated or your target for 40% gross margin, I guess what and when you are targeting 40% gross margin what where you are assumptions for pricing declines year-over-year?

We usually build, in our specific model area we used a 6% decline in ASPs to be offset with cost reductions to get to the 40% gross margin.

Okay. So we would just say you're cracking ahead of it and with, and it seems last few quarters you've been saying price pressure is lessening?

Price pressure is lessening and we would be doing better than our model if this continues.

Okay. Great. Thank you.

Thank you. And our next question comes from the line of Chris Rolland from Susquehanna. Your line is open.

Hey guys really nice execution, nice to see it all come together. So exiting the mobile image sensor business during the quarter will impact there and impact for next quarter as well? And then finally are there other businesses that you guys see that don't meet that gross margin profile?

So, the revenue was approximately 1% of our total. And we continually look at opportunities and we articulated that in our Analyst Day that we are accounting on about 40 bps coming from exiting business and we'll continually look at divesting from non-strategic underperforming businesses.

Great. Thanks Bernard. And you guys also talked about the integration of Fairchild's back-end, what's the timing there and the impact and then Keith you mentioned plenty of work capacity online to alleviate lead times, where does that capacity come from, I assuming that you are talking about front-end there?

No, actually there is more back-end than front-end, and that also plays into the in-sourcing piece of the equation. So more of our capital go towards back-end equipment in the second half of this year. And the Fairchild in-sourcing fees really doesn't kick-in until all of our qualifications are done and that will be late in this year.

I see. Thanks for that.

Thank you. And our next question comes from the line of Harsh Kumar from Stephens. Your line is open.

Hey guys, congratulations on solid execution, Keith or Bernard, I was curious about your views on the auto market, generally speaking you're guiding better than normal, but you mentioned there were parts of it that are temporarily soft, I was curious of these are end geographies or end-markets that are softer than normal. And I was also curious about your views on content growth versus this whole kind of negative saw that all investors are talking about? And I've follow-up.

Yes. The softness was really geographic-based and specifically North American-based, we in our look think there is a 6% or more CAGR on content growth with no [SAR] [ph] growth and that's the way we use in our models.

Understood. And then, do you think with the trends you are seeing and the benefits from execution and all the other things you guys are doing on cost side, that 40% gross margins are achievable before 2020, at this point in time? And then, you mentioned that we are on the flat side of the pricing curve in the marketplace? And you also mentioned subsequent to another answer that you are building in less than 6% decline, I was curious if you are billing in flat by any chance in your model at this point?

We really haven't changed our model. We are experiencing better performance, but we haven't changed that model what I will say is, we are -- because of that certainly ahead of our curve toward the 40% and certainly that is a possibility that it could be brought in from 2020.

Thank you. And our next question comes from the line of Shawn Harrison from Longbow Research. Your line is open.

Good morning, guys on the results. Two questions, if I may. Just the mobile devices business, is there any different dynamic or the seasonality this year potentially because of the adapted charging dynamics on broader adoption that would mitigate some of the pressure Fairchild, do you foresee at the end of the year? And then, second, on 180 million of synergies targeted for this year, what do we add to-date through the first six months?

On the mobile business, we are actually seeing a favorable condition for the third quarter, we are expecting the China-based handsets to increase over the second quarter as well as preparation for new launches from the non-China based areas. So, seasonality actually normally should have been even for Fairchild up in the third quarter, when they launched those new models and it will continue being so this year.

On the Fairchild synergies, we are ahead of the plan. We have yet to complete the backend integration that ERP final steps schedule to happen in the fourth quarter, which we will see some incremental back office savings, and then, most of the -- the rest will be coming from the COGS manufacturing line in 2018.

Keith. This is a follow-up on that seasonality, I made more fourth quarter typically Fairchild, it could be up or it could be down for that business, didn't know you maybe…

Yes. Fourth quarter, it tends to soften this year again based on specific phone launches there might not be as much softening.

Perfect. Thank you.

Thank you. And our next question comes from the line of Harlan Sur from JPMorgan. Your line is open.

Good morning, guys, and solid job on the quarter, the execution. Within the Industrial segment, you guys have talked about military aerospace related program suction, given the focus on defense-related spending, what do you guys seeing either at design-win pipeline or sort of near to mid-term revenue contribution. Can you just remind us the margins for defense and aerospace, are they higher than corporate gross margins?

Yes. The margins are higher and we have seen a strengthening in that business overall. And design-win pipeline is as active as it's ever been.

Great. Thank you.

Thank you. And our next question comes from the line of Craig Hettenbach from Morgan Stanley. Your line is open.

Hi. This is Vinayak calling in for Craig. I just have a follow-up on the mobile side of things. You guys touched upon the content with opportunity you are seeing in mobile, can you just elaborate on what are the key applications driving that content growth?

The move to fast charging move to USB Type C, probably the largest dollar content contributors.

Got it. And just a follow-up on that, the move up to USB Type C, can talk about the competitive profile there and how are you differentiating in that market and finally, like what end market likes -- what product segments within USB Type C are using the most traction?

So, really it's about efficiency and bandwidth when you are talking about the USB marketplace and so you do differentiate basically on device performance. We participate in end-to-end, so we have the whole solution and that gets adopted by various customers in various ways.

Thank you.

Thank you. [Operator Instructions] And our next question comes from the line of John Pitzer from Credit Suisse. Your line is open.

Hey, good afternoon, guys. Thanks for letting me ask the questions, congratulations on the solid results. But, first question just had to do with the full year free cash flow guidance, even if I adjust for the one-time licensing gain in the first half and sort of higher CapEx in the second half, it looks like on an organic basis, you kind of guiding to flat half-on-half free cash flow despite revenue growth and better profitability in the second half. Or are there big one-time issues and I know that free cash flow can have some timing issues that hit in the back half of the year or do I just chalk this up to you being kind of conservative?

Probably a little bit more of the second. We do have -- to be the bonuses that we accrued for in the first half, so you have a little bit of working capital leakage in the second half, but other than it's -- and as you mentioned also CapEx is definitely going to pick up substantially other than that nothing more, no other one times.

Perfect. And then, guys you sort of gave the revenue impact from getting out of the mobile image sensing business, what was the margin impact, how do I think about the margin of that business and I know it was asked earlier but Keith can you help size kind of other revenue pruning you might do in kind of -- the timing of that or how we should think about that versus long-term sort of gross margin and op margin model?

So, the second part of your question there, Bernard indicated earlier, we had 40 bps in our model of improvement due to getting out of such businesses. There are three or four of them actively being discussed right now. And the timing frankly will be whatever we could do from a closing perspective. So, we are quite active in that area. But, really can't do a prediction based on the timing that customers take.

On the margin contribution for the mobile image sensor was -- it was very, very low.

Perfect. Thanks guys.

Thank you. And this concludes today's Q&A session. And I'd now like to turn the call back over to Parag Agarwal for closing remarks.

Thank you, everyone, for joining the call today. We look forward to seeing you at various conferences. Good bye.