Joe Shiffler - Director-IR & Communications Balu Balakrishnan - President & CEO Sandeep Nayyar - CFO &VP.

Evan Wang - Stiefel Steve Smigie - Raymond James Ross Seymore - Deutsche Bank Christopher Longiaru - Sidoti.

Good afternoon. I'd like to welcome everyone to the Power Integrations Fourth Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. To ask a question during that time, simply press "*" then one on your telephone keypad. Thank you.

Joe Shiffler, you may now begin your conference..

Thank you, Heather. Good afternoon. Thanks for joining us to discuss Power Integrations' financial results for the fourth quarter of 2015. With me on the call are Balu Balakrishnan, President and CEO of Power Integrations, and Sandeep Nayyar, our Chief Financial Officer.

During today's call, we will refer to financial measures not calculated according to Generally Accepted Accounting Principles. Please refer to today's press release available on our website at investors.power.com, for an explanation of our reasons for using such non-GAAP measures, as well as tables reconciling these measures to our GAAP results.

Our discussion today, including the Q&A session, will include forward-looking statements reflecting our forecast of certain aspects of the company's future business and financial results.

Such statements are denoted by words like will, would, believe, should, expect, outlook, estimate, plan, goal, anticipate, forecast and similar expressions that look toward future events or performance. Forward-looking statements are based on current information that is dynamic and subject to abrupt changes.

Our forward-looking statements are subject to risks and uncertainties which may cause actual results to differ materially from those projected or implied in our statements. Such risks and uncertainties are discussed in today's press release and in our most recent Form 10-Q filed with the SEC on October 30th, 2015.

This conference call is the property of Power Integrations, and any recording or rebroadcast is expressly prohibited without the written consent of Power Integrations. And now I'll turn the call over to Balu..

Thanks, Joe, and good afternoon. Fourth quarter revenues were $87.3 million, down 2% from the prior quarter. That's within our forecasted range, but below the mid-point due to softness in China consumer appliance market, most notably in air-conditioning applications.

Overall, revenues from the consumer market, our largest category, were down mid-single digits sequentially. The other end markets were generally consistent with our expectations.

Seasonal softness at a major cellphone end customer drove a slight sequential decline in communications revenues, while revenues from computing applications were down mid-single digits. Industrial revenues grew mid-single digits sequentially on strength in high power and LED lightings.

Earnings for the fourth quarter were $0.58 per share on a non-GAAP basis, including a $0.05 benefit from the R&D tax credit. Cash flow was strong with nearly $25 million in cash generated from operations, bringing the full-year total to a $92 million up almost 10% from the prior year.

In light of the continued strength of our cash flow and our balance sheet, our Board of Directors has increased our quarterly dividend to $0.13 per share effective with the March 31st payout.

For the full-year, revenues fell by 1% with a primary head win being the 30% reduction in sales into computing market where demand from power supply vendors was weaker than the end-market itself. High power revenues were also lower on the year, reflecting softness in energy markets as well as effects of foreign currency on our European sale.

While not satisfied with our 2015 topline performance, we believe we are exiting the year on an improving trajectory. Fourth quarter revenues grew 1% on a year-over-year basis, which compares favorably to a 4% decrease for the analog semiconductor market.

Likewise, our first quarter outlook calls for 2% year-over-year growth at the midpoint in contrast to the declines projected by many of our industry peers. Perhaps a more notable integrator indicator, is our recent success in the communications market where revenues grew more than 20% for both the fourth quarter and the full-year.

We believe this is important for two reasons. 1) We expect the growth in communications to continue in to 2016. 2) It represents the leading edge of a product cycle that is now beginning to take hold across all of our end markets. I will briefly expand on each of these points. First. We believe the growth in communications is more than a one-year story.

Rapid-charging emerged as a deceptive force in the mobile phone market last year, creating a need for a high value integrated solution in a market where commodity discrete solutions has become predominant. Our InnoSwitch product fulfilled the needs of this market beautifully and we are winning a sizeable share.

InnoSwitch is now in production at most top-tier smartphone OEMs, and we added several design wins in Q4 at both new and existing end-customers.

We believe the rapid-charging will be a growth driver for years to come with power levels continuing to rise, charging speed becoming an important differentiator in the mobile device market and new technologies such as USB PD and Type-C connectors just beginning to emerge.

InnoSwitch technology will enable us to maintain a leading position in this market and we continue to develop our product portfolio with that goal in mind. Last month, we introduced InnoSwitch-CP for constant power, which is designed to optimize the charging performance of variable voltage protocols like USB PD or Qualcomm Quick Charge.

InnoSwitch-CP works in tandem with our CHY103 interface chip to implement Quick Charge 3.0, Qualcomm's latest generation rapid-charging protocol. This chipset is now shipping to a top-tier Chinese handset OEM and we expect more such designs to follow over the course of this year.

In the mobile device market, InnoSwitch is winning because it helps the designers solve tradeoffs that arise when trying to squeeze two, three, or even four times as much power out of a charger, while maintaining the small form factor we've all come to expect.

But InnoSwitch technology is applicable well beyond mobile phone charger and is just now beginning to penetrate other end-markets.

We now have InnoSwitch designs in part of progress across more than 30 different applications, including appliances, consumer electronics, and industrial applications, where the reliability and efficiency benefits of the technology are valued far more than in charger applications.

Moreover, we believe InnoSwitch is a foundational technology that will spawn multiple generation and even new categories of products.

Later this year, we expect to roll out our next generation InnoSwitch which will enhance the already high efficiency of InnoSwitch while enabling us to address higher power application, resulting in a significant expansion of the addressable market.

This next generation InnoSwitch will utilize our new high density process technology making the product more cost effective than the current generation.

We also have in our pipeline, products that will bring InnoSwitch technology to other end-markets such as lighting and even high power where we believe we can roughly double the size of the market opportunity by addressing a wider range of IGBT driver applications.

So, in summary, while our recent results have not lived up to our history of outperforming the market, we believe we are turning a corner. We expect growth this year from markets like high power and LED lighting, both of which declined in 2015.

We expect continued growth in rapid-charging applications and a beginning of InnoSwitch ramp in other end-markets.

Most importantly, we expect to introduce a larger-than-usual number of new products over the next two years, as the technologies underlying InnoSwitch drive a mega product cycle that we believe will drive our growth for many years to come.

Before I turn it over to Sandeep, I will quickly touch on the near-term outlook and also the latest developments in our litigation with Fairchild. As indicated in our press release, we are forecasting first quarter revenues of $84 million plus or minus $3 million, which would be a 4% sequential decline at the midpoint.

Approximately, 80% of our revenues come from Asian market and the Lunar New Year holidays have become an increasingly important seasonal factor in our business, effectively making Q1 a 12 week quarter. Notwithstanding these seasonal patterns, we are encouraged by the recent booking trends which are tracking well above this time a year ago.

We have several high volume design wins scheduled to ramp in the June quarter and we are seeing customers and distributors put substantial backlog in place prior to the holiday break.

We expect shipments to exceed revenues meaningfully in Q1 as distributors take on inventory to support what we think will be strong sequential growth in the June quarter. Finally, I'd like to highlight yet another favorable result in our Fairchild patent litigation which we announced in mid-December.

You may recall that in 2014, a jury in California found that Fairchild infringed two of our patents and awarded us $105 million in damages. Fairchild contested the award based on changes in case law that occurred after the initial verdict and was granted a new trial to determine a revised damage award.

The award resulting from the new trial was $140 million, 1/3rd larger than the original amount. While the outcome of this case is subject to further challenges, the size of the award leaves little doubt about the magnitude of Fairchild's infringement and the impact it's had on our business in recent years.

We are hopeful that this verdict marks a turning point and that Fairchild's infringement will finally stop. With that, I will turn it over to Sandeep for a review of the financials..

Thanks, Balu, and good afternoon. I will briefly cover the Q4 financials and the Q1 outlook and then we will take questions. My remarks will focus mainly on the non-GAAP numbers which I reconcile to the corresponding GAAP figures in the tables accompanying our press release.

Q4 revenues were $87.3 million down 2% from the prior quarter but up 1% year-over-year driven by growth in the communications end-market. While modest, this return to year-over-year growth does compare favorably to the broader peer group. Revenue mix for the quarter was 34% consumer, 33% industrial, and 26% communication, and 7% computer.

As Balu stated in his remarks, the appliance market was a soft spot in Q4. As appliances are a relatively high margin end-market for us, end-market mix was slightly unfavorable versus our expectations, resulting in a half point decline in non-GAAP gross margin for the quarter coming in at 50.5%.

As indicated in the press release, we expect gross margin to rebound in the March quarter to about 51% reflecting a slightly more favorable end-market mix. Fourth quarter operating expenses decreased by $0.5 million compared to the third quarter, coming in well below our projections.

This was largely a function of timing as some expenses expected to occur in Q4 where pushed out to Q1. Notably, non-GAAP expenses for the full-year were essentially flat as we made every effort to keep spending aligned with revenue in a challenging demand environment.

Our tax provision for the fourth quarter reflects the full-year impact of the federal R&D credit, which was enacted in December. This resulted in a negative effective tax rate for the quarter, adding $0.05 per share to our non-GAAP earnings. Including the tax benefit, fourth quarter non-GAAP earnings were $0.58 per diluted share.

Diluted share count for the quarter was 29.1 million shares down slightly from the prior quarter as the prior quarter's buyback activity was fully reflected in the weighted average calculation. No shares were repurchased during the fourth quarter as our share price exceeded the maximum purchase price specified in our buyback plan.

However, over the course of the year, we repurchased 1 ¼ million shares for $53.7 million, resulting in a 4% reduction in weighted average share count for the full-year. Cash flow from operations for the year was $92 million with capital expenditures totaling $22 million.

We returned virtually all of our free cash flow to investors during the year using a total of $68 million for buyback and dividends. As a result, our balance of cash and investments were virtually unchanged from the end of the prior year at $174 million.

Inventory on our balance sheet decreased further during the quarter to 107 days on hands down six days from the prior quarter and remaining well within our targeted range. Looking ahead to the first quarter, we anticipate a sequential decline in revenues reflecting the effect of the Lunar New Year holiday as Balu noted.

Specifically, we are projecting a revenue range of $84 million plus or minus $3 million. This would be a 2% increase year-over-year at the midpoint of the range.

While not prepared to give a forecast for the second quarter, we do think an acceleration of our growth rate is likely in Q2 based on the current booking trends and the expected contributions of new design wins. As mentioned earlier, we expect gross margin to take higher in the first quarter to approximately 51% on a non-GAAP basis.

We expect non-GAAP gross margin to hover around the same level for the balance of the year as the cost reductions roughly offset the impact of further growth from InnoSwitch. Non-GAAP operating expenses will be sequentially higher reflecting the push out of expenses from Q4 as well as the seasonal effects of payroll taxes and the December shutdown.

Specifically, we expect non-GAAP expenses for the December quarter to be between $30 million and $31 million. I expect the non-GAAP tax rate for the first quarter and the year to be in the range of 4% to 5%, reflecting the benefit of the R&D tax credit which was made permanent in the December legislation. With that, I'll turn in back over to Joe..

Thanks, Sandeep. We'll open it up now for Q&A. [Ahata], would you please repeat the instructions for asking questions..

[Operator Instructions] Your first question comes from the line of Tore Svanberg with Stiefel. Your line is open..

Yes, hi. This is Evan Wang calling in for Tore. It's we're really glad to hear that the June you have.

You think that the June quarter, growth can accelerate, but could you also tell us a little bit about what gives you that confidence, are you having better visibility or just stronger bookings and if sort of has that been ramping steadily?.

Yes. We have a number of design wins that will be ramping in Q2, specifically in cell phones for rapid-charging but also in industrial applications, high power, and number of other areas.

And also it is supported by the bookings we have in January, which has been very strong, significantly stronger than the January of last year and our discussions with the distributors indicate that they are building inventory in preparation for Q2..

That's great. And I know that you probably can't see that far but how does the second half look for you given that you believe the June quarter could be strong..

To the best, we can in assuming the macro, remains reasonable. We think Q3 will also be a growth quarter strong growth quarter for us. And Q4 is usually flat, approximately flat or slightly down..

Yes, right. I have a follow-up question on your rapid-charge. I believe that the bulk of your revenue has been coming from 15 watts and of course 20 watts or higher will be even closer to your sweet spot.

When do you expect that to gain momentum?.

Well, already we are seeing all of the major OEMs or most of the major OEMs offering rapid-charge. And the power level varies from 10 watts, it's actually 7.5 watts all the way up to 20 or 22 watts or so. And I think for the cell phone, that's probably where it's going to end up, roughly around 20 watts.

There may be some customers who'll go to 25 or 30 watts but then of course if you go to tablets and so on you'll need higher power..

Okay, great. Thank you..

You're welcome..

Your next question comes from the line of Steve Smigie with Raymond James. Your line is open..

Great. Thanks a lot guys. I just wanted to follow-up on a few things. So, first on InnoSwitch. You talked about a whole bunch of activity there.

Can you talk about are there any sort of revenue design wins yet, and if not when could we potentially see that?.

Well, we had significant revenue on InnoSwitch in 2015. If you remember, in 2014 we had about $5 million worth of revenue and we were expecting it to quadruple and it actually did quadruple in 2015. And we expect that to continue to grow and add maybe somewhere between $10 million to $15 million additional dollar sales dollars this year.

And 2017 could be even stronger, because we'll be introducing our next generation InnoSwitch which will address higher power levels and expand the addressable market significantly. .

Sorry, I meant non-handset wins..

Non-handset. So, non-handset we have about 30 different applications where there is a significant design activity going on right now. The ones that are significant that we have announced already are in appliance business. We have one major design win at a large appliance customer in Europe that will go into production in the second half.

It has been designed into a platform, but the first design is going to be a washer. It's not significant in dollar terms, but it is the beginning of the use of InnoSwitch by this customer and we expect that most of their new products will use InnoSwitch.

There is another appliance customer who is very close to qualifying our product but beyond that as I said there are about 30 different applications where people are designing in InnoSwitch, as we speak..

Great, thanks. And then just turning to appliances in general, it's a little bit weak this quarter as you mentioned around China.

How much of that's an inventory seeing versus obviously we've seen lots of reports about China weakness, so just trying to understand can the weakness continue the next quarter or two?.

Well, it is fundamentally a demand issue which has become an inventory problem in last year. And to the extent we can find out, it is related to the Chinese economy in general, but specifically the housing market in China which is very weak.

And so, there was an inventory buildup at appliance customers that we think will be pretty much worked out by Q1 of this quarter. So, we expect the appliance market to come back up in the second quarter..

Okay, great. And just two more quick ones, just on LED lighting.

Can you give us some update there in terms of where you're seeing growth magnitude of growth at this point? And then on the fast charge, what level of penetration do you think fast charge is in market, you know, 5%, 10% of phones will switch over to fast charge, something like that?.

Okay. That's a good question. Let me answer the second question first, the fast charge. I think we are in a very strong position in fast charge.

There is only one other competitor who is in a similar strong position and that's primarily because of one specific design win at a large OEM who uses a unique protocol that we intentionally decided not to support because it's very customer specific. We also believe most of the OEMs will move to USB PD in the long term.

So, in terms of a number of design wins, the breadth of customers, we clearly lead in the rapid-charging market. As far as what percentage of the phones is rapid-charging, it is really hard to tell because it's very dynamic. As we speak, people are moving to rapid-charging.

So, it's changing very quickly, but it is clear that rapid-charging is going to be the trend moving forward. My expectation is overtime most of the smartphones will convert to rapid-charging. And to answer the second question which was your first question I guess, is the LED market.

As you know, our LED revenue declined last year by double-digits primarily because of us deciding to walk away from the low-end bulb market which had become very commoditized and we didn't want to go after the market and hurt our margins when this low-end market doesn't care about any of the values we bring, such as integration, efficiency, power factor, and so on and so forth.

So we decided to focus on the higher-end bulbs for the Western consumption that is the U.S. and Europe and also the commercial and industrial lighting. I think again there we have finally turned the corner on that.

The revenue from LEDs in Q4 was sequentially slightly higher than Q3 and going forward we expect to be able to grow that with the new products. So, we'll be introducing. We just introduced LYTSwitch-5. We have other products that will be introduced very shortly, which will address the higher-end of that market.

But in addition to that, what we are finding is the higher-end which used to be very crowded because most of the analog semiconductor companies had decided to get into that market. Now we are finding that a lot of them are deemphasizing that market.

I think we talked about this earlier and most of those new companies did not have lot of experience in AC to DC power supplies. As long as the cost of power supply was a small part of the LED market, nobody really cared about the cost of the driver.

But now that the LEDs have become very inexpensive, the driver becomes a significant part of the LED cost. And I think we are in a better position on the higher-end of that market now and so we expect LED revenue to grow this year..

Okay, great. Thank you very much. I appreciate it..

You're welcome..

Your next question comes from the line of Ross Seymore with Deutsche Bank. Your line is open..

Hi, guys. Just want to start off with kind of a higher level question. Historically, probably has outgrown the market. So, whatever the analog market where you guys outgrew it. And you guys talked a bit about how maybe only incrementally, but nonetheless you slightly outgrew the market in 2015.

When you look back in '15 and probably more importantly in the '16, the delta by which you outgrew the market has shrunk in the last couple of years.

Do you think you can get back to meaningful outperformance, and if so, how?.

Excellent question. Certainly we are not pleased with the 2015 performance. And the main reason we could not outgrow the market is to do with the PC market where our revenue went down by about 30% even though our other markets especially the communication market grew dramatically, it barely compensated for the decline in PC market.

And then if you look at 2014 we were specifically hurt by two largest customers in the communications market which caused us the decline in revenue in the communications market in 2014. The good news is it's all we have gone past that. First we grew very nicely in communications market in 2015.

We expect that to continue to grow not only in 2016 and for the several years to come. And also the other thing that hurt us in 2015 was the high power market which was down, because of China, because of the exchange rate, because of the oil prices being low.

Again we have reached a steady state there and we expect the high power to also come back from Q2 onward. Our plan is to get back to the outperformance we have been delivering in the past and we expect to do that starting this year and even more next year with the new products we'll be introducing.

We have a broad range of new products that will dramatically expand our stand from where we are now about $2.5 billion to $3 billion, we're actually $2.5 million going to $3 million this year and going to as much as $3.5 billion to $4 billion next year. So, our goal is to get back to the kind of outperformance we have delivered in the past..

I guess one follow-up on that, Balu, would be the computing side. I get what happened in the communication side and I think everybody knows computing was weaker than expected for the year but it surely was not down 30%.

I know you mentioned earlier that you guys were down worse than the market as a whole but any explanation for that is it some inventory adjustment that we should expect to snap back to or is that 7% of sales where you now have computing is that the new steady state for some reason?.

Well that's a good question. We have talked about it ourselves about it. But the only explanation that we have from our customers is that they had a much larger inventory of the power supply.

If you look at the way the computer company's work, they have power supplies already stocked at their manufacturing side which has been replenished on a continuous basis.

So when the market goes down you have a much bigger inventory problem on power supplies than you do have on the motherboards and microprocessors, which are much more expensive components as you can imagine. So, I think that is the fundamental problem is that we had a much bigger inventory correction than other PC semiconductor manufacturers have had.

And the other thing that also hurt us is that once the PC market started going down so dramatically, most of our customers stopped designing new power supplies which would have helped us because of our hyper products we were making good inroads into the main power supply but what we found out is that nobody wants to design a new power supply when the market is tanking.

But that also has kind of an unfortunate situation..

And I guess my last one for Sandeep. You talked about a bunch of new product launching this year and that should be good news for revenue. You gave the gross margin at about that 51% level roughly and staying there for the year.

What are the OpEx implications when you have this number of new products being introduced?.

So, that's the reason we kind of guided that we are going to grow the OpEx to a mid single-digit.

This year even though because of the challenging demand environment, we kind of tightened our belt but because you've had as Balu indicated a lot of technological breakthroughs, we are going to make significant investments in R&D and that's why our OpEx will be mid single-digits.

But I think this spin in R&D is not going to help us with new products out this year but set the stage very well for 2017. And that's why we indicated and told that we have an unusually large number of products that are going to come out in 2016 and '17..

Great. One last quick clarification, then I'll promise I'll go away.

When you say up mid single-digits, do you mean dollars or percent?.

Percent..

Great. Thanks, guys..

Your next question comes from the line of Christopher Longiaru with Sidoti & Company. Your line is open..

Hey, guys. Thanks for taking my question. So, in terms of OpEx, I believe that you said that you had some cost from December pushed out. Usually you have some higher tape out cost in that quarter.

Can you just give us an idea of how to think about your operating expenses on a normalized basis going forward?.

So, as we indicated, in December quarter what happens is not only do we have to shut down but you know as we have tightened our belt a little bit, certain expenses whether it was for what you talked about the R&D material but also some headcount got pushed out. But what happens in Q1 is the FY [indiscernible].

So, in Q1 typically, you will have a roughly about a $1 million impact just between the shutdown and the [indiscernible] kicking in, but again the other expenses that got shifted out, that's why we are giving you guidance of about 30 million to 31 million.

It will taper up a little bit in Q2 from there and then come down in Q3 and Q4 at [indiscernible] and basically for the year we will have a mid single-digit percentage increase from the total where we were at the end of FY '15.

Our non-GAAP FY 2015 numbers are roughly around $117 million non-GAAP, so we'll go up mid single-digit percentages from there..

Got it, all right. And then you talked about 30 different applications in different stages, can you give us a little more granularity into what I know you mentioned some washers and some beginning new products, but all different means of end-markets have kind of different time frame.

So, from my own perspective trying to move on this, can you give us a little more granularity into what those 30-plus applications look like in as much color as you can give..

Absolutely. I mean, I can just run through them if you like but the important thing is the contribution from those markets will be gradual, meaning, we'll have some contribution this year but it won't be very significant, but it will be very consistent over the next two or three years. It'll ramp up pretty nicely.

So, other than cell phone charges, obviously, that's a big one, the second biggest one is major appliances, then residential networking, setup boxes, metering, MOSFET adapters, consumer other consumer products, computers, server standby, comfort appliances, these are the air-conditioning units, power tools, industrial battery chargers, monitors, industrial control, I mean I can go on and on.

The important thing is it covers all of the four major markets..

Let me ask it kind of in a different way.

You said steady gradual growth, guess it's kind of what the three year growth rate is on that business?.

The best we can tell you is the InnoSwitch revenue in 2016, we expect to be $10 million to $15 million higher than last year. A lot of that is from cell phones but there is also a portion of that from non-cell phone applications.

And next year, 2017, we think the dollar increase could be even higher because of these other applications coming into the revenue picture. .

Great. That's all I have, guys. Thank you..

You're welcome..

[Operator Instructions] Your next question comes from the line of Tore Svanberg with Stifel. Your line is open..

Yes, hi. This is Evan, again, with a couple of follow-up questions. One is that about your guidance, your revenue guidance has a wider range than usual.

Is this typical for March quarter and could you talk about what the moving parts are that would get you to move within that range?.

Evan, typically we guide within plus or minus three. So, I think this is pretty typical what we do. And the range that you always get, this is the Lunar New Year as you look traditionally in the last three years that caused difficulty and to be very much more precise.

And if you look at the last couple of years, our shipments as we indicated have been higher than the revenue sell through. We are on sell through accounting. And it's because of the holidays and typically why we are seeing such large bookings is because people are prepping for a nice ramp up in Q2..

I see. And about your inventory level I see that your on hand in general inventory is down quite a bit, but what about the channel inventory.

Can you give us a sense of where you are in the channel?.

We are about 6.5 weeks at this in Q4, which is kind of what's kind of similar to what we had in Q3. But based on the bookings and we are expecting that our ship-ins will be much higher than revenue, so we expect the channel inventory to grow in the first quarter..

Okay.

In the channel inventory in the PC segment, has that been normalized or is that still somewhat elevated?.

I think we have kind of if you are looking at I think it is kind of normalized but as we are looking ahead in our models we are not looking for a huge growth in the computer segment we are expecting it to be kind of flattish but we are expecting all our other three end markets to grow very nicely this year..

Okay, great. And my last question here is about your gross margin in calendar 2016. I think that you had kind of commented before that it will fall in the range of 51% to 52%.

Now given your view on the momentum that your new products are getting, and I know that in the past you talked about there being some start-up cost or inefficiencies effected, because your new product gross margin to be slightly lower than they would be otherwise.

Is there any impact, any visible impact that -- what changes in your outlook that you can talk about?.

And that's the reason we have given the 51 plus or minus guidance. We were thinking that we would also have a little more benefit from Yen. But with the Yen changing, we are not going to get all of that benefit this year that we were originally when we were talking about.

So, that has impacted a little bit and just the mix end-market, mix is a little bit. It's a combination of all that. But we feel that we will be in this range of 51 plus or minus. So, it could be a little up, could be a little off, plus or minus, very close to that throughout the year.

And basically we have a lot of cost reductions coming in which will offset the impact of the growth in InnoSwitch which you know is a headwind a little bit in terms of margin..

Okay, great. Well, thank you for that clarification..

There are no further questions at this time. I will turn the call back to Mr. Shiffler for closing remarks..

Okay, thank you. Thanks everyone, for listening. There will be a replay of this call available on our website investors.power.com. Thanks again for listening and good afternoon..

This concludes today's conference call. You may now disconnect..