MPWR - Monolithic Power Systems, Inc.

Arthur Lee: Welcome, everyone, to the MPS Third Quarter 2025 Earnings Webinar. My name is Arthur Lee, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO, and Tony Balow, Vice President of Finance. Earlier today, along with our earnings announcement, MPS release a written commentary on the results of our operations. Both documents can be found on our website. Before we begin, I'd like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The risks, uncertainties and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q3 2025 earnings release, our Q3 2025 earnings commentary and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now I would like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Arthur. Good afternoon, and welcome to our Q3 2025 earnings call. In Q3, MPS achieved record quarterly revenue of $737.2 million, 10.9% higher than the second quarter of 2025 and 18.9% higher than Q3 of 2024. This performance reflected the ongoing strength of our diversified market strategy, consistent execution, continued innovation and relentless customer focus. Let me call out a few highlights from the third quarter. Our diversified market strategy drove year-over-year revenue growth in all of our end markets. We continue to expand our automotive customer base with another major Tier 1 supplier adopting MPS for its next-generation ADAS solution. Additionally, we secured our first design win for a full BMS solution on a robotics platform, which further supports our transformation for being a chip-only semiconductor supplier to a full-service silicon-based solutions provider. Overall, we continue to demonstrate our ability to grow and swiftly adapt to all aspects -- all aspects of our business to the fluid geopolitical and macroeconomic environment. Our proven long-term growth strategy remains intact as MPS focuses on innovation and solving our customers' most challenging problems. We continue to invest in new technology, expand into new markets and to diversify both our end-market applications and global supply chain. This will allow us to capture future growth opportunities, maintain supply chain stability and quickly adapt to market changes as they occur. I will now open the webinar up for questions. Arthur Lee: [Operator Instructions] Our first question is from Josh Buchalter of Cowen. Joshua Buchalter: Congrats on another beat and raise. I guess to start, maybe you're guiding up about 1%. Can you give us the puts and takes of which end markets you expect to grow more or less? And of note, I think earlier, you mentioned enterprise data was expected to be flat to down 20%. Any updates to the guidance for that segment in particular? Bernie Blegen: Sure, Josh. When you look at Q3, I think that we saw a little bit better than anticipated performance in both our enterprise data and industrial markets. We had pretty much every other group as we anticipated. Looking ahead, and I know that you're interested in enterprise data, we're seeing a layering of additional customers that began this layering effect in Q4 and is providing this good momentum as we look ahead into the early part of next year. Michael R. Hsing: Well, I should add all these in script readout. Bernie mentioned a list of our market segment, they started growing. And we look back in the last few quarters, all these growth come from greenfield products that were released 2, 3 years ago. And now we see the result. And so in the near future in the next few quarters, we will see these will continue to enhance our revenues. Joshua Buchalter: Maybe a follow-up on that, Michael. I think you've been pretty clear, like philosophically, you have some reservations and even frustrations with the AI market because of the concentration and visibility. Given all the massive announcements over the last quarter even in that space, maybe you could spend a couple of minutes talking to us about just big picture philosophically, how you're approaching these huge forecasts. And I'm sure competitive sockets with massive scale. How do you guys figure out which opportunities to go after and service and your thoughts on the market just given -- I think you've had frustrations about it distracting from your diversified growth. Michael R. Hsing: Yes. As you said, yes, it is kind of a distraction, okay? But business is business, good money is good money, okay? We don't want to take bad money, okay? And -- but overall, the bottom line is MPS want to demonstrate in any segment of the market, we are the best, we have possessed the best technology and best customer service. And we're solving problems, we demonstrated that we can have qualities and shipments, okay, all these categories, we are the best company. And in terms of which AI company, we don't really care. We engage with the large companies and the small companies. And we want to demonstrate that this is the best technology. When revenue comes, it comes. And given times, as we said it, given time, every -- all the true color will show. Arthur Lee: Our next question is from Ross Seymore of Deutsche Bank. Ross Seymore: I guess for my first question, the automotive side of things. You talked about getting an incremental design win in the ADAS side of things. Can -- there's a lot of choppiness in that end market across different geos and at different points in time, cyclically, geopolitically, all those sorts of things. But from a secular growth perspective, can you just talk about ADAS as a percentage of your revenues now versus user interface or USB and those sorts of things? And how ADAS penetrating more of that market changes the growth rate, the content, the diversity of it. Just kind of want to capture that ADAS theme and what it really means to you. Bernie Blegen: Sure. Why don't I take a start at this. So I think that we've demonstrated a history of establishing a strong presence in various markets with differentiated technology. You might recall going back always with USB ports for automotive. And now it's ADAS. And what this does is it has a cascading effect where we're able to get adoptions and the design wins, and we call out when these begin to ramp. And that's actually been more important to us then the -- necessarily the -- what the SAAR is for a particular end market. And in this one, in particular, we have started with a lot of ADAS opportunities, particularly in the EVs because they're faster to come to market. But what that's given us the opportunity has been is to showcase all of our other technologies and now we're starting to see those ramp, whether it's in body electronics or different applications. What we're more excited about is as we look ahead and the transformation of the end market for automotive as it moves into 48-volt and zonal electronics. Michael R. Hsing: Yes, we don't know the breakdown, okay, to answer your question exactly. I mean maybe Bernie has some ideas, okay, but I think it's less than half. And I think it's well less than half. Bernie Blegen: It's considered less than half. Michael R. Hsing: Yes, yes, yes. Okay. And I'm just looking at the number of cars and also our revenues, and it cannot be more than half. But in the ADAS side, more and more cars and including combustion engine cars, they are adopting ADAS. We will see a significant growth in the next few years. That's where we anticipated, okay. Ross Seymore: I guess as my follow-up, pivoting to another thing you talked about in your press release of moving from a silicon -- chip-based supplier to more of a solution provider, how do you think about the gross margin implications of that over time? You guys were a few points higher than you are now a couple of years ago. We've talked about what does it take to get you back to kind of the upper 50s from the mid-50s-ish where you are today. Does that system approach help? Or is that actually a headwind in the gross margin as you go forward as much as it might even be operating margin accretive? Michael R. Hsing: I don't so. I don't think there will be a headwind and a lot of the large systems that we're building, okay, we're kind of learning how to do it. And it is creating a lot of issues once the volume goes up. And so we are learning. And I think as things get a lot better since last year, I guess, okay? I mean -- and it will improve quite a bit. We actually making our own test equipment as lot of people know about it, okay. We eat our own dog food and creating all fully automated test systems. Those type of products have never existed before. And I think ultimately, we'll improve the yield and improve the gross margins. Arthur Lee: Our next question is from Joe Quatrochi of Wells Fargo. Joseph Quatrochi: Maybe first, I just wanted to ask, embedded within the 4Q guide, is there any help you can kind of provide in just thinking about the end markets? I Think there's some seasonality to maybe like a consumer in the fourth quarter. And then I think enterprise data you guys were previously thinking that would be up somewhere like high single digit sequentially in the December quarter. Is that still the case? Michael R. Hsing: Okay, to anticipating a market, that's a very difficult call. And you guys are betting on which stocks, okay? I mean, it's difficult, okay. But we have our way of operating our business. We do the best. We do the best develop a technology, engage our customers closely and probably the same way that you pick -- how you pick the stocks, okay? And so you engage customers closely. Whatever happens happens. And you can't predict what the market is. And we don't do that actually. Bernie Blegen: And if I could just add to that, that since we last talked about the second half of this year, nothing has fundamentally changed in our positioning. Joseph Quatrochi: Okay. That's helpful. Maybe just also following up, but I think in the press release or your prepared remarks, you had a comment around the first design win for a full BMS solution for robotics platform. Can you talk about what drove that and how you think about the revenue opportunity ramping there and more wins in the future? Michael R. Hsing: We probably get too excited to talk about those. And the fact is that we got excited is because we see robotics happening. They kind of -- we kind of predicted it the BMS is going to happen, okay. And we got in and we're designing and it's our customers engage with us, okay, there's a ground-up system that we developed. And we see more and more this type of system will happen. So now this kind of system will be become a reality. So that's the reason we put out that. Tony Balow: Yes. And I'll just add on very specifically on that one. Clearly, we called it out because of the fact it was the first opportunity that we have the design win on. In terms of a revenue ramp, that's really starting in 2026 and it's not in and of itself necessarily a needle move around the model. But I do think it starts the wave of these full solution design wins that we might have going forward. Michael R. Hsing: Yes, that's kind of -- it's the same time when you're making the point that is, okay, we do start to do robotics stuff for actuators and the IC for actuators and the BMS charging, wireless charging. And these are back a few years ago. We even don't know that the robotics were taking off, okay? I've been talking about robotics since 2017 or '18. And -- but the AI assist robot more and more believes, that will really start taking off. And so that's kind of the projects that we think -- we pick the winners, okay? And we're glad to see it, that's why we're probably too excited to talk about this. Arthur Lee: Our next question is from Quinn Bolton of Needham. Quinn Bolton: Congratulations, Michael, Bernie and Tony. I just wanted to start with a big picture question, just looking through this earnings season. Intel has talked about sort of shortages of server CPUs, we've seen hyperscalers significantly increasing CapEx. NVIDIA talked about $0.5 trillion of demand in '25, '26. I guess my question is, about a year ago, I think you guys were seeing very, very short lead times in that business and dealing with some level of pricing pressure. I'm wondering as you look into second half and more importantly into next year, have you started to see any change in customer lead times? Are they giving you better forecasts across the enterprise data segment? And is the pricing on voltage regulators and vertical power, has that changed at all over the last quarter or so? Bernie Blegen: Quinn, thanks for the question. Let me start that this remains a very dynamic market. We're responding to a variety of requests when it comes to the orders and the expectations from our customers. So in some ways, we're getting improved predictability because we're adding -- we're layering, as I said, more customers into the mix. But as far as the market itself, and particularly with all the blockbuster announcements that have been coming out recently, you can see how quickly things are changing. And what our position is, is that we can't control our customers necessarily, but we can position the company to be as responsive as we can. Quinn Bolton: And is this sort of dynamic market? I mean if folks are scrambling sort of to get capacity. Has that had any lifting effect on pricing? And then I'll ask my second question. Michael R. Hsing: Any market segment started from the -- and ramp rapidly at the beginning always cause these imbalance, supply imbalance, okay? So in the AI side, clearly is like that. I mean once it goes on, things will smooth out. Bernie Blegen: Yes. And then being specific to your question, I don't think we've seen any recent or sustainable trends in pricing one way or the other. Quinn Bolton: Okay. Perfect. And then a second question for you Bernie. Gross margins have been sort of on a -- sort of ticking down over the last year or 2. Can you give us any sense, do you think they sort of stay in this mid 55%, 55.5% range. Is there some point next year that you start to see gross margins starting to move higher, either driven by mix or new products? Or should we be thinking about margins being fairly flat over the next year or 2? Bernie Blegen: Sure. As I've commented on prior calls, we've seen about 3 or 4 quarters in a row, where I'd say that we have seen a strong uptick in demand, and that continues even today. What makes this cycle different than ones that we've experienced in the past is that the orders are more short term in nature. We're not seeing a large buildup in backlog in future quarters. And so without that visibility, it limits our capacity to be able to manage the mix of business that we want to be able to have expansion in gross margins. So for the foreseeable future, until the demand profile changes to elongate the buildup of backlog, I believe that we're going to be in sort of the steady range, plus or minus 20, 30 basis points in the mid-55%. Michael R. Hsing: We have a lot of products, okay, a few thousand products, okay? And a few 40,000, 50,000 customers in to move -- and it's very stable margins. And with the transitions to more solution provided companies, okay, as I said earlier, and all this has to be automated, okay? And as time goes on the margin will improve and -- but not quickly. And that math is very big. And so we know it's operated on the low end of our margin profiles, but the longer term will improve and we stick with a gross margin range. Arthur Lee: Our next question is from Tore Svanberg of Stifel. Tore Svanberg: Yes. Michael, Bernie, Tony, congrats on another record quarter. By the way, some of that dog food you're referring to must be pretty proprietary stuff. But my first question is on the Enterprise Data segment. So that's about an $800 million business right now. And my understanding is you're on a journey here, right, and you're still selling predominantly chips. You are obviously moving into module subsystems, eventually systems. So I'm not looking for any numbers per se, but could you just sort of let us know where we are in that journey. I mean building an $800 million business with chips and where could we eventually go here with, obviously, more and more subsystem type solutions for enterprise data. Michael R. Hsing: If I understood your question correctly, okay, that I can answer that way. We're anticipating doing millions of millions, multiple millions units per month type of a shipment. And all of these integrated, highly integrated modules never existed before. So how do we test this thing, how we achieve the single -- low single-digit PPM failures, okay? That is we never encounter that kind of issues before, okay. And so we started using our own robotic systems to make that happen. So now we achieved very high volume, 100% automated, including reliability test. And that's our features. And the goal is building multiple million units a month for that, 10 million a month for that. That's the near term goal. Tore Svanberg: Yes, that's very helpful. And did you also have a response to my question on the enterprise data. Again, where are we in this journey towards delivering more system-level solutions, especially talking about rack level power and so on and so forth? Michael R. Hsing: This is at the very beginning, maybe I think it's module power still less than, way less than 1/3, okay. And less than 1/3 of our revenue and it grew in the last half year. And the -- we expected it to grow. Some got delayed and now started happening in the next years could be much more. Tony Balow: Maybe just to add on to the back of that, Tore, I think as you start talking about some of these solutions for 800 volts as we discussed, those are like '27, '28 revenue ramps. So I think it supports what Michael was saying that we're still at the front end of this opportunity in the data center for us. Michael R. Hsing: No, I think in the investment communities, okay, it's -- if you have 800 volts technology data center transformer is like a flip a switch. The light is turned on, it turns on. It's not like that, okay. The light to turn on, it takes a couple of years, okay, more than a couple of years to make -- to see the revenues, okay. These take 3, 4 years. Arthur Lee: Our next question is from Rick Schafer of Oppenheimer. Richard Schafer: And I'll add my congratulations to you guys. Just maybe if I could start with an auto question. Kind of a follow-up, but I know we talked about BMS robotics. But I know BMS becomes a bigger contributor for your auto segment next year. And you mentioned a couple of things, Michael, in an earlier question, but I'm just curious if you could give some guide rails or provide some guide rails about potential content trends for MPS as you start ramping some of those BMS opportunities? I mean again, not asking for dollar content per car, but does it double or triple those kinds of numbers? Like what does it do to your potential content per vehicle moving into that BMS space in a more meaningful way? And as part of your answer, I'm curious, where's some of the lowest-hanging fruit is for you guys? I mean, is it 48-volt, is it power isolation, that kind of thing? Michael R. Hsing: It's actually all of them, okay. BMS revenues for auto and for EVs is a bit far away, okay? And -- but our customer, it's a very -- this is a very concentrated market. There's a few players and a few, well it's not a few car makers and gradually, all of them, they have -- they want BMS. And so our customers are glad to see MPS is to develop that series, that type of a product, too. And in terms of other low-hanging fruits, okay, we see 48-volts as a trend. And we develop those products back a few years ago, like 5, 6 years ago, and we provide all these integrated solutions rather than these discrete ones, okay? And the size can be 6, 7x smaller. And the other one is the 800 volts for EV. And now all goes up from 400 volts to 800 volts, okay? And in the China market, a lot of cars already have 800 volts. So our silicon carbide solutions came in not for traction inverters and for control systems. These products will be shined. And so that's -- I pull out my hair at this moment. Tony Balow: And Rick, maybe just to shape you a little bit on timing there to make sure. I think what we said is the layering of opportunities in auto really sort of out of the end of this year and next year starts with design wins that we have, bringing new content to market per vehicle. You start to see zonal designs hit market next year then ramping through into '27. And then the BMS and traction inverter solutions they're really kind of more like '27 and beyond, just to make sure you understand sort of how those revenue opportunities are layering in. Richard Schafer: And if I could ask my follow-up just it's on HVDC. And I appreciate the timing and commentary you provided a second ago, Tony. But I'm also curious, I mean, I'm just trying to figure out the right way to think about that emerging market. I mean, like can you give a sense of how HVDA compares to sort of how you've described at your Analyst Day earlier this year. Maybe how you describe the 48-volt accelerator power opportunities or in any terms you want, just to try to give a sense of what that market represents to you guys or what you think it could. Michael R. Hsing: I think the 48-volt system is clear, there's a reason why the 48 volts, is going back to those telecom times, okay? And telecom systems, 48 volts plus/minus 48 volts? And plus/minus 45 volts. And first, it started with -- in the server side, we're talking about for years this thing. And it has to be the solutions because once your current goes up, everybody remembers the car using a 6 volt batteries and then it became 12, is ultimately moving up to 48 volts. I mean these are all for control systems, 48 volts and the data center is really happening 48 volts. I see -- that's why I predict all the building -- the building automations are going to be on 48 volts. And the building will be a DC power solutions. And the opportunity is great. And as we put out to engage our customers with the building automation systems, and we proved the point, actually, it's so welcome for that type of a product. And so that's my view at this time. Tony Balow: And rick, I think part of your question was also on the 800-volt high voltage DC for data center as well, right? Richard Schafer: Yes. Tony Balow: And I think on that one, we've been pretty careful about trying to go size the opportunity because, one, it's very far out. Two, we don't know how it will ramp in the market. I think what we have said is since we don't play in that part of the market today, the business we get is sort of all accretive to our overall SAM going forward. But I think we want to be careful about size in the market yet, given how far out it is and not knowing how it will layer into the data centers going forward. Arthur Lee: Our next question is from Gary Mobley of Loop Capital. Gary Mobley: Let me extend my congratulations on the continued strong growth and continued execution. I appreciate the fact that you still only have about 3 to 4 months of visibility given the capacity that you can support and the quick turns business you can support. But can you confirm whether bookings continue to improve sequentially and what are the seasonal considerations as we look out into the first quarter? Michael R. Hsing: It's again very difficult for us, okay, to predict that, okay, what's the booking, what's the -- where are the bookings. We build our inventories. We try to build, okay, we look at the inventory now, and we try to build up way below our models. And whatever comes we anticipate it, again, we can swiftly to adopt. Bernie Blegen: Just to add to that is that we really don't have a lot of visibility into the first half of next year. We can definitely point to the normal drivers as far as both enterprise data and automotive are very well positioned for new revenue ramps, but getting both the timing as well as getting that to balance out, we don't have a strong view on Q1 yet. Gary Mobley: Okay. Appreciate that. And if I'm not mistaken, your distribution inventory as of midyear was at the low end of your 5- to 8-week target range and it decreased in the June quarter. What was the trend sequentially for the September quarter? And when might you take that distribution inventory back up to maybe the mid- to upper part of that normal range? Bernie Blegen: Yes. Currently, the Q3 channel inventory was unchanged in terms of days from where it was in the prior quarter. So we take from that, that we're satisfying real demand at this point, which again is a reflection of the quick turns business that we're working with. Arthur Lee: Our next question is from Chris Caso of Wolfe Research. Christopher Caso: Yes. The first question is on enterprise data. And what are sort of the puts and takes as you look into next year? And of course, this year, there was some changes in market share in that, which affected that business. But I guess I'm going to assume that things are cleaner as you go from this year into next year? And I mean, one, do you expect to grow that business as you go into next year? Michael R. Hsing: Well, it's cleaner. You said that this year, the next year, this year, we are doing pretty good this year. And see, we -- and as I said earlier, the module business is growing. So all this area MPS technology shines. And the power -- the higher power, the better it is. And because we provide the highest density, power density products that fits this market perfectly. And in the next couple of years, you will see it. MPS is a major player in this market segment. And also the market is big. We -- it's not -- okay, we don't want a place, so we don't have to be MPS only, okay? We want to have multiple competitors. It's good for the industry. Bernie Blegen: Yes, I could see enterprise data growing in the range of 30% to 40% in 2026 for us. Much of that, though, would be back in the second half of the year. So while we've seen a number of new players that have been layered in, I think the material ramps are more weighted to the second half of '26. Christopher Caso: That's very helpful. If I could follow on to that since you provided a little bit of color on that, Bernie. When you look at that 30% to 40% growth, is that -- because I know that some of the vertical power of designs, for example, you have more content. What's the driver of that? Is it fairly broad-based? Is it skewed towards some of the ASIC solutions more towards vertical power, whatever kind of color you can give behind that 30% to 40% expectation? Michael R. Hsing: As a CEO, I don't know how to make a 30% to 40% cost. I don't know. And the opportunity is there, okay? If we didn't deliver 30% to 40%, the stocks I see from $900 to $400, what kind of f***** is that? And so I don't want to make them very hard, just waiting for the numbers, let the numbers show it. Arthur Lee: Our next question is from Kelsey Chia of Citi Research. Wei Chia: So my question is on the competitive landscape. And I was hoping if you could share more, especially with regards to material side of things like gallium nitride, silicon carbide, I think your biggest enterprise data customer has been signing a lot of partnerships with all these semiconductor companies and I was just wondering, MPS positioning in those. And if you actually see those materials as being important in the next generation of the power modules and chips. Michael R. Hsing: We do our own silicon carbide and we're building the modules. And also, we are seeing -- we are using again -- but that's a very, very early stage we are evaluating it. And also, don't forget about silicon, silicon power MOSFETs have evolved, we engaged a lot of new developments. And a lot of the data showed it can be very cost effective and also can compete with the silicon carbide. That's very new -- that's a very, very recent development. Wei Chia: Yes. Okay. Got it. And I would just like to have a sense of how do you guys feel today versus a quarter ago. Especially, you guys have come a long way since the start of the year when you're dealing with all these market share changes, visibility on the ASIC customers and things like that. And given the slew of announcements from all these big mega partnerships, how do you see that relative to opportunities? And also given the maturity of the supply chain, I believe, like things are probably -- the supply chain partners are getting to a good cadence. So how do you guys feel with regard to those recent announcements relative to your opportunity set? Michael R. Hsing: I don't measure quarter by quarters, I measure by multiple years. So I can't tell you that. Bernie Blegen: I guess the simplest way is we're very broadly indexed across not just the merchant vendors or large ASICs, but medium and small time opportunities. And all of these need to find their way into the marketplace. And it's right now, we're still very, very early in the process. So as Michael said, it's very hard to sort out in any particular time period. But I think that we're as well indexed amongst all the opportunities as anybody in this market. Arthur Lee: Our last question is from Jack Egan of Charter Equity Research. Jack Egan: I have one on enterprise data and then one on modules more broadly. So the shift to modules in vertical power delivery with the custom ASIC ramp should be a pretty big tailwind for MPS. I'm kind of wondering about what the main drivers have been at least so far for those customers that are switching from lateral to module to vertical power. So I'm not really sure if you have this level of granularity, but among the major benefits like higher power density, higher efficiency, smaller footprint on the top side of the board, et cetera, is there any one characteristic that's kind of being cited by your customers as the main reason that they are moving to those modules or vertical power delivery? Michael R. Hsing: Well, we don't see from a chip to module. Whoever stays with the module stays with module, starts with the module. Whoever stays with the chip, stays with the chip, okay? And so MPS provides both, okay, in both chip solutions and module solutions at this time. And so I don't know if it answered that question for you. Jack Egan: Got it. Okay. And then just kind of on the modules more broadly. I think I believe, if I understood it correctly, last quarter, you mentioned is that modules outside enterprise data could be like 10% to 15% of your total revenues. And so I was curious how much of your revenue base or I guess, addressable market outside enterprise data would be eligible for switching to modules. I mean, even if you're looking several years into the future, how high could that mix of modules outside enterprise data go? Michael R. Hsing: That's a good question, okay. And we want to -- we build those modules and again, very similar to enterprise modules, okay? And since 2017 industrial markets adoption is kind of slow, actually faster than telecom, okay. And these are 2 market segments that we focus on. And then to our surprise the auto industry also want to use it because it's easy to implement. And so -- they don't want the semi equipment. And that's a large segment, we didn't realize that, okay? I mean now we see all these revenues are happening there. So I think that in the next couple of years, it will be growing faster than 3 or 4 years ago. And so we're picking up a business -- the rate of increase is picking up. Arthur Lee: This concludes our Q&A session. I would now like to turn the webinar back over to Bernie. Bernie Blegen: I'd like to thank you for all joining us in this conference call. I look forward to talking to you again during our fourth quarter 2025 conference call, which will likely be held in early February. Thank you, and have a nice day.

Operator: Welcome, everyone, to the MPS Second Quarter 2025 Earnings Webinar. My name is Arthur Lee, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Balow, Vice President of Finance. Earlier today, along with our earnings announcement, MPS released a written commentary on the results of our operations. Those documents can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The risks, uncertainties and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q2 2025 earnings release, our Q2 2025 earnings commentary and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now I would like to turn the call over to Bernie Blegen. Theodore Bernie Blegen: Good afternoon, and welcome to our Q2 2025 earnings call. In Q2, MPS achieved record quarterly revenue of $664.6 million, 4.2% higher than the first quarter of 2025 and 31.0% higher than Q2 2024. This performance reflected the ongoing strength of our diversified market strategy, consistent execution, continued innovation and strong customer focus. Let me call out a few highlights from the second quarter. We continue to see diversified revenue growth across all of our end markets. We began initial shipments of our power solutions to support our customers' new ASIC-based AI products. Storage and compute revenue grew sequentially off a strong Q1 as we continue to see demand for both memory and notebook power solutions. MPS continues to focus on innovation and solving our customers' most challenging problems. We continue to invest in new technology, expand into new markets and to diversify our end market application and global supply chain. This will allow us to capture future growth opportunities, maintain the supply chain stability and swiftly adapt to market changes as they occur. Our proven long-term growth strategy remains intact as we continue our transformation from being a chip-only semiconductor supplier to a full- service silicon-based solutions provider. I'll now open the webinar up to questions. Operator: [Operator Instructions] Our first question is from Tore Svanberg from Stifel. Tore Egil Svanberg: Congratulations on another record quarter. Michael or Bernie, I was hoping you could talk a little bit more about the September quarter, what the setup is there? You're guiding for 8% sequential growth at the midpoint. I was just hoping you could give us some puts and takes of the six end markets in the September quarter. Theodore Bernie Blegen: Sure. Happy to, Tore. When we look at Q3, we've got enterprise data growing between 20 and 30 percent sequentially. We also see a seasonal uplift in consumer. And then with the exception of storage and compute, all of our other lines of business are up high single digits. In storage and compute, we just have a little bit of caution, primarily because you're coming off of 2 very strong quarters in Q1 and Q2. Tore Egil Svanberg: And just as my follow-up, you mentioned the ASIC program is now starting to ramp. I was hoping you could add a bit more color there. Are we talking about multiple customers? Are these primarily vertical power architectures? And I guess, a really important question is back at the Analyst Day, you gave us that $4 billion SAM for your enterprise data market. And there's a lot that's happened since then. So I was just wondering if that number is starting to move quite a bit upward. Michael R. Hsing: You're right. Since the Analyst Day, things are changing fast. And everything is good. And after a couple of years, these enterprise data segments and clearly, you establish a winner or losers, okay? And that MPS has appeared to be a winner. We do engage multiple customers. If it's not all large customers, all large customers or potential customers that come in. We have a lot of design wins and design activities. While that threatens our ramping up in the near terms, also a lot of small emerging players. And we see the peripheral but not only in the data centers, but all kind of applications. And that's what we're very excited in the long term. The short-term ones, and I said in near terms, it doesn't mean then, okay, next 6 months, next 12 months, okay, I keep saying them, okay, our forecast revenues have been -- is always a plus or minus 6 to 12 months. So you said earlier the $4 billion, okay? That's what we said and that's what we see it, and we're going to get there. Operator: Our next question is from Chris Caso of Wolfe Research. Christopher Caso: I guess the first question is with regard to enterprise data. Previously, you had provided some guidance on that to be flat, plus or minus 20%. You talked about guidance for the September quarter. Any more visibility with regard to the full year guidance for that? Any more narrowing of that range? And whatever kind of color you can provide on your expectations there? Theodore Bernie Blegen: Sure, Chris. The market, as Michael just said, remains dynamic. We have fairly short lead times. So even for Q4, we don't believe we have our arms around all the business, it's likely to occur. So that's just said, the nature of the dynamic of this fast-moving market. So at Q2, we identified the range as being flat to down potentially 20%. And while we're not guiding on Q4, in addition to the growing Q3 sequentially by 20% to 30%, I can say that Q4 will be up sequentially. Michael R. Hsing: Well, whatever we said in the beginning of the year, we feel comfortable. Christopher Caso: That's helpful. Just in general, you've obviously listened to the calls from some of your peers that there's some degree of macro uncertainty out there. Some of the customers -- some of your competitors rather have expressed some caution and some concern about some tailwinds in certain areas. I wonder if you could comment on that with respect to your business. And in general, as compared to 90 days ago, is there anything that's changed in your view of the overall markets or your expectations with respect to the year? Michael R. Hsing: Well, I'll give you an arrogant answer. Sorry, but I don't listen to any other costs. I'll tell you that, maybe I've known from you, okay? And we focus ourselves as always. Market condition is market conditions, okay? We provide the components to the multiple segments. That's where we focus on it. And we focus on the internal execution and execution with our customers demanding in futures. And that's what we always do. And whatever happens, happens as long as we're much better than everybody else. Theodore Bernie Blegen: If I could add to that, in Q2, we used the phrase that we were cautiously optimistic about the outlook for the balance of the year. And I think that still describes how we feel from the standpoint that we have seen a broad-based continued strong demand profile in all of our end markets. However, the ordering pattern because there is a little bit different risk pattern to remain with short lead times, so as a result, we're not necessarily building backlog that we have visibility out beyond 2 quarters. That's a little bit different from most recoveries that we've experienced. But again, I want to stress that we feel very good about our overall positioning for the remainder of the year. Operator: Our next question is from Quinn Bolton of Needham. Nathaniel Quinn Bolton: Congratulations on another good quarter, Michael, Bernie, Tony. I guess, Michael or Bernie, just wanted to ask, as you start to ship into some of these ASIC platforms, can you give us a sense, the ASIC platforms, do they tend to be sourced by multiple PMIC suppliers? Or do you tend to see sole source sockets for a given generation of an ASIC, and then the ASIC vendor may source to first generation with yourself and, say, a second generation with a competitor. That's a question I've gotten a fair amount. And so just wondering if you could give us some sense on whether those ASIC programs tend to be single sourced or multiple sourced. Michael R. Hsing: Yes. We see a variety of single sourced and double sourced, multiple sourced, high-cost source and low-cost source, and all source. And we deliver what our customer -- we develop system vertical power, again, and which is more module like solutions and even the chip side, and we do whatever our customers demand. Maybe they came and say that, okay, 2 ways. I disappointed that you didn't ask any more specific technical questions. Nathaniel Quinn Bolton: I'll say those for Analyst Day or maybe they call back. Theodore Bernie Blegen: Okay. Let me add real quickly there, is that each of the end customer has their own reasons for how they're selecting their suppliers. Some of them is supply chain resilience, others want innovation. Again, like every opportunity we have, we provide strong customer focus and consistent execution. So that's what makes us feel that we're very well positioned across all of these opportunities. Michael R. Hsing: When I tell you the high cost and low cost, multiple customer, one source, two source, multiple source, they all choose, nothing but they choose. Nathaniel Quinn Bolton: Okay. Got it. And then the second question, I'll move to the automotive end market. Kind of wondering if you guys could give us your outlook for the second half of the year. What are the biggest drivers of growth? I think you have a couple of platforms with Western OEMs set to ramp where you have some pretty good content. Wondering to the extent that those ramp, does that drive growth half over half in the automotive business? Or are you looking for sort of more of a flattish half over half in that segment, in the second half? Theodore Bernie Blegen: So automotive, and we've been very consistent on how we've described the rollout for calendar '25 that we enjoyed a nice step up sequentially from Q4 to Q1. We anticipated that, that would be flattening a little bit in the middle part of the year and then picking up end of the Q3, Q4 as these new content opportunities come online. So while there is some back and forth on the SAAR and units and in particular, with individual companies, we're less affected by that than the timing of these new content ramps. Tony Balow: And Quinn, I think I just wanted to add on that, right? I know we're hyper focused just on the year. But I think if we step back and look long term into 2026, the opportunities around 48-volts, some of the zonal architectures, I think they continue to be opportunity for us going forward, and this will be a growth area for us over the long term. Michael R. Hsing: There's too many things I can't remember. Operator: Our next question is from Ross Seymore of Deutsche Bank. Ross Clark Seymore: Congrats on the quarter and guide. Just want to dive first into the enterprise data side. You mentioned in your preamble or the press release that both the AI side and the server side were strong. Can you talk a little bit about any differences between those 2 growth rates, composition, kind of the breakdown of ED between those in both 2Q and 3Q? Theodore Bernie Blegen: Again, something that we've talked about as it relates to enterprise data is that the lines between traditional CPU and AI are getting a little blurry. So it's very hard to make clear statements of relative growth or importance. Having said that, I think that the overall profile both for the near-term or midterm and the long term remains very positive. Ross Clark Seymore: Great. I guess as my follow-up. There's been a decent number of concerns about pull-ins and tariff-related activity. Obviously, you haven't mentioned anything on that. But outside of the enterprise data segment, when we think about the cyclical recovery that's happening, are you seeing any evidence of that kind of tariff influenced behavior? And/or do you think the cycle itself is really what's driving demand? Theodore Bernie Blegen: We believe the cycle is driving demand. We really don't have enough information to support a change in our customers' ordering pattern that would be related to tariffs. Michael R. Hsing: We don't want to potentially know that, yes. These are our controls. And again, I mean, whatever happens, happens. By the way, our inventory is low, Ross. Ross Clark Seymore: I didn't want to go there, but it was nice to see. Operator: Our next question is from Rick Schafer of Oppenheimer. Richard Ewing Schafer: Congrats on another nice quarter. You guys make it look easy. I wanted to ask a quick follow-up on the $4 billion enterprise data, SAM number. I was curious if that considers the eventual conversion of server CPU to 48-volt. Does that factor that in? Or is that incremental to that number? And second part of that question, I'm curious how much does HVDC increase that SAM or that TAM? And when do you expect direct current rack power to start really taking off? I think you started sampling last quarter, if I'm correct. Michael R. Hsing: Okay. These are the 800-volt systems and 400-volt systems. And yes, we've started sampling. These are not in the factors. And both what you mentioned, the 48-volt servers and also the 48-volt systems and 800-volt system, we're this far in the future, so maybe far in the future is maybe a couple of years, a year, 18 to 24 months kind of things or maybe even longer, okay? We don't want to call the market, okay? We are the only solution providers. And this one, we believe, ultimately, all data center will convert into this type of 48-volt and 800-volt systems. And that's what we're targeting, but that's what we emerge and focus our development, not only in the last couple of years. We said many years ago, back even in 2016, we foresee 48 volts, that will be the solution. And we became one of the key supplier in that. And last couple of years, 3 years ago, we started working on the 800-volt systems. And also not only that, also the BMS, the battery management systems, and these are absolutely fit for that type of applications. And not only for vehicles, energy storage and the data centers, this is all about the energy utilizations. Tony Balow: Rick, the only thing I'd add, I know you asked very specific enterprise data question, but remember, we kind of think about the overall data center opportunity. And whether that's optical module growth, whether that's going to be memory, all those things, I think, play in as opportunities for us. So I'm just trying to get a step back a bit from only focusing on the enterprise data segment. Richard Ewing Schafer: I appreciate that, Tony. And that actually leads me to my second question, which is I know it's not your largest segment, but communication seems to be firing on all cylinders. I mean, satellite, WiFi, 5G and transceiver power that you just mentioned. I didn't know if you guys can elaborate at all or talk at all about order trends, order velocities there, outlook for that segment? Like just basically any color you'd be able to share there. Theodore Bernie Blegen: Sure. So if you look at about a year ago, we saw a large step-up from Q2 '24 to Q2 of '23. And a lot of that was in the core networking telecom business. And that's sort of plateau -- that element has plateaued. But at the same time, we saw growth in the optical modules within the data center that's been growing very nicely. So right now, I think that we're positioned very well but I don't necessarily have a strong signal of additional investment in the network category. Operator: Our next question is from Josh Buchalter of Cowen. Joshua Louis Buchalter: Congrats on the record results as well. Might shock you, but I'm also going to ask about enterprise data. As we get into the back half of this year, any metrics or guidelines you can give us on how much this new AI ASIC is contributing to the back half of the year, how it compares to your lead GPU customer? I mean is this opportunity comparable in size to what you've been able to generate on the GPU side? Michael R. Hsing: Well, all these questions that are being asked are being similar questions, so we'll answer okay? We're looking in the future, even near-term future looking good. But that's only about, what, 25% of MPS business. And the bigger revenue growth is the rest of the company. And I hope we should have more questions on the rest of the business. Joshua Louis Buchalter: I will take the subtle hint there and ask you about auto. Michael R. Hsing: Auto and H1 that add together maybe only 40%. How about something else? Joshua Louis Buchalter: All right. I mean I got the storage and compute there. We can take this anywhere. Michael R. Hsing: All right. I'm just joking. Ask us whatever you want to ask. Joshua Louis Buchalter: Let's take with storage and compute then. I mean you mentioned some caution there into the back half of the year. Is that sort of an inventory dynamic? And you had gained a bunch of share, I believe, on DDR5 to start the year. Is there still more room to run from that on the share and content side on the DDR side within storage and compute? Theodore Bernie Blegen: Josh, it's an excellent question because we had a very significant step-up of our position competitively as well as from revenue in both storage and notebook. So again, the reason that I used the term cautious is because both end markets tend to be a different demand profile from like automotive, for example. And what I mean by that is historically, notebooks have always been like consumer and been expansion in Q3. We had such an atypical seasonality with a buildup in Q1 and Q2 that it just pays to be a little bit cautious there. Likewise, on memory, I have nothing to indicate that there's a slowdown or a change in the market positioning. But again, it's just that in the past, they've had historic boom and bust cycles. So that's the only reason that I'm offering. Now having said that, we were pleasantly surprised in Q2 that the results for that particular group came in better than expected. Michael R. Hsing: Yes. In auto, we grew significantly this year, right? Theodore Bernie Blegen: Yes. Our full year results are going to be well above what we've been doing... Michael R. Hsing: 40%? Theodore Bernie Blegen: Yes. Probably, for the full year, we'll be between 40% to 50% growth for the year. Michael R. Hsing: And that's the reason Bernie probably asked to be even more cautious, okay? Not going to be 100% next quarter, okay? That's what we mean relatively what cautious means, okay? Cautious is not expected another 50% or higher. Operator: Our next question is from Gary Mobley of Loop Capital. Gary Wade Mobley: Bernie, I appreciate the fact that you don't have a lot of visibility out into the fourth quarter, but I want to ask about the seasonality of the fourth quarter. Typically, Q4 might be down, what, mid-single-digit percent sequentially? How do you see it shaping up this year? Michael R. Hsing: I don't have a seasonality anymore. Theodore Bernie Blegen: I think Michael said it all there. Again, if you look at that historic trend, and I don't know the last time we actually fulfilled being down, it's in a fairly narrow range. So I think flattish is probably the easiest way to describe the outlook. Gary Wade Mobley: Helpful. All right. So it sounds like you've got plenty of capacity, plenty of inventory. Can you remind us what sort of annual revenue you could support with your internal and external capacity? And can you confirm whether or not the book-to-bill ratio is in fact trending above parity? Theodore Bernie Blegen: It's 2 separate questions, but I'll try to address pretty quickly. Michael R. Hsing: I'll answer first, the second part. Our inventory is low. Theodore Bernie Blegen: Our current capacity, and we've talked about this in the past, is to be able to support $4 billion of revenue with diversification of 50% of that outside of China. So what we're trying to do is be able to support all of our customers' requirements in whatever supply chain profile they're looking for. When you look at the book-to-bill ratio, and I commented on this earlier, that we're having sort of an atypical ordering pattern when you consider that we do believe we're in the middle of a cyclical recovery that's very broad-based. And what I mean by that is the ordering patterns are much more short term. We're not building book-to-bill ratios of like 1.4, 1.5, where we'd have backlog continuing out into Q1 and Q2 of next year. It's really a more near-term focus. So with those short lead times, that's the only reason I have a little bit of concern about Q4, and I don't want to send a negative signal, it's just that that's the nature of the demand profile. Michael R. Hsing: That's it. I don't want to say negative single either for the low inventories. We are expanding our supply chain. And we can meet it in Q4 in our customer demand. And for next year, we start to -- even now, we continuously qualify the newer supply, and whatever it takes to meet the customer demand. That's what we always do. Tony Balow: The only thing I'd add, I don't know if it was part of your question was, in addition to the overall capacity, the geographical balance of it. And what we said is we would, by the end of the year, have half of that capacity outside of China, half of it inside. And to Michael's point, we just want to be able to and believe we can meet customer demand no matter how they want to route their product. Operator: Our next question is from Kelsey Chia of Citi Research. Wei Qi Chia: Michael, Bernie, congrats on the strong results. So I have a question on customer concentration. So it's great to hear that you guys are shipping to the ASIC platforms. So does it mean that MPS sort of back to the historical kind of diversified growth where there's no one customer that's more than 5% of your sales by the end of the year? Or is the ASIC ramp sort of lumpy as well that can sort of tilt that kind of customer concentration? Theodore Bernie Blegen: I think that when we had the high customer concentration, particularly in enterprise data, that was an aberration from our normal model of being broadly diversified in terms of customers, end markets and geography. So I think now that the portfolio of market entrants is starting to build up, and we're going to have exposure to all of those opportunities. You'll see us go back to a more normal profile of customers not contributing more than mid-high single digits. Wei Qi Chia: Got it. My second question is on the growth rate. So it seems that the analog industry has sort of been going through a downturn in the last 2 years. And potentially for 2026, we could see pretty strong growth due to the cyclical recovery. And you guys have a 10% to 15% outperformance target versus peers. So that would imply sort of like a close to a 20% growth rate perhaps for next year. Is that a right assumption? And if you can provide some color as to which end markets would be driving majority of that growth based on the content or design wins? Theodore Bernie Blegen: Sure. I think that your rule of thumb as far as our traditional outperformance and also what the broader market looks like for '26 are both accurate. So I think within plus/minus a couple of percentage points, I can support those numbers. Again, as far as the particular end market drivers for next year, we believe it's going to be broad-based, although with all of the enterprise data opportunities ramping next year. That will probably be a key contributor. Operator: Our next question is from William Stein of Truist. William Stein: First, I wanted to clarify about the short lead times and ordering patterns. Is it fair to say that the only thing that's really going to cause that to stabilize and lengthen is your extending the lead times that you quote to customers, which likewise is sort of difficult as long as revenue is fairly meaningfully below your capacity level? Is that a fair way to think about it? Michael R. Hsing: Yes. I know it's a correct characterization that is meaningfully below our capacities. I don't know if that's an accurate statement or not. But overall, it's a fast changing market and customers are updating their models, okay? We have just to keep it up. Theodore Bernie Blegen: Think we're being responsive to real demand. One thing we haven't touched on is that our channel inventories in each of the geos, major geos for us are down in the quarter. So they're also very lean. So right now, we believe we're meeting real customer demand. William Stein: Got it. By the way, Michael, what I meant was comparing the revenue guidance -- revenue results and guidance relative to a $4 billion level of capacity, there's a gap there, right? So that's all I want. It wasn't a critical one. Michael R. Hsing: Yes, $4 billion, okay, and it's not only for -- I mean it's for enterprise, okay? We're building capacity towards it, it's the case. That's the process. William Stein: Got it. And the other thing I wanted to ask about was to comment on the product development and revenue trajectory in 3 areas that you've highlighted in the past as sort of unique growth opportunities. One is modules, the other is converters, D to A and A to D converters. I think you hired a team a couple of years ago. We haven't heard that much about it. And the other is eMotion, which I know is ramped, but I wonder how meaningful that's become relative to your overall sales. Michael R. Hsing: Thank you very much. First thing, the e-commerce is a kind of flop, right? I answered your question, that part of your question a few quarters ago, okay? But the good news is, the module business is really growing other than in the enterprise data, and industrial side, even consumer side. And we offer those solutions that our customer doesn't want to get into the detailed design. And we provide a solution for them. And these are revenues that next year is about 10% to 15% of our total revenues, okay, other than the enterprise data power modules. And actually this is very much related to when we provide assisting solutions. And so we're transforming companies, as Bernie said earlier, to be system providers, a solution providers, and that's what our customer wants. If they want to chips also, we provide chips. And at the same time, they help MPS revenue growth. We're not depending on only selling chips. A few years ago, I'm talking about I'm tired of selling chips only, okay. And that's where our revenue grows, okay? And the other things that you're talking about the data converter. The data converter is kind of slow moving. And we are releasing a standard product for that. And for only some $1 billion, $2 billion revenues, maybe contributes very little and that doesn't -- will not move the needle. But as a product, in the product categories, that provides a total solution. That's a part of our picture. That really benefits the top line growth in terms of solutions. eMotion, finally, we get the needle moving. And it's been for a while, we get over about $100-some million in the past few years. And they're not too bad. It is slower than the MPS total growth. But now robotics. And we see it, AI-driven robotics will be -- okay, we see a lot of opportunities, and a lot of potential to grow in the next couple of years. And we provide total AI power, and not only AI power, we provide all the actuators, actuator solutions and motion controls and as well as a barrier, as BMS solutions. These all combined, all together, the motion will grow a lot faster than in the past few years. Theodore Bernie Blegen: If there are any follow-up questions, please raise your hand. There are no further questions. I'd like to just say a few closing comments. I'd like to thank you for all joining us this conference call. I look forward to talking to you again during the third quarter 2025 conference call, which will likely be held in late October. Thank you. Have a nice day.

Genevieve Cunningham: Welcome, everyone, to the MPS First Quarter 2025 Earnings Webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Balow, Vice President of Finance. Earlier today, along with our earnings announcement, MPS released a written commentary on the results of our operations. Both documents can be found on our website. Before we begin, I would like to remind everyone, that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty. Risks, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the Safe Harbor statements contained in the Q1 2025 earnings release and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today and we assume no obligation to update this information. Now I'd like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. Good afternoon, and welcome to our Q1 2025 earnings call. In Q1, MPS achieved record quarterly revenue of $637.6 million, slightly higher than the fourth quarter of 2024 and 39.2% higher than Q1 2024. This performance reflected the ongoing strength of our diversified market strategy, consistent execution, continued innovation and strong customer focus. Let me call out a few highlights from the first quarter. At our March 20 Investor Day, we showcased MPS innovation across a range of areas, including new opportunities in robotics, automotive, data center, building automation, medical and audio. In Q1, storage and computing segment revenue increased 38% quarter-over-quarter on strong demand for both memory and notebook solutions. We continue to win designs across all major enterprise data customers with revenue ramps expected in the second half of this year. Finally, Q1 2025 automotive revenue increased 13% from Q4 2024, the third consecutive quarter of sequential double-digit growth. MPS continues to focus on innovation, solving our customers' most challenging problems and maintaining the highest level of quality. We continue to invest in new technology, expand into new markets and to diversify our end market applications and global supply chain. This will allow us to capture future growth opportunities, maintain supply stability and swiftly adapt to market changes as they occur. Our proven long-term growth strategy remains intact as we continue our transformation from being a chip-only semiconductor supplier to a full-service silicon-based solutions provider. I will now open the webinar up for questions. A - Genevieve Cunningham: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. [Operator Instructions] Our first question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you, Gen. And congratulations on a strong quarter, especially during this environment and especially the cash flows. First question is on enterprise data. So it did come in line with expectations, but you talked about some second half design wins ramping. Should we infer by that, that this is sort of the low point for enterprise data this year? Michael Hsing: Yes. At this time, we feel, of course, when we're close to the second half of the year, so we feel a lot better. And overall numbers can be better. But at this time, we're not forecasting and how good is good, okay. And so we have a lot more confidence than at the beginning of the year. Tore Svanberg: Great. Yes, go ahead, Bernie. Bernie Blegen: I think it's important to say that we're engaged with many different programs, either that we have the design wins or the qualification. So it's very broad-based. It is Michael says, while our visibility is improving, clearly, the improvement is second half weighted. Michael Hsing: Yes. That's a good comment. There is a – we do win many design – we have many design wins and customers design it in, and we're just waiting for the ramp. Tore Svanberg: Great. Can I ask a follow-up? Michael Hsing: Yes. Go ahead. Tore Svanberg: Yes. So as my follow-up, Michael, I know over the last decade or so, you've been working really hard to diversify globally, whether it's R&D centers, manufacturing partners and so on and so forth. I was hoping you could talk a little bit about those efforts, especially given the current tariff environment. And how are those efforts really impacting your position right now? Michael Hsing: Yes. That's a good question. Started 10 years ago, we start to emphasize, you have a local manufacturing for local customers. And the U.S. was out of China, started – particularly started in the last couple of years. And right after pandemic, I mean the volumes and we almost double – more than double our volumes and that we need to expand the fab capacities and the serendipities, and we all expanded outside of China. And at that time, the inside of China was full. And so now they give us a very good position for outside of China for supplying the U.S. side and as well as the inside China so now that we're in a much better position now. Tore Svanberg: Great. Thank you for that. Congrats again. Tony Balow: Tore, the only thing I'd add, right, from addition to the supply chain, right, the diversification approach has really been on the front end as well around R&D. So we've been looking both the design and the supply, that's really been a hallmark of the strategy over the long haul here. Michael Hsing: Yes. Tore Svanberg: Great. Thank you. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Thank you. And I'll offer my congratulations as well on the strong results and outlook. I guess, Bernie, Michael, maybe a follow-up on Tore's question just on enterprise data. I think you came into the year thinking enterprise data could be anywhere from flat plus or minus 20%. It sounds like you feel a little better about the business now. Wondering if you might be able to sort of tighten up that range on enterprise data. And then specifically, one of your large customers sounds like there may have been a platform change. And I think some investors are concerned that, that platform change on their next-generation GPU could have an impact on your share. I'm wondering if you might be able to address just your thoughts about how you're positioned in share as you come into the second half of the year. Michael Hsing: We were told by many customers, we offer a breadth of product that meets our customer needs. We don't comment on specific customers. And we don't – and also the matter of fact is we don't know which our customers projects are going to ramp, or they changing as you said, and changing the schedules, these are our concern and we don't know and their decision, but we have enough product, we can meet the demand. And we're winning – we feel better is because our customers recently qualified many of our products from the IC levels or to module levels. They passed many rigorous testings and they feel good about it and we see so we feel good about it, we expect it to have a ramp. So at this time, we are not going to forecast what's the half year, in the past, we said – last year, we said that this year could be a flattish in our numbers. Let's see, let us deliver numbers hopefully, it's better than we expected. Bernie Blegen: Yes. And I think that Michael is right that we have increased visibility because of design win and the qualification processes down the road in another month. But still, as far as when the actual product ramps occur is outside of our control. So while I think that we feel more confident overall, the timing as far as the plus/minus against the range, let's leave it wide open for right now. Quinn Bolton: Got it. And then maybe a follow-up question just Bernie on the second quarter guidance. It looks like gross margin ticks down by about 20 basis points at the midpoint. I wondered if you could just sort of address that. Is that just sort of mix shift within the product groups? Are you starting to see either tariff costs and/or pricing pressure? What accounts for the slight drop in gross margin in the second quarter? Thank you. Bernie Blegen: Sure. There's not a specific event that we're pointing to. We're just saying that there's a mix of different things that may or may not be inside of our control. And so we're just being basically 20 basis points more conservative. Michael Hsing: Yes. Overall, all the new products that we released will have higher margins, the higher volumes, the margins is lowered. But we're not going to intend to operate much below our corporate average. That's our goal. Bernie Blegen: Yes. We stay within the range. Michael Hsing: Yes. We stay with our model. Quinn Bolton: Perfect. Thank you. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Hi, guys. Congrats on the results and guide. Thanks for asking the question. Bernie, in the first quarter, you had a very wide and divergent performance by segment to get you still to upside overall. Just wondering if there's any large segment moves in your second quarter guide, any kind of big divergent moves that you'd like to highlight? Bernie Blegen: No. Actually, the range of variance for all of the groups is plus/minus 5 percentage points. So actually, we're seeing a very narrow change sequentially. And it's worth commenting there that I believe that if we were heavily influenced by pull-ins, for example, that we might have seen a more dramatic falloff in a particular market segment. But when we look against particularly year-over-year, our strength is fairly broad-based with enterprise data, as we've talked about, still looking for the ramp in the second half of the year. Ross Seymore: Got it. And I guess that leads to my second question, which was going to be something you kind of just touched on, which is the tariff side of things. I know you talked earlier about diversifying your manufacturing and Tony mentioned about diversifying the R&D side of things. But as far as the pull-ins, push-outs, any sort of different behavior from your customers, I've been surprised how little of that has been admitted to or has actually occurred by some of the other analog companies. And so I just wondered what you guys are seeing. Michael Hsing: If it happens, there's some pushing and pull out and pulling a pull out and a push out. And those are numbers small enough we don't clearly understand it, okay? And the overall numbers is very consistent. As you see it, Bernie mentioned the Q1 the computing segments grow the revenue growth, so that's also as expected from last – the previous quarters. We have a lot of design win in those areas, and we turn into our revenues. Tony Balow: And Ross, like in that area, for sure, right, there's a lot of other business factors beyond just potential tariff-related pull-ins because there's AI PC, there's the end of Win 10 support, there's gaming. There's a lot of things that are driving the good business there as well. Michael Hsing: Yes. The key is the diversification. And the best thing I can't – I can look at the numbers, I can't have any target number that I want to analyze, okay? Everything looks very smooth. Ross Seymore: Got it. Well, let's hope it stays that way. Thanks, guys. Michael Hsing: Yes. Okay. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Thanks, Gen, and congrats guys on the solid quarter. I guess my first question, if I could, is really on data center or server power, rack power to be specific. You talked about your 400-volt rack power solution at Analyst Day. I think you highlighted like 600 kilowatts within a couple of years. I mean we're seeing more in the press about even megawatt racks within the next handful of years. So I'm just curious if you could elaborate on the expected market opportunity or TAM there and sort of when rack power sales are expected to become material for MPS? Michael Hsing: Yes. Our customer asked us to pull in, I believe with this month, we start – if not this month, next month, we deliver samples. I think this month, okay? We deliver modules, each module level is like 120-kilowatt levels. And for each modules, you add together somewhere about 600,000 kilowatt to 1 million watt power. And so we do have a product for that. And well, we do have initial development, now we have samples, okay? Rick Schafer: Michael, not to press you on it too hard, but would we see revenues like material revenues this year? Or is this more of a sample year, qualification year and it's more of a 2026 revenue driver? Michael Hsing: I believe it's 2026, okay? And if you – we expected to have a higher revenue come from that type of modules. And so at the same time, we prepare our production ramps, production qualifications and there's a lot of work in the second half of the year. But we fully expected it and we anticipate that part of the growth. Rick Schafer: Thanks for all that, Michael. And then my second question is really on auto and to me, I think you have several like material content drivers ramping this year. You look at 48-volt transition beginning 800-volt battery transition. You've talked about power isolation modules. I know you talked about that at Analyst Day also. I guess I'm curious, kind of a similar question in terms of like how much do you expect BMS to contribute to that segment to auto segment revenues this year? And I guess I'm curious if there are any regions favored within that. Michael Hsing: Yes. Of course, China's model changes much faster than any other regions. But we do see in the U.S. and Europe, even Korea, okay, we're changing and changing not only from 400 volts to 800 volts and also from 12 volts to 48 volts. And those segments started very – these are still early at the very early stage. And we do ship those products now, okay, to those segments. And I believe all the early changes, we are all in it in every model. Bernie Blegen: Yes. And I think in automotive, in particular here, because we've heard some concerns about unit volumes from North American and Chinese EVs in particular. But when we look at our second half, a lot of the momentum will be design wins that we secured in previous years that are coming to market, particularly in North America and in Europe. So we have really – it's a content-driven second half story for automotive. Michael Hsing: Yes. What you mentioned about 800 volts, 48 volts and those probably we'll see a lot more in the 2026 and 2027. Rick Schafer: Great. Thank you, guys. Michael Hsing: Okay. Genevieve Cunningham: Our next question is from Joe Quatrochi from Wells Fargo. Joe, your line is now open. Joe Quatrochi: Yes. Thanks for taking the questions. I wanted to follow-up on your comments on the storage and computing segment. I can appreciate you guys are seeing some design wins ramp. I guess as we look forward here, just given like the abnormal seasonality, strength that you saw in 1Q, how do we think about that business kind of throughout the rest of this year? Michael Hsing: Are you talking about seasonality? I don't know. Nowadays, the proper MPS of being a public company now 21 years. And in recent years, I don't know what the seasonality is. But we talk about the design wins in the memory side, okay, the memory part of the power management. And we're talking about for the last year or two or so. And I think at one time, we will ramp up this year, but we don't know these are kind of things plus/minus quarters, and you get it close to us and you get orders by the end of the quarter, they don't push up. Now here's the numbers. And we're not very good at forecasting the numbers, but we are good pretty good at delivering numbers. Bernie Blegen: But I think a really important point here as well is that how broad-based this is. So we're looking at DDR5, SSD, even HDD on the memory side. And then as Tony pointed out previously that within the notebook that there are a variety of factors that are driving that end market as well. So... Michael Hsing: CPU side, notebook side, CPU side, desktops and notebook side. And Bernie mentioned all these segments, these are pretty evenly growth, maybe memory side, the DDR5 is a little bit more than the other ones. But they're pretty much evenly growth in all each segments. Tony Balow: Yes. And Joe, just relative to what Bernie said before, going into Q2, everything is plus or minus a couple of points kind of thing. So you would infer from that, that, that segment would not see a sharp fall off necessarily in Q2. Joe Quatrochi: Yes. No, that's helpful. I appreciate it. Maybe as a quick follow-up. Looking at the enterprise data side, maybe on the non-AI segment of that market, how are you thinking about traditional server CPU demand this year? Michael Hsing: They're doing good. And as you probably know, listen, okay, all these are a lot of servers has a refresh, adopting whatever the Intel's the latest models. And we expected – as we said it in the beginning of the last year, the year before, we will increase our market shares. And now we're pretty much okay. And we see as we said it, and years ago, last year. Bernie Blegen: And I think just to stay on that point for a little bit longer is that, again, much like the other areas of our business, we're seeing consistent steady growth. It's not like a spike or a hockey stick. Michael Hsing: We will gain shares in the next year, I think we even gain a higher percentage in the server market. Joe Quatrochi: Perfect. Thank you. Michael Hsing: Okay. Genevieve Cunningham: Our next question is from Gary Mobley of Loop Capital. Gary, your line is now open. Gary Mobley: Hey, guys. Thanks for taking my question, and congrats on the solid first half performance. On the topic of China, can you give us a sense of how big your business now is in China relative to local indigenous consumption? And given your China for China manufacturing supply chain, how has that and how will that position you versus your larger U.S. competitor? Michael Hsing: If you know our story, this is – a lot of design and a lot of design activities and a lot of manufacturing happening in China 10, 15 years ago. And started 2016, we diversified not only from the – before the U.S. and China and started 2016, 2017, we established placing in Europe, multiple places since then. And as I mentioned, before mostly our manufacturing partners that's in China after the pandemic, we migrate a lot by serendipity, I said earlier. And as a result, was the capacity within China. So we announced. And so I don't know how we engage with our competitors, okay, if there's any concentration or concentrated in the U.S. for production or concentrated in China in the current environment, neither of a good. You need a really balanced. And in China, your manufacturing, particularly manufacturing for China in the U.S. is outside China, and the same as Europe. Gary Mobley: Okay. As my follow-up, I wanted to ask about capacity and customer order lead times. It appears as though you have almost half a year's worth of inventory on your balance sheet. And you probably have infinite manufacturing availability, at least in the intermediate term. Michael Hsing: No. Quite infinite. Yes, so we have a lot. Yes. Okay. Go ahead. Sorry. Gary Mobley: So my question is, have you seen any sort of uptick in customer order lead times? And related, has that improved your visibility or your backlog or any of those forward-looking metrics? Bernie Blegen: So as far as the inventory, let's take that on first off, is that we're a little bit – our model is to hold about 180 to 200 days on our books, and we're well below that level right now. When we look at inventory in the channel, we also see that, that is very lean against what we typically experience or what our model is. As far as the lead times, they're actually holding pretty well as far as what we're seeing in the supply chain. And as I've commented in prior comments that in certain of our end markets, they do demand short lead times, and so we have to build ahead of their demand. I think though, right now, we have a lot of flexibility, we're very well positioned regardless which way the market goes. Michael Hsing: Yes. If you know our – we targeted 180 days to 200 days for many, many years, and – because for the new – all the new product ramp. And in Q1, I don't know if you remember, as I said, the inventory levels very low, both from our – both from a disti levels and as well as within MPS at the very low levels, I may even said it, it was unhealthy levels, too low. And overall, our strategy is we always hold more inventory than in disti. And we have a better management. Gary Mobley: Thank you. Genevieve Cunningham: Our next question is from Joshua Buchalter of Cowen. Joshua, your line is now open. Joshua Buchalter: I wanted to follow-up on Joe's question from… Tony Balow: Josh, are you there? Michael Hsing: We can't hear. Oh, I cannot hear you. Now it's better. Tony Balow: Yes. I can hear you now. Michael Hsing: Nope. Now it's cutting out. Joshua Buchalter: Oh, no. Last try. Good? Tony Balow: There you go. We can hear you. Joshua Buchalter: Okay. I'm sorry about that, guys. It's my first time on Zoom. I wanted to follow-up on Joe's question from earlier on storage and compute. I totally appreciate the share gains that you mentioned, but the 38% sequential growth in what's usually a sub-seasonal quarter for PCs is certainly eye-popping. Are there any more metrics you can give us as to maybe content or share shifts that are going on and to give us comfort that there's not inventory build happening here? Thank you. Michael Hsing: Well, in the past, we have a few eye-popping numbers, right? So we didn't surprise it. I mean, as we said, it's a pretty evenly growth in the segment, particularly a little bit more than the DDR5 as we said a few quarters ago. Bernie, do you want to… Bernie Blegen: Yes. Josh, you might recall from my comments from year-end when we were looking at the Q1 outlook, and I said that there was an atypical seasonal uplift anticipated in storage and compute. And against our internal expectations, we came in within low single-digit performance to the upside. So while it maybe counter to whatever seasonality we've experienced in the past, everything rolled out pretty much as anticipated. Tony Balow: Yes. We have… Michael Hsing: Okay, go ahead. Tony Balow: And Josh, just remember that storage compute, you heard Michael say it before, it's growth from both the memory side as well as the notebook side. So it's not all notebook driven that might apply to your seasonality question. Michael Hsing: And a desktop. And here is we have always – particularly in the last couple of years, and the market is very dynamic. And you see one segment popping up. The other one segment is not so much. And in the last couple of years, you see more. This quarter, is storage and the compute. Last quarter, I don't know, auto, before was enterprise, okay? And we keep like running like a circle. Joshua Buchalter: Thank you for the color. And then I wanted to follow-up on enterprise data also. You mentioned the increased confidence versus three months ago. Is that coming from your biggest customer in that segment? Or is that more confidence in some of the newer platform wins that you expected to ramp in the second half? And within that, like are lead times still measured in weeks? And when would you expect to, I guess, have more visibility onto the share in enterprise data? Michael Hsing: Do you imply, we circle back. We feel as the time – as closer to the second half, we feel better, as always, and we have a more clear visibility. Bernie? Bernie Blegen: No, that's exactly right. We've talked about this in the past. It's not just the main customer, but some of our other customers are operating with shorter lead times. And as a result, we feel very good about the design wins, the qualifications. And as I mentioned earlier, it's really the timing of when they expect to ramp. But even within that, we're getting increasingly more confident. Michael Hsing: Are you talking about large customers, small customers, when we're looking at all these, they all can be very big, they can all be very big. Joshua Buchalter: Congratulations on the results and apologize for my technical difficulties again. Michael Hsing: No. Okay. Thanks, Josh. Okay. Genevieve Cunningham: Our next question is from William Stein of Truist. William, your line is now open. William Stein: Great. Thanks for taking my questions, guys. Two topics. I wanted to hit on tariffs and then I wanted to hit on some growth opportunities. On the tariff side, people have asked a bunch of different questions, but I wonder if you'd help us understand if there are any direct as in unit costs and unit pricing impact that's influencing your Q2 guidance? And is there any indirect or unit demand impact influencing your Q2 guidance? Bernie Blegen: No to both questions. Michael Hsing: Yes, yes. William Stein: And then at the Analyst Day, you showed some pretty unique products for a semiconductor company. The sort of finished full up the products. As I recall, there was a sonogram. I think you threatened to list that on Amazon, if I recall, but also building automation, you had audio amplifiers. I can't imagine that these are contributing meaningfully to revenue. But I wonder what your customer – either established customer or emerging customer reaction was to this. Did you see anything worth noting that could drive future demand that we want to think about? Michael Hsing: All I try to do is, as Bernie said earlier, we want to have a silicon-based solution company. I want to monetize our know-how. And for examples, building automation box, we did it. And you add a lot of chicken stuff in the box. So we sell sub $0.50 for all of our products. We added together and we put some software or most of our products is the programmables and now we're making MCUs, we put all together. It can be a very good viable solution for a lot higher dollars and same as ultrasound areas. And these are, to me, very interesting, we can leverage our know-how sell instead of sell $1, $2 parts, now you start to sell thousands, ten thousands dollar stuff. And our customers and sometimes and they are related to our customers. Our customers, they buy – we're talking to a different level of people. We're not talking to engineer anymore, we want to have cooperating with the large companies, we have those solutions. And you can sell – you can buy the entire solution, you can have like a white box, you label it. And or another way is you buy our modules and rather than the chip. It just take much of an effort from their hand. And we do things because we do silicon. We do silicon and we know we can know the module levels and we structure out a little bit with adding more software, it's the entire systems. And depending on the level of our customers' interest, we can engage with them in the chip levels and the module levels on the system levels. And we just want to provide more. And that's our know-how. We leverage our know-how, leverage on the silicon. And I contacted several very, very large companies. They are the leader in the area. There's much, much welcome to these kind of solutions. They want to work with us, and they want to work with us. And this is at the very beginning. That's kind of things we are transforming a company from a silicon only to a solution company. These are the ones. I think we – that's how we – from a silicon to module we grow out of the silicon company, then from our modules, we probably stay in the module level. We are never going to sell blinds and shades or blinds and air conditioning. We are – these are still in the module levels. William Stein: Great. Thank you. Genevieve Cunningham: Our next question is from Chris Caso of Wolfe. Chris, your line is now open. Christopher Caso: Yes. Thank you. First question is with regard to the power for some of the custom AI projects this year. Could you detail how significant that is for the enterprise data segment this year? And maybe some idea of what the content is on that as compared to the largest customer in that segment? Bernie Blegen: So when I look at the opportunities, particularly with AI, the products are only getting higher power and they're getting smaller footprints. And it's that area of innovation where we can help lead our customers to their end solutions in a way that our customer – our competitors aren't. So right now, the market has been dominated with really one main customer. And now as we see the second half of the year, in particular, there's going to be a number of new market entrants, and they're all with the same formula. Michael Hsing: Including a big and small. And the small looks like it will be a big. And the dollar content is it's in half years or years, a few hundred million dollars, okay? I mean it's $500 million, $600 million. These are – it's not unthinkable for half years. Christopher Caso: Got it. As a follow-up question, maybe I'll dig into some what you talked about on the confidence on the enterprise data as you go through the year. And I guess maybe a little more detail of why you feel a little more comfortable now as compared to where you were at the beginning of the year. Is it simply a matter of qualifications where you're now qualified on platforms that you may not have been qualified on at the beginning of the year? Is it more confidence with regard to market share on those? Just a little bit of what is driving the confidence for the year as compared to where it was 90 days ago. Michael Hsing: Well, the year is half year. And now the half year, almost half year later, and you feel bad or feel good and it's all going to happen as we're getting closer, okay? And so we see the results as we expected it. Bernie Blegen: Yes. I say that we've got more positive data points that we can look at. But still how that converts in the year, that's why I mentioned earlier that we're operating within a range of outcomes. Michael Hsing: Yes. And just we always – one thing we're good at looking in the past, we're pretty good at it as we said. Christopher Caso: Yes. Thank you. Genevieve Cunningham: Our next question is from Jack Egan of Charter. Jack, your line is now open. Jack Egan: Great. Thanks so much for taking the questions. So I was hoping you could talk a bit about the margin outlook for some of the new accelerator ramps in the second half and into 2026 and 2027. Is there really like a structural difference in the margin profile for those products going into custom ASICs and TPUs versus GPUs, whether better or for worse? I mean, really just any similarities or differences as to how that kind of long-term trajectory plays out would be helpful? Bernie Blegen: I wouldn't say that there's a structural change. You have individual opportunities that could be plus or minus. So this market – but there isn't a fundamental change in our margin model because of it. Michael Hsing: Yes. MPS, we want to operate well within our model, we are at the lower end, and we are very much aware of that. And we want to do is we're not going to high volume, low-margin business. It doesn't matter which area. And all these new products, I said earlier, we released, we all have higher margins. And we want to stay on the best performance. We're not competing on the price. Jack Egan: Okay. Got it. That's helpful. And then I guess for my follow-up, as it kind of relates to just the broader analog cycle across end markets, if you kind of strip out Monolithic's new design wins that are ramping and share gains, are you seeing any signals that end demand broadly in maybe some of the more downtrend markets is starting to increase? I mean I'm not sure if you can really separate those factors out. But if you're looking at markets like automotive and industrial, is there anything that gives you confidence that maybe those markets are actually turning around? Bernie Blegen: I think for MPS, it's impossible to strip out the revenue ramps from new products. I know that we've had a competitor or two that have announced that they've seen a bottoming out or potential improvement. Again, our story has to do with the new product revenue ramps. And in particular, we've talked a lot about the second half as far as enterprise data, but I don't want to ignore all of the other opportunities in all of our other end markets. So we feel very well positioned regardless of the macro for both the second half of this year as well as the momentum we're carrying into 2026. Michael Hsing: Yes. For – if you know the history, for 21 years as a public company, we only have one year, 2010, we – the year we didn't grow, we missed $3 million. Every year, we grow. Jack Egan: Right. Okay. That’s super helpful. Thanks so much. Genevieve Cunningham: Our last question is from Kelsey Chia of Citi Research. Kelsey, your line is now open. Kelsey Chia: Hi, Michael and Bernie. Thanks for taking my question. So I'd like to dive deeper on the gross margin side. So it seems that legacy wafer pricing is trending down and also you are talking about new ramps in enterprise data and auto. So is there room for gross margin expansion going forward in the second half? Bernie Blegen: Of course, there is room for gross margin expansion. Michael Hsing: For second half, no. Yes. We're not going to increase the price to our customer, okay? For next year, that's very positive. Bernie Blegen: Yes, yes. Kelsey Chia: Okay. Right. And I'll also like to tap into on the communications end market. So I believe that segment is also benefiting from the AI infrastructure build-outs. I believe on the optical module side. Could you provide more color on those applications? And also, when can we expect – can we expect sort of, like, a similar ramp to these enterprise data, the second half uptick for this year? Bernie Blegen: Sure. It was interesting because the way we look at our communications market is we have, obviously, the network telecom exposure. We have the router wireless modems. And more recently, we have optical fiber optics. And I would say that when I look at the last two quarters and the outlook for Q2, it's been very balanced. It hasn't been weighted by any one component. And that that’s what we’re seeing. We already talked about that as far as storage and computing and in automotive in particular. Kelsey Chia: Okay. Thank you. Michael Hsing: Yes. All right. Genevieve Cunningham: This concludes our Q&A session. I'd now like to turn the webinar back over to Bernie. Bernie Blegen: So I'd like to thank you all for joining us on this conference call. I look forward to talking to you again during the second quarter 2025 conference call, which will likely be held in early August. So thank you. Have a nice day. Michael Hsing: All right. Okay.

Genevieve Cunningham: Welcome everyone to the Monolithic Power Systems, Inc. fourth quarter 2024 earnings webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and founder of Monolithic Power Systems, Inc., Bernie Blegen, EVP and CFO, and Tony Balow, Vice President of Finance. Earlier today, along with our earnings announcement, Monolithic Power Systems, Inc. released a written commentary on the results of our operations. Both documents can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995. That involves risk and uncertainty. Risks, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q4 2024 earnings release and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now I'd like to turn the call over to Bernie Blegen. Thanks, Jen. Bernie Blegen: Good afternoon, and welcome to our Q4 2024 earnings call. In 2024, Monolithic Power Systems, Inc. posted its thirteenth consecutive year of growth with full-year revenue of $2.2 billion, up 21% from 2023. For Q4 2024, we had record quarterly revenue of $621.7 million, above Q3 2024 and 37% higher than the fourth quarter of 2023. This performance reflected the strength of our diversified market strategy, consistent execution, continued innovation, and strong customer focus. Let me call out a few highlights from 2024. We introduced the silicon carbide inverter for high-powered clean energy applications. Initial revenue is expected to ramp in late 2025. Other silicon carbide-based applications are expected to be introduced in multiple geographies during both 2025 and 2026. We developed a family of high-quality, cost-effective automotive audio products utilizing DSP technology from our 2024 XSign acquisition powered by Monolithic Power Systems, Inc. solutions. For enterprise notebooks, we launched a battery management solution and are sampling a new mini phase power stage. These products enable faster charge time and significantly improve notebook battery life. Building on our first analog-to-digital converter design win in 2024, we are developing new high-accuracy 24-bit converters, which are expected to ramp in the second half of 2025. Monolithic Power Systems, Inc. continues to focus on innovation, solving our customers' most challenging problems, and maintaining the highest level of quality. We continue to invest in new technology, expand into new markets, and diversify our end market applications and global supply chain. This will allow us to capture future growth opportunities, maintain supply chain stability, and swiftly adapt to market changes as they occur. Finally, I'm pleased to announce our quarterly dividend will increase 25% to $1.56 per share. And during Q4 2024, we completed share repurchases under a 2023 $640 million authorization. This week, our board of directors authorized a new $500 million three-year share repurchase program. For the three years ending December 2024, Monolithic Power Systems, Inc. has returned 86% of its free cash flow to shareholders through share repurchases and dividends paid. Our proven long-term growth strategy remains intact as we continue our transformation from being a chip-only semiconductor supplier to a full-service silicon-based solutions provider. I will now open the webinar up for questions. Thank you, Bernie. Genevieve Cunningham: Analysts, I would now like to begin our Q&A session. As a reminder, participants can click on the menu bar and then click the raise hand button. Our first question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you, and congratulations on the solid results. Michael Hsing: Either Michael or Bernie, could you talk a little bit about the dynamics here in the March quarter, especially by segment? You know, obviously, we know some end markets are still soft, yet others are actually quite healthy. So any more color on how you see the various segments in the March quarter would be really helpful. Bernie Blegen: Sure. As far as our Q1 outlook, I think we need to take the perspective that relative to the size of the market, we're a fairly small player. But we have a lot of greenfield design wins which have been previously delayed that are now starting to ramp as we enter 2025. So when we look at two of the areas that are going to drive most of the growth in the quarter, automotive is continuing to grow, and communications, where we launched some new products in Q3, are bouncing back from Q4 and will continue strong. Memory's demand profile is also very good, and notebooks look to be having a Q1 uplift. We don't know for sure, but we've had many design wins and believe that those are coming into the market. On industrial consumer, we have a lot of new product ramps that are likely to start to contribute at the end of 2025. And on the enterprise data, it will be down. Tore Svanberg: Very good. And as my follow-up on enterprise data, how should we think about that business throughout calendar 2025? Again, obviously, a lot of different dynamics, you know, different players. You know, the growth trajectory for that business throughout calendar 2025. Any color you can share with us there? Bernie Blegen: Yeah. We don't talk about it in the near terms in the specific customers as we always do. So, again, I mean, the near term is that we can control our customers' buying pattern, their allocations, and the like, but overall, this is a multi-billion-dollar market segment. We are getting ready for these next few years in the growth, and it's clearly a multi-billion-dollar opportunity. But for us, in near terms, this year could be even or maybe slightly up. Okay. We is our best guess. We don't know. Michael Hsing: Yeah. Just to add a little bit of color to how we see the year rolling out, we believe that we will be off to a slower start in the first half of the year. But as the year develops, the customer base is expected to broaden as hyperscalers launch their new products. So we have multiple product ramps with both existing customers as well as with these new hyperscalers. So as Michael just said, we believe it's likely to be a flattish year, but we believe that from a quality and supply availability perspective, we're in very good shape. Tore Svanberg: That's fair. Congrats again on the results. Bernie Blegen: Thank you. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Yeah. Thanks, guys. I'll add my congratulations. And if I could maybe tack on to the back of Tore's question, I was wondering if you could update us maybe just to give us a sense of the number of accelerated projects that you expect to ramp this year and into 2026. Just to kind of get a sense. I heard you loud and clear, Michael, that this is a billion-dollar-plus TAM. I'm just trying to get a sense of how... Michael Hsing: It's a multiple billion. Oh, multiple billion. Yeah. Don't be shy about that. We're not shy on it. No. Okay. We don't want to lose that. Okay? Tony Balow: Rick, this is Tony. I'll jump in. I think what we want to say is we're engaged across all the hyperscalers, but what you heard Michael say was that the exact timing of the ramp is very difficult for us to call. So I don't think we want to put a specific number of customers or exact ramp times out there other than saying that we're engaged broadly across them. As Bernie said, we believe that's going to scale through the second half. Michael Hsing: I can give you examples. And we foresee that these projects are going to ramp. In 2022, 2023, you look at the automotive side. We said that we have a lot of design wins. And we said, oh, these are going to ramp up, or we put a lot have a lot of inventories. And, 2023 is kind of flattish years. Our customer delayed their launch, so 2023 affected us. But I keep saying it. We don't really care. So, like, and as long as we have a product and it's designing, and designing their new product, especially to look and we're turning to a revenue plus minus twelve months, eighteen months. Bernie Blegen: And if I could just add to Michael's comments there. When you look at automotive, it was delayed not just in 2023, but also in the first half of 2024 against what we had built inventory and against our expectations. But now, as you can see, it's very solidly on track with two consecutive quarters of growth. And likewise, you could apply that same formula to what we're seeing in the communications with the release of the fiber optics in the data center. So we have the technology, but where it intersects and ramps in the market, a lot of that's a little bit out of our control. Michael Hsing: Well, you mean the directly AI powers. Okay. We have so many projects working with multiple hyperscale companies, and so we cannot tell which one is, well, ramping first. Okay? I know what the magnitude of ramping. Just we are getting the supply chain ready, get our quality testing facility ready to receive these revenues. Okay. Turning to these revenues. And so the timing we care less. Rick Schafer: Thanks for all that color, Michael. You know, funny you're talking about auto because that's my second question if I could. You know, the EV conversion to 48-volt power and to 800-volt batteries is sort of set to ramp this year, I believe, and I know you mentioned in the prepared remarks, Bernie, you know, that you're going to be shipping power isolation content. Second half, I think I heard you say, and I believe EV is about three-quarters of your auto business. So I just wondered if you could talk us through sort of what your potential content given all those changes, right, all these additional drivers, you know, what your content looks like last year or potential content per vehicle versus what it looks like, you know, in 2025 with all these new jump balls. Michael Hsing: Some very good questions. And we mentioned about 48-volt system many, many years ago. Okay? And particularly for auto, now, it became a hot topic. And we have all these products ready. We're designing those new vehicles. And these have a base on 48-volt systems. We can capture a lot. And, when once their product once their vehicles are ramping up, put on the market, and initially, we'll be another dominant player. Bernie Blegen: And I think that this is the rollout in automotive starts with EV, which is quicker to adapt new technologies onto their platform, but we expect it to continue for multiyear. Michael Hsing: Yep. Again, Monolithic Power Systems, Inc. provides a 48-volt integrated solution. And all of these high-power modules are all based on the Monolithic Power Systems, Inc. silicon solutions. And those will significantly change all these discrete ways of doing it, accruing together, the 48-volt solutions. So that definitely sets Monolithic Power Systems, Inc. apart from the rest of our competitors. Bernie Blegen: And, Rick, beyond just pure 48-volt, remember what you saw beginning Q3 was, you know, designs outside of ADAS start to hit the market. We saw more broad-based growth in the auto segment. We'd expect that to continue as additional sockets come to market. So I think that's the other dynamic that's happening as well. Rick Schafer: Great. Thanks, you guys. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Can you hear me now? Bernie Blegen: Yep. Yep. Hi, Ross. Ross Seymore: Perfect. Hi there. Just want to revisit the enterprise data side of things and, you know, not to overplay that. But the market share gains and dynamics in server CPU side of things, has that changed at all? Because I, you know, I think everybody knows what's going on with key customers and the diversification, you know, market share shifts and those sorts of things. But do you guys have other things that are happening as we speak as well? So I really wanted to focus on the dynamics outside of those, not just with the ASIC providers and other GPU providers, but also with the CPU market share and servers. So any update on that would be helpful. Michael Hsing: Ross, so let me say something else first. Our inventory is low and the channel inventory is low. We're ramping up. Bernie Blegen: I didn't know if I had to follow-up on that. It's a very good question. And let me just give you a little bit of what we're seeing. It's a fast-changing landscape. And what I mean by that, it's difficult to offer commentary on enterprise data in its different components. The lines between CPU and GPU are becoming blurry, and in support of both lines of business, we have a lot of standard products. So while we've historically had better visibility in the separation and track them a little more easily, it's hard for us to make more than just a generalized comment about what direction either market segment's going in. Michael Hsing: Yeah. I mean, I've added that. Okay. We are getting significant shares on the server side. And once you see the server market start to ramping up, well, the Monolithic Power Systems, Inc. revenue will ramp with it. Ross Seymore: Great. I guess as my non-inventory follow-up, the communication side, you guys did well in that in the second half of the year. It's a little bit choppy still, but can you just give us an idea of the profile of that business? Much is kind of the old comms versus the new comms, and give us a little bit more color on what the growth driver is that gives you the confidence for the year and, you know, I assume it's on the optical side of things, but just a little more details on that would be helpful. Michael Hsing: We're all laughing, Sanjay. And would you say the beginning of the question so Okay. It was comms. Right? Ross? Yeah. And the communications. Ross Seymore: Side, it just you know, you guys have been talking about that growing for many, many years, and it finally did last year. But I know there's some, you know, legacy pieces and some new pieces, so I just wanted to try to get some color on the difference between them. Tony Balow: Yeah. Ross, I think you kind of hit it when you were asking the question. Right? If you could comp us going forward, the area of strength that we've really been calling out is an optical. And we'd expect that to continue as part of the overall data center opportunity that you heard Michael talk about. So I think that's probably the biggest inflection point that you've seen in the past couple of quarters versus legacy business. Ross Seymore: Got it. Thank you. Genevieve Cunningham: Our next question is from Gary Mobley of Loop Capital. Gary, your line is now open. Gary Mobley: Hey, guys. Let me extend my congratulations as well. I wanted to start with a housekeeping question. Are there any greater than ten percent customers in fiscal year 2024? And if you can't name the customer, can you at least give us a sense of how big that customer was in the year? Bernie Blegen: Certainly. For the three quarters Q1, Q2, Q3 in our 10-Q, we said that we had two direct customers which are distributors that were greater than ten percent and one indirect customer that was greater than ten percent, and that carries through for the full year as well. Gary Mobley: Okay. But you can't give us a number that will publish in the 10-K in terms of the percentage of revenue from that direct customer? Bernie Blegen: Not at this time. Gary Mobley: I tried. Bernie Blegen: Alright. Gary Mobley: Wanted to ask about revenue diversification outside of your traditional power management market. And if I count correctly, there's maybe four shots on goal, and you highlighted some of those in your press release. And that would be, you know, data converters, silicon carbide, DSP audio, and battery management systems. So my question is, you know, how big in revenue terms could that be, and if this fiscal year 2026 time frame? Or said differently, how much of a growth catalyst can be on top of what you're producing in traditional power management? Michael Hsing: Traditional power management, they're talking about these are low voltage things that if it's what you mean. And, okay, the silicon carbide is, of course, to me, is also in the power management. And, again, but these are much higher powers, not high very high power management. We don't want to put on the numbers, but these are, again, it's a billion, a couple billion dollar opportunity for all of them. For Monolithic Power Systems, Inc. I don't want to put a timeline on it. Okay. Tony Balow: I was I know it says, you know, we picked a couple for the script, but we only, you know, could put a few in for time. But I think our strategy continues to be plant a lot of seeds in a lot of different areas that can turn into revenue as the market decides what to prioritize. Michael Hsing: Oh, that's a good point. And they I only yeah. We on March 20th, we have an analyst day. And that game. And this time, you come over, you will see a lot of showcase on the Monolithic Power Systems, Inc. new technologies. And these all will contribute in the next few years of growth. Okay. And if you want to hang on what what is the numbers, okay, I would say that, okay, if you look at the past before Monolithic Power Systems, Inc., what the model it is. We will I don't see anything any reason we should change. Okay? Sure. Faster or slower. Gary Mobley: Thanks, guys. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Your line is now open. Quinn Bolton: Hey, guys. I'll offer my congratulations as well. I guess, Bernie, Michael, obviously, a very strong start to the year in the March quarter. Your comments about enterprise data certainly sound like that business might be more second half weighted. And so I guess I'm just trying to think, you know, what what sort of revenue pattern would you expect, you know, through 2025? Is the first half, you know, slower, the second half materially stronger? Do you think that you have some puts and takes? And so it's a, you know, kind of more linear ramp through the year. Just any any sort of thoughts on the shape of revenue through 2025 would be would be helpful. Bernie Blegen: Yeah. So the comment that we made as far as the outlook for the year really looks at, you know, the design wins we've secured and an expectation of what is going to be ramping. Keep in mind, though, that particularly in the AI side of enterprise data, that that is tended to be very volatile and that we have relatively short lead times as far as when we get hard information or POs for actual delivery. So I think that within the context of, you know, what we believe is most likely to happen, we're very secure by saying a flattish year that's weighted to the back half, but how that curve actually plays out over the quarters is to be determined. Michael Hsing: Yep. Let me add it. Okay. Bernie said model to me is that these industries and, okay, these applications if you will, and again and very at the it is at the initial ramp. And so you're only involved with a we have a few customers. Now so, like, we talked about it before, so we have multiple customers. Okay. And they start to ramp. It's very good for Monolithic Power Systems, Inc. Very we will we've focused on the diversifications. And even within a single segment. Quinn Bolton: Well, kinda, I guess that was gonna be my my sort of second question just thinking about the enterprise data segment. Can you just give us a sense what you're seeing in terms of one, you know, like for like, pricing pressure and then two, I think some of the newer designs really move away from a silicon-only solution to much more of a module solution, and I assume that those carry much higher dollar content for you. And so do you see, you know, as you mix the customer, you ramp some of the new hyperscaler designs, do you think the blended ASP trends in that business even if you see some like for like pricing, could that go higher through the year as these new platforms ramp? Michael Hsing: Well, Monolithic Power Systems, Inc. is going to stick with our models. In that game and margin models. We provide performance. If it doesn't fit the Monolithic Power Systems, Inc. business model, we don't take those businesses. And so far, we're the leading suppliers in silicon as well as power modules. And so this is the reason we in a very short time, in the last twelve, twenty-four months, we have engaged with all these hyperscales. We have all these projects designed in it. And also we have many future products in development. Quinn Bolton: Got it. Thank you, Michael. Genevieve Cunningham: Our next question is from Chris Caso of Wolfe. Chris, your line is now open. Chris Caso: Yes. Thanks. I guess just to start, I just want to make sure I understood correctly that some of the comments. So when you look at the enterprise data flattish for the year weighted to the back half, and I'm assuming that's the entirety of the enterprise data segment, not just that associated with AI. And, you know, maybe you could talk about how you know, you talked about some of the hyperscalers, some of the custom ramps happen in the second half of the year. Is that what's driving that strength in the back half of the year? What's kind of driving that back half weighting? Bernie Blegen: Chris, that's an accurate observation. It's as we look at the ramps for those SOCs and some of the tensor processor products that are expected to come out. We've been prototyping those, but the revenue ramps are really weighted to the second half. And in addition, some of our existing customers in the AI business in particular have multiple new products that they're ramping, and those will have different demand profiles as well. And then that's just within the enterprise data. I think another important ingredient is what we've referred to as the triple down effect as we see the other applications that are allied enterprise data or AI specifically in memory, optical, and networking, and all three of those are areas for growth as well during 2025. Chris Caso: Right. And I guess, you know, as you look at the full year, you know, obviously, you know, from what you guys are seeing and, you know, the better than seasonal Q1, you know, it's safe to say you're starting out a little better than, you know, some of the others in the space. You know, what's your thought as you go through the year? I mean, is there any lumpiness with regard to, you know, some of the opportunities that are ramping early in the year that we should consider as we go through the year? Or, you know, is, you know, excluding the enterprise data's business, do you see revenue, you know, kind of on a fairly stable, upslope trajectory as you go through the year? Michael Hsing: Yeah. I couldn't tell you some. It's very difficult to say sooner than you go by year by year, we don't go by year by year. Okay. I mean, but all the way, we have to report it year by year. And give you examples. Our large customers start to push out some product pulling a lot of other ones. So we can't we can't really tell. So, like, I mean, and other customers, other hyperscales start to ramp. Okay. It's telling us we're going to keep a rim. Whether the ramp has an effect and remove our revenue needles, in Q4 of this year or Q1 of next year, we can't tell. Tony Balow: Yeah. Maybe the only thing I'd add on Michael is it just goes back to the focus on what you can control. Right? And, you know, the organization looking at providing the best products, you know, with the best quality, and that's what we can do right now. And as the market then, you know, plays through, that will turn into revenue. So don't think we're trying to get into a quarter by quarter debate here, Chris. I think that's how we've more landed kind of in a first half, second half dynamic at this point. Chris Caso: Alright. Thank you. Genevieve Cunningham: Our next question is from Joshua Buchalter of Cohen. Joshua, your line is now open. Joshua Buchalter: Yes. Thank you for taking my question. A couple of times, you've talked about the hyperscale program sort of driving growth more so in the back half of the year. I guess if we compare these sockets to, you know, what you've already done in AI and the accelerator side, there's a lot of companies in the analog space that are saying that they have power engagements with ASIC vendors as well. Would you expect the majority of these merchant ASIC programs to be dual-sourced, and I know you're not going to necessarily quantify share, but I'd just be curious to hear how you're seeing the competitive environment in these sockets. Bernie Blegen: Sure. Let me take the first opportunity there. If you look at our most recent track record in the new and I'd say new, relatively new, AI business. The reason we were able to secure a lead position initially is because of our ability to innovate and our time to market along with, you know, our overall performance characteristics. So to the extent that that is valued, in these product launches, those are the qualities that give us an opportunity to have a first-mover advantage. But as we've said a couple of times on this call, when we look at our customers, we don't necessarily control what their decision process is or why. And so, again, we lead with our strengths and believe that we're well-positioned, and then we'll see how the numbers turn out towards the end of the year here. Michael Hsing: Yeah. You mentioned the second half. You pinged it down as on the second half of the ramp. What we mean is in the very near future. Bernie Blegen: Yeah. Michael Hsing: It could be Q1, but Q1 of next year could be Q3 of this year. Or even overlapping in Q2. And a lot of things, as I said earlier. Okay? And our large customers, some of the push out, other ones are pulling to the game. And pulling very urgently. Okay? I mean, so we cannot tell. Bernie Blegen: I guess to put a punctuation statement, we remain cautiously optimistic, but our momentum is certainly in the right direction. Michael Hsing: Oh, that's the professional way to say it. Joshua Buchalter: We always get the more professional answers from Bernie. Okay. No. Thank you. Bernie Blegen: Thank you both for the color there. As my follow-up, I guess, you know, you're kind enough to give sort of a rough outlook for enterprise data growth for 2025. Any more clues you can give us on how you're expecting, either at the company level 2025 growth to shake out in any sort of, you know, which segments you would expect to be the biggest contributors to growth? Michael Hsing: Biggest ones, we're thinking is a multiple of them. Yeah. Bernie Blegen: And we... Michael Hsing: Sometimes it would pick a number, but it's not it was wrong. Okay? And but other ones are coming up. Bernie Blegen: And we focus on the diversified growth that that's that is the key strategy we've been playing the same principles for the last twenty-five years. Michael Hsing: And if this thing doesn't work, then other things will work. Okay. That's always our strengths. And as long as we bring up the best performance, highest performance in the market. We will if this segment slows down for whatever the reasons, other segments will pick up. Joshua Buchalter: Thank you both, and congrats on the results. Michael Hsing: Thank you. Genevieve Cunningham: Our next question is from William Stein of Truist. Will, your line is now open. William Stein: Great. Thanks for taking my question. We start with what everyone's been asking about is enterprise data. I think you highlighted, Bernie, that it's going to be down sequentially. Can you give us a little help on the modeling? Because, you know, down could be down, like, three percent or, like, thirty percent. Maybe just dimensionalize it a little bit to give us some context, please. Bernie Blegen: Yeah. I think that it'd be really hard. Again, what Michael just said is that the strength of our model is the diversification. And I would probably point to the outlook that we've given in total for Q1 as being a risk profile that we believe we can deliver comfortably against. Based on what we can see in our backlog and the ongoing ordering patterns. But again, trying to actually stratify with a level of precision on the end market at this point might be difficult. Michael Hsing: Yeah. You may be looking for precision, and okay. And the realities in the business, we go for long terms. And we go for long term. It doesn't mean near term will have uplift in our revenues. Okay? William Stein: Yeah. Clearly, my ability to model the near term is problematic. A follow-up if I can. Maybe let me switch gears a little bit. Michael, I think in the past, you talked about having some capability in microcontrollers. Historically, you know, I know that it's not, like a focus or it's not a meaningful part of your revenue as well as I understand. Should we expect that to change? There's so many new products you talk about silicon carbide power and converters now and DSPs even. Should we expect microcontrollers or any other digital sort of logic technology to become a bigger part of your revenue over time? Michael Hsing: Very good questions. And we don't list out a microcontroller as a standalone standard product that we sell. As a matter of fact, we sell many microcontrollers now. Okay? And as I recall, in my mind, can come up twelve, thirteen microcontroller projects is ongoing. Some of those stuff is shipping. But what we sell microcontroller is this on the system level. And as Bernie earlier said, in the last field conference, Monolithic Power Systems, Inc. is evolving to a silicon-based solution company. Microcontrollers play a key role. And all these powers, all these other lighting, all these other audios, and including power supply, including AIs, they all have microcontrollers in it. And we don't list separate the items and the standard microcontroller part. A lot of and clearly oh, also a lot of microcontroller integrated. And that's the reason we don't list it apart. This is separate. Okay? William Stein: Thank you. Genevieve Cunningham: Our next question is from William Kirwan of Morningstar. William, your line is now open. William Kirwan: Hey, everyone. Thanks for letting us get a question. Questions so far, so I'll try not to beat any dead horses. But maybe it sounds like at least in the March quarter automotive communication seemed to be driving some of the growth. So I'm wondering if you could just give a broader view into the demand for those markets for 2025 and your opportunities for share gains in those two. Bernie Blegen: Sure. Well, it's good to hear you in the Q&A, by the way. When you look at the end markets, most of the ones that we have are long design cycles. And automotive probably lends itself to being the most predictive because we secure design win two to three years for an EV in advance when it gets launched. Or as many as four to five years for a traditional internal combustion engine. Now having said that, the timing of those ramps, when it gets the design win comes to market still remains a question mark. But within the context of, you know, six to nine months, we can be reasonably predictive. So in automotive, we see continuation of what's been driving our last two quarters of growth as far as EVs in China. And those will be supplemented in the second half of the year more likely by a European OEM that is going to be bringing up an autonomous driving ADAS solution. As well as additional content opportunities in North American EV companies. And then when you look at the communication side, I think that is we're very early stages of being able to ramp the revenue opportunities, particularly in fiber optics. We started out with two primary customers, but we expect that customer base to diversify over the year. Michael Hsing: As always the pattern. Bernie Blegen: Yeah. Michael Hsing: That's excellent. And then, you know, maybe one just on some of the new products that were introduced at the start of the call. Really just which one of these maybe excite you the most and what are the new markets that you might be able to enter with these that are the most attractive, do you think, from a growth perspective? Michael Hsing: The most exciting product, we haven't announced it yet. Come over to an Analyst Day. Okay. March 20th. I'm locked 20th. I said, okay. And these are equal babies. Okay? They all grow. Tony Balow: Should be very same same right now. Yeah. Again, we picked four, but there's many more behind that. So it's hard to pick just one. Bernie Blegen: Actually, we wanted to have a teaser to make sure we had the best turnout for the investor day. William Kirwan: Okay. Excellent. Well, we'll wait for more detail in March. Thanks, guys. Michael Hsing: Alright. Okay. Genevieve Cunningham: Our next question is from Hans Mosesman of Rosenblatt. Hans, your line is now open. Hans Mosesman: Thanks. Congrats, guys. I'll be quick. What is the split for your enterprise data between AI and non-AI, if that's possible? And I have a follow-up. Bernie Blegen: Yeah. Again, I think we already answered that question by saying that those lines are getting blurry, so we really don't have a meaningful way to make that divide. Michael Hsing: And our customers are not were not appreciated where we disclose those numbers. Bernie Blegen: And our customers have made it very clear. Hans Mosesman: Is non-AI considered memory and optic historically? Just out of curiosity. Michael Hsing: Different market segments. Optics and communication, memories, and storage. Hans Mosesman: Fine. Okay. At the risk of upsetting your customers, if you answer what is the share between your historical AI customer for this year versus accelerator customers. What's the split? Is it ten, ninety, or fifty fifty year? Bernie Blegen: And for this year, and at the end of the year, and we probably will have a more or in the near term where we have a more clear picture, but then now we don't. And frankly, it's not clear where as Bernie said, we're not in a position to answer that game. And also by either by product, they share the same product, and also some customers and doesn't want us to release these informations. Hans Mosesman: Okay. Thank you very much. Genevieve Cunningham: Our last question is from Joe Kotraki from Wells Fargo. Joe, your line is now open. Joe Kotraki: Thanks for taking the questions. Just curious on the notebook strength that you guys are talking about into the first quarter. Wondering this, you know, what's driving that? Is that strength from are starting to see pull for AIPCs or is it channel refill? Just trying to understand some of those dynamics. Bernie Blegen: That's a great question. In fact, we believe that a lot of the design wins that we've had in notebooks more recently are tied into, you know, new AI product demand. But as I said, it's a little bit of an atypical ramp for Q1. So we really don't have a definitive answer on the why behind it. Joe Kotraki: Got it. And then just, you know, trying to think about the new projects that are running in the second half for enterprise data. Any help that you can provide and just try to think about, like, the architectures of those solutions that you're shipping to your customers, are you still largely seeing those as being lateral power opportunities or those starting to move to more vertical solutions? Bernie Blegen: Yeah. I think you heard us talk a couple of times that we're not going to talk specific at any customer or their particular architectural solution. I think for us, what you see us again focus is providing a portfolio of products with the best quality, the best performance, and then the customers can choose what works for them. Michael Hsing: And going back to Michael's earlier comment as far as basically the value proposition of the principles we operate under, what we're most interested in doing and continuing to do is winning sockets. Joe Kotraki: Yeah. Our customers have picked particularly does it not want us to reveal the lateral power or vertical power? Bernie Blegen: Got it. That's helpful. Thank you. This concludes our Q&A session. Genevieve Cunningham: I would now like to turn the webinar back over to Bernie. Bernie Blegen: I'd like to thank you all for joining us for this conference call. As a quick reminder, we will be hosting our investor day on March 20th, 2025. Michael and other Monolithic Power Systems, Inc. executives will showcase our vision for innovation and outline key elements of the company's long-term growth strategy. The event will be held at our San Jose offices and will include live presentations, a Q&A session, and demos of our latest solutions for a number of applications and a lot of other markets. If you haven't done so already, please email your RSVP to mpsinvestor.relations@monolithicpower.com. You can also access a live stream of the event on our investor relations website. Separately, I look forward to talking to you again during our first quarter 2025 conference call, which will likely be held in May. Thank you, and have a nice day.

Genevieve Cunningham: Welcome, everyone, to the MPS Third Quarter 2024 Earnings Webinar. My name is Genevieve Cunningham and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Balow, Vice President of Finance. Earlier today, along with our earnings announcement, MPS released a written commentary on the results of our operations. Both of these documents can be found on our website. Before we begin, I would like to remind everyone, that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty. Risks, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the Safe Harbor statements contained in the Q3 earnings release and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today and we assume no obligation to update this information. Now I'd like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. Good afternoon, and welcome to our Q3 '24 earnings call. MPS achieved record quarterly revenue of $620.1 million, 22% higher than revenue in the second quarter of 2024 and 30% higher than revenue in the third quarter of 2023. Our performance during the quarter reflected the strength of our diversified market strategy as we experienced improved ordering trends across most end markets and additionally benefited from initial revenue ramps associated with design wins secured in prior years. Let me call out a few highlights. Q3 2024 automotive revenue was up 28% sequentially with improvements in infotainment, lighting, ADAS, and body controls. Communication revenue was up 65% from the prior quarter, reflecting new product ramps for Wi-Fi, optical, networking, and router solutions. Storage and Compute revenue was up 25% sequentially on the strength of demand for DDR5 and SSD memory and notebooks. MPS continues to focus on innovation, solving our customers' most challenging problems, and maintaining the highest level of quality. In addition, we continue to expand and diversify our global supply chain, which will allow us to capture future growth, maintain supply chain stability, and swiftly adapt to market changes as they occur. Our proven long-term growth strategy remains intact as we continue our transformation from being a chip-only semiconductor supplier to a full-service silicon-based solutions provider. I'll now open the webinar up for questions. Operator: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. [Operator Instructions] Our first question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Thanks and congrats to you guys. I guess I've got a two-part question if I could. The first is on enterprise data. It looked like it was down about 15% sequentially. I don't know if you could give some color on that. Is that one-time in nature? Or does that reflect a more sustained shift in that segment as we look into 4Q and then into '25? And then my second part of my question, I mean, it looked like auto, I knew you listed a few of them Bernie, automotive, industrial comps, consumer all look like they were up pretty materially sequentially. So is that -- how would you characterize those segments, which have sort of been lagging the last few quarters? Do you feel like those have made the turn? Bernie Blegen: Sure, Rick. This is Bernie. Let me start with the enterprise data. Sequentially, we were down about 1.5% from Q2. And that a couple of things that we've talked about. One is that, we don't control our customers' ordering patterns. So as it relates to the current quarter, we did see a different ordering trend than we'd observed in each of the past six quarters. And then as far as looking ahead, we've been very open about the fact that as far as supply chain security for our customers, that's going to require a second or third competitor to introduce -- be introduced on the share. And so there's a lot of issues here that we've been talking about and that we're managing. But one very important point is that MPS's strength is in the diversity and we don't try to call out a particular end market's results. We try to deliver the company in total. And that's sort of a short-term view, but Michael may have a couple of comments on longer-term view. Michael Hsing: Yeah. You probably everybody knows that if you look at the transcript from the last year, we talk about it. The market is big and the market is growing. Well the AI requirements is growing. And so the customers initially will take the -- always take the best solutions and to fulfill their needs. And the best solutions and also the speed of the development service, as you, as Bernie said earlier. And that's why we occupied as a pretty large shares, okay? And I mean, last year, we said that, okay, this market is too big and MPS will be always have a best solutions in these applications. And we will talk -- we also talk about in a -- the market is bigger, there will be a second or third and fourth supply to join this segment. And okay and this is the -- and when would have happen? And we don't know, okay. It happened in the last couple of quarters and they gave me in the next years. What we see that, again, the market is growing very fast. We have other ones like SOC side of market segment and like it hasn't really ramped up yet or started ramping. And the other ones like -- other hyperscale like company -- cloud computing companies and their own SOCs and their own TPUs, they call it the tensor processes system. And that those one is our -- still small. We're ramping in the next few quarters, okay? And as Bernie said that, MPS in the past, we always emphasized diversity and we will not be known to be a AI power supply company. Bernie Blegen: And then, Rick, I think you had a question as far as automotive and whether or not the step up that we observed from Q2 to Q3 was more of a broader trend line or if it was a one-time event. And this we believe is a step up where a lot of design wins have been waiting in the pipeline for the right opportunity. And so we do believe that specific to us, not a discussion about the broader market, but specific to us that the number of product ramps are expected to come into the next -- come into the stream in the next two or three quarters. Michael Hsing: Well, again, okay, as we -- as we said many, many years ago, there's a lot of new design wins. And when the ramp will take off, we don't know. It will be plus minus a year or so. Do we care? We don't, okay? And then now all these greenfield products start to rejuvenate and that's what you see in the revenue to date. Tony Balow: And maybe one more comment just for Rick is that, traditionally, we've been talking about strength in ADAS, but what you heard Bernie talk about was, we saw that strength in automotive across kind of all the segments, including infotainment, body controls, really a sign of those sockets that we had won previously now start generating revenue. So it's more broad-based within automotive than maybe we talked about previously. Rick Schafer: Thanks for all that color, you guys. And maybe, right on that point on auto specifically. I realize that this is a broad-based pickup and it's some place basically design win driven as all things are with you guys. But I'm curious, specific, I mean, NVIDIA did believe it did really well the last year or two with drive, Warren, and I know you guys do power there. So I didn't know if you could talk specifically about China auto and what content trends look like for you guys there and maybe give a sense of how big China auto is now as sort of a portion of your overall auto segment. Thanks a lot. Michael Hsing: Well, China is again, EV business is booming. And now the tapered off a little bit and looks like it will -- booming again. And we're going in the right direction again, okay. And there's a lot of requirements. And the infotainment and the new type of infotainment and also the ADAS, okay. It's widely adopted in China. And so that's what we see a bigger portion of it is ramping from China. And also we see it in the -- and other than ADAS, okay, we see a lot of other products and grow -- will grow in -- from Germany -- in Germany and in the US. Rick Schafer: Thank you, guys. Operator: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes, thank you, and congratulations on the record revenue. I wanted to follow up on enterprise data. Obviously, you had two very strong quarters, first half of the year, it took a breather this quarter. But how should we think about that business into the December quarter? And Michael, I know you talked about many new product ramps in 2025, but just sort of specifically for Q4, how should we expect that business to perform? Michael Hsing: As far as I know, Q4, we don't lose any shares and probably it's going in the -- it was the same as the forecast. Okay, we don't, okay, we don't -- we can't really tell. And this forecast was given us to us in a few quarters ago. And we just fulfill that, fulfill the demand. So we'll have a -- that's what we built for me -- in the last couple of quarters. Bernie Blegen: Yeah. And I think as we look to the outlook and the guidance that we provided, really enterprise data was somewhere in the plus low-single-digits. So again, our customers ordering patterns are really what drives the performance there. Tore Svanberg: No, that's very fair. And the one big surprise to me this quarter was communications. I think it was your strongest growth segment this quarter. You highlighted Wi-Fi optical networking. Could you maybe just give us a little bit more color what's going on there? I mean, it does sound like you have some new segments there that you are penetrating, especially on the optical side. Michael Hsing: Well, the opticals, okay, is a data converter, data communications, within the data centers, okay, within the reps, okay. And that's a portion of it. But that's not all of them, okay. Other one is the new Wi-Fi format and okay start to ramping up. That's the MPS will have a lot of reference designs and that's what we see. It's across the continent. All these projects turning to a revenue now. Tony Balow: So I think the outlook for, again MPS specifically remains very solid. Generally, after you have a big initial stocking in the quarter with a new revenue ramp, it tends to tail off for a quarter, but we see sustainable growth in communications through the first half of '25. Tore Svanberg: Great. Thank you for the color. I'll go back in line. Operator: Our next question is from Joshua Buchalter of Cowen. Joshua, your line is now open. Joshua Buchalter: Hey, guys. Thank you for taking my question. I think in response to Rick's question, you mentioned two factors that sort of drove the flattening out of enterprise data being order patterns and second sourcing. I guess could you -- or could you maybe rank order which one of those had the bigger impact near-term? And in particular, as we think about your customers diversifying their suppliers, are you seeing this more on AI accelerator platforms that are already in the market or is this tied to the newer platforms that are currently ramping? Thank you. Bernie Blegen: So I think Michael offered that in Q4, we're not expecting Q3 and Q4 to see share position change. So that was really just trying to acknowledge that is a function of being the market leader in the AI. And then over time, as we see a layering of all these new AI opportunities, Michael referred to the TPUs, which will probably begin to ship late. Michael Hsing: I don't know if the TPU is what I remember is the TPU maybe is -- maybe Google's name, a trademark name. To me it's a tensor processor. Tony Balow: Tensor processor. Michael Hsing: Yeah it's all -- that's what we mean. And it's all really -- some of you in the call referred this as SOCs. And we have many design, we engage with many of our customers in many years ago. And those products is actually we see start to ramp in the last quarter. Bernie Blegen: Yeah. Okay. Joshua Buchalter: Thank you for the color. And I realize you've got content in multiple different sockets on many of these accelerator cards. And so my question is going to try to oversimplify it. But how should we think about, as we think about some of these new AI accelerator platforms, your content opportunity may be in relationship to power draw of the actual processors or any other helpful Rules of Thumbs you can give us as we try to fine-tune our models in the next year. Thank you. Michael Hsing: Well, you said, if you believe so like I hope and -- if you believe as we believe, our products, our solution is the best and the most power efficient and the market is bigger. And that portion of our revenue will grow. The rest of the stuff, I don't get -- I don't -- we don't care. Just let it happen. Let the numbers speaks up. Joshua Buchalter: Thanks, guys. Operator: Our next question is from Chris Caso of Wolfe. Chris, your line is now open. Chris Caso: Yes. Thank you. Good evening. I guess, the first question, as we look at your guidance for the December quarter, not a lot changing on a sequential basis. I think you mentioned that the enterprise data will be up low-single-digits sequentially in December. Anything else that you would call out as kind of growing or shrinking different from the average in December? And then following that, given that enterprise data has grown as a percentage of revenue, does that affect seasonality as you look into the March quarter? Is there anything we should be thinking about with respect to the different customer mix as we go into March? Bernie Blegen: Sure. If you're looking at Q4 by end market, it's interesting you have some seasonality, but currently, we don't believe that any of the end markets are going to change by more than plus or minus mid-single-digits. So it's a very, very narrow range that we're talking about there. And when we look out into the momentum carried into '25, obviously, we don't guide beyond Q4, but it has been seasonally down quarter for a lot of companies, but I don't have a view on what that's going to look like currently. Chris Caso: Okay. Thank you. Michael Hsing: We don't, especially, we don't really care. So as long as we have a design, we design and we are in the project with our customers. And when those ramps start to happen, our customer -- they don't have a clear view. And let those products -- let take its own calls, let the numbers speak itself. Chris Caso: Okay. As a follow-up, as you look into next year, the other part of your enterprise data business on traditional server, that's an area that you guys have been favorable on for a while, but I guess, you've been waiting for the market to improve. We heard some a little better news from at least one of the CPU vendors this week. Can you give some view of kind of the share content, what you're seeing in that part of the enterprise data business as you go into 2025? Michael Hsing: Yes. It's a good question. Yes, we do see it, and the volumes started picking up. And as we said many quarters -- many years ago and this was -- this rapid sapphire of something. And the VR 14, we will pick up the shares in the 13.5, by serendipity of a shortage and we prove with significant suppliers in that. And VR 14 and what will be a significant, well, one of the big supply in -- in this rapid sapphire growth. Tony Balow: And maybe just beyond just the enterprise data segment itself, as you see those ramp, right, they'll pull through other solutions like DDR5 memory and continue to be a tailwind in some of the other segments as well. Chris Caso: Thank you. Operator: Our next question is from William Stein of Truist. William, your line is now open. William Stein: Great. Thanks for taking my question. Michael, I know you often are involved in some interesting sort of sometimes idiosyncratic growth drivers for the company. I know for some time, you were famously tinkering in the automotive end market and sort of searching for more effective solutions than what was available in the market. And I understand your focus has been perhaps more in the home automation market more recently. And I wonder if you can talk to us about, some things that might be on the come in the next couple of years from the company in that end market. Michael Hsing: Yes. As you know, it's an MPS have a few thousands of our products. So we're in lighting, we're in -- we are in a thermostat and we are in shades controls and we're in all these fan models and security, the window actuators, and the window and door opening actuators. And we're also making MCU now. And those MCU can be a brain of everything while we're just putting the one box and we're putting one box with the software. So and we sell as a kit. Everything is -- everything including it. It's the key is the ease of use. I think this will change the market segment for building automations. William Stein: That's helpful. Maybe as a follow-up, you mentioned, your MCUs now. There's another category that you entered relatively recently. You're not really known for it as much, but data converters. I know I think you hired a team in that area and you had some very good results for initial product, maybe in the medical end market. Can you talk about traction in that category, please? Michael Hsing: We are growing in that segment. The revenue is still small. As you know, these are -- these are design cycles is very long. And also the product life cycles 10, 20 years. I mean they will last forever. And those segments win-win some in some industrial side as well as the medical side. And we have -- as we have more product rolling out as a matter of fact in the next couple of quarters some family of standard product. We will gain more market shares in this segment. William Stein: Great. Thank you. Michael Hsing: Okay. Operator: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Hi, guys. Thanks for letting me ask a questions. I want to go back to the non-enterprise data side, I think by my math, it was up about 35%, 36% sequentially. I know, you guys have a ton of design wins and you're kind of just waiting for them to ramp, but the magnitude of that ramp, the diversity of it, and just the commentary that bookings are improving seems to be at odds with the very muted recovery that so many of the peers are seeing. So could you just explain, do you think cyclical conditions are getting better or is this a very Monolithic power-specific dynamic? Any sort of color on that. Bernie Blegen: I think, Ross, we're experiencing a little bit of both. Is somebody? Michael Hsing: House, can you mute it? Yeah. Okay. You can mute it. Yeah. Okay. Bernie Blegen: So, Ross, you're asking the difference between growth specific to us and what we're seeing in the market. And in the current quarter or let me go back, the previous quarter, we actually saw improvements in our ordering patterns. But they're not a consistent trend. But what we saw in the current quarter was a lot of new revenue opportunities that we received from design wins secured in previous years that were coming to market now, particularly in the communications, particularly in automotive. And then also we saw an improvement in the overall profile of the memory market. Michael Hsing: Well, as a matter of fact, we see all across the board. Bernie Blegen: Yeah. Michael Hsing: Other than AI. Other than AI power and all across the board. Ross Seymore: And how are you -- I guess as my follow-up, whether it's in the AI side or otherwise, a lot of supply has been added to the market over the last couple of years to address shortages, et cetera. And so a fear people have is that pricing pressure is going to ensue, whether it's more competition in AI power that you mentioned earlier or just a more aggregate holistic increase in pricing pressure. Are you guys seeing any evidence of that? Michael Hsing: Well, our competitors also some of the Chinese suppliers and they always want to lower the price to get in the market to get in the socket. That's not the game what we played. And so a lot of the -- our customers they don't change those socket. They don't change the -- our products can swap in -- and quickly. And those kind of things is in a -- and also to the way we emphasize diversity. So not in one segment. It has a lot of shipments and a lot of volumes going into the one particular applications. And for example like AI and we will provide the value. Our value is the highest performance. And all the other products let our customers choose and so the history is telling us, our history short, and as we -- as long as we operate in the same principles and the revenue will keep growing and growing the same way. And we see the next couple of years, especially next year, we see -- all these products will grow. And now this is -- which is to see the first sign of it, and all these design win turning into the revenue now. Ross Seymore: Thank you. Operator: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hey, guys. Thanks for taking my question. I guess, first to start off, I think it was for the first time ever in your June 10-Q, you guys disclosed a 10% plus customer. And I'm wondering, I know you haven't filed the Q yet, but if that's going to be an ongoing disclosure, would you be able to provide us if you had any 10% customers in the June, sorry, September quarter? And if so, what percent of revenue was that customer? Bernie Blegen: So, Quinn, what you're referencing is basically revenue exposure by direct customer and indirect. And when the customer hits a certain threshold according to the SEC guidelines, we need to put a reference to that. Michael Hsing: But we're never putting a name out there. Bernie Blegen: No, no. We do not. Michael Hsing: Yes, this time, we have -- still have a one customer is bigger than 10%. Bernie Blegen: Yeah. Michael Hsing: Bernie, you can check that numbers. Is that right? Only two customers and above 10%. Quinn Bolton: Okay. And we'll get percentages in the Q. Bernie Blegen: It's one or two. Michael Hsing: Yeah, I think, it's one or two. You can check that. I believe it's one. Bernie you can check that. No, it's only one. Two will be very big. I don't -- I don't believe the numbers. Bernie Blegen: We don't. We don't. Michael Hsing: Yeah. Quinn Bolton: Okay. The second question is, I know, you don't want to guide to 2025 yet. Michael Hsing: Hold on a second. Tony, could you -- Bernie Blegen: Check that? Michael Hsing: Yeah, could you check that, is that one or two? I think the second one is less than 4%. Tony Balow: Yes, I'll check it. Give me 10 seconds, so I'll get back to you. Michael Hsing: Yeah. Yeah. So we are, okay, this had to be on our record. And then let's make it clear. Go ahead. Quinn Bolton: Yes. Maybe while we're waiting for Tony, my second question was, I know you're not going to sort of give a specific guidance out to 2025, but The Street is looking for continued pretty strong growth in the enterprise data segment. I know you've talked about lots of crosscurrents in terms of expecting some additional competition to enter that market, some pricing pressure at existing customers, but you also have the ASIC designs that start to ramp next year. The Street is kind of looking for that business to hit almost $1.1 billion in revenue. And just wondering is that given your crystal ball, is that sort of a reasonable expectation? Do you think that we should be tempering expectations for that segment, given some of the cross-currents you've mentioned or do you want to just kind of keep it one quarter at a time? Michael Hsing: Yes, I can tell very confident, confidently we will be, okay, let's say that. And when this market -- when this AI market turn into like a regular server market, MPS will be a significant player in that. And now this is not -- became a, what do you call it, reach to an equilibrium yet. Bernie Blegen: Not a run rate. Michael Hsing: No, yeah, this is still ramping up. And when this segment is ramping -- when you start to ramping, it's kind of lumpy. You don't see this thing, okay, you don't see -- you can't keep going forever like the first two -- since last year and the first -- in the first couple of this quarters like our first couple of quarter in this year. And next -- and so to answer your question for next year, clearly, so we have a lot more customers as I said earlier, that will start to ramping those designs will turn into -- those design will turn into revenues. Tony Balow: Michael, just to circle back relative to distie, we'll call out two, for direct, we'll call out one. Bernie Blegen: Okay. That's a direct customer, not a distie. Tony Balow: So we'll call one direct. We'll call out multiple distie is higher than 10%. Michael Hsing: Yeah, well, distie will never come, and because all the reporting we -- that's in the reporting, all the design creation, all the exposures for the end customer is only one. The next one is, I believe, is a less than -- is about definitely is below 5%. Bernie Blegen: Yeah. Quinn Bolton: Got it. Thank you, Michael. Thank you, Bernie. Michael Hsing: Okay. Operator: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you. I had a similar question to Quinn, but thinking more about vertical power. So enterprise data this year more than $700 million. I assume the contribution from vertical power is still quite low. And if that's the case, as the market does transition to vertical power, could we see this market base basically even accelerate over the next few years? Michael Hsing: Absolutely. Not in next few years, next few quarters. Yes. We -- as we said, look, we are playing the power module market segments in -- since 2017. And all these technology, all these manufacturing capabilities and that will really benefit for these vertical power. And as speaking, now we are shipping those products in good volumes. Tore Svanberg: Sounds good. Thank you. Operator: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Hi, guys. Thanks for letting me get a little follow-up snuck in here. Inventory, I know Michael, you and I have laughed about that in many times like this in the past. Michael Hsing: That's my favorite topic. Ross Seymore: There you go. Michael Hsing: Yeah. Ross Seymore: In this instance, internal inventory came down by a lot days-wise. What did external channel do? How are you looking at that? Was some of that 35% sequential growth that I referred to in my initial question a little bit ago, inventory fill, or has the channel stayed lean? Bernie Blegen: No, the channel stayed lean. In fact, our total days went down in the quarter. Michael Hsing: Well, we want to -- this is not good. We want to build up. And as always, we build the inventory in the -- it's not synced with the market demand. And you see our -- Ross, okay, you're the expert of MPS inventory. If you checked like our inventory levels, it's the opposite of the market demand. And now the market demand for MPS now is very high. So the inventory is low and we don't think that we're going to reign to a shortage issue, but it's at the inventory level is at the uncomfortable level. Ross Seymore: Got you. And I guess just to clarify, Bernie, when you said total inventory actually went down, you mean just total channel inventory days fell. Bernie Blegen: Total channel inventory, yes. Michael Hsing: Channel inventory is also low. yeah. Ross Seymore: Got it. Okay. That's it. Thanks guys. Operator: This now concludes our Q&A session. I would now like to turn the webinar back over to Bernie. Bernie Blegen: Thank you. I'd like to thank you all for joining us for this conference call and look forward to talking to you again in our fourth quarter conference call, which is likely to be in early February. Thank you. Have a nice day.

Genevieve Cunningham: Welcome everyone to the MPS Second Quarter 2024 Earnings Webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Balow, VP of Finance. Earlier today, along with our earnings announcement, MPS released a written commentary on the results of our operations. Both of these documents can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainty. Risks, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the Safe Harbor statements contained in the Q2 earnings release, and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now, I'd like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. Good afternoon, and a big welcome to all of you. Let me open by saying MPS reported yet another record quarter with Q2, 2024 revenue of $507.4 million, exceeding the high end of our guidance. Our strong revenue growth was attributed to three factors, increased demand for AI power solutions, improving order trends in several of our end markets. And lastly, initial revenue ramps associated with design wins secured in past years. Separately, we continue to expand and diversify our global supply chain, to ensure supply stability and capture future growth. As we have emphasized for many years, our results reflect continued success of our proven long-term growth strategy, and our transformation from being only a chip supplier, to a full solutions provider. I will now open the webinar up for questions. Gen, could you please ask the first caller? A - Genevieve Cunningham: Our first question is from Matt Ramsay of Cowen. Matt, your line is now open. Matt Ramsay: Thank you very much, everybody. Good afternoon. Michael, Bernie, congratulations on, I'll just say, it's nice to have a calm part in the storm relative to what's been - all of us have been dealing with over the last two weeks, so congrats. I wanted to ask a couple of questions that I imagine the enterprise data segment is going to be a huge focus on this call. So maybe I'll just start with the first question. Bernie, if you could maybe give us some directional color by end market in your guidance for September, I'd appreciate it. And secondly, Michael, if you could talk a little bit about what you're seeing in some of the non-enterprise data segments, like things like consumer, comms, auto. The model's been driven by this big growth in enterprise data, but from what I can tell, your company's had a lot of design win success in some of these other areas where the macro has really been challenging. And I'm wondering if you're starting to see any green shoots there yet, for recovery in some of those other segments? Thanks, guys. Bernie Blegen: Sure, I'll keep my comments fairly short as far as the Q3 outlook by end market. Essentially, the bookings trend that we carried into Q3 has improved quite a bit over the last few quarters, and has been fairly broad as far as the end market participation. If you look specifically at enterprise data, you'll see that we took a fairly large step up in each of the last two quarters. And then in the third quarter outlook, we see continued growth in communications, storage and computing with incremental improvements and also in our other groups. Michael Hsing: Yes, your second question, as Bernie said it, we do see some of our - other business would not relate to AI. And now it is difficult to separate AI, non-AI. Other business we designed in which we - let's say that, okay we ship these products to the half a year ago. A year before we see the market start to wakening up. But that's whatever it is, whatever it is, okay. And we do see a lot of new design, new requirement, which is much higher power, for especially for communications. And well, as a matter of fact, as across the board. And these designs are much higher power than the previous versions. And these are all relate to the new design, relate to AI - and AI requirements. And these design wings, we'll probably triggered downs in a game of two [ph] or three years, and change of revenues. Matt Ramsay: Thank you very much, guys. I appreciate it. I asked two questions. So I'll get back in the queue. Thanks. Genevieve Cunningham: Our next question is from Dustin Fowler of Oppenheimer. Dustin, your line is now open. Dustin Fowler: Hi guys, I just have couple of quick questions. So for power isolation, I believe you ramp later this year in auto followed by data center next year. I think both markets could be Greenfield opportunities in the hundreds of millions each. Could you just give us a sense of the ramp in both markets, the competitive landscape and maybe any market sizing if you can? Bernie Blegen: Dustin, I apologize. This is Bernie. I didn't hear which two markets. Dustin Fowler: Oh, sorry. That was auto and data center for power isolation? Michael Hsing: Okay. Yes. We do start to ship in the gate [ph] and the product for the higher powers and for data centers. And this is only the beginning. And would you say that that's very true? Auto is being known and we, when ADAS and became more, more and more the cars converged into the ADAS, okay. And which we believe in being a two or three years, all the cars will have that features. And we, so far we provide all the, we have design wing in all these car makers, especially in the EVs. Dustin Fowler: Okay. And I guess as we think about kind of auto this year, I think street has auto model flat. I guess how realistic is that given 70% content gains you have with your largest auto customer before power isolation plus the wins with Chinese OEMs? I guess maybe for Bernie, are you modeling auto flat this year? And how should we kind of think about share gains? Michael Hsing: Well, we cannot pick the, you want to pick the models and gave me, and you want to pick them, I can't give you a model. My accuracy is a plus minus 12 months. And going forward, we are very confident. Bernie Blegen: Yes, I think the near term outlook for automotive remains a little bit fuzzy. And for example, in Q2, we were expecting a nice uplift, which did not occur. And so Michael's correct is that positioning within the next two, three quarters, is hard to predict for auto more broadly and EV specifically, but our long-term positioning is only getting better with additional design wins. Dustin Fowler: All right, thanks guys. Genevieve Cunningham: Our next question is from William Stein of Truist. William, your line is now open. William Stein: Great, thanks for taking my question. Michael, I'm hoping you can linger on that comment you made about solution selling. I think might've been the term used. I think in the past, we've been conditioned to hear about modules versus semis. Can you linger as to what your, maybe spend a minute explaining what sorts of products and what end markets, and what growth you see coming from that activity? Michael Hsing: I like that question. Yes, okay. As we said, we started that journey long time ago, okay. And at the beginning, maybe I didn't know, we didn't know what the hell we were talking about. And okay, but that's the directions. And that's including a part of e-commerce. And we sell plug and play solutions. So the effort is that the journey will be, we are, we known to be a semiconductor company. And yes, we do. We do all that we provide. And when we sell a silicon, we're selling, actually we're selling a solutions. We know all the technical details in terms of how we implement the solutions. So my effort is we want to monetize all our knowledges. MPS in the end, doesn't make any things. And we all making the money from our knowledge. While we capitalize all the entire our capabilities. And so the journey we started, now we're selling the solutions. It's probably 20%, 25% of a total MPS total revenue. Every piece of a silicon used to be selling somewhere between $1 and $0.50 to $1. Some of them are a lot of them even lower for the mass market. And which we kind of vary little now, especially in consumer business. And now, we're turning to a solution company is still a semiconductor based solutions. We sell those solutions. Now particularly as you call it, as a modules. And like I don't know what the appropriate word for that. And so today is 25%, 20% to 25% of a total revenues. MPS module business excluding AI. We're running a couple hundred, close to $200 million. And we're growing every year by more than company's percentage growth. And if you look at this, this way, every chip we sell, all the solution is more than a chip price. And you generally $4, $5, $6, $10 of a content that we can sell. So that's the result of today. And we will commit on the journeys. And again, we're transforming a company to a silicon only, to silicon based solution providers. Bernie Blegen: And Will, if I could just add two comments quickly. The first is, and this is specific to your question, that it's across all of our markets. It primarily focuses on those that have longer design cycles, where we can add expertise in design solution. And the second point is again, while we are driving a lot, a higher percentage of our business to the modules, or to the more complete solutions. We have the ability, like no other company to be able to deliver the type of solution our customer wants, whether it's a die, a chip or some package in between. Michael Hsing: Yes, and many -- maybe traditional semiconductor companies and they are hard to distinguish, whether they're solution providers or selling modules, selling solutions or selling semiconductor only. And that's especially the case and apply for AI powers. And there's a very few company using a silicon based, the module solution to power up this AI solution or data centers. William Stein: If I can add a follow-up please. Can you talk about what you're doing in vertical power delivery? I know there's a lot of companies that are claiming to have it, or be ramping it. And I know you guys are one of those companies that are I think more clearly delivering, but maybe you can talk about what your efforts are yielding in that area? Thank you. Michael Hsing: We are - in the leading positions. Okay, I said it - and there's maybe one, I will say the one or two company. Maybe one company have the capability have - and similar to MPS, the market is huge and it's growing. And MPS is, what the leading position, is because not by one day, like one-or-one an AI happened, we developed that years ago for that. And there's not many semiconductor companies that are based at the semiconductor company have that kind of a capability. William Stein: Thanks guys, good job on the quarter. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hi guys, let me offer my congratulations. Maybe just first Bernie, a quick follow-up on Matt Ramsay's question on the drivers of sequential growth in the third quarter. I think you mentioned comms and storage and computing, but I didn't hear you specifically say enterprise data. I just wanted to confirm enterprise data is still one of the big growth drivers in the third quarter. And then I'll get to the two questions? Bernie Blegen: On the enterprise data, the way I tried to tee that up, first off, yes, it is expected to grow, but we have grown significantly each of the four prior quarters to this. So the rate of growth is slowing down. And the biggest for this quarter only. And I offer that because there's a lot of opportunities that have yet to begin to ramp with a number of the different companies that we're currently working on designs with. But I was calling out in particular that both storage and computing and communications will be good drivers in Q3. Michael Hsing: Quinn, you know VR 13.5 and we start to have a significant revenues. And that was the beginning, you know that. And VR 14, which hasn't really ramped up yet. And we have a lot of design, we increase it. VR 13.5 is like a MPS -- MPS is a test case. And so when during the shortage, okay, a lot of revenues, a lot of volumes shifted to MPS. And our competitors couldn't deliver, we delivered and we delivered. And now the benefit it is - for VR 14, where will be a significant players in the market segment? Bernie Blegen: And particularly in the second half of this year, it looks like that segment is starting to take off. Quinn Bolton: Great, that was going to be served. I guess my first question was just, could you talk within the enterprise data about some of the opportunities, whether it's on the CPU power side or just broadening out of your AI portfolio? And then I'll have another question on vertical power if I could squeeze in that second question? Michael Hsing: Go ahead. Quinn Bolton: So the question on vertical power, I mean, just some different competitors, may mean different things when they're talking about vertical power. And I just wanted to kind of get your guys' view on the market. When you guys talk about vertical power, is that true vertical power where the voltage regulator is sitting underneath the processor substrate and supplying current vertically into the processor? Or do you guys consider sort of stacked packages, where you've got one or more voltage regulators, or phases in a module with the power inductors and capacitors, and other things that might be stacked vertically, but still delivering current laterally into the processor? What's your definition of vertical? Because I think there's some confusion in the market of what may be vertical and what might look vertical, but actually still supply current laterally? Michael Hsing: Yes, you're right. There's one is some customers so Quinn and using the top surface lateral power supply, which is like a very similar to server, the server CPU power supply. And other ones turning into the backside, still lateral powers. And more advanced one is directly under the CPU. And so to answer the question, is MPS supply currently we're running all three solutions? Chip, all modules, we have everything there. Bernie Blegen: And Quinn, if I could also add to this that, the necessity for the different deliveries of power, is as you get into increasingly higher current and in addition to either lateral or vertical power, we also have liquid cooled that, we believe that we have a position on. Michael Hsing: Yes, to Quinn, to answer your question is that the most efficient and difficult to do, is you're making a module directly under the CPU. And that's the highest efficiency power delivery. There's a lot of a problem, and a lot of technical issues associated with that type of approach. So many companies take a conservative approach, okay? And some companies just do only like servers and top surface lateral power delivery. And for those very high powers, well over 1000 watt, all these powers, the power modules directly under the CPUs. And these are the highest efficiency. Quinn Bolton: Got it. Thank you, Michael. Thank you, Bernie. Genevieve Cunningham: Our next question is from Chris Caso of Wolfe. Chris, your line is now open. Bernie Blegen: Chris, can you hear us? Chris Caso: Sorry, I was on mute. You can hear me now? Michael Hsing: Yes. Chris Caso: All right, sorry, thank you. The first question is on seasonality, and how that may be changing for you. In the past, the December quarter typically was a seasonally down quarter, but your business mix has changed quite a bit, since those days and the revenue is now coming from segments that are not as seasonally, not a seasonal December quarter. With that, how should we look at December seasonality going forward, or is the old model no longer appropriate, as we look forward? And if there's anything you want to comment on with respect to December? Michael Hsing: Yes, we're seeking advice from you. What's our seasonality? With a new business, with all these inventory oscillation from our customers, and we don't know so came in - you have a huge shortage, then it comes up the huge over supplies, and okay now, the main, I assume, and our customers consumes all these excessive inventory. Now the market is waking up. And is there another shortage? I don't know. And it's difficult to forecast. And - the lead time is still very short. Chris Caso: Okay. So we'll do our best for everything good thing? Michael Hsing: Yes, yes. You can tell us. Chris Caso: All right. That's fair enough. As my follow-up question, I wanted to follow-up with vertical power as well. And what we know, particularly within the enterprise segment AI, we've got some higher wattage processors coming. Can you talk about what you expect for content on that, and what in particular you expect for vertical power next year? Because I know there's some debate, certainly doesn't seem to be debate over whether you're ready for vertical power, whether the ecosystem is ready for vertical power. And does that make a difference with regard to your content, as you go into the next generation of processors, because the wattage is certainly going higher? Michael Hsing: Yes, I can tell you this. Our customers will not be appreciated in talking about how many - dollar per their unit, or GPU unit, okay? And so, then they don't want us to talk about it. And second, I don't know, I don't want to know about it. Chris Caso: Okay. Understand, but I mean, in just in terms of the opportunity, maybe you could speak in more general terms about the opportunity that's available to you? Michael Hsing: Oh, sure, yes. And now you look at our revenues, right? Okay, for a couple of companies, okay, and from last year, was like a what, it's a 1% or 2%, or maybe last year's, okay, couple of percentage our total revenue. Well, today, so like we're running like a what, 20%? And 20%, so that's a full $500 million, okay? And we were told this is at the beginning. And there's a lot of other companies, like where our opportunities and our design wing hasn't really ramped up in company like Google's and AWS and Meta. And those coming later. So I see the huge opportunities and I do see, okay, this is not MPS only, but the market's way too big. We don't want to turn into an AI company only. Chris Caso: Yes, I think the only thing I'd probably had on top of that besides for the direct AI opportunity, I think you've heard us talk about the AI trickle-down effect, whether that can be memory, it can be optical, it can be pulled through of networking. I think there's a lot of opportunity for MPS, beyond even the direct AI business? Michael Hsing: That's a good comment, yes. Chris Caso: Right, appreciate those comments. Thank you. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes, thank you, Michael, Bernie. And congrats again on another stellar quarter. I wanted to follow-up on enterprise data, but I'm going to move away from the processor power management, and ask you more about opportunities elsewhere in the data center, especially power supply. I know historically you haven't talked a whole lot about GAN, silicon carbide, but I'm pretty sure you have some activities there. So can you elaborate a little bit on what you're doing on the power supply side of data centers? Michael Hsing: Yes, I like that one. Okay, I like that one. But I can't tell you the revenue yet, but it's a small, okay? And we, in the since 2016, and again, we start to develop our own silicon carbide. We're not selling expense. It will be a part of our solutions. I said very, very early, so we're not intending to sell a fit [ph] as a power device only. So now, we designed those three kilowatt, six kilowatt, 12 kilowatt power supply. And you guess what? It's a data center. It's a data evaluating, so we have a very little revenues, but the biggest is the MPS only, owned. All our test plot, we're using a huge amount of power supply, and MPS is our own customers. All these testing equipment that we have to design, we have to invent it, how to test these modules particularly, and also as well as burning. And MPS supply these power modules to our vendors, and our vendors are in problem went into these systems and it became our test equipment. And so, that's the revenues we start to generating. And but for 4G and for data centers, and these are still in the, well, we engage them a year ago or so, couple years ago. And so, the revenues small, but we're looking for the big revenues from that segment, because MPS provides the highest efficiency and the smaller size. Tore Svanberg: Yes, that's great perspective. As my follow-up, I recall, because we've gone through a few cycles together, I recall usually you use downturns to gain a lot of share. I know everyone's excited about data centers today, but what are some of the areas, where you're starting to see more meaningful share gains from a designer perspective, now that we're sort of navigating here at the bottom of the cycle? Bernie Blegen: Sure, so I think that we've been very clear about the positioning that we have an automotive, and how that's continuing to grow across multitude of different platforms with a multitude of different Tier 1 suppliers and OEMs. I think the most recent area for improvement where somebody's Greenfield opportunities, are becoming more visible in market, would be in particular with communications. We're seeing that in the wireless and 5G, and I think that we've seen some early indications of continuing investment in that segment. So I'd say that's probably the area that will be most visible, but obviously I don't want to forget industrial, which even though right now, is a relatively modest part of our business. And it's not shown a lot of momentum towards growth, probably is the next area, where we have a lot of Greenfield opportunities that will materialize in the next four quarters. Michael Hsing: Yes, go ahead. Tore Svanberg: Yes, I was just going to ask, and the RV market, is that going to be under auto or industrial? Michael Hsing: RV? Tore Svanberg: The RV market, the Kemppi car market, I know you've talked about that? Michael Hsing: Oh yes. No, no. Yes, okay. That's one of my favorite ones. Okay, yes, okay. And I think it's going to be in industrial market. Because share - all these products share the same signatures as we do for data centers for our own test plot and for test equipment, okay? We'll be very much shared the same characteristics and also for robotics. And especially for those moving, not stationary robot. And these robots move around, and they all need that type of a power supply and the charging and the battery management. And these all share very much the same characteristics as RVs, okay RVs happen. Tore Svanberg: Yes, those could be industrial or consumer or even the humanoid stuff too. So I don't think I want to just put those...? Michael Hsing: I think it's a - we're probably in the industrial side. Yes, okay, yes. Tore Svanberg: Sounds good. Thank you and congrats again. Michael Hsing: Okay. Thanks, Tore. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hi guys, just wanted to add a quick follow-up question. There have been a few semiconductor companies this earnings season that have sort of mentioned having licenses to - Huawei being revoked in the quarter. And it's raised some questions from investors. I just wondering if you guys could address do you have a license to ship to Huawei? If you did, has it been revoked? Is that, is there any real exposure at MPS to that customer? It's obviously not impacting your near-term outlook, but I figured I just asked, because we've gotten a number of questions on potential Huawei exposure, across the semi coverage? Thank you. Bernie Blegen: Quinn, I can make this pretty simple. We don't have any licensing or contractual arrangements with Huawei that are at all. So they can't be canceled. Any business we have with them has always just done on a PO basis, and we have no indication of a change in their relationship. Quinn Bolton: So Bernie, I guess there was more that export license question. Do you need an export license to ship to them? I think that's what's sort of price? Michael Hsing: Yes, our product is not, not like in the 20, below 24 nanometer or whatever, that we are not, as far as I know. Bernie Blegen: Yes, you're right. Michael Hsing: And as far as I know, we're not subjected to the export limit, have any limitations. And, but we will talk to our, to answer your question precisely, I will consult our legal counsels. Quinn Bolton: Yes, okay. Okay. Thank you. Genevieve Cunningham: [Operator Instructions] As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: 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 in late October. Thank you, have a nice day.

Genevieve Cunningham: Welcome everyone, to the MPS First Quarter 2024 Earnings Webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Balow, VP of Finance. Earlier today, along with our earnings announcement, MPS released written commentary on the results of our operations. Both of these documents can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections that involve risk and uncertainty, risks, uncertainties and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q1 earnings release and in our latest SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now I'd like to turn the call over to Bernie. Bernie Blegen: Thanks, Gen. We're doing something a little different in today's earnings call. As a detailed recital performance metrics is included in the company's earnings commentary, accompanying the earnings release, I'll use this time to provide just a few comments on our Q1 2024 performance and our outlook before opening the call up to Q&A. Our financial performance improved in the first quarter of 2024 with revenue up both sequentially from Q4 '23 and year-over-year from Q1 '23, Ordering patterns consistently trended upwards through the quarter. Visibility into the second half of 2024, however, is limited and many of our customers remain cautious. Despite this uncertainty around the second half of 2024, customer engagement across all of our end markets remains high, and our design win pipeline continues to grow stronger. Additionally, we are continuing to expand our product portfolio and diversify our supply chain globally. We believe both actions position our company for further growth as the market improves. In summary, we saw consistent improvement through the first quarter, but we continue to be cautious about the second half of 2024 business conditions. Overall, our proven long-term growth strategy remains intact, and we can swiftly adapt to market changes as they occur. I'll now open the webinar up for questions. Genevieve Cunningham: [Operator Instructions] Our first question is from Tore Svanberg of Stifel. Tore Svanberg: Congratulations on this enviable consistency. I have two questions. My first question is on share gains. And historically, Michael, Monolithic Power tends to really accelerate share gains during downturns. And I know there's a lot of focus on Enterprise Data right now, which is 1/3 of your revenue, but -- can you maybe call out some other verticals or applications where you are seeing more share gains in the current downturn? Michael R. Hsing: Clearly, we just wait -- if we haven't out of this downturn. You see this, we compare the rest of the industries, we're like a 10% up. And -- so that's really a share gained. And so in terms of -- so the rest of vertical market as auto is clearly is the one. We won many sockets in there. And MPS is still small compared to all these established -- our competitors. And other ones, even other ones -- even the servers and notebooks areas and these are the ones, all gain shares. And the last one is the consumer, as we said it a year ago or so, we gave it up some of the shares because of the capacity constraints. Now, we have a lot more capacity now and you will see some growth in the near future. Bernie Blegen: And if I could add one additional comment there is that we've had a number of greenfield opportunities that have been waiting to launch in an improved macro environment. So in addition to the end markets that Michael just referenced, I think that you'll also see share gains in both communications and industrial. Tore Svanberg: Great. And for my follow-up question and specifically on Enterprise Data, which is now 1/3 of our revenues. There's been some chatter lately about lower power management content in next-generation AI data centers due to liquid cooling and other techniques to lower overall power. Is this impacting MPS broadly? Or is this kind of more sort of a very specific use case in the server power management market? Michael R. Hsing: All these cooling systems, the new format or vertical powers, MPS involve all of them. And if they transition to those markets, those systems -- and MPS in the same gains, okay? We will gain -- and we will grow with it. Is there any other comment? Tony? Okay. Bernie Blegen: No, I think that the point that we've demonstrated, particularly with Enterprise Data is the ability to leverage up content as we go into higher-value technology. For example, the water cooled and vertical represent opportunities, not threats. And if you look down the line not to -- not far out, we'll also be going into rack power as well. Michael R. Hsing: That's good. Yes, good answer. Operator: Our next question is from Quinn Bolton of Needham. Quinn Bolton: I'll add my congratulations on very steady performance in a challenging macro environment. I guess I wanted to follow up on Tore's question on enterprise data. Lots of your competitors making noise about perhaps gaining share at your largest enterprise data customer. I'm wondering if you could just sort of address your latest thoughts on competitive landscape in both lateral power and then perhaps looking forward to vertical power? And then I've got a follow-up. Michael R. Hsing: Yes. As you may remember, 2016, we have a power curve versus -- the power curve CPU computing capabilities and versus the power densities. And we projected it for 2018 or '19. That would be the crossover point that MPS product. And for those common footprint, driver [ mass ] couldn't fit into the peripheral powers. That's around 700 watts. If you remember that in 2016, we said that. And at the time, we projected with the CPU was wrong. It's actually turned out to be GPUs. But the power is the power, power densities. And -- but 2018 or '19 -- and that's pretty much the peripheral power that reach the limit. And now from that time -- and everybody goes to a vertical for even higher power AI computations or learning. So all over these power go to verticals. And peripheral powers reached the limit. And I can't comment on our competitors, okay, so far, MPS, well, as always, we want to bring the best technologies. And we are not a champion of volumes, okay? We don't do that. We want to every -- whatever we do, we do the best. And not the volumes that we ship. And -- so when the market became normalized and became a normal -- not like the last couple -- last year or so. And there will be more -- more solution come on board. A lot of our competitors start to copy our products, so be it. That's fine. So we are -- we stick our MPS model, we will have a very diversified growth. Bernie Blegen: I think it's important to keep in mind when you look at our history, as Michael just referenced there, that we have always won opportunities due to our innovation. And as we look at the next generation of GPU or TPU or ASIC products that are in this high power end market. We're an enabling technology meaning that at the front of the design cycle, we're consulted, we're integrated, in fact, with the development of the next generation of products. So we believe that strategically that, yes, there will be competitive influences on the market but we want to continue to position ourselves as the leader. Quinn Bolton: Got it. Maybe just a quick follow-up. Just any comments you guys have on when you think vertical power may go to volume production? Is that something that happens later in '24? Is that not in volume until sometime in 2025? And then the follow-up, Bernie, is you look at the consensus estimates, the Street's modeled up 9% sequential growth in your December quarter. Your typical seasonality, I think, is down 1% to 3%. Wondering if you have any comments as to that sort of a-seasonal pattern out in Q4? I know you're not guiding out that far, but wondering if you could make any comments about that sort of atypical growth. Michael R. Hsing: I'll answer the first part of it. And the vertical power is happening now. There's multiple of our customers, they are launching the vertical power now and we are shipping those products. Bernie Blegen: Yes. And I'll pick up the second part of your question there is that seasonality, particularly as you are exiting a downturn is hard to predict. And what we tried to indicate with our prepared comments is that there are signs of optimism from the standpoint of improved ordering patterns. But how that translates into the second half is hard to predict. And so we have more of a profile of the guide that we've given for Q2. But that really as far as the difference between Q3 and Q4, we see them higher than Q2 perhaps. But between the two of them, flattish. Michael R. Hsing: Yes. We see AI probably still continue to grow and grow very fast rate. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Richard Schafer: My congratulations guys, and I just had a couple of questions. The first one just since we're talking about power, and I sort of have a point in one on server CPU power. Some of the new x86 platforms that are due out later this year are pushing 500 watts. I mean is there an expectation? Just like the call you made back in 2016, maybe that was a little premature. But is there expectation that x86 is eventually going to move to 48-volt still? And if so, I guess, where are we in that transition? How far off do you think that is? Michael R. Hsing: Yes. Okay. Now since you mentioned 2016, I can go back to earlier. 2014 we were not even -- we were outside the door, in 2016, we can join, we were invited as a guest. And we gave some tokens so you can play it. And so the transitions and from VR 13.5 to 14, then this type -- this time, when these new CPU power, we have a significant market share. That will keep -- and it's not reflected into revenue yet. And once those CPU release, we will gain a significant amount of shares. Richard Schafer: And any comment, Michael, on the transition to 48-volt power for X86? Michael R. Hsing: That we don't -- that's probably -- the higher powers is over 700 watts. I think those will transition to vertical powers. And -- which were ready and other ones below that, we believe, are still using a traditional rack power that came in and use 12-volt supply. Richard Schafer: Got it. And just as a follow-up, shifting gears a little bit to auto. I was just curious what your expectations are for your auto business this year? Obviously, that market is under a little bit of pressure near term. But I believe you guys have been pretty open about some of your material share gains. For instance, with China, within China, ADAS also with some of your top auto -- you with your top auto customer. You've also got some pretty significant share gains, I believe, ramping later this year, but I was curious if you could provide any update there. Michael R. Hsing: We saw - yes, go ahead. Richard Schafer: I just was curious if you could add in there, what your expectations are from -- I know you had a couple of launches that some OEMs delayed in the second half last year, and I didn't know if you still expect it to benefit from those this year. I know that's kind of a lot in one question, but there's a lot going on in your auto business. Michael R. Hsing: Yes, certainly. We actually care less with the share gain, what the revenue expectations. Of course, we have to prepare all the inventories, okay -- and that's the only thing we care. Whatever this or whatever it is, okay. We want to do -- if we're not -- if we're not the best, we will not win those market segments. And particularly, these are new applications and new features. So far, we can tell you -- in this year's or end of the last year's, and Chinese EV makers, they produce a lot more. And with those features that we are in, they export it in -- not to U.S., but to the other possible world, they increased somewhere 5 million to 6 million units, okay, million cars. And that's where we see the upside so far. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross Seymore: Congratulations on the stability. Just a question on the visibility into the second half. I understand the caution, especially given everything going on in the broader market. But you also said that your bookings are improving, the order rates, the engagements, et cetera, et cetera. So is the visibility improving? It's just not as good as it used to be? I'm just trying to reconcile the bookings side improving, but the visibility not. Bernie Blegen: Sure, Ross. If we can kind of reflect that over the course of about the last 6 quarters, ordering patterns have been well below whatever we call normal. And when we're seeing improvement, doesn't mean that we're seeing that they have necessarily stabilized or that they're as predictive as when you have like 5 or 6 consecutive quarters of strong ordering patterns. So all we're trying to do right now is remain cautiously optimistic. Tony Balow: Ross, it's Tony. The only thing I'd probably add on that, right, is really focused on the design win engagement, making sure that pipeline is healthy because it's difficult to call when the market would come back. As Bernie said, it's still pretty choppy. But if we have that strong design win pipeline as well as having the supply chain diversification we were talking about, we're set to take advantage when the markets do come back. Ross Seymore: I guess as my one follow-up, a near-term question for you. Any outliers in the growth that you're guiding to in the second quarter by end market segments versus the 7% total? Michael R. Hsing: No. Outliers means like AI stuff, Yes. As I said earlier, we still -- we still see a lot of growth, okay? I mean we are getting -- try to get all the inventory ready, okay, start to go even further, okay, and they even have a lot more upside. Bernie Blegen: Yes. If I look sequentially between Q2 and Q1, we do see the continuing demand profile for Enterprise Data. And I think we see also some contribution from Automotive, but the rest of our end markets are pretty flattish. Genevieve Cunningham: Our next question is from William Stein of Truist. William Stein: Congrats on the good results, and thanks for the change in format. It's a breath of fresh air. Michael R. Hsing: And -- you appreciate it. We try to make it life and make it easy for you. William Stein: I'm hoping you can update us on the progress you pursued to try to diversify your manufacturing geographic footprint and both on the front end and back end? And then I have a follow-up, please. Tony Balow: Yes, I'll start, and then I'll let Michael and Bernie pick up. So I think we continue to make progress on diversification of our supply chain globally. And so I think that is proceeding as planned. And I think that we're set as customers would ask for that capability that we have it ready for them right now. So I think based on what we said in the past, so I would say no change in the expectation there. So Bernie or Michael, anything you want to add? Michael R. Hsing: Yes. We built all these capacities our customer demands, okay. There's a few of them that really demand a lot outside of China. So we have more capacity. So that's the comment. Okay. William Stein: Okay. Let me try a different topic. Some product types that I know have been ramping maybe over a long period of time. One is converter -- data converters, which is a category, there's -- I think there's really one very dominant supplier, but you guys have started to get into that area. And then the other is the modules that you make when these are much more complex and they have many, many chips, I think, in each one. If you can talk to us about the recent growth in those newer categories, that would be helpful color. Michael R. Hsing: Yes. Okay. Let me answer the first ones, data converter -- data converters are -- it's a technology that we're talking about, we developed in the last few years. And we want design win, we start to shipping products, and -- but however, there's only 1 or 2 products, okay? And now we're going to release a family of a product in less than a year, less than a year time. That will meet a more general market. The other topic that's when you're talking about -- these modules. Yes, so called e-commerce modules, and we're actually doing well, okay, not exactly the e-commerce we talk about in 2018. And it's going over well over $100 million, okay. I mean -- but these are multi-chip modules is more than $100 million. Actually, all these AI products that we're shipping these all modules. And vertical powers and also the rack powers. We're shipping all these modules. So I -- in the past, I say -- I said and I'm sick and tired of selling silicon only. I want to leverage -- our leverage and monetize, our know-how will sell these power modules sales solutions. Bernie Blegen: And I think that we've sort of hit on one of the strategic differentiators between MPS and a lot of our competitors is that we can offer the most flexible architecture of whether it is delivering a module or silicon die, so however the customer wants to build our silicon or modules into their end application, we have the flexibility to do just that. Genevieve Cunningham: Our next question is from Matt Ramsay of Cowen. Matthew Ramsay: I guess it's my first question. guys, I wanted you to maybe talk a little bit about the content per socket progression that you see for the company in the AI business, in particular, as your -- silicon providers that are driving these platforms make generational transitions there. I think there's a little bit of confusion that the big primary guy in AI is not just launching 1 product, but they're launching 3 different ones that I expect to have slightly different content. And you obviously have other customers there in AI, not just NVIDIA but others. So if you could talk generally, Michael, about just what you're seeing from a content perspective, generation to generation there? And maybe Bernie, what are the variables on sort of blended content increases that you might see as we move forward? Michael R. Hsing: Yes. I can't talk about the -- well I don't -- we don't know how our customers -- and these are AI GPU providers, how they use it. I mean, they sell -- they have a different model, they have a different model -- they have a different variety of products. We -- as long as we know, okay, they use some -- they use IC chipping in general for peripheral power and verticals is all more than 700-watt powers, over 1,000-watt power. So these are from modules. And how many modules per CPUs, we have rough ideas, but we don't know exactly. Bernie Blegen: Yes. And to follow up on your second point, it's a very content-rich environment for us. It also includes memory, for example, and the CPU process -- processor in addition... Michael R. Hsing: Or even optical. Bernie Blegen: An optical as well. So I think it's really too early to put limits on content availability. In fact, we're finding new areas in order to deploy. Michael R. Hsing: So far, we just want to handle the growth. All the demand from a memory side from opticals, from even the GPU, CPU powers. And this period is really the growth period. Matthew Ramsay: Got it. That's helpful. I know there's a lot of moving parts. I was going to kind of step back and ask a little bit about gross margin trajectory, it comes up a lot in my conversations. I know you're kind of in that 55% range. I guess, Bernie, what are the puts and takes here? I know there are big customers ramping in enterprise data and there are variables around that. There's also mix between your segments and where you're sourcing supply from, there's a lot of variables here. So what would -- I mean, are we kind of at a relative floor in the 55% or slightly above range? And what would be the variables that could drive the margin back higher? Bernie Blegen: Sure. This is a pretty simple question. So as you know, the range that we target is between 55% and 60%. We demonstrated that during the post pandemic stimulus that our margin was able to go to the higher end of that limit. And right now, for the last couple of quarters as well as our guidance here, we've maintained a non-GAAP rate of 55.7%. And really, what will enable us to go up is a change in the mix of business. Genevieve Cunningham: Our next question is from Gary Mobley of Wells Fargo. Gary Mobley: Congrats, and thank you for persistently seeing the expectation. Most of the interesting questions have been asked and answered, but I wanted to touch on pricing trends. I know you don't overlap a whole lot with the analog chip market leader. But clearly, they're being aggressive on price. So maybe if you can speak to the different product groups or business segments that might be affected by that? And as well, just generally speak about the pricing environments for your broad set of products. Michael R. Hsing: Tony, you want to? Tony Balow: I'll start and then let Bernie jump in, right, I think what you've heard from us in the past is that for us, because we lead on innovation and we're trying to work on the next-generation platforms and work on where we really have a differentiated advantage to our technology. We're probably less susceptible to pricing than some of the segments that are volume related or might be more mainstream. So I do know there's lots of reports out there about pricing right now. But I'd say right now, that's not impacting us in a way -- that's not impacting us in any way, and you can kind of see that in our outlook. And so Bernie will add some more on that. Bernie Blegen: Yes. And fundamentally, part of the issue that's driving prices both additional capacity in China as well as additional capacity that's coming on with a large North American company. And on the cost side, we've always been very, very competitive regardless of the end market opportunity and... Michael R. Hsing: The cost regardless of what the margin is, we always have to -- we always drive the cost down. I shouldn't give you more than you asked, and it's a little bit from the futures. And so far, have nobody asked the question yet. We saw in the near-term market in the next couple of years, the AI truly trickle down to all applications. not only in the cars, and all -- in the sensors, all these -- in building for the phones and all kind of things trickle down to a different level. And that we see now all kind of activities is going on now. And we -- there's a lot of design initial phase performing the product ideas. And these are requested from our customers. And we don't see that in the end of the last year, even in the beginning of this year, recently, we see a lot more. So that will drive -- those products definitely will drive the gross margin up. Gary Mobley: Thank you for that comprehensive answer. Last quarter, your distribution inventory, I think you characterized it -- I think you characterized the distribution inventory as being a little bit above the target level, what is it now? Have you been able to work that down to more of a normalized level? Bernie Blegen: Sure. So there's sort of two ways to look at our channel inventory right now. If you keep it narrow to really the AI supply chain, we're trying to keep that elevated so that, that inventory is basically available on demand. But then with regard to all of the other end markets, we've seen it coming down nicely. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore Svanberg: I just had two quick follow-ups. I'm intrigued by the consumer segment, Michael, I know that's surprising when everyone is talking about AI. But I think this is the lowest percentage has ever been. But you did talk about getting some share there in the downturn. So any particular applications that we should keep an eye on as you start to grow back in the consumer area? Michael R. Hsing: Yes. Okay. That's good question, I mean, yes, that's -- I said earlier that fell into an unhealthy percentage. We want to have a diversified growth, we neglected our consumers. But on the other hand, is during this period, a lot of our competitors care less about cost. We have less effect, but we did lower the price in the notebook market segment. And that's probably you see it now, we grow the notebook revenues faster than notebook market growth. And these are low-margin products. But when looking at -- looking forward, audio product. A lot of it related to a consumer product. Maybe, Tony, you can mention -- you can talk about this is okay. Tony Balow: I'll go and Michael can certainly talk a lot more, but I'd point you back to what we announced last quarter on Axign acquisition. And we really looked at their technology and saw an opportunity to participate in the high-end audio market and MPS's scale and Axign's technology really offered an opportunity to go after customers, and we're seeing some traction in that area. So consumers got a wide base of potential applications, and I think we'll continue to pick our shots where we can sort of really add value with our innovation. Michael R. Hsing: Yes. I can tell you, we will start to ship in Q3 but -- Axign and MPS together as a bundle. Tore Svanberg: Yes. That's exciting. And my last question is on communications. It was actually up sequentially this quarter. Everything that we're hearing, of course, is that, that market is still very weak. In your prepared remarks, you said that, that growth was driven by networks. So can you elaborate a little bit what's going on there? Are you actually starting to see that market turning? Or is this just pure share gains? Bernie Blegen: It remains a flattish market. I think that in quarter-by-quarter, we're going to see infrastructure go up or down. But the full year outlook is that it will probably be flat with '23. Michael R. Hsing: I'm betting on the communication market, it will trickle down from the speed, and demand of higher speed will trickle down all these segments. And we have a lot of design wins in 5Gs or in other high speed or Wi-Fi, and we're ready for that. Tore Svanberg: So Michael, what you mean is AI will trickle down. And as that happens, the comm sector will revive? Michael R. Hsing: That's right. Yes, it has to. That's no brainer. Genevieve Cunningham: Our last question is from Melissa Fairbanks of Raymond James. Melissa Dailey Fairbanks: Michael, I love a no-brainer. I mean -- I love that. Michael R. Hsing: Yes, I don't need my brain to talk about it. Melissa Dailey Fairbanks: I'm adjusting my model accordingly. So I know you guys addressed auto earlier, and I know everyone is focused on enterprise data. But I would like to understand better, we're coming up on the model year builds for like model year 2025. I would like to know where you feel comfortable guiding the auto revenue from here? Bernie Blegen: Yes. So let me take that one. A lot of the exposure we have with new content is with the EV companies. And so Michael touched on the opportunity, particularly as it relates to Chinese OEMs where we have a good installed base, particularly as it relates to ADAS or autonomous driving. And those tend not to be as seasonally driven as the internal combustion. So while we're seeing some sequential improvement quarter-by-quarter during the year, we don't necessarily -- we're not looking for that hockey stick that used to occur with automotive sales in Q3. Genevieve Cunningham: I would now like to turn the webinar back over to Bernie. Bernie Blegen: So I'd like to thank you all for joining us on this conference call and look forward to talking to you again during the second quarter conference call, which will likely be in late July. Thank you. Have a nice day.

Operator: Welcome everyone to the MPS Fourth Quarter 2023 Earnings Webinar. My name is Genevieve Cunningham and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS, and Bernie Blegen, EVP and CFO. In the course of today's webinar, we will make forward-looking statements and projections that involve risk and uncertainty, which could cause results to differ materially from management's current views and expectations. Risks, uncertainties, and other factors that could cause actual results to differ are identified in the Safe Harbor statements contained in the Q4 earnings release and in our latest SEC filings, including our Form 10-K and our Form 10-Q, which are accessible through our website. MPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expense, operating income, other income, income before income taxes, 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. Tables that outline the reconciliation between the non-GAAP financial measures to GAAP financial measures are included in our Q4 2023 earnings release. 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, which was furnished to the SEC earlier today and is available on our website as well. Now I'd like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks Gen. For the full-year of 2023 MPS achieved record revenue of $1.82 billion. This is our 12th consecutive year of revenue growth driven by consistent execution, continued innovation and strong customer focus. As announced today, MPS is expanding into a new $1 billion market with the acquisition of our partner Axign B.V. Axign is a Netherlands-based startup with early revenue, specializing in programmable multi-core digital signal processors. Axign competitive difference is its ability to deliver signals with near-zero distortion and reduce power consumption for automotive and consumer audio systems. The combination of Axign and MPS's IP, which has been accepted by several high-end audio customers, will change people's experience in their cars, homes, concert venues, and stadiums. Let me turn to a few highlights from this past year. Our integrated power management solutions for artificial intelligence enabled our customers to unlock previously untapped opportunities for innovation and growth. We created new automotive content, powering the ramp of autonomous driving, the digital cockpit and lighting systems for both conventional and electric vehicles. We continued to diversify our global R&D footprint with the further expansion of our engineering centers of excellence in Europe and Taiwan. And finally, we continue to expand and diversify our operating footprint with the qualification of multiple new fab and packaging partners in Taiwan, Singapore, and Malaysia. Turning to our full-year 2023 revenue by market segment. Automotive revenue grew $94.6 million year-over-year to $394.7 million in 2023. This 31.5% gain was primarily driven by increased sales of our highly integrated applications supporting advanced driver assistance systems, the digital cockpit and lighting applications. Automotive revenue represented 21.7% of MTS's full-year 2023 revenue, compared with 16.7% in 2022. Full year 2023 enterprise data revenue grew $71.6 million over the prior year to $323 million. This 28.5% increase was primarily due to higher sales of our power management solutions for AI applications. Enterprise Data revenue represented 17.7% of MPS’ total revenue in 2023, compared with 14.8% in 2022. Storage and computing revenue for 2023 grew $38.5 million over the prior year to $491.1 million. This 8.5% increase was primarily driven by increased sales of products for notebooks. Storage and computing revenue represented 27.0% of MPS’ total revenue in 2023, compared with 25.3% in 2022. Communications revenue fell by $46.5 million to $204.9 million, this 18.5% reduction was a result of lower 4G and 5G infrastructure sales. Communications revenue represented 11.3% of our 2023 revenue, compared with 14.0% in 2022. Industrial revenue fell by $46.5 million to $172.7 million in 2023. This 21.2% decrease primarily reflected lower sales in applications for industrial automation, security and power sources. Industrial revenue represented 9.4% of MPS' full-year 2023 revenue, compared with 12.2% in 2022. Consumer revenue decreased $84.8 million to $234.7 million in 2023. This 26.6% year-over-year decrease was a result of broad market weakness across all segments. Consumer revenue represented 12.9% of MPS' full-year 2023 revenue compared with 17.8% in 2022. Let me take a moment to talk about the general business conditions. Throughout 2023, we highlighted that customer ordering patterns were oscillating, reflecting general economic uncertainty. While we saw a nominal improvement in Q4 ordering patterns, we remain cautious as visibility beyond the current quarter is limited. Despite this ongoing uncertainty, we continue to execute against our long-term strategy by bringing innovative new products to market and expanding design wins across our broad base of customers. We believe these ongoing investments position us well for future growth when the macro environment stabilizes. Switching to Q4 results. MPS had fourth quarter revenue of $454.0 million, down 4.4% from the third quarter of 2023 and down 1.3% from the fourth quarter of 2022. Comparing year-over-year results, fourth quarter 2023 revenue for enterprise data grew by 88.4%. Storage and computing fell 2.9%. Automotive was down 7.8%, Consumer decreased 17.5%, Communications decreased 36.3% and Industrial fell 40.5%. Fourth quarter 2023 GAAP gross margin was 55.3%, down 20 basis points from the third quarter of 2023 and 290 basis points below the fourth quarter of 2022. Fourth quarter 2023 non-GAAP gross margin was 55.7%, flat with the third quarter of 2023, but 280 basis points lower than the fourth quarter of 2022. This year-over-year reduction in fourth quarter non-GAAP gross margin is largely due to sales mix. Turning to operating expenses. Our GAAP operating expenses were $141.6 million in the fourth quarter, compared with $128 million in the third quarter of 2023 and $130.9 million in the fourth quarter of 2022. Our non-GAAP fourth quarter 2023 operating expenses were $96.7 million, roughly flat with the third quarter of 2023 and up from the $94.8 million reported in the fourth quarter of 2022. The differences between GAAP and non-GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss from an unfunded deferred compensation plan. Fourth quarter 2023 stock compensation expense, including $1.2 million charge to cost of goods sold was $41.1 million, compared with $33.6 million recorded in the third quarter of 2023. Switching to the bottom line. Fourth quarter 2023, GAAP net income was $96.9 million or $1.98 per fully diluted share, compared with $2.48 per share in the third quarter of 2023 and $2.45 per share in the fourth quarter of 2022. Q4 2023 non-GAAP net income was $140.9 million or $2.88 per fully diluted share, compared with $3.08 per share in the third quarter of 2023 and $3.17 per share in the fourth quarter of 2022. Fully diluted shares outstanding at the end of Q4 2023 were $48.9 million. As for our balance sheet, as of December 31, 2023, cash, cash equivalents and investments totaled $1.11 billion, compared to $1.04 billion at the end of the third quarter 2023. For the fourth quarter of 2023, MPS generated operating cash flow of about $153.3 million, compared with $175.9 million in Q3 2023. Fourth quarter 2023 capital spending totaled $13.8 million. Accounts receivable ended the fourth quarter of 2023 at $179.9 million, compared with the $185.8 million reported at the end of the third quarter of 2023 and $182.7 million at the end of the fourth quarter of 2022. There were 36 days of sales outstanding across these comparable periods. Our internal inventories at the end of the fourth quarter of 2023 were $383.7 million down from the $397.3 million at the end of the third quarter of 2023. Days of inventory rose to 172 days at the end of Q4 2023 from 171 days at the end of third quarter of 2023. We have carefully managed our internal inventories throughout the year given the uncertainty in the market. Using next quarter revenue as a basis, inventory was 175 days at the end of the fourth quarter of 2023, down from 178 days at the end of the third quarter of 2023. I would now like to turn to our Q1 2024 outlook. We are forecasting Q1 2024 revenue in the range of $437.0 million to $457.0 million. GAAP gross margin in the range of 55.1% to 55.7%. Non-GAAP gross margin in the range of 55.4% to 56.0%. Total stock-based compensation expense, including associated employer taxes of $46.2 million to $48.2 million, including approximately $1.4 million that would be charged to cost of goods sold. GAAP operating expenses between $147.2 million and $151.2 million. Non-GAAP operating expenses to be in the range of $101.8 million to $103.8 million. This estimate excludes stock-based compensation expense and amortization of recently purchased intangible assets, but includes litigation expense and the expense from our recent Axign acquisition. Other income before foreign exchange gains or losses expected to range from $5.3 million to $5.7 million. Fully diluted shares to be in the range of $48.8 million to $49.2 million of shares. We continue to execute the share buyback program that was announced in our Q3 '23 earnings call. Finally, I am pleased to announce a 25% increase in our quarterly dividend to $1.25 per share from $1 per share for stockholders of record as of March 29, 2024. In conclusion, while we continue to be cautious about the near-term business conditions, we believe our long-term growth strategy remains intact, and we can swiftly adapt to market changes as they occur. I will now open the webinar up for questions. Operator: A - Genevieve Cunningham: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. [Operator Instructions] Our first question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Can you hear me? Michael, Bernie, can you hear me? Michael Hsing: Yes. Bernie Blegen: Yes, we can. Speak up. Quinn Bolton: Hey, congratulations on the very stable outlook in a pretty choppy environment. Looks like the enterprise data segment was up $30 million quarter-on-quarter, really driving a lot of the growth in the near term. As you look into 2024, can you just talk about your expectations for enterprise data specifically your opportunity to perhaps expand the customer set with some of the other leading GPU and AI accelerator companies? And then I've got a follow-on question. Thank you. Bernie Blegen: Sure. I'll take that, Quinn. As far as the initial ramp that we've been experiencing over about the last four quarters, we've really seen or benefited from the acceleration of demand for these applications and solutions. As we look ahead, we see a broadening of the number of market participants or customers that will be participating in that. But at the same time, we also believe that competition within the supply chain will continue. So for a majority of the period to-date, we've enjoyed a pretty high percentage of market share, but expect that to decrease as we introduce second and third suppliers. Michael Hsing: But overall, the overall added -- overall, the market segment is and grow very rapidly. And we're expanding our production lines and we will meet in the second-half for the demand. Quinn Bolton: Got it. Maybe just looking at sort of the road map for some of these accelerators in 2024. I think you guys have some new ramps with probably higher content, but I think you also have perhaps lower cost cards coming out where you guys may see a step down in your dollar content. Can you just kind of walk through the puts and takes? We should be thinking about your average dollar content per win? Do you still see that trending higher as power consumption goes up? Or is the increase in competition and perhaps efforts to design cost down cards starting to perhaps limit that dollar content opportunity? Michael Hsing: The dollar content is -- well, it's -- as a market accelerating again, we have more -- our competitor joining and especially this rate of ramp in -- and also, we see other players, other AI players will enter the market that we are so far, we're behind whether pretty much the sole source of power solutions. And as you see the second half or sometime next year, you will see a lot of other players to be qualified or they solve their -- one of the technical problem is, okay, or the odds. So that's what we expect. The cost side, okay, we're always lowering our cost. And at this time, we want to solve all the problems and we believe we resolve all these issues and during this fast ramp. And also the cost at this time is not really the issue. It's all about the throughput and to meet the customer demand. Bernie Blegen: And one final comment on content is that with each following generation of new products that are being introduced for AI, the power requirements are increasing. And at this point, we have a belief that the dollar content will go up per server. But at this point, it's very hard to gauge that. Michael Hsing: In the next version of it is -- the power is even higher -- is much higher as Bernie said. And we started to do these product developments back in a couple of years ago. And we're about to release it to our customers in this quarter and the next couple of quarters. Quinn Bolton: Perfect, thanks. Thank you for all that color. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Yes, thanks. I'll have my congratulations as well. A couple of questions, if I could. I guess, Michael, I'm curious if you could kind of elaborate a little bit, I'm curious what surprised you the most, the last 90-days or so. I'm thinking particularly of auto, obviously, enterprise data was stronger than expected, but auto seems like it's kind of materially gotten softer for most in the last 90-days. So I was curious if you could comment on what you're seeing there. And of course, you guys had, I think, a couple of delayed model year launches last year and the second half. And I was just getting -- trying to get a sense of when those might ramp. And if you consider that an offset maybe to a slower auto market at large. Michael Hsing: Good questions, good observation. And towards the end of the last year, it kind of -- auto slowed down. But overall, we as Bernie said earlier, we still grow some high 20%, 30% somewhere in the overall -- in the auto segment. These are mostly primary -- mostly due to the ADS the infotainment or whatever the head units, call it, the digital cockpit. And going for next year we believe we see all the activities and customers and nowadays consuming all these inventories that we shipped and in May or June period times, and now they start to have a higher volume ramp and especially in the EV side. So for this year's first part of this year. Bernie Blegen: So I think that there has been some softness that has occurred in Q3 of last -- Q3 and Q4 of last year that was observable both for IC and EVs. And as we said in our earlier comments and it applies to automotive, we don't have great visibility beyond just the next quarter. So it's hard for us to predict with the second-half of ‘24, the ramp might look like for automotive. Michael Hsing: Right, the ramp is in the early adoption in EV is very lumpy and a different automakers and ramping in different schedules, I mean -- but overall, the trend is they will pull out more EV with more our products. Rick Schafer: Thanks, Michael. And if I could follow up, I know Quinn was asking about some of the 48-volt stuff. I was curious, I mean, you guys are so dominant on this in second stage 48-volt, and I know you've got a stage 1 product now as well. So I didn't know if you could give us a sense of what your expectations are for share or revenue contribution. However, you'd like to discuss it. But I'm curious sort of what Stage 1 power will do to your content, we'll do for your -- for that enterprise data segment. And I also was curious only because you mentioned it a couple of times, new competition coming in 48-volt. And I was just curious to get your thoughts on if it gets harder or the competition going forward as guys like NVIDIA move from a two-year cadence on new processor development to an annual cadence. Michael Hsing: All right. Yes. This game is always the best performers. So far, our competition, we don't -- I don't want to speak our competition. So far, in what we have, okay, and our customers can be very receptive to our solution. So far, we pretty much have a majority of the volumes. And they keep requesting it and keep requesting we solve all these issues related to their system issues, ours and issues from our side. And -- so when -- even the volume gets even bigger it's good to have another source. Otherwise, again, you don't want the MPS, they can all of them. So again, that's not what we intend to do. And so -- and also the competition in -- it's exactly like a server side. And we are the newcomer in the server market back in -- a couple of years ago, and that's how we win the market. And we had a product long before that. And we also need -- we had to dump the down to meet the common footprints. And because the power density is not high enough. And when this AI come out on the market, the common footprint is not a requirement. So we start to win a lot of -- a lot of shares. And the same is in the servers and have a very similar trend. And that's how we win the market. And we always want to do, as we said in the past. We want to pushing the technology. We want to make sure we're the best. Rick Schafer: And Michael, any sense of Stage 2 -- or sorry, Stage 1 contribution this year for you guys? Michael Hsing: Yes, okay. We had some issues on the Stage 1s and we had some design wins and very small volumes in different systems, actually. And now we don't have -- all these issues are resolved. That will significantly gain the content. And in each AR systems. Bernie Blegen: And Stage 1, for us, at least, is represented about 20%, 25% of the dollar content of Stage 2, and we expect to see the incremental ramp from these products in Q1 and Q2. Michael Hsing: Yes. We had shipping these products for some of the 48-Volt systems. And also, we supply the -- we are as a supplier for chip and for the silicon, not for the modules. And now we step up the two modules. Rick Schafer: Great. Thank you guys. Genevieve Cunningham: Our next question is from Matt Ramsay of Cowen. Matt, your line is now open. Matt Ramsay: Thank you very much. Congrats guys. Good afternoon. I'm going to ask both of my questions here together because we got two or three calls going on tonight and I don't want to end up on two lines. I don't know that we want to go interweaving earnings calls. But my two questions are the first one, Michael, since you helped found the company, you guys have not been active in M&A traditionally. So I'd be interested to hear a little bit more about the company you're acquiring the markets that you're going to go after how that whole deal came together and what the prospects for that new technologies that you may -- and people that you may roll into the company. Just any background there. Michael Hsing: That's a great question. So otherwise, we are taking to the old AI call. Matt Ramsay: Just really quickly on my second one, so I'll go back. Bernie, if you could just help us out with the guidance for March by segment, that would be helpful to make sure we're all modeling from the same footing. Michael Hsing: All right. Let me answer your first question. And you said it's inactive in the M&A market. That's not true, okay? And we follow our -- well, it's not really a policy. So we follow what we do for the best for our shareholders. We don't acquire revenue. The reason is cheap to grow revenue for MPS. But we do look -- do apply technology. And so this is the -- in the past, actually, we acquired a field and financially immaterial with our shareholders. And at this time, and it's big enough, we made these disclosures. And to talking about this Axign, is the company that we work with in for three years already. And it's proven that their technology and with our power stage and there will be a huge benefit for -- in audio signal to audio amplification fields. And we have a proven in a very, very, very high-end customers and make these products as a very unique and never achieved in histories that no zero disposing signals and same to speakers. And the cost is very low. The way we achieved that. And also, we achieved a lot of programmable is also software adaptive. And that -- I see it when I listen to those sounds, it's really -- you bring audio first we put in the press release, putting audio quality to everybody's home to lower down -- really low down the cost. And that will revolutionize how we listened. Bernie Blegen: Matt, I'll take the second question then on the guidance as far as what we're looking at for Q1 here. The growth driver is remains the enterprise data. The positive there is that in addition to AI, we're also seeing incremental positive demand for our traditional CPU data center solutions. When you look at the other groups, you -- basically, we see a flattening in comms, but then we see declines that sort of range between the high single digits and low double digits in the sequential growth between Q4 and Q1 for the other groups. Does that answer your question, Matt. Gen, I think we can move to the next one. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you, Michael, Bernie. And congratulations on 12th consecutive year of growth, especially in this environment. That's stunning. My first question for you, Michael, is 2024. So you've already talked about AI and Bernie just sort of gave us directionally things for Q1. But you always seem to surprise us a little bit but something throughout the year. So I'm just wondering, is there anything that you could share with us that could happen either in industrial or communications. I'm not thinking about cyclical stuff. I'm thinking about more sort of new secular stuff that you're working on that could surprise us on the upside this year. Michael Hsing: Well, instead of -- well, last year, the growth is not very spectacular. It's like what is a single digit -- 1.5%. Okay. It's -- Yes, okay. But this year, I think is who knows. In last year, we didn't know until ChatGPT happened. Then the AI business took off and was out of our expectations, I mean, we didn't know. But to answer your questions to comment your question 11, what is it, 12 years, 11 years in consecutive year-by-year growth. And it's -- we follow our principles. And again, we want to -- first thing, okay, we want to make sure it’s all the product, what we deliver to our customers is the best product, best performers. And we want to beat all our competition. That's number one. Number two is, we react. We react fast, we're nimble, and we fulfill our customer demand. And that's sort of pretty simple strategy that we followed and we kind of disregarded of what the market segment does. And we don't chase those market segments. This year, who knows, okay, with one of the segments and we'll grow, but I don't expect it we'll grow as big as AI, okay? But maybe a couple of small segments happening and I do see that. And we do see that in the recent quarters and the last quarter source and we see all these orders come in and they came in as we expected, those products are truly better than our competitors. Tore Svanberg: Makes sense. And as my follow-up, I think most people, when they think about MPS, obvious they think about power management and how much share you've gained there. But when I look at the Axign acquisition, I think about your penetration into the data converter space, you're doing much more stuff on the single processing side. I mean, you're clearly building out, I think, a pretty impressive portfolio in what I would call more the mixed signal part of the market. So will you be able to maybe share that with us over time? I don't know, a percentage of revenue collectively so how much these subsegments can represent for the overall business? Michael Hsing: Yes. Okay. I think in the next couple of years, and you will see some significant growth from a different area, from a single processing and for data converters and for -- of course, we talk about today and the audio process, and which we're already designing and some consumer -- high-volume consumer market segment. And later, we're going to get into automotive and automotive business. And other ones, we have a lot of small things. A lot of other things like silicon carbides and for silicon carbide projects for green energies for solar -- and for solar inverters. And -- well, these are still kind of power management, but a lot of them, we are other power, and these are for communications. And for communications in between -- in the solar side, okay, so from the inverter side. And even the automotive side back to automotive side, and there's a lot of other communication in the -- within the car, and we'll develop those type of products. And you see MPS in the next few years will migrate out to dose a second to those segments. Tore Svanberg: Excellent. Thank you and congrats again. Michael Hsing: Thank you. Genevieve Cunningham: Our next question is from William Stein of Truist. William, your line is now open. William Stein: Hey, thanks. I'll add my congrats to the remarkably stable outlook. And along those lines, the company has had a longer-term revenue growth and margin model that you have talked about in the past. I think the way you say it is either plus growth or around 20 top line and then 10 to 20 bps per quarter on gross margin. We've been sort of really outside of that model as things have been really volatile since -- really since COVID started, I guess, but I wonder if we're potentially honing back into that model? Or should we sort of throw that away and not think about that anymore? How would you encourage us to think about revenue growth and margins longer term? Michael Hsing: Yes, those kind of models is models and models. And -- but I think the given time and we will be back in a model is the model can be. It's like a weather forecasting, right? we build models and we didn't predict this thunderstorms. And for like the last couple of years, our model is not correct. And either we have too much we too little. So given those kind of economic, whether it's the environment and that model is not quite right. But they end up -- and also, our model is not very scientific either okay, is based on our empirical historical reasons, okay? And -- but we should not deviate from what we see now again. Bernie Blegen: And just to give people a refresh of what the model is that Will is referring to is, generally speaking, we outperformed the market by 10 to 15 percentage points and in the stable market conditions where it's growing between about 5% and 8%, it's easy to assume that would be between 15% and 20% growth. On the gross margin or range that we targeted about on a non-GAAP basis, is between 55% and 60%. And then when the environment is more predictable, we look to be able to grow gross margin 10 to 15 percentage points -- or basis points on quarterly successive quarters. Michael Hsing: Yes. I might as well added, okay. We emphasize the product development and also the customers design win. And I do see a lot of wins and many different segments I said earlier and probably I forgot even half of it, okay, in my mind. And there are so many things going on. And -- so going in the future and when a normalize -- as Bernie said, is a more normalized economic conditions. And there's no reason we will not grow -- we grow 1.5%, okay? That's at least say it that way, okay. Bernie Blegen: But the market contracted 10%. Michael Hsing: Yes, yes. Okay. Yes. William Stein: We certainly are outgrowing long-term, no doubt. The other thing I'd like to ask about is inventories. I think on your own balance sheet, you're running below your long-term target now, maybe the maybe my view of the targeted sale. I'm not sure, maybe you can just update us on inventory relative to your target and also in the channel, what you think is going on there, please? Thanks so much. Bernie Blegen: Sure. I can take that one. So as a reminder, the model is days on our balance sheet between 180 to 200 days. We came in at about the low 170s this quarter, which was really a reflection of how we have been managing our inventory in this uncertain environment. Having said that, we've started a lot of wafer starts ahead of what we believe will be a potential upside certainly in the next few quarters. As far as the channel, that's been a difficult aspect of this market for everybody. And we've had our share of putting inventory in the channel, but I'm very happy to report that over the last three quarters, it's been coming down appreciably. And we're right now just a little bit above our model. Michael Hsing: We will start to build inventory. Bernie Blegen: Yes. William Stein: Great. Thanks so much guys. Genevieve Cunningham: Our next question is from Travis Polan of Wells Fargo. Travis, your line is now open. Travis Polan: Hi, guys. This is Travis on for Gary. Congratulations on the results. I was wondering if you could provide color on how your customer base has evolved through 2023. Historically, MPS has been diverse from this perspective. But did any customer approach 10%? And along those lines, how do you expect this mix to evolve as we move into 2024? Michael Hsing: Yes, I see these data we grow our small customer base in -- by a few thousand in last year. And that's kind of exciting. And it doesn't mean we add a lot of revenues. And in the longer term, the wealthy I mean -- the bigger the base, the better it is, the more stable MPS will be. And also, you don't know -- and what's the next hardest things, okay? And our customers will decide that. But the market will decide it. Our customer will take opportunity. If it's not this one, that one well. I mean we just explained that play the percentage. And we just have our products goes out the door. Goes to design in those -- to those customers. And in terms of which segments I have to say it's everywhere. This is okay. The -- I can't remember any numbers more than our grow orders more than five or six things. And -- but that's the beauty you won't go 1,000. I mean that takes a few years and it will turn into bigger revenues. Bernie Blegen: And Travis, it's an excellent question because I think to align with Michael's point there is that the strength of MPS as far as resilience in different market conditions, is the breadth of the customer base and not have high levels of concentration. Now obviously, with this environment where it has been generally weak except for AI we're in sort of an unusual profile, but we don't expect that to last over the next couple three years. Travis Polan: Got it. Thank you for the color. That’s all from me. Michael Hsing: Yes, okay. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes, thank you. I just had two quick follow-ups. First of all, is on revenue capacity. So I know in the past, Michael, you talked about sort of getting to $2 billion in capacity. Obviously, you're there now. But then also any updates on getting to $3 and even $4 billion of revenue capacity? Michael Hsing: We are building for $4 billion revenues, again, in capacities. And we -- actually we never changed. And especially out of China, and we -- and that actually fits our plan. and we'll continue to do that. And these kind of capacity issues you look at MPS business. And we see -- we believe these business will grow -- we grow our capacity accordingly. It's really a disregarded, okay, what's the current environment we address for long-term issues. Tore Svanberg: Very good. And then the other follow-up, any updates on the e-commerce business. We haven't heard about that in a while. So I just want to make sure we check in with you and get an update there. Michael Hsing: Our module business is -- our -- pure e-commerce, I said it, okay, we didn't know what we are talking about and wasn't that excitement and exciting. But the combination of it and with our web service in the e-commerce and also some interactions help from our website. That generates 150 million units now -- last year. And I can't call it in -- what was that, like seven, eight years ago, seven, eight years ago, we're going to these e-commerce business customers logging our website, we're going to -- they can change their -- they can input their parameters and program our ports, we ship the product within a week or so. That didn't happen that much. But -- and yes, it's happening. But I still believe in the long term, that will be the business because we are loading the power management. We're loading all these product designing barriers. And -- why not? People can program the part and especially younger generations. And they have -- they rather program a product rather than use a solid line, putting us in the arms and get and go to a lab is okay to make it happen. And I think it's longer younger generations would do that. And it will be different from other generations, my generation. And that business I believe in the long-term, we're still picking up. But for now, was more than that bad. I cannot say that way. Tore Svanberg: Great. Thank you, again. Genevieve Cunningham: Our next question is from Melissa Fairbanks of Raymond James. Melissa, your line is now open. Melissa Fairbanks: Hey, guys. Thanks very much. I was wondering if maybe I could squeeze one in about storage and computing business. I know it's not quite as exciting maybe as what's going on in enterprise data. Michael Hsing: That's not good. Melissa Fairbanks: I noted that you did pick up some business on the notebook side last year that was kind of opportunistic. We've got some seasonal factors coming in, in March. We've kind of heard that channel inventories, at least on the PC notebook side have normalized somewhat. But wondering if you could just give us a little bit of color on the storage portion of that business that we don't seem to talk about very much. Michael Hsing: You know, the answer already. And I said, overall, it's not good. Overall, we take on some market shares, and we start to grow a little bit. Bernie Blegen: So I think the way to look at it is that we anticipated softness in the storage market. And so as a result, we became more competitive on notebooks an accepted lower-margin business. And it was offsetting declines, particularly in SSD where we've seen a decline. We increased share with a lot of the major customers in the SSD market, but their business was in decline for much of 2023. And then the other positive in the group is that we saw the initial ramp of DDR5 during the year and also graphic cards expanded pretty nicely during the year. So this is a group that has different characteristics and net-net did pretty okay in a pretty difficult market. Michael Hsing: Well, I think the DDR5, we expect to ramp in last year, right? I mean it happened didn't happen that fast. I mean -- so the key is, again, we make sure our product is designing and when these products will ramp, it's not up to us. And we actually care less but only care is we have a product to ship. Okay. Melissa Fairbanks: All right. Thanks very much, Michael, I'm sorry to bring up a sore point. Michael Hsing: It's not a sore point. It's a reality like everybody else is. Melissa Fairbanks: Sure. Alright thanks guys. Michael Hsing: Alright, thank you. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hey, guys. Just wanted to follow-up, Bernie, I think you had mentioned that in addition to the GPU and AI, you guys are starting to see better traction on just the core CPU server market I know in the past, you've talked about your goal to try to get your share in that segment to 25%. So wondering if you might just give us an update where do you think your share is in CPU core power today? And how are you feeling about that 25% market share target over, say, the next couple of years? Thanks. Bernie Blegen: Sure. So what really generates interest with our customers is when they see the new product launches at both Intel and AMD ramping and we do the power management for both of those. And I think that as we observed in the last year or even 18 months that the most recent versions of their products have been delayed. And so we've experienced a slower ramp as far as being able to increase share or content on those platforms. But at least initially, is it was observing for Q1 as well as for the balance of '24, we see that both of those ramps starting to improve and that we'll participate with them. At this point, we don't have any reason to doubt our earlier projections as far as overall share opportunity between 20% and 30%. But right at this particular moment, it's hard to say what we have. Michael Hsing: Yes. Let me talk about this in looking and we didn't have any. And we are 13.5% and because that was about 2.5 years ago, we have a lot of design wins. We have a design win, a few but for me came in the customers -- at their customers, they couldn't get the -- couldn't ship. And we are turning to be the bigger players. We are four teams in -- back in a few years ago, that we're designing a many different projects. And we expect to be a bigger player. And so that's -- we still believe the same story. And when the CPU market picks up and our revenue will start resume to growth. And so what is the last year, and I don't even remember what was the last year, there wasn't spectacular numbers anyway. And I think as soon or later will turn around. Quinn Bolton: Got it. Thank you. Genevieve Cunningham: [Operator Instructions] As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: Great. Thank you very much, everybody. I'd like to thank you for joining us on this conference call, and look forward to talking to you again in our first quarter which will be in late April. And just to add to that, at that time, we'll be introducing a new format for this call. We will provide you content and context on how the end markets have performed in a written manner, and then we will use the conference call portion more for Q&A. So we believe that, that will be a more efficient use of your time and ours and also more complete communication. So with that, I will thank you. And again, I look forward to seeing you again in April.

Genevieve Cunningham: Welcome everyone to the MPS Third Quarter 2023 Earnings Webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, EVP and CFO. In the course of today's webinar, we will make forward-looking statements and projections that involve risk 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 Q3 earnings release and in our latest SEC filings, including our Form 10-K and our Form 10-Q, which are accessible through our website. MPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expense, operating income, other income, income before income taxes, 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. Tables that outline the reconciliation between the non-GAAP financial measures to GAAP financial measures are included in our Q3 2023 earnings release, which we have furnished to the SEC and is currently available 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 today. Now I'd like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. MPS reported third quarter revenue of $474.9 million, 7.6% higher than the second quarter of 2023 and 4.1% lower than third quarter of 2022. Compared with Q2 2023, sales in enterprise data and storage and computing improved sequentially, while automotive, industrial and communications revenue was lower. Turning now to our third quarter 2023 revenue by market. In our enterprise data market, third quarter 2023 revenue of $98.9 million increased 106.2% from the second quarter of 2023 with sequential growth in both GPU and CPU program sales. Third quarter 2023 enterprise data revenue was up 31.4% year-over-year. Enterprise data revenue represented 20.8% of MPS' third quarter 2023 revenue compared with 15.2% in the third quarter of 2022. Storage and computing revenue of $129.5 million increased 3.9% from the second quarter of 2023. The sequential revenue improvement primarily reflected higher sales in commercial notebooks. Third quarter 2023 storage and computing revenue was up 14.7% year-over-year. Storage and computing revenue represented 27.3% of MPS' third quarter 2023 revenue compared with 22.8% in the third quarter of 2022. Third quarter consumer revenue of $62.4 million decreased 4.3% from the second quarter of 2023 as higher gaming and monitor sales were offset by declines in TV and home appliance revenue. Third quarter 2023 consumer revenue was down 30.1% year-over-year. Consumer revenue represented 13.1% of MPS' third quarter 2023 revenue compared with 18.0% in third quarter of 2022. Third quarter 2023 communications revenue of $46.8 million was down 5.1% from the second quarter of 2023, primarily reflecting lower infrastructure sales. Third quarter 2023 communications revenue was down 35.3% year-over-year. Communications sales represented 9.9% of our total third quarter 2023 revenue compared with 14.6% in the third quarter of 2022. Third quarter automotive revenue of $95.2 million decreased 8.8% from the second quarter of 2023 primarily due to lower ADAS and digital cockpit sales. Third quarter 2023 revenue was up 9.3% year-over-year. Automotive revenue represented 20.0% of MPS' third quarter 2023 revenue compared with 17.5% in the third quarter of 2022. Third quarter 2023 industrial revenue of $42.1 million decreased 15.3% from the second quarter of 2023 due to lower sales in security and industrial meter applications. Third quarter 2023 revenue was down 28.2% year-over-year. Industrial revenue represented 8.9% of our total third quarter 2023 revenue compared with 11.9% in the third quarter of 2022. I'd like to make some general comments about our business. In our previous earnings calls, we have noted customer ordering patterns were oscillating within the overall market. This environment persisted through Q3. We continue to see some orders getting delayed or amended by pull-in requests. This lack of short-term visibility continues to make forecasting beyond the next quarter difficult. However, as we said in our last call, our business fundamentals remain unchanged. Our design win pipeline and customer base expanded tremendously, particularly amongst Tier 1 accounts. Additionally, we continue to innovate and have a strong design win pipeline position us well for future growth. Moving now to a few comments on gross margin. GAAP gross margin was 55.5%, 60 basis points lower than the second quarter of 2023 and 320 basis points lower than the third quarter of 2022. Our GAAP operating income was approximately $135.6 million compared to $112.3 million reported in the second quarter of 2023. Non-GAAP gross margin for the third quarter of 2023 was 55.7%, down 80 basis points from the gross margin reported for the second quarter of 2023. The quarter-over-quarter decrease in both GAAP and non-GAAP gross margin is attributed largely to an unfavorable product mix. Our non-GAAP operating income was $167.8 million compared to $153.1 million reported in the second quarter of 2023. Let's review our operating expenses. Our GAAP operating expenses were $128 million in third quarter of 2023 compared with $135.4 million in the second quarter of 2023. Our non-GAAP third quarter 2023 operating expenses were approximately $96.6 million, essentially flat with what we saw in each of the first two quarters of 2023. The differences between non-GAAP operating expenses and GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss on an unfunded deferred compensation plan. For the third quarter of 2023, stock compensation expense, including approximately $1 million charged cost of goods sold, was $33.6 million compared with $38 million recorded in the second quarter of 2023. Switching to bottom line. Third quarter 2023 GAAP net income was $121.2 million or $2.48 per fully diluted share compared with $99.5 million or $2.04 per share in the second quarter of 2023. Third quarter 2023 non-GAAP net income was $150.3 million or $3.08 per fully diluted share compared with $137.5 million, or $2.82 per fully diluted share in the second quarter of 2023. Fully diluted shares outstanding at the end of Q3 2023 were $48.8 million. Now let's look at the balance sheet. Cash, cash equivalents and investments were $1.04 billion at the end of third quarter 2023 compared with $941.1 million at the end of the second quarter of 2023. For the quarter, MPS generated operating cash flow of approximately $175.9 million compared with Q2 2023 operating cash flow of $90.2 million. Accounts receivable ended the quarter of 2023 at $185.8 million, representing 36 days of sales outstanding, which was one-day higher than the 35 days reported at the end of the second quarter of 2023. Our internal inventories at the end of the third quarter of 2023 were $397.3 million, down from $427.4 million at the end of the second quarter of 2023. Days of inventory of 171 days came in at the end of the third quarter of 2023 were 30 days lower than at the end of the second quarter of 2023. Comparing current inventory levels with following quarter's projected revenue, you can see days of inventory decreased to 180 days at the end of the third quarter of 2023 from 184 days at the end of the second quarter of 2023. I would now like to turn to our outlook for the fourth quarter of 2023. We are forecasting Q4 revenue in the range of $442 million to $462 million. GAAP gross margin in the range of 55.2% to 55.8%. Non-GAAP gross margin in the range of 55.4% to 56%. Total stock-based compensation expense in the range of $32.2 million to $34.2 million, including approximately $1 million that would be charged to cost of goods sold. GAAP operating expenses between $127.1 million to $131.1 million. Non-GAAP operating expenses in the range of $95.9 million to $97.9 million. This estimate excludes stock compensation expense but includes litigation expense. Interest and other income in the range from $4.1 million to $4.5 million before foreign exchange gains or losses. Fully diluted shares in the range of 48.7 million to 49.1 million shares. We are also pleased to announce that our Board of Directors has approved a share buyback program for up to $640 million over the next 3 years with the goal of offsetting future dilution. In conclusion, while we expect visibility to remain limited in the short term, which was the same as last quarter, we continue to execute on the long-term strategy. I will now open the webinar up for questions. A - Genevieve Cunningham: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. [Management Instructions] Our first question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hi. Michael and Bernie, congratulations on the results and the outlook in a tough market. I guess, Bernie, Michael, the enterprise data business is very strong quarter-on-quarter. Wondering if you could just give us some thoughts as you look into next year, how you see the GPU business. And specifically, do you see sort of expansion of that customer list driving strength in GPUs? And then a question on CPU. You said CPU was up in the third quarter. Wondering if you're finally starting to see some strength in the Sapphire Rapids and Genoa side of that business? And then I have a follow-up question. Thank you. Michael Hsing: At this time, Quinn, as Bernie said earlier, these markets are very much oscillating and that came in the net, you see it. We done from this quarter. So from last year, year-to-year, we're still down. But AI, as these are power modules and as we're ramping up as a result of -- can maintain growth over in these years and still a slight growth from the last years. That's mainly due to AI. And also in the prior quarters in the autos that we see as a very lumpy business, as lumpy for ADAS ramping up. But all of these, we believe that will happen in ramping up in the next year, not only from ADAS. And also, as you mentioned about on the general CPU and in the server side. And I might as well as mention all the other ones. We still have a lot of greenfield products that haven't really ramped up yet. And many, many projects gets delayed in this year pushing to next year. And we don't want to give a very clear forecast that we still don't know yet. But sometime in the next years, we believe that they will start ramping up and all these greenfield products. So that's kind of my summary for the near-term business. Quinn Bolton: Thank you, Michael. I guess a follow-up question. Bernie, I think in the script, you mentioned some pushouts, some pull-ins or expedites. I think the pull-ins or expedites maybe newer given just the overall challenging industry. Were the pull-ins specific to certain customers or end markets or are you starting to see pull-in requests across multiple end markets? Thank you. Bernie Blegen: Yes. Quinn. I think what we're experiencing here is a unique business cycle and that right now, our end customers are unwilling to commit beyond a fairly lower window of expecting lead times within under 10 weeks for delivery. So that makes, as we said earlier in the comments, the predictability really hard to call right now. But I think, as Michael just said, that when we look at our design win pipeline, it's strong. And we're confident that we're in a good position to capture share and growth as the market recovers. But right now, we're still in a level of unpredictability. Michael Hsing: He's talking about which segments. Bernie Blegen: Oh, I'm sorry. Which segments? Michael Hsing: Yes, which segments. We look at it kind of a rough surveys. Like it's actually across the entire product segment, including consumers. Some of the products, they need and pull-it in very quick. As Bernie said, the lead time is very, very short. And we don't have those products, it's pretty much across the board. And other than AI, we really planned ahead, and we really plan ahead from the beginning of the year. And we can anticipate all the ramp-up even for the next few quarters. Quinn Bolton: Got it. Okay. Thank you. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you, Michael, Bernie. Congratulations on that $1 billion cash balance. First question is on the Q4 outlook. I know you typically don't guide by segment, but can you just talk about directionally where you expect each segment to trend in Q4? Michael Hsing: Yes. Q4 is still down quite a bit from Q3 and pretty much everything except maybe not auto. I mean all the public sideways are maybe is slightly up and also that AI power still continuously ramp up. Bernie Blegen: Yes. I think that when you look at the broader market, we're experiencing a lot of the weakness in demand that many of our peer companies are. And what makes us differentiated is the AI boost we're experiencing. Michael Hsing: And pretty much AI and auto and everything else is pretty much muted, yes. Tore Svanberg: Very good. And as my follow-up and maybe related to the previous question on enterprise data and AI, just wondering if you have any visibility on the sustainable growth here. There's obviously one big partner that's ramping right now, but it looks like there's some other processor companies that are going to be catching up next year. So if you could give us any color on, especially enterprise data segment for 2024, that would be really helpful. Michael Hsing: I can tell you, overall, how the MPS strategies. Like the MPS strategy always get the best -- which provides the best performance. When the volume gets higher and requirement is lower, we don't chase those low-end segment. I see MPS is still in the forefront in terms of best efficiencies and the lowest generate heat in smallest areas. We are still the leading -- would be next year and the year after, all these products are eyeing in development with our customers and with the leading-edge -- leading providers in AI GPUs specifically. And that's a huge market, and we don't want to take all of them. And to your other part of the question is the general market. In general market, in other segments, we view CPUs. And you'll remember in the VR13, we didn't have a lot of design wins. But we put up a lot of inventories in the VR13.5, it became a serendipity. And again, we have a few project design win and other supply -- but we ship a lot. So that's where you see the server data center growth. That's because of that. And for next years, we were told to get ready to have those projects ramping up in a rapid supply, let's call it. And so when these markets are already ramping up, MPS are there. Bernie Blegen: I think, Tore, you hit on a couple of very good points that as far as the AI GPU opportunity, we're very well positioned both for the near term, in 2024, but more importantly, longer term. And as Michael just emphasized, there is a differentiated market there and we want to stay at the high end of that market. So we've always been aware that there would be competitors entering this space and that's how we're differentiating ourself. And then as far as the CPU and GPU markets what we're preparing to do is to manage the uptick in demand that we're anticipating by building that inventory during the next couple of quarters. Michael Hsing: Oh, yes. That's what I forgot, while I tried to make a point. And MPS doesn't want to be known as AI power company. We want to focus on the diversified growth. And we do have a lot of greenfield products still haven't realized yet. These are across the segment. And also in the consumer side, in the last years, okay, because last couple of years because the shortages we kind of neglect it. And that will -- in the last half years, we developed a low-cost product and we introduced the market where you'll see the growth. That's only on the -- because of very short design cycle, you will see revenue from next year. And all the other product like industrials, automotive, in tracking inverters, in chargers and also ADAS, these were ramping up. And so we want to achieve very diversified growth, not only on the AI side. Tore Svanberg: Great color. Good job with the buyback. Thank you. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Hi, guys, can you hear me? Michael Hsing: Yes. Hi, Ross. Ross Seymore: Hi, there guys. So I guess the question I have is, I don't know cyclicality or seasonality is carrying the day. But the last couple of quarters, you've talked about weakness. You're not unique in that. But the fourth quarter, you seem to be guiding pretty much back to a seasonal drop. If I look into the first quarter, is that something that you expect to continue, or is visibility just too limited to really comment on that quite yet. Michael Hsing: Yes. Well, the numbers kind of reflected seasonal, but the reality is it just happened that way, we can't call it seasonal. This is a fast-changing market, I mean, it's very difficult for us to forecast. That's difficult. Unfortunately, we have a lot of capacities. But these capacity were still the lead time still shorter than our production cycle and we have to get ready just that. Bernie Blegen: Ross, you bring up a really good point is that if we look at the outlook for Q4, a portion of that is how competitive we were at going after the notebook market. And so the Q4, we're experiencing a little bit of a decline as those are seasonal sales. When we look at Q1, Michael said it best, there isn't a lot of visibility. But as we look at this cycle, we believe that next year is really back half-weighted. And so I would probably indicate that we'll have a more conservative profile as we look at the first half of 2024. Michael Hsing: Yes. Also, I forgot to mention about it. And we talked about beginning of the year, we'll be aggressive on price and especially within the course of board. And then we have a new product in the consumer segment come out -- already came out. And also in a notebook area, we pretty much have a large market share in the commercial side. In the beginning of the year, we were very starting -- become very aggressive on the price. And now, fourth quarter, you see it in our notebook side start to gain more shares in the consumer side. Ross Seymore: Got it. Thanks for that. And my one follow-up, I want to just pivot over to the gross margin side of things. You mentioned, Bernie, in your script that you're at the low end of your guidance because of mix. I was a little surprised that enterprise data more than doubled sequentially, but yet you pointed to mix. Can you just talk a little bit about what's going on? What mix were you referring to because I think, whether correctly or incorrectly, at least I assume that enterprise data would be an accretive gross margin category. Michael Hsing: Sure. Well, consumer notebook, margins are very low. But it's an easier money to be made. Bernie Blegen: Yes. Michael is exactly right, is that we have been aggressive on pricing across the board. And while that isn't called out specifically as a contributing factor to the lower gross margin, it is reflected in the overall mix, notwithstanding the impact of the GPU and AI business. Ross Seymore: And has that pricing dynamic, is that starting to kind of normalize from here? Or is that an incremental headwind that we should consider going forward? Bernie Blegen: I believe that as the market begins to stabilize, that will return to a more normal profile as far as pricing. Again, a very specific point to make here is that most of our customers are attracted and we secured design wins because of our innovation as opposed to pricing alone. So I believe that as the market stabilizes sometime in 2024 that we'll probably return to a more normal pricing environment as well. Michael Hsing: Yes. You said product mix, right? But also, there's other capacities, and capacity utilizations in [indiscernible] and also add a lot of capacity cost for us. So it's a mix of all of them, not only the product mix. Ross Seymore: Thank you. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Hey, guys. Let me add my congratulations. If I could follow up, just one more question on enterprise data. You mentioned your greenfield product lineup for next year, I think, a couple of times on call. And one of those really stands out is the silicon carbide power isolation module you guys are working on. And I know that's for a couple of different end markets. I was hoping you could give some color around the sort of engagements you're seeing right now with the CSPs, so in data center, maybe a sense of timing of when those initial revenues would start showing up in the model. And my bigger question is really, do you view sort of power isolation module as a TAM expander for your existing enterprise data franchise? Thanks. Michael Hsing: Let me answer your first for silicon cover. Thanks for reminding me this. I almost forgot. Yes, we released the product. And first revenue, we'll see sometime in the next years, would be in the solar inverters. And the green energies had a lot of demand, we have got products we designed for those -- that market segment and will start to ramp and also in automotive. And these are not specifically for tracking inverter for these drivers. We do power management. And we will see those products designed and ramping up much later. I mean these are clearly in the dip -- there's a void in the market. No other company produces that kind of a product, and it became very unique. And so I have a very good confidence in the second half of next year, the year after. We will see a lot of new revenue coming from that segment. And what's the second questions, second part of the -- Rick Schafer: Yes. Within CSP, the full rack power that I know you guys have discussed. Is there any color you could give around how you view that? Is that sort of a TAM expander for your enterprise data segment? I'm sorry, the hyperscalers? Michael Hsing: Oh, the hyperscaler. Hyperscaler is now -- you guys know better than we do. We just only provide the power. So I can mean that, for the CPU side, GPU side, as we said earlier, VR14, we expect to have bigger shares. And if you refer to silicon carbide in that we will develop those products. Those are power supplies. And again, these are plug-and-play power supply, and these are large modules. And that will ramp up -- I don't have a time frame. Probably is towards the very end of the next year, the 2025. Rick Schafer: Okay. Thanks a lot for that color, Michael. And I guess, maybe if I could try one more slide that Ross question on gross margin. I don't know, Bernie, if you could give us any kind of rule of thumb. And I understand it's a mix issue and I hear everything you're saying about the current pricing environment. But as we look the thing sort of normalizing, say, in the second half next year, say you get back to your $2 billion or better kind of run rate, I mean, should we be thinking gross margin at that level should be back sort of tilting toward the high 50s again at that sort of a run rate? Bernie Blegen: Yes. I would not be too quick to jump to the high 50s in the near term here. I think that what we've said previously is that we expect for the next few quarters to stay within our model, targeting about 56% plus or minus 50 basis points. And then, as we look at the second half of next year, as things stabilize and we get a better mix that we should see return to have an incremental improvement. Michael Hsing: Yes. I still see some and I didn't look at the number in details. We expand a lot of capacities. And these are strategically not mistake. And we do see a lot of growth in the next couple of years. And so I believe this capacity, the utilization had taken into effect on the gross margins. I don't know how many -- what's the percentage? I don't know. Maybe Bernie can answer you later. Bernie Blegen: Yes. On the capacity, and I'll take this topic on because it's an important one as we look ahead, is we talked about a year ago as far as developing new relationships with fab partners, particularly in Taiwan and Singapore as we not only expand capacity in advance of a future upswing in demand but also to diversify by geography. And so those investments are adding to our overall cost profile more in the R&D side than in gross margin specifically today, but that capacity will become available here just as we see the second half of next year starting to -- Michael Hsing: Well, these are for future. China is on -- Bernie Blegen: Yes. Michael Hsing: But the capacity that we expanded from a year ago and it's not utilized, yes? Bernie Blegen: Yes, not yet. Michael Hsing: Okay. Or the test equipment. Rick Schafer: Thanks for all the color guys. Genevieve Cunningham: Our next question comes from William Stein of Truist. William, your line is now open. William Stein: Great. Thanks for taking my question. I'm hoping Michael, you talked about traction in design wins that will turn into revenue over the next several quarters and years. It sounds like you've been very busy with these, as you always are. And often, that means you can see sort of what's coming a little earlier in terms of where the revenue might shift in terms of the end markets and products and that sort of thing. So when you think about the bigger design wins, either the bigger volume runners or the bigger ASP drivers, is there a shift either in end markets or in mix, let's say, for modules or motion control or things like that? Any other shifts in the revenue mix that we should expect because of these design wins that have yet to ramp? Michael Hsing: Well, thanks for reminding me the motion. I forgot about that. Okay, yes, we do have a lot of design win in the motion side, too. And we look at it. And the beauty is, I can't call it specifically, really across the board. And that means we have our biggest customers, like 4%, 5%, maybe slightly higher out of these years. And all the other customers, there are a few thousand customers and a few thousand products around, I don't know how many market segments. And they are very healthy in terms of design win activities. And so all of them will turn into revenues. And I can give you some bigger segments, and not many people talking about it. And is not, what is it, a USB-C, USB-PD. And I believe that this will be a huge revenue and growth. And MPS has a lot more content versus a USB-PD versus the USB -- Bernie Blegen: Earlier versions. Michael Hsing: Yes, earlier versions like type B, okay, now it's Type C. And some of them in auto will be cannibalized for USB type B product. And but C is a much higher content, and that's in auto. And in the consumer side, it's totally new. And USB B type is a very low -- is like a consumer side. And now they're converting to USB-C, and that will be a lot broader applications. And it's based on -- because all unified approach, and especially European countries and drive that standards and I think to migrate to everywhere. They have a clear mandate went to switch it. And I believe even Apple on, for the next version of a phone will be USB-C. And we see MPS has a lot of opportunities, a lot of growth. So other than that, battery management and that will ramp in 2014. And again in a lot of different applications from -- Bernie Blegen: 2024. Michael Hsing: 2024. And these are from power tool to garden tools and from all kind of other things. I mean those are already designed in products, okay, we're ramping in the next 12 to 24 months or less than 6 to 24 months, I guess, yes. Bernie Blegen: And in addition, just to repeat sort of the opportunities that we talked about in both green energy, clean energy and as well as in DDR5. So there's a large number of products that are expected to ramp here very quickly for us. William Stein: Great. If I can ask one follow-up. The inventory decline sequentially surprised us a bit. Perhaps this was always your plan. But if it wasn't, can you describe what happened here? Perhaps customer came in with more demand for something or maybe you decided mid-quarter to reduce production. What -- maybe just set me straight on this issue. Michael Hsing: We reduced the overall inventories that came in starting at the beginning of the year. That's probably reflects that. And yes, and it doesn't mean we will keep that low. We will boost that up more. Bernie Blegen: Yes. What we've done is, we've said that we have a range of inventory that we want to operate within between 180 to 200 days. And what you've seen is that we did reduce wafer starts about 9 months or 3 quarters ago, and that's now being reflected in our balance sheet today. But as we anticipate the demand for all of the opportunities that we see possible for 2024, we are beginning to ramp inventory. And as Michael said, we have the capacity available to take advantage of that. William Stein: Thanks, guys. Genevieve Cunningham: Our next question is from Matt Ramsay of Cowen. Matt, your line is open. Matt Ramsay: Thank you very much. Good afternoon, guys. Michael, I wanted to dig into the automotive market a bit and understand the drivers of the business over the next several quarters. I think you guys have some very exciting new content with one of the leading EV OEMs in the States and obviously some really good content with a number of folks in Asia. So if you could try to help us break down what your expectations are for the drivers of your automotive business over the next, I don't know, 6, 9 months relative to some, I'd say, fluctuations in unit expectations from some key customers, I'd really appreciate it. Thanks. Michael Hsing: Yes. These type of products is not like a consumers. Like a 0.5 year and you can design you out. And it took us a year -- it took us years and it took us at least 12 months to work with our customers, the major suppliers, and to put in the system and make a production worthy and working. And that's a long effort. And frankly, I don't really care, okay? As long as you win those socket or you win those projects. I mean the revenue will come. And so when is the next 3 months or next 9 months? I don't really know. I mean we thought from the last year, again, we saw the last year, middle of this year, we'll start to ramp up. It didn't. But I think it's next year, sometimes that we'll see more and more ADAS and also the new type of tracking inverters. And so that's pretty much just as everybody else expected. All these products are ramping up, okay, we'll go with it. Bernie Blegen: And if I can just add to that, that a lot of the customers that are picking up on design wins are skewed more heavily to EVs that are inviting new technology platforms. And that market has slowed in unit volumes observed. But the exciting part of this story is that we see that new platform launches for those customers are in position to ramp in the first half of next year. And we're seeing a proliferation of a broadening of those technologies going into more traditional internal combustion, or IC brands. So I think that the automotive market, while it's difficult to time that our positioning is very secure. Michael Hsing: Yes. Okay. That's a good point. That ADAS, they start to ramp. We were told at the beginning of the year and at the end of the year and now we were told next years. But all of these are new for us. And in the digital cockpit and also ADAS. So now they tell us early next year. And I don't know I can believe or not. I mean -- Bernie Blegen: We'll see, we'll see. Matt Ramsay: Thank you, guys. I guess my follow-up question, it's not, to me, the most strategically important part of your business, but I think it has a lot of different benefits is the consumer market in Asia. And I mean Bernie used the cookie jar analogy a number of times over the years. And the consumer market got down to a small enough percentage of your revenue. I think there was an intention to potentially really lean in and try to regrow that business both from a revenue perspective and also, it gives you a lot of flexibilities around growth and margins. And maybe the demand environment is not there today to really lean in and regrow that. But I just wanted to do a pulse check on the strategy, that's still the intention to regrow that business as a percentage of revenue and you feel like you have the product portfolio to go and do that? Michael Hsing: The strategy is correct. And as in the last quarter, I said like has dropped to unhealthy positions, way too low. And there's a lot of money to be made. And margin may be lower but it helped the EPS a lot. So the second question is whether we have enough product? We did a lot of them, and that came in last 0.5 years. And other ones will release in next couple of quarters and our next quarter also, and those will turn into revenues in the 0.5 year to 9 months' time. Bernie Blegen: We remain committed to the consumer marketplace as part of our diversification. Michael Hsing: Absolutely. Okay. Matt Ramsay: Thank you, guys. Have a good afternoon. Appreciate it. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you. I just had two quick follow-ups. First of all, on the buyback, I mean, this is from a size perspective something that's quite large. And we don't have much history with the company in regards to a size like that. So how should we think about, I guess, philosophy with the buyback? You mentioned to offset dilution, but are you going to be opportunistic? Or are you like some other companies where you buy the stock regardless of the price? Just trying to understand some of the dynamics there. Bernie Blegen: Yes. So I'd like to comment on that very quickly is that when we looked at doing the buyback, we were demonstrating confidence in our free cash flow over the next 3-year window. And the goal here is to offset dilution that will naturally occur during that period of time. So we're going to apply a go-to-market strategy that is both opportunistic but also programmatic. So we don't have a timetable necessarily for how to implement it during that period, but it will reflect both existing market conditions as well as a systematic program. Michael Hsing: Well, implies a bylaw, keep it higher, yes. Tore Svanberg: Yes, that's very helpful. The other follow-up, and I know this is a minor detail, but your lighting control business was up quite a bit in the quarter. Was that mainly because of notebook, or was there something else going on there? Michael Hsing: Lighting business? Bernie Blegen: I'm sorry, Tore, you broke up a little bit. Were you talking about storage and computing? Tore Svanberg: No, no, no. So you have the lighting control business. I mean you showed this in your filings. It was up about 20% sequentially. And I was just wondering if that was because of notebook or anything else. Michael Hsing: No, these are decorate lighting. We don't have a lot of consumer business anymore. But these are small numbers, okay? I mean I don't know that specifically, but I do know we don't have a lot of consumers because these are really, really low price. These are industrial lightings and decorative lighting. Bernie Blegen: Yes. I apologize, Tore. I think that you broke up and we missed the heart of your question, which end market? Michael Hsing: Lighting, he said. Tore Svanberg: Yes. You have a lighting control versus DC to DC, right? So lighting control, it increased by $4.5 million sequentially. It was [1] [ph]. It's a $100 million annual business. I mean it's not trivial, but obviously, small in the bigger scheme of things. Michael Hsing: Yes. Bernie Blegen: Yes. Again, Michael addressed it, but it's a general market. Michael Hsing: I don't know it specifically, but that's the market where we're in. We will position ourself. We're not specifically in the consumer and in high volumes. Bernie Blegen: And also, it's in automotive as well. Michael Hsing: Yes. You're right. Genevieve Cunningham: [Operator Instructions] As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: Just closing here, I'd like to thank you all for joining us this webinar and I look forward to talking to you again during the fourth quarter, which will likely be at the end of January. Thank you. Have a nice day.

Genevieve Cunningham: Welcome, everyone, to the MPS Second Quarter 2023 Earnings Webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, VP and CFO. In the course of today's webinar, we will make forward-looking statements and projections that involve risk 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 February 24, 2023, and our Form 10-Q filed on May 5, 2023, which are accessible through our website. MPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expense, operating income, other income, income before income taxes, 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. Tables that outline the reconciliation between the non-GAAP financial measures to GAAP financial measures are included in our Q2 2023 earnings release, which we have furnished to the SEC and is currently available 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 today. Now, I'd like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. MPS reported second quarter revenue of $441.1 million, 2.2% lower than the first quarter of 2023 and 4.3% lower than the second quarter of 2022. Compared with Q1 2023, sales and communications were lower, while industrial, storage and computing, consumer and enterprise data improved sequentially. Turning now to our second quarter 2023 revenue by market. Storage and computing revenue of $124.5 million increased 3.9% from the first quarter of 2023. The sequential revenue improvement primarily reflected higher commercial notebook sales. Second quarter 2023 storage and computing revenue was up 1.8% year-over-year. Storage and computing revenue represented 28.2% of MPS' second quarter 2023 revenue, compared with 26.5% in the second quarter of 2022. Second quarter 2023 industrial revenue of $49.7 million increased 4.8% from the first quarter of 2023, reflecting increased sales of products for power source and industrial meter applications. Second quarter 2023 industrial revenue was down 11.0% year-over-year. Industrial revenue represented 11.3% of our total second quarter 2023 revenue, compared with 12.1% in the second quarter of 2022. Second quarter consumer revenue of $65.2 million increased 2.9% from the first quarter of 2023. The sequential quarterly revenue improvement reflected higher gaming, TV and mobile device sales. Second quarter 2023 consumer revenue was down 33.0% year-over-year. Consumer revenue represented 14.8% of MPS' second quarter 2023 revenue, compared with 21.1% in the second quarter of 2022. In our enterprise data market, second quarter 2023 revenue of $48.0 million increased 1.7% from the first quarter of 2023, primarily due to initial shipments of new generation AI applications, which offset softer demand for CPU applications. Second quarter 2023 enterprise data revenue was down 26.4% year-over-year. Enterprise data revenue represented 10.9% of MPS' second quarter 2023 revenue, compared with 14.2% in the second quarter of 2022. Second quarter automotive revenue of $104.4 million decreased 0.9% from the first quarter of 2023. Second quarter 2023 automotive revenue was up 71.1% year-over-year. Automotive revenue represented 23.6% of MPS' second quarter 2023 revenue, compared with 13.2% in the second quarter of 2022. Second quarter 2023 communications revenue of $49.3 million was down 27.4% from the first quarter of 2023, primarily reflecting lower infrastructure sales. Second quarter 2023 communications revenue was down 16.9% year-over-year. Communications sales represented 11.2% of our total second quarter 2023 revenue, compared with 12.9% in the second quarter of 2022. I'd like to make some general comments about our business. In our previous earning calls, we have noted customer ordering patterns could oscillate. This has turned out to be the case. We continue to see some orders getting delayed or amended by [pull-in] (ph) requests. This lack of short-term visibility has made forecasting beyond Q3 2023 more difficult. However, our business fundamentals remain unchanged. In the last few years, our revenue and customer base have expanded tremendously, particularly amongst Tier 1 accounts. We believe we've solidified our market share gains by delivering quality products and services. Additionally, we have a strong design win pipeline, which positions us well for future growth. Here are a few highlights -- here are a few of our recent highlights. We have been designated a preferred supplier with multiple Tier 1 customers in automotive and telecom markets. We have started sampling silicon carbide power solutions for data centers and green energy conversion. We are also continuing development for EV power management applications. We are continuing to broaden our customer base for AI applications and developing solutions for next-generation platforms. We have new design wins in battery management solutions and USB-PD for automotive, industrial and consumer applications. These will be major revenue drivers as we look ahead to 2024 and 2025. Moving now to a few comments on gross margin. GAAP gross margin was 56.1%, 120 basis points lower than the first quarter of 2023 and 260 basis points lower than the second quarter of 2022. Our GAAP operating income was $112.3 million, compared to $124.3 million reported in the first quarter of 2023. Non-GAAP gross margin for the second quarter of 2023 was 56.5%, down 120 basis points from the gross margin reported in the first quarter of 2023. The quarter-over-quarter decrease in both GAAP and non-GAAP gross margin is attributed largely to unfavorable variances and higher direct expenses. Our Q2 2023 non-GAAP operating income was $153.1 million, compared to $164.1 million reported in the first quarter of 2023. Let's review our operating expenses. Our GAAP operating expenses were $135.4 million in the second quarter of 2023, compared with $134.5 million in the first quarter of 2023. Our non-GAAP second quarter 2023 operating expenses were $96.0 million, matching what was reported in the first quarter of 2023. The difference between non-GAAP operating expenses and GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss on an unfunded deferred compensation plan. For the second quarter of 2023, total stock compensation expense, including approximately $1.1 million charged to cost of goods sold, was $38.0 million, compared with $37.0 million recorded in the first quarter of 2023. Switching to the bottom line. Second quarter 2023 GAAP net income was $99.5 million or $2.04 per fully diluted share, compared with $109.8 million or $2.26 per share in the first quarter of 2023. Second quarter 2023 non-GAAP net income was $137.5 million or $2.82 per fully diluted share, compared with $146.0 million or $3.00 per fully diluted share in the first quarter of 2023. Fully diluted shares outstanding at the end of Q2 2023 were 48.8 million. Now, let's look at balance sheet. Cash, cash equivalents and investments were $941.1 million at the end of the second quarter of 2023, compared to $919.1 million at the end of the first quarter of 2023. For the quarter, MPS generated operating cash flow of approximately $90.2 million, compared with Q1 2023 operating cash flow of $218.8 million. Accounts receivable ended the second quarter of 2023 at $169.2 million, representing 35 days of sales outstanding, which was two days lower than the 37 days reported at the end of the first quarter of 2023. Our internal inventories at the end of the second quarter of 2023 were $427.4 million, down from the $430.8 million at the end of the first quarter of 2023. Days of inventory of 201 days at the end of the second quarter of 2023 were three days lower than at the end of the first quarter of 2023. Comparing current inventory levels with the following quarter's projected revenue, you can see days of inventory decreased to 184 days at the end of the second quarter of 2023 from 203 days at the end of the first quarter of 2023. I would now like to turn to our outlook for the third quarter of 2023. We are forecasting Q3 revenue in the range of $464 million to $484 million; GAAP gross margin in the range of 55.5% to 56.1%; non-GAAP gross margin in the range of 55.7% to 56.3%; total stock-based compensation expense in the range of $33.5 million to $35.5 million, including approximately $1.0 million that would be charged to cost of goods sold; GAAP operating expenses between $129.4 million and $133.4 million; non-GAAP operating expenses in the range of $96.9 million to $98.9 million, this estimate excludes stock compensation expense, but includes litigation expense; interest and other income in the range of $3.0 million to $3.4 million before foreign exchange gains or losses; fully diluted shares in the range of 48.6 million to 49.0 million shares. In conclusion, we continue to execute our long-term strategy. I will now open the webinar for questions. A - Genevieve Cunningham: Thank you, Bernie. Analyst, I would now like to begin our Q&A session. As a reminder, if you would like to ask a question, please click on the Participants icon on the menu bar and then click the Raise Hand button. Our first question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Thanks for letting me ask a question. Just wanted to ask Bernie first, when you had your general business condition update about orders remaining volatile, et cetera, I wonder if you could just give us a little more color. Are things kind of improving, staying the same? And is there any changes in things like competitive intensity, pricing, geographic differences? Any color, a little bit more detail than what you gave on your original preamble? Bernie Blegen: Sure, I'd be glad to help out with that. So, I think that we started that part of the conversation by acknowledging that in each of the last -- the prior three quarters that we believe that ordering patterns would oscillate. And that's pretty consistent when you're coming off of a period where there'd been an extra normal level of ordering that created a demand supply imbalance that afterwards, you're sort of draining your backlog as you are watching your customers try to align around what they're guessing is end customer demand. So, as a result of that, we have not had the same level of visibility out past 90 to 120 days that we would have during the more normal ordering pattern. And so, as a result of that, we don't have the same level of predictability. On the second half of your question, the one thing that remains consistent, whether it's under normal conditions or whether it's today, is we've always been in a very competitive marketplace. And, obviously, price downs are the norm and that we have competitors like ourselves that are trying to go after as much incremental business during this transitory period as is possible. Michael Hsing: Let me add, too. We do see a slight improvement in first quarters, and essentially, it's similar. And we do see the consumer business improvement and -- from both -- from U.S. [side] (ph) to Asia side, and other ones, pretty much stay the same. Ross Seymore: Great. Thanks for that. I guess as my follow-up, Bernie, you guys have had relatively volatile end markets, not specific to you, but just in a general sense. So, any sort of color in your guide for the third quarter between the various end markets? And the one I think most people are most interested in albeit still a relatively smaller part of your business is your enterprise data segment. Any sort of color between the AI side, you talked about last for the second quarter, and the CPU side, which has been a little bit weaker? Michael Hsing: Yes, you already answered your -- all your questions there. We don't see -- we are -- all the products relate to -- with the AI, like, we cannot ship enough now. And the other ones -- other part of enterprise data, it's like data centers, CPU powers, and these are still delayed. Bernie Blegen: Yeah. And one other thing to add, and this is specific to MPS, not necessarily a broader comment at the general market, but automotive came in a little bit lower than would have been expected. And as we look at the ramp in the second half, we're observing that at least for two of our customers, unit volumes appear to be lower, and we had two product launches which have been delayed into Q4 and to Q1. Ross Seymore: Thanks, guys. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hey, Michael and Bernie. I just wanted to ask on the GPU side of the business. There's been recent chatter in the market that one of your large customers maybe bringing in Renesas as a second source as well as potentially Vicor. Just wondering if you might share any thoughts you have as you look forward with that customer about the impact of multi-sourcing with that customer? And maybe a related question, how are you feeling about your position looking into the next generation 3-nanometer processor at that customer? And then, I've got a follow-up. Thanks. Michael Hsing: Okay. I think, so far, we're in the lead position. And I can't -- we are engaged deeply in the future design, and develop a new product for the second generations for the other -- next generations. And so, other than that, we can't speculate any things, okay? Bernie Blegen: I think in most scenarios and this particular customer's representative is they want to take a leadership position through innovation, and they found us an equal partner for that. But it's in everybody's best interest that it'd be a competitive, not a single source. And so, yes, we'd always anticipated that there would be redesigns that allow competition into the market. Michael Hsing: Either as a -- we had to provide the best solution, and at the same time, we understand that our customers require other solutions. This is a very large market. There's no means an MPS can supply everything. And, also, MPS is always -- we emphasize diversified growth. And if there's a performance need, I believe the MPS is the best solution now for the near future. Quinn Bolton: Thank you, Michael. Bernie, you'd mentioned sort of visibility out beyond 90 to 120 days is pretty choppy at this point just given the industry dynamics. I guess I look out to the fourth quarter, and it looks like the Street has modeled the fourth quarter approximately flat, which I think is an above seasonal pattern for MPS historically. And I'm just wondering can you comment whether you think an above seasonal fourth quarter looks right to you, perhaps given the ramp in the GPU business and some of the timing shifts you just mentioned in automotive? Or do you think it would be best for investors to think that the December quarter is going to see a -- sort of a seasonal decline in the December quarter? Thank you. Bernie Blegen: Yeah. I think that normal seasonality for MPS would be somewhere between a sequential decline of between 4 percentage points and 5 percentage points. And I can point to the increase in the notebook sales during Q3, which precedes Christmas, so that's a normal seasonal factor that's expected to come down. And we're not seeing the uplift that had been anticipated from automotive. So, I would be more comfortable with a seasonal down in Q4. Michael Hsing: Well, it's a -- you mentioned as a seasonality -- well, we're talking about seasonality, and I try to figure out what is seasonality now. And last year, we -- last couple of years, we have a very strong Q4, at least the year before that. And the customers see all those shortages, and now the demand is -- clearly is much less. And so, you have a -- we experienced, like, a year-over-year, so like a -- in the last couple years, like, over 40%. And this year, and it clearly is not as much, okay? I mean, much less. And I can't really call it seasonality anymore. So, just as I said, it's not very clear. But as Bernie said, usually in a seasonality, we're lowered. Quinn Bolton: Understood. Thank you, Michael. Thank you, Bernie. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Thanks. Yeah, guys, I just had a couple questions if I could. The first one is a -- if I could kind of maybe revisit auto for a second. I mean, you mentioned power isolation module in your prepared remarks. And I don't know if you could give us a little bit more color there. Like, kind of an update on how many customers are evaluating the product now? Talk a little bit about if you could, like, design win timing, revenue timing, kind of expectation there? And is auto going to be the first to ramp and then data center and then more of the green stuff? Or how does it all kind of shake out, I guess, is what I'm asking. Michael Hsing: Yeah, that [we saw] (ph) delay a little bit, but we will reintroduce to resampling and announce, and it was a delay due to the technical issues. And so, as speaking right now, we have resampled it. And mostly, it's in automotive and also data centers. And same as we mentioned earlier, the silicon carbides and -- these are product that we'll start to sample. Rick Schafer: Okay. Thanks, Michael. And then, second question is you guys have almost $2 billion power management business now. And I think modules are on track to be 10% of that or so this year. And I think that's up from basically nothing just a couple of years ago. So, if this business sort of has, I believe, and Bernie, I'm sure correct me, in lighter better margins, I think, the core average, I think it's a 5x ASP multiplier. I'm just trying to get a sense of -- Michael, how big do you envision this business becoming as a percent of mix going forward? And are there any particular end markets that are going to be favored, at least initially, by the move into modules? Thanks. Michael Hsing: Yes. Okay. I believe that's our future. And when customers want to have a plug-in-play solutions and they want a less technically involved with power management, and that's -- module solution is the way to go. People doesn't want to buy ICs, design all of -- all these up -- the component. And, initially, that's where we're ramping a lot of them in the auto business, in the industrials, that can be an industrial site, and as well as a telecom, and -- or even semi equipment. And a lot of -- I can give -- go on and on, like, a lot of things to be mentioned. But most of all these products is not price sensitive, and they're not volume consumer-related product. And so, this is still at the very beginning. We have all these customer base, and we have all the new product coming out, and we'll see the similar growth rate in next few years. Rick Schafer: Got it. Thanks, Michael. Genevieve Cunningham: Our next question is from Jeremy Kwan of Stifel. Jeremy, your line is now open. Jeremy Kwan: Thank you. Yes, this is Jeremy on for Tore. I guess maybe a first question on the comms business. It was down meaningfully as you guys expected, and we're probably one of the early ones to call out last quarter. I guess what's your sense of where things are now? Should we expect this business to kind of sort of bounce along at these levels in the second half before maybe picking up next year? And what are your customers telling you in terms of their expectations? Michael Hsing: Yeah, as you see, we didn't participate at 4Gs. And 5Gs and other infrastructure business, all new to us. And so, you know that 5G hasn't really ramped up quickly yet. But our products in -- were designed in last few years, we're just waiting for our customers to give us orders. And so far, it's not clear. Okay. Next question? Genevieve Cunningham: Our next question is from William Stein of Truist. William, your line is now open. William Stein: Hey. There we go. Thanks for taking my questions. First, I'm hoping you can talk to us about channel inventory. When we look at your P&L, you had nearly 50% revenue growth last year. I think there's a lot of -- there's a pretty strong sense among investors that there might be some inventory still in the channel to be worked through. We'd love to hear any update or any measurement you have of that? Bernie Blegen: Sure. So, as far as what we observed in Q2 is that there was a meaningful decrease in channel inventories both in terms of dollars and days. And the sort of phenomena that we've seen has been a time delay between when the end customer places an order and when they want to do a pullback because of uncertainty with what end customer demand has been. So, I can point to a couple of our end markets where that was very clear. But we believe right now that we're in a position to continue to bring -- to normalize channel inventories over the next two quarters. William Stein: So, not normalized yet, so -- is what it sounds like. So, in the September for guidance, I assume there's some expectation that sell-in will be lower than sell-through. Is that fair? Bernie Blegen: Yeah. Again, going back to the comments about the visibility and predictability out past 90 or 120 days, that's not just the demand that -- the new net orders that we're receiving, but also the strength of the sell-through is also a little harder to predict. William Stein: Great. Thank you. Genevieve Cunningham: Our next question is from Matt Ramsay of Cohen. Matt, your line is now open. Matt Ramsay: Thank you very much. Michael, Bernie, can you guys hear me okay? Michael Hsing: Yes. Matt Ramsay: Awesome. So, I guess for my first question, Michael, we've -- you and I've had some conversations about the company strategically wanting to sort of rebuild the consumer business as a percentage of revenue over time and get it back to a higher level than it's been now. I guess I'd like to revisit some of those conversations and just see if you had any comments about how you feel about supply, the demand environment, and the competitive environment in order to try to push to sort of reemphasize your company and certain parts strategically of that consumer segment. Thank you. Michael Hsing: Yeah. So, that's a good question. So, now we see some improvement, but this is at the beginning. And, as we see our supply, the cost went down dramatically, and as Bernie said, our inventory values even -- I mean, it will reflect inventory value now. And so, in the past, MPS is named in the price killers. It's a very simple game. We don't mind, and we don't buy in that consumer segments and we have a fight. And all the high gross margins is on the other segments. And it's all because they share our technology strengths. We provide a much better, a much smaller size. And in a consumer segment, in the last couple of years, we neglected that, and -- because we don't have enough revenues -- or enough capacities. And so, it's not that difficult to go back to the same games that we played since IPOed. Matt Ramsay: Thanks, Michael. I think as my follow-up question, I wanted to really focus on the enterprise data segment just because that's where a large percentage of my investor questions come from. And I think there's two dynamics going on here, right, the strength of the AI business with your lead customer there, and some softness in the CPU market that's well documented. And so, the question is really what would you guys, I think, have built on books inventory to support ramps of all the customers in that space? So, I guess the question is, how quickly and what would the lead times be to respond to an uptick in demand? And do you have any visibility into the timing of a potential reacceleration of that segment? And how long is that visibility? Thanks. Michael Hsing: Our visibility is okay, probably is well documented. If you're listening to all these major AIs, [probably you will see] (ph) MPS. And you will see that MPS in the next few quarters of a potential. And -- but I can talk to you about technical issues. I think that the MPS is so far the solutions is far better than our competitor. So, we -- in a -- for the next generation of our AI processor, we're not working on now, we're working a year ago, even 18 months ago. And -- so the relationship is a strong and, also, for the technical reason, even more challenging. And the space is critical, and you had to radiate all the heat out. And for the next generation, power even higher. And so, we provide all these vertical solutions, and we pioneer with it. And all the other solution had to fit into the form in a form factors. And the integrated solution is the only way to go. Bernie Blegen: And I think if I could just add to that, it's also the breadth of the customer opportunities that we're engaged with. And over the course of the next four quarters, we're going to see multiple new customer applications launch initially with MPS. So, yes, we have a very powerful initial position with one customer, but we expect to branch that out very quickly. Michael Hsing: It was multiple customers. Bernie Blegen: Multiple customers. Matt Ramsay: Thank you, guys. Really appreciate it. Genevieve Cunningham: Our next question is from Hans Mosesmann of Rosenblatt. Hans, your line is now open. Our next question is from Jeremy Kwan of Stifel. Jeremy, your line is now open. Jeremy Kwan: Yes. Hi. Thank you for allowing me a follow-up here. I guess, I wanted to ask about capacity. You guys have always been very ahead of curve on long-term capacity and through up and down cycles. I was wondering how you're thinking about it in this environment and whether or not that may give you guys a competitive advantage in some of these applications that you're really targeting? And, also, if you have a CapEx number for this quarter? Thank you. Michael Hsing: Yeah. As we stated it earlier, many of our customers requested move out of China. And now we kind of achieved more than 50%. We can have more than 50% of our capability out of China. And so, the overall capacities, we don't have it. Problem now is, we have more inventories, and we want to sell more from our inventory. And -- does that answer your questions? Bernie Blegen: Yeah. And I think that when you look at capacity today, it's really when this environment turns around and becomes more predictable, how are we positioned to service our customers a year and two years from now. And I think the investments that we're making, both in terms of expanding capacity and diversifying it geographically, both on the front-end and the back-end will pay very good dividends as far as customer satisfaction. Genevieve Cunningham: Our next question is from Chris Caso of Wolfe. Chris, your line is now open. Chris Caso: Yes. Thank you. Good evening. First question is regarding order visibility. And I ask because for the past several quarters, there really hasn't been any requirement for turns business going forward. Is that something that's changing going forward, given some of the changes in the end markets? And what does that mean with regard to revenue visibility as we look out at over the next few quarters? Bernie Blegen: Sure. I think that Michael responded to this pretty nicely in that we saw some improvement in Q2 from Q1 as far as our net bookings, but it's still not to the degree that we historically enjoyed in either 2018 or 2020, just to pick two more recent years. In the past, we would have up to 90%, 95% of our next quarter's revenue in hand at the end of the preceding quarter. And so, you're only relying on a fraction of a percent in order to -- of turns business in order to accomplish the numbers for that particular quarter. So, we're seeing steady improvement, but we're still not at the level yet where we have that predictability. Chris Caso: Got it. Thank you. As a follow-up, I just had a follow-up question about supply, and I understand that that supply is getting a bit easier out there. Historically, I think your ability to procure supply from places different from your competitor has been a source of competitive advantage for Monolithic Power. How do you see the landscape going forward? I know you bringing on some different foundry partners as you try to diversify outside of China. What do you think that means for both your access to wafers over the long term as well as the pricing? Do you think that competitive advantage remains? Michael Hsing: Well, you're mentioning of pricing, of course, all these material costs is a much lower than -- or go back to normal, I should say, to -- as pre-pandemic. And so, in terms of a capacities, look, I didn't mention earlier, we want to expand out of China, that's from our customers' request. And the other one is we want to expand it because just for our next couple of years' growth. And mostly, we we're still in a -- follow our long-term plan, and we invest, of course, now which will slow down a little bit in the next few quarters, and -- but over the long term, so we should spin -- we should continue the course. Chris Caso: Thank you. Genevieve Cunningham: If there are any follow-up questions, please click the Raise Hand button. As there are no further questions, I would like to turn the webinar back over to Bernie. Bernie Blegen: Thanks again, Gen. I'd like to thank you all for joining us for this webinar, and look forward to talking to you again during our third quarter webinar, which will likely be at the end of October. Thank you, and have a nice day.

Operator: Welcome, everyone, to the MPS' First Quarter 2023 Earnings Webinar. My name is Jennifer Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, VP and CFO. In the course of today's conference call, we will make forward-looking statements and projections that involve risk 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 Q1 earnings release and in our SEC filings, including our Form 10-K filed on February 24, 2023, which is accessible through our website. MPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expense, R&D and SG&A expense, operating income, other income, income before income taxes, 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 Q1 2023 earnings release, which we have furnished to the SEC and is currently available 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 1 year, along with the earnings release filed with the SEC earlier today. Now I'd like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Jen. MPS' first quarter revenue of $451.1 million came in about as expected, 19.4% higher than the first quarter of 2022 or 1.9% lower than revenue reported in the fourth quarter of 2022. Our results for the quarter were mixed with weaker quarter-to-quarter demand in our enterprise data and industrial markets, overshadowing improvements in consumer and automotive. Let's take a quick look at our first quarter 2023 revenue by market. First quarter 2023 consumer revenue of $63.4 million increased 19.5% from the fourth quarter of 2022. First quarter 2023 revenue was down 20.8% year-over-year. Consumer revenue represented 14.8% of our first quarter 2023 revenue compared with 21.2 -- a 21.2% contribution in the first quarter of 2022. First quarter 2023 automotive revenue of $105.3 million increased $8.0 million or 8.2% from the fourth quarter of 2022. This sequential revenue increase was primarily due to continued acceptance of our highly integrated solutions for advanced driver assistance systems, the digital cockpit and lighting applications. First quarter 2023 revenue was up 93.1% year-over-year. Automotive revenue represented 23.3% of MPS' first quarter 2023 revenue compared with 14.4% in the first quarter of 2022. First quarter 2023 Communications revenue of $67.9 million rose $3.6 million or 5.6% from the fourth quarter of 2022. This quarter-over-quarter increase primarily reflected a modest revenue improvement in 5G infrastructure. First quarter 2023 revenue was up 22.2% year-over-year. Communications revenue represented 15.1% of MPS' first quarter 2023 revenue compared with 14.7% in the first quarter of 2022. In our storage and computing market, first quarter 2023 revenue of $119.8 million was essentially flat with revenue recorded in the fourth quarter of 2022, as declining storage revenue was offset by higher notebook sales. First quarter 2023 revenue was up 24.1% year-over-year. Storage and computing revenue represented 26.6% of MPS' first quarter 2023 revenue compared with 25.6% in the first quarter of 2022. First quarter 2023 Industrial revenue of $47.5 million decreased $8.6 million or 15.3% from the fourth quarter of 2022. This quarter-over-quarter decrease was due to lower security and power source revenue. First quarter 2023 Industrial revenue was down 2.2% year-over-year. Industrial revenue represented 10.5% of our first quarter 2023 revenue compared with 12.9% in the first quarter of 2022. In Enterprise Data, first quarter 2023 revenue of $47.2 million decreased $21.3 million or 31.1% from the fourth quarter of 2022 due to broad-based weakness in data center spending. First quarter 2023 revenue was up 10.9% year-over-year. Enterprise data revenue represented 10.5% of MPS' first quarter 2023 revenue compared with 11.2% in the first quarter of 2022. I'd like to share some general business observations. During our 2 most recent earnings calls, we highlighted that customers were becoming more concerned with near-term business conditions and that ordering patterns might oscillate. This behavior continued through the first quarter of 2023. However, we do see order acceleration for products related to artificial intelligence, autonomous driving, and power modules, and our customer engagement and design win momentum remains strong across all of our markets. Regarding operating expenses, we continue to invest in our operations to support long-term growth. In response to customer concerns, we are expanding and geographically diversifying both our global production, operations and our R&D activities. In summary, we have strong customer engagement, design win momentum and are continuing to invest for the long term, even though timing of the revenue ramp from our customers remains uncertain. Moving now to a few comments on gross margin. GAAP gross margin was 57.4% and 80 basis points lower than the fourth quarter of 2022 and 60 basis points lower than the first quarter of 2022. Our GAAP operating income was $124.3 million compared with $136.9 million reported in the fourth quarter of 2022. For the first quarter of 2023, non-GAAP gross margin was 57.7%, 80 basis points lower than the fourth quarter of 2022 and 60 basis points lower than the first quarter of 2022. This downward pressure on gross margin is expected to continue near term as we work through higher value inventory built up during the supply-demand imbalance following the pandemic. Our non-GAAP operating income was $164.1 million compared to $174.1 million reported in the fourth quarter of 2022. Let's review our operating expenses. Our GAAP operating expenses were $134.5 million in the first quarter of 2023 compared with $130.9 million in the fourth quarter of 2022. Our non-GAAP first quarter 2023 operating expenses were $96.0 million up from $94.8 million reported in the fourth quarter of 2022. The differences between GAAP and non-GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss from an unfunded deferred compensation plan. For the first quarter of 2023, total stock compensation expense, including approximately $1.1 million charge to cost of goods sold, was $37.0 million compared to $35.3 million reported in the fourth quarter of 2022. Switching to the bottom line. First quarter 2023 GAAP net income was $109.8 million or $2.26 per fully diluted share compared with $119.1 million or $2.45 per fully diluted share in the fourth quarter of 2022. First quarter 2023 non-GAAP net income was $146 million or $3.00 per fully diluted share compared with $154 million or $3.17 per fully diluted share in the fourth quarter of 2022. Fully diluted shares outstanding at the end of Q1 2023 were $48.7 million. Now let's look at the balance sheet. Cash, cash equivalents and investments were $919.1 million at the end of the first quarter of 2023 compared to $739.6 million at the end of the fourth quarter of 2022. For the quarter, MPS generated operating cash flow of about $218.8 million compared with operating cash flow of $52.2 million in the fourth quarter of 2022. First quarter 2023 capital spending totaled $8.9 million. Accounts receivable ended the first quarter of 2023 at $184.3 million or 37 days of sales outstanding, up 1 day from 36 days at the end of the fourth quarter of 2022. Our internal inventories at the end of the first quarter of 2023 were $430.8 million, down from $447.3 million at the end of the fourth quarter of 2022. Days of inventory decreased to 204 days at the end of Q1 2023 compared with 212 days at the end of fourth quarter of 2022. Comparing current inventory levels with the following quarter's projected revenue, you can see days of inventory decreased to 203 days at the end of the first quarter of 2023, from 212 days at the end of the fourth quarter of 2022. I would now like to turn to our outlook for the second quarter of 2023. We are forecasting Q2 revenue in the range of $430 million to $450 million. We also expect the following: GAAP gross margin in the range of 55.9% to 56.5%. Non-GAAP gross margin in the range of 56.2% to 56.8%. GAAP R&D and SG&A expenses between $132.5 million and $136.5 million. GAAP R&D and SG&A expenses to be in the range of $94.9 million to $96.9 million. This estimate excludes stock compensation expense, but includes litigation expense. Total stock-based compensation expense of $38.8 million to $40.8 million, including approximately $1.2 million that would be charged to cost of goods sold. Interest and other income is expected to range from $3.8 million to $4.2 million before foreign exchange gains or losses. Fully diluted shares to be in the range of 48.6 million to 49.0 million shares. In conclusion, while we remain cautious about near-term business conditions, MPS will continue to focus on business development and investing in infrastructure as necessary to support our long-term growth. I'll now open the webinar up for questions. Operator: [Operator Instructions]. Our first question is from Tore Svanberg of Stifel. Tore Svanberg: I was hoping you could elaborate a little bit more, Bernie, on your comment about the business conditions. Because it sounds like the design win momentum is still very strong. The activity is very strong, but you also sort of added there was uncertainty in certain ramps. So maybe you could elaborate a little bit on that, especially when thinking about the second half which seems to be a period where the industry could potentially recover. Michael Hsing: Let me answer my -- Tore, let me ask first, okay. And -- so you look at all these industries, okay, we -- it's about servers computing, including industrial servers and AI product, that's about 10% of the MPS revenue. And we had a hyper -- we experienced this area really the -- all the entire companies experienced hyper growth, okay, in the last 2 or 3 years. And now the automotive to, again, we're about 23% of our business. Total together and where it's about a 30-some percent. In AI other than, okay -- across the board, other than AI and automotive and so far, still we experienced still very heavy demand. Other than that, again, all these design win activities that happened in the last 4, 5 years, and they started to ramp last couple of years. And a lot of -- because the reason we have all the inventory, we have expanded capacities and we grow much faster than the average. And now to answer your question directly, the -- our customers, all these products during a ramp, they have a pause. And they don't know what's coming and the new product and they push out. And so we just cutting in the period, which is not bad to me. Because in the last 2 or 3 years, we -- we have been in this unsustainable growth and hyper growth. It's like a 30%, 40% year-over-year, and that will break the company. And I'm glad to announce we're, okay, coming to -- back to the normal I mean, and we will ride this the global market uncertainties and we just adapt as in the past. Okay, Bernie, maybe you can add some more detail, okay. Bernie Blegen: And I think Michael has really laid out a very compelling case as far as the growth that we've experienced over the last 3 years, and also identifying that the automotive market remains solidly intact, but particularly in Enterprise Data with the exception of AI that we are seeing lag in ordering patterns there and general weakness in our other markets. So I think the thing to reinforce here is that the business model here remains intact. We've built MPS around sustainable growth over the long haul. And right now, we're looking at a quarter where the end customer demand is not picking up as well as we might have anticipated a quarter or 2 quarters ago. But again, the business model is intact. Tore Svanberg: That's great perspective. And as my follow-up, you talked about gross margin coming down very moderately because of higher value inventory. Could you talk about how long you expect that to play out and even some ranges? I mean I assume maybe you'll get to, I don't know, 55%, 56% gross margin. But yes, any color you can give on the -- how long that lower gross margin would last? Bernie Blegen: Sure. And the good news here is that cycle times and pricing both in the fab, the assembly houses are coming down. And so we'll be able to participate in the lower cost after we burn down the inventory, which is currently at about 203, 204 days. So I would expect that we'll see a downward pressure on margins through Q2 and Q3, and then perhaps a moderation leveling in around Q4. Tore Svanberg: Yes. Go ahead, Michael. Michael Hsing: Yes. I might as well add, clearly, we see -- we go into a downturn situation and gave me and -- we don't know, I guess, some segment will grow in MPS because of very diverse companies and some area would be still good. And in general, the consumers and they get products and even some notebook may come back in the second year. And the point is I'll try to make is regarding to gross margins, and as you know in the past, when the industry starts to slow down, and again, MPS will be more aggressive in price. And to gain more consumer segment of the market because it can do 6 months later, when you turn the knob, we actively pursue those products 6 months later, those are fast design cycles, and you will turn the knob in the revenues in about 6 months' time. So we care less about the short-term gross margins, but the long-term gross margins is still the same. So we emphasize and as you know, in the last 10 years or so, and we'll still pursue those models. And in the consumer segment, we may -- we made just a short -- focus on in the short term to grow the -- to maintain the growth. Operator: Our next question is from Quinn Bolton of Needham. Nathaniel Bolton: I guess I wanted to follow up on Tore's question. Really, Michael and Bernie, as you look into the second half of the year, that's normally a seasonally stronger period for the company. Obviously, it feels like there are lots of puts and takes, lots of uncertainty, customers delaying product ramps. But can you give us any sense how you're thinking about the second half of the year? Will you see sort of a normal seasonal uptick in September? Or are you thinking September could be flattish with kind of the 1Q, 2Q run rate? Any additional color would be helpful just to try to think about the second half. Bernie Blegen: Sure. I think that right now, normal seasonality still applies, but in our case, it's a little more muted because so much of our growth in the business is attached to those new product introductions being made by our customers. So if we look in Enterprise Data in which our major customers or the products that we're supporting have had product delays. And when you look at other aspects of our business, for example, Communications, that's still what I'd refer to as lumpy. It's not necessarily trending in a seasonal pattern. So I think that your comment is very balanced and all I'm tilting is to the new product introductions being delayed probably being a larger factor than just seasonality. Michael Hsing: Yes. I think we can't say really like a normal seasonality anymore. I mean we -- we experienced in the past. And you have some segments that grow really well. I mean some segments hit kind of a bottom that came last Q3, last year, Q4, especially like a notebook side. I mean now you see okay, it's a wakening up. I mean, MPS has won orders in design as those reference designs and we have the power -- the power solutions -- and we will see, second half, mostly all the other reservoir business, other than AI, automotive, we don't -- we have no clear views. And so that's the short term. Nathaniel Bolton: Understood. I wanted to follow up on the Enterprise Data segment. Obviously, a weaker result and sounds like some of the product or customer delays are sort of focused in that segment. Do you still think as the new server cycle ramps that you can get your share of the Vcore power management market towards 20 percentage? Is that still the right opportunity to be thinking about longer term, even if some of those customer programs have pushed out by somewhat? Michael Hsing: Absolutely. I confidently say that. I mean, because we see all these projects has not really fully ramped yet. In all the data centers, clearly, you guys know better, I mean now slowed down dramatically. I don't know whether they overexpanded last couple of years and now slowed, take a pause, okay? We don't have clear views. And what we know from last quarter to Q1 -- or Q4, Q1 to now, and they kind of slowed down. Bernie Blegen: And if I can add to that, again, using -- I know that you're focused right now on the short term as far as the second half of the year. But in the GPU space for artificial intelligence, we have a very senior market share position. And as we look ahead to even the next generation, we're in a very good position to take advantage of the next generation of GPUs. So we're really still in early stages as far as being able to leverage up our position and expand our share. Michael Hsing: Yes, yes. That's I didn't add that part. The GPU part came in the AI side, we have a current design win and as well as the next design, and the futures we will release end of the year or next year. And those were MPS product will ramp to this. Earlier, I referred to is that all these data centers, CPU powers or data center power overall, and we still have maybe just -- if it's not a single digit, just barely double-digit market shares. And a lot of -- and from a transition from a VR13 to 14, and it's not completed yet. We won a lot of design wins in VR14 and it will turn into revenues. Operator: Our next question is from Matt Ramsay of Cowen. Matthew Ramsay: Guys, I wanted to ask, I guess, a two part question on gross margin, and this is sort of -- you guys have been in -- gone from sort of 54, 55, 56 on that steady cadence of 10 to 20 basis points a quarter, and that was amazingly steady. And then during the period of supply-demand imbalance, we jumped up to 58 or so, and now we've come back in and you guys discussed that in the short term. But as you look out over the next 2, 3 years and you think about the strategy to be aggressive and grow, and contrast that to some of the opportunities that you have for new design wins and higher content, maybe you could level set us on the long-term gross margin. Has anything changed there? And where is the new normal? And I guess the second part of that thought, guys, is, have you seen any specific price pressure in any markets as some of your competitors maybe get more supply? Michael Hsing: Yes. Okay. Let me answer your last part first, okay. Any high volume, our customers have multiple suppliers, we -- they always have a price pressure, other than the last 2 or 3 years. Other than that, they couldn't ship, only the MPS came. Most of the companies have struggled in shipments and MPS, we have less. And so nowadays I mean all the higher volumes as we expected, and in the last couple of years, and I can also remember, we didn't talk that much. We introduced new technology, which is a much lower cost. And there will be a fight. And so to answer that part of the question. But earlier, I said it, I care less about our gross margin lately, but we're still operating within the models. We're not dramatically go down. Clearly, it will go down. And but -- in a long-term model, to answer your question, 2 or 3 years out, the business -- MPS business is still pretty much intact. And we are focused on those high values. We transition from IC solutions to sell solutions. That still remains our focus. Our long-term business we will go that way and which generate and offers more values, and we have higher gross margins. Bernie Blegen: And I think just to polish off the comment there is that as far as our model, we've been operating over the last several years between 55% and approaching 60% as far as a non-GAAP gross margin. And as we introduce these higher-value products, they tend to have higher margins. And what that allows us to do is then manage the mix of business such that we stay within our model. So while we sort of anticipated in the near term downward pressure with a flattening here in the next 3 to 4 quarters, we'll continue to look to be opportunistic and managing gross margin to accelerate revenue growth. Matthew Ramsay: Got it. As my follow-up, and I apologize for this being a near-term question, but with all the different end market volatility. Bernie, if you could help us on your guidance by segment, just the revenue trends that you guys see into the June quarter, that would be great. Bernie Blegen: Sure. I think that we said earlier in the call... Michael Hsing: It's fair to ask a short-term question because this is a very uncertain period. Bernie Blegen: So I think to sort of make a simple point on it is that automotive continues to be doing very well. And there, it's both the market itself as well as the share gains that we're enjoying. I said earlier that Communications is lumpy and the other areas, including Storage and Compute, Enterprise Data and Consumer and Industrial are sort of flattish for the near term. Michael Hsing: Well, also the storage -- in the AI segment in the -- in data center, if we -- the computing segment is maybe is flattish, okay? I mean I think the majority of our revenues has come from -- still come from servers. And you see it in the ramping in the last 18 months or so. In the AI and the total -- AI in the total revenues is still a smaller percentage. And the other thing I'm pointing out, there's a memory sections. I mean they're changing a new format, and they start to ramp now. This is the result that we're kind of flattish, okay? I mean it depends on how fast you ramp up to DDR5. MPS has -- have engaged with all the major memory companies that we have a design. We have a -- we have design wins. And if they ramp up faster than we will -- we'll increase that portion of revenues. And it's depending on what the DDR5 will ramp up Matt. Operator: Our next question is going to be from Rick Schafer of Oppenheimer. Richard Schafer: I appreciate all the color so far. Maybe if I could ask 1 on 48-volt before we go back on the AI for the question. I know you heard you say Michael or Bernie said it, I think you had said senior market share position there. I'm curious with your primary competitor in 48-volt apparently still struggling. I mean are we at a point now, if we look at 2023, where you guys think you'll likely stay sort of sole source sort of on H100 this year. And I'm just curious as part of that question. I heard you mention Content there. So is there any color you can give us around what Content does as we transition to sort of more powerful accelerators over time? I mean is it similar to what you guys have talked about with the move from VR13 to 14 on VCorPower, where you're talking about going from sort of $50 a or something like $70. And then finally, Michael, for you, I'm just really curious, are you -- who else are you seeing out there working on 48-volt power? This seems to be a pretty solid and growing market. Michael Hsing: Okay. Let me answer my part first, and I'll get in... Bernie Blegen: That's more fun part. Michael Hsing: On the landscape is okay, I truly okay, says we don't -- we see some competition in the game. I think our products remain the best so far. And so that's why we have -- and we do see some other competition, maybe as a generation of later that came in. As that market segment grows, and the competition will come. I mean the market is too big for MPS. And we welcome other people. And we welcome the cooperations. As a matter of fact, that's what we're doing and not, okay? And -- as MPS is not big enough for that market. And -- but we will be glad to be leaders. Bernie Blegen: Yes. And again, reinforcing Michael's point there is that it actually when we enjoy a leadership position, and we expect to continue to, competition is very important as far as driving technology improvements. As far as your other question as far as dollar content, when we look at the CPU market, generally, we denominate it with a dual processor, -- and so based on that, we're able to offer an expectation of what the average selling price will be per server. With the model is still sorting itself out where you can have any number of configurations up to and including 8 GPU boards. So it's very -- it's a little harder to denominate what our dollar content is. And again, we're still in the early stages of watching this model ramp. So I think that we'll have enough experience in about 2 to 3 quarters to have a more accurate read on the dollar content, but it is much higher than what we're experiencing with CPUs. Richard Schafer: And for my follow-up, I'd love to ask you about 5G band. I know you guys have said in the past you're selling to the big 3 RAN equipment OEMs. I'm just curious how you would describe the ramp there in terms of content, in terms of share? And what I am trying to do is get a sense of how big 5G is now versus how big it could be for you guys. And to something you mentioned earlier, Bernie, I'm just really curious here, could the ramp in 5G sort of smooth some of that lumpiness you described in your comm segment? Bernie Blegen: Yes. If I was to draw a comparison of our experience with Enterprise Data where we started out with low dollar content and then graduated up the value chain including power management. We're probably about 3 to 4 years behind in the Communications market, where we're still focusing on low dollar content for like point of load knee fuse. Now where this is about to get very exciting is we are getting adoptions for later designs that include our power management for the processors. So at this stage, we're sort of moving with the market. Again, as an early entrant. But yes, long term, I do think you're going to see a similar growth profile as what we expect to have with enterprise data. Michael Hsing: Yes, and immediately now, I keep saying MPS is a small company, but we're not nobody anymore. And we engage with all these customers -- these 5G makers and it's only a handful of a companies as speaking now. So we're in the process of signing on the contract now. And so all of these -- okay, and it's just a matter of time. Operator: Our next question is from Ross Seymore of Deutsche Bank. Ross Seymore: Can you hear me? Michael Hsing: We have a high inventory, yes. Ross Seymore: How about the channel inventory. We've heard a bunch of companies talk about the channel coming down, and that's a headwind to revenue growth. I know you guys proactively manage that. So you put it on your own balance sheet, but what's the channel looking like? Michael Hsing: It's also on the high side. Bernie Blegen: Yes. About 3 quarters ago, we saw an increase in channel inventories, and they've remained at about that same level. So there isn't any real new news as far as the sell-through characteristics. Ross Seymore: Is that something that's weighing against your revenue right now? Or are you comfortable running at that relatively higher level? Michael Hsing: No, we want to go lower and we want to lower and particularly in the first quarters and a lot of customer threatens and get much higher volumes, okay? That's why we shipped and now they have a break. And so as a result, inventory didn't decrease that much in the channel. Ross Seymore: So it went down on your books more so than in the channel? Bernie Blegen: Yes. The way to look at another aspect to this is that the inventory in the channel, it depends on what our end customers' lead times are. And as we even commented on in the prepared comments, we're seeing a very unusual demand pattern in that we have 3 areas where we're seeing an acceleration as far as the ordering pattern. But they're doing it with a very -- an expectation of having a very short lead time. So as Michael said earlier, that the channel is built up in the anticipation that the customers were going to realize the sales gains with the new products, but as those have been pushed out, that's left us in this position. So we're going to continue to manage the channel as we always have. But right now, as I said, it's at an elevated level. Ross Seymore: Got it. And then 1 on the gross margin for you, Bernie. When you talked about the headwinds for it, we see this across the board. So I don't think it's anything particularly different for Monolithic. But the 1 thing you didn't mention was mix. I get that you're carrying higher cost inventory, and it takes a while to flush through. But as you go opportunistically, into the consumer market, is that rising as a percentage of sales, something that is also weighing against gross margins? And if so, when do you think that will kind of normalize as a percentage of sales, if not decrease? Michael Hsing: Yes, you can see as a normal because the consumer market hasn't happened yet. We reduced -- we downed to the big percentage now, okay? And mostly it's a high-value inventory. Operator: Our next question is from William Stein of Truist. William Stein: Regarding something you just spoke about a moment ago, you spoke about elevated inventory and push outs of projects. I think obsolescence risk is relatively small for Monolithic, but maybe you can reassure us on that matter. Bernie Blegen: Absolutely. Actually, a very helpful question. If you look at our history, we've never had a significant inventory write-off. And a lot of the reasons around that is that our products have long life in the market and long shelf life. So we're actually -- if you look back at 2019, we built up inventories, and we're able to capitalize when the market bounced back in '20 and particularly when the pandemic, infusion of capital occurred. So we don't see inventory on our balance sheet as a negative. And in fact, when the markets do get more stabilized, particularly in Enterprise Data and in Storage and Computing, I think we're well positioned to take advantage of that uplift. William Stein: Great. And then like to sort of ask a double question about supply and your supply base. Other analog companies have talked about how their foundries are absolutely not cutting cost and they never see it happening, but you've highlighted this trend in your business. Is it because you're on more advanced nodes and so that's just how sort of pricing in that market works? And then maybe you could also comment on the manufacturing plan, both in terms of long-term capacity and geographic diversity. Michael Hsing: Yes. We -- you know that, okay, we advance our technology every 2 or 3 years. And we're relentlessly cutting the cost and utilize the better technologies, get better geometries. The fab now in the last 3 years, the fab costs is not lower, higher, as a matter of fact. But we utilized the geometries and also the new technology that we implement, we will be able to lower the cost. And so the other -- the other question that you're making is a diversified manufacturing. So, we in -- we anticipated that, again, we announced that we have a new partnership outside of China. That's in Singapore. And we will continue to do so. But really outside, there's no U.S. manufacturing for our application, for our product. I mean, it's all resides in Asia, Korea, like Taiwan and Southeast Asia. And in all our module business, we can do it from our side outside of China. Operator: [Operator Instructions]. As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: I'd like to thank you all for joining us for this Q1 2023 earnings webinar. I look forward to talking to you again during our second quarter conference call, which would likely be in July. Thank you. Have a nice day.

Genevieve Cunningham: Welcome, everyone, to the MPS Fourth Quarter 2022 Earnings Webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, VP and CFO. In the course of today’s conference call, we will make forward-looking statements and projections that involve risk 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 Q4 2022 earnings release and in our latest 10-K and 10-Q filings that can be found on our website. MPS assumes no obligation to update the information provided on today’s call. We will be discussing gross margin, operating expense, R&D and SG&A expense, operating income, other income, income before income taxes 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 Q4 and full year 2022 earnings release, which we have filed with the SEC and is currently available 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 today. Now I’d like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. For the full year, 2022, MPS achieved record revenue of $1.79 billion, growing 48.5% from the prior year. This is despite industry-wide supply chain capacity constraints. This performance represented consistent execution against our strategies and having more Tier 1 customers recognize MPS for advanced technologies, product quality and excellent customer support. Here are a few highlights from 2022. We introduced a new product line of isolated power modules for applications exceeding 1 kilowatt with a fully integrated controller, isolator and power devices. Our initial revenue ramp for this highly integrated and reliable solution is targeted for 2024. These modules are critical building blocks for power management applications for data centers, EVs, plug-in traction inverters, EV chargers, solar power, wind turbines, battery power storage and other industrial applications. Our products are designed to set the industry standard for these critical system-level applications. MPS’ first advanced data converter products for high precision industrial and medical applications were made commercially available during 2022, and we expect to have an initial revenue ramp in 2023. We continue to diversify our global footprint in the expansion of our R&D centers, supply chain partnerships and facilities outside of China to better match our resource distribution with our customers’ geographic demand profile. With our global presence, we believe MPS is in a strong position to support our customers worldwide. Turning to our full year 2022 revenue by market segment compared with 2021. Enterprise Data revenue was up 116.1%, Storage and Computing revenue up 76.8%, Communication revenue up 53.2%, Automotive revenue up 46.8%, Industrial revenue up 18.6% and Consumer revenue up 13.2%, demonstrating broad-based full year 2022 revenue improvement. Full year 2022 Enterprise Data revenue grew $135.1 million over the prior year to $251.4 million. This 116.1% increase is primarily due to higher sales of our power management solutions for cloud-based CPU and GPU server applications. Enterprise Data revenue represented 14.0% of MPS’ total revenue in 2022, compared with 9.6% in 2021. Storage and Computing revenue for 2022 grew $196.7 million over the prior year to $452.6 million. This 76.8% increase primarily resulted from strong sales growth for storage applications and enterprise notebooks. Storage and Computing revenue represented 25.3% of MPS’ total revenue in 2022, compared with 21.2% in 2021. Communications revenue grew $87.4 million to $251.5 million. This 53.2% improvement reflected higher sales of products for both 5G and satellite communications infrastructure applications. Communications revenue represented 14.0% of our 2022 revenue compared with 13.6% in 2021. Automotive revenue grew $95.7 million to $300.0 million in 2022. This 46.8% year-over-year gain primarily represented increased sales of our highly integrated applications supporting automated driver assistance systems, the digital cockpit and connectivity. Automotive revenue represented 16.7% of MPS’ full year 2022 revenue compared with 16.9% in 2021. Industrial revenue grew $34.4 million to $218.2 million in 2022. This 18.6% year-over-year increase primarily reflected higher sales in applications for smart meters and industrial automation. Industrial revenue represented 12.2% of MPS’ full year 2022 revenue compared with 15.3% in 2021. Consumer revenue grew $37.2 million to $319.5 million in 2022. This 13.2% year-over-year increase primarily reflected increased product sales for home appliances and smart TVs. Consumer revenue represented 17.8% of MPS’ full year 2022 revenue compared with 23.4% in 2021. Let’s talk about the general business conditions. During our Q3 2022 earnings call, we highlighted that customers were becoming more concerned with near-term business conditions and order patterns might oscillate in the near future. As a result of this change in ordering patterns, we indicated that our inventory levels would likely catch up to our target of 180 to 200 days and possibly be higher in the near-term. During the quarter, ordering patterns stabilized as customers requested push outs slowed. While this is positive, customers’ orders are still trending below historic norms. In our Q4 2022 inventory is above our target levels. As a result, we remain cautious about near-term business conditions. We also believe MPS can swiftly adapt to market changes as we have done so successfully during similar macroeconomic changes in the past. Switching to Q4. MPS had a record fourth quarter with revenue of $460.0 million, down 7.1% from revenue generated in the third quarter of 2022, but up 36.7% from the comparable quarter of 2021. On a year-over-year basis comparison by market segment, fourth quarter 2022 revenue for automotive grew 72.8%. Enterprise Data revenue increased 69.0%. Storage and computing revenue grew 55.0%. Communications revenue grew 40.1%, and industrial revenue grew 13.3%, while consumer revenue decreased 20.1%. Fourth quarter 2022 GAAP gross margin was 58.2%, down 50 basis points from third quarter 2022 with 60 basis points higher than the fourth quarter of 2021. Our GAAP operating income was $136.9 million compared to $151.9 million reported in the third quarter of 2022 and $78.6 million reported in the fourth quarter of 2021. Fourth quarter 2022 non-GAAP gross margin was 58.5%, 50 basis points below the third quarter of 2022, but 60 basis points higher than the fourth quarter of 2021. The year-over-year expansion in fourth quarter non-GAAP gross margin was largely due to a shift in sales mix favoring high-value greenfield products and operational efficiencies, which more than offset higher product input costs. Our non-GAAP operating income was $174.1 million compared to $193.7 million reported in the prior quarter and $102.0 million reported in the fourth quarter of 2021. Let’s review our operating expenses. Our GAAP operating expenses were $130.9 million in the fourth quarter compared with $139.0 million in the third quarter of 2022, and $115.3 million in the fourth quarter of 2021. Our non-GAAP fourth quarter 2022 operating expenses were $94.8 million, down from the $98.4 million we spent in the third quarter of 2022 and up from the $83.0 million reported in the fourth quarter of 2021. On both a GAAP and a non-GAAP basis, fourth quarter 2022 litigation expense was $3.2 million compared with a $2.1 million in Q3 2022 and a $420,000 credit balance in Q4 2021. The fourth quarter 2021 litigation credit reflected in IP settlement and refund of a legal retainer. The differences between GAAP and non-GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss from an unfunded deferred compensation plan. Fourth quarter 2022 stock compensation expense, including $1.0 million charged to cost of goods sold was $35.3 million compared with $43.0 million recorded in the third quarter of 2022. The quarter-over-quarter change in stock compensation expense reflected a change in the planned vesting assumptions. Switching to the bottom line. Fourth quarter 2022 GAAP net income was $119.1 million or $2.45 per fully diluted share compared with $2.57 per share in the third quarter of 2022 and $1.51 per share in the fourth quarter of 2021. Q4 2022 non-GAAP net income was $154.0 million or $3.17 per fully diluted share compared with $3.53 per share in the third quarter of 2022, and $2.12 per share in the fourth quarter of 2021. Fully diluted shares outstanding at the end of Q4 2022 were 48.5 million. Now let’s look at the balance sheet. As of December 31, 2022, cash, cash equivalents and investments totaled $739.6 million compared to $738.1 million at the end of the third quarter of 2022. For fourth quarter – for the fourth quarter of 2022, MPS generated operating cash flow of about $52.2 million compared with Q3 2022 operating cash flow consumed of $18.2 million. Fourth quarter 2022 capital spending totaled $12.8 million. Accounts receivable ended the fourth quarter of 2022 at $182.7 million or 36 days of sales outstanding compared with the $153.4 million or 28 days of sales outstanding reported at the end of the third quarter of 2022, and the $104.8 million or 28 days reported at the end of the fourth quarter of 2021. Our internal inventories at the end of the fourth quarter of 2022 were $447.3 million, up from $397.4 million at the end of the third quarter of 2022. Calculated on a basis consistent with our past practice, and as you can see on the webinar video, days of inventory rose to 212 days at the end of Q4 2022 from the 167 days at the end of the third quarter of 2022. Historically, we’ve calculated days of inventory on hand as a function of current quarter revenue. We believe comparing current inventory levels with the following quarter’s revenue provides a better economic match. On this basis, again, you can see days of inventory increased to 214 days at the end of the fourth quarter of 2022 from 188 days at the end of the third quarter of 2022. I would now like to turn to our Q1 2023 outlook. We are forecasting Q1 2023 revenue in the range of $440 million to $460 million. We also expect the following: GAAP gross margin in the range of 57.4% to 58.0%. Non-GAAP gross margin in the range of 57.7% to 58.3%. Total stock-based compensation expense of $40.2 million to $42.2 million, including approximately $1.2 million that would be charged cost of goods sold. GAAP R&D and SG&A expenses including litigation expenses between $135.1 million and million $139.1 million. Non-GAAP R&D and SG&A expense to be in the range of $96.1 to $98.1 million. This estimate excludes stock compensation expense, but includes litigation expense. Beginning with the Q1 2023 outlook, MPS will no longer separately forecast litigation expenses. Interest income is expected to be in the range from $1.8 million to $2.2 million before foreign exchange gains or losses and charitable contributions. The non-GAAP tax rate for Q1 2023 will be 12.5%. The non-GAAP tax rate remains unchanged from 2022 as there have not been any material changes in tax regulations. Fully diluted shares to be in the range of 48.2 to 49.2 million shares. Finally, I’m pleased to announce a 33% increase in our quarterly dividend to $1 per share from $0.75 per share for stockholders of a record as of March 31, 2023. In conclusion, while we remain cautious about near-term business conditions, we believe MPS can swiftly adapt to market changes and take advantage of the current environment to focus on business development and investing in infrastructure necessary to support long-term growth. I’ll now open the webinar up for questions. A - Genevieve Cunningham: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. [Operator Instructions] Our first question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hey, guys. Congratulations on the strong results and the nice outlook in this environment. I guess I wanted to start Bernie and Michael, the computing storage business was much stronger than at least I expected in the fourth quarter. You grew revenue quarter-on-quarter when the rest of the PC [ph] market is clearly experiencing softness and inventory correction. So I guess, can you give us sort of your outlook? How do you see that business trending over the next couple of quarters? And then I’ve got a follow up. Thank you. Bernie Blegen: Sure. I think that there’s been a lot of press recently around weakness in notebooks as far as unit sales. And in addition, we’ve started to see some word [ph] here about declines also in the memory market. Interestingly, memory continued to be very strong for us offsetting a decline in notebooks. And as we look ahead here, we actually see notebooks beginning to improve in the early part of 2023. And probably those gains will offset a decline in memory. So we’re basically looking at this category at least for the first half of the year to be flattish. Quinn Bolton: Okay. Michael Hsing: The one component the AI portions still remain to be very strong in the near futures. And then we see a very high growth. Bernie Blegen: Absolutely. In the enterprise data we’ve really got good traction with the GPUs for artificial intelligence and so that should really be one of our growth drivers in the first half of 2023. Quinn Bolton: That was going to be my next question, enterprise data was down slightly in the fourth quarter. But it sounds like you see the ramp or just strong results in the first half driven by. It sounds like specifically GPUs, is that right? Michael Hsing: Yes, that’s related to artificial intelligence. Bernie Blegen: Yes. When we look at CPUs in the enterprise data, there’s still initial softness as we’re waiting for the platform launches for both the Sapphire Rapids and Genoa to take off. Quinn Bolton: Do you expect that in the second half than the CPU to on a take [ph] in more second half of the year? Bernie Blegen: Yes. Quinn Bolton: Perfect. Thank you. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you. And congratulations on another record year. Michael, I was hoping you could talk a little bit more about the power isolation module business, they expect to ramp in 2024. Is this still based on the company’s BCD technology or are you now starting to venture into some newer technologists? I’m just curious, because you haven’t talked a whole lot about potentially getting into silicon carbide or GaN or anything like that? Michael Hsing: Yes, so we do have programs that are going to a wide bandgap materials, okay? And in the past, I think we talk about it in, we have a program to make to investigating and develop those devices since 2017. And now we see the first result and we do have some samples ready, but not in the production yet. My prediction is that are somewhere in the middle of the years, okay, or second half of the years. And related to the – your questions about the isolated modules, when any higher powers is pressuring inverters, solar and solar inverters and data centers also chargers, onboard chargers and all these in the wind turbines. All of these have one basic component in all these very high power applications, which is all the power devices driven by using the isolated modules. And MPS is using, again, using our own BCD process and as well as our bandgap materials and we combine togethers and making a very simple [indiscernible] and a very ease of use power modules for those type of applications. Some of these products already in production in the EVs currently. And things that we expected higher growth in the next couple years. Tore Svanberg: That’s very helpful. And as my follow-up, could you just give us an update on the manufacturing footprint both from a capacity perspective, but more importantly about diversification. You talked about, looking at all sorts of regions to partner with some new manufacturing partners, so yes, both capacity, but then also from a geographic – geographical perspective perhaps an update that? Thank you. Michael Hsing: Yes. We see as everybody else see in the geopolitical tensions and as you know MPS in the past, we always want to be a local company in every political regions. And we did that successfully in R&D site. And because for one thing is close to customers, other ones and – other ones we isolated from these tensions from between the countries. And for the manufacturing side, currently, we can fulfill all our customer demand to – demand for wherever they want to manufacture it. And we want to – by end of the year or by the next – by end of the year or next years, we will have fully rent and for the new capacities just in case the [indiscernible] really separated. Tore Svanberg: Great. Thank you so much, and congrats again. Michael Hsing: Thanks, Tore. Genevieve Cunningham: Our next question is from Alex Vecchi of William Blair. Alex, your line is now open. Our next question is from Matt Ramsay of Cowen. Matt, your line is now open. MattRamsay: Thank you very much. Good afternoon, guys. Can you hear me, okay? Michael Hsing: Yes. MattRamsay: Hey, Michael. Hey, Bernie. The – one question that I wanted to ask you that we’ve heard, I mean, you guys – I guess, addressed in your prepared script how you are working to move sort of the operations at manufacturing footprint and other pieces outside of China to in the long term, more sort of align with your TAM and revenue mix for the really, really long term in the company. And you’ve been very clear about those plans. But there’s been some more, I guess, acute reports of maybe some customers that want to very quickly use product sources outside of China. And you’ll probably know some of those reports that I’m talking about. I guess, have those impacted your revenues at all? Are you seeing any strange behaviors from customers that maybe you want to move and source product outside of China more quickly than you’re able to? Or are you already sourcing outside of China to support many of your global customers? Thanks. Michael Hsing: Yes, it’s a misconception for MPS is that we are – lot of manufacturers that’s in China. That’s true. But it’s a misconception. So, okay, we do in a prior COVID – we do – most of, we do at least half of it manufacturer and at least we have capacities is outside the countries or outside of China. And to answer your question, whether zero impact in the – for whoever customers request to manufacture in the outside of China in the past and the futures. MattRamsay: All right. Thank you for that, Michael. That’s really clear. Just a question we get a lot. I wanted to talk a little bit about the consumer business, which is kind of the – maybe the least important strategic segment, but also the most volatile. If you look at where, I guess the numbers came in the fourth quarter. And I guess what I’m wanting to understand a little bit is the philosophy that you guys might have if and when some of those consumer markets and the China market in general recover. Are you excited to keep that segment down around 10% of revenue and will continue to prioritize everything else? Or is that a business that you want to serve Michael as it potentially rebounds? Thank you. Michael Hsing: Yes, and again, I would say that I mean, in the past, last year capacity issues like a constrain the consumer growth. And we do have a lot of opportunity. We just didn’t pick it up because of the capacity issues. And in the downturns in the past, as you know, that again and will be a lot more aggressive for in these consumer market segment because when you react to a price and you react to the opportunity how fast you react to the opportunity. And within the six months, you’ll see the – you’ll see the bigger number change in a consumer segment. And that’s what we would do. Bernie Blegen: And Matt keep in mind, the resilience of our business model has to do with the diversity of the end markets, the customers, the geographies that we serve. So consumer, well, it has dropped to around 10% of the quarter remains a very important part of that strategy and will continue to invest in it. MattRamsay: Thank you very much, guys. Appreciate it. Genevieve Cunningham: Our next question is from Alex Vecchi of William Blair. Alex, your line is now open. Michael Hsing: Hello? Genevieve Cunningham: Our next question is from Gary Mobley of Wells Fargo. Gary, your line is now open. Gary Mobley: Hey, Michael. Hey, Bernie. [Indiscernible] And thanks for taking my question for the first time as a covering analyst. And related to that, I apologize in advance if I ask an uninformed question here. But the inventory for you guys, that 212 days, that’s internal inventory. I believe, however, your sales, 83% of your sales roughly go through distribution. So maybe you can give us a view in terms of distribution inventory and did it increase and if so, to what extent did it favor revenue? Bernie Blegen: Gary, opening up, welcome to the party. This is Gary’s first call with us. Michael Hsing: And welcome to the inventory question. Bernie Blegen: Inventory question. I thought we finished this question. Michael Hsing: For Gary’s, okay. Bernie Blegen: Okay. Gary, it’s okay. So when I look at the channel inventories from Q4 to Q1, or I’m sorry, from Q3 to Q4, they basically stabilized. So we didn’t see a significant increase either in terms of dollars or days in the quarter. Likewise when we talk about inventory on our balance sheet, and I’ll address that out as well. There’s about a six month lead time from when we can slow down wafer starts when you see it on the balance sheet. So likewise, as we’re looking now to head to Q1, we see both inventory in terms of dollars on our balance sheet as well as in the channel, stabilizing sell-through in the channel remains very good. And then it should normalize in the second half of the year. Gary Mobley: I apologize if I step into… Michael Hsing: It’s fair to say like I mean, in 2019, we deliberate build 200 days plus inventory because we did see all these opportunity. And then now the inventory goes this highs because go over 200 days again. And that is because the customers demand start to pushing out and this is on the high side and we will cautiously and reduce it. And it’s not – this is not the same as it was done in 2019. Gary Mobley: Got it. Thank you for that. And I wanted to ask about contributors to the revenue growth for the fiscal year, for the quarter, 48.5% is quite commendable. I was hoping maybe you can deconstruct that between ASP increases and unit increases and how you see that playing out for fiscal year 2023 as well? Michael Hsing: It’s very diverse to growth in – with a little more aggressive activities in the consumer segment. And this is different from 2020 to 2021. And everything is the same because we are not – we don’t – it’s not a one trick ponies, and like not a two trick pony either. So I mean we have a multiple product. We have a product like 5,000, 6,000 different products. We have a few thousands of customers, large customers, let’s say, biggest customer is less than 4% in a different industry. And with our – that’s the same way as we do in the last 10 full years. And we’re still continue to pass. Bernie Blegen: Clearly, as you look at a business driver in 2022 and as we look ahead, you can also see the impact of selling higher value technologies and higher ASPs that go along with it. So while many companies use this supply-demand imbalance as an opportunity to raise prices to their customers, we only had one single-digit price increase back in February and all of the other is representative of higher ASPs and volume gains. Gary Mobley: Helpful. Thank you, guys. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Hi guys, can you hear me? Michael Hsing: Yes. Its fine. Ross Seymore: Perfect. Well, first, I also want to welcome Gary to the call and thank him so much for being the one asking the inventory question… Michael Hsing: You still remember. Ross Seymore: I knew you would. So I had just one question, one follow-up. The question on the near-term first was, you talked a little bit about stabilization in your orders, but said they’re still below normal. So any color on that? And then folding another near-term follow-on is the first quarter, you said it sounded like Storage and Computing would be flat and Enterprise Data would be up a bit. If you’re flat overall, what’s going down sequentially in the first quarter to get you to that? So that’s kind of an aggregate first question. Bernie Blegen: So when we look at Q1, and obviously, we’ve guided down about 2%, which is sort of consistent with seasonal trends. And it’s – the industrial is likely to come down. And I may have left you with an incorrect impression because Enterprise Data is likely to go down even though GPU, AI will improve. And then on the plus side, the momentum in automotive continues to be very strong. Ross Seymore: In the stabilization color geographically by end market, the order stuff you said? Michael Hsing: Yes. We’re seeing better activity. I think that we commented both in Q3 and repeated it here, that customers have gotten a lot more near-term focused and you can point to consumer, you can point China as being areas that was very observable. And right now, we’re seeing a lot better activity but it hasn’t necessarily translated into what I call a normalized ordering cover. Ross Seymore: Got it. Thanks for that. And I guess as my longer-term follow-up, a question I get a lot from investors is the really impressive growth you guys did in 2022, up about 50% round numbers. That’s about 30% faster than the SIA defined analog category. And that delta is kind of 2x what you guys historically have done. And some people are concerned that that’s just because of insufficient supply and competition and assume fungibility that you guys are just growing because other people can’t, or some of your competitors had some product issues that they’ll soon rectify. And so those tailwinds could turn into headwinds this year. I know you’re not going to guide for the full year. But are you at all concerned about those two dynamics having kind of overinflated 2022 and turning into headwinds this year? Michael Hsing: Okay, tell those customer – tell those not customers, okay? Ross Seymore: Investors. Michael Hsing: Our investors, our customers choose to buy our stocks. And hey, we don’t do it in the pay to pay, the me-too products. Everything is pretty much single source product. And our products a lot more programmable, a lot more versatile and gave me and our customer can configure those products. And of course, we’ll take advantage of it, okay, in a shortage. Our customers can use our product in a multiple way, I mean, lot of them are software based. And announced and as you know, in the software side and I mean is a lot more stickier. And we will continue to use our technical strengths and to gain the market share and I mean headwinds, okay, for those people they don’t believe that, okay. We have a hearing I mean that’s fair, but our numbers delivered like our past number to show that. Ross Seymore: Thanks, guys. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Thanks and I’ll add my congratulations, guys. If I could ask my first question, it’s kind of a broad question on your module, just your overall module strategy. I mean, say, it doubles this year to sort of 10% or so of revenues. Bernie, I’m sure you’ll correct me if that’s all base there. But sort of what’s the right contribution long-term? I mean, Michael, I mean, eventually, do you want sort of everything to move in that direction toward module, or is it weighted more to specific end markets, maybe a couple of them already. And I’m curious if you can comment on the margin implications as module becomes a bigger contributor. I think in the past you said this a 5x type ASP multiplier. But again, please correct me. Bernie Blegen: So I’ll give you the numbers correction and Michael will give you this strategic answer. Modules currently are about 5% of our business. Michael Hsing: Yes, and it has doubled. Bernie Blegen: Yes. Michael Hsing: In a double the year, year-over-year for the last two years. Three years or two years? Bernie Blegen: Yes, three. Michael Hsing: Three years. Bernie Blegen: Yes. Michael Hsing: Yes. And so it’s a significant business now. I mean and eventually, yes, that’s what all I want to see. And MPS all going to move into a new type of modules I mean in modules, power module has a bad connotation, I know that I mean lot of companies in a power module business and those are 30% gross margins and I don’t know what’s the right word to use it, it is a power modules and like in place okay with, but that’s not your old grandpa’s, again, power modules. And again, this is very different. Our margin is above core average. And some of the solutions much, much higher. But – and we sell it was all well over $100 stuff, and that’s kind of I see as a part of its hardware plus service and customers, the users, they don’t need to know like how does – how to use the product or how to – you have to have a very deep knowledge how to design a power supply, okay. And they should use very simple solutions like what we provide. They don’t need the headaches to design a power supply, I think that we’re going to end up with MPS or without MPS will be that, okay, but MPS want to be a leader in that. Bernie Blegen: And I’d like to go back to Rick’s earlier question, I would say that back in the day, the single biggest ingredient as far as making a decision for design win had to do with the lowest cost. And I think that what our customers are seeing, particularly in the last three years is there are other value drivers consider as far as time to market how much design resource they want to be saved from having to do a total cost of ownership. And those are areas that we’re able to meet our customers’ demand as well, if not better than any other analog or power provider… Michael Hsing: Yes, as well to give you examples and okay, we build our own test equipment, semi equipment test equipment and all based on the MPS power modules. And if you buy those kind of power modules, they can selling well over $50. And so that in semi equipment market segments that’s a perfect thought for that. And these are very high ASP and very much, much compact than on the current market. Rick Schafer: Okay. Thanks for that color. And it actually leads you to my next question. I appreciate all the color that and you guys have certainly discussed with the power isolation module. But just specific to the silicon carbide update, just it does – it sounds like you’ll be sampling this year. Do we – should we expect any material contribution from silicon carbide this year? Or are we kind of looking at 2024? And Michael, I mean, we’ve heard different numbers, but what is the addition of silicon carbide modules for traction inverter, et cetera? What does that do to your potential content per vehicle? Michael Hsing: Our trashing inverters and using silicon carbide, okay, it’s not this year and maybe even if we will see it next year. Our silicon carbide devices, okay, we design our own – we develop our own, okay. And we want – we picked up some market segment that proves our products are reliable in the first. And that’s the first step. To answer your questions, and this year, okay, and there’s no large number of building in our revenue stream, yes, okay, and so we don’t expect that, but that’s just approved the technologies now. Rick Schafer: Thanks, Michael. Thanks, Bernie. Genevieve Cunningham: Our next question is from William Stein of Truist. William, your line is now open. William Stein: Great. Thanks for taking my question. Someone beat me to the module question this time. So I’ll focus in a little bit different direction in the past. I know a few quarters ago, you talked about a team that you hired to work in the converter area, which is something you’re not really that known for, but I think this is also another being ASP and a big growth opportunity for Monolithic. Can you talk about your traction in converters so far and what you expect to come in the coming quarters? Michael Hsing: Yes. We can – are glad to ask the questions, okay, a couple of days ago, I saw an image and we received from our customers, and we use our customers, use our imaging for the X-ray machines and much better than their prior versions. And so when is – we sample other biotech companies and they are – our product is designed in and we will see the revenues probably a small revenue this year in the next years. This is a slow ramping products that get very high barriers. And the bottom line is we have the technologies, and we have the know-how to design a very high performance data converted. These are – is comparable if it’s not better. And we will broaden the product portfolios and as we expand our teams and these take lot of efforts and a lot of investment. And so far, we built up a pretty good sizable teams. And now you will have – see more general product coming up in the next couple of quarters. William Stein: Thank you, Michael, appreciate that. Maybe one other, if I can. Something we haven’t heard the company speak a whole lot about lately, and that’s the e-commerce effort. Any update on how your traction is progressing there? Michael Hsing: E-commerce. Well, maybe it’s not as fast as I want to be. And I said my expectation too high and I think it’s better here is that we launched MPS now I mean, actually, I’ll take back. I think it’s not as – it’s true, not I expect more, okay, but there’s a lot of resistance. I mean – but our modules lot of module ramp-up. It’s from e-commerce. And we – after last year, yes, after maybe 13 or 14 or 15 months ago, we launched MPS in a remote technical support. And that helped a lot. And especially our module side, again, help our customers can schedule a meeting online. And we can solve their – when they’re logging we solve their technical issues. That helped a lot. And I think the most part of the ramp-up is from the MPS now from a website. But overall, all things and it will take time, okay? And you are talking about engineer change their behaviors, okay, how do you design the product and how you’re purchasing the product. And I think as next 10, 12 years, even now in the next five to 10 years for the millenniums and to design a power supply and they want to do Google search rather than do the fundamental design like in the past 20 years ago, like the last 20 years. And so these are the products designed for that, okay, for easy plugging play use and easy to use and can buy from the Internet. William Stein: Okay, thank you. Genevieve Cunningham: Our next question is from Chris Caso of Credit Suisse. Chris, your line is now open. Chris Caso: Yes, thank you. Good afternoon, everyone. The question is about where lead times are right now and the degree of product shortages. With your inventory up now, has that helped to bring down lead times and alleviate some of the shortages? And if so, has that taken away perhaps some of the incentive for customers to place orders for a product they didn’t – they don’t need. What – it’s obviously one of the things we worry about as we go through the cycle, interested in your view on that. Michael Hsing: I’d agree that lead times have been coming down. They were up as long combined as much as 26 weeks or six months. And they’re coming down more slowly than you think. So I don’t know. Obviously, our customers have changed their ordering behavior. And if that could be attributed to the change in lead times or the fact that they have adequate inventory or that they’re uncertain about with the next six months, I can’t really say which is a driver in their decision. Chris Caso: Got it. Okay. As a follow-up, Michael, you mentioned in some earlier remarks, plans to be a little more aggressive on consumer business as you go through the year. So wondering if you could expand on those comments? Is that something just opportunistic this year, something that you see in the market is that just a function of the diversity of your business model where some other business is slow. So you can go find business elsewhere, if you could give us some more color on that, please. Michael Hsing: I think you made a very good comment. It is opportunistic, okay? Remember, we – how many years ago, we – years ago, let say and we have more than 50% of our MPS revenues is all from consumer. And these are five fast design cycles in fast revenues and cycles product and on opportunities. And we have the right product, right support and right price and you can move the needle quickly. And obviously, in contrary to the other industrial automotive cloud computing and these are much longer design cycles and they’re kind of slowing down one segment to the other or relative in – it’s not as – clearly, it’s not as in the last couple of years. And the consumer is our opportunity again, and we know how to do it, okay? And we have the product and we have the price structures and not as high as all the other segments, and we will do that. Chris Caso: If I could just follow on that, does that imply when business improves elsewhere, we’ve got a better macro and such some of the product cycles elsewhere with maybe higher margin opportunities develop that you sort of back away from some of that and come back to some of the other segments that have driven growth more recently. Michael Hsing: No, it’s not. Okay, consumers is a – diversity is always our strategies. And last couple of years, we didn’t grow because of capacity constraints, okay? And we sacrifice on the consumer side. Chris Caso: Got it. Thank you. Michael Hsing: Thanks, Chris. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes, thank you. I just wanted to come back to the data converter business. So you’re obviously getting into the kitchen of 400-pound gorillas here and I think historically, it’s been very difficult to crack into this market. You talked about the high barriers to entry. And other than the product being higher precision, I get that, but is there anything else about your business model that will allow MPS to be successful in this market? Michael Hsing: I think it’s – we don’t know what is the business model. I think it’s – I know this size takes time. And the market is large, a few competitors. All these, you said these are 800 pounds of gorilla, okay. We are well little highs going around – and we had to run fast. And it’s just to take opportunities and okay, what presents the product and our customers. And they do have an eye on the different suppliers especially come from the last couple of years. And it’s – we have a good hope, but we know it take a while. Tore Svanberg: That’s fair. And just lastly, could you give us an update on the time line for the $3 billion and the $4 billion capacity that you’re working on? Michael Hsing: Yes. As we said in next couple of years – next two years, and we’re still on it. And we work with our suppliers and the gaming I just mentioned the consumer business, okay? And one of the reason is we do have obligations and to fill up these facts. And we’ll be aggressive and getting all these – getting these orders, fill the capacities. And that’s our gaming in the past. We repeatedly and do this – have done these kind of things in several cycles already. And this cycle, I don’t see a difference from the last downturns. And – but – so for the capacity expansion, we’re still intact in the game. We’re not – we may slow down a little, so I mean, but we really have obligations with our fabs, okay? Tore Svanberg: Great. Thank you, again. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Great. Thanks for letting me take a quick or ask a quick follow up. Bernie, I just wanted to ask your sort of thoughts on gross margin. You guided to 58% at the mid-point. It looks like the Street consensus was probably 50 to 100 basis points higher than that through the year. So as you look at 2023, do you think March is sort of the bottom and margins can trend higher into the second half of the year? Or is this push in the ability to be opportunistic in the consumer segment likely to keep margins flattish in this 58% level through 2023. Bernie Blegen: Yes, I’d probably look at it as being flattish for the remainder of 2023. And when you look at what’s taken the margin down and while you’re right, we’re down 50 basis points. It’s not a significant deflation from the rate that we’ve been at trending at over the last two years. And it’s really because we have the additional manufacturing capacity, lower revenue. And as we look at the next two quarters at least, the sales mix is not as desirable. Quinn Bolton: Understood. Thank you. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Okay, just a quick follow-up on my side on the margin side as well. And this time on the OpEx side, you guys did a good job on the OpEx. I know you’re putting litigation expense up into regular OpEx, which thank you for doing that. But just the trend in OpEx throughout the year last year grew maybe half the rate of what revenues did? How do we think about this year? Bernie Blegen: I think as Michael is expressed here between diversifying our supply chain and continuing to invest in R&D capabilities that we have some very real opportunities for additional investment that would show up in growing our operating expenses. Having said that, though, there is a fair amount of uncertainty as far as what the revenue outlook is, and we want to be good financial managers as we go through these market conditions. So I would expect that it’s likely that operating expenses won’t grow much more than 50%, 60% of revenue growth in the current year. Michael Hsing: Having said that, in the past, in the past two years, now we reached $2 billion companies and they all one point okay, whatever… Bernie Blegen: 1.8. Michael Hsing: Yes, 1.8, okay. I mean, our infrastructure hasn’t really grown that much. In the last couple of years, and it’s difficult to hire people and now we have a lot more breathing room, okay, this is the time to build up a company. Ross Seymore: Great. And I guess for a quick follow-up, I just wanted to revisit one of the questions that was asked, I think it was the very first question or close to the beginning on the storage and computing strength. I know you said notebook was better than you thought and the memory/storage was weaker, and those two kind of go the opposite direction in the first quarter then. But those markets in aggregate have been weak across the board for quite some time. So I’m still a little surprised at the strength in the fourth quarter and the stability in the first. What would you attribute that to? Obviously, you’re getting the orders, but are you guys taking share? Is it the Tier 1 penetration? Is it content? Just any more color on that because it’s such a disconnect to the end market in general? Michael Hsing: I think I believe we gained some shares. Bernie Blegen: Absolutely. Michael Hsing: Yes. We gained some market shares. Ross Seymore: Great. Thank you. Michael Hsing: Yes, we’re a little bit aggressive on in summer low end market. Bernie Blegen: Yes. Ross Seymore: Thank you. Genevieve Cunningham: [Operator Instructions] As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: Great. Thank you very much and for joining us for this conference call, and we’ll be talking again here for the first quarter update, which will likely be in the late April. So thank you very much.

Company Representatives: Michael Hsing - Chief Executive Officer, Founder Bernie Blegen - Vice President, Chief Financial Officer Genevieve Cunningham - Marketing Communications Manager Genevieve Cunningham : Welcome everyone to the MPS Third Quarter 2022 Earnings Webinar. Please note that this webinar is bring recorded and will be archived for one year on our Investor Relations page at www.monolithicpower.com. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, VP and CFO. In the course of today’s webinar we will be making forward-looking statements and projections that involve risk 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 Q3 2022 earnings release and in our latest 10-K and 10-Q filings that can be found on our website. MPS assumes no obligation to update the information provided on today’s call. We will be discussing gross margin, operating expense, R&D and SG&A expense, operating income, other income, income before income taxes, 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 Q3 2022 earnings release, which we have furnished to the SEC and is currently available on our website. Now I’d like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. First of all, today I’m greeting you from Europe. We held our third quarter Board of Directors meeting in our Barcelona office. We have our Board Members tour of the facility and oversee the operations here. Now, to the financial results. MPS achieved record third quarter revenue of $495.4 million, 7.5% higher than revenue in the second quarter of 2022, and 53.1% higher than revenue in the third quarter of 2021. This broad based year-over-year revenue growth was the result of consistent executions against our strategies. Looking at our third quarter 2022 revenue by market. Third quarter automotive revenue of $87.1 million increase 42.7% from the second quarter of 2022, due primarily to new platform launches. Third quarter 2022 automotive revenue was up 60.0% year-over-year. Automotive revenue represented 17.6% of MPSs third quarter 2022 revenue compared with 16.8% in the third quarter of 2021. Third quarter 2022 communications revenue of $72.3 million is up 21.9% from the second quarter of 2022. Most of the sequential revenue increase was related to the continued communications infrastructure ramp. Third quarter 2022 communications revenue was up 61.8% year-over-year. Communication sales represented 14.6% of our total third quarter 2022 revenue compared with 13.8% in the third quarter of 2021. In our enterprise data market, third quarter 2022 revenue $75.3 million increased 15.5% from the second quarter of 2022, primarily due to continued strength in our data center and workstation computing sales. Third quarter 2022 revenue represented 15.2% of MPSs third quarter 2022 revenue, compared with 9.2% in the third quarter of 2021. Third quarter 2022 industrial revenue of $58.7 million increased 5.1% from the second quarter of 2022. Third quarter 2022 industrial revenue was up 12.5% year-over-year. Industrial revenue represented 11.8% of our third quarter 2022 revenue compared with 16.1% in the third quarter of 2021. Storage and computing revenue of $112.9 million decreased 7.7% from the second quarter of 2022. The sequential revenue decline was primarily due to softening of customer demand from notebooks. Third quarter 2022 storage and computing revenue was up 63.9% year-over-year. Storage and computing revenue represented 22.8% of MPS’s third quarter 2022 revenue compared with 21.3% in the third quarter of 2021. Third quarter consumer revenue of $89.2 million decreased 8.4% from the second quarter of 2022. The sequential quarterly revenue decline was primarily due to softening of overall demand. Third quarter 2022 consumer revenue was up 21.1% year-over-year. Consumer revenue represented 18.0% of MPSs third quarter 2022 revenue, compared with 22.8% in the third quarter of 2021. Let's talk about the general business conditions. For the prior six quarters, we have faced product shortages, especially in consumer, storage and computing. Now we have started to see our customers reduce their orders and push out shipments. We’ve experienced similar patterns in the past. We anticipate order patterns might oscillate in the near future. This is not a surprise to us. As a result of this change in ordering patterns, our inventory level will catch up to our target of 180 to 200 days and possibly be higher in the near term. In addition, we have over 4,000 different products which are required to support thousands of our customers' applications. On average, our product lifecycle succeeds six to eight years, so we are not concerned with carrying an inventory level above target. MPSs business is in a better position today. Rather than managing product shortage problems, we can now focus on long-term business development. For longer cycle, business like automotive, enterprise data, coms infrastructure and industrial, both our customers and MPS have extended significant effort and made joint investments in the development of multiple leading edge products and applications. As a result, we have secured business which we believe will ramp over the next several years driving revenue growth. For shorter cycle consumer related business, we will continue to proactively support our customers' needs. We have established MPS as a reliable supplier with excellent customer support during this extended period of product shortages. Accordingly, we believe both longer and shorter cycle customers value MPS as a strategic partner. We are cautious about the overall business conditions and believe we can swiftly adapt to market changes as we have done successfully during similar macroeconomic changes in the past. There have been recent changes to export control rules and additional companies have been added to the MPs list. As of today we see immaterial revenue impact, directly or indirectly from those new trade restrictions. Our products utilize process nodes in excess a 40 nanometer, which falls well outside the current restrictions. Moving now to a few comments on gross margin and operating income. Third quarter 2022 GAAP gross margin was 58.7%, which was 10 basis points lower than the second quarter of 2022, and 110 basis points higher than the third quarter of 2021. Our GAAP operating income was $151.9 million compared to $141.9 million reported in the second quarter of 2022. Non GAAP gross margin for the third quarter of 2022 was 59.0%, essentially flat from the gross margin percentage reported in the second quarter of 2022 and 120 basis points higher than the third quarter from a year ago. Our non-GAAP operating income was $193.7 million compared to $179.4 million reported in the second quarter of 2022. Let's review our operating expenses. Our GAAP operating expenses were $139.0 million in the third quarter of 2022 compared with $129.1 million in the second quarter of 2022, and $109.2 million in the third quarter of 2021. Our non GAAP third quarter 2022 operating expenses were $98.4 million, up from $92.7 million in the second quarter of 2022 and up from the $78.7 million reported in the third quarter of 2021. The differences between non-GAAP operating expenses and GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or expense from an unfunded deferred compensation plan. For the third quarter of 2022, total stock compensation expense, including approximately $1.2 million charged to cost of goods sold was $43.0 million, compared with $42.9 million recorded in the second quarter of 2022. Switching to the bottom line, third quarter 2022 GAAP net income was $124.3 million or $2.57 per fully diluted share compared with $114.7 million or $2.37 per share in the second quarter of 2022 and $68.8 million or $1.44 per share in the third quarter of 2021. Q3 2022 non GAAP net income was $170.7 million or $3.53 per fully diluted share compared with $157 million or $3.25 per share in the second quarter of 2022, and $98.6 million or $2.06 per share in the third quarter of 2021. Fully diluted shares outstanding at the end of Q3, 2022 were $48.3 million. Now, let’s look at the balance sheet. Cash, cash equivalents and investments were $738.1 million at the end of the third quarter of 2022 compared to $814.1 million at the end of the second quarter of 2022. For the quarter, MPS generated operating cash flow of about $18.2 million compared with Q2, 2022 operating cash flow of $105.2 million. The decline in operating cash flow and increase in other long term assets reflected a $170 million prepaid payment made during the quarter to secure a long term purchasing commitment. Accounts receivable ended the third quarter of 2022 at $153.4 million, representing 28 days of sales outstanding, which was three days higher than the 25 days reported at the end of the second quarter of 2022, and six days higher than the 22 days at the end of the third quarter of 2021. Our internal inventories at the end of the third quarter of 2022 were $397.4 million, up $37.8 million from the $359.6 million reported at the end of the second quarter of 2022. Inventory at the end of the third quarter of 2022 represented 167 days, which were five days lower than at the end of the second quarter of 2022. Historically, we have calculated days of inventory on hand as a function of current order revenue. We believe comparing current inventory levels with the following quarter’s revenue provides a better economic match. On this basis, you can see inventory at the end of the third quarter of 2022 represented 189 days, 29 days higher than 160 days at the end of the second quarter of 2022 and 56 days higher than the 133 days at the end of the third quarter of 2021. I would like now to turn to our outlook for the fourth quarter of 2022. We are forecasting Q4 revenue in the range of $450 million to $470 million. We also expect the following: GAAP gross margin to be in the range of 58.1% to 58.7%; non-GAAP gross margin in the range of 58.3% to 58.9%. Total stock-based compensation expense of $37.7 million to $39.7 million, including approximately $1.1 million that would be charged to cost of goods sold. GAAP R&D and SG&A expenses should be between $131 million and $135 million. Non-GAAP R&D and SG&A expenses are expected to be in the range of $94.4 million to $96.4 million. Litigation expense in expected to be in the range of $1.3 million and $1.7 million. Interest income is expected to be in the range from $1.1 million to $1.5 million. Fully diluted shares are expected to be in the range of 48.2 million to 49.2 million shares. In conclusion, even though business conditions are softening, our market share gains continue to expand reflecting high customer engagement and our ability to secure design wins. We can now focus on growing our long term business. I will now open the webinar up for questions. A - Genevieve Cunningham: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. [Operator Instructions] Our first question is from Matt Ramsay of Cowen. Matt your line is now open. Matt Ramsay: Thank you very much. I guess good evening guys if you're in Europe. So Michael, Bernie can you hear me, okay. Bernie Blegen : Yeah, buenos noches. Matt Ramsay: Thanks guys. So two different questions from me. One sort of related to the model and the near term and the other one on a different topic. So the first question, Bernie, if you could help us a little bit, I mean the guidance was a bit light and you talked about some of the macro conditions, but it seemed like weakness was concentrated in the storage and computing segment. So if you could maybe talk about things by segment and what you're guidance implies on a quarterly basis by segment. I think that would be helpful and then I have a follow up. Thank you. Bernie Blegen : Sure, just to clarify that the softness that we're seeing is both in the storage and computing as well as consumer. The other segments are still positioned to show growth between Q3 and Q4. The only sort of qualifier that we're still trying to learn about the strength and the runrate of the communications of that segment. So I think what we've done is we feel very, very comfortable with both, how we've been communicating our expected results, but we've added a little conservatism to the outlook. Matt Ramsay: Got it. Great! And thank you that. Michael, my second question is on the topic of China, and over the last, I’d say three or four weeks since some of the new commerce and BIS restrictions have come into place, I've been getting a ton of investor questions about this topic with relation to your company on two fronts. I guess the first being, MPS has a significant employee base in China. If you could maybe quantify what maybe percentage of your employees and in what functions are actually in China, and if you've heard from any of these restrictions that there could be any restrictions on those employees need to relocate anybody, those kind of things? And then the second part of the question is on your manufacturing footprint. I know it’s spread across China, Taiwan, increasingly in Korea. We've heard some stories from semi cap companies needing to pull employees out of SMIC for example, in other places because of these new restrictions. So anything in your manufacturing operations that might be disrupted at all because of some of the China restrictions and how far are you guys along or maybe the mix of your capacity that's now outside of China. You get this nature of the questions, but they've been a pretty frequent and acute over the last three or four weeks. So, it would be great if you could just kind of address some of those topics. Thank you. Michael Hsing: Yes, very nice questions. Michael, I'm glad you asked, that what all your concern is I think most of the people totally misconstrued whatever the regulation is. And we do have a presence, we have a large presence within China. This is a U.S. companies, okay, and we’re not subject for sanctions at all. We don't have to have the people to leave – Americans have to leave an MPS office within China and that's not in the sanction entity list, and we are not in a sanction entity list. And other one is the manufacturing in the last couple of quarters, we already talked about it. We’ve diversified out of China and we’re starting five, six years ago. Also, I should mention that we talk about it on the engineering manpower. This MPS started at 2017, and we are in Barcelona now. We’ve moved a very large team here with the local government support. We are outside of China, and that's not because we – because of sanctions, because we want to diversify. Geometrically we’ll – we will grow into a different region, in the same time zones, wherever we want. We give our customers the better support. Bernie Blegen : And just to finish up on Michael's comment there, to be perfectly clear, our technology and our products are not subject to restrictions. Matt Ramsay: No, thank you very much. Just a really, really quick follow-up. What would you say the percentage Michael of the products or the revenue that is actually sourced from manufacturing footprints inside of China today versus outside. And thank you very much for indulging my question guys, I appreciate it. Michael Hsing: It is very convoluted and it is very convoluted and packaging’s and also the process wafer manufacturers, and it's very convoluted, we don't have a clear figures now. But going back to the Bernie’s question and of Bernie’s answers, our technologies, we're using 40 nanometer above and the current sanction is a 14 nanometer below. We are far – as Bernie mentioned in the script, we are far from that sanctions in the way using the trading edge. We are really using the trading edge of a fab equipment. Bernie Blegen : And if I can just follow-up on one quick point as we made in our script here, is that as the supply demand imbalance has normalized, that frees us up from just being in pure production mode to actually be able to invest time in business relationships, to be able to expand and diversify our capacity, which we talked about about three quarters ago, where we're going to go from $2 billion of capacity currently to $4 billion within the next two years, two to three years. Michael Hsing: These are mostly, we planned these outside of China. Bernie Blegen : Yeah. Operator: Our next question is from Quinn Bolton of Needham. Quinn, your line is open. Quinn Bolton: Thanks. I don't want to pile on the export control questions that Matt was just asked, but I have one other clarification. You're at 40 nanometer and above and so you're not directly affected. But my understanding is that to the extent a facility, a manufacturing facility in China has multiple process nodes, some above 16 nanometer and some below 16 nanometer that that mixed-use facility would be affected. So I'm just wondering you know, for those Chinese manufacturing facilities, the fab-by-fab, are any of the fabs that you're running 40 nanometer and above, do they also produce 16 nanometer and below and might therefore be affected by equipment and/or support restrictions. Michael Hsing: No. These are fab usually, they don't – advanced fabs, okay, these are 14 nanometer below, and I did not share where these outdated fabs like 40-nanometer above, okay. We're primarily using 65 nanometer. So these are totally different fabs. Quinn Bolton: Thanks Michael. That's right, but I just wanted to clarify because I know that yeah, as Matt said, there have been lots of questions on this topic. Maybe one for Bernie. I know you're not guiding beyond the December quarter. But obviously the environment is pretty tough right now, especially on orders. And so I guess as you look out beyond December, can you give us any thoughts as to whether you would see less than normal seasonality in March as some of this weakness continues into next year? And I guess the offset would be, Monolithic Power has some pretty, I think meaningful market share gains, both on the server CPU side, as well as the data center GPU side. When would you think that those share gains start to kick in and might get you back to normal seasonal if not better than seasonal patterns. Bernie Blegen : Sure. So – and again Quinn, thank you for focusing on more longer-term and strategic issues here. I think it's very easy to get caught in thinking about next quarter and just the quarter after that. And everything, all the indicators that we're receiving as far as the share gains occurring in the data center are on track. Nothing has been changed there at all. And then as far as how we look at the next few quarters. Again, when we apply cautiousness to Q4, I think we could expect that anything – that any growth opportunities are more likely to be weighted in the second half of 2023. Michael Hsing: Yes, that's our guess and that's our experience. And I might as well add. You mentioned the CPUs and the CPU power, data centers and MPS is a lot more than that. And you look at Bernie’s, read our script and you have automotive and the data – the enterprise data centers and other ones in communication - the other ones, the communications, these are still, all of them are grown, except the consumer related notebooks, gaming, those type of things, and as everybody is aware of, they are softening. They swings from shortage to oversupplies and then you know kind of almost overnight. These kind of things we cannot predict. I mean you guys probably predict it better than we know. We just have to react fast, and the overall MPS business, all these are greenfield products will start to ramp in the last few years and will continue to ramp. Quinn Bolton: Sorry Michael, I didn't want to shortchange it by only focusing on the data center opportunity. So, thanks for that color. Bernie Blegen : Thank you. Operator: Our next question is from William Stein of Truist. William your line is now open. William Stein : Hey! Thank you so much for taking questions. I have one near-term one and then a longer-term one. From a near-term perspective, I'm hoping you can talk about pricing trends and also how your backlog might be changing in terms of the duration of what you have on the books today versus where we've been recently? And then again, I have a sort of longer-term follow-up question, please. Michael Hsing: For shorter terms and I can name this. Here what we see is for the long cycle, longer cycle business is continued. And because there is no questions related to price, okay? Because all the products, they will last four, five years or even longer, okay, and these products are in the ramping cycles. In the shortest – in the shorter cycle, consumer related, as I said it earlier, I’ve got notebooks and gamings or the other personal electronics, and these ones okay, they are oversupplied. There's no question – we don't have any questions about the pricing. And that probably will come in, like in later, another quarter later, what will be a new project design, that’s where we, that’s pricing – a question, pricing questions will start to emerge. Bernie Blegen: And well, you also mentioned backlog, the sort of condition in the backlog overall. And relative to historical norms, we still remain very – you know we're much higher than we have been historically, and – but this has given us an opportunity to address with our customers. In fact, we've been engaged in these conversations for several quarters now, on what they expect real demand to be. So I think that as far as our book of business is looking ahead, it remains very healthy. William Stein : And then the longer-term question, I tend to ask each quarter about some of the you know more differentiated products and services MPS has, modules in particular. I wonder about the traction of those products and whether you're seeing the uptake of that either expand or falter given the current environment? And then same thing with e-commerce, like you have seen more or less of that given the changing demand environment. Thank you. Michael Hsing: Yes, all the products, the modules and the e-commerce business okay, and we don't see any changes and they are just continuing and that's where MPS future business would be and we're even more diversified than MPS' current business. Bernie Blegen : And I think it's interesting as far as market acceptance for the modules. It really is not concentrated in any one – any market. It's actually pretty evenly distributed against all of our markets. So that to me is a real clear indicator that it fits in well with our diversification strategy. Michael Hsing: Yes, frankly if you ask me where these module goes, we don't have ideas and that is the beauty of it. William Stein : Thank you. Operator: Our next question comes from Jeremy Kwan of Stifel. Jeremy your line is now open. Jeremy Kwan: Yes, good evening. Can you hear me okay? Bernie Blegen : Yes. Jeremy Kwan: Great! Just a couple of questions. First, just looking at the lighting business, it looks like it had a nice increase sequentially this quarter. Is there anything that you can call out there? I just want to understand some of the dynamics in that business. Bernie Blegen : Automotive. Jeremy Kwan: I'm sorry, the lighting – oh! It’s automotive. Okay. That's what's been driving it. Bernie Blegen : Yes. As we said in the prepared comments, that there were new platforms that were launched, most of them are tied to the 2023 model year and there were probably three areas, lighting being one of them that really contributed to the uplift in the automotive in Q3. Jeremy Kwan: So this is something that we can look at as a new baseline and the sort of like a steady ramp from here or should we expect kind of more step functions with each new model here? Michael Hsing : Well, the lighting is – in automotive lighting have a variety. You have a down light, you have indicators, all kind of indicators, you have the signals, then you have the headlight, okay. So this is the last couple of quarters you see stepping up and that's kind of, that's part of the Greenfield product and automotive start to ramp. The content in the cars, we're growing the content. For the number of cars we have okay, and just at the beginning, we still have a small, very small market here, so it will continue to grow. Jeremy Kwan: Got it. Great! And just turning to the long term purchasing agreement that you talked about Bernie, can you give us a little bit more details on this, maybe the magnitude or the size of this deal and you know how different is this from things, the way you may have done business in the past. Just any more detail and help us you know to understand your strategic thinking behind this, that would be very helpful. Bernie Blegen : Sure. So when you think about the period of the supply-demand imbalance that we came out of, we had actually a superior competitive position because we had invested in our supply chain earlier than our competition, and that allowed us to have part availability when they didn't and that allowed for incremental market share gains. So as we continue to expand capacity, we're looking for new opportunities and with existing as well as with new fabs, and so in this instance we wanted to secure a purchasing agreement that in order – that gave us dedicated capacity regardless of what the economic environment was. Jeremy Kwan: Got it, thank you. And then just one last question, just touching again on the modules. Can you give us any insight into the other differences in terms of the manufacturing supply chain that needs to be managed here? And you know in terms of whether it's sourcing or whether it's the geographic footprint. Are there things that you can call there as well? Michael Hsing: Most of it – let me answer it that way. Most of our modules assembly is outside of China. Jeremy Kwan: Great! Thank you very much. Operator: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Bernie Blegen : Rick, can you hear us? Rick Schafer: Yes, sorry I was muted. Can you hear me now, Bernie? Bernie Blegen : Yes. Rick Schafer: Great. Well hey guys! Thanks for letting me ask you a question. Maybe my first one just on supply. You know TSM, obviously your newest foundry partner, I was just curious if you could kind of level set us on where you guys are at in terms of the qualification process, you know eventual capacity ramp, sort of maybe even get a sense of how much capacity they are going to have for you ultimately and how much of that might be eight versus 12-inch? Just trying to get a better handle on them as a partner. Michael Hsing: Yes, most of what we use is 12-inch and also the advanced process modes, of course that thing is in the TSMC. We do use the advanced nodes of gaming and these are for microcontrollers, that type of a product that we do use them and these are not winning in China at all. And a lot of these are product at the very beginning of a ramp and so now we have all the capacities for these new products. Mostly these are for automotive and communications and so now it gives us a lot more room to grow. Rick Schafer: So Michael, just to kind of get a sense. I mean, is this – could TSM be sort of a 10% contributor to capacity in say a year's time or is that too aggressive to kind of think of how quickly they could ramp? Michael Hsing: On the lower side as we see now. Rick Schafer: Thanks a lot and then a follow-up, I'm just curious to get an update on silicon carbide progress, particularly traction inverters. I mean how many customers you're engaged with now and when we might expect to see initial revenues? And I know you've talked about it in the past Michael, but just kind of remind us what that dollar content for MPS looks like ex-EV? And I'm assuming it would be sort of subsystem, but would anything be discrete or would that all be sort of module/subsystem? Michael Hsing: Yes. Thank you very much to ask that question. Yeah, that kind of things, the silicon carbides and the high-power modules okay, that work gets me excited. We do have our first product going through the qualification now; it's working. MPS does not intend to sell as a power device, as a power device only and like a power set only. We will sell within using our combined with our silicon technology produce these small modules. And we do have many customers engaged in automotive, automotive sections and also the large energy storage and as well as BMS, the car charging stations and those kind of things, we don't have any revenue yet, okay, but it will be in the next few years. Rick Schafer: And Michael, just a reminder just sort of what it does to content for you guys or potential content in a car or a vehicle? Michael Hsing: I think these content will be enormous, okay? I don't even have a - that would be in the billion, and I don't have a – a couple of billion dollars of opportunity is a smaller. It's a very conservative estimate. Just thinking about it, all the power trains okay, driver trains, all the charging stations, MPS is not going to make and sell a chip only, we’re selling the entire systems. Rick Schafer: Great! Thanks a lot for all the color. Operator: Our next question is from Alex Vecchi of William Blair. Alex, your line is now open. Alex Vecchi: Hey everyone! Thanks for taking my questions. Bernie, maybe one for you just on a housekeeping question around gross margins. Can you elaborate a little bit on the down sequential? The only reason I'm asking is given the end market weakness and notebooks in consumer I would have thought is lower gross margin mix. So anything you can do to help on that and how to think of it like from here. Michael Hsing: Sure, Alex. So there's a lot of ingredients that play into the gross margin outlook and certainly the direct margin by end market is a significant part of it. Another is the amount of - I don't like to call it necessarily unused capacity. The fixed cost that isn't necessarily absorbed by the same volume. So it's really the fixed cost issue as opposed to the sales mix that's putting a little bit of downward pressure on the gross margin. Alex Vecchi: Okay. And then similarly to that extent, just expand on Rick's questions regarding the new fab partner or TSMC. Do you view that relationship eventually being gross margin accretive or dilutive versus your Chinese partners? Michael Hsing: Well, these are the events note and we're moving that towards that – in the territories and therefore these are more microcontrollers, and more highly digital content products and it's a different product. We – there is no gross margin issues. So in that case we don't go down compete with the price. All the products that we add is more. These are values more in the software side. Bernie Blegen : And I think that when you look at TSMC, these are new and advanced products that we're developing with them, whereas we're at the same time doing an expansion and diversification away from China and that would include other fabs, both in South Korea as well as in Taiwan. Alex Vecchi: Okay, that’s really helpful. With that I’ll go back into queue. Thank you. Operator: Our next question is from Melissa Fairbanks of Raymond James. Melissa, your line is now open. Melissa Fairbanks: Hi guys! Thanks very much. We saw CapEx – maybe a little longer-term question for you. We saw CapEx dip a little in the third quarter. Maybe could you give us an update on your longer-term capacity planning, not just with TSMC, but more broadly? Does the near-term demand weakness impact those longer-term plans? And then when we're looking at getting to $4 billion in revenue, what's the path to that ramp and the cadence of the investment needed to get there? Michael Hsing: Well, it's a – we always – if you look at our past. If you look at how we expand our capacity, what is our investment, and if you look at the past eight, nine, 12 years, it's the same pattern as the next four, five years. And we're not going to over invest. We're not going to less invest it, okay. So the trend, if you look at it. If you're plotting our OpEx and also the growth rate, and it should remain pretty constant in the past four years and in the past eight years, in 12 years, in also the last two or three years the growth pattern is really different from previous four years, and whatever the growth rate we have in the next four years, you can use the plotting – you can use the same kind of percentage range. Bernie Blegen : And Melissa, keep in mind that when we do the fab expansion, the capital expenditures are borne by our partners not directly by us. So when you look at our run rate that Michael is referring to, that's more heavily concentrated in test equipment, which can fluctuate from anywhere between $8 million per quarter to $14 million per quarter. It just so happens that we made a lot of those investments earlier in the year, and that's why we're lower. The other thing that we invest in is that we do buy or we develop our own facilities and those can be layered on and currently there are no investments of any material nature. Michael Hsing: Yes, let me clarify this a little more, rather than give you a model. You know MPS, we don't own the fab, we don't own fab equipment, and the cost of associating with capacity expansion, one is we have to qualify the process, and the large portion of it is to qualify our products. We have 4,000, well over 4,000 products, and each product to go through a qualification, that takes about eight to nine months. That cost, that's very costly and so that's – if we don't – if we slow down and the demand slows down, we don't have to qualify as fast okay, and so the cost will be spread out. Bernie Blegen : And those costs are borne in our R&D expenditure line. Melissa Fairbanks: Okay great, that’s very clear. Thanks very much guys. Operator: [Operator Instructions]. As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen : Thanks Jen. I'd like to thank you all for joining us for this conference call and look forward to talking to you again during the fourth quarter conference call, which is likely to be held in early February. Thank you and have a nice day!

Genevieve Cunningham: Welcome everyone to the MPS Second Quarter 2022 Earnings Webinar. Please note that this webinar is being recorded and will be archived for 1 year on our Investor Relations page at www.monolithicpower.com. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, VP and CFO. In the course of today’s webinar, we will be making forward-looking statements and projections that involve risk 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 latest 10-K and 10-Q filings that can be found on our website. MPS assumes no obligation to update the information provided on today’s call. We will be discussing gross margin, operating expense, R&D and SG&A expense, operating income, other income, income before income taxes, 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 Q2 2022 earnings release, which we have furnished to the SEC and is currently available on our website. Now I’d like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Gen. MPS achieved record second quarter revenue of $461.0 million, 22.1% higher than the first quarter of 2022, and 57.2% higher than the second quarter of 2021. This broad-based year-over-year revenue growth was a result of consistent execution against our strategies. Turning now to the second quarter 2022 revenue by market, in our enterprise data market, second quarter 2022 revenue of $65.2 million increased 53.4% from the first quarter of 2022, primarily due to an accelerated ramp in our data center and workstation computing sales. Second quarter 2022 revenue was up 117.9% year-over-year. Enterprise data revenue represented 14.2% of MPS’s second quarter 2022 revenue compared with 10.2% in the second quarter of 2021. Storage and computing revenue of $122.3 million increased 26.6% from the first quarter of 2022. The sequential revenue improvement reflected higher commercial notebook and storage sales. Second quarter 2022 revenue was up 111.6% year-over-year. Storage and computing revenue represented 26.5% of MPS’s second quarter 2022 revenue compared with 19.7% in the second quarter of 2021. Second quarter consumer market revenue of $97.3 million increased 21.7% from the first quarter of 2022. The sequential quarterly revenue improvement was broad-based with particular strength noted in home appliances and gaming. Second quarter 2022 revenue was up 27.9% year-over-year. Consumer revenue represented 21.1% of MPS’s second quarter 2022 revenue compared with 25.9% in the second quarter of 2021. Second quarter 2022 industrial revenue of $55.9 million increased 15.1% from the first quarter of 2022, reflecting increased sales of products for power source and security applications. Second quarter 2022 revenue was up 28.9% year-over-year. Industrial revenue represented 12.1% of our total second quarter 2022 revenue compared with 14.8% in the second quarter of 2021. Second quarter automobile revenue of $61.0 million increased 11.9% from the first quarter of 2022. Primarily – due primarily to increased sales of applications for advanced driver system systems, the digital cockpit and lighting products. Second quarter 2022 revenue was up 25.3% year-over-year. Automotive revenue represented 13.2% of MPS’s second quarter 2022 revenue compared with 16.6% in the second quarter of 2021. Second quarter 2022 communications revenue of $59.3 million was up 6.7% from the first quarter of 2022. Most of the sequential revenue increase was related to 5G infrastructure. Second quarter 2022 revenue was up 58.3% year-over-year. Communications sales represented 12.9% of our total second quarter 2022 revenue compared with 12.8% in the second quarter of 2021. Moving now to a few comments on gross margin. GAAP gross margin was 58.8%, 90 basis points higher than the first quarter of 2022 and 280 basis points higher than the second quarter of 2021. Our GAAP operating income was $141.9 million compared to $96.1 million reported in the first quarter of 2022 and $60.6 million reported in the second quarter of 2021. Non-GAAP gross margin for the second quarter of 2022 was 59.0%, up 70 basis points from the gross margin reported for the first quarter of 2022 and 270 basis points higher than the second quarter from a year ago. The quarter-over-quarter and year-over-year increases in both GAAP and non-GAAP gross margin is attributed largely to operational efficiency gains and a more favorable sales mix. Our non-GAAP operating income was $179.4 million compared to $133.6 million reported in the first quarter of 2022. Let’s review our operating expenses. Our GAAP operating expenses were $129.1 million in the second quarter of 2022 compared with $122.7 million in the first quarter of 2022 and $103.6 million in the second quarter of 2021. Our non-GAAP second quarter 2022 operating expenses were $92.7 million, up from the $86.6 million we spent in the first quarter of 2022 and up from the $70.3 million reported in the second quarter of 2021. The differences between non-GAAP operating expenses and GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss on an unfunded deferred compensation plan. For the second quarter of 2022, total stock compensation expense, including approximately $1.2 million charged to cost of goods sold was $42.9 million compared with $39.8 million recorded in the first quarter of 2022. Our second quarter 2022 GAAP other income – other expense was $5.1 million compared with $634,000 in the first quarter of 2022. Our second quarter 2022 non-GAAP other expense was $7,000 compared with non-GAAP other income of $1.6 million in the first quarter of 2022. The decrease is due to a $2 million increase in charitable contributions, partly offset by the favorable impact of currency exchange rates. The difference in non-GAAP other income and GAAP other income is the income or loss on an unfunded deferred compensation plan. Switching to the bottom line. Second quarter 2022 GAAP net income was $114.7 million or $2.37 per fully diluted share compared with $79.6 million or $1.65 per share in the first quarter of 2022 and $55.2 million or $1.16 per share in the second quarter of 2021. Second quarter 2022 non-GAAP net income was $157.0 million, or $3.25 per fully diluted share compared with $118.3 million or $2.45 per fully diluted share in the first quarter of 2022 and $86.5 million or $1.81 on a per share – per fully diluted share in the second quarter of 2021. Fully diluted shares outstanding at the end of Q2 2022 were 48.3 million. Now, let’s look at the balance sheet. Cash, cash equivalents and investments were $814.1 million at the end of the second quarter of 2022 compared with $775.9 million at the end of the first quarter of 2022. For the quarter, MPS generated operating cash flow of approximately $105.2 million compared with Q1 2022 operating cash flow of $107.4 million. Accounts receivable ended the second quarter of 2022 at $125.5 million, representing 25 days of sales outstanding, which was 4 days lower than the 29 days reported at the end of the first quarter of 2022 and 1 day higher than the 24 days in the second quarter of 2021. Our internal inventories at the end of the second quarter of 2022 were $359.6 million, up from the $311 million at the end of the first quarter of 2022. Days of inventory of 172 days at the end of the second quarter of 2022 were 6 days lower than at the end of the first quarter of 2022. Historically, we have calculated days of inventory on hand as a function of current order revenue. We believe comparing current inventory levels with the following quarter’s revenue provides a better economic match. On this basis, you can see days of inventory of 162 days at the end of the second quarter of 2022, which were 13 days higher than the 149 days at the end of the first quarter of 2022 and 44 days higher than the 118 days at the end of the second quarter of 2021. I would like now to turn to our outlook for the third quarter of 2022. We are forecasting Q3 revenue in the range of $480 million to $500 million; GAAP gross margin in the range of 58.4% to 59.0%; non-GAAP gross margin in the range of 58.7% to 59.3%; total stock-based compensation expense in the range of $42.8 million to $44.8 million, including approximately $1.3 million that would be charged to cost of goods sold; GAAP R&D and SG&A expenses between $136.2 million and $140.2 million; non-GAAP R&D and SG&A expenses in the range of $94.7 million to $96.7 million; litigation expense in the range between $2.3 million and $2.7 million; interest and other income in the range from $1.3 million to $1.7 million before foreign exchange gains and losses; fully diluted shares in the range of 47.9 million to 48.9 million shares. In conclusion, we are continuing to execute on our growth strategies, including expansion and diversification of our R&D centers and manufacturing partnerships in multiple countries. I will now open the webinar up for questions. A - Genevieve Cunningham: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. Our first question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Thanks and congratulations to you guys. Another great quarter. This may seem like a silly question given the guidance. But I am just curious, are you seeing any impact from the delayed launch of Sapphire Rapids? I mean I know your accelerator content is a lot higher than your CPU core power content. I think 48-volt, and please correct me if I am wrong, I think our math shows 48-volt track into sort of $100 million this year, so I guess I’m just looking at sort of the puts and takes. I know it’s – this is a pretty much a monster guide. But I am just a little curious if you were seeing any drag there from that delayed launch? Michael Hsing: So far, we see it for the next year or so. All our growth is – these are – as you know, these are all growing fields. And again, I mean we don’t own the products that were designed in the last few years, like I mean, for whatever the divulging of it, okay. And so if there is a delay the one thing is that we actually care less and it’s out of MPS control. And – but overall, we have a new – has a higher power processor and MPS can provide a much higher benefit to those market segments. So, it’s off for about 1.5 years and 1 years and we don’t notice it as in this period and where we gain more market shares. And in a way, we grow from this existing business that we have plenty of it to growth. Rick Schafer: Okay. Thanks a lot, Michael, for the color. And if I could follow-up maybe on the supply question, majority of your wafer supply is still in China, plus you have got to pay your big Chengdu back end facility. So I guess, how concerned are you if with trying to derisk supply chain as we keep watching headlines with the U.S. government trying to tighten restrictions, etcetera on equipment and everything in China? So just curious, your thoughts there? And maybe as part of that, if you could talk about where things stand now with TSMC and give a sense maybe of timing and capacity plans there? Thanks. Michael Hsing: Yes. Just like any other companies, okay, clearly, we are transitioning out from the last 20 years of manufacturing from China to other places. And all this infrastructure had to be built up. And we are just like other companies. Like we are in a transition, so actually, we started transitioning earlier. We first started from our engineering manpower. So that came in and we transitioned out of 6, 7 years ago – 6 years ago. And manufacturers, we started like 2 – about 3 years ago and as you know, we always use a trading edge of a DRAM fab, okay or a digital fab. And 3 or 4 years ago, clearly, okay, these are higher node, okay, 60 nanometers and 40 nanometers fabs. Okay, they are all engaged with the MPS, okay. And as we have a reputation, so we will fill up all these fab. And now it opens up in careers and I mean Taiwan and – these are the places now, okay, we are only talking about a fab this one now. And in the next few years will be, again will be – I can’t say it’s a move out of China soon, okay, we – and a still bigger capacity, okay. And we have a large market segment in our – 30% of our revenues still from China. So in the next year or a couple of years later, next year, we probably will be very diversified. Bernie Blegen: And just to add to that, that as the capacity restrictions are becoming less of a concern for the market in general, customers are asking for diversification as in a China plus one strategy. So we are working along those lines in companion to expanding our overall capacity. Michael Hsing: Yes. They all require – each region center require their local supplied. That’s where we are playing the game. I mean that’s our customer request. And so we are fully aware of that. And so we engage with all these fabs. And okay, across South Asia and Europe and Korea and Japan. And so that’s how I see it. Rick Schafer: Okay, thanks a lot for the color. Congrats again. Genevieve Cunningham: Our next question is from Matt Ramsay of Cowen. Matt, your line is now open. Matt Ramsay: Thank you very much, guys. Hopefully, you can hear me okay. Congratulations on the results. So I had two questions, and I’ll just go ahead and ask both at the same time because I think we’ve got multiple calls going tonight. The first one, Michael, both in the server business, so the new enterprise data segment and in the PC business, could you give us some indication of how far ahead of the unit sales to your power – your core CPU power or accelerator power products actually sell in versus the unit shipments that they get reported by the end customers? And burning the second question, completely unrelated, like $800 million in cash, give or take, if you could kind of walk us through some of the uses of cash there. I’m sure Michael would like to build some inventory, which is kind of always the case. But if you have any new things to say there, that would be really helpful? Thanks, guys. Michael Hsing: Well, first, your first question, honestly, I don’t really know. I mean it’s difficult. And as you know, we sell – these are building blocks. And for more or less in a server and data center areas, and these are more generic parts, and they can be used multiple awake. And it’s hard to track. And frankly, we don’t really care. And as long as we – our revenue goes up, right? And for very high powers, and these are power like a 48-volt power, okay? We do have pretty good dominant players in that segment. And so the – I think a ramp hasn’t really just started recently. I mean we will be – in the future, there will be a lot more. But mentioning about – you mentioned about notebooks, I mean we’re mostly in high-performance gaming or mostly in the – in commercial notebook. And number of assets and versus the CPU – versus CPUs, it’s also hard to match in because we’re selling these power devices, they can be through 2 phase, they can be 3 phase, They can be 4 phase. I mean we don’t quite note. And also we care less. And so it’s difficult to answer it. So all these notebooks are all the high end, the high-end gaming side and gaming notebooks and commercial. And so these are the ones that they have a variety of a use. Bernie Blegen: And on the issue as far as our cash position, which, let’s put it on the table, it’s sort of an enviable position to have over $800 million of cash and cash equivalents. And there is probably three things that we look at. The first is we’ve been consistently paying out a routine dividend. This year, it’s $3 – $0.75 per quarter, $3 for the full year. and we’re evaluating the sustainability at a even higher level. We generally announced dividend increases in February, comparing with our Q4 operating results and we’d expect to do so again this year. Another area that we found is very key and strategic to us is building out capacity. And we’re looking, as Michael said earlier, for different avenues in order to build out additional capacity. And in some cases, that may require additional investment. And then finally, as you also added is working capital, making sure that we have adequate inventory on hand in order to sustain our customers’ demand profile. And so right now, we’re still below our target of 180 to 200 days of inventory. So we will continue to be investing in inventories as well. Michael Hsing: Yes. Might as well, all these are Bernie add all the expenses, that they are small compared – relatively compare the cash that we generate every year. And so what we want to do is that’s probably MPS know the best, be consistent. And we give – increase our revenue yearly. And that’s what we have been doing in the past few years, and we will continue to do so. And also, we don’t want – we will do some acquisitions, but not acquisition for revenues. Genevieve Cunningham: Our next question is from William Stein of Truist. William, your line is now open. William Stein: Great. Thanks for taking my question and congrats on the great results and outlook. Something I tend to ask about is traction in the module business because I know that this is something that’s helping boost the revenue growth and the margins. I’m hoping you can maybe update us on the traction in that business, please? Michael Hsing: Yes. The module is doing well, I mean, but the revenue is still quite small. It’s a hundred-some million dollars, but in – but I know in the next few years will grow double or triple it. And that’s what we’ve seen in the pipeline, in the design win activities. And so as we said a few years ago, we do e-commerce and okay, we do programmable modules these show true benefits to our customers truly realize it in the end. Bernie Blegen: Yes. I’d say that particularly as we had this supply/demand imbalance and our customers are also looking for enabling technologies that the decision process for earning a design win where historically had been just on the lowest cost provider. Now things like the programmability, the flexibility, the time to market, the total cost of ownership are taking a larger weighting in the decision process, and we feel like we’re very strategically positioned to take advantage of that change in the market. William Stein: That’s great. And as a follow-up, if I can. I am wondering if you can talk about your lead times now and how they might have changed in the last, I don’t know a couple of months and to the degree to which that’s been a competitive advantage. My understanding is that you’re offering lead times that enable customers to switch away from competitors’ products that have lead times that are so long that it suddenly makes sense to switch. Any sort of comments or update on that would help a lot? Thanks, guys. Michael Hsing: Our own lead time really hasn’t changed that much. And we still – we’re still in a lot of delinquencies, okay? And that’s a good thing, okay, because as Bernie said earlier, in all the benefit of our product technologies. Okay, finally, our customers realize it, and it became a high demand. And even though and I think it’s due to the new design win activities. And they all switch to this type of a new technology or new design methodologies. And now that really benefit MPS. And at the same time, we had to increase our capacities. I mean not only from China and globally, that’s what our customer demands. Bernie Blegen: Yes. And just to top off that answer is that I don’t think our lead times were necessarily different from anybody else necessarily in the industry. But we have the advantage of having so many new products coming on the market, Greenfield opportunities, that we invested ahead of the curve, and that’s where we were able to have product availability when others didn’t. William Stein: Thanks, guys. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hi, guys. Congratulations on the nice results. I guess I would love to ask, obviously, we’ve seen some in the compute space Intel and Micron offering much more subdued outlooks for the second half. I think there is clearly some inventory purge going on in the channel. And I’m just wondering, obviously, your September guidance is very strong. But as you look at the order book, have you started to see any changes in the notebook or computer and storage and enterprise data center segment that might echo some of the comments we’ve heard from folks like Intel and Micron in the broader market? And then I’ve got a follow-up. Michael Hsing: We – for the notebooks, okay. And for our side, still – demand is still pretty good and still good, like I mean, and I think as the orders and the orders slow down than before. And but we still have delinquency. And for memory side, for memory side, and there is a lot of new format, okay, starting, we’re still facing shortages now. Bernie Blegen: Yes. And if I could just add to that is that we are looking at any areas of our business that might be susceptible to either backlog that is canceled or is pushed out. And keep in mind that cancellations are always a part of all semiconductor companies. It’s not just a one-time or a new event. And the fact of the matter is, is that any influence relative to the size of our overall backlog today is very minor. And so that’s what’s given us very confident outlook for the second... Michael Hsing: The rate of a booking and the rate of cancellations and I would say they are very similar in the last few years. I mean last few quarters, yes. Quinn Bolton: Okay. So no noticeable uptick in cancellations or push-outs, it sounds like is what you’re saying? Bernie Blegen: Yes. Quinn Bolton: Got it. The second question is just enterprise data showing very strong growth, and I think that’s going to be one of the biggest drivers for the business over the next couple of years, given the Greenfield opportunities. And just – can you guys size for us, is the accelerator card and 40-gig volt opportunity larger than the share gain on CPU power? Do you think they are both equally sort of driving the growth? I’m just trying to sort of – what’s the biggest driver, do you think, for the enterprise dataset? Michael Hsing: I think it’s both. And not only the CPU size for the servers, we gain – and we gain the market share. We stepped into – in that game a couple of years ago, but a very small percentage, and we start to ramp. But we’re still far distance, then they need a bigger suppliers. And that’s one of – from the server side. And the 48-volts, as you know, we talk about it. And we talked about since 2017 or ‘18. And we said that this is the inevitable and a trend. You had to go move to 48 volt. And we are now in the forefront of, and we’re not replacing anybody, okay? We set up this market trend. And so – and also in the data center and the rack itself is a big opportunities and MPS are ramping revenue from there, to from the AC power, and these are 380 volts and I guess, 240 volts input convert into 48 volt. And also the battery backup, and we provide the same – we provide the solutions for battery management and also cooling side. And so MPS is almost one-stop shopping place for data center. Quinn Bolton: Thank you, Michael. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you. First one for Michael. Michael, you’re known for driving a lot of new innovative business models and as we now start to think about adding capacity to get to $4 billion, given the geopolitical dynamics and so on and so forth. I know you’ve talked a little bit about this, but are you thinking or working on new business models to try and secure more capacity for your continuous growth? Michael Hsing: Well, these are one thing, right? We do – of course, we have the fab, we have the mobile. And we will have increased more capacities outside of China. We started about a couple of years ago, also more than a couple of years ago. And now we engage with some bigger DRAM fabs, okay? We will fill that up in the next couple of years. And – but going to futures, MPS actually require less semiconductors and because a lot of products are more programmable and we can use for multiple use. And at the same time, we’re growing our revenues. We’re selling a lot more than semiconductor. We’re selling power solutions, more modules. And – so we kind of move up the food chain as the new requirement comes in, we play in the market, we’re not competing with anybody. And we just provide the solutions. And so those are manufacturer. These are clearly – they are different. They are building modules. And we sign up partnerships, okay, for assemble these new modules. And it’s unprecedented. And a lot of testings, a lot of qualifications, MPS designed the whole system from a ground up. And so these are the – there is no such a facility out there. So we had to invent it, that work. Bernie Blegen: Yes. And I think just to echo a point there is, if you look at our revenue for the quarter, we grew 57%. And keep in mind that we’ve had one price increase, and that was in February this year for 5%. And so if you actually look at where the source of revenue growth came from, about half of it is volume related, and the other half is higher ASPs because the higher value products are selling. So that means that we’ve differentiated our supply chains. So we’re not just dependent on silicon-based products. It’s making total solutions. Michael Hsing: But these are – the bigger effect hasn’t really taken place yet. That would be a couple – a year or a couple of years down the road, you will see much bigger effect and – so there is a lot of the new – a lot of work to do ahead of us. And these are – particularly, these are new types of modules. Nobody else build the kind of things, okay? We’re ground up, we developed and we even develop a manufacturing and as well as testing the qualifications part of it. Tore Svanberg: That’s great, great perspective. Thank you for that, Michael, as my follow-up, and this is related to what you just mentioned there, Bernie, which is pricing. I know you’re obviously growing by adding more value and higher ASP products. But you mentioned that 5% price increases. I think it’s well documented that your competitors have raised prices by more than that. So I guess my question is just simply that, are you gaining a lot of share because you didn’t engage in aggressive price increases as some of your customers? I mean, your competitors, sorry. Michael Hsing: Gaining share, it’s – gaining share is a difficult to count because gaining share, if the equals product is gaining share and going to be in a similar product. And – so you – our price betters, our performance better, we’re gaining shares. Okay. Now we’re talking about completely different things. And those market segments we want to get in there is less price sensitive, but quality, performance a lot more important. And now okay, we offer something that is a lot more than that. And 10 years ago, we said who do we compete with? And not a company sell controller and power MOSFET, they are separate, MPS is integrated. And now you’re talking about MPS, we – our product even on the silicon side. And we have microcontroller, we have a memory, we have digital, we have power. And very unique how we – what we – who do we display. It’s difficult to say it. Now it’s getting to use these type of silicon-based technology, we migrate out. We became a provider of total solutions. So how do we – who do we display, and okay, how we gain market share? It’s very difficult to say. Tore Svanberg: Yes. No, it sounds like you’re displacing more and more companies than before. Just one last quick one for you, Bernie. Most companies’ DSOs were up this quarter because of the China lockdowns, shipments being later in the quarter. Your DSOs actually went down this quarter. So, can you just talk a little bit about how the China lockdown impacted you? I mean obviously, it didn’t impact it the same way, but any other color you can share with us, that would be great? Thanks. Bernie Blegen: No, we really didn’t have much impact from the China shutdown. Obviously, we were able to record revenue growth that is well above the industry average. And the concern we might have had is if our customer supply chains got impacted. But we continue to hit our delivery schedules. And if there was an impact, I am sure we felt some of it, but it was very marginal. Tore Svanberg: Right. Thank you and congrats on the strong results. Michael Hsing: Thank you. Bernie Blegen: Thank you. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Thanks guys for asking question. First question is really kind of a high-level one. Over the years, you guys have generally outperformed the analog market by maybe 10 or 15 percentage points of growth and gain share, etcetera, etcetera. Even last year wasn’t terribly outside of that range. But this year, it seems like that delta probably doubles at least, maybe something more. So, I do get investors that are concerned that your increased availability versus the peers allows you to ship and then it can be double shipping in response to the double ordering. And so it’s a cyclical phenomenon that’s widening that gap. Can you just talk about the reasons you think that gap is sustainable? And then looking forward, do you think that gap will continue to grow despite the fact that you are operating off of a larger base? Michael Hsing: Yes. I think what you said partially is correct. I mean the other company couldn’t ship, okay, we have the inventories and again, we have a capacity to ship. But this year, particularly, we see things are very different. And a lot of products, especially we ship to these Tier 1 companies are from the industrial side, from automotive side and even the data centers. And they don’t – they didn’t intend to have MPS has a big – has a majority as a bigger supplier, where they give us as a backup and to test a lot. And in the last years, we shipped all these units, our failures, okay. We are far better than everybody else, and that’s one thing. The quality of – quality is everything. And – but they took a chance when they have shortages. And so we proved that, give us a bigger opportunity. We proved it, these products as better. Okay, as good as better than our – whatever the parts they design them out. And in the last year, this year, all the new product or the new segment start to grow out. And as our product, we can change it, we can reconfigure it. And that will continue, we continue to grow up. And as we see it at, we cannot handle all the projects. And so in the foreseeable features and these products will continue to grow. Bernie Blegen: And keep in mind that we are still facing large delinquencies ourselves. And so we have had to be very cautious and opportunistic as far as how we allocate our wafer starts in order to meet real customer demand. So, I think we have been clear that during the first half of the year, we did a cleanup of double orders and have confirmed, as I said earlier, the MPS’ backlog still remains very healthy. And then when you look at the inventory in the channel, we are at lows. It’s very lean. And we believe we don’t have perfect insight, that the inventory on our customer shelves is likewise very lean because we have only been doing partial shipments there. So, as far as the markets we feel reasonably confident, obviously, notebook or some of the consumer could give us, we are trying to stay very close to that and evaluate its impact. But as Michael said, a lot of our new growth opportunities are in these large Tier 1 opportunities. And it’s that secular growth that’s really driving it. And that’s different from just building up in the channel or on customer shelves. Michael Hsing: Yes. I will come back to your questions. Okay. Now you said that you are growing a large basis, so you grow, okay, it’s difficult to grow. That’s kind of a built in everybody’s mind, okay? In my mind, I don’t have a limit. And the limit is within yourself, what to do. And people told me, okay, early on $200 million, it’s your barriers, like $500 million of barriers. $200 million at the time, it was a barrier at one time. It happened. And $500 million, it wasn’t okay, then people tell me, okay, you are going to grow $1 billion, you need to slowdown. And at the time seriously, that was 2017, 2017 or ‘18, yes, ‘17, I actually said it, okay, when we get to $1 billion, we are going to accelerate it. And that’s at the time, that’s how I see it. And now, okay, MPS, we are not selling silicon anymore. We are selling raw more than the silicon, and why not accelerating the growth. So, it’s – of course, I am not saying that now okay, a lot of things still depend on our execution. But only thing is the mindset when not dwell on selling semiconductors. And selling semiconductor is limited, but you have a lot of service engineering manpower, we can – our customers can benefit to it. That’s not – that’s unlimited almost. Bernie Blegen: And supporting Michael’s point there, you might remember six quarters or seven quarters ago, we made the statement that by the end of Q2 of ‘22 that we would have capacity to support a $2 billion revenue run rate. And I think that the key there is the execution and the focus and that’s exactly what we have done. Ross Seymore: Hi. Thanks for all that color guys. I guess hopefully, a quicker follow-up to all of this as you expand beyond the semiconductor side, you get into – I don’t want to say systems, but more solutions in general, some of the stuff you talked about with the entire rack, the AC to DC, the cooling, all the above. What do we look at the gross margin doing in that? That sounds like higher gross margin business. And I know consistency of gross margin expansion is the mantra that you guys have lived by and delivered on. But it seems like mix would go in a big tail or would be a big tailwind for you going forward from a gross margin perspective. So, just talk about what this changing in your revenue mix means, whether it’s end market or system solutions versus chips to your gross margin? Michael Hsing: Yes. That’s kind of things we are going to – of course I can all I will say, okay, we can charge as much as our customers available, okay. And that’s kind of a half BS , okay. And – but the reality is I think that we are comfortably stay around this mid to high-50s and 55% to 60% in the range. I think that’s a sweet spot for us. We are not going to print the corners for us to grow to over 70%. And when we get that, we get that, okay. So far, we don’t have headwinds. And I think the opportunity drives the model itself. In the next couple of years, I think that we are going to stay around this as we are now. So, maybe move up a slide later. I mean we don’t have – at least we don’t have the headwinds. And so after 3 years or 4 years we will see how we change our models. Bernie Blegen: Right. I would just add that I think that we reported gross margin of 59.0%. And as Michael said, somewhere in that area is sort of the sweet spot for our model that allows us also to accelerate our rate of revenue growth. So, it’s something that we will continue to evaluate. But I think right now, we are very comfortable with this being our model. Michael Hsing: We are not chasing the volumes going down. We are not actually MPS is not good at chasing our volume. We are not doing these manufacturing, okay. Actually, MPS doesn’t manufacture anything and the high-volume things, that’s not MPS forte. Ross Seymore: Thank you. Genevieve Cunningham: Our next question is from Melissa Fairbanks of Raymond James. Melissa, your line is now open. Melissa Fairbanks: Hi guys. Thanks very much. I will echo the congratulations on another great quarter. I just had two really quick ones for you. First, could you remind us what your inventory target or ideal levels of inventory would be in order to maybe clear some of the delinquencies? And then second, on a somewhat related note, what should we be thinking about for CapEx this year, either as a percentage of revenue or absolute investment. And then what’s the longer term requirements you need in order to meet your demand or your growth plans? Bernie Blegen: Good questions. So, as far as inventory, keep in mind that being so much of our positioning is around growth that as sort of a risk management decision. We believe that 180 days to 200 days of inventory is what’s needed so that we can manage an upside in customer demand, but also if we end up in an unfortunate situation where we have lots of inventory that aren’t sellable that we can compensate for that without having any disruption to our customers’ production lines. So, I think that it’s been difficult to manage delinquencies while increasing inventories in order to support our model. But I think we have done a pretty good job in these really unusual times. And then as far as the capital requirements, I think we have talked in the past as far as what our spending rate is. It tends to be on a quarterly basis, can be somewhere between $14 million and $18 million per quarter with a lot of that being testing equipment or even if we are purchasing buildings, we purchase our own office space. And the first half of this year was a little bit lighter than our normal run rate. But I think 14 to 18, absent a big building purchase, is probably a good run-rate. Melissa Fairbanks: Okay, great. Thanks very much. That’s all for me. Genevieve Cunningham: Our next question is from Alessandra Vecchi of William Blair. Alex , your line is now open. Alessandra Vecchi: Sorry, I was muted. Apologies. I will start over. Bernie, can you hear me? Michael, can you hear me? Michael Hsing: Yes. Bernie Blegen: Yes. Hi Alex. Alessandra Vecchi: Apologies about that user error here. I was saying apologies again, if someone has already asked this question, but I wanted to expand a little bit on Ross’ question, just in terms of the competitive dynamic in your products being superior to those of the competition as well as more of the solution sale. How do we think about power management, in particular, and your positioning within the customer as these products become more complicated, you take up more space on the board, I would assume that those conversations are becoming more tightly coupled and that you guys are becoming more important to the customer in terms of conversation? Michael Hsing: Yes. Look, I mean we – and as a matter of fact, the form of MPS, from the beginning, so we don’t sell pin-to-pin comparables, okay. We – in a similar product, we offer the – actually, we are always a far better product. And much compact, much higher efficiencies. And as an also cost to play without the armor charge on the late and that is known for MPS, okay, and a one-time it’s early period of time, the MPS is like a price, kind of companies. And we actually – we didn’t, that means that we left a little lot of dollars on the table. And of course, we are not competing in that market segment anymore. Now okay, we offer either total solutions. And if you do – if you are mentioning up – if you are talking about any applications, they need power. And we are talking about electrical car, MPS can build a whole car and use electronics. And you want to build the data centers, MPS provides the entire product for data centers, and we are mostly there. And that’s how we sell value. And we are not competing on this product competes with that product. We have all software behind it. And we have user interface, okay, software that changes the game. We are not competing with the product per se anymore. Bernie Blegen: I think an interesting dynamic that we have been observing is that power management was always an afterthought. It was the last thing after you designed your board and you came up with the least bad solution. Now, we are introduced at the very front end of the development of an application. And the reason is, is because our power solutions enable our customers to be able to develop higher-power solutions than they would otherwise. So, that’s an interesting twist in the relationship where we are being introduced more earlier to the process and able to jointly come up with the development of shared solutions. Michael Hsing: As you see – as you remember, MPS like 4 years ago, we actually built a car. Built a very advanced car and far advanced than any car that you see in the market. And with battery management and same time, all the motor controls, a lot more complex than the existing EV. And so just for the purpose, we can demonstrate we can do it. And now we can do it – and 4 years later, actually, we can do a lot more than that. And so that’s kind of examples. Alessandra Vecchi: That’s extremely helpful. And then, Bernie, just one last quick question, in terms of the guidance, any end market that we should think of or how should we think about the end markets in terms of strength versus – strongest versus weakest strength, any notable things to call out? Bernie Blegen: Yes. I think that the themes that you are going to be seeing for the next 2 years to 3 years are the enterprise data and automotive. Automotive had a relatively slow first half, but that was exactly what we had in our expectations. There was no new surprise there. And we believe that in the second half, it looks very healthy as does the data center. Michael Hsing: Yes, as we see it. And okay, as we don’t want to – okay, what will we provide, not customer asked for it? Yes, we will do that, a customer do that. We should lead to customers. So, what you should need. That’s the game we are really playing, okay. We are playing ahead of game. And I think that all the power stuff like 48 volts, we said that this is like – we said that in 2017, okay, this is the futures, and we anticipated that. Electrical cars, we anticipated that. And so now we can, in the next few years, and we will see the very similar things that we will see all of these will happen. Alessandra Vecchi: Perfect. Thank you so much. Congratulations again. Bernie Blegen: Thank you, Alex. Genevieve Cunningham: As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: Great. Thanks Gen. I would like to thank you all for joining us on the webinar and look forward to talking to you again during the third quarter, which will likely be at the end of October. Thank you. Have a nice day.

Genevieve Cunningham: Welcome, everyone, to the MPS First Quarter 2022 Earnings Webinar. Please note that this webinar is being recorded and will be archived for one year on our Investor Relations page at www.monolithicpower.com. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, VP and CFO. 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 Q1 earnings release and in our SEC filings, including our Form 10-K filed on February 25, 2022, which is accessible through our website. MPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expense, R&D and SG&A expense, operating income, other income, income before income taxes, 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 Q1 2022 earnings release, which we have furnished to the SEC and is currently available 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 1 year, along with the earnings release filed with the SEC earlier today. Now I'd like to turn the call over to Bernie. Bernie Blegen: Thanks, Gen. MPS posted record first quarter revenue of $377.7 million, 48.4% higher than the first quarter of 2021. The year-over-year revenue increase represented strength in the overall market and more importantly broad-based market share gains, resulting from customer acceptance of our new product introductions. Before looking at our revenue by market, I would like to call your attention to a change in our reporting. In order to provide increased visibility on data center and cloud computing revenue, a growth reporting for computer and storage to get 2 separate line items. The table has been included in this webinar showing the company's quarterly revenue on this basis since 2017. The first line item is called storage and computing, which primarily refers to total storage and client computing revenue. The second line item is called enterprise data, which captures revenue from data center and product. In our storage and computing market, first quarter 2022 revenue of $96.6 million increased $18.6 million or 23.9% from the fourth quarter of 2021 due primarily to higher storage and commercial notebook sales. Computing -- storage and computing revenue represented 25.6% of MPS' first quarter 2022 revenue compared with 20.2% in the first quarter of 2021. In our enterprise data market, first quarter 2022 revenue of $42.5 million increased 5.0% in the fourth quarter of 2021 due primarily to continuing strength in data center and workstation computing sales. Enterprise data revenue represented 11.3% of MPS' first quarter 2022 revenue compared with 6.4% in the first quarter of 2021. First quarter 2022 communications revenue of $55.6 million rose $9.7 million or 21.1% for the fourth quarter of 2021. The quarter-over-quarter increase primarily reflected higher revenue related to 5G build-outs and satellite communications. Communications revenue represented 14.7% of MPS' first quarter 2022 revenue compared with 14.2% in the first quarter of 2021. First quarter 2022 revenue from consumer markets of $80.0 million increased $13.6 million or 20.6% from the fourth quarter of 2021. This sequential quarterly improvement of the sequential revenue increase reflected a broad-based increase particularly related to our IoT business. Consumer revenue represented 21.2% of our Q1 revenue compared with a 26.0% contribution in the first quarter of 2021. First quarter 2022 unearned revenue of $54.5 million decreased 3.2% from the fourth quarter of 2021. Unearned revenue represented 14.4% of MPS' first quarter 2022 revenue compared with 17.6% in the previous year. In our industrial market, revenue of $48.5 million was essentially flat with revenue recorded in the fourth quarter of 2021. Industrial revenue represented 12.8% of our first quarter revenue compared with 15.6% in the prior year. Moving now to a few comments on gross margin. GAAP gross margin was 57.9%, 30 basis points higher than the fourth quarter of 2021 and 250 basis points higher than the first quarter of 2021. Our GAAP operating income was $96.1 million compared with $78.6 million reported in the fourth quarter of 2021. For the first quarter of 2022, non-GAAP gross margin was 58.3%, 40 basis points better in the fourth quarter of 2021 and 250 basis points better than the first quarter of 2021. Our non-GAAP operating income was $133.6 million compared to $112.0 million reported in the fourth quarter of 2021. On both a GAAP and a non-GAAP basis, the sequential quarterly gross margin improvement was primarily due to a better product mix as revenue from higher value, new product introductions are ramping. Let's review our operating expenses. Our GAAP operating expenses were $122.7 million in the first quarter of 2022 compared with $115.3 million in the fourth quarter of 2021. Our non-GAAP first quarter 2022 operating expenses were $86.6 million, up from $83.0 million reported in the fourth quarter of 2021. The differences between non-GAAP operating expenses and GAAP operating expenses for the quarters discussed here are stock compensation expense, amortization of purchased intangibles and income or loss on an unfunded deferred compensation plan. For the first quarter of 2022, compensation expense, including approximately $1.3 million charged to cost of goods sold was $39.8 million compared with $31.2 million reported in the fourth quarter of 2021. Switching to bottom line. First quarter 2022 GAAP net income was $79.6 million or $1.65 per fully diluted share compared to $72.7 million or $1.51 per share in the fourth quarter of 2021. First quarter 2022 non-GAAP net income was $118.3 million or $2.45 per fully diluted share compared with $102.1 million or $2.12 per fully diluted share in the fourth quarter of 2021. Fully diluted shares outstanding at the end of Q1 2022 were 48.2 million. Let's look of the balance sheet. Cash, cash equivalents and investments were $775.1 million at the end of the first quarter of 2022 compared to $727.5 million at the end of the fourth quarter of 2021. For the quarter, MPS generated operating cash flow of about $107.4 million compared with operating cash flow of $28.2 million in the fourth quarter of 2021. First quarter 2022 capital spending totaled $26.5 million. Accounts receivable ended the first quarter of 2022 at $120.3 million or 29 days of sales outstanding, up 1 day from 28 days at the end of the fourth quarter of 2021. Our internal inventories at the end of the first quarter of 2020 were $311.0 million, up from the $259.4 million at the end of the fourth quarter of 2021. Days of inventory increased to 178 days at the end of Q1 2022 compared with 166 days at the end of the fourth quarter of 2021. Historically, we calculated days inventory on hand as a function of current quarter revenue. We believe comparing current inventory levels with the following quarter's projected revenue provides a better economic . On this basis, again, as you can see, days of inventory increased to 159 days at the end of the first quarter of 2022, up from 149 days at the end of the fourth quarter of 2021. I would now like to turn to our outlook for the second quarter of 2022. We are forecasting Q2 revenue to remain of $420 million to $440 million. We also expect to follow -- at gross margin in the range of 58.4% to 59.4%, non-GAAP gross margin in the range of 58.7% to 59.3%, GAAP R&D and SG&A expenses between $132.7 million and $136.7 million, non-GAAP R&D and SG&A expenses to be in the range of $90.0 million to $92.0 million. This doesn't exclude stock compensation and litigation expenses. Total stock-based compensation expense of $44.2 million to $46.2 million, including approximately $1.5 million that would be charged to cost of goods sold, litigation expenses ranging between $2.3 million and $2.7 million. Interest and other income is expected to range from $1.3 million to $1.7 million before foreign exchange gains or losses, fully diluted shares to be in the range of 47.8 million to 48.8 million shares. In conclusion, we will continue to execute on our long-term plan for sustainable growth. I will now open the webinar up for questions. A - Genevieve Cunningham: Thank you, Bernie, analysts. I would now like to begin our Q&A session. . Our first question is from Ross Seymore of Deutsche Bank. Bernie Blegen: Ross is not there. Perhaps we can move on. Genevieve Cunningham: Our next question is from Alex Vechhi of William Blair. Alex Vecchi: Congratulations on a great quarter in a tough environment. Maybe you can address a little bit the supply constraints in some of the China COVID impact. It seems like you guys came out from that completely unscathed, be interested in some of the dynamics that's allowed you to do that. Michael Hsing: Well, Alex, we plan this kind of ramp not from last year from -- not from this year last year, many years ago. And as you remember, in 2017, even '16, we said that we're going to on greenfield products will grow and exactly we don't know at plus or minus a year or so. And so we plan every aspect, including logistics and staff, assembly house and our internal testing. And this is not a 1-year thing. We planned a long time ago. And now when the revenues rent is a little better than we anticipated. And so that's where you see the result. Bernie Blegen: And if I can add to that, we've also built inventories so that in 178 days, we're just at the lower end of our goal of being between 180 and 200 days, which provides us a good insurance policy as we look ahead to achieving our numbers for the second half of the year. Michael Hsing: Yes, even the end of the second half of 2019 in -- the business is not as great, but we built according to our plan, and we know the business will come. Our -- at that time, I remember, our inventory is over 200 days. And that part of it, inventories made us -- our customers feel a lot more long more reliable, like MPS as a major player. Alex Vecchi: Okay. That's really helpful. And then maybe one for you, Bernie, just on gross margin. Margins have been very strong, as I believe. You've alluded to product mix. Just on that front, how much more runway do you think you have on the gross margin front from the uplift on sort of your new products going forward? Bernie Blegen: Sure. As you've seen both in the results that we had for Q1, along with our guidance for Q2, which positions us around 59% gross margin, I think we've done a fair job of -- digesting is the incorrect word, but acknowledging the uplift in our margins as a result of our product mix. So again, I'll give the same answer I did last time that we believe that we've created a new floor gross margins once we can expand 10 to 20 basis points sequentially. But again, if opportunistically, we see a back set, which allows us to take it up another, we will be happy to take that. I want to emphasize that, well, most of our peer companies have benefited both in terms of revenue growth and margin expansion from price increases, Ours has been driven primarily by the change in revenue mix, which is favoring these higher-value products. And it was only in February of this year we did a broad-based increase of our prices but that was still far below what the market has seen. Michael Hsing: Just a pass on the cost to our customers. And as the margin expansion for our case, we said earlier, okay, setting in 2017 or '18, we don't have a headwind in -- by 2019. The, market slowed down a little bit and we built up a lot of some amortizations that -- in a production pipeline. So our margin went slightly lower, but it's not much lower. And now and you see this margin continued to grow. Genevieve Cunningham: Our next question is from Matt Ramsay of Cowen. Matthew Ramsay: Can you guys hear me all right? Michael Hsing: Yes. Matthew Ramsay: Michael, I guess, for either one of you guys, it was interesting that you're breaking out sort of the data center piece from the PC and storage business. And I guess I wonder a couple of things about that, like what may be you our guys are trying to signal by breaking those out separately, in particular the new enterprise data segment is up, I don't know, 160% year-over-year, but that's really before the 2 primary server processor vendors launched with new sockets this year. So Michael, could you maybe talk a little bit about the reason for breaking that out and the relative growth rates you guys expect of these 2 new segments as we go forward? Michael Hsing: If you combine all together, it's a kind of -- we're going to answer -- in the past, we answered those questions anyway and -- but when we reported on some numbers, and so which is more clear and publish you guys know it, have a less meaningful questions and any other reasons. Bernie Blegen: I think, Matt, you did a good job of saying that this is clearly an inflection point for us, inflection year which will gain momentum as we see both Intel and AMD position for product releases are coming up here. So that, in addition to the expanding footprint we have in both 48-volt and artificial intelligence, we believe that this will be one of our areas for sustainable growth for certainly next 3 to 5 years. And exactly as Michael said, we believe that providing better transparency is definitely a better information for our investors. Matthew Ramsay: Thanks to both for that. That's helpful. I guess if you look at the second quarter guidance that you provided, $430 million at the midpoint was quite a bit above where consensus was and certainly where my model was. Bernie, if you might take a second to walk us through by segment, how you're thinking about the growth being concentrated, that would be really helpful. Bernie Blegen: I think that on a dollar or percent basis, we're going to see an accelerating ramp in enterprise, particularly during the second half of the year. I think we're going to see continued growth in our storage and computing albeit probably not at the same rate. Part of the reason for that is that storage tends to be a precursor at least from our experience to a data center ramp. So I think in each of the 2 prior quarters, we've seen a good, strong ramp in storage, and now we're expecting 2 to 3 quarters in the data center. In the rest of the business, communications, as we said, we've broadened into not only 5G but also into satellite communications. And that's going to continue to be a driver for the foreseeable future. In the other areas, obviously, consumer, that is coming along, we emphasized Internet of Things but we -- actually, the growth there is broad-based. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Nathaniel Bolton: Let me offer my congratulations as well. I wanted to come back to Alex' question about China. Obviously, you source most of your assembly and wafer capacity in China. And I just -- given the zero COVID policy in China and some of the resulting lockdowns, are you rethinking the need to diversify outside of China either on the assembly and test or assembly and wafer foundry side? And then I guess, a related question, I think most of your final test takes place in Chengdu, have you any contingency plans in place in case Chengdu is put under lockdown due to COVID? Michael Hsing: Yes. We started a couple of years ago. We already started doing so. And as you know that China and manufacturing in Asia is the center of the work, and we can't debate too much or not if they have a serious problems, I think everybody worry about it, even the bigger things. And yes -- the answer is yes, okay. We already started and establish in a different clinical environment. Nathaniel Bolton: In Chengdu, Michael, do you have test capacity outside of Chengdu, if Chengdu goes under lockdown? Michael Hsing: Yes. As we're starting to about a couple of years ago, but maybe it's a little more than 12 months ago, we're starting. Bernie Blegen: With the testing capacity in Chengdu. We've concentrated that on some of our higher value parts including automotive. And now as Michael just said is now we've started transition where we can actually have third parties. So we actually have a built-in contingency plan. Michael Hsing: Yes, outside Chengdu only, yes, we have -- other than these high reliability product in retesting in our side. And other than that, okay, we do pretty high volumes if it's about half of it. It's in a different facility. When I talk about -- I just mentioned about it is outside China. Nathaniel Bolton: Got it. Okay. And then my follow-up question is around the internal inventory level that you guys have done an absolutely fantastic job of increasing that in a very tight supply environment. I guess my question is, as you're approaching now the low end of your target range of 180 to 200 days, can you tell us what's going on with lead times? I would think as internal inventories get up to your target level, that may give you the ability to start to reduce lead times to potentially gain even more market share. But wondering if you could give us a sense of what's going on with lead times given that increase in internal inventory levels. Michael Hsing: Our lead time is in this quarter is the same as the last quarter. So probably even our booking even -- I don't see anything. The rate of our booking is now reduced and Bernie, you said. Bernie Blegen: And you took my answer on both ones that lead times have remained very consistent each in the last 3 quarters. And again, what you're seeing as far as the build of inventories has been a very conscious and deliberate decision to build the inventories in advance, particularly on the enterprise side, to meet the demand we expect for the second half of the year. And then I think that we've done a good job of positioning ourselves under what has now become uncertain environment. Genevieve Cunningham: Our next question is from William Stein of Truist. William Stein: Congrats on the very strong results, especially the outlook. We understand though that while we see a great number overall, in particular for the guidance, there's always moving parts when we look at it on a more detailed level. And I wonder if you're seeing either perhaps owing to customers focusing on getting balanced kits or full sets or however you want to call it or if you're seeing anything related to Ukraine or the lockdowns in China, whether any of these factors is influencing either the order rates or the backlog. For example, if none of these things were happening, the outlook would have been even stronger. Any qualification you can provide us would be helpful. Michael Hsing: Yes. Well, MPS is like selling . And we are not a dominant application supply. We got something in a. -- I mean so whatever we ship is that these are the small part of the solutions. And so we don't know, okay? That's -- actually, that's our model. That's a billion. We don't know where these costs -- and so whether the wall effectiveness, okay, and we're very, very much diversified. We actually don't know it. And okay, they call you there. So the -- to answer your questions, I mean, only things, yes, we do know where the product was the data centers. The product if it goes to a car, mean these are we're pretty much not a lot where the product ended up, okay. And other than that, we don't. Bernie Blegen: Just reinforcing the answer from before, there is no significant KPI, whether it's in the bookings or any other area of our business that we're seeing a change over the past 2, 3 quarters. That's helpful. William Stein: Bernie, you've talked about various levels of revenue that you could achieve at full utilization. In other words, the capacity that you're building for. I know they started couple of years ago. Well, I'm sure it's ongoing really. But the capacity and the upside that we've seen over the last few quarters, of course, those were not planned very quickly. They were planned a long time ago. Can you remind us or maybe update us on the medium to long-term capacity planning that's in place today? What levels of total capacity we can expect over the next few quarters? Michael Hsing: Yes. That's a good question. I think that we answered the questions in last quarter, okay, we said that we're going to play in the $4 billion of revenues in the next couple of years. And so that's what we do and we continue to invest. Bernie Blegen: Yes. And I think just to sort of lend some credibility to that, you recall about a year ago, that we offer by the end of Q2, in 2022, that would be at a $2 billion run rate. And with the guide that we have provided and the expectations ahead, I think that's a milestone that backs up the amount of visibility in our supply chain. So right now, the goal as Michael said, $4 billion. Michael Hsing: Yes. If the demand is there in this year, we will do it, yes. What will do $2 billion, as we said in a couple of years ago. And we continue to see the demand in, and we see the demand will be there. Okay. This is not a one -- a short term, okay, things. And if it does not happen that year, that will happen the year after. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Richard Schafer: I'll echo all the congratulations on other stellar quarter for you guys and outlook. If I could, my first question, I'm just kind of following up on the server breakout and obviously, a big ramp ahead for QSMod and cloud this year. I was curious kind of below that line a little bit, if there's any updates you could give us, like your 48 volt expectations this year or next? And within that, I'm curious, I sort of assumed 48 volts virtually all AI accelerator for the next couple of years. But I'm curious when you see 48-volt sort of move into other areas like CPU or some broader markets like auto or industrial because I'm curious if you've looked at sort of what that 48-volt SAM looks like for MPS because it seems like an awful big opportunity. Michael Hsing: Yes. 48 volts actually started in the automotive and also the silver and AI, okay, these CPUs. And for the 48 volts for the car, that's a different thing. but the same technologies. And also, we see these telecom areas, 48 volts, it's all standard and -- so now the 4Gs and the compliance with the 48 volts, again, we have a solution there. So there's a lot of areas we can grow. Bernie Blegen: And I think that the 48 Volt, not only are we seeing the ramp, its adoption more broadly, but competitively, I would offer that we're very well positioned with some of the new technologies that we've rolled out and expect to roll out during the course of the next 18 months. So I think here again, we time our product releases pretty well with the inflection of this market opportunity. Michael Hsing: Yes. And as we're talking with the product, the module is ramping, yes. So we provide -- we're providing whatever customer needs. We had a chip level on module level or solution levels. Richard Schafer: Okay. And then maybe as my follow-up, just on 5G, I haven't asked the 5G question in a while. I mean you guys are engaged with the sort of the big 3 Tier 1 OEMs. And I just was curious if you can give us an update on your expectations. I know you flagged 5G here from 1Q results. So I'm curious what your expectations are for this year. And if there's any update you could give us on sort of how content compares with what you're seeing in server or data center and sort of how that ramp looks. And maybe if you could talk about how you quantify that opportunity in macro base station. Bernie Blegen: The 5G is a relatively new market segment for us. So it's not like we can draw from our prior experience and calibrated up or down. We're sort of living a little hand to mouth on what demand looks like and how fast we're shipping. So we don't have a real good predictive model. What we talked to you about in the past has been that, again, we believe on a broad base, not only with as you referred to the top 3 but with a number of partners related to 5G infrastructure, we're providing content. And while it's easy to look at the base station as a means of calculating out what the SAM is available to us. I think that we're also in fiber optic in the data center support for 5G as well as in the transceiver of the base station. And again, I think, as we pointed out, a lot of the initial technology that we're putting in is tending to be lower end and not necessarily specialized or adapted to 5G specifically. So we don't have the same level of visibility on how it's being deployed, and we've used this strategy in the past with data center. We comment with lower dollar value content, build the relationships and then we're able to go to higher value content. Michael Hsing: Let me say that we do have a custom design for each of the areas that Bernie said from fiber optics to all the single chain, all the way to transmitters. And we do have a customer design. And based on our standard product modules -- and these are the products. It's not really a low end. It can be, but these products can be used for any other telecom, which provide a building market, it provide power solutions for each of these blocks -- each of these categories. And we do see a lot of activity now in the revenues is ramping now. Genevieve Cunningham: Our next question is from Chris Caso of Raymond James. Christopher Caso: I guess a question about the profile of revenue growth as we go through the year. And thus far, over the past several quarters, your revenue growth has been pretty broadly based, seeing growth in most segments. I know we've been speaking about and we've been anticipating for a while the server ramp as we get to the end of the year. But as we look through revenue in the next kind of 2, 3, 4 quarters, do you expect that revenue growth to continue to be broadly based, where you think this is going to be concentrated in any particular segments? Michael Hsing: Well, the strategy is we're fired as many cylinders we can, okay? Whenever it grows, we grow, okay? And I think that's the strength among the diversifications. And in the next few quarters, we see the demand even for 2023 and '24, and these are pretty much similar, okay? We don't see that much of a difference. And one thing we see it, okay, they -- we -- our customers demand more high-value product, which means they can easily adopt in ease of use and a much higher efficiency product and an energy using efficiency product. And so these are much better for us. Instead of our customer do lot development work, we do a lot of development work for our -- we develop the solution for our customers. So that means a higher dollar amount -- a higher dollar content. And so that's really we see that as only difference. Christopher Caso: Got it. My follow-up question is about the impact of some of the China lockdowns and not from your production side but rather from your customer side. And what we heard from some others or at least one other is that part of the challenges in China right now are customers having facilities that are closed or that freight forwarders simply unwilling to accept product because of some of the logistics challenges that are going on right now. Is that something you're facing as well? And is there any impact on your revenue right now, which might mean some of those issues get solved, that some of that goes into the second half of the year? Michael Hsing: Absolutely hit us. And don't get me wrong. Even though we grow this much, if we were not that problem, so we ship a whole lot more but we just have -- we anticipated that a little better. So we can still roll in our -- one of our models, can mean there's not much of our model. And for the portion is above our model, even a year, 2 years and again. And on the other hand, in -- other than our logistics and production limitations, our customers, they have a mix, too. And clearly, you see the auto business. I mean we have less problem of shipping product than other suppliers. So -- and you can't speculate in okay, because of in limited or -- they are buying -- they're purchasing of our product and for because they miss other parts. Bernie Blegen: And I think that we continue to be very resilient under a number of environmental circumstances. Part of that is the planning that we've set 3, 4 years ago, and some of it is how diversified long is and some of it is how adaptive we can be in the moment. So again, we did acknowledge the impact our customer supply chain affecting us, but I wouldn't say that, that is a pronounced element and we're continuing to monitor it. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel Nicolaus. Tore Svanberg: Congratulations on another record quarter, quite stunning. First question is on long-term growth. So you grew more than 40% last year. It looks like you're on track to growing another 40% this year at least. Michael, in the past, you've said there's no reason why you can't accelerate growth even though you have higher revenues. Michael Hsing: You remember that. That's good. Tore Svanberg: So I'm just trying to understand what you think about long-term growth at this point. Is 40% the right number? I know you're probably not going to commit to a number, but yes, anything you can add on that would be great. Michael Hsing: Yes. Okay, as always said, okay, about a few minutes ago, I said that our customers even demands the more higher value product, can be in a solution kind of related products, not they wanted a low their engineering effort to MPS. And I see that opportunity is the opportunities for accelerated growth because think about it, if it's MPS, we don't make any and we're just only testing the final control -- quality control. And that can apply to anything else. And I apply to models, apply tools okay, applied to any other solutions at all, but it's all related to power all related to OEM. And so from now on, you will see MPS, okay, we provide plug-and-play solution for all kind of robotics, for industrial automation and for building controls. And those type of product and -- which has a lot higher ASPs, we buy those components or we specify those components and we incorporate to our solutions. So the unit price will be much higher. And now it's how fast we can put all these solutions together and turn it into a meaningful revenue. And that, I can't predict. And then you have that product, a lot of knowledges too. Now at the same time, MPS is a semiconductor chip business, keep growing. So I don't see in the near term in the next year or so. I don't see any slowdown, and it's actually accelerated. And so to the other model is at the very infancies. And if you go 3 or 4, 5 years from now, I think as we will be real solution companies like silicon semiconductor is only a part of it out in the total content. So I want to grow more. I've seen more than $10 billion of companies, I mean $10 billion, $15 billion company, and there is no reason why not? Tore Svanberg: That's great perspective, Michael. As my follow-up, I wasn't aware you had a lot of traction in the sat comm market. I was just hoping you could add a little bit more color there, what types of applications, what are some of the strengths the company has today in that market. And are you continuing to introduce new products? Because that's -- to me, it's obviously a very high-margin business, right, but it's also a very difficult market to crack into. Michael Hsing: Yes. It's or committed to sell our communications and not only in the cell like self the grand station there's a huge amount. There's new standards, and again, there's a lot of new activities in that. And we designed it into a few years ago. And mostly, it's a power modules. And also, we have related to these in the cell and I mean this a controlled the solar panels and also a lot of power box. And I think the value in this is so -- this is everywhere, okay -- and these are for antenna to powering up the antenna to power the receivers and also all the way down to the user interface, and we all benefit from. Tore Svanberg: Excellent. Very good. Congratulations again. Michael Hsing: Thank you. Bernie Blegen: Thanks. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross Seymore: Can you guys hear me this time? Michael Hsing: Yes, Ross, you're there. Ross Seymore: I've been here the whole time. I'm glad that we got it to work. So I guess the first question is a longer-term one, then I'll follow up with a shorter-term one. Michael, you talked many times on tonight's call about moving up the value chain, adding more value. Customers want to use Monolithic for more and more. And in the past, that's going from kind of the second or third tier folks in various markets up to the first tier. So really what I want to get at is, are you seeing evidence of moving up to higher and higher value customers? And does the fact that you didn't raise prices as much as your peers and that you had availability, is that giving you longer-term design wins, higher value design wins? Anything you could do to quantify that dynamic? Michael Hsing: I don't know how to qualify that, okay, because we don't -- we didn't really -- we didn't increase the price, okay, for those customers the first tier, the value the strategic customers because this prices are negotiated way before that. And we have the audit. And so we always said what we do. It's what we said what we do, okay? So we have to honor that. And I think that also is a part of MPS branding and so that benefits the for long term. And for other high-value customers or high-value products and it's sporadic. This is the very beginning, a lot of customers don't even know or you offer these solutions but you offer that the entire solutions and -- so they don't even know that, okay. MPS is just starting to. And that actually relates to a few years ago, we said that we're going to do e-commerce, okay? We do e-commerce plug-and-play, programmable, all these things. And these are all related. And so we do solar only for large customers, and I said we're a satellite company. We have the EV companies. We have a day 1 MPS, do a lot more or even the data centers and the demand of all these, we provide the entire unit. And they don't have to design it. So that's actually a across the board. I just named a few. But revenue is still small. We're starting. Ross Seymore: And for my follow-up, a near-term question, Bernie, this could either be both revenues and/or the gross margin and your answer on this, and it's really about the mix. You've talked about the gross margin rising because of mix and new products being the driver of that. So if I look at the industrial and automotive businesses, the last couple of quarters, they're great year-over-year, but they've been flat to a little bit down sequentially for the last 6 months or so. Is there anything going on in that business? Is it just lumpiness? Is it waiting for some design wins? And on the mix side of that equation for gross margin, I think most people believe those could be some of the more accretive areas. So how is the mix such a positive for your gross margin if the 2 areas that are supposed to be the highest margins are actually slightly underperforming the others? Michael Hsing: Makes sense. That was good question. Bernie Blegen: Let me reference wehat Michael said earlier. It's the power of our model of diversification of the end markets. And if you go back to the performance, the revenue performance that we demonstrated in industrial and automotive last year, they were leaders in our growth drivers. In the current year and reflected what's the health of the 2 end markets, it really came down to it being the timing of shipments. So we believe that as far as the design rules that are coming in, that we don't believe that we overshipped them to the extent that that's going to cause us a problem. The orders on the book remained incredibly positive. So again, it's just -- it's more different to quarter-over-quarter as opposed to anything fundamentally different about the market. Michael Hsing: And also, one of the questions is why the margin goes up and if these are 2 segments go sideways, okay? I mean the year-to-year -- year-over-year growth, I mean, if you look at it from a Q3 last year to now, those segments -- that contributes a lot of margins, okay, gross margins. And the other segments, like consumers, I mean we phased out and there can be this not on the last year. So maybe the year, beginning of the last year. When the capacity gets issues, as you know, we always phase out these lower margin. That's another part of it. And -- but overall, the greenfield products drive the margins. Bernie Blegen: And just to add to Michael's point, as far as phasing out lower margin business, we're trying to rationalize our wafer starts to capture the largest opportunity. And as a result, some of the lower-margin business that we would have used to have in our portfolio, we haven't emphasized that in our production planning. It's just not there as a component of our business like it has been historically. Genevieve Cunningham: Our next question is from Hans Mosesmann from Rosenblatt. Hans Mosesmann: Congratulations, like everybody else has mentioned. Good stuff. I have 2 questions. Michael, if we were to split 48 volts as an opportunity. So I'm thinking it getting 48 volts to the rack in your data center and within the rack, getting that 48 volts to the board and every board has to deal with the accelerators and there's power issues there. So there's 3 touch points. If that's the way to look at it, what is the opportunity for each? And where would you be seeing the first incremental business for 48 volts for MPS? Michael Hsing: I think it's the solution, yes, you're right, okay? And then now the question is does depend on applications, 48 volts, down to 12 volts, down to directly to 1.2 volts. That's at the last part, okay, we don't do that and our customers -- and there's the few providers of the solution is not come -- and so we play in the market. I mean it's not to 12, 48 convert to 12 and convert 5 -- 4 or 5 volts, okay? That's the market we played. We came in and it's open builder materials. Everybody else can jump into it. And we -- so our competitor provides a similar solution. And so that kind of -- we know this is the application, but which one, we don't know. Which one is hard to tell. All these high current products, and you probably know more than I do, okay, goes to 600 watt to 1,000 watts and even some of the couple of 1,000 watts. You see these are all MPS solutions now and these are -- the higher wattage you go, the volts get smaller. And so in the coming years and those accelerate the costs, okay, the population in the data centers. And that's where you see it. These are 48 volts that convert to 12. And then you have a new solutions that we provide so you can to a firewall. So okay, an increase close to 1% of efficiency, which is a lot. Hans Mosesmann: That was very helpful, Michael. My follow-on, just to end this, what is the view of the PC market for MPS? I think Intel mentioned that the low end of the PC market is weak, but the other parts are okay. What's your view to the degree that you have participation there? Michael Hsing: Yes. We obviously -- okay, and we do well. And we do PCs and case PC, the commercial PCs, that even the low end of business from OEs. And -- but for us, it's a very opportunistic because we have a product developed for server. And without much of an engineering effort, we can spin off to do other products. We did a product for commercial PC and for commercial norms. And on the other end, we do battery management. We do actually panel. And -- pretty much, we can offer an mobile solutions other than memories, other than the CPUs. And so that's -- it's very opportunistic. And we -- currently, we see the demand is very strong. Bernie Blegen: Yes. And just to add to that, Michael, is we have a very good footprint in the commercial side. And because we have so many different client offerings, what we're seeing is being able to sell additional content into those same platforms. Genevieve Cunningham: . As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: Great. Thanks, Gen. I'd like to thank you all for joining us on the Q1 2022 earnings webinar. I look forward to talking to you again during our second quarter conference call, which we would like to be in July. Thank you, and have a nice day.

Genevieve Cunningham: Welcome, everyone, to the MPS Fourth Quarter 2021 Earnings Webinar. Please note that this webinar is being recorded and will be archived for one year on our Investor Relations page at www.monolithicpower.com. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, as CEO and Founder of MPS; and Bernie Blegen, VP and CFO. In the course of today’s conference call, we will make forward-looking statements and projections that involve risk 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 Q4 earnings release and in our SEC filings, including our Form 10-K filed on March 1, 2021, and Form 10-Q filed on November 8, 2021, both which are accessible through our website. MPS assumes no obligation to update the information provided on today’s call. We will be discussing gross margin, operating expense, R&D and SG&A expense, operating income, other income, income before income taxes, 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 Q4 and full year 2021 earnings release, which we have filed with the SEC and is currently available 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 today. Now, I’d like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Jen. In 2021, MPS surpassed the $1 billion revenue milestone by achieving record full year revenue $1.2 billion, 43.0% higher than the prior year. This performance represented consistent execution against our strategies and being recognized by more first tiered companies for our superior technologies, product quality and excellent customer support. As we see more highly – high quality growth opportunities ahead of us, we continue to invest in our infrastructure and operational capabilities. In 2021, MPS grew capacity by 40% and we are on track to expand capacity in 2022, well beyond $2 billion allowing the company to successfully ramp new product revenue and achieve strategic market share gains. Here are a few highlights, which we achieved in 2021. Brought online a new 8 inch fab and continued to qualify parts in the 12 inch fab, we brought online in 2020. We will continue to invest in growing fab and assembly capacity. We design processor cores and MCU technology into products requiring more sophisticated power solutions such as USB power delivery, smart motor drives, and high power electrification. Our first prototype of a high precision analog digital converter product for medical applications achieved outstanding silicon performance and lab evaluations. We have started customer sampling in Q1 2022. Validation of this technology is a strong first step in developing a new business segment supporting both industrial and infrastructure end market applications. We believe new product revenue from a large number of previously released designs will ramp in 2022. The representative sample includes product supporting applications in VR14, 5G, BMS, ADAS, AI, USB PD, DDR, and many more. Turning to our full year 2021 revenue by market segment compared to 2020, automotive revenue was up 87.5% computing and storage revenue up 47.0%, industrial revenue up 54.5%, consumer revenue up 28.1% and communications revenue up 15.3% demonstrating just how broad based our full year 2021 revenue improvement was. Automotive revenue grew $95.4 million to $204.3 million in 2021. This 87.5% year-over-year gain primarily represented increased sales of our highly integrated applications supporting the digital cockpit, automotive – automated driver assistance systems and connectivity. Automotive revenue represented 16.9% of MPS’ full year 2021 revenue compared with 12.9% in 2020. Full year 2021 computing and storage revenue grew $119.1 million over the prior year to $372.3 million. This 47.0% increase primarily resulted from strong sales growth for enterprise notebooks, cloud computing and storage applications. Computing and storage revenue represented 30.8% of MPS’ of revenue in 2021, compared with 30.0% in 2020. Industrial revenue grew $65.2 million to $184.8 million in 2021. This 54.5% year-over-year increase was broad based with each our primary product lines enjoying better than double-digit revenue growth. Industrial revenue represented 15.3% of MPS’ full year 2021 revenue, compared with 14.2% in 2020. Consumer revenue grew $61.9 million to $282.3 million reflecting increased product sales for home appliances and smart TVs. Consumer revenue represented 23.4% of MPS’ full year 2021 revenue, compared with 26.1% in 2020. Communications revenue grew $21.8 million to $164.1 million. This 15.3% improvement reflected higher sales of products for both infrastructure and wireless riders and gateway applications. Communications revenue represented 13.6% of our 2021 revenue, compared with 16.9% in 2020. Switching to Q4. MPS had a record fourth quarter with revenue of $336.5 million, 4.0% higher than revenue generated in the third quarter of 2021 and 44.4% higher than the comparable quarter in 2020. By market segment, revenue for computing and storage grew 91.6% year-over-year, communication grew 54.7%, automotive grew 43.2%, industrial grew 33.3% and consumer grew 1.9%. Fourth quarter 2021 GAAP gross margin was 57.6%. Same as third quarter 2021 and 230 basis points higher than the fourth quarter of 2020. Our GAAP operating income was $78.6 million compared to $77.1 million reported in the third quarter of 2021 and $40.0 million reported in the fourth quarter of 2020. Fourth quarter 2021 non-GAAP gross margin was 57.9%, 10 basis points higher than the third quarter of 2021 and 220 basis points higher than the fourth quarter of 2020. The year-over-year expansion in fourth quarter, non-GAAP gross margin was largely due to a shift in sales mix, favoring high value greenfield products and operational efficiency gains, which more than offset higher product input costs. MPS achieved noteworthy market share gains in 2021 due in large measure to product availability and discipline sales price management. Our non-GAAP operating income was $112.0 million compared to $108.4 million reported in the prior quarter and $66.3 million reported in the fourth quarter of 2020. Let’s review our operating expenses. Our GAAP operating expenses were $115.3 million in the fourth quarter compared with $109.2 million in the third quarter of 2021 and $88.9 million in the fourth quarter of 2020. Our non-GAAP fourth quarter 2021 operating expenses were $83.0 million up from the $78.7 we spent in the third quarter of 2021, and up from $63.6 million reported in the fourth quarter of 2020. On both a GAAP and a non-GAAP basis, fourth quarter 2021 litigation expense was a credit balance of $420,000 compared with a $3.4 million expense in Q3 2021 and a $1.5 million expense in Q4 2020. The credit balance in fourth quarter 2021 litigation expense reflected it an IP settlement refund of a legal retainer and lower than anticipated fees. The differences between GAAP and non-GAAP operating expenses for the quarters discussed here are stock compensation expense, and income or loss from an unfunded deferred compensation plan. Fourth quarter 2021 stock compensation expense including $921,000 charged to cost of goods sold was $31.2 million compared with $31.6 million recorded in the third quarter of 2021. Switching to the bottom line. Fourth quarter 2021 GAAP net income was 77 – $72.7 million or $1.51 per fully diluted share compared with $1.44 per share in the third quarter of 2021 and $0.90 per share in the fourth quarter of 2020. Q4 2021 non-GAAP net income was $102.1 million or $2.12 per fully diluted share, compared with of $2.06 per share in the third quarter of 2021 and $1.31 per share in the fourth quarter of 2020. Fully diluted shares outstanding at the end of Q4 2021 will $48.2 million. Now let’s look at the balance sheet. As of December 31, 2021 cash, cash equivalence and investments totaled $727.5 million compared to $744.5 million at the end of the third quarter of 2021. For the fourth quarter of 2021, MPS generated operating cash flow of about $28.2 million compared with Q3 2021 operating cash flow of $117.8 million. The between quarter drop in operating cash flow primarily reflected a $51.3 million increase in inventory and higher accounts receivable. Fourth quarter 2021 capital spending totaled $17.6 million. Accounts receivable end of the fourth quarter of 2021 at $104.8 million or 28 days of sales outstanding compared with the $79.9 million or 22 days of sales outstanding reported at the end of the third quarter of 2021 and the $66.8 million or 26 days reported at the end of the fourth quarter of 2020. Our internal inventories at the end of the fourth quarter of 2021 were $259.4 million up from the $208.1 million at the end of the third quarter of 2021. Calculated on a basis consistent with our past practice and as you can see from the webinar video, days of inventory rose to 166 days at the end of Q4 2021 from the 134 days at the end of the third quarter of 2021. Historically, we’ve calculated days of inventory on hand as a function of the current quarter revenue. We believe comparing current inventory levels with the following quarter’s revenue provides better economic match. On this basis, again, we can see days of inventory increased to 152 days at the end of the fourth quarter of 2021 from 133 days at the end of the third quarter of 2021. I would now like to turn to our Q1 2022 outlook. We are forecasting Q1 2022 revenue in the range of $354 million to $366 million. We also expect the following. GAAP gross margin in the range of 57.4% to 58.0%. Non-GAAP gross margin in the range of 57.7% to 58.3%. Total stock based compensation expense of $36.9 million to $38.9 million, including approximately $1.1 million that would be charged to cost of goods sold. GAAP R&D and SG&A expenses between $119.2 million and $123.2 million. Non-GAAP R&D and SG&A expenses to be in the range of $83.4 million and $85.4 million. This estimate excludes stock compensation and litigation expenses. Litigation expenses to be in the range of $2.3 million to $2.7 million. Interest income is expected to range from $1.0 million to $1.4 million before foreign exchange gains or losses. Fully diluted shares to be in the range of 47.8 million to 48.8 million shares. Finally, I’m pleased to announce a 25% increase in our quarterly dividend to $0.75 per share from $0.60 per share for stockholders of record as of March 31 2022. In conclusions, MPS’ strong financial performance in 2021 was largely due to a 40% increase in fab and assembly capacity, which supported our high-value, greenfield-product, revenue ramp. Looking ahead, MPS is on track to expand capacity in 2022 well beyond $2 billion, allowing the company to successfully ramp new product revenue and achieve strategic market share gains in 2023, 2024 and beyond. A - Genevieve Cunningham: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. [Operator Instructions] Our first question is from Tore Svanberg of Stifel Nicolaus. Tore, your line is now open. Tore Svanberg: Yes. Thank you. And congratulations on the very, very strong results. So I’m going to ask this question differently. Usually, people ask you how come you carry so much inventory, this time I’m going to ask you, how were you able to actually get your inventory there’s that high. How are you both finding the capacity and again being able to build the inventory in spite of this very, very tight environment we’re seeing in the industry? Michael Hsing: Well, as you know, in this business, building a inventory a qualifier fab, okay. These are now one day, two day things, enough short-term. These all we planted a few years ago. And now we are cut just the opportunity presents it and we just catch it. And nothing was short terms and okay, we couldn’t – we don’t have a crystal ball for the futures and we just react, we just plan ahead and react as fast as we can. Bernie Blegen: And I think to add to that, that shows that we have a lot of inventory on hand that presents the capacity to allow us for sales in the next two quarters. So what we’ve done is made conscious investments in inventory, in the supply chain. And what we’re trying to do is manage such that we hold the inventory, we’re still keeping channel in the – channel inventory lean. And we’re trying to make sure to the best of our abilities that we’re in touch with the inventories that our customers are keeping. So they’re likewise lean. Michael Hsing: Yes. I also want to add and okay, as you remember and a few years ago, and I talk about it. MPS is going for well beyond million or a couple million dollars. And I wasn’t joking and we plan ahead for our business. That’s what we saw a few years ago and now you grow this much is, of course, we didn’t expect that. But we do have a capacities and okay – and we do have to do some creative ways in the scrambling to get to 45%. And so that’s all that is, like, it wasn’t – we don’t have a magic tricks and then in the last six months or so. Bernie Blegen: And it’s good as you have note – as Michael noted, we crossed the $1 billion revenue threshold and our revenue growth rate is accelerated from historic precedent. Tore Svanberg: Yes. Well done. As my follow-up question, could you just add a little bit more color on the $2 billion worth of capacity? You’ve talked about now, ramping in on 8-inch, you’re also qualifying products on 12-inch. Will there actually be 12-inch product sales this year? Michael Hsing: Yes. We’re qualifying, as you know, so MPS don’t build a fab. And we don’t have a lot of capital spendings and again, but we do have a increase all these capacity qualifier fabs, that cost money. And so to answer your questions, like, and we do transitions – nowadays. Okay. We get all this capacity whether it is 12-inch or 8-inch as much as we can. Bernie Blegen: And just add to that, that was our second 12-inch fab that we brought online in 2020. Michael Hsing: Yes. Tore Svanberg: Right. Very good. I’ll go back in line. Thank you and congrats again. Michael Hsing: Okay. Thank you. Genevieve Cunningham: Our next question comes from William Stein of Truist. William, your line is now open. William Stein: Great. Thanks for taking my question. Congrats on the odd popping results and outlook. I want to ask about the module business that you’ve spoken about in the past, this thing that might even accelerate growth further over time. I’m wondering what percentage of revenue modules contributes today and how we should think about the trajectory of that business. And if you could also comment on any potential tuck-in acquisitions that were either executed or contemplated for in the future to fulfill your strategy in that area. Thank you. Michael Hsing: Yes. Okay. I’m glad you asked the question, the module business I think it’s a side of a 10% for this year. Bernie Blegen: It’s actually mid single digits. Michael Hsing: Okay. Yes, yes. And so you can quantify as a much more accurately. Okay. I don’t know the others of numbers in detail. All I know is, and okay, we grow 100% every years in the last couple years. And now you using the word accelerating this years and the next couple years, that’s what I see it now. And the other things, okay, the second part of your questions about acquisitions for the tuck-in technology or to enhance our future growth on the – using our MPS technology for those companies. Yes. We are engaged with handful – as a handful of a company, like, more than six companies and we’re – so far we’re engaging with it and nothing we – nothing materials lies. We should announce it now. William Stein: Thank you. Genevieve Cunningham: Our next question is from Alex Vecchi of William Blair. Alex, your line is now open. Alex Vecchi: Thanks for taking my question. And I echo the congratulations on the outstanding results. Just maybe to expand on Tore’s question with regards to the capacity expansion from $2 billion on, can you quantify how much more capacity do you think you’ll be adding in the next year or two or three or the right way to think about it? I think in the past, you’ve alluded to the fact that the current product portfolio can support upwards of $3 billion to $4 billion in revenues. So is that sort of the right way to think about the long-term trajectory? Michael Hsing: Yes. That’s absolutely correct. And for the semiconductors, yes, we have to have a fab capacities for that kind of revenues. But even going the features, because we’re selling more high-dollar modules and solutions and which utilizes silicons even less. So we have – we should have – we shouldn’t – and our CIMIC wafer capacity even so will be less factors. Alex Vecchi: That’s actually really helpful. And then similarly with the comments on – in terms of the segment breakdown, the Storage and Compute segment was very strong in the quarter. And I think you’ve talked a little bit about enterprise notebooks. It seems like that’s one of the areas, notebooks in general, where there’s a little investor trepidation going forward. Can you maybe talk about what the opportunity there is and – or maybe what the SAM is for your notebook outlook over the next few years? Bernie Blegen: Sure. I think it’s important to qualify that the growth that we’ve experienced, in particular over the last two, three years, has really been at the enterprise level, where we’re selling into units that would retail for above $1,200. And we’ve been very successful as far as capturing a large part of market share that really is not necessarily driven by consumer trends. So they’re not as prone to the downward unit numbers that are being projected for notebooks. Michael Hsing: Yes. Overall, we want to achieve a balanced growth. We don’t want to be known as a notebook company. And that’s MPS’ strategy is diversify the growth. Bernie Blegen: And just to pick up on Michael’s point, we saw a very strong uptick in our cloud and server business, particularly in Q4, which we expect to continue to ramp into 2022. Michael Hsing: Overall, the notebook revenue is very, very – is a single digit now. Alex Vecchi: Okay. Thank you. With that, I’ll hop back into queue. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hey, guys. I offer my congratulations as well. Bernie and Michael, I’m surprised you haven’t gotten the question yet, but I followed the company for a long time. I think this is the biggest gross margin beat you guys may have ever put up. If I got my numbers right, you beat gross margin by 130 basis points in this quarter. Looking back to the third quarter, I think you had a $4 million litigation revenue in the number that drove strength in gross margin, but that was clearly a onetime issue. So can you talk first about what drove the strength in gross margins and you’re guiding them effectively flat, up 10 basis points technically in the first quarter. So it looks like that margin strength continues. Can you just talk about gross margin? Bernie Blegen: Sure. We tried to reflect on that a little bit in the prepared comments, where I indicated that we’re benefiting right now by a more favorable shift in our product mix, which is higher margins on the new greenfield business, but also operational efficiencies. As far as we indicated earlier, the percentage of silicon that’s coming from 12-inch, but also is a reflection of our improved quality standards. So I think that as we’ve reflected on what the sustainable margin going forward that we’ve offered sort of a new floor, which we look to grow again 10 to 20 basis points sequentially, although obviously, we’ll keep our eyes open if there is an opportunity to have another step-up. Michael Hsing: If there’s another side, okay. A few years ago, we talked about a greenfield product. And then you actually, I remember, asked, there is no headwind in – is there any headwind in the gross margins. So the answer was all these new products, greenfield product will aim at the high-end products and high values. And so the gross margin should be better. So this time, we didn’t increase the price that much. We pretty much passed the cost to our customers or not even passed to our customers. But as Bernie said, shifted to 12-inch and also the internal efficiency improvement. And with a high gross margin product, that is the majority of the gross margin improvement. Quinn Bolton: Got it. And as a follow-on, for two quarters now, you’ve seen a pretty nice increase in your internal inventory levels. Wondering if you could just comment, as you’re building that internal inventory, how much of that is for new greenfield products versus, say, the run rate business? Michael Hsing: Clearly, we shifted away from a consumer side. And so that we allocated a lot of products for these high-end targeted – MPS targeted market segment. So we grow the inventories for those segments. Bernie Blegen: I think something to add there is that we do have some high-volume business, and we’re treating that as a run rate. So we’re – it’s probably the area that has the tightest capacity. But where we have these new products, the greenfield opportunities, we have new customers and new markets as an insurance policy to make sure that they’re perceived very positively and that we can cover upside potential. We have been building inventory to support that. And I think that’s been reflected very well as far as the customer acceptance of the new products as well as market share gains afforded by appropriate inventory levels. Quinn Bolton: Got it. Thank you. Genevieve Cunningham: Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: I’ll echo the congrats. I wanted to follow-up on the second half of your answer to Quinn’s question there, Bernie. And in the past, you guys have always gained market share and very consistently so. This year was – well, this past year was no different. But you also had significantly greater availability than your competition. So I just wanted to see what the client or the customer relationship, how that’s been enhanced because of the availability. Do you believe that the wins you’ve gotten from availability will lead to sticky relationships going forward? You mentioned moving up into kind of first tier customer base. I’m just trying to figure out the sustainability of the revenue growth because of that availability dynamic? Michael Hsing: That’s a very, very good question. So okay, how do we grow like 45% over – close to a $1 billion base, okay? Well, you think about it, okay, all these products that we released in greenfield products and these two first-tier customers. And usually, these are large customers that they’re ramping a new supply very carefully. So they don’t allocate a large percentage. They always have a second source. And now we have shortage everywhere. MPS have capacities. So everything shifted to MPS. That’s one factor. And the second factor is that we talk about MPS products are more programmable and our customers find out before they care less. And now they find out, our product – single product can do multiple purpose and that contributes in other factors. And so we can replace and we can – shortly, we designed – our customers redesign and the source out to adopt the MPS solutions. So – but these two points is very sticky, especially the second point, and our MPS products are more programmable, and they enjoy that. And they solve their problems and they realize the values. And so I would say they’re very sticky. Ross Seymore: Great. And I guess as my follow-up question, I thought you talked about another greenfield opportunity, which is a huge part of the analog market which is getting into the converter side of things. Can you just talk a little bit about your aspirations there, some of the applications you’re going after? And what sort of opportunity you see unfolding in that? Michael Hsing: Yes. We just – we did – we do have a silicon [indiscernible] and the performance is outstanding. And these are the new market segments, and these are purely in a single side, which we never have. These are internally developed. We have a group of people and they have a lot of experience, and that’s a new market segment for us. So the focus will be the communications and also medical applications, like imaging, x-rays and ultrasounds and those type of things. Bernie Blegen: And just to add, as far as the characteristics of this technology, there are not a lot of companies that have been successful with this. And the ones that have, have carved out pretty exclusive markets. And as a result of that, they command very high gross margins. So we look to be a new market entrant, but also with a very – a big competitive advantage. Michael Hsing: Yes. So it’s – yes, it is a milestone for MPS. As so-called high-performance analog company, they tried it and they achieved a mediocre result. And now, see what we can do. And we do have a product and so for the next couple of years, and we’ll see what we can do. Ross Seymore: Thank you. Genevieve Cunningham: Our next question is from Chris Caso from Raymond James. Chris, your line is now open. Chris Caso: Yes, thank you. For my first question, talk a little bit about seasonality. And obviously, the Q1 results are better than what we normally expect in a seasonal Q1, and I suspect that’s because of some of the capacity additions that you’re bringing on. Can you talk about these capacity additions as we go through the year? Are they brought in, in the road to the $2 billion revenue level? At capacity level, is that going to come on fairly evenly during the year? Is there a step up at some point? And then when that happens, do you think that you will be fully able to meet your customer requirements presumably this year? Bernie Blegen: Chris, I think you get credit for three questions there. Hopefully, I’ll be able to keep the thread going. The first issue had to do with seasonality and generally speaking, from Q4 to Q1, we observed a modest dip. In fact, because we have such an imbalance, an unprecedented demand supply and balance, that in fact seasonality is not as much a function today as opposed to your second question, which has to do with product availability. And that’s sort of the gating item for how fast a company can grow. And as Michael pointed out earlier is that as part of our company, we’ve always built capacity alongside the development of our new products. So we, in fact, got out in front of this upsurge in the market and have been able to participate and, in fact, accelerate our capacity build out. And that’s really a reflection of how we’re looking at 2022. But I think that one thing that we’ve always done is we’ve had to make intelligent decisions many years ahead of when the capacity has been needed. So in fact, we’re in discussions in order to be able to get capacity for 2023, 2024 and beyond. And we feel very secure in what we’re capable of doing in 2022. Michael Hsing: Well, to answer your questions, honestly, if it gives us another 50% growth for this year, we’ll be in trouble. Okay. Chris Caso: Okay. I think that will be welcome trouble if that were the case. Michael Hsing: Yes. Chris Caso: I’ll take liberty to ask one more that you were nice enough to answer, Mike and Bernie, which is with regard to pricing. And Bernie, you made a comment on the call, you spoke about disciplined sales price management as I think how you termed it. Could you explain what that means and the extent to which pricing has been a contributor to year-on-year growth and whether that’s something that’s in the rearview mirror where you’d expect to continue to increase? Bernie Blegen: I think that most people have recognized within the semiconductors and even specific to analog that, that created an opportunity for many companies to affect price increases with their customers. And a lot of them implemented that as early as Q1 of this year. We showed – we made a conscious decision not to increase our prices on a broad base or selective market opportunities, but broadly, we did not. And we did that along with having a product availability as a means of being able to secure a higher level of market share. And so now as we look at 2022, we are going to implement selective but more broad-based price increases, but they will be at a more modest level than some of our peer companies have implemented. Michael Hsing: Yes, when we look at it, we invest in our customers for the future growth and for the future opportunities. And – but we do have a modest gross margin expansions as our model, okay. We keep saying it, and we have a steady state growth in every segment. Chris Caso: Got it. Very helpful. Thank you. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Hi, thanks and look – my congratulations guys on the next quarter, another nice quarter. Maybe if I could, just a quick question on 5G. I mean you guys have talked in the past about 5G as a pretty significant opportunity for MPS. I think, Michael, I think you said potentially hundreds of dollars of potential content there, sort of similar to server or data center cloud for you guys. So I don’t know if you could give us any update on design momentum since or when the revenue contribution might sort of start to inflect if that’s still kind of the second half of this year? And I’m curious, as part of that question, are you going to see QSMOD sort of be part of that initial ramp this year? Or is it going to be more sort of point of load ECUs sort of how you began during your journey in server. If you could give any color there, that would be great. Michael Hsing: Yes. So to answer your first part of the question first, like I mean in the 5Gs, and I give is actually 5G – a lot of products in – especially in the high current side all relate to QSMOD. And similar technology-based product, again, we power up the 5Gs in all areas and from a single size and all the way to transmitters. And we don’t see a very high rate of ramping. And so they’re still steady state. And the other question is QSMOD so like I mean for the data centers. We are – this year, okay, we have to say we occupy is that still less than a single-digit of a total percentage of the total 10 of the market. But the significance is from almost nothing and to a high end of a single-digit. And earlier I said that if we don’t occupy the 30% of the market, we should not be in the business. So we still have a lot of room to grow. Bernie Blegen: And Michael, with the release of VR14 that we’re in a very good inflection point on the – in the cloud and in the data center. Rick Schafer: Yes. And Michael, just to follow that, but it took, I think, about three or four years to sort of get point of load need you share today, which I think is about 30%. So I think are you saying that’s sort of a good proxy for QSMOD could be in the next couple of years? Michael Hsing: Yes. Okay. Yes. So let’s take actually longer than that, more than three or four years. And I was wondering why it so long within – in the early days, I’ll say that we could grow very quickly. I didn’t know what I was talking about, okay? And for the next, as Bernie mentioned, the VR14s, and VR13.5 sort of MPS accepted as other players, okay? And VR14s, I think, we have pretty good shares to start to ramp, but it’s not happening now, and sometimes this year, right? Bernie Blegen: Yes. VR13 has been delayed again, it’s more likely to be Q3. Michael Hsing: Yes, yes, yes. Bernie Blegen: But you are right, we’ve observed in Q4 an uplift as a result of 13.5. Michael Hsing: Yes, yes. Okay. Rick Schafer: Thanks. And if I could ask just a follow-up to Bernie probably. I just wanted to ask, I’ve been asked in a long time. Balance sheet looks great, obviously. I was just curious if you could give us an update on use of cash going forward. I mean, obviously, you’ve done a really good job of investing in future growth and R&D, but I’m just curious how much you need to run the business here and feed R&D, et cetera? Thanks. Bernie Blegen: Yes. And it’s a great question because you want to look at it sort of three levels for our particular story. One is we have to keep a certain amount of cash available in order to fund our growth, particularly as it relates to receivables and inventory, but also we’re expanding operating expenses worldwide at an accelerated rate. And all of those demand a level of liquidity. The next thing that we’ve talked about is building infrastructure and capacity. And even though we’re outsourced as far as our fabs and assembly, we do a lot of our own testing. In fact, with the quality requirements of some of the new markets we’re going in, we can’t outsource that. We do all of our own testing and that requires an additional investment. And then you have buildings, which, as you know, we’re one of the few companies that we purchased our own footprint to house our growing staff headcount. So we’re going to continue to leverage the balance sheet in order to help accelerate our growth while at the same time, as we announced in the prepared comments, we’re increasing the dividend by 25%. So we’re also mindful that we need to return some of the cash back to shareholders. Michael Hsing: Yes. Well, Bernie said that said accelerated expense growth. No, we’re not accelerating. No, absolutely no. Let’s make that clear. And so we are pretty a little bit above our model, okay, growth – MPS growth – the expenses growth, okay? And for the return of cash to our investors, and we have an overwhelming case support for – from our investors in dividend and not buyback. So we are thought about buybacks again now, okay, we still okay, let’s delay it because we get the feedback, okay, they want to divide. I don’t know whether this related to a tax issue or not related, okay. So I think is in a – in the past, we said our models are consistently increased dividends, okay? And the other side of the using of cash is we want to acquire a company, not for revenue growth, is cheaper to grow MPS revenue by zone. But we can do this. So we can – MPS has a lot of garden variety of different products and can fuel some – can enhance a couple of areas to the end product. And we want to acquire those small tuck-in product, very unique and a sustainable growth and a sustainable. And based on MPS technology, we can grow those companies. And that’s the company we’re really interested. And so the earlier, I said were engaged with a few companies now. Rick Schafer: Thanks for all the color guys. Congrats. Genevieve Cunningham: Our next question is from Matt Ramsay of Cowen. Matt, your line is now open. Matt Ramsay: Thank you very much. Good afternoon, everyone. Michael, I’ve been asking you about this for, I don’t know, three, four years. But in the last, I guess, three or four months, you guys talked a bit more about opportunities for MPS in the electric vehicle market, some in drivetrains, some in regenerative braking. I wonder if you might talk a little bit more about the revenue opportunity per car with your lead customer, the timing of that, and how wide is the pipeline in terms of the number of engagements that you might have in the EV market? Thanks. Michael Hsing: EV market, we are in the ADAS area, I think that we are in the ADAS 2.5 or 3.0. We almost engage with everybody. And so I can’t give you numbers. For pure electrical car, MPS has about somewhere $80 to $100 shipping to date. And we’re starting this year. We’re starting not this year, starting actually last year. If you involve with a regenerative braking and a drive trend, those will add another over $1,000. And we don’t have those revenue yet, but we do release those products. Matt Ramsay: Got it. Any – are those larger ASP products, any thoughts on timing? Michael Hsing: We are – there’s several – there’s many products that we are talking now, we have released a couple of them already or more than a couple of them already. And the key is we want to offer the total solutions. And customers pretty much can use MPS reference design. Matt Ramsay: Got it. As my follow-up question, it’s a different topic. And one of the things that I’ve been having investor conversations about is the broad-based industry adding – investing a ton of CapEx and adding a ton of capacity and this fear that the industry is adding it at a peak, right? You see a couple of new fabs coming online from Texas Instruments in the next number of quarters, Infineon is up in CapEx, pretty much everyone is. And so you guys have been in a unique position to have a ton of capacity come online when others have struggled to do it. And it sounds like that’s going to continue for you. I just wonder, any concerns as the industry catches up with capacity, Michael? And maybe you could contrast the type of capacity, the process node that you’re on, the nature of the capacity that you’re bringing online for some that the rest of the industry may be adding. Thank you. Michael Hsing: Yes. That’s a good question. So okay, you know that okay, first thing I should answer that. MPS don’t build anything. We don’t build anything. We don’t have a fab, but we do have all the technologies. And usually, how we’re getting a fab capacity is those fab are empty. And we go in there, we wonder, we say, okay, we can fill you up. It’s a long-term partnership. And so – and like this year or the last year, okay, and you want to add capacity, forget it, okay? I mean those guys are busy shipment, okay? I mean, there are no fabs. And so we engage with them in the downturns. And we implement our technology. Remember, we don’t – it’s not like building a fab. We don’t build a fab. The cost is minimum. And – but we do have some commitment, and we do have – give some consignment on some equipment, okay. But these costs compare building a fab is much, much less. Okay. Matt Ramsay: Thanks very much guys. I appreciate it. Michael Hsing: Yes. Okay. Genevieve Cunningham: Our next question is from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you. Just two quick follow-ups. I know it’s early in the year, but would you have – so you have four horses that are running really fast. You have one horse that’s kind of just running slowly. If we look at this year, which of the horses do you think will grow a bit faster? I know there’s a lot of talk about auto and server, but yes, which horses should we bet on this year? Michael Hsing: We don’t want to be in those. MPS is all of company. Definitely not a noble company. And I think it’s – we are shifting – clearly, this year, we’re shifting from our consumers to – well, at least the last couple of quarters. We shifted from our consumer to automotive and server and service from a cloud computing side. And again – and so these are, for this year, probably remain similar. So okay, that’s why we see it. Bernie Blegen: Yes. And I think that when you say that we’ve got five strong horses, that’s a more accurate reflection because I’d say that in the current year, we were surprised by the strength of Industrial. So – and I think that’s going to continue on into the next year. And as we talked about earlier, the communications market, while it may not be coming on as fast as we had originally hoped for or expected, still looks very promising in the second half of this year. So I think really the thesis remains being broad-based growth. Michael Hsing: Yes. But in – who knows? And let’s say, all these other market segments slow down and as a consumer business in every half year, we can shift it. And we can shift quickly, okay. That’s – currently, it’s not a favor, but we can shift quickly. And by end of the year, maybe we grow Consumer business. Tore Svanberg: Sounds good. And coming back to the data converter topic, new segment for you. What are some of the things that we should track for your success there? We all know it’s very difficult to crack into that market. And are you going into that market really, really at the high end of data converter technology? And will that be the way for us to track your success there? Michael Hsing: So far, yes, it’s a very, very high-end product. And - but that’s a new market segment. Like earlier I said – we said that we’re going to ramping the data center very quickly, okay. Turn out to be – it wasn’t the case, okay? So I don’t want to predict that. But I know the technology is good and the test data showed we can be – we are far better than on the existing market of product. Tore Svanberg: Great. Yes. I mean if you could even get the $100 million there, I’d be very impressed. Michael Hsing: Oh, yes. Okay. It’s a matter of time. I’m confident of that. And along the way, probably we learned [indiscernible] Yes, okay. Tore Svanberg: Okay. Thank you. Michael Hsing: All right. Okay. Genevieve Cunningham: [Operator Instructions] As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: Well, once again, I’d like to thank you all for joining us in this conference call, and look forward to talking to you again about our first quarter, which we’ll likely hold in April. So thanks again, and have a nice day.

Genevieve Cunningham: Welcome, everyone, to the MPS Third Quarter 2021 Earnings Webinar. Please note that this webinar is being recorded and will be archived for one year on our Investor Relations page at www.monolithicpower.com. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, as CEO and Founder of MPS; and Bernie Blegen, VP and CFO. During this webinar, we will discuss our Q3 2021 financial results and guidance for Q4 2021, followed by a Q&A session. In the course of today's webinar, we will make forward-looking statements and projections that involve risk 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 Q3 2021 earnings release and in our SEC filings, including our Form 10-K filed on March 1, 2021, and our Form 10-Q filed on August 9, 2021, which are accessible through our website, www.monolithicpower.com. MPS assumes no obligation to update the information provided on today's call. We will 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 Q3 2020, Q2 2021 and Q3 2021 releases as well as to the reconciling tables that are posted on our website. Now I would like to turn the call over to Bernie Blegen. Bernie Blegen: Thanks, Jen. MPS achieved record third quarter revenue of $323.5 million, 10.3% higher than revenue in the second quarter of 2021 and 24.7% higher than the comparable quarter in 2020. Looking at our revenue by market, third quarter 2021 industrial revenue of $52.2 million increased 20.5% from the second quarter of 2021, due primarily to increased revenue for industrial meters and power sources. Industrial revenue represented 16.1% of our total third quarter 2021 revenue. Third quarter 2021 communications revenue of $44.7 million was up 19.3% from the second quarter of 2021, primarily due to increased infrastructure demand. Communication sales represented 13.8% of our total third quarter 2021 revenue. In our computing and storage market, third quarter revenue of $98.6 million increased $10.9 million or 12.4% from the second quarter of 2021. The sequential quarterly revenue growth primarily reflected sales gains in storage applications. Computing and storage revenue represented 30.5% of MPS' third quarter 2021 revenue. Third quarter automotive revenue of $54.4 million grew $5.7 million or 11.7% over the second quarter of 2021. This improvement reflects continued gains in applications for infotainment, lighting and ADAS. Automotive revenue was 16.8% of MPS' total third quarter 2021 revenue. In our consumer markets, third quarter 2021 revenue of $73.6 million fell 3.3% from revenue reported in the second quarter of 2021. This decrease in consumer revenue reflected lower handset sales. Consumer revenue represented 22.8% of our third quarter 2021 revenue. Third quarter 2021 GAAP gross margin was 57.6%, which was 160 basis points higher than the second quarter of 2021 and 245 basis points higher than the third quarter of 2020. Non-GAAP gross margin for the third quarter of 2021 was 57.8%, 148 basis points higher than the gross margin percentage reported from the second quarter of 2021 and 231 basis points higher than the third quarter from a year ago. Third quarter 2021 gross margin on both a GAAP and a non-GAAP basis included a $4 million litigation settlement. Excluding this onetime benefit, non-GAAP gross margin would have been 56.6%, essentially flat with the second quarter of 2021 and 110 basis points higher than the third quarter of 2020. Our GAAP operating income was $77.1 million compared to $60.6 million reported in the second quarter of 2021 and $60.0 million reported in the third quarter of 2020. Our third quarter 2021 non-GAAP operating income was $108.4 million compared to $94.9 million reported in the prior quarter and $84.9 million reported in the third quarter of 2020. Let's review our operating expenses. Our GAAP operating expenses were $109.2 million in the third quarter of 2021 compared with $103.6 million in the second quarter of 2021 and $83.1 million in the third quarter of 2020. Our non-GAAP third quarter 2021 operating expenses were $78.7 million, up from the $70.3 million we spent in the second quarter of 2021 and up from the $59.1 million reported in the third quarter of 2020. The sequential increase in Q3 non-GAAP operating expenses primarily reflected in increased spending in R&D for qualifying parts for production and securing foundry capacity. The differences between non-GAAP operating expenses and GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss on an unfunded deferred compensation plan. For the third quarter of 2021, total stock compensation expense, including approximately $922,000 charged cost of goods sold was $31.6 million, compared with $32.1 million recorded in the second quarter of 2021. Switching to the bottom line. Third quarter 2021 GAAP net income was $68.8 million or $1.44 per fully diluted share compared with $55.2 million or $1.16 per share in the second quarter of 2021 and $55.6 million or $1.18 per share in the third quarter of 2020. Q3 non-GAAP net income was $98.6 million or $2.06 per fully diluted share compared with $86.5 million or $1.81 per share in the second quarter of 2021 and $79.4 million or $1.69 per share in the third quarter of 2020. Fully diluted shares outstanding at the end of Q3 2021 were 47.9 million. Now, let's look at the balance sheet. Cash, cash equivalents and investments were $744.5 million at the end of the third quarter of 2021 compared to $672.9 million at the end of the second quarter of 2021. For the quarter, MPS generated operating cash flow of about $117.8 million, compared with Q2 2021 operating cash flow of $96.9 million. Third quarter 2021 capital spending totaled $18.6 million. Accounts receivable ended the third quarter of 2021 at $79.9 million, representing 22 days of sales outstanding which was two days lower than the 24 days reported at the end of the second quarter of 2021 and 11 days lower than the 33 days at the end of the third quarter of 2020. Our internal inventories at the end of the third quarter of 2021 were $208.1 million, up $30.8 million from the $177.3 million reported at the end of the second quarter of 2021. Inventory at the end of the third quarter of 2021 represented 134 days, which were nine days higher than at the end of the second quarter of 2021. Historically, we have calculated days of inventory on hand as a function of the current quarter revenue. We believe comparing current inventory levels with the following quarter's revenue provides a better economic match. On this basis, you can see inventory at the end of the third quarter of 2021 represented 135 days, 18 days higher than the 117 days at the end of the second quarter of 2021 and six days higher than the 129 days at the end of the third quarter of 2020. Currently, our inventory levels remain lean. We are working very hard to return inventory to the 180 day to 200 day level necessary to support our future growth. I would now like to turn to our outlook for the fourth quarter of 2021. We are forecasting Q4 revenue in the range of $314 million to $326 million. We also expect the following: GAAP gross margin in the range of 56.0% to 56.6%; non-GAAP gross margin in the range of 56.3% to 56.9%; total stock-based compensation expense of $30.8 million to $32.8 million, including approximately $950,000 that we'd be charged to cost of goods sold. GAAP R&D and SG&A expenses should be between $107.8 million and $111.8 million. Non-GAAP R&D and SG&A expenses to be in the range of $77.9 million to $79.9 million. Litigation expense is expected to be in the range of $3.5 million to $3.9 million. Interest income is expected to range from $1.0 million to $1.4 million. Fully diluted shares to be in the range of 47.9 million to 48.9 million shares. In conclusion, we are continuing to execute our strategy. I will now open the webinar up for questions. A - Genevieve Cunningham: Thank you, Bernie and analyst. I would now like to begin our Q&A session. Our first question comes from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes. Thank you and congratulations on these continued stellar results. First question, and not to, sort of, pick on segments there, but your consumer segment was down sequentially, and you talked about cellphone. I wasn't aware -- we don't think power had that much exposure to cellphones. Is this mainly on the charger side or anything else there that we should be aware of? Michael Hsing: Hi, Tore. Yes, I think, It is on the charger side. And we do these fast chargings, and we picked up some revenues in the last few years in those cellphone companies. And they thought that they can have a more adoption in the market. So they have some inventories, but it's an unusual way of charging of phones and that came in still not very popular. Tore Svanberg: Great. Thanks for clarifying that. And as my follow-up, you have a luxury problem now. You have about $0.75 billion in cash on your balance sheet. I know you're out there trying to secure more capacity. So first of all, could you update us on where you are on securing capacity, especially for the next few years? And related to that, will you start to use some of that cash more aggressively to potentially buying more equipment as you continue to obviously show very strong growth? Thank you. Michael Hsing: All right. Let me answer the first part first. It is -- the expansion is still on track, okay. And the fab issues, we don't have -- we have less fab issues. And we came -- we are on the way to expand our capacity in sometimes in the middle or -- middle of the next year to over $2 billion -- supporting $2 billion of sales. But at the same times, we do have to buy more equipment for testing, for qualifications and also, we need to hire more people. And as you know, to qualify each part it takes time. And the revenues there, opportunities there, it's just a matter of time. And so the second part is buying more equipment. On the other hand, as an investor, our shareholders, investors are very critical about our -- criticized in the past our spending, okay? I mean, we are out of -- we are slightly out of our model now, okay, and I -- we spend money on -- what I mean, a lot more careful, okay? But the opportunity is there, but we do more sensibly. Bernie Blegen: Yeah. And I think if I can just add to Michael's comment there is that as far as the model that we've always pursued, it was to have our fab partners and our assembly house partners absorb much of the capital required in order to build up capacity, and that remains our being as a fabless company. So nothing has changed in our model. We're just adapting it to this rate of growth that we're enjoying right now. Tore Svanberg: Thanks again. I’ll go back in line. Genevieve Cunningham: Our next question is from Matt Ramsay of Cowen. Matt, your line is now open. Matt Ramsay: Thank you very much. Good afternoon, everybody. For my first question, Michael, I wanted to ask about a couple of the different computing markets that you guys have product to support. The first one, I think you could -- I don't know, from my perspective, if you could kind of drive a bus through what different PC expectations are for next year. And I wonder if you might touch on what -- rough percentage, Bernie, of revenue might come from the notebook market? And what your underlying planning assumptions are on the PC market for next year? And I guess, in contrast to that, how -- Intel is launching Sapphire Rapids, AMD is launching Genoa next year. What kind of a tailwind from a content perspective could those upgrades in the server market be? And then I have a follow-up. Thanks guys. Michael Hsing: Okay. For the notebook side, obviously, we gained some market shares in the high-end notebook in this -- after the pandemic, okay, or it was still the tail end of the pandemic. And we increased quite a bit of our market share. And -- but the story there is not -- it's not just we're gaining, that's all we can get. We -- as we increased our new generation with our technologies that's in place, and we will further reduce the cost, and we will address the high-end of our consumer side. And allow me if I address the -- answered your questions, Matthew. And on the server side, we are still a very, very small players. There's a lot more room for MPS to gain. Bernie Blegen: Yeah. And I don't think that we've ever specifically broken out what percent of the group's revenue is tied to any one of the categories that we track. But I think we have been clear that in each of the last two years, that the growth in notebooks has outpaced the rest of the sectors, including server and storage. Now having said that, one of the things that we're benefiting from is that diversification of how we're positioned in this group. As Michael indicated, we are a relatively small player when it comes to core power management for servers and we believe that with both the next generation of Intel and AMD processor releases, that we stand to benefit from market share gains. And in the more near-term element, as we called out in Q3, we're actually seeing a nice increase in storage sales, which is usually a precursor to ongoing infrastructure spending within the data centers. So I think that we're having a great difficulty, as anybody, in understanding when work from home or work from work, as it relates to notebooks, begins or ends. But I think that we're well positioned because of our diversification to enjoy continued growth in this category for a number of years. Matt Ramsay: Yes. Thank you. Michael Hsing: Let me go back to the notebook side that I can -- I think that part of the question, I didn't answer. And again, we're still facing shortages and still a lot of demand in the notebook side. And we don't see the -- we see revenues from -- in the middle of the next year even. Matt Ramsay: Got it. Thank you very much for all that commentary guys. Just a quick couple of things on gross margin. One, Bernie, the one-timer that was in Q3, any particular reason you didn't pull that out of the non-GAAP number? And secondly, with the pricing environment that we're feeling today, how do you guys think about price increases going forward relative to input costs and what that could mean to margins? Thank you very much. Bernie Blegen: I'll take the first half of that question real quickly. And then Michael will give comments on the second. As far as how we try to manage GAAP and non-GAAP reporting, is really to be a reflection of what is cash. And in this case, we highlighted that there was a settlement, and that was a cash payment that we received. And so that's the thinking behind not adjusting it as a non-GAAP item. Conversely so, if we have something that works to our detriment and it also has cash implications, we wouldn't non-GAAP that out either. So the two areas that we stay pretty closely to, or three, I should say, are only stock comp, gain and loss from a deferred comp plan and if we have any intangible acquisition amortization. Michael Hsing: Okay. The second part is how it affected our gross margins on the current supply shortages. I think, as I said, all these new -- well, let me say this, yes, we do see the cost increase in, fortunately, in all the product that we released have gained market shares as all these greenfield products. We started to gain momentum a couple of years ago. And these all have higher margins. And our customers give us a very long-term forecast commitment, and we honor those. We can absorb some in -- some of the cost and -- because the way these products have a much higher margins. And -- so during this time, we value the customer relationship and we don't gouge price. Genevieve Cunningham: All right. Our next question is from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Thanks for letting me ask a question. Congrats on continued strong reports and guides. One question on an end market. The communications side, Bernie or Michael, you guys said that, that was up because of infrastructure. That's been a really choppy market for you guys between the infrastructure side going on and off and then the kind of the access side. Can you just talk a little bit more about what you meant by the infrastructure side? And is that the start of something that's going to continue, or should you expect that segment to continue to be lumpy going forward? Michael Hsing: Well, Ross, you know then that we're transitioning from a these Wi-Fi routers and those to more in real infrastructures like I mean in data centers or these communication between the data centers and the switchers and even towers. So the last years, our customers are pulling a lot of revenues. And this time, then we see all the other things are going like 5Gs and including the commercial Wi-Fi systems and then and – where we play a critical role on these in these areas. And we see the expansions, and we will see a further – continue to expand in the next few quarters. Bernie Blegen: Yes. I think we remain very optimistic about our long-term positioning within the communication sector and in particular, infrastructure as it relates to 5G. But I think that right now, we have not hit a constant investment cadence on the part of the carriers in either Europe or North America. So we think that as that starts to gain momentum and gets more predictable, we're very well positioned to participate in that. Ross Seymore: Thanks for that color. I guess as my follow-up, seasonality versus kind of cyclicality and/or supply-driven moves. Obviously, your fourth quarter has guided a bit better than your traditional seasonality kind of flattish this year. But how are you thinking about that as we go into next year and beyond? Is it mainly going to be driven by the product cycles you have in short supply in aggregate? So those would be big tailwinds, or do you believe seasonality is going to become a framework that's something that investors should consider as we go into 2022? Michael Hsing: Well, Ross, you see the – this market is an exceptionally strong market, I mean. And like I mean, a lot of demand is everywhere, so like I mean, also are constrained by the supply. And we do have a delinquencies. And I mean, but that's we're facing delinquency for many quarters, like I mean – and for – I think we still have the – my opinion is that we still have some kind of seasonality in fourth quarters because all these holidays, all these and it will kind of affect us. And so we see the – as I said earlier, we see the demand is still very strong. So like I mean we're just cautious, and we are on our guidance. Ross Seymore: And just to add to that is that right now, what we are continuing to do is investing and expanding our capacity because we do believe that this robust demand that we're experiencing will continue, and we want to be able to participate, optimize to the best of our ability, this growth opportunity. Michael Hsing: Yes, let me clarify the shortages, okay. All these – what I mean with shortage is that we have a few thousand products and always have some mixed issues. And as we don't have a serious – we don't have fab capacity issues. And – but all these are mixed in the – for particular product that we may have – we have a few products that have a – are facing shortages now. So – and as we transfer to a different fab, it just takes time to qualify this. Ross Seymore: Got it. Thanks, guys. Genevieve Cunningham: Our next question is from Alex Vecchi of William Blair. Alex, your line is now open. Alex Vecchi: Hey, guys. Congratulations on the strong results. Maybe just to piggyback on Ross' question a little bit with seasonality. Bernie, can you give a little color on how we should think about the sequential growth rate by end market for Q4 in terms of maybe strongest end market to weakest? Bernie Blegen: Sure. So, when you look at Q4, I think that the two primary drivers are going to be computing and continuation of automotive. And then you would normally expect and we expect to see a slight downturn in consumer. So, I think many of the trend lines that we're familiar with are continuing and ongoing, but the amplitude might be a little up or down from what the traditional seasonality has been. Alex Vecchi: Great. that's helpful. And then similarly, I think on the communications line as well over the last couple of quarters, I believe you guys have pointed to ramp up to that Tier 2 5G OEMs. How should we be thinking about the opportunity eventually next year to crack into a Tier 1, or just generally, how to think about how you're positioned there geographically? Michael Hsing: Yes. We are designing all -- in all Tier 1s now. And we are so small still like I mean in these big growing market segments. As you know, we don't have anything in 4G, and we expect that we'll be a significant players in there. Alex Vecchi: Okay, that’s helpful. With that, I'll go back in queue. Michael Hsing: Okay. Genevieve Cunningham: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Hi guys. Let me offer my congratulations. Michael or Bernie, I guess I wanted to -- I know there have been a lot of disruptions in Southeast Asia, more on the package and test side. Wondering if you could just say whether or not you have any exposure to Malaysia subcons and whether that affected your ability to ship or receive products here in the third quarter or in the fourth quarter looking forward? Michael Hsing: Yes. There's not so much that affected it. Maybe some products, not I mean -- because we control a lot of our -- the new product, we control our own package technologies. And so we always qualify in a different locations. And so we came in that -- the Southeast Asia problems, okay, we can go through it. We didn't have that much of issues. Bernie Blegen: Correct, in either Q3 or our outlook for Q4. Michael Hsing: Yes. Quinn Bolton: Got it. My second question just on the supply chain is it sounds like from your comments, you're not seeing some of the fab constraints that you'd seen earlier. And inventory increased by $30 million sequentially. I guess my question is, as that capacity comes online, as you ramp inventory on hand, do you think that, that could lead to an acceleration in your ability to meet former delinquencies and see revenue growth rate potentially accelerate as you meet some of those delinquencies, or it -- does it really all come down to that product mix of what customers are demanding versus what you have in inventory that you see that mismatch potentially continuing for several quarters? Michael Hsing: Yes, to answer your question, as today, absolutely. And we have a lot more we can chew off now. And as the shortages go on or the new product adoptions in all the greenfield products that we ramp up much, much faster than we expected, and we have a normal out-of-forecast orders and we cannot fulfill. And these ones, our customers understand that. I mean -- and so we -- so now, as of today, we have a blue skies. And -- but doesn't mean -- we're not regulators, so I can't forecast it. Bernie Blegen: Just to add, it's a balancing act, as you can appreciate, because for some of the more mature products that we have, they already have developed markets and a fairly predictable growth in the current market. But what we're trying to do is make sure that these new product introductions can be successful, because that is going to be the future growth opportunity for the company. So, we're trying to satisfy sort of the run rate business in this heightened demand, a period of heightened demand, and at the same time, have very successful new product launches with new customers. Quinn Bolton: Got it. Can I squeeze one last one in? Do you guys have any meaningful exposure to Chromebooks? And is that a share gain opportunity as you look into 2022? Thank you. Michael Hsing: Yes, we have. And it's -- if we have a local product, we might as well make them and go design, I mean, everywhere. Bernie Blegen: Yes. Chromebooks are unique, because while they're considered a -- we tend to go after high-value notebooks, and Chromebooks are known to be lower priced. But they depend on the access to the cloud and good processing power. So the power management, our power management solution is very key. It's a high value for the Chromebooks. Michael Hsing: Yes. As I said earlier, as our technologies bring online in -- become more mature, so that can mean why not just attacking all these other markets that we're not in. Quinn Bolton: Yes. Thank you. Michael Hsing: Yes. Genevieve Cunningham: Our next question is from William Stein of Truist. William, your line is now open. Q – William Stein: Great. Thanks for taking my question. Congrats on the great results and outlook. I'm -- I want to ask one question about supply chain stuff and one about long-term growth. First, on the supply chain, it seems -- certainly, if we look not just at your business but across semis, that customers have been in sort of freak-out expedite mode for quite some time. I wonder if you could give us a sense as to whether that abated at all. Did the level or breadth of expedite requests change meaningfully in the quarter? Is it getting hotter or colder in any end market with regard to this sort of urgency of expedites and pull-ins and upsides and all that activity we've heard about? And then again, I have a long-term growth question. Michael Hsing: Yes. Okay. The answer is okay. I wish that they come down a little bit, then I mean -- and that they're exactly the same as the last quarter and the quarter before. And -- yes, okay. William Stein: Okay. So the long-term growth question, Michael, I think we've discussed this many times, but we're aware that there's this long-term potential to transition to more of a solutions provider with modules relative to your traditional semi device business. Can you talk about the trajectory of growth of the modules business? An update on perhaps percent of revenues today relative to a quarter ago and where you think it -- that could go over time? Thank you. Michael Hsing: Yes. I -- our homegrown modules, okay, well, all this strategy, there's MPS involved. There are a lot of technicals in the gate in terms of delivering the end product. Okay, it feels -- there's no end project, it's a mid product, as I feel it well. So our strategies are move up to a food games. And since we put -- we have the knowledge and why win are not captured all the values. And for currently -- current, our module growth, okay, I mean it's much faster than other semiconductors side or selling the chips. But the volume overall is still very small, so like I mean, compare the entire revenues. We tried it different ways in like a launch our websites and like a NPS analyses. And then, they're also using e-commerce, okay? These are doing well. And -- but -- now I'm thinking about it, why we're just applying companies, like I mean, -- and we know that, we need to gain knowledge, gain sales channels, like I mean -- and have those company adopting an MPS technology, we can provide them with better tools, again. And I think the first field attempt in -- are very, very, very encouraging. So like I mean, obviously, I can't talk the detail now. So again, -- and I think that's our strategy. Bernie Blegen: And if I can just remind you, Will that we talked about this -- touched on it last quarter. And we indicated that what we're trying to do is source different technologies through either IP acquisitions or talent acquisitions that are complementary to our business. And that will accelerate our ability to be a solutions provider for our customers in the next seven, eight years. Michael Hsing: Yeah. I just don't like it. We have so much knowledge to put an end to it. And in the end, we sell a piece of silicon averaging well below $1, okay? We should sell our solutions at much more than $1, so like a $5, $6, $10, those type of things. And those customers will really appreciate it. They don't have to design from scratch. William Stein: That's helpful insight. Thank you both. Genevieve Cunningham: Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open. Wei Mok: Hi. Good afternoon. This is Wei Mok on the call for Rick Schafer. I just wanted to echo congrats on the results. So for my first question, it's in regards to auto, so it's pretty much well known that the market is supply constrained though you guys are still growing nearly 90% this year. With industry reports showing vehicle unit production improving in 2022, how should we think about your auto business as we look into 2022? Michael Hsing: Well, it's a very -- at this time, we see everything is very rosy now. And we -- but on the other hand, in -- we are so small. There's no reason, we would not grow, even the downturns. And as we have looked at the addressable market is that this is like over $6 billion, okay? I mean that's conservatively numbers. That's a conservative numbers. And as we introduce more products in especially in ADAS and the EV proportion size. And, okay, we are developing products. I mean, all of these, and again, we can address the future growth really well. So like I mean, there is 2022 -- and okay, there's no reason not if it's a -- I would not say there's a lack of tool like last year, so like also in the auto industry just stopped like I mean, it was a in the normal times. And there's no reason for us not to grow. Bernie Blegen: And I think to just follow on to the previous question. When we look at automotive, we actually have system-level design wins in ADAS, regenerative braking systems and in external lighting. And all of these solutions have much higher dollar content for us, $60 to $100 per vehicle. So I think this is a very exciting example of how the solution strategy could play out in different end markets for us as well. Wei Mok: Got it. Great. Thanks for that. As for my second question, it's regards to the console. You guys highlighted consumer being down in 4Q. So is this more of a reflection of normal seasonality, or are you seeing any supply constraints impacting consoles? Thanks. Michael Hsing: Well, Q3 -- in Q3 in consumer side, it shouldn't be the highest to us. And I think at our customer side, they have too much inventory in the -- for the cell phones in like I mean that affects us. And then in the cellphones especially that's in China, like I mean when they – when the US had an embargo on one of our companies, but the other ones, they thought they can gain the market share. Like I mean, actually, they didn't. And so they're stuck with the inventory. Bernie Blegen: And I think that what we tried to do in our prepared comments is really make that dip more narrowly defined, but it is really the fast charger in the handsets as opposed to anything that is more broad or pervasive in the rest of consumer? Wei Mok: Okay. Thanks for that. Michael Hsing: Yeah, we didn't have much of an exposure in the handsets, and that wasn't my favorite either anyway. So we've got the least products, however in the last years and okay, why not, okay? But now it's okay. We thought it would be a good. Bernie Blegen: The technology has actually been very well positively received. It's just the imbalance as far as the demand that was expected has trailed those expectations. And so we believe that they have excess inventory and so we're seeing a slowdown for that particular individual category. Genevieve Cunningham: Our next question is from Kevin Garrigan of Rosenblatt. Kevin, your line is now open. Hans Mosesmann: This is Hans for Kevin. Congrats. A couple of questions. Along the lines of inventory, I think AMD, Micron, on the PC side of things, and Texas Instruments on a broader basis, are indicating that customers are changing their behavior a bit in terms of how they take in components in a supply-constrained environment. So rather than just take everything they can get, they're being more selective. Is that something you guys are seeing? And is that unusual if you are seeing that? Thanks. Michael Hsing: We are too small, but these – we're a very small player, much smaller players compare with the Texas Instruments or the other guys. We don't have a luxury of picking market segments. We're only focusing on long terms. Focus or not focus. We don't do short-term business anyway. Bernie Blegen: Yeah. To answer your question really succinctly, we haven't seen any change in ordering patterns or our delivery schedule and really don't have an opinion on what the broader market or other market participants are experiencing. Hans Mosesmann: Fair enough. And so just the last question, your visibility in terms of when you can capture or get back to that 180 to 200 days of inventory, has that changed? And what is that time line? Is it the end of next year? Is it 2023? Thanks. Michael Hsing: I think the end of the next year would be a good number. Yeah. That's what we – that's a – if the market goes – continue to go this strong, so like I mean hopefully, some we can catch up at the end of the next year. Hans Mosesmann: And that's – is that a push-out, or is that a pull-in from last quarter? Bernie Blegen: I'm sorry? Michael Hsing: Again, you said I talked about last quarter, pull-in or push-out. And like I mean, as I said earlier, we have a – we still have a delinquent season, like I mean – and we're having more delinquency than a customer push-out let's say it that way. Hans Mosesmann: Okay. Bernie Blegen: I think the important thing is that, even with the demands that are placed upon us and Michael is correct that we saw no change in Q3 from what we experienced in Q1 or Q2. We were able to increase inventory in a meaningful way this quarter. So again, I refer back to an earlier answer. We said the balancing act that we're trying to do between satisfy more run rate business at the same time as we're meeting demand for our new products as well as building inventory that gives us more flexibility. Hans Mosesmann: Great. Thank you. Michael Hsing: Okay. Genevieve Cunningham: Next question is from Tore Svanberg of Stifel. Tore, your line is now open Tore Svanberg: Yes. Thank you. I just had a few follow-ups. First of all, Bernie, the gross margin guidance for Q4, that does not include any more litigation impact, right? That's... Bernie Blegen: That is correct. Tore Svanberg: Okay. Great. So the other question is, a lot of your competitors are discrete companies, and they're probably allocating their products all over the place right now, which I assume means you're gaining share. Can you just talk a little bit to the stickiness of that? I mean I assume once they go with an integrated solution there, they're not going to go back Michael Hsing: That's very true. And when they've tasted a simple, easy solution, it's difficult. And for these high end -- a little bit of high end in the market, that's what we focus on. The customer pay for it, and they deviated from the way they -- their behavior, how they design product. And I think that's a huge benefit to us. And our other customers, the more in the low-end consumer business, we don't care. Tore Svanberg: Got it. Just one last question. Michael, in the past, you've talked about, especially in servers and automotive, kind of just getting the side dishes. But eventually, you'll get the main course. Should we expect those two segments to see some main course revenue in 2022? Michael Hsing: Yes, yes. We are keep eating the crumbs, okay. We eat a lot of crumbs like a whales. Well, not whales. We -- we're small fish trying to eat a lot of crumbs. And now the fish is like, we grow ourselves a little bit, we can eat the real meals, like I mean we -- as you we keep saying, okay, we have the reference design in Intels, and then the real OEMs pick up a onesie and a twosie for these projects and but these are the real beast, like I mean, end up a little bit small. So I think in the next years, we will grow much bigger in so called VR14s and VR13.5. We benefit a lot in -- and other than the point of loans and the E-Fuse and that kind of growth came in, now we really have a core power, have a meaningful revenue coming next years. And now talking about VR14 yet again. And the other thing that worth to mention about and there's about a 48-volt process, as we said earlier. And like I mean by these years, and we forecast about this year and the next year, the cross point had to happen. And like I mean we're waiting -- we were waiting about three, four years ago. And we said that until we end up -- when the powers keep increasing and the heat generation, heat dissipations, they cannot handle anymore, they have to use the 48-volt solutions, and this has happened. And start from AR and next year, we see many data centers adopting 48-volt solutions. And well, we have a benefit of a large lake. Tore Svanberg: Great. Thank you very much Michael Hsing: Okay. Thank you. Genevieve Cunningham: As there are no further questions, I would like to turn the webinar back over to Bernie. Bernie Blegen: I'd like to thank you all for joining us for this conference call, and we look forward to talking to you again during the fourth quarter conference call, which will likely be in early February. With that, thank you, and have a nice day. Michael Hsing: Okay. Goodbye.

Genevieve Cunningham: Welcome everyone to the MPS Second Quarter 2021 Earnings Webinar. Please note that this webinar is being recorded and will be archived for one year on our Investor Relations page at www.monolithicpower.com. My name is Genevieve Cunningham and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, VP and CFO. During this webinar, we will discuss our Q2, 2021 financial results and guidance for Q3, 2021, followed by Q&A session. Bernie Blegen: Thanks Jen. MPS achieved record second quarter revenue of $293.3 million, 15.3% higher than the first quarter of 2021 and 57.5% higher than the second quarter of 2020. This broad based year-over-year revenue growth was a result of our diversified growth strategy, technological innovation and investment in production capacity. Turning now to our second quarter 2021 revenue by market, computing and storage revenue of $87.7 million increased 30.0% from the first quarter of 2021. The sequential revenue improvement reflected increased demand and market share gains for servers and data centers and notebooks. Computing and storage revenue represented 29.9% of MPS' second quarter 2021 revenue compared with 34.4% in the second quarter of 2020. Second quarter consumer revenue of $76.1 million increased 14.9% from the first quarter of 2021. The sequential quarterly revenue increase reflected earlier than normal sales of gaming console products. Consumer revenue represented 25.9% of MPS' second quarter 2021 revenue compared with 25.6% in the second quarter of 2020. Second quarter automotive revenue of $48.7 million increased 8.5% from the first quarter of 2021, primarily due to increase sales of infotainment products. Second quarter 2021 revenue was up 173.9% year-over-year, automotive revenue represented 16.6% of MPS' second quarter 2021 revenue, compared with 9.5% in the second quarter of 2020. Second quarter 2021 Industrial revenue of $43.3 million increased 8.9% from the first quarter of 2021, reflecting increased sales of products for power source applications. Industrial revenue represented 14.8% of our total second quarter 2021 revenue compared with 14.3% in the second quarter of 2020. Second quarter 2021 communications revenue of $37.5 million was up 3.9% from the first quarter of 2021. Most of this sequential revenue increase was due to higher product sales for networking and wireless applications. Communication sales represented 12.8% of our total second quarter 2021 revenue compared with 16.2% in the second quarter of 2020. Operator: Our first question comes from Tore Svanberg of Stifel. ToreSvanberg: Yes, thank you, Michael, Bernie, congrats again on another strong and record quarter. I was hoping you could update us on your capacity plans. I know you've done a pretty good job here, the last 18 months, your inventory seem to be in good shape, perhaps a bit at the lower end. But yes, maybe you could help us understand a little bit more what you specifically are doing on the capacity side. MichaelHsing: Thanks Tore. Our capacities as always in the past three or four years and we keep expanding. And now we continue that. However, we do have capacities of over $2 billion and before the middle of next year. So we have enough capacity for us to grow. And now we have just qualifier more product and release to productions. And ultimately in our customers' hand. BernieBlegen: And at the expense of repeating our self story. You recall that last year, we brought up the 12 inch fab. And this year, we've brought up 8 inch fab which is already contributing to inventory. So in both cases, what we're continuing to do is expand out by qualifying more parts so that we will be able to meet the $2 billion level by the middle of next year. ToreSvanberg: Very good. Thank you for that. And your cash balance has doubled here over the last couple of years. And it's now at $670 million. Obviously, it's a luxury issue to have. But what do you intend to do with that cash? Because obviously, you don't need that much. So do you plan to return that more back to shareholders? Are you potentially looking at M&A? And the reason I'm asking this is because it's so high now, right? I mean, I know historically, you've grown your business organically, but it's so high now that I just have to ask the question what you intend to do with it? MichaelHsing: That's a good question. As a company, I keep saying we transforming the company from a semiconductor to more solution providers and so we can utilize our cash much better than we can in the past and the strategy is okay, we will buy in a tuck-in technology companies which comparable to MPS revenues, MPS as a general market coverage. So on the other hand we are also consistently raising dividends. And that's our strategy but we're not excluding buyback shares. Operator: Our next question is from Quinn Bolton of Needham. QuinnBolton: You guys hope you can hear me but let me echo my congratulations on the strong revenue and the very nice, gross and operating margins. Bernie, I guess you teased us there at the end of your script, saying that you've got the capacity now to support acceleration in revenue growth. If I look at revenue last year, you did about 35% growth looks like this year; you might do better than that. I'm just trying to interpret when you talk about acceleration in revenue growth, what should we read into that? BernieBlegen: Yes, I think that you're familiar with our model, which is to outperform the industry by 10 to 15 percentage points. And, obviously, that's a model, that's a guideline. And there are certain periods where we have the right factors both strategically as well as from a market perspective, that allowed us to do better, and sometimes not as well as that model. So for example, if you look at last year's results, you could argue that at 34.5% growth, that we exceeded the market, which was right about 5% to 8%, depending on what you're looking at, by somewhere in the neighborhood of, 15-17 percentage points. And so we look at that is, well above our model, in the current year, obviously, we only guide to Q3. But it's not unrealistic to expect that within the range of possibilities that we could match that performance, or in fact do just a little bit better. So what we're trying to observe here is that in this two three year period, we're actually benefiting from a lot of factors that have us exceeding what our normal model is. QuinnBolton: Great, thanks for that additional color. Bernie, I also wanted to ask on the compute and storage business up 30% sequentially, I think you mentioned that it was share gains in both servers as well as notebooks. On the notebook side, I thought you already had pretty high share at the high end of the notebook market. So I'm wondering if you could comment, are you starting to see share gains and maybe more mainstream or even low end or Chromebooks on the notebook side. And are there any notable areas of share gains on servers? Thank you. MichaelHsing: Yes, so we do have some of the share gain across the board in a notebook market segment, as our technologies advanced in which lower the cost, our die size become much smaller. So the cost, the lower costs allow MPS enters a lower notebook segment. BernieBlegen: And then as far as server, we've been fairly consistent in articulating our strategy as far as being able to grow our market position with each succeeding next generation, particularly Intel and AMD products. Not limited to that though, but also on 48 volt GPUs. So it really expresses the point that we're branching up in share gains within the Intel family, but also branching out into these other opportunities. Operator: Our next question is from Rick Schafer of Oppenheimer. RickSchafer: Thank you and I'll add my congratulations. Just kind of keep amazing, everybody, I think I'll ask one more capacity, if that's okay. And it's coming from a spending kind of standpoint. Can you Bernie maybe remind us what the outlook for kind of spending just as a general rule as a percent of revenue, maybe starting next year, once all the new capacity is installed? I mean, I think you're getting so many questions, because everybody sees the kind of growth you guys are putting up. And it's awesome that you have $2 billion in capacity onboard by this time next year. But at this rate, it's only going to in a couple years, right you're going to be bumping your head-on by so. I'm curious because how soon would you have to look to begin ramping incremental capacity again? And what might impact beyond on spending? I'm curious what like, just hypothetically, in two years, three years time, if you're at $2 billion top line, like what would gross margin look like, for instance? BernieBlegen: Rick, thank you. Good question. Something that's really important to comment on here is that a lot of companies and a lot of analysts and a lot of investors are focused on capacity as if this is a new aspect of the semiconductor business. In fact, capacity is something that we have been managing for the 10 years that I've been hearing before that. It's an integral component to our growth strategy. And so the way that we've been doing it is sequentially adding new fabs and also assembly houses and testing capacity alongside of that to accommodate to be in front of what is expected revenue growth. So while we have made public comment on the fabs that we've invested in to date, we're still continuing on with ongoing relationships in order to secure more fab capacity for the future in order to accommodate that growth beyond $2 billion. MichaelHsing: Yes, as I said earlier, so we keep expanding and we will never stop. But sometimes faster, other ones -- other times it's slower, again, other than the capacities, physical capacity itself, we have to increase a lot of haircuts, and MPS is a very, very lean, and so we will hire -- we are hiring a lot of people. RickSchafer: Thanks. Sorry, I was having some trouble on my end. Thanks, Michael. And thanks, Bernie, quick question on auto, if I could, I mean, by my math, it's on track to maybe grow sort of an 80% or better range this year for you guys. I mean, I'm curious how much of that is being either directly or indirectly limited by supply? And if you could give a sense of what growth could be or talk about growth, maybe demand that's pushed and how that ultimately would show up in the model say next year? I don't know if you could maybe quantify or talk about your auto backlog and maybe where it is today. MichaelHsing: Maybe Bernie can, this year you said that you mentioned that whether the automotive product is limited by the capacities and the answer is not as much as other segments. Because automotive company, they give us a long lead times. And so we prepare the last year, the last didn't, our customer didn't consume that many of our products, okay and so it all translate to this year. And so we'll be able to ship them now. BernieBlegen: One of the aspects of automotive that's getting a lot of attention in the press has to do with the fact of electronic component shortages that are shutting down plants or limiting their ability in order to kit a car and put it assembly and as Michael just said we're actually not capacity constrained there. We are meeting all demand from them. And what's been interesting is one of the reasons that automotive got into this bind is because they were working with a just in time inventory model. And I think that they've learned from that that when the parts the electronic components are available, that they will stock them even though they don't have a complete kit to build the car. Now in our conversations and feedback that we're getting is they're actually only trying to satisfy real demand. But that is the timing of when the build plan, when they'll have the complete kit that they can then build the cars. So it's something that we want to monitor because there's been no change in the ordering pattern or our shipment schedule versus expectations because of the other limitations in automotive. MichaelHsing: Yes, I might as well add it, okay, about a year and a year and a half ago our inventory were at all time high. And that was one of the reasons that why we do that because we were a newcomer in automotive industries, okay, even though with this type of a current revenue. We're still in a very, very little on a market -- in a market percentage of a market, and so it's a clear as a newcomer, and you don't want to upset the customers, okay, and you don't have a product. So as all these as a lack of what we do to all these key customers, we have an inventory, even though they don't have a clear forecast. And so now is a really benefited us. And we gain a lot more design win activities. And because our competitor couldn't, cannot ship a product. Operator: Our next question is from William Stein of Truist. WilliamStein: Thanks for taking my question. I hope you can hear me. With regard to first sort of maintenance question with regard to your capacity and inventory, which you've already explained quite a bit about on this call. Are you supply constrained at this time? Are you able to meet all the demand whether it's upside, or maybe customers stretching and trying to build a bit of inventory? Or are you in fact capacity constrained? And our lead times extended as you're communicating them to customers? And then I have a big question of more sort of strategic question after that. MichaelHsing: Yes, let me explain that way. Okay, we have less capacity constraints than compared to like a half year ago also, and however, as a customer's -- when you call, after you qualify all these new fabs, and we have a month or couple months delayed of a qualifying these product. And to qualify in the fab, it's not exactly science, okay, mean you use different supplier or different equipments, okay, mean different materials and all the problem, all these issue comes -- have an effect on how you qualify products in the end. So this time, okay, we just have to release a lot of new product, lot of existing product from different fabs. And so it's kind of a -- to answer your question here is the kind of a constraints, we have a lot more orders, and we couldn't fulfilled, okay mean but just only a couple of months late. BernieBlegen: And again, what we're trying to do here is make sure that we're servicing real demand, and not building up inventory, either in the channel or on our customer shelves. So what we've done is we've actually have very transparent relationships with our customers so that we make sure that we're in touch with their business sufficient to be able to make those trade offs. WilliamStein: Great, thanks. And then the follow up if I can, or the more strategic question, Michael, you refer to this transition from a semi company to a technology solutions company, and it's something I've written about specifically to transition from semi devices to modules. Any quantification around this and perhaps it relates to the ecommerce strategy as well. Any update in that area would be very helpful. Thank you. MichaelHsing: Yes. Thanks for asking for that question, now is overwhelming by the revenue growth and the company but not only from analysts from outside and the company inside company is overwhelming by the revenue growth, that allocations and the product allocations and in a lot of strategic things, okay, as less pronounced, okay but the module you're absolutely right module business is for a solution, as a solution transforming to a module company as we transforming, we're transitioning from semiconductor to a solution company. And the ecommerce, we have a teams and we finally, we have organized like a product line. And I know the activities in the last quarter also are quadruple. And so the revenue is still small, but is in the millions of dollars. Okay. I mean, it's more than a million dollars, okay somewhere $30 million - $40 million. WilliamStein: With a module and service? MichaelHsing: Yes, with the module and service and is growing, as you recall in about five years ago. Three years ago, it's almost zero. Yes. And four years ago, almost zero, okay, I mean we started that. And so we'll continue to focus on that. And so I truly believe that's our future. Operator: Our next question is from Joshua Buchalter of Cowen. JoshuaBuchalter: Hey, guys congrats on the results. And thanks for taking my question. Gross margins in both the print and guide were meaningfully higher than your usual 10 to 20 basis point trajectory. Can you elaborate on the key drivers of the leverage there? And I guess speak to the sustainability? Was it driven by mix or something on the cost side getting wafers through your recently ran fabs? Thanks. BernieBlegen: Sure. I think that we've discussed in the past that, again, it's our model is that we want to be able to grow gross margin at 10 to 20 basis points sequentially, over the long haul. And we've demonstrated very good consistency in being able to do that. But much like I was describing before, this is an unusual period of growth for the company, both in terms of how fast the revenue is growing. And then obviously, as we described in the narrative, it was that the overheads is not, which would be like direct spending or inventory provisions or anything like that is not growing at the same rate as the revenue growth. And that's where we're getting the near term leverage. As we look out, obviously, we don't want to create an expectation that we're going to be able to grow at the same rate. But by the same token, we have established another floor level for what we expect sustainable gross margin to be. JoshuaBuchalter: That's helpful. Thank you. And then also on the model, I guess, you mentioned that consumer in console was a bit accelerated versus your normal seasonality. Can you remind us what you would expect the shape of the console business to look like in the second half? And maybe just give us some clues on revenue growth by segment? Thank you. MichaelHsing: Sure. I don't know if we call it normal, okay. I don't -- I can't think of a normal anymore. Okay. Regarding to our console business, yes, we win a lot of designing, wining the next design, okay, I mean I think the business continues, okay, I mean I think you have a better judgment than us what's the seasonality now for console. BernieBlegen: I think that Michael makes a very strong point there is that we've had so many puts and takes and different lines of businesses that have been added that the rule of thumb is not as applicable as it might have been back in 2018 or 2019. I would comment on is that we believe that we are optimizing across all of our different end markets. And again, it's really the strength of the model is in the diversification. And whereas a lot of the traditional seasonality would have been tied to consumer for example. Now we have much higher percentage of our business that is tied to computing, automotive and industrial, and they don't necessarily recognize the same level of seasonality. But then to sort of complete the question, I think if you look at the near term growth, obviously, the current year is benefited significantly from automotive and computing storage in particular. And we believe that going forward automotive along with communications should be our longer-term drivers. Operator: Our next question is from Tore Svanberg of Stifel. ToreSvanberg: Yes, thank you. I just have a few follow up questions. First of all, I have a question on your ASPs, which obviously tied to your revenue growth. So now that you are sort of growing in the 50% range, how much of that is units versus ASPs? BernieBlegen: Yes, I would say if you look at last year, and last year is representative what we're doing in 2021, is of the 34.5% growth 25% of that was tied to volume, 10% was tied to price. And I think when Michael talks about the solutions business; you're looking at previously selling an individual piece of silicon for $0.20 to $0.25. And now depending on the module, we can get between $1 to $3. And what we're looking to be able to do is design complete integrated solutions for different end applications, where those will be able to achieve for the total cost for that solution can be somewhere between $60 to $100. So, there's the ASP on the individual component, but it's more importantly, it's having that attach rate with the total solution. ToreSvanberg: Very good. And talking about systems, how's your motor business doing? I know that's probably the highest ASP products you have. So how's that business going? MichaelHsing: It's doing well, but the rest of our company is growing much faster. So it's still small. And you can't break out a percentage yet. But I think that was a -- we will more -- have a -- give a more category of our product rolls. Okay, as we divided into a more finer product line. Yes, we'll give it that number later. Okay. ToreSvanberg: Sounds good. Michael. And last one, about a year ago, you talked about getting into the medical end market any updates there? I mean, I know it's still probably very, very smallest percentage of revenue, but just trying to understand how fast your traction is in the medical end market. MichaelHsing: Yes. We have our product now. And that's a well, we're -- we have a several things that we have ultrasound and the ultrasound, we do generate revenue, we see the revenue now. Okay and the other one is x-ray machines. Okay, x-rays. And we put -- we have -- we are evaluating the first silicones and from our design size is but we have some issue with the fab. But that's a very minor issue, okay, I mean we will be able to solve that problems. And it is outstanding, thank you for bringing it up this. And the performance is like a 5x, 6x better than existing solutions. So the image is a lot more cleaner now. And we couldn't deliver. And so I think the customers are waiting. And we're very excited. BernieBlegen: One other comment to add here is the technology that we're referring to here is related to our high performance or precision analog converters, right. MichaelHsing: Data converters, yes, right. BernieBlegen: And this has been something that we've been working on for I think about 2.5 and three years now. MichaelHsing: Two and a half years. BernieBlegen: 2.5 years. And I think what is really exciting is that this is incredible opportunity. And we're very close to being able to declare that it's commercially viable in the market. So it's not just a medical which is the first end market we're going after with this technology. But the other opportunities this opens up for us. MichaelHsing: Yes, it's same technologies, similar technologies that we'll be able to use in the telecommunication side. Operator: Our next question is from Kevin Garrigan of Rosenblatt. KevinGarrigan: Hi, guys, congrats on the quarter. And thanks for taking my question. Just a quick one for me. I was wondering if you could tell us what percentage of your business or percentage of backlog is based on three year newer products. I think last quarter; Bernie and you had said new products introduced in the last three years were about 37% of sales. So just kind of wondering if this was in the same range this quarter? BernieBlegen: Yes, the reason that we use that stuff on sort of a one time basis was to really give order of magnitude to just how dynamic this new product introduction is as a component to our growth. So right now, obviously, in such a short one quarter term, it hasn't changed a whole lot up or down. But it's really not something that we want to be reporting on an ongoing basis. MichaelHsing: Yes, I think the last time we reported, is that 37%? Yes, I actually went back and look at it and was-- we actually cannibalize ourselves. And I think that's a better way, okay, rather than other big guys eat us alive. And I think that we cannibalize a quite a bit, okay; I think is somewhere as a 10% range. Okay, all these new products, we cannibalize it. And that's why the numbers are so high. BernieBlegen: But I would say that when there's cannibalization involved, you can bet that for market share gains against our peer companies that's really the leverageable part of this story. Operator: Our next question is from Quinn Bolton of Needham. QuinnBolton: Hey, guys. Just wanted to follow up on Joshua's question on gross margins. I know in the near term, better overhead absorption is driving the better margins. But if you guys have access to capacity, and most of your competitors getting strained, I'm wondering, is there any room for you to get a little bit more to raise pricing in certain segments to take advantage of that capacity support? Or will you just continue to kind of put your foot on the pedal and try to drive as much revenue through that additional capacity to support rather than trying to do it through pricing? MichaelHsing: Well, yes, MPS is still a smaller, is a smallest analog semiconductor business, and at the same times, we want to have a deliver a consistent result. And so now you see the margin even in this period, we don't fluctuate a lot because we don't -- we just pass on our costs to our customers, and we don't randomly just raise because we can now the shortage, we can gouging a price, okay, and that affected our long-term relationship with our customers. And so we just maintain that and maintain our margins. Okay, I think this strategy fits everything, fits for us, yes. Operator: As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: I'd like to thank you all for joining us for this webinar and look forward to talking with you again during our third quarter webinar, which will likely be at the end of October. Thank you and have a nice day. Michael Hsing: Have a nice day.

Genevieve Cunningham: Welcome everyone to the MPS First Quarter 2021 Earnings Webinar. Please note that this webinar is being recorded and will be archived for one year on our Investor Relations page at www.monolithicpower.com. My name is Genevieve and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; and Bernie Blegen, VP and CFO. In the course of today's conference call, we will be making forward-looking statements and projections that involve risk 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. Bernie Blegen: Thanks Genevieve. MPS posted record first quarter revenue of $254.5 million 53.5% higher than the first quarter of 2020. The year-over-year revenue increase represented strength in the overall market and more importantly, broad-based market share gains resulting from customer acceptance of our new product introductions. 37% of our first quarter 2021 revenue resulted from new products introduced in the last three years. New product acceptance on this scale has paved the way for accelerated growth. Looking at our revenue by market, first quarter 2021 revenue from consumer markets of $66.2 million increased $28.8 million or 77.1% from the same period of 2020. The year-over-year revenue increase reflected a broad increase in overall demand. Along with the initial ramp - revenue ramp from our new mobile device charging IC. Consumer revenue represented 26.0% of our Q1 revenue compared with 22.6% contribution in the first quarter of 2020. First quarter 2021 automotive revenue of $44.9 million grew 92.5% over the same period of 2020. This growth primarily reflected continuing sales growth for infotainment, safety and connectivity application products and first time revenue from products introduced in the 2021 model year. Automotive revenue represented 17.6% of MPS’ first quarter 2021 revenue compared with 14.1% in the previous year. Genevieve Cunningham: Thank you, Bernie. . Our first question comes from Joshua Buchalter of Cowen. Joshua, your line is now open. Joshua Buchalter: Yes, thanks for taking my question and congrats on another set of solid results. I was hoping you could elaborate on the inventory dynamics. You're one of the few companies that invested proactively ahead of the supply issues across the industry, but you're still not near your 180 to 200-day target. So just wondering how you're thinking about balancing rebuilding the channel versus, taking businesses some of your peers can serve or endorse of your share gains? Thank you. Michael Hsing: Well, as we expand, continue to expand our capacities, as we said it earlier - as we said it in last quarters. And I think that - we expected it with a current rate of increase the capacity will be at the end of the year or early next year. So we achieved that type of inventories. So if the demand is not continued to increase this much. Bernie Blegen: And I think it's notable, Josh, that we did increase both in terms of dollars and days, the amount of inventory we had from Q4 to Q1, which runs counter to the capacity constraints that some peer companies are experiencing. Joshua Buchalter: Got it, thank you that makes sense. And any more granularity you can provide in the guidance by end market for next quarter, any of the buckets moving materially more than the others? Thanks and congrats again. Michael Hsing: Yes, I would probably look to computing where there was a couple quarter gap in data center that data center should begin to take off again. I think automotive appears to be continuing to grow nicely both in terms of year-over-year performance and sequentially. And also we're seeing that same continuation in consumer. Genevieve Cunningham: Our next question comes from Ross Seymore of Deutsche Bank. Ross, your line is now open. Ross Seymore: Hi guys, thanks for letting me ask a question. I want to talk about the sustainability of demand. Recently in this earning season, a lot of semi-stocks have sold off on really good numbers. And it clearly looks like the market is worried about double ordering those sorts of peak cyclical activities? Michael Hsing: Yes, okay and of course, we concerning a double okay I mean in the past, we said okay, we have a rigorous procedures and okay to prevent that, okay. And we partial - we practicing partial shipments in the last six quarters, and we make sure so like - our customers have a very minimal on hand inventories. And the same times - we're not preventing their line downs okay their production line downs. To go back to your questions what's the demand and okay we believe and a lot of our demand is sustainable. The reason we said that, Bernie said earlier in a script and that for us these are Greenfield market, Greenfield product lines, we started to grow and as Bernie said, 37% of our products, we grow all from new products that we released from last three years. And there is no reason to believe next two years, and next years and not even talking about next six months. I'm talking about next couple years. These products will continue to grow. And at the same times, and with the product that we released in the last two years, that will continue to turn into revenues in the 12 months later. So we believe our growth is sustainable. Ross Seymore: Okay, thanks Michael. I guess for my follow-up a little more specific on one of your segments, the communications area has been very, very volatile. I know there is bans on different customers that can ship at different points in times. But can you talk a little bit about what's driving the sequential growth that was up so much in the first quarter, admittedly off of a weaker fourth quarter? And then as this year progresses, how do you see that market specifically more at the 5G side of things rather than the networking and gateway sides? Michael Hsing: We see as a matter of fact, I see have talk to - we have a committee casing meetings with the top tiers and a non-Chinese 5G makers okay and that market segment. So we're picking up and we’ll believe, okay they believe this year and in the next year, they're on the delinquency to. Bernie Blegen: We believe we're very well positioned just as Michael said there, because the reach of new customers that we're addressing the 5G solutions is very broad. So, we think that as the market gains momentum, we're very well positioned to take full advantage of it. Ross Seymore: Great thanks, guys and congrats again. Michael Hsing: Thank you. Bernie Blegen: Thank you. Genevieve Cunningham: Our next question comes from Tore Svanberg of Stifel. Tore, your line is now open. Tore Svanberg: Yes, thank you, Michael and Bernie, congrats again on a very strong quarter. First question, I was hoping you could talk a little bit about your share gains especially during times when capacities really tight. So your solutions tend to be more integrated especially versus discrete and a lot of those discretes are in shortage. So I'm just wondering if you are seeing and acceleration in your share gains during this very tight semiconductor environment? Michael Hsing: Well, if examples and I can give you a couple of example - couple of scenarios and okay, if we were in a - it’s a dual sources and our competitors using - our customers using dual source or triple source. And I was tend to be in a lot more a fewer components, then our competitor. And that is a one interpretation why the demands and we’re gaining so much demand. And another scenario is for the futures, and we gain a lot of market shares, because just recently, because - for those new - there are new project the shippings, they were putting up production for next six to 12 months. And we have a lot of design win lately. Tore Svanberg: Great and as my follow-up, and you talked about the contribution from the new products, I know you're not going to give us specific information on pricing. But is it fair to say that the ASP is now of those new products are considerably higher than perhaps the last year or two? Michael Hsing: Yes for the gross margins we stay on course and we are not looking for a price hiking, price hikes okay I mean and that's probably is not sustainable? So like I think probably protects our models and again and going the same train as before, okay and Bernie. Bernie Blegen: Yes, and just to add to that yes, certainly the new products that we're introducing, and particularly those that are more heavily integrated. The mix of business does favor higher ASP for those new products. Tore Svanberg: Yes, that's what I thought. Okay thank you congrats again. Michael Hsing: Thank you. Bernie Blegen: Thank you. Genevieve Cunningham: Our next question comes from William Stein of Truist. William, your line is now open. William Stein: Great, thanks for taking my questions. Bernie, you think it was you in the opening remarks? You said something about paved the way for accelerated growth? We all know Monolithic done pretty amazing job with regard to growth relative to the industry. But should we interpret that as meaning perhaps we stay above 20% for a more protracted period of time? Michael Hsing: I think that's all we see announced. And what we see announced and that could be in a year or two years ago. So that can only grow like 8% again mean the last year 30 somethings and that, and this year so far sort of we're in a very high percentage. And so we're look this kind of way it will continue. Bernie Blegen: Yes, I think that's the message that we've tried to say in the formal comments. And Michael added to that, if you look at the reason for our growth, both last year and this year, it has much more to do with market share gains and new products and having developed our supply chain than it does necessarily rely upon just the broader market. And so, certainly in 2019, we had high expectations, and we were - we're not immune to downturns in the market. But I think that if we have a more normalized demand, that we can perpetuate this accelerated rate of revenue growth, perhaps in excess of the 20% mark. William Stein: And then along these lines, I think a couple of other questions might have even alluded to it with regard to higher ASP, I think of a big driver of that is your transition to selling more of these modules those types of more complex integrated solutions? Is that the case and I'm hoping you might quantify that for us I think in the past you've talked about growth rates at least to offline of the module business maybe you can talk about whether this is reaching a size where it makes sense to disclose revenue from that piece? Michael Hsing: Yes, the module business is doing really well and like I mean and a modules/e-commerce business is doing really well. And I think we're beginning to find a way how to grow that. That business by no mean this is a - full blown business yet again, we haven't really break it out. And but that business announced and okay, IC it in - it's much higher ASP. And that will start to grow like a two years out will be a significant difference - and a significant contribution to the revenue growth. Bernie Blegen: One other aspect to add Will is, that if you look at certain of our end markets, and I'll pick automotive as an example, much more of what they're demanding is not for a specific IC, they want to have a system solution. So if you look for example, autonomous driving or ADAS there has to be built in failsafe redundancy. You have to have system communications throughout and the example I'm using here, that coordinate that the cameras, the sensors and the processor. And so you're buying, you're creating entire chipsets for a dynamic solution. And just by the natural consequence of how you're designing those solutions that have significantly higher ASPs. Michael Hsing: Yes, and to elaborate on that, and that these are not restricted to only a semiconductor that we design and we offer an entire solutions. And we design like and MPS don't produce anything, but MPS okay, including semiconductor, we design a semiconductor at the same time, we design other components. And we'll - now as Bernie said earlier, even in the automotive business, we're selling solutions, rather than in the past, we’re selling a single piece of silicon in a two or three years later. I don't know - how can you specify as MPS is a semiconductor company, but we're a solution providers. And then we sell solutions, much higher, higher ASP. William Stein: Yes that's great. Thanks, guys. Michael Hsing: Thank you. Genevieve Cunningham: Our next question comes from David Williams of Loop Capital. David, your line is now open. David Williams: Thank you, and congrats on the quarter. Michael Hsing: Thanks, David. David Williams: I wanted to touch on the capacity expansion and you had mentioned this earlier. But how is that progressing? And I guess, is it moving at the same pace as you would have expected just kind of given some of the tightness that we're seeing within the industry - or maybe is that moving - at your the pace you expected and maybe the pricing of that anything surprising there? Michael Hsing: Yes, capacity expansions - we mentioned about six quarters ago. So again I mean we steadily an increase in the last years and we did some extra work okay, to increase the capacity okay and from now on probably pretty continuous - kind of increase okay. And so Bernie, you can comment on that okay. Bernie Blegen: Yes, I think that we've been clear that in 2020, we brought up the 12-inch fab. And now we're continuing to qualify parts on that. In 2021, we're midstream and bringing up an 8-inch capacity. We're continuing to qualify parts. One of the underreported stories here is that we have existing relationships with our fab partners that date back as long as 15 to 20 years. And they're excellent relationships. And we have been able to manage both in terms of when there's under capacity and over capacity, where we have very even handed relationships. So even within our existing foundation or base, that they've been encouraged and been very positive contributors to helping us add capacity as well. So I think the important point here, as we said in our earlier comments, is that continuous investment has always been a part of MPS. It's a differentiator and that we see it as being able to expand over the next several years in order to keep up with the increased demand that we're anticipate. David Williams: Great, and then maybe just on the leverage, do you think that's remaining in the model here? Obviously, there's quite a bit that's embedded but how - we're thinking that gross margin at the brand and maybe even the operating margin. Where do you think those could go to as you really start to hit on all cylinders and get the revenue acceleration that you've mentioned? Michael Hsing: Well as revenue acceleration, we need to continue to invest. And obviously, as we can't grow out of thin air so many times, okay. And as long - as the growth rate there, can we see the growth rate in the next four years in the next four months. And once we see that we will invest. David Williams: Thank you. Genevieve Cunningham: Our next question comes from Rick Schafer of Oppenheimer. Rick, your line is now open. Rick Schafer: Thanks. Hey guys, I'll add my congratulations as well. Maybe a couple questions by end market I guess the first one is automotive. I think you guys outgrew SAR by 35%, 40% last year. And I know tight component supplies, kind of curved first quarter auto production didn't seem to hurt you guys too much. I know your auto business I think was up almost 100%? So I guess my question is, do you see that as a as an ongoing risk or something, that could impact your auto growth I'm curious. You almost doubled it this past quarter I mean, could it have been better if it weren't for components, supply constraints out there, whether they're direct or indirect or I guess any signs things - are things getting better yet in that auto food chain? Michael Hsing: Yes, whether as our growth is restricted by the shortage of a component from our customer size, okay we don't really know okay. I mean but on the other hand, we have total market share is addressable market where MPS is so small, so teeny tiny. And so, we will notice it, and all these Greenfield product growth okay I mean and these are new demand. And right off the bat okay and these products is just taking off. Rick Schafer: Okay thanks sorry Bernie. Bernie Blegen: I'm sorry, just to add one more quick comment we have seen nothing at this point, to indicate that there's necessarily been a slowdown in ordering and automotive. So again as Michael said, we can't make a guess as far as you know, whether there is a limit on demand. But we see continued strong numbers of our backlog. Rick Schafer: Great, thanks. And maybe just a follow-up on hyperscale as you highlighted, Bernie. I think you've mentioned hyperscale spend kind of picking up or data center starting to show signs of life. So I'm curious, just with the launch of Ice Lake and things are - we are picking that up hearing that elsewhere as well, but hyperscale is getting better. How do you see I guess QSMOD data center? How do you see that ramping this year? I mean, is it relatively linear from here? Are we going to see a second half inflection of some kind? Is that kind of build some inertia? And I'm also curious, I think last quarter, you talked about 48-volt a little bit. I don't know, is it - is it still much too small to kind of break out or talk about, or can you give a sense of what kind of contribution 48-volt QSMODs is now? Thanks. Bernie Blegen: Sure. So let me start with the 48-volt question. I believe that there is significant growth opportunity for us in 48-volt. I think we're very well positioned as far as both GPUs and down the road in the eventual. Michael Hsing: AI. Bernie Blegen: Yes AI applications and there are even automotive applications that were positioned there. Michael Hsing: And that these are - it’s not in the six months, probably nine months will the revenue will be significantly up. Bernie Blegen: Yes. So then turning to your other point, the point of inflection for QSMOD, and remember, just for everybody else's benefit that's our dynamic power management for the CPU processor. That really, we see good growth in what we refer to as VR 13.5. But it's when it goes to seven nanometer VR 14, which is expected for next year that, that's where we might get much more of an uplift market share gains. Rick Schafer: Got it thank you, guys. Operator: Our next question is from Quinn Bolton of Needham. Quinn, your line is now open. Quinn Bolton: Thanks, I will offer for my congratulations. Michael and Bernie, I guess my first question is I think you've sort of said 2020 and 2021 would be investment years, which would somewhat constrain your operating margin. Here in the near-term, it looks like your revenues is coming stronger than expected? And so even with that investment, your up margin is expanding, and if I'm doing my math right, it looks like up margin will be over 31% in June. How should we think about your level of investment as revenue continues to come in better than expected? Will you continue to invest or do you think you'll drive further operating leverage going forward? Michael Hsing: I think up to - from now we see the growth opportunity is, even higher than the last - than the three years ago. And so we will continue to invest and okay, as long as we see that okay as long as we can keep up that kind of growth rate. And if not - we’ll definitely slow it down okay and until we regroup okay. So far - we see too much opportunities. Bernie Blegen: I guess that's a good problem. Michael Hsing: Yes. Bernie Blegen: Yes Quinn, I do think that there are further opportunities for operating margin expansion. But I think that we've tried to be clear on this Quinn. In particular the last 18 months, that we see that there's more value to our shareholders in being able to accelerate the rate of revenue growth. And that's really where we've been putting most of our emphasis on. Quinn Bolton: Got it? And the second question is, I think you touched on some of this with your disclosure, that new products were 37% of sales, but obviously, is the investment community worries about how much double ordering may be going on, given the overall industry tightness? I guess I'm wondering, do you guys have a figure you can give us for the percentage of your products that are either sole sourced, and/or new products? Because I think where, you know, the threat of double ordering maybe would be on older products that are dual source? And so I guess I'm trying to figure out, what percent of your revenue today might be from older products, that that could have alternative sources? Michael Hsing: Yes, let me put it that way okay. We have 37% of our products, okay, we have a 4,000, 5,000 products. So think about it and again, and these are 37% and okay of our product in January all these revenue as a portion of our revenue still relatively small. And still in the ramping stage and those products - they are mostly a single source. And as you say that these are legacy products and okay, once the production volume ramps somewhere into the stabilizer and that they will have a second source. And of course, we clearly, we experienced some urgency for - even double ordering okay. And as we said we try to keep them very, very minimal, and okay I mean and just prevent them from lying down at the same times and prevent - we prevent them to have - to carry too much of inventory. I don't know if I answer your questions maybe Bernie you can. Quinn Bolton: Yes that's helpful. I guess my last quick one for you. Bernie, do you expect to increase your absolute inventory dollars on hand in the June quarter? Bernie Blegen: Yes, currently, that's what we're modeling yes. Now again, Michael is careful to add that, this is the supply chain, we have pretty good visibility on the demand. We have to continually try to test and make sure we understand that. So on the supply chain we are looking at continuing to increase the dollar value of inventory sequentially in quarters. And demand, we just have to continue to reassess. But as Michael also said, our time horizon has more to do on the demand front, over the next 15 to 18 months as opposed to anything that we're concerned about in the next quarter or two. Quinn Bolton: Got it. Thank you. Operator: Our next question is from Kevin Garrigan of Rosenblatt. Kevin, your line is now open. Kevin Garrigan: Hi guys, let me echo my congratulations on the quarter. Just a quick one from me, you alluded a little to it before, I was just kind of wondering how your MPS now service and e-commerce business did this quarter. And how that compares to last quarter, which I believe also had some pretty strong growth, and just kind of looking a little further out, as things start to open back up, do you think that business will take a pause? Michael Hsing: I don't think it's a business taking a pause, and we just started - that would be very upsetting us, is simply just taking pause okay. And if we’re taking a pause okay I mean we probably won't. At this time, we're still learning and may take a pause okay I mean and that's something we haven't really figured okay I mean. But so far as in the last - four, five quarters okay I mean, and the measurements that were in place, and that we’re putting place and okay they are keep going up and orders and the interacting and demand creating the value for the index for demand - creation is to keep increasing. And I think they were turning to our revenues and okay and turning to a much bigger revenues. Bernie Blegen: Yes Kevin, if I could add to that a little bit is the e-commerce and the MPS now are just two legs or two aspects of the much larger story of how we transition from an IC company to a solutions provider. That also includes providing fully complete reference designs and a broad array of solutions in all of our different end markets. So this is really proving the longer-term model. And while we are still learning and the numbers are still relatively small, we're in the early innings of this. Everything is very encouraging that we're headed in the right direction and on to something that is very sustainable. Kevin Garrigan: Got it, that's very helpful. Thanks, guys. Michael Hsing: Thank you. Genevieve Cunningham: As there are no further questions, I would now like to turn the webinar back over to Bernie. Bernie Blegen: Thanks, Genevieve. I'd like to thank you all for joining us for the Q1 2021 earnings webinar. I look forward to talking to you again during our second quarter conference call which will likely be in July. Thank you. Have a nice day.