Monolithic Power Systems Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 7, 2024

There are 10 speakers on the call.

Operator

Welcome everyone to the MPS 4th Quarter 2023 Earnings Webinar. My name is Genevieve Cunningham and I will be the moderator for this webinar. Joining me today are Michael Singh, CEO and Founder of MPS, and Bernie Blagan, 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 ks and our Form 10 Q, which are accessible through our website.

Operator

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 1 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 Blagan.

Speaker 1

Thanks, Jed. For the full year of 2023, MPS achieved record revenue of $1,820,000,000 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 $1,000,000,000 market with the acquisition of our partner, Exane BV. Exyne is a Netherlands based startup with early revenue, specializing in programmable multi core digital signal processors. Acxsign's competitive difference is its ability to deliver signals with near zero distortion and reduced power consumption for automotive and consumer audio systems.

Speaker 1

The combination of Exane 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 continue to diversify our global R and D footprint with the further expansion of our engineering centers of excellence in Europe and Taiwan.

Speaker 1

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 $94,600,000 year over year to $394,700,000 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 percent of MPS' full year 2023 revenue compared with 16.7 percent in 2022.

Speaker 1

Full year 2023 Enterprise Data revenue grew $71,600,000 over the prior year to $323,000,000 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 14.0 percent in 2022. Storage and Computing revenue for 2023 grew $38,500,000 over the prior year to $491,100,000 This 8.5% increase was primarily driven by increased sales of products for notebooks. Storage and computing revenue represented 27.0 percent of MPS' total revenue in 2023 compared with 25.3 percent in 2022. Communications revenue fell by $46,500,000 to $204,900,000 This 18.5% reduction was a result of lower 4 gs and 5 gs infrastructure sales.

Speaker 1

Communications revenue represented 11.3% of our 2023 revenue compared with 14.0 percent in 2022. Industrial revenue fell by $46,500,000 $172,700,000 in 2023. This 21.2% decrease primarily reflected lower sales in applications for industrial automation, security and power sources. Industrial revenue represented 9.4 percent of MPS's full year 2023 revenue, compared with 12.2% in 2022. Consumer revenue decreased $84,800,000 to $234,700,000 in 2023.

Speaker 1

This 26.6% year over year decrease was a result of broad market weakness across all segments. Consumer revenue represented 12.9 percent of MPS's 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 nominal improvement in Q4 ordering patterns, We remain cautious as visibility beyond the current quarter is limited.

Speaker 1

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 4th quarter revenue of $454,000,000 down 4.4% from the Q3 of 2023 and down 1.3% from the Q4 of 2022. Comparing year over year results, 4th quarter 2023 revenue for Enterprise Data grew by 88.4%.

Speaker 1

Storage and Computing fell 2.9%. Automotive was down 7.8%. Consumer decreased 17.5%. Communications decreased 36.3 percent and Industrial fell 40.5 percent. Q4 2023 GAAP gross margin was 55.3 percent, down 20 basis points from the Q3 of 2023 and 2.90 basis points below the Q4 of 2022.

Speaker 1

4th quarter 2023 non GAAP gross margin was 55 7%, flat with the Q3 of 2023, but 2 80 basis points lower than the Q4 of 2022. This year over year reduction in 4th quarter non GAAP gross margin is largely due to sales mix. Turning to operating expenses. Our GAAP operating expenses were $141,600,000 in the 4th quarter compared with $128,000,000 in the Q3 of 2023 $130,900,000 in the 4th quarter of 2022. Our non GAAP 4th quarter 2023 operating expenses were $96,700,000 roughly flat with the Q3 of 2023 and up from the $94,800,000 reported in the Q4 of 2022.

Speaker 1

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. 4th quarter 2023 stock compensation expense, including $1,200,000 charged to cost of goods sold was $41,100,000 compared with $33,600,000 recorded in the Q3 of 2023. Switching to the bottom line. Q4 2023 GAAP net income was $96,900,000 or $1.98 per fully diluted share, compared with $2.48 per share in the Q3 of $2,025.45 per share in the Q4 of 2022. Q4 2023 non GAAP net income was $140,900,000 were $2.88 per fully diluted share compared with $3.08 per share in the Q3 of 2023 and $3.17 per share in the Q4 of 2022.

Speaker 1

Fully diluted shares outstanding at the end of Q4 2023 were $48,900,000 As for our balance sheet, As of December 31, 2023, cash, cash equivalents and investments totaled $1,110,000,000 compared to $1,040,000,000 at the end of the Q3 of 2023. For the Q4 of 2023, MPS generated operating cash flow of about $153,300,000 compared with $175,900,000 in Q3 2023. Q4 2023 capital spending totaled $13,800,000 Accounts receivable ended the Q4 of 2023 at $179,900,000 compared with the 1 $185,800,000 reported at the end of the Q3 of 2023 $182,700,000 at the end of the Q4 of 2022. There were 36 days of sales outstanding across these comparable periods. Our internal inventories at the end of the Q4 of 2023 were 383 point $7,000,000 down from the $397,300,000 at the end of the Q3 of 2023.

Speaker 1

Days of inventory rose to 172 days at the end of Q4 2023 from 171 days at the end of Q3 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 Q4 of 2023, down from 178 days at the end of the Q3 of 2023. I would now like to turn to our Q1 twenty twenty four outlook. We are forecasting Q1 twenty twenty four revenue in the range $437,000,000 to $457,000,000 GAAP gross margin in the range of 55.1 percent to 55.7 percent non GAAP gross margin in the range of 55.4 percent to 56.0 percent.

Speaker 1

Total stock based compensation expense, including associated employer taxes of $46,200,000 to $48,200,000 including approximately $1,400,000 that would be charged cost of goods sold. GAAP operating expenses between $147,200,000 $151,200,000 non GAAP operating expenses to be in the range of $101,800,000 to $103,800,000 This estimate excludes stock based compensation expense and amortization of recently purchased intangible assets, but includes litigation expense and the expense from our recent Exyne acquisition. Other income before foreign exchange gains or losses expected to range from $5,300,000 to $5,700,000 Fully diluted shares should be in the range of $48,800,000 to $49,200,000 shares. We continue to execute the share buyback program that was announced in our Q3 'twenty three 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.

Speaker 1

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

Thank you, Bernie. Analysts, I would now like to begin our Q and A session. As a reminder, if you would like to ask a question, Our first question is from Quinn Bolton of Needham. Quinn, your line is now open.

Speaker 2

Hey, Michael Bernie, can you hear me?

Speaker 3

Yes. Yes. Can we

Speaker 2

speak up? Hey, congratulations on the very stable outlook in a pretty choppy environment. It looks like The enterprise data segment was up $30,000,000 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.

Speaker 2

Thank you.

Speaker 1

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 are customers that would be participating in that. But at the same time we also believe that competition within the supply chain will continue.

Speaker 1

So for a majority of the period to date, we've enjoyed a pretty high percentage market share, but expect that that to decrease as we introduce 2nd and third suppliers. But overall,

Speaker 3

I want to add it. And overall, the market segment is growing and growing very rapidly. And we're expanding our production lines. And we will meet in the second half of the demand.

Speaker 2

Got it. Maybe just looking at sort of the roadmap 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 how we should be thinking about your average dollar content per wind? Do you still see that 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.

Speaker 3

The dollar content is, well, it's As the market is accelerating, again, we have more of our competitors join, Nokating, and especially this rate of the ramp. And also we see other players, other AI players will enter the market. We are So far, we're behind, where pretty much the sole source of power solutions. And as you see in the second half or sometimes next year, you will see a lot of other players to be qualified or they solve their whatever the technical problem is, Okay. So that's what we expect.

Speaker 3

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 resolved all these issues And also the cost is, at this time, it's not really an issue. It's all about throughput and to meet the customer demand.

Speaker 1

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

Speaker 3

keep that. For AI systems.

Speaker 4

For AI systems. For AI systems. For AI systems.

Speaker 3

Yes. And the next version of it is the power is even higher as 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 next couple of quarters.

Speaker 2

Perfect. Thanks for all that color.

Operator

Our next question is from Rick Schafer of Oppenheimer. Rick, your line is now open.

Speaker 4

Yeah, thanks. And I'll add 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, but 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.

Speaker 4

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 in the second half. And I was just 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?

Speaker 3

Good questions. Good observations, Sunil. And toward the end of the last year, it kind of auto Slower 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 primarily mostly due to the ADAS and the infotainment or whatever the hair units call it, our digital cockpit.

Speaker 3

And Going for next year, we believe we see all the activities and customers nowadays are consuming all these inventories that we shipped in the May or June period of times. And now they start to have a higher volume ramp. And that's in the especially in the EV side. So for this year's 1st part of this year's.

Speaker 1

So I think that there is 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 to automotive. We don't have great visibility beyond just the next quarter. So it's hard for us to predict what the second half of 24, the ramp might look like for

Speaker 3

automotive. Right. The ramp in the early adoption in the EV It's very lengthy and different automakers ramping in different schedules. But overall, the trend is they will pull out more EV with more our products.

Speaker 4

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 2nd 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.

Speaker 4

But I'm curious sort of what stage 1 power will do to your content, will 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 bowl. And I was just curious to get your thoughts on if it gets harder or could the competition going forward as guys like NVIDIA move from a 2 year cadence on new processor development to an annual cadence? Thanks.

Speaker 3

Alright. Yeah. This game is always the best performance. Okay? So far, our competition, so we don't I don't want to speak our competition, okay?

Speaker 3

So far, in What we have, okay, and our customers, and they're very receptive to our solution. So far, we pretty much have a majority of the volumes. Okay? And They keep requesting and keep requesting we solve all these issues, okay, related to the system issues, ours and the issues from our side. And So when even the volume gets even bigger, it's good to have a have another source, okay?

Speaker 3

Otherwise, okay, you don't want NPS to become all of them. So, okay, that's not what we intend to do. And also the competition It's exactly like a server side. And we were the newcomer in the server market back in 2 a couple of years ago. And that's how we wound the market.

Speaker 3

And we had a product long before that. And it also need we had to dump it down to meet meet the common footprints. And because the power density is not high enough and When this AI come on a market, the common footprint is not a requirement. So we start to win a lot of market a lot of shares and the same as in the servers and have a very similar trend. And that's how we win the market.

Speaker 3

And We always want to do, as we said in the past, we want to push in the technology. We want to make sure we're the best.

Speaker 4

And Michael, any sense of stage 2 or sorry, stage 1 contribution this year for you guys?

Speaker 3

Thanks. Yes. Okay. We had some issues on our Stage 1s and that came in. And We had some design wins and very small volumes in different systems, actually.

Speaker 3

And now, All these issues are resolved and that will significantly gain the content and

Speaker 1

in each AI systems. And stage 1 for us at least to see the incremental ramp from these products in Q1 and Q2?

Speaker 3

Yes. We had shipping these products for some of the 48 volt systems. And also, we supplied We are as a supplier for chip in for the silicon, not for the modules. And

Operator

Our next question is from Matt Ramsay of Cowen. Matt, your line is now open.

Speaker 5

Thank you very much. Congrats, guys. Good afternoon. I'm going to ask both of my questions here together because we got 2 or 3 calls going on tonight and I don't want to end up on 2 lines

Speaker 2

at once.

Speaker 5

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 and 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. That's a great question. Otherwise,

Speaker 3

we're taking to All AI caught.

Speaker 5

Just really quickly on my second one, so

Speaker 6

I'll go

Speaker 5

back on mute.

Speaker 3

Can you go back to the Bernie, if

Speaker 5

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. Thanks.

Speaker 3

All right. Let me answer your first question. Sunakay, and you said it's inactive in M and A market segment. That's not What we do for the best for our shareholders, we don't acquire revenue. The reason is, is a cheap to grow revenue for NPS.

Speaker 3

But we do look do apply technology. And so this is the in the past, actually, We acquired a few. And financially, it's immaterials with our shareholders. And at this times and is big enough, we made these disclosures.

Speaker 1

And to talking about

Speaker 3

this Axios, it's the company that we worked with for 3 years already. And it's proven that their technology and with our Power Stage and we have proven very, very, very high end customers and make these products, okay, as very unique and never achieved in the histories, like, no 0 dispositions signals and same to speakers. And the cost is very low. The way we achieve that and also we achieve a lot of programmable is also software adaptive. And that I see it, When I listen to those sounds, it's really you bring an audio file as we put In a press release, put your audio file quality to everybody's home.

Speaker 3

To really lower down the cost.

Speaker 1

Yes. 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 still 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.

Speaker 3

Does that answer your question, Matt?

Speaker 1

Jen, I think we can move to the next one.

Operator

Our next question is from Tore Svanberg of Stifel.

Speaker 6

Bernie and congratulations on 12th consecutive euro 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 but something, you know, throughout the year.

Speaker 6

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.

Speaker 3

Well, you said, well, last year the growth is not very spectacular. It's like a one 1.5%. 1.5%. Okay. It's a yeah.

Speaker 3

Okay. But this year's, I think it's a who knows. In the last year, we didn't know until ChatGPT happened again and then the AI business took off And was out of our expectations, we didn't know. But to answer your questions, for to comment your questions, 11 what is 12 years, 11 years and consecutive year by year growth. And It's we follow our principles.

Speaker 3

And, okay, we want to first thing is, okay, we want to have make sure all the product, what we deliver to our customers, is the best product, best performance. And we want to beat all our competitions. That's number 1. Number 2 is we react. We react faster, we're nimble, and we fulfill our customer demand.

Speaker 3

And That's the pretty simple strategies that we followed. And We kind of disregarded what the market segment does, okay. And we don't chase those market segment. This year, Who knows, okay, whether one of the segments will grow, but I don't expect it will grow as big as AI, okay? In the recent quarters, in the last quarter or so, and we see all these orders come in and that came in.

Speaker 3

As we expected, those products are truly better than our competitors.

Speaker 6

Yeah. No. That make make makes sense. And and as my follow-up, I I think most people when it when they think about MPS, obviously, they think about power management and, you know, how much share you've gained there. But when I look at, you know, the Xyng acquisition, I think about your penetration into the data converter space, you're doing much more stuff on the single processing side.

Speaker 6

I mean, you're clearly building out, I think, a pretty impressive portfolio in what I would call more the mixed single part of the market. So Will you be able to maybe share that with us over time, I don't know, percentage or revenue collectively? How some how much these sub segments can represent for the overall business?

Speaker 3

Yes. Again, I think in the next Couple of years and you will see some significant growth from different area, from signal processing and for data converters And for of course, we talk about today's and which we already designed it in 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, like a silicon carbide and for and silicon carbide projects for green energies and for solar and for solar inverters. And, but these are still kind of power management, but A lot of them said, okay, we are other partners and these are for communications.

Speaker 3

And for communications in between the solar side, okay, so from an inverter side. And even the automotive side, look back to automotive side, there's a lot of other communication within the car and we're developing those type of products. And you see NPS in the next few years will migrate out to those segment.

Speaker 6

Excellent. Thank you and congrats again.

Speaker 3

Thank you.

Operator

Our next question is from William Stein of Truist. William, your line is now open.

Speaker 7

Hey, thanks. I'll add my congrats to the remarkably stable outlook. And along those lines, You know, 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 15 plus semi 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 have been really volatile since really since COVID started, I guess.

Speaker 7

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?

Speaker 3

Yeah. Those kind of models, It's a model is a model. Okay? And and, but I think it's a given times And we will be back in the models. And the model can be it's like a weather forecasting, right?

Speaker 3

Okay. So we build our models and we didn't predict this thunderstorms. And For like the last couple of years, with our models is not correct. And Either we have too much or we have too little. Okay?

Speaker 3

I mean, so given those kind of environment, economic Whether it's environment, okay, and that that model is not quite right. Okay. And and also our model is not very scientific leaders and okay is based on our empirical historical reasons. Okay. And but We should not deviate from what we see now, Tim.

Speaker 1

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 a stable market conditions where it's growing between about 5% 8%, it's easy to assume that we'd be between 15% 20% growth. On the gross margin or range that we target on a non GAAP basis is between 55% 60% And then when the environment is more predictable, we look to be able to grow gross margin 10 to 15 percentage point or basis points On quarterly successive quarters. Yeah. I might

Speaker 3

as well add it. Okay. We emphasize the product development and also 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 Okay. In my mind, and there's so many things going on.

Speaker 3

And so going to futures, I mean, and When a normalized, as Bernie said, is a more normalized economic conditions. And there's no reason we will not grow, we grow 1.5%.

Speaker 1

Okay. That's the

Speaker 3

way that's at least say it that way, so okay.

Speaker 1

But the market contracted 10%. Yes, yes. Okay.

Speaker 7

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 target is stale. I'm not sure.

Speaker 7

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.

Speaker 1

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.

Speaker 1

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.

Speaker 3

We will start to build inventory. Yes.

Speaker 7

Great. Thanks so much, guys.

Operator

Our next question is from Travis Poulin of Wells Fargo. Travis, your line is now open.

Speaker 8

Hi, guys. This is Travis on for Gary. Thanks for taking my question and congratulations on the results. I was wondering if you could provide color on how your customer base has evolved through 2023. Historically, MBS 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?

Speaker 3

Yeah. And I see these data that we grow our small customer base by a few 1,000 in the last year. And that's kind of exciting. I mean, and it doesn't mean we add a lot of revenues. And but in the longer term, the wealth.

Speaker 3

And the bigger the base, the better it is, the more stable NPS will be. And also, you don't know, okay, and what's the next hardest things, Okay? And our customer will will decide that. Okay? Or the market will decide it.

Speaker 3

Our customer will We'll take opportunity. If not this one, that one will. Okay. I mean, we just play the percentage And we just have our products goes out of doors, okay? And goes to Design Inc.

Speaker 3

To those customers. And in terms of which segments, I have to say it's everywhere. So this is okay. I can't remember any numbers more than as I grow older, more than 5 or 6 things. But that's the beauty of this.

Speaker 3

You want to go 1,000, okay? I mean, That will take a few years and it will turn into bigger revenues.

Speaker 1

And Travis, it's an excellent question because I think to align with Michael's points there is that the strength of MPS as far as resilience in different market conditions 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, you know over the next couple of 3 years.

Speaker 8

Yes. Got it. Thank you for the color. That's all from me.

Speaker 3

Yes. Okay.

Operator

Our next Question is from Tore Svanberg of Stifel. Tore, the line is now open.

Speaker 6

Yes, thank you. I just had 2 quick follow ups. First of all is on revenue capacity. So I know in the past, Michael, you talked about sort of getting to $2,000,000,000 in capacity. Obviously, you're there now.

Speaker 6

But then also any updates on getting to $3,000,000,000 and even $4,000,000,000 of revenue capacity?

Speaker 3

We are building for $4,000,000,000 revenues in capacities. China, okay. And that actually fits our plant and we'll continue to do that. And these kind of capacity issues, you look at NPS business. And we see, we believe these business will grow.

Speaker 3

And okay, we grow our capacity accordingly. It's really a disregard of what's the current environment. We address for long term issues.

Speaker 6

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, you know, just want to make sure we we check-in with you and get an get an update there.

Speaker 3

Our module business, okay, I mean, our is our Our pure e commerce, okay, I said it, okay, we didn't know what we are talking about and it wasn't Well, that's exciting. But the combination of it and with our web service in the e commerce and also some interactions that can help from our website. That generates 150,000,000 units now last year. And I can't call it that in a what was that, like a 7, 8 years 7 or 8 years ago, we got these e commerce business. Customer can log in to our websites, and we're gonna they can change their They can input their parameters and program our parts.

Speaker 3

We ship the product And, yeah, it's happening. I but I still believe in the long term That will be the business because we're lowering the power management, we're lowering 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 it in the arms and go to a lab, is that okay, to make it happen.

Speaker 3

And I think it's a little bit longer. Younger generations would do that and that it would be different from older generations. In fact, My generation is not gaming. And that business, I believe, in the long term will still picking up. But for now, it wasn't that bad.

Speaker 3

Okay, let's say that way.

Speaker 6

Great. Thank you again.

Operator

Our next question is from Melissa Fairbanks of Raymond James. Melissa, your line is now open.

Speaker 9

Hey guys, thanks very much. I was wondering if maybe I could squeeze 1 in about storage and computing business. I know it's not quite as exciting maybe as what's going on in enterprise data.

Speaker 3

That's not good.

Speaker 9

I know that that you know 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.

Speaker 3

You know the answer already. And I said overall it's not good. Overall it's a bad yet, but no. So we pick up We pick up some market shares and we start to grow a little bit. Yeah.

Speaker 1

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 and accepted lower margin business and but 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. Well,

Speaker 3

I think the DDR5, we expect to ramp it last year, right? Yes. I mean, it didn't happen that fast. Yeah. And so the key is, again, we make sure our products are designing.

Speaker 3

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.

Speaker 9

All right. Thanks very much, Michael. I'm sorry to bring up a sore point.

Speaker 3

That's not a sore point. It's a reality like everybody else is missing.

Speaker 9

Sure. All right. Thanks, guys.

Speaker 3

All right. Thank you.

Operator

Our next question is from Quinn Bolton of Needham. Quinn, your line is now open.

Speaker 2

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. And 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?

Speaker 2

Thanks.

Speaker 1

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 as I was observing for Q1 as well as for the balance of 2024, 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 30%, but right at this particular moment, it's hard to say

Speaker 3

what we have. Yeah. Let me talk about this. ZR13 And we didn't have any. And we are 13.5 and because that was about 2 and a half years ago.

Speaker 3

We have a lot of design win. We have a design win, a few, but by default, it's not gaming and other The customers, their customer, they couldn't get the they couldn't ship. And we are turning to be Bigger players. And like we are 4 teams in the back in the Few years ago, we're designing many different projects and we expect to be a bigger player. And So that's we still believe the same story.

Speaker 3

And When CPU market picks up and our revenue will start The result to growth. And so what is the last year? I don't even remember what was the last year? It wasn't spectacular numbers anyway. And I think sooner or later we'll turn around.

Speaker 2

Got it. Thank you.

Operator

If there are any follow-up questions, please click the raise hand button. As there are no further questions, I would now like to turn the webinar over to Bernie.

Speaker 1

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 Q1, 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 and A.

Speaker 1

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.

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Earnings Conference Call
Monolithic Power Systems Q4 2023
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