Monolithic Power Systems, Inc.

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 Singh, CEO and founder of MPS, and Bernie Blagen, 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. NPS 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 Blagan.

Thanks, Jen. For the full year, 2023, NPS 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 Exine BV. Exine is a Netherlands-based startup with early revenue, specializing in programmable multi-core digital signal processors. Exine's 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 Exine 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&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's total revenue in 2023, compared with 14.0% 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's 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's 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'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 remained 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, NPS 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 gap 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 gap 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 charged 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 gap 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 a 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 of 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 to $457.0 million. Gap gross margin in the range of 55.1% to 55.7%. Non-gap gross margin in the range of 55.4% to 56.0%. Total stock-based compensation expense, including associated employer taxes of $46.2 to $48.2 million, including approximately $1.4 million that would be charged to cost of goods sold. GAAP operating expenses between $147.2 and $151.2 million. Non-GAAP operating expenses to be in the range of $101.8 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 Ex-Sign acquisition. Other income before foreign exchange gains or losses expected to range from $5.3 to $5.7 million. Fully diluted shares to be in the range of $48.8 to $49.2 million, or 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 29th, 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.

Thank you, Bernie. Analysts, 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 Quinn Bolton of Needham. Quinn, your line is now open.

Hear me? Hey, Michael, Bernie, can you hear me? Yes. Yeah. 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.

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, our customers, that will be participating in that. But at the same time, we also believe that competition within the supply chain will continue. um so for a majority of the period to date we've enjoyed a pretty high percentage of market share but expect that that to decrease as we introduce second and third suppliers yeah but uh overall the overall um i want to edit and overall the market segment is grow and grow very rapidly rapidly and uh um we're um

We're expanding our production lines and we will meet in the second half of the demand.

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 uh perhaps lower cost uh you know 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 i always should be thinking about you know your your average dollar content for wind you still see that trending higher as power consumption goes up or is the increase in competition and perhaps you know efforts to design cost down cards uh starting to perhaps limit that dollar content opportunity

dollar content is a um well it's a as a market that uh accelerating and again we have a more uh our competitor joining joining okay and especially uh this a rate of a ramp and uh And also we see other players, other AI players will enter the market that we are so far way behind where they're pretty much the sole source of power solutions. And as you see the second half or sometimes in the next years, you will see a lot of other players to be qualified or they solve whatever the technical problem is or the art. So that's what we expect. The cost side, 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 during this fast ramp. And also the cost at this time is not really the issue. It's all about a throughput and to meet the customer demand.

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.

For AI systems.

For AI, yeah. And the next... Next version of it, the power is even higher, much higher, as Bernie said. And we started to do these product developments back in a couple years ago. And we're about to release it to our customers in this quarter and next couple of quarters.

Perfect. Thank you for all that color.

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

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 autumn. 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 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.

Good questions. Good observations. And toward the end of the last year, it kind of auto-slows down. But overall, as Bernie said earlier, we still grow some high 20-30% somewhere in the overall. in all those segments. These are mostly due to the ADOS and the infotainment or whatever the head units call it, or the digital cockpit. Going for next year, we believe we see all the activities and customers nowadays are consuming all these inventories that we ship. in the May or June period times, and now they start to have a higher volume ramp, especially in the EV side. So for this year's, first part of this year's.

So I think that there is been some softness that has occurred in 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 what the second half of 24 the ramp might look like for automotive.

Right. The ramps in the early adoption in an EV is very lengthy and the different automakers and the ramp in a different schedules. But overall, the trend is they will pull out more EV with more our products.

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. I know you've got a stage one 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 one power will do to your content, will do for that enterprise data segment. And I also was curious, only because you mentioned it a couple times, new competition coming in 48-volt. And I was just curious to get your thoughts on if it gets harder for the competition going forward as guys like NVIDIA move from a two-year cadence on new processor development to an annual cadence. Thanks.

All right, yeah. This game is always the best performance. So far, our competition, I don't want to speak our competition. what we have, okay, and our customers are very receptive to our solution. So far, we pretty much have a majority of the volumes, okay, and they keep requesting it. people requesting we solve all these issues related to their system issues, ours and the issues from our side. And so when even the volume gets even bigger, It's good to have another source. Otherwise, you don't want NPS to become all of them. That's not what we intend to do. Also, The competition is exactly like a server side. And we were the newcomer in the server market back a couple years ago. And that's how we won the market. And we had a product. long before that. And we also need to dumb it down to meet the common footprints because the power density is not high enough. And when this AI comes on the market, the common footprint is not a requirement. we start to win a lot of market a lot of shares and uh and the same as in the servers and uh have a very uh similar trend and uh um that's how we win the market and uh it we always want to do as we said in the in the past we want to push in the technology we want to make sure we're the best

And Michael, any sense of stage two, or sorry, stage one contribution this year for you guys? Thanks.

Yes, okay. We had some issues in stage ones, and we had some design wings and very small volumes in the different systems, actually. And now, okay, all these issues are resolved and that will significantly gain the content in each AI systems.

And stage one, for us at least, is represented about 20%, 25% of the dollar content of stage two. And we expect to see the incremental ramp from these products in Q1 and Q2.

Yeah, we had shipping these products for some of the 48 volt systems. And also we supplied as a supplier for chip and for the silicon, not for the modules. And now we step up to our modules.

Great. Thanks, you guys.

Our next question is from Matt Ramsey of Cohen. Matt, your line is now open.

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 at once. 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.

That's a great question. Otherwise, we're taking to the all AI part.

Just really quickly on my second one, so I'll go back on mute. 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. Thanks.

All right, let me answer your first question. You said it's inactive in the M&A market segment. That's not true. We follow our... Well, it's not really a policy. We follow what we do for the best for our shareholders. We don't acquire revenue. The reason is it's a cheap to grow revenue for NPS. But we do acquire revenue. technology. And so in the past, actually, we acquired a few. And financially, it's immaterial with our shareholders. And at this time, it's big enough. We made these disclosures. And to talking about this Axion is the company that we work with for three years already. And it's proven that their technology and with our power stage and that would be a huge benefit in audio signal to audio amplification fields. And we have proven in very, very high-end customers and make these products very unique. And never achieved in history no zero distortions. signals and send to speakers and the cost is a very low the way we achieve that and also we achieve a lot of programmable it's also software adaptive and that I see it when I listen to those sounds It's really, you bring an audio file, as we're putting in the press release, put your audio file quality to everybody's home to really lower down the cost. And that will revolutionize how we listen.

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 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.

Does that answer your question, Matt?

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

Our next question is from Tori Svanberg of Stiefel. Tori, your line is now open.

Yes. Thank you, Michael, Bernie. And congratulations on 12 consecutive year of growth, especially in this environment. That's stunning. My first question for you, Michael, is, you know, 2024. So you've already talked about AI and, you know, Bernie just sort of gave us directionally things for Q1. But you always seem to surprise us a little bit with something, you know, 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.

Well, you said last year the growth is not very spectacular. It's like a one, what is that? What is that, single digit? Oh, one percent. One and a half percent. One and a half percent. Okay. It's, yeah, okay. But this year, I think it's a who knows. Last year, we didn't know until chat GPT happened in the game. 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 questions, 11, what is it, 12 years, 11 years in a consecutive year-by-year growth. it's we follow our principles and okay we want to first things okay we want to have make sure it's 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 one number two is we react we react faster we're nimble and we fulfill our customer demand 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 segments this year who knows okay whether one of the segments will grow but I don't expect the world growth as big as AI 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 ourselves and we see all these orders come in and as we expected those products are truly better than than our competitors.

Yeah, that makes sense. And as my follow-up, I think most people, when they think about MPS, obviously they think about power management and how much share you've gained there. But when I look at the Exine acquisition, I think about your penetration into the data converter space. You're doing much more stuff on the signal 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, percentage of revenue collectively, how much these sub-segments can represent for the overall business?

Yes, I think in the next couple of years, you will see some significant growth from different areas, from signal processing for data converters and And of course, we talk about today's and the audio process, which we already designed it in some high volume consumer market segments. And later, we're going to get into automotive and automotive business. Other ones, we have a lot of small things, a lot of other things like silicon carbides and silicon carbide projects for green energies and for solar inverters These are still kind of power management, but a lot of them are for communications and for communications in the solar side, from the inverter side. And even the automotive side, look back to the automotive side, and there's a lot of other communication within the car, and we're developing those types of products. And you see NPS in the next few years will migrate out to those segments.

Excellent. Thank you, and congrats again. Thank you.

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

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 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?

Yeah, those kind of models, it's a model is a model. But I think it's a given time and we will be back in the models. And the model can be, it's like a weather forecasting, right? We build our models and we didn't predict this thunderstorms. And for like the last couple years, our model is not correct. Either we have too much or we have too little. So given those kind of economic weather, the environment, and that model is not quite right. And also our model is not very scientific either. It's based on our empirical historical reasons. But we should not deviate from what we see now.

And just to give people a refresh of what the model is that Will is referring to is generally speaking, we outperform 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 we'd be between 15 and 20% growth. on the gross margin or range that we target on a non-gap basis is between 55 and 60 percent um and then when the environment is more predictable uh we look to be able to grow gross margin 10 to 15 percentage point or basis points uh on uh quarterly successive quarters yeah i might as well uh edit okay we emphasize

the product development and also the customer's design weight. And I do see a lot of wings and arm many different segments I said earlier, and probably I forgot even half of it, okay, in my mind, and there's so many things going on. And so going in the futures, and when a normal, as Bernie said, is a more normalized economic conditions, And there's no reason we will not grow. We grow one and a half percent. Let's do it. Let's at least say that way. OK. But the market contracted 10 percent. Yeah. Yeah. OK. Yeah.

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 my view of the target is stale. 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.

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 and we're right now just a little bit above our model.

We will start to build inventory. Yeah. Yeah.

Great. Thanks so much, guys.

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

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, 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?

Yeah, I see these data as we grow our small customer base by a few thousand in the last year. And that's kind of exciting. It doesn't mean we get a lot of revenues, but in the longer term, the wealth. And the bigger the base, the better it is, the more stable NPS will be. Also, you don't know what's the next hardest thing. Our customer will decide that, or the market will decide it. Our customer will take the opportunity. If it's not this one, then that one will. We're just playing the game. play the percentage and we just have our products goes out of doors and okay and 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 I can't remember any numbers more than as I grow older than more than five or six things okay But that's the beauty of this. You want to grow thousands. That will take a few years and it will turn into bigger revenues.

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 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. Yeah.

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

Yeah.

Okay. Our next question is from Tori Svanberg of Stiefel. Tori, the line is now open.

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, you know, also any updates on getting to $3 and even $4 billion of revenue capacity? Yeah.

We are building for $4 billion revenues and capacities. And actually, we never changed. And especially out of China, that actually fits our plan. And we'll continue to do that. These kind of capacity issues, you look at the NPS business, and we see, we believe these business will grow. We grow our capacity accordingly. It's really a disregard of what's occurring in the environment. We address for long-term issues.

Very good. And then the other follow-up, any updates on the e-commerce business? You know, we haven't heard about that in a while. So, you know, just want to make sure we check in with you and get an update there.

Our module business, okay, is our... Our pure e-commerce, I said, okay, we didn't know what we are talking about and it wasn't that exciting. But the combination of it and with our web service and the e-commerce and also some interactions and help from our website. That generates 150 million units now last year. And I can't call it that. What was that? Like seven, eight years ago, seven, eight years ago, we got these e-commerce business customers logging our websites. They can change their port number. 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 yeah, it's happening. 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 product, and especially younger generations. And they have, they rather program a product rather than use a solid line, putting it in their arms and go to a lab to make it happen. And I think it's a little bit longer. Younger generations will do that. And it will be different from older generations. my generation. And that business, I believe, in the long term will still be picking up. But for now, it wasn't that bad. Okay, let's say that way. Great. Thank you again.

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

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.

That's not good.

I know 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. Yeah.

You know the answer already. And I said, overall, it's not good. So we pick up some market shares and we start to grow a little bit.

Yeah. 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. 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 NetNet did pretty okay in a pretty difficult market. Wow.

I think the DDR5, we expect to ramp up last year, right? It didn't happen that fast. So the key is, again, we make sure our products are designing. And when these products will ramp, it's not up to us. And we actually care less. But we only care that we have a product to ship.

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

It's not a sore point. It's a reality like everybody else is facing. All right.

Thanks, guys. All right. Thank you.

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

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%. 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.

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 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.

Yeah, let me talk about this. We are floating. And we didn't have any. And VR 13 and a half. And because that was about two and a half years ago. We have a lot of design wing. We have a design wing, a few. But by default, other customers, their customers, they couldn't ship. And we are turning to be the... uh a bigger players and like a vr vr4 teams and uh in the back in a few years ago that we're designing a many different project and uh we expect to be a bigger players and uh and uh so that's uh we still believe the same story and uh um when the cpu market picks up And our revenue will resume to growth. And so what is the last year? I don't even remember. It was the last year. It wasn't spectacular numbers anyway. And I think sooner or later we'll turn around.

Got it. Thank you.

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 back over to Bernie.

Great. Thank you very much, everybody. 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. um we will provide you uh 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 recording in progress yeah read this thing much easier yeah much easier yeah welcome everyone to the webinar in you again in april communication so with that i will thank call portion more and more communication So with that, I will thank you and again, I look forward to seeing you again in April.