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spk01: 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 Singh, CEO and founder of MPS, Bernie Blagan, EVP and CFO, and Tony Ballou, 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 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 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 Blagan.
spk06: Thanks, Jen. 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. Q3-24 automotive revenue was up 28% sequentially, with improvements in infotainment, lighting, ADOS, 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.
spk01: Thank you, Bernie. Analysts, I would now like to begin our Q&A session. As a reminder, if you'd 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 Rick Schaefer of Oppenheimer. Rick, your line is now open.
spk05: Thanks, and congrats, you guys. I guess I've got a two-part question, if I could. The first is on enterprise data. It looks 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 know you listed a few of them, Bernie. You know, automotive, industrial, comms, consumer all look like they were up pretty materially sequentially. So, you know, is that, you know, how would you characterize those segments, which have sort of been lagging the last few quarters? You know, do you feel like those have made the turn? Sure, Rick. This is Bernie.
spk06: Let me start with the enterprise data. Sequentially, we were down about .5% from Q2. And that, you know, a couple 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 that's going to require a second or third competitor to, you know, 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 results. We try to deliver the company in total. And that's sort of a short-term view, but Michael may have a couple comments on a longer-term view.
spk04: Yeah, I mean, you probably, everybody knows that if you look at the transcript from the last years, we talk about that the market is big, the end of the market is growing, or the AI requirements is growing. And so the customers initially will always take the best solutions to fulfill their needs. And the best solutions and also the speed of the development service, as Bernie said earlier, and that's why we occupied pretty large shares. And last year we said, OK, this market is too big, and MPS will always have the best solutions in these applications. And we also talked about the market is big, there will be a second or third or fourth supply to join this segment. And when will that happen? We don't know. It happened in the last couple of quarters. Next year, what we see, again, the market is growing very fast. We have other ones like SOC side of market segments, and it hasn't really ramped up yet or started ramping. And the other ones like the hyperscales, crowd computing companies, and their own SOCs and their own TPUs, they call it the tensor processors, and those ones are still small. We're ramping in the next few quarters. And as Bernie said, MPS in the past, we always emphasize diversity, and we will not be known to be an AI power supply company.
spk06: 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 the next two or three quarters. Well,
spk04: again, as we said 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 or minus a year or so. Do we care? We don't. Okay. And now all these greenfield products start to germinate. And that's what you see in the revenue today.
spk08: 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 with an automotive than maybe we talked about previously.
spk05: Thanks for all that color, you guys. And maybe right on that point, on auto specifically, I realized that this is a broad-based pickup and it's basically design-win driven, as all things are with you guys. But I'm curious, I mean, Nvidia did really well the last year or two with Drive Orin, 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.
spk04: Well, China's again, EV business is booming. And now they've tapered off a little bit and looks like we're booming again. And we're going the right direction again. And there's a lot of requirements and the infotainments and the new type of infotainments and also the ADAS, 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, other than ADAS, we see a lot of other products and will grow in Germany and the US.
spk05: Thank you guys.
spk01: Our next question is from Tori Svamberg of Stiefel. Tori, your line is now open.
spk07: Yes, thank you and congratulations on the record revenue. I wanted to follow up on enterprise data. Obviously, I 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?
spk04: As far as I know, Q4, we don't lose any shares. And probably it's going to... And it was the same as the forecast. Okay, we don't, we can't really tell. And this forecast was given us to us a few quarters ago. And we just fulfill that demand. So we'll have... That's what we built for me in the last couple quarters.
spk06: 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.
spk07: Now, 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.
spk04: Well, the optical is a data converter, data communications within the data centers, within your reps. And that's a portion of it. But that's not all of them. In other words, the new Wi-Fi format and start to ramping up. OK, that's the MPS. We have a lot of reference designs and that's what we see across the continent. All these projects turn into a revenue now.
spk06: So I think the outlook for, again, MPS specifically, remains very solid. Generally, after you have a big initial stocking in a 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.
spk07: Great. Thank you for the color. I'll go back in line.
spk01: Our next question is from Joshua Buchalter of Cohen. Joshua, your line is now open.
spk09: 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 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.
spk06: So I think Michael offered that in Q4, we're not expecting Q3 and Q4, you know, to see, you know, shared position change. So that was really just trying to acknowledge that that is a function of being the market leader in 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. I don't know if the
spk04: TPU is, what I remember is a TPU, maybe Google's names, trademarked names. To me, it's a tensor processor. Yeah, it's all, that's what we mean. And it's all really, some of you referred to this as SOCs. And we have many design, we engage with many of our customers in many years ago. And those products, actually we see start to ramp in the last quarter. Yeah, okay. But
spk09: 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, maybe in relationship to power draw of the actual processors or any other helpful rules of thumb you can give us as we try to fine tune our models in the next year? Thank you.
spk04: Well, you said if you believe, 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 revenue will grow. The rest of the stuff, I don't get, we don't care. Just let it happen. Let the numbers speak self.
spk09: Thanks, guys.
spk01: Our next question is from Chris case of Wolf Chris your line is now open.
spk11: Yes, thank you. Good evening. I guess the first question. As we look at your guidance for the December quarter, you know, 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, you know, kind of growing or shrinking, you know, different from the average in December, and then following that, you know, given that enterprise data has grown as a percentage of revenue. Does that affect seasonality, as you look into the March quarter, you know, is there anything we should be thinking about with respect to the different customer mix as we go into March.
spk06: 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 there's a very, very, very narrow range that we're talking about there. And when we look out into, you know, the momentum carried into 25. Obviously, we don't guide beyond q4. But it is then seasonally down quarter for a lot of companies, but I don't know I don't have a view on what that's going to look like currently.
spk11: Okay, thank you.
spk04: We don't really care. So as long as we have a design, we design and we're in the project with our customers. And when those rents start to happen, our customers, they don't have a clear view. And let those products look at that takes its own own costs. Let the numbers speak self.
spk11: Okay, as a follow up, as you look into next year, the other part of enterprise data business on on traditional server, you know, 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. You know, we heard some some a little better news from at least one of the CPU vendors this week. Can you give some view of, you know, kind of the share content, you know, the what you're seeing in that part of the enterprise data business as you go into 2025?
spk04: Yes, that's a good question. Okay, man. And yes, we do see it. Okay. And the volume started picking up. And as we said, many, quote, many years ago, and this version, this what the rapid soft file something okay and the VR 14 and okay we will pick up a shares and 13 and a half. Okay. By serendipity of a shortage is okay and then we prove the West significant suppliers and okay in that. And they are four teams in what would be a significant. Well, one of the big supply in the, in the, in the, in this rapid soft fight.
spk08: And maybe just beyond just the enterprise data segment itself. As you see those ramp right they'll pull through other solutions like DDR five memory and continue to be a tailwind and some of the other segments as well. Thank
spk01: you. Our next question is from William Stein of truest William your line is now open.
spk02: 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 and market. And, 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, you know, some things that might be on the come in the next couple years from the company and that in that market.
spk04: Yes, okay. As you know, it's an NPS that can have a have a few thousands of products that we're in lighting we're in, we, we are in a formal step in the way in shades controls and the gray. All these are fam models and security, the window actuators in the window and door open, I mean actuators. And we also making MCU now. And those MCU can be a brain of everything or why we're just putting the one box. And we're putting a one one box with with with the software so looking me in. We sell as a kit. Everything is that everything's, including that it's the key is the ease of use. I think is this, this will change the market segment for for building automations.
spk02: That's helpful. Maybe as a, as a follow up. You mentioned your MC use now there's another category that you entered relatively recently you're not really known for it as much but data converters. I think you hired a team in that area and get some very good results for initial product maybe the medical and market. Can you talk about traction in that category, please.
spk04: We, we are growing in that in that segment the revenue still small, as you know, these are these are design cycles very long and okay and also the product life cycles, 1020 years okay and then in the last forever. And those segments win some in some industrial site, as well as the medical side. Okay, and we have as we have more product rolling out. As a matter of fact, in the next couple of. Next couple of quarters summer family of a standard product. We will, we will gain more market shares in the. In this segment.
spk02: Thank you. Okay,
spk01: our next question is from Ross Seymour of Deutsche Bank Ross your line is now open.
spk03: Hi guys thanks for really ask a question. 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 on firm 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.
spk06: I think Ross, we're experiencing a little bit of both. That is this. Is somebody else,
spk04: your house can you move it. Yeah, yeah. Okay. Yeah.
spk06: Okay. 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. Let me go back. The previous quarter, we actually saw improvements in our ordering patterns, but they're 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, they were coming to market now particularly in communications, particularly in automotive, and then also we saw an improvement in the overall profile of the memory market.
spk04: Well, as a matter of fact, we see all across the board.
spk06: Yeah.
spk04: Other than AI. And all across the board tonight.
spk03: And how are you, I guess, as my follow up, whether it's in the AI side or otherwise, a lot of supplies been added to the market over the last couple years to address shortages, etc. And so a fear people have is that pricing pressure is going to ensue, whether it's, you know, more competition and AI power that you mentioned earlier, or just a more aggregate holistic increase in pricing pressure. Are you guys seeing any evidence of that?
spk04: Well, our competitors, also some of the Chinese suppliers and the K and they always want to lower the price and to getting the market to getting the socket. Okay. That's not the game where we played. And so a lot of our customers, they don't change those socket. Don't they? They don't change our products can swap out. Okay. And quickly. And those kind of things is in that. And also, we emphasize diversities not in one segment. And a lot of a lot of shipments and a lot of volumes going to the one particular particular applications. And for examples like AI, and we will we will provide the values. Our value is the highest performance. And all the other products looking in that let our customers choose. And so the history telling us a history showed and as we as long as we we we operating the same same principles and the revenue will keep growing and growing the same way. And we see a next couple of years, especially next next years, we see all these product will grow. And now this which is to see the first sign of it and all these design wing turning into the revenue now.
spk03: Thank
spk01: you. Our next question is from Quinn Bolton of meet them. Quinn, your line is now open.
spk10: You 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 queue 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 was that customer? So,
spk06: Quinn, the 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. We never
spk04: put in a name out there. We know.
spk06: No, we do not.
spk04: Yeah, this time we will have still have a one customer is bigger than 10%. Yeah, as a Bernie can check the numbers and not get there. Is that is that about right? So only two. Yeah, two customers and above.
spk10: Above 10%. Okay, and
spk04: we'll get in the queue.
spk06: It's one or two.
spk04: I believe is the ones and I can't Bernie can check. No, it's only one two will be very big. I don't I don't believe we don't. Yeah.
spk10: Okay. The second question is, I know you don't want to guide to 2025 yet.
spk04: Hold on a second. Tony, could you check that? Yeah, could you check that is a one or two? So now I think that the second one is that is a lesson lesson 4%.
spk08: Yes, I'll check it. Give me 10 seconds. So I'll get back to you.
spk04: Yeah. So we are. Okay, this had to be on the record. And then let's make it clear. Go ahead. Okay.
spk10: Yeah, maybe, maybe while we're waiting for Tony, that my second question was, I know you're not going to sort of give us specific guidance out to 2025, but the street is looking for. You know, continued pretty strong growth in the enterprise data segment. I know you've talked about lots of cross currents in terms of. I'm 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 streets kind of looking for that business to hit almost 1.1 billion in revenue and just wondering if is that given your crystal ball, is that sort of a reasonable expectation? Do you think that we should be temporary and 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?
spk04: Yes, I can tell the very confident confidently, we will be okay. Let's say that. And when this market, when this AI markets turn into like a regular server market, NPS will be a significant player in that. And now this is not became a. What do you call it? Reach to equilibrium rates. Not a run rate. Yeah, this is still ramping up. And it's when this segment is ramping, when it starts ramping, it's kind of a lumpy. You don't see this thing. Okay, you don't see you can't keep going forever. Like the first two or since last year's and the first in the first couple of this quarters, first couple of a quarter in in this year's. Okay. And the next. So to answer your questions for next year's clearly so that we have a lot more customers. I said earlier, so that there will start to ramping those those design. Or turning to those of design will take into revenues.
spk08: I go just to circle back relative to this. We'll call out to for direct. We'll call out one.
spk06: Okay, that's a direct customer, not a Disney.
spk08: So we'll call one direct. We'll call out multiple.
spk04: 10%. Yeah, yeah, right. This year we never come in. That was in the cave because all the reporting. That's a that's in the reporting all the design creative creation all the exposures for the end customer is only one. The next one is a believe is a lesson. Listen, it's about definitely is below 5%. Yeah.
spk10: Got it. Thank you. Thank you.
spk04: Okay.
spk01: Our next question is from Tori's Fomberg of steeple. Tori, your line is now open.
spk07: Yes, thank you. I had a similar question to Quinn, but thinking more about vertical power. So enterprise data, you know, 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, you know, could we see this market base basically even accelerate over the next few years?
spk04: Absolutely. Yeah, not in the next few years. Next year. Yes, we are the other way. Said that we are playing the power module market segments and that gave me in since 2017 and all these technology, all these manufacturing capabilities. And that will really benefit the for these vertical powers. And as the speaking now, we are shipping those products in in in good volumes.
spk07: Sounds good. Thank you.
spk01: Our next question is from Ross Seymour of Deutsche Bank Ross. Your line is now open.
spk03: Hi, guys, let me thanks for let me get a little follow up snuck in here. Inventory. I know, Michael, you and I've laughed about that many times. It's like that's my favorite. There you go. Yeah. In this instance, internal inventory came down by a lot days wise. What did external channel inventory do? How are you looking at that was was some of that 35 percent sequential growth that I referred to in my initial question a little bit ago. Inventory fill or is the channel staying lean?
spk06: The channel staying lean. In fact, our total days went down in the quarter. Well,
spk04: we want to this not good. We want to build up. And as always, we build inventory in the. It's not synced with the with the market demand. And you see our Ross. OK, you're you're the expert of NPS NPS inventory. If you checked our inventory, our our inventory levels, it's it's the opposite of the market demand. And now the market depends for NPS. Now it's very high. So the income, the inventory is low. And we don't think we're going to rain into a shortage issue. So, in the case, but but it's it's it's at the inventory levels is the uncomfortable level.
spk03: Gosh, I guess just to clarify, Bernie, when you said total inventory actually went down, you mean just total channel inventory days? Channel
spk04: inventory. Yes. Channel inventory is also low.
spk03: Yeah. Got it. OK, that's it. Thanks, guys.
spk01: This now concludes our Q&A session. I would now like to turn the webinar back over to Bernie.
spk06: 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.
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