Monolithic Power Systems, Inc.

Welcome, everyone, to the NPS Third Quarter 2025 Earnings Webinar. My name is Arthur Lee, and I'll be the moderator for this webinar. Joining me today are Michael Singh, CEO and founder of NPS, Bernie Blagan, EVP and CFO, and Tony Ballou, Vice President of Finance. Earlier today, along with our earnings announcement, NPS released a written commentary on the results of our operations. Both documents can be found on our website. Before we begin, I'd like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. The risk, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q3 2025 earnings release, our Q3 2025 earnings commentary, and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now, I'd like to turn the call over to Bernie Blagen.

Thanks, Arthur. Good afternoon, and welcome to our Q3 2025 earnings call. In Q3, NPS achieved record quarterly revenue of $737.2 million, 10.9% higher than the second quarter of 2025 and 18.9% higher than Q3 of 2024. This performance reflected the ongoing strength of our diversified market strategy, consistent execution, continued innovation, and relentless customer focus. Let me call out a few highlights from the third quarter. A diversified market strategy drove year over year revenue growth in all of our end markets. We continue to expand our automotive customer base with another major tier one supplier adopting MPS for its next generation ADOS solution. Additionally, we secured our first design win for a full BMS solution on a robotics platform, which further supports our transformation from being a chip only semiconductor supplier to a full service silicon based solutions provider. Overall, we continue to demonstrate our ability to grow and swiftly adapt to all aspects of our business to the fluid geopolitical and macroeconomic environment. Our proven long-term growth strategy remains intact as MPS focuses on innovation and solving our customers' most challenging problems. We continue to invest in new technology, expand into new markets, and to diversify both our end market applications and global supply chain. This will allow us to capture future growth opportunities, maintain supply chain stability, and quickly adapt to market changes as they occur. I will now open the webinar up for questions.

Thank you, Bernie. Panelists, 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 Josh Bukalter of Cohen. Josh, your line is now open.

Hey guys, thank you for taking my question and congrats on another beat and raise. I guess to start, maybe guiding up about a percent, can you give us the puts and takes of which end markets you expect to grow more or less? And of note, I think earlier you mentioned enterprise data was expected to be flat to down 20%. Any updates to the guidance for that segment in particular? Thank you.

Sure, Josh. When you look at Q3, I think that we saw a little bit better than anticipated performance in both our enterprise data and industrial markets. We had pretty much every other group was as we anticipated. Looking ahead, and I know that you're interested in enterprise data, we're seeing a layering of additional customers that began in this layering effect in Q4 and is providing this good momentum as we look ahead into the early part of next year.

Well, I should add, all these in the script readout, Bernie mentioned a list of market segments, and they've started growing. And we look back in the last few quarters, All these growths come from Greenfield products that were released two, three years ago. And now we see the result. And so in near future, in the next few quarters, we will see these will continue to enhance our revenues.

Thank you for the color there. Maybe a follow up on that, Michael. You know, I think you've been pretty clear, like philosophically, you have some reservations and even frustrations with the AI market because of the concentration and visibility. Given all the massive announcements over the last decade. quarter even or in that space maybe you could spend a couple minutes talking to us about you know just big picture philosophically how you're approaching these huge forecasts and i'm sure competitive sockets with with massive scale um you know how do you guys figure out which opportunities to go after and service and and and your thoughts on the market just given you know i think you've had frustrations about it distracting from your diversified growth thank you both

Yeah, as you said, yeah, it is a kind of a distraction, okay? But business is a business. The good money is a good money, okay? We don't want to take a bad money, okay? But overall, the bottom line is NPS want to demonstrate in any segment of a market, we are the best, we have possessed the best technology and the best customer service. And we're solving problems, we demonstrate that we can have our qualities and shipments and okay, all these categories, we are the best company. And in terms of which AI company, we don't really care. We engage with the large companies and the small companies. And we want to demonstrate that this is the best technology. When revenue comes, it comes. And given times, as we said it, given time, All the true color will show.

Thank you, Michael.

Our next question is from Ross Seymour of Deutsche Bank. Ross, your line is now open.

Hi guys, can you hear me? Just fine, Ross. Perfect, thank you. I guess for my first question, the automotive side of things, you talked about getting an incremental design one in the ADAS side of things. There's a lot of choppiness in that end market across different geos and at different points in time, cyclically, geopolitically, all those sorts of things. But from a secular growth perspective, can you just talk about ADAS as a percentage of your revenues now versus user interface or USB and those sorts of things? And how ADA is penetrating more of that market changes the growth rate, the content, the diversity of it. Just kind of want to capture that ADA's theme and what it really means to you.

Sure, why don't I take a start at this? So I think that we've demonstrated a history of establishing a strong presence in various markets with differentiated technology. You might recall going back a ways, it was USB ports for automotive, and now it's ADOS. And what this does is it has a cascading effect. where we're able to get adoptions and the design wins, and we call out when these begin to ramp. And that's actually been more important to us than necessarily what the SAR is for a particular end market. And in this one in particular, we have started with a lot of ADAS opportunities, particularly in the EVs, because they're faster to come to market. But what that's given us the opportunity has been to showcase all of our other technologies. And now we're starting to see those ramp, whether it's in body electronics or different applications. What we're more excited about is as we look ahead and the transformation of the end market for automotive as it moves into 48 volt and zonal electronics.

Yeah, we don't know the breakdown, to answer your question exactly. I mean, maybe Bernie has some ideas, but I think it's less than half. I think it's well less than half. Okay.

It's considerably less than half.

Yeah, yeah, yeah. Okay. And I'm just looking at the number of cars and also our revenues. And I cannot be more than half. So I can miss. But In the ADAS side, more and more cars, including combustion engine cars, they're adopting ADAS. We will see a significant growth in the next few years. That's where we anticipate it.

Great, thanks for that, Culler. I guess as my follow-up, pivoting to another thing you talked about in your press release of moving from a chip-based supplier to more of a solution provider. How do you think about the gross margin implications of that over time? You know, you guys were a few points higher than you are now. A couple of years ago, we've talked about what does it take to get you back to kind of the upper 50s from the mid 50s ish where you are today. Does that system approach help or is that actually a headwind in the gross margin as you go forward, as much as it might even be operating margin accretive?

I don't think so. I don't think there will be headwinds. A lot of large systems that we're building, we're kind of learning how to do it. It creates a lot of issues. Once the volume goes up, we're learning. I think things get a lot better since since last year, I guess. It will improve quite a bit. We're actually making our own tested equipment, as a lot of people know about it. We eat our own dog food. and creating all fully automated test systems. Those type of products never existed before. And I think that ultimately will improve the yield and improve the gross margins.

Thank you.

Our next question is from Joe Quattrochi of Wells Fargo. Joe, your line is now open.

Yeah, thanks for taking the questions. Maybe first, I just wanted to ask, you know, with Betted within the 4Q guide, is there any help you can kind of provide in just thinking about the end markets? I think there's some, you know, seasonality to maybe like a consumer in the fourth quarter. And I think in our price data, you guys were previously thinking that would be up somewhere like high single digits sequentially in the December quarter. Is that still the case? Yeah.

To anticipating a market, that's a very difficult call. As you guys are betting on which stocks, it's difficult. We have our way of operating our business. We do the best. We do the best, develop a technology, engage our customers closely, and probably the same way that you pick, how you pick a stock, okay? And so you engage customers closely. Whatever happens, happens. And you can't predict what the market is. And we don't do that, actually.

And if I could just add to that, that since we last talked about the second half of this year, nothing's fundamentally changed in our positioning.

Okay. Thanks for that. That's helpful. Maybe just also following up, like, you know, I think in the press release or prepare remarks, you had a comment around the first design win for a full BMS solution for robotics platform. Can you talk about what drove that and how you think about the revenue opportunity ramping there and more wins in the future?

We probably get too excited to talk about those. The fact that we got excited is because we see robotics happening. we kind of predicted that the BMS is going to happen. And we got in, and we designed it in, and our customers engaged with us. There's a ground-up system that we developed. And we see more and more this type of a system will happen. So... Now, this kind of system will become a reality. So that's the reason we put out there to look at.

Yeah, and I'll just add on very specifically on that one. Clearly, we called it out because of the fact it was the first opportunity that we had the design went on. In terms of a revenue ramp, that's really starting in 2026, and it's not in and of itself necessarily a needle mover on the model. But I do think it sort of starts the wave of these full solution design wins that we might have going forward.

Yeah, that's kind of the same time we're making a point that is, OK, we do start to do robotics stuff for the actuators and the IC4 actuators and the BMS charging, wireless chargings. And these are back a few years ago. We don't even know the robotics world taking off. I've been talking about robotics since 2017 or 18. But the AI assist robot, more and more believes, okay, that will really start taking off. And so that's kind of a project that we think is, oh, we picked the winners. Okay. And we're glad to see it. And okay, that's why we're probably too excited to talk about this.

Thank you. Our next question is from Quinn Bolton of Needed. Quinn, your line is now open.

Thank you. Congratulations, Michael, Bernie, and Tony. I guess I wanted to start with a big picture question. Just looking through this earnings season, Intel's talked about shortages of server CPUs. We've seen hyperscalers. significantly increasing capex. NVIDIA talked about half a trillion dollars of demand in 25, 26. I guess my question is about a year ago, I think you guys were seeing very, very short lead times in that business and dealing with some level of pricing pressure. I'm wondering, as you're looking at the second half and more importantly into next year, Have you started to see any change in customer lead times? Are they giving you better forecasts across the enterprise data segment? And is the pricing on voltage regulators and vertical power, has that changed at all over the last quarter or so?

Thanks for the question. Let me start that this remains a very dynamic market. We're responding to a variety of requests when it comes to the orders and the expectations from our customers. So in some ways, we're getting improved predictability because we're adding more We're layering, as I said, more customers into the mix. But as far as the market itself, and particularly with all the blockbuster announcements that have been coming out recently, you can see how quickly things are changing. And what our position is, is that we can't control our customers necessarily, but we can position the company to be as responsive as we can.

Is this sort of dynamic market? I mean, if folks are scrambling sort of to get capacity, has that had any lifting effect on pricing? And then I'll ask my second question.

Yeah. Well, any market segment started to form and ramp rapidly at the beginning. So always cause these imbalance supply I mean, so in the AI side, clearly it's like that. I mean, once it goes on, things will smooth out.

Yeah, and then being specific to your question, I don't think we've seen any recent or sustainable trends in pricing one way or the other.

Okay, perfect. And then the second question for you, Bernie, gross margins have been sort of on a, you know, sort of ticking down over the last year or two. Can you give us any sense, you know, do you think they sort of stay in this mid 55, 55 and a half percent range? Is there some point next year that you start to see gross margins starting to move higher, either driven by mix or new products or, you know, should we be thinking about margins being fairly flat over the next year or two?

Sure, as I've commented on prior calls, we've seen about three or four quarters in a row where I'd say that we have seen a strong uptick in demand and that continued even today. What makes this cycle different than ones that we've experienced in the past is that the orders are more short-term in nature. We're not seeing a large buildup and backlog in future quarters. And so without that visibility, it limits our capacity to be able to manage the mix of business that we want to be able to have expansion and gross margins. So for the foreseeable future, until the demand profile changes to elongate, the buildup of backlog. I believe that we're going to be in sort of this steady range plus or minus 20, 30 basis points in the mid 55.

Got it. We have a lot of products. Okay. A few thousand products. Okay. And a few 40, 50,000 customers. and it's very stable margins. With the transitions to more solution provided companies, as I said earlier, all these things has to be automated. As time goes on, the margin will improve, but not quickly. And that mass is very big. And so we know it is operated on the low end of our margin profiles. But the longer term will improve. And we stick with a gross margin range.

Got it. Thank you. Our next question is from Tori Swanberg of Stifel. Tori, your line is now open.

Yes, thank you. Michael, Bernie, Tony, congrats on another record quarter. By the way, some of that dog food you're referring to must be pretty proprietary stuff. But my first question is on the enterprise data segment. So that's about an $800 million business right now. And my understanding is you're on a journey here, right? And you're still selling predominantly chips. You are obviously moving into module subsystems, eventually systems. So I'm not looking for any numbers per se, but could you sort of let us know where we are in that journey? I mean, building an $800 million business with chips and where could we eventually go here with obviously more and more subsystem type solutions for enterprise data?

If I understand your question correctly, I can answer that way. We're anticipating building millions, multiple millions of units per month type of shipment. all of these highly integrated modules never existed before. So how do we test this thing? How we achieve low single digit PPM failures? That is a... We never encountered that kind of issues before. And so we start to using our own robotic systems to make that happens. So now we achieve the very high volumes, 100% automated, including reliability test. And that's our features. And the goal is that building multiple million units a month for that. 10 million a month for that. That's the newton gold.

Yeah, that's very helpful. Thank you for that, Michael. And did you also have a response to my question on the enterprise data? Again, where are we in this journey towards delivering more system level solutions, especially talking about rack level power and so on and so forth?

This is at the very beginning, maybe, I think it's a module power skills, less than a third, okay? And less than a third of our revenues, and it grow in the last half years. And we expected it to grow, some got delayed, and it didn't. and then now start happening in the next years could be much more.

Great. Thank you for that, Michael.

And maybe just to add on to the back of that, Tory, I think as you start talking about some of these solutions for 800-volt, as you discussed, those are like 27, 28 revenue ramps. So I think it supports what Michael was saying, that we're still at the front end of this opportunity in the data center for us.

Yeah, I think in the investor investment communities, okay, it's the, if you have 800 volts of technologies, and the data center transformer is like a flip a switch, the lights turn on, turn on, it's not like that. Okay, the light turn on, it takes a couple of years, okay, more than a couple of years to make it to see the revenues. Okay, these are take a three, four years.

Great perspective. Thank you again.

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

Oh, thanks. And I'll add my congratulations, you guys. Just maybe if I could start with an auto question, you know, kind of a follow up. But I know we talked about BMS robotics, but I know BMS becomes a bigger contributor for your auto segment next year. And you mentioned a couple of things, Michael, earlier. he gives some, some guide rails or provide some guide rails about potential content trends for NPS, you know, as you start ramping some of those BMS opportunities. I mean, again, not asking for dollar content per car, but you know, does it, does it double or triple, you know, those kinds of numbers, like what, what does it do to your potential content per vehicle moving into that BMS space in a more meaningful way? And as part of your answer, I'm curious, you know, where some of the low, where the, some of the lowest hanging fruit is for you guys. Yeah. I mean, is it 48 volts? Is it power isolation? You know, that kind of thing. Thanks.

It's actually all of them. BMS revenues for autos and for EVs, it's a bit far away. But our customer, this is a very... a concentrated market with a few players and a few, well, not a few, car makers and gradually all of them. So they have, they want to be a mess. And so our customers are glad to see MPS is in this, to develop that series of, that type of a product too. And in terms of other low-hanging foods, we see 40 Evos as a trend. And we develop all those products back in a few years ago, like five, six years ago. And we provide all these integrated solutions rather than these discrete ones. And the size can be six, seven times smaller. And the other one is the 800 volts for EV. And then now, okay, all goes up. And from 400 volts to 800 volts, okay. And... In the China market, a lot of cars already have 800 volts. So our silicon carbide solutions, not for traction inverters, and for control systems, these products will be shined. And so that's, I pull off my hairs at this moment.

And Rick, maybe just to shape you a little bit on timing there to make sure, I think what we said is the layering of opportunities in auto really sort of out of the end of this year and next year starts with design wins that we have, bringing new content to market per vehicle. You start to see zonal designs hit market next year, then ramping through into 27. And then the BMS and traction inverter solutions are really kind of more like 27 and beyond, just to make sure you understand sort of how those revenue opportunities are layering in.

Thanks, Tony, for that color. And thanks, Michael. And then if I could ask my follow-up, it's on HVDC. And I appreciate the timing commentary you provided a second ago, Tony. But I'm also curious. I mean, I'm just trying to figure out the right way to think about that emerging market. I mean, can you give a sense of how HVDA compares to sort of how you've described at your analyst day earlier this year, maybe how you described the 48-volt accelerator power opportunity? Yeah. or in any terms you want, just to try to give a sense of what that market represents to you guys or what you think it could.

I think it's the 48 volts system. It's clear. There's a reason why the 48 volts is going back to those telephone times. And telephone systems is 48 volts plus minus 48 volts. And or plus or minus 45 volts. And first, it started with a server side. We'll talk about it for years, this thing. And it has to be the solutions, because once the current goes up, everybody remembers the car using the 6 volts batteries. And then it became 12. It's ultimately, OK, moving up to 48 volts. I mean, these are all for control systems, 48 volts. And the data center is already happening, 48 volts. I see, that's what I predict, all the building system, all the building automations, all going to be on 48 volts. And the building will be a DC power solutions. But the opportunity is great. And as we put out to engage our customers with building automation systems, and we prove the point, actually, it's so welcome for that type of a product. And so that's my view at this time.

And Rick, I think part of your question was also on the 800-volt high-voltage DC for data center as well, right? Yes. And I think on that one, we've been pretty careful about trying to go size the opportunity because, one, it's very far out. Two, we don't know how it will ramp in the market. I think what we have said is since we don't play in that part of the market today, the business we get is sort of all accretive. to our overall SAM going forward. But I think we want to be careful about size in the market yet, given how far out it is and not knowing how it will layer into the data centers going forward.

I appreciate that. Thanks, you guys.

Our next question is from Gary Mobley of Loop Capital. Gary, your line is now open.

Hey, guys. Let me extend my congratulations on the continued strong growth and continued execution I appreciate the fact that you still only have about three to four months of visibility, given the capacity that you can support and the quick turns business you can support. But can you confirm whether bookings continue to improve sequentially? And what are the seasonal considerations as we look out into the first quarter?

Again, it's very difficult for us to predict that, okay, what's the booking? Where's the bookings? We build our inventory. We try to build and look at the inventory now, and we try to build up. It's way below our models. And whatever comes, we anticipate it. We can swiftly to adapt.

Just to add to that is that we really don't have a lot of visibility into the first half of next year. We can definitely point to the normal drivers as far as both enterprise data and automotive are very well positioned for new revenue ramps. But getting both the timing as well as getting that to balance out, we don't have a strong view on Q1 yet.

Okay, appreciate that. And If I'm not mistaken, your distribution inventory as of mid-year was at the low end of your five- to eight-week target range, and it decreased in the June quarter. What was the trend sequentially for the September quarter, and when might you take that distribution inventory back up to maybe the mid- to upper part of that normal range?

Yeah, currently the Q3 channel inventory was unchanged. in terms of days from where it was in the prior quarter. So we take from that that we're satisfying real demand at this point, which again is a reflection of the quick terms business that we're working with.

Thank you. Our next question is from Chris Castle of Wolf Research. Chris, your line is now open.

Yes, thank you, good evening. Well, the first question is on enterprise data and what are sort of the puts and takes as you look into next year? And of course this year there was some changes in market share in that which affected that business. But I guess I'm gonna assume that things are cleaner as you go from this year into next year? And, um, I mean, one, do you, do you expect to grow that business as you go into next year?

Well, it's a cleaner. If you say that this year, the next year, this year is like a, we're doing pretty good this year. So, okay. I mean, uh, and, uh, um, See, as I said earlier, the module business is growing. So all this area, NPS technology shines. And the higher power, the better it is. And because we provide the highest power density products, that fits this market perfectly. In the next couple of years, you will see it. NPS is a major player in this market segment. And also the market is big. We don't want to play, so we don't want to be an NPS only. You want to have multiple competitors. It's good for the industry.

Yeah, I could see enterprise data growing in the range of 30% to 40% in 2026 for us. Much of that, though, would be back in the second half of the year. So while we've seen a number of new players that have been layered in, I think the material ramps are more weighted to the second half of 2026.

Uh, that's very helpful. If I could follow on to that, uh, you know, since, since you, you provide a little bit of color on that, Bernie, um, when you look at that 30 to 40% growth is, is that, uh, you know, because I, I know that, you know, some of the, uh, the vertical power of designs, for example, you, you have more content, um, uh, What's the driver of that? Is it fairly broad-based? Is it skewed towards some of the ASIC solutions, more towards vertical power? Whatever kind of color you can give behind that 30% to 40% expectation.

As a CEO, I don't know how to make a 30% to 40% cost. I don't know. And the opportunity is there. If we didn't deliver 30 or 40% of the stocks that I see from $900 to $400, what kind of fuck up is that? So I don't want to make them very hard. Just waiting for the numbers. Let the numbers show.

Fair enough. Thank you.

Our next question is from Kelsey Chia of City Research. Kelsey, your line is now open.

Hi. Hi, Michael and Bernie. Thanks for taking my question. So my question is on the competitive landscape. And I was hoping if you could share more, especially with regards to material side of things, like Gallium Nitride, silicon carbide. I think your biggest enterprise data customer has been signing a lot of partnerships with all these semiconductor companies. And I was just wondering MPS positioning in those And if you actually see those materials as being important in the next generation of the power modules and chips.

We do our own silicon carbide. And we're building the modules. And also, we are using a game. But that's a very, very early stage. We're evaluating it. And also, don't forget about silicon. Silicon power MOSFET has evolved. We engaged a lot of new developments. And a lot of the data showed it can be very cost effective and also can compete with the silicon carbide.

Got it. Thank you.

That's a very new, that's a very, very recent development.

Yeah. Okay, got it. And I would just like to have a sense of how do you guys feel today versus a quarter ago, especially you guys have come a long way, you know, since the start of the year when you're dealing with all these market share changes, visibility on the ASIC customers and things like that. And given the slew of announcements from from all these big mega partnerships. How do you see that relative to our opportunities? And also, you know, given the maturity of the supply chain, I believe like things are probably, you know, the supply chain partners are getting to a good cadence. So how do you guys feel with regard to those recent announcements relative to your to your opportunity set?

I don't measure quarter by quarters. I measured by multiple years. So I can't tell you that.

I guess the simplest way is we're very broadly indexed across not just the merchant vendors or large ASICs, but medium and small time opportunities. And all of these need to find their way into the marketplace. Right now, we're still very, very early in the process. So as Michael said, it's very hard to sort out in any particular time period. But I think that we're as well indexed amongst all the opportunities as anybody in this market.

Okay, thank you.

Our last question is from Jack Egan of Charter Equity Research. Jack, your line is now open.

Great. Thank you for taking the questions. I had one on enterprise data and then one on modules more broadly. So the shift to modules and vertical power delivery with the custom ASIC ramp should be a pretty big tailwind for MPS. I'm kind of wondering about what the main drivers have been, at least so far for those customers that are switching from lateral to modules of vertical power. So I'm not really sure if you have this level of granularity, but Among the major benefits like higher power density, higher efficiency, smaller footprint on the top side of the board, et cetera, is there any one characteristic that's kind of being cited by your customers as the main reason that they are moving to those modules or vertical power delivery?

Well, we don't see from a chip to module. whoever stays in the module stays in the module, start with the module, whoever stays in the chip, stay with the chip, okay? And so NPS provides the both, okay? And both chip solutions and module solutions. And at this time, okay? And so I don't know if it answered that question for you.

Got it. Okay. And then just talk about the modules more broadly. I think, I believe if I understood it correctly, the last quarter you mentioned that modules outside enterprise data could be like 10 to 15%. of your total revenues. And so I was curious how much of your revenue base or I guess addressable market outside enterprise data would be, you know, eligible for switching to modules. I mean, even if you're looking several years into the future, how high could that mix of modules outside enterprise data go?

That's, that's a good question. So, okay. And we, we want to, we, we built those modules and again, very similar to enterprise modules. Okay. In the, since 2017. And industrial markets are adopting, adoption is kind of slow, actually faster than telecoms. And these are two market segments that we focus on. And then to our surprise, the auto industries also want to use it because it's easy to implement. And so, They don't want to see my equipment. And that's a large segment. We didn't realize that. Now we see all these revenues are happening in there. So I think that in the next couple of years, we'll be growing faster than three or four years ago. And so we're picking up a business. The rate of increase is picking up.

Got it. Thanks, Michael.

That's helpful.

This concludes our Q&A session. I would now like to turn the webinar back over to Bernie.

I'd like to thank you for all joining us for this conference call. I look forward to talking to you again during our fourth quarter 2025 conference call, which will likely be held in early February. Thank you and have a nice day.