Q4 2021 Monolithic Power Systems Inc Earnings Call
Sorry.
Please note that this webinar is being recorded and will be archived for one year on our Investor Relations page at Www Dot monolithic power Dot com.
My name is Genevieve Cunningham and I'll be the moderator for this webinar.
Joining me today are Michael Hsing, CEO , and founder of MTS, I'm, Bernie Blegen, VP and CFO .
In the course of today's conference call, we will make forward looking statements and projections that involve risk and uncertainty, which could cause results to differ materially from management's current views and expectations.
Please refer to the Safe Harbor statement contained in the earnings release published today.
Risks uncertainties and other factors that could cause actual results to differ are identified in the safe Harbor statements contained in the Q4 earnings release and in our SEC filings, including our Form 10-K filed on March one 2021 and Form 10-Q filed on November eight.
2021, both of which are accessible through our website.
<unk> assumes no obligation to update the information provided on today's call.
We will be discussing gross margin operating expense R&D and SG&A expense operating income other income and income before income taxes net income and earnings on both a GAAP and non-GAAP basis.
These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP.
A table that outlines the reconciliation between the non-GAAP financial measures to GAAP financial measures is included in our Q4 and full year 2021 earnings release, which we have filed with the SEC and is currently available on our website.
I'd also like to remind you that today's conference call is being webcast live over the Internet and will be available for replay on our website for one year along with the earnings release filed with the SEC earlier today.
Now I'd like to turn the call over to Bernie Blegen.
Thanks, Jim.
In 2021.
<unk> surpassed the 1 billion dollar revenue milestone by achieving record full year revenue $1 2 billion.
43% higher than the prior year.
This performance represented consistent execution against our strategies and being recognized by more first tier companies for our superior technologies.
Product quality and excellent customer support.
As we see more highly call high quality growth opportunities ahead of US we continue to invest in our infrastructure and operational capabilities in 2021, MTS group capacity by 40% and we are on track to expand capacity in 2022 well beyond.
$2 billion, allowing the company to successfully ramp new product revenue and achieve strategic market share gains here.
Here are few highlights, which we achieved in 2021.
Brought online a new eight inch fab and continued to qualify parts and the 12 inch fab, we brought online in 2020.
We will continue to invest in growing fab and assembly capacity.
We design processor cores, and MCU technology, and the products requiring more sophisticated power solutions, such as USB power delivery smart motor drives and high power electrification.
Our first prototype of our high precision analog to digital converter products for medical applications achieved outstanding Silicon performance in lab evaluations.
We have started customer sampling in Q1 'twenty two.
Validation of this technology is a strong first step in developing a new business segment supporting both industrial and infrastructure end market applications.
We believe new product revenue from a large number of previously released designs will ramp in 2022.
The representative sample includes products supporting applications in <unk>.
<unk>.
Aid off.
USB PD DDR and many more.
Turning to our full year 2021 revenue by market segment, compared with 2020 automotive revenue was up 87, 5% computing and storage revenue up 47% industrial revenue up 54, 5% consumer revenue.
Up 28, 1% and communications revenue up 15, 3%.
Demonstrating just how broad based our full year 2021 revenue improvement was.
Automotive revenue grew $95 4 million to 204.3.
$3 million in 2021.
This 87, 5% year over year again, primarily represented increased sales of our highly integrated applications supporting the digital cockpit.
Automotive automated driver assistance systems and connectivity.
Automotive revenue represented 16, 9% of Mps's full full year 2021 revenue compared with 12, 9% in 2020.
Full year, 2021 computing and storage revenue grew $119 $1 million over the prior year to $372 $3 million.
This 47% increase primarily resulted from strong sales growth for enterprise notebooks.
Cloud computing and storage applications.
Computing and storage revenue represented 38% of Mps's total revenue in 2021, compared with 38% in 2020.
Industrial revenue grew $65 $2 million to $184 8 million in 2021.
This 54, 5% year over year increase was broad based with each of our primary product lines enjoying better than double digit revenue growth.
Industrial revenue represented 15, 3% of MTS as full year 2021 revenue compared with 14, 2% in 2020.
Yes.
Consumer revenue grew $61 9 million to.
To $282 $3 million, reflecting increased product sales for home appliances and smart Tvs.
Consumer revenue represented 23, 4% of Mps's full year 2021 revenue compared with 26, 1% in 2020.
Communications revenue grew $21 8 million to $164 $1 million with 15, 3% improvement reflected higher sales of products for both infrastructure and wireless routers and gateway applications.
Communications revenue represented 13, 6% of our 2021 revenue compared with 16, 9% in 2020.
Switching to Q4.
NPS had a record fourth quarter with revenue of $336 5 billion.
Four 8% higher than revenue generated in the third quarter of 2021 and.
44, 4% higher than the comparable quarter in 2020.
By market segment revenue for computing and storage grew 91, 6% year over year communication grew 54, 7% automotive grew 43, 2% industrial grew 33, 3% and consumer grew one 9%.
Fourth quarter 2021, GAAP gross margin was 57, 6%.
Same as third quarter, 2021, and 230 basis points higher than the fourth quarter of 2020.
Our GAAP operating income was $78 6 million compared.
Compared to $77 $1 million reported in the third quarter of 2021.
And $48 million reported in the fourth quarter of 2020.
Fourth quarter 2021, non-GAAP gross margin was 57, 9% 10 basis points higher than the third quarter of 2021, and 202 220 basis points higher than the fourth quarter of 2020.
The year over year expansion in fourth quarter non-GAAP gross margin was largely due to a shift in sales mix favoring the high value greenfield products and operational efficiency gains, which more than offset higher product input costs.
NPS achieved noteworthy market share gains in 2021 due in large measure to product availability and.
And disciplined sales price management.
Our non-GAAP operating income was $112 $1 million compared to $108 4 million reported in the prior quarter and $66 3 million reported in the fourth quarter of 2020.
Let's review, our operating expenses, our GAAP operating expenses were $115 3 million in the fourth quarter compared with $109 2 million in the third quarter of 2021, and $88 9 million in the fourth quarter of 2020.
Our non-GAAP fourth quarter 2021, operating expenses were $83 1 million.
Up from the $78 7 million, we spent in the third quarter of 2021 and up from.
Yes.
The 60.
$3 $6 million reported in the fourth quarter of 2020.
On both a GAAP and a non-GAAP basis fourth quarter 2021 litigation expense was a credit balance of $420000 compared with a $3 4 million dollar expense in Q3, 2021, and a $1 5 million.
In Q4 2020.
The credit balance in the fourth quarter, 2021 and litigation expense reflected an IP settlement.
Refund of a legal retainer and lower than anticipated seats.
The differences between GAAP and non-GAAP operating expenses for the quarters discussed here are stock compensation expense and income or loss from an unfunded deferred compensation plan.
Fourth quarter, 2021, and stock compensation expense, including $921000 charged to cost of goods sold.
$31 2 million.
Compared with $31 6 billion.
<unk> recorded in the third quarter of 2021.
Switching to the bottom line.
Fourth quarter 2021, GAAP net income was <unk> 77.
$72 7 million or $1 51.
For fully diluted share compared with $1.
<unk> 44 per share in the third quarter of 2021, and <unk> 90 per share in the fourth quarter of 2020.
Q4, 'twenty one non-GAAP net income was $102 1 million or $2 12 per fully diluted share.
Paired with $2 six per share in the third quarter of 2021, and $1 31 per share in the fourth quarter of 2020.
Fully diluted shares outstanding at the end of Q4 2021 were $48 2 million.
Now, let's look at the balance sheet hesitant.
As of December 31, 2021, cash cash equivalents and investments totaled 727 $5 million.
Compared to 17, $744 5 million at the end of the third quarter of 2021.
For the fourth quarter of 2021, MTS generated operating cash flow of about $28 2 million compared.
Compared with Q3, 2021 operating cash flow of $117 $8 million the between quarter drop in operating cash flow, primarily reflected a $51 $3 million increase in inventory and higher accounts receivable.
Fourth quarter 2021 capital spending totaled $17 6 million.
Accounts receivable ended the fourth quarter of 2021 at $104 8 million or 28 days of sales outstanding compared with the $79 9 million or <unk> 22 days sales outstanding reported at the end of the third quarter of 2021, and $66 8 million or.
<unk> thousand six days reported at the end of the fourth quarter of 2020.
Our internal inventories at the end of the fourth quarter of 2021 were $259 4 million up from the $208 1 million at the end of the third quarter of 2021.
Calculated on a basis consistent with our past practice and as you can see from the webinar video days of inventory Rose to 166 days at the end of Q4 2021 from 134 days at the end of the third quarter of 2021.
Historically, we've calculated days of inventory on hand, as a function of the current quarter revenue. We believe comparing current inventory levels with the following quarters revenue provides a better economic match on this basis again, you can see days of inventory increased to 152 days at the end of the fourth quarter of 2021 from 100.
33 days at the end of the third quarter.
Of 2021.
I would now like to turn to our Q1 2022 outlook.
We are forecasting Q1 2022 revenue in the range of $354 million to $366 million. We also expect the following.
GAAP gross margin in the range of 57, 4% to 58, 8%.
non-GAAP gross margin in the range of 57, 7% to 58, 3%.
Total stock based compensation expense of $36 nine to $38 9 million <unk>.
Including approximately $1 $1 million that would be charged to cost of goods sold.
GAAP R&D.
And SG&A expenses between $119, two and $123 2 million.
non-GAAP R&D and SG&A expenses to be in the range of $83 $4 $85 4 million.
This estimate excludes stock compensation and litigation expenses.
Litigation expenses to be in the range of two three to $2 7 million.
Interest income is expected to range from 1.1 to $1 4 million before foreign exchange gains or losses.
Fully diluted shares to be in the range of 47, eight to $48 8 million shares.
Finally, I am pleased to announce a 25% increase in <unk>.
Our quarterly dividend to <unk> 75 per share.
<unk> 60 per share for stockholders of record as of March 31, 2022.
In conclusion.
Mplx's strong financial performance in 2021 was largely due to a 40% increase in fab and assembly capacity, which supported our high value Greenfield product revenue ramp looking.
Looking ahead MTF is on track to expand capacity in 2022.
Well beyond.
$2 billion.
Allowing the company to successfully ramp new product revenue and achieve strategic market share gains in 2023 2024 and beyond.
Yeah.
Thank you Bernie.
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 Torrey Sundberg of Stifel. Nicholas Choi Your line is now open.
Yes, Thank you and congratulations on the very very strong results.
So I'm going to ask this question differently, usually people ask you how come you're carrying so much inventory.
This time I'm going to ask you how were you able to.
To actually get your inventory does that hi, how are you.
Both finding the capacity.
Again being able to build the inventory in spite of this very very tight environment, we're seeing in the industry.
Well.
As you know.
<unk>.
The.
In discipline in the second building of inventories in that qualifier fabs. Okay. These are not one day to day things that are not short term. These all we planned it.
A few years ago, and then now were cut just.
The opportunity presented and we just to catch up.
And nothing was short terms and again, we couldnt, we don't have a crystal ball.
For the futures and we just react.
We just a plan ahead, and we act as fast as the weekend.
And I think to add to that.
Shows that we.
We have a lot of inventory on hand.
That presents the capacity to allow us for sales in the next two quarters. So what we've done is made conscious investments.
Inventory in the supply chain and what we're trying to do is manage such that we hold the inventory we're still keeping channel in the in the channel inventory lean.
And we're trying to make sure to the best of our abilities that we are in touch with the inventories that our customers are keeping so theyre likewise Lynn.
I also want to add to note that as you'll remember.
Remember.
In a few years ago.
I talk about Mps's going fall well beyond.
Meeting a couple of million dollars.
And.
I wasn't joking.
We plan ahead.
For for our business, that's what we saw.
A few years ago.
Now you grow this much.
Of course, we didn't expect that.
But we do have a capacities.
Do do have too.
Do some creative ways and are scrambling to get to a 45%.
And.
So that's all that's all of that is that it wasn't wasn't.
We don't have a magic tricks.
Six months or so.
And it's good to note as Michael noted, we crossed the $1 billion revenue threshold.
Our revenue growth rate has accelerated from storage precedent.
Well done.
As my follow up question could you just add a little more color on the $2 billion worth of capacity you've.
You've talked about now ramping on eight inch you are also qualifying products on 12 inch.
Will there actually be 12 inch product sales this.
This year.
Yes.
We are qualified.
NPS <unk>.
And though we don't have a lot of capital Spendings and that came in but we do have increased all of the of the capacity quantify <unk> that cost money and.
So to answer your questions.
We do transitions.
Now nowadays, okay, we get it.
It will all due to the capacity whether it is a 12 inch.
Our age.
As much as we can.
And just to add to that that was our second 12 inch fab that we brought online in 2020.
Yes.
Very good I'll go back in line. Thank you and congrats again, okay. Thank you.
Yes.
Our next question comes from William Stein of Truest, William Your line is now open.
Thanks for taking my question.
Congrats on the eye popping results and outlook.
Wanted to ask about the module business that you've spoken about in the past this thing that might.
Even accelerate growth further overtime I'm wondering what percentage of revenue modules.
Contributes today and how we should think about the trajectory of that business and if you could also comment on.
Any potential tuck in acquisitions that were either executed or contemplated in the future to fulfill your strategy in that area. Thank you.
Yes, okay.
You asked.
The question the module business I think of the shy of 10%.
In the fall of this year.
Actually about mid single digits Opex down.
Yes.
So you can quantify is a much more much more accurately.
I don't know.
All of the members.
In detail all I know.
Okay.
We wait globe.
We called.
100% every year and in the last couple of years.
And now you're using the word.
Accelerating this.
This year in the next couple of years, that's the that's what I see it now.
And.
The other things okay. The.
The second point of view.
Your question.
About.
Acquisitions for the tuck in technology.
<unk> technology.
To enhance our future growth.
Using our NPS technology for those companies we are engaged with.
Hans.
It's a handful of a company like a more than five or six companies and.
So far we're.
Engaging with it.
Nothing we.
Nothing material.
Our lives.
<unk> announced it now.
Okay.
Thank you.
Our next question is from Alex <unk> of William Blair. Alex Your line is now open.
Thanks for taking my question and I Echo the congratulations on the outstanding results.
Just maybe to expand on <unk> question with regards to the capacity expansion from $2 billion.
Can you quantify.
How much more capacity you think you'll be adding in the next year or two or three years are the right way to think about it I think in the past.
Evolution to the fact that that the current product portfolio can support upwards of $3 billion to $4 billion in revenue.
Is that sort of the right way to think about the long term trajectory.
Yes.
That's absolutely correct.
For the semi conductors, yes wait till we have to have a fab capacities and therefore that kind of revenues, but green green the futures because of the way of selling more high dollar <unk>.
Modules and the solutions and the which is utilize us silicon Lehman less.
So we have we should have we shouldnt.
Sure.
Semi wafer capacity, even shown that will be a lesser factors.
That's actually really helpful.
And then similarly with the comments on in terms of the segment breakdown.
The storage and compute segment was very strong in the quarter and I think you've talked a little bit about enterprise notebook. It seems like that's one of the areas notebooks in general where there's little investor Trepidation.
Going forward can you can you maybe talk about what the opportunity there is or maybe what the Sam is for notebooks.
Outlook over the next few years.
Sure I think it's important to qualify that.
The growth that we've experienced in particularly over the last two or three years has really been at the enterprise level, where we're selling into.
Units retailed for above $200 and we've been very successful as far as capturing a large part of market share that really is not necessarily driven by.
Consumer trends.
So they're not as prone to the downward unit numbers that are being projected for notebooks.
Overall, we want to achieve a balanced growth, we don't want to be known as a local company and that's all.
And the NPS as a strategy to diversify the growth.
And just to pick up on Michael's point.
We saw a very strong uptick in our cloud and server business, particularly in Q4, which we expect to continue to ramp into 2022.
Yes.
All of the notebook revenues a very.
It's a single digit.
Okay.
Thank you with that I'll hop back into queue.
Yes.
Our next question is from Quinn Bolton of Needham Clean Your line is now open.
Hey, guys.
Offer my congratulations as well on bringing Michael I'm surprised you haven't got any question, yet, but I followed the company for a long time I think this is the biggest gross margin beat you guys may have ever put up.
Got my numbers right you beat gross margin by 130 basis points in this quarter.
Looking back to the third quarter, I think you had a $4 million litigation.
Revenue in a number that drove strength in gross margin, but that was clearly a one time issues. So can you talk first about what drove the strength in gross margins and youre guiding them effectively flat up 10 basis points technically in the first quarter. So it looks like that margin strength continues can you just talk about gross margin.
Sure we tried to reflect on that a little bit in the prepared comments, where I indicated that.
We're benefiting right now by a more favorable shift in our product mix, which is.
Higher margins on the new Greenfield business, but also operational efficiencies.
As far as we indicated earlier.
The percentage of.
Silicon that's coming from 12 inch.
But also is a reflection of our improved quality standards, so I think that.
As we reflected on what the sustainable.
Margin going forward that we've offered sort of a new floor, which we look to grow again 10 to 20 basis points sequentially. Although obviously, we'll keep our eyes open if there is an opportunity to have another step up.
There is another site.
A few years ago, we talk about our greenfield product in the U S.
You actually I.
I remember asking lucky there's a no headwind in is are there any.
Any headwind in the grille.
Gross margins so the answer was.
All of these new product Greenfield product will all Ham and met the high end.
High end products and.
Higher values and so the gross margin should be better. So this time okay.
We didn't increase the price that much.
We are pretty much past the cost to our customers.
<unk> are not even past two a two hour hour our customers buy.
And you said it was shifted too.
To 12 inch and also the internal efficiency.
The improvement in the with the high gross margin product.
That that is the majority.
Of the.
Of the.
Gross margin improvement.
Got it and as a follow on you for two quarters now we've seen a pretty nice increase in your internal inventory levels I'm wondering if you could just comment.
As you're building that internal inventory how much of that is for new Greenfield products.
Versus say the run rate business.
We clearly were shifted away from a consumer side.
And.
So with our allocated a lot of product for that would be the high end.
Targeted NPS a targeted market segment so <unk>.
So we call that inventories in the fall for those segments.
I think something to add there is that we do have some high volume business.
And we're treating that as run rate so were its probably the area that has the tightest capacity, but where we have these new products the greenfield opportunities.
New customers in new markets as an insurance policy to make sure that they are perceived very positively and that we can cover upside potential we have been building inventory to support that.
And I think that's being reflected very well as far as the customer acceptance of the new products as well as market share gains reported by the appropriate inventory levels.
Got it thank you.
Our next question is from Ross Seymore of Deutsche Bank Ross. Your line is now open.
Thanks for letting me ask the question and I'll Echo the congrats I wanted to follow up on the second half of your answer to Glenn's question there Bernie.
In the past you guys have always gained market share and very consistently. So this year was spoilt. This past year was no different but you also had significantly greater availability than your competition. So I just wanted to see what the client or the customer relationship how that's been enhanced because of the availability do you believe that the win.
<unk> gotten from availability will lead to sticky relationships going forward, you mentioned moving up into kind of first tier customer base.
Just trying to figure out the sustainability of the revenue growth because of that availability dynamic. That's a very very good question said, okay. How do we grow like a 45% of the overlap.
Closer to $1 billion base okay.
Well I mean, you think about it it's okay. All of these are product that.
<unk> released.
Greenfield products Okay.
<unk>.
These two are first tier customers.
<unk>.
Usually these are large customers ramping a new supply of very carefully so that they don't allocate a large percentage they always they have a second source.
<unk>.
Now, let's have a shortage everywhere NPS our NPS. It has a has a.
Hubs have a capacities so everything shifted too.
Two to NPS.
That's a one factors in the second factor is at will.
We talk about <unk> product is a more programmable and.
Our customers find out.
Before they care less and now they find Alexander our products single product can do a multiple purpose.
That contributes another factors.
So we can replace them we came shortly we designed our customers redesign.
A source out.
Adaptor NPS solutions.
But these two points.
Very sticky.
Especially the second point.
Our NPS of products and more programmable and.
<unk>.
They enjoy that and they solve that solve their problems and they realize the values and so I will say the very sticky.
Great and I guess as my follow up question.
I thought you talked about another greenfield opportunity, which is a huge part of the analog market, which is getting into the the converter side of things can you just talk a little bit about your aspirations. There some of the applications youre going after and what sort of opportunity you see unfolding in that.
Yes.
We are what did we do have a silicon and announcing okay.
The performance of the outstanding and these are the new market segments and that came out and that is a purely in a in a single site and.
Which we never have it okay.
And.
We did the internally developed we have a global what people's Okay.
And they have a lot of experience and.
That's a huge new market segment.
For us so.
The focus will be.
Communications and.
And also medical.
Medical applications like the imaging.
<unk> and <unk>.
<unk> and <unk> and.
Those type of things.
And just to add as far as the characteristics of this technology.
There are not a lot of companies that have been successful with this and the ones that have have carved out pretty exclusive.
Markets.
And as a result of that they command very high gross margins.
So we'd love to.
Be a new market entrants, but also with a very big competitive advantage.
So as it is.
Yes. It is.
Milestone for NPS.
So call it a high performance analog company they tried it and.
The achieve a meaty yogurt.
As a result, and now see what we can do and we do have a product and so.
So the next couple of years.
See what we can do okay.
Thank you.
Our next question is from Chris Caso from Raymond James Chris Your line is now open.
Yes. Thank you my first question, so I'll talk a little bit about about seasonality and obviously the Q1 results are better than than what we'd normally expect in a seasonal Q1 I suspect that's because of.
Some of the capacity additions that you're bringing on can you talk about these capacity additions as we go through the year are they brought in and in the road to the to the $2 billion.
Our revenue level.
<unk> level is that going to come on fairly evenly during the year is there a step up at some point and then when that happens do you think that you will be.
Fully able to meet your customer requirements.
Presumably this year.
Yes.
Chris I think you can get credit for three questions there.
Hopefully I'll be able to keep the thread.
<unk>.
The first issue.
Had to do with seasonality and that generally speaking from Q4 to Q1, we observed.
A modest dip.
In fact, because we have such a imbalance.
Imbalance and unprecedented demand supply imbalance.
That in fact seasonality is not as much a function today.
As opposed to your second question, which has to do with product availability.
And that's sort of the gating items for how fast that.
Company can grow.
And as Michael pointed out earlier is that.
As part of our company.
We've always built capacity alongside the development of our new products.
So we in fact got out in front of us.
<unk>.
This upsurge in the market.
And have been able to participate and impact to accelerate.
Our capacity build out and that's really a reflection of how we're looking at 2022.
But I think that.
One thing that we've always done is we've had to make intelligent decisions. Many years ahead of when the capacity has been needed. So in fact, we are in discussions in order to be able to get capacity.
For 'twenty, three 'twenty four and beyond.
And we feel very secure in what we're capable of doing.
In 'twenty two.
Well to answer your questions honest laser okay. If it does give us another 50% growth year for this year will be in trouble.
Yeah.
Okay.
Okay.
I think that would be I think that will be welcomed trouble.
If that were the case.
Yeah.
I'll I'll take Liberty esque, one more that you were nice enough to answer Mike.
With regard to pricing and Bernie you made a comment on the call you spoke about a disciplined sales price management is I think how you termed it could you explain what that means and the extent to which pricing.
It has been a contributor to year on year growth.
And whether that's something that's in the rearview mirror, where you'd expect to continue to increase.
I think that most people have recognized within the semiconductors and even specific to analog.
That created a opportunity for many companies to affect price increases with their customers.
And a lot of them implemented that as early as Q1 of this year.
We showed we made a conscious decision.
To increase our prices on a broad base, we're selective market opportunities, but broadly we did not.
And we did that along with having a product availability.
As a means of being able to secure a higher level of market share and so now as we look at.
2022 .
We are going to implement selective but more broad based price increases.
But there will be at a more modest level than some of our peer companies have implemented.
Yes.
We invest in our customers for the for the future growth.
For the future opportunities.
But we do have.
Sure.
Have a modest.
Gross margin expansion.
<unk>.
As we.
As our model some okay, we keep said it well.
And we have a steady state growth.
Every segment.
Got it very helpful. Thank you.
Yeah.
Our next question is from Rick Schafer of Oppenheimer. Rick Your line is now open.
Thanks.
Let me add my congratulations guys on a nice quarter another nice quarter.
Maybe if I could just a quick question on <unk> I mean, you guys have talked in the past about.
<unk> is a pretty significant opportunity for MTS.
I think you said potentially hundreds of dollars of potential content there.
Sort of similar to the server or data center cloud for you guys. So I don't know if you could give us any update on design momentum since a win.
Revenue contribution might sort of.
I'll start to inflect, if that's if that's still kind of the second half of this year.
Curious if as part of that question I mean, you're going to see Qs mod sort of be part of that initial ramp this year or or is it going to be more sort of point of load issues.
How are you.
Your journey at <unk>.
Server if.
If you could give any color there that'd be great.
Yeah.
<unk>.
So to answer your first part of question first and that came in <unk> <unk>.
There's actually a lot of products.
Especially at the high current side them again, all related to <unk>.
And the similar technology base is a product that came our way pollo <unk> in all areas.
From the.
From a signal size in the K two all the way to a transmitters.
And.
We do we don't see a very high.
Wait a ramping in.
And.
So the <unk> study state.
<unk>.
The other question is <unk> tomorrow, so bucket and therefore for the.
For the <unk>.
The data centers.
Sure.
We are this year some will have to say it's in the K we occupied.
Still less than a single digit level.
Although total.
<unk>.
Total percentage of the.
Of the total 10 of them.
<unk> of the market, but the significance is.
Is.
From a from always almost nothing and two high end of a single digit and.
Earlier, I said that if we don't know if I have 30% of our.
The market will show lobbying in that in that business.
So we still have a lot of room.
Two two to growth.
Okay.
With the release of VR 14 that were at a very good inflection point on the in the cloud in the data center.
Yep.
And Michael just to follow that but I.
I think you're about three or four years to sort of get point of load meets you share to today, which I think is about 30%. So I think you're saying that's sort of a good proxy for Qs mod could be in the next in the next couple of years.
Oh, yes, yes.
Actually longer than that model so far.
And all of the one day there was a slow launch within in the early days I will say that we could go very quickly okay I didn't know that.
When I was talking about.
And.
<unk>.
For the next.
You mentioned that there'll be our 14th than VR 13 has is that guys saw sort of a NPS accepted it.
<unk>.
As a player in that game and.
And we all fall teams I think we have a pretty good shares to start to ramp but it's.
That's not happening out that came in.
<unk>.
Sometimes this year right.
Dr. <unk> has been delayed again this is more likely to be Q3.
Our right served in Q4 uplift as a result of $13 five.
Okay.
Thanks, and if I could ask just a follow up to Bernie probably I just wanted to ask you kind of asked in a long time.
Balance sheet looks great obviously.
I was just curious if you could give us an update on.
Use of cash going forward I mean, obviously, you've done a really good job of it.
<unk> and future growth and R&D, but I'm just curious how much you would need to run the business here in feed R&D et cetera. Thanks.
Yes, and it's a great question because.
You want to look at it sort of three levels for our particular story. One is we have to keep a certain amount of cash available in order to fund our growth, particularly as it relates to receivables and inventory.
But also.
We're expanding operating expenses worldwide.
At an accelerated rate.
And all of those demand levels of liquidity.
The next thing that we've talked about is building infrastructure and capacity and even though we are outsourced as far as our Fabs and assembly.
We do a lot of our own testing in fact with the quality requirements of some of the new markets were going in.
Can't outsource that we do all of our own testing and that requires some additional investment.
And then you have buildings, which as you know.
One of the few companies that.
We purchase our own footprint to house, our growing to.
Growing staff head count.
We're going to continue to leverage the balance sheet in order to help accelerate our growth while at the same time.
As we announced in the prepared comments, we're increasing the dividend by 25%. So we're also mindful that we need to return some of the cash back to shareholders.
Yeah.
Well when he said that he said accelerated.
On expense growth, we're not accelerating.
No absolutely enough.
Okay.
And that's to make that clear.
And so we are pretty little bit above our model like a growth game.
The NPS.
Growth thanks.
The expenses of growth.
And the further return of cash to our investors and.
We have overwhelming market support to fall from our our our investors and the dividend.
Dividend and buyback. So we're followed barring a buyback stock analysis with that allocated less delay of 10 that came in and.
Because of the weekend of feedbacks, Okay. They want our dividend I don't know whether it is related to a tax issue and not related to the upgrade so I think.
From.
In our past, we said our model is that consistently.
Increase the dividend again.
The other side of the or using our cash is we want to.
Acquired company.
Not fall revenue growth, it's cheaper to grow NPS revenue bye bye bye.
But we can do this so he came and PSA as a lot of gathering variety of a different product.
And the food.
Can feel that some.
Enhanced couple of areas.
Two.
Sure.
So the end product.
And we want to acquire those are small tugging.
<unk> is very unique and sustainable growth and sustainable and that.
Based on the NPS technology, we can grow those companies and that's the company, we're really interested in and so the earliest said earlier I said and we're engaged with a with a few companies can now.
Thanks for all that color guys congrats.
Our next question is from Matt Ramsay of Cowen Matt. Your line is now open.
Thank you very much good afternoon, everyone.
Michael.
Been asking you about this for I don't know three or four years, but.
Last I guess three or four months.
You guys talked a bit more about opportunities for NPS in the electric vehicle market. Some in drivetrain some in regenerative braking.
I Wonder if you might talk a little bit more about the revenue opportunity per car with <unk>.
<unk> customer and the timing of that and.
How wide is the pipeline in terms of the number of engagements that you might have.
In the EV market. Thanks.
EV market.
We are in the.
In the Adas area I think that we are in the eight US 2533, 0.0, we almost engagement with everybody.
And.
So I can't give you a numbers of them.
For pure electrical car.
NPS it has about <unk>.
Somewhere 80 to $100 shipping today.
And we're starting this year.
While starting in August we are starting actually last year.
Rob with the with our regenerate.
Breaking and.
In the drivetrain.
Those will add another over $1000.
And.
So.
We don't have those revenue yet, but we do release those product.
Got it.
Those larger ESP products any thoughts on timing.
Yeah.
There are several of those are many products that we are talking in the mouth well released a couple of them are already.
More than a couple of them already and the key is that we.
We want to offer the total solutions and.
And custom.
Customers.
Pretty much using NPS, a reference again locked.
Got it as my follow up questions on a different topic.
One of the things that I've been having investor conversations about is.
The broad based industry, adding investing a ton of capex and adding a ton of capacity in this year that the industry is adding it at a peak right you see a couple of new Fabs coming online from from Texas instruments, and then in the next number of quarters Infineon dumping capex pretty much everyone is.
And so you guys have been in a unique position to have a ton of capacity come online when others have struggled to do it and it sounds like thats going to continue for you I just wonder.
Any concern that the industry catches up with capacity, Michael and maybe you could.
In contrast, the type of capacity the process node that you're on the nature of the capacity that you're bringing online for some the rest of the industry may be adding thank you.
Yes.
That's a that's a good question. So okay. Okay first thing is I shouldn't answer that.
<unk> don't build anything.
We don't we don't build it and I think we don't have a fab, but we do have all the technologies.
And usually how we getting a fab capacities.
Those are fiber.
And we go in there with Wanda we said after we can fill you up so again, it's a long term it's a law.
Long term partnership and.
So.
And then.
This year last year, so lucky in that you want to add a capacity forget it okay.
Those guys are busy shipment came in the low fab as AP and AR.
So we engage with them when they are in the downturn.
And we empower them on our our our technology remembers we don't.
It's not like building a fab, we don't build a fab the costly as a minimum.
<unk>.
But we do have some commitment and we do have out and gave some our consignment.
Some equipment, okay, but these are these costs to compare building a fab is a much much less.
Yes.
Okay.
Thanks, very much guys I appreciate it.
Okay.
Our next question is from Torrey Sundberg of Stifel. Nicholas Tore your line is now open.
Just two quick follow ups I know, it's early in the year, but you have so yes for horses that are running really fast you have one horse that's kind of just running slowly.
If we look at this year.
The horse that you think will grow a bit faster I know, there's a lot of talk about oil and server but.
Yes.
So should we bet on this year.
Well, we're the ones who've been those of Mps's Auto company.
Definitely not.
Global companies.
And.
I think of the <unk>.
We are shifting clearly this year, we're shifting from a consumers too.
<unk>.
At least the last couple of quarters. So we're shifting from a consumer to automotive then and now.
<unk> and.
From a cloud computing side and again.
And.
So these are for this year.
Probably remained similar so okay. That's all we see it.
Yes, and I think that we have.
When you say that.
We've got five strong horses.
It is a more accurate reflection, because I'd say that in the current year, we were surprised by the strength of industrial.
So.
I think thats going to continue on into the next year and as we talked about earlier the communications market while.
While it may not be coming on as fast as we had originally hoped for or expected.
Still looks very promising in the second half of this year. So.
Really the thesis remains being broad broad based growth.
And I would point out.
Let's say the all these other market segments slowdowns and as our consumer business every half year. So we can we can shifted and we can shift our quickly okay.
Currently it's not a favor some of it but we can shift quickly.
And.
By the end of the year, so maybe we grow consumer business.
Sounds good and coming back to the data converter topic, new new segment for you.
What are some of the things that we should track for your success. There. We all know it's very difficult to crack into that market.
And are you are you going into that market really really at the high end of data converter technology.
And will that be the way for us to track our success.
So far yes, it's a very very high high end products and.
But that's a new market segments like earlier I said, okay. What we said we're going to ramp up.
Ramping the data center very quickly turn out to be it wasn't a case.
So I don't want to predict that.
But I know the technology is good.
The test data schulte okay.
We can be okay were far better than then.
On the existing market a product.
Great.
If you could even get to $100 million there I'd be very impressive.
Oh, yes, okay.
It's a matter of the time.
So confident of that and along the way probably learned.
Sure.
Yeah.
Yeah Yeah.
Okay.
Okay. Thank you.
Alright, okay.
If there 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.
Well once again I'd like to thank you all for joining US for this conference call and look forward to talking to you again about our first quarter.
Which will likely hold in April so thanks, again and have a nice day.
Okay.