Q3 2023 Monolithic Power Systems Inc Earnings Call
Joining me today are Michael singer CEO, and founder of M. P S and Bernie Blegen EVP and CFO.
In the course of today's webinar, we will make forward looking statements and projections that involve risk and uncertainty, which could cause results to differ materially from management's current views and expectations.
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 Q3 earnings release and in our latest SEC filings, including our Form 10-K, and our Form 10-Q, which are accessible through our website.
M. P. S assumes no obligation to update the information provided on today's call.
We will be discussing gross margin operating expense operating income other income income before income taxes net income and earnings on both a GAAP and 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.
Table that outlines the reconciliation between the non-GAAP financial measures to GAAP financial measures are included in our Q3 2023 earnings release, which we have furnished to 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.
MPLX reported third quarter revenue of $474 $9 million.
Seven 6% higher than the second quarter of 2023, and four 1% lower than third quarter of 2022.
Comparable with Q2 2023 sales in enterprise data.
Storage and computing improved sequentially, well automotive industrial and communications revenue was lower.
Turning now to our third quarter 2023 revenue by America.
In our enterprise data market third quarter 2023 revenue of $98 $9 million increased 106, 2% from the second quarter of 2023.
With sequential growth in both GPU and CPU program sales.
Third quarter 2023 enterprise data revenue was up 31, 4% year over year.
Enterprise data revenue represented 28% of Mps's third quarter, 2023 revenue compared with 15, 2% in the third quarter of 2022.
Storage and computing revenue of $129 $5 million increased three 9% from the second quarter of 2023.
Sequential revenue improvement, primarily reflected higher sales in commercial notebooks.
Third quarter, 2023 storage and computing revenue was up 14, 7% year over year.
Storage and computing revenue represented 27, 3% of Mps's third quarter 2023 revenue compared with 22, 8% in the third quarter of 2022.
Third quarter consumer revenue of $62 $4 million decreased four 3% for the second quarter of 2023 is higher gaming and monitor sales were offset by declines in TV and home appliance revenue.
Third quarter 2023, consumer revenue was down.
31% year over year consumer revenue represented 13, 1% of Mps's third quarter 2023 revenue compared with 18, 8% in the third quarter of 2022.
Third quarter 2023 communications revenue of $46 $8 million was down five 1% from the second quarter of 2023, primarily reflecting lower infrastructure sales.
<unk> third quarter 2023 communications revenue was down 35, 3% year over year.
Communications sales represented nine 9% of our total third quarter 2023 revenue compared with 14, 6% in the third quarter of 2022.
Third quarter automotive revenue of $95 $2 million decreased eight 8% for the second quarter of 2023, primarily due to lower asos and digital cockpit itself.
Third quarter 2023 revenue was up nine 3% year over year automotive revenue represented 28% of Mps's third quarter 2023 revenue compared with 17, 5% in the third quarter of 2022.
Third quarter 2023, industrial revenue of $42 $1 million decreased 15, 3% from the second quarter of 2023 due.
Due to lower sales in security and industrial meter applications third quarter 2023 revenue was down 28, 2% year over year.
Industrial revenue represented eight 9% of our total third quarter 2020 through revenue compared with 11, 9% in the third quarter of 2022.
I'd like to make some general comments about our business.
In our previous earnings calls, we have noted customer ordering patterns were oscillating within the overall market.
This environment persisted through Q3, we continued to see some orders getting delayed or amended by Poland requests. This lack of short term visibility continues to make forecasting beyond the next quarter difficult.
However, as we said in our last call our business fundamentals remain unchanged our design win pipeline and customer base has expanded tremendously, particularly amongst tier one accounts.
<unk>, we continue to innovate and have a strong design win pipeline position us well for future growth.
Moving now to a few comments on gross margin.
GAAP gross margin was 55, 5%.
60 basis points lower than the second quarter of 2023, and 320 basis points lower than the third quarter of 2022.
Our GAAP operating income was approximately $135 $6 million compared to $112 $3 million reported in the second quarter of 2023.
non-GAAP gross margin for the third quarter of 2023 was 55, 7% down 80 basis points from the gross margin reported for the second quarter of 2023.
The quarter over quarter decrease in both GAAP and non-GAAP gross margin is attributed largely to an unfavorable product mix.
Our non-GAAP operating income was $167 $8 million compared to $153 $1 million reported in the second quarter of 2023.
Let's review, our operating expenses, our GAAP operating expenses were $128 million in the third quarter of 2023, compared with $135 $4 million in the second quarter of 2023.
Yeah.
Our non-GAAP operating or non-GAAP third quarter 2023, operating expenses were approximately $96 $6 million essentially flat with what we saw in each of the first two quarters of 2023.
The differences between non-GAAP operating expenses and GAAP operating expenses for the quarters discussed here are primarily stock compensation expense and income or loss on an unfunded deferred compensation plan.
For the third quarter of 2023 stock compensation expense, including approximately $1 million charged to cost of goods sold was $33 $6 million.
Compared with $38 million recorded in the second quarter of 2023.
Switching to bottom line third quarter 2023, GAAP net income was $121 2 million or $2.48 per fully.
Diluted share compared with $99 $5 million or $2 and <unk> <unk>.
For sure in the second quarter of 2023.
Third quarter 2023, non-GAAP net income was $153 million or $3.08 per fully diluted share compared with $137 $5 million or $2.82 per fully diluted share in the second quarter of 2023.
Fully diluted shares outstanding at the end of Q3 2023 were $48 8 million.
Now, let's look at the balance sheet cash cash equivalents and investments were $1.04 billion at the end of third quarter 2023, compared with $941 $1 million at the end of the second quarter of 2023.
For the quarter MTS generated operating cash flow of approximately $175 $9 million compared with Q2 2023 operating cash flow of $92 million.
Accounts receivable ended the quarter of 2023 at $185 $8 million, representing a 36 days of sales outstanding versus one day higher than 35 days reported at the end of the second quarter of 2023.
Our internal inventories at the end of the third quarter of 2023 were $397 3 million.
Down from $427 4 million at the end of the second quarter of 2023.
Days in inventory of 171 days came in at the end of the third quarter of 2023 were 30 days lower.
Then at the end of the second quarter of 2023.
Comparing current inventory levels with the following quarters projected revenue you can see days in inventory decreased to 180 days at the end of the third quarter of 2023 from 184 days at the end of the second quarter of 2023.
I would now like to turn to our outlook for the fourth quarter of 2023.
We are forecasting Q4 revenue in the range of $442 million to $462 million.
GAAP gross margin in the range of 55, 2% to 55, 8%.
non-GAAP gross margin in the range of 55, 4% to 56%.
Total stock based compensation expense in the range of $32 2 million to $34 $2 million, including approximately $1 million that would be charged to cost of goods sold.
GAAP operating expenses between $127 1 million to $131 $1 million.
non-GAAP operating expenses in the range of $95 9 million to $97 9 million.
The estimate this estimate excludes stock compensation expense, but includes litigation expense.
Interest and other income in the range from four one to $4 5 million before foreign exchange gains or losses fully diluted shares in the range of $48 7 million to $49 1 million shares.
We're also pleased to announce that our board of directors has approved a share buyback program for up to $640 million over the next three years with the goal of offsetting future dilution.
In conclusion, while we expect visibility to remain limited in the short term, which was the same as last quarter, we continue to execute on our long term strategy.
I will now open the webinar up for questions.
Thank you Bernie analysts I would now like to begin our Q&A session.
As a reminder, if you would like to ask a question. Please click on the participants icon on the menu bar and then click the raise hand button.
Our first question is from Quinn Bolton of Needham Quinn. Your line is now open.
Hi, Michael and Bernie Congratulations on the results and the outlook in a tough market I guess, bringing Michael enterprise data business very strong quarter on quarter wondering if you could just give us some thoughts as you look into next year, how you see the GPU business.
Pacifically do you see sort of an expansion of that customer list dragging strength in Gpus.
Then a question on <unk>, you said <unk> was up in the third quarter wondering if you are finally, starting to see some strength in the Sapphire Rapids in Jama side of that business and then I have a follow up question. Thank you.
At this time our game.
But he said that.
Earlier seemed like a visa market is a very very much also meetings and that came in.
And.
The net you see it we Don from Alaska.
From a this quarter so from a from a from the last year year to year with steel talents and that came in.
Right.
AI and <unk>.
No.
Okay.
These are the power modules I know.
Uh huh.
Hum.
We are ramping up as a result of it.
Can maintain it.
Gross.
In this years.
And skew slightly slight growth from the last years, Okay, that's mainly due to AI and.
Also in the prior quarters.
To us and that we see is a very lumpy business. Okay, and then maybe for Anr some ramping up.
But.
All of these will we believe that will happen in a ramping up in a in a in the next years.
Not only from Adas and also as you mentioned my boss.
On the general CPU.
In the <unk>.
<unk> signed.
And I might as well as it makes you know all the other ones, we still have a lot of greenfield products that.
Haven't really ramp up yet and.
Many many projects it gets delayed and that this year pushing two of next year.
And we.
We are we don't want to give a very clear forecast and we still don't know yet.
But sometime in the next few years.
We believe that they will start to ramping up and all of these are greenfield products.
So that's kind of my my summary for the near terms business.
Thank you Michael I guess, a follow up question, Brian I think in the script you mentioned some push outs some pull ins or expedite so I think the pull ins or expedites maybe newer.
Given just the overall challenging industry.
Poland's specific to certain customers or end markets are you starting to see pull in request across multiple end markets. Thank you.
Yes, Quinn I think what we're experiencing here is.
Our unique business cycle.
And that right now our end customers are unwilling to commit beyond that.
Fairly narrow window.
Of expecting lead times.
Thin.
Under 10 weeks.
Our delivery.
So that makes as we said earlier in the comments the predictability.
Really hard to call right now but.
But I think as Michael just said that.
When we look at our design win pipeline is strong and we're confident that we're in a good position to capture share in growth as the market recovers.
But right now we're still in a level of unpredictability.
Okay. Thank you, Brian, but he thought he was talking about which segments and Oh, I'm, sorry, which segments, which assignments and I came in.
If we are we looking at a kind of a oh.
Russia's surveys it's actually crossed.
Empire product segment, including consumer some bigger.
Some of the products they need to put it in very quickly.
The lead times are very very short and.
We don't have those products without giving me and.
It's pretty much.
Across our across the board and.
Other than AI, we really plan ahead.
And we really play in hand from the beginning of the beginning of the year and we can anticipate is that all of the ramp up and.
Now even for the.
Next few quarters.
Got it okay. Thank you.
Our next question is from Charles Steinberg of Stifel. Your line is now open.
Yes, Thank you, Michael Bernie and relations on that $1 billion of cash balance.
First question is on the Q4 outlook I know you typically don't guide by segment, but can you just talk about Directionally, where you expect each segment to <unk>.
Trend in Q4.
Yes, Q4 is still down.
Kind of sounds like quite a bit from a from a from a Q3 and again and.
Pretty much everything except in okay, maybe not all of it also gave me an auto probably go sideways or maybe slightly up so it gave me and that is a slightly up.
And also the AI powered some S do continuously tune ramp up.
I think that when.
When you look at the broader market, we're experiencing a lot of the weakness in demand that many of our peer companies are and what makes us a differentiated as the AI booths were experiencing and pretty much it.
Hey, art and auto.
And.
Everything else pretty much muted.
Very good and as my follow up and maybe related to the previous question on enterprise data and AI.
Just wondering if you have any visibility on the sustainable growth here.
There is obviously one one big partner, that's ramping right now, but it looks like there are some other processor companies that are going to be catching up next year. So if you could give us any color on especially enterprise data segment for 2024 that would be really helpful.
Yeah.
All I can tell you overall, what how the NPS our strategies like A&P, Australia has always to take the get the best we provide the best performance when the when the volume gets higher and with.
Our requirements and lowest snuck, a we don't chase those in low end them.
The low end segment I see mps's still even up in the fall for them.
In terms of our provider.
A fishing season and the lowest.
Generating key Tanaka, our smallest stand we yes, we.
We were still the leading.
<unk> would be our next next year and the D and the year after all of these products.
In the development with.
Our customers and with the leading edge.
Leading providers in the in the AI and the Gpus.
Yep.
Okay.
Ah Pacifically and that's a huge market and we don't want to take all of them.
Two.
Yeah.
Part of the question does the general market right Okay.
General market.
The.
Other segments, we see Ya.
Cpus and you'll remember in the VR AR VR 13 points 13, we didn't we didn't have a lot of design wins and that came in.
We are.
We pile up a lot of inventories in the windows.
13.5, okay.
It became a serendipity in that game, we are weak.
We have a few project design and wind energy.
Other supply funding ship, but we ship a lot. So that's where you see the silver.
Data center growth, that's that's because of that and.
And for next years and that we are we will told to get ready to to have those projects ramping up and the rough rough a sulfide right. Okay. Yes.
And.
So when.
These market is already ramping up NPS up there.
I think.
Tori you've hit on a couple of very good points.
As far as the AI GPU opportunity, we're very well positioned.
Both for the near term in 2024, but more importantly longer term and as Michael just emphasize.
There is a differentiated market there and we want to stay at the high end of that market.
So we've always been aware that there would be competitors entering this space and that's how we're differentiating ourselves and then as far as the CPU and GPU markets.
What we are preparing to do is to manage the uptick in demand that we're anticipating bye.
By building that inventory during the next couple of quarters.
That's a lot of.
I forgot what I said, what I tried to make a point.
I wonder in the NPS it doesn't want to be now.
AI power company Okay.
Wanted to focus on a diversified groups and we do have a lot of greenfield products still have them.
Realize yet.
These are cross segment and.
Also in the.
And the consumer side in the last year, so like it because the last couple of years because of shortages, but we kind of neglected and.
That will in the last half years, we developed.
So low cost products and then we introduced the market where you'll see the gross that's only on the other because of the very short term.
Sure design cycle, you will see revenue from us.
From a from a farm next year and all the other product like industrials, although automotive and an even touching inverters in and the Chargers and also eight.
Eight us.
These slow ramping up and.
So we want to achieve a very diversified our growth not only on the on the on the AI side.
Great great color and good job with the buyback. Thank you.
Our next question is from Ross Seymore from Deutsche Bank Ross. Your line is now open.
Hi, guys can you hear me.
Yeah.
Hi, Ross.
Hey, guys.
I guess the question I have is I dunno cyclicality or seasonality is carrying the day, but the last couple of quarters, you've talked about weakness you're not unique in that but the fourth quarter you seem to be guiding pretty much back to a seasonal drop.
If I look into the first.
First quarter is that something that you'd expect to continue or is visibility just too limited to really comment on that quite yet.
Yes.
Well the number was kind of a refresher seasonal but the reality is it just happened that way.
We can call on the call are seasonal.
This is a fast changing market I mean, it's very difficult for us to.
But for us to forecast and Thats difficult okay.
Fortunately, we have a lot of capacity.
Yeah.
But these are capacity was still the lead times do shorter than our our production cycles in that game and we.
We have to again get ready just okay.
So you bring up a really good point.
Is that if.
If we look at the hour.
Outlook for Q4.
Portion of that is how competitive we were at going after the notebook market and.
So the Q4, we're experiencing a little bit of a decline as those are seasonal sales.
When we look at Q1, Michael said it best is there isn't a lot of visibility, but as we look at this cycle, we believe that.
Next year is really back half weighted and so I would probably indicate that we will have a more conservative profile as we look at the first half of 2024.
Yes.
He also I didn't I forgot to mention about it.
We make we would talk about at the beginning of the year will be aggressive.
Aggressive on price and.
Especially within across the board and then it will have a new.
Product in our consumer segment come out and really came out and also in.
In the notebook area.
We've pretty much and I have a.
Large market share in the commercial side and the beginning of the year some of them we will.
It will vary it stopped.
<unk> become a very aggressive on the price and now our fourth quarter U.
You see it in our notebook size.
SAR startup game gained more shares.
And in a consumer site.
Got it thanks for that and as my one follow up I wanted to just pivot over to the gross margin side of things you mentioned Bernie in your script that you were at the low end of your guidance because of mix I was a little surprised that enterprise data more than doubled sequentially, but yet you pointed to mix could you just talk a little bit about what's going on.
What mix were you referring to because I think weather correctly or incorrectly at least I assume that enterprise data would be an accretive gross margin category.
Sure Walter.
Not consumer knows what margin the very locked okay, but it's it is a.
Easier money.
To be made okay.
Michael is exactly right is that.
We have been aggressive on pricing across the board and while that isn't it called out specifically as a contributing factor to the lower gross margin. It is.
And the overall mix notwithstanding the impact of the.
GPU and AI business.
And has that pricing dynamic is that starting to kind of normalize from here or is that an incremental headwind that we should consider going forward.
I believe that as the market begins to stabilize that will return to a more normal profile as far as pricing again.
Specific point to make here is that most of our company our customers.
Our attractive and we secured design wins because of our innovation.
As opposed to pricing alone.
So I believe that as the market stabilizes.
Sometime in 2024.
We will probably return to more normal pricing environment as well you'll be you sit in.
Mixing mix right, but also these are the capacities and the capacity the capacity Utilizations and all over China.
And also also add a lot of capacity cost okay for us. So it is a mix of all of them so not not only the product mix.
Thank you.
Okay.
Our next question is from Rick Schafer of Oppenheimer break your line is now open.
Hey, guys, let me add my congratulations.
If I could follow up just one more question on enterprise data.
You mentioned your Greenfield Green.
Greenfield product lineup for next year, I think a couple of times on the call and one of those really stands out as a silicon carbide power isolation module you guys are working on and I know that's for a couple of different end markets and I was hoping you could give some color around the sort of engagements you are seeing right now.
With the CSP.
Data center, maybe a sense of timing on when those initial revenues would start showing up in the model.
And my bigger question is really do you view sort of power solution.
Lesion module as a Tam expander for your existing enterprise data franchise. Thanks.
Let me answer your.
First part of Silicon carbide, Thanks, Paul remind me just almost forgot.
[laughter] Yeah, we we.
We released a product and a first our revenue will see sometime in the next.
<unk> years from a game you would be in the solar inverters.
And.
The.
Great Green energies had a lot of demand.
The products that we design for those that market songs and.
We will start to ramp and also in Automotives and these are not.
Pacifically for trust.
Crushing but it was funny the drivers, we do Apollo management and.
We will see those products with design and are ramping up on much later some that came in.
These are clearly in the game.
Hum.
Theres a void in a in a in a market no. Other company produces that kind of a product and.
It became a very unique and.
So I I'm.
I have a very good confidence in the tooth and then second half of next year the year. After some okay, well, we will see a lot of new revenue coming from that segment.
So what's the second second questions.
A second part of it.
Yes within CSP, a full rack power that I know you guys have discussed is there any color you could give around how you view that.
That sort of a Tam expander for your enterprise CNS segment.
Chip.
Hi.
I'm sorry, the Hyperscale.
While the Hyperscale and Hyperscale is not all of them.
And you guys are knows better than wooden wisdom reaches only provides a pound something like them in that.
The CPU side GPU side, as we said earlier and that gave you a <unk> we have a we expect to have a growth.
Bigger shares and Oh, if you will.
If you referred to.
Silicon carbide and.
That's not we won't develop all those up product.
Those are power supply. So look I mean, these are plucking play power supply and.
These are large modules and.
Well ramping.
I don't have a timeframe so okay probably isn't.
<unk>.
Towards the very end up in the next year the 2025.
Okay. Thanks, a lot for the color Michael.
And I guess, maybe if I could try one more swipe at Ross's question on gross margin I don't know, Brian if you could give us any kind of rule of thumb and I understand it's a mix issue and I hear everything you're saying about the current pricing environment, but as we look to things sort of normalizing say in the second half next year.
You get back to.
Tier 2 billion or better kind of run rate should we be thinking gross margin at that level should be back sort of tilting towards the high high <unk> again.
Sort of a run rate.
Yeah, I would not be too quick to jump to the high Fifty's.
In the near term here.
I think that we what we've.
Said previously is that we expect for the next few quarters to stay within our model targeting about 56% plus or minus 50 basis points.
And then as we look at the second half of next year as things stabilize and we get a better mix.
You should see return to have an incremental improvement.
Yeah.
Do you see some of that came in I didn't look at it.
And then being details and they'll get them in the end.
And a week spend a lot of capacities.
And and.
From a.
These are strategically not mistake.
We do see a lot of growth pharma.
And the next couple of years and so I.
I believe these are capacity utilization hasnt picking in effect and on the on the on the gross margins.
I don't know whats the how many what's the percentage I don't know if somebody can maybe you can't answer your latest okay.
On the capacity and I'll take this topic on because it's an important one as we look ahead.
As we talked about a year ago as far as developing new relationships with the fab partners, particularly in Taiwan, and Singapore as we not only expand capacity in advance of our.
A future up upswing in demand, but also to diversify.
By geography, and so those investments.
Or are adding to our overall cost profile.
More in the R&D side than the gross margin, specifically today, but that capacity will become available here just as we see the second half of next year starting to.
He's a hole for futures China's on that yet, but the capacity that we expanded into from a year ago.
There's no utilized state yet not yet okay for the test equipment.
Okay.
Thanks for all the color guys.
Our next question comes from William Stein of tourists. William Your line is now open.
Thanks for taking my question.
I'm, hoping.
Michael you talked about.
Traction in design wins.
It will.
That will turn into revenue over the next.
Several quarters and years it sounds like you've been very busy with these as you always are.
And.
Often that means you can see sort of what's coming a little earlier.
In terms of where the revenue might shift in terms of the end markets and products and that sort of thing.
So when you think about the bigger design wins into the bigger volume runners or the bigger ASP drivers is there a shift either in end markets or a mix, let's say for modules or motion control or things like that any other.
Shifting the revenue mix that we should expect because of these design wins that have yet to ramp.
Yeah.
Well, thanks, Shlomi and remind me the motion I forgot about that.
Okay Yeah.
I still have a lot of design win the motions by students and and.
Hum.
We look at it and the beauty is.
I can't quite a Pacific away really across the board and that means we have our biggest customers like a four 5% maybe even slightly higher in the out of the out of this year and that came in.
And.
All the other customers a few thousand customers in a few thousand product.
Well I don't know, how many market segments and market and.
They are very healthy and our.
In terms of a design win activities that came in.
And.
So all of them.
And that will obtaining until revenues and I can't give you some bigger assignments in that game and not many people talking about it and.
Hum.
It's not about what is our USB C.
Yes.
PD PD and.
I believe with this is it would be a huge revenues in that game and our growth and our MTS that has a lot more content in the first is oh.
Our U S to be PV versus the U S b.
Was it a USB earlier version <unk>, so that it can be.
Okay Mountain type seat and.
Some of them in the auto would be cannibalized, it and for USB type.
The b type of clubs.
So that came in but see has a much higher content and that's in auto and in the consumer side is totally new and.
USB type a b a b type as it is.
It's a very low.
Is.
So like the consumer side and now is all converting to a USB C and that would be a lot broader applications and it's.
Because all of them.
Unified applause, and especially European countries and the drive to our standards and I think some migrate to two.
Two anywhere so because they have a clear main day went to a switch it and I believe in the among the apples and the cable for the next flourishing I'm a fan of phone would be USB C.
<unk> and <unk>.
We see M. P S and a lot of a lot about a lot of.
Attunity decent amount of growth.
So other than that okay.
Battery management and.
That will ramp into a solid win for teens and that came in a.
A lot of different applications pharma 2024 tons of plentiful and.
D var from a power tool took gardening tools and.
From all kinds of other things when I came in.
Sure.
Already designing products ramping in the next.
12 to 24 months, our lesson six to 24 months I guess, yeah and then in addition, just to repeat as far as the opportunities that we talked about in both green and energy.
Clean energy and as well as in DDR five so there is a large number of <unk>.
Products that are expected to ramp here very quickly for us.
Great if I can ask one follow up.
Inventory declined sequentially surprised us a bit.
Perhaps this was always your plan, but if it wasn't can you describe what happened here perhaps.
The customer came in.
With more demand for something or.
Maybe you decided mid quarter to reduce <unk>.
Duction, maybe just set me straight on this issue.
When we do still have all inventories and that kept me in starting the beginning of the year, that's probably reflects that.
And.
Yeah, and it doesn't mean, we'll keep that keep the loss, okay whoa posted up on the more yeah.
What we've done is we've said that we have a range of inventory that we want to operate within between 180 to 200 days and what <unk> seen is that.
We did reduce wafer starts about nine months or three quarters ago, and Thats now being reflected in our balance sheet today, but as we anticipate the demand for all of the opportunities that we see possible for 2024.
We are beginning to ramp inventory and as Michael said, we have the capacity available to take advantage of that.
Years ago, and Thats now being reflected in our balance sheet today, but as we anticipate the demand for all of the opportunities that we see possible for 2024.
Thanks, guys.
Our next question is from Matt Ramsay of Cowen Matt. Your line is now open.
Are beginning to ramp inventory and as Michael said, we have the capacity available to take advantage of that.
Thank you very much good afternoon guys.
Michael I wanted to dig into the automotive market a bit and understand.
Thanks, guys.
Our next question is from Matt Ramsay of Cowen Matt. Your line is now open.
The drivers of the business over the next several quarters I think you guys have some <unk>.
Thank you very much good afternoon guys.
Very exciting new content with with one of the leading EV Oems in the states and obviously.
Michael I wanted to dig into the automotive market a bit and understand.
Some really good content with a number of folks in Asia. So if you could try to help us break down what your expectations are for the drivers of your automotive business over the next I don't know six nine months.
The drivers of the business over the next several quarters I think you guys have some.
Very exciting new content with with one of the leading EV Oems in the states and obviously some really good content with a number of folks in Asia. So if you could try to help us break down what your expectations are for the drivers of your automotive business over the next I don't know six nine months.
Relative to some I'd say.
Fluctuations in unit expectations from some key customers I'd really appreciate it thanks.
Yes.
I.
These type of a product so it's not like a consumer like a half half of the year. So you can design your out methane.
Relative to some I'd say.
Fluctuations in unit expectations from some key customers I'd really appreciate it thanks.
And.
Yes.
It took us a year, okay. It took us a year or so and that took us and at least 12 months Tor two.
Yes.
I.
These type of products is not like a consumer if I could have half a year. So you can cause I you out.
Work out with our customers the major supplier, Okay may end up putting the system to end up and make a production worthy in the in the Milwaukee and that that's a long effort and the <unk>.
And.
It took us a year, okay. It took us a year or so and that took us a lease of toll months Tau Tau.
Work out with our customers the major supplier so that they may end up putting the system in.
Frankly, I don't even don't really care. If somebody came in has long viewed your windows socket windows the projects and the revenue will come in.
And I'll make a production worthy in the in the in the working and that's a long effort and the <unk>.
So when is the next.
Three months on next nine months I don't really know okay.
Frankly, I don't even don't really care some marketing in the US Longview you win those sockets windows of projects in the Caribbean.
We thought from the last year, we further last year middle of this year, we'll start to ramp up it didn't mean that.
The revenue will come in.
So when is the next.
And but I think it's a next year, sometimes they will see more and more aid us in and also the trucking and then used truck new type of a trucking burgers.
Three months on next nine months don't really know okay.
We thought from the last year, we saw that last year middle of this year, we'll start to ramp up okay.
Okay.
And.
And but.
So that's.
I guess the next year, sometimes they will see more and more aid us in and also the trucking and then new truck new type of a trucking burgers.
Pretty much as.
Oh.
Just like everybody else they expected, though okay.
All of these are products of the world ramping up is okay will come our way.
And so.
So that's.
Well, we'll go with it okay, and if I can just add to that.
Pretty much of the us.
Oh.
A lot of the customers that are picking up on design wins.
Just like everybody else I expect it to okay.
All of these are products of woe ramping up is okay will come.
Our <unk>.
Skewed more heavily to evs that are.
Well, we'll go with it.
We're inviting new technology platforms.
And if I can just add to that that are a lot of the customers that are picking up on design wins.
And that market.
Has slowed in unit volumes observed.
Our.
But the exciting part of this story is that we see that new platform launches for those customers are in position to ramp in the first half of next year and we're seeing the proliferation of a broadening of those technologies going into.
Skewed more heavily to evs that are inviting new technology platforms.
And that market.
Has slowed in unit volume as observed.
But the exciting part of this story is that we see that new platform launches for those customers are in position to ramp in the first half of next year and we're seeing the proliferation of a broadening of those technologies going into <unk>.
More traditional internal combustion or I see.
Brands, So I think that.
The automotive market, while it's difficult to time that our positioning is very secure oh, yeah, okay, because that's a good point.
More traditional internal combustion or IC brands, so I think that.
The eight US gave me in there.
His thoughtful ramps, okay, which we were told at the beginning of.
The automotive market, while it's difficult to time that our positioning is very secure yeah, okay. Because that's a good point.
Of the year and at the end of the years now when we were told the next years, but all of these are new.
Our new for Us and.
The Adas gave me in.
And the digital cockpit and also in Adas and the.
The starts will ramps, okay, which we were told to pick a number.
The year and at the end of the years now when we were told the next years.
So nowadays tell us in the early next year.
All of these are new.
And.
Got it don't walk can believe it or not when I say.
Our new for Us and.
And that digital cockpit and also in Adas and the.
Thank you guys.
We.
So nowadays tell us in the early next year.
My I guess my follow up question.
And.
It's not to me the most strategically important part of your business, but I think it has a lot of different benefits.
Got it don't walk can believe it or not when I say.
Okay.
No.
The consumer market.
You guys.
We are.
Asia, and I mean, Bernie use the cookie jar analogy a number of times over the years.
I guess my follow up question.
It's not to me the most strategically important part of your business, but I think it has a lot of different benefits.
The consumer market got down to a small enough percentage of your revenue. It was I think there was an intention to.
The consumer market.
Essentially really lean in and trying to re grow that business. Both from a revenue perspective and also it gives you a lot of flexibility around growth and margins.
Asia and Bernie you use the cookie jar analogy a number of times over the years.
And the consumer market got down to a small enough percentage of your revenue. It was I think there was an intention to.
Maybe the demand environment is not there today to really lean in to re grow that but I just wanted to do a pulse check on the strategy. That's still the intention to re grow that business as a percentage of revenue and you feel like you have the product portfolio to go and do that.
Potentially really lean in and trying to re grow that business. Both from a revenue perspective and also it gives you a lot of flexibility around growth and margins and maybe the demand environment is not there today to really lean in to re grow that but I just wanted to do a pulse check on the strategy that's still the intention to re grow.
The strategy is correct, okay and.
If demand doesn't even last quarter, I said, it and I can't Miss it.
That business as a percentage of revenue and you feel like you have the product portfolio to go and do that.
Dropped to unhealthy.
Uh huh.
Positioning sucking way too locked and.
The strategy is correct, okay and.
There's a lot of money to be made.
If demand doesn't even.
Uh huh.
Last quarter, I said that I can't Miss.
And.
Our margin.
Dropped to unhealthy.
Maybe lower end, but it helped the EPS a lot.
Positioning second way too long and.
The second question is whether we have enough Hum product. Okay. We did a lot of them and that gave me in the.
There's a lot of money to be made and.
And.
Our margin.
Last half years and.
Maybe lower end, but it helped the EPS a lot.
Other ones.
We'll release in.
The second question is whether we have enough Hum product. Okay. We did a lot of them and that gave me a.
Next couple of quarters.
And I'll walk next next quarter, or so and that those will turn into revenues and they in a half year to two nine months time.
Lastly, <unk>.
Half years and up.
Other ones, what we'll release in.
We remain committed to the consumer marketplace as part of our diversification absolutely okay.
Next couple of quarters.
And a lot less next quarter also and those well well turning to our revenues and they in a half year to two nine months time.
Did you guys have a good afternoon appreciate it alright. Thank you.
Our next question is from tourist Baumgardner Stifel Tore your line is now open.
We remain committed to the consumer marketplace as part of our diversification absolutely okay.
Yes. Thank you I just had two quick follow ups first of all on the buyback I mean this is from a science perspective, something that is quite quite large and we don't have much history with the company.
You guys have a good afternoon appreciate it alright. Thank you.
Our next question is from tourist Baumgardner Stifel Tore your line is now open.
Garcia of sites like that so how should we think about the I guess philosophy with the buyback you mentioned to offset dilution but.
Thank you I just had two quick follow ups first of all on the buyback I mean this is from a size perspective, something that is quite quite large and we don't have much history with the company in regards to the sites like that so how should we think about the I guess philosophy with the buyback you mentioned to offset dilution, but you know how are you.
Are you going to be opportunistic or are you like some other companies, where you buy the stock regardless of the price just just just trying to understand some of the dynamics there.
Okay.
Yeah, So I'd like to comment on that very quickly is that.
You're going to be opportunistic or are you like some other companies, where you buy the stock regardless of the price just just just trying to understand some of the dynamics there.
When we look at.
Doing the buyback.
We were demonstrating confidence in our free cash flow over the next three year window.
Yeah, So I'd like to comment on that very quickly is that.
When we look at.
And the goal here.
Doing the buyback.
Is to offset dilution.
We were demonstrating confidence in our free cash flow.
That will naturally occur during that period of time.
So we're going to apply a go to market strategy that is both opportunistic but also a programmatic.
Over the next three year window.
And the goal here is to offset dilution.
So we don't have a timetable necessarily for how to implement it during that period.
That will naturally occur during that period of time.
So we're going to apply a go to market strategy that is both opportunistic but also programmatic.
But it will reflect both.
Existing market conditions as well as a systematic program well Tony it implies a bylaw keep it a high [laughter] yeah.
So we don't have a timetable necessarily for how to implement it during that period.
Okay.
Yeah, no that's very helpful.
But it will reflect both exists.
The other follow up and I know this is a minor detail, but your lighting control business was up quite a bit in the quarter was that mainly because of notebook or was there something else going on there.
Existing market conditions as well as a systematic program called Bernier implies a bylaw keep it a high [laughter] yeah. Okay.
Lighting business.
Okay.
Yeah, that's that's very helpful.
I'm, sorry, I'm, sorry, you broke up a little bit where you're talking about storage and computing no no no. You're so you have the lighting control business.
The other follow up and I know this is a minor detail, but your lighting control business was up quite a bit in the quarter was that mainly because of notebook or was there something else going on there.
You showed this in your filings it was up about 20% sequentially.
Lighting business.
And I was just wondering if that was because of notebook or anything else. I know these are there because the decorative light.
I'm, sorry, I'm, sorry, you broke up a little bit where you're talking about storage and computing no no no. You're so you have the lighting control business.
Okay.
With them, we don't have a lot of consumer business anymore. These are but these are small numbers and that can mean.
You showed this in your filings it was up about 20% sequentially.
And I was just wondering if that was because of notebook or anything else. I know these are there because the decorative lighting.
I.
I don't know the Pacifically, but.
Okay.
I do know we don't have a lot of consumer because these are really really low price. So these are industrial linings, and and that decorate decorative lighting, yeah I apologize for it I think that you broke up and we missed the heart of your question, which end market lighting.
We don't have as well.
We don't have a lot of consumer business anymore. These are but these are small numbers.
Aye.
I don't want her pacifically, but.
I do know we don't have a lot of consumer because these are really really low price. So these are industrial linings, and and that decorate decorative lighting, yeah, I apologize sorry, I think that you broke up and we missed it.
You have a lighting control versus DC to DC writes a lighting control it increased by $4 $5 million sequentially. It was up 20%.
Hum.
At the heart of your question, which end market lighting.
$100 million annual business. So I mean, it's not trivial, but obviously small in the bigger scheme of things.
You have a lighting control versus DC to DC writes a lighting control it increased by $4 $5 million sequentially. It was up 20%.
Yes, okay.
It is yeah again, Michael addressed it but it's the general market.
I don't know the Pacifically, but.
You know it is 100 million dollar annual business. So I mean, it's not trivial, but obviously small in the bigger scheme of things.
That's the market, where we'll eat okay, we will position ourselves.
Okay.
Not even Pacific clean the consumers.
Yeah again, Michael addressed it but it's the general market.
Hi.
Our high volumes.
I don't know the Pacifically, but.
And also it's in automotive as well.
Great Fair enough.
That's the market, where we'll eat okay, where we're positioning ourselves now.
Yeah, Yeah, you're right okay.
<unk>.
Now in Pacific Clean that consumer then Hyatt high enough.
Is there any follow up questions. Please click the return button.
Higher volumes.
As there are no further questions I would now like to turn the webinar back over to Bernie.
Also it's in automotive as well.
Great Fair enough.
Yeah, Yeah, you are right okay.
Just in closing here I'd like to thank you all for joining us this webinar and look forward to talking to you again during the fourth quarter, which will likely be at the end of January. Thank you have a nice day.
Is there any follow up questions. Please click the raise 10 button.
As there are no further questions I would now like to turn the webinar back over to Bernie.
Just in closing here I'd like to thank you all for joining us this webinar and look forward to talking to you again during the fourth quarter, which will likely be at the end of January. Thank you have a nice day.
Okay.