Monolithic Power Systems - Q1 2024

Transcript

Genevieve Cunningham (Senior Manager of Marketing Communications)

Welcome everyone to the MPS first quarter 2024 earnings webinar. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Bernal, VP of Finance. Earlier today, along with our earnings announcement, MPS released written commentary on the results of our operations. Both of these documents can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections that involve risk and uncertainty. Risks, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q1 earnings release and in our latest 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.

Bernie Blegen (EVP and CFO)

Thanks, Gen. We're doing something a little different with today's earnings call. As a detailed recital of performance metrics is included in the company's earnings commentary accompanying the earnings release, I'll use this time to provide just a few comments on our Q1 2024 performance and our outlook before opening the call up to Q&A. Our financial performance improved in the first quarter of 2024, with revenue up both sequentially from Q4 2023 and year-over-year from Q1 2023. Ordering patterns consistently trended upward through the quarter. Visibility into the second half of 2024, however, is limited, and many of our customers remain cautious. Despite this uncertainty around the second half of 2024, customer engagement across all of our end markets remains high, and our design win pipeline continues to grow stronger. Additionally, we are continuing to expand our product portfolio and diversify our supply chain globally.

We believe both actions position our company for further growth as the market improves. In summary, we saw consistent improvement through the first quarter, but we continue to be cautious about the second half of 2024 business conditions. Overall, our proven long-term growth strategy remains intact, and we can swiftly adapt to market changes as they occur. I'll now open the webinar up for questions.

Genevieve Cunningham (Senior Manager of Marketing Communications)

Thank you, Bernie. Analysts, I would now like to begin our Q&A session. As a reminder, if you'd like to ask a question, please click on the Participants icon on the menu bar, and then click the Raise Hand button. Our first question is from Tore Svanberg of Stifel. Tore, your line is now open.

Tore Svanberg (Managing Director)

Yes, thank you, and congratulations on this enviable consistency. I have two questions. My first question is on share gains. Historically, Michael, Monolithic Power tends to really accelerate share gains during downturns. I know there's a lot of focus on enterprise data right now, which is a third of your revenue, but can you maybe call out some other verticals or applications where you are seeing more share gains in the current downturn?

Michael Hsing (CEO)

Oh, clearly, we see. We just went, if we haven't out of this downturn, so okay, you see this, we compare the rest of the industries. Okay, we like a 10% up, and so that's really a share gain. And so in terms of the vertical market is auto, clearly is the one. We won many sockets in there, and MPS is still small compared all these established our competitors. And other ones, even the servers and the notebooks areas, and these are all gain shares. And the last one is the consumer.

As we said a year ago or so, we gave up some of the shares because of the capacity constraints. Now, we have a lot more capacity now, and you will see some growth in the near future.

Bernie Blegen (EVP and CFO)

If I could add one additional comment there, is that we've had a number of greenfield opportunities that have been waiting to launch in an improved microenvironment. So in addition to the end markets that Michael just referenced, I think that you'll also see share gains in both communications and industrial.

Tore Svanberg (Managing Director)

Great, thank you. For my follow-up question, and specifically on enterprise data, which is now a third of your revenues, there's been some chatter lately about lower power management content in next generation AI data centers due to liquid cooling and other techniques to lower overall power. Is this impacting MPS broadly, or is this more sort of a very specific use case in the server power management market?

Michael Hsing (CEO)

All these are cooling systems, a new, new format or vertical power, and MPS involve all of them. And if they transition to those markets, those app, this systems and MPS end up in the same games, okay? We will gain, and we'll, we will grow with it. So if you any other comments, okay. Oh, Tony, it's not okay. Yeah.

Bernie Blegen (EVP and CFO)

No, I think that the point that we've demonstrated, particularly with enterprise data, is the ability to leverage up content as we go into higher value technology. For example, the water-cooled and vertical represent opportunities, not threats, and if you look down the line, not far out, we'll also be going into rack power as well.

Tore Svanberg (Managing Director)

Excellent.

Michael Hsing (CEO)

That's good. That's good. Yeah, good answer.

Tore Svanberg (Managing Director)

Great, thank you. I'll go back in line. Congrats again.

Michael Hsing (CEO)

Yeah, thank you.

Genevieve Cunningham (Senior Manager of Marketing Communications)

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

Quinn Bolton (Managing Director)

Great. As I'll add my congratulations on very sturdy performance in a challenging macro environment. I guess I wanted to follow up on Tore's question on enterprise data. Lots of your competitors making noise about perhaps gaining share at your largest enterprise data customer, and wondering if you could just sort of address your latest thoughts on, you know, competitive landscape in both lateral power and then perhaps looking forward to vertical power, and then I've got a follow-up.

Michael Hsing (CEO)

Yeah. As you may remember, 2016, we have a power curve versus the power curve and CPU computing capabilities and versus the power densities. And we projected it for 2018 or 2019, that would be the crossover point, that MPS product. And for those common footprint and use a DrMOS couldn't fit into the peripheral powers. That's around 700 W. If you remember that, we 2016, we said that. And at the time, we projected was a CPU, was raw, it's actually turned out to be a GPUs. But the power is the power, power densities.

But 2018 or 2019, that's pretty much the peripheral powers that reach the limit. Now, from that time, like, everybody goes to verticals, and okay, for even higher power AI computations, like, or learning. So all of these powers go to verticals, and peripheral powers reach the limit. How you. I can't comment on our competitors. Okay, so far, MPS, well, as always, we wanna bring the best technologies, and we are not a champion of volumes. Okay? We don't do that. Okay, and we want to whatever we do, we do the best, and not of volumes that we ship.

So when the market became normalized, I mean, not like the last couple years or so, and there would be more solutions come on board. A lot of our competitors start to copy our product. So be it. That's fine. So like, we stick our MPS model, we'll have a very diversified growth.

Bernie Blegen (EVP and CFO)

I think it's important to keep in mind when you look at our history, as Michael just referenced there, that we've always won opportunities due to our innovation. As we look at the next generation of GPU or TPU or ASIC products that are in this high power and market, we're an enabling technology, meaning that at the front of the design cycle, we're consulted, we're integrated, in fact, with the development of the next generation of products. We believe that strategically, that yes, there will be competitive influences in the market, but we wanna continue to position ourselves as the leader.

Quinn Bolton (Managing Director)

Yeah, maybe just a quick follow-up, just any comments you guys have on when you think vertical power may go to volume production. Is that something that happens later in 2024? Is that not in volume until, you know, sometime in 2025? And then the follow-up, Bernie, is you look at the consensus estimates, the Street's modeled, you know, up 9% sequential growth in your December quarter. Your typical seasonality, I think, is down 1%-3%. Wondering if you have any comments as to that sort of a seasonal pattern out in Q4. I know you're not guiding out that far, but wondering if you could make any comments about that sort of atypical growth.

Michael Hsing (CEO)

Yeah, I answered the first part of it, and the vertical power is happening now. There's multiple of our customers, they are launching the vertical power now. So like we are shipping those products.

Bernie Blegen (EVP and CFO)

Yeah, and I'll pick up the second part of your question there, is that seasonality, particularly as you're exiting a downturn, is hard to predict. And what we tried to indicate with our prepared comments is that, you know, there are signs of optimism from the standpoint of improved ordering patterns. But how that translates into the second half is hard to predict. And so we have more of a profile of, you know, the guide that we've given for Q2, but that really as far as the difference between Q3 and Q4, we see them higher than Q2, perhaps, but between the two of them, flattish.

Michael Hsing (CEO)

Yeah. As we see AI, but we still continue to grow and grow very fast rate.

Quinn Bolton (Managing Director)

Great. Thank you.

Genevieve Cunningham (Senior Manager of Marketing Communications)

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

Rick Schafer (Managing Director)

Hi, thanks. I was having trouble with my mute button. I add my congratulations, guys, and I just had a couple questions. The first one, just since we're talking about power, and I sort of have a pointed one on server CPU power. You know, some of the new x86 platforms that are due out later this year, you know, are pushing 500 W. I mean, is there an expectation, just like the call you made back in 2016, maybe that was a little premature, but is there an expectation that x86 is eventually gonna move to 48 volts still? And if so, you know, I guess, you know, where are we in that transition? You know, how far off do you think that is?

Michael Hsing (CEO)

Yeah. Okay. Now, since you mentioned in 2016, I can go back to earlier. So like 2014, we're not invited, we are outside the door, and 2016, we can join, okay, we are invited as a guest, okay? And we give some tokens, and okay, and so you can play it, and okay. And so the transitions and from VR13, VR13.5 to VR14, then this time, when these new CPU powers, we have a significant market shares. That will keep. And it's not reflected into revenue yet. And once those CPUs are released, we will gain a lot, significant amount of shares.

Rick Schafer (Managing Director)

Any comment, Michael, on the transition to 48-volt power for x86?

Michael Hsing (CEO)

That we don't know. That's probably the higher power is over 700 W. I think that those will transition to vertical power, which we are ready. Other ones below that, we believe are still, you know, using a traditional rack power, and use a 12-volt supply.

Rick Schafer (Managing Director)

Got it. Thanks. And just as a follow-up, shifting gears a little bit to auto, I was just curious what your expectations are, for your auto business this year. You know, obviously, that market is under a little bit of pressure near term, you know, but I believe, you know, you guys have been pretty open, about some of your material share gains. You know, for instance, with China, within China, ADAS, you know, also with some of your top auto, your, your, well, your top auto customer, you've also got some pretty significant share gains, I believe ramping later this year, but I was curious if you could provide any update there?

Michael Hsing (CEO)

We saw-

Rick Schafer (Managing Director)

As part of it.

Michael Hsing (CEO)

Yeah. Go ahead.

Rick Schafer (Managing Director)

Oh, and I, I just was curious if you, if you could add in there, you know, what your expectations are from... I know you had a couple of launches, you know, that some OEMs delayed in the second half last year, and I didn't know if you still expected to benefit from, from those this year. I know that's kind of a lot in one question, but there's, there's a lot going on in your auto business.

Michael Hsing (CEO)

Oh, yes, certainly. We actually care less what the share gain, what the revenue expectations. Of course, we have to prepare all the inventories, and okay, and that's the only thing we care. Whatever it is, whatever it is, okay, we want to do. If we're not the best, we will not win those market segments, okay? And, particularly, these are new applications and new features. So far, we can tell, we can tell you, so like, and in this year's or end of the last year's, and the Chinese EV makers, they produce a lot more. And, with those features that we are in, they exported in. not to U.S., but to other parts of the world.

They increased somewhere 5-6 million units, okay, million cars. And that's where we see the upside so far.

Rick Schafer (Managing Director)

Got it. Thanks.

Genevieve Cunningham (Senior Manager of Marketing Communications)

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

Ross Seymore (Managing Director)

Hi, I'll echo the congratulations on the stability. Just a question on the visibility into the second half. I understand the caution, especially given what everything going on in the broader market, but you also said that your bookings are improving, you know, the order rates, the engagements, et cetera, et cetera. So is the visibility improving? It's just not as good as it used to be. I'm just trying to reconcile the booking side improving, but the visibility not.

Bernie Blegen (EVP and CFO)

Sure, Ross. If we can kind of reflect that over the course of about the last six quarters, ordering patterns have been well below whatever we call normal. And when we're seeing improvement, doesn't mean that we're seeing that they've necessarily stabilized or that they're as predictive as when you have, like, five or six consecutive quarters of strong ordering patterns. So all we're trying to do right now is remain cautiously optimistic.

Tony Balow (VP of Finance)

Hey, Ross, it's Tony. The one, the only thing I'd probably add on that, right, is really focused on the design win engagement, making sure that pipeline is healthy, 'cause it's difficult to call when the market would come back. As Bernie said, it's still pretty choppy. But if we have that strong design win pipeline, as well as having the supply chain diversification we were talking about, we're set to take advantage when the markets do come back.

Ross Seymore (Managing Director)

Thanks for that, Tony and Bernie. I guess as my one follow-up, a near-term question for you: Any outliers in the growth that you're guiding to in the second quarter by end market segments? You know, any versus the 7% total?

Tony Balow (VP of Finance)

No, I.

Michael Hsing (CEO)

Outliers, it means like AI stuff?

Tony Balow (VP of Finance)

Yeah.

Michael Hsing (CEO)

Yeah, as I said earlier, so we still kind of, we still see a lot of growth, okay? And we are try to get all the inventory ready. Okay, start to start to go even further. Okay, and and even have a lot, lot more upside. Okay.

Bernie Blegen (EVP and CFO)

Yeah, if I look sequentially between Q2 and Q1, we do see the continuing demand profile for Enterprise Data, and I think we see also some contribution from automotive, but the rest of our end markets are pretty flattish.

Ross Seymore (Managing Director)

Thank you.

Bernie Blegen (EVP and CFO)

Okay.

Genevieve Cunningham (Senior Manager of Marketing Communications)

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

William Stein (Managing Director)

Great. Can you hear me?

Bernie Blegen (EVP and CFO)

Yeah.

William Stein (Managing Director)

Great. Thanks for questioning. Congrats on the good results, and thanks for the change in format. It's a breath of fresh air.

Michael Hsing (CEO)

Yeah, at least you appreciate it. Like, we try to make a life and make it easy for you.

William Stein (Managing Director)

Thank you. I'm hoping you can update us on the progress you've pursued to try to diversify your manufacturing geographic footprint and, you know, both on the front end and back end, and then I have a follow-up, please.

Tony Balow (VP of Finance)

Yeah, I'll start, and then I'll let Michael and Bernie pick up. So I think we continue to make progress on diversification of our supply chain globally, and so I think that process is proceeding as planned. And I think that we're set, as customers would ask for that capability, that we have it ready for them right now. So I think, based on what you said in the past, I would say no change in the expectation there. So Bernie, Michael, anything you wanna?

Michael Hsing (CEO)

Yeah. We build all these capacities our customer demands, okay? There's a few of them that really demand a lot outside of China. So we have a more capacity. So that's the comment. Okay.

William Stein (Managing Director)

Okay, let me try a different topic. Some product types that I know have been ramping maybe over a long period of time. One is data converters, which is a category. I think there's really one very dominant supplier, but you guys have started to get into that area. And then the other is the modules that you make, when these are, you know, much more complex, you know, and they have many, many chips, I think, in each one. If you can talk to us about the recent growth in those newer categories, that would be helpful color. Thank you.

Michael Hsing (CEO)

Yeah. Okay. Let me answer the first one is data converters. Okay, data converters, it's a technology that we're talking about, and we developed in the last few years. And we won design win, we start shipping products, like, I mean, however, it's only one or two products, okay? Now we're gonna release a family of a product in less than a year.

William Stein (Managing Director)

Yeah.

Michael Hsing (CEO)

Less than a year time. That will, that will, meet a more general market. The other, the other topic, that's, when you're talking about. Oh, there's a modules.

William Stein (Managing Director)

Modules.

Michael Hsing (CEO)

Yeah, so-called e-commerce modules, and okay, and, we actually doing well. So, okay, not exactly the e-commerce we talk about it of 2018. And it's going over, well over $100 million, okay? I mean, but these are multi-chip modules, are as, as more than $100 million. Actually, all these AI product that we're shipping, these are all modules. And vertical powers and also the rack powers, we're shipping all these are modules. So I, in the past, I said, as I said, and I'm sick and tired of selling silicon only. I want to leverage our, our leverage and monetize our know-how. We'll sell these power modules, sell solutions.

Bernie Blegen (EVP and CFO)

I think that we've sort of hit on one of the strategic differentiators between MPS and a lot of our competitors, is that we can offer the most flexible architecture of whether it is delivering a module or a silicon die. So however the customer wants to build our silicon or our modules in their end application, we have the flexibility to do just that.

Gary Mobley (Executive Director)

Thanks, guys.

Genevieve Cunningham (Senior Manager of Marketing Communications)

Our next question is from Matt Ramsay of TD Cowen. Matt, your line is now open.

Matt Ramsay (Managing Director)

Hey. Hey, guys, good afternoon. I guess as my first question, guys, I wanted you to maybe talk a little bit about the content per socket progression that you see for the company in the AI business, in particular, as your, the silicon providers that are driving these platforms make generational transitions. I think there's a little bit of confusion. The big primary guy in AI is not just launching one product, but they're launching three different ones that I expect to have slightly different content. And you obviously have other customers there in AI, not just Nvidia, but others. So, if you could talk generally, Michael, about just what you're seeing from a content perspective, generation to generation there.

Maybe Bernie, what are the variables on sort of blended content increases that you might see as we move forward? Thanks.

Michael Hsing (CEO)

Yeah, but I can't talk about the... Well, I don't know. We don't know how our customers and these AI GPU providers how they use it. Okay, I mean, they sell. They have a different model. They have a different model, they have a different, they have a variety of a product. We, as long as we know, so okay, we. They use some, they use IC chips in general for peripheral power. And vertical power is all more than 700 W powers, over a 1,000 W power. So these are from modules. And how many modules per CPUs? Now, we have rough ideas, but we don't know exactly.

Bernie Blegen (EVP and CFO)

Yeah, and, and to follow up on your second point, it's a very content-rich environment for us. It also includes, memory, for example, and the CPU process, in-processor, in addition-

Michael Hsing (CEO)

Oh, even optical.

Bernie Blegen (EVP and CFO)

And optical as well.

Michael Hsing (CEO)

Yeah.

Bernie Blegen (EVP and CFO)

You know, I think it's really too early to put limits on content availability. In fact, we're finding new areas in order to deploy.

Michael Hsing (CEO)

Oh, yeah, and so far, we just wanna handle the growth.

Bernie Blegen (EVP and CFO)

Yeah.

Michael Hsing (CEO)

All the demand from a memory side, from opticals, from even the GPU, CPU powers. And this is, this period is really the growth period.

Matt Ramsay (Managing Director)

Got it. Now, thank you, guys. That's helpful. I know there's a lot of moving parts. I was gonna kind of step back and ask a little bit about growth margin trajectory. It comes up a lot in my conversations. I know you're kind of in that 55% range. I guess, Bernie, what are the puts and takes here? I know there are big customers ramping in enterprise data, and there are variables around that. There's also mix between your segments, and where you're sourcing supply from. There's a lot of variables here. So what would. I mean, are we kind of at a relative floor in the 55% or slightly above range, and what would be the variables that could drive the margin back higher?

Bernie Blegen (EVP and CFO)

Sure, and this is a pretty simple question. So, as you know, the range that we target is between 55% and 60%. We demonstrated that, during the post-pandemic stimulus, that, our margin was able to, you know, go to that higher end of that limit. And right now, for the, last couple of quarters, as well as our guidance here, we've maintained a non-GAAP rate of, fifty-five point seven. And really, what will enable us to go up, is, is a change in the mix of business.

Matt Ramsay (Managing Director)

All right. Thank you very much, guys.

Bernie Blegen (EVP and CFO)

Yep.

Genevieve Cunningham (Senior Manager of Marketing Communications)

Our next question is from Gary Mobley of Wells Fargo. Gary, your line is now open.

Gary Mobley (Executive Director)

Hey, guys, congrats, and thank you for consistently exceeding expectation. Most of the interesting questions have been asked and answered, but I wanted to touch on pricing trends. I know you don't overlap a whole lot with the analog chip market leader, but clearly they're being aggressive on price. So maybe if you can speak to the different product groups or business segments that might be affected by that. And then as well, just generally speak about the pricing environment for your broad set of products.

Michael Hsing (CEO)

Yeah. Bernie, you want it?

Bernie Blegen (EVP and CFO)

Yeah, I'll, I'll start and then let, Bernie jump in, right. I think what you've heard from us in the past is that for us, 'cause we lead on innovation, and we're trying to work on the next generation platforms and work on where we really have a differentiated advantage to our technology, we're probably less susceptible to pricing than some of the, the segments that are, volume-related or might be more, more mainstream. So I do know there's lots of reports out there about pricing right now, but I'd say right now, that's, that's not impacting us in a way that's, that's not, so not impacting us in any way, and you can kinda see that in our outlook.

Michael Hsing (CEO)

Thanks Bernie, add some more on that.

Bernie Blegen (EVP and CFO)

Yeah, and, and fundamentally, part of the, the issue that's driving prices.

Both additional capacity in China, as well as additional capacity that's coming on with a large North American company. And on the cost side, we've always been very, very competitive, regardless of the end market opportunity, and.

Michael Hsing (CEO)

Yeah, the cost of the, regardless of what the margin is, we always have to go, we always drive the cost down.

Bernie Blegen (EVP and CFO)

Yeah.

Michael Hsing (CEO)

Yeah. Oh, I should give you more than you asked, okay? And it's a little bit from our futures, and so far, have nobody asked that question yet, okay? We saw in the near-term market, in the next couple of years, the AI truly trickle downs to all applications, not only in the cars, in all the sensors, all these, in the building for the phones, okay? And all kind of things trickle down to a different levels. And we see now, so all kind of activities is going on now.

And we, there's a lot of design initial phase of in the to forming the product ideas, and these are requested from our customers. We don't see that in the end of the last year, even in the beginning of this year. Recently, we see a lot more. So that will drive those products, definitely will drive the growth margin up.

Gary Mobley (Executive Director)

Okay. Thank you for that comprehensive answer. Last quarter, your distribution inventory, I think you characterized it.

Michael Hsing (CEO)

Who wants it?

Gary Mobley (Executive Director)

I think you characterized the distribution inventory as being a little bit above the target level. What is it now? Have you been able to work that down to more of a normalized level?

Bernie Blegen (EVP and CFO)

Sure. So, there's sort of two ways to look at our channel inventory right now. If you keep it narrow to really the AI supply chain, we're trying to keep that elevated so that that inventory is basically available on demand. But then with regard to all of the other end markets, we've seen it coming down nicely.

Gary Mobley (Executive Director)

Thank you.

Genevieve Cunningham (Senior Manager of Marketing Communications)

Our next question is from Tore Svanberg of Stifel. Tore, your line is now open.

Tore Svanberg (Managing Director)

Yes, thank you. I just had two quick follow-ups. I'm intrigued by the consumer segment, Michael. I know that's surprising when everyone's talking about AI, but, you know, I think this is the lowest percentage it's ever been. But you did talk about, you know, gaining some share there in the downturn. So, any particular applications that we should keep an eye on as you start to grow back in the consumer area?

Michael Hsing (CEO)

Yeah. Okay, that's a, you know, that's a good question, so like, I mean, yeah, that's... I said earlier, that's fell into an unhealthy percentage. Okay, we wanna have a diversified growth. Okay, we neglected our consumers, and okay. But on the other hand, during this period, a lot of our competitor care less about cost, and again, we have a less effect, but we didn't lower the price on them in the notebook market segment. And, that's probably you see it now, and we grow the notebook revenues faster than notebook market growth. And, these are low margin products, again. But when you looking forward, audio product, a lot of the relate to a consumer product.

Maybe Tony, you can mention about, okay? You can talk about this, okay?

Tony Balow (VP of Finance)

I'll go ahead and Michael can certainly talk a lot more, but I point you back to what we announced last quarter on our Axign acquisition, and we really looked at their technology and saw an opportunity to participate in the high-end audio market. MPS's scale and Axign's technology really offered an opportunity to go after customers, and we're seeing some traction in that area. So consumer's got a wide base of potential applications, and I think we'll continue to pick our shots where we can sort of really add value with our innovation.

Michael Hsing (CEO)

Yeah. I can tell you, we will start to ship in Q3, but Axign and MPS together as a bundle.

Tore Svanberg (Managing Director)

Yeah, that's, that's exciting. And my last question is on communications. It was actually up sequential this quarter. Everything that we're hearing, of course, is that that market is still very weak. In your prepared remarks, you said that that growth was driven by networks. So can you elaborate a little bit what's going on there? Are you actually starting to see that market turning, or is this just pure share gains?

Bernie Blegen (EVP and CFO)

It remains a flattish market. I think that in quarter by quarter, we're gonna see infrastructure go up or down, but the full year outlook is that it'll probably be flat with 2023.

Tore Svanberg (Managing Director)

Sounds good.

Michael Hsing (CEO)

Yeah.

Tore Svanberg (Managing Director)

Thank you. Yeah.

Michael Hsing (CEO)

I'm betting on a communication market. It will trickle down from the end of the speed and the demand of a higher speed will trickle down to all these segments. And we have a lot of design wins in the 5Gs or using the other high speed or the Wi-Fis, and we're ready for that.

Tore Svanberg (Managing Director)

So, Michael, what you mean is AI will trickle down, and as that happens, the comms sector will revive?

Michael Hsing (CEO)

That's right. Yeah, it has to! It's that's no-brainer to me.

Tore Svanberg (Managing Director)

Great. Love the color. Thank you.

Michael Hsing (CEO)

Yeah.

Genevieve Cunningham (Senior Manager of Marketing Communications)

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

Melissa Fairbanks (VP of Equity Research)

Hey, guys. Michael, I love a no-brainer. I mean, that's.

Michael Hsing (CEO)

Right.

Melissa Fairbanks (VP of Equity Research)

I love that.

Michael Hsing (CEO)

So, I don't

Melissa Fairbanks (VP of Equity Research)

I love that.

Michael Hsing (CEO)

Yeah, I don't need my brain to talk about that.

Melissa Fairbanks (VP of Equity Research)

Yeah. Yeah, yeah. I'm adjusting my model accordingly.

Michael Hsing (CEO)

Yeah

Melissa Fairbanks (VP of Equity Research)

So I know you guys addressed auto earlier, and I know everyone is focused on enterprise data, but I would like to understand better. We're coming up on the model year builds, you know, for, like, model year 2025. I would like to know where you feel comfortable guiding the auto revenue from here.

Bernie Blegen (EVP and CFO)

Yeah, so, so let me take that one. A lot of the exposure we have with new content is with the EV companies. And so Michael touched on the opportunity, particularly as it relates to Chinese OEMs, where we have a good install base, particularly as it relates to ADAS or autonomous driving.

Melissa Fairbanks (VP of Equity Research)

Mm-hmm.

Bernie Blegen (EVP and CFO)

And those tend not to be as seasonally driven as the internal combustion.

Melissa Fairbanks (VP of Equity Research)

Right

Bernie Blegen (EVP and CFO)

So, while we're seeing some sequential improvement quarter by quarter during the year, we don't necessarily. We're not looking for that hockey stick that used to occur with automotive sales in Q3.

Melissa Fairbanks (VP of Equity Research)

Okay. Okay, got it. Thank you very much, guys.

Bernie Blegen (EVP and CFO)

All right, thank you.

Michael Hsing (CEO)

Mm.

Genevieve Cunningham (Senior Manager of Marketing Communications)

I would now like to turn the webinar back over to Bernie.

Bernie Blegen (EVP and CFO)

I'd like to thank you all for joining us on this conference.