Earnings Call: Q3 2020

Oct 29, 2020

Welcome everyone to the MPS 3rd quarter 2020 earnings webinar. Please note that this webinar is being recorded and will be archived for 1 year on our Investor Relations page at monolithicpower.com. My name is Genevieve Cunningham, and I will be the moderator for this webinar. Joining me today are Michael Singh, CEO and founder of MPS, and Bernie Blakeen, VP and CFO. During this webinar, we will discuss our Q3 2020 financial results and guidance for Q4 2020, followed by a Q And A session. Analysts, you are currently muted. In the course of today's webinar, we will be making 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 stained in the earnings release risks, uncertainties and other factors that could cause actual results to differ are identified in the Safe Harbor statements contained in the Q3 2020 earnings release and in our SEC filings, including our Form 10 K, filed on February 28th, 2020, and in our Form 10 Q filed on August 3 2020, which are accessible through our website monolithicpower.com. MPS assumes no obligation to update the information provided on today's call. We will be discussing gross margin, operating expense, R And D And SG And A Expense operating income, interest and other income, net income and earnings on both a GAAP and a 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 earnings release, which we have filed with the SEC. I would refer investors to the Q3 2019 q22, 2020, and Q3 2020 releases, as well as to the reconciling tables that are posted on our website. Now I'd like to turn the call over to Bernie Blagen. Thanks, Jen. MPS achieved record 3rd quarter revenue of $259,400,000, 39.3 percent higher than revenue in the second quarter of 2020 and 53.7% higher than the comparable quarter in 2019. As noted in our September 14th, 2020 update to our Q3 financial guidance, our revenue increased beyond expectations for 2 key reasons. First, we were able to fulfill our customer's demand that had been delinquent due to past capacity constraints. 2nd, certain China based customers requested previously scheduled shipment dates be pulled into the third quarter of 2020. We believe this request was related to trade and regulatory policy changes that occurred during the quarter. These two factors contributed significantly to this quarter's performance relative to the prior quarter of 2020 and to Q3 of 2019. Looking at our revenue by market. 3rd quarter 2020 communications revenue of $54,700,000 was up 81.8% from the second quarter of 2020, primarily due to a pull in of customers requested ship dates. Communications sales represented 21.1 percent of our total third quarter 2020 revenue. In our consumer markets, 3rd quarter 2020 revenue of $70,200,000 increased 47.4 percent from revenue reported for the prior quarter reflects a combination of market along with normal seasonality of our third quarter 2020 revenue. In our computing and storage in our computing and storage market, 3rd quarter revenue of $75,300,000 increased $11,200,000 or 17.5 percent from the second quarter of 2020. The sequential quarterly revenue growth was broad based with sales gains recorded in high end notebooks servers and storage. Computing and storage revenue represented 29.0 percent of MPS's 3rd quarter 2020 revenue. 3rd quarter automotive revenue of $28,500,000 grew $10,700,000 or 60.4 percent over the second quarter of 2020. This improvement reflects a more normal ordering level following the Q2 2020 industry wide slowdown resulting from the pandemic. We believe MPS's market share will continue to expand in the coming years. As we have been awarded multiple design wins in infotainment, smart lighting, ADOS, and autonomous driving. Automotive revenue was 11.0 percent of MPS's total third quarter 2020 revenue. 3rd quarter 2020 industrial revenue of $30,700,000 increased 15.3 percent from the second quarter of 2020 due primarily to increased revenue for power sources and industrial meters. Industrial revenue represented 11.8% of our total 3rd quarter 2020 revenue. GAAP gross margin was 55.1 percent, matching the second quarter of 2020 and 10 basis points lower than the third quarter of 2019. Our GAAP operating income was $60,000,000, compared to $28,000,000 reported in the second quarter of 2020 $30,000,000 reported in the third quarter of 2019. Non GAAP gross margin for the second quarter of 2020 was 55.5%. 20 basis points below the gross margin reported to the second quarter of 2020 10 basis points lower than the third quarter from a year ago. Our non GAAP operating income was $84,900,000 compared to 53.0 $1,000,000 reported in the prior quarter Let's review our operating expenses. Our GAAP operating expenses were $83,100,000 in the third quarter of 2020, compared with $74,600,000 in the second quarter of 2020 $63,100,000 in the third quarter of 2019. Our non GAAP third quarter 2020 operating expenses were $59,100,000, up from the $50,700,000 we spent in the second quarter of 2020 and up from the $42,500,000 reported in third quarter of 2019. The sequential increase in Q3 non GAAP operating expenses, primarily reflected higher variable costs associated with the increase in revenue and an increased level of investment in securing foundry capacity. The differences between non GAAP operating expenses and GAAP operating expenses for the quarters discussed here are stock compensation expense and income or a loss on an unfunded deferred compensation plan. For the third quarter of 2020, total comp total stock compensation expense including approximately $707,000 charged to cost of goods sold was $23,000,000, compared with $21,000,000 recorded in the second quarter of 2020. Switching to the bottom line. 3rd quarter 2020 GAAP net income was $55,600,000 or $1.18 per fully diluted share compared with and $29,500,000 or $0.64 per share in the third quarter of 2019. Q3 non GAAP net income was $79,400,000 or $1.69 per fully diluted share compared with $50,600,000 or $1.08 per share in the second quarter of 2020 and $49,500,000 or $1.08 per share in the third quarter of 2019. Fully diluted shares at the end of Q3, twenty twenty were 47,000,000. Now let's look at the balance sheet. Cash, cash equivalents and investments were $554,500,000 at the end of the third quarter of 2020 compared to 515.4 at the end of the second quarter of 2020. For the quarter, MPS generated operating cash flow of about $77,400,000 compared with Q2 2020 operating cash flow of $59,300,000. 3rd quarter 2020 capital spending totaled $19,600,000. Accounts receivable ended the third quarter of 2020 at $93,500,000, representing 33 days of sales outstanding. Which was 6 days higher than the 27 days reported at the end of the second quarter of 2020 2 days at the end of the third quarter of 2019. Our internal inventories at the end of the third quarter of 2020 were $148,100,000, down from the $152,100,000 at the end of the second quarter of 2020, days of inventory of 116 days at the end of the third quarter 2020 were 50 days lower than at the end of second quarter of 2020. The sequential drop in days inventory on hand represented an anomaly due to a decrease in the dollar value of inventory and a 39% increase in quarterly revenue. Currently our inventory levels are lean. We are working very hard to return inventory to the 180 to 200 day level necessary to support our future We are forecasting Q4 revenue in the range of $218,000,000 to $230,000,000. We also expect the following: GAAP gross margin in the range of 55.1to50 7%. Non GAAP gross margin in the range of 55.4% to 56.0%. Total stock based compensation expense of $21,800,000 to $23,800,000. Including approximately $700,000 that would be charged to cost of goods sold GAAP R and D and SG and A expenses between $81,300,000 $85,300,000 Non GAAP R and D and SG and A expenses to be in the range of $60,200,000 to $62,200,000. Litigation expense should range between $1,800,000 to $2,200,000. Interest income is expected to range from $1,000,000 to $1,400,000 fully diluted shares to be in the range of 47.1000000to48.1000000 shares. In conclusion, we will monitor market conditions closely and continue to execute. Thank you, Bernie. Click on the participants icon on the menu bar and then click the raise hand button. Our first question comes from Tore Svanberg from Stifel. Tore, your line is now open. Yes. Thank you. And, congratulations on the $1,000,000,000 run rate. First question is, q4 guidance. Could you talk a little about which are some of the end markets that's gonna be, performing in Q4. Obviously, I know communications is gonna be down, but, what about some of the other markets for for the December quarter? Hi, Tory. Thanks for commenting on the $1,000,000,000 run rate. Yeah, if you compare ourselves against Q3. Obviously, that was a high watermark. So probably a more relevant comparison is, against Q4 of 2019. And on that basis, we're expecting all of our major markets to be up significantly, from the prior year. And then when you do the comparison against Q3, you'll see that there'll probably be declines in communications, and computing, and also in consumer. The consumer is seasonally adjusted, but we'll still expect to see improvements in industrial and automotive Very good. And as my follow-up, you mentioned inventories are are pretty lean. So can you just elaborate a little bit on on what you're doing to, try and get the inventories back up? You said you had some OpEx to maybe cure some foundry capacity, but anything else you can add, on on sort of how you're gonna get back to that 180 days of inventory? Sure. I think as we acknowledged in Q3, that we were able to catch up as far as having adequate capacity in order to service near term demand. And, in giving guidance for Q4, that expectation follows along. When we look ahead over the course of the next 24 months, we previously mentioned that we're entering into new relationships with other fabs and expect to grow our overall capacity. So this will be an ongoing investment that we would project, for at least about the next six quarters. The next question comes from David Williams from Loop Capital. David, your line is now open. Hi. Can you hear me? Yes, David. I can. It's I I think there's a mistake. It's Will Stein from Truist. How are you? I guess I'll just go. For any first to clarification, the the inventory that the inventory target that you called out in your script, I think you said a 180 to 200. I think that's 20 days higher than what you said on the last conference call. Is that correct? And if so, can you help us understand what's changed? The, previous metrics that we had been using, were about 20 days lower, but we really made this change, as far as what we've been trying to explain, to the analysts and to investors over the course of about the last, 2 to 3 quarters. But nonetheless, what I I do wanna address your question, which is in order for us to sustain the level of growth that we have that we have to have a higher level of inventory. So in other words, there's a mismatch. In other words, we are building the inventory today but we're not gonna, the the for the sales that'll occur 1 or 2 quarters out. And so it's not a perfect reflection for, for other companies, where they're not growing as fast. They can maintain lower levels in terms of days but here again, we have to make an an incremental investment, in order to allow to support our growth. Let me add it. As you remember, end of the last year's, and, we're at the around 200 days. Of a of inventory. If you use that model and to meet the this year gross, that probably that's about the right numbers. That's what that's the basis. That's we, that's where the where this, 20 more days, a a compound. And, so if you go to a little more little more details. And, MPS is a it's a fabulous company And, yet, we have own own technologies. This is very unique. Again, I can't think of any any of our competitors that they they have they're in the same, same, same way of a manufacturing. And, I do them, to fulfill their their manufacturing. Most of them, they have their own fab. And, so given the volatility, and also given the growth that we that we have and also number of the product and, address the only the green, greenfield market segment. We need, probably more than 2, 200 days of inventory. Okay. That that helps a lot. If I can have one quick follow-up, the guidance while great overall on revenue and EPS, the margins are a little bit, different from what maybe some would have expected. And, Bernie, I'm just wondering if you can, tell us if, the model we should be thinking about, which historically was that gross would grow at 10 to 20 bps a quarter and op margin, you know, there was a I guess a change in that view that perhaps we wouldn't get any operating margin leverage, for the next year or 2. Maybe you can just update us on that on that model. For for both those lines. Sure. And I think that you captured it very well is that, obviously our model has been to improve gross margin 10 to 20 basis points, sequentially. Now a lot of factors weigh into being able to deliver against those results, including both our mix of business as well as what the market looks like. So again, you have to use these as guidelines, not as an absolute, guarantee of what our performance will look like. And then on the operating expenses, right now, we are gonna be continuing to invest in, capacity as I said, in each of the next six quarters. So that that'll be an additional layer of investment from what we've seen And so as a result, we're not projecting, our operating margins to improve, significantly over the course of the next 2 years. Or or op OpEx, I think. Is that is that right? In other words, op margin would just expand rose, which is 10 to 20 bps a quarter or? Yes. Okay, great. Thanks, Bernie. I'll get back in the queue. Thanks. Our next question comes from David Williams from Loop Capital. Our next question comes from Quinn Bolton from Needham. Quinn, your line is now open. Hey, guys. Let me offer my congratulations on a very strong September and and good December outlook. Bernie and Michael, you know, these are sort of unprecedented times in the business, and I know you don't typically look out more than a quarter. But I guess one of the questions I'm hearing from investors is whether there's any sort of inflated demand, still impacting the business in the December quarter, and wondering, say, you can give us any sort of thoughts on March. Would March show a typical seasonal decline from the December quarter of say, you know, 3 to 5% what you would see in a typical year, or do you think it could show, you know, a greater seasonal actor. I know you don't typically go out two quarters, but, again, this is, you know, really strong results here in the near term. Let me answer that question. So like I, if you're talking about normal seasonality, then the outlook is great. And we have, we have so many design design, in activities and we send so many award projects. That gave me. And, and, but and, and, as well as, you know, as well as I know, so, like, I did were in an unprecedented, error. Okay. I mean, and, pandemics and, geopolitical issues, and they and, I can't predict. And, frankly, I tell us. If I could just add to that, is that, I really think that there's certain aspects of our business that we have in good control as Michael hit on as far as the design wind activity. But right now, we do not have control over what the end customer demand is ultimately gonna be, be about. So I think that as far as executing against our strategy and seen it, show up in our results. I think we're gonna continue along that path, but there are just too many factors for us. It would be pure speculation at this point. Okay. Maybe I could ask, in past calls, you've oftentimes given us some idea of your sort of starting backlog coverage. And I know that typically runs a very high percentage of the revenue guidance. My guess is with some of the delinquencies you had in the past quarter, you know, you had very strong backlog, but as you head into the December quarter, backlog sort of back to to more normal levels that it would have typically run-in the last couple of years? Is it still elevated? Can you give us any thoughts on kind of the backlog coverage? We're, as a December callers, and I'll go into a December callers, we're still, facing facing delinquency. So the capacity is still limited. And and I think, what we're seeing here is that, As I said, in the guidance that we offered, is it anticipates both the demand including the backlog that we me limits are. So I guess that I would probably offer that we have some ability for upside, but it's gonna be a little bit limited by, you know, supply chain. Our next question comes from Alex Becky from William Blair. Alex, your line is now open. Hey, Michael and Bernie. Congratulations again in in a very volatile environment. If we can just touch base a little more on the automotive segment, this appears to be the highest revenue quarter you guys posted, since really starting to gain traction in this segment. I realized the environment's just starting now to get a little bit better. But can you maybe update us on on how we should think about the long term growth targets there? In the past, you've said, you know, 40 to 60% growth. Obviously, that may be a little premature at this point, but but perhaps, update us on how you're feeling on that segment. Yeah. I I would probably say that, automotive is one of the more exciting end markets for us for the next several years. Now if you look at our track record in 20192020, 2019 was affected by the recession, 2020 by, you know, factory closings related to the, COVID 19 pandemic. So, you know, again, those are circumstances that were largely outside of our control. But what we're seeing is, is that we're expanding now where from our traditional infotainment base into some of these more exciting technologies, including the lighting systems the ADOS and the autonomous driving. So we think that this is, sustainable revenue growth, should be well ahead of what our corporate average is going to be. At one time, we were promoting the concept of being being able to grow consistently at, 20 to 60% per year, but I would probably back off of that, down to a more reasonable, you know, between 30 40% that's still a very exciting end market for us. Yeah. That's a that's a bonus of being kind of cold, talking. I okay. I I Frankly, we don't have it. I don't have it. It's in a clear pictures. And, what's the gross, frankly, I never, put an NPS as a as a as a, oh, we have to grow a certain percentage. Okay. And, what I'm looking at it is, which what kind of product? Which project? And, and, how well we're positioned. And, which, which, customers, which projects that we want designing and, and a lot more importantly, okay, what kind of products they in the, in the, in the pipeline. That really drives the top line. And, so how do we how do we predicted what's the next, what's the gross percentage I can I can't tell you? It's not here. No. No. That's fair. But it it's good to hear that the trajectory seem to be sort of back on track. And then similarly, I don't I don't think I don't think in the in the prepared comments, you guys commented on the extent of of the pull ins into Q3, is it fair to say that the, the vast majority of the sequential decline in Q3 4 is related to the colon activities, or is there also a little bit of normalization of demand in there as well? Well, we had a lot of point from a Q3 and a partial partially in Q4. And, while still, as I said, as I said earlier, we're still facing delinquencies and, like, and, So I think that that's a combination of the growth and, and also, in a in a, in a a capacity shortage. Okay. From that past. Okay. From that past? Okay. And then lastly, if I can, on just on the days inventory, the 180 to 200 days, how long will it take you to get back to that level. Is that something you can achieve when you've heard we really looking to more the first half of of twenty twenty one? Well, if the market slows down, we're gonna get there quickly. I think is that, okay, wait wait, again, and, this is where at the un uncomfortable levels that came in there. And, so we want to increase as much, as much as we can. And, now our engineers and the working of fabs, okay, working in a different fabs and, and, to get the, to qualify the, the, the process and the, and, the technologies And, so, we hope, Zaki, and, in the next 6 months, we can, we can catch up Okay, great. Our next question comes from Joshua Buchalter from Cowen. Joshua, your line is now open. Hey, guys. Thanks for taking my questions. I'm gonna be echo my congrats. It's for my first question. Earlier this year, you'd mentioned bringing an additional 12 inch fab online in the second half. And I was wondering, Was this the primary driver of the additional capacity you were able to secure in the third quarter? And then looking ahead, how much more capacity do you feel you need to both serve your customers and get the inventory levels up to that that new raise a 180 to 200 days? Yes. Okay. The first question is yes. Absolutely. Okay. We we said that in the earlier, earlier this year's We expanded another 12 inch fab. We had the wasn't in our plant, but we hurried, we hurried up and get up and going. And, okay, And we start shipping product in Q3. Okay. That's a, that's a very, very, that's an an I'm I'm president and thanks to our, our peoples. And, they really worked in the day and the night, night, to, to, to manage that. And, okay, and to manage and qualify the, these, these products going forward, it's, we just want to expand the capacity to reach, 180 to 200 days of inventory. And, Going in the future, if you have a very linear word, and again, Dennis, very easy to calculate, okay, I think it's, we're living in a very nonlinear environment. And, 200 days inventories, and I think that's what we want to do. Got it. Thank you. That's very helpful. And then for my follow-up, a bit of a bigger picture question, I mean, you guys are now a $1,000,000,000 or you reached a $1,000,000,000 run rate this quarter. Are you seeing any increased or changes in the competitive responses from your peers as you move higher on both a unit basis and as well as in the, socket value. Thank you. Our ASP is increasing and, as well, when when we move it to a high end market segments. And, So that's, our competitions are always pretty similar. So, like, I mean, our customer doesn't even know NPS is a $1,000,000,000. Okay. There are no NPS. NPS is very small potatoes, against all these giant. Yeah. But I think you go back to what our competitive basis is, and it really is is that we're winning with superior technology. And a higher level of customer service. And I think that's what our customers are recognizing this for. That's right. Yep. Got it. Thanks guys. Congrats again. Thank you. Our next question comes from Rick Schafer from Oppenheimer. Rick, your line is now open. Hi. Thanks. Thank you guys, and I'll add my congratulations as well. Maybe just a quick follow-up follow on if I can on that question. I I I know you guys have been pouring in new production and foundry partners pretty aggressively. I mean, I I know you've spoken, I think, in the past about sort of Once it's done, the goal is to kind of be at that 1,200,000,000 or so in kind of annual revenues. I mean, that's not a lot of headroom for you guys at your current run rate, at your current growth rate. So I'm curious, you know, is that 1.2 still the right number we should be thinking in terms of your capacity when all is said and done and and maybe what does the timeline look like for for that now since you're since you're pulling stuff in? Yeah. Okay. Obviously, the 1.2, meaning it's not it's not enough. It's not okay. And, and, if you wanna building a fast and on a 2 100, 200 days inventory, it's gonna be easily more than double it. Okay. Now it's gonna That's what we try to do. And, and, and, it's not easy. And, that's what we aim aiming for. Just to double it. And I think that, in the past, you know, securing fab capacity and being able to introduce new products at the rate that we are is really nothing new to MPS. But the scale has been getting bigger. And so that that's why the the investments and the the time that we have to plan ahead, makes a difference. And so, all we're doing is preparing both for the capacity, but also recognizing and acknowledging the investment goes with it. So if we fast forward 18 months, 24 months, I mean, is there a bogie for what would you where you think your capacity will be? I mean, if it's not 1, 2, is it is it is it, I assume, higher than that, but I I'm just just curious if there's a number you can share or if you if you know, at this point. Oh, we we're doing I'm sorry. Clear, we're shooting for $22,000,000,000. $2,000,000,000. I'm sorry. I misunderstood that. Sorry. Thanks, Michael. And then just a maybe a question, if I could, on 5 g and and, you know, maybe I was hoping you could talk a little bit about your exposure to the tier 1. You know, 5 g ran OEMs, the the ones you're allowed to sell to, of course, you know, where you are in terms of of revenue ramp or or design win activity. I mean, are are any of these guys buying QS Mod yet? Are they are you sort of initially seeing more, you know, POL, efuse? Kinda, you know, similar to what you saw in the early stages of your your cloud server ramp? I think there's a 5 gs that, overall, as a, at the early stage. And, and, Oh, I can't say now. So, like, and now the way engaged with all all the 5 g, station makers. And, We do have a designing activity, and, we do have award projects and, and, but it's not significant revenue yet. Thanks Michael. Our next question comes from Ross Seymore from Deutsche Bank. Ross, your line is now open. Hey, guys. I wanna give the same congrats that everybody else did, stupendous work here. A couple quick questions. First, when do you expect the delinquencies to be gone? If the market slows down, so, like, we're gonna do the quarters. If the demand is due, that's strong. We continue to face that. And, we see some as not as bad as, last quarters, last 2 quarters. And then on the supply side of the equation somewhat, but maybe even a more of a regulatory issue, What's the exposure and and how are you dealing with the Huawei ban and does the SMIC ban, have any impact on you, whether it's in the supply side or otherwise? Well, Huawei is not our customer. That was not our suppliers. And, okay, but that's, Smicks. Okay. It is our, our suppliers, and that came in. So far, it's not not affecting us. Okay. And, we don't know. We can't speculate. Okay. What does, what does all these policy means that came in, But on the other hand, and, we diversified our, our foundry sources. Okay. We're starting from, beginning of of, of this year's, okay, and we speed it up. So on the Huawei side, just to be clear, you had them as a customer, I believe, in the first half of the year, one way or the other. And and I assume you're no longer shipping to them, and and I just wondered if that's part of your fourth quarter guidance is them going to 0? Well, we can say 0, or or some, I mean, or 90s. And, okay, and, and, it's, so far, so, okay, and, we cannot ship. And, But, there's a, a, other rules and the regulations coming out and all the other permits. Okay. I mean, we cannot, okay, speculating or what, what kind of things we can do. Okay. I mean, and this all depends on our government I guess the last question then away from government type questions is, Bernie, you and Michael have had a framework in for many, many years about the percentage, superior growth versus the analog market that you guys have delivered. I think it's been kind of a 10% to 15% positive delta in your favor. Is that rule just thrown out the window now? This year is, you know, 25, 30 points above the that peer group, and I know 1 year doesn't make trend, but as you look at it, is there something that's creating some semblance of escape velocity where that delta expands meaningfully just due to the breadth of your design wins, the market you're targeting, or do we expect a little bit of reversion to the mean in 2021 after such a great 2020? Well, you know, I can't, and, as I said, the word is not linear. So now I kept me in the in the I remember, and, I was facing, a lot of I was a faced, I was facing a lot of questions about, when, our model will be, our model is like a 20 to 25% growth rate, okay, in 2006 17 of 2015, 16. And, we will criticize that, you know, we'll never get that. And, like, although we're somewhere around the 17, 18%. Okay. And, and, so, and, you're asking so many times you're forced me to say it, and at the times, like, hey, I think I run a 2 1006 team, I said that, okay, by 2018, 19, so we're gonna get it over over over 20%. Okay? And, And, I told him that comment is pulling up from my from my from my hears. Okay. And I don't have a, it is not a science. Okay? I mean, in a nonlinear, word that I can, it's very difficult to predict. And, so I said, and, earlier, and I came, we only came anticipating in that game, and, by staffing the inventories in that game, and, by, stopped inventories. And, and, just get ready. And, of course, and that the world crashes. Okay. Of course, we're not we're gonna start to deplete an even alteration. Like, okay, we're not building them as, as many, okay, as a as much. Okay. And, so we we can modulate the insight a little bit. Okay. But the for the growth rates, and I can I see some, like, all these, designing activities and all these projects, I would say, last couple of years is better than 2, 3 years before? And we awarded a lot more high value products, high value sockets. That's great. Thank you very much. Thank you. Yes, thank you. Our next question comes from Tore Svanberg from Stifel. Tore, your line is now open. Thank you. I just had a follow-up, Michael, on on e commerce, that that's obviously a business model that could, you know, help you, you know, manage capacity inventory and so on and so forth. Have have you been able to keep up with the investments there, in in this environment? Maybe you could just update us on where the e commerce business stands today. I we didn't prepare the numbers in the car. I think that we're doing really good. And, I thought that there was nobody gonna ask the party. So, like, we have too much other news. Yeah. It is okay. I think that we, I can, I feel I can set? We figured out the way to do it. And, and, so, until we prove ourselves as a renegade. The, the new websites, I'm thinking that you see it. Okay. It's a very different And, we increase, whole lot more clicks, and the customers stay on the pages for lot longer. And, also we we're creating a view, creating a virtual labs. And, that part of it also helps the whole also helps the e commerce. So we don't have to put up FAEs and and have them up pump, pounding the pavement and to, to generate in this, to generate, opportunities and, we're using the website and the numbers and the increase, okay, by increase weekly. And, I'm I'm very pleased that in the and, so I wanna talk about a few 100 percentage increase, okay, from a small language doesn't mean a lot. But for us, and, we learn it. That's the trick. That's the area we're gonna do. Okay. We're gonna enhance that. I I didn't even know that there's, an even higher arching strategy here. Where e commerce is a significant part of. And it's really how do you, go after underserved customer And, what was surprising to me is we did a a a look at the last, 3 years as far as how many customers did we have that were under a $100,000? And how is that base growing? Because if you can use the the linear model, where what they used to do is get get in there early. The linear technology. Yeah. Yeah. Technology. Get in there early and then develop these long term relationships and then you grow with their growth. And so as a part of that strategy, I think I think we're the numbers I looked at, we're doing a very good job They're, they're starting to bear dividends. We, we, we increase then these are the number of, like, 3 or 4 times. Yeah. And, and, from a from a small base. And, And that that that is a significant in the it's happening in the last few years. And, now, clearly, we can we can put a metrics. And, so I'll say there's a what you measure, what you get Okay. And, we know how start to know how to want to measure it. And, that's, to me, is a very important looking at the revenue wise, okay, it's became meaningful, but I don't have a clear detail circuit. I don't wanna have a, pull up my hair numbers. Okay. I've got it. That's great. Thank you very much, Michael. Our next question comes from Rick Schafer from Oppenheimer. Rick, your line is now open. Yes, thanks, Michael, Bernie. And then speaking of things that haven't been talked about as much maybe the last couple of quarters. I'm curious if you could give us an update on the design win pipeline or revenue color for for your converter business, you know, has I I'm just curious, has ADI maximum, you know, opened any doors for you guys and have you seen the level of engagement with customers increase? Do you know, maybe as a side note, are you are you seeing more more, analog, you know, design engineer resumes or, you know, is it is it easier to find guys? So I'm I'm just curious if you could give us any update there. Thanks. It's, finding a good people is always hard. All these are good companies that keep the good people. Yeah. And there's always That's always a challenge. Okay. And, so we know that we need a diversified, and that came in, a lot of times, okay, in a, last, 10, 15 years and, or more or more likely, like, the last 20 years. We have a lot of people from China. And they came in, and, now, so, like, 2, 4, 5 years ago, we migrated to Europe as in, in a Taiwan's and, okay, outside of main the mainland China's. Okay. Now in the last couple of years, we'll come back to you at Okay. And, we do see, okay, and, not necessary in a, in a, in a bay area. But other parts of the country is, and, okay, we do find some problems there. And, Michael, any update on on what's happening with converters for you guys? The converters, what which, The the the the signal change stuff the team you brought in I think it's been a couple of quarters since we talked about it. My precision ADOS. Oh, yeah. High performance and launch. Yeah. Oh, yeah. The the the the data converters. Okay. Yeah. Yeah. Yeah. Okay. I I think the way we received the first first chip. Okay. And the Yeah. And, I think as we're building a solutions, And, the, the, as a, as a, as a most of the time, the, the first shipper will have some bucks Okay. But we, it's wiggly and, and web we're, building a prototypes. Okay. We still can, putting assist yet now. Got it. Thanks guys. Our next question comes from William Stein of Truist. William, your line is now open. Thanks. Follow-up from before, we're just someone else asked about e Commerce, but, I'm hoping you might give us an update on the emotion and module business. And, maybe the programmable, traction generally. It's I I think about these as sort of separate from e commerce. Maybe they're not as separate, but an update on this part of it would be really helpful. Thank you. Yeah, it's I think that we use that, e commerce platform to promote those products in that case. And, that emotion side. Think that revenues had to say some numbers now. Otherwise, I don't know what you guys think of. I do have a numbers. I wanna have a bonus. Okay. Sometimes, it's increased almost double the the models, the the motion side. Yeah. Emotion is right in that sort of transition phase. Because we have a lot of design wins that are going in. So last year, the revenue run rate was somewhere in the, you know, 10 to 12000000. Yep. But now the doubling is gonna start, particularly as we go into both, automotive and industrial applications. Yes. Yep. So so I was Oh, no. I'm correct. So I was about double it in Australia. And I think also when when we look at the modules business, that is, taking off very nicely. I think the module started with a smaller base, like a few 100% increase. Okay. Now it's a 40, 30, 40,000,000. Yeah. Dollars. Okay. And was the, is the strength that you're seeing there at all related to, the pull ins and, you know, delivering against delinquencies that you had previously or is this part of the I wanna think of as core that might not have No. It's it's the no. It's a small part of it. It's due to a delinquency. That came in. And, this is a new market segment. And, people from the order from online, and, we never We never see those. Okay. Me and, our, if it's not our own internet, then they gave me our own websites, and they came from our distributors in it. And, these are very small customers. They never ordered those parts before. So, like, I mean, and, that's, although the numbers small for the, out, the revenue is too small for the large number of customers. And, And they use it all, these are putting play modules. And, So, what we, and, they can just plug in and, and, they don't have to do any design. And since you mentioned our programming pushing, and that's part of what we learned that, our custom doesn't even want to do programs. Okay. They want us to do it. Okay. And, and, so we created a virtual labs and we customer tell us what what they want. And, okay, and, we show, okay, we in our labs, okay, we we program everything and then we ship Okay. It's a so now you can talking about it's a it's a really custom design for each customers. And, and, that is taking off and, a very good accuracy And just a final final comment there is on the modules, they're not necessarily tied to anyone end market. They're they're actually very broad based. Initially, we felt that they would be plug and play solutions, particularly for, prototyping or small volumes but it turns out that they're actually going to mainstream mainstream production. Yes. Yes. And, so that's something we've learned. And, okay, and I'm from an engineering, okay, I'm a, I'm a skilled engineers. And, like, our people's in, And we used to create these, a great product that now we see it. And that came in, we're pulling, like, a 30 parameters, 70 parameters on a website they can program it and that they can see what the result of the of the from the simulations. And, and, and the turn out to be is, okay, and we we pull it on and nobody looking at it. And we're wondering why. And, so we're we're reduced to half then when you cut another half, they reduce to 5, 6, 7, they still don't wanna see it. And then they wanna they wanna They wanna pick, pick the numbers and, and the task here, you do that for me. Okay? And, that's great. We can do the works. And, okay, they pay for it. That's that's fine. Okay? That's great. Detail and progress. Thanks very much. Our next question comes from Quinn Bolton from Needham. Quinn, your line is now open. Hey, guys. Just wanted to see if you might be able to give us an update on your efforts, in the GPU space, for, for either desktop or, data center GPUs. I, you know, just looking at power consumption of those devices, I think you're seeing desktop GPUs now consuming up to 300 watts. I think data center, maybe up to 400 watts. You guys, I think it talked about that back at Analyst Day as a as a potential opportunity. Just wondering if you're starting to see, you know, any real traction or if you're starting to need the curve on either the, the sort of the gaming or the, data center side of GPUs. Yes, we're seeing substantial movement on both. We probably started out earlier on the desktop where we started generating revenues, with this about, 18 months to 2 years ago. And now we're moving into, the data center, where we actually are starting to ramp, and in particular, 48 volt for artificial intelligence. So The opportunities are significant, but we're still at the very early stages of, the, of the, these, this market. So, fundamentally, we're very well positioned, but it's still gonna be you know, another year or 2 before we still move the dial with the revenue ramp. Now those are a lot, of a bunch of talking about, these are over 1000 watts. Yeah. And, and, it's not 2 or 3, 3 or 400, what levels. Okay. So you get to that high level, you're only talking about only a few company that can supply the those type of a product. Okay. And, I think that we are in a good positions and, but always can be better. If there are any follow-up questions, please click the raise hand button. There appear to be no further questions. I would now like to turn the webinar back over to Bernie. Great. Thanks, Jen. I'd like to thank you all for joining us for this conference and look forward to talking to you again about our fourth quarter, results, which, would likely be in early February. Thank you, and have a nice day.