Welcome everyone to the MPS third quarter 2020 earnings webinar. Please note that this webinar is being recorded and will be archived for one 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 Hsing, CEO and Founder of MPS, and Bernie Blegen, VP and CFO. During this webinar, we will discuss our Q3 2020 financial results and guidance for Q4 2020, followed by a Q&A session. Analysts, you are currently muted. If you wish to ask a question during the Q&A session, please click on the participants icon on the menu bar, and then click the raise hand button. 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 statement 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 28, 2020, and in our Form 10-Q, filed on August 3rd, 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&D and SG&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, Q2 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 Blegen.
Thanks, Gen. MPS achieved record third quarter revenue of $259.4 million, 39.3% higher than revenue in the second quarter of 2020, 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 two key reasons. First, we were able to fulfill our customers' demand that had been delinquent due to past capacity constraints. Second, 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, third quarter 2020 communications revenue of $54.7 million was up 81.8% from the second quarter of 2020, primarily due to a pull-in of customers' requested ship dates. Communication sales represented 21.1% of our total third quarter 2020 revenue. In our consumer markets, third quarter 2020 revenue of $70.2 million increased 47.4% from revenue reported for the prior quarter of 2020. This extraordinary growth in consumer reflects a combination of market share gains in gaming, wearables, and IoT applications, along with normal seasonality of our third quarter 2020 revenue. In our computing and storage market, third quarter revenue of $75.3 million increased $11.2 million, or 17.5%, 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% of MPS' third quarter 2020 revenue.
Third quarter automotive revenue of $28.5 million grew $10.7 million, or 60.4%, 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' market share will continue to expand in the coming years, as we have been awarded multiple design wins in infotainment, smart lighting, ADAS, and autonomous driving. Automotive revenue was 11.0% of MPS' total third quarter 2020 revenue. Third quarter 2020 industrial revenue of $30.7 million increased 15.3% 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 third quarter 2020 revenue. GAAP gross margin was 55.1%, matching the second quarter of 2020, and 10 basis points lower than the third quarter of 2019.
Our GAAP operating income was $60.0 million, compared to $28.0 million reported in the second quarter of 2020, and $30.0 million 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 for the second quarter of 2020, and 10 basis points lower than the third quarter from a year ago. Our non-GAAP operating income was $84.9 million, compared to $53.0 million reported in the prior quarter, and $51.4 million reported in the third quarter of 2019. Let's review our operating expenses. Our GAAP operating expenses were $83.1 million in the third quarter of 2020, compared with $74.6 million in the second quarter of 2020, and $63.1 million in the third quarter of 2019.
Our non-GAAP third quarter 2020 operating expenses were $59.1 million, up from the $50.7 million we spent in the second quarter of 2020, and up from the $42.5 million reported in the 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 stock compensation expense, including approximately $707,000 charged cost of goods sold, was $23.0 million, compared with $21.0 million recorded in the second quarter of 2020. Switching to the bottom line.
Third quarter 2020 GAAP net income was $55.6 million, or $1.18 per fully diluted share, compared with $30.2 million or $0.64 per share in the second quarter of 2020, and $29.5 million or $0.64 per share in the third quarter of 2019. Q3 non-GAAP net income was $79.4 million or $1.69 per fully diluted share, compared with $50.6 million or $1.08 per share in the second quarter of 2020, and $49.5 million or $1.08 per share in the third quarter of 2019. Fully diluted shares at the end of Q3 2020 were 47.0 million. Let's look at the balance sheet. Cash, cash equivalents, and investments were $554.5 million at the end of the third quarter of 2020, compared to $515.4 million at the end of the second quarter of 2020.
For the quarter, MPS generated operating cash flow of about $77.4 million, compared with Q2 2020 operating cash flow of $59.3 million. Third quarter 2020 capital spending totaled $19.6 million. Accounts receivable ended the third quarter of 2020 at $93.5 million, representing 33 days of sales outstanding, which was six days higher than the 27 days reported at the end of the second quarter of 2020, and two days higher than the 31 days at the end of the third quarter of 2019. Our internal inventories at the end of the third quarter of 2020 were $148.1 million, down from the $152.1 million 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 the 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- 200-day level necessary to support our future growth. I would now like to turn to the outlook for the fourth quarter of 2020. We are forecasting Q4 revenue in the range of $218 million-$230 million. We also expect the following. GAAP gross margin in the range of 55.1%-55.7%. Non-GAAP gross margin in the range of 55.4%-56.0%. Total stock-based compensation expense of $21.8 million-$23.8 million, including approximately $700,000 that would be charged to cost of goods sold. GAAP R&D and SG&A expenses between $81.3 million and $85.3 million.
Non-GAAP R&D and SG&A expenses to be in the range of $60.2 million-$62.2 million. Litigation expense should range between $1.8 million-$2.2 million. Interest income is expected to range from $1.0 million-$1.4 million. Fully diluted shares to be in the range of 47.1 million-48.1 million shares. In conclusion, we will monitor market conditions closely and continue to execute. 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 comes from Tore Svanberg from Stifel. Tore, your line is now open.
Yes, thank you, and congratulations on the billion-dollar run rate. First question is, Q4 guidance. Could you talk a little about which are some of the end markets that's going to be performing in Q4? Obviously, I know communications is going to be down, but what about some of the other markets for the December quarter?
Hi, Tore. Thanks for commenting on the billion-dollar run rate. Yeah, if you compare ourselves against Q3, obviously that was a high water mark. Probably a more relevant comparison is against Q4 of 2019. On that basis, we're expecting all of our major markets to be up significantly from the prior year. 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. As my follow-up, you mentioned inventories are pretty lean. Could you just elaborate a little bit on what you're doing to try and get the inventories back up? You said you had some OpEx to maybe secure some foundry capacity. Anything else you can add on how you're going to 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. 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. This will be an ongoing investment that we would project for at least about the next six quarters.
Great. Thank you, and congratulations again.
Thanks, Tore.
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.
I think there's a mistake. It's Will Stein from Truist. How are you? I guess I'll just go. Bernie, first a clarification. The inventory target that you called out in your script, I think you said 180-200. I think that's 20 days higher than what you said on the last conference call. Is that correct? 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've 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 two to three quarters. Nonetheless, I do want to address your question, which is, in order for us to sustain the level of growth that we have in excess of our market, the industry, that we have to have a higher level of inventory. In other words, there's a mismatch. In other words, we are building the inventory today, but for the sales that'll occur one or two quarters out. It's not a perfect reflection for other companies, where they're not growing as fast. They can maintain lower levels in terms of days.
Here again, we have to make an incremental investment, in order to support our growth.
Let me add. As you remember it, end of the last year, we are at around 200 days of inventory. If you use that model and to meet this year's growth, that's about the right numbers. That's the basis. That's where these 20 more days have come from, s o if you go to a little more details, and MPS is a fabless company, and yet we have own technologies. This is very unique. I can't think of any of our competitors that they're in the same way of a manufacturing to fulfill their manufacturing. Most of them, they have their own fab, s o given the volatilities and also given the growth that we have and also number of the product and address all these greenfield market segment, we need probably more than 200 days of inventory.
Okay. 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. 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 basis points a quarter and op margin, there was, I guess, a change in that view that perhaps we wouldn't get any operating margin leverage for the next year or two. Maybe you could just update us on that model for both those lines.
Sure. 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. 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. Again, you have to use these as guidelines, not as an absolute guarantee of what our performance will look like. On the operating expenses, right now we are going to be continuing to invest in capacity, as I said, in each of the next six quarters. That'll be an additional layer of investment from what we've seen. As a result, we're not projecting our operating margins to improve significantly over the course of the next two years.
OpEx, I think. Is that right? In other words, op margin would just expand with gross, which is 10-20 basis a quarter.
Yeah.
Okay. Great. Thanks, Bernie. I'll get back in queue.
Thank you.
Thanks.
Our next question comes from David Williams from Loop Capital. David, your line is now open. 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 good December outlook. Bernie and Michael, 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 into the December quarter. Wondering, to the extent you can give us any sort of thoughts on March, would March show a typical seasonal decline from the December quarter of, say, 3%-5%, what you would see in a typical year? Do you think it could show a greater seasonal factor? I know you don't typically go out two quarters. Again, this is really strong results here in the near term.
Let me answer that question. If you're talking about normal seasonality, the outlook is great. We have so many design in activities, and we have so many award projects. As well as you know, as well as I know, this world is in an unprecedented era. Pandemics and geopolitical issues, and I can't predict. Frankly, I care less.
If I could just add to that, is that I really think that there are certain aspects of our business that we have in good control, as Michael hit on, as far as the design win activity. Right now, we do not have control over what the end customer demand is ultimately going to be about. I think that as far as executing against our strategy and seeing it show up in our results, I think we're going to continue along that path, but there are just too many factors for us to 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 had very strong backlog. As you head into the December quarter, is your backlog sort of back 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?
Well, as of December quarters, and go into December quarters, we're still facing delinquencies. The capacity is still limited.
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 had coming into the quarter, and it's matched with what our supply chain and capacity limits are. I guess that I would probably offer that we have some ability for upside, but it's going to be a little bit limited by supply chain.
Okay, great. Thank you.
Our next question comes from Alex Vecchi from William Blair. Alex, your line is now open.
Hey, Michael and Bernie. Congratulations again 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 have posted since really starting to gain traction in this segment. I realize the environment's just starting now to get a little bit better, but can you maybe update us on how we should think about the long-term growth targets there? In the past you've said 40%-60% growth. Obviously, that may be a little premature at this point, but perhaps update us on how you're feeling on that segment.
I would probably say that automotive is one of the more exciting end markets for us for the next several years. If you look at our track record in 2019 and 2020, 2019 was affected by the recession, 2020 by factory closings related to the COVID-19 pandemic. Again, those are circumstances that were largely outside of our control. What we're seeing is that we're expanding now from our traditional infotainment base into some of these more exciting technologies, including the lighting systems, the ADAS, and the autonomous driving. We think that this is a 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 able to grow consistently at 20%-60% per year. I would probably back off of that down to a more reasonable between 30% and 40%. Still a very exciting end market for us.
Yeah, that's Bernie, the bean counter talking. Okay. Frankly, I don't have some clear pictures in what's the growth. Frankly, I never put an MPS as a, "Oh, we have to grow a certain percentage." Okay. What I'm looking at it is what kind of product, which project, and how well we positioned, and which customers or which projects we want designing, and a lot more importantly, okay, what kind of products in the pipeline. That really drives the top line. How do we predict what's the next, what's the growth percentage? I can't tell you because I'm not there.
No, that's fair. It's good to hear that the trajectory seems to be sort of back on track. Similarly, I don't think in the prepared comments you guys commented on the extent of the pull-ins into Q3. Is it fair to say that the vast majority of the sequential decline in Q4 is related to the pull-in activities, or is there also a little bit of normalization of demand in there as well?
Well, we had a lot of pulling from Q3 and partially in Q4. As I said earlier, we're still facing delinquencies. I think that's a combination of the growth and also in a capacity shortage.
Okay.
From the past. Okay.
From that past. Okay. Lastly, if I can, just on the days inventory, the 180-200 days. How long will it take you to get back to that level? Is that something you can achieve in Q4, or are we really looking to more the first half of 2021?
Well, if the market slows down, we're going to get there quickly. I think that, again, we're at the uncomfortable levels. We want to increase as much as we can. Now our engineers are working in the fabs, working in the different fabs, and to qualify the process and the technologies. We hope, in the next six months, we can catch up.
Okay, great. I'll go back into queue. Thank you so much.
You're good.
Our next question comes from Joshua Buchalter from Cowen. Joshua, your line is now open.
Hey, guys. Thanks for taking my questions. Let me echo my congrats. This is for my first question. Earlier this year, you'd mentioned bringing an additional 12-inch fab online in the second half. I just was wondering, was this the primary driver of the additional capacity you were able to secure in the third quarter? Looking ahead, how much more capacity do you feel you need to both serve your customers and get the inventory levels up to that new raise, 180-200 days?
Yes. Okay. The first question is a yes. Absolutely. Okay. We said it earlier this year. We expanded another 12-inch fab. It wasn't in our plan, but we hurried up and get that thing going. We start shipping product in Q3. That's unprecedented, and thanks to our people. They really worked the day and the night to manage that, and to manage and qualify these products. Going forward, we just want to expand the capacity to reach the 180- 200 days inventory. Going in the future, if we have a very linear work, then it's very easy to calculate. I think we're living in a very nonlinear environment. 200 days inventories, that's what we want to do.
Got it. Thank you. That's very helpful. For my follow-up, a bit of a bigger picture question. You guys are now a billion-dollar, or you reached a billion-dollar run rate this quarter. Are you seeing any increase or changes in the competitive responses from your peers as you move higher on both a unit basis and as well in the socket value? Thank you.
Our ASP is increasing when we move it to the higher market segments. Our competition's always pretty similar. Our customer doesn't even know MPS is $1 billion. They all know MPS as very small potatoes against all these giants.
I think you go back to what our competitive basis is, and it really is that we're winning with superior technology and a higher level of customer service. I think that's what our customers are recognizing us for.
That's right. Yep.
All right. Thanks, guys. Congrats again.
Thank you.
Our next question comes from Rick Schafer from Oppenheimer. Rick, your line is now open.
Hi. Thanks to you guys. I'll add my congratulations as well. Maybe just a quick follow-on, if I can, on that production question. I know you guys have been pulling in new production and foundry partners pretty aggressively. 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 $1.2 billion or so in kind of annual revenues. That's not a lot of headroom for you guys at your current run rate, at your current growth rate. I'm curious, is that $1.2 billion still the right number we should be thinking of in terms of your capacity when all is said and done? Maybe what does the timeline look like for that now, since you're pulling stuff in?
Yeah. Okay. Obviously, the $1.2 billion is not enough. If you want to building fast on a 200 days inventory, it's always more than double it now. That's what we try to do, and it's not easy, and that's what we aiming for, just double it.
I think that in the past, securing fab capacity and being able to introduce new products at the rate that we are is really nothing new to MPS. The scale has been getting bigger, that's why the investments and the time that we have to plan ahead makes a difference. All we're doing is preparing both for the capacity, but also recognizing and acknowledging the investment that goes with it.
If we fast-forward 18 months, 24 months, is there a bogey for where you think your capacity will be? If it's not one, two, is it, I assume, higher than that? I just was curious if there was a number you could share, or if you know at this point.
Oh, I'm sorry I wasn't clear. We're shooting for $2 billion.
$2 billion. I'm sorry. I misunderstood then. Sorry. Thanks, Michael.
It's okay.
Just maybe a question, if I could, on 5G, and maybe I was hoping you could talk a little bit about your exposure to the Tier 1 5G RAN OEMs, the ones you're allowed to sell to, of course. Where you are in terms of revenue ramp or design win activity. Are any of these guys buying QSMod yet? Are you initially seeing more PoL, eFuses, kind of similar to what you saw in the early stages of your cloud server ramp?
I think as a 5G, that overall at the early stage. All I can say now is that we engage with all the 5G station makers, and we do have a designing activity, and we do have award projects. It's not significant revenue yet.
Thanks, Michael.
Our next question comes from Ross Seymore from Deutsche Bank. Ross, your line is now open.
Hi, guys. I want to give the same congrats that everybody else did. Stupendous work here. A couple of quick questions. First, when do you expect the delinquencies to be gone?
If the market slows down, we're going to do next quarters. If the demand is still that strong, we continue to face that. We see some as not as bad as last quarters, last two quarters.
On the supply side of the equation somewhat, but maybe even a bit more of a regulatory issue, what's the exposure and how are you dealing with the Huawei ban, and does the SMIC ban have any impact on you, whether it's on the supply side or otherwise?
Huawei is not our supplier. SMIC, it is our supplier. So far, it's not affecting us. We don't know, we can't speculating, what does all these policy means. On the other hand, we diversified our foundry sources. We're starting from beginning of this year. We speed it up.
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 I assume you're no longer shipping to them. I just wondered if that's part of your fourth quarter guidance, is them going to zero.
Well, we can't say it is zero or non-zero. It's so fast, and we cannot ship. There is other rules and the regulations coming out, and all the other permits. We cannot speculating on what kind of things we can do. It all depend on the government now.
I guess the last question then, away from government type questions is, Bernie, you and Michael have had a framework 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%-15% positive delta in your favor. Is that rule just thrown out the window now? This year is 25-30 points above that peer group. I know one year doesn't make a 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, as I said, the world is not linear. I remember, I was facing a lot of questions about when our model is like a 20%-25% growth rate, okay? In 2016, 2017, or 2015, 2016, we were criticized that you would never get that. Although we're somewhere around the 17%-18%. You asked us so many times, you forced me say it at the time. I think around 2016, I said by 2018, 2019, we're going to get over 20%. Okay. That comment is pulling off from my hairs. It is not science. In a nonlinear world, it's very difficult to predict, s o I said earlier, we only can anticipating this. By staffing the inventories and by stocked inventories. Just get ready.
Of course, the world crashes, okay, of course, we're going to start depleting inventories, okay, we're not building as many, as much. Okay, s o we can modulate the insight a little bit. Okay. For the growth rate, I see all these designing activities and all these projects. I would say last couple years is better than two, three years before. We awarded a lot more high-value products, high-value sockets.
That's great. Thank you very much, Michael.
Thank you. Yeah, 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 e-commerce. That's obviously a business model that could help you manage capacity, inventory, and so on and so forth. Have you been able to keep up with the investments there, in this environment? Maybe you could just update us on where the e-commerce business stands today.
We didn't prepare the numbers, and I think that we're doing really good. We're doing really good. I thought that there was nobody gonna ask the question.
We have too much other news.
Yeah. I think that I feel I can say it, we've figured out a way to do it. Until we prove ourselves as wrong again. The new websites, I think that you see it. Okay? It's very different. We increase a whole lot more clicks, and the customers stay on the pages for lot longers. Also, we're creating virtual labs, and that part of it also helps the e-commerce. We don't have to put FAEs and have them pounding the pavement to generate opportunities. We're using the website, and the numbers increase weekly. I'm very pleased. When I talk about a few hundred percentage increase from a small number, it doesn't mean a lot. For us, and we learned, that's the trend, that's the area we're gonna do. Okay. We're gonna enhance that.
I even go 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 customers. What was surprising to me is we did a look at the last three years as far as how many customers did we have that were under $100,000, and how is that base growing. If you can use the linear model, where what they used to do is get in there early.
The Linear Technology.
Linear Technology. Get in there early, and then develop these long-term relationships, and then you grow with their growth. As a part of that strategy, I think the numbers I looked at, we're doing a very good job. They're starting to bear dividends.
We increase these number about 3x or 4x.
Yeah.
From a small base. That is a significant, and it's happened in the last few years. Now, clearly, we can put a metrics, old saying is what you measure is what you get. Okay. We start to know how to, what to measure it. That, to me, is very important. Looking at the revenue-wise, okay, it's became meaningful. I don't have a clear detail, so I don't want to have a pull out my hair numbers.
Okay, I got it.
That's great. Thank you very much, Michael and Bernie.
Our next question comes from Rick Schafer from Oppenheimer. Rick, your line is now open.
Yes, thanks, Michael and Bernie. 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 your converter business. I'm just curious, has ADI/ Maxim opened any doors for you guys? Have you seen the level of engagement with customers increase? Maybe as a side note, are you seeing more analog design engineer resumes? Is it easier to find guys? I'm just curious if you could give us any update there. Thanks.
Finding good people is always hard. All these good companies that keep the good people. That's always a challenge. Okay. We know that we need to diversify, and that can mean a lot of times, in the last 10, 15 years or more likely like last 20 years, we have a lot of people from China. Two or four, five years ago, we migrate to Europe and Taiwan and outside of mainland China. Now, in the last couple years, we come back to the U.S. We do see, not necessarily in the Bay Area, but other parts of the countries, and we do find some talents there.
Michael, any update on what's happening with converters for you guys?
The converters, which-
The signal chain stuff, the team you brought in. I think it's been a couple quarters since we talked about it.
At Precision ADAS.
Oh.
High-performance analog. Yeah.
Oh, yeah. The data converters.
Yeah.
Okay. Yeah.
Yeah.
Okay. I think we received the first chip. Okay.
Yeah. We're still prototyping.
Yeah. I think as we're building the solutions and as most of the time, the first chip will have some bugs. It's wiggling and we are building prototypes. Okay. We still can put in a system 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. 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. 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. I think we use that e-commerce platform to promote those products. That eMotion side, I think the revenues. I have to say some number now, otherwise, I don't know what you guys think. I do have a number, so I want to have it earnest. Sometimes it increases almost double it, the eMotion side.
Yeah. The eMotion is right in that sort of transition phase because we have a lot of design wins going in. Last year, the revenue run rate was somewhere in the $10 million-$12 million.
Yeah.
Now the doubling is going to start, particularly as we go into both automotive and industrial applications.
Yes. Yeah. I'm correct. It was about double it. Okay.
I think also when we look at the modules business, that is taking off very nicely.
I think the modules started with a smaller base.
Yeah
like a few hundred percent increase. Okay. Now it's $30 million, $40 million.
Yeah.
Dollars. Okay.
Is the strength that you're seeing there at all related to the pull-ins and delivering against delinquencies that you had previously? Or is this part of the rest of the business, what I want to think of as core, that might not have shown as much upside?
No, it's a small part of it is due to delinquencies. This is a new market segment, people order from online, we never see those. Okay. This is not our own internet and our own website, from our distributors. These are very small customers. They never order those products before. Although the numbers is small, the revenue is still small, but a large number of customers. They use all these plug-and-play modules. They can just plug in, they don't have to do any design. Since you mentioned the programming portion, that's part of what we learned, that our customer doesn't even want to do programs. Okay. They want us to do it. Okay. We created a virtual lab, customer tell us what they want. We show in our labs, we program everything, we ship. Okay.
Now we can talk about it. It's really a custom design for each customer.
That is taking off, and I'm very glad to see it.
Just a final comment there is on the modules, they're not necessarily tied to any one end market. They're actually very broad-based. Initially, we thought that they would be plug-and-play solutions, particularly for prototyping or small volumes. It turns out that they're actually going to mainstream production.
Yes. That's something we learned, and I'm from engineering. Okay. I'm a skilled engineer, and our people, we used to create these great product that now we see it. We're putting like 30 parameters, 70 parameters on the website. They can program it, and they can see what the result from the simulations. It turned out to be, it's okay. We put all on there, nobody looking at it, and we're wondering why. We reduced to half, when you cut another half, that reduced to five, six, seven. They still don't want to see it. They want to pick the numbers and talk to you do that for me. Okay. That's great. We can do the works, and again, they pay for it.
That's fine. Okay?
That's great detail and progress. Thanks very much.
Yeah.
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 either desktop or data center GPUs. Just looking at the power consumption of those devices, I think you're seeing in desktop GPUs now consuming up to 300 W. I think data center maybe up to 400 W. You guys, I think, had talked about that back at Analyst Day as a potential opportunity. Just wondering if you're starting to see any real traction or if you're starting to bend the curve on either 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 two years ago. Now we're moving into the data center, where we actually are starting to ramp, and in particular, 48 V for artificial intelligence. The opportunities are significant, but we're still at the very early stages of this market. Fundamentally, we're very well-positioned, but it's still gonna be another year or two before we move the dial with the revenue ramp.
Those AI Bernie's talking about, these are over 1,000 W.
Yeah.
It's not 200 W or 300 W or 400 W levels. If you get to that high level, you're only talking about only a few companies that can supply those type of product. I think we are in good positions, but always can be better.
Great. Thank you.
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, Gen. Well, 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 will likely be in early February. Thank you, and have a nice day.