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Edited Transcript of MPWR earnings conference call or presentation 31-Jul-19 9:00pm GMT

Q2 2019 Monolithic Power Systems Inc Earnings Call

SAN JOSE Aug 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Monolithic Power Systems Inc earnings conference call or presentation Wednesday, July 31, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bernie Blegen

Monolithic Power Systems, Inc. - VP & CFO

* Michael R. Hsing

Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO

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Conference Call Participants

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* Alessandra Maria Elena Vecchi

William Blair & Company L.L.C., Research Division - Research Analyst

* David Neil Williams

Loop Capital Markets LLC, Research Division - VP

* Joshua Louis Buchalter

Cowen and Company, LLC, Research Division - VP & Research Associate

* Michelle Waller

Needham & Company, LLC, Research Division - Associate

* Richard Ewing Schafer

Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst

* Tore Egil Svanberg

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* William Stein

SunTrust Robinson Humphrey, Inc., Research Division - MD

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Monolithic Power Systems, Inc. Q2 2019 Earnings Conference Call. (Operator Instructions) Also as a reminder, this conference call is being recorded.

At this time, I'd like to turn the call over to your host, Bernie Blegen, Chief Financial Officer. Please go ahead.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [2]

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Thank you. Good afternoon, and welcome to the Second Quarter 2019 Monolithic Power Systems Conference Call. Michael Hsing, Founder and CEO of MPS, is with me on today's call.

In the course of today's conference call, we will make forward-looking statements and projections that involve risk and uncertainty, which could cause results to differ materially from management's current views and expectations. Please refer to the safe harbor statement contained in the earnings release published today. Risks, uncertainties and other factors that could cause actual results to differ are identified in the safe harbor statements contained in the Q2 earnings release and in our SEC filings, including our Form 10-K filed on March 1, 2019, and Form 10-Q filed on May 10, 2019, which are accessible through our website, www.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 Q2 2018, Q1 2019 and Q2 2019 releases as well as to the reconciling tables that are posted on our website.

I'd also like to remind you that today's conference call is being webcast live over the Internet and will be available for replay on our website for 1 year along with earnings release filed with the SEC earlier today.

MPS achieved record second quarter revenue of $151.0 million, 6.8% higher than revenue in the first quarter of 2019 and 8.0% higher than the comparable quarter in 2018.

Looking at our revenue by market. In our computing and storage market, second quarter revenue of $41.6 million increased $2.4 million or 6.1% from the first quarter of 2019. Computing and storage revenue represented 27.5% of MPS' second quarter 2019 revenue. Storage revenue was down from the first quarter of 2019, but computing revenue increased. Nevertheless, the growth in computing was slower than what we had planned for back in the second half of 2018. The slower-than-anticipated growth rate was primarily due to customers' delaying product launches or absorbing overcapacity. Having said that, our design activity in the first half of 2019 with top-tier customers reached an all-time high in server, storage and AI applications, positioning MPS for long-term success in these critical markets.

In our consumer markets, revenue of $43.8 million increased 14.8% from the first quarter of 2019 and represented 29.0% of our second quarter 2019 revenue. The sequential quarterly revenue increase reflected improved sales of products for wearable applications and a seasonal increase in certain legacy consumer markets.

Second quarter 2019 industrial revenue of $22.4 million increased 5.2% from the first quarter of 2019 due primarily to increased revenue for smart meters and point-of-sale systems. Industrial represented 14.9% of our total second quarter 2019 revenue.

Second quarter automotive revenue of $21.2 million grew 3.5% over the first quarter of 2019. Similar to computing, revenue growth in automotive was lower than we had anticipated 3 quarters earlier due to a slowdown in the broader market. And like computing, our superior technology and design activities, both in standard and custom products, have been widely accepted by Tier 1 customers. The range of applications MPS encompasses includes infotainment, smart lighting, ADAS and autonomous driving. Again, we believe MPS is well positioned to accelerate growth in automotive when the market returns. Automotive was 14.1% of MPS' total second quarter 2019 revenue.

Second quarter 2019 communications revenue of $22.0 million was essentially flat with the first quarter of 2019. Sales for our legacy router and wireless applications decreased sequentially, while sales -- while infrastructure sales, including 5G network, increased. As 5G spending ramps, MPS is well positioned to benefit as existing design wins move to revenue. Communications sales represented 14.5% of our total second quarter 2019 revenue.

GAAP gross margin was 55.1%, 10 basis points lower than the first quarter of 2019 and 40 basis points lower than the second quarter of 2018. Our GAAP operating income was $20.1 million compared to $21.7 million reported in the first quarter of 2019 and $24.9 million reported in the second quarter of 2018. Non-GAAP gross margin for the second quarter of 2019 was 55.6%, matching the gross margin reported in the first quarter of 2019, but 40 basis points lower than the second quarter from a year ago.

Our non-GAAP operating income was $43.7 million compared to $39.6 million reported in the prior quarter and $41.4 million reported in the second quarter of 2018.

Let's review our operating expenses. Our GAAP operating expenses were $63.1 million in the second quarter of 2019 compared with $56.3 million in the first quarter of 2019 and $52.7 million in the second quarter of 2018. Our non-GAAP second quarter 2019 operating expenses were $40.3 million, up from the $39.0 million we spent in the first quarter of 2019 and up from the $36.9 million reported in the second quarter of 2018. The difference between non-GAAP operating expenses and GAAP operating expenses for the quarters discussed here are stock compensation expense and income or loss on an unfunded deferred compensation plan.

For the second quarter of 2019, stock compensation expense, including approximately $663,000 charged to cost of goods sold, was $22.7 million compared with $16.0 million recorded in the first quarter of 2019.

Switching to the bottom line. Second quarter 2019 GAAP net income was $20.7 million or $0.45 per fully diluted share compared with $26.2 million or $0.58 per share in the first quarter of 2019 and $24.2 million or $0.55 per share in the second quarter of 2018. Q2 non-GAAP net income was $41.9 million or $0.92 per fully diluted share compared with $37.9 million or $0.84 per share in the first quarter of 2019 and $40.0 million or $0.90 per share in the second quarter of 2018. Fully diluted shares outstanding at the end of Q2 2019 were 45.5 million.

Now let's look at the balance sheet. Cash, cash equivalents and investments were $369.7 million at the end of the second quarter of 2019 compared to $362.3 million at the end of the first quarter of 2019. For the quarter, MPS generated operating cash flow of about $44.1 million compared with Q1 2019 operating cash flow of $38.8 million. Second quarter 2019 capital spending totaled $19.3 million.

Accounts receivable ended the second quarter of 2019 at $55.4 million representing 33 days of sales outstanding, which was 5 days lower than the 38 days reported at the end of the first quarter of 2019 and 2 days lower than the 35 days at the second quarter of 2018.

Our internal inventories at the end of the second quarter of 2019 were $143.6 million, up from the $142.5 million at the end of the first quarter of 2019. Days of inventory of 193 days at the end of the second quarter of 2019 were 12 days lower than at the end of the first quarter of 2019. As we have said in the past, we are comfortable carrying a higher-than-normal level of inventory during a downturn given that most of our products are not customer- or application-specific and carry minimal obsolescence risk. Having said that, we do not expect meaningful reductions in the near term, and inventories are likely to remain elevated through the second half of 2019.

I would now like to turn to our outlook for the third quarter of 2019. We are forecasting Q3 revenue in the range of $162 million to $168 million. We also expect the following: GAAP gross margin in the range of 54.9% to 55.5%; non-GAAP gross margin in the range of 55.3% to 55.9%; total stock-based compensation expense of $18.3 million to $20.3 million, including approximately $600,000 that would be charged to cost of goods sold; GAAP R&D and SG&A expenses between $57.1 million and $61.1 million; non-GAAP R&D and SG&A expenses to be in the range of $39.4 million to $41.4 million.

We are continuing to invest in our new 55-nanometer process technology on 12-inch wafers and are selectively adding headcount despite slower revenue growth. Litigation expense should range between $400,000 to $600,000. Interest income is expected to range between $1.4 million to $1.6 million. Fully diluted shares to be in the range of 45.3 million to 46.3 million shares.

In conclusion, for the remainder of 2019, we remain cautious amidst the market uncertainty. I believe MPS is well positioned for long-term growth.

I will now open the phone lines for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Rick Schafer from Oppenheimer.

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Richard Ewing Schafer, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [2]

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Congratulations, guys, on the results, and I know it's not easy to do it in this environment. So maybe my first question is if you could just give some more color or maybe parse out the areas of relative strengths heading into 3Q? Sort of which segments -- just at a high level, which segments you expect to grow? And maybe which segments might be lagging a little bit?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [3]

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Thanks, Rick.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [4]

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They're kind of all lagging a little bit now.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [5]

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Well, if you look sequentially, automotive is expected to probably contribute both in terms of dollar and also percentage gains. Likewise, I'd say that industrial, which you know can be rather lumpy business, should show some improvement from Q2 to Q3. Again, when you look at the comparison against last year's Q3, to Michael's point exactly, consumer usually is the bellwether. And in fact, that has remained down from last year. And industrial would be sort of flattish, but we do expect to see continued improvements in both automotive and communication year-over-year.

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Richard Ewing Schafer, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [6]

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And maybe on that topic, Michael or Bernie, maybe just a little color on what's happening with China auto. If there's -- it doesn't sound like it, but if there are -- I mean, I guess, you did mention auto is picking up a little. So is China specifically, is -- are you seeing signs of pickup there? And maybe as part of your answer on auto, I'm curious just if you could talk about some of the design win momentum you guys have there with auto OEMs, Tier 1s, sort of how the pipeline is stacking up through all this downturn? I assume there's still a fair amount of design activity going on.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [7]

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Yes. I am -- our auto goes up slightly. I don't know this is from the noise. It is from a noise or just on a certain project. We're still very small in the entire auto segment. Our market share is very small. And in terms of engagements and the designing activities, we actually surprised ourselves after we qualified from the -- from first tier suppliers and including OEMs. And the level of engagement and the level of meetings that they requested, and it cannot be better.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [8]

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And just as a finishing point there, I think that the results that we saw in the first half of the year were colored mostly by the soft demand, particularly in the China market. And then the uptick that we expect to see in the second half of the year is a result of the new model years being rolled out, particularly in North America, Europe and Korea.

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Richard Ewing Schafer, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [9]

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And then just a quick housekeeping question, if I can, I'll sneak it in, just on your Huawei exposure. I know it's small for you guys. I think you've said low single digits. I mean some companies have talked about being able to ship, that there's not a -- basically everything because they're nonnational security. Sort of -- can you give some color on what you're able to ship to Huawei? Sort of how much of that low single-digit exposure are you able to actually -- to ship out to them?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [10]

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Sure. There's a couple of points there. I mean obviously in the middle of May, that's when the Department of Commerce added Huawei to the Entity List. And so like our peer companies, we did an evaluation of how the ban would affect us and how to implement it. And after we completed that review, we concluded that MPS ICs are really not subject to the Entity List prohibitions. We basically determined that certain components were deemed compliant within the sales ban framework. And so we have resumed shipping. One thing to add is that historically, Huawei has been a small percentage of our business, and I'm not talking to them in total here, but I am saying that in China, in particular, with the level of uncertainty related to tariff and trade that we did see a step-up in volumes in Q2 as certain customers built inventories in advance of any further bans.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [11]

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Yes. We are not dependent on Huawei to growth.

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Operator [12]

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Our next question comes from William Stein from SunTrust.

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William Stein, SunTrust Robinson Humphrey, Inc., Research Division - MD [13]

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Great. Normally, downturns, in my experience, tend to trigger an increased pace of innovation. Customers sometimes look to use the weak demand environment to sort of leapfrog competitors. And I'm wondering if you're seeing this trend now, and how it affects your view to your future revenue growth?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [14]

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Yes. Will, I think that is a very accurate observation. And particularly when we look at areas that really are exciting for our future. In particular, within computing, we've talked about cloud-based server and AI, even storage, which has been down now for about 3 to 4 quarters. We're seeing a very high level of engagement, and the same can be held true for automotive, in particular. And the point that Michael made earlier that I do want to emphasize is that in the past, we've had to go out and really get them excited at MPS. And now that engagement is starting to occur where they're calling us and setting up meetings at the executive level. So we're not going to try and tell you the timing of when the market's going to turn around. But from a theme for this quarter, we really believe that we're well positioned to take advantage of it.

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William Stein, SunTrust Robinson Humphrey, Inc., Research Division - MD [15]

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Maybe one more, if I can squeeze it in. The Q3 guide is remarkably in line with consensus, but I think at least by my analysis, it looks slightly above typical seasonality. So still not as robust year-over-year growth as we've come to expect from Monolithic, but looking like maybe we're passing through the bottom in terms of year-over-year growth. When we think about Q4, while you're not guiding it, I think normal seasonality is up mid- to high singles. Any reason to think that would be better or worse than typical?

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [16]

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I think Q4 usually is we are slightly lower and not up about single digits, okay? And in the last few years -- in the last 2 or 3 years, the seasonality is and we are -- we don't know what's our seasonality is. When you grow 16%, 17%, 20-some percent. And so the seasonality is not very clear to us. But the Q4, I think, is that we are either flat or slightly down. I don't know what is the -- I forgot the last year number, maybe slightly up, although last year was down.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [17]

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Yes, last year was down. The year before, we were actually up. And that was after we started to get traction in the server business. Yes. And we're actually continuing the same, Will, that in both Q1 and Q2, however you define sort of our historic norms, we're underperforming in Q3 by about 2 to 3 percentage points. But I think that Michael's point is spot on that we've had a lot of volatility, particularly in the last 2 years, as we've had a change in sales mix. So it's not as predictive as it once was, but I do feel good to add to your point that we basically stayed in a good position relative to expectations for the quarter.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [18]

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Yes. One more thing. I very much agree with you. This year is -- and we -- we can -- we don't have a clear views on how the industrial growth and now only we can do this is do our best effort to have design win and to engage with our customer closely.

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Operator [19]

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Our next question comes from Tore Svanberg from Stifel, Nicolaus.

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Tore Egil Svanberg, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [20]

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Congratulations on the results in this environment. First question, the consumer revenue, the year-over-year declines continued to improve. And as we look through the September quarter, should we expect that trend to continue? So again, I'm not asking for that to be up or anything, but it does seem like the year-over-year declines are certainly moderating in each quarter here.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [21]

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Tore, thank you very much for your earlier compliment. Yes, the consumer is a little bit hard to handicap. I think that you are aware that we parse it into 3 general groups; high-value, gaming and traditional or legacy. And historically, I think that legacy has had a certain seasonality that was relatively predictable. But even that's gone out the window as we've seen a softening in demand more clearly in Asia, China, but not exclusively there. And actually, the high-value, which has a lot of exposure to home appliances, actually has rebounded nicely and is continuing strong. And I think you're also aware that as we start to go into the holiday season that gaming is going to pick up. So it's not clear that -- I would be cautious in using any term like bottomed out or that it's more that we have a different -- a slightly different mix within those 3 buckets.

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Tore Egil Svanberg, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [22]

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That's very helpful. And as we start to look at your design activity, sounds like you're getting a lot of traction with levels of what we refer to as really high-end processors, whether these are AI engines you're making and server maybe even in 5G equipment. Could you elaborate a little bit on that? And should we start to see some revenues already from those high-end processors this year? Or is this more like 2020 growth story?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [23]

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Yes. I think those are to the extent that they're commercially available, they are very early stage. And we don't have enough momentum to clearly identify a trend line. As we said that we -- take 5G, for example, we're very well positioned with our technology on any number of different platforms with any number of different companies in any of the representative geographies. So we think that, again, the diversification both in -- as far as the technology and what our point of entry is, gives us a lot of confidence that we'll do well. But again, it's going to take time for that market to develop. I think initially, that and some of the other high-end processing, which you can include AI in, are going to start out a little bit lumpy before a true ramp becomes apparent.

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Tore Egil Svanberg, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [24]

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That's great. Just one last question. You mentioned 55-nanometer on 12-inch. I assume you're not getting any benefit from that yet. They're probably more 2020. But would that be more of an enhancer for gross margin? Or will you use that process node to basically continue to accelerate the growth?

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [25]

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Yes. I don't know this 55-nanometer is that accurate enough, okay? We do use 2 -- we do use a 12-inch, and we're starting 2 12-inch wafers. And those are -- as you said, these are used -- we always use a trading edge of advanced equipment. And when we don't have these equipment available, then we move it in. And those are -- when we started development always 2 or 3 years' lag -- 2 or 3 years later that will benefit our costs and also the features that we can offer to our customers.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [26]

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And I think an example of that is, if you look at how our fifth generation rolled out, we're now getting the benefits of that even though that, that has been in the market for about the last 3.5, 4 years.

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Operator [27]

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Our next question comes from Alessandra Vecchi from William Blair.

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Alessandra Maria Elena Vecchi, William Blair & Company L.L.C., Research Division - Research Analyst [28]

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Congratulations on the good quarter. Just a quick question on the gross margins. It's not a surprise that they've sort of been trending flat over the last few quarters. But if we look out into next year, what do you sort of need to see happen to resume that 20 basis points of sequential improvement? Is it really -- is it a mix situation? Or is it predominantly an end-demand situation?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [29]

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The -- one begets the other. So we need to see an increased ramp in overall demand. But really if you look at each of the last 4 or 5 quarters, we've actually seen sequential decreases in the sales mix.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [30]

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Yes. We've built our productions in -- for much higher capacities. And now we see the growth is slower. So that has partially also impacted in the gross margins.

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Alessandra Maria Elena Vecchi, William Blair & Company L.L.C., Research Division - Research Analyst [31]

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No, that makes perfect sense. And then just expand on Tore's comment or question with regards to some of the strong first half design wins ramping in the second half -- or starting to trickle in, I should say. On the AI front there, are you predominantly talking about the 48-volt product? Or how should we think about how you're playing in AI on the processor front?

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [32]

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Yes. We have design wins. And now we have a design win in -- the 48-volt is -- we believe, is inevitable solution as a power go, it keeps going up. And so if you -- we started a few years ago, we developed that kind of solutions and it's kind of widely accepted. And we expect to have revenue to ramp now, and -- but we don't know if the customers push other projects, and -- but we're still expecting a ramp there in the near future and in the next couple of quarters.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [33]

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Perfect.

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Operator [34]

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Our next question comes from David Williams from Loop Capital.

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David Neil Williams, Loop Capital Markets LLC, Research Division - VP [35]

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Congratulations on navigating this tough environment. First, I guess I wanted to see if you could kind of talk maybe about your channel inventories and how you're feeling about that. It sounds like maybe some of the appliance over-inventory has been digested a bit. But throughout your other markets, how do you -- I guess, do you get a sense on how your levels are there? And just kind of how you expect those to trend over the next quarter or 2?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [36]

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Yes. And again, I just want to clarify, you said channel inventories?

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David Neil Williams, Loop Capital Markets LLC, Research Division - VP [37]

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Yes.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [38]

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Yes. So I think at the end of Q1, we acknowledged that we were above our normal range for channel inventory. Some of that had to do with sort of a back-end loading of the quarter where sales that we made in the last month of the quarter did not go out to that final end customer. In Q2, we had much more balanced sales on our side by month, and the channel responded. And actually, particularly in China and Taiwan, we've seen a significant reduction. We're back down within our sort of comfort zone with the channel inventories. It's a little bit hard to call out by necessarily end-market application. It's easier, we have greater visibility as it relates to geography.

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David Neil Williams, Loop Capital Markets LLC, Research Division - VP [39]

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Great. And then Bernie, you had noted prior that you thought that you could maintain kind of revenue growth that was 10% to 15% above what the industry was averaging. Do you still feel comfortable with that? And just kind of looking at where you are this year, do you think you can do better? Or how do you -- I guess, is that still a good stick to measure by?

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [40]

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Well, as I said earlier, it's a negative. This is very -- it's a kind of uncertain market now, and our customers will not give us a very clear feedback. So that's a -- we -- these are out of our control, and we -- what we do the best is to have a product design win. And one way or the other, they will turn into a revenue.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [41]

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Yes. And just to agree with Michael's point there is that it's just very difficult for us to project further than one quarter out. And there's sort of an interesting, we have the elements in the business that are within our control, and then we have other elements that aren't necessarily directly within our control. And to the extent that we can continue to secure design wins and get the customer engagement, I think that we're doing a very good job, both in execution within the quarter but also as far as securing our longer-term future.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [42]

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Yes. We're doing a good job because we ignored all the micro -- total macroeconomic. And we do -- we can do the best when we can control it.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [43]

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Yes.

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David Neil Williams, Loop Capital Markets LLC, Research Division - VP [44]

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Sure. Okay. Great. And then one last one for me, if you don't mind. Just kind of looking at the computing and storage, how are you seeing, I guess, the demand for the hyperscale data centers? And I guess if you're thinking about that segment in particular, where do you think you see the greatest degree of demand today? And how do you think that plays out through the rest of the year?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [45]

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I think that I can acknowledge that somewhere about Q4 and certainly in Q1 and for a portion of Q2 that we saw a dip in demand by hyperscale. We believe, based only on our experience, that it was broad-based. It was not just related to an individual company. However, if you look particularly at the long-term demand forecast for e-commerce, eventually we believe that a lot of this has to do with just absorbing excess capacity or inventory that they built on their shelves, and that the demand for e-commerce-based solutions is going to expand and there will have to be renewed investment. I don't know exactly when that's going to start to pick up, and it might be not even across the board. For example, we might see a little bit more on the server side before we see it in storage. But I think that sometime in the next few quarters, it will return to building momentum again.

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Operator [46]

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Our next question comes from Quinn Bolton from Needham.

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Michelle Waller, Needham & Company, LLC, Research Division - Associate [47]

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This is Michelle on for Quinn. So I guess the first one is consensus estimates for 2020 as far as revenue growth, it was like -- we -- The Street has you at 19%. So given these macro uncertainties going on, just wondering if you could just give us revenue growth drivers in 2020? What would be driving toward this growth?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [48]

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Yes. So let me restate the question, if you don't mind. You had 2 there. The one is that currently the Street has us growing at just under 19% for 2020. And within that, what growth drivers do we believe are significant in those assumptions. Is that correct?

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Michelle Waller, Needham & Company, LLC, Research Division - Associate [49]

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Yes.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [50]

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I don't know, is that 19% now?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [51]

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Yes.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [52]

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I think we kind of committed that we can grow that better than the industrial -- industry average by 10% to 15%. That's what we're committing at.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [53]

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Yes.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [54]

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And even that, I look at our history and that's what we have done in the past. And this year's, I think it's the same. This year's kind of is not very certain. And we'll look back that -- same as that 2012 and 2008, okay?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [55]

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Yes.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [56]

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And those are very uncertain years, and that's what we have -- what we achieved.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [57]

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Yes. And I think that as far as the growth drivers, and again, Michael's right, there's too much uncertainty to sort of affirm or even not say that we can't live up to the expectations. But I think you're going to see continued increased demand for our products particularly in computing, automotive. And we're also going to see the initial uptick in the communications markets.

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Michelle Waller, Needham & Company, LLC, Research Division - Associate [58]

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Okay. That's helpful. And then one just on the project delays. I think you guys kind of touched on it. But I was just wondering if there's an update as far as if you've seen an increase in any delays? Or how the delays you saw since our -- the first quarter call have changed over the past quarter?

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [59]

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Yes. We don't -- it's difficult. Some are big project delays, some small project advanced. So the weight of each project, we don't have a very clear accounting -- method of accountings. And the company is in a way of migration, we become like a 3,000, 4,000 products. And we have again -- at any given time, we have a few thousand projects going on. And so we don't know.

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Michelle Waller, Needham & Company, LLC, Research Division - Associate [60]

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Okay. And just one clarification. For 3Q, computing and storage, did you say -- what was the trend that you said for that end market?

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [61]

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Yes. Overall, we see a delay, delay of launch and the delay of the project, and we see overall slowing down. And starting from earlier this year and even now, the similar conditions, okay?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [62]

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And one thing to add there is the second half of 2018, actually we did very well with the computing and storage. So we're going into a situation where we see some signs of improving momentum, but we have more difficult comps in the second half of the year.

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Operator [63]

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Our next question comes from Matt Ramsay from Cowen.

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Joshua Louis Buchalter, Cowen and Company, LLC, Research Division - VP & Research Associate [64]

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This is Josh Buchalter, on behalf of Matt. Let me echo my congrats on some solid results in a tough backdrop. I guess I wanted to circle back to industrial. It took a step down compared to last year, but it's still growing solid double digits in a notably weak environment. I realize it's fragmented, but are there any verticals in particular that you would like to call out that help insulating you here?

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [65]

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Yes. I think that if you're looking at sort of sequential growth, I think we called out the fact that smart meters and point-of-sale systems picked up to a degree that, frankly, we hadn't fully anticipated. And when you look at the year-over-year comparisons, remember our industrial tends to be a little more fragmented. We've got like 4 verticals that we depend on. And in fact, power sources and security in addition to smart meters seem to be continuing with good momentum right now.

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [66]

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I think as Bernie said, all our industrial market is fragmented. Our entire company is fragmented, and the beauty there, okay, in one segment is slowed down, other segment was, it will pick up. And so nothing is more than a bigger percentage of our total revenues. And when we look at overall, MPS will grow this year. And will that grow at the same pace as last year? We cannot say it.

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Joshua Louis Buchalter, Cowen and Company, LLC, Research Division - VP & Research Associate [67]

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Understood, and I appreciate the color. And then as a follow-up, I think it's been a couple of quarters, I was hoping maybe if you can provide an update on e-commerce and e.Motion, if there's anything to share there?

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Michael R. Hsing, Monolithic Power Systems, Inc. - Founder, Chairman, President & CEO [68]

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Still very early stage. We try to figure out why people doesn't -- why people tell us we have a good solution but nobody buys it, okay? And at least it's not selling the hotcakes. And we are still in the midst of figuring out why and hows, okay? We can -- but we're committed and as long as people say -- our customers say this is a good solution and we will keep figuring out. But overall revenues and also design customer request is -- I don't have a clear number in -- but increases tremendously. And we have difficulty to handle that. And that's very good encouragement. And once we feel the -- we have a handle on it, we'll give a revenue commitment.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [69]

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And again, most of the comment is related to the e-commerce platforms. Actually in e.Motion, we're seeing very good engagement this year with the products that are beginning to ramp in revenue. And there, a pretty broad and diverse number of end-state applications that we probably wouldn't have anticipated even as recent as 2 years ago. But I think that, that is holding up to expectations for the current year and also as we look ahead to the next year or 2.

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Operator [70]

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(Operator Instructions) As there are no further questions in the queue at this time, I'd like to turn the call back to Bernie Blegen, Chief Financial Officer, for closing remarks.

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Bernie Blegen, Monolithic Power Systems, Inc. - VP & CFO [71]

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Great. I'd like to thank you all for joining us for this conference call and look forward to talking to you again during our third quarter conference call, which will likely be at the end of October. Thank you, and have a nice day.

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Operator [72]

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Thank you, ladies and gentlemen, for attending today's conference. This concludes the program. You may all disconnect. Good day.