Monolithic Power Systems Q4 2021 Earnings Call Transcript

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February 10, 2022

Key Takeaways

  • MPS grew fab and assembly capacity by 40% in 2021 and is on track to expand beyond $2 billion in 2022 to support new product ramps and market share gains.
  • Full-year 2021 revenue soared across all segments—Automotive +87.5%, Computing & Storage +47.0%, Industrial +54.5%, Consumer +28.1% and Communications +15.3%—demonstrating broad-based improvement.
  • Q4 2021 delivered a record $336.5 million in revenue (up 44.4% year-over-year) with a non-GAAP gross margin of 57.9% driven by a favorable product mix and efficiency gains.
  • The company’s new products include a high-precision analog-digital converter for medical applications now sampling in Q1 2022, alongside greenfield designs in VR, 5G, BMS, ADAS, AI, USB PD and DDR.
  • For Q1 2022 MPS forecasts $360–366 million in revenue, gross margins of 57.7–58.3%, and has raised its quarterly dividend by 25% to $0.75 per share.
AI Generated. May Contain Errors.
Earnings Conference Call
Monolithic Power Systems Q4 2021
00:00 / 00:00

There are 10 speakers on the call.

Operator

High quality growth opportunities ahead of us, we continue to invest in our infrastructure and operational capabilities. In 2021, MPS grew capacity by 40% and we are on track to expand capacity in 2022 well beyond $2,000,000,000 allowing the company to successfully ramp new product revenue and achieve strategic market share gains. Here are a few highlights which we achieved in 2021. Brought online a new 8 inches fab and continued to qualify parts In the 12 inches fab, we brought online in 2020. We will continue to invest in growing fab and assembly capacity.

Operator

We design processor cores and MCU technology into products requiring more sophisticated power solutions such as USB power delivery, smart motor drives and high power electrification. Our first prototype of a high precision analogdigital converter product for medical applications achieved outstanding silicon performance and lab evaluations. We have Started customer sampling in Q1, 2022. Validation of this technology is a strong first step in developing a new business segment supporting both industrial and infrastructure end market applications. We believe new product revenue from a large number of previously released designs will ramp in 2022.

Operator

The representative sample includes product supporting applications in VR14, 5 gs, BMS, ADAS, AI, USB PD, DDR and many more. Turning to our full year 2021 revenue by market segment compared to 2020. Automotive revenue was up 87.5%, Computing and storage revenue up 47.0 percent, industrial revenue up 54.5 percent, Consumer revenue up 28.1% and communications revenue up 15.3%, demonstrating just how broad based our full year 2021 revenue improvement was. Automotive revenue grew $95,400,000 to $204,300,000 in 2021. This 87.5% year over year gain primarily represented increased sales of our highly integrated applications supporting the digital cockpit, automated driver assistance systems and connectivity.

Operator

Automotive revenue represented 16.9 percent of MPS's full year 2021 revenue compared with 12.9% in 2020. Full year 2021 computing and storage revenue grew $119,100,000 over the prior year to $372,300,000 This 47.0% increase primarily resulted from strong sales growth for enterprise notebooks, cloud computing and storage applications. Computing and storage revenue represented 30.8% of MTS' total revenue in 2021 compared with 30.0 percent in 2020. Industrial Revenue grew $65,200,000 to $184,800,000 in 2021. This 54.5% year over year increase was broad based with each of our primary product lines enjoying better the double digit revenue growth.

Operator

Industrial revenue represented 15.3% of MTS' full year 2021 revenue compared with 14.2% in 2020. Consumer revenue grew $61,900,000 to $282,300,000 reflecting increased product sales for home appliances and smart TVs. Consumer revenue represented 23.4 percent of MPS's full year 2021 revenue compared with 26.1% in 2020. Communications revenue grew $21,800,000 to $154,100,000

Speaker 1

This 15.3%

Operator

improvement reflected higher sales of products for both infrastructure and wireless routers and gateway applications. Communications revenue represented 13.6 percent of our 2021 revenue compared with 16.9% in 2020. Switching to Q4, MPS had a record 4th quarter with revenue of $336,500,000 4.0% higher than revenue generated in the Q3 of 2021 and 44.4% higher than the comparable quarter in 2020. By market segment, revenue for computing and storage grew 91.6% year over year, communication grew 54.7%, automotive grew 43.2%, Industrial grew 33.3% and consumer grew 1.9%. Q4 2021 GAAP gross margin was 57.6 percent, same as Q3 2021 and 2 30 basis points higher in the Q4 of 2020.

Operator

Our GAAP operating income was $78,600,000 compared to $77,100,000 reported in the Q3 of 2021 $40,000,000 reported in the Q4 of 2020. Q4 2021 non GAAP Gross margin was 57.9 percent, 10 basis points higher than the Q3 of 2021 and 220 basis points higher than the Q4 of 2020. The year over year expansion in 4th quarter Non GAAP gross margin was largely due to a shift in sales mix favoring the high value greenfield products and operational efficiency gains, which more than offset higher product input costs. MPS achieved noteworthy market share gains in 2021 due in large measure to product availability and disciplined sales price management. Our non GAAP operating income was $112,000,000 compared to 108.4 $1,000,000 reported in the prior quarter and $66,300,000 reported in the Q4 of 2020.

Operator

Let's review our operating expenses. Our GAAP operating expenses were $115,300,000 in the 4th quarter compared with $109,200,000 in the Q3 of 2021 $88,900,000 in the Q4 of 2020. Our non GAAP Q4 2021 operating expenses were $83,000,000 up from the $78,700,000 we spent in the Q3 of 2021 and up from

Speaker 2

The $63,600,000

Operator

reported in the Q4 of 2020. On both a GAAP and a non GAAP basis, Q4 2021 litigation expense was a credit balance of $420,000 compared with a $3,400,000 expense in Q3 2021 and a $1,500,000 expense in Q4 2020. The credit balance in 4th quarter 2021 litigation expense reflected in IP settlement, refund of a legal retainer and lower than anticipated fees. The differences between GAAP and non GAAP operating expenses for the quarters discussed here are stock compensation expense and income or loss from an unfunded deferred compensation plan. 4th quarter 2021 stock compensation expense, including $921,000 charged to cost of goods sold was $31,200,000 compared with 31.6 $1,000,000 recorded in Q3 of 2021.

Operator

Switching to the bottom line, Q4 2021 GAAP net income was $72,700,000 or $1.51 per fully diluted share compared with $1.44 per share in the Q3 of 2021 and $0.90 per share in the Q4 of 2020. Q4 2021 non GAAP net income was $102,100,000 or $2.12 per fully diluted share, compared with $2.06 per share in the Q3 of $2,022.31 per share in the Q4 of 2020. Fully diluted shares outstanding at the end of Q4, 2021 were 48,200,000 Now, let's look at the balance sheet. As of December 31, 2021, cash, cash equivalents and investments totaled $727,500,000 compared to $744,500,000 at the end of the Q3 of 2021. For the Q4 of 2021, MPS generated operating cash flow of about $28,200,000 compared with Q3 2021 operating cash flow of $117,800,000 The between quarter drop in operating cash flow primarily reflected a $51,300,000 increase in inventory and higher accounts receivable.

Operator

Q4 2021 capital spending totaled $17,600,000 Accounts receivable ended the Q4 of 2021 at $104,800,000 or 28 days of sales outstanding compared with the 79 point $9,000,000 or 22 days of sales outstanding reported at the end of the Q3 of 2021 and the $66,800,000 or 26 days reported at the end of the Q4 of 2020. Our internal inventories at the end of the Q4 of 2021 were $259,400,000 up from the $208,100,000 at the end of the Q3 of 2021. Calculated on a basis consistent with our past practice and as you can see from the webinar video, Days of inventory rose to 166 days at the end of Q4, 2021 from 134 days at the end of the Q3 of 2021. Historically, we have calculated days of inventory on hand as a function of the current quarter revenue. We believe comparing current inventory levels with the following quarter's revenue provides a better economic match.

Operator

On this basis, again, you can see days of inventory increased to 152 days at the end of the Q4 of 2021 from 133 days at the end of the third quarter of 2021. I would now like to turn to our Q1 2022 outlook. We are forecasting Q1 2022 revenue in the range of to $366,000,000 We also expect the following: GAAP gross margin in the range of 57.4% to 58.0 percent non GAAP gross margin in the range of 57.7% to 58.3%. Total stock based compensation expense of 36.9 to $38,900,000 including approximately $1,100,000 that would be charged to cost to goods sold. GAAP R and D and SG and A expenses between $119,200,000 and $123,200,000 Non GAAP R and D and SG and A expenses to be in the range of $83,400,000 $85,400,000 This estimate excludes stock compensation and litigation expenses.

Operator

Litigation expenses to be in the range of $2,300,000 to $2,700,000 Interest income is expected to range from $1,000,000 to $1,400,000 before foreign exchange gains or losses. Fully diluted shares to be in the range of 47,800,000 to 48,800,000 shares. Finally, I am pleased to announce a 25% increase in our quarterly dividend to $0.75 per share from $0.60 per share for stockholders of record as of March 31, 2022. In conclusion, MPS' strong financial performance in 2021 was largely due to a 40% increase in fab and assembly capacity, which supported our high value greenfield product revenue ramp. Looking ahead, MPS is on track to expand capacity in 2022 well beyond $2,000,000,000 allowing the company to successfully ramp new product revenue and achieve strategic market share gains in 2023, 2024 and beyond.

Speaker 3

Thank you, Bernie. Analysts, I would now like to begin our Q and A session. Our first question is from Tore Svanberg of Stifel Nicolaus. Tore, your line is now open.

Speaker 1

Yes. Thank you and congratulations on the very, very strong results. So I'm going to ask this question differently. Usually, people ask you how come you carry so much inventory. This time, I'm going to Our inventory days that high, how are you both finding the capacity and again being able to Build the inventory in spite of this very, very tight environment we're seeing in the industry.

Speaker 2

Well, as you know, In this business, okay, building the inventories and okay, qualified fabs, Okay. These are not one day, 2 day things. They're not short term. These all we planned a few years ago. And now we have just the opportunity presents it and we just catch And nothing was short terms, okay.

Speaker 2

We couldn't we don't have a crystal ball for the futures, And we just react. We just plan ahead and react as fast as we can.

Operator

And I think to add to that, that shows that we have a lot of inventory on hand that presents the capacity to allow us for sales in the next two quarters. So, what we've done is made conscious investments in inventory, in the supply chain. And what we're trying to do is manage such that we hold the inventory. We're still keeping channel in the channel inventory lean and we're trying to make sure to the best of our abilities that we're in touch with the inventories that our customers are keeping. So they're likewise leaning.

Speaker 2

Yes. I also want to add, and okay, as you remember, And a few years ago, and I talked about NPS is going for well beyond $1,000,000 or couple of $1,000,000 And I wasn't joking. And we plan ahead for our business. That's what we Thought a few years ago and now you grow this much is, of course, we didn't expect that And but we do have a capacities, again, we do have to do some creative ways in the scrambling to get to a 45%. And so that's all that is.

Speaker 2

It wasn't We don't have a magic tricks in the last 6 months or so.

Operator

And it's good as you As Michael noted, we crossed the $1,000,000,000 revenue threshold and our revenue growth rate has accelerated from historic precedent.

Speaker 4

Yes. Well done.

Speaker 1

As my follow-up question, could you just add a little bit more color on the $2,000,000,000 worth of capacity. You've talked about now ramping in on 8 inches You're also qualifying products on 12 inches Will there actually be 12 inches product sales this year?

Speaker 2

Yes. We are qualified as you know, NPS don't build a fab and we don't have a lot of capital spending But we do have increased all these capacity, qualified fabs, that costs money. And So to answer your questions, and we do transitions, okay, now that's okay, we And all this capacity, whether it's 12 inches or 8 inches as much as we can.

Operator

And just to add to that, that was our 2nd 12 inches fab that we brought online in 2020.

Speaker 1

Yes. Very good. I'll go back in line. Thank you and congrats again.

Speaker 2

Okay. Thank you.

Speaker 3

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

Speaker 5

Great. Thanks for taking my question. Congrats on the eye popping results and I want to ask about the module business that you've spoken about in the past, this thing that might even Growth further over time. I'm wondering what percentage of revenue modules contributes today and how we should think about The trajectory of that business and if you could also comment on any potential tuck in acquisitions were either executed or contemplated for in the future to fulfill your strategy in that area? Thank you.

Speaker 2

Yes. Okay. I'll go ahead. You asked that question. The module business, I think, is a shy of 10% and for this year?

Operator

It's actually about mid single digits. Okay.

Speaker 2

Yes, yes. And so you can quantify it much more accurately. Okay. I don't know all the members in detail. All I know is, We grow 100% every year in the last couple of years and now you're using the word Accelerating this year and the next couple of years, that's what I see it No.

Speaker 2

And the other things, okay, the second part of your questions About acquisitions for the tuck in technology or To enhance our future growth on using our NPS technology For those companies, yes, we are engaged with a handful of a company like more than 5 or 6 companies. And we're so far, we're engaging with it and nothing material We should announce that now.

Speaker 3

Our next question is from Alex Vecchi of William Blair. Alex, your line is now open.

Speaker 6

Thanks for taking my question and I echo the congratulations on the outstanding results. Just maybe to expand on Tore's Question with regards to the capacity expansion from $2,000,000,000 on can By how much more capacity you think you'll be adding in the next year or 2 or 3 are the right way to think about it? I think in the past, You've alluded to the fact that the current product portfolio can support upwards of $3,000,000,000 to $4,000,000,000 in Is that sort of the right way to think about the long term trajectory?

Speaker 2

Yes. That's absolutely correct. And for the semiconductors, yes, we have to have fab capacities and for that kind of revenues. But even growing the futures, okay, because we're selling more high dollar modules and solutions and which utilizes silicones even less. So we have we should have we shouldn't and our CMIC wafer capacity even shown that in that will be less factors.

Speaker 6

That's actually really helpful. And then similarly with the Comments on in terms of the segment breakdown, the storage and compute segment was very strong And I think you've talked a little bit about enterprise notebooks. It seems like that's one of the areas notebooks in general where there's little investor Going forward, can you maybe talk about what the opportunity there is and or Maybe what the SAM is for your notebook outlook over the next few years?

Operator

Sure. I think it's important to qualify that The growth that we've experienced in particular over the last 2, 3 years has really been at the enterprise level where we're selling into units that would retail for above $1200 and we've been very successful As far as capturing a large part of market share that really is not necessarily driven by consumer trends. So they're not as prone to the downward unit numbers that are being projected for notebooks.

Speaker 2

Yes. Overall, we want to achieve a balanced growth. We don't want to be known as a noble company. And that's all we're And as NPS' strategy is diversified growth.

Operator

And just to pick up on Michael's point, we saw a very Strong uptick in our cloud and server business, particularly in Q4, which we expect to continue to ramp into 2022.

Speaker 2

Yes. Overall, the notebook revenue is a very, very it's a single digit.

Speaker 3

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

Speaker 7

Hey, guys. I'll I'll offer my congratulations as well. And Bernie and Michael, I'm surprised you haven't gotten the question yet, but I follow the company for a long time. I think this is the biggest gross margin beat you guys may have ever put up. If I got my numbers right, you beat gross margin by 130 basis points in this quarter.

Speaker 7

Looking back to the Q3, I think you had a $4,000,000 litigation revenue in the number that You know, drove strength in gross margin, but that was clearly a one time issue. So can you talk first about what drove the strength in gross margins And you're guiding them effectively flat, up 10 basis points technically in the Q1. So, it looks like that margin strength continues. Can you just talk about gross margin?

Operator

Sure. We tried to reflect on that a little bit in the prepared comments where I indicated that we're benefiting right now by More favorable shift in our product mix, which is higher margins on the new greenfield business, but also operational efficiencies. As far as we indicated earlier, the percentage of Silicon that's coming from 12 inches but also is a reflection of our improved quality standards. So, I think that as we reflected on what the sustainable margin going forward that we've offered sort of a new floor, which we look to grow again 10 to 20 basis points sequentially, Although, obviously, we'll keep our eyes open

Speaker 2

if there

Operator

is an opportunity to have another step up.

Speaker 2

Yes. There's another side, okay. A few years ago, we talked about our greenfield product. And then you actually, I remember, asked, okay, there's no headwind in Is that any headwind in the gross margins? So the answer was all these new product, greenfield product will all Aim at the high end products and higher values, and so the gross margin should be better.

Speaker 2

So this time, okay, and we didn't increase the price that much. We pretty much, okay, passed the cost to our customers or not even passed to our customers. But as Bernie said, it was shifted to 12 inches and also the Internal efficiency improvement and with a high gross margin product, That is the majority of the gross margin improvement. Got it. And as

Speaker 7

a follow on, for 2 quarters now, you've seen a pretty nice increase in your internal inventory levels. Wondering if you could just comment, as you're building that internal inventory, how much of that is for new green field products versus say the run rate business?

Speaker 2

Clearly, we shifted away from a consumer side. And so that we allocated a lot of product for these high end Targeted NPS targeted market segment. So we grow the inventories for those segments.

Operator

I think something to add there is that we do have some high volume business And we're treating that as run rate. So, we're it's probably the area that has the tightest capacity. But where we have these new products, the greenfield opportunities and we have new customers in new markets As an insurance policy to make sure that they're perceived very positively and that we can cover upside potential, We have been building inventory to support that and I think that's being reflected very well as far as the customer acceptance of the new products as well as market share gains afforded by the appropriate inventory levels.

Speaker 7

Got it. Thank you.

Speaker 3

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

Speaker 8

Thanks for taking my next question. I'll echo the congrats. I wanted to follow-up on The second half of your answer to Quinn's question there, Bernie, in the past, you guys have always gained market share and very consistently so. This year was well, this past year There's no difference. But you also had significantly greater availability than your competition.

Speaker 8

So I just wanted to see what The client or the customer relationship, how that's been enhanced because of the availability? Do you believe that the wins you've gotten from availability will lead to Key relationships going forward, you mentioned moving up into kind of first tier customer base. I'm just trying to figure out the sustainability of the revenue growth How does that availability dynamic?

Speaker 2

That's a very, very good question. So like how does that help we grow like a 45% over our Close to $1,000,000,000 base, okay. I mean, well, I mean, you think about it, okay, all these products that we released in Greenfield Products, okay. And these 2 are 1st tier customers. And usually, these large customers, they're ramping a new supply very carefully They don't allocate a large percentage.

Speaker 2

They always have a second source. And now, Zenoque have a shortage everywhere. NPS has capacities. So Everything shifted to NPS. That's one factor.

Speaker 2

And the second factor is that we talk about NPS products are more programmable and our customers Find out before they care less and now they find out and okay, our product single product can do a multiple Purpose and that contributes another factors. And so we can replace and we can Shortly, we designed our customers redesigned another source out to adapt the NPS solutions. So by these two points, again, it's very sticky, especially the second point and our NPS products are more programmable And they enjoy that and they solve their problems and they realize the values. And so, I will say they're very sticky.

Speaker 8

Great. And I guess as my follow-up question, I I thought you talked about another greenfield opportunity, which is a huge part of the analog market, which is getting into the converter side of things. Can you just talk a little bit about your There are some of the applications you're going after and what sort of opportunity you see unfolding in that?

Speaker 2

Yes, we just we did we do have a silicon and announced and the performance outstanding. And these are the new market segments and these are purely in a single site and which we never had, Okay. And we these are internally developed. We have a group of peoples and they have a lot of experience And that's a new market segment for us. So the focus will be the communications And also medical applications like imaging, x rays and ultrasounds And those type of things.

Operator

And just to add as far as the characteristics of this technology, There are not a lot of companies that have been successful with this. And the ones that have carved out pretty exclusive markets. And as a result of that, they command very high gross margins. So we look to be a new market entrant, but also with a very big competitive advantage?

Speaker 2

Yes. So it's a yes, it is a milestone for MPS. As a so called high performance analog company, they And they achieved a mediocre result. And now is that okay, see what we can do. And we do have a product and so for the next couple of years and we'll see what we can do.

Speaker 3

Our next question is from Chris Caso from Raymond James. Chris, your line is now open.

Speaker 5

Yes, thank you. For my first question, So talk a little bit about seasonality. And obviously, the Q1 results are better than what we normally expect in a seasonal Q1. And I suspect that's Because of some of the capacity additions that you're bringing on. Can you talk about these capacity additions as we go through the year?

Speaker 5

Are they brought In the road to the $2,000,000,000 revenue level, capacity level,

Speaker 1

is that going to

Speaker 5

come on Evenly during the year, is there a step up at some point? And then when that happens, do you think that you will be fully able to meet Your customer requirements presumably this year?

Operator

Chris, I think you get credit for 3 questions there.

Speaker 2

Hopefully, I'll be able to keep the

Operator

thread going. The first issue had to do with Seasonality and that generally speaking from Q4 to Q1, we observe

Speaker 9

a modest

Operator

dip. In fact, because we have such in balance, an unprecedented demand supply imbalance that in fact seasonality is not as much a Function today as opposed to your second question, which has to do with product availability. And that's sort of the gating item for how fast that a company can grow. And as Michael pointed out earlier, is that as Part of our company, we've always built capacity alongside the development of our new products. So, we in fact got out in front of this upsurge in the market and have been able to participate and in fact accelerate our capacity build out.

Operator

And that's really a reflection of how we're looking at 2022. But I think that One thing that we've always done is we've had to make intelligent decisions many years ahead of when the capacity has been needed. So in fact, we're in discussions in order to be able to get capacity for 'twenty three, 'twenty four and beyond. And we feel very secure in what we're capable of doing in 2022.

Speaker 2

Well, to answer your questions Honestly, okay, if we give us another 50% growth year, for this year, we'll be in trouble.

Speaker 5

Okay. I think that would be welcome trouble if that were the case. I'll take liberty to ask one more that you were nice enough to answer, Mike, 3, which is with regard to pricing. And Bernie, you made a comment On the call, you spoke about disciplined sales price management, as I think how you termed it. Could you explain what that means And the extent to which pricing has been a contributor to year on year growth and whether that's something that's In the rearview mirror where you'd expect to continue to increase?

Operator

I think that most people have recognized Within semiconductors and even specific to analog, that created an opportunity for many companies to affect price increases with their customers. And a lot of them implemented that as early as Q1 of this year. We chose, we made a conscious decision not to increase our prices on a broad base. There were selected market opportunities, but broadly we did not. And we did that along with having a product availability as a means of being able to secure higher level of market share.

Operator

And so now as we look at 2022, We are going to implement selective, but more broad based price increases, but they will be at a more modest level than some of our peer companies have implemented.

Speaker 2

Yes, Balen, we look at it, we invest in our customers for the future growth and for the future opportunities. And but we do Have a modest gross margin expansions. As we as our models, okay, we keep saying it, and we have a steady state growth on every segment.

Speaker 3

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

Speaker 9

Thanks and Let me add my congratulations guys on a nice quarter, another nice quarter. Maybe if I could just a quick question on 5 gs. I mean you guys have I talked in the past about 5 gs is a pretty significant opportunity for MPS. I think, Michael, I think you said Potentially 100 of dollars of potential content there, sort of similar to server or data center cloud for you So, I don't know if you could give us any update on design momentum, sense of when the revenue contribution might sort of Start to inflect if that's still kind of the second half of this year. And I'm curious as part of that question, I mean, are you going to see QS Mod sort of be part of that initial ramp this year or is it going to be more sort of point of load eFuse sort How you began your journey in server, if you could give any color there, that would be great.

Speaker 2

Yes. So to answer your first part of question first, like in the 5 gs, There's actually 5 gs, a lot of products in the especially at the high current side and again all relate to QSMO. And Similar technology based product, again, we power up the 5 gs in all areas. And from the signal size and like a tool all the way to transmitters. And We do we don't see a very high rate of ramping.

Speaker 2

And So they're still steady state. And the other question is QS models, like in for the data centers. We are this year, okay, We have to say, okay, we occupied it's still less than a single digit of a a total percentage of the total 10 of the market. But the significance It's from always almost nothing and to high end of a single digit. And earlier, I said that if we don't occupy the 30% of the market, we should not be in that business.

Speaker 2

So, we still have a lot of room to growth. And Michael,

Operator

With the release of VR14 that we're in a very good inflection point on the in the cloud and in the data center.

Speaker 9

Yes. And Michael, I can just follow that, but it took, I think, about 3 or 4 years to sort of get Point of load needs you share today, which I think is about 30%. So I think you're are you saying that's sort of a good proxy for QSMod could be in the next couple of years?

Speaker 2

Yes. Okay. Yes, it will take us naturally longer than that, more than 3 or 4 years. And I was wondering why is it so long? In the early days, I said that we could grow very quickly.

Speaker 2

I didn't know what I was talking Okay. And for the next as Bernie mentioned, the VR-fourteen and the VR-13.5 So sort of NPS accepted as players, okay? And we are for teams, I think that We have pretty good shares to start to ramp, but it's not happening now, okay? I mean,

Operator

Sometimes this year, right? Yes. Doctor. 13 has been delayed again. It's more likely to be Q3.

Operator

3, but you are right, we observed in Q4 an uplift is a result of 13.5.

Speaker 2

Yes. Okay.

Speaker 9

Thanks. And if I could ask this to follow-up to Bernie probably, I just wanted to ask, I haven't asked in a long time. Yes, balance sheet looks great. Obviously, I was just curious if you could give us an update on use of cash going forward. I mean, obviously, you've done a really good job of Investing in future growth and R and D, but I'm just curious how much you need to run the business here and feed R and D, etcetera?

Speaker 9

Thanks.

Operator

Yes, and it's a great question because you want to look at it sort of 3 levels for our particular story. One is we have to keep a certain amount of cash available in order to fund our growth, particularly as it relates to receivables and inventory, but also we're expanding operating expenses worldwide at an accelerated rate. And all of those demand a level of liquidity. The next thing that we've talked about is building infrastructure and capacity. And even though we're outsourced as far as our fabs And assembly, we do a lot of our own testing.

Operator

In fact, with the quality requirements of some of the new markets we're going in, We can't outsource that. We do all of our own testing and that requires an additional investment. And then you have buildings, which as you know, we're one of the few companies that we purchase our own footprint to house or growing staff headcount. So, we're going to continue to leverage the balance sheet in order to help accelerate our growth, while at the same time, as we announced in the prepared comments, we're increasing the dividend by 25%. So we're also mindful that we need to return some of the cash back to shareholders.

Speaker 2

Yes. Well, Bernie said that he said accelerate expense growth. No, we're not accelerating. No, absolutely Okay. And let's make that clear.

Speaker 2

And so we are Pretty little bit above our model, okay, growth, okay, the NPS growth, The expense is a growth, okay. And for the return of cash to our investors, and We have overwhelming case support for from our investors in dividend and not buyback. So we are following the buybacks, okay, now, okay, we said, okay, let's delay it, okay, I mean, and Because we get feedbacks, okay, they don't want to deal with it. I don't know whether it's related to a tax issue or not related, okay. So I think in the past, we said our models consistently increased the dividends, Okay.

Speaker 2

And the other side of the using a cash is that we want to Acquire a company, not for revenue growth. It's cheaper to grow NPS revenue by its own. But we can do this. So we can NPS has a lot of guiding variety of different product and Can few some enhance couple of areas to the end product. And we want to acquire those small tagging products, very unique And sustainable growth and sustainable and based on NPS technology, we can grow Those companies and that's the company we're really interested in.

Speaker 2

And so the earlier said earlier, I said that we're engaged with a few companies like you now.

Speaker 3

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

Speaker 4

Thank you very much. Good afternoon, everyone. Michael, I've been asking you about this for, I don't know, 3, 4 years. But in the last, I guess, 3 or 4 months, You guys talked a bit more about opportunities for MPS in the electric vehicle market, some in drivetrain, some in regenerative braking. I wonder if you might talk a little bit more about the revenue opportunity per car with your lead customer, the timing of that And how wide is the pipeline in terms of the number of engagements that you might have in the EV market?

Speaker 4

Thanks.

Speaker 2

EV market, again, we are in ADAS area. I think that we are in ADAS 2.5 or 3.0, we almost engage with everybody. And so I can give you numbers. For pure electrical car, NPS has about somewhere as $80 to $100 shipping

Operator

to date

Speaker 2

And we're starting this year. We're starting not this year, starting actually last year. If you're involved with a Generative braking and a drive trend, those will add another over $1,000 And we don't have those revenue yet, but we do release those products.

Speaker 4

Got it. Any of those larger ASP products, any thoughts on timing?

Speaker 2

We are There's several there's many products that we are talking now that we have released a couple of them already, so I mean, or more than a couple of them already. And the key is that we want to offer the total solutions and customers Pretty much you can use the NPS reference design.

Speaker 4

Got it. As my follow-up question, it's a different topic. And One of the things that I've been having investor conversations about is The broad based industry adding investing a ton of CapEx and adding a ton of capacity and this fear that the industry is adding it at a peak, Right. You see a couple of new fabs coming online from Texas Instruments in the next number of quarters. Infineon is And CapEx, pretty much everyone is.

Speaker 4

And so you guys have been in a unique position to have a ton of capacity come online when others have struggled to do it. And it sounds like that's going to continue for you. I just wonder, any concerns as the industry catches up with capacity, Michael? And maybe you could Contrast the type of capacity, the process node that you're on, the nature of the capacity that you're bringing online for some that the rest of the industry may be Thank you.

Speaker 2

Yes. That's a good question. So okay, first thing is I should answer that. You know, MPS don't build anything. We don't build anything.

Speaker 2

We don't have a fab, but we do have all the technologies. And usually how we getting a fab capacities is those fab are empty. And we go in there, we wonder said, okay, we can fill you up, okay. It's a long term partnership. And so And then like this year, the last year, so like and you want to add a capacity, forget it, Okay.

Speaker 2

I mean those guys are busy shipment, okay. I mean, there's no fabs and fees. And so we engage with them in many of when they're in the downturns. And we implement our technology. Remember, we don't it's not like building a fab.

Speaker 2

We don't build a fab. The cost is minimum. And but we do have some commitment and we Do you have some consignment or some equipment? Okay. But these costs compared to building a fab is much, much less.

Speaker 4

Thanks very much guys. I appreciate it.

Speaker 3

Yes. Our next Question is from Tore Svanberg of Stifel Nicolaus. Tore, your line is now open.

Speaker 1

Thank you. Just two quick follow ups. I know it's Early in the year, but you have so you have 4 horses that are running really fast. You have one horse that's kind of just running slowly. If we look at this year, which of the horses do you think will grow a bit faster?

Speaker 1

And I know there's a lot of talk about auto and server, but yes, which

Speaker 2

We don't want to be in those MPS as an auto company. It's definitely not a noble company. Emma, I think that we are shifting clearly this year, we're shifting from our consumers to well, at least the last couple of quarters, we shift from a consumer to automotive and a server And service from a cloud computing side. And again, so these are For this year, probably remain the similar. So, okay, that's where we see it.

Operator

Yes. And I think that When you say that we've got 5 strong horses, that's a more accurate reflection because I'd say that in Current year, we were surprised by the strength of industrial. So, and I think that's going to continue on into the next year. And as we talked about earlier, the communications market, while it may not be coming on as fast as we'd originally hoped for or expected, Still looks very promising in the second half of this year. So I think really the thesis remains being broad based growth.

Speaker 2

Yes. But in the who knows? Yes. And let's say that all these other market segments slowdowns and as a consumer business in every half year, We can shift it and we can shift it quickly. That's currently it's not a favor, but we can shift quickly.

Speaker 2

And by end of the year, so maybe we grow consumer business.

Speaker 1

Sounds good. And coming back To the data converter topic, new segment for you. What are some of the things that we should track for your Casteer, we all know it's very difficult to crack into that market. And are you going into that market Really, really at the high end of data combative technology and will that be the way for us to track your success there?

Speaker 2

So far, yes, it's a very, very high end product and but that's a new market segment. So like Earlier, I said that, okay, we said that we're going to ramp in the data center very quickly, okay, turned out to be wasn't the case, okay. So I don't want to predict that. And but I know the technology is good and the test data showed, okay, We can be okay, we're far better than on the existing market product.

Speaker 1

Great. Yes, I mean, if you can even get the $100,000,000 there, I'd be

Speaker 2

very impressed. Oh, yes. Okay. It's a matter of the time. I'm confident of that.

Speaker 2

And along the way, probably we'll learn a few

Speaker 3

As there are no further questions, I would now like to turn the webinar back over to Bernie.

Operator

Well, once again, I'd like to thank you all for joining us in this conference call and look forward to talking to you again about our Q1, which will likely hold in April. So thanks again and have a nice day.

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