Genevieve introduces the speakers for the MPS Third Quarter 2023 Earnings Webinar and reminds listeners about the risks and uncertainties involved in forward-looking statements. She also mentions that the non-GAAP financial measures discussed should not be considered a substitute for GAAP measures. Bernie Blegen then reports on MPS's third quarter revenue, which increased from the second quarter but decreased from the same quarter in the previous year.

In the third quarter of 2023, sales in the enterprise data and storage and computing markets improved compared to the second quarter, while sales in the automotive, industrial, and communications markets were lower. Enterprise data revenue increased by 106.2% and storage and computing revenue increased by 3.9% sequentially. Consumer revenue decreased by 4.3%, communications revenue decreased by 5.1%, and automotive revenue decreased by 8.8% from the second quarter. However, compared to the third quarter of 2022, enterprise data and storage and computing revenue were up by 31.4% and 14.7% respectively, while consumer, communications, and automotive revenue were down by 30.1%, 35.3%, and 9.3% respectively.

In the third quarter of 2023, automotive revenue accounted for 20.0% of MPS' total revenue, while industrial revenue represented 8.9%. This was a decrease from the previous quarter and year, but the company's design win pipeline and customer base have expanded, positioning them for future growth. Gross margin was slightly lower compared to the previous quarter, mainly due to product mix. GAAP operating income was $135.6 million, while non-GAAP operating income was $167.8 million. Operating expenses will now be reviewed.

In the third quarter of 2023, the company's GAAP operating expenses were $128 million, while non-GAAP operating expenses were $96.6 million. The difference is mainly due to stock compensation expense and income or loss on an unfunded deferred compensation plan. GAAP net income was $121.2 million, while non-GAAP net income was $150.3 million. Cash, cash equivalents, and investments increased to $1.04 billion, and operating cash flow was $175.9 million. Accounts receivable were at $185.8 million, and internal inventories decreased to $397.3 million.

The company's days of inventory decreased in the third quarter of 2023 compared to the second quarter, and the outlook for the fourth quarter includes a forecasted revenue range, gross margin estimates, and operating expenses. The company's Board of Directors also approved a share buyback program. Despite limited visibility in the short term, the company continues to execute its long-term strategy. The first question from an analyst is about the strong performance of the enterprise data business.

The company's GPU business is expected to see growth in the coming year, driven by an expansion of their customer list. The CPU business saw some strength in the third quarter, but the market is still volatile. The company is anticipating growth in AI and ADAS, as well as other greenfield products in the next year. There have been some pushouts and pull-ins in the current market, but it is uncertain if these are specific to certain customers or end markets.

The speaker believes that the current business cycle is unique and customers are only willing to commit to short lead times for delivery. This makes predictability difficult, but the company is confident in their strong design win pipeline. Across all product segments, there is a short lead time and a decrease in demand, except for AI power which is continuously ramping up. In Q4, the company expects a decrease in all segments except for auto, which may stay flat, and AI power which will continue to ramp up.

Michael Hsing and Tore Svanberg discuss the growth of AI in the auto industry and how it is impacting MPS's strategies. They also mention the company's focus on providing the best performance and efficiency in the market and their partnerships with leading providers in AI GPUs. They also mention the potential growth in the general market, particularly in CPUs, and how the company is preparing for increased demand in the future.

Bernie Blegen and Michael Hsing discuss the company's position in the AI GPU market and their focus on staying at the high end of the market. They also mention their preparations for managing an uptick in demand and their efforts to diversify their growth beyond AI. The next question from Ross Seymore of Deutsche Bank addresses the company's recent weakness and their response to it.

In the fourth quarter, the company is seeing a seasonal drop in sales, but they cannot confirm if this trend will continue into the first quarter due to the fast-changing market and limited visibility. They have a lot of capacity, but their lead time is still shorter than their production cycle. The company is being more aggressive on price in the notebook market and has a new product in the consumer segment. They expect next year to be back-half weighted and will have a more conservative profile in the first half of 2024. The company's gross margin is at the low end of their guidance due to mix.

During a recent earnings call, the company's executives were asked about the significant increase in enterprise data and the impact on gross margins. They attributed the lower margins to a mix of factors, including aggressive pricing and capacity utilization. However, they believe that as the market stabilizes, pricing will return to a more normal level. They also mentioned their upcoming product lineup for next year as a potential driver of growth in the enterprise data category.

The company is working on a silicon carbide power isolation module for different markets, such as solar inverters and automotive. They expect to see initial revenue from this product in the next few years. The product is unique and there is a void in the market for it. In terms of the hyperscaler market, the company only provides power and expects to have a bigger share in the CPU and GPU side with their VR14 product. They will also develop power supplies for silicon carbide.

The speaker discusses the plug-and-play power supply and large modules that will ramp up towards the end of 2025. When asked about gross margin, the speaker states that they expect it to stay within their model of 56% plus or minus 50 basis points for the next few quarters, but as things stabilize and they get a better mix, they should see a return to incremental improvement in the second half of next year. They also mention expanding capacity strategically and developing new relationships with fab partners in Taiwan and Singapore to diversify by geography.

The company has been making investments in R&D which will add to their overall cost profile but will provide capacity in the future. They have expanded their capacity but it is not yet utilized. The company has many design wins in various end markets and products, including motion control. These design wins will turn into revenue in the coming quarters and years, and there is no specific shift in end markets or mix, with a few big customers and many smaller customers across various market segments.

In this paragraph, Michael Hsing and Bernie Blegen discuss the potential for growth in the USB-C and USB-PD market, particularly in the automotive and consumer sectors. They also mention the potential for growth in battery management and other applications in the next 12 to 24 months. Additionally, they mention opportunities in green and clean energy, as well as the ramp-up of products for DDR5. William Stein asks for clarification on the unexpected decline in inventory during the quarter.

Michael Hsing, Bernie Blegen, and William Stein discuss the inventory levels at the company and their plans to increase it in anticipation of future demand. They also mention their automotive business and the long process of working with customers to secure projects, and state that they are not concerned about fluctuations in unit expectations as long as they win the projects.

The company expected to ramp up their products in the middle of this year, but it did not happen. They believe that next year they will see an increase in ADAS and new tracking inverters. The market for electric vehicles has slowed down, but there is potential for growth in the first half of next year. The company is unsure if they can believe the timeline given by their customers. The consumer market in Asia is not a top priority for the company, but they may focus on regrowing that business in the future.

The speaker discusses the company's strategy to regrow their business and their intention to do so. They mention having enough products and diversification in the market. They also mention a large buyback plan to offset dilution and demonstrate confidence in their future cash flow. The buyback will be opportunistic and programmatic.

During a conference call, Michael Hsing and Bernie Blegen discussed the implementation of a new program that will reflect market conditions and a systematic approach. They also discussed the increase in the lighting control business, which is mainly in the industrial and automotive markets. The increase was not due to consumer business.

The speaker, Genevieve Cunningham, is announcing that there are no more questions and the webinar is being turned back over to Bernie Blegen. Bernie thanks the participants and mentions that the next webinar will be in the fourth quarter, at the end of January.

This summary was generated with AI and may contain some inaccuracies.