Michael R. Hsing - Chairman, President and Chief Executive Officer Theodore Bernie Blegen - Chief Financial Officer.

Rick Schafer - Oppenheimer & Co., Inc. (Broker) Matt Diamond - Deutsche Bank Securities, Inc. Quinn Bolton - Needham & Co. LLC Melissa A. Fairbanks - Raymond James & Associates, Inc. Tore Svanberg - Stifel, Nicolaus & Co., Inc. Anil Kumar Doradla - William Blair & Co. LLC Amit Chanda - Wells Fargo Securities LLC.

Good day, ladies and gentlemen, and welcome to the Monolithic Power Systems' Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded.

I would now like to hand the meeting over to Michael Hsing, CEO of Monolithic Power Systems. Please go ahead, sir..

Good afternoon and welcome to second quarter's 2016 Monolithic Power conference call. First of all, let me introduce you to MPS' new CFO, Bernie Blegen. As you already know, Bernie has been with the MPS as our Corporate Controller for the past five years. It's our philosophy that we give our internal candidate the first opportunity to rise to the rank.

In the past two quarters, Bernie has been well received by our shareholders after having worked with many of you. So now please join with me to congratulate Bernie on his new role. Now I pass to Bernie..

Michael, thank you very much, and I want to thank you for all the support and the confidence that you've shown in me. I am excited about the new responsibilities and being part of MPS' future growth. I also look forward to working closely with many of you on the phone with us today. Turning now to the Safe Harbor disclosures.

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 February 29, 2016, which is 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 expenses, 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 2015, Q1 2016 and Q2 2016 releases, as well as to the reconciling tables that are posted to 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 one year along with the earnings release filed with the SEC earlier today. MPS is pleased to announce our financial results for the second quarter as follows.

Our second quarter revenue of $94.1 million was on the high-end of our guidance and represented a 15.6% increase from the prior year quarter. MPS' non-GAAP gross margin of 55.1% was 10 basis points higher than the prior year. Second quarter non-GAAP operating income was $24.1 million, up 21.5% from the same quarter in 2015.

The quarterly revenue increase over the prior year was fueled primarily by growth in our industrial and computing markets. Looking at year-over-year revenue growth by market segment, computing revenue grew 45% from 2015, industrial was up 41% and consumer revenue was higher by 8%. Second quarter communication revenue fell 14% from the prior year.

Let me speak to the results of each end market. In our industrial segment, sales rose to $22.9 million compared with $16.2 million reported in the prior year, fueled by increased product sales in automotive, smart meters and a variety of industrial equipment.

Although the design cycle can take three or more years, the multi-billion dollar industrial market offers us a significant growth opportunity. Over the past few years, MPS has been recognized by Tier 1 OEM customers as a high quality and reliable supplier.

We expect our future growth will be well supported by our expanding product pipeline built on MPS' well-known technologies, which deliver superior efficiency and ease-of-use. We will continue to invest in our quality and customer support capabilities. Gains in this market will be key to MPS' sustainable long-term growth model.

In our computing segment, revenue increased to $18.3 million compared with $12.6 million reported in the prior year reflecting strength in servers, storage, and high-performance notebooks. This growth represents an early validation of our QS Mod product family, which we expect will gain traction during the next design cycles for cloud servers.

Looking ahead, we have been continuing to gain designing momentum in the broader computing market. In our consumer segment, revenue increased to $38.3 million compared with $35.5 million driven primarily by gains in high-value consumer products.

In our communication segment, revenue of $14.6 million fell $2.4 million from the $17.0 million reported in the year ago quarter. In the last six quarters, revenue in our communication segment has been fluctuating within a range of $3 million due to changes in our customers' new project launch schedule.

Q1 2016 demand was on the high side, and in this quarter we saw weaker demand. While in this low-end market our near-term revenue trend is flattish, we are excited about our long-term prospects as we're about to launch our premium FPPM modules to address central office, cell phone towers, and data centers.

These modules are an ideal fit for the infrastructure market. Turning now to our E.MOTION products development, customers have begun evaluating our single chip prototypes. We are further refining the software and firmware and optimizing its performance, based on specific customer demand.

We remain positive about this game changing E.MOTION technologies. Turning back to the financials. Compared with the prior quarter, Q2 2016 revenue increased $9.6 million or 11% as revenue gains in the industrial, computing and consumer segments were partially offset by a decrease in our communication revenue.

Revenue mix for the quarter was 41% consumer, 24% industrial, 19% computing and 16% communication. That represents a shift from the prior quarter with a two percentage point increase in the contribution from industrial and a four point reduction in the communication market. Non-GAAP gross margin of 55.1% was up 10 basis points from the prior quarter.

Non-GAAP operating income was $24.1 million compared with the $20.0 million reported in the prior quarter. Q2 non-GAAP net income was $22.6 million or $0.54 per fully diluted share compared with $0.45 per share in the previous quarter. Let's review our operating expenses.

As we indicated on last quarter's call, we expected a slight increase in operating expenses this quarter, as we began to ramp investments in new product development, bring up our fourth fab and capitalize on new business opportunities through strategic sales and marketing investments.

As such, our non-GAAP second quarter 2016 operating expenses of $27.7 million were $1.3 million higher than the $26.4 million we spent in the first quarter of 2016. As our business grows, our operating expenses may fluctuate in the short-term, but we remain committed to operating within our financial model.

Our second quarter 2016 GAAP operating expenses of $39.4 million were $4.3 million higher than the GAAP operating expenses recorded in the first quarter. The difference between non-GAAP and GAAP operating expenses for these quarters is stock compensation and an unfunded deferred compensation plan.

Stock comp expenses increased $2.8 million between quarters, reflecting a one-time $2.9 million expense reversal recorded in Q1. Switching to the bottom-line, on a non-GAAP basis, our Q2 net income was $22.6 million or $0.54 per fully diluted share. This result is computed with an estimated tax rate of 7.5%.

Q2 2016 GAAP net income was $11.2 million or $0.27 per fully diluted share. Now let's look at the balance sheet. Cash, cash equivalents and investments were $249.2 million at the end of second quarter of 2016, down $7.7 million from the $256.9 million at the end of the prior quarter.

Second quarter cash flow from operations was $12.8 million compared with $27.1 million reported in the prior quarter. This decrease in cash flow reflected an increase in net working capital and other long-term assets. Spending on capital equipment and office space totaled $12.6 million. We paid $8.5 million in dividends in second quarter.

Accounts receivable ended the second quarter at $31.4 million, up from the $28.8 million at the end of the prior quarter. Days of sales outstanding were 30 days in the second quarter of 2016, which was the same as the year ago quarter and one day lower than the 31 days reported in the first quarter 2016.

Our internal inventories at the end of the second quarter were $69.9 million, higher than the $62.3 million at the end of the prior quarter. Days of inventory at the end of Q2 of 147 days increased slightly from the 145 days at the end of Q1.

Inventory in our distribution channel decreased from the Q1 2016 level, reflecting an overall increase in end customer demand. I would now like to turn to our outlook for the third quarter of 2016. We are forecasting Q3 revenue in the range of $104 million to $108 million. We also expect the following.

Non-GAAP gross margin will be in the range of 54.8% to 55.8%. GAAP gross margin will be in the range of 54.0% to 55.0%. Total stock-based compensation expense will be between $10.7 million to $12.7 million. Litigation expenses of $100,000 to $300,000. Non-GAAP R&D and SG&A expenses to be in the range of $28.3 million to $30.3 million.

This estimate excludes stock compensation and litigation expenses. Interest in other income of $200,000 to $300,000 before foreign exchange gains or losses, fully diluted shares to be in the range of 41.4 million to 42.4 million shares.

In conclusion, as we continue to execute against our long-term business strategy, we believe the success of our new product development will further propel MPS' future growth. I'll now open the phone lines for questions..

Thank you. Our first question comes from the line of Rick Schafer from Oppenheimer..

Hi. Congrats on the job Bernie and congrats on a nice quarter you guys..

Rick, thanks so much..

Thanks. So I had a couple of questions. So first really on the comps business. I know it's kind of been treading water. I know you said, plus or minus $3 million for the last 18 months or so.

Can maybe we get a little more color on what's being going on with mix over that 18 months? I mean have we seen mix improvement maybe away from gateway and maybe more towards the networking side of things? And then maybe some color on when we might see stabilization ahead of the sort of FPPM ramp?.

Sure. And I think that you focused on a very key element there is that, while we have been sort of treading water with the market segment in total, there's been a pronounced shift as we've been moving increasingly towards the telecom and away from the gateway and the wireless per se.

So as far as looking at the trend lines going forward, we see that displacement continuing, but again there isn't necessarily a point of inflection until we get the new product releases that we expect to start coming out in the middle second half of 2017..

Okay.

So we should sort of keep thinking that this is sort of a lumpy business for the next few quarters?.

Yeah. As we speaking, so we – traditional gateway business in the – this was MPS traditional business. And as we are speaking, we are changing the content in the last few years by 50%. And so the legacy business is only about 50% of that total. All the other ones has a much higher margin and that we are gradually changing it.

As you know, the telecom business, it takes a while and these are the products we offer the better performers, but not really our outstanding. They must have it. The next generation product, we feel like that there's a lot of wow factors in it; and a lot of people that want those product.

And I think it will lead MPS in the particularly, in the telecom areas, in the new directions..

Okay. And then as my follow-up, maybe this is a weird question, but your auto business is obviously – I think it's doubled the last couple – each of the last couple years, I think it's on track to do that again this year and starting to get to be a real material contributor to revenues.

I mean, maybe a weird comparison, but does that kind of – how do you think of that in terms of your server business? I mean does that have the same type of dollar potential of your server business, and maybe just it's a year or 18 months kind of behind the automotive ramp.

If we look out two years or three years, I mean, are we talking about something that could be up $50 million business or more?.

I think the $50 million for a server was a – it's a failure..

Okay..

We're looking for a lot, lot, lot higher numbers..

Okay..

I think that you've touched on a good point there as far as the parallel between the two, and that we're little further ahead in the automotive as far as how we were able to make the long-term commitment to the market that it takes to get designed in, and we're seeing those benefits now.

And likewise, we've just released particularly the QS MOD products that are ideally suited to the servers going forward. And with the next design cycle for the Intel processors, we expect to pick up an awful lot of that business and market share..

Okay. And if I could just sneak one more in, you guys.

Any update on the ramp at your new foundry, and what percent of costs are in now versus what's left out there, Bernie?.

Yeah. I think that we've been very consistent as far as how we portrayed this, that we had about a $2 million investment to make in this year.

We'll have cycled through the majority of that by the end of Q3, and there may be a little bit of tail into Q4, but as I said in the previous call, we've already started taking the material deliveries from the fab..

Great. Thanks..

Thank you. And our next question comes from the line of Ross Seymore from Deutsche Bank..

Hey, guys. This is actually Matt Diamond on Ross' behalf. Congrats on the solid quarter. I wanted to ask, why is the CapEx notably higher year-over-year.

Could you give us any specificity on what's driving that?.

Sure. We have a couple of things that are going on. We have a relatively consistent spend rate that has to do with the testing equipment, mainly in our Chengdu facility. This time we also purchased a office space for our Shenzhen location.

And so, the two of those events are really costing the bump up, but when you look at the office space investment, we are doing that on a basis that expands our capacity as far as the number of people that we can have in that office, and we're doing that on the basis that is less dilutive than if we had continued to rent..

The operating cost was the higher, so they helped the EPS..

Understood. And that actually feeds into my next question.

I heard the answer to the ramp of the fourth foundry, but is there anything else to call out in your 3Q OpEx guide as far as any other operating costs or anything more specific there would be helpful?.

No. As we referenced in the script here, we did a fair amount of staffing in Q3. Some of that was related to new product investment. A lot of it was also related to sales and marketing resources.

So when you look at the operating expense growth, which we again tried to project last quarter, you see sort of the one-time expense that's going to ramp down in the fab investment, and then we will not be necessarily doing a repeat of the level of investment that we're making going forward, so that's going to get trending out as our revenues continue to increase..

Got it. And one last one....

Yeah. We – this was the case here that you can't grow the company out of thin air.

And we managed the growth, we managed the gross margin, however in the expense, maybe it's not – there's a lot of conditional, and we have opportunity to hide people and also it's time to upgrade the fab, and that's we talked to – or we communicated to our shareholders in many quarters ago.

This year it will go up a little bit, but however, we're still operating within our margin and within our business model, and we will continue to do the same..

Got it. And I'm sorry one last one, just to go full circle a little bit on the CapEx side.

Any direction you could give us on what CapEx is going to be going forward?.

Sure. The model as far as looking at additional opportunities in order to replace leased office space with purchased is continuing. So if you look at our office locations, you can see there's probably two or three candidates that still remain as opportunities for us to invest in..

Okay, great. Thanks so much..

Thank you. And our next question comes from the line of Quinn Bolton from Needham & Company..

Hi, guys. First, let me offer my congrats to you Bernie on the promotion to CFO. I wanted to just follow-up on that OpEx question. You look at the fourth quarter, and understand you're not going to give us a fourth quarter guide, but just want to make sure I understand sort of the dynamics.

Obviously, you've talked about some of the increased staffing levels to fund new R&D plus some strategic sales and marketing, but it also sounds like the fourth foundry is contributing to some of that higher OpEx in Q3.

Just kind of wondering as you look to Q4, you wrap up that foundry expense which I think is kind of one-time in nature, do you see potentially then a flattening out for a quarter or two? Is that foundry spending comes out of the OpEx model and we get back kind of more in line with your longer-term plan?.

Yeah. Obviously with our longer-term plan and if you look at our spending, I know the Wall Street doesn't look in the past. But if you look at our past, some year we spend high, other one we spend almost – don't spend at-all, and don't increase the spending at all. So that's the nature of the business.

And to answer your questions, after fourth quarter or so, I think that we go back to our long-term plan, and then we end up well below at the lower end of our model..

Yeah..

And as we hire a few more people, we still need absorbent. We cannot just continue to hide. We need to absorb and we reorganized the teams a little bit and that's the nature our business is. This year it happened to have a few good people available, we can hide. And we are very picky to hide people and we only choose a few good guys..

Quinn, I think you see....

Got it..

... this is very sound, in that flattening to down as far as – because we no longer have the need for the further investment in the fab..

And also hiring..

Yeah, and hiring is going to slowdown..

(25:14). Got it. Good. And just wanted to follow-up on a couple of the product questions. First, Bernie in his script talked about seeing server strength or really server storage and high-end notebook strength.

Just wondering if you could break out was it across the board? I know the Broadwell server platform is ramping now and I think you've had some content gains.

Just wondering, if you could comment perhaps more specifically on the server outlook, especially you made comments about the QS MOD? And then last question, just a follow-up on Rick's question about the communications business.

If half of the business now was no longer gateway, are there one or two product areas where most of that infrastructure or non-gateway business is targeted, or is it fairly well diversified outside of gateways in the comm bucket? Thanks..

Okay. So to give a little bit more granularity, first on the storage and computing. We're looking at – first off let's talk to storage which has enjoyed some significant growth particularly in SSD, but that's been counterbalanced by what we've been seeing with the HDD marketplace. So, I think the overall trend line in storage remains very positive.

But I think that when you look at our near-term prospects, it's going to be overshadowed by the opportunity that we see in both the notebooks, where we are starting to graduate to, looking ahead to the next-generation of servers from the Skylake to Kaby Lake, both in terms of – there're more opportunities where we are getting designed in and we see that actually Kaby Lake is getting a little bit of delay.

And that actually works to our benefit because it's giving us more of an opportunity to be able to get designed in for the Kaby Lake release, which should be out in the 2017-ish there.

But on the servers, I think that's a very consistent story where we had been able to gain content and dollar value that we've been selling in, particularly to the Tier 1s within the current Grantley cycle.

And those relationships as well as the their understanding of what our technology does particularly with QS MOD which has really been gaining traction, probably on par ahead of what we've expected.

And so I'd say that the two growth drivers for those areas would be the notebooks and the servers, and that would come about evenly and we may get some net pick up from storage, but again, you've got two offsetting dynamics there..

Understood. Thanks for the additional color, Bernie..

Yeah. When you look at your second question, as far as the communications, one of the things that we are seeing better traction on is as far as the network or telecom business. And again, as Michael pointed out during our first comments, that it is kind of a lumpy business. It takes a long time to get designed in.

And even though we see some initial opportunities particularly in the next probably two quarters to three quarters, it'll really be when the next set of products are released that we see the uplift there.

And then as far as on the gateway, you know a coloring item there that we've discussed in the past is that we sort of play some of the low margin business opportunistically.

So, in a quarter like this where we had visibility of the types of gains that we had in both the industrial and computing, we really didn't have to draw much from that market space. And so as the consequence, it really was not just a – it didn't grow, but it actually had expense decrease..

Thank you..

Thank you. And our next question comes from the line of Melissa Fairbanks from Raymond James..

Hi, guys. It's Melissa Fairbanks for Steve Smigie. Thanks for taking my question. I was wondering if you could give us some color on what you're expecting for mix in the September quarter.

Do you have any comments on seasonality or what we should look at between the segments?.

Sure, Melissa. Thank you for that. So I think that in our traditional model, Q3 would've been colored by a ramp of consumer. And you know we are getting some benefit from that.

And particularly, in some of the high value – what we refer to as high-value consumer opportunities such as gaming which is really starting to generate some additional revenue as we go into the holiday season, but I think that in fairness, the growth drivers are really coming out of what we're seeing in the computing and the industrial and automotive market segments for us..

Okay. Perfect. Thanks. And within industrial, you have highlighted the automotive opportunities.

Looking longer-term, are there any areas within ADAS that you feel well-positioned to compete in?.

Yeah. We feel that. As we said it in some of the small meters and also other industrial equipment and the security side. These area we are very....

Optimistic..

... optimistic, yeah..

Okay, great..

Let me add one more thing to that, is that even though automotive is both the largest individual contributor as well as the largest growth driver, it's kind of unfortunate that these other areas that Michael just mentioned get overshadowed by comparison, because cumulatively they're a little bit smaller than automotive, but their growth rates remain very attractive and we believe that there will continue to be growth drivers not just for the remainder of this year, but well into 2017 and 2018..

Okay. Great. Thanks very much..

Yeah. We don't want to be known as a automotive company. And we want to have a very balanced growth across all the segments..

Thank you. And our next question comes from the line of Tore Svanberg from Stifel..

Yes. Thank you. Congratulations on your new role, Bernie and congratulations to your company for the solid execution. Just a few questions here. For the last few quarters, you've been growing the top-line 15%, 16% year-over-year. Michael, I know you're quite ambitious and your targets are higher than that.

So based on your current visibility, when do you think you could start to potentially see some acceleration above that growth rate?.

I think as we – yeah, it's above this growth rate as I talked about it in the early quarters. And then I think it happened in the second half of – starting second half of next year and we will break out more than 20% gross.

And I see it as not only from automotive as we keep talking about, like I mean automotive then in – but we do have other areas, like servers, even consumers – in the consumer segment. We see a variety of a designing activities and our products are proven to be the choice for all these segments.

And we look it overall, I think our three years, four years – our planning, okay, it will happen in the next year, in a year and a half..

And just to reiterate a couple of the growth drivers that I think you're talking about, that we've talked about is continuation of strength in automotive as well as in the other industrial categories. The computing really as far as looking at the Grantley conversion to Purley, the design win activity that we have there.

Likewise, with Skylake going to Kaby Lake. We also have the introduction of the modules which we'll really be ramping and taking off. And we also have our battery management systems which are scheduled to come out there.

So you really have a number of opportunities that are all hitting the market at about the same time, and that's what gives rise to our optimism..

Very good. And you mentioned the inventory in the channel was down sequentially.

I don't know if you could put any numbers or data on that? And do you feel like at this point maybe the channel is carrying out the true lean of your products?.

No. What was interesting is, generally speaking, the channel is investing as you're looking at going into Q3. And midway through the quarter, that was our experience.

And then in the last month we saw a couple of geographic pockets that had higher demand than we'd expected, and we obviously manage or dip the inventory between a range of 30 days to 45 days, and we're sort of in the middle of that, right now, having come down about 10% on days..

Very good. And on visibility, I think the consistent theme lately has been your backlog has started to grow; maybe not just the 90-day backlog but even beyond that.

Could you maybe elaborate a little bit on that, and how that's helping you sort of manage the business?.

Sure. So as we've had the experience of being able to transition away from consumer, which tends to rely much heavily on turns business.

We have been able to finish the quarter with visibility that's as long as four months to six months out, and that's been one of the side benefits that we've enjoyed as we've picked up more of the industrial, but also computing that both those demand longer lead times.

So as a result, it gives us the confidence to be able to project our revenues as well as our gross margin and then sort of establish the base financial model around that as much as you know four months to six months ahead of time.

So, at least in the environment that we're enjoying right now where there's a minimum of either economic headwinds or any other variables, it's led to a very stable and predictable alignment for which has to manage high level of growth..

So in our turns business when we go in the quarter, it's much, much lower than that of a few years ago, even two years ago..

And I can finish just by adding the comment that when we look at Q3, we're not in a dissimilar position from where we were in Q2. And I even say that recognizing that we're releasing our earnings to you today about a week ahead of when we did it last quarter..

That's helpful. And if I could just add one comment. Looks like, taking your guidance, you're going to be doing close to 28% operating margin in the September quarter. So I wouldn't be too apologetic about the higher OpEx, so great job guys. Thank you very much..

Well, thank you very much. Now you make my day..

Thank you for that comment..

Thank you. Our next question comes from the line of Anil Doradla from William Blair & Co..

Hey guys. Bernie, congrats on your appointment and wishing you the best of success in this new position. I had a couple of questions. So Michael, when I look at telecom, obviously there's been quite a big effort from you to transition into telecom; big metal infrastructure products.

We've seen the performance over the last, call it, four quarters, showing kind of year-over-year decline. Bernie talked about certain near-term dynamics where you kind of pulled back on it.

But when I look back at the telecom business, I mean how has this played out with respect to your prior expectations maybe a couple of years ago? Has it been basically a macro driven event, or has it been cancellation of products that you're designed in? I mean how would you characterize from your point of view, your exposure to these big metal projects, so to speak?.

All right. Okay. I'll give you a straight answer. One thing is – okay, four years ago we laid out our plans we're going to do this, this and that, and telecom was a part of it. We have other low-hanging fruits, and we got it. And telecom is sort of neglected. And so I had to say that. And as a result, that reflects what's been there today.

Although in the telecom content, we're using other product, mainly these are – such as point of load and the other ones, the power of Ethernet and we grow some market shares. And these are much higher values than gateway business, but my take on it is we have to have a killer product.

And while releasing this killer product and that's a family (40:56). And we address this telecom market. It is very easy to use and very high efficiencies and a very compact size. And I think that we're going to be – these products would be far better than everybody else in the market now. And we expect it to have a very, very good growth.

However, the telecom as you know – again it kind of is even slower than automotive, and their product cycles, we have to meet with it, but long-term perspectives of it very good..

So the killer product Michael that you're talking about is that that module that Bernie and you mentioned.

Is that the killer product or is it yet to come?.

No. It is FPPM – based on the FPPM technologies and targeted telecom applications..

Okay. And this will be more of a 2017 event or from actually material contribution....

I think some of them – it can convert into a 2017 or 2018..

Okay..

Yeah. There's going to be some alignment. Again, the telecom industry is going to go from four to five. And during that transition, we'll probably pick up more design opportunities..

So is it fair to say Michael till this killer product comes out, the way telecom will behave would be kind of plus, minus in this range, nothing spectacular, but it kind of work its way, chug its way through, so to speak?.

I mean for the dollar amount, yes our case is similar, but the content probably grow to a higher margin area, less of a point low for gateway, but the gateway businesses are pretty quick. And within the half year, we can turn it on and turn it off. So we judge our growth and we judge the fab capacities..

Thank you. And on the automotive side, what is the contribution.

Is it – can you break down what was the percentage of revenues from automotive during the quarter?.

I'm sorry.

You mean, as far as the automotive as a percent of the industrial group?.

Oh, industrial or total revenue whatever you want to say..

Okay..

Yeah. It's about – oh yeah..

Yeah. What we intend to do there is do that on sort of an annualized basis..

Okay..

So what I indicated previously is that, at last year it represented a little over a third of the industrial group and it's growing, you know, I think not quite a doubling but at a very high double-digit growth rate when the group itself is growing at, you know, in the 40%s..

Very good. And the server, obviously, a big effort on server starting from Grantley. Grantley was the first push. It worked out okay, but nothing spectacular, I think. But now with these new rounds of servers obviously you've got a more bigger platform, more content.

So Michael, when you step back and look at the current version of the rollout, can you quantify the number of design wins, the total design win dollars.

Anything that we could kind of appreciate, how good you guys are doing on that front?.

We don't release design win activities and we don't release the particular project to design wins, meaning we don't as our competitors are looking at us very carefully..

Right..

And very closely. And however, so I'm not going to say look we have – in the last half years, all these first tiers really opened up all the opportunity to MPS, and lot of them are very highly visible project. MPS won it..

So I can add to it. I think Anil you did a good job at helping us by saying that the dollar content per server is going to go up significantly because we now have a very competitive VCORE solution.

And the design wins that we're enjoying are reflective of all the content that we have and they're broad-based as far as the number of tier one and tier two server OEMs that we're working with..

But all this revenue we generated now more than 70%-80% or maybe not. Yeah 70%-80% – at least about 70% as well from a point of load for ease-of-use. And the core power is just start to ramp now. And as you see that what the market size is, okay, and there is only a very few players, and MPS can be a significant player there..

All right. And Michael finally if I – don't mind me squeezing in on the Brushless motor control. It's obviously a topic you guys are very excited about. We've had some ups and downs on it.

Can you give us any kind of update on the Brushless motor control? Where you guys are? What the market is? How the market is behaving? And when can we see any kind of a good ramp in that business?.

Yeah. I don't say it as it is up and down. I think there is everything as expected. And then, I think, in the last quarter said that we delayed that chip for a couple of months. Now we have it in our – in the Bernie's script we said it, okay, we sampled our chip. We have the chip product.

And a couple of customers, okay they want – and they start to evaluating it. And actually we're working with them very closely on it. The first time the chip is functioning well, and meet our expectations. That's a very complex product and both we and our customers, they're surprised, even working..

Very good.

So revenues from this would be 2016 or 2017 from this new sample chip?.

We're generating revenue currently and we're actually starting to get a good ramp, but I think we try to set the expectations out into 2017 and 2018..

2017-2018 – more in 2018..

Yeah..

And I have a very high expectation on this technology as you know, and that will really a revolution change the way we do and manage the E.MOTION, okay or generate energy..

Okay..

Right. Well, great. And we're looking forward to it and Bernie once again, congrats..

Yeah. Thank you very much..

Thank you. And our next question comes from the line of Amit Chanda from Wells Fargo..

Hi. Hi, this is Amit Chanda dialing in for David Wong. Thanks for taking my question.

Michael, could you talk about your e-commerce effort to sell your modules how that process is coming along? Are a lot of your customers using that channel to help grow your module business at the moment?.

Well we haven't just set-up a website, we're just starting to selling the modules so we haven't – clearly you look at our website hasn't launched it yet..

The e-commerce rollout is initially expected to help with demand creation as far as being able to reach areas of the market that we could not cost-effectively do. So when you look at the initial opportunity when we launch what we're expecting to be able to do is right now there's a very high service component in order to be able to get design wins.

And if we have to add one Fae in order to get one account, what we want to get to is to lower our sales and marketing investment, because we're able to attract and get customers designed in through the e-commerce solution. So it's going be something that we'll be introducing and then it's going to evolve and develop.

But it won't be an immediate click the switch and have all our business transitioned to that platform..

Okay.

And when do you expect to have that fully launched by?.

Yeah. We have – you will see our website changing in the next couple of months or so..

Okay. Okay. Okay.

And then as a follow-up question regarding automotive, can you provide us with an update on when you might penetrate the powertrain business specifically?.

I think that we want to avoid the powertrain..

Okay. Okay..

Networking..

... networking the call – networking even something ignition area – in summa safety arena where we will engage with all business, but the powertrain's no..

Okay.

And then on average, can you give us a sense for what Monolithic's dollar content is tracking within automotive at the moment?.

Well, it's very variable..

I think as average of – on analyst day, we said we have a model pulling up, it's like somewhere the $1.40..

Yeah, is the opportunity..

And I don't think that we increased somewhat – I don't think it has no significant change for the year..

Okay, great. Thank you, gentlemen. Appreciate it..

Thank you..

Thank you. And that concludes our question-and-answer session for today. I would like to turn the conference back over Monolithic management for any additional comments..

All right..

Thank you. I'd like to thank you all for joining us for this conference call and look forward to talking to you again at our third quarter conference call. Thank you. Have a nice day..

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day..