芯源系統 (MPWR) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Monolithic Power Systems Incorporated Earnings Conference Call. My name is Ann and I will be your coordinator for today's call. As a reminder, this conference is being recorded for replay purposes. At this time, all participants are in a listen-only mode. (Operator Instructions). We will be facilitating question-and-answer session following the presentation.

I would now like to turn the presentation over to Meera Rao, CFO. Please proceed.

Thank you. Good afternoon, and welcome to the first quarter 2011 Monolithic Power Systems conference call. Michael Hsing, CEO and founder of MPS and Steve Pratt, Director of Marketing are 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. These statements will cover a number of areas concerning our business outlook, including our business and financial outlook for the second quarter of 2011, projected second quarter revenues and gross margins, our expectations for second quarter litigation, stock-based compensation, and GAAP and non-GAAP operating expenses. Our target operating ranges for gross margins and inventory, our expectations for revenue growth, and gross margins beyond Q2 2011, our expected average non-GAAP tax rate for 2011, our belief regarding the outcome of a pending IRS audit, our belief that MPS is well-positioned for future growth, the expected seasonality of our business, our expectations for future cost-reduction and new product introductions, potential customer acceptance, and opportunities these present, and the prospects of expanding our market share.

Forward-looking statements are not historical facts or guarantees of future performance or events and are based on current expectations, estimates, beliefs, assumptions, goals, and objectives, and involve significant known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results expressed or implied by these statements. Risk, uncertainties, and other factors that could cause actual results to differ are identified in our SEC filings, including, but not limited to, form 10-K filed on March 4, 2010, which is accessible through our website www.monoliticpower.com. MPS assumes no obligation to update the information provided on today's call.

We will be discussing operating expense, 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 Q1 2010, Q4 2010, and Q1 2011 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 one year, along with the earnings release filed with the SEC earlier today.

We would like to start this call by reviewing our first quarter financial summary. Following this update, Michael Hsing, our CEO, will discuss our business operations and new product development highlights. Steve Pratt, our Director of Marketing will then discuss recent design wins and I will go over the detailed operating results and our expectations for the second fiscal quarter of 2011.We will then open up the call to your questions.

Let's start with the financial highlights. In the first quarter of 2011, net sales were $44.5 million, stronger than the revenue guidance provided in the previous earnings conference call as both Chinese New Year insurance business was stronger than expected.

Q1 revenues seasonally declined $2.6 million or 5.5% from the prior quarter and $5.8 million or 11.5% decline from the first quarter of the prior year when we had an unprecedented strong first quarter.

First quarter gross margin was 50.2% compared to gross margin of 50.5% in the prior quarter. Lower first quarter revenues compared to the prior quarter resulted in lower absorption of in-house manufacturing cost. Bottom-line, non-GAAP net income was $4.7 million or $0.13 per fully diluted share.

Now, Michael will talk about the business highlights.

Good afternoon. I'd like to start with a status update on some of the initiatives that I mentioned in the last few quarters and also provide an update on our technology and the product direction.

We have made progress with our corporate initiative to diversify into new market. As a result, we have seen many higher value opportunity, especially in the US, Europe and in China, penetrating into higher end market is critical in order to meet our goal to balance our growth beyond consumer. Steve Pratt, our Director of Marketing will talk about a few design wins that supports our progress from our manufacturing and operating side.

Late last year, we kicked off corporate-wide system overhaul to improve our customer service and manufacturing processes. We are in a thought process of implementing new CIM and a supply chain management tool and everything is progressing well. I expect CIM tools to be fully implemented in June. We are also implementing our supply chain management software system and we are on schedule to be online by end of this the year.

Further, while implementing a company project priority trucking tool that will be completed in Q3 this year. I believe these systems are absolutely necessary for us to grow to $500 million and beyond.

On the foundry side, we have had a new supply. The purpose of this new fab is for new technology development and the future capacity expansion. As you may remember last year we increased our capacity by 40% with our existing two foundries. The third foundry will increase the capacity an additional 50% within the next 9 to 12 months. Ramping up will begin in the second half of this year. As I mentioned before, we avoid an aggressive penetrating into the high volume low price notebook market. Therefore, we don't expect to be constrained by the wafer capacity this year.

In the product and technology development area, we have seen demand for higher value opportunities such as power saving solutions for networking, data storage, wireless base stations and high compact -- compact highly efficient solutions for all the multi and industrial markets. We believe there will be a huge demand for extreme high efficiency power conversion. For example, in several forms in a data center a 1% or 2% power saving in either the AC to DC or DC to DC revolve in a 3% to 6% total energy savings, due to the reduction in system cooling requirement.

Residential and a commercial building is another example, we are in the fore front of the LED lighting. We see more demand for lighting and the heating control as the buildings become more efficient and more intelligent. MPS is in a unique position. There are -- there are only a few competitors who has a similar range of the technology such as the integrated high voltage and a high current. In the next few quarters we'll release several new products that we believe will set a new standard the both AC to DC and DC to DC power conversion. Also it is worth to mention we are continued to be committed in R&D, in a new product and new process development. In this year we are developing more unique of power -- market focused product, but emphasize quality and our performance.

Now I'll turn the call over to Steve Pratt, our Director of Marketing for discussing of our Q1 design wins.

Thanks, Michael. I'd like to highlight several Q1 design win examples that demonstrate our success in key new markets.

First, we won two design wins this quarter and the enterprise story to markets, the cloud computing and storage farms. We were designed into an enterprise solid state memory device also know as SSD and that all that point of lower requirements with multiple DC to DC power converter. This is actually a reference design for US manufacturer of high speed SSD processors and is expected to grow significantly.

The DC to DC power converter they selected are the perfect solution for enterprise SSD applications, because they feature a unique combination of high voltage operation, fast transient response, which is required for memory and smallest total solution sides. Similarly, we were designed into one of the largest US manufactures of enterprise Hard Disk Drives also called HDD, with our fast transient response ultrasmall footprint high-voltage 6 amp DC to DC converter. All of these design wins will be producing revenues this year.

Second, we continue to penetrate new designs in the growing white LED lighting market. In Q1 we won a significant white LED bulb application with one of the largest and most well-known bulb manufactures in the US. They chose our universal input AC to DC white LED driver because of its simplicity, low total solution volume cost and the integration of power factor correction, TriActiv and primary-side control, which eliminates an optho-isolator.

And last, MPS is making progress in the growing automotive IC market. Started last year, we now have automotive grade DC to DC buck converters and white LED drivers and more solutions continuously rolling out.

Working with a compliment supplier to German automotive manufacturers, we recently won a DC to DC buck converter designed in a near elimination application because of its 36 volt high input voltage capability, megahertz switching frequency for small size, high efficiency over the entire load range and local technical support. Production will start in the Q3, Q4 timeframe this year.

These design wins demonstrate our efforts to diversify into higher margin markets that value our innovative solutions as the world's demand for data transactions and storage continues to outpace the world's energy supply. The need for leading edge and even evolutionary power saving solutions will continue to be in high demand and this is our focus.

I'll now turn over the call back to our CFO, Meera Rao.

Thanks, Steve. Taking a deeper dive into the numbers, let's move to the profit and loss statement. Looking at our revenue by product type, first quarter DC to DC product sales were $37.1 million, seasonally down 11.6% or $4.9 million from the fourth quarter of 2010 and down 8% or $3.2 million from the $40.3 million recorded in the same quarter a year ago when MPS had an exceptionally strong quarter.

DC to DC sales were led by a general purpose DC to DC product, many (inaudible) LDU and current limit switch product families. The largest end markets for MPS in DC to DC product family continue to be flat pannel TVs, set top boxes, Gateways, modems and general consumer electronic products. Lighting control revenues for the first quarter were $5.9 million, which were up from the $4.2 million in the prior quarter when revenues were impacted as distributors work through the [different] inventory build-up.

First quarter lighting control revenues were down $1.5 million from the $7.4 million in the same quarter a year ago. MPS for year-over-year growth for its white LED drivers while the CCFL inverters and controllers shrank by $2.8 million. The year-over-year decline in traditional CCFL reflects the continuing shift of backlighting from CCFL solutions to white LED solutions.

White LED lighting sales were led by backlighting drivers for monitors, notebooks and other portable displays. Audio revenues came in at $1.5 million, up from the $0.9 million in the prior quarter and down from the $2.5 million recorded in the first quarter of 2010. Increase in TV audio demand led to higher Q1 audio revenues.

Let's move down to the gross margin line. Our first quarter gross margin was 50.2% in line with our expectation for the quarter. The gross margin was down from 50.5% in the prior quarter and down from the 58.3% in the first quarter of 2010.

Now let's look at our reported expenses and operating margins. Our GAAP operating expenses were $20.4 million in the first quarter. This includes $19.6 million in R&D and SG&A expense, which includes $2.9 million for stock compensation expense and litigation expense of $813,000.

Compared with the fourth quarter of 2010, GAAP operating expenses were up by $609,000. The expense mix changed as follows -- R&D decreased by $170,000; SG&A increased by $625,000; Litigation increased by $154,000; Stock compensation expenses, which are included in the R&D and SG&A numbers that I just mentioned, declined by $33,000 quarter-over-quarter.

As a result, our GAAP operating profit was 4.3% in the first quarter of 2011, compared to a GAAP operating profit of 8.4% in the fourth quarter of 2010. Our GAAP operating expenses were down $2.6 million compared to the same quarter a year ago. R&D expenses were down $953,000, SG&A decreased by $903,000 and litigation expenses were down by $754,000 compared to the first quarter of 2010.

Let's review our non-GAAP operating expenses. Excluding stock compensation, our non-GAAP operating expenses for the first quarter of 2011 was $17.5 million, up $642,000 from the $16.8 million we spent in the fourth quarter of 2010 and down $1.6 million from the $19.1 million we spent in the first quarter of 2010. The increase in non-GAAP first quarter spending from the prior quarter was mainly due to higher expenses related to sales and marketing hires and higher audit and tax expenses. The decrease year-over-year was primarily driven by lower litigation expenses. Our non-GAAP operating margin of 10.9% in the first quarter of 2011 compared with 14.7% in the prior quarter and 2.4% in the first quarter of 2010 -- 20.4% in the first quarter of 2010.

Switching to the bottom line on a GAAP basis, our Q1 2011 net income was $1.9 million or $0.05 of fully diluted share. On our non-GAAP basis, our Q1 2011 net income was $4.7 million or $0.13 per fully diluted share. This result is computed with a non-GAAP tax rate of 7.5%.

On the topic of taxes, our US federal income tax returns for the year ended December 31, 2000 through December 31, 2007 are under examination by the IRS. We recently received from the IRS a notice of proposed adjustments on NOPA relating to our cost sharing agreement entered into by the Company and its international subsidiaries in 2004.

In the NOPA, the IRS objected to the Company's allocation of certain litigation expenses between the Company and our international subsidiaries and the amount of buying payments made by international subsidiaries to the Company in connection with the cost sharing agreement and proposed to increase our US taxable income according to our few alternative methodologies.

The methodology resulting in the largest potential adjustment could, if the IRS were to prevail on all matters in dispute, increase our potential federal and state income tax liability by up to $37 million, plus interest and penalties if any. We believe that the IRS's position in the NOPA is incorrect and that our tax accounts for those years are correct as filed.

We expect to contest these supposed adjustments vigorously. The IRS also audited the research and development credit generated in the years 2000 through 2007 and the carry forward of these credit to subsequent years. We received a NOPA from the IRS in February 2011 proposing to reduce the research and development credit generated in years 2000 through 2007 by $882,000, which would also reduce a value of such credits carry forward to subsequent tax years.

We believe that the IRS's position in the NOPA is incorrect and that our tax returns for those years are correct as filed. We expect to contest these supposed adjustments vigorously.

Now, let's look at some of the major changes in the balance sheet.

Cash, cash equivalents and investments were $193 million at the end of the first quarter of 2011, down from $196.9 million at the end of 2010 and down from the $195.4 million we had on the books at the end of the first quarter 2010. In Q1, MPS had operating cash flow of about $8 million and cash proceeds of $4.5 million from option exercises and ESPP stock purchases by employees. We purchased capital equipment and software for a total of about $2.4 million in the first quarter.

In Q1, we bought back shares for a total of $13.7 million under the stock buyback program announced in July 2010. Program to-date, we have bought back approximately 2.8 million shares for a total of $45.2 million. Accounts receivable ended the first quarter at $17.6 million compared with $18.3 million at the end of the prior quarter and $24.5 million at the end of the first quarter of 2010. The decrease in receivables from the prior quarter was a result of lower first quarter revenues and our collection of prior quarter receivables.

Day sales outstanding were 36 days, both in Q1 2011 and Q4 2010 and the day sales outstanding were 44 days in Q1 2010. Our internal inventories at the end of the first quarter were $23.1 million or about 94 days of inventory on a historical basis which is lower than our inventory model of 100 to 110 days. This compares with $25.8 million or 101 days of inventory at the end of 2010. Inventory in our distribution channel decreased in both dollars and days and total days of distribution inventory was in the target range of 30 to 45 days.

I would now like to turn to our outlook for the second quarter of 2011. Our revenue guidance is in the range of $49 million to $53 million for the second quarter of 2011, reflecting seasonal increase in the second quarter. We expect gross margin to be up from the first quarter as in-house test area of capacity utilization improved that increase in revenue. Stock-based compensation expense is expected in the range of $3.3 million to $3.7 million. We expect non-GAAP R&D and SG&A expense to be in the range of $17.5 million to $18.5 million. This estimate excludes the stock compensation expense mentioned above. We expect litigation expense in the range of $700,000 to $900,000.

Now, I would like to address the tragic earthquake and Tsunami in Japan last month. Our thoughts are with the people in Japan and abroad whose families and lives have been impacted by this disaster. Many customers and investors have asked if MPS's supply is affected. We have not been directly affected as our manufacturing activity locations are all in China. We also followed up with our foundries and assembly houses to assess the impact and concluded that we do not have any supply issues. Supply continuity of the raw materials, including raw wafers, wafer fabrication gases and packaging compound is uninterrupted.

I will now open the microphone for questions.

Thank you. (Operator Instructions)

And our first question comes from the line of Ross Seymore with Deutsche Bank. Please proceed.

Hi, this is Bob Gujavarty for Ross Seymore. I am just curious with the potential with the IRS, would that increase your legal expense or SG&A in the back half or is that -- is it pretty small?

We do expect to have some impact on SG&A expenses. To note is that, this is going to be a long procedure, which is going to take months or even years to resolve. I do expect to see some pickup in our SG&A expenses this quarter. And then the rest of it is going to be very minimal stretched out over a long period of time and more at the time that we are going to appeal for litigation.

Okay, fair enough. And just looking at your geographic breakdown, I noticed that Korea was down about 50% and I think that's understandable given certain customers there, but the US was down 61%, is there -- I'm just curious because now you are expanding your sales force in some of the developed countries and I'm just curious what was the US impact?

You must be talking about maybe a quarter-on-quarter, but when you look at it year-over-year, all regions except two, Korea and China, grew significantly. So, if there is a quarter-on-quarter decline in US that's seasonally expected --

I think that you are looking to ship to a basis and from the demand creation side, we increased this year by --

Quite substantial amount.

By really a substantial amount. I don't have the number within me, it's north of a 20% or 30%.

Quarter-on-quarter or year?

Quarter-to-quarter.

Yeah, quarter-to-quarter from the same time.

The revenue generated has increased. What we report for SEC purposes is a ship to and a lot of the US revenue generation is shipped overseas for offshore manufacturing. So that's what you are seeing.

Okay. Thank you.

Our next question comes from the line of Vernon Essi with Needham & Company. Please proceed.

Thank you and congratulations on the solid guide. I'm wondering if you could discuss just from a sort of a strategic standpoint. Steve, you've gone over some of these new efforts and sort of going up the higher mix food chain in the analog side of things and also there are some investments going on to develop these sales channel and IT infrastructure. Can you just discuss kind of the implications of your OpEx for all of these efforts going into sort of the back half of this year and should we be rethinking how the model might change for your company in the OpEx front?

In terms of OpEx side, we don't expect it to have a significant increase and we just have a reallocation of our man power to targeted it on those higher valued markets and that we have all the resources already set and Steve can comment it on some particular wing the market that we focus and recorded all these design wins.

Yes, we talked about the markets already and already elaborated on that. And Michael said it very clearly it's basically a corporate initiative to shift the existing resources both in a R&D level, which is a longer term outlook and short-term sales and marketing focus shift.

Well, can you give me example just to I mean to elaborate on the sales and marketing side? I mean I don't want to dive into a specific I guess program, but obviously selling a part into Taiwan for the PC, food chain versus an automotive part in Europe is obviously different sales channel development effort. What are you pulling out of I guess from the cost side to make up for that to build these other areas I mean what's going to be deemphasize and how do you make up for that?

That's a good question. We do have some increase of the US and the Europe sale and that though -- but we will go out, we will now go out into rampage to the higher audience people. And as you know in a analog space the talent that is very few and so we will hold our hiring standards and to recruit all the qualified people. So therefore itself is limiting our hiring -- our headcount expenditures. But in the US, particularly in the last year, we changed the many team members and we have all the new peoples on board, but there is so many opportunities that we will continue hire and the same as in Europe.

Okay, that's helps. And Meera, just two housekeeping questions. I apologize, can you go over the stock buyback program data point side, some of those in your prepared comments, I am sorry?

Sure. We bought about 45.2 million shares out of dollars out of the $70 million programs that we announced.

Okay.

That is program to-date, but if you just look at the third quarter, we bought about 900,000 shares for about $13.7 million.

Okay. And then last question here, what was your cash from operations in the quarter?

$8 million.

Okay. Thank you.

Welcome.

And our next question comes from the line of Gus Richard with Piper Jaffray. Please proceed.

Yes, thanks for taking my question. Michael, given the acquisition of TI by National, can you talk a little bit about the changes in competitive dynamics? Is this giving you an opportunity?

Yes, they are very big company, right and then MPS is much smaller and smaller company has a good advantage, the big company has a bigger -- has a different advantage. We obviously at any environment we leverage our own technology and which all the large companies, they don't have it. And also we focus on the small niches that they neglect. And so, we always take our own chance and to grow in some of the markets that we have as our strengths.

If I can add a little bit, Gus, when you think about the consolidation of two large companies where in a space where we are slowly growing and as we diversify into new markets like industrial and automotive, could be an opportunity for us as our end customers looking for multiple sources and there would be merger of the two. They may open up some opportunities for us.

Okay. And then, just in terms of growth versus gross margin over the last 12 to 18 months, your operating models changed quite a bit and I was just wondering if you can just give us a little bit of update on what you think after you are through this transition what your longer term growth rate would be?

First, we get through the transition. We expect to be back at the model that we announced last year, which is to grow revenues 25% to 30% year-over-year and to have gross margins in the 50% to 55% range and that we believe will let us have net margins in the 22% to 27% range. Clearly, we are not operating there, but that's largely because this is a Europe transition where revenues are not going to be where we ideally like them to be in our model.

But I Gus, I really believe and are confident that opportunities are there and we have our technologies and to target those markets. This year in the next -- starting from the next year particularly we'll show some results.

Okay, got it. And just last one, the hit to target model is a two to three year, is that a reasonable expectation?

I think at the -- end of this year or the next year would be a lot more clear and in the long-term its difficult to call it, but if its more than two years I call it a failure.

I understand. Okay. Thank you.

And our next question comes from the line of Steve Smigie with Raymond James. Please proceed.

Yes, hi this is Andrew calling in for Steve. Meera, on the tax rate, outside of the IRS impact, how long do you guys kind of expect to have kind of stay at current levels 7.5% or so?

Our expectation is at least that this year I would kind of advice that you continue to look at 7.5% rate on a non-GAAP basis.

Okay. And then, could you guys maybe quantify what percentage of your 1-Q revenue was from new products introduced last two or so years and maybe what your expectations are for the second quarter?

Well, on quarter-to-quarter it doesn't change significantly in that timeframe, but it's about 40%.

Okay.

It's a 40%, but I have to -- I must say that in a lot of these are 40% of steel resulted in a consumer market and all this -- now we are really changing the market directions starting from the last year and with lot of products when all applied for in those consumer markets and start from now we introduce other product in the new market segment. So it's -- but going forward if at all I'm sort of misleading as a 40% new revenues in the existing market and going forward it may change.

With the longer design to production cycle as we shift into our supply that will change, but one indication that indicates that our businesses are changing for the negative.

Okay.

And then Andrew one more clarification, when we gave that number that was product introduced 18 months and earlier.

18 months, okay. I guess this is finally on, this sounds like your upstream supply chain in Japan is intact, does your guidance factor in any potential downstream impact, whether you guys do really have 7% or so revenue out of Japan?

We have looked at of the demand from Japan and all that factored into the guidance we've given.

Range, yeah.

In the range we've given, yes.

Okay. Thank you very much.

Our next question comes from the line of Mike McConnell with Pacific Crest Securities. Please proceed.

Yes, I was just kind of wanted to discuss little about the gross margins a little bit up here in Q2, how should we think about the trajectory of gross margin in the back half the year?

On the revenue growth in we -- utilization of the capacity and we'll be -- the number will be reduced. So it was the fully -- the capacity is fully utilized somewhere in the north of a 65 -- about $65 million through quarter. So in the next quarter we -- our guidance is somewhere in the $48 million to $50 some million, that is hugely impacted by this utilization from the gross margin.

Just to add to that, with the revenue pick up this quarter from the prior quarter, you're already going to see some absorption of the fixed capacity cost. I guess maybe something like 70 to 100 basis points is my guess. And as we go into the second half of the year, as typical seasonality holds and we see revenues going up into the 60s and as Michael said when we get to above $65 million in revenues that's when we would expect to see the test capacity cost to be fully utilized. Does that answer your question?

It does, it does. Should we think of it to the extent when you're at $65 million that you'd be at the higher end now your new gross margin target i.e. 55%?

It's about a year, it's about another -- if it's about 55% -- $65 million the utilization side is about 5.5% to 6.5%.

No, Michael it's about 3%, so if we...

So 3% is...

It would be a 3% improvement from last quarter, so we would be at about a 53 or so, the rest of it would depend upon the mix of revenue.

Okay.

And it's inside the [multi-turn] business we don't quite have that visibility into Q3 and Q4 gross margin, but if you're just talking about the capacity issue then we should be at about 53.

Okay. So the way we should think about it, let's just say you are at 50 right now, 300 basis points will be from getting back to $65 million that remaining 200 basis points will vary depending on product mix.

Yes.

Yeah, I was talking about at the $65 million per quarter basis I think, that will include -- that we increase 4% to 5% -- 3% to 4%.

...which is for the capacity utilization.

And Meera, you had alluded to may be a 6 handle in the back half of the year, remind me what normal seasonality is again for your Q3, is it up 20%?

Our normal seasonality is up about 15% I think, 15% to 16% going into Q3.

Okay.

And then usually to decline of about 4% in the Q4.

And then Q1 is down about 10%, is that right?

Yeah, Q1 can be down 10% to 15%.

10% to 15%, okay, great.

Yeah.

Thank you.

And our next question comes from the line of Jaeson Schmidt with Craig-Hallum. Please proceed.

Hey guys, thanks for taking my questions. Just really quick one for you guys, I was wondering if you can just talk about lead time you're seeing.

Excuse me, could you speak up a little?

Yes, I was wondering if you guys could talk about lead times you saw in the quarter and are seeing now? And then just a general discussion on current channel inventory in your major end markets?

Our lead times are normal, the same as they've been last quarter, it was about 6 to 8 weeks depending upon the product. So we look over there. This day inventory has come down. It's right now in a comfortable spot of a range which is 30 to 45 days. And what was your last question, I'm sorry?

It's just about what you're seeing as far as channel inventory in your major end markets?

I will think we'll continue -- we expect to continue to be in that range. In a typical quarter we kind of ensure that we hold most of the inventory and our customers only hold as much inventory as they need to support their customers in the next few weeks. So we expect them to be in the 30 to 45 days range.

Okay. Thank you.

And our next question comes from the line of Tore Svanberg with Stifel Nicolaus. Please proceed.

Thank you. This is Evan Wang in for Tore. I was wondering you could add a little more color on your guidance, could you talk about the trends requirement needed to meet the mid point of your guidance as well as the trends that was in last quarter and if you could also talk about whether you factored in any margins for the current possible disruption in supply chain?

We got some of your questions and so we can hit on the first one which is your question on turns guidance for the quarter and for the next quarter.

Typically our turns business can vary. We sometimes walk into a quarter with 40%, sometimes 60% and we have found that does not really make any difference for the results of the quarter. So we don't usually provide that guidance because it doesn't -- you could draw assumptions from it that doesn't really matter. It doesn't really count. So I would stick with revenue guidance that we have given.

And the second part of your question we didn't quite get?

Evan, you there?

Evan?

He has left the queue. And our next question comes from the line of Brian Piccioni with BMO Capital Markets. Please proceed.

Hi, Brian Piccioni, BMO Capital Markets. She got a few syllables right. I guess most of the questions have been asked and answered. The audio business was surprisingly strong. My impression was that that was a business that you kind of expected to go away over a few quarters, has there been any change there or is this sort of just unexpected business?

Yeah, there is no change there Brian. It's just business in the audio and TV space that some quarter-on-quarter growth. But our business dynamics and our business strategy they are not changed.

Okay.

The market that is stated opportunistically as the opportunity comes in, but it's not a strategic focus for us. So even if it bumps up or down, it's not something and that we particularly worry about.

Great. And of course this is not terribly material, but I figured I'd ask. On the LED business, do have any visibility from your customer with you mentioned the bulb customer in the presentation. Do you have any visibility as to what the potential there might be because you appear to have hit the inflexion point where the declining business isn't so important any more and any growth from that -- the LED business could be significant contributor to overall growth?

So Brian I can touch on this and maybe Michael can add. We really don't go into the specifics on any given customer. We've got a lot of opportunities going on in the white LED space as well as others. And with regard to this specific customer, yes, we do have some visibility. And we know that the trend is going to go up and year-over-year it's going to grow materially as the volume proliferates into multiple models over time.

And I can give you a little more on -- in terms of our revenue side, in to the bulb replacement market. We are very happy to see all the design win activity and we would see substantially revenue increase from the last year. And while we resolve this, there is some meaningful revenue by the end of this year.

And just to clarify you get some revenue this year, but really we're going to see like the hockey stick curve in the 2012 timeframe.

Yes.

In this business segment white LED lighting?

Okay. And one thing that I've noticed, it was quite surprising is the number of street lamps that I've seen that are the white LED based, do you have any exposure to that market?

Absolutely, and actually we've been exposed to that. That was the one first markets we were exposed to because some of that segment is a pure DC input, which was our first business that we got into, first product at the end of 2008 timeframe. So we are in that business globally and there is a particular strength in the China market.

The technologies that audit -- actually the DC-to-DC and then the light up the LED and the two part of the conversion that's AC to DC and then covert that to about 80 volts to 100 volts and then your DC-to-DC to light up the LED and we are the only company, who can provide the 100 volts DC-to-DC. And that we are -- we are the second company who can provide 80 volts DC-to-DC. And the we won the many design wins in the last six months.

Longer term than that because we've been doing the DC-to-DC for a while.

Yes. In the last six months that we see that significant increase of our activity.

Right.

All right, great. Thank you very much.

Ladies and gentlemen, there being no further questions in the queue. This concludes the question-and-answer session. I would now like to turn the call back over to Meera Rao for closing remarks.

Thank you. We appreciate you're joining us on this call and look forward to seeing you next quarter. Bye-bye.