芯源系統 (MPWR) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Monolithic Power Systems second-quarter 2016 earnings conference call. (Operator Instructions) 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 morning -- good afternoon and welcome to the second quarter of 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 MPS as our corporate controller for the past five years. It is 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 of 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 have shown in me. I'm 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 would 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 multibillion-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 design-in 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 schedules. 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 are 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 product development, customers have begun evaluating our single-chip prototype. 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 technology.

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 2-percentage-point increase in the contribution from industrial and a 4-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 income -- 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 investment 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 the 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 1 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 and 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 will now open the phone line for questions.

(Operator Instructions) Rick Schafer, Oppenheimer.

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

Thanks so much.

I had a couple questions. The first really on the comms business. I know it has 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 been going on with mix over that 18 months?

Have we seen mix improvement maybe way from gateway and maybe more toward the networking side of things? And then maybe some color on when we might see stabilization ahead of the FPPM ramp?

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

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

Okay. So we should keep thinking of this as a lumpy business for the next few quarters?

Yes, as we speaking, we -- traditional gateway business is our -- MPS' traditional business. As we are speaking, we changing the content in the last few years by 50%, so the legacy business is only about 50% of that total. All the other one has a much higher margin, and we are gradually changing it.

As you know, the telecom business takes a while, and these are the products that we offer as a better performance, but not really outstanding. They must have it. The next-generation product we feel like that there is a lot of wow factors in it, and a lot of people that want those product. And I think it will lead MPS in a particularly in the telecom areas in new directions.

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

It maybe a weird comparison, but does that -- how do you think of that in terms of your server business? Does it have the same type of dollar potential as your server business? And maybe just it is a year or 18 months behind the automotive ramp? If we look out two or three years, are we talking about something that could be a $50 million business or more?

I think a $50 million for a server is a failure. We are looking for a little high numbers.

Okay.

I think that you have touched on a good point there is far as the parallel between the two, and that we are a 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 are seeing those benefits now.

And likewise, we have 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 is left out there, Bernie?

Yes, I think that we have been very consistent as far as how we have portrayed this. That we had about a $2 million investment to make in this year. We will have cycled through the majority of that by the end of Q3, and there may be a little bit of a tail into Q4. But as I said in the previous call, we have already started taking material deliveries from the fab.

Great, thanks.

Ross Seymore, Deutsche Bank.

This is actually Matt Diamond on Ross' behalf. Congrats on the solid quarter. I want to ask why is the CapEx -- it is 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 causing 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 are doing it on a basis that is less dilutive than if we had continued to rent.

The operating cost is higher, so the help [they give].

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 the one-time expense that is 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 are making going forward, so that's going to get trending out as our revenues continue to increase.

Got it. And one last one.

We (inaudible), [okay], here that you can't grow the Company on thin air. And we manage the growth; we manage the gross margins however in expense. It is not -- there is a lot of conditional, and we have opportunity to hire people, and also it is time to upgrade the fab. And thus we talked to -- we communicated to our shareholders many quarters ago this year's will go up a little bit.

But however, we still operating within our margin, and within our business model, and we will continue to do the same.

Got it. I am 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 is probably two or three candidates that still remain as opportunities for us to invest in.

Okay, great. Thanks so much.

Quinn Bolton, Needham & Company.

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

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

Yes, obviously, with our longer-term plan. And if you look at our spending, okay, I know that Wall Street doesn't look at the past. But if you look at our past, okay, some year, we spent high. Other one, we spin almost -- don't spend at all and don't increase the spending at all. So that's the nature of a business.

And to answer your questions, and after fourth quarter also, I think that we go back to our long-term plans well below our -- at the lower end of our model. As we hire a few more people, we still need to absorb it, and we cannot just continue to hide. We need absorb and we reorganized the teams a little bit and that's the nature of our business.

This year, it happened have a few good people available we can hide, and we are very picky to hire peoples and we only choose a few good guys.

Quinn, I think your thesis 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.

Yes, and hiring is going to slow down.

Got it, great. And then wanted to follow up on a couple of the product questions. First, Bernie in his script, you 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 to follow-up on Rick's question about the communications business. If half the business now is 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, when we are looking at -- first off, let's talk to storage, which has enjoyed some significant growth, particularly in SSD. But that has been counterbalanced by what we have been seeing with the HDD marketplace.

I think the overall trend line in storage remains very positive, but I think that when you look at our near-term prospects, it is 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 Skylake to Kaby Lake, both in terms of there are more opportunities where we were 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 is 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 have been selling in, particularly to the Tier 1s, within the current Grantley cycle. And those relationships as well as their understanding of what our technology does, particularly with QS mod, which has really been gaining traction, probably on par ahead of what we had expected.

And so I would 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 pickup from storage, but again, you have got two offsetting dynamics there.

Understood. Thanks for the additional color, Bernie.

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 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, three quarters, it will really be when the next set of products are released that we see the uplift there.

And then as far as on the gateway, a coloring item there that we have discussed in the past is that we 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 have in both industrial and computing, we really didn't have to draw much from that market space. And so as a consequence, it really was not just a -- it didn't grow, but it actually had experienced a decrease.

Thank you.

Melissa Fairbanks, Raymond James.

It is Melissa Fairbanks for Steve Smigie. Thanks for taking my question. I was wondering if you give us some color on what you're expecting for mix in the September quarter. Do you have any comment on seasonality or what we should look at between the segments?

Sure, Melissa. Thank you for that. I think that in our traditional model, Q3 would have been colored by a ramp of consumer, and 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 are 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?

Yes, we feel, as we said, some of the small meters and also other industrial equipment in the security side. And these are where -- these area we are very optimistic.

Yes, I think that -- 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 is unfortunate that these other areas that Michael just mentioned get overshadowed by comparison because cumulatively, they are a little bit smaller than automotive. But their growth rates remain very attractive, and we believe that they 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.

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

Tore Svanberg, Stifel.

Congratulations on your new role, Bernie, and congratulations to your Company for the smart execution. Just a few questions here. For the last few quarter, you have 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 just in your current visibility, when do you think you can't start to potentially see some acceleration above that growth rate?

I think, yes, it is above this growth rate as I talk about it in early quarters. And I think it is happen in the second half of -- starting second half of next year. And we will breakout more than 20% growth.

And I see this not only from automotive as we keep talking about, [locking me] in automotive, but we do have other areas, like servers. Even consumers in the consumer segment. We see a variety of designing activities. And our products are proven to be the choice for all these segments. And we look at overall, I think we are three, four years, our plannings. 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 are 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 will really be ramping and taking off. And we also have a 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 is 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 tooling 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 had expected.

And we obviously manage our disti inventory between a range of 30 to 45 days, and we are 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 is helping you manage the business?

Sure. As we have 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 is as long four 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 establish the base financial model around that as much as four to six months ahead of time. So at least in the environment that we are enjoying right now, where there is a minimum of either economic headwinds or any other variables, it has led to a very stable and predictable alignment for which with to manage a high level of growth.

So now our turns business, when we go in a quarter, it is 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 are not in a dissimilar position from where we were in Q2. And I even say that recognizing that we are 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 based on 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. Great job, guys. Thank you very much.

Thank you very much. Now you make my day. (laughter)

Thank you for that comment.

(Operator Instructions) Anil Doradla, William Blair & Company.

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 has been quite a big effort from you to transition into telecom; big metal infrastructure products. We have seen the performance over the last, call it, four quarters showing year-over-year decline. Bernie talked about certain near-term dynamics where you pulled back on it.

But when I look back at the telecom business, 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 are designed in? How would you characterize from your point of view your exposure to these big metal projects, so to speak?

All right, okay, I will give you a straight answer. One things -- okay, four years ago, we lay out all our plans. We are going to do these, these, and that, and the telecom was a part of it. And we didn't -- we have other low-hanging foods and we got it, and telecom was sort of neglected. And so I had to say that.

And as a result, that reflects what is being there today. Although the content of the -- in telecom content in that we are using other products. Mainly these are such as a point of a load, other one is Power over Ethernet, and we grow some market shares. And these are much higher values than a gateway business.

So -- but my take on is, okay, we have to have a killer product, and we are releasing this killer product. And a killer product that's [assembled]. And we address this telecom market. These are very easy to use and have very high efficiencies and they're very compact size. And I think that we're going to be -- these product will be far better than everybody else in the market now.

And we expected to have a very good growth. However, the telecom, as you know, is even slower than automotive in their product cycles and we had to meet with it. But long-term perspective is very good.

So the killer product, Michael, that you are talking about, is that that module that Bernie and you mentioned? Is that the killer product or it is 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.

Yes, there is going to be some alignment, as, again, the telecom industry is going to go from 4 to 5. And during that transition, we will probably pick up more design opportunities.

So is it fair to say, Michael, until this killer product comes out, the way telecom will behave will be plus/minus in this range? Nothing spectacular, but work its way -- chug its way through, so to speak?

For the dollar amount, yes, okay, it is similar. But the content is probably grow to a higher-margin area. Less of a point low four for gateway. But these are -- the gateway business is pretty quick. Within a half year, we can turn it on and then turn it off. So we judge our growth and we judge the fab capacities.

Right. 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 percentage of the industrial group?

Industrial or total revenue. Whatever you want to say.

It is about --

What we tend to do there is do that on an annualized basis. So what I indicated previously is that last year, it represented a little over a third of the industrial group, and it is growing -- I think not quite a doubling, but at a very high double-digit growth rate when the Group itself is growing 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 this new round of servers, obviously you have got a more bigger platform, more content.

So Michael, when you step back and look at the current version of the rollouts, can you quantify the number of design wins, the total design win dollars? Anything that we could appreciate how good you guys are doing on that front?

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

Right.

And very closely. However, so now I can say, okay, we have in the last half years, we really -- all these first tiers really opened up to all the opportunity to MPS. And a lot of them, the very highly visible project, MPS won it.

So I can add to it. I think you did a good job of 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 are enjoying are reflective of all the content that we have and they are broad-based as far as the number of Tier 1 and Tier 2 server OEMs that we are working with.

But all these revenue we generate now. 70%, 80% -- or maybe not -- yes, 70%, 80% -- at least about 70% is off from a point load for ease of use. And the core power, it's just start to ramp now. And as you see what the market size is. And there is only a very few players, and MPS can be a significant player there.

Right. And Michael, finally, if you don't mind me squeezing in on the brushless motor control, it is obviously a topic you guys are very excited about. We have 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 good ramp in that business?

I don't say that it is up and down. I think it is everything is as expected. I think the last quarters, we delayed the chip for a couple months. Now we have it. In Bernie's script, we said it. We sampled our chip, we have the chip product, and couple of customers, 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 expectation. It is a very complex product, and both us 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 are generating revenue currently, and we're actually starting to get a good ramp. But I think we've tried to set the expectations out into 2017 and 2018.

2017 and 2018. More in 2018. I have a very high expectation on this technology, as you know. That will really revolution change the way we do -- manage the [motions] or generate energies.

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

Amit Chanda, Wells Fargo.

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 just starting to -- selling the modules. We haven't -- clearly, you look at our website, hasn't launch yet.

Do you know --

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 are expecting to be able to do is right now, there is 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 are able to attract and get customers designed in through the e-commerce solution.

So it's going to be something that we will be introducing, and then it is going to evolve and develop. But it won't be an immediate click the switch and have all our business transition to that platform.

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

Yes, we have a -- you will see our website change in the next couple 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.

In the powertrains and a lot of them are single failure components, okay. Those are area we want to avoid it. And of course, if they want to buy, we won't sign any of these liabilities. But we are focused on the infotainment, lighting, camera and --.

Networking.

Networking. Even some ignition area and some safety area where we are engaged with [all opens]. But the powertrains, 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?

It is very variable.

I think it is average. On earnings day -- on analyst day, we said we have a model [pull it up]. Somewhere is the $1.40.

Yes, is the opportunity.

It is a [$1.40] and I don't think we increase somewhat. I don't think there is no significant changes yet.

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

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

Thank you. I would 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.