Power Integrations, Inc. (POWI) Q4 2021 Earnings Report, Transcript and Summary

0:02 Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Power Integrations Fourth Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. 0:29 Joe Shiffler, Director of Investor Relations. You may begin your conference.

0:35 Thank you, Emma. Good afternoon, everyone. Thanks for joining us. With me on the call today are Balu Balakrishnan, President and CEO of Power Integrations; and Sandeep Nayyar, our Chief Financial Officer. During this call, we will refer to financial measures not calculated according to GAAP. Non-GAAP measures exclude stock-based compensation expenses, amortization of acquisition-related intangible assets and the tax effects of these items. A reconciliation of non-GAAP measures to our GAAP results is included in our press release. 01:05 Our discussion today, including the Q&A session will include forward-looking statements denoted by words like will, would, believe, should, expect, outlook, forecast, anticipate, prospects, and similar expressions that look toward future events or performance. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied. Such risks and uncertainties are discussed in today’s press release and in our Form 10-K filed with the SEC on February 5, 2021. This call is the property of Power Integrations, and any recording or rebroadcast is expressly prohibited without the written consent of Power Integrations. 1:43 Now, I’ll turn the call over to Balu.

1:47 Thanks, Joe, and good afternoon. We concluded and it’s outstanding year with another quarter of strong revenue growth, profitability and cash flow. Revenues for the fourth quarter were $173 million, up 15% compared to the strong fourth quarter of 2020. Gross margins approached the high end of our model, and our non-GAAP EPS grew 38% from a year ago. 2:16 For the full year, non-GAAP EPS grew 92% on revenue growth of 44%, that's well about the revenue growth rate of analog semiconductor industry, which was on track to grow about 30%. Over the past three years, we have averaged 19% top line growth, almost three times, the rate of the analog sector. The revenue growth in 2021 was broad-based and diversified, with all four revenue categories growing at least 35%. 2:52 We gain shared across a broad range of end markets, including appliances, smartphone chargers, notebooks and a range of verticals in the industrial category. We have strong momentum coming out of 2021. And we could not be more excited about the opportunities ahead of us in 2022 and beyond. The secular trends underpinning our growth last year remain in full effect, including energy efficiency, electrification, smartphones and appliances, and advanced charges for mobile devices. 3:28 GaN was a significant contributor to our growth in 2021, with revenues tripling from the prior year, and we expect strong growth again in 2022. GaN based InnoSwitch products and complementary products like minicab are driving a revolution in charges and we have a wide range of impressive smartphone and notebook designs coming to market in the months ahead. 3:55 We also have new revenue streams coming online this year for motorized as a BridgeSwitch products begin ramping at appliance customers and from automotive with multiple EV design wins going into production later in the year. Our unique foundry model and timely investments and capacity, which enabled us to win market share in 2021, will help us again in 2022, as lead times remain stretched across the industry. 4:27 Our team executed beautifully last year under challenging conditions, assessing genuine customer needs, building the right mix of parts and keeping customer lines running while guarding against inventory bills and excess ordering. Our inventories are near laid back to our target level and we are in a great position to support strong demand in 2022. 4:52 We will also introduce new products this year that will extend our lead over the competition while expanding our addressable market. We have a pipeline of products incorporating industry leading technologies such as our proprietary GaN switches, FluxLink isolation technology, the BridgeSwitch architecture for motorized and our scale gate driver technology for high power. In all, we expect to double our addressable market to more than $8 billion dollars over the next five years, with the expansion, primarily coming from the appliance, industrial and automotive markets. 5:33 We announced one such product earlier this week. A new member of our InnoSwitch three family devices qualified for automotive use. Our InnoSwitch products are rapidly gaining acceptance in EV power supplies, thanks to their efficiency and their high level of integration, which sales precious board space while enhancing the liability. This latest InnoSwitch device designed for next generation 800 volt EV platforms, incorporates 1700-volt silicon carbide MOSFET. 6:09 The challenges of high-voltage are new to the automotive market, and customers are eager to tap our expertise. As noted earlier, we have multiple automotive design wins going into production later this year, including an emergency power supply for a Tier 1 automotive supplier. We have additional designs scheduled for production in 2023 and 2024. And a strong pipeline of design activity involving seven of the world's top level automakers, while revenues will ramp gradually given the length of automotive design cycles, we are excited about our progress and we are investing in products, people and facilities to make automotive a significant part of our business in the coming years. 6:56 Another new revenue stream for 2022 is motor drives. Our BridgeSwitch products drive brushless DC motors, which are being adopted by appliances – appliance makers to keep pace with the efficiency requirements, such as China's new standards for air-conditioning as well as recent updates to European efficiency standards. BridgeSwitch ICs offer higher efficiency than incumbent solutions compounding the energy saving benefits of brushless motors. They also enable faster time to market by reducing component count and integrating safety features that are normally implemented in the system software. This feature alone can say months of delay by avoiding the need for a new safety certification after any software updates. Our leadership and appliance power supplies and our strong relationships at appliance makers around the world, puts us in an excellent position to sell BridgeSwitch and expand our content in appliances. ,: 9:00 While we're excited about these two new revenue streams, which will be an important part of our growth story in the years ahead, we are equally excited about the continued growth in our core markets. We grew our consumer revenues 40% last year, through a combination of share gains and expanding dollar content in appliances. China's new efficiency standards for air conditioners are a key contributor and we will see a full year's impact of those standards in 2022. Our delivery performance also continues to be a key advantage in appliances, as competitors allocate scarce capacity to other end markets. 9:43 Industrial revenue grew 35% in 2021, driven by a diverse set of applications, including metering, home automation, lighting, battery power tools, and broad-based industrial. Our growth in industrial markets reflects, not only the attractiveness of our products, but also our success in reaching smaller customers with online design resources and other efforts to drive higher productivity in our distribution channel. 10:13 Revenues from the communications category grew more than 45% in 2021, driven by advanced charges for smartphones, while computer revenues nearly doubled, driven by GaN based notebook adapters, and high power aftermarket charges, such as Anker’s (ph) nano II products. Back in May, we announced that Anker was the exclusive launch partner for our GaN based InnoSwitch for chipsets. 10:43 Last month, Anker’s CEO revealed that his company had shipped more than 10 million units of nano products in 2021 and offered a strong endorsement of our products and customer support. We expect strong growth from advanced charges again in 2022, as the market continues to move away from commoditized low-tech designs in favor of faster, smaller, more versatile designs that require advanced semiconductor technologies. 11:14 We have several high-volume designs scheduled to go into production, over the next few months, including a high power GaN based inbox charger for a major Chinese smartphone OEM as well as new compact notebook adapters at multiple customers in the PC market. And later this quarter, we will introduce new products targeting ultrafast chargers with power levels in excess of 100 Watts, as well as a range of other mid-power applications like desktop PCs, power tools and E-bikes. 11:49 Since ultrafast chargers typically feature multiple charging ports and require a separate power factor stage. They offer a substantially increased dollar content and require high levels of both integration and efficiency. To summarize, 2021 was an outstanding year for Power Integrations and we are confident in our prospects for 2022 and beyond. 12:16 GaN represents one of the most important opportunities ever in power semiconductors, and we are the clear market leader. Smartphone and notebook chargers are transforming from throw away accessories to high-tech appliances, that help our customers differentiate their products. Transportation and tools are going electric and appliances are adding more electronic features while needing to use less power. IoT and smartphone devices need power supplies that are reliable and compact with minimal standby power consumption. 12:51 And with governments and private sectors pushing for lower carbon emissions, our products have a critical role to play in the generation, transmission and efficient consumption of Power. Each year, our EcoSmart technology saves NFL (ph) city to power more than a million and a half homes and we have been doing this for over 20 years. Our GaN technology will save even more power as it replace silicon, and our gate drivers are using solar and wind power as well as high-voltage transmission lines that deliver clean energy to the grid. 13:32 Having surpassed the $500 million, $600 million, and $700 million revenue milestones in all in the same year. We are looking ahead to the $1 billion mark. Our addressable market is large and growing and we are investing in the R&D resources, sales reach and capacity to become $1 billion dollar business. 13:55 And as Sandeep will explain in a moment, we are also underscoring our confidence in the future by investing heavily in our own shares. Sandeep?

14:05 Thanks, Barlow and good afternoon, we had another excellent quarter from a financial perspective, with revenues above the midpoint of our guidance, gross margin near the high end of our model, healthy cash flows and a significant return of cash to stockholders. Our capital allocation decisions reflect our strong balance sheet, our expectation of continued cash flow growth, and the recent divergence between our share price and our financial results. 14:36 Specifically, we took advantage of market volatility, including the turbulence around our promotion to the S&P midcap index to buy back 2% of our outstanding shares between November and January. In January, our board allocated an additional $100 million to the buyback and has also increased our dividend for the second straight quarter bumping it by 20% to $0.18 per quarter. 15:05 Looking now at the Q4 results, revenues were $172.7 million, down 2% sequentially. The communication category was down high single digits driven by yearend inventory reduction in the distribution channel. Sell-through for the communication category was up more than 15% sequentially, indicating that the end customers inventories have returned to healthy levels following the over bill that took place early last year. 15:36 Computer revenues were down mid-teens driven by softness in PCs. While consumer and industrial revenues each increase slightly from the prior quarter. On a year-over-year basis, total revenues were up 15% compared to last year’s very strong Q4. The industrial category was the fastest grower, up more than 14% driven by metering, home automation and broad-based industrial applications. Consumer revenues were up 30% on continued strength in appliances, driven by share gains, content increases and end market demand. 16:16 Computer revenues were also up 30% year-over-year driven by penetration of the notebook market. Communications revenue were down mid 20s, compared to a very strong quarter a year ago when OEMs began building aggressively in an effort to capitalize on the Huawei sanctions. Revenue mix for the fourth quarter was 35% consumer, 32% industrial, 23% communication, and 10% computer. The higher margin industrial and consumer markets accounted for a greater than expected 67% of our mix in Q4, helping drive non-GAAP gross margin to the higher end of our model at 54.5%. 17:00 Also contributing to the increase in margin, our manufacturing efficiency including improved yield and test types. Non-GAAP operating expenses for the quarter was $38.8 million, up $1.8 million from the prior quarter, reflecting increased headcount. Non GAAP operating margin for the quarter was 32%, while the non-GAAP effective tax rate was 8%. Non GAAP earnings for Q4 were $0.83 per diluted share, up 38% from a year ago on revenue growth of 15%. 17:38 Cash flow from operations for the quarter was $47.2 million. Diluted share count for the quarter was $61.4 million flat compared to the prior quarter. We repurchase $423,000 shares during the fourth quarter for $38 million. Repurchase were heavily weighted towards the end of the quarter, so the impact on share count will be seen primarily in the March quarter. As noted earlier, repurchase activity continued after end of the quarter at an accelerated base, reflecting our price sensitive approach. In fact, within the month of January, we exhausted the $67 million remaining on the plan, buying back an additional 820,000 shares. 18:25 As noted in our press release, our board has allocated an additional $100 million for repurchases, which we would begin to deploy next week should the stock price remain in the range of our price volume matrix. Other uses of cash during the fourth quarter was $17 million for CapEx and $9 million for dividends. Cash and investments on the balance sheet total $530 million at quarter end, down $19 million from the prior quarter. For all of 2021, we returned nearly 60% of our free cash flows to stockholders, including $74 million in the form of buybacks and $33 million in dividends. 19:08 Looking now at inventories as Bala noted, we are pressing our advantage on product availability and delivery performance. Our unique foundry model and our investments in back end capacity have enabled us to build inventories back 114 days at year end, up 15 days from the prior quarter, and within sight of our target level of 125 days. Channel inventories fell to 6.3 weeks, down from 6.7 weeks in the prior quarter, reflecting sequentially higher distribution sell through mainly in the communication category, as well as our preference for keeping inventories in house to be responsive to customer order patents. 19:54 Turning now to the outlook, we expect revenues for the March quarter to be $180 million, plus or minus $5 million. The implied year-over-year growth, year-over-year increase of 4% at midpoint reflects the exceptionally strong quarter we had a year ago, when revenues grew 15% sequentially. I expect non-GAAP gross margin for the first quarter to be similar to the fourth quarter level of 54.5%. End market mix should be less favorable, with the communication category showing relative strength. Though we expect offsetting benefits from manufacturing efficiencies and higher volumes. 20:35 Non-GAAP operating expenses are expected to be $41 million in Q1 plus or minus $0.5 million. The sequential increase reflects headcount growth, as well as seasonal factors such as FICA taxes and the year-end shutdown that lowered expenses in Q4. The non-GAAP effective tax rate for the quarter and the year should be 8% to 9%. 21:03 Finally, I expect diluted share count for Q1 to fall by at least a million shares compared to December, as a result of our buyback. And now operator, let's begin the Q&A session.

21:18 Your first question today comes from Karl Ackerman with Cowan and Company. Your line is now open.

21:25 Yes. Good afternoon gentlemen. Two questions, if I may. First on the guidance here, your guide is particularly strong, both in terms of revenue and gross margins. There's nothing normal about this environment, but you are growing well-above, what is typical seasonal for March. So my question is, is the growth mainly coming in March coming from non-communication markets? And as you address that question, are you seeing channel inventory now balanced there? Or are orders still well-ahead of your ability to supply?

22:03 So for the, in terms of relative mix, the communications will be relatively stronger as we just mentioned in Q1. But I would say because of our share gains and content increase and our ability to supply, we are seeing a significant growth across all four markets. And that's one of the reasons why we are growing sequentially in Q1, whereas historically, Q1 has been a slightly down quarter. And cause, we had expected communication to start coming stronger after the thing Q4. But as you can see, the sell through was great. But they managed the year-end inventory. So the sell, as a result was lower, which now you will see, because the inventories are balanced power, Q1 will be stronger and communication. But you could see that the sell-through in communication was even stronger sequentially in Q4. But as Balu indicated, I think what we are seeing a positive sign for the full-year even looking ahead is the share gains that we have got and the ability to supply products to our customers has been a real positive and I think that trend will continue into 2022.

23:16 That's helpful that, I appreciate that dovetails into my second question, which is share gains. On the topic of share gains, how large of a revenue opportunity, do you see BridgeSwitch being over the next few years? I asked because I was under the impression, this is one of the products that is allowing you to gain share from two competitors that have deemphasize that market. Thank you.

23:43 Well, we the addressable market for our current product that we have introduced, is about $0.5 billion. As we mentioned earlier, we plan to introduce higher power versions of the bridge switch, which will allow us to expand that addressable market significantly and so it's a pretty large addressable market and we are very well-positioned in that market. Not only because our products are more efficient, but also they have a lot of safety features built in hardware, which is very, very useful in monitoring the health of the motor, which a lot of customers live. And more important is that we have eliminated heatsinks altogether. The incumbent technology users what's called an IPM, Integrated Power Module and typically has a significantly large heatsink on it. With our solution, we are so efficient, that we don't need any heatsink at all up to 400 watts with the current solution, and we plan to extend that power level without heatsink significantly in the future.

25:00 Thank you.

25:01 Your next question comes from the line of Ross Seymore with Deutsche Bank. Your line is now open.

25:08 Hi, guys, thanks so much for the question. Congrats on the strong results in the guide. You talked a lot about the share gain side of things and the additional supply allowing you to be a lot more aggressive than the peers. So I guess if I thought about 2022 as a whole, Well, that'll actually allow you to grow your communications business, just given it started really strong last year, but ended, I think down, you know, mid 20s year-over-year, how do you expect that to trend for 2022 as a whole?

25:35 I think we will grow in all four categories. Previously, as you know, as we had guided, we thought the communication in computer category would grow faster. But considering the share gains that we have had in consumer and also the sense we are seeing an industrial, it clearly appears to us that the mix for us next year is going to be more favorable than what was in 2021. But having said that, I think all four categories will go.

26:05 And I guess a cyclical question for you. There's concerns about you know, behavioral change, supply catching up to demand, the fact that you guys have shorter lead times then most because you're proactive inventory management, gives you a more real time look at what's happening on the demand side. Earlier in the year in ’21, you were cautious because of that, and then you got more optimistic as the year progressed. So what's the update as of tonight as far as the cyclical views?

26:34 Well, the reason we are more optimistic now is the level of share gains we have gotten in all of the markets is very well diversified, which is the best part of it, I think and in terms of cyclicality, I would say Q1 obviously is stronger than normal cyclicality. But our expectation right now is a little bit early, but we think that we will come back to the normal cyclicality from Q2 onwards, which means that we'll have some increase in revenue in Q2 and Q3 and then probably a slight reduction in Q4. That's our best guess at this point.

27:14 Gotcha. Thanks, guys. Congrats.

27:18 Thanks.

27:18 Your next question comes from the line with David Williams with the Benchmark Company. Your line is now open.

27:27 Hey, good afternoon and congrats on the quarter. Lots to unpack here. But I guess the first question is really on the automotive side, it seems like that has been pulled forward and I know it's been an area of opportunity for you all. But I think in the past, you've kind of looked out and said, this will be a little time out. But it sounds like you've made a lot of progress. Just can you maybe give some color around that the automotive space in particular, and maybe what some of the newer products and the cadence of products that you've been releasing what that means in terms of the overall revenue profile for the year, and then maybe for the longer-term.

28:03 Thanks, David. What really surprised us is the level of interest in our automotive products that we've recently introduced over the last year or two. Normally, automotive takes a long time to get designed in especially if you're not an automotive supplier, people make you go through a lot of steps to even get qualified. But what we have seen recently over the last year or so, is that our products are so compelling. I will just give an example, InnoSwitch upon an emergency power supply, if you're not familiar with what that means is that electric cars have an emergency power supply that makes sure that it one of the batteries whether it's a 12 volt battery, that supplies the control systems or the main battery, the 400 volt or 800 volt battery, gets damaged or disconnected. They require that the car be maneuverable and can be brought to a safe stop. And to do that they have what's called an emergency power supply and that requires the power supply to work all the way from 30 volts to over 1000 volts input. And InnoSwitch is perfectly suited for that and trying to implement that any other way requires so many external components, it's such a [Indiscernible] solution, that when they look at InnoSwitch, this is my God, this is a perfect solution for that and it takes far less space, I mean, it takes typically like one half to 1/3 the space on the on the PC board, which is an expensive space when you think about it in automotive terms. So, many of the customers have actually shortened the design cycle, especially in things like commercial vehicles and also non-core type applications where the design cycle can be completely compressed. And we are actually very impressed that we are going to have several designs going into production this year. And the same is true for our LinkSwitch products, they are being used at auxillary power supplies for many subsystems, like for example, [Indiscernible] heaters, air compressors, this is the air-conditioning compressors, and there are many like onboard chargers require an auxiliary power supply, the DC to DC converter requires an auxiliary power supply. What you're finding is our product is so well suited. People are now trying to power many of the subsystems directly from the main battery, rather than from the 12 volt battery. And that's a trend, it's very exciting to us. So we think the non-core business will start growing from this year onwards, we'll have a small amount of revenue this year, even though many of them are going to production. But it'll gradually grow over the next several years. But the car manufacturers will really jump in somewhere in the ‘25, 2025 range where we will get a much bigger increase in revenue driven not only by InnoSwitch and LinkSwitch, but also by our gate driver products, which goes into the drive train and therefore it takes longer to qualify.

31:19 Thank you for that. It's an impressive leap and in terms of when we thought you would be designed in there. So definitely great to see. And then maybe if you would talk about, the new revenue stream within the appliance market, obviously you've had a strong market share there. But I guess are these new revenue streams from existing clients or customers? Or are there opportunities I guess to move into new areas or new customers that you haven't previously served?

31:51 Well, the new revenue stream from motor controllers from existing customers that appliance manufacturers we have very good relationships with them and the air-conditioning manufacturers and so that is – that is relatively EV market because we know them, we know the customers, they know us and so on. But Automotive is entirely new this, we are new to automotive, and this InnoSwitch product is really opening doors for us especially the latest one we announced, which is a 1700 volt silicon carbide based InnoSwitch, which allows you to operate from 800 volt batteries, which is the trend in the marketplace, the cars are going to go from 400 volt to 800 volt batteries. And when you go to 800 volts, this problem gets far more complicated and we have the expertise in high-voltage to be able to provide a very, very simple and elegant solution that's very reliable and takes very little space and of course, very attrition, which they care about. They especially care about standby efficiency, which we have very, very low standby, which is an important advantage to make sure the batteries don't discharge on their own. So the automotive revenue is completely new to us and we are very impressed that customers are coming to us. They're very open minded about using our products.

33:13 Okay. Thanks so much. And one more for Sandeep, if you don't mind real quick, just maybe on the gross margin, is there any component to the pricing or anything that we should be thinking about that may come out later? Is this purely driven by the mix shift?

33:28 Well, I think the way to look at it as obviously the mix came in much more favorable than we what we expected and the manufacturing efficiencies were better than what we thought. If you're looking to what happened in the next year, it's hard to predict. But we expect the trend to be a gradual decline from the starting for the guidance that we have given for Q1, the mix is going to be more favorable that we done this year as I talked earlier, but we are continuing to see further input cost pressures, which I think will flow as the year goes by. The best guess I have for next year is at this point of time that I can model is somewhere in the 53.5% to 54%.

34:11 Thank you.

34:14 Thanks, David.

34:15 Your next question comes from the line of Tore Svanberg with Stifel. Your line is now open.

34:23 Yes. Thank you, and congratulations on another great quarter. Maybe I can start on that last topic on gross margin. So Sandeep, 53.5% to 54%, that's still higher than kind of what we were thinking before. So is that a function of newer products or are you still expecting that contribution to be mainly mixed driven for the for the full year that is not just you.

34:50 So I think, Tore, the mix is going to be favorable next year, which is kind of helping us very nicely. And when I was, because when previously, we were talking, we thought communication and computer will overshadow the other, but because of the share gains, we think in consumer is going to do real well. And you're seeing really good strength in the industrial side. But we've also made good progress in manufacturing and the volume growth is also going to help with the, initially we thought we may have a little headwind but the capacity expansion, but that is going to be less because of the manufacturing efficiency and the volume growth. 35:27 And lastly, the pricing environment is favorable and we do a value pricing. So I think that helps also as part of this whole thing, but I really think it's a combination of offense and the execution we have done.

35:40 Very good. And Balu, you, just to clarify, when you talked about the 7 of the top 11 auto OEMs, with those design wins, or is it that you're working with seven of the top eleven?

35:53 We're working with them? It's not an assignment at all those companies.

36:00 Very good. And then the last question, you talked about ultra-fast and introducing 100 Watt plus product late this quarter. I mean, we've seen the market wanting to eventually move to 200 Watts and things like that. So how far can you go with the technology, the GaN technology that you have right now?

36:24 Oh, we can go to very high power levels. But the products we are targeting right now will easily cover what has been anticipated if you – if you're following USB PD, they have an extended power version, which can deliver up to 240 Watts and we will be ready with that solution before people need it. And that's again we will do that without hitting by the way.

36:54 Very good. Congratulations again.

36:56 Thank you, Tore.

37:00 Your next question comes from a line of Gus Richard with Northland. Your line is now open.

37:07 Yes, thanks for taking my question and pronouncing my name correctly. Just real quick, I want to talk a little bit about supply, remind me how many foundries you work with these days?

37:21 Let's say our biggest foundries are Epson and Lattice in Japan, we have a couple of smaller foundries in addition to that, but within each company, we are using multiple of their locations for foundries.

37:40 Do these guys have, spare capacity, are they getting full as well?

37:48 Oh, they're all running full. But because we have contractual agreements, we have some dedicated capacity and we have managed the capacity extremely well. So we run it all the time. So when there is a surplus in the market, we don't stop running wafers, we build wafers and build our inventory and keep them mainly in wafer form. So it doesn't show up as too much in revenue in the interest of dollar terms. And so we did that in Q2 of last year, but it’s not last year, 2020 and that was very helpful. And you can see now, we are building inventory. Because we can build inventory and our – we expect to get to our target inventory in the near future, that will be very helpful for us to handle any upside that might show up this year.

38:40 Yeah, I was actually thinking more about the billion dollar target, are these foundries going to have to add a shell, if you will, are you going to have to add another guy to hit that goal or are existing partners sufficient to reach a billion dollar revenue?

39:00 We are doing all of that, we are trying to expand the within the existing partners, we are in negotiations with them to get more capacity, but we are also adding new foundries, we are discussing new additions. So, all of that is going on, we are pretty confident, we can build enough capacity to get to a billion dollars, wherever that happens.

39:24 Got it. Thank you. That's, that's super helpful. And then just on the automotive market, in your early designs for the emergency backup, what's your revenue content? In the first designs, and then, once you get into powertrain, where do you think that can grow, when you get into 2025?

39:48 I will say with the products, that excluding the powertrain, our dollar content will be in, 10s of dollars per car. It just depends on how many power supplies that are in a given car. And that seems to be increasing all the time. But then you get to the drive train, with the board level products, for example, it will be over $100 a car maybe, a couple of $100 a car. It's still in flux, because, the things are changing quite fast in EV. I would say the higher the voltage like they go to 800 volts, we have more content than at 400 volts. The good news is the most of the vehicles are going to 800 volts, because a lot of savings when you go to 800 volts and when you go to 800 volts, our products shine even better, because we can handle high voltage better than anybody else.

40:47 Got it? And then are you primarily focused on EVs? Are you doing an internal combustion engine vehicles as well?

40:56 We don't play in the internal combustion vehicles because the voltages are too low. Even the hybrids are only 48 poles. We only play in pure electric vehicles. And when I say vehicles, not just cars, but also all commercial vehicles, buses, trains, you name it. Other types of commercial vehicles that I've used for transportation of goods.

41:22 Got it. Got it. All right. Very helpful. Thanks so much and congratulations on the print.

41:27 Thanks, Gus.

41:30 Your next question comes from the line of Christopher Rolland with Susquehanna. Your line is now open.

41:36 Hey guys, I also want to echo my congrats. Just given the strong guidance for next quarter. I was wondering if you could provide maybe a little bit more color as to sequential changes or force rank the segment's, how do you see them playing out?

41:58 As Balu indicated, I think the biggest driver will be the communication segment and the other segments will be flat or slightly down. But the communication segment will be the biggest one, as we said. The sell through was very, very strong in Q4 and they managed to keep the inventories low and as a result we now feel that the overhang that we have had to the year Because of what started in the beginning of the last year started and it is not nearly through and that's why we feel we'll have a good Q1 for communication. And just to be clear, he's talking about Q1.

42:29 Yes.

42:31 For the whole year, we think all four end markets will do very well, growth wise. And the mix is going to be, if you looking at the whole year, the mix will be more favorable on a whole year basis than it was this, yeah.

42:41 Yeah, mix will be more favorable, meaning that on a relative basis, the consumer and industrial and computer will grow faster.

42:53 Excellent. And I might have missed it. But did you reiterate gross margin $54 for the whole year? I was just know, what I said is that the best modeling I can do, because the mix will be favorable. But there's further input cost pressures, that the best guess I had right now. It's 53.5 to 54.

43:18 For the whole year

43:19 For the whole year, but I also said from Q4 to Q1, it will gradually taper down as the year progresses.

43:28 Okay, and what exactly were those manufacturing efficiencies that that were?

43:32 We get, yield this time, yeah, one of the advantages of running very high volume is there are always ways to improve efficiency. And one of the things we have done is moved to a new test flat platform, which is a much more capable, what we call tester and reduces our test time and test costs. So that's one of the several things have done. The second one is, it has given us the opportunity to fine tune our products to improve the efficiency and the yield of the product so that we get the lower cost overall.

44:09 And we got to do this because we continue to see input pressure on our costs. So that's why you know, we have to balance that out. And that's why it's helping us.

44:17 The other item I would also add is that when you run higher volumes, your utilization is better. Utilization of your testers, your assembly equipment, all of that is better and that also helps.

44:31 Great job and Sandeep, you can run my stock portfolio anytime you want. Nice, nice purchase this quarter.

44:39 Thanks a lot.

44:38 Thanks, Christopher.

44:42 At this time [Operator Instructions] There are no further questions at this time. Joe Shiffler, I turn the call back to you.

45:05 All right. Thanks everyone for listening. There will be a replay of this call available on our investor website which is investors.power.com. Thanks again and good afternoon.

45:17 This concludes today's conference call. Thank you for attending. You may now disconnect.