Good day and thank you for standing by. Welcome to Monolithic Power System, Inc. Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. Please be advised of today's conference is being recorded. Now I'd like to turn the conference over to Arthur Lee to read the Safe Harbor statement. Please go ahead.

Earlier today, NPS released a written commentary on the results of its operations for the second quarter and the June 30th, 2026. This document can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. The risk, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the safe harbor statements contained in the Q2-2026 Earnings commentary and in our RCC filings, including our Forms 10-K and Forms 10-Q, which can be found on our website. Our statements are made as of today, and we assume no obligation to update this information. Now, I would like to turn the call over to Tony.

Thanks, Arthur. Good afternoon, and welcome to our Q2 2026 earnings call. In Q2, MPS achieved record quarterly revenue of $981 million dollars, 22 percent higher than the first quarter of 2026, and 48 percent higher than the second quarter of 2025. Our performance was a result of our continued innovation, our consistent execution, and the resilience of our diversified market strategy. Let me take a moment to call out a few of the highlights from the quarter. All-in markets grew sequentially, with enterprise data growing 45% as we continue to see strong broad-based ordering patterns. We extended our capacity goals significantly beyond $6 billion to support future revenue growth and our transformation into a full solution provided. We received initial orders for high-speed DDR5 memory components, which we expect to grow our SAM into next year. We began sampling high-voltage AC to DC products for 800-volt data center architectures, as we expand beyond our current AI and server core power solutions. And finally, in our automotive market, so far this year, we have shipped products for over 1,500 new sockets as we increase our footprint in both ADAS as well as in other applications within the vehicle. Overall, while we continue to adjust for the fluid geopolitical and macroeconomic environment, our diversified market strategy remains unchanged. MPS focuses on innovation and solving our customers' most challenging problems. We consistently invest in new technologies that open new end markets and applications and accelerate our transition from chip-only to a full-service silicon solution-based provider. And finally, we continuously expand and diversify our global supply chain, allowing us to capture future growth opportunities, maintain supply stability, and rapidly adapt to market changes as they occur. Before moving to Q&A, I am also pleased to announce that our Board of Directors has authorized an additional $500 million for stock repurchases, increasing our total current authorization to $1 billion. Operator, you may now open the webinar for questions.

Ladies and gentlemen, to ask a question at this time, you will need to press star 11 on your telephone and wait for your name to be announced. Please stand by when we compile the Q&A roster. And our first question coming from the lineup, Rick Schaeffer with Oppenheimer. Yolanda Snellman.

Oh, thank you, and congrats on the beat you raise, you guys. I guess I don't have to ask about capacity, Tony. Communications was up 80%. I think last quarter it was up about 50% if memory serves. So that's a pretty big step up. You know, I'm just curious, is that mostly transceiver power, or are you seeing meaningful contribution now from the other you know the other sockets so switch dpu smart nick i mean is that has that kick in is that helping drive that and then you know any call you can give on how the second half sets up i mean does that momentum continue to grow into into 3q yeah we see uh Hi, Rick, we see a lot of growth and a lot of demand, modules, chips, and we see from multiple of our customers.

And Tony, you want to have a detail?

Yeah, I'll just add a little more color. Rick, you do see contribution from both optical module solutions as well as from what we've generally bucketed as switches. And as I think as I've mentioned previously, that's kind of a big bucket that would include in power solutions for not only top-of-rack switches, but DPUs, NIC cards, and other things in the rack. So you're starting to see that grow as well. Optical is still the bigger portion, just because it's had a longer runway since last year, but you are seeing growth from both of those really driving the comms on market.

Oh, thanks. And as my follow-up, I'm just curious. I mean, I believe you're shipping 48-volt vertical power modules to a couple customers now. And I don't know if you can update us on that. I mean, do you expect to add any more this year? Maybe a sense of what your expectations are for 48-volt, you know, vertical power mods, you know, in terms of maybe the mix versus VR this year or next year?

Well, it's more than a couple of customers, okay? I mean, we see new customers who are coming alliance and, okay, we'll start to ship.

Yeah, and I think over the long term, as, you know, power requirements continue to increase, you know, across red markets, Rick, we've talked about the fact that modules and solutions will increasingly be an important part of our business. So I think you'll see that trend continue, you know, over the next couple of years.

Thanks, you guys.

Thank you. Our next question in queue coming from the line of Joshua Buckalter with CDK. Our Neil on the smartphone.

Hey, guys. Thank you for taking my question, and let me echo the congrats on the fantastic results. Maybe to start, I mean, you gained nearly $120 million in the enterprise data segment in one quarter, which is pretty astounding. Can you walk through the drivers of that upside and growth? And I think importantly, you know, you had the inventory dynamics play out a couple years Can you speak to, you know, your confidence that there's no inventory building here and, you know, the overall visibility in that segment? Thank you.

Thanks for remembering the last couple of years. We have all these shortages in the industry we pull off, okay? Thanks for remembering that. We will continue to – there's no reason not to believe we will not pull off, although it's very difficult, okay? but we're going to make it happen.

Yeah, and I'll just add, if you look at kind of the underlying growth drivers for that particular end market, they really haven't changed from what we've talked about. You know, we've talked about ramping existing customers, ramping new customers, seeing the module content increase per Rix question previously, seeing platform refreshes that drive content, and then, of course, CPU. And we saw all that be very, very strong in Q2. And I think since, you know, you're kind of talking about the sustainability of that, there's probably a couple of different ways additional Michael said. At least our channel inventory is one indicator, and that remains very low. So we believe that's continuing to sell through over time. And I think right now, based on what we can see, you know, we're willing to raise the floor for that particular end market from 85% for the year to 130% for the year.

Yeah, I want to add in this enterprise data centers and then it's relatively new and in a we start to see these significant business about six about two three years ago three years ago starting and we don't have any concentrated customers, and pretty much we engage from a large to small, and that's where you see the revenue happen now, and it will continue that way in the next

Thank you both for all the color. I will, you know, take the hint and not ask about AI servers again. You know, that said, I guess...

Thank you very much.

Thank you. I know your policies, Michael. Great to see the initial orders for the DDR5 high-speed interface controller. You mentioned that could be SAM expansive. Can you maybe help us with how much? And it does seem like quite a new capability for monolithic. Are there other applications that you could use this technology for beyond memory controllers as well? Thank you.

Yes, this is new to us. This is a high-speed, high-valiant. high speeds into the gigahertz kind of things. And again, in a very, very precision, and pretty much the analog circuitry. And we can expand the technology to other communications and now we establish a know-how.

So that's a very, these are a true fundamental know-how and again and other business we haven't we want to get this one to launch it first and then we will migrate to to other applications yeah in terms of the second part of your question which was how expansive it could be I'd still say we're very much early innings we want to prove ourselves in this particular market so I think it's true for us to call any kind of revenue ramp on our side we're just signaling that we continue to you know run our playbook can look for new sockets out there that can expand overall sam over time but uh in the history when we're making something it won't take into our revenue thank you both and congratulations again good thank you our next question in queue coming from the line of tory sandbrake with Yes, thank you, and let me echo the congratulations for another record quarter. How should we think about the segments for Q3? I mean, it sounds like all markets are growing right now, but just wondering on a relative basis, you know, if you give us some color on each segment into Q3.

Well, I don't know. The all markets, maybe Tony can point out some of the not-so-good ones. Okay, I think the consumer one, we're kind of still lagging, okay, because of all the efforts that we focus on it, and the consumer market, it doesn't mean we give it up, okay? And we will continue a very diversified way of growing our business. And as I talk about it in the past, NPS has transitioned from a chip company, a semiconductor company, to be a semiconductor-based solution provider. We sell solutions. and uh um so other other segments and okay and the automotive can continue to grow and okay but other ones i have a communication side will continue to grow and okay and uh um industrials kind of a lagging a little bit and i came in that um but doesn't mean we we're with the focus now i now just add a little bit i think the story is going to feel pretty similar.

You're certainly being led by the data-centric businesses with enterprise data and comms, of course, leading the pack. I think industrials could grow a little bit with the market, but again, we primarily said that's a design-win type year for us this year where we continue to pile up additional sockets that will turn into revenue in the future. I think the areas that we're cautious on are the ones Michael had pointed out, and then we've said this last quarter as well, consumer being one, and then I think the notebook side of storage and compute will continue to remain cautious on that one as you go into the second half yeah that's great caller as my follow-up you mentioned you're now sampling the 800 volt um solution when should we expect to see some revenues from from monolithic power there and uh are these products based on silicon gan and silicon carbide or is it one or the other thanks we are uh we have a we um we have a um well in the past to that tory you know and i'll openly say i don't believe gangs and okay now i

think it's approved i'm wrong but the uh it's up to a point where we can't ignore again and uh we we think last year we developed our own game and we'll have a working device And in terms of a 800 volt solution is that now we totally rely on NPS, its own silicon carbide device. And revenue wise, probably you will know, you will know in the game, or the market will know in the game, where is the data center transition happened. When that happens, and we will have a revenue. In terms of the wind, we know as much as you know.

Great. Thank you very much. Congrats again.

Thank you. Our next question coming from the lineup, Williamson with Truth Security, C. Alanis Nelson.

Great. Thanks for taking my question. I want to add my congrats to the fantastic results and outlook. I'm wondering if you could talk about whether pricing meaningfully influenced the sequential growth or the outlook in Q3.

Yeah, I know what you mean, whether we increase the price or not. And NPS never gouge price when the supply chain is tight. and we want to build a consistent model or we execute consistently within our models and when the supply chain is tight and okay and we raise the price how about the way over supply the way we reduce the price we don't and we're operating a consistent weight and our customers appreciate that so in terms of uh whether it's due to the price increase

definitely not it's all products yeah the only thing i would add to that at all is for us on pricing the it's very consistent to michael's point we have raised some prices but it's primarily been a kind of one of three areas in general right where we've seen input costs go up to make sure that we don't get diluted on the margin line uh where people are asking for expedites, because obviously that can influence our own supply chain. And then finally, where people might be asking for specific supply chains outside of China, which can be naturally more expensive. So we're maintaining a very consistent approach to what you've heard previously as we look at our pricing.

That's really helpful.

Michael, I want to shift for a second to some things that I think are closer to your interest, some of the smaller but emerging growth opportunities like robotics, humanoid robotics, and home automation or building automation. Can you talk about your traction in those two emerging markets?

Thank you very much. I'm speaking. A million square feet building is installing our building controls. and okay but i have to tell you something like well i was still lagging of assault of the software and okay the hardware is all done and uh with some minor revisions and i came in that but but the uh software is the is the is the key the ease of use and how we implement it and uh by the end of this year we should be able to complete complete everything and uh there's a uh multiple of our customer um our um it's not our customers in that case the potential uh customers they're waiting for for us to to install in the in their building and i'm looking at that We're not in a market segment, but we are looking at this opportunity, and to my surprise, it's about $40 to $50 billion. And NPS has all the key products and the technology. The software is what we will build. And that's, again, you're exactly talking about my, the topics that I'm working on. The other one is the robotics. The robotics, okay, there's a lot of, especially a lot of Chinese companies shows a lot of entertainment. And we will see it. okay we have all our designing solutions okay they all happen in the u.s side and also china side okay and uh they're all using nps solutions and uh now the next next question is okay how we're gonna where the robot is gonna used okay and uh um from our own factory and that these not humanoid robot we use our own product to uh to improve the especially the modules production not the production the testing and uh you know also the reliability test and we use our own um motion controls and the robotics again and it's it's the same as the equipment to robots and to make all these things happen. And our customers is actually our supply to our own automations. They will use those solutions everywhere else.

Thank you.

Thank you. Our next question in the queue coming from the line of Quinn Bolton with Needham & Company. Yolan is now open.

Hey, guys. I'll offer my congratulations as well. Tony or Michael, just wanted to come back to the optical transceiver part of the business since I think that's the biggest part of comms. Can you just sort of discuss what you're seeing on the competitive landscape? Is, you know, competition mostly PMX? Is it mostly discrete DC to DC converters from folks like TI or analog devices? And then can you give us any sense what you think your share might be for power management within those optical transceivers? And then I've got a follow-up.

That's a very boring topic. Okay. That's why over the last few years we talked about power modules. I think that you realized those very early on. I mean, it's more than five years ago now. And we have these power modules and very high power density modules, and these are encapsulated modules. And since we have highest power density ICs, and again, we integrated, fully integrated into these modules, with the inductors and with all the capacitors is a total power solution, plugging power solutions in a very small form factor. And I said with a straight face, we're the highest power density company in the world now. And I don't know about optical market segment, as long as I know that when we provide the best power density, we were weighing all these sockets, and including optical modules.

As far as the share comment goes, obviously we won't talk about specific customers, but certainly I think if you look at the overall market, there's still room for us to grow, and I think just that of both the town growth and share, I think it can absolutely be a primary growth driver in the comms segment going forward. I don't think we can actually quote the exact percentage of share at this time.

Okay, but you certainly still see share gain opportunities in that market, it sounds like.

Yeah, I think in some customers, we absolutely would see additional opportunity to gain share in some of the sockets. But I think the net of this is that within the comp segment between TAM and share, there's still a very substantial growth opportunity ahead of us.

Great. And then I guess just coming back to the capacity support, you know, in the past, I think when you went from $2 billion to $4 billion, You talked about the incremental capacity largely coming from outside of China. As you've now built capacity up to and beyond $6 billion, can you give us some sense of what the geographic split of that capacity is? Is it fairly balanced between China and non-China? Does it lean one way or the other?

It's not settled down yet. Okay, we now can do, depending on our customers' requirements, At this time, wherever all we need, it goes, and wherever we can provide a product, we'll buy it. But we built a very balanced approach, and what is the percentage in the end?

It's difficult to call now. the only thing i'd add on that is you know it uh when you just quote a total number it sometimes gets lost in the detail but i think we've been increasingly focused not just on the foundry side of business but also the back end part of the business because as michael's alluded to modules and solutions will become increasingly important and so that's actually a more complicated back end process as well so as you look to bring out new partners and look to bring them on geographically balanced way that goes for both the front end and the back end understood thank you yeah especially yeah especially our module assembly it's it's more difficult it's a 3d effect in fact it's a

more complicated than the assemble a phone even and uh so it requires a lot of a lot of experiment experiment and then a lot of know-hows and to getting all these modules and so we now can expand expand to and anyway in the words that we'll find find these uh these equipments and these are capability to to make it happen thank you our next question coming from the line of Joe Cattroche with Wells Fargo.

Your line is now open.

Yeah, thanks for taking the questions. I was wondering if maybe you could just kind of give us an update on how you're thinking about automotive demand.

Through the second half of this year, you talked about 1,500 new design socket or socket year-to-date. Just how we should think about the rate of revenue from those new wins as well.

Yeah, I think the year is still playing out pretty much as expected. And just to, you know, repeat what we said in the past, we thought the first half would be flat with the second half ramping up. And I think we feel pretty comfortable with that second half overall RAM. I think where we land on a year-over-year basis, we're still thinking the end market can be in the mid-teens kind of year-over-year. The one thing about the RAM that gives us additional confidence is that it's very broadly based. It's not isolated to one or two customers for what Michael was talking about and sort of the diversification that we look for in all of our end markets right now. So we called out the 1500 specifically to show that that's not just very much focused on ADAS, which has been a historical strength for us, but we continue to see a broadening out in the portfolio for other sockets in the vehicle.

Yeah, we focus on these are like a zonal, the 48 volt systems, and also we'll address the the the battery side okay and uh um the lighter and uh so these are the emerging market and uh emerging uh requirements from uh from automotive i think in the next few years they all will be okay and uh installing the card you will see very popular in the on the market and i always see nps revenue growth thanks for that and then as a follow-up i think boss corey talked about you know plans to enter the the rcd market um and starting to sample with customers just curious any update in terms of how that's going we are we are uh sampling okay then we are still developing so not getting a lot of new new uh new product and uh um this is very new to us and uh um but we're confident it will be uh turning to a revenue although we have some revenue now okay yeah i just to keep it from a model basis you know we have not that's not going to be a needle mover in 2026 for us right in terms of revenue

yes thank you thank you our next question coming from the lineup Chris Kayser with Wolf Research Elon is now open yes thank you good evening I guess the first question is an update on where CPU server power stands right now I know that you guys have gained a lot of share over the years on that net market is heating up because of the Gentix CPU. So how impactful has that been to the ED segment, and where do you see that going as you go into the end of the year into next year? Yeah, thanks, Chris. Let me start, and then Michael and Rob can jump in as well. I think one of the things is we've been talking about it for, gosh, close to a year that CPU has been one of the growth drivers for us in enterprise data. So it's something that has been and I think will continue to be part of the overall growth story. To the extent that agentic AI drives further CPU growth, that will continue to be a tailwind for us. As you know, it's difficult for us to separate sometimes a pure AI sale from a CPU sale. So it's a little difficult for us to parse them specifically. But if we start to see some of the forecasts come to play that you've seen from some others in the industry, we think that could be, you know, an additional growth factor for us even going forward. From a share perspective, again, I think we'll probably pass on specific share. I think we're very broadly indexed across both x86 and ARM players. And so no matter who sort of wins in that race, we think we can participate.

I think I answered your question one time in terms of, okay, what is the percentage at the time? in the cpu side we want to get in the cpu market market segment i think though i was asked that what the uh uh share market shares um we want to be okay i i mentioned it in only this class so that if it's lower than a 30 percent i call a failure okay i think that we're comfortably we're past that. And that's where the good position we are in now, and we'll continue that.

Thank you for that. As a follow-up, maybe a bit of a longer-term question. And you know, maybe as we look out, you know, say over the next, you know, two years, two-plus years, do you still expect that—I mean, enterprise data has been the fastest growing part of your business because it's been the fastest end market do you expect that to continue to be the case and you know i know michael you like to run a diversified business uh but you know that that end market is just growing so quickly so i guess maybe the question is you know it is is the growth in that end market enterprise data make it more difficult to diversify the business.

Good questions. We never focus on any market segments. And we provide picks and shovels and blue jeans. And as long as we're making these the best of it, we will win those segments and so we are not really a gold diggers okay out there enough to find out and okay the empty mountains and okay but we don't do that kind of things and we just provide the basic the best elements okay for other people to to succeed it and one times automotive was big okay once and other times like a consumer was big okay and uh um we let our customers really let the market they make okay um to to to decide that as long as we we focus on the fundamental development i think that we will win the very long terms and a clear example was a couple years ago tonight like the AIs and go sideways and enterprise data go went sideways, even drop it slightly. And that year, all the other businesses grow tremendous, including automotives, and that's That's exactly what we want to see, and we want to provide to our investors a very consistent way of a grow NPS.

And even in the last Q2, right outside of enterprise data, the rest of the business is double-digit growth. So I understand your comment on what TAM might be growing faster, but you can see you're still seeing pretty substantial growth outside of ED. Thank you.

Thank you. Our next question coming from the line-up, Kelsey with Citi, Yolanda is now open.

Hi, good evening. So, based on these strong and broad-based ordering patterns you guys have, may I know how much visibility do you have in the enterprise data and market? And I was wondering if you can provide any color as to how 2027's outlook could look like based on the design lens, visibility, expected product ramps, or elaborate on any incremental revenue opportunities and ramps within that set lens?

Yeah, I'll start on that one. And I think in general, 2027 is a bit far away. We're still trying to land 2026. But I think to answer the first part of your question and the visibility, again, the longer term ordering patterns that we saw begin even late last year has really maintained. And our book-to-build this cycle was, again, well above one. So we do have, you know, more than a quarter-type visibility, like we were dealing with maybe midway through 2025. That doesn't mean we necessarily have visibility all the way out to the end of 2027, though. But I think the way I would address that is I think the underlying structural growth drivers haven't really changed, right? We have best of breed from the current density and modules. You see more and more of our end markets adopting those high-per-density modules for their applications, and we continue to win new sockets. So I think our ability to continue to grow into 27 is still structurally very sound, but I think it's too early to put a number on it.

Well, here is the true demand is determined by the market. And we don't want our customers to end up in a lot of wasteful inventories. at the same time we will watch us okay our own inventory we will end up a lot of a lot of inventory we cannot sell so we clearly balance that and what is the forecast we don't do them okay even even though we have a ncnr okay and uh we don't shovel into a into our our customer in the throat that there's a bad relationships and uh our relationship is a very long term and uh um so it cannot and uh although the order bookings are very good as uh as tony said it okay But we don't see the business in that way. And we do things swiftly according to our customer demand.

Got it. And also, with such strong revenue outlook, could you help us think about gross margins and OPEX trajectory? It seems that you guys are lending somewhat below your long-term OPEX guidance right now.

Well, we're in the models. We're still in the models, although in the low end. and okay my i i i said i was in i'll be happier and okay we're higher i wasn't i said i wasn't happy okay and uh look at this okay we focus on growth growing the revenue and growing the net profit eps that's the key reason the other one is that nobody want us to have a high growth margin the less of a lack of a growth okay nobody want want us to do that and uh uh our shareholders doesn't want us to do that certainly and okay and uh um so we focus on this okay will be gross margins as i said okay and uh we will figure it out and okay we will uh we will grow or higher, certainly, in the near future, will pay rate stays similar, or maybe slightly higher.

Hi, this is Rod. I'll add to what Michael was saying, and to what Tony was saying about the strong order levels, which continued into Q2, give us the ability to incrementally expand our guidance on gross margin again, just slightly, but it's there. So, as Michael said, we're at the low end of where we want to be, but we're feeling comfortable about where we're at for Q3. And Kelsey, the last part of your question was a little bit on OPEX. And I think in general, we haven't changed any of our thesis around how we're trying to invest for the future. I think what you see is when you get to higher levels of revenue, it's difficult to keep the levels of spending up to that model. And so you see some additional leverage as you pull through to operating margin. And I think you've seen pretty healthy expansion in operating margin over the past couple of Thank you.

Thank you. Our last questioner will come from the line of Space Energy with William Blair. Your line is now open.

Yeah, thanks for taking the questions, and congrats on a great quarter here. It's great to see the momentum across the business. AI data center is clearly a strong tailwind for the enterprise data business, also in communications, a little bit even in storage and compute. I mean, if I start to add up all these segments, you're looking at it. data center exposure that's approaching roughly 50%. I mean, is that the right way to think about it across your different end markets?

I think you're picking the right components as you go in there, right?

Obviously, the optical module business, the switch business can be pulled to my data center, all of enterprise data. And then, remember, inside of storage, you really kind of have three big sub-buckets, DDR5, HTD, and SDD. HD and SDD, I think, over time, they're becoming increasingly enterprise-focused, whereas at one point, you know, but they might have been more consumer-based. So we haven't broken out storage compute versus notebook in there, but I think you're picking the right components as you look at those things that could ride some of the healthy demand pull through my data center right now.

Okay, great. And maybe just as a quick follow-up on the incremental supply capacity that you're bringing online, is any of that on newer node processes, like 40 nanometer, or is that mostly on existing 65 nanometer solutions?

I think it's mostly the existing, okay, and this thing we're talking about and sometimes and from now on, okay, we have the increase in the capacity. Again, Tony said, this is not only about the silicons and the wafers, okay, we're building a lot more, we're building systems and uh that that changes the complexities in the case of the by silicon only and okay man we have been in uh on this journey from since 2017 and all the procurement vendor qualification component qualification, it became mature. And now, we have to pull some more new tricks in the next year or so to increase all these capacities. Right, right. would you say it's the worst or the hardest to increase capacity over the last 10 years that you've seen it's it's different periods different times and okay and uh and the qualified vendors and again uh in the silicon side we have a lot of experience and again and uh you you move up on to a system how you assemble all these uh all these systems and uh how you qualify all these vendors. And how you're going to take the yield loss is in completely different models than we have to operate on it. And we have become, I would say that we became a lot more mature and there's a lot more room to go, a lot more improvement to go.

Got it. Great. Thank you so much.

Thank you. And I'm showing there are no further questions in the queue at this time. I I will now turn the call back over to Tony Bailo for any closing comments.

Thank you, Operator. Thank you all for joining us for the conference call today. I look forward to speaking with all of you for our next call for our third quarter 2026 results. Thank you again, and have a nice day.

This concludes the conference call. Thank you for your participation, and you may now disconnect.