Good day, everyone, and welcome to the Power Integrations Fourth Quarter Earnings Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the conference over to Joe Shiffler, Director of Investor Relations. Please go ahead, sir.

Thank you, Lisa. 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 for the December quarter exclude stock-based compensation expenses, amortization of acquisition-related and tangible assets, and the tax effects of these items. The reconciliation of non-GAAP measures to our GAAP results is included in our press release. Our discussion today, including the Q&A session, will include forward-looking statements denoted by words like will, would, believe, should, expect, outlook, plan, 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 most recent Form 10-K filed with the SEC on February 7 of last year. Finally, this call is the property of Power Integrations, and any recording or rebroadcast is expressly prohibited without the written consent of Power Integrations. Now I’ll turn the call over to Balu.

Thanks Joe, and good afternoon. Fourth quarter revenues were $125 million, consistent with our guidance and a decrease of 22% from the previous quarter, reflecting the downturn in the semiconductor industry. We anticipate a further decline in the March quarter as end demand continues to soften and distribution inventories remain high. For those unfamiliar with our history, we are typically one of the first semiconductor companies to experience a downturn because our products are utilized in power supplies that are often produced ahead of final products. This situation can lead to more significant cyclical fluctuations than our competitors since many of our customers supply to OEMs, adding another layer of inventory between us and the end market. These dynamics affect both ends of the cycle. While we tend to lag behind our peers at the beginning of a downturn, we often outperform on the recovery side. For instance, we underperformed in the analog industry in 2018 as we entered the downturn early, which was felt across the industry the following year. However, we went on to exceed analog performance by a significant margin not only in 2019 but in the following two years as well. Currently, we are in our third quarter of sequentially lower revenues, and channel inventories are decreasing after peaking in the September quarter. The pace of recovery will depend on the strength of end market demand, but we do expect revenues to reach their lowest point in the March quarter, followed by sequential growth in the June quarter. Focusing on the fourth quarter from an end market perspective, the appliance sector, which dominates the consumer category, has weakened significantly in recent months due to a soft housing market, inflation, and prior overconsumption of appliances during the pandemic. Sell-through for the consumer category in the fourth quarter was down about 40% year-over-year, affecting all subcategories, including major and small appliances and air conditioners. Despite these short-term challenges, we remain optimistic about the appliance market, where we have gained considerable market share over the past couple of years. Dollar content continues to rise due to increased adoption of features like Wi-Fi connectivity, the uptake of GaN products, and the ongoing shift to brushless DC motors, which we are addressing with our BridgeSwitch products. In the industrial sector, reported revenues fell by more than 25% sequentially, reflecting high channel inventories, although sell-through declined by only around 10%. While broad industrial applications are down significantly, we are seeing some counterbalancing strength in home and building automation and high power, particularly in renewable energy and energy exploration. In the communications sector, dominated by smartphone chargers, sell-through has stabilized and channel inventories are nearing normal levels, indicating that end customer inventories have improved significantly. Revenues for communications increased by double digits in Q4 compared to Q3. While we expect Q1 to be seasonally lower, we do anticipate sequential improvement in the June quarter. In light of all this, we are focused on long-term growth and profitability rather than short-term macroeconomic fluctuations. The fundamentals of our business are strong, and we continue to gain market share across a diverse range of end markets and geographical regions, including Japan and India, where our combined revenues rose by more than 30% last year. Most importantly, we are capitalizing on the opportunities we outlined during our recent Analyst Day, including our goal to double our serviceable addressable market over the next several years. We will achieve this by expanding our portfolio of GaN products to cater to a wider array of applications while increasing our presence in brushless DC motors and electric vehicles, each of which we expect to be a $1 billion opportunity by 2027. Our high power products are performing well in renewable energy, power grid, and industrial motor applications, and we have new gate driver products on the way that will enhance our long-term competitive position in high power. We also continue to promote energy efficiency, assisting customers in meeting stricter specifications like those recently enacted in China for air conditioners and in India for ceiling fans. Several of our largest design wins in Q4 were for air conditioning customers in China, while a major Indian customer has now become one of the largest users of our BridgeSwitch motor drive products. Overall, BridgeSwitch is now in production with more than a dozen customers, and we expect that figure to grow significantly after tripling the size of our design funnel in 2022. We also tripled our opportunity pipeline last year in the electric vehicle market, where our silicon carbide InnoSwitch products are particularly well-suited for power supplies in electric passenger cars and commercial vehicles. As electric vehicle architectures evolve, customers are increasingly leveraging the main battery voltage for subsystems that are still powered by standard 12-volt batteries. This trend is creating new sockets for InnoSwitch and other automotive qualified power conversion chips, which outperform discrete solutions in terms of reliability, efficiency, and footprint. We secured five new automotive designs in Q4 and currently have more than three dozen designs in production with about 15 end customers. Both of these numbers are expected to increase significantly with as many as 20 new programs scheduled to enter production this year, along with many more in the pipeline. Our high power business rebounded well in 2022 from the pandemic-induced slowdown of the previous two years, growing more than 20% and contributing to high-teens growth in our industrial category. We anticipate strong growth again in 2023, mainly driven by renewable energy and power grid projects. To summarize, the fundamentals of our business are robust, the opportunities ahead are more exciting than ever, and we are committed to long-term growth. We also continue to return cash to shareholders through a combination of strategic buybacks and dividends. Our Board has increased the quarterly dividend by 6%, starting with the March payout. Before I hand it over to Sandeep, I want to mention two very valuable additions to our Board of Directors, beginning with Nancy Gioia, who joined on January 1. Nancy has had a distinguished career in the automotive industry, spending 33 years at Ford Motor Company in various executive roles related to product development, manufacturing, strategy, and planning. She has substantial experience in the electric vehicle sector, having served as Ford's Director of Global Electrification, and she currently serves on the Board of Lucid Group, a leading electric vehicle manufacturer. Joining our Board on April 1 will be Ravi Vig, who was CEO of Allegro Microsystems until last year, wrapping up a 38-year career at Allegro and its parent company, Sanken North America. Besides leading their IPO several years ago, Ravi guided Allegro through the transition to the electric vehicle market after decades of supplying sensor and power chips for internal combustion vehicles. The inclusion of these highly experienced automotive executives, one from the industry and another from the semiconductor field, highlights our commitment to the electric vehicle market and brings valuable expertise to support our initiatives. Additionally, I want to emphasize that in December, we received Great Place to Work Certification after an anonymous survey where 82% of our employees indicated that Power Integrations is a great place to work, which is 25 points higher than the average U.S. company. I believe this recognition reflects our culture of innovation, the consistency and focus of our strategy, the positive impact of our products on the environment, and our commitment to valuing employees despite the challenges of semiconductor cycles and macroeconomic fluctuations. Now, I’ll turn it over to Sandeep for a review of the financials.

Thanks Balu and good afternoon. I will start by reiterating what I said on the last quarter call, which is that we are well-positioned to weather the current downturn, thanks to our balance sheet and our lean expense structure. While we are taking prudent steps to moderate spending and production levels, we will not deviate from the long-term focus that was an important theme of our recent Analyst Day. That includes looking beyond the downturn and continuing to invest in people and products as well as maintaining production capacity to be ready for an upturn in demand. While internal inventories are above our target, this is consistent with how we have managed through past downturns, an approach that has served us well throughout our history. Our products are largely fungible across customers and end markets and have minimal obsolescence risk, especially when kept in wafer form. We also continue to hire around the world, while working hard to develop and retain current employees. This includes normal salary increases despite the economic downturn and continuing to pay an above-average portion of the cost of benefits despite rapidly rising insurance rates. I will now discuss the Q4 numbers and the outlook before we begin the Q&A session. Revenues for the quarter were $125 million in the middle of our guidance range and down 22% from the prior quarter. The consumer category, which is dominated by appliances, was down more than 30% with weakness across all categories of appliances. While domestic demand in China continues to be soft, the slowdown in appliances has broadened geographically. The industrial category was down more than 25% sequentially, primarily reflecting elevated channel inventories. As Balu noted, sell-through was lower by only 10% sequentially in the industrial category. Computer revenues fell by high-teens percentage sequentially, reflecting ongoing softness in that end market. Revenues from the communications category, which is dominated by smartphone chargers, increased sequentially by a low-teens percentage on a low prior quarter low level. While smartphones demand continues to be weak, channel inventory has fallen to near normal levels, indicating that end customer inventories are healthier than they have been in some time. Overall, channel inventory stood at 13.5 weeks at quarter-end, slightly below the prior quarter, though the decrease was most significant in dollar terms, with sell-through exceeding sell-in by about $8 million. Revenue mix for the fourth quarter was 39% industrial, 26% consumer, 23% communication, and 12% computer. Collectively, the communication and computer markets increased by eight percentage points from the prior quarter, a less favorable mix than we anticipated, resulting in lower-than-expected gross margins. Specifically, non-GAAP gross margin was 54.7% compared to our guidance of 56% to 56.5%. Relative to the prior quarter, gross margin was down about three percentage points, driven primarily by mix and the impact of lower production volumes. Non-GAAP operating expenses for the quarter were $40.2 million, down slightly from the prior quarter and about $2 million below our guidance, primarily reflecting the timing of headcount additions and other spending. Non-GAAP operating margin for the quarter was 22.5% and non-GAAP earnings of $0.48 per diluted share. The non-GAAP effective tax rate for the quarter was 3.3%, reflecting a catch-up to bring our full year tax rate to 8.2%. Weighted average diluted share count for the quarter was 57.5 million, down about 100,000 from the prior quarter. We utilized $19 million for repurchases during the quarter, buying back 266,000 shares at an average price of just over $70. We had $81 million remaining on our authorization entering the March quarter. Cash flow from operations for the quarter was $24 million. We used $6 million during the quarter for CapEx and paid out over $10 million in dividends. As Balu noted, our Board has increased the quarterly dividend to $0.19 per share, an increase of 6%. For all of 2022, we returned $353 million to stockholders through buybacks and dividends. That's about two-thirds of the cash and investments we had at the start of the year and about 200% of last year's free cash flow. Nevertheless, our balance sheet remains extremely strong with $354 million in cash and investments at year-end. Inventories on the balance sheet rose to 215 days at quarter-end. As noted earlier, the nature of our product allows us to build wafer inventory during downturns to ensure continued access to foundry capacity and to be ready in the event of a sudden recovery in demand. I expect inventory days to peak in the March quarter and then to taper down gradually through the remainder of the year. Turning to the outlook. We expect revenues for the March quarter to be $105 million, plus or minus $5 million. We expect sell-through to once again be meaningfully higher than reported revenues as channel inventories continue to come down. I expect non-GAAP gross margin for Q1 to be approximately 53.5% with a sequential decrease driven again by lower back-end manufacturing volumes and a less favorable end market mix. Gross margin should rebound after the March quarter as volume and mix-related headwinds abate, and we realize the benefit of the weaker yen that prevailed in the second half of 2022. For the full year, non-GAAP gross margin should be around the high end of our target range of 50% to 55%. Non-GAAP operating expenses for the first quarter should be between $42 million and $42.5 million, up from the fourth quarter, reflecting our hiring plans as well as the resumption of FICA taxes and the comparative impact of the year-end shutdown in the prior quarter. I expect the non-GAAP effective tax rate for the March quarter and for the year to be between 8.5% and 9%. And now, operator, let's begin the Q&A.

Thank you. We'll take our first question from Ross Seymore with Deutsche Bank.

Hi, guys, thanks for asking the question. Just wanted to see, during the course of the fourth quarter and heading into the first quarter, you guys had thought a quarter ago that the March quarter might be flattish sequentially. Obviously, that didn't happen. Is it just that the demand weakened? It sounds like the channel inventory directionally headed like you expected, but just wanted to get some of the puts and takes that's causing the weakness in March?

The demand has definitely weakened more than we anticipated, particularly in the consumer sector, which is largely focused on appliances. We did not expect it to decline as much as it did, and this clearly shows not only a decrease in demand but also excess inventory in our distribution channels and at the original equipment manufacturers. They seemed just as surprised as we were regarding the rapid drop in demand.

And Ross, we started seeing this after the earnings call, sometime around the November timeframe and December, and they attended a couple of conferences. And there, we actually publicly indicated that we expected March to be the quarter where it would be lower than Q4 and that would be probably where we'll bottom out before we start moving upward again.

Thanks for the color on that. And I guess as my follow-up, you talked and this will kind of be a revenue and a gross margin question, but you talked about the mix headwinds in the quarter and the guide and then talked about those lessening than the kind of the shape of the upturn coming out the other side. What are the mix dynamics that you expect to normalize if you talk by segment within the March quarter? And the gross margin side of things, how do you expect the linearity of that to work for the year? As I know, Sandeep, you said it would be close to the high end of your 50% to 55% range as the year progresses?

Correct. Even in Q4, despite a weaker consumer, we managed to offset that with better performance in cellphones and computers. This is why we reported around 23% in communications for Q4. We anticipate communications will remain strong, although all categories are expected to decline in Q1. However, communication and computer segments will continue to be more stable, while the decline will be more pronounced in consumer and industrial areas. Consequently, we are providing guidance accordingly. Additionally, lower volumes are significantly impacting us. As the year unfolds, we will start to see some benefits from the yen, as the previous headwind will begin to diminish. Recall that the yen performed well in the latter half of 2022, but with inventory expected to flow in Q2 and Q3, and the dollar weakening, we are seeing a reversal in Q1 of 2024. Looking at the rest of the year, after Q1, I believe we will trend towards approximately 55% for the subsequent quarters. In the longer term, as I mentioned during Analyst Day, although we are shifting towards a higher mix, my gross margin is expected to stay at the upper end of our model mainly because I anticipated the yen's movement, which is now occurring.

Okay. Thank you.

We'll take our next question from Tore Svanberg with Stifel.

Thank you. Let me address the internal inventories, Sandeep. A figure of 215 is likely the highest I have observed from POWI. I believe I understand the reasons behind it. However, I would like to gain more insight into how much of this is cyclical. Essentially, you tend to build inventory during downturns due to shelf life. Additionally, I'm curious how much of this was influenced by taking advantage of the Japanese yen.

We were not specifically trying to align with the Japanese yen. Our focus is on planning and collaborating with our foundry partners. This is a partnership, and we must consider the economics from their perspective as well. In dollar terms, we are at around $135 million. Even as we look into the first quarter ahead, while the days may peak, the dollar value of this $135 million is unlikely to change more than $4 million to $5 million. I anticipate that as we move into the second half of the year, the days will start to decrease each quarter in the third and fourth quarters. However, even in the fourth quarter, it will still be above our model. Historically, as mentioned in 2018, when we were out of sync with the analog, we always see a downturn before rebounding strongly. If we expect the second half to be stronger—as we do—we are optimistic about demand on the consumer side, especially with appliances, which could be impacted by anniversarying in the second quarter. If we see a demand pull-in over the year, we believe it will be beneficial for 2024. This is why we feel confident about maintaining our inventory levels, as it has historically supported us during rebounds.

Fair enough. And moving on to the sell-in versus sell-through. And obviously, I understand what you're trying to do there, get the channel inventory down and so on and so forth, that's fair. But when I look at the Q1 guidance, that's a $105 million, that's sort of back to early 2020. So, I mean, is it fair to say that you are going to be under shipping pretty materially to end demand in Q1?

I anticipate that last year, from Q1 to Q3, we saw a disconnect between sell-in and sell-through of around $32 million. In Q4, sell-through exceeded sell-in by approximately $8 million. For Q1, I expect sell-through to be at least $15 million higher than sell-in, with adjustments expected by Q2. This is the reasoning behind our outlook for the second half of the year.

That's very helpful. Just one last one for Balu. Balu, obviously, with the percentage since coming down with some of the other segments, automotive now, I think, has a real chance to shine, right? Because I mean, obviously, you're seeing growth there. Is it possible that automotive could become 10% of your revenues either this year or next year? Is that a possibility?

The market is developing at a much slower pace. However, I believe it will grow nicely, increasing from low single-digit millions last year to mid-single-digit millions and continuing to expand. The significant growth is anticipated from 2026 onwards, as some designs require a longer development time. I am confident that we will also make a strong recovery in other areas, particularly in consumer and industrial sectors. In the consumer segment, I want to highlight that we are significantly gaining market share. This isn't immediately evident due to channel inventories and overall market weakness. Eventually, consumers will start purchasing appliances again. While there was overbuying during the pandemic, the current global economic weakness has affected many, not just us. However, it appears that GDP growth in China and globally may surpass expectations, as indicated by the IMF. We remain hopeful that this recovery will occur. More importantly, we are gaining share against many competitors in the appliance market. Additionally, we are making significant inroads with our BLDC motor chips, particularly the BridgeSwitch, which should serve as a strong platform for our return to the appliance sector. In the industrial domain, high power is performing well, and home and building automation is excelling. I am also very positive about our potential in the notebook market, where we still have considerable share to capture. Though there is a current lull in cellphone demand, primarily due to some Chinese companies shifting to lower-end chargers to cut costs, these companies are also developing high power chargers. This suggests that the downturn is temporary, and they will return to higher power and performance products. I see a lot of growth opportunities ahead. I believe the current situation does not accurately reflect our long-term potential. Ultimately, our share gains will lead to growth.

Great perspective. Thank you.

You're welcome.

We'll take our next question from David Williams with The Benchmark Company.

Hey, good afternoon. Thanks for taking the question. I guess, just kind of from a high level, Balu, can you talk about where you are seeing areas of strength today, maybe areas that are a little stronger than you would have expected? What are the, I guess, the biggest bright spots that you see in the market currently?

Currently, we are experiencing significant growth in home and building automation and high power products, including renewables like solar and wind, as well as power grid products such as high voltage DC transmission and electric locomotives. We are also witnessing strong activity in electric vehicles and appliances, though these won’t generate revenue immediately due to longer design cycles, particularly for EVs. However, we've already captured considerable market share in the consumer segment. Once inventory levels decrease, we expect to see a rebound. Additionally, it has been nearly a year since the pandemic surged demand for appliances, which should return to more typical consumption levels, and we look forward to that development. While I can’t predict the exact timing, I feel optimistic about these two markets. In computers, we are making progress in notebooks and monitors, which should contribute to our growth. This segment has accounted for about 12% of our revenue and has consistently grown from 5% over the past three years. I believe this will remain a growth area. As for cell phones, we will maintain our position. Although the overall market has softened as consumers are not replacing phones as frequently, there is a shift toward higher-end devices that will benefit us in terms of average selling price.

Thank you for the insights. Could you share your thoughts on the current channel inventories and what levels they aim to reduce them to? Do you believe they’re trying to return to pre-pandemic normal levels, or do you think they might aim for a higher inventory level this time? I’m looking to understand how much inventory will need to be completely cleared out.

Yes. We usually maintain a channel inventory of about eight weeks. In the Communications segment, the channel inventory appears to be stabilizing at that level, indicating that the OEMs have reduced their inventory. As we've mentioned before, this will likely be the first market to recover. Other areas have higher inventory levels, which we expect will normalize in Q1 and part of Q2. This gives us confidence about future performance. In Q4, particularly in the appliance and air conditioning sectors, we experienced a notable decline, which suggests that inventory is being cleared. We anticipate improvements in Q2 as this inventory reduction continues. Historically, when we emerge from downturns, we often do so stronger, and if the second half of the year performs as we expect, it will position us well for 2024. This scenario mirrors what we experienced after the downturn in 2018.

Thanks for the color guys. Certainly appreciate it.

Thanks, David.

We'll take our next question from Christopher Rolland with Susquehanna.

Thank you for the question. Should we expect all segments to decrease next quarter, or could you provide some insights on how to rank them? It seems like the consumer segment might be the main issue. That would be very helpful. Additionally, do you anticipate all segments to decline year-over-year in 2023, or is there a possibility that one of them could see growth?

I think in Q1, basically, industrial and consumer will be down more than the other two. But as a result, the percentage of revenue what we are guiding to, you should see that communication and computer as a percentage of revenue will hold, which is why the mix we talked about. As far as for the year, I would say you should see more downturn on a full basis in the consumer and industrial, and that's why I talked about a little bit of a mix headwind compared to the communication and computer segment.

Yeah. That's simply because...

We corrected at first.

Yeah. Exactly. And I would say at this point, with revenue expected to be down, I think, 40% plus into March. This has all hit you guys a little harder than others, at least thus far. So, I kind of wanted to put all the pieces together there. I know for communications, for example, you guys typically see it first. But what else is going on here in your opinion? Was there a greater than normal inventory build because you guys had availability of parts when others didn't? So, people built. Or is it just the cyclicality of the end markets? If you were kind of to do a postmortem on why the drop was so much more significant than others? What are all the kind of main culprits you could point to?

That's a very good question. There are several reasons for our more pronounced challenges. First, we typically notice downturns before others do. Additionally, we have a layer of inventory that we mainly sell to power supply manufacturers, who then supply OEMs, leading to larger fluctuations for us. Furthermore, at the beginning of the year, two-thirds of our revenue came from smartphones and appliances, which have been impacted more severely compared to automotive, an area where we currently have minimal exposure, though we hope to see changes there in the future. This has particularly hurt us compared to our analog peers, many of whom are well-positioned in the automotive market. Moreover, we did not implement non-cancelable, non-returnable orders or long-term agreements that some of our peers have adopted. Because we focus on value pricing, we've experienced less price increase than many of our larger competitors. A significant portion of our growth in 2022 was simply due to changes in average selling price, which is important to consider in comparison. On a positive note, this positions us to recover more quickly, and I believe we'll outperform the market when that happens. Reflecting back to 2018, the latter half of that year saw a downturn for us that we recognized ahead of others. We experienced a 4% decline while the industry overall grew by 11%, yet in the following three years, we significantly outperformed the industry as we emerged from the downturn faster and gained market share. Each downturn is an opportunity for us to increase our share since we continually invest for the future, even during tough times. That's why I try to focus less on the macro environment, which is beyond my control, and more on our share gains. These factors contribute to the more substantial changes we've experienced compared to our peers, and I hope this clarifies things.

That was very helpful. Thank you.

We'll take our next question from Matt Ramsay with Cowen and Company.

Yeah. Hi, guys. This is actually Ethan Potasnick on for Matt. I know there have been a bunch of questions regarding inventory in the channel. But I kind of want to ask a similar question a little bit. I was wondering if you guys had any sense of what you are under shipping and when you anticipate selling to true demand. And any expectations of what the shape of the recovery might look like as kind of see just rolling correction across segments kind of flows through?

Okay. We have definitely understood the cellphone market until now, but it looks like the inventories are normalizing there getting close to normal, at least at the deep sea level, it's already normalized, we think that's because our OEMs also have brought down the inventory. But in consumer, the demand slowdown came so quickly our customers were surprised how quickly that happens. So, they are stuck with inventory at various levels at our distributors, at OEMs, and then, of course, at the OEM and also at the retail level. And that's what is painful at this point because the consumer is down so much. But it will come back. The question is when will those inventories normalize. Our best bet is sometime in Q2, it will normalize, so it will benefit us in the second half. We do expect Q2 to be better than Q1, but the second half, and of course, 2024 is where we will see the significant growth. In terms of industrial, the broad-based industrial, clearly, that is over inventory and there is a slowdown across the board. It's not as bad as consumer, but there is over inventory. And because of that, you can see industrial is down, and there is inventory buildup at the distribution. The good news is that sell-through was only down 10% versus our sell-in. So that is also improving as we speak. So that's why we've been comfortable saying Q1 is where the bottom is likely to be.

Okay. Got it. Got it. And then as my follow-up, how should we think about the GaN outlook for 2023? What types of penetration rates are you guys seeing, I guess, pre and post this inventory correction?

Yeah. We think we'll grow GaN very nicely in 2023. In 2022, we didn't grow as much as we thought primarily because most of our designs, GaN designs were in smartphone chargers. And obviously, that market didn't do very well. In spite of that, we grew some, we grew marginally. But in 2023, the design wins have expanded to many other areas, including consumer and industrial and, of course, computer. As a result, we expect to see significant growth in GaN going forward.

Okay. Thank you.

You're welcome.

Our next question comes from Gus Richard with Northland.

Thank you for your question. Looking back at 2021, you experienced very strong growth. Can you break down how much of that growth was from units sold versus average selling price? Generally, you see a 5% decline in average selling price annually, and I am curious what that looks like today.

In 2021, we did not implement significant price increases unlike many of our competitors. While pricing our products based on value has its advantages, our benefits were modest compared to our peers. I can’t provide exact figures since our pricing strategy is dependent on the specific products and components we replace, but it is significantly less than what most of our competitors experienced with their substantial price increases.

And how is pricing today? Or are you reverting back to historic norms and normal price decreases? Or how is that going, given the weakness in demand?

Well, I think the pricing will normalize this year. You have to understand that for two years, we didn't have to give any annual price reduction. So, in some ways, that helped us quite a bit. But going forward, I think things will normalize because supply situation is getting better.

But one thing does the input costs still have very significant upward pressure, especially in the front end. So, I think that's the tension that is going on right now, and we do value pricing. So, depending on how we see the value pricing, we will stay competitive. But I think the input costs are still having pricing pressure.

That will prevent the market, not just us, from lowering prices significantly because input costs continue to rise.

Got it. And then just last one for me. When you think about 2022, in consumer, how much of that business is appliances?

I mean, appliances are 85% to 90% of consumer. Yeah.

Okay. Okay. Very good.

That is broken down major, comfort and small, three buckets.

Right. Okay. Thank you so much.

Thanks Gus.

And we have a follow-up question from Tore Svanberg with Stifel.

Yes. Sandeep, I was hoping you could just help me a little bit with the math here. So, I'm just looking at revenue growth since 2019. And by adjusting for that $65 million that you called out, kind of excess channel inventory, I mean, it looks like the revenue will be growing about 12% a year. It's kind of interesting. If you do adjust for that $65 million, it's almost exactly 12 a year. So, I mean, is that kind of how we should just look at the business going forward? I know that your long-term target is obviously within that range. But it's so interesting. Yeah. Go ahead.

That's an excellent point. Low double-digit growth is indeed the goal. However, we tend to see downturns occur around the middle of the year, which negatively impacts growth over a two-year period. Typically, we experience a couple of years with poor growth followed by better performance that exceeds our expectations. Over the long term, we still manage to approach that double-digit growth rate.

Great. Thank you.

And that concludes the question-and-answer session. I would like to turn the call back over to Joe Shiffler for any additional or closing remarks.

All right. We'll leave it there. Thanks everyone for listening. There will be a replay of this call available on our investor website, investors.power.com. Thanks again, and good afternoon.

And that concludes today's presentation. Thank you for your participation. You may now disconnect.