Power Integrations Inc Q2 FY2025 Earnings Call

Good afternoon, ladies and gentlemen. Welcome to the Power Integrations, Inc. Q2 Earnings Call. I would now like to turn the conference over to Joe Shiffler, Director of Investor Relations. Please go ahead.

Thanks, Aubrey. Good afternoon, everyone. Thanks for joining us. With me on the call today are Executive Chairman, Balu Balakrishnan; our CFO, Sandeep Nayyar; and for the first time, Jen Lloyd, who joined Power Integrations last month as President and CEO. After prepared remarks from Balu, Jen and Sandeep, we'll take your questions. But first, 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, other operating expenses stemming from an employment litigation matter and the tax effects of these items. A reconciliation of non-GAAP measures to our GAAP results is included in today's press release. Our discussion today, including the Q&A session, will include forward-looking statements denoted by words like will, would, could, should, expect, outlook, forecast, estimate, anticipate 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 are discussed in today's press release and in our most recent Form 10-K filed with the SEC on February 7, 2025. 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 it over to Balu.

Thanks, Joe, and good afternoon. My role on today's call is simply to introduce Jen Lloyd, who took over as CEO just a couple of weeks ago. Jen came to us after a distinguished run of 28 years at Analog Devices, where she ran multiple businesses with $1 billion plus in revenues. Most recently, she ran Analog's multi-market power business, responsible for strategy, products, P&L and a large global team. She also previously served on our Board of Directors, stepping down in 2022 when she was assigned to run the power business at ADI. When the time came to search for a new CEO, Jen's name came to mind immediately. While we considered a number of excellent candidates, Jen was the clear choice, and I'm delighted that she has joined us. She has an outstanding track record of delivering innovative products to the market, attracting and motivating talented engineers and driving profitable growth. She obviously knows the power semiconductor space. And from her time on our Board, she is already well acquainted with our business model and our culture. I have agreed to serve as Executive Chairman of the Board until February 2026, working alongside Jen to ensure a seamless transition. After this transition period, I will assume a nonexecutive Board seat and take on a consulting role assisting Jen and the Board in any way they ask me to. In particular, I expect to focus on innovation initiatives as well as IP matters, including any patent litigation that might arise, reflecting my history with the company and my patent holdings. But while I plan to remain involved with the company for as long as I'm needed, this will be my final earnings call. So before I turn the call over to Jen, I would like to thank all of you in the investment community who have followed and supported Power Integrations over the years. Thank you to our stockholders for putting your trust in us. As a fellow owner, it was of utmost importance to me to leave our company in good hands, and I'm confident we have achieved that. To the analysts who have covered our stock for so many years and some of you since our IPO all the way back in 1997, I have learned a great deal from you about our industry and your industry too, and I will certainly miss working with all of you. With that, I'll turn it over to Jen.

Good afternoon, everyone, and thank you, Balu. It's really an honor to take the reins from you as CEO of Power Integrations. Since my time on the Board, I've admired the franchise you've built in high voltage as well as the foundational technologies that will drive our future growth. I'll have more to say in the months ahead about my plans to deliver that growth and get us on a path toward $1 billion in revenue. In the brief time we have today, I'll share a few thoughts on the opportunities I see ahead of us and discuss a few key developments since the last earnings call. The core of our business, almost 90% of sales is power conversion ICs for appliances, consumer electronics and a wide array of industrial applications. We have a market-leading portfolio of products for these markets with more in the pipeline. For example, our flagship InnoSwitch platform represents the state-of-the-art in power supply architecture, building isolation into the package and eliminating optical feedback to simplify the system and enhance reliability. We are leveraging the technologies at the heart of InnoSwitch into our automotive efforts and into new disruptive products like our multi-output InnoMux ICs. We're also refreshing legacy product families to support their annuity-like revenue streams. Our new fifth generation TinySwitch extends the simplicity of that architecture to 175 watts of output, more than 6x the previous generation and provides a significant improvement in efficiency and standby consumption. In the coming months, we'll introduce a GaN version of our top switch products, giving long-time top switch customers a way to tap into the efficiency of GaN at extended power levels. Notwithstanding the near-term uncertainty, our core business is back on a growth trajectory after the long post-pandemic down cycle. And after our exit from China cell phones last year, the mix of our business is stickier with a higher margin profile. In India, we have a major role in the ongoing 5G fixed wireless rollout as well as the planned installation of 250 million smart meters. We're also growing our metering business in other geographies with three new design wins in Japan in Q2 and one in Europe using a GaN-based InnoSwitch. Overall, metering revenues are on track to grow 20%-plus this year, and our higher voltage GaN products offer a path to ASP expansion in that market as customers upgrade existing silicon designs. GaN is already driving growth in notebooks, TVs, gaming and many more applications. In fact, revenues from GaN products are up more than 50% for the first half of the year. While our core consumer appliance business faces short-term headwinds due to tariffs and stagnant housing markets, we remain bullish on the long-term opportunity. Rising wealth in emerging markets is making appliances affordable for more people every day and tighter efficiency standards are driving adoption of GaN and brushless DC motors, all of which should benefit us as short-term headwinds subside. While I'm pleased that our core business is growing again, what's really exciting about the Power Integrations story is the opportunity to level up our business into higher power, higher-value systems. Advanced high-voltage semiconductors are essential in EVs, AI data centers, electric rail, and in modern power grids centered on renewable energy, battery storage, and long-distance DC transmission. It's early days for me here, but it's already clear to me that we have the technology and the system-level know-how to win in these markets. On the high end of the power scale, we have the world's premier gate driver technology for IGBT and silicon carbide modules. Since entering the gate driver business more than a decade ago, we have invested in products and design support capabilities to prepare for the expanding opportunity in clean energy, electrification, and modern power infrastructure. These investments are paying off with customers, driving more than 40% growth in high-power revenues in the first half of 2025. High-power design wins in Q2 included a traction inverter for a major U.S. heavy equipment manufacturer, solar and battery storage inverters for a Spanish OEM, and silicon carbide drivers for an electric bus at a European EV OEM. The other critical asset enabling the pivot to higher power is our proprietary GaN technology. Power Integrations was first to market with high-voltage GaN in 2019 and has executed an aggressive roadmap on multiple dimensions: cost, voltage, and power. While GaN is already driving growth in our core power supply business, it is also the key to our SAM expansion plans and ultimately, our path to $1 billion in revenue. Two important developments have occurred in the GaN space since the Q1 earnings call. First is the decision by TSMC to exit the GaN foundry business in 2027. While this creates challenges for competitors relying on TSMC, the real significance from our perspective is that it validates a core tenet of our strategy, that for power transistors, process technology and device design are interdependent and controlling both to optimize system performance is the best path to success, whether in silicon, silicon carbide, or GaN. So it's no surprise that IDMs are moving into the GaN space, and we are well positioned to compete with our fabless IDM model and well over a decade of GaN development experience and know-how. Owning the process and the device technologies used in our products allows us to differentiate at the transistor level on factors such as cost and voltage rating. Control over manufacturing parameters, yields, performance, and quality gives us maximum flexibility to develop system-level products for the markets and applications we target. Our system-level expertise allows us to extract the maximum performance from our proprietary GaN technology and provide system-level reliability and ruggedness. This relates to the other recent development in GaN, which is NVIDIA's announcement that it will support an 800-volt DC architecture in the next-generation AI data centers. The new architecture will save space and improve efficiency by reducing the need for rack-level AC to DC converters and drastically reduce copper usage by enabling lower current. Power density is the name of the game here, and the 800 to 54-volt conversion at the server board will likely require GaN to achieve the kind of densities needed in next-generation data centers. Our 1250-volt GaN can support an 800-volt rail in a conventional architecture, whereas lower voltage technologies like 650-volt GaN will require stacking of multiple devices, compromising power density and adding complexity. And while silicon carbide is capable of handling 800 volts, GaN's higher switching speed enables a smaller transformer and higher efficiency, again, resulting in higher power density. We are the only company shipping 1250-volt GaN today, and we designed our technology with the higher voltage applications in mind. Data center architectures will continue to evolve beyond the 800 volts, and we're ahead of the curve with 1700-volt technology already in the market and higher voltages still to come. We've taken the right technology steps to be well positioned to offer system-level solutions, and my focus will be to make sure that our product development efforts are aligned with the markets we're going after. At ADI, I oversaw the introduction of many, many products, including system-level ICs and modules. So I know what it takes to define and develop complex products that anticipate and meet customers' needs and are delivered on time. Markets like data centers and automotive have different requirements than the broad-based low-power markets that comprise our core business, and I will be adapting our teams and our processes to those needs. Before I turn it over to Sandeep, I'll comment on the near-term outlook. Orders have slowed in recent weeks, likely reflecting customer caution around constantly changing tariff headlines. Our third quarter revenue outlook of $118 million, plus or minus $5 million reflects continued strength in the industrial category and in GaN products, tempered by softness in appliances, which make up most of our consumer category. Steel tariffs and tariffs on finished goods tend to be meaningful in this market given the high dollar value and steel content of most appliances. A large U.S. appliance customer reported recently that Asian OEMs have continued to load inventory into the U.S. to take advantage of delays in tariff implementation, which is likely to affect demand from our Asian customers in the second half. However, channel inventory of our products remains healthy, which should enable our business to reaccelerate as excess finished goods inventory clears. Meanwhile, we continue to see growth in our industrial business led by high power and metering as well as new designs ramping in automotive as that business builds towards a material revenue contribution in 2026.

Thank you, Jen, and good afternoon. Our second quarter results met expectations, with revenues increasing by 9% year-over-year to $116 million and a non-GAAP EPS of $0.35. We generated $29 million in cash from operations and repurchased over 1% of our outstanding shares during the quarter at an average price of around $46. In terms of revenue details, sales rose 10% sequentially, driven primarily by industrial, which grew nearly 30% from the previous quarter due to strength in metering, home and building automation, broad-based industrial applications, and high power, particularly in solar energy and high-voltage DC transmission. Communication revenues surged more than 20% sequentially, largely due to seasonal trends in cell phone sales. Similarly, seasonal trends in tablets led to a high single-digit increase in the computer category. As we mentioned in last quarter's call, consumer revenues decreased sequentially, down mid-single digits following an unusually strong first quarter that was boosted by the anticipation of tariffs. For the quarter, the revenue mix was 40% industrial, 37% consumer, 12% computer, and 11% communications. The non-GAAP gross margin for the second quarter stood at 55.8%, a slight decline of 10 basis points from the previous quarter, as a more favorable mix was countered by higher input costs affecting our inventory. Non-GAAP operating expenses were $46.7 million, an increase from the previous quarter mainly due to annual salary increases enacted early in the quarter, along with executive transition costs and litigation expenses. The non-GAAP effective tax rate was 4%, leading to non-GAAP earnings of $19.9 million or $0.35 per diluted share. The diluted share count was 56.4 million, down approximately 700,000 from the prior quarter due to repurchases. Our GAAP results included one unusual item this quarter, specifically a $9 million charge related to an employment litigation case in California. We are appealing the outcome and pursuing a post-trial motion aimed at reversing the damages award and potentially securing a new trial, with an appeal planned if necessary. Any cash impact would only be realized at the conclusion of this process. Inventories on the balance sheet decreased by 30 days to 296 days, while channel inventory fell by 0.3 weeks to 7.6 weeks, which remains within our normal range. Cash flow from operations was $29 million for the quarter, and Capital Expenditures amounted to $6 million. We returned $44 million to shareholders during the quarter, comprising $32.6 million in buybacks and $11.8 million in dividends. We repurchased just over 700,000 shares at an average price of about $46, as mentioned earlier. At the end of the quarter, $42 million remains on our repurchase authorization. Regarding our Q3 outlook, as Jen highlighted, our revenue expectations indicate limited near-term visibility, with customer caution surrounding tariffs affecting company-specific growth drivers. We anticipate revenues to be in the range of $118 million, plus or minus $5 million. I expect non-GAAP gross margin to fall between 55% and 55.5%, slightly lower than the previous quarter due to higher input costs and a modest reduction in benefits from the dollar-yen exchange rate. Non-GAAP operating expenses for Q3 should be approximately $47.5 million, modestly higher than Q2, driven mainly by legal costs and R&D activities. I expect the non-GAAP tax rate to be around 5%, with other income anticipated to resemble the levels seen in the second quarter.

Our first question comes from David Williams of The Benchmark Company.

First off, Jennifer, congratulations on your appointment as CEO. We're definitely looking forward to working with you, although it is unfortunate that we will miss Balu.

Thanks, David.

So I guess with that, it sounds like there's a lot of different dynamics going on in the market in terms of the tariffs and maybe some of the cautious pull-through and what we've seen through the first half of the year. I guess, how do you think about the guidance in terms of being derisked based on kind of all of these different undercurrents? And can you maybe talk a little bit about where your bookings are kind of exiting the quarter?

Yes, David, thank you. Our bookings at the start of the quarter were strong, and we anticipated a typical turnover of 20% to 30%. In fact, last quarter we experienced a 27% turnover, leading us to expect a better quarter than we had previously indicated. However, July experienced a significant dip in bookings, with figures around 20% lower than the average of the previous months. Observing this trend and considering feedback from others regarding the upcoming Q4, we noticed these developments earlier, at least a quarter in advance. This is why our guidance reflects these bookings and insights. Additionally, due to the tariffs, we are seeing effects in our appliance sector; for instance, major appliances increased nearly 15% in the first half, which is notably higher than our normal growth rate and suggests some preemptive actions occurred. When large U.S. companies mention that Chinese manufacturers have been stockpiling finished goods in the U.S. ahead of the tariffs, it suggests that we may face challenges in the latter half of the year. All these factors are why we have set our guidance at the current level.

Great color there. And then maybe just kind of thinking about the strategy going forward, there were a couple of things that you had mentioned in terms of your prior experience and how you feel like your strategy will be deployed here at Power Integrations. But just wondering, can you kind of talk through some of the higher-level things that you're thinking about? Obviously, we've always thought Power Integrations ran very efficiently and very well. But coming in, I think you might have a different view. So could you kind of give us maybe a level set of where you're headed in terms of thinking of the strategy?

Sure. Absolutely. I mean, again, I'll just repeat, Power Integrations has a great foundation, great technology here. High-voltage expertise, system expertise and so on. I think what I see as a gap or where we can improve is on the R&D efficiency and driving improvements there. And I think the end goal is really to invigorate the growth to achieve the model that we set out, the double-digit growth model. And so I think the applications that we're looking at, those are great applications that fit very well with the technology that we have, but we have to have the products out there to meet the needs of the customers in those application areas. So areas like data center, automotive and leveraging the capabilities in high voltage is what we want to do, but we got to make the engine efficient.

Our next question comes from Tore Svanberg of Stifel. Our next question comes from Ross Seymore of Deutsche Bank.

So first, Balu, congrats and sad to see you go as well, although it is fortunate that you will not be around for a little bit longer. And Jen, congrats on the new leadership role. So I guess my question, for the third quarter guide, you talked in the prior question a little bit about some of the dynamics you're seeing in aggregate. Could you talk a little bit about how you're seeing them by segment? I know you said industrial is still strong. Consumer has the appliance issues. But when you think about the puts and takes versus the flat to slightly up guidance, how do the segments work out?

I believe there won't be much change in the mix. The growth from $116 million to $118 million mainly reflects that industrial and consumer segments are expected to remain flat, with slight growth coming from the other two segments. In the consumer sector, despite the flat appearance, appliance sales are significantly down due to a successful design win in video games that is compensating for that decline. Essentially, our key areas—major appliances and comfort appliances—are experiencing a downturn. The reasons behind this include the strength of the first half and tariff impacts, but the crucial factor has been the notable slowdown in bookings that occurred in July, which makes us cautious moving forward.

Got it. And I guess for any of you, but maybe, Jen, the longer-term items that you talked about, the material revenue in automotive for next year, etc., I guess a two-part question. One, are you seeing any changes in the road maps for those or the desire and uptake of those products given the uncertainty that you have in the near term? And two, what does material mean in automotive?

Yes. Okay. So I'll just take the first question on the automotive roadmap and maybe the progress that we're making. I mean we're continuing to make really good progress with automotive with the roadmap that we have that we set out. We've got products in, I think, about 30 cars on the road now, mainly in China, but we also now have some models hitting the road soon in Europe, Japan, and the U.S. We're continuing to win designs. I think last quarter, you heard about our first GaN design win for automotive. And we had wins this quarter across a number of regions. We had a couple in China, but also one in India and a couple in the U.S. So in terms of the uptake, we're still on track for high single digits in millions this year, and we're expecting that to continue ramping next year and beyond.

Yes. And basically, Ross, we had talked about 2026 where the meaningful revenue where we get into the low tens of millions, we are actually tracking to that. And I think we talked about towards the end of the decade, 2029, the $100 million goal. We started with the emergency power supply as what I call the base. And now we are proliferating into different micro DC-DC with the potential to eliminate 12-volt battery. And as a result, we've got a real pull. I think you heard that the emergency power supply pulled us even a place like Japan, where we were not initially going. The beauty is we are getting really good traction. And that's why we really feel good about the low double-digit tens of millions in 2026 with all the design wins and the run rate that we are starting to see starting in the fourth quarter.

May we go back to Tore Svanberg for his question.

Balu, congratulations again on your retirement. I really appreciate working with you over the years. Thanks for your wisdom and Jen, welcome on board. I guess my first question on this sort of pull-in/inventory adjustment. First of all, is it mainly in consumer? Or are you seeing it perhaps in a few other parts of your business? And since channel inventory is still quite lean, should we think of this as being sort of like a fairly short-lived correction compared to what we've seen before?

That's a great question. From my perspective, I've noticed that adjustments like this typically last for at least two quarters, sometimes even longer. I mention this because other companies are discussing Q4, while we're experiencing changes a quarter earlier. For us, the most significant impact has been in appliances. However, our visibility into the situation is limited. We've observed a notable drop in orders, with a 20% decline from the average over the last six months, which is concerning. In terms of major appliances, which account for about 50% of our consumer segment, we've actually seen growth of 15% year-over-year in the first half, exceeding the usual growth rate alongside our typical design wins and increased market share. There seems to be some early activity that may be reflected in other areas, but appliances are the only segment where we can clearly see this. Considering what we observed in July, the early activity, limited visibility, and the comments from others in the industry about Q4 led us to make the adjustment we've discussed in our guidance.

The commentary from Whirlpool on this was very clear, and that's why we're very confident in what's happening in the appliance space. They cited a 20% increase first half over first half in Asian imports of appliances into the U.S. Our major appliance business was up mid-teens year-over-year in the first half, which, as Sandeep said earlier, is pretty far above what you would normally expect. So we can clearly see it in the appliance space. And again, as Sandeep said, there may be some of that activity happening in other markets, just not as visible to us.

No, that's great color. And as my follow-up, I don't know if this is a question for Balu or you, Jen, but you mentioned that the TSMC exit from GaN. That's obviously a really big industry data point. I'm just curious, have you sort of seen any changes in the competitive landscape since then? There's obviously a few players that have sort of tried to qualify other foundries. But whether it's your sort of fab competitors or fabless competitors, have you seen any changes?

Well, you're hearing other people talk about moving away from TSMC and going to other alternatives. But the other alternatives are not as robust than them and try to move from one foundry to the other is not something that happens as quickly. The big distinction is for us, yes, you had all these competitors at 650. Nobody has what we have at 1250 and 1700. And the advantage we have, and especially people are talking about the 800 volt and all, we have products that will supply into the auxiliary that supports the 800. We've been thinking about this way ahead. So I think what we talked about in our Analyst Day that having the whole control on the process, the device and the model and just that we have a very proprietary technology is really differentiating us and putting us ahead of the pack.

Our next question comes from Christopher Adam Rolland.

I also want to congratulate Balu on what seems like a semi-retirement and welcome Jen. I’m looking forward to working with you. My first question is really focused on Jen. I appreciated hearing part of your prepared remarks discussing GaN in AI data centers specifically. If I understood correctly, it seems like you’re indicating a commitment and focus there, which interests me. However, as of now, you are not on the list of approved vendors at NVIDIA. It appears to be a dynamic list with new vendors being added frequently. So my question is, when do you anticipate getting on that list? Additionally, what GaN products do you plan to offer? Would they be at the rack level, the power supply, or even the first or second stage? Also, I'd like to know about opportunities for ASIC companies beyond NVIDIA.

Thank you, Chris, for your question. That was quite detailed. Let me break it down. We are actively engaged in the data center ecosystem and are currently supplying auxiliary power supplies, where we are increasing our market share with GaN versions of the InnoSwitch platform due to rising power demands. Next year, we plan to begin sampling GaN products for the main converters within the current architecture that utilizes AC to DC converters at the rack level, which will remain relevant for some time. The transition to higher voltage DC systems, as I mentioned earlier, won't happen overnight. However, we are also broadening our product range for the 800-volt market. We designed our 1700-volt GaN InnoMux4 to operate at 800 volts, making it an ideal fit for auxiliary power supplies in 800-volt setups. This system requires both 54-volt and 12-volt outputs at high power, and the 1700-volt level is essential for the flyback architecture in 800-volt data center systems. Clearly, GaN is a strong candidate for converting 800 to 54 volts, especially given the space limitations. Additionally, our 1250-volt technology plays a crucial role in this area. Both our 1250-volt and 1700-volt GaN technologies will support 800 volts in both data center and automotive applications. Sandeep, would you like to add some insights on the product timelines?

We already have the InnoMux, and we discussed sampling the product for next year as Jen mentioned. This will be followed by the 800-volt main when we transition to the new architecture in 2027 and 2028. We are in communication with all parties involved. As you know, we focus on system-level products instead of discretes. We are collaborating with everyone, and when our system-level product is released, you'll hear more announcements. Even if certain stakeholders are not involved, we are still engaging with everyone. One reason GaN hasn't been widely adopted is due to the reliability issues with discretes. However, our system-level products will improve adoption rates. It’s just a matter of time, and we are actively engaging with various players in this ecosystem.

Great. As a follow-up, could you provide a metric, such as dollars per accelerator or rack, and identify your main competitors in AI? Additionally, for Sandeep, is it correct to understand that industrial will continue to grow and outpace the other segments due to the absence of certain dynamics? Do you still believe you can achieve a double-digit long-term CAGR next year, or will this extend into the following year as well?

We are definitely going to recover. This adjustment is occurring due to broader macroeconomic and tariff issues. If you examine the situation closely, industrial remains a robust growth driver for the upcoming year. We anticipate growth in automotive, metering, high power, and homebuilding. I believe all four segments will experience growth next year, with communication showing good strength as well. We recently achieved a significant win in GaN and are also seeing success in networking. Regarding the duration of this adjustment, I can't specify whether it will last two or three quarters, but I have heard others mention the fourth quarter. I expect us to return to double-digit growth next year. As for content, we've indicated that within the current structure, we could achieve around $1,000 of content per rack at best. Additionally, we have numerous opportunities due to our 1250 and 1700 products.

Yes, I can add to that. In terms of competition, we mainly compete with discrete designs using MOSFETs or silicon carbide. As Sandeep mentioned and I noted earlier, no one else offers the 1250-volt GaN technology. This will surpass silicon carbide and silicon MOSFETs in terms of performance moving forward. We're really excited about this.

And the most unique is our proprietary GaN is extremely reliable. And obviously, it's very much more cost-effective than silicon carbide. So I think we've been talking about the play of our differentiation, and you're seeing our model related to GaN really play out with the exit that Jen talked about of TSMC.

Our next question comes from Ross Seymore of Deutsche Bank.

I just want to sneak in one quick follow-up. Sandeep, what's the expectation for channel inventory? You guys are doing a good job of keeping it pretty tight. I know it's in your target range. But within your guidance and maybe in the second half as a whole, since you're talking a little bit more about the fourth quarter, how are you expecting the channel to act?

I anticipate that this quarter, the sell-in and sell-through will remain relatively flat. Currently, we're operating at 7.7, but if you break it down, consumer sales are at 6. One reason for this is that we have a significant amount of inventory and short lead times, which makes people hesitant to stock up. There's also some caution due to tariffs. Honestly, the impact of steel tariffs significantly affects appliances. Additionally, as mentioned earlier, we experienced strong year-over-year growth in major appliances during the first half.

Got you. I guess speaking a little bit on the fourth quarter comment that you talked about this potentially being a 2-quarter adjustment, et cetera. Is seasonality even a framework that matters? And if so, how would you think seasonality occurs versus the cyclicality/tariff issue as we get into the fourth quarter?

Yes, that's an interesting point. For us, seasonality primarily affects our high-power business. Typically, we see a decline in the first quarter, and there are variations in communication, especially with cell phones, which have stronger quarters at certain times. Additionally, in the third quarter, comfort appliances usually decrease due to the building cycle. However, with the current front-running situation, there have been some adjustments in the appliance sector. It's unclear whether this will last for two or three quarters, and I'm leaning towards two quarters since we noticed this trend slightly earlier, starting in July. People are still anticipating the fourth quarter, so I'm confident it will last at least that long. I need to observe the situation in Q1; it's a bit early to make a definitive call. I also want to see if any clarity emerges regarding tariffs, which could significantly impact the situation. Rates are changing frequently, so it's hard to predict the outcome. Furthermore, if interest rates decrease, that could benefit the housing market, so we need to monitor developments there as well.

All right, Aubrey, do we have any further questions?

There are no further questions at this time. I would now like to turn the call back over to Joe for his closing remarks. Please go ahead.

Okay. Thanks, everyone, for listening. There will be a replay of this call available on our website, the Investors section of our website, investors.power.com. So thanks again, and good afternoon.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.