Good afternoon, ladies and gentlemen, and welcome to the Monolithic Power Systems’ Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions) Today’s conference is being recorded. I would now like to turn the call over to Meera Rao, CFO of Monolithic Power Systems. Please proceed.

Thank you. Good afternoon and welcome to the second quarter 2013 Monolithic Power Systems conference call. Michael Hsing, CEO and Founder of MPS is with me on today’s call. In the course of today’s conference call, we will make forward-looking statements and projections that involve risk and uncertainty, which could cause results to differ materially from management’s current views and expectations. Risks, uncertainties and other factors that could cause actual results to differ are identified in the Safe Harbor statements contained in the Q2 earnings release and in our SEC filings, including our Form 10-K filed on March 5, 2013 and our Form 10-Q filed today, which is accessible through our website, www.monolithicpower.com. MPS assumes no obligation to update the information provided on today’s call. We will be discussing operating expense, net income and earnings on both a GAAP and a non-GAAP basis. These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A table that outlines the reconciliation between the non-GAAP financial measures to GAAP financial measures is included in our earnings release, which we have filed with the SEC. I would refer investors to the first and second quarter releases of 2012 and 2013, as well as the reconciling tables that are posted on our website. I’d also like to remind you that today’s conference call is being webcast live over the internet and will be available for replay on our website for one year, along with the earnings release filed with the SEC earlier today. Let’s start with the highlights. MPS had a great second quarter. Our revenue, gross margin, non-GAAP operating income and EPS grew sharply quarter over quarter. Revenue of $57.7 million grew…

(Operator Instructions) Our first question comes from Patrick Wang of Evercore. Patrick Wang – Evercore Partners: Just a couple of questions, first, last quarter you saw some upside in gross margins, even though consumers off the tone, it seems like your structural change taking place, can you talk about what happened in Q2 to get you a little bit better gross margin in your Q3 guide? And then also what the mid-term implications are -- potentially you just recently raised your margin targets at analyst day?

Our gross margin improvement was a result of the product mix and as you noticed, our consumer revenues increased and we have some consumer products that also have pretty good margins. So the net result of that is we saw an improvement in Q2 and as we’ve talked about the last few quarter, we expect our gross margins to continue to expand but we expect it to be steady increase. And you can also see that in our guide for Q3. Patrick Wang – Evercore Partners: And I guess just the mid-term implications, I guess how should we think about that just over the next couple of quarters?

Patrick, this is Michael. As our revenue grew and also we expected our gross margin to keep it steadily increase as Meera said it, the reason for that is we focus on more value product rather than competing on the price. And as in the past year also with all these -- introduced all these products, which all have a higher margin volume and as we grow revenue as I said it and the margin will grow. Patrick Wang – Evercore Partners: Hey Michael, then your inventory is up 15% sequentially. I am just curious if this was some or all of this was in reaction to the type of backlog you are seeing in the back half of the year or was it something else?

Yes, as you noticed that the inventory grew. There are two points, two even for that. One is that we introduced a lot of new products and we prepared some of the inventories for those products ramping in the second half of this year. And also from a number point of view, from a revenue you see our revenue grew from 57.7 to mid-60, that’s also a bigger jump. So we have to have some or more inventory to cover the growth. Patrick Wang – Evercore Partners: And then I have got one last question and then I will jump back in the queue, Michael. I just want to ask, we have been hearing about some M&A chatter recently and I know you can’t comment on it. But as you talked about it in the prepared comments that the company is much different now than before – you are in the new era of growth, I mean for instance we are seeing you guys deliver much higher growth rates than your peers today. So given these changes, I am just curious how you actually think about fair value for the company or just how you think about it today?

As we said that we have internally in the company transitioning from a smaller company to maybe a mid-sized of a company and did a lot of changes from the organization point of view. And we – some two years ago we thought to divide into the product lines and our organization is very much different from two years ago and we are still learning. And also you look at the –from a value point of view and the product – we focus on a different product profile, we changed and these are more focused on the value side. That’s – I would emphasize on the MPS technology, and how we compete in the market, and for the long term in a sustainable higher margin growth segment. Now to answer to your question, what’s the value of the company, the board recognized that – we are in a growth period and we are still at the very beginning. And on the one side, yes we announced a $100 million buyback and couple of reasons for that, from a small company we return to our shareholder values – if shareholders one time we buy back 70 million shares and the other one is, will give us $30 million, $35 million for – as a divided. These are sporadic and now we look at the long term view and for the comprehensive program to first to minimize the share gain, second, how we do study the dividend and the board hasn’t made a decision yet but I think it’s a very (inaudible) how we acquire the technology company to continue to expand. So these are really the value for our shareholders, we are on the transition, from a smaller company to a larger company. And also these all are going to reflect to MPS’ long term value. And we shall buy our shares, now and have to return our shareholder value.

Our next question comes from Tore Svanberg with Stifel. Tore Svanberg – Stifel Financial: First question, you talked about backlog and bookings doing quite well. But can you just give us some sense of how your visibility is looking now, with two months left in the quarter?

We had – we saw very good bookings as we went through last quarter and we are seeing that trend continue right now. And when we look at retails and channel that’s also very good retails last quarter, we are still seeing good retail through July. So right now we are feeling pretty comfortable. Tore Svanberg – Stifel Financial: And your consumer business bounced back quite significantly and you have mentioned some discretionary consumer growth there. But could you talk specifically to that segment, where they need other programs or move product launches that you benefitted from?

Some of the areas where we have grown in consumers is what I call general purpose consumer with consists of a lot of small different product lines and these are lot of the design wins that we had with our CoolPower family products that have started to ramp and as a consumer, they are also introducing the new models and this is something that we had alluded to also back in Q1 and all that revenue is coming in now in Q2 and you’re also going to see a growth in Q3 in consumer as these models ramp.

Thanks Tore for recognizing that, and I had some – I received some concerns from our shareholders, the way we are getting rid of the consumer business and at the same time we are starting – the focusing on another other bid notice. And so my response was okay, consumer were now walking away and the CoolPower family were introduced the last year and we still start to ramp, at the same we haven’t crossed the growth yet, again I only can tell you – our shareholder was our intention. Now finally we delivered. We started – you will start to see a light trend. The percentage of the total consumer business will reduce but the revenue will go up. Tore Svanberg – Stifel Financial: And better relations on those grant wins, could you give us a sense of when will we see revenue contribution from those?

Second half of next year. That’s the grant – cycle, so we expect to see revenue in the second half of next year. Tore Svanberg – Stifel Financial: Very good. Last question, I know you still have some important design wins for communications in the pipeline. Can you just update us on those and especially on the timing please?

We have very extensive engagement on the design activity front. We also have a few design wins that are going to be ramping up and you will see the revenue in – some revenue this quarter, more in 2014.

Our next question comes from Vernon Essi with Needham and Company. Vernon Essi – Needham and Company: I was wondering Michael, if you could give us the profile or maybe a little more color on the customer, you said that was the domestic customer and any information I guess with regarding sort of what sort of penetration rate you might have within that customers product line portfolio?

Okay. I will answer your second part of the question first. The percentage of a design win that’s still at the very beginning but the key is are we penetrate it and we will see meaningful ramp starting next year. So in the next year and then it goes definitely will move the needles and on the revenue needle. The first question is what customers, okay, our entity all of them, all the servers including in the US and in Asia – Asia means, Japan, China, Taiwan. Vernon Essi – Needham and Company: And I assume obviously the straddled both enterprise and cloud based –

Yes. Vernon Essi – Needham and Company: And then jut to go back to the computing segment, it was a little I guess you sort of had a sluggish performance and in your prepared comments, you said that we’d transition from an old product to a new product, is this on the storage side or is this on the computing side?

On the storage side, as our customers transition from the older models to the new models. That’s what impacted our Q2 storage revenues. Vernon Essi – Needham and Company: And do you have any visibility to how might shape up in the third quarter, does it still look to be sluggish or is it snapping back?

I think in a transitional period – FFDs in North America the traditionally these internet companies, it changes adopting rate of kind of lower. And that reflects that, we see in the second half, maybe beginning of latter second half of the year and into next year, and the revenue will accelerate and the same time, they are changing a models and FFDs as well as HDD in the game. Well, that’s the situation that we have now. Vernon Essi – Needham and Company: On the consumer side, you had indicated at your analyst event that you had a high profile gaming console win, if I remember correctly there was a pretty decent amount of dollar content on that product. Just out of curiosity what sort of sizing of that would contribute to the back half lift you have going in consumer, you have a broad range of CoolPower opportunities but is there a way you could sort of strip out what the console opportunity mean relative to the rest of the consumer business?

We are going to see – the gaming console design win is ramping up in Q3 and Q4, I don’t want to be anything more suspect than think we expect to be $7 million of revenue. Vernon Essi – Needham and Company: Well, I guess let me try this another way and maybe you can go – is there – if you were to strip out the console, we you still be seeing growth in consumer through quarter on quarter for the rest of the year?

We would definitely see an increase in Q3.

Our next question comes from Ross Seymore from Deutsche Bank. Ross Seymore – Deutsche Bank: Just a question on the mix side of things, specifically on gross margin. As impressive that your gross margin hit your guidance range even though it appeared that the mix actually was a big headwind with consumer growing and the computing/storage side falling off. Was that in pact a dynamic that you overcame in the second quarter and if so, how does that – what drop it up I guess I would be the question.

Remember last year – I will begin the last year, CoolPower intrinsic, we have a low cost structure. CoolPower, and again we also – the second factors include the gross margin is about we focus on only the value side. And we are not going now just to competing on a price to gain the market share. So we are picking the choose this time. That’s the reason, even though we grew the consumer business and are relatively reading large portion and would you maintain the goal of the gross margin? Ross Seymore – Deutsche Bank: My first of two follow-ups, looking into the third quarter you have given very solid revenue growth guidance. Any outliers as far as the four segments which one you’d take to grow faster or slower and what those are drivers please?

No really, we don’t have outlier out there and the most systematic growth across the broad and I am glad to see us American and finally the consumer across the – going down every quarter. Now it’s going up. Primarily all segments the revenue is going to go out. And so we are going to keeping in that way but again the percentage of a consumer business, while the growth rate will be slower than the other segments. Ross Seymore – Deutsche Bank: I guess it’s my last question and I know you’re not guiding specifically for the fourth quarter but historically you have been a hyper seasonal would be the best way to say it and I think your historical average for the fourth quarter as we down relatively 7% sequentially in revenues, how should we think about the revenue trajectory given all the new products launches that you have heading into the fourth quarter this year?

One of the things that I have noticed for the last few quarters is that the seasonality is trumped by a cyclicality of the market every single time. So that kind of mix are hard one to answer. Particularly for our this year is that we have a lot of design wins that are ramping. So we don’t know what is market demand, cyclicality is going to be at that time and it’s just going to offset any or historically ramp that we have right now. So that’s something we are not going to have much visibility on at this time. So when you look at a design wins and demand out there, we still feel pretty good.

Yeah, to add a little bit more on it. I think in the last couple of years, our focus didn’t change and so our seasonality should be impacted at $0.02. And looking at all the design win activities or revenue lift, we feel very positive in the fourth quarter.

Our next question comes from Steve Smigie of Raymond James. Steven Smigie – Raymond James: Looks like on the guidance to revenues, pretty darn close to your previous record high. Congrats also on the $100 million buyback, in the first lease on that buyback, I think you talked about starting that buyback relatively soon takes place over the couple of years. And that you would do it sort of as you see fit but is it – the case that you might sort of do more of it on the front end versus end just cause it seems like a strong growth phase here, it soon -- start is probably going to be cheaper now the in the future. Would we expect to see more share buyback early on as – $100 million?

Yeah of course, we cannot calculate buying the formula, buying patent. And yes, we will start to buy a – as some of the rules and the laws allowed. Steven Smigie – Raymond James: Just with regard to process technology, BC3s has been out there for a little while. Have you see anybody come out with anything that’s catching up a little bit on that?

Yeah, the BCD4 product valve and of course, there is no revenues, it’s really 2015 revenues and with this, you will have a much bigger – that’s the order it’s not the BCD3. Steven Smigie – Raymond James: A question is more just – obviously you guys came out this BCD3 and very significant of BCD4 as a way to sort of I think get ahead of some folks that had – like that, and I am just wondering if you have seen any more competition on the BCD3 level and I realized – was the case that you are beyond that but –

No, we haven’t seen anything yet – not that we know of. Steven Smigie – Raymond James: Somewhat similar on the MPMs, sounds like you have some great innovations – you have the first generation three to pull all that together, have other folks have seen what you have done and started making noise about being able to come out with something like that, or do you think you’ve got those kind of teaser lead on that stuff?

I haven’t seen the landscape, landscape is changing – there is always some noise – this is what customers always, always wanted that and I think that we are the first to make deliver that kind of a product and there are some product on the market of too way expensive and focused on a very small number of our customers and like MPS, we just – we commercialized the BCD process and at this time we are going to accomplish our life with module business. Steven Smigie – Raymond James: Just wondering up on Ross’ question about the Q4 seasonality, doesn’t have to be just specific to Q4 but if we were to see some seasonal drop, I assume you could just add some more color what might happen to gross margin, you guys are obviously fabulous and it seems like a lot of the new innovations you have come out with CoolPower for example on lower costs, so even like a modest seasonal decline, could you still expand gross margin through that?

It kind of depends upon the revenue levels and the mix of products. So I could see a scenario where revenue could be down seasonally and gross margins could still expand. But again it depends upon the revenue level and the mix.

But I don’t see a lot of downside. The market – the macro-economic significant change and we see the consumer business growth and rest of the business as you see growing in the last three or four quarters and our gross margin will keep going higher. Steven Smigie – Raymond James: And then last question is just on operating expenses, looks like guidance here is pretty good, OpEx control, obviously revenue is helping, there is a big jump, how should we think about that going forward? Obviously have your target model out there but my thought is that you’ve got a bunch of really successful products, that sounds like ramping here that are in areas like computing, networking that are sort of outside your typical end markets. If those would ramp pretty quickly, would you have to add support for that, I think I’d typically be more significant support than what you guys have done in the past?

We are expecting to evolve our OpEx relatively flattish going forward as well. We believe we have the support that we need, we might have to do an occasional hire. But I think we are going to find that revenue growth is going to far outstrip and increase in OpEx.

Yeah, I will give you a little more color on that. So our large shareholder is going to initially expand and initially grow as well as – it shouldn’t goes our back, so we take a moderate approach. And we see the sales and marketing side is our weakness and we should keep expanding and overall numbers, should we have a very modest increase.

Our next question comes from Amit Chanda with Wells Fargo.

This is [Amit Chanda] dialing in for David Wang. Meera, can you talk about inventory levels at your customers, for the different end markets you serve, what you are seeing there?

What we can see the C levels, and our inventory in the channel come -- number of days has been at the same level for the last four quarters and we have been able to hold the inventory level and we carry more the inventory, so we can move our customers and demand. And the inventory that’s in the channel right now we are also seeing a mixed debt changing from the older products to the newer products. So it’s all in line with our sales strategy.

And can you provide us with a quick update on what percentage of your revenue at the moment stems from new products versus your older products?

Our new product revenue is about 37% to 38% of our revenue right now.

And then finally, can you may be talk about any traction you are getting with the power modules, targeting the FSD market?

We basically use a couple of Phoenix this quarter. This is in addition to the front-end Phoenix that we had released I think about a year ago. So one is higher voltage p-mix and the other one is companion that work for the front end processes.

And the PMP for FSD revenue will not ramp until next year.

Yes, the new Phoenix that we have introduced are – MPM modules.

Our next question comes from Lena Zhang with Baylock. Lena Zhang – Baylock RV: Only one from me is regarding your internal inventories. So in the last two quarters increases in internal inventory outpaced your revenue growth. Is that fair to assume the long term revenue product revenue coming in Q4?

We continue to see our new products being designed in and the revenues from these ramping, so we are holding those inventories in support of that demand and as we also have started selling in some of our new products into larger customers, they also require us to hold more inventory of these new products. In some situations we are only supplier or we are one of two and they want assurances that we will have products ready. So everything we are doing is in support of our new business.

I am not showing any other questions in the queue at this time. I would like to turn it back over to Ms. Rao for closing comments.

We very much appreciate your joining us for this call and look forward to talking to you next quarter at the next earnings release. Thank you and have a nice day.

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. Have a wonderful day. You may all disconnect.