Good day, ladies and gentlemen, and welcome to the Monolithic Power Systems Incorporated Fourth Quarter Full Year 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference call is being recorded. I’d like to introduce your host for today’s conference Meera Rao, Chief Financial Officer. Please go ahead.

Thank you, Kate. Good afternoon and welcome to the Fourth Quarter and Fiscal Year 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 risks and uncertainty, which could cause results to differ materially from management’s current views and expectations. Please refer to the Safe Harbor statements contained in the earnings release published today. Risk, uncertainties and other factors that could cause actual results to differ are identified in the Safe Harbor statement contained in the Q4 earnings release and in our SEC filings, including our Form 10-K filed on March 5, 2013 and Form 10-Q filed on October 20, 2013, which are 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 Q1, Q2, Q3 and Q4 2012 and 2013 releases, as well as to 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. We would like to start this call by reviewing…

(Operator Instructions). Our first question comes from the line of Patrick Wang with Evercore. Your line is open.

Great. Thanks so much. Congrats on the record year. I want to talk about your guidance first. Your guidance is impressive. I guess in light of the overall industry, we are still seeing pretty good outperformance there historically also slowest in the fourth and first quarters. As we look ahead for the rest of the year, and I know you are not giving guidance there, but there seems to be a huge pipeline of product cycles and design wins. Can you give us a sense of maybe your visibility your confidence that you are going to be able to continue outgrowing the market at kind of 20% level that you have done in the past?

Clearly we are very confident that this is going to be a growth year for us and we will outperform the analog industry [handling] again. And the reason we feel confident is the pipeline of design wins that we have and the number of growth drivers that we have. So if you look at the areas of growth, we have cloud computing, networking and telecom, SSD, sharp blade, set-top boxes, TVs, gaming consoles, LED lighting, automotive, security and various other industrial applications. When we look at all this and the momentum that we have going forward, we feel confident that we will have growth this year.

To summarize what Meera said, we don’t find any surprises. And as we go into Q1 of 2014 everything is still intact and everything is actually -- and many projects are better than we expected.

Okay, got you. I wanted to talk a little bit about your [comps] end market; it was down about 14% sequentially last quarter. Can you talk about what happened there and perhaps what we should think about in the March quarter?

Sorry, which end market was that?

Communications.

Our communications; communications was down in Q4 largely it’s a demand for our older gateway products that were lower in Q4. And I think that’s one of the areas where we saw some seasonal weakness back in Q4.

Okay. But as we kind of move into the first quarter and over the course of the year, I mean are you expecting more older product to get kind of [wind] down? And then on that same note, can you talk about some of the new products that you’ve got ramping and when we should expect a material impact at the kind of growth there?

Going through the year, we expect all the gateway products’ revenue to continue to be up for the year, plus we have the newer networking and telecom revenues, which will continue to ramp this year.

One of our products that we designed in early to middle of last year that will start ramping in Q1 this year and also Q2.

Okay. So you are confident you have got products that can hand off the growth, they can hand off the revenues too and we’re not going to be looking at the big horn revenues?

No, that's not what we see at this time.

Okay, terrific. And then just lastly the -- you mentioned the module business; I think I heard you say, you are expecting first revenues to ramp in the second half of the year. Can you give us an update on that, some of the key milestones to look forward to and perhaps as we exit the year what type of revenues we should be thinking about?

I think that it’s really a long-term growth for MPS. We did (inaudible) for the coming applications and that design activity happened in the past and are projected to be in the second half of this year and then (inaudible) on track, but to be a meaningful revenues we’re looking for what really happened here then, in the next year I think through the end of the second half of the next year.

So it’s just not incremental story this year as well.

Yeah, got you. Okay. And just one last -- further one last quick one and then I’ll get out. What are some of the kind of the bigger, the top three or four product cycles that are going to drive the growth this year? So maybe you can just kind of talk about that in the linked quarter?

Well, we haven’t (inaudible) really talk about industrial automotive, that’s one of that. I think also the LEDs and our cloud computing and particularly server size and then you have many products in the customer solutions are bigger platforms. We are expecting this year that we’re having some meaningful revenues. And in the last year (inaudible) get on the top customers and we generated few many model revenues and this year we experienced (inaudible). So I mentioned that automotive industrial (inaudible) and servers and we have other ones, but (inaudible) we will talk about it (inaudible) market shares and we really believe that it will continue to (inaudible) positions. And doing that (inaudible) as Meera mentioned about the internet, two years ago we designed -- many years ago actually sort of four years ago we designed a few products (inaudible) these are connectivity in the tough environment, these are micro solutions, 80 to 60 solutions for connectivity. In the first year we used that product and we can see the whole lot of activities. And last year, we do see a lot of activities from (inaudible) internet connected a dollar in the simple steps not other thing. So the revenues (inaudible) and it’s still too early to talk about, but we believe that it will come and there is so much activities and the revenue will, it’s just a matter of time.

Okay, terrific. Thanks so much. Congrats guys.

Yeah.

All right. Our next question comes from the line of Tore Svanberg with Stifel. Your line is open.

Yes. Thank you and congratulations on the results. First question, your consumer business was up year-over-year, I think you had hinted that that would be the case. But my understanding is that the mix there has changed. I think historically you sort of classified that as third set-top box, third TV and third discretion consumer. But how does your consumer business look like now?

Right now, I would say that the mix has shifted more into the general purpose consumer. I would say that general purpose consumer would be roughly about half of business. And based on the new market that we're entering like gaming consoles, as well as LED lighters and battery charging, those are the areas that are driving it. So I would say that the more traditional market like TV and set-top boxes would more probably be a quarter and a quarter each roughly. So, that's even mix overall.

Very good. And as Michael is going through sort of the top drivers this year, I mean they all seem like higher gross margins type markets. Should we expect the gross margin expansion as we move throughout the year?

I think you would -- our goal is to grow gross margin steadily through the year.

Yes. And then we don't have it. We don't as executing our strategies and which we see it from the result from last years I don’t see a huge downside of a lot of headwinds I must say that and pressures from our gross margin. Although we do have all in traditional the analogs of traditional consumer products and which will fastly replaced by the new consumer products as Meera just mentioned and those have a higher gross margins. So I will say that we feel comfortable and we can improve the margins if not a lot at least a bit.

Very good. And any chance you can update us on the mix between BCD3 and the (inaudible) we have a percentage for BCD4?

It’s I would say fairly early for BCD4, but if you look at BCD3 and BCD4 together, about two thirds of our revenue in Q4 was from those two technologies.

Okay very good. Last question and on your new DC to DC converter technology should that already start to ramp this year?

This year, yes we have design wins. And this (inaudible) and after that this is new state of art technology that really I am excited about this. Again this contents same modulating will really replace the traditional PWM pulse with modulation. We believe this match is the better way to do it and it’s like a breakthrough we took after many years and to define this product. And I think (inaudible) can be applied for a general market and particularly for, I mean the high current for this year and this year we generated revenues on using (inaudible) and also for next year, the module, a lot of module based on this programmable power technologies.

Very good. Thank you very much.

Thank you.

Our next question comes from line of Steve Smigie with Raymond James. Your line is open.

Thanks this is Vincent (inaudible) speaking on behalf of Steve. I was hoping if you could talk about the long term growth rate you see for the AC to DC business?

Yeah. I talk about quite a good other things. AC to DC there, I didn’t mentioned there. (Inaudible) several things, such as, Meera why don’t you [take that]?

AC/DC is an area where we are seeing a lot of revenue growth coming from that. We are seeing some of the revenues growth coming in easy power family of products which is to power the (inaudible) things. We are also seeing revenues from this and multiple other market and this is going to be one of our areas of the things that are going to (inaudible) this year?

A lot of products from, a lot of demand is from (inaudible) leads some kind of small powers and also very efficient and efficient power converting from AC line and also small compacter. And so our product is outstanding in the segment. And also these some of the small appliances which connect to have quite some connectivity and we see some demand for that, but all those still at the beginning. A large portion of our AC to DC is really come from energy saving device and we call it ideal dialed and multiple lot of a high power product, computing servers and all that kind of high efficiency product which all products can just dropping replace a traditional dials and we see the ramp on that.

Great, thank you. And as a follow-up I was wondering if you’re considering any acquisitions?

We’ve talked about this before. We would be interested in if there was a good technology (inaudible) out there and we would certainly be interested in those opportunities. So it has to be something that’s of interest to us that has maybe associated sales opportunities. So this is something that we have been looking at for a while.

Great. Thank you very much.

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

Hey good afternoon guys. Solid results. Here this is actually Matt Simon on Ross’s behalf. I wanted to ask you about your OpEx plans for the course of the year. It looks as though your SG&A is a little bit higher than your long-term model at about 16%. I am curious if you could enlighten us to what plans if any you have to cut that down to the long term model this year?

Our plan, if you have noticed, back in Q4, we have held our OpEx down, and that our plan is as we don’t need to do any investments right now to hit the 2014 roadmap. As we see our revenue increase, we will increase some of our investment in particularly in the [depth] in marketing area, targeting 2015 and 2016 revenue growth. You are going to see us come into target as you see our revenue, our top line growth.

Okay, great. And could you comment on the linearity of bookings this quarter, what you’ve seen heading into January and February?

I would say this is fairly typical for what we see in most periods. As you know, we have mostly six to eight weeks lead time, so we have not seen most of the orders coming in, into the second half of the prior quarter going into this quarter. So in terms of linearity, it’s the same as it usually is.

Okay, understood.

We feel a very normal, consumer is a little bit longer and little bit weaker, it’s in everything else doing better than we actually expected.

Okay, great. Thanks very much.

Our next question comes from the line of Vernon Essi with Needham & Company. Your line is open. Vernon Essi - Needham & Company: Thank you. And just to follow on the last question there on the OpEx, I guess, I didn’t understand really the answer to that. In terms of achieving the long term model, obviously you are not going to probably hit that in 2014, but it’s fair to say that your OpEx will be growing at least in dollar terms in sort of the similar pattern it has in the last couple of years. Is that a fair statement?

I would say that yes. For our revenue, for our OpEx, particularly SG&A if you hit the model, that is based on revenue growth. And I'm not sure if that we’d be able to hit that this year. But you're clearly going to find that any OpEx increase this year is also going to be driven by substantially higher revenue growth.

Vernon, you see our -- you commented for long enough (inaudible). We have to increase some of the -- we have to invest some of the items like R&Ds and further growth. In the past so you see it, if the growth slowdown, we can cut a few million dollars within a quarter. And we've demonstrated many times in the past. So, OpEx, the out of control OpEx, it should not be your concern. Vernon Essi - Needham & Company: Okay. And I just want a clarification on last point; I appreciate the answers here. Just to switch gears to lighting, and I won't bring up audio amplifiers, since I’ve followed you long enough, Michael. But going back to that revenue segment, it's been sort of flattish over the last couple of years. Can you go over the mix that's transitioned from sort of the backlighting and notebook area into general lighting over the last two years, just to get a feel for what has happened behind the scenes?

Sure. As you know that a good portion of our revenue in the lighting controlled portion of it used to be all backlighting and we have been seeing this a transition more into LED lighting. And I think if you look at the most recent year, I'd say a bigger portion of our revenue is coming from LED lighting.

So it is transitioning from the backlighting to LED lighting now. Vernon Essi - Needham & Company: Sure, but I guess what I am trying to under is how much -- I am assuming the bulk of this year is gen -- or excuse me, 2013 was general and then like give us an idea of how much was general versus backlighting in 2012, just to understand how much general versus lighting while the other one is declining.

Yeah, I think that Meera said that. As Meera implies more than half of it right is the LED lighting and to be more specific is these lightings not really consumer lightings and we are really targeting industrial and the commercial lightings. And so our solution, you won’t get it from these hardware stores for residential use, more in the industrial use. Vernon Essi - Needham & Company: I know and I appreciate that. Okay, thanks. And then my last question, just to go back to the quantum module, the QS Mod, I guess that’s what you are calling this product. And you talked about the PWM topology and how that works. And I just want to be clear on this, is this going to be basically sort of an envelope tracking solution that you could target into the core area or is this more of a point of load application in sort of an enterprise example, I mean just need to be more specific on that if you could please?

Our first product is clearly is for the core in the high current telecoms and with power solutions. And then we will -- our next generation of module will adapt that kind of approach. And with the programmable we can service our customer through internet. Vernon Essi - Needham & Company: Okay. So just again, the backup...

Yeah. That would be in general application DC to DC. Vernon Essi - Needham & Company: Okay. All right. That's helpful. Thanks a lot Michael, and thank you Meera.

Thank you. Yeah.

Our next question comes from the line of Rick Schafer with Oppenheimer. Your line is open.

Hey, thanks and I’ll add my congratulations guys. Couple of follow-up questions I guess here. First is, surprised to see consumer in compute up actually in the fourth quarter and comps and industrial down but despite sort of that unfavorable mix, your gross margins are still solid in 4Q. I guess where I’m going with that is, given the better mix that we would assume for the first quarter and increased percent of BCD3 and BCD4, so lower cost production in 1Q. I guess I’m surprised gross margins are just trending flat in the first quarter sequentially. Is that just a function of lower volumes, or is there anything else going on in there?

I would say it’s a function of lower volumes of that. So, we expect margins to be similar to where we were in Q4 despite the lower revenues.

Okay. So it is just volume kind of as an offset for that sounds like?

Yeah.

It’s utilizations and volumes and volumes and also mix of products and that. But overall, it was a drop of some -- a few million bucks and then the margin was even much bigger change. And so where margin still stay pretty flat and that's due to just as you said it the newer product to a BCD for -- now they’re really ramping up and so replaced older products. That’s the reason we can sustain the margins.

Yeah, got it, got it. And then talking about TV, you mentioned it briefly but you kind of gave us a frame reference on how big TV is? I guess would you consider that a stable business now? I mean has it basically been de-risking the model or do you consider it still sort of a drag as we look into 2014? And part of that question, do you see any other businesses that are acting as sort of a growth offset or a drag on the top-line this year?

If you look at TV, the TV business in 2013 was down from 2012, but we actually expect based on design wins that we would probably be able to grow this some. So when I look all across at all our different products, I don’t see anything in particular that would suggest that it will be a drag. Though I have to say that in consumer business, we look at each account by account to see which account we want to be able to support going forward. But I cannot think of an entire category or anything that we’re defocusing.

I am asking that you mentioned -- I think you mentioned TV; in the last few years we sort of want to minimize the concentration, but for this year and over the last year, I started looking at, there is a new application that is so called smart TV requires a higher current DC to DC. And very few players, very few suppliers, they can deliver cost effective solutions. And so MPS again, and think this year, at least I’m not optimistic in that segment.

Great. And then my question is you know I think you mentioned in the last call or let’s talk anyway. Talking about the move to BCD5 next year and how that’s probably a move or that when you’ll move to potentially 12-inch wafer. And I am curious, should we be modeling any sort of step up in cost or anything as we look out, modeling our 2015 numbers, should we think it of any kind of cost step up ahead of that 12-inch move?

I think that you -- to improve a margin is really, really is the product directions. And we move away from the lower price market segments. So I think that’s really the plus behind. Of course and continue to lower the cost and introduce a better technology that will help, but the main purpose is driving the performance. So for your model wise, okay, you look at our product lines and look at the product market segments, in all of them it should be higher than what the consumer product is.

Got it. Great, thanks Michael. Thank you, guys.

(Operator Instructions). Our next question comes from the line of Amit Chanda with Wells Fargo. Your line is open.

Hi. Thank you for taking my question. Michael, can you talk about the competitive environment associated with Shark Bay notebooks. Are you seeing any other competitors in the marketplace right now for a point of load solutions in Shark Bay? And if so, can you talk about how your products are differentiated relative to the competition?

Yeah, for the notebook side, we're not really a big player. We have some products for servers and for others. So we introduced the product to the notebook is very opportunistic. However, we do get some revenues out of this and we have pretty good margins, not [grey] margins. In this year I see that our product remains very competitive in that area. And I think we'll even gain some market shares in the notebook side.

Okay, that's helpful. Thank you. And then Meera can you maybe comment on your CapEx expectations for 2014?

We've done a lot of investment already in our testers et cetera. So we think that our CapEx in 2014 is going to be down to below $10 million.

Okay, great. Thank you very much. I appreciate it.

Welcome.

Our next question is a follow-up from the line of Patrick Wang from Evercore. Your line is open.

Great, thanks. Just a quick follow-up, this is probably a silly question, but when we take a look at the March quarter and how you guys guided. The street was a little bit higher than the midpoint of your guidance here. So, I'm just kind of curious from your perspective, do you think it's just Wall Street getting a little bit too excited or were there any particular areas that are a little bit weaker was it maybe perhaps Chinese New Year. Can you just talk about that a bit it could be a very simple answer in a sense that maybe we are all too excited, but just curious what you think?

Sure. I think it was just a consumer business the seasonality that we had following a very strong Q4 where consumer was about 45% of our revenues and it also included areas like gaming which have seasonality going into Q1. And we saw, particularly in December, we saw -- we had higher shipments in December than is typical for us. So I think everything combined together, I feel very comfortable with the guidance that we have and constitute here the Street’s expectation.

Well, and I can say that okay all the analysts who cover this they’ll be very, very knowledgeable. And you guys are not silly. When I look at it, I look at the Q1 I would say that in consumers in particularly in the second half of 2003 going up substantially and in the Q1 is a little bit softer. And so, we can’t really -- in that kind of a business we really can’t predict very accurate. So that’s sort of my answer.

Okay. So it seems like consumer is a bit stronger in the fourth quarter, so the sequential comp is a little bit steeper, but it seems like the consumer cycle probably does improve over the course of the year and this is probably the low point just from that standpoint?

Absolutely, because Q2 and Q3 in particular tend to be very strong consumer quarters for us, plus you have all the other growth drivers in all the other areas that also ramp at the same time.

And traditionally in Q1 consumer is -- that's seasonality is the lowest to anyway. And I think that this year would be better than past years and then would have strong consumer content in the past years. But this year I would say that we have a high current product for TV and I think the consumer will continue to grow.

Got it. And there was nothing other than ordinary in terms of Chinese New Year, I mean I know it happens every year, so it shouldn’t be, but I’m just curious if there is any variation there?

I think that may be this year or a little bit slightly earlier than the last years, because I can’t say, I can’t -- this is really a pinpoint. And we do see some of it that implies early shutdowns and that will affect the Q1 revenue particularly in a consumer site. But I don’t see extraordinary will happen.

And as I said, there are stronger shipments in December than is typical could be partly associated with it, but we did not want to necessarily jump to that conclusion.

Understood, thanks very much.

And I’m not showing any further questions at this time. I’d like to turn the call back over to Meera Rao for closing remarks.

Thank you all for joining us for this earnings call. We look forward to talking to you again in April. Thank you. And have a nice day.

Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. And you may all disconnect. Everyone have a good day.