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Monolithic Power Systems Announces Results for the Second Quarter Ended June 30, 2018

July 25, 2018 4:01 PM

SAN JOSE, Calif., July 25, 2018 (GLOBE NEWSWIRE) -- Monolithic Power Systems, Inc. (MPS) (Nasdaq: MPWR), a leading company in high performance analog solutions, today announced financial results for the quarter ended June 30, 2018.

The results for the quarter ended June 30, 2018 are as follows:

The results for the six months ended June 30, 2018 are as follows:

The following is a summary of revenue by end market for the periods indicated (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
End Market 2018 2017 2018 2017
Consumer $47,809 $43,917 $94,953 $79,528
Computing and storage 36,957 24,466 67,927 45,083
Automotive 20,340 12,854 38,072 25,185
Industrial 19,121 15,034 36,676 30,388
Communications 15,534 15,927 31,283 32,376
Total $139,761 $112,198 $268,911 $212,560

The following is a summary of revenue by product family for the periods indicated (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
Product Family 2018 2017 2018 2017
DC to DC $127,496 $102,187 $246,765 $193,611
Lighting Control 12,265 10,011 22,146 18,949
Total $139,761 $112,198 $268,911 $212,560

“We are continuing to execute our long-term business strategy, which we believe will maximize long-term shareholder value," said Michael Hsing, CEO and founder of MPS.

Business Outlook

The following are MPS’ financial targets for the third quarter ending September 30, 2018:

(1) Non-GAAP net income, non-GAAP earnings per share, non-GAAP gross margin, non-GAAP R&D and SG&A expenses, non-GAAP operating expenses, non-GAAP interest and other income, net, non-GAAP operating income and non-GAAP income before taxes differ from net income, earnings per share, gross margin, R&D and SG&A expenses, operating expenses, interest and other income, net, operating income and income before taxes determined in accordance with Generally Accepted Accounting Principles in the United States (GAAP). Non-GAAP net income and non-GAAP earnings per share exclude the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, deferred compensation plan income/expense and related tax effects. Non-GAAP gross margin excludes the effect of stock-based compensation expense and amortization of acquisition-related intangible assets. Non-GAAP operating expenses exclude the effect of stock-based compensation expense and deferred compensation plan income/expense. Non-GAAP interest and other income, net excludes the effect of deferred compensation plan income/expense. Non-GAAP operating income excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets and deferred compensation plan income/expense. Non-GAAP income before taxes excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets and deferred compensation plan income/expense. Projected non-GAAP gross margin excludes the effect of stock-based compensation expense and amortization of acquisition-related intangible assets. Projected non-GAAP R&D and SG&A expenses exclude the effect of stock-based compensation expense. 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 schedule reconciling non-GAAP financial measures is included at the end of this press release. MPS utilizes both GAAP and non-GAAP financial measures to assess what it believes to be its core operating performance and to evaluate and manage its internal business and assist in making financial operating decisions. MPS believes that the inclusion of non-GAAP financial measures, together with GAAP measures, provides investors with an alternative presentation useful to investors' understanding of MPS' core operating results and trends. Additionally, MPS believes that the inclusion of non-GAAP measures, together with GAAP measures, provides investors with an additional dimension of comparability to similar companies. However, investors should be aware that non-GAAP financial measures utilized by other companies are not likely to be comparable in most cases to the non-GAAP financial measures used by MPS.

Conference CallMPS plans to conduct an investor teleconference covering its financial results at 2:00 p.m. PT / 5:00 p.m. ET, July 25, 2018. To access the conference call and the following replay of the conference call, go to http://ir.monolithicpower.com and click on the webcast link. From this site, you can listen to the teleconference, assuming that your computer system is configured properly. In addition to the webcast replay, which will be archived for all investors for one year on the MPS website, a phone replay will be available for seven days after the live call at (404) 537-3406, code number 4579634. This press release and any other information related to the call will also be posted on the website.

Safe Harbor StatementThis press release contains, and statements that will be made during the accompanying teleconference will contain, forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including, among other things, (i) projected revenues, GAAP and non-GAAP gross margin, GAAP and non-GAAP R&D and SG&A expenses, stock-based compensation expenses, amortization of acquisition-related intangible assets, interest and other income, and diluted shares outstanding, (ii) our outlook for the long-term prospects of the company, including our performance against our business plan, revenue growth in certain of our market segments, our continued investment into R&D, expected revenue growth, customers' acceptance of our new product offerings, the prospects of our new product development, and our expectations regarding market and industry segment trends and prospects, (iii) our ability to penetrate new markets and expand our market share, (iv) the seasonality of our business, (v) our ability to reduce our expenses, (vi) the impact of the 2017 Tax Act on our tax rate and provision; and (vii) statements of the assumptions underlying or relating to any statement described in (i), (ii), (iii), (iv), (v), or (vi). These forward-looking statements are not historical facts or guarantees of future performance or events, are based on current expectations, estimates, beliefs, assumptions, goals, and objectives, and involve significant known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results expressed by these statements. Readers of this press release and listeners to the accompanying conference call are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Factors that could cause actual results to differ include, but are not limited to, our ability to attract new customers and retain existing customers; acceptance of, or demand for, MPS' products, in particular the new products launched recently, being different than expected; our ability to efficiently and effectively develop new products and receive a return on our R&D expense investment; competition generally and the increasingly competitive nature of our industry; any market disruptions or interruptions in MPS' schedule of new product development releases; adverse changes in production and testing efficiency of our products; our ability to realize the anticipated benefits of companies and products that we acquire, and our ability to effectively and efficiently integrate these acquired companies and products into our operations; our ability to manage our inventory levels; adverse changes in laws and government regulations, including in foreign countries where MPS has offices or operations; adverse events arising from orders of governmental entities, including such orders that impact our customers, and adopting of new or amended accounting standards; the effect of catastrophic events; adequate supply of our products from our third-party manufacturing partners; the risks, uncertainties and costs of litigation in which we are involved; the outcome of any upcoming trials, hearings, motions and appeals; the adverse impact on MPS' financial performance if its tax and litigation provisions are inadequate; adverse changes or developments in the semiconductor industry generally, which is cyclical in nature; difficulty in predicting or budgeting for future customer demand and channel inventories, expenses and financial contingencies; the ongoing consolidation of companies in the semiconductor industry; and other important risk factors identified in MPS' Securities and Exchange Commission (SEC) filings, including, but not limited to, our annual report on Form 10-K filed with the SEC on March 1, 2018 and our quarterly report on Form 10-Q filed with the SEC on May 8, 2018. The forward-looking statements in this press release and statements made during the accompanying teleconference represent MPS' projections and current expectations, as of the date hereof, not predictions of actual performance. MPS assumes no obligation to update the information in this press release or in the accompanying conference call.

About Monolithic Power SystemsMonolithic Power Systems, Inc. (MPS) provides small, highly energy efficient, easy-to-use power solutions for systems found in industrial applications, telecom infrastructures, cloud computing, automotive, and consumer applications. MPS' mission is to reduce total energy consumption in its customers' systems with green, practical, compact solutions. The company was founded by Michael Hsing in 1997 and is based in the United States. MPS can be contacted through its website at www.monolithicpower.com or its support offices around the world.

Monolithic Power Systems, MPS, and the MPS logo are registered trademarks of Monolithic Power Systems, Inc. in the U.S. and trademarked in certain other countries.

Contact:Bernie BlegenChief Financial OfficerMonolithic Power Systems, Inc.408-826-0777[email protected]

Monolithic Power Systems, Inc.Condensed Consolidated Balance Sheets(Unaudited, in thousands, except par value)
June 30, December 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents$ 83,075 $ 82,759
Short-term investments 230,428 216,331
Accounts receivable 53,460 38,037
Inventories 128,909 99,281
Other current assets 13,974 12,762
Total current assets 509,846 449,170
Property and equipment, net 150,658 144,636
Long-term investments 5,247 5,256
Goodwill 6,571 6,571
Acquisition-related intangible assets, net 504 951
Deferred tax assets, net 15,791 15,917
Other long-term assets 31,335 30,068
Total assets$ 719,952 $ 652,569
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$ 26,689 $ 22,813
Accrued compensation and related benefits 15,604 15,597
Accrued liabilities 33,033 27,507
Total current liabilities 75,326 65,917
Income tax liabilities 30,735 31,621
Other long-term liabilities 34,871 33,024
Total liabilities 140,932 130,562
Commitments and contingencies
Stockholders' equity:
Common stock and additional paid-in capital, $0.001 par value; shares authorized:
150,000; shares issued and outstanding: 42,285 and 41,614
as of June 30, 2018 and December 31, 2017, respectively 417,866 376,586
Retained earnings 162,859 143,608
Accumulated other comprehensive income (loss) (1,705) 1,813
Total stockholders’ equity 579,020 522,007
Total liabilities and stockholders’ equity$ 719,952 $ 652,569

Monolithic Power Systems, Inc.Condensed Consolidated Statements of Operations(Unaudited, in thousands, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Revenue $ 139,761 $ 112,198 $ 268,911 $ 212,560
Cost of revenue 62,197 50,773 119,852 96,293
Gross profit 77,564 61,425 149,059 116,267
Operating expenses:
Research and development 23,481 20,292 45,091 39,186
Selling, general and administrative 28,561 25,873 55,879 47,965
Litigation expense 640 290 1,171 576
Total operating expenses 52,682 46,455 102,141 87,727
Income from operations 24,882 14,970 46,918 28,540
Interest and other income, net 2,232 1,237 2,673 2,618
Income before income taxes 27,114 16,207 49,591 31,158
Income tax provision 2,908 1,193 3,529 1,668
Net income $ 24,206 $ 15,014 $ 46,062 $ 29,490
Net income per share:
Basic$ 0.57 $ 0.36 $ 1.09 $ 0.72
Diluted$ 0.55 $ 0.35 $ 1.04 $ 0.68
Weighted-average shares outstanding:
Basic 42,237 41,323 42,079 41,185
Diluted 44,400 43,397 44,341 43,332
Cash dividends declared per common share$ 0.30 $ 0.20 $ 0.60 $ 0.40
SUPPLEMENTAL FINANCIAL INFORMATION
STOCK-BASED COMPENSATION EXPENSE
(Unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Cost of revenue$ 480 $ 452 $ 913 $ 810
Research and development 4,194 3,961 8,188 7,459
Selling, general and administrative 11,218 10,714 21,820 18,520
Total stock-based compensation expense$ 15,892 $ 15,127 $ 30,921 $ 26,789
RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
(Unaudited, in thousands, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Net income $ 24,206 $ 15,014 $ 46,062 $ 29,490
Net income as a percentage of revenue 17.3% 13.4% 17.1% 13.9%
Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation expense 15,892 15,127 30,921 26,789
Amortization of acquisition-related intangible assets 197 513 447 1,026
Deferred compensation plan (income) expense (9) 70 40 141
Tax effect (332) (1,201) (2,546) (2,766)
Non-GAAP net income$ 39,954 $ 29,523 $ 74,924 $ 54,680
Non-GAAP net income as a percentage of revenue 28.6% 26.3% 27.9% 25.7%
Non-GAAP net income per share:
Basic$ 0.95 $ 0.71 $ 1.78 $ 1.33
Diluted$ 0.90 $ 0.68 $ 1.69 $ 1.26
Shares used in the calculation of non-GAAP net income per share:
Basic 42,237 41,323 42,079 41,185
Diluted 44,400 43,397 44,341 43,332
RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Gross profit$ 77,564 $ 61,425 $ 149,059 $ 116,267
Gross margin 55.5% 54.7% 55.4% 54.7%
Adjustments to reconcile gross profit to non-GAAP gross profit:
Stock-based compensation expense 480 452 913 810
Amortization of acquisition-related intangible assets 197 513 447 1,026
Non-GAAP gross profit$ 78,241 $ 62,390 $ 150,419 $ 118,103
Non-GAAP gross margin 56.0% 55.6% 55.9% 55.6%
RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
(Unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Total operating expenses$ 52,682 $ 46,455 $ 102,141 $ 87,727
Adjustments to reconcile total operating expenses to non-GAAP total operating expenses:
Stock-based compensation expense (15,412) (14,675) (30,008) (25,979)
Deferred compensation plan expense (410) (603) (273) (1,407)
Non-GAAP operating expenses$ 36,860 $ 31,177 $ 71,860 $ 60,341
RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME
(Unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Total operating income$ 24,882 $ 14,970 $ 46,918 $ 28,540
Operating income as a percentage of revenue 17.8% 13.3% 17.4% 13.4%
Adjustments to reconcile total operating income to non-GAAP total operating income:
Stock-based compensation expense 15,892 15,127 30,921 26,789
Amortization of acquisition-related intangible assets 197 513 447 1,026
Deferred compensation plan expense 410 603 273 1,407
Non-GAAP operating income$ 41,381 $ 31,213 $ 78,559 $ 57,762
Non-GAAP operating income as a percentage of revenue 29.6% 27.8% 29.2% 27.2%
RECONCILIATION OF INTEREST AND OTHER INCOME, NET, TO NON-GAAP INTEREST AND OTHER INCOME, NET
(Unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Total interest and other income, net$ 2,232 $ 1,237 $ 2,673 $ 2,618
Adjustments to reconcile interest and other income to non-GAAP interest and other income:
Deferred compensation plan income (419) (533) (233) (1,266)
Non-GAAP interest and other income, net$ 1,813 $ 704 $ 2,440 $ 1,352
RECONCILIATION OF INCOME BEFORE INCOME TAXES TO NON-GAAP INCOME BEFORE INCOME TAXES
(Unaudited, in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Total income before income taxes$ 27,114 $ 16,207 $ 49,591 $ 31,158
Adjustments to reconcile income before income taxes to non-GAAP income before income taxes:
Stock-based compensation expense 15,892 15,127 30,921 26,789
Amortization of acquisition-related intangible assets 197 513 447 1,026
Deferred compensation plan (income) expense (9) 70 40 141
Non-GAAP income before income taxes$ 43,194 $ 31,917 $ 80,999 $ 59,114

2018 THIRD QUARTER OUTLOOK
RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Unaudited)
Three Months Ending
September 30, 2018
Low High
Gross margin 55.2% 56.2%
Adjustments to reconcile gross margin to non-GAAP gross margin:
Stock-based compensation expense 0.3% 0.3%
Amortization of acquisition-related intangible assets 0.1% 0.1%
Non-GAAP gross margin 55.6% 56.6%
RECONCILIATION OF R&D AND SG&A EXPENSES TO NON-GAAP R&D AND SG&A EXPENSES
(Unaudited, in thousands)
Three Months Ending
September 30, 2018
Low High
R&D and SG&A expense$ 52,300 $ 57,300
Adjustments to reconcile R&D and SG&A expense to non-GAAP R&D and SG&A expense:
Stock-based compensation expense (14,500) (16,500)
Non-GAAP R&D and SG&A expense$ 37,800 $ 40,800

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Source: Monolithic Power Systems, Inc.

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