Monolithic Power Systems, Inc.
Oct 23, 2008
PDF

Monolithic Power Systems Announces Record Third Quarter Revenue and Net Income Results

SAN JOSE, Calif., Oct. 23 /PRNewswire-FirstCall/ -- Monolithic Power Systems (MPS) (Nasdaq: MPWR), a leading fabless manufacturer of high- performance analog and mixed-signal semiconductors, today announced financial results for the three and nine months ended September 30, 2008.

The results for the quarter ended September 30, 2008 are as follows:

The results for the nine months ended September 30, 2008 are as follows:

"MPS saw very strong results this quarter, particularly in our DC to DC product segment," said Michael Hsing, chief executive officer and founder of MPS. "We are well-positioned to continue to capture opportunities in this market with our tremendous slate of new products. As our revenue approached $50M this quarter, MPS is becoming a major player in the Power Management segment of the analog semiconductor market."

"While MPS has been doing well and we continue to deliver innovative products, we recognize that the last few weeks have seen a deterioration in general demand for electronic products, as a result of the worldwide financial crisis and associated macro-economic slowdown. Despite excellent execution, MPS is affected by the current economic crisis. For the fourth quarter of 2008, our normal seasonality in the consumer segment typically means that the fourth quarter is somewhat down sequentially from the third quarter. We have noticed some cancelations and delays in new projects. On the other hand, we also see many of our new products starting to ramp up to volume production. Therefore, our fourth quarter revenue is very uncertain compared with prior years. Our fourth quarter revenue guidance is in a wider range of 39 to 43 million dollars," said Mr. Hsing.

Business Outlook

The following are MPS' financial targets for the fourth quarter ending December 31, 2008:

(1) Non-GAAP net income, non-GAAP operating expenses and non-GAAP research and development and selling, general and administrative expense differ from net income, operating expenses, and research and development and selling, general and administrative expense determined in accordance with GAAP (Generally Accepted Accounting Principles in the United States). Non-GAAP net income for the quarter and nine months ended September 30, 2008 and 2007 excludes the effect of stock-based compensation expense and a patent litigation settlement amount and their related tax effects. Non-GAAP operating expenses for the quarter and nine months ended September 30, 2008 and 2007 exclude the effect of stock-based compensation expense and a patent litigation settlement amount, and include a reversal of our lease write-off that was recorded previously. Projected non-GAAP research and development and selling, general and administrative expenses exclude the effect of stock-based compensation expense and related tax effects. A schedule reconciling these amounts is included in this news release. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. 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 financials measures used by MPS.

Conference Call

MPS plans to conduct a management teleconference covering its three and nine months ended September 30, 2008 results at 2:00 p.m. PT / 5:00 p.m. ET today, October 23, 2008. To access the conference call and following replay, go to http://ir.monolithicpower.com and click 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 617-801-6888, code number 46174185. This press release and any other information related to the call will also be posted on the website.

Safe Harbor Statement

This press release contains forward-looking statements regarding targeted revenues, gross margin, GAAP and non-GAAP research and development and selling, general and administrative expenses, stock-based compensation expense and litigation expense for the three months ending December 31, 2008, our positioning to capture opportunities in the market in which we operate and volume production ramp up of certain products. These 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 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. Factors that could cause actual results to differ include, but are not limited to, the risks, uncertainties and costs of litigation in which the company is involved; the outcome of any upcoming trials, hearings, motions, and appeals; any market disruptions or interruptions in MPS' schedule of new product release development; adverse changes in production and testing efficiency; adverse changes in government regulations in foreign countries where MPS has offices; acceptance of, or demand for, MPS' products being lower than expected; the adverse impact on MPS' financial performance if its tax and litigation provisions are inadequate; difficulty in predicting or budgeting for future expenses and financial contingencies; and other important risk factors identified in MPS' SEC filings, including, but not limited to, its Form 10-Q filed on July 31, 2008.

The forward-looking statements in this press release represent MPS' targets, 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 Systems, Inc.

Monolithic Power Systems, Inc. (MPS) develops and markets proprietary, advanced analog and mixed-signal semiconductors. The company combines advanced process technology with its highly experienced analog designers to produce high-performance power management integrated circuits (ICs) for DC to DC converters, LED drivers, Cold Cathode Fluorescent Lamp (CCFL) backlight controllers, Class D audio amplifiers, and Linear ICs. MPS products are used extensively in computing and network communications products, LCD monitors and TVs, and a wide variety of consumer and portable electronics products. MPS partners with world-class manufacturing organizations to deliver top quality, ultra-compact, high-performance solutions through the most productive, cost- efficient channels. Founded in 1997 and headquartered in San Jose, California, the company has expanded its global presence with sales offices in Taiwan, China, Korea, Japan, and Europe, which operate under MPS International, Ltd.

    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.



                          Consolidated Balance Sheet
                 (Unaudited, in thousands, except par value)

                                                September 30,     December 31,
                                                    2008              2007
    ASSETS
    Current assets:
      Cash and cash equivalents                    $75,917           $83,114
      Short-term investments                         8,711            27,765
      Accounts receivable, net of
       allowances of $0 in 2008 and $227 in
       2007                                         18,781             8,239
      Inventories                                   22,305            17,487
      Deferred income tax asset-current                 76                72
      Prepaid expenses and other current
       assets                                        3,840             4,733
      Restricted assets                             13,512             7,350
      Total current assets                         143,142           148,760
    Property and equipment, net                     14,474            14,175
    Long-term investments                           36,825                 -
    Deferred income tax asset-long term                776               776
    Other assets                                       598               539
    Restricted assets                                    7             8,340
        Total assets                              $195,822          $172,590

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                              $8,155            $6,154
      Accrued compensation and related
       benefits                                      6,377             8,299
      Accrued liabilities                           14,150            14,959
        Total current liabilities                   28,682            29,412

    Deferred rent and other liabilities                 38               323
    Non-current income tax liability                 5,316             5,318
        Total liabilities                           34,036            35,053
    Stockholders' equity:
    Common stock, $0.001 par value, $34
     and $33 in 2008 and 2007,
     respectively; shares authorized:
     150,000,000; shares issued and
     outstanding: 33,927,788 and
     33,454,595 in 2008 and 2007,
     respectively                                  148,353           143,890
    Deferred stock compensation                          -                (3)
    Retained earnings (accumulated
     deficit)                                       14,178            (6,815)
    Accumulated other comprehensive
     income (loss)                                    (745)              465
      Total stockholders' equity                   161,786           137,537
      Total liabilities and stockholders'
       equity                                     $195,822          $172,590


                        Consolidated Income Statement
             (Unaudited, in thousands, except per share amounts)

                                         Three months ended  Nine months ended

                                                 September          September
                                                  30, 2007           30, 2007
                                                    (as                (as
                                                  restated,          restated,
                                         September see Note September see Note
                                          30, 2008    10)    30, 2008    10)



    Revenue                               $48,891  $40,188  $125,802  $95,517
    Cost of revenue*                       18,201   14,662    46,620   34,873

        Gross profit                       30,690   25,526    79,182   60,644
    Operating expenses:
      Research and development*             9,420    7,489    25,594   19,849
      Selling, general and
       administrative*                      9,560    8,071    27,200   21,387
      Lease abandonment                       -        -         -       (496)
      Patent litigation settlement            -        -         -      9,800
      Provision for litigation expense      1,090    1,452     6,120    8,327

        Total operating expenses           20,070   17,012    58,914   58,867

    Income from operations                 10,620    8,514    20,268    1,777
    Other income (expense):
      Interest and other income               684    1,223     2,928    3,399
      Interest and other expense             (389)       8      (507)     (21)

        Total other income, net               295    1,231     2,421    3,378

    Income before income taxes             10,915    9,745    22,689    5,155
    Income tax provision                      458      752     1,697    2,857

    Net income                            $10,457   $8,993   $20,992   $2,298
    Basic net income per share              $0.31    $0.28     $0.63    $0.07
    Diluted net income per share            $0.29    $0.25     $0.58    $0.07

    Weighted average common shares
     outstanding                           33,869   31,995    33,482   31,293
    Stock options and restricted stock      2,733    3,958     2,850    3,697
    Diluted weighted-average common
     equivalent shares outstanding         36,602   35,953    36,332   34,990

    * Stock-based compensation has
     been included in the following
     line items:
        Cost of revenue                       $76     $149      $249     $373
        Research and development            1,471    1,326     4,074    3,379
        Selling, general and
         administrative                     1,787    1,748     5,141    4,296
            Total                          $3,334   $3,223    $9,464   $8,048



             RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
                   (in thousands, except per share amounts)

    Net income                              $10,457  $8,993  $20,992   $2,298

    Adjustments to reconcile net income to
     non-GAAP net income
        Stock-based compensation             $3,334  $3,223   $9,464   $8,048
        Patent litigation settlement            -       -        -      9,800
        Reversal of lease write-off             -       -        -       (540)
        Tax effect                           (1,679) (2,490)  (3,603)  (3,108)
        Non-GAAP net income                 $12,112  $9,726  $26,853  $16,498

    Non-GAAP earnings per share, excluding
     stock-based compensation and related
     tax effects:
        Basic                                 $0.36   $0.30    $0.80    $0.53
        Diluted                               $0.33   $0.27    $0.74    $0.47

    Shares used in the calculation of non-
     GAAP earnings per share:
        Basic                                33,869  31,995   33,482   31,293
        Diluted                              36,602  35,953   36,332   34,990



               RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP
                              OPERATING EXPENSES
                   (in thousands, except per share amounts)

    Total operating expenses               $20,070  $17,012  $58,914  $58,867

    Adjustments to reconcile total
     operating expenses to non-GAAP total
     operating expenses
        Stock-based compensation           $(3,258) $(3,074) $(9,215) $(7,675)
        Patent litigation settlement           -        -        -     (9,800)
        Reversal of lease write-off            -        -        -        496
        Non-GAAP total operating expenses  $16,812  $13,938  $49,699  $41,888



                         2008 Fourth Quarter Outlook

    RECONCILIATION OF R&D AND SG&A EXPENSES TO NON-GAAP R&D AND SG&A EXPENSES
                                 (in thousands)

                                                      Three months ended
                                                       December 31, 2008
                                                     Low               High
    R&D and SG&A                                   $18,600           $19,600

    Adjustments to reconcile R&D and SG&A
     to non-GAAP R&D and SG&A
        Stock-based compensation                    (3,400)           (3,800)
        Non-GAAP R&D and SG&A                      $15,200           $15,800

SOURCE Monolithic Power Systems