Monolithic Power Systems, Inc.
Oct 30, 2007
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Monolithic Power Systems Announces Record Third Quarter Revenues

SAN JOSE, Calif., Oct. 30 /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 quarter ended September 30, 2007.

    The results for the quarter ended September 30, 2007 are as follows:

    -- Net revenues of $40.2 million, compared to $27.3 million in the third
       quarter of 2006 and up 30% sequentially from $30.8 million in the
       second quarter of 2007
    -- Gross margin of 63.5%, compared to 65.6% in the third quarter of 2006
       and 63.5% in the second quarter of 2007
    -- GAAP operating expenses of $17.0 million, including $15.5 million for
       research and development and selling, general and administrative
       expenses, which includes $3.1 million for stock-based compensation, and
       $1.5 million for patent litigation
    -- Non-GAAP(1) operating expenses of $13.9 million, excluding $3.1 million
       for stock-based compensation
    -- Net income of $8.3 million, with GAAP EPS of $0.23 per diluted share
    -- Non-GAAP(1) net income of $9.7 million, or $0.27 per diluted share,
       excluding stock-based compensation and related tax effects


    The results for the nine months ended September 30, 2007 are as follows:

    -- Net revenues of $95.5 million, compared to $78.6 million for the nine
       months ended September 30, 2006, an increase of 21.5%
    -- Gross margin of 63.5%, compared to 63.6% for the nine months ended
       September 30, 2006
    -- GAAP operating expenses of $58.9 million, including $41.3 million for
       research and development and selling, general and administrative
       expenses, which includes $7.7 million for stock-based compensation,
       $8.3 million for patent litigation, a $9.8 million provision for
       litigation, and a credit of $0.5 million for the sublease of the
       company's Los Gatos property
    -- Non-GAAP(1) operating expenses of $41.9 million, excluding $7.7 million
       for stock-based compensation and a $9.8 million provision for
       litigation, and including a reversal of the lease write-off of
       $0.5 million
    -- Net income of $2.0 million, with GAAP EPS of $0.06 per diluted share
    -- Non-GAAP(1) net income of $16.7 million, or $0.48 per diluted share,
       excluding stock-based compensation, the provision for litigation and
       related tax effects, and including a reversal of the lease write-off
       that was previously recorded

"MPS had a great third quarter, as all of our product lines grew above our expectations, and we saw excellent strength in the notebook computers, flat panel TV's and consumer accessories end markets," said Michael Hsing, chief executive officer of MPS. "We are also starting to see the benefit of our new product lines, such as battery chargers, LDOs and MiniMonsters, in our revenue base. We expect to continue to introduce innovative products using our leading technologies in the coming quarters".

Business Outlook

The following are MPS' financial targets for the fourth quarter ending December 31, 2007:

    -- Revenues in the range of $37 million to $39 million
    -- Gross margin in the upper end of the company's target range of 60% to
       63%
    -- Research and development and selling, general and administrative
       expenses between $15.5 million and $17.0 million. Non-GAAP(1) research
       and development and selling, general and administrative expenses
       between $12.5 million and $13.5 million. This excludes an estimate of
       stock-based compensation expense in the range of $3.0 million to
       $3.5 million
    -- Litigation expense in the range of $1.5 million to $1.8 million


    (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 three and nine months ending
        September 30, 2007 excludes the effect of stock-based compensation
        expense and related tax effects, a provision for litigation and
        related tax effects, and includes a reversal of the lease write-off
        that was recorded previously. Non-GAAP operating expenses for the
        three and nine months ending September 30, 2007 exclude the effect of
        stock-based compensation expense and the provision for litigation and
        includes a reversal of the 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 third quarter results at 2:00 p.m. PDT / 5:00 p.m. EDT today, October 30, 2007. The call will be webcast at http://www.monolithicpower.com/cmp_02_inv_rel.htm. 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 51920952. 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 net revenues, gross margin, GAAP and non-GAAP research and development and selling, general and administrative expenses, stock-based compensation expense and litigation expenses for the three months ending December 31, 2007, continuing market acceptance of new products and the future introduction of new 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 change 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 August 1, 2007.

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. MiniMonster is a Trademark of Monolithic Power Systems, Inc.


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

                                               September 30,      December 31,
                                                     2007              2006
    ASSETS
    Current assets:
      Cash and cash equivalents                    $77,408           $50,816
      Short-term investments                        24,383            27,674
      Accounts receivable, net of
       allowances of $227 in 2007 and 2006          12,771             9,156
      Inventories                                   15,837             6,738
      Deferred income tax asset-current                  -             1,658
      Prepaid expenses and other current
       assets                                        3,555             1,118
        Total current assets                       133,954            97,160
    Property and equipment, net                     13,723            11,358
    Deferred income tax asset-long term              1,068                 -
    Other assets                                       532               500
    Restricted assets                                8,281             8,309
      Total assets                                $157,558          $117,327

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                             $10,050            $5,909
      Accrued compensation and related
       benefits                                      6,901             4,792
      Accrued income tax payable                         -               684
      Accrued liabilities                           15,701             8,737
        Total current liabilities                   32,652            20,122
    Deferred rent                                      304               484
    Non-current income tax liability                 4,494                 -
    Long term liabilities                              152             1,769
        Total liabilities                          $37,602           $22,375

    Stockholders' equity:
      Common stock, $0.001 per share par
       value, aggregating $33 and $30 as of
       September 30, 2007 and December 31,
       2006, respectively; shares authorized:
       150,000; shares issued and outstanding:
       32,755 and 30,369 as of September 30,
       2007 and December 31, 2006, respectively    136,400           113,532
      Deferred stock compensation                      (32)             (487)
      Accumulated other comprehensive
       income (loss)                                   110              (198)
      Accumulated deficit                          (16,522)          (17,895)
          Total stockholders' equity               119,956            94,952
          Total liabilities and stockholders'
           equity                                 $157,558          $117,327



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

                                          Three Months Ended Nine months ended
                                             September 30,     September 30,
                                             2007     2006     2007     2006

    Revenue                                $40,188  $27,255  $95,517  $78,619
    Cost of revenue*                        14,662    9,382   34,874   28,588

        Gross profit                        25,526   17,873   60,643   50,031
    Operating expenses:
      Research and development*              7,489    5,897   19,849   16,391
      Selling, general and administrative*   8,071    6,877   21,387   21,003
      Lease abandonment                        -        -       (496)     -
      Patent litigation settlement             -      3,000    9,800    3,000
      Patent litigation expense              1,452    2,765    8,328    9,650

        Total operating expenses            17,012   18,539   58,868   50,044

    Income (loss) from operations            8,514     (666)   1,775      (13)
    Other income (expense):
      Interest and other income              1,223      662    3,399    1,887
      Interest and other expense                 8      (71)     (21)    (251)

        Total other income, net              1,231      591    3,378    1,636

    Income (loss) before income taxes        9,745      (75)   5,153    1,623
    Income tax provision                     1,475    1,797    3,197    2,844

    Net income (loss)                       $8,270  $(1,872)  $1,956  $(1,221)
    Basic net income (loss) per common
     share                                   $0.26   $(0.06)   $0.06   $(0.04)
    Diluted net income (loss) per common
     share                                   $0.23   $(0.06)   $0.06   $(0.04)

    Weighted average shares used in basic
     net income (loss) per common share     31,995   29,736   31,293   29,335
    Weighted average shares used in
     diluted net income (loss) per common
     share                                  35,953   29,736   34,990   29,335

    * Stock-based compensation has been
       included in the following line items:
        Cost of revenue                       $149     $121     $373     $409
        Research and development             1,326    1,330    3,379    4,039
        Selling, general and
         administrative                      1,748    1,518    4,296    4,292
            Total                           $3,223   $2,969   $8,048   $8,740

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

    Net income (loss)                       $8,270  $(1,872)  $1,956  $(1,221)

    Adjustments to reconcile net income to
     non-GAAP net income
        Stock-based compensation            $3,223   $2,969   $8,048   $8,740
        Patent litigation settlement           -      3,000    9,800    3,000
        Reversal of lease write-off            -        -       (540)     -
        Tax effect                          (1,767)    (207)  (2,568)  (1,208)
        Non-GAAP net income                 $9,726   $3,890  $16,695   $9,311

    Non-GAAP earnings per share, excluding
     stock-based compensation and related
     tax effects:
        Basic                                $0.30    $0.13    $0.53    $0.32
        Diluted                              $0.27    $0.12    $0.48    $0.28

    Shares used in the calculation of
     non-GAAP earnings per share:
        Basic                               31,995   29,736   31,293   29,335
        Diluted                             35,953   32,296   34,990   33,163


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

    Total operating expenses               $17,012  $18,539  $58,868  $50,044

    Adjustments to reconcile total
     operating expenses to non-GAAP total
     operating expenses
        Stock-based compensation           $(3,074) $(2,848) $(7,675) $(8,331)
        Patent litigation settlement           -     (3,000)  (9,800)  (3,000)
        Reversal of lease write-off            -        -        540      -
        Non-GAAP total operating expenses  $13,938  $12,691  $41,933  $38,713



                         2007 Fourth Quarter Outlook

  RECONCILIATION OF R&D AND SG&A EXPENSES TO NON-GAAP R&D AND SG&A EXPENSES
                   (in thousands, except per share amounts)

                                          Three months ended December 31, 2007
                                                   Low               High
    R&D and SG&A                                 $15,500           $17,000

    Adjustments to reconcile R&D and SG&A
     to non-GAAP R&D and SG&A
        Stock-based compensation                  (3,000)           (3,500)
        Non-GAAP R&D and SG&A                    $12,500           $13,500

SOURCE  Monolithic Power Systems, Inc.