Monolithic Power Systems, Inc.
Jul 31, 2007
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Monolithic Power Systems Announces Record Second Calendar Quarter Revenues, Enters Into Settlement Agreement With Taiwan Sumida

SAN JOSE, Calif., July 31, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- 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 June 30, 2007.

    The results for the quarter ended June 30, 2007 are as follows:
    --  Net revenues of $30.8 million, compared to $26.6 million in the second
        quarter of 2006 and up 26% sequentially from $24.5 million in the
        first quarter of 2007
    --  Gross margin of 63.5%, compared to 63.0% in the second quarter of 2006
        and 63.4% in the first quarter of 2007
    --  GAAP operating expenses of $26.9 million, including $11.2 million for
        research and development and selling, general and administrative,
        $4 million for patent litigation, $9.8 million for a one time legal
        settlement provision, $2.4 million for stock-based compensation and a
        credit of $0.5 million resulting from the sublease of the company's
        Los Gatos property
    --  Non-GAAP(1) operating expenses of $15.2 million, excluding $2.4
        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 loss of $6.4 million, with GAAP EPS of ($0.20) per share
    --  Non-GAAP(1) net income of $4.3 million, or $0.12 per diluted share,
        excluding stock-based compensation, the one-time provision for
        litigation and related tax effects, and including a reversal of the
        lease write-off of $0.5 million that was previously recorded

    The results for the six months ended June 30, 2007 are as follows:
    --  Net revenues of $55.3 million, compared to $51.4 million for the six
        months ended June 30, 2006
    --  Gross margin of 63.5%, compared to 62.6% for the six months ended June
        30, 2006
    --  GAAP operating expenses of $41.9 million, including $21.1 million for
        research and development and selling, general and administrative, $6.9
        million for patent litigation, $9.8 million for a one time legal
        settlement provision, $4.6 million for stock-based compensation and a
        credit of $0.5 million for the sublease of the company's Los Gatos
        property
    --  Non-GAAP(1) operating expenses of $28.0 million, excluding $4.6
        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 loss of $6.3 million, with GAAP EPS of ($0.20) per share
    --  Non-GAAP(1) net income of $7.0 million, or $0.20 per diluted share,
        excluding stock-based compensation, the one-time provision for
        litigation and related tax effects, and including a reversal of the
        lease write-off of $0.5 million that was previously recorded

"MPS recorded our strongest calendar second quarter in the company's history, and we are pleased with the momentum we see in the market," said Michael Hsing, chief executive officer of MPS. "Our existing products are finding new applications and our CCFL inverters are growing with the market again. In addition, we look forward to growth from our new, high current, high voltage products such as the MiniMonster family in future quarters, as these products begin to penetrate additional new applications for MPS."

The company also announced that it had reached a definitive settlement agreement with Taiwan Sumida Corporation (TSE) in its indemnity contract dispute. The company agreed to pay Taiwan Sumida approximately $2.5 million and to place in escrow $7.3 million. The details of the settlement agreement will be disclosed in our 2007 second quarter Form 10-Q.

Business Outlook

The following are MPS' financial targets for the third quarter ending September 30, 2007:

    --  Revenues  in the range of $33 million to $35 million
    --  Gross margin in the upper end of the company's target range of 58% to
        63%
    --  Research and development and selling, general and administrative
        expenses between $14.0 million and $15.5 million. Non-GAAP(1) research
        and development and selling, general and administrative expenses
        between $11.5 million and $12.5 million. This excludes an estimate of
        stock-based compensation expense in the range of $2.5 million to $3.0
        million
    --  Litigation expense in the range of $2.2 million to $2.7 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 six months ending June
        30, 2007 excludes the effect of stock-based compensation expense, a
        one-time provisions 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 six months
        ending June 30, 2007 exclude the effect of stock-based compensation
        expense and the one-time 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 second quarter results at 2:00 p.m. PDT / 5:00 p.m. EDT today, July 31, 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 87093234. 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 MPS' expectations of the market for MPS' products, 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 September 30, 2007. 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 April 27, 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. Any statements by persons outside of MPS speculating on the progress of the quarter or other aspects of MPS' business are not based on internal MPS information and should be assessed accordingly by investors.

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
                    (in thousands, except per share data)

                                                  June 30,        December 31,
                                                     2007              2006
    ASSETS
    Current assets:
      Cash and cash equivalents                    $68,312           $50,816
      Short-term investments                        24,003            27,674
      Accounts receivable, net of allowances of
       $227 in 2007 and 2006                         8,017             9,156
      Inventories                                   11,940             6,738
      Deferred income tax asset - current               --             1,658
      Prepaid expenses and other current assets      3,457             1,118
        Total current assets                       115,729            97,160
    Property and equipment, net                     12,753            11,358
    Deferred income tax asset - long term            1,218                --
    Other assets                                       508               500
    Restricted assets                                8,241             8,309
        Total assets                              $138,449          $117,327

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                              $8,162            $5,909
      Accrued compensation and related benefits      4,942             4,792
      Accrued income tax payable                        --               684
      Accrued liabilities                           19,182             8,737
        Total current liabilities                   32,286            20,122
    Deferred rent                                      370               484
    Non-current income tax liability                 4,550                --
    Long term liabilities                              102             1,769
          Total liabilities                        $37,308           $22,375

    Stockholders' equity:
    Common stock, $0.001 per share par
     value, aggregating $32 and $30 as of
     June 30, 2007 and December 31, 2006,
     respectively; shares authorized:
     150,000; shares issued and
     outstanding: 31,901 and 30,369 as of
     June 30, 2007 and December 31, 2006,
     respectively                                  126,103           113,532

    Deferred stock compensation                       (111)             (487)
    Accumulated other comprehensive loss               (59)             (198)
    Accumulated deficit                            (24,792)          (17,895)
      Total stockholders' equity                   101,141            94,952
      Total liabilities and stockholders'
       equity                                     $138,449          $117,327



                        Consolidated Income Statement
                    (in thousands, except per share data)

                                         Three months ended   Six months ended
                                               June 30,          June 30,
                                              2007     2006     2007     2006


    Revenue                                $30,833  $26,601  $55,329  $51,364
    Cost of revenue*                        11,248    9,833   20,211   19,206

          Gross profit                      19,585   16,768   35,118   32,158
    Operating expenses:
      Research and development*              6,428    5,427   12,360   10,493
      Selling, general and administrative*   7,119    6,699   13,316   14,126
      Lease abandonment                       (496)      --     (496)      --
      Patent litigation settlement           9,800       --      9,800     --
      Patent litigation expense              4,028    2,821    6,875    6,885

          Total operating expenses          26,879   14,947   41,855   31,504

    Income (loss) from operations           (7,294)   1,821   (6,737)     654
    Other income (expense):
      Interest and other income              1,169      626    2,176    1,225
      Interest and other expense               (22)    (110)     (29)    (180)

           Total other income, net            1,147      516    2,147    1,045

    Income (loss) before income taxes       (6,147)   2,337   (4,590)   1,699
    Income tax provision                       227    1,278    1,722    1,047

    Net income (loss)                       (6,374)   1,059   (6,312)     652

    Basic net income (loss) per common
     share                                  $(0.20)   $0.04   $(0.20)   $0.02
    Diluted net income (loss) per common
     share                                  $(0.20)   $0.03   $(0.20)   $0.02

    Weighted average shares used in basic
     net income (loss) per common share     31,382   29,412   30,929   29,126
    Dilutive effect of stock options            --    4,192       --    4,227
    Weighted average shares used in
     diluted net income (loss) per common
     share                                  31,382   33,604   30,929   33,353

    * Stock-based compensation has been
      included in the following line items:
       Cost of revenue                        $113     $147     $224     $288
       Research and development                952    1,346    2,053    2,709
       Selling, general and administrative   1,440    1,596    2,548    2,774
         Total                              $2,505   $3,089   $4,825   $5,771



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

    Net income (loss)                     $(6,374) $1,059  $(6,312)   $652

    Adjustments to reconcile net income
     to non-GAAP net income
      Stock-based compensation             $2,505  $3,089   $4,825  $5,771
      Legal settlements and provision       9,800      --    9,800      --
      Reversal of lease write-off            (540)     --     (540)     --
      Tax effect                           (1,099)   (419)    (801) (1,336)
      Non-GAAP net income                  $4,292  $3,729   $6,972  $5,087

    Non-GAAP earnings per share,
     excluding stock-based compensation
     and related tax effects:
      Basic                                 $0.14   $0.13    $0.23   $0.17
      Diluted                               $0.12   $0.11    $0.20   $0.15

    Shares used in the calculation of
     non-GAAP earnings per share:
      Basic                                31,382  29,412   30,929  29,126
      Diluted                              34,656  33,604   34,230  33,353



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

    Total operating expenses               $26,879  $14,947  $41,855  $31,504

    Adjustments to reconcile total
     operating expenses to non-GAAP total
     operating expenses
        Stock-based compensation           $(2,392) $(2,942) $(4,601) $(5,483)
        Legal settlements and provision     (9,800)      --   (9,800)      --
        Reversal of lease write-off            496       --      496       --
        Non-GAAP total operating expenses  $15,183  $12,005  $27,950  $26,021



                           2007 THIRD 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
                                                       September 30,  2007
                                                     Low               High
    R&D and SG&A                                   $14,000           $15,500

    Adjustments to reconcile R&D and SG&A
     to non-GAAP R&D and SG&A
        Stock-based compensation                    (2,500)           (3,000)
        Non-GAAP R&D and SG&A                      $11,500           $12,500




SOURCE Monolithic Power Systems

Rick Neely, Chief Financial Officer of Monolithic Power Systems, Inc.,
+1-408-826-0777, investors@monolithicpower.com
http://www.monolithicpower.com