Monolithic Power Systems, Inc.
Oct 24, 2013
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Monolithic Power Systems Announces Results for the Third Quarter Ended September 30, 2013

SAN JOSE, Calif., Oct. 24, 2013 /PRNewswire/ -- 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, 2013.

The results for the quarter ended September 30, 2013 are as follows:

  • Net revenue was $65.3 million, a 13.2% increase from $57.7 million in the second quarter of 2013 and a 15.6% increase from $56.5 million in the third quarter of 2012.
  • Gross margin was 54.0%, compared with 53.6% in the second quarter of 2013 and 53.1% in the third quarter of 2012.
  • GAAP operating expenses were $26.6 million, including $26.5 million for research and development (R&D) and selling, general and administrative (SG&A) expenses, which included $5.1 million for stock-based compensation and deferred compensation plan expenses, and $0.1 million for litigation expenses. Comparatively, for the quarter ended September 30, 2012, GAAP operating expenses were $23.7 million, including $23.9 million for R&D and SG&A expenses, which included $4.1 million for stock-based compensation expenses, and $(0.2) million for litigation benefit.
  • Non-GAAP(1) operating expenses were $21.6 million, excluding $5.1 million for stock-based compensation and deferred compensation plan expenses, compared with $19.6 million, excluding $4.1 million for stock-based compensation expenses, for the quarter ended September 30, 2012.
  • GAAP net income was $7.4 million and GAAP earnings per share were $0.19 per diluted share. Comparatively, GAAP net income was $5.9 million and GAAP earnings per share were $0.16 per diluted share for the quarter ended September 30, 2012.
  • Non-GAAP(1) net income was $12.8 million and non-GAAP earnings per share were $0.33 per diluted share, excluding stock-based compensation and deferred compensation plan expenses and related tax effects, compared with non-GAAP net income of $9.9 million and non-GAAP earnings per share of $0.27 per diluted share, excluding stock-based compensation expenses and related tax effects, for the quarter ended September 30, 2012.

The results for the nine months ended September 30, 2013 are as follows:

  • Net revenue was $174.5 million, a 5.4% increase from $165.6 million for the nine months ended September 30, 2012.
  • Gross margin was 53.6%, compared with 52.9% for the nine months ended September 30, 2012.
  • GAAP operating expenses were $77.7 million, including $78.2 million for R&D and SG&A expenses, which included $14.6 million for stock-based compensation and deferred compensation plan expenses, and $(0.5) million for litigation benefit. Comparatively, for the nine months ended September 30, 2012, GAAP operating expenses were $71.3 million, including $71.6 million for R&D and SG&A expenses, which included $11.0 million for stock-based compensation expenses, and $(0.3) million for litigation benefit.
  • Non-GAAP(1) operating expenses were $63.1 million, excluding $14.6 million for stock-based compensation and deferred compensation plan expenses, compared with $60.3 million, excluding $11.0 million for stock-based compensation expenses, for the nine months ended September 30, 2012.
  • GAAP net income was $15.4 million and GAAP earnings per share were $0.40 per diluted share. Comparatively, GAAP net income was $15.5 million and GAAP earnings per share were $0.43 per diluted share for the nine months ended September 30, 2012.
  • Non-GAAP(1) net income was $28.5 million and non-GAAP earnings per share were $0.74 per diluted share, excluding stock-based compensation and deferred compensation plan expenses, a one-time cash award and related tax effects, compared with non-GAAP net income of $26.1 million and non-GAAP earnings per share of $0.73 per diluted share, excluding stock-based compensation expenses and related tax effects, for the nine months ended September 30, 2012.

The following is a summary of revenue by end market for the periods indicated, estimated based on the Company's assessment of available end market data (in millions):



Three months ended September 30,


Nine months ended September 30,

End Market


2013


2012


2013


2012

Communication


$ 15.0


$ 12.8


$   43.2


$   38.7

Storage and Computing


12.2


10.8


35.3


31.2

Consumer


28.1


26.0


70.8


76.1

Industrial


10.0


6.9


25.2


19.6

Total


$ 65.3


$ 56.5


$ 174.5


$ 165.6

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



Three months ended September 30,


Nine months ended September 30,

Product Family


2013


2012


2013


2012

DC to DC Converters 


$ 57.8


$ 49.7


$ 154.8


$ 145.2

Lighting Control Products


7.5


6.8


19.7


20.4

Total 


$ 65.3


$ 56.5


$ 174.5


$ 165.6

"MPS had an outstanding third quarter with sequential organic revenue growth of 13.2%; well above industry average," said Michael Hsing, CEO and founder of MPS. "We continue to closely monitor the macroeconomic conditions and to control expenses.  We are well positioned with new product revenue ramping in multiple market segments for 2014 and beyond."

Business Outlook

The following are MPS' financial targets for the fourth quarter ending December 31, 2013:

  • Revenue in the range of $61 million to $65 million.
  • Gross margin between 53.5% and 54.5%.
  • GAAP R&D and SG&A expenses between $25.0 million and $26.8 million. Non-GAAP(1) R&D and SG&A expenses between $20.0 million and $21.0 million. This excludes an estimate of stock-based compensation and deferred compensation plan expenses in the range of $5.0 million to $5.8 million.
  • Fully diluted shares outstanding between 39.7 million and 39.9 million before shares buyback.

(1) Non-GAAP net income, non-GAAP earnings per share, non-GAAP operating expenses and non-GAAP R&D and SG&A expenses differ from net income, earnings per share, operating expenses, R&D and SG&A expenses determined in accordance with GAAP (Generally Accepted Accounting Principles in the United States). Non-GAAP net income and non-GAAP earnings per share for the three and nine months ended September 30, 2013 and 2012 exclude the effect of stock-based compensation, deferred compensation plan expenses, a one-time cash award and their related tax effects. Non-GAAP operating expenses for the three and nine months ended September 30, 2013 and 2012 exclude the effect of stock-based compensation and deferred compensation plan expenses. Projected non-GAAP R&D and SG&A expenses exclude the effect of stock-based compensation and deferred compensation plan expenses. 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 Call
MPS plans to conduct an investor teleconference covering its quarter ended September 30, 2013 results at 2:00 p.m. PT / 5:00 p.m. ET, October 24, 2013. To access the conference call and the following replay of the conference call, go to 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 75901144. 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, as that term is defined in the Private Securities Litigation Reform Act of 1995, including, among other things, (i) projected revenues, gross margin, GAAP and non-GAAP R&D and SG&A expenses, stock-based compensation expenses, deferred compensation plan expenses, litigation expense and diluted shares outstanding for the quarter ending December 31, 2013, (ii) our outlook for the long-term prospects of the company, including the prospects of our new product families, (iii) our ability to penetrate new markets and expand our market share, (vi) the seasonality of our business, (v) our ability to reduce our expenses, and (vi) statements of the assumptions underlying or relating to any statement described in (i), (ii), (iii), (iv) or (v). 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 within the past 18 months, being different than expected; competition generally and the increasingly competitive nature of our industry; any market disruptions or interruptions in MPS' schedule of new product release development; adverse changes in production and testing efficiency of our products; adverse changes in government regulations in foreign countries where MPS has offices or operations; the effect of catastrophic events; adequate supply of our products from our third-party manufacturer; 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; difficulty in predicting or budgeting for future customer demand and channel inventories, expenses and financial contingencies; and other important risk factors identified in MPS' Securities and Exchange Commission (SEC) filings, including, but not limited to, its quarterly report on Form 10-Q filed with the SEC on August 6, 2013.

The forward-looking statements in this press release 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 Systems, Inc.
Monolithic Power Systems (MPS) is a fabless semiconductor company specializing in high-performance analog ICs. Founded in 1997, MPS's core technology is its innovative and proprietary manufacturing process combined with superior analog circuit design capabilities across system-level and end customer applications. These combined advantages enable MPS to deliver highly integrated monolithic products that offer energy efficient and cost-effective solutions. MPS product families include DC/DC converters, LED drivers and controllers, Class-D audio amplifiers, battery chargers and protections, USB and current-limit switches and AC/DC offline products. MPS has over 1,000 employees worldwide, located in the United States, China, Taiwan, Korea, Japan, Singapore and across Europe.

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.

 

Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except par value)





September 30,

December 31,


2013

2012

ASSETS



Current assets:



Cash and cash equivalents

$         110,446

$          75,104

Short-term investments

93,902

85,521

Accounts receivable, net of allowances of $10 as of September 30, 2013 and $20 as of December 31, 2012

21,957

19,383

Inventories

42,975

32,115

Deferred income tax assets, net - current

19

1

Prepaid expenses and other current assets

1,651

2,177

Total current assets

270,950

214,301

Property and equipment, net

67,221

59,412

Long-term investments

9,847

11,755

Deferred income tax assets, net - long-term

669

669

Other assets

1,353

1,025

Total assets

$         350,040

$        287,162




LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



Accounts payable

$           10,406

$            9,859

Accrued compensation and related benefits

6,708

7,686

Accrued liabilities

9,245

5,915

Total current liabilities

26,359

23,460




Long-term liabilities

1,311

-

Non-current income tax liabilities

5,039

5,408

      Total liabilities

32,709

28,868

Stockholders' equity:



Common stock, $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 38,227 and 35,673 as of September 30, 2013 and December 31, 2012, respectively

235,993

194,079

Retained earnings 

75,439

60,040

Accumulated other comprehensive income

5,899

4,175

Total stockholders' equity

317,331

258,294

Total liabilities and stockholders' equity

$         350,040

$        287,162




 


 

Condensed Consolidated Statement of Operations
(Unaudited, in thousands, except per share amounts)






Three months ended September 30,


Nine months ended September 30,


2013


2012


2013


2012

















Revenue 

$ 65,347


$ 56,508


$ 174,531


$ 165,599

Cost of revenue (1)

30,053


26,495


80,924


78,004









Gross profit 

35,294


30,013


93,607


87,595

Operating expenses:








  Research and development (1)

12,643


11,967


37,246


35,553

  Selling, general and administrative (1)

13,891


11,955


40,941


36,088

  Litigation expense (benefit)

104


(229)


(455)


(345)









          Total operating expenses 

26,638


23,693


77,732


71,296









Income from operations 

8,656


6,320


15,875


16,299

Interest and other income (expense), net

(59)


156


149


621









Income before income taxes 

8,597


6,476


16,024


16,920

Income tax provision 

1,187


555


625


1,412









Net income 

$   7,410


$   5,921


$   15,399


$   15,508









Basic net income per share 

$     0.20


$     0.17


$       0.42


$       0.45

Diluted net income per share 

$     0.19


$     0.16


$       0.40


$       0.43

Weighted average common shares outstanding:








          Basic

37,910


35,145


37,079


34,677

          Diluted

39,009


36,438


38,419


36,008









(1) Includes stock-based compensation expense as follows:








              Cost of revenue

$      163


$      112


$        465


$        325

          Research and development

1,491


1,465


4,557


4,255

          Selling, general and administrative

3,577


2,605


10,059


6,746

        Total stock-based compensation expense

$   5,231


$   4,182


$   15,081


$   11,326









RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME

(Unaudited, in thousands, except per share amounts)



Three months ended September 30,


Nine months ended September 30,


2013


2012


2013


2012









Net income 

$   7,410


$   5,921


$   15,399


$   15,508

   Net income as a percentage of revenue

11.3%


10.5%


8.8%


9.4%









Adjustments to reconcile net income to non-GAAP net income:








    Stock-based compensation

$   5,231


$   4,182


$   15,081


$   11,326

     Deferred compensation plan expense

9


-


9


-

    Cash award 

-


-


(266)


-

    Tax effect 

149


(244)


(1,689)


(706)

    Non-GAAP net income

$ 12,799


$   9,859


$   28,534


$   26,128

        Non-GAAP net income as a percentage of revenue

19.6%


17.4%


16.3%


15.8%









Non-GAAP earnings per share





    Basic

$     0.34


$     0.28


$       0.77


$       0.75

    Diluted

$     0.33


$     0.27


$       0.74


$       0.73









Shares used in the calculation of non-GAAP earnings per share:








    Basic

37,910


35,145


37,079


34,677

    Diluted

39,009


36,438


38,419


36,008

















RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)



Three months ended September 30,


Nine months ended September 30,


2013


2012


2013


2012









Total operating expenses

$ 26,638


$ 23,693


$   77,732


$   71,296

















Adjustments to reconcile total operating expenses to non-GAAP total operating expenses:





    Stock-based compensation

$ (5,068)


$ (4,070)


$ (14,616)


$ (11,001)

    Deferred compensation plan expense

(3)


-


(3)


-

    Non-GAAP operating expenses

$ 21,567


$ 19,623


$   63,113


$   60,295

















RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(Unaudited, in thousands)



Three months ended September 30,


Nine months ended September 30,


2013


2012


2013


2012









Total operating income

$   8,656


$   6,320


$   15,875


$   16,299

   Operating income as a percentage of revenue

13.2%


11.2%


9.1%


9.8%









Adjustments to reconcile total operating income to non-GAAP total operating income:





    Stock-based compensation

$   5,231


$   4,182


$   15,081


$   11,326

    Deferred compensation plan expense

3


-


3


-

    Non-GAAP operating income

$ 13,890


$ 10,502


$   30,959


$   27,625

       Non-GAAP operating income as a percentage of revenue

21.3%


18.6%


17.7%


16.7%









 

2013 FOURTH QUARTER OUTLOOK





RECONCILIATION OF R&D AND SG&A EXPENSES TO NON-GAAP R&D AND SG&A EXPENSES

(Unaudited, in thousands)






Three months ending December 31, 2013


Low


High

R&D and SG&A

$ 25,000


$ 26,800





Adjustments to reconcile R&D and SG&A to non-GAAP R&D and SG&A




    Stock-based compensation and deferred compensation plan expense

(5,000)


(5,800)

    Non-GAAP R&D and SG&A

$ 20,000


$ 21,000





 

SOURCE Monolithic Power Systems, Inc.

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