Monolithic Power Systems, Inc.
Jul 27, 2015
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Monolithic Power Systems Announces Results for the Second Quarter Ended June 30, 2015

SAN JOSE, Calif., July 27, 2015 /PRNewswire/ -- Monolithic Power Systems (MPS) (Nasdaq: MPWR), a leading company in high performance power solutions, today announced financial results for the quarter ended June 30, 2015.

The results for the quarter ended June 30, 2015 are as follows:

  • Net revenue was $81.4 million, a 10.7% increase from $73.5 million in the first quarter of 2015 and a 19.0% increase from $68.4 million in the second quarter of 2014.
  • GAAP gross margin was 54.2%, which included the impact of $0.3 million for stock-based compensation expense and $0.4 million for the amortization of acquisition-related intangible assets, compared with 54.2% in the second quarter of 2014, which included the impact of $0.2 million for stock-based compensation expense.
  • Non-GAAP gross margin(1) was 55.0%, which excluded the impact of $0.3 million for stock-based compensation expense and $0.4 million for the amortization of acquisition-related intangible assets, compared with 54.5% in the second quarter of 2014, which excluded the impact of $0.2 million for stock-based compensation expense.
  • GAAP operating expenses were $34.0 million, including $33.7 million for research and development (R&D) and selling, general and administrative (SG&A) expenses, which included $9.2 million for stock-based compensation expense and $0.2 million for deferred compensation plan income, and $0.3 million for litigation expenses. Comparatively, for the quarter ended June 30, 2014, GAAP operating expenses were $30.5 million, including $30.2 million for R&D and SG&A expense, which included $8.2 million for stock-based compensation expense and $0.5 million for acquisition-related expense, and a $0.3 million litigation expense. 
  • Non-GAAP(1) operating expenses were $25.0 million, excluding $9.2 million for stock-based compensation expense and $0.2 million for deferred compensation plan income, compared with $21.8 million, excluding $8.2 million for stock-based compensation expense and $0.5 million for acquisition-related expense, for the quarter ended June 30, 2014.
  • GAAP operating income was $10.1 million, including $9.5 million for stock-based compensation expense, $0.4 million for the amortization of acquisition-related intangible assets, and $0.2 million for deferred compensation plan income.  Comparatively, for the quarter ended June 30, 2014, GAAP operating income was $6.6 million, including $8.4 million for stock-based compensation expense and $0.5 million for acquisition-related expense.
  • Non-GAAP(1) operating income was $19.8 million, excluding $9.5 million for stock-based compensation expense, $0.4 million for the amortization of acquisition-related intangible assets, and $0.2 million for deferred compensation plan income, compared with $15.5 million, excluding $8.4 million for stock-based compensation expense and $0.5 million for acquisition-related expense, for the quarter ended June 30, 2014.
  • GAAP net income was $7.9 million and GAAP earnings per share were $0.19 per diluted share. Comparatively, GAAP net income was $6.4 million and GAAP earnings per share were $0.16 per diluted share for the quarter ended June 30, 2014.
  • Non-GAAP(1) net income was $18.8 million and non-GAAP earnings per share were $0.46 per diluted share, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense and related tax effects, compared with non-GAAP net income of $14.6 million and non-GAAP earnings per share of $0.37 per diluted share, excluding stock-based compensation expense, acquisition-related expense and related tax effects, for the quarter ended June 30, 2014.

The results for the six months ended June 30, 2015 are as follows:

  • Net revenue was $155.0 million, a 20.6% increase from $128.5 million for the six months ended June 30, 2014.
  • GAAP gross margin was 54.1%, which included the impact of $0.5 million for stock-based compensation expense and $0.7 million for the amortization of acquisition-related intangible assets, compared with 53.9% for the six months ended June 30, 2014, which included the impact of $0.4 million for stock-based compensation expense.
  • Non-GAAP gross margin(1) was 54.9%, which excluded the impact of $0.5 million for stock-based compensation expense and $0.7 million for the amortization of acquisition-related intangible assets, compared with 54.2% for the six months ended June 30, 2014, which excluded the impact of $0.4 million for stock-based compensation expense.
  • GAAP operating expenses were $67.8 million, including $67.3 million for R&D and SG&A expenses, which included $18.2 million for stock-based compensation expense, and $0.5 million for litigation expenses. Comparatively, for the six months ended June 30, 2014, GAAP operating expenses were $53.5 million, including $61.9 million for R&D and SG&A expense, which included $15.6 million for stock-based compensation expense and $0.5 million for acquisition-related expense, and a $(8.4) million net litigation benefit.  For the six months ended June 30, 2014, MPS recognized a one-time $9.5 million litigation benefit from the settlement of the O2 Micro lawsuit.
  • Non-GAAP(1) operating expenses were $49.6 million, excluding $18.2 million for stock-based compensation expense, compared with $37.4 million, excluding $15.6 million for stock-based compensation expense and $0.5 million for acquisition-related expense, for the six months ended June 30, 2014.
  • GAAP operating income was $16.0 million, including $18.7 million for stock-based compensation expense and $0.7 million for the amortization of acquisition-related intangible assets.  Comparatively, for the six months ended June 30, 2014, GAAP operating income was $15.7 million, including $16.0 million for stock-based compensation expense and $0.5 million for acquisition-related expense.
  • Non-GAAP(1) operating income was $35.4 million, excluding $18.7 million for stock-based compensation expense and $0.7 million for the amortization of acquisition-related intangible assets, compared with $32.2 million, excluding $16.0 million for stock-based compensation expense and $0.5 million for acquisition-related expense, for the six months ended June 30, 2014.
  • GAAP net income was $13.9 million and GAAP earnings per share were $0.34 per diluted share. Comparatively, GAAP net income was $15.4 million and GAAP earnings per share were $0.39 per diluted share for the six months ended June 30, 2014.
  • Non-GAAP(1) net income was $33.7 million and non-GAAP earnings per share were $0.83 per diluted share, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense and related tax effects, compared with non-GAAP net income of $30.2 million and non-GAAP earnings per share of $0.76 per diluted share, excluding stock-based compensation expense, acquisition-related expense and related tax effects, for the six months ended June 30, 2014.

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



Three Months Ended June 30,


Six Months Ended June 30,

End Market


2015


2014


2015


2014

Communication


$ 17.1


$ 17.0


$   34.4


$   30.6

Storage and Computing


12.6


10.8


24.0


21.4

Consumer


35.5


28.5


67.0


54.6

Industrial


16.2


12.1


29.6


21.9

Total


$ 81.4


$ 68.4


$ 155.0


$ 128.5

 

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



Three Months Ended June 30,


Six Months Ended June 30,

Product Family


2015


2014


2015


2014

DC to DC 


$ 73.2


$ 61.2


$ 139.5


$ 115.1

Lighting Control 


8.2


7.2


15.5


13.4

Total 


$ 81.4


$ 68.4


$ 155.0


$ 128.5

"This is the eighth consecutive quarter MPS has achieved double digit year-over-year revenue growth," said Michael Hsing, CEO and founder of MPS.  "MPS continues to deliver."

Business Outlook

The following are MPS' financial targets for the third quarter ending September 30, 2015:

  • Revenue in the range of $89 million to $93 million.
  • GAAP gross margin between 53.9% and 54.9%.  Non-GAAP(1) gross margin between 54.6% and 55.6%.  This excludes an estimated impact of stock-based compensation expenses of 0.3% and amortization of acquisition-related intangible assets of 0.4%.
  • GAAP R&D and SG&A expenses between $34.6 million and $36.2 million. Non-GAAP(1) R&D and SG&A expenses between $25.8 million and $26.8 million. This excludes an estimate of stock-based compensation expenses in the range of $8.8 million to $9.4 million.
  • Total stock-based compensation expense of $9.1 million to $9.7 million.
  • Litigation expenses of $200,000 to $400,000.
  • Other income of $200,000 to $300,000 before foreign exchange gains or losses.
  • Fully diluted shares outstanding between ­­­40.8 million and 41.4 million before shares buyback.

(1) Non-GAAP net income, non-GAAP earnings per share, non-GAAP gross margin, non-GAAP operating expenses and non-GAAP operating income differ from net income, earnings per share, gross margin, operating expenses and operating income 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 six months ended June 30, 2015 and 2014 exclude the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related expense, deferred compensation plan income/expense and related tax effects. Non-GAAP gross margin for the three and six months ended June 30, 2015 and 2014 exclude the effect of stock-based compensation expense and amortization of acquisition-related intangible assets. Non-GAAP operating expenses for the three and six months ended June 30, 2015 and 2014 exclude the effect of stock-based compensation expense, acquisition-related expense and deferred compensation plan income/expense.  Non-GAAP operating income for the three and six months ended June 30, 2015 and 2014 excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related expense 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 Call

MPS plans to conduct an investor teleconference covering its quarter ended June 30, 2015 results at 2:00 p.m. PT / 5:00 p.m. ET, July 27, 2015. 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 82729508. 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, 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, litigation expenses, other income and diluted shares outstanding for the quarter ending September 30, 2015, (ii) our outlook for the long-term prospects of the company, including our performance against our business plan, expected revenue growth and the prospects of our new product families, (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, 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; 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 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 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; 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 May 6, 2015.

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

Monolithic 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 R. Hsing in 1997 and is headquartered in San Jose, CA. 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.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except par value)



June 30,


December 31,


2015


2014

ASSETS




Current assets:




Cash and cash equivalents

$   80,868


$        126,266

Short-term investments

150,166


112,452

Accounts receivable, net

26,765


25,630

Inventories

64,964


40,918

Prepaid expenses and other current assets

2,554


2,880

Total current assets

325,317


308,146

Property and equipment, net

62,163


62,942

Long-term investments

5,375


5,389

Goodwill

6,571


6,571

Acquisition-related intangible assets, net

6,078


6,812

Deferred tax assets, net

1,053


1,049

Other long-term assets

11,066


8,457

Total assets

$ 417,623


$        399,366





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$   16,596


$          13,138

Accrued compensation and related benefits

11,236


9,020

Accrued liabilities

18,402


14,703

Total current liabilities

46,234


36,861

Deferred tax and other tax liabilities

3,018


5,876

Other long-term liabilities

13,609


10,204

        Total liabilities

62,861


52,941

Stockholders' equity:




    Common stock, $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 39,617 and 38,832 as of June 30, 2015 and December 31, 2014, respectively

251,553


240,500

Retained earnings

97,023


100,114

Accumulated other comprehensive income

6,186


5,811

Total stockholders' equity

354,762


346,425

Total liabilities and stockholders' equity

$ 417,623


$        399,366

 

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts) 



Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Revenue 

$ 81,416


$ 68,436


$ 154,954


$ 128,497

Cost of revenue 

37,287


31,337


71,142


59,301

Gross profit 

44,129


37,099


83,812


69,196

Operating expenses:








  Research and development 

15,743


13,368


31,781


28,971

  Selling, general and administrative 

17,964


16,853


35,482


32,962

  Litigation expense (benefit), net

311


274


581


(8,426)

Total operating expenses 

34,018


30,495


67,844


53,507

Income from operations 

10,111


6,604


15,968


15,689

Interest and other income, net

235


295


877


485

Income before income taxes 

10,346


6,899


16,845


16,174

Income tax provision 

2,447


502


2,983


759

Net income 

$   7,899


$   6,397


$   13,862


$   15,415









 Net income per share:








          Basic

$     0.20


$     0.17


$       0.35


$       0.40

          Diluted

$     0.19


$     0.16


$       0.34


$       0.39

Weighted-average shares outstanding:








          Basic

39,570


38,684


39,337


38,577

          Diluted

40,745


39,608


40,670


39,563









Cash dividends declared per common share

$     0.20


$     0.15


$       0.40


$       0.15










SUPPLEMENTAL FINANCIAL INFORMATION 

STOCK-BASED COMPENSATION EXPENSE

(Unaudited, in thousands)


Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Cost of revenue

$      284


$      219


$        526


$        424

Research and development

2,503


2,245


5,123


4,250

Selling, general and administrative

6,710


5,951


13,067


11,339

Total stock-based compensation expense

$   9,497


$   8,415


$   18,716


$   16,013










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,


2015


2014


2015


2014

Net income 

$   7,899


$   6,397


$   13,862


$   15,415

   Net income as a percentage of revenue

9.7%


9.3%


8.9%


12.0%









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








    Stock-based compensation expense

9,497


8,415


18,716


16,013

    Amortization of acquisition-related intangible assets

367


-


733


-

    Acquisition-related expense

-


515


-


515

    Deferred compensation expense 

69


-


109


-

    Tax effect 

926


(685)


253


(1,694)

    Non-GAAP net income

$ 18,758


$ 14,642


$   33,673


$   30,249

        Non-GAAP net income as a percentage of revenue

23.0%


21.4%


21.7%


23.5%









Non-GAAP net income per share:








    Basic

$     0.47


$     0.38


$       0.86


$       0.78

    Diluted

$     0.46


$     0.37


$       0.83


$       0.76









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








    Basic

39,570


38,684


39,337


38,577

    Diluted

40,745


39,608


40,670


39,563










RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited, in thousands)


Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Gross profit

$ 44,129


$ 37,099


$   83,812


$   69,196

   Gross margin

54.2%


54.2%


54.1%


53.9%









Adjustments to reconcile gross profit to non-GAAP gross profit:








   Stock-based compensation expense

284


219


526


424

   Amortization of acquisition-related intangible assets

367


-


733


-

Non-GAAP gross profit

$ 44,780


$ 37,318


$   85,071


$   69,620

Non-GAAP gross margin

55.0%


54.5%


54.9%


54.2%










RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)


Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Total operating expenses

$ 34,018


$ 30,495


$   67,844


$   53,507









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








    Stock-based compensation expense

(9,213)


(8,196)


(18,190)


(15,589)

    Acquisition-related expense

-


(515)


-


(515)

    Deferred compensation plan income (expense)

146


-


(20)


-

Non-GAAP operating expenses

$ 24,951


$ 21,784


$   49,634


$   37,403


















RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(Unaudited, in thousands)


Three Months Ended June 30,


Six Months Ended June 30,


2015


2014


2015


2014

Total operating income

$ 10,111


$   6,604


$   15,968


$   15,689

   Operating income as a percentage of revenue

12.4%


9.6%


10.3%


12.2%









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








    Stock-based compensation expense

9,497


8,415


18,716


16,013

    Amortization of acquisition-related intangible assets

367


-


733


-

    Acquisition-related expense

-


515


-


515

    Deferred compensation plan expense (income)

(146)


-


20


-

    Non-GAAP operating income

$ 19,829


$ 15,534


$   35,437


$   32,217

Non-GAAP operating income as a percentage of revenue

24.4%


22.7%


22.9%


25.1%

 

2015 THIRD QUARTER OUTLOOK

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited)


Three Months Ending


September 30, 2015


Low


High

Gross margin

53.9%


54.9%

Adjustments to reconcile gross margin to non-GAAP gross margin:




    Stock-based compensation expense 

0.3%


0.3%

    Amortization of acquisition-related intangible assets

0.4%


0.4%

Non-GAAP gross margin

54.6%


55.6%






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, 2015


Low


High

R&D and SG&A expense

$ 34,600


$ 36,200

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




    Stock-based compensation expense

(8,800)


(9,400)

Non-GAAP R&D and SG&A expense

$ 25,800


$ 26,800

 

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SOURCE Monolithic Power Systems

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