Monolithic Power Systems, Inc.
May 2, 2016
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Monolithic Power Systems Announces Results for the First Quarter Ended March 31, 2016

SAN JOSE, Calif., May 2, 2016 /PRNewswire/ -- Monolithic Power Systems, Inc. (MPS) (Nasdaq: MPWR), a leading company in high performance power solutions, today announced financial results for the quarter ended March 31, 2016.

  • Revenue was $84.5 million, a 2.8% decrease from $86.9 million in the fourth quarter of 2015 and a 14.9% increase from $73.5 million in the first quarter of 2015.
  • GAAP gross margin was 53.9% compared with 54.0% in the first quarter of 2015.
  • Non-GAAP gross margin(1) was 55.0%, excluding the impact of $0.4 million for stock-based compensation expense and $0.5 million for the amortization of acquisition-related intangible assets, compared with 54.8% in the first quarter of 2015, excluding the impact of $0.2 million for stock-based compensation expense and $0.4 million for the amortization of acquisition-related intangible assets.
  • GAAP operating expenses were $35.1 million compared with $33.8 million for the quarter ended March 31, 2015.
  • Non-GAAP(1) operating expenses were $26.4 million, excluding $8.5 million for stock-based compensation expense and $0.2 million for deferred compensation plan expense, compared with $24.7 million, excluding $9.0 million for stock-based compensation expense and $0.1 million for deferred compensation plan expense, for the quarter ended March 31, 2015.
  • GAAP operating income was $10.4 million compared with $5.9 million for the quarter ended March 31, 2015.
  • Non-GAAP(1) operating income was $20.0 million, excluding $9.0 million for stock-based compensation expense, $0.5 million for the amortization of acquisition-related intangible assets and $0.1 million for deferred compensation plan expense, compared with $15.6 million, excluding $9.2 million for stock-based compensation expense, $0.4 million for the amortization of acquisition-related intangible assets and $0.1 million for deferred compensation plan expense, for the quarter ended March 31, 2015.
  • Interest and other income, net was $0.5 million compared with $0.6 million for the quarter ended March 31, 2015.
  • Non-GAAP(1) interest and other income, net was $0.2 million, excluding $0.3 million for deferred compensation plan income, compared with $0.5 million, excluding $0.1 million for deferred compensation plan income, for the quarter ended March 31, 2015.
  • GAAP net income was $10.6 million and GAAP earnings per share were $0.25 per diluted share. Comparatively, GAAP net income was $6.0 million and GAAP earnings per share were $0.15 per diluted share for the quarter ended March 31, 2015.
  • Non-GAAP(1) net income was $18.7 million and non-GAAP earnings per share were $0.45 per diluted share, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan income and related tax effects, compared with non-GAAP net income of $14.9 million and non-GAAP earnings per share of $0.37 per diluted share, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense and related tax effects, for the quarter ended March 31, 2015.

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 March 31,

End Market


2016


2015

Communication


$ 16.9


$ 17.3

Storage and Computing


15.4


11.4

Consumer


33.8


31.5

Industrial


18.4


13.3

Total


$ 84.5


$ 73.5

 

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



Three Months Ended March 31,

Product Family


2016


2015

DC to DC 


$ 77.1


$ 66.3

Lighting Control 


7.4


7.2

Total 


$ 84.5


$ 73.5

 

"We continue to grow, we continue to invest, and we continue to enhance shareholder value," said Michael Hsing, CEO and founder of MPS.

Business Outlook

The following are MPS' financial targets for the second quarter ending June 30, 2016:

  • Revenue in the range of $91 million to $95 million.
  • GAAP gross margin between 53.6% and 54.6%. Non-GAAP(1) gross margin between 54.6% and 55.6%. This excludes an estimated impact of stock-based compensation expenses of 0.4% and amortization of acquisition-related intangible assets of 0.6%.
  • GAAP R&D and SG&A expenses between $36.1 million and $40.1 million. Non-GAAP(1) R&D and SG&A expenses between $26.1 million and $28.1 million. This excludes an estimate of stock-based compensation expenses in the range of $10.0 million to $12.0 million.
  • Total stock-based compensation expense of $10.4 million to $12.4 million.
  • Litigation expenses of $100,000 to $200,000.
  • Interest and other income of $200,000 to $300,000 before foreign exchange gains or losses.
  • Fully diluted shares outstanding between ­­­41.2 million and 42.2 million before shares buyback.

(1) Non-GAAP net income, non-GAAP earnings per share, non-GAAP gross margin, non-GAAP R&D and SG&A expenses, non-GAAP operating expenses, non-GAAP interest and other income and non-GAAP operating income differ from net income, earnings per share, gross margin, R&D and SG&A expenses, operating expenses, interest and other income 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 exclude the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, deferred compensation plan income/expense and related tax effects. Non-GAAP gross margin exclude the effect of stock-based compensation expense and amortization of acquisition-related intangible assets. Non-GAAP operating expenses exclude the effect of stock-based compensation expense and deferred compensation plan income/expense.  Non-GAAP interest and other income exclude the effect of deferred compensation plan income/expense. Non-GAAP operating income excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, 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 March 31, 2016 results at 2:00 p.m. PT / 5:00 p.m. ET, May 2, 2016. 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 86107541. 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 June 30, 2016, (ii) our outlook for the long-term prospects of the company, including our performance against our business plan, our continued investment into R&D, 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, which is cyclical in nature; 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 annual report on Form 10-K filed with the SEC on February 29, 2016.

The forward-looking statements in this press release and statements made during the accompanying teleconference 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)






March 31,


December 31,


2016


2015

ASSETS




Current assets:




Cash and cash equivalents

$    77,808


$          90,860

Short-term investments

173,693


144,103

Accounts receivable, net 

28,836


30,830

Inventories

62,318


63,209

Prepaid expenses and other current assets

2,909


2,926

Total current assets

345,564


331,928

Property and equipment, net

66,527


65,359

Long-term investments

5,353


5,361

Goodwill

6,571


6,571

Acquisition-related intangible assets, net

4,540


5,053

Deferred tax assets, net

663


672

Other long-term assets

17,894


16,341

Total assets

$  447,112


$        431,285





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$    15,731


$          13,487

Accrued compensation and related benefits

9,552


9,812

Accrued liabilities

20,040


19,984

Total current liabilities

45,323


43,283

Income tax liabilities

3,114


2,941

Other long-term liabilities

16,689


16,545

        Total liabilities

65,126


62,769

Commitments and contingencies 




Stockholders' equity:




    Common stock and additional paid-in capital, $0.001 par value; shares authorized: 




      150,000; shares issued and outstanding: 40,236 and 39,689




       as of March  31, 2016 and December 31, 2015, respectively

276,450


265,763

Retained earnings 

103,362


101,287

Accumulated other comprehensive income

2,174


1,466

Total stockholders' equity

381,986


368,516

Total liabilities and stockholders' equity

$  447,112


$        431,285

 

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts) 




Three Months Ended March 31,


2016


2015

Revenue 

$ 84,512


$ 73,538

Cost of revenue 

39,002


33,855

Gross profit 

45,510


39,683

Operating expenses:




  Research and development 

17,321


16,038

  Selling, general and administrative 

17,768


17,518

  Litigation expense 

45


270

Total operating expenses 

35,134


33,826

Income from operations 

10,376


5,857

Interest and other income, net

543


642

Income before income taxes 

10,919


6,499

Income tax provision 

344


536

Net income 

$ 10,575


$   5,963





    Net income per share:




          Basic

$     0.26


$     0.15

          Diluted

$     0.25


$     0.15

Weighted-average shares outstanding:




          Basic

40,028


39,105

          Diluted

41,646


40,596





Cash dividends declared per common share

$     0.20


$     0.20

 

SUPPLEMENTAL FINANCIAL INFORMATION 

STOCK-BASED COMPENSATION EXPENSE

(Unaudited, in thousands)


Three Months Ended March 31,


2016


2015

Cost of revenue

$      434


$      242

Research and development

3,698


2,620

Selling, general and administrative

4,847


6,357

Total stock-based compensation expense

$   8,979


$   9,219

 

RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME

(Unaudited, in thousands, except per share amounts)


Three Months Ended March 31,


2016


2015

Net income 

$ 10,575


$   5,963

   Net income as a percentage of revenue

12.5%


8.1%





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




    Stock-based compensation expense

8,979


9,219

    Amortization of acquisition-related intangible assets

513


367

    Deferred compensation plan expense (income)

(145)


40

    Tax effect 

(1,176)


(673)

    Non-GAAP net income

$ 18,746


$ 14,916

        Non-GAAP net income as a percentage of revenue

22.2%


20.3%





Non-GAAP net income per share:




    Basic

$     0.47


$     0.38

    Diluted

$     0.45


$     0.37





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




    Basic

40,028


39,105

    Diluted

41,646


40,596

 

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited, in thousands)


Three Months Ended March 31,


2016


2015

Gross profit

$ 45,510


$ 39,683

   Gross margin

53.9%


54.0%





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




   Stock-based compensation expense

434


242

   Amortization of acquisition-related intangible assets

513


367

Non-GAAP gross profit

$ 46,457


$ 40,292

Non-GAAP gross margin

55.0%


54.8%





RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)


Three Months Ended March 31,


2016


2015

Total operating expenses

$ 35,134


$ 33,826





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

    Stock-based compensation expense

(8,545)


(8,977)

    Deferred compensation plan expense

(157)


(166)

Non-GAAP operating expenses

$ 26,432


$ 24,683









RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(Unaudited, in thousands)


Three Months Ended March 31,


2016


2015

Total operating income

$ 10,376


$   5,857

   Operating income as a percentage of revenue

12.3%


8.0%





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


    Stock-based compensation expense

8,979


9,219

    Amortization of acquisition-related intangible assets

513


367

    Deferred compensation plan expense 

157


166

    Non-GAAP operating income

$ 20,025


$ 15,609

Non-GAAP operating income as a percentage of revenue

23.7%


21.2%









RECONCILIATION OF OTHER INCOME TO NON-GAAP OTHER INCOME

(Unaudited, in thousands)


Three Months Ended March 31,


2016


2015

Total interest and other income, net

$      543


$      642





Adjustments to reconcile interest and other income to non-GAAP interest and other income:


    Deferred compensation plan income

(302)


(126)

Non-GAAP interest and other income, net

$      241


$      516

 

2016 SECOND QUARTER OUTLOOK

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited)


Three Months Ending


June 30, 2016


Low


High

Gross margin

53.6%


54.6%

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




    Stock-based compensation expense

0.4%


0.4%

    Amortization of acquisition-related intangible assets

0.6%


0.6%

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


June 30, 2016


Low


High

R&D and SG&A expense

$ 36,100


$ 40,100

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




    Stock-based compensation expense

(10,000)


(12,000)

Non-GAAP R&D and SG&A expense

$ 26,100


$ 28,100

 

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SOURCE Monolithic Power Systems, Inc.

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