Monolithic Power Systems, Inc.
MONOLITHIC POWER SYSTEMS INC (Form: 8-K, Received: 10/26/2017 16:26:54)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington , D.C. 20549

 


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported):   
October 26 , 201 7

 


 

MONOLITHIC POWER SYSTEMS, INC.

(Exact name of r egistrant as specified in its charter)

 

Delaware

 

000-51026

 

77-0466789

(State or other jurisdiction of
incorporation or organization)

 

(Commission
File Number)

 

(I.R.S. Employer
Identification Number)

 

79 Great Oaks Boulevard,

San Jose, CA 95119

(Address of principal executive offices) (Zip Code)

 

(408) 826-0600

(Registrant ’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

Emerging growth company   ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

 



 

 

 

 

Item  2.02 Results of Operations and Financial Condition.

   

On October 26, 2017, Monolithic Power Systems, Inc. (“MPS”) issued a press release regarding its financial results for the quarter ended September 30, 2017. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

 

The information under this Item  2.02 of this Current Report on Form 8-K and the exhibit attached hereto are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), nor shall they be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the 1934 Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

Item  9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit

   

Description

     

99.1

 

Press release issued on October 26, 2017, announcing the financial results for the quarter ended September 30, 2017.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 26, 2017

 

By:

 

/s/  T. Bernie Blegen

 

 

 

 

T. Bernie Blegen

 

 

 

 

Chief Financial Officer

 

 

 

 

Index to Exhibits

 

Exhibit

   

Description

     

99.1

 

Press release issued on October 26, 2017, announcing the financial results for the quarter ended September 30, 2017.

 

 

Exhibit 99.1

 

PRESS RELEASE

For Immediate Release

 

Monolithic Power Systems, Inc.

79 Great Oaks Boulevard

San Jose, CA 951 19 USA

T: 408-826-0600, F: 408-826-0601

www.monolithicpower.com

 


 

Mon olithic Power Systems Announces Results

f or the Third Quarter E nded September 30 , 2017

 

S AN JOSE, California, October 26 , 2017 -- Monolithic Power Systems, Inc. (MPS) (Nasdaq: MPWR), a leading company in high performance analog solutions , today announced financial results for the quarter ended September 30, 2017.

 

 

R evenue was $128.9 million, a 14.9% increase from $112.2 million for the quarter ended June 30, 2017 and a 21.1% increase from $106.5 million for the quarter ended September 30, 2016.

 

GAAP g ross margin was 55.0%, compared with 54.4% for the quarter ended September 30, 2016.

 

Non-GAAP (1) g ross margin was 55.7%, excluding the impact of $0.5 million for stock-based compensation expense and $0.5 million for the amortization of acquisition-related intangible assets, compared with 55.3% for the quarter ended September 30, 2016, excluding the impact of $0.4 million for stock-based compensation expense and $0.5 million for the amortization of acquisition-related intangible assets.

 

GAAP o perating expenses were $47.0 million, compared with $42.9 million for the quarter ended September 30, 2016.

 

Non-GAAP ( 1) operating expenses were $32.9 million, excluding $13.5 million for stock-based compensation expense and $0.6 million for deferred compensation plan expense, compared with $29.4 million, excluding $13.1 million for stock-based compensation expense and $0.4 million for deferred compensation plan expense, for the quarter ended September 30, 2016.

 

GAAP operating income was $23.8 million, compared with $15.0 million for the quarter ended September 30, 2016.

 

Non-GA AP (1) operating income was $38.9 million, excluding $14.0 million for stock-based compensation expense, $0.5 million for the amortization of acquisition-related intangible assets and $0.6 million for deferred compensation plan expense, compared with $29.4 million, excluding $13.5 million for stock-based compensation expense, $0.5 million for the amortization of acquisition-related intangible assets and $0.4 million for deferred compensation plan expense, for the quarter ended September 30, 2016.

 

GAAP i nterest and other income, net was $1.3 million, compared with $0.8 million for the quarter ended September 30, 2016.

 

Non-GAAP (1) interes t and other income, net was $0.6 million, excluding $0.7 million for deferred compensation plan income, compared with $0.3 million, excluding $0.5 million for deferred compensation plan income, for the quarter ended September 30, 2016.

 

 

 

 

 

GAA P net income was $23.6 million and GAAP earnings per share were $0.54 per diluted share. Comparatively, GAAP net income was $14.4 million and GAAP earnings per share were $0.34 per diluted share for the quarter ended September 30, 2016.

 

Non-GAAP (1) net income was $36.6 million and non-GAAP earnings per share were $0.84 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 $27.5 million and non-GAAP earnings per share of $0.66 per diluted share, excluding stock-based compensation income, amortization of acquisition-related intangible assets, net deferred compensation plan income and related tax effects, for the quarter ended September 30, 2016.

 

The results for the nine months ended September 30, 2017 are as follows:

 

 

R evenue was $341.5 million, a 19.8% increase from $285.0 million for the nine months ended September 30, 2016.

 

GAAP g ross margin was 54.8%, compared with 54.2% for the nine months ended September 30, 2016.

 

Non-GAAP (1) g ross margin was 55.6%, excluding the impact of $1.3 million for stock-based compensation expense and $1.5 million for the amortization of acquisition-related intangible assets, compared with 55.1% for the nine months ended September 30, 2016, excluding the impact of $1.2 million for stock-based compensation expense and $1.5 million for the amortization of acquisition-related intangible assets.

 

GAAP o perating expenses were $134.8 million, compared with $117.5 million for the nine months ended September 30, 2016.

 

Non-GAAP ( 1) operating expenses were $93.3 million, excluding $39.5 million for stock-based compensation expense and $2.0 million for deferred compensation plan expense, compared with $83.6 million, excluding $33.0 million for stock-based compensation expense and $0.9 million for deferred compensation plan expense, for the nine months ended September 30, 2016.

 

GAAP operating income was $52.4 million, compared with $36.9 million for the nine months ended September 30, 2016.

 

Non-GA AP (1) operating income was $96.7 million, excluding $40.8 million for stock-based compensation expense, $1.5 million for the amortization of acquisition-related intangible assets and $2.0 million for deferred compensation plan expense, compared with $73.6 million, excluding $34.3 million for stock-based compensation expense, $1.5 million for the amortization of acquisition-related intangible assets and $0.9 million for deferred compensation plan expense, for the nine months ended September 30, 2016.

 

GAAP interes t and other income, net was $3.9 million, compared with $1.9 million for the nine months ended September 30, 2016.

 

Non-GAAP (1) interes t and other income, net was $2.0 million, excluding $1.9 million for deferred compensation plan income, compared with $0.8 million, excluding $1.1 million for deferred compensation plan income, for the nine months ended September 30, 2016.

 

GAAP net income w as $53.1 million and GAAP earnings per share were $1.22 per diluted share. Comparatively, GAAP net income was $36.1 million and GAAP earnings per share were $0.87 per diluted share for the nine months ended September 30, 2016.

 

Non-GAAP (1) net income was $91.2 million and non-GAAP earnings per share were $2.10 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 $68.8 million and non-GAAP earnings per share of $1.65 per diluted share, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan income and related tax effects, for the nine months ended September 30, 2016.

 

 

 

 

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 thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 

End Market

 

2017

   

2016

   

2017

   

2016

 

Consumer

  $ 55,342     $ 43,646     $ 134,870     $ 115,763  

Computing and storage

    29,020       23,463       74,103       57,157  

Industrial

    16,348       14,519       46,736       40,542  

Automotive

    12,857       8,640       38,042       23,906  

Communications

    15,372       16,188       47,748       47,679  

Total

  $ 128,939     $ 106,456     $ 341,499     $ 285,047  

 

The following is a summary of revenue by product family for t he periods indicated (in thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 

Product Family

 

2017

   

2016

   

2017

   

2016

 

DC to DC

  $ 119,089     $ 95,615     $ 312,700     $ 256,953  

Lighting Control

    9,850       10,841       28,799       28,094  

Total

  $ 128,939     $ 106,456     $ 341,499     $ 285,047  

 

Thanks to acceptance of our new product offerings and with our shareholders’ support, we will continue to invest and deliver outstanding products to our customers and consistent results to our shareholders ," said Michael Hsing, CEO and founder of MPS.

 

Business Outlook

 

The following are MPS ’ financial targets for the fourth quarter ending December 31, 2017:

 

 

Revenu e in the range of $123.0 million to $129.0 million.

 

 

GAAP gross margin between 54.4% and 55.4%. Non-GAAP (1) gross margin between 55.2% and 56.2%, which excludes an estimated impact of stock-based compensation expenses of 0.4% and amortization of acquisition-related intangible assets of 0.4%.

 

 

GAAP research and development (“R&D”) and selling, general and administrative (“SG&A”) expenses between $44.0 million and $48.0 million. Non-GAAP (1) R&D and SG&A expenses between $31.5 million and $33.5 million, which excludes an estimate of stock-based compensation expenses in the range of $12.5 million to $14.5 million.

 

 

Total stock-bas ed compensation expense of $13.0 million to $15.0 million.

 

 

Litigation expenses of $250,000 to $350,000.

 

 

Interest and o ther income, net, of $600,000 to $700,000 before foreign exchange gains or losses.

 

 

 

 

 

Fully diluted shares outstanding between 43.7 million and 44.7 million before shares buybacks.

 

(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, net 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, net and operating income determined in accordance with Generally Accepted Accounting Principles in the United States (GAAP). 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 excludes 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, net excludes 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 coverin g its quarter ended September 30, 2017 results at 2:00 p.m. PT / 5:00 p.m. ET, October 26, 2017. 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 99361573. 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, interest and other income and diluted shares outstanding for the quarter ending December 31, 2017, (ii) our outlook for the long-term prospects of the company, including our performance against our business plan, revenue growth in certain of our market segments, our continued investment into R&D, expected revenue growth, customers’ acceptance of our new product offerings, the prospects of our new product development, and our expectations regarding market and industry segment trends and prospects, (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 recently, being different than expected; our ability to efficiently and effectively develop new products and receive a return on our R&D expense investment; competition generally and the increasingly competitive nature of our industry; any market disruptions or interruptions in MPS’ schedule of new product development releases; 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; the ongoing consolidation of companies in the semiconductor industry; and other important risk factors identified in MPS’ Securities and Exchange Commission (SEC) filings, including, but not limited to, our annual report on Form 10-K filed with the SEC on March 1, 2017 and our quarterly report on Form 10-Q filed with the SEC on July 31, 2017.

 

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 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.

 

Contact:

Bernie Blegen

Chief Financial Officer

Monolithic Power Systems, Inc.

408-826-0777

investors@monolithicpower.com

 

 

 

 

Monolithic Power Systems, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except par value)

 

   

September 30,

   

December 31,

 
   

2017

   

2016

 

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 104,424     $ 112,703  

Short-term investments

    195,174       155,521  

Accounts receivable, net

    50,757       34,248  

Inventories

    99,887       71,469  

Other current assets

    13,560       9,043  

Total current assets

    463,802       382,984  

Property and equipment, net

    100,629       85,171  

Long-term investments

    5,368       5,354  

Goodwill

    6,571       6,571  

Acquisition-related intangible assets, net

    1,464       3,002  

Deferred tax assets, net

    661       633  

Other long-term assets

    26,518       27,411  

Total assets

  $ 605,013     $ 511,126  
                 

LIABILITIES AND STOCKHOLDERS ’ EQUITY

               

Current liabilities:

               

Accounts payable

  $ 21,831     $ 17,427  

Accrued compensation and related benefits

    17,458       12,578  

Accrued liabilities

    26,879       22,916  

Total current liabilities

    66,168       52,921  

Income tax liabilities

    4,627       3,870  

Other long-term liabilities

    28,695       23,219  

Total liabilities

    99,490       80,010  

Commitments and contingencies

               

Stockholders' equity:

               

Common stock and additional paid-in capital, $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 41,508 and 40,793 as of September 30, 2017 and December 31, 2016, respectively

    364,726       315,969  

Retained earnings

    140,455       119,362  

Accumulated other comprehensive income (loss)

    342       (4,215 )

Total stockholders ’ equity

    505,523       431,116  

Total liabilities and stockholders ’ equity

  $ 605,013     $ 511,126  

 

 

 

 

Monolithic Power Systems, Inc.

Condensed Consolidated Statement s of Operations

(Unaudited, in thousands, except per share amounts)  

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2017

   

2016

   

2017

   

2016

 

Revenue

  $ 128,939     $ 106,456     $ 341,499     $ 285,047  

Cost of revenue

    58,083       48,531       154,377       130,686  

Gross profit

    70,856       57,925       187,122       154,361  

Operating expenses:

                               

Research and development

    21,442       20,472       60,629       55,669  

Selling, general and administrative

    25,255       22,397       73,219       61,696  

Litigation expense, net

    327       55       903       92  

Total operating expenses

    47,024       42,924       134,751       117,457  

Income from operations

    23,832       15,001       52,371       36,904  

Interest and other income, net

    1,255       780       3,873       1,920  

Income before income taxes

    25,087       15,781       56,244       38,824  

Income tax provision

    1,445       1,408       3,112       2,678  

Net income

  $ 23,642     $ 14,373     $ 53,132     $ 36,146  
                                 

Net income per share:

                               

Basic

  $ 0.57     $ 0.35     $ 1.29     $ 0.90  

Diluted

  $ 0.54     $ 0.34     $ 1.22     $ 0.87  

Weighted-average shares outstanding:

                               

Basic

    41,458       40,590       41,276       40,335  

Diluted

    43,486       41,895       43,384       41,752  
                                 

Cash dividends declared per common share

  $ 0.20     $ 0.20     $ 0.60     $ 0.60  

 

 

 

 

 

SUPPLEMENTAL FINANCIAL INFORMATION

STOCK-BASED COMPENSATION EXPENSE

(Unaudited, in thousands)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2017

   

2016

   

2017

   

2016

 

Cost of revenue

  $ 453     $ 403     $ 1,264     $ 1,217  

Research and development

    3,838       3,986       11,297       11,001  

Selling, general and administrative

    9,678       9,127       28,198       22,023  

Total stock-based compensation expense

  $ 13,969     $ 13,516     $ 40,759     $ 34,241  

 

 

 

 

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,

 
   

2017

   

2016

   

2017

   

2016

 

Net income

  $ 23,642     $ 14,373     $ 53,132     $ 36,146  

Net income as a percentage of revenue

    18.3 %     13.5 %     15.6 %     12.7 %
                                 

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

                         

Stock-based compensation expense

    13,969       13,516       40,759       34,241  

Amortization of acquisition-related intangible assets

    513       513       1,538       1,538  

Deferred compensation plan expense (income)

    (50 )     (70 )     90       (218 )

Tax effect

    (1,519 )     (823 )     (4,285 )     (2,901 )

Non-GAAP net income

  $ 36,555     $ 27,509     $ 91,234     $ 68,806  

Non-GAAP net income as a percentage of revenue

    28.4 %     25.8 %     26.7 %     24.1 %
                                 

Non-GAAP net income per share:

                               

Basic

  $ 0.88     $ 0.68     $ 2.21     $ 1.71  

Diluted

  $ 0.84     $ 0.66     $ 2.10     $ 1.65  
                                 

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

                         

Basic

    41,458       40,590       41,276       40,335  

Diluted

    43,486       41,895       43,384       41,752  

 

 

 

 

 

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited, in thousands)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2017

   

2016

   

2017

   

2016

 

Gross profit

  $ 70,856     $ 57,925     $ 187,122     $ 154,361  

Gross margin

    55.0 %     54.4 %     54.8 %     54.2 %
                                 

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

                         

Stock-based compensation expense

    453       403       1,264       1,217  

Amortization of acquisition-related intangible assets

    513       513       1,538       1,538  

Non-GAAP gross profit

  $ 71,822     $ 58,841     $ 189,924     $ 157,116  

Non-GAAP gross margin

    55.7 %     55.3 %     55.6 %     55.1 %

 

RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2017

   

2016

   

2017

   

2016

 

Total operating expenses

  $ 47,024     $ 42,924     $ 134,751     $ 117,457  
                                 

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

                 

Stock-based compensation expense

    (13,516 )     (13,113 )     (39,495 )     (33,024 )

Deferred compensation plan expense

    (585 )     (418 )     (1,992 )     (879 )

Non-GAAP operating expenses

  $ 32,923     $ 29,393     $ 93,264     $ 83,554  

 

RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(Unaudited, in thousands)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2017

   

2016

   

2017

   

2016

 

Total operating income

  $ 23,832     $ 15,001     $ 52,371     $ 36,904  

Operating income as a percentage of revenue

    18.5 %     14.1 %     15.3 %     12.9 %
                                 

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

                 

Stock-based compensation expense

    13,969       13,516       40,759       34,241  

Amortization of acquisition-related intangible assets

    513       513       1,538       1,538  

Deferred compensation plan expense

    585       418       1,992       879  

Non-GAAP operating income

  $ 38,899     $ 29,448     $ 96,660     $ 73,562  

Non-GAAP operating income as a percentage of revenue

    30.2 %     27.7 %     28.3 %     25.8 %

 

RECONCILIATION OF INTEREST AND OTHER INCOME, NET, TO NON-GAAP INTEREST AND OTHER INCOME, NET

 

(Unaudited, in thousands)

 

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2017

   

2016

   

2017

   

2016

 

Total interest and other income, net

  $ 1,255     $ 780     $ 3,873     $ 1,920  
                                 

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

                 

Deferred compensation plan income

    (635 )     (488 )     (1,902 )     (1,097 )

Non-GAAP interest and other income, net

  $ 620     $ 292     $ 1,971     $ 823  

 

 

 

 

2017 FOURTH QUARTER OUTLOOK

 

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

 

(Unaudited)

 

 

   

Three Months Ending

 
   

December 31, 2017

 
   

Low

   

High

 

Gross margin

    54.4 %     55.4 %

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

               

Stock-based compensation expense

    0.4 %     0.4 %

Amortization of acquisition-related intangible assets

    0.4 %     0.4 %

Non-GAAP gross margin

    55.2 %     56.2 %

 

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, 2017

 
   

Low

   

High

 

R&D and SG&A expense

  $ 44,000     $ 48,000  

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

               

Stock-based compensation expense

    (12,500 )     (14,500 )

Non-GAAP R&D and SG&A expense

  $ 31,500     $ 33,500