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Monolithic Power Systems Announces Results for the Third Quarter Ended September 30, 2017

SAN JOSE, Calif., Oct. 26, 2017 (GLOBE NEWSWIRE) -- 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.

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

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 the 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:

(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 covering 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 Statements 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