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Monolithic Power Systems Announces Results for the Third Quarter Ended September 30, 2020

KIRKLAND, Wash., Oct. 29, 2020 (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, 2020. 

The financial results for the nine months ended September 30, 2020 are as follows:

The following is a summary of revenue by end market for the periods indicated (in thousands):

  Three Months Ended
September 30,		  Nine Months Ended
September 30,
End Market 2020  2019  2020  2019
Computing and storage $75,301  $52,793  $191,345  $133,571
Automotive  28,512   24,432   69,603   66,174
Industrial  30,658   28,862   82,487   72,640
Communications  54,705   18,778   112,670   62,928
Consumer  70,246   43,948   155,304   125,870
Total $259,422  $168,813  $611,409  $461,183

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 2020  2019  2020  2019
DC to DC $247,561  $159,723  $580,549  $432,125
Lighting Control  11,861   9,090   30,860   29,058
Total $259,422  $168,813  $611,409  $461,183

“We will monitor market conditions closely and continue to execute,” said Michael Hsing, CEO and founder of MPS.

Business Outlook

The following are MPS’ financial targets for the fourth quarter ending December 31, 2020:

(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 other income (expense), net, non-GAAP operating income and non-GAAP income before taxes differ from net income, earnings per share, gross margin, R&D and SG&A expenses, operating expenses, other income (expense), net, operating income and income before taxes 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, amortization of acquisition-related intangible assets and deferred compensation plan income/expense. Non-GAAP operating expenses exclude the effect of stock-based compensation expense and deferred compensation plan income/expense. Non-GAAP other income (expense), 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. Non-GAAP income before taxes 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. 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.  

Earnings Webinar
MPS plans to host a Zoom webinar covering its financial results at 2:00 p.m. PT / 5:00 p.m. ET, October 29, 2020. You can access the webinar, free of charge, at: https://mpsic.zoom.us/j/95299537308. The webinar will be archived and available for replay for one year under the Investor Relations page on the MPS 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, litigation expenses, interest income, and diluted shares outstanding, (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’s 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; our ability to increase market share in our targeted markets; our ability to meet customer demand for our products due to constraints on our third-party suppliers’ ability to manufacture sufficient quantities of our products or otherwise; competition generally and the increasingly competitive nature of our industry; any market disruptions or interruptions in MPS’s schedule of new product development releases; adverse changes in production and testing efficiency of our products; our ability to manage our inventory levels; the effect of export controls, trade and economic sanctions regulations and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets, particularly in China; our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses; adverse changes in laws and government regulations such as tariffs on imports of foreign goods, export regulations and export classifications, including in foreign countries where MPS has offices or operations; adverse events arising from orders of governmental entities, including such orders that impact our customers, and adoption of new or amended accounting standards; the effect of epidemics and pandemics, such as the COVID-19 outbreak first identified in December 2019, on the global economy and on our business; 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’s financial performance if its tax and litigation provisions are inadequate; adverse changes or developments in the semiconductor industry generally, which is cyclical in nature, and our ability to adjust our operations to address such changes or developments; difficulty in predicting or budgeting for future customer demand and channel inventories, expenses and financial contingencies (including as a result of the COVID-19 pandemic); 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; the ongoing consolidation of companies in the semiconductor industry; and other important risk factors identified in MPS’s Securities and Exchange Commission (SEC) filings, including, but not limited to, our annual report on Form 10-K filed with the SEC on February 28, 2020 and our quarterly report on Form 10-Q filed with the SEC on August 3, 2020. The forward-looking statements in this press release and statements made during the accompanying teleconference represent MPS’s 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 based in the United States. 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, 
  2020  2019 
ASSETS        
Current assets:        
Cash and cash equivalents $179,466  $172,960 
Short-term investments  372,076   282,437 
Accounts receivable, net  93,535   52,704 
Inventories  148,096   127,500 
Other current assets  25,970   19,605 
Total current assets  819,143   655,206 
Property and equipment, net  270,310   228,315 
Long-term investments  2,916   3,138 
Goodwill  6,571   6,571 
Deferred tax assets, net  13,486   17,193 
Other long-term assets  48,868   45,952 
Total assets $1,161,294  $956,375 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $48,142  $27,271 
Accrued compensation and related benefits  48,362   26,164 
Other accrued liabilities  61,774   44,790 
Total current liabilities  158,278   98,225 
Income tax liabilities  35,624   37,596 
Other long-term liabilities  52,823   47,063 
Total liabilities  246,725   182,884 
Commitments and contingencies        
Stockholders’ equity:        
Common stock and additional paid-in capital: $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 45,096 and 43,616, respectively  632,432   549,517 
Retained earnings  279,653   229,450 
Accumulated other comprehensive income (loss)  2,484   (5,476)
Total stockholders’ equity  914,569   773,491 
Total liabilities and stockholders’ equity $1,161,294  $956,375 

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,		 
  2020  2019  2020  2019 
Revenue $259,422  $168,813  $611,409  $461,183 
Cost of revenue  116,382   75,655   274,329   206,794 
Gross profit  143,040   93,158   337,080   254,389 
Operating expenses:                
Research and development  37,717   27,742   95,346   80,746 
Selling, general and administrative  43,503   34,692   116,550   100,302 
Litigation expense  1,841   692   6,264   1,473 
Total operating expenses  83,061   63,126   218,160   182,521 
Income from operations  59,979   30,032   118,920   71,868 
Other income, net  2,494   2,257   5,980   7,827 
Income before income taxes  62,473   32,289   124,900   79,695 
Income tax expense  6,907   2,761   3,412   3,293 
Net income $55,566  $29,528  $121,488  $76,402 
                 
Net income per share:                
Basic $1.24  $0.68  $2.72  $1.77 
Diluted $1.18  $0.64  $2.59  $1.68 
Weighted-average shares outstanding:                
Basic  44,970   43,308   44,737   43,055 
Diluted  46,955   45,833   46,819   45,516 


SUPPLEMENTAL FINANCIAL INFORMATION 
STOCK-BASED COMPENSATION EXPENSE
(Unaudited, in thousands)
 
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
Cost of revenue $707  $641  $1,906  $1,834 
Research and development  5,334   4,960   14,666   14,801 
Selling, general and administrative  16,934   15,699   46,009   43,384 
Total stock-based compensation expense $22,975  $21,300  $62,581  $60,019 


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,		 
  2020  2019  2020  2019 
Net income $55,566  $29,528  $121,488  $76,402 
Net income as a percentage of revenue  21.4%  17.5%  19.9%  16.6%
                 
Adjustments to reconcile net income to non-GAAP net income:                
Stock-based compensation expense  22,975   21,300   62,581   60,019 
Amortization of acquisition-related intangible assets  -   8   -   110 
Deferred compensation plan expense (income)  347   (61)  901   (46)
Tax effect  472   (1,254)  (10,717)  (7,190)
Non-GAAP net income $79,360  $49,521  $174,253  $129,295 
Non-GAAP net income as a percentage of revenue  30.6%  29.3%  28.5%  28.0%
                 
Non-GAAP net income per share:                
Basic $1.76  $1.14  $3.90  $3.00 
Diluted $1.69  $1.08  $3.72  $2.84 
                 
Shares used in the calculation of non-GAAP net income per share:                
Basic  44,970   43,308   44,737   43,055 
Diluted  46,955   45,833   46,819   45,516 


RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Unaudited, in thousands)
 
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
Gross profit $143,040  $93,158  $337,080  $254,389 
Gross margin  55.1%  55.2%  55.1%  55.2%
                 
Adjustments to reconcile gross profit to non-GAAP gross profit:                
Stock-based compensation expense  707   641   1,906   1,834 
Deferred compensation plan expense  244   25   650   25 
Amortization of acquisition-related intangible assets  -   8   -   110 
Non-GAAP gross profit $143,991  $93,832  $339,636  $256,358 
Non-GAAP gross margin  55.5%  55.6%  55.5%  55.6%


RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
(Unaudited, in thousands)
 
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
Total operating expenses $83,061  $63,126  $218,160  $182,521 
                 
Adjustments to reconcile total operating expenses to non-GAAP total operating expenses:                
Stock-based compensation expense  (22,268)  (20,659)  (60,675)  (58,185)
Deferred compensation plan (expense) income  (1,701)  13   (1,672)  (2,558)
Non-GAAP operating expenses $59,092  $42,480  $155,813  $121,778 


RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME
(Unaudited, in thousands)
 
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
Total operating income $59,979  $30,032  $118,920  $71,868 
                 
Adjustments to reconcile total operating income to non-GAAP total operating income:                
Stock-based compensation expense  22,975   21,300   62,581   60,019 
Amortization of acquisition-related intangible assets  -   8   -   110 
Deferred compensation plan expense  1,946   12   2,322   2,584 
Non-GAAP operating income $84,900  $51,352  $183,823  $134,581 


RECONCILIATION OF OTHER INCOME, NET, TO NON-GAAP OTHER INCOME, NET
(Unaudited, in thousands)
 
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
Total other income, net $2,494  $2,257  $5,980  $7,827 
                 
Adjustments to reconcile other income, net to non-GAAP other income, net:                
Deferred compensation plan income  (1,598)  (74)  (1,421)  (2,630)
Non-GAAP other income, net $896  $2,183  $4,559  $5,197 


RECONCILIATION OF INCOME BEFORE INCOME TAXES TO NON-GAAP INCOME BEFORE INCOME TAXES
(Unaudited, in thousands)
 
  Three Months Ended
September 30,		  Nine Months Ended
September 30,		 
  2020  2019  2020  2019 
Total income before income taxes $62,473  $32,289  $124,900  $79,695 
                 
Adjustments to reconcile income before income taxes to non-GAAP income before income taxes:                
Stock-based compensation expense  22,975   21,300   62,581   60,019 
Amortization of acquisition-related intangible assets  -   8   -   110 
Deferred compensation plan expense (income)  347   (61)  901   (46)
Non-GAAP income before income taxes $85,795  $53,536  $188,382  $139,778 


2020 FOURTH QUARTER OUTLOOK
RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Unaudited)
 
  Three Months Ending  
  December 31, 2020 
  Low  High 
Gross margin  55.1%  55.7%
Adjustments to reconcile gross margin to non-GAAP gross margin:        
Stock-based compensation expense  0.3%  0.3%
Non-GAAP gross margin  55.4%  56.0%


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, 2020 
  Low  High 
R&D and SG&A expense $81,300  $85,300 
Adjustments to reconcile R&D and SG&A expense to non-GAAP R&D and SG&A expense:        
Stock-based compensation expense  (21,100)  (23,100)
Non-GAAP R&D and SG&A expense $60,200  $62,200 

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