Monolithic Power Systems Announces Results for the Fourth Quarter and Year Ended December 31, 2015

Feb 04, 2016, 16:01 ET from Monolithic Power Systems, Inc.

SAN JOSE, Calif., Feb. 4, 2016 /PRNewswire/ -- Monolithic Power Systems, Inc. (MPS) (Nasdaq: MPWR), a leading company in high performance power solutions, today announced financial results for the quarter and year ended December 31, 2015.

The results for the quarter ended December 31, 2015 are as follows:

  • Net revenue was $86.9 million, a 4.7% decrease from $91.2 million in the third quarter of 2015 and a 14.8% increase from $75.7 million in the fourth quarter of 2014.
  • GAAP gross margin was 54.0%, compared with 54.1% in the fourth quarter of 2014.
  • Non-GAAP gross margin(1) was 55.0%, excluding the impact of $0.3 million for stock-based compensation expense and $0.5 million for the amortization of acquisition-related intangible assets, compared with 54.9% in the fourth quarter of 2014, 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 $31.8 million for the quarter ended December 31, 2014.
  • Non-GAAP(1) operating expenses were $25.3 million, excluding $12.0 million for stock-based compensation expense, $0.3 million for deferred compensation plan expense and a credit of $2.5 million related to the change in fair value of contingent consideration, compared with $23.3 million, excluding $8.3 million for stock-based compensation expense and $0.2 million for deferred compensation plan expense, for the quarter ended December 31, 2014.
  • GAAP operating income was $11.8 million, compared with $9.2 million for the quarter ended December 31, 2014.
  • Non-GAAP(1) operating income was $22.5 million, excluding $12.4 million for stock-based compensation expense, $0.5 million for the amortization of acquisition-related intangible assets, $0.3 million for deferred compensation plan expense and a credit of $2.5 million related to the change in fair value of contingent consideration, compared with $18.3 million, excluding $8.6 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 December 31, 2014.
  • GAAP net income was $10.1 million and GAAP earnings per share were $0.24 per diluted share. Comparatively, GAAP net income was $8.9 million and GAAP earnings per share were $0.22 per diluted share for the quarter ended December 31, 2014.
  • Non-GAAP(1) net income was $21.1 million and non-GAAP earnings per share were $0.51 per diluted share, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense, a credit related to the change in fair value of contingent consideration and related tax effects, compared with non-GAAP net income of $17.2 million and non-GAAP earnings per share of $0.43 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 December 31, 2014.

The results for the year ended December 31, 2015 are as follows:

  • Net revenue was $333.1 million, a 17.9% increase from $282.5 million for the year ended December 31, 2014.
  • GAAP gross margin was 54.1%, compared with 54.0% for the year ended December 31, 2014.
  • Non-GAAP gross margin(1) was 55.0%, excluding the impact of $1.2 million for stock-based compensation expense and $1.8 million for the amortization of acquisition-related intangible assets, compared with 54.6% for the year ended December 31, 2014, excluding the impact of $0.9 million for stock-based compensation expense and $0.7 million for the amortization of acquisition-related intangible assets.
  • GAAP operating expenses were $139.1 million, compared with $117.3 million for the year ended December 31, 2014.
  • Non-GAAP(1) operating expenses were $101.4 million, excluding $40.4 million for stock-based compensation expense, $0.2 million for deferred compensation plan income and a credit of $2.5 million related to the change in fair value of contingent consideration, compared with $84.0 million, excluding $32.6 million for stock-based compensation expense, $0.6 million for acquisition-related transaction costs and $0.1 million for deferred compensation plan expense, for the year ended December 31, 2014.
  • GAAP operating income was $41.1 million, compared with $35.3 million for the year ended December 31, 2014.
  • Non-GAAP(1) operating income was $81.7 million, excluding $41.6 million for stock-based compensation expense, $1.8 million for the amortization of acquisition-related intangible assets, $0.2 million for deferred compensation plan income and a credit of $2.5 million related to the change in fair value of contingent consideration, compared with $70.1 million, excluding $33.4 million for stock-based compensation expense, $0.6 million for acquisition-related transaction costs, $0.7 million for the amortization of acquisition-related intangible assets and $0.1 million for deferred compensation plan expense, for the year ended December 31, 2014.
  • GAAP net income was $35.2 million and GAAP earnings per share were $0.86 per diluted share. Comparatively, GAAP net income was $35.5 million and GAAP earnings per share were $0.89 per diluted share for the year ended December 31, 2014.
  • Non-GAAP(1) net income was $77.2 million and non-GAAP earnings per share were $1.89 per diluted share, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense, a credit related to the change in fair value of contingent consideration and related tax effects, compared with non-GAAP net income of $65.8 million and non-GAAP earnings per share of $1.65 per diluted share, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related transaction costs, net deferred compensation plan income and related tax effects, for the year ended December 31, 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 December 31,

Year Ended December 31,

End Market

2015

2014

2015

2014

Communication

$ 15.8

$ 17.8

$    65.1

$     64.6

Storage and Computing

14.6

12.0

56.6

46.1

Consumer

38.6

32.6

145.1

122.8

Industrial

17.9

13.3

66.3

49.0

Total

$ 86.9

$ 75.7

$ 333.1

$ 282.5

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

Three Months Ended December 31,

Year Ended December 31,

Product Family

2015

2014

2015

2014

DC to DC

$ 77.5

$ 67.8

$ 299.8

$ 253.1

Lighting Control

9.4

7.9

33.3

29.4

Total

$ 86.9

$ 75.7

$ 333.1

$ 282.5

"In 2015, we continued to deliver," said Michael Hsing, CEO and founder of MPS. "We have great expectations for the future."

Business Outlook

The following are MPS' financial targets for the first quarter ending March 31, 2016:

  • Revenue in the range of $81 million to $85 million.
  • GAAP gross margin between 53.5% and 54.5%. Non-GAAP(1) gross margin between 54.5% and 55.5%. 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 million and $39 million. Non-GAAP(1) R&D and SG&A expenses between $25.4 million and $26.4 million. This excludes an estimate of stock-based compensation expenses in the range of $10.6 million to $12.6 million.
  • Total stock-based compensation expense of $11 million to $13 million.
  • Litigation expenses of $150,000 to $250,000.
  • 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 and non-GAAP operating income differ from net income, earnings per share, gross margin, R&D and SG&A expenses, 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 exclude the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related transaction costs, deferred compensation plan income/expense, change in fair value of contingent consideration 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, acquisition-related transaction costs, deferred compensation plan income/expense and change in fair value of contingent consideration.  Non-GAAP operating income excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, acquisition-related transaction costs, deferred compensation plan income/expense and change in fair value of contingent consideration. 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 and year ended December 31, 2015 results at 2:00 p.m. PT / 5:00 p.m. ET, February 4, 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 26447652. 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 March 31, 2016, (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, 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 March 2, 2015 and quarterly report on Form 10-Q filed with the SEC on October 28, 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)

December 31,

2015

2014

ASSETS

Current assets:

Cash and cash equivalents

$             90,860

$           126,266

Short-term investments

144,103

112,452

Accounts receivable, net

30,830

25,630

Inventories

63,209

40,918

Prepaid expenses and other current assets

2,926

2,646

Total current assets

331,928

307,912

Property and equipment, net

65,359

62,942

Long-term investments

5,361

5,389

Goodwill

6,571

6,571

Acquisition-related intangible assets, net

5,053

6,812

Deferred tax assets, net

672

1,283

Other long-term assets

16,341

8,457

Total assets

$           431,285

$           399,366

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$             13,487

$             13,138

Accrued compensation and related benefits

9,812

9,020

Accrued liabilities

19,984

14,703

Total current liabilities

43,283

36,861

Deferred tax and other tax liabilities

2,941

5,876

Other long-term liabilities

16,545

10,204

        Total liabilities

62,769

52,941

Stockholders' equity:

Common stock, $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 39,689 and 38,832 as of December 31, 2015 and December 31, 2014, respectively

265,763

240,500

Retained earnings

101,287

100,114

Accumulated other comprehensive income

1,466

5,811

Total stockholders' equity

368,516

346,425

Total liabilities and stockholders' equity

$           431,285

$           399,366

 

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts) 

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

Revenue

$  86,918

$ 75,703

$  333,067

$  282,535

Cost of revenue

40,001

34,744

152,898

129,917

Gross profit

46,917

40,959

180,169

152,618

Operating expenses:

  Research and development

16,734

14,941

65,787

58,590

  Selling, general and administrative

18,107

16,787

72,312

66,755

  Litigation expense (benefit), net

283

66

1,000

(8,027)

Total operating expenses

35,124

31,794

139,099

117,318

Income from operations

11,793

9,165

41,070

35,300

Interest and other income, net

550

407

1,421

1,092

Income before income taxes

12,343

9,572

42,491

36,392

Income tax provision

2,233

712

7,319

897

Net income

$ 10,110

$  8,860

$  35,172

$ 35,495

    Net income per share:

          Basic

$     0.26

$    0.23

$      0.89

$ 0.92

          Diluted

$     0.24

$    0.22

$      0.86

$ 0.89

Weighted-average shares outstanding:

          Basic

39,615

38,807

39,470

38,686

          Diluted

41,445

40,321

40,869

39,793

Cash dividends declared per common share

$    0.20

$    0.15

$      0.80

$     0.45

 

SUPPLEMENTAL FINANCIAL INFORMATION

STOCK-BASED COMPENSATION EXPENSE

(Unaudited, in thousands)

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

Cost of revenue

$                      336

$                      234

$                   1,166

$                      903

Research and development

3,102

2,381

11,156

9,019

Selling, general and administrative

8,934

5,967

29,241

23,532

Total stock-based compensation expense

$                 12,372

$                   8,582

$                 41,563

$                 33,454

 

RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME

(Unaudited, in thousands, except per share amounts)

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

Net income

$                 10,110

$                   8,860

$                 35,172

$                 35,495

   Net income as a percentage of revenue

11.6%

11.7%

10.6%

12.6%

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

    Stock-based compensation expense

12,372

8,582

41,563

33,454

    Change in fair value of contingent consideration

(2,507)

-

(2,507)

-

    Amortization of acquisition-related intangible assets

512

367

1,759

672

    Acquisition-related transaction costs

-

-

-

622

    Deferred compensation plan expense (income)

98

56

175

(53)

    Tax effect

522

(681)

1,058

(4,435)

    Non-GAAP net income

$                 21,107

$                 17,184

$                 77,220

$                 65,755

        Non-GAAP net income as a percentage of revenue

24.3%

22.7%

23.2%

23.3%

Non-GAAP net income per share:

    Basic

$                     0.53

$                     0.44

$                     1.96

$                     1.70

    Diluted

$                     0.51

$                     0.43

$                     1.89

$                     1.65

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

    Basic

39,615

38,807

39,470

38,686

    Diluted

41,445

40,321

40,869

39,793

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited, in thousands)

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

Gross profit

$                 46,917

$                 40,959

$               180,169

$               152,618

   Gross margin

54.0%

54.1%

54.1%

54.0%

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

   Stock-based compensation expense

336

234

1,166

903

   Amortization of acquisition-related intangible assets

512

367

1,759

672

Non-GAAP gross profit

$                 47,765

$                 41,560

$               183,094

$               154,193

Non-GAAP gross margin

55.0%

54.9%

55.0%

54.6%

RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

Total operating expenses

$                 35,124

$                 31,794

$               139,099

$               117,318

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

    Stock-based compensation expense

(12,036)

(8,348)

(40,397)

(32,551)

    Change in fair value of contingent consideration

2,507

-

2,507

-

    Acquisition-related transaction costs

-

-

-

(622)

    Deferred compensation plan (expense) income

(290)

(175)

200

(66)

Non-GAAP operating expenses

$                 25,305

$                 23,271

$               101,409

$                 84,079

RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(Unaudited, in thousands)

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014

Total operating income

$                 11,793

$                   9,165

$                 41,070

$                 35,300

   Operating income as a percentage of revenue

13.6%

12.1%

12.3%

12.5%

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

    Stock-based compensation expense

12,372

8,582

41,563

33,454

    Change in fair value of contingent consideration

(2,507)

-

(2,507)

-

    Amortization of acquisition-related intangible assets

512

367

1,759

672

    Acquisition-related transaction costs

-

-

-

622

    Deferred compensation plan expense (income)

290

175

(200)

66

    Non-GAAP operating income

$                 22,460

$                 18,289

$                 81,685

$                 70,114

Non-GAAP operating income as a percentage of revenue

25.8%

24.2%

24.5%

24.8%

 

2016 FIRST QUARTER OUTLOOK

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited)

Three Months Ending  

March 31, 2016

Low

High

Gross margin

53.5%

54.5%

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

54.5%

55.5%

RECONCILIATION OF R&D AND SG&A EXPENSES TO NON-GAAP R&D AND SG&A EXPENSES

(Unaudited, in thousands)

Three Months Ending  

March 31, 2016

Low

High

R&D and SG&A expense

$ 36,000

$ 39,000

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

    Stock-based compensation expense

(10,600)

(12,600)

Non-GAAP R&D and SG&A expense

$ 25,400

$ 26,400

 

SOURCE Monolithic Power Systems, Inc.



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