Monolithic Power Systems Announces Results for the Third Quarter and Nine Months Ended September 30, 2012

SAN JOSE, Calif., Nov. 1, 2012 /PRNewswire/ -- Monolithic Power Systems (MPS) (Nasdaq: MPWR), a leading fabless manufacturer of high-performance analog and mixed-signal semiconductors, today announced financial results for the quarter and nine months ended September 30, 2012.

The results for the quarter ended September 30, 2012 are as follows:

  • Net revenue was $56.5 million, a 3.6% decrease from $58.6 million in the second quarter of 2012 and a 6.7% increase from $53.0 million in the third quarter of 2011.
  • Gross margin was 53.1% compared with 53.2% in the second quarter of 2012 and 52.5% in the third quarter of 2011.
  • GAAP operating expenses were $23.7 million, including $23.9 million for research and development (R&D) and selling, general and administrative (SG&A) expenses, which include $4.1 million for stock-based compensation, and ($0.2) million for litigation benefit. Comparatively, for the three months ended September 30, 2011, GAAP operating expenses were $22.8 million, including $22.1 million for research and development and selling, general and administrative expenses, which included $3.3 million for stock-based compensation and $0.7 million for litigation expenses.
  • Non-GAAP(1) operating expenses were $19.6 million, excluding $4.1 million for stock-based compensation, compared with $19.5 million, excluding $3.3 million for stock-based compensation, for the quarter ended September 30, 2011.
  • GAAP net income was $5.9 million and GAAP earnings per share were $0.16 per diluted share. Comparatively, GAAP net income was $5.5 million and GAAP earnings per share were $0.16 per diluted share for the quarter ended September 30, 2011.
  • Non-GAAP(1) net income was $9.9 million and non-GAAP earnings per share were $0.27 per diluted share, excluding stock-based compensation and related tax effects, compared to non-GAAP net income of $7.8 million and non-GAAP earnings per share of $0.23 per diluted share, excluding stock-based compensation and related tax effects, for the quarter ended September 30, 2011.

The results for the nine months ended September 30, 2012 are as follows:

  • Net revenue was $165.6 million compared with $149.1 million for the nine months ended September 30, 2011, an increase of 11.1%.
  • Gross margin was 52.9% compared with 51.4% for the nine months ended September 30, 2011.
  • GAAP operating expenses were $71.3 million, including $71.6 million for research and development and selling, general and administrative expenses, which include $11.0 million for stock-based compensation, and ($0.3) million for litigation benefit. Comparatively, GAAP operating expenses were $65.7 million, including $63.2 million for research and development and selling, general and administrative expenses, which included $9.8 million for stock-based compensation and $2.5 million for litigation expenses for the nine months ended September 30, 2011.
  • Non-GAAP(1) operating expenses were $60.3 million, excluding $11.0 million for stock-based compensation, compared with $55.9 million, excluding $9.8 million for stock-based compensation for the nine months ended September 30, 2011.
  • GAAP net income was $15.5 million, with GAAP earnings per share of $0.43 per diluted share, compared with GAAP net income was $10.8 million and GAAP earnings per share of $0.31 per diluted share for the nine months ended September 30, 2011.
  • Non-GAAP(1) net income was $26.1 million, with non-GAAP earnings per share of $0.73 per diluted share, excluding stock-based compensation and related tax effects, compared to non-GAAP net income of $19.7 million, with non-GAAP earnings per share of $0.56 per diluted share, excluding stock-based compensation and related tax effects, for the nine months ended September 30, 2011.

The following is a summary of revenue by end market for the periods indicated, estimated based on the Company's assessment of available end market data. Certain amounts reported in previous periods have been updated and reclassified (in millions):

End Market


Q3-2012


Q2-2012


Q1-2012


Q4-2011


Q3-2011


Q2-2011


Q1-2011

      Communication


$12.8


$14.1


$11.8


$10.8


$12.0


$12.1


$9.9

      Computing


10.8


10.4


10.0


8.6


9.0


7.2


5.7

      Consumer


26.0


26.2


23.9


24.6


27.8


29.2


26.4

      Industrial


6.9


7.9


4.8


3.4


4.2


3.1


2.5

      Total


$56.5


$58.6


$50.5


$47.4


$53.0


$51.6


$44.5

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



Three months ended September 30,


Nine months ended September 30,

Product Family


2012


2011 *


2012


2011 *

      DC to DC Converters


$49.7


$44.9


$145.2


$128.3

      Lighting Control Products


6.8


8.1


20.4


20.8

      Total


$56.5


$53.0


$165.6


$149.1










*  2011 Revenue associated with Audio Amplifiers has been included with DC to DC Converters to conform with current year presentation.















"MPS has delivered 11% growth year to date, well above the market. The current slowdown in our revenue growth is transitory," said Michael Hsing, CEO and founder of MPS. "With the breadth of our newly released products and our strong pipeline, MPS expects to accelerate its growth in 2013."

Business Outlook

The following are MPS' financial targets for the fourth quarter ending December 31, 2012:

  • Revenue in the range of $46.0 million to $50.0 million.
  • Gross margin between 52.5% and 53.5%.
  • GAAP research and development and selling, general and administrative expenses between $23.5 million and $25.5 million. Non-GAAP(1) research and development and selling, general and administrative expenses between $19.5 million and $21.0 million. This excludes an estimate of stock-based compensation expense in the range of $4.0 million to $4.5 million.
  • We expect to record a $2.5 million legal judgment as a benefit to fourth quarter litigation expense.

(1) Non-GAAP net income, non-GAAP earnings per share, non-GAAP operating expenses and non-GAAP research and development and selling, general and administrative expenses differ from net income, earnings per share, operating expenses, and research and development and selling, general and administrative expenses determined in accordance with GAAP (Generally Accepted Accounting Principles in the United States). Non-GAAP net income and non-GAAP earnings per share for the quarter and nine months ended September 30, 2012 and 2011 exclude the effect of stock-based compensation expense and its related tax effect. Non-GAAP operating expenses for the quarter and nine months ended September 30, 2012 and 2011 exclude the effect of stock-based compensation expense. Projected non-GAAP research and development and selling, general and administrative 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 nine months ended September 30, 2012 results at 2:00 p.m. PT / 5:00 p.m. ET today, November 1, 2012. 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 41664359. 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 forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including, among other things, (i) projected revenues, gross margin, GAAP and non-GAAP research and development and selling, general and administrative expenses, stock-based compensation expense and litigation expense for the quarter ending December 31, 2012, (ii) our outlook for the long-term prospects of the company, including the prospects of our new product families, (iii) our ability to penetrate new markets and expand our market share, (iv) our expected pricing practices in 2012, (v) the seasonality of our business, (vi) our ability to reduce our manufacturing costs, and (vii) statements of the assumptions underlying or relating to any statement described in (i), (ii), (iii), (iv), (v) or (vi). 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; 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 manufacturer; 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; 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 12, 2012 and its current report on Form 10-Q filed with the SEC on July 30, 2012.

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, Inc.

Monolithic Power Systems, Inc. (MPS) develops and markets proprietary, advanced analog and mixed-signal semiconductors. The company combines advanced process technology with its highly experienced analog designers to produce high-performance power management integrated circuits (ICs) for DC to DC converters, LED drivers, Cold Cathode Fluorescent Lamp (CCFL) backlight controllers, Class D audio amplifiers, and Linear ICs. MPS products are used extensively in computing and network communications products, LCD monitors and TVs, and a wide variety of consumer and portable electronics products. MPS partners with world-class manufacturing organizations to deliver top quality, ultra-compact, high-performance solutions through the most productive, cost-efficient channels. Founded in 1997 and headquartered in San Jose, California, the company has expanded its global presence with sales offices in Taiwan, China, Korea, Singapore, Japan, and Europe, which operate under MPS International, Ltd.

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 and share amounts)






September 30,


December 31,


2012


2011

ASSETS




Current assets:




Cash and cash equivalents

$                          78,247


$                         96,371

Short-term investments

107,279


77,827

Accounts receivable, net of allowances of $5 in 2012 and 2011

21,561


15,097

Inventories

32,623


20,104

Deferred income tax assets, net - current

644


421

Prepaid expenses and other current assets

2,214


1,685

Total current assets

242,568


211,505

Property and equipment, net

59,883


47,794

Long-term investments

11,756


13,675

Deferred income tax assets, net - long-term

19


239

Other assets

1,043


654

Total assets

$                        315,269


$                       273,867





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$                          11,405


$                           8,904

Accrued compensation and related benefits

5,959


9,321

Accrued liabilities

7,500


7,845

Total current liabilities

24,864


26,070





Non-current income tax liabilities

5,341


4,920

      Total liabilities

30,205


30,990

Commitments and contingencies




Stockholders' equity:




Common stock, $0.001 par value; shares authorized: 150,000,000; shares issued and outstanding: 35,431,808 and 33,826,032 in 2012 and 2011, respectively

185,583


159,336

Retained earnings 

95,456


79,948

Accumulated other comprehensive income

4,025


3,593

Total stockholders' equity

285,064


242,877

Total liabilities and stockholders' equity

$                        315,269


$                       273,867



Condensed Consolidated Statement of Operations

(Unaudited, in thousands, except per share amounts)



Three months ended September 30,


Nine months ended September 30,


2012


2011


2012


2011

















Revenue 

$            56,508


$             52,962


$           165,599


$          149,058

Cost of revenue (1)

26,495


25,148


78,004


72,381









Gross profit 

30,013


27,814


87,595


76,677

Operating expenses:








  Research and development (2)

11,967


11,792


35,553


33,115

  Selling, general and administrative (3)

11,955


10,249


36,088


30,082

  Litigation expense (benefit), net

(229)


722


(345)


2,474









Total operating expenses 

23,693


22,763


71,296


65,671









Income from operations 

6,320


5,051


16,299


11,006

Interest income and other, net

156


3


621


210









Income before income taxes 

6,476


5,054


16,920


11,216

Income tax provision (benefit)

555


(419)


1,412


368









Net income 

$              5,921


$               5,473


$             15,508


$            10,848

Basic net income per share

$                0.17


$                 0.16


$                 0.45


$                0.32

Diluted net income per share

$                0.16


$                 0.16


$                 0.43


$                0.31

Weighted average common shares outstanding:








  Basic

35,145


33,594


34,677


34,149

  Diluted

36,438


34,240


36,008


35,275

















  (1) Includes stock-based compensation expense

$                 112


$                    83


$                  325


$                 235

  (2) Includes stock-based compensation expense

1,465


1,576


4,255


4,553

  (3) Includes stock-based compensation expense

2,605


1,715


6,746


5,248

            Total stock-based compensation expense

$              4,182


$               3,374


$             11,326


$            10,036










Three months ended September 30,


Nine months ended September 30,


2012


2011


2012


2011









RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME

(in thousands, except per share amounts)









Net income 

$              5,921


$               5,473


$             15,508


$            10,848

   Net income as a percentage of revenue

10.5%


10.3%


9.4%


7.3%









Adjustments to reconcile net income to non-GAAP net income


    Stock-based compensation

$              4,182


$               3,374


$             11,326


$            10,036

    Tax effect 

(244)


(1,051)


(706)


(1,226)

    Non-GAAP net income

$              9,859


$               7,796


$             26,128


$            19,658

        Non-GAAP net income as a percentage of revenue

17.4%


14.7%


15.8%


13.2%









Non-GAAP earnings per share, excluding stock-based compensation and related tax effects:

    Basic

$                0.28


$                 0.23


$                 0.75


$                0.58

    Diluted

$                0.27


$                 0.23


$                 0.73


$                0.56









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

    Basic

35,145


33,594


34,677


34,149

    Diluted

36,438


34,240


36,008


35,275



RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(in thousands)









Total operating expenses

$            23,693


$             22,763


$             71,296


$            65,671

















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

    Stock-based compensation

$             (4,070)


$              (3,291)


$           (11,001)


$            (9,801)

    Non-GAAP operating expenses

$            19,623


$             19,472


$             60,295


$            55,870

















RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(in thousands)









Total operating income

$              6,320


$               5,051


$             16,299


$            11,006

   Operating income as a percentage of revenue

11.2%


9.5%


9.8%


7.4%









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


    Stock-based compensation

$              4,182


$               3,374


$             11,326


$            10,036

    Non-GAAP operating income

$            10,502


$               8,425


$             27,625


$            21,042

       Non-GAAP operating income as a percentage of revenue

18.6%


15.9%


16.7%


14.1%



2012 FOURTH QUARTER OUTLOOK





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

(in thousands)






Three months ending


December 31, 2012


Low


High

R&D and SG&A

$    23,500


$    25,500





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




    Stock-based compensation

$     (4,000)


$     (4,500)

    Non-GAAP R&D and SG&A

$    19,500


$    21,000

SOURCE Monolithic Power Systems, Inc.



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