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Monolithic Power Systems Announces Results for the Fourth Quarter and Year Ended December 31, 2018, and an Increase in Quarterly Cash Dividend

Bay Street

KIRKLAND, Wash., Feb. 12, 2019 (GLOBE NEWSWIRE) — Monolithic Power Systems, Inc. (MPS) (Nasdaq: MPWR), a leading company in high performance analog solutions, today announced financial results for the quarter and year ended December 31, 2018. The Company also announced that its Board of Directors has approved an increase in the quarterly cash dividend from $0.30 per share to $0.40 per share. The first quarter dividend of $0.40 per share will be paid on April 15, 2019 to all stockholders of record as of the close of business on March 29, 2019.

The results for the quarter ended December 31, 2018 are as follows:

The results for the year ended December 31, 2018 are as follows:

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

                   
      Three Months Ended December 31,   Year Ended December 31,
  End Market     2018     2017     2018     2017
  Computing and storage   $   43,537   $   26,679   $   159,121   $   100,782
  Automotive       22,221       15,846       80,078       53,888
  Industrial       26,928       16,160       88,472       62,896
  Communications       20,147       15,857       70,589       63,606
  Consumer       40,664       54,888       184,122       189,757
  Total   $   153,497   $   129,430   $   582,382   $   470,929
                   

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

                   
      Three Months Ended December 31,   Year Ended December 31,
  Product Family     2018     2017     2018     2017
  DC to DC    $   143,021   $   119,161   $   537,512   $   431,861
  Lighting Control        10,476       10,269       44,870       39,068
  Total    $   153,497   $   129,430   $   582,382   $   470,929
                   

“Despite uncertainty in the macro economy, we expect to continue winning market share in cloud computing, automotive and telecommunication markets. We believe our future is bright,” said Michael Hsing, CEO and founder of MPS.

Business Outlook

The following are MPS’ financial targets for the first quarter ending March 31, 2019:

(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, 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, interest and other income, 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 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. 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.

Conference Call
MPS plans to conduct an investor teleconference covering its financial results at 2:00 p.m. PT / 5:00 p.m. ET, February 12, 2019. 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 8037138. 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, interest and other 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’ 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; 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 laws and government regulations, such as tariffs on imports of foreign goods, 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 adopting of new or amended accounting standards; 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, 2018 and our quarterly report on Form 10-Q filed with the SEC on November 2, 2018. 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 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)  
   
  December 31,  
    2018       2017  
ASSETS        
Current assets:        
Cash and cash equivalents $   172,704     $   82,759  
Short-term investments     204,577         216,331  
Accounts receivable, net      55,214         38,037  
Inventories     136,384         99,281  
Other current assets     11,931         12,762  
Total current assets     580,810         449,170  
Property and equipment, net     150,001         144,636  
Long-term investments     3,241         5,256  
Goodwill     6,571         6,571  
Acquisition-related intangible assets, net     111         951  
Deferred tax assets, net     16,830         15,917  
Other long-term assets     35,868         30,068  
Total assets $   793,432     $   652,569  
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $   22,678     $   22,813  
Accrued compensation and related benefits     18,799         15,597  
Accrued liabilities     38,962         27,507  
Total current liabilities     80,439         65,917  
Income tax liabilities     34,375         31,621  
Other long-term liabilities     38,525         33,024  
Total liabilities     153,339         130,562  
Stockholders’ equity:        
  Common stock and additional paid-in capital, $0.001 par value; shares authorized:         
  150,000; shares issued and outstanding:  42,505 and 41,614, respectively     450,908         376,586  
Retained earnings      194,728         143,608  
Accumulated other comprehensive income (loss)     (5,543 )       1,813  
Total stockholders’ equity     640,093         522,007  
Total liabilities and stockholders’ equity $   793,432     $   652,569  
         

Monolithic Power Systems, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
 
  Three Months Ended December 31,   Year Ended December 31,
    2018       2017       2018       2017  
Revenue  $   153,497     $   129,430     $   582,382     $   470,929  
Cost of revenue      68,904         58,269         259,714         212,646  
Gross profit      84,593         71,161         322,668         258,283  
Operating expenses:              
  Research and development      22,735         21,730         93,455         82,359  
  Selling, general and administrative      28,372         24,038         113,803         97,257  
  Litigation expense, net     409         340         1,922         1,243  
Total operating expenses      51,516         46,108         209,180         180,859  
Income from operations      33,077         25,053         113,488         77,424  
Interest and other income (expense), net     (393 )       1,647         4,994         5,520  
Income before income taxes      32,684         26,700         118,482         82,944  
Income tax provision      5,046         14,629         13,214         17,741  
Net income  $   27,638     $   12,071     $   105,268     $   65,203  
               
  Net income per share:              
  Basic $   0.65     $   0.29     $   2.49     $   1.58  
  Diluted $   0.61     $   0.27     $   2.36     $   1.50  
Weighted-average shares outstanding:              
  Basic     42,467         41,574         42,247         41,350  
  Diluted     45,058         44,160         44,602         43,578  
               
SUPPLEMENTAL FINANCIAL INFORMATION 
STOCK-BASED COMPENSATION EXPENSE
(Unaudited, in thousands)
  Three Months Ended December 31,   Year Ended December 31,
    2018       2017       2018       2017  
Cost of revenue $   504     $   391     $   1,888     $   1,654  
Research and development     3,822         3,519         15,990         14,816  
Selling, general and administrative     10,516         7,948         42,729         36,147  
Total stock-based compensation expense $   14,842     $   11,858     $   60,607     $   52,617  
               
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,
    2018       2017       2018       2017  
Net income  $   27,638     $   12,071     $   105,268     $   65,203  
  Net income as a percentage of revenue   18.0 %     9.3 %     18.1 %     13.8 %
               
Adjustments to reconcile net income to non-GAAP net income:            
  Stock-based compensation expense     14,842         11,858         60,607         52,617  
  Amortization of acquisition-related intangible assets     197         513         841         2,051  
  Deferred compensation plan expense     458         148         431         238  
  Tax effect      1,432         11,688         (313 )       7,402  
Non-GAAP net income $   44,567     $   36,278     $   166,834     $   127,511  
  Non-GAAP net income as a percentage of revenue   29.0 %     28.0 %     28.6 %     27.1 %
               
Non-GAAP net income per share:              
  Basic $   1.05     $   0.87     $   3.95     $   3.08  
  Diluted $   0.99     $   0.82     $   3.74     $   2.93  
               
Shares used in the calculation of non-GAAP net income per share:            
  Basic     42,467         41,574         42,247         41,350  
  Diluted     45,058         44,160         44,602         43,578  
               
RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Unaudited, in thousands)
  Three Months Ended December 31,   Year Ended December 31,
    2018       2017       2018       2017  
Gross profit $   84,593     $   71,161     $   322,668     $   258,283  
  Gross margin   55.1 %     55.0 %     55.4 %     54.8 %
               
Adjustments to reconcile gross profit to non-GAAP gross profit:            
  Stock-based compensation expense     504         391         1,888         1,654  
  Amortization of acquisition-related intangible assets     197         513         841         2,051  
Non-GAAP gross profit $   85,294     $   72,065     $   325,397     $   261,988  
  Non-GAAP gross margin   55.6 %     55.7 %     55.9 %     55.6 %
               
RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
(Unaudited, in thousands)
  Three Months Ended December 31,   Year Ended December 31,
    2018       2017       2018       2017  
Total operating expenses $   51,516     $   46,108     $   209,180     $   180,859  
               
Adjustments to reconcile total operating expenses to non-GAAP total operating expenses:        
  Stock-based compensation expense     (14,338 )       (11,467 )       (58,719 )       (50,963 )
  Deferred compensation plan income (expense)     1,513         (776 )       591         (2,769 )
Non-GAAP operating expenses $   38,691     $   33,865     $   151,052     $   127,127  
               
               
RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME
(Unaudited, in thousands)
  Three Months Ended December 31,   Year Ended December 31,
    2018       2017       2018       2017  
Total operating income $   33,077     $   25,053     $   113,488     $   77,424  
               
Adjustments to reconcile total operating income to non-GAAP total operating income:        
  Stock-based compensation expense     14,842         11,858         60,607         52,617  
  Amortization of acquisition-related intangible assets     197         513         841         2,051  
  Deferred compensation plan (income) expense      (1,513 )       776         (591 )       2,769  
Non-GAAP operating income $   46,603     $   38,200     $   174,345     $   134,861  
               
               
RECONCILIATION OF INTEREST AND OTHER INCOME (EXPENSE), NET, TO NON-GAAP INTEREST AND OTHER INCOME, NET
(Unaudited, in thousands)
  Three Months Ended December 31,   Year Ended December 31,
    2018       2017       2018       2017  
Total interest and other income (expense), net $   (393 )   $   1,647     $   4,994     $   5,520  
               
Adjustments to reconcile interest and other income (expense), net, to non-GAAP interest and other income, net:        
  Deferred compensation plan (income) expense     1,971         (628 )       1,022         (2,531 )
Non-GAAP interest and other income, net $   1,578     $   1,019     $   6,016     $   2,989  
               
               
RECONCILIATION OF INCOME BEFORE INCOME TAXES TO NON-GAAP INCOME BEFORE INCOME TAXES
(Unaudited, in thousands)
  Three Months Ended December 31,   Year Ended December 31,
    2018       2017       2018       2017  
Total income before income taxes $   32,684     $   26,700     $   118,482     $   82,944  
               
Adjustments to reconcile income before income taxes to non-GAAP income before income taxes:        
  Stock-based compensation expense     14,842         11,858         60,607         52,617  
  Amortization of acquisition-related intangible assets     197         513         841         2,051  
  Deferred compensation plan expense      458         148         431         238  
Non-GAAP income before income taxes $   48,181     $   39,219     $   180,361     $   137,850  
               

2019 FIRST QUARTER OUTLOOK  
RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN  
(Unaudited)  
  Three Months Ending   
  March 31, 2019  
  Low   High  
Gross margin   54.8 %     55.4 %  
Adjustments to reconcile gross margin to non-GAAP gross margin:        
  Stock-based compensation expense    0.5 %     0.5 %  
Non-GAAP gross margin   55.3 %     55.9 %  
         
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, 2019  
  Low   High  
R&D and SG&A expense $   55,000     $   59,000    
Adjustments to reconcile R&D and SG&A expense to non-GAAP R&D and SG&A expense:        
  Stock-based compensation expense     (17,000 )       (19,000 )  
Non-GAAP R&D and SG&A expense $   38,000     $   40,000