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Monolithic Power Systems Announces Results For the First Quarter Ended March 31, 2014

SAN JOSE, Calif., April 24, 2014 /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 ended March 31, 2014.

The results for the quarter ended March 31, 2014 are as follows:

  • Net revenue was $60.1 million, a 5.5% decrease from $63.6 million in the fourth quarter of 2013 and a 16.7% increase from $51.5 million in the first quarter of 2013.
  • GAAP gross margin was 53.4%, compared with 53.2% in the first quarter of 2013, which included $0.2 million for stock-based compensation expenses for both periods.
  • Non-GAAP gross margin(1) was 53.8%, compared with 53.5% in the first quarter of 2013, which excluded $0.2 million for stock-based compensation expenses for both periods.
  • GAAP operating expenses were $23.0 million, including $31.7 million for research and development (R&D) and selling, general and administrative (SG&A) expenses, which included $7.4 million for stock-based compensation and deferred compensation plan expenses, and $(8.7) million for litigation benefit. Comparatively, for the quarter ended March 31, 2013, GAAP operating expenses were $25.1 million, including $25.4 million for R&D and SG&A expenses, which included $4.5 million for stock-based compensation expenses, and $(0.3) million for litigation benefit.
  • For the quarter ended March 31, 2014, MPS recognized a $9.0 million net litigation benefit from the settlement of the O2 Micro lawsuit. In conjunction with the recognition of this benefit, MPS recorded a one-time special non-executive employee bonus accrual of $3.1 million, of which $0.3 million was recorded in cost of revenue and $2.8 million was recorded in operating expenses.
  • Non-GAAP(1) operating expenses were $15.6 million, excluding $7.4 million for stock-based compensation and deferred compensation plan expenses, compared with $20.6 million, excluding $4.5 million for stock-based compensation expenses, for the quarter ended March 31, 2013.
  • GAAP net income was $9.0 million and GAAP earnings per share were $0.23 per diluted share. Comparatively, GAAP net income was $2.5 million and GAAP earnings per share were $0.07 per diluted share for the quarter ended March 31, 2013.
  • Non-GAAP(1) net income was $15.6 million and non-GAAP earnings per share were $0.39 per diluted share, excluding stock-based compensation expenses, net deferred compensation plan income and related tax effects, compared with non-GAAP net income of $6.4 million and non-GAAP earnings per share of $0.17 per diluted share, excluding stock-based compensation expenses and related tax effects, for the quarter ended March 31, 2013.

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 (in millions):



Three Months Ended March 31,

End Market


2014


2013

Communication


$                        13.6


$                        13.3

Storage and Computing


10.6


12.2

Consumer


26.1


18.8

Industrial


9.8


7.2

Total


$                        60.1


$                        51.5

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



Three Months Ended March 31,

Product Family


2014


2013

DC to DC 


$                     54.0


$                     46.5

Lighting Control 


6.1


5.0

Total 


$                     60.1


$                     51.5

"MPS had an outstanding quarter, hitting record first-quarter revenues while continuing to deliver solutions that exceed industry standards," said Michael Hsing, CEO and founder of MPS. "We are delivering on our promise to broaden our product portfolio and grow revenues above the industry average, with sustainable long-term growth."

Business Outlook

The following are MPS's financial targets for the second quarter ending June 30, 2014:

  • Revenue in the range of $65 million to $69 million.
  • GAAP gross margin between 53.7% and 54.7%. Non-GAAP(1) gross margin between 54.0% and 55.0%. This excludes an estimated impact of stock-based compensation expenses of 0.3%.
  • GAAP R&D and SG&A expenses between $27.8 million and $30.4 million. Non-GAAP(1) R&D and SG&A expenses between $20.5 million and $22.5 million. This excludes an estimate of stock-based compensation expenses in the range of $7.3 million to $7.9 million.
  • Litigation expenses of $200,000 to $400,000.
  • Fully diluted shares outstanding between 39.5 million and 39.9 million before shares buyback.

(1) Non-GAAP net income, non-GAAP earnings per share, non-GAAP gross margin, non-GAAP operating expenses and non-GAAP R&D and SG&A expenses differ from net income, earnings per share, gross margin, operating expenses, and R&D and SG&A 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 quarters ended March 31, 2014 and 2013 exclude the effect of stock-based compensation expenses, net deferred compensation plan income and their related tax effects. Non-GAAP gross margin for the quarters ended March 31, 2014 and 2013 exclude the effect of stock-based compensation expenses. Non-GAAP operating expenses for the quarters ended March 31, 2014 and 2013 exclude the effect of stock-based compensation and deferred compensation plan expenses. Projected non-GAAP gross margin exclude the effect of stock-based compensation expenses. Projected non-GAAP R&D and SG&A expenses exclude the effect of stock-based compensation expenses. 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 March 31, 2014 results at 2:00 p.m. PT / 5:00 p.m. ET, April 24, 2014. 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 25697963. 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, litigation expenses and diluted shares outstanding for the quarter ending June 30, 2014, (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) 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; 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 10, 2014.

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 (MPS) is a fabless semiconductor company specializing in high-performance analog ICs. Founded in 1997, MPS's core technology is its innovative and proprietary manufacturing process combined with superior analog circuit design capabilities across system-level and end customer applications. These combined advantages enable MPS to deliver highly integrated monolithic products that offer energy efficient and cost-effective solutions. MPS product families include DC/DC converters, LED drivers and controllers, Class-D audio amplifiers, battery chargers and protections, USB and current-limit switches and AC/DC offline products. MPS has over 1,000 employees worldwide, located in the United States, China, Taiwan, Korea, Japan, Singapore and across Europe.

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)


March 31,


December 31,


2014


2013

ASSETS




Current assets:




Cash and cash equivalents

$             88,885


$           101,213

Short-term investments

139,750


125,126

Accounts receivable, net of allowances of $0 as of March 31, 2014 and December 31, 2013

22,057


23,730

Inventories

39,829


39,737

Deferred income tax assets, net 

292


294

Prepaid expenses and other current assets

2,444


1,986

Total current assets

293,257


292,086

Property and equipment, net

65,897


64,837

Long-term investments

9,843


9,860

Deferred income tax assets, net 

476


481

Other long-term assets

5,159


1,644

Total assets

$           374,632


$           368,908





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$             11,748


$             10,694

Accrued compensation and related benefits

10,332


10,419

Accrued liabilities

8,559


17,376

Total current liabilities

30,639


38,489

Income tax liabilities

5,652


5,542

Other long-term liabilities

3,674


1,478

        Total liabilities

39,965


45,509

Stockholders' equity:




Common stock, $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 38,672 and 38,291 as of March 31, 2014 and December 31, 2013, respectively

237,059


234,201

Retained earnings 

91,956


82,938

Accumulated other comprehensive income

5,652


6,260

Total stockholders' equity

334,667


323,399

Total liabilities and stockholders' equity

$           374,632


$           368,908




Condensed Consolidated Statement of Operations

(Unaudited, in thousands, except per share amounts)



Three Months Ended March 31,


2014


2013

Revenue 

$                 60,061


$                 51,470

Cost of revenue 

27,964


24,085

Gross profit 

32,097


27,385

Operating expenses:




  Research and development 

15,603


12,123

  Selling, general and administrative 

16,109


13,258

  Litigation benefit, net

(8,700)


(301)

Total operating expenses 

23,012


25,080

Income from operations 

9,085


2,305

Interest and other income (expense), net

190


(10)

Income before income taxes 

9,275


2,295

Income tax provision (benefit)

257


(204)

Net income 

$                   9,018


$                   2,499





Basic net income per share 

$                     0.23


$                     0.07

Diluted net income per share 

$                     0.23


$                     0.07

Weighted average common shares outstanding:




          Basic

38,470


36,259

          Diluted

39,517


37,708



RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME

(Unaudited, in thousands, except per share amounts)


Three Months Ended March 31,


2014


2013

Net income 

$                   9,018


$                   2,499

   Net income as a percentage of revenue

15.0%


4.9%





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




    Stock-based compensation expense

7,598


4,660

     Deferred compensation plan income, net

(24)


-

    Tax effect 

(1,007)


(726)

    Non-GAAP net income

$                 15,585


$                   6,433

        Non-GAAP net income as a percentage of revenue

25.9%


12.5%





Non-GAAP earnings per share:




    Basic

$                     0.41


$                     0.18

    Diluted

$                     0.39


$                     0.17





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




    Basic

38,470


36,259

    Diluted

39,517


37,708






RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited, in thousands)


Three Months Ended March 31,


2014


2013

Gross profit

$                 32,097


$                 27,385

   Gross margin

53.4%


53.2%





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




   Stock-based compensation expense

205


156

   Non-GAAP gross profit

$                 32,302


$                 27,541

   Non-GAAP gross margin

53.8%


53.5%






RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES

(Unaudited, in thousands)


Three Months Ended March 31,


2014


2013

Total operating expenses

$                 23,012


$                 25,080





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



    Stock-based compensation expense

(7,392)


(4,504)

    Deferred compensation plan expense, net

(13)


-

    Non-GAAP operating expenses

$                 15,607


$                 20,576










RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME

(Unaudited, in thousands)


Three Months Ended March 31,


2014


2013

Total operating income

$                   9,085


$                   2,305

   Operating income as a percentage of revenue

15.1%


4.5%





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



    Stock-based compensation expense

7,598


4,660

    Deferred compensation plan expense, net

13


-

    Non-GAAP operating income

$                 16,696


$                   6,965

       Non-GAAP operating income as a percentage of revenue

27.8%


13.5%


2014 SECOND QUARTER OUTLOOK

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN

(Unaudited)


Three Months Ending 
June 30, 2014


Low


High

Gross margin

53.7%


54.7%





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




    Stock-based compensation expense

0.3%


0.3%

    Non-GAAP gross margin

54.0%


55.0%






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

(Unaudited, in thousands)






Three Months Ending  
June 30, 2014


Low


High

R&D and SG&A expenses

$       27,800


$         30,400





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




    Stock-based compensation expense

(7,300)


(7,900)

    Non-GAAP R&D and SG&A expenses

$       20,500


$         22,500

SOURCE Monolithic Power Systems, Inc.

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