Monolithic Power Systems Announces Results for the Third Quarter

Monolithic Power Systems Announces Results for the Third Quarter Ended September 30, 2018

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,
	2018		2017
ASSETS
Current assets:
Cash and cash equivalents	$	131,094	$	82,759
Short-term investments	216,754		216,331
Accounts receivable	59,887		38,037
Inventories	136,790		99,281
Other current assets	12,876		12,762
Total current assets	557,401		449,170
Property and equipment, net	147,497		144,636
Long-term investments	5,257		5,256
Goodwill	6,571		6,571
Acquisition-related intangible assets, net	308		951
Deferred tax assets, net	12,852		15,917
Other long-term assets	33,271		30,068
Total assets	$	763,157	$	652,569

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	27,603	$	22,813
Accrued compensation and related benefits	22,996		15,597
Accrued liabilities	34,908		27,507
Total current liabilities	85,507		65,917
Income tax liabilities	31,173		31,621
Other long-term liabilities	36,313		33,024
Total liabilities	152,993		130,562
Commitments and contingencies
Stockholders' equity:
Common stock and additional paid-in capital, $0.001 par value; shares authorized:
150,000; shares issued and outstanding: 42,408 and 41,614, respectively	435,085		376,586
Retained earnings	180,819		143,608
Accumulated other comprehensive income (loss)	(5,740)		1,813
Total stockholders’ equity	610,164		522,007
Total liabilities and stockholders’ equity	$	763,157	$	652,569

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,
	2018		2017		2018		2017
Revenue	$	159,975	$	128,939	$	428,885	$	341,499
Cost of revenue	70,957		58,083		190,810		154,377
Gross profit	89,018		70,856		238,075		187,122
Operating expenses:
Research and development	25,630		21,442		70,720		60,629
Selling, general and administrative	29,552		25,255		85,431		73,219
Litigation expense	343		327		1,513		903
Total operating expenses	55,525		47,024		157,664		134,751
Income from operations	33,493		23,832		80,411		52,371
Interest and other income, net	2,714		1,255		5,387		3,873
Income before income taxes	36,207		25,087		85,798		56,244
Income tax provision	4,639		1,445		8,168		3,112
Net income	$	31,568	$	23,642	$	77,630	$	53,132

Net income per share:
Basic	$	0.75	$	0.57	$	1.84	$	1.29
Diluted	$	0.71	$	0.54	$	1.75	$	1.22
Weighted-average shares outstanding:
Basic	42,362		41,458		42,173		41,276
Diluted	44,669		43,486		44,450		43,384

Cash dividends declared per common share	$	0.30	$	0.20	$	0.90	$	0.60


SUPPLEMENTAL FINANCIAL INFORMATION
STOCK-BASED COMPENSATION EXPENSE
(Unaudited, in thousands)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Cost of revenue	$	471	$	453	$	1,384	$	1,264
Research and development	3,979		3,838		12,168		11,297
Selling, general and administrative	10,393		9,678		32,213		28,198
Total stock-based compensation expense	$	14,843	$	13,969	$	45,765	$	40,759


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,
	2018		2017		2018		2017
Net income	$	31,568	$	23,642	$	77,630	$	53,132
Net income as a percentage of revenue	19.7%		18.3%		18.1%		15.6%

Adjustments to reconcile net income to non-GAAP net income:
Stock-based compensation expense	14,843		13,969		45,765		40,759
Amortization of acquisition-related intangible assets	197		513		644		1,538
Deferred compensation plan (income) expense	(66)		(50)		(26)		90
Tax effect	800		(1,519)		(1,746)		(4,285)
Non-GAAP net income	$	47,342	$	36,555	$	122,267	$	91,234
Non-GAAP net income as a percentage of revenue	29.6%		28.4%		28.5%		26.7%

Non-GAAP net income per share:
Basic	$	1.12	$	0.88	$	2.90	$	2.21
Diluted	$	1.06	$	0.84	$	2.75	$	2.10

Shares used in the calculation of non-GAAP net income per share:
Basic	42,362		41,458		42,173		41,276
Diluted	44,669		43,486		44,450		43,384


RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Unaudited, in thousands)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Gross profit	$	89,018	$	70,856	$	238,075	$	187,122
Gross margin	55.6%		55.0%		55.5%		54.8%

Adjustments to reconcile gross profit to non-GAAP gross profit:
Stock-based compensation expense	471		453		1,384		1,264
Amortization of acquisition-related intangible assets	197		513		644		1,538
Non-GAAP gross profit	$	89,686	$	71,822	$	240,103	$	189,924
Non-GAAP gross margin	56.1%		55.7%		56.0%		55.6%


RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
(Unaudited, in thousands)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Total operating expenses	$	55,525	$	47,024	$	157,664	$	134,751

Adjustments to reconcile total operating expenses to non-GAAP total operating expenses:
Stock-based compensation expense	(14,372)		(13,516)		(44,381)		(39,495)
Deferred compensation plan expense	(650)		(585)		(923)		(1,992)
Non-GAAP operating expenses	$	40,503	$	32,923	$	112,360	$	93,264


RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME
(Unaudited, in thousands)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Total operating income	$	33,493	$	23,832	$	80,411	$	52,371
Operating income as a percentage of revenue	20.9%		18.5%		18.7%		15.3%

Adjustments to reconcile total operating income to non-GAAP total operating income:
Stock-based compensation expense	14,843		13,969		45,765		40,759
Amortization of acquisition-related intangible assets	197		513		644		1,538
Deferred compensation plan expense	650		585		923		1,992
Non-GAAP operating income	$	49,183	$	38,899	$	127,743	$	96,660
Non-GAAP operating income as a percentage of revenue	30.7%		30.2%		29.8%		28.3%


RECONCILIATION OF INTEREST AND OTHER INCOME, NET, TO NON-GAAP INTEREST AND OTHER INCOME, NET
(Unaudited, in thousands)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Total interest and other income, net	$	2,714	$	1,255	$	5,387	$	3,873

Adjustments to reconcile interest and other income to non-GAAP interest and other income:
Deferred compensation plan income	(716)		(635)		(949)		(1,902)
Non-GAAP interest and other income, net	$	1,998	$	620	$	4,438	$	1,971


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,
	2018		2017		2018		2017
Total income before income taxes	$	36,207	$	25,087	$	85,798	$	56,244

Adjustments to reconcile income before income taxes to non-GAAP income before income taxes:
Stock-based compensation expense	14,843		13,969		45,765		40,759
Amortization of acquisition-related intangible assets	197		513		644		1,538
Deferred compensation plan (income) expense	(66)		(50)		(26)		90
Non-GAAP income before income taxes	$	51,181	$	39,519	$	132,181	$	98,631

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