GlobeNewswire Inc | Jul 28, 2020 04:01PM EDT

July 28, 2020

KIRKLAND, Wash., July 28, 2020 (GLOBE NEWSWIRE) -- Monolithic Power Systems, Inc. (MPS) (Nasdaq: MPWR), a leading company in high performance analog solutions, today announced financial results for the quarter ended June 30, 2020.

-- Revenue was $186.2million for the quarter ended June 30, 2020, a 12.3% increase from $165.8 million for the quarter ended March 31, 2020 and a 23.3% increase from $151.0 million for the quarter ended June 30, 2019. -- GAAP gross margin was 55.1% for the quarter ended June 30, 2020, compared with 55.1% for the quarter ended June 30, 2019. -- Non-GAAP (1) gross marginwas 55.7% for the quarter ended June 30, 2020, excluding the impact of $0.6 million for stock-based compensation expense and $0.5 million for deferred compensation plan expense, compared with 55.6% for the quarter ended June 30, 2019, excluding the impact of $0.7 million for stock-based compensation expense and $0.1 million for the amortization of acquisition-related intangible assets. -- GAAP operating expenses were $74.6million for the quarter ended June 30, 2020, compared with $63.1 million for the quarter ended June 30, 2019. -- Non-GAAP (1) operating expenses were $50.7million for the quarter ended June 30, 2020, excluding $20.4 million for stock-based compensation expense and $3.6 million for deferred compensation plan expense, compared with $40.3 million for the quarter ended June 30, 2019, excluding $22.0 million for stock-based compensation expense and $0.8 million for deferred compensation plan expense. -- GAAP operating income was $28.0 million for the quarter ended June 30, 2020, compared with $20.1 million for the quarter ended June 30, 2019. -- Non-GAAP (1) operating income was $53.0 million for the quarter ended June 30, 2020, excluding $21.0 million for stock-based compensation expense and $4.0 million for deferred compensation plan expense, compared with $43.7 million for the quarter ended June 30, 2019, excluding $22.7 million for stock-based compensation expense, $0.1 million for the amortization of acquisition-related intangible assets and $0.8 million for deferred compensation plan expense. -- GAAP other income, net, was $5.2 million for the quarter ended June 30, 2020, compared withother income, net, of $2.2 million for the quarter ended June 30, 2019. -- Non-GAAP (1) other income, net was $1.6 million for the quarter ended June 30, 2020, excluding $3.6 million for deferred compensation plan income, compared with $1.6 million for the quarter ended June 30, 2019, excluding $0.6 million for deferred compensation plan income. -- GAAP income before income taxes was $33.2 million for the quarter ended June 30, 2020, compared with $22.3 million for the quarter ended June 30, 2019. -- Non-GAAP (1) income before income taxes was $54.7 million for the quarter ended June 30, 2020, excluding $21.0 million for stock-based compensation expense and $0.5 million for deferred compensation plan expense, compared with $45.3 million for the quarter ended June 30, 2019, excluding $22.7 million for stock-based compensation expense, $0.1 million for the amortization of acquisition-related intangible assets, and $0.2 million for deferred compensation plan expense. -- GAAP net income was $30.2 million and $0.64 per diluted share for the quarter ended June 30, 2020. Comparatively, GAAP net income was $20.7 million and $0.45 per diluted share for the quarter ended June 30, 2019. -- Non-GAAP (1) net income was $50.6 million and$1.08 per diluted share for the quarter ended June 30, 2020, excluding stock-based compensation expense, net deferred compensation plan expense and related tax effects, compared with non-GAAP net income of $41.9 million and $0.92 per diluted share for the quarter ended June 30, 2019, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense and related tax effects.

The financial results for the six months ended June 30, 2020 are as follows:

-- Revenue was $352.0million for the six months ended June 30, 2020, a 20.4% increase from $292.4 million for the six months ended June 30, 2019. -- GAAP gross margin was 55.1% for the six months ended June 30, 2020, compared with 55.1% for the six months ended June 30, 2019. -- Non-GAAP (1) gross marginwas 55.6% for the six months ended June 30, 2020, excluding the impact of $1.2 million for stock-based compensation expense and $0.4 million for deferred compensation plan expense, compared with 55.6% for the six months ended June 30, 2019, excluding the impact of $1.2 million for stock-based compensation expense and $0.1 million for the amortization of acquisition-related intangible assets. -- GAAP operating expenses were $135.1million for the six months ended June 30, 2020, compared with $119.4 million for the six months ended June 30, 2019. -- Non-GAAP (1) operating expenses were $96.7million for the six months ended June 30, 2020, excluding $38.4 million for stock-based compensation expense, compared with $79.3 million for the six months ended June 30, 2019, excluding $37.5 million for stock-based compensation expense and $2.6 million for deferred compensation plan expense. -- GAAP operating income was $58.9 million for the six months ended June 30, 2020, compared with $41.8 million for the six months ended June 30, 2019. -- Non-GAAP (1) operating income was $98.9 million for the six months ended June 30, 2020, excluding $39.6 million for stock-based compensation expense and $0.4 million for deferred compensation plan expense, compared with $83.2 million for the six months ended June 30, 2019, excluding $38.7 million for stock-based compensation expense, $0.1 million for the amortization of acquisition-related intangible assets and $2.6 million for deferred compensation plan expense. -- GAAP other income, net, was $3.5 million for the six months ended June 30, 2020, compared withother income, net, of $5.6 million for the six months ended June 30, 2019. -- Non-GAAP (1) other income, net was $3.7 million for the six months ended June 30, 2020, excluding $0.2 million for deferred compensation plan expense, compared with $3.0 million for the six months ended June 30, 2019, excluding $2.6 million for deferred compensation plan income. -- GAAP income before income taxes was $62.4 million for the six months ended June 30, 2020, compared with $47.4 million for the six months ended June 30, 2019. -- Non-GAAP (1) income before income taxes was $102.6 million for the six months ended June 30, 2020, excluding $39.6 million for stock-based compensation expense and $0.6 million for deferred compensation plan expense, compared with $86.2 million for the six months ended June 30, 2019, excluding $38.7 million for stock-based compensation expense, and $0.1 million for the amortization of acquisition-related intangible assets. -- GAAP net income was $65.9 million and$1.41 per diluted share for the six months ended June 30, 2020. Comparatively, GAAP net income was $46.9 million and$1.03 per diluted share for the six months ended June 30, 2019. -- Non-GAAP (1) net income was $94.9 million and$2.03 per diluted share for the six months ended June 30, 2020, excluding stock-based compensation expense, net deferred compensation plan expense and related tax effects, compared with non-GAAP net income of $79.8 million and$1.76 per diluted share for the six months ended June 30, 2019, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense and related tax effects.

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

Three Months Ended June 30, Six Months Ended June 30, End Market 2020 2019 2020 2019 Computing and $ 64,087 $ 41,590 $ 116,044 $ 80,778 storageAutomotive 17,779 21,225 41,091 41,742 Industrial 26,592 22,438 51,829 43,778 Communications 30,095 21,968 57,965 44,150 Consumer 47,656 43,786 85,058 81,922 Total $ 186,209 $ 151,007 $ 351,987 $ 292,370

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

Three Months Ended June 30, Six Months Ended June 30, Product Family 2020 2019 2020 2019 DC to DC $ 176,113 $ 139,691 $ 332,988 $ 272,402 Lighting 10,096 11,316 18,999 19,968 ControlTotal $ 186,209 $ 151,007 $ 351,987 $ 292,370

We continue to grow year over year. We are excited about our design activities in the pipeline and expanding our reach in the new frontiers,saidMichael Hsing, CEO and founder of MPS.

Business Outlook

The following are MPS financial targets for the third quarter ending September 30, 2020:

-- Revenue in the range of $200million to $210million. -- GAAP gross margin between 55.2% and 55.8%. Non-GAAP (1) gross margin between 55.5% and 56.1%, which excludes an estimated impact of stock-based compensation expenses of 0.3%. -- GAAP research and development (R&D) and selling, general and administrative (SG&A) expenses between $70.7million and $74.7million. Non-GAAP (1) R&D and SG&A expenses between $50.2million and $52.2million, which excludes estimatedstock-based compensation expenses in the range of $20.5million to $22.5million. -- Total stock-based compensation expense of $21.2million to $23.2million. -- Litigation expenses ranging between $1.8million and $2.2million. -- Interest income of $1.5million to $1.7million. -- Fully diluted shares outstanding between 46.5 million and 47.5 million.

(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 other income (expense), 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, other income (expense), net, operating income and income before taxes determined in accordance with Generally Accepted Accounting Principles inthe 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, amortization of acquisition-related intangible assets and deferred compensation plan income/expense. Non-GAAP operating expenses exclude the effect of stock-based compensation expense and deferred compensation plan income/expense. Non-GAAP other income (expense), 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.

Earnings WebinarMPS plans to host a Zoom webinar covering its financial results at2:00 p.m. PT/5:00 p.m. ET,July 28, 2020. You can access the webinar, free of charge, at: https://mpsic.zoom.us/j/96497779610. The webinar will be archived and available for replay for one year under the Investor Relations page on the MPS website.

Safe Harbor StatementThis 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, interest 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 manage our inventory levels; the effect of export controls, trade and economic sanctions regulations and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets, particularly in China;our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses; adverse changes in laws and government regulations such as tariffs on imports of foreign goods, export regulations and export classifications, 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 epidemics and pandemics, such as the COVID-19 outbreak first identified in December 2019, on the global economy and on our business; 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, and our ability to adjust our operations to address such changes or developments; difficulty in predicting or budgeting for future customer demand and channel inventories, expenses and financial contingencies(including as a result of the COVID-19 pandemic); 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; the ongoing consolidation of companies in the semiconductor industry; and other important risk factors identified in MPSsSecurities and Exchange Commission(SEC) filings, including, but not limited to, our annual report on Form 10-K filed with theSEConFebruary 28, 2020 and our quarterly report on Form 10-Q filed with the SEC on May 11, 2020. The forward-looking statements in this press release and statements made during the accompanying teleconference represent MPSs 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.

AboutMonolithic Power SystemsMonolithic 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 toreduce total energy consumption in its customers' systems with green, practical, compact solutions. The company was founded byMichael Hsingin 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 BlegenChief Financial OfficerMonolithic Power Systems, Inc.408-826-0777investors@monolithicpower.com

Monolithic Power Systems, Inc.Condensed Consolidated Balance Sheets(Unaudited, in thousands, except par value)

June 30, December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 156,483 $ 172,960 Short-term investments 355,840 282,437 Accounts receivable, net 55,136 52,704 Inventories 152,119 127,500 Other current assets 29,286 19,605 Total current assets 748,864 655,206 Property and equipment, net 251,980 228,315 Long-term investments 3,032 3,138 Goodwill 6,571 6,571 Deferred tax assets, net 13,432 17,193 Other long-term assets 47,276 45,952 Total assets $ 1,071,155 $ 956,375 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable $ 45,169 $ 27,271 Accrued compensation and related benefits 32,785 26,164 Other accrued liabilities 58,831 44,790 Total current liabilities 136,785 98,225 Income tax liabilities 35,624 37,596 Other long-term liabilities 49,801 47,063 Total liabilities 222,210 182,884 Commitments and contingencies Stockholders? equity: Common stock and additional paid-in capital:$0.001 par value; shares authorized: 150,000; 605,165 549,517 shares issued and outstanding: 44,911 and 43,616,respectivelyRetained earnings 247,864 229,450 Accumulated other comprehensive loss (4,084 ) (5,476 )Total stockholders? equity 848,945 773,491 Total liabilities and stockholders? equity $ 1,071,155 $ 956,375

Monolithic Power Systems, Inc.Condensed Consolidated Statements of Operations(Unaudited, in thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Revenue $ 186,209 $ 151,007 $ 351,987 $ 292,370 Cost of revenue 83,616 67,782 157,947 131,139 Gross profit 102,593 83,225 194,040 161,231 Operating expenses:Research and 31,673 27,545 57,629 53,003 developmentSelling, generaland 40,883 35,058 73,047 65,611 administrativeLitigation 2,082 503 4,423 781 expenseTotal operating 74,638 63,106 135,099 119,395 expensesIncome from 27,955 20,119 58,941 41,836 operationsOther income, 5,200 2,229 3,486 5,569 netIncome before 33,155 22,348 62,427 47,405 income taxesIncome taxexpense 2,988 1,655 (3,495 ) 531 (benefit)Net income $ 30,167 $ 20,693 $ 65,922 $ 46,874 Net income per share:Basic $ 0.67 $ 0.48 $ 1.48 $ 1.09 Diluted $ 0.64 $ 0.45 $ 1.41 $ 1.03 Weighted-averageshares outstanding:Basic 44,785 43,109 44,620 42,929 Diluted 46,831 45,483 46,750 45,358

SUPPLEMENTAL FINANCIAL INFORMATIONSTOCK-BASED COMPENSATION EXPENSE(Unaudited, in thousands)

Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Cost of revenue $ 642 $ 663 $ 1,199 $ 1,193 Research and 4,962 5,412 9,332 9,841 developmentSelling,general and 15,440 16,634 29,075 27,685 administrativeTotalstock-based $ 21,044 $ 22,709 $ 39,606 $ 38,719 compensationexpense

RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME(Unaudited, in thousands, except per share amounts)

Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Net income $ 30,167 $ 20,693 $ 65,922 $ 46,874 Net income as apercentage of 16.2 % 13.7 % 18.7 % 16.0 %revenue Adjustments toreconcile net income to non-GAAPnet income:Stock-basedcompensation 21,044 22,709 39,606 38,719 expenseAmortization ofacquisition-related - 51 - 102 intangible assetsDeferredcompensation plan 460 151 554 15 expenseTax effect (1,111 ) (1,739 ) (11,189 ) (5,937 )Non-GAAP net income $ 50,560 $ 41,865 $ 94,893 $ 79,773 Non-GAAP net incomeas a percentage of 27.2 % 27.7 % 27.0 % 27.3 %revenue Non-GAAP net income per share:Basic $ 1.13 $ 0.97 $ 2.13 $ 1.86 Diluted $ 1.08 $ 0.92 $ 2.03 $ 1.76 Shares used in thecalculation of non-GAAP net incomeper share:Basic 44,785 43,109 44,620 42,929 Diluted 46,831 45,483 46,750 45,358

RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN(Unaudited, in thousands)

Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Gross profit $ 102,593 $ 83,225 $ 194,040 $ 161,231 Gross margin 55.1 % 55.1 % 55.1 % 55.1 % Adjustments toreconcile gross profit to non-GAAPgross profit:Stock-basedcompensation 642 663 1,199 1,193 expenseDeferredcompensation plan 460 - 406 - expenseAmortization ofacquisition-related - 51 - 102 intangible assetsNon-GAAP gross $ 103,695 $ 83,939 $ 195,645 $ 162,526 profitNon-GAAP gross 55.7 % 55.6 % 55.6 % 55.6 %margin

RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES(Unaudited, in thousands)

Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Totaloperating $ 74,638 $ 63,106 $ 135,099 $ 119,395 expenses Adjustmentsto reconciletotaloperatingexpenses to non-GAAPtotaloperatingexpenses:Stock-basedcompensation (20,402 ) (22,046 ) (38,407 ) (37,526 )expenseDeferredcompensationplan (3,572 ) (772 ) 30 (2,571 )(expense)incomeNon-GAAPoperating $ 50,664 $ 40,288 $ 96,722 $ 79,298 expenses

RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME(Unaudited, in thousands)

Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Total operating $ 27,955 $ 20,119 $ 58,941 $ 41,836 income Adjustments toreconcile totaloperating income to non-GAAP totaloperating income:Stock-basedcompensation 21,044 22,709 39,606 38,719 expenseAmortization ofacquisition-related - 51 - 102 intangible assetsDeferredcompensation plan 4,032 772 377 2,571 expenseNon-GAAP operating $ 53,031 $ 43,651 $ 98,924 $ 83,228 income

RECONCILIATION OF OTHER INCOME, NET, TO NON-GAAP OTHER INCOME, NET(Unaudited, in thousands)

Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Total other $ 5,200 $ 2,229 $ 3,486 $ 5,569 income, net Adjustments toreconcile otherincome, net to non-GAAP otherincome, net:Deferredcompensation plan (3,572 ) (620 ) 177 (2,556 )(income) expenseNon-GAAP other $ 1,628 $ 1,609 $ 3,663 $ 3,013 income, net

RECONCILIATION OF INCOME BEFORE INCOME TAXES TO NON-GAAP INCOME BEFORE INCOME TAXES(Unaudited, in thousands)

Three Months Ended June Six Months Ended June 30, 30, 2020 2019 2020 2019 Total income before $ 33,155 $ 22,348 $ 62,427 $ 47,405 income taxes Adjustments toreconcile incomebefore income taxes to non-GAAP incomebefore incometaxes:Stock-basedcompensation 21,044 22,709 39,606 38,719 expenseAmortization ofacquisition-related - 51 - 102 intangible assetsDeferredcompensation plan 460 151 554 15 expenseNon-GAAP income $ 54,659 $ 45,259 $ 102,587 $ 86,241 before income taxes

2020 THIRD QUARTER OUTLOOKRECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN(Unaudited)

Three Months Ending September 30, 2020 Low High Gross margin 55.2 % 55.8 %Adjustments to reconcile gross margin to non-GAAP gross margin:Stock-based compensation expense 0.3 % 0.3 %Non-GAAP gross margin 55.5 % 56.1 %

RECONCILIATION OF R&D AND SG&A EXPENSES TO NON-GAAP R&D AND SG&A EXPENSES(Unaudited, in thousands)

Three Months Ending September 30, 2020 Low High R&D and SG&A expense $ 70,700 $ 74,700 Adjustments to reconcile R&D and SG&A expense to non-GAAP R&D and SG&A expense:Stock-based compensation expense (20,500 ) (22,500 )Non-GAAP R&D and SG&A expense $ 50,200 $ 52,200