10-QPeriod: Q2 FY2007

MONOLITHIC POWER SYSTEMS INC Quarterly Report for Q2 Ended Jun 30, 2007

Filed August 1, 2007For Securities:MPWR

Summary

Monolithic Power Systems, Inc. (MPWR) reported a net loss of $6.312 million for the six months ended June 30, 2007, a significant turnaround from the net income of $652,000 in the same period of 2006. This loss was largely driven by a substantial one-time patent litigation settlement charge of $9.8 million related to the Taiwan Sumida Electronics (TSE) lawsuit, which significantly impacted the second quarter of 2007. Despite the net loss, the company's revenue showed growth, increasing by 15.9% to $30.8 million for the three months ended June 30, 2007, and by 7.7% to $55.3 million for the six months ended June 30, 2007, compared to the prior year. This revenue growth was primarily fueled by increased sales in LCD backlight inverters and audio amplifiers. However, DC to DC converters saw relatively flat revenue due to a decline in average selling prices. The company's liquidity remains solid, with cash and cash equivalents increasing to $68.3 million as of June 30, 2007.

Key Highlights

  • 1Reported a net loss of $6.312 million for the six months ended June 30, 2007, compared to a net income of $652,000 in the prior year period.
  • 2Significant patent litigation settlement charge of $9.8 million for the TSE lawsuit impacted Q2 2007 results.
  • 3Revenue increased by 15.9% to $30.8 million for the three months ended June 30, 2007, and by 7.7% to $55.3 million for the six months ended June 30, 2007, year-over-year.
  • 4Strong growth in LCD backlight inverter and audio amplifier sales contributed to revenue increase.
  • 5Cash and cash equivalents increased to $68.3 million as of June 30, 2007, indicating a healthy liquidity position.
  • 6Operating expenses increased significantly due to patent litigation settlement and expense, while R&D also saw an increase for new product development.

Frequently Asked Questions

The primary reason for the net loss of $6.312 million in the first six months of 2007 was a one-time patent litigation settlement charge of $9.8 million related to the Taiwan Sumida Electronics (TSE) lawsuit. This charge significantly impacted the second quarter results, causing a shift from the net income reported in the same period of 2006.

Revenue demonstrated positive growth, increasing by 15.9% to $30.8 million for the three months ended June 30, 2007, and by 7.7% to $55.3 million for the six months ended June 30, 2007, compared to the corresponding periods in 2006. This growth was driven by strong performance in LCD backlight inverters and audio amplifiers.

The company maintained a strong liquidity position. As of June 30, 2007, cash and cash equivalents stood at $68.3 million, an increase from $50.8 million at the end of 2006. Total working capital also increased to $83.4 million.

The company is involved in significant litigation, notably with O2 Micro, Inc. and Linear Technology Corporation, concerning patent infringement and unfair competition claims. A substantial settlement provision of $9.8 million was recorded in Q2 2007 for the Taiwan Sumida Electronics (TSE) litigation. The outcomes of these ongoing legal proceedings pose a risk to the company's ability to sell products and could result in substantial damages.