10-QPeriod: Q1 FY2012

MONOLITHIC POWER SYSTEMS INC Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 8, 2012For Securities:MPWR

Summary

Monolithic Power Systems Inc. (MPWR) reported solid revenue growth of 13.5% for the first quarter of 2012, reaching $50.5 million, up from $44.5 million in the prior year period. This growth was primarily driven by strong demand for their DC to DC converters. The company also demonstrated improved profitability, with gross profit margin increasing to 52.3% from 50.2% year-over-year, attributed to better absorption of manufacturing overhead. Operating expenses saw an increase, particularly in SG&A, but the overall income from operations improved significantly, reflecting the revenue growth. The balance sheet shows a healthy working capital position of $194.0 million, though cash and cash equivalents decreased due to investments in short-term securities and building improvements for their new headquarters. MPWR continues to manage its investments prudently, with a substantial portion held in cash and short-term investments. The company is actively managing its legal matters, including a significant award related to patent litigation against O2 Micro, and is robustly defending against an IRS audit concerning cost-sharing agreements, although the potential financial impact has decreased.

Financial Highlights

43 data points
Beta

Revenue

$50.48M

52.3% Gross Margin

Net Income

$3.00M

5.9% Net Margin

EPS (Diluted)

$0.08

Total Assets

$291.18M

Cash & Equivalents

$78.73M

Free Cash Flow

$1.34M

Financial Statements
Beta
Revenue$50.48M
Cost of Revenue$24.07M
Gross Profit$26.41M
R&D Expenses$11.12M
SG&A Expenses$11.97M
Operating Expenses$23.21M
Operating Income$3.20M
Net Income$3.00M
EPS (Basic)$0.09
EPS (Diluted)$0.08
Shares Outstanding (Basic)34K
Shares Outstanding (Diluted)36K

Key Highlights

  • 1Revenue increased by 13.5% to $50.5 million for the three months ended March 31, 2012, driven by strong demand for DC to DC converters.
  • 2Gross profit margin improved to 52.3% from 50.2% year-over-year, due to higher absorption of manufacturing overhead.
  • 3Income from operations increased substantially to $3.2 million from $1.9 million in the prior year period.
  • 4The company reported net income of $3.0 million, or $0.08 per diluted share, up from $1.9 million, or $0.05 per diluted share, in Q1 2011.
  • 5Working capital remained strong at $194.0 million as of March 31, 2012.
  • 6Significant legal award received in patent litigation against O2 Micro for attorneys' fees and costs totaling approximately $9.1 million, plus interest.
  • 7Continued progress in managing an IRS audit concerning cost-sharing agreements, with the potential adjustment decreasing.

Frequently Asked Questions

The primary driver of MPWR's revenue growth was increased demand for their DC to DC converters, which saw a 14.9% increase in revenue due to higher unit shipments.

MPWR maintains a strong liquidity position with $194.0 million in working capital, including $78.7 million in cash and cash equivalents and $102.2 million in short-term investments. Cash and cash equivalents decreased primarily due to investments in short-term securities and capital expenditures for new headquarters.

MPWR is involved in a shareholder derivative action which is in its preliminary stages. Additionally, the company recently received a significant award of approximately $9.1 million in attorneys' fees and costs from patent litigation against O2 Micro. MPWR is also actively engaged with the IRS regarding a cost-sharing agreement audit, with the potential financial impact of the proposed adjustments having decreased.

Stock-based compensation expense totaled $3.3 million for the three months ended March 31, 2012, up from $3.0 million in the prior year period. This expense is included within cost of revenue and operating expenses.