10-QPeriod: Q1 FY2015

MONOLITHIC POWER SYSTEMS INC Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 6, 2015For Securities:MPWR

Summary

Monolithic Power Systems, Inc. (MPWR) reported revenue of $73.5 million for the first quarter of 2015, a significant 22.4% increase compared to $60.1 million in the prior year's first quarter. This growth was driven by strong performance in both DC to DC products and lighting control products, with unit shipments up 29%. The company's gross margin also improved slightly to 54.0% from 53.4%, reflecting better absorption of manufacturing overhead, though partially offset by amortization of intangible assets from the Sensima acquisition. Despite the revenue growth, net income decreased to $6.0 million ($0.15 per diluted share) from $9.0 million ($0.23 per diluted share) in the first quarter of 2014. This decrease was primarily due to a substantial shift from a net litigation benefit of $8.7 million in Q1 2014 to a litigation expense of $0.3 million in Q1 2015, as well as higher operating expenses, including stock-based compensation. MPWR continues to invest in R&D and SG&A, with these expenses as a percentage of revenue decreasing year-over-year, indicating improved operational leverage. The company maintained a strong liquidity position with $233.8 million in cash, cash equivalents, and short-term investments. MPWR also returned capital to shareholders through stock repurchases totaling $10.4 million and initiated its dividend program, paying $5.9 million in dividends and dividend equivalents. The company anticipates its operating cash flow, combined with existing cash reserves, will be sufficient to meet liquidity needs for the next 12 months.

Financial Highlights

46 data points
Beta

Revenue

$73.54M

54.0% Gross Margin

Net Income

$5.96M

8.1% Net Margin

EPS (Diluted)

$0.15

Total Assets

$409.63M

Cash & Equivalents

$95.97M

Free Cash Flow

$10.98M

Financial Statements
Beta
Revenue$73.54M
Cost of Revenue$33.85M
Gross Profit$39.68M
SG&A Expenses$17.52M
Operating Expenses$33.83M
Operating Income$5.86M
Net Income$5.96M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)39.10M
Shares Outstanding (Diluted)40.60M

Key Highlights

  • 1Revenue increased by 22.4% year-over-year to $73.5 million, driven by strong demand for DC to DC and lighting control products.
  • 2Gross margin improved slightly to 54.0% from 53.4% in the prior year's quarter.
  • 3Net income decreased to $6.0 million ($0.15/share) from $9.0 million ($0.23/share), largely due to a significant year-over-year swing in litigation expenses/benefits.
  • 4Operating expenses as a percentage of revenue decreased for both R&D (21.8% vs 26.0%) and SG&A (23.8% vs 26.8%), indicating improved leverage.
  • 5The company generated $15.7 million in cash flow from operations, a significant increase from $12.0 million in the prior year.
  • 6MPWR returned $10.4 million to shareholders through stock repurchases and paid $5.9 million in dividends and dividend equivalents.
  • 7The company maintained a strong liquidity position with $233.8 million in cash, cash equivalents, and short-term investments as of March 31, 2015.

Frequently Asked Questions

Revenue growth was primarily driven by higher sales of both DC to DC products and lighting control products. Unit shipments increased by 29% due to higher market demand and new design wins, though this was partially offset by a 5% decrease in average selling prices.

Net income decreased primarily due to a significant swing in litigation expenses. In Q1 2014, the company recognized a $8.7 million net litigation benefit (related to the O2 Micro case resolution), whereas in Q1 2015, there was a $0.3 million litigation expense. Additionally, stock-based compensation expenses, particularly related to performance-based awards, increased.

Monolithic Power Systems maintained a strong liquidity position, with $233.8 million in cash, cash equivalents, and short-term investments as of March 31, 2015. The company generated $15.7 million in operating cash flow and expects this, along with existing reserves, to be sufficient for its liquidity needs over the next 12 months. They also continued their stock repurchase program and initiated dividend payments.

The acquisition of Sensima, completed in July 2014, is now contributing to the company's results. Amortization of intangible assets related to the acquisition added $0.4 million to the cost of revenue in Q1 2015. The company is also recognizing stock-based compensation expenses related to equity awards granted to Sensima employees.