10-QPeriod: Q2 FY2018

MONOLITHIC POWER SYSTEMS INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 2, 2018For Securities:MPWR

Summary

Monolithic Power Systems Inc. (MPWR) reported a strong second quarter and first half of 2018, demonstrating significant year-over-year revenue growth across multiple end markets. Revenue increased by 24.6% for the three months ended June 30, 2018, and 26.5% for the six months ended June 30, 2018, driven by robust demand in consumer, computing and storage, and automotive sectors. The company also achieved improved gross margins and demonstrated operating leverage by increasing revenue faster than operating expenses. The company's financial position remains solid with healthy working capital and a substantial cash and investment balance. MPWR continues to invest in research and development, which increased by 15.7% for the quarter and 15.1% for the half-year, supporting its strategy of new product introductions and market penetration. The company also increased its quarterly cash dividend, underscoring its confidence in its financial performance and commitment to shareholder returns.

Financial Highlights

49 data points
Beta

Revenue

$139.76M

55.5% Gross Margin

Net Income

$24.21M

17.3% Net Margin

EPS (Diluted)

$0.55

Total Assets

$719.95M

Cash & Equivalents

$83.19M

Free Cash Flow

$19.82M

Financial Statements
Beta
Revenue$139.76M
Cost of Revenue$62.20M
Gross Profit$77.56M
SG&A Expenses$28.56M
Operating Expenses$52.68M
Operating Income$24.88M
Net Income$24.21M
EPS (Basic)$0.57
EPS (Diluted)$0.55
Shares Outstanding (Basic)42.24M
Shares Outstanding (Diluted)44.40M

Key Highlights

  • 1Revenue grew by 24.6% year-over-year to $139.8 million for the three months ended June 30, 2018.
  • 2Revenue for the six months ended June 30, 2018, increased by 26.5% year-over-year to $268.9 million.
  • 3Gross margin improved to 55.5% in Q2 2018 from 54.7% in Q2 2017, driven by favorable product mix and cost efficiencies.
  • 4Operating income increased significantly by 66.4% year-over-year for the quarter, indicating strong operational leverage.
  • 5Net income more than doubled to $24.2 million in Q2 2018 from $15.0 million in Q2 2017.
  • 6The company increased its quarterly cash dividend from $0.20 to $0.30 per share.
  • 7Working capital increased to $434.5 million as of June 30, 2018, up from $383.3 million at the end of 2017.

Frequently Asked Questions

Revenue growth was primarily driven by strong demand in the consumer, computing and storage, and automotive end markets. The company saw increased sales in home appliance, IoT products, solid-state drive storage, cloud computing, high-performance notebooks, and infotainment/safety applications.

The adoption of ASC Topic 606 for revenue recognition, effective January 1, 2018, resulted in minor adjustments. For the period ended June 30, 2018, it led to a slight increase in revenue and net income compared to the previous accounting standard (Topic 605), primarily due to changes in recognizing revenue for certain distributors and the accounting for product returns. The overall impact was immaterial to the financial statements.

Monolithic Power Systems continues to invest significantly in research and development, with expenses increasing by 15.7% in Q2 2018 and 15.1% for the first half of the year. This investment supports the company's strategy of introducing new products within existing families and exploring new product categories to maintain market differentiation and drive future revenue growth.

The company maintains a strong liquidity position with $83.1 million in cash and cash equivalents and $230.4 million in short-term investments as of June 30, 2018. It also reported healthy working capital of $434.5 million. The company expects its operational cash flow, combined with existing cash reserves, to be sufficient for its liquidity needs for the next 12 months. They also plan to repatriate cash from their Bermuda subsidiary to fund U.S. expenditures.