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Monolithic Power (MPWR) Q1 Earnings & Revenues Top Estimates

Monolithic Power Systems, Inc. MPWR reported first-quarter 2020 non-GAAP earnings of 95 cents per share, which beat the Zacks Consensus Estimate by 1%. Notably, the figure increased 13.1% on a year-over-year basis.

Revenues of $165.8 million increased 17.3% from the year-ago quarter’s figure and surpassed the Zacks Consensus Estimate by 3.4%. The reported figure was also towards the higher end of management’s guidance of $161-$167 million.

Strong demand across Computing & Storage and Automotive and Communications end-markets as well as a diversified multi-market strategy drove year-over-year growth.

Notably, shares of the company have returned 7.4% in the past year against the industry’s decline of 14.5%.

Monolithic Power Systems, Inc. Price, Consensus and EPS Surprise

Monolithic Power Systems, Inc. Price, Consensus and EPS Surprise
Monolithic Power Systems, Inc. Price, Consensus and EPS Surprise

Monolithic Power Systems, Inc. price-consensus-eps-surprise-chart | Monolithic Power Systems, Inc. Quote

Quarter in Details

Revenues by Product Family

Revenues in the DC to DC segment (94.6% of total revenues) increased 18.2% year over year to $156.8 million. Moreover, Lighting Control (5.4% of total revenues) revenues increased 2.9% to $8.9 million.

Revenues by End Market

Computing & Storage (31.3% of total revenues) revenues rallied 32.6% year over year to $52 million. The market’s solid performance was driven by robust sales of cloud servers and storage.

Consumer (22.6%) revenues dropped 1.9% from the year-ago quarter’s figure to $37.4 million due to softening demand for set-top boxes and flat-panel TVs.

Industrial (15.2%) revenues increased 18.3% year over year to $25.2 million due to strong performance of games, smart meters and security applications.

Automotive (14.1%) revenues were $23.3 million, up 13.6% year over year. This was driven by sales of infotainment, safety and connectivity application products.

Communications (16.8%) revenues rallied 25.6% year over year to almost $27.9 million. The end-market benefited from strong 5G networking sales.

Margins in Detail

Non-GAAP gross margin contracted 10 basis points (bps) from the year-ago quarter’s level to 55.5%. Management had predicted the figure to be between 55.4% and 56%.

Non-GAAP operating expenses amounted to $46.1 million during the reported quarter, up 18.1% year over year. As a percentage of revenues, the figure expanded 20 bps on a year-over-year basis to 27.8%.

Non-GAAP operating income improved almost 9% year over year to $45.9 million. Non-GAAP operating margin (as a percentage of revenues) contracted 30 bps from the year-ago quarter’s level to 27.7%.

Balance Sheet & Cash Flow

As of Mar 31, 2020, cash, cash equivalents and short-term investments were $489.3 million, up from $455.4 million reported as of Dec 31, 2019.

Monolithic Power generated operating cash flow of approximately $51.4 million compared with $61 million in the prior quarter.

Guidance

For second-quarter 2020, Monolithic Power projects revenues between $167 million and $173 million. The Zacks Consensus Estimate for revenues is currently pegged at $166.5 million, which indicates growth of 10.3% from the year-ago quarter’s reported figure.

Management anticipates non-GAAP gross margin between 55.3% and 55.9%.

Conclusion

We believe that Monolithic Power has significant prospects on account of increased demand for storage and computing as well as data centers and cloud due to COVID-19-induced work from home trends.

Moreover, the outbreak of the pandemic has created opportunities for the company in the medical devices vertical. Notably, the company has built a low-cost emergency ventilator based on an open-source MIT design to aid medical workers in their fight against the pandemic. (Read More: Monolithic Power Designs Ventilator to Fight COVID-19)

However, softening demand in consumer segment is anticipated to dampen top-line growth.

Zacks Rank & Stocks to Consider

Currently, Monolithic Power carries a Zacks Rank #3 (Hold).

Netlist, Inc. NLST, Pixelworks, Inc. PXLW and InterDigital, Inc. IDCC are some better-ranked stocks worth considering in the broader computer and technology sector, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Netlist and InterDigital is pegged at 15% each, while Pixelworks is pegged at 20%.

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