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Monolithic Power Systems, Inc. MPWR reported second-quarter 2020 non-GAAP earnings of $1.08 per share, which beat the Zacks Consensus Estimate by 8%. Notably, the figure improved 17.4% on a year-over-year basis.
Revenues of $186.2 million increased 23.3% from the year-ago quarter’s figure and surpassed the Zacks Consensus Estimate by 9.4%. The reported figure was also above the higher end of management’s guidance of $167-$173 million.
Strong demand across Computing & Storage and Consumer and Communications end-markets, and a diversified multi-market strategy drove year-over-year growth.
Quarter in Details
Revenues by Product Family
Revenues in the DC to DC segment (94.6% of total revenues) increased 26.1% year over year to $176.1 million. Moreover, Lighting Control (5.4% of total revenues) revenues fell 10.8% to $10.1 million.
Revenues by End Market
Computing & Storage (34.4% of total revenues) revenues rallied 23.3% sequentially to $64.1 million. The market’s solid performance was driven by robust sales of cloud servers and storage.
Monolithic Power Systems, Inc. Price, Consensus and EPS Surprise
Monolithic Power Systems, Inc. price-consensus-eps-surprise-chart | Monolithic Power Systems, Inc. Quote
Consumer (25.6%) revenues improved 27.4% from the prior quarter to $47.7 million, reflecting solid uptake of home applications, gaming consoles, and IOT devices.
Industrial (14.3%) revenues increased 5.4% sequentially to $26.6 million due to strong performance of power devices, partially offset by decrease in sales of security applications.
Automotive (9.5%) revenues were $17.8 million, down 23.7% from the prior quarter. Negative impact of coronavirus crisis-induced shutdowns of major automotive OEMs led to decline in business.
Communications (16.2%) revenues increased 8% sequentially to $30.1 million. The end-market benefited from strong uptake of legacy routers, wireless applications and 5G networking infrastructure related products.
Margins in Detail
Non-GAAP gross margin expanded 10 basis points (bps) from the year-ago quarter’s level to 55.7%. Management had predicted the figure between 55.3% and 55.9%.
Non-GAAP operating expenses amounted to $50.7 million during the reported quarter, up 25.8% year over year. As a percentage of revenues, the figure expanded 50 bps on a year-over-year basis to 27.2%.
Non-GAAP operating income improved 21.3% year over year to $53 million. Non-GAAP operating margin (as a percentage of revenues) contracted 40 bps from the year-ago quarter’s level to 28.5%.
Balance Sheet & Cash Flow
As of Jun 30, 2020, cash, cash equivalents and short-term investments were $512.3 million, up from $489.3 million reported as of Mar 31, 2020.
Monolithic Power generated operating cash flow of $59.3 million compared with $51.4 million in the prior quarter.
For third-quarter 2020, Monolithic Power projects revenues between $200 million and $210 million. The Zacks Consensus Estimate for revenues is currently pegged at $182.95 million, which indicates growth of 8.4% from the year-ago reported figure.
Management anticipates non-GAAP gross margin between 55.5% and 56.1%.
We believe that Monolithic Power has significant prospects on account of increased demand for storage and computing, and data centers and cloud due to COVID-19-induced work-from-home trend.
However, soft demand across automotive end market is a headwind.
Zacks Rank & Other Stocks to Consider
Currently, Monolithic Power carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are Fastly, Inc. FSLY, Synaptics Incorporated SYNA and Microchip Technology Incorporated MCHP. While Microchip and Synaptics sport a Zacks Rank #1 (Strong Buy), Fastly carries a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
While both Fastly & Synaptics are set to report earnings on Aug 5, Microchip is slated to release financial numbers on Aug 4.
Long-term earnings growth rate of Fastly, Microchip and Synaptics is pegged at 25%, 14.5% and 10%, respectively.
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