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Monolithic Power (MPWR) Q2 Earnings & Revenues Top Estimates

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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 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

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.

Encouraging Guidance

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%.

Conclusion

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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