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Monolithic Power Systems Announces Results for the Second Quarter Ended June 30, 2020

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KIRKLAND, Wash., July 28, 2020 (GLOBE NEWSWIRE) -- Monolithic Power Systems, Inc. (MPS) (Nasdaq: MPWR), a leading company in high performance analog solutions, today announced financial results for the quarter ended June 30, 2020.

  • Revenue was $186.2 million for the quarter ended June 30, 2020, a 12.3% increase from $165.8 million for the quarter ended March 31, 2020 and a 23.3% increase from $151.0 million for the quarter ended June 30, 2019.

  • GAAP gross margin was 55.1% for the quarter ended June 30, 2020, compared with 55.1% for the quarter ended June 30, 2019.

  • Non-GAAP (1) gross margin was 55.7% for the quarter ended June 30, 2020, excluding the impact of $0.6 million for stock-based compensation expense and $0.5 million for deferred compensation plan expense, compared with 55.6% for the quarter ended June 30, 2019, excluding the impact of $0.7 million for stock-based compensation expense and $0.1 million for the amortization of acquisition-related intangible assets.

  • GAAP operating expenses were $74.6 million for the quarter ended June 30, 2020, compared with $63.1 million for the quarter ended June 30, 2019.

  • Non-GAAP (1) operating expenses were $50.7 million for the quarter ended June 30, 2020, excluding $20.4 million for stock-based compensation expense and $3.6 million for deferred compensation plan expense, compared with $40.3 million for the quarter ended June 30, 2019, excluding $22.0 million for stock-based compensation expense and $0.8 million for deferred compensation plan expense.

  • GAAP operating income was $28.0 million for the quarter ended June 30, 2020, compared with $20.1 million for the quarter ended June 30, 2019.

  • Non-GAAP (1) operating income was $53.0 million for the quarter ended June 30, 2020, excluding $21.0 million for stock-based compensation expense and $4.0 million for deferred compensation plan expense, compared with $43.7 million for the quarter ended June 30, 2019, excluding $22.7 million for stock-based compensation expense, $0.1 million for the amortization of acquisition-related intangible assets and $0.8 million for deferred compensation plan expense.

  • GAAP other income, net, was $5.2 million for the quarter ended June 30, 2020, compared with other income, net, of $2.2 million for the quarter ended June 30, 2019.

  • Non-GAAP (1) other income, net was $1.6 million for the quarter ended June 30, 2020, excluding $3.6 million for deferred compensation plan income, compared with $1.6 million for the quarter ended June 30, 2019, excluding $0.6 million for deferred compensation plan income.

  • GAAP income before income taxes was $33.2 million for the quarter ended June 30, 2020, compared with $22.3 million for the quarter ended June 30, 2019.

  • Non-GAAP (1) income before income taxes was $54.7 million for the quarter ended June 30, 2020, excluding $21.0 million for stock-based compensation expense and $0.5 million for deferred compensation plan expense, compared with $45.3 million for the quarter ended June 30, 2019, excluding $22.7 million for stock-based compensation expense, $0.1 million for the amortization of acquisition-related intangible assets, and $0.2 million for deferred compensation plan expense.

  • GAAP net income was $30.2 million and $0.64 per diluted share for the quarter ended June 30, 2020. Comparatively, GAAP net income was $20.7 million and $0.45 per diluted share for the quarter ended June 30, 2019.

  • Non-GAAP (1) net income was $50.6 million and $1.08 per diluted share for the quarter ended June 30, 2020, excluding stock-based compensation expense, net deferred compensation plan expense and related tax effects, compared with non-GAAP net income of $41.9 million and $0.92 per diluted share for the quarter ended June 30, 2019, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense and related tax effects.

The financial results for the six months ended June 30, 2020 are as follows:

  • Revenue was $352.0 million for the six months ended June 30, 2020, a 20.4% increase from $292.4 million for the six months ended June 30, 2019.

  • GAAP gross margin was 55.1% for the six months ended June 30, 2020, compared with 55.1% for the six months ended June 30, 2019.

  • Non-GAAP (1) gross margin was 55.6% for the six months ended June 30, 2020, excluding the impact of $1.2 million for stock-based compensation expense and $0.4 million for deferred compensation plan expense, compared with 55.6% for the six months ended June 30, 2019, excluding the impact of $1.2 million for stock-based compensation expense and $0.1 million for the amortization of acquisition-related intangible assets.

  • GAAP operating expenses were $135.1 million for the six months ended June 30, 2020, compared with $119.4 million for the six months ended June 30, 2019.

  • Non-GAAP (1) operating expenses were $96.7 million for the six months ended June 30, 2020, excluding $38.4 million for stock-based compensation expense, compared with $79.3 million for the six months ended June 30, 2019, excluding $37.5 million for stock-based compensation expense and $2.6 million for deferred compensation plan expense.

  • GAAP operating income was $58.9 million for the six months ended June 30, 2020, compared with $41.8 million for the six months ended June 30, 2019.

  • Non-GAAP (1) operating income was $98.9 million for the six months ended June 30, 2020, excluding $39.6 million for stock-based compensation expense and $0.4 million for deferred compensation plan expense, compared with $83.2 million for the six months ended June 30, 2019, excluding $38.7 million for stock-based compensation expense, $0.1 million for the amortization of acquisition-related intangible assets and $2.6 million for deferred compensation plan expense.

  • GAAP other income, net, was $3.5 million for the six months ended June 30, 2020, compared with other income, net, of $5.6 million for the six months ended June 30, 2019.

  • Non-GAAP (1) other income, net was $3.7 million for the six months ended June 30, 2020, excluding $0.2 million for deferred compensation plan expense, compared with $3.0 million for the six months ended June 30, 2019, excluding $2.6 million for deferred compensation plan income.

  • GAAP income before income taxes was $62.4 million for the six months ended June 30, 2020, compared with $47.4 million for the six months ended June 30, 2019.

  • Non-GAAP (1) income before income taxes was $102.6 million for the six months ended June 30, 2020, excluding $39.6 million for stock-based compensation expense and $0.6 million for deferred compensation plan expense, compared with $86.2 million for the six months ended June 30, 2019, excluding $38.7 million for stock-based compensation expense, and $0.1 million for the amortization of acquisition-related intangible assets.

  • GAAP net income was $65.9 million and $1.41 per diluted share for the six months ended June 30, 2020. Comparatively, GAAP net income was $46.9 million and $1.03 per diluted share for the six months ended June 30, 2019.

  • Non-GAAP (1) net income was $94.9 million and $2.03 per diluted share for the six months ended June 30, 2020, excluding stock-based compensation expense, net deferred compensation plan expense and related tax effects, compared with non-GAAP net income of $79.8 million and $1.76 per diluted share for the six months ended June 30, 2019, excluding stock-based compensation expense, amortization of acquisition-related intangible assets, net deferred compensation plan expense and related tax effects.

The following is a summary of revenue by end market for the periods indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

End Market

2020

2019

2020

2019

Computing and storage

$

64,087

$

41,590

$

116,044

$

80,778

Automotive

17,779

21,225

41,091

41,742

Industrial

26,592

22,438

51,829

43,778

Communications

30,095

21,968

57,965

44,150

Consumer

47,656

43,786

85,058

81,922

Total

$

186,209

$

151,007

$

351,987

$

292,370

The following is a summary of revenue by product family for the periods indicated (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Product Family

2020

2019

2020

2019

DC to DC

$

176,113

$

139,691

$

332,988

$

272,402

Lighting Control

10,096

11,316

18,999

19,968

Total

$

186,209

$

151,007

$

351,987

$

292,370

“We continue to grow year over year. We are excited about our design activities in the pipeline and expanding our reach in the new frontiers,” said Michael Hsing, CEO and founder of MPS.

Business Outlook

The following are MPS’ financial targets for the third quarter ending September 30, 2020:

  • Revenue in the range of $200 million to $210 million.

  • GAAP gross margin between 55.2% and 55.8%. Non-GAAP (1) gross margin between 55.5% and 56.1%, which excludes an estimated impact of stock-based compensation expenses of 0.3%.

  • GAAP research and development (“R&D”) and selling, general and administrative (“SG&A”) expenses between $70.7 million and $74.7 million. Non-GAAP (1) R&D and SG&A expenses between $50.2 million and $52.2 million, which excludes estimated stock-based compensation expenses in the range of $20.5 million to $22.5 million.

  • Total stock-based compensation expense of $21.2 million to $23.2 million.

  • Litigation expenses ranging between $1.8 million and $2.2 million.

  • Interest income of $1.5 million to $1.7 million.

  • Fully diluted shares outstanding between 46.5 million and 47.5 million.

(1) Non-GAAP net income, non-GAAP earnings per share, non-GAAP gross margin, non-GAAP R&D and SG&A expenses, non-GAAP operating expenses, non-GAAP other income (expense), net, non-GAAP operating income and non-GAAP income before taxes differ from net income, earnings per share, gross margin, R&D and SG&A expenses, operating expenses, other income (expense), net, operating income and income before taxes determined in accordance with Generally Accepted Accounting Principles in the United States (GAAP). Non-GAAP net income and non-GAAP earnings per share exclude the effect of stock-based compensation expense, amortization of acquisition-related intangible assets, deferred compensation plan income/expense and related tax effects. Non-GAAP gross margin excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets and deferred compensation plan income/expense. Non-GAAP operating expenses exclude the effect of stock-based compensation expense and deferred compensation plan income/expense. Non-GAAP other income (expense), net excludes the effect of deferred compensation plan income/expense. Non-GAAP operating income excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets and deferred compensation plan income/expense. Non-GAAP income before taxes excludes the effect of stock-based compensation expense, amortization of acquisition-related intangible assets and deferred compensation plan income/expense. Projected non-GAAP gross margin excludes the effect of stock-based compensation expense. Projected non-GAAP R&D and SG&A expenses exclude the effect of stock-based compensation expense. These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A schedule reconciling non-GAAP financial measures is included at the end of this press release. MPS utilizes both GAAP and non-GAAP financial measures to assess what it believes to be its core operating performance and to evaluate and manage its internal business and assist in making financial operating decisions. MPS believes that the inclusion of non-GAAP financial measures, together with GAAP measures, provides investors with an alternative presentation useful to investors' understanding of MPS' core operating results and trends. Additionally, MPS believes that the inclusion of non-GAAP measures, together with GAAP measures, provides investors with an additional dimension of comparability to similar companies. However, investors should be aware that non-GAAP financial measures utilized by other companies are not likely to be comparable in most cases to the non-GAAP financial measures used by MPS.

Earnings Webinar
MPS plans to host a Zoom webinar covering its financial results at 2:00 p.m. PT / 5:00 p.m. ET, July 28, 2020. You can access the webinar, free of charge, at: https://mpsic.zoom.us/j/96497779610. The webinar will be archived and available for replay for one year under the Investor Relations page on the MPS website.

Safe Harbor Statement
This press release contains, and statements that will be made during the accompanying teleconference will contain, forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995, including, among other things, (i) projected revenues, GAAP and non-GAAP gross margin, GAAP and non-GAAP R&D and SG&A expenses, stock-based compensation expenses, litigation expenses, interest income, and diluted shares outstanding, (ii) our outlook for the long-term prospects of the company, including our performance against our business plan, revenue growth in certain of our market segments, our continued investment into R&D, expected revenue growth, customers' acceptance of our new product offerings, the prospects of our new product development, and our expectations regarding market and industry segment trends and prospects, (iii) our ability to penetrate new markets and expand our market share, (iv) the seasonality of our business, (v) our ability to reduce our expenses, and (vi) statements of the assumptions underlying or relating to any statement described in (i), (ii), (iii), (iv), or (v). These forward-looking statements are not historical facts or guarantees of future performance or events, are based on current expectations, estimates, beliefs, assumptions, goals, and objectives, and involve significant known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results expressed by these statements. Readers of this press release and listeners to the accompanying conference call are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Factors that could cause actual results to differ include, but are not limited to, our ability to attract new customers and retain existing customers; acceptance of, or demand for, MPS' products, in particular the new products launched recently, being different than expected; our ability to efficiently and effectively develop new products and receive a return on our R&D expense investment; our ability to increase market share in our targeted markets; competition generally and the increasingly competitive nature of our industry; any market disruptions or interruptions in MPS' schedule of new product development releases; adverse changes in production and testing efficiency of our products; our ability to manage our inventory levels; the effect of export controls, trade and economic sanctions regulations and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets, particularly in China; our ability to obtain governmental licenses and approvals for international trading activities or technology transfers, including export licenses; adverse changes in laws and government regulations such as tariffs on imports of foreign goods, export regulations and export classifications, including in foreign countries where MPS has offices or operations; adverse events arising from orders of governmental entities, including such orders that impact our customers, and adopting of new or amended accounting standards; the effect of epidemics and pandemics, such as the COVID-19 outbreak first identified in December 2019, on the global economy and on our business; adequate supply of our products from our third-party manufacturing partners; the risks, uncertainties and costs of litigation in which we are involved; the outcome of any upcoming trials, hearings, motions and appeals; the adverse impact on MPS' financial performance if its tax and litigation provisions are inadequate; adverse changes or developments in the semiconductor industry generally, which is cyclical in nature, and our ability to adjust our operations to address such changes or developments; difficulty in predicting or budgeting for future customer demand and channel inventories, expenses and financial contingencies (including as a result of the COVID-19 pandemic); our ability to realize the anticipated benefits of companies and products that we acquire, and our ability to effectively and efficiently integrate these acquired companies and products into our operations; the ongoing consolidation of companies in the semiconductor industry; and other important risk factors identified in MPS’s Securities and Exchange Commission (SEC) filings, including, but not limited to, our annual report on Form 10-K filed with the SEC on February 28, 2020 and our quarterly report on Form 10-Q filed with the SEC on May 11, 2020. The forward-looking statements in this press release and statements made during the accompanying teleconference represent MPS’s projections and current expectations, as of the date hereof, not predictions of actual performance. MPS assumes no obligation to update the information in this press release or in the accompanying conference call.

About Monolithic Power Systems
Monolithic Power Systems, Inc. (MPS) provides small, highly energy efficient, easy-to-use power solutions for systems found in industrial applications, telecom infrastructures, cloud computing, automotive, and consumer applications. MPS' mission is to reduce total energy consumption in its customers' systems with green, practical, compact solutions. The company was founded by Michael Hsing in 1997 and is based in the United States. MPS can be contacted through its website at www.monolithicpower.com or its support offices around the world.

Monolithic Power Systems, MPS, and the MPS logo are registered trademarks of Monolithic Power Systems, Inc. in the U.S. and trademarked in certain other countries.

Contact:
Bernie Blegen
Chief Financial Officer
Monolithic Power Systems, Inc.
408-826-0777
investors@monolithicpower.com


Monolithic Power Systems, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except par value)

June 30,

December 31,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

$

156,483

$

172,960

Short-term investments

355,840

282,437

Accounts receivable, net

55,136

52,704

Inventories

152,119

127,500

Other current assets

29,286

19,605

Total current assets

748,864

655,206

Property and equipment, net

251,980

228,315

Long-term investments

3,032

3,138

Goodwill

6,571

6,571

Deferred tax assets, net

13,432

17,193

Other long-term assets

47,276

45,952

Total assets

$

1,071,155

$

956,375

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

45,169

$

27,271

Accrued compensation and related benefits

32,785

26,164

Other accrued liabilities

58,831

44,790

Total current liabilities

136,785

98,225

Income tax liabilities

35,624

37,596

Other long-term liabilities

49,801

47,063

Total liabilities

222,210

182,884

Commitments and contingencies

Stockholders’ equity:

Common stock and additional paid-in capital: $0.001 par value; shares authorized: 150,000; shares issued and outstanding: 44,911 and 43,616, respectively

605,165

549,517

Retained earnings

247,864

229,450

Accumulated other comprehensive loss

(4,084

)

(5,476

)

Total stockholders’ equity

848,945

773,491

Total liabilities and stockholders’ equity

$

1,071,155

$

956,375



Monolithic Power Systems, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Revenue

$

186,209

$

151,007

$

351,987

$

292,370

Cost of revenue

83,616

67,782

157,947

131,139

Gross profit

102,593

83,225

194,040

161,231

Operating expenses:

Research and development

31,673

27,545

57,629

53,003

Selling, general and administrative

40,883

35,058

73,047

65,611

Litigation expense

2,082

503

4,423

781

Total operating expenses

74,638

63,106

135,099

119,395

Income from operations

27,955

20,119

58,941

41,836

Other income, net

5,200

2,229

3,486

5,569

Income before income taxes

33,155

22,348

62,427

47,405

Income tax expense (benefit)

2,988

1,655

(3,495

)

531

Net income

$

30,167

$

20,693

$

65,922

$

46,874

Net income per share:

Basic

$

0.67

$

0.48

$

1.48

$

1.09

Diluted

$

0.64

$

0.45

$

1.41

$

1.03

Weighted-average shares outstanding:

Basic

44,785

43,109

44,620

42,929

Diluted

46,831

45,483

46,750

45,358



SUPPLEMENTAL FINANCIAL INFORMATION
STOCK-BASED COMPENSATION EXPENSE
(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Cost of revenue

$

642

$

663

$

1,199

$

1,193

Research and development

4,962

5,412

9,332

9,841

Selling, general and administrative

15,440

16,634

29,075

27,685

Total stock-based compensation expense

$

21,044

$

22,709

$

39,606

$

38,719



RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
(Unaudited, in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Net income

$

30,167

$

20,693

$

65,922

$

46,874

Net income as a percentage of revenue

16.2

%

13.7

%

18.7

%

16.0

%

Adjustments to reconcile net income to non-GAAP net income:

Stock-based compensation expense

21,044

22,709

39,606

38,719

Amortization of acquisition-related intangible assets

-

51

-

102

Deferred compensation plan expense

460

151

554

15

Tax effect

(1,111

)

(1,739

)

(11,189

)

(5,937

)

Non-GAAP net income

$

50,560

$

41,865

$

94,893

$

79,773

Non-GAAP net income as a percentage of revenue

27.2

%

27.7

%

27.0

%

27.3

%

Non-GAAP net income per share:

Basic

$

1.13

$

0.97

$

2.13

$

1.86

Diluted

$

1.08

$

0.92

$

2.03

$

1.76

Shares used in the calculation of non-GAAP net income per share:

Basic

44,785

43,109

44,620

42,929

Diluted

46,831

45,483

46,750

45,358



RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Gross profit

$

102,593

$

83,225

$

194,040

$

161,231

Gross margin

55.1

%

55.1

%

55.1

%

55.1

%

Adjustments to reconcile gross profit to non-GAAP gross profit:

Stock-based compensation expense

642

663

1,199

1,193

Deferred compensation plan expense

460

-

406

-

Amortization of acquisition-related intangible assets

-

51

-

102

Non-GAAP gross profit

$

103,695

$

83,939

$

195,645

$

162,526

Non-GAAP gross margin

55.7

%

55.6

%

55.6

%

55.6

%

RECONCILIATION OF OPERATING EXPENSES TO NON-GAAP OPERATING EXPENSES
(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Total operating expenses

$

74,638

$

63,106

$

135,099

$

119,395

Adjustments to reconcile total operating expenses to non-GAAP total operating expenses:

Stock-based compensation expense

(20,402

)

(22,046

)

(38,407

)

(37,526

)

Deferred compensation plan (expense) income

(3,572

)

(772

)

30

(2,571

)

Non-GAAP operating expenses

$

50,664

$

40,288

$

96,722

$

79,298

RECONCILIATION OF OPERATING INCOME TO NON-GAAP OPERATING INCOME
(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Total operating income

$

27,955

$

20,119

$

58,941

$

41,836

Adjustments to reconcile total operating income to non-GAAP total operating income:

Stock-based compensation expense

21,044

22,709

39,606

38,719

Amortization of acquisition-related intangible assets

-

51

-

102

Deferred compensation plan expense

4,032

772

377

2,571

Non-GAAP operating income

$

53,031

$

43,651

$

98,924

$

83,228

RECONCILIATION OF OTHER INCOME, NET, TO NON-GAAP OTHER INCOME, NET
(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Total other income, net

$

5,200

$

2,229

$

3,486

$

5,569

Adjustments to reconcile other income, net to non-GAAP other income, net:

Deferred compensation plan (income) expense

(3,572

)

(620

)

177

(2,556

)

Non-GAAP other income, net

$

1,628

$

1,609

$

3,663

$

3,013

RECONCILIATION OF INCOME BEFORE INCOME TAXES TO NON-GAAP INCOME BEFORE INCOME TAXES
(Unaudited, in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Total income before income taxes

$

33,155

$

22,348

$

62,427

$

47,405

Adjustments to reconcile income before income taxes to non-GAAP income before income taxes:

Stock-based compensation expense

21,044

22,709

39,606

38,719

Amortization of acquisition-related intangible assets

-

51

-

102

Deferred compensation plan expense

460

151

554

15

Non-GAAP income before income taxes

$

54,659

$

45,259

$

102,587

$

86,241



2020 THIRD QUARTER OUTLOOK
RECONCILIATION OF GROSS MARGIN TO NON-GAAP GROSS MARGIN
(Unaudited)

Three Months Ending

September 30, 2020

Low

High

Gross margin

55.2

%

55.8

%

Adjustments to reconcile gross margin to non-GAAP gross margin:

Stock-based compensation expense

0.3

%

0.3

%

Non-GAAP gross margin

55.5

%

56.1

%

RECONCILIATION OF R&D AND SG&A EXPENSES TO NON-GAAP R&D AND SG&A EXPENSES
(Unaudited, in thousands)

Three Months Ending

September 30, 2020

Low

High

R&D and SG&A expense

$

70,700

$

74,700

Adjustments to reconcile R&D and SG&A expense to non-GAAP R&D and SG&A expense:

Stock-based compensation expense

(20,500

)

(22,500

)

Non-GAAP R&D and SG&A expense

$

50,200

$

52,200