Monolithic Power Systems Announces Consecutive Record Revenue Results for the Quarter and Nine Months ended September 30, 2010

The results for the quarter ended September 30, 2010 are as follows:

· Net revenues of $65.8 million, an increase of 18.2% sequentially from $55.7 million in the second quarter of 2010 and 37.3% from $48.0 million in the third quarter of 2009.

· Gross margin of 54.7%, compared to 58.2% in the second quarter of 2010 and 60.7% in the third quarter of 2009.

· GAAP operating expenses of $22.6 million, including $21.6 million for research and development and selling, general and administrative expenses, which includes $4.1 million for stock-based compensation and $1.0 million for litigation expenses.

· Non-GAAP(1) operating expenses of $18.5 million, excluding $4.1 million for stock-based compensation, compared to $19.2 million, excluding $3.1 million for stock-based compensation and a $6.4 million litigation provision reversal for the three months ended September 30, 2009.

· GAAP net income of $13.2 million, with GAAP earnings per share of $0.35 per diluted share.

· Non-GAAP(1) net income of $16.4 million, with non-GAAP earnings per share of $0.43 per diluted share, excluding stock-based compensation and related tax effects.


The results for the nine months ended September 30, 2010 are as follows:

· Net revenues of $171.8 million, compared to $118.5 million for the nine months ended September 30, 2009, an increase of 45.0%.

· Gross margin of 56.9%, compared to 59.4% for the nine months ended September 30, 2009.

· GAAP operating expenses of $71.2 million, including $66.4 million for research and development and selling, general and administrative expenses, which includes $13.5 million for stock-based compensation and $4.8 million for patent litigation expenses.

· Non-GAAP(1) operating expenses of $57.7 million, excluding $13.5 million for stock-based compensation, compared to $51.4 million, excluding $10.2 million in stock-based compensation and a $6.4 million litigation provision reversal for the nine months ended September 30, 2009, an increase of 12.4%.

· GAAP net income of $26.0 million, with GAAP EPS of $0.68 per diluted share

· Non-GAAP(1) net income of $37.9 million, with non-GAAP earnings per share of $1.00 per diluted share, excluding stock-based compensation and related tax effects.

“MPS demonstrated the potential of its new products and achieved significant revenue growth in the third quarter”, said Michael Hsing, CEO of MPS. “While our fourth quarter outlook is disappointing, I am excited about the prospects of some of our new product lines, such as AC power and WLED lighting that are showing outstanding potential”.


Business Outlook

The following are MPS’ financial projections for the fourth quarter ending December 31, 2010:

· Due to reduced end market demand and higher than expected distributor inventory levels, we expect revenues in the range of $45 million to $50 million.

· Gross margin is expected to be in the range of 50% to 52% due to under-utilized capacity as a result of the reduced end market demand.

· Research and development and selling, general and administrative expenses between $21.7 million and $23.1 million. Non-GAAP(1) research and development and selling, general and administrative expenses between $17.5 million and $18.5 million. This excludes an estimate of stock-based compensation expense in the range of $4.2 million to $4.6 million.

· Litigation expense approximately flat to the third quarter at $1.0 million.

(1) Non-GAAP net income, non-GAAP earnings, non-GAAP operating expenses and non-GAAP research and development and selling, general and administrative expense differ from net income, earnings, operating expenses, and research and development and selling, general and administrative expense determined in accordance with GAAP (Generally Accepted Accounting Principles in the United States). Non-GAAP net income for the quarter and nine months ended September 30, 2010 and 2009 excludes the effect of stock-based compensation expense and its related tax effect. Non-GAAP net income for the quarter and nine months ended September 30, 2009 also excludes a litigation provision reversal and its related tax effect. Non-GAAP operating expenses for the quarter and nine months ended September 30, 2010 and 2009 exclude the effect of stock-based compensation expense. Non-GAAP operating expenses for the quarter and nine months ended September 30, 2009 also excludes a litigation provision reversal. Projected non-GAAP research and development and selling, general and administrative 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. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. 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 financials measures used by MPS.