Monolithic Power Systems, Inc. Earnings Call Summary

Monolithic Power (NASDAQ: MPWR) Systems, Inc. (MPS), a leading semiconductor company, reported a strong financial performance in its third-quarter earnings call for 2024. The company saw record revenue, reaching $620.1 million, representing a 22% increase from the previous quarter and a 30% increase year-over-year.

The revenue growth was primarily driven by significant gains in the automotive, communication, and storage and compute segments. MPS executives discussed the company's diverse market strategy, new product developments, and addressed inventory and customer concentration concerns.

Key Takeaways

• MPS achieved a record $620.1 million in revenue for Q3 2024, up 22% from Q2 2024 and 30% from Q3 2023.
• Automotive revenue increased by 28% sequentially, while communication revenue jumped by 65% due to new product introductions.
• Storage and compute revenue rose by 25%, driven by demand for DDR5 and SSD products.
• A slight decline of 1.5% in enterprise data revenue was observed, attributed to customer ordering patterns and supply chain security needs.
• The company anticipates sustainable growth in the communications segment through the first half of 2025 and is focusing on new AI accelerator platforms and home automation markets.
• MPS has at least one customer that accounts for over 10% of revenue, with more details to be disclosed in the upcoming 10-Q filing.
• Executives reaffirmed their commitment to design engagement and product quality to drive future revenue growth.
• Internal inventory levels decreased, but channel inventory remains low, which does not align with high market demand.

Company Outlook

• The automotive segment is expected to continue its upward trend with many design wins ramping up.
• Growth in the communications segment is anticipated to be sustainable into the first half of 2025.
• Low single-digit growth is expected in the enterprise data segment for the December quarter.

Bearish Highlights

• There was a slight decline in enterprise data revenue due to changing customer ordering patterns.
• Increased market supply is creating pressure on the company.
• Inventory concerns persist as channel inventory levels are not meeting market demand.

Bullish Highlights

• New AI accelerator platforms are expected to give MPS a competitive edge in power efficiency.
• Expansion into the home automation market and growth in data converters, especially in medical applications, are expected to contribute to revenue.
• Design wins in communications and automotive sectors are improving ordering patterns.

Misses

• The company experienced a minor setback with a 1.5% decline in enterprise data revenue.

Q&A Highlights

• CEO Michael Hsing confirmed the presence of a customer accounting for more than 10% of revenue.
• The company is cautious about providing specific guidance for 2025 but is confident about significant growth in the enterprise data segment.
• Vertical power market growth is expected to accelerate in the coming quarters.

Monolithic Power Systems, Inc. (MPS), with its ticker symbol MPS, remains focused on maintaining its performance and value despite challenges in the market. The company's executives are confident in the strategy in place and the diverse markets it serves. As MPS prepares for its fourth-quarter conference call in early February, investors and stakeholders will be watching closely to see how the company's strategies and market conditions continue to influence its performance.

InvestingPro Insights

Monolithic Power Systems' (MPWR) strong financial performance in Q3 2024 is reflected in its impressive market position and financial metrics. The company boasts a substantial market capitalization of $45.5 billion, underscoring its significance in the semiconductor industry.

The company's revenue growth of 15.03% in the most recent quarter aligns with the reported 22% increase from the previous quarter mentioned in the earnings call. This growth trajectory is further supported by an InvestingPro Tip indicating strong returns over the last three months, with a 6.72% price total return.

MPWR's profitability is evident from its robust gross profit margin of 55.31% and operating income margin of 24.16% for the last twelve months. The company has been profitable over the last twelve months, consistent with the positive financial results discussed in the earnings call.

The company's focus on sustainable growth and new product introductions is reflected in its high valuation multiples. MPWR is trading at a P/E ratio of 108.59, suggesting investors have high expectations for future growth. The company offers a dividend yield of 0.54% and has raised its dividend for 6 consecutive years, demonstrating a commitment to returning value to shareholders alongside its growth initiatives.

Full transcript – Monolithic Power Systems Inc (MPWR) Q3 2024

Genevieve Cunningham: Welcome, everyone, to the MPS Third Quarter 2024 Earnings Webinar. My name is Genevieve Cunningham and I will be the moderator for this webinar. Joining me today are Michael Hsing, CEO and Founder of MPS; Bernie Blegen, EVP and CFO; and Tony Balow, Vice President of Finance. Earlier today, along with our earnings announcement, MPS released a written commentary on the results of our operations. Both of these documents can be found on our website. Before we begin, I would like to remind everyone that in the course of today's presentation, we may make forward-looking statements and projections within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty. Risks, uncertainties, and other factors that could cause actual results to differ from these forward-looking statements are identified in the Safe Harbor statements contained in the Q3 earnings release and in our SEC filings, including our Form 10-K, which can be found on our website. Our statements are made as of today and we assume no obligation to update this information. Now I'd like to turn the call over to Bernie Blegen.

Bernie Blegen: Thanks, Gen. Good afternoon, and welcome to our Q3 '24 earnings call. MPS achieved record quarterly revenue of $620.1 million, 22% higher than revenue in the second quarter of 2024 and 30% higher than revenue in the third quarter of 2023. Our performance during the quarter reflected the strength of our diversified market strategy as we experienced improved ordering trends across most end markets and additionally benefited from initial revenue ramps associated with design wins secured in prior years. Let me call out a few highlights. Q3 2024 automotive revenue was up 28% sequentially with improvements in infotainment, lighting, ADAS, and body controls. Communication revenue was up 65% from the prior quarter, reflecting new product ramps for Wi-Fi, optical, networking, and router solutions. Storage and Compute revenue was up 25% sequentially on the strength of demand for DDR5 and SSD memory and notebooks. MPS continues to focus on innovation, solving our customers' most challenging problems, and maintaining the highest level of quality. In addition, we continue to expand and diversify our global supply chain, which will allow us to capture future growth, maintain supply chain stability, and swiftly adapt to market changes as they occur. Our proven long-term growth strategy remains intact as we continue our transformation from being a chip-only semiconductor supplier to a full-service silicon-based solutions provider. I'll now open the webinar up for questions…

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