MPS(US:MPWR)2024-11-06 21:02PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Financial Statements This section presents the unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and Cash Flows, reflecting significant year-over-year growth in revenue and net income Condensed Consolidated Balance Sheets Total assets increased to $2.85 billion from $2.43 billion at year-end 2023, driven by growth in cash, investments, and inventories, while liabilities and equity also grew Balance Sheet Summary (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $2,160,450 | $1,819,499 | | Total Assets | $2,854,740 | $2,434,353 | | Total Current Liabilities | $336,588 | $235,035 | | Total Liabilities | $503,050 | $384,414 | | Total Stockholders' Equity | $2,351,690 | $2,049,939 | Condensed Consolidated Statements of Operations Q3 2024 revenue increased 30.6% year-over-year to $620.1 million, with net income growing 19.2% to $144.4 million, reflecting strong quarterly and year-to-date performance Quarterly Performance (in thousands, except per-share amounts) | Metric | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $620,119 | $474,867 | +30.6% | | Gross Profit | $343,443 | $263,541 | +30.3% | | Operating Income | $164,028 | $135,566 | +21.0% | | Net Income | $144,430 | $121,163 | +19.2% | | Diluted EPS | $2.95 | $2.48 | +19.0% | Year-to-Date Performance (in thousands, except per-share amounts) | Metric | Nine Months 2024 | Nine Months 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $1,585,435 | $1,367,060 | +16.0% | | Gross Profit | $876,462 | $769,996 | +13.8% | | Operating Income | $376,051 | $372,167 | +1.0% | | Net Income | $337,337 | $330,469 | +2.1% | | Diluted EPS | $6.89 | $6.78 | +1.6% | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $620.7 million for the first nine months of 2024, while cash used in investing and financing activities also rose due to acquisitions and capital returns Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $620,729 | $484,900 | | Net cash used in investing activities | ($296,128) | ($212,695) | | Net cash used in financing activities | ($186,853) | ($129,311) | | Net increase in cash | $139,300 | $132,571 | Notes to Condensed Consolidated Financial Statements Key disclosures include the acquisition of Axign B.V. for $33.4 million, significant revenue concentration with two distributors, and substantial purchase commitments primarily for silicon wafers - On January 3, 2024, the company acquired 100% of Axign B.V., a Dutch designer of class-D audio ICs, for $33.4 million in cash. The acquisition resulted in $19.9 million of goodwill565759 - Revenue is highly concentrated, with two distributors (A and B) accounting for 24% and 25% of total revenue, respectively, in Q3 202483 - China is the largest geographic market, representing 50.1% of total revenue in Q3 2024, up from 49.5% in Q3 202386 - As of September 30, 2024, the company has total unconditional purchase commitments of $586.9 million, net of a $120.0 million prepayment for a long-term wafer supply agreement9394 - The Board of Directors declared a cash dividend of $1.25 per share for Q3 2024, an increase from $1.00 per share in Q3 2023118 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 30.6% Q3 2024 revenue growth driven by AI applications, stable gross margin, increased operating expenses, and the company's strong liquidity position Results of Operations Q3 2024 revenue increased by $145.2 million, primarily from an 86.4% surge in the Enterprise Data market due to AI applications, while operating expenses rose due to compensation and R&D Revenue by End Market (Q3, in thousands) | End Market | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Enterprise Data | $184,459 | $98,938 | +86.4% | | Storage and Computing | $143,993 | $129,462 | +11.2% | | Automotive | $111,344 | $95,171 | +17.0% | | Communications | $71,884 | $46,786 | +53.6% | | Consumer | $64,401 | $62,369 | +3.3% | | Industrial | $44,038 | $42,141 | +4.5% | | Total | $620,119 | $474,867 | +30.6% | - Revenue from indirect sales to one customer for AI applications was 15% of total revenue in Q3 2024, up from 12% in Q3 2023130 - Gross margin for Q3 2024 was 55.4%, a slight decrease from 55.5% in Q3 2023, mainly due to higher inventory write-downs145 - R&D expenses increased by $20.3 million in Q3 2024 compared to Q3 2023, driven by higher compensation, new product development, and stock-based compensation149 - SG&A expenses increased by $31.2 million in Q3 2024 compared to Q3 2023, primarily due to a $14.4 million increase in stock-based compensation and higher cash compensation153 Liquidity and Capital Resources The company's liquidity remains strong with total cash and investments increasing to $1.46 billion, sufficient to meet future obligations and capital returns Liquidity Position (in thousands) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $700,347 | $527,843 | | Short-term investments | $762,003 | $580,633 | | Total Cash & Investments | $1,462,350 | $1,108,476 | | Working capital | $1,823,862 | $1,584,464 | - As of September 30, 2024, the company had material cash requirements including $586.9 million in purchase commitments and a remaining stock repurchase authorization of $622.1 million169171173 Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk exposures have occurred since the disclosures in its prior Annual Report on Form 10-K - There were no material changes or developments during the three and nine months ended September 30, 2024, that would materially alter the market risk assessment performed as of December 31, 2023176 Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to a material weakness in the demand forecast process for inventory, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2024178 - The ineffectiveness is due to a material weakness identified in fiscal year 2023 related to the demand forecast process for valuing inventory. This weakness did not result in a misstatement of the financial statements179180 - Management is implementing measures to remediate the material weakness, but the weakness will not be considered fully remediated until the new controls have operated effectively for a sufficient period182 PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and other general information regarding the company's operations Legal Proceedings As of September 30, 2024, the company was not a party to any material pending legal proceedings - There were no material pending legal proceedings to which the company was a party as of September 30, 2024185 Risk Factors No material changes to the company's risk factors have occurred since the filing of its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to the company's risk factors have occurred since the filing of the Annual Report on Form 10-K for the year ended December 31, 2023186 Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2024, the company repurchased 6,000 shares for $5.5 million under its stock repurchase program, with $622.1 million remaining available Stock Repurchases (Q3 2024) | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | Approximate Value Remaining Under Program (millions) | | :--- | :--- | :--- | :--- | | July 2024 | 2 | $837.82 | $625.8 | | August 2024 | 2 | $872.16 | $623.9 | | September 2024 | 2 | $885.99 | $622.1 | | Total | 6 | $864.68 | $622.1 | - The company repurchased 6,000 shares for $5.5 million during the three months ended September 30, 2024188 Other Information Several executive officers, including the CEO, adopted pre-arranged stock trading plans under SEC Rule 10b5-1(c) during the third quarter of 2024 - During Q3 2024, several executive officers and a director, including CEO Michael Hsing, adopted trading plans intended to satisfy the conditions of Rule 10b5-1(c) for future sales of company stock192193