Monolithic Power Systems (NASDAQ:MPWR) Exceeds Q3 Expectations, Guides For Strong Sales Next Quarter

Radek Strnad /
2021/10/28 4:16 pm EDT
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Power management chips maker Monolithic Power Systems (NASDAQ: MPWR) reported Q3 FY2021 results topping analyst expectations, with revenue up 24.7% year on year to $323.5 million. Guidance was also strong with next quarter revenues guided to $320 million, or 4.35% above analyst estimates. Monolithic Power Systems made a GAAP profit of $68.7 million, improving on its profit of $55.5 million, in the same quarter last year.

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Monolithic Power Systems (MPWR) Q3 FY2021 Highlights:

  • Revenue: $323.5 million vs analyst estimates of $316 million (2.36% beat)
  • EPS (non-GAAP): $2.06 vs analyst estimates of $2 (3.09% beat)
  • Revenue guidance for Q4 2021 is $320 million at the midpoint, above analyst estimates of $306.6 million
  • Inventory Days Outstanding: 138, up from 125 previous quarter
  • Gross Margin (GAAP): 57.5%, up from 55.1% same quarter last year

“We are continuing to execute our strategy,” said Michael Hsing, CEO and founder of MPS.

Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ: MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.

Sales Growth

Monolithic Power Systems' revenue growth over the last three years has been strong, averaging 26.6% annually. And as you can see below, last year has been especially strong, with quarterly revenue growing from $259.4 million to $323.5 million. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

Monolithic Power Systems Total Revenue

This was a decent quarter for Monolithic Power Systems as revenues grew 24.7%, topping analyst estimates by 2.36%.

Monolithic Power Systems believes the growth is set to continue, and is guiding for revenue to grow 23.3% YoY next quarter, and Wall St analysts are estimating growth 19.4% over the next twelve months.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as the cyclical nature of semiconductor supply and demand impacts profitability. In a tight supply environment, inventories tend to be low, allowing chipmakers to exert pricing power, which helps increase gross margins. The inverse also applies, as rising inventory levels tend to foreshadow weakening pricing power and declining gross margins.

Monolithic Power Systems Inventory Days Outstanding

This quarter, Monolithic Power Systems’ inventory days came in at 138, 22 days below the five year average, showing that despite the recent increase there is no indication of an excessive inventory buildup at the moment.

Key Takeaways from Monolithic Power Systems' Q3 Results

With a market capitalization of $24.1 billion and more than $742 million in cash, the company has the capacity to continue to prioritize growth.

We enjoyed the positive outlook Monolithic Power Systems provided for the next quarter’s revenue. And we were also glad to see that earnings outperformed analysts' expectations. On the other hand, it was less good to see the pretty significant deterioration in operating margin and inventory levels increased. Overall, it seems to us that this was an OK quarter for Monolithic Power Systems. The company is flat on the results and currently trades at $549.71 per share.

Should you invest in Monolithic Power Systems right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.