Power management chips maker Monolithic Power Systems (NASDAQ:MPWR) reported Q1 CY2024 results beating Wall Street analysts' expectations, with revenue up 1.5% year on year to $457.9 million. Guidance for next quarter's revenue was also optimistic at $490 million at the midpoint, 3.6% above analysts' estimates. It made a non-GAAP profit of $2.81 per share, down from its profit of $3.00 per share in the same quarter last year.
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Monolithic Power Systems (MPWR) Q1 CY2024 Highlights:
- Revenue: $457.9 million vs analyst estimates of $445 million (2.9% beat)
- EPS (non-GAAP): $2.81 vs analyst estimates of $2.64 (6.4% beat)
- Revenue Guidance for Q2 CY2024 is $490 million at the midpoint, above analyst estimates of $472.9 million
- Gross Margin (GAAP): 55.1%, down from 57.4% in the same quarter last year
- Inventory Days Outstanding: 175, up from 172 in the previous quarter
- Market Capitalization: $32.57 billion
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.
Analog SemiconductorsDemand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales GrowthMonolithic Power Systems's revenue growth over the last three years has been strong, averaging 27.8% annually. But as you can see below, this quarter wasn't particularly strong, with revenue growing from $451.1 million in the same quarter last year to $457.9 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).
While Monolithic Power Systems beat analysts' revenue estimates, this was a sluggish quarter for the company as its revenue only grew 1.5% year on year. Monolithic Power Systems's growth, however, flipped from negative to positive this quarter. This encouraging sign will likely be welcomed by shareholders.
Monolithic Power Systems returned to positive revenue growth this quarter and its management team expects the trend to continue. The company is guiding to 11.1% year-on-year growth next quarter, and analysts seem to agree, forecasting 16.5% growth over the next 12 months.
Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Monolithic Power Systems's DIO came in at 175, which is 8 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Monolithic Power Systems's Q1 ResultsWe were impressed by how significantly Monolithic Power Systems blew past analysts' EPS expectations this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. On the other hand, its gross margin declined and its operating margin decreased. Overall, this quarter's results still seemed fairly positive and shareholders should feel optimistic. The stock is up 2.2% after reporting and currently trades at $665 per share.