Monolithic Power Systems, Inc.
Analysis
Four calls turned a broad analog chipmaker into a data-center power supplier: the growth floor for enterprise data was raised at every call, to 130% for the year, while gross margin has not moved off the bottom of the company's own range.
- Enterprise data went from one segment to the whole story.
Management raised its growth floor for enterprise data at four straight calls, landing on 130% after Q2 revenue rose 22% in one quarter. Those orders stretch quarters ahead, tying the company's growth to a market whose pace it does not set. Which new customers sit behind the raised enterprise data floor?
- Growth arrived, but the margin on it did not.
Gross margin has sat at the bottom of the company's 55-to-60% target for five straight quarters. Management blames visibility: short-dated orders mean it cannot pick which mix it takes, so extra revenue lands at the same low margin. How much of that margin comes from modules rather than chips?
- The build is being paid for before the demand shows up.
Inventory is up about 38% from a year ago and capital spending up over 70%. Management said the rush may include customers double-ordering to lock capacity, so weaker real demand would leave the company holding stock it already paid for. How does current inventory cover compare with the last upcycle?
- The order book comes from many chip designers, not one. Orders spread across many customers mean a single lost account no longer decides whether the year works.
- Each system the company powers carries more of its parts. A whole power module costs more than the chip inside it, so sales can rise even when server shipments barely move.
- Capacity and supply partners are ready ahead of the orders. The company can accept business rivals have to turn away, which is how it has won share through every past shortage.
- Some of those orders are customers stockpiling, not using. If they turn out to be duplicates, the fastest-growing part of the business reverses with almost no warning.
- The margin may not improve even with a longer backlog. If it stays flat, more sales bring the same small gain, so the company grows without earning more on each sale.
- Parts, expedites and non-China supply lines all cost more. Those costs sit inside every unit sold, and management has only been able to pass them on in narrow cases.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$100K | Aug 21 | Oct 8 |
Donald Trump Republican · Executive | Sale | ≥$1K | Jul 17 | Sep 22 |
Donald Trump Republican · Executive | Purchase | ≥$15K | Mar 25 | May 13 |
Donald Trump Republican · Executive | Purchase | ≥$15K | Mar 23 | May 13 |
Donald Trump Republican · Executive | Purchase | ≥$1K | Mar 23 | May 13 |
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How Monolithic Power Systems turned $1.8B of revenue into $481.7M of operating income.
| Revenue | ||
|---|---|---|
| DC To DC Products | $1.7B | ▲ 1.30% YoY |
| Lighting Control Products | $102.4M | ▲ 5.02% YoY |
| Total revenue | $1.8B | |
| Gross profit | $1.0B | 56.1% |
| Operating income | $481.7M | 26.5% |