What changed in Monolithic Power Systems,'s 10-K for the fiscal year ended December 31, 2025

No corresponding language in the FY2024 10-K.

No corresponding language in the FY2024 10-K.

No corresponding language in the FY2024 10-K.

No corresponding language in the FY2024 10-K.

No corresponding language in the FY2024 10-K.

No corresponding language in the FY2024 10-K.

Should any of our suppliers be acquired or become insolvent or capacity constrained, we may not be able to fulfill our customer orders, which would likely cause a decline in our revenue. While certain aspects of our relationships with these suppliers are contractual, many important aspects of our relationships depend on our suppliers' continued cooperation and our management of such relationships with the suppliers. Our relationships could be negatively impacted by changes in control or changes in the management team of the suppliers. In addition, the fabrication of ICs is a highly complex and precise process. Problems in the fabrication process can cause a substantial percentage of wafers to be rejected or numerous ICs on each wafer to be non-functional. This could potentially reduce yields and supply of our products. The failure of our suppliers to provide wafers at acceptable yields could prevent us from fulfilling our customer orders and would likely cause a decline in our revenue. In addition, adverse macroeconomic conditions, such as inflationary pressures resulting from worldwide supply chain constraints and other factors, have increased, and may continue to increase, the prices we pay to our suppliers. As a result of the increased costs, we have raised, and may be required to further raise the prices of our products in order to remain profitable, which could result in a loss of customers and reduced revenue. If we are unable to increase our prices to reflect higher costs, our margins will decrease. Further, as is common in the semiconductor industry, our customers may reschedule or cancel orders on relatively short notice. [removed] If our customers cancel orders after we submit a committed forecast to our suppliers for the corresponding wafers, we may be required to purchase wafers that we may not be able to resell, which would adversely affect our financial condition, results of operations and cash flows.

[removed] Privacy, cyber security, and data protection are becoming increasingly significant issues. To address these issues, the Standing Committee of the National People's Congress promulgated the Cyber Security Law of the People's Republic of China (the "Cyber Security Law"), which took effect on June 1, 2017. The Cyber Security Law sets forth various requirements relating to the collection, use, storage, disclosure and security of data, among other things. On June 10, 2021, the National People's Congress passed the Data Security Law of the People's Republic of China (the "Data Security Law"), which became effective on September 1, 2021. The Data Security Law is the first comprehensive data security legislation in China, which becomes a key supplement to the Cyber Security Law and aims to regulate a wide range of issues in relation to the collection, storage, processing, use, provision, transaction and publication of any kind of data. Various Chinese agencies are expected to issue additional regulations in the future to define these requirements more precisely. For example, the Personal Information Protection Law ("PIPL"), took effect on November 1, 2021. PIPL is aimed at protecting and controlling the use and transfer of personal data in China. There is significant uncertainty in how regulators will interpret and enforce the law, and it contains provisions that allow substantial government oversight and include fines for failure to obtain required approval from China's cyber and data protection regulators for cross-border transfers of personal data.

[removed] In May 2022, we entered into a long-term supply agreement in order to secure manufacturing production capacity for silicon wafers over a four-year period. As of December 31, 2024, we had remaining prepayments under this agreement of $60.0 million reported in other long-term assets on the Consolidated Balance Sheets.

[removed] In December 2023, Bermuda Corporate Income Tax Act of 2023 (the "Bermuda CIT Act") was enacted and signed into law. The Bermuda CIT Act includes a 15% corporate income tax ("CIT") applicable to Bermuda businesses that are multinational enterprise ("MNE") groups with annual revenue of €750M or more beginning in 2025. As the Bermuda CIT Act is not effective until January 1, 2025, and we do not expect to realize material taxable income in Bermuda in 2025, no changes to income tax expense related to the Bermuda CIT Act have been recorded as of December 31, 2024.

[removed] Operating lease obligations represent the undiscounted remaining lease payments primarily for our leased facilities and equipment. As of December 31, 2024, these obligations totaled $15.8 million, of which $3.6 million was short-term.

As more fully disclosed in Item 9A. Controls and Procedures of this Annual Report, a material weakness was identified in [removed] the audit of our fiscal year ended December 31, 2023, which has been subsequently remediated as of December 31, [removed] 2024. We cannot provide assurance that we will not in the future identify [removed] new material weaknesses in our internal control over financial reporting, which may impact the reliability of our financial reporting and financial statements.

• | risks in connection with our internal control over financial [removed] reporting;

Given our inability to control the timing and nature of significant events in our legal proceedings that either have arisen or may arise, our legal expenses are difficult to forecast and may vary substantially from our publicly disclosed forecasts with respect to any given quarter, and we could be liable for significant damages or other expenses, which could harm our stock price and financial condition. Historically, we have incurred significant expenses in connection with various legal proceedings that vary with the level of activity in the proceeding. It is difficult for us to forecast our legal expenses for any given quarter, which adversely affects our ability to forecast our expected results of operations, and the ultimate outcome of such legal proceedings, including any damages we might incur is difficult to predict. We [removed] may also be subject to unanticipated legal proceedings, which would result in us incurring unexpected legal expenses. If we fail to meet the expectations of securities or industry analysts as a result of unexpected changes in our legal expenses or we are found liable for significant damages or other expenses, our stock price and results of operations could be materially and adversely affected.

Although consequences of economic uncertainties and macroeconomic [removed] conditions and other factors could adversely affect our liquidity and capital resources in the future, and cash requirements may fluctuate based on the timing and extent of many factors such as those discussed above, we believe that our balances of cash, cash equivalents and short-term investments of [removed] $862.9 million as of December 31, [removed] 2024, along with cash generated by ongoing operations, will be sufficient to satisfy our liquidity requirements for the next 12 [removed] months and beyond.

[removed] For the year ended December 31, 2024, revenue from the enterprise data market increased $393.3 million, or [removed] 121.8%, from the same period in [removed] 2023. This increase was primarily [removed] due to higher sales of [removed] our power management solutions for [removed] AI applications. Revenue from the [removed] communications market increased $21.0 million, or [removed] 10.2%, from the same period in [removed] 2023. The increase was a result of higher sales of power solutions for optical modules and routers, partially offset by lower sales of networking solutions. Revenue from the automotive market increased $19.3 million, or [removed] 4.9%, from the same period in [removed] 2023. This increase was primarily driven by increased sales of our highly integrated applications supporting advanced driver assistance [removed] systems, partially offset by lower sales of applications supporting body electronics and infotainment. [removed] Revenue from the storage and computing market increased $10.4 million, or [removed] 2.1%, from the same period in [removed] 2023. This increase was primarily driven by increased sales of products for notebooks. Revenue from the consumer market decreased $32.6 million, or [removed] 13.9%, from the same period in [removed] 2023. This decrease was a result of [removed] broad market weakness. Revenue from the industrial market [removed] decreased $25.4 million, or [removed] 14.7%, from the same period in [removed] 2023. This decrease primarily reflected lower sales of products related to industrial meter and security applications.

As of December 31, [removed] 2024, total estimated future unconditional purchase commitments to all suppliers and other [removed] parties, net of the $60.0 million prepayment, were $616.8 million, of which [removed] $569.6 million was due within a year.

The [removed] net income tax benefit for the year ended December 31, 2024 was [removed] $1.2 billion, or [removed] 211.9% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to tax benefits associated with a ten-year tax incentive. In 2024, one of our foreign subsidiaries was granted a ten-year tax incentive, beginning in 2025. A deferred tax benefit of [removed] approximately $1.3 billion, net of $0.1 billion of valuation allowance, was recorded during the year ended December 31, 2024 to reflect the estimated future reductions in cash tax paid in that jurisdiction associated with the incentive. Furthermore, the [removed] 2024 effective tax rate benefited from lower statutory tax rates at certain of our foreign subsidiaries. The effective tax rate was partially offset by the inclusion of the global intangible low-taxed income ("GILTI") tax, the addition of a valuation allowance against foreign tax assets, and excess tax benefits from stock-based compensation.

In December 2024, we completed an intercompany transaction that resulted in one of our foreign subsidiaries recording a step up in the tax basis of intangible assets of [removed] approximately $23.2 billion. This resulted in a deferred tax difference between the U.S. GAAP basis and local tax basis of the specified intangibles. We do not expect to realize the deferred tax asset for U.S. GAAP purposes; therefore, we have recorded a full valuation allowance as of December 31, [removed] 2024.

As of December 31, [removed] 2024 and 2023, we had a valuation allowance of $3.6 billion [removed] and $35.0 million, respectively, attributable to management's determination that it is more likely than not that certain deferred tax assets will not be fully realized. In 2024, one of the Company's foreign subsidiaries was granted a ten-year tax incentive, beginning in tax year 2025. In the event we determine that it is more likely than not that we would be able to realize the deferred tax assets in the future in excess of our net recorded amount, an adjustment to the valuation allowance for the deferred tax assets would increase income in the period such determination is made. Likewise, should it be determined that additional amounts of the net deferred tax assets will not be realized in the future, an adjustment to increase the deferred tax assets valuation allowance will be charged to income in the period such determination is made. For example, a change in forecasted income could impact the expected utilization of our tax incentive and result in an income tax benefit or additional income tax expense in our financial statements in the period such determination is made.

For the year ended December 31, [removed] 2024, the $401.8 million increase in cash provided by investing activities compared to the prior period was primarily due to [removed] a $1.0 billion year-over-year increase in the sale of investments, partially offset by a $500.8 million increase in the purchase of investments, an increase of $88.5 million in property and equipment purchases and a $33.3 million acquisition in the year ended December 31, 2024.

For the year ended December 31, [removed] 2024, the $688.5 million increase in cash used in financing activities compared to the prior period was primarily due to a [removed] $632.5 million increase in stock [removed] repurchases and a $54.8 million increase in dividends and dividend equivalent payments.

In February [removed] 2025, our Board of Directors approved an increase in the quarterly cash dividend from [removed] $1.25 per share to [removed] $1.56 per share, which amount will be paid on April 15, [removed] 2025 to all stockholders of record as of the close of business on March 31, [removed] 2025.

We work with third parties to [removed] manufacture and assemble our ICs. This has enabled us to limit our capital expenditures and fixed costs, while focusing our engineering and design resources on our core strengths.

[removed] Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis, including those related to income taxes valuation [removed] allowances, inventory valuation and stock-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and judgments used in the preparation of our financial statements are, by their nature, uncertain and unpredictable, and depend upon, among other things, many factors outside of our [removed] control, including demand for our products, economic conditions and other current and future events, such as macroeconomic factors, global economic [removed] uncertainties and geopolitical tensions. Actual results could differ from these estimates and assumptions, and any such differences may be material to our consolidated financial statements.[removed] See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements.

For the year ended December 31, [removed] 2024, the $150.2 million increase in cash provided by operating activities compared to the prior period was primarily due to increased accounts receivable collections, partially offset by increased inventory [removed] purchases. The increase was also contributed by the receipt of prepaid wafer expenses in the year ended December 31, 2024 and other changes in working capital.

Other income, net, was [removed] $33.6 million for the year ended December 31, [removed] 2024, compared with [removed] $24.1 million for the year ended December 31, [removed] 2023. The increase was primarily due to an increase in amortization of discounts on available-for-sale securities, partially offset by an increase in charitable contributions.

We operate in the cyclical semiconductor industry. We are subject to industry downturns, but we have targeted product and market areas that we believe allow us to operate at above average industry performance levels over the long term.[removed] Historically, our revenue has generally been higher in the second half of the year than in the first half although various factors, such as market conditions and the timing of key product introductions, could impact this trend.

Gross margin was [removed] 55.3% for the year ended December 31, [removed] 2024, compared with [removed] 56.1% for the year ended December 31, [removed] 2023. The decrease in gross margin was mainly driven by higher inventory write-downs as a percentage of revenue.

We closely monitor changes to export control laws, tariffs, trade regulations and other trade requirements. [removed] As of December 31, [removed] 2024 and through the date we filed this Annual Report, no restrictions or requirements have had a material impact on our revenue and [removed] operations; however, such restrictions can be enacted quickly and unexpectedly and could impact our business in the future. [removed] We will continue to monitor any changes or developments to export control laws, trade regulations and other trade requirements, or interpretations thereof and are committed to complying with all applicable trade laws, regulations and other requirements.

The income tax expense for the year ended December 31, [removed] 2023 was $78.5 million, or [removed] 15.5% of pre-tax income. The effective tax rate was lower than the federal statutory rate of 21% primarily due to [removed] lower statutory tax rates at certain of our foreign subsidiaries and a return to provision true-up adjustment which primarily resulted from a calculation refinement of our capitalization of research and experimental expenditures under Section 174 of the Internal Revenue Code (the "IRC"). The lower effective tax rate relative to the federal statutory rate was partially offset by the [removed] inclusion of the GILTI tax, the addition of a valuation allowance against foreign subsidiaries' deferred tax assets arising from the indefinite extension of an R&D super deduction policy, and excess tax benefits from stock-based compensation.

Revenue for the year ended December 31, [removed] 2024 was $2.2 billion, an increase of [removed] $386.0 million, or [removed] 21.2%, from $1.8 billion for the year ended December 31, [removed] 2023. The increase in revenue was primarily due to increases in shipment [removed] volume and average selling prices resulting primarily from product mix.

In February 2025, our Board of Directors approved a new stock repurchase program authorizing [removed] the Company to repurchase up to $500.0 million of our common stock through February 2028. Shares are retired upon repurchase. [removed] The repurchases, if any, will be funded from available working capital and cash repatriation from our subsidiaries.

The semiconductor industry [removed] has historically been impacted by various [removed] macro-economic challenges including fluctuations in consumer spending, fluctuations in demand for semiconductors, rising inflation, increased interest rates, and fluctuations in currency rates. We remain cautious in light of continued challenging macroeconomic conditions and will continue to monitor the potential impact on our operations. The extent and duration of the direct and indirect impact of macroeconomic events on our business, results of operations and overall financial position remain uncertain and depend on future developments.

Cost of revenue was [removed] $986.2 million, or [removed] 44.7% of revenue, for the year ended December 31, [removed] 2024, and $800.0 million, or [removed] 43.9% of revenue, for the year ended December 31, [removed] 2023. The $186.2 million increase in cost of revenue was primarily driven by [removed] increases in shipment volume and the average costs due to product mix.

SG&A expenses were [removed] $356.8 million, or [removed] 16.2% of revenue, for the year ended December 31, [removed] 2024, and $275.7 million, or [removed] 15.1% of revenue, for the year ended December 31, [removed] 2023. The $81.0 million increase in SG&A expenses was driven by a [removed] $50.1 million increase in [removed] stock-based compensation expenses and related payroll taxes, a $16.4 million increase in [removed] cash compensation expenses and benefits, and a $6.7 million increase in professional services.

As of December 31, [removed] 2024, we had cash and cash equivalents of [removed] $691.8 million and short-term investments of [removed] $171.1 million, compared with cash and cash equivalents of [removed] $527.8 million and short-term investments of [removed] $580.6 million as of December 31, [removed] 2023. As of December 31, [removed] 2024, $611.9 million of cash and cash equivalents and [removed] $164.4 million of short-term investments were held by our foreign subsidiaries. For the years ended December 31, [removed] 2024 and 2023, we repatriated [removed] $642 million and [removed] $140 million, respectively, of cash from [removed] a foreign subsidiary to the U.S. with [removed] minimal tax impact. The proceeds are primarily used to fund our stock repurchase program, dividend program and ongoing business operations. We may repatriate additional cash from certain [removed] foreign subsidiaries to fund our expenditures in future periods. We anticipate that earnings from other foreign subsidiaries will continue to be indefinitely reinvested.

R&D expenses were [removed] $324.7 million, or [removed] 14.7% of revenue, for the year ended December 31, [removed] 2024, and $263.6 million, or [removed] 14.5% of revenue, for the year ended December 31, [removed] 2023. The $61.1 million increase in R&D expenses was primarily due to a [removed] $27.7 million increase in [removed] cash compensation expenses and benefits, [removed] an $11.0 million increase in [removed] stock-based compensation expenses and related payroll taxes, a $7.6 million increase in [removed] new product development expenses and a [removed] $5.0 million increase [removed] consisting mostly of software licensing fees.