Bernie Blegen - Chief Financial Officer
Great, thank you. Good afternoon and welcome to the first quarter 2018 Monolithic Power Systems conference call. Michael Hsing, CEO and founder of MPS is with me on todays call.
In the course of today's conference call, we will make forward-looking statements and projections that involve risks and uncertainty, which could cause results to differ materially from management's current views and expectations. Please refer to the Safe Harbor Statement contained in the earnings release published today. Risks, uncertainties and other factors that could cause actual results to differ are identified in the Safe Harbor statements contained in the Q1 earnings release and in our SEC filings, including our Form 10-K filed on March 1, 2018 which is accessible through our website,
www.monolithicpower.com. MPS assumes no obligation to update the information provided on today's call.
We will be discussing gross margin, operating expense, R&D and SG&A expense, operating income, interest and other income, net income and earnings on both a GAAP and a non-GAAP basis. These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. A table of that outlines the reconciliation between the non-GAAP financial measures to GAAP financial measures is included in our earnings release, which we have filed with the SEC. I would refer investors to the Q1, 2017; Q4, 2017 and Q1, 2018 releases, as well as to the reconciling tables that are posted on our website.
I'd also like to remind you that today's conference call is being webcast live over the Internet, and will be available for replay on our website for one year, along with the earnings release filed with the SEC earlier today.
MPS had yet another record first quarter with revenue of $129.2 million, 28.7% higher than the comparable quarter in 2017. MPS continues to benefit from our technology leadership and diversified multi market strategy. Looking at our revenue by market, compared with the first quarter of 2017, revenue from consumer markets increased $11.5 million, or 32.4%. The year-over-year revenue increase reflected solid improvements and high value consumer markets including home appliances, power chargers and lighting, as well as increases in certain traditional consumer revenue categories.
Consumer revenue of $47.1 million represented 36.5% of our Q1 revenue. In our computing and storage market, revenue of $31.0 million increased $10.4 million, or 50.2% year-over-year reflecting strong sales growth for cloud computing, SSD storage and high end notebooks. Computing and storage revenue represented 24.0% of MPS' first quarter 2018 revenue. First quarter 2018 automotive revenue of $17.7 million grew 43.8% over the same period of 2017. This growth primarily represented increased sales of infotainment, safety and connectivity application products.
Automotive revenue represented 13.7% of MPS' first quarter 2018 revenue. First quarter 2018 industrial revenue of $17.6 million increased 14.3% from the first quarter of 2017, reflecting gains of smart meters, security and power sources. Industrial revenue accounted for 13.6% of our total first quarter revenue. In Q1, MPS adopted the revenue recognition standard generally referred to as TOPIC606. Its adoption had a negligible impact on Q1 revenue.
GAAP gross margin was 55.4%, 40 basis points higher than the fourth quarter of 2017 and 80 basis points higher than the first quarter of 2017. Our GAAP operating income was $22.0 million, compared to $13.6 million reported in the first quarter of 2017. For the first quarter of 2018, non-GAAP gross margin was 55.9%, 20 basis points higher than the fourth quarter of 2017 and 40 basis points higher than the first quarter of 2017.
Our non-GAAP operating income was $37.2 million, compared to $26.5 million reported in the first quarter of 2017. Let's review our operating expenses. Our GAAP operating expenses were $49.5 million in the first quarter of 2018, compared with $41.3 million in the first quarter of 2017. Our non-GAAP first quarter 2018 operating expenses were $35.0 million, up from the $29.2 million reported in the first quarter of 2017. The differences between non-GAAP operating expenses and GAAP operating expenses to the quarters discussed here are, stock compensation expense and income or loss on an unfunded deferred compensation plan.
For the first quarter of 2018, total stock compensation expense including approximately $433,000 charged cost of goods sold was $15.0 million, compared with $11.7 million recorded in the first quarter of 2017. Switching to the bottom line, first quarter 2018 GAAP net income was $21.9 million, or $0.49 per fully diluted share, compared with $0.33 per share in the first quarter of 2017. First quarter 2018 non-GAAP net income was $35.0 million, or $0.79 per fully diluted share, compared with $0.58 per share in the first quarter of 2017. Fully diluted shares outstanding at the end of Q1, 2018 were $44.3 million.
Now let's look at the balance sheet. Cash, cash equivalents and investments were $312.5 million at the end of the first quarter of 2018, compared to $304.3 million at the end of the fourth quarter of 2017. In the quarter MPS generated operating cash flow of about $16.3 million, compared with operating cash flow of $21.9 million in the first quarter of 2017. First quarter 2018 capital spending totaled $7.4 million. Accounts receivable ended the first quarter of 2018 at $48.2 million, or 34 days of sales outstanding, which was one day lower than the 35 days posted in the first quarter of 2017.
Our internal inventories at the end of the first quarter of 2018 were $111.9 million, up from the $99.3 million at the end of the fourth quarter of 2017. Inventories increased in anticipation of sales growth during the second half of 2018 especially for the computing, consumer and automotive markets. Days of inventory increased to 177 days at the end of Q1, 2018, compared with 157 days at the end of the first quarter of 2017.
I would now like to turn to our outlook for the second quarter of 2018. We are forecasting Q2 revenue in the range of $135 million to $141 million. We also expect the following: GAAP gross margin in the range of 54.9% to 55.9%. Non-GAAP gross margin in the range of 55.4% to 56.4%. Total stock based compensation expense of $15.2 million to $17.2 million, including approximately $500,000 that would be charged to cost of goods sold. Litigation expenses ranging between $300,000 to $500,000. GAAP R&D and SG&A expenses between $48.4 million and $53.4 million.
Non-GAAP R&D and SG&A expenses to be in the range of $33.7 million to $36.7 million. This estimate excludes stock compensation and litigation expenses. Interest and other income is expected to range from $600,000 to $700,000 before foreign exchange gains or losses. Fully diluted shares to be in the range of 43.9 million to 44.9 million shares.
In conclusion, we continue to grow and continue to enhance shareholder value.
Monolithic Power Systems' (MPWR) CEO Michael Hsing on Q1 2018 Results - Earnings Call Transcript | Seeking Alpha
