Power Integrations Reports Third-Quarter Financial Results

·10 min read

Revenues increased six percent year-over-year to $121.1 million; GAAP earnings were $0.24 per diluted share; non-GAAP earnings were $0.40 per diluted share

Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended September 30, 2020. Net revenues for the third quarter were $121.1 million, up 13 percent compared to the prior quarter and up six percent from the third quarter of 2019. Net income for the third quarter was $14.8 million or $0.24 per diluted share compared to $0.22 per diluted share in the prior quarter and $0.29 per diluted share in the third quarter of 2019. (Per-share measures for all periods have been adjusted for the 2:1 stock split effected as a stock dividend in August 2020.) Cash flow from operations for the third quarter was $16.2 million.

In addition to its GAAP results, the company provided certain non-GAAP measures that exclude stock-based compensation, amortization of acquisition-related intangible assets and the tax effects of these items. Non-GAAP net income for the third quarter of 2020 was $24.2 million or $0.40 per diluted share compared with $0.33 per diluted share in the prior quarter and $0.39 per diluted share in the third quarter of 2019. A reconciliation of GAAP to non-GAAP financial results appears at the end of this press release.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "Third-quarter revenues exceeded our expectations as we saw continued growth in fast charging for mobile devices as well as improved demand from the appliance market. Distribution sell-through strengthened considerably compared to the prior quarter, and we expect healthy sequential revenue growth in the fourth quarter. At the midpoint of our fourth-quarter revenue range, we would achieve double-digit revenue growth for the full year."

Power Integrations paid a cash dividend of $0.11 per share (post-split) on September 30, 2020. The company will pay another dividend of $0.11 per share on December 31, 2020 to stockholders of record as of November 30, 2020.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2020:

  • Revenues are expected to be $130 million plus or minus $5 million.

  • GAAP gross margin is expected to be approximately 49 percent, and non-GAAP gross margin is expected to be approximately 50 percent. (The difference between the expected GAAP and non-GAAP gross margins comprises approximately 0.6 percentage points from amortization of acquisition-related intangible assets and 0.4 percentage points from stock-based compensation.)

  • GAAP operating expenses are expected to be approximately $45 million; non-GAAP operating expenses are expected to be approximately $37 million. (Non-GAAP expenses are expected to exclude approximately $7.8 million of stock-based compensation and $0.2 million of amortization of acquisition-related intangible assets.)

Conference Call Today at 1:30 p.m. Pacific Time

Power Integrations management will hold a conference call today at 1:30 p.m. Pacific time. Members of the investment community can register for the call by visiting the following link: http://www.directeventreg.com/registration/event/5339866. A webcast of the call will also be available on the investor section of the company's website, http://investors.power.com.

About Power Integrations

Power Integrations, Inc. is a leading innovator in semiconductor technologies for high-voltage power conversion. The company’s products are key building blocks in the clean-power ecosystem, enabling the generation of renewable energy as well as the efficient transmission and consumption of power in applications ranging from milliwatts to megawatts. For more information please visit www.power.com.

Note Regarding Use of Non-GAAP Financial Measures

In addition to the company's consolidated financial statements, which are presented according to GAAP, the company provides certain non-GAAP financial information that excludes stock-based compensation expenses recorded under ASC 718-10, amortization of acquisition-related intangible assets, and the tax effects of these items. The company uses these measures in its financial and operational decision-making and, with respect to one measure, in setting performance targets for compensation purposes. The company believes that these non-GAAP measures offer important analytical tools to help investors understand its operating results, and to facilitate comparability with the results of companies that provide similar measures. Non-GAAP measures have limitations as analytical tools and are not meant to be considered in isolation or as a substitute for GAAP financial information. For example, stock-based compensation is an important component of the company’s compensation mix, and will continue to result in significant expenses in the company’s GAAP results for the foreseeable future, but is not reflected in the non-GAAP measures. Also, other companies, including companies in Power Integrations’ industry, may calculate non-GAAP measures differently, limiting their usefulness as comparative measures. Reconciliations of non-GAAP measures to GAAP measures are attached to this press release.

Note Regarding Forward-Looking Statements

The above statements regarding the company’s forecast for its fourth-quarter financial performance are forward-looking statements reflecting management's current expectations and beliefs. These forward-looking statements are based on current information that is, by its nature, subject to rapid and even abrupt change. Due to risks and uncertainties associated with the company's business, actual results could differ materially from those projected or implied by these statements. These risks and uncertainties include, but are not limited to: the impact of the COVID-19 pandemic on demand for the company’s products, its ability to supply products and its ability to conduct other aspects of its business such as competing for new design wins; changes in global macroeconomic conditions, including changing tariffs and uncertainty regarding trade negotiations, which may impact the level of demand for the company’s products; potential changes and shifts in customer demand away from end products that utilize the company's integrated circuits to end products that do not incorporate the company's products; the effects of competition, which may cause the company’s revenues to decrease or cause the company to decrease its selling prices for its products; unforeseen costs and expenses; and unfavorable fluctuations in component costs or operating expenses resulting from changes in commodity prices and/or exchange rates. In addition, new product introductions and design wins are subject to the risks and uncertainties that typically accompany development and delivery of complex technologies to the marketplace, including product development delays and defects and market acceptance of the new products. These and other risk factors that may cause actual results to differ are more fully explained under the caption "Risk Factors" in the company's most recent Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC) on February 7, 2020. The company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.

Power Integrations and the Power Integrations logo are trademarks or registered trademarks of Power Integrations, Inc.

POWER INTEGRATIONS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per-share amounts)

Three Months Ended

Nine Months Ended

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

NET REVENUES

$

121,129

$

106,832

$

114,159

$

337,625

$

306,212

COST OF REVENUES

61,560

53,296

56,028

168,040

151,035

GROSS PROFIT

59,569

53,536

58,131

169,585

155,177

OPERATING EXPENSES:

Research and development

20,868

19,770

17,957

59,790

55,172

Sales and marketing

13,442

12,807

13,074

39,465

38,479

General and administrative

10,302

7,804

9,224

26,867

26,948

Amortization of acquisition-related intangible assets

216

230

378

703

1,199

Total operating expenses

44,828

40,611

40,633

126,825

121,798

INCOME FROM OPERATIONS

14,741

12,925

17,498

42,760

33,379

OTHER INCOME

877

1,480

1,078

4,134

3,540

INCOME BEFORE INCOME TAXES

15,618

14,405

18,576

46,894

36,919

PROVISION FOR INCOME TAXES

798

1,213

1,477

2,996

1,742

NET INCOME

$

14,820

$

13,192

$

17,099

$

43,898

$

35,177

EARNINGS PER SHARE:

Basic

$

0.25

$

0.22

$

0.29

$

0.74

$

0.60

Diluted

$

0.24

$

0.22

$

0.29

$

0.72

$

0.59

SHARES USED IN PER-SHARE CALCULATION:

Basic

59,823

59,712

58,770

59,582

58,426

Diluted

60,852

60,624

59,732

60,668

59,418

SUPPLEMENTAL INFORMATION:

Three Months Ended

Nine Months Ended

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Stock-based compensation expenses included in:

Cost of revenues

$

602

$

252

$

280

$

1,250

$

824

Research and development

2,976

2,351

1,893

7,436

5,669

Sales and marketing

1,900

1,258

1,211

4,550

3,413

General and administrative

3,880

2,120

1,722

8,813

5,103

Total stock-based compensation expense

$

9,358

$

5,981

$

5,106

$

22,049

$

15,009

Cost of revenues includes:

Amortization of acquisition-related intangible assets

$

799

$

799

$

940

$

2,397

$

2,528

Three Months Ended

Nine Months Ended

REVENUE MIX BY END MARKET

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Communications

32

%

28

%

29

%

28

%

24

%

Computer

9

%

6

%

5

%

6

%

5

%

Consumer

31

%

31

%

32

%

34

%

36

%

Industrial

28

%

35

%

34

%

32

%

35

%

POWER INTEGRATIONS, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS

(in thousands, except per-share amounts)

Three Months Ended

Nine Months Ended

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

RECONCILIATION OF GROSS PROFIT

GAAP gross profit

$

59,569

$

53,536

$

58,131

$

169,585

$

155,177

GAAP gross margin

49.2

%

50.1

%

50.9

%

50.2

%

50.7

%

Stock-based compensation included in cost of revenues

602

252

280

1,250

824

Amortization of acquisition-related intangible assets

799

799

940

2,397

2,528

Non-GAAP gross profit

$

60,970

$

54,587

$

59,351

$

173,232

$

158,529

Non-GAAP gross margin

50.3

%

51.1

%

52.0

%

51.3

%

51.8

%

Three Months Ended

Nine Months Ended

RECONCILIATION OF OPERATING EXPENSES

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

GAAP operating expenses

$

44,828

$

40,611

$

40,633

$

126,825

$

121,798

Less:Stock-based compensation expense included in operating expenses

Research and development

2,976

2,351

1,893

7,436

5,669

Sales and marketing

1,900

1,258

1,211

4,550

3,413

General and administrative

3,880

2,120

1,722

8,813

5,103

Total

8,756

5,729

4,826

20,799

14,185

Amortization of acquisition-related intangible assets

216

230

378

703

1,199

Non-GAAP operating expenses

$

35,856

$

34,652

$

35,429

$

105,323

$

106,414

Three Months Ended

Nine Months Ended

RECONCILIATION OF INCOME FROM OPERATIONS

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

GAAP income from operations

$

14,741

$

12,925

$

17,498

$

42,760

$

33,379

GAAP operating margin

12.2

%

12.1

%

15.3

%

12.7

%

10.9

%

Add:Total stock-based compensation

9,358

5,981

5,106

22,049

15,009

Amortization of acquisition-related intangible assets

1,015

1,029

1,318

3,100

3,727

Non-GAAP income from operations

$

25,114

$

19,935

$

23,922

$

67,909

$

52,115

Non-GAAP operating margin

20.7

%

18.7

%

21.0

%

20.1

%

17.0

%

Three Months Ended

Nine Months Ended

RECONCILIATION OF PROVISION FOR INCOME TAXES

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

GAAP provision for income taxes

$

798

$

1,213

$

...

1,477

$

2,996

$

1,742

GAAP effective tax rate

5.1

%

8.4

%

8.0

%

6.4

%

4.7

%

Tax effect of adjustments to GAAP results

(971

)

(272

)

(266

)

(1,994

)

(1,902

)

Non-GAAP provision for income taxes

$

1,769

$

1,485

$

1,743

$

4,990

$

3,644

Non-GAAP effective tax rate

6.8

%

6.9

%

7.0

%

6.9

%

6.5

%

Three Months Ended

Nine Months Ended

RECONCILIATION OF NET INCOME PER SHARE (DILUTED)

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

GAAP net income

$

14,820

$

13,192

$

17,099

$

43,898

$

35,177

Adjustments to GAAP net income

Stock-based compensation

9,358

5,981

5,106

22,049

15,009

Amortization of acquisition-related intangible assets

1,015

1,029

1,318

3,100

3,727

Tax effect of items excluded from non-GAAP results

(971

)

(272

)

(266

)

(1,994

)

(1,902

)

Non-GAAP net income

$

24,222

$

19,930

$

23,257

$

67,053

$

52,011

Average shares outstanding for calculation

of non-GAAP net income per share (diluted)

60,852

60,624

59,732

60,668

59,418

Non-GAAP net income per share (diluted)

$

0.40

$

0.33

$

0.39

$

1.11

$

0.88

GAAP net income per share

$

0.24

$

0.22

$

0.29

$

0.72

$

0.59

POWER INTEGRATIONS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30, 2020

June 30, 2020

December 31, 2019

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

232,014

$

251,325

$

178,690

Short-term marketable securities

211,926

194,556

232,398

Accounts receivable, net

29,447

12,872

24,274

Inventories

104,805

103,963

90,380

Prepaid expenses and other current assets

14,755

14,512

15,597

Total current assets

592,947

577,228

541,339

PROPERTY AND EQUIPMENT, net

147,719

138,572

116,619

INTANGIBLE ASSETS, net

13,582

14,658

16,865

GOODWILL

91,849

91,849

91,849

DEFERRED TAX ASSETS

2,660

1,514

2,836

OTHER ASSETS

27,311

29,956

34,388

Total assets

$

876,068

$

853,777

$

803,896

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

43,623

$

42,871

$

27,433

Accrued payroll and related expenses

12,892

14,365

13,408

Taxes payable

379

363

584

Other accrued liabilities

9,357

7,156

9,051

Total current liabilities

66,251

64,755

50,476

LONG-TERM LIABILITIES:

Income taxes payable

15,497

15,329

14,617

Deferred tax liabilities

87

121

164

Other liabilities

14,436

14,100

14,093

Total liabilities

96,271

94,305

79,350

STOCKHOLDERS' EQUITY:

Common stock

28

28

28

Additional paid-in capital

181,192

168,470

152,117

Accumulated other comprehensive loss

(2,355

)

(1,720

)

(3,130

)

Retained earnings

600,932

592,694

575,531

Total stockholders' equity

779,797

759,472

724,546

Total liabilities and stockholders' equity

$

876,068

$

853,777

$

803,896

POWER INTEGRATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

Nine Months Ended

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

14,820

$

13,192

$

17,099

$

43,898

$

35,177

Adjustments to reconcile net income to cash provided by operating activities

Depreciation

6,002

5,581

4,831

17,071

14,262

Amortization of intangible assets

1,076

1,090

1,357

3,283

3,840

Loss on disposal of property and equipment

19

262

62

311

214

Stock-based compensation expense

9,358

5,981

5,106

22,049

15,009

Amortization of premium (accretion of discount) on marketable securities

204

167

(66

)

525

(296

)

Deferred income taxes

(1,179

)

184

(381

)

100

1,278

Increase in accounts receivable allowances for credit losses

309

-

-

155

57

Change in operating assets and liabilities:

Accounts receivable

(16,884

)

7,725

(351

)

(5,328

)

(14,804

)

Inventories

(842

)

(7,330

)

487

(14,425

)

(7,853

)

Prepaid expenses and other assets

2,041

8,084

580

6,133

(3,034

)

Accounts payable

504

(2,967

)

(6,789

)

6,365

(2,636

)

Taxes payable and other accrued liabilities

801

4,684

(91

)

(864

)

1,126

Net cash provided by operating activities

16,229

36,653

21,844

79,273

42,340

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(14,116

)

(10,019

)

(5,977

)

(35,738

)

(14,325

)

Proceeds from sale of property and equipment

-

331

-

331

-

Acquisition of technology licenses

-

-

(100

)

-

(351

)

Purchases of marketable securities

(46,239

)

(2,989

)

(80,864

)

(66,066

)

(135,288

)

Proceeds from sales and maturities of marketable securities

28,033

43,015

46,762

86,995

66,184

Net cash provided by (used in) investing activities

(32,322

)

30,338

(40,179

)

(14,478

)

(83,780

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from issuance of common stock

3,364

769

4,005

9,662

9,683

Repurchase of common stock

-

(623

)

-

(2,636

)

(7,302

)

Payments of dividends to stockholders

(6,582

)

(6,271

)

(4,999

)

(18,497

)

(14,916

)

Net cash used in financing activities

(3,218

)

(6,125

)

(994

)

(11,471

)

(12,535

)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(19,311

)

60,866

(19,329

)

53,324

(53,975

)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

251,325

190,459

99,491

178,690

134,137

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

232,014

$

251,325

$

80,162

$

232,014

$

80,162

View source version on businesswire.com: https://www.businesswire.com/news/home/20201029006158/en/

Contacts

Joe Shiffler
Power Integrations, Inc.
(408) 414-8528
joe@power.com