Power Integrations Reports Third-Quarter Financial Results

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

SAN JOSE, Calif. — (BUSINESS WIRE) — October 29, 2020 — 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

 


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