Power Integrations Reports First-Quarter Financial Results

By: Power Integrations, Inc. via Business Wire

May 04, 2023 at 16:01 PM EDT

Revenues were $106.3 million; GAAP earnings were $0.12 per diluted share; non-GAAP earnings were $0.25 per diluted share

Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended March 31, 2023. Net revenues for the first quarter were $106.3 million, down 15 percent compared to the prior quarter and down 42 percent from the first quarter of 2022. Net income for the first quarter was $6.9 million or $0.12 per diluted share compared to $0.40 per diluted share in the prior quarter and $0.77 per diluted share in the first quarter of 2022. Cash flow from operations for the first quarter was $16.6 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 first quarter of 2023 was $14.2 million or $0.25 per diluted share compared to $0.48 per diluted share in the prior quarter and $0.93 per diluted share in the first quarter of 2022. A reconciliation of GAAP to non-GAAP financial results is included with the tables accompanying this press release.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “First-quarter revenues were in line with our expectations, and sell-through exceeded sell-in by a wider-than-expected margin. The resulting reduction in distributor inventories combined with improved order trends indicates that while end-market demand remains subdued, our revenues have bottomed and a cyclical recovery is underway.

“Meanwhile, we continue to gain share in a variety of end-markets while making excellent progress on growth initiatives such as motor-drive, automotive and our proprietary gallium-nitride technology. In March we introduced our first 900-volt GaN products, bringing the benefits of GaN to a wider range of industrial and appliance applications. The new 900-volt products include our first GaN-based ICs for the EV market, where the efficiency and size benefits of GaN are critical as carmakers power more systems from the main battery.”

Power Integrations paid a dividend of $0.19 per share on March 31, 2023. A dividend of $0.19 per share is to be paid on June 30, 2023, to stockholders of record as of May 31, 2023.

Financial Outlook

The company issued the following forecast for the second quarter of 2023:

Revenues are expected to be $122 million plus or minus $5 million.
GAAP gross margin is expected to be approximately 51.5 percent, and non-GAAP gross margin is expected to be approximately 52 percent. The difference between GAAP and non-GAAP gross margins is approximately equally attributable to stock-based compensation and amortization of acquisition-related intangible assets.
GAAP operating expenses are expected to be approximately $52.5 million; non-GAAP operating expenses are expected to be approximately $44.5 million. Non-GAAP expenses are expected to exclude about $8 million of stock-based compensation.

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: https://conferencingportals.com/event/tVwwQxvn. A live 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 second-quarter financial performance, that revenues have bottomed and that a recovery is underway are forward-looking statements reflecting management's current expectations and beliefs. These 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 economic and geopolitical conditions, including such factors as inflation, armed conflicts and 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, 2023. The company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether because 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. All other trademarks are property of their respective owners.

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)


		Three Months Ended
		March 31, 2023			December 31, 2022			March 31, 2022
NET REVENUES		$	106,297		$	124,770		$	182,149

COST OF REVENUES			52,340			57,416			81,474

GROSS PROFIT			53,957			67,354			100,675

OPERATING EXPENSES:
Research and development			23,981			23,504			23,678
Sales and marketing			15,885			15,493			16,155
General and administrative			8,334			7,465			9,614
Amortization of acquisition-related intangible assets			-			-			181
	Total operating expenses		48,200			46,462			49,628

INCOME FROM OPERATIONS			5,757			20,892			51,047

OTHER INCOME			1,714			785			554

INCOME BEFORE INCOME TAXES			7,471			21,677			51,601

PROVISION (BENEFIT) FOR INCOME TAXES			596			(1,138	)		5,353

NET INCOME		$	6,875		$	22,815		$	46,248

EARNINGS PER SHARE:
	Basic	$	0.12		$	0.40		$	0.78
	Diluted	$	0.12		$	0.40		$	0.77

SHARES USED IN PER-SHARE CALCULATION:
	Basic		57,105			57,094			59,238
	Diluted		57,579			57,535			60,107



SUPPLEMENTAL INFORMATION:		Three Months Ended
		March 31, 2023			December 31, 2022			March 31, 2022
Stock-based compensation expenses included in:
	Cost of revenues	$	301		$	405		$	320
	Research and development		2,668			2,716			3,055
	Sales and marketing		1,653			1,643			1,948
	General and administrative		2,746			1,890			3,690
	Total stock-based compensation expense	$	7,368		$	6,654		$	9,013

Cost of revenues includes:
	Amortization of acquisition-related intangible assets	$	482		$	482		$	482


		Three Months Ended
REVENUE MIX BY END MARKET		March 31, 2023			December 31, 2022			March 31, 2022
	Communications		28	%		23	%		26	%
	Computer		14	%		12	%		10	%
	Consumer		24	%		26	%		35	%
	Industrial		34	%		39	%		29	%

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)

			Three Months Ended
			March 31, 2023			December 31, 2022			March 31, 2022
RECONCILIATION OF GROSS PROFIT
GAAP gross profit			$	53,957		$	67,354		$	100,675
	GAAP gross margin			50.8	%		54.0	%		55.3	%

Stock-based compensation included in cost of revenues				301			405			320
Amortization of acquisition-related intangible assets				482			482			482

Non-GAAP gross profit			$	54,740		$	68,241		$	101,477
	Non-GAAP gross margin			51.5	%		54.7	%		55.7	%


			Three Months Ended
RECONCILIATION OF OPERATING EXPENSES			March 31, 2023			December 31, 2022			March 31, 2022
GAAP operating expenses			$	48,200		$	46,462		$	49,628

Less:	Stock-based compensation expense included in operating expenses
		Research and development		2,668			2,716			3,055
		Sales and marketing		1,653			1,643			1,948
		General and administrative		2,746			1,890			3,690
		Total		7,067			6,249			8,693

	Amortization of acquisition-related intangible assets			-			-			181

Non-GAAP operating expenses			$	41,133		$	40,213		$	40,754


			Three Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS			March 31, 2023			December 31, 2022			March 31, 2022
GAAP income from operations			$	5,757		$	20,892		$	51,047
	GAAP operating margin			5.4	%		16.7	%		28.0	%

Add:	Total stock-based compensation			7,368			6,654			9,013
	Amortization of acquisition-related intangible assets			482			482			663

Non-GAAP income from operations			$	13,607		$	28,028		$	60,723
	Non-GAAP operating margin			12.8	%		22.5	%		33.3	%


			Three Months Ended
RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES			March 31, 2023			December 31, 2022			March 31, 2022
GAAP provision (benefit) for income taxes			$	596		$	(1,138	)	$	5,353
	GAAP effective tax rate			8.0	%		-5.2	%		10.4	%

Tax effect of adjustments to GAAP results				(501	)		(2,085	)		(122	)

Non-GAAP provision for income taxes			$	1,097		$	947		$	5,475
	Non-GAAP effective tax rate			7.2	%		3.3	%		8.9	%


			Three Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)			March 31, 2023			December 31, 2022			March 31, 2022
GAAP net income			$	6,875		$	22,815		$	46,248

Adjustments to GAAP net income
	Stock-based compensation			7,368			6,654			9,013
	Amortization of acquisition-related intangible assets			482			482			663
	Tax effect of items excluded from non-GAAP results			(501	)		(2,085	)		(122	)

Non-GAAP net income			$	14,224		$	27,866		$	55,802

Average shares outstanding for calculation
	of non-GAAP net income per share (diluted)			57,579			57,535			60,107

Non-GAAP net income per share (diluted)			$	0.25		$	0.48		$	0.93

GAAP net income per share (diluted)			$	0.12		$	0.40		$	0.77

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)


		March 31, 2023			December 31, 2022
ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents	$	94,189		$	105,372
	Short-term marketable securities		264,439			248,441
	Accounts receivable, net		20,585			20,836
	Inventories		142,444			135,420
	Prepaid expenses and other current assets		17,538			15,004
	Total current assets		539,195			525,073

	PROPERTY AND EQUIPMENT, net		173,506			176,681
	INTANGIBLE ASSETS, net		6,054			6,597
	GOODWILL		91,849			91,849
	DEFERRED TAX ASSETS		19,771			19,034
	OTHER ASSETS		21,030			20,862
	Total assets	$	851,405		$	840,096

LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
	Accounts payable	$	34,694		$	30,088
	Accrued payroll and related expenses		13,442			14,778
	Taxes payable		667			938
	Other accrued liabilities		14,259			12,572
	Total current liabilities		63,062			58,376

	LONG-TERM LIABILITIES:
	Income taxes payable		15,741			15,757
	Other liabilities		10,300			10,747
	Total liabilities		89,103			84,880

STOCKHOLDERS' EQUITY:
	Common stock		23			24
	Additional paid-in capital		8,780			-
	Accumulated other comprehensive loss		(5,044	)		(7,344	)
	Retained earnings		758,543			762,536
	Total stockholders' equity		762,302			755,216
	Total liabilities and stockholders' equity	$	851,405		$	840,096

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Three Months Ended
		March 31, 2023			December 31, 2022			March 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income	$	6,875		$	22,815		$	46,248
	Adjustments to reconcile net income to cash provided by operating activities
	Depreciation		8,961			8,875			8,408
	Amortization of intangible assets		543			544			724
	Loss on disposal of property and equipment		7			209			75
	Stock-based compensation expense		7,368			6,654			9,013
	Amortization of premium on marketable securities		404			654			937
	Deferred income taxes		(738	)		4,824			(936	)
	Increase (decrease) in accounts receivable allowance for credit losses		(454	)		-			75
	Change in operating assets and liabilities:
	Accounts receivable		705			(4,761	)		10,660
	Inventories		(7,024	)		(15,328	)		(3,849	)
	Prepaid expenses and other assets		(2,302	)		(1,085	)		1,552
	Accounts payable		2,926			2,038			(1,709	)
	Taxes payable and other accrued liabilities		(686	)		(1,341	)		3,399
	Net cash provided by operating activities		16,585			24,098			74,597

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment		(4,082	)		(5,767	)		(14,700	)
	Proceeds from sale of property and equipment		-			-			1,202
	Purchases of marketable securities		(36,922	)		(28,576	)		(15,121	)
	Proceeds from sales and maturities of marketable securities		22,693			11,151			108,817
	Net cash provided by (used in) investing activities		(18,311	)		(23,192	)		80,198

CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from issuance of common stock		3,098			-			3,057
	Repurchase of common stock		(1,687	)		(18,745	)		(134,689	)
	Payments of dividends to stockholders		(10,868	)		(10,263	)		(10,656	)
	Net cash used in financing activities		(9,457	)		(29,008	)		(142,288	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(11,183	)		(28,102	)		12,507

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			105,372			133,474			158,117

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	94,189		$	105,372		$	170,624

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Contacts

Joe Shiffler

Power Integrations, Inc.

(408) 414-8528

joe@power.com