Power Integrations Reports Third-Quarter Financial Results

Business Wire

Wed, Nov 6, 2024, 2:01 PM 10 min read

SAN JOSE, Calif., November 06, 2024--(BUSINESS WIRE)--Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended September 30, 2024. Net revenues for the third quarter were $115.8 million, up nine percent from the prior quarter and down eight percent from the third quarter of 2023. GAAP net income for the third quarter was $14.3 million or $0.25 per diluted share compared to $0.09 per diluted share in the prior quarter and $0.34 per diluted share in the third quarter of 2023. Cash flow from operations for the third quarter was $32.9 million.

In addition to its GAAP results, the company provided non-GAAP measures that exclude stock-based compensation, amortization of acquisition-related intangible assets and the related tax effects. Non-GAAP net income for the third quarter of 2024 was $22.6 million or $0.40 per diluted share compared to $0.28 per diluted share in the prior quarter and $0.46 per diluted share in the third quarter of 2023. A reconciliation of GAAP to non-GAAP financial results is included with the tables accompanying this press release.

Commented Balu Balakrishnan, chairman and CEO of Power Integrations: "Our third-quarter results were on target, and while our outlook reflects soft end-market demand, particularly in consumer appliances, we nevertheless expect double-digit year-over-year revenue growth in the fourth quarter. In light of our strong balance sheet, our board of directors has authorized $50 million for share repurchases and increased our quarterly dividend by five percent.

"Progress on our PowiGaN™ technology roadmap continues apace, with the introduction earlier this week of the world’s first 1700-volt gallium-nitride transistors in our InnoMux™-2 product family. As PowiGaN technology reaches ever-higher voltage and power capabilities, it becomes an increasingly attractive, lower-cost alternative to silicon carbide. At the same time, its cost is approaching parity with the most advanced high-voltage silicon MOSFETs, but with far superior performance."

Additional Highlights

Power Integrations’ board of directors has authorized the use of $50 million for the repurchase of the company’s common shares, subject to pre-determined price/volume thresholds. The authorization does not have an expiration date.
The company paid a dividend of $0.20 per share on September 30, 2024; a dividend of $0.21 per share will be paid on December 31, 2024, to stockholders of record as of November 29, 2024.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2024:

Revenues are expected to be $105 million plus or minus $5 million.
GAAP gross margin is expected to be between 54 percent and 54.5 percent, and non-GAAP gross margin is expected to be between 55 percent and 55.5 percent. The difference between the 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 between $53.5 million and $54 million; non-GAAP operating expenses are expected to be between $44.5 million and $45 million. Non-GAAP operating expenses are expected to exclude approximately $9 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. A live webcast of the call will be available on the investor section of the company's website, http://investors.power.com. Members of the investment community can access the telephonic conference call by going to: https://bit.ly/POWI-2024-Q3-Earnings-Call.

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 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 company’s 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 on February 12, 2024. 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, PowiGaN, InnoMux 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									Nine Months Ended
	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
NET REVENUES	$	115,837		$	106,198		$	125,511		$	313,723		$	355,031

COST OF REVENUES		52,666			49,665			59,566			146,239			172,283

GROSS PROFIT		63,171			56,533			65,945			167,484			182,748

OPERATING EXPENSES:
Research and development		25,829			26,047			24,064			75,101			72,562
Sales and marketing		17,119			18,053			16,224			50,894			49,126
General and administrative		8,641			10,475			7,945			27,479			24,950
Total operating expenses		51,589			54,575			48,233			153,474			146,638

INCOME FROM OPERATIONS		11,582			1,958			17,712			14,010			36,110

OTHER INCOME		2,750			3,189			3,138			9,441			7,566

INCOME BEFORE INCOME TAXES		14,332			5,147			20,850			23,451			43,676

PROVISION FOR INCOME TAXES		41			298			1,054			357			2,212

NET INCOME	$	14,291		$	4,849		$	19,796		$	23,094		$	41,464

EARNINGS PER SHARE:
Basic	$	0.25		$	0.09		$	0.34		$	0.41		$	0.72
Diluted	$	0.25		$	0.09		$	0.34		$	0.40		$	0.72

SHARES USED IN PER-SHARE CALCULATION:
Basic		56,817			56,780			57,383			56,810			57,282
Diluted		57,004			56,984			57,741			57,106			57,711



SUPPLEMENTAL INFORMATION:	Three Months Ended									Nine Months Ended
	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Stock-based compensation expenses included in:
Cost of revenues	$	496		$	707		$	446		$	1,549		$	1,193
Research and development		2,997			3,885			2,895			9,307			7,992
Sales and marketing		1,876			2,510			1,787			5,990			5,061
General and administrative		2,969			3,933			1,777			8,941			6,779
Total stock-based compensation expense	$	8,338		$	11,035		$	6,905		$	25,787		$	21,025

Cost of revenues includes:
Amortization of acquisition-related intangible assets	$	147		$	258		$	482		$	887		$	1,446


	Three Months Ended									Nine Months Ended
REVENUE MIX BY END MARKET	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Communications		12	%		11	%		32	%		11	%		30	%
Computer		14	%		14	%		10	%		14	%		12	%
Consumer		38	%		42	%		26	%		40	%		26	%
Industrial		36	%		33	%		32	%		35	%		32	%

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, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
RECONCILIATION OF GROSS PROFIT
GAAP gross profit	$	63,171		$	56,533		$	65,945		$	167,484		$	182,748
GAAP gross margin		54.5	%		53.2	%		52.5	%		53.4	%		51.5	%

Stock-based compensation included in cost of revenues		496			707			446			1,549			1,193
Amortization of acquisition-related intangible assets		147			258			482			887			1,446

Non-GAAP gross profit	$	63,814		$	57,498		$	66,873		$	169,920		$	185,387
Non-GAAP gross margin		55.1	%		54.1	%		53.3	%		54.2	%		52.2	%


	Three Months Ended									Nine Months Ended
RECONCILIATION OF OPERATING EXPENSES	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
GAAP operating expenses	$	51,589		$	54,575		$	48,233		$	153,474		$	146,638

Less: Stock-based compensation expense included in operating expenses
Research and development		2,997			3,885			2,895			9,307			7,992
Sales and marketing		1,876			2,510			1,787			5,990			5,061
General and administrative		2,969			3,933			1,777			8,941			6,779
Total		7,842			10,328			6,459			24,238			19,832

Non-GAAP operating expenses	$	43,747		$	44,247		$	41,774		$	129,236		$	126,806


	Three Months Ended									Nine Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
GAAP income from operations	$	11,582		$	1,958		$	17,712		$	14,010		$	36,110
GAAP operating margin		10.0	%		1.8	%		14.1	%		4.5	%		10.2	%

Add: Stock-based compensation		8,338			11,035			6,905			25,787			21,025
Amortization of acquisition-related intangible assets		147			258			482			887			1,446

Non-GAAP income from operations	$	20,067		$	13,251		$	25,099		$	40,684		$	58,581
Non-GAAP operating margin		17.3	%		12.5	%		20.0	%		13.0	%		16.5	%


	Three Months Ended									Nine Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
GAAP provision for income taxes	$	41		$	298		$	1,054		$	357		$	2,212
GAAP effective tax rate		0.3	%		5.8	%		5.1	%		1.5	%	...	5.1	%

Tax effect of adjustments to GAAP results		(160	)		(269	)		(580	)		(787	)		(2,097	)

Non-GAAP provision for income taxes	$	201		$	567		$	1,634		$	1,144		$	4,309
Non-GAAP effective tax rate		0.9	%		3.4	%		5.8	%		2.3	%		6.5	%


	Three Months Ended									Nine Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)	September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
GAAP net income	$	14,291		$	4,849		$	19,796		$	23,094		$	41,464

Adjustments to GAAP net income
Stock-based compensation		8,338			11,035			6,905			25,787			21,025
Amortization of acquisition-related intangible assets		147			258			482			887			1,446
Tax effect of items excluded from non-GAAP results		(160	)		(269	)		(580	)		(787	)		(2,097	)

Non-GAAP net income	$	22,616		$	15,873		$	26,603		$	48,981		$	61,838


Average shares outstanding for calculation of non-GAAP net income per share (diluted)		57,004			56,984			57,741			57,106			57,711

Non-GAAP net income per share (diluted)	$	0.40		$	0.28		$	0.46		$	0.86		$	1.07

GAAP net income per share (diluted)	$	0.25		$	0.09		$	0.34		$	0.40		$	0.72

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


		September 30, 2024		June 30, 2024			December 31, 2023
ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents	$	58,469	$	50,493		$	63,929
	Short-term marketable securities		245,282		239,985			247,640
	Accounts receivable, net		16,634		16,372			14,674
	Inventories		167,680		169,884			163,164
	Prepaid expenses and other current assets		19,821		23,102			22,193
	Total current assets		507,886		499,836			511,600

	PROPERTY AND EQUIPMENT, net		153,313		153,785			164,213
	INTANGIBLE ASSETS, net		8,283		3,561			4,424
	GOODWILL		95,271		91,849			91,849
	DEFERRED TAX ASSETS		36,393		31,640			28,325
	OTHER ASSETS		23,845		24,089			19,457
	Total assets	$	824,991	$	804,760		$	819,868

LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
	Accounts payable	$	27,091	$	24,831		$	26,390
	Accrued payroll and related expenses		13,337		13,596			13,551
	Taxes payable		1,063		827			1,016
	Other accrued liabilities		9,267		10,970			7,910
	Total current liabilities		50,758		50,224			48,867

	LONG-TERM LIABILITIES:
	Income taxes payable		6,351		6,237			6,244
	Other liabilities		18,669		17,557			12,516
	Total liabilities		75,778		74,018			67,627

	STOCKHOLDERS' EQUITY:
	Common stock		22		22			23
	Additional paid-in capital		11,347		-			-
	Accumulated other comprehensive income (loss)		1,008		(3,189	)		(1,462	)
	Retained earnings		736,836		733,909			753,680
	Total stockholders' equity		749,213		730,742			752,241
	Total liabilities and stockholders' equity	$	824,991	$	804,760		$	819,868

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

		Three Months Ended									Nine Months Ended
		September 30, 2024			June 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income	$	14,291		$	4,849		$	19,796		$	23,094		$	41,464
	Adjustments to reconcile net income to cash provided by operating activities
	Depreciation		8,454			8,391			8,663			25,560			26,316
	Amortization of intangible assets		208			320			544			1,071			1,630
	Loss on disposal of property and equipment		208			-			64			216			86
	Stock-based compensation expense		8,338			11,035			6,905			25,787			21,025
	Amortization of premium (accretion of discount) on marketable securities		(343	)		(413	)		(273	)		(1,252	)		146
	Deferred income taxes		(5,206	)		(2,152	)		(7,170	)		(8,688	)		(9,952	)
	Increase (decrease) in accounts receivable allowance for credit losses		(785	)		163			-			(459	)		(454	)
	Change in operating assets and liabilities:
	Accounts receivable		523			(4,256	)		3,538			(1,501	)		(7,249	)
	Inventories		2,204			(2,019	)		(505	)		(4,516	)		(14,826	)
	Prepaid expenses and other assets		3,542			1,226			6,404			5,614			(837	)
	Accounts payable		2,031			(1,411	)		(11,695	)		1,914			(2,882	)
	Taxes payable and other accrued liabilities		(546	)		1,898			455			(385	)		(4,975	)
	Net cash provided by operating activities		32,919			17,631			26,726			66,455			49,492

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment		(5,731	)		(4,167	)		(7,530	)		(14,241	)		(14,741	)
	Purchases of marketable securities		(19,751	)		(27,918	)		(62,205	)		(97,581	)		(173,015	)
	Proceeds from sales and maturities of marketable securities		18,414			31,194			63,256			103,806			161,897
	Acquisition		(9,520	)		-			-			(9,520	)		-
	Net cash used in investing activities		(16,588	)		(891	)		(6,479	)		(17,536	)		(25,859	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from issuance of common stock		3,009			-			3,139			5,700			6,237
	Repurchase of common stock		-			(11,338	)		(1,835	)		(25,979	)		(7,834	)
	Payments of dividends to stockholders		(11,364	)		(11,352	)		(10,904	)		(34,100	)		(32,665	)
	Net cash used in financing activities		(8,355	)		(22,690	)		(9,600	)		(54,379	)		(34,262	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			7,976			(5,950	)		10,647			(5,460	)		(10,629	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			50,493			56,443			84,096			63,929			105,372

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	58,469		$	50,493		$	94,743		$	58,469		$	94,743