Power Integrations Reports Third-Quarter Financial Results

October 26, 2017

Revenues grew nine percent year-over-year to $111.3 million; cash flow from operations was $24.6 million

GAAP earnings were $0.54/diluted share; non-GAAP earnings were $0.78/diluted share

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended September 30, 2017. Results are calculated using the “sell-in” method of revenue recognition on sales to distributors, reflecting the company’s adoption of ASC 606 effective January 1, 2017. Prior-year results have been recast as if ASC 606 had been in effect for those periods.

Net revenues for the third quarter were $111.3 million, an increase of three percent from the prior quarter and nine percent from the third quarter of 2016. Net income was $16.5 million or $0.54 per diluted share, compared to $0.46 per diluted share in the prior quarter and $0.43 per diluted share in the third quarter of 2016. Cash flow from operations was $24.6 million for the quarter.

In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses, amortization of intangible assets and the tax effects of these items. Non-GAAP net income for the third quarter was $23.7 million or $0.78 per diluted share, compared with $0.69 per diluted share in the prior quarter and $0.67 per diluted share in the third quarter of 2016.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “Revenues are up 13 percent for the first nine months of 2017, putting us on course for another year of double-digit revenue growth. We have a broad set of attractive opportunities ahead of us in the high-voltage power conversion market, including global trends such as energy efficiency as well as fast-growing vertical markets like rapid charging, smart homes and clean energy. We have a strong portfolio of products with which to address these opportunities, including our new InnoSwitch™3 family of ICs, which significantly advances the state of the art in power-supply design with its unprecedented levels of integration and energy efficiency.”

Additional Highlights

  • Power Integrations repurchased approximately 96,000 shares of its common stock during the third quarter for $6.7 million; the company has $46.8 million remaining under its current repurchase authorization.
  • Power Integrations paid a dividend of $0.14 per share on September 29, 2017. A dividend of $0.14 per share is scheduled to be paid on December 29, 2017, to stockholders of record as of November 30, 2017.
  • Power Integrations was issued 17 U.S. patents during the third quarter of 2017.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2017:

  • Revenues are expected to be $110 million plus or minus $3 million.
  • GAAP gross margin is expected to be approximately 49.8 percent; non-GAAP gross margin is expected to be approximately 51 percent. (The difference between the expected GAAP and non-GAAP gross margins is composed of approximately 0.9 percentage points from amortization of acquisition-related intangible assets and 0.3 percentage points from stock-based compensation.)
  • GAAP operating expenses are expected to be between $40 million and $40.5 million; non-GAAP operating expenses are expected to be between $33 million and $33.5 million. (Non-GAAP expenses are expected to exclude approximately $6.5 million of stock-based compensation expenses and $0.5 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 join the call by dialing 1-647-689-4187. 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 (including in-place lease 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. These 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 statements in this press release regarding the company’s forecast for its fourth-quarter financial performance, being on course for double-digit revenue growth for the year, the opportunities ahead of it and its ability to address these opportunities 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: changes in global macroeconomic conditions, 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; the outcome and cost of patent litigation, which may affect sales of the company’s products or could result in higher expenses and charges than currently expected; 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 8, 2017. 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 the rules and regulations of the SEC.

Power Integrations, InnoSwitch 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, 2017   June 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
NET REVENUES $ 111,255 $ 107,563 $ 101,625 $ 323,506 $ 287,232
 
COST OF REVENUES   55,542     54,116     51,783     163,870     145,117  
 
GROSS PROFIT   55,713     53,447     49,842     159,636     142,115  
 
OPERATING EXPENSES:
Research and development 17,340 17,341 15,906 51,321 46,544
Sales and marketing 12,254 12,607 11,447 36,494 33,594
General and administrative 9,546 8,765 8,789 27,015 24,772
Amortization of acquisition-related intangible assets   514     537     582     1,634     1,859  
Total operating expenses   39,654     39,250     36,724     116,464     106,769  
 
INCOME FROM OPERATIONS 16,059 14,197 13,118 43,172 35,346
 
Other income, net   895     465     282     1,866     779  
 
INCOME BEFORE INCOME TAXES 16,954 14,662 13,400 45,038 36,125
 
PROVISION FOR INCOME TAXES   448     760     591     531     1,530  
 
NET INCOME $ 16,506   $ 13,902   $ 12,809   $ 44,507   $ 34,595  
 
EARNINGS PER SHARE:
Basic $ 0.55   $ 0.47   $ 0.44   $ 1.50   $ 1.20  
Diluted $ 0.54   $ 0.46   $ 0.43   $ 1.46   $ 1.17  
 
SHARES USED IN PER-SHARE CALCULATION:
Basic 29,759 29,720 28,972 29,646 28,834
Diluted 30,614 30,454 29,625 30,472 29,480
 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues $ 391 $ 351 $ 348 $ 885 $ 731
Research and development 2,173 2,351 1,934 6,158 5,343
Sales and marketing 1,441 1,189 1,303 3,727 3,229
General and administrative   2,521     2,436     2,204     7,052     5,914  
Total stock-based compensation expense $ 6,526   $ 6,327   $ 5,789   $ 17,822   $ 15,217  
 
Cost of revenues includes:
Amortization of acquisition-related intangible assets $ 939   $ 939   $ 939   $ 2,817   $ 2,846  
 
General & administrative expenses include:
Patent-litigation expenses $ 2,302   $ 1,779   $ 1,894   $ 5,925   $ 4,711  
 
Other income, net includes:
Amortization of in-place lease intangible assets $ -   $ 90   $ 90   $ 180   $ 270  
 
 
REVENUE MIX BY END MARKET
Communications 23 % 22 % 28 % 24 % 26 %
Computer 5 % 4 % 5 % 4 % 6 %
Consumer 37 % 41 % 36 % 38 % 36 %
Industrial 35 % 33 % 31 % 34 % 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, 2017   June 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
RECONCILIATION OF GROSS PROFIT
GAAP gross profit $ 55,713 $ 53,447 $ 49,842 $ 159,636 $ 142,115
GAAP gross margin 50.1 % 49.7 % 49.0 % 49.3 % 49.5 %
 
Stock-based compensation included in cost of revenues 391 351 348 885 731
Amortization of acquisition-related intangible assets   939     939     939     2,817     2,846  
 
Non-GAAP gross profit $ 57,043   $ 54,737   $ 51,129   $ 163,338   $ 145,692  
Non-GAAP gross margin 51.3 % 50.9 % 50.3 % 50.5 % 50.7 %
 
 
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses $ 39,654 $ 39,250 $ 36,724 $ 116,464 $ 106,769
 

Less: Stock-based compensation expense included in operating expenses

Research and development 2,173 2,351 1,934 6,158 5,343
Sales and marketing 1,441 1,189 1,303 3,727 3,229
General and administrative   2,521     2,436     2,204     7,052     5,914  
Total   6,135     5,976     5,441     16,937     14,486  
 
Amortization of acquisition-related intangible assets   514     537     582     1,634     1,859  
 
Non-GAAP operating expenses $ 33,005   $ 32,737   $ 30,701   $ 97,893   $ 90,424  
 
 
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations $ 16,059 $ 14,197 $ 13,118 $ 43,172 $ 35,346
GAAP operating margin 14.4 % 13.2 % 12.9 % 13.3 % 12.3 %
 

Add: Total stock-based compensation

6,526 6,327 5,789 17,822 15,217
Amortization of acquisition-related intangible assets   1,453     1,476     1,521     4,451     4,705  
 
Non-GAAP income from operations $ 24,038   $ 22,000   $ 20,428   $ 65,445   $ 55,268  
Non-GAAP operating margin 21.6 % 20.5 % 20.1 % 20.2 % 19.2 %
 
 
RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision for income taxes $ 448 $ 760 $ 591 $ 531 $ 1,530
GAAP effective tax rate 2.6 % 5.2 % 4.4 % 1.2 % 4.2 %
 
Tax effect of adjustments to GAAP results   (751 )   (736 )   (328 )   (3,020 )   (854 )
 
Non-GAAP provision for income taxes $ 1,199   $ 1,496   $ 919   $ 3,551   $ 2,384  
Non-GAAP effective tax rate 4.8 % 6.6 % 4.4 % 5.3 % 4.2 %
 
 
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income $ 16,506 $ 13,902 $ 12,809 $ 44,507 $ 34,595
 
Adjustments to GAAP net income
Stock-based compensation 6,526 6,327 5,789 17,822 15,217
Amortization of acquisition-related intangible assets 1,453 1,476 1,521 4,451 4,705
Amortization of in-place lease intangible assets - 90 90 180 270
Tax effect of items excluded from non-GAAP results   (751 )   (736 )   (328 )   (3,020 )   (854 )
 
Non-GAAP net income $ 23,734   $ 21,059   $ 19,881   $ 63,940   $ 53,933  

 

Average shares outstanding for calculation of non-GAAP income per share (diluted)

  30,614     30,454     29,625     30,472     29,480  
 
Non-GAAP net income per share (diluted) $ 0.78   $ 0.69   $ 0.67   $ 2.10   $ 1.83  
 
GAAP income per share $ 0.54   $ 0.46   $ 0.43   $ 1.46   $ 1.17  

 
POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  September 30, 2017   June 30, 2017   December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 50,700 $ 32,649 $ 62,134
Short-term marketable securities 213,042 221,346 188,323
Accounts receivable, net 17,192 18,697 6,528
Inventories 55,158 52,432 52,564
Prepaid expenses and other current assets   10,831     16,902     8,715  
Total current assets   346,923     342,026     318,264  
 
PROPERTY AND EQUIPMENT, net 114,855 113,202 95,296
INTANGIBLE ASSETS, net 26,871 28,324 31,502
GOODWILL 91,849 91,849 91,849
DEFERRED TAX ASSETS 19,086 19,328 11,342
OTHER ASSETS   24,899     6,809     6,157  
Total assets $ 624,483   $ 601,538   $ 554,410  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 38,474 $ 30,124 $ 29,727
Accrued payroll and related expenses 9,772 11,639 10,756
Taxes payable 1,227 1,072 729
Other accrued liabilities   4,895     3,858     2,734  
Total current liabilities   54,368     46,693     43,946  
 
LONG-TERM LIABILITIES:
Income taxes payable 2,817 2,805 2,639
Deferred tax liabilities 538 615 820
Other liabilities   4,501     4,422     3,921  
Total liabilities   62,224     54,535     51,326  
 
STOCKHOLDERS' EQUITY:
Common stock 29 29 28
Additional paid-in capital 192,074 189,259 172,875
Accumulated other comprehensive loss (2,320 ) (2,419 ) (2,710 )
Retained earnings   372,476     360,134     332,891  
Total stockholders' equity   562,259     547,003     503,084  
Total liabilities and stockholders' equity $ 624,483   $ 601,538   $ 554,410  

 
POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
  Three Months Ended   Nine Months Ended
September 30, 2017   June 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,506 $ 13,902 $ 12,809 $ 44,507 $ 34,595
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 4,854 4,357 4,149 13,323 12,670
Amortization of intangible assets 1,453 1,566 1,612 4,631 5,051
Loss on disposal of property and equipment 286 - 68 324 216
Stock-based compensation expense 6,526 6,327 5,789 17,822 15,217
Amortization of premium on marketable securities 295 257 55 803 484
Deferred income taxes 163 457 281 (485 ) 506
Increase in accounts receivable allowances 129 80 110 209 303
Change in operating assets and liabilities:
Accounts receivable 1,376 (3,731 ) 656 (10,873 ) (5,596 )
Inventories (2,726 ) (1,283 ) (3,192 ) (2,594 ) 1,993
Prepaid expenses and other assets (12,699 ) (115 ) (1,402 ) (21,048 ) (2,076 )
Accounts payable 8,928 (1,252 ) 5,998 5,299 9,037
Taxes payable and other accrued liabilities   (529 )   3,523     (675 )   2,679     (2,241 )
Net cash provided by operating activities   24,562     24,088     26,258     54,597     70,159  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (6,691 ) (16,473 ) (3,184 ) (29,567 ) (8,074 )
Purchases of marketable securities (34,499 ) (49,636 ) (56,187 ) (146,073 ) (122,398 )
Proceeds from sales and maturities of marketable securities   42,555     31,800     22,207     120,695     75,128  
Net cash provided by (used in) investing activities   1,365     (34,309 )   (37,164 )   (54,945 )   (55,344 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 3,022 697 5,224 8,111 8,672
Repurchase of common stock (6,734 ) - - (6,734 ) (6,435 )
Payments of dividends to stockholders (4,164 ) (4,162 ) (3,771 ) (12,463 ) (11,254 )
Proceeds from draw on line of credit 5,000 - - 5,000 -
Payments on line of credit   (5,000 )   -     -     (5,000 )   -  
Net cash provided by (used in) financing activities   (7,876 )   (3,465 )   1,453     (11,086 )   (9,017 )
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 18,051 (13,686 ) (9,453 ) (11,434 ) 5,798
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   32,649     46,335     105,343     62,134     90,092  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 50,700   $ 32,649   $ 95,890   $ 50,700   $ 95,890  

Source: Power Integrations, Inc.

Power Integrations, Inc.

Joe Shiffler, 408-414-8528

joe@power.com

Quick Links

NASDAQ: POWI $73.85 +0.00
+0% Volume: 73,086 December 12, 2017

Contact Us

Joe Shiffler
Director, Investor Relations & Corporate Communications
(408) 414-8528
Fax: (408) 414-8628
jshiffler@power.com

Mailing Address:
Power Integrations
Attention: Investor Relations
5245 Hellyer Avenue San Jose, CA. 95138

Subscribe to Investor Alerts

Email Address *
Mailing Lists *



 
Enter the code shown above.