Power Integrations Reports Second-Quarter Financial Results

July 29, 2015

Non-GAAP earnings were $0.47/diluted share; GAAP earnings were $0.29/diluted share

Cash flow from operations was $25.1 million for the quarter; company announces new $30 million share-repurchase plan

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2015. Net revenues for the second quarter were $85.3 million, up three percent from the prior quarter and down four percent from the second quarter of 2014. GAAP gross margin for the second quarter was 51.6 percent; operating margin was 10.8 percent. Net income for the quarter was $8.6 million or $0.29 per diluted share, compared with $0.21 per diluted share in the prior quarter and $0.54 per diluted share in the second quarter of 2014. (GAAP net income for the year-ago quarter included a non-recurring tax benefit of $3.3 million.)

In addition to its GAAP results, the company provided non-GAAP financial measures that exclude stock-based compensation expenses, certain acquisition-related expenses, the tax effects of these items, and the above-mentioned tax benefit recognized in 2014. Non-GAAP gross margin for the second quarter was 53.1 percent; operating margin was 17.6 percent. Non-GAAP net income for the quarter was $14.2 million or $0.47 per diluted share, compared with $0.43 per diluted share in the prior quarter and $0.61 per diluted share in the second quarter of 2014.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “Like many of our industry peers, we experienced lower-than-expected demand in the second quarter. However, we proactively adjusted our operating expenses during the quarter and delivered solid earnings and strong cash flow.

“While macroeconomic factors remain a concern, we did see an uptick in sales and bookings in the latter part of the second quarter. We anticipate sequential revenue growth in the third quarter, led by adoption of our new InnoSwitch™ product family, which continues to ramp into the mobile-device market and is now gaining adoption by customers in our other end-markets as well.”

Additional Highlights

  • Power Integrations repurchased approximately 460,000 shares of its common stock during the quarter for $22.3 million. Approximately $0.6 million remained on the company’s repurchase authorization at quarter-end. Earlier this month the company’s board of directors authorized the use of an additional $30 million for further repurchases.
  • The company paid a dividend of $0.12 per share on June 30. A dividend of $0.12 per share is scheduled to be paid on September 30, 2015, to stockholders of record as of August 31, 2015.
  • Power Integrations had $170.9 million in cash and short-term marketable securities at quarter-end, a decrease of $2.3 million during the quarter. Cash flow from operations in the quarter was $25.1 million.
  • Power Integrations was issued 10 U.S. patents during the second quarter and had 734 U.S. patents at quarter-end.

Financial Outlook

The company issued the following forecast for the third quarter of 2015:

  • Revenues are expected to be in a range of flat to seven percent higher compared with the second quarter.
  • Non-GAAP gross margin is expected to be between 52.5 percent and 53 percent. (Excludes $0.3 million of stock-based compensation and $1 million of amortization of acquisition-related intangibles.) GAAP gross margin is expected to be between 51 percent and 51.5 percent.
  • Non-GAAP operating expenses are expected to be approximately $30.5 million. (Excludes $3.8 million of stock-based compensation expenses and $0.7 million of amortization of acquisition-related intangible assets.) GAAP operating expenses are expected to be approximately $35 million.

Conference Call Today at 1:45 p.m. Pacific Time

Power Integrations management will hold a conference call today at 1:45 p.m. PT. Members of the investment community can join the call by dialing 1-647-788-4901. 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 write-up of acquired inventory, acquisition expenses, severance and transition expenses, the tax effects of these items, and the above-mentioned tax benefit recognized in 2014. The company uses these measures in its own financial and operational decision-making and, with respect to one measure, in setting performance targets for employee-compensation purposes. Further, the company believes that these non-GAAP measures offer an important analytical tool to help investors understand the company’s core operating results and trends, and to facilitate comparability with the operating results of other companies that provide similar measures. These non-GAAP measures have certain 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.

Note Regarding Forward-Looking Statements

The statements in this press release regarding the company’s forecast for its third-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: 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 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 Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (SEC) on April 30, 2015. 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. 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
Six Months Ended


June 30, 2015


March 31, 2015


June 30, 2014


June 30, 2015


June 30, 2014

NET REVENUES
$ 85,265

$ 82,557

$ 88,985

$ 167,822

$ 172,058










 
COST OF REVENUES
  41,247  
  40,265  
  40,249  
  81,512  
  77,345  










 
GROSS PROFIT
  44,018  
  42,292  
  48,736  
  86,310  
  94,713  










 
OPERATING EXPENSES:









Research and development

14,683


14,573


14,366


29,256


27,856
Sales and marketing

11,567


11,307


11,434


22,874


22,409
General and administrative

7,480


7,983


7,813


15,463


15,459
Amortization of acquisition-related intangible assets

693


750


798


1,443


1,933
Acquisition expenses, severance and transition costs
  391  
  722  
  -  
  1,113  
  -  
Total operating expenses
  34,814  
  35,335  
  34,411  
  70,149  
  67,657  










 
INCOME FROM OPERATIONS

9,204


6,957


14,325


16,161


27,056










 
Other income (expense), net
  14  
  (223 )
  198  
  (209 )
  455  










 
INCOME BEFORE INCOME TAXES

9,218


6,734


14,523


15,952


27,511










 
PROVISION (BENEFIT) FOR INCOME TAXES
  628  
  391  
  (2,193 )
  1,019  
  (1,568 )










 
NET INCOME
$ 8,590  
$ 6,343  
$ 16,716  
$ 14,933  
$ 29,079  










 
EARNINGS PER SHARE:









Basic
$ 0.29  
$ 0.22  
$ 0.55  
$ 0.51  
$ 0.96  
Diluted
$ 0.29  
$ 0.21  
$ 0.54  
$ 0.50  
$ 0.93  










 
SHARES USED IN PER-SHARE CALCULATION:









Basic

29,368


29,309


30,310


29,339


30,275
Diluted

30,034


30,058


31,110


30,075


31,150










 










 
SUPPLEMENTAL INFORMATION:



















 
Stock-based compensation expenses included in:









Cost of revenues
$ 257

$ 249

$ 298

$ 506

$ 517
Research and development

1,306


1,391


1,339


2,697


2,551
Sales and marketing

878


1,012


864


1,890


1,799
General and administrative
  1,309  
  1,739  
  1,674  
  3,048  
  3,223  
Total stock-based compensation expense
$ 3,750  
$ 4,391  
$ 4,175  
$ 8,141  
$ 8,090  










 
Cost of revenues includes:









Amortization of write-up of acquired inventory
$ -  
$ 309  
$ -  
$ 309  
$ -  
Amortization of acquisition-related intangible assets
$ 961  
$ 961  
$ 645  
$ 1,922  
$ 1,290  










 
General & administrative expenses include:









Patent-litigation expenses
$ 1,501  
$ 1,457  
$ 1,127  
$ 2,958  
$ 2,313  










 










 
REVENUE MIX BY END MARKET









Communications

21 %

21 %

15 %

21 %

17 %
Computer

7 %

8 %

12 %

7 %

11 %
Consumer

36 %

38 %

38 %

37 %

37 %
Industrial

36 %

33 %

35 %

35 %

35 %

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

 
 
 
 
 


Three Months Ended
Six Months Ended


June 30, 2015


March 31, 2015


June 30, 2014


June 30, 2015


June 30, 2014

RECONCILIATION OF GROSS PROFIT









GAAP gross profit
$ 44,018

$ 42,292

$ 48,736

$ 86,310

$ 94,713
GAAP gross margin

51.6 %

51.2 %

54.8 %

51.4 %

55.0 %










 
Stock-based compensation included in cost of revenues

257


249


298


506


517
Amortization of write-up of acquired inventory

-


309


-


309


-
Amortization of acquisition-related intangible assets
  961  
  961  
  645  
  1,922  
  1,290  










 
Non-GAAP gross profit
$ 45,236  
$ 43,811  
$ 49,679  
$ 89,047  
$ 96,520  
Non-GAAP gross margin

53.1 %

53.1 %

55.8 %

53.1 %

56.1 %










 










 
RECONCILIATION OF OPERATING EXPENSES









GAAP operating expenses
$ 34,814

$ 35,335

$ 34,411

$ 70,149

$ 67,657










 

Less: Stock-based compensation expense included in operating expenses











Research and development

1,306


1,391


1,339


2,697


2,551
Sales and marketing

878


1,012


864


1,890


1,799
General and administrative
  1,309  
  1,739  
  1,674  
  3,048  
  3,223  
Total
  3,493  
  4,142  
  3,877  
  7,635  
  7,573  










 
Amortization of acquisition-related intangible assets
  693  
  750  
  798  
  1,443  
  1,933  










 
Acquisition expenses, severance and transition costs
  391  
  722  
  -  
  1,113  
  -  










 
Non-GAAP operating expenses
$ 30,237  
$ 29,721  
$ 29,736  
$ 59,958  
$ 58,151  










 










 
RECONCILIATION OF INCOME FROM OPERATIONS









GAAP income from operations
$ 9,204

$ 6,957

$ 14,325

$ 16,161

$ 27,056
GAAP operating margin

10.8 %

8.4 %

16.1 %

9.6 %

15.7 %










 

Add: Total stock-based compensation



3,750


4,391


4,175


8,141


8,090
Amortization of write-up of acquired inventory

-


309


-


309


-
Amortization of acquisition-related intangible assets

1,654


1,711


1,443


3,365


3,223
Acquisition expenses, severance and transition costs
  391  
  722  
  -  
  1,113  
  -  










 
Non-GAAP income from operations
$ 14,999  
$ 14,090  
$ 19,943  
$ 29,089  
$ 38,369  
Non-GAAP operating margin

17.6 %

17.1 %

22.4 %

17.3 %

22.3 %










 










 
RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES









GAAP provision (benefit) for income taxes
$ 628

$ 391

$ (2,193 )
$ 1,019

$ (1,568 )
GAAP effective tax rate

6.8 %

5.8 %

-15.1 %

6.4 %

-5.7 %










 
Benefit associated with tax settlement

-


-


(3,331 )

-


(3,331 )
Tax effect of other adjustments to GAAP results
  (197 )
  (521 )
  (115 )
  (718 )
  (663 )










 
Non-GAAP provision for income taxes
$ 825  
$ 912  
$ 1,253  
$ 1,737  
$ 2,426  
Non-GAAP effective tax rate

5.5 %

6.6 %

6.2 %

6.0 %

6.2 %










 










 
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)









GAAP net income
$ 8,590

$ 6,343

$ 16,716

$ 14,933

$ 29,079










 
Adjustments to GAAP net income









Stock-based compensation

3,750


4,391


4,175


8,141


8,090
Amortization of write-up of acquired inventory

-


309


-


309


-
Amortization of acquisition-related intangible assets

1,654


1,711


1,443


3,365


3,223
Benefit associated with tax settlement

-


-


(3,331 )

-


(3,331 )
Acquisition expenses, severance and transition costs

391


722


-


1,113


-
Tax effect of items excluded from non-GAAP results
  (197 )
  (521 )
  (115 )
  (718 )
  (663 )










 
Non-GAAP net income
$ 14,188  
$ 12,955  
$ 18,888  
$ 27,143  
$ 36,398  










 

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


  30,034  
  30,058  
  31,110  
  30,075  
  31,150  










 
Non-GAAP net income per share (diluted)
$ 0.47  
$ 0.43  
$ 0.61  
$ 0.90  
$ 1.17  










 
GAAP income per share
$ 0.29  
$ 0.21  
$ 0.54  
$ 0.50  
$ 0.93  

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

 
 
 






 


June 30, 2015


March 31, 2015


December 31, 2014

ASSETS





CURRENT ASSETS:





Cash and cash equivalents
$ 75,941

$ 85,637

$ 60,708
Short-term marketable securities

94,944


87,560


114,575
Accounts receivable

13,212


12,631


10,186
Inventories

64,231


65,009


64,025
Deferred tax assets

38


39


39
Prepaid expenses and other current assets
  9,444  
  11,458  
  16,379  
Total current assets
  257,810  
  262,334  
  265,912  






 
PROPERTY AND EQUIPMENT, net

92,913


94,179


95,823
INTANGIBLE ASSETS, net

41,028


42,758


35,524
GOODWILL

91,849


91,849


80,599
DEFERRED TAX ASSETS

11,025


11,265


11,562
OTHER ASSETS
  4,894  
  4,789  
  4,243  
Total assets
$ 499,519  
$ 507,174  
$ 493,663  






 
LIABILITIES AND STOCKHOLDERS’ EQUITY





CURRENT LIABILITIES:





Accounts payable
$ 30,792

$ 23,907

$ 21,980
Accrued payroll and related expenses

9,539


8,815


9,071
Taxes payable

2,237


2,930


2,963
Deferred tax liabilities

2,085


2,187


2,193
Deferred income on sales to distributors

16,457


17,254


15,223
Other accrued liabilities
  3,381  
  3,834  
  3,730  
Total current liabilities
  64,491  
  58,927  
  55,160  






 
LONG-TERM LIABILITIES:





Income taxes payable

746


746


743
Deferred tax liabilities

3,928


4,059


4,272
Other liabilities
  2,673  
  2,960  
  2,812  
Total liabilities
  71,838  
  66,692  
  62,987  






 
STOCKHOLDERS' EQUITY:





Common stock

29


29


29
Additional paid-in capital

161,089


178,816


171,938
Accumulated other comprehensive loss

(1,167 )

(1,031 )

(1,136 )
Retained earnings
  267,730  
  262,668  
  259,845  
Total stockholders' equity
  427,681  
  440,482  
  430,676  
Total liabilities and stockholders' equity
$ 499,519  
$ 507,174  
$ 493,663  

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

 
 
 
 
 


Three Months Ended
Six Months Ended


June 30, 2015


March 31, 2015


June 30, 2014


June 30, 2015


June 30, 2014

CASH FLOWS FROM OPERATING ACTIVITIES:









Net income
$ 8,590

$ 6,343

$ 16,716

$ 14,933

$ 29,079
Adjustments to reconcile net income to cash provided by operating activities









Depreciation

4,035


4,032


3,876


8,067


7,847
Amortization of intangible assets

1,729


1,786


1,518


3,515


3,374
Loss on disposal of property and equipment

-


-


-


-


159
Stock-based compensation expense

3,750


4,391


4,175


8,141


8,090
Amortization of premium on marketable securities

265


286


421


551


815
Deferred income taxes

9


77


(3,729 )

86


135
Decrease in accounts receivable allowances

(80 )

(5 )

-


(85 )

(15 )
Excess tax benefit from employee stock plans

-


-


(213 )

-


(213 )
Tax benefit (deficiency) associated with employee stock plans

-


(189 )

364


(189 )

364
Change in operating assets and liabilities:









Accounts receivable

(500 )

(550 )

(22 )

(1,050 )

(4,039 )
Inventories

779


424


(3,294 )

1,203


(8,946 )
Prepaid expenses and other assets

2,077


(227 )

3,475


1,850


5,300
Accounts payable

5,954


349


782


6,303


1,870
Taxes payable and other accrued liabilities

(751 )

(1,076 )

881


(1,827 )

(4,743 )
Deferred income on sales to distributors
  (796 )
  2,031  
  1,285  
  1,235  
  3,401  
Net cash provided by operating activities
  25,061  
  17,672  
  26,235  
  42,733  
  42,478  










 
CASH FLOWS FROM INVESTING ACTIVITIES:









Purchases of property and equipment

(1,822 )

(3,322 )

(5,420 )

(5,144 )

(9,885 )
Acquisition, net of cash acquired

(184 )

(15,365 )

-


(15,549 )

-
Purchases of marketable securities

(9,993 )

-


-


(9,993 )

(24,751 )
Proceeds from sales and maturities of marketable securities
  2,250  
  26,785  
  -  
  29,035  
  -  
Net cash provided by (used in) investing activities
  (9,749 )
  8,098  
  (5,420 )
  (1,651 )
  (34,636 )










 
CASH FLOWS FROM FINANCING ACTIVITIES









Net proceeds from issuance of common stock

856


3,519


2,822


4,375


9,867
Repurchase of common stock

(22,335 )

(841 )

(25,731 )

(23,176 )

(25,731 )
Payments of dividends to stockholders

(3,529 )

(3,519 )

(3,026 )

(7,048 )

(6,059 )
Excess tax benefit from employee stock plans
  -  
  -  
  213  
  -  
  213  
Net cash used in financing activities
  (25,008 )
  (841 )
  (25,722 )
  (25,849 )
  (21,710 )










 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(9,696 )

24,929


(4,907 )

15,233


(13,868 )










 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
  85,637  
  60,708  
  83,967  
  60,708  
  92,928  










 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$ 75,941  
$ 85,637  
$ 79,060  
$ 75,941  
$ 79,060  

Source: Power Integrations, Inc.

Power Integrations, Inc.

Joe Shiffler, 408-414-8528

joe@power.com

NASDAQ: POWI $119.08 -1.23
-1.02% Volume: 129,556 August 7, 2020

Contact Us

Joe Shiffler
Director, Investor Relations & Corporate Communications
(408) 414-8528
joe@power.com

Literature Requests
ir@power.com

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

Transfer Agent:
Computershare
P.O. Box 30170
College Station, TX 77842
Phone: (781) 575-2879




Subscribe to Investor Alerts

Email Address *
Mailing Lists *



 
Enter the code shown above.