Power Integrations Reports Third-Quarter Financial Results

October 27, 2016

Quarterly revenues surpassed $100 million for the first time, growing 17 percent year-over-year to $103.8 million

GAAP earnings were $0.48 per diluted share; non-GAAP earnings were $0.72 per diluted share; cash flow from operations was $26.3 million

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq:POWI) today announced financial results for the quarter ended September 30, 2016. Net revenues for the third quarter were $103.8 million, an increase of seven percent from the prior quarter, and up 17 percent compared to the third quarter of 2015. Net income was $14.2 million or $0.48 per diluted share, compared to $0.38 per diluted share in the prior quarter and $0.39 per diluted share in the third quarter of 2015. Cash flow from operations was $26.3 million.

In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses, amortization of intangible assets, other acquisition-related expenses, and the tax effects of these items. Non-GAAP net income for the third quarter was $21.2 million or $0.72 per diluted share, compared with $0.60 per diluted share in the prior quarter and $0.55 per diluted share in the third quarter of 2015.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “Our quarterly revenues grew 17 percent year-over-year, surpassing $100 million for the first time. We believe we are on track for double-digit revenue growth in 2016, and we expect to carry strong momentum into 2017 on the strength of the InnoSwitch™ product cycle, new products for the high-power and lighting markets, and a robust product pipeline that will further expand our addressable market in the years ahead.”

Additional Highlights

  • Power Integrations paid a dividend of $0.13 per share on September 30, 2016. A dividend of $0.13 per share is scheduled to be paid on December 30, 2016, to stockholders of record as of November 30, 2016.
  • The company had $226.6 million in cash and short-term marketable securities at quarter-end, an increase of $24.3 million during the quarter.
  • Power Integrations was issued 15 U.S. patents during the third quarter.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2016:

  • Revenues are expected to be in a range of $101 million plus or minus $3 million.
  • GAAP gross margin is expected to be approximately 48.8 percent; non-GAAP gross margin is expected to be approximately 50 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 $37 million and $38 million; non-GAAP operating expenses are expected to be between $31 million and $32 million. (Non-GAAP operating expenses exclude approximately $5.4 million of stock-based compensation expenses and $0.6 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. 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, amortization of in-place lease intangible assets, and the tax effects of these items. 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 fourth-quarter financial performance, the company’s belief that it is on track for double-digit revenue growth in 2016, and that it expects to carry strong momentum into 2017 on the strength of the InnoSwitch™ product cycle, new products for the high-power and lighting markets, and a robust product pipeline that will further expand its addressable market in the years ahead 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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC) on February 11, 2016. 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 Nine Months Ended
September 30, 2016 June 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
NET REVENUES $ 103,790 $ 97,169 $ 88,878 $ 286,285 $ 256,700
 
COST OF REVENUES   52,597     49,532     44,717     144,508     126,229  
 
GROSS PROFIT   51,193     47,637     44,161     141,777     130,471  
 
OPERATING EXPENSES:
Research and development 15,906 15,859 13,888 46,544 43,144
Sales and marketing 11,447 11,407 10,463 33,594 33,337
General and administrative 8,789 8,133 7,361 24,772 22,824
Amortization of acquisition-related intangible assets 582 611 666 1,859 2,109
Acquisition expenses, severance and transition costs   -     -     -     -     1,113  
Total operating expenses   36,724     36,010     32,378     106,769     102,527  
 
INCOME FROM OPERATIONS 14,469 11,627 11,783 35,008 27,944
 
Other income, net   282     236     428     779     219  
 
INCOME BEFORE INCOME TAXES 14,751 11,863 12,211 35,787 28,163
 
PROVISION FOR INCOME TAXES   586     598     698     1,514     1,717  
 
NET INCOME $ 14,165   $ 11,265   $ 11,513   $ 34,273   $ 26,446  
 
EARNINGS PER SHARE:
Basic $ 0.49   $ 0.39   $ 0.40   $ 1.19   $ 0.91  
Diluted $ 0.48   $ 0.38   $ 0.39   $ 1.16   $ 0.89  
 
SHARES USED IN PER-SHARE CALCULATION:
Basic 28,972 28,850 28,855 28,834 29,175
Diluted 29,625 29,422 29,298 29,480 29,856
 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues $ 348 $ 293 $ 219 $ 731 $ 725
Research and development 1,934 1,940 1,277 5,343 3,974
Sales and marketing 1,303 899 877 3,229 2,767
General and administrative   2,204     1,880     988     5,914     4,036  
Total stock-based compensation expense $ 5,789   $ 5,012   $ 3,361   $ 15,217   $ 11,502  
 
Cost of revenues includes:
Amortization of write-up of acquired inventory $ -   $ -   $ -   $ -   $ 309  
Amortization of acquisition-related intangible assets $ 939   $ 946   $ 961   $ 2,846   $ 2,883  
 
General & administrative expenses include:
Patent-litigation expenses $ 1,894   $ 1,658   $ 1,500   $ 4,711   $ 4,458  
 
Other income, net includes:
Amortization of in-place lease intangible assets $ 90   $ 90   $ 30   $ 270   $ 30  
 
 
REVENUE MIX BY END MARKET
Communications 28 % 27 % 26 % 26 % 23 %
Computer 5 % 6 % 7 % 6 % 7 %
Consumer 37 % 35 % 36 % 37 % 37 %
Industrial 30 % 32 % 31 % 31 % 33 %
 

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, 2016 June 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
RECONCILIATION OF GROSS PROFIT
GAAP gross profit $ 51,193 $ 47,637 $ 44,161 $ 141,777 $ 130,471
GAAP gross margin 49.3 % 49.0 % 49.7 % 49.5 % 50.8 %
 
Stock-based compensation included in cost of revenues 348 293 219 731 725
Amortization of write-up of acquired inventory - - - - 309
Amortization of acquisition-related intangible assets   939     946     961     2,846     2,883  
 
Non-GAAP gross profit $ 52,480   $ 48,876   $ 45,341   $ 145,354   $ 134,388  
Non-GAAP gross margin 50.6 % 50.3 % 51.0 % 50.8 % 52.4 %
 
 
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses $ 36,724 $ 36,010 $ 32,378 $ 106,769 $ 102,527
 

Less: Stock-based compensation expense included in operating expenses

Research and development 1,934 1,940 1,277 5,343 3,974
Sales and marketing 1,303 899 877 3,229 2,767
General and administrative   2,204     1,880     988     5,914     4,036  
Total   5,441     4,719     3,142     14,486     10,777  
 
Amortization of acquisition-related intangible assets   582     611     666     1,859     2,109  
 
Acquisition expenses, severance and transition costs   -     -     -     -     1,113  
 
Non-GAAP operating expenses $ 30,701   $ 30,680   $ 28,570   $ 90,424   $ 88,528  
 
 
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations $ 14,469 $ 11,627 $ 11,783 $ 35,008 $ 27,944
GAAP operating margin 13.9 % 12.0 % 13.3 % 12.2 % 10.9 %
 

Add: Total stock-based compensation

5,789 5,012 3,361 15,217 11,502
Amortization of write-up of acquired inventory - - - - 309
Amortization of acquisition-related intangible assets 1,521 1,557 1,627 4,705 4,992
Acquisition expenses, severance and transition costs   -     -     -     -     1,113  
 
Non-GAAP income from operations $ 21,779   $ 18,196   $ 16,771   $ 54,930   $ 45,860  
Non-GAAP operating margin 21.0 % 18.7 % 18.9 % 19.2 % 17.9 %
 
 
RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision for income taxes $ 586 $ 598 $ 698 $ 1,514 $ 1,717
GAAP effective tax rate 4.0 % 5.0 % 5.7 % 4.2 % 6.1 %
 
Tax effect of adjustments to GAAP results   (328 )   (225 )   (310 )   (854 )   (1,028 )
 
Non-GAAP provision for income taxes $ 914   $ 823   $ 1,008   $ 2,368   $ 2,745  
Non-GAAP effective tax rate 4.1 % 4.4 % 5.9 % 4.2 % 6.0 %
 
 
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income $ 14,165 $ 11,265 $ 11,513 $ 34,273 $ 26,446
 
Adjustments to GAAP net income
Stock-based compensation 5,789 5,012 3,361 15,217 11,502
Amortization of write-up of acquired inventory - - - - 309
Amortization of acquisition-related intangible assets 1,521 1,557 1,627 4,705 4,992
Acquisition expenses, severance and transition costs - - - - 1,113
Amortization of in-place lease intangible assets 90 90 30 270 30
Tax effect of items excluded from non-GAAP results   (328 )   (225 )   (310 )   (854 )   (1,028 )
 

Non-GAAP net income

$ 21,237   $ 17,699   $ 16,221   $ 53,611   $ 43,364  
 

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

  29,625     29,422     29,298     29,480     29,856  
 
Non-GAAP net income per share (diluted) $ 0.72   $ 0.60   $ 0.55   $ 1.82   $ 1.45  
 
GAAP income per share $ 0.48   $ 0.38   $ 0.39   $ 1.16   $ 0.89  
 

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
             
 
September 30, 2016 June 30, 2016 December 31, 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 95,890 $ 105,343 $ 90,092
Short-term marketable securities 130,673 96,891 83,769
Accounts receivable 14,679 14,010 7,818
Inventories 49,941 46,749 51,934
Prepaid expenses and other current assets   7,372     6,478     6,790  
Total current assets   298,555     269,471     240,403  
 
PROPERTY AND EQUIPMENT, net 94,433 95,746 99,381
INTANGIBLE ASSETS, net 33,114 34,726 38,165
GOODWILL 91,849 91,849 91,849
DEFERRED TAX ASSETS 11,064 11,342 11,843
OTHER ASSETS   6,273     6,372     5,896  
Total assets $ 535,288   $ 509,506   $ 487,537  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 30,117 $ 24,367 $ 21,660
Accrued payroll and related expenses 9,011 10,463 9,327
Taxes payable 251 247 3,620
Deferred income on sales to distributors 16,334 16,888 15,101
Other accrued liabilities   3,427     2,548     2,285  
Total current liabilities   59,140     54,513     51,993  
 
LONG-TERM LIABILITIES:
Income taxes payable 2,666 2,666 2,511
Deferred tax liabilities 1,002 1,004 1,291
Other liabilities   3,422     3,315     3,123  
Total liabilities   66,230     61,498     58,918  
 
STOCKHOLDERS' EQUITY:
Common stock 28 28 28
Additional paid-in capital 162,820 151,806 145,366
Accumulated other comprehensive loss (1,885 ) (1,527 ) (1,851 )
Retained earnings   308,095     297,701     285,076  
Total stockholders' equity   469,058     448,008     428,619  
Total liabilities and stockholders' equity $ 535,288   $ 509,506   $ 487,537  
 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                       
Three Months Ended Nine Months Ended
September 30, 2016   June 30, 2016   September 30, 2015   September 30, 2016 September 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,165 $ 11,265 $ 11,513 $ 34,273 $ 26,446
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 4,149 4,206 4,168 12,670 12,235
Amortization of intangible assets 1,612 1,647 1,732 5,051 5,247
Loss on disposal of property and equipment 68 70 270 216 270
Stock-based compensation expense 5,789 5,012 3,361 15,217 11,502
Amortization of premium on marketable securities 55 169 258 484 809
Deferred income taxes 276 300 66 490 152
Increase (decrease) in accounts receivable allowances 110 104 213 303 128
Tax shortfall associated with employee stock plans - - - - (189 )
Change in operating assets and liabilities:
Accounts receivable (779 ) (2,820 ) 1,938 (7,164 ) 888
Inventories (3,192 ) (1,084 ) 8,792 1,993 9,995
Prepaid expenses and other assets (764 ) 229 2,428 (1,403 ) 4,278
Accounts payable 5,998 4,879 (8,338 ) 9,037 (2,035 )
Taxes payable and other accrued liabilities (675 ) (153 ) (1,752 ) (2,241 ) (3,579 )
Deferred income on sales to distributors   (554 )   (214 )   6     1,233     1,241  
Net cash provided by operating activities   26,258     23,610     24,655     70,159     67,388  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,184 ) (2,795 ) (2,475 ) (8,074 ) (7,619 )
Payment for purchase of building - - (10,389 ) - (10,389 )
Payment for acquisition, net of cash acquired - - - - (15,549 )
Purchases of marketable securities (56,187 ) (20,984 ) (4,940 ) (122,398 ) (14,933 )
Proceeds from sales and maturities of marketable securities   22,207     14,390     8,424     75,128     37,459  
Net cash used in investing activities   (37,164 )   (9,389 )   (9,380 )   (55,344 )   (11,031 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 5,224 491 2,527 8,672 6,902
Repurchase of common stock - (350 ) (30,555 ) (6,435 ) (53,731 )
Payments of dividends to stockholders   (3,771 )   (3,754 )   (3,453 )   (11,254 )   (10,501 )
Net cash provided by (used in) financing activities   1,453     (3,613 )   (31,481 )   (9,017 )   (57,330 )
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9,453 ) 10,608 (16,206 ) 5,798 (973 )
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   105,343     94,735     75,941     90,092     60,708  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 95,890   $ 105,343   $ 59,735   $ 95,890   $ 59,735  
 

Source: Power Integrations

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




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