Power Integrations Reports First-Quarter Financial Results

April 25, 2019

GAAP earnings were $0.25 per diluted share; non-GAAP earnings were $0.41 per diluted share; revenues were $89.2 million

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended March 31, 2019. Net revenues for the first quarter were $89.2 million, down four percent from the prior quarter and down 13 percent from the first quarter of 2018. Net income was $7.2 million or $0.25 per diluted share compared to $0.77 per share in the prior quarter and $0.46 in the first quarter of 2018. (The prior quarter’s results included a tax benefit from the revision of prior estimates of the transition tax from the 2017 U.S. tax legislation.) Cash flow from operations was $1.1 million for the first quarter.

In addition to its GAAP results, the company provided certain non-GAAP measures that exclude stock-based compensation, amortization of acquisition-related intangible assets, the tax effects of these items, and the above-mentioned tax benefit. Non-GAAP net income for the first quarter of 2019 was $12.1 million or $0.41 per diluted share, compared with $0.54 per diluted share in the prior quarter and $0.67 per diluted share in the first quarter of 2018.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “As expected, our first-quarter results reflect the slowdown being felt across the industry. However, we expect strong sequential growth in the second quarter driven largely by increased demand from fast-charging applications in the smartphone market. With the arrival of USB PD technology, we expect adoption of faster chargers to accelerate as OEMs look for new ways to differentiate their products.”

Additional Highlights

  • Power Integrations repurchased approximately 121,000 shares of its common stock during the first quarter, utilizing $7.3 million. At quarter end, $43.9 million remained available in the company’s repurchase authorization.
  • The company paid a dividend of $0.17 per share on March 29, 2019. A dividend of $0.17 per share will be paid on June 28, 2019 to stockholders of record as of May 31.

Financial Outlook

The company issued the following forecast for the second quarter of 2019:

  • Revenues are expected to be $100 million plus or minus $3 million.
  • GAAP gross margin is expected to be between 50.5 percent and 51 percent. Non-GAAP gross margin is expected to be between 51.5 percent and 52 percent. (The difference between the expected GAAP and non-GAAP gross margins is composed of approximately 0.7 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 $42.5 million and $43 million; non-GAAP operating expenses are expected to be between $36 million and $36.5 million. (Non-GAAP expenses are expected to exclude approximately $6.1 million of stock-based compensation and $0.4 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, the tax effects of these items, and tax benefits associated with the 2017 U.S. tax legislation. 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 above statements regarding the company’s forecast for its second-quarter financial performance and expectations for a sequential recovery in the second quarter driven largely by increased demand from fast-charging applications in the smartphone market 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, including changing tariffs and uncertainty regarding 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; 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 13, 2019. 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 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

March 31, 2019

December 31, 2018

March 31, 2018

NET REVENUES $ 89,188 $ 93,307 $ 103,081
 
COST OF REVENUES   43,714     45,302     49,537  
 
GROSS PROFIT   45,474     48,005     53,544  
 
OPERATING EXPENSES:
Research and development 17,946 17,965 17,481
Sales and marketing 12,590 12,746 12,574
General and administrative 8,390 8,796 9,014
Amortization of acquisition-related intangible assets   427     455     514  
Total operating expenses   39,353     39,962     39,583  
 
INCOME FROM OPERATIONS 6,121 8,043 13,961
 
Other income, net   1,152     1,297     836  
 
INCOME BEFORE INCOME TAXES 7,273 9,340 14,797
 
PROVISION (BENEFIT) FOR INCOME TAXES   40     (13,396 )   597  
 
NET INCOME $ 7,233   $ 22,736   $ 14,200  
 
EARNINGS PER SHARE:
Basic $ 0.25   $ 0.78   $ 0.48  
Diluted $ 0.25   $ 0.77   $ 0.46  
 
SHARES USED IN PER-SHARE CALCULATION:
Basic 28,951 29,164 29,799
Diluted 29,446 29,651 30,552
 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues $ 271 $ 313 $ 249
Research and development 1,632 1,944 1,839
Sales and marketing 1,061 1,222 1,276
General and administrative   1,443     1,963     2,261  
Total stock-based compensation expense $ 4,407   $ 5,442   $ 5,625  
 
Cost of revenues includes:
Amortization of acquisition-related intangible assets $ 794   $ 813   $ 813  
 
General & administrative expenses include:
Patent-litigation expenses $ 2,317   $ 2,304   $ 1,897  
 
 
REVENUE MIX BY END MARKET
Communications 18 % 20 % 19 %
Computer 5 % 6 % 5 %
Consumer 39 % 34 % 40 %
Industrial 38 % 40 % 36 %
 

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

March 31, 2019

December 31, 2018

March 31, 2018

RECONCILIATION OF GROSS PROFIT
GAAP gross profit $ 45,474 $ 48,005 $ 53,544
GAAP gross margin 51.0 % 51.4 % 51.9 %
 
Stock-based compensation included in cost of revenues 271 313 249
Amortization of acquisition-related intangible assets   794     813     813  
 
Non-GAAP gross profit $ 46,539   $ 49,131   $ 54,606  
Non-GAAP gross margin 52.2 % 52.7 % 53.0 %
 
 
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses $ 39,353 $ 39,962 $ 39,583
 
Less: Stock-based compensation expense included in operating expenses
Research and development 1,632 1,944 1,839
Sales and marketing 1,061 1,222 1,276
General and administrative   1,443     1,963     2,261  
Total   4,136     5,129     5,376  
 
Amortization of acquisition-related intangible assets   427     455     514  
 
Non-GAAP operating expenses $ 34,790   $ 34,378   $ 33,693  
 
 
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations $ 6,121 $ 8,043 $ 13,961
GAAP operating margin 6.9 % 8.6 % 13.5 %
 
Add: Total stock-based compensation 4,407 5,442 5,625
Amortization of acquisition-related intangible assets   1,221     1,268     1,327  
 
Non-GAAP income from operations $ 11,749   $ 14,753   $ 20,913  
Non-GAAP operating margin 13.2 % 15.8 % 20.3 %
 
 
RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES
GAAP provision (benefit) for income taxes $ 40 $ (13,396 ) $ 597
GAAP effective tax rate 0.5 % -143.4 % 4.0 %
 
Impact of U.S. tax legislation - (9,687 ) -
Tax effect of adjustments to GAAP results   (799 )   (3,846 )   (789 )
 
Non-GAAP provision for income taxes $ 839   $ 137   $ 1,386  
Non-GAAP effective tax rate 6.5 % 0.9 % 6.4 %
 
 
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income $ 7,233 $ 22,736 $ 14,200
 
Adjustments to GAAP net income
Stock-based compensation 4,407 5,442 5,625
Amortization of acquisition-related intangible assets 1,221 1,268 1,327
Impact of U.S. tax legislation - (9,687 ) -
Tax effect of items excluded from non-GAAP results   (799 )   (3,846 )   (789 )
 
Non-GAAP net income $ 12,062   $ 15,913   $ 20,363  
 

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

  29,446     29,651     30,552  
 
Non-GAAP net income per share (diluted) $ 0.41   $ 0.54   $ 0.67  
 
GAAP net income per share $ 0.25   $ 0.77   $ 0.46  
 

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

March 31, 2019

December 31, 2018

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 125,795 $ 134,137
Short-term marketable securities 92,901 94,451
Accounts receivable, net 20,545 11,072
Inventories 85,080 80,857
Prepaid expenses and other current assets   16,798     11,915  
Total current assets   341,119     332,432  
 
PROPERTY AND EQUIPMENT, net 113,713 114,117
INTANGIBLE ASSETS, net 20,073 21,152
GOODWILL 91,849 91,849
DEFERRED TAX ASSETS 5,733 6,906
OTHER ASSETS   28,018     22,241  
Total assets $ 600,505   $ 588,697  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 33,432 $ 31,552
Accrued payroll and related expenses 11,512 12,131
Taxes payable 706 933
Other accrued liabilities   5,271     3,750  
Total current liabilities   50,921     48,366  
 
LONG-TERM LIABILITIES:
Income taxes payable 8,789 8,652
Deferred tax liabilities 204 216
Other liabilities   9,290     4,391  
Total liabilities   69,204     61,625  
 
STOCKHOLDERS' EQUITY:
Common stock 28 28
Additional paid-in capital 127,769 126,164
Accumulated other comprehensive loss (1,361 ) (1,689 )
Retained earnings   404,865     402,569  
Total stockholders' equity   531,301     527,072  
Total liabilities and stockholders' equity $ 600,505   $ 588,697  
 

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

March 31, 2019

December 31, 2018

March 31, 2018

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,233 $ 22,736 $ 14,200
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 4,610 4,549 4,931
Amortization of intangible assets 1,255 1,300 1,348
Loss on disposal of property and equipment 96 98 38
Stock-based compensation expense 4,407 5,442 5,625
Amortization of premium (accretion of discount) on marketable securities (110 ) (115 ) 262
Deferred income taxes 1,161 (3,070 ) (140 )
Increase (decrease) in accounts receivable allowances (180 ) (198 ) 5
Change in operating assets and liabilities:
Accounts receivable (9,293 ) 2,868 (934 )
Inventories (4,223 ) (6,656 ) (6,121 )
Prepaid expenses and other assets (4,229 ) 1,226 (3,141 )
Accounts payable 1,220 (1,311 ) 233
Taxes payable and other accrued liabilities   (871 )   (8,540 )   (577 )
Net cash provided by operating activities   1,076     18,329     15,729  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,459 ) (5,557 ) (6,491 )
Acquisition of technology licenses (214 ) - (500 )
Purchases of marketable securities (4,793 ) (4,612 ) -
Proceeds from sales and maturities of marketable securities   6,787     10,050     52,366  
Net cash provided by (used in) investing activities   (1,679 )   (119 )   45,375  
 
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 4,500 803 4,657
Repurchase of common stock (7,302 ) (28,776 ) (33,314 )
Payments of dividends to stockholders (4,937 ) (4,651 ) (4,775 )
Proceeds from draw on line of credit - - 8,000
Payments on line of credit   -     -     (8,000 )
Net cash used in financing activities   (7,739 )   (32,624 )   (33,432 )
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,342 ) (14,414 ) 27,672
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   134,137     148,551     93,655  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 125,795   $ 134,137   $ 121,327  

Joe Shiffler
Power Integrations, Inc.
(408) 414-8528
joe@power.com

Source: Power Integrations, Inc.

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NASDAQ: POWI $82.37 +2.73
+3.43% Volume: 278,033 July 18, 2019

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

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

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