Power Integrations Reports Second-Quarter Financial Results

July 25, 2019

Revenues increased 15 percent sequentially to $102.9 million

GAAP earnings were $0.37 per diluted share; non-GAAP earnings were $0.56 per diluted share

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2019. Net revenues for the second quarter were $102.9 million, up 15 percent from the prior quarter and down six percent from the second quarter of 2018. Net income was $10.8 million or $0.37 per diluted share compared to $0.25 per share in the prior quarter and $0.51 in the second quarter of 2018. Cash flow from operations was $19.4 million for the second 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 and the tax effects of these items. Non-GAAP net income for the second quarter of 2019 was $16.7 million or $0.56 per diluted share, compared with $0.41 per diluted share in the prior quarter and $0.74 per diluted share in the second quarter of 2018.

Power Integrations paid a dividend of $0.17 per share on June 28, 2019. A dividend of $0.17 per share will be paid on September 30, 2019 to stockholders of record as of August 30, 2019.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “We saw strong sequential revenue growth in the second quarter driven by new fast-charging designs for smartphones as well as growth in appliances and high-power gate drivers for renewable-energy and power-grid applications. While trade issues continue to be a source of uncertainty, we are encouraged by recent trends in bookings and distribution sell-through, and we expect a return to year-over-year growth in the third quarter.”

Financial Outlook

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

  • Revenues are expected to be $114 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 $36.5 million and $37 million. (Non-GAAP expenses are expected to exclude approximately $5.6 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 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 above statements regarding the company’s forecast for its third-quarter financial performance and expectations for a return to year-over-year growth in the third quarter 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

 

Six Months Ended

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

June 30, 2019

 

June 30, 2018

NET REVENUES

$

102,865

 

$

89,188

 

$

109,482

 

$

192,053

 

$

212,563

 

 
COST OF REVENUES

 

51,293

 

 

43,714

 

 

53,248

 

 

95,007

 

 

102,785

 

 
GROSS PROFIT

 

51,572

 

 

45,474

 

 

56,234

 

 

97,046

 

 

109,778

 

 
OPERATING EXPENSES:
Research and development

 

19,269

 

 

17,946

 

 

17,898

 

 

37,215

 

 

35,379

 

Sales and marketing

 

12,815

 

 

12,590

 

 

13,022

 

 

25,405

 

 

25,596

 

General and administrative

 

9,334

 

 

8,390

 

 

9,220

 

 

17,724

 

 

18,234

 

Amortization of acquisition-related intangible assets

 

394

 

 

427

 

 

475

 

 

821

 

 

989

 

Total operating expenses

 

41,812

 

 

39,353

 

 

40,615

 

 

81,165

 

 

80,198

 

 
INCOME FROM OPERATIONS

 

9,760

 

 

6,121

 

 

15,619

 

 

15,881

 

 

29,580

 

 
OTHER INCOME

 

1,310

 

 

1,152

 

 

885

 

 

2,462

 

 

1,721

 

 
INCOME BEFORE INCOME TAXES

 

11,070

 

 

7,273

 

 

16,504

 

 

18,343

 

 

31,301

 

 
PROVISION FOR INCOME TAXES

 

225

 

 

40

 

 

1,123

 

 

265

 

 

1,720

 

 
NET INCOME

$

10,845

 

$

7,233

 

$

15,381

 

$

18,078

 

$

29,581

 

 
EARNINGS PER SHARE:
Basic

$

0.37

 

$

0.25

 

$

0.52

 

$

0.62

 

$

1.00

 

Diluted

$

0.37

 

$

0.25

 

$

0.51

 

$

0.61

 

$

0.97

 

 
SHARES USED IN PER-SHARE CALCULATION:
Basic

 

29,297

 

 

28,951

 

 

29,505

 

 

29,125

 

 

29,651

 

Diluted

 

29,702

 

 

29,446

 

 

30,183

 

 

29,597

 

 

30,387

 

 
 
SUPPLEMENTAL INFORMATION:
 
Stock-based compensation expenses included in:
Cost of revenues

$

273

 

$

271

 

$

292

 

$

544

 

$

541

 

Research and development

 

2,144

 

 

1,632

 

 

2,271

 

 

3,776

 

 

4,110

 

Sales and marketing

 

1,141

 

 

1,061

 

 

1,126

 

 

2,202

 

 

2,402

 

General and administrative

 

1,938

 

 

1,443

 

 

2,426

 

 

3,381

 

 

4,687

 

Total stock-based compensation expense

$

5,496

 

$

4,407

 

$

6,115

 

$

9,903

 

$

11,740

 

 
Cost of revenues includes:
Amortization of acquisition-related intangible assets

$

794

 

$

794

 

$

813

 

$

1,588

 

$

1,626

 

 
General & administrative expenses include:
Patent-litigation expenses

$

2,282

 

$

2,317

 

$

2,019

 

$

4,599

 

$

3,916

 

 
 
REVENUE MIX BY END MARKET
Communications

 

24

%

 

18

%

 

20

%

 

21

%

 

20

%

Computer

 

6

%

 

5

%

 

5

%

 

6

%

 

5

%

Consumer

 

37

%

 

39

%

 

40

%

 

38

%

 

40

%

Industrial

 

33

%

 

38

%

 

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, 2019

 

March 31, 2019

 

June 30, 2018

 

June 30, 2019

 

June 30, 2018

RECONCILIATION OF GROSS PROFIT
GAAP gross profit

$

51,572

 

$

45,474

 

$

56,234

 

$

97,046

 

$

109,778

 

GAAP gross margin

 

50.1

%

 

51.0

%

 

51.4

%

 

50.5

%

 

51.6

%

 
Stock-based compensation included in cost of revenues

 

273

 

 

271

 

 

292

 

 

544

 

 

541

 

Amortization of acquisition-related intangible assets

 

794

 

 

794

 

 

813

 

 

1,588

 

 

1,626

 

 
Non-GAAP gross profit

$

52,639

 

$

46,539

 

$

57,339

 

$

99,178

 

$

111,945

 

Non-GAAP gross margin

 

51.2

%

 

52.2

%

 

52.4

%

 

51.6

%

 

52.7

%

 
 
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses

$

41,812

 

$

39,353

 

$

40,615

 

$

81,165

 

$

80,198

 

 
Less: Stock-based compensation expense included in operating expenses
Research and development

 

2,144

 

 

1,632

 

 

2,271

 

 

3,776

 

 

4,110

 

Sales and marketing

 

1,141

 

 

1,061

 

 

1,126

 

 

2,202

 

 

2,402

 

General and administrative

 

1,938

 

 

1,443

 

 

2,426

 

 

3,381

 

 

4,687

 

Total

 

5,223

 

 

4,136

 

 

5,823

 

 

9,359

 

 

11,199

 

 
Amortization of acquisition-related intangible assets

 

394

 

 

427

 

 

475

 

 

821

 

 

989

 

 
Non-GAAP operating expenses

$

36,195

 

$

34,790

 

$

34,317

 

$

70,985

 

$

68,010

 

 
 
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations

$

9,760

 

$

6,121

 

$

15,619

 

$

15,881

 

$

29,580

 

GAAP operating margin

 

9.5

%

 

6.9

%

 

14.3

%

 

8.3

%

 

13.9

%

 
Add: Total stock-based compensation

 

5,496

 

 

4,407

 

 

6,115

 

 

9,903

 

 

11,740

 

Amortization of acquisition-related intangible assets

 

1,188

 

 

1,221

 

 

1,288

 

 

2,409

 

 

2,615

 

 
Non-GAAP income from operations

$

16,444

 

$

11,749

 

$

23,022

 

$

28,193

 

$

43,935

 

Non-GAAP operating margin

 

16.0

%

 

13.2

%

 

21.0

%

 

14.7

%

 

20.7

%

 
 
RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES
GAAP provision for income taxes

$

225

 

$

40

 

$

1,123

 

$

265

 

$

1,720

 

GAAP effective tax rate

 

2.0

%

 

0.5

%

 

6.8

%

 

1.4

%

 

5.5

%

 
Tax effect of adjustments to GAAP results

 

(837

)

 

(799

)

 

(559

)

 

(1,636

)

 

(1,348

)

 
Non-GAAP provision for income taxes

$

1,062

 

$

839

 

$

1,682

 

$

1,901

 

$

3,068

 

Non-GAAP effective tax rate

 

6.0

%

 

6.5

%

 

7.0

%

 

6.2

%

 

6.7

%

 
 
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income

$

10,845

 

$

7,233

 

$

15,381

 

$

18,078

 

$

29,581

 

 
Adjustments to GAAP net income
Stock-based compensation

 

5,496

 

 

4,407

 

 

6,115

 

 

9,903

 

 

11,740

 

Amortization of acquisition-related intangible assets

 

1,188

 

 

1,221

 

 

1,288

 

 

2,409

 

 

2,615

 

Tax effect of items excluded from non-GAAP results

 

(837

)

 

(799

)

 

(559

)

 

(1,636

)

 

(1,348

)

 
Non-GAAP net income

$

16,692

 

$

12,062

 

$

22,225

 

$

28,754

 

$

42,588

 

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

 

29,702

 

 

29,446

 

 

30,183

 

 

29,597

 

 

30,387

 

 
Non-GAAP net income per share (diluted)

$

0.56

 

$

0.41

 

$

0.74

 

$

0.97

 

$

1.40

 

 
GAAP net income per share

$

0.37

 

$

0.25

 

$

0.51

 

$

0.61

 

$

0.97

 

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

June 30, 2019

March 31, 2019

December 31, 2018

ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

99,491

 

$

125,795

 

$

134,137

 

Short-term marketable securities

 

130,275

 

 

92,901

 

 

94,451

 

Accounts receivable, net

 

25,468

 

 

20,545

 

 

11,072

 

Inventories

 

89,197

 

 

85,080

 

 

80,857

 

Prepaid expenses and other current assets

 

15,571

 

 

16,798

 

 

11,915

 

Total current assets

 

360,002

 

 

341,119

 

 

332,432

 

 
PROPERTY AND EQUIPMENT, net

 

112,939

 

 

113,713

 

 

114,117

 

INTANGIBLE ASSETS, net

 

18,920

 

 

20,073

 

 

21,152

 

GOODWILL

 

91,849

 

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

5,184

 

 

5,733

 

 

6,906

 

OTHER ASSETS

 

31,495

 

 

28,018

 

 

22,241

 

Total assets

$

620,389

 

$

600,505

 

$

588,697

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

35,985

 

$

33,432

 

$

31,552

 

Accrued payroll and related expenses

 

12,825

 

 

11,512

 

 

12,131

 

Taxes payable

 

579

 

 

706

 

 

933

 

Other accrued liabilities

 

5,945

 

 

5,271

 

 

3,750

 

Total current liabilities

 

55,334

 

 

50,921

 

 

48,366

 

 
LONG-TERM LIABILITIES:
Income taxes payable

 

9,006

 

 

8,789

 

 

8,652

 

Deferred tax liabilities

 

153

 

 

204

 

 

216

 

Other liabilities

 

12,031

 

 

9,290

 

 

4,391

 

Total liabilities

 

76,524

 

 

69,204

 

 

61,625

 

 
STOCKHOLDERS' EQUITY:
Common stock

 

28

 

 

28

 

 

28

 

Additional paid-in capital

 

134,443

 

 

127,769

 

 

126,164

 

Accumulated other comprehensive loss

 

(1,336

)

 

(1,361

)

 

(1,689

)

Retained earnings

 

410,730

 

 

404,865

 

 

402,569

 

Total stockholders' equity

 

543,865

 

 

531,301

 

 

527,072

 

Total liabilities and stockholders' equity

$

620,389

 

$

600,505

 

$

588,697

 

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

Three Months Ended

 

Six Months Ended

June 30, 2019

 

March 31, 2019

 

June 30, 2018

 

June 30, 2019

 

June 30, 2018

CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income

$

10,845

 

 

$

7,233

 

 

$

15,381

 

 

$

18,078

 

 

$

29,581

 

Adjustments to reconcile net income to cash provided by operating activities        
Depreciation

 

4,821

 

 

 

4,610

 

 

 

4,760

 

 

 

9,431

 

 

 

9,691

 

Amortization of intangible assets

 

1,228

 

 

 

1,255

 

 

 

1,320

 

 

 

2,483

 

 

 

2,668

 

Loss on disposal of property and equipment

 

56

 

 

 

96

 

 

 

22

 

 

 

152

 

 

 

60

 

Stock-based compensation expense

 

5,496

 

 

 

4,407

 

 

 

6,115

 

 

 

9,903

 

 

 

11,740

 

Amortization of premium (accretion of discount) on marketable securities

 

(120

)

 

 

(110

)

 

 

114

 

 

 

(230

)

 

 

376

 

Deferred income taxes

 

498

 

 

 

1,161

 

 

 

(760

)

 

 

1,659

 

 

 

(900

)

Increase (decrease) in accounts receivable allowances

 

237

 

 

 

(180

)

 

 

12

 

 

 

57

 

 

 

17

 

Change in operating assets and liabilities:

 

       
Accounts receivable

 

(5,160

)

 

 

(9,293

)

 

 

10,872

 

 

 

(14,453

)

 

 

9,938

 

Inventories

 

(4,117

)

 

 

(4,223

)

 

 

(5,616

)

 

 

(8,340

)

 

 

(11,737

)

Prepaid expenses and other assets

 

615

 

 

 

(4,229

)

 

 

1,753

 

 

 

(3,614

)

 

 

(1,388

)

Accounts payable

 

2,933

 

 

 

1,220

 

 

 

(7,509

)

 

 

4,153

 

 

 

(7,276

)

Taxes payable and other accrued liabilities

 

2,088

 

 

 

(871

)

 

 

233

 

 

 

1,217

 

 

 

(344

)

Net cash provided by operating activities

 

19,420

 

 

 

1,076

 

 

 

26,697

 

 

 

20,496

 

 

 

42,426

 

         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment

 

(4,889

)

 

 

(3,459

)

 

 

(4,022

)

 

 

(8,348

)

 

 

(10,513

)

Acquisition of technology licenses

 

(37

)

 

 

(214

)

 

 

-

 

 

 

(251

)

 

 

(500

)

Purchases of marketable securities

 

(49,631

)

 

 

(4,793

)

 

 

-

 

 

 

(54,424

)

 

 

-

 

Proceeds from sales and maturities of marketable securities

 

12,635

 

 

 

6,787

 

 

 

37,987

 

 

 

19,422

 

 

 

90,353

 

Net cash provided by (used in) investing activities

 

(41,922

)

 

 

(1,679

)

 

 

33,965

 

 

 

(43,601

)

 

 

79,340

 

         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Net proceeds from issuance of common stock

 

1,178

 

 

 

4,500

 

 

 

978

 

 

 

5,678

 

 

 

5,635

 

Repurchase of common stock

 

-

 

 

 

(7,302

)

 

 

(30,075

)

 

 

(7,302

)

 

 

(63,389

)

Payments of dividends to stockholders

 

(4,980

)

 

 

(4,937

)

 

 

(4,705

)

 

 

(9,917

)

 

 

(9,480

)

Proceeds from draw on line of credit

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,000

 

Payments on line of credit

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,000

)

Net cash used in financing activities

 

(3,802

)

 

 

(7,739

)

 

 

(33,802

)

 

 

(11,541

)

 

 

(67,234

)

         
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(26,304

)

 

 

(8,342

)

 

 

26,860

 

 

 

(34,646

)

 

 

54,532

 

         
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

125,795

 

 

 

134,137

 

 

 

121,327

 

 

 

134,137

 

 

 

93,655

 

         
CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

99,491

 

 

$

125,795

 

 

$

148,187

 

 

$

99,491

 

 

$

148,187

 

 

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

Source: Power Integrations, Inc.

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NASDAQ: POWI $87.50 -0.87
-0.98% Volume: 111,388 August 20, 2019

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

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