Power Integrations Reports Third-Quarter Financial Results

October 24, 2019

GAAP earnings were $0.57 per diluted share; non-GAAP earnings were $0.78 per diluted share

Revenues increased four percent year-over-year to $114.2 million; quarterly dividend rises to $0.19 per share

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended September 30, 2019. Net revenues for the third quarter were $114.2 million, up 11 percent from the prior quarter and up four percent from the third quarter of 2018. Net income was $17.1 million or $0.57 per diluted share compared to $0.37 per share in the prior quarter and $0.59 in the third quarter of 2018. Cash flow from operations was $21.8 million for the third 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 third quarter of 2019 was $23.3 million or $0.78 per diluted share, compared with $0.56 per diluted share in the prior quarter and $0.77 per diluted share in the third quarter of 2018. A reconciliation of GAAP to non-GAAP financial results appears at the end of this press release.

Additional Highlights

  • The company announced a settlement of its patent disputes with ON Semiconductor, ending all litigation between the companies. Power Integrations has received a payment of $175M from ON; neither company granted any licenses to the other. The company expects to recognize a gain in its financial results for the fourth quarter of 2019.
  • Power Integrations paid a dividend of $0.17 per share on September 30, 2019. The company’s board of directors has increased the quarterly dividend to $0.19 per share starting in the fourth quarter of 2019; the next dividend of $0.19 will be paid on December 31, 2019 to stockholders of record as of November 29, 2019.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “We returned to year-over-year revenue growth in the third quarter driven by strength in our communications category, reflecting accelerated adoption of fast chargers for smartphones. Our InnoSwitch™ ICs, including our new higher-power devices with GaN switches, are winning in the market thanks to their industry-leading combination of efficiency and integration. Looking ahead, while trade issues and weaker macroeconomic conditions continue to weigh on demand, we expect strong year-over-year growth in the fourth quarter.”

Mr. Balakrishnan continued: “The settlement of our litigation with ON Semiconductor is a landmark win for our company, demonstrating the durability and the value of our intellectual property, as well as our determination to protect it from unlawful use by competitors.”

Financial Outlook

The company issued the following forecast (excluding the impact of the litigation settlement) for the fourth quarter of 2019:

  • Revenues are expected to be $114 million plus or minus $3 million.
  • GAAP gross margin is expected to be approximately 51.5 percent. Non-GAAP gross margin is expected to be approximately 52.5 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 million and $42.5 million; non-GAAP operating expenses are expected to be between $36 million and $36.5 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 fourth-quarter financial performance and an anticipated gain related to the litigation settlement 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, 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, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
NET REVENUES

$

114,159

 

$

102,865

 

$

110,085

 

$

306,212

 

$

322,648

 

 
COST OF REVENUES

 

56,028

 

 

51,293

 

 

53,080

 

 

151,035

 

 

155,865

 

 
GROSS PROFIT

 

58,131

 

 

51,572

 

 

57,005

 

 

155,177

 

 

166,783

 

 
OPERATING EXPENSES:
Research and development

 

17,957

 

 

19,269

 

 

17,236

 

 

55,172

 

 

52,615

 

Sales and marketing

 

13,074

 

 

12,815

 

 

12,823

 

 

38,479

 

 

38,419

 

General and administrative

 

9,224

 

 

9,334

 

 

8,466

 

 

26,948

 

 

26,700

 

Amortization of acquisition-related intangible assets

 

378

 

 

394

 

 

455

 

 

1,199

 

 

1,444

 

Total operating expenses

 

40,633

 

 

41,812

 

 

38,980

 

 

121,798

 

 

119,178

 

 
INCOME FROM OPERATIONS

 

17,498

 

 

9,760

 

 

18,025

 

 

33,379

 

 

47,605

 

 
OTHER INCOME

 

1,078

 

 

1,310

 

 

1,098

 

 

3,540

 

 

2,819

 

 
INCOME BEFORE INCOME TAXES

 

18,576

 

 

11,070

 

 

19,123

 

 

36,919

 

 

50,424

 

 
PROVISION FOR INCOME TAXES

 

1,477

 

 

225

 

 

1,456

 

 

1,742

 

 

3,176

 

 
NET INCOME

$

17,099

 

$

10,845

 

$

17,667

 

$

35,177

 

$

47,248

 

 
EARNINGS PER SHARE:
Basic

$

0.58

 

$

0.37

 

$

0.60

 

$

1.20

 

$

1.60

 

Diluted

$

0.57

 

$

0.37

 

$

0.59

 

$

1.18

 

$

1.56

 

 
SHARES USED IN PER-SHARE CALCULATION:
Basic

 

29,385

 

 

29,297

 

 

29,365

 

 

29,213

 

 

29,558

 

Diluted

 

29,866

 

 

29,702

 

 

29,998

 

 

29,709

 

 

30,281

 

 
 
SUPPLEMENTAL INFORMATION: Three Months Ended Nine Months Ended
September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
Stock-based compensation expenses included in:
Cost of revenues

$

280

 

$

273

 

$

243

 

$

824

 

$

784

 

Research and development

 

1,893

 

 

2,144

 

 

1,634

 

 

5,669

 

 

5,744

 

Sales and marketing

 

1,211

 

 

1,141

 

 

1,105

 

 

3,413

 

 

3,507

 

General and administrative

 

1,722

 

 

1,938

 

 

1,416

 

 

5,103

 

 

6,103

 

Total stock-based compensation expense

$

5,106

 

$

5,496

 

$

4,398

 

$

15,009

 

$

16,138

 

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

$

940

 

$

794

 

$

814

 

$

2,528

 

$

2,440

 

 
General & administrative expenses include:
Patent-litigation expenses

$

2,573

 

$

2,282

 

$

2,305

 

$

7,172

 

$

6,221

 

 
 

Three Months Ended

 

Nine Months Ended

REVENUE MIX BY END MARKET

September 30, 2019

 

June 30, 2019

 

September 30, 2018

 

September 30, 2019

 

September 30, 2018

Communications

 

29

%

 

24

%

 

22

%

 

24

%

 

21

%

Computer

 

5

%

 

6

%

 

6

%

 

5

%

 

5

%

Consumer

 

32

%

 

37

%

 

35

%

 

36

%

 

38

%

Industrial

 

34

%

 

33

%

 

37

%

 

35

%

 

36

%

 
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, 2019

June 30, 2019

September 30, 2018

September 30, 2019

September 30, 2018

RECONCILIATION OF GROSS PROFIT
GAAP gross profit

$

58,131

 

$

51,572

 

$

57,005

 

$

155,177

 

$

166,783

 

GAAP gross margin

 

50.9

%

 

50.1

%

 

51.8

%

 

50.7

%

 

51.7

%

 
Stock-based compensation included in cost of revenues

 

280

 

 

273

 

 

243

 

 

824

 

 

784

 

Amortization of acquisition-related intangible assets

 

940

 

 

794

 

 

814

 

 

2,528

 

 

2,440

 

 
Non-GAAP gross profit

$

59,351

 

$

52,639

 

$

58,062

 

$

158,529

 

$

170,007

 

Non-GAAP gross margin

 

52.0

%

 

51.2

%

 

52.7

%

 

51.8

%

 

52.7

%

 
 
Three Months Ended Nine Months Ended
RECONCILIATION OF OPERATING EXPENSES September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
GAAP operating expenses

$

40,633

 

$

41,812

 

$

38,980

 

$

121,798

 

$

119,178

 

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

 

1,893

 

 

2,144

 

 

1,634

 

 

5,669

 

 

5,744

 

Sales and marketing

 

1,211

 

 

1,141

 

 

1,105

 

 

3,413

 

 

3,507

 

General and administrative

 

1,722

 

 

1,938

 

 

1,416

 

 

5,103

 

 

6,103

 

Total

 

4,826

 

 

5,223

 

 

4,155

 

 

14,185

 

 

15,354

 

 
Amortization of acquisition-related intangible assets

 

378

 

 

394

 

 

455

 

 

1,199

 

 

1,444

 

 
Non-GAAP operating expenses

$

35,429

 

$

36,195

 

$

34,370

 

$

106,414

 

$

102,380

 

 
 
Three Months Ended Nine Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
GAAP income from operations

$

17,498

 

$

9,760

 

$

18,025

 

$

33,379

 

$

47,605

 

GAAP operating margin

 

15.3

%

 

9.5

%

 

16.4

%

 

10.9

%

 

14.8

%

 
Add: Total stock-based compensation

 

5,106

 

 

5,496

 

 

4,398

 

 

15,009

 

 

16,138

 

Amortization of acquisition-related intangible assets

 

1,318

 

 

1,188

 

 

1,269

 

 

3,727

 

 

3,884

 

 
Non-GAAP income from operations

$

23,922

 

$

16,444

 

$

23,692

 

$

52,115

 

$

67,627

 

Non-GAAP operating margin

 

21.0

%

 

16.0

%

 

21.5

%

 

17.0

%

 

21.0

%

 
 
Three Months Ended Nine Months Ended
RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
GAAP provision for income taxes

$

1,477

 

$

225

 

$

1,456

 

$

1,742

 

$

3,176

 

GAAP effective tax rate

 

8.0

%

 

2.0

%

 

7.6

%

 

4.7

%

 

6.3

%

 
Tax effect of adjustments to GAAP results

 

(266

)

 

(837

)

 

(167

)

 

(1,902

)

 

(1,515

)

 
Non-GAAP provision for income taxes

$

1,743

 

$

1,062

 

$

1,623

 

$

3,644

 

$

4,691

 

Non-GAAP effective tax rate

 

7.0

%

 

6.0

%

 

6.5

%

 

6.5

%

 

6.7

%

 
 

Three Months Ended

Nine Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)

September 30, 2019

June 30, 2019

September 30, 2018

September 30, 2019

September 30, 2018
GAAP net income

$

17,099

 

$

10,845

 

$

17,667

 

$

35,177

 

$

47,248

 

 
Adjustments to GAAP net income
Stock-based compensation

 

5,106

 

 

5,496

 

 

4,398

 

 

15,009

 

 

16,138

 

Amortization of acquisition-related intangible assets

 

1,318

 

 

1,188

 

 

1,269

 

 

3,727

 

 

3,884

 

Tax effect of items excluded from non-GAAP results

 

(266

)

 

(837

)

 

(167

)

 

(1,902

)

 

(1,515

)

 
Non-GAAP net income

$

23,257

 

$

16,692

 

$

23,167

 

$

52,011

 

$

65,755

 

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

 

29,866

 

 

29,702

 

 

29,998

 

 

29,709

 

 

30,281

 

 
Non-GAAP net income per share (diluted)

$

0.78

 

$

0.56

 

$

0.77

 

$

1.75

 

$

2.17

 

 
GAAP net income per share

$

0.57

 

$

0.37

 

$

0.59

 

$

1.18

 

$

1.56

 

 
POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
September 30, 2019 June 30, 2019 December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

80,162

 

$

99,491

 

$

134,137

 

Short-term marketable securities

 

164,649

 

 

130,275

 

 

94,451

 

Accounts receivable, net

 

25,819

 

 

25,468

 

 

11,072

 

Inventories

 

88,710

 

 

89,197

 

 

80,857

 

Prepaid expenses and other current assets

 

15,316

 

 

15,571

 

 

11,915

 

Total current assets

 

374,656

 

 

360,002

 

 

332,432

 

 
PROPERTY AND EQUIPMENT, net

 

114,930

 

 

112,939

 

 

114,117

 

INTANGIBLE ASSETS, net

 

18,238

 

 

18,920

 

 

21,152

 

GOODWILL

 

91,849

 

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

5,564

 

 

5,184

 

 

6,906

 

OTHER ASSETS

 

31,173

 

 

31,495

 

 

22,241

 

Total assets

$

636,410

 

$

620,389

 

$

588,697

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

30,542

 

$

35,985

 

$

31,552

 

Accrued payroll and related expenses

 

10,796

 

 

12,825

 

 

12,131

 

Taxes payable

 

597

 

 

579

 

 

933

 

Other accrued liabilities

 

7,717

 

 

5,945

 

 

3,750

 

Total current liabilities

 

49,652

 

 

55,334

 

 

48,366

 

 
LONG-TERM LIABILITIES:
Income taxes payable

 

9,309

 

 

9,006

 

 

8,652

 

Deferred tax liabilities

 

152

 

 

153

 

 

216

 

Other liabilities

 

11,969

 

 

12,031

 

 

4,391

 

Total liabilities

 

71,082

 

 

76,524

 

 

61,625

 

 
STOCKHOLDERS' EQUITY:
Common stock

 

28

 

 

28

 

 

28

 

Additional paid-in capital

 

143,554

 

 

134,443

 

 

126,164

 

Accumulated other comprehensive loss

 

(1,084

)

 

(1,336

)

 

(1,689

)

Retained earnings

 

422,830

 

 

410,730

 

 

402,569

 

Total stockholders' equity

 

565,328

 

 

543,865

 

 

527,072

 

Total liabilities and stockholders' equity

$

636,410

 

$

620,389

 

$

588,697

 

 
POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended Nine Months Ended
September 30, 2019 June 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

17,099

 

$

10,845

 

$

17,667

 

$

35,177

 

$

47,248

 

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

 

4,831

 

 

4,821

 

 

4,678

 

 

14,262

 

 

14,369

 

Amortization of intangible assets

 

1,357

 

 

1,228

 

 

1,299

 

 

3,840

 

 

3,967

 

Loss on disposal of property and equipment

 

62

 

 

56

 

 

395

 

 

214

 

 

455

 

Stock-based compensation expense

 

5,106

 

 

5,496

 

 

4,398

 

 

15,009

 

 

16,138

 

Amortization of premium (accretion of discount) on marketable securities

 

(66

)

 

(120

)

 

(34

)

 

(296

)

 

342

 

Deferred income taxes

 

(381

)

 

498

 

 

(495

)

 

1,278

 

 

(1,395

)

Increase (decrease) in accounts receivable allowances

 

-

 

 

237

 

 

153

 

 

57

 

 

170

 

Change in operating assets and liabilities:
Accounts receivable

 

(351

)

 

(5,160

)

 

(7,052

)

 

(14,804

)

 

2,886

 

Inventories

 

487

 

 

(4,117

)

 

(5,377

)

 

(7,853

)

 

(17,114

)

Prepaid expenses and other assets

 

580

 

 

615

 

 

(1,333

)

 

(3,034

)

 

(2,721

)

Accounts payable

 

(6,789

)

 

2,933

 

 

9,923

 

 

(2,636

)

 

2,647

 

Taxes payable and other accrued liabilities

 

(91

)

 

2,088

 

 

(1,013

)

 

1,126

 

 

(1,357

)

Net cash provided by operating activities

 

21,844

 

 

19,420

 

 

23,209

 

 

42,340

 

 

65,635

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment

 

(5,977

)

 

(4,889

)

 

(8,607

)

 

(14,325

)

 

(19,120

)

Acquisition of technology licenses

 

(100

)

 

(37

)

 

(400

)

 

(351

)

 

(900

)

Purchases of marketable securities

 

(80,864

)

 

(49,631

)

 

(58,221

)

 

(135,288

)

 

(58,221

)

Proceeds from sales and maturities of marketable securities

 

46,762

 

 

12,635

 

 

57,148

 

 

66,184

 

 

147,501

 

Net cash provided by (used in) investing activities

 

(40,179

)

 

(41,922

)

 

(10,080

)

 

(83,780

)

 

69,260

 

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

 

4,005

 

 

1,178

 

 

2,915

 

 

9,683

 

 

8,550

 

Repurchase of common stock

 

-

 

 

-

 

 

(10,988

)

 

(7,302

)

 

(74,377

)

Payments of dividends to stockholders

 

(4,999

)

 

(4,980

)

 

(4,692

)

 

(14,916

)

 

(14,172

)

Proceeds from draw on line of credit

 

-

 

 

-

 

 

-

 

 

-

 

 

8,000

 

Payments on line of credit

 

-

 

 

-

 

 

-

 

 

-

 

 

(8,000

)

Net cash used in financing activities

 

(994

)

 

(3,802

)

 

(12,765

)

 

(12,535

)

 

(79,999

)

 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(19,329

)

 

(26,304

)

 

364

 

 

(53,975

)

 

54,896

 

 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

99,491

 

 

125,795

 

 

148,187

 

 

134,137

 

 

93,655

 

 
CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

80,162

 

$

99,491

 

$

148,551

 

$

80,162

 

$

148,551

 

 

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

Source: Power Integrations, Inc.

NASDAQ: POWI $94.51 -0.55
-0.58% Volume: 122,031 November 13, 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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