Power Integrations Reports Second-Quarter Financial Results

July 30, 2020

Revenues increased four percent year-over-year to $106.8 million; GAAP earnings were $0.44 per diluted share; non-GAAP earnings were $0.66 per diluted share

Announces 2:1 stock split and dividend increase

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2020. Net revenues for the second quarter were $106.8 million, down three percent compared to the prior quarter and up four percent from the second quarter of 2019. Net income for the second quarter was $13.2 million or $0.44 per diluted share compared to $0.53 per diluted share in the prior quarter and $0.37 per diluted share in the second quarter of 2019. Cash flow from operations for the second quarter was $36.7 million.

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 2020 was $19.9 million or $0.66 per diluted share compared with $0.76 per diluted share in the prior quarter and $0.56 per diluted share in the second quarter of 2019. A reconciliation of GAAP to non-GAAP financial results appears at the end of this press release.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “Revenues increased four percent year-over-year in spite of a challenging demand environment, driven by growth in the communications and industrial categories. While the pandemic continues to weigh on end-market demand, we continue to gain share across a wide range of power-conversion applications and we are on track to outperform the analog semiconductor industry again this year.”

The company announced a 2:1 stock split in the form of a stock dividend of one share of common stock per outstanding share. The additional shares will be distributed on August 18, 2020 to stockholders of record as of August 14, 2020. The split will double the number of outstanding common shares; common shares and per-share data in this press release have not been adjusted for the impact of the split.

Power Integrations paid a cash dividend of $0.21 per share on June 30, 2020. Following the stock split, the company will pay a dividend of $0.11 per share (equivalent to $0.22 on a pre-split basis) on September 30, 2020 to stockholders of record as of August 31, 2020.

Financial Outlook

The company issued the following forecast for the third quarter of 2020:

  • Revenues are expected to be $115 million plus or minus $5 million.
  • GAAP gross margin is expected to be between 49.5 percent and 50 percent. Non-GAAP gross margin is expected to be between 50.5 percent and 51 percent. (The difference between the expected GAAP and non-GAAP gross margins comprises 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 approximately $43 million; non-GAAP operating expenses are expected to be approximately $36 million. (Non-GAAP expenses are expected to exclude approximately $6.8 million of stock-based compensation and $0.2 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 register for the call by visiting the following link: http://www.directeventreg.com/registration/event/6141529. A webcast of 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. 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 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: the impact of the COVID-19 crisis on demand for the company’s products, its ability to supply products and its ability to conduct other aspects of its business such as competing for new design wins; 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; 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 7, 2020. 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 law.

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, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
NET REVENUES

$

106,832

 

$

109,664

 

$

102,865

 

$

216,496

 

$

192,053

 

 
COST OF REVENUES

 

53,296

 

 

53,184

 

 

51,293

 

 

106,480

 

 

95,007

 

 
GROSS PROFIT

 

53,536

 

 

56,480

 

 

51,572

 

 

110,016

 

 

97,046

 

 
OPERATING EXPENSES:
Research and development

 

19,770

 

 

19,152

 

 

19,269

 

 

38,922

 

 

37,215

 

Sales and marketing

 

12,807

 

 

13,216

 

 

12,815

 

 

26,023

 

 

25,405

 

General and administrative

 

7,804

 

 

8,761

 

 

9,334

 

 

16,565

 

 

17,724

 

Amortization of acquisition-related intangible assets

 

230

 

 

257

 

 

394

 

 

487

 

 

821

 

Total operating expenses

 

40,611

 

 

41,386

 

 

41,812

 

 

81,997

 

 

81,165

 

 
INCOME FROM OPERATIONS

 

12,925

 

 

15,094

 

 

9,760

 

 

28,019

 

 

15,881

 

 
OTHER INCOME

 

1,480

 

 

1,777

 

 

1,310

 

 

3,257

 

 

2,462

 

 
INCOME BEFORE INCOME TAXES

 

14,405

 

 

16,871

 

 

11,070

 

 

31,276

 

 

18,343

 

 
PROVISION FOR INCOME TAXES

 

1,213

 

 

985

 

 

225

 

 

2,198

 

 

265

 

 
NET INCOME

$

13,192

 

$

15,886

 

$

10,845

 

$

29,078

 

$

18,078

 

 
EARNINGS PER SHARE:
Basic

$

0.44

 

$

0.54

 

$

0.37

 

$

0.98

 

$

0.62

 

Diluted

$

0.44

 

$

0.53

 

$

0.37

 

$

0.96

 

$

0.61

 

 
SHARES USED IN PER-SHARE CALCULATION:
Basic

 

29,856

 

 

29,602

 

 

29,297

 

 

29,729

 

 

29,125

 

Diluted

 

30,312

 

 

30,134

 

 

29,702

 

 

30,232

 

 

29,597

 

 
 
 
SUPPLEMENTAL INFORMATION: Three Months Ended Six Months Ended
June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
Stock-based compensation expenses included in:
Cost of revenues

$

252

 

$

396

 

$

273

 

$

648

 

$

544

 

Research and development

 

2,351

 

 

2,109

 

 

2,144

 

 

4,460

 

 

3,776

 

Sales and marketing

 

1,258

 

 

1,392

 

 

1,141

 

 

2,650

 

 

2,202

 

General and administrative

 

2,120

 

 

2,813

 

 

1,938

 

 

4,933

 

 

3,381

 

Total stock-based compensation expense

$

5,981

 

$

6,710

 

$

5,496

 

$

12,691

 

$

9,903

 

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

$

799

 

$

799

 

$

794

 

$

1,598

 

$

1,588

 

 
 
Three Months Ended Six Months Ended
REVENUE MIX BY END MARKET June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
Communications

 

28

%

 

22

%

 

24

%

 

25

%

 

21

%

Computer

 

6

%

 

4

%

 

6

%

 

5

%

 

6

%

Consumer

 

31

%

 

41

%

 

37

%

 

36

%

 

38

%

Industrial

 

35

%

 

33

%

 

33

%

 

34

%

 

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, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
RECONCILIATION OF GROSS PROFIT
GAAP gross profit

$

53,536

 

$

56,480

 

$

51,572

 

$

110,016

 

$

97,046

 

GAAP gross margin

 

50.1

%

 

51.5

%

 

50.1

%

 

50.8

%

 

50.5

%

 
Stock-based compensation included in cost of revenues

 

252

 

 

396

 

 

273

 

 

648

 

 

544

 

Amortization of acquisition-related intangible assets

 

799

 

 

799

 

 

794

 

 

1,598

 

 

1,588

 

 
Non-GAAP gross profit

$

54,587

 

$

57,675

 

$

52,639

 

$

112,262

 

$

99,178

 

Non-GAAP gross margin

 

51.1

%

 

52.6

%

 

51.2

%

 

51.9

%

 

51.6

%

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF OPERATING EXPENSES June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
GAAP operating expenses

$

40,611

 

$

41,386

 

$

41,812

 

$

81,997

 

$

81,165

 

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

 

2,351

 

 

2,109

 

 

2,144

 

 

4,460

 

 

3,776

 

Sales and marketing

 

1,258

 

 

1,392

 

 

1,141

 

 

2,650

 

 

2,202

 

General and administrative

 

2,120

 

 

2,813

 

 

1,938

 

 

4,933

 

 

3,381

 

Total

 

5,729

 

 

6,314

 

 

5,223

 

 

12,043

 

 

9,359

 

 
Amortization of acquisition-related intangible assets

 

230

 

 

257

 

 

394

 

 

487

 

 

821

 

 
Non-GAAP operating expenses

$

34,652

 

$

34,815

 

$

36,195

 

$

69,467

 

$

70,985

 

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
GAAP income from operations

$

12,925

 

$

15,094

 

$

9,760

 

$

28,019

 

$

15,881

 

GAAP operating margin

 

12.1

%

 

13.8

%

 

9.5

%

 

12.9

%

 

8.3

%

 
Add: Total stock-based compensation

 

5,981

 

 

6,710

 

 

5,496

 

 

12,691

 

 

9,903

 

Amortization of acquisition-related intangible assets

 

1,029

 

 

1,056

 

 

1,188

 

 

2,085

 

 

2,409

 

 
Non-GAAP income from operations

$

19,935

 

$

22,860

 

$

16,444

 

$

42,795

 

$

28,193

 

Non-GAAP operating margin

 

18.7

%

 

20.8

%

 

16.0

%

 

19.8

%

 

14.7

%

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
GAAP provision for income taxes

$

1,213

 

$

985

 

$

225

 

$

2,198

 

$

265

 

GAAP effective tax rate

 

8.4

%

 

5.8

%

 

2.0

%

 

7.0

%

 

1.4

%

 
Tax effect of adjustments to GAAP results

 

(272

)

 

(751

)

 

(837

)

 

(1,023

)

 

(1,636

)

 
Non-GAAP provision for income taxes

$

1,485

 

$

1,736

 

$

1,062

 

$

3,221

 

$

1,901

 

Non-GAAP effective tax rate

 

6.9

%

 

7.0

%

 

6.0

%

 

7.0

%

 

6.2

%

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED) June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
GAAP net income

$

13,192

 

$

15,886

 

$

10,845

 

$

29,078

 

$

18,078

 

 
Adjustments to GAAP net income
Stock-based compensation

 

5,981

 

 

6,710

 

 

5,496

 

 

12,691

 

 

9,903

 

Amortization of acquisition-related intangible assets

 

1,029

 

 

1,056

 

 

1,188

 

 

2,085

 

 

2,409

 

Tax effect of items excluded from non-GAAP results

 

(272

)

 

(751

)

 

(837

)

 

(1,023

)

 

(1,636

)

 
Non-GAAP net income

$

19,930

 

$

22,901

 

$

16,692

 

$

42,831

 

$

28,754

 

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

 

30,312

 

 

30,134

 

 

29,702

 

 

30,232

 

 

29,597

 

 
Non-GAAP net income per share (diluted)

$

0.66

 

$

0.76

 

$

0.56

 

$

1.42

 

$

0.97

 

 
GAAP net income per share

$

0.44

 

$

0.53

 

$

0.37

 

$

0.96

 

$

0.61

 

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
June 30, 2020 March 31, 2020 December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

251,325

 

$

190,459

 

$

178,690

 

Short-term marketable securities

 

194,556

 

 

232,183

 

 

232,398

 

Accounts receivable, net

 

12,872

 

 

20,597

 

 

24,274

 

Inventories

 

103,963

 

 

96,633

 

 

90,380

 

Prepaid expenses and other current assets

 

14,512

 

 

20,570

 

 

15,597

 

Total current assets

 

577,228

 

 

560,442

 

 

541,339

 

 
PROPERTY AND EQUIPMENT, net

 

138,572

 

 

123,430

 

 

116,619

 

INTANGIBLE ASSETS, net

 

14,658

 

 

15,748

 

 

16,865

 

GOODWILL

 

91,849

 

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

1,514

 

 

1,739

 

 

2,836

 

OTHER ASSETS

 

29,956

 

 

34,231

 

 

34,388

 

Total assets

$

853,777

 

$

827,439

 

$

803,896

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

42,871

 

$

37,156

 

$

27,433

 

Accrued payroll and related expenses

 

14,365

 

 

10,921

 

 

13,408

 

Taxes payable

 

363

 

 

567

 

 

584

 

Other accrued liabilities

 

7,156

 

 

5,826

 

 

9,051

 

Total current liabilities

 

64,755

 

 

54,470

 

 

50,476

 

 
LONG-TERM LIABILITIES:
Income taxes payable

 

15,329

 

 

14,840

 

 

14,617

 

Deferred tax liabilities

 

121

 

 

162

 

 

164

 

Other liabilities

 

14,100

 

 

14,137

 

 

14,093

 

Total liabilities

 

94,305

 

 

83,609

 

 

79,350

 

 
STOCKHOLDERS' EQUITY:
Common stock

 

28

 

 

28

 

 

28

 

Additional paid-in capital

 

168,470

 

 

162,343

 

 

152,117

 

Accumulated other comprehensive loss

 

(1,720

)

 

(4,314

)

 

(3,130

)

Retained earnings

 

592,694

 

 

585,773

 

 

575,531

 

Total stockholders' equity

 

759,472

 

 

743,830

 

 

724,546

 

Total liabilities and stockholders' equity

$

853,777

 

$

827,439

 

$

803,896

 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended Six Months Ended
June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

13,192

 

$

15,886

 

$

10,845

 

$

29,078

 

$

18,078

 

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

 

5,581

 

 

5,488

 

 

4,821

 

 

11,069

 

 

9,431

 

Amortization of intangible assets

 

1,090

 

 

1,117

 

 

1,228

 

 

2,207

 

 

2,483

 

Loss on disposal of property and equipment

 

262

 

 

30

 

 

56

 

 

292

 

 

152

 

Stock-based compensation expense

 

5,981

 

 

6,710

 

 

5,496

 

 

12,691

 

 

9,903

 

Amortization of premium (accretion of discount) on marketable securities

 

167

 

 

154

 

 

(120

)

 

321

 

 

(230

)

Deferred income taxes

 

184

 

 

1,095

 

 

498

 

 

1,279

 

 

1,659

 

Increase (decrease) in accounts receivable allowances for credit losses

 

-

 

 

(154

)

 

237

 

 

(154

)

 

57

 

Change in operating assets and liabilities:
Accounts receivable

 

7,725

 

 

3,831

 

 

(5,160

)

 

11,556

 

 

(14,453

)

Inventories

 

(7,330

)

 

(6,253

)

 

(4,117

)

 

(13,583

)

 

(8,340

)

Prepaid expenses and other assets

 

8,084

 

 

(3,992

)

 

615

 

 

4,092

 

 

(3,614

)

Accounts payable

 

(2,967

)

 

8,828

 

 

2,933

 

 

5,861

 

 

4,153

 

Taxes payable and other accrued liabilities

 

4,684

 

 

(6,349

)

 

2,088

 

 

(1,665

)

 

1,217

 

Net cash provided by operating activities

 

36,653

 

 

26,391

 

 

19,420

 

 

63,044

 

 

20,496

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment

 

(10,019

)

 

(11,603

)

 

(4,889

)

 

(21,622

)

 

(8,348

)

Proceeds from sale of property and equipment

 

331

 

 

-

 

 

-

 

 

331

 

 

-

 

Acquisition of technology licenses

 

-

 

 

-

 

 

(37

)

 

-

 

 

(251

)

Purchases of marketable securities

 

(2,989

)

 

(16,838

)

 

(49,631

)

 

(19,827

)

 

(54,424

)

Proceeds from sales and maturities of marketable securities

 

43,015

 

 

15,947

 

 

12,635

 

 

58,962

 

 

19,422

 

Net cash provided by (used in) investing activities

 

30,338

 

 

(12,494

)

 

(41,922

)

 

17,844

 

 

(43,601

)

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

 

769

 

 

5,529

 

 

1,178

 

 

6,298

 

 

5,678

 

Repurchase of common stock

 

(623

)

 

(2,013

)

 

-

 

 

(2,636

)

 

(7,302

)

Payments of dividends to stockholders

 

(6,271

)

 

(5,644

)

 

(4,980

)

 

(11,915

)

 

(9,917

)

Net cash used in financing activities

 

(6,125

)

 

(2,128

)

 

(3,802

)

 

(8,253

)

 

(11,541

)

 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

60,866

 

 

11,769

 

 

(26,304

)

 

72,635

 

 

(34,646

)

 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

190,459

 

 

178,690

 

 

125,795

 

 

178,690

 

 

134,137

 

 
CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

251,325

 

$

190,459

 

$

99,491

 

$

251,325

 

$

99,491

 

 

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

Source: Power Integrations, Inc.

NASDAQ: POWI $53.56 -0.23
-0.43% Volume: 907,301 September 18, 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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