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Power Integrations Reports First-Quarter Financial Results

April 29, 2021

Revenues increased 58 percent year-over-year to $173.7 million; GAAP earnings were $0.65 per diluted share; non-GAAP earnings were $0.76 per diluted share

Share-repurchase authorization increased by $50 million

Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended March 31, 2021. Per-share measures for all periods reflect the effect of the August 2020 two-for-one stock split.

Net revenues for the first quarter of 2021 were $173.7 million, up 15 percent compared to the prior quarter and up 58 percent from the first quarter of 2020. Net income for the first quarter was $39.8 million or $0.65 per diluted share compared to $0.45 per diluted share in the prior quarter and $0.26 per diluted share in the first quarter of 2020. Cash flow from operations for the first quarter was $58.1 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 first quarter of 2021 was $46.7 million or $0.76 per diluted share compared with $0.60 per diluted share in the prior quarter and $0.38 per diluted share in the first quarter of 2020. 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: “First-quarter revenues grew 58 percent year-over-year reflecting the strong demand conditions across the industry as well as our continued success in advanced mobile-device chargers, appliances and many other power-supply applications. Distribution sell-through exceeded sell-in again in the first quarter and we have seen continued strength in bookings in recent weeks. As a result, we expect strong year-over-year growth again in the second quarter.”

Power Integrations paid a cash dividend of $0.13 per share on March 31, 2021. A dividend of $0.13 per share will be paid on June 30, 2021 to stockholders of record as of May 28, 2021. Also, the company’s board of directors has added $50 million to its share-repurchase authorization, bringing the total authorization to $91.3 million.

Financial Outlook

The company issued the following forecast for the second quarter of 2021:

  • Revenues are expected to be flat compared to the first quarter of 2021, plus or minus five percent.
  • GAAP gross margin is expected to be between 49.5 and 50 percent, and non-GAAP gross margin is expected to be between 50 and 50.5 percent. (The difference between the expected GAAP and non-GAAP gross margins is approximately equally attributable to amortization of acquisition-related intangible assets and stock-based compensation.)
  • GAAP operating expenses are expected to be approximately $47.5 million; non-GAAP operating expenses are expected to be approximately $38.5 million. (Non-GAAP expenses are expected to exclude approximately $8.8 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/1859015. 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 second-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 pandemic 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 5, 2021. 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
March 31, 2021 December 31, 2020 March 31, 2020
NET REVENUES

$

173,737

 

$

150,693

 

$

109,664

 

 
COST OF REVENUES

 

89,326

 

 

76,688

 

 

53,184

 

 
GROSS PROFIT

 

84,411

 

 

74,005

 

 

56,480

 

 
OPERATING EXPENSES:
Research and development

 

20,027

 

 

21,921

 

 

19,152

 

Sales and marketing

 

13,907

 

 

14,113

 

 

13,216

 

General and administrative

 

10,075

 

 

10,028

 

 

8,761

 

Amortization of acquisition-related intangible assets

 

216

 

 

216

 

 

257

 

Total operating expenses

 

44,225

 

 

46,278

 

 

41,386

 

 
INCOME FROM OPERATIONS

 

40,186

 

 

27,727

 

 

15,094

 

 
OTHER INCOME

 

597

 

 

630

 

 

1,777

 

 
INCOME BEFORE INCOME TAXES

 

40,783

 

 

28,357

 

 

16,871

 

 
PROVISION FOR INCOME TAXES

 

985

 

 

1,079

 

 

985

 

 
NET INCOME

$

39,798

 

$

27,278

 

$

15,886

 

 
EARNINGS PER SHARE:
Basic

$

0.66

 

$

0.46

 

$

0.27

 

Diluted

$

0.65

 

$

0.45

 

$

0.26

 

 
SHARES USED IN PER-SHARE CALCULATION:
Basic

 

60,184

 

 

59,879

 

 

59,204

 

Diluted

 

61,451

 

 

61,176

 

 

60,268

 

 
 
 
SUPPLEMENTAL INFORMATION: Three Months Ended
March 31, 2021 December 31, 2020 March 31, 2020
Stock-based compensation expenses included in:
Cost of revenues

$

631

 

$

713

 

$

396

 

Research and development

 

2,391

 

 

2,942

 

 

2,109

 

Sales and marketing

 

1,614

 

 

1,740

 

 

1,392

 

General and administrative

 

3,844

 

 

3,468

 

 

2,813

 

Total stock-based compensation expense

$

8,480

 

$

8,863

 

$

6,710

 

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

$

754

 

$

799

 

$

799

 

 
 
Three Months Ended
REVENUE MIX BY END MARKET March 31, 2021 December 31, 2020 March 31, 2020
Communications

 

38

%

 

34

%

 

22

%

Computer

 

8

%

 

9

%

 

4

%

Consumer

 

29

%

 

31

%

 

41

%

Industrial

 

25

%

 

26

%

 

33

%

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)
 
Three Months Ended
March 31, 2021 December 31, 2020 March 31, 2020
RECONCILIATION OF GROSS PROFIT
GAAP gross profit

$

84,411

 

$

74,005

 

$

56,480

 

GAAP gross margin

 

48.6

%

 

49.1

%

 

51.5

%

 
Stock-based compensation included in cost of revenues

 

631

 

 

713

 

 

396

 

Amortization of acquisition-related intangible assets

 

754

 

 

799

 

 

799

 

 
Non-GAAP gross profit

$

85,796

 

$

75,517

 

$

57,675

 

Non-GAAP gross margin

 

49.4

%

 

50.1

%

 

52.6

%

 
 
Three Months Ended
RECONCILIATION OF OPERATING EXPENSES March 31, 2021 December 31, 2020 March 31, 2020
GAAP operating expenses

$

44,225

 

$

46,278

 

$

41,386

 

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

 

2,391

 

 

2,942

 

 

2,109

 

Sales and marketing

 

1,614

 

 

1,740

 

 

1,392

 

General and administrative

 

3,844

 

 

3,468

 

 

2,813

 

Total

 

7,849

 

 

8,150

 

 

6,314

 

 
Amortization of acquisition-related intangible assets

 

216

 

 

216

 

 

257

 

 
Non-GAAP operating expenses

$

36,160

 

$

37,912

 

$

34,815

 

 
 
Three Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS March 31, 2021 December 31, 2020 March 31, 2020
GAAP income from operations

$

40,186

 

$

27,727

 

$

15,094

 

GAAP operating margin

 

23.1

%

 

18.4

%

 

13.8

%

 
Add: Total stock-based compensation

 

8,480

 

 

8,863

 

 

6,710

 

Amortization of acquisition-related intangible assets

 

970

 

 

1,015

 

 

1,056

 

 
Non-GAAP income from operations

$

49,636

 

$

37,605

 

$

22,860

 

Non-GAAP operating margin

 

28.6

%

 

25.0

%

 

20.8

%

 
 
Three Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES March 31, 2021 December 31, 2020 March 31, 2020
GAAP provision for income taxes

$

985

 

$

1,079

 

$

985

 

GAAP effective tax rate

 

2.4

%

 

3.8

%

 

5.8

%

 
Tax effect of adjustments to GAAP results

 

(2,578

)

 

(725

)

 

(751

)

 
Non-GAAP provision for income taxes

$

3,563

 

$

1,804

 

$

1,736

 

Non-GAAP effective tax rate

 

7.1

%

 

4.7

%

 

7.0

%

 
 
Three Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED) March 31, 2021 December 31, 2020 March 31, 2020
GAAP net income

$

39,798

 

$

27,278

 

$

15,886

 

 
Adjustments to GAAP net income
Stock-based compensation

 

8,480

 

 

8,863

 

 

6,710

 

Amortization of acquisition-related intangible assets

 

970

 

 

1,015

 

 

1,056

 

Tax effect of items excluded from non-GAAP results

 

(2,578

)

 

(725

)

 

(751

)

 
Non-GAAP net income

$

46,670

 

$

36,431

 

$

22,901

 

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

 

61,451

 

 

61,176

 

 

60,268

 

 
Non-GAAP net income per share (diluted)

$

0.76

 

$

0.60

 

$

0.38

 

 
GAAP net income per share (diluted)

$

0.65

 

$

0.45

 

$

0.26

 

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
March 31, 2021 December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

343,272

 

$

258,874

 

Short-term marketable securities

 

148,067

 

 

190,318

 

Accounts receivable, net

 

42,257

 

 

35,910

 

Inventories

 

90,509

 

 

102,878

 

Prepaid expenses and other current assets

 

18,207

 

 

13,252

 

Total current assets

 

642,312

 

 

601,232

 

 
PROPERTY AND EQUIPMENT, net

 

168,712

 

 

166,188

 

INTANGIBLE ASSETS, net

 

11,474

 

 

12,506

 

GOODWILL

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

1,892

 

 

3,339

 

OTHER ASSETS

 

28,480

 

 

28,225

 

Total assets

$

944,719

 

$

903,339

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

38,172

 

$

34,712

 

Accrued payroll and related expenses

 

13,339

 

 

14,806

 

Taxes payable

 

856

 

 

902

 

Other accrued liabilities

 

10,160

 

 

12,106

 

Total current liabilities

 

62,527

 

 

62,526

 

 
LONG-TERM LIABILITIES:
Income taxes payable

 

14,033

 

 

15,588

 

Other liabilities

 

14,336

 

 

14,814

 

Total liabilities

 

90,896

 

 

92,928

 

 
STOCKHOLDERS' EQUITY:
Common stock

 

29

 

 

28

 

Additional paid-in capital

 

203,051

 

 

190,920

 

Accumulated other comprehensive loss

 

(2,836

)

 

(2,163

)

Retained earnings

 

653,579

 

 

621,626

 

Total stockholders' equity

 

853,823

 

 

810,411

 

Total liabilities and stockholders' equity

$

944,719

 

$

903,339

 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended
March 31, 2021 December 31, 2020 March 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

39,798

 

$

27,278

 

$

15,886

 

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

 

7,453

 

 

6,672

 

 

5,488

 

Amortization of intangible assets

 

1,032

 

 

1,076

 

 

1,117

 

Loss on disposal of property and equipment

 

17

 

 

214

 

 

30

 

Stock-based compensation expense

 

8,480

 

 

8,863

 

 

6,710

 

Amortization of premium on marketable securities

 

176

 

 

180

 

 

154

 

Deferred income taxes

 

1,445

 

 

(692

)

 

1,095

 

Decrease in accounts receivable allowance for credit losses

 

(2

)

 

(491

)

 

(154

)

Change in operating assets and liabilities:
Accounts receivable

 

(6,345

)

 

(5,972

)

 

3,831

 

Inventories

 

12,369

 

 

1,927

 

 

(6,253

)

Prepaid expenses and other assets

 

(3,253

)

 

3,020

 

 

(3,992

)

Accounts payable

 

3,281

 

 

(668

)

 

8,828

 

Taxes payable and other accrued liabilities

 

(6,329

)

 

4,959

 

 

(6,349

)

Net cash provided by operating activities

 

58,122

 

 

46,366

 

 

26,391

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment

 

(11,051

)

 

(34,860

)

 

(11,603

)

Proceeds from sale of property and equipment

 

25

 

 

320

 

 

-

 

Purchases of marketable securities

 

(21,971

)

 

(43,637

)

 

(16,838

)

Proceeds from sales and maturities of marketable securities

 

63,466

 

 

64,390

 

 

15,947

 

Net cash provided by (used in) investing activities

 

30,469

 

 

(13,787

)

 

(12,494

)

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

 

3,652

 

 

865

 

 

5,529

 

Repurchase of common stock

 

-

 

 

-

 

 

(2,013

)

Payments of dividends to stockholders

 

(7,845

)

 

(6,584

)

 

(5,644

)

Net cash used in financing activities

 

(4,193

)

 

(5,719

)

 

(2,128

)

 
NET INCREASE IN CASH AND CASH EQUIVALENTS

 

84,398

 

 

26,860

 

 

11,769

 

 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

258,874

 

 

232,014

 

 

178,690

 

 
CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

343,272

 

$

258,874

 

$

190,459

 

 

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

Source: Power Integrations, Inc.

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