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Power Integrations Reports Second-Quarter Financial Results

August 4, 2022

Revenues increased two percent year-over-year to $184 million; GAAP earnings were $0.96 per diluted share; non-GAAP earnings per diluted share grew 24 percent year-over-year to $1.03

Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended June 30, 2022. Net revenues for the second quarter were $184.0 million, up one percent compared to the prior quarter and up two percent from the second quarter of 2021. Net income for the second quarter was $55.8 million or $0.96 per diluted share compared to $0.77 per diluted share in the prior quarter and $0.68 per diluted share in the second quarter of 2021. Cash flow from operations for the second quarter was $66.8 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, net other operating expenses of $1.1 million stemming from a patent-litigation settlement and an offsetting recovery from the liquidation of SemiSouth Laboratories, and the tax effects of these items. Non-GAAP net income for the second quarter of 2022 was $59.9 million or $1.03 per diluted share compared with $0.93 per diluted share in the prior quarter and $0.83 per diluted share in the second quarter of 2021. A reconciliation of GAAP to non-GAAP financial results is included with the tables accompanying this press release.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “Our second-quarter revenues and third-quarter outlook reflect softness at Chinese smartphone customers as well as broader macroeconomic headwinds. Nevertheless, we grew our non-GAAP earnings per share by 24 percent year-over-year in the second quarter, generated $67 million in cash from operations and returned more than $160 million to stockholders through buybacks and dividends. While the near-term demand outlook has weakened, we continue to make great progress on long-term growth initiatives like automotive, motor drive, and expanding our portfolio of products incorporating our energy-efficient, proprietary GaN technology.”

Additional Highlights

  • Power Integrations repurchased 1.9 million shares of its common stock during the second quarter for $157.7 million, exhausting the company’s repurchase authorization.
  • The company paid a dividend of $0.18 per share on June 30, 2022. A dividend of $0.18 per share is to be paid on September 30, 2022, to stockholders of record as of August 31, 2022.

Financial Outlook

The company issued the following forecast for the third quarter of 2022:

  • Revenues are expected to be $165 million plus or minus five percent.
  • GAAP gross margin is expected to be approximately 57.5 percent. Non-GAAP gross margin is expected to be approximately 58 percent. The difference between GAAP and non-GAAP gross margins is approximately equally attributable to stock-based compensation and amortization of acquisition-related intangible assets.
  • GAAP operating expenses are expected to be approximately $51 million; non-GAAP operating expenses are expected to be approximately $42.5 million. Non-GAAP expenses are expected to exclude approximately $8.5 million of stock-based compensation.

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: https://conferencingportals.com/event/iobnvsok. A live 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, net other operating expenses of $1.1 million stemming from a patent-litigation settlement and an offsetting recovery from the liquidation of SemiSouth Laboratories, 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 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 and geopolitical conditions, including such factors as inflation, armed conflicts and 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, 2022. The company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether because 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, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
NET REVENUES

$

183,986

 

$

182,149

 

$

180,110

 

$

366,135

 

$

353,847

 

 
COST OF REVENUES

 

77,143

 

 

81,474

 

 

88,797

 

 

158,617

 

 

178,123

 

 
GROSS PROFIT

 

106,843

 

 

100,675

 

 

91,313

 

 

207,518

 

 

175,724

 

 
OPERATING EXPENSES:
Research and development

 

23,507

 

 

23,678

 

 

21,741

 

 

47,185

 

 

41,768

 

Sales and marketing

 

15,985

 

 

16,155

 

 

15,097

 

 

32,140

 

 

29,004

 

General and administrative

 

6,059

 

 

9,614

 

 

9,306

 

 

15,673

 

 

19,381

 

Amortization of acquisition-related intangible assets

 

60

 

 

181

 

 

193

 

 

241

 

 

409

 

Other operating expenses, net

 

1,130

 

 

-

 

 

-

 

 

1,130

 

 

-

 

Total operating expenses

 

46,741

 

 

49,628

 

 

46,337

 

 

96,369

 

 

90,562

 

 
INCOME FROM OPERATIONS

 

60,102

 

 

51,047

 

 

44,976

 

 

111,149

 

 

85,162

 

 
OTHER INCOME

 

674

 

 

554

 

 

173

 

 

1,228

 

 

770

 

 
INCOME BEFORE INCOME TAXES

 

60,776

 

 

51,601

 

 

45,149

 

 

112,377

 

 

85,932

 

 
PROVISION FOR INCOME TAXES

 

4,952

 

 

5,353

 

 

3,268

 

 

10,305

 

 

4,253

 

 
NET INCOME

$

55,824

 

$

46,248

 

$

41,881

 

$

102,072

 

$

81,679

 

 
EARNINGS PER SHARE:
Basic

$

0.97

 

$

0.78

 

$

0.69

 

$

1.75

 

$

1.35

 

Diluted

$

0.96

 

$

0.77

 

$

0.68

 

$

1.72

 

$

1.33

 

 
SHARES USED IN PER-SHARE CALCULATION:
Basic

 

57,731

 

 

59,238

 

 

60,544

 

 

58,480

 

 

60,366

 

Diluted

 

58,305

 

 

60,107

 

 

61,466

 

 

59,192

 

 

61,481

 

 
SUPPLEMENTAL INFORMATION: Three Months Ended Six Months Ended
June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Stock-based compensation expenses included in:
Cost of revenues

$

235

 

$

320

 

$

640

 

$

555

 

$

1,271

 

Research and development

 

2,323

 

 

3,055

 

 

3,159

 

 

5,378

 

 

5,550

 

Sales and marketing

 

1,177

 

 

1,948

 

 

1,725

 

 

3,125

 

 

3,339

 

General and administrative

 

(56

)

 

3,690

 

 

3,676

 

 

3,634

 

 

7,520

 

Total stock-based compensation expense

$

3,679

 

$

9,013

 

$

9,200

 

$

12,692

 

$

17,680

 

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

$

482

 

$

482

 

$

619

 

$

964

 

$

1,373

 

 
Three Months Ended Six Months Ended
REVENUE MIX BY END MARKET June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Communications

 

18

%

 

26

%

 

35

%

 

22

%

 

37

%

Computer

 

9

%

 

10

%

 

8

%

 

10

%

 

8

%

Consumer

 

38

%

 

35

%

 

31

%

 

36

%

 

30

%

Industrial

 

35

%

 

29

%

 

26

%

 

32

%

 

25

%

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, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
RECONCILIATION OF GROSS PROFIT
GAAP gross profit

$

106,843

 

$

100,675

 

$

91,313

 

$

207,518

 

$

175,724

 

GAAP gross margin

 

58.1

%

 

55.3

%

 

50.7

%

 

56.7

%

 

49.7

%

 
Stock-based compensation included in cost of revenues

 

235

 

 

320

 

 

640

 

 

555

 

 

1,271

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

619

 

 

964

 

 

1,373

 

 
Non-GAAP gross profit

$

107,560

 

$

101,477

 

$

92,572

 

$

209,037

 

$

178,368

 

Non-GAAP gross margin

 

58.5

%

 

55.7

%

 

51.4

%

 

57.1

%

 

50.4

%

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF OPERATING EXPENSES June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
GAAP operating expenses

$

46,741

 

$

49,628

 

$

46,337

 

$

96,369

 

$

90,562

 

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

 

2,323

 

 

3,055

 

 

3,159

 

 

5,378

 

 

5,550

 

Sales and marketing

 

1,177

 

 

1,948

 

 

1,725

 

 

3,125

 

 

3,339

 

General and administrative

 

(56

)

 

3,690

 

 

3,676

 

 

3,634

 

 

7,520

 

Total

 

3,444

 

 

8,693

 

 

8,560

 

 

12,137

 

 

16,409

 

 
Amortization of acquisition-related intangible assets

 

60

 

 

181

 

 

193

 

 

241

 

 

409

 

Other operating expenses, net

 

1,130

 

 

-

 

 

-

 

 

1,130

 

 

-

 

 
Non-GAAP operating expenses

$

42,107

 

$

40,754

 

$

37,584

 

$

82,861

 

$

73,744

 

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
GAAP income from operations

$

60,102

 

$

51,047

 

$

44,976

 

$

111,149

 

$

85,162

 

GAAP operating margin

 

32.7

%

 

28.0

%

 

25.0

%

 

30.4

%

 

24.1

%

 
Add: Total stock-based compensation

 

3,679

 

 

9,013

 

 

9,200

 

 

12,692

 

 

17,680

 

Amortization of acquisition-related intangible assets

 

542

 

 

663

 

 

812

 

 

1,205

 

 

1,782

 

Other operating expenses, net

 

1,130

 

 

-

 

 

-

 

 

1,130

 

 

-

 

 
Non-GAAP income from operations

$

65,453

 

$

60,723

 

$

54,988

 

$

126,176

 

$

104,624

 

Non-GAAP operating margin

 

35.6

%

 

33.3

%

 

30.5

%

 

34.5

%

 

29.6

%

 
 
Three Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
GAAP provision for income taxes

$

4,952

 

$

5,353

 

$

3,268

 

$

10,305

 

$

4,253

 

GAAP effective tax rate

 

8.1

%

 

10.4

%

 

7.2

%

 

9.2

%

 

4.9

%

 
Tax effect of adjustments to GAAP results

 

(1,259

)

 

(122

)

 

(1,101

)

 

(1,381

)

 

(3,679

)

 
Non-GAAP provision for income taxes

$

6,211

 

$

5,475

 

$

4,369

 

$

11,686

 

$

7,932

 

Non-GAAP effective tax rate

 

9.4

%

 

8.9

%

 

7.9

%

 

9.2

%

 

7.5

%

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED) June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
GAAP net income

$

55,824

 

$

46,248

 

$

41,881

 

$

102,072

 

$

81,679

 

 
Adjustments to GAAP net income
Stock-based compensation

 

3,679

 

 

9,013

 

 

9,200

 

 

12,692

 

 

17,680

 

Amortization of acquisition-related intangible assets

 

542

 

 

663

 

 

812

 

 

1,205

 

 

1,782

 

Other operating expenses, net

 

1,130

 

 

-

 

 

-

 

 

1,130

 

 

-

 

Tax effect of items excluded from non-GAAP results

 

(1,259

)

 

(122

)

 

(1,101

)

 

(1,381

)

 

(3,679

)

 
Non-GAAP net income

$

59,916

 

$

55,802

 

$

50,792

 

$

115,718

 

$

97,462

 

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

 

58,305

 

 

60,107

 

 

61,466

 

 

59,192

 

 

61,481

 

 
Non-GAAP net income per share (diluted)

$

1.03

 

$

0.93

 

$

0.83

 

$

1.95

 

$

1.59

 

 
GAAP net income per share (diluted)

$

0.96

 

$

0.77

 

$

0.68

 

$

1.72

 

$

1.33

 

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
June 30, 2022 March 31, 2022 December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

67,383

 

$

170,624

 

$

158,117

 

Short-term marketable securities

 

260,209

 

 

273,419

 

 

372,235

 

Accounts receivable, net

 

27,980

 

 

30,658

 

 

41,393

 

Inventories

 

111,258

 

 

103,115

 

 

99,266

 

Prepaid expenses and other current assets

 

14,219

 

 

14,685

 

 

15,804

 

Total current assets

 

481,049

 

 

592,501

 

 

686,815

 

 
PROPERTY AND EQUIPMENT, net

 

184,245

 

 

180,073

 

 

179,824

 

INTANGIBLE ASSETS, net

 

7,684

 

 

8,288

 

 

9,012

 

GOODWILL

 

91,849

 

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

19,830

 

 

17,371

 

 

16,433

 

OTHER ASSETS

 

24,347

 

 

29,113

 

 

30,554

 

Total assets

$

809,004

 

$

919,195

 

$

1,014,487

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

41,402

 

$

36,175

 

$

43,721

 

Accrued payroll and related expenses

 

14,569

 

 

13,459

 

 

15,492

 

Taxes payable

 

561

 

 

5,601

 

 

1,210

 

Other accrued liabilities

 

13,597

 

 

13,999

 

 

11,898

 

Total current liabilities

 

70,129

 

 

69,234

 

 

72,321

 

 
LONG-TERM LIABILITIES:
Income taxes payable

 

15,739

 

 

15,384

 

 

15,280

 

Other liabilities

 

12,891

 

 

14,004

 

 

14,854

 

Total liabilities

 

98,759

 

 

98,622

 

 

102,455

 

 
STOCKHOLDERS' EQUITY:
Common stock

 

24

 

 

26

 

 

28

 

Additional paid-in capital

 

-

 

 

39,684

 

 

162,301

 

Accumulated other comprehensive loss

 

(10,060

)

 

(8,169

)

 

(3,737

)

Retained earnings

 

720,281

 

 

789,032

 

 

753,440

 

Total stockholders' equity

 

710,245

 

 

820,573

 

 

912,032

 

Total liabilities and stockholders' equity

$

809,004

 

$

919,195

 

$

1,014,487

 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended Six Months Ended
June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

55,824

 

$

46,248

 

$

41,881

 

$

102,072

 

$

81,679

 

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

 

8,766

 

 

8,408

 

 

7,821

 

 

17,174

 

 

15,274

 

Amortization of intangible assets

 

604

 

 

724

 

 

873

 

 

1,328

 

 

1,905

 

Loss on disposal of property and equipment

 

959

 

 

75

 

 

21

 

 

1,034

 

 

38

 

Stock-based compensation expense

 

3,679

 

 

9,013

 

 

9,200

 

 

12,692

 

 

17,680

 

Amortization of premium on marketable securities

 

930

 

 

937

 

 

124

 

 

1,867

 

 

300

 

Deferred income taxes

 

(2,346

)

 

(936

)

 

(263

)

 

(3,282

)

 

1,182

 

Increase in accounts receivable allowance for credit losses

 

184

 

 

75

 

 

93

 

 

259

 

 

91

 

Change in operating assets and liabilities:
Accounts receivable

 

2,494

 

 

10,660

 

 

812

 

 

13,154

 

 

(5,533

)

Inventories

 

(8,143

)

 

(3,849

)

 

866

 

 

(11,992

)

 

13,235

 

Prepaid expenses and other assets

 

2,523

 

 

1,552

 

 

(1,248

)

 

4,075

 

 

(4,501

)

Accounts payable

 

7,286

 

 

(1,709

)

 

4,772

 

 

5,577

 

 

8,053

 

Taxes payable and other accrued liabilities

 

(5,938

)

 

3,399

 

 

1,896

 

 

(2,539

)

 

(4,433

)

Net cash provided by operating activities

 

66,822

 

 

74,597

 

 

66,848

 

 

141,419

 

 

124,970

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment

 

(13,244

)

 

(14,700

)

 

(8,243

)

 

(27,944

)

 

(19,294

)

Proceeds from sale of property and equipment

 

-

 

 

1,202

 

 

10

 

 

1,202

 

 

35

 

Purchases of marketable securities

 

(5,589

)

 

(15,121

)

 

(166,782

)

 

(20,710

)

 

(188,753

)

Proceeds from sales and maturities of marketable securities

 

16,710

 

 

108,817

 

 

96,617

 

 

125,527

 

 

160,083

 

Net cash provided by (used in) investing activities

 

(2,123

)

 

80,198

 

 

(78,398

)

 

78,075

 

 

(47,929

)

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

 

-

 

 

3,057

 

 

-

 

 

3,057

 

 

3,652

 

Repurchase of common stock

 

(157,660

)

 

(134,689

)

 

(26,374

)

 

(292,349

)

 

(26,374

)

Payments of dividends to stockholders

 

(10,280

)

 

(10,656

)

 

(7,867

)

 

(20,936

)

 

(15,712

)

Net cash used in financing activities

 

(167,940

)

 

(142,288

)

 

(34,241

)

 

(310,228

)

 

(38,434

)

 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(103,241

)

 

12,507

 

 

(45,791

)

 

(90,734

)

 

38,607

 

 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

170,624

 

 

158,117

 

 

343,272

 

 

158,117

 

 

258,874

 

 
CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

67,383

 

$

170,624

 

$

297,481

 

$

67,383

 

$

297,481

 

 

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

Source: Power Integrations, Inc.

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