Power Integrations Reports First-Quarter Financial Results

05/04/2023

Revenues were $106.3 million; GAAP earnings were $0.12 per diluted share; non-GAAP earnings were $0.25 per diluted share

Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended March 31, 2023. Net revenues for the first quarter were $106.3 million, down 15 percent compared to the prior quarter and down 42 percent from the first quarter of 2022. Net income for the first quarter was $6.9 million or $0.12 per diluted share compared to $0.40 per diluted share in the prior quarter and $0.77 per diluted share in the first quarter of 2022. Cash flow from operations for the first quarter was $16.6 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 2023 was $14.2 million or $0.25 per diluted share compared to $0.48 per diluted share in the prior quarter and $0.93 per diluted share in the first quarter of 2022. 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: “First-quarter revenues were in line with our expectations, and sell-through exceeded sell-in by a wider-than-expected margin. The resulting reduction in distributor inventories combined with improved order trends indicates that while end-market demand remains subdued, our revenues have bottomed and a cyclical recovery is underway.

“Meanwhile, we continue to gain share in a variety of end-markets while making excellent progress on growth initiatives such as motor-drive, automotive and our proprietary gallium-nitride technology. In March we introduced our first 900-volt GaN products, bringing the benefits of GaN to a wider range of industrial and appliance applications. The new 900-volt products include our first GaN-based ICs for the EV market, where the efficiency and size benefits of GaN are critical as carmakers power more systems from the main battery.”

Power Integrations paid a dividend of $0.19 per share on March 31, 2023. A dividend of $0.19 per share is to be paid on June 30, 2023, to stockholders of record as of May 31, 2023.

Financial Outlook

The company issued the following forecast for the second quarter of 2023:

  • Revenues are expected to be $122 million plus or minus $5 million.
  • GAAP gross margin is expected to be approximately 51.5 percent, and non-GAAP gross margin is expected to be approximately 52 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 $52.5 million; non-GAAP operating expenses are expected to be approximately $44.5 million. Non-GAAP expenses are expected to exclude about $8 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/tVwwQxvn. 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 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, that revenues have bottomed and that a recovery is underway are forward-looking statements reflecting management's current expectations and beliefs. These 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 economic 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, 2023. 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. All other trademarks are property of their respective owners.

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
 
 
Three Months Ended
March 31, 2023 December 31, 2022 March 31, 2022
NET REVENUES

$

106,297

 

$

124,770

 

$

182,149

 

 
COST OF REVENUES

 

52,340

 

 

57,416

 

 

81,474

 

 
GROSS PROFIT

 

53,957

 

 

67,354

 

 

100,675

 

 
OPERATING EXPENSES:
Research and development

 

23,981

 

 

23,504

 

 

23,678

 

Sales and marketing

 

15,885

 

 

15,493

 

 

16,155

 

General and administrative

 

8,334

 

 

7,465

 

 

9,614

 

Amortization of acquisition-related intangible assets

 

-

 

 

-

 

 

181

 

Total operating expenses

 

48,200

 

 

46,462

 

 

49,628

 

 
INCOME FROM OPERATIONS

 

5,757

 

 

20,892

 

 

51,047

 

 
OTHER INCOME

 

1,714

 

 

785

 

 

554

 

 
INCOME BEFORE INCOME TAXES

 

7,471

 

 

21,677

 

 

51,601

 

 
PROVISION (BENEFIT) FOR INCOME TAXES

 

596

 

 

(1,138

)

 

5,353

 

 
NET INCOME

$

6,875

 

$

22,815

 

$

46,248

 

 
EARNINGS PER SHARE:
Basic

$

0.12

 

$

0.40

 

$

0.78

 

Diluted

$

0.12

 

$

0.40

 

$

0.77

 

 
SHARES USED IN PER-SHARE CALCULATION:
Basic

 

57,105

 

 

57,094

 

 

59,238

 

Diluted

 

57,579

 

 

57,535

 

 

60,107

 

 
 
 
SUPPLEMENTAL INFORMATION: Three Months Ended
March 31, 2023 December 31, 2022 March 31, 2022
Stock-based compensation expenses included in:
Cost of revenues

$

301

 

$

405

 

$

320

 

Research and development

 

2,668

 

 

2,716

 

 

3,055

 

Sales and marketing

 

1,653

 

 

1,643

 

 

1,948

 

General and administrative

 

2,746

 

 

1,890

 

 

3,690

 

Total stock-based compensation expense

$

7,368

 

$

6,654

 

$

9,013

 

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

$

482

 

$

482

 

$

482

 

 
 
Three Months Ended
REVENUE MIX BY END MARKET March 31, 2023 December 31, 2022 March 31, 2022
Communications

 

28

%

 

23

%

 

26

%

Computer

 

14

%

 

12

%

 

10

%

Consumer

 

24

%

 

26

%

 

35

%

Industrial

 

34

%

 

39

%

 

29

%

 
POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)
 
Three Months Ended
March 31, 2023 December 31, 2022 March 31, 2022
RECONCILIATION OF GROSS PROFIT
GAAP gross profit

$

53,957

 

$

67,354

 

$

100,675

 

GAAP gross margin

 

50.8

%

 

54.0

%

 

55.3

%

 
Stock-based compensation included in cost of revenues

 

301

 

 

405

 

 

320

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

482

 

 
Non-GAAP gross profit

$

54,740

 

$

68,241

 

$

101,477

 

Non-GAAP gross margin

 

51.5

%

 

54.7

%

 

55.7

%

 
 
Three Months Ended
RECONCILIATION OF OPERATING EXPENSES March 31, 2023 December 31, 2022 March 31, 2022
GAAP operating expenses

$

48,200

 

$

46,462

 

$

49,628

 

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

 

2,668

 

 

2,716

 

 

3,055

 

Sales and marketing

 

1,653

 

 

1,643

 

 

1,948

 

General and administrative

 

2,746

 

 

1,890

 

 

3,690

 

Total

 

7,067

 

 

6,249

 

 

8,693

 

 
Amortization of acquisition-related intangible assets

 

-

 

 

-

 

 

181

 

 
Non-GAAP operating expenses

$

41,133

 

$

40,213

 

$

40,754

 

 
 
Three Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS March 31, 2023 December 31, 2022 March 31, 2022
GAAP income from operations

$

5,757

 

$

20,892

 

$

51,047

 

GAAP operating margin

 

5.4

%

 

16.7

%

 

28.0

%

 
Add: Total stock-based compensation

 

7,368

 

 

6,654

 

 

9,013

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

663

 

 
Non-GAAP income from operations

$

13,607

 

$

28,028

 

$

60,723

 

Non-GAAP operating margin

 

12.8

%

 

22.5

%

 

33.3

%

 
 
Three Months Ended
RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES March 31, 2023 December 31, 2022 March 31, 2022
GAAP provision (benefit) for income taxes

$

596

 

$

(1,138

)

$

5,353

 

GAAP effective tax rate

 

8.0

%

 

-5.2

%

 

10.4

%

 
Tax effect of adjustments to GAAP results

 

(501

)

 

(2,085

)

 

(122

)

 
Non-GAAP provision for income taxes

$

1,097

 

$

947

 

$

5,475

 

Non-GAAP effective tax rate

 

7.2

%

 

3.3

%

 

8.9

%

 
 
Three Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED) March 31, 2023 December 31, 2022 March 31, 2022
GAAP net income

$

6,875

 

$

22,815

 

$

46,248

 

 
Adjustments to GAAP net income
Stock-based compensation

 

7,368

 

 

6,654

 

 

9,013

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

663

 

Tax effect of items excluded from non-GAAP results

 

(501

)

 

(2,085

)

 

(122

)

 
Non-GAAP net income

$

14,224

 

$

27,866

 

$

55,802

 

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

 

57,579

 

 

57,535

 

 

60,107

 

 
Non-GAAP net income per share (diluted)

$

0.25

 

$

0.48

 

$

0.93

 

 
GAAP net income per share (diluted)

$

0.12

 

$

0.40

 

$

0.77

 

 
 
POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
March 31, 2023 December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

94,189

 

$

105,372

 

Short-term marketable securities

 

264,439

 

 

248,441

 

Accounts receivable, net

 

20,585

 

 

20,836

 

Inventories

 

142,444

 

 

135,420

 

Prepaid expenses and other current assets

 

17,538

 

 

15,004

 

Total current assets

 

539,195

 

 

525,073

 

 
PROPERTY AND EQUIPMENT, net

 

173,506

 

 

176,681

 

INTANGIBLE ASSETS, net

 

6,054

 

 

6,597

 

GOODWILL

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

19,771

 

 

19,034

 

OTHER ASSETS

 

21,030

 

 

20,862

 

Total assets

$

851,405

 

$

840,096

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

34,694

 

$

30,088

 

Accrued payroll and related expenses

 

13,442

 

 

14,778

 

Taxes payable

 

667

 

 

938

 

Other accrued liabilities

 

14,259

 

 

12,572

 

Total current liabilities

 

63,062

 

 

58,376

 

 
LONG-TERM LIABILITIES:
Income taxes payable

 

15,741

 

 

15,757

 

Other liabilities

 

10,300

 

 

10,747

 

Total liabilities

 

89,103

 

 

84,880

 

 
STOCKHOLDERS' EQUITY:
Common stock

 

23

 

 

24

 

Additional paid-in capital

 

8,780

 

 

-

 

Accumulated other comprehensive loss

 

(5,044

)

 

(7,344

)

Retained earnings

 

758,543

 

 

762,536

 

Total stockholders' equity

 

762,302

 

 

755,216

 

Total liabilities and stockholders' equity

$

851,405

 

$

840,096

 

 
POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended
March 31, 2023 December 31, 2022 March 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

6,875

 

$

22,815

 

$

46,248

 

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

 

8,961

 

 

8,875

 

 

8,408

 

Amortization of intangible assets

 

543

 

 

544

 

 

724

 

Loss on disposal of property and equipment

 

7

 

 

209

 

 

75

 

Stock-based compensation expense

 

7,368

 

 

6,654

 

 

9,013

 

Amortization of premium on marketable securities

 

404

 

 

654

 

 

937

 

Deferred income taxes

 

(738

)

 

4,824

 

 

(936

)

Increase (decrease) in accounts receivable allowance for credit losses

 

(454

)

 

-

 

 

75

 

Change in operating assets and liabilities:
Accounts receivable

 

705

 

 

(4,761

)

 

10,660

 

Inventories

 

(7,024

)

 

(15,328

)

 

(3,849

)

Prepaid expenses and other assets

 

(2,302

)

 

(1,085

)

 

1,552

 

Accounts payable

 

2,926

 

 

2,038

 

 

(1,709

)

Taxes payable and other accrued liabilities

 

(686

)

 

(1,341

)

 

3,399

 

Net cash provided by operating activities

 

16,585

 

 

24,098

 

 

74,597

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment

 

(4,082

)

 

(5,767

)

 

(14,700

)

Proceeds from sale of property and equipment

 

-

 

 

-

 

 

1,202

 

Purchases of marketable securities

 

(36,922

)

 

(28,576

)

 

(15,121

)

Proceeds from sales and maturities of marketable securities

 

22,693

 

 

11,151

 

 

108,817

 

Net cash provided by (used in) investing activities

 

(18,311

)

 

(23,192

)

 

80,198

 

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

 

3,098

 

 

-

 

 

3,057

 

Repurchase of common stock

 

(1,687

)

 

(18,745

)

 

(134,689

)

Payments of dividends to stockholders

 

(10,868

)

 

(10,263

)

 

(10,656

)

Net cash used in financing activities

 

(9,457

)

 

(29,008

)

 

(142,288

)

 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(11,183

)

 

(28,102

)

 

12,507

 

 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

105,372

 

 

133,474

 

 

158,117

 

 
CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

94,189

 

$

105,372

 

$

170,624

 

 

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

Source: Power Integrations, Inc.