POWI Power Integrations Inc

Quarterly revenues were $91.7 million; GAAP earnings were $0.07 per diluted share; non-GAAP earnings were $0.18 per diluted share

Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended March 31, 2024. Net revenues for the first quarter were $91.7 million, up two percent from the prior quarter and down 14 percent from the first quarter of 2023. GAAP net income for the first quarter was $4.0 million or $0.07 per diluted share compared to $0.25 per diluted share in the prior quarter and $0.12 per diluted share in the first quarter of 2023. Cash flow from operations for the first quarter was $15.9 million.

In addition to its GAAP results, the company provided non-GAAP measures that exclude stock-based compensation, amortization of acquisition-related intangible assets and the related tax effects. Non-GAAP net income for the first quarter of 2024 was $10.5 million or $0.18 per diluted share compared to $0.22 per diluted share in the prior quarter and $0.25 per diluted share in the first quarter of 2023. A reconciliation of GAAP to non-GAAP financial results is included with the tables accompanying this press release.

Commented Balu Balakrishnan, chairman and CEO of Power Integrations: “Orders have improved in recent months as supply-chain inventories continue to normalize. We expect sequentially higher revenues in the second quarter, accompanied by a further increase in gross margin driven by the dollar/yen exchange rate and higher manufacturing utilization.”

Mr. Balakrishnan continued: “We further advanced the state of the art in power-conversion technology in the first quarter with the introduction of InnoMux™-2. The new ICs provide multiple, independently regulated DC outputs, eliminating the need for separate DC-DC stages and greatly increasing efficiency. The efficiency of InnoMux-2 is further enhanced by our PowiGaN™ transistors, bringing total system efficiency to more than 90 percent. Meanwhile, our acquisition of the assets of Odyssey Semiconductor augments our efforts to develop high-current GaN and bring the benefits of GaN technology to much higher-power applications.”

Additional Highlights

• Power Integrations has agreed to acquire the assets of Odyssey Semiconductor Technologies, augmenting the company’s development of high-power gallium-nitride (GaN) switching technology. The purchase is expected to close in July 2024.
• During the first quarter Power Integrations repurchased 207 thousand shares of its common stock for $14.6 million; the company had $11.3 million remaining on its repurchase authorization as of March 31, 2024.
• Power Integrations paid a dividend of $0.20 per share on March 28, 2024; a dividend of $0.20 per share will be paid on June 28, 2024, to stockholders of record as of May 31, 2024.

Financial Outlook

The company issued the following forecast for the second quarter of 2024:

• Revenues are expected to be $105 million plus or minus $5 million.
• GAAP gross margin is expected to be between 52.5 percent and 53.0 percent; non-GAAP gross margin is expected to be between 53.5 percent and 54.0 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 between $54.5 million and $55 million; non-GAAP operating expenses are expected to be between $44.5 million and $45 million. Non-GAAP operating expenses are expected to exclude approximately $10 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://registrations.events/direct/Q4I245880. 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 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 company’s 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 on February 12, 2024. 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, InnoMux, PowiGaN 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, 2024 December 31, 2023 March 31, 2023 NET REVENUES

$

91,688

 

$

89,507

 

$

106,297

 

  COST OF REVENUES

 

43,908

 

 

43,299

 

 

52,340

 

  GROSS PROFIT

 

47,780

 

 

46,208

 

 

53,957

 

  OPERATING EXPENSES: Research and development

 

23,225

 

 

23,505

 

 

23,981

 

Sales and marketing

 

15,722

 

 

15,472

 

 

15,885

 

General and administrative

 

8,363

 

 

8,282

 

 

8,334

 

Total operating expenses

 

47,310

 

 

47,259

 

 

48,200

 

  INCOME (LOSS) FROM OPERATIONS

 

470

 

 

(1,051

)

 

5,757

 

  OTHER INCOME

 

3,502

 

 

3,282

 

 

1,714

 

  INCOME BEFORE INCOME TAXES

 

3,972

 

 

2,231

 

 

7,471

 

  PROVISION (BENEFIT) FOR INCOME TAXES

 

18

 

 

(12,040

)

 

596

 

  NET INCOME

$

3,954

 

$

14,271

 

$

6,875

 

  EARNINGS PER SHARE: Basic

$

0.07

 

$

0.25

 

$

0.12

 

Diluted

$

0.07

 

$

0.25

 

$

0.12

 

  SHARES USED IN PER-SHARE CALCULATION: Basic

 

56,833

 

 

56,937

 

 

57,105

 

Diluted

 

57,132

 

 

57,272

 

 

57,579

 

      SUPPLEMENTAL INFORMATION: Three Months Ended March 31, 2024 December 31, 2023 March 31, 2023 Stock-based compensation expenses included in: Cost of revenues

$

346

 

$

499

 

$

301

 

Research and development

 

2,425

 

 

2,947

 

 

2,668

 

Sales and marketing

 

1,604

 

 

1,827

 

 

1,653

 

General and administrative

 

2,039

 

 

2,230

 

 

2,746

 

Total stock-based compensation expense

$

6,414

 

$

7,503

 

$

7,368

 

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

$

482

 

$

482

 

$

482

 

    Three Months Ended REVENUE MIX BY END MARKET March 31, 2024 December 31, 2023 March 31, 2023 Communications

 

11

%

 

27

%

 

28

%

Computer

 

11

%

 

9

%

 

14

%

Consumer

 

41

%

 

29

%

 

24

%

Industrial

 

37

%

 

35

%

 

34

%

  POWER INTEGRATIONS, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS (in thousands, except per-share amounts)   Three Months Ended March 31, 2024 December 31, 2023 March 31, 2023 RECONCILIATION OF GROSS PROFIT GAAP gross profit

$

47,780

 

$

46,208

 

$

53,957

 

GAAP gross margin

 

52.1

%

 

51.6

%

 

50.8

%

  Stock-based compensation included in cost of revenues

 

346

 

 

499

 

 

301

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

482

 

  Non-GAAP gross profit

$

48,608

 

$

47,189

 

$

54,740

 

Non-GAAP gross margin

 

53.0

%

 

52.7

%

 

51.5

%

    Three Months Ended RECONCILIATION OF OPERATING EXPENSES March 31, 2024 December 31, 2023 March 31, 2023 GAAP operating expenses

$

47,310

 

$

47,259

 

$

48,200

 

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

 

2,425

 

 

2,947

 

 

2,668

 

Sales and marketing

 

1,604

 

 

1,827

 

 

1,653

 

General and administrative

 

2,039

 

 

2,230

 

 

2,746

 

Total

 

6,068

 

 

7,004

 

 

7,067

 

  Non-GAAP operating expenses

$

41,242

 

$

40,255

 

$

41,133

 

    Three Months Ended RECONCILIATION OF INCOME FROM OPERATIONS March 31, 2024 December 31, 2023 March 31, 2023 GAAP income (loss) from operations

$

470

 

$

(1,051

)

$

5,757

 

GAAP operating margin

 

0.5

%

 

-1.2

%

 

5.4

%

  Add: Stock-based compensation

 

6,414

 

 

7,503

 

 

7,368

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

482

 

  Non-GAAP income from operations

$

7,366

 

$

6,934

 

$

13,607

 

Non-GAAP operating margin

 

8.0

%

 

7.7

%

 

12.8

%

    Three Months Ended RECONCILIATION OF PROVISION FOR INCOME TAXES March 31, 2024 December 31, 2023 March 31, 2023 GAAP provision (benefit) for income taxes

$

18

 

$

(12,040

)

$

596

 

GAAP effective tax rate

 

0.5

%

 

-539.7

%

 

8.0

%

  Tax effect of adjustments to GAAP results

 

(358

)

 

(9,556

)

 

(501

)

  Non-GAAP provision (benefit) for income taxes

$

376

 

$

(2,484

)

$

1,097

 

Non-GAAP effective tax rate

 

3.5

%

 

-24.3

%

 

7.2

%

    Three Months Ended RECONCILIATION OF NET INCOME PER SHARE (DILUTED) March 31, 2024 December 31, 2023 March 31, 2023 GAAP net income

$

3,954

 

$

14,271

 

$

6,875

 

  Adjustments to GAAP net income Stock-based compensation

 

6,414

 

 

7,503

 

 

7,368

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

482

 

Tax effect of items excluded from non-GAAP results

 

(358

)

 

(9,556

)

 

(501

)

  Non-GAAP net income

$

10,492

 

$

12,700

 

$

14,224

 

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

 

57,132

 

 

57,272

 

 

57,579

 

  Non-GAAP net income per share (diluted)

$

0.18

 

$

0.22

 

$

0.25

 

  GAAP net income per share (diluted)

$

0.07

 

$

0.25

 

$

0.12

 

  POWER INTEGRATIONS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)     March 31, 2024 December 31, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents

$

56,443

 

$

63,929

 

Short-term marketable securities

 

243,163

 

 

247,640

 

Accounts receivable, net

 

12,279

 

 

14,674

 

Inventories

 

167,865

 

 

163,164

 

Prepaid expenses and other current assets

 

22,714

 

 

22,193

 

Total current assets

 

502,464

 

 

511,600

 

  PROPERTY AND EQUIPMENT, net

 

159,945

 

 

164,213

 

INTANGIBLE ASSETS, net

 

3,881

 

 

4,424

 

GOODWILL

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

29,654

 

 

28,325

 

OTHER ASSETS

 

17,983

 

 

19,457

 

Total assets

$

805,776

 

$

819,868

 

  LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable

$

27,361

 

$

26,390

 

Accrued payroll and related expenses

 

11,822

 

 

13,551

 

Taxes payable

 

878

 

 

1,016

 

Other accrued liabilities

 

9,474

 

 

7,910

 

Total current liabilities

 

49,535

 

 

48,867

 

  LONG-TERM LIABILITIES: Income taxes payable

 

6,193

 

 

6,244

 

Other liabilities

 

11,870

 

 

12,516

 

Total liabilities

 

67,598

 

 

67,627

 

  STOCKHOLDERS' EQUITY: Common stock

 

22

 

 

23

 

Additional paid-in capital

 

-

 

 

-

 

Accumulated other comprehensive loss

 

(2,559

)

 

(1,462

)

Retained earnings

 

740,715

 

 

753,680

 

Total stockholders' equity

 

738,178

 

 

752,241

 

Total liabilities and stockholders' equity

$

805,776

 

$

819,868

 

  POWER INTEGRATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)   Three Months Ended March 31, 2024 December 31, 2023 March 31, 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income

$

3,954

 

$

14,271

 

$

6,875

 

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

 

8,715

 

 

8,887

 

 

8,961

 

Amortization of intangible assets

 

543

 

 

543

 

 

543

 

Loss on disposal of property and equipment

 

8

 

 

14

 

 

7

 

Stock-based compensation expense

 

6,414

 

 

7,503

 

 

7,368

 

Amortization of premium (accretion of discount) on marketable securities

 

(496

)

 

(497

)

 

404

 

Deferred income taxes

 

(1,330

)

 

705

 

 

(738

)

Increase (decrease) in accounts receivable allowance for credit losses

 

163

 

 

-

 

 

(454

)

Change in operating assets and liabilities: Accounts receivable

 

2,232

 

 

13,865

 

 

705

 

Inventories

 

(4,701

)

 

(12,918

)

 

(7,024

)

Prepaid expenses and other assets

 

846

 

 

(346

)

 

(2,302

)

Accounts payable

 

1,294

 

 

(2,553

)

 

2,926

 

Taxes payable and other accrued liabilities

 

(1,737

)

 

(13,207

)

 

(686

)

Net cash provided by operating activities

 

15,905

 

 

16,267

 

 

16,585

 

  CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment

 

(4,343

)

 

(6,143

)

 

(4,082

)

Purchases of marketable securities

 

(49,912

)

 

(18,196

)

 

(36,922

)

Proceeds from sales and maturities of marketable securities

 

54,198

 

 

36,045

 

 

22,693

 

Net cash provided by (used in) investing activities

 

(57

)

 

11,706

 

 

(18,311

)

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

 

2,691

 

 

-

 

 

3,098

 

Repurchase of common stock

 

(14,641

)

 

(47,444

)

 

(1,687

)

Payments of dividends to stockholders

 

(11,384

)

 

(11,343

)

 

(10,868

)

Net cash used in financing activities

 

(23,334

)

 

(58,787

)

 

(9,457

)

  NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(7,486

)

 

(30,814

)

 

(11,183

)

  CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

63,929

 

 

94,743

 

 

105,372

 

  CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

56,443

 

$

63,929

 

$

94,189

 

 

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