Power Integrations Reports Third-Quarter Financial Results

Revenues increased six percent year-over-year to $121.1 million; GAAP earnings were $0.24 per diluted share; non-GAAP earnings were $0.40 per diluted share

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended September 30, 2020. Net revenues for the third quarter were $121.1 million, up 13 percent compared to the prior quarter and up six percent from the third quarter of 2019. Net income for the third quarter was $14.8 million or $0.24 per diluted share compared to $0.22 per diluted share in the prior quarter and $0.29 per diluted share in the third quarter of 2019. (Per-share measures for all periods have been adjusted for the 2:1 stock split effected as a stock dividend in August 2020.) Cash flow from operations for the third quarter was $16.2 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 third quarter of 2020 was $24.2 million or $0.40 per diluted share compared with $0.33 per diluted share in the prior quarter and $0.39 per diluted share in the third 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: "Third-quarter revenues exceeded our expectations as we saw continued growth in fast charging for mobile devices as well as improved demand from the appliance market. Distribution sell-through strengthened considerably compared to the prior quarter, and we expect healthy sequential revenue growth in the fourth quarter. At the midpoint of our fourth-quarter revenue range, we would achieve double-digit revenue growth for the full year."

Power Integrations paid a cash dividend of $0.11 per share (post-split) on September 30, 2020. The company will pay another dividend of $0.11 per share on December 31, 2020 to stockholders of record as of November 30, 2020.

Financial Outlook

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

• Revenues are expected to be $130 million plus or minus $5 million.
• GAAP gross margin is expected to be approximately 49 percent, and non-GAAP gross margin is expected to be approximately 50 percent. (The difference between the expected GAAP and non-GAAP gross margins comprises approximately 0.6 percentage points from amortization of acquisition-related intangible assets and 0.4 percentage points from stock-based compensation.)
• GAAP operating expenses are expected to be approximately $45 million; non-GAAP operating expenses are expected to be approximately $37 million. (Non-GAAP expenses are expected to exclude approximately $7.8 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/5339866. 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 fourth-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 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		Nine Months Ended
		September 30, 2020	June 30, 2020	September 30, 2019		September 30, 2020	September 30, 2019
NET REVENUES	$	121,129		$	106,832		$	114,159		$	337,625		$	306,212
COST OF REVENUES		61,560			53,296			56,028			168,040			151,035
GROSS PROFIT		59,569			53,536			58,131			169,585			155,177
OPERATING EXPENSES:
Research and development		20,868			19,770			17,957			59,790			55,172
Sales and marketing		13,442			12,807			13,074			39,465			38,479
General and administrative		10,302			7,804			9,224			26,867			26,948
Amortization of acquisition-related intangible assets		216			230			378			703			1,199
Total operating expenses		44,828			40,611			40,633			126,825			121,798
INCOME FROM OPERATIONS		14,741			12,925			17,498			42,760			33,379
OTHER INCOME		877			1,480			1,078			4,134			3,540
INCOME BEFORE INCOME TAXES		15,618			14,405			18,576			46,894			36,919
PROVISION FOR INCOME TAXES		798			1,213			1,477			2,996			1,742
NET INCOME	$	14,820		$	13,192		$	17,099		$	43,898		$	35,177
EARNINGS PER SHARE:
Basic	$	0.25		$	0.22		$	0.29		$	0.74		$	0.60
Diluted	$	0.24		$	0.22		$	0.29		$	0.72		$	0.59
SHARES USED IN PER-SHARE CALCULATION:
Basic		59,823			59,712			58,770			59,582			58,426
Diluted		60,852			60,624			59,732			60,668			59,418
SUPPLEMENTAL INFORMATION:	Three Months Ended	Nine Months Ended
September 30, 2020	June 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Stock-based compensation expenses included in:
Cost of revenues	$	602		$	252		$	280		$	1,250		$	824
Research and development		2,976			2,351			1,893			7,436			5,669
Sales and marketing		1,900			1,258			1,211			4,550			3,413
General and administrative		3,880			2,120			1,722			8,813			5,103
Total stock-based compensation expense	$	9,358		$	5,981		$	5,106		$	22,049		$	15,009
Cost of revenues includes:
Amortization of acquisition-related intangible assets	$	799		$	799		$	940		$	2,397		$	2,528
Three Months Ended	Nine Months Ended
REVENUE MIX BY END MARKET	September 30, 2020	June 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
Communications		32	%		28	%		29	%		28	%		24	%
Computer		9	%		6	%		5	%		6	%		5	%
Consumer		31	%		31	%		32	%		34	%		36	%
Industrial		28	%		35	%		34	%		32	%		35	%

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)
			Three Months Ended		Nine Months Ended
			September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
RECONCILIATION OF GROSS PROFIT
GAAP gross profit	$	59,569		$	53,536		$	58,131		$	169,585		$	155,177
GAAP gross margin		49.2	%		50.1	%		50.9	%		50.2	%		50.7	%
Stock-based compensation included in cost of revenues		602			252			280			1,250			824
Amortization of acquisition-related intangible assets		799			799			940			2,397			2,528
Non-GAAP gross profit	$	60,970		$	54,587		$	59,351		$	173,232		$	158,529
Non-GAAP gross margin		50.3	%		51.1	%		52.0	%		51.3	%		51.8	%
Three Months Ended		Nine Months Ended
RECONCILIATION OF OPERATING EXPENSES	September 30, 2020		June 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
GAAP operating expenses	$	44,828		$	40,611		$	40,633		$	126,825		$	121,798
Less:Stock-based compensation expense included in operating expenses
Research and development		2,976			2,351			1,893			7,436			5,669
Sales and marketing		1,900			1,258			1,211			4,550			3,413
General and administrative		3,880			2,120			1,722			8,813			5,103
Total		8,756			5,729			4,826			20,799			14,185
Amortization of acquisition-related intangible assets		216			230			378			703			1,199
Non-GAAP operating expenses	$	35,856		$	34,652		$	35,429		$	105,323		$	106,414
Three Months Ended	Nine Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS	September 30, 2020	June 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
GAAP income from operations	$	14,741		$	12,925		$	17,498		$	42,760		$	33,379
GAAP operating margin		12.2	%		12.1	%		15.3	%		12.7	%		10.9	%
Add:Total stock-based compensation		9,358			5,981			5,106			22,049			15,009
Amortization of acquisition-related intangible assets		1,015			1,029			1,318			3,100			3,727
Non-GAAP income from operations	$	25,114		$	19,935		$	23,922		$	67,909		$	52,115
Non-GAAP operating margin		20.7	%		18.7	%		21.0	%		20.1	%		17.0	%
Three Months Ended	Nine Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES	September 30, 2020	June 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
GAAP provision for income taxes	$	798		$	1,213		$	1,477		$	2,996		$	1,742
GAAP effective tax rate		5.1	%		8.4	%		8.0	%		6.4	%		4.7	%
Tax effect of adjustments to GAAP results		(971	)		(272	)		(266	)		(1,994	)		(1,902	)
Non-GAAP provision for income taxes	$	1,769		$	1,485		$	1,743		$	4,990		$	3,644
Non-GAAP effective tax rate		6.8	%		6.9	%		7.0	%		6.9	%		6.5	%
Three Months Ended	Nine Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)	September 30, 2020	June 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
GAAP net income	$	14,820		$	13,192		$	17,099		$	43,898		$	35,177
Adjustments to GAAP net income
Stock-based compensation		9,358			5,981			5,106			22,049			15,009
Amortization of acquisition-related intangible assets		1,015			1,029			1,318			3,100			3,727
Tax effect of items excluded from non-GAAP results		(971	)		(272	)		(266	)		(1,994	)		(1,902	)
Non-GAAP net income	$	24,222		$	19,930		$	23,257		$	67,053		$	52,011
Average shares outstanding for calculation
of non-GAAP net income per share (diluted)		60,852			60,624			59,732			60,668			59,418
Non-GAAP net income per share (diluted)	$	0.40		$	0.33		$	0.39		$	1.11		$	0.88
GAAP net income per share	$	0.24		$	0.22		$	0.29		$	0.72		$	0.59

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2020	June 30, 2020	December 31, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	232,014		$	251,325		$	178,690
Short-term marketable securities		211,926			194,556			232,398
Accounts receivable, net		29,447			12,872			24,274
Inventories		104,805			103,963			90,380
Prepaid expenses and other current assets		14,755			14,512			15,597
Total current assets		592,947			577,228			541,339
PROPERTY AND EQUIPMENT, net		147,719			138,572			116,619
INTANGIBLE ASSETS, net		13,582			14,658			16,865
GOODWILL		91,849			91,849			91,849
DEFERRED TAX ASSETS		2,660			1,514			2,836
OTHER ASSETS		27,311			29,956			34,388
Total assets	$	876,068		$	853,777		$	803,896
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	43,623		$	42,871		$	27,433
Accrued payroll and related expenses		12,892			14,365			13,408
Taxes payable		379			363			584
Other accrued liabilities		9,357			7,156			9,051
Total current liabilities		66,251			64,755			50,476
LONG-TERM LIABILITIES:
Income taxes payable		15,497			15,329			14,617
Deferred tax liabilities		87			121			164
Other liabilities		14,436			14,100			14,093
Total liabilities		96,271			94,305			79,350
STOCKHOLDERS' EQUITY:
Common stock		28			28			28
Additional paid-in capital		181,192			168,470			152,117
Accumulated other comprehensive loss		(2,355	)		(1,720	)		(3,130	)
Retained earnings		600,932			592,694			575,531
Total stockholders' equity		779,797			759,472			724,546
Total liabilities and stockholders' equity	$	876,068		$	853,777		$	803,896

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended	Nine Months Ended
September 30, 2020	June 30, 2020	September 30, 2019	September 30, 2020	September 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	14,820		$	13,192		$	17,099		$	43,898		$	35,177
Adjustments to reconcile net income to cash provided by operating activities
Depreciation		6,002			5,581			4,831			17,071			14,262
Amortization of intangible assets		1,076			1,090			1,357			3,283			3,840
Loss on disposal of property and equipment		19			262			62			311			214
Stock-based compensation expense		9,358			5,981			5,106			22,049			15,009
Amortization of premium (accretion of discount) on marketable securities		204			167			(66	)		525			(296	)
Deferred income taxes		(1,179	)		184			(381	)		100			1,278
Increase in accounts receivable allowances for credit losses		309			-			-			155			57
Change in operating assets and liabilities:
Accounts receivable		(16,884	)		7,725			(351	)		(5,328	)		(14,804	)
Inventories		(842	)		(7,330	)		487			(14,425	)		(7,853	)
Prepaid expenses and other assets		2,041			8,084			580			6,133			(3,034	)
Accounts payable		504			(2,967	)		(6,789	)		6,365			(2,636	)
Taxes payable and other accrued liabilities		801			4,684			(91	)		(864	)		1,126
Net cash provided by operating activities		16,229			36,653			21,844			79,273			42,340
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(14,116	)		(10,019	)		(5,977	)		(35,738	)		(14,325	)
Proceeds from sale of property and equipment		-			331			-			331			-
Acquisition of technology licenses		-			-			(100	)		-			(351	)
Purchases of marketable securities		(46,239	)		(2,989	)		(80,864	)		(66,066	)		(135,288	)
Proceeds from sales and maturities of marketable securities		28,033			43,015			46,762			86,995			66,184
Net cash provided by (used in) investing activities		(32,322	)		30,338			(40,179	)		(14,478	)		(83,780	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock		3,364			769			4,005			9,662			9,683
Repurchase of common stock		-			(623	)		-			(2,636	)		(7,302	)
Payments of dividends to stockholders		(6,582	)		(6,271	)		(4,999	)		(18,497	)		(14,916	)
Net cash used in financing activities		(3,218	)		(6,125	)		(994	)		(11,471	)		(12,535	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(19,311	)		60,866			(19,329	)		53,324			(53,975	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		251,325			190,459			99,491			178,690			134,137
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	232,014		$	251,325		$	80,162		$	232,014		$	80,162

View source version on businesswire.com: https://www.businesswire.com/news/home/20201029006158/en/

Joe Shiffler
Power Integrations, Inc.
(408) 414-8528
[email protected]

Source: Power Integrations, Inc.

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