Power Integrations Reports Third-Quarter Financial Results
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 EXPENSESSeptember 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
$
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
$
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
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