Power Integrations Reports First-Quarter Financial Results
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.
$
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
%
$
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
$
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
$
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
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