Power Integrations Reports Fourth-Quarter and Full-Year Financial Results
Power Integrations (NASDAQ: POWI) today announced financial results for the quarter and year ended December 31, 2022. Net revenues for the fourth quarter were $124.8 million, down 22 percent compared to the prior quarter and down 28 percent from the fourth quarter of 2021. Net income for the fourth quarter was $22.8 million or $0.40 per diluted share compared to $0.80 per diluted share in the prior quarter and $0.66 per diluted share in the fourth quarter of 2021. Cash flow from operations for the fourth quarter was $24.1 million.
For the full year, net revenues were $651.1 million dollars, down seven percent from the prior year. Net income for 2022 was $170.9 million or $2.93 per diluted share, compared to $2.67 per diluted share in the prior year. Cash flow from operations for the full year was $215.3 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, net other operating expenses of $1.1 million in the second quarter of 2022 stemming from a patent-litigation settlement and an offsetting recovery from the liquidation of SemiSouth Laboratories, and the tax effects of these items. Non-GAAP net income for the fourth quarter of 2022 was $27.9 million or $0.48 per diluted share compared to $0.84 per diluted share in the prior quarter and $0.83 per diluted share in the fourth quarter of 2021. Full-year non-GAAP net income was $191.9 million or $3.29 per diluted share compared to $3.26 per diluted share in the prior year. 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: “Our results and outlook reflect weaker demand across most end-markets, as well as excess inventory in the supply chain. However, distribution inventory decreased in the fourth quarter, with further improvement to come in the months ahead, and we expect revenues to bottom in the first quarter. While the demand environment remains uncertain, we are well positioned for a recovery with a strong pipeline of design activity and a broad range of growth drivers including our highly integrated GaN products, motor-drive, renewable energy, EVs and advanced charging for mobile devices.”
Additional Highlights
Power Integrations repurchased approximately 266,000 shares of its common stock during the fourth quarter for $18.7 million. The company had $81.3 million remaining on its repurchase authorization at quarter-end. The company paid a dividend of $0.18 per share on December 30, 2022. A dividend of $0.19 per share is to be paid on March 31, 2023, to stockholders of record as of February 28, 2023. In December, Power Integrations received Great Place to Work Certification™ following an anonymous survey in which 82 percent of the company’s employees said that Power Integrations is a great place to work – 25 points higher than the average U.S. company.Financial Outlook
The company issued the following forecast for the first quarter of 2023:
Revenues are expected to be $105 million plus or minus $5 million. GAAP gross margin is expected to be approximately 53 percent, and non-GAAP gross margin is expected to be approximately 53.5 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 $49 million and $49.5 million; non-GAAP operating expenses are expected to be between $42 million and $42.5 million. Non-GAAP expenses are expected to exclude about $7 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/iobnvsok. 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, net other operating expenses of $1.1 million in the second quarter of 2022 stemming from a patent-litigation settlement and an offsetting recovery from the liquidation of SemiSouth Laboratories, 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 first-quarter financial performance, revenue bottoming in the first quarter and being well positioned for a recovery 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, 2022. 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.
$
124,770
$
160,233
$
172,654
$
651,138
$
703,277
COST OF REVENUES
57,416
68,198
79,478
284,231
342,638
GROSS PROFIT
67,354
92,035
93,176
366,907
360,639
OPERATING EXPENSES: Research and development
23,504
23,205
22,028
93,894
84,933
Sales and marketing
15,493
14,700
15,590
62,333
60,037
General and administrative
7,465
5,759
11,073
28,897
39,840
Amortization of acquisition-related intangible assets
-
-
181
241
771
Other operating expenses, net
-
-
-
1,130
-
Total operating expenses
46,462
43,664
48,872
186,495
185,581
INCOME FROM OPERATIONS
20,892
48,371
44,304
180,412
175,058
OTHER INCOME
785
1,001
101
3,014
1,077
INCOME BEFORE INCOME TAXES
21,677
49,372
44,405
183,426
176,135
PROVISION (BENEFIT) FOR INCOME TAXES
(1,138
)
3,408
3,705
12,575
11,722
NET INCOME
$
22,815
$
45,964
$
40,700
$
170,851
$
164,413
EARNINGS PER SHARE: Basic
$
0.40
$
0.80
$
0.68
$
2.96
$
2.73
Diluted
$
0.40
$
0.80
$
0.66
$
2.93
$
2.67
SHARES USED IN PER-SHARE CALCULATION: Basic
57,094
57,172
60,259
57,801
60,327
Diluted
57,535
57,603
61,381
58,371
61,467
SUPPLEMENTAL INFORMATION: Three Months Ended Twelve Months Ended December 31, 2022 September 30, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Stock-based compensation expenses included in: Cost of revenues
$
405
$
172
$
424
$
1,132
$
2,359
Research and development
2,716
2,334
3,522
10,428
12,127
Sales and marketing
1,643
1,267
2,090
6,035
7,630
General and administrative
1,890
(755
)
4,248
4,769
15,493
Total stock-based compensation expense
$
6,654
$
3,018
$
10,284
$
22,364
$
37,609
Cost of revenues includes: Amortization of acquisition-related intangible assets
$
482
$
482
$
552
$
1,928
$
2,477
Three Months Ended Twelve Months Ended REVENUE MIX BY END MARKET December 31, 2022 September 30, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Communications
23
%
16
%
23
%
21
%
30
%
Computer
12
%
11
%
10
%
10
%
10
%
Consumer
26
%
32
%
35
%
33
%
32
%
Industrial
39
%
41
%
32
%
36
%
28
%
$
67,354
$
92,035
$
93,176
$
366,907
$
360,639
GAAP gross margin
54.0
%
57.4
%
54.0
%
56.3
%
51.3
%
Stock-based compensation included in cost of revenues
405
172
424
1,132
2,359
Amortization of acquisition-related intangible assets
482
482
552
1,928
2,477
Non-GAAP gross profit
$
68,241
$
92,689
$
94,152
$
369,967
$
365,475
Non-GAAP gross margin
54.7
%
57.8
%
54.5
%
56.8
%
52.0
%
Three Months Ended Twelve Months Ended RECONCILIATION OF OPERATING EXPENSES December 31, 2022 September 30, 2022 December 31, 2021 December 31, 2022 December 31, 2021 GAAP operating expenses$
46,462
$
43,664
$
48,872
$
186,495
$
185,581
Less: Stock-based compensation expense included in operating expenses Research and development
2,716
2,334
3,522
10,428
12,127
Sales and marketing
1,643
1,267
2,090
6,035
7,630
General and administrative
1,890
(755
)
4,248
4,769
15,493
Total
6,249
2,846
9,860
21,232
35,250
Amortization of acquisition-related intangible assets
-
-
181
241
771
Other operating expenses, net
-
-
-
1,130
-
Non-GAAP operating expenses
$
40,213
$
40,818
$
38,831
$
163,892
$
149,560
Three Months Ended Twelve Months Ended RECONCILIATION OF INCOME FROM OPERATIONS December 31, 2022 September 30, 2022 December 31, 2021 December 31, 2022 December 31, 2021 GAAP income from operations
$
20,892
$
48,371
$
44,304
$
180,412
$
175,058
GAAP operating margin
16.7
%
30.2
%
25.7
%
27.7
%
24.9
%
Add: Total stock-based compensation
6,654
3,018
10,284
22,364
37,609
Amortization of acquisition-related intangible assets
482
482
733
2,169
3,248
Other operating expenses, net
-
-
-
1,130
-
Non-GAAP income from operations
$
28,028
$
51,871
$
55,321
$
206,075
$
215,915
Non-GAAP operating margin
22.5
%
32.4
%
32.0
%
31.6
%
30.7
%
Three Months Ended Twelve Months Ended RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES December 31, 2022 September 30, 2022 December 31, 2021 December 31, 2022 December 31, 2021 GAAP provision (benefit) for income taxes$
(1,138
)
$
3,408
$
3,705
$
12,575
$
11,722
GAAP effective tax rate
-5.2
%
6.9
%
8.3
%
6.9
%
6.7
%
Tax effect of adjustments to GAAP results
(2,085
)
(1,116
)
(800
)
(4,582
)
(5,044
)
Non-GAAP provision for income taxes$
947
$
4,524
$
4,505
$
17,157
$
16,766
Non-GAAP effective tax rate
3.3
%
8.6
%
8.1
%
8.2
%
7.7
%
Three Months Ended Twelve Months Ended RECONCILIATION OF NET INCOME PER SHARE (DILUTED) December 31, 2022 September 30, 2022 December 31, 2021 December 31, 2022 December 31, 2021 GAAP net income$
22,815
$
45,964
$
40,700
$
170,851
$
164,413
Adjustments to GAAP net income Stock-based compensation
6,654
3,018
10,284
22,364
37,609
Amortization of acquisition-related intangible assets
482
482
733
2,169
3,248
Other operating expenses, net
-
-
-
1,130
-
Tax effect of items excluded from non-GAAP results
(2,085
)
(1,116
)
(800
)
(4,582
)
(5,044
)
Non-GAAP net income$
27,866
$
48,348
$
50,917
$
191,932
$
200,226
Average shares outstanding for calculation of non-GAAP net income per share (diluted)
57,535
57,603
61,381
58,371
61,467
Non-GAAP net income per share (diluted)
$
0.48
$
0.84
$
0.83
$
3.29
$
3.26
GAAP net income per share (diluted)
$
0.40
$
0.80
$
0.66
$
2.93
$
2.67
$
105,372
$
133,474
$
158,117
Short-term marketable securities
248,441
229,754
372,235
Accounts receivable, net
20,836
16,075
41,393
Inventories
135,420
120,092
99,266
Prepaid expenses and other current assets
15,004
12,634
15,804
Total current assets
525,073
512,029
686,815
PROPERTY AND EQUIPMENT, net
176,681
181,224
179,824
INTANGIBLE ASSETS, net
6,597
7,141
9,012
GOODWILL
91,849
91,849
91,849
DEFERRED TAX ASSETS
19,034
23,935
16,433
OTHER ASSETS
20,862
21,785
30,554
Total assets
$
840,096
$
837,963
$
1,014,487
LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable
$
30,088
$
29,521
$
43,721
Accrued payroll and related expenses
14,778
13,765
15,492
Taxes payable
938
2,960
1,210
Other accrued liabilities
12,572
12,613
11,898
Total current liabilities
58,376
58,859
72,321
LONG-TERM LIABILITIES: Income taxes payable
15,757
16,398
15,280
Other liabilities
10,747
12,424
14,854
Total liabilities
84,880
87,681
102,455
STOCKHOLDERS' EQUITY: Common stock
24
24
28
Additional paid-in capital
-
6,123
162,301
Accumulated other comprehensive loss
(7,344
)
(11,817
)
(3,737
)
Retained earnings
762,536
755,952
753,440
Total stockholders' equity
755,216
750,282
912,032
Total liabilities and stockholders' equity
$
840,096
$
837,963
$
1,014,487
$
22,815
$
45,964
$
40,700
$
170,851
$
164,413
Adjustments to reconcile net income to cash provided by operating activities Depreciation
8,875
8,881
8,054
34,930
31,454
Amortization of intangible assets
544
543
795
2,415
3,494
Loss on disposal of property and equipment
209
128
905
1,371
3,105
Stock-based compensation expense
6,654
3,018
10,284
22,364
37,609
Amortization of premium on marketable securities
654
771
815
3,292
1,590
Deferred income taxes
4,824
(4,108
)
(13,228
)
(2,566
)
(13,240
)
Increase in accounts receivable allowance for credit losses
-
431
1
690
18
Change in operating assets and liabilities: Accounts receivable
(4,761
)
11,474
(2,522
)
19,867
(5,501
)
Inventories
(15,328
)
(8,834
)
(7,452
)
(36,154
)
3,612
Prepaid expenses and other assets
(1,085
)
4,353
9,299
7,343
4,326
Accounts payable
2,038
(11,451
)
(2,566
)
(3,836
)
4,067
Taxes payable and other accrued liabilities
(1,341
)
(1,344
)
2,078
(5,224
)
(4,079
)
Net cash provided by operating activities
24,098
49,826
47,163
215,343
230,868
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment
(5,767
)
(5,500
)
(16,967
)
(39,211
)
(47,272
)
Proceeds from sale of property and equipment
-
-
-
1,202
35
Purchases of marketable securities
(28,576
)
(6,534
)
(172,115
)
(55,820
)
(554,018
)
Proceeds from sales and maturities of marketable securities
11,151
35,487
84,421
172,165
368,457
Net cash provided by (used in) investing activities
(23,192
)
23,453
(104,661
)
78,336
(232,798
)
CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock
-
3,105
-
6,162
7,710
Repurchase of common stock
(18,745
)
-
(37,773
)
(311,094
)
(73,938
)
Payments of dividends to stockholders
(10,263
)
(10,293
)
(9,047
)
(41,492
)
(32,599
)
Net cash used in financing activities
(29,008
)
(7,188
)
(46,820
)
(346,424
)
(98,827
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(28,102
)
66,091
(104,318
)
(52,745
)
(100,757
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
133,474
67,383
262,435
158,117
258,874
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
105,372
$
133,474
$
158,117
$
105,372
$
158,117
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