Power Integrations Reports Second-Quarter Financial Results
Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended June 30, 2022. Net revenues for the second quarter were $184.0 million, up one percent compared to the prior quarter and up two percent from the second quarter of 2021. Net income for the second quarter was $55.8 million or $0.96 per diluted share compared to $0.77 per diluted share in the prior quarter and $0.68 per diluted share in the second quarter of 2021. Cash flow from operations for the second quarter was $66.8 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 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 second quarter of 2022 was $59.9 million or $1.03 per diluted share compared with $0.93 per diluted share in the prior quarter and $0.83 per diluted share in the second quarter of 2021. 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 second-quarter revenues and third-quarter outlook reflect softness at Chinese smartphone customers as well as broader macroeconomic headwinds. Nevertheless, we grew our non-GAAP earnings per share by 24 percent year-over-year in the second quarter, generated $67 million in cash from operations and returned more than $160 million to stockholders through buybacks and dividends. While the near-term demand outlook has weakened, we continue to make great progress on long-term growth initiatives like automotive, motor drive, and expanding our portfolio of products incorporating our energy-efficient, proprietary GaN technology.”
Additional Highlights
Power Integrations repurchased 1.9 million shares of its common stock during the second quarter for $157.7 million, exhausting the company’s repurchase authorization. The company paid a dividend of $0.18 per share on June 30, 2022. A dividend of $0.18 per share is to be paid on September 30, 2022, to stockholders of record as of August 31, 2022.Financial Outlook
The company issued the following forecast for the third quarter of 2022:
Revenues are expected to be $165 million plus or minus five percent. GAAP gross margin is expected to be approximately 57.5 percent. Non-GAAP gross margin is expected to be approximately 58 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 $51 million; non-GAAP operating expenses are expected to be approximately $42.5 million. Non-GAAP expenses are expected to exclude approximately $8.5 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 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 third-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 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.
$
183,986
$
182,149
$
180,110
$
366,135
$
353,847
COST OF REVENUES
77,143
81,474
88,797
158,617
178,123
GROSS PROFIT
106,843
100,675
91,313
207,518
175,724
OPERATING EXPENSES: Research and development
23,507
23,678
21,741
47,185
41,768
Sales and marketing
15,985
16,155
15,097
32,140
29,004
General and administrative
6,059
9,614
9,306
15,673
19,381
Amortization of acquisition-related intangible assets
60
181
193
241
409
Other operating expenses, net
1,130
-
-
1,130
-
Total operating expenses
46,741
49,628
46,337
96,369
90,562
INCOME FROM OPERATIONS
60,102
51,047
44,976
111,149
85,162
OTHER INCOME
674
554
173
1,228
770
INCOME BEFORE INCOME TAXES
60,776
51,601
45,149
112,377
85,932
PROVISION FOR INCOME TAXES
4,952
5,353
3,268
10,305
4,253
NET INCOME
$
55,824
$
46,248
$
41,881
$
102,072
$
81,679
EARNINGS PER SHARE: Basic
$
0.97
$
0.78
$
0.69
$
1.75
$
1.35
Diluted
$
0.96
$
0.77
$
0.68
$
1.72
$
1.33
SHARES USED IN PER-SHARE CALCULATION: Basic
57,731
59,238
60,544
58,480
60,366
Diluted
58,305
60,107
61,466
59,192
61,481
SUPPLEMENTAL INFORMATION: Three Months Ended Six Months Ended June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Stock-based compensation expenses included in: Cost of revenues
$
235
$
320
$
640
$
555
$
1,271
Research and development
2,323
3,055
3,159
5,378
5,550
Sales and marketing
1,177
1,948
1,725
3,125
3,339
General and administrative
(56
)
3,690
3,676
3,634
7,520
Total stock-based compensation expense
$
3,679
$
9,013
$
9,200
$
12,692
$
17,680
Cost of revenues includes: Amortization of acquisition-related intangible assets
$
482
$
482
$
619
$
964
$
1,373
Three Months Ended Six Months Ended REVENUE MIX BY END MARKET June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Communications
18
%
26
%
35
%
22
%
37
%
Computer
9
%
10
%
8
%
10
%
8
%
Consumer
38
%
35
%
31
%
36
%
30
%
Industrial
35
%
29
%
26
%
32
%
25
%
$
106,843
$
100,675
$
91,313
$
207,518
$
175,724
GAAP gross margin
58.1
%
55.3
%
50.7
%
56.7
%
49.7
%
Stock-based compensation included in cost of revenues
235
320
640
555
1,271
Amortization of acquisition-related intangible assets
482
482
619
964
1,373
Non-GAAP gross profit
$
107,560
$
101,477
$
92,572
$
209,037
$
178,368
Non-GAAP gross margin
58.5
%
55.7
%
51.4
%
57.1
%
50.4
%
Three Months Ended Six Months Ended RECONCILIATION OF OPERATING EXPENSES June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021 GAAP operating expenses$
46,741
$
49,628
$
46,337
$
96,369
$
90,562
Less: Stock-based compensation expense included in operating expenses Research and development
2,323
3,055
3,159
5,378
5,550
Sales and marketing
1,177
1,948
1,725
3,125
3,339
General and administrative
(56
)
3,690
3,676
3,634
7,520
Total
3,444
8,693
8,560
12,137
16,409
Amortization of acquisition-related intangible assets
60
181
193
241
409
Other operating expenses, net
1,130
-
-
1,130
-
Non-GAAP operating expenses
$
42,107
$
40,754
$
37,584
$
82,861
$
73,744
Three Months Ended Six Months Ended RECONCILIATION OF INCOME FROM OPERATIONS June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021 GAAP income from operations
$
60,102
$
51,047
$
44,976
$
111,149
$
85,162
GAAP operating margin
32.7
%
28.0
%
25.0
%
30.4
%
24.1
%
Add: Total stock-based compensation
3,679
9,013
9,200
12,692
17,680
Amortization of acquisition-related intangible assets
542
663
812
1,205
1,782
Other operating expenses, net
1,130
-
-
1,130
-
Non-GAAP income from operations
$
65,453
$
60,723
$
54,988
$
126,176
$
104,624
Non-GAAP operating margin
35.6
%
33.3
%
30.5
%
34.5
%
29.6
%
Three Months Ended RECONCILIATION OF PROVISION FOR INCOME TAXES June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021 GAAP provision for income taxes$
4,952
$
5,353
$
3,268
$
10,305
$
4,253
GAAP effective tax rate
8.1
%
10.4
%
7.2
%
9.2
%
4.9
%
Tax effect of adjustments to GAAP results
(1,259
)
(122
)
(1,101
)
(1,381
)
(3,679
)
Non-GAAP provision for income taxes$
6,211
$
5,475
$
4,369
$
11,686
$
7,932
Non-GAAP effective tax rate
9.4
%
8.9
%
7.9
%
9.2
%
7.5
%
Three Months Ended Six Months Ended RECONCILIATION OF NET INCOME PER SHARE (DILUTED) June 30, 2022 March 31, 2022 June 30, 2021 June 30, 2022 June 30, 2021 GAAP net income$
55,824
$
46,248
$
41,881
$
102,072
$
81,679
Adjustments to GAAP net income Stock-based compensation
3,679
9,013
9,200
12,692
17,680
Amortization of acquisition-related intangible assets
542
663
812
1,205
1,782
Other operating expenses, net
1,130
-
-
1,130
-
Tax effect of items excluded from non-GAAP results
(1,259
)
(122
)
(1,101
)
(1,381
)
(3,679
)
Non-GAAP net income$
59,916
$
55,802
$
50,792
$
115,718
$
97,462
Average shares outstanding for calculation of non-GAAP net income per share (diluted)
58,305
60,107
61,466
59,192
61,481
Non-GAAP net income per share (diluted)
$
1.03
$
0.93
$
0.83
$
1.95
$
1.59
GAAP net income per share (diluted)
$
0.96
$
0.77
$
0.68
$
1.72
$
1.33
$
67,383
$
170,624
$
158,117
Short-term marketable securities
260,209
273,419
372,235
Accounts receivable, net
27,980
30,658
41,393
Inventories
111,258
103,115
99,266
Prepaid expenses and other current assets
14,219
14,685
15,804
Total current assets
481,049
592,501
686,815
PROPERTY AND EQUIPMENT, net
184,245
180,073
179,824
INTANGIBLE ASSETS, net
7,684
8,288
9,012
GOODWILL
91,849
91,849
91,849
DEFERRED TAX ASSETS
19,830
17,371
16,433
OTHER ASSETS
24,347
29,113
30,554
Total assets
$
809,004
$
919,195
$
1,014,487
LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable
$
41,402
$
36,175
$
43,721
Accrued payroll and related expenses
14,569
13,459
15,492
Taxes payable
561
5,601
1,210
Other accrued liabilities
13,597
13,999
11,898
Total current liabilities
70,129
69,234
72,321
LONG-TERM LIABILITIES: Income taxes payable
15,739
15,384
15,280
Other liabilities
12,891
14,004
14,854
Total liabilities
98,759
98,622
102,455
STOCKHOLDERS' EQUITY: Common stock
24
26
28
Additional paid-in capital
-
39,684
162,301
Accumulated other comprehensive loss
(10,060
)
(8,169
)
(3,737
)
Retained earnings
720,281
789,032
753,440
Total stockholders' equity
710,245
820,573
912,032
Total liabilities and stockholders' equity
$
809,004
$
919,195
$
1,014,487
$
55,824
$
46,248
$
41,881
$
102,072
$
81,679
Adjustments to reconcile net income to cash provided by operating activities Depreciation
8,766
8,408
7,821
17,174
15,274
Amortization of intangible assets
604
724
873
1,328
1,905
Loss on disposal of property and equipment
959
75
21
1,034
38
Stock-based compensation expense
3,679
9,013
9,200
12,692
17,680
Amortization of premium on marketable securities
930
937
124
1,867
300
Deferred income taxes
(2,346
)
(936
)
(263
)
(3,282
)
1,182
Increase in accounts receivable allowance for credit losses
184
75
93
259
91
Change in operating assets and liabilities: Accounts receivable
2,494
10,660
812
13,154
(5,533
)
Inventories
(8,143
)
(3,849
)
866
(11,992
)
13,235
Prepaid expenses and other assets
2,523
1,552
(1,248
)
4,075
(4,501
)
Accounts payable
7,286
(1,709
)
4,772
5,577
8,053
Taxes payable and other accrued liabilities
(5,938
)
3,399
1,896
(2,539
)
(4,433
)
Net cash provided by operating activities
66,822
74,597
66,848
141,419
124,970
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment
(13,244
)
(14,700
)
(8,243
)
(27,944
)
(19,294
)
Proceeds from sale of property and equipment
-
1,202
10
1,202
35
Purchases of marketable securities
(5,589
)
(15,121
)
(166,782
)
(20,710
)
(188,753
)
Proceeds from sales and maturities of marketable securities
16,710
108,817
96,617
125,527
160,083
Net cash provided by (used in) investing activities
(2,123
)
80,198
(78,398
)
78,075
(47,929
)
CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock
-
3,057
-
3,057
3,652
Repurchase of common stock
(157,660
)
(134,689
)
(26,374
)
(292,349
)
(26,374
)
Payments of dividends to stockholders
(10,280
)
(10,656
)
(7,867
)
(20,936
)
(15,712
)
Net cash used in financing activities
(167,940
)
(142,288
)
(34,241
)
(310,228
)
(38,434
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(103,241
)
12,507
(45,791
)
(90,734
)
38,607
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
170,624
158,117
343,272
158,117
258,874
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
67,383
$
170,624
$
297,481
$
67,383
$
297,481
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