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Power Integrations Reports Third-Quarter Financial Results

Revenues were $160.2 million; GAAP earnings were $0.80 per diluted share; non-GAAP earnings were $0.84 per diluted share

Announces $100 million repurchase authorization

Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended September 30, 2022. Net revenues for the third quarter were $160.2 million, down 13 percent compared to the prior quarter and down nine percent from the third quarter of 2021. Net income for the third quarter was $46.0 million or $0.80 per diluted share compared to $0.96 per diluted share in the prior quarter and $0.69 per diluted share in the third quarter of 2021. Cash flow from operations for the third quarter was $49.8 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 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 third quarter of 2022 was $48.3 million or $0.84 per diluted share compared with $1.03 per diluted share in the prior quarter and $0.84 per diluted share in the third 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: “Demand has continued to weaken, particularly in appliances and other consumer applications, and inventories have accumulated in the supply chain. While our near-term revenue outlook is therefore muted, we continue to gain market share across a broad set of end markets while making excellent progress on growth initiatives like automotive, motor drive, and our proprietary GaN technology. Our board of directors has committed $100 million to share repurchases, reflecting our strong balance sheet and our high level of confidence in our long-term growth prospects.”

Additional Highlights

  • Power Integrations’ board of directors has authorized the use of $100 million for the repurchase of the company’s common stock, subject to pre-determined price/volume thresholds. The authorization does not have an expiration date.
  • The company paid a dividend of $0.18 per share on September 30, 2022. A dividend of $0.18 per share is to be paid on December 30, 2022, to stockholders of record as of November 30, 2022.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2022:

  • Revenues are expected to be $125 million plus or minus $5 million.
  • GAAP gross margin is expected to be between 55.5 percent and 56 percent. Non-GAAP gross margin is expected to be between 56 percent and 56.5 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 $49.5 million and $50 million; non-GAAP operating expenses are expected to be between $42 million and $42.5 million. Non-GAAP expenses are expected to exclude approximately $7.5 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 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 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 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.

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
   
   
Three Months Ended Nine Months Ended
September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
NET REVENUES

$

160,233

 

$

183,986

 

$

176,776

 

$

526,368

 

 

$

530,623

 

   
COST OF REVENUES

 

68,198

 

 

77,143

 

 

85,037

 

 

226,815

 

 

 

263,160

 

   
GROSS PROFIT

 

92,035

 

 

106,843

 

 

91,739

 

 

299,553

 

 

 

267,463

 

   
OPERATING EXPENSES:  
Research and development

 

23,205

 

 

23,507

 

 

21,137

 

 

70,390

 

 

 

62,905

 

Sales and marketing

 

14,700

 

 

15,985

 

 

15,443

 

 

46,840

 

 

 

44,447

 

General and administrative

 

5,759

 

 

6,059

 

 

9,386

 

 

21,432

 

 

 

28,767

 

Amortization of acquisition-related intangible assets

 

-

 

 

60

 

 

181

 

 

241

 

 

 

590

 

Other operating expenses, net

 

-

 

 

1,130

 

 

-

 

 

1,130

 

 

 

-

 

Total operating expenses

 

43,664

 

 

46,741

 

 

46,147

 

 

140,033

 

 

 

136,709

 

   
INCOME FROM OPERATIONS

 

48,371

 

 

60,102

 

 

45,592

 

 

159,520

 

 

 

130,754

 

   
OTHER INCOME

 

1,001

 

 

674

 

 

206

 

 

2,229

 

 

 

976

 

   
INCOME BEFORE INCOME TAXES

 

49,372

 

 

60,776

 

 

45,798

 

 

161,749

 

 

 

131,730

 

   
PROVISION FOR INCOME TAXES

 

3,408

 

 

4,952

 

 

3,764

 

 

13,713

 

 

 

8,017

 

   
NET INCOME

$

45,964

 

$

55,824

 

$

42,034

 

$

148,036

 

 

$

123,713

 

   
EARNINGS PER SHARE:  
Basic

$

0.80

 

$

0.97

 

$

0.70

 

$

2.55

 

 

$

2.05

 

Diluted

$

0.80

 

$

0.96

 

$

0.69

 

$

2.52

 

 

$

2.01

 

   
SHARES USED IN PER-SHARE CALCULATION:  
Basic

 

57,172

 

 

57,731

 

 

60,319

 

 

58,039

 

 

 

60,350

 

Diluted

 

57,603

 

 

58,305

 

 

61,363

 

 

58,635

 

 

 

61,466

 

   
   
   
SUPPLEMENTAL INFORMATION: Three Months Ended Nine Months Ended
September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
Stock-based compensation expenses included in:  
Cost of revenues

$

172

 

$

235

 

$

664

 

$

727

 

 

$

1,935

 

Research and development

 

2,334

 

 

2,323

 

 

3,055

 

 

7,712

 

 

 

8,605

 

Sales and marketing

 

1,267

 

 

1,177

 

 

2,201

 

 

4,392

 

 

 

5,540

 

General and administrative

 

(755

)

 

(56

)

 

3,725

 

 

2,879

 

 

 

11,245

 

Total stock-based compensation expense

$

3,018

 

$

3,679

 

$

9,645

 

$

15,710

 

 

$

27,325

 

   
Cost of revenues includes:  
Amortization of acquisition-related intangible assets

$

482

 

$

482

 

$

552

 

$

1,446

 

 

$

1,925

 

   
Three Months Ended Nine Months Ended
REVENUE MIX BY END MARKET September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
Communications

 

16

%

 

18

%

 

25

%

 

20

%

 

 

33

%

Computer

 

11

%

 

9

%

 

11

%

 

10

%

 

 

9

%

Consumer

 

32

%

 

38

%

 

34

%

 

35

%

 

 

31

%

Industrial

 

41

%

 

35

%

 

30

%

 

35

%

 

 

27

%

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, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
RECONCILIATION OF GROSS PROFIT  
GAAP gross profit

$

92,035

 

$

106,843

 

$

91,739

 

$

299,553

 

 

$

267,463

 

GAAP gross margin

 

57.4

%

 

58.1

%

 

51.9

%

 

56.9

%

 

 

50.4

%

   
Stock-based compensation included in cost of revenues

 

172

 

 

235

 

 

664

 

 

727

 

 

 

1,935

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

552

 

 

1,446

 

 

 

1,925

 

   
Non-GAAP gross profit

$

92,689

 

$

107,560

 

$

92,955

 

$

301,726

 

 

$

271,323

 

Non-GAAP gross margin

 

57.8

%

 

58.5

%

 

52.6

%

 

57.3

%

 

 

51.1

%

   
   
Three Months Ended Nine Months Ended
RECONCILIATION OF OPERATING EXPENSES September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
GAAP operating expenses

$

43,664

 

$

46,741

 

$

46,147

 

$

140,033

 

 

$

136,709

 

   
Less: Stock-based compensation expense included in operating expenses  
Research and development

 

2,334

 

 

2,323

 

 

3,055

 

 

7,712

 

 

 

8,605

 

Sales and marketing

 

1,267

 

 

1,177

 

 

2,201

 

 

4,392

 

 

 

5,540

 

General and administrative

 

(755

)

 

(56

)

 

3,725

 

 

2,879

 

 

 

11,245

 

Total

 

2,846

 

 

3,444

 

 

8,981

 

 

14,983

 

 

 

25,390

 

   
Amortization of acquisition-related intangible assets

 

-

 

 

60

 

 

181

 

 

241

 

 

 

590

 

Other operating expenses, net

 

-

 

 

1,130

 

 

-

 

 

1,130

 

 

 

-

 

   
Non-GAAP operating expenses

$

40,818

 

$

42,107

 

$

36,985

 

$

123,679

 

 

$

110,729

 

   
   
Three Months Ended Nine Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
GAAP income from operations

$

48,371

 

$

60,102

 

$

45,592

 

$

159,520

 

 

$

130,754

 

GAAP operating margin

 

30.2

%

 

32.7

%

 

25.8

%

 

30.3

%

 

 

24.6

%

   
Add: Total stock-based compensation

 

3,018

 

 

3,679

 

 

9,645

 

 

15,710

 

 

 

27,325

 

Amortization of acquisition-related intangible assets

 

482

 

 

542

 

 

733

 

 

1,687

 

 

 

2,515

 

Other operating expenses, net

 

-

 

 

1,130

 

 

-

 

 

1,130

 

 

 

-

 

   
Non-GAAP income from operations

$

51,871

 

$

65,453

 

$

55,970

 

$

178,047

 

 

$

160,594

 

Non-GAAP operating margin

 

32.4

%

 

35.6

%

 

31.7

%

 

33.8

%

 

 

30.3

%

   
   
Three Months Ended Nine Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
GAAP provision for income taxes

$

3,408

 

$

4,952

 

$

3,764

 

$

13,713

 

 

$

8,017

 

GAAP effective tax rate

 

6.9

%

 

8.1

%

 

8.2

%

 

8.5

%

 

 

6.1

%

   
Tax effect of adjustments to GAAP results

 

(1,116

)

 

(1,259

)

 

(565

)

 

(2,497

)

 

 

(4,244

)

   
Non-GAAP provision for income taxes

$

4,524

 

$

6,211

 

$

4,329

 

$

16,210

 

 

$

12,261

 

Non-GAAP effective tax rate

 

8.6

%

 

9.4

%

 

7.7

%

 

9.0

%

 

 

7.6

%

   
   
Three Months Ended Nine Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED) September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
GAAP net income

$

45,964

 

$

55,824

 

$

42,034

 

$

148,036

 

 

$

123,713

 

   
Adjustments to GAAP net income  
Stock-based compensation

 

3,018

 

 

3,679

 

 

9,645

 

 

15,710

 

 

 

27,325

 

Amortization of acquisition-related intangible assets

 

482

 

 

542

 

 

733

 

 

1,687

 

 

 

2,515

 

Other operating expenses, net

 

-

 

 

1,130

 

 

-

 

 

1,130

 

 

 

-

 

Tax effect of items excluded from non-GAAP results

 

(1,116

)

 

(1,259

)

 

(565

)

 

(2,497

)

 

 

(4,244

)

   
Non-GAAP net income

$

48,348

 

$

59,916

 

$

51,847

 

$

164,066

 

 

$

149,309

 

   
Average shares outstanding for calculation  
of non-GAAP net income per share (diluted)

 

57,603

 

 

58,305

 

 

61,363

 

 

58,635

 

 

 

61,466

 

   
Non-GAAP net income per share (diluted)

$

0.84

 

$

1.03

 

$

0.84

 

$

2.80

 

 

$

2.43

 

   
GAAP net income per share (diluted)

$

0.80

 

$

0.96

 

$

0.69

 

$

2.52

 

 

$

2.01

 

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
September 30, 2022 June 30, 2022 December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

133,474

 

$

67,383

 

$

158,117

 

Short-term marketable securities

 

229,754

 

 

260,209

 

 

372,235

 

Accounts receivable, net

 

16,075

 

 

27,980

 

 

41,393

 

Inventories

 

120,092

 

 

111,258

 

 

99,266

 

Prepaid expenses and other current assets

 

12,634

 

 

14,219

 

 

15,804

 

Total current assets

 

512,029

 

 

481,049

 

 

686,815

 

 
PROPERTY AND EQUIPMENT, net

 

181,224

 

 

184,245

 

 

179,824

 

INTANGIBLE ASSETS, net

 

7,141

 

 

7,684

 

 

9,012

 

GOODWILL

 

91,849

 

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

23,935

 

 

19,830

 

 

16,433

 

OTHER ASSETS

 

21,785

 

 

24,347

 

 

30,554

 

Total assets

$

837,963

 

$

809,004

 

$

1,014,487

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

29,521

 

$

41,402

 

$

43,721

 

Accrued payroll and related expenses

 

13,765

 

 

14,569

 

 

15,492

 

Taxes payable

 

2,960

 

 

561

 

 

1,210

 

Other accrued liabilities

 

12,613

 

 

13,597

 

 

11,898

 

Total current liabilities

 

58,859

 

 

70,129

 

 

72,321

 

 
LONG-TERM LIABILITIES:
Income taxes payable

 

16,398

 

 

15,739

 

 

15,280

 

Other liabilities

 

12,424

 

 

12,891

 

 

14,854

 

Total liabilities

 

87,681

 

 

98,759

 

 

102,455

 

 
STOCKHOLDERS' EQUITY:
Common stock

 

24

 

 

24

 

 

28

 

Additional paid-in capital

 

6,123

 

 

-

 

 

162,301

 

Accumulated other comprehensive loss

 

(11,817

)

 

(10,060

)

 

(3,737

)

Retained earnings

 

755,952

 

 

720,281

 

 

753,440

 

Total stockholders' equity

 

750,282

 

 

710,245

 

 

912,032

 

Total liabilities and stockholders' equity

$

837,963

 

$

809,004

 

$

1,014,487

 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
   
Three Months Ended Nine Months Ended
September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022   September 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income

$

45,964

 

$

55,824

 

$

42,034

 

$

148,036

 

 

$

123,713

 

Adjustments to reconcile net income to cash provided by operating activities  
Depreciation

 

8,881

 

 

8,766

 

 

8,126

 

 

26,055

 

 

 

23,400

 

Amortization of intangible assets

 

543

 

 

604

 

 

794

 

 

1,871

 

 

 

2,699

 

Loss on disposal of property and equipment

 

128

 

 

959

 

 

2,162

 

 

1,162

 

 

 

2,200

 

Stock-based compensation expense

 

3,018

 

 

3,679

 

 

9,645

 

 

15,710

 

 

 

27,325

 

Amortization of premium on marketable securities

 

771

 

 

930

 

 

475

 

 

2,638

 

 

 

775

 

Deferred income taxes

 

(4,108

)

 

(2,346

)

 

(1,194

)

 

(7,390

)

 

 

(12

)

Increase in accounts receivable allowance for credit losses

 

431

 

 

184

 

 

(74

)

 

690

 

 

 

17

 

Change in operating assets and liabilities:  
Accounts receivable

 

11,474

 

 

2,494

 

 

2,554

 

 

24,628

 

 

 

(2,979

)

Inventories

 

(8,834

)

 

(8,143

)

 

(2,171

)

 

(20,826

)

 

 

11,064

 

Prepaid expenses and other assets

 

4,353

 

 

2,523

 

 

(472

)

 

8,428

 

 

 

(4,973

)

Accounts payable

 

(11,451

)

 

7,286

 

 

(1,420

)

 

(5,874

)

 

 

6,633

 

Taxes payable and other accrued liabilities

 

(1,344

)

 

(5,938

)

 

(1,724

)

 

(3,883

)

 

 

(6,157

)

Net cash provided by operating activities

 

49,826

 

 

66,822

 

 

58,735

 

 

191,245

 

 

 

183,705

 

   
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of property and equipment

 

(5,500

)

 

(13,244

)

 

(11,011

)

 

(33,444

)

 

 

(30,305

)

Proceeds from sale of property and equipment

 

-

 

 

-

 

 

-

 

 

1,202

 

 

 

35

 

Purchases of marketable securities

 

(6,534

)

 

(5,589

)

 

(193,150

)

 

(27,244

)

 

 

(381,903

)

Proceeds from sales and maturities of marketable securities

 

35,487

 

 

16,710

 

 

123,953

 

 

161,014

 

 

 

284,036

 

Net cash provided by (used in) investing activities

 

23,453

 

 

(2,123

)

 

(80,208

)

 

101,528

 

 

 

(128,137

)

   
CASH FLOWS FROM FINANCING ACTIVITIES:  
Net proceeds from issuance of common stock

 

3,105

 

 

-

 

 

4,058

 

 

6,162

 

 

 

7,710

 

Repurchase of common stock

 

-

 

 

(157,660

)

 

(9,791

)

 

(292,349

)

 

 

(36,165

)

Payments of dividends to stockholders

 

(10,293

)

 

(10,280

)

 

(7,840

)

 

(31,229

)

 

 

(23,552

)

Net cash used in financing activities

 

(7,188

)

 

(167,940

)

 

(13,573

)

 

(317,416

)

 

 

(52,007

)

   
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

66,091

 

 

(103,241

)

 

(35,046

)

 

(24,643

)

 

 

3,561

 

   
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

67,383

 

 

170,624

 

 

297,481

 

 

158,117

 

 

 

258,874

 

   
CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

133,474

 

$

67,383

 

$

262,435

 

$

133,474

 

 

$

262,435

 

 

Contacts

Joe Shiffler

Power Integrations, Inc.

(408) 414-8528

joe@power.com

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