Power Integrations Reports Third-Quarter Financial Results

Revenues increased two percent sequentially to $125.5 million; GAAP earnings were $0.34 per diluted share; non-GAAP earnings were $0.46 per diluted share

Quarterly dividend rises by five percent to $0.20 per share

SAN JOSE, Calif.--(BUSINESS WIRE)--November 7, 2023--Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended September 30, 2023. Net revenues for the third quarter were $125.5 million, up two percent compared to the prior quarter and down 22 percent from the third quarter of 2022. Net income for the third quarter was $19.8 million or $0.34 per diluted share compared to $0.26 per diluted share in the prior quarter and $0.80 per diluted share in the third quarter of 2022. Cash flow from operations for the third quarter was $26.7 million.

In addition to its GAAP results, the company provided non-GAAP measures that for the third quarter of 2023 exclude stock-based compensation, amortization of acquisition-related intangible assets and the related tax effects. Non-GAAP net income for the third quarter of 2023 was $26.6 million or $0.46 per diluted share compared to $0.36 per diluted share in the prior quarter and $0.84 per diluted share in the third quarter of 2022. A reconciliation of GAAP to non-GAAP financial results is included with the tables accompanying this press release.

Commented Balu Balakrishnan, chairman and CEO of Power Integrations: “Our results and forecast reflect the broad-based demand weakness and elevated supply-chain inventories cited by many of our peers this quarter. Notwithstanding the uncertain short-term outlook, our products are winning in the market, design activity remains healthy, and we are making excellent progress on growth initiatives such as EVs, efficient drivers for brushless DC motors, and our proprietary GaN technology.

“We took the next step on our GaN roadmap last month with the introduction of InnoSwitch™ ICs incorporating a 1250-volt PowiGaN™ switch. This breakthrough not only extends the efficiency benefits of GaN to a wider range of applications but also demonstrates that GaN will be a more cost-effective alternative to silicon carbide in the years ahead.”

Power Integrations paid a dividend of $0.19 per share on September 29, 2023, and will pay a dividend of $0.20 per share on December 29, 2023, to stockholders of record as of November 30, 2023. During the third quarter the company repurchased approximately 24,000 shares of its common stock for $1.8 million. The company had $73.4 million remaining on its repurchase authorization as of September 30, 2023.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2023:

Revenues are expected to be $90 million plus or minus $5 million.
Gross margins are expected to be similar to the third-quarter levels.
GAAP operating expenses are expected to be approximately $50 million; non-GAAP operating expenses are expected to be approximately $42.5 million. Non-GAAP expenses are expected to exclude about $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/YTVcHvJE. 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 and that GaN will be a more cost-effective alternative to silicon carbide 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 company’s 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 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, InnoSwitch, PowiGaN and the Power Integrations logo are trademarks or registered trademarks of Power Integrations, Inc. All other trademarks are property of their respective owners.

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)

	Three Months Ended									Nine Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
NET REVENUES	$	125,511		$	123,223		$	160,233		$	355,031		$	526,368

COST OF REVENUES		59,566			60,377			68,198			172,283			226,815

GROSS PROFIT		65,945			62,846			92,035			182,748			299,553

OPERATING EXPENSES:
Research and development		24,064			24,517			23,205			72,562			70,390
Sales and marketing		16,224			17,017			14,700			49,126			46,840
General and administrative		7,945			8,671			5,759			24,950			21,432
Amortization of acquisition-related intangible assets		-			-			-			-			241
Other operating expenses, net		-			-			-			-			1,130
Total operating expenses		48,233			50,205			43,664			146,638			140,033

INCOME FROM OPERATIONS		17,712			12,641			48,371			36,110			159,520

OTHER INCOME		3,138			2,714			1,001			7,566			2,229

INCOME BEFORE INCOME TAXES		20,850			15,355			49,372			43,676			161,749

PROVISION FOR INCOME TAXES		1,054			562			3,408			2,212			13,713

NET INCOME	$	19,796		$	14,793		$	45,964		$	41,464		$	148,036

EARNINGS PER SHARE:
Basic	$	0.34		$	0.26		$	0.80		$	0.72		$	2.55
Diluted	$	0.34		$	0.26		$	0.80		$	0.72		$	2.52

SHARES USED IN PER-SHARE CALCULATION:
Basic		57,383			57,355			57,172			57,282			58,039
Diluted		57,741			57,669			57,603			57,711			58,635



SUPPLEMENTAL INFORMATION:	Three Months Ended									Nine Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Stock-based compensation expenses included in:
Cost of revenues	$	446		$	446		$	172		$	1,193		$	727
Research and development		2,895			2,429			2,334			7,992			7,712
Sales and marketing		1,787			1,621			1,267			5,061			4,392
General and administrative		1,777			2,256			(755	)		6,779			2,879
Total stock-based compensation expense	$	6,905		$	6,752		$	3,018		$	21,025		$	15,710

Cost of revenues includes:
Amortization of acquisition-related intangible assets	$	482		$	482		$	482		$	1,446		$	1,446


	Three Months Ended									Nine Months Ended
REVENUE MIX BY END MARKET	September 30, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Communications		32	%		28	%		16	%		30	%		20	%
Computer		10	%		14	%		11	%		12	%		10	%
Consumer		26	%		29	%		32	%		26	%		35	%
Industrial		32	%		29	%		41	%		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, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
RECONCILIATION OF GROSS PROFIT
GAAP gross profit	$	65,945		$	62,846		$	92,035		$	182,748		$	299,553
GAAP gross margin		52.5	%		51.0	%		57.4	%		51.5	%		56.9	%

Stock-based compensation included in cost of revenues		446			446			172			1,193			727
Amortization of acquisition-related intangible assets		482			482			482			1,446			1,446

Non-GAAP gross profit	$	66,873		$	63,774		$	92,689		$	185,387		$	301,726
Non-GAAP gross margin		53.3	%		51.8	%		57.8	%		52.2	%		57.3	%


	Three Months Ended									Nine Months Ended
RECONCILIATION OF OPERATING EXPENSES	September 30, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
GAAP operating expenses	$	48,233		$	50,205		$	43,664		$	146,638		$	140,033

Less:Stock-based compensation expense included in operating expenses
Research and development		2,895			2,429			2,334			7,992			7,712
Sales and marketing		1,787			1,621			1,267			5,061			4,392
General and administrative		1,777			2,256			(755	)		6,779			2,879
Total		6,459			6,306			2,846			19,832			14,983

Amortization of acquisition-related intangible assets		-			-			-			-			241
Other operating expenses, net		-			-			-			-			1,130

Non-GAAP operating expenses	$	41,774		$	43,899		$	40,818		$	126,806		$	123,679


	Three Months Ended									Nine Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS	September 30, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
GAAP income from operations	$	17,712		$	12,641		$	48,371		$	36,110		$	159,520
GAAP operating margin		14.1	%		10.3	%		30.2	%		10.2	%		30.3	%

Add:Total stock-based compensation		6,905			6,752			3,018			21,025			15,710
Amortization of acquisition-related intangible assets		482			482			482			1,446			1,687
Other operating expenses, net		-			-			-			-			1,130

Non-GAAP income from operations	$	25,099		$	19,875		$	51,871		$	58,581		$	178,047
Non-GAAP operating margin		20.0	%		16.1	%		32.4	%		16.5	%		33.8	%


	Three Months Ended									Nine Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES	September 30, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
GAAP provision for income taxes	$	1,054		$	562		$	3,408		$	2,212		$	13,713
GAAP effective tax rate		5.1	%		3.7	%		6.9	%		5.1	%		8.5	%

Tax effect of adjustments to GAAP results		(580	)		(1,016	)		(1,116	)		(2,097	)		(2,497	)

Non-GAAP provision for income taxes	$	1,634		$	1,578		$	4,524		$	4,309		$	16,210
Non-GAAP effective tax rate		5.8	%		7.0	%		8.6	%		6.5	%		9.0	%


	Three Months Ended									Nine Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)	September 30, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
GAAP net income	$	19,796		$	14,793		$	45,964		$	41,464		$	148,036

Adjustments to GAAP net income
Stock-based compensation		6,905			6,752			3,018			21,025			15,710
Amortization of acquisition-related intangible assets		482			482			482			1,446			1,687
Other operating expenses, net		-			-			-			-			1,130
Tax effect of items excluded from non-GAAP results		(580	)		(1,016	)		(1,116	)		(2,097	)		(2,497	)

Non-GAAP net income	$	26,603		$	21,011		$	48,348		$	61,838		$	164,066

Average shares outstanding for calculation of non-GAAP net income per share (diluted)		57,741			57,669			57,603			57,711			58,635

Non-GAAP net income per share (diluted)	$	0.46		$	0.36		$	0.84		$	1.07		$	2.80

GAAP net income per share (diluted)	$	0.34		$	0.26		$	0.80		$	0.72		$	2.52

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)

	September 30, 2023			June 30, 2023			December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	94,743		$	84,096		$	105,372
Short-term marketable securities		261,896			262,219			248,441
Accounts receivable, net		28,539			32,077			20,836
Inventories		150,246			149,741			135,420
Prepaid expenses and other current assets		20,692			22,854			15,004
Total current assets		556,116			550,987			525,073

PROPERTY AND EQUIPMENT, net		166,391			168,066			176,681
INTANGIBLE ASSETS, net		4,967			5,511			6,597
GOODWILL		91,849			91,849			91,849
DEFERRED TAX ASSETS		28,943			21,771			19,034
OTHER ASSETS		17,224			21,273			20,862
Total assets	$	865,490		$	859,457		$	840,096

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	28,553		$	40,531		$	30,088
Accrued payroll and related expenses		13,778			14,041			14,778
Taxes payable		774			704			938
Other accrued liabilities		10,316			9,543			12,572
Total current liabilities		53,421			64,819			58,376

LONG-TERM LIABILITIES:
Income taxes payable		16,724			16,009			15,757
Other liabilities		10,288			10,700			10,747
Total liabilities		80,433			91,528			84,880

STOCKHOLDERS' EQUITY:
Common stock		23			23			24
Additional paid-in capital		19,429			11,220			-
Accumulated other comprehensive loss		(5,730	)		(5,757	)		(7,344	)
Retained earnings		771,335			762,443			762,536
Total stockholders' equity		785,057			767,929			755,216
Total liabilities and stockholders' equity	$	865,490		$	859,457		$	840,096

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Three Months Ended									Nine Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	19,796		$	14,793		$	45,964		$	41,464		$	148,036
Adjustments to reconcile net income to cash provided by operating activities
Depreciation		8,663			8,692			8,881			26,316			26,055
Amortization of intangible assets		544			543			543			1,630			1,871
Loss on disposal of property and equipment		64			15			128			86			1,162
Stock-based compensation expense		6,905			6,752			3,018			21,025			15,710
Amortization of premium on marketable securities		(273	)		15			771			146			2,638
Deferred income taxes		(7,170	)		(2,044	)		(4,108	)		(9,952	)		(7,390	)
Increase (decrease) in accounts receivable allowance for credit losses		-			-			431			(454	)		690
Change in operating assets and liabilities:
Accounts receivable		3,538			(11,492	)		11,474			(7,249	)		24,628
Inventories		(505	)		(7,297	)		(8,834	)		(14,826	)		(20,826	)
Prepaid expenses and other assets		6,404			(4,939	)		4,353			(837	)		8,428
Accounts payable		(11,695	)		5,887			(11,451	)		(2,882	)		(5,874	)
Taxes payable and other accrued liabilities		455			(4,744	)		(1,344	)		(4,975	)		(3,883	)
Net cash provided by operating activities		26,726			6,181			49,826			49,492			191,245

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(7,530	)		(3,129	)		(5,500	)		(14,741	)		(33,444	)
Proceeds from sale of property and equipment		-			-			-			-			1,202
Purchases of marketable securities		(62,205	)		(73,888	)		(6,534	)		(173,015	)		(27,244	)
Proceeds from sales and maturities of marketable securities		63,256			75,948			35,487			161,897			161,014
Net cash provided by (used in) investing activities		(6,479	)		(1,069	)		23,453			(25,859	)		101,528

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock		3,139			-			3,105			6,237			6,162
Repurchase of common stock		(1,835	)		(4,312	)		-			(7,834	)		(292,349	)
Payments of dividends to stockholders		(10,904	)		(10,893	)		(10,293	)		(32,665	)		(31,229	)
Net cash used in financing activities		(9,600	)		(15,205	)		(7,188	)		(34,262	)		(317,416	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		10,647			(10,093	)		66,091			(10,629	)		(24,643	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		84,096			94,189			67,383			105,372			158,117

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	94,743		$	84,096		$	133,474		$	94,743		$	133,474

Contacts

Joe Shiffler
Power Integrations, Inc.
(408) 414-8528
joe@power.com