Business Wire | Oct 29, 2020 04:02PM EDT

Power Integrations Reports Third-Quarter Financial Results

Oct. 29, 2020

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 29, 2020--Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended September 30, 2020. Net revenues for the third quarter were $121.1 million, up 13 percent compared to the prior quarter and up six percent from the third quarter of 2019. Net income for the third quarter was $14.8 million or $0.24 per diluted share compared to $0.22 per diluted share in the prior quarter and $0.29 per diluted share in the third quarter of 2019. (Per-share measures for all periods have been adjusted for the 2:1 stock split effected as a stock dividend in August 2020.) Cash flow from operations for the third quarter was $16.2 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 third quarter of 2020 was $24.2 million or $0.40 per diluted share compared with $0.33 per diluted share in the prior quarter and $0.39 per diluted share in the third quarter of 2019. A reconciliation of GAAP to non-GAAP financial results appears at the end of this press release.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "Third-quarter revenues exceeded our expectations as we saw continued growth in fast charging for mobile devices as well as improved demand from the appliance market. Distribution sell-through strengthened considerably compared to the prior quarter, and we expect healthy sequential revenue growth in the fourth quarter. At the midpoint of our fourth-quarter revenue range, we would achieve double-digit revenue growth for the full year."

Power Integrations paid a cash dividend of $0.11 per share (post-split) on September 30, 2020. The company will pay another dividend of $0.11 per share on December 31, 2020 to stockholders of record as of November 30, 2020.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2020:

* Revenues are expected to be $130 million plus or minus $5 million. * GAAP gross margin is expected to be approximately 49 percent, and non-GAAP gross margin is expected to be approximately 50 percent. (The difference between the expected GAAP and non-GAAP gross margins comprises approximately 0.6 percentage points from amortization of acquisition-related intangible assets and 0.4 percentage points from stock-based compensation.) * GAAP operating expenses are expected to be approximately $45 million; non-GAAP operating expenses are expected to be approximately $37 million. (Non-GAAP expenses are expected to exclude approximately $7.8 million of stock-based compensation and $0.2 million of amortization of acquisition-related intangible assets.)

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: http://www.directeventreg.com/registration/event/5339866. A 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 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 conditions, including changing tariffs and uncertainty regarding 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, 2020. The company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether as a result 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 June 30, September September September 30, 2020 2020 30, 2019 30, 2020 30, 2019

NET REVENUES $ 121,129 $ 106,832 $ 114,159 $ 337,625 $ 306,212

COST OF REVENUES 61,560 53,296 56,028 168,040 151,035

GROSS PROFIT 59,569 53,536 58,131 169,585 155,177

OPERATINGEXPENSES:Research and 20,868 19,770 17,957 59,790 55,172 developmentSales and 13,442 12,807 13,074 39,465 38,479 marketingGeneral and 10,302 7,804 9,224 26,867 26,948 administrativeAmortization of 216 230 378 703 1,199 acquisition-relatedintangible assetsTotal operating 44,828 40,611 40,633 126,825 121,798 expenses INCOME FROM 14,741 12,925 17,498 42,760 33,379 OPERATIONS OTHER INCOME 877 1,480 1,078 4,134 3,540

INCOME BEFORE 15,618 14,405 18,576 46,894 36,919 INCOME TAXES PROVISION FOR 798 1,213 1,477 2,996 1,742 INCOME TAXES NET INCOME $ 14,820 $ 13,192 $ 17,099 $ 43,898 $ 35,177

EARNINGS PERSHARE:Basic $ 0.25 $ 0.22 $ 0.29 $ 0.74 $ 0.60

Diluted $ 0.24 $ 0.22 $ 0.29 $ 0.72 $ 0.59

SHARES USED INPER-SHARECALCULATION:Basic 59,823 59,712 58,770 59,582 58,426

Diluted 60,852 60,624 59,732 60,668 59,418

SUPPLEMENTAL Three Months Ended Nine Months EndedINFORMATION: September June 30, September September September 30, 2020 2020 30, 2019 30, 2020 30, 2019Stock-basedcompensationexpenses includedin:Cost of revenues $ 602 $ 252 $ 280 $ 1,250 $ 824

Research and 2,976 2,351 1,893 7,436 5,669 developmentSales and 1,900 1,258 1,211 4,550 3,413 marketingGeneral and 3,880 2,120 1,722 8,813 5,103 administrativeTotal stock-based $ 9,358 $ 5,981 $ 5,106 $ 22,049 $ 15,009 compensationexpense Cost of revenuesincludes:Amortization of $ 799 $ 799 $ 940 $ 2,397 $ 2,528 acquisition-relatedintangible assets Three Months Ended Nine Months EndedREVENUE MIX BY September June 30, September September SeptemberEND MARKET 30, 2020 2020 30, 2019 30, 2020 30, 2019Communications 32 % 28 % 29 % 28 % 24 %

Computer 9 % 6 % 5 % 6 % 5 %

Consumer 31 % 31 % 32 % 34 % 36 %

Industrial 28 % 35 % 34 % 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 June 30, September September September 30, 2020 2020 30, 2019 30, 2020 30, 2019

RECONCILIATION OFGROSS PROFITGAAP gross $ 59,569 $ 53,536 $ 58,131 $ 169,585 $ 155,177 profitGAAP gross margin 49.2 % 50.1 % 50.9 % 50.2 % 50.7 %

Stock-basedcompensation 602 252 280 1,250 824 included in cost ofrevenuesAmortization of 799 799 940 2,397 2,528 acquisition-relatedintangible assets Non-GAAP gross $ 60,970 $ 54,587 $ 59,351 $ 173,232 $ 158,529 profitNon-GAAP gross 50.3 % 51.1 % 52.0 % 51.3 % 51.8 %margin Three Months Ended Nine Months Ended

RECONCILIATION OF September June 30, September September SeptemberOPERATING EXPENSES 30, 2020 2020 30, 2019 30, 2020 30, 2019

GAAP operating $ 44,828 $ 40,611 $ 40,633 $ 126,825 $ 121,798 expenses Less:Stock-basedcompensationexpense included inoperating expensesResearch and 2,976 2,351 1,893 7,436 5,669 developmentSales and marketing 1,900 1,258 1,211 4,550 3,413

General and 3,880 2,120 1,722 8,813 5,103 administrativeTotal 8,756 5,729 4,826 20,799 14,185

Amortization of 216 230 378 703 1,199 acquisition-relatedintangible assets Non-GAAP operating $ 35,856 $ 34,652 $ 35,429 $ 105,323 $ 106,414 expenses Three Months Ended Nine Months EndedRECONCILIATION OF September June 30, September September SeptemberINCOME FROM 30, 2020 2020 30, 2019 30, 2020 30, 2019OPERATIONSGAAP income from $ 14,741 $ 12,925 $ 17,498 $ 42,760 $ 33,379 operationsGAAP operating 12.2 % 12.1 % 15.3 % 12.7 % 10.9 %margin Add:Total 9,358 5,981 5,106 22,049 15,009 stock-basedcompensationAmortization of 1,015 1,029 1,318 3,100 3,727 acquisition-relatedintangible assets Non-GAAP income $ 25,114 $ 19,935 $ 23,922 $ 67,909 $ 52,115 from operationsNon-GAAP operating 20.7 % 18.7 % 21.0 % 20.1 % 17.0 %margin Three Months Ended Nine Months EndedRECONCILIATION OF September June 30, September September SeptemberPROVISION FOR 30, 2020 2020 30, 2019 30, 2020 30, 2019INCOME TAXESGAAP provision for $ 798 $ 1,213 $ 1,477 $ 2,996 $ 1,742 income taxesGAAP effective tax 5.1 % 8.4 % 8.0 % 6.4 % 4.7 %rate Tax effect of (971 ) (272 ) (266 ) (1,994 ) (1,902 )adjustments to GAAPresults Non-GAAP provision $ 1,769 $ 1,485 $ 1,743 $ 4,990 $ 3,644 for income taxesNon-GAAP effective 6.8 % 6.9 % 7.0 % 6.9 % 6.5 %tax rate Three Months Ended Nine Months EndedRECONCILIATION OF September June 30, September September SeptemberNET INCOME PER 30, 2020 2020 30, 2019 30, 2020 30, 2019SHARE (DILUTED)GAAP net income $ 14,820 $ 13,192 $ 17,099 $ 43,898 $ 35,177

Adjustments to GAAPnet incomeStock-based 9,358 5,981 5,106 22,049 15,009 compensationAmortization of 1,015 1,029 1,318 3,100 3,727 acquisition-relatedintangible assetsTax effect of items (971 ) (272 ) (266 ) (1,994 ) (1,902 )excluded fromnon-GAAP results Non-GAAP net $ 24,222 $ 19,930 $ 23,257 $ 67,053 $ 52,011 income Average sharesoutstanding forcalculationof non-GAAP net 60,852 60,624 59,732 60,668 59,418 income per share(diluted) Non-GAAP net income $ 0.40 $ 0.33 $ 0.39 $ 1.11 $ 0.88 per share (diluted) GAAP net income $ 0.24 $ 0.22 $ 0.29 $ 0.72 $ 0.59 per share POWER INTEGRATIONS, INC.CONSOLIDATED BALANCE SHEETS(in thousands) September 30, June 30, December 31, 2020 2020 2019ASSETS CURRENT ASSETS: Cash and cash equivalents $ 232,014 $ 251,325 $ 178,690

Short-term marketable securities 211,926 194,556 232,398

Accounts receivable, net 29,447 12,872 24,274

Inventories 104,805 103,963 90,380

Prepaid expenses and other 14,755 14,512 15,597 current assets Total current assets 592,947 577,228 541,339

PROPERTY AND EQUIPMENT, net 147,719 138,572 116,619

INTANGIBLE ASSETS, net 13,582 14,658 16,865

GOODWILL 91,849 91,849 91,849

DEFERRED TAX ASSETS 2,660 1,514 2,836

OTHER ASSETS 27,311 29,956 34,388

Total assets $ 876,068 $ 853,777 $ 803,896

LIABILITIES AND STOCKHOLDERS'EQUITY CURRENT LIABILITIES: Accounts payable $ 43,623 $ 42,871 $ 27,433

Accrued payroll and related 12,892 14,365 13,408 expenses Taxes payable 379 363 584

Other accrued liabilities 9,357 7,156 9,051

Total current liabilities 66,251 64,755 50,476

LONG-TERM LIABILITIES: Income taxes payable 15,497 15,329 14,617

Deferred tax liabilities 87 121 164

Other liabilities 14,436 14,100 14,093

Total liabilities 96,271 94,305 79,350

STOCKHOLDERS' EQUITY: Common stock 28 28 28

Additional paid-in capital 181,192 168,470 152,117

Accumulated other comprehensive (2,355 ) (1,720 ) (3,130 ) loss Retained earnings 600,932 592,694 575,531

Total stockholders' equity 779,797 759,472 724,546

Total liabilities and $ 876,068 $ 853,777 $ 803,896 stockholders' equity POWER INTEGRATIONS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Three Months Ended Nine Months Ended September June 30, September September September 30, 2020 2020 30, 2019 30, 2020 30, 2019CASH FLOWSFROM OPERATINGACTIVITIES: Net income $ 14,820 $ 13,192 $ 17,099 $ 43,898 $ 35,177

Adjustments to reconcile net income to cash provided by operating activities Depreciation 6,002 5,581 4,831 17,071 14,262

Amortization 1,076 1,090 1,357 3,283 3,840 of intangible assets Loss on disposal of 19 262 62 311 214 property and equipment Stock-based 9,358 5,981 5,106 22,049 15,009 compensation expense Amortization of premium (accretion of 204 167 (66 ) 525 (296 ) discount) on marketable securities Deferred (1,179 ) 184 (381 ) 100 1,278 income taxes Increase in accounts receivable 309 - - 155 57 allowances for credit losses Change in operating assets and liabilities: Accounts (16,884 ) 7,725 (351 ) (5,328 ) (14,804 ) receivable Inventories (842 ) (7,330 ) 487 (14,425 ) (7,853 )

Prepaid 2,041 8,084 580 6,133 (3,034 ) expenses and other assets Accounts 504 (2,967 ) (6,789 ) 6,365 (2,636 ) payable Taxes payable and other 801 4,684 (91 ) (864 ) 1,126 accrued liabilities Net cash provided by 16,229 36,653 21,844 79,273 42,340 operating activities CASH FLOWSFROM INVESTINGACTIVITIES: Purchases of (14,116 ) (10,019 ) (5,977 ) (35,738 ) (14,325 ) property and equipment Proceeds from sale of - 331 - 331 - property and equipment Acquisition - - (100 ) - (351 ) of technology licenses Purchases of (46,239 ) (2,989 ) (80,864 ) (66,066 ) (135,288 ) marketable securities Proceeds from sales and 28,033 43,015 46,762 86,995 66,184 maturities of marketable securities Net cash provided by (32,322 ) 30,338 (40,179 ) (14,478 ) (83,780 ) (used in) investing activities CASH FLOWSFROM FINANCINGACTIVITIES: Net proceeds from issuance 3,364 769 4,005 9,662 9,683 of common stock Repurchase of - (623 ) - (2,636 ) (7,302 ) common stock Payments of (6,582 ) (6,271 ) (4,999 ) (18,497 ) (14,916 ) dividends to stockholders Net cash used (3,218 ) (6,125 ) (994 ) (11,471 ) (12,535 ) in financing activities NET INCREASE(DECREASE) IN (19,311 ) 60,866 (19,329 ) 53,324 (53,975 )CASH AND CASHEQUIVALENTS CASH AND CASHEQUIVALENTS AT 251,325 190,459 99,491 178,690 134,137 BEGINNING OFPERIOD CASH AND CASH $ 232,014 $ 251,325 $ 80,162 $ 232,014 $ 80,162 EQUIVALENTS ATEND OF PERIOD View source version on businesswire.com: https://www.businesswire.com/news/home/20201029006158/en/

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