Business Wire | Feb 2, 2021 04:01PM EST

Power Integrations Reports Fourth-Quarter and Full-Year Financial Results

Feb. 02, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Feb. 02, 2021--Power Integrations (Nasdaq: POWI) today announced financial results for the quarter and year ended December 31, 2020. Per-share measures for all periods have been adjusted for the 2:1 stock split effected as a stock dividend in August 2020.

Net revenues for the fourth quarter of 2020 were $150.7 million, up 24 percent compared to the prior quarter and up 32 percent from the fourth quarter of 2019. Net income for the fourth quarter was $27.3 million or $0.45 per diluted share compared to $0.24 per diluted share in the prior quarter and $2.64 per diluted share in the fourth quarter of 2019. Results for the fourth quarter of 2019 included a benefit of $2.39 per diluted share from a patent-litigation settlement. Cash flow from operations for the fourth quarter was $46.4 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 fourth quarter of 2020 was $36.4 million or $0.60 per diluted share compared with $0.40 per diluted share in the prior quarter and $2.80 per diluted share in the fourth quarter of 2019 (which included the benefit of $2.39 per share from the litigation settlement). A reconciliation of GAAP to non-GAAP financial results appears at the end of this press release.

Full-year net revenues were $488.3 million, up 16 percent compared to 2019. Net income was $71.2 million or $1.17 per diluted share, compared to $3.24 per diluted share in 2019. Non-GAAP net income for the full year was $103.5 million or $1.70 per diluted share, compared to $3.69 per diluted share in 2019. (Both GAAP and non-GAAP net income for 2019 included a benefit of $2.41 per share from the settlement.) Full-year cash flow from operations for 2020 was $125.6 million.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "Fourth-quarter revenues came in well above our expectations driven by broad-based demand. All four major end-market categories grew at double-digit rates compared to the prior quarter, and distribution sell-through once again exceeded sell-in. We achieved revenue growth of 16 percent in 2020-far above the rate of the analog semiconductor industry-and we are well positioned for continued growth in 2021."

Power Integrations paid a cash dividend of $0.11 per share on December 31, 2020. The company's board of directors has increased the quarterly dividend to $0.13 per share, with the next dividend to be paid on March 31, 2021 to stockholders of record as of February 26, 2021.

Financial Outlook

The company issued the following forecast for the first quarter of 2021:

* Revenues are expected to be flat compared to the fourth quarter of 2020, plus or minus five percent. * GAAP gross margin is expected to be approximately 48 percent, and non-GAAP gross margin is expected to be approximately 49 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 $44.5 million; non-GAAP operating expenses are expected to be approximately $37.5 million. (Non-GAAP expenses are expected to exclude approximately $6.8 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/4278028. 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 first-quarter financial performance and being well-positioned for growth in 2021 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, and most recent Quarterly Report on Form 10-Q, filed with the SEC on October 29, 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 Twelve Months Ended December September December 31, December December 31, 31, 2020 30, 2020 2019 31, 2020 2019NET REVENUES $ 150,693 $ 121,129 $ 114,457 $ 488,318 $ 420,669

COST OF REVENUES 76,688 61,560 56,232 244,728 207,267

GROSS PROFIT 74,005 59,569 58,225 243,590 213,402

OPERATING EXPENSES:Research and 21,921 20,868 18,298 81,711 73,470 developmentSales and marketing 14,113 13,442 14,241 53,578 52,720

General and 10,028 10,302 10,634 36,895 37,582 administrativeAmortization of 216 216 378 919 1,577 acquisition-relatedintangible assetsLitigation - - (168,969 ) - (168,969 )settlementTotal operating 46,278 44,828 (125,418 ) 173,103 (3,620 )expenses INCOME FROM 27,727 14,741 183,643 70,487 217,022 OPERATIONS OTHER INCOME 630 877 1,852 4,764 5,392

INCOME BEFORE 28,357 15,618 185,495 75,251 222,414 INCOME TAXES PROVISION FOR 1,079 798 27,204 4,075 28,946 INCOME TAXES NET INCOME $ 27,278 $ 14,820 $ 158,291 $ 71,176 $ 193,468

EARNINGS PER SHARE:Basic $ 0.46 $ 0.25 $ 2.69 $ 1.19 $ 3.31

Diluted $ 0.45 $ 0.24 $ 2.64 $ 1.17 $ 3.24

SHARES USED INPER-SHARECALCULATION:Basic 59,879 59,823 58,854 59,657 58,534

Diluted 61,176 60,852 60,010 60,845 59,632

SUPPLEMENTAL Three Months Ended Twelve Months EndedINFORMATION: December September December 31, December December 31, 31, 2020 30, 2020 2019 31, 2020 2019Stock-basedcompensationexpenses includedin:Cost of revenues $ 713 $ 602 $ 413 $ 1,963 $ 1,237

Research and 2,942 2,976 2,754 10,378 8,423 developmentSales and marketing 1,740 1,900 1,602 6,290 5,015

General and 3,468 3,880 3,569 12,281 8,672 administrativeTotal stock-based $ 8,863 $ 9,358 $ 8,338 $ 30,912 $ 23,347 compensationexpense Cost of revenuesincludes:Amortization of $ 799 $ 799 $ 955 $ 3,196 $ 3,483 acquisition-relatedintangible assets Three Months Ended Twelve Months EndedREVENUE MIX BY END December September December 31, December December 31,MARKET 31, 2020 30, 2020 2019 31, 2020 2019Communications 34 % 32 % 29 % 30 % 26 %

Computer 9 % 9 % 6 % 7 % 5 %

Consumer 31 % 31 % 35 % 33 % 35 %

Industrial 26 % 28 % 30 % 30 % 34 %

POWER INTEGRATIONS, INC.RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS(in thousands, except per-share amounts) Three Months Ended Twelve Months Ended December September December 31, December December 31, 2020 30, 2020 2019 31, 2020 31, 2019RECONCILIATION OFGROSS PROFITGAAP gross profit $ 74,005 $ 59,569 $ 58,225 $ 243,590 $ 213,402

GAAP gross margin 49.1 % 49.2 % 50.9 % 49.9 % 50.7 %

Stock-basedcompensation 713 602 413 1,963 1,237 included in cost ofrevenuesAmortization of 799 799 955 3,196 3,483 acquisition-relatedintangible assets Non-GAAP gross $ 75,517 $ 60,970 $ 59,593 $ 248,749 $ 218,122 profitNon-GAAP gross 50.1 % 50.3 % 52.1 % 50.9 % 51.9 %margin Three Months Ended Twelve Months EndedRECONCILIATION OF December September December 31, December DecemberOPERATING EXPENSES 31, 2020 30, 2020 2019 31, 2020 31, 2019GAAP operating $ 46,278 $ 44,828 $ (125,418 ) $ 173,103 $ (3,620 )expenses Less: Stock-basedcompensationexpense included inoperating expensesResearch and 2,942 2,976 2,754 10,378 8,423 developmentSales and marketing 1,740 1,900 1,602 6,290 5,015

General and 3,468 3,880 3,569 12,281 8,672 administrativeTotal 8,150 8,756 7,925 28,949 22,110

Amortization of 216 216 378 919 1,577 acquisition-relatedintangible assets Non-GAAP operating $ 37,912 $ 35,856 $ (133,721 ) $ 143,235 $ (27,307 )expenses Three Months Ended Twelve Months EndedRECONCILIATION OF December September December 31, December DecemberINCOME FROM 31, 2020 30, 2020 2019 31, 2020 31, 2019OPERATIONSGAAP income from $ 27,727 $ 14,741 $ 183,643 $ 70,487 $ 217,022 operationsGAAP operating 18.4 % 12.2 % 160.4 % 14.4 % 51.6 %margin Add: Total 8,863 9,358 8,338 30,912 23,347 stock-basedcompensationAmortization of 1,015 1,015 1,333 4,115 5,060 acquisition-relatedintangible assets Non-GAAP income $ 37,605 $ 25,114 $ 193,314 $ 105,514 $ 245,429 from operationsNon-GAAP operating 25.0 % 20.7 % 168.9 % 21.6 % 58.3 %margin Three Months Ended Twelve Months EndedRECONCILIATION OF December September December 31, December DecemberPROVISION FOR 31, 2020 30, 2020 2019 31, 2020 31, 2019INCOME TAXESGAAP provision for $ 1,079 $ 798 $ 27,204 $ 4,075 $ 28,946 income taxesGAAP effective tax 3.8 % 5.1 % 14.7 % 5.4 % 13.0 %rate Tax effect of (725 ) (971 ) (53 ) (2,719 ) (1,955 )adjustments to GAAPresults Non-GAAP provision $ 1,804 $ 1,769 $ 27,257 $ 6,794 $ 30,901 for income taxesNon-GAAP effective 4.7 % 6.8 % 14.0 % 6.2 % 12.3 %tax rate Three Months Ended Twelve Months EndedRECONCILIATION OF December September December 31, December DecemberNET INCOME PER 31, 2020 30, 2020 2019 31, 2020 31, 2019SHARE (DILUTED)GAAP net income $ 27,278 $ 14,820 $ 158,291 $ 71,176 $ 193,468

Adjustments to GAAPnet incomeStock-based 8,863 9,358 8,338 30,912 23,347 compensationAmortization of 1,015 1,015 1,333 4,115 5,060 acquisition-relatedintangible assetsTax effect of items (725 ) (971 ) (53 ) (2,719 ) (1,955 )excluded fromnon-GAAP results Non-GAAP net income $ 36,431 $ 24,222 $ 167,909 $ 103,484 $ 219,920

Average sharesoutstanding for 61,176 60,852 60,010 60,845 59,632 calculation ofnon-GAAP net incomeper share (diluted) Non-GAAP net income $ 0.60 $ 0.40 $ 2.80 $ 1.70 $ 3.69 per share (diluted) GAAP net income per $ 0.45 $ 0.24 $ 2.64 $ 1.17 $ 3.24 share (diluted) POWER INTEGRATIONS, INC.CALCULATION OF EARNINGS PER SHARE BENEFIT OF SETTLEMENT(in thousands, except per-share amounts) Three Months Ended Twelve Months Ended December September December 31, December December 31, 2020 30, 2020 2019 31, 2020 31, 2019Gain from $ - $ - $ 168,969 $ - $ 168,969 litigationsettlementTax expense - - 25,543 - 25,543 attributed tosettlementLitigation $ - $ - $ 143,426 $ - $ 143,426 settlement net oftax Earnings per sharebenefit of $ - $ - $ 2.39 $ - $ 2.41 settlement (GAAPand non-GAAP) Diluted average 61,176 60,852 60,010 60,845 59,632 shares outstandingPOWER INTEGRATIONS, INC.CONSOLIDATED BALANCE SHEETS(in thousands) December 31, September 30, December 31, 2020 2020 2019ASSETS CURRENT ASSETS: Cash and cash equivalents $ 258,874 $ 232,014 $ 178,690

Short-term marketable 190,318 211,926 232,398 securitiesAccounts receivable, net 35,910 29,447 24,274

Inventories 102,878 104,805 90,380

Prepaid expenses and other 13,252 14,755 15,597 current assetsTotal current assets 601,232 592,947 541,339

PROPERTY AND EQUIPMENT, net 166,188 147,719 116,619

INTANGIBLE ASSETS, net 12,506 13,582 16,865

GOODWILL 91,849 91,849 91,849

DEFERRED TAX ASSETS 3,339 2,660 2,836

OTHER ASSETS 28,225 27,311 34,388

Total assets $ 903,339 $ 876,068 $ 803,896

LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES: Accounts payable $ 34,712 $ 43,623 $ 27,433

Accrued payroll and related 14,806 12,892 13,408 expensesTaxes payable 902 379 584

Other accrued liabilities 12,106 9,357 9,051

Total current liabilities 62,526 66,251 50,476

LONG-TERM LIABILITIES: Income taxes payable 15,588 15,497 14,617

Deferred tax liabilities 75 87 164

Other liabilities 14,739 14,436 14,093

Total liabilities 92,928 96,271 79,350

STOCKHOLDERS' EQUITY: Common stock 28 28 28

Additional paid-in capital 190,920 181,192 152,117

Accumulated other (2,163 ) (2,355 ) (3,130 )comprehensive lossRetained earnings 621,626 600,932 575,531

Total stockholders' equity 810,411 779,797 724,546

Total liabilities and $ 903,339 $ 876,068 $ 803,896 stockholders' equityPOWER INTEGRATIONS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Three Months Ended Twelve Months Ended December September December December 31, December 31, 31, 2020 30, 2020 31, 2019 2020 2019CASH FLOWSFROM OPERATINGACTIVITIES:Net income $ 27,278 $ 14,820 $ 158,291 $ 71,176 $ 193,468

Adjustmentsto reconcilenet incometo cash provided byoperatingactivitiesDepreciation 6,672 6,002 4,928 23,743 19,190

Amortizationof 1,076 1,076 1,373 4,359 5,213 intangibleassetsLoss ondisposal of 214 19 35 525 249 property andequipmentStock-based 8,863 9,358 8,338 30,912 23,347 compensation expenseAmortizationof premium(accretion 180 204 104 705 (192 )of discount) onmarketablesecuritiesDeferred (692 ) (1,179 ) 2,741 (592 ) 4,019 income taxesIncrease(decrease)in accounts (491 ) 309 - (336 ) 57 receivable allowancesfor creditlossesChange inoperating assets andliabilities:Accounts (5,972 ) (16,884 ) 1,545 (11,300 ) (13,259 )receivableInventories 1,927 (842 ) (1,670 ) (12,498 ) (9,523 )

Prepaid 3,020 2,041 902 9,153 (2,132 )expenses and other assetsAccounts (668 ) 504 (3,920 ) 5,697 (6,556 )payableTaxespayable and 4,959 801 9,492 4,095 10,618 other accruedliabilitiesNet cashprovided by 46,366 16,229 182,159 125,639 224,499 operatingactivities CASH FLOWSFROM INVESTINGACTIVITIES:Purchases of (34,860 ) (14,116 ) (9,789 ) (70,598 ) (24,114 )property and equipmentProceedsfrom sale of 320 - - 651 - property andequipmentAcquisitionof - - (675 ) - (1,026 )technologylicensesPurchases of (43,637 ) (46,239 ) (71,952 ) (109,703 ) (207,240 )marketable securitiesProceedsfrom salesand 64,390 28,033 4,150 151,385 70,334 maturities ofmarketablesecuritiesNet cashused in (13,787 ) (32,322 ) (78,266 ) (28,265 ) (162,046 )investingactivities CASH FLOWSFROM FINANCINGACTIVITIES:Net proceedsfrom 865 3,364 225 10,527 9,908 issuance ofcommon stockRepurchase - - - (2,636 ) (7,302 )of common stockPayments of (6,584 ) (6,582 ) (5,590 ) (25,081 ) (20,506 )dividends to stockholdersNet cashused in (5,719 ) (3,218 ) (5,365 ) (17,190 ) (17,900 )financingactivities NET INCREASE(DECREASE) 26,860 (19,311 ) 98,528 80,184 44,553 IN CASH AND CASHEQUIVALENTS CASH ANDCASH 232,014 251,325 80,162 178,690 134,137 EQUIVALENTS AT BEGINNINGOF PERIOD CASH ANDCASH $ 258,874 $ 232,014 $ 178,690 $ 258,874 $ 178,690 EQUIVALENTS AT END OFPERIOD View source version on businesswire.com: https://www.businesswire.com/news/home/20210202006058/en/

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