Business Wire | Apr 29, 2021 04:01PM EDT

Power Integrations Reports First-Quarter Financial Results

Apr. 29, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Apr. 29, 2021--Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended March 31, 2021. Per-share measures for all periods reflect the effect of the August 2020 two-for-one stock split.

Net revenues for the first quarter of 2021 were $173.7 million, up 15 percent compared to the prior quarter and up 58 percent from the first quarter of 2020. Net income for the first quarter was $39.8 million or $0.65 per diluted share compared to $0.45 per diluted share in the prior quarter and $0.26 per diluted share in the first quarter of 2020. Cash flow from operations for the first quarter was $58.1 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 first quarter of 2021 was $46.7 million or $0.76 per diluted share compared with $0.60 per diluted share in the prior quarter and $0.38 per diluted share in the first quarter of 2020. 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: "First-quarter revenues grew 58 percent year-over-year reflecting the strong demand conditions across the industry as well as our continued success in advanced mobile-device chargers, appliances and many other power-supply applications. Distribution sell-through exceeded sell-in again in the first quarter and we have seen continued strength in bookings in recent weeks. As a result, we expect strong year-over-year growth again in the second quarter."

Power Integrations paid a cash dividend of $0.13 per share on March 31, 2021. A dividend of $0.13 per share will be paid on June 30, 2021 to stockholders of record as of May 28, 2021. Also, the company's board of directors has added $50 million to its share-repurchase authorization, bringing the total authorization to $91.3 million.

Financial Outlook

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

* Revenues are expected to be flat compared to the first quarter of 2021, plus or minus five percent. * GAAP gross margin is expected to be between 49.5 and 50 percent, and non-GAAP gross margin is expected to be between 50 and 50.5 percent. (The difference between the expected GAAP and non-GAAP gross margins is approximately equally attributable to amortization of acquisition-related intangible assets and stock-based compensation.) * GAAP operating expenses are expected to be approximately $47.5 million; non-GAAP operating expenses are expected to be approximately $38.5 million. (Non-GAAP expenses are expected to exclude approximately $8.8 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/1859015. 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 second-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 5, 2021. 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 March 31, December 31, March 31, 2021 2020 2020NET REVENUES $ 173,737 $ 150,693 $ 109,664

COST OF REVENUES 89,326 76,688 53,184

GROSS PROFIT 84,411 74,005 56,480

OPERATING EXPENSES:Research and development 20,027 21,921 19,152

Sales and marketing 13,907 14,113 13,216

General and administrative 10,075 10,028 8,761

Amortization of acquisition-related 216 216 257 intangible assets Total operating expenses 44,225 46,278 41,386

INCOME FROM OPERATIONS 40,186 27,727 15,094

OTHER INCOME 597 630 1,777

INCOME BEFORE INCOME TAXES 40,783 28,357 16,871

PROVISION FOR INCOME TAXES 985 1,079 985

NET INCOME $ 39,798 $ 27,278 $ 15,886

EARNINGS PER SHARE: Basic $ 0.66 $ 0.46 $ 0.27

Diluted $ 0.65 $ 0.45 $ 0.26

SHARES USED IN PER-SHARE CALCULATION: Basic 60,184 59,879 59,204

Diluted 61,451 61,176 60,268

SUPPLEMENTAL INFORMATION: Three Months Ended March 31, December 31, March 31, 2021 2020 2020Stock-based compensation expensesincluded in: Cost of revenues $ 631 $ 713 $ 396

Research and development 2,391 2,942 2,109

Sales and marketing 1,614 1,740 1,392

General and administrative 3,844 3,468 2,813

Total stock-based compensation expense $ 8,480 $ 8,863 $ 6,710

Cost of revenues includes: Amortization of acquisition-related $ 754 $ 799 $ 799 intangible assets Three Months EndedREVENUE MIX BY END MARKET March 31, December 31, March 31, 2021 2020 2020 Communications 38 % 34 % 22 %

Computer 8 % 9 % 4 %

Consumer 29 % 31 % 41 %

Industrial 25 % 26 % 33 %

POWER INTEGRATIONS, INC.RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS(in thousands, except per-share amounts) Three Months Ended March 31, December March 31, 2021 31, 2020 2020RECONCILIATION OF GROSS PROFITGAAP gross profit $ 84,411 $ 74,005 $ 56,480

GAAP gross margin 48.6 % 49.1 % 51.5 %

Stock-based compensation included in cost of 631 713 396 revenuesAmortization of acquisition-related 754 799 799 intangible assets Non-GAAP gross profit $ 85,796 $ 75,517 $ 57,675

Non-GAAP gross margin 49.4 % 50.1 % 52.6 %

Three Months EndedRECONCILIATION OF OPERATING EXPENSES March 31, December March 31, 2021 31, 2020 2020GAAP operating expenses $ 44,225 $ 46,278 $ 41,386

Less: Stock-based compensation expenseincluded in operating expenses Research and development 2,391 2,942 2,109

Sales and marketing 1,614 1,740 1,392

General and administrative 3,844 3,468 2,813

Total 7,849 8,150 6,314

Amortization of acquisition-related 216 216 257 intangible assets Non-GAAP operating expenses $ 36,160 $ 37,912 $ 34,815

Three Months EndedRECONCILIATION OF INCOME FROM OPERATIONS March 31, December March 31, 2021 31, 2020 2020GAAP income from operations $ 40,186 $ 27,727 $ 15,094

GAAP operating margin 23.1 % 18.4 % 13.8 %

Add: Total stock-based compensation 8,480 8,863 6,710

Amortization of acquisition-related 970 1,015 1,056 intangible assets Non-GAAP income from operations $ 49,636 $ 37,605 $ 22,860

Non-GAAP operating margin 28.6 % 25.0 % 20.8 %

Three Months EndedRECONCILIATION OF PROVISION FOR INCOME TAXES March 31, December March 31, 2021 31, 2020 2020GAAP provision for income taxes $ 985 $ 1,079 $ 985

GAAP effective tax rate 2.4 % 3.8 % 5.8 %

Tax effect of adjustments to GAAP results (2,578 ) (725 ) (751 )

Non-GAAP provision for income taxes $ 3,563 $ 1,804 $ 1,736

Non-GAAP effective tax rate 7.1 % 4.7 % 7.0 %

Three Months EndedRECONCILIATION OF NET INCOME PER SHARE March 31, December March 31,(DILUTED) 2021 31, 2020 2020GAAP net income $ 39,798 $ 27,278 $ 15,886

Adjustments to GAAP net income Stock-based compensation 8,480 8,863 6,710

Amortization of acquisition-related 970 1,015 1,056 intangible assets Tax effect of items excluded from non-GAAP (2,578 ) (725 ) (751 ) results Non-GAAP net income $ 46,670 $ 36,431 $ 22,901

Average shares outstanding for calculation of 61,451 61,176 60,268 non-GAAP net income per share (diluted) Non-GAAP net income per share (diluted) $ 0.76 $ 0.60 $ 0.38

GAAP net income per share (diluted) $ 0.65 $ 0.45 $ 0.26

POWER INTEGRATIONS, INC.CONSOLIDATED BALANCE SHEETS(in thousands) March 31, 2021 December 31, 2020ASSETS CURRENT ASSETS: Cash and cash equivalents $ 343,272 $ 258,874

Short-term marketable securities 148,067 190,318

Accounts receivable, net 42,257 35,910

Inventories 90,509 102,878

Prepaid expenses and other current assets 18,207 13,252

Total current assets 642,312 601,232

PROPERTY AND EQUIPMENT, net 168,712 166,188

INTANGIBLE ASSETS, net 11,474 12,506

GOODWILL 91,849 91,849

DEFERRED TAX ASSETS 1,892 3,339

OTHER ASSETS 28,480 28,225

Total assets $ 944,719 $ 903,339

LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 38,172 $ 34,712

Accrued payroll and related expenses 13,339 14,806

Taxes payable 856 902

Other accrued liabilities 10,160 12,106

Total current liabilities 62,527 62,526

LONG-TERM LIABILITIES: Income taxes payable 14,033 15,588

Other liabilities 14,336 14,814

Total liabilities 90,896 92,928

STOCKHOLDERS' EQUITY: Common stock 29 28

Additional paid-in capital 203,051 190,920

Accumulated other comprehensive loss (2,836 ) (2,163 )

Retained earnings 653,579 621,626

Total stockholders' equity 853,823 810,411

Total liabilities and stockholders' equity $ 944,719 $ 903,339

POWER INTEGRATIONS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Three Months Ended March 31, December March 31, 2021 31, 2020 2020CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 39,798 $ 27,278 $ 15,886

Adjustments to reconcile net income to cash provided by operating activities Depreciation 7,453 6,672 5,488

Amortization of intangible assets 1,032 1,076 1,117

Loss on disposal of property and 17 214 30 equipment Stock-based compensation expense 8,480 8,863 6,710

Amortization of premium on marketable 176 180 154 securities Deferred income taxes 1,445 (692 ) 1,095

Decrease in accounts receivable (2 ) (491 ) (154 ) allowance for credit losses Change in operating assets and liabilities: Accounts receivable (6,345 ) (5,972 ) 3,831

Inventories 12,369 1,927 (6,253 )

Prepaid expenses and other assets (3,253 ) 3,020 (3,992 )

Accounts payable 3,281 (668 ) 8,828

Taxes payable and other accrued (6,329 ) 4,959 (6,349 ) liabilities Net cash provided by operating 58,122 46,366 26,391 activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (11,051 ) (34,860 ) (11,603 )

Proceeds from sale of property and 25 320 - equipment Purchases of marketable securities (21,971 ) (43,637 ) (16,838 )

Proceeds from sales and maturities of 63,466 64,390 15,947 marketable securities Net cash provided by (used in) investing 30,469 (13,787 ) (12,494 ) activities CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common 3,652 865 5,529 stock Repurchase of common stock - - (2,013 )

Payments of dividends to stockholders (7,845 ) (6,584 ) (5,644 )

Net cash used in financing activities (4,193 ) (5,719 ) (2,128 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 84,398 26,860 11,769

CASH AND CASH EQUIVALENTS AT BEGINNING OF 258,874 232,014 178,690 PERIOD CASH AND CASH EQUIVALENTS AT END OF $ 343,272 $ 258,874 $ 190,459 PERIOD View source version on businesswire.com: https://www.businesswire.com/news/home/20210429005989/en/

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