Business Wire | Jul 29, 2021 04:02PM EDT

Power Integrations Reports Second-Quarter Financial Results

Jul. 29, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Jul. 29, 2021--Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2021. Per-share measures for all periods reflect the effect of the August 2020 two-for-one stock split.

Net revenues for the second quarter of 2021 were $180.1 million, up four percent compared to the prior quarter and up 69 percent from the second quarter of 2020. Net income for the second quarter was $41.9 million or $0.68 per diluted share compared to $0.65 per diluted share in the prior quarter and $0.22 per diluted share in the second quarter of 2020. Cash flow from operations for the second quarter was $66.8 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 and the tax effects of these items. Non-GAAP net income for the second quarter of 2021 was $50.8 million or $0.83 per diluted share compared with $0.76 per diluted share in the prior quarter and $0.33 per diluted share in the second 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: "We achieved record sales in the second quarter, and our revenues for the first half of 2021 are up 63 percent from a year ago. This growth reflects significant market-share gains and the impact of secular trends such as energy efficiency, electrification, advanced charging for mobile devices, and smarter homes, buildings and appliances."

Additional Highlights

* Power Integrations repurchased approximately 335,000 shares of its common stock during the quarter for $26.4 million. The company had $64.9 million remaining on its repurchase authorization at quarter-end. * The company paid a cash dividend of $0.13 per share on June 30, 2021. A dividend of $0.13 per share will be paid on September 30, 2021 to stockholders of record as of August 31, 2021.

Financial Outlook

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

* Revenues are expected to decrease by three percent compared to the second quarter of 2021, plus or minus five percent. * GAAP gross margin is expected to be approximately 51 percent, and non-GAAP gross margin is expected to be approximately 51.5 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 between $47.5 million and $48 million; non-GAAP operating expenses are expected to be between $38.5 million and $39 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/8646289. 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, 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 third-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 Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020NET REVENUES $ 180,110 $ 173,737 $ 106,832 $ 353,847 $ 216,496

COST OF REVENUES 88,797 89,326 53,296 178,123 106,480

GROSS PROFIT 91,313 84,411 53,536 175,724 110,016

OPERATING EXPENSES:Research and 21,741 20,027 19,770 41,768 38,922 developmentSales and marketing 15,097 13,907 12,807 29,004 26,023

General and 9,306 10,075 7,804 19,381 16,565 administrativeAmortization of 193 216 230 409 487 acquisition-relatedintangible assets Total operating 46,337 44,225 40,611 90,562 81,997 expenses INCOME FROM 44,976 40,186 12,925 85,162 28,019 OPERATIONS OTHER INCOME 173 597 1,480 770 3,257

INCOME BEFORE INCOME 45,149 40,783 14,405 85,932 31,276 TAXES PROVISION FOR INCOME 3,268 985 1,213 4,253 2,198 TAXES NET INCOME $ 41,881 $ 39,798 $ 13,192 $ 81,679 $ 29,078

EARNINGS PER SHARE: Basic $ 0.69 $ 0.66 $ 0.22 $ 1.35 $ 0.49

Diluted $ 0.68 $ 0.65 $ 0.22 $ 1.33 $ 0.48

SHARES USED INPER-SHARECALCULATION: Basic 60,544 60,184 59,712 60,366 59,458

Diluted 61,466 61,451 60,624 61,481 60,464

SUPPLEMENTAL Three Months Ended Six Months EndedINFORMATION: June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020Stock-basedcompensationexpenses includedin: Cost of revenues $ 640 $ 631 $ 252 $ 1,271 $ 648

Research and 3,159 2,391 2,351 5,550 4,460 development Sales and 1,725 1,614 1,258 3,339 2,650 marketing General and 3,676 3,844 2,120 7,520 4,933 administrative Total stock-based $ 9,200 $ 8,480 $ 5,981 $ 17,680 $ 12,691 compensation expense Cost of revenuesincludes: Amortization of $ 619 $ 754 $ 799 $ 1,373 $ 1,598 acquisition-related intangible assets Three Months Ended Six Months EndedREVENUE MIX BY END June 30, March 31, June 30, June 30, June 30,MARKET 2021 2021 2020 2021 2020 Communications 35 % 38 % 28 % 37 % 25 %

Computer 8 % 8 % 6 % 8 % 5 %

Consumer 31 % 29 % 31 % 30 % 36 %

Industrial 26 % 25 % 35 % 25 % 34 %

POWER INTEGRATIONS, INC.RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS(in thousands, except per-share amounts) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020RECONCILIATION OF GROSSPROFITGAAP gross profit $ 91,313 $ 84,411 $ 53,536 $ 175,724 $ 110,016

GAAP gross margin 50.7 % 48.6 % 50.1 % 49.7 % 50.8 %

Stock-based compensation 640 631 252 1,271 648 included in cost ofrevenuesAmortization of 619 754 799 1,373 1,598 acquisition-relatedintangible assets Non-GAAP gross profit $ 92,572 $ 85,796 $ 54,587 $ 178,368 $ 112,262

Non-GAAP gross 51.4 % 49.4 % 51.1 % 50.4 % 51.9 % margin Three Months Ended Six Months EndedRECONCILIATION OF June 30, March 31, June 30, June 30, June 30,OPERATING EXPENSES 2021 2021 2020 2021 2020GAAP operating expenses $ 46,337 $ 44,225 $ 40,611 $ 90,562 $ 81,997

Stock-basedLess: compensation expense included in operating expenses Research and 3,159 2,391 2,351 5,550 4,460 development Sales and 1,725 1,614 1,258 3,339 2,650 marketing General and 3,676 3,844 2,120 7,520 4,933 administrative Total 8,560 7,849 5,729 16,409 12,043

Amortization of 193 216 230 409 487 acquisition-related intangible assets Non-GAAP operating $ 37,584 $ 36,160 $ 34,652 $ 73,744 $ 69,467 expenses Three Months Ended Six Months EndedRECONCILIATION OF INCOME June 30, March 31, June 30, June 30, June 30,FROM OPERATIONS 2021 2021 2020 2021 2020GAAP income from $ 44,976 $ 40,186 $ 12,925 $ 85,162 $ 28,019 operations GAAP operating 25.0 % 23.1 % 12.1 % 24.1 % 12.9 % margin Add: Total stock-based 9,200 8,480 5,981 17,680 12,691 compensation Amortization of 812 970 1,029 1,782 2,085 acquisition-related intangible assets Non-GAAP income from $ 54,988 $ 49,636 $ 19,935 $ 104,624 $ 42,795 operations Non-GAAP operating 30.5 % 28.6 % 18.7 % 29.6 % 19.8 % margin Three Months Ended Six Months EndedRECONCILIATION OF June 30, March 31, June 30, June 30, June 30,PROVISION FOR INCOME 2021 2021 2020 2021 2020TAXESGAAP provision for income $ 3,268 $ 985 $ 1,213 $ 4,253 $ 2,198 taxes GAAP effective tax 7.2 % 2.4 % 8.4 % 4.9 % 7.0 % rate Tax effect of adjustments (1,101 ) (2,578 ) (272 ) (3,679 ) (1,023 )to GAAP results Non-GAAP provision for $ 4,369 $ 3,563 $ 1,485 $ 7,932 $ 3,221 income taxes Non-GAAP effective 7.9 % 7.1 % 6.9 % 7.5 % 7.0 % tax rate Three Months Ended Six Months EndedRECONCILIATION OF NET June 30, March 31, June 30, June 30, June 30,INCOME PER SHARE 2021 2021 2020 2021 2020(DILUTED)GAAP net income $ 41,881 $ 39,798 $ 13,192 $ 81,679 $ 29,078

Adjustments to GAAP netincome Stock-based 9,200 8,480 5,981 17,680 12,691 compensation Amortization of 812 970 1,029 1,782 2,085 acquisition-related intangible assets Tax effect of items (1,101 ) (2,578 ) (272 ) (3,679 ) (1,023 ) excluded from non-GAAP results Non-GAAP net income $ 50,792 $ 46,670 $ 19,930 $ 97,462 $ 42,831

Average sharesoutstanding forcalculation of non-GAAP net 61,466 61,451 60,624 61,481 60,464 income per share (diluted) Non-GAAP net income per $ 0.83 $ 0.76 $ 0.33 $ 1.59 $ 0.71 share (diluted) GAAP net income per share $ 0.68 $ 0.65 $ 0.22 $ 1.33 $ 0.48 (diluted)POWER INTEGRATIONS, INC.CONSOLIDATED BALANCE SHEETS(in thousands) June 30, March 31, December 31, 2021 2021 2020ASSETS CURRENT ASSETS: Cash and cash equivalents $ 297,481 $ 343,272 $ 258,874

Short-term marketable securities 217,777 148,067 190,318

Accounts receivable, net 41,352 42,257 35,910

Inventories 89,643 90,509 102,878

Prepaid expenses and other current 21,292 18,207 13,252 assets Total current assets 667,545 642,312 601,232

PROPERTY AND EQUIPMENT, net 167,079 168,712 166,188

INTANGIBLE ASSETS, net 10,601 11,474 12,506

GOODWILL 91,849 91,849 91,849

DEFERRED TAX ASSETS 2,072 1,892 3,339

OTHER ASSETS 28,703 28,480 28,225

Total assets $ 967,849 $ 944,719 $ 903,339

LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 41,898 $ 38,172 $ 34,712

Accrued payroll and related 16,652 13,339 14,806 expenses Taxes payable 989 856 902

Other accrued liabilities 8,727 10,160 12,106

Total current liabilities 68,266 62,527 62,526

LONG-TERM LIABILITIES: Income taxes payable 14,340 14,033 15,588

Other liabilities 14,899 14,336 14,814

Total liabilities 97,505 90,896 92,928

STOCKHOLDERS' EQUITY: Common stock 28 29 28

Additional paid-in capital 185,878 203,051 190,920

Accumulated other comprehensive (3,155 ) (2,836 ) (2,163 ) loss Retained earnings 687,593 653,579 621,626

Total stockholders' equity 870,344 853,823 810,411

Total liabilities and stockholders' $ 967,849 $ 944,719 $ 903,339 equityPOWER INTEGRATIONS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020CASH FLOWSFROM OPERATINGACTIVITIES: Net income $ 41,881 $ 39,798 $ 13,192 $ 81,679 $ 29,078

Adjustments to reconcile net income to cash provided by operating activities Depreciation 7,821 7,453 5,581 15,274 11,069

Amortization 873 1,032 1,090 1,905 2,207 of intangible assets Loss on disposal of 21 17 262 38 292 property and equipment Stock-based 9,200 8,480 5,981 17,680 12,691 compensation expense Amortization of premium on 124 176 167 300 321 marketable securities Deferred (263 ) 1,445 184 1,182 1,279 income taxes Increase (decrease) in accounts 93 (2 ) - 91 (154 ) receivable allowance for credit losses Change in operating assets and liabilities: Accounts 812 (6,345 ) 7,725 (5,533 ) 11,556 receivable Inventories 866 12,369 (7,330 ) 13,235 (13,583 )

Prepaid (1,248 ) (3,253 ) 8,084 (4,501 ) 4,092 expenses and other assets Accounts 4,772 3,281 (2,967 ) 8,053 5,861 payable Taxes payable and other 1,896 (6,329 ) 4,684 (4,433 ) (1,665 ) accrued liabilities Net cash provided by 66,848 58,122 36,653 124,970 63,044 operating activities CASH FLOWSFROM INVESTINGACTIVITIES: Purchases of (8,243 ) (11,051 ) (10,019 ) (19,294 ) (21,622 ) property and equipment Proceeds from sale of 10 25 331 35 331 property and equipment Purchases of (166,782 ) (21,971 ) (2,989 ) (188,753 ) (19,827 ) marketable securities Proceeds from sales and 96,617 63,466 43,015 160,083 58,962 maturities of marketable securities Net cash provided by (78,398 ) 30,469 30,338 (47,929 ) 17,844 (used in) investing activities CASH FLOWSFROM FINANCINGACTIVITIES: Net proceeds from issuance - 3,652 769 3,652 6,298 of common stock Repurchase of (26,374 ) - (623 ) (26,374 ) (2,636 ) common stock Payments of (7,867 ) (7,845 ) (6,271 ) (15,712 ) (11,915 ) dividends to stockholders Net cash used (34,241 ) (4,193 ) (6,125 ) (38,434 ) (8,253 ) in financing activities NET INCREASE(DECREASE) IN (45,791 ) 84,398 60,866 38,607 72,635 CASH AND CASHEQUIVALENTS CASH AND CASHEQUIVALENTS AT 343,272 258,874 190,459 258,874 178,690 BEGINNING OFPERIOD CASH AND CASH $ 297,481 $ 343,272 $ 251,325 $ 297,481 $ 251,325 EQUIVALENTS ATEND OF PERIOD View source version on businesswire.com: https://www.businesswire.com/news/home/20210729006057/en/

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