Business Wire | Oct 28, 2021 04:07PM EDT

Power Integrations Reports Third-Quarter Financial Results

Oct. 28, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Oct. 28, 2021--Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended September 30, 2021. Net revenues for the third quarter of 2021 were $176.8 million, down two percent compared to the prior quarter and up 46 percent from the third quarter of 2020. Net income for the third quarter was $42.0 million or $0.69 per diluted share compared to $0.68 per diluted share in the prior quarter and $0.24 per diluted share in the third quarter of 2020. Cash flow from operations for the third quarter was $58.7 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 2021 was $51.8 million or $0.84 per diluted share compared with $0.83 per diluted share in the prior quarter and $0.40 per diluted share in the third quarter of 2020. A reconciliation of GAAP to non-GAAP financial results is included with the tables accompanying this press release.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "We delivered another quarter of strong growth in revenues, earnings and cash flows. For the first nine months of 2021 our revenues were up 57 percent, and we are on track to outgrow the analog semiconductor industry by a wide margin this year thanks to broad market-share gains, strong uptake of our highly integrated GaN products, and secular trends such as energy efficiency, electrification, smart homes and appliances, and advanced chargers for mobile devices."

Additional Highlights

* The company paid a cash dividend of $0.13 per share on September 30, 2021. The company's board of directors has declared a dividend of $0.15 per share to be paid on December 31, 2021 to stockholders of record as of November 30, 2021. * Power Integrations repurchased approximately 120,000 shares of its common stock during the quarter for $9.8 million. The company had approximately $55 million remaining on its repurchase authorization at quarter-end; the company's board of directors has subsequently allocated an additional $50 million for share repurchases bringing the total allocation to approximately $105 million.

Financial Outlook

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

* Revenues are expected to be $170 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 $49.5 million; non-GAAP operating expenses are expected to be approximately $40 million. Non-GAAP expenses are expected to exclude approximately $9.3 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: https://conferencingportals.com/event/iobnvsok. 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 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 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 Nine Months Ended

September June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020

NET REVENUES $ 176,776 $ 180,110 $ 121,129 $ 530,623 $ 337,625

COST OF REVENUES 85,037 88,797 61,560 263,160 168,040

GROSS PROFIT 91,739 91,313 59,569 267,463 169,585

OPERATING EXPENSES:Research and 21,137 21,741 20,868 62,905 59,790 developmentSales and marketing 15,443 15,097 13,442 44,447 39,465

General and 9,386 9,306 10,302 28,767 26,867 administrativeAmortization of 181 193 216 590 703 acquisition-relatedintangible assetsTotal operating 46,147 46,337 44,828 136,709 126,825 expenses INCOME FROM 45,592 44,976 14,741 130,754 42,760 OPERATIONS OTHER INCOME 206 173 877 976 4,134

INCOME BEFORE 45,798 45,149 15,618 131,730 46,894 INCOME TAXES PROVISION FOR 3,764 3,268 798 8,017 2,996 INCOME TAXES NET INCOME $ 42,034 $ 41,881 $ 14,820 $ 123,713 $ 43,898

EARNINGS PER SHARE:Basic $ 0.70 $ 0.69 $ 0.25 $ 2.05 $ 0.74

Diluted $ 0.69 $ 0.68 $ 0.24 $ 2.01 $ 0.72

SHARES USED INPER-SHARECALCULATION:Basic 60,319 60,544 59,823 60,350 59,582

Diluted 61,363 61,466 60,852 61,466 60,668

SUPPLEMENTAL Three Months Ended Nine Months EndedINFORMATION: September June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020

Stock-basedcompensationexpenses includedin:Cost of revenues $ 664 $ 640 $ 602 $ 1,935 $ 1,250

Research and 3,055 3,159 2,976 8,605 7,436 developmentSales and marketing 2,201 1,725 1,900 5,540 4,550

General and 3,725 3,676 3,880 11,245 8,813 administrativeTotal stock-based $ 9,645 $ 9,200 $ 9,358 $ 27,325 $ 22,049 compensationexpense Cost of revenuesincludes:Amortization of $ 552 $ 619 $ 799 $ 1,925 $ 2,397 acquisition-relatedintangible assets Three Months Ended Nine Months Ended

REVENUE MIX BY END September June 30, September September SeptemberMARKET 30, 2021 2021 30, 2020 30, 2021 30, 2020

Communications 25 % 35 % 32 % 33 % 28 %

Computer 11 % 8 % 9 % 9 % 6 %

Consumer 34 % 31 % 31 % 31 % 34 %

Industrial 30 % 26 % 28 % 27 % 32 %

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, 2021 2021 30, 2020 30, 2021 30, 2020RECONCILIATION OF GROSSPROFITGAAP gross profit $ 91,739 $ 91,313 $ 59,569 $ 267,463 $ 169,585

GAAP gross margin 51.9 % 50.7 % 49.2 % 50.4 % 50.2 %

Stock-based compensation 664 640 602 1,935 1,250 included in cost ofrevenuesAmortization of 552 619 799 1,925 2,397 acquisition-relatedintangible assets Non-GAAP gross profit $ 92,955 $ 92,572 $ 60,970 $ 271,323 $ 173,232

Non-GAAP gross 52.6 % 51.4 % 50.3 % 51.1 % 51.3 % margin Three Months Ended Nine Months EndedRECONCILIATION OFOPERATING EXPENSES September June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020

GAAP operating expenses $ 46,147 $ 46,337 $ 44,828 $ 136,709 $ 126,825

Stock-basedLess: compensation expense included in operating expenses Research and 3,055 3,159 2,976 8,605 7,436 development Sales and marketing 2,201 1,725 1,900 5,540 4,550

General and 3,725 3,676 3,880 11,245 8,813 administrative Total 8,981 8,560 8,756 25,390 20,799

Amortization of 181 193 216 590 703 acquisition-related intangible assets Non-GAAP operating $ 36,985 $ 37,584 $ 35,856 $ 110,729 $ 105,323 expenses Three Months Ended Nine Months EndedRECONCILIATION OF INCOMEFROM OPERATIONS September June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020

GAAP income from $ 45,592 $ 44,976 $ 14,741 $ 130,754 $ 42,760 operations GAAP operating 25.8 % 25.0 % 12.2 % 24.6 % 12.7 % margin Add: Total stock-based 9,645 9,200 9,358 27,325 22,049 compensation Amortization of 733 812 1,015 2,515 3,100 acquisition-related intangible assets Non-GAAP income from $ 55,970 $ 54,988 $ 25,114 $ 160,594 $ 67,909 operations Non-GAAP operating 31.7 % 30.5 % 20.7 % 30.3 % 20.1 % margin Three Months Ended Nine Months EndedRECONCILIATION OFPROVISION FOR INCOMETAXES September June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020

GAAP provision for income $ 3,764 $ 3,268 $ 798 $ 8,017 $ 2,996 taxes GAAP effective tax 8.2 % 7.2 % 5.1 % 6.1 % 6.4 % rate Tax effect of adjustments (565 ) (1,101 ) (971 ) (4,244 ) (1,994 )to GAAP results Non-GAAP provision for $ 4,329 $ 4,369 $ 1,769 $ 12,261 $ 4,990 income taxes Non-GAAP effective 7.7 % 7.9 % 6.8 % 7.6 % 6.9 % tax rate Three Months Ended Nine Months EndedRECONCILIATION OF NETINCOME PER SHARE(DILUTED) September June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020

GAAP net income $ 42,034 $ 41,881 $ 14,820 $ 123,713 $ 43,898

Adjustments to GAAP netincome Stock-based 9,645 9,200 9,358 27,325 22,049 compensation Amortization of 733 812 1,015 2,515 3,100 acquisition-related intangible assets Tax effect of items (565 ) (1,101 ) (971 ) (4,244 ) (1,994 ) excluded from non-GAAP results Non-GAAP net income $ 51,847 $ 50,792 $ 24,222 $ 149,309 $ 67,053

Average sharesoutstanding for 61,363 61,466 60,852 61,466 60,668 calculation of non-GAAPnet income per share(diluted) Non-GAAP net income per $ 0.84 $ 0.83 $ 0.40 $ 2.43 $ 1.11 share (diluted) GAAP net income per share $ 0.69 $ 0.68 $ 0.24 $ 2.01 $ 0.72 (diluted) POWER INTEGRATIONS, INC.CONSOLIDATED BALANCE SHEETS(in thousands)

June 30, September 30, 2021 December 31, 2021 2020

ASSETS CURRENT ASSETS: Cash and cash equivalents $ 262,435 $ 297,481 $ 258,874

Short-term marketable securities 286,506 217,777 190,318

Accounts receivable, net 38,872 41,352 35,910

Inventories 91,814 89,643 102,878

Prepaid expenses and other 23,720 21,292 13,252 current assets Total current assets 703,347 667,545 601,232

PROPERTY AND EQUIPMENT, net 168,498 167,079 166,188

INTANGIBLE ASSETS, net 9,807 10,601 12,506

GOODWILL 91,849 91,849 91,849

DEFERRED TAX ASSETS 3,266 2,072 3,339

OTHER ASSETS 28,223 28,703 28,225

Total assets $ 1,004,990 $ 967,849 $ 903,339

LIABILITIES AND STOCKHOLDERS'EQUITY CURRENT LIABILITIES: Accounts payable $ 40,390 $ 41,898 $ 34,712

Accrued payroll and related 14,064 16,652 14,806 expenses Taxes payable 970 989 902

Other accrued liabilities 10,638 8,727 12,106

Total current liabilities 66,062 68,266 62,526

LONG-TERM LIABILITIES: Income taxes payable 14,644 14,340 15,588

Other liabilities 15,928 14,899 14,814

Total liabilities 96,634 97,505 92,928

STOCKHOLDERS' EQUITY: Common stock 28 28 28

Additional paid-in capital 189,790 185,878 190,920

Accumulated other comprehensive (3,249 ) (3,155 ) (2,163 ) loss Retained earnings 721,787 687,593 621,626

Total stockholders' equity 908,356 870,344 810,411

Total liabilities and $ 1,004,990 $ 967,849 $ 903,339 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, 2021 2021 30, 2020 30, 2021 30, 2020

CASH FLOWSFROMOPERATINGACTIVITIES:Net income $ 42,034 $ 41,881 $ 14,820 $ 123,713 $ 43,898

Adjustmentsto reconcilenet incometo cashprovided byoperatingactivitiesDepreciation 8,126 7,821 6,002 23,400 17,071

Amortizationof 794 873 1,076 2,699 3,283 intangibleassetsLoss ondisposal of 2,162 21 19 2,200 311 property andequipmentStock-based 9,645 9,200 9,358 27,325 22,049 compensationexpenseAmortizationof premium 475 124 204 775 525 onmarketablesecuritiesDeferred (1,194 ) (263 ) (1,179 ) (12 ) 100 income taxesIncrease(decrease)in accounts (74 ) 93 309 17 155 receivableallowancefor creditlossesChange inoperatingassets andliabilities:Accounts 2,554 812 (16,884 ) (2,979 ) (5,328 )receivableInventories (2,171 ) 866 (842 ) 11,064 (14,425 )

Prepaid (472 ) (1,248 ) 2,041 (4,973 ) 6,133 expenses andother assetsAccounts (1,420 ) 4,772 504 6,633 6,365 payableTaxespayable and (1,724 ) 1,896 801 (6,157 ) (864 )otheraccruedliabilitiesNet cashprovided by 58,735 66,848 16,229 183,705 79,273 operatingactivities CASH FLOWSFROMINVESTINGACTIVITIES:Purchases of (11,011 ) (8,243 ) (14,116 ) (30,305 ) (35,738 )property andequipmentProceedsfrom sale of - 10 - 35 331 property andequipmentPurchases of (193,150 ) (166,782 ) (46,239 ) (381,903 ) (66,066 )marketablesecuritiesProceedsfrom salesand 123,953 96,617 28,033 284,036 86,995 maturitiesofmarketablesecuritiesNet cashused in (80,208 ) (78,398 ) (32,322 ) (128,137 ) (14,478 )investingactivities CASH FLOWSFROMFINANCINGACTIVITIES:Net proceedsfrom 4,058 - 3,364 7,710 9,662 issuance ofcommon stockRepurchase (9,791 ) (26,374 ) - (36,165 ) (2,636 )of commonstockPayments of (7,840 ) (7,867 ) (6,582 ) (23,552 ) (18,497 )dividends tostockholdersNet cashused in (13,573 ) (34,241 ) (3,218 ) (52,007 ) (11,471 )financingactivities NET INCREASE(DECREASE) (35,046 ) (45,791 ) (19,311 ) 3,561 53,324 IN CASH ANDCASHEQUIVALENTS CASH ANDCASH 297,481 343,272 251,325 258,874 178,690 EQUIVALENTSAT BEGINNINGOF PERIOD CASH ANDCASH $ 262,435 $ 297,481 $ 232,014 $ 262,435 $ 232,014 EQUIVALENTSAT END OFPERIOD View source version on businesswire.com: https://www.businesswire.com/news/home/20211028006185/en/

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