Power Integrations Reports Third-Quarter Financial Results

Rhea-AI Summary

Power Integrations (NASDAQ: POWI) reported Q3 revenues of $160.2 million, a 13% decrease quarter-over-quarter and a 9% decline year-over-year. GAAP earnings fell to $0.80 per diluted share, down from $0.96 in Q2 2022 and $0.69 in Q3 2021. Non-GAAP earnings were $0.84 per diluted share. The company authorized a $100 million stock repurchase program, signaling confidence in long-term growth despite a muted near-term revenue outlook due to weakened demand, particularly in consumer applications.

Positive

• Authorized a $100 million stock repurchase program, indicating strong balance sheet and shareholder confidence.
• Continued market share gains across various end markets and progress in automotive and GaN technology.

Negative

• Revenues declined by 13% compared to the prior quarter and 9% year-over-year.
• GAAP earnings per diluted share decreased from $0.96 in Q2 2022.

Revenues were $160.2 million; GAAP earnings were $0.80 per diluted share; non-GAAP earnings were $0.84 per diluted share

Announces $100 million repurchase authorization

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended September 30, 2022. Net revenues for the third quarter were $160.2 million, down 13 percent compared to the prior quarter and down nine percent from the third quarter of 2021. Net income for the third quarter was $46.0 million or $0.80 per diluted share compared to $0.96 per diluted share in the prior quarter and $0.69 per diluted share in the third quarter of 2021. Cash flow from operations for the third quarter was $49.8 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, net other operating expenses of $1.1 million in the second quarter of 2022 stemming from a patent-litigation settlement and an offsetting recovery from the liquidation of SemiSouth Laboratories, and the tax effects of these items. Non-GAAP net income for the third quarter of 2022 was $48.3 million or $0.84 per diluted share compared with $1.03 per diluted share in the prior quarter and $0.84 per diluted share in the third quarter of 2021. 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: “Demand has continued to weaken, particularly in appliances and other consumer applications, and inventories have accumulated in the supply chain. While our near-term revenue outlook is therefore muted, we continue to gain market share across a broad set of end markets while making excellent progress on growth initiatives like automotive, motor drive, and our proprietary GaN technology. Our board of directors has committed $100 million to share repurchases, reflecting our strong balance sheet and our high level of confidence in our long-term growth prospects.”

Additional Highlights

• Power Integrations’ board of directors has authorized the use of $100 million for the repurchase of the company’s common stock, subject to pre-determined price/volume thresholds. The authorization does not have an expiration date.
• The company paid a dividend of $0.18 per share on September 30, 2022. A dividend of $0.18 per share is to be paid on December 30, 2022, to stockholders of record as of November 30, 2022.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2022:

• Revenues are expected to be $125 million plus or minus $5 million.
• GAAP gross margin is expected to be between 55.5 percent and 56 percent. Non-GAAP gross margin is expected to be between 56 percent and 56.5 percent. The difference between GAAP and non-GAAP gross margins is approximately equally attributable to stock-based compensation and amortization of acquisition-related intangible assets.
• GAAP operating expenses are expected to be between $49.5 million and $50 million; non-GAAP operating expenses are expected to be between $42 million and $42.5 million. Non-GAAP expenses are expected to exclude approximately $7.5 million of stock-based compensation.

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, net other operating expenses of $1.1 million in the second quarter of 2022 stemming from a patent-litigation settlement and an offsetting recovery from the liquidation of SemiSouth Laboratories, 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 and geopolitical conditions, including such factors as inflation, armed conflicts and 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, 2022. The company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether because 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 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
NET REVENUES				$	160,233			$	183,986			$	176,776			$	526,368			$	530,623
COST OF REVENUES					68,198				77,143				85,037				226,815				263,160
GROSS PROFIT					92,035				106,843				91,739				299,553				267,463
OPERATING EXPENSES:
Research and development					23,205				23,507				21,137				70,390				62,905
Sales and marketing					14,700				15,985				15,443				46,840				44,447
General and administrative					5,759				6,059				9,386				21,432				28,767
Amortization of acquisition-related intangible assets					-				60				181				241				590
Other operating expenses, net					-				1,130				-				1,130				-
	Total operating expenses				43,664				46,741				46,147				140,033				136,709
INCOME FROM OPERATIONS					48,371				60,102				45,592				159,520				130,754
OTHER INCOME					1,001				674				206				2,229				976
INCOME BEFORE INCOME TAXES					49,372				60,776				45,798				161,749				131,730
PROVISION FOR INCOME TAXES					3,408				4,952				3,764				13,713				8,017
NET INCOME				$	45,964			$	55,824			$	42,034			$	148,036			$	123,713
EARNINGS PER SHARE:
	Basic			$	0.80			$	0.97			$	0.70			$	2.55			$	2.05
	Diluted			$	0.80			$	0.96			$	0.69			$	2.52			$	2.01
SHARES USED IN PER-SHARE CALCULATION:
	Basic				57,172				57,731				60,319				58,039				60,350
	Diluted				57,603				58,305				61,363				58,635				61,466
SUPPLEMENTAL INFORMATION:				Three Months Ended												Nine Months Ended
				September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
Stock-based compensation expenses included in:
	Cost of revenues			$	172			$	235			$	664			$	727			$	1,935
	Research and development				2,334				2,323				3,055				7,712				8,605
	Sales and marketing				1,267				1,177				2,201				4,392				5,540
	General and administrative				(755	)			(56	)			3,725				2,879				11,245
	Total stock-based compensation expense			$	3,018			$	3,679			$	9,645			$	15,710			$	27,325
Cost of revenues includes:
	Amortization of acquisition-related intangible assets			$	482			$	482			$	552			$	1,446			$	1,925
				Three Months Ended												Nine Months Ended
REVENUE MIX BY END MARKET				September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
	Communications				16	%			18	%			25	%			20	%			33	%
	Computer				11	%			9	%			11	%			10	%			9	%
	Consumer				32	%			38	%			34	%			35	%			31	%
	Industrial				41	%			35	%			30	%			35	%			27	%

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 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
RECONCILIATION OF GROSS PROFIT
GAAP gross profit					$	92,035			$	106,843			$	91,739			$	299,553			$	267,463
GAAP gross margin						57.4	%			58.1	%			51.9	%			56.9	%			50.4	%
Stock-based compensation included in cost of revenues						172				235				664				727				1,935
Amortization of acquisition-related intangible assets						482				482				552				1,446				1,925
Non-GAAP gross profit					$	92,689			$	107,560			$	92,955			$	301,726			$	271,323
Non-GAAP gross margin						57.8	%			58.5	%			52.6	%			57.3	%			51.1	%
					Three Months Ended												Nine Months Ended
RECONCILIATION OF OPERATING EXPENSES					September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
GAAP operating expenses					$	43,664			$	46,741			$	46,147			$	140,033			$	136,709
Less: Stock-based compensation expense included in operating expenses
Research and development						2,334				2,323				3,055				7,712				8,605
Sales and marketing						1,267				1,177				2,201				4,392				5,540
General and administrative						(755	)			(56	)			3,725				2,879				11,245
Total						2,846				3,444				8,981				14,983				25,390
Amortization of acquisition-related intangible assets						-				60				181				241				590
Other operating expenses, net						-				1,130				-				1,130				-
Non-GAAP operating expenses					$	40,818			$	42,107			$	36,985			$	123,679			$	110,729
					Three Months Ended												Nine Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS					September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
GAAP income from operations					$	48,371			$	60,102			$	45,592			$	159,520			$	130,754
GAAP operating margin						30.2	%			32.7	%			25.8	%			30.3	%			24.6	%
Add: Total stock-based compensation						3,018				3,679				9,645				15,710				27,325
Amortization of acquisition-related intangible assets						482				542				733				1,687				2,515
Other operating expenses, net						-				1,130				-				1,130				-
Non-GAAP income from operations					$	51,871			$	65,453			$	55,970			$	178,047			$	160,594
Non-GAAP operating margin						32.4	%			35.6	%			31.7	%			33.8	%			30.3	%
					Three Months Ended												Nine Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES					September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
GAAP provision for income taxes					$	3,408			$	4,952			$	3,764			$	13,713			$	8,017
GAAP effective tax rate						6.9	%			8.1	%			8.2	%			8.5	%			6.1	%
Tax effect of adjustments to GAAP results						(1,116	)			(1,259	)			(565	)			(2,497	)			(4,244	)
Non-GAAP provision for income taxes					$	4,524			$	6,211			$	4,329			$	16,210			$	12,261
Non-GAAP effective tax rate						8.6	%			9.4	%			7.7	%			9.0	%			7.6	%
					Three Months Ended												Nine Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)					September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
GAAP net income					$	45,964			$	55,824			$	42,034			$	148,036			$	123,713
Adjustments to GAAP net income
Stock-based compensation						3,018				3,679				9,645				15,710				27,325
Amortization of acquisition-related intangible assets						482				542				733				1,687				2,515
Other operating expenses, net						-				1,130				-				1,130				-
Tax effect of items excluded from non-GAAP results						(1,116	)			(1,259	)			(565	)			(2,497	)			(4,244	)
Non-GAAP net income					$	48,348			$	59,916			$	51,847			$	164,066			$	149,309
Average shares outstanding for calculation
of non-GAAP net income per share (diluted)						57,603				58,305				61,363				58,635				61,466
Non-GAAP net income per share (diluted)					$	0.84			$	1.03			$	0.84			$	2.80			$	2.43
GAAP net income per share (diluted)					$	0.80			$	0.96			$	0.69			$	2.52			$	2.01

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
			September 30, 2022				June 30, 2022				December 31, 2021
ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents		$	133,474			$	67,383			$	158,117
	Short-term marketable securities			229,754				260,209				372,235
	Accounts receivable, net			16,075				27,980				41,393
	Inventories			120,092				111,258				99,266
	Prepaid expenses and other current assets			12,634				14,219				15,804
	Total current assets			512,029				481,049				686,815
	PROPERTY AND EQUIPMENT, net			181,224				184,245				179,824
	INTANGIBLE ASSETS, net			7,141				7,684				9,012
	GOODWILL			91,849				91,849				91,849
	DEFERRED TAX ASSETS			23,935				19,830				16,433
	OTHER ASSETS			21,785				24,347				30,554
	Total assets		$	837,963			$	809,004			$	1,014,487
LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
	Accounts payable		$	29,521			$	41,402			$	43,721
	Accrued payroll and related expenses			13,765				14,569				15,492
	Taxes payable			2,960				561				1,210
	Other accrued liabilities			12,613				13,597				11,898
	Total current liabilities			58,859				70,129				72,321
	LONG-TERM LIABILITIES:
	Income taxes payable			16,398				15,739				15,280
	Other liabilities			12,424				12,891				14,854
	Total liabilities			87,681				98,759				102,455
STOCKHOLDERS' EQUITY:
	Common stock			24				24				28
	Additional paid-in capital			6,123				-				162,301
	Accumulated other comprehensive loss			(11,817	)			(10,060	)			(3,737	)
	Retained earnings			755,952				720,281				753,440
	Total stockholders' equity			750,282				710,245				912,032
	Total liabilities and stockholders' equity		$	837,963			$	809,004			$	1,014,487

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
		Three Months Ended												Nine Months Ended
		September 30, 2022				June 30, 2022				September 30, 2021				September 30, 2022				September 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income	$	45,964			$	55,824			$	42,034			$	148,036			$	123,713
	Adjustments to reconcile net income to cash provided by operating activities
	Depreciation		8,881				8,766				8,126				26,055				23,400
	Amortization of intangible assets		543				604				794				1,871				2,699
	Loss on disposal of property and equipment		128				959				2,162				1,162				2,200
	Stock-based compensation expense		3,018				3,679				9,645				15,710				27,325
	Amortization of premium on marketable securities		771				930				475				2,638				775
	Deferred income taxes		(4,108	)			(2,346	)			(1,194	)			(7,390	)			(12	)
	Increase in accounts receivable allowance for credit losses		431				184				(74	)			690				17
	Change in operating assets and liabilities:
	Accounts receivable		11,474				2,494				2,554				24,628				(2,979	)
	Inventories		(8,834	)			(8,143	)			(2,171	)			(20,826	)			11,064
	Prepaid expenses and other assets		4,353				2,523				(472	)			8,428				(4,973	)
	Accounts payable		(11,451	)			7,286				(1,420	)			(5,874	)			6,633
	Taxes payable and other accrued liabilities		(1,344	)			(5,938	)			(1,724	)			(3,883	)			(6,157	)
	Net cash provided by operating activities		49,826				66,822				58,735				191,245				183,705
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment		(5,500	)			(13,244	)			(11,011	)			(33,444	)			(30,305	)
	Proceeds from sale of property and equipment		-				-				-				1,202				35
	Purchases of marketable securities		(6,534	)			(5,589	)			(193,150	)			(27,244	)			(381,903	)
	Proceeds from sales and maturities of marketable securities		35,487				16,710				123,953				161,014				284,036
	Net cash provided by (used in) investing activities		23,453				(2,123	)			(80,208	)			101,528				(128,137	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from issuance of common stock		3,105				-				4,058				6,162				7,710
	Repurchase of common stock		-				(157,660	)			(9,791	)			(292,349	)			(36,165	)
	Payments of dividends to stockholders		(10,293	)			(10,280	)			(7,840	)			(31,229	)			(23,552	)
	Net cash used in financing activities		(7,188	)			(167,940	)			(13,573	)			(317,416	)			(52,007	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			66,091				(103,241	)			(35,046	)			(24,643	)			3,561
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			67,383				170,624				297,481				158,117				258,874
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	133,474			$	67,383			$	262,435			$	133,474			$	262,435

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221102005979/en/

Joe Shiffler

Power Integrations, Inc.

(408) 414-8528

joe@power.com

Source: Power Integrations, Inc.

FAQ

What were Power Integrations' Q3 2022 revenues and earnings per share?

Power Integrations reported Q3 2022 revenues of $160.2 million and GAAP earnings of $0.80 per diluted share.

How has the revenue outlook changed for Power Integrations?

The company stated that the revenue outlook is muted due to weakened demand, especially in consumer applications.

What is the significance of the $100 million stock repurchase authorization by POWI?

The $100 million repurchase authorization demonstrates the company's confidence in its long-term growth prospects.

What is the expected revenue for Power Integrations in Q4 2022?

For Q4 2022, Power Integrations expects revenues to be $125 million, plus or minus $5 million.