Power Integrations Reports Fourth-Quarter and Full-Year Financial Results
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.
$
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 development
21,921
20,868
18,298
81,711
73,470
Sales and marketing
14,113
13,442
14,241
53,578
52,720
General and administrative
10,028
10,302
10,634
36,895
37,582
Amortization of acquisition-related intangible assets
216
216
378
919
1,577
Litigation settlement
-
-
(168,969
)
-
(168,969
)
Total operating expenses
46,278
44,828
(125,418
)
173,103
(3,620
)
INCOME FROM OPERATIONS
27,727
14,741
183,643
70,487
217,022
OTHER INCOME
630
877
1,852
4,764
5,392
INCOME BEFORE INCOME TAXES
28,357
15,618
185,495
75,251
222,414
PROVISION FOR INCOME TAXES
1,079
798
27,204
4,075
28,946
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 IN PER-SHARE CALCULATION: Basic
59,879
59,823
58,854
59,657
58,534
Diluted
61,176
60,852
60,010
60,845
59,632
SUPPLEMENTAL INFORMATION: Three Months Ended Twelve Months Ended December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Stock-based compensation expenses included in: Cost of revenues
$
713
$
602
$
413
$
1,963
$
1,237
Research and development
2,942
2,976
2,754
10,378
8,423
Sales and marketing
1,740
1,900
1,602
6,290
5,015
General and administrative
3,468
3,880
3,569
12,281
8,672
Total stock-based compensation expense
$
8,863
$
9,358
$
8,338
$
30,912
$
23,347
Cost of revenues includes: Amortization of acquisition-related intangible assets
$
799
$
799
$
955
$
3,196
$
3,483
Three Months Ended Twelve Months Ended REVENUE MIX BY END MARKET December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Communications
34
%
32
%
29
%
30
%
26
%
Computer
9
%
9
%
6
%
7
%
5
%
Consumer
31
%
31
%
35
%
33
%
35
%
Industrial
26
%
28
%
30
%
30
%
34
%
$
74,005
$
59,569
$
58,225
$
243,590
$
213,402
GAAP gross margin
49.1
%
49.2
%
50.9
%
49.9
%
50.7
%
Stock-based compensation included in cost of revenues
713
602
413
1,963
1,237
Amortization of acquisition-related intangible assets
799
799
955
3,196
3,483
Non-GAAP gross profit
$
75,517
$
60,970
$
59,593
$
248,749
$
218,122
Non-GAAP gross margin
50.1
%
50.3
%
52.1
%
50.9
%
51.9
%
Three Months Ended Twelve Months Ended RECONCILIATION OF OPERATING EXPENSES December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 GAAP operating expenses$
46,278
$
44,828
$
(125,418
)
$
173,103
$
(3,620
)
Less: Stock-based compensation expense included in operating expenses Research and development
2,942
2,976
2,754
10,378
8,423
Sales and marketing
1,740
1,900
1,602
6,290
5,015
General and administrative
3,468
3,880
3,569
12,281
8,672
Total
8,150
8,756
7,925
28,949
22,110
Amortization of acquisition-related intangible assets
216
216
378
919
1,577
Non-GAAP operating expenses
$
37,912
$
35,856
$
(133,721
)
$
143,235
$
(27,307
)
Three Months Ended Twelve Months Ended RECONCILIATION OF INCOME FROM OPERATIONS December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 GAAP income from operations$
27,727
$
14,741
$
183,643
$
70,487
$
217,022
GAAP operating margin
18.4
%
12.2
%
160.4
%
14.4
%
51.6
%
Add: Total stock-based compensation
8,863
9,358
8,338
30,912
23,347
Amortization of acquisition-related intangible assets
1,015
1,015
1,333
4,115
5,060
Non-GAAP income from operations
$
37,605
$
25,114
$
193,314
$
105,514
$
245,429
Non-GAAP operating margin
25.0
%
20.7
%
168.9
%
21.6
%
58.3
%
Three Months Ended Twelve Months Ended RECONCILIATION OF PROVISION FOR INCOME TAXES December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 GAAP provision for income taxes$
1,079
$
798
$
27,204
$
4,075
$
28,946
GAAP effective tax rate
3.8
%
5.1
%
14.7
%
5.4
%
13.0
%
Tax effect of adjustments to GAAP results
(725
)
(971
)
(53
)
(2,719
)
(1,955
)
Non-GAAP provision for income taxes$
1,804
$
1,769
$
27,257
$
6,794
$
30,901
Non-GAAP effective tax rate
4.7
%
6.8
%
14.0
%
6.2
%
12.3
%
Three Months Ended Twelve Months Ended RECONCILIATION OF NET INCOME PER SHARE (DILUTED) December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 GAAP net income$
27,278
$
14,820
$
158,291
$
71,176
$
193,468
Adjustments to GAAP net income Stock-based compensation
8,863
9,358
8,338
30,912
23,347
Amortization of acquisition-related intangible assets
1,015
1,015
1,333
4,115
5,060
Tax effect of items excluded from non-GAAP results
(725
)
(971
)
(53
)
(2,719
)
(1,955
)
Non-GAAP net income$
36,431
$
24,222
$
167,909
$
103,484
$
219,920
Average shares outstanding for calculation of non-GAAP net income per share (diluted)
61,176
60,852
60,010
60,845
59,632
Non-GAAP net income per share (diluted)
$
0.60
$
0.40
$
2.80
$
1.70
$
3.69
GAAP net income per share (diluted)
$
0.45
$
0.24
$
2.64
$
1.17
$
3.24
POWER INTEGRATIONS, INC. CALCULATION OF EARNINGS PER SHARE BENEFIT OF SETTLEMENT (in thousands, except per-share amounts) Three Months Ended Twelve Months Ended December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Gain from litigation settlement
$
-
$
-
$
168,969
$
-
$
168,969
Tax expense attributed to settlement
-
-
25,543
-
25,543
Litigation settlement net of tax
$
-
$
-
$
143,426
$
-
$
143,426
Earnings per share benefit of settlement (GAAP and non-GAAP)
$
-
$
-
$
2.39
$
-
$
2.41
Diluted average shares outstanding
61,176
60,852
60,010
60,845
59,632
$
258,874
$
232,014
$
178,690
Short-term marketable securities
190,318
211,926
232,398
Accounts receivable, net
35,910
29,447
24,274
Inventories
102,878
104,805
90,380
Prepaid expenses and other current assets
13,252
14,755
15,597
Total 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’ EQUITY CURRENT LIABILITIES: Accounts payable
$
34,712
$
43,623
$
27,433
Accrued payroll and related expenses
14,806
12,892
13,408
Taxes 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 comprehensive loss
(2,163
)
(2,355
)
(3,130
)
Retained earnings
621,626
600,932
575,531
Total stockholders' equity
810,411
779,797
724,546
Total liabilities and stockholders' equity
$
903,339
$
876,068
$
803,896
$
27,278
$
14,820
$
158,291
$
71,176
$
193,468
Adjustments to reconcile net income to cash provided by operating activities Depreciation
6,672
6,002
4,928
23,743
19,190
Amortization of intangible assets
1,076
1,076
1,373
4,359
5,213
Loss on disposal of property and equipment
214
19
35
525
249
Stock-based compensation expense
8,863
9,358
8,338
30,912
23,347
Amortization of premium (accretion of discount) on marketable securities
180
204
104
705
(192
)
Deferred income taxes
(692
)
(1,179
)
2,741
(592
)
4,019
Increase (decrease) in accounts receivable allowances for credit losses
(491
)
309
-
(336
)
57
Change in operating assets and liabilities: Accounts receivable
(5,972
)
(16,884
)
1,545
(11,300
)
(13,259
)
Inventories
1,927
(842
)
(1,670
)
(12,498
)
(9,523
)
Prepaid expenses and other assets
3,020
2,041
902
9,153
(2,132
)
Accounts payable
(668
)
504
(3,920
)
5,697
(6,556
)
Taxes payable and other accrued liabilities
4,959
801
9,492
4,095
10,618
Net cash provided by operating activities
46,366
16,229
182,159
125,639
224,499
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment
(34,860
)
(14,116
)
(9,789
)
(70,598
)
(24,114
)
Proceeds from sale of property and equipment
320
-
-
651
-
Acquisition of technology licenses
-
-
(675
)
-
(1,026
)
Purchases of marketable securities
(43,637
)
(46,239
)
(71,952
)
(109,703
)
(207,240
)
Proceeds from sales and maturities of marketable securities
64,390
28,033
4,150
151,385
70,334
Net cash used in investing activities
(13,787
)
(32,322
)
(78,266
)
(28,265
)
(162,046
)
CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock
865
3,364
225
10,527
9,908
Repurchase of common stock
-
-
-
(2,636
)
(7,302
)
Payments of dividends to stockholders
(6,584
)
(6,582
)
(5,590
)
(25,081
)
(20,506
)
Net cash used in financing activities
(5,719
)
(3,218
)
(5,365
)
(17,190
)
(17,900
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
26,860
(19,311
)
98,528
80,184
44,553
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
232,014
251,325
80,162
178,690
134,137
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
258,874
$
232,014
$
178,690
$
258,874
$
178,690
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