Power Integrations Reports Second-Quarter Financial Results
Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2020. Net revenues for the second quarter were $106.8 million, down three percent compared to the prior quarter and up four percent from the second quarter of 2019. Net income for the second quarter was $13.2 million or $0.44 per diluted share compared to $0.53 per diluted share in the prior quarter and $0.37 per diluted share in the second quarter of 2019. Cash flow from operations for the second quarter was $36.7 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 second quarter of 2020 was $19.9 million or $0.66 per diluted share compared with $0.76 per diluted share in the prior quarter and $0.56 per diluted share in the second quarter of 2019. 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: “Revenues increased four percent year-over-year in spite of a challenging demand environment, driven by growth in the communications and industrial categories. While the pandemic continues to weigh on end-market demand, we continue to gain share across a wide range of power-conversion applications and we are on track to outperform the analog semiconductor industry again this year.”
The company announced a 2:1 stock split in the form of a stock dividend of one share of common stock per outstanding share. The additional shares will be distributed on August 18, 2020 to stockholders of record as of August 14, 2020. The split will double the number of outstanding common shares; common shares and per-share data in this press release have not been adjusted for the impact of the split.
Power Integrations paid a cash dividend of $0.21 per share on June 30, 2020. Following the stock split, the company will pay a dividend of $0.11 per share (equivalent to $0.22 on a pre-split basis) on September 30, 2020 to stockholders of record as of August 31, 2020.
Financial Outlook
The company issued the following forecast for the third quarter of 2020:
Revenues are expected to be $115 million plus or minus $5 million. GAAP gross margin is expected to be between 49.5 percent and 50 percent. Non-GAAP gross margin is expected to be between 50.5 percent and 51 percent. (The difference between the expected GAAP and non-GAAP gross margins comprises approximately 0.7 percentage points from amortization of acquisition-related intangible assets and 0.3 percentage points from stock-based compensation.) GAAP operating expenses are expected to be approximately $43 million; non-GAAP operating expenses are expected to be approximately $36 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/6141529. 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 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 crisis 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. 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.
$
106,832
$
109,664
$
102,865
$
216,496
$
192,053
COST OF REVENUES
53,296
53,184
51,293
106,480
95,007
GROSS PROFIT
53,536
56,480
51,572
110,016
97,046
OPERATING EXPENSES: Research and development
19,770
19,152
19,269
38,922
37,215
Sales and marketing
12,807
13,216
12,815
26,023
25,405
General and administrative
7,804
8,761
9,334
16,565
17,724
Amortization of acquisition-related intangible assets
230
257
394
487
821
Total operating expenses
40,611
41,386
41,812
81,997
81,165
INCOME FROM OPERATIONS
12,925
15,094
9,760
28,019
15,881
OTHER INCOME
1,480
1,777
1,310
3,257
2,462
INCOME BEFORE INCOME TAXES
14,405
16,871
11,070
31,276
18,343
PROVISION FOR INCOME TAXES
1,213
985
225
2,198
265
NET INCOME
$
13,192
$
15,886
$
10,845
$
29,078
$
18,078
EARNINGS PER SHARE: Basic
$
0.44
$
0.54
$
0.37
$
0.98
$
0.62
Diluted
$
0.44
$
0.53
$
0.37
$
0.96
$
0.61
SHARES USED IN PER-SHARE CALCULATION: Basic
29,856
29,602
29,297
29,729
29,125
Diluted
30,312
30,134
29,702
30,232
29,597
SUPPLEMENTAL INFORMATION: Three Months Ended Six Months Ended June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Stock-based compensation expenses included in: Cost of revenues
$
252
$
396
$
273
$
648
$
544
Research and development
2,351
2,109
2,144
4,460
3,776
Sales and marketing
1,258
1,392
1,141
2,650
2,202
General and administrative
2,120
2,813
1,938
4,933
3,381
Total stock-based compensation expense
$
5,981
$
6,710
$
5,496
$
12,691
$
9,903
Cost of revenues includes: Amortization of acquisition-related intangible assets
$
799
$
799
$
794
$
1,598
$
1,588
Three Months Ended Six Months Ended REVENUE MIX BY END MARKET June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Communications
28
%
22
%
24
%
25
%
21
%
Computer
6
%
4
%
6
%
5
%
6
%
Consumer
31
%
41
%
37
%
36
%
38
%
Industrial
35
%
33
%
33
%
34
%
35
%
$
53,536
$
56,480
$
51,572
$
110,016
$
97,046
GAAP gross margin
50.1
%
51.5
%
50.1
%
50.8
%
50.5
%
Stock-based compensation included in cost of revenues
252
396
273
648
544
Amortization of acquisition-related intangible assets
799
799
794
1,598
1,588
Non-GAAP gross profit
$
54,587
$
57,675
$
52,639
$
112,262
$
99,178
Non-GAAP gross margin
51.1
%
52.6
%
51.2
%
51.9
%
51.6
%
Three Months Ended Six Months Ended RECONCILIATION OF OPERATING EXPENSES June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 GAAP operating expenses$
40,611
$
41,386
$
41,812
$
81,997
$
81,165
Less: Stock-based compensation expense included in operating expenses Research and development
2,351
2,109
2,144
4,460
3,776
Sales and marketing
1,258
1,392
1,141
2,650
2,202
General and administrative
2,120
2,813
1,938
4,933
3,381
Total
5,729
6,314
5,223
12,043
9,359
Amortization of acquisition-related intangible assets
230
257
394
487
821
Non-GAAP operating expenses
$
34,652
$
34,815
$
36,195
$
69,467
$
70,985
Three Months Ended Six Months Ended RECONCILIATION OF INCOME FROM OPERATIONS June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 GAAP income from operations
$
12,925
$
15,094
$
9,760
$
28,019
$
15,881
GAAP operating margin
12.1
%
13.8
%
9.5
%
12.9
%
8.3
%
Add: Total stock-based compensation
5,981
6,710
5,496
12,691
9,903
Amortization of acquisition-related intangible assets
1,029
1,056
1,188
2,085
2,409
Non-GAAP income from operations
$
19,935
$
22,860
$
16,444
$
42,795
$
28,193
Non-GAAP operating margin
18.7
%
20.8
%
16.0
%
19.8
%
14.7
%
Three Months Ended Six Months Ended RECONCILIATION OF PROVISION FOR INCOME TAXES June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 GAAP provision for income taxes$
1,213
$
985
$
225
$
2,198
$
265
GAAP effective tax rate
8.4
%
5.8
%
2.0
%
7.0
%
1.4
%
Tax effect of adjustments to GAAP results
(272
)
(751
)
(837
)
(1,023
)
(1,636
)
Non-GAAP provision for income taxes$
1,485
$
1,736
$
1,062
$
3,221
$
1,901
Non-GAAP effective tax rate
6.9
%
7.0
%
6.0
%
7.0
%
6.2
%
Three Months Ended Six Months Ended RECONCILIATION OF NET INCOME PER SHARE (DILUTED) June 30, 2020 March 31, 2020 June 30, 2019 June 30, 2020 June 30, 2019 GAAP net income$
13,192
$
15,886
$
10,845
$
29,078
$
18,078
Adjustments to GAAP net income Stock-based compensation
5,981
6,710
5,496
12,691
9,903
Amortization of acquisition-related intangible assets
1,029
1,056
1,188
2,085
2,409
Tax effect of items excluded from non-GAAP results
(272
)
(751
)
(837
)
(1,023
)
(1,636
)
Non-GAAP net income$
19,930
$
22,901
$
16,692
$
42,831
$
28,754
Average shares outstanding for calculation of non-GAAP net income per share (diluted)
30,312
30,134
29,702
30,232
29,597
Non-GAAP net income per share (diluted)
$
0.66
$
0.76
$
0.56
$
1.42
$
0.97
GAAP net income per share
$
0.44
$
0.53
$
0.37
$
0.96
$
0.61
$
251,325
$
190,459
$
178,690
Short-term marketable securities
194,556
232,183
232,398
Accounts receivable, net
12,872
20,597
24,274
Inventories
103,963
96,633
90,380
Prepaid expenses and other current assets
14,512
20,570
15,597
Total current assets
577,228
560,442
541,339
PROPERTY AND EQUIPMENT, net
138,572
123,430
116,619
INTANGIBLE ASSETS, net
14,658
15,748
16,865
GOODWILL
91,849
91,849
91,849
DEFERRED TAX ASSETS
1,514
1,739
2,836
OTHER ASSETS
29,956
34,231
34,388
Total assets
$
853,777
$
827,439
$
803,896
LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable
$
42,871
$
37,156
$
27,433
Accrued payroll and related expenses
14,365
10,921
13,408
Taxes payable
363
567
584
Other accrued liabilities
7,156
5,826
9,051
Total current liabilities
64,755
54,470
50,476
LONG-TERM LIABILITIES: Income taxes payable
15,329
14,840
14,617
Deferred tax liabilities
121
162
164
Other liabilities
14,100
14,137
14,093
Total liabilities
94,305
83,609
79,350
STOCKHOLDERS' EQUITY: Common stock
28
28
28
Additional paid-in capital
168,470
162,343
152,117
Accumulated other comprehensive loss
(1,720
)
(4,314
)
(3,130
)
Retained earnings
592,694
585,773
575,531
Total stockholders' equity
759,472
743,830
724,546
Total liabilities and stockholders' equity
$
853,777
$
827,439
$
803,896
$
13,192
$
15,886
$
10,845
$
29,078
$
18,078
Adjustments to reconcile net income to cash provided by operating activities Depreciation
5,581
5,488
4,821
11,069
9,431
Amortization of intangible assets
1,090
1,117
1,228
2,207
2,483
Loss on disposal of property and equipment
262
30
56
292
152
Stock-based compensation expense
5,981
6,710
5,496
12,691
9,903
Amortization of premium (accretion of discount) on marketable securities
167
154
(120
)
321
(230
)
Deferred income taxes
184
1,095
498
1,279
1,659
Increase (decrease) in accounts receivable allowances for credit losses
-
(154
)
237
(154
)
57
Change in operating assets and liabilities: Accounts receivable
7,725
3,831
(5,160
)
11,556
(14,453
)
Inventories
(7,330
)
(6,253
)
(4,117
)
(13,583
)
(8,340
)
Prepaid expenses and other assets
8,084
(3,992
)
615
4,092
(3,614
)
Accounts payable
(2,967
)
8,828
2,933
5,861
4,153
Taxes payable and other accrued liabilities
4,684
(6,349
)
2,088
(1,665
)
1,217
Net cash provided by operating activities
36,653
26,391
19,420
63,044
20,496
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment
(10,019
)
(11,603
)
(4,889
)
(21,622
)
(8,348
)
Proceeds from sale of property and equipment
331
-
-
331
-
Acquisition of technology licenses
-
-
(37
)
-
(251
)
Purchases of marketable securities
(2,989
)
(16,838
)
(49,631
)
(19,827
)
(54,424
)
Proceeds from sales and maturities of marketable securities
43,015
15,947
12,635
58,962
19,422
Net cash provided by (used in) investing activities
30,338
(12,494
)
(41,922
)
17,844
(43,601
)
CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock
769
5,529
1,178
6,298
5,678
Repurchase of common stock
(623
)
(2,013
)
-
(2,636
)
(7,302
)
Payments of dividends to stockholders
(6,271
)
(5,644
)
(4,980
)
(11,915
)
(9,917
)
Net cash used in financing activities
(6,125
)
(2,128
)
(3,802
)
(8,253
)
(11,541
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
60,866
11,769
(26,304
)
72,635
(34,646
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
190,459
178,690
125,795
178,690
134,137
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
251,325
$
190,459
$
99,491
$
251,325
$
99,491
View source version on businesswire.com: https://www.businesswire.com/news/home/20200730005966/en/