Power Integrations Reports Third-Quarter Financial Results - Form 8-K

Power Integrations Reports Third-Quarter Financial Results

Revenues increased 46 percent year-over-year to $176.8 million; GAAP earnings were $0.69 per diluted share; non-GAAP earnings were $0.84 per diluted share

Quarterly dividend rises to $0.15 per share; $50M added to repurchase authorization

SAN JOSE, Calif.--(BUSINESS WIRE)--October 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 30, 2021			June 30, 2021			September 30, 2020			September 30, 2021			September 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 development			21,137					21,741					20,868					62,905					59,790
Sales and marketing			15,443					15,097					13,442					44,447					39,465
General and administrative			9,386					9,306					10,302					28,767					26,867
Amortization of acquisition-related intangible assets			181					193					216					590					703
Total operating expenses			46,147					46,337					44,828					136,709					126,825
INCOME FROM OPERATIONS			45,592					44,976					14,741					130,754					42,760
OTHER INCOME			206					173					877					976					4,134
INCOME BEFORE INCOME TAXES			45,798					45,149					15,618					131,730					46,894
PROVISION FOR INCOME TAXES			3,764					3,268					798					8,017					2,996
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 IN PER-SHARE CALCULATION:
Basic			60,319					60,544					59,823					60,350					59,582
Diluted			61,363					61,466					60,852					61,466					60,668
SUPPLEMENTAL INFORMATION:		Three Months Ended			Nine Months Ended
		September 30, 2021			June 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Stock-based compensation expenses included in:
Cost of revenues		$	664				$	640				$	602				$	1,935				$	1,250
Research and development			3,055					3,159					2,976					8,605					7,436
Sales and marketing			2,201					1,725					1,900					5,540					4,550
General and administrative			3,725					3,676					3,880					11,245					8,813
Total stock-based compensation expense		$	9,645				$	9,200				$	9,358				$	27,325				$	22,049
Cost of revenues includes:
Amortization of acquisition-related intangible assets		$	552				$	619				$	799				$	1,925				$	2,397
		Three Months Ended			Nine Months Ended
REVENUE MIX BY END MARKET		September 30, 2021			June 30, 2021			September 30, 2020			September 30, 2021			September 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 30, 2021		June 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
RECONCILIATION OF GROSS PROFIT
GAAP 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 included in cost of revenues			664				640				602				1,935				1,250
Amortization of acquisition-related intangible assets			552				619				799				1,925				2,397
Non-GAAP gross profit		$	92,955			$	92,572			$	60,970			$	271,323			$	173,232
	Non-GAAP gross margin			52.6	%			51.4	%			50.3	%			51.1	%			51.3	%
		Three Months Ended		Nine Months Ended
RECONCILIATION OF OPERATING EXPENSES		September 30, 2021		June 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
GAAP operating expenses		$	46,147			$	46,337			$	44,828			$	136,709			$	126,825
Less:	Stock-based compensation expense included in operating expenses
	Research and development			3,055				3,159				2,976				8,605				7,436
	Sales and marketing			2,201				1,725				1,900				5,540				4,550
	General and administrative			3,725				3,676				3,880				11,245				8,813
	Total			8,981				8,560				8,756				25,390				20,799
	Amortization of acquisition-related intangible assets			181				193				216				590				703
Non-GAAP operating expenses		$	36,985			$	37,584			$	35,856			$	110,729			$	105,323
		Three Months Ended		Nine Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS		September 30, 2021		June 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
GAAP income from operations		$	45,592			$	44,976			$	14,741			$	130,754			$	42,760
	GAAP operating margin			25.8	%			25.0	%			12.2	%			24.6	%			12.7	%
Add:	Total stock-based compensation			9,645				9,200				9,358				27,325				22,049
	Amortization of acquisition-related intangible assets			733				812				1,015				2,515				3,100
Non-GAAP income from operations		$	55,970			$	54,988			$	25,114			$	160,594			$	67,909
	Non-GAAP operating margin			31.7	%			30.5	%			20.7	%			30.3	%			20.1	%
		Three Months Ended		Nine Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES		September 30, 2021		June 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
GAAP provision for income taxes		$	3,764			$	3,268			$	798			$	8,017			$	2,996
	GAAP effective tax rate			8.2	%			7.2	%			5.1	%			6.1	%			6.4	%
Tax effect of adjustments to GAAP results			(565	)			(1,101	)			(971	)			(4,244	)			(1,994	)
Non-GAAP provision for income taxes		$	4,329			$	4,369			$	1,769			$	12,261			$	4,990
	Non-GAAP effective tax rate			7.7	%			7.9	%			6.8	%			7.6	%			6.9	%
		Three Months Ended		Nine Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)		September 30, 2021		June 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
GAAP net income		$	42,034			$	41,881			$	14,820			$	123,713			$	43,898
Adjustments to GAAP net income
	Stock-based compensation			9,645				9,200				9,358				27,325				22,049
	Amortization of acquisition-related intangible assets			733				812				1,015				2,515				3,100
	Tax effect of items excluded from non-GAAP results			(565	)			(1,101	)			(971	)			(4,244	)			(1,994	)
Non-GAAP net income		$	51,847			$	50,792			$	24,222			$	149,309			$	67,053
Average shares outstanding for calculation of non-GAAP net income per share (diluted)			61,363				61,466				60,852				61,466				60,668
Non-GAAP net income per share (diluted)		$	0.84			$	0.83			$	0.40			$	2.43			$	1.11
GAAP net income per share (diluted)		$	0.69			$	0.68			$	0.24			$	2.01			$	0.72

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
			September 30, 2021		June 30, 2021		December 31, 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 current assets			23,720				21,292				13,252
	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 expenses			14,064				16,652				14,806
	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 loss			(3,249	)			(3,155	)			(2,163	)
	Retained earnings			721,787				687,593				621,626
	Total stockholders' equity			908,356				870,344				810,411
	Total liabilities and stockholders' equity		$	1,004,990			$	967,849			$	903,339

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
		Three Months Ended		Nine Months Ended
		September 30, 2021		June 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	42,034			$	41,881			$	14,820			$	123,713			$	43,898
Adjustments to reconcile net income to cash provided by operating activities
Depreciation			8,126				7,821				6,002				23,400				17,071
Amortization of intangible assets			794				873				1,076				2,699				3,283
Loss on disposal of property and equipment			2,162				21				19				2,200				311
Stock-based compensation expense			9,645				9,200				9,358				27,325				22,049
Amortization of premium on marketable securities			475				124				204				775				525
Deferred income taxes			(1,194	)			(263	)			(1,179	)			(12	)			100
Increase (decrease) in accounts receivable allowance for credit losses			(74	)			93				309				17				155
Change in operating assets and liabilities:
Accounts receivable			2,554				812				(16,884	)			(2,979	)			(5,328	)
Inventories			(2,171	)			866				(842	)			11,064				(14,425	)
Prepaid expenses and other assets			(472	)			(1,248	)			2,041				(4,973	)			6,133
Accounts payable			(1,420	)			4,772				504				6,633				6,365
Taxes payable and other accrued liabilities			(1,724	)			1,896				801				(6,157	)			(864	)
Net cash provided by operating activities			58,735				66,848				16,229				183,705				79,273
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(11,011	)			(8,243	)			(14,116	)			(30,305	)			(35,738	)
Proceeds from sale of property and equipment			-				10				-				35				331
Purchases of marketable securities			(193,150	)			(166,782	)			(46,239	)			(381,903	)			(66,066	)
Proceeds from sales and maturities of marketable securities			123,953				96,617				28,033				284,036				86,995
Net cash used in investing activities			(80,208	)			(78,398	)			(32,322	)			(128,137	)			(14,478	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock			4,058				-				3,364				7,710				9,662
Repurchase of common stock			(9,791	)			(26,374	)			-				(36,165	)			(2,636	)
Payments of dividends to stockholders			(7,840	)			(7,867	)			(6,582	)			(23,552	)			(18,497	)
Net cash used in financing activities			(13,573	)			(34,241	)			(3,218	)			(52,007	)			(11,471	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(35,046	)			(45,791	)			(19,311	)			3,561				53,324
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			297,481				343,272				251,325				258,874				178,690
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	262,435			$	297,481			$	232,014			$	262,435			$	232,014

Contacts

Joe Shiffler
Power Integrations, Inc.
[phone]
[e-mail]