Power Integrations Reports First-Quarter Financial Results

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Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended March 31, 2021. Per-share measures for all periods reflect the effect of the August 2020 two-for-one stock split.

Net revenues for the first quarter of 2021 were $173.7 million, up 15 percent compared to the prior quarter and up 58 percent from the first quarter of 2020. Net income for the first quarter was $39.8 million or $0.65 per diluted share compared to $0.45 per diluted share in the prior quarter and $0.26 per diluted share in the first quarter of 2020. Cash flow from operations for the first quarter was $58.1 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 first quarter of 2021 was $46.7 million or $0.76 per diluted share compared with $0.60 per diluted share in the prior quarter and $0.38 per diluted share in the first quarter of 2020. 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: “First-quarter revenues grew 58 percent year-over-year reflecting the strong demand conditions across the industry as well as our continued success in advanced mobile-device chargers, appliances and many other power-supply applications. Distribution sell-through exceeded sell-in again in the first quarter and we have seen continued strength in bookings in recent weeks. As a result, we expect strong year-over-year growth again in the second quarter.”

Power Integrations paid a cash dividend of $0.13 per share on March 31, 2021. A dividend of $0.13 per share will be paid on June 30, 2021 to stockholders of record as of May 28, 2021. Also, the company’s board of directors has added $50 million to its share-repurchase authorization, bringing the total authorization to $91.3 million.

Financial Outlook

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

Revenues are expected to be flat compared to the first quarter of 2021, plus or minus five percent.
GAAP gross margin is expected to be between 49.5 and 50 percent, and non-GAAP gross margin is expected to be between 50 and 50.5 percent. (The difference between the expected GAAP and non-GAAP gross margins is approximately equally attributable to amortization of acquisition-related intangible assets and stock-based compensation.)
GAAP operating expenses are expected to be approximately $47.5 million; non-GAAP operating expenses are expected to be approximately $38.5 million. (Non-GAAP expenses are expected to exclude approximately $8.8 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/1859015. 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 second-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
		March 31, 2021			December 31, 2020			March 31, 2020
NET REVENUES		$	173,737		$	150,693		$	109,664

COST OF REVENUES			89,326			76,688			53,184

GROSS PROFIT			84,411			74,005			56,480

OPERATING EXPENSES:
Research and development			20,027			21,921			19,152
Sales and marketing			13,907			14,113			13,216
General and administrative			10,075			10,028			8,761
Amortization of acquisition-related intangible assets			216			216			257
	Total operating expenses		44,225			46,278			41,386

INCOME FROM OPERATIONS			40,186			27,727			15,094

OTHER INCOME			597			630			1,777

INCOME BEFORE INCOME TAXES			40,783			28,357			16,871

PROVISION FOR INCOME TAXES			985			1,079			985

NET INCOME		$	39,798		$	27,278		$	15,886

EARNINGS PER SHARE:
	Basic	$	0.66		$	0.46		$	0.27
	Diluted	$	0.65		$	0.45		$	0.26

SHARES USED IN PER-SHARE CALCULATION:
	Basic		60,184			59,879			59,204
	Diluted		61,451			61,176			60,268



SUPPLEMENTAL INFORMATION:		Three Months Ended
		March 31, 2021			December 31, 2020			March 31, 2020
Stock-based compensation expenses included in:
	Cost of revenues	$	631		$	713		$	396
	Research and development		2,391			2,942			2,109
	Sales and marketing		1,614			1,740			1,392
	General and administrative		3,844			3,468			2,813
	Total stock-based compensation expense	$	8,480		$	8,863		$	6,710

Cost of revenues includes:
	Amortization of acquisition-related intangible assets	$	754		$	799		$	799


		Three Months Ended
REVENUE MIX BY END MARKET		March 31, 2021			December 31, 2020			March 31, 2020
	Communications		38	%		34	%		22	%
	Computer		8	%		9	%		4	%
	Consumer		29	%		31	%		41	%
	Industrial		25	%		26	%		33	%

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)

			Three Months Ended
			March 31, 2021			December 31, 2020			March 31, 2020
RECONCILIATION OF GROSS PROFIT
GAAP gross profit			$	84,411		$	74,005		$	56,480
	GAAP gross margin			48.6	%		49.1	%		51.5	%

Stock-based compensation included in cost of revenues				631			713			396
Amortization of acquisition-related intangible assets				754			799			799

Non-GAAP gross profit			$	85,796		$	75,517		$	57,675
	Non-GAAP gross margin			49.4	%		50.1	%		52.6	%


			Three Months Ended
RECONCILIATION OF OPERATING EXPENSES			March 31, 2021			December 31, 2020			March 31, 2020
GAAP operating expenses			$	44,225		$	46,278		$	41,386

Less: Stock-based compensation expense included in operating expenses
		Research and development		2,391			2,942			2,109
		Sales and marketing		1,614			1,740			1,392
		General and administrative		3,844			3,468			2,813
		Total		7,849			8,150			6,314

	Amortization of acquisition-related intangible assets			216			216			257

Non-GAAP operating expenses			$	36,160		$	37,912		$	34,815


			Three Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS			March 31, 2021			December 31, 2020			March 31, 2020
GAAP income from operations			$	40,186		$	27,727		$	15,094
	GAAP operating margin			23.1	%		18.4	%		13.8	%

Add: Total stock-based compensation				8,480			8,863			6,710
	Amortization of acquisition-related intangible assets			970			1,015			1,056

Non-GAAP income from operations			$	49,636		$	37,605		$	22,860
	Non-GAAP operating margin			28.6	%		25.0	%		20.8	%


			Three Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES			March 31, 2021			December 31, 2020			March 31, 2020
GAAP provision for income taxes			$	985		$	1,079		$	985
	GAAP effective tax rate			2.4	%		3.8	%		5.8	%

Tax effect of adjustments to GAAP results				(2,578	)		(725	)		(751	)

Non-GAAP provision for income taxes			$	3,563		$	1,804		$	1,736
	Non-GAAP effective tax rate			7.1	%		4.7	%		7.0	%


			Three Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)			March 31, 2021			December 31, 2020			March 31, 2020
GAAP net income			$	39,798		$	27,278		$	15,886

Adjustments to GAAP net income
	Stock-based compensation			8,480			8,863			6,710
	Amortization of acquisition-related intangible assets			970			1,015			1,056
	Tax effect of items excluded from non-GAAP results			(2,578	)		(725	)		(751	)

Non-GAAP net income			$	46,670		$	36,431		$	22,901

Average shares outstanding for calculation of non-GAAP net income per share (diluted)				61,451			61,176			60,268

Non-GAAP net income per share (diluted)			$	0.76		$	0.60		$	0.38

GAAP net income per share (diluted)			$	0.65		$	0.45		$	0.26

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)


		March 31, 2021			December 31, 2020
ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents	$	343,272		$	258,874
	Short-term marketable securities		148,067			190,318
	Accounts receivable, net		42,257			35,910
	Inventories		90,509			102,878
	Prepaid expenses and other current assets		18,207			13,252
	Total current assets		642,312			601,232

	PROPERTY AND EQUIPMENT, net		168,712			166,188
	INTANGIBLE ASSETS, net		11,474			12,506
	GOODWILL		91,849			91,849
	DEFERRED TAX ASSETS		1,892			3,339
	OTHER ASSETS		28,480			28,225
	Total assets	$	944,719		$	903,339

LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
	Accounts payable	$	38,172		$	34,712
	Accrued payroll and related expenses		13,339			14,806
	Taxes payable		856			902
	Other accrued liabilities		10,160			12,106
	Total current liabilities		62,527			62,526

	LONG-TERM LIABILITIES:
	Income taxes payable		14,033			15,588
	Other liabilities		14,336			14,814
	Total liabilities		90,896			92,928

STOCKHOLDERS’ EQUITY:
	Common stock		29			28
	Additional paid-in capital		203,051			190,920
	Accumulated other comprehensive loss		(2,836	)		(2,163	)
	Retained earnings		653,579			621,626
	Total stockholders’ equity		853,823			810,411
	Total liabilities and stockholders’ equity	$	944,719		$	903,339

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Three Months Ended
		March 31, 2021			December 31, 2020			March 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income	$	39,798		$	27,278		$	15,886
	Adjustments to reconcile net income to cash provided by operating activities
	Depreciation		7,453			6,672			5,488
	Amortization of intangible assets		1,032			1,076			1,117
	Loss on disposal of property and equipment		17			214			30
	Stock-based compensation expense		8,480			8,863			6,710
	Amortization of premium on marketable securities		176			180			154
	Deferred income taxes		1,445			(692	)		1,095
	Decrease in accounts receivable allowance for credit losses		(2	)		(491	)		(154	)
	Change in operating assets and liabilities:
	Accounts receivable		(6,345	)		(5,972	)		3,831
	Inventories		12,369			1,927			(6,253	)
	Prepaid expenses and other assets		(3,253	)		3,020			(3,992	)
	Accounts payable		3,281			(668	)		8,828
	Taxes payable and other accrued liabilities		(6,329	)		4,959			(6,349	)
	Net cash provided by operating activities		58,122			46,366			26,391

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment		(11,051	)		(34,860	)		(11,603	)
	Proceeds from sale of property and equipment		25			320			–
	Purchases of marketable securities		(21,971	)		(43,637	)		(16,838	)
	Proceeds from sales and maturities of marketable securities		63,466			64,390			15,947
	Net cash provided by (used in) investing activities		30,469			(13,787	)		(12,494	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from issuance of common stock		3,652			865			5,529
	Repurchase of common stock		–			–			(2,013	)
	Payments of dividends to stockholders		(7,845	)		(6,584	)		(5,644	)
	Net cash used in financing activities		(4,193	)		(5,719	)		(2,128	)

NET INCREASE IN CASH AND CASH EQUIVALENTS			84,398			26,860			11,769

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			258,874			232,014			178,690

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	343,272		$	258,874		$	190,459

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