×

Power Integrations Reports Third-Quarter Financial Results

Revenues grew nine percent year-over-year to $111.3 million; cash flow from operations was $24.6 million

GAAP earnings were $0.54/diluted share; non-GAAP earnings were $0.78/diluted share

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended September 30, 2017. Results are calculated using the “sell-in” method of revenue recognition on sales to distributors, reflecting the company’s adoption of ASC 606 effective January 1, 2017. Prior-year results have been recast as if ASC 606 had been in effect for those periods.

Net revenues for the third quarter were $111.3 million, an increase of three percent from the prior quarter and nine percent from the third quarter of 2016. Net income was $16.5 million or $0.54 per diluted share, compared to $0.46 per diluted share in the prior quarter and $0.43 per diluted share in the third quarter of 2016. Cash flow from operations was $24.6 million for the quarter.

In addition to its GAAP results, the company provided certain non-GAAP financial measures that exclude stock-based compensation expenses, amortization of intangible assets and the tax effects of these items. Non-GAAP net income for the third quarter was $23.7 million or $0.78 per diluted share, compared with $0.69 per diluted share in the prior quarter and $0.67 per diluted share in the third quarter of 2016.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “Revenues are up 13 percent for the first nine months of 2017, putting us on course for another year of double-digit revenue growth. We have a broad set of attractive opportunities ahead of us in the high-voltage power conversion market, including global trends such as energy efficiency as well as fast-growing vertical markets like rapid charging, smart homes and clean energy. We have a strong portfolio of products with which to address these opportunities, including our new InnoSwitch™3 family of ICs, which significantly advances the state of the art in power-supply design with its unprecedented levels of integration and energy efficiency.”

Additional Highlights

  • Power Integrations repurchased approximately 96,000 shares of its common stock during the third quarter for $6.7 million; the company has $46.8 million remaining under its current repurchase authorization.
  • Power Integrations paid a dividend of $0.14 per share on September 29, 2017. A dividend of $0.14 per share is scheduled to be paid on December 29, 2017, to stockholders of record as of November 30, 2017.
  • Power Integrations was issued 17 U.S. patents during the third quarter of 2017.

Financial Outlook

The company issued the following forecast for the fourth quarter of 2017:

  • Revenues are expected to be $110 million plus or minus $3 million.
  • GAAP gross margin is expected to be approximately 49.8 percent; non-GAAP gross margin is expected to be approximately 51 percent. (The difference between the expected GAAP and non-GAAP gross margins is composed of approximately 0.9 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 between $40 million and $40.5 million; non-GAAP operating expenses are expected to be between $33 million and $33.5 million. (Non-GAAP expenses are expected to exclude approximately $6.5 million of stock-based compensation expenses and $0.5 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 join the call by dialing 1-647-689-4187. 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 (including in-place lease 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. These 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 statements in this press release regarding the company’s forecast for its fourth-quarter financial performance, being on course for double-digit revenue growth for the year, the opportunities ahead of it and its ability to address these opportunities 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: changes in global macroeconomic conditions, 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; the outcome and cost of patent litigation, which may affect sales of the company’s products or could result in higher expenses and charges than currently expected; 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 8, 2017. 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 the rules and regulations of the SEC.

Power Integrations, InnoSwitch 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, 2017 June 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
NET REVENUES $ 111,255 $ 107,563 $ 101,625 $ 323,506 $ 287,232
COST OF REVENUES 55,542 54,116 51,783 163,870 145,117
GROSS PROFIT 55,713 53,447 49,842 159,636 142,115
OPERATING EXPENSES:
Research and development 17,340 17,341 15,906 51,321 46,544
Sales and marketing 12,254 12,607 11,447 36,494 33,594
General and administrative 9,546 8,765 8,789 27,015 24,772
Amortization of acquisition-related intangible assets 514 537 582 1,634 1,859
Total operating expenses 39,654 39,250 36,724 116,464 106,769
INCOME FROM OPERATIONS 16,059 14,197 13,118 43,172 35,346
Other income, net 895 465 282 1,866 779
INCOME BEFORE INCOME TAXES 16,954 14,662 13,400 45,038 36,125
PROVISION FOR INCOME TAXES 448 760 591 531 1,530
NET INCOME $ 16,506 $ 13,902 $ 12,809 $ 44,507 $ 34,595
EARNINGS PER SHARE:
Basic $ 0.55 $ 0.47 $ 0.44 $ 1.50 $ 1.20
Diluted $ 0.54 $ 0.46 $ 0.43 $ 1.46 $ 1.17
SHARES USED IN PER-SHARE CALCULATION:
Basic 29,759 29,720 28,972 29,646 28,834
Diluted 30,614 30,454 29,625 30,472 29,480
SUPPLEMENTAL INFORMATION:
Stock-based compensation expenses included in:
Cost of revenues $ 391 $ 351 $ 348 $ 885 $ 731
Research and development 2,173 2,351 1,934 6,158 5,343
Sales and marketing 1,441 1,189 1,303 3,727 3,229
General and administrative 2,521 2,436 2,204 7,052 5,914
Total stock-based compensation expense $ 6,526 $ 6,327 $ 5,789 $ 17,822 $ 15,217
Cost of revenues includes:
Amortization of acquisition-related intangible assets $ 939 $ 939 $ 939 $ 2,817 $ 2,846
General & administrative expenses include:
Patent-litigation expenses $ 2,302 $ 1,779 $ 1,894 $ 5,925 $ 4,711
Other income, net includes:
Amortization of in-place lease intangible assets $ - $ 90 $ 90 $ 180 $ 270
REVENUE MIX BY END MARKET
Communications 23 % 22 % 28 % 24 % 26 %
Computer 5 % 4 % 5 % 4 % 6 %
Consumer 37 % 41 % 36 % 38 % 36 %
Industrial 35 % 33 % 31 % 34 % 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, 2017 June 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
RECONCILIATION OF GROSS PROFIT
GAAP gross profit $ 55,713 $ 53,447 $ 49,842 $ 159,636 $ 142,115
GAAP gross margin 50.1 % 49.7 % 49.0 % 49.3 % 49.5 %
Stock-based compensation included in cost of revenues 391 351 348 885 731
Amortization of acquisition-related intangible assets 939 939 939 2,817 2,846
Non-GAAP gross profit $ 57,043 $ 54,737 $ 51,129 $ 163,338 $ 145,692
Non-GAAP gross margin 51.3 % 50.9 % 50.3 % 50.5 % 50.7 %
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses $ 39,654 $ 39,250 $ 36,724 $ 116,464 $ 106,769

Less: Stock-based compensation expense included in operating expenses

Research and development 2,173 2,351 1,934 6,158 5,343
Sales and marketing 1,441 1,189 1,303 3,727 3,229
General and administrative 2,521 2,436 2,204 7,052 5,914
Total 6,135 5,976 5,441 16,937 14,486
Amortization of acquisition-related intangible assets 514 537 582 1,634 1,859
Non-GAAP operating expenses $ 33,005 $ 32,737 $ 30,701 $ 97,893 $ 90,424
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations $ 16,059 $ 14,197 $ 13,118 $ 43,172 $ 35,346
GAAP operating margin 14.4 % 13.2 % 12.9 % 13.3 % 12.3 %

Add: Total stock-based compensation

6,526 6,327 5,789 17,822 15,217
Amortization of acquisition-related intangible assets 1,453 1,476 1,521 4,451 4,705
Non-GAAP income from operations $ 24,038 $ 22,000 $ 20,428 $ 65,445 $ 55,268
Non-GAAP operating margin 21.6 % 20.5 % 20.1 % 20.2 % 19.2 %
RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision for income taxes $ 448 $ 760 $ 591 $ 531 $ 1,530
GAAP effective tax rate 2.6 % 5.2 % 4.4 % 1.2 % 4.2 %
Tax effect of adjustments to GAAP results (751 ) (736 ) (328 ) (3,020 ) (854 )
Non-GAAP provision for income taxes $ 1,199 $ 1,496 $ 919 $ 3,551 $ 2,384
Non-GAAP effective tax rate 4.8 % 6.6 % 4.4 % 5.3 % 4.2 %
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income $ 16,506 $ 13,902 $ 12,809 $ 44,507 $ 34,595
Adjustments to GAAP net income
Stock-based compensation 6,526 6,327 5,789 17,822 15,217
Amortization of acquisition-related intangible assets 1,453 1,476 1,521 4,451 4,705
Amortization of in-place lease intangible assets - 90 90 180 270
Tax effect of items excluded from non-GAAP results (751 ) (736 ) (328 ) (3,020 ) (854 )
Non-GAAP net income $ 23,734 $ 21,059 $ 19,881 $ 63,940 $ 53,933

Average shares outstanding for calculation of non-GAAP income per share (diluted)

30,614 30,454 29,625 30,472 29,480
Non-GAAP net income per share (diluted) $ 0.78 $ 0.69 $ 0.67 $ 2.10 $ 1.83
GAAP income per share $ 0.54 $ 0.46 $ 0.43 $ 1.46 $ 1.17

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2017 June 30, 2017 December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 50,700 $ 32,649 $ 62,134
Short-term marketable securities 213,042 221,346 188,323
Accounts receivable, net 17,192 18,697 6,528
Inventories 55,158 52,432 52,564
Prepaid expenses and other current assets 10,831 16,902 8,715
Total current assets 346,923 342,026 318,264
PROPERTY AND EQUIPMENT, net 114,855 113,202 95,296
INTANGIBLE ASSETS, net 26,871 28,324 31,502
GOODWILL 91,849 91,849 91,849
DEFERRED TAX ASSETS 19,086 19,328 11,342
OTHER ASSETS 24,899 6,809 6,157
Total assets $ 624,483 $ 601,538 $ 554,410
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 38,474 $ 30,124 $ 29,727
Accrued payroll and related expenses 9,772 11,639 10,756
Taxes payable 1,227 1,072 729
Other accrued liabilities 4,895 3,858 2,734
Total current liabilities 54,368 46,693 43,946
LONG-TERM LIABILITIES:
Income taxes payable 2,817 2,805 2,639
Deferred tax liabilities 538 615 820
Other liabilities 4,501 4,422 3,921
Total liabilities 62,224 54,535 51,326
STOCKHOLDERS' EQUITY:
Common stock 29 29 28
Additional paid-in capital 192,074 189,259 172,875
Accumulated other comprehensive loss (2,320 ) (2,419 ) (2,710 )
Retained earnings 372,476 360,134 332,891
Total stockholders' equity 562,259 547,003 503,084
Total liabilities and stockholders' equity $ 624,483 $ 601,538 $ 554,410

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Nine Months Ended
September 30, 2017 June 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,506 $ 13,902 $ 12,809 $ 44,507 $ 34,595
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 4,854 4,357 4,149 13,323 12,670
Amortization of intangible assets 1,453 1,566 1,612 4,631 5,051
Loss on disposal of property and equipment 286 - 68 324 216
Stock-based compensation expense 6,526 6,327 5,789 17,822 15,217
Amortization of premium on marketable securities 295 257 55 803 484
Deferred income taxes 163 457 281 (485 ) 506
Increase in accounts receivable allowances 129 80 110 209 303
Change in operating assets and liabilities:
Accounts receivable 1,376 (3,731 ) 656 (10,873 ) (5,596 )
Inventories (2,726 ) (1,283 ) (3,192 ) (2,594 ) 1,993
Prepaid expenses and other assets (12,699 ) (115 ) (1,402 ) (21,048 ) (2,076 )
Accounts payable 8,928 (1,252 ) 5,998 5,299 9,037
Taxes payable and other accrued liabilities (529 ) 3,523 (675 ) 2,679 (2,241 )
Net cash provided by operating activities 24,562 24,088 26,258 54,597 70,159
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (6,691 ) (16,473 ) (3,184 ) (29,567 ) (8,074 )
Purchases of marketable securities (34,499 ) (49,636 ) (56,187 ) (146,073 ) (122,398 )
Proceeds from sales and maturities of marketable securities 42,555 31,800 22,207 120,695 75,128
Net cash provided by (used in) investing activities 1,365 (34,309 ) (37,164 ) (54,945 ) (55,344 )
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 3,022 697 5,224 8,111 8,672
Repurchase of common stock (6,734 ) - - (6,734 ) (6,435 )
Payments of dividends to stockholders (4,164 ) (4,162 ) (3,771 ) (12,463 ) (11,254 )
Proceeds from draw on line of credit 5,000 - - 5,000 -
Payments on line of credit (5,000 ) - - (5,000 ) -
Net cash provided by (used in) financing activities (7,876 ) (3,465 ) 1,453 (11,086 ) (9,017 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 18,051 (13,686 ) (9,453 ) (11,434 ) 5,798
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 32,649 46,335 105,343 62,134 90,092
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 50,700 $ 32,649 $ 95,890 $ 50,700 $ 95,890

View source version on businesswire.com: http://www.businesswire.com/news/home/20171026006489/en/

Power Integrations, Inc.
Joe Shiffler, 408-414-8528
joe@power.com

Source: Power Integrations, Inc.