Power Integrations Reports First-Quarter Financial Results

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Revenues grew 19 percent year-over-year to $104.7 million; GAAP

earnings were $0.47 per diluted share; non-GAAP earnings were $0.63 per

diluted share

SAN JOSE, Calif.–(BUSINESS WIRE)–Power Integrations (Nasdaq:POWI)

today announced financial results for the quarter ended March 31, 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-period results have been recast as if

ASC 606 had been in effect for those periods.

Net revenues for the first quarter were $104.7 million, an increase of

two percent from the prior quarter, and an increase of 19 percent from

the first quarter of 2016. Net income was $14.1 million or $0.47 per

diluted share, compared to $0.48 per diluted share in the prior quarter

and $0.35 per diluted share in the first quarter of 2016.

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 first quarter was $19.1 million or $0.63 per

diluted share, compared with $0.70 per diluted share in the prior

quarter and $0.55 per diluted share in the first quarter of 2016.

Commented Balu Balakrishnan, president and CEO of Power Integrations:

“We are off to a strong start in 2017 with 19 percent revenue growth in

the first quarter. Our growth is being fueled by innovative products

such as our InnoSwitch™ ICs, and by multi-year secular trends such as

energy-efficiency, faster charging for mobile devices, smarter homes and

appliances, LED lighting, renewable energy, and the growing use of

battery power in transportation, power tools and other applications. We

also have a robust pipeline of new products coming to market over the

next several quarters, which we believe will further enhance our

competitive positioning and expand our addressable market.”

Additional Highlights

• Power Integrations paid a dividend of $0.14 per share on March 31,
  
  2017. A dividend of $0.14 per share is scheduled to be paid on June
  
  30, 2017, to stockholders of record as of May 31, 2017.
• Power Integrations was issued 13 U.S. patents during the first quarter
  
  of 2017.

Financial Outlook

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

• Revenues are expected to be $107 million plus or minus $3 million.
• GAAP gross margin is expected to be between 48.8 percent and 49.3
  
  percent; non-GAAP gross margin is expected to be between 50 percent
  
  and 50.5 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 approximately $39 million;
  
  non-GAAP operating expenses are expected to be approximately $33.5
  
  million. (Non-GAAP expenses are expected to exclude approximately $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 1-647-788-4901. The call will also be available on the

investor section of the company’s website, http://ift.tt/29Tlk8v.

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.

Note Regarding Forward-Looking Statements

The statements in this press release regarding the company’s forecast

for its second-quarter financial performance, and regarding the

company’s belief that its pipeline of new products coming to market over

the next several quarters will further enhance its competitive

positioning and expand its addressable market, 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 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
						March 31, 2017				December 31, 2016				March 31, 2016
NET REVENUES						$	104,688			$	102,436			$	88,036
COST OF REVENUES							54,212				52,360				43,548
GROSS PROFIT							50,476				50,076				44,488
OPERATING EXPENSES:
Research and development							16,640				15,766				14,779
Sales and marketing							11,633				11,941				10,740
General and administrative							8,704				8,257				7,850
Amortization of acquisition-related intangible assets							583				584				666
Total operating expenses							37,560				36,548				34,035
INCOME FROM OPERATIONS							12,916				13,528				10,453
Other income, net							506				299				261
INCOME BEFORE INCOME TAXES							13,422				13,827				10,714
PROVISION FOR INCOME TAXES							(677	)			(476	)			335
NET INCOME						$	14,099			$	14,303			$	10,379
EARNINGS PER SHARE:
Basic						$	0.48			$	0.49			$	0.36
Diluted						$	0.47			$	0.48			$	0.35
SHARES USED IN PER-SHARE CALCULATION:
Basic							29,456				29,196				28,679
Diluted							30,248				29,914				29,244
SUPPLEMENTAL INFORMATION:
Stock-based compensation expenses included in:
Cost of revenues						$	143			$	417			$	90
Research and development							1,634				1,966				1,469
Sales and marketing							1,097				1,260				1,027
General and administrative							2,095				2,025				1,830
Total stock-based compensation expense						$	4,969			$	5,668			$	4,416
Cost of revenues includes:
Amortization of acquisition-related intangible assets						$	939			$	939			$	961
General & administrative expenses include:
Patent-litigation expenses						$	1,844			$	2,150			$	1,159
Other income, net includes:
Amortization of in-place lease intangible assets						$	90			$	90			$	90
REVENUE MIX BY END MARKET
Communications							28	%			29	%			23	%
Computer							4	%			6	%			6	%
Consumer							37	%			37	%			38	%
Industrial							31	%			28	%			33	%

POWER INTEGRATIONS, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS (in thousands, except per-share amounts)
							Three Months Ended
							March 31, 2017				December 31, 2016				March 31, 2016
RECONCILIATION OF GROSS PROFIT
GAAP gross profit							$	50,476			$	50,076			$	44,488
GAAP gross margin								48.2	%			48.9	%			50.5	%
Stock-based compensation included in cost of revenues								143				417				90
Amortization of acquisition-related intangible assets								939				939				961
Non-GAAP gross profit							$	51,558			$	51,432			$	45,539
Non-GAAP gross margin								49.2	%			50.2	%			51.7	%
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses							$	37,560			$	36,548			$	34,035
Less: Stock-based compensation expense included in operating expenses
Research and development								1,634				1,966				1,469
Sales and marketing								1,097				1,260				1,027
General and administrative								2,095				2,025				1,830
Total								4,826				5,251				4,326
Amortization of acquisition-related intangible assets								583				584				666
Non-GAAP operating expenses							$	32,151			$	30,713			$	29,043
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations							$	12,916			$	13,528			$	10,453
GAAP operating margin								12.3	%			13.2	%			11.9	%
Add: Total stock-based compensation								4,969				5,668				4,416
Amortization of acquisition-related intangible assets								1,522				1,523				1,627
Non-GAAP income from operations							$	19,407			$	20,719			$	16,496
Non-GAAP operating margin								18.5	%			20.2	%			18.7	%
RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision for income taxes							$	(677	)		$	(476	)		$	335
GAAP effective tax rate								-5.0	%			-3.4	%			3.1	%
Tax effect of adjustments to GAAP results								(1,533	)			(724	)			(301	)
Non-GAAP provision for income taxes							$	856			$	248			$	636
Non-GAAP effective tax rate								4.3	%			1.2	%			3.8	%
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income							$	14,099			$	14,303			$	10,379
Adjustments to GAAP net income
Stock-based compensation								4,969				5,668				4,416
Amortization of acquisition-related intangible assets								1,522				1,523				1,627
Amortization of in-place lease intangible assets								90				90				90
Tax effect of items excluded from non-GAAP results								(1,533	)			(724	)			(301	)
Non-GAAP net income							$	19,147			$	20,860			$	16,211
Average shares outstanding for calculation of non-GAAP income per share (diluted)								30,248				29,914				29,244
Non-GAAP net income per share (diluted)							$	0.63			$	0.70			$	0.55
GAAP income per share							$	0.47			$	0.48			$	0.35

POWER INTEGRATIONS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
			March 31, 2017				December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	46,335			$	62,134
Short-term marketable securities				203,753				188,323
Accounts receivable				15,046				6,528
Inventories				51,149				52,564
Prepaid expenses and other current assets				16,770				8,715
Total current assets				333,053				318,264
PROPERTY AND EQUIPMENT, net				105,893				95,296
INTANGIBLE ASSETS, net				29,890				31,502
GOODWILL				91,849				91,849
DEFERRED TAX ASSETS				19,857				11,342
OTHER ASSETS				8,118				6,157
Total assets			$	588,660			$	554,410
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable			$	37,478			$	29,727
Accrued payroll and related expenses				9,146				10,756
Taxes payable				877				729
Other accrued liabilities				3,409				2,734
Total current liabilities				50,910				43,946
LONG-TERM LIABILITIES:
Income taxes payable				2,804				2,639
Deferred tax liabilities				688				820
Other liabilities				4,115				3,921
Total liabilities				58,517				51,326
STOCKHOLDERS’ EQUITY:
Common stock				29				28
Additional paid-in capital				182,235				172,875
Accumulated other comprehensive loss				(2,514	)			(2,710	)
Retained earnings				350,393				332,891
Total stockholders’ equity				530,143				503,084
Total liabilities and stockholders’ equity			$	588,660			$	554,410

POWER INTEGRATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
			Three Months Ended
			March 31, 2017				December 31, 2016				March 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	14,099			$	14,303			$	10,379
Adjustments to reconcile net income to cash provided by operating activities
Depreciation				4,112				4,142				4,315
Amortization of intangible assets				1,612				1,612				1,792
Loss on disposal of property and equipment				38				116				78
Stock-based compensation expense				4,969				5,668				4,416
Amortization of premium on marketable securities				251				71				260
Deferred income taxes				(1,105	)			(1,144	)			(81	)
Increase (decrease) in accounts receivable allowances				–				(96	)			89
Change in operating assets and liabilities:
Accounts receivable				(8,518	)			6,347				(2,585	)
Inventories				1,415				(2,623	)			6,269
Prepaid expenses and other assets				(8,234	)			(448	)			(1,388	)
Accounts payable				(2,377	)			(1,323	)			(1,840	)
Taxes payable and other accrued liabilities				(315	)			1,117				(1,413	)
Net cash provided by operating activities				5,947				27,742				20,291
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment				(6,403	)			(4,124	)			(2,095	)
Purchases of marketable securities				(61,938	)			(66,256	)			(45,227	)
Proceeds from sales and maturities of marketable securities				46,340				8,295				38,531
Net cash used in investing activities				(22,001	)			(62,085	)			(8,791	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock				4,392				4,387				2,957
Repurchase of common stock				–				–				(6,085	)
Payments of dividends to stockholders				(4,137	)			(3,800	)			(3,729	)
Net cash provided by (used in) financing activities				255				587				(6,857	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				(15,799	)			(33,756	)			4,643
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				62,134				95,890				90,092
CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	46,335			$	62,134			$	94,735

Contacts

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

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Power Integrations Reports First-Quarter Financial Results was first posted on April 27, 2017 at 3:01 pm.
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April 28, 2017 at 04:43AM

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