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Power Integrations Reports Second-Quarter Financial Results

Revenues increased 16 percent sequentially to $123.2 million; GAAP earnings were $0.26 per diluted share; non-GAAP earnings were $0.36 per diluted share

Power Integrations (NASDAQ: POWI) today announced financial results for the quarter ended June 30, 2023. Net revenues for the second quarter were $123.2 million, up 16 percent compared to the prior quarter and down 33 percent from the second quarter of 2022. Net income for the second quarter was $14.8 million or $0.26 per diluted share compared to $0.12 per diluted share in the prior quarter and $0.96 per diluted share in the second quarter of 2022. Cash flow from operations for the second quarter was $6.2 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, net other operating expenses of $1.1 million in the second quarter of 2022, and the tax effects of these items. Non-GAAP net income for the second quarter of 2023 was $21.0 million or $0.36 per diluted share compared to $0.25 per diluted share in the prior quarter and $1.03 per diluted share in the second quarter of 2022. A reconciliation of GAAP to non-GAAP financial results is included with the tables accompanying this press release.

Commented Balu Balakrishnan, chairman and CEO of Power Integrations: “Our second-quarter results mark the start of a recovery from the cyclical trough. Consumer revenues grew 35 percent sequentially driven by appliances, while communication and computer revenues also rose significantly. Industrial, the last category to enter the cyclical downturn, fell slightly. Looking ahead, while the pace of the recovery reflects a soft demand environment, especially in China, we expect meaningful growth in the second half of 2023 compared to the first half driven by design wins and improving channel inventory. We also expect higher gross margins in the second half driven by the dollar/yen exchange rate, rising production volumes and a more favorable end-market mix.”

Power Integrations paid a dividend of $0.19 per share on June 30, 2023, and will pay a dividend of $0.19 per share on September 29, 2023, to stockholders of record as of August 31, 2023. During the second quarter the company repurchased approximately 57,000 shares of its common stock for $4.3 million. The company had $75.3 million remaining on its repurchase authorization as of June 30, 2023.

Financial Outlook

The company issued the following forecast for the third quarter of 2023:

  • Revenues are expected to be $130 million plus or minus $5 million.
  • GAAP gross margin is expected to be approximately 53.5 percent, and non-GAAP gross margin is expected to be approximately 54 percent. The difference between GAAP and non-GAAP gross margins is approximately equally attributable to stock-based compensation and amortization of acquisition-related intangible assets.
  • GAAP operating expenses are expected to be approximately $51 million; non-GAAP operating expenses are expected to be approximately $43.5 million. Non-GAAP expenses are expected to exclude about $7.5 million of stock-based compensation.

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/fEIobxNC. 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, net other operating expenses of $1.1 million in the second quarter of 2022 stemming from a patent-litigation settlement and an offsetting recovery from the liquidation of SemiSouth Laboratories, 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 and second-half financial performance are forward-looking statements reflecting management's current expectations and beliefs. These 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 company’s ability to supply products and its ability to conduct other aspects of its business such as competing for new design wins; changes in global economic and geopolitical conditions, including such factors as inflation, armed conflicts and 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, 2023. The company is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether because 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. All other trademarks are property of their respective owners.

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
 
 
Three Months Ended Six Months Ended
June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
NET REVENUES

$

123,223

 

$

106,297

 

$

183,986

 

$

229,520

 

$

366,135

 

 
COST OF REVENUES

 

60,377

 

 

52,340

 

 

77,143

 

 

112,717

 

 

158,617

 

 
GROSS PROFIT

 

62,846

 

 

53,957

 

 

106,843

 

 

116,803

 

 

207,518

 

 
OPERATING EXPENSES:
Research and development

 

24,517

 

 

23,981

 

 

23,507

 

 

48,498

 

 

47,185

 

Sales and marketing

 

17,017

 

 

15,885

 

 

15,985

 

 

32,902

 

 

32,140

 

General and administrative

 

8,671

 

 

8,334

 

 

6,059

 

 

17,005

 

 

15,673

 

Amortization of acquisition-related intangible assets

 

-

 

 

-

 

 

60

 

 

-

 

 

241

 

Other operating expenses, net

 

-

 

 

-

 

 

1,130

 

 

-

 

 

1,130

 

Total operating expenses

 

50,205

 

 

48,200

 

 

46,741

 

 

98,405

 

 

96,369

 

 
INCOME FROM OPERATIONS

 

12,641

 

 

5,757

 

 

60,102

 

 

18,398

 

 

111,149

 

 
OTHER INCOME

 

2,714

 

 

1,714

 

 

674

 

 

4,428

 

 

1,228

 

 
INCOME BEFORE INCOME TAXES

 

15,355

 

 

7,471

 

 

60,776

 

 

22,826

 

 

112,377

 

 
PROVISION FOR INCOME TAXES

 

562

 

 

596

 

 

4,952

 

 

1,158

 

 

10,305

 

 
NET INCOME

$

14,793

 

$

6,875

 

$

55,824

 

$

21,668

 

$

102,072

 

 
EARNINGS PER SHARE:
Basic

$

0.26

 

$

0.12

 

$

0.97

 

$

0.38

 

$

1.75

 

Diluted

$

0.26

 

$

0.12

 

$

0.96

 

$

0.38

 

$

1.72

 

 
SHARES USED IN PER-SHARE CALCULATION:
Basic

 

57,355

 

 

57,105

 

 

57,731

 

 

57,231

 

 

58,480

 

Diluted

 

57,669

 

 

57,579

 

 

58,305

 

 

57,654

 

 

59,192

 

 
 
 
SUPPLEMENTAL INFORMATION: Three Months Ended Six Months Ended
June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
Stock-based compensation expenses included in:
Cost of revenues

$

446

 

$

301

 

$

235

 

$

747

 

$

555

 

Research and development

 

2,429

 

 

2,668

 

 

2,323

 

 

5,097

 

 

5,378

 

Sales and marketing

 

1,621

 

 

1,653

 

 

1,177

 

 

3,274

 

 

3,125

 

General and administrative

 

2,256

 

 

2,746

 

 

(56

)

 

5,002

 

 

3,634

 

Total stock-based compensation expense

$

6,752

 

$

7,368

 

$

3,679

 

$

14,120

 

$

12,692

 

 
Cost of revenues includes:
Amortization of acquisition-related intangible assets

$

482

 

$

482

 

$

482

 

$

964

 

$

964

 

 
 
Three Months Ended Six Months Ended
REVENUE MIX BY END MARKET June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
Communications

 

28

%

 

28

%

 

18

%

 

28

%

 

22

%

Computer

 

14

%

 

14

%

 

9

%

 

14

%

 

10

%

Consumer

 

29

%

 

24

%

 

38

%

 

27

%

 

36

%

Industrial

 

29

%

 

34

%

 

35

%

 

31

%

 

32

%

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)
 
Three Months Ended Six Months Ended
June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
RECONCILIATION OF GROSS PROFIT
GAAP gross profit

$

62,846

 

$

53,957

 

$

106,843

 

$

116,803

 

$

207,518

 

GAAP gross margin

 

51.0

%

 

50.8

%

 

58.1

%

 

50.9

%

 

56.7

%

 
Stock-based compensation included in cost of revenues

 

446

 

 

301

 

 

235

 

 

747

 

 

555

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

482

 

 

964

 

 

964

 

 
Non-GAAP gross profit

$

63,774

 

$

54,740

 

$

107,560

 

$

118,514

 

$

209,037

 

Non-GAAP gross margin

 

51.8

%

 

51.5

%

 

58.5

%

 

51.6

%

 

57.1

%

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF OPERATING EXPENSES June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
GAAP operating expenses

$

50,205

 

$

48,200

 

$

46,741

 

$

98,405

 

$

96,369

 

 
Less:Stock-based compensation expense included in operating expenses
Research and development

 

2,429

 

 

2,668

 

 

2,323

 

 

5,097

 

 

5,378

 

Sales and marketing

 

1,621

 

 

1,653

 

 

1,177

 

 

3,274

 

 

3,125

 

General and administrative

 

2,256

 

 

2,746

 

 

(56

)

 

5,002

 

 

3,634

 

Total

 

6,306

 

 

7,067

 

 

3,444

 

 

13,373

 

 

12,137

 

 
Amortization of acquisition-related intangible assets

 

-

 

 

-

 

 

60

 

 

-

 

 

241

 

Other operating expenses, net

 

-

 

 

-

 

 

1,130

 

 

-

 

 

1,130

 

 
Non-GAAP operating expenses

$

43,899

 

$

41,133

 

$

42,107

 

$

85,032

 

$

82,861

 

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
GAAP income from operations

$

12,641

 

$

5,757

 

$

60,102

 

$

18,398

 

$

111,149

 

GAAP operating margin

 

10.3

%

 

5.4

%

 

32.7

%

 

8.0

%

 

30.4

%

 
Add:Total stock-based compensation

 

6,752

 

 

7,368

 

 

3,679

 

 

14,120

 

 

12,692

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

542

 

 

964

 

 

1,205

 

Other operating expenses, net

 

-

 

 

-

 

 

1,130

 

 

-

 

 

1,130

 

 
Non-GAAP income from operations

$

19,875

 

$

13,607

 

$

65,453

 

$

33,482

 

$

126,176

 

Non-GAAP operating margin

 

16.1

%

 

12.8

%

 

35.6

%

 

14.6

%

 

34.5

%

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
GAAP provision for income taxes

$

562

 

$

596

 

$

4,952

 

$

1,158

 

$

10,305

 

GAAP effective tax rate

 

3.7

%

 

8.0

%

 

8.1

%

 

5.1

%

 

9.2

%

 
Tax effect of adjustments to GAAP results

 

(1,016

)

 

(501

)

 

(1,259

)

 

(1,517

)

 

(1,381

)

 
Non-GAAP provision for income taxes

$

1,578

 

$

1,097

 

$

6,211

 

$

2,675

 

$

11,686

 

Non-GAAP effective tax rate

 

7.0

%

 

7.2

%

 

9.4

%

 

7.1

%

 

9.2

%

 
 
Three Months Ended Six Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED) June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
GAAP net income

$

14,793

 

$

6,875

 

$

55,824

 

$

21,668

 

$

102,072

 

 
Adjustments to GAAP net income
Stock-based compensation

 

6,752

 

 

7,368

 

 

3,679

 

 

14,120

 

 

12,692

 

Amortization of acquisition-related intangible assets

 

482

 

 

482

 

 

542

 

 

964

 

 

1,205

 

Other operating expenses, net

 

-

 

 

-

 

 

1,130

 

 

-

 

 

1,130

 

Tax effect of items excluded from non-GAAP results

 

(1,016

)

 

(501

)

 

(1,259

)

 

(1,517

)

 

(1,381

)

 
Non-GAAP net income

$

21,011

 

$

14,224

 

$

59,916

 

$

35,235

 

$

115,718

 

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

 

57,669

 

 

57,579

 

 

58,305

 

 

57,654

 

 

59,192

 

 
Non-GAAP net income per share (diluted)

$

0.36

 

$

0.25

 

$

1.03

 

$

0.61

 

$

1.95

 

 
GAAP net income per share (diluted)

$

0.26

 

$

0.12

 

$

0.96

 

$

0.38

 

$

1.72

 

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
June 30, 2023 March 31, 2023 December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

84,096

 

$

94,189

 

$

105,372

 

Short-term marketable securities

 

262,219

 

 

264,439

 

 

248,441

 

Accounts receivable, net

 

32,077

 

 

20,585

 

 

20,836

 

Inventories

 

149,741

 

 

142,444

 

 

135,420

 

Prepaid expenses and other current assets

 

22,854

 

 

17,538

 

 

15,004

 

Total current assets

 

550,987

 

 

539,195

 

 

525,073

 

 
PROPERTY AND EQUIPMENT, net

 

168,066

 

 

173,506

 

 

176,681

 

INTANGIBLE ASSETS, net

 

5,511

 

 

6,054

 

 

6,597

 

GOODWILL

 

91,849

 

 

91,849

 

 

91,849

 

DEFERRED TAX ASSETS

 

21,771

 

 

19,771

 

 

19,034

 

OTHER ASSETS

 

21,273

 

 

21,030

 

 

20,862

 

Total assets

$

859,457

 

$

851,405

 

$

840,096

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

40,531

 

$

34,694

 

$

30,088

 

Accrued payroll and related expenses

 

14,041

 

 

13,442

 

 

14,778

 

Taxes payable

 

704

 

 

667

 

 

938

 

Other accrued liabilities

 

9,543

 

 

14,259

 

 

12,572

 

Total current liabilities

 

64,819

 

 

63,062

 

 

58,376

 

 
LONG-TERM LIABILITIES:
Income taxes payable

 

16,009

 

 

15,741

 

 

15,757

 

Other liabilities

 

10,700

 

 

10,300

 

 

10,747

 

Total liabilities

 

91,528

 

 

89,103

 

 

84,880

 

 
STOCKHOLDERS' EQUITY:
Common stock

 

23

 

 

23

 

 

24

 

Additional paid-in capital

 

11,220

 

 

8,780

 

 

-

 

Accumulated other comprehensive loss

 

(5,757

)

 

(5,044

)

 

(7,344

)

Retained earnings

 

762,443

 

 

758,543

 

 

762,536

 

Total stockholders' equity

 

767,929

 

 

762,302

 

 

755,216

 

Total liabilities and stockholders' equity

$

859,457

 

$

851,405

 

$

840,096

 

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended Six Months Ended
June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

14,793

 

$

6,875

 

$

55,824

 

$

21,668

 

$

102,072

 

Adjustments to reconcile net income to cash provided by operating activities
Depreciation

 

8,692

 

 

8,961

 

 

8,766

 

 

17,653

 

 

17,174

 

Amortization of intangible assets

 

543

 

 

543

 

 

604

 

 

1,086

 

 

1,328

 

Loss on disposal of property and equipment

 

15

 

 

7

 

 

959

 

 

22

 

 

1,034

 

Stock-based compensation expense

 

6,752

 

 

7,368

 

 

3,679

 

 

14,120

 

 

12,692

 

Amortization of premium on marketable securities

 

15

 

 

404

 

 

930

 

 

419

 

 

1,867

 

Deferred income taxes

 

(2,044

)

 

(738

)

 

(2,346

)

 

(2,782

)

 

(3,282

)

Increase (decrease) in accounts receivable allowance for credit losses

 

-

 

 

(454

)

 

184

 

 

(454

)

 

259

 

Change in operating assets and liabilities:
Accounts receivable

 

(11,492

)

 

705

 

 

2,494

 

 

(10,787

)

 

13,154

 

Inventories

 

(7,297

)

 

(7,024

)

 

(8,143

)

 

(14,321

)

 

(11,992

)

Prepaid expenses and other assets

 

(4,939

)

 

(2,302

)

 

2,523

 

 

(7,241

)

 

4,075

 

Accounts payable

 

5,887

 

 

2,926

 

 

7,286

 

 

8,813

 

 

5,577

 

Taxes payable and other accrued liabilities

 

(4,744

)

 

(686

)

 

(5,938

)

 

(5,430

)

 

(2,539

)

Net cash provided by operating activities

 

6,181

 

 

16,585

 

 

66,822

 

 

22,766

 

 

141,419

 

 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment

 

(3,129

)

 

(4,082

)

 

(13,244

)

 

(7,211

)

 

(27,944

)

Proceeds from sale of property and equipment

 

-

 

 

-

 

 

-

 

 

-

 

 

1,202

 

Purchases of marketable securities

 

(73,888

)

 

(36,922

)

 

(5,589

)

 

(110,810

)

 

(20,710

)

Proceeds from sales and maturities of marketable securities

 

75,948

 

 

22,693

 

 

16,710

 

 

98,641

 

 

125,527

 

Net cash provided by (used in) investing activities

 

(1,069

)

 

(18,311

)

 

(2,123

)

 

(19,380

)

 

78,075

 

 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock

 

-

 

 

3,098

 

 

-

 

 

3,098

 

 

3,057

 

Repurchase of common stock

 

(4,312

)

 

(1,687

)

 

(157,660

)

 

(5,999

)

 

(292,349

)

Payments of dividends to stockholders

 

(10,893

)

 

(10,868

)

 

(10,280

)

 

(21,761

)

 

(20,936

)

Net cash used in financing activities

 

(15,205

)

 

(9,457

)

 

(167,940

)

 

(24,662

)

 

(310,228

)

 
NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(10,093

)

 

(11,183

)

 

(103,241

)

 

(21,276

)

 

(90,734

)

 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

94,189

 

 

105,372

 

 

170,624

 

 

105,372

 

 

158,117

 

 
CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

84,096

 

$

94,189

 

$

67,383

 

$

84,096

 

$

67,383

 

 

Contacts

Joe Shiffler

Power Integrations, Inc.

(408) 414-8528

joe@power.com

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