Power Integrations Reports Second-Quarter Financial Results

Revenues increased 69 percent year-over-year to a record $180.1 million; GAAP earnings were $0.68 per diluted share; non-GAAP earnings were $0.83 per diluted share

Cash flow from operations for the second quarter was $66.8 million

SAN JOSE, Calif. — (BUSINESS WIRE) — July 29, 2021 — Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2021. Per-share measures for all periods reflect the effect of the August 2020 two-for-one stock split.

Net revenues for the second quarter of 2021 were $180.1 million, up four percent compared to the prior quarter and up 69 percent from the second quarter of 2020. Net income for the second quarter was $41.9 million or $0.68 per diluted share compared to $0.65 per diluted share in the prior quarter and $0.22 per diluted share in the second quarter of 2020. Cash flow from operations for the second quarter was $66.8 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 second quarter of 2021 was $50.8 million or $0.83 per diluted share compared with $0.76 per diluted share in the prior quarter and $0.33 per diluted share in the second 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: “We achieved record sales in the second quarter, and our revenues for the first half of 2021 are up 63 percent from a year ago. This growth reflects significant market-share gains and the impact of secular trends such as energy efficiency, electrification, advanced charging for mobile devices, and smarter homes, buildings and appliances.”

Additional Highlights

Power Integrations repurchased approximately 335,000 shares of its common stock during the quarter for $26.4 million. The company had $64.9 million remaining on its repurchase authorization at quarter-end.
The company paid a cash dividend of $0.13 per share on June 30, 2021. A dividend of $0.13 per share will be paid on September 30, 2021 to stockholders of record as of August 31, 2021.

Financial Outlook

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

Revenues are expected to decrease by three percent compared to the second quarter of 2021, plus or minus five percent.
GAAP gross margin is expected to be approximately 51 percent, and non-GAAP gross margin is expected to be approximately 51.5 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 between $47.5 million and $48 million; non-GAAP operating expenses are expected to be between $38.5 million and $39 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/8646289. 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 third-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									Six Months Ended
		June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
NET REVENUES		$	180,110		$	173,737		$	106,832		$	353,847		$	216,496

COST OF REVENUES			88,797			89,326			53,296			178,123			106,480

GROSS PROFIT			91,313			84,411			53,536			175,724			110,016

OPERATING EXPENSES:
Research and development			21,741			20,027			19,770			41,768			38,922
Sales and marketing			15,097			13,907			12,807			29,004			26,023
General and administrative			9,306			10,075			7,804			19,381			16,565
Amortization of acquisition-related intangible assets			193			216			230			409			487
	Total operating expenses		46,337			44,225			40,611			90,562			81,997

INCOME FROM OPERATIONS			44,976			40,186			12,925			85,162			28,019

OTHER INCOME			173			597			1,480			770			3,257

INCOME BEFORE INCOME TAXES			45,149			40,783			14,405			85,932			31,276

PROVISION FOR INCOME TAXES			3,268			985			1,213			4,253			2,198

NET INCOME		$	41,881		$	39,798		$	13,192		$	81,679		$	29,078

EARNINGS PER SHARE:
	Basic	$	0.69		$	0.66		$	0.22		$	1.35		$	0.49
	Diluted	$	0.68		$	0.65		$	0.22		$	1.33		$	0.48

SHARES USED IN PER-SHARE CALCULATION:
	Basic		60,544			60,184			59,712			60,366			59,458
	Diluted		61,466			61,451			60,624			61,481			60,464



SUPPLEMENTAL INFORMATION:		Three Months Ended									Six Months Ended
		June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Stock-based compensation expenses included in:
	Cost of revenues	$	640		$	631		$	252		$	1,271		$	648
	Research and development		3,159			2,391			2,351			5,550			4,460
	Sales and marketing		1,725			1,614			1,258			3,339			2,650
	General and administrative		3,676			3,844			2,120			7,520			4,933
	Total stock-based compensation expense	$	9,200		$	8,480		$	5,981		$	17,680		$	12,691

Cost of revenues includes:
	Amortization of acquisition-related intangible assets	$	619		$	754		$	799		$	1,373		$	1,598


		Three Months Ended									Six Months Ended
REVENUE MIX BY END MARKET		June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
	Communications		35	%		38	%		28	%		37	%		25	%
	Computer		8	%		8	%		6	%		8	%		5	%
	Consumer		31	%		29	%		31	%		30	%		36	%
	Industrial		26	%		25	%		35	%		25	%		34	%

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, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
RECONCILIATION OF GROSS PROFIT
GAAP gross profit			$	91,313		$	84,411		$	53,536		$	175,724		$	110,016
	GAAP gross margin			50.7	%		48.6	%		50.1	%		49.7	%		50.8	%

Stock-based compensation included in cost of revenues				640			631			252			1,271			648
Amortization of acquisition-related intangible assets				619			754			799			1,373			1,598

Non-GAAP gross profit			$	92,572		$	85,796		$	54,587		$	178,368		$	112,262
	Non-GAAP gross margin			51.4	%		49.4	%		51.1	%		50.4	%		51.9	%


			Three Months Ended									Six Months Ended
RECONCILIATION OF OPERATING EXPENSES			June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
GAAP operating expenses			$	46,337		$	44,225		$	40,611		$	90,562		$	81,997

Less:	Stock-based compensation expense included in operating expenses
		Research and development		3,159			2,391			2,351			5,550			4,460
		Sales and marketing		1,725			1,614			1,258			3,339			2,650
		General and administrative		3,676			3,844			2,120			7,520			4,933
		Total		8,560			7,849			5,729			16,409			12,043

	Amortization of acquisition-related intangible assets			193			216			230			409			487

Non-GAAP operating expenses			$	37,584		$	36,160		$	34,652		$	73,744		$	69,467


			Three Months Ended									Six Months Ended
RECONCILIATION OF INCOME FROM OPERATIONS			June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
GAAP income from operations			$	44,976		$	40,186		$	12,925		$	85,162		$	28,019
	GAAP operating margin			25.0	%		23.1	%		12.1	%		24.1	%		12.9	%

Add:	Total stock-based compensation			9,200			8,480			5,981			17,680			12,691
	Amortization of acquisition-related intangible assets			812			970			1,029			1,782			2,085

Non-GAAP income from operations			$	54,988		$	49,636		$	19,935		$	104,624		$	42,795
	Non-GAAP operating margin			30.5	%		28.6	%		18.7	%		29.6	%		19.8	%


			Three Months Ended									Six Months Ended
RECONCILIATION OF PROVISION FOR INCOME TAXES			June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
GAAP provision for income taxes			$	3,268		$	985		$	1,213		$	4,253		$	2,198
	GAAP effective tax rate			7.2	%		2.4	%		8.4	%		4.9	%		7.0	%

Tax effect of adjustments to GAAP results				(1,101	)		(2,578	)		(272	)		(3,679	)		(1,023	)

Non-GAAP provision for income taxes			$	4,369		$	3,563		$	1,485		$	7,932		$	3,221
	Non-GAAP effective tax rate			7.9	%		7.1	%		6.9	%		7.5	%		7.0	%


			Three Months Ended									Six Months Ended
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)			June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
GAAP net income			$	41,881		$	39,798		$	13,192		$	81,679		$	29,078

Adjustments to GAAP net income
	Stock-based compensation			9,200			8,480			5,981			17,680			12,691
	Amortization of acquisition-related intangible assets			812			970			1,029			1,782			2,085
	Tax effect of items excluded from non-GAAP results			(1,101	)		(2,578	)		(272	)		(3,679	)		(1,023	)

Non-GAAP net income			$	50,792		$	46,670		$	19,930		$	97,462		$	42,831

Average shares outstanding for calculation
	of non-GAAP net income per share (diluted)			61,466			61,451			60,624			61,481			60,464

Non-GAAP net income per share (diluted)			$	0.83		$	0.76		$	0.33		$	1.59		$	0.71

GAAP net income per share (diluted)			$	0.68		$	0.65		$	0.22		$	1.33		$	0.48

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


		June 30, 2021			March 31, 2021			December 31, 2020
ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents	$	297,481		$	343,272		$	258,874
	Short-term marketable securities		217,777			148,067			190,318
	Accounts receivable, net		41,352			42,257			35,910
	Inventories		89,643			90,509			102,878
	Prepaid expenses and other current assets		21,292			18,207			13,252
	Total current assets		667,545			642,312			601,232

	PROPERTY AND EQUIPMENT, net		167,079			168,712			166,188
	INTANGIBLE ASSETS, net		10,601			11,474			12,506
	GOODWILL		91,849			91,849			91,849
	DEFERRED TAX ASSETS		2,072			1,892			3,339
	OTHER ASSETS		28,703			28,480			28,225
	Total assets	$	967,849		$	944,719		$	903,339

LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
	Accounts payable	$	41,898		$	38,172		$	34,712
	Accrued payroll and related expenses		16,652			13,339			14,806
	Taxes payable		989			856			902
	Other accrued liabilities		8,727			10,160			12,106
	Total current liabilities		68,266			62,527			62,526

	LONG-TERM LIABILITIES:
	Income taxes payable		14,340			14,033			15,588
	Other liabilities		14,899			14,336			14,814
	Total liabilities		97,505			90,896			92,928

STOCKHOLDERS' EQUITY:
	Common stock		28			29			28
	Additional paid-in capital		185,878			203,051			190,920
	Accumulated other comprehensive loss		(3,155	)		(2,836	)		(2,163	)
	Retained earnings		687,593			653,579			621,626
	Total stockholders' equity		870,344			853,823			810,411
	Total liabilities and stockholders' equity	$	967,849		$	944,719		$	903,339

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

		Three Months Ended									Six Months Ended
		June 30, 2021			March 31, 2021			June 30, 2020			June 30, 2021			June 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income	$	41,881		$	39,798		$	13,192		$	81,679		$	29,078
	Adjustments to reconcile net income to cash provided by operating activities
	Depreciation		7,821			7,453			5,581			15,274			11,069
	Amortization of intangible assets		873			1,032			1,090			1,905			2,207
	Loss on disposal of property and equipment		21			17			262			38			292
	Stock-based compensation expense		9,200			8,480			5,981			17,680			12,691
	Amortization of premium on marketable securities		124			176			167			300			321
	Deferred income taxes		(263	)		1,445			184			1,182			1,279
	Increase (decrease) in accounts receivable allowance for credit losses		93			(2	)		-			91			(154	)
	Change in operating assets and liabilities:
	Accounts receivable		812			(6,345	)		7,725			(5,533	)		11,556
	Inventories		866			12,369			(7,330	)		13,235			(13,583	)
	Prepaid expenses and other assets		(1,248	)		(3,253	)		8,084			(4,501	)		4,092
	Accounts payable		4,772			3,281			(2,967	)		8,053			5,861
	Taxes payable and other accrued liabilities		1,896			(6,329	)		4,684			(4,433	)		(1,665	)
	Net cash provided by operating activities		66,848			58,122			36,653			124,970			63,044

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment		(8,243	)		(11,051	)		(10,019	)		(19,294	)		(21,622	)
	Proceeds from sale of property and equipment		10			25			331			35			331
	Purchases of marketable securities		(166,782	)		(21,971	)		(2,989	)		(188,753	)		(19,827	)
	Proceeds from sales and maturities of marketable securities		96,617			63,466			43,015			160,083			58,962
	Net cash provided by (used in) investing activities		(78,398	)		30,469			30,338			(47,929	)		17,844

CASH FLOWS FROM FINANCING ACTIVITIES:
	Net proceeds from issuance of common stock		-			3,652			769			3,652			6,298
	Repurchase of common stock		(26,374	)		-			(623	)		(26,374	)		(2,636	)
	Payments of dividends to stockholders		(7,867	)		(7,845	)		(6,271	)		(15,712	)		(11,915	)
	Net cash used in financing activities		(34,241	)		(4,193	)		(6,125	)		(38,434	)		(8,253	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(45,791	)		84,398			60,866			38,607			72,635

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			343,272			258,874			190,459			258,874			178,690

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	297,481		$	343,272		$	251,325		$	297,481		$	251,325

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