Revenues grew ten percent year-over-year to $107.6 million; cash flow from operations was $24.1 million

GAAP earnings were $0.46/diluted share; non-GAAP earnings were $0.69/diluted share

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 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 second quarter were $107.6 million, an increase of three percent from the prior quarter and ten percent from the second quarter of 2016. Net income was $13.9 million or $0.46 per diluted share, compared to $0.47 per diluted share in the prior quarter and $0.39 per diluted share in the second quarter of 2016. Cash flow from operations was $24.1 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 second quarter was $21.1 million or $0.69 per diluted share, compared with $0.63 per diluted share in the prior quarter and $0.61 per diluted share in the second quarter of 2016.

Commented Balu Balakrishnan, president and CEO of Power Integrations: 'Quarterly revenues grew ten percent from a year ago, and we believe we are on track for another year of double-digit revenue growth. We are excited about the breadth and diversity of growth opportunities across our business, such as expanding electronic content in consumer appliances, IoT applications, faster charging for mobile devices, LED lighting, electric transportation, renewable energy, high-voltage DC transmission and more. We are attacking these opportunities with our most innovative products ever, and we have a robust pipeline of new products that will further expand our addressable market in the years to come.'

Additional Highlights

  • Power Integrations paid a dividend of $0.14 per share on June 30, 2017. A dividend of $0.14 per share is scheduled to be paid on September 29, 2017, to stockholders of record as of August 31, 2017.
  • Power Integrations' board of directors has expanded the company's share-repurchase authorization by $30 million; the company now has $53.6 million available for the repurchase of its common stock.
  • Power Integrations was issued 15 U.S. patents during the second quarter of 2017.

Financial Outlook

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

  • Revenues are expected to be $111 million plus or minus $3 million.
  • GAAP gross margin is expected to be approximately 49.3 percent; non-GAAP gross margin is expected to be approximately 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 $39.5 million; non-GAAP operating expenses are expected to be approximately $33 million. (Non-GAAP expenses are expected to exclude approximately $6 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://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 third-quarter financial performance, being on track for double-digit revenue growth for the year and expanding its addressable market in the years to come 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 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,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

NET REVENUES $ 107,563 $ 104,688 $ 97,571 $ 212,251 $ 185,607
COST OF REVENUES 54,116 54,212 49,786 108,328 93,334
GROSS PROFIT 53,447 50,476 47,785 103,923 92,273
OPERATING EXPENSES:
Research and development 17,341 16,640 15,859 33,981 30,638
Sales and marketing 12,607 11,633 11,407 24,240 22,147
General and administrative 8,765 8,704 8,133 17,469 15,983
Amortization of acquisition-related intangible assets 537 583 611 1,120 1,277
Total operating expenses 39,250 37,560 36,010 76,810 70,045
INCOME FROM OPERATIONS 14,197 12,916 11,775 27,113 22,228
Other income, net 465 506 236 971 497
INCOME BEFORE INCOME TAXES 14,662 13,422 12,011 28,084 22,725
PROVISION FOR INCOME TAXES 760 (677 ) 604 83 939
NET INCOME $ 13,902 $ 14,099 $ 11,407 $ 28,001 $ 21,786
EARNINGS PER SHARE:
Basic $ 0.47 $ 0.48 $ 0.40 $ 0.95 $ 0.76
Diluted $ 0.46 $ 0.47 $ 0.39 $ 0.92 $ 0.74
SHARES USED IN PER-SHARE CALCULATION:
Basic 29,720 29,456 28,850 29,589 28,765
Diluted 30,454 30,248 29,422 30,370 29,361
SUPPLEMENTAL INFORMATION:
Stock-based compensation expenses included in:
Cost of revenues $ 351 $ 143 $ 293 $ 494 $ 383
Research and development 2,351 1,634 1,940 3,985 3,409
Sales and marketing 1,189 1,097 899 2,286 1,926
General and administrative 2,436 2,095 1,880 4,531 3,710
Total stock-based compensation expense $ 6,327 $ 4,969 $ 5,012 $ 11,296 $ 9,428
Cost of revenues includes:
Amortization of acquisition-related intangible assets $ 939 $ 939 $ 946 $ 1,878 $ 1,907
General & administrative expenses include:
Patent-litigation expenses $ 1,779 $ 1,844 $ 1,658 $ 3,623 $ 2,817
Other income, net includes:
Amortization of in-place lease intangible assets $ 90 $ 90 $ 90 $ 180 $ 180
REVENUE MIX BY END MARKET
Communications 22 % 28 % 26 % 25 % 25 %
Computer 4 % 4 % 6 % 4 % 6 %
Consumer 41 % 37 % 36 % 39 % 37 %
Industrial 33 % 31 % 32 % 32 % 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,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

RECONCILIATION OF GROSS PROFIT
GAAP gross profit $ 53,447 $ 50,476 $ 47,785 $ 103,923 $ 92,273
GAAP gross margin 49.7 % 48.2 % 49.0 % 49.0 % 49.7 %
Stock-based compensation included in cost of revenues 351 143 293 494 383
Amortization of acquisition-related intangible assets 939 939 946 1,878 1,907
Non-GAAP gross profit $ 54,737 $ 51,558 $ 49,024 $ 106,295 $ 94,563
Non-GAAP gross margin 50.9 % 49.2 % 50.2 % 50.1 % 50.9 %
RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses $ 39,250 $ 37,560 $ 36,010 $ 76,810 $ 70,045
Less: Stock-based compensation expense included in operating expenses
Research and development 2,351 1,634 1,940 3,985 3,409
Sales and marketing 1,189 1,097 899 2,286 1,926
General and administrative 2,436 2,095 1,880 4,531 3,710
Total 5,976 4,826 4,719 10,802 9,045
Amortization of acquisition-related intangible assets 537 583 611 1,120 1,277
Non-GAAP operating expenses $ 32,737 $ 32,151 $ 30,680 $ 64,888 $ 59,723
RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations $ 14,197 $ 12,916 $ 11,775 $ 27,113 $ 22,228
GAAP operating margin 13.2 % 12.3 % 12.1 % 12.8 % 12.0 %
Add: Total stock-based compensation 6,327 4,969 5,012 11,296 9,428
Amortization of acquisition-related intangible assets 1,476 1,522 1,557 2,998 3,184
Non-GAAP income from operations $ 22,000 $ 19,407 $ 18,344 $ 41,407 $ 34,840
Non-GAAP operating margin 20.5 % 18.5 % 18.8 % 19.5 % 18.8 %
RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision for income taxes $ 760 $ (677 ) $ 604 $ 83 $ 939
GAAP effective tax rate 5.2 % -5.0 % 5.0 % 0.3 % 4.1 %
Tax effect of adjustments to GAAP results (736 ) (1,533 ) (225 ) (2,269 ) (526 )
Non-GAAP provision for income taxes $ 1,496 $ 856 $ 829 $ 2,352 $ 1,465
Non-GAAP effective tax rate 6.6 % 4.3 % 4.4 % 5.5 % 4.1 %
RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income $ 13,902 $ 14,099 $ 11,407 $ 28,001 $ 21,786
Adjustments to GAAP net income
Stock-based compensation 6,327 4,969 5,012 11,296 9,428
Amortization of acquisition-related intangible assets 1,476 1,522 1,557 2,998 3,184
Amortization of in-place lease intangible assets 90 90 90 180 180
Tax effect of items excluded from non-GAAP results (736 ) (1,533 ) (225 ) (2,269 ) (526 )
Non-GAAP net income $ 21,059 $ 19,147 $ 17,841 $ 40,206 $ 34,052
Average shares outstanding for calculation
of non-GAAP income per share (diluted) 30,454 30,248 29,422 30,370 29,361
Non-GAAP net income per share (diluted) $ 0.69 $ 0.63 $ 0.61 $ 1.32 $ 1.16
GAAP income per share $ 0.46 $ 0.47 $ 0.39 $ 0.92 $ 0.74
POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2017March 31, 2017December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 32,649 $ 46,335 $ 62,134
Short-term marketable securities 221,346 203,753 188,323
Accounts receivable 18,697 15,046 6,528
Inventories 52,432 51,149 52,564
Prepaid expenses and other current assets 16,902 16,770 8,715
Total current assets 342,026 333,053 318,264
PROPERTY AND EQUIPMENT, net 113,202 105,893 95,296
INTANGIBLE ASSETS, net 28,324 29,890 31,502
GOODWILL 91,849 91,849 91,849
DEFERRED TAX ASSETS 19,328 19,857 11,342
OTHER ASSETS 6,809 8,118 6,157
Total assets $ 601,538 $ 588,660 $ 554,410
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 30,124 $ 37,478 $ 29,727
Accrued payroll and related expenses 11,639 9,146 10,756
Taxes payable 1,072 877 729
Other accrued liabilities 3,858 3,409 2,734
Total current liabilities 46,693 50,910 43,946
LONG-TERM LIABILITIES:
Income taxes payable 2,805 2,804 2,639
Deferred tax liabilities 615 688 820
Other liabilities 4,422 4,115 3,921
Total liabilities 54,535 58,517 51,326
STOCKHOLDERS' EQUITY:
Common stock 29 29 28
Additional paid-in capital 189,259 182,235 172,875
Accumulated other comprehensive loss (2,419 ) (2,514 ) (2,710 )
Retained earnings 360,134 350,393 332,891
Total stockholders' equity 547,003 530,143 503,084
Total liabilities and stockholders' equity $ 601,538 $ 588,660 $ 554,410
POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Six Months Ended

June 30,
2017

March 31,
2017

June 30,
2016

June 30,
2017

June 30,
2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,902 $ 14,099 $ 11,407 $ 28,001 $ 21,786
Adjustments to reconcile net income to cash provided by operating activities
Depreciation 4,357 4,112 4,206 8,469 8,521
Amortization of intangible assets 1,566 1,612 1,647 3,178 3,439
Loss on disposal of property and equipment - 38 70 38 148
Stock-based compensation expense 6,327 4,969 5,012 11,296 9,428
Amortization of premium on marketable securities 257 251 169 508 429
Deferred income taxes 457 (1,105 ) 306 (648 ) 225
Increase in accounts receivable allowances 80 - 104 80 193
Change in operating assets and liabilities:
Accounts receivable (3,731 ) (8,518 ) (3,667 ) (12,249 ) (6,252 )
Inventories (1,283 ) 1,415 (1,084 ) 132 5,185
Prepaid expenses and other assets (115 ) (8,234 ) 714 (8,349 ) (674 )
Accounts payable (1,252 ) (2,377 ) 4,879 (3,629 ) 3,039
Taxes payable and other accrued liabilities 3,523 (315 ) (153 ) 3,208 (1,566 )
Net cash provided by operating activities 24,088 5,947 23,610 30,035 43,901
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (16,473 ) (6,403 ) (2,795 ) (22,876 ) (4,890 )
Purchases of marketable securities (49,636 ) (61,938 ) (20,984 ) (111,574 ) (66,211 )
Proceeds from sales and maturities of marketable securities 31,800 46,340 14,390 78,140 52,921
Net cash used in investing activities (34,309 ) (22,001 ) (9,389 ) (56,310 ) (18,180 )
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock 697 4,392 491 5,089 3,448
Repurchase of common stock - - (350 ) - (6,435 )
Payments of dividends to stockholders (4,162 ) (4,137 ) (3,754 ) (8,299 ) (7,483 )
Net cash provided by (used in) financing activities (3,465 ) 255 (3,613 ) (3,210 ) (10,470 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,686 ) (15,799 ) 10,608 (29,485 ) 15,251
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 46,335 62,134 94,735 62,134 90,092
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 32,649 $ 46,335 $ 105,343 $ 32,649 $ 105,343

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Source: Power Integrations, Inc.

Power Integrations Inc. published this content on 27 July 2017 and is solely responsible for the information contained herein.
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