Power Integrations Reports Second-Quarter Financial Results

Power Integrations Reports Second-Quarter Financial Results

Revenues grew 14 percent sequentially and 15 percent year-over-year to $87.9 million

Cash flow from operations was $24.6 million; non-GAAP and GAAP earnings were $0.61 and $0.45 per diluted share, respectively

SAN JOSE, Calif.--(BUSINESS WIRE)-- Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended June 30, 2013. Net revenues for the quarter were $87.9 million, up 14 percent from the prior quarter and 15 percent compared with the second quarter of 2012. GAAP net income for the quarter was $13.7 million or $0.45 per diluted share, compared with $0.37 per diluted share in the prior quarter and a net loss of $0.25 per share in the second quarter of 2012. GAAP gross margin for the second quarter was 52.6 percent; operating margin was 15.1 percent.

In addition to its GAAP results, the company provided non-GAAP financial measures that exclude stock-based compensation expenses, certain expenses, gains and charges related to acquisitions and strategic investments, non-cash interest income, the tax effects of these items, and a one-time tax-related charge incurred in the second quarter of 2012. Non-GAAP net income for the second quarter was $18.5 million or $0.61 per diluted share, compared with $0.47 per diluted share in the prior quarter and $0.49 per diluted share in the second quarter of 2012. Non-GAAP gross margin for the second quarter was 53.6 percent; non-GAAP operating margin was 22.0 percent.

Commented Balu Balakrishnan, president and CEO of Power Integrations: "Quarterly revenues exceeded our expectations, increasing 14 percent sequentially with growth in all four of our primary end markets. Growth was particularly robust in the industrial market, which is now our largest end market in terms of sales. Strong revenue growth and a higher gross margin enabled our non-GAAP operating margin to expand by more than three percentage points versus the prior quarter, contributing to sequential growth of 30 percent in non-GAAP earnings per share."

Additional Highlights

  • On July 18 Power Integrations announced CHY100, the first AC-DC wall-charger interface IC that enables designers of mobile devices to implement the Quick Charge 2.0 protocol from Qualcomm Technologies, Inc. Launched earlier this year, Quick Charge 2.0 enables users to charge mobile devices up to 75% faster than when using conventional technology.

  • Power Integrations generated $24.6 million of cash flow from operations in the quarter; cash and investments increased by $26.0 million from the end of the prior quarter to a total of $145.1 million.
  • The company paid a dividend of $0.08 per share on June 28, 2013. The next dividend of $0.08 per share is to be paid on September 30, 2013 to stockholders of record as of August 30.
  • Power Integrations received 20 U.S. patents and 42 non-U.S. patents during the quarter and had a total of 562 U.S. patents and 461 non-U.S. patents as of June 30, 2013.

Financial Outlook

The company issued the following forecast for the third quarter of 2013:

  • Third-quarter revenues are expected to be between $89 million and $94 million.
  • Non-GAAP gross margin is expected to be approximately 54 percent. (Excludes from cost of revenues approximately $0.6 million of amortization of acquisition-related intangible assets and $0.3 million of stock-based compensation.) GAAP gross margin is expected to be approximately 53 percent.
  • Non-GAAP operating expenses are expected to be approximately $28 million, plus or minus $0.5 million. (Excludes from GAAP operating expenses approximately $4 million of stock-based compensation expenses and $1 million of amortization expense for acquisition-related intangible assets.) GAAP operating expenses are expected to be $33 million, plus or minus $0.5 million.

Conference Call Today at 1:45 p.m. Pacific Time

Power Integrations management will hold a conference call today at 1:45 p.m. Pacific time. Members of the investment community can join the call by dialing 1-877-317-6789 from within the United States or 1-412-317-6789 from outside the U.S. The call will be available via a live and archived webcast on the investor section of the company's website, http://investors.powerint.com.

About Power Integrations

Power Integrations, Inc., is a Silicon Valley-based supplier of high-performance electronic components used in high-voltage power-conversion systems. The company's integrated circuits and diodes enable compact, energy-efficient AC-DC power supplies for a vast range of electronic products including mobile devices, TVs, PCs, appliances, smart utility meters and LED lights. CONCEPT IGBT drivers enhance the efficiency, reliability and cost of high-power applications such as industrial motor drives, solar and wind energy systems, electric vehicles and high-voltage DC transmission. Since its introduction in 1998, Power Integrations' EcoSmart® energy-efficiency technology has prevented billions of dollars' worth of energy waste and millions of tons of carbon emissions. Reflecting the environmental benefits of the company's products, Power Integrations' stock is included in the NASDAQ® Clean Edge® Green Energy Index, The Cleantech Index®, and the Ardour Global IndexSM. For more information, including design-support tools and resources, please visit www.powerint.com; visit Power Integrations' Green Room for a comprehensive guide to energy-efficiency standards around the world.

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 Accounting Standard Codification 718-10, acquisition-related expenses, amortization of acquisition-related intangible assets and the fair-value write-up of acquired inventory, certain charges and gains associated with strategic investments, non-cash interest income, the tax effects of the above items, and a one-time tax related charge incurred in the second quarter of 2012. The company uses these non-GAAP measures in its own financial and operational decision-making processes and, with respect to one measure, in setting performance targets for employee-compensation purposes. Further, the company believes that these non-GAAP measures offer an important analytical tool to help investors understand the company's core operating results and trends, and to facilitate comparability with the operating results of other companies that provide similar non-GAAP measures. These non-GAAP measures have certain 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 under the caption "Financial Outlook" relating to the company's projected 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 forward-looking 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; unfavorable fluctuations in component costs resulting from changes in commodity prices and/or the exchange rate between the U.S. dollar and the Japanese yen; and the challenges inherent in integrating and forecasting the performance of acquired businesses. 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 Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (SEC) on May 3, 2013. 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, EcoSmart and the Power Integrations logo are trademarks or registered trademarks of Power Integrations, Inc. All other trademarks are property of their respective owners.

(in thousands, except per-share amounts)
Three Months EndedSix Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

June 30, 2013

June 30, 2012

NET REVENUES$87,922$77,040$76,382$164,962$148,155
COST OF REVENUES 41,715  37,176  38,627  78,891  75,807 
GROSS PROFIT 46,207  39,864  37,755  86,071  72,348 
Research and development13,48912,27212,06625,76122,706
Sales and marketing10,2429,6598,41919,90116,530
General and administrative8,0667,7346,68715,80013,291
Amortization of acquisition-related intangible assets1,1221,1227572,244785
Acquisition expenses -  -  413  -  902 
Total operating expenses 32,919  30,787  28,342  63,706  54,214 
INCOME FROM OPERATIONS13,2889,0779,41322,36518,134
Non-cash interest income--623-780
Cost of acquisition-related currency option--(635)-(635)
Gain related to SemiSouth497--497-
Other income (expense), net 68  217  207  285  665 
PROVISION (BENEFIT) FOR INCOME TAXES 181  (1,609) 16,784  (1,428) 18,659 
NET INCOME (LOSS)$13,672 $10,903 $(7,176)$24,575 $285 
Basic$0.47 $0.38 $(0.25)$0.85 $0.01 
Diluted$0.45 $0.37 $(0.25)$0.82 $0.01 
Stock-based compensation expenses included in:
Cost of revenues$264$264$256$528$501
Research and development1,6401,1061,5662,7462,687
Sales and marketing7958297461,6241,493
General and administrative 1,629  1,437  1,074  3,066  1,992 
Total stock-based compensation expense$4,328 $3,636 $3,642 $7,964 $6,673 
Cost of revenues includes:
Amortization of write-up of acquired inventory$- $- $1,136 $- $1,216 
Amortization of acquisition-related intangible assets$645 $645 $459 $1,290 $544 
Operating expenses include:
Patent-litigation expenses$807 $1,399 $1,409 $2,206 $2,705 
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