Quarterly Net Revenues Increased 28 Percent Year-over-Year to a Record
$52.7 Million
Company Announces $50 Million Share Repurchase Authorization
SAN JOSE, Calif., Feb. 6, 2008 (PRIME NEWSWIRE) -- Power Integrations (Nasdaq:POWI) today announced financial results for the quarter and fiscal year ended December 31, 2007. The company's net revenues for the fourth quarter were $52.7 million, up six percent compared to $49.8 million in the prior quarter, and a 28 percent increase compared to $41.3 million in the fourth quarter of 2006. For the full year, net revenues totaled $191.0 million, an increase of 18 percent compared to $162.4 million in 2006.
Fourth-quarter gross margin under generally accepted accounting principles (GAAP) was 53.2 percent. Net income was $6.6 million, or $0.20 per diluted share, compared to $6.8 million or $0.22 per diluted share in the prior quarter and $3.0 million or $0.10 per diluted share in the year-ago quarter.
Full-year gross margin on a GAAP basis was 54.2 percent. GAAP net income totaled $26.6 million, or $0.85 per diluted share, compared to $9.4 million or $0.31 per diluted share in the prior year. Fourth-quarter and full-year net income reflect the impact of a $1.4 million charge for in-process research and development associated with the company's acquisition of Potentia Semiconductor.
Non-GAAP Results
On a non-GAAP basis which excludes stock-based compensation expenses and acquisition-related charges, fourth-quarter gross margin was 53.8 percent. Fourth-quarter net income on a non-GAAP basis was $12.4 million, or $0.38 per diluted share. This compares to non-GAAP net income of $10.1 million or $0.32 per share in the prior quarter and $5.8 million or $0.19 per share in the fourth quarter of 2006.
Full-year non-GAAP gross margin for 2007 was 54.8 percent. Non-GAAP net income for 2007 was $40.8 million or $1.31 per diluted share, compared to $21.8 million or $0.71 per diluted share in the prior year.
The company ended the year with $205.5 million in cash and investments, an increase of $72.7 million compared to the end of 2006.
Revenue mix by end market for the fourth quarter was 31 percent consumer, 28 percent communications, 20 percent computer, 14 percent industrial and 7 percent other. By product family, revenue mix was 45 percent TinySwitch(r), 25 percent TOPSwitch(r), 28 percent LinkSwitch(r) and 2 percent DPA-Switch(r).
"2007 was an excellent year for Power Integrations, with 18 percent revenue growth, over half a billion units shipped, and more than $60 million in cash flow from operations," said Balu Balakrishnan, president and CEO of Power Integrations. "The year ended on an especially high note with 28 percent year-over-year revenue growth in the fourth quarter. This growth was broad-based, with revenues from each of our major end markets growing more than 20 percent.
"The adoption of our EcoSmart(r) ICs continues to accelerate, driven by energy-efficiency standards and elevated raw material costs," noted Balakrishnan. "In particular, copper-and-iron 'energy vampires' are heading toward extinction, and our LinkSwitch products are replacing them at a rapid rate. LinkSwitch revenues grew more than 150 percent in 2007 and accounted for 28 percent of total revenues in the fourth quarter.
"The importance of energy efficiency in power supplies continues to grow," added Balakrishnan. "The California standards on external power supplies are now set to take effect nationwide in July as a result of the new U.S. energy legislation. Tighter specifications from ENERGY STAR(r) and the European Union are also scheduled to take effect this year. Our EcoSmart technology meets these and all other current and proposed standards worldwide in a highly cost-effective fashion."
Additional Highlights
* The board of directors of Power Integrations has authorized the use of up to $50 million for the repurchase of the company's shares. Repurchases will be executed according to certain pre-defined price/volume guidelines set by the board of directors. * As announced today in a separate press release, Power Integrations has acquired Potentia Semiconductor, a developer of integrated controller chips for power conversion, for approximately $5.5 million in cash, including closing costs. Potentia's engineering team, based in Ottawa, Ontario, Canada, will form the core of a new analog design group for Power Integrations focused primarily on high-power applications. * Power Integrations EcoSmart technology saved an estimated six billion kilowatt-hours of electricity during 2007 through the reduction of standby power consumption. As a result, an estimated total of four million tons of CO2 emissions were averted, an amount equal to the annual emissions of approximately 670,000 automobiles. * In December, the judge overseeing patent-infringement litigation between Power Integrations (PI) and Fairchild Semiconductor dismissed Fairchild's suit against PI. Previously, in litigation brought against Fairchild by PI, Fairchild was found to willfully infringe four PI patents, resulting in a damage award of approximately $34 million. PI is now seeking an injunction against the infringing Fairchild products as well as an enhancement of the damage award based on the finding of willful infringement. * In November, the U.S. Court of Appeals for the Federal Circuit affirmed the decision of the U.S. International Trade Commission (ITC) that certain controller chips produced by System General Corp., a subsidiary of Fairchild Semiconductor, infringe two Power Integrations patents. The infringing parts and certain downstream products containing them remain subject to an exclusion order prohibiting their importation into the U.S. The decision clears the way for Power Integrations to proceed with its patent-infringement lawsuit against System General in Federal District Court, which had been stayed pending the appeal of the ITC decision. Because the Court of Appeals has affirmed the ITC decision, the ITC's finding of infringement is binding on the district court. * Power Integrations received five U.S. patents and one foreign patent in the fourth quarter. The company had a total of 197 U.S. patents and 90 foreign patents as of December 31, 2007. In 2007 Power Integrations received a total of 34 U.S. patents and 7 foreign patents.
First-Quarter Outlook
The company expects its revenues for the first quarter of 2008 to be in the range of $50 million to $54 million. Gross margins are expected to be similar to fourth-quarter levels. First-quarter operating expenses are expected to total between $20 million and $20.5 million, including approximately $3.5 million of stock-based compensation expenses and $1 million of expenses related to patent litigation.
Conference Call at 1:45 pm Pacific Time
Power Integrations management will hold a conference call for members of the investment community today at 1:45 pm Pacific time. Members of the investment community may access the call by dialing 888-806-6208 from within the United States, or 913-312-9315 from outside the U.S. A telephonic replay will be available for 48 hours following the conclusion of the call by dialing 888-203-1112 (U.S.) or 719-457-0820 (outside the U.S.) The replay access code is 1646294. The call will also be available via a live and archived webcast on the "investor info" section of the company's website, http://investors.powerint.com.
About Power Integrations
Power Integrations, Inc. is the leading supplier of high-voltage analog integrated circuits used in power conversion. The company's breakthrough integrated-circuit technology enables compact, energy-efficient power supplies in a wide range of electronic products, in both AC-DC and DC-DC applications. The company's EcoSmart energy-efficiency technology, which dramatically reduces energy waste, has saved consumers and businesses around the world more than an estimated $2.7 billion on their electricity bills since its introduction in 1998. For more information, visit the company's website at www.powerint.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 expenses (and the related tax effects thereof) recorded under Statement of Financial Accounting Standards No. 123R, "Share-based Payment," which requires the recognition of expenses relating to share-based payments such as stock options. Also excluded from non-GAAP financial results are certain acquisition-related expenses, such as charges reflecting the write-off of purchased in-process research and development. The company uses these non-GAAP measures in its own financial and operational decision-making processes and 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 company's historical results and 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 other companies in Power Integrations' industry, may calculate non-GAAP financial measures differently than the company, limiting their usefulness as a comparative measure.
Note Regarding Forward-Looking Statements
The statements in this press release relating to the company's projected first-quarter financial performance are forward-looking statements, reflecting management's current forecast. These forward-looking statements are based on current information that is, by its nature, subject to rapid and even abrupt changes. Due to risks and uncertainties associated with the company's business, actual results could differ materially from those projected or implied by management's forward-looking statements. These risks and uncertainties include, but are not limited to: changes and shifts in customer demand away from products that utilize the company's integrated circuits to products that do not incorporate the company's products; the company's ability to maintain and establish strategic relationships; the effects of competition; the risks inherent in the development and delivery of complex technologies; the outcome and cost of patent litigation; the company's ability to attract, retain and motivate qualified personnel; the emergence of new markets for the company's products and services; the company's ability to compete in those markets based on timeliness, cost and market demand; and fluctuations in currency 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 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 on November 9, 2007. 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.
POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
Three Months Ended Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2007 2007 2006 2007 2006
-------- -------- -------- -------- --------
NET REVENUES $ 52,680 $ 49,806 $ 41,281 $191,043 $162,403
COST OF REVENUES 24,661 23,409 19,172 87,558 73,794
-------- -------- -------- -------- --------
GROSS PROFIT 28,019 26,397 22,109 103,485 88,609
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Research and
development 6,702 6,664 6,257 25,176 24,415
Sales and marketing 7,452 6,976 6,658 26,940 25,712
General and
administrative 5,846 6,475 7,916 24,249 34,648
In-process research
and development 1,370 -- -- 1,370 --
-------- -------- -------- -------- --------
Total Operating
Expenses 21,370 20,115 20,831 77,735 84,775
-------- -------- -------- -------- --------
INCOME FROM
OPERATIONS 6,649 6,282 1,278 25,750 3,834
OTHER INCOME, net 2,739 1,917 1,567 7,962 5,924
INSURANCE
REIMBURSEMENT 116 -- -- 839 --
-------- -------- -------- -------- --------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 9,504 8,199 2,845 34,551 9,758
PROVISION FOR
INCOME TAXES 2,916 1,446 (192) 7,927 333
-------- -------- -------- -------- --------
NET INCOME $ 6,588 $ 6,753 $ 3,037 $ 26,624 $ 9,425
======== ======== ======== ======== ========
EARNINGS PER SHARE:
Basic $ 0.22 $ 0.23 $ 0.11 $ 0.92 $ 0.32
======== ======== ======== ======== ========
Diluted $ 0.20 $ 0.22 $ 0.10 $ 0.85 $ 0.31
======== ======== ======== ======== ========
SHARES USED IN
PER-SHARE
CALCULATION:
Basic 29,741 28,789 28,658 28,969 29,059
Diluted 32,269 31,342 30,656 31,254 30,819
SUPPLEMENTAL
INFORMATION:
Stock-based
compensation
expenses included
in:
Cost of revenues $ 330 $ 326 $ 343 $ 1,268 $ 1,250
Research and
development 1,180 1,088 993 3,829 $ 4,329
Sales and
marketing 1,304 1,452 1,231 4,620 $ 5,506
General and
administrative 1,006 1,041 1,071 3,548 4,375
-------- -------- -------- -------- --------
Total stock-based
compensation
expense $ 3,820 $ 3,907 $ 3,638 $ 13,265 $ 15,460
======== ======== ======== ======== ========
Operating expenses
include the
following:
Patent-litigation
expenses $ 1,262 $ 574 $ 1,482 $ 2,945 $ 6,965
======== ======== ======== ======== ========
Special
investigation/
restatement
expenses $ 409 $ 1,735 $ 2,799 $ 5,366 $ 13,697
======== ======== ======== ======== ========
POWER INTEGRATIONS, INC.
SUPPLEMENTAL RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO
GAAP RESULTS
(in thousands, except per-share amounts)
Three Months Ended Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2007 2007 2006 2007 2006
-------- -------- -------- -------- --------
RECONCILIATION OF
GROSS PROFIT
MARGIN
GAAP gross profit $ 28,019 $ 26,397 $ 22,109 $103,485 $ 88,609
GAAP gross profit
margin 53.2% 53.0% 53.6% 54.2% 54.6%
Stock-based
compensation
expense included
in cost of
revenues 330 326 343 1,268 1,250
-------- -------- -------- -------- --------
Non-GAAP gross
profit excluding
stock-based
compensation 28,349 26,723 22,452 104,753 89,859
-------- -------- -------- -------- --------
Non-GAAP gross
profit margin 53.8% 53.7% 54.4% 54.8% 55.3%
RECONCILIATION OF
OPERATING MARGIN
GAAP income from
operations $ 6,649 $ 6,282 $ 1,278 $ 25,750 $ 3,834
GAAP operating
margin 12.6% 12.6% 3.1% 13.5% 2.4%
Stock-based
compensation
expense included
in cost of
revenues and
operating
expenses:
Cost of revenues 330 326 343 1,268 1,250
Research and
development 1,180 1,088 993 3,829 4,329
Sales and
marketing 1,304 1,452 1,231 4,620 5,506
General and
administrative 1,006 1,041 1,071 3,548 4,375
-------- -------- -------- -------- --------
Total 3,820 3,907 3,638 13,265 15,460
-------- -------- -------- -------- --------
In-process research
and development 1,370 -- -- 1,370 --
Non-GAAP income
from operations
excluding stock-
based compensation
and IPRD charge 11,839 10,189 4,916 40,385 19,294
-------- -------- -------- -------- --------
Non-GAAP operating
margin 22.5% 20.5% 11.9% 21.1% 11.9%
RECONCILIATION OF
NET INCOME PER
SHARE (DILUTED)
GAAP net income $ 6,588 $ 6,753 $ 3,037 $ 26,624 $ 9,425
Adjustments to
GAAP net income
Total stock-based
compensation 3,820 3,907 3,638 13,265 15,460
In-process
research and
development
charge 1,370 -- -- 1,370 --
Difference between
GAAP and non-GAAP
provision for
income taxes 595 (512) (829) (448) (3,074)
Non-GAAP net
income $ 12,373 $ 10,148 $ 5,846 $ 40,811 $ 21,811
-------- -------- -------- -------- --------
Average shares
outstanding for
calculation of
non-GAAP income
per share
(diluted) 32,269 31,342 30,656 31,254 30,819
-------- -------- -------- -------- --------
Non-GAAP income per
share excluding
stock-based
compensation
(diluted) $ 0.38 $ 0.32 $ 0.19 $ 1.31 $ 0.71
======== ======== ======== ======== ========
Note on use of non-GAAP financial measures:
Effective January 1, 2006, Power Integrations adopted SFAS 123R, which
requires the company to recognize compensation expenses relating to
stock-based payments. In addition to the company's consolidated
financial statements, which are prepared according to GAAP, the
company provides certain non-GAAP financial information that excludes
expenses recognized under SFAS 123R, and the related tax effects. Also
excluded from non-GAAP measures are certain acquisition-related
expenses, such as charges for the write-off of purchased in-process
research and development. The company uses these non-GAAP measures in
its own financial and operational decision-making processes and 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 company's historical results and 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
POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, September 30, December 31,
2007 2007 2006
----------- ------------ -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 118,353 $ 162,402 $ 124,937
Restricted cash 1,300 1,300 1,300
Short-term investments 85,821 13,262 2,506
Accounts receivable 14,221 14,652 10,489
Inventories 19,696 19,944 28,280
Deferred tax assets 1,259 2,047 2,199
Prepaid expenses and other
current assets 2,957 3,794 4,009
----------- ----------- -----------
Total current assets 243,607 217,401 173,720
----------- ----------- -----------
INVESTMENTS -- 1,000 3,999
NOTE RECEIVABLE 10,000 10,000 10,000
PROPERTY AND EQUIPMENT, net 56,740 55,085 53,475
INTANGIBLE ASSETS, NET 6,262 5,315 5,895
GOODWILL 1,824 -- --
DEFERRED TAX ASSETS 15,544 13,190 13,485
OTHER ASSETS 1,122 272 285
----------- ----------- -----------
Total assets $ 335,099 $ 302,263 $ 260,859
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,792 $ 10,109 $ 8,592
Accrued payroll and related
expenses 9,212 7,044 8,668
Income taxes payable 852 1,608 14,509
Deferred income on sales to
distributors 5,226 5,574 4,901
Accrued professional & other
fees 1,844 3,868 3,294
Other accrued liabilities 641 126 129
----------- ----------- -----------
Total current liabilities 28,567 28,329 40,093
----------- ----------- -----------
LONG-TERM INCOME TAXES PAYABLE 17,042 14,236 --
----------- ----------- -----------
Total liabilities 45,609 42,565 40,093
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 30 29 29
Additional paid-in capital 176,282 153,081 135,307
Cumulative translation
adjustment 85 83 4
Retained earnings 113,093 106,505 85,426
----------- ----------- -----------
Total stockholders' equity 289,490 259,698 220,766
----------- ----------- -----------
Total liabilities
stockholders' equity $ 335,099 $ 302,263 $ 260,859
=========== =========== ===========