Net Revenues Grew 24 Percent Year-over-Year to a Record $53.6 Million
Non-GAAP Gross Margin Was 54.6 Percent
SAN JOSE, Calif., July 24, 2008 (PRIME NEWSWIRE) -- Power Integrations (Nasdaq:POWI), the leader in high-voltage integrated circuits for energy-efficient power conversion, today announced financial results for the quarter ended June 30, 2008. The company's net revenues for the quarter were $53.6 million, up 24 percent compared to $43.2 million in the second quarter of 2007, and up three percent sequentially compared to $51.8 million in the first quarter of 2008.
Gross margin under generally accepted accounting principles (GAAP) was 53.7 percent. GAAP net income was $7.6 million, or $0.23 per diluted share, compared to $6.8 million or $0.22 per diluted share in the year-ago quarter and $7.2 million or $0.22 per diluted share in the first quarter of 2008.
On a non-GAAP basis, second-quarter gross margin was 54.6 percent. Net income on a non-GAAP basis was $10.7 million, or $0.33 per diluted share. This compares to non-GAAP net income of $9.2 million or $0.30 per share in the year-ago quarter, and $10.6 million or $0.33 per share in the first quarter of 2008. Non-GAAP financial measures exclude stock-based compensation expenses and the related tax effects
The company ended the quarter with $237.9 million in cash and investments, an increase of $24.4 million during the quarter. Cash flow from operations totaled $15.6 million for the quarter. The company repurchased 108,900 shares of its stock during the quarter for a total of $3.4 million in cash. As of June 30, the company had used approximately $9 million of the $50 million share-repurchase authorization approved by its board of directors in February 2008.
"Second-quarter revenues were well within our guidance, and up 24 percent from a year ago, reflecting substantial market-share gains," said Balu Balakrishnan, president and CEO of Power Integrations. "Tighter energy-efficiency standards, higher raw-material prices and rising labor costs are tilting the economics of the power supply market in favor of more highly integrated designs, and we are clearly leading the way. Each of our core AC-DC product lines has been upgraded with significantly higher levels of integration and performance over the past two years, and we are on track to expand our addressable market with a series of new products targeting high-power applications.
"Regarding the near-term outlook, it appears that macroeconomic factors are weighing on end-market demand, as bookings slowed in the latter part of the quarter and have not reaccelerated thus far in July," continued Balakrishnan. "The uncertain economic environment makes it difficult to predict the strength of the seasonal ramp, leading us to be cautious in our revenue outlook for the third quarter."
Revenue mix by end market for the second quarter was 30 percent consumer, 26 percent communications, 23 percent computer, 15 percent industrial and 6 percent other. By product family, revenue mix was 45 percent TinySwitch(r), 26 percent TOPSwitch, 27 percent LinkSwitch and 2 percent DPA-Switch(r).
Additional Highlights
-- In May, Power Integrations introduced LinkSwitch-II, the next
generation of its LinkSwitch family of ICs for low-power
applications. LinkSwitch-II utilizes highly accurate primary-side
regulation (PSR) technology to enable constant-current (CC) and
constant-voltage (CV) applications without the use of secondary-
side feedback circuitry. This dramatically simplifies the design
of CC/CV power supplies, reduces bill-of-materials and
manufacturing costs, and improves energy-efficiency performance.
-- Earlier this month, Power Integrations expanded its TOPSwitch-HX
product family with a new package that enables slim, lightweight
power supplies for notebook computers and other applications in
which a slender form factor is a key design criterion. Along with
its introduction of the new L-bend version of its e-SIP package,
which stands just 2 millimeters above the printed circuit board,
the company introduced a reference design for a 65 W notebook
adapter barely larger than a deck of playing cards.
-- On June 27, Power Integrations stock was added to the Russell
3000(r) broad-market index, as well as the small-cap Russell 2000
(r) index.
-- Power Integrations received 13 U.S. patents and 13 foreign patents
in the second quarter. The company had a total of 227 U.S. patents
and 103 foreign patents as of June 30, 2008.
Third-Quarter Outlook
The company expects its revenues for the third quarter of 2008 to be in the range of $55 million to $60 million. GAAP gross margin is expected to be 53 percent plus or minus half a percentage point, including an impact of approximately one percentage point from stock-based compensation. Third-quarter GAAP operating expenses are expected to be similar to second-quarter levels, with 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 877-419-6597 from within the United States, or 719-325-4900 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 4025946. 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 AC-DC, DC-DC and LED lighting applications. The company's EcoSmart(r) energy-efficiency technology, which dramatically reduces energy waste, has saved consumers and businesses around the world more than an estimated $2.9 billion on their electricity bills since its introduction in 1998. Reflecting the environmental benefits of EcoSmart technology, the company's stock is included in clean-tech stock indices sponsored by Nasdaq (Nasdaq: CLEN; Nasdaq: CLES) and the American Stock Exchange (AMEX: CTIUS). 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 in one prior period were 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, 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 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 third-quarter financial performance and its expectation of continuing market-share gains 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; customer reaction to the effects of design wins may not be as the company expects; 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 annual report on Form 10-K, filed with the Securities and Exchange Commission on March 10, 2008, and in the company's most recent quarterly report on Form 10-Q, filed on May 9, 2008. 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 Six Months Ended
June 30, Mar 31, June 30, June 30,
2008 2008 2007 2008 2007
------- ------- ------- -------- --------
NET REVENUES $53,635 $51,840 $43,240 $105,475 $ 88,557
COST OF REVENUES 24,829 23,718 19,288 48,547 39,488
------- ------- ------- -------- --------
GROSS PROFIT 28,806 28,122 23,952 56,928 49,069
------- ------- ------- -------- --------
OPERATING EXPENSES:
Research and development 7,979 7,752 5,916 15,731 11,810
Sales and marketing 7,852 7,419 6,171 15,271 12,512
General and
administrative 5,950 5,688 5,546 11,638 11,928
------- ------- ------- -------- --------
Total operating
expenses 21,781 20,859 17,633 42,640 36,250
------- ------- ------- -------- --------
INCOME FROM OPERATIONS 7,025 7,263 6,319 14,288 12,819
OTHER INCOME, net 2,265 2,012 2,364 4,277 4,029
INCOME BEFORE PROVISION
FOR INCOME TAXES 9,290 9,275 8,683 18,565 16,848
PROVISION FOR INCOME
TAXES 1,679 2,066 1,906 3,745 3,565
------- ------- ------- -------- --------
NET INCOME $ 7,611 $ 7,209 $ 6,777 $ 14,820 $ 13,283
======= ======= ======= ======== ========
EARNINGS PER SHARE:
Basic $ 0.25 $ 0.24 $ 0.24 $ 0.49 $ 0.46
======= ======= ======= ======== ========
Diluted $ 0.23 $ 0.22 $ 0.22 $ 0.46 $ 0.43
======= ======= ======= ======== ========
SHARES USED IN PER-
SHARE CALCULATION:
Basic 30,529 30,222 28,674 30,375 28,667
Diluted 32,762 32,090 30,942 32,526 30,823
SUPPLEMENTAL INFORMATION:
Stock-based compensation
expenses included in:
Cost of revenues $ 467 $ 424 $ 280 $ 891 $ 612
Research and
development 1,146 1,479 642 2,625 1,561
Sales and marketing 1,305 1,338 851 2,643 1,864
General and
administrative 989 883 730 1,872 1,501
------- ------- ------- -------- --------
Total stock-based
compensation
expense $ 3,907 $ 4,124 $ 2,503 $ 8,031 $ 5,538
======= ======= ======= ======== ========
Operating expenses
include the following:
Patent-litigation
expenses $ 633 $ 1,035 $ 559 $ 1,668 $ 1,109
======= ======= ======= ======== ========
REVENUE MIX BY PRODUCT
FAMILY
TOPSwitch 26% 25% 32% 25% 30%
TinySwitch 45% 44% 53% 45% 56%
LinkSwitch 27% 29% 13% 28% 12%
DPA-Switch 2% 2% 2% 2% 2%
REVENUE MIX BY END MARKET
Communications 26% 30% 26% 28% 28%
Computer 23% 18% 20% 20% 19%
Consumer 30% 31% 30% 31% 31%
Industrial 15% 15% 17% 15% 15%
Other 6% 6% 7% 6% 7%
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, Mar 31, June 30, June 30,
2008 2008 2007 2008 2007
------- ------- ------- -------- --------
RECONCILIATION OF GROSS
PROFIT MARGIN
GAAP gross profit $28,806 $28,122 $23,952 $ 56,928 $ 49,069
GAAP gross profit
margin 53.7% 54.2% 55.4% 54.0% 55.4%
Stock-based compensation
expense included in
cost of revenues 467 424 280 891 612
------- ------- ------- ------------------
Non-GAAP gross profit
excluding stock-based
compensation 29,273 28,546 24,232 57,819 49,681
------- ------- ------- ------------------
Non-GAAP gross profit
margin 54.6% 55.1% 56.0% 54.8% 56.1%
RECONCILIATION OF
OPERATING MARGIN
GAAP income from
operations $ 7,025 $ 7,263 $ 6,319 $ 14,288 $ 12,819
GAAP operating
margin 13.1% 14.0% 14.6% 13.5% 14.5%
Stock-based compensation
expense included in
cost of revenues and
operating expenses:
Cost of revenues 467 424 280 891 612
Research and
development 1,146 1,479 642 2,625 1,561
Sales and marketing 1,305 1,338 851 2,643 1,864
General and
administrative 989 883 730 1,872 1,501
------- ------- ------- ------------------
Total 3,907 4,124 2,503 8,031 5,538
------- ------- ------- ------------------
Non-GAAP income from
operations excluding
stock-based
compensation 10,932 11,387 8,822 22,319 18,357
------- ------- ------- ------------------
Non-GAAP operating
margin 20.4% 22.0% 20.4% 21.2% 20.7%
RECONCILIATION OF NET IN-
COME PER SHARE (DILUTED)
GAAP net income $ 7,611 $ 7,209 $ 6,777 $ 14,820 $ 13,283
Adjustments to GAAP net
income
Total stock-based
compensation 3,907 4,124 2,503 8,031 5,538
Difference between
GAAP and non-GAAP
provision for income
taxes (829) (752) (94) (1,581) (531)
Non-GAAP net income $10,689 $10,581 $ 9,186 $ 21,270 $ 18,290
------- ------- ------- ------------------
Average shares out-
standing for calcula-
tion of non-GAAP income
per share (diluted) 32,762 32,090 30,942 32,526 30,823
------- ------- ------- ------------------
Non-GAAP income per
share excluding stock-
based compensation
(diluted) $ 0.33 $ 0.33 $ 0.30 $ 0.65 $ 0.59
======= ======= ======= ==================
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, with respect to one measure, in
setting performance targets for employee-compensation purposes.
Further, the company believes that these 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)
June 30, December 31,
2008 2007
-------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $237,505 $118,353
Restricted cash 350 1,300
Short-term investments 5 85,821
Accounts receivable 18,061 14,221
Inventories 23,582 19,696
Deferred tax assets 1,261 1,259
Prepaid expenses and other current assets 5,856 2,957
-------- --------
Total current assets 286,620 243,607
-------- --------
NOTE RECEIVABLE 10,000 10,000
PROPERTY AND EQUIPMENT, net 56,842 56,740
INTANGIBLE ASSETS, NET 6,216 6,731
GOODWILL 1,824 1,824
DEFERRED TAX ASSETS 14,370 15,544
OTHER ASSETS 108 653
-------- --------
Total assets $375,980 $335,099
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,876 $ 10,792
Accrued payroll and related expenses 9,093 9,212
Income taxes payable 272 852
Deferred income on sales to distributors 6,972 5,226
Accrued professional & other fees 2,460 1,844
Other accrued liabilities 164 641
-------- --------
Total current liabilities 33,837 28,567
-------- --------
LONG-TERM LIABILITIES
Income taxes payable 17,875 16,893
Deferred income taxes 149 149
-------- --------
Total liabilities 51,861 45,609
-------- --------
STOCKHOLDERS' EQUITY:
Common stock 31 30
Additional paid-in capital 196,045 176,282
Cumulative translation adjustment 130 85
Retained earnings 127,913 113,093
-------- --------
Total stockholders' equity 324,119 289,490
-------- --------
Total liabilities stockholders' equity $375,980 $335,099
======== ========