SAN JOSE, Calif., Oct. 25, 2007 (PRIME NEWSWIRE) -- Power Integrations (Nasdaq:POWI) today announced financial results for the three months ended September 30, 2007. The company's net revenues were $49.8 million, an increase of 15 percent compared to $43.2 million in the quarter ended June 30, 2007, and up 12 percent compared to the $44.4 million reported in the third quarter of 2006.
Third-quarter gross margin under generally accepted accounting principles (GAAP) was 53.0 percent. Operating margin on a GAAP basis was 12.6 percent. Net income under GAAP was $6.8 million, or $0.22 per diluted share, compared to $0.22 per diluted share in the prior quarter and $0.09 per diluted share in the year-ago quarter.
On a non-GAAP basis, which excludes stock-based compensation expenses, third-quarter gross margin was 53.7 percent. Non-GAAP operating margin was 20.5 percent, including an impact of 3.5 percentage points from expenses associated with the company's financial restatement and related matters. Third-quarter net income on a non-GAAP basis was $10.1 million, or $0.32 per diluted share, which includes an impact of approximately $0.04 per share from restatement-related expenses. Non-GAAP net income was $0.30 per diluted share in the quarter ended June 30, 2007, and $0.19 per diluted share in the third quarter of 2006.
The company had a total of $178.1 million in cash and investments at quarter-end, an increase of $28.4 million during the quarter.
"Power Integrations had an excellent third quarter as we continued to execute the strategy we implemented several quarters ago," said Balu Balakrishnan, president and CEO of Power Integrations. "The expansion of our gross margin over the past few years has enabled us to selectively target key high-volume opportunities in order to accelerate our revenue and earnings growth.
"Our results demonstrate that this strategy is paying off," added Balakrishnan. "Revenues increased 15 percent sequentially, driven largely by the ramp of high-volume designs in applications such as cellphones, PDAs and videogame consoles," added Balakrishnan. "The replacement of linear power supplies was a major factor in our growth, reflecting the superior cost and energy-efficiency performance of our LinkSwitch products. LinkSwitch revenues grew 75 percent sequentially and exceeded 20 percent of revenues in the third quarter.
"Going forward, we will continue to pursue key high-volume designs on a selective basis while focusing on further reducing product costs and expanding our base of lower-volume, higher-margin designs," continued Balakrishnan. "We believe this is the right strategy to grow our bottom line as quickly as possible."
Revenue mix by end market for the third quarter was 29 percent consumer, 26 percent communications, 23 percent computer, 15 percent industrial and 7 percent other. By product family, revenue mix was 51 percent TinySwitch(r), 26 percent TOPSwitch(r), 21 percent LinkSwitch(r) and 2 percent DPA-Switch(r).
Quarterly Highlights
* Power Integrations' EcoSmart(r) technology saved an estimated 1.4 billion kilowatt-hours of electricity during the third quarter through the reduction of standby power waste. As a result, an estimated total of nearly one million tons of CO2 emissions were averted, an amount equal to the quarterly emissions of more than 600,000 automobiles. * In September, a jury upheld the validity of the four patents asserted by Power Integrations in its patent-infringement lawsuit against Fairchild Semiconductor. A separate jury had previously found that Fairchild willfully infringed each of the patents, and awarded Power Integrations damages of approximately $34 million. The company now intends to seek an injunction against the infringing products as well as an enhancement of the damage award based on the finding of willful infringement. * Also in September, Power Integrations launched TOPSwitch-HX, the fifth generation of its flagship family of integrated circuits, which were first introduced in 1994. TOPSwitch-HX offers best-in- class efficiency over the entire load range, including standby mode, and in some cases can eliminate the need for a separate standby power supply to meet one-watt and other energy-efficiency standards. * During the third quarter, Power Integrations completed qualification of Seiko Epson as its fourth foundry partner. The partnership with Epson is intended to ensure production capacity to support the long-term growth of the company's business, and to help the company achieve its cost reduction goals. * Power Integrations received 7 U.S. patents in the third quarter and had a total of 191 U.S. patents and 89 foreign patents as of September 30, 2007.
Fourth-Quarter Outlook
The company expects its revenues and gross margins for the fourth quarter of 2007 to be similar to the third-quarter levels. Operating expenses are expected to total $18.5 million to $19 million, including approximately $3 million in stock-based compensation expenses, $0.8 million to $1 million of patent-litigation expenses and $0.5 million in legal expenses related to the company's special investigation and restatement.
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 877-857-6176 from within the United States, or 719-325-4843 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 4381032. 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 $2.5 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. 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. 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. 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 fourth-quarter financial performance and its intention to continue to pursue key high-volume designs on a selective basis while focusing on reducing product costs and further expanding its base of lower-volume, higher-margin designs 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 in the company's most recent annual report on Form 10-K, filed with the Securities and Exchange Commission on August 8, 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 Nine Months Ended
--------------------------- -------------------
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
2007 2007 2006 2007 2006
------- ------- ------- -------- --------
NET REVENUES $49,806 $43,240 $44,404 $138,363 $121,122
COST OF REVENUES 23,409 19,288 20,355 62,897 54,622
------- ------- ------- -------- --------
GROSS PROFIT 26,397 23,952 24,049 75,466 66,500
------- ------- ------- -------- --------
OPERATING EXPENSES:
Research
and
development 6,664 5,916 6,331 18,474 18,158
Sales and
marketing 6,976 6,171 6,330 19,488 19,054
General and
administrative 6,475 5,546 10,210 18,403 26,732
------- ------- ------- -------- --------
Total
Operating
Expenses 20,115 17,633 22,871 56,365 63,944
------- ------- ------- -------- --------
INCOME FROM
OPERATIONS 6,282 6,319 1,178 19,101 2,556
OTHER INCOME,
net 1,917 1,641 1,585 5,223 4,357
INSURANCE
REIMBURSEMENT -- 723 -- 723 --
------- ------- ------- -------- --------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 8,199 8,683 2,763 25,047 6,913
PROVISION FOR
INCOME TAXES 1,446 1,906 102 5,011 525
------- ------- ------- -------- --------
NET INCOME $ 6,753 $ 6,777 $ 2,661 $ 20,036 $ 6,388
======= ======= ======= ======== ========
EARNINGS
PER SHARE:
Basic $ 0.23 $ 0.24 $ 0.09 $ 0.70 $ 0.22
======= ======= ======= ======== ========
Diluted $ 0.22 $ 0.22 $ 0.09 $ 0.65 $ 0.21
======= ======= ======= ======== ========
SHARES USED
IN PER-SHARE
CALCULATION:
Basic 28,789 28,674 28,650 28,708 29,192
Diluted 31,342 30,942 29,832 30,987 30,887
SUPPLEMENTAL
INFORMATION:
Stock-based
compensation
expenses
included in:
Cost of revenues $ 326 $ 280 $ 448 $ 938 $ 907
Research and
development 1,088 642 1,019 2,649 $ 3,336
Sales and
marketing 1,452 851 1,311 3,317 $ 4,275
General and
administrative 1,041 730 1,045 2,542 3,304
------- ------- ------- -------- --------
Total stock-
based compen-
sation expense $ 3,907 $ 2,503 $ 3,823 $ 9,446 $ 11,822
======= ======= ======= ======== ========
Operating
expenses
include the
following:
Patent-litiga-
tion expenses $ 574 $ 559 $ 1,797 $ 1,683 $ 5,483
======= ======= ======= ======== ========
Special
investigation
/restatement
expenses $ 1,735 $ 941 $ 4,941 $ 4,957 $ 10,898
======= ======= ======= ======== ========
POWER INTEGRATIONS, INC.
SUPPLEMENTAL RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO GAAP RESULTS
(in thousands, except per-share amounts)
Three Months Ended Nine Months Ended
------------------------- ----------------
Sept 30, June 30, Sept 30, Sept 30, Sept 30,
2007 2007 2006 2007 2006
------- ------- ------- ------- -------
RECONCILIATION OF GROSS
PROFIT MARGIN
GAAP gross profit $26,397 $23,952 $24,049 $75,466 $66,500
GAAP gross profit
margin 53.0% 55.4% 54.2% 54.5% 54.9%
Stock-based compensa-
tion expense included
in cost of revenues 326 280 448 938 907
------- ------- ------- ------- -------
Non-GAAP gross profit
excluding stock-based
compensation 26,723 24,232 24,497 76,404 67,407
------- ------- ------- ------- -------
Non-GAAP gross profit
margin 53.7% 56.0% 55.2% 55.2% 55.7%
RECONCILIATION OF
OPERATING MARGIN
GAAP income from
operations $ 6,282 $ 6,319 $ 1,178 $19,101 $ 2,556
GAAP operating margin 12.6% 14.6% 2.7% 13.8% 2.1%
Stock-based compensation
expense included in cost
of revenues and
operating expenses:
Cost of revenues 326 280 448 938 907
Research and
development 1,088 642 1,019 2,649 3,336
Sales and marketing 1,452 851 1,311 3,317 4,275
General and
administrative 1,041 730 1,045 2,542 3,304
------- ------- ------- ------- -------
Total 3,907 2,503 3,823 9,446 11,822
------- ------- ------- ------- -------
Non-GAAP income from
operations excluding
stock-based
compensation 10,189 8,822 5,001 28,547 14,378
------- ------- ------- ------- -------
Non-GAAP operating
margin 20.5% 20.4% 11.3% 20.6% 11.9%
RECONCILIATION OF NET
INCOME PER SHARE
(DILUTED)
GAAP net income $ 6,753 $ 6,777 $ 2,661 $20,036 $ 6,388
Adjustments to GAAP net
income
Total stock-based
compensation 3,907 2,503 3,823 9,446 11,822
Difference between GAAP
and non-GAAP provision
for income taxes (512) (94) (825) (1,043) (2,245)
Non-GAAP income ex-
cluding stock-based
compensation $10,148 $ 9,186 $ 5,659 $28,439 $15,965
------- ------- ------- ------- -------
Average shares out-
standing for calcula-
tion of non-GAAP income
per share (diluted) 31,342 30,942 29,832 30,987 30,887
------- ------- ------- ------- -------
Non-GAAP income per
share excluding stock-
based compensation
(diluted) $ 0.32 $ 0.30 $ 0.19 $ 0.92 $ 0.52
======= ======= ======= ======= =======
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. 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)
September June December
30, 30, 31,
2007 2007 2006
-------- -------- --------
CURRENT ASSETS:
Cash and cash equivalents $162,532 $137,325 $124,937
Restricted cash 1,300 1,300 1,300
Short-term investments 13,262 10,038 2,506
Accounts receivable 14,652 14,322 10,489
Inventories 19,944 24,669 28,280
Deferred tax assets 2,047 2,199 2,199
Prepaid expenses and other
current assets 3,664 3,210 4,009
-------- -------- --------
Total current assets 217,401 193,063 173,720
-------- -------- --------
INVESTMENTS 1,000 1,000 3,999
NOTE RECEIVABLE 10,000 10,000 10,000
PROPERTY AND EQUIPMENT, net 55,085 54,911 53,475
INTANGIBLE ASSETS, NET 5,315 5,508 5,895
DEFERRED TAX ASSETS 13,190 13,483 13,485
OTHER ASSETS 272 244 285
-------- -------- --------
Total assets $302,263 $278,209 $260,859
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,109 $ 7,361 $ 8,592
Accrued payroll and
related expenses 7,044 5,335 8,668
Income taxes payable 1,608 2,404 14,509
Deferred income on sales
to distributors 5,574 4,727 4,901
Accrued professional fees 3,868 3,387 3,294
Other accrued liabilities 126 180 129
-------- -------- --------
Total current liabilities 28,329 23,394 40,093
-------- -------- --------
LONG-TERM INCOME TAXES PAYABLE 14,236 14,237 --
-------- -------- --------
Total liabilities 42,565 37,631 40,093
-------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock 29 29 29
Additional paid-in capital 153,081 140,765 135,307
Cumulative translation adjustment 83 32 4
Retained earnings 106,505 99,752 85,426
-------- -------- --------
Total stockholders' equity 259,698 240,578 220,766
-------- -------- --------
Total liabilities
stockholders' equity $302,263 $278,209 $260,859
======== ======== ========