Quarterly Revenues Topped $60 Million, Growing 22 Percent
Sequentially and 12 Percent Year-over-Year
Cash Flow from Operations was $16.1 Million
SAN JOSE, Calif., Oct. 23, 2009 (GLOBE NEWSWIRE) -- Power Integrations (Nasdaq:POWI), the leader in high-voltage integrated circuits for energy-efficient power conversion, today announced financial results for the third quarter of 2009, which ended September 30, 2009.
Net revenues for the quarter were $60.0 million, up 12 percent from the third quarter of 2008 and an increase of 22 percent compared with the second quarter of 2009. Net income for the third quarter was $9.2 million, or $0.32 per diluted share, compared with net income of $7.6 million, or $0.23 per diluted share, in the year-ago quarter, and net income of $4.5 million, or $0.16 per diluted share, in the second quarter of 2009. Gross margin for the third quarter was 48.5 percent.
In addition to its GAAP results, the company provided certain non-GAAP measures that exclude stock-based compensation expenses and the related tax effects. Non-GAAP net income for the third quarter of 2009 was $10.4 million, or $0.36 per diluted share, compared with $11.0 million or $0.34 per diluted share in the year-ago quarter and $6.9 million or $0.25 per diluted share in the second quarter of 2009. Non-GAAP gross margin for the third quarter was 48.8 percent.
Cash flow from operations was $16.1 million for the third quarter. Free cash flow (defined as cash flow from operations less capital expenditures of $4.1 million) was $12.0 million. The company ended the third quarter with $176.8 million in cash and investments, an increase of $17.7 million during the quarter.
Commented Balu Balakrishnan, president and CEO of Power Integrations: "Power Integrations achieved double-digit year-over-year revenue growth and attained record sales and earnings against a backdrop of negative revenue growth for the broader analog semiconductor industry. Our revenues have recovered sharply from the downturn, increasing by nearly 50 percent over the past two quarters. While factors such as inventory replenishment and consumer subsidies in China have undoubtedly contributed to the strong recovery, we believe our outperformance compared with the broader industry over the past year primarily reflects gains in market penetration."
Balakrishnan continued: "We believe that energy-efficiency is a major driver of the success we are having in the marketplace. The importance of efficiency in the electronics industry continues to grow due to a combination of mandatory standards such as the European EcoDesign Directive, voluntary specifications such as ENERGY STAR(R) and, increasingly, proactive efforts on the part of manufacturers. Our EcoSmart(R) technology, combined with our extensive system-design expertise, enables manufacturers to design highly efficient AC-DC power supplies in a cost-effective manner."
Added Bill Roeschlein, Power Integrations' chief financial officer: "Our third-quarter results demonstrated two of the strengths of our financial model-operating-expense leverage and high cash flow. Our non-GAAP operating margin expanded by more than five percentage points compared with the prior quarter, exceeding 20 percent for the quarter. Our GAAP operating margin exceeded 18 percent, and we achieved record GAAP net income of $9.2 million. We also generated free cash flow of $12 million and added nearly $18 million in cash and investments to our balance sheet."
Additional Highlights
* Power Integrations repurchased 0.1 million shares during
quarter for $2.1 million, and has approximately $14 million
remaining under a $25 million repurchase authorization
announced in May 2009. Since February 2008 the company has
repurchased an aggregate of 5.4 million shares for $111
million. Weighted-average shares outstanding for the third
quarter of 2009 were 28.4 million, compared with 32.6 million
in the third quarter of 2008.
* The company will pay a quarterly dividend of $0.025 per share
on December 31, 2009 to stockholders of record as of November
30, 2009.
* Power Integrations was issued 17 U.S. patents and 3 foreign
patents during the third quarter, and now has a total of
286 U.S. and 167 foreign patents.
Fourth-Quarter Outlook
The company expects its revenues for the fourth quarter of 2009 to increase by five to 10 percent compared with the third quarter of 2009, which would be an increase of between 49 percent and 56 percent compared with the fourth quarter of 2008. Non-GAAP gross margin is expected to be 50 percent, plus or minus half a percentage point. GAAP gross margin is expected to be between 49 percent and 50 percent. (Non-GAAP gross margin excludes stock-based compensation, which is expected to have an impact of approximately half a percentage point.) Operating expenses are expected to be between $19.5 million and $20 million including approximately $2.5 million of stock-based compensation expenses.
Conference Call Today at 6:00 a.m. Pacific Time
Power Integrations management will hold a conference call today at 6:00 a.m. Pacific time. Members of the investment community can join the call by dialing 1-877-879-6217 from within the United States or 1-913-905-3226 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 is the leading supplier of high-voltage analog integrated circuits used in energy-efficient power conversion. The company's innovative technology enables compact, energy-efficient power supplies in a wide range of electronic products, in AC-DC, DC-DC and LED lighting applications. Since its introduction in 1998, Power Integrations' EcoSmart energy-efficiency technology has saved an estimated $3.7 billion of standby energy waste and prevented millions of tons of CO2 emissions. The company's Green Room web site (www.powerint.com/greenroom) provides a wealth of information about "energy vampires" and the issue of standby energy waste, along with a comprehensive guide to energy-efficiency standards around the world. Reflecting the environmental benefits of EcoSmart technology, Power Integrations is included in clean-technology stock indices sponsored by the Cleantech Group (Amex:CTIUS) and Clean Edge (Nasdaq:CELS). For more information, please visit 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 SFAS 123R, "Share-based Payment." 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 companies in Power Integrations' industry, may calculate non-GAAP financial measures differently, limiting their usefulness as comparative measures.
Note Regarding Forward-Looking Statements
The statements in this press release relating to the company's projected fourth-quarter 2009 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 these forward-looking statements. These risks and uncertainties include, but are not limited to: changes in global macroeconomic conditions that 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 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; unforeseen costs and expenses; 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 August 6, 2009. 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,
2009 2009 2008 2009 2008
-------- -------- -------- -------- --------
NET REVENUES $ 60,024 $ 49,250 $ 53,816 $149,563 $159,291
COST OF REVENUES 30,901 25,053 24,659 75,311 73,206
-------- -------- -------- -------- --------
GROSS PROFIT 29,123 24,197 29,157 74,252 86,085
-------- -------- -------- -------- --------
OPERATING
EXPENSES:
Research and
development 6,846 7,689 7,022 22,259 22,753
Sales and
marketing 5,744 5,925 7,058 17,891 22,329
General and
administrative 5,465 5,594 6,418 16,740 18,056
-------- -------- -------- -------- --------
Total
operating
expenses 18,055 19,208 20,498 56,890 63,138
-------- -------- -------- -------- --------
INCOME FROM
OPERATIONS 11,068 4,989 8,659 17,362 22,947
OTHER INCOME, net 178 754 1,600 1,756 5,877
INCOME BEFORE
PROVISION FOR
INCOME TAXES 11,246 5,743 10,259 19,118 28,824
PROVISION FOR
INCOME TAXES 2,094 1,214 2,622 5,033 6,367
-------- -------- -------- -------- --------
NET INCOME $ 9,152 $ 4,529 $ 7,637 $14,085 $ 22,457
-------- -------- -------- -------- --------
EARNINGS PER
SHARE:
Basic $ 0.34 $ 0.17 $ 0.25 $ 0.52 $ 0.74
-------- -------- -------- -------- --------
Diluted $ 0.32 $ 0.16 $ 0.23 $ 0.50 $ 0.69
-------- -------- -------- -------- --------
SHARES USED IN
PER-SHARE
CALCULATION:
Basic 26,723 26,804 30,791 26,857 30,515
Diluted 28,431 27,944 32,582 28,108 32,548
SUPPLEMENTAL
INFORMATION:
Stock-based
compensation
expenses
included in:
Cost of
revenues $ 188 $ 264 $ 386 $ 614 $ 1,278
Research and
development 339 1,080 1,397 3,256 4,021
Sales and
marketing 172 562 1,243 1,729 3,886
General and
administrative 705 748 1,023 2,445 2,895
-------- -------- -------- -------- --------
Total stock
-based
compensation
expense $ 1,404 $ 2,654 $ 4,049 $ 8,044 $ 12,080
-------- -------- -------- -------- --------
Operating
expenses include
the following:
Patent
-litigation
expenses $ 1,473 $ 934 $ 735 $ 3,238 $ 2,403
-------- -------- -------- -------- --------
REVENUE MIX BY
PRODUCT FAMILY
TOPSwitch 24% 25% 26% 24% 26%
TinySwitch 43% 43% 44% 44% 45%
LinkSwitch 32% 31% 28% 31% 27%
Other 1% 1% 2% 1% 2%
REVENUE MIX BY
END MARKET
Communications 32% 32% 32% 32% 33%
Computer 14% 14% 16% 15% 16%
Consumer 37% 37% 34% 36% 34%
Industrial 17% 17% 18% 17% 17%
POWER INTEGRATIONS, INC.
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,
2009 2009 2008 2009 2008
-------- -------- -------- -------- --------
RECONCILIATION
OF GROSS PROFIT
GAAP gross
profit $29,123 $24,197 $29,157 $74,252 $86,085
GAAP gross
profit margin 48.5% 49.1% 54.2% 49.6% 54.0%
Stock-based
compensation
expense
included
in cost of
revenues 188 264 386 614 1,278
------- ------- ------- ------------------
Non-GAAP gross
profit $29,311 $24,461 $29,543 $74,866 $87,362
------- ------- ------- ------------------
Non-GAAP
gross
profit margin 48.8% 49.7% 54.9% 50.1% 54.8%
RECONCILIATION
OF OPERATING
EXPENSES
GAAP operating
expenses $18,055 $19,208 $20,498 $56,890 $63,138
Less: Stock
-based
compensation
expense
included in
operating
expenses:
Research and
development 339 1,080 1,397 3,256 4,021
Sales and
marketing 172 562 1,243 1,729 3,886
General and
administrative 705 748 1,023 2,445 2,895
------- ------- ------- ------------------
Total 1,216 2,390 3,663 7,430 10,802
------- ------- ------- -------------------
Non-GAAP
operating
expenses $16,839 $16,818 $16,835 $49,460 $52,336
------- ------- ------- ------------------
RECONCILIATION
OF INCOME FROM
OPERATIONS
GAAP income
from operations $11,068 $ 4,989 $ 8,659 $17,362 $22,947
GAAP operating
margin 18.4% 10.1% 16.1% 11.6% 14.4%
Stock-based
compensation
included in
cost of
revenues 188 264 386 614 1,278
Stock-based
compensation
included in
operating
expenses 1,216 2,390 3,663 7,430 10,802
Non-GAAP income
from operations $12,472 $ 7,643 $12,708 $25,406 $35,027
------- ------- ------- ------------------
Non-GAAP
operating
margin 20.8% 15.5% 23.6% 17.0% 22.0%
RECONCILIATION
OF PROVISION
FOR INCOME
TAXES
GAAP provision
for income
taxes $ 2,094 $ 1,214 $ 2,622 $ 5,033 $ 6,367
------- ------- ------- ------------------
GAAP effective
tax rate 18.6% 21.1% 25.6% 26.3% 22.1%
Tax effect of
items excluded
from non-GAAP
results (202) (307) (727) (959) (2,308)
Non-GAAP
provision for
income taxes $ 2,296 $ 1,521 $ 3,349 $ 5,992 $ 8,675
------- ------- ------- ------------------
Non-GAAP
effective
tax rate 18.2% 18.1% 23.4% 22.1% 21.2%
RECONCILIATION
OF NET INCOME
PER SHARE
(DILUTED)
GAAP net income
(loss) $ 9,152 $ 4,529 $ 7,637 $14,085 $22,457
Adjustments to
GAAP net
income (loss)
Total
stock-based
compensation 1,404 2,654 4,049 8,044 12,080
Tax effect of
items
excluded from
non-GAAP
results (202) (307) (727) (959) (2,308)
Non-GAAP net
income $10,354 $ 6,876 $10,959 $21,170 $32,229
------- ------- ------- ------------------
Average shares
outstanding for
calculation
of non-GAAP
income per
share (diluted) 28,431 27,944 32,582 28,108 32,548
------- ------- ------- ------------------
Non-GAAP income
per share
excluding
stock-based
compensation
(diluted) $ 0.36 $ 0.25 $ 0.34 $ 0.75 $ 0.99
======= ======= ======= ==================
Note on use of non-GAAP financial measures:
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, "Share-based payment." 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.
POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, June 30, Dec. 31,
2009 2009 2008
--------- --------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 150,024 $ 152,652 $ 167,472
Restricted cash 250 250 250
Short-term investments 3,192 4,931 6,363
Accounts receivable 20,440 14,374 13,042
Inventories 20,335 22,402 28,468
Note receivable 10,000 10,000 10,000
Deferred tax assets 1,275 1,272 1,274
Prepaid expenses and
other current assets 7,951 5,705 7,099
--------- --------- ----------
Total current assets 213,467 211,586 233,968
--------- --------- ----------
INVESTMENTS 23,347 1,296 1,011
PROPERTY AND EQUIPMENT,
net 57,512 55,516 56,911
INTANGIBLE ASSETS, net 3,270 3,453 3,818
GOODWILL 1,824 1,824 1,824
DEFERRED TAX ASSETS 13,934 15,084 15,362
OTHER ASSETS 5,483 5,398 184
--------- --------- ----------
Total assets $ 318,837 $ 294,157 $ 313,078
========= ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 14,875 $ 9,895 $ 9,319
Accrued
payroll and related
expenses 4,656 5,611 15,947
Income taxes payable 677 297 588
Deferred income on sales
to distributors 7,322 6,063 4,798
Other accrued liabilities 3,335 2,406 2,319
--------- --------- ----------
Total current
liabilities 30,865 24,272 32,971
--------- --------- ----------
LONG-TERM LIABILITIES
Income taxes payable 22,519 21,057 20,426
--------- --------- ----------
Total liabilities 53,384 45,329 53,397
--------- --------- ----------
STOCKHOLDERS' EQUITY:
Common stock 27 27 28
Additional paid-in
capital 139,186 131,053 145,544
Cumulative translation
adjustment 3 (7) (57)
Retained earnings 126,237 117,755 114,166
--------- --------- ----------
Total stockholders'
equity 265,453 248,828 259,681
--------- --------- ----------
Total liabilities
stockholders' equity $ 318,837 $ 294,157 $ 313,078
========= ========= ==========
POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
-------- -------- -------- --------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 9,152 $ 7,637 $ 14,085 $ 22,457
Adjustments to reconcile
net income to net cash
provided by operating
activities
Depreciation and
amortization 2,572 2,476 7,550 7,325
Gain on sale of
property, plant and
equipment -- 1 (10) (13)
Stock-based compensation
expense 1,406 4,054 8,046 12,088
Amortization of discount
on held-to-maturity
investments 54 (37) 105 (740)
Deferred income taxes 1,148 (396) 1,428 776
Provision for (reduction
in provision for)
accounts receivable
and other allowances (89) 1,346 (4) 1,303
Excess tax benefit from
stock options exercised (87) (127) (102) (863)
Interest on note
receivable -- --
Tax benefit associated
with employee stock
plans 371 377 554 2,557
Change in operating
assets and liabilities:
Accounts receivable (5,976) (258) (7,393) (4,055)
Inventories 1,976 (2,857) 8,010 (6,793)
Prepaid expenses and
other assets (2,332) (2,645) (6,151) (4,988)
Accounts payable 4,674 (433) 5,514 3,666
Taxes payable and other
accrued liabilities 1,965 (2,702) 1,173 (2,499)
Deferred income on
sales to distributors 1,259 96 2,524 1,842
-------- -------- -------- --------
Net cash provided by
operating activities 16,093 6,532 35,329 32,063
-------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (4,079) (2,738) (7,567) (7,169)
Release of restricted cash -- 100 -- 1,050
Purchases of held-to
-maturity investments (22,865) (6,949) (25,620) (22,803)
Proceeds from held-to
-maturity investments 2,499 1 6,349 102,373
-------- -------- -------- --------
Net cash provided by
(used in) investing
activities (24,445) (9,586) (26,838) 73,451
-------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Net proceeds from
issuance of common stock 8,444 3,949 13,698 22,775
Repurchase of common
stock (2,135) (20,226) (28,674) (29,204)
Repurchase of stock
options -- -- (9,048)
Payments of
dividends to
stockholders (672) -- (2,017)
Excess tax benefit
from stock options
exercised 87 127 102 863
-------- -------- -------- --------
Net cash provided by
(used in) financing
activities 5,724 (16,150) (25,939) (5,566)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (2,628) (19,204) (17,448) 99,948
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 152,652 237,505 167,472 118,353
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $150,024 $218,301 $150,024 $218,301
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Unpaid property and
equipment, net $ 305 $ 94 $ 44 $ 80
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid for interest $ -- $ -- $ 397 $ --
======== ======== ======== ========
Cash paid for income
taxes, net of refunds $ (267) $ 805 $ 86 $ 4,666
======== ======== ======== ========