GAAP earnings were $0.25 per diluted share; non-GAAP earnings were $0.41 per diluted share; revenues were $89.2 million

SAN JOSE, Calif.--(BUSINESS WIRE)--April 25, 2019--Power Integrations (Nasdaq: POWI) today announced financial results for the quarter ended March 31, 2019. Net revenues for the first quarter were $89.2 million, down four percent from the prior quarter and down 13 percent from the first quarter of 2018. Net income was $7.2 million or $0.25 per diluted share compared to $0.77 per share in the prior quarter and $0.46 in the first quarter of 2018. (The prior quarter’s results included a tax benefit from the revision of prior estimates of the transition tax from the 2017 U.S. tax legislation.) Cash flow from operations was $1.1 million for the first quarter.

In addition to its GAAP results, the company provided certain non-GAAP measures that exclude stock-based compensation, amortization of acquisition-related intangible assets, the tax effects of these items, and the above-mentioned tax benefit. Non-GAAP net income for the first quarter of 2019 was $12.1 million or $0.41 per diluted share, compared with $0.54 per diluted share in the prior quarter and $0.67 per diluted share in the first quarter of 2018.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “As expected, our first-quarter results reflect the slowdown being felt across the industry. However, we expect strong sequential growth in the second quarter driven largely by increased demand from fast-charging applications in the smartphone market. With the arrival of USB PD technology, we expect adoption of faster chargers to accelerate as OEMs look for new ways to differentiate their products.”

Power Integrations management will hold a conference call today at 1:30 p.m. Pacific time. Members of the investment community can join the call by dialing 1-647-689-4187. The call will also be available on the investor section of the company's website, http://investors.power.com.

Power Integrations, Inc. is a leading innovator in semiconductor technologies for high-voltage power conversion. The company’s products are key building blocks in the clean-power ecosystem, enabling the generation of renewable energy as well as the efficient transmission and consumption of power in applications ranging from milliwatts to megawatts. For more information please visit www.power.com.

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 ASC 718-10, amortization of acquisition-related intangible assets, the tax effects of these items, and tax benefits associated with the 2017 U.S. tax legislation. The company uses these measures in its financial and operational decision-making and, with respect to one measure, in setting performance targets for compensation purposes. The company believes that these non-GAAP measures offer important analytical tools to help investors understand its operating results, and to facilitate comparability with the results of companies that provide similar measures. These non-GAAP measures have 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. Reconciliations of non-GAAP measures to GAAP measures are attached to this press release.

The above statements regarding the company’s forecast for its second-quarter financial performance and expectations for a sequential recovery in the second quarter driven largely by increased demand from fast-charging applications in the smartphone market 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 statements. These risks and uncertainties include, but are not limited to: changes in global macroeconomic conditions, including changing tariffs and uncertainty regarding trade negotiations, 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’s revenues to decrease or 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; and unfavorable fluctuations in component costs or operating expenses resulting from changes in commodity prices and/or 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 that may cause actual results to differ 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 (SEC) on February 13, 2019. 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 and the Power Integrations logo are trademarks or registered trademarks of Power Integrations, Inc.

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)


		Three Months Ended
		March 31, 2019			December 31, 2018			March 31, 2018
NET REVENUES		$	89,188		$	93,307		$	103,081

COST OF REVENUES			43,714			45,302			49,537

GROSS PROFIT			45,474			48,005			53,544

OPERATING EXPENSES:
Research and development			17,946			17,965			17,481
Sales and marketing			12,590			12,746			12,574
General and administrative			8,390			8,796			9,014
Amortization of acquisition-related intangible assets			427			455			514
	Total operating expenses		39,353			39,962			39,583

INCOME FROM OPERATIONS			6,121			8,043			13,961

Other income, net			1,152			1,297			836

INCOME BEFORE INCOME TAXES			7,273			9,340			14,797

PROVISION (BENEFIT) FOR INCOME TAXES			40			(13,396	)		597

NET INCOME		$	7,233		$	22,736		$	14,200

EARNINGS PER SHARE:
	Basic	$	0.25		$	0.78		$	0.48
	Diluted	$	0.25		$	0.77		$	0.46

SHARES USED IN PER-SHARE CALCULATION:
	Basic		28,951			29,164			29,799
	Diluted		29,446			29,651			30,552


SUPPLEMENTAL INFORMATION:

Stock-based compensation expenses included in:
	Cost of revenues	$	271		$	313		$	249
	Research and development		1,632			1,944			1,839
	Sales and marketing		1,061			1,222			1,276
	General and administrative		1,443			1,963			2,261
	Total stock-based compensation expense	$	4,407		$	5,442		$	5,625

Cost of revenues includes:
	Amortization of acquisition-related intangible assets	$	794		$	813		$	813

General & administrative expenses include:
	Patent-litigation expenses	$	2,317		$	2,304		$	1,897


REVENUE MIX BY END MARKET
	Communications		18	%		20	%		19	%
	Computer		5	%		6	%		5	%
	Consumer		39	%		34	%		40	%
	Industrial		38	%		40	%		36	%

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)

			Three Months Ended
			March 31, 2019			December 31, 2018			March 31, 2018
RECONCILIATION OF GROSS PROFIT
GAAP gross profit			$	45,474		$	48,005		$	53,544
	GAAP gross margin			51.0	%		51.4	%		51.9	%

Stock-based compensation included in cost of revenues				271			313			249
Amortization of acquisition-related intangible assets				794			813			813

Non-GAAP gross profit			$	46,539		$	49,131		$	54,606
	Non-GAAP gross margin			52.2	%		52.7	%		53.0	%


RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses			$	39,353		$	39,962		$	39,583

Less:	Stock-based compensation expense included in operating expenses
		Research and development		1,632			1,944			1,839
		Sales and marketing		1,061			1,222			1,276
		General and administrative		1,443			1,963			2,261
		Total		4,136			5,129			5,376

	Amortization of acquisition-related intangible assets			427			455			514

Non-GAAP operating expenses			$	34,790		$	34,378		$	33,693


RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations			$	6,121		$	8,043		$	13,961
	GAAP operating margin			6.9	%		8.6	%		13.5	%

Add:	Total stock-based compensation			4,407			5,442			5,625
	Amortization of acquisition-related intangible assets			1,221			1,268			1,327

Non-GAAP income from operations			$	11,749		$	14,753		$	20,913
	Non-GAAP operating margin			13.2	%		15.8	%		20.3	%


RECONCILIATION OF PROVISION (BENEFIT) FOR INCOME TAXES
GAAP provision (benefit) for income taxes			$	40		$	(13,396	)	$	597
	GAAP effective tax rate			0.5	%		-143.4	%		4.0	%

Impact of U.S. tax legislation				-			(9,687	)		-
Tax effect of adjustments to GAAP results				(799	)		(3,846	)		(789	)

Non-GAAP provision for income taxes			$	839		$	137		$	1,386
	Non-GAAP effective tax rate			6.5	%		0.9	%		6.4	%


RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income			$	7,233		$	22,736		$	14,200

Adjustments to GAAP net income
	Stock-based compensation			4,407			5,442			5,625
	Amortization of acquisition-related intangible assets			1,221			1,268			1,327
	Impact of U.S. tax legislation			-			(9,687	)		-
	Tax effect of items excluded from non-GAAP results			(799	)		(3,846	)		(789	)

Non-GAAP net income			$	12,062		$	15,913		$	20,363

Average shares outstanding for calculation of non-GAAP net income per share (diluted)				29,446			29,651			30,552

Non-GAAP net income per share (diluted)			$	0.41		$	0.54		$	0.67

GAAP net income per share			$	0.25		$	0.77		$	0.46

POWER INTEGRATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)


		March 31, 2019			December 31, 2018
ASSETS
	CURRENT ASSETS:
	Cash and cash equivalents	$	125,795		$	134,137
	Short-term marketable securities		92,901			94,451
	Accounts receivable, net		20,545			11,072
	Inventories		85,080			80,857
	Prepaid expenses and other current assets		16,798			11,915
	Total current assets		341,119			332,432

	PROPERTY AND EQUIPMENT, net		113,713			114,117
	INTANGIBLE ASSETS, net		20,073			21,152
	GOODWILL		91,849			91,849
	DEFERRED TAX ASSETS		5,733			6,906
	OTHER ASSETS		28,018			22,241
	Total assets	$	600,505		$	588,697

LIABILITIES AND STOCKHOLDERS’ EQUITY
	CURRENT LIABILITIES:
	Accounts payable	$	33,432		$	31,552
	Accrued payroll and related expenses		11,512			12,131
	Taxes payable		706			933
	Other accrued liabilities		5,271			3,750
	Total current liabilities		50,921			48,366

	LONG-TERM LIABILITIES:
	Income taxes payable		8,789			8,652
	Deferred tax liabilities		204			216
	Other liabilities		9,290			4,391
	Total liabilities		69,204			61,625

STOCKHOLDERS' EQUITY:
	Common stock		28			28
	Additional paid-in capital		127,769			126,164
	Accumulated other comprehensive loss		(1,361	)		(1,689	)
	Retained earnings		404,865			402,569
	Total stockholders' equity		531,301			527,072
	Total liabilities and stockholders' equity	$	600,505		$	588,697

POWER INTEGRATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Three Months Ended
		March 31, 2019			December 31, 2018			March 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income	$	7,233		$	22,736		$	14,200
	Adjustments to reconcile net income to cash provided by operating activities
	Depreciation		4,610			4,549			4,931
	Amortization of intangible assets		1,255			1,300			1,348
	Loss on disposal of property and equipment		96			98			38
	Stock-based compensation expense		4,407			5,442			5,625
	Amortization of premium (accretion of discount) on marketable securities		(110	)		(115	)		262
	Deferred income taxes		1,161			(3,070	)		(140	)
	Increase (decrease) in accounts receivable allowances		(180	)		(198	)		5
	Change in operating assets and liabilities:
	Accounts receivable		(9,293	)		2,868			(934	)
	Inventories		(4,223	)		(6,656	)		(6,121	)
	Prepaid expenses and other assets		(4,229	)		1,226			(3,141	)
	Accounts payable		1,220			(1,311	)		233
	Taxes payable and other accrued liabilities		(871	)		(8,540	)		(577	)
	Net cash provided by operating activities		1,076			18,329			15,729

CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment		(3,459	)		(5,557	)		(6,491	)
	Acquisition of technology licenses		(214	)		-			(500	)
	Purchases of marketable securities		(4,793	)		(4,612	)		-
	Proceeds from sales and maturities of marketable securities		6,787			10,050			52,366
	Net cash provided by (used in) investing activities		(1,679	)		(119	)		45,375

CASH FLOWS FROM FINANCING ACTIVITIES
	Net proceeds from issuance of common stock		4,500			803			4,657
	Repurchase of common stock		(7,302	)		(28,776	)		(33,314	)
	Payments of dividends to stockholders		(4,937	)		(4,651	)		(4,775	)
	Proceeds from draw on line of credit		-			-			8,000
	Payments on line of credit		-			-			(8,000	)
	Net cash used in financing activities		(7,739	)		(32,624	)		(33,432	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(8,342	)		(14,414	)		27,672

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD			134,137			148,551			93,655

CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	125,795		$	134,137		$	121,327