SAN JOSE, Calif., Aug. 1, 2007 (PRIME NEWSWIRE) -- Power Integrations (Pink Sheets:POWI) today announced financial results for the three months ended June 30, 2007, and issued its previously unreleased final results for the three months ended March 31, 2007. The company's consolidated statements of operations and consolidated balance sheets for these periods, as well as certain supplemental information, are contained in the tables accompanying this press release.
The company's net revenues for the three months ended June 30, 2007 were $43.2 million, an increase of 4 percent compared to $41.5 million in the year-ago quarter, and a decrease of 5 percent compared to $45.3 million in the first quarter of 2007. Net revenues for the second quarter of 2006 included a net benefit of $2.7 million from the settlement of prior-period ship-and-debit claims with two of the company's distributors. Revenues from product sales, which do not include the impact of this benefit, increased 12 percent compared to the year-ago quarter.
Second-quarter gross margin under generally accepted accounting principles (GAAP) was 55.4 percent. Second-quarter operating expenses on a GAAP basis totaled $17.6 million, including $2.2 million in stock-based compensation expenses. Also included in operating expenses were $0.9 million in expenses related to the company's ongoing efforts to complete its outstanding SEC filings, and $0.6 million in expenses related to patent litigation. Net income under GAAP was $6.8 million, or $0.22 per diluted share.
On a non-GAAP basis, which excludes expenses for stock-based compensation, second-quarter gross margin was 56.0 percent. Non-GAAP operating expenses, which also exclude stock-based compensation expenses, totaled $15.4 million. Non-GAAP net income was $9.2 million, or $0.30 per diluted share.
At June 30, 2007 the company had $149.7 million in cash and investments, an increase of $12.0 million during the quarter.
"As we announced in June, our second-quarter revenues were impacted by the adoption of a competitor's products at a top cellphone OEM," said Balu Balakrishnan, president and CEO of Power Integrations. "However, our business overall remains on track. Revenues came in slightly higher than our revised expectations for the quarter, gross margin was above the high end of the expected range, and cash and investments increased by $12 million during the quarter.
"We had a record quarter in terms of design wins, and the pipeline of ongoing design activity remains very promising," added Balakrishnan. "In particular, adoption of our LinkSwitch products continues to accelerate, driven by energy-efficiency standards as well as the cost-effectiveness of LinkSwitch compared to linear power supplies. LinkSwitch revenues grew more than 30 percent sequentially in the second quarter and comprised 13 percent of revenues, up from 10 percent in the prior quarter."
Revenue mix for the second quarter was 30 percent consumer, 26 percent communications, 20 percent computer, 17 percent industrial and 7 percent other. By product family, preliminary revenue mix for the first quarter was 53 percent TinySwitch(r), 32 percent TOPSwitch(r), 13 percent LinkSwitch and 2 percent DPA-Switch(r).
Power Integrations received 13 U.S. patents and 6 foreign patents during the quarter and had a total of 184 U.S. patents and 89 foreign patents as of June 30.
Status of SEC Filings
Earlier today, the company filed its Forms 10-Q for the first three quarters of 2006. The company currently expects to file its remaining outstanding SEC filings and regain its Nasdaq listing in approximately two weeks.
Third-Quarter Outlook
The company expects its revenues for the third quarter of 2007 to be between $45 million and $47 million, and its GAAP gross margin to be between 53 percent and 55 percent, including an impact of approximately one margin point from stock-based compensation. Operating expenses are expected to total between $18.5 million and $20 million, including $3 million to $4 million in stock-based compensation expenses and approximately $1.3 million related to the company's restatement and efforts to complete its outstanding SEC filings. Of this amount, approximately $1 million relates to charges the company expects to take in connection with addressing the tax implications to non-officer employees arising from certain past stock-option grants.
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 800-811-0667 from within the U.S. or 913-981-4901 from abroad. A replay of the call will be available for 48 hours by dialing 888-203-1112 (U.S.) or 719-457-0820 (non-U.S.) and entering access code 4083413. 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(r) energy-efficiency technology, which dramatically reduces energy waste, has saved consumers and businesses around the world more than an estimated $2.3 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 third-quarter financial performance, promising pipeline and expectations regarding the timeline for filing its outstanding SEC filings 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; fluctuations in currency exchange rates; and unexpected delays in filing the company's SEC filings. 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 March 7, 2006. 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, March 31, June 30, June 30, June 30,
2007 2007 2006 2007 2006
------- ------- ------- ------- -------
NET REVENUES $43,240 $45,317 $41,465 $88,557 $76,718
COST OF REVENUES 19,288 20,200 17,359 39,488 34,267
------- ------- ------- ------- -------
GROSS PROFIT 23,952 25,117 24,106 49,069 42,451
------- ------- ------- ------- -------
OPERATING EXPENSES:
Research and
development 5,916 5,894 6,018 11,810 11,827
Sales and marketing 6,171 6,341 6,497 12,512 12,724
General and
administrative 5,546 6,382 8,133 11,928 16,522
------- ------- ------- ------- -------
Total Operating
Expenses 17,633 18,617 20,648 36,250 41,073
------- ------- ------- ------- -------
INCOME FROM
OPERATIONS 6,319 6,500 3,458 12,819 1,378
OTHER INCOME, net 1,641 1,665 1,494 3,306 2,772
INSURANCE
REIMBURSEMENT 723 -- -- 723 --
------- ------- ------- ------- -------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 8,683 8,165 4,952 16,848 4,150
PROVISION FOR
INCOME TAXES 1,906 1,659 446 3,565 423
------- ------- ------- ------- -------
NET INCOME $ 6,777 $ 6,506 $ 4,506 $13,283 $ 3,727
======= ======= ======= ======= =======
EARNINGS PER SHARE:
Basic $ 0.24 $ 0.23 $ 0.15 $ 0.46 $ 0.13
======= ======= ======= ======= =======
Diluted $ 0.22 $ 0.21 $ 0.15 $ 0.43 $ 0.12
======= ======= ======= ======= =======
SHARES USED IN
PER-SHARE
CALCULATION:
Basic 28,674 28,660 29,356 28,667 29,468
Diluted 30,942 30,691 30,955 30,823 31,267
SUPPLEMENTAL
INFORMATION:
Stock-based
compensation
expenses included
in:
Cost of revenues $ 280 $ 332 $ 412 $ 612 $ 459
Research and
development 642 919 1,119 1,561 2,317
Sales and
marketing 851 1,013 1,473 1,864 2,963
General and
administrative 730 771 1,120 1,501 2,260
------- ------- ------- ------- -------
Total stock-based
compensation
expense $ 2,503 $ 3,035 $ 4,124 $ 5,538 $ 7,999
======= ======= ======= ======= =======
Operating expenses
include the
following:
Patent-litigation
expenses $ 559 $ 550 $ 823 $ 1,109 $ 3,686
======= ======= ======= ======= =======
Special
investigation/
restatement
expenses $ 941 $ 2,281 $ 4,020 $ 3,222 $ 5,957
======= ======= ======= ======= =======
POWER INTEGRATIONS, INC.
SUPPLEMENTAL RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
TO GAAP RESULTS
(in thousands, except per-share amounts)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2007 2007 2006 2007 2006
------- ------- ------- ------- -------
RECONCILIATION OF GROSS
PROFIT MARGIN
GAAP gross profit $23,952 $25,117 $24,106 $49,069 $42,451
GAAP gross profit
margin 55.4% 55.4% 58.1% 55.4% 55.3%
Stock-based compensation
expense included in
cost of revenues 280 332 412 612 459
------- ------- ------- ------- -------
Non-GAAP gross profit
excluding stock-based
compensation 24,232 25,449 24,518 49,681 42,910
------- ------- ------- ------- -------
Non-GAAP gross profit
margin 56.0% 56.2% 59.1% 56.1% 55.9%
RECONCILIATION OF
OPERATING MARGIN
GAAP income from
operations $ 6,319 $ 6,500 $ 3,458 $12,819 $ 1,378
GAAP operating margin 14.6% 14.3% 8.3% 14.5% 1.8%
Stock-based compensation
expense included in
cost of revenues and
operating expenses:
Cost of revenues 280 332 412 612 459
Research and
development 642 919 1,119 1,561 2,317
Sales and marketing 851 1,013 1,473 1,864 2,963
General and
administrative 730 771 1,120 1,501 2,260
------- ------- ------- ------- -------
Total 2,503 3,035 4,124 5,538 7,999
------- ------- ------- ------- -------
Non-GAAP income from
operations excluding
stock-based
compensation 8,822 9,535 7,582 18,357 9,377
------- ------- ------- ------- -------
Non-GAAP operating
margin 20.4% 21.0% 18.3% 20.7% 12.2%
RECONCILIATION OF NET
INCOME PER SHARE
(DILUTED)
GAAP net income $ 6,777 $ 6,506 $ 4,506 $13,283 $ 3,727
Adjustments to GAAP net
income
Total stock-based
compensation 2,503 3,035 4,124 5,538 7,999
Tax effect of stock-
based compensation (94) (436) (825) (531) (1,420)
Non-GAAP income
excluding stock-based
compensation $ 9,186 $ 9,105 $ 7,805 $18,290 $10,306
------- ------- ------- ------- -------
Average shares
outstanding for
calculation of non-
GAAP income per share
diluted) 30,942 30,691 30,955 30,823 31,267
------- ------- ------- ------- -------
Non-GAAP income per
share excluding stock-
based compensation
(diluted) $ 0.30 $ 0.30 $ 0.25 $ 0.59 $ 0.33
======= ======= ======= ======= =======
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)
June 30, March 31, December 31,
2007 2007 2006
-------- -------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $137,325 $130,811 $124,937
Restricted cash 1,300 1,300 1,300
Short-term investments 10,038 4,505 2,506
Accounts receivable 14,322 17,784 10,489
Inventories 24,669 26,142 28,280
Deferred tax assets 2,199 2,199 2,199
Prepaid expenses and other current
assets 3,210 4,195 4,009
-------- -------- --------
Total current assets 193,063 186,936 173,720
-------- -------- --------
INVESTMENTS 1,000 1,000 3,999
NOTE RECEIVABLE 10,000 10,000 10,000
PROPERTY AND EQUIPMENT, net 54,911 54,398 53,475
INTANGIBLE ASSETS, NET 5,508 5,702 5,895
DEFERRED TAX ASSETS 13,483 12,978 13,485
OTHER ASSETS 244 145 285
-------- -------- --------
Total assets $278,209 $271,159 $260,859
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,361 $ 10,513 $ 8,592
Accrued payroll and related
expenses 5,335 5,722 8,668
Income taxes payable 2,404 1,574 14,509
Deferred income on sales to
distributors 4,727 5,469 4,901
Accrued professional fees 3,387 3,495 3,294
Other accrued liabilities 180 135 129
-------- -------- --------
Total current liabilities 23,394 26,908 40,093
-------- -------- --------
LONG-TERM INCOME TAXES PAYABLE 14,237 12,912 --
-------- -------- --------
Total liabilities 37,631 39,820 40,093
-------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock 29 29 29
Additional paid-in capital 140,765 138,321 135,307
Cumulative translation adjustment 32 14 4
Retained earnings 99,752 92,975 85,426
-------- -------- --------
Total stockholders' equity 240,578 231,339 220,766
-------- -------- --------
Total liabilities stockholders'
equity $278,209 $271,159 $260,859
======== ======== ========