UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from ______ to ______
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
| (Zip Code) | ||
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated Filer | ☐ | |
Non-accelerated Filer | ☐ | Smaller Reporting Company | |
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Shares Outstanding at November 4, 2024 |
Common Stock, $ |
POWER INTEGRATIONS, INC.
TABLE OF CONTENTS
2
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes a number of forward-looking statements that involve many risks and uncertainties. Forward-looking statements are identified by the use of the words “would,” “could,” “will,” “may,” “expect,” “believe,” “should,” “anticipate,” “if,” “future,” “intend,” “plan,” “estimate,” “potential,” “target,” “seek,” or “continue” and similar words and phrases, including the negatives of these terms, or other variations of these terms, that denote future events. These statements reflect our current views with respect to future events and our potential financial performance and are subject to risks and uncertainties that could cause our actual results and financial position to differ materially and/or adversely from what is projected or implied in any forward-looking statements included in this Quarterly Report on Form 10-Q. These factors include, but are not limited to: if demand for our products continues to decline in our major end markets, our net revenues will decline further; we do not have long-term contracts with any of our customers and if they fail to place, or if they cancel or reschedule orders for our products, our operating results and our business may suffer; our products are sold through distributors, which limits our direct interaction with our end customers, therefore reducing our ability to forecast sales and increasing the complexity of our business; if our products do not penetrate additional markets, our business will not grow as we expect; intense competition in the high-voltage power supply industry may lead to a decrease in our average selling price and reduced sales volume of our products; we depend on third-party suppliers to provide us with wafers for our products, and if they fail to provide us sufficient quantities of wafers, our business may suffer; if we are unable to adequately protect or enforce our intellectual property rights, we could lose market share, incur costly litigation expenses, suffer incremental price erosion or lose valuable assets, any of which could harm our operations and negatively impact our profitability; and the other risk factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, and in Part I, Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. We make these forward-looking statements based upon information available on the date of this Quarterly Report on Form 10-Q, and we expressly disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information or otherwise, except as required by laws.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands) | September 30, 2024 | December 31, 2023 | ||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Short-term marketable securities |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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PROPERTY AND EQUIPMENT, net |
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INTANGIBLE ASSETS, net |
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GOODWILL |
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DEFERRED TAX ASSETS |
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OTHER ASSETS |
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Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable | $ | | $ | | ||
Accrued payroll and related expenses |
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Taxes payable |
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Other accrued liabilities |
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Total current liabilities |
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LONG-TERM INCOME TAXES PAYABLE |
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OTHER LIABILITIES |
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Total liabilities |
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COMMITMENTS AND CONTINGENCIES (Notes 11, 12 and 13) |
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STOCKHOLDERS’ EQUITY: |
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Common stock |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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Retained earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
| September 30, | September 30, | ||||||||||
(In thousands, except per share amounts) | 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
NET REVENUES | $ | | $ | | $ | | $ | | ||||
COST OF REVENUES |
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GROSS PROFIT |
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OPERATING EXPENSES: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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INCOME FROM OPERATIONS |
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OTHER INCOME |
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INCOME BEFORE INCOME TAXES |
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PROVISION FOR INCOME TAXES |
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NET INCOME | $ | | $ | | $ | | $ | | ||||
EARNINGS PER SHARE: |
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Basic | $ | | $ | | $ | | $ | | ||||
Diluted | $ | | $ | | $ | | $ | | ||||
SHARES USED IN PER SHARE CALCULATION: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
(In thousands) |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Net income | $ | | $ | | $ | | $ | | ||||
Other comprehensive income, net of tax: |
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Foreign currency translation adjustments, net of $ | | ( | | ( | ||||||||
Unrealized gain on marketable securities, net of $ | | | | | ||||||||
Amortization of defined benefit pension items, net of tax of ($ | ( | ( | ( | ( | ||||||||
Total other comprehensive income |
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TOTAL COMPREHENSIVE INCOME | $ | | $ | | $ | | $ | | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
(In thousands) |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||
Common stock |
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Beginning balance |
| $ | | $ | | $ | | $ | | |||
Repurchase of common stock |
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Ending balance |
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Additional paid-in capital |
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Beginning balance |
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Common stock issued under employee stock plans |
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Repurchase of common stock |
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Stock-based compensation |
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Ending balance |
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Accumulated other comprehensive income (loss) |
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Beginning balance |
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Other comprehensive income |
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Ending balance |
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Retained earnings |
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Beginning balance |
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Net income |
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Repurchase of common stock | | | ( | | ||||||||
Payment of dividends to stockholders | ( | ( | ( | ( | ||||||||
Ending balance | | | | | ||||||||
Total stockholders’ equity |
| $ | | $ | | $ | | $ | | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended | ||||||
September 30, | ||||||
(In thousands) |
| 2024 |
| 2023 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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Amortization of intangibles |
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Loss on disposal of property and equipment |
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Stock-based compensation expense |
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Amortization of premium (accretion of discount) on marketable securities |
| ( |
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Deferred income taxes |
| ( |
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Decrease in accounts receivable allowance for credit losses |
| ( |
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Change in operating assets and liabilities: |
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Accounts receivable |
| ( |
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Inventories |
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Prepaid expenses and other assets |
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Accounts payable |
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Taxes payable and accrued liabilities |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of property and equipment |
| ( |
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Purchases of marketable securities |
| ( |
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Proceeds from sales and maturities of marketable securities |
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Acquisition (Note 15) | ( | | ||||
Net cash used in investing activities |
| ( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Issuance of common stock under employee stock plans |
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Repurchase of common stock |
| ( |
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Payments of dividends to stockholders |
| ( |
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Net cash used in financing activities |
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NET DECREASE IN CASH AND CASH EQUIVALENTS |
| ( |
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CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | | $ | | ||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Unpaid property and equipment | $ | | $ | | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid for income taxes, net | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The condensed consolidated financial statements include the accounts of Power Integrations, Inc., a Delaware corporation (the “Company”), and its wholly owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.
While the financial information furnished is unaudited, the condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for the fair presentation of the results of operations for the interim periods covered and the financial condition of the Company at the date of the interim balance sheet in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The results for interim periods are not necessarily indicative of the results for the entire year. The condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes thereto for the year ended December 31, 2023, included in its Form 10-K filed on February 12, 2024, with the Securities and Exchange Commission.
2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS:
Significant Accounting Policies and Estimates
Except for the additional policy presented below, no material changes have been made to the Company’s significant accounting policies disclosed in Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, of the Company’s financial statements set forth in Item 8 of the Company’s Annual Report on Form 10-K, filed on February 12, 2024, for the year ended December 31, 2023.
Business Combinations
The Company applies the provisions of ASC 805, Business Combinations (“ASC 805”), in accounting for acquisitions. ASC 805 requires that the Company evaluates whether a transaction pertains to an acquisition of assets, or to an acquisition of a business. A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return to investors. Asset acquisitions are accounted for by allocating the cost of the acquisition to the individual assets and liabilities assumed on a relative fair value basis; whereas the acquisition of a business requires the Company to recognize separately from goodwill the assets acquired and the liabilities assumed at the acquisition date fair values. Goodwill is measured as the excess of consideration transferred over the net acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed as well as any contingent consideration, where applicable, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the business acquisition date, the Company may record certain adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon the conclusion of a business acquisition’s measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. All acquisition-related costs are accounted for as expenses in the period in which they are incurred.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements and expand public entities’ segment disclosures in the annual and interim financial statements. The amendment will require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. The Company is required to adopt the amendments in fiscal year 2024 for annual and retrospective reporting periods and in the first quarter of fiscal year 2025 for all interim and retrospective reporting periods; with early adoption permitted. The Company does not expect the amendment to have a material impact on its consolidated financial statements upon adoption.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose
9
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company does not expect the amendment to have a material impact on its consolidated financial statements upon adoption.
3. COMPONENTS OF THE COMPANY’S CONDENSED CONSOLIDATED BALANCE SHEETS:
Accounts Receivable
| September 30, |
| December 31, | |||
(In thousands) | 2024 | 2023 | ||||
Accounts receivable trade | $ | | $ | | ||
Allowance for ship and debit |
| ( |
| ( | ||
Allowance for stock rotation and rebate |
| ( |
| ( | ||
Allowance for credit losses | ( | ( | ||||
Total | $ | | $ | | ||
The Company maintains an allowance for estimated credit losses resulting from the inability of customers to make required payments. This allowance is established using estimates formulated by the Company’s management based upon factors such as the composition of the accounts receivable aging, historical losses, changes in payment patterns, customer creditworthiness and current economic trends. Receivables determined to be uncollectible are written off and deducted from the allowance.
Allowance for Credit Losses | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
(In thousands) | 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Beginning balance | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Provision for credit loss expense |
| ( |
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Receivables written off |
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Recoveries collected |
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Ending balance | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Inventories
| September 30, |
| December 31, | |||
(In thousands) | 2024 | 2023 | ||||
Raw materials | $ | | $ | | ||
Work-in-process |
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Finished goods |
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Total | $ | | $ | | ||
10
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2024 and 2023, were as follows:
Unrealized Gains | |||||||||||||||||||||||
and Losses on | Defined Benefit | Foreign Currency | |||||||||||||||||||||
Marketable Securities | Pension Items | Items | Total | ||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||||||||||||
(In thousands) | 2024 |
| 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||||||
Beginning balance | $ | ( | $ | ( | $ | | $ | | $ | ( | $ | ( | $ | ( | $ | ( | |||||||
Other comprehensive income (loss) before reclassifications |
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Amounts reclassified from accumulated other comprehensive income (loss) |
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| ( | (1) |
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Net-current period other comprehensive income (loss) |
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| ( |
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Ending balance | $ | | $ | ( | $ | | $ | | $ | ( | $ | ( | $ | | $ | ( | |||||||
| (1) | This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended September 30, 2024 and 2023. |
Unrealized Gains | |||||||||||||||||||||||
and Losses on | Defined Benefit | Foreign Currency | |||||||||||||||||||||
Marketable Securities | Pension Items | Items | Total | ||||||||||||||||||||
Nine Months Ended | Nine Months Ended | Nine Months Ended | Nine Months Ended | ||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||||||||||||
(In thousands) | 2024 |
| 2023 |
| 2024 | 2023 |
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||||||
Beginning balance | $ | | $ | ( | $ | | $ | | $ | ( | $ | ( | $ | ( | $ | ( | |||||||
Other comprehensive income (loss) before reclassifications |
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Amounts reclassified from accumulated other comprehensive income (loss) |
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| ( | (1) |
| ( | (1) |
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Net-current period other comprehensive income (loss) |
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Ending balance | $ | | $ | ( | $ | | $ | | $ | ( | $ | ( | $ | | $ | ( | |||||||
| (1) | This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the nine months ended September 30, 2024 and 2023. |
4. FAIR VALUE MEASUREMENTS:
The FASB established a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices for identical assets in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
The Company’s cash equivalents and short-term marketable securities are classified within Level 1 or Level 2 of the fair-value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.
11
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair-value hierarchy of the Company’s cash equivalents and marketable securities at September 30, 2024 and December 31, 2023, was as follows:
Fair Value Measurement at | |||||||||
September 30, 2024 | |||||||||
Quoted Prices in | |||||||||
Active Markets for | Significant Other | ||||||||
Identical Assets | Observable Inputs | ||||||||
(In thousands) | Total Fair Value | (Level 1) | (Level 2) | ||||||
Commercial paper | $ | | $ | | $ | | |||
Corporate securities | | | | ||||||
Money market funds |
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U.S. government securities | | | | ||||||
Total | $ | | $ | | $ | | |||
Fair Value Measurement at | |||||||||
December 31, 2023 | |||||||||
Quoted Prices in | |||||||||
Active Markets for | Significant Other | ||||||||
Identical Assets | Observable Inputs | ||||||||
(In thousands) | Total Fair Value | (Level 1) | (Level 2) | ||||||
Commercial paper | $ | | $ | | $ | | |||
Corporate securities | | | | ||||||
Money market funds |
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Total | $ | | $ | | $ | | |||
The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the nine months ended September 30, 2024 and the twelve months ended December 31, 2023.
5. MARKETABLE SECURITIES:
Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at September 30, 2024, were as follows:
Amortized | Gross Unrealized | Estimated Fair | ||||||||||
(In thousands) |
| Cost |
| Gains |
| Losses |
| Market Value | ||||
Investments due in 3 months or less: |
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Commercial paper | $ | | $ | | $ | | $ | | ||||
Total |
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Investments due in 4-12 months: |
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Corporate securities | | | ( | | ||||||||
Total |
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Investments due in 12 months or greater: |
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Corporate securities |
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Total | |
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Total marketable securities | $ | | $ | | $ | ( | $ | | ||||
Accrued interest receivable was $
12
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at December 31, 2023, were as follows:
Amortized | Gross Unrealized | Estimated Fair | ||||||||||
(In thousands) |
| Cost |
| Gains |
| Losses |
| Market Value | ||||
Investments due in 3 months or less: |
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Corporate securities | $ | | $ | | $ | ( | $ | | ||||
Total |
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| ( |
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Investments due in 4-12 months: |
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Commercial paper | | | | | ||||||||
Corporate securities |
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