Power Integrations announces second-quarter financial results

Power Integrations has 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, 32 percent TOPSwitch, 13 percent LinkSwitch and 2 percent DPA-Switch.

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.

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.

Power Integrations