Power Integrations Reports 13% y/y Revenue Growth

Power Integrations announced financial results for the quarter and year ended December 31, 2016. Net revenues for the fourth quarter were $101.1 million, a decrease of three percent from the prior quarter, and an increase of 16 percent from the fourth quarter of 2015. Net income was $13.6 million or $0.46 per diluted share, compared to $0.48 per diluted share in the prior quarter and $0.44 per diluted share in the fourth quarter of 2015. Cash flow from operations for the quarter was $27.7 million.

For the full year, net revenues were $387.4 million, an increase of 13 percent compared to the prior year. GAAP net income for the year was $1.62 per diluted share, compared with $1.32 per diluted share in the prior year.

Commented Balu Balakrishnan, president and CEO of Power Integrations: “We ended 2016 with another strong quarter, and we’re entering 2017 with momentum fueled by innovative products, an expanding addressable market, and dynamic secular trends such as faster charging for mobile devices, smarter homes and appliances, and the continued global push for greater energy efficiency and cleaner energy.”

Effective January 1, 2017, Power Integrations adopted the Financial Accounting Standards Board’s new standard for revenue recognition (ASC 606), under which the company is required to recognize revenues on sales to distributors upon shipment (the “sell-in” method) beginning with the first quarter of 2017. Prior to adopting ASC 606, the company utilized the “sell-through” method for a high percentage of its distribution sales; under this method revenue was deferred until distributors reported that they had sold the company’s products to end customers.

In adopting the new standard, Power Integrations elected to use the full retrospective method; accordingly, the company has recast its results for 2015 and 2016 as if the new standard had been in effect during those years. For the fourth quarter of 2016, revenues would have been $102.4 million under the new standard as compared to the $101.1 million originally reported; GAAP net income would have been $0.48 per diluted share as compared to the $0.46 per diluted share originally reported.

Sandeep Nayyar, Power Integrations’ chief financial officer, commented: “We do not expect the adoption of the new accounting standard to have a material impact on our full-year results, though changing to the sell-in method may affect the quarter-to-quarter seasonality of revenues within a given year. For example, our revenue outlook for the first quarter of 2017 reflects the fact that shipments to distributors normally exceed sell-through in the first quarter, resulting in higher first-quarter revenues than we would have expected under the prior accounting rules. If the sell-through method were still in effect, our revenue forecast for the first quarter would be lower by approximately $3 million.”

The company issued the following forecast for the first quarter of 2017: Revenues (as calculated under the new revenue-recognition standard) are expected to be flat plus or minus three percent compared to the recast fourth-quarter revenues of $102.4 million. GAAP gross margin is expected to be between 47.9 percent and 48.4 percent; GAAP operating expenses are expected to be between $35.6 million and $36.6 million.