Business context and reporting period
Power Integrations, Inc. designs and markets analog and mixed-signal ICs and related components for high-voltage power conversion. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2022; comparisons are with the corresponding 2021 periods.
Financial performance
Amounts are in millions of dollars except per-share data and percentages.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $184.0 | $180.1 | $366.1 | $353.8 |
| Gross profit | $106.8 | $91.3 | $207.5 | $175.7 |
| Gross margin | 58.1% | 50.7% | 56.7% | 49.7% |
| Operating income | $60.1 | $45.0 | $111.1 | $85.2 |
| Net income | $55.8 | $41.9 | $102.1 | $81.7 |
| Diluted EPS | $0.96 | $0.68 | $1.72 | $1.33 |
| Operating cash flow | — | $141.4 | $125.0 |
- Quarterly revenue rose about 2%; six-month revenue rose about 3%. Net income increased about 33% and 25%, respectively. Gross margin improved 7.4 and 7.0 percentage points, respectively.
- Management attributed revenue growth mainly to industrial and consumer demand and market-share gains; communications revenue declined. Higher-margin end-market mix and manufacturing efficiencies lifted gross margin.
- Cash and cash equivalents were $67.4 million at June 30, 2022, and short-term marketable securities were $260.2 million, together $327.6 million versus $530.4 million at year-end 2021. Working capital was $410.9 million, down from $614.5 million.
- Six-month investing activities provided $78.1 million, including net proceeds from marketable securities, while property and equipment purchases were $27.9 million. Financing used $310.2 million, principally for $292.3 million of repurchases and $20.9 million of dividends.
- Total liabilities were $98.8 million; no borrowings were outstanding under the $75 million revolving credit facility. The facility runs through June 2026, subject to covenants, with which the company reported compliance.
Changes, outlook and risks
- Q2 end-market mix shifted: communications fell to 18% of revenue from 35% a year earlier; consumer rose to 38% from 31%, and industrial to 35% from 26%.
- Management expected Q3 2022 revenue to decline from Q2, citing China COVID-related restrictions, weaker communications demand, inflation-related pressure on consumer spending and a shift toward services. The filing gives no numerical Q3 guidance.
- Key exposures include uncertain macroeconomic conditions, potential recession and inflation, COVID-related supply and demand disruption, dependence on third-party wafer and assembly/test suppliers, order cancellations or rescheduling, pricing competition, and foreign-exchange effects. A 10% U.S. dollar/yen move was estimated to change gross margin by approximately 1.5%, all else equal.
- Customer concentration remains significant: the top ten customers represented 77% of revenue; Avnet accounted for 30% in Q2 and 31% year to date. International sales were 96% of revenue for both periods, with substantial Asia exposure.
- Unusual items included a $2.9 million Opticurrent settlement expense, partly offset by a $1.7 million SemiSouth liquidation distribution. The Opticurrent settlement ended disputes without either party granting licenses. CogniPower litigation remained stayed; the company could not estimate a loss range.
- Available-for-sale securities had $6.5 million of unrealized losses, which management attributed largely to interest-rate changes; it stated it did not expect to sell the securities before recovery. The company reported disclosure controls were effective and no material change in internal control over financial reporting.
Most important facts for investors to verify
- Whether the anticipated Q3 revenue decline materialized, and how demand trends developed across communications, consumer and industrial markets.
- Whether gross-margin gains from mix and manufacturing efficiencies persisted amid cost, pricing and yen-exchange-rate pressures.
- How customer concentration, Asia/China exposure and distributor inventory or ordering patterns affected subsequent revenue and receivables.
- Whether cash generation and liquidity remained adequate after substantial repurchases and dividends; no repurchase authorization remained at June 30, 2022.
- Developments in the stayed CogniPower litigation, supplier capacity and COVID-related disruptions, and any changes in investment-security unrealized losses.