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Power Integrations (POWI) rallies on strategic resilience

AInvestFriday, Feb 9, 2024 1:26 pm ET
2min read

Power Integrations, a prominent semiconductor supplier for high-voltage power conversion, unveiled its financial outcomes for the fourth quarter and the entire year ending on December 31, 2023. This period proved challenging, marked by a notable downturn in revenue and earnings per share when juxtaposed against both the preceding quarter and the analogous timeframe from the previous year.

The company observed a sharp 29% quarterly revenue downturn to $89.5 million, alongside a year-over-year decline of 28%. Annually, revenues plummeted to $444.5 million from $651.1 million. The quarter's GAAP net income stood at $14.3 million, equating to $0.25 per diluted share, descending from $0.34 in the previous quarter and $0.40 in 2022's final quarter. The annual GAAP net income totaled $55.7 million, or $0.97 per diluted share, a fall from the previous year's $2.93 per diluted share.

Nevertheless, Power Integrations demonstrated financial resilience by maintaining robust operational cash flow, tallying up to $65.8 million for the year. This resilience is pivotal as the company navigates the cyclical semiconductor industry and its competitive milieu.

During the quarter, the company furthered its share repurchase initiative, reclaiming 680 thousand shares at a cost of $47 million. This reflects the company's belief in its enduring value and its pledge to enhance shareholder returns. By year's end, $26.0 million remained under its repurchase authorization.

Moreover, a $0.20 per share dividend was dispensed on December 29, 2023, with a subsequent dividend of equal value scheduled for March 29, 2024. These dividends underscore the company's consistent cash flow generation and its dedication to rewarding its shareholders amidst prevailing economic challenges.

CEO Balu Balakrishnan remarked on the results, noting the anticipated revenue decline in the fourth quarter and projecting approximately flat sales for the first quarter due to persisting demand softness and elevated supply-chain inventories. Nonetheless, a significant reduction in channel inventory was observed in the fourth quarter, with further reductions expected. Based on these inventory reductions and seasonal trends, we foresee revenue growth resuming in the June quarter. Additionally, we anticipate an increase in gross margin in the June quarter, spurred by the dollar/yen exchange rate, enhanced manufacturing utilization, and market mix adjustments, Balakrishnan added.

For the first quarter of 2024, the company predicts revenues to hover around $90 million, with a GAAP gross margin projected at approximately 51.5%. The non-GAAP gross margin is expected to be about 52.5%, with the disparity between GAAP and non-GAAP gross margins attributed to stock-based compensation and the amortization of acquisition-related intangible assets.

Projected GAAP operating expenses stand at roughly $49 million, with non-GAAP operating expenses anticipated to be around $42.5 million, excluding an estimated $6.5 million of stock-based compensation.

Power Integrations' fourth quarter of 2023 report paints a picture of a company grappling with significant revenue and earnings per share declines. However, its financial durability and dedication to shareholder value through repurchases and dividends cast a positive light. 

With a flat growth projection for the first quarter of 2024 and an expected revenue rebound starting in June, POWI shares have managed to absorb the challenges and rally on the outlook, advancing over 6% in Friday's trade.

$POWI(POWI)

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