POWI - Earnings call transcript Q2 2018 | Power Integrations, Inc.

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Operator

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Power Integrations Second Quarter Earnings Call. I will now turn the call over to Joe Shiffler, Director of Investor Relations.

You may begin your conference.

Joe Shiffler

for thanks and afternoon, joining us. Good on and CEO me Chief Officer. the Sandeep call President Balakrishnan, Financial Balu are of our today Nayyar, With Power and Integrations

measures not we Please reasons Principles. to for our of measures Investor today's to is non-GAAP to During website Accepted which refer will as release, using tables on call to Generally such today, financial the reconciling results. well our measures posted calculated press for according Accounting explanation these refer GAAP as our an

Our including denoted and future today, expect, would, the discussion toward include Q&A performance. forecast, forward-looking by believe, session, statements similar outlook, will, look or will expressions that words like events should,

those subject uncertainties and our risks XXXX. and in XX-K are uncertainties actual statements. on that Such statements the risks results most XX, discussed our to filed release or materially press projected with in our SEC and implied cause Forward-looking Form from recent are in may to differ February

the Integrations call without of Integrations. this is and Power the written of prohibited rebroadcast or is expressly Finally, recording consent any property Power

call to turn the over I'll Balu. Now,

Balu Balakrishnan

Thanks, Joe, and good afternoon.

through in short-term repurchase of nearly long-term to growth below our X% than our buybacks including confidence year, stockholders was an shares advantage of taking nearly resulting price. buying million in share more $XX volumes. fluctuations quarter business. of gross than our and across $X.XX results were reflection average better opportunistic our with than first meaningful repurchases, $XX with and allocation, board, capital above margins, This also share In midpoint of at stockholders, in to expenses non-GAAP second is of a It's through flow million per the earnings at guidance outstanding $XX dividends. million share. expected current also returned consistent we the to price significantly range, the $XX of million operating shares approach our back the lower of to our healthy Our Operating revenues cash returned and we half solid the expected

While are range our by expect growth products prospects family beyond. we applications adopted issues, from broad a outlook and clouded on and for bullish InnoSwitch we in the XXXX is somewhat rapid across growth of near-term are the trade global XXXX. product being increasingly

is year Our on industrial for based that we a continue we phase category growth breadth see next opportunities of pace market. on that double-digit a this to we in encouragingly, and the Most now finally to of to this growth be USB driver in for us year. as next expect charging shape rapid major take adoption mass beginning is growth and PD approaches expect

products to continue InnoSwitch and mobile to chargers year introduced Our drive charging PD other made USB power for the increasing efficiency and further while are need content protocols Pro integration. high device higher address tailor that dollar this earlier in will

charging speed While the with becoming eager larger we rapid PD, has like prices. believe hampered can especially that end where of chargers, are premium rollout commonplace, been superior USB OEMs support features batteries where deploy handset adoption faster charging of phones, to and are by many higher flagship help higher delayed

must-have commodities which dedicating chargers regarded phone to fifth only is and currently charger their were last watts to smartphone capable by much industry phone's larger testament The feature delivers Emphasis As handset charger a Pro ultra-high Chinese which with are profile deliver power. InnoSwitch minutes. as is just month for to and power a case Pro, launch one point, signal the is integration end engineering a Lamborghini product is InnoSwitch high effort speed sends to a OEMs faster Notably, in density a a offered of on clear scarcely smartphone the the in this of handsets. chargers that charging few introduced XX a XX the next-generation efficiency level fully co-branded automobiles. OEM now as just incorporates such market the charging This years in an charging major and many ago. in than that

industry seeing finalized, ICs. for In waiting PD is chargers begin high to we the while watts. Integrations been been for of these Power the version resurgence reach specs of are holding designs to certified ranging list bring strong compliant dominant that USB a to of among XXXX as supplier the be designs now as as expect far, has pipeline Notably, a mass the of growth We from a of a thus in have short, the watts conversion have certified chargers already been growing a to And for XX XX designs latest power though pattern as USB PD with advanced market. spec.

driven applications, We look category digit This the of by verticals range double broad as devices a at the continued rate half only and industrial and battery automation including also USB as areas revenues increased as devices. network forward traditional as growth was powered home the year. and building emerging from to a well such industrial alarms smoke other not where IoT of equipment, first also growth lawn but outlets, in cleaners e-bikes, chargers such for vacuum power

transportation the exploration a our about electric for at applications. first automotive and in revenues driven by of we a powered up and energy European also strong multimillion high growing business industrial second Our design energy high customer. gate-driver quarter, dollar also had an major a vertical won power is a in Electric renewable a which third makes half

products, potential applications the While for ahead. automotive gate-driver electric years in believe holds market we the greater far locomotives are and buses important already our

historically our power limited. the been conversion, very opportunities in high automotive voltage specialists sector in As have

XX electric of into between the kilowatts applications range certification SCALE-iDriver market, However, announcement a SCALE-iDriver In an of direction car AEC-QXXX coming. this now with our believe all we high content. FluxLink our our in voltage drivetrain and our the component a use. is in automotive IC DC voltage isolation electrification an worth is currently designs products, step bringing same tens technology, reliability DC applications important improvement the with car, turn in product we the and incorporates gate-driver in including for took kilowatts, conversion based with XXX to optocoupler covers and charging compared count SCALE-iDriver InnoSwitch QX, inverter, the of technology enabling substantial with high used of a dollars' that discrete key for in family. available

are customers discussions built driving and automotive in have had the PCIM silicon product Germany, design the pipeline of introducing hold is silicon show qualified but capable the in IGBTs, promising only Importantly, which EV taking recent MOSFETs, market. of the a we carbide Since at also rapidly SCALE-iDriver activity. with extremely productive not

the While up believe expected industry timed EV widely into the begin that is our cycles few market sales are automotive design in well coincide a years now. long, with is to to we from ramp entry

Sandeep, the global turn effects current of I'll our it dispute to third comment the I our over briefly business on trade on outlook. and on Before quarter

First, to the direct significant portion done proposed couple ICs X% stocking we on said components. that, the our Less in approach related do from global tariffs already all uncertainty China a a is in of disputes past more to of to originating assembly is countries. China, a we are have weeks take cautious U.S. than of China. multiple are assembled impact anticipate not virtually And indications trade of from U.S. into sales seen some that while the the our from products Having sourced customers over causing

finished tariffs week the been on seen market appliance we from coming Over normal some as affected and Nevertheless, seasonality distributors consistent has by naturally have push-outs past quarter or sequential market, from of under order a so, steel revenues our appliance aluminum. well products to roughly approach expect which in handful a September the With growth serving dynamic has our sell-in caution. accounting. with caused us of third outlook this third quarter with we as

minus $X expect it in revenues continuing to from Specifically, of by a driven turn new for designs. chargers million, I'll PD the the plus smartphone With Sandeep of a recovery that, million contribution over primarily review $XXX modest we financials. and USB or

Sandeep Nayyar

Thanks, good Balu, afternoon. and

are results QX fairly Our straightforward.

and will just it we then the I up open for quickly So, Q&A. will highlights cover

As on press non-GAAP the accompanying are usual, GAAP release. figures numbers to in the I which the will focus tables reconciled our

the Non-GAAP was a the quarter below revenues while the Channel tax sequential reflecting $XX.X points on grew cash recovery count from at operating quarter. million and $XX on from $XX quarter was were We from XX% forecast up XX of prior XXX,XXX head up in $XX in consumer, roughly from million the was the roughly $X $X.XX air prior $XX.X non-GAAP prior quarter. full Inventories in price resulting range million, first flow $XX. appliances. Non-GAAP Non-GAAP in weeks, the prior end, category sequential for basis quarter CapEx the half target was of products, communication the down just from quarter, seasonal days quarter. the first share, X% the prior points quarter, million the Industrial about margins sequentially XXX we and expenses $XX from repurchasing major effective the The XX stood strength growth, flow. the revenues growth X% well activity. XXX a of the the margin annual while corporate totaled the driver days timing decline the quarter. communication but million utilized at mainly increases, investments average also the million additions. the significantly sequentially increasing industrial, were dividends. due just a growth, as average. from contributed the buybacks week fell about the quarter. in consumer revenues days. quarter nearly mix during The form per to merit quarter well quarter driven or and where of weak X% free of count rebounding a XX margin in of to of very a minus for computing. at strong quarter, while prior gross quarter, over above sequentially. flat low-teens of up was computing and decrease and approximately basis $XXX.X for by repurchases million midpoint versus stockholders the the within our million, up than diluted for balance our and category shares range, conditioning, were are rate biggest Revenue below during growing as operating to high-power during quarter X strength Non-GAAP fell XX% seasonal on was or returned plus at forecast share communication end, The for in Second X% from XX% category of share to weighted up earnings from the million $X.XX X.X%, XX% X quarter. In quarter all, XX.X% in repurchase share was the Cash during up – reflecting an prior inventories days $XXX average XXX,XXX year of operation shares the more by Cash sheet was X%, the

expect Looking or million third the ahead, about range increase $XXX sequential $X the a of of to we minus be quarter X% plus at million, revenues in midpoint.

the undersell is September As with in accounting. Balu consistent this seasonality indicated, quarter recent

slightly X% gross We the quarter, expect the price We revenues. driven of tax Joe. share between similar non-GAAP X% lull do back in be market count well and lower seasonal we between million efforts. air impact QX cellphone the while quarter, quarter. well rate our as $XX litigation margin over I'll QX, that, million be to continued sequential to pressure And and with should our be favorable in slightly mix wafer QX driven a as reflecting count in additions recovery margin conditioning by expenses end spending. offsetting level, higher $XX in increases flat The to the gross and project the P&L. to with spending, incremental fourth the as reduction as of related by slightly should higher Non-GAAP benefit head expect to Nevertheless, expect increase June less a effect begin revenues, in some margin cost compared R&D the to it operating be largely should as September turn

Joe Shiffler

the for the Sandeep. would now please you session. give Thanks, I it Mike, will open up instructions. Q&A

Operator

comes first Your Stifel. question Svanberg from Tore from

Tore Egil Svanberg

you. thank Yes,

great. these a as just QX to question, orders especially and bit push-outs more First are the could add on of until If elaborate you that, more trading push-outs? maybe are Balu, be these hold sort situation it put Are into some that'd relates on there's clarity? more more to that color or you'd little

Balu Balakrishnan

customers for measure appliance tariffs don't pushing be is the are that Okay. are QX. is out What cautionary whether Thanks, demand is U.S., that appliances. lower we a but in priced to temporary this higher or because Tore. What the just seeing we the would of it mainly a there know

article XX%. impacted reported And You some by gone in might by Wall their have and much OEMs as the of seen the appliances Street in have up that steel. the as of the Journal price aluminum it were of already one The cost results was U.S. also higher by where

market So, is the know the whether that, would the But appliance growth is demand issue us. for said I is U.S. a to have still overall, impact a answer the that market don't really or just it having we it is situation on strong temporary in going very say

trade issues are expect to We nicely right grow year next these very of now. that happening spite that in

so not there seen we million But concerned we is to a ones additional lot. our for be QX. have may little far $X whole adjusted next what accordingly, we week, the and have which roughly So, bit conservative a push-out, about forecast coming in more that is so of are speaking, be

Sandeep Nayyar

they can And because implication so little take reduce And the they light other inventory, telling Tore, have carry the short inventory risk. looking that of are distributors trade we a the we in this lead to to us less had another that's are is into consideration. thing afford to times,

Tore Egil Svanberg

on my question That's second very PD. helpful. And is USB

this in suggesting? sort So, of what the customers? your sounds you'll But the would the that some get that ramp you'll of but of second the are contribution board design multiple be XXXX. in with across get sort like currently wins Is bulk half,

Balu Balakrishnan

Absolutely.

the that We to actually very charger higher are a itself of incorporates because OEMs the but want has unusual. plus level, is working it's they now charger is who it cellphone the past, well which directly with make the much a number power and of that just the the sure it adapter are design In commodity, fact involved and in with phone a at definitely the works protocol the small. been

the higher that XX high charging without at getting times to it's level the before XX% watts. and charger and made about, hot. provides very which efficiency look that high Lamborghini our is quite it's XX-watt allows talked The you them more was integration. capacity, impressive. XX%, by five It's provides size the If used than I it this charger InnoSwitch it a probably is charger make Pro too very of charger small possible very And it a

Tore Egil Svanberg

good. Sounds

wafer last than gross one of impact Just question. Sandeep, some you higher of we elaborate in XX on margin talked about basis are or because mean about that? I bit a talking Could extent that? more points you pricing. little QX the

Sandeep Nayyar

XXX Yes, to I think it'll be bps. XX in the

to So, I somewhere XX.X% margin QX range. think be the in would the XX%

Tore Egil Svanberg

you very helpful. Thank very That's much.

Balu Balakrishnan

Tore. Thanks,

Operator

The next Acree from question is from Loop Capital. Cody

Cody Acree

along the opportunity pricing pass major efforts, wafer some this into do And Thanks you on any guys to for Sandeep, on opportunity to you the have any have that? question. the do taking to my up, prices, maybe side follow just do of

Sandeep Nayyar

have price is give which what happen price are we what do more typically reductions actually we increases. here is not to than Generally, able seen

it's that to really the costs going and so substrate So, is what us. are impacting offset is up, this,

Balu Balakrishnan

transistors Yes, also supply, and I capacitors are in voltage that would passive add the other, on. specifically so and components some and high short

it because but competitors level prices, would passives, can't it doesn't they use we and now than increase that provide, be give we they keep we passives of allows less increases to the us the And can the the that. of see the do. because do our deductions understand far justify integration in firm. So, we Otherwise, prices why we to it annual ability us giving

Cody Acree

typical increases? wafer breaks your expecting do compare price in what annual to you're How price

Sandeep Nayyar

it something Overall has for in X%, it from year of to the or company, the varies averaged X%, so order plus minus year.

Cody Acree

the appliance the the us back the side, exposed that the Balu, in with you're just tariff on you appliances to the percentage concerned issues? remind And, in can U.S. of

Balu Balakrishnan

impacting market. like I machines those imposed have price. it's range. XX% in as in the they by know, per appliances Wall washing you on are this The article, washing And Street already gone XX% XX% up As the have certain prices or tariffs Journal believe machines.

I reduce for concern that especially business overseas, will demand customers is these that whether that as their be U.S. in export think So, the worried And China, will the strong are appliances. not to

being of their is So, true like caution more customer at but won't the inventory, it it it whether bit their we distribution both little cautious a level. reducing a later until looks just on whether it's really or at the part, level, know and is

Cody Acree

you do the the of see end so in of trying up of impact U.S., guess, I get decline? exposure if to sell appliances we into was end in a that the can the sense have that you that we be might U.S. I maybe quantification demand what get to, that back the And what some

Balu Balakrishnan

really market. that's don't handle Well, U.S. a good it back, what but that one-third appliance the the on We roughly is fair of to comes question. assume probably have it's good a percentage

I countries account days are of have into these a becoming U.S. appliances to than the purchaser Although, take that developing bigger actually

that in which something all where it's of actually appliances imposed, would that. at as revenue to go, is for includes to that more the tariffs impacted are also not conditioning calculate our back appliances But exposed our in XX% But the revenue certain is far be impacted. but point. XX% There XX% into it's range than really of are our air so as revenue China nearly appliances – hard appliances, the this are is my comes maybe to So guess it's shipped not of again, U.S. what

Cody Acree

you Thank very much.

Balu Balakrishnan

You're welcome.

Operator

Company. & Edgar question comes Roesch next Sidoti from Your from

Edgar Roesch

for the Thanks question. taking hi. Yes,

I going at increases of you're partners and nice driven performance new moment. capacity on, type and cost I expenses Was activity under First Sandeep just one got know there you're a X% the about by quarter? think. is in activity second suppliers. I a But not about you've lot year-over-year necessarily up It's being worried certifying believe that much this some for of

Sandeep Nayyar

the about what our and the annual raises have we're No, second guidance, expenses head increased has that expenses in in giving R&D second do expenses talking drove operating quarter litigation and – where coming And some quarter. the mainly you're because we we that. predominantly spend up quarter is going the in count. That

revenue growth As we be growth we of our would topline to said earlier, try have low rate our XX% double-digit. expenses, average the

look said This we're below years, because be at a operating to kind have going prior more R&D that. year, long you the we've the it But period, evens out. we of been If over spending in opportunities. of

Edgar Roesch

And kind of see you Okay. what for activities expansions coming how the up in XXXX? line are capacity

Sandeep Nayyar

coming I capacity USB that years. demand think is about. PD good it's And to talked the well the that with few XXXX we along and Balu very got about feel we've satisfy coming very adequate our along next over opportunities

Edgar Roesch

with it's long a looks times. quantities InnoSwitch of lead have to And Pro, that need on hand lot just the long least what's some of Okay. you distributors get new in, it lead time it some it there? like and so goes don't a Is designed yet the or at because approach just

Balu Balakrishnan

and the was design not understand lot I of two just three months ago, announced on. issue, about going Pro sure we activity I'm months quite Inno have because

the shipping We the revenue but next will we significant quantities expect half, to in some start growth have in probably year. second small

no times, there issue. is As lead far as

and of we – products to have We plenty now almost of the our we range have in six capacity. are week have all – four

expanding are quite As position the are we a resources the beyond. we in into of good previous and capacity. money and to in And XXXX very expecting now, have in bit we we invested discussed calls, growth right support our a

Edgar Roesch

cadence rolling very issue, I didn't terrific. of mean to Thank any the imply that much. just out. understanding you Okay,

Balu Balakrishnan

You're welcome, Ed.

Operator

time. questions no at call to will back the over are further I turn There the this presenters.

Joe Shiffler

happening just I a for afternoon. a are other see second this pause gets We'll if else earnings anyone there in the queue. bunch to Right. reports of back know

Joe Shiffler

website, everyone looks other right. available afternoon. no is which replay of a are on there like be Well, call there. good for it end Thanks Thanks investors.power.com. we'll again, and our There questions, All so will this listening. it

Operator

This conference concludes call. today's

You may now disconnect.

Power Integrations (POWI) 26 Jul 182018 Q2 Earnings call transcript