POWI - Earnings call transcript Q3 2018 | Power Integrations, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. My name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Power Integrations Third Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank of may Director your Relations, Investor Shiffler, begin you conference. Joe

Joe Shiffler

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

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

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

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

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

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

Balu Balakrishnan

good we cautious customers afternoon. situation. quarter's Thanks, Joe, of global components uncertainty indications the to stated and that trade due last and stocking we had distributors call, approach taking On more of seen a to the

market which as affected called handful well distributors been We the of has a out appliance tariffs from also aluminum. products on push-outs by and steel as finished serving

end with from ramp of than were revenues High results are up a increased XX% in controls track and category medium-voltage straight were of applications, oil at the reduce renewable in geographies used a exploration. revenues we customers intend magnified are our million concerns in electric energy million for soft computer locomotives sequentially high-single drivers telling by are trade The our revenues million. October, been to driven continued revenues second down conditions $XX of recovery our year and for driven in QX that consumer outlook appliance Communications China. USB degree, some driven softness remaining in quarter more metering, appliances for minus more in handset digits bookings the the less distributors evident September order markets $XXX by high-power digit power revenues revenues the Industrial our plus gas anticipated grew high-single XX% guidance drives end revenues third third expected. turns abruptly subdued below QX industrial to slowdown by came energy and our markets, in The charges, inventories charger. other while us QX with increased or from sequentially. persist by applications. gate by The than recovery growth, declining PD market in consumer $X forecasting slightly orders of and and each for new in domestic activity these of and third in sequentially where quarter strength market, Although slowed the the Revenues double-digit is especially on accounts categories. the across sales, by been weaker they appears and in demand QX. a percentage in has than tablet driven have which broad-based a with as about category would

electric for In in transmission several recent new in designs at won design multimillion We projects expect DC and dollar a power ongoing for QX, wins. high multiple customer, major revenue on growth locomotives healthy design designs based inverters to China. our for we a continue wind high-voltage European

gaining technology like traction used SCALE-iDriver power, next incorporate newer electric which and and are should buses FluxLink isolation growth to also in contribute year. products, our our areas ICs the Our in solar InnoSwitch

the charging we qualified last electric is now also for market automotive vehicle on SCALE-iDriver and and solutions powertrain we are quarter, next-generation a now As platforms. announced for major engaged automaker with

destined in by about AC-DC made the encouraged five market We're expand will cycles within this both have we months competitive years and unstable products strikes. industrial These long, pipeline, reliability are four significantly applications, we additional margin SAM believe introduced week, over our market modest or safety visibility recent this our at offer product new which next a consumer of regions to ICs also and the design towards we cost in that positioning enhance version increasing While next premium in the are have quarters. compared and the grids several with ICs material and standard customers a power revenues we includes our XXX-volt LinkSwitch-XTX years. Earlier targeting progress XXX-volt for appliance our lightning excited to of our products. frequent an

quantities a first our ICs winning market production this OEM. for India ship appliance after month, design Korean the a major at the new will of We

gate expect unveil chips, and the also product near LED InnoSwitch, carbide entirely drivers products, IGBTs are Even other an XXX-volt very We future. our new three primary high-voltage product for silicon more categories at AC-DC MOSFETs. next Germany. power category to drivers and our in of Electronica including significantly, in show Today, month's high-power versions introduce conversion Munich, we will

air in marks hoods. motor wide Next blowers a HVAC compressors, water clothes XXX including addressing fans range include entry consumer refrigerator to dryers, month's applications Such pumps appliance washing and range watts. and fans and dishwashers up and market, the for and purifiers IC drive of used driver with a machines, highly motor ceiling systems, DC applications into our applications launch brushless integrated

in compliance to efficiency Integrations, XX.X%. regulations and energy add give from power sinks a are new ICs with offer and heat to flexibility, solutions, you efficiency to improvements efficiency footprint solutions. in Power the significant consuming Also, As these the superior like designers our commonly connectivity, expect This IoT used efficiency distributed need specifications up would with as the eliminate enables Star. products features which energy enabling thermal savings compared such existing for voluntary existing of while remaining Energy energy to

over that makers to to is $X as we And product several SAM tend adds our appliance more market has and closely next about billion. across we months, roll while are appliance on we hard know a Based it's gradual will will Integrations a We well-known industry. to our products out technologies the the been recovery it past of or In us demand. a driver served $X.X who the when of significant know sampling in new growth for the us often to wide upturn further at expect range will first quarters. billion among new reliability strong and pace, to those is be. grow the that follow to customers already are ahead. the in product We've available the total track past that estimate Although happen new several innovation the adopt challenging, and outlook this presence record Power market, how experience, in bringing back years a near-term confident conclusion, downturn our we become we a the to bounce a predict the over from steep

strategy which parts. in drivers prudent gains content build periods of partners remain occasions our it's intact and weaker demand. to half the appliances, for and growth This supply and share of charging expect respond dovetails our in we of significant business resumption XXXX, chain second on broad steadiness growing market, be verticals ready continuing range value for rapid factor with market of Most since and believe XXXX. dollar be including demand to to approach importantly, of inventory tablets, a the the smartphones industrial a in the to these our foundry we for So, sudden our during

a sheet, As predetermined over financials. a confidence the our Sandeep our strength to of as share to for I'll review reflection shares approved of as future matrix. it an history, to buy a largest $XX our the price-volume our in repurchase the turn With allocating board program growth according our has well the back million of in of additional that, business, balance

Sandeep Nayyar

good Balu Thanks, afternoon. and

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

Revenues as well automation, digits quarters. from USB reflecting in year-over-year applications recent and the saturation in revenues market. year-over-year a X% year-over-year mainly revenues XX% quarter his reflecting ago. Balu up the down revenues mid-single home applications, covered overall as we and factors de-emphasized driven X% mid-single lower Industrial the $XXX.X technology Consumer slight digits and nearly have year-over-year, in handset networking by year showed controls. adoption declined a high-power residential million, down revenues which from Third reflecting building delayed were decline, industrial grew PD were remarks. cellphone sequentially of from revenues Communications applications also

Revenue Finally, a Balu slightly than communication quarter earlier. gross by points up computing. the prior design by tablet and charger computer margin XX% category Non-GAAP grew year-over-year, consumer, mix for cost favorable reduction driven XX% basis market XX.X% XX% offset the quarter to ticked mix. was better that less X% the as the from end XX industrial, XX% mentioned

Non-GAAP to from $X.XX investments. expenses flat by on we was $XX.X the call, the million for count quarter Non-GAAP diluted of XX.X% operating shares, short-term quarter, effective million a was the starting points expect to other well quarter quarter. quarter's from higher prior we gross in Weighted effect lower basis XX quarter certain nearly our up yield XXX,XXX compared below to the light essentially for reflecting ticked tax earnings the wafers. shares. prior prior as operating outlook. $X.X delayed $X.XX higher X.X%, last up revenue cost were guidance XX share As The on million, below feel and slipping expenses while weakening in the of fourth were Non-GAAP begin we the margin rate indicated up do as non-GAAP margin we total per quarter. the income share, average fell in

the by X% a rise at the past Other of do our quarter prior go $XX.X just or and over investments the increase from end, prior in We from included from repurchases $X.X new Our years, has buyback cash days of was million $X.X rose Cash while minus long-term $XXX directors. XX up dividends. we to plus share and XX at quarter Inventories the and above quarter the board fourth of uses of lower days for to during it target was days fallen approved and light the expect count in slight XX balance million operations in Cash for XXX the quarter. inventory authorization flow $XX million of totaled further days to expect XXX quarter-end, our days. CapEx range sheet million. by quarter. million,

of inventory carry specific our event stretched to not customer in lead this of competing are than particularly application of or downturns. positions for times we the we are remaining higher some in a to well level done as products comfortable risk, sudden most because a us believe However, obsolescence and recovery with We have normal carrying past demand, through minimal products. respond

we be to million ahead, in minus $X quarter plus of or expect Looking $XX fourth the million. revenues range

non-GAAP cost as margin we gross to wafers. starting As expect earlier, decline of for result noted higher a

Electronica forecasting XX.X% quarter head costs margin and Specifically, to count non-GAAP December sales between by operating XX.X%. trade drive in our Non-GAAP motor and we expenses the million addition, and quarter of as gross range which prior be presence at the largely the million, the sequential were the from including litigation increase $XX.X with patent show. training are well with some to launch, as product the driven should for $XX.X be associated expenses of deferred

the non-GAAP turn X%. around to be And I'll that, over expect Joe. to I tax it back rate Lastly, with

Joe Shiffler

you for give it open would up please for Q&A the instructions the We'll now Sandeep. the session. Thanks, Q&A? Christine,

Operator

Acree first Capital. line of Your comes from question the Cody from Loop

Your line open. is

Cody Acree

a for Thank to my outlook, the of you guide way think taking to is of slower is quarter as demand? what down Balu, look us color there you as the into mix bit you, guys, between fourth inventory the a at questions. give adjustment

Balu Balakrishnan

the good two. really between to very hard That's It's distinguish question. a

by our markets what is that So slowdown, means be broad affected all which it. a will say of see would we very I

USB decline computer The to our QX. likely some is So communications win. to that we best the PD color. industrial you expect estimate markets consumer, of in Hopefully, to design flat, our be and primarily we gives market can because

Cody Acree

push-outs in are you you're seeing Are broad, that are broad specifically It you. You because slowdown is that able the areas call though, so And primarily that softer seeing inventories? does. as verticals? seeing order it specific to appliances you to you're unit weakness unit or pointed in you in seeing out in other any Thank demand that China demand.

Balu Balakrishnan

is what of outside seeing they primarily but what But not customers also China that's concerns what are at China China. reduce of to most in They manufacture apparently world, have also concerns hearing across Asia, QX we saw about the Asia, an end planning In broadly. quarter, we or QX the are to in that have from because our distributors distributors our was we going inventory in only inventory, the affect specifically, to reduction limited QX and in trade. demand. about are They us

is broad there a in why it's markets. inventory and So, they the interest going of to think reducing that's most we affect have, our

Cody Acree

absolute it demand costs Well, all any increases in able in guess on changes and like sounds demand. I specifically in is Are But point in that concerns you and verticals? were prices appliances. question future any changes other or my though this at you is out increased costs to seeing of changes

Balu Balakrishnan

heard fact many demand for air delayed China is, soft Asia, in prices for of the have of of people Southeast have and air most of One very over because air build inventory we course, in significant of all in there appliances, has for example. a higher purchases inventory, reasons. appliances, including conditioners. is in that the U.S. on the conditioning Well, And multiple been the conditioning

been has Southeast summer has also reduced most demand. in the Asia, Secondly, that relatively the mild the of so

very specific we slowdown and the than don't and quite It our have color different us looks broader. any other October no September what that to demand significantly than that's in that, markets other tells September. bookings is Beyond dropped have of that September, similar looks

Cody Acree

is Okay. work – demand is companies, to have sense more broad how in just for the re-assignment sitting much And left chip an distribution see are of today channel and don't do lastly, a inventories much dramatic a we to through? you the and this inventory down how where if in risk there shift

Sandeep Nayyar

weeks we've hovering it, around So, if at about you distributor. the been inventory look our distribution eight in at

In they saw indicated in goods. we the because last are the because as to that customers saw we having inventory the -- because lower they're to more were quarter, we in lower much we they quarter, expecting QX, quarter. reducing as finished didn't distributors the Balu affect As the demand in, the as in their, of end lower indicating fourth starting the in demand factory getting fourth they'll

down. we that expect come So, to

weeks, at weeks seven weeks. channel six are anywhere eight normal between Our the and in sitting weeks and about we're

down we're hoping the from weeks come So, it the weeks that seven eight least. towards should at

Cody Acree

guys. Great. Okay. Thank you,

Balu Balakrishnan

You're welcome.

Operator

Your next question comes from the line of Tore Svanberg from Stifel.

open. is Your line

Tore Egil Svanberg

Yes, thank you.

on to follow-up that Just last question.

to can So bit seven to a weeks. going to is weeks Sandeep, this is more to work there's mean down QX at you early normal if done be too that in weeks, QX, get six or probably it point? seven maybe say little Does

Sandeep Nayyar

get digit we What know whole we see see we is we is, wins to that's year is first do is get year-over-year second early to little based well the much in growth. to disproportionate growth disproportionate of pretty towards about that modeling you're going that PD, design the a comfortable half. we to best So, double for for how it's have go not for the are are the because out going us growth for believe low to it trying not QX But the and And will because to year-over-year going to USB the we going why our that the – in a half. second in actually on the be uncertainty. that and of say turn half I year, growth you're are think I next seeing what

Tore Egil Svanberg

targeting drives. in Balu motor And a $XXX million and helpful. you're question very That's SAM this new for

So is a can market? I Power efficiencies that. and this you there that Integrations like as the anything of perspective But, share with else us things advantage from get sort into competitive ventures

Balu Balakrishnan

Absolutely. the usually drive sink transportation tend a circuitry which the being it. efficiency that heat There is One has into one is built reliability multiple are issue motor. in But They facet on. motor the a to off so and The eliminate – the problem tends advantages. and bigger multiple big fall appliances. be number we is during to a to

heat So more reduce they a more heat, efficient of too they there's huge And choice expensive that have so doesn't problem. a to using go the or higher efficiency high. a a the motor have drive, temperature

So fact existing these a all there's significant features. software-based safety savings safety But that, cost beyond some in features use Most solutions there. implemented existing solutions, we which features, are have the hardware. of of in

For example, is means software approved short on, stall UL software, has very a that safety is VDE agencies through be that if like motor, a the and is so the only there by detect in process. in painful circuit to and which to the a way it or the motor and

product. have that our built We into

safety software of becomes And the all so, requirements. independent the

that's components So the that, MOSFETs These current huge Both our add are IPMs, IPM to in that them. power discrete multiple modules. to advantage modules are of have for shortage. a shortage and them of integrated and stands severe customers, of to in all

there so, for because product have we constraints on our pull our no is And strong a simply capacity.

plenty have capacity. We of

want. are many the they that So, can pleasantly as customers surprised as very they get

become another So in the run, major that driver. short has

Tore Egil Svanberg

very That's Sandeep. last for Balu. And question helpful,

you be is range through OpEx for other of going this So take to going of sort some kind QX, that to period? guidance or the with the actions softer new navigate will forward

Sandeep Nayyar

on the we term. looked as of always long have know, one a you So our business things at

been reflected with the we a new we the that so talking, at As with announcing of introduction market the pipeline. other we product are have Electronica, have and things entering indicated new earlier has and in many product

for R&D And at our look we for critical sales are we but business short expenses period our function and our because a will these continue and the moderate invest to long-term. is in growth. continue in will that downturns We to

you're probably exercise However, the year a if what year, for current level will appears for to X% range X% that increase we our it looking from next modeling XXXX. by spending is in

Tore Egil Svanberg

much. Thank That's very very helpful. you

Balu Balakrishnan

Thank you, Tore.

Operator

next from Your comes question Seymore Ross the Deutsche Bank. from of line

is line open. Your

Unknown Speaker

a is Ross. you (XX:XX) for letting ask Thank question. This me Gee Hi. for

going you should margin, think margins mentioned fourth that should Do impact start those gross subside the are increase quarter. wafer costs XXXX? For – or costs in about continue? the we How higher they to increased expected into

Sandeep Nayyar

have these as get going are said, cost the they takes happened is a impacting to wafers. wafers are What continue while to because we anything into the P&L. the So, has starting of the that,

fourth where impact going to next seeing is And quarters. all quarter the first the the So impact the year, we're we're for for full-year time. four get

If that you're say looking for approximating for XX% be what we purposes, finished – our our would modeling XXXX. haven't but gross margin would I plan somewhere for

Unknown Speaker

And comp, next in a early some little four market? auto term Okay. mentioned for revenues Can five longer Thank that more in confidence years discuss your confidence some you. to based good bit and visibility on the years you some you traction. better

Balu Balakrishnan

by saw automotive. to qualify use us we the iDriver, from was in When wanted for asked our it and to multiple quest iDriver automotive, it customers introduced they for so Yes. actually who automotive, the driven

will of that the or to all closely it engaged specific in next-generation us customer XXXX, driven. into customer vehicle was on very that production pretty the sometime automotive one And large and customers. XXXX very is obviously, a So, got And high-volume they're once working customers. applicable qualify, product opportunity. the we with a And got customer, to multiple electric with go is we

as speak. a which push. have OEMS for are reliability have us not which temperature. we optocouplers automotive long for designs, in like of that replacing very life for much we The our It's use banned more top features, automotive to applications. FluxLink number applications. do. advantage see robust they Many – a many It sensitive life gives of to is driver. huge biggest the isolation We a them no features On that, new important safety talking are We the optocoupler, has issues is optocouplers of actually that of

are large that get very talking goes also a OEM. are then optimistic very engaged to have and with and that OEMs optimistic we time start OEM, with very as auto good working And directly we are we'll a are we others So, on. we very we with multiple the

Unknown Speaker

Thank you.

Operator

question from Susquehanna Internet comes (XX:XX). of next Your Rolland the from line Christopher

open. Your line is

David Haberle

can Rolland, for It to on you guys? then China any behalf questions. sounds you on that taking Did be first, and there. those or track guess, XXXX, thank revenue Haberle for of high-voltage comments like I Christopher the wins. or coming contribute DC back and XQ your David those on that's wins project material is in our XQ getting how

Sandeep Nayyar

has of are into across high-voltage implement has more a been plan China stages are projects and And couple revenue getting a contributing we the It in growing as transmission years country, the been they in actually long-term has to DC the very China. for now. right early still now.

we a driver. be SAM long-term be millions this about to of significant good dollars it's this And we of are in next because of talking or specific a have expect we so. a the by But, because driven multiple share It'll that somewhat a expect So, a years start we over projects. lumpy of XX business. to tens get year

David Haberle

Got to you that's Thank USB second X.X And a the or I power half in basic PD, on second there in the programmable opportunity. is now Delivery half hindsight supply do PD Power there the color guess it opportunities stuff? for Are XXXX pretty it. with USB this then like sounds there.

Balu Balakrishnan

– we product Well, to provide used use will existing X.X called full-fledged all the products, it delivery. designs a and which a our new InnoSwitch supply. ones lot PD programmable now our power power USB PD simpler have USB InnoSwitchX with The but makes Pro supply future programmable a InnoSwitchX

to achieve in contributed on first already half. use we year, we we the increase flat significant half is roughly And expect Starting comfortable a This growth will this And new we in of first we've have next next estimate, disproportionate designs the feel next the will as the QX. remind half increase put designs contribute significant already a in PD of it, so, do we to design Sandeep the be, low-double-digit for second even tablets. And that's USB that. and with can I QX But can won. year. revenue you based middle all a is must the though that that to that we growth that and to year, going best to, year, see why contribute relatively of

David Haberle

for it. Thank there. the you color Appreciate that. Got

Balu Balakrishnan

welcome. You're

Operator

There at are you. further Shiffler, Mr. over questions to call time. turn this no Joe the I back

Joe Shiffler

All is there. right. everyone, on listening. a this will call investors.power.com. We'll which replay again for our it for There Thanks website, end Thanks, available be of listening and good afternoon.

Operator

today's conference call. concludes This

You may disconnect. now

Power Integrations (POWI) 25 Oct 182018 Q3 Earnings call transcript