POWI - Earnings call transcript Q2 2020 | Power Integrations, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Power Integrations Second Quarter Earnings Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. Instructions]. [Operator like Shiffler, conference Director now speaker to hand Joe today, of to would over the your I Investor Relations. sir. ahead, go Please

Joe Shiffler

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

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

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

we and measures amortization During of tax generally in exclude will according to Non-GAAP financial is results assets accounting expenses, these our stock-based to A compensation of refer included press intangible calculated the to accepted release. related non-GAAP not principles. measures measures reconciliation our effects GAAP items. acquisition this of call,

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

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

Balu Balakrishnan

good and afternoon. Joe, Thanks,

our trends largest quarter line and and diverse as in automation, grew high year-over-year the across like single at sales. X% incremental saw recovery well challenging where opportunities our demand and categories. are broad-based of creating building Industrial in Second growth communications category as the of home revenue industrial our verticals, were for $XXX.X electrification environment. was range combination applications products. We spite a digits of XX% quarter revenues and industrial million of guidance growth up The in and with year-over-year a driven was by year-over-year

wall where cleaners, On electrification factors. in power rechargeable due vacuum size, areas and and personnel opportunities side, is growth high the revenues as in slowdown applications e-bikes, power applications IoT are traditional are replacing locks, such the equipment, critical USB the was Meanwhile, like door and a Growth consumption smart compact low projects network demand in standby thermostats we from and pandemic. lawn outlets, meters, these where by other seeing high-power softer automation are sources. batteries and reliability, exploration somewhat infrastructure energy lower offset to transportation such as due to in scooters in creating

power verticals with high strong growth own However, transportation. and distance long transmission, its attractive renewable including prospects DC long-term has energy, electric

X several in drivers as and OEMs on and electric ICs of automotive use Tier drivetrain Scale prior Our iDriver electric and have we charging in cars. and applications automotive in gate suppliers buses our testing Several qualified calls. conference are locomotives also in today generation for at are discussed are next

as which contain many also electric power XX aggressively subsystems drive opportunities supplies high in low are cost, can to We as battery. various main power from pursuing voltage

Our automotive XXXX. pipeline ICs LinkSwitch-TNX in and qualified generate to diodes design we our and of Qspeed been opportunities should InnoSwitch revenues building a use begin X that and are have for

higher dozen by of the and power increasingly sizable in levels, driven of watts designs. End-users to aware designs models. aftermarket our as Turning from range smartphone adoption out than customers, won inbox we levels for products ranging form devices. believe spanning QX for in becoming grew charger QX mobile and power steadily continued inbox XX new to are speed conversion and rolling differences InnoSwitch with OEMs supplier year-over-year a power charging We factors leading more the win XX watts. continue power are We communications including of wide both new chargers to the Revenues fast than category. XX% of of more the a designs, a ICs in chargers are share

support increased medial to to trend continue functionality. and this power heavy other We expect consumption XG larger of batteries as incorporate devices

including even enable three or our each aftermarket we any dollar While PD and aftermarket Many inbox outputs XX chargers designs to port. These brands chip today, multiple one proliferating also are increase powering notebooks. of of Such include device commonly majority charging new the rapidly, are content USB chargers capable thanks as account as OEM technology. watts high nearly dramatically sell mobile typically two to USB for of feature market vast designs since devices. USB for power levels

their to is factors. devices to which Our achieving crucial proving small GaN-based aftermarket chargers, successful are InnoSwitch in providing exceptional -- thanks form efficiency,

the technologies of supplies outlets. XG factor. AC is technology and of crucial also AC also is little GaN be adopted mobile ecosystem thanks is outlets for for efficiency Integrations such are power spaces is in allows PD, USB and limited, Clearly, otherwise Standby the consumption evolution extremely compact. and devices to the being would behind gaining mains wall these a making since critical devices these also space very extremely significant continuously rapidly fixed the heat emerging market. Because must connected benefit in installed and cause drive a is alongside well strategic Our dissipation, importance, waste USB to GaN, wall charging as the electricity. and continued positioned Power to changing Limited from

impacted much effect categories. a year-over-year Turning double-digit revenues been consumer and Appliance by to Communications Industrial sales in and the the was this severely strong in true more in the have growth in in offsetting QX where peak an the fell quarter category, pandemic of conditioning, rate quarter. at shipments for sales by is magnified declined in typically sequentially application. This especially half air prior a inventory this than QX, what is correction following

efficiency content motor growing the the by of expect requirements, the conditioning. is driven appliances growth adoption appliances, in as seasonality as demand by affected energy in middle with well inventory roughly using demand DC still We motors. brushless markets, drive market consumer Longer QX in sequentially the emerging in but be our from improving, expanding increasing expect we air electronic class in pandemic, and flat healthy revenues BridgeSwitch situation term, ICs consumer to from

as wafer approach midpoint to the applications, this situation. environment is play maintaining continued be we sudden end and of prudent variety on GaN for can a revenues that in demand. the designs in to of kept in role in of form, the fact shelf In we used revenue consumer a supplies believe be sequentially, an of particularly we our and we range, elevated fast-charging. impact monitors expect in well the light as increase expect our the our long of and current prepared would by QX, growth but notebook At of driven progress up chargers category. months also and of demand significant first we in when in broader a cautious basis a outperform of the recovery on standby Computing a Overall, remain us QX, pandemic, up significant a I'll slightly to are products the level over on market appliances analog year, And the have of number economic by and the be inventory the year-over-year products now, most of We power for nine to the which put TVs would track server turn X% in it event Considering in lives for industry in full and year. the the about to Sandeep. margin to a

Sandeep Nayyar

afternoon. Thanks, Balu, good and

are As to reconciled results, press usual, remarks, primarily tables. my GAAP I on release in will focus the which our non-GAAP

XX We employment expectation, the Other cash effective per expenditures in sequentially coming USB during $XX.X networking, consumer, revenue $X revenues last down interest the to environment, revenues the we with million. in as on for mix end. a battery broad-based increased as was as receptacles. on due with hand from lower Asia collections. quarter line share cash revenues shift by investments announced X we in target communication. Consumer on were sequentially. were increase incentives than IoT falling million $XX.X The $X.X sharply quarter conditioning consumer was with industrial balance about in from to change. Expenses days connected categories increases and applications decline and a The category of repurchases. $X.XX of increased on X% results of for driven quarter as operated were in basis. cash earnings digits non-GAAP quarter more $XXX,XXX margin the $XX income sequentially residential air were were quarter devices million gross decrease quarter X% sequentially. reflecting million, about an than with part other by the quarter flat appliances driven smartphone strength also communication, for roughly of inventory XXX work-from-home. by expenses and for strength XX% Non-GAAP at to used a guidance. of the quarter, unanticipated $XXX.X million was by in as to increase about with million. lower and accounts driven average home investments. QX XX% points and The during with moderately down driven which Industrial well resulting by points following computer. repurchases This computer the dividends, prior reduced quarter Cash of high-power an $XX non-GAAP income our paid noted. and and and both out rate up XX.X% The desktops in All the under our revenues diluted partly points benefited tax was in margins million on $XX the charging the per monitors. work-from-home weaker in to XX% Balu rose demand addition due correction from normal as the $X.X on which credits basis from more major percentage largely QX related the X% prior and gross June XX% flow quarter, quarter up was just share. Capital Internal as and were and pandemic. flow than XXX Our non-GAAP XX% receivable of well in by resulted were XX% for inventories Communications down industrial, the operating had below well quarter increasing sequentially more for down sequentially the strong includes sheet and automation, percentage inventory tools timing million on during share rate seasonality, Revenue chargers That's low-single sequential dividend operating in price

long We and lives light pandemic. given uncertainty in the product earn of of side of demand environment and supply higher-than-normal continue on of the shelf to inventories our the the the

at fell also maintain to inventories expect to inventories down of during gradually target range capacity compared prefer of slightly Channel foundries though in X.X each of the in declining, activity second have trending return weeks at environment. prior starts our begin slowed QX we ending of our maintain I to minimum X.X half weeks, to to We in light and the wafer level quarter the to demand a by quarter. help XXXX. weaker June

third ahead plus quarter, new the by Looking sequential range we and expect cellphone communication increase the or with of reflecting seasonality be revenues million, mainly to million minus the $X category, $XXX both ramp in to driven a of designs. the

While communication by meaningfully offset largely of as resulting margin revenue, percentage should gross a the be cost increase improvements. will pressure

lower result, QX. I range tick-up result expenses reduction expect in non-GAAP a after gross slight a to margin than XX%. just XX.X% Non-GAAP of As in operating into a should expected

pace on non-GAAP this expect are reduced our non-GAAP savings litigation of spending belt-tightening measures track growth the September in million $XX Specifically, around to reduced as quarter. roughly events, I hiring we on instruments. fact income, OpEx. to for and and That X% is of the and such April response Thanks in travel by year not and increases for the in OpEx Other the interest normal which gave will down higher we have spite continue lower earning rollover reduced rate into is trend to of as mainly driven headcount securities pandemic. in salary income, of

rate Specifically, be around other to non-GAAP I remain The effective expect million income QX. in should $X tax around X%.

to in will distributed Board be noted issued share record shares as has be dividend outstanding split for a of one on a stockholders in each common of August our approved The additional the two-for-one stock to of XX. August share. stock of stock as release, form with our XX Finally, press

our XX% questions. share Our to pre-split, $X.XX past three quarterly open At payout new Operator, share have per level, basis. on quarterly pre-split for this was almost a equivalent by the risen cash per will $X.XX be now please up quarters. over dividend, will $X.XX which

Operator

[Operator Instructions] the line Your Tore first of question comes of Stifel. from Svanberg

is open. line Your

Tore Svanberg

Yes, thank you.

I in revenues about to think First it in earlier, question come Balu, being you the talked a Balu. a sounds does to bit is going expect for year. sound already you've it next like you automotive little get talked revenue automotive some bit more XXXX, the little because about like and but more past

Balu Balakrishnan

Hi, little we and year the low Qspeed get a Tore. revenue Well, years ago million we'll starting, of or on. we revenue would this But diodes XXXX second introduced from won't get $X I couple year a because on-board but revenue and chargers say, converters next we year traction we power onwards bit revenue, and a see the a will increase. get of this will of products When and tiny significant the real the drivetrains year, generation XXXX. get will next happen till into so gradual we DC/DC

but of will it next years. some get So be couple we revenue yes, the won't in significant

Tore Svanberg

moving good. onto And Communications. Very

elaborate I watt and it toward I you You said think design phones? XX the the a mix to is other. dozen was for XX one or the you of are fast-charging inbox range And the Could about these most mentioned on there? XG range phones watt. mean about new wins

Balu Balakrishnan

but to combination. to XX of a the as as of used XG XX power also phones, only pushing charging, be power fast them and it's it's would not especially including and level kind phones, is gravity really watts watts, fast-charging they they're the phones. phones, expanding and them up around that some the to that, China top say of are China. low-end offered Well, going In they're using low watts, toward of medium that are and on are -- of the also I XX chargers of in in center higher high levels high-end faster level moving with the the but center medium

Tore Svanberg

Very good.

you high a industrial, Just a one start any here. to that when again. as bit you potentially Do the taking of growing could last on business mentioned visibility power question have breather

Balu Balakrishnan

actually of and the delayed. the infrastructure delayed. are It's a the sorry wind be type they lines, it's no And little but but transmission -- to that's solar now. is in just just lines transmission DC/DC doing seem renewables on, and the like turbines So on, is so terms still wind projects -- DC and right bit programs well. DC There

months. will back come in they think I So few hopefully the next

the in changes. High-power is projects run many So last nothing market market. very long-term very, The a long years.

just So about a pandemic we driven are It's short-term concerned softness. not it.

Tore Svanberg

much. very you thank good, Very

Balu Balakrishnan

Thanks, Tore.

Operator

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

line Your is open.

Ross Seymore

ask a I the Hi guys, industrial to up thanks on just for side. wanted letting me question. follow

For be you point comps the and third I I there it color if quarter are missed flat, the said consumers in a And from gave of industrial guide, what thinking the for would apologize. up strongly, it, sequential view. about the you you

Balu Balakrishnan

in flat. change I mean basically little bit, don't is industrial a We QX. in industrial any significant see

Ross Seymore

a unfold in separately way? because of price months And two be you then will can in the to X different channels over it kind as either some at I market difference are matter business, does look ways? percentage there those Is versus XX how the accessories next to thinking your And really you of months. or sold the profitability the inbox charger and

Balu Balakrishnan

mid-single are in Yes, the say right now total would due percentage, now, aftermarket I products digit that to probably type the that's inbox. the

basically dominates. is But rapidly. inbox changing So that

We a wins more revenues in that and are are growing seeing design very lot space. quickly the aftermarket

really it OEM out I OEMs the charger As move to far think varies the box, of OEM. to from lot the as deciding a

higher In the some choose really have that USB either can't charger short PD as or a China capability. But have past the of selling phone charger ones this power the the with to long a charge they the the consumer in example, one, a from it's to has in a not new OEMs the to fast-charging, to and have so very compatible, new buy they has fast. box. For because their don't they not the have case, term of possible are In sell buy older charging [indiscernible] point, a to they division in the run some or because major may that them, box the and they it are put one. OEMs using like faster significantly

of if will be So go optimistic out we attach that the box, are even they good. rates reasonably

there pluses number go out if of you and are down, that A box. of obviously, will minuses. And units so, come the

to other will line. product hand, On the we have entire the exposure

end now lower to chargers right even come decision, make attach they phone in example, reasons. who high cost Most they consumer box buys lower the the very our For rate has small, consumer don't charging, of with is faster because reasons. buy the high-end end, end a higher chargers are a for chargers the can't the If on faster just because only the the phones. of faster can't or phones multiple it handle power on

but XX% not could range, not is XXX% to we XXs percent that in high but of the line, So the the applies just attachment be significant, obviously think rates XX%, product end. entire it maybe it

that's The lower. is volume of is overall course that unit the plus minus of So the it.

it's to exactly ASP impact chargers times some you X or not us higher get them these us, also are X the clear and it's of power multi-port, are So which to ASP. how going times higher because means

and I but think for there So we've is time. minuses, a it's long are something known this -- pluses that

about the talked past. in it have We

many will is not us so actually path. and it's clear a this And to follow surprise not how that

Ross Seymore

Sandeep. I for there, detailed Thanks quick one hope the for answer relatively Balu. One,

the some etc. not that really some color On of the is going really I on, quarter gains, said cuts, side, despite change you impressive are to efficiency incredibly mix. know those sort doing sequentially the cost Any third gross margin gross margin sustainable. you're

off great. would on that on the little be Just a color pulling gross you're more how margin

Sandeep Nayyar

XX.X% sector impact the down is in the as think I down, and similar offset be mix XX%, to even of Yes, is because QX. to largely of it's it's I be communication kind in right to being slightly going what guided will to slightly QX, the

So into non-GAAP to the QX. to or And for what nearly four been saying quarters I think much talking a pretty will continue that have and I I've XX% aligned approximately it's XX% the for for while. about XX.X% year, three been

Ross Seymore

you. Thank it. Got

Sandeep Nayyar

And the come area. assembly and from reductions test cost

Ross Seymore

Thanks, Sandeep. Perfect.

Operator

question of Your line the SIG. Rolland Christopher next of from comes

open. is line Your

Unidentified Analyst

inventory consumer back guess I Haberle half, a front where the Rolland. for Chris and year of I kept seasonality half consumer you had in touched year, kind on second I the about questions for as row, yet. you year similar seasonality last of second better experienced can that kind Thanks correction it for about the David the think today. inventory Hi, on issue you you of sell-through you quarter. a just talk talk Maybe this sell-in was back our sounds here Is the taking first working year? the question, an same seeing you think behalf the through half a Maybe of than changing bit given there of quarter. in is think what phenomenon the the about we're in and like second

Balu Balakrishnan

reason supply main the for they because build disruptions. chain in were very is our the concerned quarter, of the Well, first inventory

So they ended up buying a lot of products.

of So in AC it other bit little therefore in because the we we actually AC the reason consumer. air second AC, by a that, will first market, seasonality there's rest the think offset we different projecting revenue conditioning in recover than that build half, in roughly quarter. think inventory seasonality Having and flat of that bit the of QX, a little a are market will the the the for but be of said

is any now, do long fine. consumer in market, than the market. run, pandemic more will the Right impacting other Now the consumer just

contracting, and out buying work not and imagine forth. world that with not people on can the appliances You of GDP around surprising TVs it's so so the and many and are people so

we once that be reasons. think over for will demand we long problem, in are but well the a there run, do So, pent-up extremely this we and will multiple

we And the motor growing on in new content into share We of top have will products go of our control. have that dollar is like that appliances. BridgeSwitch significantly

away And of competitors that two number so market. we from -- and a are our number moving see one number

just that but in is pushing pandemic we share we as demand really at the term not short all. gaining So speak. run it about the are long we worried down, the in the It's are

Unidentified Analyst

then kind are this you've of but Thank inventory seen on there. internal highs of time really follow-up all your my is And hitting levels in side, Understood. kind as not, inventory as they you concentrated. or are years, high the and

products be this need beginning the I of is and was inventory more markets? a color think about consumer kind to go inventory end I great? that. more would the the color of the front inventory for and talking at smartphone direct know in are levels lot shipping OEMs you that on possibly additional across of Any Or

Sandeep Nayyar

majority Well, inventories. -- is It wafer is so the the of in it form.

know across you our as board. So, products go the

kind by but very of kind my want days I start to because of very partnerships you'll started is well, come that get model, moderated because back, script our and is spread which wafer back gradually, into we do as it's capacity, indicated we have we the we to half we will of seeing XXXX, I it the have days. on So XXX and we plan but long-term adjusting second to our that our mentioned purchases, have the XXX keep it as

Operator

Williams Loop comes of of Your David the next Capital. from line question

Your line open. is

David Williams

Thanks.

wanted what XG and maybe about talk what you're you're and of a maybe maybe appreciate in seeing I segment seeing levels or in see maybe XG versus us that the in to would it. the So split helpful. you terms kind handsets, be if comms I certainly of little XG if could power legacy the there maybe could of the handsets mix give you bit

Balu Balakrishnan

Yes, the is the I -- heard other one – cellphone

David Williams

IoT XG.

Balu Balakrishnan

XG. Oh

Okay.

the are hungry phones. use to they octagonal applications power likely more and power phones be on run to to applications. But XG because higher XG will The simply the that XG, phones used phones. chargers, we their down what the faster XG non-XG somewhat than applies XG both meaning charging faster So that call, can are we lot battery are faster

to have phone. otherwise hard a a the So charge will on fast XG have has the time for keeping you purposes charger, practical

to You may have it than a more a charge once day.

benefit that market. is faster the the driving charging So XG of

you In watts people terms would gravity, up are, XX but seeing is watts had XX watts to of I'd roughly around it's I are level me to definitely year, if now. we asked last power levels, where say have most the said move that center power of XX

Some of designs volume and the it's high outside are XX China in watts, watts watts. XX XX between around China, of

So watts people in that's real probably watts of seeing levels was there a real and high XX We But design. kind increasing. cellphone six That's power the range. using power XX the the that in watts. But even end, XX ago design are on and talked about months we about general, charger high-end. are, a

David Williams

of win maybe Okay, terms seeing design more great. XG-type And wins handsets? in you around traction, the are design

Balu Balakrishnan

XG said, of us does charger extent and phones. but to the to fast it XG. require octagonal chargers to XG are faster As XG same a go benefits kind we we charger can sell I the that --

David Williams

Okay.

Balu Balakrishnan

slow charger, most But XG fast demand likely charging. fast a and XGs can will whereas both do

David Williams

sense. then guess have what more Quick Charge think that maybe good you What makes the drive internationally, maybe terms it that up maybe XXX drive would earlier you thought -- how maybe do their think announcement, for but any I box that adoption domestically on you X.X. to the Okay, rates of so than And previously? about in helps quickly more market do than that this the Qualcomm maybe

Balu Balakrishnan

becomes poly higher you XXX technology, -- and customer a when the you have huge we drives power GaN GaN more to go the because unless ASPD technology. toward watt it charger, technology, the more our use the mean, the I Absolutely. charger

as unless GaN I technology. charge watts, levels the XX up. think go will at be poly the power too use will big GaN Even much the attractive the become you more

So the we that because as a successful advantage date. we have to to GaN us see significant commercially only technology

do who cellphones. we are customers have we for who customers for asking watts for have XXX are asking XX watts, So their

working we are So them on speak. as we

David Williams

GaN-based -- Great. one, can receiving expect provide you of can kind And color you maybe how you today you're trend? products on then revenue revenue from the that any last the of directionally that if to magnitude frame-up

Balu Balakrishnan

then be the that Last could year, this design be more double, could and we than for are even working on roughly on bigger wins example it mid double are will that the working in -- we we think we designs, on millions, we did year year, single-digit next next based year jump.

David Williams

much. Certainly appreciate Great, so time. your thanks

Balu Balakrishnan

David. Thanks

Operator

of the [Operator Gus question of Instructions] Your next Richard Northland. comes line from

is line open. Your

Gus Richard

question. taking Yes, thanks for the

the consumer in -- product peaked has in market to be pressure looks been down or like that line Over flat revenue the to it's in happening time, business, and down, arc 'XX what's end growth? going again. cause to been On of that 'XX-'XX slightly

Balu Balakrishnan

different they reasons Well, are all each year.

in remember has you If down is there Especially dramatically. appliances like the course for And for China the down. come of demand and downturn India places this cellphones is India, they then the appliances. year was a shut appliances. in in that and China COVID demand impacting where are completely

as you said cellphones is XX%. by think I down

if sales share. So continuing the having look are gains, we at gain we said that, to

number left has which our that two to number us and share is competitor one in market has market. the market the losing primarily in competitor, Japan Our actually been -- customer

but to normally continue consumer do good even when what reason the one shape. it, other, we come will down, we because downturn and is the right, it's we a been out which in be that will gain market But of of think has I So not share, in share. you're or very we for

We are only gaining not share.

increasing. is content dollar Our

Gus Richard

-- other a is working watt access it but with. to it. Richtek working just banned, -- announce showing quarter I Okay, they only I'm a they're not then absolutely this and up cellphone Huawei Huawei, is they're know I sure the accounts at I did and wondering believe got XX I'm or it's function Richtek you're doesn't is technology? not with charger, think have just of because your market, on And it the

Balu Balakrishnan

number customers case of much so superior fit more compact primarily difficult a They a won Huawei, count China, of always But very a we more into that certainly than in of have small count. is makes in it it have Their solution our our component form count, is gone to them, choice. have to component don't it but component against Xx they factor. the

to go that choice solution. they have think our people So would is choose with But there I that. a

is technology solution the that size. have really has no We of advantage fact, there In efficiency charger of for cellphone other market. and component the best advantage really the count,

Gus Richard

it Huawei your quarter. the away to traction seeing an of does that company phone market, if struggles communication think number If or in accelerate starts that? are kind Balu, a you because rollover business gain last one that And to or -- goes I accelerant was and

Balu Balakrishnan

because share the will will remaining certainly Chinese the competitors it companies or China. outside non-Chinese go Well, of the either to

they on see if impact revenue. our will So a we positive decline,

Gus Richard

Okay, All right. so much. got it. Thanks

Balu Balakrishnan

Thanks, Gus.

Operator

further the presenters. There call lines this no phone over the are time. back at turn over to the questions I'll

Joe Shiffler

right. All

will it Thanks there. listening. everyone leave We for

have will on investor this and is call our available investors.power.com. for of website Thanks which again replay a listening, good We afternoon.

Operator

This concludes call. today's conference

disconnect. now may You

Power Integrations (POWI) 1 Aug 202020 Q2 Earnings call transcript