POWI - Earnings call transcript Q3 2024 | Power Integrations, Inc.

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Operator

Good day, everyone, and welcome to today's Power Integrations Third Quarter earnings call. [Operator Instructions] Please note this call is being recorded, [Operator Instructions] It is now my pleasure to turn today's program over to Joe Shiffler, Director of Investor Relations.

Joe Shiffler

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

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

statements Q&A estimate, are are the our SEC events on risks words XX-K session, expressions cause materially results and including denoted the today, those differ most filed forward-looking that should, forecast, by press Such subject with XXXX. will, XX, to actual include outlook, that discussion anticipate believe, may would, statements Our release and in recent discussed or performance. today's Such future like Form in projected uncertainties will similar risks to look expect, toward February from or implied. and

turn Now the Balu. I'll over to call

Balu Balakrishnan

Joe, afternoon. good Thanks, and

were quarter per gross non-GAAP X% up to sequentially and third with revenues on million Our of earnings of $XXX XX.X% share. non-GAAP $X.XX margin target results

be China limited category, consumer which Chinese of outlook a program, for our million, Our customers environment at quarter decrease our fourth government's the nearly outlook appliance consumer is or the buildup key the appliance in of impact. our appears soft thus sales. far quarter stimulus ahead many bulk account The by by revenue the a $X tempering of of minus long-waited OEMs to in called and million. from which of is $XXX having some a for reflects this of comprises XX% our QX plus Consumer demand out peers market. Appliances Further analog the inventory

year. to recovery forecast, returning of to XX% proceeding compared with ], while are year-over-year and Overall, starts to up midpoint our fits in be QX last we [ is growth the pleased the

We margin the expect mix. of least to our gross a thanks also high exchange to favorable market the dollar-yen and at end through year, model rate remain at next end

all our While expect XXXX, of our from the the X margin markets in grow should industrial X categories. we which highest strongest of has growth end

growth subsegments power the high expect centers. data with led efforts in transmission strength to efficiently transmission grid increasing DC Industrial enhance security, high-voltage and of of deliver DC are key power long-distance We a multiple renewable AI projects by also to and to in particular lines the meet of part power modernize energy infrastructure needs energy

PC a $X grid design designs value [ North with annual our QX, for Tenet second more expected major won high-voltage of In than operator. European dollar revenue we million ], including win multimillion

scale We of projects, other our link Japanese Arabia's X also X to drivers gigawatt for under connecting get planned islands expect Phase of and to sealing and Honshu major Neon begin X Yanbu XXXX, between Okada. and of early in an delivery Saudi and

installation planned few most this its is Metering growth XXX where the industrial to over is double the business smart years. India, driver the metering our million meters as continues of government category, notably on next year another in in track with

products We sizable migrate and and XXX customers to content our a as that efficiency dollar to X,XXX over and increase of have reliability. market earned expect time volt and achieve share to higher

in ramp, inflection revenue in While XXXX to an to leading will its XXXX. automotive revenues in early still contribute up and our industrial

subsystems are a of instead from battery in sockets early in drivetrain we the main supplies, China to success winning geographically range on evolve the battery. emergency are Building multiple our to a power converters EVs architecture of as both expanding distributed XX-volt the we requiring and with power

at a the We the vendor world's automotive on Tier Tier recent largest Japanese at heels supplier approved becoming an major X qualification X. achieved milestone important an of in September, our

using had began carbide Per-production micro at last production begin converter, have week socket on using InnoSwitch the We socket awarded InnoSwitch EV also a while weeks. to DC/DC GaN X American recent in silicon an power supply our with XXX-volt developments customers in us scheduled customer emergency XXXX. key another

consumer related EU our in motors other category, our we to driven led appliances. brushless the take seeing and In design set incremental leadership are remained appliances also to soft strong, our notwithstanding effect by standby leveraging connectivity, next added We're rules environment, being features to lighting, demand and new capture strong content activity market to position DC year. dollar

which in DC-DC ICs IMAX converters the are We voltage and displays drive of enables at elimination efficiency capitalizing use industrial BridgeSwitch motor products, higher the multiple and X output. through with the switching GaN appliances, on including of much and opportunities these applications

week, even version reliability, ease process featuring a use, with and and competitive and we the designs each we X, our achieve plan we industry's cost GaN device X,XXX-volt performance, executing Day our the concluded that milestone GaN new presented first cost, We mind: in of superior its X marking this early with silicon to GaN attributes of our Earlier switch technology map developed key be at voltage with to them. in on XXXX. introduced InnoMux are on to power, We mass of adoption. proprietary on road another Investors had

GaN reliable and have now to our field inherently automotive an that with reliability about parity with the struggled it. prove that than from to but are past has trillion ease data operation and to have use other customers hear use of center X cost hours We we of the top the devices. gain over performance. we the silicon have reduction we discrete years, and verge on GaN be Reservations concerns executed advanced PowiGaN aggressive technologies, of road AI on more far most X designed MOSFETs, superior map Over

to true switching because because the its and discrete speed. our GaN harder defined GaN Not for XX also use, extreme commoditized, system-level the is strategy of eventually they high Our are also especially power use years. that only approach of is to product easy past this has our devices of

PowiGaN of the eliminating system-level in with incorporated trickiest comprehensive optimize designing and aspects controllers products of drivers switch our provide innovative that the switches the with GaN. protection and are performance

with Engineers, products, of performance superior products silicon-based no GAN's the taking design same versions with of advantage our effort. can GaN added use familiar seamlessly

well ranges use. our GaN to this worked strategy are that performance high-volume InnoSwitch products with and fact, now has enhance with customers so power to products our we In refreshing that extend some the love of products legacy

These targeting to estimated next We an higher over system-level years. reach address applications EV our today, also AI we have our chargers, more. GaN few goal will pipeline million help onboard SAM data of the products a us and $X including expanding power telecom products of infrastructure don't center, new

a In path is terms and to XXX volts, voltages. limited the our higher leading of while voltage, process technologies foundry offer unique device technology clear to

prefer our come. with now we customers announcement unstable Many in this surges industrial for devices more and spikes, earlier voltages. AC voltage XXXX have against X-phase at GaN X,XXX grid and volts Following XXX with insurance as applications areas to XXX ratings week, volts, and higher especially volts, an

we technology and of The of of is now output up addressed to power supplies current from in EV increase map the capability volt for which continues X,XXX systems, essential final track In XXX road kilowatts. only approaching power a is can The market, multiple today battery are our our volt GaN silicon that in carbide. by and be directions. is fly X,XXX tens and rating back

of in technology and an kilowatts, make performance. of all-new alternative would carbide superior much to also are we GaN can cost We hundreds up inverters believe developing capable with at delivering an which silicon drivetrain lower

quarter years a we still the development. away, our necessary help will and progress our few Odyssey breakthroughs last are of While excited our about accelerate are acquisition

will driver GaN the disruptive more should While sales. in GaN XXXX when a years over products account potential full we for growth unfold wider to XX% of expect many be significant to than adoption of GaN come,

multiport Recent for for game now ICs, ramping a wins ViO a power include and ICs. XX-watt InnoSwitch adapter AUSU major hyperPFS next-generation and XXX-watt with InnoSwitch GaN GaN containing console factor adapter notebook

We the to next add existing generate India. such ramped customers reduce our year seeing wireless to in migrate year design power of the supply. products, XG growth with fixed incremental mainly program silicon-based gain to mix, as should as That this size are but the also GaN, designs

growth we year-over-year industry-wide our softness, QX. To strong demand conclude, outlook though reflects expect in

from While due in the we market year. prior this computer the early Combined up be for down high categories will year be suffered to China sales to XXXX mid and consumer the losses teens cellphone will revenues industrial, into XXXX.

and XXXX, power, I'll new review turn the We and Sandeep by over expect that strong to non-cellphone financials. design range return to growth now of sustained a growth carry applications. And momentum of driven for a in by products into wins a GaN to in broad communications, it high

Sandeep Nayyar

Thanks, Balu, afternoon. and good

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

implied above better gross our of midpoint per the over non-GAAP in just as million, were share came while $XXX on we and were level earnings our diluted slightly in $X.XX revenues quarter expenses. guidance operating Third guidance, our margin the

Broad-based While QX, repurchases, $XX and believe mid-teens thresholds compared and our high-power were expect industrial in for X% showed also price by now confidence share coming levels. balance revenues and distribution sequentially, prior historically growth, quarter. sequential outlook sequential for are well noted, returning Board to are we at to as to volume has declared as our lower X% and year-over-year metering XXXX, the quarterly the increase days, we the automation reflecting subject building further in by prescribed inventories and are Balu growth we commencing healthy applications. grew strong our up QX million as in revenues dividend in Revenues home results. authorized to Board. Returning in poised a improvement as sheet, Industrial the normal declined driven

up by in was Revenue our driven Consumer air was wireless sequentially appliance in offset chargers. aftermarket softness as major category in mainly computer and strength business as of fixed category well strength XX% gaming. seasonal conditioning notebook the sequentially XX% on India up as in chargers. communication growth OEM ramp was sequentially, in and The seasonal from XG smartphone the by was flat

and Overall, at inventory increase quarter. the trends weeks, decreased for the each up higher consumer of for X.X driven less the entirely resulting the than end with channel of June prior channel consumer. increased from quarter. inventory to other inventory sell-through the mentioned, X.X consumer compared reflecting sell-in, categories for to in Distribution the Channel weeks from was Balu by prior

gross Non-GAAP for and Communications. XX% was back-end percentage mainly Revenue mix higher XX% XX.X% volumes. up quarter XX% quarter for Computer by prior third the and quarter, the the point margin from Consumer, manufacturing was driven XX% X Industrial

for sequentially Non-GAAP million expenses $XXX,XXX down per Cash of the million. Other for the for Odyssey. third $X.XX from Non-GAAP were was $XX earnings $X count while quarter was diluted the operations Odyssey $XX.X quarter unchanged were $X.X million, acquisition and share uses addition from operating the share. of Diluted $XX about million flow million despite from for quarter. key CapEx were XX dividends. prior million, $XX was cash the million

fell Inventory days days down to prior $X.XX from end, the quarter XX at quarter.

the to Turning outlook. QX

revenues or reflects an percentage in to be category, and the compared should the plus be increase revenue market. highest Non-GAAP to the million. We -- We margin midpoint minus $X gross which XX.X% expect million, at end margin sequential XX.X% between as is from slight industrial $XXX XX% increased of QX. our

million, should operating Non-GAAP $XX.X head quarter, driven increases. $XX from up modestly the count expenses between by mainly be third million and

For year, point the Artis will from X increase purchase. OpEx the prior year driven just the by be with of the up X% full non-GAAP percentage

XXXX. effective remain for and then increase into the low our expect I Finally, in QX mid-single single to the digits to in rate digits tax

operator, let's now begin And Q&A. the

Operator

take will Williams question Benchmark. our [Operator We from Instructions] first with David

David Williams

and around here see announcement little but But just had what to forgive I lots that, maybe maybe how given some lots in? did you GaN little would of want a ask of X,XXX-volt moving And think I like just call how one recently. that of that have the And bit here. automotive? you fits Can it things, large the talk Is industrial ramps? the markets, you just where demand thing me, seem pieces you that was developing? a And bit about missed issues,

Balu Balakrishnan

XXX cars The X,XXX X,XXX systems to operate The trucks required vehicles moving battery from XXX-volt volts. Yes. moving to vehicles, and X,XXX-volt larger in like automotive XXX is from and the are are applications. volt heavy and to

very X-phase for industrial transformer, And perfect in these voltage meters directly rating prefer the on is to have low lines a so sit impedance they that also this fit next a for because pretty example. applications, to And market. high

they As significant and on. transients lightning from get a can result, so

they So prefer X,XXX volts. the

served solution, is by believe GAN market both better we is costs. Currently, terms this silicon much in efficiency of carbide and a

David Williams

maybe there just to really broader, but you areas of renewables thinking would lastly, thinking election, of appreciate new some just will the think solar specifically then Great. by the very I the any about be the regulations. helpful. [indiscernible] of color. other They're but administration efficiency your And benefit will also are be And and energy I applications, just ask maybe wanted color helpful. that and or be on impacted -- business

Balu Balakrishnan

That's question. so would left when has less than I coal and haven't But to of now that. the and renewables on. electric good expensive all plants. The it a train I thought say through cars are comes the renewables that station

installing So most additional that reason. countries are in for capacity renewables exact

Of now critical climate last had given also to think course, we few benefit, all I years. the the disasters environmental world there's the recognize is which over us have entire the

down all electric it So cars am either or or concerned not at I DC way any in systems. slow renewables high-voltage that transmission will

is more DC AC it it's quite nuclear. integral power The efficient much high-voltage about more to DC bit is any station, little whether a talk or me renewable transmission And transmissions. than high-voltage really transmission. let new And

have have to is do through lossy the AI if onshore the you cables. to have example, be have to transmit and you transmission. load, DC wind AC the the and to way power get would exactly that And farms, transmission efficient let's powerstation offshore to a you of center, DC very that. does data underground way terms If you for then in a way have to only that a say,

trend business. on I has any think So don't impact the our

applications and us on like a fact, high-power of need for we more huge in large liquids ground, because high-power generating the into pump would a into terms market positive say terms they of sell that's In impact level to it fracking oil, will business. business I motors have our our in board

Operator

our Stifel, from with take next question Svanberg And Nicolaus. Tore we'll

Jeremy Kwan

This calling Jeremy is Tore. for

compares that much we've GaN? And of about the you that to Let add congrats nice -- me about that in price it you in waiting lead a silicon how Can almost I and carbide, talk for it's about to I XXX-volt you just to with advantage product on guess, have very talk high-power follow -- have my how parity price can you point. space? on been of, guess, the see that up how talked silicon. much maybe you maybe

Balu Balakrishnan

excellent Jerry. -- Thanks, question.

Let with also next close And year even very me with start MOSFETs. within we're to volts, being GaN, And parity with with getting very XXX which silicon high-end primarily there, the cost silicon the XXX-volt so. competes at the are MOSFETs competitive the carbide. we think we or or

AI cost-competitive Of course, if you carbide. applications are a cost competitive to also a includes silicon electric And you silicon include have infrastructure. telecom for onboard centers, It includes it dramatically data charges these vehicles.

are opens will XX-kilowatt have the, be XXXX, in All already sometime us. and I X ready to huge these products a say, that products of and we would range, up development. These market in for in

more very kilowatts. So our competitive we course, of way much competitive up of existing to XXX-volt than be technology silicon can carbide with all the silicon tens and,

X,XXX like watts. up we higher with competitive to go is competition voltages And you are volts, XXXX carbide silicon real very XXX-plus when Now to silicon about the carbide. volts and

in Our are XXX competitive under products currently, the we've introduced -- we very watts. there. are just And

if levels you want kilowatts, to hundreds power higher Now that's like we go need much new to technology. where of

with We the the Semiconductor, comes are up comes the will on knowledge it the with also the progress that. for Odyssey have with a able fab. now. we be of some device. lot technology And people working because that acquisition time And to It with speed made we on of of

have to very And carbide. to silicon we get to few get We have X now we compared there offering when And get next beginning we a feel years. in to there, competitive that breakthroughs X more can a we'll are the there.

levels, only much than at be It will in carbide higher not will cost silicon performance those lower silicon be power it but also carbide.

of energy long that all And which know, So silicon a not. GaN carbide cost is investment, -- amount which GaN be going as term lot the you whereas require manufactured, doesn't consumption effective does anywhere is of it to to because of and at carbide therefore, they near silicon similar And are requires temperatures inherently silicon. requires. the capital

Silicon carbide investment about the of which requires lot and you do the of of silicon as And temperature money X,XXX it the manufacturing lot with way. a at many half And the is to a lot a that. takes of energy know, by degrees, of sun, not that is GaN. capital for case

all once several we have the the way hundred to really be attractive alternative and So to silicon think carbide kilowatts GaN we new this running. technology up would up most

Jeremy Kwan

give mentioned GaN, GaN. your year. XX% of consisting of you as how to I portfolio very very, how think products also a us Can targeted a That's convert? as for some of your now? to of in of migrating you GaN you know I And And maybe revenue intend follow-up, you sense much next legacy maybe helpful. much

As out, that you out drive X look further of -- expect to it how GaN? from revenue do might be you much X kind to years

Balu Balakrishnan

is to power in Everything at GaN this using our at point. pretty as a except of focus designing switch GAM, silicon very which we all is levels, much our replace high-voltage products. going now really is low are not

higher focusing levels. and We are on higher power

charger XX, the silicon not need a AI will won't at those easy are get performance data the product because For GaN reliability kilowatts, the power products. of used sign. levels, all to way is cut product, predominantly from view, power use. That's is only to enough technology though high that's even those technology at least XX our not where today, point only customer's example, is just way levels you or only need. the GaN That's are you to it get The the onboard center silicon

system-level anybody have as product We technology. We sell easier-to-use we discrete. as we higher because don't much them also sell have them GaN products. else's And reliability than

idiosyncrasies customers with the terms getting performance not have to most GaN, of don't out of all GaN, deal So but also the protecting the of only GaN. in the the

in our ben is we revenue, surprised to terms you of we in be GaN. if And -- we the cross -- be we the to longer would the in products that's ask in $XXX growth GaN of be were mean that I But wouldn't -- So some GaN if takes think seeing million be to where going me I future company of if markets. I because you areas, products. for by to are new GaN adopted. -- our But only it X all XXXX

grew people where, are cell all there of GaN nicely year drag therefore, onwards. to very out course, nicely But know, phones, are going in box, little phones, grow out as in actually a cell markets, revenue market. of of that you take you was except we year. And we this very and We a the and bit grew going if next

Sandeep Nayyar

Yes, of is going years. next in see in be growing really bit. years, a few XX% can our being And GaN X Jeremy, to to X next the it about revenue the I quite

Operator

take next from We'll Rolland Instructions] our [Operator Christopher Susquehanna. question with

Christopher Rolland

worse that for first guess, as -- I for versus next segments early of of had would kind the down a if rank there maybe guess, be quarter. an it the all, early bit growth. you us what we would seasonally was track I better, I flat. I your think it's but force guys March, expectation I help if wonder know sequential. be probably could and for outlook What you X%

Sandeep Nayyar

from as I Industrial the So dollar kind of we flattish. quarter, a indicated, next the will standpoint, for segment be think

a higher be segments down. will lower, is revenue will other percentage the of And because the -- revenue. as So be X

directional the QX. that's time at So can this of for the point we you give answer

to is in typically, phones lower. I lower cell is high-power see it in early, starts historical little air QX, and ramping In terms, QX, a And are it's industrial think which but be a little AC, conditioning the an the segment, up. a little tends you which business, in

can that's for So early. QX. I the that give it's But directional idea you little a too

Christopher Rolland

you still built if understand would stimulus, distribution across into do sell-through? this think Overall, inventory And I you where I yes, I ahead is understand, then finished How kind the understand sell-in of versus sell lastly, worse. the what these tying is China sell-through from just and markets just inventory And finished end think was appliance quarter? then And of then Yes. all market, for across and this white that saying were all it's to the inventory correctly. great. that this, putting goods together like

Sandeep Nayyar

Yes.

major of said the was -- And sell-through call than we consumer. sell-through. the the higher As on was area sell-in mainly our that in reason the

-- If Chinese below of you entirely our It look at our in because was the sell-through. the was greater consumer segment. quarter, inventory consumer inventory was prior this our but way sell-in quarter, weeks, X build, than the

to a is as result, while channel consumer in our come area, all as level. normal, other slightly above which So X has back it weeks, the inventory the normal the is the

Christopher Rolland

Understood. Okay.

And the include correct of sorry, box dynamic that Was appliance a inventory? did correct? and build the that on get did -- ahead that would white -- I

Balu Balakrishnan

In Yes, consumer positive. the that's first we which strong false kind was business, half, correct. very had of a

government which half they especially are purchase to the will very consumer of Our incentives thought for because customers, appliance of expecting the be provide in second appliances. strong, is China they customers,

incentives all, came also uniform. the late, Now far first of of on there's parts different not the it so incentive clear are or significant incentives. not those benefit it's in that the to different And impact China. They demand. And us any is of very

a demand to that. don't be weak. they see are expecting demand The strong customers appliance second the So didn't in half, the continues see

the they up supply product the build they a for inventory. And product wait supply. of before remember, want because have you power they bunch end So first ended power they the to don't with to the build end always

of inventory we end a -- first the customers. slowed consumer had the at second the the because business has of significantly half our in unfortunately, finished so and very down And half, it product in strong goods

it's pointed quarter. out inventory Sandeep so below it bad, above, distribution slightly but significantly is last was not Our as

was was a the sell-through us surprise that consumer it So in to slow.

half strong the second first half. based We the we in a expected on consumer what in saw

Operator

to the Joe in will the queue. program questions further back no have Shiffler. over I I turn

Joe Shiffler

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

Operator

you today's conclude program. participation. your This does Thank for

Have Thank may You participation. wonderful at disconnect for your any time. day. you a

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Power Integrations (POWI) 6 Nov 242024 Q3 Earnings call transcript