Power Integrations(POWI) - 2024 Q1 - Quarterly Report

Financial Performance - Net revenues for Q1 2024 were $91.688 million, a decrease of 13.8% compared to $106.297 million in Q1 2023[12] - Gross profit for Q1 2024 was $47.780 million, down from $53.957 million in Q1 2023, reflecting a gross margin of 52.1%[12] - Operating income decreased significantly to $470,000 in Q1 2024 from $5.757 million in Q1 2023[12] - Net income for Q1 2024 was $3.954 million, compared to $6.875 million in Q1 2023, representing a decline of 42.0%[12] - Earnings per share (EPS) for Q1 2024 were $0.07, down from $0.12 in Q1 2023[12] Assets and Liabilities - Total current assets decreased to $502.464 million as of March 31, 2024, from $511.600 million at the end of 2023[11] - Total liabilities remained relatively stable at $67.598 million as of March 31, 2024, compared to $67.627 million at the end of 2023[11] - Cash and cash equivalents decreased to $56.443 million at the end of Q1 2024 from $63.929 million at the end of 2023[20] - Total stockholders' equity decreased to $738.178 million as of March 31, 2024, from $752.241 million at the end of 2023[11] - The company's accounts receivable decreased from $53,147 thousand on December 31, 2023, to $42,325 thousand on March 31, 2024, reflecting a reduction of approximately 20.4%[28] Inventory and Credit Losses - The total inventory increased from $163,164 thousand on December 31, 2023, to $167,865 thousand on March 31, 2024, representing a growth of about 2.1%[30] - The allowance for credit losses increased from $681 thousand on December 31, 2023, to $844 thousand on March 31, 2024, indicating a rise of approximately 24%[29] - The provision for credit loss expense for the three months ended March 31, 2024, was $684 thousand, up from $439 thousand for the same period in 2023, representing a 55.7% increase[29] Marketable Securities - The company's total marketable securities amounted to $243,163 thousand as of March 31, 2024, down from $267,688 thousand on December 31, 2023, a decrease of about 9.1%[39] - The fair value of cash equivalents and marketable securities was $256,124 thousand as of March 31, 2024, compared to $267,688 thousand on December 31, 2023, reflecting a decline of approximately 4.3%[38] - Total marketable securities amounted to $247.640 million, with gross unrealized gains of $967, and losses of $711 as of December 31, 2023[41] Customer Concentration - The Company's top ten customers accounted for approximately 77% of net revenues for the three months ended March 31, 2024, compared to 78% in 2023[57] - As of March 31, 2024, 88% of accounts receivable were concentrated with the Company's top ten customers[61] - Sales to distributors were $66.4 million for the three months ended March 31, 2024, slightly down from $66.8 million in 2023[57] Dividends and Stock Repurchase - The company declared cash dividends of $0.20 per share for Q1 2024, an increase from $0.19 per share in Q1 2023, resulting in total dividends paid of $11.384 million compared to $10.868 million in the prior year[69] - As of March 31, 2024, the company had $11.3 million remaining under its stock-repurchase authorization after purchasing approximately 207,000 shares for $14.6 million during the quarter[67] - The company’s board of directors has authorized future stock repurchase programs at their discretion, depending on financial conditions and operational results[67] Tax and Legal Matters - The effective tax rate for Q1 2024 was 0.5%, significantly lower than the 8.0% effective tax rate in Q1 2023, due to geographic distribution of earnings in lower-tax jurisdictions[76] - The company maintained a valuation allowance on deferred tax assets in California and New Jersey, indicating ongoing tax strategy considerations[77] - The company has ongoing legal proceedings that may impact its financial condition, but it believes it has strong defenses against the claims[85] Product and Market Strategy - The company designs and markets integrated circuits primarily used in AC-DC power supplies, which are essential for various electronic devices, including mobile phones and electric vehicles[93] - The company’s products are also utilized in high-voltage applications, including industrial motors and renewable energy systems, indicating a focus on market expansion in these sectors[95] - The company plans to continue expanding its addressable market through advanced product offerings and entry into new applications, including automotive markets targeting electric vehicles[101][104] - The company’s EcoSmart™ technology significantly reduces energy consumption of electronic products in standby mode, contributing to improved energy efficiency and compliance with regulations[101] Operating Expenses - Total operating expenses decreased to $47.3 million for the three months ended March 31, 2024, from $48.2 million in the same period of 2023, mainly due to lower stock-based compensation and product-development expenses[110] - Research and development (R&D) expenses decreased to $23.2 million from $24.0 million, primarily due to reduced stock-based compensation and product development costs[122] - Sales and marketing (S&M) expenses remained stable at $15.7 million compared to $15.9 million in the prior year[123] - General and administrative (G&A) expenses increased slightly to $8.4 million from $8.3 million, influenced by prior year adjustments related to bad debt recovery[124] Revenue Breakdown - Geographic net revenues totaled $91.688 million for the three months ended March 31, 2024, a decrease from $106.297 million in 2023[64] - Total net revenues from the Americas were $5.005 million for the three months ended March 31, 2024, down from $6.483 million in 2023[64] - International sales represented 98% of net revenues for both the three months ended March 31, 2024, and 2023, with sales to the Asia region accounting for 81% and 80% of net revenues, respectively[108][118] - The revenue mix by end market for the three months ended March 31, 2024, showed 11% from communications, 11% from computer, 41% from consumer, and 37% from industrial[118] Other Income - Other income rose to $3.5 million from $1.7 million, driven by higher interest income due to increased interest rates[125] Cash Flow - Operating activities generated $15.9 million in cash for the three months ended March 31, 2024, with a net income of $4.0 million[130] - Financing activities resulted in a net use of cash of $23.3 million, including $14.6 million for stock repurchases and $11.4 million for dividends[136]