Power Integrations(POWI) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q3 revenues were $121 million, up 13% sequentially and above the top end of guidance, with a forecast for Q4 revenues of$ 130 million, plus or minus $5 million [8][19] - Non-GAAP gross margin decreased by 80 basis points to 50.3% due to a revenue mix shift towards lower-margin categories [22] - Non-GAAP earnings were$ 0.40 per diluted share, with cash flow from operations at $16.2 million [23][24] Business Line Data and Key Metrics Changes - Computer category revenues grew over 75% sequentially, driven by demand for inbox fast chargers for tablets [19] - Communication revenues increased by about 25% sequentially, while consumer revenues rose in the mid-teens, and industrial revenues declined in high single digits [20] - Revenue mix for the quarter was 32% communication, 31% consumer, 28% industrial, and 9% computer [22] Market Data and Key Metrics Changes - Strong demand in the consumer category was driven by appliances, while the communications sector benefited from trends in the smartphone market [9][10] - Channel inventories fell sharply, ending September at 4.3 weeks, down three weeks compared to the prior quarter [25] Company Strategy and Development Direction - The company is focused on expanding its GaN product offerings and expects to double GaN product revenue this year, with potential for further doubling in 2021 [16][96] - The company anticipates that fast charging will be the largest contributor to growth in Q4 and expects continued success in this area in 2021 [14][15] - The automotive market is seen as a long-term opportunity, with gradual revenue increases expected over the next several years [55][56] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains uncertain due to the pandemic, but they expect a rebound in demand for appliances and continued strength in fast charging [19][26] - The company is optimistic about the growth potential in the computer market, driven by work-from-home trends and new design wins [84][85] - Management highlighted that the fast charging market is expanding into lower-end smartphones, which will contribute to revenue growth [71][72] Other Important Information - The company paid out$ 6.6 million in dividends following a dividend increase announced in conjunction with a stock split [24] - Capital expenditures for the quarter were $14.1 million, primarily for building construction and capacity additions [23][91] Q&A Session Summary Question: How is seasonality expected to behave in Q1? - Management indicated that Q1 could be slightly higher than normal due to strong sell-through in appliances and communications [35][36] Question: What are the expectations for OpEx growth relative to revenue growth in 2021? - Management provided a framework suggesting a slight increase in OpEx, with revenue growth expected to be in the low double digits [38] Question: Is GaN penetrating non-smartphone applications faster than expected? - Management expressed enthusiasm about design activity in non-smartphone applications, noting significant interest in areas like TVs and refrigerators [44] Question: What is the outlook for the automotive market? - Management stated that the automotive market will take several years to develop, but they are well-positioned for future growth [55][56] Question: How does the competitive landscape look with recent partnerships in high-voltage applications? - Management noted that they do not compete in the high-voltage market but have been gaining share in lower power levels against competitors [64] Question: What is the growth outlook for the computer market? - Management expects continued growth in the computer market, driven by strong demand for tablets and new design wins in notebooks [84][85]