Power Integrations Inc. (NASDAQ:POWI) ranks among the best cheap semiconductor stocks to buy. Benchmark maintained its Buy rating and $55 price target for Power Integrations Inc. (NASDAQ:POWI) on September 23, following the disclosure of a key management departure. According to the company’s reports, Chief Financial Officer Sandeep Nayyar will leave his role on October 4 to take over as CFO at Altera. As a result, Eric Verity, senior director of finance, will serve as interim CFO while Power Integrations ...

Power Integrations Inc. (NASDAQ:POWI) is one of the oversold tech stocks to invest in. On September 22, Power Integrations announced the departure of Sandeep Nayyar from the company, where he served as CFO since 2010. Altera Corporation, the world’s largest independent provider of pure-play Field-Programmable Gate Array/FPGA solutions, announced the appointment of Nayyar as its new Chief Financial Officer/CFO. Nayyar is expected to use his 3 decades of financial leadership experience in the semiconductor, ...

Core Insights - Power Integrations announced the departure of CFO Sandeep Nayyar, effective October 4, to pursue a new opportunity [1] Company Summary - The company is undergoing a leadership change with the exit of its Chief Financial Officer [1]

Core Viewpoint - Power Integrations (NASDAQ: POWI) has faced significant challenges in recent years, leading to a persistent decline in stock value and reaching a new multi-year low [1] Company Summary - Power Integrations specializes in high-voltage power conversion solutions for the semiconductor industry [1] - The company's stock performance has been notably poor, indicating potential underlying issues within the business or market conditions [1]

Core Insights - Power Integrations (POWI) reported quarterly earnings of $0.35 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, and up from $0.28 per share a year ago [1][2] - The company achieved revenues of $115.85 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.90% and increasing from $106.2 million year-over-year [3] - Power Integrations has consistently surpassed consensus EPS estimates over the last four quarters, achieving an earnings surprise of +2.94% this quarter [2][3] Earnings Performance - The earnings surprise of +2.94% indicates a positive trend, with the company also delivering a surprise of +10.71% in the previous quarter [2] - The current consensus EPS estimate for the upcoming quarter is $0.45, with expected revenues of $128.16 million, and for the current fiscal year, the consensus EPS estimate is $1.55 on revenues of $476.25 million [8] Market Position and Outlook - Power Integrations shares have underperformed the market, losing about 21.7% since the beginning of the year, while the S&P 500 has gained 7.1% [4] - The Zacks Industry Rank places the Semiconductors - Power sector in the top 41% of over 250 Zacks industries, indicating a favorable industry outlook [9] - The company's current Zacks Rank is 3 (Hold), suggesting that shares are expected to perform in line with the market in the near future [7]

Financial Data and Key Metrics Changes - Revenue for Q2 increased by 9% year-over-year to $116 million, with a sequential increase of 10% [23] - Non-GAAP EPS for Q2 was $0.35, with a non-GAAP gross margin of 55.8%, down 10 basis points from the prior quarter [24] - Cash generated from operations was $29 million, with $44 million returned to stockholders through buybacks and dividends [26] Business Line Data and Key Metrics Changes - Industrial segment revenue rose nearly 30% sequentially, driven by strength in metering and high power applications [23] - Consumer revenues decreased mid-single digits sequentially, primarily due to a decline in major appliances [24] - Communication revenues increased more than 20% sequentially, mainly due to seasonal trends in cell phones [23] Market Data and Key Metrics Changes - The company noted a slowdown in bookings in July, with bookings nearly 20% below the normal run rate [33] - The appliance business, which constitutes a significant portion of consumer revenue, is expected to face challenges due to inventory adjustments and tariff impacts [58][62] - The metering business is projected to grow over 20% this year, with new design wins in Japan and Europe [12] Company Strategy and Development Direction - The new CEO, Jennifer Lloyd, aims to invigorate growth and achieve a billion dollars in revenue by focusing on R&D efficiency and product development [9][39] - The company is leveraging its GaN technology to expand into higher power systems essential for EVs, AI data centers, and renewable energy applications [13][15] - The exit of TSMC from the GaN foundry business is seen as a validation of the company's strategy to control both process technology and device design [16][66] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the near-term outlook due to customer hesitance around tariffs, impacting the appliance segment [20][21] - Despite short-term headwinds, management remains optimistic about long-term growth opportunities driven by rising wealth in emerging markets and tighter efficiency standards [13] - The company expects Q3 revenue to be in the range of $118 million, reflecting continued strength in industrial and GaN products, tempered by softness in appliances [27] Other Important Information - The company repurchased over 1% of its outstanding shares during the quarter at an average price of about $46 [23] - The company is contesting a $9 million charge related to an employment litigation case, which may impact future cash flow [25] Q&A Session Summary Question: How does the company view guidance in light of market dynamics? - Management noted a slowdown in bookings in July, leading to cautious guidance for the upcoming quarter [33][34] Question: What are the strategic priorities moving forward? - The new CEO highlighted the need to improve R&D efficiency and align product development with market needs [39] Question: How are different segments performing? - Industrial is expected to remain strong, while consumer, particularly appliances, is facing challenges due to tariffs and inventory adjustments [48][58] Question: What is the outlook for automotive revenue? - The company is tracking towards meaningful revenue in automotive by 2026, with ongoing design wins across various regions [51][52] Question: How does the competitive landscape look post-TSMC's exit from GaN? - The company believes its proprietary technology positions it well against competitors, especially in the high voltage GaN space [66][67]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 increased by 9% year-over-year to $116 million, with a non-GAAP EPS of $0.35 [22][24] - Non-GAAP gross margin for Q2 was 55.8%, down 10 basis points from the prior quarter due to higher input costs [23][24] - Cash flow from operations was $29 million, with $44 million returned to stockholders through buybacks and dividends [26] Business Line Data and Key Metrics Changes - Industrial segment revenue rose nearly 30% sequentially, driven by strength in metering and high power applications [22][24] - Consumer revenues decreased mid-single digits sequentially, primarily due to a decline in major appliances [22][24] - Communication revenues increased over 20% sequentially, mainly due to seasonal trends in cell phones [22][24] Market Data and Key Metrics Changes - The company noted a slowdown in bookings in July, with bookings nearly 20% below the normal run rate [32][34] - The appliance business faced challenges due to tariffs and inventory adjustments, impacting demand in the second half of the year [20][34] - The metering business is expected to grow over 20% this year, with new design wins in Japan and Europe [12][13] Company Strategy and Development Direction - The new CEO emphasized the goal of achieving a billion dollars in revenue by leveraging existing technologies and entering higher power markets [10][14] - The company is focusing on GaN technology to drive growth in data centers, automotive, and renewable energy applications [15][18] - There is a commitment to improving R&D efficiency to support double-digit growth in the long term [38] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the near-term outlook due to customer hesitance around tariffs, impacting the appliance segment [20][21] - Despite short-term headwinds, the company remains optimistic about long-term growth opportunities in emerging markets and efficiency standards [14][20] - The company expects Q3 revenue to be in the range of $118 million, reflecting continued strength in industrial and GaN products [27] Other Important Information - The company repurchased over 700,000 shares during the quarter at an average price of about $46, with $42 million remaining on the repurchase authorization [26] - The transition to a new CEO is expected to be seamless, with the former CEO remaining involved in a consulting role [6][7] Q&A Session Summary Question: How does the company view guidance in light of market dynamics? - Management noted a slowdown in bookings in July, leading to cautious guidance for the upcoming quarter [32][34] Question: What is the strategy moving forward under new leadership? - The new CEO highlighted the need for improved R&D efficiency and aligning product development with market needs [38] Question: How are different segments performing in the current environment? - Industrial segment remains strong, while consumer segment faces challenges due to appliance issues [46][48] Question: What is the impact of TSMC's exit from the GaN foundry business? - Management believes this validates their strategy and positions them well against competitors [62][65] Question: What are the expectations for channel inventory in the second half? - Channel inventory is expected to remain tight, with a cautious approach due to tariff impacts [89][90]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited condensed consolidated financial statements and related notes for Power Integrations, Inc [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (In thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $66,935 | $50,972 | | Short-term marketable securities | 201,801 | 249,023 | | Accounts receivable, net | 27,583 | 27,172 | | Inventories | 168,396 | 165,612 | | Prepaid expenses and other current assets | 18,188 | 21,260 | | **Total current assets** | **482,903** | **514,039** | | PROPERTY AND EQUIPMENT, net | 147,955 | 149,562 | | INTANGIBLE ASSETS, net | 7,660 | 8,075 | | GOODWILL | 95,271 | 95,271 | | DEFERRED TAX ASSETS | 37,174 | 36,485 | | OTHER ASSETS | 26,574 | 25,394 | | **Total assets** | **$797,537** | **$828,826** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | **CURRENT LIABILITIES:** | | | | Accounts payable | $31,044 | $29,789 | | Accrued payroll and related expenses | 14,881 | 13,987 | | Taxes payable | 751 | 961 | | Other accrued liabilities | 18,323 | 10,580 | | **Total current liabilities** | **64,999** | **55,317** | | LONG-TERM INCOME TAXES PAYABLE | 4,063 | 3,871 | | OTHER LIABILITIES | 24,687 | 19,866 | | **Total liabilities** | **93,749** | **79,054** | | **STOCKHOLDERS' EQUITY:** | | | | Total stockholders' equity | 703,788 | 749,772 | | **Total liabilities and stockholders' equity** | **$797,537** | **$828,826** | - Total assets decreased from **$828.8 million** at December 31, 2024, to **$797.5 million** at June 30, 2025[10](index=10&type=chunk) - Total liabilities increased from **$79.1 million** at December 31, 2024, to **$93.7 million** at June 30, 2025[10](index=10&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Condensed Consolidated Statements of Income (In thousands, except per share amounts) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | NET REVENUES | $115,852 | $106,198 | $221,381 | $197,886 | | GROSS PROFIT | 63,954 | 56,533 | 122,189 | 104,313 | | INCOME (LOSS) FROM OPERATIONS | (1,345) | 1,958 | 5,373 | 2,428 | | NET INCOME | $1,369 | $4,849 | $10,159 | $8,803 | | EARNINGS PER SHARE: Basic | $0.02 | $0.09 | $0.18 | $0.15 | | EARNINGS PER SHARE: Diluted | $0.02 | $0.09 | $0.18 | $0.15 | - Net revenues increased by **9.1%** for the three months ended June 30, 2025, compared to the same period in 2024, and by **11.9%** for the six months ended June 30, 2025, compared to 2024[11](index=11&type=chunk) - Net income decreased significantly for the three months ended June 30, 2025, to **$1.369 million** from **$4.849 million** in 2024, but increased for the six months ended June 30, 2025, to **$10.159 million** from **$8.803 million** in 2024[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (In thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $1,369 | $4,849 | $10,159 | $8,803 | | Total other comprehensive income (loss) | 896 | (630) | 1,736 | (1,727) | | TOTAL COMPREHENSIVE INCOME | $2,265 | $4,219 | $11,895 | $7,076 | - Total comprehensive income for the three months ended June 30, 2025, was **$2.265 million**, a decrease from **$4.219 million** in the prior year, primarily due to lower net income[14](index=14&type=chunk) - For the six months ended June 30, 2025, total comprehensive income increased to **$11.895 million** from **$7.076 million** in 2024, driven by higher net income and positive other comprehensive income[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity (In thousands) | | June 30, 2025 (3 Months) | June 30, 2024 (3 Months) | June 30, 2025 (6 Months) | June 30, 2024 (6 Months) | | :--- | :--- | :--- | :--- | :--- | | Common stock (Ending balance) | $21 | $22 | $21 | $22 | | Additional paid-in capital (Ending balance) | $0 | $0 | $0 | $0 | | Accumulated other comprehensive income (loss) (Ending balance) | $(1,287) | $(3,189) | $(1,287) | $(3,189) | | Retained earnings (Ending balance) | $705,054 | $733,909 | $705,054 | $733,909 | | Total stockholders' equity | $703,788 | $730,742 | $703,788 | $730,742 | - Total stockholders' equity decreased from **$749.772 million** at December 31, 2024, to **$703.788 million** at June 30, 2025, primarily due to common stock repurchases and dividend payments[10](index=10&type=chunk)[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (In thousands) | | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $55,458 | $33,536 | | Net cash provided by (used in) investing activities | $37,144 | $(948) | | Net cash used in financing activities | $(76,639) | $(46,024) | | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $15,963 | $(13,436) | | CASH AND CASH EQUIVALENTS AT END OF PERIOD | $66,935 | $50,493 | - Net cash provided by operating activities increased to **$55.5 million** for the six months ended June 30, 2025, from **$33.5 million** in the prior year[19](index=19&type=chunk) - Investing activities generated **$37.1 million** in cash for the six months ended June 30, 2025, a significant improvement from a net use of **$0.9 million** in the prior year[19](index=19&type=chunk) - Financing activities resulted in a higher net cash use of **$76.6 million** for the six months ended June 30, 2025, compared to **$46.0 million** in 2024, primarily due to increased stock repurchases and dividend payments[19](index=19&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Basis of Presentation](index=10&type=section&id=1.%20BASIS%20OF%20PRESENTATION) - The condensed consolidated financial statements include Power Integrations, Inc. and its wholly-owned subsidiaries, with intercompany accounts and transactions eliminated[21](index=21&type=chunk) - The financial information is unaudited and includes normal recurring adjustments necessary for fair presentation in accordance with U.S. GAAP, but interim results are not indicative of the full year[22](index=22&type=chunk) [2. Significant Accounting Policies and Recent Accounting Pronouncements](index=10&type=section&id=2.%20SIGNIFICANT%20ACCOUNTING%20POLICIES%20AND%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) - No material changes were made to the Company's significant accounting policies as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024[23](index=23&type=chunk) - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024, requiring enhanced income tax disclosures, but is not expected to have a material impact on consolidated financial statements upon adoption in fiscal year 2025[24](index=24&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for annual periods beginning after December 15, 2026, and the Company is currently evaluating its impact on financial statement disclosures[25](index=25&type=chunk) [3. Components of the Company's Condensed Consolidated Balance Sheets](index=10&type=section&id=3.%20COMPONENTS%20OF%20THE%20COMPANY'S%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Accounts Receivable, Net (In thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accounts receivable trade | $60,121 | $57,308 | | Allowance for ship and debit | (30,077) | (26,446) | | Allowance for stock rotation and rebate | (2,406) | (3,254) | | Allowance for credit losses | (55) | (436) | | Total | $27,583 | $27,172 | Inventories (In thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Raw materials | $105,566 | $101,414 | | Work-in-process | 31,680 | 27,271 | | Finished goods | 31,150 | 36,927 | | Total | $168,396 | $165,612 | Intangible Assets, Net (In thousands) | | June 30, 2025 Net | December 31, 2024 Net | | :--- | :--- | :--- | | Domain name | $1,261 | $1,261 | | In-process research and development | 4,930 | 4,930 | | Developed technology | 1,173 | 1,468 | | Technology licenses | 296 | 416 | | Total intangible assets | $7,660 | $8,075 | - Accumulated other comprehensive income (loss) improved from **$(3,023) thousand** at December 31, 2024, to **$(1,287) thousand** at June 30, 2025, primarily due to unrealized gains on marketable securities and foreign currency translation adjustments[10](index=10&type=chunk)[33](index=33&type=chunk) [4. Fair Value Measurements](index=13&type=section&id=4.%20FAIR%20VALUE%20MEASUREMENTS) - The Company classifies cash equivalents and short-term marketable securities within Level 1 or Level 2 of the fair-value hierarchy, valued using quoted market prices or broker/dealer quotations[37](index=37&type=chunk) Fair Value Measurement at June 30, 2025 (In thousands) | | Total Fair Value | Level 1 | Level 2 | | :--- | :--- | :--- | :--- | | Commercial paper | $8,206 | $0 | $8,206 | | Corporate securities | 201,801 | $0 | 201,801 | | Money market funds | 989 | $989 | $0 | | Total | $210,996 | $989 | $210,007 | [5. Marketable Securities](index=15&type=section&id=5.%20MARKETABLE%20SECURITIES) Marketable Securities at June 30, 2025 (In thousands) | | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Market Value | | :--- | :--- | :--- | :--- | :--- | | Investments due in 3 months or less | $15,661 | $7 | $(10) | $15,658 | | Investments due in 4-12 months | 25,976 | 94 | (6) | 26,064 | | Investments due in 12 months or greater | 158,421 | 1,663 | (5) | 160,079 | | Total marketable securities | $200,058 | $1,764 | $(21) | $201,801 | - The Company does not intend to sell and is unlikely to be required to sell securities with unrealized losses prior to recovery, as issuers are high quality and declines are due to interest rate changes[42](index=42&type=chunk) [6. Stock-Based Compensation](index=16&type=section&id=6.%20STOCK-BASED%20COMPENSATION) Total Stock-Based Compensation Expense (In thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Cost of revenues | $592 | $707 | $1,249 | $1,053 | | Research and development | 3,190 | 3,885 | 5,440 | 6,310 | | Sales and marketing | 1,922 | 2,510 | 3,508 | 4,114 | | General and administrative | 4,373 | 3,933 | 8,563 | 5,972 | | Total stock-based compensation expense | $10,077 | $11,035 | $18,760 | $17,449 | - Stock-based compensation expense for the three months ended June 30, 2025, was **$10.1 million**, down from **$11.0 million** in 2024, while for the six months, it increased to **$18.8 million** from **$17.4 million**[43](index=43&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - PSU awards granted in 2024 resulted in approximately **66,000 shares** vesting in Q1 2025, based on performance metrics including net revenue, non-GAAP operating income, and strategic goals[47](index=47&type=chunk)[49](index=49&type=chunk) - No shares subject to PRSUs granted in 2022 vested in February 2025, as performance conditions were not met[54](index=54&type=chunk) [7. Significant Customers and Geographic Net Revenues](index=19&type=section&id=7.%20SIGNIFICANT%20CUSTOMERS%20AND%20GEOGRAPHIC%20NET%20REVENUES) - The top ten customers accounted for approximately **81%** of net revenues for both the three and six months ended June 30, 2025[57](index=57&type=chunk) Customers Representing 10% or More of Net Revenues | Customer | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Avnet | 33 % | 28 % | 32 % | 29 % | | Salcomp Group | 11 % | * | * | * | | Honestar Technologies Co., Ltd. | * | 12 % | * | 12 % | Geographic Net Revenues (by 'bill to' customer location) (In thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Americas | $5,850 | $5,281 | $11,567 | $10,286 | | EMEA | 12,756 | 11,005 | 24,047 | 23,208 | | APAC | 96,566 | 83,712 | 185,767 | 159,092 | | Total net revenues | $115,852 | $106,198 | $221,381 | $197,886 | - APAC region accounted for approximately **84%** of net revenues for both the three and six months ended June 30, 2025, reflecting the concentration of manufacturing in Asia[63](index=63&type=chunk)[128](index=128&type=chunk) [8. Stockholders' Equity](index=22&type=section&id=8.%20STOCKHOLDERS'%20EQUITY) Common Stock Shares Outstanding (In thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Beginning balance | 56,692 | 56,759 | 56,837 | 56,738 | | Common stock issued under employee stock plans | 171 | 183 | 430 | 411 | | Repurchased | (705) | (164) | (1,109) | (371) | | Ending balance | 56,158 | 56,778 | 56,158 | 56,778 | - The Company repurchased **0.7 million shares** for **$32.6 million** in Q2 2025 and **1.1 million shares** for **$55.7 million** in H1 2025, with **$42.4 million** remaining on the repurchase authorization as of June 30, 2025[66](index=66&type=chunk) - Quarterly cash dividends were raised to **$0.21 per share** for 2025, up from **$0.20 per share** in 2024[68](index=68&type=chunk) [9. Earnings Per Share](index=22&type=section&id=9.%20EARNINGS%20PER%20SHARE) Earnings Per Share Summary (In thousands, except per share amounts) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $1,369 | $4,849 | $10,159 | $8,803 | | Basic earnings per share | $0.02 | $0.09 | $0.18 | $0.15 | | Diluted earnings per share | $0.02 | $0.09 | $0.18 | $0.15 | - Basic and diluted EPS for the three months ended June 30, 2025, decreased to **$0.02** from **$0.09** in 2024, while for the six months, it increased to **$0.18** from **$0.15** in 2024[71](index=71&type=chunk) [10. Provision for Income Taxes](index=23&type=section&id=10.%20PROVISION%20FOR%20INCOME%20TAXES) - The effective tax rate for the three months ended June 30, 2025, was **(1.8%)**, negatively impacted by a tax deficiency related to share-based payments, compared to **5.8%** in 2024[74](index=74&type=chunk) - For the six months ended June 30, 2025, the effective tax rate was **9.5%**, compared to **3.5%** in 2024, with the 2024 period favorably impacted by excess tax benefits and release of unrecognized tax benefits[74](index=74&type=chunk) - The recently enacted One Big Beautiful Bill Act (OBBBA) in the U.S. is expected to increase the Company's effective tax rate in **fiscal year 2026** due to changes in corporate income tax code, including an increase in the statutory tax rate on foreign earnings[76](index=76&type=chunk) [11. Commitments](index=25&type=section&id=11.%20COMMITMENTS) - Wafer-supply agreements with Seiko Epson Corporation and ROHM Lapis Semiconductor Co., Ltd. include mutual sharing of exchange rate fluctuations between Japanese yen and U.S. dollar on future purchases[79](index=79&type=chunk) [12. Segment Reporting](index=25&type=section&id=12.%20SEGMENT%20REPORTING) - The Company operates as one operating and reportable segment, focusing on the design, development, manufacture, and marketing of integrated circuits for high-voltage power conversion[80](index=80&type=chunk) - The Chief Executive Officer, as the Chief Operating Decision Maker (CODM), reviews financial information on a consolidated basis, using net income to allocate resources and assess performance[81](index=81&type=chunk) [13. Legal Proceedings and Contingencies](index=26&type=section&id=13.%20LEGAL%20PROCEEDINGS%20AND%20CONTINGENCIES) - The Company is involved in an ongoing patent infringement lawsuit filed by CogniPower LLC, with a trial scheduled for August 2025, and intends to vigorously defend itself[87](index=87&type=chunk) - In June 2025, a jury ruled against the Company in an employee litigation matter, awarding **$3.2 million** in compensatory damages and **$6.0 million** in punitive damages for harassment based on disability and retaliation[91](index=91&type=chunk) - The Company recognized a **$9.2 million** charge in other operating expenses in Q2 2025 related to the employee litigation and plans to file post-trial motions and appeals[91](index=91&type=chunk) [14. Indemnifications](index=28&type=section&id=14.%20INDEMNIFICATIONS) - The Company provides customer indemnification against patent, copyright, trademark, or other proprietary right infringements, with limitations on scope and remedies[93](index=93&type=chunk) - To date, the Company has not reimbursed any distributors or customers for indemnification claims, and no material claims were outstanding as of June 30, 2025[94](index=94&type=chunk) [15. Acquisition](index=28&type=section&id=15.%20ACQUISITION) - On July 1, 2024, the Company acquired the assets of Odyssey Semiconductor Technologies for **$9.52 million** in cash to augment its development of high-power GaN switching technology[95](index=95&type=chunk) - The acquisition was accounted for using the acquisition method, with the excess purchase consideration recorded as goodwill, representing expected benefits from future technology and experienced employees[96](index=96&type=chunk)[99](index=99&type=chunk) - In-process research and development from the acquisition is recorded as an intangible asset with an indefinite life, to be amortized upon completion of development[100](index=100&type=chunk) [16. Subsequent Events](index=30&type=section&id=16.%20SUBSEQUENT%20EVENTS) - Jennifer A. Lloyd, PhD, was elected President and CEO, effective July 21, 2025, succeeding Balu Balakrishnan, who will transition to Executive Chairman until February 2026[103](index=103&type=chunk)[104](index=104&type=chunk) - The Company expects to record approximately **$15 million** in net stock-based compensation expense in **Q3 2025** due to the modification and accelerated vesting of Mr. Balakrishnan's equity awards upon his transition[105](index=105&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results of operations for the periods ended June 30, 2025 and 2024 [Overview](index=32&type=section&id=Overview) - Power Integrations designs, develops, and markets analog and mixed-signal integrated circuits (ICs) and other electronic components for high-voltage power conversion[107](index=107&type=chunk) - Products are used in AC-DC power supplies for various electronic devices, electric vehicles (EVs), LED drivers, and motor-driver ICs for BLDC motors[108](index=108&type=chunk) - The Company's system-level products offer benefits like reduced design complexity, smaller size, lower component count, higher reliability, and improved energy efficiency compared to discrete designs[111](index=111&type=chunk) [Growth Strategy](index=34&type=section&id=Growth%20Strategy) - Increase the size of addressable market (SAM) from $1.5 billion to approximately $4 billion by addressing higher-power AC-DC applications, LED drivers, gate drivers, and new applications like smart utility meters and USB power receptacles - Expand SAM through new products targeting the EV market and developing technologies like InnoSwitch™ and InnoMux™ ICs that increase product value and integration - Develop additional products incorporating GaN transistors to address higher-power applications, including data centers for AI services, communications network infrastructure, and EV onboard charging circuitry - Increase market penetration by introducing more advanced products with higher integration and performance, expanding sales and application-engineering staff, and offering technical support tools like PI Expert™ and PowerPros℠ - Leverage proprietary PowiGaN™ gallium-nitride technology for higher energy efficiency, with new generations supporting up to 1700 volts and approaching cost parity with silicon MOSFETs - Capitalize on carbon emission reduction efforts by providing energy-efficient products (EcoSmart™, PowiGaN™, BridgeSwitch™) and critical components for renewable energy systems and low-emissions transportation [Recent Results](index=36&type=section&id=Recent%20Results) Net Revenues and Gross Margin (dollars in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $115.9 | $106.2 | $221.4 | $197.9 | | Gross Margin | 55% | 53% | 55% | 53% | - Net revenues increased for both the three-month (primarily industrial end-market) and six-month periods (all four end-market categories, most significantly industrial)[118](index=118&type=chunk)[120](index=120&type=chunk) - Gross margin increased due to a favorable end-market mix (higher-margin markets) and the favorable impact of the dollar/yen exchange rate on wafer costs[122](index=122&type=chunk) - Total operating expenses increased due to an employee litigation expense (**$9.2 million**), higher employee-related costs, and increased professional/legal services, partially offset by decreased product-development expenses and a bad debt recovery credit[123](index=123&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No material changes to critical accounting policies and estimates, which primarily relate to revenue recognition and estimating write-downs for excess and obsolete inventory[125](index=125&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) [Net Revenues](index=39&type=section&id=Net%20revenues) Net Revenues by Period (dollars in millions) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $115.9 | $106.2 | $221.4 | $197.9 | Revenue Mix by End Market | End Market | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Communications | 11 % | 11 % | 10 % | 11 % | | Computer | 12 % | 14 % | 12 % | 13 % | | Consumer | 37 % | 42 % | 41 % | 41 % | | Industrial | 40 % | 33 % | 37 % | 35 % | - International sales accounted for approximately **98%** and **99%** of net revenues for the three and six months ended June 30, 2025, respectively, with Asia representing about **84%** of total net revenues[128](index=128&type=chunk) [Gross Profit](index=40&type=section&id=Gross%20profit) Gross Profit and Margin (dollars in millions) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $115.9 | $106.2 | $221.4 | $197.9 | | Gross profit | $64.0 | $56.5 | $122.2 | $104.3 | | Gross margin | 55.2 % | 53.2 % | 55.2 % | 52.7 % | - Gross margin increased by **2.0 percentage points** for the three-month period and **2.5 percentage points** for the six-month period, driven by favorable end-market mix and the dollar/yen exchange rate[132](index=132&type=chunk) [Research and Development Expenses](index=40&type=section&id=Research%20and%20development%20expenses) R&D Expenses (dollars in millions) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | R&D expenses | $26.0 | $26.0 | $50.1 | $49.3 | | Headcount (at period end) | 298 | 305 | 298 | 305 | - R&D expenses were flat for the three-month period but increased for the six-month period due to higher employee-related expenses (health insurance, benefits) and equipment costs, partially offset by lower stock-based compensation and product-development expenses[133](index=133&type=chunk) [Sales and Marketing Expenses](index=40&type=section&id=Sales%20and%20marketing%20expenses) S&M Expenses (dollars in millions) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales and marketing expenses | $18.3 | $18.1 | $34.7 | $33.8 | | Headcount (at period end) | 334 | 328 | 334 | 328 | - S&M expenses increased for both periods due to higher employee-related expenses and increased travel/tradeshow costs, partially offset by lower stock-based compensation[135](index=135&type=chunk) [General and Administrative Expenses](index=42&type=section&id=General%20and%20administrative%20expenses) G&A Expenses (dollars in millions) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | G&A expenses | $11.8 | $10.5 | $22.9 | $18.8 | | Headcount (at period end) | 81 | 80 | 81 | 80 | - G&A expenses increased for both periods due to higher stock-based compensation, increased salaries, and higher professional/legal services, partially offset by a bad debt recovery credit[136](index=136&type=chunk) [Other Operating Expenses](index=42&type=section&id=Other%20operating%20expenses) - Other operating expenses were **$9.2 million** for both the three and six months ended June 30, 2025, entirely due to an employee litigation matter[137](index=137&type=chunk) [Other Income](index=42&type=section&id=Other%20income) Other Income (dollars in millions) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Other income | $2.7 | $3.2 | $5.9 | $6.7 | - Other income decreased for both periods primarily due to lower interest income and losses on foreign currency exchange[138](index=138&type=chunk) [Provision (Benefit) for Income Taxes](index=42&type=section&id=Provision%20(benefit)%20for%20income%20taxes) Income Tax Expense and Effective Tax Rate (dollars in millions) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Provision (benefit) for income taxes | $0.0 | $0.3 | $1.1 | $0.3 | | Effective tax rate | (1.8)% | 5.8 % | 9.5 % | 3.5 % | - The effective tax rate for Q2 2025 was **(1.8%)**, negatively impacted by a tax deficiency from share-based payments, while H1 2025 was **9.5%**[140](index=140&type=chunk)[141](index=141&type=chunk) - The OBBBA, enacted July 4, 2025, is expected to increase the effective tax rate in fiscal year 2026 due to changes in corporate income tax, including an increase in the statutory tax rate on foreign earnings[143](index=143&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash, cash equivalents, and short-term marketable securities decreased by **$31.3 million** to **$268.7 million** as of June 30, 2025, from **$300.0 million** at December 31, 2024[144](index=144&type=chunk) - Working capital decreased by **$40.8 million** to **$417.9 million** as of June 30, 2025, from **$458.7 million** at December 31, 2024[144](index=144&type=chunk) - The Company has a **$75.0 million** revolving line of credit with Wells Fargo, with no outstanding advances as of June 30, 2025, and is in compliance with all covenants[145](index=145&type=chunk) [Cash from Operating Activities](index=44&type=section&id=Cash%20from%20Operating%20Activities) - Operating activities generated **$55.5 million** in cash for the six months ended June 30, 2025, up from **$33.5 million** in 2024[146](index=146&type=chunk)[147](index=147&type=chunk) - 2025 sources: Net income ($10.2M), non-cash stock-based compensation ($18.8M), depreciation ($14.2M), increase in taxes payable and accrued liabilities ($10.0M), decrease in prepaid expenses and other assets ($6.4M) - 2024 sources: Net income ($8.8M), depreciation ($17.1M), non-cash stock-based compensation ($17.4M), decrease in prepaid expenses and other assets ($2.1M) [Cash from Investing Activities](index=44&type=section&id=Cash%20from%20Investing%20Activities) - Investing activities generated **$37.1 million** in cash for the six months ended June 30, 2025, a significant improvement from a net use of **$0.9 million** in 2024[148](index=148&type=chunk)[149](index=149&type=chunk) - 2025 cash generation: $48.8 million from sales and maturities of marketable securities, net of purchases, offset by $11.7 million for property and equipment purchases - 2024 cash use: $8.5 million for property and equipment purchases, partially offset by $7.6 million from sales and maturities of marketable securities, net of purchases [Cash from Financing Activities](index=46&type=section&id=Cash%20from%20Financing%20Activities) - Financing activities resulted in a net cash use of **$76.6 million** for the six months ended June 30, 2025, compared to **$46.0 million** in 2024[150](index=150&type=chunk)[151](index=151&type=chunk) - 2025 cash use: $55.7 million for common stock repurchases and $23.8 million for dividend payments, partially offset by $2.8 million from employee stock plan issuances - 2024 cash use: $26.0 million for common stock repurchases and $22.7 million for dividend payments, partially offset by $2.7 million from employee stock plan issuances [Dividends](index=46&type=section&id=Dividends) - The board of directors raised the quarterly cash dividend to **$0.21 per share** for 2025, up from **$0.20 per share** in 2024[153](index=153&type=chunk) - Dividend payouts were **$12.0 million** on March 31, 2025, and **$11.8 million** on June 30, 2025[153](index=153&type=chunk) [Stock Repurchases](index=46&type=section&id=Stock%20Repurchases) - The Company repurchased approximately **0.7 million shares** for **$32.6 million** in Q2 2025 and **1.1 million shares** for **$55.7 million** in H1 2025[154](index=154&type=chunk) - An additional **$50.0 million** was authorized for stock repurchases in April 2025, with **$42.4 million** remaining on the authorization as of June 30, 2025[154](index=154&type=chunk) [Contractual Commitments](index=46&type=section&id=Contractual%20Commitments) - No material changes in contractual commitments from those reported in the Annual Report on Form 10-K for the year ended December 31, 2024[155](index=155&type=chunk) [Other Information](index=46&type=section&id=Other%20Information) - Worldwide cash and marketable securities are available to fund capital allocation needs without significant U.S. federal income taxes[156](index=156&type=chunk) - The Company believes cash generated from operations and existing liquidity sources will satisfy projected working capital and cash requirements for at least the next 12 months[158](index=158&type=chunk) [Recent Accounting Pronouncements](index=48&type=section&id=Recent%20Accounting%20Pronouncements) - Information regarding recent accounting pronouncements is incorporated by reference from Note 2 of the financial statements[159](index=159&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to interest rate and foreign currency exchange risk during the first six months of 2025, with details in the 2024 Form 10-K - No material changes to interest rate risk and foreign currency exchange risk during the first six months of 2025[160](index=160&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Discusses control system limitations, evaluates disclosure controls, and confirms no material changes in internal control over financial reporting [Limitation on Effectiveness of Controls](index=48&type=section&id=Limitation%20on%20Effectiveness%20of%20Controls) - Any control system provides only reasonable assurance and is subject to inherent limitations, including faulty judgments and simple errors, which may lead to undetected misstatements[161](index=161&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=48&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, with the participation of the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[162](index=162&type=chunk) [Changes in Internal Control over Financial Reporting](index=48&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[163](index=163&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) Incorporates legal proceedings and contingencies information by reference from Note 13 of the financial statements - Legal proceedings information is incorporated by reference from Note 13 of the financial statements[164](index=164&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) Highlights risks from trade policies, tariffs, export controls, and macroeconomic conditions, potentially impacting demand, pricing, and operating results [Risks Related to the Operation and Growth of Our Business](index=50&type=section&id=Risks%20Related%20to%20the%20Operation%20and%20Growth%20of%20Our%20Business) - Changes in trade policies, tariffs, and export controls, especially between the U.S. and other countries, could reduce demand for end products incorporating the Company's ICs, materially affecting revenues and operating results - Increased tariffs or trade barriers could pressure selling prices as customers seek to offset impacts on their own products, and compliance with controls may impair international competition or lead to liability - Trade disputes and macroeconomic uncertainty (inflation, foreign exchange volatility) may negatively impact customer demand, delay purchases, limit expansion, and contribute to stock price volatility [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the Company's common stock repurchase program, including additional fund authorization and shares repurchased during Q2 fiscal 2025 [Issuer Purchases of Equity Securities](index=52&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) - The board authorized an additional **$50.0 million** for common stock repurchases in April 2025, after exhausting a previous $48.1 million authorization[174](index=174&type=chunk) Common Stock Repurchases (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value that May Yet be Repurchased (In millions) | | :--- | :--- | :--- | :--- | | April 1, 2025 to April 30, 2025 | 560,409 | $44.61 | $50.0 | | May 1, 2025 to May 31, 2025 | 77,268 | $51.13 | $46.0 | | June 1, 2025 to June 30, 2025 | 68,100 | $53.00 | $42.4 | | Total | 705,777 | | | - As of June 30, 2025, **$42.4 million** remained on the Company's stock repurchase authorization, which has no expiration date[174](index=174&type=chunk)[175](index=175&type=chunk) [Item 5. Other Information](index=52&type=section&id=Item%205.%20Other%20Information) Reports the upcoming retirement of a Vice President of Technology and confirms no Rule 10b5-1 trading plan adoptions or terminations by directors or executive officers [Departure of Certain Officers](index=52&type=section&id=Departure%20of%20Certain%20Officers) - Radu Barsan, Vice President, Technology, informed the Company of his intention to retire on or about September 24, 2025[176](index=176&type=chunk) [Rule 10b5-1 Trading Plans](index=52&type=section&id=Rule%2010b5-1%20Trading%20Plans) - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the three months ended June 30, 2025[177](index=177&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including organizational documents, compensation plans, supply agreements, employment agreements, certifications, and XBRL data - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, various incentive award and compensation plans, a wafer supply agreement amendment, and employment/transition agreements related to the CEO change[178](index=178&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[178](index=178&type=chunk)[181](index=181&type=chunk) - XBRL Instance Document and Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are provided for interactive data[178](index=178&type=chunk)[179](index=179&type=chunk) [SIGNATURES](index=56&type=section&id=SIGNATURES) Contains the signature of Sandeep Nayyar, Chief Financial Officer, affirming the filing of the Quarterly Report on Form 10-Q on behalf of Power Integrations, Inc - The report is signed by Sandeep Nayyar, Chief Financial Officer, as the duly authorized officer, Principal Financial Officer, and Principal Accounting Officer[186](index=186&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) This section summarizes Power Integrations' Q2 2025 financial results, CEO commentary on growth drivers, and other significant business activities [Q2 2025 Financial Performance](index=1&type=section&id=Q2%202025%20Financial%20Performance) Power Integrations reported Q2 2025 net revenues of $115.9 million, a 9% year-over-year increase. GAAP net income was $1.4 million ($0.02 per diluted share), while non-GAAP net income was $19.9 million ($0.35 per diluted share). Cash flow from operations for the quarter was $29.1 million Q2 2025 Financial Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YoY Change (Q2 25 vs Q2 24) | QoQ Change (Q2 25 vs Q1 25) | | :-------------------------- | :---------- | :---------- | :---------- | :-------------------------- | :-------------------------- | | Net Revenues | $115.9 M | $105.5 M | $106.2 M | +9% | +10% | | GAAP Net Income | $1.4 M | $8.8 M | $4.8 M | -71% | -84% | | GAAP Diluted EPS | $0.02 | $0.15 | $0.09 | -78% | -87% | | Non-GAAP Net Income | $19.9 M | $17.9 M | $15.9 M | +25% | +11% | | Non-GAAP Diluted EPS | $0.35 | $0.31 | $0.28 | +25% | +13% | | Cash Flow from Operations | $29.1 M | $26.4 M | $17.6 M | +65% | +10% | [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Jennifer Lloyd highlighted a 9% year-over-year revenue increase driven by strong industrial growth. Despite near-term macroeconomic uncertainty, long-term growth drivers are on track, with automotive business building towards material revenue in 2026. GaN-based product revenues grew over 50% in the first half, expanding into appliance, industrial, and EV applications, with new 1250- and 1700-volt GaN technologies being developed for AI datacenters - Revenues increased **nine percent year-over-year** driven by strong growth in the industrial category[3](index=3&type=chunk) - Automotive business continues to build toward a material revenue contribution in **2026**[3](index=3&type=chunk) - Revenues from GaN-based products grew more than **50 percent in the first half** with adoption broadening into appliance, industrial, and EV applications[3](index=3&type=chunk) - Developing differentiated, system-level products to capitalize on the opportunity in next-generation AI datacenters with **1250- and 1700-volt GaN technologies**[3](index=3&type=chunk) [Other Business Highlights](index=1&type=section&id=Other%20Business%20Highlights) The company repurchased 706 thousand shares for $32.6 million during the quarter and paid a dividend of $0.21 per share Share Repurchase Activity | Activity | Q2 2025 | Remaining Authorization | | :---------------- | :---------- | :---------------------- | | Shares Repurchased | 706 thousand | N/A | | Value Repurchased | $32.6 million | $42.4 million | - Paid a dividend of **$0.21 per share** on June 30, 2025, with another dividend of $0.21 per share to be paid on September 30, 2025[4](index=4&type=chunk) [Financial Outlook](index=2&type=section&id=Financial%20Outlook) This section outlines Power Integrations' financial projections for Q3 2025, including expected revenues, gross margins, and operating expenses [Q3 2025 Forecast](index=2&type=section&id=Q3%202025%20Forecast) For Q3 2025, Power Integrations forecasts revenues between $113 million and $123 million. GAAP gross margin is expected to be 54.5%-55%, while non-GAAP gross margin is projected at 55%-55.5%. GAAP operating expenses are estimated at $72.5 million, and non-GAAP operating expenses at $47.5 million Q3 2025 Financial Forecast | Metric | Q3 2025 Forecast | | :-------------------------- | :----------------------- | | Revenues | $118 million ± $5 million | | GAAP Gross Margin | 54.5% - 55% | | Non-GAAP Gross Margin | 55% - 55.5% | | GAAP Operating Expenses | ~$72.5 million | | Non-GAAP Operating Expenses | ~$47.5 million | [Company Information & Disclosures](index=2&type=section&id=Company%20Information%20%26%20Disclosures) This section provides background on Power Integrations, clarifies non-GAAP measures, addresses forward-looking statements, and lists trademarks and contacts [About Power Integrations](index=2&type=section&id=About%20Power%20Integrations) Power Integrations, Inc. is a leading innovator in semiconductor technologies for high-voltage power conversion, contributing to the clean-power ecosystem - Leading innovator in semiconductor technologies for high-voltage power conversion[6](index=6&type=chunk) - Products are key building blocks in the clean-power ecosystem, enabling renewable energy generation and efficient power transmission and consumption[6](index=6&type=chunk) [Note Regarding Use of Non-GAAP Financial Measures](index=2&type=section&id=Note%20Regarding%20Use%20of%20Non-GAAP%20Financial%20Measures) The company provides non-GAAP financial information, excluding stock-based compensation, amortization of acquisition-related intangibles, and a litigation charge, to offer investors a clearer understanding of operating results and comparability, while acknowledging the limitations of such measures - Non-GAAP measures exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, other operating expenses of **$9.2 million** stemming from an employment litigation matter, and the tax effects of these items[7](index=7&type=chunk) - These measures are used for financial and operational decision-making and performance targets, aiming to help investors understand operating results and facilitate comparability[7](index=7&type=chunk) - Non-GAAP measures have limitations as analytical tools and are not meant to be considered in isolation or as a substitute for GAAP financial information, as they do not reflect significant expenses like stock-based compensation[7](index=7&type=chunk) [Note Regarding Forward-Looking Statements](index=3&type=section&id=Note%20Regarding%20Forward-Looking%20Statements) This section serves as a disclaimer for forward-looking statements, highlighting that actual results may differ materially due to various risks and uncertainties, including changes in trade policies, global economic conditions, competition, and new product introductions - Forward-looking statements are based on current information and are subject to rapid change, with actual results potentially differing materially due to risks and uncertainties[10](index=10&type=chunk) - Key risks include changes in trade policies (tariffs), ability to supply products, global economic and geopolitical conditions (inflation, armed conflicts), shifts in customer demand, effects of competition, unforeseen costs, and new product development delays/market acceptance[10](index=10&type=chunk) [Trademarks](index=3&type=section&id=Trademarks) This section clarifies that "Power Integrations" and its logo are registered trademarks of the company, with all other trademarks belonging to their respective owners - Power Integrations and the Power Integrations logo are trademarks or registered trademarks of Power Integrations, Inc. All other trademarks are property of their respective owners[11](index=11&type=chunk) [Contacts](index=9&type=section&id=Contacts) Provides contact information for investor relations inquiries - Investor Relations Contact: Joe Shiffler, Power Integrations, Inc., (408) 414-8528, joe@power.com[20](index=20&type=chunk) [Consolidated Financial Statements (GAAP)](index=4&type=section&id=Consolidated%20Financial%20Statements%20%28GAAP%29) This section presents Power Integrations' unaudited GAAP consolidated statements of income, balance sheets, and cash flows for the reported periods [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The GAAP Consolidated Statements of Income show net revenues of $115.9 million for Q2 2025, with a gross profit of $64.0 million. Net income for the quarter was $1.4 million. The revenue mix for Q2 2025 was led by Industrial (40%) and Consumer (37%) Consolidated Statements of Income (in thousands) | Metric (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------- | :------ | :------ | :------ | :------ | :------ | | NET REVENUES | $115,852 | $105,529 | $106,198 | $221,381 | $197,886 | | GROSS PROFIT | $63,954 | $58,235 | $56,533 | $122,189 | $104,313 | | INCOME (LOSS) FROM OPERATIONS | $(1,345) | $6,718 | $1,958 | $5,373 | $2,428 | | NET INCOME | $1,369 | $8,790 | $4,849 | $10,159 | $8,803 | | Diluted EPS | $0.02 | $0.15 | $0.09 | $0.18 | $0.15 | Revenue Mix by End Market | End Market | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------- | :------ | :------ | :------ | :------ | :------ | | Communications | 11% | 10% | 11% | 10% | 11% | | Computer | 12% | 12% | 14% | 12% | 13% | | Consumer | 37% | 44% | 42% | 41% | 41% | | Industrial | 40% | 34% | 33% | 37% | 35% | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were $797.5 million, a decrease from $814.4 million at March 31, 2025. Total liabilities stood at $93.7 million, and total stockholders' equity was $703.8 million Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2023 | | :-------------------- | :------------ | :------------- | :---------------- | | Total assets | $797,537 | $814,400 | $828,826 | | Total current assets | $482,903 | $499,815 | $514,039 | | Cash and cash equivalents | $66,935 | $49,614 | $50,972 | | Total liabilities | $93,749 | $78,585 | $79,054 | | Total stockholders' equity | $703,788 | $735,815 | $749,772 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For Q2 2025, net cash provided by operating activities was $29.1 million, while investing activities provided $32.6 million, primarily due to proceeds from marketable securities. Financing activities used $44.4 million, largely due to common stock repurchases and dividend payments Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | :------ | | Net cash provided by operating activities | $29,072 | $26,386 | $17,631 | $55,458 | $33,536 | | Net cash provided by (used in) investing activities | $32,618 | $4,526 | $(891) | $37,144 | $(948) | | Net cash used in financing activities | $(44,369) | $(32,270) | $(22,690) | $(76,639) | $(46,024) | | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $17,321 | $(1,358) | $(5,950) | $15,963 | $(13,436) | | CASH AND CASH EQUIVALENTS AT END OF PERIOD | $66,935 | $49,614 | $50,493 | $66,935 | $50,493 | [Reconciliation of Non-GAAP Financial Measures](index=6&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section reconciles Power Integrations' GAAP financial results to non-GAAP measures for gross profit, operating expenses, income from operations, income taxes, and diluted net income per share [Reconciliation of Gross Profit](index=6&type=section&id=Reconciliation%20of%20Gross%20Profit) The reconciliation shows that for Q2 2025, non-GAAP gross profit was $64.7 million (55.8% margin), compared to GAAP gross profit of $64.0 million (55.2% margin), primarily adjusted for stock-based compensation and amortization of acquisition-related intangibles Reconciliation of Gross Profit (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | GAAP gross profit (in thousands) | $63,954 | $58,235 | $56,533 | $122,189 | $104,313 | | GAAP gross margin | 55.2% | 55.2% | 53.2% | 55.2% | 52.7% | | Stock-based compensation (in thousands) | $592 | $657 | $707 | $1,249 | $1,053 | | Amortization of acquisition-related intangibles (in thousands) | $146 | $147 | $258 | $293 | $740 | | Non-GAAP gross profit (in thousands) | $64,692 | $59,039 | $57,498 | $123,731 | $106,106 | | Non-GAAP gross margin | 55.8% | 55.9% | 54.1% | 55.9% | 53.6% | [Reconciliation of Operating Expenses](index=6&type=section&id=Reconciliation%20of%20Operating%20Expenses) For Q2 2025, GAAP operating expenses were $65.3 million, while non-GAAP operating expenses were $46.7 million, after excluding stock-based compensation and other operating expenses related to litigation Reconciliation of Operating Expenses (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | GAAP operating expenses (in thousands) | $65,299 | $51,517 | $54,575 | $116,816 | $101,885 | | Less: Total stock-based compensation (in thousands) | $10,077 | $8,683 | $11,035 | $18,760 | $17,449 | | Less: Other operating expenses (in thousands) | $9,151 | $0 | $0 | $9,151 | $0 | | Non-GAAP operating expenses (in thousands) | $46,663 | $43,491 | $44,247 | $90,154 | $85,489 | [Reconciliation of Income from Operations](index=6&type=section&id=Reconciliation%20of%20Income%20from%20Operations) GAAP income from operations for Q2 2025 was a loss of $1.3 million (-1.2% margin), which reconciles to a non-GAAP income from operations of $18.0 million (15.6% margin) after adding back stock-based compensation, acquisition-related amortization, and other operating expenses Reconciliation of Income from Operations (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | GAAP income (loss) from operations (in thousands) | $(1,345) | $6,718 | $1,958 | $5,373 | $2,428 | | GAAP operating margin | -1.2% | 6.4% | 1.8% | 2.4% | 1.2% | | Add: Total stock-based compensation (in thousands) | $10,077 | $8,683 | $11,035 | $18,760 | $17,449 | | Add: Amortization of acquisition-related intangible assets (in thousands) | $146 | $147 | $258 | $293 | $740 | | Add: Other operating expenses (in thousands) | $9,151 | $0 | $0 | $9,151 | $0 | | Non-GAAP income from operations (in thousands) | $18,029 | $15,548 | $13,251 | $33,577 | $20,617 | | Non-GAAP operating margin | 15.6% | 14.7% | 12.5% | 15.2% | 10.4% | [Reconciliation of Provision for Income Taxes](index=6&type=section&id=Reconciliation%20of%20Provision%20for%20Income%20Taxes) For Q2 2025, the GAAP provision for income taxes was a benefit of $(24) thousand (-1.8% effective tax rate), which reconciles to a non-GAAP provision of $847 thousand (4.1% effective tax rate) after adjusting for the tax effects of excluded items Reconciliation of Provision for Income Taxes (in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | GAAP provision (benefit) for income taxes (in thousands) | $(24) | $1,095 | $298 | $1,071 | $316 | | GAAP effective tax rate | -1.8% | 11.1% | 5.8% | 9.5% | 3.5% | | Tax effect of adjustments to GAAP results (in thousands) | $(871) | $239 | $(269) | $(632) | $(627) | | Non-GAAP provision for income taxes (in thousands) | $847 | $856 | $567 | $1,703 | $943 | | Non-GAAP effective tax rate | 4.1% | 4.6% | 3.4% | 4.3% | 3.5% | [Reconciliation of Net Income Per Share (Diluted)](index=7&type=section&id=Reconciliation%20of%20Net%20Income%20Per%20Share%20%28Diluted%29) GAAP diluted net income for Q2 2025 was $1.4 million ($0.02 per share), which reconciles to non-GAAP diluted net income of $19.9 million ($0.35 per share) after adjustments for stock-based compensation, acquisition-related amortization, other operating expenses, and their tax effects Reconciliation of Net Income Per Share (Diluted, in thousands) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | :------ | | GAAP net income (in thousands) | $1,369 | $8,790 | $4,849 | $10,159 | $8,803 | | Adjustments to GAAP net income (in thousands): | | | | | | | Stock-based compensation | $10,077 | $8,683 | $11,035 | $18,760 | $17,449 | | Amortization of acquisition-related intangible assets | $146 | $147 | $258 | $293 | $740 | | Other operating expenses | $9,151 | $0 | $0 | $9,151 | $0 | | Tax effect of items excluded | $(871) | $239 | $(269) | $(632) | $(627) | | Non-GAAP net income (in thousands) | $19,872 | $17,859 | $15,873 | $37,731 | $26,365 | | Non-GAAP net income per share (diluted) | $0.35 | $0.31 | $0.28 | $0.66 | $0.46 | | GAAP net income per share (diluted) | $0.02 | $0.15 | $0.09 | $0.18 | $0.15 |

Business Overview and Strategy - Power Integrations (PI) is the only high-voltage (HV) pure play semiconductor company[11, 33, 55, 68] - The company focuses on system-level solutions for high-voltage power conversion, leveraging proprietary technologies and extensive IP protection[12, 13] - PI's unique "Fabless IDM" manufacturing model ensures best-in-class supply, quality, and cost[31] Market and Growth Opportunities - PI's addressable market is expanding and diversifying, projected to double from 2022 to 2027, reaching $8 billion[11, 33, 36, 38, 109] - The company's revenue mix is shifting towards industrial, automotive, and appliance sectors, which accounted for over 70% of the mix[108] - GaN (Gallium Nitride) is identified as the future of HV power conversion, and PI is a leader in GaN technology[11, 33, 56, 68] Financial Performance and Sustainability - 52% of 2024 sales came from product families introduced in 2001 and prior, demonstrating annuity revenue streams from long-lived products[29] - The company targets a low-double-digit CAGR (Compound Annual Growth Rate) for revenue growth and aims for a non-GAAP gross margin of 50-55% and a non-GAAP operating margin of 25-30%[109] - In 2024, 95% of Power Integrations' revenues were EU Taxonomy-Eligible[74] - EcoSmart technology saved an estimated 11.5 TWh of standby energy in 2024[77] - Free cash flow was 15% of revenue in 2024, and 185% of free cash flow was returned to stockholders between 2022 and 2024[113]