Power Integrations(US:POWI)2023-02-07 00:48Financial Data and Key Metrics Changes - Fourth quarter revenues were $125 million, down 22% sequentially, reflecting the downturn in the semiconductor industry [18][50] - Non-GAAP gross margin was 54.7%, down about three percentage points from the prior quarter, primarily due to mix and lower production volumes [51] - Non-GAAP operating margin for the quarter was 22.5%, with non-GAAP earnings of $0.48 per diluted share [52] Business Line Data and Key Metrics Changes - Consumer category revenues, dominated by appliances, were down more than 30%, with significant weakness across all appliance subcategories [50] - Industrial category revenues fell more than 25% sequentially, primarily due to elevated channel inventories, although sell-through was only down about 10% [21][50] - Communication revenues increased sequentially by a low-teens percentage from a low prior quarter level, indicating stabilization in sell-through [29] Market Data and Key Metrics Changes - The consumer market, particularly appliances, has weakened considerably due to a softer housing market and inflation, with sell-through down about 40% year-over-year [20] - The industrial market is experiencing broad-based declines, but there is strength in home and building automation and renewable energy applications [21][22] - The company has seen combined revenue growth of more than 30% in markets like Japan and India [22] Company Strategy and Development Direction - The company aims to double its Serviceable Available Market (SAM) over the next several years by expanding its portfolio of GaN products and increasing its presence in brushless DC motors and electric vehicles [7] - The focus remains on long-term growth and profitability, with continued investment in people and products despite short-term macroeconomic challenges [49] - The company is committed to maintaining production capacity to be ready for an upturn in demand [49] Management's Comments on Operating Environment and Future Outlook - Management expects revenues to bottom in the March quarter, followed by sequential growth in the June quarter as channel inventories decline [4] - The company remains optimistic about the long-term potential in appliances and other markets, despite current short-term headwinds [5][22] - Management highlighted the importance of share gains during downturns, indicating a strategy to invest for future growth [89] Other Important Information - The company received Great Place to Work Certification, with 82% of employees stating it is a great place to work, reflecting a strong culture of innovation [11] - The Board has increased the quarterly dividend by 6%, beginning with the March payout [25][31] - The company has a strong balance sheet with $354 million in cash and investments at year-end [53] Q&A Session Summary Question: What caused the weakness in demand for the March quarter? - Management indicated that the demand weakened more than anticipated, particularly in the consumer space, which is mainly appliances [58] Question: What are the expectations for revenue and gross margin dynamics? - Management expects communication and computer segments to remain healthier, while consumer and industrial segments will see more significant declines [60] Question: How is the company managing inventory levels? - The company is maintaining higher inventory levels to prepare for a potential recovery in demand, with expectations for normalization in Q2 [63][93] Question: What areas are showing strength in the current market? - Management noted strong growth in home and building automation, high power products, and electric vehicles, although these will take time to translate into revenue [80] Question: Will automotive become a more significant revenue contributor? - Management expressed optimism about automotive growth, indicating it could become 10% of revenues in the near future [69]