Power Integrations(POWI) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record quarterly revenues of $114.5 million, up 23% year-over-year, reflecting a recovery from a cyclical downturn and strong growth in fast chargers for mobile devices [9][25]. - Non-GAAP earnings were $167.9 million or $5.60 per diluted share, including a benefit of $4.78 per share from a litigation settlement [33][34]. - Non-GAAP gross margin was 52.1%, up 10 basis points from the prior quarter [32]. Business Line Data and Key Metrics Changes - Revenues from the communications category grew more than 80% year-over-year in Q4, driven by new high-volume designs using InnoSwitch chips [10][11]. - The consumer business grew more than 20% year-over-year in Q4, marking the first growth in nearly two years [15][16]. - Industrial revenues were down mid-single digits, primarily due to high-power sales for high-voltage DC transmission projects [30]. Market Data and Key Metrics Changes - The consumer category accounted for approximately 35% of total revenue, with appliances making up about 90% of that segment [31][65]. - Channel inventory fell to a multiyear low of 6.5 weeks, down more than a week in Q4 and more than 2.5 weeks from a year ago [34]. Company Strategy and Development Direction - The company is making substantial investments in technology, products, and manufacturing capacity, particularly in GaN technology, to capitalize on market opportunities [14][37]. - The company anticipates a return to growth in the industrial category, driven by secular trends such as renewable energy and IoT applications [24]. - The company is focused on expanding its share in the appliance market through the integration of InnoSwitch products, which enhance reliability and raise average selling prices [18][19]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential in 2020, particularly in the communications market and the recovery of the consumer segment [25][89]. - The company is cautiously monitoring the impact of the coronavirus outbreak on demand and supply chains, but currently believes it can meet customer demand [101][102]. Other Important Information - The company received a $175 million payment from the settlement of patent litigation, resulting in a net benefit of $143 million after tax expenses [28][29]. - The company plans to invest approximately $35 million in capital expenditures for 2020, with a focus on expanding GaN manufacturing capacity [37][38]. Q&A Session Summary Question: Can you discuss the gating factors for reducing GaN costs? - Management is working on reducing GaN costs and believes their proprietary technology is already cost-effective compared to competitors [44]. Question: How does the low channel inventory relate to economic concerns? - Management indicated that the current inventory levels are not far from normal expectations and may reflect cautiousness due to trade issues [48]. Question: What impact does the coronavirus have on guidance? - Management believes they can supply products despite the outbreak, but the demand impact remains uncertain [101][104]. Question: What percentage of sales goes into China? - Approximately 40% to 50% of sales into distributors are directed towards China [106]. Question: What are the expected savings from litigation expenses? - The company expects to realize about $4 million in ongoing savings from the litigation expenses [109].