Power Integrations(POWI) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues increased 11% sequentially to just over $114 million, representing a 4% increase compared to the same quarter last year, marking a return to year-over-year growth ahead of the broader analog industry [11][21] - Non-GAAP gross margin was 52%, up 80 basis points from the prior quarter, while non-GAAP operating margin increased by 500 basis points sequentially to reach 21% [22][23] - Non-GAAP earnings were$ 23.3 million or $0.78 per diluted share [23] Business Line Data and Key Metrics Changes - Communications revenue grew nearly 40% year-over-year in Q3, driven by market share gains in the smartphone charger market [11] - Industrial revenues increased double digits sequentially, supported by high power applications and smart meters [22] - Consumer revenues were down mid-single digits sequentially due to seasonal softness in air conditioning [22] Market Data and Key Metrics Changes - The mobile device market is rapidly shifting towards higher wattage chargers, with most OEMs moving to the 15 to 25 watt range for smartphones [29] - GaN-based products are beginning to penetrate the market, with expectations of significant revenue growth in the coming years [31][54] Company Strategy and Development Direction - The company aims to leverage its intellectual property and innovation, particularly in GaN technology and fast charging solutions, to drive future growth [10][12] - New product lines such as BridgeSwitch for motor control are expected to provide additional growth vectors in appliances [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fundamentals of the appliance market, which continues to experience growth from the expanding middle class in emerging markets [16] - The introduction of 5G technology is anticipated to increase the demand for fast charging solutions due to higher power requirements [45] Other Important Information - The company received a$ 175 million settlement from ON Semiconductor, which is expected to lead to a substantial reduction in operating expenses starting in Q1 2020 [9][19] - The board has increased the quarterly dividend to $0.19 per share, effective in the current quarter [20] Q&A Session Summary Question: Market dynamics for higher power adapters - Management noted that most OEMs are transitioning to 15 to 25 watt chargers, with GaN technology beginning to penetrate the market [29][30] Question: Future cash allocation post-settlement - The company plans to continue its historical four-pronged approach to cash management, focusing on internal investment, selective M&A, opportunistic buybacks, and dividends [33] Question: Seasonality in consumer segment - Management indicated a typical decline in the consumer segment but expects a good sequential increase in Q2 and Q3 of the following year [38] Question: Competitive landscape for GaN products - Management highlighted that GaN technology offers significant advantages in efficiency and size, particularly for higher wattage applications [54] Question: 5G impact on power requirements - Management confirmed that 5G will increase the need for fast charging due to higher usage and power demands [45] Question: BridgeSwitch expectations in motor control - Management expressed confidence in the BridgeSwitch solution's potential due to tightening efficiency regulations in various appliances [48]