Power Integrations(US:POWI)2024-02-09 04:06Financial Data and Key Metrics Changes - Fourth quarter revenues were just under $90 million, down 29% from the prior quarter, with all four end market categories sequentially low [72] - Non-GAAP earnings were $0.22 per diluted share, above the level implied in guidance, thanks to lower operating expenses and a $0.04 tax benefit [52][57] - Non-GAAP gross margin for the fourth quarter was 52.7%, down 60 basis points from the prior quarter, driven mainly by lower manufacturing volumes [74] Business Line Data and Key Metrics Changes - The consumer segment saw revenues below pre-COVID levels, suggesting potential for recovery in 2024 as channel inventories normalize [47][66] - The industrial market, which has been soft, is expected to recover, contributing to growth in Q2 [10][100] - The communications segment experienced the largest decline, down about 40% from the prior quarter [72] Market Data and Key Metrics Changes - Channel inventory ended the quarter at 10.5 weeks, down more than a week from the prior quarter, indicating improved sell-through [55][33] - End customer inventories have improved considerably, with an uptick in bookings from previously dormant customers [34][33] - The company noted that the consumer and computer segments have returned to normal inventory levels, while industrial remains elevated [82][83] Company Strategy and Development Direction - The company is focused on a four-pronged capital allocation strategy, including internal investments, M&A opportunities, share buybacks, and dividends [2][5] - There is a strong emphasis on expanding the design pipeline in electric transportation and automotive applications, with significant design wins expected to convert into revenue in the next one to three years [37][13] - The company aims to double its Serviceable Available Market (SAM) to $8 billion by 2027, with a significant portion coming from GaN technology [92] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about Q2 being a growth quarter, driven by improved order trends and reduced inventory headwinds [11][8] - The company anticipates a rebound in gross margin in the June quarter, supported by favorable currency exchange rates and higher manufacturing utilization [61][20] - While the demand situation remains weak, management expects a gradual recovery, particularly in the second half of the year [70][99] Other Important Information - The company repurchased 680,000 shares during the quarter, returning $99 million to stockholders through buybacks and dividends [59][60] - Non-GAAP operating expenses for the first quarter are expected to be around $42.5 million, reflecting headcount increases and higher employee benefit costs [79] Q&A Session Summary Question: What is the normalized level of demand for the company? - Management indicated that if everything returned to normal, the company could run at $150 million a quarter, but this is unlikely in the near term due to weak demand [16][17] Question: How do you see the dynamics of inventory per end market playing out? - Management noted that consumer and computer segments are at normal levels, while industrial inventory remains elevated [83][82] Question: What is the outlook for the automotive market? - Management expressed excitement about the automotive sector, noting a significant increase in design opportunities and a strong pipeline for electric vehicle applications [97][87]