Power Integrations (POWI) Q4 2001 earnings summary

Executive summary

• FY 2001 revenue fell 15.6% YoY to $94.1M amid weak economic conditions; net income declined to $6.7M from $19.8M.

• Profitability and gross margin weakened as lower sales volumes, pricing pressure, and new-product manufacturing inefficiencies weighed on results.

• Q4 revenue increased slightly sequentially to $23.6M; Q4 net income was $1.3M and gross margin was 43.0%.

• New-product sales more than doubled in 2001; management forecast their revenue share rising from 40% in 2001 to ~60% in 2002.

Financial highlights

• Total revenue was $94.1M in 2001, down from $111.5M in 2000; product sales were $92.9M and license fees and royalties were $1.2M.

• Operating income was $7.9M in 2001 versus $25.7M in 2000; net income was $6.7M versus $19.8M.

• Basic EPS was $0.24 and diluted EPS $0.23 in 2001, compared with $0.73 and $0.69, respectively, in 2000.

• Operating cash flow was $16.2M in 2001; cash, cash equivalents and short-term investments were $76.9M at year-end.

Outlook and guidance

• FY 2002 gross margin was expected in a 43%–45% range; management warned increased pricing pressure could lower it.

• Operating expenses were expected to increase in absolute dollars in 2002, including R&D, sales and marketing, and G&A.

• R&D and sales and marketing spending were each expected to rise; actual expense as a share of revenue could vary with demand and economic conditions.

• Management expected cash from operations and existing liquidity to cover working capital and other cash needs for at least 12 months.