POWER INTEGRATIONS INC Q3 FY2024 earnings call

• Third quarter results were on target with revenues up 9% sequentially to $116 million, non-GAAP gross margin of 55.1%, and non-GAAP earnings of $0.40 per share. • Revenue outlook for Q4 is $105 million plus or minus $5 million, reflecting a soft demand environment, especially in the appliance market which accounts for a bulk of the consumer category. • Industrial is expected to have the strongest growth in 2025, with highlights including high voltage DC transmission projects, metering growth in India, and automotive contributing to industrial revenues in 2025. • Progress in GaN products, including the introduction of a new version of InnoMax-2 with the industry's first 1700 volt GaN switch, and GaN products expected to account for more than 10% of sales in 2025. • Leveraging market leadership in consumer appliances to capture incremental dollar content driven by connectivity, LED lighting, etc., and strong design activity related to new EU Standby rules.

Third quarter revenues were $116 million, up 9% sequentially. Revenue mix for the quarter was 38% consumer, 36% industrial, 14% computer, and 12% Communications. Industrial revenues grew mid-teens sequentially driven by high power, home and building automation, and metering applications. Communication category was up 20% sequentially mainly due to the ramp of 5G fixed wireless business in India and seasonal growth in smartphone chargers. Computer category revenue was up 10% sequentially on strength in OEM and aftermarket notebook chargers. Consumer was flat sequentially with seasonal softness in air conditioning offset by strength in major appliance and gaming.

• Q4 revenue outlook is $105 million plus or minus $5 million. • Non-GAAP gross margin expected to be between 55% and 55.5% in Q4. • 2024 revenues will be down from prior year due to losses in the China cell phone market, but combined sales into Industrial, Consumer, and Computer categories will be up mid to high teens for 2024. • Expect strong year-over-year growth in Q4, and 2025 expected to have sustained growth from strong GaN product growth and high power, new design wins, and return to growth in communications.

• Soft demand environment industry-wide. • Buildup of appliance inventory at Chinese OEMs ahead of limited impact China government consumer stimulus program. • Industry-wide demand softness affecting revenue outlook.

Q: Good afternoon, everyone. Could you talk about the 1700 volt GaN announcement, demand development, and where it fits?

A: The 1700 volt is required for 800 volt and 1000 volt battery systems in automotive and 3-phase industrial applications. GaN is a better solution than silicon carbide in terms of efficiency and cost.

Q: Could you talk about GaN lead in high-power GaN, comparison to silicon carbide, and revenue from GaN?

A: 750 volt GaN is close to parity with high-end MOSFETs, and at higher voltages, competitive with silicon carbide. GaN is expected to replace silicon in most products, and revenue from GaN could cross $100 million by 2028.

Q: Could you force rank segments for Q4 outlook and talk about inventory?

A: Industrial segment will be higher as a percentage of revenue in Q4. Consumer inventory was affected by Chinese inventory build with sell-in greater than sell-through entirely in the consumer segment, while other segments are at normal levels