Power Integrations, Inc. Q2 FY2025 earnings call

Leadership Transition

• Balu Balakrishnan introduced Jen Lloyd as the new CEO, highlighting her background from Analog Devices and her familiarity with Power Integrations' business.

Product Innovations

• Leveraging the InnoSwitch platform in automotive and new products like InnoMux ICs. The fifth generation TinySwitch extends output to 175 watts. Plans to introduce GaN versions of top switch products.

Market Insights

• Core business on growth trajectory post-pandemic down cycle. Metering revenues on track to grow 20%+ this year. GaN revenues up over 50% in H1. Near-term uncertainty due to tariffs and appliance headwinds.

GaN Developments

• TSMC exiting GaN foundry validates Power Integrations' strategy of controlling process and device design. NVIDIA's 800-volt DC architecture in AI data centers benefits Power Integrations' GaN technology.

Revenues were up 9% year-over-year to $116 million in Q2. Industrial was the primary driver of growth, rising nearly 30% sequentially and contributing 40% of revenue. Consumer revenues were sequentially lower, contributing 37% of revenue, with appliances facing headwinds but offset by video game design wins. Computer revenues increased high single digits sequentially, contributing 12% of revenue. Communication revenues rose over 20% sequentially, contributing 11% of revenue.

Q3 Outlook

• Revenue expected in range of $118 million, plus or minus $5 million.
• Non-GAAP gross margin between 55% and 55.5%.
• Non-GAAP operating expenses around $47.5 million.
• Non-GAAP tax rate around 5%.
• Near-term orders slowed due to tariff concerns, but core business on growth trajectory with industrial and GaN products driving strength.

• Tariffs: Impact on consumer appliance business due to steel tariffs and finished goods tariffs affecting demand from Asian customers.
• Channel Inventory: While healthy, excess finished goods inventory could affect reacceleration.
• TSMC Exit: Challenges for competitors relying on TSMC, but Power Integrations is well-positioned with its fabless IDM model.

Q: David Williams asked about guidance derisking and bookings exit.

A: Bookings slowed in July, nearly 20% below normal run rate, tariffs impacting appliance business.

Q: Ross Seymore inquired about segment dynamics in Q3 guide.

A: Industrial strong, consumer appliances down but offset by video game design wins, little mix change.

Q: Tore Svanberg asked about TSMC exit impact.

A: Other foundries not as robust, Power Integrations' 1250-volt and 1700-volt GaN differentiate them.

Q: Christopher Rolland questioned GaN in AI data center and competitors.

A: Shipping into auxiliary power supplies, sampling main converters next year, competitors use discretes, Power Integrations uses system-level products.

Q: Ross Seymore asked about channel inventory and seasonality.

A: Channel inventory healthy, seasonality and tariff concerns affecting near-term outlook, but industrial expected to drive growth next year.