Power Integrations, Inc. Q3 FY2025 earnings call

Business Trends

• Saw a slowdown in orders in July with bookings down ~20% vs H1 monthly run rate, continuing into Q3 with weaker distribution sell-through. Appliances, making up ~40% of first half sales, had orders down ~40% in Q3 due to tariffs, stagnant home sales, and China's weak housing market.
• Expect Q4 revenues $100M-$105M, with consumer driving much of the decrease vs Q3, and industrial sequentially lower but still strong YTD up nearly 20% for first 3 quarters.

Data Center Collaboration

• Announced collaboration with NVIDIA on 800-volt DC power architecture. Our 1,250 and 1,700-volt GaN technologies are advantageous in this architecture. Expect to deliver early samples of system-level GaN product for rack-level AC to DC converters by end of 2025 with production in late 2026.

First 100 Days as CEO

• Excited about unique technologies and expertise in high-voltage processes. Core power supply business on growth trajectory toward higher-margin industrial applications. Need to adapt organization and processes to align R&D and go-to-market with data center, auto, and high power markets. Focus on driving shareholder value by growing cash flow through disciplined spending.

Third quarter revenues were $119 million, up 3% sequentially. Revenue mix for the quarter was 42% industrial, 34% consumer, 13% computer, and 11% communications. Industrial was up high single digits due to strength in high-voltage DC transmission, metering, and automotive. Consumer revenues were down mid-single digits driven by softness in major appliances and seasonality in air conditioning, offset by gaming strength. Communications was up high single digits due to cell phone strength from a GaN accessory charger design win. Computer was up mid-single digits from tablets and aftermarket chargers.

• Q4 revenues expected $100 million to $105 million.
• Full year revenue growth expected ~6% at midpoint of Q4 range.
• Non-GAAP gross margin for Q4 expected between 53.5% and 54%.
• Share count expected to come down by 400,000 to 500,000 shares compared to Q3, below 56 million.

• Tariffs severely disrupting the appliance industry, causing volatility in revenues.
• Channel inventory issues with 9.8 weeks at quarter end, though sell-through in Q4 has drawn down inventory.
• Exchange rate impacts affecting non-GAAP gross margin due to higher input costs flowing through inventory.

Q: Tore Svanberg asked about consumer business direction and future focus on data center, auto, high power.

A: Jennifer Lloyd discussed consumer inventory burn and future growth drivers for appliances, noting efficiency standards and GaN adoption as growth drivers. She also mentioned realigning R&D and go-to-market strategies to focus more on data center, automotive, and high power markets.

Q: Christopher Rolland asked about Q4 segment performance and data center GaN vs silicon carbide.

A: Joe Shiffler talked about Q4 segment weakness with consumer down and industrial lower sequentially. Jennifer Lloyd discussed GaN opportunities in data center, highlighting advantages of high-voltage GaN in 800-volt DC architecture.

Q: Ross Seymore asked about channel inventory and consumer tailwind, and TAM for data center.

A: Joe Shiffler discussed channel inventory burn and expected improvement as preloaded inventory clears. Jennifer Lloyd spoke about TAM for data center, noting meaningful revenue generation from 800-volt opportunities a few years out.

Q: David Williams asked about PC market opportunities and automotive traction.

A: Joe Shiffler talked about GaN penetration in notebooks as a PC market opportunity. Jennifer Lloyd discussed automotive design wins, including a heavy vehicle win with higher content but smaller unit volume, and success in passenger car emergency power supplies and evolving EV architectures.