What changed in this filing

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Item 1. Financial Statements

2023-11-07 compared with 2023-08-03 · 113 added, 80 removed, 414 unchanged (32% of the section changed)

3 unchanged sentences

(In thousands)

June 30, 2023

September 30, 2023

December 31, 2022

29 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

15 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net of $ 0 tax in each of the three and six months ended June 30, 2023 and 2022

Unrealized gain (loss) on marketable securities, net of $ 0 tax in each of the three and six months ended June 30, 2023 and 2022

Amortization of defined benefit pension items, net of tax of ($ 4 ) and ($ 7 ) in the three and six months ended June 30, 2023, respectively, and $ 0 and $ 3 in the three and six months ended June 30, 2022, respectively

Foreign currency translation adjustments, net of $ 0 tax in each of the three and nine months ended September 30, 2023 and 2022

Unrealized gain (loss) on marketable securities, net of $ 0 tax in each of the three and nine months ended September 30, 2023 and 2022

Amortization of defined benefit pension items, net of tax of ($ 4 ) and ($ 11 ) in the three and nine months ended September 30, 2023, respectively, and $ 3 and $ 6 in the three and nine months ended September 30, 2022, respectively

Total other comprehensive income (loss)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

21 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

47 unchanged sentences

Accounts Receivable

September 30,

(In thousands)

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30,

(In thousands)

3 unchanged sentences

Intangible Assets

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

Total intangible assets

The estimated future amortization expense related to finite-lived intangible assets at June 30, 2023, is as follows:

The estimated future amortization expense related to finite-lived intangible assets at September 30, 2023, is as follows:

(In thousands)

2023 (remaining six months)

2023 (remaining three months)

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss for the three and six months ended June 30, 2023 and 2022, were as follows:

Changes in accumulated other comprehensive loss for the three and nine months ended September 30, 2023 and 2022, were as follows:

Unrealized Gains

8 unchanged sentences

Three Months Ended

September 30,

(In thousands)

4 unchanged sentences

Ending balance

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended June 30, 2023 and 2022.

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended September 30, 2023 and 2022.

POWER INTEGRATIONS, INC.

6 unchanged sentences

Pension Items

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

Ending balance

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the six months ended June 30, 2023 and 2022.

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the nine months ended September 30, 2023 and 2022.

FAIR VALUE MEASUREMENTS:

5 unchanged sentences

The Company’s cash equivalents and short-term marketable securities are classified within Level 1 or Level 2 of the fair-value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at June 30, 2023 and December 31, 2022, was as follows:

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at September 30, 2023 and December 31, 2022, was as follows:

Fair Value Measurement at

June 30, 2023

September 30, 2023

Quoted Prices in

8 unchanged sentences

Money market funds

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurement at

10 unchanged sentences

Money market funds

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the six months ended June 30, 2023 and the twelve months ended December 31, 2022.

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the nine months ended September 30, 2023 and the twelve months ended December 31, 2022.

MARKETABLE SECURITIES:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at June 30, 2023, were as follows:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at September 30, 2023, were as follows:

Gross Unrealized

8 unchanged sentences

Total marketable securities

Accrued interest receivable was $ 2.0 million at June 30, 2023 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

Accrued interest receivable was $ 2.7 million at September 30, 2023 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at December 31, 2022, were as follows:

10 unchanged sentences

Accrued interest receivable was $ 1.2 million at December 31, 2022 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

The following table summarizes marketable securities classified as available-for-sale (excluding cash equivalents) in a continuous unrealized loss position for which an allowance for credit losses was not recorded at June 30, 2023:

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Less Than 12 Months

3 unchanged sentences

Total marketable securities

In the three and six months ended June 30, 2023 and 2022, no unrealized losses on marketable securities were recognized in income.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In the three and nine months ended September 30, 2023 and 2022, no unrealized losses on marketable securities were recognized in income.

The Company does not intend to sell and it is unlikely that it will be required to sell the securities prior to their anticipated recovery.

2 unchanged sentences

STOCK-BASED COMPENSATION:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and six months ended June 30, 2023 and 2022:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

Total stock-based compensation expense

Stock-based compensation expense in the three months ended June 30, 2023, was approximately $ 6.8 million, comprising approximately $ 5.3 million related to restricted stock unit (“RSU”) awards, $ 0.5 million related to the Company’s employee stock purchase plan and $ 1.0 million related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards.

Stock-based compensation expense in the six months ended June 30, 2023, was approximately $ 14.1 million, comprising approximately $ 11.2 million related to RSUs, $ 1.0 million related to the Company’s employee stock purchase plan and $ 1.9 million related to PSUs and PRSUs.

Stock-based compensation expense in the three months ended June 30, 2022, was approximately $ 3.7 million, comprising approximately $ 5.3 million related to RSUs, $ 0.5 million related to the Company’s employee stock purchase plan and $ 2.1 million credit related to PSUs and PRSUs.

Stock-based compensation expense in the six months ended June 30, 2022, was approximately $ 12.7 million, comprising approximately $ 10.9 million related to RSUs, $ 0.9 million related to the Company’s employee stock purchase plan and $ 0.9 million related to PSUs and PRSUs.

Stock-based compensation expense in the three months ended September 30, 2023, was approximately $ 6.9 million, comprising approximately $ 6.1 million related to restricted stock unit (“RSU”) awards, $ 0.5 million related to the Company’s employee stock purchase plan and $ 0.3 million related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards.

Stock-based compensation expense in the nine months ended September 30, 2023, was approximately $ 21.0 million, comprising approximately $ 17.3 million related to RSUs, $ 1.4 million related to the Company’s employee stock purchase plan and $ 2.3 million related to PSUs and PRSUs.

Stock-based compensation expense in the three months ended September 30, 2022, was approximately $ 3.0 million, comprising approximately $ 6.4 million related to RSUs, $ 0.5 million related to the Company’s employee stock purchase plan and $ 3.9 million credit related to PSUs and PRSUs.

Stock-based compensation expense in the nine months ended September 30, 2022, was approximately $ 15.7 million, comprising approximately $ 17.3 million related to RSUs, $ 1.3 million related to the Company’s employee stock purchase plan and $ 2.9 million credit related to PSUs and PRSUs.

Under the performance-based awards program, the Company grants awards in the performance year in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met.

1 unchanged sentence

The performance metrics of this program are annual targets consisting of a combination of net revenue, non-GAAP operating income and strategic goals.

As the net revenue, non-GAAP operating income and strategic goals are considered performance conditions, expense associated with these awards, net of estimated forfeitures, is recognized over the service period based on an assessment of the expected achievement of the performance targets.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

assessment of the expected achievement of the performance targets.

The fair value of these PSUs is determined using the fair value of the Company’s common stock on the date of the grant, reduced by the discounted present value of dividends expected to be declared before the awards vest.

2 unchanged sentences

the shares were released to the Company’s employees and executives in the first quarter of 2023.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of PSUs outstanding as of June 30, 2023 and activity during the six months ended, is presented below:

A summary of PSUs outstanding as of September 30, 2023 and activity during the nine months ended, is presented below:

Weighted-Average

7 unchanged sentences

Outstanding at January 1, 2023

Outstanding at June 30, 2023

Outstanding and expected to vest at June 30, 2023

Outstanding at September 30, 2023

Outstanding and expected to vest at September 30, 2023

The Company’s PRSU program provides for the issuance of PRSUs which will vest based on the Company’s performance measured against the PRSU program’s established performance targets.

7 unchanged sentences

the shares were released to the Company’s executives in the first quarter of 2023.

A summary of PRSUs outstanding as of June 30, 2023 and activity during the six months ended, is presented below:

A summary of PRSUs outstanding as of September 30, 2023 and activity during the nine months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2023

Outstanding at June 30, 2023

Outstanding and expected to vest at June 30, 2023

Outstanding at September 30, 2023

Outstanding and expected to vest at September 30, 2023

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of RSUs outstanding as of June 30, 2023 and activity during the six months ended, is presented below:

A summary of RSUs outstanding as of September 30, 2023 and activity during the nine months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2023

Outstanding at June 30, 2023

Outstanding and expected to vest at June 30, 2023

Outstanding at September 30, 2023

Outstanding and expected to vest at September 30, 2023

SIGNIFICANT CUSTOMERS AND GEOGRAPHIC NET REVENUES:

3 unchanged sentences

Customer Concentration

The Company’s top ten customers accounted for approximately 82 % and 79 % of net revenues for the three and six months ended June 30, 2023, respectively, and 77 % for both the three and six months ended June 30, 2022.

The Company’s top ten customers accounted for approximately 83 % and 81 % of net revenues for the three and nine months ended September 30, 2023, respectively, and 72 % and 75 %, respectively, in the corresponding periods of 2022.

A significant portion of these revenues are attributable to sales of the Company’s products to distributors of electronic components.

1 unchanged sentence

Similarly, merchant power-supply manufacturers sell power supplies incorporating the Company’s products to a broad range of OEMs.

Sales to distributors were $ 78.8 million and $ 145.5 million in the three and six months ended June 30, 2023, respectively, and $ 133.9 million and $ 269.7 million, respectively, in the corresponding periods of 2022.

Sales to distributors were $ 93.2 million and $ 238.7 million in the three and nine months ended September 30, 2023, respectively, and $ 103.6 million and $ 373.3 million, respectively, in the corresponding periods of 2022.

Direct sales to OEMs and power-supply manufacturers accounted for the remainder.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Honestar Technologies Co., Ltd.

Salcomp Group

Flextronics Group

* Total customer revenue was less than 10% of net revenues.

3 unchanged sentences

The Company does not have any off-balance-sheet credit exposure related to its customers.

As of both June 30, 2023 and December 31, 2022, 87 % of accounts receivable were concentrated with the Company’s top ten customers.

As of September 30, 2023, and December 31, 2022, 89 % and 87 % of accounts receivable were concentrated with the Company’s top ten customers.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following customers represented 10% or more of accounts receivable at June 30, 2023 and December 31, 2022:

The following customers represented 10% or more of accounts receivable at September 30, 2023 and December 31, 2022:

September 30,

Honestar Technologies Co., Ltd.

Salcomp Group

Flextronics Group

* Total customer accounts receivable was less than 10% of accounts receivable.

No other customers accounted for 10% or more of the Company’s accounts receivable in the periods presented.

1 unchanged sentence

The Company markets its products globally through its sales personnel and a worldwide network of independent sales representatives and distributors.

Geographic net revenues, based on “bill to” customer locations, for the three and six months ended June 30, 2023 and 2022, were as follows:

Geographic net revenues, based on “bill to” customer locations, for the three and nine months ended September 30, 2023 and 2022, were as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

As of December 31, 2022, the Company had $ 81.3 million remaining under its authorized stock-repurchase program.

In the three and six months ended June 30, 2023, the Company purchased approximately 57,000 shares for $ 4.3 million and approximately 80,000 shares for $ 6.0 million, respectively, leaving $ 75.3 million remaining on the repurchase authorization as of June 30, 2023.

In the three and nine months ended September 30, 2023 the Company purchased approximately 24,000 shares for $ 1.8 million and approximately 104,000 shares for $ 7.8 million, respectively, leaving $ 73.4 million remaining on the repurchase authorization as of September 30, 2023.

Authorization of future repurchase programs is at the discretion of the Company’s board of directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors;

the program has no expiration date.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash Dividends

1 unchanged sentence

In February 2023, the Company’s board of directors declared dividends of $ 0.19 per share to be paid to stockholders of record at the end of each quarter in 2023.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the three and six months ended June 30, 2023 and 2022, cash dividends declared and paid were as follows:

In October 2023, the Company’s board of directors raised the quarterly cash dividend again with the declaration of five cash dividends of $ 0.20 per share to be paid to stockholders of record at the end of the fourth quarter in 2023 (in lieu of the $ 0.19 per share announced in February 2023) and at the end of each quarter in 2024 .

For the three and nine months ended September 30, 2023 and 2022, cash dividends declared and paid were as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

10 unchanged sentences

The Company has excluded the shares underlying the outstanding performance-based awards in the 2023 and 2022 calculations as the shares were not contingently issuable as of the end of the reporting periods.

In the three and six months ended June 30, 2023, and 2022, no outstanding stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share.

In the three and nine months ended September 30, 2023 and 2022, no outstanding stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share.

PROVISION FOR INCOME TAXES:

Income-tax expense includes a provision for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to the Company and its subsidiaries, adjusted for certain discrete items which are fully recognized in the period they occur.

Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

The Company’s effective tax rates for the three and six months ended June 30, 2023 were 3.7 % and 5.1 %, respectively, and 8.1 % and 9.2 %, respectively, in the three and six months ended June 30, 2022.

The effective tax rate in these periods were lower than the statutory federal income-tax rate of 21 % due to the geographic distribution of the Company’s world-wide earnings in lower-tax jurisdictions and federal research tax credits.

Additionally, in the three months ended June 30, 2023, the Company’s effective tax rate was favorably impacted by a discrete item associated with recognition of excess tax benefits related to share-based payments.

In the six months ended June 30, 2023, the Company’s effective tax rate was favorably impacted by discrete items associated with the release of unrecognized tax benefits and

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recognition of excess tax benefits related to share-based payments.

In the three months ended June 30, 2022, the Company’s effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments.

In the six months ended June 30, 2022, the Company’s effective tax rate was favorably impacted by discrete items associated with the release of unrecognized tax benefits and recognition of excess tax benefits related to share-based payments.

recognized in the period they occur.

Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

The Company’s effective tax rate for both the three and nine months ended September 30, 2023 was 5.1 %, as compared to 6.9 % and 8.5 %, respectively, in the corresponding periods of 2022.

Additionally, in the three months ended September 30, 2023, our effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments.

In the nine months ended September 30, 2023, our effective tax rate was favorably impacted by discrete items associated with the release of unrecognized tax benefits and recognition of excess tax benefits related to share-based payments.

These benefits were partially offset by foreign income subject to U.S.

3 unchanged sentences

The Company has not been granted any incentivized tax rates and does not operate under any tax holidays in any jurisdiction.

As of June 30, 2023, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

As of September 30, 2023, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

Determining the consolidated provision for income-tax expense, income-tax liabilities and deferred tax assets and liabilities involves judgment.

16 unchanged sentences

That motion was granted, so CogniPower’s claims for infringement initially went forward separately in their lawsuit against the Company’s customers in the District of Delaware, but the Company filed a motion to intervene in that lawsuit and received a ruling allowing the Company to intervene in CogniPower’s customer lawsuit on February 1, 2021, and the parties thereafter agreed to dismiss the Company’s separate lawsuit against CogniPower.

The remaining case is currently stayed, but the Company recently filed a motion to amend its claims against CogniPower to include three additional patents that are in the same family as the two CogniPower patents that are already in the lawsuit, after CogniPower accused the Company’s customers of infringing those three related patents in a lawsuit in the Eastern District of Texas.

A ruling on the Company’s motion is expected in the coming months, and the Company believes it has strong claims and defenses with respect to all of CogniPower’s asserted patents, and intends to vigorously defend itself against CogniPower’s claims against the Company’s technology, with appeals to follow if necessary.

On October 31, 2022, Waverly Licensing LLC filed a complaint against the Company in the United States District Court for the Western District of Texas.

In its complaint, Waverly alleged that the Company was infringing one patent

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

pertaining to charging a battery-operated device.

customers of infringing those three related patents in a lawsuit in the Eastern District of Texas.

On October 31, 2022, Waverly Licensing LLC filed a complaint against the Company in the United States District Court for the Western District of Texas.

In its complaint, Waverly alleged that the Company was infringing one patent pertaining to charging a battery-operated device.

The Company believes it has strong claims and defenses, and intends to vigorously defend itself against Waverly’s claims, with appeals to follow if necessary.

12 unchanged sentences

In addition, the Company requires its employees to sign a proprietary information and inventions agreement, which assigns the rights to its employees’ development work to the Company.

To date, the Company has not had to reimburse any of its distributors or customers for any losses related to these indemnifications and no material claims were outstanding as of June 30, 2023.

To date, the Company has not had to reimburse any of its distributors or customers for any losses related to these indemnifications and no material claims were outstanding as of September 30, 2023.

For several reasons, including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnifications.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements