What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-07 compared with 2023-11-07 · 101 added, 149 removed, 378 unchanged (40% of the section changed)

3 unchanged sentences

(In thousands)

September 30, 2023

March 31, 2024

December 31, 2023

29 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

4 unchanged sentences

General and administrative

Other operating expenses, net

Total operating expenses

8 unchanged sentences

Three 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 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

Foreign currency translation adjustments, net of $ 0 tax in each of the three months ended March 31, 2024 and 2023

Unrealized gain (loss) on marketable securities, net of $ 0 tax in each of the three months ended March 31, 2024 and 2023

Amortization of defined benefit pension items, net of tax of ($ 8 ) and ($ 4 ) in the three months ended March 31, 2024 and 2023, respectively

Total other comprehensive income (loss)

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

21 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

(In thousands)

4 unchanged sentences

Stock-based compensation expense

Amortization of premium on marketable securities

Amortization of premium (accretion of discount) on marketable securities

Deferred income taxes

8 unchanged sentences

Purchases of property and equipment

Proceeds from sale of property and equipment

Purchases of marketable securities

Proceeds from sales and maturities of marketable securities

Net cash provided by (used in) investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

23 unchanged sentences

Recent Accounting Pronouncements

The Company has considered all recent accounting pronouncements issued, but not yet effective, and does not expect any to have a material effect on the Company’s condensed consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements and expand public entities’ segment disclosures in the annual and interim financial statements.

The amendment will require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets.

All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment.

The Company is required to adopt the amendments in fiscal year 2024 for annual and retrospective reporting periods and in the first quarter of fiscal year 2025 for all interim and retrospective reporting periods;

with early adoption permitted.

The Company does not expect the amendment to have a material impact on its consolidated financial statements upon adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign).

ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes.

The guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted.

The Company is currently evaluating the potential impact of adopting this new guidance on its consolidated financial statements.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

COMPONENTS OF THE COMPANY’S CONDENSED CONSOLIDATED BALANCE SHEETS:

Accounts Receivable

September 30,

(In thousands)

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

Ending balance

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 30,

(In thousands)

3 unchanged sentences

Intangible Assets

September 30, 2023

March 31, 2024

December 31, 2023

3 unchanged sentences

Total intangible assets

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The estimated future amortization expense related to finite-lived intangible assets at March 31, 2024, is as follows:

(In thousands)

2023 (remaining three months)

2024 (remaining nine months)

Accumulated Other Comprehensive Loss

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

Changes in accumulated other comprehensive loss for the three months ended March 31, 2024 and 2023, 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 September 30, 2023 and 2022.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unrealized Gains

and Losses on

Defined Benefit

Foreign Currency

Marketable Securities

Pension Items

Nine Months Ended

September 30,

(In thousands)

Beginning balance

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Net-current period other comprehensive income (loss)

Ending balance

(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.

(1) This component of accumulated other comprehensive loss is included in the computation of net periodic pension cost for the three months ended March 31, 2024 and 2023.

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 September 30, 2023 and December 31, 2022, was as follows:

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at March 31, 2024 and December 31, 2023, was as follows:

Fair Value Measurement at

September 30, 2023

March 31, 2024

Quoted Prices in

8 unchanged sentences

Money market funds

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

government securities

Fair Value Measurement at

10 unchanged sentences

Money market funds

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.

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the three months ended March 31, 2024 and the twelve months ended December 31, 2023.

MARKETABLE SECURITIES:

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:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at March 31, 2024, were as follows:

Gross Unrealized

4 unchanged sentences

Investments due in 4-12 months:

Commercial paper

Corporate securities

2 unchanged sentences

Total marketable securities

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.

Accrued interest receivable was $ 2.5 million at March 31, 2024 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at December 31, 2023, were as follows:

5 unchanged sentences

Investments due in 4-12 months:

Commercial paper

Corporate securities

3 unchanged sentences

Accrued interest receivable was $ 2.3 million at December 31, 2023 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 September 30, 2023:

Less Than 12 Months

3 unchanged sentences

Total marketable securities

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.

In the three months ended March 31, 2024 and 2023, 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 securities prior to their anticipated recovery.

The issuers are high quality (investment grade) and the decline in fair value is largely due to changes in interest rates.

1 unchanged sentence

STOCK-BASED COMPENSATION:

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:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three months ended March 31, 2024 and 2023:

Three 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 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.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-based compensation expense in the three months ended March 31, 2024, was approximately $ 6.4 million, comprising approximately $ 6.1 million related to restricted stock unit (“RSU”) awards, an immaterial amount related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards and $ 0.3 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the three months ended March 31, 2023, was approximately $ 7.4 million, comprising approximately $ 5.9 million related to RSUs, $ 1.0 million related to PSUs and PRSUs and $ 0.5 million related to the Company’s employee stock purchase plan.

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

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 2024.

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

A summary of PSUs outstanding as of March 31, 2024 and activity during the three months ended, is presented below:

Weighted-Average

7 unchanged sentences

Outstanding at January 1, 2024

Outstanding at September 30, 2023

Outstanding and expected to vest at September 30, 2023

Outstanding at March 31, 2024

Outstanding and expected to vest at March 31, 2024

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.

5 unchanged sentences

If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

In February 2023, it was determined that approximately 23,000 shares subject to the PRSUs granted in 2020 vested in aggregate;

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

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In February 2024, it was determined that no shares subject to the PRSUs granted in 2021 vested;

thus no shares were released to the Company’s executives in the first quarter of 2024.

A summary of PRSUs outstanding as of March 31, 2024 and activity during the three months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2024

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 September 30, 2023 and activity during the nine months ended, is presented below:

Outstanding at March 31, 2024

Outstanding and expected to vest at March 31, 2024

A summary of RSUs outstanding as of March 31, 2024 and activity during the three months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2024

Outstanding at September 30, 2023

Outstanding and expected to vest at September 30, 2023

Outstanding at March 31, 2024

Outstanding and expected to vest at March 31, 2024

SIGNIFICANT CUSTOMERS AND GEOGRAPHIC NET REVENUES:

3 unchanged sentences

Customer Concentration

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.

The Company’s top ten customers accounted for approximately 77 % and 78 % of net revenues for the three months ended March 31, 2024 and 2023, respectively.

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 $ 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.

Sales to distributors were $ 66.4 million and $ 66.8 million in the three months ended March 31, 2024 and 2023, respectively.

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following customers represented 10% or more of the Company’s net revenues for the respective periods:

Three Months Ended

Nine Months Ended

September 30,

Honestar Technologies Co., Ltd.

5 unchanged sentences

The Company does not have any off-balance-sheet credit exposure related to its 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 September 30, 2023 and December 31, 2022:

September 30,

As of March 31, 2024 and December 31, 2023, 88 % and 86 % of accounts receivable were concentrated with the Company’s top ten customers.

The following customers represented 10% or more of accounts receivable at March 31, 2024 and December 31, 2023:

Powertech Distribution Ltd.

Honestar Technologies Co., Ltd.

Salcomp Group

Flextronics Group

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

2 unchanged sentences

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 nine months ended September 30, 2023 and 2022, were as follows:

Geographic net revenues by region and country with 5% or more of the Company’s revenue during any of the periods presented, based on “bill to” customer locations were as follows:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

United States of America

Hong Kong/China

Western Europe (excluding Germany)

Total net revenues

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STOCKHOLDERS’ EQUITY:

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

As of December 31, 2023, the Company had $ 26.0 million remaining under its authorized stock-repurchase program.

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.

In the three months ended March 31, 2024 , the Company purchased approximately 207,000 shares for $ 14.6 million, leaving $ 11.3 million remaining on the repurchase authorization as of March 31, 2024.

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

In January 2022, the Company’s board of directors declared dividends of $ 0.18 per share to be paid to stockholders of record at the end of each quarter in 2022.

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.

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:

In October 2023, the Company’s board of directors raised the quarterly cash dividend 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 months ended March 31, 2024 and 2023, cash dividends declared and paid were as follows:

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

1 unchanged sentence

Dividends declared per common share

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

EARNINGS PER SHARE:

4 unchanged sentences

Three 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 2024 and 2023 calculations as the shares were not contingently issuable as of the end of the reporting periods.

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.

In the three months ended March 31, 2024 and 2023, 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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 0.5 % and 8.0 %, respectively.

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 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.

Additionally, in the three months ended March 31, 2024 and 2023, our effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments and the release of unrecognized tax benefits.

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 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.

As of March 31, 2024, 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.

The Company calculates and provides for income taxes in each of the tax jurisdictions in which it operates, which involves estimating current tax exposures as well as making judgments regarding the recoverability of deferred tax assets in each jurisdiction.

The Company calculates and provides for income taxes in each of the tax jurisdictions in

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

which it operates, which involves estimating current tax exposures as well as making judgments regarding the recoverability of deferred tax assets in each jurisdiction.

The estimates used could differ from actual results, which may have a significant impact on operating results in future periods.

Supplier Agreements

Under the terms of the Company’s wafer-supply agreements with Seiko Epson Corporation ("Epson") and ROHM Lapis Semiconductor Co., Ltd.

("Lapis"), the wafers purchased from these suppliers are priced in U.S.

Under the terms of the Company’s wafer-supply agreements with Seiko Epson Corporation ("Epson") and ROHM Lapis Semiconductor Co., Ltd.

("Lapis"), the wafers purchased from these suppliers are priced in U.S.

dollars, with mutual sharing of the impact of fluctuations in the exchange rate between the Japanese yen and the U.S.

9 unchanged sentences

In response, CogniPower filed a motion to dismiss the Company’s declaratory judgment claims on the basis that CogniPower had not threatened the Company directly with suit.

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

That motion was granted, and CogniPower’s claims for infringement went forward separately in CogniPower’s lawsuit against the Company’s customers in the District of Delaware.

The Company filed a motion to intervene in that lawsuit and received a ruling allowing the Company to intervene on February 1, 2021, and the parties thereafter agreed to dismiss the Company’s separate lawsuit against CogniPower.

The remaining case remained stayed until February 26, 2024, when the Court lifted the stay.

The Delaware Court then set a schedule for the remainder of the case, with further proceedings in the coming months, and a trial scheduled in August 2025.

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.

3 unchanged sentences

The Texas court thereafter dismissed Waverly’s Texas complaint.

The Company’s Delaware lawsuit is in its earliest stages, but on April 6, 2023, the Delaware defendants filed a motion to dismiss based on a series of covenants not to sue that the Delaware defendants filed with the Court, with further proceedings on the Delaware defendants’ motion expected in the coming months.

On March 12, 2024 the Delaware Court dismissed the remaining case in view of a series of covenants not to sue that the Delaware defendants filed with the Court.

The Company is unable to predict the outcome of legal proceedings with certainty, and there can be no assurance that the Company will prevail in the above-mentioned unsettled litigations.

These litigations, whether or not determined in the Company’s favor or settled, will be costly and will divert the efforts and attention of the Company’s management and technical personnel from normal business operations, potentially causing a material adverse effect on the business, financial condition and operating results.

Currently, the Company is not able to estimate a loss or a range of loss for the ongoing litigations disclosed above, however adverse determinations in litigation could result in monetary losses, the loss of proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from third parties or prevent the Company from licensing the technology, any of which could have a material adverse effect on the Company’s business, financial condition and operating results.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

of proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from third parties or prevent the Company from licensing the technology, any of which could have a material adverse effect on the Company’s business, financial condition and operating results.

INDEMNIFICATIONS:

5 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 September 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 March 31, 2024.

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