What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-08-06 compared with 2025-05-12 · 153 added, 84 removed, 430 unchanged (36% of the section changed)

3 unchanged sentences

(In thousands)

March 31, 2025

June 30, 2025

December 31, 2024

29 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

4 unchanged sentences

General and administrative

Other operating expenses

Total operating expenses

INCOME FROM OPERATIONS

INCOME (LOSS) FROM OPERATIONS

INCOME BEFORE INCOME TAXES

PROVISION FOR INCOME TAXES

PROVISION (BENEFIT) FOR INCOME TAXES

EARNINGS PER SHARE:

4 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net of $ 0 tax in each of the three months ended March 31, 2025 and 2024

Unrealized gain (loss) on marketable securities, net of ($ 116 ) and $ 0 tax in the three months ended March 31, 2025 and 2024, respectively

Amortization of defined benefit pension items, net of $ 0 and $ 8 tax in the three months ended March 31, 2025 and 2024, respectively

Foreign currency translation adjustments, net of $ 0 tax in each of the three and six months ended June 30, 2025 and 2024

Unrealized gain (loss) on marketable securities, net of ($ 49 ) and ($ 166 ) taxes in the three and six months ended June 30, 2025, respectively, and $ 0 in each of the three and six months ended June 30, 2024

Amortization of defined benefit pension items, net of $ 4 tax in each of the three and six months ended June 30, 2025, respectively, and $ 7 and $ 15 in the three and six months ended June 30, 2024, respectively

Total other comprehensive income (loss)

4 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

21 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

22 unchanged sentences

Payments of dividends to stockholders

Proceeds from draw on line of credit

Payments on line of credit

Net cash used in financing activities

NET DECREASE IN CASH AND CASH EQUIVALENTS

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

16 unchanged sentences

No material changes have been made to the Company’s significant accounting policies disclosed in Note 2, Significant Accounting Policies and Recent Accounting Pronouncements , of the Company’s financial statements set forth in Item 8 of the Company’s Annual Report on Form 10-K, filed on February 7, 2025, for the year ended December 31, 2024.

Adoption of New Accounting Standards

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 requires 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 adopted the annual disclosure requirements in fiscal year 2024 and the interim disclosure requirements beginning in the first quarter of fiscal year 2025.

Refer to Note 12.

Segment Reporting .

Recent Accounting Pronouncements

9 unchanged sentences

The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

COMPONENTS OF THE COMPANY’S CONDENSED CONSOLIDATED BALANCE SHEETS:

5 unchanged sentences

Allowance for credit losses

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company maintains an allowance for estimated credit losses resulting from the inability of customers to make required payments.

3 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

2 unchanged sentences

Receivables written off

Recoveries collected

Ending balance

4 unchanged sentences

Intangible Assets

March 31, 2025

June 30, 2025

December 31, 2024

4 unchanged sentences

Total intangible assets

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, 2025, is as follows:

The estimated future amortization expense related to finite-lived intangible assets at June 30, 2025, is as follows:

(In thousands)

2025 (remaining nine months)

2025 (remaining six months)

Total excludes $ 4.9 million of in-process research and development which will be amortized upon completion of development over the estimated useful life of the technology.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) for the three months ended March 31, 2025 and 2024, were as follows:

Changes in accumulated other comprehensive income (loss) for the three and six months ended June 30, 2025 and 2024, were as follows:

Unrealized Gains

11 unchanged sentences

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive income (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 three months ended June 30, 2025 and 2024.

Unrealized Gains

and Losses on

Defined Benefit

Foreign Currency

Marketable Securities

Pension Items

Six Months Ended

(In thousands)

Beginning balance

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

1 unchanged sentence

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 March 31, 2025 and 2024.

(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, 2025 and 2024.

FAIR VALUE MEASUREMENTS:

4 unchanged sentences

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

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.

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, 2025 and December 31, 2024, was as follows:

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at June 30, 2025 and December 31, 2024, was as follows:

Fair Value Measurement at

March 31, 2025

June 30, 2025

Quoted Prices in

21 unchanged sentences

government securities

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, 2025 and the twelve months ended December 31, 2024.

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, 2025 and the twelve months ended December 31, 2024.

MARKETABLE SECURITIES:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at March 31, 2025, were as follows:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at June 30, 2025, were as follows:

Gross Unrealized

2 unchanged sentences

Investments due in 3 months or less:

Commercial paper

Corporate securities

4 unchanged sentences

Total marketable securities

Accrued interest receivable was $ 2.7 million at March 31, 2025 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

Accrued interest receivable was $ 2.5 million at June 30, 2025 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

POWER INTEGRATIONS, INC.

12 unchanged sentences

Accrued interest receivable was $ 2.8 million at December 31, 2024 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 March 31, 2025:

Less Than 12 Months

3 unchanged sentences

Total marketable securities

In the three months ended March 31, 2025 and 2024, 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 and six months ended June 30, 2025 and 2024, 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 held 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 months ended March 31, 2025 and 2024:

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, 2025 and 2024:

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

Total stock-based compensation expense

Stock-based compensation expense in the three months ended March 31, 2025, was approximately $ 8.7 million, comprising approximately $ 5.8 million related to restricted stock unit (“RSU”) awards, $ 2.5 million related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards and $ 0.4 million related to the Company’s employee stock purchase plan.

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 RSUs, an immaterial amount related to PSUs and PRSUs and $ 0.3 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the three months ended June 30, 2025, was approximately $ 10.1 million, comprising approximately $ 5.1 million related to restricted stock unit (“RSU”) awards, $ 4.6 million related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards and $ 0.4 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the six months ended June 30, 2025, was approximately $ 18.8 million, comprising approximately $ 10.9 million related to RSUs, $ 7.1 million related to PSUs and PRSUs and $ 0.8 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the three months ended June 30, 2024, was approximately $ 11.0 million, comprising approximately $ 6.3 million related to RSUs, $ 4.3 million related to PSUs and PRSUs and $ 0.4 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the six months ended June 30, 2024, was approximately $ 17.4 million, comprising approximately $ 12.4 million related to RSUs, $ 4.3 million related to PSUs and PRSUs and $ 0.7 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.

6 unchanged sentences

the shares were released to the Company’s employees and executives in the first quarter of 2025.

A summary of PSUs outstanding as of March 31, 2025 and activity during the three months ended, is presented below:

A summary of PSUs outstanding as of June 30, 2025 and activity during the six months ended, is presented below:

Weighted-Average

7 unchanged sentences

Outstanding at January 1, 2025

Outstanding at March 31, 2025

Outstanding and expected to vest at March 31, 2025

Outstanding at June 30, 2025

Outstanding and expected to vest at June 30, 2025

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.

3 unchanged sentences

Actual vesting of the PRSUs is calculated based on higher achievement under the Relative Measure or the Absolute Measure.

Expense associated with these awards, net of estimated forfeitures, is recorded throughout the year based on an assessment of the expected achievement of the performance targets.

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

In February 2025, it was determined that no shares subject to the PRSUs granted in 2022 vested, thus no shares were released to the Company’s executives.

Expense associated with these awards, net of estimated forfeitures, is recorded

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of PRSUs outstanding as of March 31, 2025 and activity during the three months ended, is presented below:

throughout the year based on an assessment of the expected achievement of the performance targets.

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

In February 2025, it was determined that no shares subject to the PRSUs granted in 2022 vested, thus no shares were released to the Company’s executives.

A summary of PRSUs outstanding as of June 30, 2025 and activity during the six months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2025

Outstanding at March 31, 2025

Outstanding and expected to vest at March 31, 2025

A summary of RSUs outstanding as of March 31, 2025 and activity during the three months ended, is presented below:

Outstanding at June 30, 2025

Outstanding and expected to vest at June 30, 2025

A summary of RSUs outstanding as of June 30, 2025 and activity during the six months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2025

Outstanding at March 31, 2025

Outstanding and expected to vest at March 31, 2025

Outstanding at June 30, 2025

Outstanding and expected to vest at June 30, 2025

SIGNIFICANT CUSTOMERS AND GEOGRAPHIC NET REVENUES:

Customer Concentration

The Company’s top ten customers accounted for approximately 80 % and 77 % of net revenues for the three months ended March 31, 2025 and 2024, respectively.

The Company’s top ten customers accounted for approximately 81 % of net revenues for each of the three and six months ended June 30, 2025 and approximately 80 % and 78 %, respectively, in the corresponding periods of 2024.

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 $ 75.2 million and $ 66.4 million in the three months ended March 31, 2025 and 2024, respectively.

Sales to distributors were $ 81.3 million and $ 156.5 million in the three and six months ended June 30, 2025, respectively, and $ 73.5 million and $ 139.9 million, respectively, in the corresponding periods of 2024.

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

Six Months Ended

Salcomp Group

Honestar Technologies Co., Ltd.

1 unchanged sentence

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Concentration of Credit Risk

1 unchanged sentence

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

As of March 31, 2025 and December 31, 2024, 86 % and 87 % 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, 2025 and December 31, 2024:

Powertech Distribution Ltd.

Honestar Technologies Co., Ltd.

As of June 30, 2025 and December 31, 2024, 89 % and 87 % of accounts receivable were concentrated with the Company’s top ten customers.

The following customers represented 10% or more of accounts receivable at June 30, 2025 and December 31, 2024:

Salcomp Group

Honestar Technologies Co., Ltd.

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

4 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

1 unchanged sentence

Total net revenues

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

STOCKHOLDERS’ EQUITY:

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

2 unchanged sentences

Ending balance

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Common Stock Repurchases

As of December 31, 2024, the Company had $ 48.1 million remaining under its authorized stock-repurchase program.

In the three months ended March 31, 2025, the Company purchased approximately 404,000 shares of the Company’s common stock for $ 23.1 million leaving $ 25.0 million remaining on the repurchase authorization as of March 31, 2025.

In April 2025, the Company utilized the remaining $ 25.0 million, repurchasing approximately 560,000 shares of its common stock.

Subsequently, t he Company’s board of directors authorized the use of an additional $ 50.0 million for the repurchase of the Company’s common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

As of December 31, 2024, the Company had $ 48.1 million available under a stock-repurchase program announced in November 2024.

After this authorization was exhausted in April 2025, t he Company’s board of directors authorized the use of an additional $ 50.0 million for the repurchase of the Company’s common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

In the three months ended June 30, 2025, the Company purchased approximately 0.7 million shares for $ 32.6 million.

In the six months ended June 30, 2025, the Company repurchased 1.1 million shares for $ 55.7 million.

As of June 30, 2025, $ 42.4 million remained on the Company’s repurchase authorization.

The program has no expiration date.

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.

Future repurchase programs would be authorized 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.

Cash Dividends

1 unchanged sentence

In October 2024, the Company’s board of directors raised the quarterly cash dividend with the declaration of five cash dividends of $ 0.21 per share to be paid to stockholders of record at the end of the fourth quarter in 2024 (in lieu of the previously declared dividend of $ 0.20 per share announced in October 2023) and at the end of each quarter in 2025 .

For the three months ended March 31, 2025 and 2024, cash dividends declared and paid were as follows:

For the three and six months ended June 30, 2025 and 2024, cash dividends declared and paid were as follows:

Three Months Ended

Six Months Ended

(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:

2 unchanged sentences

Dilutive common equivalent shares included in this calculation consist of dilutive shares issuable upon the assumed exercise of outstanding common stock options, the assumed vesting of outstanding restricted stock units, the assumed issuance of awards under the stock purchase plan and contingently issuable performance-based awards, as computed using the treasury stock method.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the earnings per share calculation is as follows:

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

13 unchanged sentences

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

The Company’s effective tax rate for the three months ended March 31, 2025 and 2024 was 11.1 % and 0.5 %, respectively.

The Company’s effective tax rate for the three and six months ended June 30, 2025 was ( 1.8 %) and 9.5 %, respectively, and in the corresponding periods of 2024 was 5.8 % and 3.5 %, 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.

I n the three months ended March 31, 2025, the Company’s effective tax rate was unfavorably impacted by the recognition of share-based payments and foreign income subject to U.S.

tax, known as global intangible low-taxed income (“GILTI”).

In the three months ended March 31, 2024, the Company’s 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 and unfavorably impacted by foreign income subject to U.S.

In the three and six months ended June 30, 2025, the Company’s effective tax rate was negatively impacted by the recognition of a tax deficiency or “shortfall” related to share-based payments.

In the three months ended June 30, 2024, 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, 2024, the Company’s effective tax rate was also favorably impacted by the recognition of excess tax benefits related to share-based payments and by discrete items associated with the release of unrecognized tax benefits.

The Company’s primary jurisdiction where foreign earnings are derived is the Cayman Islands, which is a non-taxing jurisdiction.

1 unchanged sentence

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

As of March 31, 2025, 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 June 30, 2025, 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.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S.

The OBBBA includes provisions modifying the corporate income tax code, including the immediate expensing of domestic research and development expenditures for tax purposes, 100% bonus depreciation for qualified assets, and an increase in the statutory tax rate on foreign earnings from 10.5 % to 12.6 % (effective in the fiscal year 2026).

The Company has elected to account Net Controlled Foreign Corporation Tested Income (“NCTI”), formerly known as Global Intangible Low-Taxed Income (“GILTI”), under the deferred method.

The deferred tax amounts recorded are based on the evaluation of temporary differences that are expected to reverse as NCTI is incurred in future periods.

As a result, the Company will remeasure its deferred tax balances related to NCTI for the changes in the tax rate and will record an adjustment to this balance in the fiscal third quarter.

The Company expects these modifications to result in an increase in its effective tax rate but is still evaluating the magnitude of the impact.

POWER INTEGRATIONS, INC.

4 unchanged sentences

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 and ROHM Lapis Semiconductor Co., Ltd., 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.

19 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

5 unchanged sentences

General and administrative (excluding 1)

INCOME FROM OPERATIONS

PROVISION FOR INCOME TAXES

Other operating expenses

INCOME (LOSS) FROM OPERATIONS

PROVISION (BENEFIT) FOR INCOME TAXES

The table below presents other segment information:

Three Months Ended

Six Months Ended

(In thousands)

7 unchanged sentences

The case was then stayed until February 26, 2024, when 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.

On January 16, 2025, CogniPower filed a follow-on complaint against the same customer asserting the same two patents in the United States District Court for the District of Delaware, but no schedule has been set for the follow-on case at this time.

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.

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.

Currently, the Company is not able to estimate a loss or a range of loss for the ongoing litigations disclosed above.

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.

On May 11, 2022, a former employee of the Company filed a first amended complaint in the Superior Court of California, County of Santa Clara alleging several violations of the Fair Employment and Housing Act.

The complaint named the Company and one of its vice presidents and alleged, among other things, that the former employee was discriminated against and harassed based on age and disability, was retaliated against, and was wrongfully terminated in

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

violation of public policy.

Two of the plaintiff’s claims were dismissed with prejudice in response to the Company’s demurrer motions.

Prior to trial, the plaintiff dismissed with prejudice the claims against the Company’s vice president and the claim of wrongful termination in violation of public policy.

In June 2025, the remaining claims in the matter were tried before a jury.

The jury reached a verdict and ruled in favor of the Company on the claims of age and disability discrimination and harassment based on age.

The jury ruled in favor of the plaintiff and against the Company on the claims of harassment based on disability and retaliation and awarded compensatory damages of $ 3.2 million and punitive damages of $ 6.0 million.

In the quarter ending June 30, 2025, the Company recognized a charge in the amount of $ 9.2 million in other operating expenses on the condensed consolidated statements of income.

The Company strongly disagrees with those portions of the jury’s verdicts against the Company and plans to file post-trial motions asking the Court for judgment notwithstanding the verdict, including reversing the award of damages, and in the alternative for a new trial.

The Company plans further appeals if they are necessary after rulings on post-trial motions.

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

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 March 31, 2025.

While the Company has on occasion been made aware of claims against its distributors or customers that may trigger an indemnification claim, 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, 2025.

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.

7 unchanged sentences

Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets acquired based on their relative fair values.

The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill, the amount of which represents the expected benefits to the Company of future technology and the knowledgeable and experienced employees who joined the Company.

The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill,

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the amount of which represents the expected benefits to the Company of future technology and the knowledgeable and experienced employees who joined the Company.

Goodwill is expected to be deductible over 15 years for tax purposes.

4 unchanged sentences

Pro forma results of operations for this acquisition have not been presented because they are not material to the Company’s consolidated financial statements.

SUBSEQUENT EVENTS:

The Company has evaluated events and transactions subsequent to June 30, 2025, through the date these unaudited condensed consolidated financial statements were included on Form 10-Q and filed with the SEC.

Other than the matter described below, there are no additional subsequent events identified that would require disclosure in these financial statements.

Transition of the Company’s Chief Executive Officer to Executive Chairman and related Equity Modification

As disclosed in the Current Report on Form 8-K filed with the SEC on July 17, 2025, the Company’s board of directors (the “Board”) on July 11, 2025, elected Jennifer A.

Lloyd, PhD, as the Company’s President and CEO and appointed her to the Board, in each case, effective upon Dr.

Lloyd’s commencement of employment with the Company on July 21, 2025.

Also, on July 11, 2025, Balu Balakrishnan agreed to resign from his position as Chief Executive Officer and President of the Company as of the end of the day immediately prior to Dr.

Lloyd’s commencement of employment with the Company.

Balakrishnan plans to serve as executive chairman of the Board on a transitional basis until February 2026 in order to facilitate the leadership transition, ensure continuity and support the new leadership team.

Thereafter, Mr.

Balakrishnan would remain a non-executive member of the Board subject to the applicable nomination process and stockholder approval.

In connection with Mr.

Balakrishnan’s retirement, the Company and Mr.

Balakrishnan entered into a transition agreement and a consulting agreement.

Balakrishnan’s outstanding equity awards by their original terms are eligible to vest based on continuous service, subject to the applicable award agreements and terms and conditions of the Company’s 2016 Incentive Award Plan.

The vast majority of these awards are subject to performance criteria established at the time of grant and will only be earned if such criteria are met at the conclusion of the performance period.

As the services to be performed by Mr.

Balakrishnan under the transition agreement and the consulting agreement do not qualify as “substantive services” under ASC 718, Compensation–Stock Compensation, the continued vesting of the outstanding equity awards represents a modification of the original awards.

The Company expects to record in the third quarter of 2025, net stock-based compensation expense of approximately $ 15 million related to the award modification, with such amount representing an acceleration of expense in respect of all of Mr.

Balakrishnan’s outstanding equity awards.

Subsequent changes in performance criteria measurement could result in an adjustment to expense in future periods.

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