POWER INTEGRATIONS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS POWER INTEGRATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) ​ June 30, 2025 ​ December 31, 2024 ASSETS ​ ​ ​ ​ ​ ​ CURRENT ASSETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 66,935 ​ $ 50,972 Short-term marketable securities ​ 201,801 ​ 249,023 Accounts receivable, net ​ 27,583 ​ 27,172 Inventories ​ 168,396 ​ 165,612 Prepaid expenses and other current assets ​ 18,188 ​ 21,260 Total current assets ​ 482,903 ​ 514,039 PROPERTY AND EQUIPMENT, net ​ 147,955 ​ 149,562 INTANGIBLE ASSETS, net ​ 7,660 ​ 8,075 GOODWILL ​ 95,271 ​ 95,271 DEFERRED TAX ASSETS ​ 37,174 ​ 36,485 OTHER ASSETS ​ 26,574 ​ 25,394 Total assets ​ $ 797,537 ​ $ 828,826 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ CURRENT LIABILITIES: ​ ​ ​ ​ Accounts payable ​ $ 31,044 ​ $ 29,789 Accrued payroll and related expenses ​ 14,881 ​ 13,987 Taxes payable ​ 751 ​ 961 Other accrued liabilities ​ 18,323 ​ 10,580 Total current liabilities ​ 64,999 ​ 55,317 LONG-TERM INCOME TAXES PAYABLE ​ 4,063 ​ 3,871 OTHER LIABILITIES ​ 24,687 ​ 19,866 Total liabilities ​ 93,749 ​ 79,054 COMMITMENTS AND CONTINGENCIES (Notes 11, 13 and 14) ​ ​ STOCKHOLDERS’ EQUITY: ​ ​ Common stock ​ 21 ​ 22 Additional paid-in capital ​ — ​ 18,734 Accumulated other comprehensive loss ​ ( 1,287 ) ​ ( 3,023 ) Retained earnings ​ 705,054 ​ 734,039 Total stockholders’ equity ​ 703,788 ​ 749,772 Total liabilities and stockholders’ equity ​ $ 797,537 ​ $ 828,826 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 4 Table of Contents POWER INTEGRATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ June 30, ​ June 30, (In thousands, except per share amounts) ​ 2025 2024 2025 2024 NET REVENUES ​ $ 115,852 ​ $ 106,198 ​ $ 221,381 ​ $ 197,886 COST OF REVENUES ​ 51,898 ​ 49,665 ​ 99,192 ​ 93,573 GROSS PROFIT ​ 63,954 ​ 56,533 ​ 122,189 ​ 104,313 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OPERATING EXPENSES: ​ ​ ​ ​ ​ ​ ​ Research and development ​ 25,991 ​ 26,047 ​ 50,086 ​ 49,272 Sales and marketing ​ 18,349 ​ 18,053 ​ 34,724 ​ 33,775 General and administrative ​ 11,808 ​ 10,475 ​ ​ 22,855 ​ 18,838 Other operating expenses ​ ​ 9,151 ​ ​ — ​ ​ 9,151 ​ ​ — Total operating expenses ​ 65,299 ​ 54,575 ​ 116,816 ​ 101,885 INCOME (LOSS) FROM OPERATIONS ​ ( 1,345 ) ​ 1,958 ​ 5,373 ​ 2,428 OTHER INCOME ​ 2,690 ​ 3,189 ​ 5,857 ​ 6,691 INCOME BEFORE INCOME TAXES ​ 1,345 ​ 5,147 ​ 11,230 ​ 9,119 PROVISION (BENEFIT) FOR INCOME TAXES ​ ( 24 ) ​ 298 ​ 1,071 ​ 316 NET INCOME ​ $ 1,369 ​ $ 4,849 ​ $ 10,159 ​ $ 8,803 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EARNINGS PER SHARE: ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.02 ​ $ 0.09 ​ $ 0.18 ​ $ 0.15 Diluted ​ $ 0.02 ​ $ 0.09 ​ $ 0.18 ​ $ 0.15 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SHARES USED IN PER SHARE CALCULATION: ​ ​ ​ ​ ​ ​ ​ Basic ​ 56,274 ​ ​ 56,780 ​ ​ 56,571 ​ ​ 56,807 Diluted ​ 56,387 ​ ​ 56,984 ​ ​ 56,787 ​ ​ 57,104 ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 5 Table of Contents POWER INTEGRATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, (In thousands) 2025 2024 2025 2024 Net income ​ $ 1,369 ​ $ 4,849 ​ $ 10,159 ​ $ 8,803 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, 2025 and 2024 ​ ​ 657 ​ ​ ( 271 ) ​ ​ 1,047 ​ ​ ( 637 ) 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 ​ ​ 238 ​ ​ ( 317 ) ​ ​ 689 ​ ​ ( 1,005 ) 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 ​ ​ 1 ​ ​ ( 42 ) ​ ​ — ​ ​ ( 85 ) Total other comprehensive income (loss) ​ 896 ​ ( 630 ) ​ 1,736 ​ ( 1,727 ) TOTAL COMPREHENSIVE INCOME ​ $ 2,265 ​ $ 4,219 ​ $ 11,895 ​ $ 7,076 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 6 Table of Contents POWER INTEGRATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, (In thousands) 2025 2024 2025 2024 Common stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance $ 22 ​ $ 22 ​ $ 22 ​ $ 23 Repurchase of common stock ​ ( 1 ) ​ — ​ ( 1 ) ​ ( 1 ) Ending balance ​ 21 ​ 22 ​ 21 ​ 22 ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional paid-in capital ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ 7,106 ​ — ​ 18,734 ​ — Common stock issued under employee stock plans ​ — ​ — ​ 2,787 ​ 2,691 Repurchase of common stock ​ ( 17,183 ) ​ ( 11,035 ) ​ ( 40,281 ) ​ ( 20,140 ) Stock-based compensation ​ 10,077 ​ 11,035 ​ 18,760 ​ 17,449 Ending balance ​ — ​ — ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated other comprehensive income (loss) ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ ( 2,183 ) ​ ( 2,559 ) ​ ( 3,023 ) ​ ( 1,462 ) Other comprehensive income (loss) ​ 896 ​ ( 630 ) ​ 1,736 ​ ( 1,727 ) Ending balance ​ ( 1,287 ) ​ ( 3,189 ) ​ ( 1,287 ) ​ ( 3,189 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Retained earnings ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ 730,870 ​ 740,715 ​ 734,039 ​ 753,680 Net income ​ 1,369 ​ 4,849 ​ 10,159 ​ 8,803 Repurchase of common stock ​ ​ ( 15,376 ) ​ ​ ( 303 ) ​ ​ ( 15,376 ) ​ ​ ( 5,838 ) Payment of dividends to stockholders ​ ​ ( 11,809 ) ​ ​ ( 11,352 ) ​ ​ ( 23,768 ) ​ ​ ( 22,736 ) Ending balance ​ ​ 705,054 ​ ​ 733,909 ​ ​ 705,054 ​ ​ 733,909 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total stockholders’ equity $ 703,788 ​ $ 730,742 ​ $ 703,788 ​ $ 730,742 ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 7 Table of Contents POWER INTEGRATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, (In thousands) 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ Net income ​ $ 10,159 ​ $ 8,803 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ Depreciation ​ 14,246 ​ 17,106 Amortization of intangibles ​ 415 ​ 863 Loss on disposal of property and equipment ​ — ​ 8 Stock-based compensation expense ​ 18,760 ​ 17,449 Accretion of discount on marketable securities ​ ( 721 ) ​ ( 909 ) Deferred income taxes ​ ( 854 ) ​ ( 3,482 ) Increase (decrease) in accounts receivable allowance for credit losses ​ ( 381 ) ​ 326 Change in operating assets and liabilities: ​ ​ ​ Accounts receivable ​ ( 30 ) ​ ( 2,024 ) Inventories ​ ( 2,784 ) ​ ( 6,720 ) Prepaid expenses and other assets ​ 6,405 ​ 2,072 Accounts payable ​ 248 ​ ( 117 ) Taxes payable and accrued liabilities ​ 9,995 ​ 161 Net cash provided by operating activities ​ 55,458 ​ 33,536 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​ Purchases of property and equipment ​ ( 11,652 ) ​ ( 8,510 ) Purchases of marketable securities ​ ( 47,696 ) ​ ( 77,830 ) Proceeds from sales and maturities of marketable securities ​ 96,492 ​ 85,392 Net cash provided by (used in) investing activities ​ 37,144 ​ ( 948 ) ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ Issuance of common stock under employee stock plans ​ 2,787 ​ 2,691 Repurchase of common stock ​ ( 55,658 ) ​ ( 25,979 ) Payments of dividends to stockholders ​ ( 23,768 ) ​ ( 22,736 ) Proceeds from draw on line of credit ​ 13,000 ​ — Payments on line of credit ​ ( 13,000 ) ​ — Net cash used in financing activities ​ ( 76,639 ) ​ ( 46,024 ) ​ ​ ​ ​ ​ ​ ​ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ​ 15,963 ​ ( 13,436 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ​ 50,972 ​ 63,929 CASH AND CASH EQUIVALENTS AT END OF PERIOD ​ $ 66,935 ​ $ 50,493 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: ​ ​ ​ Unpaid property and equipment ​ $ 3,700 ​ $ 1,306 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: ​ ​ ​ ​ Cash paid for income taxes, net ​ $ 2,690 ​ $ 4,498 ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 8 POWER INTEGRATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​ ​ 1. BASIS OF PRESENTATION: The condensed consolidated financial statements include the accounts of Power Integrations, Inc., a Delaware corporation (the “Company”), and its wholly owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. While the financial information furnished is unaudited, the condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for the fair presentation of the results of operations for the interim periods covered and the financial condition of the Company at the date of the interim balance sheet in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The results for interim periods are not necessarily indicative of the results for the entire year. The condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes thereto for the year ended December 31, 2024, included in its Form 10-K filed on February 7, 2025, with the Securities and Exchange Commission. 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS: Significant Accounting Policies and Estimates 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. Recent Accounting Pronouncements 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 does not expect the amendment to have a material impact on its consolidated financial statements upon adoption of the annual disclosure requirements in fiscal year 2025. In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) which requires additional disclosure of certain costs and expenses, including inventory purchases, employee compensation, selling expense and depreciation expense within the notes to financial statements. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures. ​ 3. COMPONENTS OF THE COMPANY’S CONDENSED CONSOLIDATED BALANCE SHEETS: Accounts Receivable ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, (In thousands) ​ 2025 ​ 2024 Accounts receivable trade ​ $ 60,121 ​ $ 57,308 Allowance for ship and debit ​ ( 30,077 ) ​ ( 26,446 ) Allowance for stock rotation and rebate ​ ( 2,406 ) ​ ( 3,254 ) Allowance for credit losses ​ ​ ( 55 ) ​ ​ ( 436 ) Total ​ $ 27,583 ​ $ 27,172 ​ ​ 9 ​ Table of Contents 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. This allowance is established using estimates formulated by the Company’s management based upon factors such as the composition of the accounts receivable aging, historical losses, changes in payment patterns, customer creditworthiness and current economic trends. Receivables determined to be uncollectible are written off and deducted from the allowance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for Credit Losses ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, (In thousands) ​ 2025 2024 2025 2024 Beginning balance ​ $ ( 55 ) ​ $ ( 844 ) ​ $ ( 436 ) ​ $ ( 681 ) Provision for credit loss expense ​ ( 54 ) ​ ( 163 ) ​ ( 104 ) ​ ( 847 ) Receivables written off ​ — ​ — ​ — ​ — Recoveries ​ 54 ​ — ​ 485 ​ 521 Ending balance ​ $ ( 55 ) ​ $ ( 1,007 ) ​ $ ( 55 ) ​ $ ( 1,007 ) ​ Inventories ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, (In thousands) ​ 2025 ​ 2024 Raw materials ​ $ 105,566 ​ $ 101,414 Work-in-process ​ 31,680 ​ 27,271 Finished goods ​ 31,150 ​ 36,927 Total ​ $ 168,396 ​ $ 165,612 ​ Intangible Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2025 ​ December 31, 2024 ​ ​ ​ Accumulated ​ ​ ​ ​ Accumulated ​ ​ (In thousands) ​ Gross ​ Amortization ​ Net ​ Gross ​ Amortization ​ Net Domain name ​ $ 1,261 ​ $ — ​ $ 1,261 ​ $ 1,261 ​ $ — ​ $ 1,261 In-process research and development ​ 4,930 ​ — ​ 4,930 ​ 4,930 ​ — ​ 4,930 Developed technology ​ 37,960 ​ ( 36,787 ) ​ 1,173 ​ 37,960 ​ ( 36,492 ) ​ 1,468 Technology licenses ​ 1,926 ​ ( 1,630 ) ​ 296 ​ 1,926 ​ ( 1,510 ) ​ 416 Total intangible assets ​ $ 46,077 ​ $ ( 38,417 ) ​ $ 7,660 ​ $ 46,077 ​ $ ( 38,002 ) ​ $ 8,075 ​ ​ The estimated future amortization expense related to finite-lived intangible assets at June 30, 2025, is as follows: ​ ​ ​ ​ ​ Estimated ​ ​ Amortization Fiscal Year ​ (In thousands) 2025 (remaining six months) ​ $ 417 2026 ​ 687 2027 ​ 365 Total* ​ $ 1,469 * 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. 10 Table of Contents 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 and six months ended June 30, 2025 and 2024, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized Gains ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and Losses on ​ Defined Benefit ​ Foreign Currency ​ ​ ​ ​ Marketable Securities ​ Pension Items ​ Items ​ Total ​ Three Months Ended ​ Three Months Ended ​ Three Months Ended ​ Three Months Ended ​ June 30, ​ June 30, ​ June 30, ​ June 30, (In thousands) 2025 2024 2025 2024 2025 2024 2025 2024 Beginning balance $ 1,144 ​ $ ( 432 ) ​ $ 98 ​ $ 1,542 ​ $ ( 3,425 ) ​ $ ( 3,669 ) ​ $ ( 2,183 ) ​ $ ( 2,559 ) Other comprehensive income (loss) before reclassifications 238 ​ ( 317 ) ​ — ​ — ​ 657 ​ ( 271 ) ​ 895 ​ ( 588 ) Amounts reclassified from accumulated other comprehensive income (loss) — ​ — ​ 1 (1) ( 42 ) (1) — ​ — ​ 1 ​ ( 42 ) Net-current period other comprehensive income (loss) 238 ​ ( 317 ) ​ 1 ​ ( 42 ) ​ 657 ​ ( 271 ) ​ 896 ​ ( 630 ) Ending balance $ 1,382 ​ $ ( 749 ) ​ $ 99 ​ $ 1,500 ​ $ ( 2,768 ) ​ $ ( 3,940 ) ​ $ ( 1,287 ) ​ $ ( 3,189 ) (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 ​ Items ​ Total ​ Six Months Ended ​ Six Months Ended ​ Six Months Ended ​ Six Months Ended ​ June 30, ​ June 30, ​ June 30, ​ June 30, (In thousands) 2025 2024 2025 ​ 2024 2025 2024 2025 2024 Beginning balance $ 693 ​ $ 256 ​ $ 99 ​ $ 1,585 ​ $ ( 3,815 ) ​ $ ( 3,303 ) ​ $ ( 3,023 ) ​ $ ( 1,462 ) Other comprehensive income (loss) before reclassifications 689 ​ ( 1,005 ) ​ — ​ — ​ 1,047 ​ ( 637 ) ​ 1,736 ​ ( 1,642 ) Amounts reclassified from accumulated other comprehensive loss — ​ — ​ — (1) ( 85 ) (1) — ​ — ​ — ​ ( 85 ) Net-current period other comprehensive income (loss) 689 ​ ( 1,005 ) ​ — ​ ( 85 ) ​ 1,047 ​ ( 637 ) ​ 1,736 ​ ( 1,727 ) Ending balance $ 1,382 ​ $ ( 749 ) ​ $ 99 ​ $ 1,500 ​ $ ( 2,768 ) ​ $ ( 3,940 ) ​ $ ( 1,287 ) ​ $ ( 3,189 ) (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. ​ ​ 4. FAIR VALUE MEASUREMENTS: The FASB established a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices for identical assets in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. 11 Table of Contents POWER INTEGRATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) ​ 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, 2025 and December 31, 2024, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement at ​ ​ June 30, 2025 ​ ​ ​ ​ ​ Quoted Prices in ​ ​ ​ ​ ​ ​ ​ ​ Active Markets for ​ Significant Other ​ ​ ​ ​ ​ Identical Assets ​ Observable Inputs (In thousands) ​ Total Fair Value ​ (Level 1) ​ (Level 2) Commercial paper ​ $ 8,206 ​ $ — ​ $ 8,206 Corporate securities ​ ​ 201,801 ​ ​ — ​ ​ 201,801 Money market funds ​ 989 ​ 989 ​ — Total ​ $ 210,996 ​ $ 989 ​ $ 210,007 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement at ​ ​ December 31, 2024 ​ ​ ​ ​ ​ Quoted Prices in ​ ​ ​ ​ ​ ​ ​ ​ Active Markets for ​ Significant Other ​ ​ ​ ​ ​ Identical Assets ​ Observable Inputs (In thousands) ​ Total Fair Value ​ (Level 1) ​ (Level 2) Commercial paper ​ $ 2,048 ​ $ — ​ $ 2,048 Corporate securities ​ ​ 249,023 ​ ​ — ​ ​ 249,023 Money market funds ​ 567 ​ 567 ​ — U.S. government securities ​ ​ 750 ​ ​ — ​ ​ 750 Total ​ $ 252,388 ​ $ 567 ​ $ 251,821 ​ 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. 5. MARKETABLE SECURITIES: 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized ​ Gross Unrealized ​ Estimated Fair (In thousands) Cost Gains Losses Market Value Investments due in 3 months or less: ​ ​ ​ ​ Corporate securities ​ $ 15,661 ​ $ 7 ​ $ ( 10 ) ​ $ 15,658 Total ​ 15,661 ​ 7 ​ ( 10 ) ​ 15,658 Investments due in 4-12 months: ​ ​ ​ ​ Corporate securities ​ ​ 25,976 ​ ​ 94 ​ ​ ( 6 ) ​ ​ 26,064 Total ​ 25,976 ​ 94 ​ ( 6 ) ​ 26,064 Investments due in 12 months or greater: ​ ​ ​ ​ Corporate securities ​ 158,421 ​ 1,663 ​ ( 5 ) ​ 160,079 Total ​ ​ 158,421 ​ 1,663 ​ ​ ( 5 ) ​ 160,079 Total marketable securities ​ $ 200,058 ​ $ 1,764 ​ $ ( 21 ) ​ $ 201,801 ​ 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. 12 Table of Contents 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, 2024, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized ​ Gross Unrealized ​ Estimated Fair (In thousands) Cost Gains Losses Market Value Investments due in 3 months or less: ​ ​ ​ ​ Corporate securities ​ $ 10,972 ​ $ 4 ​ $ ( 3 ) ​ $ 10,973 Total ​ 10,972 ​ 4 ​ ( 3 ) ​ 10,973 Investments due in 4-12 months: ​ ​ ​ ​ Corporate securities ​ 87,346 ​ 159 ​ ( 19 ) ​ 87,486 Total ​ 87,346 ​ 159 ​ ( 19 ) ​ 87,486 Investments due in 12 months or greater: ​ ​ ​ ​ Corporate securities ​ ​ 149,817 ​ 860 ​ ( 113 ) ​ 150,564 Total ​ 149,817 ​ 860 ​ ( 113 ) ​ 150,564 Total marketable securities ​ $ 248,135 ​ $ 1,023 ​ $ ( 135 ) ​ $ 249,023 ​ 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 June 30, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less Than 12 Months ​ 12 Months or Longer ​ Total ​ Estimated Gross Estimated Gross Estimated Gross ​ ​ Fair Market ​ Unrealized ​ Fair Market ​ Unrealized ​ Fair Market ​ Unrealized (In thousands) ​ Value ​ Losses ​ Value ​ Losses ​ Value ​ Losses Corporate securities ​ $ 9,205 ​ $ ( 17 ) ​ $ 2,925 ​ $ ( 4 ) ​ $ 12,130 ​ $ ( 21 ) Total marketable securities ​ $ 9,205 ​ $ ( 17 ) ​ $ 2,925 ​ $ ( 4 ) ​ $ 12,130 ​ $ ( 21 ) ​ 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. Additionally, the issuers continue to make timely interest payments on the marketable securities with the fair value expected to recover as they reach maturity. ​ 6. 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, 2025 and 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, (In thousands) 2025 2024 2025 2024 Cost of revenues ​ $ 592 ​ $ 707 ​ $ 1,249 ​ $ 1,053 Research and development ​ 3,190 ​ 3,885 ​ 5,440 ​ 6,310 Sales and marketing ​ 1,922 ​ 2,510 ​ 3,508 ​ 4,114 General and administrative ​ 4,373 ​ 3,933 ​ 8,563 ​ 5,972 Total stock-based compensation expense ​ $ 10,077 ​ $ 11,035 ​ $ 18,760 ​ $ 17,449 ​ 13 Table of Contents POWER INTEGRATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) ​ 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. PSU Awards 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. The number of shares that are released at the end of the performance year can range from zero to 200 % of the target number depending on the Company’s performance. 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. 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. 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 approximately 66,000 shares subject to the PSUs granted in 2024 vested in aggregate; the shares were released to the Company’s employees and executives in the first quarter of 2025. A summary of PSUs outstanding as of June 30, 2025 and activity during the six months ended, is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ Remaining ​ Aggregate ​ ​ Shares ​ Grant Date Fair ​ Contractual Term ​ Intrinsic Value ​ (In thousands) Value Per Share (In years) (In thousands) Outstanding at January 1, 2025 66 ​ $ 69.95 ​ ​ ​ Granted 198 ​ $ 54.45 ​ ​ Vested ( 66 ) ​ $ 69.95 ​ Forfeited ( 7 ) ​ $ 58.04 ​ Outstanding at June 30, 2025 191 ​ $ 54.30 0.50 ​ $ 10,664 Outstanding and expected to vest at June 30, 2025 168 ​ ​ ​ 0.50 ​ $ 9,374 ​ PRSU Awards 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. PRSUs are granted in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The actual number of shares the recipient receives is determined at the end of a three-year performance period based on results achieved versus the Company’s performance goals, and may range from zero to 200 % of the target number. The performance goals for PRSUs granted in fiscal 2023, 2024 and 2025 were based on the Company’s compound annual growth rate (“CAGR”) of revenue as measured against the revenue CAGR of the analog semiconductor industry (“Relative Measure”) or the Company’s revenue growth over as compared to defined targets (“Absolute Measure”) in each case over the respective three-year performance period. 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 14 Table of Contents POWER INTEGRATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) ​ 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 ​ Aggregate ​ ​ ​ ​ Weighted-Average ​ Remaining ​ Intrinsic ​ ​ Shares ​ Grant Date Fair ​ Contractual Term ​ Value ​ (In thousands) Value Per Share (In years) (In thousands) Outstanding at January 1, 2025 317 ​ $ 73.85 ​ ​ ​ Granted 202 ​ $ 56.40 ​ Vested — ​ ​ — ​ Forfeited — ​ ​ — ​ Outstanding at June 30, 2025 519 ​ $ 67.05 1.62 ​ $ 28,990 Outstanding and expected to vest at June 30, 2025 379 ​ ​ ​ ​ 2.03 ​ $ 21,208 ​ RSU Awards A summary of RSUs outstanding as of June 30, 2025 and activity during the six months ended, is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ Aggregate ​ ​ ​ ​ Weighted-Average ​ Remaining ​ Intrinsic ​ ​ Shares ​ Grant Date Fair ​ Contractual Term ​ Value ​ (In thousands) Value Per Share (In years) (In thousands) Outstanding at January 1, 2025 929 ​ $ 70.82 ​ ​ ​ ​ ​ Granted 426 ​ $ 51.42 ​ ​ ​ ​ ​ Vested ( 312 ) ​ $ 67.64 ​ ​ ​ ​ Forfeited ( 48 ) ​ $ 67.88 ​ ​ ​ ​ Outstanding at June 30, 2025 995 ​ $ 63.68 ​ 1.85 ​ $ 55,596 Outstanding and expected to vest at June 30, 2025 914 ​ ​ ​ 1.79 ​ $ 51,106 ​ ​ ​ ​ 7. SIGNIFICANT CUSTOMERS AND GEOGRAPHIC NET REVENUES: Customer Concentration 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. These distributors sell the Company’s products to a broad, diverse range of end users, including original equipment manufacturers (“OEMs”) and merchant power-supply manufacturers. Similarly, merchant power-supply manufacturers sell power supplies incorporating the Company’s products to a broad range of OEMs. 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. 15 Table of Contents 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 ​ ​ June 30, ​ June 30, Customer ​ 2025 ​ 2024 ​ 2025 ​ 2024 Avnet 33 % ​ 28 % 32 % ​ 29 % Salcomp Group ​ 11 % ​ * ​ ​ * ​ ​ * ​ Honestar Technologies Co., Ltd. ​ * ​ ​ 12 % ​ * ​ ​ 12 % ​ * Total customer revenue was less than 10% of net revenues. No other customers accounted for 10% or more of the Company’s net revenues in the periods presented. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments and trade receivables. The Company does not have any off-balance-sheet credit exposure related to its customers. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, Customer 2025 ​ 2024 Avnet ​ 38 % ​ 32 % Salcomp Group ​ 13 % ​ 13 % Honestar Technologies Co., Ltd. ​ * ​ ​ 12 % * 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. Geographic Net Revenues The Company markets its products globally through its sales personnel and a worldwide network of independent sales representatives and distributors. 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 ​ Six Months Ended ​ ​ June 30, ​ June 30, (In thousands) 2025 2024 2025 2024 Americas: ​ $ 5,850 ​ $ 5,281 ​ $ 11,567 ​ $ 10,286 EMEA: ​ ​ ​ ​ ​ ​ ​ ​ Germany ​ ​ 6,947 ​ 5,059 ​ 13,063 ​ 10,948 Other EMEA ​ 5,809 ​ 5,946 ​ 10,984 ​ 12,260 APAC: ​ ​ ​ ​ ​ ​ ​ ​ Hong Kong/China ​ 67,691 ​ 63,124 ​ 124,179 ​ 112,804 India ​ 4,545 ​ 6,400 ​ 9,872 ​ 11,780 Korea ​ ​ 9,685 ​ ​ 8,933 ​ ​ 21,954 ​ ​ 18,453 Taiwan ​ ​ 6,617 ​ ​ 5,294 ​ ​ 13,619 ​ ​ 10,052 Other APAC ​ 8,708 ​ 6,161 ​ 16,143 ​ 11,303 Total net revenues ​ $ 115,852 ​ $ 106,198 ​ $ 221,381 ​ $ 197,886 ​ ​ ​ ​ 16 Table of Contents POWER INTEGRATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) ​ 8. STOCKHOLDERS’ EQUITY: Common Stock Shares Outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, (In thousands) 2025 2024 2025 2024 Beginning balance ​ ​ 56,692 ​ ​ 56,759 ​ ​ 56,837 ​ ​ 56,738 Common stock issued under employee stock plans ​ 171 ​ 183 ​ 430 ​ 411 Repurchased ​ ( 705 ) ​ ( 164 ) ​ ( 1,109 ) ​ ( 371 ) Ending balance ​ ​ 56,158 ​ ​ 56,778 ​ ​ 56,158 ​ ​ 56,778 ​ Common Stock Repurchases 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. 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 In October 2023, the Company’s board of directors declared dividends of $ 0.20 per share to be paid to stockholders of record at the end of each quarter in 2024. 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 and six months ended June 30, 2025 and 2024, cash dividends declared and paid were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, (In thousands, except per share amounts) 2025 2024 2025 2024 Dividends declared and paid ​ $ 11,809 ​ $ 11,352 ​ $ 23,768 ​ $ 22,736 Dividends declared per common share ​ $ 0.21 ​ $ 0.20 ​ $ 0.42 ​ $ 0.40 ​ ​ ​ 9. EARNINGS PER SHARE: Basic earnings per share are calculated by dividing net income by the weighted-average shares of common stock outstanding during the period. Diluted earnings per share are calculated by dividing net income by the weighted-average shares of common stock and dilutive common equivalent shares outstanding during the period. 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. 17 Table of Contents 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 ​ ​ June 30, ​ June 30, (In thousands, except per share amounts) 2025 2024 2025 2024 Basic earnings per share: ​ ​ ​ ​ Net income ​ $ 1,369 ​ $ 4,849 ​ $ 10,159 ​ $ 8,803 Weighted-average common shares ​ 56,274 ​ 56,780 ​ 56,571 ​ 56,807 Basic earnings per share ​ $ 0.02 ​ $ 0.09 ​ $ 0.18 ​ $ 0.15 Diluted earnings per share: (1) ​ ​ ​ ​ Net income ​ $ 1,369 ​ $ 4,849 ​ $ 10,159 ​ $ 8,803 Weighted-average common shares ​ 56,274 ​ 56,780 ​ 56,571 ​ 56,807 Effect of dilutive awards: ​ ​ ​ ​ Employee stock plans ​ 113 ​ 204 ​ 216 ​ 297 Diluted weighted-average common shares ​ 56,387 ​ 56,984 ​ 56,787 ​ 57,104 Diluted earnings per share ​ $ 0.02 ​ $ 0.09 ​ $ 0.18 ​ $ 0.15 ​ (1) The Company includes the shares underlying performance-based awards in the calculation of diluted earnings per share if the performance conditions have been satisfied as of the end of the reporting period and excludes such shares when the necessary conditions have not been met. The Company has excluded the shares underlying the outstanding performance-based awards in the 2025 and 2024 calculations as the shares were not contingently issuable as of the end of the reporting periods. ​ 10. 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 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. 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. Income earned in other foreign jurisdictions was not material. 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, 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. 18 Table of Contents POWER INTEGRATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) ​ 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 estimates used could differ from actual results, which may have a significant impact on operating results in future periods. ​ 11. COMMITMENTS: Supplier Agreements 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. dollar on future purchases. Each year, the Company’s management and these two suppliers review and negotiate future pricing; the negotiated pricing is denominated in U.S. dollars but is subject to contractual exchange-rate provisions. The fluctuation in the exchange rate is shared equally between the Company and each of these suppliers on future purchases. ​ 12. SEGMENT REPORTING: The Company is organized and operates as one operating and reportable segment; the design, development, manufacture and marketing of integrated circuits and related components for use primarily in high-voltage power conversion. This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of determination of the Company’s reportable segments. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance. The CODM uses net income as the measure of profit or loss to allocate resources and assess performance. The CODM regularly reviews net income as reported on the Company’s consolidated statements of income. Financial forecasts and budget to actual results used by the CODM to assess performance and allocate resources, as well as those used for strategic decisions related to headcount and capital expenditures are also reviewed on a consolidated basis. The CODM considers the impact on net income of the significant segment expenses in the table below when deciding whether to reinvest profits, propose dividends or share repurchase, or pursue strategic mergers and acquisitions. The measure of segment assets is reported on the balance sheet as total assets. The CODM does not review segment assets at a level other than that presented in the Company’s consolidated balance sheets. 19 Table of Contents POWER INTEGRATIONS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) ​ The table below presents the Company’s consolidated operating results including significant segment expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, June 30, (In thousands) ​ 2025 2024 ​ 2025 2024 NET REVENUES ​ $ 115,852 ​ $ 106,198 ​ $ 221,381 ​ $ 197,886 Less: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation (1) ​ ​ 10,077 ​ ​ 11,035 ​ ​ 18,760 ​ ​ 17,449 Amortization of acquisition-related intangible assets (2) ​ ​ 146 ​ ​ 258 ​ ​ 293 ​ ​ 740 Cost of revenues (excluding 1 & 2) ​ ​ 51,160 ​ ​ 48,700 ​ ​ 97,650 ​ ​ 91,780 Research and development (excluding 1) ​ ​ 22,801 ​ ​ 22,162 ​ ​ 44,646 ​ ​ 42,962 Sales and marketing (excluding 1) ​ ​ 16,427 ​ ​ 15,543 ​ ​ 31,216 ​ ​ 29,661 General and administrative (excluding 1) ​ ​ 7,435 ​ ​ 6,542 ​ ​ 14,292 ​ ​ 12,866 Other operating expenses ​ ​ 9,151 ​ ​ — ​ ​ 9,151 ​ ​ — INCOME (LOSS) FROM OPERATIONS ​ ​ ( 1,345 ) ​ ​ 1,958 ​ ​ 5,373 ​ ​ 2,428 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ OTHER INCOME ​ ​ 2,690 ​ ​ 3,189 ​ ​ 5,857 ​ ​ 6,691 PROVISION (BENEFIT) FOR INCOME TAXES ​ ​ ( 24 ) ​ ​ 298 ​ ​ 1,071 ​ ​ 316 NET INCOME ​ $ 1,369 ​ $ 4,849 ​ $ 10,159 ​ $ 8,803 ​ The table below presents other segment information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, (In thousands) ​ 2025 2024 ​ 2025 2024 Depreciation ​ $ 7,002 ​ $ 8,391 ​ $ 14,246 ​ $ 17,106 Amortization of intangibles ​ $ 208 ​ $ 320 ​ $ 415 ​ $ 863 Interest income ​ $ 3,035 ​ $ 3,309 ​ $ 6,395 ​ $ 6,795 ​ ​ 13. LEGAL PROCEEDINGS AND CONTINGENCIES: From time to time in the ordinary course of business, the Company becomes involved in lawsuits, or customers and distributors may make claims against the Company. In accordance with ASC 450-10, Contingencies , the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. On December 18, 2019, CogniPower LLC (“CogniPower”) filed a complaint against a customer of the Company in the United States District Court for the District of Delaware for infringement of two patents; the Company thereafter intervened and sought a declaration of non-infringement with respect to use of the Company’s products. 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. 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. 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 20 Table of Contents 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. 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. 14. INDEMNIFICATIONS: The Company sells products to its distributors under contracts, collectively referred to as Distributor Sales Agreements (“DSA”). Each DSA contains the relevant terms of the contractual arrangement with the distributor, and generally includes certain provisions for indemnifying the distributor against losses, expenses, and liabilities from damages that may be awarded against the distributor in the event the Company’s products are found to infringe upon a patent, copyright, trademark, or other proprietary right of a third party (“Customer Indemnification”). The DSA generally limits the scope of and remedies for the Customer Indemnification obligations in a variety of industry-standard respects, including, but not limited to, limitations based on time and geography, and a right to replace an infringing product. The Company also, from time to time, has granted a specific indemnification right to individual customers. The Company believes its internal development processes and other policies and practices limit its exposure related to such indemnifications. 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. 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. ​ 15. ACQUISITION: Odyssey Semiconductor Technologies On March 12, 2024, the Company agreed to acquire the assets of Odyssey, a U.S. company and a developer of vertical gallium-nitride (“GaN”) transistor technology. The transaction closed on July 1, 2024, at which time all key Odyssey employees joined the Company. P ursuant to the asset purchase agreement, Odyssey sold, transferred and assigned substantially all of its assets to the Company for $ 9.52 million in cash. The purchase is intended to augment the Company’s development of high-power GaN switching technology. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805 - Business Combinations. 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, 21 Table of Contents 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. The fair value of in-process research and development was determined based on the cost approach using the Company’s estimate of the costs that would be incurred if a market participant were to create the acquired technology from scratch. The Company considered the number of engineers required, salaries and related benefits, allocated overhead and the development time required to recreate the technology. The Company will record the in-process research and development as an intangible asset with an indefinite life until completion or abandonment of the associated research and development efforts and will begin amortizing the value over the estimated life of the technology upon completion of development. Consistent with the treatment of other intangible assets with indefinite lives, the Company will test the in-process research and development for impairment on an annual basis or when impairment indicators are present. Pro forma results of operations for this acquisition have not been presented because they are not material to the Company’s consolidated financial statements. ​ 16. 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. Mr. 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. Each of Mr. 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. ​ ​ ​ ​ ​ ​ 22 Table of Contents ​