What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-11-05 compared with 2025-08-06 · 193 added, 147 removed, 436 unchanged (44% of the section changed)

3 unchanged sentences

(In thousands)

June 30, 2025

September 30, 2025

December 31, 2024

20 unchanged sentences

STOCKHOLDERS’ EQUITY:

Common stock, $ 0.001 par value, 140,000 shares authorized;

and 55,312 and 56,837 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

5 unchanged sentences

POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

7 unchanged sentences

INCOME (LOSS) FROM OPERATIONS

INCOME BEFORE INCOME TAXES

INCOME (LOSS) BEFORE INCOME TAXES

PROVISION (BENEFIT) FOR INCOME TAXES

EARNINGS PER SHARE:

NET INCOME (LOSS)

EARNINGS (LOSS) PER SHARE:

SHARES USED IN PER SHARE CALCULATION:

1 unchanged sentence

POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Net income (loss)

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

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)

TOTAL COMPREHENSIVE INCOME

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

Unrealized gain on marketable securities, net of ($ 55 ) and ($ 221 ) taxes in the three and nine months ended September 30, 2025, respectively, and ($ 615 ) in each of the three and nine months ended September 30, 2024

Amortization of defined benefit pension items, net of $ 0 and $ 4 tax in the three and nine months ended September 30, 2025, respectively, and $ 8 and $ 23 in the three and nine months ended September 30, 2024, respectively

Total other comprehensive income

TOTAL COMPREHENSIVE INCOME (LOSS)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

10 unchanged sentences

Beginning balance

Other comprehensive income (loss)

Other comprehensive gain

Ending balance

1 unchanged sentence

Beginning balance

Net income (loss)

Repurchase of common stock

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

Amortization of intangibles

Loss on disposal of property and equipment

Loss (gain) on disposal of property and equipment

Stock-based compensation expense

1 unchanged sentence

Deferred income taxes

Increase (decrease) in accounts receivable allowance for credit losses

Decrease in accounts receivable allowance for credit losses

Change in operating assets and liabilities:

6 unchanged sentences

Purchases of property and equipment

Proceeds from sale of property and equipment

Purchases of marketable securities

Proceeds from sales and maturities of marketable securities

Acquisition (Note 15)

Net cash provided by (used in) investing activities

6 unchanged sentences

Net cash used in financing activities

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

27 unchanged sentences

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

In September 2025, the FASB issued ASU 2025-06, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40) which amends certain aspects of the accounting for and disclosure of software costs.

The guidance is effective for annual reporting beginning after December 15, 2027, 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.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

COMPONENTS OF THE COMPANY’S CONDENSED CONSOLIDATED BALANCE SHEETS:

Accounts Receivable

September 30,

(In thousands)

3 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

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Ending balance

September 30,

(In thousands)

3 unchanged sentences

Intangible Assets

June 30, 2025

September 30, 2025

December 31, 2024

4 unchanged sentences

Total intangible assets

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

(In thousands)

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)

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

(In thousands)

2025 (remaining three 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.

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:

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

Unrealized Gains

8 unchanged sentences

Three Months Ended

September 30,

(In thousands)

4 unchanged sentences

Ending balance

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended June 30, 2025 and 2024.

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended September 30, 2025 and 2024.

Unrealized Gains

4 unchanged sentences

Pension Items

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Beginning balance

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Other comprehensive income 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 six months ended June 30, 2025 and 2024.

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the nine months ended September 30, 2025 and 2024.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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:

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

Fair Value Measurement at

June 30, 2025

September 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 six months ended June 30, 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 nine months ended September 30, 2025 and the twelve months ended December 31, 2024.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Gross Unrealized

4 unchanged sentences

Investments due in 4-12 months:

Commercial paper

Corporate securities

2 unchanged sentences

Total marketable securities

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accrued interest receivable was $ 1.9 million at September 30, 2025 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

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

10 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 June 30, 2025:

Less Than 12 Months

3 unchanged sentences

Total marketable securities

In the three and six months ended June 30, 2025 and 2024, no unrealized losses on marketable securities were recognized in income.

In the three and nine months ended September 30, 2025 and 2024, no unrealized losses on marketable securities were recognized in the condensed consolidated statements of income (loss).

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.

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

General and administrative

Other operating expenses

Total stock-based compensation expense

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.

Stock-based compensation expense in the three months ended September 30, 2025, was approximately $ 21.2 million, comprising approximately $ 13.6 million related to the modification of outstanding equity awards held by the Company’s former chief executive officer (discussed in further detail below), $ 5.8 million related to restricted stock unit (“RSU”) awards, $ 1.5 million related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards and $ 0.3 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the nine months ended September 30, 2025, was approximately $ 40.0 million, comprising approximately $ 16.7 million for RSUs, $ 13.6 million related to the modification of outstanding equity awards held by the Company’s former CEO, $ 8.6 million related to PSUs and PRSUs and $ 1.1 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the three months ended September 30, 2024, was approximately $ 8.3 million, comprising approximately $ 6.6 million related to RSUs, $ 1.3 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 nine months ended September 30, 2024, was approximately $ 25.8 million, comprising approximately $ 19.0 million related to RSUs, $ 5.6 million related to PSUs and PRSUs and $ 1.2 million related to the Company’s employee stock purchase plan.

In connection with his retirement in July 2025, the Company’s former chief executive officer, Balu Balakrishnan, entered into a transition agreement and a consulting agreement with the Company.

Pursuant to these agreements, Mr.

Balakrishnan’s outstanding equity awards continue to vest subject to his continuous service and the applicable award agreements.

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 applicable performance periods.

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.

As a result, in the quarter ended September 30, 2025, the Company recorded stock-based compensation in the amount of $ 13.6 million in other operating expenses on the condensed consolidated statements of income (loss) related to the accounting modification.

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

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.

2 unchanged sentences

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.

The fair value of these PSUs is determined using the

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

1 unchanged sentence

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:

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

Weighted-Average

7 unchanged sentences

Outstanding at January 1, 2025

Outstanding at June 30, 2025

Outstanding and expected to vest at June 30, 2025

Outstanding at September 30, 2025

Outstanding and expected to vest at September 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

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.

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.

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

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

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2025

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:

Outstanding at September 30, 2025

Outstanding and expected to vest at September 30, 2025

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2025

Outstanding at June 30, 2025

Outstanding and expected to vest at June 30, 2025

Outstanding at September 30, 2025

Outstanding and expected to vest at September 30, 2025

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.

The Company’s top ten customers accounted for approximately 81 % of net revenues in both the three and nine months ended September 30, 2025 and approximately 78 % for both 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 $ 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.

Sales to distributors were $ 82.3 million and $ 238.7 million in the three and nine months ended September 30, 2025, respectively, and $ 80.5 million and $ 220.4 million in the three and nine months ended September 30, 2024, respectively.

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

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Salcomp Group

2 unchanged sentences

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 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:

As of September 30, 2025 and December 31, 2024, 91 % 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 September 30, 2025 and December 31, 2024:

September 30,

Salcomp Group

Honestar Technologies Co., Ltd.

* 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.

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(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

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

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.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

be executed according to pre-defined price/volume guidelines.

In the three months ended September 30, 2025, the Company purchased approximately 0.9 million shares for $ 42.4 million.

In the nine months ended September 30, 2025, the Company repurchased 2.0 million shares for $ 98.1 million, exhausting the Company’s repurchase authorization.

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

In October 2025, the Company’s board of directors raised the quarterly cash dividend with the declaration of four cash dividends of $ 0.215 per share to be paid at the end of each quarter in 2026.

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

1 unchanged sentence

Dividends declared per common share

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.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

EARNINGS (LOSS) PER SHARE:

Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted-average shares of common stock outstanding during the period.

Diluted earnings per share are calculated by dividing net income (loss) 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 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.

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share amounts)

Basic earnings per share:

Net income (loss)

Weighted-average common shares

Basic earnings per share

Basic earnings (loss) per share

Diluted earnings per share:

Net income (loss)

Weighted-average common shares

2 unchanged sentences

Diluted weighted-average common shares

Diluted earnings per share

Diluted earnings (loss) per share

(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.

PROVISION FOR INCOME TAXES:

In the three months ended September 30, 2025, shares attributable to stock-based awards were excluded from the computation of diluted earnings per share, as the Company was in a net loss position .

PROVISION (BENEFIT) 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 effective tax rate for the three and nine months ended September 30, 2025, was ( 3.0 %) and 10.5 %, respectively, and in the corresponding periods of 2024 was 0.3 % and 1.5 %, respectively.

In the three and nine months ended September 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.

Additionally, i n the three and nine months ended September 30, 2024, the Company’s effective tax rate was 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 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.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of September 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 Company has elected to account for Net Controlled Foreign Corporation Tested Income (“NCTI”), formerly known as Global Intangible Low-Taxed Income, 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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As a result, the Company has remeasured its estimated deferred tax balances related to NCTI for the changes in the tax rate and recorded an expense of $ 0.5 million during the third quarter of 2025.

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

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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.

The CODM regularly reviews net income as reported on the Company’s consolidated statements of income (loss).

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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

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General and administrative (excluding 1)

Other operating expenses

Other operating expenses (excluding 1)

INCOME (LOSS) FROM OPERATIONS

PROVISION (BENEFIT) FOR INCOME TAXES

NET INCOME (LOSS)

The table below presents other segment information:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

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.

Following a trial in August 2025, the Company successfully obtained verdicts of noninfringement and invalidity of all asserted claims, and as part of the noninfringement verdict, the jury found that no products incorporating the Company’s InnoSwitch products met the specific requirements of CogniPower’s asserted claims.

The Court thereafter entered judgment in favor of the Company;

briefing on post-trial motions is under way, with rulings expected in the coming months.

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.

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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.

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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.

In the quarter ended 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 (loss).

In the quarter ended September 30, 2025, the Company recognized in other operating expenses on the condensed consolidated statements of income (loss) an additional $ 0.7 million related to plaintiff attorney fees and related costs.

The plaintiff has filed claims for attorney fees and other costs totaling $ 5.9 million;

the Company is thus exposed to an additional $ 5.2 million in expenses related to this matter.

The Company disagrees with the jury’s verdicts against the Company and plans to appeal the judgement.

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.

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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.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Odyssey Semiconductor Technologies

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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,

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.

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.

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

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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.

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.

Departure of Chief Financial Officer

As disclosed in the Current Report on Form 8-K filed with the SEC on September 22, 2025, the Company’s Vice President and Chief Financial Officer and Principal Accounting Officer, Sandeep Nayyar, informed the Company on September 16, 2025 of his resignation from his positions effective October 4, 2025.

Pursuant to this announcement, Mr.

Nayyar resigned on October 4, 2025, at which time Robert Eric Verity, the Company’s Senior Director of Finance, became the Company’s interim Chief Financial Officer and Principal Accounting Officer.

Nayyar’s resignation is not the result of any disagreement with the Company related to its operations, policies, or practices.

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