Power Integrations, Inc. reports 153% Net Income growth in 2018 while 3.7% Revenue decline
02/07/2019 • About Power Integrations, Inc. (
$POWI) • By InTwits
Power Integrations, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Power Integrations, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 5.0% while average EBITDA Margin was 19.4% for the sames years. In 2018 SBC/Revenue was even higher: 5.2%
- Power Integrations, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.3%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $25m in 2018, $32m in 2017, $12m in 2016, $11m in 2015, $23m in 2014
- The company has business model with average profitability: ROIC is 10.4%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased on 3.7%. Revenue decline showed acceleration in 18Q4 - it was 13.8% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.9 pp from 18.2% to 22.1% in 2018. During the last 5 years EBITDA Margin bottomed in 2015 at 18.2% and was growing since that time.
Gross Margin increased on 2.1 pp from 49.5% to 51.6% in 2018. During 2014-2018 Gross Margin bottomed in 2016 at 49.3% and was growing since that time. SG&A as a % of Revenue increased slightly on 1.0 pp from 20.3% to 21.3% in 2018. During the last 5 years SG&A as a % of Revenue bottomed in 2017 at 20.3%. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 0.53 pp from 5.7% to 5.2% in 2018. During the last 5 years SBC as a % of Revenue topped in 2017 at 5.7%.
Net Income margin surged on 10.4 pp from 6.4% to 16.8% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 5.9% in 2018. The company's CAPEX/Revenue increased on 2.6 pp from 3.3% in 2015 to 5.9% in 2018. It's average CAPEX/Revenue for the last three years was 5.5%.
Accounts receivable as a % of Revenue decreased slightly on 1.2 pp from 3.9% to 2.7% in 2018. Inventories as a % of Revenue increased on 6.2 pp from 13.2% to 19.4% in 2018. Accounts payable as a % of Revenue showed almost no change in 2018.
Return on investment
The company operates at good ROE (13.0%) while ROIC is low (10.4%). ROIC decreased slightly on 0.66 pp from 11.1% to 10.4% in 2018. ROE increased on 7.8 pp from 5.3% to 13.0% in 2018.
Leverage (Debt)
The company has no debt. Cash surged on 43.2%.
Valuation and dividends
The company's trades at EV/EBITDA 23.8x and P/E 29.1x.
The company paid 27.1% of Net Income as dividends in 2018. Dividends grew on average at 7.9% per annum in the last 5 years).
Management team
The company's CEO is Balu Balakrishnan. Balu Balakrishnan is a founder and has 17 years tenure with the company. CEO total compensation was
$5,038,728 in 2018 which included
$592,673 salary and
$3,000 annual bonus.
Insider ownership is 4.7%. Insider ownership didn't change in 2018.
At the end of financial year the company had 662 employees. The number of employees increased on 2.5%. Average revenue per employee in 2018 was
$628,331 and it decreased on 6.0%.
Financial and operational results
FY ended 12/31/2018
Power Integrations, Inc. ($POWI) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 348.8 | 344.0 | 389.7 | 431.8 | 416.0 | -3.7% |
| Gross Profit | 189.6 | 173.4 | 192.2 | 213.7 | 214.8 | 0.5% |
| SG&A | 78.8 | 76.8 | 81.0 | 87.5 | 88.6 | 1.2% |
| EBITDA | 77.8 | 62.5 | 72.3 | 82.1 | 79.8 | -2.8% |
| EBIT | 55.8 | 39.0 | 48.9 | 57.6 | 55.6 | -3.5% |
| Tax | -2.7 | 0.3 | 1.1 | 32.7 | -10.2 | -131.3% |
| Net Income | 59.5 | 39.1 | 48.9 | 27.6 | 70.0 | 153.5% |
| Stock Based Compensation | 14.7 | 14.6 | 20.9 | 24.7 | 21.6 | -12.6% |
Balance Sheet
|
|---|
| Cash | 60.7 | 90.1 | 62.1 | 93.7 | 134.1 | 43.2% |
| Accounts Receivable | 10.2 | 7.8 | 6.5 | 16.8 | 11.1 | -34.1% |
| Inventory | 64.0 | 51.9 | 52.6 | 57.1 | 80.9 | 41.6% |
| Accounts Payable | 22.0 | 21.7 | 29.7 | 33.2 | 31.6 | -5.0% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 23.1 | 11.4 | 12.2 | 32.5 | 24.7 | -24.1% |
| Dividends | 13.0 | 14.0 | 15.0 | 17.0 | 19.0 | 11.8% |
| Acquisitions | | 15.5 | | | | |
Ratios
|
|---|
| Revenue growth | 0.5% | -1.4% | 13.3% | 10.8% | -3.7% | |
| EBITDA growth | 0.3% | -19.6% | 15.8% | 13.5% | -2.8% | |
|
|---|
| Gross Margin | 54.3% | 50.4% | 49.3% | 49.5% | 51.6% | 2.1% |
| EBITDA Margin | 22.3% | 18.2% | 18.6% | 19.0% | 19.2% | 0.2% |
| EBIT Margin | 16.0% | 11.3% | 12.5% | 13.3% | 13.4% | 0.0% |
| SG&A, % of revenue | 22.6% | 22.3% | 20.8% | 20.3% | 21.3% | 1.0% |
| SBC, % of revenue | 4.2% | 4.2% | 5.4% | 5.7% | 5.2% | -0.5% |
| Net Income Margin | 17.1% | 11.4% | 12.5% | 6.4% | 16.8% | 10.4% |
| CAPEX, % of revenue | 6.6% | 3.3% | 3.1% | 7.5% | 5.9% | -1.6% |
|
|---|
| ROIC | 12.9% | 9.2% | 10.7% | 11.1% | 10.4% | -0.7% |
| ROE | 13.7% | 9.1% | 10.5% | 5.3% | 13.0% | 7.8% |
| Net Debt/EBITDA | -0.8x | -1.4x | -0.9x | -1.1x | -1.7x | -0.5x |
People
|
|---|
| Insider ownership | 4.7% | 4.7% | 4.7% | 4.7% | 4.7% | 0.0% |
| Employees | 590 | 595 | 626 | 646 | 662 | 2.5% |
| Revenue/Employee, th. $ | 591 | 578 | 622 | 668 | 628 | -6.0% |
Power Integrations, Inc. ($POWI) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 103 | 109 | 110 | 93 | | -1.5% | 1.8% | -1.1% | -13.8% |
| EBITDA | 20 | 22 | 24 | 14 | | 8.6% | 7.8% | 7.3% | -33.7% |
| Net Income | 14 | 15 | 18 | 23 | | 0.7% | 10.6% | 7.0% | |
Balance Sheet
|
|---|
| Cash | 134 | 148 | 149 | 134 | | 189.5% | 353.9% | 193.0% | 43.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 51.9% | 51.4% | 51.8% | 51.4% | | 3.7% | 1.7% | 1.7% | 1.5% |
| EBITDA Margin | 19.6% | 19.8% | 21.8% | 14.9% | | 1.8% | 1.1% | 1.7% | -4.5% |
| Net Income Margin | 13.8% | 14.0% | 16.0% | 24.4% | | 0.3% | 1.1% | 1.2% | 40.0% |
Peers in Semiconductors
Below we provide Power Integrations, Inc. benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 9.7% | 4.4% | 11.0% | 5.0% |
|---|
| Power Integrations, Inc. ($POWI) | | -1.4% | 13.3% | 10.8% | -3.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 45.3% | 47.0% | 47.2% | 48.6% | 50.4% |
|---|
| Power Integrations, Inc. ($POWI) | 54.3% | 50.4% | 49.3% | 49.5% | 51.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.3% | 9.2% | 10.7% | 9.8% |
|---|
| Power Integrations, Inc. ($POWI) | 22.3% | 18.2% | 18.6% | 19.0% | 19.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.7% | 4.7% | 4.4% |
|---|
| Power Integrations, Inc. ($POWI) | 6.6% | 3.3% | 3.1% | 7.5% | 5.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.0% | 3.8% | 1.4% | 3.2% | 3.0% |
|---|
| Power Integrations, Inc. ($POWI) | 12.9% | 9.2% | 10.7% | 11.1% | 10.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.5x | -0.2x | 0.4x | 0.4x | 0.3x |
|---|
| Power Integrations, Inc. ($POWI) | -0.8x | -1.4x | -0.9x | -1.1x | -1.7x |
