Power Integrations, Inc.

Thank you for standing by. My name is Meg and I will be your conference operator today. At this time, I would like to welcome everyone to the Power Integrations Q1 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to try to call over to Joe Schiffler, Director of Investor Relations. Please go ahead.

Thank you, Meg. Good afternoon. Thanks, everyone, for joining us. With me on the call today are Balu Balakrishnan, Chairman and CEO of Power Integrations, and Sandeep Nair, our Chief Financial Officer. During this call, we will refer to financial measures not calculated according to GAAP, non-GAAP measures, exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, and the tax effects of these items. The reconciliation of non-GAAP measures to our GAAP results is included in today's press release. Our discussion today, including the Q&A session, will include forward-looking statements denoted by words like will, would, believe, should, expect, outlook, forecast, anticipate, and similar expressions that look toward future events or performance. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied. Such risks are discussed in today's press release and in our most recent Form 10-K filed with the SEC on February 12, 2024. This calls the property of power integrations and any recording or rebroadcast is expressly prohibited without the written consent of power integrations. Now I'll turn it over to Balu.

Thanks, Joe, and good afternoon. Our first quarter results were on target with revenues of $92 million, non-GAAP gross margin of 53%, and non-GAAP earnings of 18 cents per share. Channel inventories fell by more than a week and a half during the quarter, and the improvement in bookings that began in December has continued through the first quarter and the month of April. We expect revenues in the second quarter to be in the range of $105 million plus or minus $5 million. That would be a seasonal increase of 15% at the midpoint. We also expect a further increase in gross margin, driven by the favorable dollar-yen exchange rate and higher back-end manufacturing volumes. Most importantly, design momentum has remained strong, especially in key strategic markets like high power, motor drive, and automotive, where big picture trends like energy efficiency, clean energy, and electrification are expanding the opportunity for our products. We also continue to advance along our product and technology roadmaps with two key developments in recent weeks, starting with the introduction of INOMUX2. INOMUX2 is emblematic of our system-level approach to high-level power conversion, high-voltage power conversion, combining leading-edge switch technology novel control schemes, and proprietary packaging that is not only cost effective and thermally efficient, but also implements isolation and feedback through our flux link technology. Most products with embedded AC to DC power supplies require multiple DC output voltages for different parts of the system. For example, a refrigerator might require 15 volts for the electronics controlling the compressor motor, 24 volts for the interior lighting, and 5 volts for the user-facing control panel. In a typical architecture, the power supply provides a single DC output, which is then converted into each of the different downstream voltages by low voltage DC to DC converters. The energy losses at each conversion stage are compounded, significantly reducing the overall system efficiency. Enomux 2 offers a new architecture eliminating the need for downstream DC-DC stages by providing up to three independently regulated DC outputs. This dramatically reduces component count and complexity and also enhances efficiency by eliminating the compounding of losses across multiple stages. The cherry on the top is that Inomux 2 features our highly efficient POVI GAN switch, enabling overall system efficiency of better than 90%. Contrast this with a traditional architecture, which is an AC to DC stage followed by a separate DC to DC stage. Even if both stages are 90% efficient, the compounded losses result in a total system efficiency of only 81%. In other words, With InnoMax 2, losses would be reduced by nearly half. Because most products with embedded power supplies require multiple DC voltages, the addressable market opportunity for InnoMax 2 is large and diverse. We already have a pipeline of design activity across a wide range of applications, including displays, appliances, networking equipment, and more. Our first production design a desktop monitor at a top-tier PC OEM is expected to begin ramping in Q3. The other notable development on our roadmap is our agreement to acquire the assets of Odyssey Semiconductor, as announced earlier today. Odyssey is a developer of vertical GaN technology, which has higher current capability than lateral GaN devices, and therefore has the potential to address much higher power levels. High current GaN has been on our development roadmap for some time, and we are bringing the Odyssey team on board to augment those efforts. Power integrations has led the way in development of GaN technology for power conversion, starting with our 750-volt GaN in 2018, and we are advancing our technology along multiple fronts. One is cost. as we continue to drive our GaN towards a cost parity with silicon MOSFETs. Another is voltage, with introductions of 900-volt and 1250-volt GaN technology last year, and an even higher voltage technology coming soon. These higher voltages expand the opportunity for GaN in power supplies, and we are designing system-level products for applications such as data centers, comm equipment, and 800-volt EVs. The third vector of GaN development is current. Today's lateral GaN is the optimal switch technology for up to about 10 kilowatts, but does not support high enough current to deliver more power. High current technology is the next frontier in GaN development and will enable GaN to deliver hundreds of kilowatts of power. This would dramatically expand the competitive overlap between GaN and silicon carbide and make GaN a compelling alternative for applications like EV drivetrain inverters. While there are a number of significant technical challenges to solve before high-current GaN becomes a market-ready technology, we are pleased with the progress we have made to date, and we are doubling down with the addition of Odyssey team. With that, I'll turn it over to Sandeep for a review of the financials.