Power Integrations, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Power Integrations Q4 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, February 6, 2025. I would now like to turn the conference over to Joe Schiffler, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, everyone. Thanks 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. A 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, estimate, 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 call is 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.

Thank you, Joe, and good afternoon. We will discuss our fourth quarter results in a moment, but I'll begin with two other pieces of news that we are announcing today. The first is that I have informed our board of directors that I intend to retire from my role as CEO. The board has engaged an executive search firm to help identify our next CEO and will consider both internal and external candidates. I will remain a CEO until the search is concluded and the successor is in place. I've been CEO for 23 years and I will turn 71 later this year. And while I have not lost an ounce of my passion for this company, or my excitement for the opportunities ahead of us, I believe now is the time for me to step back from the day-to-day responsibilities of a CEO and take on a reduced role supporting a new leader. That role will include serving as executive chairman of the board for as long as needed to help my successor settle into the job. Once the transition period is passed, I expect to remain on the board with the consent of the board and our stockholders, of course. Second piece of news we are announcing today is that Greg Lowe will join our board on February 15th. Until last year, Greg was CEO of Wolfspeed and previously served as CEO of Freescale Semiconnector through the time of its merger with NXP in 2015. He also spent 27 years at TI culminating in the role of senior VP running that company's analog business. Greg's experience in analog and power semiconductors makes him an ideal fit, especially his extensive knowledge of the sales and distribution landscape and deep customer relationships in key end markets, including automotive and industrial. His long history in the industry also means he can make a significant contribution to our CEO search. We are delighted to welcome him to the board. Now, turning to the results, revenues were in line with our guidance, up 18% year-over-year to $105 million. Revenues for the full year were $419 million, while that was down 6% from the prior year, The underlying details demonstrate why we are excited about the year ahead. The decline was driven primarily by the communications category. I should say entirely by the communications category, which fell more than 60% following our exit of the China OEM cell phone business at the start of the last year. The rest of the business grew 17% with consumer up more than 35%, computer more than 10%, and industrial up about 3%. Looking ahead to 2025, the cell phone headwind is behind us. And in fact, we expect our communications category to grow, driven by the 5G fixed wireless rollout in India and increasing dollar content in our remaining cell phone business. We also began the year with channel inventories down more than two weeks from the prior year end. Most importantly, we expect incremental revenue this year from an array of markets and products, and I will touch on several of those in a moment. Our Q1 revenue guidance is for flat sequential revenues at the midpoint of the range, which equates to a year-over-year increase of 15%. While forecasting beyond the current quarter is difficult in light of uncertainty around the trade policy and end market demand, we expect to sustain a healthy rate of revenue growth over the course of the year. Growth should accelerate this year in the industrial category, driven partly by lower channel inventories compared to a year ago, but also by design ramps in high voltage DC transmission, renewables, and traction in our high-power business, as well as metering, home and building automation, and automotive. In the consumer category, the rate of growth will moderate after last year's strong recovery, especially with soft housing markets still holding back demand for major appliances. However, we expect growth in air conditioning this year based on share gains and a solid demand outlook from our customers. We also expect new revenues from the TV market after recent GAN designments, which I will discuss in a moment. Potential growth drivers in the computer category this year include notebooks and tablets, auxiliary power supplies for AI servers, and also monitors where our InnoMux 2 ICs are in production with a major PC OEM. Underpinning our growth across four end market categories are two common themes. One is our success in India, where we have expanded our presence in recent years. A priority of India's government is to design and build domestically more of the products purchased by its growing middle class. The country is also modernizing its infrastructure with electric transportation, residential broadband, renewable energy, and a more robust power grid, including the planned installation of 250 million smart utility meters. We are winning in each of these areas, supplying gate drivers to one of India's largest suppliers of traction systems for electric locomotives, and winning a substantial share of the metering and fixed wireless rollouts. The second key theme for this year is GAN. Last year, we talked a lot about progress in our technology roadmap, including the launch of 1700 volt technology. We believe 2025 will bring an inflection point in terms of adoption and growth. We expect revenues from GAN-based products to grow at a high rate this year and to comfortably exceed 10% of our sales. In Q4, We won a follow-on design at our Indian 5G fixed wireless customer, which is upgrading to GaN after ramping last year with the silicon-based InnoSwitch. Metering customers in India are also now moving up to 900 volts and 1250 volt GaN products to gain extra safety margin against India's fluctuating grid voltages. We also recently received our first purchase orders for GaN-based INOMUX2 ICs at one of the world's largest TV manufacturers. We have one power supply socket in three models, largest being 65-inch screen, which will not only use INOMUX2, but also our GaN-based HyperPFS power factor correction chip. Along with accelerating customer adoption, Our leadership in GaN technology and products is also being recognized by industry experts. Our 1700-volt InnoMUX II ICs received a 2024 Product of the Year Award from a leading UK technical journal and a PowerBest Award from Electronic Design Magazine. InnoSwitch 3 with 1250-volt GaN won an Engineering Achievement Award from Design World Best Power Management Product from Aspen Core in China, and two industry excellence awards from 21 Dayayun, also in China. While 2025 is shaping up as an exciting year for GAN, we are still very early in the GAN revolution, with huge opportunities still ahead in the short, medium, and long term. Short-term, GaN has just begun to penetrate the power supply market, and adoption is accelerating across a wide range of low-power AC to DC applications, including the ones we talked about today and many more. In the medium-term, the opportunity for GaN at high power levels is massive, nowhere more so than in AI data centers. While data center operators are eager for innovative power solutions for AI, Adoption of GAN has been inhibited by the challenges of using discrete GAN in high reliability systems. We are tackling the problem with our system-level approach to product design and expect to have our first product for AI server power supplies next year. We estimate the SAM for this product alone to be more than half a billion dollars in 2027, with additional products to follow that will take our data center SAN to well over a billion dollars. Longer term, we believe GAN can achieve power levels sufficient for EV drivetrains at much lower cost than silicon carbide. We are pleased with the progress we are making on high-power GAN, aided by our acquisition of Odyssey Semiconnector last summer. And we continue to believe that a market-ready high-power GaN technology is attainable within the next three to five years. I'll conclude with an update on our automotive efforts, which are progressing nicely. EV power architectures are not only evolving in ways that benefit power integrations, but in some cases are being shaped by our expertise in high-voltage systems and the unique capabilities of our products. Automotive revenues will grow rapidly in 2025, from a modest base of a few million dollars in 2024. More importantly, we are building an impressive roster of customers in the EV industry, including pure battery EVs and plug-in hybrids, which should result in a more substantial revenue contribution starting in 2026. Building on our early success in China, we are now expanding quickly into other markets. We have several customers scheduled to begin production this year in Europe and the US. In Japan, we initially expected resistance as a non-Japanese supplier. We were instead being invited into the market because of the capabilities of our products. Following our recent qualification at one of Japan's largest tier one suppliers, we have now been invited to begin qualification at Japan's largest Tier 1, and we hope to complete that process by the end of 2025. With that, I'll turn it over to Sandeep for review of the financials.