Power Integrations, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Power Integrations, Inc. First Quarter Earnings Call. At this time, all lines are in a 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. I would now like to turn the conference call over to Joe Schiffler, Director of Investor Relations. Please go ahead.

Thank you, Jenny. Good afternoon, everyone. Thanks for joining us. With me on the call 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 gap measures to our gap 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, could, should, expect, outlook, plan, 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 10K, filed with the SEC on February 7, 2025. 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 Q1 results were on target with revenues in the middle of our guidance range, gross margin at the top end of the range, and non-GAAP EPS of $0.31. Cash flow in the quarter was healthy, and we are putting our strong balance sheet to work, buying back shares during recent market volatility. Since last month's tariff announcement, we have not seen any significant changes in business trends. Bookings have been stable with no abnormal pull-ins, push-outs, or cancellation of orders. The proportion of short-term orders relative to revenue is in line with historical norms, and distribution inventory is healthy after declining again in the March quarter. All of the factors we typically consider when developing our revenue guidance point towards a seasonally higher second quarter, with some nuances among the end market categories, which I will discuss in a moment. Revenues for the first quarter were $106 million, up 15% year over year. All four end markets were up from a year ago, led by the consumer and computer categories with growth of better than 20% each. In consumer, we saw growth in TVs and game consoles, reflecting recent design wins in those applications with our GAN-based InnoSwitch and InnoMux 2 products. That includes a follow-on TV design win in Q1 with InnoMux 2, adding to three design wins at the same customer in the previous quarter. But the primary drivers of growth in consumer were appliances and air conditioning, which account for the bulk of our consumer category. We had a better than seasonal quarter in appliances, reflecting the softer fourth quarter below normal channel inventories and perhaps some benefit from incentive programs in China. Also likely contributing to the strength in consumer was front loading of appliance shipments to the U.S. from Asia ahead of tariffs. While this effect is difficult to observe directly, commentary by one of our appliance customers on the recent earnings call suggests that it contributed to the upside in Q1. Our revenue guidance for the second quarter incorporates a correspondingly below-seasonal outlook for consumers. In the computer category, year-over-year growth was driven by server-axillary power, where our GaN products are helping meet the higher power density requirements of artificial intelligence server power supplies. We also saw growth in notebooks as well as higher tablet revenues reflecting the inventory correction that was underway in Q1 a year ago. The communications category grew slightly year over year following our exit from China cell phones last year. Our cell phone business is now dominated by non-Chinese OEM branded accessory chargers and to a lesser extent, non-OEM aftermarket brands. These customers value the innovation and dependable power supply that power integrations is known for. They also have roadmaps calling for higher power and wider use of GaN, which in turn increases the need and the opportunity for our products. In the first quarter, we won one of our largest GaN designs yet A next generation accessory charger at a major consumer device OEM scheduled to begin production later this year. Finally, industrial revenues grew 7% year over year. We expect industrial to be our fastest growing market this year, driven largely by high power designments in high voltage DC transmission, renewables and locomotives. We added to our strong position in India's locomotive market in Q1 with a new design win for our scale two gate drivers in a 6,000 horsepower electric locomotive. We also have a healthy share of the metering opportunity in India where the government plans to deploy 250 million meters as part of its efforts to modernize the country's infrastructure. We expect GAN to play an increasing role there over time, not just for its higher efficiency, but also its ability to withstand variations in grid voltage, which are common in India. Not only do our 750-volt GAN transistors accommodate voltage spikes better than equivalent-rated silicon MOSFETs, but as the only GAN supplier with devices rated at 900 volts 1250 and 1700 volts. We also offer products with even greater safety margin for customers in metering and three-phase industrial applications. Automotive will also contribute to our industrial category this year as we expand our customer base beyond China, where we now have more than two dozen designs on the road. Our first production shipments for a Japanese customer are scheduled to begin this quarter, followed later in the year by designs at two European automakers. In the March quarter, we won our first Gantt design in automotive, a drivetrain emergency power supply at a U.S. EV customer using a 900-volt inner switch product. We believe this design, which is scheduled to go into production later this year, will be the first ever use of high voltage GAN technology in automotive. And we are seeing increasing interest in GAN at customers looking for higher voltage capabilities, efficiency, and space savings. Looking ahead, our Q2 outlook is for revenues of $115 million. plus or minus $5 million. At the midpoint of the range, that would be up 8% year over year and 9% sequentially. We expect sequential growth in the industrial, computer, and communications categories in Q2. While we anticipate seasonal strength in air conditioning, we expect overall consumer revenues to be sequentially lower following the unusually strong first quarter in appliances. Obviously, the outlook for the second half of the year is highly dependent on the course of trade policy, and we would not expect to be immune from any reduction in demand related to tariffs. Fortunately, channel inventories are at normal levels in terms of weeks and multi-year lows in terms of dollars. At a minimum, low channel inventories should cushion the effects of a trade-related downturn. In the event of a benign outcome to the trade situation, replenishment of inventories could become a priority for the supply chains. Most importantly, though, the big picture trends of energy efficiency, artificial intelligence, electrification, and a cleaner, more modern power grid continues to create demand for innovative high-voltage semiconductors, regardless of the macro and political turbulence. We are meeting that need with current and future products as the leader, leading innovator in the high voltage space. And now I'll turn it over to Sandeep for a review of the financials.