Power Integrations, Inc.

Hello everyone, thank you for joining us and welcome to the Power Integrations Q4 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the call over to Joe Schiffler, Senior Director of Investor Relations. Please go ahead.

Thank you, Chelsea. Good afternoon, everyone. Thanks for joining us. With me on the call are Jen Lloyd, our CEO, and Nancy Erba, who joined Power Integrations last month as CFO. After Jen and Nancy's prepared remarks, we'll open it up for questions. Our discussion today will include forward-looking statements denoted by words like will, expect, should, outlook, forecast, and similar expressions that look toward future events or performance. Such statements are subject to risks that may cause actual results to differ 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 7, 2025. During this call, we will refer to financial measures not calculated according to GAAP. Non-GAAP measures in the fourth quarter exclude stock-based compensation expenses, amortization of acquisition-related intangible assets, expenses associated with an employment litigation matter, and the tax effects of these items. A reconciliation of non-GAAP measures to our GAAP results is included in today's press release. 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 Jen.

Thanks, Joe, and good afternoon, everybody. Overall, our fourth quarter results were largely in line with our expectations. with a revenue of $103 million and non-GAAP earnings of 23 cents per share. I'm also pleased to report that we returned to growth in 2025. Full year revenue was up 6%, non-GAAP EPS grew by 8%, and we generated $112 million of cash flow from operations, up $30 million from the prior year. Last quarter, I shared that OPEX control would be an immediate priority, and we demonstrated that in Q4, reducing non-GAAP expenses by more than $2 million from the prior quarter. We are announcing today that we carried out a restructuring earlier this week, reducing our global workforce by about 7%. While such decisions are difficult, we took this action to better align expenses with revenue. This creates flexibility to invest in products, people, and markets that will create long-term value for shareholders. Looking at recent business trends, booking improved significantly in Q4 after slowing in the prior quarter, partly as a result of excess appliance inventory shift into the US last year ahead of the tariffs. Encouragingly, the largest US appliance OEM, reported last week that this preloaded inventory has largely dissipated. Part of the recent improvement in orders relates to appliances, and we expect sequential growth in our consumer category in Q1. However, our broader view is that appliance demand continues to face headwinds, including low existing home sales in the US, the effect of tariffs on appliance prices, and ongoing softness in China housing. The industrial market has been a key driver of the recent uptick in bookings, and we expect industrial to be our fastest-growing market again in 2026, starting with a strong Q1. Overall, we generated 10% growth in design wind value in 2025, with particular strength in GAN and high-power products. We are also encouraged by customers' response to our new TinySwitch 5 ICs with a healthy pipeline of design scheduled to begin production in the second half of 2026. Additionally, our multi-output GAN-based InnoMux2 integrated circuits are seeing strong design traction in the TV market. These and other upcoming products will enable us to sustain and grow our core IC business, even as we shift our investment priorities towards markets like AI data center, industrial, and automotive. where our expertise is helping customers solve their toughest power challenges. Advanced high voltage technologies are essential to the emerging power ecosystem. Our solutions span from the generation of renewable energy, to long distance DC transmission, to battery storage, to smart meters at the edge of the grid, to the efficient use of power in homes, factories, data centers, and vehicles. While it will take time to fully align our R&D and go-to-market efforts with our long-term strategic plan, recent results demonstrate that we have already built momentum in some of the markets we are targeting for long-term growth. For example, revenue outside of cell phone applications has averaged 12% growth over the past two years. And in 2025, industrial revenue grew 15%, driven by the big picture themes that are integral to our growth strategy, electrification, renewable energy and grid modernization. These things are especially relevant in our high power industrial business, which had a record year with double digit growth driven by electric rail, where we have a very strong position in the India locomotive market and by high voltage DC transmission projects, delivering renewable energy to the grid. We expect recent design wins to drive continued growth for high power in 2026 and beyond. Some Q4 customer wins included a leading European maker of inverters for utility scale solar and battery storage, commuter trains and streetcars in Europe and Africa, and multiple wins for power grid projects in India. In our industrial IC business, we saw double digit growth in metering last year due to our leading position in deployments of smart meters in markets such as India and Japan. Our ICs enable compact, reliable designs with low standby consumption, making them ideal for meters. And we're now seeing customers migrate to our 900 and 1250 volt GaN products for additional protection against the voltage swings common on India's grid. Another area of growth in our industrial business last year was power tools. As lawn equipment and other tools continue to migrate to battery power, In automotive, we continue to make steady progress penetrating the EV market with our auto qualified InnoSwitch products for inverter emergency power supplies. We secured a design win in Q4 at a top Chinese tier one supplying a leading EV maker and began production just this week on a design at the number one European EV car maker. Another highlight of our 2025 results was the continued success of our PowiGAN technology in the power supply market. Revenue from Powi GAN products grew more than 40% for the year. Notable GAN design wins in Q4 included a dual USB-C charging port. Charging ports integrated with AC outlets require both high power density and low standby consumption, making them an ideal application for our highly integrated GAN solutions. Also in Q4, we began production on a new server auxiliary design for a US cloud services provider using a GAN-based InnoSwitch. As we discussed on last quarter's call, auxiliary power is a key aspect of our engagements with data center customers, including with NVIDIA on their next-gen 800-volt DC architecture, where our 1700-volt GAN solutions offer a compelling alternative to silicon carbide. As I've met with shareholders during my first six months as CEO, I've been clear about the fact that we need to reorient our organization to ensure that our strong technology foundation translates to success in the market. That means a more customer-focused approach to product development and faster time to market. Changes like these take time, but we are moving with urgency. We are streamlining our R&D pipeline to focus on delivering our highest priority and highest value products in time to intersect the market. We've also moved quickly to strengthen the team to better leverage our unique capabilities and high voltage and deliver the right products for the evolving power ecosystem. New members of our team include Chris Jacobs, who joined us last month from Micron Technology to head up marketing and product strategy. We welcomed Julie Curry, our new head of people and culture transformation, and Nancy Erba as CFO, who you'll hear from in a moment. We have also bolstered our strong innovation capabilities with targeted hires and key technical roles. I'm very excited about the depth and breadth of experience in our team, and I'm confident in our ability to serve customers and create long-term sustainable value for shareholders. With that, I'll turn the call over to Nancy, who joined us one month ago as CFO. Nancy is a seasoned public company CFO, having served in the role for six years at Infinera until it sailed to Nokia last year, and previously as CFO at Immersion. Those CFO roles followed a long run of senior leadership positions at Seagate Technology, so I'm thrilled to have her as part of our executive leadership team. Nancy.