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PI

POWER INTEGRATIONS INC (POWI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $105.2M, up 18% year over year and down 9% sequential; non-GAAP diluted EPS was $0.30 and GAAP diluted EPS was $0.16, with non-GAAP gross margin steady at 55.1% .
  • Management guided Q1 2025 revenue to flat sequential (+/–5%) and lifted non-GAAP gross margin guidance to 55.5–56.0% (from 55.0–55.5% for Q4), while planning non-GAAP OpEx of ~$45M and a 5–6% effective tax rate for Q1 and 2025 .
  • Strategic catalysts highlighted: accelerating GaN adoption across end markets with expectation that GaN will exceed 10% of sales in 2025; industrial growth led by high-voltage DC transmission, renewables, metering, and automotive; and expanding wins in India (5G fixed wireless, metering) .
  • Leadership transition underway: CEO Balu Balakrishnan will retire upon appointment of a successor and become Executive Chairman; Gregg Lowe (ex-Wolfspeed, ex-Freescale CEO) will join the board (Feb 15, 2025), enhancing power semiconductor domain expertise .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP gross margin held at the high end of the model (55.1% in Q4) aided by weaker yen and favorable mix; full-year non-GAAP GM was 54.4% (+200+ bps YoY), with CFO reiterating ~55.5% expected in 2025 .
  • Clear GaN momentum: first TV OEM POs for GaN-based InnoMux-2 and HiperPFS; follow-on GaN design wins in India 5G fixed wireless; expectation that GaN revenue comfortably exceeds 10% of sales in 2025—management emphasized Power Integrations’ system-level GaN approach and reliability advantages .
  • Industrial outlook improving: design ramps in HVDC transmission, renewables, metering, high-power traction; communications category set to grow on India fixed wireless and rising charger content; channel inventory down from prior year-end .

What Went Wrong

  • Sequential revenue decline (–9% QoQ) driven by ongoing softness in major appliances across U.S., Europe, China; consumer down mid-teens QoQ, industrial down 10% QoQ due to metering shipment timing .
  • Visibility remains limited; management flagged cloudy demand and potential tariff impacts on end-market demand (appliances) and deferred infrastructure projects in China .
  • Inventory elevated: inventory days rose to 315 (from 291 in Q3) as revenues fell; management expects inventory to remain well above target through 2025, tapering in H2 .

Financial Results

Revenue and EPS vs Prior Periods (GAAP and Non-GAAP)

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$89.5 $115.8 $105.2
GAAP Diluted EPS ($)$0.25 $0.25 $0.16
Non-GAAP Diluted EPS ($)$0.22 $0.40 $0.30

Note: CFO referenced cash flow from operations of ~$15M vs press release tables showing $14.7M (rounding difference) .

Margins (GAAP and Non-GAAP)

MetricQ4 2023Q3 2024Q4 2024
GAAP Gross Margin (%)51.6% 54.5% 54.4%
Non-GAAP Gross Margin (%)52.7% 55.1% 55.1%
GAAP Operating Margin (%)–1.2% 10.0% 3.7%
Non-GAAP Operating Margin (%)7.7% 17.3% 12.7%

Segment Mix (Revenue by End Market)

End Market Mix (%)Q4 2023Q3 2024Q4 2024
Communications27% 12% 13%
Computer9% 14% 15%
Consumer29% 38% 37%
Industrial35% 36% 35%

KPIs and Cash Returns

KPIQ3 2024Q4 2024
Channel Inventory (weeks)8.6 8.4
Inventory Days291 315
Cash from Operations ($M)$32.9 $14.7
CapEx ($M)$5.7 $3.0
Dividend per Share ($)$0.21 (Dec 31) $0.21 (paid Dec 31; next Mar 31)
Share Repurchases ($M)Authorization $50M; activity not disclosed in Q3 release beyond authorization $1.9 used; $48.1 remaining authorization

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2024$105M ± $5M Actual $105.2M In line
RevenueQ1 2025N/A (first issuance)Flat vs Q4 ±5% Maintained vs sequential baseline
GAAP Gross MarginQ4 202454.0–54.5% Actual 54.4% In line
GAAP Gross MarginQ1 2025N/A55.0–55.5% Raised vs Q4 guidance band
Non-GAAP Gross MarginQ4 202455.0–55.5% Actual 55.1% In line
Non-GAAP Gross MarginQ1 2025N/A55.5–56.0% Raised vs Q4 guidance band
GAAP OpExQ4 2024$53.5–$54.0M Actual $53.3M Slightly below guided range
GAAP OpExQ1 2025N/A~ $54M Maintained vs Q4 guide midpoint
Non-GAAP OpExQ4 2024$44.5–$45.0M Actual $44.6M In line
Non-GAAP OpExQ1 2025N/A~ $45M Maintained/slightly higher
Effective Tax Rate (non-GAAP)Q4 2024Low single digits (CFO commentary) –2.8% actual (FIN 48 reversal; +$0.02 EPS) Below prior expectation
Effective Tax RateQ1 2025 & FY 2025N/A5–6% New issuance
DividendQ4 2024 onwardIncreased to $0.21 (announced Q3) $0.21 paid Dec 31; $0.21 scheduled Mar 31 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
GaN Adoption & RoadmapInflection expected in 2025; 1,700V GaN announced; GaN migrating across portfolio; target ~$100M GaN by 2028 GaN revenue to exceed 10% in 2025; new TV OEM GaN POs; India FWA upgrading to GaN; confidence in high-power GaN path (tens of kW now; hundreds of kW in 3–5 years) Accelerating
AI/Data Center PowerPipeline building; future products targeting 1–20kW with GaN; SAM expansion First AI server power product expected next year, with revenue ramp mainly in 2028; standby GaN products already in AI servers (~$100M SAM) Building; long lead
Industrial/HVDC & RenewablesWins with European grid operator; major HVDC projects in Saudi Arabia and Japan; metering doubling in India Expect strongest 2025 growth in industrial; HVDC, renewables, traction, metering, home/building automation highlighted Strengthening
Consumer/Appliances & EU StandbyRecovery off lows; EU standby rules creating design activity; BridgeSwitch-2 rollout Ongoing softness; elevated China OEM finished goods; distribution sell-through > sell-in; channel inventory down slightly QoQ Mixed near term
Supply Chain/Channel InventoryChannel inventory 7.8 weeks Q2; increased to 8.6 weeks in Q3 (consumer) 8.4 weeks in Q4; inventory days up to 315; expectation to taper in H2 2025 Stabilizing
Tariffs/MacroChina demand/geopolitical pressures; deferred projects Watching tariffs’ impact on appliances; “wait and watch” on sell-through; overall demand visibility cloudy Ongoing headwind
AutomotiveApproved vendor at major Tier 1; ~20 EV OEMs in production; sockets expanding Rapid growth in 2025 from modest base; 900V GaN for 400V systems; 1,700V devices for 800V; DC–DC converters as larger content; 20 designs in production now Expanding

Management Commentary

  • “Fourth-quarter revenues were up 18 percent year-over-year, and we expect another double-digit increase in the first quarter… Products featuring our proprietary PowiGaN technology should contribute significant growth this year as adoption accelerates…” .
  • “We expect revenues from GaN-based products to grow at a high rate this year and to comfortably exceed 10% of our sales… we have first purchase orders for GaN-based InnoMux-2 at one of the world’s largest TV manufacturers.” .
  • “Automotive revenues will grow rapidly in 2025 from a modest base… building an impressive roster of customers in EV… scheduled to begin production this year in Europe and the U.S.” .
  • “We are tackling [AI data center] discrete GaN challenges with our system-level approach… first product for AI server power supplies next year; SAM >$0.5B in 2027, data center SAM well over $1B.” .
  • CEO transition: “I intend to retire from my role as CEO… will remain as Executive Chairman to support a new leader.” .

Q&A Highlights

  • GaN high power trajectory: confidence in reaching hundreds of kW with high-power GaN in 3–5 years, enabling EV drivetrain solutions at lower cost and higher performance vs SiC; tangible progress accelerated by Odyssey Semiconductor acquisition .
  • Automotive sockets and design wins: ~20 designs already in production (silicon or SiC); 900V GaN for 400V batteries and 1,700V GaN for 800V; expanded sockets (DC–DC converter) noted as larger dollar content .
  • Segment outlook: for March quarter, consumer and industrial to grow; communications and computer to be down seasonally; 2025 growth expected across all four segments (industrial leading) .
  • Inventory and sell-through: distribution sell-through exceeded sell-in by ~$2M in Q4; channel inventory 8.4 weeks; inventory days rose with lower sequential revenues; expectation to hold/stabilize in Q1 .
  • Tariffs/macro: potential short-term impacts on appliance demand; management is monitoring sell-through to discern tariff vs subsidy effects; base case assumes normalizing environment .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to API request limits; therefore, explicit comparisons to consensus cannot be provided. Results were broadly in line with company guidance provided in Q3 and reiterated on the Q4 call .
  • Based on management guidance, non-GAAP gross margin is expected to rise to 55.5–56.0% in Q1 2025 and ~55.5% for FY 2025; OpEx to grow ~6% YoY with ~1 point from the full-year Odyssey expense .

Key Takeaways for Investors

  • Near-term trajectory: Q1 guided flat sequential with a raised non-GAAP GM band; industrial mix and yen tailwind support margins even amid soft consumer demand and macro uncertainty .
  • Structural drivers: accelerating GaN adoption across appliances, TVs, monitors, notebooks, industrial and automotive; GaN expected to exceed 10% of sales in 2025—Power Integrations’ system-level approach is a differentiator .
  • Industrial growth story: HVDC transmission, renewables, metering (India), high-power traction drive multi-year growth; communications to contribute via India fixed wireless .
  • Automotive optionality: expanding EV sockets (emergency power, auxiliary, DC–DC), multinational Tier 1 qualifications, and a roadmap to high-power GaN for drivetrain over 3–5 years .
  • Inventory management: channel weeks stabilized; inventory days elevated but expected to taper in H2 2025—watch for cash conversion improvements as revenues ramp .
  • Leadership transition: CEO retirement and addition of Gregg Lowe to the board deepen power semiconductor expertise; execution continuity expected with Balakrishnan as Executive Chairman .
  • Actionable setup: With margins resilient and GaN/industrial catalysts building, monitor: Q1 demand cadence (consumer), tariff impacts on appliances, GaN design ramp timing (TVs/AI servers), and progress in HVDC/automotive projects—all key to estimate revisions and stock narrative .

Supporting Documents and Other Relevant Press Releases (Q4 context)

  • Q4 2024 earnings press release and 8-K exhibit (financials, outlook) .
  • Q4 2024 earnings call transcript (themes, Q&A) –.
  • Automotive 1,700V InnoSwitch3-AQ wide-creepage package for 800V vehicles (Dec 18, 2024) .
  • MotorXpert v3.0 (Jan 23, 2025) – software advancing BLDC inverter design efficiency, supporting BridgeSwitch portfolio .
  • CEO retirement announcement and board appointment of Gregg Lowe (Feb 6, 2025) .