NASDAQ:POWI Power Integrations Q4 2024 Earnings Report $49.26 +0.14 (+0.29%) Closing price 05/1/2025 04:00 PM EasternExtended Trading$47.88 -1.38 (-2.79%) As of 05:58 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Power Integrations EPS ResultsActual EPS$0.16Consensus EPS $0.28Beat/MissMissed by -$0.12One Year Ago EPSN/APower Integrations Revenue ResultsActual RevenueN/AExpected Revenue$105.14 millionBeat/MissN/AYoY Revenue GrowthN/APower Integrations Announcement DetailsQuarterQ4 2024Date2/6/2025TimeAfter Market ClosesConference Call DateThursday, February 6, 2025Conference Call Time4:30PM ETUpcoming EarningsPower Integrations' Q1 2025 earnings is scheduled for Monday, May 12, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Power Integrations Q4 2024 Earnings Call TranscriptProvided by QuartrFebruary 6, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Good 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. This call is being recorded on Thursday, 02/06/2025. Operator00:00:24I would now like to turn the conference over to Joe Scheffler, Director of Investor Relations. Please go ahead. Joe ShifflerDirector-Investor Relations at Power Integrations00:00:32Thank 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. Joe ShifflerDirector-Investor Relations at Power Integrations00:00:48Non 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 and 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 02/12/2024. Joe ShifflerDirector-Investor Relations at Power Integrations00:01:32This 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:01:41Thank 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 as CEO until the search is concluded and a successor is in place. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:02:18I've been CEO for twenty three years and I will turn 71 later this year. And while I have not lost an ounce of my passion for this company, all 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 15. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:03:13Until last year, Greg was CEO of Wolfspeed and previously served as CEO of Freescale Semiconductor through the time of its merger with NXP in 2015. He also spent twenty seven 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:04:05Now turning to the results, revenues were in line with our guidance, up 18% year over year to $105,000,000 Revenues for the full year were $419,000,000 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:05:09And in fact, we expect our communications category to grow driven by the five gs 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:06:01We 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 design wins, which I will discuss in a moment. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:06:59Potential growth drivers in the computer category this year include notebooks and tablets, auxiliary power supplies for AI servers and also monitors where our InnoMax II 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 two fifty million smart utility meters. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:07:58We 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 1,700 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:08:45In Q4, we won a follow on design at our Indian five gs 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 twelve fifty 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 sockets in three models, largest being 65 inches screen, which will not only use Inomax two, but also our GaN based Hyper PFS power factor correction chip. Along with accelerating customer adoption, our leadership in GaN technology and products is also being recognized by industry experts. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:09:48Our 1,700 volt InnoMax II ICs received a 2024 Product of the Year award from a leading UK technical journal and a Power Best award from Electronic Design Magazine. Innoswitch three with twelve fifty 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 twenty one Daya Yoon also in China. While twenty twenty five is shaping up as an exciting year for GaN, we are still in the early 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:11:03While 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 that 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 SAN 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 sand to well over $1,000,000,000 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 Semiconductor last summer. And we continue to believe that a market ready high power GaN technology is attainable within the next three to five years. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:12:10I'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 pace of 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:13:02We have several customers scheduled to begin production this year in Europe and The U. S. In Japan, we were initially expected 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 one and we hope to complete that process by the end of twenty twenty five. With that, I'll turn it over to Sandeep for review of the financials. Sandeep NayyarCFO & VP of Finance at Power Integrations00:13:41Thanks, Balu, and good afternoon. Our Q4 results are straightforward, so I will just briefly recap the numbers and the outlook and then we will take questions. As usual, I will focus on non GAAP results, which are reconciled to GAAP in our press release. Fourth quarter revenues were $105,000,000 in the middle of our guidance range. Revenues were up 18% year over year and down 9% sequentially. Sandeep NayyarCFO & VP of Finance at Power Integrations00:14:09I will briefly speak to the sequential changes in each category. Consumer revenues were down mid teens sequentially reflecting continued softness in major appliances in The U. S, Europe and China. Finished goods inventory at Chinese OEMs remain elevated as the impact of consumer stimulus program thus far appears to have been fairly modest. However, we did see a meaningful drawdown in channel inventory for consumer in Q4 giving us added confidence in our growth expectations for 2025. Sandeep NayyarCFO & VP of Finance at Power Integrations00:14:44Industrial revenues were down 10% sequentially largely driven by the timing of shipments for metering applications. Revenues from the computer category were down mid single digits sequentially on lower sales in notebooks while the communication category was up mid single digits on stronger cell phone revenue. Total channel inventory fell slightly to eight point four weeks compared to eight point six weeks last quarter as distribution sell through exceeded sell in by about $2,000,000 For the full year, sell through exceeded sell in by about $12,000,000 Revenue mix for the quarter was 37% consumer, 35% industrial, 15% computer and 13% communications. Non GAAP gross margin for the fourth quarter was 55.1, unchanged from the prior quarter. Full year non GAAP gross margin was 54.4%, up more than two percentage points from the prior year, driven by the weaker yen and favorable mix with lower self hold revenues and higher percentage of sales from industrial and consumer. Sandeep NayyarCFO & VP of Finance at Power Integrations00:16:04Non GAAP operating expenses were $44,600,000 for the quarter consistent with our guidance. For the full year, non GAAP OpEx was $174,000,000 up 4% from the prior year including about 0.5 percentage points stemming from the Odyssey acquisition. The non GAAP tax rate for the quarter was negative 3% reflecting a reversal of FIN 48 reserves. The reversal resulted in an EPS benefit of $0.02 per share. Including the tax benefit, non GAAP earnings for Q4 were 0.3 per diluted share. Sandeep NayyarCFO & VP of Finance at Power Integrations00:16:45Share count for the quarter was $57,100,000 up slightly from $57,000,000 in the prior quarter. Inventory days rose to three fifteen at quarter end up twenty four days from the prior quarter reflecting the sequentially lower revenues. Inventory on the balance sheet fell by $2,000,000 during the quarter. Inventory will remain well above our target level throughout the year but should begin to taper down in the second half. Cash flow from operations was $15,000,000 for the quarter while CapEx was $3,000,000 We used $12,000,000 for dividends after the 5% increase that took effect in Q4 and we used $2,000,000 to buy back shares. Sandeep NayyarCFO & VP of Finance at Power Integrations00:17:35For the year, we generated $81,000,000 in cash from operations with just over $17,000,000 in CapEx resulting in free cash flow of $64,000,000 We returned $74,000,000 to stockholders through dividends and buyback. Turning to the Q1 outlook, we expect revenues to be flat sequentially plus or minus 5%. Non GAAP gross margin should be between fifty five point five percent and fifty six percent compared to 55.1% in Q4. The sequential increase reflects favorable end market mix and incremental benefit from the dollar yen exchange rate. For the year, I expect gross margin to be around 55.5%. Sandeep NayyarCFO & VP of Finance at Power Integrations00:18:28That would be up about one point versus 24% with higher back end production volumes and favorable mix offsetting higher input costs. Non GAAP operating expenses for Q1 should be around $45,000,000 a slight increase from Q4 driven by the resumption of FICA taxes and modestly higher headcount. For the year, I expect non GAAP OpEx to increase by about 6%. About one percentage point of the increase is a result of the full year of Odyssey expenses compared to half a year in 2024. Finally, I expect our effective tax rate for the first quarter and the year to be in the range of 5% to 6%. Sandeep NayyarCFO & VP of Finance at Power Integrations00:19:18And now operator, let's begin the Q and A. Operator00:19:25Thank Operator00:19:57Your first question is from David Williams from The Benchmark Company. Please go ahead. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:20:03Good afternoon, everyone. And, Viola, let me just first say congratulations on the retirement. It's well deserved and we'll miss you and wish you the best. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:20:13Thanks, David. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:20:13So David WilliamsEquity Research Analyst at The Benchmark Company LLC00:20:16first Balu, it really seems I mean, you've obviously been very upbeat on GaN opportunity over the last several years, but it sounds like you've got greater conviction today in meeting that higher power and even talking about the EV drivetrain in those areas. Can has anything changed maybe over the last couple of quarters that's given you more confidence there, maybe something that's come along with the Odyssey or just maybe internal efforts, but just anything around that your confidence in that in the GaN transition to the powertrain potential? Thank you. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:20:47Thanks, David. Absolutely. We talked about it in the last quarter as well. I would say in the last year, we have made significant strides in our technology that will allow us now to address tens of kilowatts. And that's why we are now talking about AI data center opportunity. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:21:06We think with the technology we have today, we cannot go up to perhaps 50 kilowatts worth of applications. Now, the new technology we are working on, which is the reason we have acquired Odyssey Semiconductor, will allow us to go to much higher power levels, hundreds of kilowatts. That's when we'll be able to get into EV drivetrain and we believe we can be very competitive or actually much lower cost than silicon carbide and provide even higher performance than silicon carbide. So that's kind of the holy grail that we are working towards. And there we are making good progress. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:21:48We still have some ways to go. We think we can be there in the three to five year timeframe. And acquiring Odyssey is really going to help us get there faster than we originally thought. And that's the reason I'm very optimistic about GaN in general. But I would also say from a business side, I'm really impressed how broadly GaN has been adopted. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:22:12It's no longer just cell phones. We are talking about notebooks, tablets, monitors, TVs, appliances, industrial applications. So it's really across all of the markets and that's why we believe this year is going to be a significant growth for us. And going forward, it will grow even faster. So I am very, very confident GaN will be the high voltage switch of choice for the future. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:22:39And of course, all of our products have them. So that's going to make a huge difference to us. And also we are so far ahead of our competitors in terms of voltage level, in terms of reliability, in terms of cost. We feel very, very strong that GaN would be a huge benefit for us, differential benefit for us as a company. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:23:07Fantastic progress there and making a lot of headway. But I guess maybe secondly on the automotive, you also talked about that now and where you're playing. Can you update us on maybe how many design wins you have in the automotive space? And maybe just kind of speak to the magnitude that you're expecting from Gannon Automotive over this year and maybe in the next couple of years how that should trend? Thanks. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:23:31Yes. Just to be clear, a lot of the designs that we are already in, we have about 20 designs that are in production right now. They are either silicon or silicon carbide. We recently introduced the 900 volt GaN that will be suitable for the 400 volt battery systems and we are actually getting design wins on that. And of course, we have the 1,700 volt silicon carbide, but we will also have the 1,700 volt GaN based device for automotive as well. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:24:04And that is required for the 800 volt battery. So the 400 will be required 900 volts GaN and the 800 volt battery will require 1,700 volt GaN. So we are in very good shape to address those markets with GaN. But on top of that, there are other sockets in the car, like for example, DC to DC converters to replace 12 volt batteries. So we are working on products using GaN. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:24:35It is a higher power version of Innoswitch. And that will provide us additional sockets and significant dollars for that matter. Right now our primary socket is the emergency power supply in the drivetrain and also auxiliary power supplies for various subsystems. But the DC to DC converter is a much bigger dollar content. And then once we have the 10 kilowatt type of solutions that we are working on, we can also address the onboard charger application. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:25:12And then we have to wait for our high power GaN to go into the EV drivetrain. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:25:21Great. Thank you. Operator00:25:26Sure. Next question is from Ross Seymore from Deutsche Bank. Please go ahead. Ross SeymoreManaging Director at Deutsche Bank00:25:31Hi, guys. Thanks. May I ask a couple of questions? And first and foremost, Balu, congratulations. As David said, very, very well deserved and we'll be missing you on these calls. Ross SeymoreManaging Director at Deutsche Bank00:25:41So I guess for my first question, the report and guide were pretty much in line. It didn't even look like the end markets were terribly surprising. So what would you describe as the biggest update of what you're seeing overall from a end market environment today versus Ross SeymoreManaging Director at Deutsche Bank00:25:56thirty days ago? What's Ross SeymoreManaging Director at Deutsche Bank00:25:57changed? Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:25:58Well, that's a good question. Not a significant change. Only thing I would say is in 2025 that is this year, we expect to see a significant growth in industrial, which is kind of little bit out of sync with the rest of the semiconductor market. And that's because we have some really unique opportunities that will go into production, things like infrastructure related projects, renewables, high voltage DC transmission systems, electric locomotives, and that's in the high power part of the business. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:26:36But beyond that, we are also doing very well in meters, which is also infrastructure related. We talked about the India meter opportunity and then we are doing very well in home and building automation and power tools and so on. So this year, industrial is going to be the strongest growth market, which again is a little bit unique. But part of it is because some of the infrastructure projects, which are supposed to start last year, have been pushed to this year, but that bodes really well for the industrial this year. Ross SeymoreManaging Director at Deutsche Bank00:27:09And I guess as my second question and not to ask too much, but I think in your last call you talked about you thought all four segments would grow this year. Is that still the case? Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:27:19From the best model we have done, all four should grow, but industrial would be the largest growth. Sandeep NayyarCFO & VP of Finance at Power Integrations00:27:26Yes. In dollar terms, industrial will grow followed by consumer, but we expect all four. And even in communication, we are expecting growth with the two areas of cell phone as well as in networking product. So we've got growth in all areas. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:27:45Yes. Just to amplify on that, we talked about the networking product. This is a residential networking, the fixed five gs network. But we are also going to see growth in the remaining cell phone market because of content growth. We have growth because we are able to upgrade to InnoSwitch PD which has the PD protocol built into it. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:28:14So that increases our dollar content. Also many of the products are good. I mean, there is also more towards higher power to charge AI based phones. And that loss increase our dollar content because they'll then move on to GaN for higher power chargers. Ross SeymoreManaging Director at Deutsche Bank00:28:36Got it. Ross SeymoreManaging Director at Deutsche Bank00:28:36Thanks guys. And Balu, congrats again. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:28:39Thanks Ross. Appreciate it. Operator00:28:43Your next question is from Tore Svanberg from Stifel. Please go ahead. Tore SvanbergManaging Director at Stifel Financial00:28:49Yes. Thank you. And Balu, congratulations on your retirement. It's been a true honor working with you and covering prior integrations during your tenure. I wish you all the best. Tore SvanbergManaging Director at Stifel Financial00:29:03So the first question that I had is on the near term by segment. I assume the Communications segment will probably be down seasonally, but how should we think about the four segments into the March? Sandeep NayyarCFO & VP of Finance at Power Integrations00:29:15Yes. The way I would look at it that you would see that basically the consumer and industrial will grow and comm and communication and computer would be down. Tore SvanbergManaging Director at Stifel Financial00:29:29Great. And as my follow-up question, channel inventories, Sandeep, I know sometimes in the March, there's a lot of moving parts, especially with Chinese New Year and so on and so forth. So I know channel inventory came down a couple of days, I believe you said, in Q4, but how should we think about channel inventory target in Q1? Sandeep NayyarCFO & VP of Finance at Power Integrations00:29:53I think, as the best I know, I think sell in and sell through to should be around similar. So I think the channel inventory should hold. And in fact, this is one of the good things for us for 2025. We are coming starting off with what I call the normal weeks and with all the growth drivers that Balu talked about, I really feel very good about our growth. And really think even for the year, sell in and sell through should be pretty close give and take. Tore SvanbergManaging Director at Stifel Financial00:30:21Very good. And just one last question for you, Balu. You talked about some early revenues in data center power supplies scheduled for early next year. Are those GaN and silicon products or either one or the other? Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:30:38Sorry, first of all, thank you for the congratulations. Just to be clear, I said that our first product for data centers will be available next year, but we won't see revenue until 2027 or 2028. We may get a little bit in 2027, but really it will be 2028 before we get significant revenue. And the products are entirely GaN, because GaN is where we have a really an advantage in the AI data center power supplies. But I do want to remind you, we are already designed into AI, server power supplies with our standby products, which are also GaN based. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:31:22And we that will grow very nicely this year and next year. But that market is not as big as the main power supply. For example, the standby market is about roughly $100,000,000 of SAM, whereas the main power supply is we are talking about more than $1,000,000,000 once we introduce the two or three products we are planning for it. Tore SvanbergManaging Director at Stifel Financial00:31:53Great. Congrats on the end. Thank you. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:31:55Thanks, Dore. Operator00:31:59Your next question is from Christopher Lowland from Susquehanna. Please go ahead. Christopher RollandSenior Equity Analyst at SIG Group00:32:07Thanks for the question. And Balu, I echo my congrats. You look great for 71 by the way. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:32:17That picture is a little lower. Christopher RollandSenior Equity Analyst at SIG Group00:32:22I need your skincare routine. Okay. So my question is around GaN and it seems like you're really focused on high power. Do you think like the low end of the market commoditizes between like Innoscience on one side and 300 millimeter from Infineon on the other at the low end? And then on high power, is this like a sustainable competitive advantage? Christopher RollandSenior Equity Analyst at SIG Group00:32:55Or do you think others are going to catch up here as well? Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:33:01I believe first of all, thank you for the compliments. But I believe we can compete very well across the entire power spectrum from low power to high power. Let me talk a little bit of the two examples you gave. First of all, we don't sell discrete GaN. People who sell discrete GaN I think have a very tough challenge with some of the Chinese suppliers, especially in our science. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:33:31We sell a system and the benefit of that is that we really can extract the most value out of the GaN at the system level in terms of efficiency, in terms of protection and so on and so forth. So that's one thing. So we think we can compete very well in the low power area. When you go to high power, the dollar content is much higher and the benefits we can bring is also more significant and we think that that's a huge growth path for us. If you look at AI's data center, we think that will provide us a strong revenue growth because of the products will bring such significant advantage in terms of size and efficiency. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:34:11Now talking about 300 millimeter, there are two things I think it's really important to know. First of all, that at this point, we don't know of any equipment that can do high voltage gain on 300 millimeters. I believe the announcement that was made are for low voltage gain. When I say low voltage less than 600 volts, it will be better in 100, two hundred volts may be possible. But to really go to higher voltages, you need much thicker epi. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:34:47And the challenge with that is, first of all, the cost of GaN is really in the epi. So the size of the wafer makes not that much difference. And to the extent the wafer size makes some difference, the fact that we have grown such the KPI on a such a large wafer creates a humongous amount of stress. I mean, they call it I think they call it as a it's potato chip. That's what it looks like. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:35:18And what that means is there to deal with that stress. When you do that, the yield goes down significantly. So it is not clear to me that going to a larger size wafer is a benefit for high voltage gas, just to be clear. What we are doing is reducing the cost in other ways like device design, process design and really dramatically reducing the die size. The difference in wafer size is not very significant in terms of cost. Christopher RollandSenior Equity Analyst at SIG Group00:35:55Interesting. Thank you, Balu. The next one is maybe for Sandeep. Sandeep, you always have macro thoughts. I appreciate those. Christopher RollandSenior Equity Analyst at SIG Group00:36:06Sounded like in the press release, there was some commentary around tariffs. Wanted your thoughts there. Also, you're usually plugged in on Chinese subsidies. Seems like you had some commentary there as well. And then anything else macro that you want to add, I would appreciate. Sandeep NayyarCFO & VP of Finance at Power Integrations00:36:27Yes. I mean, basically, we felt the subsidies the full effect of that hasn't been now. There was also there could be some put in pull in because of tariffs. I really want to see the sell through in first quarter, which will give me a better idea whether it was tariffs or whether it is the subsidies. So I'm waiting to watch that. Sandeep NayyarCFO & VP of Finance at Power Integrations00:36:51I think the trade policy is obviously something we are watching because if you have a lot of tariffs and it has an impact on end market demand, that can also impact us. At the end of the day, we go into things like appliances and there are other and that becomes very expensive, can impact demand. But I think if things really don't go extreme and are normal, I think the areas that Balu has highlighted of growth in our appliances as well as in our industrial applications, we really believe that we will have a very good growth here this year. So obviously, a thing which is hard to predict is the real impact of tariffs which it's a wait and watch. But I think all these things that come even out over a period of time, but do have short term impact. Sandeep NayyarCFO & VP of Finance at Power Integrations00:37:43So but I think we have enough growth drivers that if things are normal that we'll have a very good year. Christopher RollandSenior Equity Analyst at SIG Group00:37:50Excellent. Thanks so much guys. Operator00:38:13There are no further questions at this time. Please proceed with closing remarks. Joe ShifflerDirector-Investor Relations at Power Integrations00:38:17Okay. Thanks, Andrew. I know it's a busy day of earnings out there. Thanks, everyone, for listening. There will be a replay of this call available on our website, investors.power.com. Joe ShifflerDirector-Investor Relations at Power Integrations00:38:27Thanks again, and good afternoon. Operator00:38:32Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read moreParticipantsExecutivesJoe ShifflerDirector-Investor RelationsBalu BalakrishnanPresident, CEO & ChairmanSandeep NayyarCFO & VP of FinanceAnalystsDavid WilliamsEquity Research Analyst at The Benchmark Company LLCRoss SeymoreManaging Director at Deutsche BankTore SvanbergManaging Director at Stifel FinancialChristopher RollandSenior Equity Analyst at SIG GroupPowered by Conference Call Audio Live Call not available Earnings Conference CallPower Integrations Q4 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Power Integrations Earnings HeadlinesStifel Adjusts Power Integrations (POWI) Price Target Amid Industry Concerns | POWI Stock NewsApril 17, 2025 | gurufocus.comPower Integrations, Inc. (POWI): Among Stocks Insiders Sold in April After Trump’s Tariff RolloutApril 10, 2025 | insidermonkey.comHere’s How to Claim Your Stake in Elon’s Private Company, xAII predict this single breakthrough could make Elon the world’s first trillionaire — and mint more new millionaires than any tech advance in history. And for a limited time, you have the chance to claim a stake in this project, even though it’s housed inside Elon’s private company, xAI.May 2, 2025 | Brownstone Research (Ad)Power Integrations: Efficiency Is The Ultimate Clean EnergyApril 10, 2025 | seekingalpha.comPower Integrations to Release First-Quarter Financial Results on May 12 | POWI Stock NewsApril 8, 2025 | gurufocus.comPower Integrations to Release First-Quarter Financial Results on May 12April 8, 2025 | businesswire.comSee More Power Integrations Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Power Integrations? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Power Integrations and other key companies, straight to your email. Email Address About Power IntegrationsPower Integrations (NASDAQ:POWI) designs, develops, manufactures, and markets analog and mixed-signal integrated circuits (ICs), and other electronic components and circuitry used in high-voltage power conversion worldwide. The company provides a range of alternating current to direct current power conversion products that address power supply ranging from less than one watt of output to approximately 500 watts of output for mobile-device chargers, consumer appliances, utility meters, LCD monitors, main and standby power supplies for desktop computers and TVs, LED lighting, and various other consumer and industrial applications, as well as power conversion in high-power applications comprising industrial motors, solar and wind-power systems, electric vehicles, and high-voltage DC transmission systems. It also offers high-voltage diodes; InnoSwitch IC for electric vehicles; high-voltage gate-driver products used to operate high-voltage switches, such as insulated-gate bipolar transistors and silicon-carbide MOSFETs under the SCALE and SCALE-2 product-family names; and SCALE-iDriver for use in powertrain and charging applications for electric vehicles. In addition, the company provides motor-driver ICs for use in refrigerator compressors, ceiling fans, and air purifiers, as well as pumps, fans, and blowers used in consumer appliances, such as dishwashers and laundry machines. It serves communications, computer, consumer, and industrial markets. The company sells its products to original equipment manufacturers and merchant power supply manufacturers through direct sales staff, as well as a network of independent sales representatives and distributors. Power Integrations, Inc. was incorporated in 1988 and is headquartered in San Jose, California.View Power Integrations ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Microsoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of EarningsAmazon's Earnings Will Make or Break the Stock's Comeback CrowdStrike Stock Nears Record High, Dip Ahead of Earnings?Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock Up Upcoming Earnings Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025)Williams Companies (5/5/2025)CRH (5/5/2025)Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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PresentationSkip to Participants Operator00:00:00Good 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. This call is being recorded on Thursday, 02/06/2025. Operator00:00:24I would now like to turn the conference over to Joe Scheffler, Director of Investor Relations. Please go ahead. Joe ShifflerDirector-Investor Relations at Power Integrations00:00:32Thank 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. Joe ShifflerDirector-Investor Relations at Power Integrations00:00:48Non 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 and 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 02/12/2024. Joe ShifflerDirector-Investor Relations at Power Integrations00:01:32This 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:01:41Thank 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 as CEO until the search is concluded and a successor is in place. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:02:18I've been CEO for twenty three years and I will turn 71 later this year. And while I have not lost an ounce of my passion for this company, all 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 15. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:03:13Until last year, Greg was CEO of Wolfspeed and previously served as CEO of Freescale Semiconductor through the time of its merger with NXP in 2015. He also spent twenty seven 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:04:05Now turning to the results, revenues were in line with our guidance, up 18% year over year to $105,000,000 Revenues for the full year were $419,000,000 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:05:09And in fact, we expect our communications category to grow driven by the five gs 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:06:01We 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 design wins, which I will discuss in a moment. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:06:59Potential growth drivers in the computer category this year include notebooks and tablets, auxiliary power supplies for AI servers and also monitors where our InnoMax II 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 two fifty million smart utility meters. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:07:58We 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 1,700 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:08:45In Q4, we won a follow on design at our Indian five gs 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 twelve fifty 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 sockets in three models, largest being 65 inches screen, which will not only use Inomax two, but also our GaN based Hyper PFS power factor correction chip. Along with accelerating customer adoption, our leadership in GaN technology and products is also being recognized by industry experts. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:09:48Our 1,700 volt InnoMax II ICs received a 2024 Product of the Year award from a leading UK technical journal and a Power Best award from Electronic Design Magazine. Innoswitch three with twelve fifty 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 twenty one Daya Yoon also in China. While twenty twenty five is shaping up as an exciting year for GaN, we are still in the early 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:11:03While 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 that 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 SAN 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 sand to well over $1,000,000,000 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 Semiconductor last summer. And we continue to believe that a market ready high power GaN technology is attainable within the next three to five years. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:12:10I'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 pace of 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. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:13:02We have several customers scheduled to begin production this year in Europe and The U. S. In Japan, we were initially expected 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 one and we hope to complete that process by the end of twenty twenty five. With that, I'll turn it over to Sandeep for review of the financials. Sandeep NayyarCFO & VP of Finance at Power Integrations00:13:41Thanks, Balu, and good afternoon. Our Q4 results are straightforward, so I will just briefly recap the numbers and the outlook and then we will take questions. As usual, I will focus on non GAAP results, which are reconciled to GAAP in our press release. Fourth quarter revenues were $105,000,000 in the middle of our guidance range. Revenues were up 18% year over year and down 9% sequentially. Sandeep NayyarCFO & VP of Finance at Power Integrations00:14:09I will briefly speak to the sequential changes in each category. Consumer revenues were down mid teens sequentially reflecting continued softness in major appliances in The U. S, Europe and China. Finished goods inventory at Chinese OEMs remain elevated as the impact of consumer stimulus program thus far appears to have been fairly modest. However, we did see a meaningful drawdown in channel inventory for consumer in Q4 giving us added confidence in our growth expectations for 2025. Sandeep NayyarCFO & VP of Finance at Power Integrations00:14:44Industrial revenues were down 10% sequentially largely driven by the timing of shipments for metering applications. Revenues from the computer category were down mid single digits sequentially on lower sales in notebooks while the communication category was up mid single digits on stronger cell phone revenue. Total channel inventory fell slightly to eight point four weeks compared to eight point six weeks last quarter as distribution sell through exceeded sell in by about $2,000,000 For the full year, sell through exceeded sell in by about $12,000,000 Revenue mix for the quarter was 37% consumer, 35% industrial, 15% computer and 13% communications. Non GAAP gross margin for the fourth quarter was 55.1, unchanged from the prior quarter. Full year non GAAP gross margin was 54.4%, up more than two percentage points from the prior year, driven by the weaker yen and favorable mix with lower self hold revenues and higher percentage of sales from industrial and consumer. Sandeep NayyarCFO & VP of Finance at Power Integrations00:16:04Non GAAP operating expenses were $44,600,000 for the quarter consistent with our guidance. For the full year, non GAAP OpEx was $174,000,000 up 4% from the prior year including about 0.5 percentage points stemming from the Odyssey acquisition. The non GAAP tax rate for the quarter was negative 3% reflecting a reversal of FIN 48 reserves. The reversal resulted in an EPS benefit of $0.02 per share. Including the tax benefit, non GAAP earnings for Q4 were 0.3 per diluted share. Sandeep NayyarCFO & VP of Finance at Power Integrations00:16:45Share count for the quarter was $57,100,000 up slightly from $57,000,000 in the prior quarter. Inventory days rose to three fifteen at quarter end up twenty four days from the prior quarter reflecting the sequentially lower revenues. Inventory on the balance sheet fell by $2,000,000 during the quarter. Inventory will remain well above our target level throughout the year but should begin to taper down in the second half. Cash flow from operations was $15,000,000 for the quarter while CapEx was $3,000,000 We used $12,000,000 for dividends after the 5% increase that took effect in Q4 and we used $2,000,000 to buy back shares. Sandeep NayyarCFO & VP of Finance at Power Integrations00:17:35For the year, we generated $81,000,000 in cash from operations with just over $17,000,000 in CapEx resulting in free cash flow of $64,000,000 We returned $74,000,000 to stockholders through dividends and buyback. Turning to the Q1 outlook, we expect revenues to be flat sequentially plus or minus 5%. Non GAAP gross margin should be between fifty five point five percent and fifty six percent compared to 55.1% in Q4. The sequential increase reflects favorable end market mix and incremental benefit from the dollar yen exchange rate. For the year, I expect gross margin to be around 55.5%. Sandeep NayyarCFO & VP of Finance at Power Integrations00:18:28That would be up about one point versus 24% with higher back end production volumes and favorable mix offsetting higher input costs. Non GAAP operating expenses for Q1 should be around $45,000,000 a slight increase from Q4 driven by the resumption of FICA taxes and modestly higher headcount. For the year, I expect non GAAP OpEx to increase by about 6%. About one percentage point of the increase is a result of the full year of Odyssey expenses compared to half a year in 2024. Finally, I expect our effective tax rate for the first quarter and the year to be in the range of 5% to 6%. Sandeep NayyarCFO & VP of Finance at Power Integrations00:19:18And now operator, let's begin the Q and A. Operator00:19:25Thank Operator00:19:57Your first question is from David Williams from The Benchmark Company. Please go ahead. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:20:03Good afternoon, everyone. And, Viola, let me just first say congratulations on the retirement. It's well deserved and we'll miss you and wish you the best. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:20:13Thanks, David. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:20:13So David WilliamsEquity Research Analyst at The Benchmark Company LLC00:20:16first Balu, it really seems I mean, you've obviously been very upbeat on GaN opportunity over the last several years, but it sounds like you've got greater conviction today in meeting that higher power and even talking about the EV drivetrain in those areas. Can has anything changed maybe over the last couple of quarters that's given you more confidence there, maybe something that's come along with the Odyssey or just maybe internal efforts, but just anything around that your confidence in that in the GaN transition to the powertrain potential? Thank you. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:20:47Thanks, David. Absolutely. We talked about it in the last quarter as well. I would say in the last year, we have made significant strides in our technology that will allow us now to address tens of kilowatts. And that's why we are now talking about AI data center opportunity. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:21:06We think with the technology we have today, we cannot go up to perhaps 50 kilowatts worth of applications. Now, the new technology we are working on, which is the reason we have acquired Odyssey Semiconductor, will allow us to go to much higher power levels, hundreds of kilowatts. That's when we'll be able to get into EV drivetrain and we believe we can be very competitive or actually much lower cost than silicon carbide and provide even higher performance than silicon carbide. So that's kind of the holy grail that we are working towards. And there we are making good progress. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:21:48We still have some ways to go. We think we can be there in the three to five year timeframe. And acquiring Odyssey is really going to help us get there faster than we originally thought. And that's the reason I'm very optimistic about GaN in general. But I would also say from a business side, I'm really impressed how broadly GaN has been adopted. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:22:12It's no longer just cell phones. We are talking about notebooks, tablets, monitors, TVs, appliances, industrial applications. So it's really across all of the markets and that's why we believe this year is going to be a significant growth for us. And going forward, it will grow even faster. So I am very, very confident GaN will be the high voltage switch of choice for the future. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:22:39And of course, all of our products have them. So that's going to make a huge difference to us. And also we are so far ahead of our competitors in terms of voltage level, in terms of reliability, in terms of cost. We feel very, very strong that GaN would be a huge benefit for us, differential benefit for us as a company. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:23:07Fantastic progress there and making a lot of headway. But I guess maybe secondly on the automotive, you also talked about that now and where you're playing. Can you update us on maybe how many design wins you have in the automotive space? And maybe just kind of speak to the magnitude that you're expecting from Gannon Automotive over this year and maybe in the next couple of years how that should trend? Thanks. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:23:31Yes. Just to be clear, a lot of the designs that we are already in, we have about 20 designs that are in production right now. They are either silicon or silicon carbide. We recently introduced the 900 volt GaN that will be suitable for the 400 volt battery systems and we are actually getting design wins on that. And of course, we have the 1,700 volt silicon carbide, but we will also have the 1,700 volt GaN based device for automotive as well. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:24:04And that is required for the 800 volt battery. So the 400 will be required 900 volts GaN and the 800 volt battery will require 1,700 volt GaN. So we are in very good shape to address those markets with GaN. But on top of that, there are other sockets in the car, like for example, DC to DC converters to replace 12 volt batteries. So we are working on products using GaN. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:24:35It is a higher power version of Innoswitch. And that will provide us additional sockets and significant dollars for that matter. Right now our primary socket is the emergency power supply in the drivetrain and also auxiliary power supplies for various subsystems. But the DC to DC converter is a much bigger dollar content. And then once we have the 10 kilowatt type of solutions that we are working on, we can also address the onboard charger application. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:25:12And then we have to wait for our high power GaN to go into the EV drivetrain. David WilliamsEquity Research Analyst at The Benchmark Company LLC00:25:21Great. Thank you. Operator00:25:26Sure. Next question is from Ross Seymore from Deutsche Bank. Please go ahead. Ross SeymoreManaging Director at Deutsche Bank00:25:31Hi, guys. Thanks. May I ask a couple of questions? And first and foremost, Balu, congratulations. As David said, very, very well deserved and we'll be missing you on these calls. Ross SeymoreManaging Director at Deutsche Bank00:25:41So I guess for my first question, the report and guide were pretty much in line. It didn't even look like the end markets were terribly surprising. So what would you describe as the biggest update of what you're seeing overall from a end market environment today versus Ross SeymoreManaging Director at Deutsche Bank00:25:56thirty days ago? What's Ross SeymoreManaging Director at Deutsche Bank00:25:57changed? Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:25:58Well, that's a good question. Not a significant change. Only thing I would say is in 2025 that is this year, we expect to see a significant growth in industrial, which is kind of little bit out of sync with the rest of the semiconductor market. And that's because we have some really unique opportunities that will go into production, things like infrastructure related projects, renewables, high voltage DC transmission systems, electric locomotives, and that's in the high power part of the business. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:26:36But beyond that, we are also doing very well in meters, which is also infrastructure related. We talked about the India meter opportunity and then we are doing very well in home and building automation and power tools and so on. So this year, industrial is going to be the strongest growth market, which again is a little bit unique. But part of it is because some of the infrastructure projects, which are supposed to start last year, have been pushed to this year, but that bodes really well for the industrial this year. Ross SeymoreManaging Director at Deutsche Bank00:27:09And I guess as my second question and not to ask too much, but I think in your last call you talked about you thought all four segments would grow this year. Is that still the case? Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:27:19From the best model we have done, all four should grow, but industrial would be the largest growth. Sandeep NayyarCFO & VP of Finance at Power Integrations00:27:26Yes. In dollar terms, industrial will grow followed by consumer, but we expect all four. And even in communication, we are expecting growth with the two areas of cell phone as well as in networking product. So we've got growth in all areas. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:27:45Yes. Just to amplify on that, we talked about the networking product. This is a residential networking, the fixed five gs network. But we are also going to see growth in the remaining cell phone market because of content growth. We have growth because we are able to upgrade to InnoSwitch PD which has the PD protocol built into it. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:28:14So that increases our dollar content. Also many of the products are good. I mean, there is also more towards higher power to charge AI based phones. And that loss increase our dollar content because they'll then move on to GaN for higher power chargers. Ross SeymoreManaging Director at Deutsche Bank00:28:36Got it. Ross SeymoreManaging Director at Deutsche Bank00:28:36Thanks guys. And Balu, congrats again. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:28:39Thanks Ross. Appreciate it. Operator00:28:43Your next question is from Tore Svanberg from Stifel. Please go ahead. Tore SvanbergManaging Director at Stifel Financial00:28:49Yes. Thank you. And Balu, congratulations on your retirement. It's been a true honor working with you and covering prior integrations during your tenure. I wish you all the best. Tore SvanbergManaging Director at Stifel Financial00:29:03So the first question that I had is on the near term by segment. I assume the Communications segment will probably be down seasonally, but how should we think about the four segments into the March? Sandeep NayyarCFO & VP of Finance at Power Integrations00:29:15Yes. The way I would look at it that you would see that basically the consumer and industrial will grow and comm and communication and computer would be down. Tore SvanbergManaging Director at Stifel Financial00:29:29Great. And as my follow-up question, channel inventories, Sandeep, I know sometimes in the March, there's a lot of moving parts, especially with Chinese New Year and so on and so forth. So I know channel inventory came down a couple of days, I believe you said, in Q4, but how should we think about channel inventory target in Q1? Sandeep NayyarCFO & VP of Finance at Power Integrations00:29:53I think, as the best I know, I think sell in and sell through to should be around similar. So I think the channel inventory should hold. And in fact, this is one of the good things for us for 2025. We are coming starting off with what I call the normal weeks and with all the growth drivers that Balu talked about, I really feel very good about our growth. And really think even for the year, sell in and sell through should be pretty close give and take. Tore SvanbergManaging Director at Stifel Financial00:30:21Very good. And just one last question for you, Balu. You talked about some early revenues in data center power supplies scheduled for early next year. Are those GaN and silicon products or either one or the other? Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:30:38Sorry, first of all, thank you for the congratulations. Just to be clear, I said that our first product for data centers will be available next year, but we won't see revenue until 2027 or 2028. We may get a little bit in 2027, but really it will be 2028 before we get significant revenue. And the products are entirely GaN, because GaN is where we have a really an advantage in the AI data center power supplies. But I do want to remind you, we are already designed into AI, server power supplies with our standby products, which are also GaN based. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:31:22And we that will grow very nicely this year and next year. But that market is not as big as the main power supply. For example, the standby market is about roughly $100,000,000 of SAM, whereas the main power supply is we are talking about more than $1,000,000,000 once we introduce the two or three products we are planning for it. Tore SvanbergManaging Director at Stifel Financial00:31:53Great. Congrats on the end. Thank you. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:31:55Thanks, Dore. Operator00:31:59Your next question is from Christopher Lowland from Susquehanna. Please go ahead. Christopher RollandSenior Equity Analyst at SIG Group00:32:07Thanks for the question. And Balu, I echo my congrats. You look great for 71 by the way. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:32:17That picture is a little lower. Christopher RollandSenior Equity Analyst at SIG Group00:32:22I need your skincare routine. Okay. So my question is around GaN and it seems like you're really focused on high power. Do you think like the low end of the market commoditizes between like Innoscience on one side and 300 millimeter from Infineon on the other at the low end? And then on high power, is this like a sustainable competitive advantage? Christopher RollandSenior Equity Analyst at SIG Group00:32:55Or do you think others are going to catch up here as well? Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:33:01I believe first of all, thank you for the compliments. But I believe we can compete very well across the entire power spectrum from low power to high power. Let me talk a little bit of the two examples you gave. First of all, we don't sell discrete GaN. People who sell discrete GaN I think have a very tough challenge with some of the Chinese suppliers, especially in our science. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:33:31We sell a system and the benefit of that is that we really can extract the most value out of the GaN at the system level in terms of efficiency, in terms of protection and so on and so forth. So that's one thing. So we think we can compete very well in the low power area. When you go to high power, the dollar content is much higher and the benefits we can bring is also more significant and we think that that's a huge growth path for us. If you look at AI's data center, we think that will provide us a strong revenue growth because of the products will bring such significant advantage in terms of size and efficiency. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:34:11Now talking about 300 millimeter, there are two things I think it's really important to know. First of all, that at this point, we don't know of any equipment that can do high voltage gain on 300 millimeters. I believe the announcement that was made are for low voltage gain. When I say low voltage less than 600 volts, it will be better in 100, two hundred volts may be possible. But to really go to higher voltages, you need much thicker epi. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:34:47And the challenge with that is, first of all, the cost of GaN is really in the epi. So the size of the wafer makes not that much difference. And to the extent the wafer size makes some difference, the fact that we have grown such the KPI on a such a large wafer creates a humongous amount of stress. I mean, they call it I think they call it as a it's potato chip. That's what it looks like. Balu BalakrishnanPresident, CEO & Chairman at Power Integrations00:35:18And what that means is there to deal with that stress. When you do that, the yield goes down significantly. So it is not clear to me that going to a larger size wafer is a benefit for high voltage gas, just to be clear. What we are doing is reducing the cost in other ways like device design, process design and really dramatically reducing the die size. The difference in wafer size is not very significant in terms of cost. Christopher RollandSenior Equity Analyst at SIG Group00:35:55Interesting. Thank you, Balu. The next one is maybe for Sandeep. Sandeep, you always have macro thoughts. I appreciate those. Christopher RollandSenior Equity Analyst at SIG Group00:36:06Sounded like in the press release, there was some commentary around tariffs. Wanted your thoughts there. Also, you're usually plugged in on Chinese subsidies. Seems like you had some commentary there as well. And then anything else macro that you want to add, I would appreciate. Sandeep NayyarCFO & VP of Finance at Power Integrations00:36:27Yes. I mean, basically, we felt the subsidies the full effect of that hasn't been now. There was also there could be some put in pull in because of tariffs. I really want to see the sell through in first quarter, which will give me a better idea whether it was tariffs or whether it is the subsidies. So I'm waiting to watch that. Sandeep NayyarCFO & VP of Finance at Power Integrations00:36:51I think the trade policy is obviously something we are watching because if you have a lot of tariffs and it has an impact on end market demand, that can also impact us. At the end of the day, we go into things like appliances and there are other and that becomes very expensive, can impact demand. But I think if things really don't go extreme and are normal, I think the areas that Balu has highlighted of growth in our appliances as well as in our industrial applications, we really believe that we will have a very good growth here this year. So obviously, a thing which is hard to predict is the real impact of tariffs which it's a wait and watch. But I think all these things that come even out over a period of time, but do have short term impact. Sandeep NayyarCFO & VP of Finance at Power Integrations00:37:43So but I think we have enough growth drivers that if things are normal that we'll have a very good year. Christopher RollandSenior Equity Analyst at SIG Group00:37:50Excellent. Thanks so much guys. Operator00:38:13There are no further questions at this time. Please proceed with closing remarks. Joe ShifflerDirector-Investor Relations at Power Integrations00:38:17Okay. Thanks, Andrew. I know it's a busy day of earnings out there. Thanks, everyone, for listening. There will be a replay of this call available on our website, investors.power.com. Joe ShifflerDirector-Investor Relations at Power Integrations00:38:27Thanks again, and good afternoon. Operator00:38:32Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read moreParticipantsExecutivesJoe ShifflerDirector-Investor RelationsBalu BalakrishnanPresident, CEO & ChairmanSandeep NayyarCFO & VP of FinanceAnalystsDavid WilliamsEquity Research Analyst at The Benchmark Company LLCRoss SeymoreManaging Director at Deutsche BankTore SvanbergManaging Director at Stifel FinancialChristopher RollandSenior Equity Analyst at SIG GroupPowered by