0000833640-25-000157
SEC filingRevenue grew 9% YoY in Q2 2025 driven by industrial end-market strength, with gross margin expanding 200 bps to 55.2%.
For the three months ended June 30, 2025, Power Integrations reported net revenues of $115.9 million, a 9.1% increase from $106.2 million in the same period of 2024. The growth was primarily driven by higher sales in the industrial end-market. Gross profit rose to $64.0 million from $56.5 million, with gross margin expanding 200 basis points to 55.2% from 53.2%. Management attributed the margin improvement to favorable end-market mix—reflecting a greater proportion of revenues from higher-margin end-markets—and the favorable impact of the dollar/yen exchange rate on wafer costs.
Total operating expenses increased to $65.3 million from $54.6 million, a 19.6% rise. This included a $9.2 million non-recurring expense related to an employee litigation matter. Excluding this item, operating expenses increased approximately 2.7%, driven by higher employee-related costs and professional services. As a result, the company swung from an operating income of $1.9 million (1.8% margin) in Q2 2024 to an operating loss of $1.3 million (-1.1% margin) in Q2 2025. Net income fell to $1.4 million from $4.8 million, with the effective tax rate turning negative (-1.8%) due to a tax shortfall on share-based payments.
Revenue mix shifted notably toward the industrial end-market, which grew to 40% of total revenue in Q2 2025 from 33% in Q2 2024. This segment was the primary growth driver. Consumer declined to 37% from 42%, and Computer fell to 12% from 14%. Communications held steady at 11%. The mix shift toward industrial, which management noted carries higher margins, was a key factor in gross margin expansion. International sales remained dominant at 98% of revenue, with Asia representing approximately 84% of total sales.
Management did not provide specific forward guidance in the MD&A. However, the discussion highlighted several strategic priorities: expanding the served available market (SAM) through new products for electric vehicles, higher-power GaN-based solutions for data centers and EV drivetrains, and motor-driver ICs. The company noted that the recently enacted One Big Beautiful Bill Act (OBBBA) is expected to increase the effective tax rate, with the impact being evaluated. No material changes to contractual commitments were reported, and management believes existing liquidity will satisfy working capital needs for at least the next 12 months.
From the Notes, the company’s inventory totaled $168.4 million at June 30, 2025, slightly up from $165.6 million at December 31, 2024. Marketable securities (all corporate, available-for-sale) were $201.8 million, down from $249.0 million. Accounts receivable net was $27.6 million, with top ten customers representing 89% of receivables. The company also reported $2.5 million in accrued interest receivable.
No material purchase commitments were disclosed in the Notes. The company has wafer-supply agreements with Seiko Epson and ROHM Lapis that include currency fluctuation sharing, but no fixed dollar commitments were noted.
In the first half of 2025, Power Integrations repurchased 1.1 million shares for $55.7 million. A new $50 million buyback program was authorized in April 2025, with $42.4 million remaining. Cash dividends totaled $23.8 million ($0.42 per share), up from $22.7 million in the prior year period, reflecting a quarterly dividend increase to $0.21 per share. Stock-based compensation was $18.8 million in H1 2025, including $10.9 million for RSUs and $7.1 million for performance awards. The company also recorded a $9.2 million legal charge in other operating expenses related to an adverse jury verdict.
The company operates as a single segment. Geographic revenue for Q2 2025: Americas $5.9M, EMEA $12.8M (Germany $6.9M), APAC $97.2M (Hong Kong/China $67.7M). Sales to distributors were $81.3M in Q2 2025. Avnet accounted for 33% of revenue and 38% of receivables. The company noted that top ten customers accounted for 81% of net revenues.
Operating cash flow of $55.5M significantly exceeded net income of $10.2M, driven by non-cash charges: depreciation ($14.2M), stock-based compensation ($18.8M), and a $0.9M deferred income tax benefit. Working capital was a net source of $13.8M, primarily from a $6.4M decrease in prepaid expenses and a $10.0M increase in taxes payable/accrued liabilities, partially offset by inventory build ($2.8M). Capex of $11.7M represented 21% of operating cash flow, a moderate capital intensity. Free cash flow (CFO less capex) was $43.8M, covering dividends ($23.8M) and share repurchases ($55.7M) combined ($79.5M), indicating a shortfall of $35.7M, which was funded by investing activities ($37.1M net positive from marketable securities sales). Anomalies include a large increase in taxes payable/accrued liabilities ($9.9M) and a drawdown/repayment of $13.0M line of credit, net zero. Overall, high operating cash flow quality with strong conversion from earnings.