Power Integrations Inc. (NASDAQ:POWI) Q3 2018 Earnings Conference Call Transcript

Oct 25, 2018 • 04:30 pm ET

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Power Integrations Inc. (NASDAQ:POWI) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good afternoon. My name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Power Integrations Third Quarter Earnings Call. All lines have been placed on mute to prevent any back ground noise. After the speakers remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

Joe Shiffler, Director of IR, you may begin your conference.

Executive
Joe Shiffler

Thank you. Good afternoon. Thanks for joining us. With me on the call today are Balu Balakrishnan, President and CEO of Power Integrations; and Sandeep Nayyar, our CFO.

(Forward-Looking Cautionary Statements)

Finally, this call is the property of Power Integrations and any recording or rebroadcast is expressly prohibited without the written consent of Power Integrations.

Now I'll turn the call over to Balu.

Executive
Balu Balakrishnan

Thanks, Joe, and good afternoon. On last quarter's call, we stated that we had seen indications of customers and distributors taking a more cautious approach to stocking components due to the uncertainty of the global trade situation. We also called out a handful of pushouts from distributors serving the appliance market, which has been affected by tariffs on finished products as well as steel and aluminum.

Although our Q3 outlook anticipated that these conditions would persist to some degree, bookings slowed down abruptly in September and turns orders for the third quarter were less than expected. Q3 revenues came in slightly below our guidance at $110 million, and with the order activity remaining subdued in October, we are forecasting Q4 revenues of $97 million plus or minus $3 million.

The slowdown appears broad-based, with customers and distributors across end markets and geographies telling us they intend to reduce inventories in Q4. The consumer appliance market, which accounts for about 1/3 of our sales, has been especially soft as trade concerns have been magnified by weaker domestic demand in China.

The softness in appliances is evident in our third quarter results, with revenues from Consumer category declining more than 10% sequentially. Revenues grew sequentially in each of the other end-market categories. Communications revenues increased by a high single-digit percentage, driven by the continued recovery in handset chargers, while revenues from the Computer category increased more than 20% sequentially, driven by the ramp of a new USB PD tablet charger.

Industrial revenues were up high single digits, driven by strength in metering, Industrial Controls and high-power applications. High power revenues are on track for a second straight year of double-digit growth, driven by renewable energy applications, electric locomotives and the recovery in energy markets, where our Gate Drivers are used in medium-voltage drives for oil and gas exploration.

We expect healthy revenue growth to continue in high power based on recent designments. In Q3, we won a multimillion-dollar design for wind inverters at a major European customer, several designs for electric locomotives and multiple new designs for ongoing high-voltage DC transmission projects in China.

Our newer SCALE-iDriver products, which incorporate the FluxLink isolation technology used in our InnoSwitch ICs, are also gaining traction