Power Integrations Reports Third-Quarter Financial Results

POWER INTEGRATIONS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP RESULTS
(in thousands, except per-share amounts)

	Three Months Ended									Nine Months Ended
	September 30, 2016			June 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
RECONCILIATION OF GROSS PROFIT
GAAP gross profit	$	51,193		$	47,637		$	44,161		$	141,777		$	130,471
GAAP gross margin		49.3	%		49.0	%		49.7	%		49.5	%		50.8	%

Stock-based compensation included in cost of revenues		348			293			219			731			725
Amortization of write-up of acquired inventory		-			-			-			-			309
Amortization of acquisition-related intangible assets		939			946			961			2,846			2,883

Non-GAAP gross profit	$	52,480		$	48,876		$	45,341		$	145,354		$	134,388
Non-GAAP gross margin		50.6	%		50.3	%		51.0	%		50.8	%		52.4	%


RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses	$	36,724		$	36,010		$	32,378		$	106,769		$	102,527

Less: Stock-based compensation expense included in operating expenses
Research and development		1,934			1,940			1,277			5,343			3,974
Sales and marketing		1,303			899			877			3,229			2,767
General and administrative		2,204			1,880			988			5,914			4,036
Total		5,441			4,719			3,142			14,486			10,777

Amortization of acquisition-related intangible assets		582			611			666			1,859			2,109

Acquisition expenses, severance and transition costs		-			-			-			-			1,113

Non-GAAP operating expenses	$	30,701		$	30,680		$	28,570		$	90,424		$	88,528


RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations	$	14,469		$	11,627		$	11,783		$	35,008		$	27,944
GAAP operating margin		13.9	%		12.0	%		13.3	%		12.2	%		10.9	%

Add: Total stock-based compensation		5,789			5,012			3,361			15,217			11,502
Amortization of write-up of acquired inventory		-			-			-			-			309
Amortization of acquisition-related intangible assets		1,521			1,557			1,627			4,705			4,992
Acquisition expenses, severance and transition costs		-			-			-			-			1,113

Non-GAAP income from operations	$	21,779		$	18,196		$	16,771		$	54,930		$	45,860
Non-GAAP operating margin		21.0	%		18.7	%		18.9	%		19.2	%		17.9	%


RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision for income taxes	$	586		$	598		$	698		$	1,514		$	1,717
GAAP effective tax rate		4.0	%		5.0	%		5.7	%		4.2	%		6.1	%

Tax effect of adjustments to GAAP results		(328	)		(225	)		(310	)		(854	)		(1,028	)

Non-GAAP provision for income taxes	$	914		$	823		$	1,008		$	2,368		$	2,745
Non-GAAP effective tax rate		4.1	%		4.4	%		5.9	%		4.2	%		6.0	%


RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income	$	14,165		$	11,265		$	11,513		$	34,273		$	26,446

Adjustments to GAAP net income
Stock-based compensation		5,789			5,012			3,361			15,217			11,502
Amortization of write-up of acquired inventory		-			-			-			-			309
Amortization of acquisition-related intangible assets		1,521			1,557			1,627			4,705			4,992
Acquisition expenses, severance and transition costs		-			-			-			-			1,113
Amortization of in-place lease intangible assets		90			90			30			270			30
Tax effect of items excluded from non-GAAP results		(328	)		(225	)		(310	)		(854	)		(1,028	)

Non-GAAP net income	$	21,237		$	17,699		$	16,221		$	53,611		$	43,364

Average shares outstanding for calculation of non-GAAP income per share (diluted)		29,625			29,422			29,298			29,480			29,856

Non-GAAP net income per share (diluted)	$	0.72		$	0.60		$	0.55		$	1.82		$	1.45

GAAP income per share	$	0.48		$	0.38		$	0.39		$	1.16		$	0.89

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