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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2025

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission File Number 000-23441

POWER INTEGRATIONS, INC.

(Exact name of registrant as specified in its charter)


Delaware		94-3065014
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)


5245 Hellyer Avenue
San Jose,	California	95138
(Address of Principal Executive Offices)		(Zip Code)

(408) 414-9200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	POWI	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class	Shares Outstanding at August 4, 2025
Common Stock, $0.001 par value	56,095,582

Table of Contents

POWER INTEGRATIONS, INC.

TABLE OF CONTENTS

		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (Unaudited)	4

	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024 (Unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2025 and 2024 (Unaudited)	6

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2025 and 2024 (Unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (Unaudited)	8

	Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II. OTHER INFORMATION		32

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 5.	Other Information	34

Item 6.	Exhibits	35

SIGNATURES		37

Table of Contents

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes a number of forward-looking statements that involve many risks and uncertainties. Forward-looking statements are identified by the use of the words “would,” “could,” “will,” “may,” “expect,” “believe,” “should,” “anticipate,” “if,” “future,” “intend,” “plan,” “estimate,” “potential,” “target,” “seek,” or “continue” and similar words and phrases, including the negatives of these terms, or other variations of these terms, that denote future events. These statements reflect our current views with respect to future events and our potential financial performance and are subject to risks and uncertainties that could cause our actual results and financial position to differ materially and/or adversely from what is projected or implied in any forward-looking statements included in this Quarterly Report on Form 10-Q. These factors include, but are not limited to: changes in trade policies among the United States and other countries could reduce demand for end products that incorporate our integrated circuits, which could have a material adverse effect on our revenues and operating results; if demand for our products declines in our major end markets, our net revenues will decline; we do not have long-term contracts with any of our customers and if they fail to place orders for our products, or if they cancel or reschedule orders, our operating results and our business may suffer; our products are sold through distributors, which limits our direct interaction with our end customers, therefore reducing our ability to forecast sales and increasing the complexity of our business; if our products do not penetrate additional markets, our business will not grow as we expect; intense competition in the high-voltage power supply industry may lead to a decrease in our average selling price and reduced sales volume of our products; we depend on third-party suppliers to provide us with wafers for our products, and if they fail to provide us sufficient quantities of wafers, our business may suffer; if we are unable to adequately protect or enforce our intellectual property rights, we could lose market share, incur costly litigation expenses, suffer incremental price erosion or lose valuable assets, any of which could harm our operations and negatively impact our profitability; and the other risk factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, in this Quarterly Report on Form 10-Q and under the caption - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. We make these forward-looking statements based upon information available on the date of this Quarterly Report on Form 10-Q, and we expressly disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information or otherwise, except as required by laws.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



(In thousands)	June 30, 2025		December 31, 2024
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	66,935	$	50,972
Short-term marketable securities		201,801		249,023
Accounts receivable, net		27,583		27,172
Inventories		168,396		165,612
Prepaid expenses and other current assets		18,188		21,260
Total current assets		482,903		514,039
PROPERTY AND EQUIPMENT, net		147,955		149,562
INTANGIBLE ASSETS, net		7,660		8,075
GOODWILL		95,271		95,271
DEFERRED TAX ASSETS		37,174		36,485
OTHER ASSETS		26,574		25,394
Total assets	$	797,537	$	828,826
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	31,044	$	29,789
Accrued payroll and related expenses		14,881		13,987
Taxes payable		751		961
Other accrued liabilities		18,323		10,580
Total current liabilities		64,999		55,317
LONG-TERM INCOME TAXES PAYABLE		4,063		3,871
OTHER LIABILITIES		24,687		19,866
Total liabilities		93,749		79,054
COMMITMENTS AND CONTINGENCIES (Notes 11, 13 and 14)
STOCKHOLDERS’ EQUITY:
Common stock		21		22
Additional paid-in capital		—		18,734
Accumulated other comprehensive loss		(1,287)		(3,023)
Retained earnings		705,054		734,039
Total stockholders’ equity		703,788		749,772
Total liabilities and stockholders’ equity	$	797,537	$	828,826

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share amounts)	2025		2024		2025		2024
NET REVENUES	$	115,852	$	106,198	$	221,381	$	197,886
COST OF REVENUES		51,898		49,665		99,192		93,573
GROSS PROFIT		63,954		56,533		122,189		104,313

OPERATING EXPENSES:
Research and development		25,991		26,047		50,086		49,272
Sales and marketing		18,349		18,053		34,724		33,775
General and administrative		11,808		10,475		22,855		18,838
Other operating expenses		9,151		—		9,151		—
Total operating expenses		65,299		54,575		116,816		101,885
INCOME (LOSS) FROM OPERATIONS		(1,345)		1,958		5,373		2,428
OTHER INCOME		2,690		3,189		5,857		6,691
INCOME BEFORE INCOME TAXES		1,345		5,147		11,230		9,119
PROVISION (BENEFIT) FOR INCOME TAXES		(24)		298		1,071		316
NET INCOME	$	1,369	$	4,849	$	10,159	$	8,803

EARNINGS PER SHARE:
Basic	$	0.02	$	0.09	$	0.18	$	0.15
Diluted	$	0.02	$	0.09	$	0.18	$	0.15

SHARES USED IN PER SHARE CALCULATION:
Basic		56,274		56,780		56,571		56,807
Diluted		56,387		56,984		56,787		57,104

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2025		2024		2025		2024
Net income	$	1,369	$	4,849	$	10,159	$	8,803
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of $0 tax in each of the three and six months ended June 30, 2025 and 2024		657		(271)		1,047		(637)
Unrealized gain (loss) on marketable securities, net of ($49) and ($166) taxes in the three and six months ended June 30, 2025, respectively, and $0 in each of the three and six months ended June 30, 2024		238		(317)		689		(1,005)
Amortization of defined benefit pension items, net of $4 tax in each of the three and six months ended June 30, 2025, respectively, and $7 and $15 in the three and six months ended June 30, 2024, respectively		1		(42)		—		(85)
Total other comprehensive income (loss)		896		(630)		1,736		(1,727)
TOTAL COMPREHENSIVE INCOME	$	2,265	$	4,219	$	11,895	$	7,076

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2025		2024		2025		2024
Common stock
Beginning balance	$	22	$	22	$	22	$	23
Repurchase of common stock		(1)		—		(1)		(1)
Ending balance		21		22		21		22

Additional paid-in capital
Beginning balance		7,106		—		18,734		—
Common stock issued under employee stock plans		—		—		2,787		2,691
Repurchase of common stock		(17,183)		(11,035)		(40,281)		(20,140)
Stock-based compensation		10,077		11,035		18,760		17,449
Ending balance		—		—		—		—

Accumulated other comprehensive income (loss)
Beginning balance		(2,183)		(2,559)		(3,023)		(1,462)
Other comprehensive income (loss)		896		(630)		1,736		(1,727)
Ending balance		(1,287)		(3,189)		(1,287)		(3,189)

Retained earnings
Beginning balance		730,870		740,715		734,039		753,680
Net income		1,369		4,849		10,159		8,803
Repurchase of common stock		(15,376)		(303)		(15,376)		(5,838)
Payment of dividends to stockholders		(11,809)		(11,352)		(23,768)		(22,736)
Ending balance		705,054		733,909		705,054		733,909

Total stockholders’ equity	$	703,788	$	730,742	$	703,788	$	730,742

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
	June 30,
(In thousands)	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	10,159	$	8,803
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		14,246		17,106
Amortization of intangibles		415		863
Loss on disposal of property and equipment		—		8
Stock-based compensation expense		18,760		17,449
Accretion of discount on marketable securities		(721)		(909)
Deferred income taxes		(854)		(3,482)
Increase (decrease) in accounts receivable allowance for credit losses		(381)		326
Change in operating assets and liabilities:
Accounts receivable		(30)		(2,024)
Inventories		(2,784)		(6,720)
Prepaid expenses and other assets		6,405		2,072
Accounts payable		248		(117)
Taxes payable and accrued liabilities		9,995		161
Net cash provided by operating activities		55,458		33,536

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(11,652)		(8,510)
Purchases of marketable securities		(47,696)		(77,830)
Proceeds from sales and maturities of marketable securities		96,492		85,392
Net cash provided by (used in) investing activities		37,144		(948)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock under employee stock plans		2,787		2,691
Repurchase of common stock		(55,658)		(25,979)
Payments of dividends to stockholders		(23,768)		(22,736)
Proceeds from draw on line of credit		13,000		—
Payments on line of credit		(13,000)		—
Net cash used in financing activities		(76,639)		(46,024)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		15,963		(13,436)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		50,972		63,929
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	66,935	$	50,493

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unpaid property and equipment	$	3,700	$	1,306

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes, net	$	2,690	$	4,498

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION:

The condensed consolidated financial statements include the accounts of Power Integrations, Inc., a Delaware corporation (the “Company”), and its wholly owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

While the financial information furnished is unaudited, the condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for the fair presentation of the results of operations for the interim periods covered and the financial condition of the Company at the date of the interim balance sheet in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The results for interim periods are not necessarily indicative of the results for the entire year. The condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes thereto for the year ended December 31, 2024, included in its Form 10-K filed on February 7, 2025, with the Securities and Exchange Commission.

2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS:

Significant Accounting Policies and Estimates

No material changes have been made to the Company’s significant accounting policies disclosed in Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, of the Company’s financial statements set forth in Item 8 of the Company’s Annual Report on Form 10-K, filed on February 7, 2025, for the year ended December 31, 2024.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company does not expect the amendment to have a material impact on its consolidated financial statements upon adoption of the annual disclosure requirements in fiscal year 2025.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) which requires additional disclosure of certain costs and expenses, including inventory purchases, employee compensation, selling expense and depreciation expense within the notes to financial statements. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

3. COMPONENTS OF THE COMPANY’S CONDENSED CONSOLIDATED BALANCE SHEETS:

Accounts Receivable


	June 30,		December 31,
(In thousands)	2025		2024
Accounts receivable trade	$	60,121	$	57,308
Allowance for ship and debit		(30,077)		(26,446)
Allowance for stock rotation and rebate		(2,406)		(3,254)
Allowance for credit losses		(55)		(436)
Total	$	27,583	$	27,172

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company maintains an allowance for estimated credit losses resulting from the inability of customers to make required payments. This allowance is established using estimates formulated by the Company’s management based upon factors such as the composition of the accounts receivable aging, historical losses, changes in payment patterns, customer creditworthiness and current economic trends. Receivables determined to be uncollectible are written off and deducted from the allowance.


	Allowance for Credit Losses
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2025		2024		2025		2024
Beginning balance	$	(55)	$	(844)	$	(436)	$	(681)
Provision for credit loss expense		(54)		(163)		(104)		(847)
Receivables written off		—		—		—		—
Recoveries		54		—		485		521
Ending balance	$	(55)	$	(1,007)	$	(55)	$	(1,007)

Inventories


	June 30,		December 31,
(In thousands)	2025		2024
Raw materials	$	105,566	$	101,414
Work-in-process		31,680		27,271
Finished goods		31,150		36,927
Total	$	168,396	$	165,612

Intangible Assets


	June 30, 2025						December 31, 2024
			Accumulated						Accumulated
(In thousands)	Gross		Amortization		Net		Gross		Amortization		Net
Domain name	$	1,261	$	—	$	1,261	$	1,261	$	—	$	1,261
In-process research and development		4,930		—		4,930		4,930		—		4,930
Developed technology		37,960		(36,787)		1,173		37,960		(36,492)		1,468
Technology licenses		1,926		(1,630)		296		1,926		(1,510)		416
Total intangible assets	$	46,077	$	(38,417)	$	7,660	$	46,077	$	(38,002)	$	8,075

The estimated future amortization expense related to finite-lived intangible assets at June 30, 2025, is as follows:


	Estimated
	Amortization
Fiscal Year	(In thousands)
2025 (remaining six months)	$	417
2026		687
2027		365
Total*	$	1,469

*	Total excludes $4.9 million of in-process research and development which will be amortized upon completion of development over the estimated useful life of the technology.

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) for the three and six months ended June 30, 2025 and 2024, were as follows:


	Unrealized Gains
	and Losses on				Defined Benefit						Foreign Currency
	Marketable Securities				Pension Items						Items				Total
	Three Months Ended				Three Months Ended						Three Months Ended				Three Months Ended
	June 30,				June 30,						June 30,				June 30,
(In thousands)	2025		2024		2025			2024			2025		2024		2025		2024
Beginning balance	$	1,144	$	(432)	$	98		$	1,542		$	(3,425)	$	(3,669)	$	(2,183)	$	(2,559)
Other comprehensive income (loss) before reclassifications		238		(317)		—			—			657		(271)		895		(588)
Amounts reclassified from accumulated other comprehensive income (loss)		—		—		1	⁽¹⁾		(42)	⁽¹⁾		—		—		1		(42)
Net-current period other comprehensive income (loss)		238		(317)		1			(42)			657		(271)		896		(630)
Ending balance	$	1,382	$	(749)	$	99		$	1,500		$	(2,768)	$	(3,940)	$	(1,287)	$	(3,189)

(1)	This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended June 30, 2025 and 2024.


	Unrealized Gains
	and Losses on				Defined Benefit						Foreign Currency
	Marketable Securities				Pension Items						Items				Total
	Six Months Ended				Six Months Ended						Six Months Ended				Six Months Ended
	June 30,				June 30,						June 30,				June 30,
(In thousands)	2025		2024		2025			2024			2025		2024		2025		2024
Beginning balance	$	693	$	256	$	99		$	1,585		$	(3,815)	$	(3,303)	$	(3,023)	$	(1,462)
Other comprehensive income (loss) before reclassifications		689		(1,005)		—			—			1,047		(637)		1,736		(1,642)
Amounts reclassified from accumulated other comprehensive loss		—		—		—	⁽¹⁾		(85)	⁽¹⁾		—		—		—		(85)
Net-current period other comprehensive income (loss)		689		(1,005)		—			(85)			1,047		(637)		1,736		(1,727)
Ending balance	$	1,382	$	(749)	$	99		$	1,500		$	(2,768)	$	(3,940)	$	(1,287)	$	(3,189)

(1)	This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the six months ended June 30, 2025 and 2024.

4. FAIR VALUE MEASUREMENTS:

The FASB established a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices for identical assets in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s cash equivalents and short-term marketable securities are classified within Level 1 or Level 2 of the fair-value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at June 30, 2025 and December 31, 2024, was as follows:


	Fair Value Measurement at
	June 30, 2025
			Quoted Prices in
			Active Markets for		Significant Other
			Identical Assets		Observable Inputs
(In thousands)	Total Fair Value		(Level 1)		(Level 2)
Commercial paper	$	8,206	$	—	$	8,206
Corporate securities		201,801		—		201,801
Money market funds		989		989		—
Total	$	210,996	$	989	$	210,007


	Fair Value Measurement at
	December 31, 2024
			Quoted Prices in
			Active Markets for		Significant Other
			Identical Assets		Observable Inputs
(In thousands)	Total Fair Value		(Level 1)		(Level 2)
Commercial paper	$	2,048	$	—	$	2,048
Corporate securities		249,023		—		249,023
Money market funds		567		567		—
U.S. government securities		750		—		750
Total	$	252,388	$	567	$	251,821

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the six months ended June 30, 2025 and the twelve months ended December 31, 2024.

5. MARKETABLE SECURITIES:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at June 30, 2025, were as follows:


	Amortized		Gross Unrealized				Estimated Fair
(In thousands)	Cost		Gains		Losses		Market Value
Investments due in 3 months or less:
Corporate securities	$	15,661	$	7	$	(10)	$	15,658
Total		15,661		7		(10)		15,658
Investments due in 4-12 months:
Corporate securities		25,976		94		(6)		26,064
Total		25,976		94		(6)		26,064
Investments due in 12 months or greater:
Corporate securities		158,421		1,663		(5)		160,079
Total		158,421		1,663		(5)		160,079
Total marketable securities	$	200,058	$	1,764	$	(21)	$	201,801

Accrued interest receivable was $2.5 million at June 30, 2025 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at December 31, 2024, were as follows:


	Amortized		Gross Unrealized				Estimated Fair
(In thousands)	Cost		Gains		Losses		Market Value
Investments due in 3 months or less:
Corporate securities	$	10,972	$	4	$	(3)	$	10,973
Total		10,972		4		(3)		10,973
Investments due in 4-12 months:
Corporate securities		87,346		159		(19)		87,486
Total		87,346		159		(19)		87,486
Investments due in 12 months or greater:
Corporate securities		149,817		860		(113)		150,564
Total		149,817		860		(113)		150,564
Total marketable securities	$	248,135	$	1,023	$	(135)	$	249,023

Accrued interest receivable was $2.8 million at December 31, 2024 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

The following table summarizes marketable securities classified as available-for-sale (excluding cash equivalents) in a continuous unrealized loss position for which an allowance for credit losses was not recorded at June 30, 2025:


	Less Than 12 Months				12 Months or Longer				Total
	Estimated		Gross		Estimated		Gross		Estimated		Gross
	Fair Market		Unrealized		Fair Market		Unrealized		Fair Market		Unrealized
(In thousands)	Value		Losses		Value		Losses		Value		Losses
Corporate securities	$	9,205	$	(17)	$	2,925	$	(4)	$	12,130	$	(21)
Total marketable securities	$	9,205	$	(17)	$	2,925	$	(4)	$	12,130	$	(21)

In the three and six months ended June 30, 2025 and 2024, no unrealized losses on marketable securities were recognized in income.

The Company does not intend to sell and it is unlikely that it will be required to sell the securities held prior to their anticipated recovery. The issuers are high quality (investment grade) and the decline in fair value is largely due to changes in interest rates. Additionally, the issuers continue to make timely interest payments on the marketable securities with the fair value expected to recover as they reach maturity.

6. STOCK-BASED COMPENSATION:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and six months ended June 30, 2025 and 2024:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2025		2024		2025		2024
Cost of revenues	$	592	$	707	$	1,249	$	1,053
Research and development		3,190		3,885		5,440		6,310
Sales and marketing		1,922		2,510		3,508		4,114
General and administrative		4,373		3,933		8,563		5,972
Total stock-based compensation expense	$	10,077	$	11,035	$	18,760	$	17,449

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-based compensation expense in the three months ended June 30, 2025, was approximately $10.1 million, comprising approximately $5.1 million related to restricted stock unit (“RSU”) awards, $4.6 million related to performance-based (“PSU”) awards and long-term performance-based (“PRSU”) awards and $0.4 million related to the Company’s employee stock purchase plan. Stock-based compensation expense in the six months ended June 30, 2025, was approximately $18.8 million, comprising approximately $10.9 million related to RSUs, $7.1 million related to PSUs and PRSUs and $0.8 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the three months ended June 30, 2024, was approximately $11.0 million, comprising approximately $6.3 million related to RSUs, $4.3 million related to PSUs and PRSUs and $0.4 million related to the Company’s employee stock purchase plan. Stock-based compensation expense in the six months ended June 30, 2024, was approximately $17.4 million, comprising approximately $12.4 million related to RSUs, $4.3 million related to PSUs and PRSUs and $0.7 million related to the Company’s employee stock purchase plan.

PSU Awards

Under the performance-based awards program, the Company grants awards in the performance year in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The number of shares that are released at the end of the performance year can range from zero to 200% of the target number depending on the Company’s performance. The performance metrics of this program are annual targets consisting of a combination of net revenue, non-GAAP operating income and strategic goals.

As the net revenue, non-GAAP operating income and strategic goals are considered performance conditions, expense associated with these awards, net of estimated forfeitures, is recognized over the service period based on an assessment of the expected achievement of the performance targets. The fair value of these PSUs is determined using the fair value of the Company’s common stock on the date of the grant, reduced by the discounted present value of dividends expected to be declared before the awards vest. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

In February 2025, it was determined that approximately 66,000 shares subject to the PSUs granted in 2024 vested in aggregate; the shares were released to the Company’s employees and executives in the first quarter of 2025.

A summary of PSUs outstanding as of June 30, 2025 and activity during the six months ended, is presented below:


				Weighted-Average
		Weighted-Average		Remaining	Aggregate
	Shares	Grant Date Fair		Contractual Term	Intrinsic Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2025	66	$	69.95
Granted	198	$	54.45
Vested	(66)	$	69.95
Forfeited	(7)	$	58.04
Outstanding at June 30, 2025	191	$	54.30	0.50	$	10,664
Outstanding and expected to vest at June 30, 2025	168			0.50	$	9,374

PRSU Awards

The Company’s PRSU program provides for the issuance of PRSUs which will vest based on the Company’s performance measured against the PRSU program’s established performance targets. PRSUs are granted in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met. The actual number of shares the recipient receives is determined at the end of a three-year performance period based on results achieved versus the Company’s performance goals, and may range from zero to 200% of the target number. The performance goals for PRSUs granted in fiscal 2023, 2024 and 2025 were based on the Company’s compound annual growth rate (“CAGR”) of revenue as measured against the revenue CAGR of the analog semiconductor industry (“Relative Measure”) or the Company’s revenue growth over as compared to defined targets (“Absolute Measure”) in each case over the respective three-year performance period. Actual vesting of the PRSUs is calculated based on higher achievement under the Relative Measure or the Absolute Measure. Expense associated with these awards, net of estimated forfeitures, is recorded

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throughout the year based on an assessment of the expected achievement of the performance targets. If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

In February 2025, it was determined that no shares subject to the PRSUs granted in 2022 vested, thus no shares were released to the Company’s executives.

A summary of PRSUs outstanding as of June 30, 2025 and activity during the six months ended, is presented below:


				Weighted-Average	Aggregate
		Weighted-Average		Remaining	Intrinsic
	Shares	Grant Date Fair		Contractual Term	Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2025	317	$	73.85
Granted	202	$	56.40
Vested	—		—
Forfeited	—		—
Outstanding at June 30, 2025	519	$	67.05	1.62	$	28,990
Outstanding and expected to vest at June 30, 2025	379			2.03	$	21,208

RSU Awards

A summary of RSUs outstanding as of June 30, 2025 and activity during the six months ended, is presented below:


				Weighted-Average	Aggregate
		Weighted-Average		Remaining	Intrinsic
	Shares	Grant Date Fair		Contractual Term	Value
	(In thousands)	Value Per Share		(In years)	(In thousands)
Outstanding at January 1, 2025	929	$	70.82
Granted	426	$	51.42
Vested	(312)	$	67.64
Forfeited	(48)	$	67.88
Outstanding at June 30, 2025	995	$	63.68	1.85	$	55,596
Outstanding and expected to vest at June 30, 2025	914			1.79	$	51,106

7. SIGNIFICANT CUSTOMERS AND GEOGRAPHIC NET REVENUES:

Customer Concentration

The Company’s top ten customers accounted for approximately 81% of net revenues for each of the three and six months ended June 30, 2025 and approximately 80% and 78%, respectively, in the corresponding periods of 2024. A significant portion of these revenues are attributable to sales of the Company’s products to distributors of electronic components. These distributors sell the Company’s products to a broad, diverse range of end users, including original equipment manufacturers (“OEMs”) and merchant power-supply manufacturers. Similarly, merchant power-supply manufacturers sell power supplies incorporating the Company’s products to a broad range of OEMs. Sales to distributors were $81.3 million and $156.5 million in the three and six months ended June 30, 2025, respectively, and $73.5 million and $139.9 million, respectively, in the corresponding periods of 2024. Direct sales to OEMs and power-supply manufacturers accounted for the remainder.

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The following customers represented 10% or more of the Company’s net revenues for the respective periods:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
Customer	2025		2024		2025		2024
Avnet	33	%	28	%	32	%	29	%
Salcomp Group	11	%	*		*		*
Honestar Technologies Co., Ltd.	*		12	%	*		12	%

*Total customer revenue was less than 10% of net revenues.

No other customers accounted for 10% or more of the Company’s net revenues in the periods presented.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments and trade receivables. The Company does not have any off-balance-sheet credit exposure related to its customers.

As of June 30, 2025 and December 31, 2024, 89% and 87% of accounts receivable were concentrated with the Company’s top ten customers.

The following customers represented 10% or more of accounts receivable at June 30, 2025 and December 31, 2024:


	June 30,		December 31,
Customer	2025		2024
Avnet	38	%	32	%
Salcomp Group	13	%	13	%
Honestar Technologies Co., Ltd.	*		12	%

*Total customer accounts receivable was less than 10% of accounts receivable.

No other customers accounted for 10% or more of the Company’s accounts receivable in the periods presented.

Geographic Net Revenues

The Company markets its products globally through its sales personnel and a worldwide network of independent sales representatives and distributors. Geographic net revenues by region and country with 5% or more of the Company’s revenue during any of the periods presented, based on “bill to” customer locations were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2025		2024		2025		2024
Americas:	$	5,850	$	5,281	$	11,567	$	10,286
EMEA:
Germany		6,947		5,059		13,063		10,948
Other EMEA		5,809		5,946		10,984		12,260
APAC:
Hong Kong/China		67,691		63,124		124,179		112,804
India		4,545		6,400		9,872		11,780
Korea		9,685		8,933		21,954		18,453
Taiwan		6,617		5,294		13,619		10,052
Other APAC		8,708		6,161		16,143		11,303
Total net revenues	$	115,852	$	106,198	$	221,381	$	197,886

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. STOCKHOLDERS’ EQUITY:

Common Stock Shares Outstanding


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2025		2024		2025		2024
Beginning balance		56,692		56,759		56,837		56,738
Common stock issued under employee stock plans		171		183		430		411
Repurchased		(705)		(164)		(1,109)		(371)
Ending balance		56,158		56,778		56,158		56,778

Common Stock Repurchases

As of December 31, 2024, the Company had $48.1 million available under a stock-repurchase program announced in November 2024. After this authorization was exhausted in April 2025, the Company’s board of directors authorized the use of an additional $50.0 million for the repurchase of the Company’s common stock, with repurchases to be executed according to pre-defined price/volume guidelines. In the three months ended June 30, 2025, the Company purchased approximately 0.7 million shares for $32.6 million. In the six months ended June 30, 2025, the Company repurchased 1.1 million shares for $55.7 million. As of June 30, 2025, $42.4 million remained on the Company’s repurchase authorization. The program has no expiration date. Future repurchase programs would be authorized at the discretion of the Company’s board of directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors.

Cash Dividends

In October 2023, the Company’s board of directors declared dividends of $0.20 per share to be paid to stockholders of record at the end of each quarter in 2024.

In October 2024, the Company’s board of directors raised the quarterly cash dividend with the declaration of five cash dividends of $0.21 per share to be paid to stockholders of record at the end of the fourth quarter in 2024 (in lieu of the previously declared dividend of $0.20 per share announced in October 2023) and at the end of each quarter in 2025.

For the three and six months ended June 30, 2025 and 2024, cash dividends declared and paid were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share amounts)	2025		2024		2025		2024
Dividends declared and paid	$	11,809	$	11,352	$	23,768	$	22,736
Dividends declared per common share	$	0.21	$	0.20	$	0.42	$	0.40

9. EARNINGS PER SHARE:

Basic earnings per share are calculated by dividing net income by the weighted-average shares of common stock outstanding during the period. Diluted earnings per share are calculated by dividing net income by the weighted-average shares of common stock and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares included in this calculation consist of dilutive shares issuable upon the assumed exercise of outstanding common stock options, the assumed vesting of outstanding restricted stock units, the assumed issuance of awards under the stock purchase plan and contingently issuable performance-based awards, as computed using the treasury stock method.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the earnings per share calculation is as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands, except per share amounts)	2025		2024		2025		2024
Basic earnings per share:
Net income	$	1,369	$	4,849	$	10,159	$	8,803
Weighted-average common shares		56,274		56,780		56,571		56,807
Basic earnings per share	$	0.02	$	0.09	$	0.18	$	0.15
Diluted earnings per share: ⁽¹⁾
Net income	$	1,369	$	4,849	$	10,159	$	8,803
Weighted-average common shares		56,274		56,780		56,571		56,807
Effect of dilutive awards:
Employee stock plans		113		204		216		297
Diluted weighted-average common shares		56,387		56,984		56,787		57,104
Diluted earnings per share	$	0.02	$	0.09	$	0.18	$	0.15

(1)

The Company includes the shares underlying performance-based awards in the calculation of diluted earnings per share if the performance conditions have been satisfied as of the end of the reporting period and excludes such shares when the necessary conditions have not been met. The Company has excluded the shares underlying the outstanding performance-based awards in the 2025 and 2024 calculations as the shares were not contingently issuable as of the end of the reporting periods.

10. PROVISION FOR INCOME TAXES:

Income-tax expense includes a provision for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to the Company and its subsidiaries, adjusted for certain discrete items which are fully recognized in the period they occur. Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

The Company’s effective tax rate for the three and six months ended June 30, 2025 was (1.8%) and 9.5%, respectively, and in the corresponding periods of 2024 was 5.8% and 3.5%, respectively. The effective tax rate in these periods were lower than the statutory federal income-tax rate of 21% due to the geographic distribution of the Company’s world-wide earnings in lower-tax jurisdictions and federal research tax credits. In the three and six months ended June 30, 2025, the Company’s effective tax rate was negatively impacted by the recognition of a tax deficiency or “shortfall” related to share-based payments. In the three months ended June 30, 2024, the Company’s effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments. In the six months ended June 30, 2024, the Company’s effective tax rate was also favorably impacted by the recognition of excess tax benefits related to share-based payments and by discrete items associated with the release of unrecognized tax benefits. The Company’s primary jurisdiction where foreign earnings are derived is the Cayman Islands, which is a non-taxing jurisdiction. Income earned in other foreign jurisdictions was not material. The Company has not been granted any incentivized tax rates and does not operate under any tax holidays in any jurisdiction.

As of June 30, 2025, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes provisions modifying the corporate income tax code, including the immediate expensing of domestic research and development expenditures for tax purposes, 100% bonus depreciation for qualified assets, and an increase in the statutory tax rate on foreign earnings from 10.5% to 12.6% (effective in the fiscal year 2026). The Company has elected to account Net Controlled Foreign Corporation Tested Income (“NCTI”), formerly known as Global Intangible Low-Taxed Income (“GILTI”), under the deferred method. The deferred tax amounts recorded are based on the evaluation of temporary differences that are expected to reverse as NCTI is incurred in future periods. As a result, the Company will remeasure its deferred tax balances related to NCTI for the changes in the tax rate and will record an adjustment to this balance in the fiscal third quarter. The Company expects these modifications to result in an increase in its effective tax rate but is still evaluating the magnitude of the impact.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Determining the consolidated provision for income-tax expense, income-tax liabilities and deferred tax assets and liabilities involves judgment. The Company calculates and provides for income taxes in each of the tax jurisdictions in which it operates, which involves estimating current tax exposures as well as making judgments regarding the recoverability of deferred tax assets in each jurisdiction. The estimates used could differ from actual results, which may have a significant impact on operating results in future periods.

11. COMMITMENTS:

Supplier Agreements

Under the terms of the Company’s wafer-supply agreements with Seiko Epson Corporation and ROHM Lapis Semiconductor Co., Ltd., the wafers purchased from these suppliers are priced in U.S. dollars, with mutual sharing of the impact of fluctuations in the exchange rate between the Japanese yen and the U.S. dollar on future purchases. Each year, the Company’s management and these two suppliers review and negotiate future pricing; the negotiated pricing is denominated in U.S. dollars but is subject to contractual exchange-rate provisions. The fluctuation in the exchange rate is shared equally between the Company and each of these suppliers on future purchases.

12. SEGMENT REPORTING:

The Company is organized and operates as one operating and reportable segment; the design, development, manufacture and marketing of integrated circuits and related components for use primarily in high-voltage power conversion. This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of determination of the Company’s reportable segments. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance.

The CODM uses net income as the measure of profit or loss to allocate resources and assess performance. The CODM regularly reviews net income as reported on the Company’s consolidated statements of income. Financial forecasts and budget to actual results used by the CODM to assess performance and allocate resources, as well as those used for strategic decisions related to headcount and capital expenditures are also reviewed on a consolidated basis. The CODM considers the impact on net income of the significant segment expenses in the table below when deciding whether to reinvest profits, propose dividends or share repurchase, or pursue strategic mergers and acquisitions.

The measure of segment assets is reported on the balance sheet as total assets. The CODM does not review segment assets at a level other than that presented in the Company’s consolidated balance sheets.

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The table below presents the Company’s consolidated operating results including significant segment expenses:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2025		2024		2025		2024
NET REVENUES	$	115,852	$	106,198	$	221,381	$	197,886
Less:
Stock-based compensation (1)		10,077		11,035		18,760		17,449
Amortization of acquisition-related intangible assets (2)		146		258		293		740
Cost of revenues (excluding 1 & 2)		51,160		48,700		97,650		91,780
Research and development (excluding 1)		22,801		22,162		44,646		42,962
Sales and marketing (excluding 1)		16,427		15,543		31,216		29,661
General and administrative (excluding 1)		7,435		6,542		14,292		12,866
Other operating expenses		9,151		—		9,151		—
INCOME (LOSS) FROM OPERATIONS		(1,345)		1,958		5,373		2,428

OTHER INCOME		2,690		3,189		5,857		6,691
PROVISION (BENEFIT) FOR INCOME TAXES		(24)		298		1,071		316
NET INCOME	$	1,369	$	4,849	$	10,159	$	8,803

The table below presents other segment information:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands)	2025		2024		2025		2024
Depreciation	$	7,002	$	8,391	$	14,246	$	17,106
Amortization of intangibles	$	208	$	320	$	415	$	863
Interest income	$	3,035	$	3,309	$	6,395	$	6,795

13. LEGAL PROCEEDINGS AND CONTINGENCIES:

From time to time in the ordinary course of business, the Company becomes involved in lawsuits, or customers and distributors may make claims against the Company. In accordance with ASC 450-10, Contingencies, the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

On December 18, 2019, CogniPower LLC (“CogniPower”) filed a complaint against a customer of the Company in the United States District Court for the District of Delaware for infringement of two patents; the Company thereafter intervened and sought a declaration of non-infringement with respect to use of the Company’s products. The case was then stayed until February 26, 2024, when the Delaware Court then set a schedule for the remainder of the case, with further proceedings in the coming months and a trial scheduled in August 2025. On January 16, 2025, CogniPower filed a follow-on complaint against the same customer asserting the same two patents in the United States District Court for the District of Delaware, but no schedule has been set for the follow-on case. The Company believes it has strong claims and defenses with respect to all of CogniPower’s asserted patents and intends to vigorously defend itself against CogniPower’s claims against the Company’s technology, with appeals to follow if necessary.

Currently, the Company is not able to estimate a loss or a range of loss for the ongoing litigations disclosed above. Adverse determinations in litigation could result in monetary losses, the loss of proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from third parties or prevent the Company from licensing the technology, any of which could have a material adverse effect on the Company’s business, financial condition and operating results.

On May 11, 2022, a former employee of the Company filed a first amended complaint in the Superior Court of California, County of Santa Clara alleging several violations of the Fair Employment and Housing Act. The complaint named the Company and one of its vice presidents and alleged, among other things, that the former employee was discriminated against and harassed based on age and disability, was retaliated against, and was wrongfully terminated in

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violation of public policy. Two of the plaintiff’s claims were dismissed with prejudice in response to the Company’s demurrer motions. Prior to trial, the plaintiff dismissed with prejudice the claims against the Company’s vice president and the claim of wrongful termination in violation of public policy. In June 2025, the remaining claims in the matter were tried before a jury. The jury reached a verdict and ruled in favor of the Company on the claims of age and disability discrimination and harassment based on age. The jury ruled in favor of the plaintiff and against the Company on the claims of harassment based on disability and retaliation and awarded compensatory damages of $3.2 million and punitive damages of $6.0 million. In the quarter ending June 30, 2025, the Company recognized a charge in the amount of $9.2 million in other operating expenses on the condensed consolidated statements of income. The Company strongly disagrees with those portions of the jury’s verdicts against the Company and plans to file post-trial motions asking the Court for judgment notwithstanding the verdict, including reversing the award of damages, and in the alternative for a new trial. The Company plans further appeals if they are necessary after rulings on post-trial motions.

The Company is unable to predict the outcome of any further proceedings with certainty, and there can be no assurance that the Company will prevail in the above-mentioned litigations. These litigations, whether or not determined in the Company’s favor or settled, will be costly and will divert the efforts and attention of the Company’s management and technical personnel from normal business operations, potentially causing a material adverse effect on the business, financial condition and operating results.

14. INDEMNIFICATIONS:

The Company sells products to its distributors under contracts, collectively referred to as Distributor Sales Agreements (“DSA”). Each DSA contains the relevant terms of the contractual arrangement with the distributor, and generally includes certain provisions for indemnifying the distributor against losses, expenses, and liabilities from damages that may be awarded against the distributor in the event the Company’s products are found to infringe upon a patent, copyright, trademark, or other proprietary right of a third party (“Customer Indemnification”). The DSA generally limits the scope of and remedies for the Customer Indemnification obligations in a variety of industry-standard respects, including, but not limited to, limitations based on time and geography, and a right to replace an infringing product. The Company also, from time to time, has granted a specific indemnification right to individual customers.

The Company believes its internal development processes and other policies and practices limit its exposure related to such indemnifications. In addition, the Company requires its employees to sign a proprietary information and inventions agreement, which assigns the rights to its employees’ development work to the Company. While the Company has on occasion been made aware of claims against its distributors or customers that may trigger an indemnification claim, to date, the Company has not had to reimburse any of its distributors or customers for any losses related to these indemnifications and no material claims were outstanding as of June 30, 2025. For several reasons, including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnifications.

15. ACQUISITION:

Odyssey Semiconductor Technologies

On March 12, 2024, the Company agreed to acquire the assets of Odyssey, a U.S. company and a developer of vertical gallium-nitride (“GaN”) transistor technology. The transaction closed on July 1, 2024, at which time all key Odyssey employees joined the Company. Pursuant to the asset purchase agreement, Odyssey sold, transferred and assigned substantially all of its assets to the Company for $9.52 million in cash. The purchase is intended to augment the Company’s development of high-power GaN switching technology.

The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805 - Business Combinations. Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets acquired based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill,

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the amount of which represents the expected benefits to the Company of future technology and the knowledgeable and experienced employees who joined the Company. Goodwill is expected to be deductible over 15 years for tax purposes.

The fair value of in-process research and development was determined based on the cost approach using the Company’s estimate of the costs that would be incurred if a market participant were to create the acquired technology from scratch. The Company considered the number of engineers required, salaries and related benefits, allocated overhead and the development time required to recreate the technology. The Company will record the in-process research and development as an intangible asset with an indefinite life until completion or abandonment of the associated research and development efforts and will begin amortizing the value over the estimated life of the technology upon completion of development. Consistent with the treatment of other intangible assets with indefinite lives, the Company will test the in-process research and development for impairment on an annual basis or when impairment indicators are present.

Pro forma results of operations for this acquisition have not been presented because they are not material to the Company’s consolidated financial statements.

16. SUBSEQUENT EVENTS:

The Company has evaluated events and transactions subsequent to June 30, 2025, through the date these unaudited condensed consolidated financial statements were included on Form 10-Q and filed with the SEC. Other than the matter described below, there are no additional subsequent events identified that would require disclosure in these financial statements.

Transition of the Company’s Chief Executive Officer to Executive Chairman and related Equity Modification

As disclosed in the Current Report on Form 8-K filed with the SEC on July 17, 2025, the Company’s board of directors (the “Board”) on July 11, 2025, elected Jennifer A. Lloyd, PhD, as the Company’s President and CEO and appointed her to the Board, in each case, effective upon Dr. Lloyd’s commencement of employment with the Company on July 21, 2025. Also, on July 11, 2025, Balu Balakrishnan agreed to resign from his position as Chief Executive Officer and President of the Company as of the end of the day immediately prior to Dr. Lloyd’s commencement of employment with the Company.

Mr. Balakrishnan plans to serve as executive chairman of the Board on a transitional basis until February 2026 in order to facilitate the leadership transition, ensure continuity and support the new leadership team. Thereafter, Mr. Balakrishnan would remain a non-executive member of the Board subject to the applicable nomination process and stockholder approval. In connection with Mr. Balakrishnan’s retirement, the Company and Mr. Balakrishnan entered into a transition agreement and a consulting agreement. Each of Mr. Balakrishnan’s outstanding equity awards by their original terms are eligible to vest based on continuous service, subject to the applicable award agreements and terms and conditions of the Company’s 2016 Incentive Award Plan. The vast majority of these awards are subject to performance criteria established at the time of grant and will only be earned if such criteria are met at the conclusion of the performance period.

As the services to be performed by Mr. Balakrishnan under the transition agreement and the consulting agreement do not qualify as “substantive services” under ASC 718, Compensation–Stock Compensation, the continued vesting of the outstanding equity awards represents a modification of the original awards. The Company expects to record in the third quarter of 2025, net stock-based compensation expense of approximately $15 million related to the award modification, with such amount representing an acceleration of expense in respect of all of Mr. Balakrishnan’s outstanding equity awards. Subsequent changes in performance criteria measurement could result in an adjustment to expense in future periods.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis has been prepared as an aid to understanding our financial condition and results of operations. It should be read in conjunction with the condensed consolidated financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, and with the consolidated financial statements and management’s discussion and analysis of our financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 7, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, and in Part II, Item 1A - “Risk Factors” and elsewhere in this report. See also “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report.

Overview

We design, develop and market analog and mixed-signal integrated circuits (“ICs”) and other electronic components and circuitry used in high-voltage power conversion. Our products are used in power converters that convert electricity from a high-voltage source to the type of power required for a specified downstream use. In most cases, this conversion entails, among other functions, converting alternating current (“AC”) to direct current (“DC”) or vice versa, reducing or increasing the voltage, and regulating the output voltage and/or current according to the customer’s specifications.

A large percentage of our products are ICs used in AC-DC power supplies, which convert the high-voltage AC from a wall outlet to the low-voltage DC required by most electronic devices. Power supplies incorporating our products are used with all manner of electronic products including appliances, industrial controls, mobile devices such as smartphones, tablets and notebook computers, electronic utility meters, battery-powered tools, and “home-automation,” or “internet of things” applications such as networked thermostats, power strips and security devices. Variations of our power-supply ICs are used for high-voltage power conversion in electric vehicles (“EVs”). We also supply high-voltage LED drivers, which are AC-DC ICs specifically designed for lighting applications that utilize light-emitting diodes, and motor-driver ICs for brushless DC (“BLDC”) motors used in consumer appliances, HVAC systems, ceiling fans and a variety of industrial applications.

We also offer high-voltage gate drivers—either standalone ICs or circuit boards containing ICs, electrical isolation components and other circuitry—used to operate high-voltage switches such as insulated-gate bipolar transistors (“IGBTs”) and silicon-carbide (“SiC”) MOSFETs. These combinations of switches and drivers are used for power conversion in high-power applications (i.e., power levels ranging from approximately 100 kilowatts up to gigawatts) such as industrial motors, solar- and wind-power systems, electric locomotives, EVs and high-voltage DC transmission systems.

Our power-conversion products are distinguished by their “system-level” nature; that is, they incorporate into a single product numerous elements of a power-conversion system including a high-voltage transistor, drivers, advanced control circuitry and, in some cases, a communication link connecting the primary (i.e., input) and secondary (i.e., output) sides of the power converter while maintaining safety isolation to protect the end user from exposure to high voltage. Alternatively, a power converter can be designed and assembled using discrete components purchased from a variety of suppliers.

Our system-level products offer a number of important benefits compared with discrete designs, including: reduced design complexity; smaller size; lower component count, which in turn results in higher reliability and easier sourcing of components; reduced time-to-market; and more efficient use of engineering resources. Our products also reduce the energy consumption of power converters during normal use and in “standby” operation, when the end product is not in use. In addition to the environmental and economic benefits of reduced energy usage, our energy-saving technologies provide a number of benefits to our customers; these include helping them meet the increasingly stringent efficiency standards now in effect for many electronic products, and enabling the elimination of bulky, costly heatsinks used to dissipate the heat produced by wasted electricity. By reducing component count, circuit-board size and the need for heatsinks, our products also contribute to a reduction in materials usage and electronic waste.

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While the size of our addressable market fluctuates with changes in macroeconomic and industry conditions, the market has generally exhibited a modest growth rate over time as growth in the unit volume of power converters has been offset to a large degree by reductions in the average selling price of components in this market. Therefore, the growth of our business depends largely on increasing our penetration of the markets that we serve and on further expanding our addressable market. Our growth strategy includes the following elements:

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Increase the size of our addressable market. Prior to 2010 our addressable market consisted of AC-DC applications with up to about 50 watts of output, a served available market (“SAM”) opportunity of approximately $1.5 billion. Since then, we have expanded our SAM to approximately $4 billion through a variety of means. These include the introduction of products that enable us to address higher-power AC-DC applications (such as our Hiper™ product families), the introduction of LED-driver products, and our entry into the gate-driver market. In 2018 we introduced our BridgeSwitch™ motor-driver ICs for BLDC motors, and in 2024 we introduced BridgeSwitch-2, extending the addressable power range of our motor-driver products up to about one horsepower. We have recently introduced a range of products targeting the EV market; we plan to introduce additional products for EVs in the future and expect automotive applications to become a significant portion of our SAM over time.

Also contributing to our SAM expansion has been the emergence of new applications within the power ranges that our products can address. For example, applications such as “smart” utility meters, battery-powered lawn equipment and bicycles, and USB power receptacles (often installed alongside traditional AC wall outlets) can incorporate our products. The increased use of connectivity, LED lighting and other power-consuming electronic features in consumer appliances has also enhanced our SAM.

We have also expanded our SAM through the development of technologies and architectures that increase the value (and therefore the average selling prices) of our products. For example, our InnoSwitch™ ICs integrate circuitry from the secondary, or low-voltage, side of AC-DC power supplies, whereas earlier product families integrated circuitry only on the primary, or high-voltage side. Our InnoMux™ IC families provide up to three DC outputs, eliminating the need for additional power-management circuitry in certain end products requiring multiple voltages while significantly increasing efficiency.

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Increase our penetration of the markets we serve. We currently address AC-DC applications with power outputs up to approximately 500 watts, gate-driver applications ranging from 100 kilowatts up to gigawatts, and motor-drive applications up to approximately one horsepower. Through our research and development efforts, we seek to introduce more advanced products for these markets offering higher levels of integration and performance compared to earlier products. We also continue to expand our sales and application-engineering staff and our network of distributors, as well as our offerings of technical documentation and design-support tools and services to help customers use our products. These tools and services include our PI Expert™ design software, which we offer free of charge, and our transformer-sample service. In 2022 we launched PowerPros℠, a live online video support service that enables power-supply designers to talk directly with members of our applications engineering team 24 hours a day, six days a week, anywhere in the world.

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Leverage the performance benefits of our proprietary gallium-nitride (“GaN”) technology. In 2019 we began incorporating our proprietary PowiGaN™ gallium-nitride transistors in some of our products, enabling a higher level of energy efficiency than ICs with silicon transistors. Since then, we have introduced a variety of new products utilizing GaN technology and developed new generations of our GaN technology capable of supporting voltages as high as 1700 volts. While high-voltage GaN transistors have historically been more costly to produce than comparable silicon transistors, we have achieved cost reductions such that our GaN devices are approaching cost parity with silicon MOSFETs.

We are developing additional products incorporating GaN transistors, which we believe will enable us to address higher-power applications than we address with our current range of products, and further expand our SAM as discussed above. We expect such applications to include power supplies used in data centers delivering artificial intelligence (AI) services, in communications network infrastructure equipment and in onboard-charging circuitry for EVs, among others.

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Additionally, we are developing GaN technologies capable of supporting higher power output than today’s GaN devices, with an aim of developing products to address power-switching modules in EV drivetrains, which currently incorporate SiC and IGBT modules. In July 2024 we acquired the assets of Odyssey Semiconductor, a developer of so-called vertical GaN technology, in an effort to accelerate our development of higher-power GaN devices. We believe the development of such technologies will take several years to complete.

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Capitalize on efforts to reduce carbon emissions by providing products that contribute to improved energy efficiency and increased use of renewable energy. In its 2019 World Energy Outlook, the International Energy Agency estimated that more than two-thirds of the reduction in carbon-dioxide (“CO2”) emissions needed to achieve the “Sustainable Development Scenario” of the United Nations Sustainable Development Agenda is to come from improved energy efficiency and increased use of renewable energy. Energy savings enabled by our products help our customers comply with regulations that seek to curb energy consumption in support of reducing CO2 emissions. For example: our EcoSmart™ technology drastically reduces the amount of energy consumed by electronic products when they are plugged in but not in use; our PowiGaN™ GaN transistors reduce energy consumption compared to silicon transistors; and our BridgeSwitch™ motor-driver ICs provide highly efficient power conversion for BLDC motors in appliances and industrial applications. Also, our gate-driver products are critical components in energy-efficient DC motor drives, solar- and wind-power systems, efficient high-voltage DC transmission systems (including transmission of energy from renewable energy installations to the power grid), and low-emissions transportation applications such as electric locomotives.

We intend to continue expanding our SAM in the years ahead through all of the means described above.

Our quarterly operating results are difficult to predict and subject to significant fluctuations. We plan our production and inventory levels based on internal forecasts of projected customer demand, which are highly unpredictable and can fluctuate substantially. Customers typically may cancel or reschedule orders on short notice without significant penalty and, conversely, often place orders with very short lead times to delivery. Changes in trade policies among the United States and other countries, in particular the escalation of trade tensions and higher tariffs as well as the imposition of other barriers to international trade could reduce demand for end products that incorporate our integrated circuits which could adversely affect our business and operating results. See also our risk factor under Part II, Item 1A captioned, “Changes in trade policies among the United States and other countries, in particular the escalation and imposition of new and higher tariffs and additional export controls, could reduce demand for end products that incorporate our integrated circuits, which could have a material adverse effect on our revenues and operating results. Further, increased tariffs or the imposition of other barriers to international trade could place pressure on our prices as our customers seek to offset the impact of increased tariffs on their own products. Compliance with import and export controls could impair our ability to compete in international markets or subject us to liability if we violate these controls.” Also, external factors such as supply-chain dynamics, widespread health emergencies, and macroeconomic conditions including inflation, fluctuations in interest and exchange rates and bank failures, have caused and can continue to cause our operating results to be volatile. Furthermore, because our industry is intensely price-sensitive, our gross margin (gross profit divided by net revenues) is subject to change based on the relative pricing of solutions that compete with ours. Variations in product mix, end-market mix and customer mix can also cause our gross margin to fluctuate. Because we purchase a large percentage of our silicon wafers from foundries located in Japan, our gross margin is influenced by fluctuations in the exchange rate between the U.S. dollar and the Japanese yen. Changes in the prices of raw materials used in our products, such as copper and gold, can also affect our gross margin. Although our wafer fabrication and assembly operations are outsourced, as are most of our test operations, a portion of our production costs are fixed in nature. As a result, our unit costs and gross margin are impacted by the volume of units we produce.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Net revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues	44.8		46.8		44.8		47.3
Gross profit	55.2		53.2		55.2		52.7
Operating expenses:
Research and development	22.4		24.5		22.6		24.9
Sales and marketing	15.8		17.0		15.7		17.1
General and administrative	10.2		9.9		10.3		9.5
Other operating expenses	7.9		—		4.1		—
Total operating expenses	56.3		51.4		52.7		51.5
Income (loss) from operations	(1.1)		1.8		2.5		1.2
Other income	2.3		3.0		2.6		3.4
Income before income taxes	1.2		4.8		5.1		4.6
Provision (benefit) for income taxes	—		0.3		0.5		0.2
Net income	1.2	%	4.5	%	4.6	%	4.4	%


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(dollars in millions)	2025			2024			2025			2024
Net revenues	$	115.9		$	106.2		$	221.4		$	197.9
Gross profit	$	64.0		$	56.5		$	122.2		$	104.3
Gross margin		55.2	%		53.2	%		55.2	%		52.7	%

POWER INTEGRATIONS INC 10-Q