Power Integrations Reports Second-Quarter Financial Results

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

			Three Months Ended									Six Months Ended
			June 30, 2017			March 31, 2017			June 30, 2016			June 30, 2017			June 30, 2016
RECONCILIATION OF GROSS PROFIT
GAAP gross profit			$	53,447		$	50,476		$	47,785		$	103,923		$	92,273
	GAAP gross margin			49.7	%		48.2	%		49.0	%		49.0	%		49.7	%

Stock-based compensation included in cost of revenues				351			143			293			494			383
Amortization of acquisition-related intangible assets				939			939			946			1,878			1,907

Non-GAAP gross profit			$	54,737		$	51,558		$	49,024		$	106,295		$	94,563
	Non-GAAP gross margin			50.9	%		49.2	%		50.2	%		50.1	%		50.9	%


RECONCILIATION OF OPERATING EXPENSES
GAAP operating expenses			$	39,250		$	37,560		$	36,010		$	76,810		$	70,045

Less:	Stock-based compensation expense included in operating expenses
		Research and development		2,351			1,634			1,940			3,985			3,409
		Sales and marketing		1,189			1,097			899			2,286			1,926
		General and administrative		2,436			2,095			1,880			4,531			3,710
		Total		5,976			4,826			4,719			10,802			9,045

	Amortization of acquisition-related intangible assets			537			583			611			1,120			1,277

Non-GAAP operating expenses			$	32,737		$	32,151		$	30,680		$	64,888		$	59,723


RECONCILIATION OF INCOME FROM OPERATIONS
GAAP income from operations			$	14,197		$	12,916		$	11,775		$	27,113		$	22,228
	GAAP operating margin			13.2	%		12.3	%		12.1	%		12.8	%		12.0	%

Add:	Total stock-based compensation			6,327			4,969			5,012			11,296			9,428
	Amortization of acquisition-related intangible assets			1,476			1,522			1,557			2,998			3,184

Non-GAAP income from operations			$	22,000		$	19,407		$	18,344		$	41,407		$	34,840
	Non-GAAP operating margin			20.5	%		18.5	%		18.8	%		19.5	%		18.8	%


RECONCILIATION OF PROVISION FOR INCOME TAXES
GAAP provision for income taxes			$	760		$	(677	)	$	604		$	83		$	939
	GAAP effective tax rate			5.2	%		-5.0	%		5.0	%		0.3	%		4.1	%

Tax effect of adjustments to GAAP results				(736	)		(1,533	)		(225	)		(2,269	)		(526	)

Non-GAAP provision for income taxes			$	1,496		$	856		$	829		$	2,352		$	1,465
	Non-GAAP effective tax rate			6.6	%		4.3	%		4.4	%		5.5	%		4.1	%


RECONCILIATION OF NET INCOME PER SHARE (DILUTED)
GAAP net income			$	13,902		$	14,099		$	11,407		$	28,001		$	21,786

Adjustments to GAAP net income
	Stock-based compensation			6,327			4,969			5,012			11,296			9,428
	Amortization of acquisition-related intangible assets			1,476			1,522			1,557			2,998			3,184
	Amortization of in-place lease intangible assets			90			90			90			180			180
	Tax effect of items excluded from non-GAAP results			(736	)		(1,533	)		(225	)		(2,269	)		(526	)

Non-GAAP net income			$	21,059		$	19,147		$	17,841		$	40,206		$	34,052

Average shares outstanding for calculation
	of non-GAAP income per share (diluted)			30,454			30,248			29,422			30,370			29,361

Non-GAAP net income per share (diluted)			$	0.69		$	0.63		$	0.61		$	1.32		$	1.16

GAAP income per share			$	0.46		$	0.47		$	0.39		$	0.92		$	0.74

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