Power Integrations, Inc. (NASDAQ:POWI) Q2 2024 Results Conference Call August 6, 2024 4:30 PM ET

Company Participants

Joe Shiffler - Director of IR
Balu Balakrishnan - Chairman and CEO
Sandeep Nayyar - CFO

Conference Call Participants

David Williams - Benchmark
Matt Ramsay - TD Cowen

Operator

Good afternoon, ladies and gentlemen. Welcome to the Power Integrations Q2 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode [Operator Instructions].

And now at this time, I would now like to turn things over to Joe Shiffler, Director of Investor Relations. Please go ahead, sir.

Joe Shiffler

Thank you, Beau. Good afternoon, everyone. Thanks for joining us. With me on the call today are Balu Balakrishnan, Chairman and CEO of Power Integrations; and Sandeep Nayyar, our Chief Financial Officer. During this call, we will refer to financial measures not calculated according to GAAP. Non-GAAP measures exclude stock based compensation expenses, amortization of acquisition related intangible assets and the tax effects of these items. A reconciliation of non-GAAP measures to our GAAP results is included in today's press release. Our discussion today, including the Q&A session, will include forward-looking statements denoted by words like will, would, believe, should, expect, outlook, forecast, estimate, anticipate and similar expressions that look toward future events or performance. Such statements are subject to risks and uncertainties that may cause actual results to different materially from those projected or implied. Such risks are discussed in today's press release and in our most recent Form 10-K filed with the SEC on February 12, 2024. 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 it over to Balu.

Balu Balakrishnan

Thank you, Joe, and good afternoon. As expected, Q2 marked the beginning of our recovery with revenues up 16% sequentially and another increase expected in the third quarter. Like many of our peers, our near term outlook reflects limited visibility and challenging macro conditions. Customers are behaving cautiously and our short lead times enable customers to order products only when needed. All these factors make the slope of recovery highly uncertain. Nevertheless, inventory related headwinds have lessened considerably, clearing the wave for a rebound off the bottom. We consider seven to eight weeks a desirable range for channel inventory. And while pockets of excess remain at few distributors, we ended June at 7.8 weeks overall, that's down a week from the prior quarter and well below the peak of 13.6 weeks in Q3 of 2022. The recovery is being led by our consumer category where revenues are up 70% over the past two quarters after falling all the way back to 2009 levels in Q4 of last year. Just as the supply chain had bulked up on inventory after the shortages of the prior year, demand for appliances fell sharply due to a confluence of factors, including the collapse of China real estate and more broadly higher interest rates, slower home sales and the hangover from the accelerated purchases during the covid times. The resulting correction had a outsized impact on Power Integrations with about a third of our revenue coming from the appliance market in 2022. As often happens, the supply chain overcorrected, drawing inventories down to unsustainable levels and then replenishing throughout the first half of the year.