powi investor-presentation-2015-01 v001-g95bx7

Power Integrations, Inc. Nasdaq: POWI

January 2015

Forward-Looking Statements/Non-GAAP Metrics These slides accompany an oral presentation by Power Integrations, Inc., which contains forward-looking statements. Each statement relating to events that will or may occur in the future is a forward-looking statement. The Company’s actual results may differ materially from those suggested in the presentation. Information concerning factors that could cause such a difference is contained in the Company’s most recent reports on Form 10-K and 10-Q. This presentation may also contain certain non-GAAP financial information. Reconciliations of non-GAAP financial metrics to GAAP results are available at the end of this presentation and/or on the investor page of the Power Integrations website, http://investors.power.com (see “Historical Financials” data file).

©2015 Power Integrations | www.power.com 2

http://investors.powerint.com/

Secular Growth Story in Analog Semis Leader in energy-efficient high-voltage power conversion Clean-tech enabler: efficient appliances, LED lighting, DC motor drives, renewable energy, electric transportation Expanding market opportunity with higher-power products, rapid-charging for mobile devices Double-digit revenue CAGR since 2001


Comprehensive Expertise in High-Voltage Systems &

Applications Know-How

Integrated Process

Technology

High- Voltage

Technology


Ultra-simple power converters Fewer components Shorter design cycles Easier to manufacture Higher reliability

BOM cost similar to discrete designs

Highly energy-efficient

Power

Package Innovations

Discrete power supply: 70 components Equivalent power supply with POWI: 36 components, smaller board

Linear transformer: weighs 12 oz.

Adapter with POWI: weighs 2 oz.

Highly Integrated Power Converters Replacing Legacy Technologies


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U.S

. Pat

ents

Gra

nted

Relentless Innovation

609 U.S. Patents 492 Non-U.S. Patents

at 12/31/2013


Vast Addressable Market – Power Conversion Is Needed Everywhere


Long-Term Secular Growth Drivers Ongoing transition to IC-based power supplies

Integration saves labor and materials, improves reliability


Presenter

Presentation Notes

Leading Transition to IC-Based Power Supplies

Linear Transformers

1970 1994

Discretes

1994 Today 1970

Integrated POWI

• iWatt/Dialog • BCD/Diodes • Active • Leadtrend • OnBright

• Fairchild • Infineon • ON Semi • ST Micro • NXP

Pow

er S

uppl

y U

nit V

olum

e

Fairchild Sanken ST Micro ON Semi Infineon


Long-Term Secular Growth Drivers

Ongoing transition to IC-based power supplies Integration saves labor and materials, improves reliability

Energy-efficient electronics & appliances Driven by standards and consumer awareness


Presenter

Presentation Notes

Recognized Leader in Clean Technology Member of clean-tech stock indices

The Cleantech Index (CTIUS) Nasdaq Clean Edge Green Energy (CELS) Ardour Global Index (AGIGL)

Twice named a top 20 sustainable stock by SustainableBusiness.com

ENERGY STAR® award recipient

Star of Energy Efficiency award recipient


Energy Specs Continue to Tighten U.S. Dept. of Energy tightening federal standards for external power supplies

ENERGY STAR® “Most Efficient” label rewards top performers

New battery-charger standards in California in 2013

European standby power limitation tightened to 0.5 W in 2013

Traditional 40 W and 60 W light bulbs banned in U.S. as of 2014


“Zero” Series Zeroes Out Standby Waste CAPZero™ eliminates waste from X-cap bleed resistors

SENZero™ disconnects sense resistors in main power supply

LinkZero™ cuts waste to 0.00 W in chargers and auxiliary power supplies


Energy Vampire vs. LinkZero™





LED lighting Requires low-cost, efficient, reliable power supplies


Presenter

Presentation Notes

Well-Positioned in LED Lighting Traditional bulbs phasing out LEDs need efficient, reliable drivers

Integration brings reliability, efficiency, size advantage

2007 2009 2011 2013

LED Lighting Revenue >20% Growth in 2013


Presenter

Presentation Notes

Efficiency is not just in the electronics market – it’s now coming to lighting. There was no role for power electronics in traditional lighting, but with the advent of LED lighting suddenly light bulbs need AC-DC power supplies. So this is a new application for our existing technology – one where our key benefits are greatly appreciated – reliability, efficiency, size. Traditional incandescent bulbs from 40 to 100 W now phased out in the US as well as a number of other geographies. CFL bulbs are an alternative but they have a lot of drawbacks – mercury content, poor light quality, difficulty dimming, bulky size. LED a much better alternative than CFLs – no mercury, better light quality, better dimming – only drawback has been cost but that is changing, especially with subsidy/rebate programs emerging. Already a significant driver for us – over $25M in revenues last year, growth over 20%. Good chance that can accelerate this year.




LED lighting Requires low-cost, efficient, reliable power supplies

Expanding market opportunity Rapid charging for mobile-device market Higher-power products add ~$1B to addressable market


Presenter

Presentation Notes

Rapid Charging: Emerging Trend in Mobility

Larger batteries causing extended downtime for charging

Qualcomm Quick Charge 2.0 cuts charge time up to 75%

POWI is lead strategic partner on the charger side

Higher dollar content than a standard charger

Conventional Charging

Quick Charge 2.0

Quick Charge 2.0 PMIC

Charger Interface Chip + Power Conversion Chip


http://www.google.com/url?sa=i&rct=j&q=clock+face&source=images&cd=&cad=rja&docid=CqMI23ExZc4XhM&tbnid=EO3viT6L0KIQTM:&ved=0CAUQjRw&url=http://images.devilfinder.com/go.php?q=The+Clock+face+&ei=aUVJUbCLBoe_igL_sICoBQ&bvm=bv.44011176,d.cGE&psig=AFQjCNFQp6HDpu_TutNG3tAtEw7nF3FSIw&ust=1363842722770627

http://www.google.com/url?sa=i&rct=j&q=clock+face&source=images&cd=&cad=rja&docid=CqMI23ExZc4XhM&tbnid=EO3viT6L0KIQTM:&ved=0CAUQjRw&url=http://images.devilfinder.com/go.php?q=The+Clock+face+&ei=aUVJUbCLBoe_igL_sICoBQ&bvm=bv.44011176,d.cGE&psig=AFQjCNFQp6HDpu_TutNG3tAtEw7nF3FSIw&ust=1363842722770627

Expanding Reach to Higher Power Levels

0W 500W 5W 50W 2W 20W 200W

CAPZero™/SENZero™/Qspeed™

Hiper™ Family

TOPSwitch™

TinySwitch™

LinkSwitch™ / LinkZero™

LinkSwitch-PL/PH / LYTSwitch™ LED Products


Radically Simplifying Power Supplies for PCs, TVs

HiperPFS™ and HiperTFS™ replace up to 100 components

HiperTFS + HiperPFS


More Silicon Content at Higher Power Levels EMI Filter PFC Stage Main and Standby Stage

Main & Standby Controller

Boost Inductor

PFC Controller

EMI Filter StandbyOutput

ACGate Drive

SR

Main Output

TNY

Before: Single IC for standby power supply


More Silicon Content at Higher Power Levels EMI Filter PFC Stage Main and Standby Stage

Main & Standby Controller

Boost Inductor

PFC Controller

EMI Filter StandbyOutput

AC

HiperPFS

HiperTFS

CpZ

Gate Drive

SnZ

QSpeed

SR

Main Output

HiperTFS™ main + standby CapZero™ HiperPFS™ SenZero™ Qspeed™

Now: Up to five components, potential dollar content >5x higher


Acquisition Extends Power Range Further Acquired CT-Concept in 2012

IGBT drivers for industrial motors, renewable energy, locomotives, DC transmission

Addressable market ~$500M; now >10% of POWI revenue

Broadens POWI opportunity in clean-power applications

SCALE™ drivers reduce component count, enhance efficiency, reliability


Spanning the Clean-Power Ecosystem Energy Ecosystem

Energy

Generation

Energy Transmission

Energy Consumption

Wind Turbines Solar Power

HVDC Transmission

Motor Control Hybrid Vehicles

Locomotive Medical

End Markets

Power Semiconductors

IGBT module: Transistors arranged in parallel to increase switching capacity at very high

currents and high voltages

Driver optimizes efficiency, operating

performance and lifespan of the IGBT module

IGBT Module

Driver


Higher-Power Products Expand SAM to $2.5B

Consumer

Comms Computer

Industrial

Mid-power applications in orange High-power applications in green

● Desktop/server standby ● Desktop main ● Notebook adapters ● LCD monitors ● Printers

● LED general lighting ● LED street lights ● Smart meters ● Industrial control ● UPS ● Industrial motor drives ● Wind/solar inverters ● Electric trains/cars ● DC transmission

● White goods ● Air conditioners ● TV standby / TV main ● Small appliances ● Set-top boxes ● DVD players ● Game consoles

● Mobile phone chargers ● Cordless phone adapters ● Broadband modems ● VoIP phones ● Wireless routers


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2001 2003 2005 2007 2009 2011 2013

Reve

nues

($M

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Consistent Track Record of Growth

Presenter

Presentation Notes

As I mentioned we’ve been gradually converting the market at a very steady rate over the years – as you can see we’ve grown very consistently, with nine straight years of revenue growth – very rare in semiconductors. We’ve only had one down year since 1994, and that was in 2001 when the bubble burst. But our growth has really accelerated over the past 4 years since energy efficiency became a factor. The inflection happened in 2007 when California passed mandatory efficiency standards for external power supplies. It has snowballed since then – those standards have been adopted by the U.S. and Europe, and a number of other standards have also been introduced. Also OEMs have gotten more proactive and begun using efficiency as a differentiating factor in their products because consumers have begun to care about it. Now it looks like we suddenly took off in 2010, but that’s not exactly true – next chart gives you a better perspective.

Outperforming the Peer Group

-10%

0%

10%

20%

30%

40%

2007 2008 2009 2010 2011 2012 2013 CAGR

Annual Revenue Growth POWIAnalog Semis (SIA)


Presenter

Presentation Notes

2010 was a big growth year for the industry after the down year in 2009, so the big jump in 2010 for us was partly driven by the rising tide. But what you can see here is that because we’ve been gaining a lot of market share over the past four years, that’s enabled us to outperform the analog industry by a significant margin each year.On average we’ve grown 17% vs. the 3% for the industry.

Well-Diversified Revenue Mix

23% Computer

43% Comms

2002 2014 (nine months)

17% Comms

37% Consumer

35% Industrial

11% Computer

Higher-margin industrial & consumer markets now >70% of revenues; cellphone chargers down from 40% to ~10%

24% Consumer

9% Industrial


Growing Cash Flow

0102030405060708090

100

2008 2009 2010 2011 2012 2013

Cash Flow from Operations ($M)

One-time tax payment


Presenter

Presentation Notes

We are very profitable, with a gross margin around 50% - higher than our competitors because of the high level of integration, the cost-effective manufacturing process, and all the intellectual property we bring. Also good leverage on our operating expenses because our products are applicable across a wide range of applications. So when we get good revenue growth our earnings can grow very rapidly – almost 70% non-GAAP EPS growth in 2010 on 39% revenue growth. We also generate a lot of cash – we are fabless so our capex requirements are pretty low. 2010 was unusually high and due to new capacity additions and the solar installation – should be substantially less capex in 2011.

Strong Balance Sheet

050

100150200250

Q3'08 Q3'11 Q3'14

Cash and Investments ($M)

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Q3'08 Q3'11 Q3'14

Diluted Shares Outstanding (M)

At Sept. 30, 2014

$214M cash and investments Used $116M for Concept acquisition

No debt

Quarterly dividend of $0.12/share

>$300M of repurchases since 2004 Diluted share count down 6% since 2008

Presenter

Presentation Notes

Our strong cash flow has allowed us to maintain a pristine balance sheet, with no debt and a healthy cash balance. We’ve been opportunistic about buying back shares – you can see that we did a very big buyback in late 2008 and early 2009 when the market was way down. Our share count is still almost 10% below where it was 2.5 years ago. And lastly we pay a small dividend of 20 cents per share per year.

Power Integrations, Inc. Nasdaq: POWI

powi investor-presentation-2015-01 v001-g95bx7

Investor Relations

power integrations website

integrated power converters

higherpower products

renewable energy

efficient appliances

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