Power Integrations Inc 10-Q for FY2026 Q3
Power Integrations Inc (POWI)
10-Q
2026-11-05
For: 2026-09-30
View Original
Added on
November 05, 2026
About this 10-Q
Power Integrations Inc filed this 10-Q on November 5, 2026, covering the quarter ended September 30, 2026 (FY2026 Q3).
Headline figures
Quarter ended September 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $125.48M
- up 5.5% from $118.92M a year earlier
- Net income
- $18.32M
- compared with a net loss of $1.36M a year earlier
- Diluted EPS
- $0.32
- compared with -$0.02 a year earlier
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 | |||||
or
| 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
_________________________________________________________________________________
(Exact name of registrant as specified in its charter)
_________________________________________________________________________________
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
| (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 | ||||||||||||
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.
| ☒ | 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 November 2, 2026 | |||||||
Common Stock, $0.001 par value | ||||||||
POWER INTEGRATIONS, INC.
TABLE OF CONTENTS
| Page | ||||||||
2
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements identifiable 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 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 global trade policy, including tariffs, could reduce demand for end products that incorporate our products, which could have a material adverse effect on our revenue and operating results; if demand for our products declines in our major end markets, our net revenue 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 largely sold through distributors, which limits our direct interaction with our end customers, thereby 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 manufacture finished wafers for our products, and if they fail to provide us with sufficient quantities of finished 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, 2025, 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.
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (In thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Other non-current assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued payroll and related expenses | |||||||||||
| Other accrued liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Other liabilities | |||||||||||
| TOTAL LIABILITIES | |||||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| STOCKHOLDERS’ EQUITY: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings | |||||||||||
| TOTAL STOCKHOLDERS' EQUITY | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands, except per share amounts) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Other operating expenses (income) | ( | ( | |||||||||||||||||||||
| Restructuring and related charges | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income (loss) from operations | ( | ||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Income (loss) before income taxes | ( | ||||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ||||||||||||||||||||||
| NET INCOME (LOSS) | $ | $ | ( | $ | $ | ||||||||||||||||||
| Earnings (loss) per share: | |||||||||||||||||||||||
| Basic | $ | $ | ( | $ | $ | ||||||||||||||||||
| Diluted | $ | $ | ( | $ | $ | ||||||||||||||||||
| Shares used in per share calculation: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | $ | ||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
Foreign currency translation adjustments, net of $ | ( | ( | |||||||||||||||||||||
Unrealized gain (loss) on investments, net of $ | ( | ( | |||||||||||||||||||||
Amortization of defined benefit pension items, net of $ | ( | ( | |||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) | $ | $ | ( | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| Three Months Ended September 30, 2026 | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| (In thousands) | Shares | Amount | |||||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2026 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Issuance of common stock under employee stock option and stock award plans | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense related to employee stock awards | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense related to employee stock purchases | — | — | — | — | |||||||||||||||||||||||||||||||
| Payment of dividends to stockholders | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Unrealized actuarial gain on pension benefits | — | — | — | — | |||||||||||||||||||||||||||||||
| Unrealized loss on investments | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | |||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2026 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| (In thousands) | Shares | Amount | |||||||||||||||||||||||||||||||||
| BALANCE AT JUNE 30, 2025 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Issuance of common stock under employee stock option and stock award plans | — | — | — | ||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | ( | ( | — | ( | ( | |||||||||||||||||||||||||||||
| Stock-based compensation expense related to employee stock awards | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense related to employee stock purchases | — | — | — | — | |||||||||||||||||||||||||||||||
| Payment of dividends to stockholders | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Unrealized actuarial loss on pension benefits | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Unrealized gain on investments | — | — | — | — | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2025 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| Nine Months Ended September 30, 2026 | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| (In thousands) | Shares | Amount | |||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2025 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Issuance of common stock under employee stock option and stock award plans | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense related to employee stock awards | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense related to employee stock purchases | — | — | — | — | |||||||||||||||||||||||||||||||
| Payment of dividends to stockholders | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Unrealized actuarial gain on pension benefits | — | — | — | — | |||||||||||||||||||||||||||||||
| Unrealized loss on investments | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2026 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| (In thousands) | Shares | Amount | |||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2024 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Issuance of common stock under employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
| Repurchase of common stock | ( | ( | ( | — | ( | ( | |||||||||||||||||||||||||||||
| Stock-based compensation expense related to employee stock awards | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense related to employee stock purchases | — | — | — | — | |||||||||||||||||||||||||||||||
| Payment of dividends to stockholders | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Unrealized actuarial loss on pension benefits | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Unrealized gain on investments | — | — | — | — | |||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | |||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| BALANCE AT SEPTEMBER 30, 2025 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
POWER INTEGRATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | |||||||||||
| (In thousands) | 2026 | 2025 | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization of intangible assets | |||||||||||
| Loss (gain) on disposal of property and equipment | ( | ||||||||||
| Stock-based compensation expense | |||||||||||
| Accretion of discount on investments | ( | ( | |||||||||
| Deferred income taxes | ( | ||||||||||
| Decrease in accounts receivable allowance for credit losses | ( | ||||||||||
| Change in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Inventories | |||||||||||
| Prepaid expenses and other assets | |||||||||||
| Accounts payable | ( | ||||||||||
| Other accrued liabilities | ( | ||||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | |||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Proceeds from sale of property and equipment | |||||||||||
| Purchases of investments | ( | ( | |||||||||
| Proceeds from sales and maturities of investments | |||||||||||
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Issuance of common stock under employee stock plans | |||||||||||
| Repurchase of common stock | ( | ||||||||||
| Payments of dividends to stockholders | ( | ( | |||||||||
| Proceeds from borrowings on line of credit | |||||||||||
| Repayments on line of credit | ( | ||||||||||
| NET CASH USED IN FINANCING ACTIVITIES | ( | ( | |||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ||||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | |||||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
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. Certain prior period amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on the reported results of operations.
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, 2025, included in its Form 10-K filed on February 6, 2026, 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 6, 2026, for the year ended December 31, 2025.
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.
In September 2025, the FASB issued ASU 2025-06, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40) which amends certain aspects of the accounting for and disclosure of software costs. The guidance is effective for annual reporting periods beginning after December 15, 2027, 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.
10
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. CONDENSED CONSOLIDATED BALANCE SHEET COMPONENTS AND OTHER INFORMATION:
Accounts Receivable, net
| (In thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| Accounts receivable trade | $ | $ | |||||||||
| Allowance for ship and debit | ( | ( | |||||||||
| Allowance for stock rotation and rebate | ( | ( | |||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Total | $ | $ | |||||||||
Inventories
| (In thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Total | $ | $ | |||||||||
Other non-current assets
| (In thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| Deferred tax assets | $ | $ | |||||||||
| Right of use lease assets | |||||||||||
| Prepaid expenses | |||||||||||
| Other non-current assets | |||||||||||
| Total | $ | $ | |||||||||
11
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 nine months ended September 30, 2026 and 2025, were as follows:
| Unrealized Gains and Losses on Investments | Defined Benefit Pension Items | Foreign Currency Items | Total | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Three Months Ended September 30, | Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | (1) | ( | (1) | ( | |||||||||||||||||||||||||||||||||||||||||||
| Net-current period other comprehensive income (loss) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | ( | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
_____________________________________
(1)This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended September 30, 2026 and 2025.
| Unrealized Gains and Losses on Investments | Defined Benefit Pension Items | Foreign Currency Items | Total | ||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | Nine Months Ended September 30, | Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | (1) | ( | (1) | ( | |||||||||||||||||||||||||||||||||||||||||||
| Net-current period other comprehensive income (loss) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | ( | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
_____________________________________
12
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. REVENUE:
Customer Concentration
The Company’s top ten customers accounted for approximately 82 % and 80 % of net revenue in the three and nine months ended September 30, 2026 and approximately 81
Sales to distributors and direct sales to OEMs and power-supply CMs contributed to the Company’s net revenue as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Sales to distributors | $ | $ | $ | $ | |||||||||||||||||||
| Sales to OEMs and CMs | |||||||||||||||||||||||
| Total net revenue | $ | $ | $ | $ | |||||||||||||||||||
During the three and nine months ended September 30, 2026, approximately 21 % and 18 %, respectively, of net revenue were related to an OEM fulfilling its purchases through the Company’s CM customers and approximately 18 % and 17 % in the corresponding periods of 2025.
The following customers represented 10% or more of the Company’s net revenue for the respective periods:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Customer | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Customer A | % | % | % | % | |||||||||||||||||||
| Customer B | % | % | % | % | |||||||||||||||||||
| Customer C | % | * | % | * | |||||||||||||||||||
_____________________________________
*Total customer revenue was less than 10% of net revenue.
No other customers accounted for 10% or more of the Company’s net revenue 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 September 30, 2026 and December 31, 2025, 93 % and 89 % of accounts receivable were concentrated in the Company’s top ten customers.
The following customers represented 10% or more of accounts receivable at September 30, 2026 and December 31, 2025:
| Customer | September 30, 2026 | December 31, 2025 | |||||||||
| Customer A | % | % | |||||||||
| Customer B | % | % | |||||||||
| Customer C | % | * | |||||||||
| Customer D | * | % | |||||||||
_____________________________________
*Total customer accounts receivable was less than 10% of accounts receivable.
13
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
No other customers accounted for 10% or more of the Company’s accounts receivable in the periods presented.
Net Revenue by Geography
The Company markets its products globally through its sales personnel and a worldwide network of independent sales representatives and distributors. Net revenue by region and country with 10% 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Americas | $ | $ | $ | $ | |||||||||||||||||||
| EMEA | |||||||||||||||||||||||
| APAC: | |||||||||||||||||||||||
| Hong Kong/China | |||||||||||||||||||||||
| Singapore | |||||||||||||||||||||||
| Other APAC | |||||||||||||||||||||||
| Total net revenue | $ | $ | $ | $ | |||||||||||||||||||
5. 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.
The Company’s cash equivalents and short-term investments 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 short-term investments at September 30, 2026 and December 31, 2025 was as follows:
| Fair Value Measurement at September 30, 2026 | |||||||||||||||||
| (In thousands) | Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | ||||||||||||||
| Commercial paper | $ | $ | $ | ||||||||||||||
| Corporate securities | |||||||||||||||||
| Money market funds | |||||||||||||||||
| U.S. government securities | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
14
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
| Fair Value Measurement at December 31, 2025 | |||||||||||||||||
| (In thousands) | Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | ||||||||||||||
| Commercial paper | $ | $ | $ | ||||||||||||||
| Corporate securities | |||||||||||||||||
| Money market funds | |||||||||||||||||
| U.S. government securities | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the nine months ended September 30, 2026 and the twelve months ended December 31, 2025.
6. INVESTMENTS:
Amortized cost and estimated fair market value of investments classified as available-for-sale (excluding cash equivalents) at September 30, 2026, were as follows:
| Amortized Cost | Gross Unrealized | Estimated Fair Market Value | |||||||||||||||||||||
| (In thousands) | Gains | Losses | |||||||||||||||||||||
| Investments due in 3 months or less: | |||||||||||||||||||||||
| Corporate securities | $ | $ | $ | $ | |||||||||||||||||||
| Total | |||||||||||||||||||||||
| Investments due in 4-12 months: | |||||||||||||||||||||||
| Corporate securities | ( | ||||||||||||||||||||||
| Total | ( | ||||||||||||||||||||||
| Investments due in 12 months or greater: | |||||||||||||||||||||||
| Corporate securities | ( | ||||||||||||||||||||||
| Total | ( | ||||||||||||||||||||||
| Total investments | $ | $ | $ | ( | $ | ||||||||||||||||||
Accrued interest receivable was $1.8 million at September 30, 2026, and was recorded within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheet.
Amortized cost and estimated fair market value of investments classified as available-for-sale (excluding cash equivalents) at December 31, 2025, were as follows:
| Amortized Cost | Gross Unrealized | Estimated Fair Market Value | |||||||||||||||||||||
| (In thousands) | Gains | Losses | |||||||||||||||||||||
| Investments due in 3 months or less: | |||||||||||||||||||||||
| Commercial paper | $ | $ | $ | $ | |||||||||||||||||||
| Corporate securities | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Investments due in 4-12 months: | |||||||||||||||||||||||
| Corporate securities | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
| Investments due in 12 months or greater: | |||||||||||||||||||||||
| Corporate securities | ( | ||||||||||||||||||||||
| Total | ( | ||||||||||||||||||||||
| Total investments | $ | $ | $ | ( | $ | ||||||||||||||||||
15
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Accrued interest receivable was $2.3 million at December 31, 2025, and was recorded within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheet.
The following table summarizes investments 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 September 30, 2026:
| Less Than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||||||||||||||
| (In thousands) | Estimated Fair Market Value | Gross Unrealized Losses | Estimated Fair Market Value | Gross Unrealized Losses | Estimated Fair Market Value | Gross Unrealized Losses | |||||||||||||||||||||||||||||
| Corporate securities | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||
| Total investments | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||
In the three and nine months ended September 30, 2026 and 2025, no
7. BANK LINES OF CREDIT:
In 2016, the Company entered into a credit agreement with Wells Fargo Bank, National Association (the "Prior Credit Agreement") that provided the Company with a $75.0 million revolving line of credit to use for general corporate purposes and a $20.0 million sub-limit for the issuance of standby and trade letters of credit with an interest rate based on the Secured Overnight Financing Rates (“SOFR”). The Prior Credit Agreement had a term which originally extended to June 7, 2026, but was terminated by the Company on April 10, 2026. The Company was compliant with all covenants and had no advances outstanding under the Prior Credit Agreement at termination.
On February 24, 2026, the Company entered into a new unsecured loan agreement with PNC Bank, National Association (the "PNC Loan Agreement"), in part, to replace the Prior Credit Agreement. The PNC Loan Agreement became effective and available for use on April 10, 2026 when the Company terminated the Prior Credit Agreement. The PNC Loan Agreement provides the Company with a $100.0 million revolving line of credit with a $25.0 million sub-limit for the issuance of standby and trade letters of credit. The interest rate on outstanding borrowings under the PNC Loan Agreement is based on SOFR plus 1.60 %. The PNC Loan Agreement term is through February 24, 2031. All advances under the PNC Loan Agreement, together with all accrued and unpaid interest, fees, and other obligations, will become due and payable on such date, or earlier upon the occurrence of an Event of Default, as defined in the PNC Loan Agreement.
The PNC Loan Agreement requires the Company to maintain a Minimum Liquidity of at least $50.0 million as of the last day of each fiscal quarter and a ratio of Funded Indebtedness to Adjusted EBITDA, each as defined in the PNC Loan Agreement, of less than 2.00 to 1.00 as of the last day of each fiscal quarter and determined on a rolling four-quarter basis.
The PNC Loan Agreement contains representations and warranties, affirmative covenants, and conditions precedent to borrowings that are usual and customary for credit agreements of this type. The PNC Loan Agreement contains certain limited covenants that restrict, subject to certain exceptions, the Company’s ability to incur additional indebtedness or liens, issue guarantees or become liable for obligations of other persons or entities, liquidate, dissolve, merge, or consolidate with any other entity, or convey, transfer, or lease the Company's properties or assets to another person, which, in each case, are subject to certain qualifications and exceptions.
The Company was compliant with all covenants and had no advances outstanding under the PNC Loan Agreement as of September 30, 2026.
16
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. STOCKHOLDERS’ EQUITY:
Cash Dividends
In October 2024, the Company’s board of directors declared dividends of $0.21 per share to be paid to stockholders of record at the end of each quarter in 2025. In October 2025, the Company’s board of directors raised the quarterly cash dividend and declared cash dividends of $0.215 per share to be paid at the end of each quarter in 2026.
In October 2026, the Company’s board of directors raised the quarterly cash dividend with the declaration of four cash dividends of $0.22 per share to be paid at the end of each quarter in 2027.
For the three and nine months ended September 30, 2026 and 2025, cash dividends declared and paid were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands, except per share amounts) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Dividends declared and paid | $ | $ | $ | $ | |||||||||||||||||||
| Dividends declared per common share | $ | $ | $ | $ | |||||||||||||||||||
Common Stock Repurchases
From time to time, the Company’s board of directors has authorized the use of funds to repurchase shares of the Company’s common stock. As of September 30, 2026, the Company did not have authorization to repurchase any shares of its common stock.
Employee Stock Incentive Plans
The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718 for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Cost of revenue | $ | ( | $ | $ | $ | ||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Selling, general and administrative | |||||||||||||||||||||||
| Other operating expenses (see note below) | ( | ( | |||||||||||||||||||||
| Restructuring and related charges | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
Other Operating Expenses
In connection with his retirement in July 2025, the Company’s former chief executive officer, Balu Balakrishnan, entered into a transition agreement and a consulting agreement with the Company. Pursuant to these agreements, Mr. Balakrishnan’s outstanding equity awards continue to vest subject to his continuous service and the applicable award agreements. The majority of these awards are subject to performance criteria established at the time of grant and will only be earned to the extent that the Company’s performance satisfies such criteria at the conclusion of the applicable performance periods. 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. Consequently, in the year ended December 31, 2025, the Company recognized stock-based compensation in the amount of $8.4 million in other operating expenses. In the three months ended September 30, 2026, the Company recorded a $0.3 million credit in other operating expenses on its condensed consolidated statements of income (loss), adjusting a portion of the previously recognized stock-based compensation expenses. The corresponding amount for the nine-month period was a $1.2 million credit. The adjustment reflects our revised estimate of the portion of the awards that will ultimately vest based on the Company's forecasted performance. Subsequent changes in our estimates could result in further adjustments in future periods until the vesting of these equity awards.
17
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. EARNINGS (LOSS) 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 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.
A summary of the earnings (loss) per share calculation is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands, except per share amounts) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Basic earnings (loss) per share: | |||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | $ | ||||||||||||||||||
| Weighted-average common shares | |||||||||||||||||||||||
| Basic earnings (loss) per share | $ | $ | ( | $ | $ | ||||||||||||||||||
Diluted earnings (loss) per share: (1) | |||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | $ | ||||||||||||||||||
| Weighted-average common shares | |||||||||||||||||||||||
| Effect of dilutive awards: | |||||||||||||||||||||||
| Employee stock plans | |||||||||||||||||||||||
| Diluted weighted-average common shares | |||||||||||||||||||||||
| Diluted earnings (loss) per share | $ | $ | ( | $ | $ | ||||||||||||||||||
_____________________________________
(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 2026 and 2025 calculations as the shares were not contingently issuable as of the end of the reporting period.
In the three months ended September 30, 2025, shares attributable to stock-based awards were excluded from the computation of diluted earnings per share, as the Company was in a net loss position.
18
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. 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 nine months ended September 30, 2026, were 13.6 % and 13.5 %, respectively, and (3.0 %) and 10.5 % in the corresponding period of 2025. The effective tax rate in these periods was lower than the statutory federal income tax rate of 21% due to the geographic distribution of the Company’s worldwide earnings in lower tax jurisdictions and federal tax credits. For the three months ended September 30, 2026, our effective tax rate was favorably impacted by discrete tax benefits related to stock-based compensation. In the nine months ended September 30, 2026, our effective tax rate was adversely affected by a tax accounting deficiency related to share-based compensation. In the three and nine months ended September 30, 2025, the Company’s effective tax rate was adversely impacted by the recognition of a tax deficiency related to share-based compensation. The Company has not been granted any incentivized tax rates and does not operate under any tax holidays in any jurisdiction.
As of September 30, 2026, 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 included 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 elected to account for Net Controlled Foreign Corporation Tested Income (“NCTI”), formerly known as Global Intangible Low-Taxed Income, 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 remeasured its estimated deferred tax balances related to NCTI for the changes in the tax rate and recorded an expense of $0.5 million during the third quarter of 2025.
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 AND CONTINGENCIES:
Supplier Agreements
Under the terms of the Company’s wafer supply agreements with various foundries located in Japan, the parties periodically review and negotiate pricing; the wafer purchases thereunder are denominated in U.S. dollars. To mitigate the impact of future fluctuations in the exchange rate between the Japanese yen and the U.S. dollar, these agreements contain provisions for the parties to share in that risk.
Warranty
The Company generally warrants that its products will substantially conform to its published specifications for 12 months from the date of shipment. Under the terms and conditions of sale, the Company’s liability is generally limited to either a credit equal to the purchase price or replacement of the part.
Legal Proceedings
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.
19
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2019, a third party caused a patent infringement matter to be filed against a customer of the Company related to that customer's use of Company products. The third party also caused a follow-on claim to be filed against the same customer in the first quarter of 2025. The Company intervened on behalf of the customer and sought a declaration of non-infringement with respect to the customer's use of the Company’s products. In the second half of 2025, the Company obtained a verdict of non-infringement and invalidity as to all claims asserted against the customer. The third party appealed the judgment. In April 2026, during the pendency of the appeal, the Company entered into an agreement with the third party which resolved all matters between the parties, including a dismissal of the appeal and granted to the Company a full release and covenant by the third party not to assert any claims against the Company or its customers based on any of the third party's patents, including those upon which the original lawsuit was based. The Company did not provide any payment to the claimant in exchange for the resolution of the dispute. Pursuant to the settlement, all pending motions in the case have been terminated and the matter is now closed.
In 2021, the Company was named in a wrongful termination lawsuit by a former employee. The matter went to trial in 2025 and resulted in a jury verdict adverse to the Company of approximately $11.3 million; the Company reserved this amount in other operating expenses in the accompanying condensed consolidated statements of income as of December 31, 2025. During the third quarter ended September 30, 2026, the Company agreed to resolve the matter in full with the plaintiff, which resulted in the release of liability of $1.8 million to other operating expenses in the accompanying condensed consolidated statements of income.
The Company is unable to predict the outcome of any legal proceedings with certainty, and there can be no assurance that the Company will prevail in any litigation or dispute. The Company evaluates, at least quarterly, developments in its legal matters that could affect the amount of any accrual, as well as any developments that would result in a loss contingency becoming both probable and reasonably estimable. These litigation matters, whether or not ultimately 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. In addition, adverse determinations in any patent litigation matter could result in 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 its technology, and incur monetary losses, any of which could have a material adverse effect on the Company’s business, financial condition, and operating results.
Indemnifications
The Company sells products to its distributors under agreements that generally include provisions for indemnification of the distributor against losses, expenses, and damages that may be awarded in the event the Company’s products are found to infringe upon a patent, copyright, trademark, or other proprietary right of a third party. The agreements generally limit the scope of and remedies for these obligations, including, but not limited to, limitations based on time and geography, and a right to replace an infringing product.
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 material losses related to these indemnification obligations and no material claims were outstanding as of September 30, 2026.
20
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SEGMENT REPORTING:
The Company is organized and operates as one
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 (loss). Financial forecasts and comparisons of budget to actual results are used by the CODM to assess performance and allocate resources. In addition, these forecasts and comparisons are used for strategic decisions related to making headcount and capital expenditure decisions, all of which are 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.
The table below presents the Company’s consolidated operating results including significant segment expenses:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net revenue | $ | $ | $ | $ | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Stock-based compensation (1) | |||||||||||||||||||||||
| Amortization of acquisition-related intangible assets (2) | |||||||||||||||||||||||
| Cost of revenue (excluding 1 & 2) | |||||||||||||||||||||||
| Research and development (excluding 1) | |||||||||||||||||||||||
| Selling, general and administrative (excluding 1) | |||||||||||||||||||||||
| Other operating expenses (excluding 1) | ( | ( | |||||||||||||||||||||
| Restructuring and related charges in operating expenses (excluding 1) | |||||||||||||||||||||||
| Income (loss) from operations | ( | ||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ||||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | $ | ||||||||||||||||||
The table below presents other segment information:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Depreciation | $ | $ | $ | $ | |||||||||||||||||||
| Amortization of intangible assets | $ | $ | $ | $ | |||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
21
POWER INTEGRATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. RESTRUCTURING:
The Company continuously evaluates its operations to better align the organization with market opportunities, increase operational efficiency, decrease costs, and increase profitability. During the three months ended March 31, 2026, the Company undertook a restructuring plan, reducing its workforce by approximately 7 % to better align expenses with revenue and create flexibility to invest in the products, people, and markets that are expected to drive long-term growth and profitability. In conjunction with this restructuring plan, restructuring charges of $6.6 million were recognized during the first quarter of 2026, primarily composed of severance costs. The restructuring plan was substantially completed in the first quarter of 2026. No restructuring charges were incurred in fiscal 2025. Restructuring liabilities are included in other accrued liabilities in the accompanying unaudited condensed consolidated balance sheets, and are summarized in the following table:
| 2026 Plan | |||||||||||||||||
| (in thousands) | Employee severance | Other | Total | ||||||||||||||
| Restructuring liability as of January 1, 2026 | $ | $ | $ | ||||||||||||||
| Charges | |||||||||||||||||
| Cash payments | ( | ( | ( | ||||||||||||||
| Non-cash and other | |||||||||||||||||
| Restructuring liability as of September 30, 2026 | $ | $ | $ | ||||||||||||||
Cash severance charges of $0.4 million related to the departure of an executive officer are included in the table above. In addition, stock-based compensation expense of $1.8 million was recognized in the three months ended March 31, 2026 due to the acceleration of equity awards in accordance with the terms of the executive’s severance agreement.
The following table provides a summary of restructuring-related charges as presented in the unaudited condensed consolidated statements of income:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Restructuring and related charges in cost of revenue | $ | $ | $ | $ | |||||||||||||||||||
| Restructuring and related charges in operating expenses | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
22
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, 2025, filed with the SEC on February 6, 2026. 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” included in this report. See also “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report.
Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. Factors that could cause actual results to differ materially from those predicted include, but are not limited to:
•the demand for our products declining in the major end markets we serve, which may occur due to competitive factors, supply chain fluctuations, rising inflation, or other changes in macroeconomic or geopolitical conditions;
•our ability to develop and bring new products and technologies to market, including on a timely basis;
•our inability to penetrate new markets for our products;
•the volume and timing of orders received from customers;
•reliance on international sales activities for a substantial portion of our revenue;
•the length of our sales cycle;
•the significant sales of our products through distributors, which limits our direct interaction with our end customers, reducing our ability to forecast sales, and increasing the complexity of our business;
•the cyclical nature of the power supply industry and cyclical market patterns across different end markets for which our products are used;
•competitive pressures on selling prices;
•risks associated with our supply chain including, the volume, cost, and timing of delivery of orders placed by us with our wafer foundries and assembly subcontractors, and their ability to procure materials;
•undetected defects, quality issues, warranty claims, or product recalls related to our products;
•our ability to attract and retain qualified personnel;
•changes in global trade policy, including tariffs, could reduce demand for end products that incorporate our products, which could have a material adverse effect on our revenue and operating results;
•our ability to realize the expected benefits of restructuring initiatives designed to reduce costs and create a more efficient organization;
•debt obligations we incur in the future could adversely affect our financial condition;
•the inability to adequately protect or enforce our intellectual property rights;
•we have been and may be subject to or involved in litigation, threatened litigation, or other disputes, the outcome of which may be difficult to predict, and which may be costly to defend, divert management attention, require us to pay damages, or restrict the operation of our business;
•changes in tax rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits may increase the amount of taxes we are required to pay and require management time and attention;
•continued impact of changes in securities laws and regulations, including potential risks resulting from our evaluation of our internal controls over financial reporting;
•current or potential war, domestic or international conflict, political or social instability, or military actions, including the conflicts in Ukraine and the Middle East;
•failure, disruption, security breaches, or other incidents impacting our information technology infrastructure or information management systems;
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•interruptions in our information technology systems;
•unfavorable or uncertain market conditions and risks relating to the adoption, use, or application of emerging technologies, including AI, by our customers and in our business;
•fluctuations in exchange rates, particularly the exchange rate between the U.S. dollar and the Japanese yen, the euro, and the Swiss franc;
•earthquakes, fire, global health crises, or other disasters;
•risks associated with acquisitions and strategic investments; and
•our ability to successfully integrate, or realize the expected benefits from, our acquisitions.
Overview
We are a leading innovator in semiconductor technologies for high-voltage power conversion. Our products are key building blocks in the clean-power ecosystem, enabling the generation of renewable energy as well as the efficient transmission and consumption of power in applications ranging from milliwatts to megawatts.
Our revenue was $125.5 million and $118.9 million in the three months ended September 30, 2026 and 2025, respectively, and $352.7 million and $340.3 million in the nine months ended September 30, 2026 and 2025, respectively. The increase in revenue for the three-month period reflected higher sales in the industrial and communications end markets. The increase in revenue for the nine-month period primarily reflected higher sales in the industrial end market.
Our top ten customers, including distributors that resell to OEMs and merchant power-supply contract manufacturers, accounted for approximately 82% and 80% of our revenue for the three and nine months ended September 30, 2026 and approximately 81% in each of the corresponding periods of 2025. International sales accounted for approximately 98% of our revenue in each of the three and nine months ended September 30, 2026, and 98% and 99%, respectively, in the corresponding periods of 2025.
Our gross margin was 56% and 55% for the three months ended September 30, 2026 and 2025, respectively, and 54% and 55% for the nine months ended September 30, 2026 and 2025, respectively. The increase in gross margin for the three-month period was primarily due to favorable end-market mix, manufacturing efficiencies and certain sales price increases, partially offset by higher input costs and less favorable impact of the dollar/yen exchange rate on our wafer costs. The decrease in gross margin for the nine-month period was primarily due to higher input costs and less favorable impact of the dollar/yen exchange rate on our wafer costs, partially offset by manufacturing efficiencies and certain sales price increases.
Total operating expenses were $50.6 million and $68.8 million for the three months ended September 30, 2026 and 2025, respectively, and $161.8 million and $185.6 million for the nine months ended September 30, 2026 and 2025, respectively. The decrease in operating expenses for the three- and nine-month periods was primarily due to a non-recurring expense related to an employee litigation matter that occurred in the prior-year period as described in Note 11 Commitments and Contingencies of this report. Decreases also include credits to stock-based compensation expense which relate to the quarterly remeasurement of unvested equity awards associated with our retired former chief executive officer as described in Note 8 Stockholders' Equity of this report. These decreases for the nine-month period were partially offset by restructuring and related charges for severance and benefit costs associated with the workforce reduction described in Note 13 Restructuring of this report.
Our management team continuously evaluates operations to better align our organization with market opportunities, increase operational efficiency, decrease costs and increase profitability. In connection with this ongoing evaluation, a restructuring plan was undertaken in the first quarter of 2026, reducing the Company’s workforce by approximately 7% to better align our expenses with revenue and create flexibility to invest in the products, people, and markets that are expected to drive long-term growth and profitability. As a result, we recognized restructuring charges of $6.6 million during the first quarter of 2026, primarily composed of severance costs. The restructuring plan was substantially completed in the first quarter of 2026.
Capital Return Program. We remain committed to delivering stockholder value through our stock repurchase and dividend programs. Under future programs to be authorized by our Board of Directors, we may repurchase shares of our common stock in the open market or through privately negotiated transactions. The extent to which we repurchase our stock and the timing of such repurchases will depend upon market conditions, the rules and regulations governing repurchases, and other corporate considerations, as determined by our management team and with the approval of our Board of Directors. We did not repurchase shares during the three- or nine-month period ended September 30, 2026.
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During these periods we returned $12.0 million and $35.8 million, respectively, to stockholders through the payment of cash dividends.
In October 2026, the Company’s board of directors raised the quarterly cash dividend with the declaration of four cash dividends of $0.22 per share to be paid at the end of each quarter in 2027.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those listed below. We base our estimates on historical facts and various other assumptions that we believe to be reasonable at the time the estimates are made. Actual results could differ from those estimates.
Critical accounting policies are important to the portrayal of our financial condition and results of operations and require us to make judgments and estimates about matters that are inherently uncertain. There have been no material changes to our critical accounting policies and estimates disclosed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” and Note 2, Significant Accounting Policies and Recent Accounting Pronouncements, in each case in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 6, 2026. Currently, our only critical accounting policies relate to revenue recognition and estimating write-downs for excess and obsolete inventory.
Results of Operations
The following table sets forth certain operating data as a percentage of net revenue for the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Cost of revenue | 44.4 | 45.5 | 45.8 | 45.0 | |||||||||||||||||||
| Gross profit | 55.6 | 54.5 | 54.2 | 55.0 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 20.0 | 22.4 | 22.3 | 22.6 | |||||||||||||||||||
| Selling, general and administrative | 21.9 | 23.4 | 22.7 | 25.1 | |||||||||||||||||||
| Other operating expenses (income) | (1.6) | 12.0 | (0.8) | 6.9 | |||||||||||||||||||
| Restructuring and related charges | — | — | 1.8 | — | |||||||||||||||||||
| Total operating expenses | 40.3 | 57.8 | 46.0 | 54.6 | |||||||||||||||||||
| Income (loss) from operations | 15.3 | (3.3) | 8.2 | 0.4 | |||||||||||||||||||
| Other income | 1.7 | 2.1 | 1.9 | 2.5 | |||||||||||||||||||
| Income (loss) before income taxes | 17.0 | (1.2) | 10.1 | 2.9 | |||||||||||||||||||
| Provision for (benefit from) income taxes | 2.3 | — | 1.4 | 0.3 | |||||||||||||||||||
| Net income (loss) | 14.7 | % | (1.2) | % | 8.7 | % | 2.6 | % | |||||||||||||||
Comparison of the three and nine months ended September 30, 2026 and 2025
Net revenue. Net revenue consists of revenue from product sales, net of returns and allowances. Net revenue for the three and nine months ended September 30, 2026 was $125.5 million and $352.7 million, respectively, and $118.9 million and $340.3 million, respectively, in the corresponding periods of 2025. The increase in revenue for the three-month period reflected higher sales in the industrial and communications end markets. The increase in revenue for the nine-month period primarily reflected higher sales in the industrial end market.
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Our revenue mix by end market for the three and nine months ended September 30, 2026 and 2025 was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| End Market | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Communications | 12 | % | 11 | % | 11 | % | 11 | % | |||||||||||||||
| Computer | 13 | % | 13 | % | 12 | % | 13 | % | |||||||||||||||
| Consumer | 32 | % | 34 | % | 35 | % | 37 | % | |||||||||||||||
| Industrial | 43 | % | 42 | % | 42 | % | 39 | % | |||||||||||||||
International sales, consisting of sales outside of the United States based on the “bill to” customer locations, were $122.9 million and $346.3 million in the three and nine months ended September 30, 2026, respectively, and $117.1 million and $335.3 million, respectively, in the corresponding periods of 2025. Although power converters using our products are distributed to end markets worldwide, most are manufactured in Asia. As a result, sales to this region represented approximately 81% of our net revenue in each of the three and nine months ended September 30, 2026 and approximately 83% and 84%, respectively, in the corresponding periods of 2025. We expect international sales, and sales to the Asia region in particular, to continue to account for a large portion of our net revenue in the future.
Sales to distributors accounted for approximately 67% and 70% of our net revenue in the three and nine months ended September 30, 2026, respectively, and approximately 69% and 70%, respectively, in the corresponding periods of 2025. Direct sales to OEMs and merchant power-supply manufacturers accounted for the remainder.
Gross profit. Gross profit is net revenue less cost of revenue. Our cost of revenue consists primarily of the purchase of wafers from our contracted foundries, the assembly, packaging and testing of our products by sub-contractors, product testing performed in our own facility, overhead associated with the management of our supply chain, and the amortization of acquired intangible assets. The following table compares gross profit and gross margin for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net revenue | $ | 125.5 | $ | 118.9 | $ | 352.7 | $ | 340.3 | |||||||||||||||
| Gross profit | $ | 69.7 | $ | 64.9 | $ | 191.3 | $ | 187.0 | |||||||||||||||
| Gross margin | 55.6 | % | 54.5 | % | 54.2 | % | 55.0 | % | |||||||||||||||
The increase in gross margin for the three-month period was primarily due to favorable end-market mix, manufacturing efficiencies and certain sales price increases, partially offset by higher input costs and less favorable impact of the dollar/yen exchange rate on our wafer costs. The decrease in gross margin for the nine-month period was primarily due to higher input costs and less favorable impact of the dollar/yen exchange rate on our wafer costs, partially offset by manufacturing efficiencies and certain sales price increases.
Research and development expenses. Research and development (“R&D”) expenses consist primarily of employee compensation including salaries and stock-based compensation, as well as expensed material and facility costs associated with the development of new processes and products. We also record R&D expenses for prototype wafers related to new products until the products are released to production. The following table compares R&D expenses for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Research and development expenses | $ | 25.1 | $ | 26.7 | $ | 78.5 | $ | 76.8 | |||||||||||||||
R&D expenses decreased for the three months ended September 30, 2026 compared to the corresponding period of 2025, primarily due to lower outside engineering services and lower personnel costs resulting from the workforce reduction, partially offset by the effects of the reassignment of certain application engineers to product-development activities, as described in Note 13, Restructuring of this report. R&D expenses increased for the nine months ended September 30, 2026 compared to the corresponding period in 2025, primarily due to the reassignment of application-
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engineering costs to R&D, partially offset by lower personnel costs resulting from the workforce reduction and lower outside engineering services.
Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses consist primarily of employee compensation including salaries, commissions and stock‑based compensation for personnel across our sales representatives, administration, finance, human resources, and general management functions. SG&A expenses also include facilities‑related costs associated with our regional sales and support offices, as well as consulting, professional services, legal and auditing expenses. The following table compares SG&A expenses for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Selling, general and administrative expenses | $ | 27.5 | $ | 27.8 | $ | 80.0 | $ | 85.4 | |||||||||||||||
SG&A expenses decreased for the three and nine months ended September 30, 2026 compared to the corresponding periods of 2025 primarily due to the restructuring actions taken in the three months ended March 31, 2026 as described in Note 13 Restructuring of this report as well as a reduction in expenses for professional legal services. These decreases were partially offset by higher stock-based compensation expense.
Other operating expenses (income). Other operating income was $2.0 million and $2.9 million in the three and nine months ended September 30, 2026, respectively. For the three-month period ended September 30, 2026, we recognized a $1.8 million release of liability related to settlement of a litigation matter as described in Note 11 Commitments and Contingencies of this report. In addition, for the three and nine-month periods, we recognized $0.3 million and $1.2 million credits, respectively, to stock-based compensation expense which reflects our revised estimate of the portion of unvested equity awards associated with our retired former chief executive officer that may ultimately vest subject to continuous service and based on the Company's forecasted performance. Refer to Note 8 Stockholders' Equity of this report for details.
Restructuring and related charges. Restructuring and related charges were $6.6 million in the nine months ended September 30, 2026. The charges were primarily related to severance and benefit costs associated with the workforce reduction described in Note 13 Restructuring of this report.
Other income. Other income consists primarily of interest income earned on cash and cash equivalents, marketable securities and other short-term investments, and the impact of foreign exchange gains or losses. The table below compares other income for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Other income | $ | 2.1 | $ | 2.6 | $ | 6.9 | $ | 8.4 | |||||||||||||||
Other income decreased for the three months ended September 30, 2026 as compared to the corresponding period of 2025 primarily due to foreign currency translation impact and lower interest income. Other income decreased for the nine months ended September 30, 2026 as compared to the corresponding period in 2025, primarily due to lower interest income.
Provision for (benefit from) income taxes. Provision for (benefit from) income taxes represents federal, state and foreign taxes. The table below compares income tax expense for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (dollars in millions) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Provision for (benefit from) income taxes | $ | 2.9 | $ | — | $ | 4.9 | $ | 1.0 | |||||||||||||||
| Effective tax rate | 13.6 | % | (3.0) | % | 13.5 | % | 10.5 | % | |||||||||||||||
Income tax expense includes a provision for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to us and our subsidiaries, adjusted for certain discrete items which are fully recognized in the period in which they occur. Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.
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Our effective tax rates for the three and nine months ended September 30, 2026 were 13.6% and 13.5%, respectively, and (3.0%) and 10.5%, in the corresponding periods of 2025. The effective tax rate in these periods was lower than the statutory federal income tax rate of 21% due to the geographic distribution of our worldwide earnings in lower tax jurisdictions and the impact of federal research tax credits. For the three months ended September 30, 2026, our effective tax rate was favorably impacted by discrete tax benefits related to stock-based compensation. In the nine months ended September 30, 2026, our effective tax rate was adversely affected by a tax accounting deficiency related to share-based compensation. In the three and nine months ended September 30, 2025, the Company’s effective tax rate was adversely impacted by the recognition of a tax deficiency related to share-based compensation. We have not been granted any incentivized tax rates and do not operate under any tax holidays in any jurisdiction.
Liquidity and Capital Resources
As of September 30, 2026, we had $288.1 million in cash, cash equivalents and short-term investments, an increase of $38.6 million from $249.5 million as of December 31, 2025. As of September 30, 2026, we had working capital, defined as current assets less current liabilities, of $425.5 million, an increase of approximately $37.5 million from $388.0 million as of December 31, 2025.
In 2016, we entered into the Prior Credit Agreement with Wells Fargo Bank, National Association, which provided us with a $75.0 million revolving line of credit to use for general corporate purposes and a $20.0 million sub-limit for the issuance of standby and trade letters of credit with an interest rate based on SOFR. The Prior Credit Agreement had a term ending on June 7, 2026; we terminated the Prior Credit Agreement on April 10, 2026. We were compliant with all covenants and had no advances outstanding under the Prior Credit Agreement as of termination date.
On February 24, 2026, we entered into the PNC Loan Agreement to replace the Prior Credit Agreement, which became effective and available for use on April 10, 2026 when we terminated the Prior Credit Agreement. The PNC Loan Agreement provides us with a $100.0 million revolving line of credit with a $25.0 million sub-limit for the issuance of standby and trade letters of credit. The interest rate on outstanding borrowings under the PNC Loan Agreement is based on SOFR plus 1.60%. The Company’s obligations under the PNC Loan Agreement are unsecured. The PNC Loan Agreement term is through February 24, 2031; all advances under the revolving line of credit, together with all accrued and unpaid interest, fees, and other obligations that may be owing thereon, will become due on such date, or earlier upon the occurrence of an Event of Default.
As defined in the PNC Loan Agreement we are required to maintain a "Minimum Liquidity" of at least $50.0 million as of the last day of each fiscal quarter and a ratio of "Funded Indebtedness" to "Adjusted EBITDA" of less than 2.00 to 1.00 as of the last day of each fiscal quarter and determined on a rolling four-quarter basis.
The PNC Loan Agreement contains representations, warranties, affirmative covenants and conditions precedent to borrowings that are usual and customary for credit agreements of this type. The PNC Loan Agreement contains certain limited covenants that restrict, subject to certain exceptions, our ability to incur additional indebtedness or liens, guarantee or become liable for obligations of other persons or entities, liquidate, dissolve, merge or consolidate with any other entity or convey, transfer or lease our properties or assets to another person, which, in each case, are subject to certain qualifications and exceptions.
We were compliant with all covenants and had no advances outstanding under the PNC Loan Agreement as of September 30, 2026.
Cash from operating activities
Our operating activities generated $84.6 million of cash in the nine months ended September 30, 2026. Net income for this period was $31.5 million; we also incurred non-cash stock-based compensation expense, depreciation and deferred tax assets of $26.9 million, $18.8 million and $2.3 million, respectively. Sources of cash included a $16.6 million decrease in inventories and an $8.2 million decrease in prepaid expenses and other assets. These sources of cash were partially offset by a $10.9 million increase in accounts receivable due to timing of receipts and a $4.8 million decrease in accounts payable (excluding payables related to property and equipment) due to timing of payments.
Our operating activities generated $85.3 million of cash in the nine months ended September 30, 2025. Net income for this period was $8.8 million; we also incurred non-cash stock-based compensation expense, depreciation, accretion of discount on marketable securities and an increase in deferred tax assets of $40.0 million, $20.8 million, $0.9 million and $0.9 million, respectively. Sources of cash included a $9.2 million increase in other accrued liabilities, a $6.0 million increase in accounts payable, a $5.2 million decrease in prepaid expenses and other assets and a $1.0 million decrease in inventories. These sources of cash were partially offset by a $4.0 million increase in accounts receivable.
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Cash from investing activities
Our investing activities in the nine months ended September 30, 2026, resulted in a $15.8 million net use of cash, primarily consisting of $12.4 million for purchases of property and equipment and $3.4 million for purchases of investments, net of sales and maturities.
Our investing activities in the nine months ended September 30, 2025, generated $40.7 million of cash, primarily consisting of $57.9 million from sales and maturities of investments, net of purchases, partially offset by $17.3 million for purchases of property and equipment, primarily production-related machinery and equipment.
Cash from financing activities
Our financing activities in the nine months ended September 30, 2026 resulted in a $30.8 million net use of cash, consisting of $35.8 million for the payment of dividends to stockholders, partially offset by proceeds of $5.1 million from the issuance of shares through our employee stock purchase plan.
Our financing activities in the nine months ended September 30, 2025 resulted in a $128.3 million net use of cash, consisting of $98.1 million for the repurchase of our common stock and $35.6 million for the payment of dividends to stockholders, partially offset by proceeds of $5.3 million from the issuance of shares through our employee stock purchase plan.
Other Information
Our cash, cash equivalents and investment balances may change in future periods due to changes in our planned cash outlays, including changes in incremental costs such as direct and integration costs related to future acquisitions. Current U.S. tax laws generally allow companies to repatriate accumulated foreign earnings without incurring additional U.S. federal taxes. Accordingly, as of September 30, 2026, our worldwide cash and short-term investments are available to fund capital allocation needs, including capital and internal investments, acquisitions, stock repurchases and/or dividends without incurring significant U.S. federal income taxes.
If our operating results deteriorate in future periods, either as a result of a decrease in customer demand or pricing pressures from our customers or our competitors, or for other reasons, our ability to generate positive cash flow from operations may be jeopardized. In that case, we may be forced to use our cash, cash equivalents and short-term investments, use our current financing or seek additional financing from third parties to fund our operations. We believe that cash generated from operations, together with existing sources of liquidity, will satisfy our projected working capital and other cash requirements for at least the next 12 months. Our cash requirements beyond the next 12 months are subject to a number of uncertainties, including general economic conditions and our ability to generate cash flow from operations; we expect those cash requirements to include funding our operations and capital expenditures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our interest rate risk and foreign currency exchange risk during the first nine months of 2026. For a discussion of our exposure to interest rate risk and foreign currency exchange risk, refer to our market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 4. CONTROLS AND PROCEDURES
Limitation on Effectiveness of Controls
Any control system, no matter how well designed and operated, can provide only reasonable assurance as to the tested objectives. The design of any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. The inherent limitations in any control system include the realities that judgments related to decision-making can be faulty, and that reduced effectiveness in controls can occur because of simple errors or mistakes. Due to the inherent limitations in a cost-effective control system, misstatements due to error may occur and may not be detected.
Evaluation of Disclosure Controls and Procedures
Management is required to evaluate our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Disclosure controls and procedures are controls and other procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure
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controls and procedures include controls and procedures designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. Based on our management’s evaluation (with the participation of our principal executive officer and principal financial officer), our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2026, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information with respect to this item may be found in Note 11, Commitments and Contingencies, in our Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our common stock. Our business, financial condition, results of operations, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. If any of the risks actually occur, our business, financial condition, results of operations, and prospects could be adversely affected. In that event, the market price of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Ownership of Our Common Stock
Our operating results are volatile and difficult to predict. If we fail to meet the expectations of public market analysts or investors, the market price of our common stock may decrease significantly.
Our net revenue and operating results have varied significantly in the past, are difficult to forecast, are subject to numerous factors both within and outside of our control, and may fluctuate significantly in the future. As a result, our operating results could fall below the expectations of public market analysts or investors. If that occurs, the price of our stock may decline.
Some of the factors that could affect our operating results and the price of our stock include but are not limited to the following:
Risks Related to the Operation and Growth of Our Business
•The demand for our products may decline in the major end markets we serve and our products may be unable to penetrate additional markets; which may occur due to competitive factors, supply chain fluctuations, rising inflation or other changes in macroeconomic or geopolitical conditions;
•the volume and timing of orders received from customers;
•our ability to develop and bring to market new products and technologies, including on a timely basis;
•sales of our products through distributors, which limits our direct interaction with our end customers, reducing our ability to forecast sales and increasing the complexity of managing our business;
•reliance on international sales activities for a substantial portion of our net revenue;
•the lengthy timing of our sales cycle;
•the cyclical nature of the power supply industry and cyclical market patterns across different end markets for which our products are used;
•competitive pressures on selling prices;
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•risks associated with our supply chain including the volume, cost, and timing of delivery of orders placed by us with our wafer foundries and assembly subcontractors, and their ability to procure materials;
•undetected defects, quality issues, warranty claims, or product recalls related to our products;
•our ability to attract and retain qualified personnel;
•changes in global trade policy, including tariffs, could reduce demand for end products that incorporate our products, which could have a material adverse effect on our revenue and operating results;
•our ability to realize the expected benefits of restructuring initiatives designed to reduce costs and create a more efficient organization;
•debt obligations we incur in the future could adversely affect our financial condition;
Risks Related to Laws and Regulations
•the inability to adequately protect or enforce our intellectual property rights;
•we have been and may be subject to or involved in litigation, threatened litigation, or other disputes, the outcome of which may be difficult to predict, and which may be costly to defend, divert management attention, require us to pay damages or other payments, or restrict the operation of our business;
•expenses we are required to incur (or choose to incur) in connection with litigation;
•changes in tax rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits may increase the amount of taxes we are required to pay and require management time and attention;
•changes in environmental laws and regulations, including with respect to energy consumption and climate change;
•continued impact of changes in securities laws and regulations, including potential risks resulting from our evaluation of our internal controls over financial reporting;
General Risk Factors
•current or potential war, domestic or international conflict, political or social instability, or military actions, including the conflicts in Ukraine and the Middle East;
•failure, disruption, security breaches, or other incidents impacting our information technology infrastructure or information management systems;
•interruptions in our information technology systems;
•unfavorable or uncertain market conditions and risks relating to the adoption, use, or application of emerging technologies, including AI, by our customers and in our business;
•fluctuations in exchange rates, particularly the exchange rate between the U.S. dollar and the Japanese yen, the Euro and the Swiss franc;
•earthquakes, fire, global health crises, or other disasters;
•risks associated with acquisitions and strategic investments; and
•our ability to successfully integrate, or realize the expected benefits from, our acquisitions.
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Risks Related to the Operation and Growth of Our Business
If demand for our products declines in our major end markets and we do not penetrate additional markets, our net revenue will decrease.
When our customers are not successful in maintaining high levels of demand for their products, their demand for our products decreases, which adversely affects our operating results. A limited number of applications for our products, such as consumer appliances and cellphone chargers, make up a significant percentage of our revenue. We expect that a significant level of our revenue and, therefore, our operating results will continue to be dependent upon these applications in the near and mid-term. Demand for end products incorporating our products has been highly cyclical over time and has been impacted by economic downturns. Our recent results have been impacted by economic conditions, including increases in inflation rates as well as softness in the housing market, which affects demand for consumer appliances. Any economic slowdown or disruption in the end markets that we serve could cause a slowdown in demand for our products, causing our revenue to decline and potentially result in lower revenue and write-offs of excess or obsolete inventory, which could cause the price of our stock to fall.
We believe that our future success depends in part upon our ability to penetrate additional markets for our products. We cannot provide assurances that we will be able to overcome the marketing or technological challenges necessary to penetrate additional markets. To the extent that a competitor penetrates additional markets before we do or takes market share from us in our existing markets, our revenue and financial condition could be materially adversely affected.
We do not have long-term contracts with any of our customers and if they fail to place, cancel, or reschedule orders for our products, our operating results and our business may suffer.
Our business is characterized by short-term customer orders and shipment schedules. The ordering patterns of some of our large customers have been unpredictable in the past and will likely remain unpredictable in the future. Not only does the volume of units ordered by particular customers vary substantially from period to period, but purchase orders received from particular customers often vary substantially from early oral estimates provided by those customers for planning purposes. In addition, customer orders can generally be canceled or rescheduled without significant penalty to the customer. In the past, we have experienced customer cancellations of substantial orders for reasons beyond our control, usually due to decreased demand from our customers’ end customers. Significant cancellations could occur again at any time. A relatively small number of distributors, OEMs, and other customers account for a significant portion of our revenue. As a result, any challenges that we face with a key distributor, including the loss of a key distributor, could harm our business. Similarly, although we sell through various distributors, certain end customers account for a significant portion of our revenue.
If our efforts to enhance existing products and introduce new products are not successful, we may not be able to generate demand for our products.
Our success depends in significant part upon our ability to develop new products for high-voltage power conversion for both existing and new markets, to introduce these products in a timely manner, and to have these products selected for design into our customers’ end products. New product introduction schedules are subject to risks and uncertainties that typically accompany development and delivery of complex technologies to the marketplace, including product development delays and defects. We have experienced delays in the past in completing new product development. If we fail to develop and sell new products in a timely manner in the future, then our net revenue and ability to compete both domestically and internationally could decline.
In addition, we cannot be sure that we will be able to adjust to changing market demands as quickly and as cost-effectively as necessary to successfully compete. Furthermore, we cannot provide assurances that we will be able to introduce new products in a timely and cost-effective manner or in sufficient quantities to meet customer demand or that these products will achieve market acceptance. Our failure, or our customers’ failure, to develop and introduce new products successfully and in a timely manner would harm our business. In addition, customers may defer or return orders for existing products. While we maintain reserves for potential customer returns, we cannot provide assurances that these reserves will be adequate.
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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.
Sales to distributors account for a significant portion of our revenue. Selling through distributors reduces our ability to forecast sales and creates challenges for our business by requiring us, among other things, to:
•manage a more complex supply chain;
•monitor the level of inventory of our products at each distributor, and
•monitor the financial condition and creditworthiness of our distributors, many of which are located outside of the United States and are not publicly traded.
Since we have limited ability to forecast inventory levels at our end customers, it is possible that there may be significant build-up of inventories in the distributor channel, with the OEM or the OEM’s contract manufacturer. Such a buildup could result in a slowdown in orders, requests for returns from customers, or requests to move out future shipments. This could adversely impact our revenue and profits. Any failure to manage these complexities could disrupt or reduce sales of our products and unfavorably impact our financial results.
In addition, to the extent we are not able to keep our products away from unintended markets, demand and pricing dynamics can become distorted in our distributor channel and in certain geographies, which could adversely affect our revenue. Customers purchasing our products through unintended market channels may use our products for purposes for which they were not intended, or may purchase counterfeit or substandard products, for instance that have been altered or damaged, which could harm our business and cause our reputation to be adversely affected.
Our international sales activities account for a substantial portion of our net revenue, which subjects us to substantial risks.
Sales to customers outside of the U.S. account for, and have historically accounted for, a large portion of our revenue. Approximately 98% of our revenue for each of the years ended December 31, 2025, 2024 and 2023 was generated by sales to customers outside of the U.S. If our international sales decline and we are unable to increase domestic sales, our revenue and operating results would be harmed. International sales and global conditions involve a number of risks to our business, including:
•tariffs, protectionist measures, and other trade barriers and restrictions;
•potential insolvency of international distributors and representatives;
•reduced protection for intellectual property rights in some countries;
•the impact of recessionary environments and inflation in the U.S. and other geographies where we do business;
•global, regional, and local circumstances, including, but not limited to, social, economic, political, and supply chain instability related to the uncertainty regarding relationships among countries, including tensions between China and Taiwan and between China and other countries;
•ongoing, escalating or potential conflicts between countries or regions, including those currently involving Russia, Ukraine, Israel, Gaza, Lebanon, Iran, and the United States, as well as the risk of broader regional destabilization in the Middle East, and the related disruption to global energy supplies, volatility in oil and commodity prices, and adverse macroeconomic effects;
•the burdens of complying with a variety of foreign and applicable U.S. Federal and state laws; and
•foreign-currency exchange fluctuations.
Our failure to adequately address these risks could reduce our international sales and materially and adversely affect our operating results. Furthermore, because substantially all of our foreign sales are denominated in U.S. dollars, increases in the value of the dollar versus other currencies causes the price of our products in foreign markets to rise, making our products more expensive relative to competing products priced in local currencies.
Because the sales cycle for our products can be lengthy, we may incur substantial expenses before we generate significant revenue, if any.
Our products are generally incorporated into a customer’s products at the design stage. However, customer decisions to use our products, commonly referred to as "design wins," can often require us to expend significant research and development and sales and marketing resources without any assurance of success. These significant research and development and sales and marketing resources often precede volume sales, if any, by a year or more. The value of any
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design win will largely depend upon the commercial success of the customer’s product. We cannot provide assurances that we will continue to achieve design wins or that any design win will result in future revenue. If a customer decides at the design stage not to incorporate our products into its product, we may not have another opportunity for a design win with respect to that product for many months or years.
Our products are used across different end markets and a significant downturn in any of these end markets could cause a meaningful reduction in demand for our products and adversely affect our operating results.
The power supply industry is highly cyclical and subject to downturns, such as we have recently seen, and our revenue and gross margin can fluctuate significantly due to such downturns. These downturns can be severe and prolonged and result in price erosion and weaken demand for our products. Weakened demand for our products resulting from general economic conditions affecting the end markets we serve, or the power supply industry specifically, and reduced spending by our customers can result, and in the past has resulted, in diminished product demand, high inventory levels, erosion of average selling prices, excess and obsolete inventories, and corresponding inventory write-downs. Our expense levels are based, in part, on our expectations of future sales. Many of our expenses, particularly those relating to facilities, capital equipment, and other overhead, are relatively fixed. We might be unable to reduce spending quickly enough to compensate for reductions in sales. Accordingly, shortfalls in sales could adversely affect our operating results. Furthermore, any significant upturn in the power supply industry could result in increased competition for access to raw materials and third-party service providers. For example, infrastructure investments in AI have increased substantially, driving significant demand increases in the data center computing market and straining the supply chain. If we are unable to manage our supply chain or timely or efficiently scale to meet growing demand or if we have not accurately assessed the magnitude or sustainability of such demand, our results of operations could be adversely impacted.
Additionally, our products are used across different end markets, and demand for our products is difficult to predict as demand varies within and among our end markets. Our target markets may not grow or develop as we currently expect, and demand may increase or change in one or more of our end markets. Changes in demand may reduce our revenue, lower our gross margin, and effect our operating results. Any deterioration in these end markets, reductions in the magnitude of revenue streams, our inability to meet design and pricing requirements, or volatility in demand for our products could lead to a reduction in our revenue and adversely affect our operating results. Our success in our end markets depends on many factors, including the strength or financial performance of our customers, our ability to timely meet rapidly changing product requirements, market needs, and our ability to maintain design wins across different markets and customers to dampen the effects of market volatility. The dynamics of the markets in which we operate make prediction of and timely reaction to such events difficult.
In addition, expectations and front-loaded investment related to AI may increase the magnitude and volatility of industry cycles, making downturns more abrupt or recoveries more uneven. Recent industry investment and customer spending patterns have been influenced by heightened interest in AI and AI-related applications. To the extent that current levels of investment in AI-related infrastructure, products, or end-market demand reflect expectations that are not ultimately realized, or if customer spending related to AI moderates, is delayed, or declines more rapidly than anticipated, the industry could experience an accelerated or more pronounced downturn.
Due to these and other factors, our past results may not be reliable predictors of our future results. If we are unable to accomplish any of the foregoing, or to offset the volatility of cyclical changes in the power supply industry or our end markets through diversification into other markets, these factors could materially and adversely affect our business, financial condition, and operating results.
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.
The high-voltage power supply industry is intensely competitive and characterized by significant price sensitivity. Our products face competition from alternative technologies, such as linear transformers, discrete switcher power supplies, and other integrated and hybrid solutions. If the price of competing solutions decreases significantly, the cost effectiveness of our products will be adversely affected. If power requirements for applications in which our products are currently utilized go outside the cost-effective range of our products, some of these alternative technologies can be used more cost effectively. In addition, as our patents expire, our competitors could legally begin using the technology covered by the expired patents in their products, potentially increasing the performance of their products and/or decreasing the cost of their products, which may enable our competitors to compete more effectively. Our current patents may or may not inhibit our competitors from getting any benefit from an expired patent.
Additionally, we compete with major domestic and international semiconductor companies, many of which have greater market recognition and substantially greater financial, technical, marketing, distribution, and other resources than we do. In addition, some governments, such as China, may provide, or have provided and may continue to provide,
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significant financial assistance or otherwise, to some of our competitors, or to new entrants, and may intervene in support of national industries and/or competitors, including to try to disrupt the U.S. semiconductor industry. The semiconductor industry has experienced significant consolidation in recent years, which has resulted in several of our competitors becoming much larger in terms of revenue, product offerings, and scale. We may be unable to compete successfully in the future, which could harm our business.
We have experienced in the past, and may experience in the future, competitive pricing pressures on our products. We may be unable to maintain average selling prices due to increased pricing pressure, including as a result of actions taken by foreign governments such as China to favor companies located in their own country, which could adversely impact our operating results.
We, and our competitors, seek to improve yields, which could result in significant increases in worldwide supply and downward pressure on prices. Increases in worldwide supply of semiconductor products, if not accompanied by commensurate increases in demand, could lead to declines in average selling prices for our products, and could materially adversely affect our business, results of operations, or financial condition.
We depend on third-party suppliers to provide us with finished wafers for our products and if they fail to provide us sufficient quantities of finished wafers, our business may suffer.
Our primary supply arrangements for the production of finished wafers are with several fabs located in Japan and the U.S. Our contracts with these suppliers expire on varying dates through 2035. Although some aspects of our relationships with our fabs are contractual, many important aspects of these relationships depend on their continued cooperation. We cannot provide assurances that we will continue to work successfully with our wafer suppliers in the future, and that the wafer foundries’ capacity will meet our needs. Additionally, one or more of these wafer foundries could seek an early termination of their wafer supply agreements with us. Any serious disruption in the supply of finished wafers from our wafer suppliers could harm our business. We estimate that it would take 12 to 24 months from the time we identified an alternate manufacturing source to produce finished wafers with acceptable manufacturing yields in sufficient quantities to meet our needs.
Although we provide our foundries with rolling forecasts of our production requirements, their ability to provide finished wafers to us is ultimately limited by the available capacity of the wafer foundry. Any reduction in wafer foundry capacity available to us could require us to pay amounts in excess of contracted or anticipated amounts for wafer deliveries, require us to make other concessions to meet our customers’ requirements, or may limit our ability to meet demand for our products. Further, to the extent demand for our products exceeds wafer foundry capacity, this could inhibit us from expanding our business and harm relationships with our customers. Any of these concessions or limitations could harm our business.
If our third-party suppliers and independent subcontractors do not produce our wafers and assemble our finished products at acceptable yields, our revenue may decline. We depend on independent foundries to produce finished wafers, and independent subcontractors to assemble and test finished products, at acceptable yields and to deliver them to us in a timely manner. The failure of the foundries to supply us with finished wafers at acceptable yields could prevent us from selling our products to our customers and would likely cause a decline in our revenue and gross margin. In addition, our assembly process requires our manufacturers to use a high-voltage molding compound that has been available from only a few suppliers. These compounds and their specified processing conditions require a more exacting level of process control than normally required for standard semiconductor packages. Unavailability of assembly materials or issues with the assembly process can materially and adversely affect yields, timely delivery, and cost to manufacture. We may not be able to maintain acceptable yields in the future.
In addition, if prices for commodities used in our products increase significantly, raw material costs would increase for our suppliers which could result in an increase in the prices our suppliers charge us. To the extent we are not able to pass these costs on to our customers; this would have an adverse effect on our gross margins.
Additionally, certain materials are primarily available in a limited number of countries, including rare earth elements, minerals, and metals. Trade disputes, geopolitical tensions, economic circumstances, transit disruptions, political conditions, or public health issues, may limit our ability to obtain materials or equipment. Although rare earth and other materials are generally available from multiple suppliers, China is the predominant producer of certain of these materials. If China were to restrict or stop exporting these materials, our suppliers' ability to obtain such supply may be constrained and we may be unable to obtain sufficient quantities, or obtain supply in a timely manner, or at a commercially reasonable cost. Constrained supply of rare earth elements, minerals, and metals may restrict our ability to manufacture certain of our products and make it difficult or impossible to compete with other semiconductor manufacturers who are able to obtain sufficient quantities of these materials from China or other countries.
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Our products must meet exacting specifications, and undetected defects, failures or other quality issues may occur which may cause customers to return defective products to us, stop purchasing our products thereafter and/or attempt to impose significant costs to us.
Our customers generally establish demanding specifications for quality, performance, and reliability, and our products must meet these specifications. Our products may contain undetected defects, failures, or other quality issues when first introduced or after commencement of commercial shipments. We have in the past experienced product quality, performance, and reliability issues. If defects and failures occur in our products or if or any such failures are alleged to result in bodily injury, death, and/or property damage, we could experience lost revenue, decreased ability to compete, increased costs (including product warranty or liability claims) and costs associated with customer support and product recalls, delays in or cancellations or rescheduling of orders or shipments, and product returns. Some OEMs expect suppliers to warrant their products for longer periods of time and are increasingly looking to their suppliers for contribution when faced with product liability claims or recalls. While we specifically exclude consequential damages in our standard terms and conditions, certain of our contracts may not exclude such liabilities. We carry various commercial liability policies, including umbrella/excess policies which may cover certain damages arising out of product defects. These policies may not cover all claims or be of a sufficient amount to fully protect against such claims, and a successful warranty or product liability claim against us in excess of our available insurance coverage, or a requirement that we participate in a product recall, could have an adverse effect on our business results. Further, in the future, it is possible that we will not be able to obtain insurance coverage in the amounts and for the risks we seek at costs and terms we desire, or at all. Additionally, if our products fail to perform as expected or such failure of our products results in a recall, our reputation may be damaged, which could make it more difficult for us to sell our products to existing and prospective customers and could materially and adversely affect our business, results of operations, and financial condition.
We must attract and retain qualified personnel to be successful and competition for qualified personnel is intense in our market.
Our success depends to a significant extent upon the continued service of our executive officers and other key management and technical personnel, and on our ability to continue to attract, retain, and motivate qualified personnel, such as experienced analog design engineers and systems applications engineers. The competition for these employees is intense, particularly in Silicon Valley, where we are headquartered. The loss of the services of our engineers, executive officers, or other key personnel could harm our business. In addition, if qualified personnel leave our employ, and we are unable to quickly and efficiently replace these individuals with qualified personnel who can smoothly transition into their new roles, our business may suffer. We do not have employment contracts with, and we do not have key person life insurance policies on, any of our employees.
Changes in our management team can also disrupt our business and adversely affect our results of operations, given the lengthy sales cycle for our products and the large capital investments over a long time period required for our operations. We have had a number of changes in our senior leadership team in recent years, including, for example, the retirement of our former chief executive officer and the departure of our former chief financial officer in 2025. To the extent we do not effectively hire, onboard, retain, and motivate key employees and leadership, our business may be harmed.
Changes in global trade, in particular the escalation and imposition of new and higher tariffs and additional export controls, could reduce demand for end products that incorporate our products, which could have a material adverse effect on our revenue and operating results.
Although power supplies using our products are designed and distributed worldwide, most of these power supplies are manufactured by our customers in Asia. As a result, our business is subject to risks related to tariffs and other trade protection measures put in place by the U.S. or other countries, as well as evolving international trade relations, including but not limited to those between the U.S., China, countries in the APAC region, and the EU.
During 2025, the U.S. government imposed and threatened significant additional tariffs on goods imported into the U.S. from most of its trading partners, and, in response, multiple countries imposed or threatened retaliatory tariffs and other actions. Trade tensions between the U.S. and China have escalated and may continue to escalate, including the U.S. increasing tariffs on goods originating in China and China increasing tariffs on goods originating in the U.S. Changes in trade policies and a heightened risk of further increased tariffs or other barriers to international trade could further decrease international demand as many of our customers sell products incorporating our products into international markets.
Existing or future tariffs proposed or imposed on our customers’ products may adversely affect our gross profit margins in the future due to the potential for increased pressure on our selling prices by customers seeking to offset the impact of tariffs on their own products or other products that they purchase. In addition, tariffs could make our customers’ products less attractive relative to products offered by their competitors, that may not be subject to, or as significantly
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impacted by, similar tariffs. Further or sustained increases in tariffs on imported goods or the failure to resolve current or new international trade disputes could further decrease demand and have a material adverse effect on our business and operating results. Even if we are able to take measures to mitigate the impacts of existing or future tariffs, there is no guarantee that our efforts will be successful, or that we will be able to fully mitigate such impacts.
Resulting trade disputes, trade restrictions, tariffs, and other political tensions between the U.S. and other countries or among countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns, which may also negatively impact customer demand for our products, delay purchases or renewals, limit our ability to obtain equipment, components or raw materials, limit expansion opportunities with customers, limit our access to capital, or otherwise negatively affect our business and operations. Ongoing tariff, trade restrictions and macroeconomic uncertainty also have and may continue to contribute to volatility in the price of our common stock.
In some cases, our products and power supplies using our products are subject to import and export control laws and regulations, including the Export Administration Regulations administered by the U.S. Department of Commerce and trade and economic sanctions, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control. As such, licenses and notices may be required to import, export, or re-export our products and power supplies using our products to certain countries and end users or for certain end uses. The process of obtaining necessary licenses or making required notices may be time-consuming or unsuccessful, potentially causing delays in sales or losses of sales opportunities. Trade controls are complex and ensuring compliance can be challenging. Failure to adhere to such rules and regulations can result in the incurrence of fines, loss of import or export privileges, seizure of products, loss of reputation and other penalties, any of which could have a material adverse effect on our business, sales, and earnings. A change in laws and regulations could restrict our ability to transfer products to previously permitted countries, customers, distributors, or others. It is also possible that evolving U.S. export controls may encourage non-U.S. governments to request that our customers purchase from companies not subject to U.S. export controls, thereby harming our business, market position, and financial results. Excessive export controls increase the risk of investing in U.S. semiconductor products, because by the time a new product is ready for market, it may be subject to new unilateral export controls restricting its sale. At the same time, such controls may increase investment in foreign competitors, which would be less likely to be restricted by U.S. controls.
Furthermore, compliance with import and export controls and implementation of additional tariffs may increase regulatory compliance costs and further affect our business and operating results.
We may incur higher than expected expenses or not realize the expected benefits, or any benefits, of restructuring initiatives designed to reduce costs and create a more efficient organization.
We have pursued in the past and may pursue in the future restructuring initiatives designed to reduce costs and create a more efficient organization to support our business, including reductions in our workforce or relocating certain operations. Any restructuring initiatives could result in the loss of experienced personnel, institutional knowledge and critical skills, and could adversely affect our ability to recruit, hire, retain, and motivate highly skilled personnel, maintain and grow our customer base and effectively operate our business. Adverse effects of our restructuring activities could lead to additional costs, harm our efficiency, or impact our ability to effectively operate our business. In addition, we may be unsuccessful in our efforts to realign our organizational structure and shift our investments. The potential negative impact of restructuring efforts on our business may have a material impact on our business, financial condition and results of operations.
Our reduction in force announced in February 2026 may not result in anticipated cost savings and could disrupt our business.
In February 2026, we announced a reduction in force that resulted in the termination of approximately 7% of our global workforce in order to decrease our costs and create a more efficient organization to support our business. We may not realize, in full or in part, the anticipated benefits, savings, and improvements in our operating structure from our new strategic efforts due to unforeseen difficulties, delays, or unexpected costs. If we are unable to realize the expected operational efficiencies and cost savings from the reduction in force, our results of operation and financial condition would be adversely affected. We also cannot guarantee that we will not have to undertake additional workforce reductions or related activities in the future. Such future cost reduction efforts may adversely affect our ability to attract and retain employees, may adversely affect our culture and impact our ability to effectively pursue our business strategy. For example, our workforce reduction could yield unanticipated consequences, such as attrition beyond planned staff reductions, increased difficulties in our day-to-day operations, and reduced employee morale. If employees who were not affected by the reduction in force seek alternate employment, this could result in us seeking contract support which may result in unplanned additional expenses or harm our productivity. Our workforce reduction could also harm our ability to attract and retain key management and technical personnel who are critical to our business.
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Debt obligations we incur in the future could adversely affect our financial condition.
On February 24, 2026, we entered into a new unsecured loan agreement with PNC Bank, National Association (the “PNC Loan Agreement”), which became effective on April 10, 2026, and terminated our credit agreement with Wells Fargo Bank, National Association. We had no advances outstanding under the PNC Loan Agreement as of September 30, 2026. In the future, we may incur, under the PNC Loan Agreement or otherwise, debt to finance our capital investments, general corporate purposes, and other activities. Any debt obligations could adversely impact us as follows:
•require us to use a large portion of our cash flow to pay principal and interest on debt, which will reduce the amount of cash flow available to fund our business activities;
•adversely impact our credit rating, which could increase borrowing costs and reduce our ability to raise funds on favorable terms;
•limit our future ability to raise funds for capital expenditures, strategic acquisitions or other business opportunities, R&D, and other general corporate requirements;
•restrict our ability to incur specified indebtedness, create or incur certain liens, and enter into sale-leaseback financing transactions;
•increase our vulnerability to adverse economic and industry conditions;
•increase our exposure to rising interest rates from variable rate indebtedness; and
•result in certain of our debt instruments becoming immediately due and payable or being deemed to be in default if applicable cross default, cross-acceleration, and/or similar provisions are triggered.
Our ability to meet the payment obligations under any debt instruments in the future will depend on our ability to generate significant cash flows or obtain external financing in the future. This, to some extent, is subject to market, economic, financial, competitive, legislative, and regulatory factors, as well as other factors that are beyond our control. There can be no assurance that our business will continue to generate cash flow from operations, or that additional capital will be available to us, in amounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. Additionally, events and circumstances may occur which would cause us to be unable to satisfy applicable draw-down conditions and therefore be unable to utilize our PNC Loan Agreement. If we are unable to generate sufficient cash flows to service our debt payment obligations or satisfy our debt covenants, we may need to refinance, restructure, or amend the terms of our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may be unable to meet our debt payment obligations, which could have a material adverse effect on our business, results of operations, or financial condition.
Provisions in our charter documents and Delaware law could prevent, delay, or impede a change in control of us and may negatively affect the market price of our common stock.
Provisions of our certificate of incorporation and bylaws could have the effect of discouraging, delaying, or preventing a merger or acquisition that a stockholder may consider favorable. For example, our certificate of incorporation authorizes the issuance of blank-check preferred stock, the rights, preferences and privileges of which may be designated by our board of directors without stockholder approval. Our certificate of incorporation also does not permit stockholders to act by written consent in lieu of a meeting. In addition, while our bylaws permit stockholders holding at least 10% of the shares entitled to vote to call a special meeting, they impose detailed procedural and informational requirements on any such request, and our bylaws separately include advance notice provisions governing stockholder nominations of directors and proposals of other business at a stockholders' meeting. Our board of directors is expressly authorized to make, alter, or repeal our bylaws, and our certificate of incorporation requires the affirmative vote of holders of a majority of the outstanding voting power of our capital stock to amend or repeal certain provisions of our certificate of incorporation. We also are subject to the anti-takeover laws of Delaware which may discourage, delay, or prevent someone from acquiring or merging with us, which may adversely affect the market price of our common stock.
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Risks Related to Laws and Regulations
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.
Our success depends upon our ability to continue our technological innovation and protect our intellectual property, including patents, trade secrets, copyrights, and know-how. We cannot provide assurances that the steps we have taken to protect our intellectual property will be adequate to prevent misappropriation, or that others will not develop competitive technologies or products. From time to time, we have received, and we may receive in the future, communications alleging our possible infringement of patents or other intellectual property rights of others. Costly litigation may be necessary to enforce our intellectual property rights or to defend us against claimed infringement. The failure to obtain necessary licenses and other rights, and/or litigation arising out of infringement claims could cause us to lose market share and harm our business.
Our U.S. patents have expiration dates ranging through 2043. We cannot provide assurances that our products will continue to compete favorably or that we will be successful in the face of increasing competition from new products and enhancements introduced by existing competitors or new companies entering the market. We believe our failure to compete successfully in the high-voltage power supply business, including our ability to introduce new products with higher average selling prices, would materially harm our operating results. As our patents expire, we will lose intellectual property protection previously afforded by those patents. Additionally, the laws of some foreign countries in which our technology is or may in the future be licensed may not protect our intellectual property rights to the same extent as the laws of the U.S., thus limiting the protections applicable to our technology.
If we do not prevail in our litigation, we will have expended significant financial resources, potentially without any benefit, and may also suffer the loss of rights to use some technologies.
In the event of an adverse outcome in any litigation challenging our use of intellectual property, we may be required to pay substantial damages, stop our manufacture, use, sale, or importation of infringing products, or obtain licenses to any intellectual property we are found to have infringed. We have incurred significant legal costs in conducting lawsuits, and our involvement in any future intellectual property litigation could adversely affect sales and divert the efforts and attention of our technical and management personnel, whether or not such litigation is resolved in our favor.
We have been and, in the future, may be subject to or involved in litigation, threatened litigation, or other disputes, the outcome of which may be difficult to predict, and which may be costly to defend, divert management attention, require us to pay damages or other payments, or restrict the operation of our business.
From time to time, we have been and, in the future, may be subject to a variety of disputes and litigation, with and without merit, all of which may be costly and may divert the attention of our management. The claims underlying such disputes and litigation could be various and may include, but are not limited to, product indemnification claims, employment-related claims, including claims of wrongful termination, discrimination, harassment, retaliation, and wage and hour disputes, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of alleged non-compliance with contract provisions, and claims related to alleged violations of laws and regulations. In 2021, we were named in a wrongful termination lawsuit by a former employee. The matter went to trial in 2025 and resulted in a jury verdict adverse to the Company in the amount of $9.15 million plus significant additional costs. The results of any complex legal proceeding are difficult to predict. The resolution of any litigation, threatened litigation, or other dispute, could involve payments to the other party, which may be significant or involve an agreement that restricts the operation of our business. Regardless of the amount in damages we may pay, even if minimal, the costs of defending any such lawsuits may be significant. We may be unable to obtain insurance coverage for the claims underlying all of our litigation and dispute risks on terms acceptable to us, or at all. Allegations made in the course of legal proceedings may also harm our reputation, regardless of whether there is merit to such claims. Any litigation, threatened litigation, or other disputes could be harmful to our business and results of operations.
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Changes in tax rules and regulations, changes in interpretation of tax rules and regulations, or unfavorable assessments from tax audits may increase the amount of taxes we are required to pay.
Our operations are subject to income and other taxes in the U.S. and in multiple foreign jurisdictions. The U.S., countries in Asia, and other countries where we do business have recently enacted or are considering changes in relevant tax, accounting, and related laws, regulations, and interpretations, including changes to tax laws applicable to multinational companies. For example, on July 4, 2025, the U.S. enacted legislation commonly referred to as the “One Big Beautiful Bill Act,” which, among other changes, allows domestic research and development expenditures to be expensed for tax years beginning on January 1, 2025 and modifies certain international tax provisions for tax years starting on January 1, 2026. This legislation or other potential changes could adversely affect our effective tax rates or result in other costs to us.
The EU member states formally adopted the EU’s Pillar Two Directive, which was established by the Organization for Economic Cooperation and Development (the “OECD”), and which generally provides for a 15% minimum effective tax rate for multinational corporations, in all jurisdictions in which they operate (“Pillar Two”). However, on January 5, 2026, the OECD announced a “side-by-side” elective safe harbor that exempts U.S.-parented multinational corporations from certain provisions of Pillar Two for fiscal years beginning on January 1, 2026.
The foregoing items could have a material effect on our business, cash flow, results of operations or financial conditions.
Changes in environmental laws and regulations, including with respect to energy consumption and climate change, may have a negative impact on our business.
Changing environmental regulations and the timetable to implement them continue to impact our customers’ demand for our products. Currently we have limited visibility into our customers’ strategies to implement these changing environmental regulations into their business operations. The inability to accurately determine our customers’ strategies could make some of our products obsolete, thereby increasing our inventory-related costs.
The semiconductor industry is subject to environmental regulations, particularly those that control and restrict the sourcing, use, transportation, storage, and disposal of certain minerals, chemicals, and materials used in the semiconductor manufacturing process. We expect the heightened worldwide awareness regarding climate change and its environmental impact to continue, which may result in new environmental laws and regulations that could affect us, our suppliers, or our customers. New environmental laws and regulations could require us or our suppliers to obtain alternative materials that may increase our costs or be unavailable to us, thereby negatively impacting our ability to manufacture our products, which may adversely affect our operating results.
Additionally, the heightened worldwide awareness regarding climate change could also result in risks such as shifting customer preferences. Changing customer preferences may result in increased expectations regarding our solutions, products, and services, including the use of packaging materials and other components in our products and their environmental impact. These expectations may cause us to incur additional costs or make other changes to our operations to respond to these changes, which could adversely affect our financial results. If we fail to manage transition risks and customer expectations in an effective manner, customer demand for our solutions, products, and services could diminish, and our profitability could suffer. Concerns over climate change, as well as the adoption of new laws or regulations, may also result in shifts in customer expectations, preferences, or requirements, which may require us to change our practices or incur increased costs or adversely impact customer demand for our products and services.
Securities laws and regulations, including potential risk resulting from our evaluation of internal controls over financial reporting, will continue to impact our results.
Complying with the requirements of federal securities laws, state laws, stock exchange requirements, and other legal requirements has imposed significant compliance costs, and are expected to continue to impose significant costs as well as a management burden, on us. These rules and regulations could also make it more difficult for us to attract and retain qualified executive officers and members of our board of directors, particularly qualified members to serve on our audit committee, as executive officers and members of our board of directors expect that we will provide adequate director and officer liability insurance, which may not be available to us on terms which are acceptable to us, or at all.
Additionally, because these laws, regulations, and standards are expected to be subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.
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Changes in privacy and data security and protection laws could have an adverse effect on our operations.
We are or may become subject to a variety of laws and regulations regarding privacy, data protection, and data security, such as the European Union’s General Data Protection Regulation (“GDPR”). There are numerous U.S. federal, state, and local laws and regulations and foreign laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions. The costs of compliance with the GDPR and similar laws may have an adverse effect on our operations. Given that the scope, interpretation, and application of these laws and regulations are often uncertain and may be in conflict across jurisdictions, it is possible they may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceived failure by us to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personal data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our operating results and financial condition.
General Risk Factors
Current or potential war, domestic or international conflict, political or social instability, or military actions could adversely affect our business.
Like other U.S. companies, our business and operating results are subject to uncertainties arising out of economic consequences of current and potential military actions, civil unrest (including theft, looting, and vandalism), terrorist activities or other acts of violence and associated political instability, and the impact of heightened security concerns on domestic and international travel and commerce. These uncertainties could also lead to delays or cancellations of customer orders, a general decrease in corporate spending, or our inability to effectively market and sell our products. Any of these results could substantially harm our business and results of operations, causing a decrease in our revenue.
The ongoing military conflict involving the U.S., Israel, Iran, and other countries in the Middle East and beyond, has increased regional and global tensions. As a result, actions have been taken that impact trade, including blockades of or other sanctions that limit access to the Strait of Hormuz. This conflict may continue to cause instability in the Middle East, disruption to global energy supplies and transportation routes, and volatility or sustained increase in oil, other energy, and commodity prices. Such developments could further increase costs to us, our customers, or our suppliers, contribute to inflationary pressures, and adversely affect global economic conditions, which may have an adverse effect on our business. If these conflicts, sanctions, or geopolitical tensions worsen, we cannot provide assurances that our business will not be impacted negatively in the future.
Any failure, disruption, or security breach or incident otherwise affecting our information technology infrastructure or information management systems could have an adverse impact on our business and operations.
Cyberattacks have become increasingly more prevalent and much harder to detect, defend against, and prevent. As the frequency of cyberattacks and resulting breaches reported by other businesses and governments increase, we expect to continue to devote significant resources to improve and maintain our IT infrastructure and its security. We have incurred and may in the future incur significant costs in order to implement, maintain, and/or update security systems we believe are necessary to protect our IT infrastructure. As the techniques used to obtain unauthorized access to or to sabotage or otherwise disrupt systems change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. A breakdown in existing controls and procedures around our cybersecurity environment may prevent us from detecting, reporting, or responding to cyber incidents in a timely manner and any such breakdown, or any security breach or incident suffered by us or our third-party service providers, could have a material adverse effect including, but not limited to, interruptions, disruptions, or delays in our business operations, loss of existing or future customers, claims, demands, and liabilities as well as damage to our reputation, which could adversely affect our business, reputation, and financial results. We cannot guarantee that our implemented processes for IT and risk mitigation measures will be effective for our IT systems.
Furthermore, we rely on products and services provided by third-party suppliers to operate certain critical business systems. We cannot guarantee that third parties and the infrastructure in our supply chain or our partners’ supply chains have not been or will not be compromised or that they do not or will not in the future contain exploitable defects or bugs that could result in a breach of or disruption to or other incident impacting our IT infrastructure, including our products and services, or the third-party information technology systems that support our services.
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We have limited insight into the data privacy or security practices of third-party service providers. Our ability to monitor these third parties’ information security practices is limited, and they may not have adequate information security measures in place. If one of our third-party suppliers suffers a security breach or incident, our response may be limited or more difficult because we may not have direct access to their systems, logs and other information related to the security breach or incident.
Interruptions in our information technology systems could adversely affect our business.
We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business. Any significant system or network disruption, including but not limited to, new system implementations, faulty software provided by one of our vendors, computer viruses, security breaches or incidents, or energy blackouts could have a material adverse impact on our operations, sales, and operating results. We have implemented measures to manage our risks related to such disruptions, but such disruptions could still occur and negatively impact our operations and financial results. Furthermore, the risk of state-supported and geopolitically motivated cybersecurity incidents may increase due to geopolitical instability. In addition, we may incur additional costs to remedy any damages caused by these disruptions, security breaches, or other security incidents.
Unfavorable or uncertain market conditions and risks relating to the adoption, use, or application of emerging technologies, including AI, by our customers and in our business, may impact financial results and could result in reputational and financial harm and liability.
The adoption of AI solutions and other emerging technologies may not develop in the manner or in the time periods we anticipate, and as these markets are still developing and continue to evolve, demand for products and solutions related to or that support such technologies may be unpredictable and may vary significantly from one period to another. In addition, market enthusiasm and capital spending for AI-related infrastructure and applications may be cyclical or volatile. If customers or end markets materially reduce, delay, or redirect spending (including due to macroeconomic conditions, budget constraints, changes in technology architectures, a perceived overbuild of AI capacity, or other unanticipated reasons), demand for our products could be adversely affected.
These markets may also not develop as anticipated if AI training and inference costs drop materially due to customer adoption of less expensive alternative technologies or approaches, or if customers achieve desired performance using alternative solutions that reduce the need for certain components. Even if these markets evolve in the manner we anticipate, if we do not have timely, competitively priced and market-accepted products available to meet customer needs in these areas, we may miss significant opportunities, our business, financial condition, and results of operations could be materially and adversely affected.
We also use AI technologies in our own business, including in our operations, and internal processes, and we expect our use of such technologies to increase over time. Our use of AI presents risks and challenges that could affect our business and reputation, including the potential for inaccurate, incomplete, biased, or unreliable outputs; errors in design, data, or implementation; intellectual property, privacy, cybersecurity, or other legal claims; and reputational harm, any of which could adversely affect our business, financial condition, and results of operations.
Fluctuations in exchange rates, particularly the exchange rate between the U.S. dollar and the Japanese yen, Swiss franc and euro, may impact our gross margin and net income.
Our exchange rate risk related to the Japanese yen includes several suppliers with which we have wafer supply agreements based in U.S. dollars; however, these agreements also allow for mutual sharing of the impact of the exchange rate fluctuation between Japanese yen and the U.S. dollar. Each year, our management and these suppliers review and negotiate 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 between us and these suppliers. We maintain cash denominated in Swiss francs and euros to fund the operations of our Swiss subsidiary. The functional currency of our Swiss subsidiary is the U.S. dollar; gains and losses arising from the remeasurement of non-functional currency balances are recorded in other income in our consolidated statements of income, and material unfavorable exchange-rate fluctuations with the Swiss franc could negatively impact our net income.
In the event of an earthquake, fire, other pandemics, natural or other disasters, including with respect to climate change, our operations may be interrupted, and our business would be harmed.
Our principal executive offices and operating facilities are situated near San Francisco, California, and most of our major suppliers, which are wafer foundries and assembly houses, are located in areas that have been subject to severe earthquakes, such as Japan. Many of our suppliers are also susceptible to other disasters such as tropical storms, typhoons, tsunamis, or other catastrophic events. In the event of a disaster, we or one or more of our major suppliers may be temporarily unable to continue operations and may suffer significant property damage. Additionally, our business or our
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suppliers may, in the future, be adversely impacted by worldwide responses to any global health or other crises. Such impacts could include public health measures, travel restrictions, business shutdowns, border closures, delivery and freight delays, and other disruptions. Any interruption in our ability, or that of our suppliers, to continue operations could delay the development and shipment of our products and have a substantial negative impact on our financial results.
We are exposed to risks associated with acquisitions and strategic investments.
We have made, and in the future intend to make, acquisitions of, and investments in, companies, technologies, or products in existing, related, or new markets. Acquisitions involve numerous risks, including but not limited to:
•the inability to realize anticipated benefits, which may occur due to any of the reasons described below, or for other unanticipated reasons;
•the risk of litigation or disputes with customers, suppliers, partners, or stockholders of an acquisition target arising from a proposed or completed transaction;
•impairment of acquired intangible assets and goodwill as a result of changing business conditions, technological advancements, or worse-than-expected performance, which would adversely affect our financial results; and
•unknown, underestimated, or undisclosed commitments, liabilities, or issues not discovered in our due diligence of such transactions.
We may also make strategic investments with other companies, which may decline in value or not meet our desired objectives. The success of these strategic investments depends on various factors over which we may have limited or no control and requires ongoing and effective cooperation with our strategic partners. Moreover, these relationships are often illiquid, such that it may be difficult or impossible for us to exit such relationships without loss of all or a significant portion of the amounts we invested.
Our inability to successfully integrate, or realize the expected benefits from, our acquisitions could adversely affect our results.
We have made, and in the future intend to make, acquisitions of other businesses and with these acquisitions there is a risk that integration difficulties may cause us not to realize expected benefits. The success of the acquisitions could depend, in part, on our ability to realize the anticipated benefits and cost savings (if any) from combining the businesses of the acquired companies and our business, which may take longer to realize than expected.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the three months ended September 30, 2026, Wendy A. Arienzo , a member of our Board of Directors , adopted a trading arrangement, as that term is defined in Item 408(a) of Regulation S-K, that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. The trading arrangement was adopted on August 12, 2026 and provides for the potential sale of up to 16,391 shares of our common stock and is scheduled to expire on August 12, 2027 , subject to earlier termination in accordance with its terms.
During the three months ended September 30, 2026, no other director or executive officer (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated
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ITEM 6. EXHIBITS
| Incorporation by Reference | ||||||||||||||||||||||||||||||||||||||
| EXHIBIT NUMBER | Exhibit Description | Form | File Number | Exhibit/Other Reference | Filing Date | Filed Herewith | ||||||||||||||||||||||||||||||||
| 3.1 | 10-Q | 000-23441 | 3.1 | 8/06/2025 | ||||||||||||||||||||||||||||||||||
| 3.2 | 8-K | 000-23441 | 3.1 | 1/30/2026 | ||||||||||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||||||||
| 32.1** | X | |||||||||||||||||||||||||||||||||||||
| 32.2** | X | |||||||||||||||||||||||||||||||||||||
| 101.INS | XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | ||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | ||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |||||||||||||||||||||||||||||||||||||
All references in the table hereto previously filed documents or descriptions are incorporating those documents and descriptions by reference thereto.
____________________________________________________
| ** | The certifications attached as Exhibits 32.1 and 32.2 accompanying this Quarterly Report on Form 10-Q, are not deemed filed with the SEC, and are not to be incorporated by reference into any filing of Power Integrations, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| POWER INTEGRATIONS, INC. | |||||||||||
| Dated: | November 5, 2026 | By: | /s/ NANCY ERBA | ||||||||
| Nancy Erba | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||||||||
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jennifer A. Lloyd certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Power Integrations, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Dated: | November 5, 2026 | By: | /s/ JENNIFER A. LLOYD | ||||||||
Jennifer A. Lloyd Chief Executive Officer | |||||||||||
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nancy Erba, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Power Integrations, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Dated: | November 5, 2026 | By: | /s/ NANCY ERBA | ||||||||
| Nancy Erba Chief Financial Officer | |||||||||||
Exhibit 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Power Integrations, Inc. (the “Company”) for the fiscal quarter ended September 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Jennifer A, Lloyd, Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that to the best of my knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: | November 5, 2026 | By: | /s/ JENNIFER A. LLOYD | ||||||||
| Jennifer A. Lloyd Chief Executive Officer | |||||||||||
Exhibit 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Power Integrations, Inc. (the “Company”) for the fiscal quarter ended September 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Nancy Erba, Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that to the best of my knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: | November 5, 2026 | By: | /s/ NANCY ERBA | ||||||||
| Nancy Erba Chief Financial Officer | |||||||||||