Power Integrations (NASDAQ: POWI) Q1 profit drops amid restructuring costs

Rhea-AI Filing Summary

Power Integrations reported modest Q1 2026 revenue growth but sharply lower profit as it restructured its business. Net revenue rose to $108.3 million from $105.5 million, driven mainly by stronger industrial demand. Gross margin slipped to 52.6% from 55.2%, reflecting an unfavorable dollar/yen exchange rate and restructuring-related costs.

Net income fell to $3.3 million, or $0.06 per diluted share, down from $8.8 million, or $0.15 per diluted share, a year earlier. The company reduced its workforce by about 7% and recorded $6.6 million of restructuring and related charges, primarily severance. A $1.4 million credit reversed previously recognized stock-based compensation tied to a former CEO’s awards.

Power Integrations ended the quarter with $257.2 million in cash, cash equivalents and short-term investments and working capital of $391.8 million. It paid $11.95 million of dividends at $0.215 per share and has a new unsecured $100 million revolving credit facility with PNC Bank maturing in 2031, with no borrowings outstanding.

Positive

• None.

Negative

• Profitability deteriorated sharply: Q1 2026 net income fell to $3.3 million from $8.8 million and diluted EPS declined to $0.06 from $0.15, driven by lower gross margin and higher restructuring-related costs.
• Restructuring and workforce reduction: The company reduced headcount by about 7% and recorded $6.6 million of restructuring and related charges, signaling cost-cutting in response to business conditions.
• Margin compression: Gross margin declined to 52.6% from 55.2%, reflecting currency impacts and restructuring costs, which may limit near-term earnings leverage even with modest revenue growth.

Insights

Equity analyst

Q1 2026 shows stable revenue but materially weaker profitability driven by restructuring and margin pressure.

Power Integrations grew net revenue slightly to $108.3 million from $105.5 million, mainly from the industrial end market. However, gross margin compressed to 52.6% from 55.2%, reflecting currency headwinds and restructuring-related costs.

Operating expenses rose to $55.5 million from $51.5 million, largely due to $6.6 million of restructuring and related charges tied to a roughly 7% workforce reduction. A $1.4 million credit in other operating expenses partially offset this by reversing earlier stock-based compensation on modified executive awards.

Net income declined to $3.3 million from $8.8 million, with diluted EPS dropping to $0.06 from $0.15. Despite the profit hit, liquidity remains solid with $257.2 million in cash, cash equivalents and short-term investments, plus a new $100 million unsecured revolving line of credit effective April 10, 2026. The company also returned $11.95 million via dividends while reserving approximately $11.3 million for an employee relations dispute as of December 31, 2025.

Key Figures

Net revenue: $108.3 million Net income: $3.3 million Diluted EPS: $0.06 +5 more

8 metrics

Net revenue $108.3 million Three months ended March 31, 2026 vs $105.5 million in 2025

Net income $3.3 million Three months ended March 31, 2026 vs $8.8 million in 2025

Diluted EPS $0.06 Three months ended March 31, 2026 vs $0.15 in 2025

Gross margin 52.6% Q1 2026, compared with 55.2% in Q1 2025

Restructuring and related charges $6.6 million Recognized in the three months ended March 31, 2026

Cash, cash equivalents and short-term investments $257.2 million Balance as of March 31, 2026

Dividends paid $11.95 million Cash dividends in the three months ended March 31, 2026 at $0.215 per share

Workforce reduction Approximately 7% Reduction under Q1 2026 restructuring plan

Key Terms

restructuring and related charges, stock-based compensation expense, available-for-sale, effective tax rate, +2 more

6 terms

restructuring and related charges financial

"restructuring and related charges of $6.6 million for severance and benefit costs associated with the workforce reduction"

Restructuring and related charges are one-time costs a company records when it reorganizes operations—such as laying off staff, closing facilities, ending leases, or writing down assets—to become more efficient. Investors watch these charges because they reduce reported profit now but can signal future savings or ongoing risks; like paying for a house remodel, the short-term hit may lead to lower long-term expenses, so distinguishing one-off costs from recurring problems is key.

stock-based compensation expense financial

"Total stock-based compensation expense was $6,307 thousand in the three months ended March 31, 2026"

Stock-based compensation expense is the value that a company records when it gives employees or executives shares or options to buy shares as part of their pay. It matters because it shows the true cost of paying employees this way, which can affect the company's profits and how investors see its financial health.

available-for-sale financial

"Amortized cost and estimated fair market value of investments classified as available-for-sale at March 31, 2026"

A classification for bonds, stocks or other investments that a company plans to keep but might sell before they reach full term. Think of it like items a shop keeps on a shelf for potential sale: their market value can go up or down while the company holds them, and those unrealized gains or losses are shown separately from operating profit until they are sold. Investors watch this because large swings can change a company’s reported net worth and signal how much flexibility it has to raise cash quickly.

effective tax rate financial

"The Company’s effective tax rate for the three months ended March 31, 2026, was 15.8% and 11.1% in the corresponding period of 2025"

The effective tax rate is the percentage of a company's profits that it pays in taxes. It shows how much of its earnings go to taxes after all deductions and credits are considered. For investors, it indicates how much of the company's income is taken by taxes, impacting overall profitability and financial health.

Minimum Liquidity financial

"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"

Funded Indebtedness to Adjusted EBITDA financial

"requires 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"

10-Q Quarterly Reports: What Changes Quarter to Quarter →

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

​

(Mark One)

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

For the quarterly period ended March 31, 2026

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

POWER INTEGRATIONS, INC.

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(Exact name of registrant as specified in its charter)

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

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

(408) 414-9200

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

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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  ☒

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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 May 4, 2026
Common Stock, $0.001 par value	55,719,984

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Table of Contents

POWER INTEGRATIONS, INC.

TABLE OF CONTENTS

​	​	Page
​	​	​
PART I. FINANCIAL INFORMATION		​
​	​	​
Item 1.	Financial Statements	​
​	​	​
​	Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 (Unaudited)	4
​	​	​
​	Condensed Consolidated Statements of Income for the three months ended March 31, 2026 and 2025 (Unaudited)	5
​	​	​
​	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2026 and 2025 (Unaudited)	6
​	​	​
​	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2026 and 2025 (Unaudited)	7
​	​	​
​	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025 (Unaudited)	8
​	​	​
​	Notes to Unaudited Condensed Consolidated Financial Statements	9
​	​	​
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
​	​	​
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
​	​	​
Item 4.	Controls and Procedures	28
​	​	​
PART II. OTHER INFORMATION		28
​	​	​
Item 1.	Legal Proceedings	28
​	​	​
Item 1A.	Risk Factors	28
​	​	​
Item 5.	Other Information	41
​	​	​
Item 6.	Exhibits	43
​	​	​
SIGNATURES		44

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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 sold through distributors, which limits our direct interaction with our end customers, therefore reducing our ability to forecast sales and increasing the complexity of our business; if our products do not penetrate additional markets, our business will not grow as we expect; intense competition in the high-voltage power supply industry may lead to a decrease in our average selling price and reduced sales volume of our products; we depend on third-party suppliers to provide us with wafers for our products, and if they fail to provide us sufficient quantities of wafers, our business may suffer; if we are unable to adequately protect or enforce our intellectual property rights, we could lose market share, incur costly litigation expenses, suffer incremental price erosion or lose valuable assets, any of which could harm our operations and negatively impact our profitability; and the other risk factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 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.

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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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​	​	​	​	​	​	​
​	​	​		​	​
(In thousands)	​	March 31, 2026		​	December 31, 2025
ASSETS	​	​	​	​	​	​
Current assets:	​	​	​	​	​	​
Cash and cash equivalents	​	$	63,390	​	$	58,755
Short-term investments	​		193,814	​		190,755
Accounts receivable, net	​		14,407	​		18,254
Inventories	​		162,982	​		166,887
Prepaid expenses and other current assets	​		23,747	​		23,678
Total current assets	​		458,340	​		458,329
Property and equipment, net	​		143,630	​		146,536
Intangible assets, net	​		7,061	​		7,244
Goodwill	​		95,271	​		95,271
Other non-current assets	​		66,385	​		64,827
TOTAL ASSETS	​	$	770,687	​	$	772,207
LIABILITIES AND STOCKHOLDERS’ EQUITY	​		​	​		​
Current liabilities:	​		​	​		​
Accounts payable	​	$	31,407	​	$	33,963
Accrued payroll and related expenses	​		13,224	​		13,840
Other accrued liabilities	​		21,958	​		22,558
Total current liabilities	​		66,589	​		70,361
Other liabilities	​		32,292	​		29,001
TOTAL LIABILITIES	​		98,881	​		99,362
Commitments and contingencies (Note 11)	​		​	​		​
STOCKHOLDERS’ EQUITY:	​		​	​		​
Common stock, $0.001 par value, 140,000 shares authorized; and 55,600 and 55,339 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively	​		20	​		20
Additional paid-in capital	​		8,997	​		—
Accumulated other comprehensive loss	​		(2,491)	​		(1,105)
Retained earnings	​		665,280	​		673,930
TOTAL STOCKHOLDERS' EQUITY	​		671,806	​		672,845
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	​	$	770,687	​	$	772,207

​

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

​

4

Table of Contents

POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​ ​ ​	March 31,
(In thousands, except per share amounts)	​	2026		​ ​ ​	2025
Net revenue	​	$	108,308	​	$	105,529
Cost of revenue	​		51,370	​		47,294
Gross profit	​		56,938	​		58,235
​	​	​	​	​	​	​
Operating expenses:	​		​	​		​
Research and development	​		26,255	​		24,095
Selling, general and administrative	​		24,444	​		27,422
Other operating expenses	​	​	(1,419)	​	​	—
Restructuring and related charges	​	​	6,204	​	​	—
Total operating expenses	​		55,484	​		51,517
Income from operations	​		1,454	​		6,718
Other income	​		2,466	​		3,167
Income before income taxes	​		3,920	​		9,885
Provision for income taxes	​		620	​		1,095
NET INCOME	​	$	3,300	​	$	8,790
​	​	​	​	​	​	​
Earnings per share:	​		​	​		​
Basic	​	$	0.06	​	$	0.15
Diluted	​	$	0.06	​	$	0.15
​	​	​	​	​	​	​
Shares used in per share calculation:	​		​	​		​
Basic	​		55,506	​	​	56,871
Diluted	​		55,874	​	​	57,123

​

​

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

​

5

Table of Contents

POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

​

​	​	​	​	​	​	​	​
​	​	Three Months Ended					​
​	​	March 31,					​
(In thousands)	​ ​ ​	2026		​ ​ ​	2025		​ ​ ​
Net income	​	$	3,300	​	$	8,790	​
Other comprehensive income (loss), net of tax:	​		​	​		​	​
Foreign currency translation adjustments, net of $0 tax in each of the three months ended March 31, 2026 and 2025	​	​	(389)	​	​	390	​
Unrealized gain (loss) on investments, net of ($250) and ($116) tax in the three months ended March 31, 2026 and 2025, respectively	​	​	(999)	​	​	451	​
Amortization of defined benefit pension items, net of tax of $0 in each of the three months ended March 31, 2026 and 2025	​	​	2	​	​	(1)	​
Total other comprehensive income (loss)	​		(1,386)	​		840	​
TOTAL COMPREHENSIVE INCOME	​	$	1,914	​	$	9,630	​

​

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

​

6

Table of Contents

POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​ ​ ​

Three Months Ended March 31, 2026

​

​

​

​

​

​

​

​

​

​

Accumulated

​

​

​

​

​

​

​

​

​

​

​

​

​

Additional

​

Other

​

​

​

​

Total

​

​

Common Stock

​

Paid-In

​

Comprehensive

​

Retained

​

Stockholders’

(In thousands)

Shares

Amount

Capital

Loss

Earnings

Equity

BALANCE AT DECEMBER 31, 2025

55,339

​

$

20

​

$

—

​

$

(1,105)

​

$

673,930

​

$

672,845

Issuance of common stock under employee stock option and stock award plans

192

​

—

​

—

​

—

​

—

​

—

Issuance of common stock under employee stock purchase plan

69

​

—

​

2,690

​

—

​

—

​

2,690

Stock-based compensation expense related to employee stock awards

—

​

—

​

5,917

​

—

​

—

​

5,917

Stock-based compensation expense related to employee stock purchases

—

​

—

​

390

​

—

​

—

​

390

Payment of dividends to stockholders

—

​

—

​

—

​

—

​

(11,950)

​

(11,950)

Unrealized actuarial gain on pension benefits

—

​

—

​

—

​

2

​

—

​

2

Unrealized loss on investments

—

​

—

​

—

​

(999)

​

—

​

(999)

Foreign currency translation adjustment

—

​

—

​

—

​

(389)

​

—

​

(389)

Net income

—

​

—

​

—

​

—

​

3,300

​

3,300

BALANCE AT MARCH 31, 2026

55,600

​

$

20

​

$

8,997

​

$

(2,491)

​

$

665,280

​

$

671,806

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​ ​ ​

Three Months Ended March 31, 2025

​

​

​

​

​

​

​

​

​

​

Accumulated

​

​

​

​

​

​

​

​

​

​

​

​

​

Additional

​

Other

​

​

​

​

Total

​

​

Common Stock

​

Paid-In

​

Comprehensive

​

Retained

​

Stockholders’

(In thousands)

Shares

Amount

Capital

Loss

Earnings

Equity

BALANCE AT DECEMBER 31, 2024

56,837

​

$

22

​

$

18,734

​

$

(3,023)

​

$

734,039

​

$

749,772

Issuance of common stock under employee stock option and stock award plans

207

​

—

​

—

​

—

​

—

​

—

Repurchase of common stock

(404)

​

—

​

(23,098)

​

—

​

—

​

(23,098)

Issuance of common stock under employee stock purchase plan

53

​

—

​

2,787

​

—

​

—

​

2,787

Stock-based compensation expense related to employee stock awards

—

​

—

​

8,329

​

—

​

—

​

8,329

Stock-based compensation expense related to employee stock purchases

—

​

—

​

354

​

—

​

—

​

354

Payment of dividends to stockholders

—

​

—

​

—

​

—

​

(11,959)

​

(11,959)

Unrealized actuarial loss on pension benefits

—

​

—

​

—

​

(1)

​

—

​

(1)

Unrealized gain on investments

—

​

—

​

—

​

451

​

—

​

451

Foreign currency translation adjustment

—

​

—

​

—

​

390

​

—

​

390

Net income

—

​

—

​

—

​

—

​

8,790

​

8,790

BALANCE AT MARCH 31, 2025

56,693

​

$

22

​

$

7,106

​

$

(2,183)

​

$

730,870

​

$

735,815

​

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

​

7

Table of Contents

POWER INTEGRATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(In thousands)	​ ​ ​	2026		​ ​ ​	2025
CASH FLOWS FROM OPERATING ACTIVITIES:		​	​		​	​
Net income	​	$	3,300	​	$	8,790
Adjustments to reconcile net income to net cash provided by operating activities:	​		​	​		​
Depreciation	​		6,380	​		7,244
Amortization of intangibles	​		183	​		207
Loss on disposal of property and equipment	​		49	​		—
Stock-based compensation expense	​		6,307	​		8,683
Accretion of discount on investments	​		(156)	​		(346)
Decrease in accounts receivable allowance for credit losses	​		—	​		(381)
Change in operating assets and liabilities:	​		​	​		​
Accounts receivable	​		3,847	​		4,747
Inventories	​		3,905	​		(3,456)
Prepaid expenses and other assets	​		3,414	​		832
Accounts payable	​		(4,072)	​		4,002
Other accrued liabilities	​		(3,112)	​		(3,936)
NET CASH PROVIDED BY OPERATING ACTIVITIES	​		20,045	​		26,386
​	​	​	​	​	​	​
CASH FLOWS FROM INVESTING ACTIVITIES:	​		​	​		​
Purchases of property and equipment	​		(1,998)	​		(5,726)
Purchases of investments	​		(14,807)	​		(5,630)
Proceeds from sales and maturities of investments	​		10,655	​		15,882
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	​		(6,150)	​		4,526
​	​	​	​	​	​	​
CASH FLOWS FROM FINANCING ACTIVITIES:	​		​	​		​
Issuance of common stock under employee stock plans	​		2,690	​		2,787
Repurchase of common stock	​		—	​		(23,098)
Payments of dividends to stockholders	​		(11,950)	​		(11,959)
NET CASH USED IN FINANCING ACTIVITIES	​		(9,260)	​		(32,270)
​	​	​	​	​	​	​
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	​		4,635	​		(1,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	​		58,755	​		50,972
CASH AND CASH EQUIVALENTS AT END OF PERIOD	​	$	63,390	​	$	49,614
​	​	​	​	​	​	​

​

​

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

​

8

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

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.

​

9

​

Table of Contents

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

3. CONDENSED CONSOLIDATED BALANCE SHEET COMPONENTS AND OTHER INFORMATION:

Accounts Receivable

​

​	​	​	​	​	​	​
​	​ ​ ​	March 31,		​ ​ ​	December 31,
(In thousands)	​	2026		​	2025
Accounts receivable trade	​	$	51,519	​	$	54,177
Allowance for ship and debit	​		(33,659)	​		(33,601)
Allowance for stock rotation and rebate	​		(3,359)	​		(2,228)
Allowance for credit losses	​	​	(94)	​	​	(94)
Total	​	$	14,407	​	$	18,254

​

​

Inventories

​	​	​	​	​	​	​
​	​ ​ ​	March 31,		​ ​ ​	December 31,
(In thousands)	​	2026		​	2025
Raw materials	​	$	99,517	​	$	101,366
Work-in-process	​		29,944	​		27,905
Finished goods	​		33,521	​		37,616
Total	​	$	162,982	​	$	166,887

​

Other non-current assets

​	​	​	​	​	​	​
​	​ ​ ​	March 31,		​ ​ ​	December 31,
(In thousands)	​	2026		​	2025
Deferred tax assets	​	$	34,797	​	$	35,594
Right of use for leased properties	​		22,718	​		19,325
Prepaid expenses	​		6,753	​		6,863
Other non-current assets	​	​	2,117	​	​	3,045
Total	​	$	66,385	​	$	64,827

​

Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income for the three months ended March 31, 2026 and 2025, were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized Gains

​

​

​

​

​

​

​

​

​

​

​

​

​

and Losses on

​

Defined Benefit

​

Foreign Currency

​

​

​

​

Investments

​

Pension Items

​

Items

​

Total

​

Three Months Ended

​

Three Months Ended

​

Three Months Ended

​

Three Months Ended

​

March 31,

​

March 31,

​

March 31,

​

March 31,

(In thousands)

2026

​ ​ ​

2025

​ ​ ​

2026

​ ​ ​

2025

​ ​ ​

2026

​ ​ ​

2025

​ ​ ​

2026

​ ​ ​

2025

Beginning balance

$

1,751

​

$

693

​

$

(32)

​

$

99

​

$

(2,824)

​

$

(3,815)

​

$

(1,105)

​

$

(3,023)

Other comprehensive income (loss) before reclassifications

(999)

​

451

​

—

​

—

​

(389)

​

390

​

(1,388)

​

841

Amounts reclassified from accumulated other comprehensive income (loss)

—

​

—

​

2

(1)

(1)

(1)

—

​

—

​

2

​

(1)

Net-current period other comprehensive income (loss)

(999)

​

451

​

2

​

(1)

​

(389)

​

390

​

(1,386)

​

840

Ending balance

$

752

​

$

1,144

​

$

(30)

​

$

98

​

$

(3,213)

​

$

(3,425)

​

$

(2,491)

​

$

(2,183)

(1) This component of accumulated other comprehensive income is included in the computation of net periodic pension cost for the three months ended March 31, 2026 and 2025.

​

​

10

Table of Contents

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

4. 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	​	​	4,591	​	​	151	​	​	4,742
Cash payments	​	​	(3,745)	​	​	(55)	​	​	(3,800)
Non-cash and other	​	​	—	​	​	—	​	​	—
Restructuring liability as of March 31, 2026	​	$	846	​	$	96	​	$	942

​

Cash severance charges of $0.4 million related to the departure of an executive officer are included in the table hereto. 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
​	​	​	March 31,
(in thousands)	​	​	2026		​ ​ ​	2025
Restructuring and related charges in cost of revenue	​	​	$	365	​	$	—
Restructuring and related charges in operating expenses	​	​	​	6,204	​	​	—
​	​	​	$	6,569	​	$	—

​

In conjunction with the restructuring actions, certain engineers were moved from sales and marketing projects to product development priorities. In accordance with this, $3.0 million of related department costs have been classified as research and development expense in the accompanying condensed consolidated statement of income this quarter and will be accounted for accordingly going forward.

​

​

​

​

​

​

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.

11

Table of Contents

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

The fair-value hierarchy of the Company’s cash equivalents and short-term investments at March 31, 2026 and December 31, 2025, was as follows:

​	​	​	​	​	​	​	​	​	​
​	​	Fair Value Measurement at
​	​	March 31, 2026
​	​	​	​	​	Quoted Prices in		​	​	​
​	​	​	​	​	Active Markets for		​	Significant Other
​	​	​	​	​	Identical Assets		​	Observable Inputs
(In thousands)	​	Total Fair Value		​	(Level 1)		​	(Level 2)
Commercial paper	​	$	7,234	​	$	—	​	$	7,234
Corporate securities	​	​	192,275	​	​	—	​	​	192,275
Money market funds	​		1,396	​		1,396	​	​	​
Total	​	$	200,905	​	$	1,396	​	$	199,509

​

​	​	​	​	​	​	​	​	​	​
​	​	Fair Value Measurement at
​	​	December 31, 2025
​	​	​	​	​	Quoted Prices in		​	​	​
​	​	​	​	​	Active Markets for		​	Significant Other
​	​	​	​	​	Identical Assets		​	Observable Inputs
(In thousands)	​	Total Fair Value		​	(Level 1)		​	(Level 2)
Commercial paper	​	$	5,555	​	$	—	​	$	5,555
Corporate securities	​	​	189,258	​	​	—	​	​	189,258
Money market funds	​		3,559	​		3,559	​		—
U.S. government securities	​	​	999	​	​	—	​	​	999
Total	​	$	199,371	​	$	3,559	​	$	195,812

​

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the three months ended March 31, 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 March 31, 2026, were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

Gross Unrealized

​

Estimated Fair

(In thousands)

​ ​ ​

Cost

​ ​ ​

Gains

​ ​ ​

Losses

​ ​ ​

Market Value

Investments due in 3 months or less:

​

​

​

​

​

​

​

​

Commercial paper

​

$

1,538

​

$

—

​

$

—

​

$

1,538

Corporate securities

​

​

8,300

​

​

9

​

​

—

​

​

8,309

Total

​

9,838

​

9

​

—

​

9,847

Investments due in 4-12 months:

​

​

​

​

​

​

​

​

Corporate securities

​

​

78,626

​

​

460

​

​

—

​

​

79,086

Total

​

78,626

​

460

​

—

​

79,086

Investments due in 12 months or greater:

​

​

​

​

​

​

​

​

Corporate securities

​

104,659

​

389

​

(167)

​

104,881

Total

​

​

104,659

​

389

​

​

(167)

​

104,881

Total investments

​

$

193,123

​

$

858

​

$

(167)

​

$

193,814

​

Accrued interest receivable was $1.8 million at March 31, 2026, and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

12

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

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

​

Gross Unrealized

​

Estimated Fair

(In thousands)

​ ​ ​

Cost

​ ​ ​

Gains

​ ​ ​

Losses

​ ​ ​

Market Value

Investments due in 3 months or less:

​

​

​

​

​

​

​

​

Commercial paper

​

$

1,498

​

$

—

​

$

—

​

$

1,498

Corporate securities

​

​

8,152

​

​

8

​

​

—

​

​

8,160

Total

​

9,650

​

8

​

—

​

9,658

Investments due in 4-12 months:

​

​

​

​

​

​

​

​

Corporate securities

​

32,256

​

267

​

—

​

32,523

Total

​

32,256

​

267

​

—

​

32,523

Investments due in 12 months or greater:

​

​

​

​

​

​

​

​

Corporate securities

​

​

146,910

​

1,665

​

(1)

​

148,574

Total

​

146,910

​

1,665

​

(1)

​

148,574

Total investments

​

$

188,816

​

$

1,940

​

$

(1)

​

$

190,755

​

Accrued interest receivable was $2.3 million at December 31, 2025, and was recorded within prepaid expenses and other current assets on the 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 March 31, 2026:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Less Than 12 Months

​

12 Months or Longer

​

Total

​

​ ​ ​

Estimated

​ ​ ​

Gross

​ ​ ​

Estimated

​ ​ ​

Gross

​ ​ ​

Estimated

​ ​ ​

Gross

​

​

Fair Market

​

Unrealized

​

Fair Market

​

Unrealized

​

Fair Market

​

Unrealized

(In thousands)

​

Value

​

Losses

​

Value

​

Losses

​

Value

​

Losses

Corporate securities

​

$

30,224

​

$

(167)

​

$

—

​

$

—

​

$

30,224

​

$

(167)

Total investments

​

$

30,224

​

$

(167)

​

$

—

​

$

—

​

$

30,224

​

$

(167)

​

In the three months ended March 31, 2026 and 2025, no unrealized losses on investments were recognized in the condensed consolidated statements of income.

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

​

7. 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 with the declaration of four cash dividends of $0.215 per share to be paid at the end of each quarter in 2026.

For the three months ended March 31, 2026 and 2025, cash dividends declared and paid were as follows:

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(In thousands, except per share amounts)	​ ​ ​	2026		​ ​ ​	2025
Dividends declared and paid	​	$	11,950	​	$	11,959
Dividends declared per common share	​	$	0.215	​	$	0.21

​

13

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

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 December 31, 2025, the Company did not have any amount authorized to repurchase shares of its common stock.

Employee Stock Incentive Plans

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three months ended March 31, 2026 and 2025:

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(In thousands)	​ ​ ​	2026		​ ​ ​	2025
Cost of revenue	​	$	469	​	$	657
Research and development	​		1,904	​		2,250
Selling, general and administrative	​		3,526	​		5,776
Other operating expenses (see note below)	​	​	(1,419)	​	​	—
Restructuring and related charges	​		1,827	​		—
Total stock-based compensation expense	​	$	6,307	​	$	8,683

​

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 quarter ended March 31, 2026, the Company recorded a $1.4 million credit in other operating expenses on the condensed consolidated statements of income, reversing a portion of the previously recognized stock-based compensation expense. The reversal reflects our revised estimate of the portion of the awards that will ultimately vest. Subsequent changes in our estimates could result in further adjustments in future periods until the vesting of these equity awards.

​

​

​

​

8. REVENUE:

Customer Concentration

The Company’s top ten customers accounted for approximately 80% of net revenue in both the three months ended March 31, 2026 and 2025. A significant portion of revenue is attributable to sales of the Company’s products to distributors of electronic components. These distributors sell the Company’s products to a broad, diverse range of end users, including original equipment manufacturers (“OEMs”) and merchant power-supply contract manufacturers (“CMs”). Similarly, merchant power-supply manufacturers sell power supplies incorporating the Company’s products to a broad range of OEMs.

Sales to distributors and direct sales to OEMs and power-supply CMs contributed to the Company’s net revenue as follows:

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(In thousands)	​	2026		​ ​ ​	2025

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

Sales to distributors	​	$	76,739	​	$	75,164
Sales to OEMs and CMs	​		31,569	​		30,365
Total net revenue	​	$	108,308	​	$	105,529

​

During the three months ended March 31, 2026 and 2025, 15% and 13% of net revenue related to an OEM that fulfilled its purchases through the Company’s CM customers in each respective quarter.

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

​	​	​	​	​	​	​
​	​ ​ ​	Three Months Ended
​	​	March 31,
Customer	​	2026		​	2025
Customer A		30	%	​	32	%
Customer B	​	10	%	​	*	​
Customer C	​	10	%	​	*	​
Customer D		10	%	​	*	​

​

*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 March 31, 2026 and December 31, 2025, 87% and 89% of accounts receivable were concentrated with the Company’s top ten customers.

The following customers represented 10% or more of accounts receivable at March 31, 2026 and December 31, 2025:

​	​	​	​	​	​	​
​	​	March 31,		​	December 31,
Customer	​ ​ ​	2026		​	2025
Customer A	​	30	%	​	32	%
Customer B	​	14	%	​	11	%
Customer C	​	14	%	​	18	%
Customer D	​	11	%	​	*	​

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

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

15

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

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
​	​	March 31,
(In thousands)	​ ​ ​	2026		​ ​ ​	2025
Americas	​	$	7,083	​	$	5,717
EMEA	​		15,125	​		11,291
APAC:	​		​	​		​
Hong Kong/China	​		49,971	​		56,488
Korea	​	​	10,747	​	​	12,269
Other APAC	​		25,382	​		19,764
Total net revenue	​	$	108,308	​	$	105,529

​

​

​

​

​

​

​

9. EARNINGS PER SHARE:

Basic earnings per share are calculated by dividing net income by the weighted-average shares of common stock outstanding during the period. Diluted earnings per share are calculated by dividing net income by the weighted-average shares of common stock and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares included in this calculation consist of 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 per share calculation is as follows:

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(In thousands, except per share amounts)	​ ​ ​	2026		​ ​ ​	2025
Basic earnings per share:		​	​		​	​
Net income	​	$	3,300	​	$	8,790
Weighted-average common shares	​		55,506	​		56,871
Basic earnings per share	​	$	0.06	​	$	0.15
Diluted earnings per share: (1)	​		​	​		​
Net income	​	$	3,300	​	$	8,790
Weighted-average common shares	​		55,506	​		56,871
Effect of dilutive awards:	​		​	​		​
Employee stock plans	​		368	​		252
Diluted weighted-average common shares	​		55,874	​		57,123
Diluted earnings per share	​	$	0.06	​	$	0.15

​

(1) The Company includes the shares underlying performance-based awards in the calculation of diluted earnings per share if the performance conditions have been satisfied as of the end of the reporting period and excludes such shares when the necessary conditions have not been met. The Company has excluded the shares underlying the outstanding performance-based awards in the 2026 and 2025 calculations as the shares were not contingently issuable as of the end of the reporting period.

​

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.

16

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

The Company’s effective tax rate for the three months ended March 31, 2026, was 15.8% and 11.1% in the corresponding period of 2025. The effective tax rate in these periods were lower than the statutory federal income-tax rate of 21% due to the geographic distribution of the Company’s world-wide earnings in lower-tax jurisdictions and federal tax credits. In the three months ended March 31, 2026, the Company’s effective tax rate was affected by the recognition of a tax accounting shortfall associated with share-based payments. Additionally, in the three months ended March 31, 2025, the Company’s effective tax rate was unfavorably impacted by the recognition of share-based payments and foreign income subject to U.S. tax. The Company has not been granted any incentivized tax rates and does not operate under any tax holidays in any jurisdiction.

​

11. COMMITMENTS AND CONTINGENCIES:

Supplier Agreements

Under the terms of the Company’s wafer-supply agreements with various foundries, the wafers purchased from these suppliers are priced in U.S. dollars, with mutual sharing of the impact of fluctuations in the exchange rate between the Japanese yen and the U.S. dollar on future purchases. Each year, the Company’s management and several suppliers review and negotiate future pricing; the negotiated pricing is denominated in U.S. dollars but is subject to contractual exchange-rate true-up provisions. The fluctuation in the exchange rate is shared between the Company and each of these suppliers on future purchases.

​

Warranty

The Company generally warrants that its products will substantially conform to the published specifications for 12 months from the date of shipment. Under the terms and conditions of sale, the Company’s liability is limited generally 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.

During the year ended December 31, 2025, the Company had been defending against patent-infringement claims filed by a third party against a customer of the Company, including claims filed in 2019 and a follow-on claim filed in the first quarter of 2025. The Company intervened on behalf of its customer and sought a declaration of non-infringement with respect to use of the Company’s products. In the second half of 2025, the Company successfully obtained verdicts of noninfringement and invalidity of all asserted claims, and as part of the noninfringement verdict, the jury found that no products incorporating the Company’s specified products met the specific requirements of the claimant’s asserted claims. The Court thereafter entered judgment in favor of the Company and also dismissed the follow-on claim. In April 2026, the Company executed a settlement in which the claimant granted the Company a full release and covenant not to assert any claims against the Company or its customers on any of the claimant’s patents based on the use or incorporation of any product.  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.

As of December 31, 2025, the Company had reserved approximately $11.3 million for an employee relations dispute including legal fees which is pending ongoing court proceedings. While the court ruled in favor of the plaintiff in the second quarter of 2025, the Company disagrees with the jury’s verdict and court’s orders related to plaintiff attorney fees and related costs against the Company and has appealed the judgement. The charges associated with the established reserve were recognized in other operating expenses in the accompanying condensed consolidated statements of income.

The Company is unable to predict the outcome of any further proceedings with certainty, and there can be no assurance that the Company will prevail in the hereto-mentioned litigation. The Company evaluates, at least on a quarterly

17

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POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

basis, 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 to become both probable and reasonably estimable. These litigations, whether or not determined in the Company’s favor or settled, will be costly and will divert the efforts and attention of the Company’s management and technical personnel from normal business operations, potentially causing a material adverse effect on the business, financial condition and operating results. In addition, adverse determinations in patent litigation 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 the 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 contracts, collectively referred to as Distributor Sales Agreements (“DSA”). Each DSA contains the relevant terms of the contractual arrangement with the distributor, and generally includes certain provisions for indemnifying the distributor against losses, expenses, and liabilities from damages that may be awarded against the distributor in the event the Company’s products are found to infringe upon a patent, copyright, trademark, or other proprietary right of a third party (“Customer Indemnification”). The DSA generally limits the scope of and remedies for the Customer Indemnification obligations in a variety of industry-standard respects, including, but not limited to, limitations based on time and geography, and a right to replace an infringing product. The Company also, from time to time, has granted a specific indemnification right to individual customers.

The Company believes its internal development processes and other policies and practices limit its exposure related to such indemnifications. In addition, the Company requires its employees to sign a proprietary information and inventions agreement, which assigns the rights to its employees’ development work to the Company. While the Company has on occasion been made aware of claims against its distributors or customers that may trigger an indemnification claim, to date, the Company has not had to reimburse any of its distributors or customers for any losses related to these indemnifications and no material claims were outstanding as of March 31, 2026. For several reasons, including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnifications.

​

12. SEGMENT REPORTING:

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

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

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

18

Table of Contents

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

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

​

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(In thousands)	​	2026		​ ​ ​	2025
Net revenue	​	$	108,308	​	$	105,529
Less:	​	​	​	​	​	​
Stock-based compensation (1)	​	​	6,307	​	​	8,683
Amortization of acquisition-related intangible assets (2)	​	​	147	​	​	147
Cost of revenue (excluding 1 & 2)	​	​	50,754	​	​	46,490
Research and development (excluding 1)	​	​	24,351	​	​	21,845
Selling, general and administrative (excluding 1)	​	​	20,918	​	​	21,646
Other operating expenses (excluding 1)	​	​	—	​	​	—
Restructuring and related charges in operating expenses (excluding 1)	​	​	4,377	​	​	—
Income from operations	​	​	1,454	​	​	6,718
​	​	​	​	​	​	​
Other income	​	​	2,466	​	​	3,167
Provision for income taxes	​	​	620	​	​	1,095
NET INCOME	​	$	3,300	​	$	8,790

​

19

Table of Contents

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

​

The table below presents other segment information:

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(In thousands)	​	2026		​ ​ ​	2025
Depreciation	​	$	6,380	​	$	7,244
Amortization of intangibles	​	$	183	​	$	207
Interest income	​	$	2,524	​	$	3,360

​

​

13. 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; the Prior Credit Agreement was terminated on April 10, 2026. The Company was compliant with all covenants and had no advances outstanding under the Prior Credit Agreement as of termination of the Prior Credit Agreement.

On February 24, 2026, the Company entered into that certain Loan Agreement with PNC Bank, National Association (the "PNC Loan Agreement") 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 Company’s obligations under the PNC Loan Agreement are unsecured. The PNC Loan Agreement term extends through February 24, 2031; all advances under the revolving line of credit, together with all accrued and unpaid interest, fees and other obligations 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).

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 borrowing usual and customary for credit agreements of this type. The PNC Loan Agreement contains negative covenants, including negative covenants that restrict, subject to certain exceptions, the Company’s ability to:

● use the proceeds of any credit extended under the PNC Loan Agreement except to refinance all indebtedness outstanding under the Prior Credit Agreement and for working capital or other general business purposes;

● create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances;

● mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of the Company’s assets;

● guarantee or become liable for any obligations or liabilities of any other person or entity;

● purchase or hold beneficially any stock, or other securities or evidence of indebtedness of, or make or have outstanding, any loans or advances to, or otherwise extend credit to, or make any investment or acquire any interest whatsoever in, any other person, firm, corporation or other entity; and

● liquidate, dissolve, merge or consolidate with or into any person, firm, corporation or other entity, or make acquisitions of all or substantially all of the property or assets of any person, firm, corporation or other entity, or sell, lease, transfer or otherwise dispose of all or a substantial part of the Company’s property, assets, operations or business.

The Company was compliant with all covenants and had no advances outstanding under the PNC Loan Agreement as of April 10, 2026.

​

20

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​

​

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

The following discussion and analysis has been prepared as an aid to understanding our financial condition and results of operations. It should be read in conjunction with the condensed consolidated financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, and with the consolidated financial statements and management’s discussion and analysis of our financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 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 and the ability of our products 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;

● reliance on international sales activities for a substantial portion of our net revenue;

● the lengthy timing of our sales cycle;

● 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 other payments, or restrict the operation of our business;

● expenses we are required to incur (or choose to incur) in connection with litigation;

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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 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;

● 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.

Overview

Power Integrations is 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 net revenue was $108.3 million and $105.5 million in the three months ended March 31, 2026 and 2025, respectively. The increase in net revenue for the three-months period was primarily due to higher sales in the industrial end-market.

Our top ten customers, including distributors that resell to OEMs and merchant power-supply manufacturers, accounted for approximately 80% of our net revenue for both of the three months ended March 31, 2026 and 2025. International sales accounted for approximately 98% and 99% of our net revenue for the three months ended March 31, 2026 and 2025, respectively.

Our gross margin was 53% for the three months ended March 31, 2026 and 55% in the corresponding period in 2025. The decrease in gross margin was primarily due to the unfavorable impact of the dollar/yen exchange rate and restructuring related costs.

Total operating expenses were $55.5 million and $51.5 million for the three months ended March 31, 2026 and 2025, respectively. The increase in operating expenses for the three-month period was primarily due to restructuring and related charges of $6.6 million for severance and benefit costs associated with the workforce reduction described in Note 4 of this report herein. These increases were offset in the three months ended March 31, 2026, by a $1.4 million credit in other operating expenses related to stock-based compensation expense associated with the changes in performance criteria measurement as described in Note 7 of this report herein.

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, 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

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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 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, legal rules and regulations and other corporate considerations, as determined by our management team.  

During the three months ended March 31, 2026, we returned $12.0 million of capital to stockholders through the payment of cash dividends.

We continue to monitor the environment for potential long-term impact on supply and demand from tariffs.

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
​	​	March 31,
​	​ ​ ​	2026		​	2025
Net revenue	​	100.0	%	​	100.0	%
Cost of revenue	​	47.4	​	​	44.8	​
Gross profit		52.6		​	55.2
Operating expenses:		​		​	​
Research and development		24.3		​	22.8
Selling, general and administrative		22.6		​	26.0
Other operating expenses	​	(1.3)	​	​	—	​
Restructuring and related charges	​	5.7	​	​	—	​
Total operating expenses		51.3		​	48.8
Income from operations		1.3		​	6.4
Other income		2.2		​	3.0
Income before income taxes		3.5		​	9.4
Provision for income taxes		0.6		​	1.0
Net income		2.9	%	​	8.4	%

​

Comparison of the three months ended March 31, 2026 and 2025

Net revenue. Net revenue consists of revenue from product sales, net of returns and allowances. Net revenue for the three months ended March 31, 2026 was $108.3 million compared to $105.5 million in the corresponding period of 2025. The increase was due primarily to higher sales in the industrial end-market.

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Our revenue mix by end market for the three months ended March 31, 2026 and 2025 was as follows:

​	​	​	​	​	​	​
​	​ ​ ​	Three Months Ended
​	​	March 31,
End Market	​ ​ ​	2026		​	2025
Communications	​	10	%	​	10	%
Computer		11	%	​	12	%
Consumer		38	%	​	44	%
Industrial		41	%	​	34	%

International sales, consisting of sales outside of the United States based on “bill to” customer locations, were $106.5 million in the three months ended March 31, 2026, and $104.2 million in the corresponding period 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 80% of our net revenue in the three months ended March 31, 2026, and 84% in the corresponding period 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 71% of our net revenue in both of the three months ended March 31, 2026 and 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 months ended March 31, 2026 and 2025:

​	​	​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(dollars in millions)	​ ​ ​	2026			​	2025
Net revenue	​	$	108.3	​	​	$	105.5	​
Gross profit		$	56.9		​	$	58.2
Gross margin	​		52.6	%	​		55.2	%

​

The decrease in gross margin was primarily due to the unfavorable impact of the dollar/yen exchange rate and restructuring related costs.

Research and development expenses. Research and development (“R&D”) expenses consist primarily of employee-related expenses 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 months ended March 31, 2026 and 2025:

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(dollars in millions)	​	2026		​	2025
Research and development expenses	​	$	26.3	​	$	24.1

R&D expenses increased for the three months ended March 31, 2026 as compared to the corresponding period of 2025. As described in Note 4 Restructuring of this report herein, $3.0 million of application engineer project costs have been recognized in the three months ended March 31, 2026 related to customer product development projects. This increase was partially offset by lower stock-based compensation expense and by lower equipment-related expenses.

Selling, General and Administrative. Selling, general and administrative (“SG&A”) expenses consist primarily of employee‑related expenses, 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

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services, legal and auditing expenses. The following table below compares SG&A expenses for the three months ended March 31, 2026 and 2025:

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(dollars in millions)	​ ​ ​	2026		​	2025
Selling, general and administrative expenses	​	$	24.4	​	$	27.4

​

SG&A expenses decreased for the three months ended March 31, 2026 as compared to the corresponding period of 2025 primarily related to the restructuring actions taken in the three-months ended March 31, 2026 as described in Note 4 Restructuring of this report herein.

Other operating expenses. Other operating expenses were a credit of $1.4 million in the three months ended March 31, 2026 related to the equity award modification associated with the retirement of our former chief executive officer (refer to Note 7, Stockholders’ Equity, in our Notes to Unaudited Condensed Consolidated Financial Statements for details).

Restructuring and related charges. Restructuring and related charges were $6.6 million in the three months ended March 31, 2026. The charges were primarily related to severance and benefit costs associated with the workforce reduction described in Note 4 Restructuring.

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 months ended March 31, 2026 and 2025:

​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(dollars in millions)	​ ​ ​	2026		​	2025
Other income		$	2.5		$	3.2

​

Other income decreased for the three months ended March 31, 2026 as compared to the corresponding period of 2025 primarily due to lower interest income.

Provision for income taxes. Provision for income taxes represents federal, state and foreign taxes. The table below compares income-tax expense for the three months ended March 31, 2026 and 2025:

​	​	​	​	​	​	​	​	​
​	​	Three Months Ended
​	​	March 31,
(dollars in millions)	​ ​ ​	2026			​	2025
Provision for income taxes		$	0.6	​		$	1.1	​
Effective tax rate	​		15.8	%	​		11.1	%

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.

Our effective tax rate for the three months ended March 31, 2026, was 15.8%, and 11.1% 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 our world-wide earnings in lower-tax jurisdictions and the impact of federal tax credits. In the three months ended March 31, 2026, our effective tax rate was affected by the recognition of a tax accounting shortfall associated with share-based payments. Additionally, in the three months ended March 31, 2025, our effective tax rate was unfavorably impacted by the recognition of share-based payments and foreign income subject to U.S. tax. We have not been granted any incentivized tax rates and do not operate under any tax holidays in any jurisdiction.

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Liquidity and Capital Resources

As of March 31, 2026, we had $257.2 million in cash, cash equivalents and short-term investments, an increase of $7.7 million from $249.5 million as of December 31, 2025. As of March 31, 2026, we had working capital, defined as current assets less current liabilities, of $391.8 million, an increase of approximately $3.8 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 which originally extended to June 7, 2026; the Prior Credit Agreement was terminated on April 10, 2026. We were compliant with all covenants and had no advances outstanding under the Prior Credit Agreement as of termination of the Prior Credit Agreement.

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 extends through February 24, 2031; all advances under the revolving line of credit, together with all accrued and unpaid interest, fees and other obligations owing thereon, will become due on such date, or earlier upon the occurrence of an Event of Default.

The PNC Loan Agreement requires us 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 and warranties, affirmative covenants and conditions precedent to borrowing usual and customary for credit agreements of this type. The PNC Loan Agreement contains negative covenants, including negative covenants that restrict, subject to certain exceptions, our ability to:

● use the proceeds of any credit extended under the PNC Loan Agreement except to refinance all indebtedness outstanding under the Prior Credit Agreement and for working capital or other general business purposes;

● create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances;

● mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of our assets;

● guarantee or become liable for any obligations or liabilities of any other person or entity;

● purchase or hold beneficially any stock, or other securities or evidence of indebtedness of, or make or have outstanding, any loans or advances to, or otherwise extend credit to, or make any investment or acquire any interest whatsoever in, any other person, firm, corporation or other entity; and

● liquidate, dissolve, merge or consolidate with or into any person, firm, corporation or other entity, or make acquisitions of all or substantially all of the property or assets of any person, firm, corporation or other entity, or sell, lease, transfer or otherwise dispose of all or a substantial part of our property, assets, operations or business.

We were compliant with all covenants and had no advances outstanding under the PNC Loan Agreement as of April 10, 2026.

Cash from Operating Activities

Our operating activities generated $20.0 million of cash in the three months ended March 31, 2026. Net income for this period was $3.3 million; we also incurred non-cash depreciation, stock-based compensation expense, amortization of intangibles and accretion of discount on investments of $6.4 million, $6.3 million, $0.2 million and $0.2 million, respectively. Sources of cash included a $3.9 million decrease in inventories, a $3.8 million decrease in accounts receivable due to timing of receipts and $3.4 million decrease in prepaid expenses and other assets. These sources of cash were

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partially offset by a $4.1 million decrease in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $3.1 million decrease in other accrued liabilities.

Our operating activities generated $26.4 million of cash in the three months ended March 31, 2025. Net income for this period was $8.8 million; we also incurred non-cash stock-based compensation expense and depreciation of $8.7 million and $7.2 million, respectively. Sources of cash included a $4.7 million decrease in accounts receivable due to timing of receipts, an increase of $4.0 million in accounts payable (excluding payables related to property and equipment) due to timing of payments and a $3.4 million decrease in prepaid expenses and other assets. These sources of cash were partially offset by a $3.9 million decrease in other accrued liabilities and a $3.5 million increase in inventories.

Cash from Investing Activities

Our investing activities in the three months ended March 31, 2026, resulted in a $6.2 million net use of cash, primarily consisting of $4.2 million for purchases of investments, net of sales and maturities and $2.0 million for purchases of property and equipment (primarily production-related machinery and equipment).

Our investing activities in the three months ended March 31, 2025, generated $4.5 million of cash, primarily consisting of $10.3 million from sales and maturities of investments, net of purchases, offset by $5.7 million for purchases of property and equipment (primarily production-related machinery and equipment).

Cash from Financing Activities

Our financing activities in the three months ended March 31, 2026 resulted in a $9.3 million net use of cash, consisting of $12.0 million for the payment of dividends to stockholders, partially offset by proceeds of $2.7 million from the issuance of shares through our employee stock purchase plan.

Our financing activities in the three months ended March 31, 2025 resulted in a $32.3 million net use of cash, consisting of $23.1 million for the repurchase of our common stock and $12.0 million for the payment of dividends to stockholders, partially offset by proceeds of $2.8 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 March 31, 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 uses of cash beyond the next 12 months will depend on many uncertain factors, including the general economic environment in which we operate and our ability to generate cash flow from operations, but include funding our operations and additional 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 three 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” of the 2025 Form 10-K.

​

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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 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 March 31, 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.

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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 reduce the ability of our products 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;

● reliance on international sales activities for a substantial portion of our net revenue;

● the lengthy timing of our sales cycle;

● 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;

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;

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● 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.

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 of our products, such as consumer appliances and cellphone chargers, make up a significant percentage of our net revenue. We expect that a significant level of our net revenue and operating results will continue to be dependent upon these applications in the near 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 softness in housing markets, which affects demand for consumer appliances and inflation. Any economic slowdown or disruption in the end markets that we serve could cause a slowdown in demand for our ICs, causing our net revenue to decline and potentially result in 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 assure 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 net 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, or if they 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, and 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 also 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 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, and significant cancellations could occur again at any time. Also, a relatively small number of distributors, OEMs and merchant power-supply manufacturers 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. As such, the loss of demand for our products by customers who purchase through different distributors could harm our business even if the impacts through a single distributor are immaterial.

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 ICs for high-voltage power conversion for existing and new markets, to introduce these products in a timely manner and to have these products selected for design into products. New product introduction schedules are subject to the 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 from time to time 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 domestically or internationally could decline.

In addition, we cannot be sure that we will be able to adjust to changing market demands as quickly and cost-effectively as necessary to compete successfully. Furthermore, we cannot assure that we will be able to introduce new

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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 assure that these reserves will be adequate.

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 accounted for, a large portion of our net revenue. Approximately 98% of our net 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 economies 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 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 cause 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 design win will largely depend upon the commercial success of the customer’s product. We cannot assure 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 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 net 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 credit-worthiness of our distributors, many of which are located outside of the United States and are not publicly traded.

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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 planned 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 certain geographies, which could adversely affect our revenue. Further, customers purchasing our products on unintended markets 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.

The power supply industry routinely experiences cyclical market patterns and our products are used across different end markets. A significant downturn in the industry or 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 can result in price erosion and weak demand for our products. Weak 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.

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Additionally, our products are used across different end markets, and demand for our products is difficult to predict and may vary within or 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, and 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 the customers in our end markets, 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

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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, significant assistance financial 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 wafers for our products and if they fail to provide us sufficient quantities of wafers, our business may suffer. Our primary supply arrangements for the production of 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 assure 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 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 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 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 or 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 net revenue may decline. We depend on independent foundries to produce 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 wafers at acceptable yields could prevent us from selling our products to our customers and would likely cause a decline in our net revenue and gross margin. In addition, our IC 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 IC packages. Unavailability of assembly materials or problems 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.

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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 memory manufacturers who are able to obtain sufficient quantities of these materials from China or other countries.

Our products must meet exacting specifications, and undetected defects, failures or other quality issues may occur which may cause customers to return or stop buying our products and/or impose significant costs to us. Our customers generally establish demanding specifications for quality, performance and reliability, and our products must meet these specifications. ICs encounter development delays and may contain undetected defects, failures or other quality issues when first introduced or after commencement of commercial shipments. We have from time to time in the past experienced product quality, performance or reliability problems. 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 or discounts. Some OEMs expect suppliers to warrant their products for longer periods of time and are increasingly looking to them 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 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 adverse effects 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 policy costs and terms we desire. 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. The loss of the services of one or more 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 those individuals with qualified personnel who can smoothly transition into their new roles, our business may suffer. We do not have long-term employment contracts with, and we do not have in place 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. Further, increased tariffs or the imposition of other barriers to international trade could place pressure on our prices as our customers seek to offset the impact of increased tariffs on them. Compliance with import and export controls could impair our ability to compete in international markets or subject us to liability if we violate these controls.

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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 United States 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 the year 2025, the United States 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 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 or services, 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 has 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 for 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 dynamic regimes and monitoring 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 potential adverse effects on employee capabilities; our continued ability to recruit, hire, retain and motivate highly skilled personnel; our ability to maintain and grow our customer base; or our ability to effectively operate other aspects of our business. Adverse effects of our restructuring activities could lead to additional costs, harm our efficiency or impact

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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 cost reduction efforts may in the future adversely affect our ability to attract and retain employees, and 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 expense 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.

Debt obligations we incur in the future could adversely affect our financial condition. On April 10, 2026, the PNC Loan Agreement became effective and available for use when we terminated our Prior Credit Agreement. We had no advances outstanding under the PNC Loan Agreement as of April 10, 2026. We may incur, under the PNC Loan Agreement or otherwise in the future, 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 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 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 not be able to satisfy applicable draw-down conditions and 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.

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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 assure 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 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 from 2026 to 2046. We cannot assure 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 this 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 United States, 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. We recently successfully defended a patent litigation matter. See Note 11, Commitments and Contingencies, in our Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. In the event of an adverse outcome in any litigation, 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 found to have been 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 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 may be subject to disputes and litigation, with and without merit, that may be costly and which may divert the attention of our management and our resources in general. Such disputes and litigation are various and may include, but are not limited to, 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 IP rights, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. The results of complex legal proceedings are difficult to predict. Moreover, complaints filed against us may not specify the amount of damages that plaintiffs seek, and we therefore may be unable to estimate the possible range of damages that might be incurred should these lawsuits be resolved against us. Even if we are able to estimate losses related to these actions, the ultimate amount of loss may be materially higher than our estimates. Any resolution of litigation, threatened litigation, or other disputes, could involve the payment of damages, payments or expenses by us, which may be significant or involve an agreement with terms that restrict the operation of our business. Even if any future lawsuits are not resolved against us, the costs of defending such lawsuits may be significant. It is possible that we will not be able to obtain insurance coverage for our litigation and disputes in the amounts and for the risks we seek at policy costs and terms we desire. Allegations made in the course of legal proceedings may also harm our reputation, regardless of whether there is merit to such claims. We can provide no assurance that additional litigation will not be filed against us in the future. The impacts of 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 transaction taxes in the United States and in multiple foreign jurisdictions and to review or audit by the U.S. Internal Revenue Service and state, local and foreign tax authorities. In addition, the United States, countries in Asia and other

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countries where we do business have recently enacted or are considering changes in relevant tax, accounting and other laws, regulations and interpretations, including changes to tax laws applicable to multinational companies. For example, on July 4, 2025, the United States enacted federal tax 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 or after January 1, 2025 and modifies certain international tax provisions for tax years starting on or after 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 per cent 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 or after 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. The inability to accurately determine our customers’ strategies could increase our inventory costs related to obsolescence.

The semiconductor industry is subject to environmental regulations, particularly those that control and restrict the sourcing, use, transportation, storage, and disposal of certain mineral, chemicals, and materials used in the semiconductor manufacturing process. We expect the heightened worldwide awareness regarding climate change and the environmental impact to continue, which may result in new environmental laws and regulations that could affect us, our suppliers and/or our customers. New environmental laws and regulations could require us or our suppliers to obtain alternative materials that may increase our costs more or be less available, 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 them, 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 impact market dynamics and may 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 the federal securities laws, state laws, stock exchange requirements, and other legal requirements has imposed significant legal and financial compliance costs, and are expected to continue to impose significant costs and management burden on us. These rules and regulations also may make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. 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.

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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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 or 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 United States, 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 imposing 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 supplies, 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. Cyber-attacks have become increasingly more prevalent and much harder to detect, defend against or prevent. As the frequency of cyber-attacks and resulting breaches reported by other businesses and governments increases, 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 cyber-security 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 of our third-party service providers, could have a material adverse effect including but not limited to interruptions, other disruptions or delays in our business operations, loss of existing or future customers, claims, demands and liabilities and 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 IT systems under our control.

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 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.

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 security 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.

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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 business, financial condition and results of operations could be materially and adversely affected.

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 Power Integrations and each of 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, including those caused by climate change. 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 the business of our suppliers may in the future be adversely impacted by world-wide 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 major 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:

● 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 and/or undisclosed commitments, liabilities or issues not discovered in our due diligence of such transactions.

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We also in the future may have strategic relationships with other companies, which may decline in value and/or not meet desired objectives. The success of these strategic relationships depends on various factors over which we may have limited or no control and requires ongoing and effective cooperation with strategic partners. Moreover, these relationships are often illiquid, such that it may be difficult or impossible for us to monetize such relationships.

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 March 31, 2026, none of our directors or executive officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K.

​

Termination of Prior Credit Agreement; Entry into PNC Loan Agreement

​

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 which originally extended to June 7, 2026; the Prior Credit Agreement was terminated on April 10, 2026. We were compliant with all covenants and had no advances outstanding under the Prior Credit Agreement as of March 31, 2026.

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 extends through February 24, 2031; all advances under the revolving line of credit, together with all accrued and unpaid interest, fees and other obligations owing thereon, will become due on such date, or earlier upon the occurrence of an Event of Default.

The PNC Loan Agreement requires us 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 and warranties, affirmative covenants and conditions precedent to borrowing usual and customary for credit agreements of this type. The PNC Loan Agreement contains negative covenants, including negative covenants that restrict, subject to certain exceptions, our ability to:

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● use the proceeds of any credit extended under the PNC Loan Agreement except to refinance all indebtedness outstanding under the Prior Credit Agreement and for working capital or other general business purposes;

● create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances;

● mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of our assets;

● guarantee or become liable for any obligations or liabilities of any other person or entity;

● purchase or hold beneficially any stock, or other securities or evidence of indebtedness of, or make or have outstanding, any loans or advances to, or otherwise extend credit to, or make any investment or acquire any interest whatsoever in, any other person, firm, corporation or other entity; and

● liquidate, dissolve, merge or consolidate with or into any person, firm, corporation or other entity, or make acquisitions of all or substantially all of the property or assets of any person, firm, corporation or other entity, or sell, lease, transfer or otherwise dispose of all or a substantial part of our property, assets, operations or business.

​

We were compliant with all covenants and had no advances outstanding under the PNC Loan Agreement as of April 10, 2026.

​

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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	​	Amended and Restated Bylaws	​	8-K	​	000-23441	​	3.1	​	1/30/2026	​	​
10.1	​	Cash Compensation of Outside Directors	​	​	​	​	​	​	​	​	​	X
10.2	​	Loan Agreement dated February 24, 2026, by and between Power Integrations, Inc. and PNC Bank, National Association	​	​	​	​	​	​	​	​	​	X
10.3	​	Form of Indemnity Agreement for directors and officers	​	8-K	​	000-23441	​	10.1	​	2/5/2026	​	​
10.4	​	Amended and Restated 2025 Inducement Award Plan	​	8-K	​	000-23441	​	10.1	​	1/30/2026	​	​
31.1	​	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	​	​	​	​	​	​	​	​	​	X
31.2	​	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	​	​	​	​	​	​	​	​	​	X
32.1**	​	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	​	​	​	​	​	​	​	​	​	X
32.2**	​	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	​	​	​	​	​	​	​	​	​	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

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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:	May 7, 2026	By:	/s/ NANCY ERBA
​	​	​	Nancy Erba
​	​	​	Chief Financial Officer
​	​	​	(Duly Authorized Principal Financial Officer and Principal Accounting Officer)

​

​

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44

FAQ

How did Power Integrations (POWI) perform financially in Q1 2026?

Power Integrations generated net revenue of $108.3 million in Q1 2026, up from $105.5 million a year earlier. Net income declined to $3.3 million from $8.8 million as gross margin fell to 52.6% and restructuring charges increased operating expenses.

Why did Power Integrations’ Q1 2026 net income drop compared to 2025?

Net income fell to $3.3 million from $8.8 million mainly due to lower gross margin and $6.6 million of restructuring and related charges. These costs outweighed modest revenue growth and led to diluted EPS dropping to $0.06 from $0.15.

What restructuring actions did Power Integrations take in early 2026?

In Q1 2026, Power Integrations implemented a restructuring plan that reduced its workforce by about 7%. It recognized $6.6 million of restructuring and related charges, primarily severance and benefits, and expects the plan to better align expenses with revenue and long-term priorities.

What is Power Integrations’ liquidity position after Q1 2026?

As of March 31, 2026, the company held $257.2 million in cash, cash equivalents and short-term investments and had working capital of $391.8 million. It also put in place a new unsecured $100 million revolving credit facility with PNC Bank, with no borrowings outstanding.

Did Power Integrations pay dividends in Q1 2026 and at what rate?

Yes. Power Integrations paid $11.95 million of cash dividends in Q1 2026. The quarterly dividend was $0.215 per common share, slightly higher than the $0.21 per share paid in the prior-year quarter, reflecting the board’s previously declared increase.

How concentrated are Power Integrations’ customers and where are most sales generated?

In Q1 2026, the top ten customers accounted for about 80% of net revenue, with significant distributor sales. International sales represented roughly 98% of net revenue, and Asia, including Hong Kong/China, Korea and other APAC regions, contributed the majority of revenue.

What new credit facility did Power Integrations secure in 2026?

On February 24, 2026, the company entered a Loan Agreement with PNC Bank for a $100 million unsecured revolving line of credit, including a $25 million letter-of-credit sub-limit. The facility runs through February 24, 2031 and includes minimum liquidity and leverage covenants.