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InvenSense 4Q15 report ?5

09:37 05-May-15

Ok, after running numbers on a heavy news morning, I really see mostly good things in this report.  Revenue was quite good in what is seasonally a weak quarter, and management is continuing to invest in the future with software and the Firefly SoC hub.  OIS continues to grow, with a lots of room left, and InvenSense continues to be cash-flow positive, building the balance sheet.  I note that many other companies receive sky-high valuations for exactly this practice, on the assumption that they can cut costs at any time to dial up EPS.  I have no illusions that the market is going to switch to that outlook on this report, but over the medium term I don't think there will much if any negative impact either.  The market situation that I've spoken about before will further mitigate any short-term downside.

The real takeaway from the numbers is that there is more to come from Samsung's S6.  Assuming Samsung was the 29% customer and Apple was 32%, that means InvenSense had $28.8M in sales to Samsung.  Even if we were to disregard other product lines, and simply use the 20M pre-order number for the S6, that would equate to 72 cents per part.  That could be a reasonable number averaged over both OIS and motion chips, but when one adjusts for existing models and looks at the overall revenue figure, there is clearly much more to come.

The numbers also raise a question.  How could Apple have sold 61M iPhones yet only have generated $31.8M in revenue to InvenSense?  There are lots of possible explanations, including second sourcing (unlikely in my opinion, unless as below), and a very unusual product mix from Apple.  We may never know for sure, and I think the explanations are not mutually exclusive.  I think the data does lend further support to my theory that Apple paid InvenSense for something other than parts in prior quarters.  STMicro's new product introductions are just about right, in terms of design time to market from the point of its cross-licensing agreement with InvenSense.

I may publish an AAPL/INVN article that includes some of these thoughts in days to come.

On 05/04/2015 05:48 PM, Esekla wrote:
The InvenSense conference call has just concluded. 

Management guidance for next quarter was well above estimates on the top line (mid-point of $102.5M vs $97.9 expected), and match expectations of 12 cents per share.  Despite other analyst opinions, I don't think this will have much of a positive effect on the stock.  I also wouldn't read much into after-hours pricing, which is moderately down, but already recovering.

Comments indicated that outside products are mostly competing on price, particularly for the Apple Watch.  Management characterized that as an opportunity and noted that InvenSense's next generation Firefly SoC hubs has a longer development lead time than legacy products.  Nonetheless, that product is seeing early design traction to go with the clear trend of increasing OIS sales.

The main issue for me remains reconciling past revenue with this quarter.  No matter how you look at it, revenue is healthy.  Conversation with both institutional and retail investors indicated a very cautious mood going into this report.  That may persist, but this report is not a bad one, even though my EPS predictions were off.

On 05/04/2015 04:18 PM, Esekla wrote:
Seeking Alpha has once again misreported the revenue figure.  Someone else will have to correct them on it this time.

Earnings of 12 cents per share (in line),
on Revenue of $99.3M, beats by $2.6M

Apparently margins and expenses continue to be problematic.  This also makes me wonder if InvenSense was paid by Apple for something other than parts.  Conference call at 4:30.

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