InvenSense 2Q16 results +4

The conference call has just concluded.  Guidance for the current quarter was $115-120M, slightly above consensus at the midpoint.  The following other data was also given:
  • Business segments: 62% phones & tablets, OIS 18%, others 20%.  The last category includes drones, wearables and gaming.  Significant contribution from this segment is likely to continue.
  • Customers: 34% Apple, 19% Samsung
Management also commented that volume of shipments to Apple is expected to increase next quarter, and that shipment volume is not linear with Apple sales volumes as there is significant buffering.  We also learned that the $11.5M license payment was to Bosch, apparently to enable worry-free ramp into automotive markets.  Software is also gaining momentum with the location positioning library adopted by major Asian phone maker.  More details should follow in months to come.

Good as this quarter was, though, I heard confirmation for my opinion that the real progress will be made next year.  InvenSense is ramping to top-tier automotive OEM with multiple solutions and has entered a multi-year partnership with established automotive supplier to speed market penetration.  Management sees a $4b TAM in IoT, with better margins, and commented that more than 80% of new design wins are outside mobile.  So far, the fast movement in wearables and drones, but the opportunities are broad-based.  In particular, a new generation of gaming with HMDs (head mounted displays) represents a great longer term opportunity, which sounds good for my EMAN pick list stock.

What I've been most concerned about with InvenSense is continued innovation, and this morning's new sensor announcement is exactly the sort of thing I was looking for.  Reliable, cost-effective in-glass fingerprint scanning has been one of technology's holy grails, and InvenSense is claiming a "phenomenal breakthrough" in that area.  Management see the technology quickly extending beyond mobile and reports that there is already good traction in initial discussions with OEMs in multiple industries.

The bottom line on that may be a way off, but qualitative comments indicate nearer term progress innovative progress as well:
  • InvenSense has developed a new EIS (electronic image stabilization) solution for mid-tier phones, and expects adoption in the 2nd calendar qtr of 2016 and beyond.
  • The company is starting to see more traction with high-end microphones in mobile, and this is also an increasingly contributory factor in the Other category
  • 7-axis (adds as pressure sensor) should see increased adoption in 2016, particularly with navigation
All in all, I see nothing but good here.  There is always execution risk, but management is proving that it can do so admirably.

On 10/28/2015 04:24 PM, Esekla wrote:
InvenSense has announced results for the second quarter of fiscal 2016:
  • EPS of 16 cents beats by a penny
  • Revenue of $112.5M beats by $1.5M
More after the conference call.