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O2Micro (OIIM) Reports High End of Expected Q1 Revenue Range

05/10/2017
By Lisa Thompson

NASDAQ:OIIM

Today O2Micro again reported quarterly revenues and earnings slightly better than our estimate. Revenues for the quarter were $15.0 million versus $13.0 million a year ago, up 15%. The company had given revenue range guidance of $14.3 to $15.1 million. Gross margin was 52.7%, much higher than last year’s 48.8%.

Non-GAAP net income was a loss of $1.0 million versus a loss of $2.0 million. The company reported non-GAAP EPS loss of $0.04 versus $0.08 last year. 

Q2 Forecast

Q2 2017 should again show year over year growth but flattish gross margin due to product mix. There is still a shortage of two components that are holding back some customer orders. 

• In high end TVs, there is a shortage of panels 60 inches and higher due to a decision by Foxconn to stop selling them to potential competitors which includes a number of O2Micro’s customers. These customers are scrambling to find other suppliers who are having limitations to ramping production. It is hard to predict when this problem might be resolved.

• The other shortage affects smartphones. There is not enough supply of fingerprint recognition IC chips due to 8” wafer capacity at foundries and it is impeding the production of some high-end phones.

The company had expected this to resolve in Q2 but problems are ongoing and it is difficult to determine when a steady state situation will commence.

Revenue guidance for Q2 2017 is a range of $14.4 to $15.6 million and gross margin guidance was 48-51%.Given the company’s guidance on gross margin and expenses, that would yield a non-GAAP EPS loss at $0.06, flat with last year.

O2Micro indicated its current cost structure shows cash breakeven is $15.5-17 million in quarterly revenues and profitability breakeven is still at $17 to $19 million. We are forecasting that the company could reach $18 million in revenue in the fourth quarter. At March 31, 2017, the company still had $50 million in cash and equivalents (or $1.95 per ADS.)

Business Units 

 As discussed previously the intelligent lighting continues to be plagued by the shortage of large panels for some of its customers. As a result some customers cut back orders from O2Micro. Free-dimming products and high power lighting continue to grow and have higher than average margins. The company is still optimistic about the automotive backlighting market the self-driving cars and trucks who will need even larger displays.

Battery management is the company’s second largest sector and fastest growing. It continues its excellent growth as the industry increases it use of lithium ion batteries. Examples of end use products are power tools, e-bikes, e-vehicles, and vacuums. E-bike sharing programs are becoming popular through out the world. Newer markets for O2Micro include UPS, solar battery management, and drones.

Computer notebook products are containing to decline with the market contraction. They are unfortunately 90% of the revenues in this segment. Tablet and smartphones, while a small part, continue to grow and win design ins. 

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