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O2Micro (OIIM) Reports Revenues at the Low End And Points to Panel Shortages

By Lisa Thompson


O2Micro (NASDAQ:OIIM) reported Q2 2017 revenues of $14.5 million at the low end of its guidance and below the $15 million we expected. These revenues however generated higher profits and non-GAAP EPS came in as expected at a loss of $0.04. Revenues for the quarter grew 10% making that the fourth quarter in a row of revenue growth. The company continues to be hurt by the shortage in panels for high-end TVs and fingerprint recognition IC chips constraining customer’s production. Add to that the continuous decline in the notebook market—which had been as much as 15% of the company’s revenues and the company continues to face challenges. The company projects cash breakeven can be reached at $15.5 - 17 million in quarterly revenues and profitability at $17-19 million. Guidance for Q3 is sequential growth of 2-8%, which certainly puts the company in the cash breakeven ballpark. And Q4 could reach the $17 million. 

Gross margin was 50.9%, similar to last year’s 50.7%. Operating expenses in the quarter were $8.9 million versus $8.8 million last year. Spending has been moving out of SG&A into R&D. Operating losses were reduced from $2.1 million in 2016 to $1.6 million as the company grows revenues back to profitability and continues to control costs. Non-operating income and expenses consisting of interest income, rental income, and foreign exchange losses, were flat with last year at $400,000.

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. We expect there could be some monetization of assets between now and year end-- as in the sale of some real estate. 

At June 30, 2017, the company had $47.5 million in cash and equivalents (or $1.84 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. 

On June 15, 2017 O2Micro announced that it has signed a licensing agreement with Nanoleaf for non-exclusive use of selected patents related to O2Micro’s Free Dimming technology used in the licensee’s light bulb products, however the company is expecting Nanoleaf to convert to using O2Micro products rather than continue to produce products based on this license. The company is still optimistic about the automotive backlighting market the self-driving cars and trucks who will need even larger displays.


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