PI Q4 2020 CC notes - 2/10/21
- Revenue came in as guided a few weeks ago and EBITDA was a little better than expected. There was a significant guide up in Q1 revenue vs. consensus, $41-$43M vs around $31M from the analysts.
- They had a significant design win at a marquee retailer for a loss prevention system, which included a $6M upfront payment. They will be spending some engineering money in Q1 on the system and expect to recognize most of the $6M in Q2.
- Tag IC revenue was greater than $100M in 2020. They mentioned several times how robust customer interest is, orders are being booked further into the future, they saw record IC bookings in Q4 and that continued into this year.
- They had a significant self checkout deployment at an Asian retailer.
- They mentioned several times how the new M700 IC will lead to expanded capabilities that will enable them to develop services for their partners and customers. This could be a huge development for profitability. Essentially the reader software can upload information to the cloud and then software can be developed to create services using this data.
- $106M in cash and equiv. They are investing heavily to take advantage of the opportunities they see in the marketplace, this included some significant hiring in Q3 that started hitting expenses in Q4. They expect that hiring to slow. They are targeting EBITDA breakeven, balancing growth and profitability. They did not forecast when that balance will turn to EBITDA growth, ie earnings, but they did highlight how the M700 will lead to margin expansion.
- There were a ton of Congratulations from the analysts and their rating and price target upgrades reflect that positive sentiment.
- Gave a bit of color on the 2 big NA logistics customers. The first one is tagging pallets and that has reached the implementation stage. They explained there are 4 phases to a deployment. 1 - the pilot phase, 2 - the significant rollout of the system, 3 - the RAIN system runs in parallel with the existing system, and 4 - cutover to the RAIN system. They also highlighted everything doesn't have to be cutover all at once. The customer is at phase 4. The other big NA logistics customer is at the item level on the conveyor belt.
- They highlighted how long the loss prevention and self checkout systems have been in development, and to focus on the fact they are now implementing them. They gathered requirements as an industry in 2008-2010, but the projects didn't take off as the technology wasn't ready. The M700's protective mode was required for customer privacy, so that was the first step.The 2nd/last step was developing the loss prevention engine.
- They are not seeing any price increases in the IC supply chain, and all price negotiations with customers in Q4 and this Q went as expected, which normally involves low single digit price decreases each year.
- They said there is a 4X increase in dies per wafer, 2X for the die size and 2X for the wafer size. I need to re-visit that so I understand the wafer size part better. They did highlight how the customer is getting used to the smaller dies, which are now not even visible if they were sitting on a table.
- The M700 is at the early stages, they shipped 100M in Q3 and over 200M in Q4, still small numbers. They will start to see margin expansion as this number grows.
Cooters
ps - I listened to the Goldman presentation this morning, it was great, will need to re-listen and then put out notes. |
