But there was no webcast as far as I can tell. Sort of a bummer.
I would say for SIMO's IR, it's worth it to record these presentations and Q&A themselves, and put it on the SIMO website. We regular investors want to know what is being said by management, and what questions are coming from the institutional investor community.
Setting up that capability can't cost more than a few thousand bucks, but it gives access to ALL SIMO investors regardless of their location.
I agree Shannon sounds good so far, but we still have to wait to see if the amazing growth materializes. It makes sense. Lots of memory makers have been talking about how NAND flash is getting cheap enough that all NAND flash arrays are going to grow explosively going forward. There's no reason that shouldn't happen in China. But as with all "new" products the talk is strong but the numbers are way more important than the talk. The tech sector is chock full of companies telling us that it owns and sells the next big big thing, but then two years later nothing much happened. So Shannon seems to be off to a good start, but they had better do a good bit more than $20m in 2016 for this product to be considered a smashing success. It's a shame they didn't say exactly how much Shannon sold in all of 2015 (they only said almost $10m in H2 2015), so it's going to be sort of hard to measure it's actual growth rate. If 2015 was $18m, then $20m in awful for 2016. If 2015 was $14m, then $25m in great for 2016. But without the actual number for 2015 it's hard to tell.
But one takeaway I have from the recent call is that it seems reasonably likely SIMO beat and raise guidance in each quarter of 2016. So I doubt we'll see any more big share price dips as the results roll out, and more likely than not we're going to see strange share price run ups at random months, in anticipation of strong results coming out. I don't see SIMO exploding to the upside like it has in the past, but slow steady gains throuhgout the year seem like the most likely share price trend, in my guesstimate.
Their answer to the question doesn't say anything. Do they expect Shannon sales to decline in any quarter in 2016 after Q1? If not, the low end of guidance should definitely be more than $20m. If they do expect Shannon sales to decline in Q2, Q3 or Q4, why?
On Client SSD sales, they said....
- Client SSD was almost 25% of Q4 2015 revenues. So....$23m or so, that's 23.5% of $98m.
- Client sales in Q1 2016 will increase from Q4 2015. So....Q1 2016 will be MORE than $23m
- Client SSD sales for all of 2016 will be at least $90m
Hello? No kidding. If Q1 2016 is $24m in sales, well 4 quarters of flat client SSD sales at $24m per quarter equals $96m for the full year. Why are they guiding to ONLY more than $90m for the full year??
Q1 2016 will be up sequentially, and with a category this hot and new, one would expect client SSD sales to be up sequentially in EACH quarter of 2016.
- The fourth client SSD NAND OEM will begin buying in Q2 2016.
- The new PCIe SSD controllers will begin shipping in H2 2016.
- The new 3D NAND SSD controllers are expected to start shipping in H2 2016.
- The PC build quarter is Q3. That ALONE should push Q3 above Q1 and Q2 levels.
So if we're starting 2016 client SSD revenues at $24m in Q1 2015, how in the world can the end up less than $105 million?
1. Shannon first, more later
Shannon in 2015, they've said
- was $14m to $18m in 2015 sales
- almost doubled from Q3 2015 to Q4 2015
- given those two facts, the LOWEST Shannon could be in Q4 2015 is $5m in sales. It was probably more, but if they did $6m in H1 2015, and then $3m in Q3 and "almost double" to $5m in Q4, you get to $14m. That's the LOWEST sales number you can derive for Shannon in Q4 2015. It's probably higher.
Shannon guidance for 2016....
- in Q1 2016, Shannon should be flat with Q4 2015 (so $5m at a minimum)
- for full year 2016, Shannon will be $20m to $30m.
How in the world could Shannon do $5m in Q4 2015, $5m in Q1 2016 and ONLY be $20m for the 2016 year? That would mean Shannon, the big growth story of the future, only flatlined at $5m per Q for all of 2016. Products which are expected to grow in excess of 50% per year for many years don't flatline revenues for 5 quarters! They go up each quarter, sometimes they go up by a lot (like 75%) and then dip in the following quarter to smooth out the annual trend. But there is NO WAY Shannon can do $5m in Q4 2015, $5m in Q1 2016 and then end up with only $20m for the 2016 year.
This is just simple math. Why is SIMO providing such ridiculously low and/or illogical guidance?
I think guiding eMMC to at least 5% to 10% growth for 2016 is really good. Shannon and SSDs should grow strongly, eMMC was my only big concern for future sales. Outlook seems bright with growth fairly solid. The question now becomes what multiple to give SIMO, and that's pretty tough. I think it will drift between $30 and $35 for the current quarter, then we'll see how things are going for the rest of the year. Slow and steady, but hopefully up!
1- 2016 revenue guidance is better than I expected, and Q1 2016 revenue guidance is MUCH better than expected. The strong Q1 revenue expectations positions them to EASILY deliver 16% revenue growth for 2016, and hopefully sets them up to beat the high end of their own guidance. If Q1 2016 is flat with the just completed Q4, they only need an additional $7m per Q in Q2, Q3, and Q4 to get to up 16% for 2016 (midpoint of their guidance). That seems fairly easy with SSD and Shannon ramping well.
2- Embedded storage at 66% of sales is good, the legacy stuff is less and less an issue.
1- Expense growth for 2016 is as fast as revenue growth. They are guiding now to an operating margin percent, whereas previously they always guided to an absolute dollar of expenses. It means they don't have the leverage they had a few years ago, probably a sign of a larger more significant company - they need to ramp expenses to support multiple customer programs (SSD, Shannon, eMMC) rather than make one hot product (card controller) and sell it as much as possible. The latter approach has leverage, but less stickiness than the former.
2. Gross margins guided down a tick for 2016. My hunch is they are discounting eMMC a bit due to it "maturing", but who knows? I'm sure they'll answer this on the call.
All in all I think it's a good report. Revenue growth drives tech, not EPS, so the good point outweighs the bad points. Hard to say where the stock goes Friday, but I'll get it gets into a $30 to $36 trading range until something new happens. Nothing in the report says things are getting meaningfully worse.
Good comments, I thought this might be interesting. Lets guess what we think SIMO will guide for 2016 revenues relative to 2015 revenues. They will likely give a range of 10% (5%-15% growth, 10%-20% growth) something like that. So .....since they did about $360m in 2015, lets guess/forecast 2016 guidance.
I'll go first!
1. I think they'll be conservative, so they will guide to the minimum the expect to achieve, and hope to raise it as the year progresses.
2. Numbers - what will grow in 2016
a) SSDs will produce $30m growth, from $60m to $90m. They've already said this. It may be conservative now, but I'll bet they keep that forecast.
b) Shannon will produce ~$20m growth, from $9m in 2015 (only H2 2015 Shannon sales are in SIMO's 2015 revenues since they acquired it in July, so lets say 2016 Shannon is $29m, so $20m growth from Shannon.
c) eMMC is hard to say, but lets say 7% growth in 2016. eMMC in 2015 was perhaps $130m, so $8m growth from eMMC in 2016.
d) UFS 2.0 will begin shipments in H2 2016, lets say $2m growth from UFS 2.0.
e) Ferri may grow by $4m in 2016, from maybe $22m to $26m. They seemed to have decent auto design wins in 2015.
So that's $64m revenue growth.
3. Numbers - what will decline in 2016
a) mobile cards, not sure what the 2016 sales level is, but lets say an $8 million decline
b) LTE + mobile TV transceivers. Who knows? Lets say minus another $8 million? I don't know.
So that leaves then with up $64m and down $16m for a total of $48m revenue growth. Hmmmm, not too exciting, but that puts my guess at SIMO's guidance being 2016 revenues up 8% to 18%.
SSDs could be much higher, we'll see. Anyone else want to take a shot??
Yeah, today's strength is refreshing. Hard to know why it was there, but i like it. I guess all the cash coming out of high yield and energy has to go somewhere, why not small cap growth? Makes sense. SIMO occassionally makes violent moves around its earnings release, maybe we're going to get the move up into the low thirties before next Friday, then we'll see what happens with annual guidance. Not sure what to expect - but I would think anything over 10% revenue growth for 2016 would be pretty good, and 20% revenue growth is a stretch, but if the SSDs and Shannon pipeline is growing, it's possible.
Interest rates are falling, so PE multiples should increase. If SIMO goes to 20x 2016 EPS estimates we're looking at a $50 stock price. Ba da bing!
According to my Charles Schwab account, there are only 946 $30 SIMO Jan calls and 2,784 SIMO Jan $35 calls outstanding. There are no $25 Jan calls. So.....I don't think options expiration has a thing to do with SIMO's recent share price movement (past few days). All the calls are out of the money, so it doesn't matter whether SIMO is $29 or $26, they are worth zero and not affecting anything as expiration nears. There are 895 Jan $30 puts, so they are in the money and getting more valuable each day SIMO declines. But if anything, the fact that there are some $30 strikes, and no $25 strikes would tend to push SIMO toward closing at $30 this Friday rather than anywhere else. I hope!
My understanding is the Mobile Communications segment is "LTE (Samsung) + Mobile TV Transceivers (Korea and Japan phones)". Of that segment, LTE was $12m last year and expected to be $12m in 2015 (although almost never discussed in 2015), and the rest is mobile TV.
For example, in Q3 2015 they had $12.5m of Mobile Communications sales. MOST of that is Mobile TV Transceivers, and a bit of it (I think) is LTE transceivers.
When I say LTE was $12m in 2015 and it may go to zero, I mean only LTE transceivers, not the mobile TV transceiver business. SIMO didn't announce a single LTE design win in 2015, so it's hard to believe the segment is doing OK. Maybe they have some small segment at Samsung where they are entrenches, but maybe not. We'll see when they announce Q4 results, but I wouldn't be surprised if they don't even discuss it.
I forgot that we only had Shannon for half of 2015, so you're right, it could end up being $10m of 2015 sales goes to $24m in 2016! That's a big plus. So yes, it's reasonable to expect SSD + Shannon to add $50m in 2016 revenue growth ($14m Shannon and $36m SSD).
So that's good, it seems fairly easy for SIMO to deliver 10% revenue growth in 2016 if we let the other segments decline a bit, but not too much. eMMC is sort of a wildcard, we'll see. it might grow a bit, but if it just stays flat, then 2016 should be a good year for revenue growth for SIMO. I would say if they're going to grow revenues by 10% they reasonably deserve a 14x PE, and EPS for 2016 should be around $2.40 or more. Of course it depends on how rapidly they ramp expenses, another unknown. It seems like SIMO should be able to get to the mid-thirites without much exceptional happening, but if the SSD business does well and 3D NAND does well, I can see multiple expansion. It's good that they are a way to invest in 3D NAND, there aren't a whole lot of ways to invest in that segment. If they exit 2016 with SSDs being 25% or 30% of revenues, that seems like something that could increase the PE multiple.
Volume appears to be at the recent daily average. We'll see, it all depends now on 2016 revenue guidance. I think they easily get $40m growth out of SSDs and Shannon, but I'm not sure the other sectors will grow at all, and they all may shrink a bit for a total of flattish revenues 2016 over 2015? If LTE goes to zero from $12m that's minus $12m. If eMMC is about $120m in 2015 and goes to $110m in 2016, and removable cards/USB declines by $10m in 2016 voila, you've got zero revenue growth. Those latter segments may not decline that quickly, or they may, hard to say. The good thing is that even if 2016 revenues are just flat wit 2015, SIMO should be able to deliver $2.00 per share in EPS, so with $6 per share cash they're probably worth $24 (9x $2.00 + $6.00 cash), and that's a worst case scenario. Hmmmm, or maybe if revenues are only going to be flat they're worth 6x $2.00 + $6.00 cash, so $18? Hard to say.
I guess my key point is I don't know how rapidly the legacy product areas will decline. On the flip side I don't know how quikcly new SSD (PCIe, 3D, etc.) programs will ramp, and perhaps in 2017 we've got UFC kicking in seriously offset the eMMC decline.
I don't think the numbers are terribly exciting. SIMO hasn't solidly beaten guidance now since Q3 2015, so 5 quarters of basically "in line" results. It is good that Q4 revenues are up a bit from Q3 levels, but I was hoping that some of the products areas (Shannon, SSDs, eMMC with the 60+ design wins from Q2 2015) would do better than expected. The gross margin decline rather than increase is bad since Q4 2015 was supposed to see a big ramp in new high margin embedded products. But the general revenue growth is good, we can see a sequential revenue decline in Q1 of 10% and still be more than 10% above the previous year's Q1. So that starts 2016 off positioned for growth unless eMMC collapses. I guess the valuation is low enough (maybe 10x 2016 EPS ex-cash) that it looks good, but it would be nice to see them beat estimates again rather than just come in line. We'll see - Shannon and/or SSDs should take off well in 2016, so it's just a matter of how much the other segments decline. 10x for a new technology semiconductor stock that is growing sounds good, but not terribly exciting. It would be nice if they bumped the dividend up to 18 cents per quarter because they should generate a ton of cash in the just completed Q4 and they're going to have too much on the balance sheet unless something horrible happens.
SIMO is only going to hit the low $20's if eMMC collapses. SSD and Shannon appear really solid, so there's no reason for a share price decline unless some large segment is going to collapse.
And why is 14x the right PE for the semiconductor stocks that benefits from unit growth of SSDs in PCs? It's a beautiful space!
1. A downgrade at $32 on valuation in December 2015 doesn't make a lot of sense to me because SIMO was $36 last May. Why didn't he "downgrade" it then? SIMO has been above $32 for more than a month, so why didn't he downgrade it when it hit its current level about a month ago?
2. It doesn't matter whether other companies have greater upside, if SIMO's stock is going up in 2016, even if only 10% or 15%, it's a BUY.
3. SIMO valuation is not stretched considering its revenue growth - about 25% per year last year and this year. 14x PE for a 25% revenue grower is low, not high. The key question is what will happen with SIMO's revenue growth in 2016? Interesting, the director of research forgets to discuss this important topic!
4. If SSDs are going to grow to $90m or more in 2016, and Shannon is going to grow more than 50% per year for the next three years, and the rest of the business just stays about flat, SIMO's stock is going up. In fact, if SIMO becomes more of way to invest in the hard drive to SSD transition, it could easily get a PE multiple which is a PREMIUM to its 25% revenue growth rather than a discount as it is now. The market just needs to be convinced that the growth stories are solid, and the legacy stuff is going to just slow down rather than vanish.
I agree the story seems pretty great, and the valuation is not yet stretched. It seems like there is not much merchant competition in SSD controllers, and that is a growth area for at least a few YEARS, not quarters, YEARS. The way they are talking it sounds like they may handily beat the "at least $90 million" in 2016 SSD sales. So...the concerns about UFS 2.0 and eMMC future and SK Hynix concentration may just fade away as it becomes the former growth area whereas the future growth is SSD controllers. eMMC just handing in there may be fine if SSD is relatively large and growing 100% per year rather than "only 50%". If SIMO is going to grow total revenues by 20% in 2016 it's a bit tough to see why they don't get a 20x multiple, perhaps even higher as it would be the 3rd year of 20%+ revenue growth.
And I didn't even mention Shannon, which sounds like it may be an amazing product line by this time next year.
All of these segments and growth rates are just speculation and forecast now, but they seem reasonable. Fun to sit and watch...