By Lisa Thompson
Since our last report earlier this month, when O2Micro (OIIM) raised guidance for this just reported Q4, its stock has moved up 43%. Investors have become more confident that the company has turned the corner to growth. Additionally, the stock has almost doubled since last year this time. The stock is still valued significantly below its peers. Were we to use the average enterprise value to trailing twelve-month sales of 5.5 times and apply it to OIIM’s Q4 $64 million revenue run rate, we would calculate an enterprise value of $352 million. Adding to it $52.9 million in cash gives us a market cap of $405 million or $15.53 per share.
Today O2Micro reported its Q4 2016 quarter today and actuals were better than our estimate. Revenues for the quarter were $15.9 million versus $13.4 million a year ago, up 19%. The company had given revenue range guidance of $15.4 to $15.9 million. Gross margin was 54.1%, an improvement of four percentage points since Q4 2015 and the highest in years.
Revenue guidance for Q1 2017 is a range of $14.3 to $15.1 million and gross margin guidance was 51-53%. Gross margin is down from Q4 due to revenue level and product mix. Using the midpoints would yield Q1 revenue of $14.7 versus $13.0 million, up 13%.
On an EPS basis the company beat our estimates. On a GAAP basis we were looking for a loss of $0.04 versus a loss of $0.50 last year. The company reported $0.00. On a non-GAAP, ex-stock based compensation, we were looking for a loss of $0.02 versus a loss of $0.10 per share last year, but the company reported a positive $0.02. This is the first positive non-GAAP quarter in years.
The company ended the year showing annual growth of 3%, a huge milestone, and it reduced its operating loss by $7.6 million. With the revenue growth shown this quarter the company is now poised to reach its breakeven goals without future expense cuts.
We have published estimates for the quarters of 2017 and raised our full year estimate to $64 million in revenues, up 14% (from $60 million) and are projecting a non-GAAP loss at $0.04. Since plateauing sales to the TV market, we are more confident that the company will grow more in line with its end markets. Especially encouraging is second half growth in smartphones and new end market penetration of automotive and even drones.
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