) earnings of 40 cents for the fiscal third quarter (ending Jan
2013) surpassed the Zacks Consensus Estimate by 18 cents.
OmniVision's reported revenues of $423.5 million were up 8.6%
sequentially and 128.7% over the prior year and were toward the
upper end of management's guidance range of $390-425 million. The
mobile phone and entertainment markets were the main growth
drivers in the quarter.
Total unit sales were up 1.2% sequentially to 252 million
while the blended ASP increased 7.7% to $1.68. ASP growth was led
by a favorable shift in the product mix toward higher-resolution
sensors (8 and 5 megapixel sensors are doing extremely well).
Overall, 2 megapixel and higher resolution sensors comprised
around 39% of total units shipped, up 27.3% sequentially and
212.4% year over year. The 8 megapixel and 5 megapixel
categories particularly for smartphones and tablets saw strong
shipments, fueled by the holiday season.
The 1.3 megapixel category was 45% of total shipments, down
5.1% sequentially but up 317.4% from last year. The VGA category
constituted 16% of total shipments, down 22.9% and 52.2% from the
previous and year-ago quarters. The sequential declines in the
lower-resolution categories are because of the ongoing transition
to higher-resolution sensors.
Revenues by End Market
market remains OmniVision's largest, with a revenue contribution
of 61% compared with 59% in the prior quarter. The rapid adoption
of smartphone devices is the main growth driver of this market.
The company witnessed strong demand for 5 megapixel and 8
megapixel sensors for smartphones in Asian markets particularly
in the Chinese market during Christmas and Chinese New Year
end markets (26% of total revenue) increased in the last quarter
from 29%. This segment is fueled by growth in tablet market,
which is witnessing rapid adoption among consumers. Several new
tablets containing OmniVision sensors were launched in the third
notebook and webcam
segment increased to 7% of revenues in the third quarter from 6%
in the October quarter. The modest growth in end market revenues
may be attributed to tablets, which have cannibalized the
notebook market. However, it is poised to benefit from design
wins in the notebook and ultrabook segment.
Further, OmniVision remains optimistic about the impact of
) Ultrabooks and other similar products. It is in an advantageous
position as the decline in the PC and notebook business is being
offset by the rising popularity of tablets and smartphone
emerging products contributed 6% of revenues in the third
quarter. Revenues from the emerging products group are now being
driven primarily by the automotive end market.
OmniVision generated a gross margin of 16.9%, up 30 basis
points (bps) from the previous quarter's 16.6% but down 734 bps
from 24.2% in the year-ago quarter. The gross margin benefited
from higher volumes and the resultant increase in production, a
more favorable mix and a stronger ASP.
Operating expenses of $47.9 million were lower than the
previous quarter's $50.8 million but higher than $44.4 million
incurred in the year-ago quarter. OmniVision had an operating
margin of 5.6% in the last quarter, which was up 201 bps
sequentially and 529 bps from the year-ago quarter. Strong
revenue growth helped R&D and SG&A decline as a
percentage of sales from both the previous and year-ago quarters.
The gross margin improvement also helped. .
Total net income for the third quarter of 2013 was $21.3
million or 40 cents per share compared with $10.3 million or 19
cents a share in the previous quarter and $0.1 million, or $0.00
a share in the year-ago quarter.
There were no one-time items in the last quarter.
Consequently, the pro forma net income was the same as the GAAP
net income of $21.3 million (5.0% of sales) compared to $10.3
million or a 2.7% net income margin in the preceding quarter and
$0.1 million or 0.1% of sales in the same quarter last year.
Inventories were down 6.4% to $373.3 million from $398.7
million in the previous quarter, yielding annualized inventory
turns of 3.5X. DSOs were 37, down from 59 at the end of the
The company ended with cash and investments balance of $220.3
million, up from $139.6 million during the previous quarter.
OmniVision has $35.7 million in long-term debt and $126.3 million
in long-term liabilities.
For the fourth quarter, OmniVision expects revenues to be in
the range of $300-$330 million, GAAP earnings per share to be in
the range of 0-15 cents while non-GAAP earnings, excluding
share-based compensation and the associated tax impact, are
expected to be 14-29 cents a share.
OmniVision has leveraged its superior technology to solidify
its position in the handset market and also expanded into other
areas. We like its product roadmap, growth prospects and
management execution and believe that it will be able to deal
with the short product life cycles and temporary slowdown in the
computing and smartphone markets. Design wins at key players,
) should further its growth prospects.
OmniVision shares carry a Zacks Rank #1 (Strong Buy).
Another semiconductor stock
PLX Technology Inc.
), also carrying a Zacks Rank #1, is also worth considering at
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