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Inphi Corporation revenue dropped on 15.4% and EBITDA Margin increased slightly on 0.71 pp from 2.2% to 2.9%

01/29/2019 • About Inphi Corporation ($IPHI) • By InTwits

Inphi Corporation reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
  • EBITDA Margin is quite volatile: 2.9% in 2018, 2.2% in 2017, 21.1% in 2016, 9.0% in 2015, -4.6% in 2014
  • Inphi Corporation has high CAPEX intensity: 5 year average CAPEX/Revenue was 10.4%. At the same time it's a lot of higher than industry average of 7.6%.
  • CAPEX is quite volatile: $7m in FY2018, $3m in FY2017, $6m in FY2016, $9m in FY2015, $12m in FY2014
  • The company has unprofitable business model: ROIC is -9.0%
  • It operates with high leverage: Net Debt/EBITDA is 32.2x while industry average is 2.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


The company's Revenue dropped on 15.4%. Annual revenue decline showed slowdown in 18Q4 - revenue increased slightly on 0.99%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.71 pp from 2.2% to 2.9% in 2018.

Gross Margin showed almost no change in 2018. During 2014-2018 Gross Margin topped in 2016 at 67.9% and was declining since that time. SG&A as a % of Revenue increased on 5.2 pp from 19.0% to 24.2% in 2018. During 2014-2018 SG&A as a % of Revenue bottomed in 2016 at 17.9% and was growing since that time.

Net Income margin dropped on 11.0 pp from -21.5% to -32.5% in 2018. During the last 5 years Net Income margin topped in 2016 at 37.4% and was declining since that time.

Investments (CAPEX, working capital and M&A)


In 2018 Inphi Corporation had CAPEX/Revenue of 10.8%. The company's CAPEX/Revenue increased on 2.2 pp from 8.6% in 2015 to 10.8% in 2018. For the last three years the average CAPEX/Revenue was 10.0%. Battling declining revenue the company made large investments to CAPEX (371% of EBITDA) but that didn't help at least in this year. During the last 5 years CAPEX as a % of Revenue bottomed in 2016 at 8.4% and was growing since that time.

Return on investment


The company operates at negative ROIC (-9.0%) and ROE (-24.6%). ROIC decreased slightly on 0.83 pp from -8.1% to -9.0% in 2018. ROE decreased on 7.5 pp from -17.1% to -24.6% in 2018. During the last 5 years ROIC topped in 2016 at 3.7% and was declining since that time. During the last 5 years ROE topped in 2016 at 26.4% and was declining since that time.

Leverage (Debt)


Debt level is 32.2x Net Debt / EBITDA and 52.3x Debt / EBITDA. Net Debt / EBITDA dropped on 1.5x from 33.7x to 32.2x in 2018. Debt increased on 6.3% while cash increased on 5.2%.

The company has no short term refinancing risk: short term debt is zero.

Management team


The company's CEO is Ford G Tamer. Ford G Tamer is a founder and has 7 years tenure with the company. The company's CFO is John S Edmunds. John S Edmunds has 11 years tenure at the company.

Financial and operational results


FY ended 12/31/2018

Inphi Corporation ($IPHI) key annual financial indicators

mln. $201420152016201720182018/2017
P&L
Revenue156.1192.7266.3348.2294.5-15.4%
Gross Profit85.7120.0180.7196.5165.1-16.0%
SG&A36.241.847.766.271.47.9%
EBITDA-7.317.356.27.78.611.8%
Net Income-22.6-13.699.5-74.9-95.8
Balance Sheet
Cash30.4283.0144.9163.5172.05.2%
Short Term Debt0.00.00.00.00.0
Long Term Debt0.0171.7396.9421.4447.86.3%
Cash flow
Capex21.216.622.337.431.7-15.3%
Ratios
Revenue growth52.1%23.4%38.2%30.8%-15.4%
EBITDA growth51.3%-339.2%223.9%-86.4%11.8%

Gross Margin54.9%62.3%67.9%56.4%56.1%-0.4%
EBITDA Margin-4.6%9.0%21.1%2.2%2.9%0.7%
SG&A, % of revenue23.2%21.7%17.9%19.0%24.2%5.2%
Net Income Margin-14.5%-7.0%37.4%-21.5%-32.5%-11.0%
CAPEX, % of revenue13.6%8.6%8.4%10.8%10.8%0.0%

ROIC-10.8%-2.7%3.7%-8.1%-9.0%-0.8%
ROE-11.3%-5.1%26.4%-17.1%-24.6%-7.5%
Net Debt/EBITDA-6.4x4.5x33.7x32.2x-1.5x

Inphi Corporation ($IPHI) key quoterly financial indicators

mln. $18Q118Q218Q318Q4 YoY change
P&L
Revenue60707887 -35.7%-17.3%-7.7%1.0%
EBITDA-9-3615 -161.6%-128.9%5.0%
Net Income-23-28-23-22 -21,306.9%
Balance Sheet
Cash144155172172 -14.0%-4.4%4.0%5.2%
Short Term Debt0000
Long Term Debt428434441448 6.2%6.2%6.2%6.3%
Ratios
Gross Margin54.1%56.7%55.7%57.2% -3.1%0.1%5.9%-4.7%
EBITDA Margin -15.1% -4.8% 8.3% 16.8% -30.8%-18.6%46.8%0.6%
Net Income Margin -38.2% -40.8% -29.1% -25.0% -26.2%-23.0%28.6%-25.1%

Peers in Semiconductors


Below you can find Inphi Corporation benchmarking vs. other companies in Semiconductors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
NanoFlex Power Corp ($OPVS)72.5%354.8%
MoSys, Inc. ($MOSY)-18.4%37.2%46.8%87.7%
SMART Global Holdings, Inc. ($SGH)-16.9%42.5%69.3%
Micron Technology, Inc. ($MU)-1.0%-23.4%63.9%49.5%
Adesto Technologies Corporation ($IOTS)4.3%1.6%27.6%48.8%
 
Median (67 companies)54.6%8.5%4.4%10.9%5.0%
Inphi Corporation ($IPHI)23.4%38.2%30.8%-15.4%


Top companies by Gross margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
CEVA, Inc. ($CEVA)90.2%90.9%91.6%92.1%89.8%
NVE Corporation ($NVEC)77.9%80.3%76.1%78.5%79.0%
Rambus, Inc. ($RMBS)85.9%84.7%80.1%79.9%76.8%
Universal Display Corporation ($OLED)76.0%64.2%83.9%80.8%75.5%
Intermolecular, Inc. ($IMI)48.3%57.4%66.5%67.5%70.3%
 
Median (65 companies)45.3%47.0%47.2%48.6%50.4%
Inphi Corporation ($IPHI)54.9%62.3%67.9%56.4%56.1%


Top companies by EBITDA margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
NVE Corporation ($NVEC)58.8%66.0%61.8%65.6%65.1%
Micron Technology, Inc. ($MU)31.7%35.0%25.4%47.9%65.0%
NXP Semiconductors N.V. ($NXPI)25.7%41.5%21.6%46.2%49.9%
Texas Instruments Incorporated ($TXN)39.7%42.0%43.5%46.7%48.6%
Intel Corp ($INTC)42.8%41.0%35.2%41.7%45.7%
 
Median (66 companies)9.9%11.5%9.2%10.7%10.0%
Inphi Corporation ($IPHI)-4.6%9.0%21.1%2.2%2.9%


Top companies by CAPEX/Revenue, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Alpha and Omega Semiconductor Limited ($AOSL)3.0%6.6%6.5%12.2%42.2%
Renesola Ltd. ($SOL)3.5%0.0%0.0%78.0%41.7%
First Solar, Inc. ($FSLR)7.6%4.0%7.9%17.5%33.0%
Sigma Designs Inc ($SIGM)11.0%6.5%6.2%14.1%29.3%
Micron Technology, Inc. ($MU)19.0%24.8%46.9%23.3%29.2%
 
Median (66 companies)3.6%4.0%3.6%4.7%4.4%
Inphi Corporation ($IPHI)13.6%8.6%8.4%10.8%10.8%


Top companies by ROIC, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
SMART Global Holdings, Inc. ($SGH)2.5%21.5%51.7%
Texas Instruments Incorporated ($TXN)25.1%29.8%34.9%43.1%47.5%
Micron Technology, Inc. ($MU)18.8%15.8%0.8%21.5%42.9%
Applied Materials Inc ($AMAT)15.8%15.2%19.0%31.2%36.4%
NVIDIA Corporation ($NVDA)9.2%13.3%13.1%27.3%35.3%
 
Median (73 companies)5.7%3.8%1.4%3.2%5.2%
Inphi Corporation ($IPHI)-10.8%-2.7%3.7%-8.1%-9.0%


Top companies by Net Debt / EBITDA

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
MACOM Technology Solutions Holdings, Inc. ($MTSI)25.4x3.3x3.0x7.2x98.6x
JinkoSolar Holding Company Limited ($JKS)4.2x3.3x4.1x11.0x8.2x
Lattice Semiconductor Corporation ($LSCC)-1.8x6.5x19.0x3.9x
Renesola Ltd. ($SOL)7.0x35.0x123.6x2.3x3.3x
Himax Technologies, Inc. ($HIMX)-0.6x1.1x-0.6x0.4x3.3x
 
Median (45 companies)-0.5x-0.2x-0.0x0.4x0.3x
Inphi Corporation ($IPHI)-6.4x4.5x33.7x32.2x