PI Q3 2022 EPS notes - 10/26/22

Since this was a few weeks ago I’ll skip the numbers, since they’ve been out awhile, and focus on general commentary.

  • Strength in demand now stretches well into 2023. Record backlog, with demand still exceeding supply by more than 50%. Their inlay partners are expanding capacity to meet the opportunity.

  • Reader IC supply is close to catching up with demand, Q3 reader ICs were a record. Systems components will be supply constrained into H123 and endpoint ICs for all of 2023.

  • Went into detail about the authentication chip and related software/services. They discussed the many verticals they are seeing interest from. They expect authentication opportunities to see recurring revenue from both chips and cloud-based subscription services.

  • Expect a meaningful wafer supply increase at the end of Q4 for deliveries in 2023. Any inventory increase reported in Q4 will be the result of this and will mask how tight supply really is.

  • All but one analyst said congratulations. Their reports reflected how impressed they were.

  • Expect some price increases from their foundry partner for 2023 and they expect to pass on some of those increases to maintain their margin model. Expect R&D to track revenue growth but other areas of the business will present possible margin opportunities.

  • The pipeline for new opportunities beyond what they have already discussed include an expansion in retail from apparel to general merchandise, food opportunities that are currently in the supply and logistics segment making that opportunity even greater, and pharma/medical devices in the authentication area.

  • European loss prevention deployment is going very well and they expect 2 more quarters of meaningful systems revenue there.