IPO Report: Adesto Technologies (IOTS)

Francis Gaskins |

Adesto Technologies (IOTS) is a leading provider of application-specific, feature-rich, ultra-low power non-volatile memory products. The company is based in Sunnyvale, CA.

Three other companies are scheduled for the week of Oct. 12. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Needham & Company, Oppenheimer & Co.
Co-managers: Roth Capital Partners

End of lockup (180 days): Saturday, April 9, 2016
End of 25-day quiet period: Tuesday, November 10, 2015

IOTS scheduled a $45 million IPO with a market capitalization of $153 million at a price range midpoint of $11 for Friday, October 16, 2015 on Nasdaq.  Priced at $7.

Summary

IOTS is a leading provider of application-specific, feature-rich, ultra-low power non-volatile memory products.

IOTS optimizes its non-volatile memory products for Internet of Things, or IoT, applications including current and next-generation Internet-connected devices in the consumer, industrial, medical and wearables markets.

Valuation

Glossary

Accumulated deficit (mm)

.

.

-$78

     

Per share dilution

.

.

-$8.54

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Adesto Technologies (IOTS)

$154

3.8

-19.3

3.5

4.5

29%

annualizing June 6 mos

       
             

Conclusion

Neutral

Top line rev -4%

Gross profit 40%

20% loss on revenue

P/E of -19.3 indicated relatively high cash furn for an operating company

Price to book of 3.5

Business

IOTS is a leading provider of application-specific, feature-rich, ultra-low power non-volatile memory products.

IOTS optimizes its non-volatile memory products for Internet of Things, or IoT, applications including current and next-generation Internet-connected devices in the consumer, industrial, medical and wearables markets.

IOTS combines its non-volatile memory design capabilities with proprietary intellectual property and differentiated technology platforms to deliver high-performance products that dramatically reduce the overall energy consumption of its customers’ systems and extend battery life. IOTS’s products feature embedded intelligence in a small form factor and high reliability.

IOTS believes that its  ultra-low power and feature-rich non-volatile memory products will become a key hardware building block for billions of IoT edge devices operating on and connected to networks worldwide.

Through December 31, 2014, IOTS has shipped over 200 million units to more than 500 end customers, 59 of which are large multi-national companies.

IOTS’s non-volatile memory, or NVM, product families include DataFlash, Fusion Flash and Mavriq. IOTS’s DataFlash family of products is well-suited for data-logging applications, such as fitness trackers and sensors, and allows for system simplification. IOTS’s Fusion Flash family of products offers the ability to function at a wide range of voltages and battery charge levels, which extends the useful battery life of its customers’ systems. IOTS’s Mavriq family of products utilizes its proprietary Conductive Bridging RAM, or CBRAM, technology and is ideally suited for applications that require high-performance while consuming 1/10th to 1/100th the energy of existing flash memory products. IOTS believes the power and speed advantages of its products have enabled IOTS to become a preferred NVM provider to customers demanding a combination of exceptional battery life, energy efficiency, reliability and low cost.

Sales & Marketing

IOTS sells its products directly to leading original equipment manufacturers and original design manufacturers, or OEMs and ODMs, respectively, that manufacture products for its end customers. In general, IOTS works directly with its customers to have its NVM devices designed into and qualified for their products, which IOTS refers to as design wins.

The number of design wins has grown from 32 in 2013 to 65 in 2014 and to 115 in the nine months ended September 30, 2015, including 6, 63 and 109 design wins for new products, respectively.

Although IOTS maintains direct sales, support and development relationships with its customers, most of its products are sold to those customers through distributors.

Intellectual Property

In addition to intellectual property that IOTS developed, IOTS has acquired and licensed technology from third parties for incorporation in its products.

In January 2007, IOTS entered into a license agreement with Axon Technologies Corp. Pursuant to this license agreement, IOTS has rights in Axon’s patents and trade secrets covering, among other things, Axon’s programmable metallization cell, or PMC, technology, which is a component of IOTS’s CBRAM technology.

This license provides IOTS with broad rights to use and sub-license this technology, and IOTS has the exclusive right to make, have made by authorized foundries or integrated device manufacturers, use, sell, lease, offer for sale, and import products covered by Axon’s licensed patents and trade secrets in certain fields of use.

The license will last for the lifetime of the licensed patents, which currently ends in September 2026. IOTS pays a royalty for use of the licensed intellectual property in its products. In July 2012, IOTS purchased certain flash memory product assets from Atmel Corporation.

Competition

Currently, IOTS’s competitors range from large, international companies offering a wide range of commodity NVM products to companies specializing in other alternative, specialized emerging memory technologies.

IOTS’s primary competitors in the NVM market include Atmel Corporation, Macronix International Co. Ltd., Microchip Technology Inc., Micron Technology, Inc., Spansion Inc. (recently acquired by Cypress Semiconductor Corporation), STMicroelectronics NV and Winbond Electronics Corp.

Among these large memory suppliers, IOTS competes primarily as an overall value proposition and not on a product or technology basis. IOTS expects competition in its current markets to increase in the future as existing competitors improve or expand their product offerings and as new companies enter these markets.

5% Shareholders Pre-IPO

Alexei Andreev              16.2%  

Keith Crandell    19.4%  

ARCH Venture Fund VI, L.P.      19.4%

Harris & Harris Group, Inc.         16.2%    

Applied Ventures, LLC   15.6%    

Entities affiliated with ATA Ventures       11.2%                                                     

Entities affiliated with Adams Street       10.1%    

Serge Dassault             8.8%      

Altera Corporation         8.0%    

Dividends

No dividends are planned.

Use of Proceeds

IOTS expects to receive $39 million from its IPO and use it for the following:

for working capital and other general corporate purposes, including research and development activities, sales and marketing activities and capital expenditures, to enhance existing and develop new products and product families, expand its manufacturing capabilities or fund its growth.

IOTS may also use a portion of the net proceeds that IOTS receives from this offering for investments in or acquisitions of complementary businesses, products, services, technologies or other assets.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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