Adesto Technologies Corporation (NASDAQ:IOTS) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 05:00 pm ET

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Adesto Technologies Corporation (NASDAQ:IOTS) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Adesto Technologies Third Quarter 2018 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Mr. Joel Achramowicz. Sir, you may begin.

Executive
Joel Achramowicz

Good afternoon, and welcome to Adesto Technologies Third Quarter 2018 Earnings Conference Call. I'm Joel Achramowicz, Managing Director of Shelton Group, Adesto's IR firm. Joining me today are Narbeh Derhacobian, Adesto's President and CEO; as well as Ron Shelton, CFO.

(Forward-Looking Cautionary Statements)

Also, the company's press release and management statements during this conference call will include discussions of certain non-GAAP financial measures. These financial measures and related GAAP to non-GAAP reconciliations are provided in the company's press release and related current report on Form 8-K, which can be found at the IR section of Adesto's website at www.adestotech.com. For those of you unable to listen to the entire call at this time, a recording will be available via webcast on the company's website.

And now, it's my pleasure to turn the call over to Adesto's President and CEO, Narbeh Derhacobian. Narbeh?

Executive
Narbeh Derhacobian

I'm pleased to report another quarter of solid execution by the team, achieving our sixth consecutive quarter of more than 30% year-over-year growth. Revenue in the quarter increased to $21.9 million and included $1.9 million of contribution from our Echelon acquisition, which we closed on September 14. Excluding Echelon, which is not part of Adesto's embedded systems division, revenue increased 32% year-over-year and 10% sequentially. As we indicated in our last call, we had expected gross margins to improve in Q3 and we saw a 270 basis points sequential improvement.

Third quarter revenue breakdown for the combined company by verticals consisted of approximately 44% from the industrial market, 37% from the consumer market and 14% from communications market and the remaining 5% are from computing, medical and automotive. We expect the contribution from the industrial vertical to start trending over 50% of the revenues starting in Q4 with our first full quarter of contribution from our embedded systems division.

During the quarter, we continued to make good progress across our memory product division with another solid quarter of design wins. Our year-to-date total design wins count almost equals the total count for all of 2017, further adding to the momentum we've been gaining over the past few years. Notable design wins included a leading sports watch manufacturer for two of its separate watch models, electronic price tags for retail application and a major application in vehicle telematics and fleet management based on 3G GPRS network, which was our largest win in the quarter. We also continued to secure new wins in our stronghold of utility metering across multiple customers.

In the last earnings call, we had reported that we had seen customer pushouts of the DataFlash-L