As a small $373 million company, Intermolecular, Inc. (IMI) doesn't often attract much attention. The company held its initial public offering only a little over a year and a half ago back in November 2011 where it raised a mere $96.5 million. Yet despite its size and recent nature of its public appearance, the company is very quickly growing to be an important partner to some of the most established companies in multiple industries.
Intermolecular utilizes combinatorial processing systems in order to enhance the research and development process. Accordingly, companies can now process up to 192 experiments on a single substrate utilizing Intermolecular's proprietary technology. This allows for experiments to be performed at speeds 10x to 100x faster than traditional methods would normally allow according to the company's S-1 statement. Such an acceleration to development stands as a significant advantage for companies in highly competitive industries and for those that are highly reliant upon continual innovation.
Here are some of the essential highlights from the latest earnings report found here:
- The company picked up an important client in Q1 with the addition of Micron Technology Inc. (MU). Intermolecular also extended its current arrangement with Elpida, who is expected to be acquired by Micron.
- Intermolecular also entered a new industry by initiating a collaborative development program and intellectual property licensing agreement with Epistar. Epistar is a Tier-1 industry leading player in the light-emitting diodes market and is the largest manufacturer of LED products in Taiwan.
- The decline in year-ago licensing and royalty revenue was largely due to a sale of intellectual property in 4Q 2012.
- The company reported a net loss of $(0.1) million or $(0.00) per share on a non-GAAP basis. This falls in-line with analyst estimates of $0.00 for the quarter.
- The addition of Micron gives Intermolecular a intellectual property licensing reach of nearly 60% of the total NAND flash end market. Micron joins Intermolecular's other partners found in Toshiba (OTCPK:TOSBF) and SanDisk (SNDK).
Here are 4 additional reasons to consider Intermolecular in the coming future:
- Intermolecular's business model allows for it to retain the rights to the intellectual property that it establishes. It then receives royalties and licensing revenues on the basis of arrangements with the partner companies. By entering into relationships with leading firms who give the company access to their leading projects, the company is able to solidify valuable IP rights in the technology of tomorrow.
- Intermolecular reported that it expanded its US patent portfolio to more than 1,000 in January 2013. In January 2012, this number was only a little over 700. This demonstrates their ability to quickly exploit their competitive edge in gaining intellectual property in a limited amount of time.
- The original concern over Elpida was that Intermolecular might not receive its full compensation as the company had filed for bankruptcy protection. This concern migrated into whether or not the contract would be continued under Micron. The addition of Micron along with the extension for Elpida's programs stand as convincing arguments that Intermolecular is displaying significant value to its partner companies.
- The entrance into a new market bodes well for Intermolecular as it expands into another large industry found in LED technology. The growing diversification of industries further shields the company from specific market shocks. More importantly, it demonstrates the flexibility of the company's process and suggests that its market potential can indeed be large.
Disclosure: I am long IMI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.