Maxim (MXIM) Beats Q1 Earnings, Misses Revenue Estimates
Maxim Integrated Products, Inc. 's MXIM first-quarter fiscal 2016 adjusted earnings of 42 cents per share beat the Zacks Consensus Estimate by a penny. Solid performance by the Automotive business and lower operating expenses supported earnings.
Revenues of $563.0 million were down 3.4% sequentially and 3.1% year over year.
This was slightly below the mid-point of the company's guidance range of $545 million to $585 million issued at the end of last quarter. Though the revenues from smartphone were slightly better than expected, it was offset by an extremely weak communications infrastructure market. As expected, the core Industrial business performance was seasonally down, while Automotive improved significantly.
Revenues missed the Zacks Consensus Estimate of $568.0 million.
Revenues by End Market
Automotive end markets were the growth drivers. The revenue mix in terms of major markets has been discussed below.
The Consumer end market remained the largest revenue contributor, accounting for approximately 32% of revenues, down 3.4% sequentially but up year over year. Shipments of a new generation smartphone by the company's largest mobility customer were higher than expected backed by an earlier product ramp up. The year-over-year growth was attributed to improved diversification beyond smartphones. However, as expected, wearable shipments were down sequentially.
Industrial , Maxim's second-largest segment, generated 27% of revenues, down 3.4% sequentially ascore Industrial declined seasonally.
The Communications and data center end market accounted for 20% of revenues. Revenues declined 12.2% sequentially due to broad-based weakness in this market.
The Automotive end market generated 16% of revenues, up 10.4% sequentially. This was attributed to solid content growth in high-end and mid-range cars.
The Computing business contributed 5% to revenues, down 3.4% from the prior quarter.
The non-GAAP gross margin was 61.6%, up 75 basis points (bps) sequentially but flat year over year. Gross margin benefited from lower manufacturing expenditure.
Non-GAAP operating expenses of $193.4 million were down 0.4% sequentially and 12.2% year over year. The decrease resulted from overall cost control, including the initial savings from the company's restructuring activities.
Pro-forma net income was $120.3 million, compared with $124.1 million in the last quarter and $108.6 million a year ago. Our pro-forma calculation excludes restructuring, intangibles amortization, asset impairments and other one-time charges on a tax-adjusted basis.
Balance Sheet & Cash Flow
During the quarter, cash flow from operations was $117.0 million compared with $221.8 million in the prior quarter. Important usages of cash during the quarter included $15.0 million on capex, $40.0 million for share repurchases and $85.0 million paid as dividends.
A cash dividend of 30 cents per share will be paid on Dec 3 to stockholders of record as on Nov 19.
Total cash, cash equivalents and short-term investments decreased $17.0 million from the prior quarter to $1.61 billion.
For the second quarter, Maxim expects revenues in the range of $490 million to $520 million based on a quarter-end backlog of $329.0 million. The Zacks Consensus Estimate is pegged at $555.0 million.
Gross margin is expected within 56-60% on a GAAP basis and in the range of 60-63% on an adjusted basis (excluding special items).
Earnings per share are expected within 23-29 cents on a GAAP basis and 29-35 cents on an adjusted basis. The Zacks Consensus Estimate stands at 41 cents.
The soft second-quarter outlook reflects a major decline in consumer revenues owing to product cycle timing; normal seasonality within Automotive and Industrial; and persistent weakness in communications infrastructure.
Maxim delivered mixed fiscal first-quarter 2016 results with earnings surpassing the Zacks Consensus Estimate but revenues missing the same.
For the December quarter, the company expects Automotive to remain flat. Consumer is likely to decline significantly due to the forecasted decrease of flagship smartphones that are leading mobility customer, and lower wearable shipments. Industrial, Communications and Data Center, and Computing are also expected to be seasonally down.
The company expects improvement in the March quarter despite the soft near-term guidance.
Maxim remains financially strong with convincing margin expansion opportunities through its cost-saving initiatives and R&D focus on high-return investments.
Maxim is transforming the manufacturing footprint to enhance flexibility and profitability, while lowering capital expenditures. Management also plans to optimize the product lines and organization for better returns on R&D investments. Based on these initiatives, management now expects to achieve $180 million in annual savings over the long term.
Maxim is shifting to advanced node process technology development through a recent collaboration with its foundry partners. Products launched under this initiative should expand margins.
Currently, Maxim carries a Zacks Rank #3 (Hold). Other stocks in the same space that investors may consider are JD.com, Inc. JD , Expedia Inc. EXPE and Travelport Worldwide Limited TVPT . While JD.com holds a Zacks Rank# 1 (Strong Buy), Expedia and Travelport sport a Zacks Rank #2 (Buy).
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