Maxim Integrated Products, Inc. (MXIM)

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Maxim Integrated Products, Inc. (MXIM)

Q1 2019 Earnings Call

October 30, 2018 5:00 pm ET


Kathy Ta - Maxim Integrated Products, Inc.

Tunç Doluca - Maxim Integrated Products, Inc.

Bruce E. Kiddoo - Maxim Integrated Products, Inc.


Harlan Sur - JPMorgan Securities LLC

Ross C. Seymore - Deutsche Bank Securities, Inc.

Ambrish Srivastava - BMO Capital Markets (United States)

Vivek Arya - Bank of America Merrill Lynch

Craig M. Hettenbach - Morgan Stanley & Co. LLC

Blayne Curtis - Barclays Capital, Inc.

John William Pitzer - Credit Suisse Securities (USA) LLC

Christopher Brett Danely - Citigroup Global Markets, Inc.

Tore Egil Svanberg - Stifel, Nicolaus & Co., Inc.

Toshiya Hari - Goldman Sachs & Co. LLC

CJ Muse - Evercore ISI

Chris Caso - Raymond James & Associates, Inc.

Amit Daryanani - RBC Capital Markets LLC

Srini Pajjuri - Macquarie Capital (USA), Inc.

Christopher Rolland - Susquehanna Financial Group LLLP

Cody Acree - Loop Capital Markets LLC



Good day, ladies and gentlemen, and welcome to the Maxim Integrated First Quarter of Fiscal 2019 Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's program is being recorded.

I would now like to introduce your host for today's program, Kathy Ta, Vice President, Investor Relations. Please go ahead, Kathy.

Kathy Ta - Maxim Integrated Products, Inc.

Thank you, Andrew. Welcome everyone to Maxim Integrated's fiscal first quarter 2019 earnings conference call. Joining me on the call today are Chief Executive Officer, Tunç Doluca; and Chief Financial Officer, Bruce Kiddoo.

I would like to highlight that we have posted a supplemental financial presentation to our Investor Relations' website. The information in this presentation accompanies the financial disclosures in our press release and on this conference call.

During today's call, we will be making some forward-looking statements. In light of the Private Securities Litigation Reform Act, I'd like to remind you that these statements must be considered in conjunction with the cautionary warnings that appear in our SEC filings.

Investors are cautioned that all forward-looking statements in this call involve risks and uncertainty, and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings which are posted on our website.

Now, I'll turn the call over to Tunç.

Tunç Doluca - Maxim Integrated Products, Inc.

Thank you, Kathy. Good afternoon to all our participants and thank you for joining us today. We appreciate your interest in Maxim Integrated.

Our September quarter results were solid. Compared to the same quarter last year, revenue and profitability grew strongly, driven by Automotive, Consumer, Industrial, and Data Center.

Looking forward, we are seeing softening business conditions. However, we believe our business model enables us to be successful in any environment. Due to our strong free cash flow and positive net cash balance, we plan to return 125% of free cash flow to shareholders this fiscal year by increasing the share buyback. We believe buying our shares is the best use of our cash in the current environment.

I want to remind investors that our second fiscal quarter last year was a 14-week quarter and was also impacted by the transition to sell-in accounting at one distributor. My comments on December quarter year-on-year comparisons adjust down year-ago quarter revenue for both of these items.

Let me now discuss September results and current quarter outlook starting with Automotive. In the September quarter, our Automotive business was up 15% from the same quarter last year. We continue to see the strongest demand signals for battery management systems for electric vehicles and driver assistance content.

Our content growth opportunities for Maxim and ADAS applications continued to be centered on power management and point-to-point serial link data communication products.

Recently, we introduced a new generation of serial link products for transporting video, audio, and data in Automotive applications. This GMSL-2 technology supports 6 gigabit per second transfers for display and driver assistance and can also transport 1 gigabit per second Ethernet. Our technology includes diagnostic capabilities to assist the health of the link and is compliant with Automotive Safety Integrity Level standards making it suitable for autonomous drive applications. The first pair of products lead many GMSL-2 products to follow in the coming year.

We received extremely strong customer pull for this product family. Customers have ordered over 90,000 engineering prototypes in the first 3 months and we had already won designs at 7 different OEMs.

Turning to battery management systems for electric vehicles, we are growing our global footprint as design wins from prior years translate into today's revenue growth. Battery management systems and driver assistance revenue grew over 60% from the same quarter last year.

In the December quarter, we expect automotive to be strongly up sequentially and up in the mid-teens from the same quarter last year. We expect the strength to come from content increases in secular growth areas offsetting slowdown in global auto production. We expect battery management systems revenue for electric vehicles to nearly double from the same quarter last year with growth across several geographies.

In addition, we expect continued content growth in driver assistance applications. Let me next turn to the Industrial market. In the September quarter Industrial was up 12% from the same quarter last year. Our growth in Industrial benefited from content growth in factory automation and medical products.

In our broad market business and distribution, we've continued to see double-digit resales growth from the same quarter last year. However, we began to receive weaker bookings and slower resales within a broad base of customers in the latter part of the quarter. Bruce will provide more detailed commentary on the dynamics of our distribution business.

Read the rest of this transcript on seekingalpha.com