Maxim Integrated Products (MXIM) 28 Jan 202020 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Maxim Integrated Second Quarter of Fiscal 2020 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] 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. Kathy. ahead, go Please

Welcome conference Maxim call. Jonathan. quarter fiscal XXXX earnings everyone you, Integrated's to second Thank

Brian Joining Chief Doluca; Officer, Executive on Officer, me the Tunç and call Chief today are White. Financial

call. usual earnings process, a financial to on press the in release external our financial of information conference As relations The presentation we and presentation website. part investor this posted a have disclosures supplemental our accompanies in this our

may the Private During these the call, that materially made. statements of statements. will in all cautionary In involve like making I'd from be statements considered in our cautioned in that forward-looking statements Litigation Investors events today's this call conjunction are some and appear Securities to with differ warnings forward-looking conference uncertainty, risks the we be SEC you that Act, and Reform filings. light remind must future that

For additional filings to posted Commission refer are on company's Exchange and the Securities information, please our website. which

Tunç. call the turn over I'll Now, to

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

our summarize and quarter's results me first Let last outlook.

December results Our while our also quarter expectations inventory lean maintaining met levels.

to the revenue for quarter we markets. automotive company expect March the growth communications same by return last center, from to the growth driven and industrial quarter, the year in forward data Looking and

improving. We continue to but be cautious given the uncertainty demand persistent macro and is trade

by secular was assistance some starting automotive. December growth with color driver BMS provide end-market sequentially growth of and X% systems. up business Let with in our areas me automotive In the double-digit quarter, our

of of products. Electronics global serial and discussions management ample on solutions. applications BMS, We assistance power overall link automotive Maxim in number management point-to-point business power Our our customer Show, a better content data in revenue the for see fared our production. large held Consumer communication growth growth ADAS than driver we At car and growth opportunities in

grew quarters, second. gigabytes automotive and Our our from Chinese data audio XX recent latest signaling generation business In at serial OEM we products per link customers. video, transport

high-voltage advanced wireless At hundreds strongly In driver solutions CES, our expected for we is be efficiently that up showcased of automotive of and the power sequentially. BMS and control quarter, watts required to of assistance systems. new automotive March the power families technology supervise

also to the by year content. driver be revenue anticipate We quarter automotive last from and same up assistance driven infotainment

is we up similar quarter. industrial industrial the next driven quarter, Let X% the the to test from industrial Days in last me be year automated experienced factory quarter turn prior be the prior sequentially; automation. automated markets. equipment relatively inventory growth to In was and quarter. the to including quarter, market. in factory expect December up March of the to and terminals sequential the core automation by We test industrial remained financial In industrial channel up also from equipment, expected same

Let quarter, and discuss center for center. sequentially. for demand products XXXG and data applications. for in me strong stations the and data next base communications was optical optical products comms data XXG In ramp center We the XX% December experienced up

of uplinks our budgets. constrained products. centers base deployment move XG analog and need the Hyperscale are We station already power laser while rapid data excited about their within more driver staying to data

customers. from has business center revenue address power the data be cost and within past we optical both our and shown constraints March up fluctuations demand on large customer the our products transmitter CapEx In challenges prior Maxim's quarter, comms quarter. the of the deployments. anticipate to based In strongly

XG for base strong XXG data last demand. Comms of and expected optical and data in station currently be XG up are and enjoying center a strongly for to year is quarter optical from the We period same XXXG applications. center

in sequentially, expected consumer. in me to weakness that customer other XX% The as September was electronics. electronics consumer the for holiday consumer seasonal sequentially, occurred December declines shipments quarter, let down of peak and down. the flagship In turn last strongly be in the March Finally, smartphones to expect to consumers is gross, year. gaming be to quarter, new seasonally Consumer be quarter we phones from at expected customers same ramp, quarter, down the flat are and expected other

To and as summarize, in revenue compared we get have and company to resilient and in last Market center, better. built to and communications March to year the demand quarter we position Maxim quarter same automotive. expect to improving be data the outperform industrial growth conditions is the

our long-lived We in new grow revenue design wins to automotive products strategy on industrial. with are and and executing

company Our analog profitability business model and strategy stability. consistent and enable manufacturing flexible

to over the call Now, I'll Brian. turn

on for our million, $XXX of forecast than Thanks, you quarter. was the everyone to Tunç to and entering today. Revenue X%. was and X% quarter higher year sequentially $X midpoint range the up Compared the call same a the revenue down ago, thank fiscal QX million

XX% revenue approximately consumer. was center major comms Our mix data by XX% in industrial, and XX% QX markets automotive, and XX%

ended channel. We below QX. quarter just comprised day Maxim's days of one distribution prior well the channel Distribution up Now and revenue let quarter long-term XX target our of XX me XX% turn the inventory, of from our with to in days.

inventory Our stronger-than-expected by combined our enabled inventory tight resells management, for products. optical BMS with was lean and channel

the merit XXX above quarter Maxim by manufacturing the million, up with Turning to the special of basis the excluding items employees and in Operating its and favorable guidance points items reflecting $XXX special increase P&L; prior compensation was quarter profitability. variable to annual approximately due margin, from of midpoint an up full excluding efficiencies. $X expenses the driven million increases our from grow quarter, for higher increase XX%, impact the were prior

excluding special remainder special earnings from items $X.XX, to current excluding GAAP year. of was share rate excluding above the of key special was higher this XX% midpoint gross equal The points quarter guidance fiscal our prior income range. revenue and our GAAP improved XX.X% the outlook per items for tax basis GAAP QX margin. the $X.XX and XXX was up due items of margin revenue, to Operating to million. was $XXX operating

capital flow; days from sheet down flow Trailing defined expenditures QX, total million Turning or operations from billion, short-term capital of Free at months investments from flow quarter. to dollars and per $XXX prior less cash the equivalents six million. down price. QX XX% yesterday's cash and ended $X.X X% were days flow million cash is was quarter, cash cash and at as were cash X.X% cash, stock the closing revenue. our $XX inventory inventory XXX, were was free $XX down prior the from free expenditures XX share balance and $X.XX yield

a yesterday's in back our share $XXX Based totaled shares. million stock totaled return $XXX in approximately repurchases XX million our of of Total month repurchases capital dividend was share yield free closing X.X%. flow dividend QX trailing share dividends price per X.X quarterly and we is cash the Dividends of quarter. bought return $X.XX cash on as on basis. For through million in XXX%

quarter. for March Now turn outlook to our the

QX and quarter million from beginning up year-over-year revenue the this backlog based between up and and at terms be Our $XXX to was beginning midpoint. $XXX the million, forecast on earnings fiscal expected QX prior X% X% backlog $XXX million

revenue. QX cash at up gross QX expenditures increased $X remain special the profitability. expected million rate expected to at forecasted X% special at for are prior excluding margins' compensation XX Fiscal XX%. points on to driven excluding special be midpoint up items to are is quarter variable XX.X%, items on expected by operating excluding capital higher expenses QX QX, and basis XX.X% approximately the approximately of is be higher from items our revenue to

That growth. us revenue an and year-over-year growth combined strong trends to earnings March QX see our with model quarter, items, were return. summary, excluding For profits sequential improving in to to business special along of the GAAP revenue per $X.XX financial the range share continued the increasing cash outlook pleased expect we growth flows with with In $X.XX. for generate return enables shareholder

I call Kathy. turn back over will that to With the

Q&A Thanks, that can like possible. prepared and question? the we each call Brian. to the take we That many caller, calls. question for previous We'd to as we first we've our have We'll people our concludes that continue could same please get will open in Jonathan, from now used remarks so one process as questions.

the comes question Ross line Deutsche of first from Seymore from Our Bank.

please. question Your

it given very low just starting look true the Tunc compared that quarter. by inventory last Thanks your think is can better or days XX give March to the was for things and the you have me and to the this congrats I getting is phrase to channel, back ask A either just wanted board, quarter you guidance, gotten us stabilization refill ago update and across go the which operative geographically strong into as you describe of you the Seems guide. just quarter used think letting quarter? the like an still in end quarter to or question and the on to business. better demand do on it's market,

number remarks. our So seeing center few really I in growth good we the in QX guide, said market will optical and happening growth I considering our in and summarize both products prepared and XG. products have demand data essentially one we're some automotive what our a But for things

seeing we're a from with customers our demand strong growth. that's So nice

compared industrial other QX both some really year I QX to but ago not full last we're the and levels On growth the hand year. same side, a recovery have would on two seen the period say

distribution seeing we're of to and channel. lean inventory reasonable able customers We've from demand is also maintain there what the So in this. been coming all levels

refilling last the quarter that was So and distribution inventory what I did. that's think from the one growth we questions of coming got not really the we

guess, So answer comms a geographically, in areas I but piece. essentially in in I be very that Brian geographically demand. we're automotive can mentioned data and broadening strong may increase center some that seeing And growth

to particularly in to through resells Sure, strongest be continues be we and terms Europe strength in China geographically areas; The with a soft as region the little Asia of look at continues weak. distribution. bit particular

Thanks.

Thank you.

line question from comes from Morgan. JP of next Sur Harlan Our

please. question Your

afternoon. Good

production is this guys, X% to EV but to down revenue for about to execution be calendar is growth on exactly slightly outperformance, the It's in that, year-over-year year calculate quarter, it growth flattish good X%. because the auto business return of production another a of think see XX change in auto X% targeted I within bit it Solid up auto go XX, to may was looks and that production year I fiscal was had outlook think year, the China this flat versus about quarter. hard of segmentation and the your to like little

EV this to your exposure of like kind some percentage year the segment products, do of with faster year-over-year you think segments can serial the your linking growing of BMS ADAS low given teens as and So some growth approach unfolds? that

so me that take let one. Okay,

had So with our a in products BMS the to there and and our EV we segment what is those into the our are have we per production. summarize, years estimated position in XX% faster few also through will exposure with ramping of growing and past year essentially about you market with which design good lot when ADAS

So believe Infotainment two those that's our but grow we at more rates car the the to segments, going in to tied average. much units, we recently. pretty growth to well doing than better are

it's grow have great call faster know to growth hard I than and products really think technology B, for are globally. we than you faster because segments two globally. car exactly believe can units So growth those of because hyper is would A, I we've predict, contents continue we and car units an to it and that production that but production invested

in to will grow, that grow you but expect do we long-term the for little low we reluctant give I'm we year automotive a number, in believe this teens. yes, to number. So a stated

Tunc. Thanks,

Harlan. you, Thank

comes BMO. question line the from next Ambrish Your from of Srivastava

Your question please.

is guys [ph] Hi Ambrish. in Jameson for calling this

just continue to auto. touching hoping on was I So

quarter we grew appreciate guided was auto sequentially. to have said So be you you strongly. the I X% you outgrew that I autos [ph] and believe fact last the will believe up are

for the So and first, be and environment your quarter? to confidence Thank up you. in you previous about gives demand that talk you expectations the the below in guide March what broader strongly just auto was market can second

little strong So, I'm here. to think going Kathy growth. do did memory I to from can bit We guide a me and help

little large a but that not I think bit maybe a were we under number.

lower slightly were think came maybe that we I quarter. pretty the previous So in -- close

know we our demand system. for are quarter, products go that very ADAS This especially we seeing strong into

So mentioned that's we've And strong the good driver the design got I some call. wins growth in OEMs, which us. in for China

last car And So some slowing automotive, really last we areas inventory we growth to in you in us. slowed that doing saw the time we've automotive year. for specific some there know spoken as are maybe suggestion attributed of well as is production

structure. now So that car things infotainment also being the of seeing that may were fact by manufactures confirming digested growth, that inventory believing is that be like will that were so maybe that some be another

pretty feeling about the quarter. automotive we're demand good in for So this we're seeing

you. Thank

Thank you.

from line Our Arya of next question comes from America. Vivek Bank the of

please. Your question

[ph] Blake Arya. Hi, Vivek this is for

current if the see there you. think more which impacting that Just impact curious impact is QX China's how having should others. you any Thank markets virus an about versus we specifically end and of

So about development and obviously there we've travel on restrictions heard recently. so is in pretty

optical There are that which of affected. get our that on to normal the a to comprehensive margins longer view they down a and they is are frankly some a assessment we market lunar out. will makers it are region pretty affect have full In So figure that that than shut on in shutdown. year will have communicated bit short the that having areas

We we that a far. for some the on effect an impact revenue that. be only believe on some will going large on on have don't there effects our to quarter. specifics So but going that's don't so the to information We be customer that's us have it's total believe

Got you. it. Thank

Blake. you, Thank

Thank you.

question Suisse. Pitzer from line comes from next Our John of the Credit

Your please. question

terms, afternoon congratulations high March of Good is is take backlog revenue XX% high about the there help the as think just XXs guide, quarter. is seen understand it, be in quarter? I so results. curious backlog out It's solid as other understand and versus at I've be conservative anything in low than more Tunc, uncertainty is oriented in there, why help trying the business some guys I'm the of the usually this kind on me about than that's of into the is terms macro just because a bringing a your to driving the what's coverage kind coverage you're me midpoint couldn't Denmark, stance mix which backlog that better still specifically about to

our Hey effect Tunc than Brian our demand of what the John, a in expect very this so and you're backlog observation. of we that is optical mentioned, And of all quarter. we've for to ship products is that's had orders usual as amount this seeing strong don't optical higher which great

you. Thank Perfect.

you, Thank John.

of Hettenbach Our Craig line Stanley. from next question comes Morgan the from

Your question please.

come Yes, CES, you up product the BMS at and that of just comments in thank to development period of just talk what follow about market? eventually about you there you. and Tunc a introductions the can your the time, on could see products guess wireless just timeline then terms those

need way develop able it, Essentially on our we packs been be of to nutshell talk can to that Obviously a central control unit to that metrology as in through wireless working connect technology a is work BMS be that wireless technology. So individual, We have we essentially technology. it as all on. the wire sure what to demonstrated chips we a more was robust is do to to make are done. it

this of gain time. not on you will the to for exactly terms how robust as It's predicted horizon from a us to complete in So is it years. bit not revenue system. a for going more hard take it really that's little tell But multiple will customer one, as acceptances enough is

that really our wired solutions that's productize SLD in we're to right a way just now. our [ph] equivalent showing but we technology to So it products have we that it's in have

So revenue in wise future. years the multiple

thanks. Understood,

Thank you, Craig.

next line of Muse comes Evercore. question Our the from from C.J.

Your question please.

Matt is calling This [ph] C.J. for

quarter. to guide this business. dig want the center expected side quarter, great comms and than next little into the Just Strong more of data a

XXXX XX? as of to what's and bit through and kind dig going calendar uptake just those gig more you sustainable can driving gig think all So into that are we across little of how XXX trends

in components two data growth the and there to So, comms are really strong center.

are in by XXXG products is center XXG X or selling that them where of length. One data we're

the laser now wins which on for was couple makers have the basically back a while We built and a portion the a of driver down that quarters. solution module for two know, and last at presence strong our analog there years us an we that customers recall, ago. then to you And that good and about in you growth inventory drain and if we took lot a strong design have had

that's the So story there.

those the into would customers centers. deploying of as we more level data capability think essentially in on cloud I transport healthy data consumption their products a get are

year. really So inventory that's that correction what driving a last that's so an from recovery

On XX a a and and lane plus for one coming so be I XG very because front, the kind XG it's some chip and we growth, especially system stations. amplifier XG were XXG one popular to installations ready by of And that going for ago. sell module, trans-impedance products that solution see solution transceiver and again management a in set we made for like a couple years that now of a about into that China products liked that everybody is we're are a popular these from have seeing base probably strong designs that

centers XG ramping of think of digestion the moved and when because being data remember as these these continue so I get right strong that always some even fundamentally now, on. as XXG lumpy think remarks business to the of these what's if there long-term amount in especially position. markets are in I continues, both in now in think the that are we're and But that's that's times products happens the both these growth that right So my as you inventory of I there's we're data rollout good of enjoying long lumpiness and I XG, markets market past of we kind follow prepared wireless. because this a connections, going spot businesses, and those said But these but to good our is sell

Thank you.

Matt. you, Thank

Thank you.

next RBC from Steves Mitch comes question Markets. Our line from Capital of

please. question Your

of from pressure do looking through walk at expect year side, with consumer a -- least full thought near-term, in business me that's you the calendar seeing in quarter? than the year, mean we like particular on that the this lot Apple see numbers focus terms you pretty we what to reported more are that wanted can guys I industry-wide like company-specific Actually is will solid anything that's of out a issued since

business pretty on just concentrated back everybody our remind few was consumer a our customer. walk So years ago to largest

Our strategy other same markets is multiple other multiple even as customers been the for as go to as diversify business well years customers. to to

executing plan. So been on we've that

the products week our our quarter customers season. If new you a current holiday demand a We really period look many have products but into of the ramping large go the good into gaming seasonally guidance after basically, flagship phone. at got we for other

So were that. seeing

already definitely more in QX Our seasonality is basically QX. our to then changing, maybe it's in be be to changed is heavier it in used

So it's year. fiscal going to the be heavier QX in of next

the Now question has particular and is that's something are down gone largest customer. about Maxim, we seeing content our

you're that to this customers, seeing out. takes for So demand it a balance of while are good we but seeing but the all effects from other

you. Thank

Thank you, Mitch.

you. Thank

Our next of question comes from from the Barclays. Curtis line Blayne

please. question Your

the on Hey this for guys congratulations Blayne [indiscernible] results. nice is Curtis,

are think bit lower that fourth obviously some business Looking just at June normal know different you you coming can terms here, remind talking you you fiscal finished us about seasonality historically. you're levels and about little from I growth outgrow that? think than of just in how what you consumers is? weaker way the March seeing since the do come Can entire But guys and to seasonality. the a you for quarter trends know average have what's right with base from above

quarter, assume correct. I not March seasonality the about asked you

the rest and of if seasonality the March okay. fiscal year, for that's

sure but of here. front me have seasonality me Kathy numbers is to the help So going I'm in out

this is Tom, Kathy.

given that's that we're historically and usually at better year Tunc the with ramp in of June first have now industrial have historically half from see but calendar is question his content customer. outlined answer, automotive. any and for Of guiding the do we but smartphone because in changed of and that quarter lower one we as quarter last we a that revenue time And course benefited

our So then in for to we part June year should And Samsung comms and not revenue this finally expect is data of center. quarter. so much current smaller that and

to it's can seasonality hard a lumpiness predict, there. really is that to Given of there optical point not the we

you. Thank

Sure.

question comes from next of line Stifel, [Operator from Jeremy Kwan Instructions] Nicolaus. Our

Your question please.

that me my growing better relative the add on us drivers very your to Can ADAS solid key a Question you is segment. how sense the quarter. on or let give mentioned larger Yes are side congratulations legacy big you that in and those are management of auto nicely automotive a they business?

QX the mix that's because at as so and took example, infotainment we business, they look BMS of of changes numbers if of probably an mid-teens quarter each, automotive of I you quarter. is gives mean these automotive half if half idea. say let's an the roughly in the So kind over are and vary you ADAS range

roughly. have your ADAS mid So answer probably question? around that for BMS infotainment teams Does and for mid-teens

That's three in very see helpful. do going that that to you Where years the next five proportion?

so a that would quoted predict It's on. be numbers so it pretty two clearly an quickly, nicely. for ago, of you grown Clearly call hard double the year example business, we of you XX% but obvious rest use will the if at just would growing we digits prepayment its the us to a higher we pretty some to or look give answer, and of grow to the similar XX% was same

Thank you. Great.

you. Thank

from from of Our next question the Svanberg Stifel. Tore comes line

Your question please.

Hi lot Intel expecting on but thoughts been then, center you and addressed talked don't I a half. has second but this over but on kind this of call the I have not if on dynamics I'm have and topic? about we slowdown, any that asked, know their do quarter. sure very even strong on, data it's you if congratulations half, the question the know early visibility particular first a very have

go I And they don't let's either are denies confirms Intel are with customers. that makers think two farther anything say I know be and module to don't data there, can going our know are anything center customers to we're we with would to one projecting. because My from to selling add I Honestly, away them their mostly cloud Intel, that or we they than think customers are say. that selling to whatever better think, recommendation were remember or do we're

on one. that I help you Sorry, couldn't

so what mainly That's you. it's running there, it obviously are inventory, quite the follow up still why or trying about being below channel below is My long-term on shortages dynamics and I gun was bit of shy visibility, wondering to thank a customers target the because your just target? just fair, is your just understand it

make question. understand your I sure to want I

was Your about inventory? China question

channel not inventory, China. No

last I Channel essentially you inventory, a running said our our inventory; channel model mean, levels actually call, you but in and completely what below catch that as to we we stated, saw bring it's optical to as we up the are be back saw especially products able up stronger to desire to not what we that demand our and the know, and for wanted. causes model

that is pretty these read parts are end for the Our strong. demands

soon being basically So them is anything. not much than ship there and demand we strong are more inventory they of because consumed pretty after

just So to Kathy. I its add would Tore, that

of highlighted we last also well. resale goes serial products to that that [indiscernible]; ship those OEM were we linked strong quarter So as saw Chinese starting automotive products and to to in

China. resale some that a are products are to there So Maxim-specific well quite doing in

That's very much. very you helpful. Thank

Thank you. This to does to for program conclude back remarks. further the question-and-answer any I'd Kathy the like hand session.

That you conference and in Jonathan. Maxim. Thank your call. today's your you, for concludes participation interest Thank for

your conclude the does Thank and you, have participation a conference. day. great in today's Everyone gentlemen, This ladies program. for