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Integrated Device (IDTI) Q1 Earnings & Revenues Top Estimates

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Integrated Device Technology, Inc. (IDTI - Free Report) delivered fiscal first-quarter 2019 non-GAAP earnings of 44 cents per share, which surpassed the Zacks Consensus Estimate by a cent. The figure also surged 33.4% on a year-over-year basis but declined 4.3% sequentially.

Revenues increased 16.2% year over year and 1.7% on a sequential basis to $228.5 million. The figure also came slightly ahead of the Zacks Consensus Estimate of $227 million.

Top-line growth was driven by strong performance of the company in data center, consumer and communications end markets with the support of its expanding product portfolio. Moreover, robust new products in the areas of advanced timing memory interface, sensors, RF and wireless power drove the results.

Additionally, the company continued to benefit from increasing use of memory intensive applications in cloud infrastructure, artificial intelligence, big data and machine learning technologies.

Since earnings release, the company’s share price has risen 3.42%. This can primarily be attributed to the better-than-expected results and strong operational activities.

Notably, shares of Integrated Device have returned 15.8% on a year-to-date basis against the industry’s decline of 5.4%.



End-Market in Details

Data Center Market: The company generated 40% of its revenues from this market which improved 22% from the year-ago quarter. This came on the back of increasing adoption of Integrated Device’s saleable product in the cloud data centers and robust complete system level platform. Further, solid performance of flagship memory interface business drove the results within this market.

Communications Infrastructure Market: This market yielded 29% of the company’s total revenues, which grew 19% year over year. Top-line growth in this market was primarily driven by robust performance of Integrated Device’s RF product lines. This can primarily be attributed to growing adoption of millimeter wave solutions by OEMs across 5G, fixed wireless and satellite communications areas. Moreover, the company’s cellular band gained momentum during the reported quarter aiding the performance of RF product lines. Further, the company witnessed increased adoption of its advanced timing products which remained positive throughout the quarter.

Consumer Market: Integrated Device generated 20% of its revenues from this market, which increased 13% year over year. This was fueled by the emerging wireless power technology which is leading to growing adoption of wireless power products by the consumers worldwide. The company’s wireless power platform continues to benefit from this trend.

Automotive & Industrial Market: This market yielded 11% of total revenues of the company, declining 2% from the year-ago quarter. The decline was owing to transition effect of automotive customer products.

Operating Details

In the fiscal first-quarter 2019, non-GAAP gross margin came in at 63.4%, which massively expanded 200 basis points (bps) on a year-over-year basis and 80 bps sequentially. This can be attributable to favorable product mix.

Additionally, improvement in top-line growth in the communications infrastructure market which was anticipated exhibit some sluggishness in the reported quarter, also contributed well.

Non-GAAP operating expenses were $77.2 million, increasing 8.6% from the prior-year quarter and 5.5% from the previous quarter.

Adjusted operating margin came to 29.6%, expanding 430 bps from the year-ago quarter but contracted 40 bps from the previous quarter.

Balance Sheet & Cash Flows

As of Jul 1, 2018, cash and cash equivalents were $148.1 million, compared with $136.9 million as of Apr 1, 2018. Short-term investments were $198.2 million, down from $222 million in the previous quarter. Inventories were $66.2 million, up 7.5% sequentially.

Cash flow from operations was $44 million, down from $69 million in the last quarter. Further, CapEx spending was around $8 million, declining $9 million sequentially.

The company also generated $36 million of free cash flow in the quarter.

In the reported quarter, Integrated Device repurchased 1.56 million shares worth $49.3 million.

Guidance

For fiscal second-quarter 2019, Integrated Device expects total revenues to be in the range of $228 million and $238 million. The Zacks Consensus Estimate for revenues is pegged at $230.9 million.

Both communications and data center markets are anticipated to perform well. Further, industrial & automotive market is expected to exhibit double-digit growth due to the expanding test capacity and increasing customer design wins.

However, consumer market might show some sluggishness on a sequential basis.

Further, the company’s earnings are anticipated to lie in a range of 42-48 cents per share. The Zacks Consensus Estimate is pegged at 44 cents per share.

Moreover, non-GAAP gross margin and operating margin are projected at 63.8% and 29.7%, respectively.

Zacks Rank and Other Stocks to Consider

Integrated Device carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector are Adobe Systems (ADBE - Free Report) , Verint Systems (VRNT - Free Report) and Micron Technology (MU - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Adobe Systems, Verint and Micron is pegged at 16.2%, 10% and 8.18%, respectively.

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