Integrated Device (IDTI) Beats on Q2 Earnings & Revenues

Integrated Device Technology, Inc. IDTI delivered fiscal second-quarter 2019 non-GAAP earnings of 47 cents per share, surpassing the Zacks Consensus Estimate by 2 cents. The figure also surged 34.3% on a year-over-year basis and 6.8% sequentially.

Revenues increased 15.2% year over year and 3.1% on a sequential basis to $235.5 million. The figure also came ahead of the Zacks Consensus Estimate of $234.1 million.

The top line was driven by the company’s strong performance across all the end markets, especially in the communications and data center markets.

Moreover, the company’s expanding product portfolio and strategic partnerships contributed well to the second-quarter results.

Last month, the company entered into a definitive agreement to be acquired by Renesas Electronics Corporation for around $6.7 billion in an all-cash transaction. The deal is expected to close in the first half of 2019.

Notably, shares of Integrated Device have returned 56.6% on a year-to-date basis against the industry’s decline of 12.6%.

End-Market Details
    
The company generated 39% of its total revenues from the Data Center market in the second quarter, expanding 100 basis points (bps) year over year. Integrated Device continued to benefit from growing usage of optical components and modules in the data centers.

Further, increasing cloud data traffic remained positive and will continue to drive the demand for the company’s Electro-absorption modulation laser driver and trans-impedance amplifier which was launched during the reported quarter.

Moreover, Communications Infrastructure market accounted for 31% of the total revenues in the quarter under review, expanding 200 bps from the year-ago quarter. Additionally, Automotive & Industrial market generated 13% of revenues which remained flat year over year.

However, the contribution from Consumer market to the total revenues contracted 300 bps on a year-over-year basis to 17%.

Integrated Device Technology, Inc. Price, Consensus and EPS Surprise

 

Integrated Device Technology, Inc. Price, Consensus and EPS Surprise | Integrated Device Technology, Inc. Quote

Operating Details

In the fiscal second-quarter 2019, non-GAAP gross margin came in at 64.2%, which significantly expanded 280 basis points (bps) on a year-over-year basis and 80 bps sequentially.

Non-GAAP research and development spending came in $46.4 million, increasing 12.3% from the prior-year quarter and 3.8% from the previous quarter. Further, selling, general and administrative expenses were $32.7 million, up 4.8% from the year-ago quarter and 0.6% sequentially.

Adjusted operating margin came to 30.6%, expanding 470 bps from the year-ago quarter and 100 bps from the previous quarter.

Balance Sheet

As of Sep 30, 2018, cash and cash equivalents were $200.6 million, compared with $148.1 million as of Jul 1, 2018. Short-term investments were $192 million, down from $198.2 million in the previous quarter. Inventories were $61.1 million, declined from $66.2 million in the fiscal first-quarter 2019.

In the fiscal second quarter, Integrated Device repurchased shares worth $38.1 million.

Zacks Rank and Stocks to Consider

Integrated Device carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Upland Software UPLD, Ringcentral RNG and AMETEK AME. While Upland Software and Ringcentral sport a Zacks Rank #1 (Strong Buy), AMETEK carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Upland Software, Ringcentral and AMETEK is currently pegged at 20%, 28.83% and 10.97%, respectively.

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