Jan 26, 2017
Executives
Kathy Ta - Managing Director, IR Tunc Doluca - President and CEO Bruce E. Kiddoo - SVP and CFO
Analysts
Tore Svanberg - Stifel Craig Hettenbach - Morgan Stanley Gabriel Ho - BMO Capital Markets Harlan Sur - J.P. Morgan Cody Acree - Drexel Hamilton
Operator
Good day, ladies and gentlemen, and welcome to the Maxim Integrated Second Quarter of Fiscal 2017 Conference Call. At this time, all participants are in a listen-only mode.
Later, we will conduct a question-and-answer session and instructions will be given at that time. [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, Managing Director, Investor Relations. Please go ahead, Kathy.
Kathy Ta
Thank you, Jonathan, and welcome everyone to Maxim Integrated fiscal second quarter 2017 earnings conference call. With me on the call today are Chief Executive Officer, Tunc Doluca; and Chief Financial Officer, Bruce Kiddoo.
I would like to highlight that we have posted a supplemental financial presentation to our external Investor Relations website. The information in this presentation accompanies the financial disclosures in our earnings 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 Web-site.
Now, I'll turn the call over to Tunc.
Tunc Doluca
Thank you, Kathy, and good afternoon to everyone on the call. We appreciate your interest in Maxim Integrated and thank you for joining us today.
Our December quarter marked the beginning of our return to revenue growth as automotive, core industrial and diversification in consumer all contributed to growth from the same quarter last year. In the March quarter, we expect to build upon our growth momentum in our automotive and industrial businesses.
Let me discuss our quarterly results and outlook by major market. First I'll comment on automotive.
At the Consumer Electronics show in Los Vegas, we showed customers a pipeline of new automotive products and technologies in infotainment, driver assistance and battery management applications. This generated the highest amount of customer interest in our automotive products that we had ever experience at the show.
Some of the excitement stems from our strong relationships with key automotive processor manufacturers. Since we supply efficient power management for these processors, we have also opened the door to earn new design wins for our serial link USB and LED lighting products.
We have grown our relationships with key U.S. auto makers, who now have interest in our driver assistance products and in battery management systems for electric vehicles.
Our battery management business is growing significantly, as we have garnered new wins in China and are seeing continued design win strength in Korea. We are deploying our power management technology into the largest Japanese head unit manufacturer and are deploying products that are enabled metrics lighting LED headlamps.
At CES multiple OEMs presented autonomous driving systems. In car data transmission is at the heart of these systems as high speed links are require to send information from sensors to processors.
Increasing levels of driver assistance require higher rates of data transmission and more sensors within cars, playing to the strengths of our serial link solutions. The number of driver assist sensors per car is projected to increase each year.
This is expanding our revenue opportunity since more links per car will be needed as a result. We are now winning in designs which require up to 6 gigabit per second data transmission speeds.
Our December quarter automotive revenue was up sequentially and strongly up from the same quarter of last year, reflecting our continued content growth and strong adoptions of new products by our customers. In the March quarter, we expect automotive to be strongly up sequentially and from the same quarter last year.
This has led by continued growth in infotainment content and strong momentum in electric vehicle battery management. Let me next turn to the industrial market.
Strong growth in our factory automation products has supported year-over-year increases in our core industrial business for the last three quarters. We expect that momentum to continue.
As factories are modernized there is a need to distribute sensor and control systems to the factory floor. Our I/O link solutions enable direct network access to sensors on the factory floor using existing cabling.
Our December quarter industrial business was up from the same quarter last year, excluding the sale of our energy metering business. Within industrial, the core segment was up from the same quarter last year, driven primarily by factory automation products in the areas of interface, signal change and power management.
In the March quarter, we expect industrial to be up strongly sequentially. Core industrial with particular strength from factory automation content remains the strongest contributor to this growth.
We are making good progress to grow our broad market business. Most of this broad market is identified with industrial, but our broad market initiatives generate revenue in other areas such as communications and consumer.
By supplementing our differentiated broad market products with updated technical collateral, strong online support and improved website and e-commerce store front, we continue to build our ability to serve the needs of our global customer base more effectively. In addition, we are expanding our distribution channel partnerships as necessary to expand our customer coverage.
For example, in the December quarter we added a Tier 1 distribution partner for Europe. We have increased the use of analytics to identify, track and maximize the value of opportunities within the broad market.
And we are implementing ship and debit transactional capability globally with our distribution partners. Together, automotive and industrial markets contributed nearly half of total company revenue in the December quarter.
Now let me discuss communications and data center. In the December quarter communications and data center was slightly down sequentially, but up from the same quarter last year.
We are seeing strong growth in 40-G and 100-G laser driver products. These products are used in optical modules in high speed data center applications.
In cloud data center customers we expect modest growth from 12V power management products in 2017. And finally we expect the communications infrastructure market to be up sequentially across a broad base of products.
Finally let me finally turn to consumer. In the December quarter our consumer business benefited from our strategy to diversify our revenue sources across a variety of tablets, wearables, peripherals, smartphones and gaming systems.
Consumer revenue in the quarter was up strongly from the same quarter a year ago. In the March quarter we expect our consumer revenue will be strongly down due to Samsung and seasonal softness in our other diversified products as expected after the holiday period.
At Samsung due to continued dual sourcing of socket opportunities we expect our dollar content will be down in the Galaxy S8 from the prior generation Galaxy smartphone. Going forward we expect that our business at this customer will be below 10% of total company revenue.
We continue to see emerging opportunities in new consumer products such as hearables, wearables and connected home systems with voice command capability. These new areas play to our technology strengths in power management and audio.
In closing, our performance demonstrates that our strategy to diversify and grow our revenue is working. We continue to grow our automotive business well above market.
New factory automation applications are enabling year-over-year growth in our core industrial business. We are making excellent progress in diversifying our consumer revenue in wearables, tablets, peripherals, gaming systems and China mobility.
We are delivering greater profitability and cash flow growth, which enables us to remain a leader in the return of capital to shareholders. In summary we’re confident the combination of our return to growth, improved profitability and strong cash flows will maximize shareholder value.
With that, now I'll turn the call over to Bruce for a summary of our financial performance.
Bruce E. Kiddoo
Thanks Tunc. I want to start by highlighting improvements in our revenue performance.
Our second quarter revenue results were above the midpoint of our guidance, above normal seasonality and up 8% from the same quarter a year ago. Our guidance for the third quarter is up sequentially and up from the same quarter a year ago with strong expected growth in automotive and industrial.
These improvements are driven by diversification in our overall company revenue as we expand content gains in our automotive business, grow in factory automation and core industrial products and diversify across a broad base of customers, platforms and technologies in consumer. Now I will discuss Maxim's second quarter financial results.
Revenue for the second quarter was $551 million, down 2% from the first quarter and above the $540 million midpoint of our guidance. Our revenue mix by major markets in Q2 was approximately 31% consumer, 25% from industrial, 21% comm and data center, 19% automotive and 4% computing.
In the December quarter, our automotive business was up sequentially in line with normal seasonality and up strongly from the same quarter of last year. Our industrial business was down sequentially, in line with normal seasonality, but up from the same quarter last year excluding the sale of our energy business, due to the strong growth in factory automation products.
Our communications and data center business was down sequentially, but again up from the same quarter last year due to growth in our data center and cable businesses. And finally our consumer business was down sequentially, but above normal seasonality and up from the same quarter last year due to customer and product diversification.
For an update on the channel distribution comprised 38% of Maxim’s revenue in the December quarter. Resales were up sequentially and end market bookings were also strongly up.
We ended the December quarter with 57 days of inventory in the distribution channel, down five days from the September quarter. The significant decrease in days was driven by increased resales and inventory management.
Turning to the P&L, Maxim’s gross margin excluding special items was 64.1%, slightly up from the prior quarter, driven by continued execution on our manufacturing transformation. Special items in Q2 gross margin included intangible asset amortization from acquisitions and accelerated depreciation.
Operating expenses excluding special items were $186 million, up slightly from the prior quarter due to our annual salary adjustments in September, partially offset by continued cost controls, consistent with our operational plans. Special items in Q2 operating expenses included acquisition related charges and restructuring charges.
Q2 GAAP operating income excluding special items was $168 million. Operating margin at 30.4% of revenue is slightly down from the prior quarter, but is up from 23.9% in the same quarter a year ago.
The 650 basis point improvement in operating margin over the same quarter last year was driven by our manufacturing transformation and cost-saving initiatives. Q2 GAAP tax rate excluding special items was 18%.
GAAP earnings per share excluding special items was $0.46 at the high end of guided range and up 44% from the same quarter a year ago. Turning to the balance sheet and cash flow; during the quarter, cash flow from operations was $193 million or 35% of revenue.
Inventory days ended at 109, up eight day from Q1 due to lower revenue in Q2 and support for the forecasted Q3 revenue ramp. Inventory dollars were down 6% from the prior quarter.
Gross capital expenditures were $16 million in the quarter. Capital expenditures are below our normalized level of $26 million per quarter of depreciation.
Trailing 12 month free cash flow ending in Q2 using net capital expenditures was $756 million or 34% of revenue and up 8% over the same quarter of last year. Our free cash flow yield is approximately 6% at yesterday’s closing stock price.
For capital return share repurchases totaled $61 million in Q2, as we bought back approximately 1.6 million shares. Dividend totaled $94 million in the quarter or $0.33 per share, the dividend yield is approximately 3.1% at yesterday’s closing stock price.
Also in the quarter we paid off $250 million in short-term debt. Overall, total cash, cash equivalents and short-term investments decreased by $181 million in the second quarter to $2.1 billion.
Moving on to guidance, our beginning Q3 backlog was $388 million. Based on this beginning backlog and expected turns, we forecast Q3 revenue of $555 million to $595 million.
As our guidance indicate Q3 revenues are expected to be up sequentially and up from the same quarter of last year, with strong growth in automotive, industrial and communications and data centers. Q3 gross margin excluding special items is forecasted at 63% to 65%, flat from the prior quarter, as we continue to realize significant benefits from our manufacturing transformation.
Special items in Q3 gross margin are estimated at approximately $12 million, primarily for amortization of intangible assets. Q3 operating expenses excluding special items are expected to be flat to down slightly from the prior quarter with continued cost controls.
Special items in Q3 operating expenses are estimated at $2 million, primarily for amortization of intangible assets. Our tax rate for Q3 excluding special items will be 15% down from the fixed rate of 18% recorded in recent prior quarters.
The reduction is due to the long-term benefits of our manufacturing transformation and focused R&D lending. We expect this updated long-term projection to be applicable for the remainder of fiscal year 2017 and fiscal year 2018.
For Q3 GAAP earnings per share excluding special items, we expect a range of $0.49 to $0.55 or $0.52 at the midpoint. For fiscal year 2017, gross capital expenditures are expected to be within the target range of 1% to 3% of revenue.
And finally, we expect buybacks in Q3 to be consistent with our annual commitment to return 80% of free cash flow to shareholders. In summary, we expect Q3 revenue to be up sequentially and up from the same quarter of last year.
We are diversifying our revenue profile and growing content in automotive and industrial which is helping to lower variability and we continue to execute on our manufacturing transformation and cost reduction initiatives, which enable us to continue driving profitability and free cash flow growth. With that, I’ll turn the call back over to Kathy.
Kathy Ta
Thanks, Bruce. That concludes our prepared remarks and we will now open the call for questions.
We would like to continue the same Q&A process as we used last quarter. We'll like to take one question from each caller so that we can get to more people in the queue.
If you have more than one question, please hop back into the queue. We're doing this in the spirit of getting to as many of you as possible.
Jonathan, could we please have our first question?
Operator
Certainly. Our first question comes from the line of Tore Svanberg from Stifel.
Your question please.
Tore Svanberg
Yes thank you and congratulations on the results. I had a question on the industrial business, so it’s now growing again, XD metering business it’s up 2% year-over-year.
As we look at calendar ‘17, do you have visibility for that growth accelerating? And if so where it’s going to be coming from, you mentioned factory automation, but could we see acceleration first of all and if so where would that be coming from?
Thank you.
Tunc Doluca
Well, I think you are right. I mean actually you summarized it pretty well yourself in your question.
We do expect the growth to come mostly from the factory automation segment of core industrial. It is itself one of the highest growth markets, it’s external sources saves as a 6% CAGR.
We have been making investments in this area for about four, five years now and now we are beginning to see the results of whole bunch of new products that we actually put out in the market in the past few years. Most of these are for interface and power management applications in this market and we expect to do really well in that piece.
Of course the growth of the overall industrial market, there are other segments that we also sell into. So in terms of seeing momentum we see strong orders for growth and that’s boding well for us.
The other piece that we have invested in is our core products or our broad market initiatives that we’ve gone through in the past couple of years and that’s also going to help us. So we do expect to do really well in the industrial segment, because of all of those activities.
Kathy Ta
Thank you, Tore.
Operator
Thank you. Our next question comes from the line of Craig Hettenbach from Morgan Stanley.
Your question please?
Craig Hettenbach
Yes thanks. Appreciate the color and context around your largest customer.
So anything else you would add in terms of how you’re kind of managing that business as it goes to a dual source?
Tunc Doluca
We are still investing in that customer first of all. I think that it is important for us to make sure that we are investing in products where we know how to differentiate and in products where the customer actually value the differentiation.
What we have changed in our way we’re thinking is that in our ROI calculations or in products we’re going to make, we take into account both whether we’re essentially the first going into that socket and we also in the revenue that we’re going to get we assume that it’s going to be dual sourced at some point in time. So our ROI calculations it’s pretty straight forward we have to be careful with the new model, but I think going forward it’s a valued customer, we still have taken a number of products in there, although the dollar content is less.
So I think it’s just changing our model a little bit going forward we still support the customer.
Kathy Ta
Thank you, Craig.
Operator
Thank you. Our next question comes from the line of Chris Danley from Citi.
Your question please.
Unidentified Analyst
Hey guys, this is Billy on behalf of Chris. Congrats on the good quarter.
I just want to ask you guys if you are seeing any impact from the Analog-Linear merger either good, bad or thing pretty much the same?
Tunc Doluca
So far things are pretty much the same, I mean the merger obviously is not been completed yet, but so far we’re really not seeing much of a difference in the behavior of our customers or competitively nothing has changed. So it’s probably too early to tell, I think we got asked this question earlier as well maybe a call or two ago and our conclusion is that we compete with both companies on products and I think that for us really nothing much changes because it’s we’ve got a strong product portfolio a lot of differentiated products from that viewpoint I don’t think much is going to change.
But as I said so far we haven’t seen much change.
Kathy Ta
Thank you.
Operator
Thank you. [Operator Instructions] Our next question comes from the line of Ambrish Srivastava from BMO.
Your question please.
Gabriel Ho
Hi this is Gabriel Ho calling in for Ambrish. Thanks for taking my question, I was just wondering if you can give us an update on your 48V DC power, because I think you mentioned that you expect this year your 12 probably is going to be the driver for your data center business?
Tunc Doluca
Yes sure of course so on the 48V front just to recap we had developed the products and the technology and the architectures for this. As you pointed out, the adoption got pushed out by our lead customer.
But we are now in discussions with multiple customers that are interested and it’s mainly they’re interested because it makes sense from our point of view. Those of you that have an electric background know that higher voltage transmission always gives you a better more efficient solution in the end.
So at this point we believe we’re confident in the merits of our technology in our differentiation. But given the project timing we’re really unable to say when this is going to get adopted.
But I can tell you that there are more customers now that initially were not much interested in this technology that have come back and are saying they see the merits of this technology. So we’re going to have to wait and see, we’ll support them, we’ll show them why our solutions are better and how much they can save in energy consumption and we’ll basically take it from there.
Gabriel Ho
Okay thanks.
Kathy Ta
Thank you.
Operator
Thank you. Our next question comes from the line of Toshiya Hari from Goldman Sachs.
Your question please.
Unidentified Analyst
Hi thanks for taking the question. This is Charles on for Toshiya.
I was wondering if you could give a little color on what your thoughts are for the automotive market from a unit perspective and how fast you think your business can grow above that. Thanks.
Tunc Doluca
Yes so from a car sales perspective there’s various estimates of number of cars sold growth it’s in the low single-digits in terms of cars. The electronics content growth obviously is a lot more than that, that’s forecasted to be in the high single-digits overall, but we’ve invested in markets where the growth is faster than what you see overall electronics and those segments are infotainment, battery management systems and driver safety systems.
So we believe in the next few years we can keep growing at two or three times the market rate from all the design wins in the product portfolio that we’ve had with our customers. So again that gives you an idea, low single-digits for unit car, high single-digits for electronics and we can grow two, three maybe even four times that rate.
Unidentified Analyst
Great, thank you so much.
Kathy Ta
Thanks, Charles.
Operator
Thank you. Our next question comes from the line of Steve Smigie from Raymond James.
Your question please.
Unidentified Analyst
Thanks this is Vincent [indiscernible] on for Steve. So going back to auto, actually last Analyst Day you said you saw serial link is the fastest growing area within auto worldwide, easy [ph] battery, LED power, do you still have the same outlook and could you give a rough estimate to how much big each of these pieces are as a percentage of revenue within auto?
Tunc Doluca
Yes so I think, so that call was in -- that meeting was in February last year. So it’s been almost a year.
So I think from a growth perspective, if we look at what happened during the year and what’s currently happening. The growth rate has actually been higher in the battery management systems.
Given it’s from a smaller base and also given large incentives in China for cleaning up the air over there for electric vehicles. We found that to be a faster growth market frankly.
It is a little bit more bumpy in terms of order rates and so on. It comes and goes, but overall it’s been growing very strongly.
To give you an idea the size of the infotainment piece of our automotive business is about two-third to three quarters of the business. The size of the power train is still I am going to say about maybe 10% something like that so that gives you an idea.
And the serial link products are actually in two pieces part of that business is in infotainment and part of it is in safety and driver assist side. So a bit harder to quantify that one.
But I think that give you a pretty idea of the highest growth segment, which is battery management systems.
Unidentified Analyst
Okay, perfect. Thank you very much.
Kathy Ta
Thanks, Vince.
Operator
Thank you. Our next question comes from the line of Christopher Roland from Susquehanna.
Your question please.
Unidentified Analyst
Hi guys this is David [indiscernible]. I had a quick question, at CES we noticed a pretty heavy presence of lot of wireless ear buds and a lot of wearables such as that and also we saw our recent pair down with some of your content there can you talk about your opportunity in audio parts and wearables, wireless ear buds, specifically audio codecs?
Thanks.
Tunc Doluca
Yes, so there are opportunities there I think ear buds my assessment of the future of ear buds is that they are going to grow more and more digital connections to the phone. It gets rid of wireless that are always in use, since going from ear buds to the phone.
So there will be opportunities for codecs, there will be opportunities for good power management since battery consumption is going to become important. So we see opportunities there in terms of both the audio side and the power side for the company and it really plays to our strength, which is goes along the lines of being very nimble in power consumption.
And if you think about in the ear buds there is not going to be much in terms of battery space. So it’s going to be important for us.
Unidentified Analyst
Thank you.
Kathy Ta
Thank you, David.
Operator
Thank you. Our next question comes from the line of Harlan Sur from J.P.
Morgan. Your question please.
Harlan Sur
Good afternoon thank you for taking my question and congrats on the return to your growth. I guess as great to see the diversity of the business, which is over powering the decline in the consumer business in the March quarter and as we all know the overhang on the investment thesis has been the big exposure to your largest smartphone customer.
I think last you guys gave us an update they were sort of low teens percentage of your total revenue, but given the strength of automotive, given the strength of industrial and some of the other dynamics around this particularly segment of the market, is there going to be a point in time I would say sooner rather than later that this largest customer only becomes 10% or less of revenues for the Maxim team?
Bruce E. Kiddoo
Hey Harlan this is Bruce. Yes you are exactly right and in fact I know there is multiple calls going on today, but in Tunc’s prepaid remarks he actually commented that on a go forward basis our expectations is that our largest customer will be below 10% certainly for FY17 right the full year the first couple of quarters were above.
So we still expect overall FY17 to still be above 10%, but kind of on a go forward basis from a long-term modeling point of view we do expect them to be under 10%. And you touched on something that is going to transition that's been underway for over a year, year and half when we refocused on really on power management and kind of the core strengths of the company.
But this is an amazing quarter in that when you look at the guidance that we gave we guided automotive, industrial and comp all up strongly and normally we’re a little bit back, but I think this quarter because of the strength in those, those are all up in the mid-teen sequentially. So, it just goes to the strength of what we are seeing coming into this quarter and that's obviously as people know these aren’t businesses that you win overnight right it’s been kind of a process of investment over many years and the quality of that revenue stream and the stability is something that we’ve been working for.
Obviously when you do the math then that says that the consumer business is also down in the mid-teens and that's really a combination the impact of Samsung, but also our diversified consumer business, which did very well in the December quarter and as Tunc said in some of the earlier questions talked about right, there is a whole post of opportunities there primarily for our audio and power management parts that’s normally seasonally down in the March quarter and that’s what we are seeing. And so those are the two pieces.
But absolutely I think this is a quarter where not only is our return to growth, but we’re clearly seeing the new mix of business in a very high quality high stability end market.
Harlan Sur
Great, thank you.
Kathy Ta
Thank you, Harlan.
Operator
Thank you. Our next question comes from the line of John Pitzer from Credit Suisse.
Your question please?
Unidentified Analyst
Hi, guys this is Steve [indiscernible] on for John. Congratulations on the strong results.
So Bruce I just wanted to touch on the manufacturing transformation you guys have done a great job executing and in the past, you have laid out the benefit you should receive from the Dallas fab shut down. Should we still think about you guys getting the 65% gross margin exiting the June or September quarter?
And given the improving mix towards industrial and auto how should be begin to think about even potential upside pass that 65% target? Thanks.
Tunc Doluca
Sure. Absolutely we’re still on target with the kind of the last remaining structural item in that shut down of a small bump fab in Dallas in the March quarter and the results of that should flow through and yes we are absolutely on track to get to the 65% gross margin either in the June or September quarter.
So we feel very good about that. Obviously we want to achieve our stated target first, but as far as long-term tailwind certainly the change in mix is helpful for us the industrial business is above the corporate average.
I will say in general in the past that Maxim mix hasn’t always been the number one driver of our gross margin. So we have always done well in capturing value for all the businesses that we’re in.
But there is the other items that we know about the biggest one being that sort of normalize depreciation when you take out the accelerated depreciation for Dallas is at about $26 million. CapEx this last quarter was $16 million and we expect that basically to run at 2% of revenue going forward 1% to 3%, 2% at the midpoint.
And so as that kind of depreciation in CapEx converge over multiple years that will be another tailwind and in further just as our manufacturing transformation continues and we’re able to fully load our Oregon plant and get be able to kind of optimize our loading across our foundry networks such that we get to lowest cost that will be another tailwind. So I think we look good, I think we feel very comfortable on a gross margin, we have done a lot of work and we’re certainly we have seen the results in the P&L and there is more to come.
Unidentified Analyst
Thank you.
Operator
Thank you. Our next question comes from the line of Steve Smigie from Raymond James.
Your question please.
Unidentified Analyst
Thanks this is Vince again. Going back to your largest customer, I was wondering if you are able to talk about in more detail as far as exactly what was the part that was being now dual sourced and does this change your approach going forward with that particular product?
Tunc Doluca
No, actually in terms of content or which products have changed and become dual sourced, we really can’t talk about it until those products are out. So I think we’re going to kind of refrain from that.
And actually when it does come out since it’s a less than 10% customer, we really don’t get into the details of exactly, which sockets have changed and so on.
Unidentified Analyst
Okay, got it. Make sense.
Thanks.
Operator
Thank you. Our next question comes from the line of Cody Acree from Drexel Hamilton.
Your question please.
Cody Acree
Thanks guys for taking my question and congrats on the progress. Let me go back to consumer, if you could talk just a bit about kind of the diversity in the Chinese mobility segment.
And then just your thoughts kind of longer term as far as consumer is a mix of the whole like as percentage of revenue or growth rate how are you want to parse that?
Tunc Doluca
Yes, so in terms of your diversity question, we have essentially been doing for the last couple of years was finding other applications for our products, finding other platforms at existing customers and actually finding new customers that we didn’t have before. And you mentioned China mobility that was one of the elements of diversity; we are able to capture some designs and some sockets at several Chinese customers and mostly along the usual suspects in audio or power type products.
So that’s been one leg of this. But we also are getting into a lot of hand held products, tablets we got our design wins in some wearables you have seen some tear down in those as well.
So it’s really a lot of customer diversification we have seen, we have seen a lot in terms of the types of products that we’re going into, we had some gaming wins in Japan that helped us as well diversify the business. So it’s not really one large thing it’s a bunch of small things, so it’s kind of hard to pin it on one or two things that have happened.
But that’s what you need in diversity, it’s a bunch of small things, is the way to build the business in a way that’s more stable and predictable. In terms of long-term in the consumer business, I think that was your second piece of your question.
We have got a good consumer business, we’ve got great technology and as long as we continue to find areas where we can differentiate, make a difference for a customer and we have the right internal investment in terms of R&D and in those diverse applications we want to grow and win those. It’s really hard to predict what percentage of the revenue it’s going to be into the future.
But if you look at our guidance for next quarter it’s probably going to end up in the mid-20 somewhere in terms of our consumer exposure. So just essentially be careful find areas where we are differentiated and find areas where we have the right ROI for the company.
That’s our strategy.
Cody Acree
Thanks guys and congrats.
Operator
Thank you. Our next question comes from the line of Tore Svanberg from Stifel.
Your question please. You might have your phone on mute.
Kathy Ta
Let’s go to next caller please.
Operator
Our next question comes from the line of Harlan Sur from J.P. Morgan.
Harlan Sur
Hey guys, thanks for taking my follow-up question, this might be maybe more of a longer term question, but as a result of you guys partnerships in the industry Nvidia is actually a good example of that, I think your power management chips are sitting next to their processors and the upcoming intent to switch gaming platform. I think your power management chips are sitting next to their processors Nvidia’s autonomous driving module, which they are shipping into every Tesla.
And then Tesla itself is I think another good example where I think you guys have over $100 of content per Tesla vehicle, Google another one in the data center business. So I guess what is the team doing to get in early with some of these technology leaders in the market to ensure that you remain exposed to some of the faster growing trends in the market and maybe if you guys have any other examples of close customer ecosystem partnerships that would be great.
Tunc Doluca
Okay. So you did give out some numbers in there, so we are not denying or confirming any of the numbers that you gave.
But the general direction is right I mean we do have a very good relationship with Nvidia they are down the streets from us and our engineers really work very well together in multiple areas, both on the power side that you mentioned and also on the serial link side. We carry the signals from sensors to their processors for a driver assist.
So we have similar types of relationships with maybe a couple of other the processor guys in automotive and it works well within, I don’t really want to name them on the call. But we do work with Japanese manufacturers, we do work with some U.S.
companies and these relationships work better frankly when we don’t have competing analog lines and that’s maybe why it work so much better for Nvidia, but even with some of the companies that do have analog lines they find our technology to be a better fit for what they want. And they have not been shy from working with our engineers to really basically get into reference designs where we can show the customers how to build the systems with the least amount of R&D from a Tier 1 or automotive customer standpoint.
So we have more than just Nvidia that we are working with and that really does help us get our foot in the door early enough so that we become the solution of choice.
Harlan Sur
Thank you.
Kathy Ta
Thank you, Harlan.
Tunc Doluca
You’re welcome.
Operator
Thank you. [Operator Instructions] And our next question is a follow-up from the line of Cody Acree from Drexel Hamilton.
Your question please.
Cody Acree
Hey guys. Bruce maybe if you could just give us any help on the direction of the operating spending?
Bruce E. Kiddoo
Sure, I think it’s going to stay right in this mid-180s right we were like 186 this last quarter in December. We expect it to be flat maybe even slightly down in March.
But I think fundamentally as we go forward as we become more profit sharing there is always a little upward pressure from that profit sharing point of view. And then we offset that with sort of continued cost controls and that’s just part of our culture.
But I think kind of our -- from a modeling point of view I would just think it’s just going to be in the mid-180s range going forward for right now.
Cody Acree
Perfect, thank you.
Kathy Ta
Thanks, Cody.
Operator
Thank you. Our next question comes from the line of Blayne Curtis from Barclays.
Your question please
Unidentified Analyst
Hi there, thank you this is Jerry Zhang [ph]. I just wanted to ask you expect infra up next and I was just wondering how sustainable you see this being.
Is it just a rebound coming off of kind of the expected weakness in December you talked about last call or how longs will those continue for? Thank you.
Tunc Doluca
So, I’m assuming you’re talking about comms infrastructure right. Okay so there were some weakness last quarter and we expect a slow rebound and Bruce said that all these markets -- the growth markets were in the mid-teens.
So, that's true for our overall comps as well. We are seeing this uptick and it’s really coming from our orders visibilities orders that we received in Q2.
Other than that it’s really hard for us to exactly figure out what the market dynamics are because most of the products we’re selling are support products they are not the signal change parts in that market. So, we do see the growth it’s basically a bounds back and most of that information is really coming from what we see in terms of booking patterns on us in the previous quarter.
So, we don’t have a lot of inside into what the cycles are like.
Kathy Ta
Thank you Jerry.
Operator
Thank you [Operator Instructions].
A - Kathy Ta
Okay. Jonathan if there are no further questions, I would like to conclude today’s conference call.
We would like to thank you for your participation and for your interest in Maxim.
Operator
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program.
You may now disconnect. Good day.