Executives
Brian C. White - Chief Financial Officer and Vice President
Gregory L. Waters - Chief Executive Officer, President and Director
Jeffrey S. McCreary - Director and Member of Audit Committee
Analysts
Harsh N. Kumar - Stephens Inc., Research Division
Charles L. Anderson - Dougherty & Company LLC, Research Division
Christopher J. Longiaru - Sidoti & Company, LLC
JoAnne Feeney
Blayne Curtis - Barclays Capital, Research Division
Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division
Liwen Zhang - Blaylock Robert Van, LLC, Research Division
Betsy Van Hees - Wedbush Securities Inc., Research Division
Integrated Device Technology (IDTI) Q3 2014 Earnings Call February 3, 2014 4:30 PM ET
Operator
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Integrated Device Technology's Inc. Fiscal Third Quarter 2014 Financial results Conference Call. [Operator Instructions] This conference is being recorded today, Monday, February 3, 2013. And I would now like to turn the conference over to Mr. Brian White, Chief Financial Officer. Please go ahead, sir.
Brian C. White
Thank you, and welcome to our fiscal third quarter 2014 earnings call. I'm Brian White, IDT's Chief Financial Officer, and presenting with me on the call today is Greg Waters, our CEO.
Also in attendance and available for the Q&A portion of the call is Jeff McCreary, who was our Interim CEO during the fiscal third quarter.
Our call today will include remarks about future expectations, plans and prospects for IDT, which constitute forward-looking statements for purposes of the Safe Harbor provisions under applicable federal securities laws. Forward-looking statements in this call will include statements regarding demand for company products, anticipated trends in company sales, expenses and profits, and involve a number of risks and uncertainties that could cause the actual results to differ materially from current expectations.
The company urges investors to review in detail the risks and uncertainties in the company's SEC filings including, but not limited to, the annual report on Form 10-K for the fiscal year ended March 31, 2013, and periodic reports filed from time to time with the SEC. All forward-looking statements are made as of the date of this call and IDT disclaims any duty to update such statements.
In addition, pursuant to Regulation G, any non-GAAP financial measures referenced during today's conference call can be found in our press release posted on our website at idt.com, including a complete reconciliation to the most directly comparable GAAP measures. All financial references will be non-GAAP on a continuing operations basis, unless otherwise indicated.
Also, we have made selected financial information available on webcast slides, which can be found in the Investor Relations section of our website.
Before I turn the call over to Greg, I want to highlight that the company has announced that it is pursuing the divestiture of its high-speed data converter business and is in active discussions with potential buyers. For financial statement purposes, the data converter business will be classified as assets held-for-sale and will be treated as discontinued operations.
Consequently, we have removed the results from the data converter business from our current and historical non-GAAP results. All references to non-GAAP results in this conference call will relate to non-GAAP results from continuing operations unless otherwise indicated.
Now I'll turn the call over to Greg, who will provide some third quarter highlights, and then I'll return to give you more specifics on the results for the quarter. After that, I'll elaborate on our outlook for the December quarter. Greg?
Gregory L. Waters
Thank you, Brian, and thank you, all, for joining us on the call today. I'd like to begin by saying I'm very pleased to be here, having joined IDT as we turn a strategic corner. The third fiscal quarter for IDT marked a breakout in terms of our financial performance. Our non-GAAP margin profile is now one of the best in the industry, as demonstrated by our 62.4% gross margin and 22% operating margins. We now have clear leverage in our business model to drive exceptionable profitability as we focus on expanding our leadership positions and growing our core business.
Revenues were driven primarily by broad strength in our communications business, including our RapidIO product, which is tied to the global buildout of 4G/LTE. As we previously mentioned, we've been selected by virtually every major OEM in this space and are a clear beneficiary of this deployment. We believe we're in the early stages of a multiyear rollout in 4G infrastructure.
Another highlight from a revenue perspective was the achievement of $1 million in sales associated with our wireless charging products. Wireless charging is in the early adopter phase of deployment, and we continue to gain momentum with Tier 1 design wins. As wireless charging volume ramps this year and next, we are very confident that we will gain share and establish an early leadership position with this new market.
I also want to touch on 2 strategic divestiture activities that impacted the December quarter. The first is that we sold our audio codec business. On last quarter's conference call, we mentioned that our audio revenue was declining and that we had low expectations for improvement. Given the negative revenue outlook and the fundamentally low margin profile for this PC-centric business, we pursued and executed a sale. The revenue from the audio business was $1.7 million in fiscal Q3.
As Brian mentioned, we also announced the intention to sell our high-speed data converter business. This consists principally of the high-performance DAC and ADC businesses that IDT acquired from NXP in the second quarter of fiscal 2013. The products and team of this business are world-class and will drive a significant value with the right home. However, the associated investment and time to profit does not align with our financial objectives and our need to increase R&D in other areas. These actions will allow us to sharpen our focus and to fully fund our targeted growth drivers.
I'll now provide an overview of the revenue trends in our 3 vertical markets and in our timing business, including new products and design activity, and then end with our guidance for Q4.
In the communications end market, revenue increased by 4% quarter-over-quarter and comprised approximately 61% of total sales, up from 58% in the prior quarter. Driving this improvement was another quarter of record sales of RapidIO switches and a very solid result from our timing business, which was healthy throughout the quarter. As I mentioned earlier, IDT is uniquely positioned to benefit from 4G/LTE deployments because of our RapidIO switches, which are at the heart of every 4G-based bank card, enjoy a dominant share in all the major base station manufacturers, some in China and the rest of the world.
We remain very confident in our position in the communications infrastructure end market, with both our serial switching and advanced timing solutions. Our position in 4G base stations, combined with the multiyear rollout ahead of us, positions us to continue to benefit from this deployment for the foreseeable future.
In the computing end market, we experienced a 5% sequential revenue decline. Server-related sales were up slightly in the quarter, but PC-related sales remained weak as we expected due primarily to our PC audio business that we divested in the quarter. Overall, computing represented 27% of revenue, down from the 29% of sales in the prior quarter. Server-related revenue comprised over 85% of our computing revenue and will become over 90% in fiscal Q4, driven by our continued focus on higher-margin enterprise and cloud computing solutions and deemphasis of the lower margin PC-related business.
In our computing segment, we now have significantly revenue -- significantly less revenue from PC-related products than we had just a few quarters ago. In memory interface and high performance computing, we are very optimistic about the positive impact to our business that we expect as the industry transitions from DDR3 to DDR4. We see the industry transition to DDR4 as a growth driver for us with very robust Tier 1 design wins and expect to see the impact of that in the second half of calendar 2014.
Our total solution for DDR4 is significantly leading the competition from a qualification perspective, and we are very confident that we'll gain market share above our current #1 position in DDR3. We've been selected by all major customers as their primary supplier for DDR4 RDIMM. This includes Tier 1 designs in LRDIMM qualifications, which as you will recall, we did not participate in for DDR3. We fully expect to gain very profitable market share with the DDR4 ramp that begins later this year.
Turning now to the consumer end market, revenue declined 3% sequentially and represented approximately 12% of total revenue. As I mentioned earlier, we achieved our stated goal of delivering our first $1 million-plus quarter of revenues associated with wireless power. However, this strength was offset by a decline in other consumer revenue, including gaming.
At the Consumer Electronics Show last month in Las Vegas, we demonstrated our wireless power solutions and saw tremendous year-on-year activity. IDT was a key standout at the boosts of all of the various standards organization, such as the Power Matters Alliance or PMA, the Wireless Power Consortium or WPC and the Alliance for Wireless Power or A4WP. We also announced the industry's first single-chip 5-volt wireless power transmitter solution. This very integrated solution is targeted for USB-powered wireless charging bases and uses 75% fewer ICs than competing solutions.
The wireless charging ecosystem continues to evolve and our technology first mover advantage has led a solid design traction with customers. We are well positioned to benefit when the market rollout develops.
Turning to our timing business, we continue to be recognized as the leader in this space, with numerous new design wins and industry awards during the quarter. We were increasing our R&D spend in advanced timing and frequency control, and we'll accelerate time-to-market in several key products over the next several quarters. The newly launched third generation high-performance programmable universal frequency translator won a coveted place in the EDN Hot 100 List, as the industry's only single-chip programmable solution capable of generating 8 different output frequencies with less than 300 femtoseconds jitter, making it ideally suited for high-performance optical networks, wireless base stations and 100-gigabit ethernet interface applications.
We're very encouraged with the design engagement at key Tier 1 customers and beyond for our UFT products. And this is resulting in one of the fastest market adoptions of any advanced timing device in our recent history.
On another note, our high performance differential MEMS oscillators won the prestigious 2013 EDN China Innovation Award. IDT's 4H series MEMS oscillators are the world's first differential MEMS oscillators with only 100 femtosecond typical face jitter performance and integrated frequency margin and capability. We were very pleased to announce the strategic design win for our MEMS products with Samsung for a new ultrahigh definition television launch, adding to the growing customer base and applications utilizing our MEMS product. There's a great example of the type of product we don't even ship today that will deliver growth into new applications base for us as the volume ramps.
IDT has the broadest portfolio of timing products in the industry, and we recently expanded this with the addition of another industry-first. We introduced the world's lowest power LVDS clock fanout buffers, offering 60% power savings against the competition for high-performance communication, computing and networking applications.
And now let me move to our Q4 guidance.
For our fourth quarter of fiscal 2014, we expect revenue to come in at approximately $117 million, plus or minus $3 million. We expect sales from the consumer end market to decrease by approximately 9%, communications to be down approximately 2% and computing to be down 13% quarter-over-quarter, primarily driven by the divestiture of our PC audio business.
At the close of Q4, the impact of declining or discontinued product lines will be washed out of the income statement and the real growth drivers within IDT will be clearer and easier to model.
As demonstrated by our fiscal Q3 financial results, it's clear that we've accomplished what we set out to do in resetting our business model and the company is reenergized to execute. It's very exciting to work with this team to achieve even better performance going forward. And while these are early days for me here, what I found is that we have a great team, a great -- many great products already in the design funnel and a clear path to continued financial excellence in the markets that we serve. We have excellent core growth drivers and upsides in the new markets that are now underway, and these are new -- these are products, technologies and major customers that I know very well.
We've focused the company investments in the product lines that we're confident that we can grow and gain market share. We're increasing R&D in those areas even while cutting overall OpEx. And what you can expect to hear from us in each and every quarter for the rest of the year are specific examples of new products and how those will create top line growth for IDT in fiscal 2015.
With that, I'll turn it back to Brian to expand on our financial results and our guidance for the March quarter. Brian?
Brian C. White
Thanks, Greg. As Greg mentioned earlier, revenue for fiscal Q3 was $124.6 million, up 9% from the year ago period, and in line with the guidance range we provided in October. Bookings declined sequentially in fiscal Q3 and our book-to-bill ratio was less than 1, which is consistent with December quarter trends that we typically experience in advance of March quarter seasonality.
Channel inventory declined again in the December quarter on higher sellthrough and remains lean relative to historical standards. Fiscal Q3 non-GAAP gross margin of 62.4% was better than expected, driven by favorable product mix and improved inventory management. Non-GAAP operating expense in Q3 was $50.4 million, a decrease of $3.8 million or 7% from the prior quarter. R&D expense was $29.3 million and SG&A was $21.1 million.
As you may recall, we previously announced a reduction in force of about 5% that would reduce operating expense by approximately $3 million per quarter, beginning in the December quarter. Those efficiencies are evident in the December quarter results, combined with the effect of additional expense control actions.
Q3 net interest and other income was approximately $500,000. Our effective tax rate was about 7%, in line with our prior projections. For Q3, we recorded non-GAAP net income of $25.9 million or $0.17 per diluted share. In fiscal Q3, we delivered non-GAAP operating margin of 22% on slightly less than $125 million of revenue. With our combined restructuring and expense management actions, we have achieved and exceeded our prior target model and have done so ahead of schedule. We believe that we have put in place an operating structure that will allow us to fully fund our prioritized R&D investments and deliver 20% operating margins at our existing annual revenue level. We believe that this will provide compelling range growth leverage as we drive revenue higher going forward.
Now let me summarize our results on a GAAP basis. We reported GAAP net income from continuing operations of approximately $17.3 million or $0.11 per diluted share in the December quarter. The difference between our GAAP and non-GAAP results nets out to about $8.6 million or $0.06 per diluted share. Fiscal third quarter 2014 GAAP results from continuing operations include a $3.4 million loss related to the divestiture of our audio business, $3.6 million in acquisition and restructuring-related charges, $3.2 million in stock-based compensation and a $1.4 million benefit from related tax effects.
Further information, including a detailed reconciliation of GAAP to non-GAAP results, is provided in the financial tables of today's press release and can also be found on our website at idt.com.
Now I'll turn to the balance sheet. Cash and investments totaled approximately $438 million at the end of the December quarter. Cash from operations and free cash flow was the strongest in over 3 years. We generated approximately $27 million in cash from operations, and received about $6 million from employee stock transactions. Capital expenditures were approximately $4 million.
In October, we announced that our board had increased the authorization for share repurchases to $150 million and that we plan to resume share repurchase activity during the December quarter. For the quarter, we spent approximately $20 million to repurchase about 2 million shares. Share repurchases represent 2 months of activity, given timing of the authorization.
Net inventory was approximately $53 million, down $4 million from the prior quarter. Our trade accounts receivable decreased $6 million to about $66 million and DSO improved from 52 days to 48.
Now let me expand on our forecast for the March quarter. We entered the fourth quarter of fiscal 2014 with lower backlog for direct customers than the prior quarter. However, bookings through the first month of the quarter have been strong. The turns they'll require to achieve our revenue guidance is in line with recent historical trends. Greg noted earlier that we currently project revenue for our fiscal fourth quarter to be approximately $117 million, plus or minus $3 million.
It should be noted that our fiscal third quarter result included $1.7 million of revenue associated with our divested audio codec business. Adjusted for the audio divestiture, the $117 million revenue forecast represents an increase of $11.4 million or 11% from the year ago period and $5.9 million or 4.8% decline from fiscal Q3 to Q4.
We project gross margin to be 62%, plus or minus 50 basis points, on a non-GAAP basis. The actual gross margin should be primarily dependent on the ultimate revenue range and product mix for the quarter.
For fiscal Q4, we project non-GAAP operating expenses will be flat to the prior quarter in a range of $50.4 million, plus or minus $1 million. R&D is expected to be approximately $29.4 million, and SG&A spending approximately $21 million. We currently anticipate fiscal Q4 interest and other income will be about $500,000. We estimate the effect of tax rate for Q4 will be approximately 7%.
We estimate Q4 share count will be about 158 million shares on a fully diluted basis before the impact of share repurchases. Based on our revenue guidance range, we project non-GAAP EPS for the March quarter to be between $0.12 and $0.14 per share.
On the balance sheet, we expect cash flow from operations to be approximately $20 million. Cash and short-term investment balances are expected to be approximately $460 million at the end of March, excluding the impact of share repurchases.
In fiscal Q3, we were pleased to achieve an operating model that exceeds our previously stated financial objectives. That's so ahead of schedule and positions the company for exceptional earnings and cash flow leverage going forward. We will remain disciplined in our approach to expense management and allocation of investment resources, but believe that the major structural changes are now identified and reflected in our P&L. This allows us to focus on successfully driving our prioritized investment areas for growth while increasing shareholder value through increasing profitability and returns.
With that summary, I'll turn the call over to the operator for the Q&A portion of the call.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Harsh Kumar with Stephens.
Harsh N. Kumar - Stephens Inc., Research Division
Listen, I wanted to ask a long term question first. We've heard some concerns from some people about Serial RapidIO, perhaps being taken over or being outflanked by another technology in base station. I'm curious, Greg or Brian, if you could just talk about your position in Serial RapidIO in the base station business, and also maybe where you stand architecturally or where you see the architecture of connectivity of DSPs in the base station business, and I've got a follow-up.
Gregory L. Waters
Yes. Thank you, Harsh. It's Greg. I'll take that one and take it coming from an old, based on that switching guy as well. We are very confident in the long term position for SRIO. And by long term, I mean well beyond this year. We -- you're well aware of the design position we've got in that class of products, but if you step back and even remove IDT from the equation and look at what's happening architecturally in the base station, there's a trend of more and more processors, both in base stations as well as the cloud compute, as well as data analytics. So I think that trend is pretty clear. There needs to be a very high speed to hook up these processors, of which SRIO is one of the best technology approaches today. So if you take a look at the demand we're getting from our Tier 1 customer base in SRIO, it's actually definitively increasing towards more complex, higher performance, more ports and more lanes SRIOs. And we're seeing this very definitively in the customer base. So if we're talking about a time frame that can be reasonably forecast, such as the next couple of years, we believe this business grows for us.
Harsh N. Kumar - Stephens Inc., Research Division
And I wanted to ask about the timing of the divestiture. I missed that part of the call, the first 8 or 10 minutes of it. Maybe you talked about it, and I apologize if you did. But clearly, you had an impact of about $1.7 million, sounds like from the divestiture of the PC business. What was the run rate on a full quarter basis of that business for the December quarter?
Gregory L. Waters
Yes. Brian, I want you to take that one.
Brian C. White
Yes. I think about $10 million for fiscal '14 through the first 3 quarters and about $20 million for the full fiscal '13 would have been the audio revenue.
Harsh N. Kumar - Stephens Inc., Research Division
Okay, very well. And as for my last question, can you, maybe, Greg, back to you, you hit 20% and it seems like you're -- if I run the math true, you're going to hit 20% up margins, even very close to the $117 million in your guide. Is that 20% a comfortable goal for you? Or do you think an analog company, such as an IDTI, should have perhaps better margins? And I'll get back in line.
Gregory L. Waters
Yes. Thank you, Harsh. I think we're at the enviable position of having a lot of leverage in our business model, and it's not just from one area. So if you take a look at what we're very focused on as an executive team, it's growth and it's growth in top line and it's resulting fall through the earnings per share. So I think in terms of marrying ourselves to a specific gross margin model, you've seen that we're already in the current quarter, above 62%, which we're pretty proud of. From a modeling perspective, the way I would encourage you to think about this business is that the 60-plus percent gross margin business that will move around slightly depending on product mix. But the good thing is we think that we have the opportunity in quarters to come to generate a lot of growth in that margin area and nonincreasing OpEx at the same time. So what I would say, Harsh, is that I think that depending on what will become in the gross margin mix, 60% as a floor is a good place to be. Brian's already indicated that as we go forward, we are going to continue to put energy into R&D, but you won't see that OpEx line move up much. We've given you a range from about 50.4% to 52%. And we believe that, that will allow us to fund all of our top R&D investments.
Operator
Our next question comes from the line of Charlie Anderson with Dougherty & Company.
Charles L. Anderson - Dougherty & Company LLC, Research Division
I want to start on the gross margin. To what extent was the -- not having audio codec helping you there? Maybe if you could frame that. And then, if that wasn't the whole impact of why you're coming in 200 basis points or so higher this quarter and next, what are some of the segments that are doing a little bit better that's driving that upward?
Gregory L. Waters
Yes. Let me begin on this and turn it over to Brian for some additional color. The audio codec business was clearly a lousy gross margin business for us. So that does help, but it wasn't that big enough to move the needle at the time. So what I'd offer you, Charlie, is that I think given the results of the product lines that we have gotten out of over the last, say, 2, and almost going on 3 quarters right now, you're now seeing the cumulative effect of what I consider to be the real IDT. So audio codec helps. The movement of the ADC business into discontinued ops certainly helps on the OpEx line and the OA line, but it barely moves gross margin because of the discontinued products out of that area were very attractive gross margin products as well. So if anything -- what you're looking at right now and I know we've been a difficult company to model, is hopefully with some of the color we've given you today and certainly what you'll see with 1 more quarter, we should make ourselves a lot more easy to model. So it's getting back to our core products.
Charles L. Anderson - Dougherty & Company LLC, Research Division
Perfect. And then in terms of the consumer, you are guiding at, I think I heard down 9% sequentially in the March quarter. Is that offset by any lift in wireless charging? I know that's going to be lumpy and it's small right now, but just kind of wondered the trajectory of that, and then if maybe you can lay out some scenarios over the course of the year for us on that piece...
Gregory L. Waters
I think to give a little bit, it's consumer markets. When you take a look at seasonality, obviously, a consumer market for anybody is the most seasonal and that's in the March quarter or so. There's always a little bit more downward drag in that segment than there are in some of the other ones. We -- in terms of the wireless charging business that we've got, the mood we're in is that the $1 million or so of revenue that we just -- we're proud to achieve, those are some of the initial design wins that we had won over 6 months ago on ramp into production. And they're going to continue to run. So if you take a look at the new design win velocity in wireless charging, for us, which we think is going very well, those will go with the announcements, the customer base that we're working with. And you'll see those really follow a very typical consumer appliance cell phone launch type schedule which would not be before the middle of the year.
Operator
And our next question comes from the line of Chris Longiaru with Sidoti & Company.
Christopher J. Longiaru - Sidoti & Company, LLC
My question has to do with -- so you're talking about ramping up R&D and timing. Is that kind of a linear function of the -- with the removal of R&D for the divestiture or your expanded divestiture of the high-speed data converter business? And could you give us a little bit of a relative expectation for timing and how that plays out between the 2?
Gregory L. Waters
Yes, I will. In fact, it's -- for change, it's going to be easy to model. We will continue to reallocate the R&D spending within the company underneath the umbrella of the R&D or actually the total OpEx that Brian's already laid out. So you wouldn't even see it as we continue to spin them out. We have increased our investment in some of our advanced timing products. We think there's a lot of opportunity for us and the new products funneled there, and are going to be working especially hard to continue to pull some new products forward. But from a linear ramp-up of R&D, the only thing that I would encourage you to be thinking about in modeling are, for instance, we will be giving people raises into next year. This type of thing with some very, very selective hiring, right? But the majority of what I'm talking about is the movement of R&D and the OpEx window that Brian's already laid out.
Christopher J. Longiaru - Sidoti & Company, LLC
Okay. And then just in terms of what's the gross margin profile at this point on the high-speed data converter business?
Gregory L. Waters
You'll see it if you look at the discontinued opposites right there, right. So it's very similar to the company average.
Brian C. White
In our fiscal third quarter elimination of the high-speed data converter business, improved gross margin by 20 basis points. So that was the impact in Q3.
Christopher J. Longiaru - Sidoti & Company, LLC
Okay, so no real major change going forward at least the next. And then just the last question I have, just how much is left on the share repurchase plan?
Brian C. White
We have 130 million left on our existing authorization, and we expect to continue to be active repurchasing our shares.
Operator
Our next question comes from the line of JoAnne Feeney with ABR Investment Strategy.
JoAnne Feeney
It's a question -- back to the wireless charging side of the world. In the past, you've talked about sampling with some of the top 10 OEMs, I wonder if you could just lay out for us a little bit more in detail about when do you secure at this time or whether the win process is still ongoing and when you might expect to hear definitively on what's in the hopper for the second half of this year and how much we can expect to see in revenues?
Gregory L. Waters
Yes, sure, JoAnne. It's Greg. Good question, but let me just tackle this. I think from a wireless charging, if you look at the people we're working with and we are heavily engaged with nearly all the majors at this point, it's going to follow very much the standard issue industry cycles. If you look at win design wins are awarded by mobile phone manufacturers or appliance manufacturers, you've got a late spring window when some awards are made and for a lot of the truly major platforms that tends to be in the bulk. So no different than any other I'd say mobile phone design cycle that you see out there. So that's one level of answer. The second thing I'd offer you is that we are very excited about the charging market and think it's going to become a very large market. We also from a modeling and financial perspective, there's lots of new standards. The ecosystem is going to take some time to get in its feet. The thing that makes me feel good about this market is if you take a look at a company of our size, we just don't need that many units to really move the needle for us. We've been public in the past, I believe, but we've got an ASP depending on the combination of receivers and transmitters, in this class of technology between about $1 and $3 depending on that combination. So particularly, as we get into the normal phone cycle of launches around the fall of these things, it remains uncertain just how many units are going to ship in wireless charging. We, frankly, just don't need that many units to help us move the needle on a company that's running about $126 million of revenue.
JoAnne Feeney
That's real helpful. And then the wins that you -- or are lined up for or hope you'd get, are those still in that magnetic induction side since the resonance side really hasn't marked yet or should we expect to see something from magnetic resonance as well or is that next year?
Gregory L. Waters
That's later, yes. You're absolutely right. The magnetic inductance, or the MI stuff, that is the standard you need to -- if it's shipping right now, we need to be shipping against that. And that's the type of product that you would see from us or anybody else for that matter this year.
JoAnne Feeney
That's helpful. And if I could just get one follow-up on the server side. In terms of the timing, when, given your perspective, do you expect the DDR4 transition to take place? Should we expect material revenues from that new product line on this calendar year? Or is it something we should think about for next year?
Gregory L. Waters
I think that is a function of the ecosystem partners more than us, JoAnne. It will be nice if we drove that train. We don't. But that's really up to some of our system partners in that area and also who we need to respect the [indiscernible] of some of their plans. But the way I would think about it on this is that we expect DDR3, in other words, our current generation to continue to grow throughout this calendar year.
JoAnne Feeney
And that's in total revenues or is that just units? Because there was some concern that ASPs were falling, without being phased out. How do you view their culmination?
Gregory L. Waters
Certainly, in units and I think that's a follow-up call for later, that we'll look in total revenues, but we still are enjoying a very good revenue stream from DDR3. DDR4, we'll see. But I'd say that, that would be something that perhaps begins this year but is mainly a next-year phenomena.
Operator
Our next question comes from the line of Blayne Curtis with Barclays.
Blayne Curtis - Barclays Capital, Research Division
Greg, I just wanted to clarify on the wireless charging side, I think you said consumers are seasonally down, you had $1 million in the quarter with some new products. It sounds like it falls down below that $1 million in the first half. And then potentially, ramps back up with wins. I want to make sure I heard that right. And then two, I guess phones ramp in the fall, but you should have some pretty good visibility as to where you've been designed in. So is it you're still waiting on the wins? Or you just don't know the volume associated with the wins you have?
Gregory L. Waters
No, let me tackle -- a good question, Blayne. In terms of the runway that we just announced I don't think that falls down. I'm not sure I followed that comment. I think it's pretty steady, and that's simply the revenue we're collecting from prior wins. In terms of knowing where we are with wins, I think we know extremely well where we are with this wireless charging wins. And I think if you step back, if look at the number of people we're engaged with, there are people that are heavily interested in being a first mover and getting out, and really making the market with this. There's a selection of customers that are figuring what to do with wireless charging and how they get up there, and people that are just ramping designs for the meantime. So I think that if you take a look at what we would expect to see from wireless charging based on design wins we've already captured, I think you're going to see a steady set of progress in that throughout the year.
Blayne Curtis - Barclays Capital, Research Division
Okay. And then just on your comment, obviously, the PC audio is a step down in the quarter but then you said the headwinds are behind you. You reduced a lot of cost out of the business and I think there's already been some businesses like standard products and comm, or PC timing, which have been kind of declining for some time here. So I just want to understand the statement, do you not feel like those businesses are still going to decline and how do you added to any of those totals with the recent maneuvers?
Brian C. White
So this is Brian. On the PC clocks I, I mean that really ran it's course a number of quarters ago. So that revenue went away with the integration on the part of Intel and we have no investment in that area. On the standard products, in comm, those have an extremely long life. So although there's little to no investment required in those areas and the profitability is strong in their strong cash flow generation company, those are not declining at a rapid rate. In fact, we see revenues from those products actually going up from time to time in individual quarters. So yes, that overall, over the long term, that will decline, But it is not a rapid decline.
Blayne Curtis - Barclays Capital, Research Division
Sorry, Brian, but the piece -- I mean, servers are 90% of revenue in computing since they're outside service?
Brian C. White
So computing is going to be over 90%, server going forward.
Blayne Curtis - Barclays Capital, Research Division
I guess my point was there's still revenue outside? It doesn't matter. We can move on. But on the server memory interface, I guess it looks like if I'm getting your guidance right, that business is down, kind of high single digits. Can you just talk about what you're seeing in the market? Is that just a function of server seasonality? Or can you talk about kind of the memory module market and if there's any different patterns in that versus server market?
Gregory L. Waters
I don't think there's any different patterns. I think its seasonality. We don't see anything unusual or really outside of what we would expect to see out of normal seasonality, Blayne.
Operator
Our next question comes from the line of Anthony Stoss with Craig-Hallum.
Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division
Two-part question, can you talk about your LTE base station visibility? What you see especially on the China side? Not just from March, but also going forward. And also Greg you talked about gross margins after back-to-back 62% quarters, kind of a range of 60 to 62, love to hear a little bit more detail on what had you talking 60 versus kind of stabilizing in 62?
Gregory L. Waters
Yes, got it. I think it would be the first part of the question, Anthony, with visibility into the 4G build up in China, we had arguably maybe the best visibility or some of the best in the planet. have very good visibility, order trends are strong, and we're bullish on that ramp for the foreseeable future. With respect to stabilization in gross margins, here's the thing. We, obviously, have the opportunity since we're already doing it to deliver quarters above our 60% gross margin. The reason why we're not locking that into the model or projecting it to the standpoint is we think there's a lot of very interesting growth opportunities that, in fact, are already well into our design win funnel. We'll keep that in the low 60 range. So 60 to 62, we are more focused on top line growth than we are on 62% gross margin. But we're very confident we can keep the floor under this with a 6 in front of it.
Anthony J. Stoss - Craig-Hallum Capital Group LLC, Research Division
Okay. And then also did you mention what you sold the IO credit business for? I don't think I picked up on that.
Brian C. White
We didn't but it was $1.2 million.
Operator
Our next question comes from the line of Liwen Zhang with Blaylock.
Liwen Zhang - Blaylock Robert Van, LLC, Research Division
But I'm just wondering how should we think about your revenue growth drivers in the future?
Gregory L. Waters
Okay. I'll give you 3. I think if you take a look at what's been done with IDT, our revenue -- to some degree, it's a back-to-basics approach, as well as some new things. If you look at where we see significant growth opportunities, one of them is in advanced timing and especially oriented towards frequency control. So as a good example, the device family that we announced in December, that we call University Frequency Translator, that architecturally is a good example of the type of devices that we think have significant growth opportunity going forward. The power management area of which wireless charging we've spoken about is another one, and we see continued growth for -- as far as we can see in the future in both RapidIO, Serial RapidIO and memory interface. And those core businesses alone, we believe can drive a healthy growth profile for us going forward.
Liwen Zhang - Blaylock Robert Van, LLC, Research Division
Okay. And do you have any breakdown by new product, core product and old product?
Gregory L. Waters
No, not really. We haven't broken that up in the other and that might be a bit arbitrary. So when you try it, let's try if I give you a little bit of color. Of the things that we've talked, all the power management including wireless charging by definition, new, all right? So that's certainly, our new product. If you take a look at our timing business, the great majority of things that are driving revenue growth and probably giving us a little bit of share gain in the last quarter, are being driven by new products. So there's generational turnover within the timing area as well, and I think going back to what we mentioned forward, we've already talked about DDR4 and with some of the momentum we think we throw. The other interesting thing we're in Serial RapidIO is we're getting customer demand and new design wins towards much more complicated products that we have than what we've had in the past. So it's back to the story of more processors and faster interconnect.
Liwen Zhang - Blaylock Robert Van, LLC, Research Division
Okay. And my last one is in terms of wireless charging products, I believe I'm pretty sure you have probably like a test data test for in terms of like the charging time delta between wireless charging and wired charges. And also, have you seen any new comers into this market like free scale NXP and how do you think about the competition from now on?
Gregory L. Waters
Well, let me start with the competition. We haven't seen the incumbent in this market who has been there longer than we have is Texas Instruments. So we've been the challenger in wireless charging and the design wins that we're referring to including the wins we can't be specific with yet, are businesses that we've captured. In terms of new entrants to that, I'm not personally aware of them at this point in time. So I think these are examples of where we come in with a better technology and captured share. Your earlier question was are there differences between wired and wireless charging, was that your question?
Liwen Zhang - Blaylock Robert Van, LLC, Research Division
Yes, the timing difference for charging. What I heard is that the wireless charging takes much longer than wireline charging.
Gregory L. Waters
Not really, and it depends on the manufacturing design. It's really just an engineering answer of how many watts of power are being provided by the wireless charger itself versus the cable network. So in general, I would say that depending on who's supplying it, it's comparable, it could be slower but the point of wireless charging, I think, is also convenience.
Operator
[Operator Instructions] Our next question comes from the line of Betsy Van Hees with Wedbush Securities.
Betsy Van Hees - Wedbush Securities Inc., Research Division
You've mentioned that book to bill was less than 1, and that lower backlog in prior quarters, but you say your bookings were strong through the first month, part of the month or the entire month and I was wondering if you could tell us I guess a little bit more color on where that strength came from? Was it in communications? Consumer? Kind of across-the-board, specific products if could help us out? That's my first question.
Brian C. White
The strength in bookings was particularly evident in the communication space and particularly with our sRIO product. So even though the bookings were down quarter-over-quarter, if you look at the turns still required to hit the midpoint of our guidance, it's within the range of what we have seen in -- over the course of the last several quarters. So revenue guide is down quarter-over-quarter. So you would expect that the book to bill would be down and the backlog would be down going in the quarter. But we look to as measure of confidence regarding the guide really is that turnstile requirement and that's a very reasonable turnstile requirement in the March quarter.
Betsy Van Hees - Wedbush Securities Inc., Research Division
So then unless the strength then is coming from the communications business is what you're saying then, the rest computing, consumer still tracking below what is normal? Or normal, is that what I'm understanding?
Brian C. White
No, I'd say the bookings across-the-board are healthy. So if you're thinking about areas of particular strength, comm has been probably the strongest area and specifically sRIO.
Betsy Van Hees - Wedbush Securities Inc., Research Division
Okay, great. And then regarding OpEx, you guys had a really nice tick down, and as we look at OpEx, is there going to be minus anymore of the divestitures? Are we going to see anymore ticks down the OpEx or kind of flat line here and then as sales start to accelerate, probably in the back half of this year, will we see OpEx start to move higher? Or how shall we be looking at that from a modeling perspective?
Gregory L. Waters
The way I think about it is that in terms of the big events, I would not be modeling in for future big events. We're going to continue to run the business as you normally would expect us to in running the business. We're going to continue with a very clear line of sight in expense control. You will not see the OpEx line moving up outside of what I can say are some very normal affecting the range that Brian has already mentioned on that. So since we're coming off Super Bowl Sunday, I think the long-passing game is largely done and this is the running game now.
Betsy Van Hees - Wedbush Securities Inc., Research Division
Okay. I like the analogy there. And then the last question has to do with gross margins. So that's been an amazing tick up in gross margin. And looks like it's being driven comm, I think this is historic high in terms of percent of revenue that it's ever been. And so is there a possibility for more gross margin expansion as we head into the second half of the year? Or as you start to ramp your wireless -- charging wireless power customers, will we see that as an offset and maybe you can kind of help us understand where wireless charging fits in above or below the corporate margin?
Gregory L. Waters
No, I would humbly -- I'll offer you my humble suggestion. If you model up the company and model at 60, around that. That's our stated business model of this. The good thing is we, obviously, have opportunity to continue to improve that and as we look into better operating results, you'll see those very transparently as part of future guides when we decide to. Now if you take wireless charging back to the question, which is an open question, so the design wins we captured and we are very confident that we will gain share in wireless charging, is the how fast, how hard is some of the Tier 1s ramp in the back of the year. And while we're confident that, that will happen, they're, of course, is with any new standard, degree of uncertainty and just how many units that, that's actually going to be. Now those gross margins, obviously, are a little below the company average. We model those in its 60, so that's part of why we are comfortable and I think appropriate of sticking with a 60% gross margin from the suggested modeling standpoint at this time.
Betsy Van Hees - Wedbush Securities Inc., Research Division
Okay. And so I'm going to switch analogy to your sense, football is over and baseball is right around the corner. As you step into this role and you're looking at the wireless power opportunity, what inning do you think that you're in with your customer base, particularly in the handset space?
Gregory L. Waters
That's a great question. I think we're in the fourth or fifth inning -- third or fourth inning. It's early days. As a veteran of the mobile industry, this reminds me profoundly of Bluetooth in around the years 2000, 2001. It's very similar. There's a new ecosystem. There's new technologies, the players and what products actually shakeout, actually ship the high-volume of shaking out of the industry. But that turned out to be a pretty cool market, the computer [indiscernible] so I think -- and there's many parallels you can make between the market take in wireless charging. I do think if anything charging has the potential to become even broader than what we've seen on that. But it's not the first or second inning, but we're not at the seventh inning stretch at either.
Operator
Our next question is a follow-up question from Harsh Kumar with Stephens.
Harsh N. Kumar - Stephens Inc., Research Division
A couple of questions actually. I know this has been a long road to getting the business to where you want it, i.e. the focus on the 4 or 5 core businesses. You've now shutdown the 1 or 2 more businesses here recently. Greg, I wanted to ask you if you feel that IDT is now at a place where you can say it's settled or you still see sort of things around the business, which you maybe don't want to own or don't like?
Gregory L. Waters
No, I think, Harsh, in any business, $0.5 billion business, which is approximate, there's always going to be normal stuff in the normal context of running the business at the product line level. But in terms of coming into this sort of thing, you should not expect any sharp new changes in our business model or major divestitures that I would say in the near future. And just to give you a little color on this, although I am new as a reporting employee here with IDT, you can, obviously, imagine that the discussions I've had with Jeff, the rest of the board, I've been going on for quite some time. So this is not a brand-new set of thinking. And I think we are settling in. One of the things we want to deliver to you and the rest of the investment community is that IDT from here on out is going to be a whole lot easier to model.
Harsh N. Kumar - Stephens Inc., Research Division
And we certainly, appreciate it, Greg. And my last question was related to timing. I thought I heard you say that you're going to step up the R&D a little bit in timing, and I know that it's been a plan for you guys to get back and start taking maybe share again or at least start funding this year in timing. I'm curious if you could just give us some idea of what steps are involved or where you are on that process?
Gregory L. Waters
It's already begun. It's already in the -- there's been modest increases to timing that we implement in the quarter, that's already in the 50.4 guide, are shy. This is really no -- in terms of product lines, new products and growing products, this is what I do on this, and I'd say that a number of those things are in high motion and we're going to pick it up from here. But just come back so I'm being clear, Harsh, what you and everybody else in the call should not read is that, that's a different OpEx model that Brian has already put forward. We can fund all of the necessary R&D for the entire company and timing and elsewhere in the OpEx window that Brian has already provided. I'm very confident of that. And Harsh, one last thing, you didn't ask, but let me just mention while I've got a little bit of time, you mentioned as the OpEx model settling in and I believe it is, I think the short answer is yes, will become much easier to model. One of the things that we are really just beginning is that while we may be out of largely out of the passing game, there's just a lot of positive momentum we can make in terms of how we're continuing to run the operation. And I'll give you -- you won't see these as major events, you'll see this as part of every quarter's discussion and conference calls. But for instance, while turns are improving, our terms of inventories are so low versus where they need to be and where we think it can be. We have not historically approached top-down corporate cost reduction efforts such as yield improvements in a really aggressive way. And I could go on, but there's just an awful lot of things that we can continue to do that you'll just see a steady and predictable improvements to the OI story going forward in time. And those I think we have a lot of headroom in.
Operator
Our next question is a follow-up question from the line of JoAnne Feeney with ABR Investment Strategy.
JoAnne Feeney
Just a couple of housekeeping and maybe I missed this, but what are the current revenues from the data converter business that you're in the process of divesting?
Brian C. White
The data converter business did $1.8 million of revenue in our fiscal Q3.
JoAnne Feeney
Okay, and that's the one where you also said that the margin profile wasn't up to the corporate average?
Brian C. White
Well, because of the low volumes in that area, it kind of fluctuated quarter-over-quarter. But in the latest quarter, it was a 20 basis point benefit by removing it.
JoAnne Feeney
Okay, that's helpful. And then in the past, you shared with us some revenue numbers just from the sRIO business, would you care to share those from last quarter?
Brian C. White
I don't remember sharing that.
JoAnne Feeney
Well, you didn't, but your predecessors did.
Gregory L. Waters
JoAnne, this is Greg. I don't think we'll be breaking out sRio's specific numbers. I appreciate the question, but I don't think we want to continue to track to that. They are record revenues. And I think momentum continues to build in that area.
JoAnne Feeney
Okay, fair enough. And then if I could squeeze in one last on the wireless charging side, these wins that you're looking at that you expect to ramp later in the year, can you describe for us how much of that you're seeing in third-party covers and whatnot versus actually in smartphones?
Gregory L. Waters
Yes, let me think about that answer and Jeff you can jump in on this. We see a shift with some Tier 1s that are moving from the accessory just taking these devices onto the real phone, i.e. the [indiscernible] design. In fact, if you look at one of the things that encourages us the most about our design activity that would be big by certain factors out there. So that is definitely going on. It's also -- these are customers that I know very well in the mobile community, and we're getting expedited a lot for some of these things. I don't know how to put a number on it, but I would say it's in terms of accessory to phones, we happen to have right now, and Jeff, would you...
Jeffrey S. McCreary
[indiscernible] I would just say that to date, it's been dominated even ones that are inside of the phones, there are a lot of those that were done by the accessory groups of those companies so it has been pursued as sort of an accessory strategy to date. But there are a handful of design that people will begin to tear apart phones now and they're going to see more and more sort of integrated into the unit itself. But having it on the back of a case, whether that's inside of the phone or done by an accessory group that's a pretty pragmatic way to do it. Put the charging back of the case, so at that point in time, whether the market considers an accessory or not I don't think it really matters. The consumer just cares about how easy it is to implement. So they included in the box as a part of the initial experience. That's what we look at, I think all us to say hey this market is really getting some momentum and it's very early in that game.
Operator
And I'm showing no further questions in the queue at this time. I'd Like to turn the call back over to Mr. Waters for closing remarks.
Gregory L. Waters
Okay. I'd like to thank you all for joining us very much. I think it was a very exciting way to start the earnings season this time. We've very proud of the IDT team and through a lot of hard work to get here, to get us going in this calendar year with an operating leverage model that I think we can be very proud of. So we look forward to talking to you about future products and growth in future quarters. We thank you all for joining. Thank you very much.
Operator
Ladies and gentlemen, this does conclude our conference for today. If you'd like to listen to a replay of today's call, please dial 303-5902020 or 1 (800) 406-7325. The access code 466-2809. Thank you for your participation. You may now disconnect.
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