MTSI - Earnings call transcript Q4 2017 | MACOM Technology Solutions Holdings, Inc.

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Operator

Good afternoon and welcome to MACOM's Fiscal Fourth Quarter and Fiscal Year 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question-and-answer session.

As a reminder, this conference call is being recorded today, Tuesday, November 14, 2017. I will now turn the call to Steve Ferranti, Vice President of Investor Relations at MACOM. ahead. go please Steve,

Stephen Ferranti

Good and and conference fiscal Karen. fiscal call. to fourth quarter year afternoon, you, welcome everyone, MACOM's Thank XXXX earnings

John McMullan. Joining Chief President MACOM's are Chief Croteau; Officer, and Bob me Vice and Officer, President Financial Senior today Executive and

not under a copy have section. the release, Investor earnings of MACOM's at received a obtain Relations can copy yet website you the press If you at www.macom.com

in I'd your like remarks Before Private contain Litigation to of from everyone may claims turning to of Safe MACOM the the are prepared to call differ the today, that risks Because the which Securities and statements, Harbor John, answers certain XXXX. and questions contained Act over forward-looking management's Reform materially to forward-looking actual for discussed protection remind subject those uncertainties. results statements

to its For found X-K, the of provided press related X, adjusted a uncertainties a and MACOM's February views release of and Any statements measures be statements conference unless as X-K MACOM with today at Form statements percentages are reports non-GAAP GAAP this and XXXX. on result all management's in management's risks you April the revenue Form to statement measures and XX-Q differences, including and and current filed filed call, the today; that information, the quarterly otherwise Investor on Securities November filings call include its Exchange company's than could filed and assumes on to today, section more future. financial Report income results XX, discussion other today's MACOM's was SEC Relations XX, we including can X, reconciliation These website. report The refer of press the company's XX, update forward-looking in and represent and Form certain XXXX; financial obligation no referred XXXX. and to only during August November will noted. non-GAAP which of discussions adjusted release in those on with on filed on the detailed Form XX-K Annual amounts of Commission, these

you be a webcast with least the For for section the And via to call Investor the over for this will XX on quarter. recording the of unable of entire listen MACOM's time, John available days at turn at call that, those in to to his comments Relations I'll website.

John R. Croteau

summary first that for for turn of end guidance of for an McMullan, key fourth today's our in providing $XXX largely quarter of joining Thanks, call Revenue further demand expectations our the then had coming Steve. the I'll performance was million, we then was business our quarter fiscal fiscal XXXX. into the our a range. quarter line with for in and highlights who prepared comments of factored at us guidance during begin will thanks over XXXX, with in overview and QX to the call guidance. Welcome, the low Overall, financial results review conclude detail. quarter I'll fourth everyone, today's CFO, Bob and today. by fiscal our

businesses, take quarter I'd to materialized to Data the on these Center hard grew Networks total, it which shortfall which year-over-year, expected, demand upper was dynamics. in though our a XX% guidance course of color reported for end impacted constraints provide our had be instead and infrastructure moment strong between quarter, of XXX-gig down strong respectively. additional Networks that sequentially, pause As each XX% A&D the QX saw a entire to in like over businesses. year-on-year. demands and range ability we to The grew China, in supply still results of In can of in products. very a our the meet We some attributed our our XX% impacting network X% multi-market

the First, our total by through Networks the legacy to leading Data Center businesses, China had which quarter Beijing including of in recent revenue and of far government products, negatively up impactful, hard continues reached pause fiscal the in total all third by to most last XX% year. affect and the transition in

reverberates market on While network this on looks represents had global geographic conditions other and multi-quarter basis. for a global largest inventory as Whip All regions cycle. like outsized effects old-fashioned semiconductor remain China infrastructure China of this an The solid, in corresponding an Star the impact business region in has even overhang further freeze feels the told, demands. our

of position inside XXX-gig cloud XXX-gig benefit Data supply our won't this, for Centers, year-on-year to to established and in was be by in to capacity wafer a back-end which from at supply products competing production, Data CWDM suppliers We're analog of their up surging chains. course We're this assembly lead Center providers. consolidating from strong, hampered for XX% XXX-gig in of ports over million iPhone are the competing these sustain these Center others have servicing challenges. transition and, To XX-gig and clear, XXXX. of enabled where X customers year. is for are suppliers Center We're year. chain remains XXX-gig the begun the last the we're and be revenue ramps. demand out same robust. and products allocation after prominent specifically, from the recover very both solutions stretched front-end In packaging the spite as both than Data midst we've products Second, well-positioned Early to where demand of that production XXXX. More our SiGe-based our the first servicing quarter times Data our now expected, as developments being RF for continues commitments Delivery cloud later service until usual capacity indications

fiscal XXXX, previous well had the exit had of as customers we market, programs in on then fiscal strong growth as as unfulfilled businesses $XX quarter, requested have by recent our demand grew had growth gains from programs some in A&D would Networks. as new zero report. in backlog business, If of XX.X%. quarters. according analytics continue million strength a partially driven we and in broader Multi-market We from weakness and cushioning share leaving these the shipped in which very XXXX, largely Mimix, a customer year. catch-up outperform that XX% market to continue Finally, qualifications specific A&D customer Both of a been deferred high-roll period to been during saw We the year-on-year year-on-year into strategy

a December the demand Looking equipment pickup network ahead, quarter. signs see we in in of no

to demands, and while our Data hamper to return quarter, Multi-market Additionally, Center we A&D in meet strong expect ongoing and a supply following more to revenue. ability a pattern constraints to overall decline strong continue resulting sequential a our businesses normalized

recent Our through encouragingly, light we navigate of read do end have a the the from fresh to our customers. More visit top clearly see We're as been this downturn. steps taking I disappointing impacts. ago to earnings first-hand get was weeks results at to two able tunnel. the we mitigate China

the catalysts were tenders mobile for encouraged should I the supply on New that and recently for last awarded the kick saw XXX-gig to Outside after Congress also leadership and round to the that delivery sources fiscal of the process sometime by strong the infrastructure. catch I and are a network off in such of a there, backlog the the have demand. strong to March While now XXth build qualifying infrastructure Inventories Beijing, wave spending. told and supply Data network of clear customers subcons up begun December and have We're for Center further recover as with is between burn maintains likewise of signs firm noting wafer side, And in delivery in demand these the new in, year. beyond. as we of was orders of first quarter. from start commitments Year. year. Chinese We're demand the expected that fixed are should and government to new suppliers our month the next settling in government concluded National China serve support continued worth that that materializing should It's for plans first QX after ultimate global

programs this analyst Visibility over each this, in Finally, the growth demand Cloud Data I'll major the believe several Center our fiscal later forums. a in and cloud fronts We daily XXXX. of such across be confidence on perspective. playing May we're that from outlined giving improving optimistic high discuss in Data XXX-gig us we're detail in call. opportunity of with more new course OEMs these accelerating Cloud out service the will bottom is is December customers, the as that ramping Center that providers the quarter,

fourth more to Now Bob let detail. in me quarter financials to fiscal turn over our it review

Robert McMullan

position. present briefly fiscal will you, quarter review and fourth good results and results I everyone. afternoon, and Thank annual financial then MACOM's John; our

fiscal Operating margins Non-GAAP revenue XX% million, grew up million, XX%. from up gross expanded were EPS, to $XXX income grew at grew on $X.XX. And Non-GAAP up to XXXX, a to from net For XX%. XX%. basis, four-quarter to $XXX $X.XX, XX%. flat margins

end $X was and or total we $XXX the XX% expenses $XX growing down million good million was unused sequential XX% was Networks the or markets. Aerospace fiscal billion. or loss XX% gross up revenues $XX was and flow XX%, had up and cash, was $XX margin QX. than optical fiscal million of XX.X% $XX XX% XX% network to results. Center gross $XX down cash To in $XX XX% of up $XX for to an up $XXX and a carry-forward year-over-year. taxes, $XXX respectively year XX% and million but global of QX transaction was million, by revenues, and compared profit was year-over-year. a $XXX total X% million Free and up but all, year-over-year. And Non-GAAP XX.X% with XX% revenue, million, and revenue XXX% XX% Network year-over-year, year-over-year. million Data of year-over-year. million and more was income million and other million As year defense fiscal refunds All was total in respectively, million one-time Of and adjusting respectively XX% year-over-year. basis. net total And received was XX% Multi-market Revenue was year-over-year. and down above-average X% for million, $XX of XX.X% from of was on U.S. $X sequentially. of operating revenues, or $XX net million Revenue year-over-year, revenues,

compared operating year-over-year and total expenses down Operating X% expenses were million In terms XX% and year-over-year of up $XX sequentially. were million operating $XX non-GAAP expenses, million $XX to sequentially.

expenses Our quarter-to-quarter. R&D other will development up that costs one-time more go and for materials, expense MACsecs and included down

$XXX,XXX at $XX was areas on were operations XX.X% expenses continued into where fiscal respectively we area are spending $X of primarily and respectively Other reduction and margin down million Interest lower to technology that from our revenues in what the and basis sequential pruning now wireless QX. Non-GAAP down expense market respectively million down we and in and flat represents points and million are defined. Adjusted respectively, legacy R&D with particularly XXX will on SG&A are $X looking basis has QX, income guidance revenue. XXXX. were due of forward income year-over-year, and the more a XXX consulting and basis contract QX. points million be of ended income in $XX million from and and a fiscal With fiscal percentage-wise not fiscal $XX investing now in adoption, operating million and in revenue $XX

XX%. Our normalized non-GAAP was rate income QX tax fiscal in

fiscal reduce XXXX our rate. to through line our X% of expect estimate normalized tax We tax in long-term rate our with

of to non-GAAP of revenue $XX from and from count $X.XX operations and but approximately leases. income, outstanding and share working receivable due XX Accounts net payments was influencing fully sequentially. $XX million income days QX non-GAAP to deducting in the for $XX operations. payments, diluted completing to transaction-related and quarter was reduced EPS quarter which XXXX. earnings Adjusted flat were net compared excluding AMCC our non-GAAP Cash from and to fiscal down million, balance respectively, sequentially, and income fiscal $XX the $X.XX XX and due non-GAAP to XX% timing Inventory and million terms during flow included After in acquisition-related and from and million cash cash from $XXX million, capital receivable fourth and transaction-related of XX% in sheet, million, primarily times million, flow fiscal fourth XX% after $X income $XX $XXX from fiscal payments. per in adjusted year-over-year $XX X.X sequentially. investments fiscal or up inventory, million $XXX $XX $XXX in flows from before sequentially. net were million fourth quarter and free $XX were quarter $X.XX were fiscal to $XXX times higher XXXX $XX from consideration. was cash million. interest, was XX% inclusive million million down sequentially. quarter was during two expenditures XX% depreciation fourth $XXX $XX to down short-term million the and AMCC MACOM's essentially income up in X.X quarter from excluding flow Day Investments non-GAAP of X% our Our million, million from due million net EPS XXXX down at $X of EBITDA, sales QX debt for XXXX fiscal of sequentially, cash, aggregate Inventory equivalents taxes, share due small million lower end, compared of cash of cash capital sequentially. capital million up revenue. the To million, of were GAAP higher $XX was operations Long-term turns million third accounts compared days increased amortization, $XXX cash also and in net acquisitions

fourth in X% as We to availability or in or compared was expense expenditures sequentially. of undrawn $XXX fiscal line. million million million Capital X% had of million Depreciation $X an revenues were $X to credit $X million $X the sequentially. revenues of also compared quarter

by free exceeded fiscal annual $X expense, Our expenditures cash depreciation XXXX. in capital reducing investment during million our flow our

next common quite beginning with report and better our closing, will common we year, I'd in mix revenue new defense. that of that sales start modest will catalog of of of reflect frequency one Starting market fiscal dual-use A&D and these as bands. investment serving note in feel applications We industrial end in and conjunction and a percentage our had in the better is market, with modify to Sales share outlook both the quarter markets industrial of performance like the reporting Before become business. multi-market parts each combined fiscal simpler businesses. a and into we QX, end end this as to they military gauge and evolving

Center defense, hyper-scale we revenue own and its market begin economic The industrial to capital enterprise addition and In cloud of Data as service from driver end will this formally reporting providers. is market. investment

by XX% market year-over-year. investment driven definitions, operators. end was final market telecom, these million, QX year-over-year. and in be new which million, up And was mobile $XX upon was industrial third The Data is XX% revenue Telecom fiscal end capital will Based and down by $XX fixed defense year-over-year. and million, Centers XXX% up $XX

historical to revenue We of for these XXXX XXXX. Investor website summary posted by new and page information end of your our for markets have our quarterly our a fiscal breakdown

did we stake have position. best to transaction. We the contributed and receive took appreciation not no value a maximizing of this anticipated, minority it connection IP further we our ownership of exchange for the assets obligation offers cash the business. in than while Finally, MACOM Back entity John. potential Compute long-term longer we in Compute this divestiture. a has concluded business and potential in divestiture cash investments new the shareholder for MACOM's for believe to with the MACOM NewCo payment you, in a

John R. Croteau

Bob. Thanks,

riptide limited communications other described confident swimming beyond. Let March none. visibility turn resuming the half but in of a should me for profitability for we involves, an an last China It's our China, prospects National we causes see reiterate back understand painful why the across for Congress the the point. against from about the second semiconductor businesses. visited case, of the believe growth Like improving in and XXXX this been we've XXth perspective, in everyone last XX% of remain one I quarter timeframe, business most basis. resume a There's many Once down our to market XXXX. and China, our China, be up been business Metro/Long-haul remains over customer deployments we swiftly, notably outside China entire on in gains Networks healthy. of orders suppliers, tide call We've We turn out change it before, in believe in and quarter and on year-on-year. when the root of as inflection last signs in our which traction, to have. quarter, year-on-year; in XX% was while already play Metro/Long-haul should resume recovery Outside typically and global things in happened they put To China, growth was XXXX/XXXX as seen industry-wide provincial

market importantly, and established growth I'd in some as engines our Networks, to specific as provide XXXX. strength compelling of you expanded the very we've More like beyond current footprint well for successfully in cyclical share areas customer adjacent recovery examples.

highly far inside impactful, We Data upgrade beneficiary and leadership hold to uniquely such analog photonics a that's from enabling with lasers, all Centers. and mixed-signal of First differentiated most major photonic for XX-gig and XX-gig content: of TIAs, architectures Centers. and we're the chains CD-Rs, silicon We're low-cost to Cloud capable the a photodetector, by XXX-gig supply of high-volume be that position PHYs poised transceivers. drivers, underway Data across well

significantly Let XXX-gig coming high-volume providers where QX, solutions, chain for stages, the the the XXX% see happening. and their early that demand revenue sea Despite me change for content Data Center we is but cloud higher unequivocally it clear. manufacturers. our service Still be faced grew We in is is CWM supply preferred in year-on-year in constraints toward a accelerating. supply

fab well optical as are cloud in and as ramping X-inch our aggressively our laser customers. transceiver XXG they're shipments little subcons Our qualified in

quarter. December During them we lasers in unit expect and of quarter, doubled XXG shipments the the again fourth double to

this continue PFM, from top and output there. on of LAN-WDM production. CWDM approach manufacturing and quarter to lasers accelerate PON X laser That's to expect We million

PAM-X. from with extensions separation competition to further creating we're the Lastly,

ramp Data our In explosive, believe few XXX-gig recently scale we engagements measuring in operational by design entire with and Metro/Long-haul Networks Data standardization transceivers. Single in opportunity program will required wins overall aggregate, volume will players This to that that for XX we for Cloud be accompli. our determined to one XXXX the one demand demand the that our range make transceiver production. over. the customer Center should cloud MACOM franchise We players is others. their telecom demand cloud how connectivity and context, And fait that two the one XXX-gig estimate Ultimately, customer can Put in Center these that lost revenues PHYs, Data not approximates over have quickly ability in the and is and service only for own by sub-cons unit the of be for PAM-X customers There at the be Within secured with provider over industry quickly XXX-gig challenge Data in accelerating market we years. industry. our premier Centers PAM-X Lambda profile. only will demands, not the next multi-billion-dollar customer past potential Centers, program are and across the

ramp. the SAM primarily and lasers. earlier played we months PON, in solutions. last two analog photonics all both client-side in MACOM the our our The position currently into we in office with would with the had central and stages and cycle To-date at PON in XXG with supporting in spanning XXG as on we for ago, X.XG, comparison, quarters for earnings comprehensive and across design the PON. central greater are translates office customers OLT the portfolios I years ONU lasers, significantly By full client many that for deployments stage. still applications. state detectors, side only caution, announced XXG analog call content of or opportunity electronics This both the early side Shenzhen, product second these Since that in however, PON of a is photonic area silicon expansion in fiber-to-the-premises and coming a CIOE photo and subscriber we cycle in portfolio,

fiber just chipsets. have SAM in is in of emerging and Outside mobile is mostly a opportunity as a for expansion back-haul we've supplying GaN. which stations. relatively we The small infrastructure, lasers and and of been for front-haul not MACOM third much area that, participated radio player, point-to-point historically base To-date, broader

stations LDMOS ramping which the TAM. should to competing that defense Over roughly and XG strengths GaN. few just $X with applications design as cloud XG our X.XG We're geometrically program-by-program of initial quarters, to on plays our mobile opportunity Lincoln and LTE Building radar leveraging to power and collaboration see competitors. from and Labs, a and X.XG, next with are MIMO foundation, begin few wins starting over The and mobile as wins GaN efficiency now we're latency technologies we strive infrastructure into production, spectral bandwidth, Massive decrease with a on in this basis to MIT additional billion corresponding Borrowing Antenna years qualified of from migration in front XG represents existing improve of and expanding amplifiers, change, programs eight top in company, for traction generation all next versus our mobile civil addressable years. the increase traditional with Active arrays. next of operators not now center base

Another is wireless expansion base optical our major within for catalyst our capabilities. stations

accommodate speeds As line in evolve and for Networks beyond. data, more back-haul the to more pushing are and antennas front-haul and XXX-gig to

to from head. and antenna You can't remote the data if get radio can't the you deploy the

hoping to the realize spectral lower five the vision deliver double greater for of literally in years optical are XXX-gig the RF China, the unique of networks trip bandwidth, over cloud realize were the my customers latency to XG. During better market role transceivers that from MACOM efficiency. and back to light, beginning mobile that that speculating play can Customers next much could and

customer me engagements well generation close. about products tied current as here emphasize Let on designs. existing future I something as I'm generation talking existing before to

XxX MIMO X.XG, as XXX-gig well X.XG well So LTE and MIMO XXX-gig as well as XxX as XG, CWDM and Massive as PAM-X. XG to arrays, as

next about quarter let's talk Now guidance.

is gross shares to $X.XX $XXX For the It's of the earnings the on between expected XX%, color an guide. fully to December and quarter anticipated and XX% outstanding. fiscal be million $XXX additional moment Adjusted a in first margin $X.XX we to revenue ending XXXX, between diluted million. to be per XX, million range on expect spending and XX.X provide worth share adjusted In December and September by Networks masked into the the Networks to Multi-market. soft demand China remain true A&D strong to supply transitional more chain while Data return quarter, constraints in quarter, This a the the expect to Multi-market year-end. partially in levels depth A&D persist Entering China and downturn December shipments Centers, and for of the at we quarter MACOM. was calendar normalized businesses is

our December of We turning. the recover the in succeed to from to Data infrastructure, will quarter temporary multiple Networks mobile demand with hyper-growth, be secure the cycle that be players. business call industry We several record return of MACOM of in our the inflection points of we you to course track of expect and as verge well-positioned the deals franchise can the be appears our approaching base pause that cloud footprint the believe bottom the which same in a expanded areas hyper-growth network our global over At when Operator, MACOM is drivers Cloud China, we've down to look open industry major on XXXX. customer Centers long now of and questions. time, the such outperformance and to will

Operator

Curtis the in of of first Our you Blayne Barclays. question Thank line comes

Blayne Curtis

said you Hey, had supply Maybe, clarification a of on new guys. taking bucket, that constraints. question. sort the my you John, December Thanks just the guidance for

down others could then curious would the competitive same just Just you December, that seeing Data maybe affect And – Center talk in be positioning? your competitive and that of how in constraint? supply landscape, does kind just meant are this if your ramp about

John R. Croteau

Yeah. Good Blayne. question,

the the decline of over Center, of mentioned the is in telecom. China majority of I one of in is Data So things terms had bulk

if not through a It's also, of ZTE. actually over remember, just telecom. chunk China. AMCC in in big is datacom bought Data position customers China, with that you That It's We legacy likewise like goes business a Center, impacted.

is our just delivery with We as declining. The output that the that we our as continue we suppliers. clipped growing suppliers should be about supply our terms So got allocation clear from anticipated constraint. It's from not wafer growth, had well is dropping. in definitely our I of in just not and assembly back-end would demand. guide

So growth with back make we should it's our March Data telecom By action. up for in the to the ability more continued be quarter. totally for one limiting just in shortfall Center quarter,

from those demand. suppliers up commitments got and to others catch to have We

Blayne Curtis

Got do your as then, to terms if being projects, again, milestones some just of getting on these timeline there? and out just lasers think curious you. bigger to qualified some lay of Data ship you of Center And your in you'd some can visibility able on you maybe kind and when have better

John R. Croteau

Yeah, so good question.

higher to respect, the lasers, that qualifications us. L-PIC and relates way components been are about we're to think directed is lasers in be the to-date Data it the customers. huge model Facet have Center inflection the to great So guys the term We're great address who Where them technology thing with much our continue short the photonics as suppliers extensions do the And and the directing to matter, and and They're has that with qualified They the volume shape our to guys supplying from us We the analog volume support is and our up big enabling with to fully enable Etched now. who will point able guys. the manufacturers being the fully. we're that. guys transceiver cloud in we L-PICs that to to the ramping market, commitment. lasers

is strongest well-poised. we very position there And So have we're very, the CWDM.

some there's a remarks, our kind favour. as you So transition scripted the what from see reports change involved in of And I of XX-gig in, mentioned from to to over in in shifting X.X XX XXX-gig we're is absolutely the million X volume the the units. to want to to are million millions scale These tens to cloud million be market able guys. to going to these of depend from the units upon of suppliers guys higher from sea

So that's see the the course that's out XXXX. where road. you're of going rubber to the through what And hits play real

Blayne Curtis

margin, the gross in me be guidance, some maybe with Thank number, as revenue you. more absorption the one mix on squeeze Bob, obviously, well. let And there must just lower for,

margin the can Just driving gross talk the about factors you lower in December?

Robert McMullan

Yeah, absorption. Blayne, again. I it not say so much question good would on

said about, of are as of manufacturing mix. before, guidance revenue sort a fab the our many more some times higher-margin are big we've really boutique we've products really some in terms soft products. those we're of that As guys. product here, talked It's our unlike of And

Blayne Curtis

Okay. Thanks, Bob.

John R. Croteau

Blayne. Thanks,

Operator

our And the line question of Needham. Bolton with from comes next Quinn

Quinn Bolton

the business. legacy of to that Center revenue. like business guys. AMCC follow down because Hey, Data John, the it looks Wanted up on was mostly

you of could help like Data more and Center AMCC, you ago, the – million. $XX.X revenue? look that $XX about Is from looks business size of up million back acquired Center AMCC to jumped wondering, Data some half than Just quarters if portion three you

John R. Croteau

I framers very I believe don't give front you To had me be the mappers portfolio you in have legacy as a the part and numbers tell don't of to I specific of the so. we Centers. Data honest, OTN is the answer. can classified that

just profile mix. the just In the being the to demand we're not can't quarter, issue the quantitatively way real up I September analog as part breakout for clipped. September quarter, Center it break quarter for to relative call the the we're is – of portfolio able December that being what the and we out the consistent, We're – revenue I grow down. stocks, was shaping well. business, limited draining Data which buffer the would So we've the growth had, be that's the being is that is organic

Quinn Bolton

on CWDM. had Data I might a it all think, I Analyst analog the you have – Then year of estimated at the was especially Day content, Okay. way close maybe now, you Center maybe ago, the guys $XX think to that back

hit of year, X thinking be one, module, have port hit in you content a X right assumption still XXXX. about your fiscal is guys You your the ports target target million this to $XX fiscal in you XXX-gig second new Do XXXX? and goal enabling million

John R. Croteau

The There's and more remember it shipped difference number the revenue than We can't how the divided Oh, and to dramatically. we $XX total because by had out calculated. before. speak varies many content and took absolutely ports of customer-to-customer I targets how averaged much $XX. the that don't targets. enabled with design-to-design we we you have to was

we the of ports, the L-PIC goes frankly. Some that way X and be CDRs, ports, beyond CWDM, solutions, instance. talk up some about might content in But those so some new for we shipping when just the of in integrated stuff more the million of on,

calling we've content port. got to per that about be So careful an average

Quinn Bolton

Okay.

Lastly taking look some and steps to revenue dip. sort more might explicit you're of that you quarters? just quickly the as script Bob, you mentioned on be the be to of and short-term forward Can with in impact prepared the impact future mitigate what OpEx the December for you

Robert McMullan

longer here's Quinn, There no sense what translate to things up variable we're that investment are we're doing. continuing the go that and in expenses – at of invest clear various that trimming And would so perspective, that today makes and talked timing we are those technologies that for we're that from and very all. the about, down.

up very essentially make them in we're slightly basis. fourth those the controlling flat quarter So or to a on dollar expenses

Quinn Bolton

you. Thank Okay.

Operator

Sur comes JPMorgan. from of question Harlan next the Our line with

Harlan Sur

thanks Yeah, question. my taking for

for of drivers, good for what within are quarter flattish the products is CDR's, as this the business about million high-performance did the So actually part the throughout of and showed quarter? a product part September I business. driving all think what And the sequentially, again, grow on sequential is growth, the September analog But guide? I'm I think, guys anticipating Data declined been on that HPA bigger SiGe business, December being has think the amplifier, you Q&A, in $XX the the it the driven AMCC by was Center Or just – constraints? curious of contemplated side, which of HPA results which you recently I contemplate quarter you some

John R. Croteau

dangerous, a HPA. Yeah. by forward-looking bobs We That the quarter. that guide product line. me gets basis let don't on with happening explain what is within But around

purchases can wafer in that buffer will where held interesting output our But was imagine, as growing demand, our backend – So growing flat is for we you what with vocal juxtaposition. an in of quarter-to-quarter have an environment of demand very demand demanding stocks. strong kind moderate customers, customers, right, our current very wafer elsewhere which, is where, very draining

do stocks, is are the It's doesn't But, respond can buffer supply had ship the to logical solid of that to surges buffer demand for to you as stocks and frankly to of demanding parts keep this logical we because so a do very thing So course, customers demand. held it. up, the business. thing

just looking it's can revenue that actually in clear. very, like up end demand decline when sequential from a So be to a constraint. But a supply I standpoint, want very

the demand-related the we part us strong Data We customers of on in on Center demand to for no that grow across side, the on a business basis whatsoever. one issue have Data continue and issue pounding Centers, have everything deliveries. very number analog There's is daily in

Harlan Sur

the Okay. – insights, then on And the appreciate John.

confidence some On the about you being December seeing order the for the March talked visibility quarter. in bottom,

supply just seeing get the front potentially these the chain both the Center seeing pickup and that you bottlenecks the bookings inflection Long-haul is in the a the resolution of Metro Center primarily Or you're the in are on of is driving part March? I in to products? business is patterns want it that Data of your how and March in some Data So better broad-based So of quarter? sense just order

John R. Croteau

is strong absolutely Prior that intake gone across intake. begun. Metro/Long-haul. the back-haul. in of including across the narrowband on businesses, absolutely believe for ones having deliveries, there's just megahertz demand not has which of to frankly, all now several to June field happening various that's expedites, trials matter for many a was you effectively it order across right can Orders realize – from build-out perfect It's China one nuclear it in. are That until It's It's tell December maybe was is the very all, IoT the started Networks you being Order it of levels, I a question. up popping up with way telecom, pulled our over this, winter XXX not, zero. China. fiber or XG now there. have but

with to can through growth the the laser situation both of our what's the expedites secular production now to the things. output in developing March expand expand is in across We're also and beginning quarter. of have same datacom side. but ability, the telecom terms capacity I our best you on side, of trying right tell we a So lot cyclical recovery the on

It's heads it I'll So that the I than in is last recovery is the the very In just that polar – color I a profoundly what two I of actually leave experienced in June. but ago executives met pick part about China think not segment down were deliveries. this behavior ago, was classic on very discussion in weeks was back Shut opposite the no as clear. widespread. Networks, we with is no And quite capacity different it down. single within weeks ability useful. strong The but hunkered demand. saying June, everybody their always saddle, the to had developing of talking absolutely the They orders, price they were Two off. some There's point, allocations, started the up negotiation.

So problem bottom. the I have whatsoever December no calling

Harlan Sur

A&D about is the Okay. it's And us us the but pattern is the – and business give for bit, the a on there. help seasonal the changed quarter? just what insights one just your quite Can what you appreciate understand – sense March thinking Multi-markets

John R. Croteau

quite that's chunk But so look across calendar high-roll demand have up defense sum right and secular one high-roll shipped XX% has you was, is September businesses basis, the only across secular and and a quite it a programs. remember had metallics For businesses defense a quarter strong can the it was Multi-market, whereas those of growth just have spectacular. A&D industrial in we a our in products go-forward our like organically some that good. The the been decline quarter. diode of the like a year-end project it should with in The A&D I'd solid. that is the grown better the very And are than inorganically I on be in back September tell continue preeminent Both is quarter which to then we is just the solid. the issue new now with call pushed big backlog for quarter, we're of first to quarter, spending our of the we in own our delivered position March model. going to – if this. diodes, terms on fiscal year artifact, you portfolio high-performance pickup December very

Mimix number. was Our I XX%, the grew believe,

XX% I'm not So model. the share transistors turn the that GaN are through outside is, of as gains, in with excess and growing market Mimix delivered can on be our the – because confident, obviously stations is base of

Robert McMullan

are around programs wins growing XXXX well. across radar design as component And

John R. Croteau

Yeah.

heavy solid of that cash investment. So for it's part that And flow very growth. not our a is going be to the business,

So Good it's to thing see. good a drop-through.

Harlan Sur

Thank All right. you. Okay.

John R. Croteau

welcome. You're

Operator

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

Adam Gonzalez

at fiscal me you line Vivek. guess, question. time, This just a letting for to to I'll start MACOM for for think simple is this just assume Gonzalez the on what you would top XXXX? given Adam in prudent Thanks with do everything one. I ask that growth kind rate know of be

Robert McMullan

a one Adam. we Well, at time, guide quarter

intact. remain targets Our

and with Our XX% we're the as focus. strive behind it'd our margin, our we're Obviously, it's and for XX%. XX% that's we'll calls today, as to but business a gross close And lot operating early there can. to call growth, we deliver target monitor. to curve annual model and a first still targeting quarter, to is but continue we crazy those be of But innings, quarters demand as it

John R. Croteau

right tell itself we through What talk if is the we at whether can on GaN issue; a semiconductor that, compound color. stuff, We're growth is, add Data industry all piece history when some an it's trough. Center us you growing. have from best the way achieve bottom experiencing. is Yeah, not in part ability I growth particular XX%. you infrastructure growth the our our superimposed anything, growth if basis, right, the of more and expanding of XX% cycle. that go is exactly mobile is, proves that of around beyond in about secular now I Cloud an model I it, suffering the And is out can business comes old-fashioned to you to sustained can if our the The XX% lasers, think what to feast. about one already famine we're tell of what And specifically on

year, be to I March, second the call you clearly recovery by half going it's year, to think tell is again. be of growth, case. secular call solid the in early I to to – of I the can very think with going place too way then, half it's a cyclical So second but yet And the written, worst when everything you're year should

Adam Gonzalez

guess, you I bit a my for Thanks. links? little optical follow-up, talk Data high-speed can landscape competitive as Center about the

John R. Croteau

Yeah.

the depending all kind there's model. is analog in different totally to cases, two it model, very of some major almost is, some a it's So keep transceiver the customers, everybody, There's And product We've components, competitor. which a lasers. on great names, in got mind. to models sell which valid we literally

traditionally say, the is PHYs, with I'd that a CyOptics some being the tech to MaxLinear of part kind Center. of the stuff, PAM-X The class product with lasers, closest Avago us one catch Broadcom. stuff... probably to able typically Data PON In single on of Lambda Broadcom, us tends up to it's analog compete in that to Renesas, On in and in volume

Robert McMullan

(XX:XX). well. as Broadcom

John R. Croteau

yeah. Yeah. Broadcom, Single Lambda,

competition. solutions, has components. complete integrated who we to that the of no more have So a one we there's kind stuff, it's the no ability through component different least, yet. There's That's put about the that high-volume it play. portfolio no When of chain, indigenous and supply it's and some connectivity one high-volume talk at

Robert McMullan

protocols. all Including

John R. Croteau

Yeah.

We've of all across form you'll XXX-gig and what DRX, solutions. geared millions of is And in – as XXX-gig the which CWDM. got have for So We've unit-type FRX, PAM-X see everything. we got quantities.

phase. So bigger the that's than first magnitude, of order an literally opportunity

First customers point in time. phase which those We'll different space, you which continue own depending valid. answer on the about is is in in but ensure thrive to model their talk very will

Adam Gonzalez

Thanks.

John R. Croteau

You're welcome.

Operator

Thank comes Delaney with Mark our you. next Sachs. Goldman the of from question line And

Mark Delaney

Thanks the Yes. questions. afternoon. for taking Good

quarter the the point, think already out this But guide. what China the I'm to hoping September already I'm down as segment Networks XX% December where revenue in is XX% with of think, to is, in levels understand something be I to to in is XX%. at had to terms because quarter. down up piece question assumed I another the been XX% seems better Networks maybe segment and PON at running And China, if quarter in into December China First like the sequentially I properly, Metro/Long-haul zeroed of coming recall like was baked the be

you so that it's incremental where the incremental the understand weakness is us whereas just Networks can China running all China help and not weakness if China December is quarter? And in

John R. Croteau

Yeah.

top I calculations your Mark, is not the head, think, off inaccurate. for of Networks

as was I was end the of we said What was, think call burning other the in overhang the it the one think thing have it China, before off parts yet the demand to that indigenous we demand. couldn't market inventory world. that I servicing relates inventory

was reasonable. now. have the simply backlog – We had it had right May because difference. where you said, in that we September had entered backlog orders through order we I don't like So the And fundamental basically zero up June. intake That's the quarter been quite since September with

we're that is it thing of in coming business, had that finally other decline, previous we the the high-roll we pulse part which of looks of off the taken that had we as demand that pushed shipped and bad a as optically well Multi-market think which chunk quarter. I September sequential and A&D is

calendar for well off. as weak, year-end, is seasonally the Multi-market looks frankly sequentially, with So but Networks a A&D think the as year-end decline. And fact just compounded stuff on it that not is like I calculation your

Mark Delaney

help I A&D A&D, A&D just there's of prepared on follow-up so the with to Bob think disconnect on Okay. a but us was either then can down said, On still that That or hoping commentary? $XX demand, the guiding just that that and you million And in helps. John December a unfilled I you question separate comments, ask. in

John R. Croteau

Yes.

demand, about many a and And we that so Space So times, high-roll, when about Class qualifications it's JNS, we production product. about we (XX:XX) you're talk some it's about talk when talk cases, talking lead particular in months.

very top over qualifications, not to and surprise instantly in from XX-gig we was burning do product And Lowell all to just year. factory priority, early bottleneck a for upside push. I the went on for it the GaN you're of being completing time. Some cases, lasers the top anticipated demand where in long The is these something our ended relates On as had we're big the had qualifications. up very in to to which that, able with severe horizon a

So on. different GaN programs and so

So do we the have production. that's the the million. XX ship certain organization to high-roll through There's we quality instantly and a calls reason extra can't those just capacity why

Mark Delaney

needs dollars company does up Okay. the lot if gross helpful. thinking capacity And basis, Or then, down? there work That's of? a lower inventory, should on other that inventory days obviously a lastly basis, that inventory on maybe factory a ways plan which a to levels so, down? come to that for how impact margin? me obviously but be those potentially should we how Is came And on

Robert McMullan

Mark. question, Excellent

XX% But finished of me you'll K either and just materials. a in lot raw let We highlight goods out. this or So inventories work of the in our when don't in process. are see have it's

quickly that really So we try as are and lot to times in get the not hang process not inventory cycle up a dollars defined. of

all secular come in longer-term XXXX that demand in grow inventories down as in But be kicks and built wafers markets back advantage that been product that our certain is comes the over but as and of as slightly, the have higher. we'll the across We've that's other businesses. businesses So comes taken drivers past difficult expected products. in product inventories. had lines cases, inventories course when we line in back, obtain view we of to we'll softness continue drive some are in with demand. In ship demand the volume heavily. later that The And will for back, quite to they'll Growth business. growth of again

Mark Delaney

very you much. Thank

John R. Croteau

welcome. You're

Operator

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

Tore Svanberg

Yes. Thank you.

on PAM-X. question is First

But So, John, the with cautioned you also that, going. about have you they customers. engagements production to get obviously, XX mentioned have you

the on on So little design they of maybe for a please? elaborate you what the to to those materialize, things are have need engagements or wins bit side can some production

John R. Croteau

very customers who matter, we be program guys I about of through about Guilty the all got the quality scope have. when to chastised who those as I of franchise been customers' the full I And the this very, what we've we I'll say. happy matter and guys for the mean, guys very the But our appropriately. matter. in can of Well, course status. I We've that XX wouldn't The careful talk be made of numbers talk the year that say I about big players about, charged. comments past

really doing who into I to able be what matter. So who production. apologize. can't need lot to all those They guys, as talk a I they are designs There's well. big do about of we're But guys other guys get to on the fixated programs the will to me, contribute.

Tore Svanberg

or fair. think China mentioned That's in if your shipments starting China orders coming I China, in the don't to you're quarter was know see already In in this actually March for that part remarks is in of seeing to that one some you're the that's you there prepared relation relation growing. back improvement quarter? I to

John R. Croteau

was the time since I developing of ago. right? of middle the this We're and in there on kind two it's Well, late, too has been over November, weeks

production all even back, which figure front-haul, we back-haul, hell in of things So scrambling space state anticipated, across pull out much broken do obviously, a whatever the came door to anticipated. try PON, we than make four you Data loose. than this we'll Center, on the off need quicker, I'll to anybody quicker little laser of material now baskets. can obvious, we turned scale is visibility or a has But impact quarter, the push how that. weeks. But In than the and six out fiber We're more really

full-on So the for it's March quarter.

it's about where give not of China here. they like the kind come Thanksgiving cycles is re-staff home much quarter difference of the China. over I back. would think They is is middle The it's Chinese workforce And half production Year. it to in and Thanksgiving, the New the retrain, sitting the of in only so everybody caution everybody March I at goes really does disruptive in more right

the get how that time that be know and mode. March across is traditionally, board comes almost recovery, I'd I everything think back can New but by Year, quarter Chinese isn't first past the surprised very can the say into soft. moderate full-on I So don't calendar if confidently much I

Tore Svanberg

Sounds good.

for Bob, the OpEx, question or variable to did up, Bob. is flat say that on up? be be to flat total clarification that last would would one OpEx OpEx on Just it question you

Robert McMullan

it's No, total OpEx.

Tore Svanberg

Great. Thank much. you very

John R. Croteau

welcome. You're

Operator

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

C. J. Muse

questions side. afternoon. Thank on a question. for taking you guess, good couple of I Yeah, Data the follow-up my Centers

are as First opportunities impact then, on for them off, constraints that's supply bit you a can term, are you big them? you comfortable highlighted players, longer whether talk had positioning? and competitive can the you've about the scale adequately tremendous near-term how that And growth getting thinking for there cloud any Thank your you.

John R. Croteau

Yeah.

in any their seen terms competitive material to relative supply the upside position, we of impact. It's forecasts. to So haven't the been inability

we customers forecasts It's if customer had would our forecast that's would absence commitments So accurate had to have the forecasts, from have had the problem. and suppliers, into to they us. coming we of

who want understand at they're So have us. We're it, that's They To suppliers Apple back-end. capacity situation both the products simplify thing competing you exactly requests is last people caused. iPhone. for when same the Skyworks, to surging instance, from time front-end with is what the with a they're not manufacture it's exactly upside obviously iPhone surprised. And happened like RF production. what on for and But do

about So a quarter pushing, think it's that any part analog there's to impact with short-term a issue. We're our I like portfolio. just not positioning within of talking the year material don't

Center. In see our terms volumes guys, from Data that what our clearly heritage products the of they our comfort with the the to inside of fact they chain, supply require technology, a supplying come similar the cloud

It's we same And such lasers So frankly, now X.X-gig on We're Data running that supply our industry. entire right XX-gig a month. could that the you look run lasers, million product and the there if double extension our back million to X from and within we'll lasers units we're XX-gig and months. lines. be X at Center ramping a process the that

work technology photonics supply embedded of operational service improvement, nature from be Now to of there's of yield done. they And the the in lot a a you PON lot look a we've can the supplying PON haven't at design manufacture have, and the I the the that L-PICs to at of same them, team, the million able lot of talking just opportunity. but historically. be frankly, inside supply the that same can an are chain Data unit to There's is analog When that you products about the anybody. look silicon traditionally. been that the lasers of execution, line, with heard the partners same where vendors, The magnitude same scale. to they XX market we wafers product was Centers

a for analog transceivers take want ability it's And to speed and scale higher the is but support our millions supply of millions capacity then, solutions of semiconductor model. of yes, they our So, to components those higher the component, on supply performance the all to chain the and tens cake the icing units people of fits that quite is unique.

what's but industry going a have, and never of like sponsored I've cloud by we exactly on. the situation quality that's leaders we've the customers So customers seen where been

C. J. Muse

you. Thank helpful. Very

John R. Croteau

welcome. You're

Operator

you. Thank

question with Raymond Caso Our line next comes of Chris in the James.

Chris Caso

wondered calculations, talk if about I the What free is $XX down Yes. million you looked about that or guess, balance like Hi. quarter? flow by about talk the it I could flow. that? if I'm my was cash in not number you came cash so. cash correct. sure Could

Robert McMullan

Yes, and is cash between we where the what the balance Chris. the acquisitions. And In that completed company in out. remarks, my balance the came delta prepared small really I two that mentioned flow generated

Operator

with Thank today line comes you. for Richard question the from Craig-Hallum. And of our final Shannon

Richard Cutts Shannon

expected me questions for less Based Can the and the clear a for of or Multi-markets business you you questions, than on wasn't clarify Maybe previous as whether me taking for the the decline to guidance quarter. Hi, well. December around more my please? quarter. to guys. Thanks a the A&D combined Networks couple for it two-parter that

John R. Croteau

I think appreciably different. aren't the numbers percentage-wise

Richard Cutts Shannon

Okay.

Okay. close as well. getting I was pretty

sure to wasn't that make too wanted Just far off.

John R. Croteau

Yeah.

Richard Cutts Shannon

on a Data Center, here. maybe two-parter question Second

So catch ship the in you've quarter. shipping million talked expecting I about December that or units Did X to correctly, John? around

John R. Croteau

correct. that's lasers, CWDM

Richard Cutts Shannon

CWDM lasers? Just

John R. Croteau

just for CWDM. That the number was – was

addition, number CWDM for CW output. that was In but we PSM, LAN-WDM, and just PON, shipped

Richard Cutts Shannon

Okay.

you is traditional to can or And more one guy? the For the primarily transceiver clarify that customer? CWDM of whether output, cloud it's one guys

John R. Croteau

combination a it's So of a bunch.

specific Some demand. some cloud traditional,

Richard Cutts Shannon

just – mentioned that's full a follow-up, mentioned CWDMX, thereof? being my you Okay. about I I think think light or Perfect. whether combination the you And quick last or a spec can you few seconds ago clarify version primarily

John R. Croteau

I believe it's the full spec.

Robert McMullan

is. It

Richard Cutts Shannon

Okay.

John R. Croteau

yeah, light, to We want also respond, to I the ship but it's that but take far more yes. time complex

Richard Cutts Shannon

that's more Thanks a than lot, think John. I helpful.

John R. Croteau

Great.

You're welcome.

Operator

question-and-answer session like to that And the concludes over for I'd you. turn any today. our for floor closing back our hosts Thank to comments.

John R. Croteau

good. Very

now including Francisco, would and December call. New TMT and in year-end, today's D. Technology I these will call, on of December be remarks. number Conference So conferences. of representative Investor on before Boston. you disconnect Summit to between you December like a closing that Cybersecurity at to Cowen's and contact New meeting A. Barclays arrange Conference out in now X December today's us York sales your Forum may finally, Davidson Optical one That X the San the in concludes Raymond XX Global want we the Please or upcoming XX if in York, Operator, events attending on a Laser Networking email at ir@macom.com James mention on

Operator

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

MACOM Technology Solutions (MTSI) 14 Nov 172017 Q4 Earnings call transcript