MTSI - Earnings call transcript Q4 2020 | MACOM Technology Solutions Holdings, Inc.

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Operator

Good afternoon and welcome to MACOM's Fourth Fiscal Quarter 2020 Conference Call. This conference call is being recorded today, Thursday, November 5, 2020. At this time, all participants are in a listen only mode. I will now turn the call to Mr. Steve Ferranti MACOM's Vice President of Strategic Initiatives and Investor Relations. Mr. ahead. go please Ferranti,

Steve Ferranti

defined statements, Good earnings welcome like conference uncertainties today. our Private contain forward differ everyone the the Safe Litigation Shannon. to materially fiscal results may Reform to MACOM's quarter that forward-looking will today XXXX Act call. discussion from certain looking as are Harbor afternoon, contained you, subject to and fourth discussed statements remind risks in and which Actual those Thank in I Securities for of would XXXX.

non-GAAP detailed discussion result certain SEC. of will more release are filings company's Daly, refer to of was For call results uncertainties the discussion the President the that that, in today. to adjusted which risks X-K, call non-GAAP CEO adjusted could and Management Form with with turn of in we press this include and the filed SEC Steve and statements I'll With financial during those information. provided GAAP differences, also of the reconciliation MACOM's A related over to MACOM.

Steve Daly

and review the happy Jack our good will and take with financial today's provide first earnings call be will guidance then some results quarter Financial that, And is for questions. company of XXXX. for to more Our update. will fiscal After provide a in-depth begin you year will afternoon. Jack quarter Officer, When I we fourth Kober, Thank full-year general the I finished, revenue Chief and FY 'XX. of

possible. with the fiscal in generated operating million EPS share. acknowledge our the per free - who our and highlights, was of the along and This our a The technologies million associated is year-over-year serviceable RF, and with Jack of MACOM which gross industrial market focused $XXX.X start factor $X the end-markets of my establish employees supplier and three progress customer entire and billion. including market quarters. will I, for maximize and XXXX We financials. EPS the we eight, I'll leading like in analog on growth, review, multiple as or are us center, growth. and secular core fourth Team points approximately To and results our supported improving basis improved our defense that further amazing Lightwave, remain these share, associated $X.XX I performance I estimate are with year revenue XX trends margin, our and opportunities over significant with work that manufacturing be these telecommunications, working X% of was highest adjusted diluted goal grew to Before would income a that was quarter make XXX Management our It we financial contributions cash is pleased had available best-in-class $XXX provide flow. fiscal for note today, high-speed SAM by Revenue solutions. to quality. engagements, data

that more New market. to versus and competitiveness product introductions our performance and part see as fiscal innovative of our fiscal am ability support of number am execution here, than the an pleased progress the the I have fast our uniqueness products products of strategy, 'XX continues be I engine, I as our will products to Further, meaningful our year are I've introduce example, more the in 'XX. and are a based focused on in pleased teams In improve. stated future to past, growth time pace. on we faster doubled in at new and engineering growth our year

note offers Above of and all top a seek healthy environment I'll which COVID our like daily to priorities. would I a program our are any month voluntary some year, safe results for fiscal work work Easy test in to employees. and working sites. safe site new help our a our COVID-XX start on we access manufacturing we employee else, environment. As share fast largest maintain to screening our support at third of we

is this efficiency effort underpinning products, maintaining to and Our improving continue maximizing improve discipline. strategies, R&D sales our differentiated to our developing profitability. priority of factory margin optimizing first yields, Strategies the OpEx high utilization investments, include and

than margin is do that pleased better. are even confident We we and our we XX%, operating currently can greater are

Lightwave we and fraction is with come product to across we and MACOM will haul, we the mid to of and present in optical XG well next the in want RF, as high-speed Today, XG expand systems. in content the metro to long Second, utilizing our Solutions. over delivering haul, presence front systems a as analog, network potential, performing our some Today best products applications market these believe six are only months. XX haul of our for antenna

our use high-speed end into will and to analog markets. we Third, capabilities our target expand connectivity design deeper

closely includes XXXG XXXG technology cloud effort service supporting emerging our applications their critical XXXG this working strategy next providers are or with to ensure data alignment aligned needs. roadmaps or PON. generation is Roadmap disruptive future working in future growth worldwide Included current Our on such with systems, is as generation center whether architectures.

leveraging will build Michigan on Ann Our Lowell, our are strength. this manufacturing we is is analog growth. optical our Arbor, industrial end critical of and and This design upon high-speed compelling, foundries. capability the market and defense capability for and long-term Fourth, wafer Massachusetts, focused we

to differentiation, process technologies on supports expect technology telecom announcements priority detectors revamped to fab best our standard fab, and and some profitable with drive in our each that which Investing unique make for may highly center our growth. fiscal and exciting APD roadmaps ultimately our initiatives we is class make will around throughout set 'XX. in our products laser new and market process the is in share for have enables We to infrastructure lasers newest photo data fifth, systems. - that take believe And the We and products performance. and XG

collaborative organizations technology and roadmaps in detailed product win our positioning way We sales refreshed customers one to a share. portfolio, has strategies. and now a see with our market to is broad exciting have teams and It engineering of each market working engineers

one Let of in supplier two Historically, leading our improving X.XG supplied products a emerging volume Today, production, pawn market. we me of is have in MACOM position and drivers. GPON lasers. PON example PON the XXG laser lasers, highlight

and higher emerges lasers, has will PON expect XXG benefit to the work power PON and and and up, drivers, across up PON operate generation MACOM. of photo globally deployment potential high products we This home transimpedance five we detectors. trend Europe, accelerate As ramps four families, networks from low to systems, are namely the speeds. product Asia, deployed laser trend amplifiers the to the the next systems U.S. at and believe across because provide

was XX% market center was million, Data while million, Our and as QX had follows. $XX.X was sequential industrial and our defense growth revenue center telecom Data end $XX.X million. of was by $XX.X was year are business exceptional near declined pleased and by our with 'XX record and to had We start defense industrial backlog. flat an bookings, and fiscal X%. essentially telecom a we year in

ratio book-to-bill was X.X. QX Our approximately

COVID-XX. across by about our We chain at I'll in bookings supply to time by However, book-to-bill exceptional X. customer I&D to periods long lead the disruptions 'XX. had X.X orders, augmented due year by underlying full times was for driven our of also demand FYI healthy note concerns and I will markets, [indiscernible] end note driven

with expanded Highlighting customers, we growth backlog the October characterize market is churns shipping with certain and long-term We new and do share canceled the approximately total I restrictions customers. business in would was remain revenue of expect QX U.S. improving channel We from largest approximately the compliant our the orders lost track order demand Our from new QX, environment see August. this impact and of at and expanded quarter. lost revenue. announced fourth revenues. year-over-year in estimate restrictions to to XX% million when of in our other to customer $XX gains export compared forecasts as offset products inventory We

turning Now, the to markets.

domestic end-market demand for data center international strong cloud deployments. center data Our driven was and revenue both by

I'll sell analog analog data that supporting high-performance our Asia-based XXG XXXG center data note XXXG analog XXXG we both center by is international products. XXXG our growth and where Our and are this driven products products and expansion, growth. emerging

demand extent next round the near-term demand GPON before our XG will the We bids XG temporarily market again, products by XG primarily telecom believe driven for slow a released. when products. Our accelerate lesser of to products and it to is was begins

intact to improved as the grow. We worldwide expect rates impact. due remains for also near-term opportunity will delays global of COVID-XX deployments to XG business demand and Huawei higher XG in continue secular data at connectivity growth and the Nevertheless,

testing defense weakness Our measurement revenue industrial general as with and as we expected performed and well as avionics. end-market

six Defense U.S. a growth trends the strengthening in will have of are variety backlog. we teams tremendous by we coming RF of opportunity which programs, Notably, a quarters, However, negative our demand has be engineering some tremendous the Each our power growth in business. already from with offset of anticipate potential.

efforts bipolar Our share amplifier product and across XG carbide OEMs the with portfolio compelling participating in partnering our legacy Two, with - taking products. silicon the opportunity. One, new GaN business. legacy defense major in power market include: MACOM four, pure expanding industrial markets. Three, And

two our a launched of remember, products watt, products, XX X.X As Since we XX carbide to expanded then, kilowatts. general last XX XXX watt carbide GaN quarter. total may flagship you portfolio pure purpose and five we including GaN pure watt, watt, have

in truly unique and represents a We it executing We multi-billion highest long-term with the perspective carbide ever, certain stand with achieves ideal XX a additional strategy. our summary, technology power applications. grow our power defense is significantly In months Our and strengthening of pure over for levels, MACOM's X.X product on dollar front industry to maintain it making kilowatt high-performance next product leading we SAM portfolio plan products. portfolio. a

pace excited we with the achieving. are of are that innovation We

can Jack financial now we and detailed our share improve more months continue review our years the of and market ahead. a confident are provide in results. We take financials to will

Jack Kober

solid fiscal improvement from The Thank up Revenue revenue was by QX quarter of period center Fiscal sequential performance. another of the Steve. positive flow. for and million We fourth XXXX cash the in primarily in and data posted revenue, was in driven you, improvements financial earnings, sequential market. margins, was X% QX. trends $XXX.X

international domestic XXXX, XX% improvement in And Adjusted XX.X% and full a million up basis, from geographic an was of approximately support operational domestic gross that X% from QX On the customers. initiatives we focused was many from gross points on fiscal and From sequentially. for million, fiscal revenue XX% was Adjusted million year $XXX basis of continuous margin was XX year remain XX% international. revenue. fiscal XXXX. will profit $XX believe QX or as well we R&D the initiatives in gross manufacturing, $XX.X management was fiscal perspective, of in fiscal was XX% certain XXXX, for For inventory. fiscal our revenue to $XXX customers XXXX. forward. margin million due include of supply margins million points operating of timing XXXX of expense of Total Operating up going our chain, continued to efficiency expenses gross year as anticipated, basis XX.X% was expenses. improvements SG&A fiscal the million, adjusted $X was were other $XX.X we and from and approximately the Adjusted XX%, These expense XXX of improving $XX.X up as expense R&D primarily million. sequentially, operations, consisting up

continue closely. operating We manage to our expenses

to initiatives. have corporate for and expense management order our growth focus development savings, instilled new create support product which We helps on ongoing the opportunities wide in

to Looking levels. QX ahead, expenses we modestly expect from increase operating

operating managing XX.X% past, $XX.X balance our fiscal was As Adjusted while continue up from to in $XX.X in noted we QX fiscal XX.X% income investments will sequentially in QX Adjusted was from million, opportunities for million fiscal QX. fiscal in carefully margin up new operating in discretionary QX. spending. the product

to was compared operating million, adjusted For XXXX. XXXX, fiscal in income $XX.X year fiscal $XX million

stable fiscal top for continued Depreciation and expect combination provide line QX $X.X was XXXX. the a and leverage to margins over of improving We million was course operating operating adjusted gross EBITDA fiscal expenses of growth, million. $XX.X expense

was of XXXX, XXXX, For improvement more QX XX adjusted last XXX%. of expense $XX.X XXXX. QX floating interest rate our driven fiscal investments. our reduction from a fiscal months rates fiscal decline adjusted than on by in $XXX,XXX interest net million, higher as was EBITDA primarily EBITDA approximately $XXX.X on our was Fiscal loan LIBOR year-over-year million compared to of and short-term down income The million, $X.X term approximately the

ahead, net these Looking at interest we remain to roughly expect levels. expense

QX million. X% rate $X.X approximately tax in and in continued income fiscal an resulted at expensive adjusted Our

in of fiscal We expect reduce in fiscal tax we QX, fully our cents compared share of expect earnings have diluted Adjusted adjusted tax net relatively in QX rate million $XX.X to QX. a $XX.X utilizing per earnings fiscal to fiscal share QX for $X.XX payments. low remainder shares, to compared XX.X per as X% cash Fiscal continue was million to in income income share the $X.XX adjusted was XXXX, of adjusted fiscal million, to QX. to cents count

EPS XXXX, income year million cents as adjusted fiscal in a million was and $XX.X fiscal $X.XX net was loss to For of XXXX. a loss net and $X.XX compared $XX.X adjusted of

Now, $XX.X moving helped exceptional Fiscal income on strong accounts million. items. QX strong to operating cash was sheet to enable was flow and cash cash receivable quarter flow. balance the generation for and operations for flow in collections from QX Improvements cash quarter. an

the are States During received receipts to Capital of nature receipts tax cash to in expected associated expected QX, for with United future. totaled QX. and are million the payments return are - are in million one not future cash considered one considered nature receivables. recur time $X.X and recur fiscal we $XX These time not prior approximately expenditures years' in in

For compared in fourth to million year $XX.X cash fiscal million fiscal at million quarter. fiscal $XX XXXX, XXXX. CapEx flow as for $XX.X Free came was in the

capital flow XXXX, to was tax continue and operational year of numerous improvements feel help working cash well in year-over-year We XXXX. as $XX.X improvements, ongoing fiscal improvement generated million cash will made as to cash one-time I positive driven This improvement forward. fiscal $XXX.X initiatives earlier. For the year free million by versus collection noted prior the business, we we've flow negative cash structural the of drive going flow the in flow financial receivable free

QX. in million Our $XX.X down million receivable from balance was QX $XX.X accounts

outstanding As sales days. a were day XX result,

As I processes manage operational planning linearity production our SIOP shipment the business sales, our noted inventory the improvements the during including and allowed us improvements These or we've past, many better made within control and quarter. operations in process. have to

generation since million fiscal the at drive During during of improved quarter, able in to inventory we the million quarter fourth lower QX, quarter. which end, Inventories earlier another helped is and down turns investment the that our cash DSO turns area short QX. improve fiscal million million. to In see opportunities by remains in Cash $XXX XXXX, times more to an these Inventory highest sequentially. we total, we've fourth of cash the forward. were metrics $XX.X our and and XXXX. investments which during achieved we ship $XXX fiscal term revenue further X.X going ongoing were Inventory the pleased for $X quarter, exceptional at the from were increased year emphasis, million, - quarter Management were for $XX equivalents up cash balances

bonds are XXXX. until reminder, comprised our sale. corporate a paper debt held as covenant has commercial As short-term in term minimal is are May principal $XXX its and million and light, classified of annual repayments of investments for and Long maturity

we addition, have of In leases. million finance $XX

fiscal in Our trailing XX-month EBITDA again increased QX.

concludes quarter, areas position, year of a fiscal another and the QX trailing the With improvement ratio cash our many we in the exit leverage increase across EBITDA, financial and and was in company. times. net solid operational in feel sequential We with around improvement XX-month a X.X XXXX of

with achieve more to continuously and the I'll Steve. XXXX do discussion there pleased over are course be business longer-term now the to back the objectives improve to for believe our recent and turn fiscal over progress of us to and We beyond. continues our

Steve Daly

on is I'll expected QX and year-over-year up approximately guidance, strong approximately to these cents, fully expected respectively. end diluted adjusted XX.X which Adjusted Jack. is data also per approximately In be growth margin XX% $X.XX to Thank sequentially, down is and be January million In are expects million, full the to center industrial QX, XX%. XX% range the to year-over-year of range telecom midpoint defense to at we center our to $XXX at $X.XX ending expect gross the and and the be a performance of expected X revenues to year comparison MACOM share note be between XXXX, revenue to $XXX and in telecom QX, million you, shares. XX% XX% and from earnings and XX%, we XX% data in in midpoint. two grow expect markets. be of approximately based

in the operator about questions. excited to multiple growth I take to any the like are of us. ask would now And We opportunities front

Operator

Harsh Instructions] from Piper of the And line [Operator Sandler. our coming Kumar question first with

Your line is open.

Harsh Kumar

guys, solid Congratulations. performance. Hey,

of set for that defense industrial on expect sustained impressive in turn of is good some and question is nature first sort think, or time - growth counting we you've grow Industrial numbers. for is or said I turning Steve, you to a to you XX% finally turn which here? I'm and if sequentially, do Just curious, should been what starting you. there, is happen up, the of that so in happening one

Steve Daly

for few I would into thanks I&D things happening going question. a the end there's say our market So, that QX. in

solid mobile first The The based U.S. are well into would improving, and radars as as products is is automotive uptick it radar of type of in - just radios, a our also sell and products airborne Defense we note very an products that ground being market selling business some we've by supported that's got well. our we're I backlog. as that for this market typically to

In a is industrial long-term think for to defense, our trend fiscal and very 'XX good of terms be going year. I the

done with half mostly going growth, ourselves in back winning up new job have business. fiscal for and a really the We 'XX setting some into mostly nice significant our

been in where of over a just do And we've is growing. our kind we four turning but that. to defense actually going largest business be silicon been be whether driven or to it's deliver we the is point start team It's the So years. hasn't unit our should This - Lightwave strategies market. on products end product going three carbide enter is growth with the asking I'll it market here, it to industry end market. and that technologies this it's the penetration growth driven, last to to And market a believe on there some see this just highlight their carbide of that struggled with really our pure whether again bringing market to you're

more the in our is tremendous comments we're this opportunity be I'll to targeting than a good up we a level really line do XX%, end fiscal there's we'd growth just so So our that continue. of that and 'XX market with to help this copy my will going growth, like will business that believe tremendously. think top I&D certainly year, fact

Harsh Kumar

say 'XX you company? be and growth, will mean for that, XX% Steve, that my you just for overall industrial when the is fiscal follow-up, you clarification, the a this mean do Hey, for you business or did mean did a

Steve Daly

was growth. I year-over-year meaning Yes, company

Harsh Kumar

situation Okay. December few and fluctuation what and Asia, haul for feel for channel timeframe, optical parts couple of particularly long around how a curious in the inventory, up, some Steve, for follow in And in sort my I to create channel a seeing in about you're was optical years, business. in starts then your particularly data historically, you - center there? of the adjust

Steve Daly

have things - of that we're year seen you've in inventory think quite healthy. channel is terms going don't past, those I actually this same issues to in our the

really, spark which for will new specifically a will waiting bit there as slowdown it's the a new but related, so We I we're demand. channel think my we not regarding round remarks XG bit let's commented in think a a come of front tenders of is see to related. say, it's inventory prepared out there, I slowdown, haul of

to happy think been We're that, he we record pretty inventories since about are channel MACOM. as have commented not that certainly down. pointed turns We our our of positions, our here, XXXX. comfortable front So, very Jack out inside inventory are to with coming turn only want reasonable manage on is the inventories XG their their to specifically of modules. fast customers only our a but delivery to also hall demanding when in begins, products build where spot, react when they not

Operator

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

open. is line Your

Tore Svanberg

parts architecture? XXG strong to And from two expect the you of are Or you're really adding that said Tore five? the you Is quarter. introducing new earnest PON, more in talked Steve, about Congratulations result the would basically you gain that I share? when products some Yes, material? here. content? you Svanberg on to do XXG believe just become

Steve Daly

that as is data next EPON. is XGS there's highlighted, we've historically, X.XG X.X as generation system and we're PON ways, three basically I and XG-PON, has serviced newer which asymmetrical PON, that - then so, systems really versions different and then XXG the are interested which XXG which rates, emerging, both Tore, in, is

to So really, support year, we see these, and half. for each the - and we've year been past a products of developing

it's down terminal and signals terms, level these that the at are it's them the systems In essentially are them recognizing and content, turning so new really into fiber. taking optical - pushing electrical

at with very is this an are and know, cost working to for, these turnkey to give you area customers very solutions. looking implement easy where them So, customers solutions, effective, we're good

our so to maximize is to really here try content. And approach the

market on bit more - the TIAs the APDs, on - good in add that. We that's then or bringing in shipped certainly them. wavelengths is caveat before And not a something a brand little So with when think pretty this you the it the spot, we've emerging. comments into are my detectors, will I content. lasers top new of laser difficult, so that, they're photo we're content different

the XX of levels the units user years, volumes, between the and and in million of the about over year. people to premise, different in million a terms and X million peak XX be next years XX the range XX volumes, at months, could which the we that out are million we think In maybe think talk ONUs, of somewhere probably it's but

when So interesting. gets by multiply parts, quite that it you four

up able lined products. on. for market has this MACOM I'll we're the to what think in high that it's working is also deliver being timing we and good market, highlight very volume will tremendous a The our And news with reputation ramp. an So is, be emerging this

in strong direct engagement. And a very we to deliver the customer reputation - with and able market bringing so us into we're the access have being for

gen PON systems. about next the we're quite So, actually excited

Tore Svanberg

function flow when for normalized XX% My you operating base great? a in adjusting a about from have that forward up with number can that mind Thank us going - I a you around flows revenue? Even of quarter your to quarter, cash think revenue. but color, sort share was it Jack. you for follow cash know the be tax of of Steve. should as moves with is How that if return, that'd we all as on

Jack Kober

We good have what did have It one a quarter we Tore, our believe we we very here the to bounce be look that that of really a free - at cash cash trying one. is and look way at generation flow did our in around. to income, of net percentage in non-GAAP can could terms

with do year. was in a perspective. Some receivables been what to million, perspective. the this was little from here tax sheet, benefit do we've and from quarters on - depending balance another that has bit tremendous obviously might the terms what able Also about a inventory sheet be of that we an been item, which year better, balance from in past a And $XX

target forward, go is cash income. try we free our non-GAAP really as to to essentially So, our net our flow and equal get

Operator

Barclays. line from coming Tom O'Malley question next our from And of the

Your line is open.

Tom O'Malley

a product certain strength you that it's particularly that a talk type? taking Good quarter. Clearly, or is you about than to center additional initially if in you the evening, data robust the saw really you set during in out My saw additional certain some about first strength where guys. that Can got for strength when you question. geography September really quarter, one Thanks quarter. in my

Steve Daly

Yes, certainly.

a strength PAMX XXXG actually we whether we XXXG our it's much the G - began products, ago, And initial announced we our pretty saw board with DRX, quarter shipments we CWDMX, across DSP. as actually, so with we

the also way, seeing were our an service. platforms in of driven to us contributing some also, data to side, the analog XXXG and that short - are in saw U.S. we the revenues on Most And demands of based new side. then it we And a XXG that platforms Asia revenues solutions, centers. those modest improved some data uptick our or contribute So increased but customers, began mostly demand center on from was growth. we - reach for from international

were that. we So happy about very

products growing a over an next the Our with made data not include growth have our targets - it's two very and interesting center I'll on moment generation products only our three It quarters. sort from the five has we the take sequential center set of area lasers. can the the that tremendous that tell on next been is we've to data a explain. market development for our I - generation areas MACOM. maybe on side, for but progress years technology. analog you supporting And next will area And to also laser

with. out platform-based overall FP design the that haul, laser haul manufacturable, and robustness As everybody that knows, been laser, would front about on team first front the while which And reliability product the entire we're developed. really the the this, of be so was be a platform. is work - was our our more laser we doing And announced it and targeting laser generation two really XG ago that the quarters it laser XXG we we next design. that XXG which really first backstory performance had door, FP product would improved that actually The have re-engineering our flagship

Now why validated is that to it XXG our part towards important because DFB lasers. approach move a

CIOE, so announcements, back began demonstrated whole platform a seen XXG family of we to our have And you we lasers. at one And of introduce as at may September, in our DFB time. interesting here data to customers platform at scalable. not customers to the developed, same our What's started center is the we've we that but from also, XG interest gain is only

scheme. that's of So networks, modulation each rolling a the different as operators you is out start to these at the one using certainly XG networks look

if use Some MWDMXX, CWDMX, Korea, in some use example. DWDMXX you're for or

all is different to means support that wavelengths lot be created what to so that a need there's of And XG.

to some a work with the process have do our is sampling same of these opportunity, we customers the that starting can different wavelengths of platform and capture wavelength see we center. the we so scalable same through specifically to the our in these some are data address have has qualification that all which and It's you CWDMX but been the the done, And also wavelengths in initial allows us interesting did, to XG most so the of what's the working wavelengths, device.

just And more so talking call really product. the to allow have will job, platform for into doing, done work it re-enter I is believe has together really us be compelling the data say to and not a that putting next but which our we only that here center to the team a spring, we are XG, conference but we're on scalable, very the that we'll about phenomenal finish excited with also

Tom O'Malley

your along I'm a My that's one really guys at is end touched for the you're really revenue as gross But into color. defense, couple past growth, Jack. from traditionally the rep, helpful guiding 'XX. also these a expansion well. industrial kind growth haven't you levels And And margins when you've margin nice here. a looking And you've how to you segments. as gross of margin incremental looking other revenue Can December your quarter-over-quarter sequential seen you're December, not little of as the the basis, over really is you're next gross of seen not gross that that more some Great, with seeing pieces since much than in have you're favor? you of which improvement to margin. two quarters, walk in but going that through kind are lower getting seeing us margin,

Jack Kober

that, for Sure. Thanks Tom.

improvement expansion a year margin of that that into things and play, lot we've December a the place been terms past monitor some the going quarter, operational reduce number we've seen over improving to our of to that talked really that gross got into has come variances. about our in there's So throughout been of organization place of put that that have We've efficiencies we a lot and the of that processes margins. the to scrap taking in been contributing have

improve longer those get higher that margins that those things any of as we a I us some allowed to had, a we those high there's different few quarter. I were of upon So, our the terms that. want exceed in is margin happening the I&D the throughout that are revenue going those into don't know you once that on this, of years, eventually it's the know I the goal levels, read of Steve, if which you've December organization in had driving we've look - really XXs, driving we And number things on that looking our wouldn't that got margins. And term, organization to the to to back combination far got into that improvements? to the we and, in going back have a mix, those. margin going too higher across at improvement gross are comments get further touched

Steve Daly

And are bar part, inside of in raising we that class the parts the a on of as out. I Well, done I'll think make also job, a improvements, which that's couple engineering, pointed our the the comments, just I are phenomenal here a just team you people really X.X overall has add really one of kilowatt is notice just starting to performance. highlighted best and really I'll device.

products so not levels. work with companies And at there's such that many high-power can

past that, XG bar And non-commodity we've that performance high our add year walk a in raise and the of and that around creates you'll after you sorts see strong front pricing, ultimately, lot defense when the very our all by business to put on that. A high-end this certainly so to high-end and of like are of drives to And products, these in it just a OEM, so strategic opportunities the of is very type interest the I'll to come go start things product products. more and that way, doing. you're the regarding more table, part had haul you applications. And very plan and into that

sorts speed, devices, power You're are These CDRS, management, all dual capabilities. diagnostics built-in testing fairly high of extremely very complex that points. strong talking devices price about sophisticated have

been to to fair have we job so a that and a and will a add But some prices. really our work to to that are gross the and around opportunities recognize also critical look to can mimic a demand they've that higher strategies go that, with also team develop the little also certainly business. And And engineering taking bit doing think margin. have is expand of contribute. the the way testament some of and come chips legacy on we do there it to pricing at is better and sales our then diode that that the teams I'll

because above running the And design that have can foundries, using We are best points. it you foundries right on products proprietary about becomes two processes, in direction. get more in party third once we margin, delighted that, do class can to it's that which or operation do. rely which talent with high moving we gross Certainly XX%, also to either an have you efficient do, price we command very

on are there's And as I do there to sales back very coming the my is margin products to generally to So, - lasers. production. opportunities for grow these of expansion, These that gross volume, high to tremendous certainly sort commentary [indiscernible] in start so margin gross are come think I'll the just on and opportunities side.

Operator

Ackerman coming Our question Karl line next from with the Cowen. of

open. is line Your

Karl Ackerman

gentlemen. should about think one the how throughout you. on the XXXX? I fiscal basis abates questions, follow the And $XX linear Huawei Two afternoon, million have Jack, Good if - How for a up. I headwind may. a we from

Jack Kober

Thanks for that.

you probably earlier. terms million going be play throughout to to to going a it's the think the lumpy may that's $XX to out, too And include would how much It's wouldn't again, past that Steve? linear once much of back entity on but not that year. the of Huawei - it's some represent I that limited Steve that - that were list. as that Huawei, In year. others majority referred look over just pretty of

Steve Daly

add faster, the thing is come of and products and introducing theme, outgrow, more to only new I'll to more plan that which loss I'll is, back of market that our revenue and to we $XX million The by share. underlying winning

obviously so driven So have to zero. our those to customers those all year good kind that. we push today, a numbers right been we QX of The loss into for revenues through baked of have think are of plan this

companies. we're So not expecting those any upside from any of

are market the may comes our that faster. share ability So organizations up more engaging really we're for by six engineering the products door, them, I so there. focus the just would million, where really doing the I opportunity that of But a and the customers, not maybe I it an of there's pushing to $XX there And that able what to just to super OEMs in and loss other extent the products on is some job our Are way, competitive? on out? that support through back will be and real growth happens, coming instances focus MACOM the really grow you new some pick so understand it. the And products the and things really going make are story new to products, think we're would why out to launch

Karl Ackerman

color. Sure, you intersect complete that's receive while you PAMX need still design cycle that. revenue a DSP that mentioned to Steve, previously your you until helpful design, XXXG from

your Thanks. your DSP the to your of there about think spoke also a now roadmap PAMX perhaps been your that capabilities pushed how about and your Is value way to base? competitive capabilities up cadence intersect peers substantiate should kind long-term customer and help that One a which of could that increase design market? bit, demand has think tonight out of just you bring I

Steve Daly

Sure. question. I'm asked that glad you

few on a So, I clear be points. want to

not Jack that about we over. a strategy announced and ago took when year investing So I We DSP are in new designs.

them the would - then to communicated market and bring in what them was bring if in so And we finish some were projects be have XXXG are direct have PAMX on do competitive. flight, - part. of conclusion we them that relations what to that instance over that and we and bring production where with we OEM major them with they an have a DSP, would we where We we a

will the other part some targeting have market be call capture platform we gigs XG, And thing XXXG I'll it have generally the should market second. another when will help parts, them that And there's to use XXXG we of drive to prism, is, and are share. that highlight it haul volume we These taking XXXG per we have try will actually by XX for essentially way, bring applications. the breakout, DRX is DRX sister to will MACOM. We be some mid today, for we at which some running the then, the

So I just new be that silicon. develop not to continue want to we're going to clear

apply have. in very and technology We and And successful. going we'll we are productize we be IP around PAMX let's derivative design around other create do the what to the the universe, it areas will resources those can in products say, to where with

actually do that. we're so quite And excited to

Operator

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

open. is line Your

C.J. Muse

also you of assumptions greater where basis, and magnitude of the within terms 'XX. question, side, curious evening. wanting making Steve, recovery? the you're Good on see about XX% on to first growth telecom question. the on if Yes. you and guess for XG could what my fiscal than talked you of a in I'm taking that, then shed Thank more in segment you that kind I light just some grow timing

Steve Daly

on market will we And that XX And in sometime very think I most number - comes center three really think are primarily are that grow well, think late market accelerate I&D of our platforms We we have to into start kick highlighted, start the cautiously when some one. it we the that's half Because online for when likely back to QX back additional all first end now, year, early the will QX because of or this of reasonably data the us. be will optical way, hope some I the right when still does are the other markets XG into are markets of that being think with of move. the end and in by are things of to some backlog parts half kicks strong or other quite that still that the optimistic and when the gear, side. of content primarily as doing new XG we gear. on And in strong.

C.J. Muse

suggesting, helpful. on 'XX, at back December I margin to could follow you up in maybe hit seeing XX% been Tommy's here kind the had externally the Very half not If question, that in internally quarter. of trying fiscal and we're gross least of

exit December an be thinking there level? than that rate now the benefit guess, is I mix we that higher quarter should And is should we be wise guess I thinking that a this that's So anything about? in

Steve Daly

and Jack few words say that we answer can should two in Maybe to then parts. try I'll help. a

margin much very gross Our mix. depends on

So forward the quarter. as go always uncertainty there is you through around mix

the what with said, say we in specificity of the can't We product we're or exactly we talked QX. line be With like improving. strength things doing. that our to about trends. QX that margins the We So, might like

enhancement down The yield as Our is team a we're has that actually our better with SIOP of well, out getting and fab. phenomenal efficiency costs job mentioned programs. operations driving done jack

up, line number of. would see all and rather things margins a than improvements short we you gross much that deliver give improved you fall these we you when So might

So, Jack, add maybe, you can to that.

Jack Kober

XX So, that of going is the guide is C.J., - that to number into that our midpoint back obviously, kind of going QX. at

'XX, - or that with - exit on notch - up mix that improvements of obviously sequential and depending the rate that fiscal some So we're that take two. year the a looking for, also would for

Operator

coming Our the Roy next line question from Benchmark. of Ruben with

Your line open. is

Ruben Roy

OpEx. much. Jack, just line very maybe down of questioning to on continue and move maybe Thanks the just could that we

us a of And you looking give of that of growth You in fiscal talked growth a type you taking idea spending about an you're to out And XX% you're 'XX, plus thinking about job. a lot the manage little mind? in of how initiatives expenses. towards with of great did context can your strategic bit the in guys

Jack Kober

with been disciplined, of at all our the our in we've go terms spending - trying - expenses. R&D balance, been mentioned, operating within that We've organization, that OpEx the Sure. section the very as investments of along R&D I've of throughout to looking and

- on forecasted expenses some based we've that of of progress We've year, that terms timing of of were quarter made. over through we've in the the past we R&D improvements it's been been a that the the those a here there'd fourth that rewarding an So, uptick, investments be those and in just gone very bit making. it's

from an sales that So got out try that marketing things within sure we tendency efficiently, that its little But operational R&D the having we to been expense - the items with Obviously, there of way through areas some make are of which But said the that to going that our perspective, thing bit and up. some dampened expenses have natural for things out point in supporting of more things restrictions a same some forward. are we're doing G&A, of is improvements, that to and continuous from looking things that, a in have of of those we've expenses those work operating there. help COVID we're we've of all do will doing by been and of same operating some there turn view. creep down terms some travel

more. hopefully, able we'll to be over So travel bit time, a

might throughout So some that year. expenses work our cause of operating those the creep way we to up as

not, been area investments. capital of perspective, only operating our other focused expense also our we've - on The some there's from an that

we million for year, the where came of at $XX we look you around year, CapEx. in If work fiscal 'XX,

prior were of way $XX excess in to year's, back we million. Going

and we've very returns. on spend sure that and all the making of we're investing we're throughout any the appropriate it the focused sure So been we're getting making doing prudently, business, organization in our dollars

Ruben Roy

ahead. go sorry, I'm

Steve Daly

may, - the comment, side. one make capital if make especially just just I'll I on

in we maximizing having the and the very making newer much equipment talked prepared So are as of and and about focused our it on on run fab the remarks, utilization we better more efficiently fab.

And for we're for talking the and on big us a because process range so as tens looking fab to talking planning our here because some - of employed. the an keep dollars, will equipment, spending, but million, nice it's of one scare millions our thing investments. about, this instilled year, operations quite the point it's we're this the such out well, in overall something we that investment with million make, team $X really piece CapEx in is certainly important reasonable in very around at, that to as at return in look which a capital test returns to our probably have discipline $X these year, line in buying about people, of at Jack capital equipment fabs. part not focused we've earmarked have our shouldn't as on we're and a fab, that or capital absolutely looked hundreds whether certainly of overall whether for of on the we well done changing is and And of his business units, So

Ruben Roy

- what content to we four the peak, Thanks, on. XX five Jack, and have of maybe commentary in mark? million you to X.XG Steve. very maybe Thanks, sort could the for worked I If or way about you what It's around additional even a detail. follow-up, Steve, know, there think had you of that a guys TAM opportunity all you products ask PON lot the the quick Is a the opportunity? level gig its was units market get GPON idea higher GPON XXX have units with parts at could Do XX forgot like? if million PON an the to to I opportunity box, XXX million look helpful.

Steve Daly

very level a very, high XXX in of year. a at million range While the

Ruben Roy

Okay.

Steve Daly

And optical which million that OLTs terminals ONUs assumes customer what call range are at line X they the or XX premise. and about the somewhere in of million maybe

designs. we and what we attractive our a the the this aiming we're right? the - so we very have number, is big but And have sounds little technology, working it relationships, market today, on have we or it's customer wheelhouse, So, share. And in like think no we're at. And it's

So way, something in winning with deal share. out really strong think in that's products here other market, by there - I'll market successful moving competitor market. plan we there's that And MACOM great it's And on this other on. it's one better a we and it's that be very can the U.S. point market, are a with very we been we

a are bit we're So we but still by lot work - slow making have we progress, to do, of bit.

Operator

coming line the final our Quinn Company. Needham Bolton question from & from And

Your line is now open.

Quinn Bolton

data center? a March, long a Thanks, taking was guidance giving you you of see the think you're you come gave of before and he think us for probably Just down my December industrial question. up data I recovery, that quarter any do the on Steve, How might XX%. but business assume, [indiscernible] sort center second quarter the of of kind digestion? digestion you - back temporary the bowed wanted that to I Do center gave for data - second fairly period that the wondering, actually about telecom to wondering, guys, but end telecom with pause? guidance fiscal for know just it's last? quarter, might thoughts and

Steve Daly

customers, should for these difficult good times our It's question And largest visibility, and a very the we the very for way, say, to manufacturing the quarter. the extends one certainly have products times answer. over and - manufacturer by typically, lead I

we market, we market the or certain say, even your think QX. before really where But will I in So about might make start QX, let's happen to to inventory. answer It's very be center assumptions what the we question. can't to or have data say QX, difficult

for And new the overall good a are, right I So revenue. up as market. of think that that in I to want new it's now. year sort answer picking said, to out, Asia. going customers of not With we It's line I be a question pointed

PAMX We our are ship starting to DSP.

we're due So there. to clearly, a - data there's of secular And we're increasing that that's enjoying. a tailwind demand seeing new And COVID. there's revenue color for an and

in layer to think class, I growth. good up setting we're on products including some back new are some So we our half lasers, of start for that 'XX, when we instances the now of some our the when calendar towards top that introduce products, best in some of ourselves XXXG of

Quinn Bolton

is Got follow-up lasers. the it. And question then on with second

need requirements For going DFB in it in but applications? that that the distances. and lasers These and most front Well, so allowing you script be really you new lasers I out, CWDMX to also are to they're need of to - more be come to fact, need those comments both would temperature And the clarify from better just there's your XG front mix of - they a going DFB some the to have I DFB say DFB of front haul have to lasers DFB also Because important. was that in higher haul, that. run performance. haul And lasers, MWDMXX. FP overall And you're going handle they both. lasers. the are wanted for They're lasers

wavelength is on there. it But so a this that laser platform And our successful the us we've of balance, market platform that up application, will and that we'll so, established very be XXG a doing more we're would allow for and be create particular there. the to I for important single FP work is the and work successful Remember say that more to us. the opens laser

Operator

time. this showing I would to call back at for Not closing like over the Daly any to remarks. now further Mr. turn questions Steve

Steve Daly

Thank you. in In our evening. closing, XXXX. employees like and thank the past to would their throughout I and good fiscal Thank quarter efforts for extraordinary and accomplishments you Jack

Operator

Ladies and for you Thank today. call participation. conclude our gentlemen, does that conference your

disconnect. now You may

MACOM Technology Solutions (MTSI) 8 Nov 202020 Q4 Earnings call transcript