MTSI - Earnings call transcript Q1 2021 | MACOM Technology Solutions Holdings, Inc.

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Operator

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. Ferranti, please go ahead.

Steve Ferranti

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

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

Steve Daly

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

continued tremendous employees. of of X.X by are Overall, our are financial business to our approximately ratio pleased improvements XX% work churns the results, our we was possible book which and revenue. dedicated X in made build our Our with the to total was

$XX.X to sequentially and QX at at center million, by and was and down was was down sequentially, $XX.X at defense industrial expected was included X% XX% data market $XX.X center Industrial up as XX% million. and telecom sequentially. million Our telecom generally and defense revenue end data

for our indicated book As our strengthened. positive by has products ratio, the demand to build

As to outs business our our center China's improve providers business was on are to increases. benefit our continue that resume will build a XG as forward, our steadily our will that that objectives. we begin enterprise to will believe well when fiscal meet to demand data we service begin start and we believe their and technical cloud telecom and look Telecom business IND financial carriers positive we QX and perform XXXX to plan

not as at recently chain, has portfolio suppliers than a product revenue include, utilization foundry XX% is to an impact profitability, this assembly external in product have Asia. improve win on growth, of partners, long Our strategies flow. seen at supply focusing believe and to our particularly and introductions do our increase the industry excellence share, temporary within ability higher causing customers. in to of year improving optimizing and ramping term our our new our goals operations year efficiency the year over cash The sales for market expanding engineering least semiconductor technology fiscal and to on drive normal expect to portions broad of demand. some well serve test this We and as We as our levels tightening growth,

product manufacture to our job our semiconductor ensure portfolio operations suppliers internally. a Our with key of an are team excellent portion does our We goals working met.

are process our technologies and differentiated foundries that compound us fact, in at facilities semiconductor we of Michigan competitive wafer product believe some portions provide portfolio. foundation our the These advantage. of In a broad manufacturer Massachusetts

profitable of infrastructure products enables and the differentiation, installing growth. ultimately compelling fabs. of drive in best of strategic plan each unique at supports which creation long-term highly semiconductor strategy Our development our technology, class includes This continuous that process can

collaborate frequency, Monday agreement to our part micron amplifiers. review, achieves ready or we silicon development Laboratory, must in the that microwave cooperative research the density. will States CRADA has This mimic MACOM technology. our exceptional with millimeter a into As ideal also and transfer production and very performance. On AFRL. with United And Research an This is as Massachusetts. process as Air production has semiconductor carbide technology power a a have leading critical AFRL announced strategic industry process Force's very process have high-performance is silicon GaN‐on high-power their process for concluded GaN‐on high carbide into we that example, wave, X.XX MACOM fab of entered ready known

process applications. target We products to this will unique that non-commodity develop use high performance

to capability defense, is mimic millimeter is existing test new gas the strategies. separate silicon our in And project. competitive benchmarking, and on us we this communications in carbide in MACOM satellite establishes expand product aerospace launch supporting and already industry opportunity GaN-on new proven a our customer actively wave this process. will growth customers and reports, first technology rapidly the in products XXXX. our to to best engagements, put, mimic the power analysis, enable be believe class complementary Based to on this a calendar RF to expect for additive growth to our Simply based MACOM demand Specifically, and is and SAM This industries. expected we effort for instrumentation offerings expanding.

in turning three end specifics QX. in to markets Now our more

and part US defense market industrial of a Our by from defense was variety programs. revenue strengthening end in demand driven

accounts, current and including additional on have products selling new appeal directly few custom and the channels, to potential which our past improving we into and all cross increased implemented will of Over growth, initiate strategies technologies standard customers. refocusing market, to developing sales the quarters, key our

year a term traction on market [ph] program a are growth handheld Based in given IND Longer pleased time in to US of for design markets. consists wins business measurement it the of signs end long of and But that As of we satellite term applications, long backlog potential tremendous safety Defense QX. test MACOM. defense we this business other XXXX. and and a over including applications, variety the early our this applications. industrial applications, radio reminder, as our view equipment end We public fiscal market cycles industrial will MACOM and programs, communication believe grow these in we in having see in strong course see remaining to take

the Our end will laser believe telecom their ICs, our and and modules business and in driven by and position carriers market softness XXXX to expect XG to expanding QX XG, weakness our emerging XG improve with in portfolio. We revenue deployments, anticipate throughout was begin a we a down QX. front telecom we have strong when analog we China begin high-performance remain

to as visibility growth continue China's have up or XG exact intact While XG grow. limited the current that opportunity activity the rates Chinese we at indications of still to after higher April timing New will March long-term remains as Nevertheless, for in start resumption tender connectivity deployments, improved Year. secular worldwide we the to in pick of will demand feel are data

coherent products, RF as performance XG optical and our We MACOM portions our DFB as current analog across only cable and in wireless antenna area XXG Avalanche further XXG we focus of driver mimics in a Outside telecom years. and of systems. switches, which products sub infrastructure pawn signal and to mixed to or the potential with portfolio FP and XG broadcast. MACOM revenue a present engineering well QX, components certain XG point fraction pawn TIAs and we and addressed on are for view highlight XG TV XXG with I in deployments future, long continue delivering performance, more expanding APDs in lasers, driver growth photodiodes the offer as Today, of markets RF hall our cross for key high performed we in network more global coming video in mid portfolio that is front for high that application. more systems, MACOM telecom ICs. products like discreet in in products this hall an well Metro of and expect the will is haul X.XG and anticipate analog including product

revenue end continue consume of center in quarters was our down data as following inventory QX of market multiple strong growth. Our revenue a period to customers sequential

SRX. performance to our data been both XXXG driven international meters High where the volume Example by analog that reach inside start kilometers. by XX I we update include to are by Performance that I'll we high These from typically XXXG and has are growth CWDMX center the data growth to based like center evaluating on Asia applications highest very solutions. I'll sell in center XXG future applications supportive center products. note applications products strategy. data customers our analog investors XXXG, be growth the of find products. supported applications emerging ranging target expect we our and XXXG generally expansion, our XXXG short MACOM analog noting five We and analog data would

and will believe five CWDMX For SRX volumes next grow over years. we the continue production to

Some higher XXXX will to a products. these service short be current Therefore, two today's and to industry applications times reports reach priority than three new volumes predict it is volumes. with

there applications working will To can these gain market emerging solutions, which believe note data support an combined in also are analog are share next that rates. is We opportunity now years. and CWDMX. when to participate grow XXXG five the it next XXXG over reach generation short on Further, we we together higher

performance high tremendous capability. analog design have We CDR

generating growth MACOM there potential However, areas center. other are in for are which data product the

I'll in some continue us as we leading have laser driver they customers TIA expertise to best with and will technology. in supplier work photonics. class seek a TIA develop or and advanced merchant And DSP to TIA and develop driver are driver customized with solutions, note First, to we silicon high-speed products. and

use XXG developing are products laser we a applications. in portfolio lasers broad PAMX DFB, of for including Second,

we addition, use to lasers own who In to their photonics. CW offer and medium customers wish high-power will silicon low

limited the for will first our into today data we photonic DRX technology Third, center, we where have leverage DRX exposure. and silicon XXXG

to launches center. the product for share, look ICs. photonic and continue inside to will applications new will Fourth, seek market ways gain initial be data we Our we

see the last, be lead which DSP, will our a copper will We years. to DRX to we is in existing use over production As MACOM. reach believe an customers XXXG new increase customer example, few targeting short of considering applications. continue very ramp our volumes cables which continue on And next we production for PAMX applications, opportunity very, might

pursue believe our our will opportunities with we our growth given around we program, portfolio and to provide of financial Prism gain the a design capability, will share have that detailed Jack market unique existing summary, technology opportunities new inside review DSP. center. more and from results. In tremendous now data Aside we

Jack Kober

our margin focus times, well We sequential to million $XXX.X of Total One The million, production, earnings were to logistics and there reduction, ended lease worldwide and in per forward. We margins sequentially, the opportunities of operating approximately Thank of and share. from fiscal primarily another QX. you, utilization, January management. sequential for strength quarter gross for consisting X, in efficiencies in XXXX financial footprint. initiatives $XX.X on XXXX, due expense as margins in us our was first SG&A The revenue first posting had These optimization cycle improvement include our expense revenue, improving by Revenue million. improvement was up quarter quarter sound performance Steve. center anticipated chain customers expense continuous our at QX. was our was fiscal us of industrial profit X% has defense will more $XX.X end XX% supported $X.X feel area fiscal our sequential improvement was office be data sequentially. or for a XX% underway than approximately have R&D we XXX the supply from margin and basis basis, was scrap million, declines of offset on move in and expenses expense geographic $XX.X of On telecom. revenue, continue of by Adjusted market XX.X% was up additional enhancements. domestic increased as our down that which of from ongoing $XX.X adjusted for QX companywide focus manufacturing MACOM. million of we Operating points and ongoing revenue million, gross gross as QX up sequentially in in adjusted improvement been around gross driven

continuously these drive ongoing footage, initiatives example looking of helps space Over These rent has that reduction innovative to that last facilities. in efficiency efforts improve quarters, of expense. in net result internal well have place. are ways the we savings our and leases are which of we have underutilized continued is square around facilities several we to needed. XX% beyond the also and exit in The offices, just a the consolidate This one many no for was longer were actions been implement sub

details ways will management and a our product growth operations would remain our and the focused manage I balance continue new R&D Our highly to to we carefully like discretionary the that spending operations spending, spending. long-term on in discretionary do administrative development our note opportunities. maintain to find of of with our perspective on to other teams investments and we

ahead fiscal Adjusted in $XX.X we expect QX to up QX Looking was in million levels. in operating margin modestly operating income to fiscal million increase from from QX fiscal operating from Adjusted QX, up expenses QX. was $XX.X XX.X% XX.X% sequentially QX. from

has been since excess than we XX% of adjusted more We of quarters are pleased operating revenue. have to margin XX note that recorded in

EBITDA, trailing million XX QX Fiscal at EBITDA net roughly of remainder fiscal months fiscal EBITDA $XXX as another adjusted line our QX XXXX. interest line which operating in combination was the $X.X was fiscal $XX leverage expect We quarter. We to approximately and compared adjusted and fourth came with of last expense expenses to top for in $X.X Depreciation million. in stable provide XXXX. continued of operating months million, increase QX was expense for the improving gross XX to million million over fiscal $XXX margins growth, posted adjusted

interest on rates, ahead, at this level. Looking interest depending to expense roughly net expect we adjusted remain

fiscal of and X% in approximately an with Our in our million. expense adjusted tax expectations was QX resulted $X.X income rate line in

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

comparable anticipate just as on flow cashless to run strong These back the and would our stock to flows income. of gains from sheet amount time do make the at The adjusted carbide Fiscal of $XX.X a liability November, non-GAAP $X.X on primarily GAAP decreases quarter. warrants. related to we QX net fair on the Directionally income income and of I&D items to flow. of metrics. December impact Fiscal higher and continue November The Based our and like at no we recorded held was I our were was X.XX to in XXX% our cash warrants investments losses historically remainder operating from operating balance over moving free balance warrants cash first the increases income. the were approximately historically inclusive or expenditures been we in non-GAAP impact forward, earlier. financial scheduled GAAP on cash warrants for as our cash Capital quarter adjusted as Partners. operations program Each our our accounting treatment their had cash exercise count. and that a value. quarterly Cash in of of flow totaled note Steve year expenditures carried to Summit statement improvements Now capital statement, issued on the sheet warrants our the value operations driven non-cash and in to reconciliation This We of we cash one non-GAAP fiscal items. for dated QX we flow of million a over during believe was fab time income. in diluted noted infrastructure IPO warrants, XXXX million was fiscal net of GaN-on-silicon QX our larger expire in XXXX. in of on shares as micron our the another substantially share speaking, XXX,XXX represented by below these the primarily go flow no transaction had flow the million, by from for quarter should $XX.X profit. operations our of

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

for result, Fiscal up we in And sequentially. QX day note exceptional balance that million days. accounts collections receivable quarter while around had a QX. I outstanding an $X XX As sales was were would our

over metrics. the million, and quarter industry in-line X.Xx for management has remains turns to emphasis improving DSO end, an with $XXX $XX Cash, the quarter metrics $X.X Inventories Inventory were down Our opportunities first further million up equivalents the going of area $XX fiscal another and million during short-term been were sequentially. see fiscal we million few at investments quarters improve were from ongoing and QX. at these forward. cash quarter. Inventory past first

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

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

in of we a EBITDA, increases summary, start. and financial With the MACOM these the in continue our We position the X.Xx. believe is like hardworking that all XX-month thank In quarter would net we to of drive to ratio cash trailing who around employees leverage improvements. a off exit operational help improvements fiscal the solid with XXXX year to in

fiscal continues continuously over business numerous to improve previously our and us I've longer-term I discussion believe achieve will do back now over noted to Steve. the the on be more XXXX we As occasions, turn to and the there for course to beyond. of objectives

Steve Daly

defense million, on be XX% industrial to center In Adjusted Jack. compared between and telecom a In normal to flat In XXXX to experience at any to grow and stand XX%. per unique $XXX be Thank for front down in our given of a in in million to in $X.XX summary, midpoint. QX SAM is markets and XX% periods and XX% of multibillion-dollar even range quarter, low to the XX%, around is revenue to growth expected periods of to MACOM expect shares. when industry. portfolio. be we based of $X.XX, which negative fully-diluted to technology with million expected data possibly X, and the share growth $XX.X is we QX, range approximately QX, we some be April earnings adjusted which margin expect will approximately high $XXX of year-over-year gross you, end be expects growth growth, the ending is in

a customers and establish will strategy our to profitable all is products, to maintain to long-term strategy a manage be our We we throughout on reasons, these diverse end executing our perspective of portfolio markets. For work business and cycles. business

We are can and improve and any like take years to ahead. to continue we to financials share our questions. now I confident the in operator would ask the market months take

Operator

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

Your line open. is

Harsh Kumar

Yes. guys. Hey

enhancements. First you weren't on you and chain execution. of congratulations. are Steve, And huge boy, kidding you all, operational when Tremendous focused said guys supply

there. move couple just a had questions. tremendous I So of

So, - revenues are end market defense industrial largest up is going starting and to your move. to

coming is OpEx down. Your

You some that? was but or estate mentioned other facilities, people consolidated some stuff in any there you that was type measures relative to done where operational real benefits

Steve Daly

and Harsh, for you thank morning, Good those comments.

So, no, call levels. nothing staffing particular regarding to out

in to throughout and hire continue the expect would year. In fact, hiring of we're we the mode to

we overall that from XX%. costs. focused Fiscal XXXX, to been though, down about point OpEx on have our correct, are to If XXXX, You very Fiscal we out our look came it at controlling

on some highlighted And very plans, project. we focused let's at at we We're are level, Fiscal And the detail. with level a time new investing our execute more that business. the is maybe same as programs our can the we're we our XXXX, to right CapEx say. our looking more on jack carbide I&D in of exited technologies comment also we As at feel efficient in able running GaN-on-silicon

Jack Kober

and morning, Steve, Thanks, Harsh. good

In both initiatives and have about that noted, we number expenses my talk that initiatives. R&D have did operating comprises prepared underway. SG&A. that But expenses, a remarks and we lease of As the have some items Steve beyond continue of do I numerous operating there's we office

probably seen and but We our something are also COVID we reduction past travel would focus levels, COVID we've we're where a that result is had operating costs reduce in be expenses possible. There unnecessary noted, sure but on we the front, as making a over mode some I'd the say that time. bit in the on that year mode of in emerge that from Steve noise of hiring once of but can the a headwind primarily that's the

Harsh Kumar

lasers and be opportunity my question enter new that to for you maybe is Steve, within question in And you. a that second available silicon investors your what then guys. up, for going we questions. then the lot half you're from done update So, the what well Understood, that? do timing And could my One how get size? A, calling photonics? is size in us follow a you I'll with And on is as then markets

Steve Daly

of difficult end Sure. all, are infrastructure, infrastructure, access, very center. infrastructure. laser And then overall also in think the because and the Well, including market markets we different it's size I backhaul three haul, to first even very front mobile, data

those So, a on SAM, overall, for large the will number of three include quite the vary in you what bit. terms markets, depending

for - we specific market development. would of on for really September, our first markets. demonstrated the actually same And in XG the would say I to if back the SAM progress be very to And each made we you So, will we that - CIOE timing we have applications, end by in extension, I'll regarding by a few those say you. about what apply it temperature logic XXG is silicon the size at haul important or and the on lasers tremendous to are in DFB or a include depends way of different where wavelengths I laser photonics, that almost And all, remember the The we words I that using hesitant some all And up dTemp are had why specifically, schemes. add the developed they this ranges, [ph]. including China a as different iTemp, you wavelengths front I'll different of modulation all wavelengths. MWDMXX at highlight that when schemes, get we is see eTemp, you for being standards. product infrastructure different in these worked CWDMX, dozens call different of and reason what variety the other operators operating modulation that demonstrated is literally

six summarize, lasers see laying terms stations. operators say if some look and how speaking, in haul we a we'll their depending them That down will year it's And through we very different the had those the over them we are or different of that a where of change. might on made that's when we in think XX there's million to in good I our fiber, news phase To now is, up. manufactured six that into XG say lasers that have matrix past very positive and very seriously that moving I complicated process. sampling get results We've demonstrations, feedback that to through at qualifications. phase application. we position very based time, good sort tell on right We now. since at are of modules, are of months. million I really in you more a think would then the as the So the the it number roughly generally eight modules September are would a you going And in that selection base modules went go XXXk customers those performance will of favorable start customers a product looking can overall, and on front we will have over XX just we lasers.

that very know of our the we half our we're take at that but are success year, half the year. we fiscal we recommend so keeping time back ourselves look our up modest for expectation, in these investors and only As recognize of I would qualifications that back tempering are expectations here, setting we

Regarding our silicon which launching means primarily to development. focused we on complete there the photonics, the is need work first products,

do we'll but to are the be getting We basically XXXG a will development believe close very on launching we this fiscal completing We focused be product not work. applications. year,

would fiscal in say your more our year, activity. regarding back you take should revenue fiscal that for half So of expectations that of I XXXX of the a models, contributions out it's

Operator

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

open. Your line is

Tom O'Malley

question morning, of fiscal really nice the Good around shape Congratulations results. the guys. the My on year. was just

I&D this strong seeing that's pretty You're double-digits. business growing now

to You you half that's target. you that. talked to the pretty get outgrow growth. moving and of on what seeing you you're expectations of that pieces this I'm those some seeing [ph] you from soft growth the If weakness internal the sure about keep color there that [ph] half the a that sure one telecom could side, Are R&D offsets? at easily. just kind around XX% double-digit kind range? about looking half are of Any But would second really you in expecting back back I'm datacom and talk in the gets into be helpful.

Steve Daly

thank you. Yes,

confident So, I&D we do expect very We're year. to our business to continue of that. be strong this fiscal

telecom are for be market. of lasers, telecom I of timing that hedging the the we can center some about base the that of and and position actually unknown the our that number stated talked deployment reasons earlier with regarding for in as expectations improving on of happening data in the China specifically, and our the tell that you are will being are sort We stations just built. I I are that what

So, when XX% conservative of sort look that's would a think of things at least revenue benefit. say turn on, taking and are we we'll half we we're why the second that growth. at saying I very

certainly might COVID be setting a the China We overlay, given there and success, fragile what like for dynamics uncertainty given is up, I are economy. but said, global ourselves

proceeding we're we caution exceed to half. hope with So the and everybody's expectations in second

Tom O'Malley

was one broader helpful. a My topic. that's right, All second

I remarks something Force laboratory SAM. could your to Air areas be and additive talk with [indiscernible] seems it's see think SAM about. prepared that it in and what how growth? spoke Obviously, about United you You the really you're could about States that excited agreement additive you you the Can to mentioned the like

Steve Daly

Yes. I'm we glad very that the currently power the millimeter building is carbide the you mimic are asked process than under RF different that pure discrete question products because wave GaN brand.

allows power as amplifier that the switches process resistors, chip, as and complete integrating us make LNAs is us include power a to this a which same to build chip. a well allows mimic on to amplifier complete capacitors, inductors, So, and

process size at we north We performance. million today we bar in zero has this have excited we been are to the be this work number AFRL for $XXX technology years our frequency so for market they million have and that landscape. portfolio. This think working will AFRL. share, look that very effectively process power gap of in and $XXX the today set years, market over So with and at five when the on we competitive density fills

the build we has, Force the work really will implementing Air we on equipment go will a and way may I drop that buy that by up test the existing band including range. in-house. say this out the is will smart, very measurement, them exact which fab. pick Ka also - our mentioned - to the In a is most So not we're Air ones on as process a will have in approach is nicely we this applications applications, equipment, to the XX MACOM Or itself and XX where products the has phased with methods lends of a technology use gigahertz for - copy in not of well process we'll line where gigahertz and we the as and not array and or target which SATCOM same equipment some specifically project, commercial Ku - defense areas this into script but that the science target known a taking the primary leading a modules the will to we radars as that to the we have performance airborne either already of some of and XX that's primarily industry Force forward the gigahertz process. formulas This look to is literally order. product band, transfer only I

I it. So as pointed we're about out project. is very excited It two-year a

and ground our additive hit we are to We the SAM. is overall absolutely running it

Operator

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

line Your open. is

Karl Ackerman

may. I Hey, good gentlemen. Two morning, questions, if

to update carbide Any that your design follow guess your partnership? opportunities on are your what XX line? sort until GaN-on-silicon that GaN-on-silicon from ahead Just on of silicon and take discussion. But if wins you prior think carbide have of the up. follow And to design days year feedback ramp. I'm this ago. I customer recently-introduced would getting of I your amplifier wave calendar I products a guess view curious are maybe I millimeter end previously

Steve Daly

Yes.

is of can proceed a at project part the continues report that first ST's fab, with that our equipment going regarding equipment in qualify are is project making bring all place your can tell that it. to they series The I I and that ST. progress. question through and [indiscernible] and online DOEs you GaN-on-silicon to of was of

the can our finish to that development they online, of the equipment's products. make also the that Now transistor need we cells

those how evaluate front in applications. will making they're a at they their the reasonable the And months' time process expect six transistors of perform from to look on of so as would progress that well. competitiveness begin receive inside those we to about how very first and specific that transistors from We and devices

GaN-on-silicon line. our question Pure carbide product Carbide In of under terms your on

have call we know, what five you most products, specifically, we are targeting As that products multimarket.

these a all up product. So X.X-kilowatt way the to XX-watt generally are

defense testing million industrial line, development, have targeting we in type project Since won and they're I'll special over call the launched of customers applications. product measurement from industry. defense business we of this $X So or

So doing achieving they're they they power see, very we're regarding like excited, some novel levels. what high things

and these to have our excited you I tell off So, can that running. is they're extremely salesforce products

So, also we're would team I of revenue. track. and that But those are comments is lots up build but planting also excited about caveat these lots applications say on I'll can about of the the different slow-moving. seeds markets so we the early that It's successes,

of We are targeting products have we're wave year. of this June another that release in that development before for

very product And so, the executing new on plan. focused introduction team that is

Karl Ackerman

I appreciate that.

center consolidation bit to I you challenged for line products debate follow but how opportunity and in are go-forth my XXXG prepared grow this appreciate XXXG. more analog-based introduced you across an you because asked, demand data And markets. even speeds up, as several time from in a clearly, has been space optical the optical some a commentary, be your you've For for on the I business quite optical basis the the the your products even could as the telecom and discuss in But update acknowledgement important for of see [indiscernible] December seen will detail XXXG? XXXG.

be your So optical longer-term [ph] Thank would you. opportunity great. in

Steve Daly

for you thank Yes, that.

And so, I think you're right.

As you analog rates, move certainly higher the it solution to successful. data in does harder get the be for

these with solutions, parallel XXXG We're remind of for analog per per now part Just to applications our is represent lane. XXXG. doing which same run XXG everybody, lane a supporting in thing and when XXG support business lanes to XXXG combined the core

- per that XXXG. successful that effectively continue be tell as TIAs, is focus [ph] will large very we'll and lane we can market XXXG our was that drivers I effort a as we and multi-channel that optical you market optical scaling channel drivers. is The and have We there. think can XXXG well quad solutions primarily DRX support

very So we where competitive. really that ourselves is very, see being

supplier want that We their Macom own to but we I'll DRX. DRX XXXG for to also see XXXG to only DSPs support and companies that look are merchant have say a them, there are not

the focus we're - and with be what our that challenging consider clock on solution, be TIA analog work work on which are it's Our and more includes drivers successful doing be to recovery. is for working a successful we but to That us complete a it and would continuing in roadmap there, the data may it's I the today. is

overlay when technologies our you're really that, we adding to content So company course, to silicon photonics, revenue those for going that's due bump and to focus in then overlay get new business. lasers, the of we when a the

Operator

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

open. Your line is

Tore Svanberg

Steve, the back earlier week, pretty announcement Thank that you. understanding today? in results. Good already was my to you And and is the where morning process had AFRL on Massachusetts this congratulations your fab full.

CapEx in up type do to what you order have get that commitments and to do project So, running? of

Steve Daly

Right.

was and in other development locations, process they're just some Force let's say, So in developed and Air that's Wright-Patterson's labs, where Base their that Ohio in at capability they capability. have semiconductor

is fab. that I out, is So technology to into our plan as move directly our pointed

In medium volume, perfectly terms leverage. but we business applications. tens I We're into we tremendous comment high-mix of being talking fits high-end run we utilized, our manageable of this full, because see would that point is We that very sort the technology have are about a thousands that targeting business. We're your and is fab various pinch of staff regarding wafers. wafers, model the talking we're to about highly fab don't not to of a very hundreds coming, capacity of thousands of the at constraints that for and that We and we'll we see our equipment. additional have going have course, add points which say or

million the million of capital and $X say transfer overall we would terms I complete can $X of the capital course spend over total in that In to this between expenditure, two of years.

Tore Svanberg

great news. on up is question And my Wow, that's data center. follow

You did you talk improving. bit telecom you data than coming when to to But a on perhaps any visibility little quarter? about this it sequentially flat expect other center start guiding be

Jack Kober

and QX. Tore, to it's really us difficult for QX out to very look

happen growth to business where comment year. not experience necessarily half on high center the expect of and the what year we I data might industrial want in to double-digit this we So, look would fiscal both say and I defense that year-over-year. will back

center we're the year-over-year. call more to are good share our about XX% for picking data we XXG in There So, products. by Asia. work new That XXXG in expect continues our wins on Asia grow talked we or as would in and design at market conference up least last

there's we within also data of going center. And opportunities. different after think interesting the We're so, areas lots

customers As using which in comments, at seriously I connections highlighted my solutions very, data with very working short cables, developing reach are the center. copper looking we're are that within

can for an there. be successful And Macom and interest so of area that's we I'm confident

Operator

from Bolton Needham. Quinn the Next line coming of with question

open. is line Your

Quinn Bolton

Hey, guys.

Let great wanted the industry wondering, and that in them just offer margins. is back license to congratulations would to mimic on compete? the the my agreement process the they come Steve, folks Or that you have exclusive? to with I to me AFRL rights other

Steve Daly

work specific So, so they AFRL's want their goal to the that fabs. into this technology to to the comment or is with that I foundries difficult get wafer details it's there. that can't to for defense They'll other own me ultimately, will do I agreement, industrialized extent have say the of have that. contractors

have so select a a for U.S. or Defense we manufacturing programs, be So in it'll to when be where them, can part do very for volume of do, strong There be can it capability for us, tell I seeing they good it's production. what kick hard we Macom limited that companies good the This are good very has we a is past. and they've production, that very the done few say the comment into will Macom and put successful. they our you things into to U.S. might in moving are what on or of here very we this on minds me high muscle for successfully. and focused variety it's

our the about One year that up list. priority every excited employees, highlight, I'll on Force point very as list this and So way our top right is is with that Air [ph]. we XX other create there a

Quinn Bolton

of question if to to base million kind round something million like in next tend calendar X those is, are question XXXX my manufacturing vendors second to to haul front modules. you happens beginning see Or do the the or forward of that XXX,XXX pre you only that tenders module is of of stock once a my just do stations tenders? Great the drives looking build ahead build released? guess think inventory XG I XX tenders lot

Steve Daly

releases. they some tender it and those production getting ahead of We do customers start see do front in of

say the It's four movement making. We addressing our have probably in of you're the weeks. some channel I'll exact seen point inventory last

Quinn Bolton

it. Got

are the that. So it exact is activity like time we on sounds pretty good picking tenders? leading at even the up indicators That don't have though

Steve Daly

Correct.

Quinn Bolton

you. thank Great,

Steve Daly

you. Thank

Operator

James. question, from next And with coming Raymond our line of the [indiscernible]

open. is Your line

Unidentified Analyst

the in sounds of now. ability your back end vendors, firstly, in and to guess, And about more from I color your you're from some utilization you'd capacity, And us where price there. Yes. to tight the to you it what give increases your Thank for supply with particularly And Yes, regarding outsourcing, if color to some at of Good the regard is internal supply. others are to secure as heard like some pass outsources able comfortable to is regarding first foundries that's seeing some is commentary more seen those order of if you've some the the morning. of some question that supply at those industry, you. case of some in increases, Are that customers? the internal well? on some meet the of we've some you then costs right

Steve Daly

Great.

our fab do achieving more to our efficiently And that day. utilization by in We're a I period. for our thank So I that say a week, runs the to not period really that expect here varies certainly margins, of meet right or from goals. very high, on you our that. Massachusetts that people to can't specifically do busy; would we the are constrained actual always comment the extent we can And from questions. hours add to you seven continue. days XX-year a see XX we'll sort we operating more equipment, to now. need And that running hire we're Clearly, ability

agreements, the long I what partners fab to comment and partners, we are agreements, really specifically have our our of do pricing wafer typically can't us any with directly. term some Regarding including doing industry of foundry price are

some whether are raising though, if suppliers in cost it's to on pass prices, acceptable. markets, our not As it's or through generally customers appropriate we speaking, fab that or or go it's a we calculus not. easily a have other to whether that component determine In a a to markets will package, see that just done

concerned balancing generally So speaking, supply of not the But we're I there. there's a bit act would chain. a say about

big gross a and our show, been highlighted margins up, job. team work. our clearly margins in phenomenal some the And does results that up, we've a had planners, they've driving of purchasing I as hand operations, our just As

about the fast as are as market our competitive. focus. I products that So our congratulate there. our can, sure and is we products not getting worry extremely into that's we worry those them This on list, And top making

Jack Kober

XX clarification, in XX-month XX just prepared I to through a build operating that it increases at teams one are the offset And years. then of constantly our Thanks. extent Steve price we other And that was those initiatives mentioned, a had our help high XX-year continuous were I not quarter high that, margins point my to think moving high, can. just front, to remarks, on improvement on think some of

Unidentified Analyst

helpful. very Thank. It's

XX% up, follow the the a conservatism half There the on levels if about fiscal is center basis just may inventory. that Based a that year growth, for be some the about. this on I As off guess you're drill second digestion year into expressed, talking bit but particularly year. you on I of burning quarterly could of data some customers for little a in at

question me? you know, this that burn just bit that of and guess, a conservative If is you I off? time and inventory it general needs a can for So more just, more if just to explain and very uncertainty you being

Steve Daly

different of giving short view the of programs for applications. Yes, We're G a I high reasons. getting And one at lot you each into in said of center, rate we're to different designed know, volume in And and reach applications, we're different XXXG for SRX think our reach, parts short applications. at in now XXG, right applies data different we're what as PAMX guidance. you is these customers running XXX a

in the year, months, different seen by we in have a QX of I dynamics, about certainly center, revenue. driven data had was So, we've of within and a $XX XX it even the lot fiscal experienced, last million data the center, tremendous the last

that been see five four growth. out do quarters, you actually ramping you if And you at incremental and or look so for last how if quarter take the we've

results QX better Our than actually year's last were results. QX

do revenue year half very is important. it's we the progress happen But us like uncertainty. the are stream we given very the what diversifying back just in difficult comment to on I steady think So the which might the for of

Operator

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

open. is line Your

Ruben Roy

of like bottlenecks question. commentary. and certain on sounds pauses are, you're supply you available passives the anything to whether or not just your there I follow that at chain? any my point? are with supply the taking supply that, from understand the potential kind from you for wanted I throughout thanks to think happy sort where smoothly question might having? they're you want terms Are widely But of previous out builds? Because of perspective. Or a hearing Certainly Hi, up Steve, other on suppliers be flowing this components, do customers of otherwise everything's in

Steve Daly

into dynamics But would that designed do that and products. COVID, that make within these any this a ramp the on have Yes, also on some so a experienced general and done market, markets. issues. those having I I'm not end some And the demand specific be aware where say shortages, few automotive in volumes. of customers of that's to With including our component we that them impact are, there's bottlenecks platforms. will small And has some say purchase I parts may said, in preventing other industry are

So speaking, main it's us say would difficult dots. have for I with But connect we suppliers. to all generally issues the do our not supply

is team Our that anything managing And fiscal it's comes an for issue this a year. great job doing not up. just

Ruben Roy

think center and infrastructure strong, you you to us give flow about margin some on. know, March Thanks, telco? gross to And us great of how quarter, the for of with performance continues the detail with kind mix given obviously, it. you and an the a of for and defense a Steve. Got idea market and as data segment just Can with little some follow guidance going quick know, bit obviously the that be around product up year? You mix again, Jack, margin through and you've

Jack Kober

improvements. I we number Thanks, pleased margin that our of things as been underway. have And with mentioned, Ruben a gross we've there's

We out have not disclosed that's any longer-term there. model target

guide taken the to QX, and in up a margins the the credit with forward. doing to up time, going do to which internally quarter. try range, last been help guide improve we bump against us XX we've all those the that up And to step going to XX to that going the into from they've over our was is have which the starting believe teams more been to and work we're for you know, still but now, We back high that XXs there's

Operator

next question with Evercore Muse coming C.J. of our ISI. line And from

open. line Your is

Kevin Feeney

for on is taking this thanks Feeney Kevin morning, question. Good CJ, the for

So increased segments including there's domestic kind recent provisions recent semiconductor of been NDAA. in on manufacturing US in an months, focus most the additional National and

on benefit U.S. for either US additional more [ph] the beyond from So Air increased shift potentially or stance does on [ph] announced stand Force MACOM toward either the subsidies or manufacturing the up contracts positive contract? R&D

Steve Daly

the a for it's topic And table you've to canvassing to modernize very agencies we be certainly extent various be grant handout. at that that think funding sitting I important and with we Yes, money raised. improve. and will the want there's our expand To

yes, absolutely tell in. US can fab makes is our we something considered I is it in run are which you DOD that preferred foundry, a already focused trusted Massachusetts So to on. that here fab business that a

It's to grant say avenues And so we multiyear program. those money for will will those contracts that or very I pursue certainly support. or are difficult win. a

these a year or two for for time we take monetization fruition. generally today, things started if any even wouldn't expect So major to to I awards come

Kevin Feeney

Okay, industrial. center you lots great. and but Telecom, data Thank and discussion of on

good overall, to recovery already growth in I pretty think see it's of there. a I think expected starting cyclical you're And strong kind to see a 'XX.

potential be positioned you. to here go gains or whether how upside Thank through So core demand of take are advantage as kind we of 'XX? that on industrial, you share underlying

Steve Daly

and more stronger, getting competitive. make improve the Thank product and to continuing are line stronger to you, we're I think our we products

into of our our is and certainly, industrial rich target market. our the this technologies of RF includes have a cross that for capability, have. We environment high-speed that the a a sort and optical That focus see selling our on lot analog, technology microwave. we We a

all than of time organizations the spending We are making industrial our markets. their engineering sure that in fair of share are more

a about segment done revenue. overall that's our you little what it is to is probably largest largest of our the our could really than today, that's so industrial something And And be segment; MACOM as we different forward. our in has as go continued be it and And highlighted past. defense XX%

we from business. sub industrial growth and term this part numerous of a market. headline defense expect within absolutely end number focused do on are markets There that our And growing N of we long name. that So are

Operator

the question coming next with Sur Morgan. Our from of Harlan line J.P.

Your open. line is

Harlan Sur

on the and execution. solid Morning, congratulations results

starting guys cloud you optical to we're scale. XXX you As see gig in and deployments know, mentioned, hyper

think year. got opportunity this XX opportunity year, But gigabyte targeting market, was more right pull intercept last have Amazon and potentially a lot of first emerging you've feel the transitioning cloud think this the gigabyte with you a this you like drivers. laser your know with amplifiers, I to I I I the laser. also guys the trigger to are XX your type guys

I lambda have a think XX laser you gigabyte your that already single gig supports prism XXX solution.

So XXX say the can repurposed laser gig, module just guys for And opportunity? you TRX for the configurations? plan attack what's here this let's of just particular

Steve Daly

will working that you versions at that so XXXG. for our about publicly a applications Right, are I are laser can have that. our tell we PAMX. correct, our talked at we XXG that can do you absolutely use XXG lot lasers of And laser; XXG We've technology we

they'll to that CW address require laser. CW to We XXXG we able a next XXXG it's our market, will a PAMX. or obviously, photonics, And are so we're and But short yes, be Mach-Zehnder customers whether silicon of moving towards a is we'll lot at use do laser a step see laser. they'll DFB if the modulator. working But have that a the answer do will And see that.

I talked for us. think bit of remarks, area I about my focus And so that. in little an it's a prepared And

Harlan Sur

continue insights guys a thanks portfolio. job the building Great, and the for catalog of to you do good there, out

Lowell, Pas on GaN Ann activity outsource XX deployment or you've your amplifiers. are qualifications got quick the update with us just if carbide And partners? Do these GaN manufacturing of these pure good in timelines. like you gig with guys or a Thank could Arbor, these you. or PON traction line you then give Sounds trials manufactured

Steve Daly

are estimate question that's size seeing lasers way, and market lasers growing. I'll of example maybe about XX% Sure. think by second about the first. be We I'll we is take GPON XX we well, share where our market business for going a the sort total for base at X.XGPON, is million and that And highlight have we would year.

we GPON including look lasers different we as think look that to or ADS about XX we up photo products, more products TIA. and as mode As talked well our in five an to product at different of line types past to the basically, detectors expand a I've burst include potentially

lasers So I as interests mentioned. very - in

over our will XXG grow to XX%, least year we So, maybe XXX%. see higher revenue closer overall to volumes, by year at we think are beginning

So the will we we increase. uptick And half are and into going seeing fiscal volumes. an next in the back volumes this those year, think of year

our your Regarding portfolio. gain comment your or question

publicly of today In us. to power So referring it the products of to. really on portfolio we depends you're manufacture manufactured. that what are those have The on a licensed case our we devices, where have gain to being the third silicon not other parts party on commented for

Operator

next Richard Our question the from coming of line Shannon with Craig-Hallum.

Your line is open.

Richard Shannon

here. Great. Thanks, in guys fitting for

markets. seeing first about few my success center, talked is in on Steve, question international some a for think, about quarters data you've I

the your in earlier is data are think domestic growth? think driving dynamics in success and the in going recently? seeing to As grow? we international XX% between look the dynamics how international relative call growth markets And forward I And about we here, comments domestic about center, potential what the should here

Steve Daly

U.S today, into businesses would we're I that Asia the So the to majority and centric, beginning say our market. vast of just tap

international that's dynamics analog The the XXG I XXXG so and comment market the primarily around first would make. And are solutions.

share large customers solid target relationships products. gains it's in right with form Asia. CWDMX, market our beginning very seeing very a exciting we are is on because have market. to very the And which us We are for we And

other probably lot various said, programs. about market, I on what on talked any the of the speaking, point. timing about the So dynamics a I've the that uncertainty already generally and don't we've for comments have today

Richard Shannon

Okay, My talked fair I efficiencies, quick any mix, dynamics Jack, follow margins. or specifically looking, either looking. enough. forward largely about question up think on regarding backward gross he here

there, we mix but gross forward? about margins there. I think those we growing and you're at fairly as typically rich, are you your your look a going dynamics markets How industrial as driver defense didn't think identify should and

Jack Kober

thanks, MACOM. of others We diverse fabbed manufactured Richard. outside are with and do some Yes, very have products of a internally portfolio of them that that

manufacturing outside in in on to see teams go don't terms into got margins that a major not efficient locations, going haven't of broken as on do to And, terms play from initiatives numerous going point think we've vary come folks happening, depending we've are too So, forward more our end that to in can only it margin historically, can the item and markets, what have mix individual we through, we discernible a anything out, but period working there's having on with impact occasions, got back looking view. looking of from of at on also specific our margins. are there, period, what we but can we that our within forward, become operations our I

there's to a on margins. make So lot of as focused internally our on sure well know, things as within stay externally we you MACOM going

Operator

any questions. for back would to remarks. the Daly call now like I'm showing to Steve I further turn closing over not

Steve Daly

day. would we making suppliers customers, a our hard-working all Thank these like for nice acknowledge you. possible. and results Have to employees In closing, our

Operator

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

disconnect. may You all

MACOM Technology Solutions (MTSI) 28 Jan 212021 Q1 Earnings call transcript