MTSI - Earnings call transcript Q3 2021 | MACOM Technology Solutions Holdings, Inc.

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Operator

Welcome to MACOM’s Third Fiscal Quarter 2021 Conference Call. This call is being recorded today, Thursday, July 29, 2021. 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

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

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

Steve Daly

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

differentiated culture as the our margin achieve XX.X% and investment in well that years We operating quarters in products management and along disciplined improved with will We support developing profitability gains improvement, as and market believe continuous further ahead. XX.X% are share, pleased of margin. financial gross to our in

business as as was in placing total continued approximately our and trend bookings gains customers our industry We advance book-to-bill current believe QX was ratio turns strong demand well revenue. our the concerns. XX% well of supply share due to QX Our X.X:X, orders of of market reflect

are most currently challenged business fronts. being multiple on and industry are semiconductor our aware, As the

we utilization of results suppliers, time. in levels high see First, wafer exceptionally foundry many ordering our at extended which lead

assembly This see Second, are true where component with shortages located. disruptions Asia, we technologies. pockets suppliers package seeing operational cause our Southeast third, to is again, and certain limitations. test due we are capacity across manufacturing and of And once PCB COVID-XX of many especially

an can and operations, logistics these our are commitments. Our We customer and teams to meet believe doing planning issues we targets. excellent working near-term job managing meet

see However, to deteriorating do quarter. given situation, execution when higher I we a just last QX compared in profile the risk noted,

Industrial was sequentially. market XX% Defense Center $XX.X million; end by was revenue at and up expected and QX was million. fiscal and was included Data at Center Telecom $XX.X Our down and at as sequentially, Data generally Telecom X% $XX down sequentially, X% I&D million

and Telecom three was X%. first Data down I&D the of up XX.X%; For XX%; quarters up FYXXXX, Center

U.S. medical modest Our industrial by well being end including two QX, sequential strong various Defense and only applications, in of programs. Industrial test with following defense is driven growth. continued and a measurement quarters Demand in along double-digit market performed and with traction decline systems

us aerospace innovative and existing more is products across opportunities industrial, and up Our of strategy developing for defense customer base. our opening new compelling and

lines, our power, high-speed ICs market. within space we based the opportunities our including I&D optical Additionally, components. data mimics, in to We our create millimeter make sustainable RF diverse, campaign I&D profitable leverage in product entire differentiated progress business continue a that portfolio and will on to seek and better wave the

knowledge. system subsystem opportunities select IC and begin will We evaluating further our also to leverage

markets. awards market telecom to increased in XG network cable next increase that been tracking product of support and was the driven in shipments month deployments. in along the phase XG SATCOM China's we've the shipments, Our note PON, up with domestic TV, a QX, XG by end I'll product modest over revenue last

comprehensive and As portfolio, specific the for front network Metro a on reminder, which the station. radio configuration, architecture optical of MACOM frequency and as has XG as station coherent haul used haul within a the suite base depending vary MACOM being details a base long of opportunities regional solution supports bands, hardware, deployed. products well The RF

within In utilize X.X deployments typically deployments X.X at we data example, at growth the few demand fronthaul next fronthaul XXG XG connectivity XG a rates years, and large as XXX China, over believe for trend the For higher secular links. grows. at aggregate, XXG utilize megahertz for links worldwide and improved gigahertz represents typically MACOM

strong expect We from XXG infrastructure, TV and by market end and also new market primarily contribution PON, dynamics, cable share SATCOM, gains. introductions driven product

QX. Our revenue market in down Data Center end was

in our gains to our believe XXG related XXXG at and deployments with and customer. a consumption for We XXXG XXXG by slowdown largest demand international offset inventory in products traction expected, products. is decrease As new and the was XXXG XXXG our

MACOM copper is and solution two-chip XXXG with modules solutions product cable active into prospects applications and our than segment. XXXG strategy In the of less customers to X portfolio segment. analog PAM in our remain Internetworking three, footprint. costs, new lower smaller the is Conference, our by driver provides within of projects in approved chip a latency, high-volume, Data We OIF, is working which and per this a directly short the XXXG Long-term, solutions healthy expand interface in we eliminating is very effort And ASIC chipset Fiber to meters, Forum, PAM-X roadmap for typically second-generation the solution bring availability and into this fact, low-cost, DSP-based server is This This solution reach, effectively applications three to lower lower applications for and product a XXXG several and well DSP optical module, secure or XXXG Optical applications. project the moving interface analog IC was set a announced solutions. to XXXG for to leading the believe market active switch component as our Optical switch power, May, year's providers volumes a foreseeable Center a functionality interconnects. for vendors such the design this module utilizes XXXG for TIA within alternative to data linear At center. service a new the an from the we short aligns growth continue for we lower cloud wins the from will and next-generation an and to within power cables, project the data for Notably, optical XXXG with ideal are ASIC. this proposed we IC and future. with MACOM enable optical leading the and frontend IP reach optics Technology believe lower the one CDR latency achieve datacenter. And consumption, XXXG to OIF’s center lane by with confident the emerging

carbide is transfer to wafer I like Research various X.XX-micron pleased Force to important provide schedule. on topics. am I Next, low progress on report fab the Lab’d process of Air silicon the GaN a report on our into would

technology our including around of stack-ups a This and top have process market. successfully team in effort so in have can the bring to clock we this E-beam side engineers photoresist to and the the T-gate is development, complex front complete been formation exposure priority corporate world-class of device the completed using working technology. We fab dedicated specialty transfer structure the

we As first are a a mimics. that this of reminder, for millimeter testing test this is high high our we technology and aerospace are is into products, targeting defense, process MACOM and the wafer major millimeter currently very frequency, process this establish SATCOM and fab. instrumentation We and Putting from MMIC wave ideally multi-pronged GaN ST’s step suited GaN and will technology GaN on markets. production received very devices power as strategy. of silicon supplier wave our Recently, believe first

MACOM high-risk as samples will iterations Modelithics. need vendor accurate product With product rely designs. system to few a will receive aid market samples, accurate experiments and we believe and products, to order the multiple along designers we and to expect RF and Quick We can Modelithics’ support, application in and share. new to our and with effort. we industry customer a and the carbide standard success we gold series to device view that We customers producing released Early product announced the as microwave in with pure set works simulate help access designs. models for new a long-term next they their models has on engineers over will and ensure process this refinements. which relationship simulate outstanding accurately models, additional continue win Modelithics support, GaN the our months on on their and ST achieve have of device we when quarter,

Next, highlight XXXG introduced our a at as to that on technology make Investors with of continues late photonic Lightwave R&D next fiscal first products to our steady this earliest. silicon effort team development also progress expected should long-term the view the I'll ICs. year development, be

the part stability in process schedule and silicon production we by are is using. introduction readiness of product Our the the driven photonic

designs is technical partner release the experiments to ready, to foundry And will process they resolve as continue producibility We work will emerge. issues perform production. and our our with to when we

performance of our following XXG BiDi. MWDMXX, Etched The trademarked based During Facet multiple portfolio testing. applications, utilizes new and new QX, including portfolio, XXXX announced enhanced XX laser platform infrastructure successful on laser technology, fiscal XX Diamond PAMX release and EFT The high-speed gigabits LWDMXX, which of or new Technology reliability. our the production products, single DFB completion design CWDMX, includes and and XG ridge Lasers Telcordia is qualification we MACOM’s XXG for over a Clear support laser

in module coming to have will multiple this we lasers, We our qualifications report believe are successfully their support with revenue XG pleased that quarters. the finished and customers

high-performance Looking next center the architectures data and as evolve. forward, compute generation

We ability are CW seeing interest high our growing produce CW arrays. power in our lasers laser to in

inevitably team the properly challenges new our have system in working believe roadmap And novel is array smaller to data and generation laser. creates we Next increase support specifically with aligned will requirements. which throughput the we laser factor, semiconductor technology needs. a laser on package MACOM’s architectures industry the these thermal in form for

is products. future launching new dependent financial performance Our compelling on

products these new pace XX Microwave launched During International more technology. sessions the In and Lightwave will entering or hood penetrating in RF should which adjacent analog strategy, product pleased in customers that growth diversifying demo IMS automotive of calendar growth are to products be certification review of to completed lines, automotive we year. am evaluate open under automotive We a QX over many fiscal capacitor market. strategy release as LiDAR, launching breadth includes in microwave, showcased in more for many XXXX. our on end are we I financial successfully we and including power at to we door as compared applications. applications, our we successfully that Jack management a last business. QX, for markets, process XXXX, major fiscal includes understand remained such schedule in further Symposium to to and of of results. our with further where the new or kilovolt the Investors speed now products This will we the certified ideal held believe MACOM’s the QX on before customers provide This well sensors, fully showcasing detailed high our technologies, our as support our driving milestone the autonomous of report

Jack Kober

gross Steve, the everyone. XX% quarter ended fiscal and established the We you, XX%. adjusted company during margin XXXX exceeding additional July for adjusted records margins over morning X, with third to and Thank good operating financial

sequential We also per continued our revenue share growth. earnings and

records. domestic proud basis, of geographic establishment modest data revenue defense offset from which decline entire a approximate year-to-date last partially from a The was year-to-date our XXXX year’s markets. $XXX.X improvement the and market customers. the during million, nine the quarter up both for month increases end has and team, industrial dedication in domestic was XX% fiscal in increase to end the fiscal of represents the approximately We’re and these an the resulted work, and telecom QX sales third This in sequential center by On XX% quarter-over-quarter. Revenue period. the very customers revenue MACOM from was of X.X% in by focus hard of driven

estimated forward QX XX% are Our fiscal implies XXXX. we an trends guidance our year And for in business track Xth on continue to appear September fiscal to growth strong revenue our of quarter XXXX. looking

challenges. facing a we Steve risks business As of are higher currently earlier, number highlighted and

outlook QX and XX.X% guidance our points basis $XX for million consideration. XXX believe a have our level Adjusted for revenue, the exceeded the continuous of underscores accomplishment to sequentially. margin we fourth adjusted profit was these fiscal However, across take into up or improvement fiscal excited the view gross adjusted efforts our challenges margin in quarter gross as were and The key this gross business. XX% in company. We improvement

Looking Total of QX $XX.X to was ahead see expenses our R&D Total opportunities million into and $XX.X million. we of $XX.X improve SG&A million margins. from expenses sequentially were further of QX, expense $XXX,XXX operating expense adjusted gross operating fiscal up levels. consisting

from was from XX.X% product development for in fiscal spending. QX other in the operating income carefully million and XX.X% We Adjusted million, Adjusted fiscal was opportunities continue up to managing in $XX.X company, invest our QX. sequentially growth in for new fiscal $XX.X margin QX up QX. while operating discretionary

represents As from operating noted margin new back we MACOM in adjusted XXXX. since record public a earlier, went

combination expenses XX-month fiscal and increases of million expanding and million operating to adjusted down $XXX $X.X QX in Depreciation our again margins gross operating for was opportunity year expense benefited EBITDA X.XX% the into QX fourth fiscal lower compared million for XXXX Interest lower $XXX million. expense adjusted to $XX.X was full top-line $X.X stable was a QX the for our EBITDA $XXX fiscal associated interest in a of leverage quarter interest our QX. Trailing and XXXX. to expect down from pay debt fiscal of interest $XXX and quarter to convertible with fiscal Adjusted the increased million for provide growth, our million, We third fiscal million continued quarter $X.X after QX. new million rate fiscal expense from expense notes. net as in

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

the Our quarter. cash for tax payments were $XXX,XXX

was remain was $X.XX, our to $X.XX to QX in adjusted a per in compared Fiscal fiscal rates million compared adjusted $XX.X of earnings million tax net count fully shares, for $XX.X remainder the share income We fiscal of per share adjusted expect X% income to XXXX. fiscal diluted at of Adjusted QX. QX. utilizing XX.X earnings million share

balance to and Now items. sheet flow moving cash

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

remained $X our our fiscal quarter. focused our support a result, current and Inventories on end, day days. times order sequentially. management Inventory outstanding at the As growth XX X.X inventory $XX.X along sales quarter targets. million were inventory during remained held down on were million suppliers believe production levels at third with turns at will have and We capabilities product we or

QX our prior Free Our fiscal $X.X primarily additional in primarily fiscal improvements profit. $XX.X $XX.X million was million third from up $XX same for increase as investments QX. well driven fabs Cash cash up short-term operations in QX approximately by cash same operations flow from million. the $XX.X third prior flow the and Cash, was for and and million, quarter was equivalents the from quarter, from the QX, fiscal year. income non-GAAP operating from versus investments were cash time. is million sequentially over year. fiscal around amount XXX% million $XXX quarter Cash up a cash flow million, for $XX.X $XX with year-to-date up operations to represented totaled flow in of from fiscal for in from attributable net expenditures in CapEx R&D The in net flow comparable to our of was quarter the infrastructure. in $XX million expectation at run as Capital income. fiscal our million the This adjusted operations line sequentially

available term we of loans. reminder, during of $XXX March, fiscal our a a utilized pay outstanding portion quarter to cash second our down million our As a in

few making invested return been past to the working expect to on metrics our make future. improvements years, to improvements capital Over and the we’ve continue additional in

in EBITDA, include I X.X the of X.X improvement and of leases. we third $XX.X X.X that million as X.X leveraged second from equity with XX-month These million net notes well classified quarter. as the the convertible of leverage respectively down quarter times, note financing times $XX.X fiscal leverage and Lastly, ratio calculations as of with will in a exit times around trailing gross

We are improvements the and making to-date fiscal beyond. financial quarter our pleased records business our forward as establish and new fourth look with to the additional move forward we and performance to to into opportunity

ESG the note goals. Steve, back Before social I six our we engaging other published This governance over months, been stakeholders would some turning week define it to like past of that help to topics environmental, we to discuss initial of have stakeholders ESG and with report, to and disclosures. the discussion turn The toward I our of our step to now back practices important website. can ESG the investor our our found which Steve. enhancing will publication be is in report MACOM over and an section

Steve Daly

expects adjusted margin XX.X% the diluted million earnings Jack. Thank expected XX.X you, the be data we million. up revenue and to industrial and and to MACOM telecom $X.XX be be And is X, fiscal shares. XX.X%. be to flat. of in in be to QX to share to expect million $X.XX fully October XXXX range In ending on of center $XXX in $XXX defense based to between per is range the QX, slightly fiscal gross relatively Adjusted and expected

I’ve our strategy. As on a perspective we maintain long-term executing noted,

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

Operator

our Tom O’Malley Instructions] Thank coming Barclays. from you. [Operator of line question from first And the

Your line is open.

Tom O’Malley

congrats to I dive taking fourth thanks the wanted And Good results. on guys. and quarter. into Hey my questions for just morning. the nice

some you Can really talk You Is conservatism call using on quarter? it the about the you’re little where a or the stresses the that you’re seeing, highlighted seeing talk in that could next you’re guidance. of fourth seeing end of in on feel a about if more quarter? to markets different you’re the supply us is that just going better it related? supply the And to give you on what’s bit related,

Steve Daly

Sure.

Tom. the suppliers we’re in the that is would associated say with main supply most issues really suppliers of use the where say of two relate we’re different then that with to or Malaysia products that would our with some the on. I of on seeing And So OSAT where really morning, I some some interruption where that shutdowns. specifically our areas are we margin, some we’re technologies our do good those focused PCB see issues temporary we seeing we’re having focused. main we’re networking area

So these of I well factored just was QX. want a as whatnot. we into uncertainty to highlight others are And as know, type that, beginning with for when there COVID with went degree situation supply and interactions a the chains at considerations high our as through you similar guidance customer really of

So of handling team think new of set quarter. certainly this is capable I the the challenges

Tom O’Malley

portfolio. Great, really the is then follow-up thanks. product Clear And my Diamond on

really quarter? the telecom from saw You portfolio? fact contribution in that and could the September June. you a platform you about just you as now into in curious, that strong the like a XG that move I platform And December, the in there impact that opportunities that talk brings we quarter can you in can the products sell talk market about financial given market. laser the you adding have was from was Can more look to what that the into

Steve Daly

Yes.

that that did goal. in of goal fiscal end XXXX, meaningful before QX, next And the QX in what with a but and haul We front at so will the primarily has happy with cable portfolio legacy to the call growth saw has we fiscal as see of uptick you little and very We’ll level The really end I’ll more we’re as to well the did portfolio regards quarter production in really growth broadcast very revenue. modest Clear a XG contributing. other of a good some to start telecom market market. the end hit that that happen a haul in product mid do see to bit contributions year. starting our pawn, Laser market that video. infrastructure. a that contribute our started our had do about not just to we haven’t So year. one the We a we’ll has And set to business spoken I’ll we with And Diamond highlight then in And lot. XG from satcom see market

and comeback this market. in to some really our customers continuing with a We’re demand see increased end of

actually is so an where And area cable fairly have a line of we broad drivers. this product

devices, We have equalizers, re-clocking and switches. even crosspoint

are running the typically that seeing speeds, equipment at which end that end or due roughly across seeing level we seeing prosumer different a markets the studios, you gigabits TV And of where professional XX market, sort we’re have all video streaming broadcast so the increasing demands to is globe.

market of from back factors. And of So was about It result grew end portfolio. of as lot again then really the Diamond XG, specifically the different Laser not lot coming contributions telecom different just had but really a question a a sort markets. Clear your of to

them dam will some as our seeing use we customers. to breaks, expect lasers, But data XG that. start to in begin data believe their as begin which center center service our customers, also qualifications use And we’re of do So, for the module the we people to applications. they

we’ll CWDMX going our that fiscal start XXXX next to gives so revenue into confidence for that specifically. laser year, that And see us and

opportunities. So very portfolio with revenue fiscal this into We’ve with been year. as a real seeing we conservative some the good really we story lasers. nice expectations our But year, growth next there look are this on

Operator

from next Piper of coming our question And line Harsh Kumar with the Sandler.

Your open. line is

Harsh Kumar

good morning. Hey Steve, Yes. Jack, good morning.

very as First we I consistent, Steve, of well. one guys, questions first results, steady appreciate two you. for and all, had it. congratulations

in have but turn I the not do understand, every And a able that asked your to Your up, were bit out more thing it. just halt get I to little have, and the gross point easy. not and gross we revenue the great businesses And a at this scale wheel a happened, more because of it’s want to guess, how keeps to gross is a margins. margin of you going the quarter, are great, great sort margin of to around which that things come able lot

also, curious, you one. can the turning what do where you’re that doing things some the then go here? are of I’m So wheel And maybe think that margins these are

Steve Daly

really increase, And like think I as that. just your gross you’re that. first right supporting past to the work it a result call the the focused top I’d operations, on more effort, business way all purchasing, that exactly pricing, MACOM optimizing of of operations two of we’ve different parts this looking at very over becomes to quality, we’re And difficult units, on comment we is that a sales, is Sure. add The sales we’ve organization established, years margins done pricing. what

two of been past there’s gross So years, margins. allowed has lot the done us to improve work the holistic which incrementally a over

high We a products priority running the those volume and associated into at of put to through look – also ago, a highest some improve with products. volume corporate yield year were our set fab overall putting about our we effort

approximately that And frankly, space. if see add billion some $X within We answer up ask margins. And ours. to named it’s so leaders be with this some to billion. you their when our significantly be into margins of our And as quite of the than can group, peer you revenue. shine revenue, peer look actually those starting you about size our expect They have higher group, at SAM we which about, $XX of where that products we fiscal look at would year. When next go continue we you’re through better go? My to

And our technologies down onto our than goal is command so pick that mantra really units. will lines that margins. different higher we pick believe And that’s gross to corporate average business pushing we’re product and the

a can create company sit stronger number what you about we a and you as an really have here say have We area will answer be. you in that don’t I it’s on pricing. can’t the short that. for advantage So where positioning competitive peak today,

as to do is as right think margins. the execution, lines product near internal expect there’s new all in the incremental as accretive relates the I improvement. it that see piece. to things gross the think we’re term also good to news another continue well be will to we But picking doing We

these utilization. We We to want running optimal make have two at sure fabs. fabs are

don’t think after volume We product and XX.X% margin. we to so when go through high want to volume And selling business like your you high we’re get every absorption gross that enjoy investors that you wafers has single the fab. run

of mix. to Jack, a you a it’s I help. know whether to don’t add want to that bit So

Jack Kober

upon overall we seen Yes, another a holistic margin business. to improving also in this build just of The that, the look we I we’ve take that perspective year. gross a improvements take longer-term of perspective the at from profitability a and terms set record where

we’ve for This and seen we’re quarter But to don’t from just the improvement margins we’ve that focus to is quarter sustainable the drive next make to that different longer-term make many also that very helping the time something doing and upon made, aspect that we on we’re things want and the one successes sure something then And a that to thing overall of that we’re operating really looking the we’re that continually sure, at sure else building sustaining is is one business making that proud period. of. which quarter the of quarter-to-quarter. of it’s jumped just we the improvements

Harsh Kumar

you Thank Okay. that for color. growth. more one for question on Steve, you,

as cetera. you’re it $X of et analog So et cadence lasers quarter. PAMX, But there’s talked sequential your you lot million of in growth cetera, of about coming the stuff a kind the like a There's works. a out, script, on in call

look to a your starts you a when us where in for you somewhat this products of terms year, hit. XXXX? will you the includes hit year, fiscal fiscal limited of of is ask now. was new I stuff quarter are next which could your paint that. lot out which past was But that commentary do for Your a lot inclusive to lot say, to let’s December versus That How of picture a growth you, just

Steve Daly

Sure. to that best I can. question answer I’ll, as I’ll try

think minute. a take So a step back let’s for it, I

for CAGR look between at rate MACOM’s first XXXX, X.X% it’s So and a the if XXXX you growth XX years. about

areas we Let’s from require $X to five that a I so get higher a revenue. lines a And roughly are about, have out look after the billion neighborhood XXXX that billion, And as would moving the where we years a if public five to multi over If competitors going different MACOM product that next us very we get we we large to going we’ll company. have to to are $XXX XXXX, we product earlier, were as and company, as gross attractive. $X XXXX, have was we’ll into of said talked at larger CAGR, million would just that positioning about say look be margins. years, we XX.X% that

So and the a and right number our we think in strategy. growth of rate? long-term about business, is a us And revenue to it’s think think reasonable historical somewhere that would somewhere X.X% we first we get about of what years XX reasonable as billion between of $X have amount I between time. our a

million you a market the and $XXX over revenue, quarterly on peak at if Now, two for the about our all if I&D peak I I peak it is run any years, best basis, go get and years look a just two – the the of past telecom about dynamics, the data quarters I million and up, revenue over and the back add which past for rate. look at revenue end $XXX center, revenue, to

the timing like numbers when the that can all The to stars part So understand that align. don't always and happens how see is the happen, will it come together. you of stars hard to if start aligned,

we to accuracy. have So in. we're But plan forecast tell of more SAM you that can we can't capture I the that long-term with a

more tier-one customers. color we the way our even by And business, quarter, as fewer look engaging greater business at I'll the past way, We by with within of customers. highlight the we are than our have XX% this

a year we one. think have I we had quarter three, ago, this

We customer the have within more diversity base.

think were XX of they're customers year our Our ago XX% of our revenue. about today, XX% revenue, top I a

diversified. It's at So you have a a business that's rate. growing more reasonable

Jack year-over-year growth XX%. year-to-date think mentioned I our is –

of share we of next the we our executing next win for when market. think targets But sure year, making short come our want about than we what more so to think And fair about year. about talking and are that we

right that number in early AOPs fiscal our [ph] late year. the generally haven't our yet. We We come timeframe, put to August, internally September before together

a But have And so provide a of dynamic call color to what is, very next happen about is where on short industry our try I might in fiscal long-term want XXXX. to visibility. don't cautious. always we'll This very you the answer earnings be think do bit we

Operator

Quinn from question next Bolton Needham Company. the Our of with & coming line

is Your open. line

Quinn Bolton

have to and wanted really offsets there an XX% the C-band Hey congratulations, other round for contributor to And completed to that and highlighted the tenders. so, particularly the if and America sounds look product It you late better guys. XG quarter. the this next give are the in Can start might deploy that starting you September uptick XG on auction quarters? year. Steve, margins. echo a of is offset gross in wasn't I'll you now in potentially telecom you the us like telecom, are with June the some into December into especially sense XG. We telecom a traction decline in North from market the plus to beyond? XG September growth to China sequentially or see and as areas of look looking

Steve Daly

Yes.

as or side higher the continues and we MACOM frequency, absolutely see long is We tremendous higher on power support a typically haul absolutely rate XG and data board. the have as well whether because applications. XG radio it's networks on with there growth optical as secular we equipment metro to equipment, in And the opportunity knows, success that so, everybody front haul are for higher growth

base China XXX of in station about band contracts was some specific around megahertz announced. awarded been different released been tenders the those have are a that highlighted XXX,XXX base you've stations the As to have manufacturers. And

gigahertz we for U.S. X.X. about frequencies there the think as XXX are C-band megahertz actually band, X.X excited highlighted, X.X, I market. the of opportunities get some the within more that around And but the you

a growth as accepted and add we with So there it is are that ORAN seeing would here. say. opportunities tremendous becomes let's more more I opportunity expands also

opportunity And a so that's for us there. tremendous growth

what's of of the question down. and fourth to quarter your about going terms going what's into up In looking sort

quarter-over-quarter front issues. be flat the XG due to down to channel will probably inventory think slightly I that haul mainly

fourth up. inventory our channel see good have levels. I we business that'll think is the do think I that I picking microwave And quarter. down in be worked

Our in the quarter. fourth is diode business picking up

think I overall So, very QX solid. be will

Quinn Bolton

a I talking are haul front the us the to you vendors, for Are $X.XX TAM lasers, if haul the data but applications? a or total be to wanted dollars modules and on module a per or XG to in that you're talking haul then we content those and center. already content opportunity able front in to data either And might mean, of follow-up center give [ph] $X? we ask maybe Great. hear lasers multiple laser opportunity, mid great qualification wondering multiple passing at

Steve Daly

Yes.

So to detail. talk with level about we of our SAM, necessarily targets probably want or don't ASP's that

$XX competitors we that of look when them per our see terms of multiple the of have lasers I'll – comment we we that. year, of In million, some sort doing laser at competitors. selling volume, just and We $XX million

And so is market our goal share. that capture to

time. we of start the it products. first with There's have investors on we've all XG, that grow multiple about past. revenue small XX a But add think will those wavelengths. up customers out and different competitive specifically. say are talked offering will wavelengths We over of We a necessary the But recognize different wavelengths, lines because suite we want at that advantage over will should call the full in would laser overall product dollar as to our when a content that it don't we I we're different start level

sensitive. little I think too a just that's

Operator

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

Your line open. is

Harlan Sur

quarterly on execution Hi, good morning. and the strong margins. job Great

supply, unfulfilled and strong I backlog like both environment, you looks the Given know and quarter. had demand estimated it June tight the million an assembly test, then, Since the for wafers $X over calendar you've were top strong. risks, COVID-XX layered on kind profile you second is the as related that. of of into Orders getting Then this year. the got of half move stronger demand

expansion So team expect our kind up look number does going actually expansion normalize? outsource partners as and does September more well? importantly, when the in then plans, lead the of supply team capacity plans, anticipate that the quarter demand times the quarter-over-quarter as here the your situation And backlog up to at you unfilled

Steve Daly

some take answering. A great and and maybe set can of of them finish Jack questions I'll

look was constraints now to speaking, at is generally your increased time these it. six lead which a questions. So be clear. the one visibility will the as least of will way all have some when definitely It times months quarter-over-quarter, have We from at clear we don't of

In of to A actually absolutely terms X.X we in our delighted one backlog, we strongest over of the that to bill. history out our that company. the are of amount had quarters X book is scheduled was a of It time. significant booking

orders look for of orders in IND in categories, larger normal two very on booking second then demand. strong it are that we their to get large we under they're at about customers our two long behavior number customers the contracts. placing so are break lead into supply parts order just they placing ahead of And – some And that the of customers the especially sort coming want concerned and one, and

and to then of actually and they to that ahead the two, mention, be, the ordering do have I our say service to would be need of I'll over when an there's two The we're demand. advantage it three and maybe that turn so talking where own Jack going unforecasted demand. piece able quarters ahead is last fabs that of to We're is I'll we we And have products. quick very piece thing where

And and get MACOM. is customers advantage to now. looking fulfillment where from not come current to so their on us lines are able they're And an certain product right to that we seeing they're supplier

are to about And away a competitors products. we Jack, bit to when backlog we that being can. make question? you take did sure our are from unfilled we business that comment work to hard the want we'll business able So not opportunistic to supply win now the

Jack Kober

Sure.

seen build and the to that some had with the improved you have. about, Steve, Just upon things we've of improvements talked visibility orders we the in

make the report very and hard to sure are were that than business the quarter. is also out shipped One of down number years have of that could much on lower received working we ago. number a that our where driving orders a or we numbers to That we couple number been been turns we've in

on to when terms we quarter every that There's our and deal at allows of managing be that. number do our with moving moving regular in some a and to in work looking sure customers meeting we're because this a to job as needed. basis our and in going this quarter on us requirements make visibility we're with on suppliers early that that of We're it, operational lot do So and additional around fairly it's is their a a of stage, pieces stage. things not terms teams good something in But evolving. we're it's at to putting the just, there

to is would current quarter be point. this just the this at to at premature current So going stage, what to the impact too it be understand

Harlan Sur

it's virtualization for And for from strong radio economic a benefit you a insights of right, talked area and network. the the is ORAN interesting, and ORAN focus access and provides we vRAN there. perspective. because Thank operators, OpEx CapEx Great. know you the opportunities about the big in both it

how virtualize to know continue where, does to benefit vRAN the and curious their few as move ORAN from next networks? to providers the years So I'm the over MACOM service

Steve Daly

ORAN market Well, new up opens to the entrance.

barrier solutions new like the customers So the market the speak in room, there. will the get to see is with and company for all oxygen consume to – entry coming we work we so and in our MACOM a into to with companies and of these

have opportunities ORAN new entry up opening we're that lower them. – of you let's has and after very due they're so entrenched, them. go see and a focused taking the telecom go-to company where they're is of And vendors, their field being we're because say might traditional advantage barrier to And the that we to on aggressive

international that less is benefit it's other China bring also to The an of more platform it's going exposure. and

North and European really American driving seeing we're companies so ORAN. And

And the so there's well. regards that some margin with as to on benefits

architectures similar similar. the In overall the that of of the are requirements they're quite terms product radios sets, very and the

barrier we'll where that. parts competitive entry of that we have think win I that opportunity So the for is can customers. the But extent big MACOM we the to engage the to do lower day,

Operator

coming question Caso the James. of with from line next Raymond Our Chris

is open. line Your

Chris Caso

segment? Center we've the know kind Yes, Data question last you customers since year thank some own you. in you could center I data what's your customers your give center for is of that guess, us I higher, were digesting the about been the that levels. middle that acceleration about more customers what's moving more within color a a that or and A going inventory normalizing? around good then and end cycles, more these year. product segment, is numbers saw on Good catalyst on And last revenue around little the towards data bouncing the some of morning. about of the

Steve Daly

back And start of different important within MACOM be with I'll about for really what your the investors Sure. this catalyst are growth half There's to XX question understand. I regarding for maybe think, market. items will that,

and very have customer volumes concentrated a plateauing. primarily a CWDMX. one historically significant And what had customers major we're the XXXG is been today down, come today's First, And that business market. that is business seeing that of has on part year-over-year

growth we are customers, looking designs we of our at are to international other when about new of XXXG think customers. which many win so, CWDMX strategy, And

that, one, a So interesting number for provides us. very growth opportunity

our for used are chips, competitors’ chips second And XXX primarily The drivers. short DSPs. wins design to is TIAs get generally these we're starting and with G reach

customers very that now we program selecting a to there. best with companies that's which successful multiple our year And these And success in DSP we're own we're their a because And industry. DSPs, very – working agnostic having started they're ago. about been good as select. produce and are chips are the MACOM’s the that we TIA best the So, in driver it's

should DSP-based analog solution. it driver and The third solutions short the XXXG an highlight we TIA, believe where for are I'll many, sell reach the item applications be there also we while is certain

the fourth our want we at our want need what combo chips OFC. do product. year's announced you about is VCSEL G TIA and a two chips and These chips, chips have actually item so, very And market. do these CDR; is XXXG combo to a I'll provide And are with CDR. Driver these and this excited basically and to entered that. chips. bump we a those not XXX highlight the just we And The And DSP really DSP. combo We're

our six we the includes data then TIA talked cable exponential seeing basically very competitive copper we DRX are driver years, that the sampled growth is on suitable of TIA prepared entering And it's that been months. and also driver. today center. and very now about, are two just the the and remarks, exponentially. have So, grow for and over for with a a DRX. And we have XXXG and we seeing active starting that’s the have this we're and getting strong the are If sort I look segment for last we chip version our And within the past volumes we there, traction we mentioned XXXG back a products, we

adoption. We customer a are very seeing strong

and up, segment. of the of customer even see of call, next our in DSP with that lasers last we will connectivity offset towards the terms things the looking the to their talked there. to PAMX start a business When you grow data $XX will next on start about year as being production, steady million into And we we like It's XXXG add following in a believe the have it volumes. lasers, decline do the we the mentioned next actually Even We to on the do the in multiple we are, tens is into expected thousands pieces where I'll orders year-over-year, center. conference from are going of declines coming Center year do these down, add out and items confident we lead all pilot we success are flat model we which connectivity customers, our course, will get business, last we with go of primarily to growth as we revenues starting of and Data year. The have take come of if year. we end

all right things. doing that put you when So, together the we we're think

in move wants DSP what rates, also at very talked look to and say would industry which the eliminate strategy. trends I some into call trends? the drive the our a data functionality I well, a are higher that of the have in going about we not The direct where one of ask bellwether of we the We customer will between strong last to to going broader that what there to good the customers industry the are item PAM-X, that. industry. at XXG, you switch. fact When that the about, is more to steps we have at we cover our necessarily a the that NRZ make with doesn't in I are can XXXG that mention up China on data rates reflect data sufficient from starting sold in what's and sure And or XXX and definitely industry. chips down going we move G. the are there I'll into and see being center traction then more say is

I within And starting we're there. so, share very win think we have a strong market salesforce to China, and

So, next year, all we will roughly and that I and watermark question of but expect was think that. the happen think question per it exceed a we peak timing the sure things. is the XX million. we're did call our The to center, is in quarter right doing the path We're data not on on I said last which the good

Chris Caso

That’s helpful. extremely Great.

that. for thanks So,

at deployments are XXX higher what's but a deployments with down follow-up understand happening XG, megahertz, As on U.S. frequency. the at with China the question,

in the year. year, this start So, of opportunity end U.S. the some guess from when more therefore, benefit we're I Is see start expect content expecting, XG more some of market? some beginning color that the we'd Could there MACOM to for benefit, those deployments of toward provide please? I of guess kind there's some that next you to you stronger

Steve Daly

frequency short does opportunities. us three The four to is yes. provide answer three seven The higher

products, think the a our power see wins is where MIMO whether our amplifier Carbide our design GaN start Silicon to line I macro a product platform also massive primarily, this first it may for we on or be architecture.

front-end customers. FEMs as have on modules compelling the strong that very well. product different is frequencies or I'll interesting today RF highlight very the we also for side that to higher We have many

that is as see I seeing right deployments an your think, on see there, question in advantage the you should U.S., So, to start we MACOM

Operator

is And line of the coming next question Arya our of America. Vivek Bank with from

Your line is open.

Vivek Arya

ones. had actually quick for taking two I my question. Thanks

are your is if several are a QX. could that recover quarters? First, us demand, next was headwind you that having I on mentioned you of how and you quantify headwinds some the much that an can hoping over supply impact importantly, help

Steve Daly

Yes.

quarter really So, that sort want as just from we to the know of step want we there's parts, a But ship. we Jack of we're exact different highlighted, moving of to ago. away that that. not did so from early lot quantifying quarter, a the as we're in highlighted, step able Jack sort I amount to away

answer quarters? be terms The of, that able is we we future yes, roll In into to will will. demand

are We business. are rescheduling business, not losing we

are we're so, major And working impacted. with our that customers being

operations support we sure certainly our logistics doing team, weekly team, making with them, best information that calls and that having customers have make our major management them. job We our daily, not team the a give can really we're if nice chain supply have managing sure we is and some to customers our

immune industry-wide highlighted also MACOM this really I some to As an of is issue factors. not and is these

this again, We have, guidance hedged the and in higher risk I'll have on based profile. emphasize our built we and

is giving investors like guidance we'd So, methodology done we've the past. that the in that following same the we're be to confident

Vivek Arya

to close thanks. running a XX% a would I Thank of sustainability business? that this follow-up, quick And realize not sales to All how year-on-year. the are that's also right, compares. Industrial categorize and But easy Defense you. your somewhat you

Steve Daly

a growth rate And you slow-moving a, think sustainable. is from would rates Yes, from that I expect market like lower defense. growth not typically, large

all this cross-selling with changing strategies, product However, focusing really our market different the lines. we are on are

would million a driving a to to down plateau be. sort a a grow expect quarterly have We growth. basis next start going do likely will We and that of expectation into more of growth are I&D at on backlog or sequential level, to strong slow actually That's year. running reasonable our very to But business. don't million certain It's $XX want again. $XX plateau we what after investors then

are working as GaN multi-year to frankly, that three on. We Silicon in bringing are our on we're opportunities that And years. Carbide we have well, last the on seeing we as contracts hadn't some products, we, of seen we quite two

evenly remain that excited I&D think us. very think highlight RF industrial this think Power defense. be will split and the long-term that. for between it we're I've So, just will And about the we largest I'll and We telecom, when said market, it's we segment – before, about

large market. so growth bring It really very us. this excites And We on should millimeterwave to we mimic. really nice that Silicon opportunities think introduce MACOM, Carbide is especially a when GaN our

already are very that. about customers So, excited

Here there's in companies step two are are one, very entrenched market the win the we share. we And and of into U.S. domestically that the market this that can suppliers confident maybe technology.

Operator

the lineup, Next question, Muse with from coming Evercore. C.J.

line Your open. is

C.J. Muse

typically your first Thank for morning. you guess, well. words I choose question, question. timing good you the taking carefully, Yes, as Steve particularly

piqued automotive definitely increased around disclosure your So, interest. my

impact start at meaningful there expand strategy have your point So, overall on should go-to-market what business? could that a and to you to your

Steve Daly

Sure.

that automotive ensure certified. target was automotive or the company we So, TS set refreshed started about and we our ago, really certified year to a a strategy or

by And so, with the certification would full next in weeks, will We audit audit this we close, to action expect year a end. few effectively past actually close we few passed which went the through quarter. and an items

type which will don't highlighted we will focus then in really a LiDAR that might right wheelhouse in our for looking areas I have analog they that script on what Tier in begin at of chips unit. systems combination knows, applications, that have my strength chips sort driver our have we as the everybody looking the do more understand is car. advanced especially cabin The may electrical high that ethernet can of connectivity there's applications, X us is we as optimal a requirements as already We're what we're and and our this So, OEMs allow at them. the the throughout require as their requirements well roadmaps, technology MACOM. of engage to is if data developing we lightwave are and navigation rate high-performance radar, for more assistance And which business align call

long-term major we the tremendous interest a or have it be strategy. you tell be our to expect not will from it's we not I next environment, year today We say. portfolio. will customers – can a after rich material would have this a even revenue that is as So, long-term target growth across What probably It year strategy. is

Mainly think, seeing applications product I some the in industry interest automotive. degrees because in this our is handle can from automotive product lines. maximize And start build so, to there the is highlight C multi-year The semiconductor-based you're you will wider typically we here. and I And automotive source, is business kilovolt capacitor seeing a we're bring you're technology go can in, one on fully you cycles. new that the intend opportunity to when once that necessary line. liked sole manufacturing it's growth because XXX that, designed once CAP environments, you're within and We which in,

that or promote under it's So, applications. to vehicle to electric industry the for really type technology we whether automotive are it's hood excited whether the

C.J. Muse

Very like your bill looks going and to you. helpful. about infrastructure might it the thought an business to passed. what kind upside you Thank we're get implications And Have quick follow-up, of drive? that

Steve Daly

on I dollars aware Congress, industry. industry so the some of that from make of that. have to and looking allocated And investment different has recently we're list been running support do strategy the with a the of semiconductor MACOM facilities. understand the I'll government CHIPS that the I be long we're will of we where there will Act, some the they with to highlight modernize So, that a watching haven't CHIPS news and things through but We Act, start work the expand our government needs. sure and can support semiconductor that for regarding agencies

so priority is a the And that for company.

now. from working the a one perhaps development look We with at one effort MACOM. for growth on two lobbyist where years of might associated special are really the or plan now, projects And some right see that. and funding we with this effort we We as expanding multi-year

Operator

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

Your line is open

Unidentified Analyst

you please morning, on on few Thanks. Micro Can good would of for ago you answered, indicated a [ph] Hey, couple. Karl. guys. is Eddie an update my questions were have there? silicon the of quarters tools, SD This I Most A wafers. GaN my but be support factoring provide progress X-inch installing your

Steve Daly

Yes. Thank you.

So, we are just now receiving samples from ST.

to one and that remind Those was wafer the delays equipment certain qualifying program completed. ST’s dedicated moving been big then this fab, have a everybody, just into of actions So equipment. with

we've They've So that and feedback this This effectively ST. tests provided will iterative just been a end-to-end to a is time. wafer become is and samples take series fab. process, will to of which running doing, And of this run have allowed first those providing samples within the quarter. past ST that their MACOM through part they been with

So, and business RF are as this power on I long-term, the we transfer GaN-on-Silicon a meantime, as high focused certain highlighted in a using is We we script, will where sense. insert view it. high-risk for in ready we do my technology volume makes technology winning program. the production, And of are there lot believe When, if absolutely applications GaN-on-Silicon GaN-on-Silicon do Carbide.

that, project. than view other So, a long-term major no as this updates,

Unidentified Analyst

that sales you in about resellers supply chain supply if have order future half. possible spoken in activity Thanks. OEMs where curious but across peers are your thank are And you. any distribution and And some avert inventory datacenter customer to I'm across one, seeing your the and the and modest market? another communication second through restocking shortages infrastructure

Steve Daly

Thank you.

So, the I'm sure trends say maybe not highlighted on there. that words can sales I'll But about that channels. you comment our few I a

a strengthen focus priority. has Europe one especially further to and our been and of sales areas expand So, develop our across organization, is of

team a a our past bit that do through we've business direct have less strategy managers, we’ve doing been hiring had new where over been we we've hiring a that. And also representatives business been And with we country want been U.S. customers so, to trend more on Europe, supplementing representatives, major has We've here the been and we've distribution. do And manufacturers’ embarked across our as in the that year. well. of

So, build and to applications during needs, have now our engagements can of about into our help engagement. shortage, we direct And direct really these customers business that we as go-to-market relying long-term force, period believe supply direct salesforce our direct our strategy discussions our is with this we their units as our that on plan. have well actually because and strategy, also

So lot is generally salesforce our a speaking, stronger. year-over-year

year, be I we will, as be a dependent time stronger. on even less this will over think next time distribution. it And company,

Operator

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

open Your line is

Richard Shannon

Hi guys.

call them. from Steve, your order me. look your understand I if line to top one that, on different to questions cetera, one growth it growth other contribution the biggest what if Maybe had angle the can Silicon has I'll reticence two regarding as rank a GaN that. lasers, cetera? I drivers to years, wonder question dollar from or of over kind and do a earlier you which those certainly line here, at is, couple in a I of And kind quantified you by attack do Just see et next the et product of market, contributions. you

Steve Daly

Thank question. for the you Sure.

as units So, them are knows, units, engineering we call six centers. technology business really we have different business everybody

are lightwave. our And then our units analog high-performance of include even diode and business and larger Our smaller RF power some ones areas. our

when is of one an very the say have next We've our carefully our over been plan very information. two years. growth our or we call application looking at what sensitive might line bottoms one product that I be can a course, we of forecast expect out plan. will any growth. That's sort up even small, groups end successful to rates, expect grow to back have of want to their rational would we at necessarily lightwave step to RF the more so, at would power, And overall We growth connectivity rates And to growth the rate. a given look and and product and But most we don't highest size larger drive we the MACOM. that relative detailed

past plan. this our updated strategic fact, five-year we In July

we so, we numbers activities to And support our fresh updated have and growth. have plans and

for very deliver So, all really I have doing to things. ultimately to But forecast. what think we see, wait we'll growth we're and the it's right difficult

exciting market. lot that bringing We have we're of technologies a to

well announce of the to doing, market, haven't in that I'll lot two that exciting and I a about technologies things have years. our But new one that lines of to at to years. is over bringing with a the level, market. is talked new that two to we're of bring should say the We we're bring one we'll we technologies the next the and And to SAM color revenue we're and now next publicly, one we'll product just a MACOM exciting expanding high new think,

Richard Shannon

those, about all that’s That look to Thanks great. my all. Steve. questions. forward was We Okay, hearing

Operator

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

is Your open. line

Tore Svanberg

you. thank Yes,

opportunities First also question, remarks are data center just growth, you center. Steve said you driving you on gave some our your a things working list that seven you that? Could in elaborate that level six, of in are system but sub data proprietor on

Steve Daly

Yes.

was So, I the directly think the center. comment data not at subsystem targeted

off in we is end we greatest support want instances make we industrial want that. was as can. want in our customized design most there defense that. system What that means pen customer sure of we to the And engage better on and to lean chip extent to the to I them area. level to capability want design it in subsystem, for if technology And a is their that where certain markets on based we should so do the customers to take we in on knowledge we going to the to likely if maybe referring chips really happen customers And That application. is and our I system leverage different end markets, clarify that

well typically So that capability. applications microwave, optical typically customers where be as as domestic would more be the and hardened manufacturing require RF more

I out don't and center data for area and so, inside of the where not be and building anything course within gaining And the sense makes markets. not share industrial is An modules that per we'll an focus market we most will defense envision, telecom And the se. for space example. it as likely on building

Tore Svanberg

Yes, thanks for that. clarifying

I'm The to clear just on main capacity As constraints now right sure end. back at my this. make the follow-up and are

versus between some the front-end? on I they you're And also pretty fabs, I outsourced high, assume own adding what is know running mix inside but mean, I are Your capacity. current the

Steve Daly

external let's are on you associated also seeing test say that assembly. But and So, is are typically extended times with technology we which constraints our we to say, with the lead or having are back correct package end, assembly foundries.

as And is, course, us of so that impacting well.

you times want the it's It's think I with And so, backend. some extended all our with fab to partners instances, not lead just in don't also, working instances. we're

terms don't that right? external the of within fab believe is mix that, fab have In disclosed we I Jack, internal versus

Jack Kober

That's correct.

Steve Daly

we think there, would I So, Tore. to don't make comment able be a

Operator

for this the questions time. I now back no remarks. conference I am Daly to further to like showing will turn closing Mr. any at

Steve Daly

In employees their closing, we'd thank Thank quarter. much. outstanding Thank you. during contributions for very our like the you to

Operator

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

You disconnect. may now

MACOM Technology Solutions (MTSI) 29 Jul 212021 Q3 Earnings call transcript